The following Acts and Measure were given Royal Assent:
Supply and Appropriation (Main Estimates) Act,
Stamp Duty Land Tax (Temporary Relief) Act,
Business and Planning Act,
Channel Islands Measure.
Second Reading (and remaining stages)
My Lords, with the leave of the House I will also speak to the remaining Motion standing in my name on the Order Paper.
The question is that the Bill be now read a second time. I call the next speaker: the noble Lord, Lord Livermore.
My Lords, this Finance Bill gives effect to the tax measures announced in the Chancellor’s Spring Budget. Although just four months ago, that already feels like a Budget from a different age. The subsequent Covid-19 pandemic created an unprecedented shock to the economy and the Government’s policy response was unparalleled. At 20% of GDP, it was the largest peacetime fiscal expansion in British history. Now, in his summer economic update, the Chancellor has continued to accept that he needs to intervene to support the economy by announcing an additional £30 billion of measures that bring the total cost of economic support, according to the Office for Budget Responsibility, to £192 billion, with a further £122 billion spent on loans and deferred taxes since the start of this crisis. Government borrowing is now on course to reach more than £350 billion this year. At an estimated 18% of GDP, the deficit will be twice the size reached during the 2008 global financial crisis.
The UK economy was already exceptionally weak before this pandemic, recording its worst ever average annual growth forecast in the Spring Budget. Going forward, the impact of coronavirus will be vast. This is the deepest recession in history; the economy could contract more this year than in any year since 1706. This week’s monthly GDP data show a steeper decline in March and a slower pickup in May than had been expected, leaving the economy still 25% smaller than before this crisis began. Now, as well as the UK recording the highest excess death rate in the world, Britain is also forecast to suffer the worst recession of any country in the G7.
Against this backdrop of a pandemic-induced recession, the Government have decided that the end of this year is the right time to end the transition period, imposing a red-tape bill on British business of between £7 billion and £13 billion a year. The Government’s paucity of ambition in seeking only a free trade deal, and focusing solely on tariff reduction for goods trade—when modern trade is dominated by supply chains and Britain’s strength lies in services—means that even if they achieve the deal they seek we will still see a reduction in GDP of some 6.7%, compared to staying in the single market. This puts further pressure on business, the economy and the public finances at a time of already unprecedented economic disruption.
This week’s Fiscal Sustainability Report from the Office for Budget Responsibility highlights the risk of huge job losses from this pandemic unless we see further government action. It estimates that 15% of furloughed workers will lose their jobs, meaning that unemployment would peak at 12%—some 4 million people—by the end of this year. The Labour Party has consistently argued that the furlough scheme must now evolve to deliver sectoral-specific support, targeting help where it is needed most, supporting employment in industries that are viable in the long term and protecting our country’s economic capacity for the future. Instead, the Chancellor announced in his economic update that the furlough scheme will be wound down in October, replacing it with a much less generous and very poorly targeted jobs retention bonus. The risk now is that billions of pounds will be spent on a policy that does very little to protect jobs.
The Institute for Fiscal Studies has warned that a majority of this money will go to jobs that would
“have been returned from furlough anyway”
while the Resolution Foundation argues that
“the deadweight in the scheme will be large”
“the scale and temporary nature of the bonus means”
that it will have no “major impact on employment”. The Resolution Foundation went on to conclude that this lack of further action on jobs leaves the Chancellor risking higher unemployment this autumn.
The temporary cut in stamp duty, also announced by the Chancellor, raises further questions about the Government’s willingness to target support on the areas that need it most. He announced about the first £500,000 of residential property purchases would be stamp duty-exempt for the next nine months—a measure we are also debating today. All measures which help to get the economy moving are of course welcome and, at a cost of £3.8 billion, it is a very significant revenue giveaway. But the main beneficiaries will be buyers of costlier properties in London and the south-east. The average buyer in London will be more than £14,000 better off, while the average buyer in the north-east will gain nothing.
The threshold increase also temporarily removes one of the few advantages that young people had in the housing market, while doing almost nothing to help first-time buyers. By including second-home buyers and buy-to-let investors, this measure will cost an additional £1.3 billion. It is surely right that we examine whether this delivers value for money, or whether these funds could be better spent supporting much-needed genuinely affordable and social housing.
The Chancellor’s announcement of targeted VAT cuts on hospitality, leisure and tourism are of course welcome, when local businesses are desperately in need of that support, as is the kick-start scheme to create jobs for young people, particularly since young workers have been among those hardest hit by this crisis so far. This policy is almost an exact replica of the Future Jobs Fund, introduced during the global financial crisis and previously cancelled by this Government. The scale of job creation required will be a major delivery challenge, requiring many jobs to be created by local authorities decimated by a decade of cuts. In a signal of a potential return to such austerity, the Chancellor warned in his statement last week:
“Over the medium term, we must, and we will, put our public finances back on a sustainable footing.”—[Official Report, Commons, 8/7/20; col. 974.]
Before this crisis, public finances were already rapidly deteriorating, with debt having doubled to £2 trillion and being set to reach nearly 80% of GDP. If the Chancellor now decides to increase taxes before the recovery, or to cut public services, he risks damaging demand and inhibiting the growth that our economy and public finances desperately need. The Chancellor must also ensure that the distribution of any such measures is borne more fairly than in the previous decade, when money was found to reduce the top rate of income tax while the incomes of the poorest in society were cut by some 15%.
Ultimately, very few of the measures announced by the Chancellor so far will make a significant difference if people are unwilling, or unable, to leave their homes in the months ahead. The British economy is being held back, not because families are waiting for £10 off their restaurant bill but because they are still worried for their health.
The Government were too slow into lockdown, too slow on track and trace and are now too slow on saving jobs. They have damaged public confidence and, in turn, harmed consumer demand. Only when the Government have in place an exit strategy that generates confidence will they be able to genuinely address the huge challenges that our country and economy must now confront.
My Lords, we are here to debate the annual Finance Bill, introduced in the other place following the Budget on 11 March, over four months ago. During that time, the circumstances in which we find ourselves have changed beyond recognition. The passage of this year’s Finance Bill has taken place in the shadow of a pandemic unprecedented in living memory, to which the Government have responded with one of the largest and most comprehensive economic responses in the world, aiming to protect people’s jobs, incomes and businesses.
The Government have already supported more than 11 million people and jobs through the Coronavirus Job Retention Scheme and the Self-employment Income Support Scheme, and have helped over 1 million businesses to protect jobs through tax caps, tax deferrals, direct cash grants and over 1 million government-backed loans.
In his summer economic update last week, the Chancellor set out plans for phase two of the Government’s economic response. An ambitious plan for jobs will give a job retention bonus to firms that keep on furloughed workers. The new kick-start scheme will directly pay employers to create new jobs for 16 to 24 year-olds at risk of long-term unemployment. To support the high-employing hospitality and tourism industries, the Government will cut VAT on food, accommodation and attractions from 20% to 5% for six months, and fund an “eat out to help out” 50% discount at participating businesses for the month of August.
Additionally, the Covid-19 pandemic and subsequent lockdown have resulted in uncertainty in the housing market. Property transactions fell by as much 50% and house prices have fallen for the first time in eight years. What is more, any housing market freeze is bad for jobs and businesses whose custom relies on a confident housing market, such as retailers, tradespeople and the construction industry.
As lockdown eased, there were signs that the property market was waking up. It is important to encourage this and to drive momentum. The Government are therefore cutting stamp duty land tax by temporarily increasing the nil rate band for residential property from £125,000 to £500,000, with effect until 31 March next year in England and Northern Ireland. It will cut bills for every person who buys a property for more than £125,000 and will support and create jobs. The average buyer, getting on or moving up the housing ladder, will save £4,500, with a maximum saving of £15,000. These measures have all been carefully designed to protect and sustain our economy, the public finances and the health and well-being of the British public while we weather the impact of coronavirus.
Of course, there is still some way to go to overcome this pandemic. As we do so, the Bill will make its own valuable contribution to the efforts of our health and emergency services across the country. The Bill exempts from vehicle excise duty those vehicles purpose-built to transport NHS products. It introduces legislation to ensure that workers who have returned to public sector jobs to help fight the effects of this pandemic will face no adverse pensions consequences from doing so. It legislates reforms to the pensions tapered annual allowance, so that doctors can spend more time treating patients without facing exceedingly high tax bills.
However, our collective efforts in the here and now cannot come at the expense of planning for tomorrow. In the words of the Prime Minister,
“our long national hibernation is beginning to come to an end”.—[Official Report, Commons, 23/6/20; col. 1170.]
Alongside the measures we have already taken in our plan for jobs to support employment across the country, now is the time to set about reinvigorating the economy and safeguarding our public finances.
Our police, teachers, armed services and many other public sector workers have all played their part in this pandemic, alongside the tremendous efforts of front-line NHS staff. These public sector workers cannot be provided for if the public finances are not protected with a fair and sustainable tax system. Maintaining the corporation tax rate at 19% instead of pursuing further cuts is the right approach—this is still the lowest headline rate in the G20, which demonstrates the UK’s strength as a location for inward investment.
This Government have always been clear that everybody must pay their fair share of tax. We have therefore introduced the digital services tax, legislated for in the Bill. This tax, set at a rate of 2% on revenues from digital services of larger companies, will ensure that digital businesses pay a fair share of UK tax and more accurately reflect the significant value that these businesses derive from their UK users.
As we look ahead to recovery, we must ensure that businesses receive the support that they need. That is why, in addition to all the measures the Chancellor set out last week in his plan for jobs, we have also delayed the extension of off-payroll working reforms to the private sector to April 2021. Businesses need time to prepare for these reforms and requiring them to do so during the pandemic would have been burdensome.
This Bill goes even further to support enterprise in this country, which will be desperately needed in the coming months. This Government remain committed, as ever, to levelling up all nations and regions of the United Kingdom. Britain has a long and proud history of innovation. Increasing the research and development expenditure rate to 13% will allow this to continue for businesses across the country. The structures and buildings allowance rate increase will aid investment in new shops, factories and agricultural buildings, helping to stimulate capital investment across the UK.
We must also acknowledge that Covid-19 is not the only challenge that we face. This Government have committed to reducing the United Kingdom’s carbon emissions to net zero by 2050. The Bill will take us further towards that target. Not only does it pave the way for the upcoming plastic packaging tax but it removes the vehicle excise duty expensive car supplement for zero-emissions vehicles and legislates for a carbon pricing regime now that the UK has left the European Union. Together, these measures will help ensure that the UK’s post-Covid-19 economy is greener than before.
During this Bill’s passage, our daily lives and our economic outlook have changed dramatically. However, alongside the Chancellor’s ambitious package of measures, including most recently the plan for jobs, this Bill represents a strong foundation on which to rebuild our economy and protect the public finances as we weather the impact of the virus. The Bill supports businesses, it supports the vulnerable and it supports our fantastic key workers. For these reasons, I commend it to the House.
Inevitably, my Lords, the March Budget has been overtaken by events and subsequent measures. I think we all recognise that, with the escalating crisis of Covid-19 and lockdown, the Government were faced with an unprecedented challenge which required drastic and radical action.
The measures taken have the benefit of providing cash quickly to individuals and businesses across the United Kingdom. I am sorry to record that the Scottish Government, unable to acknowledge the benefits of being part of the United Kingdom, have responded with churlish denial.
The massive increase in spending has been described as an end to austerity and, in terms of the scale of intervention and the escalation of the budget deficit, that is certainly how it looks. However, I contest that, had the coalition Government not tackled the hangover they inherited from the financial crash, the public finances would have been considerably more fragile than they are. Let us bear in mind that, before Covid-19, the economy was already slowing down and the OBR forecasts were pretty modest.
Now we know that the economy shrunk by 20% in April, and recovery is slow. Billions are being poured into helping people survive the lockdown and measures are trying to stimulate recovery. It is impossible to predict how the economy will recover and what the impact on public finances will be, but a day of reckoning will surely come.
Let me address some of the measures in the Bill. The Minister referred to the reversal of a proposed cut in corporation tax from 19% to 17%. This is projected to yield around £5 billion, but surely that now looks wide of the mark. Some companies may see a profit increase as a result of Covid-19, but surely most will struggle to make a profit or, as recent announcements have shown, even survive. Can the Minister indicate what adjustments have been made to the yield projections?
A couple of measures in the Budget are designed to claw back revenue to the HMRC, but the timing could not be worse. The loan charge proposals have hit many people hard. Some have been able to negotiate a deal with their employers, who effectively pick up the tax liability, but those who have not face real difficulty if they are forced to pay back earnings which they thought were legitimate and have probably spent. The issue of IR35 is one that we have been wrestling with for years. It convulsed the UK offshore oil and gas industry, as my constituency casework proved. Surely the case for further delaying implementation of these two measures is well made, and I hope that the Government will consider it.
The furlough scheme has been widely welcomed, but will all those furloughed have jobs to return to? Or will the Government have to fund increased unemployment, and will individuals be struggling because of the loss of their jobs?
Bounce-back loans totalling £30 billion have been rolled out, but normal due diligence has been suspended by government guarantees. What default estimate does the Government expect from those? Some people have already had access to finance in the form of grants and cheap loans, but many self-employed people have been given nothing. Such people are the backbone of the economy and provide essential, skilled services and they deserve better. Will the Government consider supporting them as they struggle to return to work and to cope with a total lack of income during lockdown?
For the hospitality industry, the VAT cut is of course welcome. However, not every hotel or restaurant can open cost-effectively this late in the season. There are considerable costs in social distancing in hotels and restaurants. For many, it can be justified only for a full season. Will the Government consider extending the VAT cut to boost bookings for what we hope will be a full season next year?
The digital services tax is a small start to what will need to be an international move to ensure that digital companies pay a fair share of tax on profits derived from their operations in individual countries. It is expected to deliver £275 million in the current tax year, rising to £440 million in 2023-24. The objective must be to ensure that digital companies are taxed fairly and equitably in the same way as other companies and pay proportionately.
The stamp duty Bill is projected to cost £3.8 billion, which is offered as a scattergun approach. Would it not have been better to target it towards first-time buyers rather than giving a kickback to many transactions that would have gone ahead anyway? Can the Minister comment on the different approaches taken by Scotland and Wales, which concentrate the benefit on the lower end of the market? Have the Government considered the effect on the lettings market? Will not landlords take advantage of this holiday to put currently let flats on the market? This would cause distress and expense to tenants forced to look for alternative accommodation, which was surely not the intention of the measure.
Finally—I declare an interest in that my wife is a local councillor—can I put in a demand that the Government recognise the crucial role played by local authorities in helping to cope with this crisis? This surely underlines the case for a fundamental review of local government finance so that it is not left at the mercy of short-term whims of the Government, happy to burden councils with responsibilities but not to provide the funding.
I hope that the mantra for moving out of this unprecedented shock is to build a fairer, more sustainable and more caring society. That is certainly what the Liberal Democrats are committed to.
My Lords, I want belatedly to congratulate the Minister on his appointment to the Treasury. I had the good fortune of supporting from the official Box one of his distinguished predecessors, the noble Earl, Lord Caithness, in a Finance Bill debate back in the 1980s. I wish the Minister well in responding to so many speakers today.
The Chancellor set out a sensible Budget in March, and this is a sensible Bill. He has announced further measures since, all of which should support demand through a very difficult time, but we should be in no doubt that the best way to support the economy is to get on top of the virus and enable people to return to work.
When it comes to a temporary stamp duty cut, timing is everything. In the early 1990s, the re-imposition of the duty after a temporary cut may have added to the housing market slump which had then taken root, but I am happy to defer to the noble Lord, Lord Lamont, on that. In current circumstances, the cut could lift animal spirits and hence demand. In any event, I hope that the Chancellor will take the opportunity to look again at the stamp duty regime. Rates of duty are too high; they discourage people from moving. In a rational world, we would follow Ireland’s example, cut stamp duty rates and introduce a self-assessed property tax, but I am a realist and I do not expect this to happen any time soon.
Of course, dispensing largesse, whether through tax cuts or higher spending, is the easy part of the Treasury’s job. The Fiscal sustainability report, published by the independent OBR earlier this week is a reminder of the difficult part. On its central projection, the country will still be a running a deficit of over £100 billion in four years’ time, which is some 4.5% of national income. That suggests to me that we will need tax rises or public spending cuts of at least £50 billion to restore the public finances to a sustainable footing.
Public spending cuts can play a part—in my view, the abolition of the so-called triple lock for uprating the state pension is long overdue—but given the Government’s promise of no return to austerity, tax increases will have to deliver the bulk of the consolidation. For my part, I would recommend a social solidarity charge, payable on all income and with no reliefs. As the economy comes off life support, I encourage Treasury Ministers to lead a national debate about how the country will live within its means in the medium term.
My Lords, I thank the Minister for his observations and applaud the bold measures taken by the Chancellor and the announcement last week. Taking the measures as a whole, the UK is, proportionately, giving a larger amount of fiscal support than Germany or Japan and about the same as America. The latest measures, including the furlough bonus scheme, may partially postpone the cliff edge back to January, but it is difficult to believe that we will avoid a tsunami of job losses.
The hard truth is this: no Finance Bill, no fiscal stimulus, no monetary stimulus can entirely compensate for the effects of restrictions such as lockdown and social distancing. Last week, for example, the Government announced a £1.75 billion package of assistance for the arts. It was well received—as well it might be, because it was extremely generous—but I doubt if it will result in theatres or concert venues putting on a single extra performance. Most of the money will go on mothballing facilities, because theatres would need to sell some three out of four seats. In the meantime, in South Korea, “Phantom of the Opera” is selling to packed houses because social distancing does not exist in theatres.
What is true for culture is true for the commercial sector in spades. Financial support is fine; lifting the restrictions is better and should be the goal, when health considerations of course allow. It would be good if Ministers could emphasise this more. Instead, some Ministers talk about social distancing being here to stay, or face masks being here for the foreseeable future. For an economy like ours, largely service-based, in which services depend partly on human proximity, social distancing is not easily compatible with them.
Sir Patrick Vallance has said that there is no reason why people should not work at home, but we have to consider the economic effects on our offices, on the City of London and on the hospitality sector. There is much debate about the cost of the Chancellor’s measures, which he has promised to address in the autumn. He does not need to act then, but he does need to set out a timetable to which he will consider acting in order to show that, long term, the finances will be sustainable.
There is, however, another cloud approaching: private and corporate indebtedness. The longer restrictions go on, the greater this becomes. Already in the US, some banks have made huge provisions. The new head of the OBR has warned of the possible need for a massive write-off of toxic Covid debt in order to stop the economy stagnating. The Chancellor has already rejected this, but I fear he may find, as politicians so often do, that words are for eating. He has been bold and I applaud it, but the difficult part is yet to come.
My Lords, we need to recall that, in attempting to increase revenue, by increasing tax we have in fact reduced revenue in stamp duty terms. This a lesson we need to learn for the future. I ask the Minister to look very closely at how this tax is reintroduced—not only its thresholds but the rationale for it. Simply imposing a large amount of tax does not in fact produce enough revenue for the Treasury.
There is an overwhelming fear in the hearts of many people in this country about the enormous amount of money we are borrowing. There is no alternative, but having been taught in recent years to believe in the age of austerity and the dangers of spending too much money on the public sector, many people fear that we are embarking on a journey whose destination and the time it will take we do not know.
There is an underlying issue when we talk about trying to regenerate the economy. Walking into this building this morning—and indeed last week, for the first time since March—one could see the problem with one’s own eyes: the people are simply not there. They are not there because they are afraid, or they can see that there are alternative ways of working—Sir Patrick Vallance tells them one thing, the Prime Minister tells them another. The fact is, the streets are largely empty in this part of London, which is symptomatic of the rest of the country. We need to get our act together, bearing in mind that, if there were to be a second spike, our economy would be in colossal difficulty.
In the 1970s, this country made a huge mistake in turning its back on manufacturing. We are not making things, and our service sector is vulnerable to very short-term issues. As has already been mentioned, the furlough was a bold announcement. But, speaking as someone who takes a keen interest in the APPG on aerospace, I know that if we do not find a sectoral resolution for aerospace, we will have great difficulties. We are number two in the world in aerospace, but that could very quickly slip away from us.
We need to refocus our economy and take this opportunity, but we need to remember that making things is how we generate the most revenue, and we are simply not doing it.
My Lords, I want to make a few remarks about the emergency stamp duty provisions announced in the Summer Statement. Cutting stamp duty to stimulate the economy is a classic response to a recession. It stimulates not just the housing market but economic activity around house purchases. At least, that is the theory. The evidence on just how much genuinely new activity it stimulates is patchy, to say the least. If you are one of the hundreds of thousands of workers who has lost their job or expects to, this will not make you move house. Most likely, it will bring forward some planned purchases, but I doubt it will stimulate many new ones.
So, what will it do? First, it will reward people for living in the south-east. The Resolution Foundation has called the measure
“a tax cut for Londoners”.
As my noble friend Lord Livermore reminded us, the average gain if you buy a house in the capital will be £14,200. The average gain in the north-east will be zero.
Secondly, this is a cash boost for buy-to-let-landlords. Experts suggest that the move will certainly lead to greater transfer of buy-to-let properties into limited company structures to take advantage of mortgage tax relief, so that is one activity that will definitely be stimulated.
Thirdly, sellers will win, as they will now be able to renegotiate asking prices to take advantage of the extra cash available to buyers. So, another activity this will stimulate is arbitrage between buyers and sellers. Fourthly, sellers may also win when March comes around, as price spikes occur when the cliff edge of the end of this tax break looms. What happens to the property market after that is anyone’s guess.
Lastly, relatively speaking, first-time buyers will lose, unless they are wealthy ones in London, because the stamp duty proposal spells the end of the period of using the tax to give preferential help to those who have never owned property before. So the stamp duty measures will generate lots of activity and may well pull forward some transactions, but at the price of greater regional inequality, loss of policy focus on promoting home-ownership and first-time buyers through stamp duty tax, and uncertainty and volatility when March of next year comes into view. Is this really where the Government’s fiscal focus should be at a time of unprecedented shocks to jobs, growth and confidence in our economy?
The unintended consequence of this, of course, arises from a more fundamental problem: the stamp duty itself. It is a bad tax. It applies only when a house is sold, so discouraging mobility and first-time buyers, and its cliff edges mean that there are perverse incentives to distort the price and save on tax. The sensible strategy on stamp duty, in my view, would be to abolish it and tax the huge windfalls that come from owning housing property, particularly for the top quarter of our population, in other ways: a housing services tax, for example, as recommended by the Mirrlees commission many years ago. I also see from the newspapers that the Chancellor is passing an interested eye on revisiting a capital gains tax. But I live in hope that perhaps he and the Treasury will be persuaded to use this moment to think about a more sensible general approach to taxing assets, especially housing, in ways that the curious side-effects of this stamp duty proposal suggest are urgently needed.
My Lords, when we debated the March Budget in this House a week after it had been delivered, coronavirus had already completely transformed the outlook since the Chancellor’s Statement. Today, the Budget seems a lifetime ago. GDP figures for May, which were well under expectations, underline the scale of the challenge we face. Alongside that disappointing news came alarming data from Siberia, which provided what scientists involved in the study, including our own Met Office, describe as unequivocal evidence of the impact of climate change on our planet. So, as we rebuild from coronavirus, it is vital that a net-zero economy is at the heart of our approach.
Coronavirus has already shown us what happens when something we cannot control gains unstoppable momentum. We need to heed that lesson with regard to climate change, and that means understanding the urgency of the moment and acting upon it. The one thing we do not have is the luxury of time. Given the three-minute time limit, sadly, nor do I, so in that very limited time available I shall focus on two areas. The first is dramatically improving the energy efficiency of our housing stock. The second is seizing the opportunities of the hydrogen economy. Liberal Democrats welcome the injection of significant funds into home energy-efficiency measures which were announced by the Chancellor last week and which we have long called for. The scheme aims to retrofit 650,000 homes, which is ambitious over the short term envisaged, but 20 million homes need attention if we are to have a hope of meeting our net-zero target. We need a commitment to year-on-year funding of this sort of magnitude over a 10-year period, as a minimum. Without that sort of long-term investment and a stable policy environment, the industry will not be able to invest in the skills required, and this will be chalked up as just another well-intentioned but ill-designed green homes scheme.
Secondly, I turn to the opportunities and imperatives of developing the UK’s hydrogen economy. The All-Party Parliamentary Group on Hydrogen, of which I am a member, recently published a report on the prospects of the hydrogen economy. It notes that the UK is well positioned to become a global leader in the technology. ITM Power, a British company based in the great city of Sheffield, is just one example of that opportunity. It is shortly opening what will be the world’s largest electrolyser factory, positioning it to supply the burgeoning demand for green hydrogen around the world. But the APPG report also warns that, despite the opportunities, we risk squandering our comparative advantage and throwing away our chance to become the global hub of this new industry. It is essential, therefore, that the Government do not delay any further in announcing a hydrogen strategy and putting a massive investment boost behind a UK-led hydrogen economy. I hope the Minister will be able to give us some hope that the Chancellor recognises the imperative of urgent action on this issue.
My Lords, I begin by saying how much I agree with the remarks of my noble friend Lord Empey. This is my first day back in the Chamber, and in London, since 18 March. I came down yesterday from Penrith on an 11-coach train. There were two people in my carriage, 30 on the whole train, and I am appalled at the empty streets and inactivity in London: that has to change.
I wish to comment on part 2 of the digital services tax. I approve of this tax, but not because these companies are indulging in so-called tax evasion—they are not, they are simply operating under all the existing rules agreed with the OECD. The trouble is that these rules are now way out of date, because we need the revenue from these companies to repair the damage they are doing to society.
I detest Twitter, Facebook and all other forms of anti-social media. Every week, feeble Governments around the world beg them to take down vile paedophile stuff, terrorist-supporting websites or fake news, and every week, these new masters of the universe tell us to clear off. How many millions of children around the world are now traumatised because of online Twitter abuse? If we cannot get them to stop their activities, which are damaging millions of people, then we have to tax them so that we have the resources to deal with the problems they have created, just as we tax tobacco to get more money for the NHS. In the last 20 years, Chancellors have taxed petrol or diesel more highly to deal with climate change—leaving aside the disastrous policy of Gordon Brown and the then chief scientist, David King, to replace petrol with diesel, which was going to be better for us. These digital companies should pay a digital tax so that we have the money to spend on children’s mental health, anti-terrorist activity and taking down paedophiles.
Then I come to Amazon. I use it a lot and I hate doing so. I desperately try to use physical, local shops, just to keep them going, but it is a losing battle, because Amazon, with its giant warehouses, pays hardly any rates and can undercut everyone else. We all know that our high-street shops are being destroyed, and Amazon is a major destroyer, aided by a rating system that is no longer fit for purpose. These giant Amazon distribution centres are treated like a big farmer’s shed, at ridiculously low rateable values, whereas shops on the high street have excessive rateable values. The Amazon distribution centres are, in effect, giant retail shops and should be treated as such.
Last year, Amazon, which made £8 billion from its total sales in the UK, paid a derisory £63 million in rates. The Debenhams rates bill is £80 million per annum; House of Fraser’s is £18 million per annum. Is it any wonder that these shops are being pushed to the verge of extinction when up against Amazon? John Lewis has a rates bill of £170 million and a net revenue of £172 million, and it did employ 80,000 people: a great British company which looks after all its workers is now just one of many being crucified by Amazon. The owner of Amazon makes $9 million per hour; he could pay the annual UK business rates for Amazon in just nine hours’ trading. Therefore, while I support a digital services tax—but at a much higher rate than 2%—it is only part of the solution. We must have urgent business rates reform to save our high-street shops.
My Lords, I broadly welcome most of the measures the Government have taken since the onset of this fiscal emergency. I think Her Majesty’s Treasury needs to be congratulated on the dexterity and speed with which it has risen to these unprecedented challenges. In a sense, our heroes are the operators of Whitehall: the Civil Service has stepped up to the mark and done an extraordinary job in the last several months.
I want to start with the reference that has been made to the health emergency being equivalent to fighting a war. If that analogy holds, surely a solidarity tax, already mentioned by the noble Lord, Lord Macpherson, would be the appropriate response, because that is what is normally used in a war. I accept that one of the unique features of this fiscal emergency is that there is both a demand and supply-side shock, and that the measures taken need to be very carefully calibrated, but I wonder whether the Minister is completely au fait with the German example after reunification in 1991, when a solidarity tax surcharge was introduced across the board: on individuals, SMEs and larger corporations. It was set at a flat rate of 7.5% for one year—it was reintroduced several years later, for a different reason—but it gave an injection to the East German economy for the vast amounts of money that had to be spent in bringing that up to the level of the West German economy.
Given where we find ourselves on the need to ultimately deal with the debt burden, will the Government consider a progressive version of that kind of programme, perhaps to last for two years at 1% for basic rate taxpayers, 2% for higher rate taxpayers and 3% for additional rate taxpayers? It would not breach the Government’s manifesto commitment not to bring in higher taxes in the sense that the public now want—I think 66% is the figure in recent polls—to pay higher taxes to support vital public services such as the NHS and social care.
My second point, very briefly, is about the stamp duty land tax. I wish it had been longer-term relief for first-time buyers and not a rather blunt tax which will benefit second homeowners, buy-to-let landlords and all those who are the last people to need assistance at this point.
My Lords, the OECD estimates that the fall in economic activity in 2020 in the UK will be the worst in any developed country. So we have both one of the worst Covid-19 death rates and the worst economic consequences.
In the United States, after the 1929 Wall Street crash, the economy sank into the great depression, with 25% unemployment. Recovery began only four years later, after President Roosevelt took office in March 1933 and launched his New Deal. In 2008, only bold Labour government action saved the UK financial system from complete collapse and stemmed the slide into slump. The British economy was growing again by the final quarter of 2009 and well on the way to recovery in 2010 when savage Tory austerity reversed it.
In both cases, it was the state, not the private sector, that got the economy moving again. Capitalism has no innate tendency to return to a full employment equilibrium state, as Keynes made clear. We must look to Government to stimulate recovery when a severe shock hits the economy hard. Waiting on the private sector to do the job would be like waiting for Godot.
The UK economy now faces its worst peacetime predicament for 300 years. British business is on life support. Industrial towns that used to brag about their bustling business centres now fear seeing them turned into shuttered trading estates or gone-out-of-business parks. Without massive state intervention, many of Britain’s businesses would already have gone bust, taking millions of families with them.
But 10 years of Tory austerity cast a long and bitter shadow. It took £150 billion of spending power out of the economy by 2020, 80% of it in public spending cuts. The Chancellor’s plan for jobs brings forward nearly £9 billion of public investment into 2020 and 2021. Alistair Darling—my noble friend Lord Darling—brought forward £29 billion of public investment into 2009 and 2010.
No one has accused the present Government of excessive spending. No one says that their budget deficit is too big or their debt dangerously high. No one has mentioned the Cameron-Osborne mantra of “maxing out the national credit card”. Today there is widespread acceptance that a national emergency warrants an extraordinary response, and that public finances must stand the strain. Even the Prime Minister concedes that, at a time of national crisis, big budget deficits and rising national debt are a sign of an effective corrective policy, not a mark of irresponsibility. In other words, all their attacks on the last Labour Government were false, and a decade of Tory austerity put Britain through years of pointless pain.
My Lords, I agree entirely with my noble friends Lord Blencathra and Lord Empey. They could not have hit the nail more clearly on the head. On the way to the station this morning to come down on an 11-carriage train from Stoke-on-Trent, with two people in my carriage, I listened to Ken Clarke, the former Chancellor, on Radio 4—as I am sure many of your Lordships did—deliberating on doom and gloom. When I got to the station, I realised what he was talking about.
The Government have done very well with their measures—furlough, bounce-back and this sort of thing. In my carriage on the way down here, there was one other person. He was a businessman who had an engineering company dealing with energy in Buxton in north Derbyshire, fairly close to where I live. He told me that he had not taken a penny in furlough money but was finding it incredibly difficult. Much of his business was done in London, and he was finding it difficult to travel here to meet the people whom he uses as financiers. A message came to me very clearly indeed: we have to get back to work and we have to do it soon.
Following on from what my noble friend Lord Empey said, I will mention two things which are key to recovering from this terrible situation. The first is training, retraining and the teaching of skills. I come originally from near Shrewsbury. Very close by is Ironbridge, the birthplace of the Industrial Revolution. In Bridgnorth, a town not that far away from there, there is an excellent firm called SD Technology, which runs training, retraining and skills courses. It is about to go under because of lack of funding, and we need it badly. Can I ask my noble friend on the Front Bench whether I can put his officials and SD Technology together so that they can discuss the way forward for the very necessary teaching and training of skills?
My second point is that I firmly believe that large infrastructure projects are a serious key to recovery. I have never been a fan of HS2—it is a dreadful scheme—but in these extraordinary times in which we find ourselves, I am sure that it is a key to the future. It will employ a lot of people. It will produce a lot of employment elsewhere in secondary places. With all these large infrastructure projects, so many things trickle down to fund other things. We really need to do that. It is much better than furlough. It is the way forward.
My Lords, this is clearly our opportunity to comment on the Chancellor’s economic policy. He has an unenviable task. The unemployment forecast is grim, particularly for the under-25s, and a recent forecast for the manufacturing industry shows the cost of the pandemic at £37.5 billion and recovery postponed to 2022 at the earliest. Obviously I welcome the overall thrust of his actions. Keynes is back, and hopefully austerity is dead. But the job of an opposition party is to provide constructive criticism and to suggest alternatives.
First, the criticism. Will £1,000 per employee brought back from furlough really provide an incentive to employers? For example, if a company employs 20 people at £15,000 per annum and brings them back at a cost of £300,000 per annum, will a £20,000 payment provide a real incentive to bring them back?
There is admirable aspiration in the Chancellor’s proposals for young people, but the proposal that 16 to 24 year-olds should receive a minimum wage for six-month work placements requires 350,000 work placements. In reality, as I am sure the noble Lord, Lord Hain, would agree, there is no chance of business offering 350,000 work placements. A similar scheme, the Future Jobs Fund referred to by the noble Lord, Lord Livermore, introduced after the 2008 crisis, produced only 100,000 placements. If the Government are modelling themselves on Roosevelt’s 1930s New Deal, as Will Hutton has suggested, do we not need an organisation such as a national youth corps as an umbrella organisation to marshal placements? Otherwise, I fear these proposals will be more aspiration than reality.
I have three suggestions as additions to the Chancellor’s policy. First, why not raise the national insurance threshold to the level of the income tax threshold? That would provide an incentive for employers to take on staff and, obviously, would help the working poor. Secondly, we should establish an entity to take on the billions of pounds of toxic loans that will remain after the virus, as was done after the previous crisis and as is recommended by the leaders of all our major banks. Thirdly, there is Brexit. The government policy is clearly to crash out and blame Covid, but that will not work. In the current climate, will we really replace the European Union with China as a major trading partner and import chlorine-washed chicken from the United States as a price for a US trade deal? The only rational policy is to conduct negotiations to keep us as close as possible to the European Union, our largest trading partner. If we do not do that, I echo the comments made by a number of commentators on our Brexit policy, who have gone back to Enoch Powell’s infamous “rivers of blood” speech in a different context:
“Those whom the gods wish to destroy, they first make mad.”
Sadly, all of us will be the victims of this lunacy.
My Lords, I cannot say much about the budget except that it is inadequate for the scale of the problems ahead. We know that coronavirus has hit us hard and shaken all our systems, but the scale of the climate change crisis will knock all that out of the park.
I will set out some of the budget figures that I think are necessary, which are from the Green Party’s fully costed 2019 manifesto and which will show the Government what a truly ambitious green new deal budget would look like. It would include: £12 billion invested in renewable energy generation; £24.6 billion for insulation and deep retrofitting of homes; £10.2 billion for 100,000 new social homes built every year by local authorities; £6 billion a year for green research and development, and another £3 billion a year for green industrial processes; £12.2 billion a year for upgrading and electrifying railways—no HS2—and £2 billion a year for upgrading cycleways and footpaths; £10 billion a year to fill the black hole in local authority funding created by a decade of Conservative austerity; a £3 billion a year climate adaptation fund, to be administered by local authorities; and £6.5 billion a year extra international aid, to help all countries meet the climate and environmental emergencies.
The corresponding tax measures would include: a £76 billion carbon tax; a £12 billion increase in corporation tax; £3.5 billion saved from scrapping HS2—hooray; and £2.2 billion saved from scrapping Trident nuclear weapons.
We can do all this, and it is actually a good time to do it; when we have had such a huge crisis, people are ready for a different normal. These are the scale of figures that we need to face up to the reality of the climate emergency. The Green Party set these figures out in last year’s general election manifesto, but the need for a huge fiscal stimulus has become only more obvious. Our country can move rapidly to a high well-being, high-employment, net-zero carbon society, but we need the Government to make the investments to achieve that. With such low borrowing costs, it is time to borrow and invest in the green future. The question is simple: if not now, when?
My Lords, I will concentrate my remarks on the stamp duty land tax Bill. This is a welcome move by the Chancellor to reduce the amount of stamp duty payable on property sales in the UK. It will help the economy as the country gets back on its feet and will help people as they assess their situation and make decisions about moving or buying a home.
However, the Bill is lacking in specific help for first-time buyers. Previously, there was an incentive for first-time buyers to gain a foothold on the property market, as compared with the people who bought properties as their second home or properties to let, thereby depriving young first-time buyers, who primarily start out in life on lower salaries than their older contemporaries. Many young people will now be hit with a double whammy of finding it harder to get or move jobs as the ongoing certainty in the jobs market continues, and then having to compete for housing without any help or incentives. Can the Minister say whether the Government will look more closely at what can be done for first-time buyers so that they are not priced out of the market and deprived of buying their first house? They need incentives, as this Bill could well encourage second home ownership, to the detriment of young people.
I sincerely congratulate the Chancellor. The Bill before us is sensible, with sensible policies. However, the key point which I remember from my economics lectures is the multiplier effect. The more people spend, it affects other levels of society, and that is the whole basis of the key to recovery.
Our economy in May was forecast to hit 5.5% but it hit 1.8%. However, there was an interesting test market there, which was the recommendation on 13 May that employees in manufacturing and construction should return to work, which they did. Sadly, however, someone in government decided that they should not take public transport and should drive to work. That was an error. Will it be better in June? Certainly, lockdown is being reduced, particularly for the services category. However, households remain very fearful, and the social distancing rules are likely to limit consumption of services until the population is vaccinated. Yes, some pent-up demand was unleashed in retail in June, but the footfall numbers are still way down on last year.
In my judgment, all employees should now return to work, in both the public and private sectors, and should not stay at home. All civil servants should stop working from home, and all Parliament personnel should stop working from home and come in to Parliament. The same applies to the private sector. We must, for their sake, reassure people that they will be safe, and they need to use public transport. Indeed, we need also to recognise that some of the services that are supposed to have reopened have not reopened. Around 50% of pubs and restaurants that in theory were going to be open are not yet open, and do not show much sign of doing so.
Frankly, social distancing going from two metres to one metre-plus is not progress. You either go from two metres to one metre or do not bother at all. That is the only way we will get back to normal life.
I say to my right honourable friend the Chancellor that the twin challenges are that, as unemployment rises just as government support fades, he will need to watch it very carefully, and he may yet need billions more. If that happens, I say to him: for heaven’s sake, make sure that you do it.
First, on the stamp duty issue and the problems facing young people, welcome though they are, the stamp duty proposals may have very perverse consequences for the most vulnerable people in the rented sector. Yesterday, I received the following message:
“Three days ago our landlord contacted us to say that he intends to put our flat on the market as a direct result of the proposed tax relief. The effect of this is increased anxiety, uncertainty and instability in a time when Covid-19 has heightened these feelings. While I understand the intention of the Bill is to stimulate the market and economy, the effect for those who rent is to precipitate an unplanned and unwanted search for a new home, affecting mental health, and at a time of financial uncertainty for many.”
This is one personal instance to illustrate what my noble friend Lord Livermore said so eloquently. This is the voice of Generation Rent, for whom the prospects of owning their own home have disappeared over the horizon, who face a lifetime in rented accommodation and who could now well lose their jobs in the next six months.
The Government are totally silent on the private rented sector, so my first question to the Minister is: how does he think people such as my correspondent should be protected? How would he answer that email?
Secondly, will he ask his right honourable friend the Chancellor to take a good look at the 12 recommendations in yesterday’s report from the Affordable Housing Commission, which argues strongly that the way to lift society, as well as parts of the economy, is by investing in a massive building programme for social and affordable housing? Housebuilding is already badly hit by Covid, especially small firms. We need a bold and real new deal for housing which is not about deconstructing the planning system or turning offices into the slum dwellings of tomorrow.
Thirdly, will the Minister ask the Chancellor to focus more resources on a long-term fund for young people and their future? The kick-starter fund is a good place to start, but there is no indication that it will meet the scale of need of those young people, who now face such a different future. They have already been landed with Brexit: 400,000 young people were out of work before the crisis; a further 800,000 are set to enter the labour market. They will be first in line if we have 12% unemployment or more by Christmas. Moreover, the Treasury’s independent forecaster has said that as much as a fifth of the 9 million people whose jobs were furloughed on the scheme will be made redundant.
I very much look forward to hearing how the Minister will answer the questions raised by my noble friend Lord Livermore. My questions to the Minister are, finally: will the money promised in kick-start create new jobs incentives, where new and green jobs can also be created—careers in tourism and environmental technologies, for example? Will it support people to remain in employment once their apprenticeship finishes? Who will get priority, and how will it improve on such a poor track record of apprenticeships so far?
The Prime Minister, in typically inflated language, says that this is all about a new deal. How I wish it were. How I wish it had the scope, salience and success of FDRs original New Deal.
My Lords, we are in unprecedented times. We had a weak economy and have now been hit badly by coronavirus, which itself is having a massive effect globally, which will affect our future trading figures. Pandemics have long been on the UK’s risk register. The Government were distracted at the beginning of the year, wanting to project the union jack onto Big Ben on 31 January, rather than looking at what was happening in China, South Korea and, by then, on our doorsteps in Italy. The Government have also decided that we are leaving the single market and the customs union, decisions which cannot be laid at the door of the referendum, when those promoting leave promised that that would not happen.
The Government have now decided that we will leave the transition period with the EU at the end of the year. Have the Government made an assessment of leaving the EU in December or extending the transition period? If not, why not, and if so, will they publish it? One would hope that the Chancellor would apply his agile brain to this challenge. He should be commended for a number of his measures in the pandemic. As he looks to the future, it is the most vulnerable in society and building a green economy that must be key. There must be worry about older people, who may not get back into the jobs market again. There is, rightly, huge concern about unemployment levels among young people.
We compete globally as countries such as China and India are rising, with a great emphasis on training their young people, but we are undermining our higher education sector by leaving the EU, reducing our ability to join mutual research programmes and attract staff and students. What level of unemployment do the Government anticipate and what analysis have they made of it on an age and regional basis?
We have also become extremely grateful to those from overseas who have been helping in our hospitals, care homes and other essential services. The measures here set in place help for some of those in this crisis. The Government have suddenly seen how important they are. What are we doing to make sure this is sustained? Are we really now going to turn our backs on them?
As it looks like we are not heading for a V-shaped recovery, I look forward to the Minister’s response.
My Lords, the Chancellor has responded to the Covid crisis with unprecedented cash handouts. Some are clearly well judged, the furlough scheme most obviously. Others, however, look off target. When the head of HMRC, Jim Harra, questions the wisdom of measures, it would surely be wise to pay attention, yet the Government took the rare step of issuing a statement to HMRC, insisting that it should go ahead with implementing two measures of highly dubious worth.
The first is a bonus scheme to reward employers for doing what they were probably going to do all along: taking back some staff who have been on furlough. The second is a £10 bribe to eat out. Do people really seem likely to respond by going out to eat because of a £10 bribe when they were frightened to go into restaurants beforehand? I doubt it.
I also question the wisdom of the changes to stamp duty, as have others: £3.8 billion is a large amount to spend to encourage people to move house when our major problem is the shortage of housing. It seems slightly weird to bribe people to buy second homes or to swap their second homes when too many people in this country do not have a home of their own. I thought we were going to use this opportunity to build infrastructure and invest in our capital, but that is not happening with the changes to stamp duty.
Others have remarked on the mixed messages coming from government on distancing and whether people should be going to the office, and I echo that. It is not helpful when the Prime Minister and the Chief Medical Officer are giving completely opposite advice to the public.
How much more confused will the public be when, in just a few months, Britain finally severs its relationship with the EU, and business has to cope with an onslaught of new form-filling and costs? Even the Trade Secretary has raised doubts about the preparedness of the UK’s ports to cope with the new regime that will dawn at the beginning of next year. We may need a job creation scheme, but 500 new members of the Border Force is a very unhelpful way of creating new jobs. Who is going to pay for these new jobs when the economy takes yet another hit? Brexit is an unnecessary onslaught on top of Covid. Can the Minister tell me that he really believes that it is the right time for such a drastic move?
My Lords, it is unfortunate that because, during the worst recession in two centuries, we have not had a full debate on the economy, we have to use this debate on the Finance Bill, but so be it.
Most recessions are the result of a shortfall of demand. This, uniquely, is caused by suppression of supply. There is considerable pent-up demand. I agree with my noble friend Lord Lamont, who said we must end the lockdown and encourage people to return to work, and Parliament itself and this House should set an example in that.
If we do so, and if the economy is enabled to, many businesses will spring back—more rapidly, I suspect, than some suppose—to full activity, but some sectors will have permanently shrunk. Many viable businesses have spent the last few months devising ways to produce previous levels of output with fewer employees, so we face a vast potential increase in unemployment, and unemployed buildings and other resources. We need to make it easier and quicker for new businesses to set up and expand, and for existing firms to expand, grow and diversify.
During the crisis, we have learned that public regulatory bodies can, in an emergency and under public pressure, take in days and weeks decisions that previously took months or years. We need to ensure that they do so henceforth to enable businesses to increase their activities rapidly. In most areas, we cannot scrap regulations, so we should accelerate decision-making in planning, building controls, environmental measures, health and safety and so on by, for example, setting time limits. If those time limits are not met, consent will be deemed to have been given. Every department should be required to publish at six-monthly intervals the times that it takes to give approvals or refusals or to make decisions when requested by business. Every Select Committee should hold those departments to account. Past experience has shown that the British labour market is more dynamic than any other in Europe; if we do this, we will be able rapidly to bring people back into work in viable and productive employment.
My Lords, I completely agree with the noble Lord, Lord Lilley, that we need a more efficient state. We need to pay attention to that in this crisis.
In his speech this morning, the Prime Minister predicted that there will be a return to normality by Christmas. I tend to be with George Eliot on these matters: of all mistakes in life, prophesy is the most unnecessary. I do not think it at all likely that we will be back to normal by Christmas, but who knows? Anyone who tries to prophesise is almost certainly making a mistake. However, we must have public policy in the midst of a crisis where, as the Japanese famously say of politics, “An inch ahead is darkness.” The question is: what should that policy be?
Among those who are more reputable economists than me, there are three different models: the post-crisis situation could be L-shaped, V-shaped or U-shaped. The truth is that no one knows whether it will be L-shaped, V-shaped or U-shaped. The right stance for the Government, who hold our destinies in their hands, is to observe the precautionary principle. Since there is a distinct possibility of mass unemployment after this crisis on a scale that we have not seen in recent history—my noble friend Lord Livermore said that the economy has contracted more this year than in any year since, I think, 1706—surely the right precautionary principle for the Government is to work on the assumption that the post-crisis situation will be L-shaped; that is, with a big shock in demand and supply, which will continue. Significant efforts by the Government to boost both supply and demand will therefore be required.
That broadly seems to be the Government’s policy, except that they make announcements then put time limits on them. At the moment, they have to do that because they can only see a certain period ahead, but I look to the Minister to assure us that, if we are in an L-shaped post-crisis situation with a massive contraction of both supply and demand, the Government will continue to provide the economic support that they have done.
On the actual measures, let me be frank: I agree with some and I disagree with others. I agree strongly with the measures taken in respect of youth employment, such as the kick-start scheme. I am sceptical about the stamp duty cut. I am not a great fan of giving people £10 to eat out when many cannot even afford to eat in. We need ceaseless activity on the Rooseveltian principle in this crisis. I will not criticise the Chancellor or the Minister for taking initiatives that involve action to try to tackle the roots of a supply and demand crisis just because I may happen to disagree with particular measures. Inaction is the great crisis that we potentially face, not too much action, particularly in respect of youth unemployment, where the kick-start scheme is vital.
I do not have time to continue. Will the Minister give a commitment that the Government will do all that they can to maintain the kick-start scheme and, if necessary, give a direct and explicit commitment to employing young people who face unemployment after this crisis? If I can break my own rule and engage in some prophesy, the big thing I fear is mass youth unemployment after this crisis, which would be unconscionable.
My Lords, I will address my remarks from the perspective of small business. As other noble Lords have said, there is much to be welcomed in this Bill, especially the £3.7 billion to support jobs and the help for our struggling hospitality sector.
However, an eye-watering £9 billion has been allocated to the supporting jobs programme. This will be largely dead money and not well spent. Either a job is economically viable enough to be retained or it is not. I do not think that a £1,000 pat on the back for keeping on someone whom you already need will change the decision if the job is not viable.
Some categories of people have been left out, such as newly self-employed people and company directors who rely mainly on dividends for their remuneration. I know that the Chancellor has steadfastly resisted the pleas from representatives of these two categories, but many entrepreneurs—those arguably at the most precarious stage of their journey and who receive awards only when they have been earned—will be lost to the economy at a time when their willingness to take risks is most needed. Rather than showering £9 billion on companies for workers who would have been retained anyway, a small fraction of this money could have saved tens of thousands of wealth generators for the future.
Finally, I make a plea on behalf of those companies whose ability to borrow will be blighted to the tune of over £1 billion—possibly far more—by proposed changes to the Government’s Crown preference policy. Floating charge creditors and unsecured creditors, such as pension schemes, would be leapfrogged by HMRC in any subsequent insolvency proceedings. Who is going to lend when they could lose everything if the company to which they are lending goes bust? This will seriously hamper the recovery, especially for small businesses. The insolvency and restructuring profession has been clear that the policy will make it harder to rescue businesses from administration and will reduce the likelihood of successful CVAs. This measure should be paused, at least until the full economic impact of Covid-19 is known. I urge the Government not to help with one hand and take away with the other.
My Lords, I will refer to the Stamp Duty Land Tax (Temporary Relief) Bill. I declare my relevant interests as recorded in the register.
It is obvious that whoever designed this policy does not understand the housing market. The timing is wrong and the wrong groups are targeted. First-time buyers will not primarily be the ones to benefit from the stamp duty reduction, as many noble Lords have said; it will be investors and those with buy-to-let portfolios. Foreign investors will also see this as a window of opportunity to invest in the UK property market, both to benefit from the current stamp duty reduction and to invest ahead of the 2% rise in SDLT coming into effect in April 2021. First-time buyers will find themselves squeezed out of the market yet again.
As I mentioned, the timing is all wrong. It is too early to stimulate the housing market. As the furlough scheme comes to an end in October and the end of the Brexit transition period looms, a massive wall of unemployment will hit the country at the end of the year and early next year—that is a fair prediction. Mass unemployment always impacts on the housing market. With the end of the stamp duty holiday and the impending 2% additional SDLT rise for foreign investors in spring 2021, the housing market will most likely come crashing down by April 2021. That is when a stimulus really will be required.
Instead of the current policy, Her Majesty’s Government should exclude buy-to-let investors, second home owners and foreign buyers from the proposed stamp duty reduction. This would avoid temporarily overheating the housing market and primarily benefit those who really need help—first-time buyers—while giving a real boost to the housing market, which provides many jobs and so much revenue for the Government: £11.9 billion in 2018-19.
My Lords, I too start by thanking the Government and congratulating them on the measures that they have introduced so far. I largely agree with my noble friends Lord Shrewsbury and Blencathra, and the noble Lord, Lord Empey, that we now need to move fast and encourage people to go out and back to work. I want to focus my attention on small and medium-sized businesses. In my own city of Leicester, we are in a second lockdown that only yesterday was extended. Many businesses will now look for further support from the Government, and I hope my noble friend can confirm that I can tell them that help will be available. Grants of £10,000 and £25,000 were issued for businesses at the start of the lockdown, but if money is still available in local authority coffers, it should be reassigned to provide further help for struggling businesses in cities like my own, because we are going to have to work even harder to ensure that they do not close down.
I would like my noble friend to speak to colleagues about skills, an issue raised by my noble friend Lord Shrewsbury. It is critical that in cities like mine where manufacturing was the main driver of economic growth, a skills programme be provided so that manufacturing can return and help support economic growth in the country. I am thinking in particular of the fallout from PPE production, which cities like Leicester and others across the East Midlands could deliver. Can my noble friend assure me that every step will be taken to put in place a skills agenda for young people in these industries? The spotlight has been shone on Leicester in recent days because of poor working conditions and workers being paid less than the minimum wage. Let us eradicate these practices and put in place proper working conditions, training and skills, so that not just the people but their local economies and the national economy as a whole can benefit. I hope that my noble friend’s response will be positive.
The Minister has talked about the digital services tax. That is a small step on the long road to properly taxing the digital economy, as called for by the noble Lord, Lord Blencathra. The noble Lord, Lord Bruce, told us that in this financial year, the digital services tax will raise £279 million. That is a small but welcome step in the right direction. In directing this tax at large companies, the Government are rightly aiming it at those which have long practised so-called “tax optimisation”, which, translated, means choosing where you pay tax. The IMF is constantly pointing out the revenues lost through these activities, so the Government are right to separate out these multinationals from domestic companies which have much less opportunity to optimise their tax.
The 2% tax will be paid by businesses that provide online marketplaces, search facilities or social media services in the UK to residents and other users. The definitions are fairly detailed, but some companies operate both online and offline. Are the Government satisfied that these can be properly identified? Part of tax optimisation can mean that digital and non-digital activities are separated, and the digital element located outside the UK. A study by Oxford University in 2019 showed that more than 50% of the subsidiaries of foreign multinational companies active here reported no taxable profits in the UK. Yet a third of the companies that received coronavirus loans under England’s largest scheme are substantially owned in a tax haven. Some of these companies have also been in receipt of job retention funds, grants and emergency loans. This is perceived by the public as unfair and is yet another example of the unfairness brought to our attention by the pandemic. Surely the quid pro quo must be a commitment to better behaviour in matters regarding tax.
I do see a glimmer of hope. There has been quite a shift—companies are acknowledging that public opinion requires them to recognise that they also have a social purpose. Indeed, only last week, HSBC reported some evidence to show that companies which focus on these strategies are weathering the consequences of the pandemic better. I welcome the digital services tax, but it is only an early step. Do the Government have further steps in mind?
My Lords, the expansion of IR35 has been postponed for a year. That is a small mercy, but a fair balance between the employed and the self-employed needs a more thorough reckoning. First, for the same reasons as now, the economy will not be in sufficient shape by next year to take the IR35 risk to workforce flexibility, nor for companies to take the burden.
Secondly, the fix is simply a tax fix that ignores the reality, recognised by both the Office of Tax Simplification and the Taylor review: that there is a set of flexible, dependent workers who are part way between being employed and self-employed. The Government are roping them in to tax and NI as if they were employed, on the basis of tax fairness, but leaving them out in the cold when it comes to employment rights and benefits, which is clearly unfair if they pay the same.
Thirdly, along with the aid given to the self-employed during lockdown, the Chancellor has indicated that a revision of national insurance and the coverage it provides for the self-employed might be necessary. This must apply vice versa, to the situation of the self-employed and the dependent worker: you must get the security that you pay for. Notably, many self-employed have been left out of grant-based help, ironically because they are not companies.
Fourthly, there is no fair solution, other than banning dependent workers, if this is not taken in the round alongside employment and social security rights.
Fifthly, contract workers have other expenses that can be imposed on them by their clients. How are these to be treated? They can include public liability insurance and giving indemnities to the client. They come as part of the package terms, which often include unreasonable contract terms that are not applied to employees. What protections will the Government bring in to defend taxpayers equally?
There are more points to make but time is short. As a veteran of proceedings on the Corporate Insolvency and Governance Bill, I share now, as I did then, the concerns expressed by my noble friend Lady Burt about the new preferential status for HMRC in insolvency, making it even wider in scope than before the Enterprise Act 2002. The arguments about it relating to tax paid by employees and held by the company do not wash, given that the company does not apply that logic to pension schemes in the hierarchy.
My Lords, this morning the Prime Minister announced that he hopes to see spectators at sports such as football by October; I trust that there is a plan on top of the hope. I suggest that the best approach to look at is the creation of spectator bubbles—in other words, the same group of 10 or 20 supporters sitting together but socially distanced from the next spectator bubble, attending each match and with no variation among them. This would allow an effective test and trace system to operate, should any of them go down with Covid, and allow the opportunity for income and spectators and the joy from that to flow back into sports such as football. An effective plan is very much needed.
I urge the Government to ensure that other policy decisions do not impinge on sport. I refer specifically to the growing demands for restrictions on gambling advertising; it is an important debate. Take one of the clubs about to be relegated from the Premier League, Norwich City, whose last accounts showed a £30 million annual loss: some 9% of its turnover comes from revenue from shirt advertising. Aston Villa, precariously positioned in the Premier League, had a £112 million annual loss in its last accounts and 12% of its turnover comes from shirt revenue. Across the Premier League, half the clubs have their shirt revenue from the gambling industry. In the Championship, it is 16 out of 24 clubs. This will be devastating at this time.
I also urge the Government to look further at the high street, not least in the red wall. The companies going bust in recent times include Peter Jones in Wakefield, Cardinal shopfitters of Yorkshire, Harveys, Boots Opticians, Poundstretcher, Monsoon, Bonmarché, Ena Shaw of St Helens and Beales of Keighley, Mansfield and Peterborough, on top of those that went last year such as Jessops, Mothercare, Clintons, Thomas Cook and Yorkshire Linen. These are the high street stores in the red wall that we most recognise. The situation is precarious, and the situation with landlords we are seeing with Bonmarché properties is perhaps even more precarious. High streets in the north and Midlands are in danger of decimation. There will need to be additional intervention if they are to be saved over the next six months.
My Lords, I welcome the tax reductions in the Stamp Duty Land Tax (Temporary Relief) Bill; they should help to get the property market moving again. Stamp duty may well be an efficient tax for collection, but it is a terrible drag on the property market. It particularly hits homes in the south-east, which account for more than two-thirds of the total yield. I hope the Government will not simply allow the system to return to its previous state when the temporary relief expires next year. They would do well to look again at the impact the tax has on the property market, in particular on the property-owning aspirations of younger people.
In previous years we have been assisted in debates on the Finance Bill by reports from the Finance Bill Sub-Committee of the Economic Affairs Committee of your Lordships’ House. Its excellent report on the off-payroll working element of the Bill is hard-hitting; the Government’s response is tone deaf. I understand that my noble friend Lord Forsyth will seek a separate debate on this report later this year, and I certainly look forward to that. As other noble Lords have said, IR35 is an area that has never really worked well. It has led to tax rules with more unfairness than fairness in them—never a good look for a tax system.
I wish the Treasury were more joined-up. On the one hand, the Chancellor has provided massive support to businesses to help them through the pandemic and to enable economic recovery, and this has been terrific; on the other, the Treasury is legislating to make business rescue and business lending much more difficult. As the noble Baroness, Lady Burt of Solihull, noted, this Finance Bill reinstates Crown preference in insolvency for tax debts. As she said, R3, the representative body for insolvency and turnaround professionals, has called it a potential £1 billion blow. That may well be an understatement. The Crown preference proposals were heavily criticised before the Covid-19 pandemic hit us, and in the current context Clause 98 could well prove disastrous if business rescues are hampered or indebted businesses cannot access further debt.
My final point is about finance Bills and our tax system in general. We have long passed the point of having the longest tax code in the world. This Finance Bill is not particularly long—a mere 207 pages—but bears the hallmark of our tax system: complexity. We have a complex web of taxes to start with. They are then complicated by reliefs and exemptions, which are in turn further complicated by anti-avoidance provisions. This does not help business. In April the economy shrank by 20%, and the bounce-back in May has so far been modest. If we are to get to where we were before the pandemic hit us, we need everything to run at top speed. Complicating the tax environment for wealth creators will not do that. A good start for the Government next year would be a finance Bill of no more than 10 pages.
My Lords, it is always a pleasure to follow my noble friend Lady Noakes, and I agree with all her comments. I also thank my noble friend the Minister for the clear way in which he introduced the Bills. I ask him to join me in paying tribute to all our front-line workers, many of them in the financial sector, who have done so much for so many over this crisis period. Does he agree with me that we owe them all an enduring debt of gratitude?
Basic economics will always remain the same: we can either increase income or take out costs. I believe we have some significant opportunities to do both these things without having economically illiterate taxation or cutting support to people who often need it the most. I agree with many of the comments of my noble friend Lord Blencathra, the noble Lord, Lord Empey, and particularly my noble friend Lord Lamont, who as an excellent Chancellor had his term cut well before it should have been.
I will ask my noble friend the Minister about three areas: payments, central bank digital currencies—CBDCs—and sovereign wealth funds. On payments, has he had a chance to look at the excellent paper from the Committee on Payments and Market Infrastructures on the need to transform cross-border payments? As in domestic settings, we pay too much and it takes too long. Does he agree that the Government, as one of the biggest payers, could save multiple billions if we had a true transformation of our payments infrastructure? For example, can he say how much the DWP pays in fees and to intermediaries in making the billions of payments it makes year on year?
Does my noble friend the Minister agree that the current consultation undertaken by the Bank of England in relation to CBDCs is an excellent piece of work and could have truly transformational benefits for the UK?
Similarly, will my noble friend comment on the work undertaken to look at the potential for a sovereign wealth fund in the UK? We have needed one for decades; I believe we need it now more than ever. Is he satisfied with the level of fintech involvement in all the current government programmes? Could the Government do more to introduce more small and medium-sized enterprises into assisting businesses and individuals who need it most? Does he agree that if we truly deploy all the elements of the fourth industrial revolution—robotics, AI, distributed ledger technology and quantum—we could truly transform the payments infrastructure, take cost out and get income in? That would benefit state and citizen alike.
My Lords, never can economic conditions have changed so much in the time between the publication of a Finance Bill and its consideration by your Lordships’ House. As the Minister has outlined, the Chancellor has, quite rightly, announced a wide range of emergency measures in response to the Covid crisis—even if, in many cases, they fall short of what these Benches would wish to see.
In macroeconomic terms, it was indeed a Budget and hence a Finance Bill from a different era, as my noble friend Lord Livermore described it in his forensic remarks from the Front Bench. But the Chancellor, basking in the current personal popularity that must cause such anxiety to his neighbour—no wonder the Prime Minister’s senior adviser is an advocate of Andy Grove’s dictum “only the paranoid survive”—has shown himself reluctant to move on fully. Yesterday, the Institute for Fiscal Studies published an analysis of the Chancellor’s recent £30 billion package, suggesting that a third of this supposed new spending is actually recycled or reallocated spending already announced in the Budget or otherwise. This
“makes scrutiny of plans more difficult and is corrosive to trust”,
commented the IFS dryly. More importantly, it means that support for the economy and employment is falling even further short of what is needed.
“The Finance Bill is a series of tweaks and corrections”,—[Official Report, Commons, 2/7/20; col. 625.]
said my honourable friend the shadow Chief Financial Secretary in another place, rather than implementing the vision necessary to address this devastating economic shock. Even these “tweaks and corrections” are under- whelming. Although the proposed delay to IR35 reform is welcome, the powerful report by the Economic Affairs Finance Bill Sub-Committee highlights the extent to which the Government are as much at sea in micro as in macro waters.
The Office of Tax Simplification reported on inheritance tax in two stages, between November 2018 and July 2019, with 11 recommendations. Could the Minister say how many of these have been adopted in the Bill? The Chancellor has just announced a further inquiry by the OTS, into capital gains tax. This prompted speculation that CGT changes would be used to fund some of the necessary public spending measures, which the Treasury quickly denied. O that in fact they might be! The Chancellor
“must change a tax system that was designed before returns to capital (and especially property) greatly outstripped returns to labour”,
wrote not a Marxist economist but the FT columnist Janan Ganesh. Although he was writing in 2015 about George Osborne, of whom he was the biographer, his analysis is even more valid today than it was then.
My Lords, faced with the greatest depression since the reign of Queen Anne, the Chancellor has displayed imagination and ingenuity. But his task will not be made easier when we come to 31 December and his Government’s insistence on the transition period being over by then, whatever happens. I worry about many aspects of the present situation, as do many colleagues. What will happen as furlough comes to an end? I welcome some of the measures announced last week—those on VAT in particular—but will the £1,000 bonus really help? Is the half-price meal voucher not a bit of a gimmick? We should be concentrating money on the self-employed, who include so many of the most talented and innovative people in our country.
My noble friend Lord Lamont, in a splendid speech, talked about the welcome package for arts and heritage, in which I take a particular interest. But there is a danger that it will be mothballed, in his words. We need some specific things to be done in that field. I warmly commend to the Chancellor a zero rating on all restoration and repair work on historic buildings. New build is zero-rated, and it would be a tremendous boost for craftsmanship. We will lose many of our craftsman in the next couple of years—and some much sooner than that—if we do not take a bold step here. I urge this on the Chancellor. I hope the Minister will refer to this in his wind-up and that tell the Chancellor himself that this would give an enormous boost to the heritage sector.
I completely agree with my noble friend Lord Blencathra in what he said about digital services. He juxtaposed Amazon and the high street, and made some telling points. I also agree noble Lords who said it was a pity that we were having to debate this subject in this manner. Parliament must lead by example. I was in the Chamber last week and, God willing, will be there next week, but I hope all noble Lords will be back in the autumn, because it is essential that the Government are held properly to account. This one-dimensional Parliament, with no opportunity for intervening or spontaneity, is not the sort of Parliament the country needs in the greatest crisis we have faced for three centuries.
My Lords, I will speak about stamp duty and the temporary change in policy being introduced. It is estimated that there could be 100,000 extra house sales in the next nine months. I accept the importance of that in reviving the housing market. When people move homes, they generate sales of fittings and materials for those new homes, which is an additional benefit. But I hope the scheme will not be extended in its current form after 31 March next year and that the opportunity is taken to learn from the experience of the next few months. There are two reasons for saying this.
First, it will not solve the housing crisis, which is primarily about a lack of supply, particularly of low-cost housing for those on lower incomes. There is a real risk that this change will just lead to more competitive bidding and sale prices higher than they would have been. I ask the Minister specifically why the Government have included second homes in this policy change. It seems a very strange subsidy, albeit a temporary one, even though the 3% additional homes levy still applies. Why have the Government included second homes, when buying a second home reduces opportunities for local first-time buyers?
This new policy will not help those who cannot afford to buy a house in the first place, nor will it help many first-time buyers get a mortgage, since banks and building societies want a 15% deposit. There is an additional danger that buy-to-let landlords will outbid first-time buyers and push up prices. There are 9 million people on furlough, who could find it hard to move anyway. What assessment have the Government made of the fact that many households will not be able to take advantage of the reduction in stamp duty anyway? The supply of low-cost homes for sale and rent to low-income earners really matters, and I see nothing in this proposal that will address that.
Might the Government look again at two related issues? The first is the question of who benefits from increasing land values, which can result from planning permission, and how that financial gain could be used differently for the support of more low-cost housing. Secondly, will they look again at why 70% of new housing supply lies with 10 developers, and what might be done to broaden the number of builders and thereby increase supply?
My Lords, I draw attention to my interests as outlined in the register. I support the contents of the stamp duty land tax Bill that are designed to enable people to feel confident to buy, sell, move and improve housing stock. The changes should assist not only first-time buyers but older people who may choose to move and release equity in their homes.
The Finance Bill is designed to protect jobs, yet no mention is made of people’s need to maintain the right to stay in the homes they currently live in. Many people expect to lose their jobs in the next few months, the prospect of which will create fear and anxiety—doubly so if they also lose their homes. We are seeing the toll coronavirus has put on the nation’s mental health. Many people have benefited from mortgage holidays and the temporary cessation of evictions. As these constructive government interventions come to an end, what is to happen to people heavily in rent arrears and mortgage debt ? What of private renters whose landlords decide to sell their housing stock quickly because of the stamp duty holiday? Are they to be evicted?
The Government are committed to protecting children’s rights and acknowledge that these need to be at the centre of any coronavirus recovery plan. The Chancellor has said that we need
“a patience to live with the uncertainty of the moment”.—[Official Report, Commons, 8/7/20; col. 978.]
I agree, but families should not have to fear eviction and either become homeless or be placed in bed and breakfast if they currently live in suitable housing. The Ride Out Recession Alliance, which is being put together by, among others, my noble friend Lord Bird, who knows a thing or two about homelessness, is calling for there to be no evictions for up to two years, to be achieved by paying or guaranteeing people’s rent or mortgages. It is argued that this will be cost effective on society in the long term.
The Affordable Housing Commission, chaired by the noble Lord, Lord Best, has called for social landlords to be supported to buy homes from “overstretched landlords”. I go further and suggest that this could include peoples own homes and repurchasing elements of shared ownership homes where arrears may otherwise lead to repossession and associated homelessness. People could then remain in their current homes, paying a fair rent.
As well as good and secure work, people need good and secure homes. The Government’s intervention to find accommodation for homeless people at the start of lockdown was truly fantastic. Can the Minister confirm that Her Majesty’s Government will give serious consideration to intervening in a similarly swift and humanistic manner to enable most families to stay in their current homes and to prevent an increase in homelessness and associated poor mental health, particularly for children, as a result of coronavirus? We need a comprehensive financial plan for homes to follow the excellent plan for the protection and future of jobs, particularly Kickstart.
My Lords, I thank the Minister for his presentation of the Finance Bill. There is no doubt that this year will be remembered as one that fundamentally challenged our economic prosperity. Indeed, Covid-19 has challenged every system of government across the world and threatened not only people’s lives but their livelihoods. Extraordinary measures had to be taken and much of the political dogma and individual party manifesto commitments have been set aside to meet the challenges presented by this crisis.
The Chancellor has made some swift and imaginative decisions that have provided businesses with immediate help to protect their long-term viability. I believe that, from the beginning, our banks could have been more proactive, sympathetic and co-operative with small and medium-sized businesses. An inquiry should be held into how quickly loans were approved and funds reached businesses in the light of the Government providing security for the loans. Sadly, for some, approval was too late.
We all acknowledge that taxes are necessary to support our public services, but we must ensure that they are fair and that those who are able to work are encouraged to do so by making work really pay. I am sure the Minister will agree that huge numbers of businesses are struggling. As we seek to emerge from these past months of lockdown, we must do everything to protect jobs while encouraging wealth creators. It is true that there are no easy answers, because we are in uncharted waters and face still unseen possibilities and probabilities. However, with fortitude, we can steer a pathway through.
In so doing, we must have an aggressive policy to deal with tax avoidance and evasion. The new 2% tax on the revenues of search engines, social media platforms and online marketplaces that derive value from UK users is to be welcomed. It is unfair that huge multinational online firms pay less in tax than small high street businesses. Like many other regions of the United Kingdom, our high streets in Northern Ireland have witnessed countless shop closures because of the burden of various taxes. We must re-energise the spirit of local enterprise and bring life back into our towns and villages. However, I also recognise that digital-based businesses will play an even greater part in our economy. Therefore, we must work with our international partners to agree an appropriate taxation system for the future.
In accepting the reality that the United Kingdom has left the European Union, I ask the Minister to ensure, in future trade negotiations, that the Government will protect Northern Ireland businesses from being disadvantaged in any manner and that our industries will not be burdened with additional bureaucracy not experienced by other regions of the United Kingdom.
I ask the Minister to consider the survival of the aviation sector. Does he not think that the time has come for the Government to look again at air passenger duty and remove this impediment, bearing in mind the unfair advantage it gives to airports in the Irish Republic, our competitors?
While I recognise the uncertainty over job retention, I trust that the Government will take measures to ensure that our young people will be able to get a mortgage and get on the property ladder. We need to get our country back to work and resurrect our manufacturing industry.
My Lords, I draw attention to my entry in the register. The Budget on 11 March, first conceived in a time of peace, was delivered under heavy bombardment. The Bill was published on 17 March—the day on which theatres closed and the grim truth sank in that full lockdown was imminent. Since then, as a nation and as families, friends and neighbours, we have endured a period when fear ran rife and hope seemed forlorn. Many of the Bill’s provisions are, of course, technical, conceived in what now feels like a different, far-off world. While we discuss the principles of this Bill, far greater principles must be in all our minds.
The coronavirus hits indiscriminately, yet it also affects different individuals and different groups in very different ways. The furlough scheme—more properly the Coronavirus Job Retention Scheme—has sustained millions of employees in this time of crisis. The brutal reality is, however, that as the furlough scheme tapers away, many jobs will disappear for good and many sectors may never recover fully. Hospitality and the performing arts are the most obvious but not the only ones. We may hope for the best, but we must also prepare for the worst. As my noble friend Lord Lamont of Lerwick put it at the start of the debate, the difficult part is yet to come.
As several noble Lords have referred to, the Prime Minister has alluded to Roosevelt’s New Deal—a highly effective response to mass unemployment in the 1930s when the free market failed. The nation needs not only tax reforms and short-term palliatives but a comprehensive response to a crisis that is obliterating the education, exams and employment of young people and leaving older people isolated and fearful. I strongly agree with my noble friend Lady Noakes that we need to see the Government being more joined up and working at top speed. We need a response that unites the nation as one nation—a response that is practical but securely founded in a shared sense of social justice. The Bill may be only one step on that urgent journey, but we will need to take many more steps before this year is out.
Before I was elected to the Commons in 1974, I spent my working life in the manufacturing industry, producing products from machine tools to motor cars, weighing machines and loudspeakers. Only one of the factories I worked in still exists. In the 1970s, manufacturing was around one-third of the economy; today it is 10%. While we remain in the top 10 countries in the world by manufacturing output, our unbalanced economy has created regional disparities. This is due to substantial deindustrialisation—greater than most, if not all, advanced economies.
It is not surprising that a key finding of the annual manufacturing report for 2019 was that two-thirds of the British people do not understand the importance of manufacturing to the economy. The brilliant House of Commons briefing paper on manufacturing, published in January, made it clear that manufacturing productivity has grown better than the whole economy.
These aspects of our debt-ridden economy, which is heading for stagnation, are neatly brought together by John Mills in part three of his Civitas Covid-19 review, The Road to Recovery: Reviving Manufacturing after Coronavirus. I cannot even begin to set out the case in three minutes, but with an overreliance on services, low growth, a high exchange rate and banks reluctant to lend to the manufacturing sector, we need a plan for turning things around and getting manufacturing up to 15% of GDP. We must not prop up only the existing companies but encourage manufacturing across the board; get the exchange rate to support manufacturing at the expense of services; and aim for 2% extra growth up to 3.5% and create the conditions for this.
We also need to rebalance society. Improving productivity is easier in manufacturing than in services. I strongly encourage a serious read of The Road to Recovery. I was told by the Minister yesterday at Oral Questions, in response to a question about PPE, that there are not thousands of UK domestic producers capable of producing the PPE that we need. That says it all. The choice is between export and investment-led growth, or imports and debt-led stagnation. We need a better policy.
My Lords, I applaud my noble friend the Minister’s opening remarks, and the comments of my noble friend Lord Hunt.
I will make three points: one minute each. First, as it addresses the challenges that noble Lords have been talking about, the Government should make it clear that they are not bound by their manifesto commitments. One was:
“We will not borrow to fund day-to-day spending,”
which is already out of the window. Another was that the national debt would be
“lower at the end of the Parliament”.
It would be insanity to pursue that. On 16 June, when I asked whether the Government would review these manifesto commitments, my noble friend Lord True replied that
“this Government are still fully committed to meeting all commitments made in the 2019 manifesto.”—[Official Report, 16/6/20; col. 2046.]
The opportunity should be taken at the end of this debate for my noble friend to clarify that remark and make it clear that the Government will not have their hands tied by those commitments.
My second, related point, is that at some point—not now—taxes will have to be raised, the difficult part referred to by my noble friend the Minister and others. I will ask your Lordships a pub quiz question: who made this statement?
“In principle, there is little economic difference between income and capital gains, and many people effectively have the option of choosing to a significant extent which to receive. And in so far as there is a difference, it is by no means clear why one should be taxed more heavily than the other. Taxing them at different rates distorts investment decisions and inevitably creates a major tax avoidance industry.”
It was my noble friend Lord Lawson, in his March 1988 Budget Statement; my noble friend Lord Lamont may have been Financial Secretary at that time. He went on to say:
“In other words, I propose in future to apply the same rate of tax to income and capital gains alike.”—[Official Report, Commons, 15/3/88; col. 1005.]
That policy was subsequently watered down. If reintroduced, the IPPR estimates that it would raise £90 billion. It is worth another look.
Finally, along with other noble Lords, I spent 90 minutes on Zoom last week with Stephanie Kelton, author of The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy. To those of us who learned economics in the 1960s, modern monetary theory is John Maynard Keynes on steroids. It asserts that there is no budgetary constraint on government spending, that we should not be fixated on debt and deficit, that the only constraints on government spending are the limits of real resources and the threat of inflation, and that we should aim at full employment. The new director of the OBR is moving in this direction with his work for the Resolution Foundation, asserting that we should stop worrying about national debt and instead focus on increasing net worth, looking at both sides of the balance sheet.
Although I have two economics degrees, I venture no comment on either of those theories, but will make this point. In the 1920s, we clung to an outdated economic theory. We stayed on the gold standard and did enormous harm to the country. A century later, we should avoid the same mistake. We should be open to fresh thinking that may help us navigate our way out of this crisis.
What a lot of good sense, my Lords.
The noble Baroness, Lady Verma, is in Leicester, which is having difficulties, and asked if there is any money left in the local authority coffers. I rise to tell her that there is not, and to talk about local government. I declare my interests, having been a local councillor in the Pendle area for most of the last half-century. Pendle is now working hard to avoid imposing a Leicester-type lockdown.
The Local Government Association estimates that the cost to local government of coronavirus will be about £7 billion. That is the shortfall after all the grants so far announced by the Government. One of the real problems is that the Government are not fully funding lost income. For the council in Pendle, of which I am a member, the overall cost for that small district is about £3 million, of which the Government have so far provided about £1 million, leaving a shortfall of £2 million. That may not sound a lot, but that is on this year’s budget of about £13.5 million, and so is a very substantial amount on top of all the cuts made in the last few years, which have cut council finances to the bone.
There are two specific grouses as far as we are concerned. The test and trace funding is going only to upper-tier local authorities in a shire county such as ours, whereas a lot of the hard work has to be done by the people on the ground: the district council environmental health officers and the public health staff, with the expertise and the local knowledge. In Lancashire, the money for the hubs which were set up to help people who could not afford food and other essentials during the worst of the lockdown goes to the county but is being spent by the district.
Finally, the cost to parish and town councils, particularly the big ones that provide leisure services and so on, has been very substantial. They are being left out altogether. Local government needs the shortfall of £7 billion to be addressed. The Government promised that they would provide whatever was needed. We are still waiting.
I am sure the House will join me in wishing a very happy birthday to the next speaker, the noble Baroness, Lady Gardner of Parkes.
My Lords, I feel privileged to speak in this debate today, particularly as my niece telephoned me this morning from Victoria, Australia, because of my birthday, for which I thank noble Lords for their good wishes. It was interesting to hear how Victoria, which is in its second lockdown, is suffering the same difficulties as Leicester. However, other states are doing more business than they did last year, so clearly the impact of coronavirus is a big problem.
It is important for us to feel that this is a matter of health. The National Health Service needs to be well supported, as do people’s social lives. People need to have contact with other human beings. The restrictions have been quite irksome, even for people such as me, who are under lockdown where we are living.
My niece told me that there is a different feeling between the economic and the social side, and it is the same here. People who would like to go back to work are finding that their premises are not necessarily available for them, which is extremely hard. The Government are aiming to change that. We do not want to face a terrible depression, which would do such tremendous damage. The spirit in this country has always been to survive; that is what we should be aiming at, and I believe that the Bill is doing that. The health issue is under control but will not be resolved until the day that an effective solution is found to deal with this particular virus.
I have always been involved in social and affordable housing and I really feel that it is the number one essential at the moment. Getting that going again will give employment and provide homes, which should be offered to people on favourable terms. Above all, people need somewhere they belong and that they feel is home. I support the Bill.
My Lords, two matters and one glaring omission arise from the Spring Statement on which I wish to comment. A few hours ago, the noble Lord, Lord Young of Cookham, said that taxes must rise and of course he is right. All of us in the Chamber and outside would agree that that is the case. One obvious case for a tax rise is the fuel duty escalator, which is not going to rise. Again, it seems a matter of pride on the part of the present Government that they are not prepared to look at the fuel tax escalator. I remind noble Lords that this tax has been frozen since 2011. The freeze will cost the nation about £520 million in the present financial year and I would like to know from the Minister how much the freeze has cost since 2011.
I remind noble Lords that the escalator was introduced by a Conservative Government in 1993 to stem the increase in pollution and cut the need for new road building. That was in 1993. Since then, the number of vehicles on our roads has risen from around 22 million to approaching 40 million, so it has not been very successful in reducing pollution and, according to the Spring Statement, we are to spend £27 billion on new road building. Although my party, the Labour Party, is often accused of declaring war on motorists, Ken Clarke was Chancellor when the fuel tax escalator was introduced. I do not know whether he is still a Conservative—the turnover in the Conservative Party is pretty enormous these days—but he was certainly a Conservative when the escalator was introduced.
The second point from the spring Budget has been dealt with fairly thoroughly in the debate, which is the digital sales tax. Rarely have I heard such unanimity. The Cross-Bencher, the noble Lord, Lord MacPherson, my noble friend Lord Haskel from the Labour Benches and, in a fairly coruscating speech, the noble Lord, Lord Blencathra, from the Conservative Benches demanded that Government proceed with the digital sales tax. Will the Minister tell us how the special relationship is looking so far as the threats about its introduction from the United States are concerned?
The omission concerns our manufacturing sector. Like my noble friend Lord Rooker, who spoke earlier, I represented a constituency in the other place where manufacturing was the main employer, but not any more, I am afraid, because across the West Midlands nearly 300,000 people in manufacturing, construction and the automotive trade are furloughed. Other noble Lords mentioned the need for proper training. Again, I am afraid that that is also a job for the Government. It is missing from the Budget and, unless it is addressed, the decline in the manufacturing industry will continue.
My Lords, many noble Lords have expressed concerns about the impact of the stamp duty holiday. I believe that I have correspondence from the same private renter as the noble Baroness, Lady Andrews—a man about to be turfed out of his home because the landlord wants to cash in. Why are the Government encouraging instability when, as the noble Baroness, Lady Watkins of Tavistock, said, what people need now is stability, security and certainty?
As the noble Lord, Lord Wood of Anfield, said, it is a huge bonus for London and the south-east—the last region in need of subsidy. As the noble Baroness, Lady Wheatcroft, said, it is slightly weird that second-home buyers will benefit. I would put it more strongly than that: it is a disgrace when we know that there is rising inequality. The young and the lower paid have suffered most in the lockdown. They are not thinking about buying second homes because they are struggling to pay the rent.
Behind this is the long-term dependence of the UK economy on house prices and treating houses as primarily a financial asset rather than a secure, genuinely affordable place for people to live. Money from bank loans has gone into pumping up property prices rather than into productive investments in making goods and providing services. Trying to kick-start the economy by more of the same is not building back better.
Many noble Lords who might be said to come from the right of the House have called on the Government to drop essential anti-Covid health measures, to pack the trains and fill the city centres again. But they are ignoring the fact that this is not within the Government’s control. People will leave home, travel on public transport and travel internationally only when they feel safe, so many measures outside the realm of finance are crucial. Also, many people have come to recognise that it is perfect possible to do their work from home. It means a chance to eat dinner with their children, read them a bedtime story or take an evening stroll around their neighbourhoods. Companies can see the huge savings in rent, gains in productivity and improvements in the health and well-being of their workers. We shall not go back to the world of December 2019.
There are many good things about that. We have, on average, twice the commuting time of the rest of Europe, the second-longest working hours and, relatedly, the highest rates of family breakdown and epidemic levels of mental ill-health. The ideal is a 15-minute community—everything you need for daily life within a 15-minute walk of your home. The just re-elected Mayor of Paris set out that vision and it is something we need to adopt in the UK, as my colleague Caroline Russell has been saying on the London Assembly. That is how the world is going: we should not be left behind. When the Government talk about levelling up, strong local economies, where money circulates in a rich ecosystem of small independent businesses, are a great way to ensure prosperity for every community in the land.
But as the noble Lord, Lord Cormack, said, we face the greatest crisis for three centuries. More than that, we have a climate emergency. Behind Covid comes the climate emergency. My noble friend Lady Jones of Moulsecoomb set out what we should be doing for that. Why are we still supporting things such as road building, HS2 and airport expansion, which are taking us in entirely the wrong direction?
My Lords, I join the Deputy Speaker in congratulating my noble friend Lady Gardner of Parkes on her birthday. I am delighted to follow the noble Baroness, Lady Bennett. I will focus my remarks primarily on how the Budget will impact rural communities and, in particular, make a plea to the Minister for rural communities to benefit from the shared prosperity fund.
I am involved in a number of charities in rural North Yorkshire and I declare my interests as in the register. Primarily, I am honorary president of the North Yorkshire Moors Railway and a member of the Yorkshire Agricultural Society. I also work closely with the charities FCN and RABI that do outstanding work with the farming community. These organisations have obviously had their fundraising activities slashed and I hope that as small charities they will benefit from the Government’s proposals for charitable organisations set out in the Budget. The impact on volunteers has been great. Many in rural areas fall into the category of self-isolation and it will be extremely difficult to re-engage with them in the future. But without them, the charities heavily rely on the staff, many of whom have been furloughed. The full impact will really be felt only when the furlough scheme ends in October. Do my noble friend and the Government recognise that the tourist season in rural areas of North Yorkshire and across the north of England and other parts of the UK is, by necessity, very short and those areas need to be treated as a special case in this regard?
The Government have set out a big homebuilding programme. On support for alternative home heating systems, I hope my noble friend will ensure that every new home has a boiler that is fit for purpose for the 21st century and that will not need to be replaced in the next five or 10 years. Will my noble friend also ensure the provision of funds to improve 4G mobile phone coverage, and that broadband will be rolled out to the hardest-to-reach areas, which currently have poor mobile signals and broadband connectivity?
I shall end with the two sectors, aviation and automotive, which have been hardest hit. The aviation industry simply asks that its furlough scheme be extended, and for a very modest 12-month air passenger duty wavier. The automotive industry is the only industry across the five EU markets in this category that does not have a scheme in place, and I hope my noble friend will set one up in the near future.
I draw attention to my interests as declared in the register. I agree with my noble friend Lord Rooker on manufacturing—he made a persuasive and positive case for a change of policy. A number of noble Lords have commented on the Government’s package of support for the arts and culture, but can the Minister say at the end of the debate when the Government will make a similar announcement in relation to sport and physical recreation, which have been damaged across the country at voluntary, local and professional elite level?
I want to focus the rest of my remarks on the strategy moving forward. As a number of noble Lords have said, we need to build back better. There are two issues in particular to which the Government should give a lot of thought over the coming weeks as they prepare the comprehensive spending review that will follow this Finance Bill and Budget. The first is the future prospects of young people in our country. In the 1980s, a generation was left aside as mass unemployment wreaked havoc in communities. It will be vital to build on the initiatives already announced by the Government to ensure that education and job creation in the private sector provide real opportunities for our young people over the coming years, and that those opportunities are not limited by the economic disaster of the past few months.
Secondly, I had a fascinating meeting yesterday with a couple of dozen of the UK’s top companies, all of which not only endorsed the sustainable development goals but are building them into their forward planning as they prepare to build back better. The Government are way behind the private sector in this area, despite signing up to the goals in 2015. Each Budget and comprehensive spending review since then has made no reference to those cross-government departmental goals. It is time to change that. Given our departure from the European Union and the recession that might follow this pandemic, an opportunity now exists to ensure that the Government’s policies align with those goals, and that we truly build back better both at home and abroad.
My Lords, it is a pleasure to follow the noble Lord, Lord McConnell of Glenscorrodale. I am grateful to the Minister for introducing this debate. I shall speak on the temporary reduction in stamp duty as part of the Government’s plan to get the economy moving again. People moving home for a variety of reasons, including downsizing or upsizing, may have a small effect in stimulating the economy, but the building of desperately needed new homes could have a definite positive effect. The timeframe is exceedingly short in terms of stimulating housebuilding. Planning permission has been given for more than 1 million homes in the past 10 years, as my noble friend Lord Shipley said. Seventy per cent of the planning permissions are held by 10 developers and work on the houses has not yet started. It could be started this weekend. What measures are the Government putting in place to ensure that those developers start and finish the sites as a matter of priority? People need decent homes and they need them now. The stamp duty holiday is a bonus, but unless the housebuilding industry gets a move on, many potential purchasers will lose out.
The stamp duty measure should be a boost to first-time buyers, but it is unlikely to be so. It is more likely that those with spare capital looking for holiday homes will snap up homes from under the noses of those trying to get on the housing ladder. Fishing villages in Cornwall and cottages in our national parks in Cumbria or the Peak District are very attractive to those escaping the towns and cities. This measure does nothing for those living and working in rural and coastal areas who are able to afford only properties in the shrinking rental market. The stamp duty holiday is a golden opportunity for potential second home owners.
There is of course the issue of geography. The Resolution Foundation has said that a non-first-time purchaser looking for a home at the average English house price will save £2,500 as a result of the stamp duty holiday, but the average buyer in the north-east will see no gain, while those in London will be more than £14,000 better off.
I would have liked to welcome this measure in the hope that it will assist families with young children and newly-weds to live in rural areas of their choice, rather than being forced into the towns, but I doubt that will happen. The cost of this measure is £3.8 billion —money that could have been targeted at improving the supply of low-cost housing for those on lower incomes. This is a wasted opportunity.
My Lords, we are here to debate the Finance Bill, which is about fiscal policy. However, I would like to focus on the off-radar branch of fiscal policy that is not openly conducted by the Treasury, by which I mean monetary measures, supposedly operated independently by central banks.
So-called quantitative easing has had impacts that mimic tax changes but with rather perverse distributional and social side-effects. It has acted like a major tax cut for financial market operators, home owners and the wealthiest asset owners, while feeling like a tax increase that has reduced the disposable income of savers, first-time buyers and the young. It has also been an effective tax increase on pensions for companies sponsoring a defined benefit scheme and those trying to buy annuities.
Central banks around the globe have continued the massive monetary policy experiment that began after the 2008 financial debt crisis. It was meant to be an emergency measure to boost growth and stave off economic collapse. Economists insisted that this was not just money-printing with a fancy name, because it would be unwound as the stimulus imparted by forcing long rates lower stabilised economies and markets. However, despite growth, rising employment and record high stock and bond prices, quantitative easing has remained in place since 2009 and has entered a further round during the current crisis.
Monetary policy has now been used to fund helicopter money, which is effectively what the furlough scheme, restaurant vouchers and other government emergency measures are. However, the side-effects of this policy are that the wealthiest asset owners and financial institutions have done very well but the rest of the economy has not necessarily benefited, as much of the new money has leaked away. Therefore, I hope that my noble friend will consider taking seriously the need to boost growth more directly than through the use of QE, which is a very indirect route.
I support the establishment of the sovereign wealth fund, and perhaps would also welcome the establishment of an organisation such as the KfW, which was so effective in rebuilding Germany. There is a potential domestic source of funding for this without creating new money. Long-term assets to be used for infrastructure, social housing and other revenue-generating investments that can deliver much better returns than gilts could be used by pension funds to help repair deficits and reduce the ongoing cost of funding in the long run. I hope that my noble friend and his department will take seriously the potential of using our long-term pension assets to boost growth directly.
My Lords, recognising the vastly changed landscape in which we discuss this Bill, I want to focus on the measures related to research and development and their potential to support the UK’s economic recovery. The extra tax relief is welcome, as is the annual increase in government spend on R&D to £22 billion by 2024—an additional £1.5 billion per year. It is not yet clear whether this will be distributed through existing or new structures, and perhaps the Minister can shed some light on that, but it is a strong acknowledgment of R&D’s importance to the economy and to post-Covid recovery.
The £22 billion is part of a broader commitment to raise UK investment in R&D to 2.4% of GDP by 2027. Most R&D comes from the private sector in roughly a 2:1 ratio, but we know that
“British business invests less in R&D compared to similar nations, and this investment is concentrated in major players in just a few sectors.”
Therefore, can the Minister say what the Government will do to persuade businesses, both UK and overseas-owned, to spend the extra £18 billion a year on R&D in the UK that would be required to meet their target?
One area in which the Government might consider measures to increase R&D is in the creative industries. Creative businesses undertake almost as much R&D as manufacturing but, as much of it relies on arts, humanities and social sciences research, it is explicitly excluded from HMRC definitions and therefore from R&D tax relief. This rules out legitimate innovation in what has for some time been one of the fastest-growing parts of the UK economy, but it misses the opportunity to build behavioural insights into technological innovations, which would increase the likelihood of wider adoption.
Thus far the UK has been
“bound by the Frascati convention of the OECD definition”
“which is tilted primarily towards technology and science”.—[Official Report, 8/1/20; col. 181.]
The noble Lord, Lord Duncan of Springbank, who is now on the Woolsack, might recognise his own words there from the Dispatch Box on 8 January, in what feels like a very different lifetime. However, as we are leaving the EU, might the Minister press the Government to consider the possibility of the UK adopting its own, wider definition of R&D? This would help in moving towards the Government’s targets and, at the same time, support the post-Covid recovery of a sector that, over recent years, has contributed almost £102 billion annually in GVA.
I want to make one brief additional point as a supporter of the Government’s commitment to levelling up. Clearly, there is a pressing need to invest in areas left behind as our industrial landscape changes, but there are deep inequalities within our cities too—inequalities starkly exposed by this pandemic. Levelling up cannot just mean equalising between north and south; it must also address inequalities within cities, including those seen as affluent, such as London, where poverty rates in some inner-city boroughs are 10 percentage points higher than in many parts of the UK. If we do not tackle the inequalities within our cities at the same time as tackling the inequalities between the regions of the UK, unleashing the nation’s potential will never be anything more than a campaign slogan.
We are meeting, as has been said, in very different circumstances from when the Budget was delivered, but I would say that we are meeting against a background of obedience, fatigue and confusion. People are getting mixed messages: our buses are going around with seats roped off, our stations tell us not to travel, but our Prime Minister tells us to go back to work. We have message confusion and numbers confusion. Most people do not have the faintest idea what £1 billion is—or a billion of anything else—but the Government keep on saying, “A billion here and a billion there”. The image created is that there is an unlimited amount of money, and I do not think that that is a good start.
There has recently been a report about 120,000 new deaths. If that figure is to be taken seriously, do we expect people to go back to work or to restaurants, et cetera? No, it is actually encouraging people to do the exact opposite. Do the Government have a financial strategy for another spike? They need a strategy.
I turn to taxes. The noble Baroness, Lady Falkner, who like me is from the LSE but is more distinguished, mentioned the need for a crisis levy. This is probably the only practical tax solution that we can come forward with. There has to be a levy that affects everybody, with everybody contributing according to their ability, but one that is severely time-limited. We all remember the temporary nature of income tax, so any levy needs to be time-limited. I also endorse the idea of a delivery charge for online orders. This could get around some of the problems of a tax. A delivery charge on online orders would be environmentally sensible; it would also even up, to an extent, the fact that out-of-town shopping opportunities such as Amazon pay virtually nothing for their premises. This would put some more tax revenue into the Exchequer.
The third thing I suggest is that we even up the tax between unearned income and PAYE income. It is ridiculous that, at the moment, you can have unearned income taxed more lightly than your earned income. I hope that the Government will look at ways in which they can raise taxes—fairly—and also have something in reserve in case there is another spike.
My Lords, I draw attention to my declaration of interests. I endorse entirely the opening remarks made by my noble friend at the very beginning of this debate on the macro position. I draw attention to the fact that, while we are debating this, our withdrawal from the world’s third-largest trading and economic bloc, the emerging conflict with China and the prospects in relation to the presidential election in November in the United States pale much of what we are debating into insignificance.
Nevertheless, I would like to endorse many of the remarks made about the digital services tax and draw attention to the current anomaly in business rates, which the noble Lord, Lord Balfe, has just referred to. Let us take the largest business rate payer in the country, Heathrow. Airlines and airports are not flavour of the month at the moment, but tens of thousands of jobs are at stake, not just in the business itself but in all the businesses that are absolutely dependent on it. It is necessary for the Government to be prepared at least to defer the national business rate for major enterprises such as Heathrow and other airports, while continuing to allow relief for retailers who have benefited from that.
Much has been said already about education and training. The £1.5 billion over five years for infrastructure for further education is welcome, but we need a massive injection of revenue so that the young people who are currently in further education can continue and those who are displaced by the terrible unemployment that faces young people have the opportunity of education and training—including apprentices who are receiving training, both on and off site, who are likely to lose their job and, with it, their training. Flexibility and responsiveness in making this possible are crucial.
We should also stop the attack on higher education. We can be in favour of further education without denigrating one of our greatest international earners and something that we should be proud of. Mention has already been made of research, not least by the noble Baroness, Lady Bull. Some of our substantial research funding comes not from government or the private sector but from the transfer from overseas students so that the cross-funding and cross-subsidisation of research can continue. Government really must recognise this.
Finally, on decentralisation, it is crucial that we put resources into local government and ensure that it can play a pivotal part in co-ordinating the future recovery of our economy
My Lords, I will make two points about measures in the Finance Bill. These are extraordinary times, and the only certainty is uncertainty—and, unfortunately, greater unemployment. As other noble Lords have said, local firms and UK chains have faced a real battle competing with online companies based overseas which do not have the same overheads as physical shops and services.
The Government’s digital services tax plan in this Bill is a mouse of a measure compared with the huge profits made by American big tech companies. The Government need to co-operate closely with the European Union, which is devising an international tax with much greater teeth so that these big tech companies will pay their fair share of tax. We need a much more sustainable, long-term solution, with a broader international base.
What impact is the demand for trade deals having on this measure? British bookstores and other businesses should not face a higher tax rate than Amazon. The Chartered Institute of Taxation points out that this part of the Finance Bill is not aimed at stopping profits arising in the UK being shifted by multinationals out of the UK to tax havens. These disrupter companies play an essential role in our economy, but they use complex ways of moving and hiding the money that we pay them. They have thrived during the pandemic as our high streets have suffered. Their business has grown as demand has shifted online. Surely their tax bills should be at least comparable with those of other retailers—it is a very uneven playing field, and the limited measure in this Bill will do little to rebalance the tax paid. The jobs in this sector are the most fragile. Those who can work at home are higher paid, and it is the lower-paid, face-to-face jobs that are being most challenged.
My second point concerns small and medium-sized enterprises in the manufacturing sector. The Government’s infrastructure announcements are welcome, but the Chancellor has performed an Aladdin sleight of hand—not “old lamps for new” but “old money for new”. The IFS has crunched the numbers and the £5.5 billion announced for transport and infrastructure is old money repurposed. My point is that this money would have been circulating in the economy anyway and does not represent a real boost to companies seeking to rebuild their order books. With half of UK manufacturing companies seeking to make redundancies in the next six months, we have to make sure that there are skilled jobs left, because they are going to be lost right across the country and all sectors of manufacturing.
My Lords, it is a great pleasure to follow my good friend the noble Lord, Lord German. I thank my noble friend the Minister for setting out the scenario at the start of this debate. As others have done, I commend my right honourable friend the Chancellor, Rishi Sunak. He has shown great ingenuity and nimbleness. I urge him to continue to demonstrate the remarkable and appropriate lack of dogma. These are extraordinary times and they demand extraordinary solutions. I also urge my right honourable friend to consider the needs of the young, particularly those who will have lost out on crucial education and apprentices whose jobs may well have been prejudiced, and I urge him to look at job creation and job retention schemes to help these people.
I turn to some of the technical aspects of the Bill which have an impact on the current scenario. As others including the noble Baroness, Lady Burt, and my noble friend Lady Noakes have urged, the return of Crown preference, even in a diluted form, is unwelcome, particularly in the present scenario. It will have the effect of prejudicing businesses as creditors at a very difficult time, effectively enabling those businesses to be queue-jumped, as it were, by the Crown. This is not appropriate.
I welcome other aspects of the Bill, as others have, such as the digital services tax, long-heralded and now being delivered from April 2020. This is the right move. Can my noble friend outline what progress we have had internationally, as I know that the success of this measure depends on international action? I also welcome the plastic packaging tax due to be introduced in April 2022, after consultation on some more detailed aspects on plastic of which less than 30% is recycled. I think that is appropriate; it helps us, it helps our position as a leader in this field and it helps in the climate change scenario.
I also welcome what the Bill does in relation to Windrush compensation payments, effectively exempting them from income and capital gains tax. This is absolutely appropriate. Can my noble friend outline what success we have had in speedier payment of the compensation, which obviously remains a key consideration and key problem?
The action of the Chancellor in particular in the Government is very much to be welcomed and encouraged. I certainly support this Finance Bill.
My Lords, I am pleased to follow the noble Lord, Lord Bourne. Coronavirus is the biggest crisis of our generation and I recognise that the Government have provided constructive financial solutions to address the many emergency economic pressures. They have protected health and the economy with the furlough and measures to help the self-employed, providing many families with some relief, even though millions have faced incredible hardship and had to rely on paltry universal credit and food banks. Countless community efforts have provided families with basic sustenance. I pay tribute to many restaurateurs, including the 5,000 Bangladesh Caterers Association UK members whose earnings have dropped by 90%. Many are finding it impossible to navigate bank loans and other measures. What assessment have the Government made—
Lady Uddin, we seem to have lost you. Are you there?
Sorry, I do not know what happened. What assessment have the Government made of the inevitable effect of withdrawing the furlough scheme and Self-employment Income Support Scheme on levels of unemployment, particularly in SMEs including the curry industry?
As the Bill includes no measures focused on increasing employment, could the Minister outline how the Government intend to address this worrying trend, particularly among women, who are often in low-paid, part-time jobs and have been exceptionally affected during this lockdown? Muslim women-led organisations are deeply concerned about the well-being of their members. What actions will the Government take to ensure that Muslim women, among other minorities, do not become further isolated and more permanently out of the job market?
According to the Government’s Social Mobility Commission, 600,000 more children are now living in relative poverty than in 2012. Their plight will be further exacerbated by benefit changes and coronavirus, with 45% from minority communities more likely to live in poverty in comparison to 26% of their white neighbours. Does this period, the most challenging in terms of addressing poverty and social injustice, warrant an equal and absolute commitment to redress the effects of social injustice and prejudice, as well as class, race and faith discriminations? What impact assessment has been made of the Bill on child poverty and the well-being of vulnerable families and people with disabilities and autism in those communities which have excessively experienced hardship?
I welcome the kick-start scheme and the guarantee of apprenticeships for those leaving care. Can this be extended to the 465,000 young people who would not currently be in line to participate in any apprenticeship? Speaking as a witness to the Canary Wharf development and the remaining disconnect with lack of employment opportunities—
My Lords, when I see the noble Lord, Lord Agnew, something in my memory tells me we should be talking about education after all these years.
The Finance Bill is the backdrop to a disaster, not one which the Government made but one which they must handle. I would like to concentrate on the charitable sector, which has had only one or two mentions so far. At the start of this process, a couple of months ago, I was lucky enough to lead a debate about the problems of the charity sector. The Government have given hundreds of millions of pounds to back it up; that is great. However, the sector looks like it has lost billions.
Why does this matter? Quite simply, there is virtually no section of our society which does not use charities to fulfil its ends. Charities are involved in education, recreation, healthcare support, housing—you name it, charities are there. They have lost their main income streams—those fun things which you do together. The sponsored walk is out; the charity dinner, where everybody drinks slightly too much and makes pledges, is gone; the high-street shop, which has filled a vacuum, is gone or has a very low uptake. The pressure is there.
Some charities, such as the British Dyslexia Foundation—I here remind the House of my interest as its president—are providing training. There is a big surge with children at home, as parents want to know what to do with a dyslexic child. One feels that, to go back to the old ground of the noble Lord, teachers should have been doing this beforehand, but never mind. All this training is fine, but you still need other activities to back it up, and not all charities can do it. Those sections of our society dependent on social activities to generate their income to deliver social goods are vulnerable.
There has not been enough attention paid to these groups at the moment. They overlap with other things, like furlough for staff—we have had a great deal of people asking why you cannot volunteer when you have been furloughed. There must be another look at how we can get this sector to work as the economy starts to emerge from lockdown. Some of the primary fundraising activities will be among the last things we can return to.
We must have another look here or the state must take over these duties, and I do not think that it has a great appetite for that. A little bit of pump-priming, thought and help is required here, or huge sections of our social support structure and things which make life bearable will be threatened.
My Lords, I refer Members to my interests, as well as to an article I wrote recently in “ConservativeHome” which expands in greater detail on some of the topics I want to cover today.
I welcome the Bill and the measures that the Government have taken over the last months to deal with this unprecedented crisis. There is much to applaud within policies such as furloughing and tax breaks—ensuring that cash can get to as many of those affected as possible so they can survive the coming months.
Of course, we are now starting to turn and look up a little further out to the coming months and rebooting our economy—bouncing back, as it has been called. I am a bit concerned that, with all the talk of bouncing back in a greener way, which is important, and levelling up, which remains rightly a priority across the country, there is an assumption in so much of our thinking at the moment, and certainly in the Bill, around normal returning. If I am wrong and what I am about to say will not happen, what a relief. However, I fear that we are entering a phase in our nation’s and the world’s history of much greater volatility. Some of that is climate driven and is obviously geopolitical. Again, with this issue of viruses, it is now cheap and becoming cheaper to manufacture viruses. I am fearful that this may not be the only one. Perhaps we will deal with this one, and perhaps there will be a lockdown in winter, or not.
My question—which I mentioned in my article—is: do we need now to have another lens, which is to look at resilience? We have had our Dunkirk and we scraped through. Millions were affected and there were huge losses, personally, in human terms, and financially. However, what will we do to make sure that this never happens again? Even if there are lockdowns in future, why will we still allow millions of people to be reliant only on work that can be done physically? I therefore welcome, for example, the Government’s policies around boosting apprenticeships; how can that be done in a way to give people resilience? How can we have less centralised healthcare so that the huge machines in hospitals can be shrunk down with better technology so that they can be closer to people’s homes or even in their homes? There is also education, supply chains and agriculture—I do not have time to go through them all. There is an opportunity potentially for this nation to become a leader in redesigning our systems so that they can work even in volatile emergency situations like this. In fact, the internet was invented to deal with emergencies like this.
How can we move our entire country forward in a way that makes something of an opportunity to help other countries deal with future crises like this? Perhaps in so doing, we may not quite end up with some of the tax issues, the debt burden and some of the productivity issues. Instead, we can become a leader in being a resilient country to ensure that those who have fewer resources than us will be better able to weather the next pandemic or crisis that hits us.
My Lords, I declare an interest as an apprenticeship ambassador. I came here today for the first time since lockdown—driving my electric car—and I have not been here because my wife has been shielding.
I echo the concerns expressed by my noble friend Lord Livermore when he opened the debate from our Front Bench, but I will focus my remarks mainly on apprenticeships. Before I do, I have to agree with my noble friend, my namesake, the noble Lord, Lord Young of Cookham, who unfortunately is not in his place. I do not have a degree in economics, unlike him, who has two—not even an O-level, come to think of it. However, he was right when he said that the Government need perhaps to challenge some of their manifesto policies. One that he did not refer to, the triple lock for pensioners, ought to be looked at in the current circumstances, and I would welcome the Minister’s comment on that.
I welcome the Government’s intention as regards helping young people, who will be hardest hit by this crisis. Who knows whether the Government have it all right or wrong? As a number of speakers have said, these are difficult, challenging and unpredictable times. However, they are right to focus on younger people. As they said, 700,000 will leave education this year, and the worst thing that could happen is for them to become institutionally unemployed, if you like, when they should be in work, training or education.
So we are going to face a challenge. There are thousands of furloughed apprentices who, unfortunately, are likely to lose their jobs, so anything that the Government do to ensure their future employment is welcome. I agree with those who have talked about SMEs, the growth companies that are likely to provide many of the opportunities for young people—and not just young people, of course, but those who are well over 25 who have been made redundant for the first time.
In the brief time that I have, I want to focus a bit on the apprenticeship levy, which is due for reform. It needed it. The number of apprenticeship starts before the crisis was actually down on what it had been a few years ago, which is worrying. Then there is the future of training providers, which are an essential part of that scheme. Many of them are, unfortunately, not going to be in business.
One area that I think the Government should be concerned about is nursing apprenticeships. They are a vital part of the Government’s policy of trying to recruit 50,000 more nurses, but they are finding difficulties there. They ought to be looking at the best practice in that area.
I close by echoing what the noble Lord, Lord Cormack, said about the importance of sustaining heritage skills and zero rating on restoration work, and with the point made by the noble Baroness, Lady Gardner of Parkes, about the importance of social housing.
My Lords, it is a pleasure to follow the noble Lord, Lord Young of Norwood Green.
In many ways, I find it slightly surreal that we are discussing this Finance Bill today. The 11 March Budget, on which the Finance Bill is based, feels like a relic from another age. The Covid-19 pandemic means that we are now living in a completely different world. It has led to an economic contraction of 25% and the total cost of emergency measures could run as high as £300 billion. These are eye-watering figures.
The recent mitigating measures announced by the Chancellor are largely welcome as far as they go, but the extent of this crisis means that the Government need to engage in some bold and imaginative new thinking, including the relief on stamp duty for house buyers for one year. I hope the Minister will advise us of further thinking in this regard.
Covid-19 has created huge volatility and uncertainty, and the economic shock waves will be with us for years to come. This means that the policies of the past and the effect that they have, in both the public and private sectors, need a thorough examination. Nothing should be left off the table. One particular focus should be on making public revenues work as hard as possible, and I am thinking particularly about tax reliefs. Earlier this year, the National Audit Office concluded that these should be reviewed, and I wonder if the Minister could provide us with some further detail on that.
I want to refer to a matter in Northern Ireland. Earlier this year, in the first week of January, the Government signed up to a wide range of financial commitments in the New Decade, New Approach all-party settlement. The then Secretary of State for Northern Ireland, Julian Smith, was congratulated on delivering this agreement with the Northern Ireland parties after a long downtime. There are important commitments in that document about getting Northern Ireland’s critical infrastructure—in particular, water, transportation and health—up to UK norms after years of underinvestment. Could the Minister investigate this matter and, if that is not possible today, come back to me in writing about when those financial commitments will be delivered as promised in New Decade, New Approach to ensure that we have proper and adequate delivery of devolution? The regions are left wondering about the disparities and inequalities.
My Lords, 40 years ago this country was confronted by mass unemployment. It went way above 3 million. Foreigners mocked us. Britain was the sick man of Europe. Unemployment was supposed to be the club with which the Opposition would beat the Thatcher Government to death, but it did not happen. The Government were re-elected. Unemployment began to decline and hope returned. But unemployment is not just figures; it is real people and real lives. I have never forgotten the darkness that enveloped my family when my father lost his job—not for days or weeks, but many months.
Today the challenge is much the same. We are about to suffer another great blow. Unemployment will rise very sharply, beyond 3 million again. Many families and decent people will suffer. Many worthy causes will suffer with them, as the noble Lord, Lord Addington, has just pointed out. Yet we are in a better position to respond than we were in the 1970s. Our economy is far more flexible, fleeter of foot, more adaptable and more entrepreneurial—and it will become much more so as Brexit opens up new opportunities.
Yet for the moment the challenge that lies ahead—for us all, not just for the Chancellor—is not just about trying to balance conflicting and impossible demands and repaying all that debt. That is important, but life is not just about money—about living on bread alone, if you will—but about dreams and intangibles that cannot be measured but are crucial. Our recovery will be about not letting go of our dreams, ambitions and entrepreneurship.
That means a prime objective for government policy will be sustaining and strengthening our wealth makers, whose success underpins everything else: our elderly, our sick, and the young people who are our future. So, simplified taxation, sustained training, providing incentives, encouraging innovation and new investment, enterprise in everything we do—and, I hope, discovering new plays, new music and new entertainments to restore our spirits.
Let us not despair. We will get through this challenge. We have before. I wish our remarkable Chancellor well.
My Lords, I will address the loan charge in the Finance Bill. For the avoidance of doubt, we do not support tax evasion and fully support everybody paying the tax that is due. However, the scandal of the loan charge must be addressed.
Today I spoke to a family whose breadwinner unwittingly signed up for a payroll loan scheme in 2012. He checked that the company was legally compliant. It was backed up by a QC opinion and a chartered accountant was appointed to look after his tax returns. It was only in 2018 when he had retired that he became aware that a loan charge had been made to his retirement plans. Now on a pension, not working, he faces a bill of upwards of £50,000. He is uncertain of the final settlement, as HMRC will decide how much to add on in penalties, interest and maybe inheritance tax. The Loan Charge APPG has published a damning report on the conduct of HMRC’s dealings with loan charge-affected citizens, who have no right of appeal to HMRC. They simply want to work and be on the right side of legislation.
This person is not alone. About 100,000 families are similarly affected. The use and industry-wide acceptance of payroll loan schemes, where the payroll scheme makes substantial deductions and passes the money back to the employees through a mixture of PAYE and credits, became common from 2010. The people affected are not Premier League footballers and celebrities, but hard-working contractors in oil, gas and IT and, latterly, NHS and care workers, for whom in many instances it was a condition of employment that they engage in a recommended payment loan scheme.
These schemes still operate. A recent BBC report on “Money Box Live” highlighted how they are drawing into their clutches lower-paid and essential workers. This Finance Bill also condones retrospective tax law—a dangerous precedent.
According to a recent Morse report, the average liability is around £50,000. For the family I spoke to, that is two years’ gross pension and clearly unpayable. They are now putting their house on the market, as they have no other course of action. New Clause 31, which is not included in the Bill, would have restored natural justice to our system. It proposed to exclude people who have submitted tax returns in good faith and that the loan change should apply only to those who have deliberately reduced their tax bill. The principle of “innocent until proven guilty” would also have been preserved.
In summary, the loan charge has not stopped payroll loan scheme companies operating. It is retrospective. It has caused immeasurable stress and hardship to those facing it. It is forcing house sales, bankruptcy, family breakdowns and confirmed suicides. It does not serve a purpose. In rejecting NC31, the opportunity to restore the rule of law and fairness to the tax system has been missed. It must be looked at again.
My Lords, if we are follow the Prime Minister’s lead in tackling obesity, we must think beyond the input of unhealthy food to output policies to address a generation of young people who are less fit now than when the Government initiated the national Fight for Fitness campaign in 1900, during the Boer War. We have a generation of young people heading into the summer holidays who are some 60% less fit than they would normally be. Mental health issues are on the increase and boredom and obesity are commonplace. We need to consider a national campaign for sport, recreation and fitness, with sports clubs, home fitness campaigns and new levels of access to facilities at an affordable cost at its epicentre.
Community sports clubs deserve to be at the centre of this plan and not, regrettably, to be penalised by the Finance Bill. Due to the way in which tax law applies to not-for-profit clubs, Schedule 16 to the Bill will impose CT liabilities and potentially significant additional costs and reporting burdens on community sports clubs in relation to Covid-19 support grants. In practice, clubs are likely to have to pay corporation tax on their grant income, thus reducing the funds available for investment in grass-roots sport at a time when finances are critical and the need to engage with a growingly unfit population is all the more important. It appears counterproductive for the Government to continue to claw back a proportion of these grants in tax when there is now a vital need to support the sectors that have been hit the hardest by the pandemic and resulting lockdown.
In addition, many clubs will have to file corporation tax returns for the first time, with many having to use costly professional help to do so. Little tax is likely to be collected, but significant administrative burdens will be imposed on both community sports clubs and HMRC. I would be grateful if my noble friend the Minister and his colleagues would consider the proposal for a coronavirus support payment received by a not-for-profit sports body to be exempt from tax under paragraphs (1) and (6). For this purpose, a not-for-profit sports body is one that qualifies as an eligible body in group 10 in Schedule 9 to the Value Added Tax Act 1994. I hope that the Government would agree.
I appreciate the constraints that this House is under when it comes to money Bills, but I very much hope that the Minister will give serious consideration to the consequences of this additional burden on the sport, recreation and fitness sector, as it is this sector that, alongside health, will unlock the potential of this country to recover through an absolutely essential improvement in the population’s fitness so that we can minimise further cases of coronavirus this winter.
My Lords, Covid-19 has changed all our lives in a way that we might have thought unimaginable a few months ago. With optimism for a V-shaped recovery receding and facing a 12.8% fall in GDP this year, and with public sector borrowing in excess of £500 billion, we face difficult times. Levels of borrowing that might previously have been said to be indefensible, dangerous and unsustainable are now being viewed as mainstream.
With the reality of major job losses growing apace, and faced with the changing norms of ongoing social distancing, working at home, changing supply chains and accelerated use of technology—just look at this place, for example—life has changed. The world of work has changed, and will change more after Brexit, and I do not think it will spring back any time soon. If it is to, where are the signs to suggest that it will?
The pandemic has brought home that, in times of crisis, we have to look to and engage the power of the state to find solutions and to provide resource and direction, nowhere more so than in tackling unemployment. It is to the state that we must look to build a safety net—the social security system newly enthused by those who hitherto never imagined that they should need recourse to it and who now have to engage with the paucity of its provision and the frustrations of its complexity. Of course, this will necessitate more borrowing, but one of the lessons we have directly learned is that levels of public borrowing must not be bound by the orthodoxy of the past. We need jobs as the priority.
One of the lessons, as we see from its nightly inclusion in people’s lives through our TV screens, is the spotlight being shone on just how unequal is the society in which we live and how fragile the financial resilience of many families—evidenced by growth in access to food banks, for example. With the poorest one-fifth of households suffering a 7% fall in income, how do we find this acceptable?
My Lords, growing up in the Midlands, and the Black Country in particular, I know how much pride there is in this country’s manufacturing tradition and its industries. The Black Country is the home of the Industrial Revolution and I am delighted that it recently received the recognition it deserves by being awarded UNESCO Global Geopark status. It is an area that makes things, where small and medium-sized enterprises and large manufacturers are working hard, creating wealth and selling their products, at home and abroad. They employ thousands of local people. This is why the Government, local government, businesses and academics come together and talk about support for the Midlands engine. This is why the Government must do more now to support manufacturing in this country.
As others have noted, our manufacturing sector faces what many employers are privately warning is a tsunami of job losses. It is tragic to read that, because of the economic shock of Covid-19, many in the manufacturing industries now expect their recovery to take 12 to 24 months. Across the West Midlands, nearly 300,000 people in manufacturing, construction and the car trade are furloughed. To put this into perspective, this is equivalent to the entire population of Dudley borough not being at work. Across the country, nearly 8,000 manufacturing jobs losses have already been announced by world-leading companies such as Rolls-Royce, McLaren, Aston Martin, Jaguar Land Rover and Arlington Automotive. The Government need to do more and act now to save our manufacturing base.
Why are the Government reluctant to consider extending the furlough scheme to different sectors of our economy that need extra support? Will they consider emergency measures to stimulate market demand, particularly in our car industry? What are the Government doing to ensure that the banks are doing their bit to help save our manufacturing sector? The need for flexible access to finance and support for firms attempting to restructure and reshape themselves to adapt to the new economic environment is vital.
For the last 300 years and more, my family has been working in iron and steel in the Midlands. Like many Black Country families, they worked hard, and now they need more action to protect their jobs and their wages if we are to save this country’s manufacturing jobs and tradition. I look forward to the Minister’s reply.
My Lords, we must brace ourselves for high levels of unemployment in the autumn and the failure of a significant number of businesses, especially in vulnerable sectors. SMEs are likely to be among the hardest hit. Many noble Lords who spoke today identified the plight of hospitality, retail, the arts, transport, the charity sector and leisure. The call for the Government has been powerful: target support and do not remove it too soon.
I am now picking up anecdotally that Brexit is resulting in a wave of damage. British SMEs are being cut out of supply chains that have been a major part of their business for years. Larger companies in the UK, which anticipated shifting operations to the EU 27 over several years because of Brexit, are now accelerating those decisions. Supply networks are just not willing to put up with the costs and complications of regulatory divergence and border constraints, which now seem inevitable under every government scenario. My noble friends Lord Razzall and Lady Northover and the noble Baroness, Lady Wheatcroft, emphasised the risk.
Add to that the breakdown of the US-China relationship—to which the noble Lord, Lord Blunkett, drew attention—and the growing momentum for the world to divide into regional economic blocs, and we see a dangerous economic storm. I am concerned that this Government have found themselves the flotsam and jetsam between regional economic powers. They have clearly decided to hitch their wagon to the US bloc, in the hope of a trade agreement that, at best, offers very modest gains to the UK.
Like others, I support the Chancellor’s swift action to mitigate the immediate impact of Covid on the economy, with a huge injection of cash. The triage has been vital. But other countries, our rival economies, have been designing their rescue plans to fit a long-term strategy of building an economy for the future—a green economy, a digital economy and an economy framed by the fourth industrial revolution. Germany, as I have remarked before, has earmarked €8 billion just for hydrogen. France has committed €7 billion just for electric vehicles. At the very least, the Government could commit to a strategy of major investment in a green recovery. My noble friend Lord Oates underscored the need for urgency and the scale of the investment and commitment required.
I want to highlight three issues with the Chancellor’s schemes that I find outrageous. The first is the exclusion of 3 million businesses from any help, mostly self-employed contractors and freelancers who work through entirely legal personal service companies. My noble friend Lady Burt discussed this in detail. I do not buy the Government’s explanation that it cannot help this sector for fear of fraud; it stems from the Treasury’s institutional hostility to these kinds of contractors. We saw it with the loan charge, and I am grateful to my noble friend Lord Goddard for expanding on this. We still urgently need a rational basis for settlement under the loan charge of open years—something that will avoid destitution and bankruptcy. We have also seen that same attitude with the new off-payroll working rules, as described by my noble friend Lady Bowles. I know we will discuss those and the Economic Affairs Committee’s report on them another day.
As the IFS reminded us this week, many of those who become unemployed because of Covid will turn to setting up their own businesses. As explained by my noble friend Lord Bruce, the solo self-employed are critical to economic recovery. If the Government do not change their attitude and provide meaningful help, there will be a long tail of unnecessary damage from Covid, and it will hit the poor, especially those with children, gig workers, women and young people the hardest.
The second issue is the failure to open the Bank of England term funding scheme to fintechs and alternate lenders. The Government announced their £330 billion in schemes, including CBILS, CLBILS and bounce-back. Only £46 billion has gone out the door. Did they really intend only 14% of their schemes to be used?
The clearing banks have been given incredibly cheap money from the Bank of England to fund these loans and have behaved in their usual way, cherry picking existing customers and the most desirable customers, and leaving out the rest. They argue that they cannot expand their balance sheets too much, but they have refused to funnel the cheap Bank of England funding money to alternate lenders, even though this would not be put on to their balance sheets, and are blatantly using public money to undermine their competition. It has left the alternate lenders accredited by the British Business Bank unable to find the cheap money that would enable them to lend under these schemes and is threatening the diversity of providers that we need for economic recovery.
I go further. The Government need to take an active step to support finance for SMEs. This includes facilitating equity investment—it is incomprehensible that EIS has not been included in the future funding scheme—and a review of forbearance, and requires permission for new mechanisms such as shared platforms to improve access to financing.
The third travesty in this Finance Bill is the restoration of Crown preference, putting HMRC ahead of the queue and collecting money from bankrupt companies. At a time of national emergency, a measure that will hit small creditors and suppliers badly—as we heard from my noble friends Lady Burt and Lady Bowles and the noble Lord, Lord Bourne—is completely unacceptable.
We are also debating the stamp duty land tax Bill. My concerns have been that these measures help those buying second homes with buy-to-let instead of being more targeted. The move does little to stimulate the building of affordable housing, as my noble friends Lord Shipley and Lady Bakewell described. My noble friend Lord Bruce, the noble Lords, Lord Wood, Lord Truscott and Lord Loomba, and the noble Baronesses, Lady Falkner and Lady Wheatcroft, underscored the concern. The stamp duty change does nothing for renters. I have received the same letter as the noble Baronesses, Lady Andrews and Lady Bennett, from a renter who has been told their lease will not be renewed because the landlord wants to sell to take advantage of the stamp duty reductions. I suspect that letter is the tip of the iceberg.
Finally, I say how disappointed I am that we still do not know how the Government plan to borrow, tax or cut its way to covering the £188 billion in crisis spending. We know that in March sterling went into free fall and the capital markets turned against the UK Government’s debt until the Chancellor intervened with his rescue package and the Bank of England announced another £200 billion in QE. We should all take note of the warnings by the noble Baroness, Lady Altmann, on QE’s down sides. I accept that right now we have to splash the cash, but we also need a long-term economic plan.
My Lords, this debate has come at an interesting time. Despite the limitations on speeches, we have had a number of insightful and diverse contributions. I am sympathetic with the Minister in the number of ideas he has to comment on.
On Tuesday the ONS published May’s GDP estimate, which suggests a weaker return to growth than many had anticipated. We also saw the OBR’s Fiscal Sustainability Report, which contained a range of potential post-Covid outcomes that give cause for concern.
Yesterday we learned that nearly 650,000 people have fallen off UK payrolls as a result of coronavirus. A survey by the British Chambers of Commerce found that just under a third of companies planned to lay off staff in the next three months, meaning that the furlough scheme will be able to disguise the scale of the problem only for so long.
Last week’s announcement of the job retention bonus has been met with bewilderment by many. Like many of the other schemes announced by the Chancellor, it was not deemed by officials to be value for money and therefore required a ministerial direction for preparation to proceed. Primark has announced that it does not intend to accept the funds, and other firms, including John Lewis, are believed to be sceptical. Despite the job retention bonus, thousands more job losses have been announced, each a personal tragedy. The Government must do more to prevent mass unemployment.
I hope the Minister will accept that the Labour Party is trying to be a constructive and co-operative Opposition throughout the coronavirus crisis. In doing so, we have pointed out what we perceive as flaws in the approach taken, and that includes in relation to the measures contained in the Bills we are considering today. For example, we did not oppose the stamp duty Bill in the Commons, despite the concerns that the measures do not necessarily help those most in need of support.
Despite playing that role and giving the Government space to formulate one, we still lack a cohesive plan for exiting lockdown. The situation was summed up by a senior Cabinet Minister telling the country on Sunday that it should not be compulsory for people to wear masks in shops, only for an announcement on Tuesday to make it compulsory. Such instances increase confusion, which in turn undermines public confidence and hence the economic recovery.
If the country’s recovery falters, the problems already felt by central and local government before the pandemic are likely to be substantially worse. This is true of the shortfalls faced by many councils, many of which feel that Ministers have failed to fulfil their promise to deliver whatever resources are necessary. That applies equally to the welfare system, which was struggling with the rollout of the flawed universal credit even before millions more suddenly required its support.
As I have raised on a number of occasions, specific sectors of our economy are at a disproportionate disadvantage as a result of recent events. Aviation, which the Government have so far failed to support in any meaningful and joined-up way, will not get back to its pre-crisis state for some years. The same applies for much of the hospitality sector, as well as the performing arts. Although the former has started to reopen and the latter will receive new support, concerns remain over the long-term viability of businesses and jobs.
With the two Bills we are discussing soon to be on the statute book, the question is: what comes next? We have all read the reports that government departments are being asked to identify substantial savings. I say to the Minister that a decade of austerity is a large part of the reason why the economy has suffered so badly from the coronavirus crisis. A return to cutting budgets for the sake of it is not the answer, especially locally, where this simply is not possible without drastic consequences for local communities.
The area we should prioritise is the immediate review of the tax system, including tax reliefs. Some of the 1,190 reliefs have their benefits, but many noble Lords will have read the NAO’s February report, which notes that the UK relies more heavily on them than other countries. It has called for significantly more oversight of tax expenditure by the Treasury and HMRC, suggesting that some costs far exceed published forecasts.
My Lords, this has been an excellent debate, and I thank noble Lords for their expert and insightful contributions. I shall use what time remains available to address some of the issues raised by your Lordships in the debate. First, I shall briefly review some of the Bill’s achievements, for, despite the unprecedented events of the past few months, it is still significant.
The introduction of the digital services tax places the UK in the vanguard of global digital tax policy development—I will build on that later in response to individual queries—even as we continue to drive forward an international effort to secure a long-term multilateral solution. Our reform of IR35 off-payroll working rules represent a significant step towards ensuring the fair and equal treatment of individuals working in the same way across the labour market.
We are delivering on the Government’s manifesto promises to increase the rates of relief for businesses investing in R&D from 12% to 13%, and, as provided by the structures and buildings allowance, from 2% to 3% per annum. This underlines our commitment to incentivise businesses to invest in research and capital assets that will drive our future prosperity as we level up across all four nations of our union. It is worth reminding noble Lords of the colossal sums committed in this budget that have been forgotten and washed away with the crisis. We have committed to increase the capital budget from £71 billion in 2019-20 to £113 billion per year up to 2024-25. That is a 40% cumulative increase.
Over the next five years, the public sector will invest more than £640 billion for our future prosperity. The OBR has said that the large planned increase in public investment should boost potential output, and indeed, when we look at the crisis we are facing, there are two ways to get through it: to increase tax or to reduce services to the public. I do not agree with that because I believe that there is another way. We can improve the productivity of this country and make the delivery of services by the Government a lot more efficient, so I want to be a little more optimistic.
I turn now to the various points raised by noble Lords and will try to address some of their queries. The noble Lord, Lord Livermore, asked about a more sector-specific approach. The view of the Government is that it would be challenging to target the comprehensive job retention scheme in a fair and deliverable way if it was sectorised. It may not be the case that this is the most effective or sensible way to provide longer-term support, but in A Plan for Jobs 2020 the Chancellor announced measures to support firms in particular sectors, including the hospitality and tourism sectors. It is the case that some firms will be affected by the coronavirus outbreak for longer than others. The Government will seek to support these firms appropriately by engaging with businesses and representative groups with the aim of ensuring that the support provided is the right kind and relevant to them.
A number of noble Lords, including the noble Baroness, Lady Wheatcroft, and the noble Lord, Lord Livermore, asked about the dead weight of the job retention bonus. This bonus will provide an additional incentive to firms to keep their employees as demand recovers. Several noble Lords talked about the horror of mass unemployment, and we want to try to instil confidence in employers so that they bring their staff back. The Chancellor has given compelling reasons to justify the introduction of the job retention bonus, which falls outside the confines of the Managing Public Money guidance. The chief executive of HMRC has asked for a direction, but it is important to remind noble Lords that that has happened on a number of the schemes announced over the past few months, many of which have been supported both here and in the other place. For example, the discretionary grants top-up required a letter of direction, as indeed did the loan schemes. This is not an unusual mechanism. We are all working at pace and trying to be proactive in the face of the enormous challenges that exist.
Noble Lords asked about support for the self-employed and the noble Baroness, Lady Bowles, said that we should do more. On 29 May, the Chancellor announced an extension of the Self-employment Income Support Scheme and eligible individuals may now qualify for a second and final grant when applications open in August. This means that the UK continues to have one of the most generous self-employment Covid support schemes in the world as the economy reopens. Around 95% of those with more than half their income from self-employment may be eligible for the scheme. By 12 July, some 2.7 million individuals had claimed grants worth £7.8 billion in total. As the Government begin to reopen the economy, it is right that state support is tapered off and the focus shifts to getting people back to work.
A number of noble Lords, including the noble Lords, Lord Livermore, Lord Wood, Lord Bruce and Lord Empey, commented on the stamp duty land tax. I should like to speak briefly about the value of this tax and the measure announced last week. SDLT continues to be an important source of government revenue, raising several billion pounds a year to help pay for services. Any permanent changes would have a significant impact on the Exchequer. The Government believe that this is the time to encourage and bring forward transactions in the property market. This measure is there to increase confidence. First-time buyers will save up to £10,000 in addition to the £5,000 that they have already saved from the holiday. The Government are committed to helping to support first-time buyers on to the property ladder. They will still pay no SDLT on purchases worth up to £300,000 once the holiday ceases, and although second home and buy-to-let property buyers will benefit from the tax change, they will continue to pay the 3% top-up of the standard SDLT rates. It is worth reminding noble Lords that it is this Government who have reduced some of the tax incentives for buy-to-let borrowers over the past few years.
The noble Baroness, Lady Bakewell, and the noble Lord, Lord Shipley, asked about the market’s concentration in the hands of 10 developers. After the 2008 crisis, the number of SME housebuilders was reduced. We have extended the short-term home building fund with an additional £450 million boost to provide support for smaller builders and developers and help them access finance for new housing developments. This additional funding will help to provide finance to firms experiencing cash-flow issues, and we anticipate that it will support the delivery of over 7,000 new homes.
Taking a broader view of the Government’s efforts to date, the noble Lord, Lord Macpherson, my noble friend Lord Lamont, the noble Baroness, Lady Falkner, and the noble Lord, Lord Young, all spoke about longer-term financial sustainability. The immediate focus of the Government’s economic and fiscal strategy is ensuring that it continues to support workers and businesses as the country recovers from the Covid crisis. I cannot speculate on the contents of future Budgets but we will set out further plans at the next Budget as the economic and fiscal outlook becomes clearer.
Noble Lords—and the noble Lord, Lord Greaves, in particular—asked about support for local authorities. The Government have provided over £3.7 billion in new grant funding to councils to help them respond to the pressures. We have provided a further £600 million to support social care and £300 million to support track and trace. On 2 July, the Government announced a major scheme to help reimburse councils for their loss of income during the pandemic.
A number of noble Lords, including my noble friends Lady Verma and Lord Cormack, raised the issue of reskilling. We are creating a new skills fund worth £2.5 billion to transform people’s lives and give businesses the workers they need. We will invest £1.5 billion in dramatically improving the entire further education college estate. We recognise that it has been something of a Cinderella, and we are addressing that. We have committed to 20 new institutes of technology, where we will connect students learning about the world of science to the real world of business and industry.
We have also committed to a dramatic increase in the number of careers coaches in jobcentres, with an additional 14,000 careers coaches between now and the end of March next year. We are unashamed in taking an idea used by the previous Labour Government during the 2008 crisis. We hope that we can learn from that experience how it might work better.
A number of noble Lords, including the noble Lord, Lord Bruce, my noble friend Lord Blencathra and the noble Lords, Lord Haskel and Lord Snape, all stressed the need for a digital services tax. We would all have preferred an international response to the rise of these new juggernauts over the last 10 years. However, we have now put in place the framework to ensure that they start to contribute to our tax base.
Going slightly off piste, I ask my noble friend Lord Blencathra to forward any ideas he has on curtailing the anti-social behaviour that occurs on some sites. My own idea, which I would like to push further, is to have the platforms designated as publishers. As such, they would not be allowed to air all the dreadful things that appear on some sites. I apologise for digressing. The Government’s preference is for a strong global solution, and we have been at the forefront of this. One noble Lord mentioned retaliation from the United States. We have been very clear in our discussions with the US that this is not aimed at a particular country; it is a solution for any large platform.
The rates system is a matter of concern for noble Lords. We have committed to a fundamental review of business rates, and we published its terms of reference in the Spring Budget. As they set out, we invite expressions of interest from everyone who is interested in coming up with solutions. As noble Lords will know, people are much keener to see the abolition of taxes than the creation of new ones, but it is an important part of our tax base and we need to come up with a sensible alternative. The DST is intended as a temporary measure until the international world catches up. I hope that we can have a system that will operate in a uniform way across the developed world.
We have published an online harms White Paper where we set out the Government’s plans for a world-leading package of online safety. We are designing our proposals, and the next step will be to publish a full response to the White Paper consultation later in the year followed by legislation.
The noble Lord, Lord Snape, referred to the US digital services tax. As I have mentioned, we are engaging and trying to show to them that this is not a matter of discrimination.
Noble Lords, including the noble Lord, Lord Bruce, asked about the loan charge. Those affected by the loan charge are already able to defer submitting their self-assessment return for 2018-19 until September this year without having to pay any late filing charges or penalties. Changing the date would impact customers who legitimately made provision to help pay in the 2018-19 year. HMRC will keep the situation under review over the coming months and take a proportionate and reasonable approach to anyone who is unable to do this.
The noble Lord, Lord Goddard, suggested that the loan charge was retrospective. It is not retrospective; it is a new charge on disguised remuneration loan balances outstanding as at April 2019. It is worth reminding noble Lords that this scheme was simply too good to be true. People were offered their remuneration on the basis that they would never have to pay tax. In the recent High Court case Zeeman and Murphy, the judge explained that the loan charge only altered the timing of the payments received and held that it was
“well within the generous margin of appreciation for Parliament to decide that it would tackle the matter in the way that it did, and impose a present … liability in respect of money whose use, tax-free, had been enjoyed by the recipient over a number of years.”
A number of noble Lords expressed concern about the changes to insolvency and making HMRC a preferred creditor. The measure is not expected to have a significant impact on financial institutions. The reforms are forecast to raise approximately £220 million a year. That money will be spread thinly and recouped from both unsecured creditors and holders of floating charges. Bank lending to small and medium-sized businesses in 2019 alone was £57 billion, which is of a massively different order of magnitude. A financial institution holding fixed charges over assets will remain above HMRC in the creditor hierarchy and will be unaffected by this reform. The Government recognise that floating-charge creditors will recoup less than under the current law as a result of the way in which such tax debts are treated. However, we believe that the measure is right. It takes a fair and proportionate approach and applies only to taxes that have been paid by employees and customers in good faith and are held on their behalf by a business before being passed on to HMRC.
Another point of contention for some noble Lords is the IR35—the noble Baroness, Lady Bowles, and other noble Lords referred to it. It is true that falling within the off-payroll working rules does not change an individual’s status in respect of employment rights, as there are separate legal frameworks for determining employment status for tax and for rights, with no direct link between the two. Again, I urge noble Lords to consider common sense. There are some very simple principles of self-employment status; for example, if you are able to send a replacement for yourself to the person or firm employing you, if you are being directed regularly by that company, and if the tools of trade that you are using are not owned by the company contracting or employing you, they are marks of self-employment. Those who wish to challenge their employment status rights can take their case to the employment tribunal. The Government are making good progress on implementing the recommendations of the Taylor review and we continue to work across government on these issues.
On green policy, noble Lords have reiterated the fact that climate change issues are a massive priority for the Government, but it is worth reminding the House that we have been a leader on climate change and have reduced our emissions faster than any other G7 country since 1990. In the spring Budget, we reinforced our strong track record in this area, announcing at least £800 million for carbon capture and storage, more than £1 billion for further support for ultra low emission vehicles and a commitment at least to double funding for energy innovation. Many of the actions will take time to deliver on climate targets, but they will also help the UK’s economy recover from the impacts of Covid. Between 1990 and 2017, the UK reduced its emissions by 42% while growing the economy by more than two-thirds.
I am running out of time, but I want to pick up on one or two other comments made by noble Lords. On the future of manufacturing, for example, the noble Lord, Lord Empey, and several other noble Lords raised concerns that we have pivoted too far away from manufacturing over the last 30 years. What this crisis has shown us, and all countries in the developed world, is that we must have tighter and more accountable supply lines. I think we will see a renaissance in manufacturing.
I have some uplifting examples of that from my own experience during the last few months. For example, I have run a small initiative to build non-medical masks in this country. One of the British companies making the masks is in the south-west called Expert Technology, which previously made car parts. It has swivelled its whole operation to build these machines. Very movingly, when I spoke to the chief executive a couple of weeks ago, he had brought 70 of his staff back from furlough to build these machines. It shows the ingenuity that lies in the bedrock of our manufacturing industry that he could move so quickly to make such a dramatic change.
Another one that I was involved with was the manufacture of CPAPs; these are a kind of oxygen support mechanism, not an intrusive ventilator. UCL teamed up on this with Mercedes, which took its Formula 1 staff from making high-performance engines and built 10,000 of these units in less than a month. It shows what we can do, and this crisis will showcase and give us the potential for doing more.
The noble Lord, Lord Oates, asked about hydrogen. I completely agree that this is a crucial development. It will take the production of offshore wind energy so that we can capture it and the hydrogen can then be used for other forms of energy creation. We announced in the Budget £121 million to support a range of projects to explore and develop the potential of low-carbon hydrogen; I am sure that more will follow.
The noble Baroness, Lady Falkner, asked about using the German reunification tax as a model for a short-term tax, but she may not know that the tax, introduced in 1991, is still there in various forms. This is the problem with these taxes; as one noble Lord mentioned, income tax was brought in to help fund the Napoleonic War, which is now some 200 years ago.
My noble friend Lord Shrewsbury asked whether he could meet officials to talk about a company in his area called SD Technology. I will be very happy to organise that.
A number of noble Lords were anxious that we are still leaving the EU in the midst of this crisis. We need to draw a line under this very divisive debate that has scarred our whole body politic, certainly for 10 years. I stood as a Referendum Party candidate in 1997, which is 23 years ago. I would like to try to get through the important message that we want to negotiate in good faith with our EU partners. We want to have a collaborative and successful relationship with them, going forward. We do not expect to be treated like a third-class citizen. When we suggested that we should be treated in the same way as they had Canada, we were told that we could not even have a Canada deal. They need to come to the table in a constructive way.
I want to pick up what the noble Baroness, Lady Andrews, said on housing. She mentioned what we call office-to-resi. I declare an interest as I have done some of these. I actually live in one, and they are not slums. There are crooks, vagabonds and bad people in any situation and walk of life, and I am sure that there have been some poorly built office-to-resi units. But tens of thousands of good-quality properties have been built; as I say, I live in one myself.
I want to raise an important point on pushing economic activity forward. I apologise to the Deputy Speaker; I will finish after this point. There are two important things. We are bringing forward an omnibus Bill in the autumn, which will have a number of levers to accelerate economic reconstruction in this country. That will include things such as looking very carefully at planning regulations. I declare an interest as having built properties over many years. The regulations are beyond parody. I have a potting shed in my garden; it took me 12 years to get planning permission and then I was told that I could not go into it before 9 am. That is the madness of the system, so I hope very much that we will attack this once and for all.
We are bringing forward a Green Paper on procurement. It will be out in the next couple of weeks in a preliminary consultative form. It will not be a formal consultation, though I am pushing it very hard as it falls in my own specific area of responsibility. This might sound dry as dust but we spend £290 billion a year on public procurement in this country, and this is a fantastic opportunity post Brexit and the OJEU rules to recast it and make sure that we can point it to parts of this country where we can generate activity. Included in there will be the first time that we have used something called social value, so we will be able to assess a contract beyond just the pounds and pence of a bid.
I have sought to address noble Lords’ questions to the best of my ability. I will of course review the record of the debate, which has been of high quality; indeed, as is so regularly the case, many of the expert interventions illustrate the significant value of the ongoing scrutiny by this House. If in my closing remarks I have missed a point of substance, I will follow up in the usual way and write to those before me. I commend the Bill to the House.
Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.
[2nd Allocated Day]
Further consideration of Bill, as amended in the Public Bill Committee
New Clause 27
Review of tax reliefs
“The Chancellor must lay before the House of Commons within a year of Royal Assent a review of the tax reliefs contained in this Act which must contain the following—
(a) the number of tax reliefs;
(b) the effect on taxation revenue of each of the tax reliefs; and
(c) an assessment of the efficacy of systems for designing, monitoring and evaluating the effect of the tax reliefs.”—(Bridget Phillipson.)
This new clause would require the Chancellor of the Exchequer to report to Parliament on the number and revenue effect of the tax reliefs contained in the Bill; and on the efficiency of systems for designing, and assessing the effects of, those reliefs.
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
With this it will be convenient to discuss the following:
New clause 2—Review of changes to entrepreneurs’ relief—
“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to entrepreneur’s relief by section 23 and Schedule 3 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the provisions on—
(a) business investment,
(b) employment, and
(3) In this section—
‘parts of the United Kingdom’ means—
(c) Wales, and
(d) Northern Ireland;
and ‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact on investment of the changes made to entrepreneurs’ relief.
New clause 4—Structures and buildings allowances: review—
“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by section 30 and Schedule 5 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the provisions on—
(a) business investment,
(c) productivity, and
(d) energy efficiency.
(3) In this section—
‘parts of the United Kingdom’ means—
(c) Wales, and
(d) Northern Ireland;
‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact on investment of the changes made to structures and buildings allowances in Schedule 5.
New clause 17—Review of geographical effects of provisions of Sections 28 to 31—
“The Chancellor of the Exchequer must within twelve months of the passing of this Act lay before both Houses of Parliament a report assessing the differential geographical effects, broken down by nation and NUTS 1 statistical region, of the changes made by sections 28 to 31 of this Act.”
This new clause would require a geographical impact assessment of the clauses of the Bill relating to reliefs for business.
Amendment 1, in clause 36, page 34, line 29, at end insert—
“(13) The Chancellor of the Exchequer must, no later than 5 April 2021, lay before the House of Commons a report—
(a) analysing the fiscal and economic effects of Government relief under the Enterprise Investment Scheme since the inception of the Scheme, and the changes in those effects which it estimates will occur as a result of the provisions of this Section, in respect of;
(i) each NUTS 1 statistical region of England and England as a whole,
(iii) Wales, and
(iv) Northern Ireland;
(b) assessing how the Enterprise Investment Scheme is furthering efforts to mitigate climate change, and any differences in the benefit of this funding in respect of—
(i) each NUTS 1 statistical region of England and England as a whole,
(iii) Wales, and
(iv) Northern Ireland;
(c) evaluating the lessons that can be drawn from the effects of the Enterprise Investment Scheme with respect to the encouragement of both private and UK Government-backed venture capital funds in the devolved nations of the UK.”
This amendment would require the Chancellor of the Exchequer to analyse the impact of the existing EIS and the changes proposed in Clause 36 in terms of impact on the economy and geographical reach; to assess the EIS’s support for efforts to mitigate climate change; and to evaluate the Scheme’s lessons for the encouragement of UK Government-backed venture capital funds in the devolved nations.
New clause 27 calls on the Government to lay a review before Parliament considering all the tax reliefs within this Act, their effect on taxation revenue and the effectiveness of systems to evaluate these reliefs and to ensure value for money. We know that there are real problems with how the Government monitor tax reliefs. Thanks to the outstanding work of the National Audit Office and its report from February this year, we can see how unwieldy the system has become over the past decade and how much this is costing the public purse. It shows that there are currently 362 tax reliefs, which support Government economic and social objectives. This is a huge financial undertaking. The cost of tax reliefs for 2018-19 is estimated to be £155 billion.
The National Audit Office notes that this is not money that would simply be recouped in tax if these reliefs were abolished, but that is not the point that we are seeking to make. We on the Opposition Benches do not doubt that sometimes the outcomes from tax reliefs can be positive and that they can drive positive social and economic behaviour. The problem, as the NAO’s report makes plainly clear, is that we simply do not know enough about this, because the Government are failing to properly monitor and evaluate their effectiveness.
Of the 362 tax reliefs, only 111 have been costed by Her Majesty’s Revenue and Customs, and only 15 have had published evaluations since 2015. At the same time, on the Government’s watch, their cost has been rising since 2010. In normal times, such an enormous cost, without corresponding effective oversight, would be an area of real concern. As the Office for Budget Responsibility identified in July 2019, tax reliefs are considered to be a new fiscal risk to public finances, due to the Government’s not knowing their full cost and the lack of transparency built into the system. But of course we are not in normal times; we are living through an incredible economic crisis. The lack of effective monitoring and evaluation is hard to justify when our public services are under such enormous strain. The inattention shown by Ministers over the past decade must change and we need a much greater focus on ensuring value for money.
In Committee, we touched on one area where I ask the Minister to respond further today, namely the social investment tax relief, an area also pressed by my hon. Friend the Member for Ilford North (Wes Streeting) and my Front-Bench colleague my hon. Friend the Member for Liverpool, Walton (Dan Carden). What further consideration has the Minister given to extending this relief from April 2021 to April 2023? Will he update us on what further consideration the Treasury has given to this arising from discussions we held in Committee? This important aspect has been raised by many charities. I know that the Minister is sympathetic to the concerns they raise and I am sure they will be grateful for any further updates he might be able to provide in this area.
Our new clause paves the way for a greater focus on value for money, by establishing a more systematic and transparent way for the Government to evaluate the cost of tax reliefs and to empower Parliament to scrutinise this more effectively. The limiting scope for amendments to the Finance Bill set by the Government means that we have been able to opt only for a review of the tax reliefs contained in the Bill. Many changes to tax reliefs—for instance, on the entrepreneurs’ relief and the annual allowance—will potentially have a significant impact on tax revenues. In other areas, there are concerns about whether tax reliefs are being abused.
TaxWatch UK has highlighted particular concerns about the future of research and development tax credits, given the evidence of abuse in recent years. It is therefore right that there is greater transparency and that Parliament can properly scrutinise whether the measures proposed by Government are having their intended effect. The Minister attempted to address some of these concerns in Committee, saying that the Government kept all these reliefs under review and that he has proposed a more systematic evaluation programme for tax reliefs. We would welcome any progress towards such a system. However, if the picture was so rosy, I doubt whether the National Audit Office would have painted such a concerning picture in its report. I also look forward to the Public Accounts Committee’s report on this issue to find out whether it agrees with his assessment or what further insight it might be able to offer.
None the less, this amendment attempts to get to a wider point, which is that Parliament currently has few proper and meaningful opportunities to scrutinise tax reliefs on an ongoing basis. The Minister will know of the 2017 joint report by the Institute for Fiscal Studies, the Institute for Government and the Chartered Institute of Taxation entitled “Better Budgets: Making tax policy better”. It states that the information publicly available to Parliament on the costs and benefits of tax expenditure is not sufficient for it to assess their value for money, pointing out:
“Although taxes constitute almost 40% of national income, Parliament has little standing support to help look at tax legislation, support general inquiries on tax issues or help with post-implementation reviews.”
The report had a clear recommendation:
“Increase support to Parliament on tax issues”.
That means going beyond the support currently available and the opportunities that exist, in Finance Bill Committees, through the Treasury Committee, through Public Accounts Committee and through other work in this House, and instead embedding a proper system so we can assess the value for money of past tax measures. That is hardly controversial. As the Resolution Foundation points out, the Governments of Canada, Australia and New Zealand produce annual tax expenditure statements, which can be accompanied by parliamentary debate.
We want to see improved scrutiny of whether money is being well spent, to ensure that the system is fair and helps those who need it most. When all the benefits and tax reliefs are taken into consideration, the Government provide more support to the richest fifth of non-retired households than to the poorest fifth, and that gap has grown since 2010. This is in part due to the system of tax reliefs that has flourished under this Government and previous Conservative Governments and is clearly not based on any genuine notion of fairness.
Today, as we grapple with the looming jobs crisis, the question of fairness is paramount. We need to create a recovery from coronavirus that benefits everyone in our society, from young to old and right across every region and nation. The Opposition do not doubt the scale of the challenge. Our public finances are enormously stretched, our public services have been pushed to the brink by the pandemic, and there is a risk of unemployment on a scale not seen since the 1980s. We have yet to hear anything about the economic support package that we need: a back-to-work Budget to help those at the sharp end of the looming jobs crisis—a Budget that creates jobs, supports people back into work and properly invests in our young people so that they have the opportunities they deserve at this challenging time.
When our public finances are under such enormous pressure, we can only do our best to ensure that there is genuine value for money and that every penny is spent fairly and wisely. A review of tax reliefs in the Bill is just the starting point. It is a step towards what we on the Opposition Benches want to see, which is a broad review of all tax reliefs. That will help us to know for sure who is benefiting from the hundreds of tax reliefs that exist, whether they are fair, whether they represent good value for money and whether they are having their intended effect. I hope that the Minister will respond to these points and give us some assurances that the Government will do a lot more in this area, so that as we start to emerge from this crisis we can have confidence that taxpayers’ money is being spent well.
I am keen to talk briefly about the future fund, which is dealt with in new clause 22. The new clause covers those who have benefited from tax relief under the enterprise investment scheme and the seed enterprise investment scheme, to ensure that those tax reliefs are not withdrawn. These are important tax reliefs. I have set up a number of companies—I declare my interest, Madam Deputy Speaker—and some of the capital needed to invest in them was solicited through the EIS and the SEIS. Those schemes are very effective in encouraging high net worth individuals and angel investors to invest in small start-up and scale-up businesses.
The future fund is really for bigger, high-growth businesses wanting to attract capital. It is a very effective scheme, in that the Government match the funding that is attracted from individual investors—often venture capital investors. It is incredibly important, as we start to recover from this crisis and seize the opportunities ahead, that we encourage more equity investment. The UK is particularly reliant on debt financing in how our businesses start up and scale up, whereas other countries are much more effective at delivering equity finance solutions. This is important because at the moment the Government are investing a huge amount—about £35 billion—through guaranteed loans in the bounce back loan scheme and the coronavirus business interruption loan scheme, which businesses are making decisions on in terms of debt finance.
However, on equity finance, the Government do not always have the best record on deciding which businesses to support. That is why the future fund is a good scheme, in that it fund-matches private sector investment, which is much better at determining which businesses are the right ones to support. Individual investors are much better at picking winners than are Governments. As we move forward, there are going to be some huge corrections in the private sector. Lots of businesses have borrowed money to get through this crisis and it is fair to say that many of them will not be able to pay that money back. My all-party parliamentary group on fair business banking has contributed to a report by the Recapitalisation Group, a consortium headed by Ernst & Young and TheCityUK, which states that there will be about £100 billion of unsustainable debt—not all connected to the Government schemes—by this time next year because of borrowing by businesses hit by the recession caused by the covid crisis.
To get us through that period and the subsequent period, and to prevent business failures—there is no question but that some businesses will fail and jobs will be lost as a result—we need to understand that it cannot be all about debt financing. The Government cannot be expected simply to give grants to keep businesses going. We need to find a different route to encourage private sector investment, which is good at picking winners, to invest in small and medium-sized enterprises and scale-up businesses. Equity finance will be critical to that. We need something different from the future fund, which is there to help to scale-up, high-growth businesses. Instead of the growth capital that characterises the future fund, we need equity finance for the restructuring, rescue and turnaround of good businesses that could get through this, but that are not big scale-up businesses. In the past, equity finance has been used for high-growth businesses rather than for restructuring and turnaround, and most equity finance is focused on London rather than the regions. I know, Madam Deputy Speaker, you are as keen as I am to ensure that our regions are well served by equity finance and support.
We need a discussion about the schemes that we could introduce. I am a big fan of the seed enterprise investment scheme and the enterprise investment scheme, and I think the tax incentives around them should be enhanced for a time. Clearly, the temptation for high net worth individuals will be to keep their money in the bank for 12 months rather than investing, and wait to see what happens the other side of the crisis. We have to encourage them to put money into businesses today. A doubling of the incentive for EIS relief would be very welcome, and a loosening of the restrictions on EIS investment—such as by enabling relatives to invest in businesses—would be appropriate for the next 12 months.
We need to relax some of the restrictions on venture capital. There are annual and lifetime limits on venture capital in businesses, and they should be doubled, because lots of businesses need extra support at the moment and the venture capital companies that sit behind them did not expect to have to see them through this crisis. I am keen for the Treasury to relax some of the unreasonable restrictions on the amount of money that can be invested in those businesses.
We should perhaps consider loans that are based on a contingent tax liability—a kind of student loan system, whereby the loan is repaid through future profits. I know that Lord Bilimoria is keen to see a new 3i scheme, in which the Government put a significant amount of money—in his view, it should be £5 billion—into several different private equity organisations to sit behind UK businesses.
I will touch on something that is not directly related to tax reliefs, but that is very important in relation to finance. The Minister has been very good at engaging with me on clause 95, which I think unreasonably restricts the opportunity for businesses to get finance by putting HMRC up the ladder as a preferred creditor. That may mean that some lenders are less likely to lend, and I caution the Treasury to keep a close eye on that to make sure that debt finance is still made available to SMEs. I am very supportive of what the Government are doing with the future fund, but we need to go a bit further in certain other areas.
I rise to speak in support of the amendments tabled in my name and in those of my SNP colleagues. It is important to state from the outset that we hear regularly from across the Chamber—albeit not today, given that it is quite empty for this discussion of tax—that the UK’s tax relief system is full of inefficiencies.
Our core aim with the proposed new clauses is to be constructive and get to the root of that problem in respect of entrepreneurs’ relief by asking the Government to undertake a review of the impact on investment of the changes to the relief. As I said in Committee, that can only be a positive thing. After all, there remain varying views on the effectiveness and efficacy of entrepreneurs’ relief, and whether it delivers the necessary economic objectives or whether that could be done by other means. Those varying views are clear for all to see. For example, the IFS has been quite critical of the relief, highlighting that it is poorly targeted. On the converse, the Federation of Small Businesses has emphasised the importance of the relief for the retirement of business owners.
I have no doubt that we will hear much from the Minister about the fact that a review has already been undertaken. It has, but that was an internal review, which is not good enough. That is of particular importance when we consider that there was much talk in the public domain of entrepreneurs’ relief being scrapped entirely at the Budget. A Back-Bench revolt ensued and that position swiftly changed, so instead of the relief being scrapped, it has gone from £10 million back to the £1 million introduced by the Labour party in 2008. I am sure that even the Minister would agree that the tail should not be wagging the dog on such important matters. What we need is clarity—clarity on effectiveness, clarity of efficacy and clarity on direction. Those points have perhaps never been as important as they are now. As we rebuild our economy following covid-19, it is more important than ever that tax incentives go to those entrepreneurs who we know will rebuild the economy.
That takes me on quite neatly to the further new clauses that we have tabled in respect of tax avoidance, for as we rebuild the economy, the very last thing that we need is individuals and organisations dodging what they are due. On the Scottish National party Benches, we have been clear and consistent in highlighting our profound concerns relating to Scottish limited partnerships, yet despite the obvious manner in which these can be abused, we are yet to see any real action. I sincerely hope that in his contribution, the Minister will make a commitment to end the avoidance practices of such partnerships, but I hope he can go further, too.
For decades, we have seen consecutive UK Governments talk the talk on ending tax avoidance, but in 2017-18, HMRC still put the tax gap at £35 billion. I have some sympathy for the Government in this regard, for just as they legislate to close one gap, another one is opened by those who wish to cheat both the system and the public, but there is scope for a comprehensive anti-avoidance rule to be introduced. The Government will point to the general anti-abuse rule introduced in 2013, but this has been heavily criticised, not least by the TUC. What we need is workable general anti-avoidance rules that tackle avoidance in all its forms, including international tax abuse, and more than ever, we need real action to combat Scottish limited partnerships.
I am conscious of the fact that you wish to finish before 2 o’clock, Madam Deputy Speaker, so I intend to keep my contribution brief. I will move on to my closing remarks, in which I wish to highlight that more can be done to incentivise energy efficiency through tax reliefs and, similarly, to meet the needs and demands of the Scottish economy.
In respect of structures and buildings, it is clear that the Government are making an attempt to amend the system to incentivise capital investment, but they can and should go further. At the risk of repeating myself once again, the easiest step they could take is to scrap VAT on building repairs. In my constituency of Aberdeen South, I have been struck by just how many homeowners, who often live in some of the most beautiful granite buildings, are unable to undertake the repairs and improvements that they either want or need due to the high costs involved. As we seek to improve energy efficiency in our homes, particularly in often old and cold buildings, surely the Government should be assessing every measure to incentivise progress, not just to help rid us of fuel poverty, but to protect both the environment and the future of our planet. Cumulative action to combat climate change is needed, and I would welcome a firm commitment from the Minister in this regard.
On the issue of tax reliefs, it would be remiss of me not to highlight to the Chamber the proposals put forward in recent days by my colleagues in the Scottish Government. I think that everyone—even the most ardent of UK Government supporters—was deeply underwhelmed by the plans announced by the Prime Minister to restart the economy, and that collective sigh from across the UK was entirely justifiable, because £5 billion will likely work out to be less than the cost of renovating the very building that we are in, and it is a far cry from the £80 billion of investment called for by the Scottish Government. Importantly, however, my colleagues called not just for capital investment, but for tax relief. Indeed, they were clear that reducing VAT must be an urgent act of this Government, both in terms of reducing the general rate of VAT from 20% to 15% for six months and, importantly, reducing tourism and hospitality VAT to just 5%. On top of that, a 2p cut in employers’ national insurance contributions to reduce the cost of hiring staff was also identified.
Unfortunately, as with all too many matters, the hands of the Scottish Government are tied on such issues. The power lies with the UK Government, a Government who Scotland neither supports nor votes for. I hope that the Minister is listening and the wider Government are listening too, because now is the time for them to introduce the tax incentives that the Scottish economy needs; to deliver the investment that the Scottish economy needs; and to provide the Scottish Parliament with the borrowing powers that it so desperately needs. If they do not, they should be ever mindful that they are only doing further damage to the very Union that they claim to support.
Diolch, Madam Deputy Speaker, for calling me to contribute to this important debate, the importance of which is perhaps not reflected in the attendance in the Chamber today, but as the shadow Minister, the hon. Member for Houghton and Sunderland South (Bridget Phillipson) rightly said in her opening remarks, reviews of tax reliefs tend to be important not just for improving the transparency of their effectiveness but, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) said in relation to the enterprise investment scheme and the future fund, for their transformative impacts on policy. I agree with him that one of the key things that we need to consider as we move ahead is how we can encourage greater investment, especially equity investment, in regions other than London. I hope to dwell a little on that point later in my remarks.
It is a pleasure to follow my hon. Friend the Member for Aberdeen South (Stephen Flynn), who not only laid out effectively the inefficiencies of the tax reliefs system but raised the important question, which I would like to address, of whether reliefs achieve their economic objectives in the current climate and context, as we try to rebuild or at least begin to consider how we can rebuild after covid-19. Tax reliefs will have an important part to play, and it will be vital that they are channelled to those who will rebuild the economy.
I wish to speak at greater length to amendment 1 and new clause 17, both of which are tabled in my name. Both are probing amendments. I seek to probe the Government’s commitment to levelling up every nation and region of the UK by requiring them to report on the differential territorial impacts of the changes that the Bill introduces to certain reliefs and tax incentives.
Most hon. Members will welcome the Conservatives’ efforts to see balanced economic growth throughout the UK and in particular to move away from what I consider to be a hub-and-spoke approach to economic development. Over the past decade, the Government have mainly concentrated on improving connectivity between rural areas and smaller towns and the supposed economic engines of the larger cities, as opposed to incentivising and supporting economic growth in those areas themselves.
Such a centralised model has inevitably concentrated economic activity in London and the south-east. As a consequence, Wales’ potential and that of other regions and nations of the UK has been overlooked. That is perhaps most apparent when we consider the way in which public funding for certain development has been allocated. Between 2001 and 2017, London R&D funding per head totalled almost twice the UK average— £3,900 per head compared with a national average of £2,300. What is more, the trend worsened in that time. The share of the core research budget spend across the three cities of Oxford, Cambridge and London—also known as the golden triangle—rose from 42.1% in 2002-03 to 46% in 2017-18.
Perhaps just as relevant to this debate is how public spending on transport infrastructure is allocated. I note that per-head spending in London in the past decade has averaged nearly three times that spent in the rest of the UK. During the same period, the city has received five times the average per-head spend on culture. It is perhaps unsurprising, therefore, given that disparity, that the golden triangle of London, the south-east of England and the east of England also attracts the lion’s share of venture capital. Indeed, the region received 73% of all venture capital between 2016 and 2018, according to the British Private Equity and Venture Capital Association. When we reflect on this concentration of venture capital in one region of the UK, as with R&D, not only are the failings of past economic development policy laid bare, but it is difficult to deny a popular saying in Ceredigion, “I’r pant y rhed y dŵr”—or in English, “To the hollow the water runs”.
It is clear that as the world moves increasingly to a knowledge-driven economy, expenditure on R&D will be vital not only as a source of innovation that can be commercialised to form the basis of the next generation of business, but as a means of equipping people with the requisite skills for the new economy and, as my hon. Friend the Member for Aberdeen South said, the post-covid economy. It follows, therefore, that the economy of any nation or region that does not receive the right level of support will be hindered in its attempt to adjust to the challenges of tomorrow. Government support for R&D is essential for Wales in particular, to address problems that range from a low-wage economy to a looming demographic time bomb, while also building an economic platform to take advantage of trends, including automation, that could otherwise cause quite a serious long-term social risk.
New clause 17 would require the Chancellor to report on the geographical impact of changes to several tax rules, including R&D expenditure credit. It would ensure that the UK Government consider how different geographic areas benefit from taxpayer-funded reliefs so that the financial incentives can be better tailored to overcome the UK’s chronic regional inequalities. I have previously drawn attention to the concentration of R&D funding in the golden triangle, but assessments might also provoke a debate within Government about how public spending on other priorities is allocated.
In a similar vein, my amendment 1 would require the Government to consider the unsustainable concentration of private investment in one region of the UK at the expense of the devolved nations and other regions of England. As the UK Government narrow the applicability of the enterprise investment scheme, they need to consider how that will affect firms in different areas of the UK. The EIS benefits us in a great many ways—the hon. Member for Thirsk and Malton outlined them effectively in his remarks. The ways in which the UK Government can encourage the establishment in the devolved nations of venture capital funds, and therefore private investment, is so important. The geographic disparities to which I have already referred are reflected in the EIS. To pick just one example, between 2015 and 2018, only 210 Welsh firms benefited from EIS, receiving just 1.3% of the total investment. By contrast, to pick on the golden triangle again, that area received 67% of all investment. The average UK business angel investment per firm has been some 40% greater than that in Wales.
Modern advanced economies such as Germany, the Netherlands and even the USA have ensured a better geographic spread of economic prosperity, so the Government’s intention to address this policy failure is to be welcomed. However, we must make sure that the rhetoric is backed up by the reality and that the measures designed to realise such lofty ambitions are fit for purpose. My amendment and new clause would require the Government to report on the effectiveness of some tax relief schemes in this regard, and I hope that the Minister can give them some serious consideration.
I am grateful to everyone who has contributed to this short but interesting debate. As colleagues have noted, when we think about tax transparency, we are in what might these days be referred to as a niche area of taxation—technical, but no less important. In some respects, it is more important that we do not get lost in the detail but can come back and talk about the issues more widely. If I may, I will address the different clauses and then come to the specific points raised in the debate.
New clause 27 would require the Government to review all
“tax reliefs contained in this Act”.
It states that the review must contain
“the number of tax reliefs…the effect on taxation revenue of each of the tax reliefs…and…an assessment of the efficacy of systems for designing, monitoring and evaluating the effect of the tax reliefs.”
It asks the Government to publish the number of tax reliefs in the Bill and their effect on taxation revenue.
As the House may be aware, the Government already publish tax changes and estimates of the Exchequer impacts of policy changes in the Budget documents at each fiscal event. Moreover, Her Majesty’s Revenue and Customs monitors the effect on taxation revenue of tax reliefs after they are introduced and issues an annual tax relief statistics publication—I am sure that is closely scrutinised by all Members—which includes estimates of the costs of tax reliefs. Building on this, HMRC is also undertaking a project to expand its published costs information. I remind the House that in May HMRC published cost estimates for a further 47 previously uncosted reliefs.
New clause 27 also asks for an assessment of the efficacy of systems for designing, monitoring and evaluating the effect of a relief. As the House will know, the Government consult on new tax reliefs and proposed changes to tax reliefs, bringing in external expertise as part of the policy making cycle wherever possible. Officials are constantly working on ways to improve the policy on development, administration and continuing management of reliefs. As colleagues will know, the Government, and particularly the Treasury, keep all reliefs under review.
The Government also do evaluations of different forms. This work has included evaluations of a number of significant reliefs—some 15 since 2015. These include our R&D tax credits and entrepreneurs relief, on both of which I will say a few words later. In 2015, HMRC published an evaluation of R&D tax credits. In 2017, it commissioned an evaluation of entrepreneurs relief that led to a series of reforms, most recently the significant reduction of its lifetime at spring Budget 2020, which is legislated for in this Bill. The hon. Member for Aberdeen South (Stephen Flynn) picked up on the point about entrepreneurs relief, which he somehow regards as “the tail wagging the dog”. What he calls “the tail wagging the dog” other people would call consultation across Parliament and discussion with stakeholders. Since the measure resulted in a 90% reduction in the scope of the relief, I do not think he can claim that there is any lack of ambition in it.
HMRC will continue to monitor and evaluate reliefs and will bring forward a pipeline of further evaluations in due course. It will also consider a proposal to which I have already said I am quite sympathetic—I thank the hon. Member for Houghton and Sunderland South (Bridget Phillipson); we have discussed this before: a more systematic evaluation programme for reliefs. In the light of all this, the Government do not believe that the new clause is necessary.
New clause 2 would require the Chancellor of the Exchequer to review the impacts of the reduction in the lifetime of entrepreneurs relief that is being legislated for in this Bill within six months of Royal Assent, and specifically to review the impacts on business investment, employment and productivity in the constituent nations and English regions of the United Kingdom. I would first highlight to hon. Members that the Government have already conducted an internal review of this relief that built on the 2017 independent research commissioned by HMRC. That review considered the distributional effects and benefits of the relief against its cost in order to better understand the targeting of the relief. This, in turn, has been used to inform the reform that is being legislated for in this Bill. It ensures that the majority of entrepreneurs are unaffected. A lot of the concern about entrepreneurs relief historically has been that it is not well targeted, and this measure greatly improves the targeting. Unfortunately, the effects of the changes to the relief will not be visible in six months’ time, and for that reason I urge the House to reject new clause 2.
New clause 4 concerns the structures and buildings allowance. It would require the Chancellor to review the impacts of clause 30, which makes miscellaneous amendments to the SBA, within six months of the passing of the Finance Act. Specifically, it would require the Chancellor to review the impacts on business investment, employment, productivity and energy efficiency. Again, I reassure Members that both HMRC and the Treasury already monitor tax reliefs according to the level of risk that they are deemed to pose. It is in the nature of a structures and buildings allowance that it is configured to reflect the fact that it can take many years to erect new buildings. Claims under the SBA are ordinarily settled when businesses bring buildings into use and submit tax returns at year end. For that reason, it would be neither possible nor appropriate to try to draw conclusions on the productivity or energy efficiency impacts of these changes within such a short period.
New clause 17 would require the Government, within 12 months, to assess and report on the geographical effects of changes to business reliefs across a variety of areas. There is a concern, which I recognise, that there are geographical disparities that reflect the historical evolution of our economy in different areas. It is by no means a uniform picture, even outside London.
HMRC does not routinely require businesses to provide geographical information about where expenditure is incurred as part of claims for the R&D expenditure credit, structures and buildings allowance or intangible fixed assets. To do that, changes would be required that would create additional burdens on businesses. Those claiming the reliefs, of course, could only provide information after the year end. For that reason, it would not be possible for HMRC to have information within the 12 months stated in the amendment, even if the amendment were passed. It is not capable of being fulfilled.
HMRC does, in fact, already publish annual statistics on many tax reliefs, including a detailed breakdown of R&D tax relief claims, that analyse both by region and by sector the number of claims and the amount of relief received. That said, this regional analysis is based on companies’ registered offices, not necessarily where expenditure is incurred, and although HMRC will publish the next set of annual R&D relief statistics in the autumn, companies can claim R&D tax relief for up to two years after the end of their accounting period. For that reason, the 2020 release will only include claims up to 2018-19 and therefore will not include claims for the increased 13% rate.
As the House will know, the Government remain firmly committed to levelling up across the regions and nations of the UK, and the spring Budget provided a £1.14 billion increase to block grant for the devolved Administrations to spend on their own priorities, in addition to £2.7 billion invested in city deals, of which £800 million will support four deals in Wales alone, and a further £1.4 billion provided for 10 deals in Scotland. We fully recognise the importance of supporting regional and devolved Administration growth.
Finally, on the enterprise investment scheme, amendment 1 to clause 36, would require the Government to review the economic and geographical impact of the existing EIS. We considered this in Committee, of course, and I appreciate the intention of hon. Members to use the EIS more strategically, but it has been specifically designed to address a market failure for young innovative UK companies that seek to obtain patient equity finance in order to grow, and we would not wish to pull it away from that important national function. Companies that use the EIS can register wherever they please in the UK, and again the registered office does not need to be in the same place as where the bulk of the staff are employed.
With permission, Madam Deputy Speaker, I will spend another minute or two addressing the specific points. The hon. Member for Houghton and Sunderland South described the tax relief system as unwieldy. It is a view I would share. It is unwieldy. I think more work needs to be done. It has grown up over time. Certainly no one in government would regard the position as rosy. The House will know that we received many billions of pounds, including one just recently, in requests for VAT relief alone. Everyone seems to be terribly keen on improving tidying up reliefs, but they are also terribly keen on increasing the number of reliefs in their particular area or sector—for perfectly good, democratic reasons, we understand, but it does create a natural tension. As relief costs rise, of course, that is sometimes a very good thing—for example, with R&D expenditure credits, which we know support high value for money investment—but sometimes it might not be such a good thing.
I will just pick up on the point made by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake)—[Interruption.]—before he intervenes. He has jumped the gun a little bit on me, because we will be discussing new clause 22 in the next debate, so if he really wishes to land his point, he only has to hang around a little bit longer. I can give him a sneak preview, though, by saying that new clause 22 makes sure that people who have made investments under EIS or SEIS schemes do not lose reliefs on those investments. Recapitalisation is an important issue that the Government are closely attending to, and my hon. Friend is right to focus on it.
Finally, the hon. Member for Ceredigion (Ben Lake) made a point about the importance of greater equity investment in the regions. I very much agree with him.
I declare an interest as somebody who has benefited from entrepreneurs’ relief in the past. Is the Minister considering extending the reduction in entrepreneurs’ relief, which I support, to investors’ relief, which currently stands at the same figure as entrepreneurs’ relief used to stand at—£10 million?
The hon. Lady is absolutely right. Let me address that. As she knows, the relief remains in place until next year. Even its doughtiest supporters would agree that so far it has not been anything like as effective as anyone would have liked or as had been projected or anticipated. Only £11.2 million has been raised under it in the period 2014 to 2018-19.
We are looking at it closely. As I mentioned in Committee, I am in discussions with leading figures across the social investment world about whether we can get some more visibility on the sources of funds that would use such a relief and the sources of projects that those funds would support. If we do not get that and we cannot have that in a slightly more concrete form, it looks like quite an empty request, but there may be other things that we can do to support social investment. As the hon. Lady knows, I have written a book on the big society. It is an area that I care deeply about, so I am happy to respond and I am grateful for her question.
We do not intend to divide the House on the new clause, but I will make a few brief points in response to what the Minister has said. I am glad that he shares our assessment that the current situation and system are unwieldy, and therefore we look forward to seeing real progress in that area. Frankly, it is not good enough that of those 362 tax reliefs, only 15 have had published evaluations since 2015, at a time when costs have risen.
During these extraordinary times, we need to see much more from the Government, not just on tackling tax avoidance, as we discussed at some length yesterday. There needs to be a renewed focus on taxpayer value for money, with greater opportunities for scrutiny of tax reliefs in this place and from external experts. Although we are not seeking to divide the House, I hope that we will see progress in that area. It is an issue to which we intend to return. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 19
Taxation of coronavirus support payments
‘(1) Schedule (Taxation of coronavirus support payments) makes provision about the taxation of coronavirus support payments.
(2) In this section, and in that Schedule, “coronavirus support payment” means a payment made (whether before or after the passing of this Act) under any of the following schemes—
(a) the coronavirus job retention scheme;
(b) the self-employment income support scheme;
(c) any other scheme that is the subject of a direction given under section 76 of the Coronavirus Act 2020 (functions of Her Majesty’s Revenue and Customs in relation to coronavirus or coronavirus disease);
(d) the coronavirus statutory sick pay rebate scheme;
(e) a coronavirus business support grant scheme;
(f) any scheme specified or described in regulations made under this section by the Treasury.
(3) The Treasury may by regulations make provision about the application of Schedule (Taxation of coronavirus support payments) to a scheme falling within subsection (2)(c) to (f) (including provision modifying paragraph 8 of that Schedule so that it applies to payments made under a coronavirus business support grant scheme).
(4) Regulations under this section may make provision about coronavirus support payments made before (as well as after) the making of the regulations.
(5) In this section, and in that Schedule—
“coronavirus” and “coronavirus disease” have the meaning they have in the Coronavirus Act 2020 (see section 1 of that Act);
“coronavirus business support grant scheme” means any scheme (whether announced or operating before or after the passing of this Act), other than a scheme within subsection (2)(a) to (d), under which a public authority makes grants to businesses with the object of providing support to those businesses in connection with any effect or anticipated effect (direct or indirect) of coronavirus or coronavirus disease;
“the coronavirus job retention scheme” means the scheme (as it has effect from time to time) that is the subject of the direction given by the Treasury on 15 April 2020 under section 76 of the Coronavirus Act 2020;
“the coronavirus statutory sick pay rebate scheme” means the scheme (as it has effect from time to time) given effect to by the Statutory Sick Pay (Coronavirus) (Funding of Employers’ Liabilities) Regulations 2020 (S.I. 2020/512);
“employment-related scheme” means the coronavirus job retention scheme or the coronavirus statutory sick pay rebate scheme;
“the self-employment income support scheme” means the scheme (as it has effect from time to time) that is the subject of the direction given by the Treasury on 30 April 2020 under section 76 of the Coronavirus Act 2020.
(6) Examples of coronavirus business support grant schemes as at 24 June 2020 include—
(a) the small business grant fund that is the subject of the guidance about that scheme and the retail, hospitality and leisure grant fund published by the Department for Business, Energy & Industrial Strategy on 1 April 2020;
(b) the retail, hospitality and leisure grant fund that is the subject of that guidance;
(c) the local authority discretionary grants fund that is the subject of the guidance about that scheme published by the Department for Business, Energy & Industrial Strategy on 13 May 2020;
(d) the schemes corresponding to the small business grant fund, retail and hospitality grant fund and local authority discretionary grants fund in Scotland, Wales and Northern Ireland.”—(Jesse Norman.)
This new clause introduces Schedule (Taxation of coronavirus support payments) and provides for definitions of the various coronavirus related support schemes to which it applies. It also allows for secondary legislation to specify further schemes to which the Schedule will apply, as well as to modify the effect of the Schedule in relation to particular schemes.
Brought up, and read the First time.
With this it will be convenient to discuss the following:
Government new clause 20—Protected pension age of members re-employed as a result of coronavirus.
Government new clause 21—Modifications of the statutory residence test in connection with coronavirus.
Government new clause 22—Future Fund: EIS and SEIS relief. Government new clause 23—Interest on unpaid tax in case of disaster etc of national significance.
Government new clause 24—Exceptional circumstances preventing disposal of interest in three year period.
Government new clause 25—HGV road user levy. Government new clause 32—Enterprise management incentives: disqualifying events. Government new schedule 1—Taxation of coronavirus support payments.
New clause 29—Review of impact of Act on poverty—
‘(1) The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on poverty and lay this before the House of Commons within six months of Royal Assent.
(2) This assessment must consider—
(a) the impact on absolute poverty,
(b) the impact on relative poverty, and
(c) whether such a study should in future be a regular duty of the Office for Budget Responsibility.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on poverty and consider whether the OBR should conduct such assessments as a regular duty.
New clause 10—Impact of provisions of the Act on child poverty—
‘(1) The Chancellor of the Exchequer must review the impact of the provisions of this Act on child poverty and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the impact on—
(a) households at different levels of income,
(b) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010,
(c) different parts of the United Kingdom and different regions of England, and
(d) levels of relative and absolute child poverty in the United Kingdom.
(3) In this section—
“parts of the United Kingdom” means—
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on child poverty.
New clause 3—Review of changes to capital allowances—
‘(1) The Chancellor of the Exchequer must review the effect of the changes to chargeable gains with respect to corporate capital losses in this Act in each part of the United Kingdom and each region of England and lay a report of that review before the House of Commons within two months of the passing of this Act.
(2) A review under this section must consider the effects of the changes on—
(a) business investment
(b) employment, and
(3) A review under this section must consider the effects in the current and each of the subsequent four financial years.
(4) The review must also estimate the effects on the changes in the event of each of the following—
(a) the UK leaves the EU withdrawal transition period without a negotiated comprehensive free trade agreement,
(b) the UK leaves the EU withdrawal transition period with a negotiated agreement, and remains in the single market and customs union, or
(c) the UK leaves the EU withdrawal transition period with a negotiated comprehensive free trade agreement, and does not remain in the single market and customs union.
(5) The review must also estimate the effects on the changes if the UK signs a free trade agreement with the United States.
(6) In this section—
“parts of the United Kingdom” means—
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause requires a review of the impact on investment, employment and productivity of the changes to chargeable gains with respect to corporate capital losses over time; in the event of a free trade agreement with the USA; and in the event of leaving the EU without a trade agreement, with an agreement to retain single market and customs union membership, or with a trade agreement that does not include single market and customs union membership.
New clause 6—General anti-abuse rule: review of effect on tax revenues—
‘(1) The Chancellor of the Exchequer must review the effects on tax revenues of section 99 and Schedule 14 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) The review under sub-paragraph (1) must consider—
(a) the expected change in corporation and income tax paid attributable to the provisions in this Schedule; and
(b) an estimate of any change, attributable to the provisions in this Schedule, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The review under subparagraph (2)(b) must consider taxes payable by the owners and employees of Scottish Limited Partnerships.’
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of Clause 99 and Schedule 14, and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
New clause 7—Call-off stock arrangements: sectoral review of impact—
‘(1) The Chancellor of the Exchequer must make an assessment of the impact of section 79 on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of the passing of this Act.
(2) The sectors to be assessed under (1) are—
(e) financial services,
(f) business services,
(g) health/life/medical services,
(k) professional sport,
(l) oil and gas,
(m) universities, and
This new clause would require the Government to report on the effect of Clause 79 on a number of business sectors.
New clause 8—Review of effects on measures in Act of certain changes in migration levels—
‘(1) The Chancellor of the Exchequer must review the effects on the provisions of this Act of migration in each of the scenarios in subsection (2) and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) Those scenarios are that—
(a) the UK leaves the EU withdrawal transition period without a negotiated future trade agreement,
(b) the UK leaves the EU withdrawal transition period following a negotiated future trade agreement, and remains in the single market and customs union, and
(c) the UK leaves the EU withdrawal transition period following a negotiated trade agreement, and does not remain in the single market and customs union.
(3) In respect of each of those scenarios the review must consider separately the effects of—
(a) migration by EU nationals, and
(b) migration by non-EU nationals.
(4) In respect of each of those scenarios the review must consider separately the effects on the measures in each part of the United Kingdom and each region of England.
(5) In this section—
“parts of the United Kingdom” means—
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require a Government review of the effects on measures in the Bill of certain changes in migration levels.
New clause 9—Review of effects on migration of measures in Act—
‘(1) The Chancellor of the Exchequer must review the effects on migration of the provisions of this Act in each of the scenarios in subsection (2) and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) Those scenarios are that—
(a) the UK leaves the EU withdrawal transition period without a negotiated future trade agreement
(b) the UK leaves the EU withdrawal transition period following a negotiated future trade agreement, and remains in the single market and customs union, and
(c) the UK leaves the EU withdrawal transition period following a negotiated trade agreement, and does not remain in the single market and customs union.
(3) In respect of each of those scenarios the review must consider separately the effects on—
(a) migration by EU nationals, and
(b) migration by non-EU nationals.
(4) In respect of each of those scenarios the review must consider separately the effects in each part of the United Kingdom and each region of England.
(5) In this section—
“parts of the United Kingdom” means—
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a Government review of the effects of the measures in the Bill on migration levels.
New clause 11—Assessment of equality impact of measures in Act—
‘(1) The Chancellor of the Exchequer must lay before the House of Commons a report assessing the effects on equalities of the provisions of this Act within 12 months of the passing of this Act.
(2) The review must make a separate assessment with respect to each of the protected characteristics set out in section 4 of the Equality Act 2010.
(3) Each assessment under (2) must report separately on the effects in in each part of the United Kingdom and each region of England.
(4) In this section—
“parts of the United Kingdom” means—
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on equalities.
New clause 15—Sectoral review of impact of Act—
‘(1) The Chancellor of the Exchequer must make an assessment of the impact of this Act on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of Royal Assent.
(2) The sectors to be assessed under (1) are—
(e) financial services,
(f) business services,
(g) health/life/medical services,
(k) professional sport,
(l) oil and gas,
(m) universities, and
This new clause would require the Government to report on the effect of the Bill on a number of business sectors.
New clause 16—Review of effect of Act on tax revenues—
‘(1) The Chancellor of the Exchequer must review the effects on tax revenues of the Act and lay a report of that review before the House of Commons within six months of Royal Assent.
(2) The review under (1) must contain an estimate of any change attributable to the provisions in this Act in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The estimate under (2) must report separately on taxes payable by the owners and employees of Scottish Limited Partnerships.’
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the Bill; and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
New clause 30—Review of rates of air passenger duty—
‘(1) The provisions of section 88 shall not come into effect until the Treasury has carried out and published a review of the likely effect of changes to rates of air passenger duty on the aviation sector.
(2) The review must take into account the effects of Covid-19 on the sector.
(3) The review must be published no later than 1 October 2020.’
This new clause would require that the changes to APD in clause 88 not come into force until a review of the effect of changes to APD has been published by the Treasury.
Amendment 2, in clause 80, page 68, line 2, at end insert—
‘(3) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this Section and lay a report of that review before the House of Commons within one year of the passing of this Act.’
This amendment would require the Government to review the impact of the proposed changes to alcohol liquor duties on public health.
Amendment 3, in clause 81, page 68, line 21, at end insert—
‘(3) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the TPDA 1979 by this Section and lay a report of that review before the House of Commons within one year of the passing of this Act.’
This amendment would require the Government to review the expected impact of the revised rates of duty on tobacco products on public health.
Amendment 4, in clause 86, page 73, line 20, after “supplies” insert “, including human breastmilk”
This amendment would ensure that vehicles carrying human breastmilk would benefit from the exemption from Vehicle Excise Duty.
Amendment 5, page 77, line 10, leave out Clause 95
Amendment 6, in clause 95, page 77, line 14, at end insert—
‘(2) The Government must lay before the House of Commons by 9 September 2020 a statement of the conditions under which it would consider it appropriate to vary rates of import duty under this Section.’
This amendment would require the Government to state the conditions under which it would consider it appropriate to vary rates of import duty in an international trade dispute.
Amendment 7, page 77, line 14, at end insert—
‘(2) No regulations under this section may be made unless a draft has been laid before and approved by a resolution of the House of Commons.’
This amendment would require the Government to seek the approval of the House before making regulations varying rates of import duty in an international trade dispute.
Amendment 8, page 77, line 14, at end insert—
‘(2) The Chancellor of the Exchequer must, no later than a month before any exercise of the power in subsection (1), lay before the House of Commons a report containing the following—
(a) an assessment of the fiscal and economic effects of the exercise of the powers in subsection (1);
(b) a comparison of those fiscal and economic effects with the effects of the UK being within the EU Customs Union;
(c) an assessment any differences in the exercise of those powers in respect of—
(iii) Wales, and
(iv) Northern Ireland; and
(d) an assessment of any differential effects in relation to the matters specified in paragraphs (a) and (b) between—
(iii) Wales, and
(iv) Northern Ireland.’
This would require a review of the economic and fiscal impact of the use of the powers in clause 95 including comparing those effects with EU Customs Union membership.
Amendment 9, in clause 96, page 77, line 26, after “tax” insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 10, page 77, line 27, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 11, page 78, line 11, after “tax”, insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 12, page 78, line 12, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
Amendment 13, page 78, line 35, after “tax”, insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
Amendment 14, page 78, line 36, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
Amendment 15, page 79, line 10, at end insert—
‘(8) The amendments made by this section do not apply to any debt secured by a floating charge in respect of monies were advanced to the debtor before 1 December 2020.’
The Government have tabled eight new clauses to the Bill, the majority of which are in response to the covid-19 pandemic. I would like to start by offering Members an explanation for why these new clauses are being brought forward on Report. The Government have been working very hard to combat the pandemic, as the House will know, and these measures are just a small part of a much more extensive and wide-ranging response. I am sure that colleagues across the House will appreciate that Ministers and civil servants have been working in extraordinary circumstances in the past three months. As I often do, I again pay great tribute to officials at the Treasury and Her Majesty’s Revenue and Customs. Without their work, it would not have been possible to deliver many, if any, of these aspects of this extremely comprehensive response, let alone in such a rapid timeframe as, for example, with the coronavirus job retention scheme.
We have brought forward these new clauses at the earliest possible opportunity, and for technical reasons, it is on Report. We have also been slightly limited by the fact that to table each new clause requires a new Ways and Means resolution to be agreed by the House. Report was the first amendable stage of the Bill to take place after the Government had been able to agree the necessary Ways and Means resolution on the Floor of the House. I hope the House will agree that there is a clear need for each of these new clauses to stand part of the Bill.
I will touch on each new clause briefly. New clause 19 seeks to do two things. First, it confirms that grants made under covid-related schemes—for example, the furlough scheme, the self-employment scheme, the small business grant fund, the retail, hospitality and leisure grant fund, the local authority discretionary grant fund and schemes corresponding to those grants within the devolved Administrations—are subject to tax. The new clause also includes a delegated power to add or remove further grant schemes through a statutory instrument, which provides sensible flexibility, so that the Government can continue to support the economy in their response to the pandemic.
The second part of the new clause ensures that HMRC has appropriate and proportionate compliance and enforcement powers in relation to the furlough scheme and the self-employment income support scheme. To ensure that taxpayer money is going only to those who are eligible, the new clause gives HMRC powers to recover overpayments and to impose penalties where there is deliberate non-compliance. HMRC has given a clear undertaking that these powers will not be used to penalise taxpayers who may be going through difficult times but make honest mistakes in their applications. As previously stated, the powers are designed to be proportionate, and they balance the fact that we are in unprecedented and uncertain times with the need to ensure that HMRC has sufficient powers to enforce the schemes according to eligibility criteria set out and to protect the Exchequer.
New clause 20 seeks to mitigate potential pensions impacts for those with a protected pension age returning to work to help in the battle against the pandemic. Its purpose is to provide certainty for those people by temporarily suspending rules that would otherwise see the pension income of recently retired people reduced if they were to return to work in crucial workforces at this important time. These retirees have been and will remain critical to the Government’s response to covid, and this new clause temporarily removes restrictions that might impede a flexible response.
New clause 21 temporarily relaxes the statutory residence test so that highly-skilled individuals from across the world are not discouraged from coming to the UK and helping this country to respond to the unprecedented health emergency. The actions and presence of normally non-resident individuals in the UK could have inadvertently affected their tax residence status. The measure is to be restricted, however, to ensure that it applies only between 1 March and 1 June 2020 for time spent in the UK by individuals who worked specifically on coronavirus disease-related activities in specified sectors. That time will not count towards the residence test.
I turn to new clause 22, much loved by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who is not in his place. It modifies the current enterprise investment scheme and seed enterprise investment scheme so that individuals who made EIS and SEIS investments before a future fund investment in the same company will not lose relief on those previous investments when the future fund loan converts into shares or is repaid. As the House will know, those schemes were intended to encourage investment in smaller, higher-risk trading companies by offering tax reliefs to individual investors who subscribe for new shares in qualifying companies. The Government announced the future fund as part of its business package in response to covid-19. Current EIS and SEIS legislation means that some future fund investors who have used those schemes for previous investments in the same company might lose their reliefs, depending on how and when the loan converts. The new clause intends to ensure that those investors do not lose that relief as a result of investing in the future fund to support innovative UK companies that may have difficulty raising finance during this period.
May I press the Minister on innovative companies getting a lack of support from HMRC? I have come across a case in my constituency where a very innovative British company appears to have had a lack of support from the agency. Would he look into that for me?
I am grateful to the hon. Gentleman for his question. As the House will be aware, HMRC is often responsive and generally extremely responsive to such issues. I will happily look at any correspondence he wants to send me, and I will ensure that there is a properly engaged response to the extent that my limited powers over HMRC permit me. I hope that will be effective.
New clause 23 enables the Treasury to specify in an order made under section 135 of the Finance Act 2008 which payments of tax and other liabilities will not attract late payment interest or surcharge as a result of being deferred by agreement during a period of national disaster or emergency. It also enables the Treasury to set specific relief periods for different deferred taxes or liabilities. As the House will know, the Government have announced an unprecedented package of economic support for businesses and individuals affected by covid. The new clause ensures that late payment interest that would normally accrue automatically where tax is paid late does not apply, supporting taxpayers further and in ways in which I am sure the whole House will support. The payment deferral for VAT that we have announced provides taxpayers with a much-needed cash flow boost. HMRC is using its existing powers as set out in the Commissioners for Revenue and Customs Act 2005 to defer those payments of tax.
New clause 24 allows a refund of the additional 3% higher rate of stamp duty where exceptional circumstances prevented the sale of the previous main residence in the three-year window within which a sale must ordinarily take place. The new clause applies to those whose refund window ended on or after 1 January 2020. It is to ensure that responsible actions taken by people do not lead to negative tax implications and that those who would otherwise have received a stamp duty land tax refund are still able to receive it, despite the pandemic.
New clause 25 suspends the heavy goods vehicle road user levy for a period of 12 months, cutting fixed operational costs to the logistics and haulage industries as the economy begins to recover from the pandemic. These industries support many other industries, and temporarily easing their financial burden will support the haulage sector, reducing fixed costs as the economy recovers over time.
I turn finally to new clause 32, which makes minor changes to the existing enterprise management incentives legislation, introducing a time-limited exception to the disqualifying event rule so that EMI option holders who can no longer meet the EMI working time requirement due only to the pandemic are not forced to forfeit their options or to exercise them earlier than planned. This has the effect of protecting employees furloughed under the coronavirus job retention scheme or who have taken unpaid leave and had their working hours reduced. The measure means that affected employees will not forfeit their options or be forced to exercise them within the statutory 90 days normally required.
Since the point of EMI schemes is to help high-growth small and medium-sized enterprises recruit and retain skilled employees by giving them tax-advantaged share options, I am sure the House will understand that the measure supports a very important sector that is also likely to be important to our recovery. The changes will be effective from 19 March to ensure that employees who were furloughed or had to reduce their hours do not lose out. I hope the House will accept the need for the new clauses in these highly uncertain and unusual times. I commend them to the House.
I thank the Financial Secretary for making the case for the Government’s new clauses this afternoon. Throughout the coronavirus pandemic, the Labour party has made clear as the official Opposition that we seek to work constructively with the Government in response to this unprecedented public health crisis which, as we have seen, has brought about an economic crisis to follow it. In that spirit, and to ensure the smooth passage of legislation, we have helped to expedite the progressive measures taken by the Government, and this afternoon will be no exception.
I wish to speak to new clause 29, which has been tabled in the name of my hon. Friend the Member for Oxford East (Anneliese Dodds), the shadow Chancellor, and other hon. and right hon. colleagues. Yesterday afternoon, I addressed the Government’s poverty of ambition on climate change. This afternoon, I want to address their poverty of ambition on tackling poverty itself.
The Conservative party has now been in government either alone or in coalition for a decade. Over the past 10 years, their record on poverty in this country and on tackling poverty in this country has been absolutely lamentable. According to the Government’s own Social Mobility Commission, 600,000 more children are now living in relative poverty than in 2012, and that is projected to increase further due to benefit changes and the obvious economic impact of covid-19. As of 20 February this year, some 14 million people were in poverty, according to the Joseph Rowntree Foundation, including 2 million pensioners and 4 million children. We know that the impacts of poverty are felt disproportion- ately among different communities. Children from black and minority ethnic groups, for example, are more likely to be in poverty, with 45% of BAME children living in poverty, as compared with 26% of children in white British families.
We believe that the Government are failing on something that should be the most basic of priorities for any Government. That is not just our view as the Opposition party; the Government’s own Social Mobility Commission has said:
“The government should be more proactive in addressing poverty overall.”
It is worth bearing in mind that behind every statistic is a child, and 30 years ago I was one of those children in the child poverty statistics, growing up on a council estate in London’s east end, sandwiched between the bright lights of the City of London and the glistening lights of what was then the blossoming London Docklands Development Corporation land, which has become Canary Wharf. Today, they are two global financial centres at the centre of our global city. In between is a vista of poverty that was bad then and remains bad now.
One of the things I find most frustrating about the experience I had growing up in a council flat in the east end in the 1980s is that I look back, and I think about the conditions of the council flat I lived in and the embarrassment of not wanting to bring friends home from school because the conditions were not ones that we were proud of. It was a source of shame and embarrassment. I think about the experience of relying on free school meals, and the stigma that arises from having to collect a dinner ticket while other children go and pay for their food quickly—and get the best food, I hasten to add, while handing over their cash. I think about the difficulties my mum had as a single mum, balancing the challenge of bringing up a child while relying on the benefits system, and having to make compromises in choosing how she spent the family budget: the choice between putting food in the fridge or some extra money in the electricity meter.
One of the things that makes me most angry is that, when I think about my experience, which I thought was bad in the 1980s, and compare it with that of children growing up in the same circumstances today, as seen in my own constituency casework, things have got worse for children in the decades following my childhood, when things ought to be getting better. Whereas I had the stability of a council flat—albeit not a nice one—and a roof over my head, children in my constituency today, and no doubt in those of so many others across the Chamber, are growing up in temporary bed-and-breakfast accommodation, being moved from pillar to post and living in substandard accommodation, with disruptive consequences for their education and their schooling, and the inability for them to form lasting friendships and for their families to build supportive networks and family relationships.
When I think about the enormous strides that were made, particularly by the last Labour Government, in tackling educational disadvantage, I think it is outrageous that, in this country in the 21st century, children still today arrive at school at the age of five with their life chances already limited and in many cases predetermined, because we failed to get early years right. Sure Start centres have closed, and the support for families is no longer there. As a result, children arrive at school, at five, less prepared than their peers from more affluent backgrounds. It makes me angry that, for all the difference made to my education through programmes under the last Labour Government and the impact they have had on children since—the London Challenge and Excellence in Cities—today children are leaving school at 16 at a time when the attainment gap between children from the most advantaged backgrounds and the least advantaged backgrounds is actually widening, and where the further education system in which many working-class young people go on to study has been described by the Government’s own Social Mobility Commission as “undervalued and underfunded”. This is at a time when the changing nature of our economy and the changing nature of the world of work make post-16 adult education delivered in further education settings more important, not less. We should be making progress, but we are in reverse gear.
My hon. Friend is making an extremely powerful speech, which focuses us, as we should be, on this vital issue. Does he agree with me that a central part of the problem many families face is that the costs of food and of rent have risen so dramatically, with the impossibility of being able to afford a home? In my constituency in Reading, it is very difficult for many people to get on to the housing ladder. Many young professionals and young families are crammed into flats, which are hugely expensive. They are also suffering huge problems with the high cost of food. Does he agree with me that this is a very significant part of the problem?
I strongly agree with my hon. Friend, and that brings me neatly on to the next point I was about to make about employment conditions in our country. For my mum, as a single mum, it was difficult to hold down a steady, stable job and often she was reliant on temporary, casual, low-paid work to help make ends meet. Looking at the picture in the labour market—and this was pre-pandemic—even in households where one or both parents are working, children are still growing up in poverty. As my hon. Friend said, over the last decade we have seen the bills going up, but the wages failing to follow.
We have also seen labour market conditions that mean that, even when people are doing the right thing, as the vast majority of people want to do—going out to work, often with two, three or even four jobs in a week, and working all the hours God sends to try to make ends meet—they are still unable to make ends meet. It should never be the case, especially in a country with the wealth and opportunity available here, that when someone goes to work and puts in a full week’s work, at the end of the day they still do not have enough to make ends meet. Things are likely to become even more challenging in the wake of the economic fallout from coronavirus. Unemployment statistics from recent months have been not only jaw dropping but unprecedented, and the pace at which our economy has collapsed as a result of the necessary shutdown has been astonishing. I welcome and recognise the steps that the Chancellor has taken to try to protect people’s incomes, but unless he goes further than he has already announced, many people will face greater poverty and hardship later this year.
Against that bleak backdrop, I would expect any reasonable Prime Minister with the right priorities, or any Prime Minister with their heart in the right place, or the faintest understanding of what life is like for most people in this country, to make tackling poverty a top priority. This Prime Minister, however, does not even know in which direction the poverty numbers are going. I do not expect him to have instant recall of month-by-month poverty data, although if I were Prime Minister I would ensure that those numbers were on a dashboard that I looked at every morning, but he did not even know that on his watch, and that of his predecessors, child poverty in this country has been rising. I think that is negligent, but having followed him closely during his time as Mayor of London, his lack of attention to detail, and lack of grip on Government, does not come as a surprise.
That brings me to our Chancellor, who many people believe to be a more impressive political figure and leader than the Prime Minister—that is certainly the talk of the Tories in the Tea Room. It remains to be seen, however, whether this Chancellor, who says that he will do whatever it takes to get the country through the pandemic, is also prepared to do whatever it takes to tackle poverty in our country. We know it can be done; we know the difference that political leadership can make. We know what happens when a Prime Minister wakes up every day and thinks, “What can I do today to make the country a fairer, more equal and just society?”, because we saw that under the previous Labour Government.
In 1999, Tony Blair promised to end child poverty within a generation, and the Government set ambitious targets to halve child poverty by 2010, and eliminate it by 2020. When that Labour Government left office, they left to the Conservative-led Government who followed an inheritance and track record that put them on course to achieve that target. The year 2020 will be remembered in the history books as the year of the covid-19 pandemic, but it should also be remembered as the year when this country, one of the richest in the world, ought to have achieved its target to end child poverty.
I am delighted that the Minister asked that question, because I am about to lay out, in full, the record of the previous Labour Government. According to the London School of Economics and its Centre for Analysis of Social Exclusion, by the end of the new Labour Government’s period in office, child poverty and pensioner poverty had fallen considerably, in circumstances where child poverty would have risen without those reforms, and pensioner poverty would have fallen less far. In terms of absolute poverty, child poverty fell by more than 2 million from 1997-98 to 2009-10, and pensioner poverty fell by almost 3 million in the same period. In terms of relative poverty, child poverty fell by 800,000 between 1997-98 and 2009-10, and the number of pensioners in relative poverty fell by more than 1 million in the same period.
That Labour Government oversaw an £18 billion annual increase in spending on social security for families with children, as well as an £11 billion rise in payments for pensioners by 2010. Those rises were supported by other anti-poverty policies, including Sure Start, the national minimum wage, increased childcare support, and increases in education spending, which rose from £56 billion in 1996-97, to £103 billion in 2009-10—a real-terms increase of 83%. The last Labour Government pretty much eradicated homelessness and made ending insecure housing a priority, reducing the number of households in priority need of housing from 135,000 in 2003-04 to just 40,000 in 2009. They pursued the decent homes standard to boot, ensuring that children were growing up in far better conditions than I did. That is a record to be proud of—a record of a Government who got their priorities right.
It took a celebrity footballer to get this Government to do the right thing on something as basic as ensuring that children who would otherwise have gone hungry were fed this summer. It is not just that the Government do not have their head in the right place; they do not have their heart in the right place either. Unfortunately, we cannot rely on Marcus Rashford being on speed dial to get the Prime Minister to do the right thing on every occasion, and we cannot rely on the Chancellor to do the right thing on every occasion either. That is why it is important, as we have laid out in new clause 29, that we ensure that what counts is what is measured.
New clause 29 would require the Chancellor to conduct a review of the impact of this Bill—no doubt, very soon, this Act—on poverty in the United Kingdom. As with the Government’s environmental ambitions, I doubt that this Bill will move the dial on poverty much, if at all.
The Government’s own Social Mobility Commission has asked for the Office for Budget Responsibility to conduct assessments of all the fiscal statements that it usually does, but this time to look at child poverty and anti-poverty measures in particular. I urge Ministers to look carefully at this issue again. We raised it in Committee and were not successful in persuading the Minister of the case then, but I hope that we can persuade him of the case now. If Treasury Ministers and officials know that the OBR will be looking at those numbers in the same way that it does the other numbers in its assessments of Government fiscal events, perhaps it will concentrate the minds of people in the Treasury to get their priorities right.
Next week, the Chancellor will be coming before the House to deliver an economic update. After the Prime Minister’s statement this week, I think he needs to do a lot better than his apparent boss did when making a speech that was trailed as a new deal. It was not a new deal. Its ambitions were modest and much of the content was re-announcement. It certainly was not a green new deal. Perhaps when the Chancellor here next week, he can do the opposite of the Prime Minister. The Prime Minister over-promised and under-delivered. Given the way in which the economic update has been trailed, perhaps the Chancellor can under-promise and over-deliver next week, because he has a golden opportunity in the wake of this crisis to think seriously and substantially about the way in which our economy works and whose interests it serves.
I hope that when he comes forward next week, he does so with the full Budget that the shadow Chancellor has called for—a back-to-work Budget that is focused on jobs, jobs, jobs, that can actually tackle the gross inequalities and injustices of our society, and that puts us back on track to eradicate child poverty within a generation and to eradicate poverty for everyone because, for all the challenges of the last decade and all the challenges that we are living through now, this remains one of the wealthiest countries in the world.
This also happens to be a great country that is full of opportunities for so many people—in education, industry, arts, science and imagination—but those opportunities are not available to everyone. That should keep Ministers awake at night. It keeps me awake at night. But having listened to our Prime Minister only weeks ago in this Chamber, when it comes to tackling child poverty in this country, I do wonder whether his heart is really in it at all.
I am grateful for the opportunity to speak to new clause 30, which stands in my name, that of my right hon. Friend the Member for Maidenhead (Mrs May) and of a former aviation Minister, as well as of other Members who understand the crucial role of the aviation sector in bringing a very large amount of employment and prosperity to our constituents—in my case I represent an area immediately adjacent to Manchester airport, and my right hon. Friend has many constituents who work at Heathrow airport—and the wider impact of the aviation sector on the British economy and the way it drives growth and opportunity in our country.
The deficiencies of air passenger duty are well known, and this is an argument that has gone on for many years. It was introduced originally under the guise of being an environmental duty or tax. In fact, it has simply been a way of driving revenue. It is, by now, the highest tax of its sort anywhere in the world. In normal times, it is a drag on the development of new routes and connections around the world and a particular problem for regional airports, which find it harder to establish those new, especially long haul routes. Crucially, air passenger duty takes no account whatever of emissions or the environmental impact of an aircraft, a class of aircraft or a flight.
New clause 30 seeks to ensure that a review should be held—and held quickly, to be published within three months, by 1 October—of the likely effect of changes in air passenger duty rates on the aviation sector. The Bill as it stands only provides the capacity for Ministers to increase rates of air passenger duty, but it is critical that we look wider than that at the possible benefits that could come from reductions or a suspension. That is particularly important, of course, in the context of the covid-19 pandemic and the Government’s response to it.
The House will know that the aviation sector, along with hospitality and leisure, is among the hardest hit sectors of all. The effect on aviation has been exacerbated by Foreign Office guidance, which still advises against all but essential overseas travel, and in the past few weeks or so by the implementation of a blanket quarantine proposal, a policy which I hope will come to an end in the very near future with the announcement of a large list of so-called air bridges, which I think the industry expects might take place tomorrow.
The effect over the last few months of both the pandemic itself and policy in relation to the pandemic has been chilling for the aviation sector. The House is well aware of the very large number of jobs that have already been lost in the aviation sector in recent weeks and months, and there is little doubt it will take a long time for aviation to come back to the state of health that it previously enjoyed. While this is by way of a probing new clause, I say to the Minister on the Treasury Bench that the real purpose of it perhaps is simply to flag the importance of this issue prior to the fiscal event or the statement that will be made next week by the Chancellor. I am sure the Minister is well aware of the principle set out by Colbert, who said:
“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
The danger at the moment is that far from being an easy source of revenue for Government, air passenger duty, if it remains unreformed in the coming weeks and months, risks killing the goose rather than allowing the Government to extract the feathers.
I hope that the Chancellor will, before his statement, look seriously at the case for a temporary reduction or suspension of air passenger duty to assist the aviation sector to get back to where it should be. This is an opportunity to see the wider economic benefits that could come by achieving greater connectivity for our aviation sector, and particularly for regional airports. It would also be an opportunity to look at whether at the end of such a period of suspension an improved regime might be introduced that seeks to reward more sustainable aviation rather than simply to extract revenue for each passenger who flies.
As I draw my remarks to a close, I think of the Prime Minister’s speech earlier in the week, in which he flagged up the importance of more sustainable aviation and the Government’s drive to make sure that Britain develops the first long-haul carbon-neutral passenger aircraft. This should be an opportunity for the Government to look at a new type of air passenger duty or a new way of taxing the sector that actually rewards and encourages better performance in environmental terms—lower emissions—and therefore helps to power investment in technological advances of that sort.
I will not press new clause 32 to a vote, but I hope that Ministers will take the case seriously and bring forward proposals next week in the Chancellor’s statement.
The unprecedented support that the UK Government have given to business during this crisis has been welcomed, but we feel we need a bolder and more radical approach to ensure that the recovery helps to deliver a fairer, more resilient economy, with wellbeing at its core.
Across the parties and nations of the UK, everybody’s aim in this crisis was principally to save lives, but we now face the difficult task of rebuilding the economy after the unprecedented suspension of economic activity over the past few months. There is no doubt that we will have divergent ideas as to how to achieve this, but my colleagues in the Scottish Government and on the SNP Benches here have worked as constructively as we can to produce a clear strategy for the future of Scotland’s economy. That strategy is important, because it is not good enough just to lurch from crisis to crisis. I have now been in Parliament for five years, with two elections in between, three Prime Ministers, and now a pandemic and a likely no-deal exit from the EU at the end of year. We have seen a vacuum of economic strategy from successive Conservative Governments; it is time for this Government to recognise the unique circumstances in which we find ourselves.
We need to rebuild and grow our economy, and we need a vision for what we want that to look like. This crisis has clearly deepened existing inequalities. We have to seize the opportunity to build a new kind of economy that tackles poverty and inequality at its root. Research from the New Economics Foundation has found that only 6% of the public want a return to the pre-pandemic economy. The SNP’s new clause 10 would hold the Government to account on tackling child poverty and require the Chancellor to review the impact of the Bill, because we want to ensure that the inequalities that have widened as a result of this crisis do not continue to widen. We support Labour’s new clause 10, which complements our clause.
Unfortunately, we cannot trust the UK Government to deliver on tackling inequality on their own. In the past couple of weeks, we have seen an intention to return to the punitive regime of benefit sanctions that has caused so many families misery and hardship. How are people supposed to go out to work when they may be shielding, when they may have children at home and when they may put their families at risk by going out to work? It is really quite impossible. I do not know how the Government expect people to do that. They should definitely urgently rethink the proposals on benefit sanctions.
We have seen the Government providing free school meals for children in England only after being shamed into a U-turn Marcus Rashford, and we have seen a Prime Minister more concerned about a £900 million paint job on a plane than supporting families. That gives a real indication of this Government’s priorities. The Scottish Government have taken child poverty incredibly seriously. They have set in statute their commitment—[Interruption.] They are grumbling on the Government Benches; if they would like to tell me why spending £900 million on a plane is more important than—
If Government Members want to tell me why spending £900,000 on a plane is more important than feeding children—[Interruption.] All of it is too much. All of it is unnecessary; when there are children in my constituency and constituencies throughout the country not having food to put on the table, money spent on redecorating a plane is a shame that should stain this Government.
As I was saying, the Scottish Government have taken child poverty incredibly seriously. They have set in statute the commitment to eradicate child poverty by 2030, with concrete action in the child poverty delivery plan backed by the £50 million tackling child poverty fund. Child poverty in Scotland had fallen, but it has been on the rise since the Conservatives took over in 2010. Research from the Joseph Rowntree Foundation directly attributes this rise to welfare policy. In addition, the policies outwith the control of the Scottish Government, such as no recourse to public funds, cause significant poverty among people who are working. Constituents come to my office who cannot put food on the table for their children and who are struggling to pay their bills. Some have come to my office several years in a row to apply for the Christmas presents fund that is run in Glasgow, because even though they are working, they are not entitled to the benefits that their neighbours get; two children may sit next to one another in the classroom but one will go without because one family has no recourse to public funds. The Government must rethink this, because we have seen through the coronavirus crisis that people with no recourse to public funds find it more difficult to support themselves through this time.
The hon. Lady is right to say that so much of the responsibility and blame for what is happening in Scotland rests on the shoulders of the decisions taken here by the Conservative Government in Westminster, but I cannot resist asking her: given that between 1999 and 2007 Labour was in government in Holyrood and Westminster, are the people of Scotland not better served when there is a Labour Government here and a Labour Government there?
The hon. Gentleman seems to think that Scotland just hangs about and waits for a Labour Government, and everything is going to be fine. We would rather have Scotland’s powers in our hands than have one hand tied behind our back in this Union. So we are stuck with the policies that this Government and Parliament propose, which the people of Scotland, in many cases, have not voted for and do not want.
It is difficult to assess the impact that no recourse to public funds has on poverty in constituencies across the UK. I asked for a breakdown by constituency of the number of people with no recourse to public funds, but the Government said that that information could not be provided to me. So I cannot tell how many people in my constituency have no recourse to public funds and are struggling. It falls to the Scottish Government to try to fix some of these problems, because as soon as anything is proposed to get around no recourse to public funds, the UK Government shut it down and say it cannot happen. The Scottish Government therefore have an anti-destitution strategy for no recourse to public funds, to take a degree of responsibility for the serious situation many people face—these are our people and we want to try to help them. When that strategy comes forward, I call on the UK Government not to stand in the way of trying to support people in society who need help.
Academic research has shown that the single most effective policy to reduce child poverty in Scotland would be for universal credit payments to be increased, and the Scottish Government are using the powers we have to invest in the new Scottish child payment, which will lift 30,000 children out of poverty. With UC applications more than doubling since this time last year, we badly need sustained investment in the welfare system from the UK Government, and it is disappointing that the Prime Minister has failed to rule out a return to austerity. The UK Government’s welfare cuts are estimated to reduce social security spending in Scotland by up to £3.7 billion in 2020-21. The Scottish Government are spending more than £100 million a year to mitigate the worst of those, including by mitigating against the bedroom tax. However, as Professor Alston, the United Nations special rapporteur on extreme poverty and human rights, wrote in his report on poverty in the UK:
“Devolved administrations have tried to mitigate the worst impacts of austerity, despite experiencing significant reductions in block grant funding and constitutional limits on their ability to raise revenue. Scotland and Northern Ireland each report spending some £125 million per year to protect people from the worst impacts of austerity and, unlike the United Kingdom Government, the three devolved administrations all provide welfare funds for emergencies and hardships.
But mitigation comes at a price, and is not sustainable. The Scottish Government said it had reached the limit of what it can afford to mitigate, because every pound spent on offsetting cuts means reducing vital services.”
Professor Alston was absolutely right in that assessment.
We cannot, in any circumstances, return to the austerity of the past. The welfare state and public services have been devasted in the past 10 years, leaving our economy vulnerable. Unfortunately, we still do not know if or when a second wave of covid-19 might happen, so we must use this opportunity to build resilience, if possible. We can allow a more flexible labour market response by increasing the generosity of universal credit, which will give people the financial headroom to gain new skills to meet the changing demands of the economy.
The Chancellor said that he would do whatever it takes to protect jobs, after a recent Treasury Committee report revealed that more than 1 million people have fallen through the gaps in support schemes. At this critical stage, it is vital that the Treasury strengthens and extends the schemes to ensure a strong economic recovery from the crisis. It is extremely concerning that the Government are pushing ahead with plans to wind down support schemes, and in particular that new clause 19 will designate grants to help businesses, employers, individuals and members of partnerships affected by the coronavirus crisis as taxable income.
It is also concerning that HMRC will be given new compliance powers to enforce those rules and that that has not been effectively communicated to businesses. Any new powers granted to HMRC must be proportionate and serve to aid recovery, rather than providing a further barrier for businesses to overcome. Those concerns have been backed by tax experts, such as the Chartered Institute of Taxation, which has said that it is vital that HMRC
“take a reasonable approach to enforcement in cases where recipients of CSPs were not entitled to the amount they received…there will be cases where people have made inadvertent errors in claims which may not come to light for some time. There will be cases where the person just did not know of the requirement to notify an overpayment. It is imperative that HMRC obtain a full understanding of the facts in every case and take a proportionate and targeted approach in their compliance activity in the months ahead.”
It is extremely important that HMRC and the Government get those details right. Many businesses are already on their knees and vulnerable to further shocks. Many businesses in my constituency are struggling to deal with HMRC, with errors in reporting systems meaning that they are not entitled to the payments that other businesses have received. It is difficult to address those problems.
If businesses are left to fail as support is withdrawn, the billions of pounds that have already been spent by the Government will be money wasted. As I did in Committee, I highlight the concerns raised by the Association of Business Recovery Professionals, R3, about the plans to grant preferential status to HMRC in insolvency procedures from December, covered by our amendments 9 to 15. It and UK Finance are concerned that that will undermine business lending and make it harder to rescue businesses from administration. Many companies across the UK in recent weeks have been struggling and going into administration, so the Treasury should carefully consider whether its plans will help businesses or hasten their demise.
Countries all over the world are facing the same choices and growing levels of public debt, but if we are to recover fully from the crisis, we need to prioritise growth and wellbeing over deficit reduction. This week, the Scottish Government laid out a plan for a fiscal stimulus package of £80 billion to stimulate growth for the whole of the UK. That would be used to accelerate major investment in low-carbon energy efficiency and digital infrastructure and deliver a green new deal for UK. The value of that investment can be recognised by assessing the Government’s fiscal sustainability in terms of its public sector net worth.
It is regrettable that the UK will, of course, miss out on the European Commission’s €750 billion stimulus. That makes it even more critical that the UK Government commit to their own stimulus—a proper stimulus, not the pretendy one that was announced by the Prime Minister this week—in the wake of covid-19, such as a reduction in VAT and job guarantees for young people.
Speaking of even younger people, I make a plug for my small and uncontentious amendment 4, which seeks to clarify that human breast milk is part of the vehicle excise duty exemption for vehicles carrying blood. It would be an important signal of support and recognition from the UK Government to those operating milk banks and to the mums donating their breast milk, which helps some of the most vulnerable babies in intensive care units across the UK. Among them is the extraordinary woman who, last week, donated an astonishing 32 litres to the milk bank that covers all of Scotland.
The Scottish Government and my colleagues in Westminster have put a considerable amount of work into formulating a meaningful strategy for Scotland’s recovery and future progress in delivering inclusive growth. I sincerely hope that those policies are taken seriously by the Treasury and that we can look back on this time as a pivotal one for making progress towards a fairer and more equitable society.
It is an honour and a privilege to be addressing you from these green Benches, Mr Deputy Speaker, and most unexpected for a Wukkington lad like me. It would be fair to say that neither the timing nor circumstance of my maiden speech are as I imagined, with my original timing altered by the loss of one of Workington’s great artists—a much-loved former teacher and my wife’s grandmother—followed by lockdown, and the circumstance altered by a socially distanced Chamber and our new normal in the light of coronavirus.
On that subject, I must pay tribute to the huge sacrifices that each and every one of my constituents has made to stop the spread of the virus and to the huge effort from many individuals and businesses with their contributions to local community and national efforts. If I was to look for one positive in recent months, it would be the way that so many of my constituents have stepped up to the plate to support those around them.
The scale and speed of the Government’s response to coronavirus has been unprecedented. The measures that we have seen across the grant schemes, rate relief schemes, furlough schemes and bounce-back loans have been welcomed by my constituents in Workington. There is more to do and there are lessons to be learned, but I am incredibly proud to be here today to support the Government in their efforts.
I stand here before a House that has never before so closely resembled the make-up of the country, particularly on the Conservative side, as so many of us now speak for industrial communities that Labour deserted. As the son of a binman and an office clerk, and as a former British Steel apprentice without a university education, I am testament to that change. While I never thought, growing up, that I might grace these green Benches, others seemed to. One of my secondary school science teachers, Mr Harris, once recognised in my school report—if the Prime Minister is listening—my ministerial potential. He suggested agriculture, but I am not fussy.
Not having spent a huge amount of time outside Cumbria, I wondered how I might identify fellow Cumbrians in the big city. Folklore has it that I should greet those about whom I have a suspicion they may be Cumbrian in my native dialect with, “’as thou e’er sin cuddy lowp a five barred yat?”, in the hope of eliciting the answer, “Aye, it mun a bin a gay lish cuddy else a varra la’al yat.” At the risk of destroying the ancient practice of identifying Cumbrians in exile, for those not lucky enough to hail from God’s own county of Cumbria, that is dialect for, “Have you ever seen a donkey jump a five-barred gate?”, and the response, “Yes, it must have been a very fit donkey or a very small gate.”
Alongside the promises I made to my constituents for infrastructure improvements, increases in school spending, nurses and police, and levelling up, which this Bill starts to deliver and are very much welcomed across Workington, I will take any attempt that I can to have Hansard record Cumbrian dialect for posterity!
It is customary on these occasions to talk about one’s predecessor, and I take the opportunity to thank Sue Hayman for the work that she has done in this House and across the constituency. She was, and remains, an assiduous proponent of her causes, which I understand she may have the chance to continue from the other place. I wish her well and look forward to working with her to enhance the lives of my constituents.
However, I also wish to talk about another predecessor, John Christian Curwen, the Whig MP for Carlisle—a long time before my hon. Friend representing that seat now—before he went on to win the Cumberland seat in 1826. Under Curwen, Workington was the birthplace of modern agricultural practices at his model farm. Schoose Farm is still farmed to this day. He also introduced the first recorded social insurance scheme locally, and attempted to do so nationally as an MP, nearly 100 years before Lloyd George put forward the scheme we now know as national insurance. If I can make a fraction of the impact that Curwen made on my constituency, we would be in a good place. But he was not, by his own confession, what is called “a good party man” He was one of those opinionated stalwarts whose independence found readiest expression in alignment with the Opposition. Having watched the drama in this place over the last few years from the outside, I hope for the sake of my hon. Friend the Member for Walsall North (Eddie Hughes) and my right hon. Friend the Member for Sherwood (Mark Spencer) that that is one of his traits I leave in the past.
It was the home of John Christian Curwen, whose picture hangs in the corridor close to your office, Mr Deputy Speaker, that brought me into politics. The destruction and subsequent decay of Workington Hall allowed over decades remains a blight on Workington. I hope to use some of my time here to bring life to what remains, which is grade I listed and partly an ancient scheduled monument.
But the town of Workington is just one of five towns in my constituency, the others being Cockermouth, a wonderful market town filled with independent traders, who have truly shown their resilience in recent years; Maryport, whose residents have accepted me so warmly into my constituency office there, and which sits on the cusp of revival thanks to this Government’s Future High Streets investment; Aspatria, where I continue to work hard to protect people’s future in the face of the proposed closure of the Sealy bed factory; and Silloth, a gem of a Victorian seaside resort that I can recommend to any hon. Members of this House.
The Workington constituency has 30 miles of coastline stretching from industrial towns to the rural villages at the end of Hadrian’s Wall. There are a number of Members of this House, and of the other place, who saw much of the constituency last year during the campaign, in all weathers. I fondly recall a video recorded by my hon. Friend the Member for Hexham (Guy Opperman) in the wind and rain in Westfield, as no one could hear a word coming from the mouth of a man who looked like he had been dragged from the sea. I give thanks to all the Members of this House and of the other place, to the many other friends, and to my wife and my family for the support they gave to me on my journey to this place, and continue to give me as I settle into these green Benches.
West Cumbria has led the way in many sectors over many centuries, not only with Curwen. Little Clifton gave us John “Iron Mad” Wilkinson, a protagonist of the industrial revolution who made his mark in the constituency of my hon. Friend the Member for Telford (Lucy Allan). Later, Henry Bessemer chose Workington to base his company, and we went on to send the finest steel around the world. Our rail and track products still underpin many a thriving economy.
Cockermouth gave us renowned astronomer Fearon Fallows, while next door in the constituency of my hon. Friend the Member for Copeland (Trudy Harrison) Eaglesfield gave us John Dalton, a pioneer of atomic theory, and Keswick’s Dr William Brownrigg discovered platinum. Borrowdale gave us graphite, and Lillyhall in my constituency became a manufacturing centre for graphite in the nuclear supply chain, and, of course, the world-beating pencils produced there today, having had a previous long history in Keswick. Today, we have various companies across the Workington constituency that produce some of the finest packaging materials in the world, used by every one of us in some way, every day.
The Workington constituency is home to some of the most beautiful places on earth and has a great tourism future ahead of it, but we are also proud of our industrial heritage and our world-beating manufacturing processes in use today. With our friends next door in Copeland, we are the home of the UK’s nuclear expertise. We stand ready to play our part in the delivery of new nuclear and in exporting that expertise around the world. The Workington constituency also has so much more to offer. With some of the highest tidal ranges in the UK—as we talk in this place of new tidal and wave energies—as the maintenance base for the Robin Rigg offshore wind farm and with the constituency set to benefit from the construction of an English-side extension, we also stand ready to play our part in truly becoming Britain’s energy coast.
Workington was a cornerstone of the industrial revolution. As we look to our future, I am sure that the Workington constituency will be at the core of the low-carbon energy revolution to come, and I am delighted to be able to be here to play my part.
I congratulate the hon. Member for Workington (Mark Jenkinson) on his maiden speech, and I hope that he—a newbie like me—enjoys his time in this place and is a strong voice for the people of Workington. Yesterday, I spoke in the Finance Bill debate about job creation and the importance of creating not only jobs, but secure jobs that put the needs of workers at the heart of the economy, rather than profit. It seems rather appropriate that I have the opportunity to speak in the child poverty debate today, because as we all know, the Government’s shameful record on employment and workers’ rights is one of the main drivers behind child poverty.
To be honest, I have absolutely no faith that the Government understand the issue of child poverty in any meaningful way. In the space of a month, I had the Secretary of State for Health and Social Care telling me that this Government were committed to levelling up the north-east, yet I also witnessed an equalities Minister admitting from the Dispatch Box that they had not heard of the Marmot report—essential reading when looking to tackle health inequalities. As one popular actor said in response, it is like a vicar not having heard of the Bible.
Over the last decade, Conservative Governments have systematically dismantled the progress that the last Labour Government made on child poverty. Currently, 4 million children are living in poverty, with 3 million of those living in a household where at least one person is in work. In addition to that, the Government’s Social Mobility Commission reports that there are 600,000 more children living in relative poverty than in 2012. The commission referenced the Government’s welfare changes as a key cause of this and have predicted that those changes, along with the impact of covid-19, will only increase child poverty. While the Prime Minister might be confused as to whether the Government have caused more child poverty, I am not. It is there in black and white in those appalling figures and, quite frankly, it is an utter disgrace.
In recent weeks, we have also seen the Government being forced into a U-turn on free school meals after a campaign by a leading footballer—one of the people the Health Secretary was telling to do their bit at the start of the crisis. Is it not shameful that we have a Government who have to be embarrassed into feeding hungry children? To top it all off, the Government have reintroduced benefit sanctions in the midst of a global pandemic and economic disaster. Welfare support from the Government will be essential during the coming recession, yet the Government seem more concerned with taking support away than supporting people in dire financial straits. How on earth does this help child poverty? I wish that the Government were as quick to sanction Dominic Cummings or the Secretary of State for Housing as they are to sanction vulnerable people. What is clear from these decisions is that the Government either fundamentally misunderstand the issue of child poverty or simply do not care. I would ask the Minister which it is, but I suspect it is both.
Unfortunately, this country now faces one of the biggest crises in living memory. There is a combined threat to public health and the economy, which must be tackled together. However, the Government’s tendency to view poverty as an issue with individual causes, and their ignorance of health inequalities, show that they are poorly equipped to deal with this problem. When confronted with the rise in child poverty by my right hon. Friend the Leader of the Opposition, the Prime Minister denied the extent of the issue. To bluster and deflect would be one thing, but to deny that the issue exists is deeply worrying. How can the Government be trusted to tackle the issue if they refuse to confront it and deny its existence?
Successive Conservative Governments have made the problem worse; that is not my opinion but a fact. What they must do now is admit that they were wrong and change course. A starting point would be to accept the Social Mobility Commission’s recommendation that the Treasury give the Office for Budget Responsibility the role of assessing the impact of the Government’s fiscal policies on poverty. Sadly, I fear that under this Government, child poverty will continue to rise, as they simply do not recognise that the problem exists or know how to solve it. I can only hope that they prove me wrong.
It is a pleasure to follow the hon. Member for City of Durham (Mary Kelly Foy). It is also a pleasure to follow my hon. Friend the Member for Workington (Mark Jenkinson) and to congratulate him on a truly excellent maiden speech. It was warm, it was witty and it was thoughtful, and I know that he will serve the people of Workington very well in this place. He, like me, represents a red wall seat. The hon. Member for Ilford North (Wes Streeting), the Labour Front-Bench spokesman, spoke nostalgically and warmly about the Blair Government. Under the Blair Government, both his seat and mine had 10,000 Labour majorities or more, and perhaps the Opposition might reflect on why those voters have lost faith with Labour to solve their problems. There is poverty in my constituency; there is poverty in my hon. Friend’s constituency, but those people put their faith in the Conservative party to make their lives and their futures better.
I turn to the Bill and the amendments. It is clear that an ambitious and decisive response was demanded of the Government by the serious economic situation that we as a nation and the whole world face. The Budget debate in which I spoke back in March already feels a very long time ago for all of us, I am sure. In many ways, the world has changed a great deal since the day when my right hon. Friend the Chancellor of the Exchequer delivered his excellent first Budget to the House. I welcome these Government new clauses, which provide both relief and certainty in a number of affected areas, and I will speak a little more specifically about new clause 20 later.
In other ways, however, it is even clearer now than it was then that my right hon. Friend was ahead of the curve in the response to the challenges that we face. The Treasury has been at the forefront of the national response to the coronavirus and a leading example to the rest of the world, with its focus on protecting jobs and maintaining the capacity of our economy, while also looking after the most vulnerable in our society in all the measures taken to respond to the virus.
The extraordinary success of the coronavirus job retention schemes means that we have been paying the wages of more than 9 million people who would otherwise have been laid off or made redundant and therefore we have protected their jobs, their livelihoods and their families through this most difficult time. The Government have, in my view, risen to the challenge of protecting our economy thoughtfully, responsibly and with ambition. In my constituency of Newcastle-under-Lyme, that has meant 10,200 jobs supported through the furlough scheme and 2,600 self-employed workers supported with grants of more than £7 million. The local borough council has also supported our local businesses by distributing more than £21 million of business grants. I have received many emails from constituents asking me to pass on their thanks to the Government for the grants, the furlough scheme and all the other measures that have helped to keep them, their businesses and their families afloat through this period.
Now, as we start to leave lockdown and we reflect on the steps that are needed to recover from the economic elements of this crisis, it is important that we all remember the manifesto pledges on which Conservative Members were elected and which this Bill implements. As we begin to look to the future and the easing of lockdown, our commitment to levelling up all parts of the country should only be strengthened. In that spirit, I welcome the Prime Minister’s announcement earlier this week of a new deal, putting jobs and infrastructure at the centre of the Government’s economic growth strategy. That will build on our manifesto commitment to spread opportunity across the country and unleash the potential of the whole United Kingdom.
The £1 billion fund for school improvements will help to ensure that our schools are well maintained and provide students with safe environments that support a high-quality education. I welcome the statement given earlier today by the Education Secretary about what we can expect in September. Newcastle-under-Lyme is one of the 101 towns that were selected for a town deal, and I draw the House’s attention to my entry in the Register of Members’ Financial Interests as a member of the town deal board. We will welcome the additional £500,000 or more to spend on local improvement projects. That will, I hope, help to support our high street at a time when it desperately needs that help.
At this point, I must highlight the ongoing concerns of the owners of pubs, bars, restaurants and cafés, and all their employees, many of whom have been in contact with me over recent months. Being able to reopen this Saturday is, of course, an exciting moment for many, and many are looking forward to it, but they still have to adapt to the new normal and that is a challenge that cannot be overestimated. Our local economies will continue to face worrying times and difficult decisions over the weeks and months ahead. We must all do we can, as individuals, to support our local businesses: shop locally, visit our markets and support our local high streets.
New clause 20 is hugely welcome. This measure would allow certain personnel to retain their protected pension rights if they are re-employed as part of the response to coronavirus. I raised this on the Floor of the House in March with my right hon. Friend the Health Secretary, because I had been contacted by a constituent who had come out of retirement to work as a nurse during the crisis and was concerned that by answering the Government’s call for help, she would lose her pension entitlement and rights. The new clause ensures fairness for her and others in her position, and I am glad to see the Government legislating to protect the brave individuals who have stepped up to help in a moment of national crisis.
In conclusion, this Finance Bill implements a Budget that not only recognises the challenges of the present, but looks to the future. The Budget and the Bill are full of ambition for our country and hope for the future. Let us not forget that our national effort in defeating coronavirus presents an opportunity for us to tackle this country’s challenges. Instead of despondency, we must focus on creating opportunity for our country. That is what this Bill aims to do, and that is why I will be supporting it.
It was Mahatma Gandhi, a hero to many Leicester residents, who famously said that the true measure of any society can be found in how it treats its most vulnerable members. When it comes to ensuring that vulnerable children are fed and looked after, our Government should be ashamed of themselves.
According to the Government’s own Social Mobility Commission, 600,000 more children are living in relative poverty now than in 2012. That is projected to increase further because of benefit changes and, of course, the coronavirus pandemic. In 2018, the number of children living in relative poverty rose by 100,000 to 4.2 million, or around 30% of all children. That appalling figure reflects the Government’s failure on the fundamental principle of governance: to provide for the most basic needs of our citizens.
As of February 2020, around 14 million people were in poverty in the UK. The virus may not discriminate, but our economic and social system certainly does. Children from African, Asian and minority ethnic families are nearly twice as likely to be in poverty than children in white British families. Leicester East is one of the most ethnically and culturally diverse places in the UK and has high levels of both child poverty and in-work poverty—we suffer from a perfect storm which enables the virus to have its impact.
Like many of our residents, I am deeply concerned about the recent increase in coronavirus cases in our city and the economic impact of the necessary lockdown extension. I am particularly worried about the impact that the pandemic will have on those Leicester children who are already living in conditions of unacceptable hardship. Over one in three children—42%—in Leicester East live in poverty. Nearly 6,000 households—around 14%—in Leicester East are in fuel poverty. As of April last year, the average weekly income for full-time employees in Leicester East was £420. That is £130 less than the east midlands average and £160 less than the UK average. The proportion of people claiming unemployment benefits in my constituency is also higher than the regional and national level. Do this Government believe that my constituents are somehow worth less than others? It is unacceptable that they have allowed such rank regional inequality to fester.
The worst thing about these shocking figures is that they reflect our local reality before the unprecedented coronavirus pandemic. We do not yet know the full impact of the unprecedented economic disruption caused by the virus. With widespread job losses, it is certain that it will have exacerbated hardship across Leicester and the UK. I have been helping countless local businesses and employees to stay afloat and access funding, despite the Government’s prohibitively strict guidelines. At a national and local level, we see companies such as British Airways take huge amounts of taxpayers’ money through the job retention scheme and then fire vast swathes of their workforce while imposing worse terms of employment. Too many Leicester residents have started to receive threats of redundancy at a time when the protection of workers must be prioritised. With Leicester required to maintain lockdown measures, it will be necessary for economic support to be extended and expanded. It is crucial that families in Leicester East have the material basis to stay safe and stay alive during the continued lockdown.
The Government’s callousness is demonstrated by the fact that benefit sanctions have been resumed at a time when we face an unprecedented period of economic hardship. For people forced to endure severe levels of hardship and such insecurity, it is impossible to comply, at times, with the Government’s guidance on self-isolation and social distancing. It is a moral imperative and in the public interest of everyone in our community that the basic needs of all residents are met. The cruelty of this Government over the last decade has transformed the Department for Work and Pensions into a symbol of fear. The coronavirus pandemic has further demonstrated the need for universal welfare support that will be there to help and support people, not punish and police them.
Even before the coronavirus hit, the Government had presided over a decade in which they cut essential services for the people of Leicester East while providing tax cuts for the wealthy, in which they allowed poverty and homelessness to rise in my constituency and across the country, and in which they sought to sow divisions as they facilitated the transfer of wealth from the poorest to the richest. The Government must act now to prevent the further impoverishment of working people and their families during the pandemic. They must start treating the widespread poverty of our children as the national scandal that it is. This virus has demonstrated that we have a moral duty to ensure that everyone in Leicester and across the country is protected. That means that, after the crisis, we can no longer live in a society that is defined by extreme inequality and in which it is commonplace for our children to go to bed hungry.
It is a pleasure to follow the passion of the hon. Member for Leicester East (Claudia Webbe). Our thoughts are with her and her constituents at this difficult time. It is a particular pleasure, if I may say so, to follow my hon. Friend the Member for Workington (Mark Jenkinson). He made us wait for his maiden contribution because of the difficult circumstances that we are in, but we are absolutely delighted that it was worth the wait. Workington has gained an important and well respected voice in this House.
I am speaking today in support of my hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady) and of new clause 30, which requests that the Treasury review the level of air passenger duty. I am doing so on behalf of the 645 individual constituents from Arundel and South Downs who have signed the parliamentary petition on support for the aviation industry. They work for firms such as British Airways, Virgin and TUI, and in the extended Gatwick supply chain in West Sussex. As we know, aviation has taken the full force of the economic impact of the covid-19 crisis; it has been devastated by border closures and the calamitous drop in passenger demand. Going into the pandemic, our aviation sector was world-leading in terms of growth, jobs and competitiveness, but that is now at real risk. Research from the International Air Transport Association shows that the UK will be the worst revenue-hit country in Europe, facing a £29 billion revenue loss and with more than 660,000 jobs at risk. There are many aspects of this crisis that my right hon. Friend the Minister cannot help with, and I shall raise those another day, but one practical thing that he could do is to remove or mitigate the headwind of air passenger duty and help hard-pressed families to return to the air.
I know that the Financial Secretary does not share this affliction, but some falsely believe that air passenger duty is an environmental measure. That is manifestly not the case. It is levied on passenger numbers, so that an inefficient empty plane pays less than an efficient full one. It bears no relation to how modern an aircraft is or to the fuel efficiency with which it is being flown. Also, it does not take into account the fact that, to the extent that it disincentivises flight, the alternative for many passengers may be a long and polluting car journey. This is particularly true of domestic aviation. In any case, aviation accounts for barely 2% of human-induced global emissions, and in February this year, UK aviation committed to being net carbon zero by 2050. That is the first national net zero aviation commitment anywhere in the world.
This is a sector on the verge of exciting and disruptive change. We are at the dawn of what is called the third era of aviation, which will bring quieter and cleaner transport to the skies. Electrification will have as profound an impact as the replacement of the piston engine by gas turbines. British businesses such as Rolls-Royce are leaders in this field, providing engines to the first generation of all-electric planes, which are being certified for use by the Federal Aviation Administration right now. Air passenger duty is not a large source of revenue for the Treasury. At the best of times, before this crisis, it was expected to account for just 0.5% of all receipts, but with our busiest airport, Heathrow, reporting flights at just 3% of their normal levels in April, the revenue from APD this year and next will in any case be paltry. I conclude by humbly putting the proposition to the Minister that he may never again have such an affordable opportunity to help a vital British industry, to enhance his own formidable reputation on the Government Benches, to strengthen the Union by supporting domestic flights and to simplify the tax system than he does in accepting new clause 30.
It is a pleasure to follow the hon. Member for Arundel and South Downs (Andrew Griffith). I spoke in the debate on the Budget delivered on 11 March, which for all of us seems like a lifetime ago, such has been the impact of covid-19 on us socially and on our health but also on our communities and, profoundly, on our economy. That is one reason why I wanted to speak, although perhaps some of my comments are more relevant to yesterday’s debate.
We were told that covid-19 would not discriminate and that all of us would be impacted equally, but, as we have seen, we are witnessing a further widening of inequality by virtue of this terrible crisis. We now know that its impacts are different according to the nature of someone’s employment, where they live and so on. It reminds me of what happened from 2010 onwards, post the financial crash, when we were told we were all in it together. Of course, that was never the case. Those who had wealth and capital prospered. Look at the wealth of the top 100 people in this country and how it grew exponentially in the past decade, and how inequality widened so considerably. That has to be our great fear: the mistakes of the period from 2010 onwards will be repeated now. The warm words are not enough. We have to address this. We must recognise the sacrifice and contributions made by everyone across our society, irrespective of what people do. It does not matter whether they work in finance in the City or whatever; it is not enough. We all make a contribution. We all have a part to play in our society and in our economy.
In my constituency, there are just under 2,000 children living in relative poverty. Many people think it is a wealthy, prosperous community, but that is one in nine of all children. When it comes to energy poverty, one in 11 households lives in such poverty. We have no quality social housing being built at scale: something like nine social rent council homes have been built since 2010, and an average of 90 social rent homes have been built a year for the past five years. That is inequality. The children of this next generation will not enjoy the same benefits as that those of us who grew up in the 70s and elsewhere. We had a right and an opportunity to quality housing, to an education and to good job prospects. We are now seeing the beginning of unemployment rocketing.
I want to cover what is missing from the Finance Bill, given the drastic change in the economic picture. With prosperity, we can address inequality, but it is a choice. In particular, the support we now need from the Treasury for the automotive industry, which is so important to my constituency, is to protect jobs and get the Warwick and Leamington economy back on its feet. Covid-19 has had a huge impact on my constituency, as it has everywhere else, but of course the effects vary.
I have spoken with a wide range of businesses that have required the financial support offered by Government, which has been broadly welcomed, albeit there have been some huge gaps in the support for directors of small limited companies and others. In Warwick district—that is not entirely the same as the constituency—16,900 people had been placed on furlough. Many of them will be in the sectors hardest hit, such as hospitality, retail, leisure and tourism, and many are the lowest paid workers in my constituency, who will be at the start of their working lives. I have great concerns about what will happen once employer contributions to the job retention scheme are phased out entirely. The claimant count in my constituency has already shot up by 129% since March to over 3,000 people, and the figure will only go higher as the JRS is wound down. I urge the Government to consider extending the scheme for those sectors that are being badly impacted by the virus, until we can remove social distancing measures. The Leader of the Opposition also asked for this at PMQs yesterday.
Even with furlough still in place, people in my constituency are already losing well paid, skilled jobs in our precious automotive industry. Just last month, Jaguar Land Rover announced that it will be cutting 1,000 jobs and Aston Martin announced 500 job losses. With UK sales down 97% in the past two months, the sector has effectively had to cease production for three months, yet companies have often found that they do not qualify for the Government-backed loans. Demand for vehicles has understandably fallen off a cliff, and those businesses are going to need a lot of support to get back on their feet.
Along with colleagues on the all-party parliamentary group on electric vehicles, I have written to the Chancellor and the Business Secretary in my role as chair of that group to ask them urgently to discuss a stimulus package for the sector. I hope they will respond to that letter soon. There is an opportunity not only to protect skilled manufacturing jobs—the kind that we are desperate to attract and retain in this country—but to drive the industry towards a greener future. I know that the industry is desperate for the Government to work with it in that regard.
We need Government intervention because it is vital to managing transition. I very much hope that we will hear some positive words from the Chancellor next week. I therefore welcome the reforms to vehicle excise duty in the Bill and the £500 million for electric vehicle charging infrastructure announced at the Budget, but we must be much bolder if we are to make electric vehicles and other alternative fuel vehicles a good choice for consumers as has been done in other markets. By way of example, Norway has been the most successful country in achieving EV market penetration. The support from the Government there provides reduced road tax, free municipal parking and VAT exemption. This approach makes the total cost of ownership less than for dirtier, more polluting vehicles. We need 30,000 charging points in the UK—three times the amount we have now—and the investment to make it happen.
When the Prime Minister talks about trying to get the economy back on its feet, the phrase “build, build, build” is wrong for me. We must make, make, make and invest, invest, invest in our infrastructure, including in EV charging points and getting more alternative energy sources into our grids in order to build a cleaner and better future. As it happens, I travel by electric bike and would encourage everyone to take shorter journeys using this mode of transport, but we must make it cheaper for consumers to do so. Such grants and benefits can really help to stimulate new sectors. I urge the Government to consider doing this next week.
I urge Treasury Ministers to look again at how the Government can use our taxation system to incentivise the purchase and uptake of new, cleaner internal combustion engine vehicles; to support our automotive industry to get firing on all cylinders again; to look at alternative fuels, electric vehicles and hydrogen vehicles; and to think about how we can really progress and drive the sector forward. The Government must have the sector at the front of their mind before any financial statement delivered next week that is designed to protect jobs. Without urgent action and action at scale, we risk losing this sector forever.
I congratulate the hon. Member for Workington (Mark Jenkinson) on his maiden speech and warmly welcome him to his place. I shall attempt to tune my Surrey ears to his Cumbrian dialect, and I very much look forward to hearing more from him.
I want to take this opportunity to ask the Government, in their response to the coronavirus and all the challenges that are still to come, to focus particularly on two priorities when making their decisions about how to allocate resources to meet this enormous challenge. The first is to focus on the interests of our children and young people. It would have been unthinkable at any other time for an entire generation of schoolchildren to have missed a whole term and a half of schooling. Among all the justifiable anxiety about infection rates, testing, PPE and reopening the economy, the needs of our children seem to have been somewhat sidelined.
I welcome the Secretary of State’s statement earlier today about reopening schools in September. Like the rest of the House, I fervently hope that infection rates continue to decline to facilitate this. I would like to see a wholesale commitment from this Government to overcoming the educational deficit that has resulted from the shutdown. We already know how much of an attainment gap opens up between different groups of children over the summer holidays, and we can only imagine how much more pronounced that this will have become after half a year’s worth of missed schooling. I urge the Government to allocate generous resources to schools so that they may invest in the additional staffing and resources that they need to meet the needs of all children who have been disadvantaged.
I would also like to see a commitment to more diverse forms of learning to help engage young people who have become alienated from traditional forms of learning over their time away. Music, drama, sport, and open-air learning can all help children to re-engage with their education and will also help to revive employment sectors that have been damaged by the shutdown.
Beyond education, we have a cohort of school leavers who are attempting to enter employment at the worst possible time. If we are not to doom this cohort to a lifetime of missed opportunities, we must act now to provide them with the employment opportunities where they can build real skills and lay the foundations for a meaningful working life. In that spirit, I welcome the aspiration in the Prime Minister’s speech to build, build, build, as I recognise that this will provide opportunities for high-skilled jobs and apprenticeships. However, I ask that the Government include a real commitment to retraining career changers to help people who have lost their jobs in this pandemic to find work among the new opportunities that these projects will provide.
I note that the sectors the Prime Minister promises to provide funding for are areas of employment that are typically masculine. I urge the Government to redouble their efforts to engage young women and female career changers in training for careers in construction and engineering if those are the sectors where employment is due most quickly to recover. We know that child poverty is most effectively overcome when women are in work and earning a good wage, supported by affordable childcare.
On that note, I draw the Government’s attention to the financial precariousness of both our pre-school providers and our universities. Every one of these institutions that is forced to close or scale back activity as a result of the pandemic is a narrowing of opportunities for our children and young people, and every effort should be made to support these sectors. While I am on this point, I should like to take the opportunity to raise the issue of travel in London for those under-18. For many years, it has been free for under-18s to travel on Transport for London services, and that has opened up to all of them a much wider range of opportunities—education, cultural, sporting and social. As part of the package that the Government put in place to bail out Transport for London earlier this summer, they specified that that travel offering for the under-18s had to be scrapped. In support of that decision, they cited the fact that young people use buses only for short journeys that they would otherwise walk. I have obtained from the Minister the evidence for that assertion, and it came from a report published some years ago that concluded that free travel for under-18s had an overwhelmingly positive impact on young people’s social and educational lives. I urge the Government to prioritise young people in this recovery and to make a start by scrapping this restriction on their travel.
The second area that I call on the Government to prioritise as we plan our future beyond this pandemic is the environment. I was really disappointed not to hear a greater emphasis on the progress towards our net-zero carbon targets in the Prime Minister’s speech. This is a fantastic opportunity to implement carbon-free and low-carbon standards into our construction of new homes and into our transport systems. We can also take this opportunity to specify new standards for biodiversity, water quality and air quality and to redouble our efforts to increase the proportion of our energy that comes from renewable sources. I particularly encourage the Government to think not just about new buildings, but about bringing existing buildings up to 21st-century standards. Committing to a programme of retrofitting insulation to our ageing homes, especially those belonging to low-income families, can provide skilled employment opportunities and help us to make substantial progress towards our net-zero carbon goals.
There are so many other challenges that this Government will need to face over the next few months and so many calls on taxpayers’ money, but I want to see the Government establish clear strategic priorities for their future spending, and I would like those priorities to be our children, our young people and our environment.
After a decade of austerity, which has seen an assault on people’s living standards and our social security system, child poverty is at a disgracefully high level, and the Bill will not work towards tackling the root causes. I am speaking in support of Labour’s new clause 29, which would ensure that the Government review the impact of the Bill on poverty, and I commend my hon. Friend on the Front Bench for his opening remarks and others on this side of the House for the passion and understanding with which they have spoken.
As a result of a decade of austerity and despite crippling cuts to its own budget, Luton’s Labour council recognises what will improve lives and has quite simply set ending poverty in our town as its key strategy. Rightly, although sadly, it is putting tackling poverty and improving wellbeing at the heart of all its policy-making. Poverty cannot be an afterthought. The Government will not eradicate poverty unless they entrench a commitment to tackling it in their economic policy. We are the sixth wealthiest country in the world, but almost one in three children are in poverty. End Child Poverty’s latest figures show that 46% of children in my constituency of Luton South are living in poverty. In Dallow and Biscot wards, this figure rises to 65% and 67% respectively. Both wards have a large black, Asian and minority ethnic population, which evidences the Social Mobility Commission’s research that states that those groups are more likely to be in poverty.
Since that research, Government statistics show that the number of young people and children living below the breadline has continued to rise across the country. The Social Mobility Commission has stated that Ministers have delivered on only 23% of their proposals relating to social mobility since 2013. This week, in the same week that more redundancies have been announced in my constituency, Luton Foodbank has put out a special plea for emergency donations to meet rising demand and depleted stocks. Local charity the Level Trust continues to provide our children with shoes, coats and recycled school uniform, yet the Government do nothing.
The Government have not taken seriously the shameful level of poverty at the heart of our communities that is trapping families and their children in cycles of struggle. The Institute for Fiscal Studies forecast that the number of those in child poverty will rise to 5.2 million by 2022, and the Social Mobility Commission states that this rise is not due to forces beyond the Government’s control, but instead is partially a result of planned benefit changes. That projection was before the coronavirus outbreak, which we now know has forced people and families into immense financial hardship. That is exactly why poverty impact assessments must be entrenched in economic policy making. No Government should be able to shirk their responsibility to support those in poverty to move out of it.
The Government’s response to child poverty during the coronavirus crisis has exacerbated the social injustice. The Government pushed to end access to free school meals for vulnerable children over the summer period, and if it were not for Marcus Rashford’s campaign—which this side of the House supported—the Government would have increased the hardship of families by allowing over a million children to go hungry this summer.
This week, the Government announced that they will reintroduce conditionality and sanctioning into the social security system, at a time when unemployment has risen, job vacancies are dropping, schools are not back open and people still need to shield. The severe reduction in support without a strategy to help people back into work will penalise families and their children for the struggling job market and force them into poverty. The Conservative Government have created an economy where work does not lift people out of poverty. Increases in child poverty and working age poverty have coincided with increasing employment. Working families are unable to make ends meet. It is hypocritical of the Government to profess that they want to tackle child poverty when they choose not to confront the structural causes of poverty, such as low pay, high living costs and a broken social safety net.
The Finance Bill will not confront the scourge of child poverty, but new clause 29 would ensure that the Government considered how their policies impact those in poverty. To tackle the unprecedented impact that this crisis is having on society’s most vulnerable families and children, the Government should introduce a full Budget next week that includes social security reforms such as suspending the benefit cap, abolishing the two-child limit in universal credit and tax credit, removing the £16,000 universal credit saving limit, converting universal credit loans into grants, and uprating legacy benefits to match the increase in universal credit. By raising the social security net’s floor and legislating to tackle the structural causes of poverty such as insecure work and high living costs, we could eradicate child poverty in our country. There are no excuses for inaction or delay. No child should grow up with the hardship of poverty, and the Government must entrench tackling poverty into their economic strategy.
I congratulate the hon. Member for Workington (Mark Jenkinson) on his maiden speech and on taking his place in the House.
I am honoured to be able to give a speech today that will be arguing for the correct place of focusing on child poverty in all our legislation. If we do otherwise, we will fail the very people we should be serving. I stand here to represent a mother whom I met last year. I went to her house to support her children and she told me in passing about the one lightbulb they have in their house. I asked, “One lightbulb, why is that?”. They moved it around from room to room so that her children would not inadvertently be able to switch on and use more electricity, because they could not afford to light up more than one room at a time. That was a stark reminder to me about the child poverty levels we have in this country.
New clause 29 would mandate the Government to look at the effect of this Finance Bill on the basis of its impact on poverty and on inequalities—on relative poverty. To measure the success of the Bill, we need to carry out a review within six months and consider whether future studies should be carried out regularly by the OBR. I may be able to pre-empt the Minister’s response to this new clause. He may well say that it is unnecessary and that impact assessments will be carried out, but if those are not public and are not regularly carried out, the Government are marking their own homework on this. When it comes to measures that may make people poorer, that is not acceptable and we need a public report. The Government’s own Social Mobility Commission says in its “Monitoring social mobility” report, published this year:
“Too often also there is little transparency concerning the impact spending decisions have on poverty. The Treasury has made some efforts in this direction, but has so far declined to give the Office for Budget Responsibility (OBR) a proper role to monitor this. There should be more independent scrutiny to help ensure policy interventions across Whitehall genuinely support the most disadvantaged groups.”
The Government must be more strategic in their recovery from coronavirus than they have been in handling the crisis. They cannot take a hands-off approach, as they have done in the past decade towards child poverty. The cost of inaction, in terms of supporting the economy and reversing growing poverty levels, will be far greater than the cost of action. This really matters in London, which has the highest rate of child poverty of any English region, with 700,000 children—37% of all children in London—living in relative poverty, after housing costs are taken into account. In my borough of Wandsworth, 36% of children live in poverty. Although poverty rates are higher for everyone in London than they are nationally, this gap is larger for children than for any other group. Two thirds of children living in poverty in the UK are in working households or where at least one adult is in work, and they will be very impacted by the measures in this Bill, so we should record it.
When the UN’s special rapporteur Philip Alston produced his report on extreme poverty and human rights in Britain in 2018, long before coronavirus came along, he found that the UK Government’s policies had led to
“the systematic immiseration of millions across Great Britain”.
He also saw the disproportionate impact on women, saying:
“If you got a group of misogynists in a room and said how can we make this system work for men and not for women they would not have come up with too many ideas that are not already in place”.
We cannot continue with this kind of policy making.
Following drastic changes in Government economic policy beginning in 2010, the two preceding decades of progress in tackling child and pensioner poverty have begun to unravel, and poverty is on the rise. This Bill must not add to that. Under the previous Labour Government, child poverty was going down, but the latest figures from the Child Poverty Action Group show that 4.1 million children live in poverty in the UK; 47% of children living in lone parent families are in poverty; and 70% of children growing up in poverty live in working families. This is going in the wrong direction, as 5.2 million children are expected to be in poverty by 2022. Under this Government, we are heading towards having half of our children being poor in 21st century Britain. That would be not only a disgrace but a social calamity and economic disaster rolled into one.
On Tuesday, the regional director of Public Health England, Professor Kevin Fenton, warned a meeting of the London health board that the coronavirus has worsened stark and pervasive inequalities in London. A growing bank of national evidence shows that the virus has hit older people, poorer communities, men, and black, Asian, and minority ethnic Londoners the hardest. Some of those groups are also likely to be impacted by the wider social and economic consequences of the outbreak. According to Professor Fenton:
“These inequalities are stark, they’re pervasive and they are a call to action for the system moving forward to ensure that we do not go back to where we were…but we redouble and enhance our efforts to address these widening inequalities.”
Given those shocking figures, the worrying direction of travel, and the limiting daily impact on so many people’s lives, any new Bill that does not bake in an assessment of its impact on the lives of the poorest people in our country is set up to fail, and it will fail all those people and children in this country who we should be serving the most.
It is a pleasure to bring up the rear in this important debate—last, but hopefully not least—and I commend the hon. Member for Workington (Mark Jenkinson) for his maiden speech. Labour Members obviously mourn the loss of his predecessor, but we trust that the hon. Gentleman will speak up for Cumbria as strongly as she did.
I wish to touch on three important areas that I think the Government should keep in mind as we look to rebuild our economy, and as communities across the UK get used to our new normal. We must remember that this is a recovery from the first wave of covid-19, and events in Leicester and elsewhere in England show how sensitive the evolving situation continues to be. A key component of any recovery effort is public sector pay, and the way we treat those who go above and beyond for us. Our workers deserve to be paid properly, and we must pledge to do that now. Last week there was a debate in this House about how we can acknowledge and support those workers in the NHS who give their lives to keep us, our families and our constituents alive and healthy. The answer to how we show our appreciation, and when we do it, is simple: we should pay people what they deserve. I hope that the Chancellor’s statement next week will lay out the building blocks to enable that to happen.
Newport is one of the most diverse parts of Wales, and I am proud of our city and its diversity. It is, however, a matter of deep regret that our cherished diversity has seen us on the frontline in the fight against the devastating impact of covid-19 on black and minority ethnic communities. A report commissioned by the Welsh Labour Government under First Minister Mark Drakeford was published recently, and it rightly calls for action to tackle the structural and systematic racism that may have contributed to the higher than average death rate in BME communities. Addressing those structural inequalities must be integral to the economic recovery for which our city is crying out.
In a city such as Newport—it will be the same in many other cities across the UK—we know at first hand how vital BME communities are for our collective prosperity. It really is as simple as that. We know that BME workers are more likely to be in low-paid jobs with little of the protection needed to stay safe and secure, and so the funding and delivery of PPE, and other protection, must be a priority for this Conservative Government.
One real, tangible thing that Ministers could do is follow the lead of the Welsh Labour Government, who have made provision for a comprehensive risk assessment that supports people from BME backgrounds in the NHS and social care sector in Wales. That works for my constituents in Newport West, and it should be rolled out in England too. For our welfare system, there is a need for common sense and decency to be at the heart of our economic recovery. That is vital to ensure that we do what the Blair and Brown Labour Governments did, which was to take millions of children out of poverty.
A few weeks ago, we saw a Manchester United player shame this Tory Prime Minister and his Ministers into ensuring that free school meals would be provided throughout the summer in England. I say to new Tory Back Benchers, many of whom are auditioning for places on the Treasury Bench: we will not forget the tweets, the press releases and the speeches in this Chamber explaining why free school meals for children in England were not possible, and neither will the people who were affected. I am proud to say that, in Wales, we take our responsibility to our children seriously. We did not need to be shamed into action; the Welsh Labour Government know how crucial it is that we give our children nutritional and accessible meals. As such, we guaranteed that free school meals will be available to Welsh children throughout the summer, because it is the right thing to do.
Tackling child poverty is also achieved by ensuring that there is a secure and realistic safety net for families in all parts of the country. It says a lot that the priority for Ministers has been to reintroduce benefit sanctions, rather than ensure that we keep supporting people through this unprecedented period. It is also about jobs. My right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) has been clear that jobs must be at the forefront of the recovery. We know that a well-paid job with good terms and conditions is the best way out of poverty. Like many of my constituents in Newport West, I read the increasingly frequent news from businesses across the country with horror, with announcement after announcement of job losses, shop closures and mergers.
I will be going to see the Orb steelworks close its doors for the last time tomorrow. It is the only site in the UK producing electrical steel. Tomorrow will be a sad day for all of us in Newport and a waste of a highly-skilled workforce who could produce the steel required for the electric cars we need for our greener future. The impact of those job losses on poverty levels, inequality and child poverty will be beyond significant, so this Government need to get a grip now.
The shocking and deadly events of recent weeks and months have shaken us to our collective core. Our families, communities and nations will never be the same again. Our economy and our United Kingdom will never be the same again. We must seize the opportunity to change our way of life for the better, and we must deliver a fairer, greener and more sustainable economy for all of us. That is my pledge to the people of Newport West, and I look forward to the Minister giving us more actions and fewer words.
As is customary at the conclusion of Report stage, I will speak to the issues that have been raised, rather than the full content of the Bill. Let me start by saying how much I enjoyed the splendidly generous and warm speech by my great and hon. Friend the Member for Workington (Mark Jenkinson). As Members across the House noted, Workington will have a fine voice in the Chamber for many years to come. I was impressed by his ability to smuggle some Cumbrian dialect into the Chamber—I do not know whether it counts as a foreign language, but it was certainly unintelligible to me, which may be true for other colleagues. I take my hat off not only to Mr Harris for identifying his prime ministerial potential but to my hon. Friend for his robust sense of self-confidence. Colleagues normally play down their prime ministerial potential early in their political careers, and I admire his chutzpah, to use a different piece of dialect, in bringing our attention to that. He also acknowledged his predecessor’s capacity to align himself with the Opposition rather than the Whip; I am grateful to him for that. He made some valuable points, and I congratulate him on his maiden speech.
Labour’s new clause 29 and the SNP’s new clause 10 would require the Chancellor to review the impact of provisions in the Bill on child poverty and total poverty and to lay a report before Parliament within six months of Royal Assent. We were treated to a moving and personal speech from the hon. Member for Ilford North (Wes Streeting). I congratulate him on his achievement in getting to Cambridge University on the back of that personal experience. Of course, he is right to focus on the importance of combating educational disadvantage—a cause that every Member of the House believes in. I found it surprising that he did not go on to acknowledge the achievement of this Government in raising the number of good or outstanding schools from 68% in 2010 to 86% today, or the fact that the proportion of 18-year-olds from disadvantaged backgrounds going to university went from only 13% in 2009-10 to 21% in 2019.
The hon. Member talked about pensioner poverty but neglected to mention that there are 100,000 fewer pensioners in poverty now than there were in 2010. He talked about jobs but without acknowledging that, at least until the pandemic, which has struck us all and will have had unfathomable effects, as we know, 3.9 million more people were in employment. Specifically, the employment of the poorest 20% was 9% higher under this Government than in 2009-10.
The hon. Member was right to say that the tragedy of an economic crisis is that it hits the least well off the hardest, and that is precisely the inheritance that this Government’s predecessors left to us in 2009-10. As I never cease to remind the House, the financial crisis of 2007-08 was brought about because bank leverage was allowed to rise from 20 times, where it had been for the previous 40 years, to 50 times in seven years under the Blair Government. If hon. Members do not believe me, they can look at the independent report on banking published under Professor Vickers.
I should, however, return to new clauses 29 and 10, some of which are not necessary because the information they seek is largely already in the public domain, including on the distributional effect of tax, welfare and spending policies, on the equalities impacts of tax measures and on poverty rates.
I thank my hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady) for his probing new clause 30. I admire his range of references. I thought he was going to reference Stephen Colbert, the American talk show host, but tragically it was Jean-Baptiste Colbert, who produced the line about plucking the feathers from the goose. He is absolutely right. No one would describe him as a hisser, but we do pay careful attention to the points he has made, and I am very grateful to him for raising them. I would also single out my hon. Friend the Member for Arundel and South Downs (Andrew Griffith), who rightly pointed out that the configuration between APD and the environmental performance of flights is a very blunt relationship indeed, so I thank him for that.
Colleagues across the House will know that new clause 30 would ask the Treasury to review the effect of proposed rate changes on APD. We are working closely with the sector and are closely attuned to its concerns in the face of the pandemic, and of course we have paid close attention to the points my hon. Friend raised. I am sure colleagues will be aware that, even as it is, the current rate will only take effect in April 2021 and will rise by only £2 for a long-haul economy flight, which is the cost of a rather inexpensive coffee at airport prices. It may not be quite as urgent, but the point about the wider need to look at this is well made.
I turn quickly to amendment 4, which seeks to extend the exemption from vehicle excise duty for medical courier charities in clause 86 explicitly to include vehicles carrying human breast milk. The hon. Member for Glasgow Central (Alison Thewliss) will know that this amendment is not necessary because the clause already provides for the transportation of human breast milk. The purpose-built vehicles used by the medical courier charities, which are exempt from VED, do not merely transport blood; they transport a wide range of medical product, including X-rays, MRA scans, plasma and human breast milk.
There are many other things I could say in response to other comments, but I will leave it there.
Question put and agreed to.
New clause 19 accordingly read a Second time, and added to the Bill.
New Clause 20
Protected pension age of members re-employed as a result of coronavirus
“(1) In FA 2004, in Schedule 36 (pension schemes etc), paragraph 22 (rights to take benefit before normal minimum pension age) is amended as follows.
(2) In sub-paragraph (7F), at the end of paragraph (b) insert “, and
(c) that the member is or was employed as mentioned in sub-paragraph (7B)(a) where—
(i) the employment began at any time during the coronavirus period, and
(ii) the only or main reason that the member was taken into employment was to help the employer to respond to the public health, social, economic or other effects of coronavirus.”
(3) After sub-paragraph (7J) insert—
“(7K) In sub-paragraph (7F)(c)—
“coronavirus” has the same meaning as in the Coronavirus Act 2020 (see section 1(1) of that Act);
“the coronavirus period” means the period beginning with 1 March 2020 and ending with 1 November 2020.
(7L) The Treasury may by regulations amend the definition of “the coronavirus period” in sub-paragraph (7K) so as to replace the later of the dates specified in it with another date falling before 6 April 2021.
(7M) The power in sub-paragraph (7L) may be exercised on more than one occasion.”
(4) The amendments made by this section are treated as having come into force on 1 March 2020.”—(Jesse Norman.)
In certain circumstances, people who have a protected pension age under a pension scheme (i.e. a right to receive pension benefits at an age below the normal minimum pension age) can lose it on being re-employed. This new clause prevents that happening for people re-employed as part of the response to coronavirus.
Brought up, read the First and Second time, and added to the Bill.
New Clause 21
Modifications of the statutory residence test in connection with coronavirus
“(1) This section applies for the purposes of determining—
(a) whether an individual was or was not resident in the United Kingdom for the tax year 2019-20 for the purposes of relevant tax, and
(b) if an individual was not so resident in the United Kingdom for the tax year 2019-20 (including as a result of this section), whether the individual was or was not resident in the United Kingdom for the tax year 2020-21 for the purposes of relevant tax.
“Relevant tax” has the meaning given by paragraph 1(4) of Schedule 45 to FA 2013 (statutory residence test).
(2) That Schedule is modified in accordance with subsections (5) to (13).
(3) Paragraph 8 (second automatic UK test: days at overseas homes) has effect as if after sub-paragraph (5) there were inserted—
“(5A) For the purposes of sub-paragraphs (1)(b) and (4), a day does not count as a day when P is present at a home of P’s in the UK if it is a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(4) Paragraph 22 (key concepts: days spent) has effect as if—
(a) in sub-paragraph (2), for “two cases” there were substituted “three cases”;
(b) after sub-paragraph (6) there were inserted—
“(7) The third case is where—
(a) that day falls within the period beginning with 1 March 2020 and ending with 1 June 2020,
(b) on that day P is present in the UK for an applicable reason related to coronavirus disease, and
(c) in the tax year in question, P is resident in a territory outside the UK (“the overseas territory”).
(8) The following are applicable reasons related to coronavirus disease—
(a) that P is present in the UK as a medical or healthcare professional for purposes connected with the detection, treatment or prevention of coronavirus disease;
(b) that P is present in the UK for purposes connected with the development or production of medicinal products (including vaccines), devices, equipment or facilities related to the detection, treatment or prevention of coronavirus disease.
(9) For the purposes of paragraph (7)(c), P is resident in an overseas territory in the tax year in question if P is considered for tax purposes to be a resident of that territory in accordance with the laws of that territory.
(10) The Treasury may by regulations made by statutory instrument—
(a) amend sub-paragraph (7)(a) so as to replace the later of the dates specified in it with another date falling before 6 April 2021;
(b) amend this paragraph so as to add one or more applicable reasons related to coronavirus disease.
(11) The powers under sub-paragraph (10) may be exercised on more than one occasion.
(12) A statutory instrument containing regulations under sub-paragraph (10) is subject to annulment in pursuance of a resolution of the House of Commons.”
(5) Paragraph 23 (key concepts: days spent and the deeming rule) has effect as if after sub-paragraph (5) there were inserted—
“(5A) For the purposes of sub-paragraph (3)(b) and (4), a day does not count as a qualifying day if it is a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(6) Paragraph 28(2) (rules for calculating the reference period) has effect as if—
(a) in paragraph (b) the “and” at the end were omitted;
(b) after paragraph (b) there were inserted—
“(ba) absences from work at times during the period specified in an emergency volunteering certificate issued to P under Schedule 7 to the Coronavirus Act 2020 (emergency volunteering leave), and”;
(c) in paragraph (c), for “or (b)” there were substituted “, (b) or (ba)”.
(7) Paragraph 29 (significant breaks from UK or overseas work) has effect as if in sub-paragraphs (1)(b) and (2)(b), for “or parenting leave” there were substituted “, parenting leave or emergency volunteering leave under Schedule 7 to the Coronavirus Act 2020”.
(8) Paragraph 32 (family tie) has effect as if after sub-paragraph (4) there were inserted—
“(4A) But a day does not count as a day on which P sees the child if the day on which P sees the child would be a day falling within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(9) Paragraph 34 (accommodation tie) has effect as if after sub-paragraph (1) there were inserted—
“(1A) For the purposes of sub-paragraph (1)—
(a) if the place is available to P on a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day), that day is to be disregarded for the purposes of sub-paragraph (b), and
(b) a night spent by P at the place immediately before or after a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day) is to be disregarded for the purposes of sub-paragraph (c).”
(10) Paragraph 35 (work tie) has effect as if after sub-paragraph (2) there were inserted—
“(3) But a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it) does not count as a day on which P works in the UK.”
(11) Paragraph 37 (90-day tie) has effect as if—
(a) the existing text were sub-paragraph (1);
(b) after that sub-paragraph, there were inserted—
“(2) For the purposes of sub-paragraph (1), a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it) does not count as a day P has spent in the UK in the year in question.”
(12) Paragraph 38 (country tie) has effect as if after sub-paragraph (3) there were inserted—
“(4) For the purposes of sub-paragraph (3), P is to be treated as not being present in the UK at the end of a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day).”
(13) Paragraph 145 (interpretation) has effect as if at the appropriate place there were inserted—
““coronavirus disease” has the same meaning as in the Coronavirus Act 2020 (see section 1(1) of that Act);”.”—(Jesse Norman.)
This new clause modifies the statutory residence test in Schedule 45 to the Finance Act 2013 so that the presence of certain individuals in the UK for purposes connected with coronavirus is discounted for the purposes of determining whether they are resident in the UK in the tax years 2019-20 and 2020-21.
Brought up, read the First and Second time, and added to the Bill.
New Clause 22
Future Fund: EIS and SEIS relief
“(1) This section applies if an individual to whom shares in a company have been issued—
(a) enters into a convertible loan agreement with the company under the Future Fund on or after 20 May 2020, and
(b) subsequently receives value from the company under the terms of the agreement.
(2) If, as a result of the receipt of value, any EIS relief attributable to shares issued before the relevant time would (apart from this subsection) be withdrawn or reduced under section 213 of ITA 2007, the value received is to be ignored for the purposes of that section.
(3) If, as a result of the receipt of value, any SEIS relief attributable to shares issued before the relevant time would (apart from this subsection) be withdrawn or reduced under section 257FE of ITA 2007, the value received is to be ignored for the purposes of that section.
(4) If, as a result of the receipt of value, shares issued before the relevant time would (apart from this subsection) cease to be eligible shares by reason of paragraph 13(1)(b) of Schedule 5B to TCGA 1992, the value received is to be ignored for the purposes of that paragraph.
(5) In this section—
“the Future Fund” means the scheme of that name operated from 20 May 2020 by the British Business Bank plc on behalf of the Secretary of State;
“the relevant time” means the time when the individual enters into the convertible loan agreement.”—(Jesse Norman.)
This new clause prevents EIS and SEIS relief from being withdrawn or reduced for the purposes of income tax and capital gains tax in cases where an individual enters into a convertible loan agreement under the Future Fund with a company and subsequently receives value from the company under the agreement.
Brought up, read the First and Second time, and added to the Bill.
New Clause 23
Interest on unpaid tax in case of disaster etc of national significance
“(1) Section 135 of FA 2008 (interest on unpaid tax in case of disaster etc of national significance) is amended as follows.
(2) In subsection (2), for the words from “arising” to the end substitute “that—
(d) arises under or by virtue of an enactment or a contract settlement, and
(e) is of a description (if any) specified in the order.”
(3) In subsection (4)—
(a) after “relief period” insert “, in relation to a deferred amount,”;
(b) in paragraph (b), after “revoked” insert “or amended so that it ceases to have effect in relation to the deferred amount”.
(4) In subsection (10)—
(a) at the end of paragraph (a), omit “and”;
(b) at the end of paragraph (b) insert “, and
(c) may specify different dates in relation to liabilities of different descriptions.”
(5) The amendments made by this section have effect from 20 March 2020.”—(Jesse Norman.)
This new clause amends section 135 of the Finance Act 2008 to enable the Treasury to specify in an order under that section which payments of tax and other liabilities that are deferred by agreement during a period of national disaster or emergency will not attract interest or surcharges.
Brought up, read the First and Second time, and added to the Bill.
New Clause 24
Exceptional circumstances preventing disposal of interest in three year period
“(1) In FA 2003, Schedule 4ZA (stamp duty land tax: higher rates for additional dwellings etc) is amended as follows.
(2) In paragraph 3 (single dwelling transactions)—
(a) in sub-paragraph (7)(b) for “the period of three years beginning with the day after the effective date of the transaction concerned” substitute “a permitted period”;
(b) after sub-paragraph (7) insert—
“(7A) For the purposes of sub-paragraph (7)(b), the permitted periods are—
(a) the period of three years beginning with the day after the effective date of the transaction concerned, or
(b) if HMRC are satisfied that the purchaser or the purchaser’s spouse or civil partner would have disposed of the major interest in the sold dwelling within that three year period but was prevented from doing so by exceptional circumstances that could not reasonably have been foreseen, such longer period as HMRC may allow in response to an application made in accordance with sub-paragraph (7B).
(7B) An application for the purposes of sub-paragraph (7A)(b) must—
(a) be made within the period of 12 months beginning with the effective date of the transaction disposing of the major interest in the sold dwelling, and
(b) be made in such form and manner, and contain such information, as may be specified by HMRC.
(7C) Schedule 11A (claims not included in returns) does not apply in relation to an application made in accordance with sub-paragraph (7B).”
(3) In paragraph 8 (further provision in connection with paragraph 3(6) and (7))—
(a) in sub-paragraph (3), after “paragraph 3(7)” insert “by virtue of paragraph 3(7A)(a)”;
(b) in sub-paragraph (4), after “paragraph 3(7)” insert “by virtue of paragraph 3(7A)(a)”;
(c) after sub-paragraph (4) insert—
“(5) Where HMRC grant an application made in accordance with paragraph 3(7B)—
(a) the land transaction return in respect of the transaction concerned is treated as having been amended to take account of the application of paragraph 3(7) by virtue of paragraph 3(7A)(b), and
(b) HMRC must notify the purchaser accordingly.”
(4) The amendments made by this section have effect in a case where the effective date of the transaction concerned is on or after 1 January 2017.”—(Jesse Norman.)
This new clause amends Schedule 4ZA to the Finance Act 2003 to provide that where a person purchases a dwelling intending it to be their only or main residence, the three-year period within which a major interest in the previous dwelling must be disposed of to be able to obtain a refund of the higher rate stamp duty land tax may be extended to a longer period if, because of exceptional circumstances, the interest was not disposed of in that three-year period.
Brought up, read the First and Second time, and added to the Bill.
New Clause 25
HGV road user levy
“(1) Section 5(2) of the HGV Road User Levy Act 2013 (HGV road user levy charged for all periods for which a UK heavy goods vehicle is charged to vehicle excise duty) does not apply where the period for which a UK heavy goods vehicle is charged to vehicle excise duty is a period that begins in the exempt period.
(2) Section 6(2) of the 2013 Act (HGV road user levy charged in respect of non-UK heavy goods vehicle for each day on which the vehicle is used or kept on a road to which the Act applies) does not apply in respect of any day in the exempt period.
(3) The exempt period is the period of 12 months beginning with 1 August 2020.
(4) Section 7 of the 2013 Act (rebate of levy) has effect as if, after subsection (2A), there were inserted—
“(2B) A rebate entitlement also arises where HGV road user levy has been paid in respect of a non-UK heavy goods vehicle in accordance with section 6(2) in respect of any part of the exempt period within the meaning of section (HGV road user levy)(3) of the Finance Act 2020.””—(Jesse Norman.)
This new clause provides that HGV road user levy is not chargeable in respect of the period of 12 months beginning with 1 August 2020. It provides that where the levy has been paid in respect of a non-UK heavy goods vehicle in respect of the exempt period a rebate can be claimed (no equivalent provision being required for UK heavy goods vehicles which will benefit from the exemption in respect of any period for which the levy would otherwise be paid that begins during the exempt period).
Brought up, read the First and Second time, and added to the Bill.
New Clause 32
Enterprise management incentives: disqualifying events
“(1) The modifications made by this section apply for the purposes of determining whether a disqualifying event occurs or is treated as occurring in relation to an employee in accordance with section 535 of ITEPA 2003 (enterprise management incentives: disqualifying events relating to employee).
(2) Paragraph 26 of Schedule 5 to ITEPA 2003 (requirement as to commitment of working time) has effect as if, in sub-paragraph (3)—
(a) the “or” at the end of paragraph (c) were omitted, and
(b) at the end of paragraph (d), there were inserted “, or
(e) not being required to work for reasons connected with coronavirus disease (within the meaning given by section 1(1) of the Coronavirus Act 2020).”
(3) Paragraph 27 of that Schedule (meaning of “working time”) has effect as if, in sub-paragraph (1)(b), for “(d)” there were substituted “(e)”.
(4) Section 535 of ITEPA 2003 has effect as if, in the closing words of subsection (3), for “(d)” there were substituted “(e)”.
(5) The modifications made by this section have effect in relation to the period—
(a) beginning with 19 March 2020, and
(b) ending with 5 April 2021.
(6) The Treasury may by regulations made in the tax year 2020-21 amend subsection (5)(b) by replacing “2021” with “2022”.”—(Jesse Norman.)
This new clause provides that a disqualifying event does not occur in relation to an individual as regards enterprise management incentives as a result of the individual taking leave, being furloughed or working reduced hours because of coronavirus disease.
Brought up, read the First and Second time, and added to the Bill.
New Schedule 1
Taxation of coronavirus support payments
Accounting for coronavirus support payments referable to a business
1 (1) This paragraph applies if a person carrying on, or who carried on, a business (whether alone or in partnership) receives a coronavirus support payment that is referable to the business.
(2) So much of the coronavirus support payment as is referable to the business is a receipt of a revenue nature for income tax or corporation tax purposes and is to be brought into account in calculating the profits of that business—
(a) under the applicable provisions of the Income Tax Acts, or
(b) under the applicable provisions of the Corporation Tax Acts.
(3) Subject to paragraph 2(5), sub-paragraph (2) does not apply to an amount of a coronavirus support payment if—
(a) the business to which the amount is referable is no longer carried on by the recipient of the amount, and
(b) the amount is not referable to activities of the business undertaken at a time when it was being carried on by the recipient of the amount.
(4) If an amount of the coronavirus support payment is referable to more than one business or business activity, the amount is to be allocated between those businesses or activities on a just and reasonable basis.
(5) Paragraph 3 contains provision about when, in certain cases, an amount of a coronavirus support payment is, or is not, referable to a business for the purposes of this paragraph and paragraph 2.
(6) In this Schedule “business” includes—
(a) a trade, profession or vocation;
(b) a UK property business or an overseas property business;
(c) a business consisting wholly or partly of making investments.
Amounts not referable to activities of a business which is being carried on
2 (1) This paragraph applies if a person who carried on a business (whether alone or in partnership) receives a coronavirus support payment that—
(a) is referable to the business, and
(b) is not wholly referable to activities of the business undertaken while the business was being carried on by the recipient of the payment.
(2) So much of the coronavirus support payment as is referable to the business but which is not referable to activities of the business undertaken while the business was being carried on by the recipient of the payment is to be treated as follows.
(3) An amount referable to a trade, profession or vocation is to be treated as a post-cessation receipt for the purposes of Chapter 18 of Part 2 of ITTOIA 2005 or Chapter 15 of Part 3 of CTA 2009 (trading income: post-cessation receipts), and—
(a) in the application of Chapter 18 of Part 2 of ITTOIA 2005 to that amount, section 243 (extent of charge to tax) is omitted, and
(b) in the application of Chapter 15 of Part 3 of CTA 2009 to that amount, section 189 (extent of charge to tax) is omitted.
(4) An amount referable to a UK property business or an overseas property business is to be treated (in either case) as a post-cessation receipt from a UK property business for the purposes of Chapter 10 of Part 3 of ITTOIA 2005 or Chapter 9 of Part 4 of CTA 2009 (property income: post- cessation receipts), and—
(a) in the application of Chapter 10 of Part 3 of ITTOIA 2005 to that amount, section 350 (extent of charge to tax) is omitted, and
(b) in the application of Chapter 9 of Part 4 of CTA 2009 to that amount, section 281 (extent of charge to tax) is omitted.
(5) In any other case, for the purposes of paragraph 1(3)—
(a) the recipient of the amount is to be treated as if carrying on the business to which the amount is referable to at the time of the receipt of the amount, and
(b) the amount is to be treated as if it were referable to activities undertaken by the business at that time.
(6) Where the recipient of the amount has incurred expenses that—
(a) are referable to the amount, and
(b) would be deductible in calculating the profits of the business if it were being carried on at the time of receipt of the amount,
the amount brought into account under paragraph 1(2) by virtue of sub-paragraph (5) is to be reduced by the amount of those expenses.
(7) But sub-paragraph (6) does not apply to expenses of a person that arise directly or indirectly from the person ceasing to carry on business.
Amounts referable to businesses in certain cases
3 (1) An amount of a coronavirus support payment made under an employment-related scheme—
(a) is referable to the business of the person entitled to the payment as an employer (even if the person is not for other purposes the employer of the employees to whom the payment relates), and
(b) is not referable to any other business (and no deduction for any expenses in respect of the same employment costs which are the subject of the payment is allowed in calculating the profits of any other business or in calculating the liability of any other person to tax charged under section 242 or 349 of ITTOIA 2005 or section 188 or 280 of CTA 2009 (post-cessation receipts)).
(2) A coronavirus support payment made under the self-employment income support scheme is referable to the business of the individual to whom the payment relates.
(3) Where an amount of a coronavirus support payment made under the self-employment income support scheme is brought into account under paragraph 1(2), the whole of the amount is to be treated as a receipt of a revenue nature of the tax year 2020-21 (irrespective of its treatment for accounting purposes).
(4) But sub-paragraph (3) does not apply to an amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of a firm where the amount is distributed amongst the partners (rather than being retained by the partner).
(5) An amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of a firm that is retained by the partner (rather than being distributed amongst the partners) is not to be treated as a receipt of the firm.
(a) the receipt is not to be included in the calculation of the firm’s profits for the purposes of determining the share of profits or losses for each partner of the firm (see sections 849 to 850E of ITTOIA 2005 and sections 1259 to 1265 of CTA 2009), and
(b) the receipt is then to be added to the partner’s share.
Exemptions, reliefs and deductions
4 (1) An amount of a coronavirus support payment that relates only to mutual activities of a business that carries on a mutual trade is to be treated as if it were income arising from those activities (and accordingly the amount is not taxable).
(2) A coronavirus support payment is to be ignored when carrying out the calculation—
(a) in section 528(1) of ITA 2007 (incoming resources limit for charitable exemptions);
(b) in section 482(1) of CTA 2010 (incoming resources limit for charitable companies);
(c) in section 661CA(1) of CTA 2010 (income condition for community amateur sports clubs).
(3) A coronavirus support payment made under an employment-related scheme is to be ignored when carrying out the calculation—
(a) in section 662(2) of CTA 2010 (exemption from corporation tax for UK trading income of community amateur sports clubs);
(b) in section 663(2) of that Act (exemption from corporation tax for UK property income community amateur sports clubs).
(4) No relief under Chapter 1 of Part 6A of ITTOIA 2005 (trading allowance) is given to an individual on an amount of a coronavirus support payment made under the self-employment income support scheme brought into account under paragraph 1(2) as profits of that tax year.
(5) For the purposes of that Part, such an amount is to be ignored when calculating the individual’s “relevant income” for that tax year under Chapter 1 of that Part.
(6) Neither section 57 of ITTOIA 2005 nor section 61 of CTA 2009 (deductions for pre-trading expenses) (including as they apply by virtue of sections 272 and 272ZA of ITTOIA 2005 and section 210 of CTA 2009) apply to employment costs where an amount of a coronavirus support payment made under an employment-related scheme relates to those costs.
Charge where employment costs deductible by another
5 (1) Income tax is charged on an amount of a coronavirus support payment made under an employment-related scheme if conditions A and B are met.
(2) Condition A is that the amount is neither brought into account under paragraph 1(2) in calculating the profits of a business carried on by the person entitled to the payment as an employer nor treated, by virtue of paragraph 2(3) or (4), as a post-cessation receipt arising from the carrying on of such a business.
(3) Condition B is that expenses incurred by another person in respect of the same employment costs which are the subject of the coronavirus support payment and to which the amount relates are deductible—
(a) in calculating the profits of a business carried on by that other person (for income or corporation tax purposes), or
(b) in calculating the liability of that other person to tax charged under section 242 or 349 of ITTOIA 2005 or section 188 or 280 of CTA 2009 (post-cessation receipts).
(4) Tax is charged under sub-paragraph (1) on the whole of the amount to which that sub-paragraph applies.
(5) The person liable for tax charged under sub-paragraph (1) is the person entitled to the coronavirus support payment as an employer.
(6) Section 3(1) of CTA 2009 (exclusion of charge to income tax) does not apply to an amount of a coronavirus support payment that is charged under this paragraph.
Charge where no business carried on
6 (1) Tax is charged on an amount of a coronavirus support payment, other than a payment made under an employment-related scheme or the self-employment income support scheme, if—
(a) the amount is neither brought into account under paragraph 1(2) in calculating the profits of a business nor treated as a post-cessation receipt by virtue of paragraph 2(3) or (4), and
(b) at the time the coronavirus support payment was received, the recipient did not carry on a business whose profits are charged to tax and to which the payment could be referable.
(2) In this paragraph “tax” means—
(a) corporation tax, in the case of a company that (apart from this paragraph) is chargeable to corporation tax, or to any amount chargeable as if it was corporation tax, or
(b) income tax, in any other case.
(3) Tax is charged under sub-paragraph (1) on the whole of the amount to which that sub-paragraph applies.
(4) The person liable for tax charged under sub-paragraph (1) is the recipient of that amount.
(5) Where income tax is charged under sub-paragraph (1), sections 527 and 528 of ITA 2007 (exemption and income condition for charitable trusts) have effect as if sub-paragraph (1) were a provision to which section 1016 of that Act applies.
(6) Where corporation tax is charged under sub-paragraph (1), sections 481 and 482 of CTA 2010 (exemption and income condition for charitable companies) have effect as if sub-paragraph (1) were a provision to which section 1173 of that Act applies.
Modification of the Tax Acts
7 The Treasury may by regulations modify the application of any provision of the Tax Acts that affects (or that otherwise would affect) the treatment of—
(a) receipts brought into account under paragraph 1(2),
(b) amounts treated as post-cessation receipts under paragraph 2(3) or (4), or
(c) amounts charged under paragraph 5(1) or 6(1).
Charge if person not entitled to coronavirus support payment
8 (1) A recipient of an amount of a coronavirus support payment is liable to income tax under this paragraph if the recipient is not entitled to the amount in accordance with the scheme under which the payment was made.
(2) But sub-paragraph (1) does not apply to an amount of a coronavirus support payment made under a coronavirus business support grant scheme or the coronavirus statutory sick pay rebate scheme.
(3) For the purposes of this Schedule, references to a person not being entitled to an amount include, in the case of an amount of a coronavirus support payment made under the coronavirus job retention scheme, a case where the person ceases to be entitled to retain the amount after it was received—
(a) because of a change in circumstances, or
(b) because the person has not, within a reasonable period, used the amount to pay the costs which it was intended to reimburse.
(4) Income tax becomes chargeable under this paragraph—
(a) in a case where the person was entitled to an amount of a coronavirus support payment paid under the coronavirus job retention scheme but subsequently ceases to be entitled to retain it, at the time the person ceases to be entitled to retain the amount, or
(b) in any other case, at the time the coronavirus support payment is received.
(5) The amount of income tax chargeable under this paragraph is the amount equal to so much of the coronavirus support payment—
(a) as the recipient is not entitled to, and
(b) as has not been repaid to the person who made the coronavirus support payment.
(6) Where income tax which is chargeable under this paragraph is the subject of an assessment (whether under paragraph 9 or otherwise)—
(a) paragraphs 1 to 6 do not apply to the amount of the coronavirus support payment that is the subject of the assessment,
(b) that amount is not, for the purposes of Step 1 of the calculation in section 23 of ITA 2007 (calculation of income tax liability), to be treated as an amount of income on which the taxpayer is charged to income tax (but see paragraph 10 which makes further provision about the application of that section), and
(c) that amount is not to be treated as income of a company for the purposes of section 3 of CTA 2009 (and accordingly the exclusion of the application of the provisions of the Income Tax Acts to the income of certain companies does not apply to the receipt of an amount charged under this paragraph).
(7) No loss, deficit, expense or allowance may be taken into account in calculating, or may be deducted from or set off against, any amount of income tax charged under this paragraph.
(8) In calculating profits or losses for the purposes of corporation tax, no deduction is allowed in respect of the payment of income tax charged under this paragraph.
(9) For the purposes of this paragraph and paragraphs 9(4) and 14, a firm is not to be regarded as receiving an amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of that firm that is retained by the partner (rather than being distributed amongst the partners).
Assessments of income tax chargeable under paragraph 8
9 (1) If an officer of Revenue and Customs considers (whether on the basis of information or documents obtained by virtue of the exercise of powers under Schedule 36 to FA 2008 or otherwise) that a person has received an amount of a coronavirus support payment to which the person is not entitled, the officer may make an assessment in the amount which ought in the officer’s opinion to be charged under paragraph 8.
(2) An assessment under sub-paragraph (1) may be made at any time, but this is subject to sections 34 and 36 of TMA 1970.
(3) Parts 4 to 6 of TMA 1970 contain other provisions that are relevant to an assessment under sub-paragraph (1) (for example, section 31 makes provision about appeals and section 59B(6) makes provision about the time to pay income tax payable by virtue of an assessment).
(4) Where income tax is chargeable under paragraph 8 in relation to an amount of a coronavirus support payment received by a firm—
(a) an assessment (under sub-paragraph (1) or otherwise) may be made on any of the partners in respect of the total amount of tax that is chargeable,
(b) each of the partners is jointly and severally liable for the tax so assessed, and
(c) if the total amount of tax that is chargeable is included in a return under section 8 of TMA 1970 made by one of the partners, the other partners are not required to include the tax in returns made by them under that section.
Calculation of income tax liability
10 (1) Section 23 of ITA 2007 (calculation of income tax liability) applies in relation to a person liable to income tax charged under paragraph 8 as if that paragraph were included in the lists of provisions in subsections (1) and (2) of section 30 of that Act (amounts of tax added at step 7).
(2) For the purposes of paragraph 7(2) of Schedule 41 to FA 2008, a relevant obligation relating to income tax charged under paragraph 8 of this Schedule relates to a tax year if the income tax became chargeable in that tax year.
(3) But this paragraph does not apply to a company to which paragraph 11 (companies chargeable to corporation tax) applies.
Calculation of tax liability: companies chargeable to corporation tax
11 (1) This paragraph applies where a person liable to income tax charged under paragraph 8 is a company that is chargeable to corporation tax, or to any amount chargeable as if it was corporation tax, in relation to a period within which the income tax became chargeable.
(2) Part 5A of TMA 1970 (payment of tax) applies in relation to that company as if—
(a) the reference to “corporation tax” in subsection (1) of section 59D (general rule as to when corporation tax is due and payable) included income tax charged under paragraph 8 of this Schedule;
(b) an amount of income tax charged under paragraph 8 of this Schedule were an amount within subsection (6) of section 59F (arrangements for paying tax on behalf of group members);
(c) any reference in section 59G (managed payment plans) to “corporation tax” included income tax charged under paragraph 8 of this Schedule.
(3) Part 9 of that Act (interest on overdue tax) applies in relation to that company as if—
(a) the references in section 86 (interest on overdue income tax and capital gains tax) to “income tax” did not include income tax charged under paragraph 8 of this Schedule;
(b) in subsection (1) of section 87A (interest on overdue corporation tax) the reference to “corporation tax” included income tax charged under paragraph 8 of this Schedule.
(4) Schedule 18 to FA 1998 (company tax returns etc.) applies in relation to that company as if—
(a) any reference in that Schedule to “tax”, other than the references in paragraph 2 of that Schedule (duty to give notice of chargeability), included income tax charged under paragraph 8 of this Schedule, and
(b) in paragraph 8(1) of that Schedule (calculation of tax payable), at the end there were inserted—
Add any amount of income tax chargeable under paragraph 8 of Schedule (Taxation of coronavirus support payments) to the Finance Act 2020.”
(5) But the modifications of that Schedule are to be ignored for the purposes of the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175).
(6) Schedule 41 to FA 2008 applies in relation to that company as if —
(a) the references to “income tax” in paragraph 7(2) did not include income tax charged under paragraph 8 of this Schedule;
(b) the reference to “corporation tax” in paragraph 7(3) included income tax charged under paragraph 8 of this Schedule;
(but see paragraph 13(5) of this Schedule which has the effect that paragraph 7 of that Schedule does not apply in certain circumstances).
(7) For the purposes of paragraph 7(3) of Schedule 41 to FA 2008 (as modified by sub-paragraph (6)), a relevant obligation relating to income tax charged under paragraph 8 of this Schedule relates to an accounting period if the income tax became chargeable in that period.
Notification of liability under paragraph 8
12 (1) Section 7 of TMA 1970 (notice of liability to income tax and capital gains tax) applies in relation to income tax chargeable under paragraph 8 as provided for in sub-paragraphs (2) to (5).
(2) Subsection (1) has effect as if paragraph (b) (and the “and” before it) were omitted.
(3) Subsection (1) has effect as if the reference to “the notification period” were to the period commencing on the day on which the income tax became chargeable and ending on the later of—
(a) the 90th day after the day on which this Act is passed, or
(b) the 90th day after the day on which the income tax became chargeable.
(4) Subsection (3)(c) has effect as if after “child benefit charge” there were inserted “or to income tax under paragraph 8 of Schedule (Taxation of coronavirus support payments) to the Finance Act 2020”.
(5) In relation to income tax chargeable under paragraph 8 in relation to an amount of a coronavirus support payment received by a firm, the duty in subsection (1) (as it has effect by virtue of sub-paragraphs (2) and (3)) is taken to have been complied with by each of the partners if one of the partners has complied with it.
(6) The reference in section 36(1A)(b) of TMA 1970 (20 year period for assessment in a case involving a loss of income tax) to a failure to comply with an obligation under section 7 of that Act is not to be taken as including a failure arising by virtue of the modification of that section by this paragraph, unless the failure is one to which paragraph 13 applies.
Penalty for failure to notify: knowledge of non-entitlement to payment
13 (1) This paragraph applies to a failure of a person to notify, under section 7 of TMA 1970 (as modified by paragraph 12), a liability to income tax chargeable under paragraph 8 where the person knew, at the time the income tax first became chargeable, that the person was not entitled to the amount of the coronavirus support payment in relation to which the tax is chargeable.
(2) Schedule 41 to FA 2008 (failure to notify) applies to a failure described in sub-paragraph (1) as follows.
(3) The failure is to be treated as deliberate and concealed.
(4) Accordingly, paragraph 6 of that Schedule has effect as if the references to a penalty for “a deliberate but not concealed failure” or for “any other case” were omitted.
(5) For the purposes of that Schedule (except in a case falling within paragraph 14 of this Schedule), the “potential lost revenue” is to be treated as being the amount of income tax which would have been assessable on the person at the end of the last day of the notification period (see paragraph 12(3)).
14 (1) This paragraph applies to a failure to notify, under section 7 of TMA 1970 (as modified by paragraph 12), a liability to income tax chargeable under paragraph 8 by a partner of a firm that received the amount of the coronavirus support payment in relation to which the tax is chargeable.
(2) For the purposes of paragraph 13(1) of this Schedule, each partner is taken to know anything that any of the other partners knows.
(3) Where a partner would be liable to a penalty under Schedule 41 to FA 2008 (whether in a case falling within paragraph 13 or otherwise), the partner is instead jointly and severally liable with the other partners to a single penalty under that Schedule for the failures by each of them to notify.
(4) In a case not falling within paragraph 13, if the failure of at least one of the partners—
(a) was deliberate and concealed, the single penalty is to be treated as a penalty for a deliberate and concealed failure;
(b) was deliberate but not concealed, the single penalty is to be treated as a penalty for a deliberate but not concealed failure.
(5) For the purposes of Schedule 41 to FA 2008, the “potential lost revenue” is to be treated as being the amount of income tax which would have been assessable on any one of the partners (see paragraph 9(4)(a))—
(a) in a case falling within paragraph 13, at the end of the last day of the notification period, or
(b) in any other case, at the end of 31 January following the tax year in which the amount of coronavirus support payment was received by the firm.
(6) Paragraph 22 of that Schedule (limited liability partnerships: members’ liability) does not apply.
Liability of officers of insolvent companies
15 (1) This paragraph—
(a) provides for an individual to be jointly and severally liable to the Commissioners for Her Majesty’s Revenue and Customs for a liability of a company to income tax charged under paragraph 8, where a notice under sub-paragraph (2) is given to the individual, and
(b) applies paragraphs 10 to 15 and 17 of Schedule 13 (joint liability notices: tax avoidance, tax evasion and repeated insolvency and non-payment) to such a notice.
(2) An officer of Revenue and Customs may give a notice under this sub-paragraph to an individual if it appears to the officer that conditions A to D are met.
(3) Condition A is that—
(a) the company is subject to an insolvency procedure, or
(b) there is a serious possibility of the company becoming subject to an insolvency procedure.
(4) Condition B is that the company is liable to income tax under paragraph 8.
(5) Condition C is that the individual was responsible for the management of the company at the time the income tax first became chargeable and the individual knew (at that time) that the company was not entitled to the amount of the coronavirus support payment in relation to which the tax is chargeable.
(6) Condition D is that there is a serious possibility that some or all of the income tax liability will not be paid.
(7) For the purposes of sub-paragraph (5) the individual is responsible for the management of a company if the individual—
(a) is a director or shadow director of the company, or
(b) is concerned (whether directly or indirectly) in, or takes part in, the management of the company.
(8) A notice under sub-paragraph (2) must—
(a) specify the company to which the notice relates;
(b) set out the reasons for which it appears to the officer that conditions A to D are met;
(c) specify the amount of the income tax liability;
(d) state the effect of the notice;
(e) offer the individual a review of the decision to give the notice and explain the effect of paragraph 11 of Schedule 13 (right of review);
(f) explain the effect of paragraph 13 of that Schedule (right of appeal).
(9) An individual who is given a notice under sub-paragraph (2) is jointly and severally liable with the company (and with any other individual who is given such a notice) to the amount of the income tax liability specified under sub-paragraph (8)(c).
For provision under which the amount so specified may be varied, see—
(a) paragraph 10 of Schedule 13 (modification etc),
(b) paragraphs 11 and 12 of that Schedule (review), and
(c) paragraphs 13 and 14 of that Schedule (appeal).
(10) Paragraphs 10 to 15 and 17 of Schedule 13 apply to a notice under sub-paragraph (2) as they apply to a joint liability notice (see paragraph 1(2) of that Schedule) as if—
(a) the references in those paragraphs to “relevant conditions” were to conditions A to D in this paragraph;
(b) sub-paragraphs (3) and (4) of paragraph 10 were omitted (and references to sub-paragraph (3) in that paragraph were omitted);
(c) in paragraph 10(6)(a), after “or (9)” there were inserted “or paragraph 15(8)(c) of Schedule (Taxation of coronavirus support payments)”;
(d) in paragraph 12(6)(b) after “5(9)” there were inserted “or paragraph 15(8)(c) of Schedule (Taxation of coronavirus support payments)”.
(11) Expressions used in this paragraph and in Schedule 13 have the same meaning in this paragraph as they have in that Schedule (subject to the modification made by sub-paragraph (10)(a)).”—(Jesse Norman.)
This new Schedule makes provision about the taxation of payments made under various coronavirus related business support schemes, including the coronavirus job retention scheme (“CJRS”) and the self-employment income support scheme (“SEISS”). Paragraphs 1 to 7 clarify how payments under those schemes are to be subject to tax, following (with some exceptions) the normal principles for taxing receipts of a business. Paragraph 8 provides that where a person receives an amount to which they were not entitled under CJRS or SEISS, or misapplies an amount paid under CJRS, the person will be liable to income tax at the rate of 100% in relation to so much of that amount as was not repaid to HMRC. Paragraphs 9 to 15 make provision in connection with that charge (for example in relation to assessments and penalties).
Brought up, read the First and Second time, and added to the Bill.
I beg to move, That the Bill be now read the Third time.
This Finance Bill stands in the shadow of a pandemic unprecedented in its scale and reach. We are keenly aware of the immense challenges and pressures that that has placed on us. These conditions—this situation—cannot and will not be ignored. The Government are working flat out to alleviate the impact of covid-19 on the economy, on the public finances, and, most importantly, on the health and wellbeing of every person and family in the United Kingdom.
My right hon. Friend the Chancellor has announced numerous measures over the past few months in response to the virus, including the job retention scheme, the business interruption loan scheme, and the self-employment income scheme. Together, this represents, contrary to many of the comments made in the previous debate, an economic intervention by Government on a scale hitherto unseen in peacetime, and necessarily so. At such a difficult time for millions of people around the United Kingdom, the Government have worked to protect businesses and are specifically focused on the wellbeing of the most vulnerable in society.
Of course we recognise, and the House must recognise, that this is a still a work in progress and there is a way to go. The crisis is not over. The pandemic continues. People around this country are still suffering and may do so for many months yet. The Government will continue to work to lessen the impact, but it remains the responsibility, the duty and the important role of businesses, families and individuals to play their part, too, in this colossal collective national effort. Together, we must work to bring ourselves through and out of this crisis.
The Bill supports the emergency services as they go about their vital duties and exempts from vehicle excise duty vehicles that have been purpose-built to transport NHS products. The Government have introduced new clauses that were considered today to ensure that workers who have returned to public sector jobs to help fight the effects of the pandemic will face no adverse pensions consequences from doing so. The Bill reforms the tapered annual allowance so that doctors can spend more time treating patients without facing precipitous tax bills. This pandemic has brought out, in many ways, the best in our society, and I am certain that the Britain that emerges from it will be stronger and fairer.
The Bill provides tax exemptions specifically for those who receive payments under the Windrush compensation scheme, the troubles permanent disablement payment scheme and the Kindertransport fund, as well as for care leavers who are starting apprenticeships, and rightly so.
The necessary focus on the here and now must not come at the expense of tomorrow. In the words of the Prime Minister, our great national hibernation is coming to an end, and we must and will now at last look to the future. Now is the time to start to rebuild the economy and to restore our public finances. Our police, our teachers, our armed forces and many other public sector workers have all played their part in combating this pandemic alongside the NHS. I would also single out, as I have said, our public servants in the civil service, particularly in my own area of HM Treasury and within HMRC.
This public sector support cannot be provided for if the public finances are not supported, in turn, with a fair and sustainable tax system. That is a key fact. We do that while seeking to remain competitive internationally, and maintaining the corporation tax rate at 19% is therefore the right approach. Even at that level, it is still the lowest headline rate in the G20, and it reminds the world of UK strength as a location for inward investment.
But we have also been clear about fairness. Everyone must pay their fair share of tax. That is one reason we have introduced the digital services tax, for which this Bill also legislates. A tax set at a rate of 2% on revenues from digital services will ensure that digital businesses pay a fairer share of UK tax that more accurately reflects the significant value that they derive from their UK users. As we look to recovery, we want business to receive the support that it needs. That is why we have delayed the extension of the off-payroll working reforms in the private sector to April 2021.
Businesses need time to prepare for the reforms, and it would have been burdensome to ask them to do so during the pandemic.
We focus on innovation in the Finance Bill. We wish to go further to support enterprise in this country, which will be desperately needed in the coming months. This country has a proud history of innovation, and increasing the research and development expenditure credit rate to 13% will allow that to continue. The structures and buildings allowance rate increase will also aid investment in new shops, factories and agricultural buildings, which will help to stimulate capital investment across the nation. As ever, we are committed to levelling up across the United Kingdom.
As has been pointed out, covid-19 is not the only crisis that we face. The Government have committed to reducing the United Kingdom’s carbon emissions to net zero by 2050. The Bill is another step towards that target. Not only does it pave the way for the forthcoming plastic packaging tax, but it removes the vehicle excise duty expensive car supplement for zero-emissions vehicles and ensures that, now we have left the European Union, a carbon price will remain in place. Those measures will help to ensure that our post-covid-19 economy is greener than before.
At the end of 10 hours of debate in the last two days, for which I thank all my colleagues and the Opposition Front-Bench team, we understand that the world during the passage of the Bill has changed. Its impact on this House, our daily lives and our economic outlook has radically altered. To some extent, we have made changes on the fly to shore up and support our public services and our response to the pandemic. As a result, the Bill is a firm foundation—indeed, firmer than it was originally framed—on which we can rebuild our economy and protect our public finances as we recover from this devastating virus. The Bill supports businesses, the vulnerable and our key workers, and I commend it to the House.
I begin by thanking my colleagues in the shadow Treasury team for their work throughout the journey of the Bill and the Minister and his colleagues for their responses to many of the questions and concerns that we have raised. I also put on record our thanks to the Clerks for all their work. They have helped us so much during the progress of the Bill in difficult and dangerous times for them. The House of Commons Library staff have, as ever, been incredibly helpful and professional and I record our thanks to them as well.
I am grateful to all hon. Members who have contributed to our discussions about the Bill. I am delighted that we have heard such a range of contributions, not least from hon. Members on the Opposition Benches. It is rather disappointing, however, that we have not heard from a single woman from the Government Benches today. I do not know whether it is men-only Thursday on the Tory side when it comes to the Finance Bill, but given that we know the impact of the coronavirus pandemic on women in particular will be profound, I hope that we might be able to set that straight when we continue our discussions of this nature on Wednesday. Women are more likely to have lost their jobs or to have been furloughed during the crisis and, sadly, despite many of the changes that we have seen in our society, they often shoulder the burden of childcare.
As I have repeated throughout the progress of the Bill, it does not recognise the scale of the challenge we face. I appreciate what the Minister said, but it is a Finance Bill for a different age. We have consistently warned of the looming threat of mass unemployment since the beginning of the pandemic. As the days go by, that is becoming a reality. This month, the OECD reported that the UK is set to face a slump in its GDP that will outstrip the falls of France, Italy, Germany and the US.
Young people are about to enter the worst jobs market in more than a decade. Those who entered the jobs market in 2008 will know what a challenge that is, but this will be worse still. The class of 2020 have no part-time retail and hospitality jobs to fall back on while they look for their first job. For young people, completing their education is supposed to be a step on the ladder, but for many this year, it will involve falling down a snake.
Airbus, TM Lewin, easyJet and SSP Group are all large employers that have announced that they will be making thousands of redundancies. At least 12,000 jobs have been lost in the last three days alone; the real number is doubtless higher still. In every case it is a tragedy for those affected, because it means thousands more jobseekers having to rely on meagre social security payments to provide for their families and thousands more jobseekers needing to sign on when demand at jobcentres will already be very high and when recruitment in many sectors has already frozen indefinitely. It is not just young people, however, who will be affected. I think especially of older workers who will need additional support to retrain and reskill during this time.
We recall the devastation of mass unemployment in the 1980s that scarred communities like mine for far too long. The pain was acute and the social and economic damage was lasting and real. I have long believed that Government can and must be a force for good, but this is a political choice. While the lockdown restrictions are slowly easing, the threat of coronavirus is far from gone. It will take much longer for businesses to operate at their usual capacity. We recognise that protecting our economy would be an immense challenge for any Government, but to meet the challenge, we will need ambitious, decisive and swift action.
When we hear that update from the Chancellor next Wednesday, we will need a full back-to-work Budget with a resolute focus on jobs. It is more important than ever that those with broadest shoulders pay their fair share, so that we can raise revenues to fund the schemes and the vital frontline workers we need to get us on the road to recovery and revive our public services.
The Finance Bill is a series of tweaks and corrections. Rather than raising revenue, it extends and expands tax reliefs and tinkers with, rather than ends the entrepreneurs’ relief. Netflix, Amazon Prime and other high-grossing streaming services will be unaffected by the digital services tax, for all we welcome its introduction in its limited scope. As it stands, the digital services tax will create up to £440 million in annual revenue, when the UK in fact loses £1.3 billion in corporation tax to five of the biggest UK tech firms each year. That is £1.3 billion that could go towards helping schools to enable children to return safely in September, towards more nurses and more doctors, towards creating new jobs, towards decarbonising our economy and towards funding more public health research, which this pandemic has shown we desperately need.
We have sought to improve the Bill in Committee and on Report, introducing amendments so that the Government could review their policies against their effects on job creation, on poverty, on a green recovery and on measuring the cost of tax reliefs. We have sought to entrench greater scrutiny of policies that may well need to be revised in what is becoming an unprecedented economic downturn. Again, the Government have defeated our amendments. We fear that their approach highlights that they have not yet recognised that they will need to go much further in protecting our economy. The Prime Minister’s plans for economic revival are mere repetitions of existing spending, announced wearing a different hard hat in a different tractor. They are a Government who run the economy by repetition, not innovation.
Labour has consistently approached this crisis constructively, and we will try to keep doing so. In this time of crisis, I urge the Government to rethink their approach and to show meaningful dedication to economic recovery next week. We know that the furlough scheme has provided a lifeline to thousands of workers, but that work is not yet done. There can be no room for a sense of pride or complacency. If the Government fail to provide a full stimulus package before October, the 1 million people who lost their jobs in March and April will have been unemployed for six months, and not enough will have been done to support demand and create new jobs.
We again call for a back-to-work Budget that is rigorous, takes into account the differing needs of sectors and regions and gives the right level of support to workers old and young, rather than taking a one-size-fits-all approach. We need a full Budget that supports viable businesses—a Budget that is future-facing in promoting green jobs, reskilling older workers and investing in our young people, because infrastructure is more than just bricks and mortar. We need a Budget that honours the sacrifices the British people have made during this crisis. The future success of our country depends on it.
Like everybody, I acknowledge these extraordinary times. The world has changed since the Budget was announced in March. All the certainties that we used to rely upon are gone, and things that we thought that the Government would never do, never say or never spend money on are suddenly things that are no barrier whatever. That goes some way to show that the Government can do a lot more when they want to, and that should give us some hope that they may go back on things they have said before.
I wish to take this opportunity to thank everybody who has contributed to debates on the Bill. I thank the Clerks and the Bill team, who have been so incredibly helpful; I thank you, Madam Deputy Speaker, for your sage advice; and I thank my hon. Friend the Member for Aberdeen South (Stephen Flynn), whose first Finance Bill this is and who has done a fantastic job representing both his constituents and the party.
I also thank our researchers, Scott Taylor and Jonathan Kiehlmann, who have supported us so well throughout this process—with all the amendments that we tabled and having to learn about everybody else’s amendments, it has been a huge challenge to keep up but they have risen to it admirably—and Mhairi Love in my office, who has also done an incredible job while studying for her exams and completing a dissertation. She has provided support to me throughout all that and I thank her for it. I thank the people on Twitter who think I talk too quickly. I swear that I am making an effort to slow down; this is just how I speak.
I repeat the call for evidence that I made at the start of the Bill’s progress. A Finance Bill Committee should be able to take evidence. Other Bill Committees in this House have the practice—for example, the Domestic Abuse Bill Committee for England and Wales took evidence from experts. It seems absolutely ludicrous that Finance Bills, which affect so many different aspects of everybody’s lives, do not take evidence from experts at the start and instead rely on getting written evidence and us scrutinising that written evidence, rather than being able to ask questions about the Government’s policies and find the best way through. I also reiterate that some kind of standing committee on the Budget is very much required to keep an eye on what the Government are doing and how effective their policies and proposals are.
Many questions remain at the end of this Budget process, and I suppose the first of those is whether we will be back here for another Budget in the autumn. Issues such as the loan charge and IR35 are not going away, as much as the Government would like them to. We cannot predict the course of the coronavirus, but we do know that the UK Government’s handling of it has been far from impressive. As I said yesterday, I fear a return to mass unemployment. The Treasury has the toughest of decisions to make, but it ought to put wellbeing and people first, because if we do not have that, we will not have much else to go with afterwards.
We believe that there are still many questions to be answered on the loan charge, not least the revelations in the press during the week over the FOI request that have raised more questions. We want to see further probing on the issue and further support for those people who have ended up losing not only their livelihoods but their homes—and some have lost their lives. It is no light-hearted matter to be considered in such a flippant way.
If the Financial Secretary to the Treasury wants to prevent scarring in the economy, he must encourage his colleague the Chancellor to be bolder next week. He must keep the job retention scheme and the self-employment support scheme going, and he must fill the gaps in those schemes when he makes his announcement next week, because too many people have lost out and too many sectors are not yet back to full strength. When that change comes—when people have to pay more of the wage costs themselves—we will see more and more employers doing what many employers have done this week and simply deciding to hand back the keys, fire their staff and wind up their companies. And the unemployment figures will soar.
Does my hon. Friend share my particular concern about the oil and gas sector in which we have already seen vast swathes of employees made redundant because the furlough scheme had an end date? The fact that that end date is now coming closer and has not been extended will only compound the difficulties and lead to further unemployment.
The oil and gas sector is a perfect example of a sector that needs additional support right now. These are people who have a great deal of uncertainty involving many different factors, not least the oil and gas price at the moment, the need to invest in green technologies in the future and the need to transition in a just way that makes sure that jobs and livelihoods are protected. The Government need to have an oil and gas sector deal to support those jobs and those people and to protect the economy of the north-east of Scotland.
Other sectors of concern include tourism, hospitality and the arts and theatre. There is a huge campaign today for the music sector as well. I fully support those concerns because if we cannot return to these venues, the people who work in them will not get a wage and they will struggle, with many companies perhaps not coming back. They will lose their Christmas season—they will lose everything and perhaps not even be able to come back to theatres and to those kinds of sectors until March. I do not know where the Government expect those people to earn a wage or how they expect them to live, but it is clear that support needs to be in place for the sectors that are affected.
There are stark figures out today from the Scottish Chambers of Commerce. Its president, Tim Allan, has said:
“It is critical that governments in Holyrood and Westminster continue to provide business support for companies during and beyond the easing of lockdown restrictions. A sudden end to these vital financial support measures would not be welcome by anyone and a tsunami of jobs would disappear overnight.”
Commenting on the results of the Scottish Chambers of Commerce survey, Professor Graeme Roy, director at the University of Strathclyde’s Fraser of Allander Institute, said:
“What is particularly worrying is the employment outlook. The survey shows a clear warning of what is to come, with a sharp rise in unemployment now inevitable as businesses adjust to a new normal.”
Inevitable—a tsunami of jobs lost. It is not surprising that 95% of the firms in that survey reported a fall in business confidence. To boost business confidence, the Government really need to make sure that the schemes continue. The findings paint a bleak picture of the deep economic hit to key sectors across Scotland, once again highlighting the need for strengthened financial support measures to help businesses and industries survive this crisis. Rather than looking to shut down the support schemes and putting increased financial pressure on firms that are already struggling to get by, it is critical that the Treasury extend and strengthen support to protect business and countless jobs.
This Government have all the levers. I only wish that the Scottish Government had at their disposal—as the Government of an independent country—the levers to make such choices. At the very least, the Chancellor should look at the fiscal framework and allow devolution of borrowing powers to the Scottish Government as soon as possible. The Scottish Government’s powers to borrow are incredibly limited, and we do not have the flexibility to meet the economic demands of this crisis. It could not have been envisaged when the fiscal framework was agreed; nobody would have seen this coming. The Government must react and listen to the demands of the Scottish Government.
This Government have a choice. They can invest in green infrastructure and recovery and they can decide to help people, or they can decide to turn off the taps and risk recession and devastation across many sectors of the economy. All I can hope is that they choose wisely.
I have followed the Treasury’s Budgets professionally for a quarter of a century and contributed to many of them, but this is the first time I have helped to legislate for a Budget. As well as speaking in various stages of the Finance Bill, I served on the Bill Committee. I have been impressed by the thought, the hard work and the dedication that Treasury Ministers and officials have put into the Bill, taking on board many of the concerns that have been raised throughout the process. I particularly pay tribute to my right hon. Friend the Financial Secretary and my hon. Friend the Exchequer Secretary, who have steered the Bill through its various stages with patience and humour.
When I first sat on the Finance Bill Committee, I never expected that in our discussions I would learn about Burkean philosophy or why there are different rates of take-up of driving licences among different ethnic groups. I pay tribute to the work of the Clerks on the Bill, who made it work so smoothly, and to my own staff, who have supported me throughout the process.
This Budget is one of the most unusual in history. Announced just weeks before lockdown, it was legislated for during the deepest recession and the biggest economic support package in modern times. It is notable that, almost without exception, the measures have withstood these exceptional circumstances and they are as justified now as they were before.
I sat through the amendments that the Opposition tabled in the Bill Committee, and I observed that none of them had anything to do with promoting economic growth. I was reminded of a conversation that I had with a peer of the realm when I first came to this House. I had always thought that he was a Labour peer, but he told me that he was a Conservative. I asked him why he was Conservative rather than Labour, and he said, “The trouble is that they know only about spending it, not about making it, but you can’t spend it unless you have made it first.” That could not be more true.
There are some much-debated measures in the Bill, but I think that in the end it gets the balance right between tackling tax avoidance and encouraging entrepreneurialism. It is right that everyone pays their fair share. I am at heart an economic liberal who believes that if a Government are going to take a person’s hard-earned money, the burden of proof lies on the Government to justify doing so. In general, I get more joy from cutting or scrapping a tax than introducing a new one, but it is notable that the Bill introduces new taxes. The possible carbon tax is needed to tackle climate change by ensuring that companies pay what economists call the externality of emitting greenhouse gases. The plastics tax is a great nudge tax, pushing industry into recycling more plastic by imposing costs on not recycling. As economists say, we should tax bads, not goods.
Then there is the new digital tax, discussed broadly in this House, which ensures that global technology companies pay their fair share. These technology companies bring us all so many benefits, which is why many of them have grown rapidly into some of the most valuable firms in the world, but their global business model and the joys of internal transfer pricing, basically mean that they can decide how much corporation tax they pay in each different country where they operate. The ultimate solution to this is a global agreement on the taxation of technology companies, but these agreements can take forever to reach, not least if those countries that benefit from the lack of an international agreement drag their heels. So it is absolutely right that countries such as the UK take the lead in introducing interim national measures. With declared national profits at the discretion of finance directors, the only option for the digital tax is to be that unprecedented thing—a tax on turnover. So the carbon tax, the plastic tax and the digital services tax are three taxes that can all clearly be justified. I welcome them.
Finally, I want to look ahead at the biggest economic challenge of our time. Yesterday in the Treasury Select Committee, on which I sit, the chief economist of the IMF and the OECD both paid tribute to the Government’s economic support package. Economists rarely agree about anything, but they do agree that things would have been a lot worse without this unprecedented Government support. I welcome the news yesterday from the Bank of England that we are bouncing back quicker than many had feared, but we are still set to have one of the sharpest recessions in modern history. Thousands of jobs are already being lost across the private sector, and the risk is that we undo the hard work that we have done since the 1980s to become a country of high employment and low unemployment. We must do everything we can to prevent that. We must not go back to the 1980s.
We now need to have a laser-like focus on getting the economy going again. We need to stop jobs being lost in the first place and then ensure that the short-term unemployed do not become the long-term unemployed. That means getting them back to work as quickly as possible. We have rightly all been paying tribute to the NHS staff who have done so much to look after us during the pandemic, but we should also pay tribute to the dedication of private sector workers—from supermarket staff who have kept us fed to drug companies that have developed treatments and companies that have built ventilators. It is private enterprise that has taken the brunt of this recession, and it is private enterprise that will pull us out of it. Private enterprise is not the problem that some on the Opposition Benches see it as; it is the solution. Across the House, we need to focus in the coming months and years on helping businesses get going again, so that they can create the jobs and pay the taxes that pay for our public services and our welfare system. We need to build, build, build, and that leads to jobs, jobs, jobs. I commend the Bill to the House.
I believe that the hon. Member for Houghton and Sunderland South (Bridget Phillipson) said that there were no female Members on the Conservative Benches, so I just want to reassure her that I am still a woman. I am also delighted to say that on the Treasury Select Committee we have five Conservative Back Benchers, of which three are women. So women are very much represented on the financial side on these Benches.
I promise to be brief, so I want to talk about only two areas in this Bill, which are really relevant to my constituents in Kensington. The first is the digital sales tax, which I commend to the House. We all want it to be superseded by a multilateral solution, but it is an important and bold interim measure. Kensington High Street, like high streets across the country, is suffering. That is partly due to the burden of business rates, but it is also due to changing shopping habits. The new tax will be an important source of revenue for the Exchequer, and it will also go some way towards levelling the playing field between online retail and high streets. I am also looking forward to the fundamental review of business rates that we shall see later in the year.
I also commend to the House the measures in this Bill that incentivise the greening of the economy. Over the last 10 years, we have shown that we can have economic growth while lowering emissions. The environment is critical to my residents in Kensington and, in particular, air quality, since we are in central London. I am glad that my area, Kensington and Chelsea, has seen the largest three-yearly decline in emissions in the whole of London, but we all know that there is an awful lot still to be done, so I welcome many of the measures in this Bill, such as the support for zero-emission vehicles, the changes to the vehicle excise duty regime and the preparations for the introduction of the plastic packaging tax. These will all be warmly welcomed in Kensington.
In the interests of brevity, I am going to conclude there and commend this Bill to the House.
Last but not least is the saying, I suppose, Madam Deputy Speaker. My hon. Friend the Member for Kensington (Felicity Buchan) gave a fantastic speech, putting it far more succinctly than I will probably be able to. I must also say that my hon. Friend the Member for South Cambridgeshire (Anthony Browne) does not look old enough to have been studying the Finance Bill for the last 25 years—that is quite something. The Treasury has made an incredible effort in preparing the Bill and in all the work that has been put together over the last few months to safeguard our economy through this pandemic, and it should be widely praised.
I shall talk about the digital services tax from two perspectives. Again, the Treasury should be roundly applauded for the tax’s hugely progressive nature. As we heard yesterday, it is a pioneering tax, but I wonder whether we can be even more pioneering. The two perspectives are these: first, by being more pioneering, we can go further and help to save the high street; and secondly, it is all very well saying that we need to do that, but we have to have a solution to be able to do that. This is nothing new—I have been talking about retailing and the high street since I became a Member of this House, and I like to think that given my previous career, I am able to talk a bit about that. However, given the pandemic, the digital services tax, in my view, cannot come quick enough, and I wonder now whether we can go even quicker. What we are seeing is a structural change to the high street, and it is of course incredibly worrying when we listen to the news in the morning and hear of bellwethers, such as John Lewis and Harrods beginning to struggle.
I have long believed that it is absolutely key that all our companies pay their fair share of tax, regardless of industry. If they create value in this country, they should be taxed in this country. That is not only bold and brave, but fit and proper. Taxing those companies is more pertinent than ever, because the incomes and profits that they generate are eating away into the more traditional businesses’ market share when they are the very ones that are paying their fair share of tax and suffering as a result of the digital platforms’ dominance. When Google is reported to have paid less than £50 million in UK tax last year and Facebook to have paid £30 million on sales of £1.5 billion, it is absolutely right that the Government are bringing this legislation in as quickly as they are. For me, this is not about taxing those with a competitive advantage, but a move in the correct direction of fairness and equality. As the Government have said, should we find a global solution to this problem, we will probably abolish this tax, making it to all intents and purposes temporary.
Of course, this is not just about taxing the Facebooks, Googles and Twitters of this world; it is more encompassing than that, and it will focus on intermediaries as well. For me, that is a really good thing, because I would like to think that the digital services tax is a bridge to where we should be going. That is the crux of my argument. I do not think at the moment the digital services tax does quite enough—I wonder whether we can go a bit further—and I will just bring out the reason for that. I would like to see some kind of online sales tax levied on online retail sales as a way to support the high street. This would enable the Treasury to take the step, which we know it wants to take, of abolishing retail business rates for good. That would level up an industry sector that is seeing technological shift erode it year after year. The DST is a stepping stone to where we want to be.
At the moment, online sales in retailing are approximately £80 billion, and their share of total retail sales has now grown from 5% when records first started to nearly 20% of all UK retail sales. That means that retailing through traditional bricks-and-mortar stores in towns and cities across the country, which employ millions of people, is being completely eroded by sales moving online, where cost bases are much smaller and profits can grow quickly. Just as we are getting a grip on online marketplaces, I wonder whether we can move on this issue as well.
What coronavirus has done is see a further step change in reduced footfall on the high street. People are doing two things: not only are they not going out, in order to avoid crowded areas, but those that have been inside have converted—we have seen evidence that they have converted, with 48% of all retail sales in supermarket shopping now being online.
If the Government would like to think about abolishing retail rates, they should consider some form of VAT-style levy on retail online sales. If we take £8 billion as the current total of UK retail rates, a VAT-style levy of a few percentage points on those total sales at the moment could pay immediately for half of the amount of abolishing those rates. Surely, that is something we would want to think about sooner rather than later to help.
I will finish by saying that I really welcome the boldness of this Bill, and I really welcome the boldness of the digital services tax. I think we are now turning to face the right direction for what I believe is a real institution in this country—shopping on our high streets—and it only leaves me to say to the Treasury Minister that I commend this Bill to the House. I wonder if we can go even further, but I think it is a fantastic step in the right direction.
Question put and agreed to.
Bill accordingly read the Third time and passed.
1st Allocated day
Consideration of Bill, as amended in the Public Bill Committee
Review of DST
I beg to move amendment 18, page 53, line 28, leave out “before the end of 2025” and insert—
“within a year of Royal Assent and annually thereafter”
This amendment would require the Government to report on the DST annually.
With this it will be convenient to discuss the following:
Amendment 19, page 53, line 29, at end insert—
“(2) Any review made under (1) must include an assessment of the effect of the DST on tax revenues.”
This amendment would require any report on the DST to include an assessment of the effect of the DST on tax revenues.
New clause 5—Digital Services Tax: review of effect on tax revenues—
“(1) The Chancellor of the Exchequer must make an assessment of the net effect on tax revenues of the introduction of the Digital Services Tax and lay a report of that assessment before the House of Commons within six months of the passing of this Act.
2) This review must also include an assessment of the revenue effect of the Digital Services Tax on tax payable by the owners and employees of Scottish Limited Partnerships.”
This new clause would require a Government assessment of the effect on tax revenues of the DST, and in particular the change in revenues associated with Scottish Limited Partnerships.
New clause 33—Requirement on groups to publish a group tax strategy including a country-by-country report—
“(1) A group which is not required to publish a tax strategy in compliance with Schedule 19 of the Finance Act 2016 shall be deemed to be so required.
(2) Any tax strategy published by a group in compliance with that Schedule must include any relevant country-by-country report.
(3) “Country-by-country report” has the meaning given by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016.
(4) A country-by-country report is relevant if it—
(a) was filed or required to be filed by the group in compliance with those Regulations on or before the date of publication of the tax strategy, or would have been so required if the head of the group were resident in the United Kingdom for tax purposes, and
(b) has not already been included in a tax strategy published by the group.”
(5) The Treasury must make regulations to bring this section into operation no later than 1 April 2021.
This new clause would require all groups subject to the DST to publish a group tax strategy, including a country-by-country report. Such a report would include information about the group’s global activities, profits and taxes.
I should draw the attention of the House to the fact that a corrected text of new clause 33 has been published this morning. The version that was initially published inadvertently omitted the concluding subsection.
Amendments 18 and 19 would require the Treasury to conduct a review of the digital services tax within a year of Royal Assent and to report to Parliament on the tax annually thereafter with a specific consideration of the effect of this measure on taxation revenue.
We welcome the introduction of the digital services tax, although this support is qualified. The Minister will be well aware that we like to be thorough even with proposals that we broadly welcome. It is deeply disappointing that it has not been possible to reach multinational international agreement, hence the need for this unilateral approach. This Government should demonstrate much more leadership in pressing for international efforts to tackle this scourge. Ensuring that companies that operate across national borders pay the tax that they should requires us to co-operate, to lead, to persuade, to negotiate and to set an example.
More troubling is the fact that, in the crisis we are living through today, when ambitious and decisive action is demanded of Government, Ministers have only managed to put forward such a modest measure, when other countries are willing to go further. Many of the companies that will be affected by this tax are the same ones that will have benefited from the impact of covid-19. Before the pandemic struck, they were the beneficiaries of an uneven playing field, while much loved high street businesses struggled.
Local firms and UK chains have faced a real battle competing with companies that base themselves overseas, do not have the same overheads as physical shops and go to great lengths to minimise their tax liabilities. The impact of lockdown has only exacerbated this tension. It has provided an unexpected boon to tech giants, which have managed to rake it in as demand soars and business is directed online. Meanwhile, our high street businesses, which were already struggling, have only seen their worries increase as footfall has understandably plummeted.
Even with the easing of lockdown, there is a real challenge ahead in ensuring the continued success of our bricks-and-mortar retail sector. If shoppers will not venture on to our high streets and the Government fail to provide an effective test, track and isolate system, many businesses that are just starting to open up will soon be forced to close their doors again, perhaps even permanently. These businesses are the bedrock of our communities. They help create a sense of place, and are often a lifeline for older and vulnerable residents and for those in more isolated communities. Government must do more to ensure that there is a level playing field, and that those who have benefited the most from this situation—as I have noted, those that have not exactly paid their fair share in the past—make more of a contribution to the national effort.
Does the hon. Member accept that not only is it right that the Government intervene to ensure that taxes are paid on a level playing field, but that, at a time when public finances are under pressure, we should not be allowing large firms to escape paying the tax revenue that is due and should be paid?
The right hon. Gentleman is absolutely right, and I sincerely hope that the Minister will respond to that point, because we have seen this unfairness built into our system. We recognise that this measure takes some steps towards levelling the playing field, but we need to see much more from Government in clamping down on the kind of tax avoidance that we have seen far too often in recent years, because it is not right.
Can I say how much I support the argument the hon. Lady is making? Does she agree with me that the Government’s digital services tax measure is actually a mouse of a measure compared with the huge profits made by American big tech? Does she also agree with me that the Government need to co-operate very closely with the European Union, which is devising an international tax with much greater teeth, so that these big tech companies do pay their fair share of tax?
Yes, I support the point the right hon. Gentleman makes, and I will come on to say more in my contribution both about how those companies need to contribute more and how it is essential that we see international consensus on this issue. The measure the Government have put forward today is necessarily time-limited, and we will need to see a much more sustainable, long-term solution with a broader international base.
It is not right that British bookstores and other businesses face a higher tax rate than Amazon. Unfortunately, this measure does not go far enough to address this fundamental unfairness, nor does it really get to the heart of the tax avoidance strategies some of these tech companies have used in recent years. As the Chartered Institute of Taxation points out, this measure is not aimed at stopping profits arising in the UK being shifted by multinationals out of the UK to tax havens. However, for far too long the companies that make the modern economy work have got away with complex ways of moving and hiding the money we pay them.
I agree with many of the points the hon. Member makes, and certainly about making sure that we have a fair and level playing field for small businesses. I am certainly a supporter of new clause 33 in principle, which is trying to see these multinationals disclose profits on a country-by-country basis. However, to be fair, does she accept that the Government have gone further than previous Governments, with measures such as the diverted profits tax and now the digital services tax?
We welcome all measures and will support any proposals to tackle tax avoidance, whether it is in terms of tech giants or more broadly, but we still face a big gap in this country, and we are urging the Government to do much more. I am sure the hon. Member would agree that it is vital that we see greater action, because we have seen this unfairness, particularly during the pandemic. He, like me, will have many wonderful local businesses in his constituency that pay their taxes and are trying to come through this crisis, and they want to ensure that there is a level playing field between the bricks-and-mortar businesses and online businesses. I am sure that we all want to get behind that endeavour.
For too long, companies have moved and hidden the money we pay them. Research by TaxWatch UK estimates that we are losing £1.3 billion in corporation tax from five of the biggest firms each year. In comparison, the Government’s own estimate is that the digital services tax is only set to produce £280 million this financial year. The modest nature of this measure becomes clear when we consider what some of the tech giants might actually have to pay under the tax. I will highlight again for the benefit of the House, as I did in Committee, research by TaxWatch UK which predicts that Facebook would face an increased tax bill of £39 million, despite estimated UK revenues of almost £2.3 billion. Google would pay slightly more—around £168 million—based on estimated UK tax revenues of £9.3 billion. Many businesses, such as Amazon, that blend their activities will be unaffected by the measure.
The Government will be aware of our concerns that streaming services are not included at all, which we discussed in Committee. The Financial Secretary to the Treasury said then that
“it would not be appropriate to implement a temporary tax on a broader basis.”––[Official Report, Finance Public Bill Committee, 11 June 2020; c. 126.]
He will doubtless be aware that taxes introduced on a temporary basis have ended up becoming permanent fixtures, including income tax, introduced to fund war with Napoleon. With little evidence that the Government are working to secure international agreement on a replacement for this tax, temporary could end up being for a very long time. Her Majesty’s Revenue and Customs employs many extremely capable people, and I am sure that it is not beyond their wit to develop a way of taxing streaming services too.
New clause 33, which was tabled by my right hon. Friend the Member for Barking (Dame Margaret Hodge) and has many cross-party supporters, would require those liable for the digital services tax to publish a country-by-country tax report. My right hon. Friend has campaigned tirelessly and incredibly effectively on this issue, and I wish it were possible for us to hear from her directly today. Sadly, the way in which we now conduct our proceedings makes it impossible for her to contribute, which is a real shame, given the expertise and insight she brings, but I am aware that the cross-party support of the new clause will allow other speakers to raise the points that she might have sought to make.
For years, the Opposition have urged the Government to commit to country-by-country reporting on a public basis. Their reticence to do so, and the way in which they have held up progress at an international level, has been a source of deep frustration to those of us who want to see far greater transparency around the taxation of multinational companies. This new clause would not only be of practical use, so that we can see whether those liable to the digital services tax are paying an appropriate amount. It would also help to address the concerns I have outlined that the measure as it stands does little to address the tax avoidance practices by digital multinational companies. It would end the secrecy around such practices and pave the way for public country-by-country reporting at a wider level. The Government have been fond in recent months of saying that they wish to be a world leader—well, here is the opportunity to become a world leader in tax transparency, and I urge the Minister to listen to the arguments being made and take urgent action to address them.
The pressure on our public finances and vital frontline services means that we should be doing far more to ensure that those tech companies that have benefited from the lockdown are contributing more. We need a level playing field between our high streets and the tech giants. We need to build a society where everyone—individuals and businesses alike—pays their fair share. A digital services tax must be part of that, but the Government simply are not going far enough. A bolder approach on a digital services tax would not only help to address this unfairness; it would help to deliver a sustainable recovery from the economic crisis we are facing.
Labour has called for a back-to-work Budget—one that focuses on retaining jobs, sustaining jobs and creating jobs; a full Budget that invests in our young people, who are facing the worst employment prospects for a generation, and helps to secure a future that they can look to with hope. An effective digital services tax would go some way to supporting that goal. As I have indicated, this measure is expected to generate a fairly limited amount when compared with the extent of the tax avoidance practices we have seen from some of these companies in recent years and the profits they have made in recent months. Therein lies the principal reason for our amendments: we need to understand as soon as possible how effectively the measure is working and what more can be done to ensure that such companies are paying an appropriate amount of tax.
The Government’s unwillingness to conduct a review earlier than 2025 means that the opportunity for Parliament to properly scrutinise the measure will be hugely limited. I know that the Minister hopes that a multilateral approach will be in place by then; we on the Opposition Benches hope that that will be the case, too. A comprehensive multilateral agreement, based on a lasting international settlement, is the only long-term solution, but until that happens, the Opposition will continue to push for a more ambitious approach, to which our European neighbours are looking as well. The times that we are living through demand such an approach.
We need to ensure that those with the broadest shoulders help to bear the cost of the recovery that the Government need to secure for our country. It is more important than ever to make sure that the big players that have benefited greatly from this crisis are taxed properly, reasonably and fairly and do not simply continue to shift around their sizeable profits. That is why we have tabled our amendments so that we can be sure that this is the right approach to digital taxation in these times of crisis and so that we can continue to consider what more can be done, not just in five years, but next year and every year.
I draw the House’s attention to interests, which are set out clearly in the Register of Members’ Financial Interests.
I rise to speak to new clause 33, which was tabled by the right hon. Member for Barking (Dame Margaret Hodge) who, alas, for the reasons set out by the hon. Member for Houghton and Sunderland South (Bridget Phillipson) from the Opposition Front Bench, cannot be here today. The House may rest assured that she will be watching every word of this debate from where she is.
The House will notice that not one but three former and current Chairs of the Public Accounts Committee—the hon. Member for Hackney South and Shoreditch (Meg Hillier) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), as well as the right hon. Member for Barking—have signed the new clause. In addition, my hon. Friend the Member for Amber Valley (Nigel Mills), who is unavoidably locked down with his two adorable new children and who has great expertise in this policy area, has also signed it
New clause 33 makes a number of points. The first is that any company that is subject to the new digital services tax, which came into force this April, must publish transparently and publicly a country-by-country report. Although as it stands in the amendment paper the new clause does not include a starting date, that was rectified this morning and the starting date would be April 2021.
The new clause is targeted at international technology giants—that is Google, Facebook and Amazon. These huge businesses are well known for using corporate structures deliberately designed to shield them from the payment of tax. The new clause would allow Parliament, journalists, campaigners and civil society to see clearly whether these businesses are paying their fair share of taxation. If the Government accept the new clause, that would, as the hon. Member for Houghton and Sunderland South suggested, make the UK a world leader in financial transparency. It would give a major boost to country-by-country reporting for all corporations, so that everyone can see that tax is paid on profits in the locations where those profits are earned.
Let me be clear at the outset that it is not our intention to divide the House on the new clause today—subject to the Minister, who is a very clever fellow, showing due respect for advancing this agenda and for the importance of making progress on this issue in due course.
In my submission, there are three reasons why the new clause really matters. The first is that its logic sits four-square behind the priorities of the Conservative-led coalition—I thought the hon. Member for Houghton and Sunderland South could perhaps have given a little more attention and, indeed, support in this respect—who wanted to inject greater transparency and openness into the financial system, in the first instance by championing open registers of beneficial ownership, which were introduced in the UK in 2016.
The open-registers process has been enhanced over the past two years, during which the right hon. Member for Barking and I persuaded the House that open registers should be embraced by the overseas territories and subsequently secured agreement that the Crown dependencies would also implement them. Such progress is a huge advance in tackling money laundering and financial corruption, and it bears down heavily on tax evasion as well. It also makes it more difficult for bent politicians and corrupt businesspeople to steal money from poor countries and their citizens. The new clause builds on that whole approach.
Secondly, at this dreadful time in our country, when our constituents are suffering financially so severely and our Government are rightly seeking to help every family as we combat the economic effects of this crisis, it is frankly obscene and very offensive that some major corporations who rely on UK customers and make huge profits in our country should not pay their fair share of tax. The public and the public finances cry out for fairness and equity, particularly at a time like this, when some companies have benefited from taxpayer-funded rescue packages organised by the Government while not contributing equitably to the public purse. Public expenditure is now at an all-time high. This borrowing will have to be paid for and it is simply not right or fair that while most taxpayers will have to pay more tax—85% of us pay taxation through PAYE—some multinational companies deliberately create financial structures to avoid paying tax.
I also point out to right hon. and hon. Members that those same multinationals are undermining British business by undercutting them on price. They can do that because they do not pay tax at anything like the same rate. In Sutton Coldfield, we are struggling to make a success of our town centre and high street, to renew it and reinvigorate it, but Amazon undercuts bookshops in our high streets and stores such as John Lewis in our shopping centres because it can avoid paying its fair share of tax.
Thirdly—this is of particular importance to developing countries—credible research shows that developing countries lose three times as much each year from tax avoidance as they gain from development aid. The OECD has been pressing for international reform in tax rules for decades. Those countries with the most to lose have been most resistance, so the OECD compromise was that information should be provided confidentially to the tax authorities. While that is progress of a sort, it does not really help developing countries, for obvious reasons to do with cost and with complexity. Clearly, it would be better, as with open registers, for all the data simply to be placed in the public domain so that there is a level playing field and public accountability for the tax conduct of multinational enterprises worldwide.
The right hon. Gentleman may remember that during the coalition Government, we put measures through, agreed at European level, for a directive on transparency on payments made by the extractive industries across the developing world because of concerns about corruption with respect to mining in particular. That created greater transparency. The same approach could be taken on the tax issues that he is raising.
Yes, the extractive industry transparency initiative, which has been led by a former Member of this House, Clare Short, for some time, did a huge amount of good as, of course, have open registers, because open registers have continued that agenda of transparency. As I said at the outset, this agenda was championed and driven forward internationally through the British at the G8.
I agree with all the points that the right hon. Gentleman has been making. Does he accept that unless we can dig behind the accounts to see where companies, for example, inflate costs in countries where they can get lower tax rates and deflate costs in countries with higher tax rates, a tax strategy in itself is simply not going to ensure that we get behind how companies avoid paying tax in the countries where they earn the profits?
There is an important principle: while commercial confidentiality should not be compromised, we should move to greater transparency to tackle the problems that lie behind what the right hon. Gentleman is saying. I agree with that and I think that there is common cause across the House that that is what we want to do. Clearly, getting a multinational standard will be the right result, but these things have to be led.
In summary, the new clause is part of the noble campaign that is supported across the House, to shine a light on the profit shifting, transfer pricing and tax haven abuse that is used to minimise tax liabilities. The House has already voted in favour of public country-by-country reporting through an amendment to the Finance Bill in 2016, which gave the Treasury the power to make the information public. My right hon. Friend the Financial Secretary will no doubt rely on the prayer of St Augustine, “O Lord, make me chaste, but not yet,” and argue that the UK would not want to implement this reform unilaterally, and he has already acknowledged, in a letter to the right hon. Member for Barking (Dame Margaret Hodge) dated 27 February this year, that a multinational agreement to do country-by-country reporting would be a good achievement, but I put it to him that that is too timid an approach.
As we contemplate Britain’s role post Brexit and we set out what we mean by global Britain, let my right hon. Friend stand tall, show leadership internationally, and follow the proud, confident example of David Cameron and George Osborne. Let global Britain lead by example, to the huge benefit of our domestic taxpayers and taxes, and for those in the poorest countries, whose mineral wealth is so often developed without their citizens reaping the benefits they should receive and that they deserve. This reform would be in the finest traditions of Britain’s past international development leadership, and I commend the new clause to the House.