Finance (No. 2) Bill

2nd reading
Wednesday 29th March 2023 Commons Chamber

Second Reading

14:08

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

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

Before I start the debate, Mr Deputy Speaker, I should declare, to avoid any potential conflict or perception of conflict, that due to a family member’s financial interests, I have recused myself from making ministerial decisions on issues relating to the soft drinks industry levy, which will be dealt with more than amply by my hon. Friend the Exchequer Secretary.

I start the debate by paying tribute to Betty Boothroyd, a groundbreaking Speaker of this House who commanded the Chamber with wit, good humour and gravitas for eight years. She developed a number of subtle and perhaps not so subtle tactics to control a rowdy House, including, I understand, yawning to hint that a speech had outrun the patience of the House. I will try, Mr Deputy Speaker, not to cause you to yawn.

Since the last Finance Bill in the autumn, 10-year gilt rates have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked. The Office for Budget Responsibility now forecasts that we will meet the Prime Minister’s priorities to halve inflation, reduce debt and get the economy growing. We are on the right track.

At the Budget, my right hon. Friend the Chancellor delivered the next part of our plan: a Budget for growth. He was clear that this Government’s focus is not just on encouraging growth as we emerge out of the downturn, but on building long-term, fiscally sustainable and healthy growth with businesses and, importantly, communities.

The Finance (No. 2) Bill delivers on those commitments. It takes forward measures to support enterprise and grow the economy by encouraging business investment and helping to increase the number of people in work. It legislates for announcements made at previous fiscal events, which take advantage of our opportunities outside the EU and reinforce our commitment to financial stability and sound money. It implements the tax measures needed to continue improving and simplifying our tax system, to ensure that it is fit for purpose.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

On fiscal events, the Minister will be aware that there was dismay in the Scotch whisky industry at the decision not to reverse the double-digit duty hike previously announced, while introducing a freeze on duty for what the Chancellor called “warm ale”. How is that consistent with the Government’s previously stated policy of reforming spirit duty to support the Scotch whisky industry?

[Victoria Atkins]

I am grateful to the right hon. Gentleman for raising that issue. I understand his concerns, and I will go into a little more detail later about the reasoning behind the restructuring of alcohol levies. In the last 10 fiscal events before this one, the whisky industry benefited from either freezes or cuts in duties. The Bill will bring into place the new framework announced some time ago, including the health aspect of being able to differentiate the strength of alcohol used in products—something that I suspect the right hon. Gentleman will want to engage with in his speech.

Let me turn to the substance of the Bill, starting with the measures to support enterprise and economic growth. Those of us on the Government Benches know that a strong private sector will grow the economy, spread wealth and prosperity across the country, help to invest in public services and support the most vulnerable in society. We recognise that central to these ambitions is private sector investment, so we are lowering business taxes to incentivise investment and tackle the productivity gap. My right hon. Friend the Prime Minister put that at the heart of his economic strategy as Chancellor, when he introduced the super deduction for corporation tax.

The next step in encouraging business investment is the full expensing policy announced in the spring Budget. The Bill introduces full expensing for the next three years. That means that for every single pound that a company invests in qualifying plant or machinery, its taxes are cut by up to 25p. That will put more than £27 billion back into the economy over the next three years. It is a corporation tax cut worth £9 billion, which the OBR has said will increase investment by 3% for every year that it is in place. It will also make us the only major European country with full expensing, and will give us the joint most generous capital allowance regime of any advanced economy, making the UK capital allowances regime the most competitive in the OECD on a net present value basis, and securing the UK’s position as a global leader.

[Sammy Wilson (East Antrim) (DUP)]

Does the Minister accept that, as a result of corporation tax increases, the amount of money taken out of firms will be more than double the amount of the allowance that she has just spoken of?

[Victoria Atkins]

I encourage the right hon. Gentleman to look carefully at the small profits rate clauses in the Bill. We clearly do not want smaller businesses, such as those on our high streets that we care for so deeply as constituency MPs, to be subject to the regimes for the largest multinational companies. If he looks at those clauses, he will see that we keep the rate at 19% for companies with profits of £50,000 or less. For companies with profits between £50,000 and £250,000, there is a tapered rate of increase. That means that 70% of companies will not see an increase in their corporation tax rate. Only the top 10% of companies will be eligible for the full main rate, but we hope that many will take advantage of the full expensing policy that we have announced.

[Harriett Baldwin (West Worcestershire) (Con)]

Many measures in the Bill will be warmly welcomed by businesses and households in West Worcestershire. However, clause 346 abolishes the Office for Tax Simplification. I do not think that anyone would say that the tax system is simpler than it was when the OTS was established. Could the Minister outline how we on the Treasury Committee can hold her accountable for continuing to simplify our tax system?

[Victoria Atkins]

I thank my hon. Friend the work that she and her Committee have done on the issue of simplification. The Committee had a very productive session with the soon to be former members of the office. What we want to do, which I will expand on a little later, is to put simplification at the heart of policymaking. So I have set my officials three objectives: making tax fairer, simpler and supportive of growth; and, for every single decision that we make, having explanations of how we will meet those three objectives. But we must acknowledge that, sometimes, there is a tension between the wish to make tax fairer and the wish to make tax simpler. The taper rate that I just described is an example of that. I appreciate that, for businesses with profits between £50,000 and £250,000 profits, their accountants will have to work out which tapering rate is available to them. But we do that precisely because we want to be fair to those businesses. I will expand on the important point that she raised later in my speech.

The Government have committed not only to supporting the growth of established businesses but to providing a boost to start-ups and young companies. That is why the Bill increases the amount of seed enterprise investment scheme funding that companies can raise over their lifetime from £150,000 to £250,000. It simplifies the process to grant options under the enterprise management incentive scheme, and it doubles the amount of share options that qualifying companies can issue to employees under the company share option plan to £60,000. Those changes intend to provide a boost to young companies by widening access to the schemes and increasing the funding limits, encouraging additional investment and further supporting growth of those companies.

We recognise how important research and development is to drive innovation and economic growth, including in our thriving life sciences sector, which employs more than a quarter of a million people and had a combined turnover of more than £90 billion in 2021. To encourage research and development, the Bill legislates for reforms to the R&D tax reliefs system previously announced by the Prime Minister when he was Chancellor. They include changes to support modern research methods by expanding the scope of qualifying expenditure for R&D reliefs to include data and cloud computing costs, and a range of measures to reduce error and fraud to ensure that our tax reliefs are well targeted and offer value for money.

By encouraging more businesses to invest in R&D, this Government are helping them to create the technologies, products and services that will advance living standards. I am pleased that, when they were announced, the chief executive of the Bioindustry Association Steve Bates OBE said of the measures:

“Modernising R&D tax reliefs to include data and cloud computing is essential for life science firms discovering and developing life-changing therapies for patients”.

We recognise the enormous contribution to our culture and economy made by theatres, orchestras and museums, as well as our vibrant film, gaming and media businesses. The Bill will extend for another two years the current 45% and 50% rates of tax relief for theatres, orchestras and museums, which will continue to offset ongoing pressures and boost investment in our cultural sectors.

The Bill will support the Chancellor’s ambitious plans relating to employment. To achieve the dynamic economy we all want, we cannot afford to waste anyone’s potential. We need to remove the barriers that stop people from working. No one should be pushed out of the workforce for tax reasons.

The British Medical Association, the Royal College of Surgeons and others have told us about the disincentive to continue working in healthcare because of tax charges on their pensions, and the NHS is our biggest employer, so to make sure that they and other professions are not deterred from working, the Bill will increase the pensions annual allowance to £60,000. The Bill will also remove the lifetime allowance charge to incentivise our most experienced and productive workers across our economy to stay in work for longer. As Dr Vishal Sharma, chair of the British Medical Association pensions committee, said:

“The scrapping of the lifetime allowance will be potentially transformative for the NHS as senior doctors will no longer be forced to retire early and can continue to work within the NHS, providing vital patient care.”

These changes will help to incentivise highly skilled and experienced individuals to remain in the labour market, which will help to grow the economy while increasing the knowledge and experience of the UK’s labour force.

[Rachel Hopkins (Luton South) (Lab)]

Can the Minister confirm whether the Government have made any assessment of the number of doctors who will stay in the NHS specifically because of the measure, which will cost more than £1 billion a year?

[Victoria Atkins]

The hon. Lady must not confine herself merely to the medical profession. I think the chair of the Association of Police and Crime Commissioners said this will be a game changer—

[Rachel Hopkins]

rose—

[Victoria Atkins]

Just give me a moment—I am galloping up to the jump. He said it would be a game changer in terms of policing. We know that education leaders have welcomed the changes, as have others, including air traffic controllers.

The hon. Lady asked a specific question about doctors. I am happy to be able to help her, using statistics produced by the Department of Health and Social Care. They suggest that, in 2023-24, around 22,000 senior NHS clinicians would have been expected to exceed the former £40,000 annual allowance—she must not forget that point—and around 31,000 clinicians would have reached at least 75% of the abolished lifetime allowance. I am happy to reiterate that we are introducing the change precisely because of the challenges we know our NHS, which we all love, faces at the moment, with waiting lists and so on, and because we can make the changes next week, in the new financial year.

I know the hon. Lady will recall that, the day after the Chancellor delivered the Budget, someone eminent in the medical profession appeared on television and said that they had already started receiving phone calls from doctors about how they could come back into the workforce or increase their hours. I know this is a point of disagreement between us and the hon. Lady’s party, but we are determined to encourage doctors and clinicians to remain in the NHS, working for all our constituents.

We are also determined to spread prosperity everywhere. One of the most exciting parts of the Budget was the creation of 12 new investment zones, helping to spread the benefits of economic growth around the UK. The Bill will deliver important aspects of that ambition. It will ensure that investment zones have access to a single five-year tax offer in specific sites, matching that in freeports, consisting of enhanced rates of capital allowances, structures and building allowances, full relief from stamp duty land tax, business rates and a reduced rate of employer national insurance contributions.

Importantly, investment zones will also uphold the UK’s high environmental standards and meet our international commitments. We require that proposals demonstrate how they support the UK reaching net zero by 2050 and our new long-term targets to protect and enhance the natural environment, and how they are resilient to the effects of climate change.

The Bill will also deliver on commitments made at previous fiscal events, including important ones to deliver on our freedom to set our own course outside the European Union. Among those opportunities is a major review of the alcohol duty system, as mentioned by the right hon. Member for Orkney and Shetland (Mr Carmichael). We have worked closely with industry on that over the last two years.

Now that the UK is able to diverge from inherited EU laws, we can implement a system that is a better fit with our national priorities, encourages growth and innovation, aligns with public health goals and is fairer for hard-working producers. The Bill simplifies the regime and moves to a progressive tax structure, where products are taxed according to their strengths. It also legislates for two reliefs: draught relief and a new small producer relief, which will support a wider range of small businesses to grow and provides recognition of the vital role that pubs and other on-trade venues play in our communities.

Thanks to the Windsor framework, the Government can implement these reforms in Northern Ireland, including the ability to tax alcohol by strength, and to introduce draught and small producer relief. We will set out more detail about how that will work in the coming weeks.

[Sammy Wilson]

The Minister appears to have anticipated my intervention. One aspect of VAT that could not apply to Northern Ireland was the relief on renewable items such as boilers and solar panels. The framework document said that, with immediate effect, zero VAT rates could apply to Northern Ireland. I do not see anything in the Bill about that. When does “immediate” apply? Did it apply last Friday, when the agreement was signed? Does it apply after this Finance Bill, or are we waiting for the EU to ratify its law changes before it can apply?

[Victoria Atkins]

I am extremely grateful to the right hon. Gentleman for his question, which I interpret to be about energy-saving materials. I ask him to watch this space. I know how keen he and his colleagues in Northern Ireland are to ensure that we are able to bring forward those measures. I was hoping he would ask me a question that would give me the opportunity to flag my love for Bushmills whiskey—in a healthy way—but sadly I have been denied that.

[Mr Carmichael]

On that point, will the Minister give way?

[Victoria Atkins]

Crikey—if the right hon. Gentleman asks me to list my favourite Scotch whisky, we could be here some time.

[Mr Carmichael]

I am well up for that challenge. We know that the Secretary of State for Scotland argued against the increase in duty. One wonders what it was that the Minister found so unattractive in that argument; perhaps we will now get some of the answer. I do not know whether the Minister regards it as a detail, but when will we see spirit duty reform? Can she give us a date?

[Victoria Atkins]

As the right hon. Gentleman knows, I am bound by collective responsibility, so I can neither confirm nor deny what the Secretary of State for Scotland may or may not have said. I do not know, but I certainly intend to continue to support the Scotch whisky industry. [Interruption.] My hon. Friend the Exchequer Secretary to the Treasury reminds me that the changes will be coming in in August. We want to work constructively with industry on this.

Another opportunity is in delivering a better connected country. As announced in the autumn Budget 2021, the Bill delivers a package of air passenger duty reforms that will bolster air connectivity across the UK through a 50% cut in domestic air passenger duty. Set at £6.50, the new domestic band will benefit more than 10 million passengers from April. The reforms will also align with UK environmental objectives by adding a new ultra-long-haul band, ensuring that those who fly furthest and have the greatest impact on emissions incur the greatest duty.

The Bill will also take forward measures to support sustainable public finances, helping to provide the stability and confidence that underpin the economy and supporting businesses and households across the country. Despite energy prices having come down since they reached historic heights after the invasion of Ukraine, we know that many families and businesses still feel the strain. The only sustainable solution to the link between the cost of gas and the price paid by customers for all electricity is to reform the energy market and reduce the reliance on gas generation, so as we announced at the autumn statement, the Government are now legislating for a tax on the extraordinary returns of electricity generators resulting from the spike in gas prices driven by Russia’s illegal war in Ukraine. It is forecast to raise approximately £14 billion over the next five years, to help to fund public services and interventions to support households and businesses with increased energy bills.

To further ensure that businesses pay their fair share of tax, the Government will also legislate to protect the UK tax base against aggressive tax planning by large multinational businesses, and to reinforce the competitiveness of the UK; I know that this is a matter of interest to several right hon. and hon. Friends. The Bill will implement OECD pillar two in the UK, which builds on the historic agreement of over 135 countries to a two-pillar solution to the tax challenges of a globalised and digital economy. The global minimum tax—pillar two, as it is called by those who speak accountancy language—will ensure that multinational enterprises pay a minimum 15% rate of tax in each jurisdiction in which they operate, meaning that those companies operating in the UK contribute their fair share to sustainable public finances.

[Richard Drax (South Dorset) (Con)]

Can the Minister tell the House how many countries have signed up to this mad, mad move?

[Victoria Atkins]

I am sensing from my hon. Friend that perhaps I have to convince him. I can tell him that 135 countries have signed the agreement.

My hon. Friend’s question may well extend to implementation; I know from listening to colleagues that there are concerns about that. We are acting in unison with other countries. EU member states are legally obliged by a directive to implement the measure by 31 December this year. Things are moving very fast. Germany published its draft legislation last week, showing its full intent to implement the directive; it joins Sweden and the Netherlands in doing so. Other countries implementing to the same timescale include Japan, Korea and Canada. In its Budget yesterday, Canada made the point that

“the multilateral framework for the global minimum tax regime is now being put in place.”

I understand the concerns that colleagues have raised about implementation and the timing thereof, but we are very much working in unison with other countries. Importantly, because of the position that we are taking, we can help to shape the rules.

[Richard Fuller (North East Bedfordshire) (Con)]

In enumerating all those countries, the Minister has covered approximately 20% of the global 100 multinationals. There are still 80 that are not covered by the countries that she has mentioned, the most important of which is of course the United States, which is having tremendous problems in fulfilling its signature to the agreement with the OECD. Can she say at the Dispatch Box whether she will be open to accepting an amendment in Committee, if such a provision is not in the Bill, to the effect that the United Kingdom will implement these changes only when all the major OECD countries have done so?

[Victoria Atkins]

I regret that I cannot undertake to do so. As my hon. Friend will know, we have had to scorecard the impact of this measure, and I have looked carefully into the implementation dates precisely because of the concerns that right hon. and hon. Friends have raised. I understand why my hon. Friend cites the US, but the United States already has rules that require US-headquartered groups to pay a minimum level of tax on their foreign activities.

We believe very strongly that acting alongside others is crucial to meeting the aims of this global reform. I know that there are certain points of tension with particular sectors, but we can point—perhaps in Committee, if not now—to examples of our ability to shape the rules in order to answer the very reasonable needs and requests of sectors that are so critical to the UK economy.

[Sammy Wilson]

The Minister is being generous in giving way. Does it not seem odd to her that at a time when we are talking about taking back sovereignty and having our independence, we are signing up to an arrangement that curtails that very ability? Does she recognise that the Republic of Ireland vigorously resists giving way on its 12.5% corporation tax? That directly competes not just with Northern Ireland, but—as we have already seen with pharmaceutical companies—with the rest of the United Kingdom.

[Victoria Atkins]

The way in which the agreement works means that the tax liability falls due in a country that has signed up, as Ireland has done, partly through its membership of the EU. The tax minimum floor is 15% and it falls due on the activities in that country. The country that collects the tax, first and foremost, will be the country in which the company is headquartered —it might be a UK-headquartered company, for example—but that floor means that with respect to those countries that do not charge 15%, the company is liable for that top-up tax. That is why being part of the group of countries helping to make the rules is so critical. It is not for me to advise the Irish Government or others on how to conduct their own tax affairs—I would not dream of doing so—but it is a member of the European Union, which has set out that directive, and the date is 31 December. I will leave that with the right hon. Gentleman.

[Nigel Mills (Amber Valley) (Con)]

rose—

[Matt Rodda (Reading East) (Lab)]

rose—

[Victoria Atkins]

I will give way once more, if I may, but then I must make some progress.

[Nigel Mills]

The Minister will know that the main motivation for this change is to stop the use of tax havens. Sadly, a lot of our overseas territories and Crown dependencies have a corporate income tax rate below 15%. Have the Government had discussions with those territories to try to ensure that they reform their position, so that they do not have their tax topped up elsewhere, effectively, rather than charging it themselves?

[Victoria Atkins]

I know my hon. Friend understands that I must not reveal conversations that may have happened with other jurisdictions, and of course it is not for me to comment on how other jurisdictions conduct their tax affairs. However, he is absolutely right that this is about having a minimum floor of tax to prevent the sort of aggressive tax planning that frankly very few people or businesses in the world can afford. It is about ensuring that they pay a fair amount, across the world, so that they are contributing to public services.

I am mindful that the right hon. Member for East Antrim (Sammy Wilson) asked me a question about sovereignty. We have a veto, so we are leading the discussion on this. If we do not like a future proposal, we have a veto: that is a very important part of the international agreement in which we are taking part.

As was announced last year and as the Chair of the Treasury Committee, my hon. Friend the Member for West Worcestershire (Harriett Baldwin), has set out, the Bill legislates for the abolition for the Office of Tax Simplification. We have taken that approach because what we want, rather than an arm’s length body overseeing simplification—albeit one with some very interesting ideas that I have certainly read carefully and been interested to consider—is a clear mandate to officials in the Treasury and His Majesty’s Revenue and Customs to put tax simplification at the heart of policy making.

A very good example that will be introduced via the Bill is that the £1 million annual investment allowance limit will be made permanent. This measure allows businesses to write off the cost of qualifying plant and machinery investment in the first year up to £1 million, simplifying the tax treatment of capital expenditure for 99% of businesses.

[Sir Stephen Timms (East Ham) (Lab)]

Will the Minister give way?

[Victoria Atkins]

I am so sorry, but I must make progress; I am sensing your yawn coming on, Mr Deputy Speaker.

The Bill will simplify pension tax by increasing the annual allowance and removing the lifetime allowance. It also legislates for a range of administrative changes to deal with technical issues, improving and modernising the tax system and making it easier for businesses to interact.

This Finance Bill takes forward important measures that are needed to support enterprise and growth, including incentives for investment and support for employment in, for instance, the NHS. It seizes freedoms that are available now that we are outside the EU, it deals with threats posed to the sustainability of our public finances by the energy crisis and aggressive tax planning, and it supports our long-standing goals of modernising and simplifying the tax system. It delivers on an important part of the Government’s commitments in the spring Budget to create long-term economic growth, and for all those reasons I commend it to the House.

[Mr Deputy Speaker (Mr Nigel Evans)]

The Minister began by paying a tribute to Betty Boothroyd. She was my first Speaker, 31 years ago. The Minister said that she ruled from this Chair with fun and firmness, and she certainly did that. When my office was over at Millbank, I tried to persuade Seb Coe to write to the Speaker and say that he found it difficult to get here in time when the Division bells rang. He refused, so I wrote to her, and she said to me, “No, I am not increasing the time, lovey.” She was the first and only Speaker to call me “lovey”, I am thankful to say! She said, “I am not doing that, because I went over to Millbank myself and even had time for a puff at a cigarette before I strolled across and did it well in time—so I am not increasing the time limit.” We do remember her with great fondness, particularly on the day of her funeral.

I now call the shadow Minister.

14:41

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

I beg to move,

That this House declines to give the Finance (No. 2) Bill a second reading because, notwithstanding the introduction of the multinational top-up tax and electricity generator levy, it fails to introduce a targeted scheme to address pension issues affecting NHS doctors, instead making blanket changes to tax-free pensions allowances which, as they will cost around £1 billion a year and benefit only those with the biggest pension pots, should not be the priority, and because it derives from a Budget which failed to set out an ambitious plan for growing the economy.

Six months ago the previous Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), described our economy as being stuck in a “vicious cycle of stagnation”, and on that one point he was absolutely right. To his credit, unlike many of his colleagues, he at least took responsibility, on behalf of the Conservative party, for more than a decade of economic failure.

However, although the previous Chancellor was right to point to our country’s economic stagnation, the prescription that he and the previous Prime Minister offered was nothing short of disastrous. They set the UK economy on fire, and people are still paying the price as a Tory mortgage penalty does lasting damage to the living standards of working people; yet the current Prime Minister and Chancellor expect praise for being better than the arsonists who preceded them. Could the bar seriously be any lower? British families and businesses deserve so much better than that. After 13 years of economic failure, people and businesses across the UK deserve a plan for the economy that offers more than managed decline.

[Anthony Browne (South Cambridgeshire) (Con)]

I fear that the hon. Gentleman may know what I am about to say. Is he aware that, according to the International Monetary Fund, economic growth in the UK—GDP, either per capita or in terms of constant prices—has grown faster than economic growth in France, Germany, Italy and Japan, faster than the G7 average, faster than the EU average and faster than the euro area average? That is quite a record, and one to be proud of, so it is not a case of 13 years of economic failure. I invite the hon. Gentleman to pay tribute to the Government’s success in ensuring that our economy grows faster than the economies of all those other countries that have faced similar international challenges.

[James Murray]

Just two weeks ago, we were promised a Budget for growth. Let us now look at the data that was published alongside that Budget. It shows that ours is the only G7 economy that is forecast to shrink this year. Our long-term growth forecasts were downgraded in the Office for Budget Responsibility report.

[Anthony Browne]

Will the hon. Gentleman give way?

[James Murray]

No, I am going to finish what I am saying before I give way again.

That data confirms that we are suffering the worst falls in household incomes in a century. The hon. Gentleman need look no further than the OBR report alongside the Budget, which make it very clear that this Government have little or nothing to be proud of when it comes to our economy. Across the UK, people and businesses want to get on with making our country better off, but we are being held back by a Government who are out of energy and out of ideas. That much is clear from the Bill that is before us today, which seeks to implement some of what the Government have promised.

Of course, consideration of any Bill on Second Reading must include what it omits as much as what it contains. Let us start with the fact that this Bill contains no mention of introducing stealth tax rises for working people, although we know that that is exactly what the Government are doing. We know that in the Budget of March 2021 and in the Finance Act that followed it, the then Chancellor, now the Prime Minister, froze the basic rate limit and personal allowance for income tax for four years. In the recent autumn statement of 2022 and in the Finance Act that followed that, the current Chancellor extended those freezes by a further two years. Now, following this month’s Budget, the OBR has made it clear that the Government’s six-year freeze in the personal allowance will take its real value in 2027-28 back down to its level in 2013-14. What is more, in a double whammy, families across the country will be hit next month by the Tories’ council tax bombshell, a move that will take the bill for a typical band D property above £2,000 for the first time. Look beyond the rhetoric from the Conservatives, and the reality is clear: their stealth taxes are hitting working people hard.

However, while the tax burden for working people is up, important measures that we have been calling for to make the tax system fairer are nowhere to be found in the Bill.

There is nothing in it to close the loopholes in the windfall tax on oil and gas giants, which we have been urging the Government to do for so long. Of course, we have been pressing for an extension of the energy price freeze for many months, and we were glad that the Government followed our lead in the Budget, but it is wrong that they are still leaving billions of pounds of windfall profits for oil and gas giants on the table when those windfalls of war should be helping to support families through the cost of living crisis.

[Matt Rodda]

My hon. Friend is making an excellent point. Does he agree that the pressures that are, as he rightly said, felt by many families are also felt by our hard-working small businesses, which face extreme pressures on their costs, suppliers and energy costs? Does he agree that the Government seem to have forgotten about them?

[James Murray]

My hon. Friend is a real champion for small businesses in his constituency and beyond. We meet small business owners all the time, and they tell us that what they want are stability, certainty and a long-term plan from the Government, but none of that is evident in the Bill.

Something else that is missing is any legislation to tackle non-dom tax status. Non-doms are getting another reprieve from the Government. Labour believes that those who make Britain their home should pay their taxes here, but while families across the UK face higher taxes year on year, the Government are helping a few at the top to avoid paying their fair share of tax when they keep their money overseas. The non-dom rules that allow this to happen cost us more than £3 billion every year, and ending that outdated, unfair loophole could fund the biggest expansion of the NHS workforce in a generation.

For most people, ending non-dom status is a no-brainer, although we know that some opinions to the contrary do exist. Last week, for instance, we learnt of a blog published by Evelyn Partners, a wealth management firm which supplies accountancy services to the Prime Minister. In that blog, the firm makes it clear that it

“would prefer not to see further tinkering with the system”,

and feels that non-doms

“will welcome some continuing stability.”

I am tempted to paraphrase Mrs Merton’s legendary quip by asking, “Prime Minister, what first attracted you to this non-dom-supporting firm of accountants?”

The Prime Minister’s accountants have not only welcomed Government inaction over non-doms; they have welcomed the changes to tax-free pension allowances in part 1 of the Bill. As the shadow Health Secretary, my hon. Friend the Member for Ilford North (Wes Streeting) has made clear, we have long been calling for a targeted scheme to deal with the pension issue facing doctors, which is forcing some of them to retire early. We had thought that a sensible, targeted approach might even gather cross-party support. Indeed, the Health and Social Care Committee made the same call last year, when the current Chancellor was its Chair. In its report published last July, it said:

“The government must act swiftly to reform the NHS pension scheme to prevent senior staff from reducing their hours and retiring early”.

However, now that he has moved into No. 11 Downing Street, the right hon. Member for South West Surrey (Jeremy Hunt) has failed in one of the most important responsibilities of being Chancellor, which is to spend taxpayers’ money wisely.

The Conservatives could have included in the Bill a targeted scheme to encourage doctors to work overtime and not to retire early, but instead they have introduced an expensive blanket change that will benefit all those with the biggest pension pots. This approach fails the test of providing value for money. In the middle of a cost of living crisis, a blanket giveaway for some of the most well-off is the wrong way to spend more than £1 billion of public money a year. As the British Medical Association has said, a scheme targeted at doctors could be introduced at a fraction of the cost. The policy is ostensibly about keeping people in work, yet as Paul Johnson, the director of the Institute for Fiscal Studies says, it will cost in the region of £100,000 per job retained. We voted against the policy last week, and as our amendment today explains, the Government’s approach is a key reason for our declining to give this Finance Bill a Second Reading.

[Hywel Williams (Arfon) (PC)]

Does the hon. Gentleman agree that the Government’s proposal will have a differential effect geographically, when comparing economies with low wages such as my own in Wales with London and the south-east, for example, and that that is hardly conducive to levelling up?

[James Murray]

I thank the hon. Gentleman for his comment. The geographical impact of policies should always be considered, but we should also ensure that the Government consider targeting sectors. Rather than having a scheme that applies to everyone with a large pension pot, let us have a targeted scheme for NHS doctors, which is something we can all agree on.

Alongside the changes to the taxation of individuals’ pensions, this Finance Bill includes measures that will affect the taxation of businesses. Disappointingly, but unsurprisingly, there is no sign of the fundamental reform of business rates once promised by the Conservatives. The Bill does, however, include changes to corporation tax and allowances. In fact, making changes to corporation tax and allowances is something the Government have become quite experienced in. Under the Conservatives, corporation tax has changed almost every year since 2010, and as the Resolution Foundation has pointed out, the introduction of the latest temporary regime for corporation tax represents the fifth major change in just two years. Businesses deserve better than this. When I meet businesses across the country, they are clear that they want stability, certainty and a long-term plan, yet after 13 years in office, this Government are incapable of providing those crucial foundations for success.

The truth is that Conservative MPs have become deeply inward-looking and riven by division, and their default when faced with difficult choices is to put party before country. No matter what they say, this means that Conservative Ministers are simply incapable of providing stability and certainty in government. We can see that reality in the policies they announce. As Paul Johnson of the IFS said in response to the latest temporary tweak to the tax regime for businesses:

“There’s no stability, no certainty, and no sense of a wider plan.”

Indeed, we can see that by looking at the Government’s decision to allow temporary full expensing for expenditure on plant and machinery. We know how important it is to get capital allowances right as the rate of corporation tax is being increased, yet, as the Office for Budget Responsibility reveals, the Government’s approach will make no difference whatever to medium-term levels of business investment. Rather than a long-term permanent change, this change is for only three years. As a result, it only brings forward investment rather than increasing its overall level.

[Craig Mackinlay (South Thanet) (Con)]

The hon. Gentleman has talked about certainty and stability, and they are qualities that I would have some sympathy with, but can he rule out, here and now on the Floor of the House, that it is not going to be Labour’s plan under any circumstances to harmonise capital gains tax with income tax?

[James Murray]

As we have said several times, we will set out our plans in our own time. But let us be clear, if the hon. Member has concerns over capital gains tax, he might want to talk to those on his own Front Bench, because they raised it in the last Finance Bill by cutting the annual exempt amount. I suggest he talks to his colleagues before he raises questions with us.

[Richard Fuller]

Will the hon. Gentleman give way?

[Ian Murray]

I am going to make some progress. I will give way to the hon. Gentleman in a moment.

Rather than a long-term permanent change, this change is for only three years. It only brings forward investment rather than increasing overall investment. The Government’s own policy paper on temporary full expensing, published on the day of the Budget, makes that clear. It says:

“This measure will incentivise businesses to bring forward investment to benefit from the tax relief.”

Meanwhile, the OBR forecast makes it clear that business investment between 2022 and 2028 is essentially unchanged as a result of these measures. If anything, there is a very slight fall. So let us be clear about the implication here: the Conservatives’ inability to provide long-term certainty means that measures in this Bill will bring no overall increase in business investment. That is not good enough. That is why, as part of Labour’s mission to secure the highest sustained growth in the G7, in government we would review the business tax system and set out a clear road map to provide certainty and boost investment. We believe that our economy’s long-term underperformance on capital investment needs long-term measures to be put in place as part of a tax framework that supports and incentivises investment.

Alongside stability and certainty, a key principle in our tax system is one of fairness. The importance of fairness in the tax system applies to individual taxpayers and to businesses too. We in the Opposition want to make sure that British businesses face a level playing field, and that is why we have for so long pressed the Government to back an ambitious global minimum tax rate for large multinationals. A global minimum would help to stop the international race to the bottom. It would help to stop British businesses that pay their fair share of tax being undercut by large multinationals that do not, and it would help to raise revenue to support British public services.

We are therefore glad to see provisions in this Finance Bill that will, as part of the international agreement fostered by the OECD, ensure that large multinationals pay a minimum level of 15% tax in each jurisdiction in which they operate. We have raised the need for such an international deal many times with the Government. It was in fact nearly two years ago, on 13 April 2021, on Second Reading of an earlier Finance Bill, that I first raised with Treasury Ministers the question of a global minimum corporation tax rate. In that debate, I pressed Treasury Ministers to confirm to the House that they and the Chancellor of the time backed plans for a global minimum corporate tax rate, and that they would do all they could to make it a reality. Ministers appeared lukewarm, so I pressed them again in subsequent debates on 20 April and 28 April, urging them to make a clear statement of support in favour of a global deal. They held back from doing so.

At the time, the Ministers’ response seemed to lend credibility to a report by Bloomberg that implied that the real reason behind the Government’s position might have been to disguise their real agenda—namely, a desire to keep alive the possibility of a race to the bottom in the future. In the end, however, plans by President Biden to set the global minimum rate at 21% did not receive wide enough support and a figure of 15% was agreed. That figure was welcomed by the then Chancellor, who began to support the deal in public. Now, however, the deal faces a new front of challenges, as the Minister acknowledged earlier in her comments. Her Back Benchers have begun to be open in their hostility towards the implementation of the deal.

[Richard Fuller]

The hon. Member is a very thoughtful man. I think one of the reasons that he might be hearing some questions from Conservative Back Benchers is that he has just positioned himself as the advocate for the policy that our Front Benchers are now implementing. I have a question of substance for him on his research. He has just mentioned the original position of 21%, and has been clear in saying that what business wants is clarity, so can he give us some clarity? Is it the intention, if there is a future Labour Government, that they will press OECD countries for an increase in that 15% to achieve the 21% that he has been advocating?

[James Murray]

It is always nice to have an intervention from the hon. Gentleman. We very much miss his being in his position on the Government Front Bench. The debate over the OECD agreement has been going on for several years. President Biden wanted 21%, but there was lukewarm support for that from this Government and we ended up with 15%. Our challenge now, frankly, is to make sure that the likes of the hon. Gentleman do not get in the way of its implementation, because we want to see this global deal in place and Britain playing its part.

The hon. Gentleman’s intervention was timely as a reminder of the opposition coming from Conservative Back Benchers. In fact, this is an issue that I have raised with the Treasury Minister before. She might remember that on 7 February I asked her if the Government would keep their promise to implement the multinational top-up tax in the UK this year. We wanted reassurance that the Prime Minister’s weakness in the face of his Back Benchers would not leave us missing out on this landmark global deal. The Minister might recall that she brushed aside concerns that her Back Benchers might oppose these plans, only for concerns to be raised moments later by the right hon. Member for Witham (Priti Patel). The former Home Secretary, who was here earlier, went on to write a piece in The Daily Telegraph on 24 February arguing against the Government’s approach. In that piece, she claimed:

“In the House of Commons, those now turning their attention to all this are beginning to bridle.”

We believe it is crucial to get this legislation in place, so I hope the Minister can reassure us today that those parts of the Bill that introduce a multinational top-up tax will not be bargained away in the face of opposition from Conservative Back Benchers.

A fairer and more certain tax system, underpinned by a long-term economic plan, is crucial to helping businesses invest and grow, but an ambitious plan for growing our economy must go much further, and we have made it clear that this would be Labour’s first mission in government. At the heart of our plan to grow the economy, to create jobs and wealth, and to make everyone in our country better off is the partnership we would build between Government and business. We understand, as do businesses, that growth comes from the Government supporting private enterprises to succeed in the industries of the economy of the future.

That is why our green prosperity plan is so important, as it would provide catalytic public investment to crowd in private sector investment and to grow our clean energy capacity and green industries across the country. We would support growth in the digital economy and the life sciences, we would update our planning system to remove barriers to investment, and we would improve access to capital for new and growing businesses. We would make sure that, under Labour, the Government and business work together and invest together, for the good of everyone in every region and nation of the UK.

This task is urgent, because the world economy is changing and other countries are pulling ahead. According to the CBI, we are investing five times less than Germany, and roughly half of France and the US, in green industries. The Institute of Directors has said that, on its present path

“the UK will find itself left behind in the accelerating race to lead the green economy.”

The Society of Motor Manufacturers and Traders said, following the Budget:

“There is little…that enables the UK to compete with the massive packages of support to power a green transition that are available elsewhere.”

From President Biden’s Inflation Reduction Act in the US to the programmes coming out of Europe, Asia and Australia, the rest of the world is chasing the opportunities of the future. We need to be in that race too. Once we are, the opportunities will be ours for the taking. Our British businesses already excel in so many sectors and, with the right support, we could be a world leader in the new and growing industries of the future, making full use of our geography, our advantage in high-tech sectors and our world-leading universities.

What British businesses and families need now is a credible, ambitious plan from the Government to grow the economy and to make everyone in every part of our country better off. The failure to do that is perhaps the greatest failure of this Finance Bill and this month’s Budget. The Conservatives have had 13 years, and they have failed. As long as they stay in power, the vicious cycle of stagnation stays too. It is time for a new Government who will get us off this path of managed decline and make sure that people and businesses in Britain succeed.

15:02

[Craig Mackinlay (South Thanet) (Con)]

I will start with a depressing fact. We have talked about the Office of Tax Simplification, and I struggle because the Bill before us runs to 456 pages and the explanatory notes run to 679 pages. Perhaps we are not going in the right direction.

As I am sure Ministers are aware, I will air my views on this Finance Bill, both the bits I like and the bits I most certainly do not like. Starting with clause 2, we know that the income tax rates are 20%, 40% and the additional rate of 45%, but that does not tell the whole story, does it? We have this peculiar rate of 60%, as the annual allowance is taken away at £1 for every £2 of extra earnings over £100,000. The tax rate for those earning between £100,001 and £125,140 is, in fact, 60%.

At the autumn statement, we debated whether the 45% additional rate is the right measure at the right time, the right measure at the wrong time, or the wrong measure at any time, but I would have been more comfortable—this may surprise Ministers—if the 45% rate started at £100,000 and we got rid of the 60% band.

My entry in the Register of Members’ Financial Interests notes that I am a chartered accountant and a chartered tax adviser, and I recommend that the Treasury considers the number of people in that £100,001 to £125,140 band. It is all very well once people push their way through the band, but there are behaviours that can enable people to avoid the band, not least with the expansion of the annual allowance for pension contributions. I foresee that there will be very few people in that band, because they will use pension planning to make sure their income is always below £100,000 if there is any threat of being in that band.

I suppose this comes down to the whole concept of tax. I am not talking about a spreadsheet in the Treasury; I am talking about people’s behaviour. We sometimes forget that making such a change does not automatically spring a certain amount of tax out of the system, as people do other things. Additional money might be raised because people spend and pay VAT. We are all very familiar with the multiplier.

[Anthony Browne]

I thank my hon. Friend for his interesting speech.

[Craig Mackinlay]

Don’t worry; there is a lot more yet.

[Anthony Browne]

I am sure there is, and I might intervene later.

My hon. Friend makes an interesting point about moving the 45% additional rate to £100,000, which I have previously recommended. Does he agree that it would be a good guiding objective for this Government, and indeed any Government, to try to reduce all marginal tax rates below 50%? It is a good, Conservative principle, but it applies to everyone, that people who work extra should keep at least half the money. People should never have to give more than half to the Government.

[Craig Mackinlay]

My hon. Friend speaks a truism that should not need to be spoken from the Conservative Benches, as it should be patently clear.

A sole trader who is running a good little business and doing quite well might be knocking on the door of £100,000 in profits—I would have thought that is not an unusual amount for some in the south-east of England, even in the building trades. Too many of them will say, “I’m not going to pay 60%, plus 2% national insurance. I will work four days a week and spend the fifth day on the golf course.” We are losing out through the 60% rate.

Ministers will not be surprised by my objection to corporation tax being increased from 19% to 25%.

[Richard Drax]

Raising corporation tax from 19% to 25% is a 31% increase. That figure is not often used.

[Craig Mackinlay]

My hon. Friend makes a very good point. This 6 percentage point increase is actually very big in percentage terms.

The corporation tax increase is in clauses 5 and 6, and corporation tax has a story in this country. I went back to April 1973, a mere 50 years ago, and it was at 42% in those days. Corporation tax has generally fallen over time, both in the Conservative years and under the Labour Administration between 1997 and 2010. Peculiarly, the Labour Administration even introduced a 0% rate on small profits up to £10,000 between 2000 and 2006. I was more vigorously in practice at the time, and the 0% rate was a bizarre move that caused a rash of incorporations, which people did not need the wisdom of Solomon to foresee. The rate was deemed to be malused, shall we say, so things changed again.

Under us, since 2010, the maximum rate of corporation tax has reduced from 28% to 19%, and what have we seen? We used to have discussions about Laffer-curve economics, to which I am an adherent. There is a sweet spot at which reducing the rate raises more tax. That was behind the thinking of George Osborne, a previous Chancellor. I would not say that I agree with everything he did—I think he meddled rather too much with the tax system; hence, we now have a tax code that runs to about 23,000 pages—but he believed that reducing corporation tax would increase returns, which is exactly what happened. The money we are looking to raise to pay for the NHS, and to do all the good things that public services provide for us, was being delivered through a lower corporation tax rate. Is it any surprise that Ireland decided to put this on steroids by taking corporation tax down to 12.5%? The rate per head of receipt in corporation tax is four times the rate in the UK. Ireland’s corporation tax returns are way in excess of what is raised from one of our primary taxes, VAT.

We lived through the 19% rate era, however, which was very welcome. It attracted international business and, on the other side of this, made domestic businesses think that the risk reward was better and they therefore took their business forward. We had a lot of complications in the old days, when we had marginal rates and businesses had to go from the lower small company rate to the bigger company mainline rate. It was a complicated calculation, and my hon. Friend the Financial Secretary referred to that. It was not only that that was complicated; those with a number of associated companies had to divide the limits, and it was a dreadfully complex calculation. She said clearly that the lower rate of 19% will remain for companies on up to £50,000 of profits, which is welcome and will catch a lot of the numbers as a percentage of the entirety registered at Companies House, so many companies will not be affected.

[Richard Fuller]

I do not want to disagree with my hon. Friend, but we on these Benches must stop being grateful when some of our businesses are exempted from increased taxation. We are the party that believes people know best how to spend their own money. We should be arguing for the widest spread of low taxes. He is talking about history, and the other aspect of corporation tax is the ability to attract capital. Back in the 1970s and ’80s, the largest source of capital to support our businesses was from a domestic pool of capital, but now we are competing for an international pool of capital. What effect does he think this increase in corporation tax will have on our ability to tap into those competitive global markets?

[Craig Mackinlay]

I do not think that was a criticism from my hon. Friend, but I was trying to be kind and find some good news in what is a fairly miserable story on corporation tax. He makes a good point: the world potentially has an almost limitless amount of global capital looking for a home, and I want that home to be here, and having a lower headline rate of corporation tax would be a very good way of achieving that. I want to develop the argument about the complication we have now added to the system.

[Kit Malthouse (North West Hampshire) (Con)]

I draw attention to my entry in the register. My hon. Friend is making a powerful point and is right about the impact of thresholds on behaviour. There are a number of thresholds, including the VAT threshold and income tax rates, and these marginal rates have a massive impact. Does he think that during the passage of this Bill the Government should consider whether the threshold of £50,000 to £250,000 ought to be higher, not least because catching a company just as it makes £50,000, on an ellipse of growth, and taxing it more is effectively to punish it for success?

What is his view on the notion that not just the rate but also consistency has an impact on the national and international sentiment about investment? The fact that we do not muck about with our rates all the time and they do not vary very significantly from year to year has a big impact on businesses’ ability to plan for the future. The Americans have a higher corporation tax rate than we do, but they have not touched it for years—it has been the same for many years—which allows businesses to trade a higher rate for a longer planning horizon. We might benefit from such a perspective.

[Craig Mackinlay]

My right hon. Friend makes a powerful point on the lower threshold for where 19% goes into the higher rate, and I am going to expand on what that rate actually is. He is right that £50,000 is not a king’s ransom these days; this should be in the phase of growth of a company as it goes on to higher levels.

I have some sympathy with my Front-Bench colleagues on the stability point. We need only think of the journey we have been on in just the last year. The former Chancellor, now the Prime Minister, declared that the rate would be going up to 25%. Then in autumn statement No. 1, it was going to stay where it was at 19%, but then we had autumn statement No.2, which confirmed that it would be going up to 25%. I was hopeful—I am sure my right hon. Friend and others were in a similar camp. I thought, “I will have a yo-yo this time; I am happy with a yo-yo. Let’s keep it at 19%.” However, my right hon. Friend makes the powerful point that stability is good. The rate might not be the one we prefer, but we can at least see to the horizon of where rates are likely to be quite a few years hence.

I want to expand on the point made by my hon. Friend the Member for South Dorset (Richard Drax) that the rise from 19% to 25% represents a 31% increase. I am afraid it is far worse than that on the marginal pound—say, if a company earns £50,001. To start at a 19% rate for up to £50,000 and get to a 25% rate at £250,000, the rate has to be more than 25% in between. The real rate on that marginal pound above £50,000 is 26.5%, so it is actually far worse. As I have said, we are going back to the bad old days where we have to divide those levels by the number of associated companies involved.

The full expensing is, of course, very welcome. I am sure that the Treasury has offered that as a quid pro quo in trying to encourage behaviour, so that companies can invest or are encouraged to invest in new plant, machinery, equipment and all the other stuff that will perhaps help our productivity gap, which we all know has been fairly poor for some time.

My hon. Friend the Financial Secretary mentioned the seed enterprise investment scheme under clause 15. There is also the old EIS, which is even more attractive to the small investor and is a means by which growth companies in early phases can get some capital from investors who may be looking for a home. The new higher levels are welcome, but I hope HMRC has the administration to cope with the applications. As my hon. Friend will know, we have had some problems with HMRC recently.

What does the message on higher corporation tax say to international investors? Big international investors will probably have a global accountancy firm that will analyse the tax rates, the deductions, the super deductions and the weave of things that go on in different countries, but the headline rate of 25% is not appealing. If a company is doing a first sort through Europe deciding where to go, Britain will not be appealing with one of the higher rates.

I worry that we are going for a sugar rush today that will lead to a deferred tax loss in the future because of the lack of domestic and international investment that otherwise might have come our way. That is a game of sliding doors—the title of a film I rather like—and one will never quite know what the future might have held, but this cannot be attractive to international investors. We raise taxes on things that are bad, such as cigarettes, to try to stop their use; why are we raising tax on something we want a lot more of?

I made a fairly lengthy speech on Budget day about the dividend tax—the dividend-free amount—and there is nothing on that in any of the clauses. I explained on the day that it has been through a story very much like the corporation tax story—up and down, with rates all over the place. We settled on the £5,000 amount of dividend-free allowance in about 2016. That did not last very long and went down to £2,000, and it is due to go down to £1,000 from next week. I stated on Budget day how I could live with £1,000 because it accords with other small amounts of income that HMRC is quite happy to disregard.

We have a disregard on trading allowance. Where someone has an eBay business that has advanced from selling the contents of the loft to doing a bit of trading, HMRC is not interested if it is under £1,000—it does not want to know and they do not have to do a tax return. A similar £1,000 allowance is in place for rent. Where someone rents their driveway out to a commuter or someone rents out their holiday home, if they are lucky enough to have one, for a couple of weeks a year, as long as the income is less than £1,000 they do not have to do a return, as no one is interested. A similar thing applies in respect of interest for basic rate taxpayers; £1,000 of interest may be earned and it does not need a tax return, as we are just not terribly interested.

The £1,000 level for dividends therefore has some common sense behind it. Obviously, as a low-tax Conservative, I would rather it were more, because this has already been taxed through the corporation tax system—it is not a deduction against corporate profits, so it is already a double tax. Reducing it further to £500 in 2024-25 breaks that £1,000 rate that we have established as reasonable. Not only that, but do we really want to drag in people who have been PAYE—pay-as-you-earn—all their lives?

We are talking about people with fairly simple affairs, who are perhaps retired and, for all the right reasons, have been in the Sharesave scheme. Let us suppose someone has accumulated a mere £10,000 over years of Sharesave in Lloyds Bank plc. The dividend from Lloyds, now that it is back paying dividends, is generally 5%. So for a mere £10,000 of Sharesave, which may have been accumulated over 20 years of work—hardly high amounts—these taxpayers, who have been PAYE all their lives, will now need to do a tax return in order to recover 8.75% on that marginal pound over £500. This seems to be unduly parsimonious, and I sincerely beg those on the Front Bench to look at it again. It will cost more for HMRC to administer these small amounts of tax receipts; there is no sensible intention here at all.

Clause 18 deals with the lifetime allowance for pensions. We are having a debate this afternoon, and Labour Members obviously think that this should be carved out just for those in the NHS and nobody else. We already have a carve-out for senior judges, and there is even a special one for the Leader of the Opposition. Why have this just for doctors? There is a saying in tax, which is that we should never allow the tax tail to wag the commercial dog, and that is exactly what has been happening with pensions: people have been retiring early and not taking up extra work because of this tax trap. I am delighted that we are getting rid of that trap. Surely a senior teacher who has been in employment for a number of years, a senior civil servant, or someone senior in the police or the armed services will be accumulating in excess of the old threshold of £1,073,000. Those very senior people are now likely to stay in post for longer, offering their services to the nation.

I could have lived with the £40,000 annual threshold, so I am delighted that it has gone up to £60,000. Why should a taxpayer—not a civil servant paid for by the public purse in any way—be penalised for good management of their pension fund? I have always found that bizarre. If they have been clever, they have had a great independent financial adviser or they have managed their own self-invested personal pension and they have exceeded that limit because of their own research and endeavours—and perhaps a bit of good luck—I say, “Good luck to them.” Why should there be a tax hit on that? Clause 20 and the annual allowance increase from £40,000 to £60,000 are therefore very welcome. The £40,000 threshold has been in place from 2014-15 and I calculated that, with inflation, it would be at £52,000 today. We have therefore done something outside the fiscal drag here, so that must be very good news. I would have thought that the Labour party, which has mentioned fiscal drag, would be grateful for that.

May I pay a particular tribute to the Financial Secretary to the Treasury, because I believe that I have had a success in this Finance Bill, and I do not get too many of those? I spotted it! It comes in clause 29, which deals with estates in administration, and in parts 1 and 2 of schedule 2, under the heading “Low income trusts and estates”. I am ignoring the complication of multiple settlements, so let us put that aside. There has been a concession by HMRC for many years that if someone had an estate in administration and the tax payable was £100 or less, HMRC did not want to know. What a lovely simplifying measure that is. However, it did not apply to small trusts, for example, where granny had left the Lloyds shares. I am being very nice to Lloyds this afternoon, so let us use a different share—

[Kit Malthouse]

Standard Life.

[Craig Mackinlay]

I thank my right hon. Friend for the prompt.

Let us suppose the Standard Life shares had been left for the grandchildren to get the capital when they are 18—I am talking about the usual little family trust. Under the changes that were made some years ago, any small amount of dividends required a full tax return, because 7.5% of dividend tax had to be found and the stopping of withholding tax on bank interest received required that to be returned. We therefore had the mad situation where people with the smallest trusts, created perhaps many moons ago for austere reasons and with parsimonious amounts, were having to do a full trust return.

I have been pushing on this since 2017, when my right hon. Friend the Member for Central Devon (Mel Stride) was the Financial Secretary, and I saw in the Bill that we are not going to have the £100 disregard on tax and that there will be a £500 income in total disregard. Thankfully, these small trusts will be able to save their accountant’s fees, if they had even thought they needed one thus far. I hope that this measure will have a degree of retrospection and HMRC will not be raising £100 fines and more all over the place for the granny trusts with a few Standard Life shares in them. This could have been achieved just by HMRC practice or an old-fashioned extra statutory concession, but it is being done legislatively and I am delighted about that.

So we are up to clause 29 of the 352 in the Bill. Members will be grateful to hear that I will leave it to others to comment on the alcohol duty changes, which range from clauses 44 to 120. So we have cut out a good amount there, Mr Deputy Speaker. What I am going to say now will perhaps be aired by others this afternoon. There was nothing on Budget day—not even the barest word—about these OECD pillar two proposals. To the Financial Secretary’s credit, she did mention them, but perhaps rather more briefly than required, given that half the Bill relates to them. In easy terms, as the Bill mentions, this is about the “multinational top-up tax”. It sounds cosy, does it not? Additionally, between clauses 265 and 312, there are measures on the “domestic top-up tax”. The House might be pleased to know that I am now up to clause 312 of 352. I have, constitutionally, an extreme disquiet, not about the proposal itself, but about what such a major international treaty commitment is doing within a Finance Bill. This has far-reaching consequences for UK corporation tax rules, yet it has been barely mentioned before today, and it is in a Finance Bill when it should be standing alone as an international treaty.

What worries me further, and it has been raised in interventions, is that most of the rest of the world is saying, “Thanks, but no thanks.” It seems that only the UK and South Korea are making substantial progress on this. I know that Switzerland, Holland, Germany and Japan have begun drafting, but 100 other countries are doing absolutely nothing at all at the moment and the EU has allowed a six-year run-on for the directive to take full effect. Four countries—Hong Kong, Thailand, Singapore and the USA—are saying that it is not for them at all.

Why, having had multiple years of Brexit battles, which were, at their core, over the sovereignty and independence of this nation, would we wish to outsource our own international corporation tax affairs to a supranational body? We are already having battles in the House with the Illegal Migration Bill about how the 1951 convention and the ECHR obligations are coming home to roost. Those conventions and treaties were signed with the best of intentions at the time, when the world was a rather different place, but they are now coming home to roost in ways that we perhaps did not expect.

The manifesto commitment on which I and every Conservative MP stood in 2019 was to take back control of our money and our laws. To see us almost unilaterally adopting this international accord on corporation tax seems rather strange. I am afraid that we are seeing rather a lot of this, including in terms of climate change commitments. We seem to be promoting a Betamax when the rest of the world is waiting for the VHS to come down the line. Being first in the field is not always the best place to be.

Perhaps it is thought that this will be a new tax-raising measure—I have seen it written that £2 billion could be raised by it. I stand to be corrected, but over many years Finance Bills have had substantial anti-avoidance legislation to stop transfer pricing. That has been the feature of much tax legislation over many years, which I would have thought would catch and overcome any mischief on low-tax profit shifting. But will this actually raise anything? I wonder what the OECD is trying to achieve. Will low-tax jurisdictions, particularly those involved in the insurance industry, just sit back and say, “Oh well, profits will be taxed up the line in the UK or elsewhere”—a very limited number of companies are taking this onboard—or will they raise tax themselves? That seems the obvious place they will go, but there is a conundrum. Much of the legislation is to do with how we calculate that profit. We have our means of calculating profit according to our corporation tax law, and other countries do the same. This is trying to overlay a determination of OECD profit out of the books and records of large, multinational corporations in the UK. That is what this is all about. It is about trying to create a new form of profit.

We have seen that—I have commented on it in the past—in something that is quite simple: whether one qualifies for support for childcare. We have three forms of calculation of profit in our tax code relating to the simple sole trader. That is the normal taxable profit in accordance with our tax law. We have a different assessment—it is marginally different—for calculation of profit to qualify for universal credits. Then there is something completely different, if someone wants to calculate their due profit for qualification of child help and support. Therefore, we are overlaying more complication on that OECD framework.

[Kit Malthouse]

Again, I draw attention to my entry in the Register of Members’ Financial Interests. Does my hon. Friend think that there is a risk that countries may seek to manipulate their tax code in such a way that, while their headline rate might comply with the international minimum, the effective rate could be manipulated by the creation of all sorts of bonkers and crazy allowances, as we have seen in the past? We have full expensing of capital. That is fine for a capital-intensive company, but we have lots of items that are disqualified for corporation tax, which could be allowed if we wanted to make the effective rate lower than the minimum 15% in future. In many ways, that encourages even more gaming of the system by countries, rather than the system that we have at the moment, where it is a bit more transparent, if indeed complex.

[Craig Mackinlay]

My right hon. Friend highlights the problem that different countries could indeed game the system. The peculiarity here is the domestic top-up tax. Even if, under the UK calculation of profit, a business had a profit rate of more than 15%, it could be under 15% using the OECD way of calculating profit and therefore there would be a top-up tax. That is truly perverse. In accordance with UK tax law, perfect rates of corporation tax are being paid, but because it does not comply with these new strictures, of which there are hundreds of pages in this legislation, someone could find themselves paying a domestic top-up.

My concern is whether we will see a rash of new statutory instruments, as we have new external nation-UK tax treaties needing to be looked at and unwound. I wonder, too, whether any thought has been given to potential trade deals; I am given to understand that the US is looking quite negatively at countries that are looking to implement the OECD pillar 2 proposals.

I am just about to conclude, which I am sure will be a great relief to many. What would I like those on the Treasury Front Bench to look at carefully before we get to Committee stage, Report and beyond? I recommend that we strip out the multinational top-up tax clauses, or implement what other hon. Friends have suggested, a start date more in accordance with when the rest of the world thinks this is a great idea as well. Otherwise, as I have said before, we could be buying the Betamax when we should be waiting for VHS.

These measures occupy half of the Bill. I would like to hear assurances that for 2024-25 we can have the £1,000 as a general disregard threshold applied to dividend taxes under a simplification measure. However, given that the Bill runs to such a huge volume, I would like to hear more about how we are going to replace the Office of Tax Simplification. I think it would be fair to say that I know many of the characters in there—there were a number of ex-presidents of the Chartered Institute of Taxation. I do not know quite how wide a remit they had, but one has to assume they did not really get very far with tax simplification.

When I qualified as a chartered accountant in 1991, there was big talk about the tax law rewrite to change seven pages explaining first in, first out with perhaps one word, FIFO. We have a lot of verbiage in our tax system, and to address and simplify the 23,000 pages would aid everybody. Those are my brief observations on the Finance Bill.

[Mr Deputy Speaker (Sir Roger Gale)]

I notice that my two predecessors in the Chair this afternoon have paid tribute to Baroness Boothroyd, and I would like to do the same. Betty was one of the two great Speakers of my parliamentary lifetime, the other being Jack Weatherill—that is excluding the current Speaker, of course, who will no doubt take his own place in those annals. Not all Speakers have a facility with names and faces, and Betty freely admitted she was one who did not—something you may have noticed I sometimes suffer from myself. She just used to say, “You, lovey—no, no, not you, lovey; you, lovey.” Happily, I can remember Stewart Hosie’s name.

15:38

[Stewart Hosie (Dundee East) (SNP)]

That was a fascinating and wide-ranging speech from the hon. Member for South Thanet (Craig Mackinlay). Twice he used the analogy of being a Betamax waiting for the VHS video to arrive. I am sure I have heard that speech from the Conservative Benches so many times that it was like a worn-out Philips Video 2000—another plan that never quite made it.

The Financial Secretary made a number of remarks at the beginning of her address. She said debt servicing costs were down, and indeed they are—down from last November, but still massively up from one year ago. She said the fiscal targets were to be met, and indeed they are. The debt target in particular will be met in five years—it will be down by 0.2% of GDP. That is £6.5 billion out of a GDP of, at that point, £3 trillion. The margin for error is very small. She also said that employment will go up—that is to be welcomed—and the OBR certainly suggests that it will. It will go, over the next five years, from 60% to 60.4% of the available workforce. That is helpful, but it does not begin to touch the edges of the labour shortage and skills problems that we have.

The OBR has told us that living standards will fall by 6% or so over this fiscal year—the largest two-year fall since Office for National Statistics records began in the ’50s. We know that there is a combination of reasons for that, particularly inflation, which was at 10.4% in February. I am sure that we have all seen in the last day or so the 17.5% inflation rate in groceries, which is really affecting people and was reported from February. We also know that the Government could have done more to ease people’s cost of living pain. They should not simply have frozen the energy price cap at £2,500 but reduced it to £2,000. They could and should have maintained the £400 energy support payment, but they chose not to. Those measures would have borne down even more on inflation, which would have been helpful.

In a sense, what is more disturbing than the lack of immediate help is that the Government seem relatively content with the modest progress made towards tackling the long-term underlying issues in the UK economy. Productivity in particular remains a huge problem. The OBR forecast from the Budget said that productivity per hour would not even reach 1.5% growth in any year during the forecast period—that is below the 2% norm.

Of course, some aspects of the Budget and the Bill are to be welcomed and may well help with productivity issues. I am thinking particularly of the full expensing of capital allowance until March 2026, but as the hon. Member for Ealing North (James Murray) pointed out, that is temporary—it is only for three years—and the impact on business investment over the forecast period is not particularly clever. At the same time, the failure to increase the annual investment allowance means that businesses planning to benefit from £1 million of investment allowance will find that that £1 million of planned investment has been badly eroded by inflation.

Likewise, the intention to deliver £20 billion of research and development spending by 2024-25, which could certainly help with productivity, was not mentioned in the Budget, as I said on Budget day. I have done some digging about because there seems to be a lack of clarity on that. Is it because that £20 billion was actually meant to be £22 billion but that figure was quietly dropped? And was the 2024-25 goal pushed back to 2026-27? In either event—whether we get £20 billion or £22 billion of total R&D spend, and whether that is in in two, three or four years—the investment will not be of the same value as when it was first announced because of inflation.

Although references to R&D credits are certainly there in the Bill, part 2 of schedule 1 seeks to limit attributable expenditure on data licences or cloud computing in some circumstances. There may be good reasons for that, but I suspect, given that a large amount of future R&D work will be on cloud technologies, that we will have to probe very carefully indeed in Committee to find out whether the Government are justified in removing from R&D credits the attribution of such costs.

Likewise, we will also need to probe in Committee the decision to remove the cap on lifetime pension allowances, which will cost around £3 billion but benefit a tiny number of already pretty comfortably well-off—or, indeed, very wealthy—people. If that measure is genuinely designed to lift certain categories of worker—doctors in particular—out of a pension and employment trap, the Government will, to be brutally honest, have to come up with a much better and narrower solution.

We also saw the decision to impose a huge 10.1% rise in the duty on Scotch whisky. The Scotch Whisky Association could not have been more stark in its response, saying:

“We have been clear with the UK Government that increasing duty would be the wrong decision at the wrong time”—

I agree with that—

“so it is deeply disappointing that one of Scotland’s largest and longest-standing industries has been treated in this way.”

It also said:

“This is an historic blow to the Scotch Whisky industry. The largest tax increase for decades means that 75% of the average priced bottle of Scotch Whisky will be collected in tax”.

I welcome and support sensible duty measures—the Government know that I would welcome a duty regime based on alcohol content, with no other criteria—but the decision to put such a significant and substantial increase on Scotch tells me that the UK Treasury views this totemic industry as, frankly, no more than a cash cow.

The Financial Secretary spoke earlier about enhancing the environment. In the Budget debate I laid out the huge cost and almost unlimited financial risk to the taxpayer of nuclear energy. The reasoned amendment that SNP Members tabled was critical of not just the decision to invest in nuclear but the failure to invest fully in real green, renewable technologies. Nowhere was that more obvious, and more starkly demonstrated, than in the next contracts for difference auction, which will be allocation round 5, the budget for which has been reduced by 30%, from £285 million to £205 million. The tidal stream ringfencing has been halved to £10 million.

This all comes at a time when inflation in the price of materials and construction is in the order of 30% for established renewables and closer to 50% for projects such as the MeyGen tidal stream, which is the largest tidal stream project in the world. Although the budgets are now annual rather than biannual, the allocation means that fewer projects can be successful when they bid, which means we are likely to see reduced pipelines of orders in the UK and reduced investor confidence. We saw that in onshore and offshore wind projects, which became reliant on foreign manufacturing. By contrast, UK-based supply chains account for 80%-plus of tidal stream content. For example, Orbital Marine Power’s O2 device was delivered with an over 80% UK supply chain spend. It was designed in Orkney and built in Dundee with steel from Motherwell, blades from the Solent, anchors from Anglesey and hydraulics from the midlands

With a bigger ringfenced pot for tidal, we have the opportunity to scale up the MeyGen site in particular; otherwise, we will end up cutting costs and being dependent on foreign manufacturing, and the technology will lose out, as did the wind technology when Denmark provided Government support for its sector and the UK lost out. At this point, if the UK Government do not increase the overall budget, the whole process could fail, like the most recent Spanish auctions, and all against a backdrop of massive investment through the Inflation Reduction Act in the United States.

[Kirsty Blackman (Aberdeen North) (SNP)]

On investment in renewables, does my right hon. Friend feel, as I do, that the Government are missing out on an opportunity? This is the opportunity to capitalise on the move towards a just transition to renewable energy, and the Government are putting down exactly the wrong markers. When we want to build up investor confidence and the industry and to take advantage of it, the UK Government are choosing not to give confidence to those who are keen to invest.

[Stewart Hosie]

This is absolutely the opportunity to invest properly, to deliver the just transition that we all speak about and want to see, and to protect the jobs, abilities and skills of the hundreds of thousands of people in the oil and gas sector across the UK as they transition into renewables, so that Scotland is no longer the oil and gas capital of Europe but becomes the Saudi Arabia of renewables—what a thing we could achieve. However, some of the decisions that are being taken, including the obsession with nuclear and the reduction in funding for real green renewables, are deeply problematic.

I also want to address the lack of action on, and support for, trade. The OBR said that while it is true that

“additional trade with other countries could offset some of the decline in trade with the EU, none of the agreements concluded to date are of a sufficient scale to have a material impact on our forecast. The Government’s own estimate of the economic impact of the free-trade agreement with Australia, the first to be concluded with a country that does not have a similar arrangement with the EU, is that it would raise total UK exports by 0.4 per cent, imports by 0.4 per cent and the level of GDP by only 0.1 per cent over 15 years.”

As an aside, if this is the much-vaunted benefit of Brexit, it is very, very thin. What that means is that the OBR estimates the economic impact of the free trade agreement with Australia, for example, will raise the level of GDP by 0.1% over the next 15 years, while estimating that Brexit will cause a drop in GDP of 4%.

With families still burdened by high inflation, and also feeling the pinch from rising mortgage and rental costs; with energy costs still way higher than they should be; with the long-term problems of the economy, particularly poor productivity, inadequately addressed; and with the self-inflicted economic harm of Brexit hampering trade and GDP growth, I am afraid that this Budget and this Finance Bill simply are not enough.

15:51

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the right hon. Member for Dundee East (Stewart Hosie). I will start where my hon. Friend the Member for South Thanet (Craig Mackinlay) did: people think that Finance Bills are a little dry, but somebody must have a sense of humour to produce a 456-page Bill and then hide in clause 346 the abolition of the Office of Tax Simplification, probably at the exact time that we really need it. When I used to practise as an accountant, I had a copy of all the tax legislation on my desk. I sense that if I were still working, I would need a much bigger desk for the successive Finance Bills we have had over the past 13 years. Perhaps at some point, we should stand back and think, “Do we really need to keep adding all of this stuff every year? At what point are we going to start taking away stuff that we have now effectively duplicated?” I suppose it would mean that I could work from home, because I probably could not carry all of those books around, so maybe there are some bonuses there.

Much of the technical stuff in this Bill has been pre-consulted on—we have seen it for a long time—and most of it is to be warmly welcomed. I will quickly mention clause 25, which finally sorts out the net pay arrangement for pensions. We have been trying to find a solution for this for quite some years; to put people whose pension scheme has chosen the net pay arrangement, rather than the other way of doing it, into the position that they should have always been in. We have finally found a solution through which HMRC will make it good, which is to be warmly welcomed. I cannot quite see a start date for that in the Bill, though—I hope it is soon—and it would have been nice if HMRC had actually paid some back pay. People who are saving pretty small amounts, who are the ones on the very lowest levels of income, could have had the tax back that they should have been getting for the past decade or so, but perhaps we should not be too greedy.

I want to focus most of my remarks on the pensions tax changes, and then on the corporation tax and the multinational top-up tax. There is a theme in those things: we have some welcome measures, but we end up on a rather haphazard journey to a very strange place where things competing with each other everywhere, and I do not quite have an idea of what we are trying to achieve.

On the pensions tax stuff, we had clearly created a problem through the reduction and freezing of the lifetime allowance. The only solution to a problem caused in that way is to undo what we have done, and it makes sense to scrap that completely. I would have probably preferred to have a higher lifetime allowance and scrap the annual allowance: if we are aiming to limit how much tax relief people get on pensions saving, I am not quite sure why we need to do it on a year-by-year basis when we should probably be more worried about the overall total. It seems a bit harsh to me that somebody who starts a business, scrimps and saves, saves every penny and reinvests it, and finally sells that business for a decent amount now cannot get the same pension as somebody who has been employed for all that time, taking much less risk, because they are capped on the £60,000 they can put in per year and by how many years they can look back. I am not sure what policy objective we are trying to achieve there, but it is welcome progress.

On the Opposition’s reasoned amendment, I am sceptical about the attraction of trying to have different tax regimes for different sectors. It becomes hard to work out which occupations we like and which we do not, and to which we want to give favourable status. Even if we wanted to do it, it becomes hard. Do I want a favourable tax regime for doctors regardless of where they work? I then have to define “doctor” and work out what sort of doctors I want to favour. Do I want it for people who work in the NHS, in which case it would have to include whoever is being paid large amounts, whether finance directors, human resources directors or diversity officers?

It would be slightly bizarre to give a more generous tax regime to a finance director in an NHS trust being paid a large amount of money, but not to somebody owning and running a business, trying to create jobs in the economy. That would be hard to do, and we would have to go through every senior public sector worker, as my hon. Friend the Member for South Thanet did, working out who to include. Even if we did that, how on earth would we work out which organisations to include? Most high-paid NHS staff are not employed by NHS England, but by God knows how many trusts around the country. If we wanted to apply the regime to GPs, too, they all have their own businesses. It would be phenomenally difficult to work out how to do that, if we think about how the lifetime allowance being set that way was causing a problem and driving people out.

[Anthony Browne]

My hon. Friend is making some excellent points about the problems of having sector-specific lifetime allowances, which would proliferate and become unbelievably confusing, as he says. We have all made the case about other public sector workers who would be affected by the lifetime allowance. We could introduce a regime where we exempt them one by one and effectively have a regime for all public sector workers, but does he agree that it would be unfair and economically irrational to have a completely separate pension regime for public sector workers and a far more punitive one for private sector workers, who are important for generating wealth in the country?

[Nigel Mills]

I agree with my hon. Friend. I remember the anger when I was first elected about people working in the private sector getting a very small pension and seeing the large generosity of the public sector ones that they could never dream of aspiring to. To have a more generous tax arrangement on top of a more generous pension that they were effectively paying for would be hard to sell to people. I think the Government have found a sensible fix on that.

Where has this situation left pension tax policy? We now have a regime where when someone earns the money and pays it into their pension, they do not pay income tax and national insurance on it, and when they draw the pension, they pay income tax, but not national insurance. We are not quite sure we like that. If someone is earning too much—more than £260,000 now—we start reducing the amount they can put in every year from the £60,000 cap down to a £10,000 cap. Then, if someone wants to draw their pension, they can have a quarter of it completely tax-free, even if they do that 10 years before they retire, but now we do not like that either, because that might be too much, so we have capped it at the level of the lifetime allowance that we have just scrapped. What are we trying to do? Added to that is the fact that if I have a defined-contribution pension that I do not draw and leave in my estate, there is no inheritance tax on it. I do not even pick up the tax at that point.

If we stood back and said, “What are we trying to incentivise and encourage people to do by the £50 billion or so of annual tax that we forgo”—or defer, strictly speaking—“on pension saving?”, I am not sure we would design this system. The Government would be well advised to create some kind of commission or review to look in the round at all the various ways we incentivise pension saving and all the ways we tax it and try to work out what a coherent system that people have some hope of understanding would be. I suspect we would get far better outcomes if we did that. I encourage the Government to do that. That would need to be on a long-term, cross-party basis. It cannot be done on a whim every few months.

The danger is that we get to a Finance Bill or Budget and we want a bit of money here, or we have found a little fire we want to put out there, or we want to make another tweak, and we end up building and building more and more strange bits on to this rather ugly looking house until it finally falls over. We should try to get it in some kind of shape before we get into that position.

Moving to the various corporation tax measures in the Bill, I am prepared to accept the rise in corporation tax. Given the fact we bailed out nearly every business in the economy three years ago in the covid pandemic, there is justification for saying that we need to pay those bills, and corporation tax, which businesses only pay when making a profit, is the right way to do that. It takes a little bit of believing to convince ourselves that we can raise the rate that businesses pay on all their future profits—all the fruits of their investment—and that that will not deter investment, but a short-term deferral of when they pay tax by having full expensing will somehow encourage loads of investment, even though they will end up paying the extra 6% on the profit they will earn from the use of new machinery at some point in the future. They will not pay it in the first year, but they will pay more in all of the subsequent years.

[Kit Malthouse]

My hon. Friend points to an argument that, I have to confess, has perplexed me. People say that raising corporation tax to 25% will not necessarily damage investment or, indeed, British business, but then why stop at 25%? Why is that the appropriate amount? If businesses are impervious to the tax rate and it does not affect their behaviour, why not have 30%, 35% or 40%? He understands my point. They are making a value judgment about where the line of damage is to be drawn, and I think he is quite right that it is hard to think that it will not have some kind of impact.

[Nigel Mills]

My right hon. Friend makes a fair point. I guess there is an attraction in that 25% is an easy calculation. We could go for 26%, which Labour had in its manifesto at the last election, and perhaps that could have been a submission. I think it also had a small companies rate rising to 21%, which it does not want to remember these days. I just think that we cannot really have it both ways—that deferring taxes encourages investment, even though businesses end up paying them, but raising them somehow does not. I think we should try to be a bit coherent about what we actually think in that situation.

Again, I have no idea what we are trying to do in giving people tax relief on their expenditure on capital assets. We now have a capital allowance regime that, for most assets, is generally 25% on a reducing balance, unless it is an asset for too long, for which the long-life regime is 4% a year, or it is a short-life asset, such as a computer, when they can choose a different regime over a shorter period of time. Then there is an up-front initial allowance, depending on whether we have one in place, and now we have a 100% initial allowance for a short period, but we do not give any tax relief at all for industrial buildings. If I want to build a new factory to bring some jobs back from China, I need to go through convoluted calculations—such as proving that the air-conditioning in my building is actually a piece of plant and equipment, not a part of the building—which makes huge amounts of work.

Could we just stand back at some point and think about what we are trying to incentivise business to do? I am not actually convinced that many businesses will really be able to use full expensing on large capital expenditure, because they just will not have the profit. It may give them some cash-flow advantage, but they will have the complexity of how much they can claim, and which company a loss gets trapped in to make sure they can use it all around the group. We are just creating difficulty. Most of the large businesses I ever worked with focused on the rate of tax they had to account for in their accounts—of course, having accelerated deduction does not change that—rather than the cash position, which was hugely complex if they were leasing an asset, finance leasing it, hire purchasing it or God knows what. So I would be a little suspicious or cynical about our actually getting the big change that the Government were hoping for here.

I would go back to an amendment I tabled a decade ago, when I said, “Why don’t we just try to move to giving people tax relief in line with their accounting treatment, so if they think this piece of kit has a five-year life and they account for it over five years, let’s just go for that? Why have all this hassle, and all the cost of all these different regimes? Let’s be more generous on the assets you get relief for, and let’s try to simplify it.” I have a feeling that, if we could somehow get to that, it would be more attractive to most businesses than the annual tinkering of saying, “You can now do this and get a bit more”, and no one knows where on earth they are in such a situation. I would recommend that.

On the multinational top-up tax, I actually support it, and I think I argued for it when it was being discussed. I have always been a little bit suspicious of the OECD—I once called it the organisation for excessively complex drivel, and if Members read the causes we have ended up with, they might think it was relatively complex. What I think we have started trying to do on base erosion is to stop people hiding profits in tax havens with very low rates of corporation tax. We generally know where they are and what their rates are. We could have gone back to what we used to have with our controlled foreign company regime, which was a list of naughty countries. If a business had a subsidiary in one of those, it had to go through some extra compliance to prove that real genuine trading profits were arising in that country, rather than that it was hiding passive income that should have been taxed somewhere else.

I think we could have found a way to have a regime that most countries accepted, where we just said, “If you’ve got a subsidiary in one of these naughty regimes then you have to pick up some tax on it,” rather than having dozens and dozens of hugely complex clauses to effectively create a whole new corporation tax range applying to companies in every country in the world, which have to try to work out whether they are paying too little tax or not based on whatever the local tax differentials are on timing and rules, which we then have to adjust for to try to work out whether someone is being naughty or not, when we know damn well a company in the Cayman Islands is paying zero on the £100 million-worth of profit it has salted there, which is what we were after in the first place.

I welcome where we have got to and I accept that if this is the way we have to do it, it is better than not doing it, but surely if anything highlights how complex our corporate income tax regime has become it is the fact that we need to have 150-odd clauses to try to tax income that is being hidden in territories that have a zero rate. It really is almost beyond belief that we have made it that difficult.

We have to remember that a lot of our own overseas territories and Crown dependencies have seen some of the worst behaviours in this area. As it was when we had to have more transparent disclosure regimes, we need to set a lead on this issue to get the rest of the world to follow. If we are not doing it and not encouraging parts of our UK family to do it, there is a fair chance that the rest of the world will think, “Well, if they’re not going to do it, we’re never going to do it.” So we end up moving at the speed of the herd, which will be standing still.

I welcome the fact that we are doing this. It is the right thing. We need to try to find a way of stopping profits being hidden in places where there is absolutely no justification for them being there. A 15% top-up rate is a good compromise. I would hope that most regimes would see the writing on the wall and up their rates to 15%, and not go for dubious reliefs, deemed deductions and so on to try to contrive their way of having a headline 15% but never applying it. Let us just say that this is the way that the world wants to go. This is what responsible ethical business looks like. This is what responsible ethical government looks like. We do not want money hidden where there is absolutely no justification for it being earnt there. We can try to end up not needing all these hugely complicated rules, which UK-headquartered companies might be having to apply to every territorial subsidiary they have, to try to catch some naughty things that they are not even doing in the first place.

Intriguingly, I do not see in the Bill the repeal of our controlled foreign companies rules. If we have a new regime that tops up the tax in every subsidiary owned by a UK group to 15%, do we need all the old compliance rules to stop UK companies hiding their profits offshore? It seems to me that we will end up with a collection of different regimes all trying to do the same thing. Maybe we could find at least a partial simplification to offset the 150-odd clauses here in the Bill.

My concluding remark on these key issues is that I welcome what the Government are trying to do, but at some point we need to stand back and think, “Have we got our tax code regime in a sensible place where we are realistically, and in as understandable a way as possible, trying to achieve these sensible aims; or have we, through quite understandable tinkering, ended up with some kind of hugely complex monstrosity that at some point will fall over and in the meantime is probably not incentivising the things we want people to do or disincentivising the things we really we do not want them to do?”

16:07

[Sir Stephen Timms (East Ham) (Lab)]

I am very pleased to follow the hon. Member for Amber Valley (Nigel Mills), whose pensions expertise we benefit from greatly on the Work and Pensions Committee.

I want to comment fairly briefly on two aspects of the Bill: first, the decision, at a time when the pension burden on ordinary families is rising so fast, to give a big tax cut to the wealthiest pension savers; and secondly, the abolition of the Office of Tax Simplification—and to reflect on the history of that initiative that led us to where we are today.

Table 4.1 in the Red Book tells us that the abolition of the lifetime pension allowance will cost the Government £1.8 billion in uncollected tax over three years. At a time when the tax burden on ordinary families is being raised to the highest level since the second world war, it seems extraordinary that the Chancellor thinks it is right to cut the tax on the 1% largest pension pots.

It is a big challenge for pensions policy that tax relief support for pension saving is so massively skewed in favour of the wealthiest. There are suggestions from time to time about how to use that relief more progressively to encourage pension saving among lower-paid workers. Instead, the Chancellor has made the unfairness £1.8 billion worse. It is difficult to understand how that can be justified.

It is a problem that Chancellors, Prime Ministers and Ministers completely unavoidably spend their time talking to people who are in that 1% wealthiest group—they are the people who make representations, who they sit next to at their dinners and so on. By giving a £1.8 billion tax cut to that group, the Chancellor has chosen the wrong priority. The hon. Member for South Thanet (Craig Mackinlay) rightly made the point in passing that it is creating a large tax avoidance opportunity for a large number of people. They will simply not pay the tax that the Bill imposes on them, but will instead choose to put an unlimited amount of money over a lifetime tax-free into their pension.

The Work and Pensions Committee’s report on saving for later life, published last September, highlighted the collapse of pension saving among the self-employed. In the late 1990s, about half of self-employed people were saving in a pension. By December 2021, that was down to 16%, compared with 88% of eligible employees, thanks to the success of auto-enrolment, which is not available to self-employed people. Pension saving for them is now at a very low level. Our report recommends that the Treasury and the DWP should set a date to trial ways to default self-employed people into pension saving, to work out how to replicate the success of auto-enrolment among self-employed people. Tax relief of £1.8 billion could have been a valuable incentive to make a success of an initiative along those lines. Unfortunately, the Government’s response to our report rejected our recommendation. Instead, the Bill is giving away that support to those who already have the largest pension pots. It is difficult to understand how that can be justified.

I was elected to the Commons in June 1994. As is usual, I served on the Finance Bill Committee the following year—some of my recently elected hon. Friends will have a similar privilege with this Finance Bill. One of the other members of that Committee was the Conservative Back Bencher Tim Smith, the MP for Beaconsfield, who no doubt you will remember, Mr Deputy Speaker. He moved an amendment in that Committee to require the Inland Revenue to prepare a report on tax simplification and to lay it before Parliament. To the fury of the Conservative Front Benchers on that Committee, not only did he move the amendment—that is a fairly normal thing to do—but he pressed it to a vote. Of course, all the Labour Committee members voted in favour of it, so it was agreed to and the Bill was amended in Committee. Ministers were absolutely livid. It was unheard of for the Government to be defeated in the Finance Bill Committee. I do not think that the relationship between Tim Smith and his party’s Front Benchers ever recovered.

Within a few weeks, the then Chancellor Ken Clarke was making a virtue of the fact he would bring forward proposals for tax simplification. The idea rapidly gained currency and Tim Smith’s idea was embraced. The spade work was done by Michael Jack, who became the Financial Secretary in 1995. What emerged from it—the hon. Member for South Thanet mentioned this—was the tax law rewrite project, which brought forward a series of five Bills under the Labour Government, which made tax law easier to understand. It certainly did not shorten tax law, but I think it made it easier to understand.

The Conservative party returned to the theme in 2010, with its manifesto commitment to set up the Office of Tax Simplification, which is abolished by the Bill. Michael Jack, a previous Financial Secretary to the Treasury, was the first chair of the project, and John Whiting of the Chartered Institute of Taxation did a lot of the spadework.

The Office of Tax Simplification was made statutory in 2016, so we understood it would be a permanent feature of the landscape. It had its first quinquennial review in 2021, when the current Prime Minister was Chancellor. That review concluded

“that the need for the OTS’s statutory function to advise the Chancellor on simplification of the tax system remains undiminished.”

What has happened in the past 18 months to mean that it is now being abolished?

PricewaterhouseCoopers makes the point that when Tim Smith’s amendment was moved in 1995, the volume of tax legislation was 5,000 pages and his aim was to reduce it. The hon. Member for South Thanet is correct that it is now 23,000 pages, so it is not clear that the need for simplification has ended. PricewaterhouseCoopers says the Office of Tax Simplification has a “high level of engagement” with the tax profession and that when the office consults on issues, it receives a lot of ideas and contributions about how to do things. PwC goes on to say:

“It has produced a number of insightful reports… The response from the Government has been mixed, however, and whilst some of its recommendations have been accepted, many have been watered down or simply ignored.”

The real reason that it is being abolished is that, in the end, the Government are not that interested and there are other priorities that have a higher weight than simplifying the tax system.

The closure was announced in the disastrous mini-Budget last September. For that reason alone, we ought to be a bit sceptical about whether it is a sensible thing to do. At the time, the then Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), said, rather as the Minister said in her opening speech:

“I have decided to wind down the Office of Tax Simplification, and mandated every one of my tax officials to focus on simplifying our tax code.”—[Official Report, 23 September 2022; Vol. 719, c. 937.]

If everybody is responsible for something, in reality nobody is, so I do not think we will hear much about further progress on that in the future. It sounds very much like the end of the project.

The Chair of the Treasury Committee, the hon. Member for West Worcestershire (Harriett Baldwin), asked about that in her intervention on the Minister. She has written to the Chancellor on behalf of her Committee to ask why the Office of Tax Simplification is being abolished; we will all be interested to see his reply. The Office of Tax Simplification has done valuable work and, having followed the progress of work on the issue since 1995, I am sorry to see it go. I will be interested to hear the Minister’s justification for the decision.

[Several hon. Members rose—]

[Mr Deputy Speaker (Sir Roger Gale)]

Order. A significant number of right hon. and hon. Members still wish to take part in the debate. The debate is open-ended, but bitter experience has taught me that if you wish to retain the attention of the House, brevity is the order of the day.

16:18

[Richard Drax (South Dorset) (Con)]

Every time my late father—bless him—heard me speak, all he said was, “Too long, Richard,” so on that basis I shall be brief. It is a pleasure to follow the right hon. Member for East Ham (Sir Stephen Timms). I refer to my entry in the Register of Members’ Financial Interests. I will speak, probably for no more than five minutes, about the corporation tax rise and the international minimum level of 15%.

I turn first to the corporation tax rise. I have huge respect for the Chancellor, as I do for the Ministers on the Front Bench, so I do not want this point to be taken incorrectly, but during his 2019 leadership campaign, he proposed reducing corporation tax to 12.5%—the rate that, I believe, the Republic of Ireland has now. Corporation tax in the UK will now rise from 19% to 25%, which may look like a 6% rise, but is actually a 31% rise. I totally accept that smaller companies will not be affected, and I accept that there are various capital allowances that larger companies can go for, but as many colleagues have said, why complicate an already complicated tax system? Why not just keep it simple? As a former soldier, I remember the acronym KISS: keep it simple, stupid. I wish sometimes that politicians would do that.

I am very surprised that the international agreement on the minimum level of tax—the OECD scheme—is being pushed through in the Bill. I find that quite extraordinary, because the two do not sit comfortably together. Many Conservative Members and some Opposition Members fought very hard to get control of our country back by leaving the EU, so that we could have our own laws, our own taxes, our own money and so on. I am therefore completely bamboozled by this, and have yet to hear a very good reason why we are signing up to the very thing we were trying to escape: something that enables an unelected multinational organisation to affect how we set our own taxes. As my hon. Friend the Member for Amber Valley (Nigel Mills) said so well, why can we not set and control our taxes? Surely we could have dealt with this on our own.

I find this move, which will subject us to a tax rate set outside our country, to be really extraordinary, and I will have great difficulty in supporting the measure on Third Reading. The Government have said that the effectiveness of the policy

“depends on a high degree of consistency in the implementation in different jurisdictions”.

The Financial Secretary listed a whole mass of countries in answer to a question I asked earlier, but as I understand it, countries including Singapore, Hong Kong and Thailand have announced that they will be delaying implementation until 2025. I also understand—I hope I am correct—that the EU has broken a commitment that was agreed internationally by giving smaller member states a six-year delay before they, too, will have to implement the measure. That will disadvantage the competitiveness of UK-based multinationals against their EU rivals.

I remember campaigning for Brexit: it was a great thing. We were going to become an offshore, Singapore, low-tax, let’s go, gung-ho place, and create business, create jobs and create wealth. That is what the Conservative policy is, so what on earth are we doing? We are signing ourselves up to a package that could once again see British courts overruled by foreign ones. The industry—I have read much about it in the press—has also called for the policy to be delayed, because UK growth will be stunted by unnecessarily burdensome administrative costs for business.

All this is being put forward in a rush. There was no mention of these plans either in the Chancellor’s Budget statement, unless I missed something, or in the accompanying Red Book and costings document. HM Treasury documents confirm that the Government still intend to implement pillar two this year. Why are we having such minimal scrutiny of something with so huge a potential effect on the ability to attract business to this country? I thought that that was exactly what we wanted to do.

The role of a Government, particularly a Conservative one, is to create an infrastructure in which business can thrive. One of the key levers for that is low taxes—the lower, the better. On the whole, as the Exchequer Secretary well knows, the lower the taxes, the more money comes rolling into the Treasury.

The size of all this has already been mentioned. I have in front of me two massive documents. Pillar two takes up 169 pages of the Bill, across 156 clauses and five schedules. The Finance Act 2022 ran to only 222 pages, including schedules, and had 104 sections in total.

I really do ask the Government to rethink. I know that Opposition Members have already commented with glee that people like me are leaping up to oppose this measure. Yes, of course we are, because we are Conservatives. I have been here for 13 years; on three or four occasions during that time the whole House has agreed to a proposal, and every single time it has been wrong, so for me that is the clearest guide that something has gone seriously wrong here.

Let me say to the Ministers on the Front Bench that it is in the best interests of the United Kingdom to delay implementation of pillar two until 2025, or, even better, to bin it altogether.

16:25

[Hywel Williams (Arfon) (PC)]

The test of any Finance Bill should be this: will it improve living standards now and into the future? With living standards plummeting at the fastest rate since records began and incomes set to remain at pre-pandemic levels until 2028, this Bill is clearly inadequate. Indeed, set against these trends, the spring Budget was a clear missed opportunity to give people at the sharp end of the cost of living crisis some much-needed relief.

Instead, the Chancellor chose, for example, to prioritise a pension tax advantage for the few. Listening to the Chancellor, one would be forgiven for thinking that the crisis was over, but with four in 10 households in Wales not heating their homes, and typical energy bills set to be 17% higher next year, the lived experience of my constituents is very different from that of those whom the Chancellor is so keen to help: those who can afford to set aside up to £60,000 every year for their pension funds, and who are now able to do so without any limit on how big that fund can be.

Accepting the extraordinary pressures under which so many people are living as anything like normality is foolhardy in the extreme. There is an immediate need for additional targeted support, which the Government could deliver directly by, for example, extending the energy bills support scheme and guaranteeing off-grid homes and businesses in rural areas an additional round of the alternative fuels payment.

Immediate support should also be extended to struggling renters. The Government’s failure to increase local housing allowance rates since 2019 means that housing is increasingly becoming unaffordable for low-income renters in Wales, and indeed elsewhere. According to research by the Bevan Foundation, last month only 32 properties throughout Wales were available at or below local housing allowance rates. That is equivalent to just 1.2% of the properties advertised on the formal rental market. Only 32 homes at affordable rents were available across the entire country!

An overwhelming proportion of renters receiving housing allowance are having to redirect money that is required for other essentials, such as food, heating and clothing, just to pay the rent. The UK Government should increase the local housing allowance forthwith to the 30th percentile of market rents, which would lift 32,000 people in Wales out of poverty and save up to £2.1 billion net by easing the pressure on public services that has been caused by chronic poverty. However, the UK Government seem to be uninterested in taking such an obvious positive step. If that is indeed the case, they should transfer the powers and the money to the Welsh Government so that they can do so.

The Chancellor could also have used the Budget to release the £1 billion owed to Wales so far in Barnett consequentials from the £20 billion that has already been spent—I would say “squandered”—on HS2. It is wrong that HS2 is held to be an England and Wales project. Not a single inch of the track is being laid in Wales and, what is more, diverting prosperity away from Wales to areas served by HS2 will actively damage our economy. Over time, Wales should receive £5 billion in Barnett consequentials, which could be spent on improving our dire public transport infrastructure. But worse, if reports are accurate, the Treasury now intends to reclassify HS3 as an England and Wales project, even though, again, not a single inch of it comes anywhere near Wales. So the Chancellor can add a further £1 billion to the payments we are due.

Enough of that—what I at least consider to be—pie in the sky. Let us take a step back and look at the longer-term forecasts. This Finance Bill fails to address the broader questions of what we want our tax system to deliver and what constitutes a coherent delivery strategy. A ten-minute rule Bill tabled by my right hon. Friend the Member for Dwyfor Meirionnydd (Liz Saville Roberts) proposes establishing a tax reform commission to do just that. I think that might have been of interest to the hon. Member for Amber Valley (Nigel Mills), who spoke earlier. My right hon. Friend’s proposal would provide an opportunity to have the required discussion, as a Parliament and as a society, about what we want our public services to deliver, how we are going to pay for it and what is the fairest way to raise the money and revenues to pay for it.

Personal taxation has been much discussed over the last week, and this has once again raised the question of why income from wealth is treated differently from income from work. If, for example, income from dividends and shares were treated in the same way as income from work, a certain Member on the Front Bench would have seen his tax bill for the last three years almost double. This is not about punishing the wealthy; it is about creating a system that raises money more fairly, to deliver our public services and reduce inequality. The wealth of the richest 1% is greater than that held by 80% of the population of the UK in total, while our public services are under severe pressure after a decade of cuts. It is clear that the tax system, as it is, is failing both to tax equitably and to tax adequately.

The spring Budget also missed the opportunity to remedy the dysfunctional Welsh fiscal settlement. A timely example this week is that Westminster has clawed back £155.5 million from the Welsh Government because of their underspending in 2021-22. That meant that they breached the Wales reserve—that is, how much funding the Welsh Government are able to carry forward from one year to the next. That reserve is currently capped at £350 million. At a time when so many are struggling and Welsh public services are so severely overstretched, that underspending is a damning indictment of the Welsh Government’s ability to plan. It is also one of the many consequences for Wales of being tied to this broken UK system.

Wales’s fiscal settlement not only allows the UK Government to claw back money; it also inhibits the Welsh Government’s ability to deliver large-scale, long-term infrastructure projects by placing strict limits on their borrowing powers. It also ensures that most Welsh taxes collected by Westminster and then sent back to Wales are based on population share rather than on actual need. Money is raised not to meet need but according to a wholly discredited formula, the Barnett formula, and this Government, like their predecessors of both main parties, are doing nothing about it. They are failing to achieve a fairer economic balance between the nations and regions of the UK and deliberately failing to level up.

I have laid out some of the much larger case as to how this Budget fails Wales and will continue to fail Wales. This Government could act differently but, after 12 years of failure to meet the requirements of my country, they clearly have little intention of doing that. So, as more and more people in Wales are realising, one way forward is for us to take responsibility for our own affairs as an independent country.

16:34

[Richard Fuller (North East Bedfordshire) (Con)]

It is a pleasure to follow the hon. Member for Arfon (Hywel Williams). I am obviously not as familiar as he is with the arrangements between Wales and the Treasury, but I think he made his points very clearly. Another thing he said—I think I caught him correctly—was about taxation not being fair enough, or sufficient. I might have slightly more disagreements with him on that.

It is a pleasure to be called to speak in this debate. As you said, Mr Deputy Speaker, this is a debate without limit. Due to my concern, shared by many hon. Members, about the complexity of our tax code, I was tempted to read out the tax code from cover to cover, but reading out all 23,000 pages might test even your patience. I will not do so this year.

It was interesting to listen to the two opening speeches. The measures in this Finance Bill go back to the Budget, and we should not lose sight of the tremendous job the Chancellor did with that Budget. At a time when there were so many competing pressures on the public purse from Conservative Back Benchers, let alone from the Opposition, it is a tribute to the Treasury and its officials that they were able to craft a Budget that has, so far, stood the test of time.

The Opposition have been scrambling to find reasons to disagree with the Budget and have alighted on one: the pension changes. That is interesting because I distinctly remember responding to a debate from the Dispatch Box in which there was pressure from all political parties —from Scottish nationalists and, I think, representatives from Northern Ireland, and definitely from Labour and Conservative Members—to make precisely the change that the Government announced in the Budget. The Labour party obviously has nothing substantive to say in opposition to the Budget, which is a tribute to Treasury Ministers.

I enjoy my encounters with the shadow Minister, the hon. Member for Ealing North (James Murray). I remember the first thing he said on my appointment to the Treasury, which was that I should be sacked. The record will show that he did not quite get what he wanted, but I am pleased our relationship has improved over time.

I gently say to the hon. Gentleman that, if the Labour party wants to be treated seriously in the run-up to the next general election, the time has passed when it can say, “Just wait and see.” It is reasonable for Members to ask him to be clear on whether Labour intends to harmonise capital gains tax with income tax, but he dodged that question. It is quite reasonable, as we are discussing the global minimum corporation tax, to ask whether Labour intends to push for the 15% rate, if it is enacted, to go up. Perhaps Labour can, in the winding-up speech, answer some of the questions put by my hon. Friend the Member for South Thanet (Craig Mackinlay) and me.

One of the Bill’s most important aspects is whether it meets the challenges of today and prepares us for the challenges of tomorrow. I told my voters at the 2019 election that this country had one of the highest rates of taxation since the 1960s, and it has since gone up because of the implications and effects of the covid support measures.

This is difficult and uncomfortable territory for Conservatives. Our intention and objective should be to lower taxation. Too rarely, in this House of Commons, do we hear voices for lowering taxation. It seems to be completely beyond the pale for the Labour party even to consider that there might be a time when it is right to lower taxes. Labour would certainly never dream of lowering taxes for those foolhardy enough to earn more than £50,000 a year. Correct me if I am wrong, but I do not see a shadow Minister standing up to say, “Hold on a minute. We are in favour of people earning more than £50,000, and there may be a day when we cut their taxes.” We do not hear that from Labour, because it relies on making people not like the fact that people can make a lot of money.

That is a huge change from the days of Tony Blair and new Labour. In those days, Tony Blair recognised that the British people liked the idea that, if they could not make a lot of money themselves, perhaps their children would start a business and make some money, or get a good career—yes, in the health service—and make a lot of money. That is what the Labour party then stood for. Because it understood that natural instinct that people want their kids to have a better future and, if they make it, to be able to keep more of their money to make a better future for their families in turn, the Labour party under Tony Blair caught the attention of the British electorate. It is clear that the Labour party under the current leader will go into the next election with nothing like the agenda new Labour stood for in 1997. [Interruption.] Labour Front Benchers say that we have not seen the manifesto. Why are they waiting? If the Labour party manifesto is so good, let’s see it; let us not hide behind it. [Interruption.] Don’t tempt me too much.

On clause 2 and the main rates of income tax, I reiterate a point made by my hon. Friend the Member for South Thanet, who talked about the 60% marginal rate. The Treasury would be wise to look at that anomaly again. There is still time, perhaps not in this Budget, but certainly in a future Budget, to come forward with some simplification.

On corporation tax, the Government were caught, and my hon. Friend the Member for Amber Valley (Nigel Mills) made a reasonable point. There is a difference between the tax-raising powers we may wish to have and the signalling effect it will have for the attraction of international capital. The headline rates of corporation tax are usually what result in investment decisions getting a green or red light from multinationals.

On the OECD mutual multinational top-up tax, I welcome that the Government are at least putting in measures in the Bill. Perhaps that is not the right place, as my hon. Friend the Member for South Thanet said, but it is important that the UK has some response. It is, however, potentially foolhardy for us to progress at a pace that creates a competitive disadvantage for us. Many Members talk about the desire for economic growth and that is great, but economic growth comes because a country offers an environment that attracts international capital and talent, and part of that is how much tax people will pay. If the Labour party heralds the fact it wants to tax individuals at the highest rate possible—and to take away an exemption, when people might come here for the first time, to stop them being double taxed—and Labour party policy is to raise corporation tax to high levels, that sends all the wrong signals. I worry about that in relation to the multinational top-up tax. So let us not progress those measures in the UK ahead of our main competitors.

The right hon. Member for East Ham (Sir Stephen Timms) has left his place, but he asked questions about the abolition of the Office of Tax Simplification, a decision made during my time at the Treasury. He made some good points about how that office provided some points about tax simplification when it was allocated the task and I have no concerns or criticisms about the work it did but, if a Government of any stripe are serious about tax simplification, I do not think that process was going to achieve that objective. My view was it would be better to embrace that as a whole-Government effort. I hear the right hon. Gentleman’s concerns about no one being in charge if everyone is in charge, but that was never the intention, of course; the intention was to move to have someone in the Treasury directly in charge to look at tax simplification on a much more holistic basis, rather than take the case-by-case approach of the OTS. That was the rationale last year. It would be fair for Front Benchers to give an update on that, but I thought I would mention that for the benefit of the right hon. Gentleman, for whom I have enormous respect.

I want to mention something that is not in the Bill but which we need to think about. On achieving net zero, we have made tremendous strides by asking our corporations to start accounting for carbon in their annual account reporting. We need to harness the power of the private sector if we are going to achieve our net zero goals. I saw reports in The Times that there are going to be some announcements tomorrow that may affect this, but we perhaps did not see enough from the Government about what the plans are on carbon taxes in the UK. If we want to achieve a social objective, the introduction of a carbon tax would be one effective way of doing it. If that could be combined with reductions in general corporation tax, it would be a helpful move. It cannot be done all of a sudden, but it would be an interesting addition to the mix for the Government.

I thank my right hon. and hon. Friends on the Front Bench for the Budget and these measures, and should I be selected by the Whips—it is a safe bet that that will not happen—I look forward to debating it line by line in Committee.

16:45

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Chancellor heralded these proposals two weeks ago as “a Budget for growth”, and thank goodness, after 13 years of a stagnating economy and with the OECD confirming that we are the only G20 economy that will shrink this year, with the exception of Russia—what a record. It is completely shameful.

I want to talk about the proposals on childcare and the extension of the free childcare entitlement, which is aimed at boosting growth and getting more parents of young children, particularly women, back into work. That is a welcome ambition. At the moment, about 1.7 million women are prevented from taking on more hours of paid work due to childcare issues, representing an estimated loss of £30 billion to the economy every year. Those numbers are as true now as they were before the Budget, because although the £1 billion tax cut for people making large tax savings on their pensions comes into effect straight away, the implementation of the free childcare arrangements is still a long way off being delivered. Parents will not receive the full benefits of the scheme until September 2025; a child who is two today will not see any of that entitlement.

The policy also risks embedding inequalities and widening the attainment gap. I worry that the Government are missing an opportunity to truly tackle the issues that are dragging growth in our economy, by not supporting parents into work, and are compounding the inequalities in our society, which are also holding people back from reaching their full productive potential. Some 80% of families earning less than £20,000 a year will not benefit from any of these entitlements—only one in five will. The north-east has the highest rate of child poverty in the country. One in five children live in workless households, and 38% of children live in households where someone has a disability, which might mean that they are unable to work. Yet those children will not receive any of this entitlement. We know that the poorest children are, on average, 11 months behind their peers when they start school. Leaving them out of this policy will just embed that inequality further. I fear that the policy confirms what we already know: levelling up is no more than a billboard announcement. If we scratch the surface, we find that there is very little underneath.

Even on the Government’s own terms, the childcare entitlement falls short. If it is about getting parents back into work, why are those who want to train as nurses, paramedics, teachers or midwives, and those who want to be apprentices, not entitled to this childcare support? Parents are trapped in low-paid work and low-skilled jobs. They dare not take time out to train because if they do so, they will lose any childcare support that they might be entitled to.

As Chair of the Petitions Committee, I know that childcare is an issue that has been raised with us time and time again, with thousands and thousands of petitioners signing petitions calling on the Government to think again. Although the Government do seem to have finally listened, it is far from job done. The provision offered covers only term time—38 weeks of the year—so for the rest of the year parents need to find the money to pay for childcare. The long-standing problem with the Government’s free childcare offer that is already in existence has been baked into these new provisions, with the risk that prices will be driven up even more.

The Government acknowledge that we have one of the most expensive childcare systems in the world. According to the Women’s Budget Group, the current provision already falls short by £1.8 billion. The new proposals from the Government have a projected £5.2 billion shortfall—the shortfall is increasing, along with the promises. Without proper funding, childcare providers will have to drive up prices, because for every hour that they provide for which there is a shortfall in funding they have to find the money to top up the rest. We must be honest here: it is parents who are picking up the tab, because the hours that parents are paying for cost far more as a result. This really should not have to be said, but crashing the childcare sector and taking money out of the pockets of hard-working parents are the absolute opposite of helping our economy to grow.

[Bob Stewart (Beckenham) (Con)]

I thank the hon. Lady for allowing me to intervene. I am getting a few cases now of people who are going to the Government to get the voucher for childcare, but the Government are taking far too long, which means that those people miss the deadline for giving the voucher to the local council—Bromley Council—so that they can get funded. This is a real problem, and it is increasing in my view.

[Catherine McKinnell]

I thank the right hon. Gentleman for raising his concern. That is just one of a number of complexities in the childcare system that are holding parents back. Adding more complexity in the system, which I fear some of these reforms will do, will only compound those problems. Parents, who are so busy, so stressed and so under pressure trying to work and bring up their children, are having to navigate the various Government offers of childcare. They call these offers free, but parents have to pay for so many hours. They also say that it is tax-free, but it is no such thing and parents need to apply for it and get the money back. It is an incredibly complex system. We could provide a much more simplified system that truly helps parents to reach their full potential and that also helps their children to reach their full potential in a quality early years environment.

That brings me to my next point, which, again, reflects my genuine concern about the Government’s proposals. To make up for the inadequate funding that the Government know they are providing, they are looking to cut corners and, I fear, to drive down quality. Against the advice of parents, providers and childcare experts, the Government are proposing to amend the ratio for two-year-old children from one adult for four children to one adult for five children. I wonder whether the Prime Minister or the Chancellor has ever tried looking after four two-year-olds, but add another into that mix and it does not get any easier. Significant investment is required in training to enable staff to manage that larger workload. Furthermore, comparing us with other countries that have much higher regulatory and training standards for their early years education staff is just a false comparison.

I urge every Member to listen to parents such as the Steepers, who, tragically, lost their son while he was at nursery. They brought a petition to Parliament to raise awareness of the danger of increasing the ratios, because they are desperate that no parent will ever face the same pain. Nobody supports a reduction in childcare quality or safety, but many warn that that is what these changes will bring. The risk is as well that it will only compound the current challenges in the early years workforce, who are leaving in their droves. Seventy five per cent. of nursery and pre-school staff have said that they are likely to leave the sector if their childcare provider increases the ratios. They are already underpaid and under pressure. Adding another child into the mix will only tip them over the edge. That will not help the Government’s target of finding 39,000 extra childcare staff to meet the needs of the new provision. That explains the delay in bringing it in, because the Government face a mammoth task to build up the workforce.

The only attempt I can see to tackle this—other than reducing the ratios, which people have said and I believe will have the opposite effect—is giving bonuses to prospective childminders. Here is the deal: if someone signs up as an individual, as people have for many years, they will get a bonus from the Government of £600. However, if they sign up with a private childcare agency, of which there are currently six in the country, all listed with hyperlinks to their websites on the Government website, they will get a double bonus of £1,200.

I asked the Prime Minister why the Government are driving people to go through an agency rather than sign up directly with their local authority. The answer I got was:

“I think it is a reflection of the fact that it is through intermediaries, so there are additional costs.”

That rather sums up how backward this policy is; there is £10 million allocated to it, and we could get two for the price of one if we cut out the middleman. Why the Government are doubling bonuses for people who sign up with agencies, I do not know. The Prime Minister has promised to write to me with answers and I eagerly await his response.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

Is it not something of a contradiction to appear to benefit nurseries over childminders when, in a Westminster Hall debate that I led on childcare, the Under-Secretary of State for Education, the hon. Member for East Surrey (Claire Coutinho), decried the loss of childminders and said how much the Government wanted to see the number of childminders return to previous levels?

[Catherine McKinnell]

I think there are many contradictions in the Government proposals, and I am attempting to set them out here. I admire the ambition, but I fear the reality does not match it. I would be interested if the Minister were able to shed some light on some of these issues when he sums up the debate.

I also want to focus on wraparound care. We know the crisis in childcare does not stop when a child starts school; the juggle only increases. Parents need help with breakfast clubs and after-school clubs and the Government must ensure that not only are they available, but they have funding to support them. Although the Government have announced an ambition to provide 8 am to 6 pm care for all primary schools, there is not much in reality to meet that ambition. The money that has been provided is for start-up funding. It runs out after 2025 and parents are left to pay the bill with no support with those costs.

The hon. Member for North East Bedfordshire (Richard Fuller) suggested that Labour is keeping its election plans very tight, but this is one policy that we shout loud and clear and are very proud of, and are disappointed that the Tories have not stolen. With our wraparound care offer we will guarantee breakfast clubs for all primary school children, paid for by abolishing the non-dom status. I would be delighted, and I think the country would too, if the Government were to steal that policy.

I will conclude, because I am aware that some hon. Members have gone on very long in this debate. The Government finally appear to recognise that childcare is part of our vital infrastructure. I welcome that. It is fundamental to our economy, to tackling the gender pay gap and to giving all children the best start in life—something that is too often forgotten in these conversations. Childcare is about not only helping parents into work, but giving children the best start in life, ensuring that they have good-quality early years provision so they are ready to start school in line with their peers.

I fear that driving down quality and a race to the bottom on ratios will not achieve those ends. The real test of the policy is whether it will make childcare more affordable and more available and whether it will deliver economic growth. We have heard from parents and providers that at best, these measures are just not enough, and at worst, they might make the problems worse. I hope the Government listen to those concerns and keep the policies carefully under review, because the childcare system in our country is so broken that sticking plasters will no longer do.

16:59

[Priti Patel (Witham) (Con)]

It is an honour to follow the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), because I wholeheartedly support the principle of getting more parents into work and, importantly, we both became Members of Parliament at a similar time, when we both had small children. There is a clear understanding that the childcare system in this country has been dysfunctional and unaffordable for too long. I was a Minister in a Government who developed the policy of tax-free childcare, and we wanted to simplify it. I think she made some important references to simplification and making childcare much more accessible to and practical for parents—we need that.

I say that because our country and our economic prosperity are built not on the foundations of government, high taxes and regulations, but on the ingenuity of the human spirit and the British public going out to work and contributing. That is effectively what we need to be doing. Our economic strength comes from the entrepreneurial spirit of businesses—obviously, I say that as an Essex MP—and from the nation’s wealth creators: our army of hard-working businesses. I come from a small business background myself—people know that I have worked overseas and all the rest of it. That is what builds economic foundations and protects us, allowing us to weather economic hard times.

We must recognise, of course, that we have seen economic hard times—certainly in my decade in this place—and we are not out of the woods; we have high levels of inflation. We also have challenges in the banking system, which could have long-term repercussions. We want to get the economy growing, and for the Government to meet their pledge to grow the economy, create more better-paid jobs—we all believe in better-paid jobs—halve inflation and reduce the national debt, we need businesses such as those in Essex. My hon. Friend the Exchequer Secretary to the Treasury is a Suffolk MP, and I am adding the entrepreneurial eastern region. We have to give people the bandwidth to invest. We need them to feel confident about the strength of our economy and that businesses will do a great deal to invest.

Of course, Governments do not create jobs—we need to recognise that—but they can help to generate growth. That is why we need the right economic foundations, fiscal framework and supply-side reforms—about which we do not talk enough—to encourage free enterprise. So many of us in this place are old enough to remember that that was the approach that lifted our country out of the economic doldrums in the 1980s. As I said in the Budget debate, there are many positives in the Budget, but there is a strong sense among the business community that the Budget and the Bill could have gone further, and that we need to think about future-proofing where we as a country go on the economy and, as many of my hon. Friends have said, about addressing the high tax burden, which curtails our economic freedoms.

I could make many references to one great Conservative, the late Baroness Thatcher, who said:

“Our challenge is to create the kind of economic background which enables private initiative and private enterprise to flourish for the benefit of the consumer, employee, the pensioner, and society as a whole.”

For me, those are the basic tests by which we should judge a Budget and a Finance Bill. Do they support private investment and enterprise? Do they ensure that we are internationally competitive? Do they help households and businesses by giving them economic freedoms?

I will touch on some measures that have already been mentioned. On the rise in corporation tax, there are measures to provide more relief, which can be welcomed, but I do not believe in increasing taxes and then providing relief to compensate for them. Too many risks come with relief. It can create complexities in the tax system, and small businesses in Essex will have to employ armies of lawyers, tax accountants and specialists. I just disagree with that; I do not think it is right, as I said in the Budget debate. I believe that we need a simplified tax code underpinned by lower taxes. We have been talking about that for years in this House but we struggle to deliver it. Of course, businesses are frustrated by that because they are the ones that have to pay the costs of it. Entrepreneurs and small businesses are subject to more regulatory costs and more restrictions, which stifles innovation. We need to do much more in that space.

The OECD minimum rate of corporation tax is a hugely complex change to our tax system that has so far progressed with very limited scrutiny, I am afraid. Given the extent of the 159 clauses, that scrutiny may happen in Committee, as colleagues have said. I hope the Minister can assure me that the time allocated to those clauses in Committee will reflect their complexity, and that key sections will be considered by the whole House, because we are deeply concerned about the impact of the change on the UK’s economic future. I have concerns about the administrative costs of those measures for businesses. We need to look at the change in more detail, given that businesses are already paying above the 15% tax rate. That is of great concern.

[Bob Stewart]

Small businesses in my constituency are complaining hugely about the fact that they will have to employ more and more accountancy hours in order to do their work. It is a real problem because it costs them more and more money.

[Priti Patel]

My right hon. Friend is absolutely right, and that brings me to a point that I hope the Minister will seek to address. The Government’s impact assessment suggests that the costs could be around £13 million initially, and then an additional £8 million annually to maintain. This is a total underestimation. When the lawyers, tax accountants and everything else—the layer cake—is included, the cost will be phenomenal. For example, the insurance sector believes that its compliance costs will increase by a minimum of 20% to 25%. Others say the increase could be as high as 40%. These are business costs—I do not need to spell them out any further.

To quote the Government, the effectiveness of the policy

“depends on a high degree of consistency of the implementation in different jurisdictions”.

It has already been said this afternoon that although we are pressing on with implementation, other countries are not. As my hon. Friend the Member for South Dorset (Richard Drax) said, the EU has granted many member states the right to delay for up to six years. The US is not going to implement it at all. We know exactly what the White House and the US House Committee on Ways and Means have said. If the UK progresses ahead, how high a degree of consistency can we expect elsewhere? In America, the House Committee on Ways and Means is threatening retaliatory measures against any countries that attempt to collect additional taxes from US corporates. We need to understand the implications across Government, because this is about not just the Treasury but the Department for Business and Trade. What impact will the Bill have on the prospects of a UK-US trade deal?

Finally, we are legislating before a final international agreement has been reached. As we know, negotiations are ongoing in respect of several measures, not least the infamous international dispute resolution, which seems to have plagued most Government policy in many other areas. We are signing up to a deal when we do not know whether it will be so loosely policed that China and other countries can game it without thinking about the wider implications. I know that the Minister will pick up these points, and I thank the Front-Bench team and the Chancellor for their strong engagement on all these issues.

I wish briefly to touch on the point that has been made about the Office of Tax Simplification. Much more work needs to be done in this policy area. At the end of the day, it applies to issues such as personal taxation rates. We on this side of the House are Conservatives and believe in allowing people to keep more of what they earn, and we trust them to make more informed choices about how they spend their money. Notwithstanding not just this Finance Bill but previous ones, it is fair to say that since 2010 we have lifted many of the lowest-paid out of income tax by increasing the tax-free allowance to £12,570. We should be proud of that. It has doubled under us and, along with the introduction of the national living wage, we have helped those on low incomes, which is absolutely the right thing to do.

The previous Finance Act that we passed froze the tax-free allowances and respective tax bands until 2028. I want to see so much more done in this policy area to give people more freedoms and to let them keep more of the income they earn, rather than having the state continuously robbing Peter to pay Paul and then reallocating so much public money in difference schemes.

We now face a real problem with fiscal drag that we have to address. Middle-income earners have already faced the impact of fiscal drag, with little change in the 40% higher-rate threshold in recent years. We also know that in 1990-91 there were 1.7 million higher-rate income tax payers out of 26.1 million, which was less than 7% of all earners. Now there are 5.5 million higher-rate income tax payers out of 34 million, which is 16% of all earners. As Members can work out, over the past 30 years we have gone from one in every 14 income tax payers paying the higher rate to one in every six. That is very significant, so this is one area that I would say to the Government, to Treasury Ministers and to the Prime Minister has to be kept under review.

To conclude, I encourage Government Front Benchers to drive forward everything that will promote free enterprise and to look at good tax cuts that will really help people, including those who, quite frankly, are struggling: low-income earners in particular, but also small businesses around the country. This is not just about the large corporates, but those that employ people in our communities. Those businesses are the backbone of our communities and our societies, and if we do more of that, we will have stronger economic freedoms to grow our economy and make our country more prosperous again.

17:10

[Ashley Dalton (West Lancashire) (Lab)]

Over the past few weeks, Government Members have described the Opposition’s objections to this Bill, and to the Budget that came before it, as “the politics of envy.” Nothing could be further from the truth. It is not envy to understand that pension tax breaks for the very richest in society do nothing to provide the economic growth we all so desperately need. It is not envy to demand an economic strategy that prioritises growth and public services, and it is not envy to want good jobs and productivity across all of our communities. This is about tapping into the potential of our country to build the better Britain that we on the Labour Benches know is not only possible, but essential. It is about priorities.

This Government had an opportunity to unlock the massive potential of our country and target measures in a way that could drive growth, invest in public services, and facilitate jobs and employment in our key sectors. However, what they have again chosen to do is paper over the cracks of 13 years of economic failure. They have chosen to dress up a massive tax cut for the richest as some kind of economic freedom, when in fact it is one of the most regressive decisions they could have taken. They have chosen to vaguely manage ongoing decline, rather than take the bold and progressive steps required to unleash the potential of our economy and build a better Britain.

I am sure that Government Members will tell us that the plan is for inflation to come down and for financial growth, but all the evidence is to the contrary. Inflation was meant to come down this month, but it went up again. Rather than improving, growth forecasts have been downgraded, and the Office for Budget Responsibility tells us that wages will fall again this year in real terms. As for the Government’s plan to abolish the pensions lifetime allowance, apparently to keep doctors in the NHS, it is a blanket measure that benefits only the very richest, and one that the former Pensions Minister Sir Steve Webb believes will actually lead to people retiring earlier.

Let us have a look at this abolition of the pensions lifetime allowance. The Government are keen to dress it up as a “keep more of what you earn” idea, as though it is going to help struggling people to save for their futures, but that is absolute nonsense. It is a common misconception that the lifetime allowance stops people from saving more than the limit—it does not. As it stands, people can save more than the lifetime allowance in their pension pots, but over that allowance they will have to pay tax on it. At first glance, anyone might think that it is a great idea that they can now save more without being taxed, but who does the policy actually benefit? In 2019-20 there were over 41 million people of working age in the UK. How many of those were fortunate enough to be able to save enough money that they went over the allowance in that year? It was 8,510. If we filled The O2 arena, four of the people in there would go over the limit. This policy will benefit at most 1% of people. How do the Government justify a policy that helps so few and costs everyone else so much? Even if it did encourage people to stay in employment longer, the IFS says it will cost the taxpayer £100,000 for every job retained. There is no guarantee at all that those people will be retained in the key sectors where we desperately them, such as doctors.

Moreover, this policy allows somebody to hoard huge unlimited wealth in pension pots tax-free. On their death, they can pass those on without having to consider inheritance tax. When Government Members claim this policy is about letting working people keep more of what they earn, we know it is a sham. When they claim it is about retaining doctors, we know it is a sham. When they claim it is about growth, we know it is a sham, because despite this so-called tax cut, the tax burden on ordinary working people is up. Not only is it up; it is at its highest in more than 70 years, and that comes on top of stagnating wages, rising inflation and rocketing interest rates.

There was a chance to put in place an affordable, targeted scheme to keep doctors, but the Government did not. There was a chance to give control back to communities through devolution deals, but 90% of us have missed out on that. There was a chance to end non-dom status and spend the money on the NHS, but it was missed. That is because the Government are out of ideas, out of steam and out of touch. It is time for them to get out of the way so that Labour can get on with building the better Britain that we not only need, but that Opposition Members know we can be.

17:16

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I wanted to start by saying a few words about the late Baroness Betty Boothroyd, because I think I may be the only Member currently in the Chamber who was here when she was Speaker. She was an extraordinary, indomitable, wonderful, tough and completely terrifying person to a new young MP—one of the 101 Labour women elected in 1997. She smashed her way through every glass ceiling that ever stopped her. She was a working-class woman, proud of her roots and of who she was, and she would let nothing get in her way.

Betty led a very different House of Commons. When you came here in the morning, you did not know what time the House would go on to in the evening. You would be terrified to get one of the invites to her many social occasions; you had to be sure you had the appropriate outfit on the back of your door in case she did invite you. Woe betide anyone who did not respond to her invites within 48 hours, because the invite would be promptly withdrawn. I do not know whether it is apocryphal, but rumour had it that she stood at the door of her social evenings and watched you come in, and if you were not appropriately dressed, you were asked to leave.

I have one last story about Betty. It was an extraordinary time in 1997, and we were all invited by Queen Elizabeth to go to Buckingham Palace. I do not know whether my right hon. Friend the Member for Doncaster Central (Dame Rosie Winterton) recalls it, but we arrived terrified. I walked into a room and I saw Betty Boothroyd. I knew that I knew her, so I could talk to her. At that point, another Labour MP who is no longer in this House turned to the Duke of Edinburgh and asked him to take a photograph of me, Betty and himself. I thought I was going to die—at least, I thought I was going to stop breathing. Everybody was silent, until Betty opened her arms and sprang into a rousing chorus of “A Nightingale Sang in Berkeley Square”, while one of the Duke’s aides took him away so that he would no longer be offended. She was a character, and we all came along behind on her coattails.

Just because Betty achieved, it does not mean that everybody could achieve. We know that the number of working mothers in our economy is in decline in the 21st century. At a time when we know that we need more people in the workforce, mothers are not entering it because they cannot afford to do so, even if they want to carry on working to develop their skills, they hope for a better career in the future or they simply need the money.

Something that makes all of our constituents cynical about politicians and Government is when much is promised and little is delivered. When my friend Natasha and her husband Pete were watching the Budget, hoping for help with childcare costs for their two-year-old son Noah, they found none. They pay more in childcare than they pay on their mortgage. There will be many women who, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said, find nothing in these proposals that is going to assist them, because they really click in in September 2024 and September 2025. We could cynically ask whether those dates have been arrived at because they will be after the general election and the current Chancellor may not have to deliver on the promises.

More worryingly, the Sutton Trust has found that only 20% of the poorest third of families will benefit from the proposals. Those are the women and the families who need to work to improve their chances. We all agree that working is the best way out of poverty, or at least that it should be. In September 2024, there will be 1,369,000 children between the ages of nine months and two years. This scheme benefits only 600,000 of them, and more—729,000 of them—will have no benefit from these proposals.

However, it is not just the mums and the families who are going to have a problem. The nurseries—the providers themselves—already have problems. We know that 5,400 nurseries have closed since 2021, because they simply could not make up for the increasing cost of gas, electricity and staffing or for the fact that the current free hours are not free to the provider. It costs about £7.49 an hour to keep a child in a nursery, but that is only subsidised to the tune of £5.50 by the Government’s plan. Promises have been made that the difference will be made up to prevent more nurseries from closing.

The money offered by the Government for the current proposal is £240 million, but the Women’s Budget Group says it will cost £1.8 billion, and that famously Trotskyist organisation the CBI reckons it will cost £1.6 billion. The Women’s Budget Group believes that the total cost in September 2025 will be £9.4 billion. The amount paid by the Government will be £4.2 billion, so it will need more than half as much again to make the scheme work. We are either going to collapse the nurseries that currently exist because they will not have anybody to cross-subsidise with, or the places will not be there for those children.

It is not about the mums and it is not about the nursery, so is it about the staffing? Our childcare works on the back of very young women being paid very little. One in eight of the staff in our nurseries is paid £5 an hour because they are too young for the national living wage. That is how nurseries manage to keep going.

[Bob Stewart]

I entirely endorse what the hon. Lady says. A lot of nurseries in my constituency are coming to me saying, “The people we employ are just not getting enough money and we can’t afford to give them more. Please, please help.”

[Siobhain McDonagh]

I completely agree with the right hon. Gentleman. I am sure that, like me, he gets emails from parents who are absolutely desperate because nurseries are closing at short notice and no alternatives are available. We think we have a problem in outer London, but the problem in Newcastle is even tougher.

Some 90,700 staff have left the profession since 2018. The Women’s Budget Group—we thank it for all its efforts in getting these details—believes that for the Government to meet their plan, they need 38,000 more childminders and nursery workers. That does not happen by magic. It requires intervention. It requires the intervention of the businesses, but also the intervention of Government. We know, and we have known for years, that children benefit from the most well-qualified and well-trained staff. Well-qualified and well-trained staff need to be paid properly. Childcare should not be the service that is provided on the back of the least well educated and the least well paid.

[Several hon. Members rose—]

[Mr Deputy Speaker (Sir Roger Gale)]

Order. There are still four Members waiting patiently to speak. We hope to start the winding-up speeches at 5.40 pm. It is a big ask. I expect you to be able to say what you need to say, but do your best.

17:26

[Sarah Olney (Richmond Park) (LD)]

Households across the country are under immense financial pressure. Mortgage bills are up, the cost of the weekly shop is up, taxes are up and energy prices are up, yet the Bill offers no immediate help with the cost of living.

The Prime Minister has repeatedly promised to halve inflation this year, but the Bill does nothing to deliver on that goal. Instead of using the measures available to tackle rampant inflation, the Government are forcing countless shops, pubs and restaurants to pass increased costs on to their customers by slashing energy support for businesses by 85%. The price of clothes, food and a drink at the local pub will all go up because the Government are cutting support. Recent statistics emphasise the direct impact that increased costs for businesses have in fuelling inflation.

Last month, the rate jumped up to 10.4%, driven largely by the cost of food and alcohol in hospitality venues, but that jump was not mirrored globally. Inflation eased to 6% in the United States and to 8.5% in the eurozone, so why is the UK suffering from persistently higher rates of inflation than other large economies? The Government would like to pin the blame solely on external factors, but they are actively choosing not to tackle rising prices by supporting businesses with their energy costs. If the Government wish to be congratulated when inflation falls, they must also take responsibility when it rises.

The impact of the Government’s failure to tackle inflation is not only felt through increased prices in the shops. Earlier this month, the Bank of England raised interest rates for the 10th consecutive time, causing further misery for millions of mortgage holders who face soaring monthly payments. In my constituency alone, 15,000 mortgage holders are now vulnerable to soaring costs because of the Conservative chaos.

The Government could be doing so much more to support families with the immediate pressures of the cost of living. The Minister claims the Government are extending support with energy bills, but that is simply not true. People will pay more for their energy this year than they did last year, not less, even though gas prices are falling. In three months’ time, there will be no extra help in place whatsoever—the £400 discount is also gone. Fuel poverty will get worse, not better.

The Liberal Democrats would cut energy bills by £500, taking them back to the level they were at last April. The Government even had unspent funds available to do that, but they simply chose not to. The Liberal Democrats would also introduce targeted support for the most vulnerable households by doubling the warm home discount and the winter fuel allowance, as well as setting up an emergency home insulation programme to bring energy bills down in the long term. To fund additional support, we would implement a proper windfall tax on the super-profits of the oil and gas giants by raising the rate and abolishing the fossil fuel investment loophole—fair taxation that would redistribute windfall profits to directly benefit households.

Not only have the Government failed to get a grip of the cost of living crisis; they are hitting hard-working families with unfair tax rises, penalising people for every extra pound they earn at a time when wages are already declining in value. Meanwhile, households have seen no benefit from the increased taxes they pay. Schools and hospitals are stretched to breaking point, with no room left in their budgets to cover essential running costs, let alone to fund vital repairs to crumbling infrastructure. The Bill completely ignores our crumbling public services, condemning them to further decline.

The Chancellor has spoken of re-engaging economically inactive people in the labour market, but the Government have no plans to fix NHS backlogs and social care staff shortages, which is essential to reduce the nearly 2.5 million workers out of work due to ill health. They cannot fix workforce problems with people with ill health if they do not fix the NHS and social care. The Government just do not seem to get that.

Above all, the Bill fails yet again to implement measures that would deliver strong, sustainable and fair growth for the UK economy. Business investment in the UK is the lowest in the G7. We urgently need to boost private sector investment in our businesses to get on the path to sustained growth. The Conservatives’ policy on that has failed badly. The lack of industrial strategy and their constant flip-flopping on tax and investment rules have not achieved the growth they promised us.

The business community has been vocal about the damage caused by the Government’s decision to scrap research and development tax credits for SMEs in the autumn statement. I was therefore disappointed by the lack of movement in that area in the Bill. I urge Treasury Ministers to reconsider their policy and to reinstate the R&D tax credits for SMEs in full. Such incentives are vital to enable small businesses to fully explore the opportunities opening up, particularly in the digital sphere, artificial intelligence and robots, and to ensure that the UK can continue to be a powerhouse of technical innovation.

The Government should also explore other tax incentives proven to boost productivity, such as tax breaks for training, digital investment and upgrades to energy efficiency. Instead, we have another temporary measure that fails to give businesses the confidence to make investment plans for the future.

Despite its 450 pages, the Bill offers nothing to support households or businesses with immediate cost of living pressures. Families are looking to the Government for support, but they are met with unfair tax hikes and crumbling public services, all the while being left to suffer the effects of rampant inflation, soaring interest rates and declining wages. The Liberal Democrats are calling for more support with energy bills, both for households to deal with the cost of living and for businesses to help curb inflation. We are calling for a proper plan for fair and sustainable economic growth, and urgent action to clear NHS backlogs and to ensure that those suffering from ill health are able to access the care that they need to return to the workforce. The Bill fails to address those points, and the Liberal Democrats will vote against it.

17:32

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

It is an honour to follow my constituency neighbour, the hon. Member for Richmond Park (Sarah Olney). However, I do not support her party’s amendment.

I rise to speak about the Finance Bill by saying:

“there’s no stability, no certainty and no sense of a wider plan”.

That is not a comment on the revolving door of Chancellors that we have seen over the past year. They are the words of Paul Johnson of the Institute of Fiscal Studies on the Government’s latest changes to the tax regime in the Budget. He is right, and his words could be applied to the entire Finance Bill and this Government’s entire Budget. The Budget that preceded the Bill was the chance to unlock Britain’s promise and potential, but it failed. Therefore, I speak in support of the amendment in the name of the Leader of the Opposition. There is a lot I could say, but I want to focus on two things: the failure to ensure that we have a tax system that works, and the impact that is having on public services and my constituents.

The business rates system is outdated and antiquated—the Government themselves have said that. Whether I talk to businesses on Chiswick High Road or in the heart of Brentford, they say that the business rates system is clobbering them, especially small, family-owned businesses that are fighting to survive. Those businesses, in addition, face rising loan costs—a Tory tax on their loans because they decided to shoot a torpedo into our economy. The economy was already struggling after 13 years of low growth and failure. We have all seen how those 13 years of failure have impacted on our public services. In our constituencies, youth centres have been closed, police numbers have been cut, and health, education and care services have been cut to the bone. We feel these cuts every day. They rip the heart out of so many communities and are the reason that we live in a country where nothing seems to work. Ambulances do not arrive, the police do not turn up, the potholes get bigger and new homes do not get built.

The 13 years of Conservative misrule have had a devasting impact on households across Hounslow, Isleworth, Brentford and Chiswick, yet the Budget and the Bill show where the Government’s real priorities lie: with the richest 1%. They were the only people to get a permanent tax cut in the Budget, through the changes to the lifetime pensions allowance. Labour called for a targeted measure, specifically to help NHS doctors, but the Government brought forward a blanket exemption for all high earners. To quote Alexander Pope,

“Who breaks a butterfly upon a wheel?”

That tax change brought a steamroller to our pensions system, when a far simpler and more targeted solution would have been the answer.

While the Government brought forward that tax break for the richest in society, the reality for families across my constituency is that living standards over the past two years have fallen by the largest levels since records began. Every week I hear from families living in small, cramped, temporary accommodation, parents working two or three jobs to keep a roof over their heads, and families worried about how they will pay the next gas bill, next month’s rent or mortgage payment, or how they will fix the washing machine. On top of that, the tax burden on families across west London continues to rise, with 3 million taxpayers caught up in the Government’s stealth tax rises.

Businesses and families in my constituency desperately want, and need, a Government who are on their side. My right hon. Friend the Member for Leeds West (Rachel Reeves) has set out how a Labour Government would be different: a comprehensive review of business rates, a proper windfall tax on oil and gas giants, a real industrial strategy that incentivises business investment, and a plan that would support our economy and give businesses and families the security they need. Heaven knows, after 13 years of Conservative rule, it is time for a change.

17:36

[Mick Whitley (Birkenhead) (Lab)]

I rise to speak in support of the reasoned amendment tabled in the name of the Leader of the Opposition, my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer), and the shadow First Secretary of State, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner).

The amendment rightly raises the question of priorities. When the Prime Minister outlined his so-called five missions to the country early in the new year, he promised the British people that

“your priorities are our priorities”.

But the Bill put to the House today, just like the Budget from which it derives, is the work of a Government who seem to be fundamentally adrift from the needs and priorities of the British people.

Indeed, looking at the measures that have been outlined today, people could be forgiven for thinking that this country was not in the midst of the worst cost of living crisis in a lifetime, that the price of basic foodstuffs was not rising at the highest rate since the late 1970s, and that the dilemma of whether to heat a home or eat was still the preserve of a few households in crisis, not a choice that is now depressingly familiar to hundreds of thousands of families across the country.

My constituents desperately needed the Chancellor to step up with a plan for progressive tax reform that would boost their disposable incomes, secure their standards of living and guarantee additional investment in our ailing public services, by asking the wealthiest few to pay their fair share. They needed action to tackle the soaring costs of food and rent, including price controls if necessary, and to close at long last the glaring loopholes in the Government’s oil and gas windfall tax scheme, so that we can begin to move towards creating an energy system that serves the public need, not the greed of private shareholders.

They wanted Ministers to take inspiration from President Biden’s Inflation Reduction Act, to recognise the importance of public finance policy in acting as a catalyst for green growth, and to begin to make up for what the Climate Change Committee has described as a “lost decade” on climate action, presided over by successive Conservative Governments. But from what we have seen today, it is clear that the Chancellor is not listening.

On the most recent reforms to the tax regime for businesses, Paul Johnson of the Institute for Fiscal Studies has rightly said:

“There’s no stability, no certainty, and no sense of a wider plan.”

He could well have been speaking for this Government as a whole. This is a Government who do not have a plan, a vision for the future of our country or the appetite to make the meaningful changes that the British people want to see. After 13 long years in power, it is time they stepped aside for a party that does.

17:39

[Grahame Morris (Easington) (Lab)]

Thank you for the chance to speak in this debate, Madam Deputy Speaker. I was quite taken by the Financial Secretary’s remarks setting out the three pillars of tax: making it fairer, making it simpler and encouraging growth. I want to focus on the failure of the Budget, and of this Bill, to address the flaws in the Government’s policy on levelling up that affect my constituency, because Easington has suffered and continues to suffer as a result of Government policy.

I am delighted that the Exchequer Secretary is on the Treasury Bench, because I want to touch on some barbed comments that he made to me and to my good friend, my hon. Friend the Member for Eltham (Clive Efford), in relation to allegations about wealth taxes, in a debate on the Budget. However, the main point that I am trying to make is about the failure of the levelling-up fund and of the Government to identify the resources needed to meet their primary objective of investing in and regenerating the poorest communities and most fragile economies in order to close the economic equality gap in the UK.

I also want to make a suggestion to Opposition Front Benchers: to develop a White Paper on investment and regeneration as part of our Budget strategy to be ready for the first days when we take office, as the Conservative party has been absolutely disastrous on supporting the poorest communities. In a previous speech, I highlighted some alternatives that the Government and my party might want to consider.

The Budget and the Finance Bill are all about political choices over tax. I am a great advocate, having looked into the matter in some detail, of a proportional property tax to replace council tax. It would be a tax cut for more than 75% of households—actually, in my constituency it would be for 100%—which would benefit from an average annual tax saving of £900. Regional economies would effectively receive a £6.5 billion economic stimulus annually, so that levelling up, rather than being a Government investment scheme, would be a feature of the tax system each and every year. It would streamline tax collection and make it more efficient, saving local authorities £400 million a year and meeting the Government’s stated aim of simplification.

In the little time I have, I want to mention the impact on Horden in my constituency. My constituents in the village of Horden were very much involved in the partnership developing the levelling-up bid. Horden is one of the poorest communities not just in east Durham or County Durham, but probably in the whole country. A great deal of time and effort went into developing the bid.

Many of the problems that Horden and my constituency face have been fashioned by Government policy. Does anyone remember the introduction of the bedroom tax? It had significant consequences for my community that we are still living through today. Accent Housing, a social landlord, cancelled a multimillion-pound decent home investment scheme in Horden, citing the collapse in demand caused by the introduction of the bedroom tax: many of its tenants were renting two-bedroom properties and were single people. The consequence was that Accent sold on the properties in a fire sale, so we have a plethora of private landlords.

Sometimes making the wrong policy decisions, particularly on tax, is worse than doing nothing. To my mind, and in the experience of many of us, the Government gimmick of making levelling up a funding competition wastes time, money and resources that could be better spent in the community. There is no way to calculate the cost and time that have been lost on consulting on and raising expectations for the failed bids, but I want to point out to the Exchequer Secretary that all five bids from County Durham were rejected. These are resources that we can ill afford to lose after 13 years of austerity, and cuts of more than a quarter of a billion pounds in Durham’s budget. My constituents are lobbying and protesting at County Hall—and, I should add, the council is now a Conservative-led coalition.

Things are very difficult, and my constituents, like me and like many other people across the country, have lost what little hope, faith and trust they may have had that a Conservative Government and Conservative policies could work in their interest, or indeed the national interest. As we have seen through their recent leaders, the Government are often more preoccupied with their own self-interest and short-term agendas. I am pleased to say that Labour is a Government in waiting, and only a general election away from restoring competent government.

I am seeking a commitment in relation to investment and regeneration. I do not want any gimmicks or games. Labour has set out our mission for government, which will guide policy and everything we do, and I therefore ask that we do not create games and competition on something as important as investment in our communities. Resources should be allocated to those in the greatest need, and I hope that the shadow Minister can confirm that instead of chaotic competition, Labour will produce a clear, targeted commitment with the purpose of closing the economic gaps and disparities and strengthening regional economies. I look forward to campaigning on such a manifesto.

Let me end by once again thanking my constituents from Hordern who are protesting and lobbying at County Hall and making their voices heard. I say to them that what this Government have done to our community is not fair or right, but together we will win, we will secure investment, and we will secure a Government who care and who represent the people.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

17:46

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

Let me begin by paying tribute to Betty Boothroyd, who was a great female trailblazer. We should do all that we can to remember her as an inspiration to all of us in this place.

I am grateful for the opportunity to close this debate on behalf of the Opposition. The Budget was a chance for the Government to unlock Britain’s promise and potential, but instead they decided to continue papering over the cracks of 13 years of economic failure. As my hon. Friends have illustrated so powerfully and persuasively today, the Government’s economic record is appalling, and the Finance Bill does nothing to fix that.

I am particularly grateful to my right hon. Friend the Member for East Ham (Sir Stephen Timms) and my hon. Friend the Member for West Lancashire (Ashley Dalton), who expressed concern about the baffling tax cut for the wealthiest 1%. My right hon. Friend the Member for East Ham said that the Chancellor had chosen the wrong thing to prioritise, and I could not have put it better myself. However, it is not just Labour Members who think that. As my hon. Friend the Member for West Lancashire pointed out, Sir Steve Webb, the former Pensions Minister and a partner in Lane Clark & Peacock, has raised concerns as well. My right hon. Friend the Member for East Ham also expressed concern about the abolition of the Office of Tax Simplification, which was announced in the disastrous mini-Budget. I should be grateful if the Minister could explain to him the justification for that decision.

My hon. Friends the Members for Newcastle upon Tyne North (Catherine McKinnell) and for Mitcham and Morden (Siobhain McDonagh) talked about the Government’s childcare proposals. They represent a welcome ambition, but all of us on this side of the House know that the devil is in the detail. Parents will be waiting until September 2025 to see the real benefits when it is fully implemented.

The right hon. Member for Witham (Priti Patel) said that the Bill could have gone further on the economy. My hon. Friend the Members for Brentford and Isleworth (Ruth Cadbury) and for Birkenhead (Mick Whitley) spoke about the impact of the current business rates system and the cost of living crisis on their constituents, a problem with which we are all too familiar in our constituencies. My hon. Friend the Member for Easington (Grahame Morris) raised his concerns about the Government’s failure to invest the levelling-up fund fairly.

The headline offering in the Budget was a blanket change in tax-free pension allowances, which benefits only those with the biggest pension pots and will cost about £1 billion a year. The Government claim that it will fix the NHS crisis, but let us be clear: this is not a targeted scheme to address pension issues affecting NHS doctors. It is a tax cut for the well off—a permanent tax cut for the richest 1% of earners that might even see workers retiring earlier, not later.

As several hon. Members have already mentioned, a former Pensions Minister has said that these changes could backfire and enable some people to retire sooner than expected. The Government could have designed a targeted scheme at a fraction of the cost, but they chose not to. As my hon. Friend the Member for Ealing North (James Murray) set out, that would have ensured value for money for the taxpayer. Perhaps the Minister can provide an explanation today for this blanket giveaway. Let us not forget that the only reason the Government have introduced a policy like this is to fix their own mess—the mess that 13 years of Tory failure has wreaked upon our national health service. Labour will continue to oppose these measures.

Let me turn to the wider economic climate facing people up and down the country. Under the Tories, growth has plummeted, leaving working people’s living standards squeezed. Since 2010, the UK has grown more slowly than its peers. Out of the 38 countries in the OECD, our average growth of 1.4% is ranked 29th, behind countries such as Mexico, Germany and the USA. UK productivity grew by just 0.4% on average between 2010 and 2019, the second slowest in the G7 after Italy, and wages are lower in real terms now than in 2010.

Labour understands the scale of this challenge and is ready to fix the failings of this Tory Government. I think that Conservative Members recognise this, given the number of policies they appear to have taken from us, including the extension of the energy price cap, addressing the scandalous treatment of those on prepayment meters, cancelling the planned fuel duty increase, introducing investment allowances to reward firms for investing, and a narrative on getting people back into work. These are all areas where Labour is leading the way and generating ideas to grow our economy.

With our mission to secure the highest sustained growth in the G7, we will create good jobs and productivity growth across every part of the country. Our plan is to replace business rates to support our high streets; to implement a modern industrial strategy to help businesses succeed; to introduce start-up reforms to make Britain the best place to grow a business; and to fix the holes in the Brexit deal so that we can export more. That will be complemented by our green prosperity plan, which will create jobs across the country. We will deliver greater self-sufficiency in renewable energy by doubling onshore wind, trebling solar and quadrupling offshore wind, thus reducing people’s energy bills and guaranteeing our energy security. We will create half a million jobs in renewable energy, and an additional half a million by insulating 19 million homes over 10 years—[Interruption.] Members may laugh, but this is more ambitious than what this Conservative Government have been delivering for 13 years.

We will make Britain a world leader in the industries of the future and ensure that people have the skills to benefit from those opportunities. As my hon. Friend the Member for Ealing North said, the world economy is changing and Britain is not grasping the opportunities to get ahead of the game. We see developments across the US and Europe that highlight the scale of the opportunity, and we see just how much Britain might miss out if we do not grasp the nettle. I know that this issue is serious, having met businesses up and down the country, including this morning. We should be at the forefront of the race to net zero, and there are individuals and innovative businesses across the UK who are working hard to play their part, but their question is: when will the Government back them and give them the tools they need to succeed? Labour’s economic plan would do just that and put the UK at the head of the pack.

So—low growth, stagnant wages and no plan for growth. That is what the UK is facing with this Government, and for precisely that reason, as our amendment today sets out, we will decline to give this Finance Bill a Second Reading. It is time for a Labour Government: a Labour Government who would get us on the path to growth; a Labour Government who would enable the United Kingdom to reach its full potential; a Labour Government who would support people and businesses to thrive and succeed.

17:55

[The Exchequer Secretary to the Treasury (James Cartlidge)]

I join the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) in paying tribute to Betty Boothroyd on the day of her funeral. I thank all colleagues who paid tribute to our great female Speaker, including in a fascinating anecdote from the hon. Member for Mitcham and Morden (Siobhain McDonagh).

It is a pleasure to respond to the many contributions from hon. and right hon. Members. I start with the Labour Front Benchers and the hon. Member for Richmond Park (Sarah Olney), who speaks for the Liberal Democrats. As at Treasury orals, they once again used the word “loophole” to describe our investment allowance for North sea oil and gas, which is an extraordinary thing to say. When we debated the autumn statement, the shadow Economic Secretary to the Treasury, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), said that

“we need more oil and gas”.—[Official Report, 22 November 2022; Vol. 723, c. 180.]

That was what she said, but it is clear from Labour’s policy that it does not want that oil and gas to come from the United Kingdom. What an extraordinary position.

If we have learned anything from what has happened since Russia’s invasion of Ukraine, it is surely that we have to maximise our domestic energy production. The windfall tax is raising significant funding so that we can pay for all the energy support our constituents are getting, but we are balancing that with an allowance so that we continue to maximise investment in our energy security.

The hon. Member for Ealing North (James Murray) lamented the fact that the Bill does not cover business rates. Well, I have news for him: Finance Bills never cover business rates, which are local taxes. If he were to pick up the Order Paper, he would see that, before this debate, my right hon. Friend the Secretary of State for Levelling Up, Housing and Communities introduced the Non-Domestic Rating Bill.

The hon. Gentleman, along with many of his colleagues, including the Chairman of the Work and Pensions Committee, the right hon. Member for East Ham (Sir Stephen Timms), and the hon. Members for Brentford and Isleworth (Ruth Cadbury) and for West Lancashire (Ashley Dalton), continued the narrative that our abolition of the lifetime allowance is somehow a tax cut for the rich. They talk of the beneficiaries as if they were oligarchs, but we do not see it like that. These people have worked hard all their working life, doing the right thing and paying into a pension.

My hon. Friend the Member for Amber Valley (Nigel Mills), in an excellent speech, like my hon. Friend the Member for South Thanet (Craig Mackinlay), made an important point about the complexities and issues that would arise if we tried to have a scheme purely for one profession. I said last Thursday that we would have to consult on such a scheme, and then we would have to respond to the consultation. All those things would take months, but our tax cut will come in on 6 April because we need these doctors on our wards now, and we do not want them to retire early. We are backing all our professions because we want to get Britain growing again.

[Catherine McKinnell]

It is interesting that the hon. Gentleman speaks with such passion about moving fast to help these very high earners. Could he explain why the Government are incapable of moving any faster than a snail’s pace on providing childcare for some of the lowest earners in the country?

[James Cartlidge]

The hon. Lady knows why we need a staggered implementation, and I will return to that point.

At the beginning of his speech, the right hon. Member for Dundee East (Stewart Hosie) referred to our progress, or lack of progress as he sees it, on reducing debt, before setting out a load of spending requests and demands for more support. He wants more energy support and more support with the cost of living. He does not want alcohol duty to be uprated by RPI, and I understand why he makes that point, but it scores £5 billion. He cannot have it both ways.

Once again, the right hon. Gentleman spoke about our relative performance following Brexit. By definition, and we can have this debate, our growth compared with other nations must always be an estimate. This is not “Sliding Doors”—my hon. Friend the Member for South Thanet mentioned that film—and there is no parallel universe, but there is one area on which we can speak definitively, and that is the saving accrued by not paying our membership fee. I can confirm to the House that, net of the divorce settlement, £14.6 billion has been made available in the current spending review by not having to pay the membership fee. That is an absolute gain from Brexit that the Opposition would not have enjoyed.

My hon. Friends the Members for South Dorset (Richard Drax) and for South Thanet and my constituency near neighbour the former Home Secretary, my right hon. Friend the Member for Witham (Priti Patel), all spoke about corporation tax, and my right hon. Friend made the brilliant Conservative point that the Government do not create jobs—she also spoke very well about eastern region entrepreneurialism, which I obviously support her on.

On the corporation tax issue, I would make this key point: we legislated for the increase in 2021 when we were still in the pandemic, and one only has to look at the graph for borrowing that followed the pandemic, showing the most extraordinary surge, to realise that it is impossible to have such a surge in borrowing without fiscal consequences. So we had to take difficult decisions. Like my right hon. Friend, I ran a small business and I did not enjoy paying corporation tax. As Conservatives we do not want to put up taxes, but we also have a duty to run the public finances in a sound and stable fashion, so we have taken difficult decisions, but they have given us the platform to cut corporation tax in this Budget and Finance Bill for businesses that invest.

The right hon. Member for Dundee East asked about tidal stream energy. We recognise the opportunity of that, which is why we are allocating a ringfenced budget for the technology in allocation round 5. The hon. Member for Richmond Park complained about our performance on inflation relative to the EU; there are 12 countries in the EU with higher inflation than us.

My right hon. Friend the Member for Witham and my hon. Friends the Members for South Dorset and for South Thanet, and I think also my hon. Friend the Member for North East Bedfordshire (Richard Fuller), raised a point about pillar 2 and sovereignty, and I totally respect the points and arguments they make. I reassure them that pillar 2 is implemented through domestic legislation in each implementing nation, rather than as an international treaty. The UK has a primary right to impose any top-up tax due on UK-headquartered groups or on foreign groups’ UK operations. If the UK does not exercise that right, the same top-up tax can be imposed by other countries, and businesses would therefore incur the same level of top-up tax but the tax would be paid to that nation, not to the UK.

I said I would respond to the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) on childcare. As she knows, we are increasing support for those on low incomes. We are increasing support for those on universal credit, not least by paying it up front. We will be phasing in the childcare support—from April 2024 working parents of two-year-olds can access 15 hours per week. From September 2024 all working parents of children aged between nine months and three years can access 15 hours per week. [Interruption.]

There seems to be a cold going round or something, as there is a lot of coughing, so I will conclude by referring to the point of the right hon. Member for East Antrim (Sammy Wilson). He is not in his place but he asked an important question, especially in light of our announcement in relation to the Windsor framework. I can confirm that the Government have today published secondary legislation that will extend full VAT relief for energy-saving materials to Northern Ireland. The Windsor framework now enables the relief to be expanded to Northern Ireland, with a single UK-wide relief set to take effect from 1 May 2023. The relief supports households across the UK to improve their energy efficiency. I hope the hon. Member for Strangford (Jim Shannon), who is always present, will relay that back to the right hon. Gentleman.

To conclude, the Prime Minister has three economic targets. We want to halve inflation; this year we are forecast to more than halve it, but we know times remain challenging for households. We want to get debt down; that is why we are running public finances in a prudent fashion. Above all, we want to get the economy growing; that is why I commend this Finance Bill to the House.

Question put, That the amendment be made.

18:03

Division 208

Ayes: 211

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Labour: 157
Scottish National Party: 42
Independent: 4
Plaid Cymru: 3
Social Democratic & Labour Party: 1
Green Party: 1
Alba Party: 1

Noes: 289

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Conservative: 283
Independent: 4
Democratic Unionist Party: 2

Question put forthwith (Standing Order No. 62(2)), That the Bill be now read a Second time.

Question agreed to.

Bill accordingly read a Second time.