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.”

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.

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.

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.

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.

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.

Jesse Norman

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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.

Jesse Norman

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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.

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.

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.

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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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

Jesse Norman

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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.

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.

Jesse Norman

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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.

The Financial Secretary to the Treasury (Jesse Norman)

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

The Financial Secretary to the Treasury (Jesse Norman)

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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?

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.

Jesse Norman

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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.