All 5 contributions to the Finance Act 2021 (Ministerial Extracts Only)

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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 8th Jun 2021
Finance Bill
Lords Chamber

2nd reading & Committee negatived & 3rd reading & 2nd reading & Committee negatived & 3rd reading

Finance (No. 2) Bill

(Limited Text - Ministerial Extracts only)

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2nd reading
Tuesday 13th April 2021

(3 years, 1 month ago)

Commons Chamber
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This text is a record of ministerial contributions to a debate held as part of the Finance Act 2021 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

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.

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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.

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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.

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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.
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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.

Finance (No. 2) Bill

(Limited Text - Ministerial Extracts only)

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

(3 years, 1 month ago)

Commons Chamber
Finance Act 2021 Read Hansard Text Watch Debate Amendment Paper: Committee of the whole House Amendments as at 19 April 2021 - large print - (19 Apr 2021)

This text is a record of ministerial contributions to a debate held as part of the Finance Act 2021 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

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
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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.

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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.

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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.
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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.
--- Later in debate ---
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.
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Siobhain McDonagh Portrait The Temporary Chair (Siobhain McDonagh)
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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.

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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.

I join my hon. Friend the Member for North East Bedfordshire (Richard Fuller) in emphasising, as he rightly did, that we need businesses to be as productive, effective and successful as possible, because they are the anchors of successful and effective employment and of the profit generation on which our tax base, and therefore the funding we need to support public services, rely. It does not follow from the fact that the Labour party is confused on corporate taxation that we should not have a policy that supports business in developing, investing and building our collective economic future.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clauses 7 and 8 ordered to stand part of the Bill.

Clause 9

Super-deductions and other temporary first-year allowances

Amendment proposed: 79, in clause 9, 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”.—(James Murray.)

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.

Question put, That the amendment be made.

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21:22

Division 264

Ayes: 260


Labour: 195
Scottish National Party: 44
Liberal Democrat: 11
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 365


Conservative: 358
Democratic Unionist Party: 7

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.
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21:33

Division 265

Ayes: 260


Labour: 195
Scottish National Party: 44
Liberal Democrat: 11
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 365


Conservative: 358
Democratic Unionist Party: 7

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.
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Jesse Norman Portrait Jesse Norman
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I rise to speak in support of clauses 109 to 111, schedules 21 and 22 and amendments 43 to 52.

The clauses will act in support of the Government’s freeports programme, which is designed to unlock investment in eight regions of England so far, with more to follow in the devolved Administrations. At Budget, following an open and transparent bidding process, the Chancellor announced the locations successful in securing freeport status: East Midlands airport, Felixstowe and Harwich, Humber, Liverpool city region, Plymouth and South Devon, Solent, Teesside, and Thames.

Freeports will be national hubs for international trade, innovation and commerce, regenerating communities across the UK by attracting new businesses and spreading jobs, investment and opportunity. They will bring together ports, local authorities, businesses and other key local stakeholders to achieve a common goal of shared prosperity and opportunity for their regions. In doing so, they will help in the Government’s ambition—indeed, all of our ambition—to level up areas that have been left behind.

The Government’s freeports model enables the UK to take advantage of the benefits of leaving the European Union. The Government have drawn on examples of successful freeport programmes all over the world to develop freeports that will attract significant new investment and encourage development across the UK. The model will enable businesses in freeports to draw on benefits relating to customs, planning, regeneration and innovation, as well as the offer of targeted tax reliefs supported by the clauses in the Bill.

The Government have engaged extensively with ports, local authorities and industry, including through a consultation on the wider programme running between 10 February and 13 July 2020. We have also listened to feedback from a wide range of stakeholders to inform the development of an effective model that will benefit port areas across the UK.

For the reasons already outlined in the earlier debates, I will confine my remarks to the key points at issue. Clauses 109 to 111 give the Government the power to designate tax sites and, once sites have been designated, to provide relief within those sites for the acquisition of commercial purpose property and new plant and machinery assets, as well as relief on the construction or renovation of buildings.

Sammy Wilson Portrait Sammy Wilson
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So far, no freeport has been designated in Northern Ireland, but one of the great fears is that because Northern Ireland remains within the single market rules of the EU, any such measures to set up a freeport could be contested by the EU and the Irish Government because they might give Belfast an advantage over Dublin, for example. How will that issue be resolved, given the terms of the Northern Ireland protocol?

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Jesse Norman Portrait Jesse Norman
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The right hon. Gentlemen raised a very similar question with me on Second Reading and, as he knows, the Government are engaging very closely with the Northern Ireland Executive. I am not in a position to second-guess what the EU may or may not do in that regard, but we have been very clear that we want to put a freeport in Northern Ireland and we want it to be a strong offer comparable to the freeports available elsewhere in the United Kingdom. That is what we will be seeking to achieve.

Bernard Jenkin Portrait Sir Bernard Jenkin (Harwich and North Essex) (Con)
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In passing, I thank the Government for designating Freeport East, which includes Harwich in my constituency, as one of the freeports. I am struggling to find how the tax concessions in this Bill avail us of the new freedoms outside the European Union. Will my right hon. Friend identify how the freedoms in this Bill are in contention with the EU state aid rules on tax subsidies? Of course, that would not apply in Northern Ireland, where the EU state aid rules still apply. The Government might as well be completely honest about this: if there are advantages for England of being outside the EU that we do not have because Northern Ireland is still effectively inside the EU, let us hear about them, because we want to know that we have those advantages in England.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I think my hon. Friend has erred in his logic. It is perfectly possible for us to benefit from the flexibility of setting taxes, as we are, while being able to have a strong agreed offer that satisfies whatever rules may apply in Northern Ireland with the Northern Ireland Executive. They will be of different characters, but there is no reason to think that neither is possible.

Clauses 109 to 111 give the Government the power to designate tax sites and, once sites have been designated, to provide relief within them for the acquisition of commercial purpose property and new plant and machinery assets, as well as relief on the construction or renovation of buildings. These powers will enable the Government to move quickly to enable businesses to begin accessing the benefits of freeports as soon as is feasible.

The Government are committed to tackling non-compliance in the tax system, and freeports are not an exception to that. Anti-avoidance and evasion provisions are included in the Bill, and will be taken across further legislation for the individual tax reliefs. In addition, the Government will take further powers to create a robust system of monitoring in freeports and enable HMRC to request relevant information from businesses. This will ensure that public money is being used effectively in pursuit of the regeneration and development of freeport locations.

Clause 109 will enable the Government to designate the location of tax sites connected to any freeport in Great Britain. The tax reliefs made available as part of the Government’s freeports programme will apply only in these sites, and the Government intend to bring forward legislation to apply these reliefs in Northern Ireland at a later date.

Bidders submitted initial proposals for their tax sites during the bidding process. The Government allowed up to 600 hectares of tax site space to be proposed, across a maximum of three separate sites per freeport. Tax site proposals were also judged against a set of criteria relating to existing deprivation and unemployment, to ensure tax measures will have maximum impact in regenerating those areas. The Government will now work with the successful locations to approve their tax site proposals. Once the successful bids have completed the full tax site assessment process, the Government will designate the agreed areas as tax sites. From that point forwards, businesses will be able to claim and benefit from the tax reliefs.

Bernard Jenkin Portrait Sir Bernard Jenkin
- Hansard - - - Excerpts

I am most grateful to my right hon. Friend; he is being very generous, though whenever I am tackled on a point of logic by a professor of philosophy, I wonder what is going on. But my question is quite an innocent one in this case. In Harwich, there are some businesses very near the tax sites which have been affected by Brexit and would benefit greatly from being included in the tax site. To what extent are the boundaries still adjustable, and is there an issue of principle regarding included businesses that could expand much more effectively? I am thinking of the particular example of a petrochemicals processing business, which exports substantially and would benefit very greatly by being in the tax site. It would generate many more jobs and much more wealth for the United Kingdom.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

Of course, the circumstances for each individual freeport site will be, and I am sure are, very different. I cannot comment on the site my hon. Friend describes, but in general the emphasis of the legislation is very much on new investment and new development, rather than on existing or dead-weight investment. It may well be the case that there are businesses that would propose to make substantial new investments and, depending on the freeport in question, it may be possible for them to qualify for some of the benefits associated with that, but, again, it is not possible for me to comment on individual cases.

Clause 110 and schedule 21 will allow businesses in freeport tax sites in Great Britain to benefit from two new capital allowances: enhanced capital allowances and an enhanced structures and buildings allowance.

On clause 111 and schedule 22, the clause makes changes to provide for a new relief from stamp duty land tax for acquisitions of land and buildings situated in freeport tax sites in England that are used for qualifying commercial purposes. Relief will be available for purchases made from the date a freeport tax site is formally designated until 30 September 2026.

Amendments 43 to 52 amend the provisions introduced by clause 111 and schedule 22 to provide certainty that property investors using sharia-compliant alternative finance are able to benefit from stamp duty land tax relief in the same way as investors using conventional finance. That will be done by taxing the alternative finance intermediary’s acquisition as though it were an acquisition by the investor. The amendments ensure that the tax payable by someone using alternative finance is the same as that which would be payable were the property purchased using a conventional financial product.

Opposition Members have tabled two new clauses relating to clauses 109 to 111. Among other things, they would place additional eligibility criteria in respect of employment rights, equalities and the environment on the claiming of capital allowances and stamp duty land tax relief in freeports. It is important to say that freeports will deliver tangible benefits that will help to level up areas. By imposing those additional criteria, the new clauses would potentially delay the implementation of these measures by making freeports more complicated for businesses to navigate, and therefore reducing their impact and effectiveness. In any case, the Government have a very strong commitment to reducing carbon emissions, which is why this country was the first major economy to implement a legally binding net zero greenhouse gas emissions target by 2050. The Government will continue to ensure that the role of tax is considered alongside other policy measures needed to meet environmental goals.

As I have already indicated, freeports will also have an important role in reducing regional disparities. The rigorous assessment of bids that has been undertaken has ensured that tax benefits are available only in areas that require regeneration and would benefit from being a tax site, helping the Government to level up those that have been left behind.

New clauses 5 and 25 as tabled would have the following effect. New clause 5 would make the commencements of clauses 109 to 111 dependent on the Secretary of State publishing a report that would allow Members to assess the economic case for freeports, and on both Houses agreeing that report. New clause 25 contains a similar request for a review of the impact of clauses 109 to 111 and schedules 21 and 22, and for a report of that review to be laid before the House within six months of the passing of this Bill and once a year thereafter. A robust and transparent bid assessment process, using the criteria set out in the bidding prospectus, ensured that the eight English freeports so far granted all demonstrated a good or better economic case, including a strong economic rationale for their proposed tax site locations.

In the interest of transparency and accountability, the Government have also published a decision-making note that clearly sets out how sustainable economic growth and regeneration were prioritised in this process of assessment. The Government will publish costings of the freeports programme at the next fiscal event, in line with conventional practice. Imposing an additional economic incentive on top of what has been outlined would only risk delaying the delivery of the programme and therefore the associated benefits of the increased investment and employment.

Amendment 54 would make the commencement of a freeport tax site in any UK nation subject to approval by the three devolved Administrations. The hon. Member for Ceredigion (Ben Lake) has already introduced that. Let me say to him that tax is first and foremost a reserved matter unless it is specifically devolved. The UK Government have the power to set tax sites that offer reserved tax reliefs across the UK, and Ministers for the devolved Administrations have the power to set devolved tax reliefs. Devolved Ministers will be accountable to their Parliaments for the use of tax instruments under their control in a freeport tax site within their nation under the proposed plans.

The Government are determined to establish freeports across the UK, not just in England. That is why we are committed to continuing discussions with the Administrations in Scotland and Wales, when their new Governments have been established, and with the Northern Ireland Executive. The Government intend to have a freeport in each nation, and are determined to deliver that as soon as practicable. They will be national hubs for trade, innovation and commerce, regenerating communities across the country. They can attract new businesses and spread jobs, investment and opportunity to towns and cities up and down the UK, which will boost international trade and economic growth.

Bernard Jenkin Portrait Sir Bernard Jenkin
- Hansard - - - Excerpts

Wil my right hon. Friend give way?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I am happy to take a third intervention from my hon. Friend.

Bernard Jenkin Portrait Sir Bernard Jenkin
- Hansard - - - Excerpts

I am most grateful. Well, it is the Committee stage of a Bill. The hon. Member for Ceredigion (Ben Lake) raised an issue that I had not considered before, which is that the provision of a freeport in a devolved nation might actually reduce the revenue being collected by that devolved Government. Has my right hon. Friend given consideration to that? I cannot see how that would actually happen, but will he give an assurance that there is a means of addressing that if it were to occur?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

As far as I am aware, this is a very remote contingency and I see no evidence to suggest that it might be the case in the context that has been described, but I can certainly tell my hon. Friend that, when the Government engage with the Welsh Government, we will be sensitive and open to discussion of the potential economic effects of a freeport in Wales, as one might expect.

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Abena Oppong-Asare Portrait Abena Oppong-Asare (Erith and Thamesmead) (Lab)
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It is a pleasure to speak for the Opposition on the clauses relating to freeports. I will speak to new clause 25 in my name and the names of my hon. and right hon. Friends. Before I turn to the detail of our new clauses in this group, I would like to say a little about Labour’s position on freeports and regional economic policy more generally.

Labour wants to see good new jobs created in every region and nation of the United Kingdom. We want to see genuine levelling up that hands power and opportunity to areas that have been deprived of them for too long. We want an economic policy that addresses the fundamental challenges facing our country and our constituents: ever widening regional inequality, low productivity and low wages in too many places; a social care crisis that threatens the dignity of older people; and an environmental crisis that threatens us all.

I am afraid that the Government’s approach to levelling up has been far less ambitious. We have seen regions and areas pitted against each other to bid for pots of money, only to find that Conservative Ministers overruled officials and handed funding to already wealthy areas. We have seen nothing to make up for the 11 years of a Conservative Government who have sucked funding and opportunities out of areas that they now say need levelling up. We have seen a total lack of ambition from the Government on supporting a recovery from the coronavirus crisis to build a stronger and more resilient economy. That brings me to freeports and the clauses that we are considering today.

I think we were all a little underwhelmed when the rabbit pulled from the hat at the end of the Chancellor’s Budget speech last month was the reannouncement of his freeports policy. The Opposition simply do not believe that freeports are the silver bullet for our post-Brexit economy that the Chancellor clearly hopes they are. In fact, the evidence is that freeports are likely to have relatively little impact on overall job creation and are far more likely to move jobs from one place to another. We want every area to flourish, whether or not they have a freeport. We know that Ministers are aware of this problem because they asked potential freeports operators to address it in their bids. Our new clause 25 would require the Government to produce an annual review of the impact of the freeports policy on job creation in freeport sites and across the country as a whole.

Jesse Norman Portrait Jesse Norman
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I would be grateful if the hon. Lady could tell us whether the Labour party’s position is to support freeports or not to support freeports.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

I thank the Minister. I will approach that later in my speech, so I thank him for already guessing what I was going to say.

We really need some honesty and transparency from the Government on this. The estimates of the job creation benefits of freeports made by their advocates so far have been flimsy to say the least. We also need a proper assessment of the risk of job displacement. If freeports simply move existing economic activity around, they risk doing harm to the economic fortunes of neighbouring areas, with no net benefit to the country as a whole. Indeed, a 2019 report by the UK Trade Policy Observatory found that the main effect of freeports was to divert businesses into a port from a surrounding area, rather than creating new jobs, so it is not just Labour saying this; it is the experts saying it too. That may be especially problematic in areas where freeports are situated near a local authority, or regional or even national borders.

Our new clause would require the Government to report on tax avoidance and evasion and criminal activity in freeports and to set out the level of additional staffing and resources required by HMRC and other Government bodies. There are long-standing concerns that freeports allow or encourage tax avoidance and evasion, and there is international evidence that freeports have been used for criminal activity. For example, the OECD has stated that there is

“clear evidence that free trade zones are being used by criminals to traffic fake goods”.

The Financial Action Task Force has said that the lack of scrutiny can facilitate trade-based money laundering through relaxed oversight and a lack of transparency. The TUC and others have warned of the dangers to workers’ rights from deregulation in freeports. We need to take these concerns seriously. As a minimum, the Government should commit to trade union representation in the governance of freeports at local and national levels.

I will now make a few points about the clauses we are considering. First, on the cost of the tax reliefs being introduced, the Government have provided some information on the expected operational costs of HMRC but, as recently as last month, they were unable to estimate the reduced revenue that the Exchequer will receive as a result of these reliefs. I hope the Minister can address that. Clause 110 includes the enhanced capital allowance for plant and machinery spending at 100%, but that is less generous than the 130% super deduction. Presumably, for the period that they overlap, companies will need to consider whether they can claim the super deduction rather than this allowance.

The Chartered Institute of Taxation has raised a number of concerns about the operation of the stamp duty relief in clause 111. One issue is how exactly freeport tax sites will be designated and whether particular buildings can be identified as either in or out the boundary of the tax site. Can the Minister provide some clarity on joint ventures where there is both commercial and residential development? The Chartered Institute of Taxation points out that the clause, as currently drafted, excludes a common commercial arrangement from that relief. Finally, there is the issue of withdrawal of relief for subsequent non-qualifying activity. A small amount of non-qualifying use can potentially lead to withdrawal of all the relief. Is the Minister concerned that the risk of loss of the full relief in such circumstances could discourage investment?

To conclude, the Opposition have real concerns about the Government’s freeports policy. If it is going to succeed and bring the sorts of benefit that those on the Government Benches claim, we need to see more detail on the operation of freeports and how the Government plan to mitigate the risks. We need regular monitoring of the effectiveness and the impact on the country as a whole over the years to come, which is exactly what new clause 25 would require the Government to do. If the Government are confident in their policy, they should be confident in allowing scrutiny of how it works in practice. I call on them to support our new clause.

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Somerset people are proud. The last battle on British soil was here. They take their democratic rights very seriously, and they will be determined to win—make no bones about it. It is the people, not a pathetic county council, who hold the key to economic regeneration in Somerset. They are the hard workers. They are the people who go out every day and strive to push our county forward, be it at Hinkley Point or any of the other massive companies that we have down there. As long as the Chancellor remembers that, I will always support economic regeneration, provided that the money goes to the people, districts and others who we know will spend it carefully and wisely, and ensure that we can be proud of Somerset, not embarrassed by a bunch that do not care.
Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I thank colleagues, not least my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger), for a very entertaining and rowdy end to the debate. Let me pick up some of the points that have been raised on this important subject.

The hon. Member for Erith and Thamesmead (Abena Oppong-Asare) asked about expected revenue for freeports. As she will be aware, it is not really appropriate to comment on that at the moment. These tax sites have not yet been agreed. The revenues, or at least the associated tax costs, are very much site-specific. I am therefore not in a position to comment on that, but of course once the sites have been agreed, the appropriate estimates will be brought forward.

The hon. Member for Salford and Eccles (Rebecca Long Bailey) argued—indeed, it was a recurrent theme—that freeports would have the effect of watering down employment protections. The Opposition have no evidence for that viewpoint at all. There is no deregulatory agenda whatever with freeports. Businesses and freeports will have to abide by UK worker and environmental regulations, national minimum wage standards, workers’ rights and the rest of it, just as any other company would anywhere else in the UK.

The hon. Member for Gordon (Richard Thomson) raised the topic of freeports in Scotland. He did not remind the Committee, but he will be aware, that the Scottish Government originally rejected the idea of a freeport, then rather changed their tune when they saw the local reaction. I encourage him and the Scottish Government, whatever their complexion after the election, to step forward and engage with the Government so that we can agree a freeport in Scotland.

My hon. Friend the Member for Harwich and North Essex (Sir Bernard Jenkin) talked about the different elements, and was worried that somehow the offer had been watered down. I reassure him that, although he did not notice that the structures and buildings allowance is legislated for in the Bill, the employer national insurance contributions relief will be legislated for in a forthcoming Bill and the business rates relief will follow in due course.

My hon. Friend the Member for Thurrock (Jackie Doyle-Price) rightly talked about the magnificent port at Tilbury. I have visited it myself, and a thoroughly splendid and impressive thing it is too. Finally, my hon. Friend the Member for Bridgwater and West Somerset put in what I think we can all agree was a typically low-key and restrained performance, for which we very much thank him. He put me ineffably in mind of a great moment in a work of literature and film with which I am sure the House will be familiar: “Animal House”. There is a marvellous moment where John Belushi’s future senator John Blutarsky says, “Was it over when the Germans bombed Pearl Harbor?” There is a pause, and someone says, “Leave him, he’s rolling.” That is what I felt we should do with our dear friend the Member for Bridgwater and West Somerset. With that, I will sit down.

Ben Lake Portrait Ben Lake
- Hansard - - - Excerpts

It is a pleasure to close the debate this evening. We have had a very beneficial debate on two main points about freeports and regional economic development. We had a very good discussion about the merits or otherwise of freeports for the areas in which they are located, and although I think we will continue to discuss whether any growth of investment generated by the sites will be new, partially new or a substitute for or displacement of economic activity elsewhere, it has been a good debate nevertheless.

My final point leads on from the question of whether any growth in investment would be new or a reflection of displacement of activity from elsewhere. That is particularly important when it comes to the question of levelling up and addressing regional inequalities and disparities. We still need to discuss that further. One potential solution in Wales’s case, for example, may be to look again at the cap of just one freeport in Wales. Perhaps we should have at least two. I am looking to other Members—perhaps that is one way to address the disagreements we have had tonight.

Either way, we have had a very good and beneficial debate and although I do not want to press my amendment to a vote, I hope that the Minister will consider how the Government can better work with the devolved Governments to address some of these concerns and the need to co-ordinate policies for our economic development. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 109 to 111 ordered to stand part of the Bill.

Schedule 21 agreed to.

Schedule 22

Relief from stamp duty land tax for freeport tax sites

Amendments made: 43, page 231, line 8, at end insert—

“(ca) Part 3A makes provision about cases involving alternative finance arrangements,”

This amendment is consequential on Amendment 52.

Amendment 44, page 231, line 26, after “sites),” insert

“other than in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies,”

This amendment is consequential on Amendment 45.

Amendment 45, page 231, line 39, at end insert—

“3A In section 81ZA (alternative finance arrangements: return where relief withdrawn)—

(a) in subsection (1), after “arrangements)” insert “or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies”,

(b) in subsection (3) (as substituted by Schedule 17 to this Act), at the end insert—

“(c) where the relief was given under Part 2 of Schedule 6C, the last day in the control period on which the qualifying freeport land is used exclusively in a qualifying manner.”, and

(c) after subsection (6) insert—

“(6A) Terms used in paragraph (c) of subsection (3) which are defined for the purposes of Schedule 6C have the same meaning in that paragraph as they have in that Schedule (as modified by paragraph 10A of that Schedule).

(6B) Paragraph 10 of Schedule 6C (as modified by paragraph 10A of that Schedule) applies for the purposes of subsection (3)(c) as it applies for the purposes of paragraph 8 of that Schedule.”

“3B In section 85(3) (liability for tax), after “arrangements)” insert “or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies”.”

This amendment makes provision about returns, and liability to SDLT, in cases in which relief under Schedule 6C to the Finance Act 2003 (freeport tax sites, inserted by Schedule 22 to the Bill) is withdrawn in cases involving certain alternative finance arrangements.

Amendment 46, page 231, line 40, leave out “86(2)” and insert “86”

This amendment is consequential on Amendment 49.

Amendment 47, page 231, line 40, after “tax)” insert “—

(a) in subsection (2),”

This amendment is consequential on Amendment 49.

Amendment 48, page 231, line 41, after “sites),” insert

“other than in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies,”

This amendment is consequential on Amendment 49.

Amendment 49, page 231, line 41, at end insert “, and

(b) in subsection (2A), after “arrangements)” insert “or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies”.”

This amendment makes provision about the payment of SDLT in cases in which relief under Schedule 6C to the Finance Act 2003 (freeport tax sites, inserted by Schedule 22 to the Bill) is withdrawn in cases involving certain alternative finance arrangements.

Amendment 50, page 231, line 44, after “sites),” insert

“other than in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies,”

This amendment is consequential on Amendment 51.

Amendment 51, page 232, line 2, after “81(1A);” insert—

“(azab) in the case of an amount payable because relief is withdrawn under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies, the date which is the date of the disqualifying event for the purposes of section 81ZA (see subsection (3) of that section);”

This amendment makes provision about interest on unpaid SDLT in cases in which relief under Schedule 6C to the Finance Act 2003 (freeport tax sites, inserted by Schedule 22 to the Bill) is withdrawn in cases involving certain alternative finance arrangements.

Amendment 52, page 235, line 25, at end insert—

“Part 3A

Alternative finance arrangements

Cases involving alternative finance arrangements

10A (1) This paragraph applies where either of the following applies—

(a) section 71A (land sold to financial institution and leased to person), or

(b) section 73 (land sold to financial institution and re-sold to person).

(2) This paragraph applies for the purposes of determining—

(a) whether relief is available under Part 2 of this Schedule for the first transaction, and

(b) whether relief allowed for the first transaction is withdrawn under Part 3 of this Schedule.

(3) For those purposes this Schedule has effect as if—

(a) references to the purchaser were references to the relevant person, and

(b) the reference in paragraph 3(2)(d) to land held (as stock of the business) for resale without development or redevelopment were a reference to land held in that manner by the relevant person.

(4) The first transaction does not qualify for relief under Part 2 of this Schedule except where it does so by virtue of this paragraph.

(5) In this paragraph—

“the first transaction” has the same meaning as in section 71A or 73 (as appropriate);

“the relevant person” means the person, other than the financial institution, who entered into the arrangements mentioned in section 71A(1) or 73(1) (as appropriate).”—(Jesse Norman.)

This amendment makes provision about the operation of Schedule 6C to the Finance Act 2003 (relief from SDLT for freeport tax sites, inserted by Schedule 22 to the Bill) in cases involving certain alternative finance arrangements.

Schedule 22, as amended, agreed to.

New Clause 25

Review of freeports

“(1) The Chancellor of the Exchequer must review the impact of sections 109 to 111 and schedules 21 and 22 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 once a year thereafter.

(2) A review under this section must estimate the expected impact of sections 109 to 111 and schedules 21 and 22 on—

(a) job creation within the sites designated as freeports and across the UK as a whole,

(b) revenue from corporation tax and stamp duty land tax within the sites designated as freeports and across the UK as a whole,

(c) levels of artificial tax avoidance and tax evasion across the UK as a whole,

(d) levels of criminal activity,

(e) the necessary level of staffing for HMRC and the UK Border Force, and

(f) departmental spending by HMRC and other departments on enforcement.”—(Abena Oppong-Asare.)

This new clause would require the Government to review the impact of the provisions of the Act introducing freeports and publish regular reports setting out the findings.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

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23:08

Division 266

Ayes: 260


Labour: 195
Scottish National Party: 44
Liberal Democrat: 11
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 366


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.

Finance (No. 2) Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
Committee stage & Committee of the Whole House (Day 2)
Tuesday 20th April 2021

(3 years ago)

Commons Chamber
Finance Act 2021 Read Hansard Text Watch Debate Amendment Paper: Committee of the whole House Amendments as at 20 April 2021 - large print - (20 Apr 2021)

This text is a record of ministerial contributions to a debate held as part of the Finance Act 2021 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Jesse Norman Portrait The Financial Secretary to the Treasury (Jesse Norman)
- View Speech - Hansard - - - Excerpts

The Government remain committed to tackling tax avoidance, evasion and other forms of non-compliance. Since 2010, we have introduced over 150 new measures and invested over £2 billion in additional funding to ensure that the right tax is paid at the right time. These efforts have helped to secure and protect over £250 billion for the UK’s public services that would otherwise have gone unpaid, and they have helped to bring down the tax gap to 4.7% in 2018-19—its lowest recorded rate.

But there is still work to do. Clauses in this Bill build on our previous reforms in order to clamp down on deliberate non-compliance and make sure that everyone pays their fair share. They include measures to tighten the anti-avoidance rules aimed at those who promote and enable tax avoidance schemes. They also close a loophole in the existing anti-avoidance rule aimed at preventing non-UK resident individuals from claiming relief when they gift business assets to a company controlled overseas.

The clauses support HMRC’s strategy on promoting good tax compliance. As an example of that approach, the Government are amending the follower notices regime, which penalises taxpayers who have used avoidance schemes that have been shown to be ineffective, in order to make it fairer for those who comply, while ensuring that the regime remains just as effective at combating avoidance. The Bill also seeks to bring parts of the hidden economy out of the shadows by making some licence approvals conditional on tax registration and compliance. The clauses in the Bill are necessarily technical, which is in part down to the complex rules that are currently in place. Given the number of issues that we are covering and the number of speakers in the debate, I will keep my remarks fairly brief.

Clause 30 and schedule 6 introduce changes to tackle abuse of the construction industry scheme. The construction industry scheme is a revenue protection scheme designed to tackle evasion in the construction sector. The scheme protects approximately £7.1 billion in tax every year by requiring contractors to make deductions from the payments they make to subcontractors that they engage. Those payments count as advance payments towards those subcontractors’ tax and national insurance. The changes made by clause 30 will allow HMRC to correct employers’ CIS deductions when they are false or incorrect. Clause 30 will clarify the rules on deductions for the cost of materials and change the rules for determining which businesses will need to operate the CIS. It will also expand the scope of the current penalty for providing false information to HMRC.

Scottish National party amendment 74 would remove paragraph 4 of schedule 6 to the Bill, which would have the effect of removing the proposed changes to rules for deductions for materials. However, there is a clear case in public policy for these changes. Some contractors and subcontractors are interpreting the rules incorrectly at present in a way that undermines the purpose of allowing materials deductions within the scheme, which allows some contractors and subcontractors an advantage over others. The proposed rule changes will ensure a clear and consistent approach, providing a level playing field for those involved. I therefore urge the House to reject amendment 74.

Amendment 73 proposes to remove paragraph 3 of schedule 6, which relates to the transitional arrangements between the old and new rules for qualifying as a deemed contractor. This would mean that many businesses would have to change their business arrangements overnight and go through the process of re-registering for the construction industry scheme under the new rules. As this could be more disruptive and confusing than the proposed transitional arrangements, I urge the House to reject the amendment.

Amendments 75 and 76 would delay the commencement of this measure to April 2022 rather than April 2021. Such a delay would not be appropriate, as industry has already been consulted on the changes and any impacts are expected to be limited. Again, I urge the House to reject these amendments.

Clause 36 and schedule 7 amend the corporation tax rules governing so-called hybrid mismatches. These rules are intended to tackle aggressive tax planning by multinational companies that seek to take advantage of differences in how countries view entities and financial instruments. Hybrid mismatches can lead to double deductions for the same expense or deductions for an expense without any corresponding receipt being taxable. The Government have consulted in this area and are amending the rules in several areas so that they remain proportionate and do not lead to economic double taxation. That includes introducing a limited grouping matching rule and a change to the type of income that counteractions under the rules can be set off against.

Government amendments 17 to 42 to clause 36 have been tabled to ensure that the changes provided under that clause work and reflect the underlying policy intent. They address various technical issues that have been raised by external commentators following the publication of the Bill, and mostly change small and technical details.

Clause 41 will close a loophole in the capital gains tax gift holdover relief rules by preventing non-UK residents from being able to claim the relief while transferring a business asset to a company controlled overseas that they personally own. By making this change, the Government are ensuring that the relief is used fairly and only for its intended purpose.

Clause 117 and schedule 29 make changes to the promoters of tax avoidance schemes regime, known as POTAS. The changes allow Her Majesty’s Revenue and Customs to issue stop notices to prevent the promotion of schemes that it suspects do not work and to obtain information from suspected promoters at an earlier stage of the process than at present. They also prevent promoters from sidestepping the rules by rearranging their corporate structure to carry out activities through different entities. There are a number of other technical amendments to ensure the continued effectiveness of the regime. There are also further measures in the Bill to enhance the operation of the disclosure of tax avoidance schemes—DOTAS—rules.

Clause 119 changes the penalties issued to enablers of tax avoidance schemes that have been defeated in court, at tribunal or otherwise counteracted. The changes will allow HMRC to obtain relevant information from potential enablers at the earliest possible moment so as to be able to consider whether they are liable for an enabler penalty.

Clause 120 and schedule 31 make changes to ensure that the general anti-abuse rule can be used as intended in respect of partnerships that have entered into abusive tax avoidance arrangements.

Finally I turn to clause 121, which from April 2022 makes the renewal of certain licences to trade conditional on licence applicants in England and Wales completing checks with HMRC. The checks will confirm whether applicants are registered for tax, and new licence applicants will be directed to HMRC guidance about their tax obligations.

I turn to the most substantive of the amendments before us today: amendment 77, which relates to the POTAS provisions that I outlined. The amendment seeks to amend schedule 29 so that anyone subject to the promoters of tax avoidance schemes regime, and promoting or enabling abusive tax arrangements, should be deemed to have been acting dishonestly unless they can show that they acted in good faith and believed the arrangements to be reasonable. This would mean, in respect of the criminal offence of cheating the public revenue, that a person would automatically be treated as dishonest where it had been demonstrated that they had promoted abusive tax arrangements as defined in the general anti-abuse rule. As such, there would be no requirement for any prosecution to prove dishonest conduct.

I fully agree that promoters who break the law should face the consequences of their actions. That is why the Government are putting so much emphasis on anti-avoidance measures and measures against promoters of tax avoidance in the Bill and elsewhere. We should be under no illusions about this. It is not honest to market tax schemes or arrangements that are known not to work and that at their heart feature false statements.

--- Later in debate ---
It has been 21 years since IR35 first came into law. Instead of achieving its objectives of ending tax avoidance in the contractor market, further Government changes brought us the retrospective taxation of the loan charge, the flawed off-payroll rules and now this industry of umbrella companies, many of which are withholding the tax and national insurance of contractors. Again and again, hard-working people are paying the price and the Revenue is losing out.
Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I am grateful to all those who have spoken in the debate. Let me start with my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who, as always, brought a robust common sense, as well as the skills of an accountant, to bear, especially when it comes to holding the Opposition to account for some of their comments.

Andrew Mitchell Portrait Mr Mitchell
- Hansard - - - Excerpts

I should defend our hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). He is not an accountant; he is an estate agent.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I have been held to account by my right hon. Friend and I am grateful to him for that, because that power—if I have any power—should always be held to account. Let me put the record straight: my hon. Friend the Member for Thirsk and Malton is an estate agent, and yet with that estate agency genius he combines the forensic skills of an accountant in holding to account, indirectly, members of the Government and, directly, the Opposition. I thank him for that.

My hon. Friend the Member for Thirsk and Malton pointed out that these disguised remuneration schemes are highly contrived. It is terribly important to remind ourselves of that. It is all very well to complain about the loan charge, but these are highly contrived schemes. My hon. Friend reminded us—as, indeed, did my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) —of the general rule that all taxpayers are responsible for their own tax, and that if, by implication, a scheme looks too good to be true, it almost certainly is too good to be true. Those are important messages and no Government should wish to weaken that important principle that people are responsible for their own tax.

Ruth Cadbury Portrait Ruth Cadbury
- Hansard - - - Excerpts

I understand what the Minister has said. Of course, most of us are aware of our own tax bands. But how can the Minister expect basic rate taxpayers—a nurse, an IT contractor, somebody working in the film industry, even somebody on minimum wage—to do due diligence when nothing they read or have been sent ever mentions loans, and when they are given a convincing narrative that their tax is being paid for and they do not need to worry? Should not HMRC and the Treasury be addressing this issue, because it is a growing part of the employment market?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

HMRC is addressing these issues. That is why this Bill has so many measures in it that are focused on the disclosure of tax avoidance schemes, toughening up that regime and improving the regime against the promoters of tax avoidance. But let me say to the hon. Lady that I thought her remark was dripping with condescension towards the ordinary taxpayers of this country. The fact of the matter is that people, from whatever walk of life, are perfectly competent—they do not need to be patronised by Labour Members of Parliament—at working out when something looks too good to be true. That is why so many—such a high percentage; well over 90% of people—do manage to work out what is too good to be true and behave on that basis. To suspect otherwise, when HMRC is absolutely working as hard as it can to make sure that the truth is out there and well understood, and is closing down opportunities for misleading advertising, in a recent initiative with the Advertising Standards Authority and a whole host of other things, is completely wrong.

I am grateful to my hon. Friend the Member for Burnley (Antony Higginbotham) for what I thought was a very robust and thoughtful contribution. He is absolutely right to highlight that HMRC has not been slow in this area. He was right to pick up the point about VAT on online platforms, but, of course, that is merely the tip of the iceberg. The hon. Member for Ealing North (James Murray) somehow suggested that we were failing to tackle this issue. The tax gap, as he pointed out, is 4.7%—a historic low. Let me remind the House and him of some of the actions that the Government have taken—leadership on base erosion and profit shifting over many years, the diverted profits tax, the corporate interest restriction, the tax charge on offshore receipts, hybrid mismatch rules, our new digital services tax.

Kevin Hollinrake Portrait Kevin Hollinrake
- Hansard - - - Excerpts

I very much welcome the digital services tax, which is there to try to make sure that everybody pays their fair share, as the Minister said in his opening remarks. Having said that, it does not apply to Amazon’s direct sales on that platform. It applies only to third-party merchants, so there is not that much of a level playing field between those two different cohorts. Will he look at that in future?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

Brilliantly, my hon. Friend has intervened just before I was about to mention that we are consulting on an online sales tax, which is a parallel initiative. Indeed, the digital services tax includes the introduction of a new basis for tax—that is, UK user content. That itself is a flag to the energy and innovation that the Government are seeking to bring to this issue, and I thank him for his comments.

The hon. Member for Ealing North asked about the beneficial ownership registry on overseas companies that own or buy property in the UK. As he will know, the Government published a draft Bill. It has gone through prelegislative scrutiny. The process has, for reasons that the House will not need any reminding of or highlighting, been somewhat interrupted over the past year, but the Government plan to introduce the Bill in due course, so I reassure him on that point.

The hon. Gentleman raised the question about minimum corporate taxation. He should know that the Government have been, as I said, in the international vanguard in trying to drive change on base erosion and profit shifting, and processes of international tax agreement through the OECD. We were also in the vanguard of delivering the creation, originally, of the G20 commitments for a comprehensive global solution to this issue, based on two pillars, and we are leading the way, during our G7 presidency, on this issue, as the Chancellor has made clear. So we absolutely welcome the renewed commitment that the US Administration have made in this area, which we think is a very important change.

Finally, I turn to the important amendment 77, which was tabled by my right hon. Friend the Member for Sutton Coldfield and the right hon. Member for Barking (Dame Margaret Hodge). My right hon. Friend was right to highlight the importance of eternal vigilance—I absolutely share his view on that—and he was right, as the right hon. Lady was, to talk about the ever-shifting and evolving ways in which some of the malefactors in this area are ceasing to operate, and, of course, that is true. However, if I may say so, he erred in suggesting that the penalty on the enablers—that is to say, a sum equal to the gross fees to be collected in relation—was in any sense modest or small. It is one of the largest charges in the tax system, and because it is a gross fee, it is of course charged on the total amount of income. It is therefore income on which the promoter will have to recognise all their costs, and indeed any profit and any tax they may have paid, so it is actually a fairly formidable penalty.

--- Later in debate ---
16:19

Division 267

Ayes: 261


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

Noes: 366


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.
--- Later in debate ---
Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

It is a pleasure to speak for the Opposition on this group of amendments and new clauses relating to stamp duty. I rise to speak on those in my name and those of my right hon. and hon. Friends.

Amendment 81 will prevent the extension of stamp duty holiday from being used for second homes, buy-to-lets and investment properties. New clause 26 would require the Government to review the equalities impact of this group of clauses, including their impact on households with different income levels and on people with protected characteristics, their compliance with the public sector equality duty and their impact on the different regions and nations of the United Kingdom. New clause 27 would require the Government to review the impact of a non-residential surcharge of 2%, which it is set at in the Bill, and 3%, which, as I shall come on to, the Conservative party previously committed to.

Before I come on to the amendments in more detail, let me say a little about the stamp duty holiday extension. Clause 87 extends the £500,000 nil rate band until 30 June. From July until the end of September, the nil rate band will be £250,000, double its normal level; it will return to the usual level of £125,000 from 1 October. It is estimated that the total cost of this extension will be £1.5 billion by the end of 2021-22. That is on top of the £3.2 billion cost of the initial stamp duty land tax holiday announced in July 2020.

The extension will of course be welcome news for those people in the process of buying a new home who face a cliff edge at the end of March. We know that many people have struggled to complete purchases in time due to the coronavirus restrictions and the significant backlog of pending transactions. In previous debates, Members raised issues of cyber-attacks on council services in Hackney that impacted the planning department and delayed people’s securing mortgages.

However, we have concerns about the broader effects of the policy. Our new clause 26 is intended to encourage the Government to be honest about the impact of the stamp duty holiday on the housing market. The Resolution Foundation says that the lower stamp duty liabilities have contributed to house price rises over the last eight months. House prices in England grew 7% between July and December 2020, which is highly unusual behaviour during a recession. In many cases, the rise in house prices over the period will have cancelled out the benefit of the stamp duty holiday. As the Institute for Fiscal Studies, the Resolution Foundation and others have pointed out, the stamp duty holiday has also had the perverse effect of temporarily removing the advantage that first-time buyers had in the market compared with existing homeowners. This, coupled with rapidly rising house prices, has meant that many first-time buyers continue to be priced out of the market. The Bill does nothing to address the housing crisis that affects millions of families across the country—yet again, a wasted opportunity from this Government.

I turn now to clause 88 and our amendment 81. It is unbelievable that, at the same time as the Chancellor is pressing ahead with a £2 billion council tax rise, he has given another tax break to second-home owners and buy-to-let landlords. This half a billion pound tax break for second-home owners and landlords is the wrong priority in the middle of an economic crisis that is hitting family incomes. Instead, this money could have been used to build nearly 3,000 socially rented homes, which is half the total built in England last year. In Wales, the equivalent tax relief has not been extended to property acquired as investment or as a second home. Labour’s amendment 81 would ensure that the extended stamp duty holiday in England and Northern Ireland followed that approach. I turn to the non-residential surcharge introduced under clause 88. During the 2019 general election campaign, the Chancellor, who was then Chief Secretary to the Treasury, said:

“Evidence shows that by adding significant amounts of demand to limited housing supply, purchases by non-residents inflate house prices.”

He went on to announce a Conservative manifesto commitment to introduce a non-resident stamp duty surcharge of 3%, which would have been spent on programmes aimed at tackling rough sleeping. But clause 88 introduces a non-resident surcharge of 2%, rather than 3%. As yet, we have had no explanation from the Government as to why they have watered down that commitment. We estimate that this means the Government could miss out on £52 million a year in revenue that should have been spent on tackling homelessness and rough sleeping.

Our new clause 27 would require the Government to review the difference between the 2% charge and the 3% charge and to reveal the lost income as a result of that decision. When the Minister stands up, perhaps he will tell us why the Government have moved from 3% to 2%.

We welcome clauses 89 to 91, which provide relief from the annual tax on enveloped dwellings and the 15% stamp duty charge for the ownership and transfer of property by housing co-operatives that do not have transferable share capital. The Treasury has listened to the co-operative housing sector on the issue and that is welcome.

To conclude, we do not believe that the Government’s clauses in this group would do anything to solve the housing crisis we face in this country. Year after year, Government have failed to build the homes we need, especially social and affordable homes. The Government are on track to miss their target of building 300,000 homes by almost a decade. The number of new social rented homes has fallen by over 80% since 2010 and home ownership is down sharply among young people, with 800,000 fewer households under 45 owning their home than in 2010. Without urgent action the housing crisis in the UK will deepen. Instead the Government have decided to give a tax break to landlords and failed to meet their own commitment on the non-residential surcharge. Our amendments will remedy these wrongs.

Jesse Norman Portrait Jesse Norman
- View Speech - Hansard - - - Excerpts

Last spring, we were only just beginning to understand as a nation what the full impact of the coronavirus might mean for us. We were told to stay at home and, for many people, that meant postponing plans that they might have made to move, creating considerable uncertainty. It was evident that the housing market was affected by that and it was made much worse when, on 26 March, buying and selling a property was largely put on hold. While business was enabled to resume from 13 May, there was concern about what the pandemic would mean for the market and for the jobs that rely on the sector.

The Chancellor announced that he would support the housing market through the stamp duty land tax holiday, quadrupling the starting threshold for SDLT to £500,000. That was designed to give a boost—indeed, the boost to the housing market that it needed to thrive through the pandemic. It has thrived: transactions in the last quarter of 2020 were 16% higher than in the same period in 2019. In other words, the SDLT holiday has given hundreds of thousands of families the confidence to buy and to sell their homes at a particularly difficult time. In turn, it has supported the livelihoods of people—tens of thousands of them, or more than that—whose businesses and jobs rely on trade with, through and from the housing market.

Towards the end of last year, it became apparent that the housing industry was struggling to meet the additional demand to move home and that there were delays in processing transactions. That meant that some of those moving home would not be able to complete the transactions that they had entered into until after the holiday ended, through no fault of their own. The Bill therefore extends the stamp duty land tax holiday in order to allow those buyers still to receive the relief. In addition, the nil rate band will be £250,000, double its standard level, until the end of September, in order to allow the market to return smoothly to its normal rates.

The Bill also introduces a non-residential SDLT surcharge. The surcharge will apply to property purchases by non-UK residents who do not come to live and work here, helping to ease house price inflation and to keep housing free for UK residents to buy. Revenue raised from the surcharge will be used to help address the issue of rough sleeping.

The hon. Member for Erith and Thamesmead (Abena Oppong-Asare) raised the question about the non-resident surcharge. She may not be aware that, at Budget 2018, the Government announced that a consultation for a 1% non-UK resident surcharge would be published. Following the announcement of the surcharge, HMRC and the Treasury carried out a public consultation in spring 2019. That included questions on whether a 1% rate was set at the right level to balance the Government’s objectives on home ownership with those of the UK remaining an open and dynamic economy. Having listened to stakeholders, the Government believe that the 2% surcharge—twice the original amount contemplated—strikes the right balance in this area. That is the basis on which the surcharge has been set.

The Bill will also relieve the 15% rate of SDLT and the annual tax for enveloped dwellings for qualifying housing co-operatives. That change ensures that these measures are fairly targeted at companies that use so-called envelopes in order to avoid tax on their properties.

Amendment 81 would disapply the SDLT holiday to purchases of additional dwellings. As the Committee will know, the SDLT holiday was intended to give a boost to the entire property market, of which developers and landlords are important parts. Although those buying second homes or buy-to-let properties will benefit from that tax change, they will continue to pay an additional 3% on top of the standard SDLT rates.

The Government have maintained the relative advantage that buyers of main homes had before the tax change. For example, the purchaser of a second home worth £500,000 will still pay £15,000 in SDLT, compared with nothing for the purchase of a main residence. It was a Conservative Government who introduced the phasing out of finance cost relief, and the higher rates of SDLT for the purchase of additional property—all steps towards a more balanced tax treatment between homeowners and landlords.

On new clause 26, HMRC routinely publishes information about SDLT, collected by house price bands and by region. Of course, a full tax impact assessment, including equalities impacts, has been published for each measure.

Extending the SDLT holiday ensures that buyers who were affected by delays in the industry will still be able to receive the tax relief.

In the longer term, the Bill introduces a new surcharge that will help more people on to the housing ladder through the new non-UK residents’ surcharge. It also ensures that stamp duty and the annual tax on enveloped dwellings remain fair by making certain that only those who the Government intend to pay corporate rates of tax are captured.

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Ben Everitt Portrait Ben Everitt (Milton Keynes North) (Con)
- View Speech - Hansard - - - Excerpts

It is a pleasure to speak on this part of the Finance Bill, and I want to start by saying thank you to the Treasury for listening to people’s suggestions relating to the stamp duty land tax holiday and for listening to the voice of the industry, which called for this extension. The original decision at the start of the pandemic to provide that stamp duty holiday was brilliant. It worked. It was the right measure at the right time, and it stimulated our economy and resulted in an almost 33% increase in the amount of home moves. It kept the whole show on the road. Now, as my hon. Friends have mentioned, the decision to extend it will remove the cliff edge that we could have faced when it went away, along with the tapering of other support packages.

These are sensitive times, and there are fiscal measures in place that are carefully balanced to stimulate growth, support people, jobs and businesses, and project confidence to the markets so that we can credibly borrow all this money to invest in our covid response, but this stamp duty holiday cannot go on for ever; it is after all, a revenue-negative intervention from the Treasury, despite the wider economic stimuli that it creates for the painters, movers, builders, white goods salesmen and so on.

So what do we do with a problem such as SDLT? I do not believe that it is simply a case, as some might say, of replacing one tax with another. We do too much shuffling and tinkering with our taxation system and our housing market. As a result, our taxation system is fiendishly complicated. However, this is our opportunity for radical reform, and this clause proves it. We need to look at the role of property values in locally raised revenue. We need to include our commitments on net zero and levelling up, as well as the target of building 300,000 houses a year.

Other interventions, such as the freeport scheme, can provide an excellent place to start. Let us put that idea on steroids. Let us have special economic zones to deliver levelling up and green homes, and sustainable investment in businesses, jobs and homes and the infrastructure that goes with them. With levers such as the super deduction combining with our global Britain approach, we can reach out to the world to get more foreign direct investment, more onshoring of manufacturing and more global brands relocating to those areas that we will level up.

The property tax element is fundamental here because it relates to the homes that people live in—the people who will do the jobs that will benefit from this investment and whom we will support through the levelling-up agenda. To put it simply, we cannot do levelling up without fixing the housing market, and the way we tax it, and what we disincentivise and incentivise as a result of that taxation, are a great place to start. I therefore fully support this clause.

Jesse Norman Portrait Jesse Norman
- View Speech - Hansard - - - Excerpts

I do not think I will ever give a more popular speech than the one I am going to give now, because I just want to thank everyone who has made comments. I thank the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) for her remarks, which I have already answered. I thank colleagues for the speeches they have made to explore the effects, purpose and potential limits, even, of the stamp duty land tax and the holiday. I ask Members to support the clauses, and I will sit down.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- View Speech - Hansard - - - Excerpts

This has been a good debate, and I too thank Members on both sides of the House for their contributions. Members on both sides have spoken on behalf of their constituents about the impact of the stamp duty holiday, the challenges of buying a home and the need for more action to make affordable housing a reality.

As I said in my opening contribution, the Opposition simply do not believe that the Government should be handing a half a billion pound tax break to buy-to-let investors and second home buyers. Once again, this is the wrong priority from a Government who are letting families down. Labour’s amendment 81 would end that unfairness, and I want to press it to a vote.

Question put, That the amendment be made.

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17:13

Division 268

Ayes: 214


Labour: 197
Liberal Democrat: 11
Independent: 2
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 364


Conservative: 357
Democratic Unionist Party: 7

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.
--- Later in debate ---
Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

May I say how much I love your exuberance, Mr Walker? It is never better in evidence than it was just now. Perhaps we are all getting a bit demob happy after 10 hours of close consideration of the Bill.

The Finance Bill includes clauses that extend temporary VAT relief for the hospitality and tourism sectors; that extend digital record keeping for VAT purposes to all businesses; that give businesses longer to make deferred VAT payments; and that add S4C, the Welsh language television channel, to an existing VAT refund scheme for public bodies. A customs clause will enable businesses that export steel into Northern Ireland from the EU to pay the same tariffs and access the same UK quotas as other UK businesses, instead of facing the prohibitive duties and quotas set out in EU legislation last year. Finally, banking clauses make changes to existing tax rules to ensure that they continue to operate as intended following the transition away from LIBOR and other benchmark rates, and update the powers to make amendments to the bank surcharge, the bank loss restriction, the bank compensation restriction and bank levy rules by regulations made by statutory instrument.

Clauses 92 and 93 ensure that businesses will continue to be supported by the temporary VAT relief for the hospitality and tourism sectors. The relief was introduced as an urgent response to the economic challenges faced by businesses in sectors severely affected by covid-19 restrictions. Together, these clauses will ensure that the relief continues to support the cashflow and viability of around 150,000 businesses, as well as the continued employment of more than 2.4 million people.

Amendment 64 seeks to remove the flexibility in the legislation that would allow for changes in the duration of the relief. As with all reliefs in response to the pandemic, the Government continue to keep the situation under review. It is important that the clauses allow for flexibility in what is, after all, still a rapidly changing environment. I therefore urge Members not to support—indeed, to reject—this amendment.

New clause 16 would require a review of the impact on investment of extending the 5% rate of VAT to the end of September, versus the year end, across the United Kingdom. This is technically not possible, because some of the required data does not exist.

Clause 94 will provide the legislative basis for the changes I announced to the Making Tax Digital for VAT service in July 2020, extending the requirement to keep digital records and submit digital VAT returns to VAT-registered businesses with taxable turnover below the VAT threshold of £85,000 from April 2022. Around 600,000 businesses have deferred VAT payments worth an estimated £34 billion as a result of the coronavirus emergency.

Clause 95 and schedule 18 legislate for a new payment scheme that will allow businesses that defer VAT payments from 20 March through to the end of June 2020, which were previously due by 31 March 2021, longer to pay in up to 11 equal monthly interest-free instalments. The new payment scheme has been available since February and will remain available until late June 2021. As of 19 April, HMRC has collected around £13 billion of the £34 billion that was deferred. Approximately 120,000 payment plans have so far been created, with a further £11 billion committed to being paid in monthly instalments. This means that over £24 billion of the total deferred VAT has now been secured as paid or scheduled to be paid. This is proving to be an extremely important and effective intervention.

Clause 96 seeks to add the Welsh language television channel S4C, the recent changes to the operating structure of which mean that it can no longer recover most of the VAT it incurs, to an existing VAT refund scheme for public bodies. That will refund VAT relating to its non-business activities of free-to-air public service broadcasting. The change will come into effect from 1 April 2021.



Clause 97 and schedule 19 ensure that businesses that move steel into Northern Ireland do not have to pay prohibitive safeguard rates as long as there is capacity in the relevant quota. The EU introduced legislation last year that could have led to prohibitive duties being charged on all steel imports into Northern Ireland, making steel more expensive there than anywhere else in the rest of the UK, or indeed in the EU. This outcome would have been quite unacceptable and incompatible with the Northern Ireland protocol. The Government wrote to the UK steel sector in January to communicate a solution that allows Northern Ireland businesses to have access to UK tariffs, including UK quotas instead of EU quotas. This clause and schedule provide the legal basis for that solution.

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Jesse Norman Portrait Jesse Norman
- View Speech - Hansard - - - Excerpts

Before I wind up the debate, I thank colleagues not only in this debate but in all our previous debates for the engaged and often constructive way in which they have approached the discussion. I also thank my friends on the Opposition Front Bench for their contributions. Let me pick up on some of the themes described.

The hon. Member for Glenrothes (Peter Grant) raised the question of the Scottish Government’s limited tax powers, but I would put it to him that what is so striking is how little the Scottish Government have used the tax powers that they have. We saw that earlier, when the hon. Member for Glasgow Central (Alison Thewliss) invited the Government to extend a relief to antibody tests, whereas of course it is perfectly within the powers of the Scottish Government to use the tax revenue they generate to fund the differential for antibody tests themselves.

David Linden Portrait David Linden
- View Speech - Hansard - - - Excerpts

I suggest that the Government cannot have it both ways. In one respect, the Minister says that we have done nothing with our taxation powers, but his colleagues north of the border would say that we are the highest taxed part of the United Kingdom. Which is it?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

The Scottish Government are fully entitled to tax the Scottish people as much as they see fit in the democratic exercise of their mandate. The point I am making is that they have the scope to do so, if they wish, so they should not always be looking to the UK Government on matters of tax if the powers to make the change exist within their own competence and power.

The hon. Member for Richmond Park (Sarah Olney) talked about Making Tax Digital for VAT, but she ignored the fact that many small businesses have already joined the Making Tax Digital for VAT programme. The reason they have done so is that they recognise that it gives them a tremendous ability to manage their tax affairs. It also allows them to enjoy the gains of improved IT productivity. We think that those gains are worth having and worth extending to other businesses. That is one of the powerful drivers behind the Making Tax Digital project.

The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone)—always a delight to see in the Chamber, and I am very pleased that he took off his mask so that we could follow his remarks closely—talked about a revenue compensation scheme. Of course, if he reflects for a moment, he will see that the self-employment income support scheme is precisely a support scheme designed to assist people’s incomes. It has proved to be extremely effective in supporting millions of people on that basis.

I think the hon. Gentleman is right to focus on the sunlit uplands. All I can say is that if we come out of this on anything like the basis that we are projected to do by some of the independent authorities, given that this is the worst economic crisis in recorded history, there will be much to be thankful for. I will be delighted if we can get to those sunlit uplands.

Jamie Stone Portrait Jamie Stone
- Hansard - - - Excerpts

I am so sorry that the Minister did not hear the first part of my speech—I could run through it again, if that would be helpful. I will chance my arm here. Last summer, the Chancellor of the Duchy of Lancaster met business representatives to talk about the sorts of issues in the hospitality trade that I was raising. I wonder whether I could crave, or look for, the favour of the Treasury Bench. Will someone in the Treasury be willing, when suitable, to meet those representatives if they came down to London, to talk about the issues, further to the discussions they have already had with the Chancellor of the Duchy of Lancaster?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I am very happy to volunteer the Chancellor of the Duchy of Lancaster, if the hon. Gentleman wishes to write to him further to that conversation. We are keenly aware of the problem. As Ministers, we spend our lives engaging with different groups. Of course we will look kindly on any suggestion that he might make, as we would on any suggestions made by any Member of this House, but I do not want him to think for a second that we need to do that in order to be keenly aware and abreast of the actual impacts that this present crisis is having on businesses and individuals.

I come to the points raised by the right hon. Member for Wolverhampton South East (Mr McFadden), which were very important. He rightly noted the impact of job losses on the under-35s. It is important to point that out, and we are keenly aware of that within the Government. He asked for an update on the Northern Ireland steel industry situation. As he will be aware, the Government are engaging closely with the EU on this issue. The Northern Ireland protocol is clear that it should be implemented in a way that has as little impact as possible on the everyday lives of people in both Ireland and Northern Ireland. As I say, there is close and constructive engagement on this topic. I am not in a position to give any more details of conversations that are still under way, but I can let him know that they are in those terms, and there has been reporting on this in the newspapers as well.

The right hon. Gentleman asked about the question of LIBOR. As he says, he and I were on the Treasury Committee when the full scale of this scandal became clear. He may recall the cross-examination I gave to Lord Grabiner on his inquiry into this issue, in which it was clear that there had been serious wrongdoing. There has been a slow and stately process of reform in this area, and businesses have been aware of the changes. Since July 2017, there has been a considerable amount of work done by the FCA. There has been a public consultation, extended because of the covid situation. There has been close engagement by a dedicated working group with industry. The Financial Services Bill reserves powers to the FCA if that is required in order to support an orderly wind-down. A tremendous amount of work has been done and is being done, and we are content with the situation as it stands.

Question put and agreed to.

Clause 92 accordingly ordered to stand part of the Bill.

Clauses 93 to 96 ordered to stand part of the Bill.

Schedule 18 agreed to.

Clause 97 ordered to stand part of the Bill.

Schedule 19 agreed to.

Clauses 128 to 130 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill, as amended, reported.

Bill to be considered tomorrow.

Finance Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
Report stage & 3rd reading
Monday 24th May 2021

(2 years, 12 months ago)

Commons Chamber
Finance Act 2021 Read Hansard Text Watch Debate Amendment Paper: Consideration of Bill Amendments as at 24 May 2021 - large print - (24 May 2021)

This text is a record of ministerial contributions to a debate held as part of the Finance Act 2021 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

James Murray Portrait James Murray
- Hansard - - - Excerpts

The vaccine has given us all hope, but we know that the health crisis from covid is far from over, and the impact on jobs, businesses and the economy resulting from the pandemic will be with us for a long time to come. People across our country and British businesses that have been struggling want to be able to get back on their feet. This Bill should have offered them the support they need to do so, but instead the Government chose to make half of all people in the UK pay more income tax, and its headline measure for businesses, quickly and with good reason, earned the nickname, “the Amazon tax cut”. This Amazon tax cut was proudly announced by the Chancellor as the new super deduction—a £25 billion tax cut that he has said represents the biggest two-year business tax cut in modern British history. What he was less keen to make clear is that this tax cut is not targeted at British businesses that have been struggling in the outbreak, but stands to benefit some of the biggest multinational tech firms that have done very well indeed over the past year or so.

As we have heard during previous debates on the Bill, small and medium-sized businesses can already benefit from the annual investment allowance. That allowance, extended by clause 15, offers a 100% tax break on investment up to £1 million, and we know that it will benefit almost all businesses already. The Financial Secretary to the Treasury has said exactly that. He stated very clearly in a written ministerial statement on 12 November last year that the annual investment allowance:

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

We pushed the Government on this matter in Committee of the Whole House, when the Financial Secretary claimed:

“The super deduction benefits all businesses that are in a position to take advantage of the eligible deduction it provides”.—[Official Report, 19 April 2021; Vol. 692, c. 764.]

He will know, however, that the 99% of businesses already benefiting from the annual investment allowance will benefit only marginally from the new super deduction.

The real winners of the super deduction were identified in Committee of the Whole House by my right hon. Friend the Member for Barking (Dame Margaret Hodge), who made the powerful argument that it will most benefit

“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…the notorious tax avoider Amazon.”—[Official Report, 19 April 2021; Vol. 692, c. 751.]

As that phrase reminds us, Amazon already avoids paying much corporation tax in the UK at all by shifting profits to low-tax countries overseas—I will return to that point shortly—but it is depressing that, through his super deduction, the Chancellor is finishing the job Amazon started and wiping out the last little bit of tax it pays in this country.

As the House may remember, we asked the Government to look again at this matter in Committee of the whole House. Our amendment at that stage would have explicitly prevented 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. At the time, the Financial Secretary to the Treasury objected to our amendment on the basis that it sought to

“restrict the relief only to certain companies”—[Official Report, 19 April 2021; Vol. 692, c. 742]

and that it imposed “burdensome conditions” on companies that want to benefit from it. That latter phrase told us plenty about the Government’s views on people’s rights at work. The conditions the Minister saw as “burdensome” are the rights to organise and to be paid a living wage. When even basic rights at work and a living wage are seen as burdensome, it is perhaps no wonder that this Government broke their promise to include an employment Bill in the Queen’s Speech earlier this month.

It is clear that we will need to push Ministers over workers’ rights on future days—from banning the shameful practice of fire and rehire to ending exploitation by rogue umbrella companies—as cross-party amendments tabled to this Bill by right hon. and right hon. Members seek to achieve. Today, we have made it very straightforward for the Government, through amendment 29, to focus specifically on preventing the very biggest tech firms—those companies liable to pay the digital services tax—from benefiting from the super deduction. This should be easy. Only a very small number of very large multinational firms that have done very well over the past year are liable for the digital services tax. The detail of that tax means that businesses are liable only when a group’s worldwide revenues from digital activities—such as providing social media platforms, search engines or online marketplaces—are more than £500 million, and when more than £25 million of these revenues are derived from UK users.

The vote on this amendment will come down to the very simple question of how Members of this House believe public money should be spent. As the Bill stands, the Government’s biggest business tax cut in modern British history will finish the job Amazon started, wiping out the last bit of tax it had to pay on the few parts of its business the profits of which it has been unable to shift overseas. A vote in favour of our amendment 29 would stop Amazon and a small number of similar firms benefiting from a giveaway of public money—public money that could be better spent for so many purposes, including to support British businesses that have been struggling throughout the past year. I urge Conservative Members to consider how they vote on amendment 29.

Before we come to that vote, I will turn to our new clause 23, through which we seek to push the Government finally to back President Biden’s plans for a global minimum corporation tax rate. I have explained how the Government’s super deduction will wipe out Amazon’s remaining tax bill in the UK, and how the amount it was due to pay in the first place was paltry compared with what it should be paying. Despite its business success in the UK, profit shifting to Luxembourg meant Amazon’s corporation tax contribution in the UK in 2019 was less than 0.1% of its turnover. People are fed up with large multinational companies avoiding their tax. It goes against the fairness that must be at the heart of our tax system, and in this year of all years, when so many British businesses are struggling to get back on their feet while Amazon’s business booms, it is clearer than ever that change is long overdue.

We have heard brazen claims from the Government about their work to combat international tax avoidance. In the debate in Committee of the whole House on this Bill, the Minister went so far as to claim that the Government have “led the international charge” in a number of ways, yet since the Biden Administration announced their proposals for a global minimum corporate tax rate, we have seen that, not for the first time, actions from the Government fail to match their words, with the UK now the only G7 country not to back the US plan. This is a once-in-a-generation opportunity to grasp the international agreement on the global taxation of large multinationals that has evaded our country and others for so long, yet rather than stepping up, our Government are stepping away.

Jesse Norman Portrait The Financial Secretary to the Treasury (Jesse Norman)
- View Speech - Hansard - - - Excerpts

The hon. Gentleman advances the extraordinary claim that the UK is the only country among the G7 not to have backed the Biden plan. Will he put in the Library the evidence for that claim?

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Jim Shannon Portrait Jim Shannon (Strangford) (DUP) [V]
- Hansard - - - Excerpts

I am grateful for the opportunity to highlight a number of issues during the Report stage of the Finance Bill. I am always pleased to see the Minister in his place and I hope that I can put forward some points to which he will be able to reply.

I want to refer to clause 6, in part 1. I have spoken on this issue on numerous occasions, and I am thankful for the clarification the Government have sought to provide. However, I am still left disappointed at the rationale as regards corporation tax. The hon. Member for Leicester East (Claudia Webbe) referred to this as well. The measure sets the charge for the main rate of corporation tax at 19% for the financial years beginning 1 April 2022 and 1 April 2023. These changes mean that from 1 April 2023 the main rate of corporation tax for non-ring-fenced profits will be increased to 25%, applying to profits over £250,000. A small profits rate will also be introduced for companies with profits of £50,000 or less, so they will continue to pay corporation tax at 19%. Companies with profits between £50,000 and £350,000 will pay tax at the main rate, reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.

The impact assessment that the Government have produced highlights the issue that I want to speak about. It states that there is no impact on families, but goes on to say:

“However, if businesses struggle or are unable to pay increased Corporation Tax, this could impact on their family formation, stability or breakdown. To support, HMRC can provide a Time To Pay arrangement.”

The issue is clear, at least in my mind and, I suspect, in the mind of many others: businesses have already struggled. While rates and wages may have been paid, and we are grateful for those schemes, the fact is that many small businesses have still had to pay out rent for equipment that they were precluded from using to make a profit, so their income was massively affected and many people’s personal savings were totally wiped out. They then took out a coronavirus business interruption loan to help them to make it through. We are beginning to come to the other side—thank the Lord for that—where they are seeking to rebuild, but instead of a meaningful reduction, there is merely a stay of execution with corporation tax.

That will affect many businesses and, by extension, many homes and families. It seems that it could well mean the end of many of our small businesses; while that is sad on a personal level, it is devastating on an economic level. We must remember that small and medium-sized businesses are the backbone of our economy. The Financial Secretary and his Conservative Government have been committed to helping small businesses. All those small and medium-sized businesses are the backbone of the whole United Kingdom—they certainly are in my constituency of Strangford.

I repeat what I have said before in this Chamber: there is no point in carrying businesses thus far, only to allow them to flounder now before any repayment is made. The Government have admitted that there will be a reduced incentive to incorporate businesses that would usually seek to take this step. All this has an effect on the long-term income to our economy. I know that the Government want a stronger economy; we all do, and I believe that we need some help.

Northern Ireland is well placed to be a central hub for business. We have much to offer, yet people can go south of the border to lower corporation tax and greater incentives. Along with my colleagues in the Democratic Unionist party, I have often argued for a reduction in corporation tax to attract businesses to Northern Ireland. I believe that the corporation tax rate repels investors, so I urge the Financial Secretary to look at the issue again. I understand that historically he has wanted a UK-wide rate of corporation tax. However, I want a UK-wide customs market, and that is not the case—ask the local small grocer who cannot even get in dog treats to sell because of the Northern Ireland protocol. There are differences made by this insidious protocol that affect our corporations and small businesses alike. It is clear that if the Financial Secretary insists on one size fits all, it must be applied in every aspect of manufacture, delivery and retail.

The Northern Ireland Assembly is establishing a working group on the consequences of creating our own corporation tax band and its effect on our block grant; maybe the Financial Secretary could highlight where those discussions have taken us so far. I believe that there is an opportunity for him to step in and do the right thing for the UK with a view to the long term. That is what I am requesting, even at this very late stage.

The UK is stronger together. I believe that the United Kingdom of Great Britain and Northern Ireland will always be stronger together. That has become the mantra of our Government, and I agree with it, but it needs to be more than words: action must follow the words and show our strengths. I believe that a reasonable rate of corporation tax across the board is a step to strengthen the Union, not cause more division.

Jesse Norman Portrait Jesse Norman
- View Speech - Hansard - - - Excerpts

I am grateful to all Members who have taken part in this debate. Let me pick up on several issues that have been raised, starting with the super deduction. You will be aware, Madam Deputy Speaker, as I think some Opposition Members are not, that it has been described by the CBI as

“a real catalyst for firms”,

while the British Chambers of Commerce said:

“We particularly welcome the massive ‘super deduction’ investment incentive.”

They are absolutely right. It is a terrible shame that the Labour party has decided to try to tarnish the super deduction, a measure from which many capital-intensive businesses around this country will benefit, especially in the north, the north-west, the north-east and the midlands. As my hon. Friend the Member for Devizes (Danny Kruger) rightly picked up, it is a measure that benefits local businesses up and down the UK. He picked Wadworth, a well-known brewer, and rightly so, but there are many, many other businesses for which that is also true. He was absolutely right to highlight that.

Let me come on to questions of wider taxation, if I may. There seems to be an astonishing level of ignorance among Members on the Opposition Benches. They seemed to be unaware that the tax gap—the difference between the amount of tax actually collected and the amount of tax that could potentially be collected—is at its lowest rate in our recorded history, at 4.7%. It may be of some interest if I point out to them—they can reflect on this—that in 2005-06 under the Labour Government it was 7.5%, so it has fallen dramatically, I am pleased to say. Tax that was not being collected by the Labour Government at that time is now being collected by the Conservative Government of the present day, and a very good thing that is too. That is a record on which they should spend some time pondering. The fact of the matter is that this Government have always made it plain that they will be very tough—as tough as they can be—in order to collect the tax that is due and to make sure that corporations and individuals pay it wherever they are due to.

--- Later in debate ---
19:21

Division 6

Ayes: 261


Labour: 196
Scottish National Party: 45
Liberal Democrat: 11
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 364


Conservative: 357
Democratic Unionist Party: 7

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.
--- Later in debate ---
19:33

Division 7

Ayes: 268


Labour: 196
Scottish National Party: 45
Liberal Democrat: 11
Democratic Unionist Party: 7
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 357


Conservative: 356

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.
--- Later in debate ---
Robin Millar Portrait Robin Millar (Aberconwy) (Con)
- Hansard - - - Excerpts

It is a privilege to follow my hon. Friend the Member for Redcar (Jacob Young). Like him, I shall take this opportunity to make a few brief remarks in support of freeports, although, as hon. Members would expect, they will be in support of a freeport in Wales, and north Wales in particular. In doing so, I shall speak against new clause 25.

Freeports and free economic zones are a common feature of international trade, with dozens utilised by our closest allies. Not only have they propelled many of the world’s previously impoverished nations to prosperity, but there are well-established international frameworks for their operation. Indeed, the OECD code of conduct for clean free trade zones is an example, to which this Government have already pledged compliance.

The measures set out in new clause 25 are simply unnecessary, and the additional costs, such as the paperwork proposed, will only reduce the attractiveness of Britain’s ports. Let us make no mistake: the ultimate bearer of extra costs will be not multinational business, but the workers of this country who will miss out on prosperity from export-driven work.

Wales occupies a vital position in UK trade. If we consider just the Republic of Ireland, we will see that in 2019, two thirds of goods carried from the Republic of Ireland came via Wales, and four fifths of goods carried to the Republic of Ireland went via Wales. I also note that Holyhead is on the international trade routes that link Dublin to Moscow, such is the strategic importance of the location and role of Wales—particularly of north Wales. It is essential, therefore, that we create an environment there that is attractive to investment and private finance. According to the British Venture Capital Association, Wales has one of the lowest average investments from venture capital in the UK, accounting for just 3.3% of all funding over the period 2016 to 2018.

A freeport offers a structured environment for investment. Whether linked with the advanced manufacturing cluster of north-east Wales—Wales’s hottest economic growth spot—or the green energy projects and innovation found on Ynys Môn, or the leading telecoms research at the University College of North Wales, the structured reliefs and incentives of a freeport offer businesses and investors a clear and attractive proposition and are a clear demonstration of the Government’s commitment to the area.

This Finance Bill makes clear the Government’s aim of growth, development and levelling up for Wales. It also presents an exciting opportunity for co-operation and collaboration with the Welsh Government. With their assistance on, for example, the additional reliefs possible for the planning laws within their control, there is an opportunity not only to deliver a freeport in Wales, but to create one of the most attractive freeport models for investment in the UK.

In conclusion, our United Kingdom is an island nation and a trading nation, and our prosperity has always come from across the seas. Freeports are an essential step towards stronger trade and exports in a global Britain, and this Finance Bill will deliver that. In Wales, we know that, although we are outward-looking, our strength comes from within. For centuries, we have exported our goods and resources around the globe. North Wales slate has roofed the world, and copper from the Great Orme in Aberconwy was used to forge bronze-age implements used in areas ranging from Brittany to the Baltic.

A freeport in Wales—in north Wales—is an opportunity to ensure our connection to a global economy, to bring investment and growth that will bring jobs, and to secure our tradition of global export for another generation. I shall be voting against new clause 25.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I thank all Members who have commented or spoken in this debate on freeports. As the House will know, freeports are a very important part of the Government’s policy to level up the British economy and to bring investment, trade and jobs to parts of the country that in many cases have not had the economic vibrancy that we as a nation would have wished. They symbolise and reinforce the opportunities provided by this country’s status as an outward-looking trading nation, open to the world.

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20:21

Division 8

Ayes: 268


Labour: 195
Scottish National Party: 45
Liberal Democrat: 11
Democratic Unionist Party: 7
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 357


Conservative: 356

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.
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What infuriates me, particularly given the experience of the past year, is that half of all care workers earn less than the real living wage and that the majority of children in poverty are living in working households. The last thing any Government should be doing now is raising taxes on low-paid workers, especially when the Government have broken their promises on raising wages. With many low-paid workers not getting a pay rise and facing household debts they have amassed during lockdown, we should not be taking more out of their income. With high street retail needing an urgent stimulus, there cannot be a worse policy at a worse time than removing demand from the economy. So at this late stage, I, like others, am appealing to the Government to change clause 5. I doubt that they will change their mind, but let me at least place on record my disgust at the Government and at the way this Bill is forcing more very low-paid people already living in poverty into further poverty and suffering.
Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I am grateful to all of those who have spoken in this debate. As the right hon. Member for Hayes and Harlington (John McDonnell) has just said, this has been something of a wash-up debate. It is fair to say that it is a bit of an omnibus group of measures pulled together, with many different clauses and issues on which colleagues have wanted to speak. That has made it wide-ranging, but if I may, I am going to focus on some of the key themes from across the various discussions we have had.

Let me start with the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) and the question of the non-resident surcharge, which was also highlighted by the hon. Member for Hackney South and Shoreditch (Meg Hillier). They may or may not be aware that in 2019 the Government carried out a public consultation on whether there should be a 1% non-resident surcharge, and decided on the basis of that consultation that the surcharge should be levied at 2%. That is twice as high as was originally contemplated in the consultation. That also should be seen in the context of the additional tax that people pay on second and third properties, many of which will fall into the scope of this measure. That is an important factor to bear in mind.

The hon. Member for Brighton, Pavilion (Caroline Lucas) revisited some of her key themes as regards the climate and environmental policy. I think that there is a misunderstanding at some very deep level of what the Government are doing, which includes: the Environment Bill; the 10-point plan that the Prime Minister has laid out; the net zero work that the hon. Lady highlighted, which was commissioned within and by the Treasury from a very eminent independent economist; and our work through the new UK Infrastructure Bank, which focuses on green policies and levelling up and for which I was pleased to visit new potential office sites in Leeds only on Thursday. It all amounts to a tremendous emphasis, particularly in the net zero review, on the long-term future of creating a sustainable and productive green economy in this country. It is very important to focus on that.

The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) talked about health inequalities. I remind her that the Government have made an enormous investment in the NHS, over and above the extraordinary interventions supporting the fabric of our society over the past 12 months. We will also have in place a new office for health promotion, designed to support better health and wellbeing across the country.

The hon. Member for Ceredigion (Ben Lake) called for greater transparency in relation to reliefs. I have a great deal of personal sympathy with his position; he is absolutely right about the importance of focusing on reliefs. To take a particular example that I know is of great interest to him, he will be aware that we have under way a review of R&D tax reliefs, an important part of policy.

The hon. Member for Hornsey and Wood Green (Catherine West) highlighted the situation in Belarus, which is not directly a matter for the Treasury or the Bill, but is obviously a topic of great importance and interest for all Members of this House, as today’s urgent question highlighted.

All those points are important to put on the record. I also want to pick up on the important speeches made by my right hon. Friends the Members for Haltemprice and Howden (Mr Davis) and for Chingford and Woodford Green (Sir Iain Duncan Smith).

My right hon. Friend the Member for Haltemprice and Howden focused on the prevalence of umbrella companies. It is important to say that there are legitimate reasons why an agency or an individual might wish to use an umbrella company. To contemplate a series of measures that might include a ban on umbrella companies would be a tremendous burden on the legitimate umbrella companies; my right hon. Friend mentioned that that was not his preferred option. It is important to point out that such companies can perform useful payroll functions for agencies, provide choice for individuals and have multiple engagements. Notably, the Low Incomes Tax Reform Group pointed out recently:

“For freelance contractors who cannot work for their clients on a sole trader or limited company basis…the option to be able to work through an umbrella can be very valuable.”

There is value to umbrella companies, but that is not to say that there is not also abuse. The Government are very focused on that: my right hon. Friend mentioned some of the measures that HMRC is taking to combat umbrella companies that are disobeying the rules or trading fraudulently, and we are committed to extending the remit of the Employment Agency Standards Inspectorate to support best practice in the area.

John Spellar Portrait John Spellar
- Hansard - - - Excerpts

I think the Financial Secretary ought to face up to the reality, which is that many of the people under these companies are not what we would describe in any normal parlance as contractors: they are people working on Test and Trace in their thousands, for example, who should be employed directly either by Serco or by the agency that they work for. There are also great numbers of people in the health service under these companies; they should be employed either by an agency or by the health service. That is where the scandal is, and that is what he really ought to be dealing with—and very promptly.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

It is a very dynamic marketplace, as the right hon. Gentleman will be aware. There are many different aspects to it with which the Government are seeking to engage. One thing that is quite important that I do not think he or others have noticed is that the changes to IR35 that the Government have made have in some quarters been widely welcomed. Let me give an example—it may not be the widest possible welcome, but it is quite noticeable—from the off-payroll advisory firm Qdos, which said:

“In recent months the tide has turned, with thousands of businesses now aware of the fact that IR35 reform is manageable”,

as it was manageable in the public sector some years before. It is important to recognise that that is also the case.

Meg Hillier Portrait Meg Hillier
- Hansard - - - Excerpts

I have to challenge the Minister on IR35. He is speaking as though it is somehow all fine. It has decimated sections of the tech and IT industry in my constituency, where groups of people came together to deliver short contracts and were actually paying as much tax as the Exchequer was getting from them. I can provide figures if he would like to take this up further, but let us not pretend that it is all fine.

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

There is no suggestion on my part that it is all fine. One cannot make meaningful change to a market that is not performing as one would like and expect everything to be perfectly fine within weeks of the implementation of the measure. The point that I am making is that there are important players in the industry that recognise that—in the quote that I have given—“thousands of businesses” are

“now aware… that IR35 reform is manageable”,

and so it is.

As the hon. Lady will well know, under the previous arrangements there were people who were performing like employees—often working side by side with them—but not paying that tax, and it was important that they did so. If she doubts that, she might want to reflect on the question of what the tax revenue raised from those organisations is used for. The answer is that it is used to support the NHS, our public services and all the other things that the Government are trying to do to get this country through a difficult moment in our history.

Iain Duncan Smith Portrait Sir Iain Duncan Smith
- Hansard - - - Excerpts

The Minister accepts that there are now some significant abuses in the way that many—not all—umbrella companies operate. Do we need action by the Treasury to deal with this issue, or is he content that it will just resolve itself as things stand?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

No, the Government have been clear that there needs to be an extension of the employment agency standards inspectorate in this area, and there may well be operational measures that HMRC needs to continue to undertake. My right hon. Friend will be aware that the Bill contains very considerable additional measures designed elsewhere in the tax system to curb the promotion of tax avoidance schemes, to improve the disclosure of those schemes and to combat organisations that would attempt to derive an unfair advantage of the kind that he has described, so we are absolutely not unaware of the importance of ensuring that people across the board pay appropriate levels of tax.

It is also worth saying that none of this really falls within the context of a Finance Bill, let alone the one that we have laid out in front of us. It is also worth saying that HMRC has used real time information in ways that were contemplated and discussed earlier in the debate in order to try to be more forward-leaning in this area. We recognise the concern and HMRC is highly active in it, but in many cases these umbrella companies do have a legitimate function, and it is important to recognise that.

I think that is it—thank you very much.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

Once again, I thank all Members who have spoken. This has been a varied and wide-ranging debate, with Members focusing on different aspects of the Bill.

My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) spoke about the impact of overseas buyers buying properties in her community in bulk. My hon. Friend the Member for Hornsey and Wood Green (Catherine West) spoke about the impact that dirty money is having on her local area and how other countries, such as the USA, are using sanctions to target corrupt individuals. Both are excellent champions for their constituents, who are too often at the sharp end of the housing crisis.

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22:01

Division 9

Ayes: 218


Labour: 194
Liberal Democrat: 11
Democratic Unionist Party: 7
Independent: 4
Alliance: 1
Green Party: 1

Noes: 358


Conservative: 357
Democratic Unionist Party: 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.
--- Later in debate ---
22:12

Division 10

Ayes: 261


Labour: 198
Scottish National Party: 43
Liberal Democrat: 11
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Noes: 365


Conservative: 357
Democratic Unionist Party: 7

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.
--- Later in debate ---
Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I beg to move, That the Bill be now read the Third time.

I thank right hon. and hon. Members who have contributed to the robust but, I would say, good-natured debate throughout this Finance Bill’s passage over the past two months. It has been a speedy but thoroughly effective process. Before I get into the bulk of my speech, I know that the right hon. Member for East Antrim (Sammy Wilson) wants to put a question to me, so let me recognise him.

Sammy Wilson Portrait Sammy Wilson
- Hansard - - - Excerpts

I thank the Minister for giving way. I tried to catch his eye earlier on; I do not think that he is deliberately avoiding me, but I did not get the chance to talk to him. New schedule 1 refers to VAT on distance selling. It covers 55 pages and was introduced tonight without much chance of consideration. It will affect businesses with a threshold of sales of £8,818, which will require them to register and to do special accounting. What assessment has been made of the likely impact of that on small businesses in Northern Ireland that sell goods into the EU?

Jesse Norman Portrait Jesse Norman
- Hansard - - - Excerpts

I rather regret it, having invited the intervention. No, of course, to engage with this, I would not have recognised the right hon. Gentleman if I had not wanted to take the intervention and I certainly was not avoiding him earlier in the debate. He is right to point out that these provisions have been put into the Bill for the first time. I am pleased to say that they have been given proper consideration in the detail that has been put up, which he alluded to. There is a new measure relating to the distance selling threshold, which will affect a small number of businesses in Northern Ireland. By and large, this put into law, in relation to Northern Ireland, a set of measures that has already been adopted elsewhere in the United Kingdom, in recognition of commitments that we made to the EU as part of the process of striking our new trade arrangements. That is that, but if he wishes to have further conversation on that, I would of course be delighted to do so.

This Finance Bill comes at a crucial juncture for our economy and our public finances as the UK recovers from what is—we must never forget this—the greatest economic and social crisis since world war two and the greatest economic recession in 300 years. It delivers on the measures announced in the Chancellor’s Budget to protect jobs and livelihoods and to provide additional support to help people and businesses through the pandemic; to begin the process of fixing the public finances; and to lay the foundations of a resilient future economy. This Bill delivers on all those commitments, and I commend it to the House.

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22:30

Division 11

Ayes: 365


Conservative: 357
Democratic Unionist Party: 7

Noes: 261


Labour: 196
Scottish National Party: 45
Liberal Democrat: 11
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1
Green Party: 1

Bill read the Third time and passed.

Finance Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
2nd reading & Committee negatived & 3rd reading
Tuesday 8th June 2021

(2 years, 11 months ago)

Lords Chamber
Finance Act 2021 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 24 May 2021 - large print - (24 May 2021)

This text is a record of ministerial contributions to a debate held as part of the Finance Act 2021 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Moved by
Lord Agnew of Oulton Portrait Lord Agnew of Oulton
- Hansard - - - Excerpts

That the Bill be now read a second time.

Lord Agnew of Oulton Portrait The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)
- Hansard - - - Excerpts

My Lords, we are here to debate the annual Finance Bill, introduced in the other place following the Budget on 3 March. My right honourable 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.

The House will of course be aware of the severe public health and economic shock caused by the pandemic; at its peak, the economy shrank by 10%, the largest fall in more than 300 years. The Government have responded with an extraordinary package of support for the economy which, taking into account measures introduced in the 2020 Budget, is now estimated at £407 billion for this year and last year. This has been essential. Thanks to it and the rapid rollout of vaccinations, the Office for Budget Responsibility and other independent authorities now expect a swifter recovery than had previously been forecast. Indeed, the OBR expects the UK economy to recover to pre-crisis levels six months earlier than it did previously—in the second, rather than the fourth, quarter of 2022.

Our first objective is protecting jobs and livelihoods. There are positive signals that we are now on the right path, but it is crucial that we continue to support the economy over the coming months and deliver on the Budget’s first aim of protecting jobs and livelihoods. That is why the tax measures outlined in the Bill go further to support the economy. We are extending the 5% reduced VAT rate until 30 September to protect almost 150,000 hard-hit hospitality and tourism businesses which employ over 2.4 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.

The Bill ensures that any business that took advantage of the original VAT deferral new payment scheme 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. This will deliver a significant cash-flow benefit for eligible businesses.

The Bill also puts into legislation the temporary cut in stamp duty land tax, with a residential stamp duty nil rate band remaining at £500,000 in England and Northern Ireland until the end of June. This 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. This extension helps buyers and supports jobs which rely on the property industry.

As well as protecting jobs and livelihoods, the Bill takes important steps to deliver on the second of the Budget’s key objectives: to strengthen public finances as we emerge from the pandemic. The coronavirus response, as we all know, created unprecedented challenges for the Exchequer. The first outturn estimates from the Office for National Statistics show borrowing for last year is estimated to have totalled £300 billion, or 14.3% of GDP. As we continue our response to this crisis, borrowing is forecast by the Office for Budget Responsibility to be £234 billion this year, which is 10.3% of GDP. This means we are forecast to borrow more this year than during the financial crisis, an amount so large it has only one rival in recent history—last year. The Government need to balance this enormous support provided to the economy in the short term with the need to start to fix the public finances in the longer term. The Bill takes forward a number of measures to do this responsibly.

First, the income tax personal allowance will rise with the consumer prices index, as planned, to £12,570 from this month. This level will then be maintained until April 2026. 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 a fair and progressive way to meet the fiscal challenge presented by the pandemic. For example, it is worth noting that the 20% highest-income households will contribute 15 times that of the 20% lowest-income households.

Secondly, the inheritance tax thresholds, the pensions lifetime allowance and the annual exempt amount in capital gains tax will 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 Bill legislates for the rate of corporation tax paid on company profits to increase to 25% from 2023. Businesses have been provided with over £100 billion of support to get through this pandemic, so it is only fair to ask them to contribute to the overall recovery. Of course, since corporation tax is charged only on company profits, businesses that may be struggling will, by definition, be unaffected. The increase will not take effect until two years’ time, well after the point when the OBR expects the economy to have recovered. This measure protects small businesses with profits of £50,000 or less by including 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.

The third goal of the Budget was to lay the foundations of our future economy as we emerge from the pandemic. This requires that the Government encourage business investment now, to help spur growth and drive productivity in the coming years. That is why the Bill contains the innovative new super-deduction measure. 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. It 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. This will bring forward investment; the OBR has said that, at its peak in the financial year 2022-23, the super-deduction will incentivise an additional £20 billion of business investment.

The Bill also contains clauses that will enable the creation of free-port tax sites. In these sites, businesses will be able to benefit from a number of tax reliefs, including a stamp duty land tax relief, an enhanced structures and buildings allowance and an enhanced capital allowance for plant and machinery. This tax offer will be combined with simpler import procedures and duty benefits in customs sites to help businesses trade, along with planning changes to give a green light to much-needed development and spending to invest in infrastructure. This comprehensive package will allow free ports to play a significant role in boosting trade, attracting inward investment and driving productive activity.

I have talked about how this legislation delivers on the core objectives of the Chancellor’s Budget. However, as might be expected in the annual Finance Bill, it also takes forward a number of other measures to progress the Government’s long-term aims to ensure a flexible, resilient and fair tax system. 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. This will help taxpayers in the sharing and gig economies get their tax right and help HMRC detect and tackle non-compliance. It will enable the extension of Making Tax Digital requirements to smaller VAT businesses from April next year, building on the successful introduction of Making Tax Digital for VAT businesses.

It implements reforms to the penalty regime for VAT and income tax self-assessment to make it fairer and more consistent, and harmonises interest for VAT and income tax. It 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.

I turn to how the Bill helps us deliver the important commitments the Government have made on the environment and carbon reduction. The new plastic packaging tax 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. To help tackle climate change and improve the UK’s air quality, the Bill reforms the entitlement to use red diesel from April next year. This will help ensure that the tax system incentivises users of polluting fuels such as diesel to invest in cleaner vehicles and machinery, or just to use less fuel.

To conclude, the coronavirus pandemic has presented an immense challenge to this country and delivered a dramatic shock to our economy. The Government have met that shock with a determined and sustained response, but the work is not yet done. This Finance Bill continues to support the lives and livelihoods of families and businesses. As we emerge from the pandemic, it will set the ground for an investment-led recovery and for strong public finances in the coming years. The Bill delivers a number of measures for a fairer and more sustainable tax system in support of the work needed to tackle climate change. For these reasons, I commend it to the House.

Baroness Finlay of Llandaff Portrait The Deputy Speaker (Baroness Finlay of Llandaff) (CB)
- Hansard - - - Excerpts

My Lords, I remind all in the Chamber that we are expected to be masked when seated.

--- Later in debate ---
Lord Agnew of Oulton Portrait Lord Agnew of Oulton (Con)
- Hansard - - - Excerpts

My Lords, this has been an excellent debate, and I thank noble Lords for their contributions. I will round up by addressing some of the issues raised by your Lordships, starting with comments on the Economic Affairs Committee and HMRC’s powers.

I take this opportunity to thank noble Lords for their contributions on the new report from the Economic Affairs Committee, which focused on HMRC powers to combat tax avoidance and promote compliance. The Government have carefully examined the issues raised by the committee and given it a comprehensive response. I am pleased to say that nine of the committee’s recommendations were accepted and six were partially accepted.

Since the publication of the committee’s report, HMRC has published its evaluation of the implementation of powers, obligations and safeguards introduced since 2012. Working closely with representatives of taxpayers and agents, the evaluation has highlighted a number of new opportunities for HMRC to improve public trust in the tax system. It is crucial that HMRC has the powers necessary to identify the minority of people and businesses who seek to avoid or evade tax, while ensuring an appropriate balance of safeguards for taxpayers.

My noble friends Lord Bridges and Lady Neville-Rolfe raised the loss of safeguards, but this new measure does have important safeguards. For example, the notice may be issued only where the information is “reasonably required” to check a known person’s tax position or in connection with the recovery of a tax debt. An authorised officer must approve all notices and must pass a test every three years to retain their status. The financial institution can appeal against any penalties charged for failure to comply with the notice, and HMRC is required to make an annual report to Parliament on the use of the financial institution notice.

My noble friend Lord Bridges asked about umbrella companies and mini umbrella companies. The Government agree on the importance of regulating umbrella companies properly and have already committed to regulating them by extending the remit of the Employment Agency Standards Inspectorate to include these. An employment Bill will be brought forward as parliamentary time allows. The mini umbrella company model is fraudulent and presents an organised crime threat to the UK Exchequer. HMRC works closely with trade bodies and other government departments to raise awareness of the mini umbrella company fraud.

My noble friends Lady Neville-Rolfe and Lord Bridges asked about Clause 125 on licensing authorities. The check has been designed to be minimal in scope and will only test compliance with the most basic obligation to be appropriately registered for tax. It does not create new tax obligations but simply ensures that these existing rules are complied with, promoting fairness for everyone in the sector. For most users it will take minutes to do and is needed only when licences are renewed—typically every three years.

My noble friend Lord Forsyth asked about corporation tax rates. At 25%, the rate is still highly competitive relative to our international peers, with the lowest headline rate in the G7. Alongside this tax increase, the Chancellor announced in the Budget a super-deduction, as we referred to earlier, from April of this year until April 2023. My noble friend is particularly concerned about the loan charge. I am sure that there is nothing I can say today that will completely allay his concerns, but I want to try because I appreciate his passion on this subject.

Promoters of tax avoidance schemes are already subject to significant penalties if they fail to meet their obligations. Since its formation in 2016, HMRC’s fraud investigation service has regularly secured convictions relating to arrangements that have been promoted and marketed as tax avoidance. Most of these people were involved in promoting tax avoidance schemes. However, we know that more can be done, and we are committed to ensuring that they face significant financial consequences for promoting these schemes.

My noble friend Lord Forsyth asked about the impact of IR35 on the self-employed. It is important to note that the reform does not apply to those who are self-employed according to the existing employment status tests. A worker’s employment status for tax purposes is not a matter of choice but is determined by the terms and conditions under which they work. This is determined by a number of factors which are set out in case law, such as whether they can send a substitute to do the work on their behalf, and the control that the client has over the work that that person does.

In terms of reforms to employment status, as laid out in our manifesto, the Government will bring forward measures to establish an employment framework which is fit for purpose and keeps pace with the needs of modern workplaces. These include measures that will encourage flexible working, protect vulnerable workers, take a smarter approach to enforcement of employment law, and build on the strengths of our flexible labour market to support jobs. The Government recognise concerns about employment status and are considering options to improve clarity in the system, making it easier for individuals and businesses to understand which rights and obligations apply to them.

The noble Lords, Lord Dodds and Lord Empey, are concerned about the red diesel issue for power generation in Northern Ireland. In response to concerns raised by red diesel users in this context during last year’s consultation about their ability to run down fuel stocks, the Government have decided to give HMRC officers the ability to disapply the liability to seizure where the user can provide evidence to satisfy officers that they have not built up their stocks or taken red diesel into the fuel system after the rules change. The Government recognise that for some users, such as those who need red diesel for back-up power generation in case of emergencies but may use it only for a few hours a year, their last purchase of red diesel may be some time before the tax change.

The noble Lord, Lord Dodds, asked about air passenger duty. We are currently consulting on the Government’s initial policy position, but the effective rate of air passenger duty on domestic flights should be reduced to support the union and regional connectivity. The consultation closes in a few days, on 15 June.

My noble friend Lord Leigh asked about capital gains tax reform. The Government are committed to a fair and simple CGT system which strikes the right balance between raising revenue and supporting the UK’s economic recovery and long-term growth. Last year, the Chancellor commissioned the Office of Tax Simplification to examine areas where the present rules on CGT can distort behaviour or do not meet their policy intent. The OTS provides independent advice. It is the role of the Government to make tax policy decisions. The Government keep all taxes under review and will respond to the OTS in due course.

My noble friend also asked about the digital services tax and pillar 1. The UK digital services tax is an interim solution to the widely held concerns with international corporate tax, and the Government’s strong preference is to secure a comprehensive global solution on digital tax and remove the DST once this is in place. We are pleased at the progress that has been made in recent days towards securing that solution but recognise that there is still work to do in reaching wider agreement among the OECD key 20 countries ahead of July. The Government’s efforts will be focused on that objective.

It is premature to set out revenue estimates—the final design details and parameters of the rules will need to be worked though—but a key condition for the UK is that pillar 1 appropriately addresses our concern and ensures that the amount of tax that multinational groups pay in the UK is commensurate with their economic activities here. My noble friend also asked whether we are no longer committed to a competitive tax regime. We are absolutely committed to one, and as I mentioned, our headline corporate tax rate of 25% is competitive among our international peers.

The noble Lord, Lord Bilimoria, made important points. I passionately agree with his point about leading the recovery from this crisis through job creation. Employment gives people dignity and a sense of purpose. We are pleased with the results so far. The OBR now expects unemployment to peak at 6.5% in the fourth quarter of this year, as the CJRS is scheduled to end, falling gradually to 4.4% by the end of 2025. The estimated unemployment rate is 1% lower than its November forecast. This is equivalent to 340,000 fewer people in unemployment, partly thanks to the extension of the furlough scheme. The noble Lord will, be aware of other initiatives, such as our dramatic increase in the number of jobcentres.

The noble Lord, Lord Sikka, asks about tax avoidance, particularly of the large accountancy firms. Rigorous anti-avoidance activity by HMRC has seen a significant proportion of those promoting schemes, including the large accountancy firms, being driven out of this market. It is now only a hard core of unscrupulous promoters, largely based offshore, who continue to promote tax avoidance schemes. The Government recognise that more could be done to raise standards more widely across the market for tax advice and ran a call for evidence on this last summer. The summary of responses and next steps was published in November. As part of this, the Government are consulting on introducing a potential requirement for tax advisers to hold professional indemnity insurance.

The noble Lord, Lord Sikka, and the noble Lord, Lord Tunnicliffe, asked about the IT and PA threshold, the freeze depressing people’s purchasing power. This policy will not come into effect until April 2022, when the economy will be on a stronger footing. We are asking people to make only a relatively modest contribution, to help fund good public services and to rebuild public finances. This is a universal and progressive policy, with those more able to pay contributing more. An average basic taxpayer will be only about £40 per year worse off in 2022-23. These are responsible decisions that will help to ensure the post-crisis task of putting the public finances back on a sustainable path.

My noble friend Lady Neville-Rolfe asked about Clauses 112 and 113 on the penalty systems that are being introduced. The current penalties and interest levied on taxpayers when they miss a submission deadline or pay their tax late are inconsistent across different taxes. The changes in this Bill bring consistency. The new approach to late submissions means that an automatic financial penalty will no longer be applied. Instead, the taxpayer will accrue points, much like driving licence points, with a financial penalty being applied only after repeated non-compliance. This means that taxpayers will incur penalties proportionate to the amount of tax they owe and how long payment is outstanding.

The noble Baroness, Lady Bennett, is concerned that we cannot aim for continuous growth because of its damage to the environment. I would respectfully disagree with her and refer her to a book called More from Less by Andrew McAfee. A couple of simple statistics on the US Geological Survey, which has been running for over 100 years, has tracked 72 resources from A, aluminium, to Z, zinc, and only six are not yet past their peak. Energy use in the UK in 2017 was 2% below what it was in 2008, even though GDP had increased by 15%. An aluminium can built in 1959 weighed 85 grams, whereas one built in 2011 only weighs 13 grams. It is extraordinary the innovation that is occurring in our society.

The noble Baroness, Lady Kramer, asked about a pre-emptive rise in VAT rates. The Government appreciate that the expiry of any temporary cut will need to be carefully timed so that it does not impede progress as the economy recovers. That is why we are announcing this six-month extension followed by six months of the 12.5% rate, which will help businesses to manage the return to a standard rate. As the Chancellor made clear in his Budget speech, it is important for the Government to be honest about the need to keep the public finances on a sustainable footing. The Government will of course keep the situation under review. The reduced rate is expensive and is expected to cost over £7 billion in tax forgone. Applying a permanently reduced rate would further increase the cost to taxpayers.

The noble Lord, Lord Tunnicliffe, asked about the G7 agreement on tax reform. We are delighted that the G7 has come together to back these proposals. It represents a major reform to the international tax framework. The UK has been at the forefront of OECD discussions to address tax challenges of digitisation. The Chancellor has made it a priority of the UK’s G7 presidency to support progress towards an agreement. Our consistent position has been that it matters where tax is paid, as well as the rate at which it is paid. So we are delighted that we have G7 backing for both pillars of the OECD proposals on reallocating taxing rights as well as the global minimum taxation.

On the concerns of the noble Lord, Lord Tunnicliffe, about multinationals, the Government have taken significant steps, both domestically and internationally, to ensure that companies pay the right amount. The corporate interest restriction rules prevent multinationals from avoiding tax using funding arrangements. This has raised £1 billion a year since its introduction in 2017. The diverted profit tax has led to £5 billion in additional revenue by countering aggressive tax planning techniques used by multinationals to divert profits away from the UK. The tax charge on offshore receipts, in respect of intangible property, is forecast to raise £1.1 billion from companies that put valuable intangible assets in low-tax jurisdictions. The UK has also been at the forefront of the OECD discussions on this, and the Chancellor has made it a priority of the G7 presidency to support progress towards an agreement.

The noble Lord, Lord Tunnicliffe, asked about freeports and economic transparency. We have a firm commitment to ensure that the transparency extends to the freeports programme. That is why we published a decision-making note that clearly sets out how sustainable economic growth and regeneration were prioritised in the assessment process. This built on a robust bid assessment, where the eight successful English freeports demonstrated a strong economic rationale for their proposed tax sites. The Government have already taken action to address the concerns that any additional reporting requirements are seeking to resolve. We will be publishing costings of the freeports programme at the next fiscal event, in line with conventional practice.

Let me wind up by saying that I hope I have succeeded in addressing noble Lords’ questions. I will of course review the record of this debate and follow up in the usual way, and write where I have not been able to provide detailed answers.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.