All 7 contributions to the Finance Act 2021

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Tue 13th Apr 2021
Finance (No. 2) Bill
Commons Chamber

2nd reading & 2nd reading & 2nd reading
Mon 19th Apr 2021
Finance (No. 2) Bill
Commons Chamber

Committee stageCommittee of the Whole House (Day 1) & Committee of the Whole House (Day 1) & Committee stage
Tue 20th Apr 2021
Finance (No. 2) Bill
Commons Chamber

Committee stageCommittee of the Whole House (Day 2) & Committee of the Whole House (Day 2)
Mon 24th May 2021
Finance Bill
Commons Chamber

Report stage & 3rd reading & Report stage
Tue 25th May 2021
Finance Bill
Lords Chamber

1st reading & 1st reading
Tue 8th Jun 2021
Finance Bill
Lords Chamber

2nd reading & Committee negatived & 3rd reading & 2nd reading & Committee negatived & 3rd reading
Thu 10th Jun 2021
Royal Assent
Lords Chamber

Royal Assent & Royal Assent

Finance (No. 2) Bill

2nd reading
Tuesday 13th April 2021

(3 years, 2 months ago)

Commons Chamber
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Second Reading
Nigel Evans Portrait Mr Deputy Speaker (Mr Nigel Evans)
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I inform the House that Mr Speaker has selected the reasoned amendment in the name of the Leader of the Opposition, and I will call James Murray to move the reasoned amendment when he comes to speak immediately after the Minister. I now call the Minister, Jesse Norman.

15:41
Jesse Norman Portrait The Financial Secretary to the Treasury (Jesse Norman)
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I beg to move, That the Bill be now read a Second time.

As you will be aware, Mr Deputy Speaker, the scrutiny of Finance Bills has lain at the centre of our parliamentary process for many centuries, ever since its origins in the 13th century, and it is a rare honour for me to bring this Bill forward today.

At the beginning of last month, my right hon. Friend the Chancellor of the Exchequer outlined a Budget with three key objectives: first, to protect jobs and livelihoods and provide additional support to get the British people and British businesses through the pandemic; secondly, to be clear about the need to fix the public finances once we are on the way to recovery and to start that work; thirdly, as we emerge from the pandemic, to lay the groundwork for a robust and resilient future economy. This Finance Bill enacts changes to taxation that support all those objectives.

I will come to the Bill itself shortly, but before I do so I want to pay tribute again to the work of the Treasury and Her Majesty’s Revenue and Customs over the past year and more. I can testify from personal experience that officials have worked around the clock throughout that period to get the covid schemes up and running, to make sure that they are as effective as possible, to tweak and extend them where they can and, by those means, to support millions of people and hundreds of thousands of businesses up and down the United Kingdom in the face of the worst peacetime economic crisis in recorded history. I will not say that this was their finest hour; they will have had many of those, as these are institutions that are arguably nigh on 500 years old. None the less, this has certainly been a time to which future historians will look back when they seek examples of exemplary public service.

It has been a privilege to work alongside officials at both Her Majesty’s Treasury and Her Majesty’s Revenue and Customs, and to see the great machinery of government working so well. I will, if I may, add one other word of scene-setting about the wider approach that we have taken to tax. It is a measure of the approach taken by the Treasury and HMRC and of our own strategic approach as a Government that, alongside these pandemic measures, we have also accelerated work to create a more effective and resilient tax system. Our goal, in simple terms, is to enhance the stability and effectiveness of the UK tax system, using last year’s announcement of a new 10-year tax administration strategy as the springboard.

We want a tax system that enhances productivity, especially across the long tail of our small and medium-sized businesses. Digitisation of the tax system provides a useful nudge to these firms to upgrade their use of information technology and the skills that it demands. We want a tax system that is more flexible, so that it is better able to adapt quickly to changing circumstances and to provide targeted support for businesses and individuals when needed. We want a tax system that is more resilient—both resilient itself and better equipped to strengthen the core resilience of the UK economy in the face of a future crisis. That transformation of our tax system is already under way, but, as the House will know, we have also taken steps to improve the process of tax policy development, most recently with the tax policies and consultations day we held on 23 March. By giving this wide array of consultations more profile, we hope to make the tax policy process still more collaborative and transparent and improve the quality of tax policy making.

Let me turn to the Bill. The House is well aware of the massive public health and economic shock that this country has experienced. The damage done by coronavirus to our economy and our society has been severe. More than 700,000 people have lost their jobs since March last year. The economy has shrunk by 10%, the largest fall in more than 300 years, and this country’s borrowing is the highest it has ever been outside wartime.

The Government’s response has been comprehensive and sustained, with the total package of support to the economy this year and next now estimated at £407 billion. That response is already showing its value. Thanks to that and to the rapid roll-out of vaccination, the Office for Budget Responsibility and other independent authorities now expect a swifter recovery than previously anticipated, with faster growth, lower unemployment, more investment and higher household incomes. Indeed, the OBR expects the UK economy to recover to its pre-crisis levels six months earlier than it did—in the second rather than the fourth quarter of 2022. In the words of the Resolution Foundation, if realised, this projected rate of unemployment,

“would be by far the lowest unemployment peak in any recent recession, despite this being the deepest downturn for 300 years.”

At the heart of our covid response is precisely that support for jobs, delivered through Her Majesty’s Revenue and Customs as the tax authority, with more than 11 million jobs furloughed between the beginning of the pandemic in March last year and February of this year. As the OBR outlined last month, without the additional measures at Budget, which included the extension of the coronavirus job retention scheme, unemployment would have peaked two quarters earlier and at a higher level. Indeed, it estimates that there would have been an additional 300,000 unemployed people in the fourth quarter of this year without these latest interventions.

The tax measures outlined in the Bill go further now to protect jobs and support the economy. We are extending the 5% reduced VAT rate until 30 September in order to protect 150,000 hard-hit hospitality and tourism businesses, which employ almost 2.5 million people. To help those businesses manage the transition back to the standard rate, VAT will then increase to an interim rate of 12.5% from October until the end of March.

For similar reasons, the Bill puts into legislation the temporary cut in stamp duty land tax with a residential SDLT nil rate band remaining at £500,000 in England and Northern Ireland until the end of June. This, again, will be followed by a phased transition back to the normal rate. From 1 July 2021, it will fall to £250,000 until the end of September, before returning to £125,000 on 1 October.

For any business that took advantage of the original VAT deferral new payments scheme, the Bill ensures that they will be able to pay that deferred VAT in up to 11 equal payments from March 2021, rather than by one larger payment due by 31 March 2021. For those businesses that have been pushed into losses, the trading loss carry-back rule is being extended from the existing one year to three years for losses of up to £2 million, which will deliver a significant cash-flow benefit for businesses.

As well as protecting jobs and livelihoods, the Bill takes important steps to strengthen the public finances. The damage done by coronavirus and the urgent need to respond to the crisis have created huge challenges for the Exchequer. The OBR’s fiscal forecasts show that this year the UK is expected to borrow a record amount: £355 billion. That is 17% of our national income—the highest level of borrowing since world war two. Borrowing is forecast to be £234 billion next year, which is 10.3% of GDP—an amount so large that it has only one rival in recent history, which is the level of borrowing this year.

It is our responsibility as a Government to balance the extraordinary support we are providing to the economy now with the need to start to fix the public finances, and the Bill strikes that balance.

First, the income tax personal allowance rises with the consumer prices index as planned to £12,570 from this month and will then be maintained at this level until April 2026. The House will recall that the UK has the highest basic personal tax allowance of any G20 country. A typical basic rate taxpayer now pays over £1,200 less in tax than in 2010. The higher rate threshold also rises to £50,270 from this month and will then be maintained at this level until April 2026. These changes are fair and progressive. It is important to note that the 20% highest income households will contribute 15 times that of the 20% lowest income households. An average basic rate taxpayer will be less than a pound a week worse off in 2022-23.

Secondly, the inheritance tax thresholds, the pensions lifetime allowance and the annual exempt amount in capital gains tax will also be maintained at their 2020-21 levels until April 2026. Maintaining the pensions lifetime allowance at current levels affects only those with the largest pensions—those worth more than £1 million.

Thirdly, the Government are providing businesses with over £100 billion of support to get through this pandemic, so our judgment has been that it is only fair to ask them to contribute to this overall recovery. The Bill therefore legislates for the rate of corporation tax paid on company profits to increase to 25% from 2023. Since corporation tax is charged only on company profits, businesses that may be struggling will, by definition, be unaffected.

The Government are also protecting small businesses with profits of £50,000 or less by creating a small profits rate, maintained at the current rate of 19%. The effect of this is that 70% of companies, or 1.4 million businesses, will not see an increase in their tax rate. There is also a taper above £50,000 so that only businesses with profits of a quarter of a million pounds or greater will be taxed at the full 25% rate—and that is itself still the lowest corporation tax rate in the G7. The increase is two years away, well after the point when the OBR expects the economy to have recovered, but it is important to legislate for this now in order to give businesses clarity about our future plans.

The next goal of this Budget has been to lay the foundations of our future economy as we emerge from the pandemic. If that economy is to support the creation of new jobs, to spur growth and to drive productivity forward, we need to encourage business investment now, so this Bill contains a highly innovative new super deduction measure, which is expected to lift the net present value of the UK’s plant and machinery allowances from 30th among the countries of the OECD to first.

In most cases, this measure will allow companies to reduce their taxable profits by 130% of the cost of investment they make, equivalent to a tax cut of up to 25p for every pound they invest. The super deduction is expected to be worth £25 billion during the two years it is in place, which would make it the biggest business tax cut in modern British history. The OBR has said that, at its peak in the financial year 2022-23, the super deduction is expected to bring forward an additional 10% of business investment, with a value of £20 billion.

Alongside a programme of national recovery, we also want to stimulate regional recovery. That is why this Bill also enables the Government to designate tax sites for freeports in Great Britain. Once approved, eligible businesses will be able to benefit from a number of tax reliefs, including an enhanced 10% rate of structures and buildings allowance, an enhanced capital allowance of 100% for companies investing in plant and machinery, and full relief from stamp duty land tax on the purchase of land or property—and to help them to invest and grow, the Bill maintains the annual investment allowance at the higher level of £1 million until the end of this year.

The House will also recall that these measures are supplemented by the Budget’s new Help to Grow: Digital scheme, which will assist smaller businesses in developing their digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software. This is all part of a package that the Institute of Directors has called

“a big win for SMEs.”

Sammy Wilson Portrait Sammy Wilson (East Antrim) (DUP)
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It is significant that no freeport sites have been allocated in Northern Ireland. Will the Minister clarify whether all the measures that will be included in freeport status will be exempt from the state aid rules, which will still apply in Northern Ireland because of our association with the EU single market rules?

Jesse Norman Portrait Jesse Norman
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I am grateful to the right hon. Gentleman for his question. He will know that it is absolutely the Government’s intention to have a freeport in Northern Ireland, and that they are in discussion with officials and members of the Northern Ireland Executive to discuss precisely how it will work. I am not in a position to comment on how it will work, but certainly the expectation is that this should be a functioning, highly successful and effective freeport. It should enjoy a very attractive set of benefits that will benefit the companies involved and be comparable to the ones we will see elsewhere, although it is important to note that freeports are themselves a mixed bag. We have had a variety of different bids of different kinds to the competition that has been run.

All the measures we have taken in relation to business growth and investment are part of a package, which the Institute of Directors has called

“a big win for SMEs.”

I was also pleased to see that the Resolution Foundation said that the Budget

“rightly sought to boost the recovery before turning to fixing the public finances”.

That is an important point.

I have discussed the work we are doing to create a more flexible and resilient tax system, but the Finance Bill also includes important measures to make it fairer and more sustainable. As part of the United Kingdom’s commitment to be a global leader on tax transparency, the Bill allows for the implementation of OECD reporting rules for digital platforms. The rules will help taxpayers in the sharing and gig economies to get their tax right. It will also help HMRC to detect and to tackle non-compliance.

To build on the successful introduction of Making Tax Digital for VAT, the Bill will enable the extension of MTD requirements for smaller VAT businesses from April next year. It also makes widely welcomed reforms to the penalty regime for VAT and income tax self-assessment, so that it is fairer and more consistent as a system, and harmonises interest for VAT and income tax.

The Bill tackles promoters of tax avoidance through strengthening existing anti-avoidance regimes and tightening rules. Importantly, it introduces an exemption from income tax for financial support payments for potential victims of modern slavery and human trafficking, made by the UK Government and devolved Administrations.

Finally, let me turn briefly to how the Bill helps us to deliver the important commitments the Government have made on the environment and on carbon reduction. The new plastic packaging tax, first announced at Budget 2018, will encourage the use of recycled plastic instead of new plastic in packaging. For plastic packaging that contains less than 30% recycled plastic content, the rate of the tax will be £200 per tonne. This will transform the economics of sustainable packaging.

The last 12 months have delivered a grave shock to this country and its economy, but the Government have met that shock with a determined and sustained response. That work is not done. With this Finance Bill, we are continuing to support the lives and livelihoods of families and businesses up and down the land, while simultaneously setting the terms for an investment-led recovery. The Bill puts in place the foundations for a fairer and more sustainable tax system. It further enshrines commitments on the environment and the work we are doing to tackle climate change, and it begins the work to rebuild the public finances. For those reasons and more, I commend it to the House.

15:55
James Murray Portrait James Murray (Ealing North) (Lab/Co-op)
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I beg to move,

That this House declines to give a Second Reading to the Finance (No. 2) Bill because it derives from a Budget that failed to guarantee a pay rise for NHS workers after their unparalleled service over the last year; because it undermines the country’s economic recovery, targeting household finances by freezing income tax allowances before increasing the rate of corporation tax; because it does nothing to mitigate the effect on family finances of the sharp council tax rise in April; because it contains measures connected with a cut to social security later in the year; and because it fails to set out the ambitious plan for jobs and growth that is needed to help the country emerge strongly from the worst economic crisis of any major economy.

May I start by extending my deepest sympathies to Her Majesty the Queen and the royal family at this sad time? His Royal Highness the Duke of Edinburgh devoted his life to public service and, crucially, to his role as a supportive husband. My thoughts are particularly with the Queen as she mourns the loss of someone who has been at her side, or just behind her, for 73 years.

As this is my first time physically in the Chamber for well over a year, I would also like to put on record my thanks to Mr Speaker, the Deputy Speakers and the Speaker’s Office for doing so much to help all Members, particularly those of us like me with relevant medical circumstances, to take part virtually throughout the pandemic. Now, having recently had my second jab and having spoken to my doctor, I am glad to be here in person to speak today to this important Bill.

Like millions of others in this country, I feel so grateful to be benefiting from the brilliance of our NHS and GP staff, scientists, lab technicians, nurses and volunteers, but we know that the health crisis of covid-19 is very far from over and that the harm to jobs and the economy resulting from the outbreak is even further from being over. On the Chancellor’s watch, our country is enduring the worst economic crisis of any major economy, yet in his and the Government’s plan we lack the ambitious, confident modern approach we need to emerge from this crisis stronger.



The Budget in March and this Finance Bill should have been an opportunity to pull out all the stops to get the economy going. The Chancellor should have focused resolutely on supporting families, securing jobs and backing small businesses. The Government should have used this opportunity to make sure we invest in solutions to the problems that we have struggled with as a country for so long, from social care to the climate emergency and the housing crisis.

There are many missed opportunities in this Bill and the recent Budget to take on some of the big challenges to which our country is begging for a solution. Take high streets, for example. We are all acutely aware of the severe difficulties that high streets are facing because of covid and how well online delivery-based businesses have done during lockdown. We know that for years, high street businesses have struggled with business rates, while tech giants have paid very little tax by comparison, and we know that the outbreak has made that imbalance far worse. Now should have been the time to at the very least level the tax playing field for high street businesses and online firms, yet there was nothing on that in this Budget, no decisions were taken on the Government’s new tax day, and the Finance Bill is silent on this crucially important issue. That is just one example of how the Government have missed opportunities to support and shape our country for the better.

Instead, so much of what the Government have done will make the problems we face worse. This Government have the wrong priorities and the wrong values, and their Ministers are following failed approaches from the past that now lack much, if any, of the wider support they may once have claimed for them.

Kevin Hollinrake Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
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I agree with the hon. Gentleman that we need to level the playing field between high street businesses and online businesses. That is a very tricky thing to do, particularly when talking about business rates. What is his solution to that?

James Murray Portrait James Murray
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I am very glad to have the hon. Gentleman’s support for our push for a solution. As he knows, the Government have been promising for some time to come forward with proposals on business rates, but we have nothing. We had the new tax day, when we were supposed to hear lots of announcements—nothing. We want to see something to help high streets, and we have not had anything. We need the Government to step up and offer a solution to the problem, which has bedevilled high streets for so long.

James Murray Portrait James Murray
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I will make a bit of progress.

High streets are just one example of how the Government have missed those opportunities. Ministers have shown that they simply do not have it within themselves to offer solutions to the challenge we face.

First and most immediately, the Government are taking money from people’s pockets. Families in all their many forms are the target of tax rises from this Government. People will suffer and our economy will stall if families see money taken from them when they need it most. It is unfair and economically illiterate, yet it is exactly what this Government are doing. Half the country will pay more next year, thanks to the provisions in this Bill to freeze income tax personal allowances.

At the same time, the Bill does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now. It supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need that help most. It tells us everything we need to know about the Government’s priorities: they raise taxes and cut help for families immediately and without a second thought, years before an increase in corporation tax. At the same time, they are letting some of the world’s biggest companies stop paying tax altogether.

If that was not bad enough, the Government are also choosing in this year of all years to take money from the pockets of NHS workers. We now know how hollow those claps on the doorsteps of No. 10 and No. 11 must have echoed around Downing Street. The Government are cutting NHS workers’ pay. Ministers are breaking their promises, and the Conservatives are showing how little they have learned from the awful experience of the last year.

If we add that NHS workers’ pay cut to the personal allowance freeze, the council tax hike and the cut to universal credit, the scale of the impact of the Government’s decisions becomes clear. To give an example, a newly qualified nurse living with their partner and two children in rented accommodation will lose more than £1,100 a year. Rather than supporting families out of this crisis, the Government are prioritising tax breaks for tech giants.

That tax break is being handed to big businesses through the so-called super deduction—the £25 billion tax break for companies that the Chancellor and the Minister say represents

“the biggest two-year business tax cut in modern British history”,

and that forms our second key concern about this Bill. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse. Economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”,

yet the Chancellor has done nothing to counter suggestions from industry consultants that the deduction could be used for luxury items, including jacuzzis.

The Government have also failed to address environmental concerns. With the deduction giving firms an incentive to buy new rather than existing assets, the Exchequer Secretary to the Treasury was recently unable to guarantee that the super deduction would be used to support green development. The Chancellor himself has seemed confused about the overall impact of the deduction, recently claiming that, as well as bringing investment forward,

“it will also increase the amount of investment”.—[Official Report, 9 March 2021; Vol. 690, c. 641.]

That claim comes despite the Office for Budget Responsibility revealing a week earlier that cumulative business investment over the next five years will be £8 billion lower following the Chancellor’s announcement of his new scheme than had been projected before.

Particularly with a tax cut of this size, it is crucial that we understand who it is helping and what it will achieve. The truth is, as we know, that companies can already benefit from the annual investment allowance, a 100% tax break on investment up to £1 million, which the Bill extends to the end of this year. The Treasury Committee concluded in its report “Tax after coronavirus” that the annual investment allowance

“appears well targeted to promote growth in small and medium-sized enterprises.”

With the existing allowance apparently well targeted at the growth of small and medium-sized businesses, and with such businesses standing to benefit only marginally from the new super deduction, we are left with an inescapable conclusion: the main beneficiaries of the Chancellor’s new scheme will be the big firms that need help least. No wonder TaxWatch has nicknamed this the “Amazon tax cut”—a giveaway from the Chancellor that could wipe out Amazon UK’s tax bill entirely.

Christian Matheson Portrait Christian Matheson (City of Chester) (Lab)
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I am grateful to my hon. Friend for talking about what has been identified as an Amazon tax cut. Has he noticed—and I get the impression from his contribution that he has—that most of the firms that will benefit from this are foreign-owned large tech firms that are not British, and most of the firms that will not benefit are the smaller British firms that will feel the wrong end of the Government’s policies? Does he not find it rather ironic that the Conservatives, who wrap themselves in the flag, are actually being entirely un-British and damaging British interests? They claim to be patriotic, but they are doing exactly the opposite.

James Murray Portrait James Murray
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My hon. Friend makes a very important point and exposes again the hypocrisy in the Government’s approach. The fact is that, rather than helping families get through the tough times ahead, this Government are delivering a tax break for tech giants.

We know that Amazon workers have provided vital deliveries to millions of people across the country during lockdown. They need their rights at work to be protected and strengthened, and we all want that company to pay its fair share of tax. I see no one calling for a tax break for Amazon, yet that is exactly what this Government are providing. The Government would do well to learn from the new Biden Administration’s approach. The US Secretary of State has said that, rather than compete on lowering tax rates for corporations, the United States will focus on its

“ability to produce talented workers, cutting-edge research and state-of-the-art infrastructure”.

The new President has also been leading a drive to put in place a global minimum corporate tax rate. A spokesperson for the Treasury here has indicated that the UK might back those plans. Taken along with the Chancellor’s decision to raise corporation tax to 25%, this seems to be an admission by the Government that the last decade of Conservative corporate tax policy making has been totally wrong-headed. If that is the case, we welcome the Government’s admission, and it is vital that the UK plays a leading role in developing and implementing the proposals that President Biden is backing. We have not yet heard from Ministers on this matter in Parliament, however, so I urge the Exchequer Secretary to use her closing speech today as an opportunity to confirm to the House that she and the Chancellor back plans for a global minimum corporate tax rate and that they will do all they can to make this a reality.

While the initiative on international tax is being led by those overseas, closer to home the offer from this Chancellor of such a large tax break to companies will, of course, make people wonder what processes will be in place to prevent Ministers from intervening improperly on behalf of commercial interests in how decisions are made. The Chancellor is still refusing to properly account for his role in the Greensill scandal. To ensure public confidence in who will benefit from this £25 billion tax break, we strongly urge the Exchequer Secretary to today set out what new safeguards will be put in place to make sure that public money is not misused.

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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Before the debate, I spoke to the shadow Minister about insurance companies. It has come to my attention that some insurance companies are unfairly using business interruption insurance premiums to punish businesses that had the foresight to take out said insurance before the pandemic. Insurance premiums are being increased dramatically. Does the shadow Minister agree that when it comes to supporting small and medium-sized businesses, we need to close the loopholes that insurance companies are notorious for using and ensure that the spirit is legislated for? Perhaps—just perhaps—this Bill might be the way to do that.

James Murray Portrait James Murray
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The hon. Gentleman is right to draw attention to the fact that the Bill does everything for the big businesses that need the help most but does not do what is necessary to protect small and medium-sized businesses. I am sure that the Ministers present heard his points, and I hope that the Exchequer Secretary will respond to them in her closing speech.

Aside from all the concerns about the super deduction—from its potential for fraud, abuse and misuse to the fact that it offers to wipe out Amazon’s UK tax bill—the fact that the Government’s only national policy for growth and investment relies almost entirely on this tax break brings us to our third key concern about the Bill and the profound lack of ambition in the Government’s approach. There is simply no plan from the Government to make sure that we invest in what is needed for the future. The Bill follows a Budget of cuts. The OBR has confirmed that the Government will cut departmental resource spending plans by £15 billion a year from 2022-23 onward, and rather than bringing forward capital spending to invest in the green recovery that we need now, the Government have cut capital plans for this year by half a billion pounds.

Far from charting a course for the future, the Bill lacks any mention of a plan to tackle the big problems that we have faced in this country for a decade or more and that have in so many cases been brought into sharp focus by the covid outbreak. It is clear that over the past decade under this Government, our country’s social care system has been underfunded, with its workers chronically underpaid. Our country’s response to climate change has stubbornly lacked the urgency, ambition and scale that it needs. Our country’s answer to the housing crisis has been left to developers and speculators, leaving an entire generation let down and left behind. Investing in better social care, new green infrastructure and the council housing that we need would create jobs, improve lives and finally start to tackle the problems that our country needs to resolve.

The Conservatives have had more than 10 years to stand up to the challenges I have outlined, yet they have failed to do so. With the recent Budget and this Bill, they have proved themselves again unable or unwilling to do so. The Government’s whole approach is being exposed as one of failure rooted in the past and an inability to rise to the future. In fact, Conservative Ministers are continuing on the course that began in 2010—one that brought us a decade in which UK growth was below the average of all major economies and business investment fell to the lowest rate in the G7.

Our country’s economy will be £300 billion smaller in 2026 than was forecast at the start of the previous decade. At times during that decade, Ministers may have benefited from some international cover for their misguided and harmful choice of cuts rather than investing in growth in response to the financial crisis, but no more: a new international consensus has rapidly been gaining strength. As the International Monetary Fund’s head of fiscal policy said, our Government and others should use fiscal policy to beat covid and to stimulate our economies by reducing unemployment and restoring economic growth. That focus on growth, investment and jobs is at the heart of the approach set out by the shadow Chancellor, my hon. Friend the Member for Oxford East (Anneliese Dodds). Our framework will meet the challenges of our times—it is a responsible approach in which a balanced current budget over the economic cycle would never prevent us from protecting people and businesses during a crisis or making critical investments in our future.

As the Bill progresses through the House, we will look at the detail in respect of the points I have outlined so far, as well as on other measures in the Bill such as those relating to freeports. We want to see good jobs and economic growth in every part of the country, irrespective of whether an area has a freeport. We need long-term, locally led investment in every region and nation, and freeports will in no way compensate for Ministers’ inexplicable decision to scrap their industrial strategy and disband their industrial council just when we need a long-term plan to support our critical industries. Furthermore, with freeports elsewhere in the world having become magnets for organised crime, tax evasion and smuggling, we fear that at a time when HMRC is already overstretched Britain is not well placed to manage such risks.

In Committee, we will challenge the Government over their approach to tax avoidance and tax evasion more widely, following up our long-standing concerns that Treasury Ministers continue to drag their feet on tackling these problems. Although the Bill contains measures to tackle the promoters of tax avoidance and change the system of penalties, there is a clear sense that those measures are extremely limited in scope, rather than the comprehensive action that we need. Indeed, those changes are not even included in the Budget report costings, suggesting that their financial impact must be minimal.

We will use the next stage of consideration of the Bill to go through the detail of the measures it contains that seek to address the problem of plastic pollution and to increase the use of recycled content. The principle of a plastic packaging tax is one that we support, and because we want it to be as effective as possible we will ask Ministers to consider the detail of its operation in Committee. Overall, however, we cannot support this Finance Bill. The Bill, and the Budget that it follows, should have seized the opportunity to help people who are struggling now; to invest in good new jobs in every part of the country; and to be ambitious in finally getting to grips with social care, housing and other challenges that our country has faced for so long without solving. In fact, rather than supporting families out of this crisis and setting an ambitious plan for the future, the Government are prioritising tax breaks for tech giants.

If this Bill had been presented by Conservative Ministers 10 years ago, it would have been the wrong solution then; a decade later, their approach has not changed but the rest of the world has moved on. No longer will they find allies for their approach in international institutions, and the politics of the United States shows that the consensus around the world is shifting. The Government are out of step with economic reality. They are taking decisions that will push up taxes for people across our country while helping Amazon to reduce its tax bill. They are choosing to cut NHS workers’ pay while failing to fix our system of social care, and they are deciding to continue a decade of cuts to public services when we urgently need to invest in the future.

Kevin Hollinrake Portrait Kevin Hollinrake
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Will the hon. Gentleman give way?

James Murray Portrait James Murray
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I have only a few moments. The hon. Gentleman may speak later.

We will vote for our amendment and against the Bill, to make it clear to people in our country that we understand that people need to be spared the Bill’s tax rises; that Amazon does not need any favours; that NHS workers deserve our support, that we need good new jobs in every region in the nation; that the economy will grow only through responsible investment; and that we need to fix social care, the climate emergency and the housing crisis. Above all, people in our country need a Government who are on their side, and it is absolutely clear from the choices that the Bill and their Budget make, and the problems that they choose to ignore, that this Government fail that test.

Rosie Winterton Portrait Madam Deputy Speaker (Dame Rosie Winterton)
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We now go to the Chair of the Treasury Committee, Mel Stride.

16:17
Mel Stride Portrait Mel Stride (Central Devon) (Con) [V]
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I shall speak in support of Second Reading.

The opening remarks by my right hon. Friend the Financial Secretary to the Treasury were extremely well made. He pointed out the huge challenges that we face as a country due to the economic crisis and the worst drop in GDP for 300 years, but he also rightly spoke of the extraordinary work that the Treasury and HMRC have carried out over the past 12 months to ensure that, at pace, we have had bold initiatives that have supported the economy, not least the labour force. I know, having held his position for about the same time as he has held his position, just how high-quality those people are and how hard and imaginatively they will have worked over the previous months.

My right hon. Friend was right also to draw the attention of the House to the improved outlook across the various forecasts. I think he mentioned the OBR, but he could equally have mentioned the IMF, whose recent forecasts for the UK economy point to a lower peak in unemployment than was feared at the start of the crisis. All of that is due, not just to the work that has been done to roll out the vaccine, but to the support packages that the Government have provided. I am not saying that everything has been perfect, but overall I think the effort has been pretty impressive.

The Bill is one step in an important journey to restore the health of the public finances. My right hon. Friend did not tell the House, because it is not his role to frighten the horses, what the consequence would be if we did not signal clearly to the markets that we are serious about getting on top of both our debt and the deficit. That would be an increase in interest rates, and we know from the forecasters that, roughly, a 1% increase in interest rates would lead to a £25 billion additional black hole in the public finances. To put that in some perspective, it would be equivalent to all the money that has been raised through the increases in corporation tax and the income tax threshold freezes. It is therefore essential that this Bill goes through the House to demonstrate that the Government are serious about getting on top of the public finances.

I would like to focus on some of the measures in the Bill. I turn first to income tax. I think that was the right place to go—a broad-based, important, very high-yielding tax—in order to raise the kinds of amounts that are required. The fact that the Chancellor has chosen to freeze thresholds rather than increase rates allows him, of course, to maintain the triple lock commitment in the Conservative manifesto. Incidentally, I have always argued that, depending on how things pan out, the public might perhaps—under the circumstances—forgive the Government were they to decide to breach the manifesto in one or two areas, given the extraordinary times in which we live, but it is good that the Chancellor has managed to avoid doing so, at least on this occasion.

We need a progressive tax system. Of course, with income tax—the wealthiest 1% paying some 28% of income tax—that is exactly what we have; but we also need an income tax system that does not undermine the link between those who pay tax and public spending. Through freezing the personal allowance, as well as raising more money, there is some benefit in ensuring that those who benefit from public services do, at least to some degree—albeit that we want a very progressive system—also pay tax to support those services.

Corporation tax also provides a large amount of money to the Exchequer. The Bill provides for quite a large increase in corporation tax, from 19% to 25%. The critical point is that we remain internationally competitive. The shadow Minister mentioned on a number of occasions President Biden and his tax policy. Well, his policy is to increase corporation or federal taxes from 21% to 28%. If we add on state taxes, that still leaves us very competitive—even at 25%—and certainly among members of the G7.

I was pleased to see in the Bill the small business rate relief. It will be important to support particularly our small and medium-sized enterprises as we come through this crisis. There are many reasons, which I will not go into in huge detail now, why that particular sector of the economy may be especially vulnerable as we come through the crisis. In the event that large swathes of SMEs go out of business, we could well see increases in market concentration and a contingent decrease in competitiveness across the economy, so it is important that we are careful and that the Treasury is mindful of the fact that those small and medium-sized enterprises will need ongoing support.

I want to say just one thing about the Laffer effect. In the context of corporation tax, it is often argued that—because corporation tax fell from 28% to 19% between 2010 and the present day, and at the same time the yield from corporation tax rose by 50%— there is some kind of causation, rather than correlation. I would argue quite strongly against that. I think that the improved yield from corporation tax was as much to do with improvements in the economy across that period, the bank levy, the bank surcharge and various anti-avoidance measures such as the corporate interest restriction. We should not fool ourselves into believing that raising taxes on companies will necessarily yield less in the medium to longer term—albeit that in the longer term we of course want to see those taxes as low as possible.

Incidentally, if my right hon. Friend the Chief Secretary to the Treasury were looking for areas where there might be a Laffer effect, I would point him to three taxes: the higher rate of capital gains tax; the stamp duty land tax on high-value properties; and duty on cigarettes. There is scope for reducing rates and getting a higher yield in all three of those areas.

I very much welcome the super deduction. I guess that there was an inevitability to it; if we signal that corporation tax rates will go up in future, we tend to find that companies delay investment such that they can gain the offset from those investments against a higher corporation tax rate. It is therefore important that the super deduction came in—in a sense, to stop that forestalling. What happens after that two-year period of the super deduction will be critical.

I urge the Treasury to look carefully at the way in which companies are undertaking investment expenditure. We know there have historically been weaknesses, quite outside the crisis. Measures such the R&D tax credits will be important in that respect. I notice that clause 19 provides a cap on those for SMEs, which, if I understand the clause correctly, is about ensuring that there is no double counting or double relief between a principal company and a subcontractor. When the Bill goes into Committee, that provision should be given careful scrutiny. I welcome clause 15, on the extension of the annual investment allowance at the £1 million level, albeit that that is temporary.

Turning briefly to the diverted profits tax, I will pick up on one or two remarks made by the shadow Minister, who seemed to imply that the Government’s record on clamping down on avoidance and evasion was rather wanting. My recollection of my time as Financial Secretary to the Treasury is quite the opposite. I direct the hon. Gentleman to HMRC’s annual report on the tax gap—the amount of money not collected that could be collected—which I think in recent years has been at historic lows, and has certainly been among the best of the figures available across tax authorities around the world.

Remarks were made about tax breaks for tech giants. It is for the Government to decide whether their corporation tax policy is to go in lock step with President Biden’s idea of minimum corporation tax rates across the world. That could be one solution to profit shifting. We must not forget, however, that this country has been in the vanguard, unilaterally rolling out the digital services tax to make sure that companies including Amazon, Google and eBay pay the appropriate level of tax. It is for the Americans to join us in a multilateral endeavour to make sure that such taxes actually work. I am quietly optimistic that the new American Administration is at least leaning in the right direction. I would be interested to hear the Exchequer Secretary explain why the diverted profits tax increase just maintains the punitive margin between the level of that tax and the increased corporation tax in the years ahead, rather than the decision being made to widen the margin, given how successful the diverted profits tax has been in preventing profit shifting.

Free ports feature prominently in the Bill. The Chancellor is, of course, enthusiastic about these, and they have exciting potential, particularly in terms of the levelling-up agenda, but I point to two areas where caution is needed. One is the possibility of fraud in free port areas. Careful scrutiny is needed of the tax incentives, albeit it that SDLT structures and building allowances and enhanced allowances for plant and machinery seem to be tax breaks that are difficult to game, because they relate to fixed assets in a specific geographical location. The second issue is possible displacement of economic activity. We do not want activity that would have occurred anyway, perhaps nearby, occurring in a particular location simply because there are advantageous economic and tax arrangements in place. The scrutiny Committee will certainly be interested in the operation of free ports.

One element of the Bill that I was especially pleased to see that has not been mentioned so far and probably will not be mentioned again in this debate is the change that ensures that where an employee receives a covid test provided by an employer in their place of work, it does not count as a taxable benefit in kind. Were it to do so, millions of workers up and down the country would find that they were liable for tax in relation to those tests. I raise the matter because there is a small but important lesson in scrutiny here. Tony Verran, who is a member of the Treasury Committee secretariat, having joined us on secondment from HMRC, spotted this anomaly in HMRC guidance. Within about 24 hours, I was able to raise it with the Chancellor on the Floor of the House in Treasury Questions, and within 24 hours of that, to his great credit, he changed the guidance, and now we see the provision in the Bill. That is how Parliament should work, so I am grateful to Tony and others who were able to point me to that issue.

In conclusion, I very much welcome the Bill. There are areas that will need considerable scrutiny. When I had my time as Financial Secretary to the Treasury I think I took through three Finance Bills with more than 1,000 pages of legislation, and I know the extraordinary amount of work involved in that, and the extraordinary amount of detail that my right hon. Friend will be going through over the coming days and weeks. I wish him well. The Treasury Committee will, of course, closely scrutinise the Bill, and will no doubt have much to say about it.

16:30
Alison Thewliss Portrait Alison Thewliss (Glasgow Central) (SNP) [V]
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It is a pleasure to follow the Chair of the Treasury Committee. As the SNP reasoned amendment sets out, the Bill falls short in a number of respects. My colleagues and I approach the Budget and the Finance Bill that follows with a sense of frustration, given the limited powers that the Scottish Parliament has over many matters in the Bill, and the imperviousness of the UK Tory Government to suggestions of improvements to their legislation. The most minor suggestions for how they might do things better are dismissed, whether they come from us as Members of the House, or from expert organisations.

That is a symptom of how this Parliament does its work, with no real incentive for compromise. There are aspects of the Bill in clauses 36 to 38 where Ministers are coming back to fix measures from the 2017 Finance Bill to make them work as intended. Expert organisations such as the Chartered Institute of Taxation, the Association of Taxation Technicians, the Institute of Chartered Accountants of Scotland, the Institute of Chartered Accountants in England and Wales, and the Low Incomes Tax Reform Group have all pointed out sensible tweaks to the Bill the Government could easily make. I urge Ministers to listen carefully to that expertise and to act.

I ask again for evidence sessions ahead of the Finance Bill. All other Government Bills—even, on occasion, private Members’ Bills—schedule evidence sessions, but not this major piece of legislation, which will impact everyone in these islands. The recent Financial Services Bill had useful evidence sessions where the Economic Secretary to the Treasury asked useful questions of our witnesses. I see no reason why the Government would not make time for that. Indeed, they might make better, more considered financial legislation if the evidence to support it was better examined.

Over the past year, the UK Government, like all Governments around the world, have taken a range of steps to support people and businesses. The Bill gives us an opportunity again to assess those measures, commend those that have worked, and examine which could usefully be extended and enhanced. It also allows us the chance to reflect on how we got here. The overriding context for the situation in which we find ourselves today has been a decade of austerity. The British Medical Association, in an article last October, referred to austerity as “covid’s little helper”, reflecting on how public health services in England have been cut back and undermined, resulting in a stalling of life expectancy in England. That came through the political choices—the budgetary and taxation choices—of this UK Tory Government. The tax breaks and the loopholes of this and previous Finance Bills, and the decisions of the Chancellor, have caused significant damage to public services across the UK, including in Scotland, where people did not vote for this austerity but have been forced to mitigate its impact.

We know that austerity is far from over; a second wave of Tory austerity is rushing towards us. The IFS has said that under current plans

“many public services are due a second, sharp dose of austerity”

and that for non-protected Departments the

“Chancellor’s spending plans are even tighter than they first appeared.”

Departments such as the Ministry of Justice, the Ministry of Housing, Community and Local Government, and the Department for Work and Pensions, will suffer cuts of 3% in 2022-23, which represents an 8% cut relative to pre-coronavirus plans in March 2020. When the Barnett formula is taken into account, that represents a cut of around £4 billion. It is a cut we cannot afford, on the back of so many that have come before. I am sure the Tories will argue that the Scottish Government should simply put up taxes, but they continually fail to recognise that we already pay in to the UK coffers, but we do not have control over what the Chancellor chooses to waste on dangerous vanity projects such as Trident, or on crony contracts to his Tory pals.

The measures in this Finance Bill regarding the coronavirus job support scheme and the self-employment income support scheme show the degree of complexity that we are now left with as a result of schemes being brought in necessarily in haste and extended for longer than the UK Government had anticipated. While the vaccine roll-out is progressing well, we are not yet out of this pandemic, and the scenes of young people out celebrating the end of lockdown last night should give us all a wee bit of pause for thought, along with the new variants that could evade vaccination in the future.

The UK Government have never been able to guarantee, regardless of their rhetoric, that life will be back to normal any time soon, so they should ensure that the support schemes reflect the course of the virus and extend them for as long as is necessary. They must now fill in the gaps in the support schemes and finally give some certainty to the millions of excluded people who have been left with not one penny piece from the UK Government for over a year.

I received some mail this morning with a book called “£xcluded Voices” from Stephen Liddell. It includes 151 stories of those excluded from support, and I hope very much that his book reaches the Chancellor’s desk. Stephen is a tour guide whom I had the pleasure to meet during a demonstration last year, and 95% of his income comes from overseas tourists. It is a sector of the economy that is highly unlikely to get going even when sectors start to reopen, and that will be two summer tourist seasons lost. He is among so many who have been left behind, completely without hope—and entirely without justification.

UKHospitality has highlighted that, with over 1 million employees in the hospitality sector still on furlough, it was critical the schemes were maintained, and it did welcome that, as do we. Yet moving to business contributions from July could prove difficult for some businesses that are not yet trading or that are off-season, and could yet result in further job losses. The stop-start, on-off furlough dither last autumn caused job losses from employers unable to bear the costs and the uncertainty, and the UK Government must not repeat that mistake.

It almost goes without saying that the SNP wants the £20 universal credit and tax credits uplift to be made permanent, but I have a wee query on the specifics in clause 31 about making the working tax credit uplift match the temporary £20 increase to UC by means of a one-off £500 payment. There are real concerns about the rough edges of this policy from experts such as the low incomes tax reform group. My understanding is that this £500 will be paid automatically, but there will be a charge to income tax where someone receives this in error—an error that would be HMRC’s error, not the recipient’s. There is a lack of certainty about what will happen if people get money they are not entitled to through HMRC’s own error, and what those receiving support are expected to do if they are unsure, especially as there is only a 90-day period in which to notify that error. I ask the Minister to give us some further detail on how exactly he envisages that this will work and what information people will receive.

We will certainly get into further detail next week, but I wish to run through some of the concerns that we and experts have with the measures put forward in this Finance Bill, in the doubtless vain hope that Ministers will start to get moving on improvements to it.

Beginning with the income tax personal allowance uplift and freeze, this would appear to be contrary to the Government’s stated policy on low-income taxpayers. National insurance thresholds will continue to move, and those under the personal allowance threshold, including those on universal credit, will not really see any benefits from this move. As always with the UK Government, there are problems in the detail. I would note that Ministers are also not taking the opportunity to amend the high income child benefit charge, which has proved so problematic for so many people.

We welcome the UK Government’s move on corporation tax, but would push them to work alongside President Biden on his call for global action on corporation tax. This is a golden opportunity for a concerted effort to move away from a race to the bottom.

On the super deduction, I must at least give the UK Government credit for a snazzy slogan, if for nothing else, but we have some queries about how it will work in practice, whether the benefits of the scheme will make a real difference to the wider economy and, as some have said already, whether this will give rise to tax dodges. The SNP has raised concerns for years about the UK’s low productivity, and the UK Government might want to act further to encourage businesses to invest more in staff, skills and technology. A real living wage, rather than their pretendy living wage, might be a better place to start.

We believe there should be a greater focus on pushing investment to meet net zero. The UK Government must ensure that this investment is one for future generations, and I ask how exactly Ministers intend to monitor the effectiveness of this super deduction. There should be safeguards against what Tax Justice has called egregious investments such as Jacuzzis. I note also that the purchase of flags might be on the list of things people could buy through their companies, which will no doubt please all the Tories on Zoom.

The Association of Taxation Technicians has some concerns about interaction with the introduction from 1 April 2023 of the small profits rate. I appreciate that the UK Government may believe they have good grounds for excluding leased or second-hand machinery, but the ICAEW has pointed out that industries that lease plant and machinery rather than acquire it outright make a significant contribution to the UK economy. The Construction Plant-hire Association estimates that the UK’s plant hire industry is worth £4 billion per annum, and the Construction Equipment Association estimates that 60% to 65% of all construction equipment sold in the UK goes into plant hire. This sounds to me to be quite significant, and I would ask Ministers to set out their reasoning in greater detail.

Moving on to clause 15, the annual investment allowance has jumped about over recent years with permanent and temporary limits, so it would be good to get more certainty on that. In the “Tax after coronavirus” report, the Treasury Committee, on which I sit, commented:

“The Annual Investment Allowance is valued by business and it appears well targeted to promote growth in small and medium-sized enterprises. As with all tax reliefs there is likely to be some deadweight cost; but we urge the Government to look favourably on further extension and possibly permanency at the existing level, which would provide welcome certainty to small and medium-sized enterprises.”

The ATT agrees that such extension or permanency would be welcome for many businesses in providing certainty, although for smaller businesses an opt-out provision might be a useful solution.

Part 2, on plastic packaging tax, takes up a substantial chunk of the Bill and is a particular area where I would like to see more evidence and scrutiny of the UK Government’s proposals from experts in the sector. There is certainly a lot in here for businesses to get their heads around. The Green Alliance sent a helpful briefing to Members, which I hope Ministers have also seen. It suggests: differentiated obligations; an escalator for the percentage of recycled material and the level of tax; a price-stabilising mechanism to de-risk investments in reprocessing and ensure that recycled content, as the more sustainable option, is always cheaper than virgin material; removing the exemption from packaging made of multiple materials, which can be difficult to recycle; and, finally, ensuring that a verification mechanism is in place. Those are all worthy of further consideration, and I am sure that as the Bill progresses we will hear from more organisations out there with their views. We have an opportunity to make legislation useful not only for the here and now, but for the future.

Clauses 92 and 93 are on VAT on tourism and hospitality, which is an area long overdue for reform. The UK has had one of the highest VAT rates on hospitality in Europe. It is welcome that the UK Government heeded the calls from industry and from the SNP for a cut in VAT for tourism and for hospitality. With people unlikely to be able to travel for their holidays this year, it is more important than ever to build the local tourism sector up and encourage people to take up the wonderful tourism opportunities on our doorstep. Scotland has done its part in giving 100% business rates relief for hospitality, and the UK Government must now do their part, too.

It is deeply disappointing that the UK Government will extend the 5% rate only until the end of September, as due to the lockdowns people have not been able to take full advantage of the reductions. Increasing the rate to 12.5% until March next year—then presumably it will revert to 20%—will mean that the tourism and hospitality sector will not see the benefit over the October holidays or the Christmas period, and then it will take a further hit next Easter. As I understand it, the reduction also applied to live music, funfairs, shows and events, so it makes even more sense to extend the reduction to a sector that has been unable to open its doors at all for the best part of a year. I urge the UK Government to consider that fully. There are also some practical difficulties for firms in moving the rates and dates, as that may cause confusion. A wider review of VAT more generally would seem sensible. I ask Ministers where that features in their plans.

On clause 113 and schedule 25, on penalties for failure to pay tax, there is no doubt that I support people paying the taxes they should in full and on time and that there should be a penalty for not doing so. That said, the ATT and the ICAEW have concerns that the proposed late payment penalty regime is overly complex and, as a result, will not be understood by taxpayers and not act as an effective deterrent. The ATT in particular feels that allowing HMRC up to 48 weeks in some circumstances to notify a person of the award of a penalty point, and up to two years to assess a penalty liability, is quite excessive. The periods should be further reduced and/or assurances should be given by Ministers that they will be used only in the most exceptional circumstances.

I turn to freeports. We on the Opposition side continue to have concerns about their effectiveness and the potential for tax dodging. The point by the Chair of the Select Committee about displacement was also well made. Their use around Europe and around the world has left many scratching their heads about what the UK Government aim to achieve. Scotland has set out a differentiated approach, engaging in good faith but adapting and improving the UK’s model to address the climate emergency in our green port approach. The Scottish Government stated:

“Operators and beneficiaries will be required to commit to adopting Fair Work First criteria and contribute to Scotland’s just transition to net zero”.

Trade Minister Ivan McKee recently raised concerns about the UK Government’s lack of willingness to engage on that while pushing forward with their own plans. If devolution means anything at all to the UK Tory Government, they must allow Scotland to pursue a model that fits the policies and ambitions of the democratically elected Scottish Parliament and Scottish Government. They must step back from using the United Kingdom Internal Market Act 2020 as a battering ram, driving through policies that Scotland did not vote for.



Where this Finance Bill really does not go far enough is on tax evasion and tax avoidance. Yes, there are some measures here, but there are also some massive gaps. Despite raising it in every Finance Bill, Scottish limited partnerships continue to exist as a means of shifting dirty money around the world. Just last month, the investigative journalist, David Leask, wrote about NovoLine Resources, a shell company with an address in Edinburgh, which was blacklisted by the World Bank following an investigation into the contracts that it won to supply equipment to Uzbekistan’s Health Ministry. If the World Bank can see that this company is up to no good, it baffles me why the UK Government will not act to shut it down. Ministers must get serious about the financial crime that their lack of attention is facilitating.

There are also gaps around trusts, and we are still waiting for the much-delayed Registration of Overseas Entities Bill. I really do have to question whose interests this serves: it is now three years since I implored the Government to stop fannying about on this matter during the consideration of the Sanctions and Anti-Money Laundering Act 2018, and very little has happened since.

This is another great big chunk of a Finance Bill, but there is so much still that is missing. It is a point of some frustration that the Scottish Parliament, with its ambitious agenda for fairness, sustainable growth and a green recovery, does not have access to the levers and the powers that it needs and that, in so many instances, the UK Government, who do, do not even want to make use of them. We will do our best in diligently trying to improve this Bill. We will engage with experts and we will move our amendments, which the UK Government will almost certainly choose to reject. I look forward to the day when these financial powers are vested much closer to the people of Scotland, in our own Parliament, where we can make much better use of them.

16:46
George Freeman Portrait George Freeman (Mid Norfolk) (Con)
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It is a great pleasure to speak in this debate and to follow the hon. Member for Glasgow Central (Alison Thewliss), principally because I can say how wonderful it is that the Scottish people have enjoyed the benefits of this great British vaccine success. It has been enjoyed by the entire United Kingdom, and funded by our deep commitment to UK life science, which comes from the United Kingdom Government. The great Scottish cluster benefits from that hugely. I was surprised not to hear the hon. Lady accept and regret the fact that, had the Scottish Nationalist party succeeded in persuading the people of Scotland to leave, they would not now be enjoying the vaccine security that they currently are. It is a wonderful thing. We are stronger together in health as we are in economics.

As my right hon. Friend the Financial Secretary put it so eloquently at the start of this debate, covid has been not just a health catastrophe, a global pandemic on a scale that none of us in this generation has seen before, but an economic catastrophe. It has been an economic shock to this country and to the global growth engine, which is not yet over. It is a sign of the generosity of the Treasury’s support that it will be only when the furlough programme, which has been rightly extended, ends in the autumn that the beginnings of the full reveal of the economic damage will strike us all. It is for that reason that the measures in the Finance Bill and in the wider relief that the Government have put in place are to be so welcomed and are so important.

I will, if I may, start by echoing the comments of others and by thanking the Chancellor and his teams—both his ministerial and official teams. It is not that common to praise Her Majesty’s Treasury in this Chamber, and particularly not for moving with speed, compassion and an instinctive desire to spend money on behalf of the health of the British people. This happened both in the economic crisis in the crash, when the Treasury moved at pace over one weekend to put in place a phenomenal package to prevent the meltdown of the City of London, and in this crisis. Indeed, it is barely possible to think that, a year ago, the Chancellor stood here and took the nation by surprise with the pace, compassion and speed with which he announced his package. The fact that more than 1 million jobs have been furloughed and protected and £800 billion has been spent in immediate relief is an absolute cornerstone of the fact that the economic recovery that we are now beginning to see is so strong.

Wes Streeting Portrait Wes Streeting (Ilford North) (Lab)
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The hon. Gentleman makes a comparison between the Treasury’s response to the covid crisis and the Treasury’s response to the last financial crisis. I wonder, therefore, whether we ought to be blaming the enormous deficit and debt now on Conservative profligacy or whether we will finally accept that, in 2007-08, as now, the Treasury did exactly the right thing to prevent the economic situation being even worse than it would otherwise have been.

George Freeman Portrait George Freeman
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The hon. Member makes an interesting point that I relish responding to. My praise was for the Treasury in moving at pace to solve and sort a crisis incubated by the last Labour Government in leaving this country deeply vulnerable as a result of a whole series of measures put in place during the Blair and Brown years, not least the smash-and-grab raid on our pensions and the foolish and reckless deregulation. The Treasury moved quickly to solve a crisis, but I am not claiming, at the same time, that the Government of the day were not responsible for incubating that crisis. They are different points.

Jesse Norman Portrait Jesse Norman
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May I remind my hon. Friend of a fact that he will know well? The leverage ratio of the British banking system was 20 times equity for 40 years until the year 2000, after which it went up from 20 times to 50 times in seven years under a Labour Government.

George Freeman Portrait George Freeman
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I thank the Financial Secretary for pointing that out. I am tempted to remind everyone that the former Chancellor of the Exchequer and then Prime Minister sold the gold at a record low and various other things, but I shall not be distracted—I simply record that—and focus on this Budget. I will not list all the measures in it, but I want to highlight one or two that the people of Mid Norfolk and I particularly welcome and then highlight three points that we need to think about as we seek to drive a powerful recovery.

I particularly welcome the measures in the Budget for the self-employed, who, in the first part of covid last year, were hit hard. Many of them were living at risk, hand to mouth and on each month’s proceeds, without the stability of a company behind them.

There is also the support for apprenticeships and traineeships. In Norfolk, when the furlough ends, we are expecting to see between 30,000 and 50,000 unemployed. The Government have rightly moved quickly to make sure that a very powerful skills and training pathway package is in place, so that people who have left old jobs that have not survived this accelerated crisis—it has accelerated much of the challenge on the high street—can quickly find jobs in the new economy that we are creating.

I want to highlight the £700 million package for the arts, culture and sport. In particular, we need to support the artists and creative people at the heart of those industries, not just the buildings. It is that genius—that creativity—which is so key to the British instinctive creative spirit, that we need to support. Rather too many of our great artists are working in all sorts of jobs and seeing their artistic careers disappear. We need to make sure that we keep them busy and get them back to work.

On levelling up, I highlight the Government’s phenomenal package of support, rightly making the crisis not just a moment to prop up the pre-covid economy but to drive growth out. The 45 town deals and the eight freeports are genuinely transformational for places such as Teesside that have been left behind by successive Labour Governments, who ought to have been representing them better. There is the move of the UK infrastructure bank to Leeds, the levelling-up fund, the community renewal fund, the Help to Grow for SMEs, the future fund and the substantial commitment to net zero and the green infrastructure that we need for a proper recovery. This was a Budget not just to repair the damage of covid, but to lay the foundations for a more sustainable and sustained economic recovery, creating jobs and opportunities for generations to come. I welcome it particularly for that reason.

That financial package is allied with the extraordinary success of the UK life sciences community, and perhaps at this point I could, as a former life sciences Minister, pay tribute to its extraordinary work. In particular, there are the scientists at Oxford and AstraZeneca, to whom we owe so much, and in Norfolk, there is the work of the Norwich Research Park and the Quadram Institute, which has done pioneering work in some of the genetic sequencing. At the same time, I welcome the work of the vaccine taskforce, led by the redoubtable Kate Bingham, with whom I know the Financial Secretary has a strong working relationship. I am tempted to channel my inner William Hague and remember the time when he commended Yorkshire for having more gold medals in the 2012 Olympics than France. In fact, he went further, saying that Mrs Brownlee had won more gold medals than France in those Olympics, and I do not think any couple has done more for the UK health economy than the Financial Secretary and the head of the vaccine taskforce.

I genuinely believe that this package is responsible, responsive and lays the foundations for a resilient set of public finances. The challenge now is to get the growth that we need from the private sector to build a really sustainable recovery, and I want to turn to that and make three key points. First, if we are really to escape debt—the debt legacy from the crash in 2007-08 and the debt legacy from covid—and to build a clean, green, smart economy, we need not just to get back to ticking over with 2% to 3% growth; to get to 4%, 5% or 6% growth, we will have to be able to host, or incubate, economies growing at 100% a year. That is the key to growth in this economy. We cannot escape debt by building over the whole of the south of England or building over any last rural area around Cambridge. To support growth, we have to make sure that we grow the economies that will grow our economy, building back better one local economy at a time and one sectoral economy at a time. To avoid the boom and bust of the City, housing and retail cycles that have left us in this state, the Treasury is absolutely right to commit to the deep infrastructure investment for tomorrow’s growth sectors. I am delighted that after my short period in the wilderness, the Prime Minister has asked me back to lead his taskforce on innovation, growth and regulatory reform to look at where, as we come out of covid and seek to lay the foundations for this recovery, free from the European Union’s regulatory frameworks but still able to trade with its market, we may be able to strike a blow for bold innovation and regulation for innovation.

I want to highlight some sectors that are growing spectacularly and that, if we were to invest strategically, would help to grow our national economy in the same way. The broader bioscience sector includes not just pharmaceuticals but the bioeconomy sector of food, medicine and energy, and, in particular, areas where those three support each other. In Norfolk I recently sat in a Lotus built at Hethel Engineering Centre that was powered by a Formula 1 low-carbon biofuel made by genetically modified bugs breaking down agricultural waste. That is what I mean by bioscience and the bioeconomy. In this century, it is biology and bioscience that will drive growth globally, just as physics did in the last century and chemistry in the one before. We are a phenomenal powerhouse in the biosciences, and if we invest in that, support it and commercialise it better, we will grow the industries of tomorrow.

Similarly, in nutraceuticals, where pharmaceuticals meet food and nutrition, there is a whole range of new crops that support growth and crops that are drought resistant and disease resistant, such as crops we export to Africa to help drive sustainable development. In biosecurity, and plant, animal and human health, we share much of the genomic sequence with most of the animals that we rely on in our agricultural system. There are huge opportunities for us to breed out susceptibility to disease and traits that will lead to huge suffering. There is a huge opportunity to harness genomics for the benefit of animal welfare, as well as progressive agriculture, in artificial intelligence, in immunotherapy, in space, in biofuels, in carbon capture and storage, and in biodiversity investment. These are huge sectors that this country is poised to grow into substantial industries, creating jobs and opportunities for tomorrow. If we get the regulatory regime for this right, which Brexit gives us an opportunity to do, and, as the Treasury is doing, we invest in the deep infrastructure and create the right commercial environment, I genuinely think that this is a moment when we could unleash a new cycle of growth, so that we look back at this, yes, as a crisis, but also as an opportunity, such that future generations will thank us for getting us off the boom and bust cycle of over-reliance on short-termism, the City, housing and retail booms, and laying the foundations for serious global growth based on technology transfer.

Secondly, from the perspective of rural Mid Norfolk—not 40 miles from Cambridge but at times feeling like 100 miles, or 100 years, from it—the small towns are fundamental. That is why I welcome so much the 45 town deals in the Budget. I hugely welcome all of them and the work that is being done. However, it is vital that as the Treasury launches these funds, we also think about how we can make it easier for the places and communities that have often been left behind because they do not have the resources of a metro Mayor or the big capacity to access multiple Government funds. Somewhere in the mix is a role for what I might call local regeneration corporations—small, fleet of foot, locally place-based public-private partnerships with powers to access money for multiple funds and deploy them over a five or 10-year plan to drive transformational local change and to pull in private finance alongside public. They would have the powers to do some compulsory purchase, to move in quickly and regenerate land left fallow after covid, to embrace some of the opportunities of land value capture and tax increment financing, and to raise infrastructure bonds and finance. Many investors around the world would love to contribute to and have a stake in this British recovery. Many places around our country will not be able to access on their own sufficient finance from the Treasury. We need to make it easy for them to drive local engines of growth that will go on in decades to come, in a similar way to the successes of the London Docklands Development Corporation, the Tyne and Wear Development Corporation and the County Durham development corporation in the ’80s and ’90s, which were so transformational.

Kevin Hollinrake Portrait Kevin Hollinrake
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My hon. Friend makes a very good point about regional economies. On engines for growth, does he think that regional mutual banks might be part of the solution? They are very effective in places such as Germany and the US, focusing on regions, making sure that SMEs get lending into the productive parts of our economy. Would he look at that as part of his remit on regulatory reform?

George Freeman Portrait George Freeman
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With pleasure, and I can go further. My hon. Friend is typically astute and on the money—absolutely. It is true that in the pension funds of this country, we invest remarkably little in equities, remarkably little in small company finance and remarkably little in our own infrastructure. I am not for a minute suggesting that Norfolk County Council should put all of its money into the Cambridge to Norwich railway, although I think it would be quite a good investment, but it would be an awful lot better than finding it had quite a lot in the Iceland bank during the crash, where we lost a lot of money. There needs to be a reasonable balance. I think a lot of people in this country would quite enjoy having a stake in their own infrastructure.

People have season tickets. What about also having a share in the mutual railway company and a share in infrastructure that they are helping to fund and that they rely on? That is part of the revolution of place-based capitalism—one might even call it stakeholder capitalism, if one were on the Opposition Benches. We can call it what we want, but it is about giving people a stake in their own economic destiny.

The third area that I wanted to highlight is the importance of global markets. If we are really going to become an innovation nation, home to these incredibly exciting technologies that will drive tomorrow’s growth, we need to make sure we are better connected to those emerging markets around the world, which are growing at 10% or 20%. As the Foresight report highlighted, global population growth means that by 2050, we are going to have to double food production globally on the same land area, with half as much water and energy. That is a phenomenal global grand challenge, but it is one that this country is well positioned to respond to, with our historic strengths in agricultural science and technology and the biosciences I have talked about.

The real trick is how to link our leadership and innovation and commercialisation in the City to global markets. I suggest that our liberation through Brexit from the European trading structure, challenging though it is in many ways, does create an opportunity for us to embrace variable tariffs. Imagine if you will for a moment saying to countries in Africa, “Look, we are not going to charge you 40% on food tariffs, like the European Union—that is immoral. We will reduce it to 5% or 10%, but 0% is only for those who are growing and producing at the most responsible and progressive standards—the very highest standards of animal welfare and food quality. We will help you to do that by exporting the technologies that we have developed here using our aid budget.”

With those commitments to growth and local places, and to globalisation, this is an opportunity, given what the Treasury has done, to make this crisis a genuine moment to unlock a new cycle of growth for the benefit of this country and generations to come.

17:02
John McDonnell Portrait John McDonnell (Hayes and Harlington) (Lab) [V]
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Budgets and their associated Finance Bills give practical meaning to the political aims of Governments. Manifestos and the rhetoric of party-leading Members and eventually the Queen’s Speech are the mechanisms used to describe the society that the governing party aims to construct, but it is its Budgets and its Finance Bills that are the tools by which the foundations of that society are laid. What we can discern from this Finance Bill is that, despite all the rhetoric from the Prime Minister, and all the personalised, personally signed social media promotions by the Chancellor, the society they want to build back to and to return us to is, in essence, the same pre-covid society of insecurity and inequality that left us so vulnerable to the pandemic.

I have heard the Prime Minister and the Chancellor claim that we have only been able to meet the demands of a pandemic because of the so-called strength of the pre-covid economy, so it is worth reminding ourselves what the pre-covid economy was like. Some 4.2 million of our children were living in poverty—30% of children in this country. Rough sleeping had more than doubled. Food banks were handing out 1.5 million food parcels a year. Nearly a million people were working on zero-hours contracts. Going into this pandemic, the NHS had suffered the longest funding squeeze in its history and there were 100,000 vacancies, including 40,000 nurse vacancies. Social care was even worse, with £8 billion taken out of social care budgets since 2010 and, according to Age UK, 1.5 million of our older people not getting the care they needed. The existential threat of climate change was effectively ignored, with the Government hopelessly off target to secure even the modest goal of net zero emissions by 2050.

We cannot stand by and let this Government return us to all that. If this Finance Bill is to have any relevance whatsoever, it must address those issues, but also the impacts and challenges presented by the pandemic, which has exacerbated many of those issues of the pre-covid economy.

Unemployment is forecast to hit 6.5% this year. Introducing the furlough scheme without conditions enabled fire-and-rehire employers to cut wages and conditions of employment. Low wages and inadequate sick pay have resulted in around 750,000 households being behind on their rent or their mortgage, and millions more are behind on basic household bills. With the eviction ban ending on 31 May and, realistically, no action on debt from the Government, we risk a surge in evictions leading to more homelessness.

Public services remain stretched, in many areas to near breaking point, getting through only by the commitment and dedication of often underpaid and still undervalued staff. Half of all care workers earn less than the living wage—the real living wage. As my hon. Friend the Member for Ealing North (James Murray) said from the Front Bench, the Government clapped for our key workers, yet now they are rewarding millions of them with a pay freeze or an insulting 1% rise. Inequality was rising before the pandemic, and the pandemic has only widened it.

The Government’s response, contained in this Finance Bill, has nothing to do with building back better. Some have suggested that, because the Government have been forced by the pandemic into large-scale spending and borrowing and corporation tax rises are now mooted, the Chancellor is implementing the policies advocated by Labour in its 2019 manifesto. Nothing could be further from the truth. It is not the rhetoric that is important; it is the substance. Without structural change in our economy that fundamentally shifts the balance of power and wealth in favour of working people, our society will simply replicate the inequality and injustices of the past.

This Finance Bill demonstrates that it is largely the same old Tories and the same old Tory policies taking us back—building back, but not better for the many. If we look at the evidence from the Budget and in this Bill, far from addressing the mounting poverty in our society, the Government are not only cutting universal credit but freezing the tax thresholds of the low paid and doing nothing for those who do not even earn enough to reach the threshold.

On low pay, the Government have already failed to meet George Osborne’s much-heralded target of a minimum wage of £9 an hour by 2020, and they are imposing a pay freeze on many of the very people who have helped to see us through the pandemic. To compound that disregard for people struggling to get by on poverty pay, there is also nothing in the Bill that discourages employers from using brutal fire-and-rehire tactics to force through permanent wage cuts.

The timings of the Bill’s tax proposals betray the reality of the Government’s attitude to inequality. The Bill pushes through a tax threshold freeze for low and middle earners but delays corporation tax increases, which there is already speculation could be dropped in a pre-election giveaway to business at some stage in the future. Plus, the Bill contains no action to fulfil the much-publicised proposals to equalise the rate of capital gains tax with income tax. The Government have talked about levelling up, but Tax Justice UK’s analysis demonstrates that 1,600 of the wealthiest Londoners made more in capital gains than the entire north of England. Instead, the Bill proposes super deductions tax reliefs—a huge giveaway of £25 billion to large corporations.

As we have debated in this Chamber, tax reliefs have a long history of corporate abuse and failure to meet their stated objectives. I remind Members of the cross-party debates we have had on the issues around the entrepreneurs allowance, the patent box and the tonnage tax, to name just a few of the allowances that have failed to deliver and been open to abuse. Unless legislative protections are put in place, there will be huge opportunities for tax abuse and waste, and a level of corporate looting that could make the billions at stake in the crony contracts and the Greensill scandal look like chicken feed in comparison.

Similarly, previous track records demonstrate that the Bill’s proposals for freeports will, unless strictly regulated, open up a vista of tax abuse, wage undercutting and the drainage of investment from surrounding regions. It cannot be right that the Government’s freeports will be in place before the Office for Budget Responsibility has done any assessment of their merits. As Tax Justice UK has pointed out, the Treasury does not even have confirmed costs for this policy, despite the Government already announcing the eight freeport sites.

Also, nothing exposes the vacuity of the Bill more than its real failure to address the existential threat of climate change with firm action. There is nothing in the Bill that dictates this priority and the scale of investment and action needed to address the crisis of climate catastrophe that we now face. If there is one thing that people have maybe begun to learn in recent months, it is that the promises of the Prime Minister and the policies of the Chancellor do not generally coincide either with reality or, as some have alleged, with the truth.

This Finance Bill evidences starkly the level of corporate capture of this Government. This is a Finance Bill for the corporations, not the people. Before the much-heralded corporation tax rises ever happen, corporations will be compensated with huge tax reliefs, including the massive £25 billion tax giveaway to corporations paid for by tax rises on working people. At the same time, £15 billion of cuts each year in departmental budgets will continue the austerity that has undermined our public services over the last decade. So, far from building back better, this Finance Bill lays the foundations for widening inequality and continuing a low-pay, insecure work economy, complemented by huge potential for tax abuse and with crony capitalism virtually embedded in our economy.



The test of the Government’s purpose in the Bill will be their attitude to the amendments that will be inevitably be tabled to protect the lowest paid from the stealth tax increases of threshold freezes; to ensure that tax reliefs are not used as methods of tax abuse; to make unearned wealth taxed at the same rate as income from work, as was proposed by the Government; and to prevent ministerial interference, tackle low pay and exploitation and ensure that responsibilities to tackle climate change are upheld. From their attitude to those amendments, we will see whether this Government are a Government for the people or, as I suspect, a Government for the corporations.

17:15
Bim Afolami Portrait Bim Afolami (Hitchin and Harpenden) (Con)
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I welcome the Bill. It is worth trying to get under the skin of Budgets, because it is so difficult. There are so many documents, there is a huge build-up, and large parts of it are incomprehensible to anybody other than the Financial Secretary. As Members of Parliament, we have to try to get under the skin of what, fundamentally, is going on here—what are the Government trying to do with the key measures?

In my view, the Chancellor is fundamentally trying to deal with one big thing that has not got enough attention in the House: our productivity problem. He is dealing with some of our deep-seated, deep-rooted economic productivity problems in two principal ways. The flashier one—and there has been some discussion of it today—is the super deduction, but I will not linger on that. In particular, I want to talk about the Help to Grow scheme, which is fundamental, transformative and can make a big difference to businesses across my constituency, Hertfordshire and, indeed, the whole United Kingdom.

On the super deduction, from listening to some of the criticism from Opposition Members, I do not think they really understand the nature of what is going on. One of the biggest economic problems that we have had for a very long time is a lack of private sector investment compared with our neighbours. That private sector investment has been further damaged by the covid pandemic for obvious reasons, as everybody appreciates. The super deduction is an inventive, creative, clever new way of turbocharging and increasing private sector investment and moving it forward so that we can help build back better during this very difficult phase that we are trying to come out of.

The hon. Member for Ealing North (James Murray) kept going on about tech companies. Well, I am afraid that he obviously has not read the detail. The super deduction is about plant and equipment. Plant and equipment tends to impact manufacturing businesses. I know that the Labour party is going through all sorts of internal difficulty and transformation at the moment, but it is a sad day when the Labour party cannot welcome measures that will benefit manufacturing businesses up and down this country.

Sammy Wilson Portrait Sammy Wilson
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Furthermore, had the hon. Member for Ealing North read the detail of the Bill, he would know that the super deduction is on new capital equipment, not on second-hand capital equipment. So even the manufacturing of equipment, provided it is made here in the United Kingdom, will generate jobs and income for firms here in the United Kingdom, which will then, as the hon. Member for Hitchin and Harpenden (Bim Afolami) pointed out, increase productivity in the firms that invest in the machinery.

Bim Afolami Portrait Bim Afolami
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I welcome that intervention. Opposition Members have also been saying, “This is only going to benefit the big companies, and the poor small companies won’t benefit.” First, it does benefit all companies if they qualify. The smaller companies already have the annual investment allowance, which is continuing and has been welcomed by everybody, including by them. And—whisper it—big companies are important for our productivity too! Big companies employ lots of people, so it would be negligent of the Government to say, “We are not going to bring forward a measure that will help our economy because it might benefit big employers that employ thousands of our constituents.”

Kevin Hollinrake Portrait Kevin Hollinrake
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May I add another point to my hon. Friend’s list of positives? Lots of the money spent because of the super deduction will be spent in the supply chain, thereby helping SMEs.

Bim Afolami Portrait Bim Afolami
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Indeed. I am having too much fun on the super deduction—I will talk about the Help to Grow scheme in a moment—so I shall finish on it. The super deduction is not something that the Chancellor just thought up as something that it might be a good idea to try; it is backed by fundamental economic analysis by people as eminent as Andy Haldane, the chief economist of the Bank of England, who I saw today has been appointed chief executive of the Royal Society of Arts. He is an incredibly able guy who has done a huge amount of work and thinking on this issue and is one of the many economists who have talked about investment being a key problem for our economy.

That brings me to the second key thing that the Budget will do for productivity: the Help to Grow scheme. So much of what we talk about in this place is the big numbers—the massive infrastructure projects, the huge budgets for the public services and all of that, which is all very important—but specific measures for small and medium-sized businesses often do not reach the Floor of the House. They are either hyper-localised in one’s constituency or they appear to be too big and too macro. The Help to Grow scheme could be really important, because it does two things that will directly help small and medium-sized businesses such as the family business that my wife runs, which employs five people, and hundreds of thousands of other companies like that.

First, the Help to Grow scheme helps to deal with our economic difficulty—pointed out by Andy Haldane, among others—which is that in most areas of the economy and of the country, we have an incredibly well-performing top 10% of highly innovative, successful companies, and we have our poorest-performing companies, and the gap between those two groups is greater than it is among all our competitors. That gap is around 80% larger in the United Kingdom compared with France and Germany. That is a significant economic difficulty for us. The question is: why is that the case?

The Bank of England’s analysis points out two key things among lots of different things. The first is technology adoption. In effect, the most successful, innovative companies adopt the newest technology and use it well, and the companies at the bottom end do not. The Government are trying to address that diffusing of knowledge throughout the economy and throughout different regions with the Help to Grow scheme. How? The Government are providing grants and assistance for productivity-enhancing software for companies in every single sector and the ability for them to get online help and advice on what technology to adopt. That could make a huge difference to hundreds of thousands of businesses all around the country and should be welcomed by everybody in this House.

The second aspect of our productivity difficulty is management and our utilisation of human capital—that is, the people who work in businesses up and down the country. How are we dealing with that? The Chancellor has an MBA from one of the best MBA schools—if not the best—in the world, Stamford, and went on to have a very successful career in finance. Not everybody will be able to do that or has the time and ability to do that, but everybody—right down to the small companies in each of our constituencies—can get huge benefit from access to high-quality management training provided by the very good local business schools up and down the country. The Help to Grow scheme gives the individual managers and owners of SMEs the ability to access that sort of knowledge, which is the sort of knowledge that most people running SMEs do not get.

If we combine that improved management capability—by the way, the Bank of England has identified that management capability is poorer in this country than it is in our competitors—with the adoption of technology, we have a ready-made mix of policies directly targeted to improve the most difficult aspects of our productivity problem. I do not know whether Help to Grow will deal with everything—I suspect it will not—but it will make a big difference, and it is a shame that so few Opposition Members have managed to understand and see the depth of seriousness of the Chancellor’s approach in that regard. That really needs to be brought out.

I shall finish—[Interruption.] Yes, I know I should finish. Hanging over us today is not just as an unusually cold April but the spectre of inflation potentially coming back in the next year, two, three or four years. There are many people warning about this from all over the world. If inflation does come back to whatever degree, interest rates may need to go up in future. If interest rates do go up, lest the House forgets, the need for fiscal responsibility will not have gone away. Small rises in interest rates do not just affect households trying to get mortgages or businesses trying to expand or to get debt; they also affect the Government hugely. Underpinning the Chancellor’s approach across everything I have said and lots of other things that have been talked about is a core understanding that fiscal responsibility matters. This Finance Bill helps to keep that in check, reminds the House of that, puts us on the right course and deals with our productivity problems, and I welcome its Second Reading.

17:25
Peter Dowd Portrait Peter Dowd (Bootle) (Lab) [V]
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I support the reasoned amendment in the names of my hon. and right hon. Friends. I hope to make a brief contribution, given the scope of the debate—I do not want to fall foul of your legendary patience and tolerance levels, Madam Deputy Speaker—but it goes to the heart of the concerns on the Opposition Benches that the Government are failing to address the many challenges faced by a whole variety of sectors across the country, especially in the light of covid.

I want to use one example in due course of the lacuna—not addressed substantively in the Bill—that may affect the finances of families and the broader health of the economy, which in turn impact on revenue raising. It is a proxy for the wider malaise that the Bill does not address.

I appreciate that the Bill is about raising revenue and not necessarily the spending of that revenue. In this regard, my call for spending on palliative care—the care that enables people to live life as fully as possible and enjoy precious time with loved ones before the end of life—is vital, but is not necessarily about revenue raising. However, I recognise that the Government have to some degree recognised how important the independent hospice sector is to our health and social care and the benefit it brings to the economy. The Government have recently used revenue from previous Finance Bills or borrowing to support the sector and enabled it to survive. Crucially, that eases the financial pressures on the families of those affected who need palliative care, but that is a proxy for the Government in this Bill not addressing the real needs of the economy.

The economy has been under stress and will continue to be so for a considerable period of time. We all have our experiences of families who are affected in one fashion or another, and palliative care and the support of people in that situation are part of that. It is time for the Government to recognise that they have to look after those in most need and use the benefit of the Finance Bill to raise revenue to support them.

The hon. Member for Hitchin and Harpenden (Bim Afolami) talked about productivity. Yes, we are one of the worst nations in the G7 for productivity. We are about 30% less productive than the Germans, about 20% less productive than the French, about 9% less productive than the Italians, and similarly 30% less productive than the Americans. There is nothing at all in this Bill in substance that deals with productivity issues. As much as the hon. Gentleman likes to say it, the Bill does not deal with that. It does not deal with job insecurity, low pay and low skills. It does not deal with inequality in education, social care and health. It talks about levelling up, but when, where and how? They are just phrases. There is absolutely no action and no route for the action that the Government wish to take over the years.

My example in relation to the health sector, and in particular the palliative care sector, is a proxy to say, “We should be investing our resources in supporting people in need, whether that is on job security or the hospice sector, because if we do not, it impacts on the economy in one fashion or another.”

I do not want to go on too much, so I will finish on this point. I would like to put on record my disappointment that the Government are continuing with the no amendment of the law provision. As the Hansard Society notes, if there is no amendment of the law resolution, then

“no amendment”—

to the Finance Bill—

“may be moved unless the relief proposed is covered by one of the Ways and Means resolutions…Nor may an amendment…exceed any figure prescribed in the relevant resolution.”

In doing this year after year since about 2017, outwith elections, the Government are breaking a 90-year-old protocol. They are freezing Parliament out. Regrettably, this is yet again more chipping away at the powers of the House by the Executive’s sequestration programme, supported by obtuse Members on the Benches opposite. That is all I have to say on that matter.

17:30
Peter Aldous Portrait Peter Aldous (Waveney) (Con) [V]
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It is a pleasure to follow the hon. Member for Bootle (Peter Dowd).

In considering the provisions in the Budget presented by my right hon. Friend the Chancellor of the Exchequer on 3 March and the ensuing Finance Bill, it must be borne in mind that they are being delivered against a backdrop of wholly unprecedented economic circumstances. The global economy has suffered a shock that has not been seen for almost 100 years. Set in that context, my right hon. Friend has generally struck the right balance in supporting people and businesses through the crisis, beginning the task of fixing the public finances and laying the foundation for an investment-led green recovery.

There are some very welcome initiatives: the extension of furlough to the end of September; two further grants for the self-employed, with an additional 600,000 people eligible; the restart grants; extending the VAT cut to 5% for a further six months, before tapering for another six; the extension of the business rates holiday for three months, before tapering for nine; the increase in corporation tax, but with a small profits rate retained at the existing level; the super deduction on capital investment; and the steps to promote pension fund investment in infrastructure.

From a Suffolk and Waveney perspective, the headlines in the Budget and the Bill are the Felixstowe freeport and the Lowestoft towns fund deal. These can be a catalyst for private sector investment. For the latter, where I sit on the place board, it is estimated that the £24.9 million of public funding will leverage in £350 million-worth of private sector investment. Previously, I was doubtful about freeports, concerned that they move business around, displacing projects rather than attracting additional investment. However, taking into account the unprecedented challenges of covid and the opportunities of Brexit, it is necessary to pursue policies that can help to attract footloose global investment, although, as we heard, the provisions of the policy will need to be looked at very closely.

A concern I do have is that the focus on freeports could lead to the abandoning of enterprise zones, introduced very successfully by my right hon. Friend the Member for Tunbridge Wells (Greg Clark) in 2012. The Lowestoft and Great Yarmouth enterprise zone has worked very well. Its provisions need some changes, so that it is properly aligned with the exciting opportunities emerging in the maritime and port sectors. It is important that that and other enterprise zones continue.

The Finance Bill paves the way for the levelling-up fund and the UK community renewal fund. There are elements in the small print that cause me concern. With the former, the Lowestoft and Waveney area, where there are significant areas of poverty, is in the priority 2 category, while with the latter there are no priority places in Suffolk, yet there are in the surrounding very similar counties of Norfolk, Essex and Cambridgeshire. This appears illogical and not properly thought through. I am writing to the Secretary of State for Housing, Communities and Local Government seeking clarification of the selection criteria.

Covid has hit hard the poorest in society. It was thus right that a year ago the Government moved quickly to introduce the £20 uplift to universal credit and to provide unprecedented levels of funding to local government for welfare support. I welcome the extension of the universal credit uplift to the end of September and the one-off payment of £500 to those receiving working tax credit. However, I am concerned that the impact of covid on the most disadvantaged will extend beyond the end of the summer and could well be heightened at the time that furloughing is scheduled to end.

The Government have put in place some very good initiatives, such as the kickstart scheme, the restart scheme and the lifetime skills guarantee, but there needs to be a strategic approach to providing people with a pathway out of poverty and there is a worry that some important stepping stones are missing. I urge my right hon. Friend the Chief Secretary to the Treasury to work closely with his Cabinet colleague and my constituency neighbour, the Secretary of State for Work and Pensions, my right hon. Friend the Member for Suffolk Coastal (Dr Coffey), to ensure that we have a welfare support system that is fit for the task ahead. This should incorporate proper long-term funding for local welfare assistance and synchronisation with the implementation of the national food strategy, and it should ensure that those on legacy benefits are not left behind.

In conclusion, the Bill provides the framework for meeting the biggest economic challenge in our lifetime, but there is a need to look more closely at some of the detail, whether the criteria for bidding to economic regeneration funds or the need for a strategic approach to welfare support. I hope that the Government will do that in the weeks ahead.

17:37
Stella Creasy Portrait Stella Creasy (Walthamstow) (Lab/Co-op) [V]
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This week the shops have opened, many of us have finally had a haircut and some have even had their eyebrows done. Vaccines are being given out and unemployment has started to fall, which we all welcome. We know how hard this year has been for our constituents and the challenge of how to help weighs heavily on the minds of many across the House. Some would say that that challenge is just about the impact of the pandemic and that this week shows that it is slowly being addressed—that it has been a horrific year with the loss of loved ones, and the shutdown of businesses made necessary to prevent transmission, but we are making it through. And let’s be honest, some people have done well in the last year. We have seen them: the ones who have been able to spend time with their families and to work from home okay—wi-fi willing. They are the ones the Chancellor is counting on to spend their savings and make his sums work—the people to whom short-term measures to keep pumping up our housing market and spending on DIY will appeal.

Thanks to the Chancellor’s efforts and legislation such as this, everything is neatly in place for a classic short-lived consumer-led boom. Cheap borrowing costs and the stamp duty holiday mean that the residential property market is red hot. Indeed, last November, this country paid back more than it had borrowed on its credit cards for the first time since July 2013. But to say that we are heading out of the woods and just to keep going is to fail to recognise why we are so vulnerable in the first place, why the UK economy collapsed so badly over the last year and why our communities were so at risk of harm from the virus that our death rate has been so high—the underinvestment and austerity that mean that our productivity rate is so sluggish, our poverty rate is rising and our people are not waving but drowning in their debt. We do a disservice to our communities if we underplay these issues or the scale of the task ahead.

We need a Finance Bill made not for the here and now, but for the long term. We cannot go back to normal when normal means 23% of our population living in destitution; when millions of people are sitting on debts and rely on insecure work in industries that will never be the same when furlough ends; when our health inequalities have worsened so dramatically over the last year.

In addressing those underlying problems in our economy, I can welcome much in the Bill. I recognise that it is right to look at corporation tax, given that those with the broadest shoulders should help the most with repairing our fractured economy. We should be tackling the devastating impact on our environment of plastics; with some amendments, the proposals could drive not only a reduction in use, but new industries. We should be trying to tackle tax avoidance, although I always tell Treasury Ministers that it would be simpler to ask my right hon. Friend the Member for Barking (Dame Margaret Hodge) what they should do next.

The truth is that the Bill takes a nut to a sledgehammer. We would do better if we were to start again, rather than continue on with the fantasy that, with a few tweaks here and there, everything can go back to normal—whatever normal is. My worry is that relying on the fantasy the Bill creates will leave millions of families abandoned who may have weathered the shock of the pandemic, but were always going to be sunk by continued austerity. While millions have benefited from working from home and being able to save, millions more are struggling to make ends meet, having lost their job or seen their income fall.

The Institute for Fiscal Studies found that last year the richest fifth of households swelled their bank balances by over £400 a month, while the poorest were about £170 worse off each month. This is not people spending to entertain themselves during lockdown. Citizens Advice shows that roughly 6 million people have fallen behind on at least one household bill during the pandemic. Most people visiting the citizens advice bureau for debt advice are not coming to ask about credit card debts or rent-to-own purchases; instead, they are in debt to the public sector because of tax credit overpayments, benefits overpayments, council tax arrears or utility bill arrears. The Trussell Trust tells us that over half of food bank users struggle to afford food and clothes because they are repaying universal credit debts. Anyone who questions why that extra £20 matters should look at that information and realise that it needs to become permanent.

In total, £10.3 billion of debt and arrears attributable to covid have built up in the UK, most often by those who were already struggling before the pandemic—people such as renters, young people, single parents and low earners; people who, now that evictions have restarted, have few options when it comes to keeping a roof over their head; and many who were excluded from Government help altogether. I see nothing in the Bill to change those facts. Indeed, instead of helping, the Bill is walloping them with a tax rise. It squeezes family finances by freezing the personal allowance, after many families will have struggled to pay their increased council tax bills as well. The Chancellor might think he is being clever by using the least visible taxes to raise funds, but I tell him this: the public will notice. They notice when nurses get a pay cut, when VAT goes up and when they have even less money left at the end of the month with which to pay their bills. They notice just how segregated this country has become, with the haves and the have-nots not just in income terms, but in the divides between town and city, north and south, because of our failure to invest in the people of this country.

“Freeports!” the Government cry in answer. The Bill suggests that this will somehow generate jobs and growth in communities that were struggling long before anyone had heard of covid-19, but no one can explain why, if regulation is bad for business in the Thames Gateway, it is not bad for businesses in my community in Walthamstow. This is not the levelling-up agenda we need. It does not recognise that we stand alone among OECD economies in the extent to which our productivity problems are regional rather than sectoral, or that a super-deduction scheme will do little to invest in the children of Hartlepool, Harwich or Hendon.

We need not just to build back better, but to build back for all. Andy Haldane has highlighted that around 10 million people in this country are on insecure contracts. Our economy was so hard hit by covid because it was over-reliant on services, which made up as much as 80% of our GDP, whereas just 14% was based in construction and just 6% in manufacturing. The Bill shows that the Government still have not learned the lessons about how we are able as a nation to handle future shocks and diversify; to invest alongside business and academia in new technologies; to learn from the vaccine programme and encourage co-operation and innovation alongside the state and not in spite of it; or, in the run-up to COP26, to provide the incentives to renewable energy manufacturing and production that could futureproof our economy for decades to come.

This Government have no answer to our research and development sector, which is crying out for support while they use this Bill to give a tax break that will go to the biggest corporations and venture capitalists. Our charity sector is on its knees, but it gets nothing from this legislation. Charities cannot claim the super deduction tax for their IT equipment, whatever the hon. Member for Hitchin and Harpenden (Bim Afolami) might suggest.

Other nations are investing in their people and infrastructure, yet our Business Secretary has chosen this moment to abandon the industrial strategy enacted just four years ago and replace it with something that is neither industrious nor strategic. Combined with the approach in the Bill, that will simply confirm what a lot of companies and investors have already suspected for some time—that it is unwise to expect any UK Government to stick to a programme of supply-side reform for more than a couple of years. Frankly, the UK has generally got away with muddling through economic crises in the past, but the scale of the challenges that we approach makes that inadequate at this point in time. And we have not even today even really begun to understand how the B-word—Brexit—interacts with these longer-term challenges, hitting as it does our high-productivity export sectors while covid hurt our employment-rich domestic service sector. But truthfully, nothing in the Bill will help those at the mercy of either factor—unless they happen to have shares in Amazon or Google, or possibly the Chancellor’s private phone number.

Austerity has weakened the very foundations of our economy, but it is a political choice that the Chancellor is making in this legislation to use straw dust, not concrete, to try to repair them. Parliamentary time is valuable, and tax and spending is crucial to get right in such a context, so I propose to the House that we reject the Bill today and instead demand better for all our constituents.

17:45
Julie Marson Portrait Julie Marson (Hertford and Stortford) (Con) [V]
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The Financial Secretary set out very clearly that the post-pandemic context of the Bill is unlike anything that we have faced before. What I see in the Bill is an understanding that it is not Government’s role to create growth and prosperity. Government does not create wealth or growth—consumers and businesses do that. We, like a groundsman, have the crucial job of preparing the pitch for our players. We have the crucial job of ensuring that the players—consumers and businesses—have the right pitch that they can play on to create that growth and prosperity. There is no doubt that we are playing on a really tough wicket at the moment, so we have a really tough job on our hands as that groundsman; but I think the Bill rises to that challenge.

With that in mind, there are two questions that I ask about the Bill today. The first is whether it maintains and secures support for businesses and consumers in my constituency and throughout the UK. In Hertford and Stortford I have spoken to so many businesses—so many pubs and restaurants, and those in hospitality—that will greatly welcome the extension of the VAT cut, the business rate holiday, restart grants and the many other measures of support that the Chancellor is delivering through the Bill. We could combine those with extending the lost carry-back, providing new VAT deferral payment schemes and extending furlough—things that I do not have time to cover. The Government are clearly innovating and continuing to provide packages of flexible support that will maintain protection for those businesses and the jobs that are still subject to restrictions.

The second question is whether the right combination of policies is in place to enable long-term, sustainable economic growth. That is the area most important to the long-term health of our economy, and that is where the Bill contains measures that I particularly welcome, such as the super deduction, freeports, the UK Infrastructure Bank, Help to Grow, the Future Fund breakthrough and refinements of our tax system, which will ensure that investment levels keep pace in this country and grow to support innovation and promote growth in strategically important sectors of the future—I commend the remarks on that subject by my hon. Friend the Member for Mid Norfolk (George Freeman).

To keep it brief, I am very happy that with the Bill the Government have risen to the challenges that we face and I wholeheartedly support Second Reading. It gives us the pitch that we need, as the economy’s groundsman, to withstand the bouncers and the strength to knock the ball out of the park—well over the boundary—for the future. I commend the Bill and look forward to seeing its results on the ground, particularly in Hertford and Stortford.

17:49
Sammy Wilson Portrait Sammy Wilson (East Antrim) (DUP)
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First, I think everyone recognises that the Chancellor had a very difficult job when bringing forward the Budget and the subsequent Finance Bill. There are many things pulling in different directions. On the one hand, as the Financial Secretary said at the very start, we have to make sure that we have dealt with the impact of the restrictions on the economy and the difficulties that was causing for businesses. Secondly, we have to look at the recovery: how to recover from GDP falling by 10% and unemployment going up by 700,000—indeed, there may be other factors to come—and then, of course, we must look at the long-term sustainability of the economy. At the same time, we did not want to be sending out the signal that we are careless about the debt we have incurred, otherwise the signals to the financial markets may cause us a bit of difficulty. So no one envies the Chancellor the job he had to do.

Before I say anything about the objectives the Chancellor has set out, I want to make some comments about specific Northern Ireland parts of the Finance Bill. As has been discussed time and again in this House, the Northern Ireland protocol has placed considerable burdens on the Northern Ireland economy already. One of the areas affected has been the steel industry, or industries that use steel in Northern Ireland. Because of the quota system and the taxes where steel is consumed out of quota, they faced 25% increases in the cost of steel. My party drew this to the Chancellor’s attention, when others were of course trying to pooh-pooh the impact of the protocol; they supported it, so they did not want to know its bad effects, although now they cannot ignore it.

As the Chairman of the Treasury Committee, the right hon. Member for Central Devon (Mel Stride), has said, when the issue was drawn to the Government’s attention, it was dealt with, and I welcome clause 97, which tackles it. It ensures that engineering firms in Northern Ireland, which do have considerable global markets, but would have found those global markets affected by the 25% tariff, are now exempted from that. I would just point out to Members that one of the major landmarks in London is the Shard, and the steel for the Shard was cut, packaged and sent in sections from Fermanagh in Northern Ireland and is now part of one of the iconic buildings here in GB. Many engineering firms of course export heavy machinery, and the steel tariff would have been extremely onerous on them.

I am disappointed, however, about other issues that we were told would be dealt with in the Finance Bill, such as the customs regime that has caused huge costs in Northern Ireland. Customs declarations for even the simplest thing now have to be made for goods coming from this part of the United Kingdom to Northern Ireland, which has added considerably to costs. I was speaking to a firm today, and on average—and it does not even matter what the size of the order is—the cost of customs declarations, supplementary declarations, frontier declarations and the guarantee management system arrangements adds £20 to an order. When the firm ordered a specialist screw that cost 35p, there was a £20 surcharge on it because of the arrangements under the protocol. I was hoping the Finance Bill would deal with some of those issues, but it has not, and I think the Government will have to come back to them.

Let me come to the issues the Chancellor had to deal with. I do not think anyone can deny that the Government took the right course of action. They had no option in my view. When they decided that they were going to close down the economy, they could not abandon workers, firms, businesses and so on, so huge amounts of money—over £400 billion—have been spent on support. As a Unionist, I keep on reminding people in Northern Ireland that the support that businesses have had, as well as furlough payments that workers are still getting, self-employed payments and so on, are owed to the fact that we are part of the fifth biggest nation in the world and, without the support of the Exchequer in the United Kingdom, we would not have been able to find a way through. Of course, the health service has also benefited from the vaccine programme. On that aspect, the Government have made the right choices and those clamouring for independence, even if they have no emotional ties to the United Kingdom, ought to remember the economic benefits of being part of the United Kingdom.

At the other end of the scale, looking to the future and having a sustainable economy, the Finance Bill deals with many of those issues. We have already had a discussion today on the tax allowances, which have been maligned by the Labour party, but they are designed to ensure that businesses across the United Kingdom have an incentive to use their profits to invest to increase productivity and competitiveness and to benefit from the opportunities that Brexit will bring us in doing deals across the world. Spending on apprenticeships and training will increase the skills of our workforce and prepare those who need to move into new industries with the skills they will need, again increasing productivity and competitiveness.

There has been some debate about the value of freeports, but they, too, will help to deal with the long-term sustainability of the economy. My main concerns are on the aspect that concerns most people in the immediate period: does the Finance Bill deal with the issues that must be addressed to get us back from where we are at present and help us to start growing the economy? I will look at the figures given in four areas. Let us take the income tax proposals and the freezing of allowances. I understand that the Government have not increased tax rates, but the freezing of allowances will increase the tax burden. If we are relying on consumer spending to aid our recovery—do not forget that 80% of our GDP is consumer spending—even though there may be some pent-up unspent money and demand, when we nevertheless consider that as a result of the proposals over the next five years we will take 25% more in income tax from people in the economy, and 10% more in the next year, we must ask: will that dampen the immediate increase in GDP and the immediate demand we require to get businesses going again?

Let us look at VAT. Yes, I welcome the rate for the hospitality industry being held until September, and then there will be a reduced rate until March 2022, but I speak to businesses in the hospitality industry who have already expended considerable amounts of money converting their premises to make them safe and, even though they have had support over the last year, many have still had to dip into their reserves because not all their costs were covered. One hotelier in my area told me that in the last year he has spent £3 million of his own money paying those bills that still come in and for which he was not given any support, and no support was available. Businesses will therefore find themselves in a perilous position and we do not know how quickly they will be able to operate fully. When will restaurants be able to have people sitting inside? When will pubs have people sitting inside? While still social distancing many will be operating with lessened capacity, and if they cannot do that, their profitability will be affected. Yet even before all the restrictions are lifted—they will be lifted at different rates in different parts of the country, and in Northern Ireland we do not even have a date for restaurants and pubs being allowed to open—we find that some of that support will be removed.

My third point is about business rates. Again, if we look at the impact of business rates over the next five years, the impact of the Budget means that in money terms, the business rates take across the economy will go up by 50%. In the next year it will go up by 20%. That is a considerable burden on businesses that are coming out of a difficult period, that have not built up cash reserves, and that still do not know exactly how the economy and the demand for their services will increase.

Corporation tax has been mentioned, and on one hand—I have some sympathy for this—those companies that invest will get the super allowances. However, because of the increase in corporation tax and so on, over the next five years covered by this Budget, corporation tax take will go up by 112%, or 20% over the next year. If we are looking at how to stimulate recovery, we must ask whether taking that amount of money from consumers, businesses, and the hospitality industry will reduce the impact of the Budget and make it more difficult for the economy to recover.

My final point is about air passenger duty. Air passenger duty is going up, and over the next year, the take from that duty will increase by 50%. According to Red Book figures, over the five years of this Budget it will go up by 300%. This industry is currently in the doldrums. It has no prospects, because we do not know when international travel will be allowed again. It has already had a considerable drain on it, and there has been no specific strategy for it as there was for the hospitality industry. In many areas of the United Kingdom, especially areas such as Northern Ireland where we rely almost totally on air connectivity, there has been an impact from the reduction in flights. I came here yesterday. There was one flight from Belfast City airport. That is putting airports under severe strain, yet when we consider the proposals in the Finance Bill, we find that rather than there being any help for this industry, which has been particularly badly hit, the proposals in the Bill represent a huge cash take from that industry in the next year and over the next five years.

For those reasons, although I commend what the Government have done regarding the particular problems caused by the economic decisions made to deal with covid, and I commend their long-term strategy in considering how to make the economy more sustainable in future, there is a big gap regarding what impact the Bill will have on the immediate recovery. We are going to have a difficult period. Once furlough finishes, we do not know what the impact on the economy will be, what the redundancies will be like, and what that does. The proposals in this Finance Bill, I am afraid, do not give me any optimism that the right decisions are being made. Some support did need to continue to be given. In their desire to reduce the debt and bring in more revenue, the Government may well have made the wrong decisions that will stymie our recovery and have impacts on many areas, especially those that are most vulnerable to downturns in the economy, including regions such as Northern Ireland.

18:05
John Redwood Portrait John Redwood (Wokingham) (Con) [V]
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I have declared my business interests in the Register of Members’ Financial Interests. I strongly support those MPs from Northern Ireland who are urging the Government to move on and make sure that we can restore the important trade between Great Britain and Northern Ireland. It has been damaged. The EU is being too intrusive. The Northern Ireland protocol clearly sets out that the United Kingdom is a whole and has its own internal market. It states that Northern Ireland should be fully part of that market, and that is not true today, so I urge the Government to take control over all trade that is internal—trade from GB to Northern Ireland and not going on to the Republic of Ireland, therefore not of concern to the European Union—and to ensure that it runs smoothly.

That is just one part of a much bigger picture that we need to fuel a strong recovery. Of course I agree with the Government that the current level of deficit is unacceptably high and we cannot go on with deficits on that scale indefinitely. I also agree with the Government that it must be a one-off, and the Government did need to be very generous, given all the damage being done to individual livelihoods and businesses by the health measures being taken to combat the pandemic. But all the time that restrictions and adverse measures are in place for health reasons, the Government should continue to be generous. People and business need support. We want people to be available to go to work and businesses to be available to produce goods and services as soon as they are legally allowed to do so.

It is a big cost, but it is manageable. We are seeing around the world that many Governments are having to do the same thing, interest rates have stayed very low and, so far, the debt has remained affordable. I encourage the Government to understand that the deficit will collapse very rapidly as soon as the controls are off and all those policies in place to promote a fast economic recovery take effect. We are going to have a much faster recovery than normal once the controls are off, because we had a much bigger fall thanks to the controls themselves, which, in an unprecedented way, stopped people working and stopped businesses trading.

The Government should take some encouragement from the United States’ example. The United States’ monetary stimulus and fiscal stimulus are huge. If we adjust for the size of the economies, the stimulus under the Federal Reserve Board’s actions and President Trump and now President Biden is about twice the scale of the UK stimulus in monetary terms and is considerably higher in fiscal terms. Perhaps the US is taking more risks with inflation than we would like. I am not suggesting that we need to match the American numbers, but I am saying to the Government that we are nowhere near the American numbers, so worry not. This is the time for stimulus—this is the time to make sure that the economy is properly supported and people can get back to work.

With that in mind, I urge the Government to look again at the idea that we need tax rises in the years ahead. If we threaten too many tax rises, it will damage confidence. We will put people off investing here and make people nervous about spending and make them want to save more. This is the time when we need people to spend, to recreate those jobs and get businesses going again. This is the time when we really need businesses to want to come to the United Kingdom or to stay and grow in the United Kingdom, because we need that massive investment. We are short of capacity in all sorts of areas. We have had too much deindustrialisation over the last few decades, and now is a great opportunity to promote it. The Government recognise that with their short-term measures to boost investment, but they may need to show that we are going to have a very benign climate on business tax after the initial impetus and stimulus is offered. If people think that we are going to gravitate to the average or to a higher tax regime, it will put them off.

I pray in aid our neighbour the Republic of Ireland, which has been extraordinarily successful by having an extremely low corporation tax rate. It is 12.5%—a knockout low rate—and what has happened? First, the Republic of Ireland collects far more as a proportion of its total tax revenues from business than us or other European Union countries, because so many great companies have gone there and book a lot of profit there, since the rate is obviously agreeable and favourable.

The Republic of Ireland also has a much higher GDP per head. It is more than twice the EU average, and it is considerably higher than the United Kingdom’s. That is entirely because the Republic of Ireland has this extremely attractive tax policy, which has been so successful in attracting a lot of inward investment, a lot of jobs based on that, and a lot of turnover and profit booking, particularly from great American corporations.

I do not know how that will work out now that President Biden is encouraging a minimum rate, which would mean almost doubling the Irish rate; we will have to see. However, in the meantime, if anyone doubts the power of lower rates to generate prosperity, greater GDP per head and, above all, greater tax revenue, they should look at the Irish example, which is very vivid.

I would like to see the Government speed up with their freeports and be very generous with both the number of freeports and the areas they cover. I also urge the Government to be as friendly as possible to business on taxation and on permits over what to do with the land and how to create all those extra jobs we wish to see. It is an interesting initiative, and the sooner it is rolled out the better. Surely, this is the time we need it—when we need to promote recovery.

I also say to the Government that we need our small business community to get back on its feet and to be able to trade again successfully. Small businesses have had a lot hurled at them, and some of them did not manage to benefit from all the schemes that the Government put forward, so they have been particularly hard hit by up to a year of lockdown or impediments to their trading and their normal work.

I do not think this is the time to be looking at new taxes on small businesses and the self-employed. I do not think the IR35 idea is a particularly good one. It would be good if there were more forthcoming to promote small businesses, which we are going to need. They will have flexibility and the ability to respond. If every self-employed person were able to take on an extra employee, it would transform the employment position, but that requires patient work on ensuring that it is affordable and that the administrative burden is not too great, obviously without undermining important protections for individuals as employees, which we rightly value.

We need flexibility and support from the Treasury and the rest of the Government to understand how important small businesses and the self-employed will be to trigger this revival and to build back in a different way—to build back better, as they are saying on both sides of the Atlantic and as this Government are saying. That implies doing different things, and it requires the innovation and the productivity-driving measures that can come from small companies and the self-employed, who need to be flexible.

There is a huge amount to be done, but the Government should be of good cheer. There can be a very rapid recovery. They have not done too much on the deficit or the monetary stimulus and have fallen quite a long way behind America in the size of the stimulus. They should be ready to do more, be generous if the controls have to go on longer than we would like, and work with the small business community and the big business community on what is a sensible tax regime. There are issues still to be solved on business rates and VAT. The whole purpose of the reviews should be to promote a strong recovery—better jobs, more better-paid jobs, more small business—and then the revenue will flow. Think of the jobs, the incomes and the prosperity, and the revenue follows. Thinking too much about the revenue first, in the mood of putting everybody’s taxes up, will be a great dampener on the recovery we need.

18:14
Kevin Hollinrake Portrait Kevin Hollinrake (Thirsk and Malton) (Con)
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It is a pleasure to follow my right hon. Friend the Member for Wokingham (John Redwood). My comments relate to the small and medium-sized enterprises that he was talking about so passionately. The sage of Omaha, the great Warren Buffett, once said that what we learn from history is that we do not learn from history. I particularly want to look at what happened to the SMEs after the last recession—the global financial crisis. It was the five years following 2008 that were so destructive for SMEs, and I am very keen to ensure that we do not make the same mistakes again. I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

I was interested in the comments of the shadow Minister, the hon. Member for Ealing North (James Murray). On tax avoidance, he must never have heard about the diverted profits tax or the digital services tax; they are very key measures. One thing about the DST that should be looked at—perhaps he will join the calls for this to be looked at as well—is that direct sales of Amazon are not covered by the digital services tax. That gives Amazon a competitive advantage over the other sellers on its platform, which cannot be right.

The Government are consulting on business rates reform and have three ideas: a land value tax; an online sales tax; or VAT. I strongly urge the Minister to consider VAT as a replacement for business rates, which I advocated in my ten-minute rule Bill.

The shadow Minister talked about social care a lot. He mentioned many problems, but did not come up with any solutions. One solution that I have advocated long and hard in this place is a German-style social care premium, which, hopefully, will feature in the Green or White Paper that is due to come forward shortly.

The Government have included many things in this Bill for SMEs. A typical SME is very grateful for the support that it has received from the Treasury, which has done a tremendous job in concert with its various agencies, introducing the job retention scheme, VAT discounts, and rates grants, particularly rates discount.

The Government have also introduced some very good loan schemes. I speak as co-chair of the all-party group on fair business banking. A very wise commentator said at the start of those loan schemes that the Government would not lend £1 billion using those loan schemes; some £75 billion later, we can see the success of those schemes. That, of course, has led to an unprecedented level of debt among SMEs in this country, which is what I am particularly worried about. On top of that are the new loan schemes coming from the recovery loans, which will be more difficult for SMEs to access. Unlike the other schemes, there is a forward-looking viability test, which will be challenging. Either way, it will mean that many SMEs are carrying lots of debt, which they will struggle to service over the next few months and years.

Furthermore, what will happen when the Government pull those schemes and let the banks go on their own in terms of lending? After the last crisis, banks were not very good at lending to the SME community from their own resources—bank lending to SMEs reduced by 25% between 2008 and 2013, just at a time when SMEs needed it. In Germany, where there is a high proliferation of regional mutual banks, which take a much more patient approach to SMEs, lending went up by 20% from those bodies. A policy that we should really push in this country is decentralising our business banking system, so that, rather than 80% of lending coming from large banks, we move towards a more regional, mutual, not-for profit system of banking, which would have a transformative effect in terms of lending to the productive economy.

The key thing in terms of making sure that SMEs are treated fairly is in the forbearance process. When businesses hit trouble, they need to be treated fairly and consistently. The Government did absolutely the right thing with bounce back loans. They set up a framework for how it would work, which lets SMEs take 12 months interest free, or payment free. They can take another six months of no payments whatsoever, and then another 18 months of interest only. They can also extend the loan to 10 years from the standard six years, which more than halves the payments on bounce back loans, which is great, without getting into any credit problem with their bank.

Similar measures do not apply to coronavirus business interruption loans or the larger scheme, CLBILS. That leaves businesses on their own. I urge the Government to work with the banking system to ensure that businesses of all shapes and sizes that have accessed these loans to help them through the crisis have these forbearance measures at their disposal without them having to go cap in hand to the bank. We know that banks are not very good in these situations when their money is at risk. Their shareholders need returns. We need support for SMEs.

Personal guarantees are also an issue, which will come as a surprise to many. I have put personal guarantees up for my business lending most of my life. If someone puts up a personal guarantee, most people think the bank will go to the business first, look at the business assets and realise those before it goes to personal assets. That is not the case—it does not have to do that. It can go straight to personal assets. The Lending Standards Board put in place a policy that banks should look at business assets first before going to personal assets, which has now been dropped from its regulations or guidance. I would very much like to see that brought back in, particularly at this time.

Thankfully, there is now dispute resolution in the form of the Financial Ombudsman Service and the Business Banking Resolution Service. All businesses with a turnover of up to £10 million will get access to free dispute resolution, which should mitigate some issues, but there are concerns nevertheless. I urge the Treasury to look at this point and make sure that businesses are treated fairly over the next few years in the fallout of this crisis.

18:21
Geraint Davies Portrait Geraint Davies (Swansea West) (Lab/Co-op) [V]
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I, too, pay tribute to Prince Philip; in tribute to him, I am wearing my father’s tie. Like Prince Philip, he served in the Royal Navy in the second world war. He lost his own father at the age of 12; Philip was, of course, estranged from his father at 13. Both fought the Nazis.

I mention this partly because the main conflict there was the battle of the Atlantic, which was the attempt by the Germans to starve Britain. In 1939, half our meat, 80% of our fruit and 70% of our cereals were imported. Last year, 80% of our food was imported. Thanks to the botched Brexit deal—there was no mention at all of this in the Budget—we now have the prospect of self-imposed food shortages. In January our exports to the EU, our largest market, were down more than 40%. Imports were down by 29%. They will go down more when we introduce non-tariff barriers. The reality is that in Britain today, a carrot pulled up in Spain on Monday could be on our shelves by Thursday. That will no longer be the case. We face the prospect of food shortages and food inflation.

The Office for Budget Responsibility found that the botched Brexit deal would cost the economy 4% within 15 years, and something like 1.4 million jobs and £1,300 each. The reason we are seeing tax increases, taking us to a share of taxes not seen since the 1960s, is not the pandemic, which is a one-off hit that will be recovered, but the ongoing problems of the botched Brexit. We need to remember that. We need to look towards better realignment and better trade with our closest marketplace.

The other thing to bear in mind is that last year something like 1 million people from the EU left this country to go back to Europe. Many will not come back, partly because of the hostile environment here, and that creates an issue about the size and quality of our labour market when it comes to productivity and production. The EU is already questioning the legality of our breaches of the Northern Ireland protocol and there is a question mark over divergence of standards and protections in the future that might lead to tariffs. If we manage this badly, we may be hit even harder.

For those on the Government Benches who say, “Oh, don’t worry—we’re opening up loads of other markets,” it is worth remembering that, the Japan deal, for example, is worth £1.5 billion to GDP, but if it had been done through the EU, it would have been worth £2.6 billion, because it can negotiate a better deal because it is bigger.

The truth is that while the Government are spending enormous amounts of money on covid, that is not really the explanation for the massive personal tax increases that Britain will suffer.

The other thing to mention about productivity, other than the loss of young workers to the EU, is that not only have we had the highest rate of death in the world from coronavirus, but there is clearly a move, once we have got people over 50 vaccinated, to be reckless again. The issue is the fall in productivity of younger people with long covid. We all know anecdotal examples, but we do not know the full impact of that. I have knowledge of music students, for instance, who have had a shake—a violinist—or who cannot blow the trumpet as well because they have lost lung capacity. These issues are significant for the overall productivity of our economy in the future.

On the workforce being fit and ready to work for our recovery, we should also think about the fact that in today’s Britain, 7.6 million people are living in hunger, 1.7 million of whom are children—it is an absolute disgrace. They are left in food insecurity, as the UN calls it and as the Environment, Food and Rural Affairs Committee recently reported. In essence, that means that they do not have sufficient nutritious food on a daily basis. That is deplorable.

Interestingly enough, in 1952, when the Queen came to the throne and Philip was 35, rationing was still in place for sugar, butter, meat, cooking fat, cheese and so on. In that year, Aneurin Bevan, the founder of the national health service, famously wrote “In Place Of Fear”, in which he warned that while we had to confront poverty and that it was difficult to define, the basic requirement was to ensure that there was no hunger. He warned that if millions were left in hunger, our civilisation would be at risk. It is certainly the case that we now face a depleted, physically weakened and hungry workforce. That surely is not the recipe for the productive economy that we need for the future. On top of that, our youngsters have lost a year in education—[Interruption.] I apologise for that, Madam Deputy Speaker.

The Government say that they have spent a lot on coronavirus and of course they have, but we have read in the newspapers and elsewhere that, in many cases, the money has not been well spent—personal protective equipment, track and trace and food parcels that have been done through Tory party dealers. We have also heard about David Cameron being involved with Greensill. There are question marks about how well this Government are treating taxpayers’ money.

When it comes to the Chancellor, of course we know that he was a founding partner of the hedge fund, Theleme, which presumably had a partner stake. We do not know about that because those tax returns and details are in the Cayman Islands, but we do know that that particular hedge fund appreciated in value from something like £7 billion to £39 billion shortly after we heard news that the Health Secretary had ordered 5 million doses of the Moderna vaccine, in which the hedge fund had invested. We do need to get to the bottom of these things and find out what happened. If it was the case, for example, that the Chancellor had, say, 15% of that hedge fund, his share of that increase—

Rosie Winterton Portrait Madam Deputy Speaker (Dame Rosie Winterton)
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Order. I do think it is quite important that we address some of the issues in the Finance Bill, so I am sure that the hon. Gentleman will be doing that.

Geraint Davies Portrait Geraint Davies
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Thank you very much for that advice, Madam Deputy Speaker. I was just going to turn to the nurses’ pay increase. Had the nurses been granted a 5% increase in pay in this Budget, that would have cost £1.7 billion gross, but in fact, after looking at the recovery of taxes from both income tax and sales tax—consumer tax—we see that it would have cost just £330 million a year. On my calculation, that is about a 10th of the value of the appreciation in the hedge fund that I was mentioning—the 15%—that would have been privately earned by the Chancellor. Obviously, we need to have these figures disclosed. I am trying to put in context the fact that we can afford to pay the nurses a decent wage. There are tremendous amounts of money moving around at the moment and we do not really have a proper tie on it.

We should contrast that with what is happening in Wales, where we have a more effective system of track and trace, PPE is bought more effectively, food parcels are not bought privately but down to local authorities, and the sickness rate and death rate from coronavirus are much lower. We should contrast it with the way that money has been invested to help business. The Chancellor has put money into cutting stamp duty, and lots of that has been spent on second homes—but not in Wales—because that money is not well targeted where it is needed. Money has been given to large businesses with large properties, but again not in Wales, where the larger supermarket stores with big properties will not get the council tax relief because they are making extra-normal profits during coronavirus. The issue is investing money where it is most needed.

Turning back to the nurses, in Wales we have the highest proportion of single earner households in the country and the lowest average wage, which is 70% of gross value added in terms of the UK average. These people might include a nurse as the only earner in a poor household who has faced nearly 10 years of pay freezes and now another pay cut. It is no surprise that nurses are going to food banks. These things are not necessary; they are political choices. I am just drawing the contrast between those who have so much and those who have not enough.

Mention has been made of Amazon and the fact that it and others have basically decimated our physical retail side. There are questions about what should be done about that. In my view, local authorities should be empowered to provide digital marketplaces to support local businesses to sell to local people with overnight delivery so that people would have a choice between sending their money offshore to some huge American organisation that does not pay tax, is destroying local jobs and undermining workers and supporting local businesses through a collective approach with a modernised online service.

We have of course elections coming up, as you know, Madam Deputy Speaker, and people are making these financial choices and comparisons—including, in Wales, those aged 16 to 18. In this Budget, prescription charges in England are now going up to £9.35, whereas in Wales people do not pay for prescriptions. In Wales, we have ensured greater safety by giving advice that people do not travel more than four or five miles, whereas in England people could go wherever they liked. In Wales, a two-metre rule was put into legislation—

Rosie Winterton Portrait Madam Deputy Speaker (Dame Rosie Winterton)
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Order. May I just interrupt the hon. Gentleman again and say that we really need to address the Finance Bill? I think the feeling is that perhaps he might be bringing his remarks to a close fairly shortly.

Geraint Davies Portrait Geraint Davies
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Yes, that is my feeling as well, Madam Deputy Speaker. I was simply making the case that owing to a more cautious approach in terms of coronavirus, we have got to a situation where productivity is better supported.

I will bring my remarks to a close as you suggest, only finally to say that we need to do more on the issue of climate change and the environment, because 64,000 people a year are dying from air pollution, while nothing has been done about diesel or accelerating towards electrification. We need to look at a different approach whereby we can generate growth and opportunity for the future.

18:33
Stephen Hammond Portrait Stephen Hammond (Wimbledon) (Con)
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It is a pleasure to follow the hon. Member for Swansea West (Geraint Davies). Before I begin my short remarks on the Finance Bill, I would like to put on record—because I was not able to be here yesterday—my condolences and those of my constituents to Her Majesty the Queen on the death of the Duke of Edinburgh.

This Finance Bill follows a year of unprecedented economic disruption unknown in the modern era, as well as a year of unprecedented support from the Government to business and individuals, ensuring not only their jobs but their lives and livelihoods. That has been true for millions of citizens, including those in my constituency of Wimbledon. This Finance Bill therefore needs to enact measures that ensure not only that our economy is in a place from which to recover and bounce back, but in one from which we can also see sustainable future growth—growth that is clean and green.

We all know the OBR forecasts that were set out in March; I will not reiterate them now. What is clear to me from reading economic commentators since then is that people are now expecting the economy to grow more quickly and more strongly, and for that recovery to be more sustained. That must be in large part due to measures in the Finance Bill that build the necessary confidence and give people necessary security for the future, including the extension of the universal credit uplift; the one-off £500 to those on working tax credit; the job retention scheme; and the self-employment income support scheme. All those measures are combined with the restart grants of up to £6,000 for non-essential retail and £18,000 for hospitality businesses. Those provisions are now extended to my constituency; initially the £51,000 threshold was not in place. I have to say to the Treasury Bench that I am extremely grateful on behalf of the hospitality industry in Wimbledon.

My hon. Friend the Exchequer Secretary to the Treasury will not be surprised that I wish to make two very quick points about the people who have been left out. First, I make the plea yet again on behalf of the English language teaching sector. Those schools received no support and are hugely important to constituencies across the country. Secondly, I know that my hon. Friend will have read clause 117 and schedule 29 on the prevention of tax avoidance and promoters of tax avoidance schemes. The explanatory notes state:

“This clause and Schedule have also been introduced in order to see the responsibility for the obligations within POTAS, and for any failure to comply with them to be placed on the people and entities behind the schemes.”

I have to say to my hon. Friend that a number of us have stood up for what we believe to be hard-working small businesspeople who have been in those schemes and recommended those schemes, and we feel that if that clause had already been in place, many of those people may not be suffering from the problems of the loan charge now. Even at this late stage, if she has the chance to talk to colleagues about this issue, we would be very grateful.

It is clear that we need a Finance Bill that looks at investment and improving infrastructure, so that we see improvement in productivity. I listened carefully to the remarks of my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), who set out the clear economic rationale for the super deduction. It is a vital measure to encourage business to invest now. Historically, the UK has underperformed; we have failed to invest at similar levels to our economic peers. It is investment that drives some of the factors that I mentioned a moment go when it comes to improving productivity. Therefore, supercharging investment through a super deduction means that we are likely not only to strengthen, but to lengthen the economic recovery. That seems an entirely sensible, welcome and rational economic measure.

It is also likely that we want to see measures that improve not only physical infrastructure and capital formation, but human formation. I particularly welcome the support for new apprentice hires in the Bill. I encourage the Government to think a bit more about this, as it is the way of the future. Could we not link the new apprentice scheme to, for instance, the length of the super deduction? The super deduction is in place for two years, while the new apprentice scheme is in place for six months; I encourage the Government to think about linking the two. I know that my hon. Friend the Minister will recognise that human capital formation and investment in skills are as important as physical formation.

Like many colleagues, I was fascinated to hear the contribution from my hon. Friend the Member for Mid Norfolk (George Freeman), who spoke at length about driving growth through innovation and the adoption of new technologies. Of course he is right. When one talks to a number of the people at whom the super deduction is aimed, one learns that it will be commonplace—it almost is now—that they will be investing in things such as AI, 3D printing and big data. Alongside that, we will need a workforce that has in-demand skills, so I particularly welcome the investment in digital skills and the lifetime skills allowance that the Bill will introduce.

Many Members have referred to the freeports policy, which clearly brings the opportunity to boost jobs in regions and to boost economies through the use of differing tariff regimes for different sectors. My hon. Friend the Minister will know the principal criticisms of freeports—that they merely redirect economic activity and investment.

May I talk about next year’s Finance Bill, Madam Deputy Speaker, just for a very brief moment?

Eleanor Laing Portrait Madam Deputy Speaker (Dame Eleanor Laing)
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This is a debate on this year’s Finance Bill.

Stephen Hammond Portrait Stephen Hammond
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I urge the Government to think about learning the lessons of economic history in respect of the power of putting wider economic development zones and the encouragement that they bring alongside freeports. We all recognise that such zones need seedcorn grants from the Government; that could give the Government the opportunity to consider local recovery bonds. We have already seen the prospect of the green infrastructure bond; why do we not see some local recovery bonds to sit alongside that work and boost economic development zones? That would seem to me to be a perfectly sensible development.

The Chancellor is absolutely right to focus on infrastructure spending and investment. Infrastructure is not an end in itself—it is the driver of growth and productivity—so the policies coming through and the measures in the Bill to allow the increase in transport spending and in departmental spending limits are welcome. I also welcome the establishment of the UK infrastructure bank. It is the private sector that will drive the investment that is necessary.

As I said a moment ago, the green gilt is welcome, but just as I urge the Government to think about local recovery bonds, I urge them to think about an infrastructure bond. As many will know, there is a consultation on the capital cap for pension funds; if that change is combined with an infrastructure bond, we could see a wealth of pension funds looking to invest in the UK’s economic recovery.

Finally, the jewel in our crown is undoubtedly financial services. A few moments ago my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) talked about the need for mutual banking and to encourage small banks. I urge the Government to think about a review of the regulation of financial services and banking to ensure that the regulation with regard to conduct and capital is competitive and appropriate. That will drive not only those sectors but the investment that will sustain the economic recovery that everyone in this House seeks.

18:43
Sarah Olney Portrait Sarah Olney (Richmond Park) (LD)
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This Bill is a catalogue of hard choices unconfronted, challenges ducked and emergency measures to deal with the pandemic used as a fig leaf for the failure to face up to long-term challenges.

We have heard a great deal in recent months about the Government’s approach to public procurement—how personal friends of Ministers get to jump the queue when contracts are being handed out. We have heard a great deal in the past few days about how friends of the former Prime Minister get preferential access to Treasury officials to make the case for financial support.

In keeping with that theme, the Chancellor presented a Budget for selected beneficiaries. Carefully handpicked groups are going to do well, but it was clearly not a Budget for the nation as a whole. We could have had, for example, a bold move on business rates. Real reform in this area to level the playing field between high street and digital retail has been long overdue. I was delighted to see retail and hospitality reopen across my constituency yesterday and I hope that predictions of a retail boom, funded by savings built up during the pandemic, will materialise to the benefit of our small businesses, but consumer behaviour is changing and that change has been accelerated by the pandemic. What is the long-term future for our town centres? How will our communities thrive without the retail businesses that traditionally provide the heart of our towns?

We need to lower the barriers to entry to retail and other town centre businesses, and invite new entrepreneurs to try new ideas. However, instead of business rates reform or devolution of power to local authorities, which could have allowed for real change across the whole country, a select few high streets, mostly in Tory-supporting constituencies, get a cash bung. What is the long-term plan for the retail sector and for small businesses in our high streets? These businesses support our communities, providing flexible and well-paid jobs. They support entrepreneurship at all levels and in particular provide opportunities for women.

Small businesses of all kinds will have breathed a sigh of relief at the Government’s announcement that they plan to continue furlough and business rates holidays until the end of September, but what will happen then? I worry that there will be a huge spike in unemployment when furlough ends and I see nothing in the Budget that will address that. The Liberal Democrats are calling for the Government to cut national insurance contributions for small businesses in order to boost employment in this sector.

We have also seen very little action for those groups that have been excluded from financial support during the pandemic. What frustrates me is that so many of the sectors that have been hardest hit are the very same that we should be investing in as key strategic industries that can provide future growth for the economy as we move out of the pandemic. In particular, the cultural sector, the travel sector and the live events and exhibitions sector have been left scrabbling for support, with many of their contractors and freelancers excluded from help. The continuing failure of the Government to help those individuals is completely baffling. When the cultural sector is reopened, it will struggle to find skilled staff as so many will have been forced out of the sector by financial necessity and will find it extremely difficult to come back.

I would like to take this opportunity to mention again that many people who were excluded from help were contractors moving between pay-as-you-earn contracts, which they were forced to take on because of the IR35 regulations that the Government are still insisting on introducing. Had they been able to continue as self-employed, they might have qualified for help.

The biggest opportunity missed, however, is the fight against climate change. We have heard many warm words on global warming from this Government. They appear to have grasped the magnitude and immediacy of the crisis we face, yet they have no plans for action. The 10-point plan for a green industrial revolution, released before Christmas, announced a wide range of aspirations, but no concrete policies or spending commitments. The Budget continues that trend. Liberal Democrats welcome the new direction to the Bank of England to take account of climate change, but that is a small drop in an ever-deepening ocean of what needs to happen if we are to take the necessary action.

The Government have shown with this Budget and Finance Bill that they are not serious about achieving net zero and creating a green recovery. They have gone as far as scrapping the industrial strategy, leaving businesses in the dark about how the UK will tackle climate change and achieve green growth in the years to come. The Budget promised to re-establish a new infrastructure bank, which merely replaces the green investment bank established by the Liberal Democrats in 2010 and sold off by the Tories in 2016. There was nothing on extending the green homes grant scheme, which could have tackled fuel poverty and cut energy bills for millions of homeowners while cutting emissions—and since then the Government have scrapped the scheme altogether. The Government even failed to cut VAT on home insulation products to encourage people to invest in their home themselves. There was nothing on increasing incentives on electric vehicles, including VAT cuts or new grants. There was nothing on investing in more public transport or new walking and cycling infrastructure. Liberal Democrats wanted a Budget to kickstart the green recovery, but the Conservatives have failed to deliver. We must see a bold green recovery plan that will invest £150 billion in the next three years to tackle climate change, create new green jobs and help us to grow our way out of this crisis.

What is the Chancellor’s plan for investing in sectors that will create jobs? It is freeports in selected sites, yet there is little evidence that they increase economic activity rather than displace it. Again, we see the benefits concentrated in preferred areas of the country, rather than a strategy for the country as a whole. The one advantage of freeports, of course, is that they can avoid the customs duties and paperwork currently creating such a barrier to trading, thanks to the Government’s terrible deal with the EU. I find it extraordinary that the Chancellor has made no mention of how he plans to offset the OBR’s projected 4% hit to the UK’s GDP as a result of leaving the EU. He is bringing forward planned economic activity or concentrating it in specific areas of the country, rather than investing in new sources of wealth and future jobs. This Budget ignores the real needs of our economy, both for the immediate challenges of the pandemic and for its long-term future.

18:50
Steve Double Portrait Steve Double (St Austell and Newquay) (Con)
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It is a pleasure to follow the hon. Member for Richmond Park (Sarah Olney). I welcome the Bill, which delivers on the Budget. The Budget struck the right balance, providing the immediate support that businesses need to enable us to begin the economic recovery from the past year, paving the way for sustainable growth in the mid-term and laying the ground for some of the tough decisions and challenges that we are going to face in the years to come to balance the books.

I particularly welcome the measures to support the hospitality sector. I speak as the chair of the all-party parliamentary group for hospitality and tourism, a sector that has been among the hardest hit as a result of the lockdowns. All the measures that were in the Budget, including extending the VAT cut and the business rate holiday, the additional round of grants, the extension of the furlough scheme and the additional self-employment income support scheme, have been hugely welcomed by the many businesses in my constituency that rely so much on tourism and hospitality. I also very much welcome the extension of the universal credit uplift, which will be vital for many families to support them through the rest of the spring and summer.

There is lots in the Budget and the Bill to welcome and support, but I just want to raise one element that I have grave concerns about. It relates to clause 98—I know that the Minister will be aware of this as I have already raised it with her—and it is the removal of the red diesel entitlement. Let me make it clear that, in principle, I absolutely support this measure. We need to move people and businesses away from an over-reliance on diesel and towards a cleaner and greener form of fuel, but I am concerned about the impact that the speed with which this measure is being introduced will have on one particular sector. I welcome the fact that agriculture and fishing will be exempt from this change and will continue to be able to use red diesel. That is vital for constituencies such as mine that have many businesses in those sectors, but there is another sector that is very important to my local economy: the mining and quarrying sector.

I should place on record that I am the chair of the all-party parliamentary group for mining and quarrying. For more than 150 years, mid-Cornwall has been mining the highest-quality china clay in the world and exporting it around the world. This industry is still a vital local employer and a significant part of our local economy. The removal of the red diesel entitlement from businesses in this sector is going to cost businesses in my constituency alone more than £10 million a year. That is £10 million that is going to be taken directly out of our local economy.

I absolutely understand the Government’s rationale behind the decision to move people away from diesel towards alternative fuels to help to reduce their environmental impact and to help us as a country to move towards our net zero target, but the fact is that much of the heavy gear used in the mining and quarrying sector just does not have an alternative to diesel. The technology does not yet exist to provide an alternative form of cleaner energy. The sector will therefore bear the brunt of the Government’s decision to introduce this change from next April in the short term.

Let me also make it clear that the sector is not resistant to moving to clean power, and it has already done so where alternatives are available, but in many cases the technology is not yet available to replace some of its heaviest machinery with cleaner alternatives. It seems unfair to penalise businesses that are willing to move to cleaner fuels and sources of power but are unable to replace their diesel-powered equipment at this time. In the coming years, alternatives are likely to be developed, but I am told that we are probably at least five, and perhaps 10 years away from there being a viable commercial option. Imposing the change next year will mean that businesses face additional costs that they simply cannot avoid, which seems counterproductive.

As is often the case when decisions such as this are made, there are unintended consequences. The sector provides much of the raw material for our economy, particularly in manufacturing and construction, yet it will be unable to absorb the additional cost, which will result either in job losses or in rising costs. The Government’s ambition is to invest heavily in infrastructure and housebuilding. It seems strange, just at the time when we want to invest significant sums in building, to introduce a change that is likely to result in increased costs.

All this is unlikely to have any beneficial impact on the environment. There will be no reduction in emissions. Diesel will still be burned by these heavy-duty bits of kit because there is no alternative. It is not as though there will be a shift away from diesel to something else, because alternatives do not yet exist. If the aim of the measure is to reduce emissions, in the short term it is unlikely to achieve it. In fact, it could actually increase the environmental impact, because if it results in UK businesses becoming uncompetitive or, worse still, going out of business, we will end up importing these materials from countries that are burning diesel and increasing the carbon footprint.

I ask the Treasury team to look again at the speed at which the change is to be introduced. Let me be clear: I believe it is the right decision; I just question the timing of implementation. We need to give the quarrying and mining sector the time needed for new technologies to emerge, so that the sector can find alternative fuels before this significant additional cost is imposed.

I wholeheartedly support the Bill. It contains the right measures that our country needs now. I simply ask the Government to look at the speed of the removal of the red diesel exemption, particularly for the mining and quarrying sector, to give it time to adjust and the economy time to recover before the additional cost is imposed.

00:04
Richard Burgon Portrait Richard Burgon (Leeds East) (Lab) [V]
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The coronavirus crisis has not just been a public health emergency; it has been a social emergency as well—a social emergency worsened by the Government’s catastrophic handling of the crisis, which, as the Office for Budget Responsibility says, led to one of the worst economic downturns of any major economy.

Of course, for some, the pandemic has not been half bad—in fact, it has been a very good crisis for some. Serco and the like have been able to use the crisis to get their hands on contracts that should have been in the public sector, and boosted their profits. We have seen how contracts worth billions have been handed over to those with political connections to top Tories, and the Greensill case involving the former Prime Minister is no one-off—

Eleanor Laing Portrait Madam Deputy Speaker (Dame Eleanor Laing)
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Order. I appreciate that the hon. Gentleman is not here in the Chamber and so is not getting the atmosphere of the debate, but no matter what the rules are, this debate is about the Finance Bill. It is only about the Finance Bill and matters within the Finance Bill, which is pretty wide-ranging. The hon. Gentleman appears to be making a speech that he might wish to make tomorrow. Could he please stick to the Finance Bill today?

Richard Burgon Portrait Richard Burgon
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Thank you, Madam Deputy Speaker. The example I have just given is one of how our system works, and I would argue that that is entirely relevant to the Finance Bill, because while the super-rich have been able to profit from the crisis, the Government have washed their hands of others who needed support. Just this week, millions relying on legacy benefits such as employment and support allowance for disabled and sick people got a pathetic 37p increase in their benefits. What a snub, especially after already being refused the £20 additional payment that went to those on universal credit. With that 37p increase, the Government are deliberately punishing disabled people. It is yet another example of how they seek to make the vast majority pay for one of the world’s deepest economic collapses.

I will vote against the Bill because it fails to give NHS staff the proper pay rise they need, because it cuts the pay of millions of public sector workers and hands billions in giveaways to mega-corporations such as Amazon, many of which have done very well out of the crisis, because it leaves many of the lowest earners facing tax rises and because later this year it will cut social security payments for people who really should get much more help. I will vote against the Bill because it serves the few and not the many. This crisis has not only shone a spotlight on the deep inequalities in our society but widened them. We should be coming out of it with a more equal society, but, to help us do that, where is the tax on the companies that have made super-profits during the crisis? Where is the one-off tax on the super-wealthy as other countries are doing? I will vote against the Bill and table an amendment calling on the Government to take measures for a super-tax on the super-rich. We need to start to build a society that serves the many, not the few. That is what the Bill should be about, but it is no surprise that, with this Government, it is anything but.

19:02
Andrew Griffith Portrait Andrew Griffith (Arundel and South Downs) (Con) [V]
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It is kind of you, Madam Deputy Speaker, to call me in this important debate. I will try to reward that by sticking to the topic we are discussing. This is an excellent Finance Bill for a much-needed recovery. The UK is already a great place to start, grow and run a business, but to increase the rate of economic growth in the UK we need to restate and foster the pro-enterprise philosophy and measures that have served us so well in the past.

To govern is to choose and the Chancellor was absolutely right to choose fiscal discipline. The Bill begins to fix the public finances with a fair and honest plan about how to do so. Nothing is more devastating to enterprise and investment than high and volatile costs of borrowing, which wipes out small businesses like a pyroclastic flow clearing forested slopes. Thousands of otherwise successful businesses were crushed in the recession of the early ’90s caused by the error of the UK's membership of the exchange rate mechanism.

A centrepiece of the Bill is the super deduction. I have spoken to lots of businesses in my constituency, and it is already mobilising significant investment. The Bill also contains two excellent initiatives under the Help to Grow banner. I believe that the Government are really on to something here and that we could see the Department for Business, Energy and Industrial Strategy start to deliver a string of practical interventions to give small businesses a hand up. When the opportunity allows, I encourage them to go further. Only 10% of small and medium-sized British businesses currently export, leaving 90% of enterprises as potential exporters. That is a vast untapped opportunity to grow the scale and productivity of UK plc. Global Britain brings huge scope to increase the number of firms involved in international trade, but for many firms, where time is the scarcest resource, it is a big and uncertain step to take. Alongside the other elements of Help to Grow in this Bill, I suggest we make available grants to support exporting. It would be a natural extension of the support that the Government provide today under the useful, but relatively modest tradeshow access programme.

Like most, I welcome the extension of the lower rate of stamp duty in this Bill. On a future occasion, I encourage the Government to bring forward an exemption to stamp duty for downsizers. In many parts of the country, the real housing crisis is one of under-occupancy. With an ageing population, too many homeowners rattle around in accommodation that would be more suitable for growing families. Stamp duty is a real brake on downsizing. The Treasury will understandably be cautious about leakage, but it should be perfectly possible to define a downsizing transaction based upon the ratio of values and the limited time interval between the two housing transactions.

This is not an academic issue. Right now my constituents are blighted by development proposals on unsustainable greenfield sites in Ashington, Adversane, Buck Barn, Kirdford and Mayfield, all based on the fallacy that, despite the UK already having more than 600,000 empty homes and the highest rate of housebuilding since 2007, the only answer is to pile up even more supply.

For a similar reason, although I fully understand the context in which the decision was made, I regret the freeze on the lifetime allowance on pensions. The UK used to have one of the best systems of providing for retirement in the western world. Freezing the lifetime allowance is another Jenga brick whipped away from that once strong pillar. NHS consultants, headteachers and airline pilots are hardly plutocrats, but they now face a tax on thrift. Money that would have gone into well-regulated, well-diversified pension funds and been allocated to grow UK businesses has instead fuelled a boom in buy-to-let property, putting home ownership for millions further out of reach.

In the year in which the UK hosts the UN climate summit, let me conclude by welcoming two measures in the Bill that help us move towards a low carbon future. The first is part 2, which introduces a plastic packaging tax from next April. We should tax things we wish to have less of, and on that basis this is an excellent piece of legislation that will provide a clear economic incentive to use recycled material in the manufacture of plastic packaging. It is estimated that as a result, the use of recycled plastic could increase by around 40%, equal to carbon savings of nearly 200,000 tonnes a year and saving a lot of plastic from ending up in landfill and incineration. We only have one planet, so as soon as this useful measure is on the statute book, I encourage my Treasury colleagues to look at increasing the rate and lowering the exemption threshold.

Similarly, I welcome the removal of red diesel from many sectors, although I am glad there is a continued exemption for agriculture, which makes a significant contribution to the landscape in my constituency of Arundel and South Downs. Red diesel accounts for about 15% of diesel used in the UK and is responsible for the release of 14 million tonnes of carbon dioxide a year. This change will help the adoption of cleaner and greener alternatives, such as hydrotreated vegetable oil, and is yet another meaningful step by this Government, who are absolutely leading the world on climate action.

19:08
Peter Grant Portrait Peter Grant (Glenrothes) (SNP) [V]
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I am pleased to be able to contribute to this debate and to expand on the reasons so passionately set out by my hon. Friend the Member for Glasgow Central (Alison Thewliss) as to why the SNP will vote against the Bill this evening. The purpose of the Bill is to give legislative effect to the Chancellor’s Budget. That Budget was a regressive Budget. It was an austerity Budget that turned its back on millions of those worst affected by the covid pandemic. It is a Budget that severely damages the interests of my constituents, so it is a Budget, and this is a Finance Bill, that I cannot and will not support.

Austerity is not an economy necessity. It is a political choice. It has been the first-choice response of almost every British Government of every complexion during my adult life, so it is maybe not surprising that so many people seem to have forgotten that there is a different way, a fairer way, and in fact a much more effective way to respond to an economic crisis. All we have to do is to care as much about the millions in these four nations who do not have enough to live on as we care about the lucky handful whose only problem is that they cannot count how many billions they have.

There is no disagreement about the fact that we need to start to repair the economic damage caused by the pandemic and by the measures that had to be taken in response. There are lessons to be learned, but perhaps the most vital lesson of all is that the inequalities that have been deliberately created and deliberately maintained in our society by successive Governments have also made our society as a whole much more vulnerable to the ravages of the disease. We know that the economic costs of covid have fallen much more heavily on the people who could least afford them. To give just one example, the British Retail Consortium did a survey that confirmed what we would probably have expected: during the pandemic, highly-paid people such as Members of Parliament have got better off and now have more savings than we had before, while most of our constituents on low incomes have been using up their savings just to survive, and many of them effectively have no savings left at all.

Presumably, the way we respond to that is to use the powers in the Finance Bill to redress that balance. Well, no—that is not the priority of this Government. In clause 5, we see a multi-year freezing of the income tax basic rate limit and, much more damaging, a freezing of the personal allowance at £12,570. It is not easy to find a way to change an income-based tax system so that we collect more tax but target the impact on people on lower incomes, but that is exactly what the Government propose to do. If it is accepted that the Treasury needs to collect more money in real terms from income tax, we should at the very least make sure that the impact in real terms is equally spread. In fact, the SNP would argue that whenever the time comes to increase taxes, those of us who are lucky enough to be on high incomes should be asked to bear a wee bit more of the pain.

I know that the Government will point to other provisions, such as clause 31 and the one-off uplift in working tax credit. In principle, that is something the SNP supports, but as my hon. Friend the Member for Glasgow Central mentioned, the way that it is implemented could harm some of the very people it is supposed to help. The eligibility criteria are crude, to say the least. It will not be at all easy for recipients to work out for themselves whether they qualify. What assessment have the Government made of the number of payments that they expect to be made in error, and are they seriously then going to chase down the recipients of those erroneous payments as if they had committed some kind of fraud, when in fact they have done absolutely nothing wrong?

I was interested to hear the comments of the Chair of the Treasury Committee, the right hon. Member for Central Devon (Mel Stride), on freeports. “Freeport” is obviously a buzzword that the focus groups have told the Tories goes down well with the party faithful, so they have decided to invent, or rather reinvent, something that looks like a rehash of 1980s-style enterprise zones but call it a freeport because that sounds like a better term. Leaving aside the terminology, how do the Government know that the provisions in clauses 109 to 111 will create new investment and new jobs, rather than just move investment and jobs that would have happened anyway, as the Committee Chair asked? How will they make sure that those who buy and sell land in a designated freeport area are investing the tax breaks they enjoy in creating jobs on the site, rather than just siphoning the money off into the profit and loss account of an offshore investment trust somewhere?

Almost a third of the Bill’s clauses relate to the plastic packaging tax, and no doubt the Bill Committee will want to spend a proportionate amount of time scrutinising the details, but for now, I draw the Minister’s attention to the National Audit Office report on 12 February this year. The report found that, although the Chancellor in his Budget speech last year was able to tell us how many tonnes of carbon the tax would save,

“the exchequer departments did not set these as measures of success in the Tax Information and Impact Note”.

A previous Tory Government brought in tax information and impact notes in a blaze of publicity, announcing that they would support better parliamentary scrutiny of tax policy, but how can Parliament scrutinise the success of this new tax if the key measure of success announced by the Chancellor does not even appear on the success radar of the Department that has to implement it?

My hon. Friend the Member for Glasgow Central raised the more general point about the woefully inadequate scrutiny that the often massive decisions in Finance Bills receive. I know that the Government will point to the number of minutes, hours, days or weeks that people have spent talking about it in Parliament, but talking about it and reading prepared speeches is not the same as proper scrutiny. For example, in this Bill we can accept, reject or amend clause 32 on the tax statement of payments under the self-employment income support scheme, which is fair enough for those who qualify, but we cannot redress the glaring injustice of the excluded millions who do not qualify at all. We can accept clause 31 or amend it to make it a lot better, to support working people whose income has been affected by covid, but we cannot vote to remove the 30 September cliff-edge when the furlough scheme is removed, because that would be an inadmissible amendment. Although the Bill can be improved in Committee and made slightly more fit for purpose, we are powerless to force the Government to undo some of the deliberately disastrous flaws and omissions in existing support schemes.

It is right that this Budget and this Finance Bill should start the process of rebuilding the economy after covid, but as the right hon. Member for Hayes and Harlington (John McDonnell) mentioned, the Government seem hellbent on taking us back to exactly the same unfair, unequal and divided society that we had before. In fact, they will probably succeed in making it even worse than before. Of course, the Tories do not want to talk about the fact that their own analysis shows that the long-term economic damage of the covid pandemic will be less than the damage of the self-inflicted and totally avoidable disaster that is Brexit.

It is an indication of how out of touch the Government are with my constituents, and with the people of Scotland generally, that the Tories, the official Opposition in Scotland, have already surrendered in the Scottish Parliament elections. They are not even pretending that they want to try and form an alternative Government after 6 May. They are delivering glossy six-page leaflets that literally have no policies on them. They are not even pretending that they have anything positive to say or to offer in Scotland—which, after all, is kind of what Scotland has been saying to them since 1955.

The Bill will get its Second Reading tonight, it will get through the Committee and it will become law. Its regressive provisions will be imposed in Scotland against the will of three-quarters of our people, no doubt to great cheers from the socially distanced Government Benches. But let me say this to them: enjoy imposing this Finance Bill on Scotland’s people, because in just over three weeks’ time, those same people will take a decisive step towards making sure that their time for imposing their policies on our country comes to an end.

Eleanor Laing Portrait Madam Deputy Speaker (Dame Eleanor Laing)
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I appreciate that this is a Finance Bill and technically it can go to any hour, so the House could be sitting until 11 o’clock or midnight, but I ought to say something to Members who are not in the Chamber but who I hope might be listening. It sometimes seems that Members who are at home and participating virtually do not pay attention to the rest of the debate. If they are listening, let me say to them that there is something a little bit distasteful about those who are sitting at home making very long speeches and keeping the entire operation of the House of Commons going till well into the evening. Everybody has the right to speak on the Finance Bill and it is very important that they do so, but it is generally recognised, and I particularly recognise it today, that that which can be said in 10 minutes can usually be said more effectively in five.

19:17
Jo Gideon Portrait Jo Gideon (Stoke-on-Trent Central) (Con)
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The Bill recognises both the short-term demands of the covid crisis and the long-term needs of global Britain’s economic future, and I am delighted to support it. I shall keep my comments brief.

As we emerge from lockdown in a cautious and gradual way, it is right that provisions are made to extend furlough, reduce VAT for tourism, maintain the increased universal credit payments, support grants for the self-employed and so on. It will be some time yet before the economy is back to pre-covid levels of activity, although it may not be as far away as we had feared just six months ago. Those who have managed to save money over lockdown are keen to put their cash back into our national economy.

Stoke-on-Trent city centre business improvement district has ensured that we will play our local part in the resumption of consumer spending. Operation Sparkle is making our city centre smarter, cleaner and more inviting, but there is only so much that even the most dedicated local groups and bodies can do to fight against litter, so I welcome part 2 of the Bill for its potential to gear the tax system ever more against plastic waste.

There is a real problem with litter, particularly along Stoke-on-Trent’s beautiful watercourses and green spaces, made much worse by the thoughtlessness of those who fear no consequence from dropping bottles and wrappers that will not immediately biodegrade. It makes responsible residents across my constituency rightly angry. The tax system should not be neutral on litter. We have all seen the dramatic impact of the plastic bag tax. I hope that the plastic packaging tax is another step towards a tax system that increasingly targets problem litter and incentivises the reuse, return and recycling of packaging.

The Office for Budget Responsibility predicts that the pre-covid level of GDP will be reached only one year from now. It further predicts that unemployment will be in its second quarter of decline by then, having peaked at 6.5% by the end of this year. That means that UK unemployment will still be 1.4 percentage points lower than when the Labour party left office in 2010. It is an extraordinary achievement. The balance of measures has been more or less right, just as the balance of measures is right in the Bill.

We were never going to escape a global pandemic unscathed. Now we must face the reality of once again looking for measures to bring the books back into balance in the medium and longer term. However, that should not mean reductions in productive investment. I particularly welcome the super deductions for new plant and machinery in clauses 9 to 14, together with the provision in clause 15 for an extension of the £1 million annual investment allowance. We are enabling the private sector to build back better.

It is often said that Chancellors are conjurors, pulling rabbits out of hats, but today’s Chancellor is more of a tightrope walker, trying to maintain a very delicate balance indeed. He is admirably succeeding. We are emerging from the international crisis with renewed national confidence in a long-term future of better days ahead.

19:21
Rushanara Ali Portrait Rushanara Ali (Bethnal Green and Bow) (Lab) [V]
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This Finance Bill fails to meet the scale of the economic challenges and it fails to provide the growth that is needed to recover from the pandemic, not to mention the impact of Brexit. Unemployment is already at 5% and is set to rise to 6.5%. Some groups have been hit particularly hard, especially the young—youth unemployment is at 14.3%—and those from minority backgrounds face much higher levels of unemployment.

Business investment has been in decline for many years and the pandemic has not, of course, made matters any better. We have heard a great deal about the productivity rate being incredibly slow, which it has been for the past decade. Instead of focusing on the big challenges facing the country, such as tackling the jobs crisis and youth unemployment, and promoting growth, what we see is the Government reverting to their comfort zone with an irresponsible council tax hike that will create even greater pressures for families who have faced the most unprecedented of challenges over the last year, and huge adversity—ordinary families in constituencies such as mine, where the level of child poverty is among the highest in the country.

By freezing the threshold for the personal income tax allowance, the Bill introduces a stealth tax on households. Meanwhile, the so-called super deduction gives tax cuts to some of the biggest businesses in the country, including those who have done particularly well during the pandemic, when the support should be targeted to companies that need much greater help and where there is greater need for support.

It is as if the Government have learned nothing from this crisis, as they take funding away from families who desperately need help. That brings me to the issue of universal credit, which will return to its original level later in the year. Millions of families will suffer when that happens. That is why I believe that this Finance Bill does not support families. The stealth tax that has been introduced will hurt ordinary families, including our NHS heroes and other key workers who have sustained us through the pandemic.

The Bill does not go far enough to support the 700,000 young people who face unemployment. Only one in 49 are eligible for support through the kickstart scheme. The Government have not taken the opportunity in the Bill to provide additional support to get those young people back to work.

Despite the fact that local councils such as mine have had to spend a great deal more because of the pandemic, there is nothing in the Bill to support them. There is very little to support our public services when they are facing an unprecedented crisis. The Bill lacks the ambition that is desperately needed after the biggest economic hit for generations. It lacks the ambition to get the unemployed back to work, and bold action to increase investment, productivity, and innovation, create the green industrial revolution, and power our economic growth in the face of the double hit of the pandemic and the 4% long-term hit to GDP as a result of Brexit. It hits families hard when they need to be supported, and it lacks the ambition to match the scale of the economic, social and healthcare challenges exposed by the pandemic. I will therefore not vote for the Bill.

19:25
Ben Lake Portrait Ben Lake (Ceredigion) (PC)
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Diolch, Madam Deputy Speaker, for calling me to speak in this debate. It is a pleasure to follow the hon. Member for Bethnal Green and Bow (Rushanara Ali). Last month’s Budget was a missed opportunity to protect jobs and incomes, support struggling employers, and set out a clear vision for a green, sustainable and fairer post-pandemic economy that works for all four nations of the United Kingdom. Instead, the Budget became an exercise in political showmanship, which further undermined devolution and put party politics above the collective good. Supposedly new spending pledges were proven to be nothing of the sort, most clearly at Wales’s expense, where only 5% of the spending announced was new and unconditional. That disappointment was compounded by the proposals unveiled for the so-called levelling-up fund, which I am afraid does a disservice to Wales and to devolution.

The Bill confirms some of the most damaging elements of that Budget-day display. It prematurely ends the VAT reduction to help hospitality businesses across the UK. It neglects fully to correct the exclusionary failures of the self-employment income support scheme, and it fails to guarantee the permanency of the £20 a week universal credit uplift. Those measures alone suggest that the Bill will hamper rather than encourage our short-term recovery.

Equally worrying is the Government’s clear determination to re-establish the pre-pandemic dysfunctional UK economic model through a “Westminster knows best” approach that is openly hostile to devolution. That is why, to ensure that Westminster works with rather than against the devolved nations on policy issues such as freeports, Plaid Cymru will table amendments requiring the consent of the devolved Parliaments before freeports can be established in their respective nations. That such amendments are necessary is sadly indicative of the Government’s centralising tendencies over the economy, despite their appalling record on delivering schemes such as tax reliefs, which worsen rather than address regional inequality in the UK.

For instance, through the UK Government’s two main innovation investment reliefs—the enterprise investment scheme and the seed enterprise investment scheme—between 2015 and 2018, start-ups in London received four times more per head of population than businesses elsewhere. In contrast, only 1.3% of UK-wide investment through the enterprise investment scheme was in Wales.

Noting the significant risk that the proposed capital allowance super deduction might turbocharge regional inequality in the UK, Plaid Cymru will also table an amendment requiring the Government to consider the impact and geographical reach of that super deduction. Given the pressing challenge of climate change, and the need to recapitalise our economy to further decarbonisation efforts, our amendment will require the Government to consider the impact of a super deduction on climate change mitigation efforts. I sincerely hope that the Government will be supportive of that amendment, particularly given the Bill’s overall lack of measures and support for the green transition—except, it is worth noting, a welcome change to the Bank of England’s mandate.

Although I welcome the proposed plastic packaging tax, even that illustrates Westminster’s inability adequately to act on the pressing issues facing society across the four nations of the UK. Only days ago it was reported that the much vaunted deposit return scheme has been further delayed until 2024. Having been unnecessarily tied to Westminster inaction on that issue, Wales will by then have waited six years for such a scheme to come to pass. That outcome is made even worse by the Government’s United Kingdom Internal Market Act 2020, which undermines Welsh efforts to counter plastic pollution, and pales in comparison to Scotland’s ability to deliver a bespoke system by next year.

In conclusion, this Bill fails to correct the flaws in the Government’s pandemic response, fails to live up to their rhetoric on levelling up and fails to match ambitious climate rhetoric with policy action to further the green transition. Instead, the Bill not only reflects the deeply misguided sense that the Treasury knows best when it comes to regional inequality, but misses an opportunity to provide a long-term plan for our post-pandemic recovery.

19:30
Jacob Young Portrait Jacob Young (Redcar) (Con)
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Let me start by expressing my sadness at the death of His Royal Highness Prince Philip. I send my condolences and those of the people of Redcar and Cleveland to Her Majesty the Queen and the royal family at this difficult time.

I direct Members to my entry in the Register of Members’ Financial Interests as a board member of the South Tees Development Corporation.

In the short time I have, I want to focus my remarks on clause 109 on freeports and on why I was so pleased to see Teesside play such a prominent role in the Chancellor’s Budget. Freeports are not of course new to Britain, but our ability to use them properly was strengthened by Brexit and the Prime Minister’s EU withdrawal agreement. Outside the EU, freeports have a significant role to play in our recovery and in levelling up our left-behind areas such as Redcar and Cleveland, and clauses 110 and 111 will help achieve that.

Our Teesside freeport is the largest in the UK, with a plan to create 18,000 jobs over the next five years. In less than a month since that Budget announcement, we have seen the creation of more than 2,000 jobs in offshore wind, with General Electric building its new turbine blade manufacturing plant within our freeport. However, the journey to this point was not a happy one. One of Teesside’s darkest days was in October 2015 when SSI fell into liquidation, with the end of 170 years of steel making on Tees and the loss of 3,000 jobs overnight. For many of us in Teesside this felt like a fatal blow and a shock from which we could not recover. For me as a chemical industry worker at the time, I remember the sinking feeling that we would be next—the next domino to fall into industrial collapse—but Teessiders throughout time have shown their immense resilience, and we refused to allow our decline to be inevitable.

In 2017, the election of a Conservative, Ben Houchen, as the Tees Valley Mayor began the journey of devolution in Teesside and the transformation of our area. That year we formed a development corporation to cover the site—the first mayoral development corporation outside London. Although there were many bumps along the road, by February 2020 the deal was done to get full control for the rest of the site, taking full ownership of the former steelworks. In July last year, Teesworks was launched, the new name for the now 4,500 acre site, and in August demolition began, clearing the way for the new jobs to come. It is the largest development site in Europe alongside the deepest port on the east coast, publicly owned and led by a Mayor who is determined to deliver for his area.

We started this journey with the loss of 3,000 jobs on Teesside, but now that site sits at the heart of the UK’s largest freeport, with a plan to create 18,000 jobs over the next five years. The Teesside freeport, which covers Teesworks, Wilton, port of Hartlepool, port of Middlesbrough, Wilton Engineering and Teesside airport, will be our gateway to global trade and the engine room for the northern powerhouse. This is our plan to level up our region, transform Teesside and truly build back better. Recoveries of the past have seen some areas boom while other areas go bust, and over the last 12 months we have faced a crisis like no other in our history. Now we will build a recovery like no other, where nowhere is left behind.

19:33
Claire Hanna Portrait Claire Hanna (Belfast South) (SDLP) [V]
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That was a fair point well made about contributions earlier, Madam Deputy Speaker, and as I am mostly going to address climate change, I will try to be aware of the levels of hot air I am producing myself.

I rise to speak in favour of the reasoned amendment in the name of the hon. Member for Brighton, Pavilion (Caroline Lucas)—my name is also on the amendment—and to say that Social Democratic and Labour party Members will vote against this Bill. We spoke last month in the Budget debate to highlight the missed opportunities, including the opportunity to respond to the economic challenges and the challenges of inequality that have been exposed by the pandemic. However, while interim and half measures can perhaps be explained away with an economy in lockdown and in deep freeze, they cannot be justified for the live climate crisis we are facing at the moment. This Bill misses the opportunity to act on that ecological emergency because it lacks the ambition and the urgency required to meet the UK’s obligations under the Paris agreement. It does not deliver the transformational investment needed to create green jobs, particularly at a time when so many people have lost their work and when so many sectors will take time to recover. Opportunities also need to be there, not least here in Northern Ireland.

Additionally, the Bill provides very little for those who have been working on the frontline throughout the pandemic. It does not say much either to people whose economic precarity has really been exposed over the past 12 or 15 months, or to young people who have missed so many experiences and opportunities and who need to see an economy in which they can have some hope—an economy that focuses on opportunities and wellbeing rather than on an obsession with growth. They need something that offers them more than just personal debt and insecurity in the years ahead.

This year, the UK hosts COP26, which provides even greater impetus than ever to be a leader in climate action, with meaningful cross-governmental action right at the very heart of the Bill and right at the very heart of this global inflection point that we are experiencing at the moment.

We have been doing things differently necessarily for the past year and we should continue to do that and to follow a different ecological and economic course from the one that we would otherwise be on. The Government have repeatedly highlighted the importance of net zero, which is welcome, but the Bill does not reflect the urgency of what we are experiencing here and what we are seeing around the world. We cannot keep putting the meaningful actions into the “too difficult” piles. Recent moves by the Government, including approving a mine, granting new licences for oil and gas exploration, scrapping the green homes grant and cutting overseas aid to countries that are dealing with the impact of climate change and removing funding at a time when they need to transition to less carbon-intensive measures, is going in the wrong direction. These are not the signals of a Government who are serious about a green recovery or serious about the wellbeing of the planet or of future generations. There needs to be consistency in domestic policies and international objectives that we are not seeing here.

I am pleased also to co-sponsor the Climate and Ecology Bill, which would have provided some signals for the actions that this Government could have chosen to take in this Bill if they were serious about the environmental urgency and dynamism that we need to see, so we will be opposing the Bill on that basis.

19:37
Richard Holden Portrait Mr Richard Holden (North West Durham) (Con)
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I draw attention to my entry in the Register of Members’ Financial Interests. I also want to highlight, as other Members have done, the tribute from my constituents following the death of His Royal Highness, Prince Philip, the Duke of Edinburgh. I know that the thoughts of so many have been with Her Majesty the Queen over the past few days.

I speak today in huge support of the Finance Bill. It is absolutely fundamental in the steps that we are taking for constituencies such as mine both in the short and the long term. I would like to associate myself with the comments of my hon. Friend the Member for Hertford and Stortford (Julie Marson). She made a really fundamental point, which is that we politicians in Westminster do not create the wealth; that is down to the businesses, entrepreneurs and workers in North West Durham and across the country, but we can help to set the pitch and enable them to succeed. The Government’s work recently, particularly in relation to continuing the business rate holiday and the VAT holiday, has been helpful and will really help some of my businesses rebound.

The broader point is that this Budget sets out some really good things for the long term, particularly around productivity, as highlighted by my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami). Technology adaptation, along with the Help to Grow scheme, needs to happen for those productivity gains in businesses. The super deduction gives a real opportunity, particularly for the manufacturing centre, which is so capital intensive, to invest for the long term, knowing that that cash will be repaid in spades and also that there will be a tax break. That will also help to counter some of the issues that we are bound to see around unemployment because of the covid pandemic.

More broadly, we are now seeing the levelling up start to take shape. The finance for lifelong learning is provided for in the Bill. That is hugely important for constituencies such as mine, where a far higher than average number of people do not have the level 3 skills that we know make the real difference to people’s earning capacity. Last year, we saw the great motor homes tax cut from the Chancellor in the Budget. That has had a real, direct impact on my constituents this year in our manufacturing centre.

On the levelling-up fund, it has been great to see that £4.6 billion was announced. The Treasury need to be aware that I will be putting in bids for both Consett and the three-town area of Crook, Willington and Tow Law. I have already had conversations with some of the other council candidates and the local council about that, so I am really hoping that we can get some of that cash into our areas to help to boost them and the towns that have felt left behind for too long.

I felt that a couple of comments from the Opposition on higher council tax being forced on to councils did beggar belief to a degree, especially when, in Durham, we are seeing our Labour-controlled council—Labour-run for 102 years—spending £50 million on a new county hall on a floodplain with a roof terrace, at the same time as raising council tax, which is currently the eighth highest in the country out of 340 councils.

I would particularly like to pick up on one other thing, as mentioned by my hon. Friend the Member for Redcar (Jacob Young): the really great news about the freeport. It just goes to show what great local MPs working with the superb Mayor of Teesside, Ben Houchen, can do. That is exactly what we need to see in County Durham as well—great, entrepreneurial, business-focused local government working with local MPs. I was somewhat alarmed by the comments from the hon. Member for Ealing North (James Murray) from the Opposition Front Bench. He suggested that these freeports would be places for smuggling and organised crime to thrive. He made it sound a bit like “Pirates of the Caribbean” is coming to Teesside, when the truth is actually quite different. We have already seen thousands of jobs being created locally and huge numbers of Government jobs both from the Treasury and the Department for International Trade moving to the north-east. That is incredibly welcome not just for Teesside and the constituents there, but the entire north-east region.

There is a lot to commend in this Budget, but the financial responsibility and the need for fiscal responsibility have not gone away. It really matters in the long term, as my right hon. Friend the Member for Central Devon (Mel Stride), the Chair of the Treasury Committee, said at the start. We have to ensure that we maintain that financial responsibility because any rise in interest rates will see serious issues for the economy and Government spending in the long term. I think this is a really balanced approach. It has some short-term measures in there to restart the economy and some of the long-term measures that my constituents voted for at the general election. And crucially, it is a proper Conservative Budget, because at the heart of it is long-term fiscal responsibility.

19:42
Bell Ribeiro-Addy Portrait Bell Ribeiro-Addy (Streatham) (Lab) [V]
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The Government’s mishandling of the pandemic and an inadequate social security system have caused widespread financial hardship, unemployment and debt, yet the Finance Bill falls short in tackling poverty, low pay, insecure work and the ever-deepening divisions in our society. Instead, it includes a whole host of damaging measures, such as cutting working tax credit to its lowest level in decades.

Action for Children estimates that 2.5 million families with children currently on universal credit and working tax credit will miss out on a combined total of £1.3 billion across this financial year when these cuts are implemented in October. Today, the Child Poverty Action Group’s new report looking into the Government’s two-child tax credit limit estimates that at least 350,000 families, including 1.25 million children, have now been affected by the policy since it started four years ago; a far cry from the Government’s so-called levelling-up agenda when those in the poorest parts of the country—children—will suffer even more.

But should we be surprised when the austerity policies pursued by this Conservative Government continue to have widespread and devastating impacts on the most disadvantaged? Years of austerity, welfare cuts, benefit changes and cuts to public services have disproportionately affected women, disabled people and black, Asian and minority ethnic people—a fact that has been repeatedly outlined by the TUC, the Runnymede Trust, the Joseph Rowntree Foundation and many more. That is why it was so utterly astounding and offensive that the report of the Government’s Commission on Race and Ethnic Disparities sought to downplay the existence of institutional racism, against all the evidence and facts showing that economic outcomes in our country are rife with racial disparities. Equally, the covid-19 pandemic is widely noted to have exacerbated these trends. It is disingenuous and misleading to seek to divide ethnic minority working-class communities and white working-class communities, which is what the report did. The same issues affect all our working-class communities. Opportunistically cherry-picking figures cannot alter what is clearly laid out in extensive research by a wide range of credible researchers and actual experts over a number of years.

When it comes to such legislation, as the Women’s Budget Group has rightly argued, meaningful equality impact assessments should consider cumulative impact, intersectional impact, the impact on individuals as well as households, impact over a lifetime, and the impact on unpaid care. Conversations about sexism, ableism, racism, poverty and the economy must go hand in hand. That is why I have consistently called on the Government to carry out and publish equality impact assessments, and I will be tabling an amendment to insist that they do so for this Bill.

Tax Justice UK and the Women’s Budget Group rightly argue that taxation and wealth is an equality issue. On average, women not only earn less than men, but they own less wealth than men, with women in the UK owning approximately 40% of the country’s total personal wealth. Coupled with the very obvious way in which the pandemic has hit women the hardest, it is clear that the Government should really be publishing equality impact assessments. Equality is our law, yet the Government refuse again and again to do that, and they have not done so for the 2021 Budget or for this Finance Bill, either measure by measure or cumulatively. While tax information and impact notes for each tax measure are available, they lack detail and quantitative estimates of impact, or simply state that no equality impacts are anticipated. That is not good enough for legislation that will so fundamentally impact on our society. I hope that the Minister will confirm why the Government have not published the information needed for Members to fully assess how the Bill impacts people right across the country.

Incentives such as the super deduction are biggest for larger firms, and the Financial Secretary to the Treasury has admitted that only 1% of firms will benefit this year, as the rest are within the annual investment allowance. How can the Government justify the fact that, under this Bill, the rich and big business are being treated to mouth-watering tax giveaways and reliefs despite unclear evidence about whether that will actually create the investment needed? For example, who benefits from Amazon paying no corporation tax in the UK as a result of the super deduction?

This Bill is a missed opportunity for a green recovery based on intersectional economics and progressive taxation to create decent, well-paid, unionised jobs and address our care crisis. It has the wrong priorities, it will create further inequality and it has unfairness and injustice rooted at its very core, so I will be voting against it today.

19:47
Duncan Baker Portrait Duncan Baker (North Norfolk) (Con) [V]
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An unprecedented time calls for an unprecedented Budget, and that is exactly what the Chancellor delivered, which is now set out in this Bill. The Budget had at its heart a focus on supporting people and businesses as we begin to emerge from the pandemic, and it laid out how, through fair taxation measures, not austerity, we can begin to rebuild and fix the public finances. Even the latest figures, published this morning, show an economy recovering, with exports, imports and GDP all improving. We already have a vaccination policy that, thanks to this Government, has been world-beating, and we now have an economy repairing itself faster than we all expected.

Not only can North Norfolk celebrate the fact that its economy, which is driven by leisure and tourism, will no doubt boom this summer, but my constituents have even more to celebrate, North Norfolk being in the top 100 places for the UK community renewal fund. Contrary to some beliefs, this is a Government reaching out to every corner of the UK, and I thank the Chancellor for putting North Norfolk on the map.

You might expect that a chartered accountant would want to talk about the taxation measures in this Bill, and I would hate to disappoint you, Madam Deputy Speaker. There are undoubtedly those who have prospered in lockdown from a sense of a captive market, and thus the taxation policy to increase corporation tax not now but in a couple of years’ time is sensible and proportionate. Equally, our rates will still be some of the lowest in the G7. Those making the lowest profits—under £50,000—will be largely unaffected and only those earning over £250,000 will pay the top rate. The vast majority of limited companies in the UK will see little tangible difference. However, I would like the Minister to explain why the super deduction is only applicable to limited companies. I acknowledge that it is a superb incentive for investment, as it is designed to be, but why not broaden the scope? Imagine farmers in my constituency parting with the best part of half a million pounds to buy farm machinery such as combine harvesters, as many of them may do, but because they operate as partnerships they are ineligible for the tax break.

As I repeatedly and relentlessly mention in this place, my fears for the overall UK high street still remain. Yes, our high streets will have the rates reprieve for nearly another year, but in the long term they will suffer as those who have converted to shopping online continue to operate under that trend. The Government must look at modernising the rates system and consider how we level up the disparity in competition between those bricks-and-mortar stores that now face online competition. I certainly look forward to perhaps seeing more of this in the autumn. But I take nothing away from the tax breaks. The confidence that the Government have injected into the economy is working and the green shoots of a post-crisis recovery are already germinating.

19:51
Mike Amesbury Portrait Mike Amesbury (Weaver Vale) (Lab)
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Today I will vote against this Bill’s Second Reading, and I will focus on three reasons why.

Reason No. 1 is that I genuinely believe that our NHS and key workers deserve a decent pay rise, not just platitudes—the clapping of hands every Thursday some time ago, the selfies and the video clips. A vote for this Bill today is a vote to cut, in real terms, the salaries of those heroes, our key workers.

Reason No. 2 is that the regressive council tax bombshell of 5% imposed by the Chancellor on councils up and down this land is classed as spending power in his Budget—a Budget of smoke and mirrors—while ushering in a new era of austerity, with billions of pounds taken from the public sector providing vital services for the most vulnerable and the most needy, whether children or adults, in our society.

Reason No. 3 is that I and others are making a stand for the millions excluded from financial help and business support, whether freelancers in the Northwich part of my constituency or care workers from Frodsham who deserve a fair level of sick pay when they have to self-isolate in this covid pandemic.

My constituents may not have a direct line to the Chancellor, Ministers or leading civil servants, and they certainly do not have share options worth millions of pounds. However, 305 of my constituents in the Daresbury area of Weaver Vale have just lost their jobs—former employees of Greensill. That is the bulk of the UK employees; they are 305 of the 400 or so who have lost their jobs in the UK. Of course, there are thousands in associated industries, whether that is at Liberty Steel or further afield. They are victims of an unregulated shadow banking crisis and the new episode of Tory sleaze.

I want to see a Chancellor who pushes his team not to support his old boss, the former Prime Minister, but to give our key workers a decent pay rise and fully fund our councils, as promised, to help the many who have been excluded from business and personal support. That is how we build forward fairer for all. It is certainly not through supporting this Bill, which I and those on the Opposition Benches will oppose.

19:54
Ruth Cadbury Portrait Ruth Cadbury (Brentford and Isleworth) (Lab)
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I welcome and endorse all the points made by my hon. Friend the Member for Ealing North (James Murray) about the Opposition’s deep concerns about the Finance Bill; I will be voting against it.

I want to focus on measures relating to contractors. The all-party parliamentary loan charge group has just published a comprehensive report, “How Contracting Should Work”, which found that the unintended consequences of IR35 or off-payroll legislation has been a proliferation of umbrella companies, some of which have pushed people into disguised remuneration schemes. The report also exposed significant malpractice, including withholding of holiday pay, kickbacks for recommending or passing on contractors, and even the provision of fitted kitchens and holidays for recruitment agency directors. We concluded that we need legislative changes in and beyond the Bill, including aligning tax and employment law. There is a real opportunity in this Finance Bill to address some specific concerns.

Clause 21 deals with “Workers’ services provided through intermediaries”. It has been described in the explanatory notes as addressing

“an unintended widening of the conditions which determine when a company is an intermediary”.

But, actually, this is a change following lobbying efforts by umbrella companies. The legislation as originally drafted would have meant that recruitment agencies had to put workers on their own payroll, where they would also have enjoyed the protections offered by existing agency legislation. That would also have meant closing the door on tax avoidance schemes. Now that door has swung wide open again, which is a very odd thing for the Government to be doing when at the same time they claim they intend to clamp down on tax avoidance schemes.

The Government could simply strike out clause 21. Doing so would ensure that workers got the agency rights they should be getting. Agencies can run their own payroll; they do for their own staff anyway. They do not need umbrella companies and neither do their contractors. Alternatively, the Government could redraft clause 21 to seek to stop the exploitation. They must do one or the other.

As the Government and HMRC are well aware, schemes are still being sold—mis-sold—to people including mid and low-paid public sector workers, nurses, NHS doctors and other clinical specialists, teachers and social workers. Such schemes are also being sold to many in the private sector, including in IT, business services and so on. We in the APPG support more action through the Bill against promoters of such schemes, but we want to see some detail in this legislation. Schemes must be stopped now, rather than trying to go after promoters when the damage has been done—many are offshore anyway.

I urge the Government to accept that there still needs to be a fair resolution for those facing the loan charge. The vast majority of people facing the loan charge and those duped into schemes since 2017—often lower-paid people—are victims of mis-selling by promoters and operators who gave and still give assurances of compliance and legitimacy, and did not make any mention of the risk of being pursued by HMRC. The reality is that people are simply not able to pay the loan charge, and enforcing it will lead to bankruptcy, hardship and worse. It is time that the Government and HMRC sought a compromise—a way to resolve this without destroying lives and families, and without making people unable to work through their being declared bankrupt. I urge the Government to look again at the APPG’s proposal last year for a final settlement opportunity.

We in the all-party parliamentary loan charge group welcome action to tackle promoters of schemes, but we want to see the details from the Government. We have seen very little so far. At the same time, we need legislative action to stop these schemes in the first place and the misery that they cause, and we want a fair resolution for those facing the loan charge. The Finance Bill gives the Government an opportunity do this, to clean up the supply chain, and to stamp out tax avoidance schemes and other malpractice. Given the importance of these workers to the economy and our public services, this is an opportunity that the Government must take now.

19:58
Richard Thomson Portrait Richard Thomson (Gordon) (SNP)
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It is a pleasure to speak in support of my colleagues in our opposition to the Finance Bill on Second Reading. This might be the Finance Bill that we have, but it is certainly not the Finance Bill that we need right now. Despite warnings and despite the damage to employment that was caused by previous hard deadlines that the Chancellor set himself on furlough—which turned out not to be such hard deadlines after all—we once again face just such a set of cliff edges with these measures come September. We face a cliff edge with the ending of the support for the self-employed, the ending of furlough and the non-continuation of the equivalent of the £20 universal credit uplift—a policy that has done so much to get families on low incomes through the pandemic, making sure that food was on the table, bills could be paid and the wolf was kept from the door. We will also face a cliff edge in key elements of the Scottish economy thanks to the removal of the 5% VAT rate for hospitality. As things stand, all these cliff edges will be encountered irrespective of the condition of the economy come September or, indeed, the progress that we continue to make in suppressing the virus.

This Bill fails to get to grips with the big issues of ensuring a green recovery and fails when it comes to dealing with the much-vaunted levelling-up agenda. In the time I have left, I wish to highlight two points of particular interest to my constituents and to wider society across the north-east of Scotland: the recently announced sector deal for the North sea and the levelling-up agenda.

First, lest there be any doubt, the sector deal is absolutely welcome. It has been called for for a long time and I know that the Government and industry have been working together closely to deliver the package. Although it might be a sector deal, whatever else it might be it is emphatically not a fiscal deal. There are big numbers in respect of the amounts of investment money that might potentially come in, but the Government are not putting a huge amount of money on the table to achieve that. It may help—I hope it does—to drive the objectives of a just transition and to boost the skills and retain human capital in the north-east of Scotland, but we need to be prepared for the possibility that further incentivisation might be needed.

Secondly, on levelling up, people who listened to my good friends and colleagues from neighbouring constituencies who represent the Conservative and Unionist party would believe that the levelling-up fund was going to leave not a single pothole unfilled, not a bridge unrepaired and not a single social project unfunded in the north-east of Scotland. Instead, when the prospectus was unveiled, the city of Aberdeen was in level 2 and Aberdeenshire was languishing in the lowest level, level 3, despite the urgent need to address the hit that the oil and gas sector has taken and tackle the impact of Brexit on our exporters. It seems that the post-Brexit power grab on Scotland’s devolved Government has morphed into a cash grab on the north-east of Scotland.

In conclusion, this is the Bill that we have but it is not the Bill that we need. Along with my colleagues, I look forward to exposing more of its shortcomings as we see them, as the Bill progresses.

20:02
Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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My contribution will not be long, Madam Deputy Speaker; I just wish to make a few points.

As on several other occasions over the past year, I have looked to ascertain whether we are doing our best to offer support to help to sustain businesses and then encourage regrowth. I put on record my thanks to the Government for all that they have done, but I must also put something on the record on behalf of the aviation sector. I hope the Minister will forgive me for putting this on the record, but it is important that I do so.

Although I accept the difficult nature of presenting a Budget at this time and the immense pressure on the Chancellor, there were a number of gaps in the Budget, one of which was support for the aviation sector. The temporary extensions of the job retention scheme and the limited business rates relief for airports were welcome, but there was palpable disappointment in the sector that the Government failed to recognise in their Budget the impact of covid-19 on aviation.

The only aviation-specific clause in the Bill is one to increase the tax burden on international travel through air passenger duty—this at a time when the Government should be putting all their efforts behind the recovery of the UK’s lost aviation connectivity. As a member of the Democratic Unionist party, I have long opposed APD on internal travel—I believe it is a factor in the growing feeling of isolation that Northern Ireland is going through—but that is for another debate in which the Unionist voice must be heard and acknowledged much more than it is being currently.

The covid-19 pandemic is the worst crisis in the history of aviation. Last summer, passenger numbers travelling through UK airports were at their lowest level since 1975. Office for National Statistics data shows that aviation was the worst-hit sector of 2020 and will continue to be the worst-affected sector in 2021.

That tells me that we need to look at how we can encourage and build the sector. Not just the Airport Operators Association’s airport recovery plan but the Office for Budget Responsibility downgraded their estimations of the recovery of levels of air passenger duty until as far away as 2024 and 2025. The Government need to acknowledge that other European countries are giving substantial grant-based funding to airports. The UK Government’s lack of support, other than limited rates relief and access to loans, risks UK aviation falling behind our European competitors. That cannot be allowed to happen given our vision of global Britain.

Instead of supporting the sector, the Finance Bill includes rises in air passenger duty that will harm the recovery of an industry that has largely been shut down for over a year. Added to that, there is the blow of the removal of airside VAT-free shopping at the end of 2020. That is another hit for airports, which rely heavily—up to 40% of their income—on retail and require a firm financial footing to successfully recover throughout the rest of the decade. The Finance Bill, unfortunately, fails to reverse that damaging decision, or put compensation in place such as arrivals duty-free shopping.

I conclude with this comment. In an intervention at the beginning of the debate, I made a comment about insurance companies. Some companies are unfairly using business interruption insurance premiums to punish businesses that had the foresight to take out said insurance before the pandemic. I believe there is a chance with this Bill— insurance companies are notorious for finding a loophole—to address this issue. I ask the Minister to do that.

20:05
Pat McFadden Portrait Mr Pat McFadden (Wolverhampton South East) (Lab)
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I would like to begin by echoing the tributes made from all sides of the House in recent days to the Duke of Edinburgh, Prince Philip. It is a testament to the endurance of his public life that you would have to be almost 80 years old to have any real memory of a time when both he and Her Majesty the Queen were not at the pinnacle of the monarchy. On behalf of my constituents, I would like to send Her Majesty and the royal family our deepest condolences at this most difficult time.

Turning to the debate, it is a pleasure for me to respond on behalf of the Opposition. I thank all Members on all sides of the House, who made very wide-ranging contributions today, and some of them, Madam Deputy Speaker, related to the Bill before us. We have heard excellent contributions on a wide range of issues, including the move away from diesel, climate change, local recovery bonds, the taxation of covid tests, those excluded from Government help schemes, the arts and cultural sector, the aviation sector, the Help to Grow scheme, freeports and regional inequality—or, as the Government call it, levelling up.

On the latter, we heard of the urgent need for action because of years of neglect. Now, I hate to pose an awkward question, but I have been scratching my head and I have to ask: who has actually been in power for the past 11 years? Who presided over that neglect? Who was it who cut billions of pounds from local authority budgets over the past decade? Who was it that abolished the regional development agencies that were responsible for regional development in the first place? Who was it that downgraded Sure Start, and attacked the opportunities and life chances of some of the lowest-income children in the country? I really think that we should be told who it was who presided over the neglect that has spurred the Government to these policies today. I admit that it is a neat trick to pretend that you have only been in power for a year, but the truth is that it has been 11 years. What the Government are now trying to do is fix their own mistakes to repair damage that they caused in the first place.

Now, I admit it must be a relief to the Treasury Ministers to attend the debate today and to be able to shelter on the Front Bench for a few hours, to get some respite from calls from David Cameron. They can tell him that they were in the Chamber and they had their mobiles switched off as he worked his way through the whole Department. If I am right, the Minister responding is one of the few people in the Treasury who has not yet received a call from the former Prime Minister, but he might still be working his way through the list. Right now in the Treasury there are no doubt officials cowering behind doors, hoping that the former Prime Minister does not have their phone number. If he does get through, they can give him the new excuse we heard today: that the new Government loan schemes on which he has been lobbying have nothing to do with the Treasury. Ignore all the press releases, ignore all the tweets, ignore the Instagram videos, ignore the invitations to “Ask Rishi”. It turns out that the case for the defence is that it is all somebody else’s responsibility. But that will not wash—it will not wash at all.

At the heart of the Finance Bill are the tax changes set out in the Budget. As we established during the Budget debates a few weeks ago, those tax changes turn on its head decades-long conservative orthodoxy, not just because tax rates are going up but because the expectation is that alongside rising tax rates will come rising revenues. The projections are set out in the Red Book on corporation tax, thresholds for income tax and the other measures laid out in the Bill.

The Red Book estimates and the Bill lay to rest the argument set out by Conservative politicians from Margaret Thatcher to George Osborne that cutting rates rather than raising them leads to an overall rise in revenues. Indeed, the argument advanced at the core of this Finance Bill—that corporation tax rates should rise and businesses should be compensated by an increase in investment allowances—is the exact mirror image of the argument used by the previous Chancellor to justify the cuts he made to corporation tax. At that time, we were told that all those reliefs and allowances were too complex and that they could be cut to help fund a cut in corporate tax rates; now, the opposite argument is being advanced. Osbornomics are officially buried by Rishnomics in this Finance Bill.

That is all, of course, at the level of policy and ideology. What about the practical level—the practical effect? The freezing of personal allowances will bring an extra 1.3 million taxpayers into the system over the next few years. I thought it might be helpful to illustrate the effect of some of the proposals on a particular constituency, so I picked one at random: Hartlepool. The proposals mean that 34,000 basic rate taxpayers in Hartlepool will face a tax increase before corporations have had to pay a single extra penny toward the costs of the pandemic. In Hartlepool, there are 11,732 households on universal credit. The decision to withdraw the £20 a week uplift from them later this year will cost them collectively almost £12 million extra over the following 12 months. That is what these changes mean in one constituency. That is what they mean to families around the country.

The Bill also sets out plans for the new system of investment allowances, which are related to the recovery loan scheme recently launched—I underline this—by the Treasury. The Treasury cannot escape ownership of this one. What will the Treasury system be to accredit lenders under the new recovery loan scheme? Will it just be for regulated lenders? How will it test the capital adequacy of the institutions involved? How will it avoid a repeat of accrediting for the scheme a lender who is on the brink of collapse?

Of course, the overall judgment on the Budget and the Finance Bill must be by the test of how it gets us through what is happening now and the foundations it lays for the future, and the Bill deals with only one phase of that. On the extension of many of the emergency measures put in place since the beginning of the pandemic, we called for many of those measures in the first place, and they are obviously necessary while we are still in the teeth of the fight against the virus. By that, I mean of course the extension of the furlough scheme, the help for the self-employed and so on. Those interventions cost considerable sums of money, but the social and economic cost of not doing them would have been far, far greater. Governments can act in times of crisis to help the country through. Indeed, if a Government did not do so, we would have to wonder what they were for. But in addition to that immediate crisis help, there is a longer-term rebuilding job to be done. We are going to need strong, job-creating growth if we are to recover from the past year. The economy will not come back exactly as it was before the first lockdown. The pandemic has exposed deep inequalities in society. It has shown the stark reality of what many key workers are paid. It has laid bare the vulnerabilities of our society and the very different circumstances of those who could work from home and those who had no choice but to go to work day after day, no matter the risk to themselves and their families.

In terms of other changes, the pandemic has been described as the “great acceleration”—10 years’ change crammed into one. The way we shop, work, pay for things, educate children, deliver healthcare and much else has been changed, probably forever. Technology and change apply to everyday life as never before. How do we make the most of these trends? How do we ensure that people are equipped for the economy that comes out of this pandemic and that these changes do not simply exacerbate existing inequalities? Those are the urgent questions facing politics today.

Expectations have been changed about what Governments can do, not only here but in the United States, as we have seen in recent weeks, and across the world. This will change the shape of the political argument in the future—not a return to the same old argument about tax and spend, but an argument instead about who can best equip the country for the future, who can rebuild the best and who can deliver the transition to greener jobs, heal the inequalities that have been exposed by the pandemic and help children to recover from the education that has been lost.

The Finance Bill is silent on those challenges, as was the Budget. That is why it is a job only half done. It puts tax increases in place for the next few years that hit family finances before corporations, and it does so with no plan for the recovery that the country needs or one to rebuild the public realm—the public square—to make it more resilient in the future. That is why we have tabled the reasoned amendment on the Order Paper. The second half of that job—what the country has to do—is still to come, and that will be where the argument over the best economic future for the country and how we truly recover from the events of the past year is played out.

20:17
Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch)
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On behalf of my constituents, I join Members across the House in expressing my deepest sympathies to Her Majesty the Queen and the royal family on the death of His Royal Highness the Prince Philip, the Duke of Edinburgh. I would also like to briefly take the opportunity to pay tribute to my colleague, Dame Cheryl Gillan, who passed away over the recess. We worked closely together on the 1922 committee between 2017 and 2019. She was an unflappable lady and always good humoured. I cannot quite believe that she has left us, and it goes to show that we often do not know how much people mean to us until they are gone.

I turn to the matter of today’s debate, which it is a privilege to close on behalf of the Government. I thank all Members for their contributions. We have heard some excellent speeches, and in particular, I thank Members such as my right hon. Friend the Member for Wokingham (John Redwood) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for the many deeply considered reflections they have shared based on the significant knowledge and experience they have gained outside the House. I will address as many points as I can, and I am sure we will consider in Committee those that I do not get to.

The Bill’s first purpose is to protect jobs and livelihoods threatened by covid-19 by providing tax support to businesses and individuals. It boosts some of the hardest hit industries through extending the VAT reduction for the hospitality and tourism sectors. It provides extra security for workers in the housing sector by maintaining the temporary cut in stamp duty until the end of June. My hon. Friend the Member for Wimbledon (Stephen Hammond) raised the issue of businesses that are ineligible for support, such as English language schools in his constituency. The Finance Bill supports struggling businesses by allowing them to carry back up to £2 million of losses and receive refunds for tax paid in additional previous years further to the one year provided at present.

In addition, the Bill contains a number of other measures that will provide a helping hand to businesses and individuals at this most difficult of times. I thank the hon. Member for Weaver Vale (Mike Amesbury), my hon. Friend the Member for North Norfolk (Duncan Baker), the hon. Members for Brentford and Isleworth (Ruth Cadbury), for Belfast South (Claire Hanna), for Bethnal Green and Bow (Rushanara Ali) and for Gordon (Richard Thomson), and all other Members who raised points on their constituents’ behalf on this issue.

The Bill has a second important purpose: to support the Government’s efforts to rebuild the nation’s finances, as eloquently expressed by my right hon. Friend the Member for Central Devon (Mel Stride), so that we have the fiscal flexibility to respond to new crises. As the Chancellor said at the Budget,

“our approach to fixing the public finances will be fair”,

asking those who can afford to contribute to play their part, while

“protecting those who cannot.”—[Official Report, 3 March 2021; Vol. 690, c. 256.]

That is why the Bill maintains the income tax personal allowance and the higher rate threshold at their current levels from next year, and why it maintains the pensions lifetime allowance, the threshold for capital gains tax and the threshold for inheritance tax at 2020-21 levels.

As my right hon. Friend the Financial Secretary to the Treasury said, businesses have received over £100 billion of support through this crisis; it is only right that we ask the firms with the broadest shoulders to support our recovery. Therefore the rate of corporation tax will increase to 25%, but only from 2023. I was very pleased to hear the faintest of praise for that measure from the hon. Member for Walthamstow (Stella Creasy). Those Members who have reservations about the impact on small businesses should know that small businesses with profits of £50,000 or less, which make up 70% of actively trading companies, will be protected from that rise. Let me also remind the House that a 25% corporation tax rate is still the lowest in the G7.

My right hon. Friend the Member for Central Devon asked why the diverted profits tax is maintained, not widened. This tax is charged at a higher rate than corporation tax to discourage the diversion of profits that should be taxed in the UK to another country. The six-point differential between the main rate and the DPT rate has proven an effective deterrent, and that is why the diverted profits tax is being increased from 25% to 31% from April 2023 to maintain the current differential.

My hon. Friend the Member for Mid Norfolk (George Freeman), the hon. Member for Richmond Park (Sarah Olney) and my hon. Friend the Member for Hertford and Stortford (Julie Marson) all raised the important issue of investment and productivity, and I thank my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) for praising our Help to Grow scheme.

The measures in the Bill support the Government’s goal of an investment-led recovery from coronavirus. Our super deduction will allow companies to claim 130% capital allowances on qualifying plant and machinery investment from this month until 2023. That is the biggest two-year business tax cut in modern history, and it will support firms to make a transformative investment in the UK’s future growth and prosperity.

HMRC assessed the potential for fraud and tax avoidance—something which some Members raised. There are a number of safeguards in the legislation to prevent such abuse, such as the exclusions of connected party transactions and second-hand assets. The legislation introduces a new anti-avoidance provision that applies to counteract arrangements that are contrived, abnormal or lacking a genuine commercial purpose.

In addition, the Bill enables the Government to designate tax sites in freeports in Great Britain, as referenced by the hon. Members for Glenrothes (Peter Grant) and for Bootle (Peter Dowd) and my hon. Friends the Members for Redcar (Jacob Young) and for North West Durham (Mr Holden), where, once approved, eligible businesses will be able to benefit from a number of tax reliefs, including capital allowances and relief from stamp duty. I am particularly grateful to my hon. Friend the Member for North West Durham for his rebuttal to the hon. Member for Ealing North (James Murray), who sought to link, incredibly, freeports to organised crime. I reassure my hon. Friend the Member for Waveney (Peter Aldous) that we do expect freeports to enhance the incentives in place in areas like his that already have enterprise zones.

I acknowledge the issues raised by the right hon. Member for East Antrim (Sammy Wilson), including about steel imports into Northern Ireland under the Northern Ireland protocol, and I welcome his remarks on clause 97. He is right to point out what the effect of 25% tariffs would be on engineering firms in Northern Ireland. The Government have been working closely with the steel sector to address that issue, and clause 97 is an example which shows that we are very much committed to ensuring that the protocol works for the people of Northern Ireland.

Let me remind the House that the Finance Bill also has a number of purposes beyond this crisis. As the Financial Secretary outlined earlier, it continues the Government’s work of building a fairer and sustainable tax system. The hon. Member for Strangford (Jim Shannon) raised air passenger duty. The Bill seeks to set air passenger duty rates for April 2022, and so will not take immediate effect. It will only increase long-haul APD rates in nominal terms, while short-haul rates will remain frozen at current rates, which will benefit over 75% of passengers. Long-haul economy rates, for example, will increase by only £2.

The Bill improves tax transparency by paving the way for the UK to implement the OECD’s international reporting rules for digital platforms, stops tax cheats by strengthening our existing anti-avoidance regimes and tightening the rules designed to tackle promoters and enablers of tax avoidance schemes, and provides even more certainty to taxpayers by setting out a more consistent, fairer penalty regime across VAT and income tax self-assessment. In addition, it will help to deliver a low-carbon future, as highlighted by my hon. Friends the Members for Arundel and South Downs (Andrew Griffith) and for Stoke-on-Trent Central (Jo Gideon) and the hon. Member for Ceredigion (Ben Lake), with the introduction of a plastic packaging tax and by removing most sectors’ entitlement to use red diesel from April next year. I know that my hon. Friend the Member for St Austell and Newquay (Steve Double) raised concerns about the policy. I will ensure that officials continue to engage with the sector, and he should receive a letter from me shortly. We recognise that it will be a big change for some businesses. They have another year before changes take effect, and we are doubling the funding provided for energy innovation through the new £1 billion net zero innovation portfolio, which will support the development of alternatives that businesses can switch to.

As every Member of the House will be all too aware, the past year has been a time of deep economic challenge. The Bill plays a major part in allowing us to meet those challenges today while readying the country for a better tomorrow. For that reason, I cannot support the reasoned amendment, and I commend the Bill as it stands to the House.

Question put, That the amendment be made.

20:26

Division 247

Ayes: 268


Labour: 197
Scottish National Party: 44
Liberal Democrat: 11
Democratic Unionist Party: 8
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1

Noes: 358


Conservative: 358

The list of Members currently certified as eligible for a proxy vote, and of the Members nominated as their proxy, is published at the end of today’s debates.
Question put forthwith (Standing Order No. 62(2)), That the Bill be now read a Second time.
20:36

Division 248

Ayes: 358


Conservative: 358

Noes: 262


Labour: 196
Scottish National Party: 44
Liberal Democrat: 11
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Bill read a Second time.
The list of Members currently certified as eligible for a proxy vote, and of the Members nominated as their proxy, is published at the end of today’s debates.
Finance (No. 2) Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Finance (No. 2) Bill:
Committal
(1) The following shall be committed to a Committee of the whole House—
(a) Clauses 1 to 5 (income tax charge, rates etc);
(b) Clauses 6 to 14 and Schedule 1 (corporation tax charge and rates, rate of diverted profits tax and capital allowances: super-deductions etc);
(c) Clauses 24 to 26 (employment income: provisions relating to coronavirus);
(d) Clause 28 (pensions: freezing the standard lifetime allowance);
(e) Clause 30 and Schedule 6 (construction industry scheme);
(f) Clauses 31 to 33 (coronavirus support payments etc);
(g) Clause 36 and Schedule 7 (corporation tax: hybrid and other mismatches);
(h) Clause 40 (capital gains tax: annual exempt amount);
(i) Clause 41 (capital gains tax: hold-over relief for foreign controlled companies);
(j) Clause 86 (inheritance tax: rate bands for tax years 2021-22 to 2025-26);
(k) Clauses 87 to 89 and Schedules 16 and 17 (stamp duty land tax);
(l) Clauses 90 and 91 (annual tax on enveloped dwellings);
(m) Clauses 92 to 96 and Schedule 18 (value added tax);
(n) Clause 97 and Schedule 19 (customs duty);
(o) Clauses 109 to 111 and Schedules 21 and 22 (freeports);
(p) Clause 115 and Schedule 27 (follower notice penalties);
(q) Clauses 117 to 121 and Schedules 29 to 32 (avoidance and conditionality);
(r) Clauses 128 to 130 (banking);
(s) any new Clauses or new Schedules relating to—
(i) the impact of any provision on the financial resources of families or to the subject matter of Clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86;
(ii) the subject matter of Clauses 6 to 14 and Schedule 1;
(iii) the impact of any provision on regional economic development;
(iv) tax avoidance or evasion;
(v) the subject matter of Clauses 87 to 89 and Schedules 16 and 17 and Clauses 90 and 91;
(vi) the subject matter of Clauses 92 to 96 and Schedule 18, Clause 97 and Schedule 19 and Clauses 128 to 130.
(2) The remainder of the Bill shall be committed to a Public Bill Committee.
Proceedings in Committee of the whole House
(3) Proceedings in Committee of the whole House shall be completed in two days.
(4) The proceedings—
(a) shall be taken on each of those days in the order shown in the first column of the following Table, and
(b) shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.

Proceedings

Time for conclusion of proceedings

First day

Clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86; any new Clauses or new Schedules relating to the impact of any provision on the financial resources of families or to the subject matter of those Clauses

2 hours from commencement of proceedings on the Bill on the first day

Clauses 6 to 14 and Schedule 1; any new Clauses or new Schedules relating to the subject matter of those Clauses and Schedule

4 hours from commencement of proceedings on the Bill on the first day

Clauses 109 to 111 and Schedules 21 and 22; and new Clauses or new Schedules relating to the impact of any provision on regional economic development

6 hours from commencement of proceedings on the Bill on the first day

Second day

Clause 30 and Schedule 6; Clause 36 and Schedule 7; Clause 41; Clause 115 and Schedule 27; Clauses 117 to 121 and Schedules 29 to 32; any new Clauses or new Schedules relating to tax avoidance or evasion.

2 hours from commencement of proceedings on the Bill on the second day

Clauses 87 to 89 and Schedules 16 and 17; Clauses 90 and 91; any new Clauses or new Schedules relating to the subject matter of those Clauses and Schedules

4 hours from commencement of proceedings on the Bill on the second day

Clauses 92 to 96 and Schedule 18; Clause 97 and Schedule 19; Clauses 128 to 130; any new Clauses or new Schedules relating to the subject matter of those Clauses and Schedules

6 hours from commencement of proceedings on the Bill on the second day

Proceedings in Public Bill Committee etc
(5) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 6 May 2021.
(6) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
(7) When the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Public Bill Committee have been reported to the House, the Bill shall be proceeded with as if it had been reported as a whole to the House from the Public Bill Committee.
Proceedings on Consideration and Third Reading
(8) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(9) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
Programming committee
(10) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House or to proceedings on Consideration and Third Reading.—(David T. C. Davies.)
Question agreed to.
Deferred Divisions
Motion made, and Question put forthwith (Standing Order No. 41A(3)),
That at this day’s sitting, Standing Order No.41A (Deferred divisions) shall not apply to the Motion in the name of the Chancellor of the Exchequer relating to Finance (No. 2) Bill: Carry-over.—(David T. C. Davies.)
Question agreed to.
Finance Bill (No. 2) Bill (Carry-Over)
Motion made, and Question put forthwith (Standing Order No. 80B(1)(a)),
That if, at the conclusion of this Session of Parliament, proceedings on the Finance (No. 2) Bill have not been completed, they shall be resumed in the next Session.—(David T. C. Davies.)
Question agreed to.

Finance (No. 2) Bill

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021

(3 years, 1 month ago)

Commons Chamber
Read Full debate Finance Act 2021 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 19 April 2021 - large print - (19 Apr 2021)
(Clauses 1 to 5; Clauses 6 to 14 and Schedule 1; Clauses 24 to 26; Clause 28; Clause 30 and Schedule 6; Clauses 31 to 33; Clause 36 and Schedule 7; Clause 40; Clause 41; Clause 86; Clauses 87 to 89 and Schedules 16 and 17; Clauses 90 and 91; Clauses 92 to 96 and Schedule 18; Clause 97 and Schedule 19; Clauses 109 to 111 and Schedules 21 and 22; Clause 115 and Schedule 27; Clauses 117 to 121 and Schedules 29 to 32; Clauses 128 to 130; any new Clauses or new Schedules relating to: the impact of any provision on the financial resources of families or to the subject matter of Clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86; the subject matter of Clauses 6 to 14 and Schedule 1; the impact of any provision on regional economic development; tax avoidance or evasion; the subject matter of Clauses 87 to 89 and Schedules 16 and 17 and Clauses 90 and 91; the subject matter of Clauses 92 to 96 and Schedule 18, Clause 97 and Schedule 19 and Clauses 128 to 130)
[1st Allocated Day]
Considered in Committee
[Dame Rosie Winterton in the Chair]
Clause 1
Income tax charge for tax year 2021-22
Question proposed, That the clause stand part of the Bill.
Rosie Winterton Portrait The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)
- Hansard - - - Excerpts

With this, it will be convenient to discuss the following:

Clauses 2 to 4 stand part.

Amendment 2, in clause 5, page 2, line 16, leave out “2022-23”.

This amendment would mean that the freezing of tax thresholds at 2021-22 levels did not apply until 2023-24.

Amendment 3, page 2, line 18, leave out “2022-23”.

See the explanatory statement for Amendment 2.

Amendment 4, page 2, line 25, leave out “2022-23”.

See the explanatory statement for Amendment 2.

Clause 5 stand part.

Clauses 24 and 25 stand part.

Amendment 93, in clause 26, page 19, line 3, at end insert—

“, or for the presence of antibodies to SARS-CoV-2”.

This amendment would extend the income tax exemption for payments to employees in respect of the cost of obtaining antigen coronavirus tests to cover antibody coronavirus tests too.

Clause 26 stand part.

Clause 28 stand part.

Amendment 92, in clause 31, page 20, line 13, at end insert—

“, where the person who received the payment is not a qualifying person by virtue of Paragraph 5 of the direction given by the Treasury under section 76 of the Coronavirus Act 2020”.

This amendment would ensure that the one-off £500 payment to certain working households in receipt of tax credits could only be recovered where it is found that the individual was not entitled to the payment because they were knowingly concerned in underlying fraud either in relation to their tax credit award or the one-off payment.

Amendment 15, page 20, line 13, at end insert—

“(4) The Chancellor of the Exchequer must, no later than 5 April 2022, lay before the House of Commons an equalities impact assessment of the provisions of this section, which must cover the impact of the provisions on—

(a) households at different levels of income,

(b) people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010,

(d) equality in different parts of the United Kingdom and different regions of England, and

(e) child poverty.”

Clauses 31 to 33 stand part.

Clause 40 stand part.

Clause 86 stand part.

New clause 7—Assessment of revenue effects of supplementary income tax rate

“(none) The Chancellor of the Exchequer must, no later than 31 October 2021, lay before the House of Commons an assessment of the effects on tax revenues of introducing a supplementary rate of income tax, charged at a rate of 55%, above a threshold of £200,000.”

This new clause would require the Government to publish an assessment of the effect on tax revenues of introducing a 55% income tax rate on income over £200,000.

New clause 8—Equalities impact assessment and distributional analysis of tax thresholds

“The Chancellor of the Exchequer must, no later than 5 April 2022, lay before the House of Commons an equalities impact assessment of existing income tax thresholds and a distributional analysis of—

(a) the effect of reducing the income tax threshold for the additional rate to £80,000, and

(b) the effect of introducing a supplementary rate of income tax, charged at a rate of 50%, above a threshold of £125,000.”

New clause 10—Review of changes to coronavirus support payments etc

“(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 coronavirus support payments etc by sections 31, 32 and 33 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,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must consider the following scenarios—

(a) the coronavirus job retention scheme and the self-employment income support scheme are continued until 30th September 2021, and

(b) the coronavirus job retention scheme and self- employment income support scheme are continued until 31st December 2021.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(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 report comparing the effect of (a) the coronavirus job retention scheme and the self-employment income support scheme being continued until 30 September 2021, and (b) the coronavirus job retention scheme and self-employment income support scheme being continued until 31 December 2021 on various economic indicators

New clause 11—Review of changes relating to cycles and cyclist’s safety equipment

“(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 25 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,

(c) productivity,

(d) GDP growth,

(e) poverty, and

(f) carbon emissions.

(3) A review under this section must consider the following scenarios—

(a) the cost of a cycle is made an allowable expense on self-assessment tax return forms, and

(b) the cost of a cycle is not an allowable expense on self-assessment tax return forms.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(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 report comparing the impact of the impact of (a) making the cost of a cycle an allowable expense on self-assessment tax return forms and (b) not doing so on various economic indicators.

New clause 12—Review of impact of section 40 on equalities

“(1) The Chancellor of the Exchequer must conduct an equality impact assessment of section 40 and lay this before the House of Commons within six months of Royal Assent.

(2) This assessment must consider the expected impact of section 40 on individuals and groups with protected characteristics under the Equality Act 2010.”

This new clause would require the Chancellor of the Exchequer to review the impact of Clause 40 on equalities.

New clause 22—Review of impact of section 40

“(1) The Chancellor of the Exchequer must review the impact of section 40 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) the regional distribution of capital gains in the UK, and

(b) projected receipts.

(3) A review under this section must consider the following scenarios—

(a) capital gains tax rates are changed so as to be equal to those of income tax, and

(b) capital gains tax rates remain at the level in this Act.”

This new clause seeks a report on the impact of equalising capital gains tax and income tax on (a)the regional distribution of capital gains in the UK, and (b) projected receipts.

New clause 23—Equality impact analysis

“(1) The Chancellor of the Exchequer must review the equality impact of sections 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86 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—

(a) the impact of those sections on households at different levels of income,

(b) the impact of those sections on people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the impact of those sections on the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and

(d) the impact of those sections on equality in different parts of the United Kingdom and different regions of England.

(3) A review under this section must give a separate analysis in relation to the following matters—

(a) income tax,

(b) employment income,

(c) coronavirus support payments,

(d) pension schemes,

(e) investments, and

(f) inheritance tax.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(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 the Chancellor of the Exchequer to carry out and publish a review of the effects of clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86 of the Bill on equality in relation to households with different levels of income, people with protected characteristics, the Treasury’s public sector equality duty and on a regional basis.

17:48
Jesse Norman Portrait The Financial Secretary to the Treasury (Jesse Norman)
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The Government have delivered an unparalleled package of support during the covid-19 pandemic, providing over £352 billion for public services, workers and businesses. This response has been fair and balanced, with the poorest households benefiting the most from the Government’s interventions. It is now necessary to take steps to ensure the sustainability of the public finances and continue to fund our excellent public services. Our approach to fixing the public finances will therefore also be fair and balanced. The fairest way to put the public finances on a more sustainable footing is to ask all taxpayers to play their part, as well as asking those people able to contribute more to do so. That is why, in these parts of the Bill, the Government are legislating for freezes to the personal allowance, higher rate thresholds, the inheritance tax thresholds, the pensions lifetime allowance and the annual exempt amount in capital gains tax. The Government are also making sensible changes to the tax treatment of coronavirus support payments and exemption-related adjustments to account for the impact of the pandemic.

Given the number of speakers and amendments, I will try to keep my remarks relatively brief. Before I turn to the changes announced at Budget, let me touch on clauses 1 to 4. These are legislated for every year and are essential for the Government to be able to collect the right amount of income tax for the tax year 2021-22.

I come now to the clauses that legislate to maintain thresholds. These clauses are an essential part of a fair and responsible fiscal approach to fixing the public finances. Clause 5 maintains the income tax personal allowance and the basic rate limit at their 2021-22 levels from April 2022 until April 2026. This is a universal, progressive and fair measure being taken to fund public services and rebuild the public finances, and it ensures that the highest-earning households will contribute more. Indeed, the top 20% of highest-income households will contribute 15 times that of the bottom 20% of lowest-income households.

I shall now respond to amendments 2 to 4 and new clause 7, which relates to clause 5. Amendments 2, 3 and 4 seek to delay the decision to maintain the income tax personal allowance and higher rate threshold until April 2023. The Office for Budget Responsibility forecast that UK GDP will reach its pre-virus peak by the second quarter of 2022. The Bank of England forecast that it will happen at the beginning of 2022. In the light of those estimates, it is reasonable and fair for the Government to uphold the start of this policy from April 2022. Nobody’s take-home pay will be less as a result of this decision. For most taxpayers, any real-terms loss will be very small in 2022-23. I therefore urge the right hon. Member for Hayes and Harlington (John McDonnell) not to press the amendments to a vote.

New clauses 12 and 23 would require the Government to publish equalities impact assessments for all the measures in this debate, and new clause 8 would require the Government to publish an equalities assessment of existing income tax thresholds. New clause 8 would also require the Government to publish distributional analysis on two changes that do not constitute Government policy—namely, reducing the additional rate threshold to £80,000 and introducing a supplementary 50% rate of income tax for income above £125,000.

The Treasury carefully considers the equality impacts of the individual measures announced at fiscal events on those who share protected characteristics, in line with both its legal obligations under the public sector equality duty and its strong commitment to issues of equality. The Treasury already publishes comprehensive assessments of income tax threshold changes. Alongside the Budget, the Government have published detailed distributional analysis of the decision to maintain income tax thresholds, both at a household and on an individual basis. The new clauses therefore do little to provide meaningful additional analysis further to the Government’s existing comprehensive publications, and I therefore urge Members not to press them to a vote.

Clause 28 makes changes to maintain the pensions lifetime allowance at £1,073,100 until April 2026. This will limit the pensions tax relief available to those with the largest pension pots and supports the Government’s objective of a system of pensions tax relief that is fair, affordable and sustainable. Clause 40 maintains the capital gains tax annual exempt amount at its 2020-21 level of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements for the tax years 2021-22 up to and including 2025-26. Maintaining the annual exempt amount at a 2020-21 level is a responsible decision, consistent with the decisions that the Government have taken to maintain the value of the other main allowances over the same period.

Clause 86 maintains inheritance tax thresholds at their 2020-21 levels until April 2026. This means that the nil rate band will remain at £325,000 and that the residence nil rate band will remain at £175,000. The tapering of the residence nil rate band will continue to start when the net value of an estate is more than £2 million. Maintaining these thresholds is forecast to contribute almost £1 billion over the next five years to help to rebuild the public finances, but this approach still ensures that more than 94% of estates will not be liable for inheritance tax in each of the next five years. Taken together, this Government’s approach to thresholds across the tax system is clear evidence of a fair and consistent fiscal strategy to repair the public finances while continuing to invest in public services.

Clauses 24 to 26 make minor adjustments to exemptions to account for the impact the coronavirus pandemic has had on businesses and workers. Let me also address one proposal relating to clauses 25 and 26. New clause 11 would commission a review of the changes relating to the employer-provided cycles exemption. I am happy to reassure the Committee that the terms of that exemption have not changed and only a minor time-limited easement is introduced by this Bill. It is not therefore necessary to review the changes. Clauses 31 to 33 relate to the Government’s package of support payments for individuals and businesses during the pandemic. Clause 31 makes changes to ensure that the one-off £500 payment to eligible working tax credit claimants announced at Budget 2021 is not subject to income tax. This will ensure that the recipients of the tax credit benefit in full and that the payment meets its objective of providing additional support to low-income working households.

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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Has the Minister had any discussion with the Low Incomes Tax Reform Group, which has indicated to me some of its concerns about how Her Majesty’s Revenue and Customs required claims from individuals? It is a delicate matter, but there is problem there. Has he had an opportunity to discuss it with the LITRG?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

The hon. Gentleman will be pleased to know that I maintain a strong dialogue, through officials, and from time to time in person, with the LITRG and I have no doubt that the input it has given has been carefully considered in this regard. If he would care to write to me with his specific concern, I would be happy to pick that up as well.

It is right that HMRC has powers to tackle fraud and abuse of the self-employment income support scheme and that the Government provide legal clarity that SEISS grants are liable for income tax in the year of receipt. Clauses 31 and 32 will allow payments made in support of individuals and businesses by the Government to meet their objectives as far as is possible. Opposition amendments 15 and 92 are already comprehensively addressed by existing policy, and I ask that Members do not press them to a vote. Clause 33 makes changes to ensure that the repayments of business rates relief are deductible for corporation tax and income tax purposes. This ensures that any repayments of support are dealt with appropriately.

Taken together, these measures will help the Government to continue to support individuals and businesses through the coronavirus pandemic, and they will also begin to put the public finances on a sustainable footing as we continue to move out of the pandemic. I therefore ask that clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86 stand part of the Bill.

James Murray Portrait James Murray (Ealing North) (Lab/Co-op)
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I rise to speak to the provisions standing in my name and those of the Leader of the Opposition and my right hon. and hon. Friends. On behalf of the Opposition, I will begin our detailed scrutiny of this Bill today by considering the impact it will have most immediately and most widely on people across the UK through its cuts to the money that families, in all their many forms, have in their pockets.

The opening clauses, 1 to 5, focus on income tax, with clause 5 freezing the personal allowance from 2022-23 through to 2025-26. That is no small change; the effect of the clause will be to make half of all people in the UK pay more tax from next year, and that is not the only measure the Government are taking that raids their pockets. We know that this Bill will make families pay more through the income tax changes next year, but it also does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now, it supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need help most, and of course it comes as the Government are choosing, in this year of all years, to take money from the pockets of NHS workers.

Sammy Wilson Portrait Sammy Wilson (East Antrim) (DUP)
- Hansard - - - Excerpts

Does the shadow Minister accept that the total take in income tax from individuals across the United Kingdom as a result of that one measure in one year will be £10 billion, and the total take over the next five years will increase by 25%? On the basis of the tax paid now, 25% more income tax will be paid collectively by individuals as a result of simply freezing thresholds.

18:00
James Murray Portrait James Murray
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I thank the hon. Member for setting out some of the figures about the impacts of the Bill. I can add to that by saying that if we take the freezes to the personal allowances, along with the cuts to NHS workers’ pay, the council tax hike and the cut to universal credit, the real scale of the impact of the Government’s decisions becomes clear. A newly qualified nurse living with their partner and two children in rented accommodation will lose more than £1,100 a year. It is plain wrong to hit families across the country in that way, but that sense of injustice is made all the more acute by the fact that that increase of costs to families comes years before any rise in corporation tax. At the same time, through the Bill the Government are letting tech giants stop paying tax altogether.

Last week, we voted against the Bill on Second Reading. Our reasoned amendment made it clear that key to the decision was its effect on family finances, through what it does and what it does nothing to stop. Today, we have the chance to stop the measure in the Bill that will make every income tax payer in the country pay more next year. We will seek a vote on clause 5, and I urge Conservative Members to join us in knocking this attack on families out of the Bill. By doing so, we would allow the Government to come back in their next Finance Bill with a fairer approach—one that does not put a misguided tax break for big business ahead of the money that families have in their pockets.

The other clauses that are being debated concern a range of other matters. Clauses 24 to 26 relate to the impact of covid on those benefiting from enterprise management incentives, cycle-to-work schemes and employer-provided coronavirus tests. Meanwhile, clause 31 exempts those receiving tax credits from paying income tax on the one-off covid-19 support scheme payment. Clause 32 clarifies the tax treatment of payments made under the self-employed income support scheme. Clause 33 provides for a relief where businesses repay covid support payments that are no longer required. Finally, clause 28 freezes the standard lifetime allowances for pensions immediately until 2025-26, while clause 40 does the same for the capital gains tax annual exempt amount and clause 86 does the same for inheritance tax thresholds.

Through our new clause 23, we ask that all the measures being considered today are considered for their effects on the finances of different households across the UK. We want to see a fair, progressive tax system in this country, so we want the Government to be transparent about the effect that their changes will have on people’s lives. The question of how changes affect the people of this country should always be the Government’s overriding concern when introducing changes to the tax system.

That is why our new clause would require that the Government analyse, review and be transparent about how their changes will affect households at different levels of income. It would further require Ministers to set out how the changes would affect people on the basis of age, disability, race, sex and other protected characteristics, and how they would affect people living in different nations and regions of the UK. There is significant evidence that women, those from black, Asian and ethnic minority communities, young people and disabled people have been disproportionately affected throughout the pandemic. The Budget report itself says:

“The economic impact of restrictions has not been felt equally. Staff in the hardest hit, largely consumer-facing sectors, such as hospitality, are more likely to be young, female, from an ethnic minority, and lower paid.”

It is therefore indefensible that not one of many supporting documents to last month’s Budget statement, nor the Bill, was an equality impact assessment.

Our new clause gives the Government a chance to right that wrong, but while that analysis is vital in setting out how different people will be affected by the Government’s choices, we know already that the biggest and most immediate impact of the changes in the Bill—and of the Government’s wider policy choices, on which the Bill is silent—will be to take money from the pockets of people across the country this month, this autumn and next year.

Andrew Griffith Portrait Andrew Griffith (Arundel and South Downs) (Con)
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We hear from the hon. Gentleman that his party seeks to strike out the single largest intervention that will help the recovery, in the form of the super-deduction, which businesses have already told me is mobilising incremental investment. I would be fascinated to hear his view of new clause 7, which was put forward by many of his recent colleagues, including many of those who were on the Front Bench, to increase the rate of income tax to 55%. What does he think of that?

James Murray Portrait James Murray
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The hon. Gentleman spoke about the super-deduction, but as that will be picked up in the next debate, I will focus now on the changes that are the subject of this debate.

Although we know that the Government will be making changes that affect different communities differently, the crucial point is that we know already what impact the Government’s policies will have this month, this autumn and next year. This month, households will feel the hit as the Government force local authorities to raise council tax in the middle of a pandemic, having broken their promise to give councils whatever was needed to help support people through the covid crisis.

This autumn, some of those families who need help will see the Government cut £20 a week off their universal credit, hitting them just as other covid support schemes are due to be winding down. This hit will come just when the Office for Budget Responsibility has predicted that unemployment will peak at 6.5%—2.2 million people—and this cut takes out-of-work support to its lowest level since the 1990s.

Next year, more than 30 million people in this country, including those earning only just enough to pay tax at all, will be forced to pay more as the freeze to income tax and personal allowances kick in. It tells us all we need to know about this Chancellor’s priorities that families will feel the impact of the Government’s choices years before businesses face an increase in corporation tax and at the very same time that some of the biggest firms in this country are offered a tax break that the Chancellor himself has boasted represents the biggest tax cut in modern British history.

We on the Labour Benches believe that our country needs a fair progressive tax system. We want to see greater investment in jobs, growth and addressing the long-term challenges that we face. We want to see families protected, not forced by this Government to shoulder the burden while tech giants see their tax bills reduced to nil. It is not just the Opposition who oppose the Government’s approach. Major international economic bodies such as the International Monetary Fund and the OECD agree that these tax rises on families are wrong. The hit to household finance is not only unfair but economically illiterate. Taking money out of people’s pockets now means that they will not spend it in small businesses or in local high streets, damaging the prospect of a recovery.

We will be voting for the Government to be clear and transparent about the effects of the measures in this Bill on all the different families and households across this country. While Conservative Members may not want to support all of our points, I would not be surprised if some did not feel deeply uncomfortable at the prospect of making families pay more through this Bill. We therefore hope to offer them a chance to join us in rejecting clause 5, halting this Bill’s plans to make all income tax payers pay more from next year and forcing the Government to think again about the fairer tax system our country needs.

Andrew Jones Portrait Andrew Jones (Harrogate and Knaresborough) (Con)
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I am aware that time is short, so I will keep my remarks brief.

All of us will have been dealing with constituents facing real financial challenges over the past year. The past months have been unprecedented in their impact on family finances. People have lost jobs, been on furlough, and faced great uncertainty. It has been genuinely hard. Yet some sectors have done very well and seen growth, so the economic impact of the pandemic has fallen very unevenly. The economic consequences have also landed very quickly, but the response from the Treasury was equally quick. We are now facing the next stages of the crisis. Over the months ahead, we will be getting the economy moving again as quickly as possible, safely, so that we can get people back into work, and considering how the Government will pay for all the extra costs they have incurred.

As my right hon. Friend the Financial Secretary to the Treasury said, economists have predicted that the economy will have fully restarted by April next year. I think that that is right, based on my own business experience and on conversations with businesses in my constituency and beyond. It therefore makes sense to start the recovery of the public finances then, and that is what some of the measures in this Bill do. The question for me, though, is how to do this fairly and without choking off the recovery.

Let me focus on one measure: personal allowances. The increases that we have seen in personal allowances over the past decade have been a key ingredient in helping some of the least well-off in our society. The allowance has nearly doubled and is one of the most generous in the world. It has been part of the broader initiative, which has been a hallmark of the past 10 years, about making work pay. It is with some caution that we should consider changes, but I will be backing these changes and urge Members to reject the Opposition amendment on this measure. It is worth remembering that nobody’s take-home pay will be less than it is now, and that this is a measure that builds over time, as will the pace of the recovery. I note that the right hon. Member for Wolverhampton South East (Mr McFadden), who is not in his place, commented that it is a fairer way to raise revenue than some others, and I agree with his analysis.

The crisis support packages have been necessary and welcome, but they come with a huge cost. There is no compassion in letting debts build up for future generations to pay off. There is no stability for Governments in failing to tackle deficits.

Sammy Wilson Portrait Sammy Wilson
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While I think we all accept that the current level of debt cannot continue, does the hon. Gentleman accept that, first, by taking £10 billion from consumers in the next year as a result of these tax allowance freezes and, secondly, because we do not know what will happen to unemployment once the furlough scheme finishes, there is a risk that the freezes this year will impact on the short-term recovery of the economy? Are they not therefore inappropriate, and ought not the Government to wait to see what happens?

Andrew Jones Portrait Andrew Jones
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The right hon. Gentleman makes a good point, as he always does. I have considered that point, and I know that the Government have also considered it, but this is about striking a balance between encouraging the recovery and choking it off. Part of that recovery is ensuring that we have sound public finances. We have had two supposed once-in-a-century events in just over 10 years, and the lesson we should draw is that financial responsibility allows Governments to respond to crises at scale. That is what we have just seen here, and that has helped the finances of families across our nation when they needed it most.

That is also why the economic recovery, with its focus on growth and investment and on households and Government, cannot be put off. The personal allowance measure in the Bill should proceed. We should not listen to the Labour party because, quite frankly, its Members have voted against all the personal allowance increases in Budget measures over the past 10 years. We need to get the focus that we have had on saving lives back on to recovering livelihoods.

Alison Thewliss Portrait Alison Thewliss (Glasgow Central) (SNP)
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I will speak to new clause 10. This UK Government said they would be led by data, not dates, and the Chancellor has stood in the Chamber on several occasions and said he will do whatever it takes to ensure recovery, yet in this Finance Bill he has seen fit to put an arbitrary date on ending the furlough scheme. The Labour shadow Chancellor has been critical of the Government’s previous dithering on extending the job retention scheme, so I hope her colleagues will support the SNP’s new clause, which will protect jobs and workers across the UK.

New clause 10 would introduce a reporting requirement to compare the effect of continuing the coronavirus job retention scheme and the self-employment income support scheme until both 30 September 2021 and 31 December 2021. Reports would be required on the specific impacts of continuing to both dates on business investment, employment, productivity, GDP growth, and poverty. SNP Members believe that the furlough and self-employment support schemes should be continued for as long as our economy requires them. It is economic recklessness to confidently predict the end of a pandemic that has thrown us curveballs time and again. Any winding down of support schemes should be linked to the numbers of covid cases in the population, with proper care taken to make sure that no badly hit areas are left behind.

We have seen the potential of new variants such as the Kent and South African variants, with the Indian variant causing the country to be added to the red list and prompting the Prime Minister to cancel his travel plans just this week. On the variants and support for people who need tests, I welcome the change to exempt coronavirus tests from income tax, but SNP amendment 93 would seek to extend the income tax exemption for payments to employees in respect of the cost of obtaining antigen coronavirus tests to cover specific antibody coronavirus tests, too. There is a wider argument for broadening the provision to future proof the Bill for future pandemics and other such incidents, so I hope Ministers will give the proposal some consideration.

Businesses have found themselves in a position of having to make payments on VAT deferred last year in the first week of the crisis while we are still in lockdown in the second peak of the crisis, and now the biggest lifeline supporting our economy is being pulled away without any due consideration for the impact on jobs.

18:15
Not only does the SNP want to see a continuation of the job retention scheme and the self-employment income support scheme; we want to see those gaps filled that the Chancellor knows fine well about. SEISS grants will be extended to September and extended to cover 600,000 more self-employed people, which we welcome, but this still leaves behind the 2.4 million people who have received zero support from this Government. They should never have been left behind.
People on precarious contracts are in many cases those who can least afford to be without support. I have recently been contacted by constituents who are entitled to the fourth and fifth rounds of the SEISS but have been asked to wait, with no money in the bank. I urge Ministers to accelerate this entitlement, to help those struggling to get by. Repeatedly and knowingly leaving large chunks of the population with little or no support is an unacceptable dereliction of duty from this UK Tory Government in the worst crisis our generation has seen, and I am sure that history will not remember them kindly for it.
We have also tabled amendment 92 to clause 31, because we agree that people should not be taxed on the £500 payment. Incidentally, this also shows, in respect of the money the Scottish Government wanted to provide to thank health and care workers, that it is possible to do these kinds of things when the UK Government decide that they want to help and make exemptions. We share the concerns of the Low Incomes Tax Reform Group that the rules on this are not yet clear enough, and I urge Ministers to provide that clarity and reassurance. This payment is made automatically by HMRC, but the provision talks of a clawback where someone who is not entitled to it receives it. It is unclear exactly how this will work. Our amendment would ensure that the one-off £500 payment to certain working households in receipt of tax credits could be recovered only where it was found that the individual was not entitled to the payment because they were knowingly concerned in underlying fraud, in relation either to their tax credit award or to the one-off payment.
I do not want to be relentlessly negative in my criticisms of the Bill, and it is true that there are some details which are to be welcomed. For example, I welcome the fact that the UK Government will adopt the Scottish Government’s policy of increasing the higher rate threshold to ensure that nobody pays more than they would next year. In such uncertain times, any small piece of certainty we can give people is a comfort. The UK Government should follow the Scottish Government’s lead and take the extra measure of freezing income tax rates and bands over the next five years.
Scotland has the most progressive income tax system in the UK, with more than half of taxpayers paying less than they would if they lived elsewhere in the UK. By asking those who earn the most to pay a little bit more, Scotland has been able to invest more in public services and deliver a range of benefits such as free prescriptions, free university tuition and concessionary bus travel. I am proud to be part of a party that in Government has put public services first and ensured that those who can least afford it pay less tax.
In contrast, this UK Tory Government are peering down the barrel of a return to austerity. We are looking at a freezing of the personal allowance, which is a tax cut by stealth. The lowest earners will be the hardest hit by this policy, and at the same time the Chancellor is handing super deduction tax breaks to big business. So much has changed in the last year, but the things that have stayed the same offer little comfort. This is the same old Tories returning to form and making brazen spending cuts on the back of the poorest and the most vulnerable.
I have said on many occasions that Finance Bills get a bad rep. They are not boring technical things; instead, they are an opportunity to take steps towards the type of society we want. A green recovery and the chance to do things differently are at the heart of our approach and our amendments. The SNP’s new clause 11 would require a report comparing the impact of making the cost of a bicycle an allowable expense on self-assessment tax returns, on business investment, employment, productivity, GDP growth, poverty and carbon emissions.
This policy proposal makes perfect sense, as it encourages active travel and reduces carbon emissions. It comes from the Cycle to Work Alliance’s report on future-proofing the cycle to work scheme, “Unlocking Access for All Workers”. This is the type of policy that sends a clear message: if someone wants to take steps to reduce their carbon footprint and improve their health, their Government should support them all the way. Currently the Government provide support only for employees and not for self-employed people. The new clause would rectify that anomaly and make it fair for everybody. HMRC could include the cost of a bike as an allowable expense on self-assessment forms, to ensure that all workers could participate, regardless of their employment status. In Scotland we have seen a manifesto commitment from the SNP to provide free bikes for school pupils who cannot afford them, and to provide grants to others. This will give every child the opportunity to engage in active travel. The new clause asks the UK Government to do their bit by making the cost of a bike an allowable tax expense.
Finally, our new clauses 12 and 22 seek to get more evidence on the impact of changes to capital gains tax. There is very little done to drill into the impact of decisions made through the Finance Bill. Again, evidence sessions beforehand might be useful, but assessing the effectiveness afterwards—particularly the impact in different parts of these islands and on the people who live here—is vital. These assessments are not an add-on or a nice-to-have; they are essential. If the UK Government truly believe their measures to be fair, they should have no fear of that evidence.
Flick Drummond Portrait Mrs Flick Drummond (Meon Valley) (Con) [V]
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Like all Conservative Governments, this is one who believe that people should be encouraged to create wealth and invest it wisely without undue interference from the state, bureaucracy or taxation for taxation’s sake. The fundamentals of our economy were strong nationally and in the Meon Valley as we headed into the coronavirus pandemic, and I am confident enough that we are well set to emerge from it and carry on with good growth. Although it is not the topic of this segment of the debate, I must welcome the announcement in the Budget of the Solent freeport, which will bring jobs and investment to the whole region, which includes my constituency.

I want to speak to clauses 5 and 28. The pandemic has created a major challenge for state finances, and I recognise that the Treasury must cover the cost of the measures it has taken to support jobs and society. The two long-running strands of policy covered in these clauses are the reform of personal income tax allowances and the lifetime allowance in pension fund accrual.

The commitment to a £12,500 personal allowance featured in the Conservative party’s 2015 election manifesto, and I am pleased that we are achieving it a year early. Since 2010, the personal allowance has grown more quickly than average earnings, and a huge number of workers have benefited. In announcing a freeze between now and 2026, we will see some of that eroded—around £8 billion of income flowing back into the Treasury by 2025-26—and I hope that Ministers will ensure that we direct the benefits of recovery at the groups on the lowest incomes, whom we have done so much to help in government already. Needless to say, I will not be supporting the Opposition amendment to clause 5.

Another area where I hope Ministers can keep an open mind is simplification of our pensions system in the future, but today I would like to concentrate on the lifetime allowance in clause 28. As many other Members will have seen in their postbag, this has been affecting doctors in the NHS, senior teachers and others in the public sector who have taken or considered early retirement to avoid breaching the cap. As well as creating a situation where the Treasury does not see some of its forecast tax take coming in, it means that in some cases, people have gone back to work as contractors or locums, sometimes filling gaps that have been created by this policy on pensions.

The intention behind the lifetime allowance when it was introduced in 2006 was to simplify a large number of regimes. However, freezing it at just over £1 million without the tie to the consumer prices index means that we are seeing some complex reworkings of remuneration schemes, and we will see more unintended consequences as growing numbers of people look to find ways to avoid the cap. The British Medical Association’s survey of GPs indicated that almost half of doctors would consider early retirement to protect their earnings after retirement. While the Budget forecast states that by 2025-26 there will be an additional £300 million of revenue, it does not account for other costs that the policy could contribute to.

Pension policy generally encourages people to forego current consumption, so that they can enjoy a higher standard of living later in life. However, the trade-off here is different, and we risk public services having to cope without staff or pay for them because they are contractors or locums if we carry on eroding the value of the lifetime allowance. I hope the Treasury will look creatively at how we can balance ensuring that people on higher incomes pay their rightful share of tax with the need to ensure that skilled and experienced workers continue to contribute to the wider public good throughout their working lives.

Stephen Timms Portrait Stephen Timms (East Ham) (Lab) [V]
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Clause 31 relates to the decision to cut the £20 a week uplift in universal credit and working tax credit in six months. I want to focus my brief remarks on that decision, highlighted by my hon. Friend the Member for Ealing North (James Murray), because it will be key in the impact analyses in new clause 23 and amendment 15. A Work and Pensions Committee report in February drew attention to the Joseph Rowntree Foundation’s finding that withdrawing the temporary increase

“will risk sweeping 700,000 more people, including 300,000 more children, into poverty”,

and that

“500,000 more people could end up in deep poverty (more than 50% below the poverty line).”

It goes on to explain that

“people who were already more likely to be in poverty were most affected by the economic storm caused by COVID-19: workers in low-wage sectors or part-time jobs, people living in areas with higher rates of deprivation, families with children, disabled people, or those from BAME backgrounds…around 60% of the families who lose out being in the bottom 30% of the income distribution.”

It goes on to say that

“60% of all single parent families in the UK will experience this overnight cut to their incomes”

when the £20 a week is removed.

Under the Government’s plans, the cut will happen just as unemployment is forecast to peak. The last time anything like this happened in such circumstances was 90 years ago under the national Government of Ramsay MacDonald. It will devastate the finances of a large number of struggling families. Ministers will find it extremely hard to justify, so I particularly welcome today’s reported call by more than 100 Conservative MPs to make the £20 a week uplift permanent.

The Resolution Foundation’s “Living Standards Outlook 2021” in January said that rising unemployment and removing the £20 uplift would push 800,000 adults and 400,000 children into relative poverty—the biggest annual poverty rise since the 1980s. A Northern Ireland woman told the Joseph Rowntree Foundation:

“The £20 uplift to Universal Credit has meant I have just about managed to keep my head just above water. I’m living day to day trying to pay my bills and keep my house warm for my child. Taking this away now or in six months means I will be drowning in debt.”

A London woman said:

“We’ve relied heavily on food banks…That £20 is often the difference between light and heat or no light and heat. If you don’t have gas, you can’t cook.”

A Leeds man said:

“I am aware of the extra—if it wasn’t for that I don’t know how I would survive. Living on Universal Credit is hard; it’s extremely hard. It is literally living day to day and working out where my next food is coming from.”

Twenty pounds a week should not be taken away from people like that just as unemployment peaks. Iain Porter of Joseph Rowntree told the Select Committee that the current benefit level without the £20 uplift is

“at the lowest level since around 1990 in real terms”,

and that as a proportion of average earnings, it is the lowest ever. Inflicting that just as unemployment is peaking is indefensible.

The principal policy manager at Citizens Advice told the Select Committee:

“At the very least, if the uplift is not made permanent, we think it needs to be in place for at least 12 months while we go through the tricky part of recovery from this crisis.”

I hope Ministers will reflect and, having done so, decide after all not to make this cut in September.

Huw Merriman Portrait Huw Merriman (Bexhill and Battle) (Con) [V]
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Thank you very much indeed for allowing me to contribute to this afternoon’s proceedings, Dame Rosie. I want to talk about clause 5, on the freezing of personal allowance for four years from 2021-22, the resulting amendments, which would push the freeze back by a year, and the general position across the proceedings this afternoon with regard to allowances and the freezing or otherwise of them.

In the six years that I have been a Member of Parliament, it has been a matter of great pride that we have reduced the personal tax allowance. It was half the level that it is now, since it was raised to £12,500. That is the highest basic personal tax allowance across all G20 countries and means that a typical taxpayer is saving £1,200 in tax. More importantly, it has really sent out the message that work pays. It is no coincidence that, as well as the increase in personal allowance and the introduction of the national living wage levels that we have, we have seen record levels of employment and record lows in unemployment. It is a great success story. The covid pandemic has put all that at risk, though,which is why I find myself in the bizarre position of supporting the personal allowances freeze and intending to vote against any amendment tabled by those on the left to delay that freeze for a year. Ultimately, if we do not do something about our finances, we will do the country a great disservice and end up costing individual taxpayers—or non-taxpayers —even more by mismanaging our national debt.

00:07
To be clear, our national debt now stands at £2 trillion —a position never seen outside the two world wars, and the equivalent of £30,000 for every man, woman and child in the UK. That is the highest debt to GDP ratio since 1962. Some on my side of my party think that does not matter, because rates are low and we can just keep on borrowing at those levels; indeed, their opinion is shared by some on the other side of the House. We have to be incredibly careful, though, because we are very vulnerable to surprise rises in interest rates and inflation. In a recent analysis of manufacturers in our supply chains, 47% said that they expected the cost of materials to rise this year. That could lead to inflationary pressures. A rise of 1 percentage point across all interest rates would add £25 billion to the servicing of our debt. That is what concerns me the most, because ultimately that debt has to be paid back. It already exceeds the amount we spend on schools, and if it increases we will spend less on schools, less on our hospitals, and we could end up with taxes rising even higher. The freezes introduced by the Government have been recognised by the Institute for Fiscal Studies as a sound way to deliver without causing so much hurt to the wider economy and to the individuals who have an unwelcome freeze put upon them.
For those of us on the Government Benches who have always been proud as we reduced the tax take and increased personal allowances, and saw increased employment and economic growth, this goes against the flow, but the most important thing for me and the reason I came into politics is to make sure the Government run the economy well, so that everyone benefits and we achieve stable economic output, which allows our public services to expand as well. If we do not do something along the lines that the Chancellor has set out and make these brave calls, which are absolutely necessary although of course they are not popular, we will not only put at risk the national interest but lose our party’s reputation for economic management.
I support the Government’s measures. I hope that, given time, they work and we can get back to where we were in past years. I hope also that those who have tabled amendments that perhaps owe more to politics than to a desire to manage the economy properly will reflect and withdraw them.
John McDonnell Portrait John McDonnell (Hayes and Harlington) (Lab)
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With the greatest respect for the previous speaker, I think there is a view across the House and in all parties that we need to manage the economy effectively in the interests of everybody. That means addressing the debt to GDP ratio—of course it does—but the question always arises, “Who bears the burden? Who carries the heaviest burden?” I believe that the Bill shifts too much of the burden on to those who are the least able to bear it. That is where we disagree, and it is an honest disagreement.

I will speak to oppose clause 5 standing part and to support amendment 2, and consequential amendments 3 and 4, which stand in my name and those of a number of my colleagues. Some of this is about confidence in politics, which at the moment is receiving a bit of a drubbing.

In the last general election, the Conservative manifesto pledged:

“We promise not to raise the rates of income tax…This is a tax guarantee that will protect the incomes of hard-working families across the next Parliament.”

Clause 5 breaches that pledge; incomes are not protected. More of people’s incomes will be hit by income tax. It is especially harsh on the millions of public sector workers who have faced from this Government: first, a pay freeze; a 5% rise in council tax; and now a stealth rise in their income tax. These people are low earners who struggle to make ends meet as it is. Low earners are heavily indebted. Some have been furloughed, losing 20% of their income for a year. Now they are being hit by a stealth rise in income tax that was not pledged at the last election and that any fair reading of the Conservative manifesto would have thought was completely ruled out.

The Labour party also stood on a manifesto that said there would be no rise in income tax for 90% of earners, and has recently said that now is not the time for tax rises. I hope that Members across the whole House will stand by their commitments at the last general election and oppose clause 5. This would allow the threshold to rise with inflation, as legislated for way back under the last Labour Government in the Income Tax Act 2007.

Low pay is endemic in our society. In 2015, the then Chancellor, George Osborne, promised a £9 minimum wage by 2020. It is 2021 and the minimum wage is still below that level. Let us look at an example. We know that half of all care workers earn less than the real living wage and the majority of children are living in working households. What does that say about low wages? The last thing any Government should be doing is raising taxes on low-paid workers, especially when that Government have broken their promises on raising wages and have failed to reach the target they set for the minimum wage.

Some Members may recall the Rooker-Wise amendment; it was a long time ago—44 years ago. That amendment overturned a similar proposal from the Callaghan Government. With many low-paid workers not getting a pay rise and facing mounting household debts, we should not be taking more of their income in tax. With high street retail needing an urgent stimulus, there cannot be a worse policy than removing demand from the economy at this time. That demand is really created by the people—these are the people who will spend, not hoard.

If the House is not minded to leave out clause 5, perhaps the Government can compromise and accept amendments 2, 3 and 4 in my name and those of other hon. and right hon. Members. These amendments would ensure that the stealth tax on working people was delayed until 2023-24—the same year that the corporation tax rise kicks in. Low-paid workers should not be hit with an extra year of tax that the corporations are not hit with.

Another point that I hope the Government will consider incorporating into the Bill before Report stage is the case for equalising capital gains tax rates with income tax rates. Ahead of the Budget, I was heavily briefed that this was being considered by the Chancellor. It is manifestly unfair that income derived from wealth is taxed at a lower level than income derived from work. I hope that the Government will look at this issue ahead of Report stage. I urge the Government to consider accepting amendments 2, 3 and 4 at a bare minimum—better still, leave out clause 5 altogether. Do not force the lowest paid in our economy to shoulder what could be the heaviest burden.

Sarah Olney Portrait Sarah Olney (Richmond Park) (LD) [V]
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I wish to speak to clause 5 relating to the changes in personal income tax allowances and to clause 28 relating to the freezing of the lifetime allowance on pension pots.

There is no doubt that the last year has made unprecedented demands on the public purse, and it is right that the Government should be prepared to take difficult decisions on taxation as we move forward, as we all very much hope, out of the pandemic and into the changed world beyond. However, the Government made clear commitments in their 2019 manifesto that they would not raise income tax on working families and they have broken that commitment in this Bill. The freezing of the personal allowance and the higher tax bands means that more working people will pay tax and at higher rates than they would otherwise have expected.

Clearly the Government are banking on a consumer-led recovery and this tax burden on working families will reduce the amount of discretionary spend available to households, limiting their ability to spend on consumer goods. As housing costs increase to their highest ever levels, household budgets will continue to be squeezed, and piling additional tax charges on top will create an enormous burden for those who are already struggling to make ends meet. It is a particular insult to those in our NHS, who have sacrificed so much to keep us all safe this year and have been told to expect only a 1% pay increase for their trouble. Our nurses will have to give back more of that 1% in tax than previously despite all that they have already given. This is particularly galling when compared with the Government’s decision to delay a corporation tax increase. The Government have chosen to tax hard-pressed frontline workers first and large, profitable corporations later. Only those companies that have remained profitable throughout the pandemic would be paying corporation tax next year, which is why an immediate increase in corporation tax could have captured the windfalls or excess profits of those who found their revenues increased as a result of the unusual trading conditions of the last year. This would have been a far more equitable route to raising income than putting the burden on hard-working families.

On clause 28, I urge the Chancellor to carefully consider the impact on NHS pensions of freezing the lifetime pension allowance. I have heard a few stories from constituents about how this measure interacts with their final salary scheme. While a figure of a little over £1 million would rightly strike most as more than sufficient as a tax-free pension pot, senior doctors in the NHS are finding it extremely difficult to assess whether or not their overtime will result in their yearly calculation of their lifetime allowance being tipped over the threshold and result in a current tax bill. The British Medical Association estimates that the number of GPs taking early retirement has tripled over the past decade and puts this down partly to the uncertainty about their tax bills.

It is worth noting that when the lifetime allowance was first introduced in 2006, it was set at £1.5 million, rising to £1.8 million in the financial year 2010-11. Since the Conservatives came to power, it has reduced every year to the current level of only just above £1 million. Like the freezing of the personal allowance, this has the impact of catching more ordinary people in the taxation net, and again we see that the Chancellor wants to raise money off the back of hard-working NHS frontline workers while protecting profitable corporations.

This issue has been a problem for doctors for the last few years, so the Government have no excuse for not knowing that the freezing of the pension lifetime allowance would make the situation worse. Have the Government carried out an impact assessment of the measure on NHS retention of senior staff? I am extremely concerned, at this time when our senior NHS staff are exhausted and facing a huge backlog of elective surgery, that skilled staff should not feel compelled to take early retirement because of an unintended and avoidable tax consequence.

The Finance Bill seeks to tax hard-working families and penalise those who have been working so hard to keep us all safe this year, and the Liberal Democrats cannot support these measures.

Matt Rodda Portrait Matt Rodda (Reading East) (Lab)
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I want to offer my support to the shadow Minister, my hon. Friend the Member for Ealing North (James Murray), who put his case very fairly. I want to illustrate what that means in my constituency of Reading East and perhaps develop some of the points he made.

I particularly want to raise the growth in the use of food banks, which has been very significant across the country, and our area is typical in so many ways, as indeed it is in many instances. The growth in the use of food banks illustrates why the Budget was such a complete failure, because the Government failed to offer real help to many families. In particular they offered very little to those in the greatest need, as we heard from the shadow Minister, and very little to those who are self-employed and have recently set up a small business. Indeed, the3million campaign group rightly pointed out that, although a small number will benefit from some measures offering further support for recently set-up small businesses, most will not, and that has been widely recognised in my constituency.

Before going into the detail of local food banks, I want to thank all the volunteers at our local council in Reading and many others, both businesses and individuals, who have helped support food banks by generously giving their time and putting the community and others first at what is a very difficult time for so many people. I have tried to keep in touch with the pressures by going to help myself and to receive regular briefings from food banks and other charities, and I want to describe to colleagues what this is like.

18:45
As many people know, Reading is a town in the south of England. It is relatively well-off; we are lucky to be in an area with quite a high level of employment and many advanced industries, such as IT. It is fairly safe to say that lots of people have fairly good jobs, but many people are under great pressure. I have helped in a number of food banks, and I want to draw the attention of the House to one in particular. It is in the suburb of Woodley, a typical suburb on the edge of a large town, full of relatively well-off families. I had to deliver food parcels; behind the front door of neat houses in suburban areas was real poverty caused by the pandemic. Families are under real pressure and the gratitude that people have when they receive food parcels is quite overwhelming. I want to make that point, because it is important that people across the House understand what the pandemic is like for ordinary people around the country. Indeed, this is just one example. There are people in far greater need who need greater help.
I wanted to make that point and express my own gratitude to those who help in the voluntary sector, and to remind people what clause 5 and the other clauses are really about. They are about families struggling in trying and difficult circumstances through no fault of their own. I know that the Minister is a very decent man, and I urge him to rethink and lobby his colleagues, particularly the Chancellor, who, I am afraid, has a bit of a habit of dashing in with some very warm words but could perhaps look further at some of the detail. Families need that help at this difficult time.
Rosie Winterton Portrait The First Deputy Chairman
- Hansard - - - Excerpts

We are having some difficulty hearing Seema Malhotra, I am afraid. Do you want to try again, Seema?

Seema Malhotra Portrait Seema Malhotra
- Hansard - - - Excerpts

[Inaudible.]

Rosie Winterton Portrait The First Deputy Chairman
- Hansard - - - Excerpts

I think what we should probably do is go to our next speaker and come back to Seema. We will go now to Sir John Redwood.

John Redwood Portrait John Redwood (Wokingham) (Con) [V]
- Hansard - - - Excerpts

Dame Rosie, I have declared my business interests in the register.

Of course, I am not going to vote against this Budget and I wish the Government well with it, but I would like them to pause a little, think through where we are and recognise that they may need to revisit some of these decisions in the months ahead. My worry is that they are being too tough in their tax measures and too tough on people’s incomes at a time when we need to build confidence and recovery, and they are doing so at a time when it is really impossible for their expert advisers and other economic forecasters to give them a clear steer of what the public finances will look like in two years’ time, let alone in three or four years’ time.

The Government seem to think that their experts can define a given amount of money that will be a shortfall in order to hit their longer-term Government targets, and therefore say that we need to make these tax changes for the next few years in order to fill the alleged black hole. It may be that they are trying to fill a hole that does not exist. It may be that we will have a much better recovery than the forecasters are thinking. It may be that the economy responds much better over the next two or three years or, indeed, over the next two or three months, as the relaxations kick in.

We can see the difficulty that the official forecasters have if we look at the numbers they gave us as recently as November 2020. Then, the OBR, forecasting the budget deficit—the amount of extra borrowing—for the year 2020-21, said that it would be £394 billion, an enormous amount. Bear in mind that it was having to forecast for only four months, as two thirds of the year had already gone. When we got the 11-month figures, up to February, recently, we discovered that they had come in at just £278 billion and so, subject to what happened in March, it may be that the OBR was the best part of £100 billion out on the deficit for the year in question when it tried to forecast, already knowing quite a lot of what had happened. It was, of course, massively too pessimistic. It is great news that we will have borrowed so much less than we feared, although clearly we are still borrowing far too much on an unsustainable basis, which is why we need to promote a strong recovery to get the deficit down.

I therefore say to the Government: let us show a little humility. The experts and advisers are not able to give us anything like accurate figures—I can sympathise with them, because extreme things have happened in response to the pandemic—so are we sure that we need to make these moves over the next three or four years?

There is also a case for showing a bit of humility and thinking ahead about whether we might need to show a bit more flexibility because the Government themselves have rightly said, now that we are out of the European Union and the economic world has been stood on its head, that they want to set out a new framework for guiding the economy. I encourage them to do that, and I hope it is a framework that promotes growth and considers real issues such as the increase in the number of jobs, the rise in real incomes and the productivity growth that can be achieved.

We need to get away from the Maastricht criteria, which have governed our policy for many years and still seem to be behind the architecture of this Bill. We seem to be driven by the need to get state debt falling as a percentage of our national output by the end of the period that we are talking about today for the tax changes. State debt is now a pretty useless figure to try to target in the way that the Maastricht criteria did. We now live in this age of monetary experimentation, where great banks such as the Bank of England, as well as the European Central Bank, have bought in very large quantities of state debt—indeed, they still are doing so. Surely, where that happens in a single sovereign country with its own central bank, owned on behalf of the taxpayers by the state, we should treat the debt that we have bought back in rather differently from the debt on which we owe money by way of interest to people outside—some our own citizens, some foreigners—who have been financing the Government. That makes state debt a very difficult number to use to guide the economy. Of course, the future system must have some control over the build-up of actual interest charges that we have to pay to third parties, but it should concentrate much more on promoting growth.

May we therefore have just a few words from the Government, accepting that these numbers are very difficult and that the current forecasts are likely to be very wrong? No one can say exactly how wrong they are going to be, because so many things will happen over the next two or three years and nobody has been through a bounce back of the kind of pace that is possible from such a big hole in our economy, created by necessary health measures to cure the pandemic.

We need a policy that is very supportive of more jobs, of higher incomes and of encouraging investment, enterprise, saving and, above all, self-employment and more small business activity. My worry is that the Government are being a bit mean with people and with small businesses in the name of controlling state debt at a time when we have no idea what the state debt will be in two or three years’ time, and when the state debt number is now very different because of the purchase of state debt by the state itself.

I would hope that the Government recognise that we may need to revisit all this, and I would want them to be on the side of people keeping more of the money they earn and, above all, of a much better deal for small business and the self-employed, where I think they are too tough.

Rosie Winterton Portrait The First Deputy Chairman
- Hansard - - - Excerpts

We are having one or two technical issues, so we will go straight to Richard Burgon.

Richard Burgon Portrait Richard Burgon (Leeds East) (Lab) [V]
- Hansard - - - Excerpts

I wish to speak to my new clause 7, which would require the Government to publish an assessment of the effect on tax revenues of introducing a 55% income tax rate on income over £200,000.

The coronavirus crisis has not only shone a spotlight on the deep inequalities in our society and their deadly consequences, but deepened them. Deep inequalities scar our nation. As we come out of this pandemic, if we are to learn the lessons and build a more equal, less divided and more inclusive society, then we need to address decades of failing tax policy. Ensuring higher taxes on those on the very highest incomes has an important role to play in building that fairer society. Since Thatcher, the Tory mantra has been that low taxes on the rich benefit everyone, but years of keeping taxes low for the very rich did not in fact boost economic growth; instead, it allowed inequality to run completely out of control. That has been proven by new research by the London School of Economics and King’s College London showing that reducing taxes on the rich leads to higher income inequality that has an insignificant effect, in any positive fashion, on economic growth or unemployment.

In short, trickle-down economics has been a lie. Now is the time to acknowledge that and address it by creating a fairer tax system. My amendment calling for a new 55% income tax rate would target those on very high incomes of over £200,000 per year—the richest part of the top 1%, or about 300,000 people. The current highest income tax rate is just 45% for those earning above £150,000—not much more than for those earning £50,000. Yet 40 years ago the average top income tax rate for the wealthy OECD member countries was 62%. The top income tax was 60% even under Margaret Thatcher, so perhaps even the Thatcherites on the Government Benches will consider offering their support for the amendment. This increase would affect less than 1% of the population—about 200,000 people, according to HMRC.

There has been huge suffering in our society over the past year, yet the very wealthiest in our society—the billionaires and the super-rich—have exploited this crisis to further line their pockets. We cannot go on layering inequality on top of inequality. Now is the time to act. Publishing an assessment of the effect on tax revenues of introducing a 55% income tax rate on income over £200,000 would be an important stepping-stone towards building a fairer and better society. That is why I would like to press my new clause 7 to a vote.

Bell Ribeiro-Addy Portrait Bell Ribeiro-Addy (Streatham) (Lab) [V]
- Hansard - - - Excerpts

I speak in support of amendment 15 and new clause 8 in my name, and amendments and new clauses in the names of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and my hon. Friend the Member for Leeds East (Richard Burgon).

My amendment 15 is tabled with the aim of highlighting the importance of the so-called £20 uplift for tax credit recipients from the covid-19 support scheme, and the damage that the Government’s decision to not continue this beyond September will cause. In March 2020, the Chancellor announced a temporary uplift of £20 per week to universal credit via the standard allowance of the working tax credit basic element for the 2020-21 financial year. A one-off payment is being made to tax credit recipients to cover a six-month period from April to September 2021 to continue this support.

As Members will know, payments from the covid-19 support scheme for working households receiving tax credits are being introduced under the Coronavirus Act 2020. Clause 31 introduces an exemption from income tax for payments made to tax credit recipients. My amendment 15 would require the Government to publish an equalities impact assessment of the provisions of clause 31, which must cover the impact of the provisions on households at different levels of income, people’s protected characteristics, equality in different parts of the United Kingdom and regions of England, and child poverty. That is because while the £20 per week top-up will temporarily be retained, helping some 6.5 million families for a further six months, this does not allay the fears that families will have going into next winter. Rather, it is clear to almost everyone—Action for Children, Child Poverty Action Group, Save the Children, the Joseph Rowntree Foundation, the trade union movement and so on—apart from the Government that the £20 increase and the associated tax relief, as per clause 31, should be made permanent and paid to all claimants, given that poverty levels were already too high pre-pandemic. Extending the £20 uplift is vital because struggling families cannot keep afloat without it, but that will be as true in six months as it is now.

19:00
Action for Children estimates that 2.5 million families with children currently on universal credit and working tax credit will miss out on a combined total of £1.3 billion across the next financial year. Statistics from March show that just over half of all children in poverty were in families with the youngest child under the age of five and 47% of children in poverty were in families with three or more children. According to those figures, the number of children living in relative poverty after housing costs rose from 4.1 million in 2018-19 to 4.3 million in 2019-20. That amounts to 31% of all children in the UK. In comparison, 3.6 million children were in poverty just 11 years ago. Deprived families have fallen deeper into poverty, with 2.9 million children considered to be in deep poverty.
What an indictment of this Government’s economic record. Years of austerity, welfare cuts, benefit changes and cuts to public services have disproportionately affected children, women, disabled people, and black, Asian and minority ethnic communities, a fact repeatedly outlined by many civil society organisations. On top of that, experts have warned that child poverty will rise even further after the pandemic. What has the Government’s response been? An offensive and factually redundant report on race and ethnicity that
“repackages racist tropes and stereotypes into fact, twisting data and misapplying statistics and studies”.
Those are not my words, but the shocked comments of a United Nations working group.
It is therefore no surprise that the Bill falls short on tackling poverty and inequality. This is why it is crucial that we make sure we have a fair and equal recovery coming out of the pandemic, with those with the broadest shoulders paying their fair share. Progressive and fair taxation, as evoked by new clause 7 in the name of my hon. Friend the Member for Leeds East and new clause 8 in my name, is crucial to that fairness. These progressive tax new clauses are about encouraging a discussion on the kind of society we want to be in. My new clause 8 would require the Government to publish an assessment of
“the effect of reducing the income tax threshold for the additional rate to £80,000”.
This is a reference to commitments in the 2019 Labour party manifesto to reduce the 45p additional rate threshold to £80,000, covering the top 5% of income tax payers, raising billions but not increasing further the burdens on the majority of people. With the International Monetary Fund now arguing for increases in taxation for those who have made huge profits from the pandemic, this is yet another area in which the Labour party manifesto has been shown to have been leading the way politically. Fair taxation is one of the building blocks of communities, in part because it supports investment in the public infrastructure and services on which we all rely. Progressive taxation means, plain and simple, that those with more means contribute relatively more.
Last October, IFS research revealed that the wealth gap between poor and rich families in the UK has been exacerbated by the pandemic, and that owing to their higher incomes and higher spending habits richer households have invariably become richer during the pandemic. The top fifth of earners saved money at a faster rate than before lockdown after their outgoings reduced by 41%. Truly progressive taxation that ensures the rich pay their fair share is crucial for the delivery of equalities and women’s rights in particular, as women tend to rely more on public services that are funded by taxes. Because of women’s and men’s different income and spending patterns, regressive taxes tend to hit women the hardest.
Similarly, given that deep economic inequalities persist between white and black, Asian and minority ethnic people and their households, we have to ensure that our tax system is not a driver of racial injustice. Unfortunately, the pay gap between white and black and Asian communities is entrenched in the UK approach to tax, which on the whole favours higher earners. To tackle this inequality in our society we need to look at addressing the fact that, as previous research has shown, top earners are overwhelmingly white and male and more likely to be based in London and the south-east. We need to address those inequalities sooner rather than later.
Seema Malhotra Portrait Seema Malhotra [V]
- Hansard - - - Excerpts

In my limited remarks, I want to support the arguments made by my hon. Friend the Member for Ealing North (James Murray), and to speak in support of Labour’s new clause 23, to which I have added my name, seeking an equality impact assessment of the measures in the Bill that affect family incomes. This includes the impact of specified sections of the legislation on households at different levels of income, on people with protected characteristics, and across the regions and nations of the UK.

About 700,000 people have lost their jobs since February last year, and many more families have seen a drop in their household income. Over 39,000 are now on universal credit in Hounslow alone, and we have seen a huge rise in the use of food banks. There is no doubt about the importance of financial inclusion at this time. The Financial Inclusion Commission, on which I sit, has highlighted how there are now millions more people facing economic hardship as a result of the covid-19 pandemic. However, the UK entered the crisis with half its population financially vulnerable: 12 million categorised as financially struggling or generally on low incomes, and 13 million as financially squeezed. Covid has laid bare existing weaknesses, vulnerabilities and structural inequalities, and StepChange research shows that 10% of people say they will certainly or probably be unable to pay for essentials in the next 12 months.

We know child poverty, already extremely high, is rising, so it is inexplicable, when the Government themselves have said in the Budget report that the

“economic impact of restrictions has not been felt equally”,

that they have not themselves published an impact assessment. It should not be for the Opposition to table this vital amendment. It seems that instead of taking action to boost our community recoveries, the Conservatives are choosing to reward families up and down the country for their sacrifices with council tax hikes, the freeze to the personal allowance from next April a whole year before corporation tax rises kick in, a real-terms pay cut for key workers and cuts to universal credit later this year, a move now even opposed 100 Tory MPs.

Even when the Chancellor has done the right thing, such as extending furlough, as Labour called for, these moves need to be underpinned by a strong social security system that provides support when people need it. People need to be protected from financial exclusion and families need a clear route out of financial difficulty when they are struggling. The Chancellor could also look at how Sadiq Khan is working to promote financial inclusion through partnership with the financial sector, social enterprises and credit unions, and at his plans for a new team dedicated to economic fairness.

But instead of economic fairness, what we know is coming is the £20-a-week cut to universal credit for millions of families within six months, just when the OBR predicts that unemployment will peak. It is a cut that takes out-of-work support to its lowest levels since the 1990s. That is why Labour has also called for urgent social security measures, including converting universal credit advances to grants instead of loans, ending the five-week wait, suspending the benefits cap and uprating legacy benefits to match the increase in universal credit. About 2.2 million people on legacy benefits have been deprived of the uplift, and given that three quarters of those claimants are disabled and on employment and support allowance, this has created a two-tier social security system that has left many struggling to cope. Evidence from the Disability Benefits Consortium found that 67% of disabled claimants have had to go without some essential items at points during the pandemic.

Minority ethnic communities have been hardest hit by both the health and economic crisis. The Resolution Foundation found that, at the end of last year, unemployment among young black graduates had risen to 34%, up from 22% before the pandemic, and almost three times that of young white graduates during the same period. StepChange research also shows that those from an ethnic minority are twice as likely, compared with the GB average, to say that they have experienced hardship, borrowed to make ends meet or have run down savings.

In conclusion, the Chancellor is hitting families up and down the country, with a quadruple hammer blow of council tax rises, cuts to universal credit, real pay cuts for key workers and the freeze to the personal allowance. If the Chancellor wants to work for a fairer Britain and build a more inclusive and financially inclusive economy, he needs to know who his policies are helping and who they are not. That is why we need an impact assessment, as called for in new clause 23, and the Government should support it today.

Rebecca Long Bailey Portrait Rebecca Long Bailey (Salford and Eccles) (Lab) [V]
- View Speech - Hansard - - - Excerpts

I speak to oppose clause 5 stand part, and in support of amendments 2, 3 and 4 in the name of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and others, as well as amendments in the name of my hon. Friend the Member for Streatham (Bell Ribeiro-Addy) and amendments from the Labour Front Bench.

The Chancellor committed to doing whatever is necessary to support people and businesses through the coronavirus pandemic. I want to believe him, but the £20 a week covid uplift to universal credit will be cut just at the time when the OBR has predicted that unemployment will peak. There has been no uplift at all, as we have heard, in covid support for those on legacy benefits or affected by the benefit cap. At the same time, an equivalent cut in working tax credit for households that have not yet made the move to universal credit will be imposed.

Further councils, whose budgets have been decimated over recent years, will be forced to increase council tax by up to 5%, pressuring household budgets even further, so the Bill is already sorely deficient in honouring the Chancellor’s original promise. However, in clause 5—the proposal to freeze the personal tax allowance—the promise is sadly contradicted entirely. The reality of the clause is that, if there is wage inflation over the next five years, someone earning just under the threshold now, for example, who then receives an inflationary pay increase for 2022-23 will start to pay tax.

As the Resolution Foundation has found, the poorest fifth of households are twice as likely to have seen their debts rise rather than fall during the crisis, so taking some of those lowest earners beyond the personal allowance threshold as their wages might slightly increase with inflation could result in their financial devastation. I therefore supported calls to remove clause 5, or at the very least for the Government to compromise and delay the changes.

I will also briefly mention clause 32 on self-employment income support. I do not disagree with the sentiment of the clause but, as the Government know, the support still does not go far enough. More than 2 million remain excluded from any Government support at all and, as I have repeatedly told this House, some have sadly taken their own lives as a result. I once again urge the Government to provide an immediate emergency grant to those affected, install new monthly arrangements while restrictions remain in place in complete parity with the extension of the coronavirus job retention scheme and the self-employment income support scheme, and remove the hard edges to eligibility criteria. Finally, they should backdate payments for a full and final settlement to deliver parity and fairness for those excluded from meaningful support.

Jim Shannon Portrait Jim Shannon
- Hansard - - - Excerpts

It is a pleasure to serve under your chairmanship, Ms McDonagh. I very much welcomed the Minister’s response when I asked him about the Low Incomes Tax Reform Group. I will send him all the information that I am concerned about, which I hope he will be able to answer.

Clause 31 ensures that the one-off £500 payment for certain working households receiving tax credit is not taxable, which is welcome. The problem arises when a person receives a payment that they were not entitled to under the rules. As the payment is made automatically by HMRC without requiring a claim from the individual, if HMRC mistakenly makes a payment to someone who is not entitled to one under the direction and it is not subsequently repaid, it appears that the tax credit claimant will automatically be subject to a tax charge under the Finance Act 2020. That triggers notification requirements for the individual, assessing powers for HMRC and potential penalties.

I would like to understand whether consideration has been, or will be, given to ensuring that HMRC will set the bar high in terms of what constitutes fraud, and whether it will be limited to those people who fall under section 35 of the Tax Credits Act 2002, in relation to their underlying tax credit award. Over the last period, you, Ms McDonagh, I and everyone in this House has seen young families on the brink of financial collapse—in particular, in my office, due to the inconsistencies of the working tax credit as between those who are self-employed and those whose annual pay packs are constant.

Briefly on clause 32, I highlight the fact that taxpayers who have made amendments to their self-assessment tax returns on or after 3 March 2021 may have to pay back some or all of the grants that they have claimed. There is a real concern, which I share, that unrepresented taxpayers may not be aware of their obligations to notify HMRC and, accordingly, may face penalties, inadvertently and perhaps without right. Minister, how will we ensure that HMRC will take steps to ensure that taxpayers become aware of any obligation to repay in time to avoid such penalties? In particular, it is unsatisfactory that taxpayers who have made amendments on or after 3 March 2021 but prior to the date of the claim appear to be obliged to pay back some or all of the grant immediately upon receipt. Some may be unaware that they have to do so, but they face harsh penalties, which were originally aimed at fraudulent claims or for failing to do this on a timely basis. So I am concerned that innocent participants in this process may find themselves in difficult times.

19:15
At this time, we are often telling people to be patient with our schemes to give us time to put them together and to be understanding as we iron out the kinks. We are in unprecedented times, but we need to get it right for all taxpayers. I am concerned that this Bill does not give the ordinary person the benefit of the doubt enough in the matters I have referred to. It does not allow them time to understand the obligations and know what the next steps to take are. In this House, we must legislate to ensure that the ordinary taxpayer knows where they stand, what direction to take next and the advice that is necessary, which they need to have available, too. There needs to be greater clarity on those matters in the Bill.
Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

It has been a good debate and I thank all Members who have taken part. Let me pick up some of the key themes that were described, one of which is the impact on taxpayers of the measures the Government have taken to address and fix concerns about the public finances.

The hon. Member for Ealing North (James Murray) raised this issue. As he will be aware from wider conversation and scrutiny, the Bill places a burden of £40 a year on the average basic rate taxpayer and no increment in take home pay. We think that a balanced and fair approach is one that is widely based and progressive. As I indicated, the top 20% of tax-paying households pay 15 times that of the bottom 20%. He was asked by my hon. Friend the Member for Arundel and South Downs (Andrew Griffith) whether he supported new clause 7, which would raise tax to 55%, and his was an eloquent silence in response. I would be interested to hear in the next debate whether he does support new clause 7’s bid to raise the top rate of income tax to 55%, but I will come to that later.

The hon. Member for Glasgow Central (Alison Thewliss) raised the question of antibody tests. As she will be aware, antigen tests, which are subject to the relief in the Bill, are connected to employment, whereas antibody tests are not, which is why the relief does not extend to them. It is, however, fully open to the Scottish Government, who have capacity to raise tax revenue themselves, to fund antibody tests if they so choose. She has raised the issue and we can assess whether the Scottish Government wish to follow her lead in funding those tests.

The right hon. Member for Hayes and Harlington (John McDonnell) described the tax measures in the Bill as a stealth tax rise. It is an interesting version of a stealth tax rise that is announced in a Budget statement at the Dispatch Box in the House of Commons. He was right when he said earlier that there was an honest disagreement here, and that is what there is. The Government’s view is that there should be a progressive, broad-based approach to fixing the public finances that begins at an appropriate time once the recovery is under way, and that remains the case.

The hon. Member for Richmond Park (Sarah Olney) declaimed the delay in the corporate tax rise. I remind her, since everyone is widely quoting the Resolution Foundation, that it said that the Government

“rightly sought to boost the recovery before turning to fixing the public finances”—

and it was right. She was opposed to the measures relating to the freeze on pensions in the Bill and appealed to the experience of ordinary people. Since the amount in question is over £1 million and the average financial savings in this country are something under £7,000, and since the lifetime allowance is itself seven times the median pension pot, I think that she is not using a definition of ordinary people that will be shared by Members of this House.

My right hon. Friend the Member for Wokingham (John Redwood) talked about the uncertainty involved, and he is right. We are coming out of a pandemic. There is a degree of uncertainty in the economic situation. That is why the Government have delayed, in the way that the Resolution Foundation has applauded, raising tax on corporations in order to start to restore the public finances. That is why it is right that we have taken a fair and balanced approach to this topic.

The hon. Member for Leeds East (Richard Burgon) spoke in support of his 55% tax rate—not a view shared by the Labour Front Bench. I remind him that HMRC ran a study of the 50% tax rate a few years ago and discovered that it was inefficient, raised far less than had been expected and was distorting tax behaviour. That is not a good recipe.

The hon. Member for Streatham (Bell Ribeiro-Addy) was concerned about the progressivity of these measures, but, as she will see if she looks closely, both the UK tax system at the moment and the changes themselves are highly progressive.

The hon. Member for Strangford (Jim Shannon) raised the question about the risk of fraud in schemes. Of course, he is right to note that. He had some concerns about reclaims in the self-employment income support scheme. All I would say is that the scheme is well understood. It is very widely publicised. Guidance has been available on the internet and in many independent bodies for many months. If people have claimed income support through that scheme for which they are in fact not eligible, it is appropriate to reclaim the sum overpaid. That is the principle that we seek to apply elsewhere in the tax system because it, too, is a fair and equitable one.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

Clause 5

Basic rate limit and personal allowance for future tax years

Question put, That the clause stand part of the Bill.

19:23

Division 261

Ayes: 356


Conservative: 355

Noes: 224


Labour: 196
Liberal Democrat: 11
Democratic Unionist Party: 8
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1

The list of Members currently certified as eligible for a proxy vote, and of the Members nominated as their proxy, is published at the end of today’s debates.
Clauses 24 to 26, 28, 31 to 33, 40 and 86 ordered to stand part of the Bill.
New Clause 10
Review of changes to coronavirus support payments etc
‘(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 coronavirus support payments etc by sections 31, 32 and 33 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,
(c) productivity,
(d) GDP growth, and
(e) poverty.
(3) A review under this section must consider the following scenarios—
(a) the coronavirus job retention scheme and the self-employment income support scheme are continued until 30th September 2021, and
(b) the coronavirus job retention scheme and self-employment income support scheme are continued until 31st December 2021.
(4) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.’—(Richard Thomson.)
This new clause would require a report comparing the effect of (a) the coronavirus job retention scheme and the self-employment income support scheme being continued until 30 September 2021, and (b) the coronavirus job retention scheme and self-employment income support scheme being continued until 31 December 2021 on various economic indicators.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
19:35

Division 262

Ayes: 261


Labour: 198
Scottish National Party: 42
Liberal Democrat: 11
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 367


Conservative: 358
Democratic Unionist Party: 8

The list of Members currently certified as eligible for a proxy vote, and of the Members nominated as their proxy, is published at the end of today’s debates.
New Clause 23
EQUALITY IMPACT ANALYSIS
‘(1) The Chancellor of the Exchequer must review the equality impact of sections 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86 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—
(a) the impact of those sections on households at different levels of income,
(b) the impact of those sections on people with protected characteristics (within the meaning of the Equality Act 2010),
(c) the impact of those sections on the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and
(d) the impact of those sections on equality in different parts of the United Kingdom and different regions of England.
(3) A review under this section must give a separate analysis in relation to the following matters—
(a) income tax,
(b) employment income,
(c) coronavirus support payments,
(d) pension schemes,
(e) investments, and
(f) inheritance tax.
(4) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.’—(James Murray.)
This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86 of the Bill on equality in relation to households with different levels of income, people with protected characteristics, the Treasury’s public sector equality duty and on a regional basis.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
19:43

Division 263

Ayes: 269


Labour: 196
Scottish National Party: 44
Liberal Democrat: 11
Democratic Unionist Party: 8
Plaid Cymru: 3
Independent: 2
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 358


Conservative: 358

The list of Members currently certified as eligible for a proxy vote, and of the Members nominated as their proxy, is published at the end of today’s debates.
Clause 6
Charge and main rate for financial years 2022 and 2023
Question proposed, That the clause stand part of the Bill.
Siobhain McDonagh Portrait The Temporary Chair (Siobhain McDonagh)
- Hansard - - - Excerpts

With this it will be convenient to discuss the following:

Clause 6 stand part.

Clause 7 stand part.

Clause 8 stand part.

Amendment 11, in clause 9, page 3, line 35, leave out “130%” and insert “18%”.

This amendment would reduce the level of the capital allowance super-deductions to the current rate of 18%.

Amendment 79, page 4, line 2, at end insert—

“provided that any such company which has more than £1 million in qualifying expenditure must also—

(i) adhere to International Labour Organisation convention 98 on the right to organise and collective bargaining,

(ii) be certified or be in the process of being certified by the Living Wage Foundation as a living wage employer, and

(iii) not be liable to the digital services tax”.

This amendment would, in respect of companies with qualifying expenditure of over £1 million, add conditions relating to ILO convention 98, the living wage and the digital services tax.

Amendment 80, page 4, line 2, at end insert—

“provided that any such company which has more than £1 million in qualifying expenditure must also make a climate-related financial disclosure in line with the recommendations of the Task Force on Climate-related Financial Disclosures within the 2021/22 tax year”.

This amendment would, in respect of companies with qualifying expenditure of over £1 million, add a condition relating to climate-related financial disclosure to the conditions that must be met in order for expenditure to qualify for super-deductions.

Amendment 66, page 4, line 6, at end insert “, except general exclusion 6”.

This amendment would remove leased assets from the list of assets excluded from the super-deduction and special rate allowance introduced by Finance (No. 2 Bill).

Amendment 67, page 4, line 21, at end insert “, except general exclusion 6”.

See the explanatory statement for Amendment 66.

Amendment 53, page 5, line 15, at end insert—

“(11) The Chancellor of the Exchequer must, no later than 5 April 2022, lay before the House of Commons a report—

(a) analysing the fiscal and economic effects of Government relief under the capital allowances super-deduction 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,

(ii) Scotland,

(iii) Wales, and

(iv) Northern Ireland,

(b) assessing how the capital allowance super-deduction 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,

(ii) Scotland,

(iii) Wales, and

(iv) Northern Ireland.”

This amendment would require the Chancellor of the Exchequer to analyse the impact of changes proposed in Clause 9 in terms of impact on the economy and geographical reach and to assess the impact of the capital allowances super-deduction scheme on efforts to mitigate climate change.

Amendment 78, page 5, line 15, at end insert—

“(11) Expenditure shall not be qualifying expenditure under this section if it is incurred by a member of a group which is required to publish a tax strategy in compliance with Schedule 19 of the Finance Act 2016, unless any tax strategy published in compliance with that Schedule after the coming into force of this Act includes any relevant country-by-country report.

(12) ‘Country-by-country report’ has the meaning given by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016.

(13) 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.”

This amendment would require large multinationals accessing super-deductions to make their country-by-country reporting public.

Clause 9 stand part.

Clause 10 stand part.

Clause 11 stand part.

Clause 12 stand part.

Clause 13 stand part.

Clause 14 stand part.

Amendment 55, page 85, line 10, in schedule 1, leave out from “period if it is” to the end of line 30 and insert—

“a related 51% group company of that company in the accounting period as defined by section 279F of CTA 2010.”

This amendment would prevent the introduction of a new definition of “associated companies” for the purposes of the small profits rate and uses an existing provision instead.

Amendment 56, page 93, line 29, leave out paragraph 11.

See the explanatory statement for amendment 55.

Amendment 57, page 94, line 5, leave out sub-sub-paragraph (a).

See the explanatory statement for amendment 55.

Amendment 58, page 94, line 14, leave out sub-paragraph (3).

See the explanatory statement for amendment 55.

Amendment 59, page 94, line 22, leave out paragraphs 15 to 17.

See the explanatory statement for amendment 55.

Amendment 60, page 95, line 5, leave out paragraphs 20 and 21.

See the explanatory statement for amendment 55.

Amendment 61, page 96, line 44, leave out paragraph 30.

See the explanatory statement for amendment 55.

Amendment 62, page 97, line 22, leave out sub-sub-paragraph (e).

See the explanatory statement for amendment 55.

New clause 1—Eligibility for super-deduction

“(1) Only employers that meet the criteria in subsection (2) shall benefit from the provisions relating to capital allowance super-deductions in sections 9 to 14.

(2) The criteria are that the employer—

(a) recognises a trade union for the purposes of collective bargaining with its workforce, and

(b) is certified by the Living Wage Foundation as a living wage employer.”

This new clause would ensure that only employers that pay their staff the living wage and recognise trade union(s) would be eligible to receive the capital allowance super-deductions.

New clause 2—Commencement of super-deduction provisions (report on the benefits)

“(1) Sections 9 to 14 shall not come into force until—

(a) the Secretary of State has commissioned and published a report that sets out the expected benefits of the capital allowance super-deductions in this Act, and

(b) the report has been debated and approved by the House of Commons.

(2) The report in subsection (1) must consider what the economic and social benefits would be of making the capital allowance super-deductions contingent on employers meeting criteria relating to—

(a) reducing their carbon emissions,

(b) tackling the gender pay gap,

(c) paying the right amount of tax and not using avoidance schemes,

(d) paying the living wage to all directly employed staff, and

(e) recognising trade unions for the purposes of collective bargaining.”

This new clause would mean that sections 9 to 14 could not come into force until the Government had published a report examining the economic, social and environmental effect of the capital allowance super-deductions and that report had been agreed by the House of Commons.

New clause 6—Commencement of super-deduction provisions (report on existing capital allowances)

“(1) Sections 9 to 14 shall not come into force until the conditions in subsection (2) are met.

(2) The conditions are—

(a) the Public Accounts Committee has reported on the effectiveness of the existing capital allowances listed in section 2(3) of the Capital Allowances Act 2001, and

(b) at least one week after the publication of the report in paragraph (a) both Houses of Parliament have agreed that sections 9 to 14 shall come into force.”

This new clause would set the following conditions before clauses 9 to 14 of the Bill come into force: that the Public Accounts Committee prepares a report on the effectiveness of existing capital allowances, and then that both Houses of Parliament approve the clauses coming into force.

New clause 9—Equalities impact assessment of capital allowance super-deductions

“(none) The Chancellor of the Exchequer must, no later than 5 April 2022, lay before the House of Commons an equalities impact assessment of the provisions sections 9 to 14 of this Act, which must cover the impact of those provisions on—

(a) households at different levels of income,

(b) people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010,

(d) equality in different parts of the United Kingdom and different regions of England, and

(e) child poverty.”

New clause 13—Review of impact of sections 6 to 14

“(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 sections 6 to 14 and schedule 1 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,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must consider the following scenarios—

(a) the United Kingdom reaches an agreement with OECD countries on a minimum international level of corporation tax, and

(b) the United Kingdom does not reach an agreement with OECD countries on a minimum international level of corporation tax.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(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 report comparing scenarios in which (a) the United Kingdom reaches an agreement with OECD countries on a minimum international level of corporation tax, and (b) the United Kingdom does not reach an agreement with OECD countries on a minimum international level of corporation tax on various economic indicators.

New clause 17—Review of impact on corporation tax revenues of global minimum rate of corporation tax

“The Chancellor of the Exchequer must within six months of Royal Assent lay before the House of Commons an assessment of the effect on corporation tax revenues in 2022 and 2023 of a global minimum corporation tax rate set at 21%.”

This new clause would require the Government to publish an assessment of the revenue effect of a global minimum corporation tax rate of 21%.

New clause 19—Review of impact of sections 6 to 14 (No. 2)

“(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 sections 6 to 14 and schedule 1 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,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must compare the estimated impact of corporation tax rate changes in this Act with the impact on investment from the changes to the corporation tax rate in each of the last 12 years.

(4) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(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 seeks a review of the estimated impact of corporation tax rate changes in this Act with the impact on investment from the changes to the corporation tax rate in each of the last 12 years on various economic indicators.

New clause 20—Review of impact of section 7

“(1) The Chancellor of the Exchequer must review the impact of section 7 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) the link between corporate profit rates and ownership, and

(b) the cost of re-introducing a small profits rate.”

This new clause seeks a review of corporation tax provisions on (a) the link between corporate profit rates and ownership, and (b) the cost of re-introducing a small profits rate.

New clause 21—Review of impact of sections 6 to 14 (No. 3)

“(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 sections 6 to 14 and schedule 1 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) progress towards the Government’s climate emissions targets, and

(b) capital investment in each of the next five years.

(3) A review under this section must include—

(a) the distribution of super-deduction claims by company size, and

(b) estimated tax fraud.

(4) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Scotland,

(d) Wales, and

(e) Northern Ireland;

and ‘regions of England’ has the same meaning as that used by the Office for National Statistics.”

This new clause seeks a report on the impact of the super deduction on (a) progress towards the Government’s climate emissions targets, and (b) capital investment in each of the next five years. A review under this section must include (a) the distribution of super-deduction claims by company size, and (b) estimated tax fraud.

New clause 24—Review of super-deductions

“(1) The Chancellor of the Exchequer must review the impact of sections 9 to 14 and schedule 1 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act, and then annually for five further years.

(2) A review under this section must estimate the expected impact of sections 9 to 14 and schedule 1 on—

(a) levels of artificial tax avoidance,

(b) levels of tax evasion, reducing the tax gap in each tax year from 2021–22 to 2025–26, and

(c) levels of gross fixed capital formation by businesses in each tax year from 2021–22 to 2025–26.

(3) The first review under this section must also consider levels of usage of the recovery loan scheme in 2021.”

This new clause would require the Government to review the impact of the provisions relating to super-deductions and publish regular reports setting out their findings.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

Clauses 6 to 14 and schedule 1 establish the charge and set the rate of corporation tax at 19% for the financial year beginning in April 2022, and establish the charge and increase the rate of corporation tax to 25% for the financial year beginning in April 2023. They also introduce a small profits rate at 19% for companies with profits of £50,000 or less, with marginal relief for companies with profits between £50,000 and £250,000; and they increase the diverted profits tax rate by 6 percentage points, in line with the increase in the main rate of corporation tax. Finally, they introduce a capital allowance super-deduction for investments in plant and machinery.

At 19%, the current rate of corporation tax is the lowest headline rate in the G20 and significantly lower than in the rest of the G7. However, given that the Government have used the full weight of the public finances to support businesses during the pandemic, protecting thousands of businesses with more than £100 billion-worth of support, it is right that, as the economy rebounds and businesses return to profit, they share in the burden of restoring the public finances to a sustainable footing. That is why the Chancellor announced at Budget that the rate of corporation tax will increase to 25% from April 2023, after the economy is forecast to recover to its pre-pandemic level.

While many businesses are struggling now and the Government are continuing to provide support for them, others are sitting on large cash reserves. To unlock those funds and support an investment-led economic recovery, from April 2021 until the end of March 2023 companies will be able to claim a 130% capital allowance super deduction on qualifying plant and machinery investments. This super-deduction makes the UK’s capital allowance regime truly world-leading, lifting the net present value of our plant and machinery allowances from 30th in the OECD to first.

Given the number of amendments and the number of speakers, I will try to keep my remarks relatively brief. Clause 6 sets the main rate of corporation tax at 25% from April 2023. The OBR forecasts that this will raise over £45 billion in the next five years. It should be noted that 25% is still the lowest headline rate in the G7—lower than in the United States, Canada, Italy, Japan, Germany and France. The clause also sets the main rate of corporation tax at 19% for the financial year beginning on 1 April 2022. That means the higher rate will not come into force until well after the point when the OBR expects the economy to have recovered to its pre-pandemic level.

To protect businesses with small profits from a rate increase, clause 7 and schedule 1 introduce a small profits rate for non-ring fence profits for the financial year beginning 1 April 2023. As a consequence, only around 10% of actively trading companies will pay the full main rate.

Clause 8 makes changes to increase the rate of diverted profits tax to 31% from 1 April 2023, along with apportionment provisions for accounting periods straddling the commencement date. This will maintain the current differential between the main rate and ensure the diverted profits tax remains an effective deterrent against profits being diverted out of the UK.

Clauses 9 to 14 make changes to encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow, and to make those investments now. Clause 9 introduces new capital allowances available for expenditure incurred by companies between 1 April 2021 and 31 March 2023. These include a 130% super deduction for new main rate plant and machinery and a 50% special rate first-year allowance for new special rate plant and machinery

Business investment fell by a record £12 billion between the first and second quarters of last year. Making capital allowances rates for plant and machinery investments more generous has the effect of stimulating business investment and enhancing productivity. As firms invest, they create new, or substitute better, assets for use in production. That increases labour productivity, as workers produce more output per hours worked through the use of new equipment that enables faster, higher-quality outputs.

The measure will greatly benefit British companies of all sizes, including those investing more than the £1 million annual investment allowance threshold, which are responsible for around 80% of total plant and machinery capital expenditure. The changes made by clauses 9 to 14 will allow all companies to reduce their taxable profits by 130%, or 50% up front, all in the first year—a cash-flow benefit powerful enough to encourage businesses to invest now. We expect the measure to cost around £25 billion over the scorecard period.

Opposition Members have tabled a number of amendments to clauses 6 to 14. Amendments 55 to 62 propose the removal of the associated companies rules that apply to the small profits rate. The rules will affect a small proportion of companies, but they are an essential feature of the regime to prevent profitable businesses from fragmenting in order to take advantage of a lower rate or creating unfair outcomes, and they were a feature of the previous regime on which these rules are based. In the absence of the rules, a consultant, for example, could provide his or her services through five companies with profits of £40,000 each and benefit from the small profits rate. I cannot believe that Opposition Members, or indeed any Member, would support that form of avoidance: restructuring in order not to pay the tax.

Several of the new clauses call on the Government to publish a review of the impact of these clauses and potential alternative policy approaches. The Office for Budget Responsibility considers the impact of policy changes in its fiscal forecasts and sets them out in its “Economic and fiscal outlook”, which is published alongside the Budget. Therefore, I can reassure Opposition Members that new clauses 17 and 20, which request reviews into the revenue impacts of a potential global minimum tax rate and the impact of the small profits rate, are not necessary.

New clauses 13, 19 and 21 request reviews into the investment and various economic impacts of clauses 6 to 14 across the UK. The economic impacts of the clauses have been reflected in the OBR’s forecasts published in its “Economic and fiscal outlook”, as were the impacts of reductions in the rate of corporation tax. The fiscal impact of any future agreement on international tax reform will be reflected in subsequent “Economic and fiscal outlook” documents.

Opposition Members have also tabled several amendments relating specifically to clauses 9 to 14. Amendment 11 would reduce the level of the super deduction to the current writing down allowance of 18% for main rate assets. That would have the effect of removing all the benefit conveyed by this groundbreaking new policy for shorter-life assets, while the benefit of a 50% first-year allowance for longer-life assets would remain. That would distort investment behaviour in favour of longer-life assets and reduce the positive benefits of the policy.

Various other amendments seek to restrict the relief only to certain companies, or require companies that claim the super deduction to meet more burdensome conditions than would be required for other first-year allowances. The super deduction is an intentionally broad-based tax relief, designed to ensure that as many companies as possible are able to benefit from this very generous policy, in order that they can invest in their own future to drive the economic recovery.

Regarding a new requirement for country-by-country reporting, I am pleased to say that this Government have championed tax transparency both at home and abroad. That is demonstrated by the requirement introduced in 2016 for large businesses to publish their annual tax strategy, containing detail on the business’s approach to tax and how it works with HMRC. However, the Government continue to believe that only a multilateral approach to public country-by-country reporting with wide international support would be effective in achieving transparency objectives and avoiding disproportionate impacts on the UK’s competitiveness, or distortions regarding group structures. The Government firmly believe that that should remain voluntary and that no further legislation is needed unless and until public country-by-country reporting is agreed on a multilateral basis.

New clauses 2 and 6 would have the effect of delaying the super deduction, but to delay the policy now would be highly irresponsible and would risk holding up the economic recovery that the policy will help to stimulate. The likely real-world effect of delaying the implementation of the super deduction would be that businesses would delay investment until they had certainty on whether the super deduction would be available. At a time when investment is most needed, delaying the implementation of the super deduction would thus have negative impacts on employment, growth and wages. Various other amendments would delay the measure, narrow its scope or replicate existing analysis and safeguards, and I urge the Committee to reject them.

20:00
The Government continue to provide unprecedented support for small businesses in response to covid-19, as evidenced by many new measures announced at this Budget. That includes over 350,000 business properties paying no business rates for a further three months, with the vast majority of eligible businesses receiving a 75% relief across the year. Many small businesses will also benefit from the freeze in fuel duty. The new small profits rate of 19% for businesses with profits of £50,000 or under means that around 70% of active trading companies will benefit from no increase in their corporation tax rate. These smaller companies will benefit from all the policies I have set out, as well as the super deduction, in line with the rules that operate regardless of the size of the business.
Clauses 6 to 14 and schedule 1 raise revenue by increasing the main rate of corporation tax while keeping that rate competitive relative to our international peers and supporting an investment-led recovery through the introduction of a super deduction that is unprecedented in its generosity, and they should therefore stand part of the Bill.
James Murray Portrait James Murray
- View Speech - Hansard - - - Excerpts

I rise to speak to the amendments and the new clause in my name, that of the Leader of the Opposition and those of my other right hon. and hon. Friends.

In the preceding debate, we saw how this Finance Bill will hit families, in all their many forms across the country, by making half of all people in the UK pay more tax from next year. As I made clear, the sense of injustice is made all the more acute by the fact that that increase in costs for families comes before any rise in corporation tax and that at the same time, through this Bill, the Government are letting tech giants stop paying tax altogether.

Clauses 6 to 8 make it clear that the proposed changes to corporation tax will come after increases to the income tax personal allowances, while clauses 9 to 14 centre on the so-called super deduction, a £25 billion tax break targeted at big corporations that the Chancellor has said represents

“the biggest two-year business tax cut in modern British history”.

That tax break forms the centre of the Chancellor’s strategy set out at the Budget, and it comes with a huge cost attached to it. We need to be absolutely clear who will benefit from it.

One thing is clear: that tax break is not targeted at small and medium-sized businesses. The truth is that such businesses can already benefit from the annual investment allowance, a 100% tax break on investment up to £1 million, which clause 15 extends to the end of this year. The Financial Secretary was very clear in his written statement of 12 November 2020, which announced the extension, that it:

“Simplifies taxes for the 99% of businesses investing up to £1 million on plant and machinery assets each year.”

Indeed, the Treasury Committee concluded in its report published in February, “Tax after coronavirus”, that the annual investment allowance

“appears well targeted to promote growth in small and medium-sized enterprises.”

The existing allowance is said to be well targeted at the growth of small and medium-sized businesses and, by the Financial Secretary’s own admission, it already benefits 99% of businesses, which will benefit only marginally from the new super deduction. Who does that leave? It is very clear who will be the main beneficiaries of the Chancellor’s new scheme. It will be a tax break for the 1%.

Sammy Wilson Portrait Sammy Wilson
- Hansard - - - Excerpts

Does the shadow Minister not accept, first, that large businesses are an important component of our economy and we need to increase productivity in those businesses as well as in small businesses, and secondly, that many large industries, such as the aviation industry, have been badly hit by the pandemic and would benefit from the kind of tax allowances proposed in the Bill?

James Murray Portrait James Murray
- View Speech - Hansard - - - Excerpts

I thank the right hon. Gentleman for his comments, but as I have set out, the annual investment allowance already appears to serve small and medium-sized enterprises well. The super deduction that we are debating now is designed to help companies such as Amazon, which do not need any help with their investment. It is important that we see this in the context of those companies that have done well throughout the outbreak and are already avoiding much of the tax they should be paying. It is no wonder that Tax Watch has nicknamed this the “Amazon Tax Cut”. This giveaway from the Chancellor could wipe out Amazon’s UK tax bill entirely.

Analysis of Amazon’s accounts from 2019 shows that the corporation’s UK operations made pre-tax profits of £102 million. In the same year, it spent £67 million on plant and machinery, £80 million on office equipment, and £15 million on computer equipment. The super deduction would have enabled Amazon to deduct £211 million from the calculation of its taxable profits— more than enough to wipe out its entire tax liability twice over. It is truly astonishing that, faced with all the challenges of this outbreak, the Government see their priority as giving Amazon a tax break.

Here and around the world, people agree with us that investment in jobs and growth is what is needed. A tax break for tech giants that already fail to pay what they should is not the answer. That is why our amendment 79 would explicitly prevent the biggest tech firms from taking advantage of the Chancellor’s tax break, as well as other big firms that do not support workers’ rights and the living wage.

The Government should be improving the lives of Amazon workers, who have helped so many people with deliveries throughout the pandemic, not giving a huge tax break to their bosses. Amendment 79 would prevent Amazon and other tech giants from accessing the super deduction by preventing firms from doing so if they are liable for the digital services tax. When the Government set out their plans for the digital services tax, they made it clear that it would apply to businesses that provide social media platforms, search engines, or online marketplaces to UK users. The detail of that tax means that businesses will be liable when the group’s worldwide revenues from these digital activities are more than £500 million, and when more than £25 million of these revenues are derived from UK users.

We are clear that those big corporations that should be caught by the digital services tax are among those that absolutely should not be benefiting from the Government proclaim as the biggest business tax cut in modern British history. We know that Amazon has brazenly made it clear that it will dodge the bill from the digital services tax by passing the cost on to its marketplace sellers. The fact that it is not even paying the tax that was designed for it to pay makes the prospect of a further massive tax cut from the Chancellor even more galling.

Furthermore, as well as excluding big corporations on the basis of their being liable for the digital services tax, we are seeking to use our amendment to stop those big businesses that do not support workers’ rights and the living wage from accessing the tax break. Both conditions would also catch Amazon and would also require other big businesses—those that are not liable for the digital services tax—to respect the right to organise and collective bargaining, and to be certified, or be in the process of being certified, by the Living Wage Foundation as a living wage employer.

When firms stand to benefit from what the Chancellor has called the biggest business tax cut in modern British history, the very least the Government should require of them is that they pay their workers the living wage and respect workers’ basic rights to organise. Alongside this, we propose in amendment 80 that the Government require big firms benefiting from the Chancellor’s tax break to make a climate-related financial disclosure, in line with the recommendations of the Task Force on Climate-related Financial Disclosures.

Beyond the specific issue of how the biggest corporations are set to benefit from this tax break the most, we have also tabled new clause 24 to reflect the widely-held concerns about the impact of the super deduction on levels of tax avoidance and evasion. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse.

As I mentioned on Second Reading, economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”.

Minsters were unable to reassure us on this point when I raised it last week, so we are asking for the levels of tax avoidance and evasion arising from the super deduction to be reviewed and put transparently before this House.

It tells us everything about the Conservatives’ priorities that they are taking money from people’s pockets at the very same time as letting tech giants off paying tax altogether. This Government are proposing to wipe out some of the biggest corporations’ tax bills through a £25 billion boon, aimed at the biggest corporations, that the Chancellor has called

“the biggest two-year business tax cut in modern British history.”

In the face of a struggling economy, a tax break for tech giants that already do not pay enough tax should be the last thing on the Government’s mind. Instead, it is top of their list. They are wrong.

Richard Fuller Portrait Richard Fuller (North East Bedfordshire) (Con)
- Hansard - - - Excerpts

Will the hon. Gentleman give way?

James Murray Portrait James Murray
- Hansard - - - Excerpts

No, let me make some progress.

The Government are wrong, and that is why we will be voting to stop the Chancellor’s tax break going to the biggest tech firms or other big corporations that do not support workers’ rights and the living wage. We need a fairer tax system and we need investment in jobs and growth. This Government’s Finance Bill fails on both fronts. I urge Conservative Members to show that they understand this, support our amendments today and take a stand against the Amazon tax cut.

Felicity Buchan Portrait Felicity Buchan (Kensington) (Con)
- Hansard - - - Excerpts

I speak in support of clauses 6 to 14 and against the amendments. This Finance Bill needs to be a delicate balancing act. It needs to give immediate support to businesses and individuals while setting a path to rebalance our books in the medium to long term. In my view, these provisions on corporate taxation and the super deduction get that balance exactly right. The Bill defers the increase in corporation tax for two years and applies to only one in 10 businesses at 25%, but at the same time it turbocharges the incentives to invest in business now.

This country has had a perennial problem with productivity. We need to incentivise and encourage business investment. That business investment will help productivity, growth and innovation, and that is exactly what we need. The OBR has said that it anticipates that business investment will go up by a massive 10% as a result of this measure and, as my right hon. Friend the Minister mentioned in his introductory remarks, we will go from No. 30 in the OECD rankings for attractiveness for business investment to No. 1. That is what we need over the course of the next two years as we turbocharge this economic recovery. We need the economic recovery to be strong.

Sammy Wilson Portrait Sammy Wilson
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Does the hon. Lady accept that many of our large companies will lead the way in our export growth as we seek to capitalise on the new markets that will open to us as a result of Brexit, and that to capitalise on that we need new, competitive products and to be productive and competitive on the world stage, which is why we need to encourage investment in firms both large and small?

Felicity Buchan Portrait Felicity Buchan
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The right hon. Gentleman makes a very good point. We need to encourage investment across the board in large, medium-sized and small firms. Productivity has lagged and we need to correct that, so I absolutely agree.

Let me move on to corporation tax. As I have said, we will increase corporation tax but that is delayed for two years. Corporation tax, by definition, is paid only by profitable companies. I am a low-tax Conservative, so I do not normally advocate increasing taxes, but given the exceptional amount of debt that we have rightly accrued and taken on, we need to be fiscally prudent and look to balance our books in the medium to long term. The reality is that we are very sensitive to interest rates and inflation, given the debt we have; so yes, I do think we need to do this, although it goes against the grain. However, as my right hon. Friend the Minister has said, even with the increase to 25% we still have the lowest headline corporation tax rate in the G7.

I also want to point out that the measure applies only to the most profitable businesses, those that make £250,000-plus. A small business that makes profits of up to £50,000 will have no change whatsoever in its corporation tax, and businesses in between will have a tapered rate. I believe that this is an unavoidable increase in corporation tax, but it still leaves us incredibly competitive on the international stage, and it applies to only one out of 10 businesses.

20:15
Sammy Wilson Portrait Sammy Wilson
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Does the hon. Lady accept that, despite the impression being given tonight that we are going to tax firms less and take less money off them, the Red Book indicates that corporation tax take in the economy as a whole will escalate from £40 billion this year to £85 billion by the end of the Budget period? The result will be that we take more tax from firms. Hopefully, those firms will become more profitable and will therefore be paying more tax.

Felicity Buchan Portrait Felicity Buchan
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I completely agree with the right hon. Gentleman that all the forecasts show a very substantial increase in the tax take by virtue of this move in corporation tax.

I believe that we have the right balance. We are increasing corporation tax, but only for 10% of our businesses and only in two years’ time. Importantly, we are also accelerating and incentivising investment in businesses, which will be critical to our economic recovery.

Richard Thomson Portrait Richard Thomson (Gordon) (SNP)
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I want to speak to the amendments and, in particular, the new clauses that have been tabled in my name and those of my colleagues.

First, I will start with the positives. We very much welcome the planned increase in corporation tax rates. For a number of years, there has been an orthodoxy that lower corporation tax rates are one way to economic growth. There was a period in the 1980s through to about the 2000s when it was possible to make the argument, as many did, that lower taxes could be a route to securing an increased level of foreign and direct investment, and that the resulting increase in economic activity could result in higher tax revenues than might otherwise have been the case. I would like to think that we are all just a bit wiser and more savvy now, given that, in the growth of that period, it is impossible to properly separate out the increase in corporation tax take and the general growth in activity that took place independently.

Given that we did not see conspicuously high levels of investment or wage growth over that period, except perhaps in boardrooms, and given the condition of our public finances and the importance of public goods as a driver of wellbeing and sustainable growth and prosperity, we consider that this increase, which will apply a new 25% rate on the top 10% of firms, is fully justified. We are relieved that firms will have until 2023 to plan for this move. We believe it was misguided for the Chancellor to try to increase it from 19% to 20% in September, ahead of any recovery starting, beyond the anticipated return-to-trend growth that we are seeing anyway.

The SNP firmly believes that it is important that our corporate citizens pay their share towards the maintenance and good functioning of the market and the public goods that allow them to flourish. However, domestic corporation tax is only part of that story. If re-elected—obviously, we have elections coming up in Scotland, which I am sure hon. Members are focused on avidly—the SNP Government will be looking to explore the possibility of levying a higher poundage on properties where the owner is registered in a tax haven. That is part and parcel of the package of measures that is needed to ensure that everyone who benefits from participation in the market is making a suitable contribution towards it.

Further, we believe that the UK must seize the opportunity that this moment presents to work closely with the Biden Administration in the USA. We must heed the call of that Administration’s Treasury Secretary, Janet Yellen, to set a global minimum tax take for companies to ensure the global economy can thrive, based on a more level playing field and the taxation of multinational corporations, and help spur innovation, growth and prosperity.

New clause 13 would oblige the Government to review the impact of the changes made by clauses 6 to 14 in all parts of the UK, particularly in respect of business investment, employment, productivity, GDP growth and poverty, and to compare the difference in actual and forecast outcomes between having a deal in place with other OECD countries on a minimum level of corporation tax and not.

Similarly, new clause 19 asks the Government to review these changes but in a way that looks both forwards and backwards. As I said earlier, orthodoxies may change in economics, and the Chancellor’s commitment to increasing the headline rate seems to mark the end of a protracted period of a race to the bottom on corporation tax rates. The Chancellor himself said on 3 March that cuts

“might not be the most effective way to drive capital investment up”.

On that basis, it is very important that the Government should compare the estimated impact of corporation tax changes in the Bill with the impact of the changes in corporation tax rates that we have seen in each of the past 12 years.

New clause 20 seeks a review of corporation tax provisions on the link between corporate profit rates and ownership, and the cost of reintroducing a small profits rate. We believe that the lower small profits rate introduces an unnecessary degree of complexity into the tax system. We were unable to find specific costings for the reintroduction of the small profits rate in the OBR policy costings. Instead, they appear to have been rolled into the costings for the overall rate increase. The Treasury should publish details of the revenue forgone through this measure for the purposes of proper scrutiny.

New clause 21 seeks a report on the impact of the super deduction on progress towards the Government’s climate emissions targets and capital investment in each of the next five years. It is important that we understand properly not just the impact that the super deduction is expected to have but the impact it actually has, because it is one of the most significant spending measures in the Budget and a very significant giveaway to big business.

The super deduction is poorly targeted, since it applies to physical assets rather than investments in software, for example, and seems to mostly benefit larger companies. Smaller investments are already tax-deductible under the annual investment allowance. OBR analysis suggests that some £5 billion of the super deduction will, in any event, be spent on previously planned investments. It is hard to avoid the conclusion that this measure will benefit larger companies in a way that does not necessarily drive growth in the way that the Chancellor would hope and certainly does not target the small and medium-sized enterprises that benefited from those deductions anyway and are the engine of growth in most parts of these islands.

When setting policy, it is always a good idea to know what we are doing and why and to have the most solid evidential base for doing so. The fact that we will not put these measures to a vote does not diminish the significance and importance of what we propose. I can assure the Minister that we will return to these matters and will look to the Government to act, even if these matters are not addressed in the final version of the Bill.

Andrew Jones Portrait Andrew Jones
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One of the biggest challenges that the UK economy has faced for many years is its productivity. The UK has some of the highest-calibre companies in the world, among the smartest and most productive on the planet, but outside the south-east, there are areas of the UK where productivity matches parts of southern Europe. For many years there has been a long tail of companies whose productivity is very poor. There are many causal factors in that, including skills—particularly digital—and infrastructure challenges, which I have focused a fair amount of my time on. One of the key issues is a lack of business investment, and one element of the Bill, which I shall focus upon in my few words, goes right to the heart of tackling that: the super deduction.

Until March 2023, companies can claim 130% capital allowances, which basically means that for every £1 a company invests, its taxes are cut by up to 25p. I have no doubt that this will prompt investment. Investment is a driver of economic growth. While the UK has performed well on growth over the last decade, it has lagged on investment, so if investment rates can be improved, the UK will do even better.

The Office for Budget Responsibility estimates that the UK will rise from 30th to first in the OECD world rankings for business investment. That is a very positive thing. Being a beacon for investment is a positive, not a negative; we should not listen to Opposition Members on this. However, such a rise in the world rankings will not be achieved unless there is real scale to this measure. For the two years that it is in place, it is estimated to amount to £25 billion. It would therefore be the largest business tax cut in modern British history, so there is indeed real scale to it.

When we talk about productivity in this place, there is a danger of speaking in jargon. What people could take away is the message that they will have to work harder, do 40 hours per week instead of 38, or work in a team of six rather than eight but still do the same work. What I know we mean, and what I am talking about, is working smarter, so that there is more economic output for the same input. Investment in new machinery and the latest technology is one way to increase productivity, and the super deduction will increase investment.

There are amendments ahead of us this evening about measuring the impact of those policies. Those amendments are not necessary as the Treasury always reviews the impact of its policies, but as the Treasury does its work it will be interesting to see the impact of the super deduction on different parts of the country. It will simply reflect the different economic mix that we have in different areas, and some will benefit more significantly than others. I think the policy will be very helpful in the levelling-up agenda.

Margaret Hodge Portrait Dame Margaret Hodge (Barking) (Lab) [V]
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With the support of a wide range of Members from across the House, I tabled amendment 78. Although we will not put it to a vote tonight, we intend to return to the subject on Report. Sadly, I cannot look the Minister in the eye, but I strongly and sincerely urge him to give the matter proper and serious consideration. A knee-jerk rejection to a practical idea simply because it is proposed by Back Benchers from across Parliament would confirm yet again that the Government listens only to the few—the powerful corporations and influential tax advisers—and ignores the views of most taxpayers in Britain today.

Boosting investment to stimulate growth is a vital and shared objective, especially as we emerge from the shadows of the pandemic, but the super deduction is both hugely expensive and poorly targeted. With a cost of £25 billion over two years—nearly half the total annual defence budget—the Government must ensure proper value for hard-working taxpayers. Our amendment seeks to target taxpayers’ money more effectively. Every new tax relief, as the Minister well knows, provides a new opportunity for the unscrupulous to identify loopholes and then to shirk their responsibilities and avoid paying their fair share of taxes. Capital allowances have long been fertile ground for tax avoidance. Anybody looking online will find an army of people advertising expertise in classifying expenditure to help companies to exploit the eligibility criteria and so avoid tax.

With a super deduction, the opportunities for exploitation are obvious. The tax relief will last for only two years, so it is unlikely to fund the aviation industry or genuinely new capital investment, which takes time to plan and to implement. It will mainly be used to cut taxes for companies that were investing anyway, and those that will benefit most are those that have prospered the most during the pandemic. They are the companies with oven-ready capital investment plans, benefiting from the increased demand that they have enjoyed over the last torrid year—companies such as BT, whose share price rose by 7% on the day the super deduction was announced, or, as others have mentioned, the notorious tax avoider Amazon.

In 2019, Amazon’s UK turnover was £13.7 billion, but by claiming that its UK sales took place in Luxembourg it exported its profits and avoided corporation tax. It declared only a bit of profit in the UK, as the shadow Minister said, on its warehousing and logistics activities. Its corporation tax contribution was less than 0.1% of its turnover. Analysis by TaxWatch shows that even that miserly contribution would be wiped out with super deductions. It would write off its investment in IT equipment and machinery against its deliberately understated profits. 8.30 pm

Does the Minister really intend to fritter taxpayers’ money away on bungs for global companies that do not pay fairly into the system? Jeff Bezos, whose personal fortune rose to $200 billion during the pandemic, and his $1 trillion company are pocketing money from the British taxpayer and flagrantly refusing to pay back into the system. Does the Minister really think that taxpayers support this sort of daylight robbery? Our amendment would provide a straightforward way for the Government to ensure that this did not happen. It would require proper transparency, with multinational corporations showing where they undertake their economic activity and where they make their profits as a condition of eligibility for super deductions.

The House voted in favour of country-by-country reporting in 2016, as the Minister said, but that power has never been enacted. Our amendment urges the Government to use that power to ensure that this egregious behaviour by companies is visible for all to see, and to ensure that taxpayers’ money is not wasted on those who greedily grasp the nation’s money and assiduously avoid contributing to the public purse. Accepting our amendment would achieve two important objectives. First, it would stop taxpayers’ money being squandered. Secondly, with President Biden pioneering a new global settlement for corporation tax and the EU reaching agreement on country-by-country reporting, it would ensure that Britain played a leading role in developing a fair and responsible global system of taxation.

John McDonnell Portrait John McDonnell
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Following on from my right hon. Friend the Member for Barking (Dame Margaret Hodge), I find it almost incredible that we are having this debate at all, given what we know about the track record of abuse of this type of tax deduction, as she so eloquently pointed out. The Minister is right to suggest that amendment 11, tabled in my name and those of other right hon. and hon. Friends, would have the effect of removing the provision of capital allowance super deductions.

There has been considerable evidence, and concern, from economic think-tanks and Committees of this House that tax reliefs have failed to deliver their stated objectives and, worse, that they have often had unintended consequences through the creation of perverse incentives. Members have raised example after example in recent years, including the entrepreneurs allowance, the patent box and the tonnage tax, all of which have not only failed in their objectives but lined the pockets of company directors and shareholders, exactly as my right hon. Friend said. Accountants, lawyers and others have been using them effectively for tax avoidance. The scope for perverse incentives and unintended consequences is even greater with these super deductions. If the Chancellor wants a sweetener to go alongside his corporation tax rises, surely at a time of rising unemployment it is more urgent to incentivise job retention through a temporary cut to employers’ national insurance contributions rather than introduce what has been described as this dog’s dinner of untargeted super deductions in clauses 9 to 14.



Unlike Ministers, in dealing with business, I do not believe in a something-for-nothing culture. If the Government are giving tax breaks to businesses, the Government, as guardians of the public purse and the public interest, should demand something in return. New clause 1, in my name and those of other hon. and right hon. Members, asks simply that, in return for companies being eligible for these super deductions, they should pay their workers the real living wage and should recognise trade unions for collective bargaining purposes—two simple things that reflect that they are responsible employers.

I regret very much the Minister’s reference to these as “burdensome” requirements. Paying a decent wage and recognising trade unions are not a burden, but actually things that enhance the role of an individual company. As has been said in debate after debate, even by Government Ministers, in many instances the greater involvement of the workers in a company increases productivity. These are just low barriers for companies to pass. It does not take long to recognise a trade union or to be accredited as paying the living wage. Companies that do not currently meet these extra criteria could easily do so during the passage of this Bill and its enactment.

I also back the Front-Bench amendments in the name of the Leader of the Opposition, and I pay tribute to my hon. Friend the Member for Ealing North (James Murray). He is right that companies such as Amazon that dodge their taxes and evade their responsibilities to their workers should not be given tax breaks on top. The Chancellor of the Exchequer made much of his compact with unions and business groups over the furlough scheme. This modest new clause 1 puts in legislation the approach I am putting forward. I believe that it is within the spirit of that relationship between Government, trade unions and employers, and I just urge the Government to think again about accepting it.

New clause 2, in my name and those of other hon. and right hon. Members, combines a request for an evidence base for super-deductions in respect of capital allowances and to explore what economic benefits could be derived from attaching social and environmental conditions to the receipt of super deductions. I heard one hon. Member in this debate say that the Treasury monitors these policies and does indeed review them; unfortunately, it does not.

Historically, tax reliefs have been introduced, and over the years an accumulation of tax reliefs have never been reviewed and never really been tested for their effectiveness in the way they should be. The Office for Budget Responsibility stated in its March “Economic and fiscal outlook” that the super deductions, as others have said, are expected to cost at least £25 billion in total between 2021-22 and 2023-24. This is a huge commitment, and it is surely in the public interest that we have an assessment of policies’ effectiveness and also ensure they deliver on social and environmental goals.

In new clause 6, I seek to create an evidence base on which this House can assess the merits and drawbacks of the super deduction policy. The Public Accounts Committee has previously looked into the operation of UK tax reliefs, and its findings painted a worrying picture. These reliefs already cost more than £100 billion a year in forgone tax, and HMRC does not even know how many reliefs exist or monitor their cost, let alone their effectiveness. Let me quote my right hon. Friend the Member for Barking, who is the former Chair of the Committee. She said:

“HM Treasury and HM Revenue and Customs…do not keep track of those tax reliefs intended to influence behaviour. They do not adequately report to Parliament or the public on whether reliefs are working as intended and what they cost and whether they represent good value for money.”

She went on:

“HMRC does not effectively monitor changes in the cost of tax reliefs so is slow in identifying instances where a relief is being exploited for a purpose”

beyond what Parliament intended. I think that is an accurate but damning indictment and one that should concern the whole House, but especially Treasury Ministers.

New clause 6 specifically recommends that the Public Accounts Committee is tasked with reviewing the effectiveness of existing capital allowances and that this House then votes on the clauses that provide for super deductions in the light of that evidence. I urge the Government to get a grip on the whole process of tax reliefs. We have seen how they can be abused. We have seen how ineffective they can be. We have also seen an industry develop, with accountants and lawyers who have profiteered from tax reliefs that the Government have introduced over decades. To add now to that abuse of taxpayers’ money in this way, I deeply regret. I urge the Government to think again. I give the Government this warning: in a few years’ time, if the Bill goes through as it is now, I bet we will be returning to this debate with example after example of how this system has been abused, to all our cost.

Miriam Cates Portrait Miriam Cates (Penistone and Stocksbridge) (Con) [V]
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I wish to speak to the numerous amendments and new clauses relating to corporation tax changes and the new super deduction.

As the previous speaker, the right hon. Member for Hayes and Harlington (John McDonnell), will no doubt keenly remember, raising corporation tax was one of the pillars of Labour’s 2019 manifesto. We frequently hear Labour Members expressing the view that big businesses should pay their fair share of tax. I completely agree, and that is why I fully support the Government’s proposals to increase corporation tax with a new maximum rate of 25% for those businesses with profits of over a quarter of million pounds from April 2023. Unlike a rise in income tax or national insurance, which affects taxpayers in a blanket way regardless of personal financial circumstances, corporation tax is only paid when profits are made—no profit, no tax due. And where profits are made, it is of course absolutely right that a proportion of those profits is returned to the taxpayer, because without the infrastructure, education, security and health services that the state provides, those businesses would clearly be much less profitable.

Members across the House like to champion small and local businesses, and rightly so. These businesses will, in the vast majority of cases, continue to pay the lower rate of corporation tax. In my constituency, we have 2,890 registered businesses, with 88% having fewer than 10 employees. These are not the kind of companies that generally make profits exceeding a quarter of a million pounds a year. The corporation tax rise will only affect the very largest and most profitable businesses. In fact, only 10% of businesses will pay the new higher rate. The Government are right to delay the increase until 2023, as it gives companies time to plan as we emerge from a period of uncertainty, but it is wrong to say that the impact of the pandemic means that the change should not take place at all. Yes, many businesses have struggled during the pandemic, but some businesses have prospered hugely, often due to circumstances for which they can take no credit. Online traders and the big supermarkets have seen their revenues increase substantially purely because other retailers have been legally forced to close. It is therefore right for the Exchequer to recoup some of those additional revenues through taxation. These measures must therefore pass without the proposed amendments, some of which could allow large businesses to restructure to avoid the high rates of tax.

We all want UK businesses to be profitable, but we also want those profits to result in higher wages, better training and reinvestment in our economy so that profits can be shared fairly across society and not just concentrated among shareholders or the most highly paid executives. In other words, we need businesses to be more productive. Low productivity has been a thorn in the flesh of the UK economy for some time. The proposed super deduction is therefore exactly the measure we need to encourage the reinvestment of profits through large-scale investment, turning crisis into opportunity and setting UK businesses on a new path to innovation, productivity and growth. The OBR has predicted that this will increase business investment by 9% and lift us from 30th in the OECD’s world rankings for business investment to first. This is the right moment for this incentive, when many businesses have been forced to pivot or have seized opportunities presented by the pandemic, and now is the time to invest. That is why I oppose the amendments to the super deduction clauses, which would ultimately delay and reduce its effectiveness.

Our economy is an ecosystem, with the private sector, the public sector, our communities, individual employees and employers existing interdependently in a multitude of symbiotic relationships. Each element of this ecosystem has obligations and responsibilities to the other parts. For businesses, these responsibilities include paying fair levels of tax and making investment decisions in the best interests of our whole society. It is the Government’s role to encourage businesses to act for the common good. The unamended measures in this Bill will be successful in doing just that.

20:45
Sarah Olney Portrait Sarah Olney [V]
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I wish to speak to clauses 6 and 7 relating to the rates of corporation tax and also to the super deduction.

Businesses everywhere, of all sizes and in many different sectors, have had an extremely challenging year. As we hopefully move into a time when business as usual can return, I know that Members in all parts of this House are united in wanting to support businesses to flourish once more. But this has also been a year of unprecedented demand on the public finances. Much of that money has been directed towards households in the shape of our furlough and SEISS schemes to ensure that incomes can be sustained and, in turn, to maintain revenue for those businesses providing essential services. Many businesses have seen increases in revenue this year as indirect competitors have been forced to close or prevented from making their goods and services available. Any business that provided a digital or delivery service found an unexpected increase in demand compared with those that provided an in-person service.

Why should the businesses that have profited from the pandemic not pay their share in restoring the public finances that have been expended on supporting us all through this difficult time? The Liberal Democrats have called for an excess profits, or windfall tax so that those businesses that have done well can contribute their share to the recovery. This could most easily be done by an immediate increase in corporation tax whereby only those companies that have remained profitable would pay it. Instead, the Government propose a sharp rise in corporation tax in 2023. This delayed increase will give larger companies time to rearrange their affairs, potentially limiting the amount of revenue that can be captured by the planned rise. It will create an artificial boost to the economy in the short term as profits are brought forward, to be reported against the lower tax rates of the next couple of years.

The Government’s changes to corporation tax rates come when the global nature of trade presents a major challenge to national autonomy on tax rates. The Liberal Democrats are in favour of higher corporation tax rates to ensure that businesses are paying their fair share. The challenge to implementing this has always been that we are in competition with other countries attracting investment by setting lower tax rates. I am interested to hear how the Government plan to react to the plans by the new Biden Administration in the United States to set a global floor for corporation tax rates. This is a fantastic opportunity to introduce a fairer and more progressive tax regime in all nations and reduce the options for corporations to reduce tax. I very much hope that the Government will sign up to the Biden plan and set an example to the rest of the world.

The Chancellor’s most eye-catching announcement in the Budget was the super deduction available to businesses over the next two years to get back 130% of the cost of new plant and machinery. I know that this will benefit many businesses, but I fear that the impact will be more limited than at first appears. First, it creates a cliff edge in investment, especially when coupled with the tax increase in the third year. Secondly, many manufacturing businesses invest for the long term and plan their capital expenditure in 10-year cycles, so a two-year incentive will not make a big change to investment plans. Thirdly, a great deal of equipment is leased rather than bought outright, so investment incentives like these will make no difference.

It would have been a better policy if the expenditure recovered could have included measures to get our economy to achieve net zero carbon emissions or have included expenditure on training and development to help us to build the high-skill economy that we need. These expenses could then have been claimed by a far wider number of businesses in many different sectors and made a genuine contribution to future prosperity and green growth.

The Government need to be clear about their business tax policy so that businesses have time to plan and an understanding of how tax policy interacts with an overall strategy to support enterprise and productivity. Many of our business owners feel a real loyalty to their communities and will maintain those connections regardless of the tax rates, but they need to know that this continues to be a country that welcomes entrepreneurs and supports small businesses. Much more can be done in our tax system to support small and medium-sized enterprises, and I regret that the Government have not taken the opportunity to do this. The Liberal Democrats would introduce a tax cut for SMEs and quadruple the annual employment allowance to allow small businesses to employ up to five people without paying any national insurance contributions. The Government have shown a lack of commitment to small and growing businesses in this Bill and no strategy for private sector growth.

The Liberal Democrats oppose the corporation tax clauses in the Bill because they mean that profitable corporations are not paying their fair share as we recover from this pandemic and the overall provisions do not provide the support we need for small businesses.

Bell Ribeiro-Addy Portrait Bell Ribeiro-Addy [V]
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I shall speak in favour of new clause 9 in my name, and the amendments and new clauses in the names of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and the Labour Front Bench.

The thread that weaves through these amendments and new clauses is utter outrage at plans for big corporations, including big firms that do not support trade union rights, that pay below the living wage or that avoid tax, to benefit from the Chancellor’s astonishing super deduction tax break giveaway. In particular, new clause 9 would require a meaningful equality impact assessment of capital allowance super deductions that must cover the impact of those provisions on households at different levels of income; people with protected characteristics; the Treasury’s compliance with the public sector equality duty; and equality in different parts of the UK and different regions of England.

For most of us, one of the key consequences of the pandemic has been to illuminate far-reaching health and socioeconomic inequalities in many countries. However much this Government try to conjure otherwise, it is just a statistical and factual truth that, as a result of years of cruel Conservative austerity followed by the callous Conservatives’ handling of the covid crisis, the pandemic’s impact has fallen disproportionately on the most vulnerable individuals and along gendered, ethnic, occupational and socioeconomic lines.

Inequalities in people’s protection from and ability to cope with this pandemic and its tremendous societal costs have stressed the importance and urgency of the societal changes needed to protect population health and wellbeing. According to the statement issued by independent experts of the special procedures of the United Nations Human Rights Council, condemning the Commission on Race and Ethnic Disparities’ report:

“The reality is that People of African descent continue to experience poor economic, social, and health outcomes at vastly disproportionate rates in the UK.”

Women—particularly the poorest women, black, Asian and minority ethnic women, disabled women, lone parents and young women—not only have been badly hit by the pandemic, but have suffered for years under this Government’s brutal austerity onslaught. Yet, coming in at an enormous £12 billion for 2021-22, the Chancellor’s announcement of a super deduction on purchases of capital goods by businesses was one of the largest spending items in the spring Budget. In fact, some argue that it is one of the largest single-year tax giveaways ever enacted by a Government. And who will it benefit? Although the Chancellor claimed in his speech that the Government’s response to covid had been “fair”, women, those on low incomes and those from BAME backgrounds stand to benefit the least from the untargeted tax breaks for large companies through the super deduction. We know that more businesses—and larger ones—are owned by men than by women. As such, it is important to recognise there are many potential equalities impacts to business taxation.

Incentives such as the super deduction are biggest for large firms and the Financial Secretary to the Treasury has admitted that only 1% of firms will benefit this year, as the rest are within the annual investment allowance. How can the Government justify the fact that under this Bill the rich and big business will be treated to mouth-watering tax giveaways and reliefs, despite unclear evidence about whether that will actually create the investment needed?

The Women’s Budget Group argues that this provision is likely to have “substantial deadweight costs”, bringing forward investment rather than generating new investment. The group also raised the point that it is unnecessarily limited to investment in “plant and machinery”, thereby excluding training and other human capital investments, and missing opportunities regarding the transition to a lower-carbon economy that recognises the economic benefits of spending on the social infrastructure that our public services provide. This goes to the crux of the problems with this Finance Bill, and with the Government’s lack of vision for a green recovery based on intersectional socialist economics and progressive taxation.

Ben Lake Portrait Ben Lake (Ceredigion) (PC)
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It is a pleasure to speak in this debate, Sir Charles. I rise to speak in support of amendment 53, which I hope will encourage the Government to bring some rigour and meaning to their rhetoric of levelling up and the use of taxpayers’ money.

In a Budget that confirmed £17 billion of spending cuts, relative to March 2020 plans, the Chancellor’s decision to announce the super deduction, equivalent to forgoing approximately 20% of the UK’s corporation tax revenues, was certainly a bold one, particularly as the Financial Secretary noted in November 2020 that the existing annual investment allowance already covers 99% of all UK businesses. The House has heard this evening that the super deduction is a major tax break for the top 1% of UK businesses. We have also heard many concerns that it is a blunt tool in need of significant refinement if its perceived benefits are to be targeted to those in greatest need of support. I also point to concerns that the super deduction will disproportionately benefit London and the south-east of England and that it flies in the face of the Government’s commitment to level up the UK economy.

I draw the House’s attention to a finding from the Centre for Progressive Policy, which has calculated that, although the super deduction could amount to a tax break worth up to £513 for London residents, it would be worth only half as much in Wales, whose sum benefit is the second lowest of the UK nations and regions, with only Northern Ireland benefiting less on this measure.

I am afraid that I disagree with other hon. Members who have suggested that the super deduction might, on the contrary, actually benefit and address regional inequality. My fear is the opposite—that the super deduction will, at best, lock in existing regional inequalities and, at worst, exacerbate rather than address the UK’s geographical economic imbalance. That is why Plaid Cymru wishes to amend the Bill to require that the Chancellor considers the impact and geographical extent of the super deduction across all the UK’s nation and regions and would support calls made by other hon. Members this evening that measures should be introduced to establish a deeper evidence base for these changes. Similarly, given the urgent need for climate action and the retooling of the economy for a net zero future, this amendment also requires the UK Government to consider the super deduction’s impact on efforts to mitigate climate change.

I hope that the Government will incorporate guarantees such as these into the Bill to ensure that we truly do rebuild back better from the pandemic, rather than resuscitate the UK’s deeply flawed pre-pandemic economy. Failure to do so would make it clear that their rhetoric of support for all nations, for the levelling-up agenda and for climate action are no more than fine words and lofty intentions.

Richard Fuller Portrait Richard Fuller
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It is right, as our hard-working business leaders emerge from the most torrid 12 months, that the Government set a clear course for their understanding of how those businesses will be taxed in future. I would have hoped that it would have been heartening for the people who have been running businesses through these most difficult times to listen in to this debate to hear what Members of Parliament have to say on their behalf. However, personally speaking, I think that most people who run businesses will be rather saddened by what they have heard—largely, a perspective that it is wrong for people to run businesses that are profitable, that there is sin in becoming rich by creating a business that creates products that people want, rather than virtue, and a complete lack of understanding that businesses that make profits are a sign of success, rather than a sign of failure.

Personally, I am rather in favour of us increasing taxes. When this or any Government seek to increase tax on corporations, I wonder whether they realise that, essentially, they are putting a tax on success—that every pound that we take away from a business, from its profits, is a pound taken away from things that the business owner may do him or herself. They might be radical things, such as investing in and expanding the number of people who work for the businesses, investing in machinery that will make their business more competitive in terms of exports, or lowering their debt so that they are on a more substantial and more stable footing for the long term. Every time a state takes away money from enterprise it is putting at risk the resources those companies have to do those things, and the future success of this country. Therefore the Government were right to consider carefully how to balance a change in corporation taxes, and given what has happened subsequently to the Budget, the Chancellor deserves a bit of a pat on the back for understanding what would be going on in the global realm of corporation tax, as well as the crucial importance of providing some short-term incentive for businesses to invest as we emerge from the recession.

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I always like to be as honest as I can, particularly having been a Member of Parliament on and off for the past 10 years. I have stood on a platform where we have argued for a reduction in corporate tax rates, saying that if we reduce corporate tax rates the corporate tax take will go up; and now I am looking at measures in this Budget that say that as we increase corporate tax rates the overall corporate tax take will go up. It is a miraculous tax that goes up whether we cut it or increase it, but such are the vagaries of public finances.
I listened with great interest when the shadow spokesman the hon. Member for Ealing North (James Murray) was speaking, and then I looked at the number of amendments that have been tabled. It seems that his boss’s predecessor, the right hon. Member for Hayes and Harlington (John McDonnell), has a much greater active understanding of Labour party policy on corporation tax than the current Opposition Front-Bench team, and I was just wondering why the name of the Leader of the Opposition was not attached to the former shadow Chancellor’s amendments. Is it because there is somehow a loss of radicalism on the Labour Front Bench—have they got frit in terms of some of the policies that their Back Benchers or former leadership wanted?
On our Benches, it is important for us to respond to the proposals that the United States seems to be putting forward for a global minimum tax. That is not in essence completely wrong in principle, although I would be interested if my right hon. Friend the Minister could say if there is any precedent for UK tax policy, in this case providing for a minimum tax, to be struck in international treaties, and whether the Treasury has assessed what the implications of that would be.
I also urge the Treasury to realise that the crux of our approach to relations with the global multinationals, particularly the digital multinationals, is that a substantial amount of the wealth created and the profits generated is not directly associated with or tied to the sales in any one country. Therefore, there is a bit of bait and switch with the US proposing a global minimum tax as somehow a solution to the need for a digital sales tax. For example, Google makes tremendous amounts of profits from having access to how people look at things online. It does not necessarily sell that in terms of ads, which could be taxed locally, but it can derive products and innovations from that which are profitable for it, yet we will never see any tax coming to this country from that practice. I therefore say to the Treasury that it is time that we started looking at how we can place ownership of data, like we place ownership of land and other assets, so that it is located within the realm of this country; only then will there be an effective answer as to why a global corporation minimum tax from President Biden is on the same basis as modern digital taxes.
My final point is on an issue raised a number of times in this debate: the environmental goals we rightly wish from our corporations. The Department for Business, Energy and Industrial Strategy and the Treasury are leading in the country so that the United Kingdom can be a centre for green finance and green investment, and that is entirely correct. Parliament has passed a law to achieve net zero within a certain time frame, but we have not really been explicit with the public about what the costs of that may be, although I think we understand that substantial investments will be required to achieve it. I gently prod my right hon. Friend the Minister: in the longer term, beyond the five-year frame that we have right now, my expectation is that there will be a need to provide additional incentives in the form of capital allowances or other allowances to enable the private sector to achieve the net zero goals and the investments required for that if we proceed with the increase, as we will, in overall headline corporation tax. I leave him to mull over that point.
Antony Higginbotham Portrait Antony Higginbotham (Burnley) (Con)
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I agree with almost everything my hon. Friend the Member for North East Bedfordshire (Richard Fuller) said about corporation tax. It is a tax on success, and on this side of the House we are all naturally low-tax Conservatives—we believe fundamentally that businesses are most successful when they are left to innovate and grow, and can keep more of the money they earn. However, we also have to accept that that is not the only thing that drives businesses. Globally adaptable businesses that look around the world at where they are going to locate their next manufacturing plant or innovation look at myriad factors: the support available; the skills of the local population; and the infrastructure in place. All of those things cost money. As we have seen during the past 12 months, the Government have gone to great lengths to support businesses. In my constituency, 11,000 jobs have been supported by the furlough scheme. That is money that has helped businesses across Burnley and Padiham prepare and stay ready for when the economy reopens. We are also talking about £20 million in grants so that those same businesses can restart as soon as the economy opens up. All businesses understand that; they understand that responsibility comes with this and the taxation they pay enables them to take part in society in a meaningful way.

With all that in mind, I agree with the measures my right hon. Friend the Chancellor set out on corporation tax, as a low-tax Conservative. I do so because the Chancellor has struck exactly the right balance in making sure we secure the economic recovery first: we do not look at businesses now as they are just starting to reopen and get trading again and say, “Just because you are profitable, we are going to increase your tax rate immediately”; we look ahead and say, “When the economy has recovered and you are trading as you were pre-pandemic, that is when we will look for you to make a fair contribution to repay some of the support we have been able to put in place.”

In Burnley and Padiham, we are heavily reliant on small and medium-sized enterprises—those small innovators. As we recover from the pandemic, we often see the most SMEs and new businesses start up; people who used to work for one company and who may have been made redundant—something may have happened—then start their own businesses. That is why the small profits rate of corporation tax is so important, because it is the incentive those innovators and entrepreneurs need to start their business, to grow, to employ someone else.

We also have to recognise that one thing we have suffered from historically in the UK, for many, many years, is low productivity, and that has come from a huge lack of investment from businesses. If we are really going to level up across the country, we need to drive investment in growth and utilise the power the private sector has through whatever means are available to us. We know that since 2007-08 there has been a systemic lack of investment, driven by the uncertainty we have had, so that there is a pot of money that so many businesses are sitting on, waiting to be unlocked. That is where the super deduction will prove so important, because it encourages those businesses that have had a stockpile—that have lived with uncertainty for the best part of a decade and so have not been able to invest, as they have not had that confidence. As we emerge from the pandemic, the super deduction gives them the confidence to invest.

In Burnley, we are talking about aerospace manufacturers, automotive manufacturers and textile makers. The super deduction will help businesses transition to green technology, as we have spoken about. It will help aerospace businesses to move into HS2 and textile companies to move into weaving—we do still make textiles here in the UK.

All of these things will result in a high-skill, high-wage manufacturing economy here in the UK. So, yes, we need to keep the UK attractive to investment, job creation and new businesses, but we do that through a fair corporation tax system, lower rates for new businesses and using schemes such as the super deduction to drive investment into manufacturing jobs, which are going to be so vital for our future.

Rebecca Long Bailey Portrait Rebecca Long Bailey [V]
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I will limit my comments to the super deduction which, as we have already heard today, will be one of the largest single-year tax giveaways ever enacted in the UK. Arguably, some companies’ corporation tax bills will be wiped out entirely for a couple of years.

My right hon. Friend the Member for Hayes and Harlington (John McDonnell) has already said that the Public Accounts Committee found that tax reliefs cost more than £100 billion a year in forgone tax, but HMRC does not know how many reliefs exist; nor does it monitor the efficacy of such reliefs. That is staggering. Can we be confident that HMRC will know what effect the super deduction will have, and who will actually benefit from it? Many of my small and medium-sized enterprises in Salford would love a super deduction, but sadly it will not benefit them. The Financial Secretary to the Treasury told the House last year that the enhanced annual investment allowance of £1 million already covers the capital expenses of 99% of businesses in the UK, so it seems that this super-relief will overwhelmingly benefit only 1% of extremely large businesses.

I would have no problem if such businesses desperately required the relief in order to protect jobs or to invest in our local economies, but let us look at some of the potential beneficiaries. Amazon has benefited from the pandemic, seeing its sales jump by 50%. According to TaxWatch, the company’s latest accounts show that they spent £66.8 million on plant and machinery, £80.4 million on office equipment and £15.3 million on computer equipment in the same year, so the 130% super deduction could entirely account for the pre-tax profits of the company even before any deductions of staff pay awards.

Similarly, many energy and water companies find themselves also able to wipe out their tax bill. United Utilities spent £1.275 billion on property, plant and equipment in the past two years, compared with a current tax liability of just under £89 million. Electricity North West stated that covid has had a limited impact, and it had a tax bill of £45 million for 2019-20 while investing £449 million in property, plant and equipment. For both companies, it would only take a small proportion of the capital investment to be spent on plant and equipment to use the super deduction to eradicate their tax bill, too.

Do these buoyant companies really need a super deduction? The answer is no. In the absence of any clear conditions specifying the use of such savings or providing a wider social benefit, such as increasing salaries for workers, investing in decarbonisation or reducing costs for end consumers, I struggle to see the benefits being passed on to anyone other than shareholders.

I hope that the Government support amendment 11 and new clauses 1, 2 and 6 in the name of my right hon. Friend the Member for Hayes and Harlington and others, as well as the Labour Front-Bench amendments, because there are companies that do need support to help them recover from the pandemic. There is a real need to support long-term, patient investment by industry, but the untargeted nature of this relief, without conditions, is not the best use of public money. In fact, it borders on the obscene.

Rachel Hopkins Portrait Rachel Hopkins (Luton South) (Lab) [V]
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I shall speak in support of the amendments in the name of the Leader of the Opposition and those in the name of my right hon. Friend the Member for Hayes and Harlington (John McDonnell). The Budget and Finance Bill represent the Government taking steps towards further structuring our economy on insecure, precarious work and deregulation, which will widen income and wealth inequality.

The Government’s unambitious plan provides neither a foundation for rebuilding our economy nor a plan to tackle the climate emergency that my constituents have called for. They have announced a future cut to social security and a real-terms pay cut for public sector workers at the same time as introducing a super deduction tax cut for big businesses, allowing firms to write off 130% of the value of qualifying capital investment against their taxes.

When we look across the Atlantic to the US, we see a stark contrast. The Biden Administration have committed to fast-tracking a $1.9 trillion Government-led stimulus package, which is about 10% of the annual output of the US economy and which contained no promises of future deficit reduction. That is alongside a forward-looking plan to spend a further $2 trillion on infrastructure. Biden’s spending plan, in proportion to GDP, is three times the size of the UK’s.

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The economic consensus is changing, but the Budget shows that the Government have not caught on. Instead, they have made it clear that low pay and increasing inequality are central parts of the UK’s future under the Conservative party. The so-called super deduction tax cut will completely wipe out the corporation tax bill for big businesses. It will cost £12.2 billion and £12.7 billion in the 2022 and 2023 financial years, the equivalent of giving up 20% of the UK’s corporation tax revenues, and it comes after a year in which many of these companies have profited hugely.
The policy’s rationale is fundamentally flawed. It will make no difference to investment in the long run. It just influences when businesses decide to invest, rather than encourages them to invest more, and it relinquishes tax revenue in doing so. Treasury Ministers have openly admitted that only 1% of businesses will benefit fully from the super deduction this year. So a small number of businesses, including Amazon, will get a tax giveaway that could result in rebates being handed out for investing in, say, swimming pools or jacuzzis. The policy also flies in the face of any credible levelling-up strategy, as it will exacerbate regional inequality. As we heard, the Centre for Progressive Policy has found that the super deduction tax cut will benefit London the most, with a tax break of £513 per head compared with £371 per head in the east of England.
The policy is wasteful and wide open to abuse, and fails to understand the rebuilding challenge before us. Even the US is moving away from this under Biden, and the public agree with us. We need Government investment in jobs and growth, not tax giveaways. The Government must publish a report examining the policy’s economic, social and environmental impact. While it is unlikely the Government will change tack, at the very minimum there must be strict criteria for access to the scheme. Workers need a cast-iron commitment that only employers that recognise a trade union for the purposes of collective bargaining and that are certified by the Living Wage Foundation as a living wage employer can access the scheme. It is not a big ask to expect big businesses to be decent employers, and it would at the very least ensure that workers receive some benefit from this giveaway scheme.
We need a Government who are on the side of working people, not on the side of big businesses enforcing low pay and poor working conditions. I hope the Chancellor and Ministers will seriously consider the super deduction tax cut and instead ensure that increased public spending directly benefits workers, who are the driving force of our recovery.
Jesse Norman Portrait Jesse Norman
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I am grateful for the contributions that have been made to this debate. It saddened me, however, that Labour Members seemed to be reading off a single piece of paper in so many of their speeches. I encourage them not to follow the script slavishly but to actually think about what they say.

The hon. Member for Salford and Eccles (Rebecca Long Bailey) put the matter at its most plain when she argued that because 99% of businesses benefit from the annual investment allowance, it meant the super deduction benefited only the remaining 1%. Of course, that is completely wrong. The super deduction benefits all businesses that are in a position to take advantage of the eligible deduction it provides, and that is better than the annual investment allowance. The whole premise of the arguments advanced by the Opposition is wrong. The fact is that tax reliefs are an understood and established part of tax policy; they are not to be thought of merely as giveaways. A raft of international authorities have testified to the benefits of greater investment allowances, including full expensing, and our proposal goes some way beyond that. We need to see it in that context.

The UK already has a rather competitive intangibles regime, and the productivity challenge that we face as a country is focused on the tangible assets and therefore it is on those that this super deduction is aimed.

The hon. Member for Ealing North repeated the line about small businesses, but also asked whether the super deduction was somehow extremely vulnerable to exploitation by malfeasant tax actors. I can tell him that the deduction has been very carefully assessed and includes important exclusions, including as to related party transactions and second-hand assets. It also includes a new anti-avoidance provision, which is designed to give it additional protections.

It is true that this is a country that takes the question of tax avoidance and tax manipulation extremely seriously. The right hon. Member for Barking (Dame Margaret Hodge), who has been a great campaigner in this area, focused on that. Of course I cannot discuss individual taxpayers. No one knows what an individual company’s taxpaying arrangements are. She purported to know—that is her privilege—but I am not in a position to discuss that. None the less, I can tell her that it would be very bad policy indeed for any Government to base tax policy on a single employer or taxpayer. If she thinks that this country has been soft in any respect on tax, let me remind her that we have led the international charge on base erosion and profit shifting, on diverted profits taxes, and on the corporate interest tax restriction. We have put into law a digital services tax and are consulting on an online sales tax. That is not the action of a Government who take these things in any way other than very seriously.
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