Finance Bill

Committee stage
Wednesday 30th November 2022 Commons Chamber

Considered in Committee

[Dame Rosie Winterton in the Chair]

Clause 1

Increase in rate of tax

13:44

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

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Amendment 4, in clause 2, page 3, line 3, at end insert—

“(3) The Chancellor of the Exchequer must lay before the House of Commons reports setting out—

(a) an assessment of the revenue that is generated by the energy (oil and gas) profits levy in the period to which the report relates,

(b) an assessment of the revenue that would have been generated in the period to which the report relates if the investment allowance had not been in effect, and

(c) the names of companies that have made use of the investment allowance and the revenue that would have been generated by them during the period to which the report relates if the investment allowance had not been in effect.

(4) The first report under subsection (3) shall be laid as soon as practicable after the 1 January 2023, in respect of the period 26 May 2022 to 1 January 2023.

(5) Subsequent reports under this section shall be laid every three months thereafter, and in respect of the period since the last report.”

This amendment would require the Government to produce an assessment of how much revenue would be generated by the Energy Profits Levy if the relief for investment expenditure had not been in effect, and to produce a quarterly report assessing how much revenue has been forgone because of the investment expenditure relief.

Clause 2 stand part.

Amendment 3, in clause 3, page 3, line 14, at end insert—

“(3) The Chancellor of the Exchequer must, within six months of this section coming into force, lay before the House of Commons an assessment of the revenue that would have been generated if, in section 1 of the Energy (Oil and Gas) Profits Levy Act 2022 (charge to tax), in subsection (3) (which sets out the accounting periods by reference to which the tax is charged), in paragraph (a), for ‘26 May 2022’, there had been substituted ‘6 October 2021’.”

This amendment would require the Government to produce an assessment of how much revenue would be generated by the Energy Profits Levy if it had been introduced on 6th October 2021.

Clauses 3 and 4 stand part.

Amendment 2, in clause 5, page 4, line 6, at end insert—

“(5) HMRC must contact every individual affected by the provisions of this section to inform them whether, as a result of the provisions of this section—

(a) they have become liable to pay the basic rate of income tax (when they were not previously so liable);

(b) they have become liable to pay the higher rate of income tax (when they were not previously so liable); and

(c) how much additional income tax they will pay as a result of the change.”

This amendment would require HMRC to contact every individual who become liable to pay standard tax or move from standard to higher rate, and how much additional tax they will have to pay as a result.

Clauses 5 to 9 stand part.

Amendment 5, in clause 10, page 7, line 23, at end insert—

“(8) The Chancellor of the Exchequer must, within six month of this section coming into force, and quarterly thereafter, lay before the House of Commons an assessment of the impact of the changes in this section on—

(a) the Secretary of State’s ability to meet the duty set out in section 1 of the Climate Change Act 2008,

(b) air pollution in the United Kingdom, and

(c) the provision of electric vehicle infrastructure and public transport in the United Kingdom.”

This amendment would require the Chancellor to produce quarterly assessments of the impact of the removal of VED exemption for electrically propelled vehicles on the UK’s climate change duties, air pollution and EV infrastructure and public transport.

Clauses 10 to 12 stand part.

New clause 1—Assessment of the impact of the investment allowance—

“(1) The Chancellor of the Exchequer must, within six months of this Act coming into force, publish an assessment of—

(a) the revenue that the energy (oil and gas) profits levy will yield,

(b) the revenue that the energy (oil and gas) profits levy would yield if the investment allowance did not have effect in respect of investment expenditure, and

(c) the revenue that the energy (oil and gas) profits levy would yield if the investment allowance did not have effect in respect of expenditure on decarbonisation by oil and gas companies.

(2) The assessment must cover the whole period that the levy is in effect and also assess the revenue in each tax year.

(3) The assessment must include an evaluation of the impact of the investment allowance on the United Kingdom’s ability to meet its climate commitments, including—

(a) the target for 2050 set out in section 1 of the Climate Change Act 2008,

(b) applicable carbon budgets made pursuant to section 4 of the Climate Change Act 2008, and

(c) the commitment given by the government of the United Kingdom in the Glasgow Climate Pact to pursue policies to limit global warming to 1.5 degrees Celsius.”

This new clause would require the Government to publish an assessment of the impact of the investment allowance on revenue raised by the Energy (Oil and Gas) Profits Levy, including investment by oil and gas companies in UK oil and gas extraction and upstream decarbonisation. The assessment should also cover the impact of the investment allowance on the UK’s ability to meet its domestic and international climate targets.

New clause 2—Review of revenue from the Energy (Oil and Gas) Profits Levy—

“(1) The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of the revenue estimated to be generated from the Energy (Oil and Gas) Profit Levy in each of the financial years 2021-22 to 2027-28.

(2) In addition to an evaluation of the revenue forecast to be raised by the Levy, the assessment must include an evaluation showing the estimated revenue that would have been raised if each of the following had been the case—

(a) the qualifying accounting period specified in section 1(3) of the Energy (Oil and Gas) Profits Levy Act 2022 had begun on 3 January 2022,

(b) the rate of the levy had been increased to 38% under this Act, and

(c) the amount of additional investment expenditure had been reduced to 0% by this Act.”

This new clause would require the Chancellor of the Exchequer to publish an assessment of estimated revenue from the energy (oil and gas) profit levy in financial years 2021-22 to 2027-28, and set out how these figures would be affected if levy were backdated to 3 January 2022, and if the rate of levy was increased to 38%, and the amount of additional investment expenditure reduced to 0%, by this Act.

New clause 3—Research and Development tax relief policy—

“(1) The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of research and development tax relief for small or medium-sized enterprises.

(2) The assessment must include the Chancellor’s assessment of the effectiveness of R&D tax reliefs and plans he has to further reform of R&D tax reliefs.”

This new clause would require the Government to publish an assessment of their view on the effectiveness of R&D tax reliefs for small and medium-sized enterprises and their intentions for any further reform.

New clause 4—Research and Development tax relief fraud and waste—

“(1) The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of research and development tax relief for small or medium-sized enterprises.

(2) This assessment must include the following, in respect of each tax year since 2018–19—

(a) an evaluation of the amount of money that has been incorrectly deducted as a qualifying cost, or incorrectly paid as a tax credit, as a result of—

(i) fraud, and

(ii) error,

(b) set out, in relation to sums incorrectly deducted as a qualifying cost, or incorrectly paid as a tax credit—

(i) how many investigations have taken place,

(ii) how many prosecutions have been brought,

(iii) how many prosecutions have resulted in a conviction, and

(iv) how much money has been reclaimed.”

This new clause would require the Government to publish a statement on error and fraud in the SME R&D tax reliefs, including details of what actions they have taken in response.

New clause 5—Assessment of the impact of changes to the basic rate limit and personal allowance for tax years 2026-27 and 2027-28—

“The Chancellor of the Exchequer must, within three months of this Act coming into force, publish an assessment of the expected impact on an average earner of the provisions of section 5 (Basic rate limit and personal allowance for tax years 2026–27 and 2027–28).”

This new clause will require the Chancellor of the Exchequer to publish an assessment of the impact on average earners of the decision to freeze the basic rate limit and personal allowances for tax years 2026/27 and 2027/28.

New clause 6—Impact assessment of measures in the Act—

“(1) The Chancellor of the Exchequer must, within three months of this Act coming into force, publish an assessment of the impact of the provisions of this Act.

(2) This assessment must consider the effects of the provisions of the Act on—

(a) different regions and nations of the United Kingdom,

(b) people with different protected characteristics under the Equality Act 2010, and

(c) people with a range of different incomes.”

This new clause will require the Chancellor of the Exchequer to publish an assessment of the impact of the measures in this Act on people in different parts of the United Kingdom, and on groups of people with different protected characteristics and incomes.

New clause 7—Assessment of the impact of measures in the Act on growth—

“(1) The Chancellor of the Exchequer must, within three months of this Act coming into force, publish an assessment of the impact of provisions of this Act on economic growth.

(2) This assessment must consider the forecast impact of measures in this Act on growth of—

(a) the UK economy as whole,

(b) the economy of different regions and nations on the UK, and

(c) average incomes in the UK.”

This new clause will require the Chancellor of the Exchequer to publish an assessment of the impact of measures in this Act on growth in the UK economy, as well as its impact on growth in different regions and nations of the UK, and its impact on growth of average incomes.

New clause 9—Assessment of investment relief on compliance with the climate change target for 2050—

“The Chancellor of the Exchequer must, within six months of this section coming into force, and quarterly thereafter, lay before the House of Commons an assessment of the impact of the effect of the relief for investment expenditure provided in sections 1 and 2 of the Energy (Oil and Gas) Profits Levy Act 2022 on—

(a) the Secretary of State’s ability to meet the duty set out in section 1 of the Climate Change Act 2008, and

(b) the additional quantity of carbon dioxide that will be generated in the United Kingdom.”

This new clause would require the Chancellor to produce an assessment of the impact of the relief for investment expenditure in relation to the Energy Profits Levy on the Secretary of State’s ability to meet the target of ensuring that the net UK carbon account for the year 2050 is at least 100% lower than the 1990 baseline. And produce a report each quarter detailing how much additional CO2 has been produced because of the investment expenditure relief.

New clause 10—Review of effect on small businesses—

“(1) The Chancellor of the Exchequer must lay before Parliament within six months of the passing of this Act a review of the impact of the measures contained in this Act on small businesses.

(2) The review must consider in particular the impact of those measures on the ability of small businesses to—

(a) meet their energy bills,

(b) minimise their debt,

(c) pay their rent,

(d) remain solvent, and

(e) employ staff.

(3) The review must include an assessment of the number of small businesses which will become liable to register for VAT as a result of the measures contained in this Act.

(4) In this section, ‘small businesses’ means any business which has average headcount of staff of less than 50 in the tax year 2022-23.”

This new clause would require the Government to produce an impact assessment of the effect of the Act on small businesses.

[The Financial Secretary to the Treasury (Victoria Atkins)]

It is a pleasure to represent the Government in this important Committee. At the autumn statement, my right hon. Friend the Chancellor set out the significant economic challenges that we face and our plan to ensure that we have economic stability, encourage growth and protect our public services. Securing fiscal sustainability in a responsible and balanced way inevitably requires some difficult decisions. We do not shy away from that, but we have sought to ensure that the heaviest burden falls on those with the broadest shoulders.

The Bill’s first three clauses relate to the energy profits levy. Clause 1 increases the rate of the levy and addresses consequential technical matters. It will ensure that oil and gas companies benefiting from extraordinary profits due to exceptionally high prices will continue to pay their fair share of tax. As hon. Members will know, the Government introduced the levy in May this year as a temporary surcharge on the extraordinary profits being made on the oil and gas sector, driven by global circumstances.

[Sir Robert Syms (Poole) (Con)]

Will the Minister define “extraordinary”—not necessarily now, but during the debate?

[Victoria Atkins]

I will happily do so. My hon. Friend will know the definition of “extraordinary” in relation to the electricity generators levy. We will come to the profits levy in due course.

The Government are raising the rate of the levy from 25% to 35% from 1 January next year, bringing the headline tax rate for the sector to 75%. That is because commodity prices—particularly gas—are expected to remain above their long-term average for the foreseeable future. However, the Government want the oil and gas sector to reinvest its profits to support the economy, jobs and the UK’s energy security, which is why the levy has an investment allowance that means that businesses overall get a 91p tax saving for every pound that they invest, providing them with an additional, immediate incentive to invest.

Clause 2 makes changes to the rate of the investment allowance within the levy to ensure that the total tax relief remains broadly the same following the increase in rate to 35%. Specifically, the clause reduces the rate of the investment allowance from 80% to 29%, effective, again, from 1 January next year. That will maintain the overall cumulative value of investment reliefs, which means that a company investing £100 will be able to claim £91.40 back in tax relief. To be clear, the investment allowance will remain at 80% for investment expenditure on upstream decarbonisation, so that we continue to support the transition to low-carbon electricity production. That will be legislated for in the spring Finance Bill, following further detailed technical work and consultation with interested parties.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Minister will know that oil and gas companies are raking in obscene levels of profit. Why does she think it is reasonable to give incentives—through taxpayers’ money—to companies that are already raking in huge profits at a time when a cost of living crisis is driving so many families into real hardship?

[Victoria Atkins]

Certainly. I hope the hon. Lady will agree that we all want to see more decarbonisation, which is precisely why we have set the net zero landmark achievement for 2050, as she knows. In relation to energy security, we have to be realistic about where we are. Much as some campaigners would like it, we cannot stop using oil tomorrow. We have to find reasonable and methodical ways of decarbonising, which is precisely what the investment allowances aim to do, while encouraging different businesses, and indeed those businesses, to invest in carbon-free and low-carbon forms of energy production.

Clause 3 will extend the levy so that it ends on 31 March 2028 rather than in 2025. Although the levy remains a temporary measure, the change simply reflects the fact that global factors are now expected to keep commodity prices, particularly gas prices, elevated for longer than was first anticipated. At the same time, the Government recognise that certainty is key for oil and gas investments. There will therefore no longer be an early phase-out of the levy ahead of the new March 2028 end date, according to prices.

Together, the changes introduced in clauses 1 to 3 will raise approximately £20 billion over the next six years. The total revenue now expected from the levy is just over £40 billion over the same period.

Clause 4 relates to rates of research and development tax credits. The changes it makes will ensure that taxpayers’ money is spent as effectively as possible. Despite the UK spending the most in the OECD on R&D tax reliefs, the current system does not provide good enough value for taxpayers. The cash value of the scheme that looks after small and medium-sized enterprises is currently three times that of the research and development expenditure credit. The corporation rate change due from April next year will make the issue worse by incentivising less R&D per £1 of taxpayer support. Sadly, the SME scheme’s generosity has also made it a target for fraud.

The clause will therefore rebalance the generosity between RDEC and the SME scheme, specifically by increasing the RDEC rate from 13% to 20%, decreasing the SME enhanced deduction from 130% to 86%, and decreasing the SME credit rate from 14.5% to 10%. The changes that the clause will introduce are also a step towards a possible simplified single RDEC-like scheme for all.

Despite raising revenue, this reform is forecast to leave the level of R&D investment in the economy unchanged. More broadly, the Government have recommitted to increasing R&D spending to £20 billion by 2024-25. Ahead of the spring Budget, we will work with industry to understand whether further support is necessary for R&D-intensive SMEs. I know that is the point that most concerns several colleagues; I suspect that we will hear more about it in due course.

Clauses 5 and 6 relate to income tax thresholds. As the autumn statement sets out, the path to fiscal sustainability requires us to ask everyone to contribute a little more towards our public finances, but we are doing so in a fair way: those with more are being asked to contribute more.

Clause 5 will set the personal allowance at £12,570 and the basic rate limit at £37,700 for 2026-27 and 2027-28. Those thresholds, which have already been fixed at the current levels until April 2026, will be maintained for a further two years until April 2028. I hope hon. Members will note that the personal allowance is still the most generous tax-free personal allowance of any G7 country. Thanks to previous significant real-terms increases, it will still be more than £2,000 higher by April 2028 than if it had been uprated by inflation since 2010, with an estimated 1.6 million more people taken out of paying tax. Approximately 30% of people do not pay tax as a result of the personal allowance. I hope Government Members are proud that we have achieved that.

This Government also enacted the largest ever increase to a personal tax starting threshold in July this year by raising the national insurance starting threshold to £12,570, ensuring that some of the lowest earners do not pay any tax. That means that in 2028 someone on the average salary of £28,000 will still pay almost £900 less in tax than if tax thresholds had gone up with inflation since 2010. The income tax higher rate threshold is still high enough to protect the vast majority of people from paying the higher rate of income tax; approximately 80% of taxpayers pay tax at the basic rate.

Clause 6 will deal with those at the higher end of the income scale, to ensure that our return to sustainable public finances happens in a fair way. It will lower the additional rate threshold from £150,000 to £125,140 from April next year, meaning that income above that level will be taxed at 45%. Only the top 2% of taxpayers will be affected by this measure, which is expected to raise £800 million per year by 2024-25, with the vast majority of revenue—more than 80%—coming from those who earn more than £150,000.

[Sir Robert Syms]

My hon. Friend is no doubt aware that, because some higher rate taxpayers lose their personal allowance, the marginal rate between about £100,000 and £120,000 can be as high as 60%. Has any thought been given to whether we should smooth that out, particularly if we are lowering the rate when you hit 45p? I think it would make for a better tax system. The artificial level needs to be dealt with, perhaps by ensuring that the withdrawal of the personal allowance happens over a wider income band.

[Victoria Atkins]

A great deal of thought went into the matter at the Treasury ahead of the autumn statement. The reason for our approach is that there are significant difficulties with the alternatives. I do not think that anyone would want a cliff edge at £100,000 where someone who earned £1 over that amount would suddenly lose the entirety of their personal allowance. We have tried in the past to taper it, although I appreciate that that has led to the situation that my hon. Friend describes. We have brought the 45p rate down to £125,000 precisely because that is the end of the taper rate for the personal allowance. We have tried to make things a little simpler; I will happily admit that the tax system is very complicated, but we have tried to simplify that part of it. I do accept my hon. Friend’s point about the marginal tax relief rate, which we genuinely continue to consider because we want to be fair to those who, through hard work, contribute as much to the tax system as they do.

On clause 6, I was saying that the vast majority of revenue—more than 80%—will come from those who earn more than £150,000. We say that the UK remains an attractive place to work and do business. The threshold is still comparable to those of other countries with a similar top marginal rate of tax, but in the circumstances we are in, it is fair that those who earn more contribute more.

Clauses 7 to 9 deal with other allowances. Clause 7 will reduce the tax-free allowance for dividend income from £2,000 to £1,000 in April 2023, and to £500 from April 2024. That will raise more than £3 billion by April 2028 and will make the tax system fairer by bringing the treatment of investment income closer in line with that of earned income. Keeping the dividend allowance at £500 will still ensure that people are not taxed on low levels of dividend income, because the combination of the personal allowance and the dividend allowance will mean that approximately 25% of people with taxable dividend income will continue to pay no dividend tax, even once the measure has come into effect. People will still be able to receive tax-free dividend income from investments made through their individual savings accounts, in which taxpayers can invest £20,000 each year.

Clause 8 makes changes to the capital gains tax annual exempt amount, or AEA. The AEA is the total amount of capital gains that an individual may make free of capital gains tax each year, and is currently set at £12,300. For the tax year 2023-24, the rate will be £6,000 for individuals; it will then be reduced to £3,000 from 2024 onwards. The clause also abolishes the annual uprating of the AEA in line with the consumer prices index, and fixes the capital gains tax reporting proceeds limit at £50,000. Reforming the system to reduce the value of the capital gains tax-free allowance supports strong public finances, and makes the system fairer by bringing the treatment of capital gains closer into line with that of income while still ensuring that individuals are not taxed on low levels of capital gains.

14:00

[Geraint Davies (Swansea West) (Lab/Co-op)]

May I ask a simple question? Why has capital gains tax not been brought completely into line with income tax? I know that it is converging, but are there any plans for it to converge further, for equity’s sake—in terms of working and investment?

[Victoria Atkins]

We acknowledge that there may be people who receive very small amounts of capital gains—through historic investments in shares, for example—but for some there is also an element of risk taking, perhaps when they are starting their own businesses. We want to reflect that, but we are mindful of the need for a closer relationship between the two systems, which is why we have tried to achieve a fair balance between those who earn their incomes through paid employment or self-employment and those who obtain theirs through dividends and capital gains.

Clause 9 maintains the current levels of inheritance tax thresholds for two years longer than previously planned, until 2028. Despite these changes, qualifying estates will still be able to pass on up to half a million pounds tax free, and the estates of surviving spouses and civil partners will still be able to pass on up to £1 million tax free. More than 93% of estates will continue to have no tax inheritance liability in each of the next five years; only 6% are expected to have a liability in 2022-23, and it will still only be 6.6% in 2027-28.

Let me now turn to the clauses relating to the taxation of electric vehicles. The transition to EVs continues apace, with new electric car registrations increasing by 76% between 2020 and 2021. Given the OBR’s forecast that 50% of all new vehicles will be electric by 2025, it is right that we seek to bring those vehicles into the motoring tax system.

[Matt Rodda (Reading East) (Lab)]

Can the Minister update the Committee on what research is being carried out by her colleagues in Government on the future impact of this measure? There has been a healthy take-up of electric vehicles so far, but she has not mentioned the future.

[Victoria Atkins]

I shall come to that in a moment, but we have been committed since 2020 to supporting the transition to electric vehicles; in fact, we have committed ourselves to £2.5 billion of support. We are giving the industry certainty about the scale of its ambitions through the zero-emission vehicle mandate. We will continue to incentivise low-emission vehicles through the company car tax, to which I am about to refer. We already publish data on air pollution, electric charging infrastructure and vehicle registrations by fuel type. That information will be available for the House to scrutinise—and, indeed, available to anyone who is interested—over the coming years.

Clause 10 will equalise the vehicle excise duty treatment of electric, petrol and diesel vehicles from April 2025, applying to both new and existing electric vehicles. The VED system will continue to support the transition to electric vehicles through favourable first-year VED rates for the lowest-emission vehicles, and owners of new zero-emission cars registered on or after 1 April 2025 will be liable to the lowest first-year VED rate, which is currently £10 a year. From the second year of registration onwards they will move to the standard rate, which is currently £165 a year. The expensive car supplement exemption for electric vehicles is also due to end in 2025. Eligible new vehicles, which are currently those with a list price exceeding £40,000, will therefore also be liable for the supplement. Those changes will raise more than £1.5 billion a year by 2028.

However, we continue to provide, and want to provide, appropriate incentives for the transition to electric cars. Clause 11—here I come to the point raised by the hon. Member for Reading East (Matt Rodda)—therefore makes changes to secure long-term certainty on company car tax rates, which have been effective in incentivising the take-up of low and zero-emission vehicles. According to figures from the British Vehicle Rental and Leasing Association, about 60% of electric vehicles on UK roads are company-registered. We have tried to ensure that that continues by increasing the appropriate rates up to 2028, and in a modest fashion. These rates are used for the purpose of calculating the taxable benefit of a company car, and we are setting them out now to provide certainty about the tax incentives available for the transition to electric vehicles. This measure supports the continued take-up of lower-emission vehicles and, therefore, our broader commitments on climate change and air quality.

[Matt Rodda]

I thank the Minister for her extensive description of the current policy, but it still appears that the Government are not yet planning to assess the likely decline in the take-up of electric vehicles as a result of the tax changes. Will she please write to me to clarify the position?

[Victoria Atkins]

I will happily write to the hon. Gentleman, who I know takes a close interest in this issue, but I must challenge the assumption that the measure will lead to a decline in the take-up of electric vehicles. This is an example of the Government’s boosting interest in electric vehicles at quite a delicate stage in their development. I say that as a proud early adopter of an electric vehicle—and even a few years ago, the number of charging points was far lower than it is now.

Of course there is much more to be done over the coming years, but I think the public will begin to gain even more confidence in the range of electric vehicles, especially as companies are able to improve their range and we build an infrastructure of charging points around the United Kingdom. That in itself will help to encourage take-up, along with, of course, the bold commitment to prohibiting the sale of new petrol and diesel cars in 2030. We wanted very much to encourage this in its early days, but we think we have now reached a stage at which the 7 million or so electric vehicles on the road should be contributing their piece towards keeping the road network in the state that we would expect.

[Geraint Davies]

Is the Treasury looking into the possibility of higher taxes on SUVs? These much larger vehicles consume more petrol and diesel, but also take up more parking space and kill more children and other pedestrians. They also stick out in the road and obstruct cyclists. The number of SUVs is increasing enormously. Is there any reason for the fact that the Minister did not look into that higher taxation, perhaps some political reason? It would clearly be a good environmental and economic initiative.

[Victoria Atkins]

We introduced the expensive car supplement some time ago, and a great many of the cars that the hon. Gentleman has described would fall into that category, particularly if they were bought new. Notwithstanding his assertion, there is no ideological reason for this. We are very conscious of the pressures on the majority of road users, and although, as the hon. Gentleman fairly pointed out, the use of SUVs has increased, that certainly does not mean that everyone who buys a third-hand or fourth-hand SUV is among the wealthiest in society. So we have tried to balance the rights and interests of those who are already paying car tax and also of those driving electric vehicles, who we think, after a certain period of time, should be contributing more towards the tax system than they do at the moment.

As I was saying, clause 11 deals with company car tax rates in order to provide businesses with the certainty they need to plan in relation to vehicle provision. Finally, clause 12 simply sets out the short title of the Bill in the usual manner for such legislation. I hope that hon. Members will not have anything to say about that, but I look forward to any comments on clause 12. I have stuck to the Bill itself because I want to listen to those hon. Members who have kindly put down amendments, which will be debated now. I will attempt to answer some of those challenges, questions and points as I wind up the Committee stage of the Bill in due course.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I call the shadow Minister.

[James Murray (Ealing North) (Lab/Co-op)]

Thank you, Madam Deputy Speaker, for this opportunity to consider the details of the Bill and speak to the amendments and new clauses in my name and that of my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare).

As we have heard from the Minister, the first three clauses of the Bill relate to the energy, oil and gas profits levy—or, as everyone in the country apart from Conservative Ministers calls it, the windfall tax. It has been a painful journey to get this windfall tax on the statute book. As I set out on Second Reading, it took five months for the Government to finally support the principle of a windfall tax after my right hon. Friend the Member for Leeds West (Rachel Reeves) first called on them to introduce one in January this year.

The current Prime Minister, who was Chancellor at the time, was dragged kicking and screaming into introducing a windfall tax before the summer, but even then he decided to couple it with a massive tax break for oil and gas giants. We do not believe it is right to let that large untargeted and unnecessary tax break continue. It is a tax break that the current Prime Minister introduced and that has left some oil and gas giants paying no windfall tax at all this year. That is why we have been pressing the Conservatives to remove that loophole.

We have also pressed the Government to strengthen the windfall tax by raising its rate from 25% to 38%, a move that would align the overall rate with the taxation of oil and gas profits in Norway. We have also pressed them to extend its period of impact by backdating it to January 2022, the month when the shadow Chancellor first proposed it, and by extending it to 2027-28. We therefore welcome at least some strengthening of the windfall tax in clause 1, which increases its rate to 35%, and clause 3, which extends the period it affects to the end of 2027-28. These clauses do not go as far as we have proposed. They fall short of our plans to increase the rate of the windfall tax to 38% and to backdate it to January 2022, but they do confirm a frequent and recurring pattern when it comes to the windfall tax: Labour leads with the ideas while the Tories object, only ultimately to be dragged kicking and screaming into a U-turn.

Clause 2 highlights one respect in which the Government are still resisting following our lead. In that clause, they have made changes to the rate at which additional investment expenditure is calculated. As the explanatory notes make clear, this rate has been carefully set to

“maintain the overall cumulative value of relief for investment expenditure”.

Let us be clear what this means. The rate of the windfall tax might be going up, but the Government are making sure that the tax break for oil and gas giants is safe. As we see time and again, even when the Government are forced to legislate on a windfall tax, they cannot bring themselves to do it properly.

It is for this reason that we have tabled new clause 2, which would require the Chancellor to publish an assessment of the revenue that is estimated to be generated by the windfall tax and show how much more it would raise if it were backdated to January 2022, if it were increased to 38% and if the additional investment expenditure were reduced to zero—a move that would remove at least some of the oil and gas giants’ tax break. We urge hon. and right hon. Members from all parts of the Committee to support this new clause and help us to push the Government for a stronger and more effective windfall tax that no longer includes such a huge giveaway to the oil and gas giants.

Clause 4 of the Bill concerns tax relief for expenditure on research and development. As we have heard from the Minister, the clause reduces the additional deduction for R&D costs incurred by small and medium-sized enterprises and reduces the rate at which qualifying losses can be surrendered by such companies. At the same time, it increases the rate of R&D expenditure credit, which is mainly claimed by large companies. On this side of the House, we recognise the need to support R&D as a crucial part of driving growth in our economy. It is critical for the Government to have in place a system of R&D tax relief that is effective, that provides as much certainty as possible for businesses to make the investments that our economy so badly needs, and that provides crucial support to key growth sectors in the UK.

14:15

However, we also firmly recognise the need for public money to be spent wisely. We know that this Government have overseen a surge in fraud and error, so we have tabled new clause 4, which would require the Government to make clear the extent of fraud and waste in relation to R&D tax reliefs for SMEs, alongside details of what action they have taken in response. In the autumn statement, the changes that are being legislated for in this Bill that relate to R&D tax reliefs were described as being a step towards a new, simplified scheme. We believe there is an urgent need for a new scheme that tackles fraud and supports R&D, so we have tabled new clause 3, which would explicitly require the Government to publish details of the Chancellor’s plans for reform. We know that firms in key growth sectors such as life sciences are anxious to know what the Government are planning, and they deserve a straight answer as soon as possible, given the uncertainty that the changes in the Bill create. We urge hon. Members across the House to support new clause 3 today to help to make this happen.

I will address clause 5 in a moment, as we will be seeking a vote on that part of the Bill. First, I will make a few remarks relating to some of the remaining parts of the Bill. We will not be opposing the other clauses in the Bill, but I would like to raise questions that arise in relation to some of them about what the Government’s wider plans might be. For instance, in clause 6, the additional rate threshold is lowered. We support a fairer tax system that sees those with the broadest shoulders paying their fair share. I would be grateful if the Minister could confirm that, as a result of clause 6, the Government expect the additional rate threshold to rise if and when the personal allowance begins to rise again. Our understanding of the proposed legislation is that it would reduce the extra tax paid by top earners as a result of future decisions to increase the personal allowance, even if such a decision was intended to help lower earners. Can the Minister confirm whether that is the case? Likewise, in relation to clause 10, which removes the VED exemption for electric vehicles, we urge the Government to set out more clearly where this decision sits within a wider strategy to increase the take-up of electric vehicles.

I turn now to clause 5, on which we will be seeking a vote. We know that clause 5 represents the latest stealth tax on working people from this Government. Freezes to the income tax personal allowance that this Government have implemented will leave an average earner paying over £500 more in income tax a year by 2027-28. That is what it looks like when working people are being made to pay the price for the Conservatives’ economic failure over the past 12 years and their economic chaos of the past 12 weeks.

It is all the more galling for people to be asked to pay more when the Conservatives are so slapdash with public money. Earlier this week, new figures showed that the current Prime Minister lost £6.7 billion to covid fraud as a consequence of ignoring warnings about the lack of basic checks. Extraordinary sums of public money are now in the hands of fraudsters, organised criminals and drug gangs. It is more galling still for working people to be asked to pay more tax when the Government are refusing to make the fairer choices on taxation that are staring them in the face. The truth is that as a result of this Bill, working people will be hit by stealth tax rises while UK residents with non-dom status will not be asked to pay a penny more on the income they earn overseas. We believe that non-dom status is a fundamental unfairness in the tax system. It leaves the public purse missing out on £3.2 billion a year. We believe that if you make Britain your home, you should pay your taxes here.

On Second Reading, I asked Ministers to confirm, at the end of the debate or in writing, whether the Prime Minister had been consulted on the option of abolishing non-dom status. I asked them to confirm whether abolishing non-dom status was ever considered as an option for this Bill. I asked whether, when the current Prime Minister was Chancellor, he ever recused himself from discussions on this matter. I thought I saw the Exchequer Secretary to the Treasury acknowledge my request. However, when the Financial Secretary, who is here today, closed the debate, she neither answered my questions nor promised to write to me. I am sure that was an inadvertent oversight, so I ask her to correct it today, either by answering my questions directly or by agreeing to write to me with answers following today’s debate.

We know the Finance Bill derives from an autumn statement with no plan for growth. We know it makes unfair choices and raises stealth taxes on working people while failing to end the tax break that benefits oil and gas giants and doing nothing to stop those who benefit from non-dom status dodging millions of pounds in tax.

As I set out, hon. and right hon. Members on both sides of the Committee have the opportunity to vote against clause 5 on the personal allowance freeze, to vote for our new clause on the windfall tax and to vote to support businesses that want to grow by supporting our new clause on R&D.

I hope Members will join the Opposition in supporting fairer choices on the tax system in our country and in pressing the Government on the urgent need for growth in our economy.

[Sir Robert Syms]

I rise, as I did on the autumn statement resolutions, broadly to support what the Government are trying to do. I am pleased that the Minister is in listening mode, which is good because not everything is perfect in these debates. Even if things are not quite right in the autumn statement, there will be further Budgets in the years ahead. I am sure she will have a very successful career and will be in the Treasury for a while, and I therefore hope she will take our comments on board.

Clearly, at a time when money is short and the demands of struggling people are high, it is more difficult to redesign the tax system in an ideal way. I raised in my second intervention the difficulty in which those earning between £100,000 and £120,000 find themselves, and I hope their marginal rate of 60% will be reviewed at a future date.

I have some sympathy with the comments about research and development. The Treasury has a habit of introducing incentives and then worrying about losing too much tax. Actually, research and development should be a priority for this Government. A business investing in new technology wants to know what will happen three, five or seven years ahead. Sudden changes to the research and development rate may undermine the funding model of new businesses. I am sure there will not be a change this year, but I hope we will review this area very carefully, because it was one of our better measures in previous Budgets.

My main remarks are about the windfall tax. I do not like windfall taxes, but the way in which the Government have designed this windfall tax is good because of the investment allowance, which is the subject of a number of amendments. The objective has to be to keep companies investing. We are blessed as a nation, as we have oil all the way around our coastline. The only question is, at what oil and gas price is it worth recovering?

What has happened in the North sea in my lifetime is a tremendous British success story. Getting oil and gas from the great depths of the North sea made us, at one point, self-sufficient. We still have a lot of oilfields that we can develop, but eking out further discoveries needs incentives. I am a bit worried about the windfall tax, but I understand the current political need to have one. I am pleased with the investment allowance, because it will encourage companies to invest, and that investment should help us to produce more oil and gas and should help the British economy.

Something else that has occurred in my lifetime is that Aberdeen and many other areas of the United Kingdom that are near oilfields have created thousands of jobs. Those people may no longer be working in our oilfields, but they are working in oilfields abroad. This is an area that we need to develop.

My concern about extending the windfall tax to 2028—I raised the word “extraordinary” in my first intervention—is that there will come a point at which prices fall, perhaps because there is peace in Ukraine or because other forms of energy come on tap. If we maintain the windfall tax, we will then do great damage to the oil and gas industry. We need a way of assessing what the Government do and do not consider to be extraordinary.

Some years ago, the Wood review of the North sea looked at what could be done to extend the life of the North sea fields. It would be helpful if the Government reported on where they stand on the oil price and the windfall tax. It might be better if they employed an expert, independent of both the Government and the oil and gas industry, to look at what is being done to assess whether investment is being hurt and whether the rates are appropriate. We assume a rate of 35% all the way up to 2028; we are not assuming a reduction, even if oil prices reduce.

I see the autumn statement as a little like a business plan that we might show to our bank manager. It does not mean that everything will necessarily happen as set out until 2028. If we expect the industry to invest, it is important that it knows what will happen to the tax rate if oil and gas prices change. North sea oilfields and gas fields are five, 10, 15 or 20 years’ worth of investment, so they are long-term, not short-term, investments. We need to focus on the short-term need to raise money, which even the oil and gas industry probably understands. The investment allowance is good, and it will encourage short-term investment, but there will be long-term damage if we are not flexible enough either to reduce the rates or to abolish the windfall tax when we get back to more normal gas prices.

[Caroline Lucas]

I am grateful to the hon. Gentleman for giving way, because my anger is becoming so extreme that I might burst at any moment. Does he recognise that this country has the world’s most generous tax regime for oil and gas companies? Does he recollect that BP’s CEO said the company is raking in more money than it knows what to do with? He compared his company to a cash machine.

Does the hon. Gentleman not think his constituents in Poole might be rather more impressed if some of the money that has been forgone by the Treasury instead went into making sure we have enough teachers in our schools and enough health workers in our hospitals?

[Sir Robert Syms]

I am glad the hon. Lady is irritated by my comments, because I think I am right. We want a very successful oil and gas industry. My constituency is on top of the Wytch Farm oilfield, which has been going for 40 years. Most of my constituents do not know they are on top of an oilfield, so they keep writing to me about oil and gas. The reality is that we will need oil and gas over the next 30 or 40 years. Apart from power, many products derive from oil and gas.

Oil and gas is a very successful industry for the United Kingdom. The hon. Lady and I probably disagree on most things, but we need to ensure that we keep the industry growing, which will create lots of jobs. This very successful industry creates a lot of wealth, which does not undermine the fact that many oil companies are now investing heavily in renewables. The North sea investments of Shell and many other major companies are consistent with decarbonisation. What we can do in producing more North sea oil and gas and in decarbonising a lot of that production is very exciting.

That is my main concern for the Minister. This has been a difficult year for the Government, partly because of worldwide factors. I look around the world and see shipping costs falling and inflation starting to tail off. I hope there will be peace in Ukraine, and I hope the Ukrainians win, which may well improve the economic situation over the next two years. The Treasury needs to be flexible in how it looks at the situation. When I listen to Opposition Members, I feel they have a very inflexible view of the oil and gas industry that I think would do us great damage. I am glad the Government are in listening mode, and I hope they listen further to the comments of Back Benchers.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I should have reminded colleagues that when we are in Committee I am to be referred to as “Chair” or “Dame Rosie”.

I call the SNP spokesperson.

[Richard Thomson (Gordon) (SNP)]

Thank you, Dame Rosie, for calling me at this point. We are discussing this Finance Bill still against a backdrop of problems with our energy security, the climate crisis and the cost of living crisis. Sadly, despite the rapid turnover in personnel in recent weeks and months at No. 10 and No. 11 Downing Street, there are still no signs in this Bill that the Government have any inclination to go about getting to grips with those three crises and challenges of our age.

14:30

The theme of the autumn statement, in as much as it had one, was fiscal consolidation, through a combination of fiscal drag and—where there were not direct spending cuts—spending increases in cash terms only, which failed to keep pace with inflation and therefore represented cuts in real terms. In discussing the autumn statement resolutions on Monday 21 November, I pointed out that there were a few measures the Chancellor could have taken if he genuinely wished to place the burden of an increased tax take on the shoulders of those best able to carry it.

One such possible measure we drew attention to was how non-domiciled UK residents could be taxed. In that regard, we particularly welcomed seeing new clause 8, on non-doms, on the amendment paper. According to the London School of Economics, the UK’s non-doms receive at least £10.9 billion-worth in offshore income and capital gains each year, which they are not required to report to His Majesty’s Revenue and Customs or to pay tax on in the UK. Instead, those who enjoy that status can pay an annual charge of either £30,000, if they have been here for at least seven of the previous nine tax years, or £60,000, if they have been here for a least 12 of the previous 14 tax years. Those are inconsequential sums, given what would, in most cases, have had to have been paid if those earnings had been subject to UK rates of taxation.

The non-dom status is anomalous. The rules originate from Britain’s colonial history, and those with that status are entitled to claim a special tax treatment not available to ordinary taxpayers on this “remittance basis”. That means that even though they might spend most of their time in the UK, and might even have lived here for several years, unlike other UK residents they can avoid paying tax on their investments by locating them offshore.

A joint study by the University of Warwick and the London School of Economics showed that on average a non-dom using the remittance basis tax break has about £420,000 in unreported income and capital gains, which is more than 10 times their UK investment income and gains, which do not receive a tax break. That highlights the scale of what is being missed out on. The LSE estimates that if this loophole had been closed, £3.2 billion would have been raised for the public purse. It is inexplicable that this status is still allowed to exist, so we firmly believe that the Treasury should be looking at carrying out its own analysis of the matter, in line with new clause 8, and that future policy decisions should be informed by that.

I turn to new clause 2 and windfall taxes. We very much believe such taxes have their place, although we have concerns about the disjointed manner in which they seem to be being applied across the energy sector and about the fact that the Government seem to have given no consideration to applying a similar tax on other industries, outside the energy sector, that are also experiencing significant increases in profits as a result of current market conditions.

With a windfall tax we need to make sure that the revenues being taken are proportionate and are not harming investment, particularly in renewables, where we will find our energy security and where we can make a significant impact on the reduction in emissions that we all know we need. Amendments 2 to 4 and new clauses 2 and 1 would not necessarily lead to the gathering of all the information we would like, but they would contribute considerably to the evidence base needed to properly assess the policy of the windfall tax and how effective it has been. On that basis, those provisions meet with our approval.

New clause 7 calls for the Chancellor to publish an assessment of the provisions of this Bill on economic growth, on the UK economy as a whole, on individual nations and regions, and on average incomes. If the last two Conservate Administrations had any kind of thought base on which they were trying to establish their credentials, it was growth, whether that was in terms of levelling up or the ill-fated “dash for growth” that saw the rest of us who were not supporters of the previous Prime Minister risibly being tarred as being somehow part of an “anti-growth coalition”.

SNP Members might be sceptical in many ways about some of the intentions behind these initiatives and their efficacy, but as a broad point of principle, taking steps to share prosperity and wealth more fairly and to encourage a more even and sustainable pattern of growth are objectives to be welcomed. It seems unclear, to me at least, where this current Administration stand on these matters, because if anything, given some of their choices, it looks as though the UK Government seem much more intent on the tired old strategy of squeezing every last drop of growth they can possibly get out of London and the south-east in preference to encouraging other local economies to grow and develop to their fullest possible extent. New clause 7 and the information it would bring would enhance the evidence base on that.

Finally, one thing I hope we can all agree on is that a key driver of an effective growth strategy is the effective use of R&D incentives. The UK as a whole has lagged behind its major competitors, such as France and Germany, in the proportion of GDP invested in R&D. In achieving growth, an increase in well-targeted R&D is important, but it is important to recognise that you do not fatten the pig the day before market. This is a long-term objective that needs to be followed if we are to start getting the benefits that R&D should be able to bring in innovation, new jobs, the driving of exports and all the other virtuous cycles we would expect.

Even in a picture of a UK lagging behind major industrial competitors, the story within the UK is shockingly imbalanced. Again, it is almost as though there were a vortex effect sucking R&D into London and the south-east. Scotland punches above its weight in many respects, but there are other regions of England to consider, and Wales achieves only about half the R&D that we would expect it to get on the basis of its population share. So in a UK that is already underperforming in R&D, there are significant imbalances, which are again distorting the regional and national growth picture. So it is perfectly reasonable that we should understand which businesses are benefiting from R&D credits, what areas these businesses are in and where they are geographically located. New clauses 3 and 4 would help to build that evidence base, which can help us to judge whether the Government are achieving their intentions on R&D.

I will draw my remarks to a close simply by observing that this is a poor Bill that fails to meet the trials of the present. It does not set us on the course we should be trying to set ourselves on to meet the challenges of the future.

[Anthony Browne (South Cambridgeshire) (Con)]

I feel that I should first explain why I have a teddy bear on the Bench beside me, because various people have been making eyes at me. The bear is the prize for my Christmas card competition. As I am en route between the gift shop and having a photograph taken with the Prime Minister, I thought that I would sit him there.

As I said on Second Reading, I very much welcome the whole thrust of this Bill, which is needed to balance the books. I will not repeat what I said then, but I have a few comments on some of the amendments. First, amendment 2 to clause 5, tabled by the hon. Member for Richmond Park (Sarah Olney), is about trying to publish the number of taxpayers who get caught in higher rate bands as a result of this Bill. I very much welcome tax transparency, and I very much welcome His Majesty’s Revenue and Customs telling people how much tax they will pay. There are many measures that we could take to promote tax transparency, but I can say with a high degree of confidence that, if this amendment were to pass, HMRC would not need to write to one single member of the public, because it is fundamentally based on a complete misunderstanding of how fiscal drag works.

The Bill keeps the personal allowance and the higher rate thresholds as they are, so somebody earning, say, £12,000 a year will not pay the base standard rate of income tax now and they will not pay it next year. The way that fiscal drag works is that people get pay rises, which push them into a higher rate band than if they had not got that pay rise, but that is not as a result of a change in the Bill. The wording of the amendment says that

“they have become liable to pay the basic rate of income tax (when they were not previously so liable)”.

It is mathematically impossible to have someone not liable at the moment who will then become liable as a result of the Bill.

[Sarah Olney (Richmond Park) (LD)]

I just want to clarify that what we are talking about in this amendment is where people are getting pay rises, and even though most people are not getting inflation-rate pay rises, they are nevertheless getting higher cash rises than they normally would have done because of the rate of inflation. For some people that will mean that they will paying income tax for the first time if their rise takes them above the personal allowance threshold, or, indeed, if it takes them above the higher rate threshold. That is what the amendment is designed to address—the fact that there will now be some people paying 40% tax on their increased salary, which, if the thresholds had risen in line with inflation, they would not have done. I am pleased to have had the opportunity to clarify that.

[Anthony Browne]

I am well aware of how fiscal drag works. I have been studying it, reporting on it and commenting on it for about 20 years. My point was that, as the amendment is worded, the person would have become liable to pay the base rate of income tax when they were not previously so liable. If they are not liable now, they will not become liable as a result of this Bill. The hon. Lady could have changed the wording of the amendment—she would need to go to lawyers to work out the wording—but, as it stands, literally no one falls into that category. The one category in which people could end up in higher tax bands as a result of the Bill is not actually mentioned, which is the lowering of the threshold for the additional rate of tax from £150,000 a year to £125,000 a year. So for example, if a person was earning £130,000 a year, they would not be liable for the additional rate of income tax—the 45p rate—now, but they will be as a result of the Bill. However, the hon. Lady’s amendment does not mention that; it mentions the standard rate and the lower rate, for which the thresholds are kept stable.

New clause 8 has not been selected, but the hon. Members for Ealing North (James Murray) and for Gordon (Richard Thomson) both talked about non-doms. I just point out that there is a lot about non-doms that I would tidy up. It is clearly not a perfect system, and I do not think that anybody would defend it. None the less, it was there throughout the time of the last Labour Government. They did many reviews on it—I remember those reviews—and they sort of tinkered with it a little bit, but fundamentally left it the same. They agreed with the arguments currently put out by the Government that it is an overall net gain for the UK economy and for the UK taxpayer.

[Peter Grant (Glenrothes) (SNP)]

I am wondering whether the teddy should be moved on to the Front Bench. It could become one of the most effective Members of the present Cabinet.

The hon. Gentleman mentioned his belief in tax transparency, which is clearly something that we would all welcome. In his autumn statement, the Chancellor made a great deal of the fact that it would mean that somebody working full time on a minimum wage would get a pay rise of about £1,900. He did not mention that the Treasury would then take back almost £500 of that because of the increased tax they would have to pay. Does he believe that it would have been more transparent for the Chancellor to admit how much additional tax somebody on a minimum wage would be paying as a result of there being no increase in the tax bands in this Finance Bill?

14:45

[Anthony Browne]

When the current Prime Minister, then Chancellor, initially froze the tax thresholds in the Budget earlier this year, he was very transparent; he said upfront that the Government were freezing the thresholds. He wanted to make sure that no one could accuse him of introducing a stealth tax rise. Previously when thresholds were frozen, Chancellors tended not to mention it during the Budget speech. They just let it pass through and it really was a stealth tax rise.

I want to make one general comment about the different amendments. They all call on the Government to publish documents and reviews of one form or another. I know that amendments are not allowed to commit the Government to new expenditure, or to change their tax take, but there are, literally, no new policies here whatever. As far as I am aware, the Opposition agree with basically all the measures in the Bill, which makes it quite difficult to suggest amendments that change any of them or to make a speech about changing them. However, fundamentally, I have a problem with legislation that urges Government to publish documents and tries to tell Ministers what to do in their jobs, because that is not the role of legislation normally. There is one easy way to get the Government to do what the Opposition want, which is to win an election; that is a little suggestion for them. If they want to get the Government to publish documents, become the Government. I do not particularly want them to, but that is the easier way to do it than trying to pass amendments.

New clause 3, which the hon. Member for Ealing North mentioned, calls for a review of the effectiveness of the research and development tax credits. I have a lot of sympathy with the broad thrust of that. I talked about that on Second Reading. Clearly, it is a big issue for my constituency. I have many life science companies that depend heavily on that tax credit. Their whole cash flow depends on it. They do research for 10 or 15 years before they earn any revenue—before they have any chance of getting money in through the door. They are funded by investors and part of their funding model is getting that tax credit. It has been alarming for them to see it being cut off in April.

Clearly, the Government are, rightly, worried about fraud in tax credits. There is a lot of fraud in that area, and a whole industry effectively encourages it, so the Government are right to tackle it. I know that the Government are committed to promoting research and development and championing the life sciences. The Minister has been generous with her time and we talked about it this morning. What the chief executives and leaders of all these life science companies want is reassurance from the Government that they are really committed to making sure that research and development in small and medium-sized enterprises is not adversely affected by this measure. I also urge her to meet the industry urgently to get to the bottom of this and to work out a regime to help them.

[Victoria Atkins]

I thank my hon. Friend for the constructive and eloquent way in which he has represented the interests of his constituents and those critical businesses in his constituency. I genuinely take this matter very seriously. In addition to a wider roundtable meeting that I am having next week with a broader range of sectors that may be affected by this, I wonder whether it would meet with his approval if we could have a meeting before Christmas specifically with the life sciences industry to try to ensure that we continue to see the thriving industry he has described, while also bringing about these much-needed changes to the R&D tax reliefs.

[Anthony Browne]

I thank the Minister for that positive and constructive response. I would be absolutely delighted, and I know that the industry would be delighted, to sit down with her urgently in the next few weeks to go through the different options.

My last comment on the R&D tax credits is on evaluation. Various people have mentioned in this debate and on Second Reading the effectiveness of those and whether they lead to more research and development. Clearly, we do not want to give good taxpayers’ money to businesses if they do not end up doing what we want them to do, which is doing more research and development. New clause 3 asks for evaluations. There are various published evaluations by His Majesty’s Revenue and Customs and other bodies already about this, but I would just caution against reading too much into the headlines, because the evaluations I have read combined the whole spectrum of businesses that claim research and development tax credits, including the fraudsters, the chancers and the people who are just doing stuff they would do anyway and trying to get a tax credit for it, and all the knowledge-intensive companies in life sciences and other sectors that are doing the valuable research we want to encourage.

I would caution the Government to base any policy on an evaluation of how the tax credit is spent on the businesses that they want to encourage, as opposed to the fraudsters and the chancers that they do not. Any change to the regime needs to try to separate and distinguish between those two branches. As a result of the constructive approach taken by the Government, who I know want to sort this out, I do not think new clause 3 is necessary and therefore I will not be supporting it. I do support the Finance Bill, however, and commend it to the Committee.

[Helen Morgan (North Shropshire) (LD)]

Thank you for your flexibility in allowing me to speak this afternoon, Dame Rosie.

I rise to speak to amendment 2, tabled in my name and that of my hon. Friend the Member for Richmond Park (Sarah Olney), and to amendments 3, 4 and 5, tabled in her name. This Bill is an unfair stealth raid on millions of hard-working low and middle-income earners during a terrible cost of living crisis. Thanks to the Conservatives’ threshold freezes, 6 million people will be dragged into a higher tax band by the end of 2028. Those stealth tax rates are not particularly obvious in someone’s monthly payslip, but that does not mean they are not going to hurt people struggling with the cost of living.

Basic rate taxpayers will pay an additional £340 this year due to the freeze of the personal allowance, and higher rate taxpayers are estimated to pay an extra £1,700. Amendment 2 would require HMRC to write to all those affected by those income tax threshold freezes, to tell them whether they are paying more tax than they normally would and, crucially, whether they have been dragged into a higher tax band. It is vital that the British public have clarity on the Conservative increases to their tax liabilities from April and for that reason I wish to push amendment 2 to a vote.

The Conservatives promised not to raise taxes, as written in their own 2019 manifesto:

“This is a tax guarantee that will protect the incomes of hard-working families across the next Parliament.”

Three Prime Ministers and five Chancellors later, the Conservative Government have delivered an autumn statement with £24 billion in tax rises, all to fill a black hole—or indeed a blue hole—that they have created through their own incompetence. The Prime Minister and his Government are now breaking the Conservative manifesto pledge and the Prime Minister has no mandate for that. The Conservatives could at least make the British public aware that their promise to the country has changed by accepting amendment 2.

In 2019, the Conservatives promised voters a high-wage, high-skilled, low-tax economy. At a time when real-terms wages continue to fall, the tax burden has reached its highest level since the second world war and we have a chronic skills shortage, I would appreciate some clarity from the Prime Minister on the delivery of his party’s manifesto commitments.

I will also speak briefly to amendments 3 and 4. The Liberal Democrats were the first party to call for a windfall tax back in October 2021, when gas prices first began to soar. Through their delay in taking action, the Government allowed fossil fuel giants to get away with half a year’s-worth of untaxed super-profits. Amendment 3 would require the Government to produce an assessment of how much revenue has been lost through their delay. I am pleased that the Government are finally raising the rate of the windfall tax, but I am afraid it does not go far enough. If Shell paid nothing when the rate was 25%, it will still pay nothing when the rate is 35%.

Amendment 4 would require the Government to produce a quarterly assessment of how much revenue has been forgone through the investment allowance and publish the names of the companies that have benefited from the tax break. The lost revenue could have gone to supporting struggling households or protecting our public services, and the British people deserve to know how the money has been spent. I am also concerned about the environmental impact of the investment allowance. The Government state that they are committed to net zero, but at the same time the allowance promotes oil and gas exploration, while refusing renewable generators an equivalent tax relief.

Lastly, I draw attention to amendment 5. At a time when petrol and diesel prices are sky high, the Government should not be making it more expensive to own an electric vehicle. They have already scrapped the plug-in car grant and now they are extending vehicle excise duty to electric cars, which will only slow the road to electrification. I urge hon. Members to support these amendments to improve this Bill and to be honest about the impact it will have on British people.

[Christian Wakeford (Bury South) (Lab)]

It is a pleasure to serve under your chairship, Dame Rosie. I rise to support new clause 2, new clause 5 and amendment 1, which would remove clause 5, as set out by my hon. Friend the Member for Ealing North (James Murray) on the Front Bench.

During the autumn statement, we heard a lot about blaming global issues. While there are global issues, there are also political choices that have got us to where we are right now. We have had the best part of a year of political instability. We have also had the run on gilts caused by the mini-Budget and an increase in mortgage rates. That was not a global issue—it was very much created here in Parliament.

We were promised an autumn statement based on fairness. People are really struggling. Fran has bravely taken on and beaten breast cancer twice. She is now unfortunately terminally ill with bone cancer that has spread to her brain. Instead of making special memories with loved ones, she is spending her final moments worrying about money. She is unable to heat her home, surviving on her husband’s part-time wages, universal credit and her disability payments.

While there was some help with benefits increasing in line with inflation, we had been calling for that commitment for months in order to remove that worry and anxiety. Unfortunately, it took until the autumn statement for the Government to come out and reassure the public who were struggling. Leighane, a 27-year-old mother, was due in court over her unpaid bills. She owed £334 in electricity and £638 on the gas bill, and her rent arrears were £1,500. Sadly, because she thought she had no support and nowhere to turn, she stepped in front of a train with her three-year-old daughter. There was no support for anyone like her in the autumn statement.

John was described as a well-liked man, who was homeless and struggled with drugs—I reiterate my commitment in this place that no one chooses to be an addict and we need to do more to tackle addiction. There was nothing to tackle addiction and no talk about how we are going to fund that through the NHS at any point during this Finance Bill or in the autumn statement. Last week, he made a final bed for his trusted dog and died outside in freezing temperatures.

I will get on to the particular amendments now, Dame Rosie. We have heard about fairness, but the question is, fairness for who? We have a lot of measures about keeping the triple lock and increasing benefits with inflation. I welcome those—I really do—it is just a shame it has taken Opposition day debates, numerous questions on the Floor of this House and numerous written questions to get to that stage.

In new clause 5, we want to make sure that there are particular impact assessments and that the documents are provided. When we think that the autumn statement ultimately included £60 billion of spending cuts or tax rises, not to be able to share any of those documents just seems like ridiculously poor management. The mind boggles that we are not considering any of those elements.

There are also amendments on the Order Paper regarding the increase in tax allowances. Is it fair that the wealth of the top 1% of earners has gone up 185%? No. What are we doing to help low earners? We are freezing tax allowances. I listened quite earnestly to the hon. Member for South Cambridgeshire (Anthony Browne); I know him very well and I know his background in the field, so I will probably have a chat with him over a cup of coffee in the Tea Room about what we can do. However, the people of this country have been clobbered with £25 billion-worth of tax rises.

We have heard slogans before—I know a few things about those—saying “We are all in this together”, but are we really? We have seen no attack on non-dom tax status and no tax on private equity managers. We see a recession that will go on for longer than a year, and all the Government could talk about was softening the blow. Well, I am sorry, but I want to aspire to better than that for this nation. I want us to talk about growth, but I have seen nothing—on Second Reading, in any of the amendments or in the Minister’s speech—that goes in any way towards addressing growth.

We keep hearing a lot of talk and rhetoric about investment. I agree that we need investment, but that is why we have to focus on one of the loopholes and ensure, as the new clauses would, that a windfall tax actually delivers meaningful impact and that large oil generators and producers cannot just get away with investing money back into their own system. They get 90p of support for every £1 they are taxed, and that does not seem fair. It does not seem fair for the people whom I have just spoken about—the people of Bury South and the people of this country—and that is why the amendments are needed.

At the same time, real household disposable income is likely to be at its lowest level, with an estimated fall of 4.3% next year alone. We hear that the Conservatives are the party of sound money, but I just do not see that at the moment. Only Labour can provide the real growth and change that the country needs. Business believes it and the public believe it, and my God, we need it. That is why we should back new clauses 2, 3 and 5, and the plethora of other new clauses tabled by the Labour Front-Bench team, and I urge all colleagues to do so.

15:00

[Caroline Lucas (Brighton, Pavilion) (Green)]

I rise to speak in support of my new clause 1, on an assessment of the impact of the investment allowance.

When the Chancellor delivered his autumn statement, he did so not just against a backdrop of recession and rising inflation, but in the context of the twin challenges of the climate and energy crises—both of which have fossil fuels at their core—and while millions of households face fuel poverty and unimaginable hardship this winter. The UN Secretary-General memorably warned at COP27 that:

“We are on a highway to climate hell with our foot on the accelerator.”

My new clause would address the continuation of a policy that locks us further into fossil fuels at the expense of the taxpayer and at the cost of exacerbating climate breakdown.

Although I welcome the strengthening of the windfall tax to 35%, bringing the total tax on oil and gas to 75%, which is still notably lower than Norway’s 78%, it is genuinely incomprehensible that the Government have failed to close the gaping loophole that lies at the heart of this windfall tax.

[Peter Grant]

Does the hon. Lady agree that the Government have missed a huge opportunity in limiting the windfall tax to oil and gas companies? They could have introduced a windfall tax on other companies that have, fortuitously, made massive profits as a result of the pandemic.

[Caroline Lucas]

I certainly agree with the hon. Gentleman. If I had to make a suggestion about where the Government should look next, it would be the distribution network operators—the companies that run the grids. There has been no spotlight on them at all even though they are making massive profits right now.

The hole at the heart of the windfall tax has led Shell—the UK’s fourth largest oil and gas producer—to pay no windfall tax or, indeed, any normal oil and gas tax at all. Indeed, oil and gas companies, which have made frankly grotesque profits, will still be able to claim £91.40 in tax relief for every £100 invested in oil and gas infrastructure. What is more, from January 1 a company spending £100 on upstream decarbonisation—which essentially translates as reducing emissions from the process of extracting oil and gas that goes on to be burned—will now be eligible for £109 relief. In other words, the taxpayer is actually paying the oil companies, which are already raking in massive profits—not the other way around.

The Government plan to make real-terms cuts to Departments that have already been starved of funding. They talk about “sacrifices” and “difficult decisions”, as the Chancellor has. Charities warn of a humanitarian crisis, and new research published this weekend shows that almost 200,000 additional young families will be pushed into fuel poverty come April when the energy price guarantee rises to £3,000. In that context, how can the Government possibly justify a situation in which taxpayers are supporting oil and gas companies, whose profits have absolutely ballooned, to fulfil obligations that they can perfectly well afford to pay for themselves.

It is also worth comparing this tax with the one on low-carbon electricity generators, which will be subject to a windfall tax of 45% for revenues above £75 per MWh, yet will not be eligible for investment relief at all. That leads to a ludicrous situation whereby companies will get a bigger tax break for building a wind turbine to power an oil rig than for building one that generates power for the energy grid. I simply cannot see how that is defensible in any shape or form.

The autumn statement should have been the moment where the Chancellor launched a transformation of our economy, powered by abundant renewable energy and with good green jobs. Instead, we had continued support for a costly and slow nuclear white elephant, and for the fossil fuels choking our planet. The so-called investment allowance—it is better termed “obscene subsidy”—is, frankly, a disgrace that fails to tax oil and gas companies properly and comes at huge cost to the public purse. Indeed, it has been estimated that if Rosebank—the UKs largest undeveloped oilfield—is developed, its owners would effectively receive more than £500 million in taxpayer subsidies.

To put that figure into context, it would be enough to extend free school meals to every child whose family receives universal credit, to pay the annual salaries of more than 14,000 nurses, or to build one new medium-sized hospital. Choosing between genuinely improving our society or subsidising a climate-wrecking project—Rosebank, in this case, which would produce more emissions than 28 low-income countries combined—should not be a difficult choice.

Make no mistake, it is a subsidy—including, it would appear, according to the Government’s own definition in the Subsidy Control Act 2022. I am sure the Government will deny that, but perhaps they will be more inclined to take note of the Institute for Fiscal Studies, which has stated that the investment allowance

“means that North Sea investment will be massively subsidised”,

through which loss-making investments could be rendered commercial.

Put simply, my new clause would require the Government to publish an assessment of the impact of the investment allowance on revenue raised by the windfall tax. The Government estimate that the oil and gas sector will pay around £80 billion in tax over the next six years, but it is essential that we have greater transparency on how much revenue will be forgone. That revenue could help to finance a real retrofit revolution to upgrade the UK’s leaky homes so that we get off gas for good.

Of course, I welcome the £6 billion investment in energy efficiency from 2025, but that will be of little comfort to households that are struggling to heat their homes right now. Crucially, my amendment would also require the Government’s assessment to cover the impact of the investment allowance on the UK’s ability to meet its domestic and international climate targets. The Glasgow climate pact, which the UK presided over, includes the commitment to pursue efforts to limit global heating to 1.5°C degrees, but the UN has made it clear that Governments plan to produce more than double the amount of fossil fuels in 2030 than would be consistent with staying below that critical threshold. I am aware that a number of amendments seek that kind of assessment of the investment allowance, and I welcome them, but I believe mine goes further because it would require the assessment to consider the impact on the 1.5° target, in addition to net zero and the UK’s carbon budgets.

It is no longer acceptable for the Government to look at its policies in isolation from our planet’s shared carbon budget. Not only does oil and gas extracted in the UK add to global emissions regardless of where it is burned, but, as the Committee on Climate Change has acknowledged, further extraction

“will support a larger global market overall”—

I remind hon. Members that that global market already has more oil and gas planned than we can possibly burn in keeping below 1.5°, and that is before we start extracting more. I therefore urge the Government not only to accept my new clause but to scrap the investment allowance once and for all, for the sake of our climate and the lives of so many people who are struggling with the cost of living crisis.

[Victoria Atkins]

I thank hon. Members for their thoughtful contributions to today’s Committee of the whole House. I will take a few moments to set out our views on the proposed amendments and the reasons why we will not support them.

I will deal first with amendments 3 and 4 and new clauses 1, 2 and 9, which relate to the energy profits levy clauses in the Bill. Starting with the amendments, my hon. Friend the Member for Poole (Sir Robert Syms) asked how “extraordinary” profits are defined, and we have not had a chance to draw that out in the course of the debate so far. The definition for the energy profits levy applies only to the profits that companies make from producing oil and gas in the UK and on the UK continental shelf. That is why we see reports in the newspaper about certain companies not contributing to the levy this year. I am not allowed to speak about individual taxpayers, but we have had to specifically focus it on UK business because we are raising taxes for the UK Treasury. That is how we are defining it.

My hon. Friend expressed concern, it is fair to say, about what will happen with the levy if prices go down, as we sincerely hope they will. Through this difficult announcement in the autumn statement, we are expanding the time in which the levy will operate until March 2028. We have done that to provide companies with certainty, because the latest OBR autumn statement price expectations for oil and gas across the forecast horizon exceed average predictions when the levy was first introduced. Commodity prices, particularly for gas, are expected to remain above their long-term average for the foreseeable future, but we will continue to keep the levy under review, as we do with all forms of taxation, while it is in place.

Moving on to amendment 3, the Government reject the premise that the levy should have been in place earlier. In the early months of this year, three significant things changed: first, there was a new war driven by Putin in Ukraine, which introduced significant instability to global energy markets; secondly, inflation was considerably higher than was previously expected; and thirdly, the Government had concrete information on the autumn and winter energy price cap. We therefore introduced the levy in response to these fast-moving conditions.

I welcome to her place the hon. Member for North Shropshire (Helen Morgan), whom I have not had the pleasure of seeing across the Chamber, if she can look up from her phone. Just to give a little context to the statistics, before covid the British economy spent £40 billion a year on energy costs. Today, the annual figure is closer to £200 billion. That means the British economy has to pay an additional £160 billion a year on energy. That is like withstanding a pressure equivalent to an entire second NHS. That is why we have had to make many of these very difficult decisions in the autumn statement, but in particular we introduced the energy profits levy and are now increasing it because of this difficult financial situation.

Amendment 4 and new clause 1 would require the Government to report on how much additional revenue would have been generated without the investment allowance. We have always been clear that we want to see significant investment from the sector to help protect our energy security. The North sea will continue to be a foundation of our energy security, so it is right that we continue to encourage investment in oil and gas. The levy will raise substantial revenues following the changes introduced by this Bill—more than £40 billion over the next six years. That takes into account the tax relief available through the investment allowance. Figures on the amount of tax raised through the levy will be published periodically, in line with other taxes, and His Majesty’s Revenue and Customs also publishes data on the costs of reliefs, and that is likely to include the investment allowance once data is available.

Although it is important to note that many companies already publish tax data through voluntary transparency schemes, the Government respect the commercial confidentiality of taxpayers. Companies within scope of the levy will be reporting information on their taxable profits in their tax returns. New clause 1 also refers to the impact of the investment allowance on the UK’s climate commitments, as does new clause 9. Supporting our domestic oil and gas sector to boost energy independence is not incompatible with these commitments, as we will need these fuels for decades to come as we transition to clean energy.

Our domestically produced gas generates lower emissions than imported seaborne liquefied natural gas, so supporting home-grown hydrocarbons helps to reduce emissions overall. When the upstream industry has reduced its overall emissions by 11% since 2018, it would not make sense to remove support towards further progress. The industry has agreed with the Government’s stretching targets towards 2030, and the investment allowance will provide additional relief to support that.

15:15

On new clause 2, tabled by the hon. Member for Ealing North (James Murray), I have already noted that the Government reject the premise that the levy should have been in place earlier. New clauses 3 and 4 concern research and development tax reliefs. With regard to new clause 3, studies published in 2019 and 2020 show that while the R&D expenditure credit incentivises £2.40 to £2.70 for every £1 of taxpayer money, the SME scheme incentivises just 60p to £1.28 for every £1. He asked about wider plans for R&D, and I am happy to tell him that we will continue the review into the R&D tax reliefs and publish a consultation on the new single scheme in due course. These reports are already public, so including new clause 3 would be of limited added value.

New clause 4 concerns error and fraud in the SME R&D tax reliefs. The most recent error and fraud statistics were set out and published in July in the HMRC annual report. We also have an ongoing inquiry into levels of error and fraud in the SME scheme. The analysis has not finished, but when that has finished, we will publish it. Since April, HMRC has written to more than 1,600 claimants who it is believed may have tried to claim money fraudulently. So far, 80% of those claimants have failed to respond within the 30-day response window, while a further 15% required further investigation after they had replied to the letter. That means that HMRC has protected at least £46 million of public money to date, with work ongoing that will see that updated.

In relation to the impact on life sciences in particular, my hon. Friends the Members for South Cambridgeshire (Anthony Browne) and for Poole both set out concerns for this vital industry within the UK economy. I hope that we will be able to resolve those concerns working with the bio industry, the Federation of Small Businesses and other R&D-intensive small businesses ahead of the Budget in the spring.

Moving to personal tax thresholds, in relation to amendment 1, the Government have been clear that clause 5 is a fair measure. The current personal allowance of £12,570 is still significant higher than it would have been if uprated by inflation from 2010. It means that hard-working people keep more of their income each year. My hon. Friend the Member for South Cambridgeshire rather demolished the wording of amendment 2, but I can reassure the House that HMRC already takes forward such information in practice by informing employed people and pensioners of changes to their tax code. Self- employed people will receive assessments informing them of their tax liabilities and HMRC has an existing online service where people can check their income tax estimates and tax codes at any time.

In relation to new clause 5, we already publish assessments of income tax threshold changes. The tax information and impact note on the measure is available on gov.uk, and we have published distributional analysis on the impact on households for the measures announced in the autumn statement.

I move now to electric vehicles and amendment 5. The Government already publish data on air pollution, electric charging infrastructure and vehicle registrations by fuel type. It would therefore not be proportionate for the Treasury to reproduce data published elsewhere. Quite fairly, Opposition and Government Members asked about the uptake of electric vehicles in the future. The independent Office for Budget Responsibility expects uptake to continue to be strong, forecasting that around half of new car registrations will be electric by 2025. The other measures in the Bill are helping to support those 60% of registrations that occur through company car schemes.

New clause 6 deals with the broader impact of the Bill. It would require various reviews on the regional impacts across the UK on people with protected characteristics and different incomes levels. The impact of all legislation on different nations and regions of the UK is carefully considered by the Treasury. I note, again, that it publishes analysis of the impact of the Government’s measures on households at different levels of income in the “Impact on households” report, which has been published separately alongside each Budget. Our most recent analysis, published alongside the autumn statement, has shown that Government decisions made at the fiscal event are progressive. Low-income households will receive the largest benefit in cash terms and as a percentage of income. The Treasury and HMRC publish equality impacts in summary form for tax measures in tax information and impact notes.

We reject the need for new clause 7. The independent Office for Budget Responsibility provides economic and fiscal forecasts and is required to provide an assessment of the impact of Government policy. It has done so in relation to the autumn statement and it will continue to monitor the impact of the measures in future forecasts. Another report is therefore unnecessary.

New clause 10, tabled by the hon. Member for Richmond Park (Sarah Olney), seeks a review of the Bill’s impact on small businesses. Small businesses are shielded from many recent tax changes. For example, the small profits rate for corporation tax means that around 90% of companies will not pay the main rate. The employment allowance is now at its highest level of £5,000 since spring. It means that 40% of businesses will be unaffected by the national insurance changes. Businesses will also benefit from a generous business rates package announced in the statement, which introduced a supporting small business scheme to cap bill increases at £600 per year for businesses losing eligibility for some or all small business rate relief at the 2023 revaluation. [Interruption.] The hon. Member for Richmond Park seems to be laughing at that support for small business. I hope her small businesses in Richmond benefit from the help that central Government are giving them.

To give businesses certainty, VAT registration thresholds will not change for a further period of two years from 2024. The UK’s VAT registration threshold is the second highest in the OECD, at £85,000, keeping the majority of businesses out of VAT altogether. We are setting the annual investment allowance at its highest ever level of £1 million from 1 April. That amounts to full expensing for an estimated 99% of UK businesses. We are also protecting businesses from soaring energy costs via the energy bill relief scheme, providing them with the certainty that they need to plan through this winter. The impact of all policy changes, including on small businesses, are considered and monitored as part of the usual decision-making process. We publish the tax information and impact notes, which include the impact of tax changes on business.

I hope that I have been able to provide some reassurances to hon. Members. I urge the House to reject the proposed amendments, and I commend clauses 1 to 12 to the House.

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 tax years 2026 and 2027-28

Amendment proposed: 2, page 4, line 6, at end insert—

“(5) HMRC must contact every individual affected by the provisions of this section to inform them whether, as a result of the provisions of this section—

(a) they have become liable to pay the basic rate of income tax (when they were not previously so liable);

(b) they have become liable to pay the higher rate of income tax (when they were not previously so liable); and

(c) how much additional income tax they will pay as a result of the change.”—(Helen Morgan.)

This amendment would require HMRC to contact every individual who become liable to pay standard tax or move from standard to higher rate, and how much additional tax they will have to pay as a result.

Question put, That the amendment be made.

15:24

Division 102

Ayes: 55

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Scottish National Party: 39
Liberal Democrat: 8
Independent: 3
Plaid Cymru: 2
Alliance: 1
Green Party: 1
Democratic Unionist Party: 1

Noes: 285

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Conservative: 284
Democratic Unionist Party: 1

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

15:38

Division 103

Ayes: 285

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Conservative: 282

Noes: 210

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Labour: 148
Scottish National Party: 38
Liberal Democrat: 10
Independent: 7
Conservative: 4
Plaid Cymru: 2
Democratic Unionist Party: 2
Social Democratic & Labour Party: 1
Green Party: 1

Clause 5 ordered to stand part of the Bill.

Clauses 6 to 12 ordered to stand part of the Bill.

New Clause 2

Review of revenue from the Energy (Oil and Gas) Profits Levy

“(1) The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of the revenue estimated to be generated from the Energy (Oil and Gas) Profit Levy in each of the financial years 2021-22 to 2027-28.

(2) In addition to an evaluation of the revenue forecast to be raised by the Levy, the assessment must include an evaluation showing the estimated revenue that would have been raised if each of the following had been the case—

(a) the qualifying accounting period specified in section 1(3) of the Energy (Oil and Gas) Profits Levy Act 2022 had begun on 3 January 2022,

(b) the rate of the levy had been increased to 38% under this Act, and

(c) the amount of additional investment expenditure had been reduced to 0% by this Act.”—(James Murray.)

This new clause would require the Chancellor of the Exchequer to publish an assessment of estimated revenue from the energy (oil and gas) profit levy in financial years 2021-22 to 2027-28, and set out how these figures would be affected if levy were backdated to 3 January 2022, and if the rate of levy was increased to 38%, and the amount of additional investment expenditure reduced to 0%, by this Act.

Brought up, and read the First time.

Question put, That the clause be added to the Bill.

15:50

Division 104

Ayes: 212

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Labour: 154
Scottish National Party: 38
Liberal Democrat: 10
Independent: 7
Plaid Cymru: 2
Social Democratic & Labour Party: 1
Green Party: 1

Noes: 292

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Conservative: 286
Democratic Unionist Party: 2

New Clause 3

Research and Development tax relief policy

“(1) The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of research and development tax relief for small or medium-sized enterprises.

(2) The assessment must include the Chancellor’s assessment of the effectiveness of R&D tax reliefs and plans he has to further reform of R&D tax reliefs.”—(James Murray.)

This new clause would require the Government to publish an assessment of their view on the effectiveness of R&D tax reliefs for small and medium-sized enterprises and their intentions for any further reform.

Brought up, and read the First time.

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

16:03

Division 105

Ayes: 212

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Labour: 152
Scottish National Party: 38
Liberal Democrat: 10
Independent: 7
Plaid Cymru: 2
Social Democratic & Labour Party: 1
Alliance: 1
Green Party: 1

Noes: 290

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Conservative: 285
Democratic Unionist Party: 2

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

16:14

[Victoria Atkins]

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

The House has had a great number of opportunities over the last two weeks to debate the autumn statement and the Finance Bill that underpins it. We had extensive and comprehensive questions to the Chancellor when he delivered the autumn statement, and we then had two days of debate on the measures in the statement. We had Second Reading on Monday and Committee of the whole House today. I humbly submit that the House probably does not need to hear any more from me about the Bill.

I will quickly summarise the autumn statement. My right hon. Friend the Chancellor was honest about the difficult decisions this Government will need to take to tackle the cost of living crisis and rebuild our economy. The Finance Bill takes forward important tax measures to help stabilise the public finances, to provide certainty to markets and businesses, and to support growth. We are legislating rapidly on this small number of measures because we are serious about fiscal sustainability, which is essential for stability and growth.

I take a moment to thank colleagues on both sides of the House for their scrutiny of this small but important Bill on Second Reading and in Committee. I also put on record my thanks to the Bill team in the Treasury, to the policy and legal officials across the Treasury, HMRC and the Office of the Parliamentary Counsel and, of course, to my private office—every Minister knows the important role our private offices play in supporting the passage of any Bill.

I commend the Bill to the House.

16:17

[James Murray]

On Second Reading on Monday, the Opposition made it clear that this Bill comes from a Government who have made the wrong choices time and again. In this Bill, the Conservatives have chosen to freeze the income tax personal allowance, which is the latest of the Government’s stealth taxes and will leave an average earner paying more than £500 a year more in income tax. Yet while raising stealth taxes on working people, they have also chosen to leave billions of pounds on the table by maintaining a tax break given to oil and gas giants for doing the things they were going to do anyway.

Furthermore, as we have discussed several times, this is a Bill that leaves non-dom tax status unaffected. The Prime Minister has chosen to preserve a £3.2 billion tax break for UK residents on their overseas income—a tax break that should have no place in the UK tax system in 2022. I ask the Minister, for a third time this week, to answer my various questions on this matter, including whether the Prime Minister was consulted on the option of abolishing non-dom tax status.

On Second Reading, we made it clear that the Government could have taken fairer choices in this Bill. In Committee, we gave hon. Members a chance to vote against the stealth tax rise on working people, but Conservative MPs refused to do so. We gave hon. Members a chance to press the Prime Minister and the Chancellor on ending tax breaks for the oil and gas giants but, again, Conservative MPs refused to do so. We are disappointed that, having had these chances to improve the Bill, we are debating the same unamended Bill we had on Monday.

As well as the unfair choices that this Bill makes, we also know it comes from a Government with no plan to grow our economy or halt the decline in living standards. Over the past 12 years, the UK economy has grown by a third less than the OECD average—a third less than during the Labour years before. We are now the only G7 economy that is still smaller than it was before the pandemic, and over the next two years we are forecast to have the lowest growth of any country in the G20, bar Russia. In the coming two years, living standards are forecast to fall by 7%—the biggest fall on record—taking incomes down to the levels of a decade ago.

The truth is that a plan for growth in the UK has been missing for a decade and its absence is now having a greater impact than ever. That is why we have used the debate on this Finance Bill not only to argue in favour of the fairer choices Labour would take when it comes to taxation, but to set out our plan to escape the doom loop of Conservative economic failure and incompetence.

Under Labour’s plan, we would grow the economy, including by replacing business rates with a fairer system to support high-street businesses; by implementing our modern industrial strategy to work hand in hand with businesses to succeed; by supporting start-ups, so that Britain becomes the best place to start and grow a new business; by fixing the holes in the Brexit deal so our businesses can export more abroad; and by creating good jobs across the country with our green prosperity plan, while making sure people have the skills they need to work in the industries of the future.

Twelve years of the Conservatives has given us chronic economic stagnation. Their reckless incompetence earlier in the autumn crashed the economy, imposed a Tory mortgage premium, put pensions in peril and trashed our reputation around the world. Now, our country faces tax hikes on working people, the biggest drop in living standards on record and no prospect of our growth rate rising from its position at the bottom of the league. We cannot afford another decade like the last, and I urge all hon. Members to join us in voting against this Finance Bill today.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I pause, lest there be any further contribution. I see none, so I will put the Question.

Question put, That the Bill be now read the Third time.

16:22

Division 106

Ayes: 280

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Conservative: 273
Democratic Unionist Party: 3

Noes: 205

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Labour: 145
Scottish National Party: 39
Liberal Democrat: 7
Independent: 6
Plaid Cymru: 2
Social Democratic & Labour Party: 1
Alliance: 1
Green Party: 1
Alba Party: 1

Bill read the Third time and passed.