Friday 17th July 2020
(4 years, 5 months ago)
Lords ChamberFinance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 2 July 2020 - (2 Jul 2020)
The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)
My Lords, with the leave of the House I will also speak to the remaining Motion standing in my name on the Order Paper.
The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)
The question is that the Bill be now read a second time. I call the next speaker: the noble Lord, Lord Livermore.
Lord Agnew of Oulton
My Lords, we are here to debate the annual Finance Bill, introduced in the other place following the Budget on 11 March, over four months ago. During that time, the circumstances in which we find ourselves have changed beyond recognition. The passage of this year’s Finance Bill has taken place in the shadow of a pandemic unprecedented in living memory, to which the Government have responded with one of the largest and most comprehensive economic responses in the world, aiming to protect people’s jobs, incomes and businesses.
The Government have already supported more than 11 million people and jobs through the Coronavirus Job Retention Scheme and the Self-employment Income Support Scheme, and have helped over 1 million businesses to protect jobs through tax caps, tax deferrals, direct cash grants and over 1 million government-backed loans.
In his summer economic update last week, the Chancellor set out plans for phase two of the Government’s economic response. An ambitious plan for jobs will give a job retention bonus to firms that keep on furloughed workers. The new kick-start scheme will directly pay employers to create new jobs for 16 to 24 year-olds at risk of long-term unemployment. To support the high-employing hospitality and tourism industries, the Government will cut VAT on food, accommodation and attractions from 20% to 5% for six months, and fund an “eat out to help out” 50% discount at participating businesses for the month of August.
Additionally, the Covid-19 pandemic and subsequent lockdown have resulted in uncertainty in the housing market. Property transactions fell by as much 50% and house prices have fallen for the first time in eight years. What is more, any housing market freeze is bad for jobs and businesses whose custom relies on a confident housing market, such as retailers, tradespeople and the construction industry.
As lockdown eased, there were signs that the property market was waking up. It is important to encourage this and to drive momentum. The Government are therefore cutting stamp duty land tax by temporarily increasing the nil rate band for residential property from £125,000 to £500,000, with effect until 31 March next year in England and Northern Ireland. It will cut bills for every person who buys a property for more than £125,000 and will support and create jobs. The average buyer, getting on or moving up the housing ladder, will save £4,500, with a maximum saving of £15,000. These measures have all been carefully designed to protect and sustain our economy, the public finances and the health and well-being of the British public while we weather the impact of coronavirus.
Of course, there is still some way to go to overcome this pandemic. As we do so, the Bill will make its own valuable contribution to the efforts of our health and emergency services across the country. The Bill exempts from vehicle excise duty those vehicles purpose-built to transport NHS products. It introduces legislation to ensure that workers who have returned to public sector jobs to help fight the effects of this pandemic will face no adverse pensions consequences from doing so. It legislates reforms to the pensions tapered annual allowance, so that doctors can spend more time treating patients without facing exceedingly high tax bills.
However, our collective efforts in the here and now cannot come at the expense of planning for tomorrow. In the words of the Prime Minister,
“our long national hibernation is beginning to come to an end”.—[Official Report, Commons, 23/6/20; col. 1170.]
Alongside the measures we have already taken in our plan for jobs to support employment across the country, now is the time to set about reinvigorating the economy and safeguarding our public finances.
Our police, teachers, armed services and many other public sector workers have all played their part in this pandemic, alongside the tremendous efforts of front-line NHS staff. These public sector workers cannot be provided for if the public finances are not protected with a fair and sustainable tax system. Maintaining the corporation tax rate at 19% instead of pursuing further cuts is the right approach—this is still the lowest headline rate in the G20, which demonstrates the UK’s strength as a location for inward investment.
This Government have always been clear that everybody must pay their fair share of tax. We have therefore introduced the digital services tax, legislated for in the Bill. This tax, set at a rate of 2% on revenues from digital services of larger companies, will ensure that digital businesses pay a fair share of UK tax and more accurately reflect the significant value that these businesses derive from their UK users.
As we look ahead to recovery, we must ensure that businesses receive the support that they need. That is why, in addition to all the measures the Chancellor set out last week in his plan for jobs, we have also delayed the extension of off-payroll working reforms to the private sector to April 2021. Businesses need time to prepare for these reforms and requiring them to do so during the pandemic would have been burdensome.
This Bill goes even further to support enterprise in this country, which will be desperately needed in the coming months. This Government remain committed, as ever, to levelling up all nations and regions of the United Kingdom. Britain has a long and proud history of innovation. Increasing the research and development expenditure rate to 13% will allow this to continue for businesses across the country. The structures and buildings allowance rate increase will aid investment in new shops, factories and agricultural buildings, helping to stimulate capital investment across the UK.
We must also acknowledge that Covid-19 is not the only challenge that we face. This Government have committed to reducing the United Kingdom’s carbon emissions to net zero by 2050. The Bill will take us further towards that target. Not only does it pave the way for the upcoming plastic packaging tax but it removes the vehicle excise duty expensive car supplement for zero-emissions vehicles and legislates for a carbon pricing regime now that the UK has left the European Union. Together, these measures will help ensure that the UK’s post-Covid-19 economy is greener than before.
During this Bill’s passage, our daily lives and our economic outlook have changed dramatically. However, alongside the Chancellor’s ambitious package of measures, including most recently the plan for jobs, this Bill represents a strong foundation on which to rebuild our economy and protect the public finances as we weather the impact of the virus. The Bill supports businesses, it supports the vulnerable and it supports our fantastic key workers. For these reasons, I commend it to the House.
Lord Agnew of Oulton
My Lords, this has been an excellent debate, and I thank noble Lords for their expert and insightful contributions. I shall use what time remains available to address some of the issues raised by your Lordships in the debate. First, I shall briefly review some of the Bill’s achievements, for, despite the unprecedented events of the past few months, it is still significant.
The introduction of the digital services tax places the UK in the vanguard of global digital tax policy development—I will build on that later in response to individual queries—even as we continue to drive forward an international effort to secure a long-term multilateral solution. Our reform of IR35 off-payroll working rules represent a significant step towards ensuring the fair and equal treatment of individuals working in the same way across the labour market.
We are delivering on the Government’s manifesto promises to increase the rates of relief for businesses investing in R&D from 12% to 13%, and, as provided by the structures and buildings allowance, from 2% to 3% per annum. This underlines our commitment to incentivise businesses to invest in research and capital assets that will drive our future prosperity as we level up across all four nations of our union. It is worth reminding noble Lords of the colossal sums committed in this budget that have been forgotten and washed away with the crisis. We have committed to increase the capital budget from £71 billion in 2019-20 to £113 billion per year up to 2024-25. That is a 40% cumulative increase.
Over the next five years, the public sector will invest more than £640 billion for our future prosperity. The OBR has said that the large planned increase in public investment should boost potential output, and indeed, when we look at the crisis we are facing, there are two ways to get through it: to increase tax or to reduce services to the public. I do not agree with that because I believe that there is another way. We can improve the productivity of this country and make the delivery of services by the Government a lot more efficient, so I want to be a little more optimistic.
I turn now to the various points raised by noble Lords and will try to address some of their queries. The noble Lord, Lord Livermore, asked about a more sector-specific approach. The view of the Government is that it would be challenging to target the comprehensive job retention scheme in a fair and deliverable way if it was sectorised. It may not be the case that this is the most effective or sensible way to provide longer-term support, but in A Plan for Jobs 2020 the Chancellor announced measures to support firms in particular sectors, including the hospitality and tourism sectors. It is the case that some firms will be affected by the coronavirus outbreak for longer than others. The Government will seek to support these firms appropriately by engaging with businesses and representative groups with the aim of ensuring that the support provided is the right kind and relevant to them.
A number of noble Lords, including the noble Baroness, Lady Wheatcroft, and the noble Lord, Lord Livermore, asked about the dead weight of the job retention bonus. This bonus will provide an additional incentive to firms to keep their employees as demand recovers. Several noble Lords talked about the horror of mass unemployment, and we want to try to instil confidence in employers so that they bring their staff back. The Chancellor has given compelling reasons to justify the introduction of the job retention bonus, which falls outside the confines of the Managing Public Money guidance. The chief executive of HMRC has asked for a direction, but it is important to remind noble Lords that that has happened on a number of the schemes announced over the past few months, many of which have been supported both here and in the other place. For example, the discretionary grants top-up required a letter of direction, as indeed did the loan schemes. This is not an unusual mechanism. We are all working at pace and trying to be proactive in the face of the enormous challenges that exist.
Noble Lords asked about support for the self-employed and the noble Baroness, Lady Bowles, said that we should do more. On 29 May, the Chancellor announced an extension of the Self-employment Income Support Scheme and eligible individuals may now qualify for a second and final grant when applications open in August. This means that the UK continues to have one of the most generous self-employment Covid support schemes in the world as the economy reopens. Around 95% of those with more than half their income from self-employment may be eligible for the scheme. By 12 July, some 2.7 million individuals had claimed grants worth £7.8 billion in total. As the Government begin to reopen the economy, it is right that state support is tapered off and the focus shifts to getting people back to work.
A number of noble Lords, including the noble Lords, Lord Livermore, Lord Wood, Lord Bruce and Lord Empey, commented on the stamp duty land tax. I should like to speak briefly about the value of this tax and the measure announced last week. SDLT continues to be an important source of government revenue, raising several billion pounds a year to help pay for services. Any permanent changes would have a significant impact on the Exchequer. The Government believe that this is the time to encourage and bring forward transactions in the property market. This measure is there to increase confidence. First-time buyers will save up to £10,000 in addition to the £5,000 that they have already saved from the holiday. The Government are committed to helping to support first-time buyers on to the property ladder. They will still pay no SDLT on purchases worth up to £300,000 once the holiday ceases, and although second home and buy-to-let property buyers will benefit from the tax change, they will continue to pay the 3% top-up of the standard SDLT rates. It is worth reminding noble Lords that it is this Government who have reduced some of the tax incentives for buy-to-let borrowers over the past few years.
The noble Baroness, Lady Bakewell, and the noble Lord, Lord Shipley, asked about the market’s concentration in the hands of 10 developers. After the 2008 crisis, the number of SME housebuilders was reduced. We have extended the short-term home building fund with an additional £450 million boost to provide support for smaller builders and developers and help them access finance for new housing developments. This additional funding will help to provide finance to firms experiencing cash-flow issues, and we anticipate that it will support the delivery of over 7,000 new homes.
Taking a broader view of the Government’s efforts to date, the noble Lord, Lord Macpherson, my noble friend Lord Lamont, the noble Baroness, Lady Falkner, and the noble Lord, Lord Young, all spoke about longer-term financial sustainability. The immediate focus of the Government’s economic and fiscal strategy is ensuring that it continues to support workers and businesses as the country recovers from the Covid crisis. I cannot speculate on the contents of future Budgets but we will set out further plans at the next Budget as the economic and fiscal outlook becomes clearer.
Noble Lords—and the noble Lord, Lord Greaves, in particular—asked about support for local authorities. The Government have provided over £3.7 billion in new grant funding to councils to help them respond to the pressures. We have provided a further £600 million to support social care and £300 million to support track and trace. On 2 July, the Government announced a major scheme to help reimburse councils for their loss of income during the pandemic.
A number of noble Lords, including my noble friends Lady Verma and Lord Cormack, raised the issue of reskilling. We are creating a new skills fund worth £2.5 billion to transform people’s lives and give businesses the workers they need. We will invest £1.5 billion in dramatically improving the entire further education college estate. We recognise that it has been something of a Cinderella, and we are addressing that. We have committed to 20 new institutes of technology, where we will connect students learning about the world of science to the real world of business and industry.
We have also committed to a dramatic increase in the number of careers coaches in jobcentres, with an additional 14,000 careers coaches between now and the end of March next year. We are unashamed in taking an idea used by the previous Labour Government during the 2008 crisis. We hope that we can learn from that experience how it might work better.
A number of noble Lords, including the noble Lord, Lord Bruce, my noble friend Lord Blencathra and the noble Lords, Lord Haskel and Lord Snape, all stressed the need for a digital services tax. We would all have preferred an international response to the rise of these new juggernauts over the last 10 years. However, we have now put in place the framework to ensure that they start to contribute to our tax base.
Going slightly off piste, I ask my noble friend Lord Blencathra to forward any ideas he has on curtailing the anti-social behaviour that occurs on some sites. My own idea, which I would like to push further, is to have the platforms designated as publishers. As such, they would not be allowed to air all the dreadful things that appear on some sites. I apologise for digressing. The Government’s preference is for a strong global solution, and we have been at the forefront of this. One noble Lord mentioned retaliation from the United States. We have been very clear in our discussions with the US that this is not aimed at a particular country; it is a solution for any large platform.
The rates system is a matter of concern for noble Lords. We have committed to a fundamental review of business rates, and we published its terms of reference in the Spring Budget. As they set out, we invite expressions of interest from everyone who is interested in coming up with solutions. As noble Lords will know, people are much keener to see the abolition of taxes than the creation of new ones, but it is an important part of our tax base and we need to come up with a sensible alternative. The DST is intended as a temporary measure until the international world catches up. I hope that we can have a system that will operate in a uniform way across the developed world.
We have published an online harms White Paper where we set out the Government’s plans for a world-leading package of online safety. We are designing our proposals, and the next step will be to publish a full response to the White Paper consultation later in the year followed by legislation.
The noble Lord, Lord Snape, referred to the US digital services tax. As I have mentioned, we are engaging and trying to show to them that this is not a matter of discrimination.
Noble Lords, including the noble Lord, Lord Bruce, asked about the loan charge. Those affected by the loan charge are already able to defer submitting their self-assessment return for 2018-19 until September this year without having to pay any late filing charges or penalties. Changing the date would impact customers who legitimately made provision to help pay in the 2018-19 year. HMRC will keep the situation under review over the coming months and take a proportionate and reasonable approach to anyone who is unable to do this.
The noble Lord, Lord Goddard, suggested that the loan charge was retrospective. It is not retrospective; it is a new charge on disguised remuneration loan balances outstanding as at April 2019. It is worth reminding noble Lords that this scheme was simply too good to be true. People were offered their remuneration on the basis that they would never have to pay tax. In the recent High Court case Zeeman and Murphy, the judge explained that the loan charge only altered the timing of the payments received and held that it was
“well within the generous margin of appreciation for Parliament to decide that it would tackle the matter in the way that it did, and impose a present … liability in respect of money whose use, tax-free, had been enjoyed by the recipient over a number of years.”
A number of noble Lords expressed concern about the changes to insolvency and making HMRC a preferred creditor. The measure is not expected to have a significant impact on financial institutions. The reforms are forecast to raise approximately £220 million a year. That money will be spread thinly and recouped from both unsecured creditors and holders of floating charges. Bank lending to small and medium-sized businesses in 2019 alone was £57 billion, which is of a massively different order of magnitude. A financial institution holding fixed charges over assets will remain above HMRC in the creditor hierarchy and will be unaffected by this reform. The Government recognise that floating-charge creditors will recoup less than under the current law as a result of the way in which such tax debts are treated. However, we believe that the measure is right. It takes a fair and proportionate approach and applies only to taxes that have been paid by employees and customers in good faith and are held on their behalf by a business before being passed on to HMRC.
Another point of contention for some noble Lords is the IR35—the noble Baroness, Lady Bowles, and other noble Lords referred to it. It is true that falling within the off-payroll working rules does not change an individual’s status in respect of employment rights, as there are separate legal frameworks for determining employment status for tax and for rights, with no direct link between the two. Again, I urge noble Lords to consider common sense. There are some very simple principles of self-employment status; for example, if you are able to send a replacement for yourself to the person or firm employing you, if you are being directed regularly by that company, and if the tools of trade that you are using are not owned by the company contracting or employing you, they are marks of self-employment. Those who wish to challenge their employment status rights can take their case to the employment tribunal. The Government are making good progress on implementing the recommendations of the Taylor review and we continue to work across government on these issues.
On green policy, noble Lords have reiterated the fact that climate change issues are a massive priority for the Government, but it is worth reminding the House that we have been a leader on climate change and have reduced our emissions faster than any other G7 country since 1990. In the spring Budget, we reinforced our strong track record in this area, announcing at least £800 million for carbon capture and storage, more than £1 billion for further support for ultra low emission vehicles and a commitment at least to double funding for energy innovation. Many of the actions will take time to deliver on climate targets, but they will also help the UK’s economy recover from the impacts of Covid. Between 1990 and 2017, the UK reduced its emissions by 42% while growing the economy by more than two-thirds.
I am running out of time, but I want to pick up on one or two other comments made by noble Lords. On the future of manufacturing, for example, the noble Lord, Lord Empey, and several other noble Lords raised concerns that we have pivoted too far away from manufacturing over the last 30 years. What this crisis has shown us, and all countries in the developed world, is that we must have tighter and more accountable supply lines. I think we will see a renaissance in manufacturing.
I have some uplifting examples of that from my own experience during the last few months. For example, I have run a small initiative to build non-medical masks in this country. One of the British companies making the masks is in the south-west called Expert Technology, which previously made car parts. It has swivelled its whole operation to build these machines. Very movingly, when I spoke to the chief executive a couple of weeks ago, he had brought 70 of his staff back from furlough to build these machines. It shows the ingenuity that lies in the bedrock of our manufacturing industry that he could move so quickly to make such a dramatic change.
Another one that I was involved with was the manufacture of CPAPs; these are a kind of oxygen support mechanism, not an intrusive ventilator. UCL teamed up on this with Mercedes, which took its Formula 1 staff from making high-performance engines and built 10,000 of these units in less than a month. It shows what we can do, and this crisis will showcase and give us the potential for doing more.
The noble Lord, Lord Oates, asked about hydrogen. I completely agree that this is a crucial development. It will take the production of offshore wind energy so that we can capture it and the hydrogen can then be used for other forms of energy creation. We announced in the Budget £121 million to support a range of projects to explore and develop the potential of low-carbon hydrogen; I am sure that more will follow.
The noble Baroness, Lady Falkner, asked about using the German reunification tax as a model for a short-term tax, but she may not know that the tax, introduced in 1991, is still there in various forms. This is the problem with these taxes; as one noble Lord mentioned, income tax was brought in to help fund the Napoleonic War, which is now some 200 years ago.
My noble friend Lord Shrewsbury asked whether he could meet officials to talk about a company in his area called SD Technology. I will be very happy to organise that.
A number of noble Lords were anxious that we are still leaving the EU in the midst of this crisis. We need to draw a line under this very divisive debate that has scarred our whole body politic, certainly for 10 years. I stood as a Referendum Party candidate in 1997, which is 23 years ago. I would like to try to get through the important message that we want to negotiate in good faith with our EU partners. We want to have a collaborative and successful relationship with them, going forward. We do not expect to be treated like a third-class citizen. When we suggested that we should be treated in the same way as they had Canada, we were told that we could not even have a Canada deal. They need to come to the table in a constructive way.
I want to pick up what the noble Baroness, Lady Andrews, said on housing. She mentioned what we call office-to-resi. I declare an interest as I have done some of these. I actually live in one, and they are not slums. There are crooks, vagabonds and bad people in any situation and walk of life, and I am sure that there have been some poorly built office-to-resi units. But tens of thousands of good-quality properties have been built; as I say, I live in one myself.
I want to raise an important point on pushing economic activity forward. I apologise to the Deputy Speaker; I will finish after this point. There are two important things. We are bringing forward an omnibus Bill in the autumn, which will have a number of levers to accelerate economic reconstruction in this country. That will include things such as looking very carefully at planning regulations. I declare an interest as having built properties over many years. The regulations are beyond parody. I have a potting shed in my garden; it took me 12 years to get planning permission and then I was told that I could not go into it before 9 am. That is the madness of the system, so I hope very much that we will attack this once and for all.
We are bringing forward a Green Paper on procurement. It will be out in the next couple of weeks in a preliminary consultative form. It will not be a formal consultation, though I am pushing it very hard as it falls in my own specific area of responsibility. This might sound dry as dust but we spend £290 billion a year on public procurement in this country, and this is a fantastic opportunity post Brexit and the OJEU rules to recast it and make sure that we can point it to parts of this country where we can generate activity. Included in there will be the first time that we have used something called social value, so we will be able to assess a contract beyond just the pounds and pence of a bid.
I have sought to address noble Lords’ questions to the best of my ability. I will of course review the record of the debate, which has been of high quality; indeed, as is so regularly the case, many of the expert interventions illustrate the significant value of the ongoing scrutiny by this House. If in my closing remarks I have missed a point of substance, I will follow up in the usual way and write to those before me. I commend the Bill to the House.