Finance (No. 2) Bill

2nd reading & Committee negatived & 3rd reading
Friday 24th May 2024 Lords Chamber

Second Reading (and remaining stages)

10:07

Moved by

[Baroness Vere of Norbiton]

That the Bill be now read a second time.

[The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)]

My Lords, it is a pleasure to open this debate on the Finance Bill on the final sitting day of this Parliament. The Bill follows on from the Budget set out by the Chancellor in March and puts in place many of the measures announced at that time. I look forward to the contributions from all noble Lords, in particular the noble Baroness, Lady Hazarika, who has chosen this debate for her maiden speech.

As I explained in the Budget debate, the fundamental economic picture has improved—and that trend has continued since then. As many noble Lords will know, since the beginning of 2023, we have been working on five priorities, three of which are economic: to halve inflation, grow the economy and reduce the national debt. A year on from when we set out those priorities, I am pleased to report that there has been significant progress. Inflation has now fallen to 2.3%, reaching the Prime Minister’s goal of halving inflation, and real wages are rising faster than inflation. This week, the International Monetary Fund upgraded its forecast for UK growth in 2024, and in April it said that the UK is expected to see the fastest cumulative growth of any major European economy over the next six years. Finally, our national debt is on track to fall as a share of the economy.

The work is not yet done, and I recognise that times are still too tough for too many. However, we should also recognise that we are making real progress. We are seeing robust evidence that the economy is improving, which is why we need to stick to our plan, so that we can deliver the long-term change that our country needs to deliver a brighter future. The Finance Bill builds on those improvements through four key pillars: rewarding work, encouraging investment in the economy, boosting home ownership and improving our tax system. The Bill covers 24 different measures; I do not intend to go through each today, but I will outline some of the more substantive elements.

First, the Bill rewards work. A simple truth that the Government adhere to is that work should pay. That approach benefits not only individuals and families but overall growth and the UK economy. A key measure in the Bill is to increase the high-income child benefit charge threshold from £50,000 to £60,000. The rate of the charge will also be halved, meaning that child benefit will not be repaid in full until you earn £80,000. That will take 170,000 families out of paying this tax charge. Overall, we estimate that 485,000 families will gain an average of £1,260 in child benefit in this tax year. The OBR estimates that these policies will result in the economy gaining additional hours worked equivalent to around 10,000 full-time individuals by 2028-29.

Secondly, the Bill will drive investment in the economy. Our creative industries, for example, contributed £126 billion in gross value added in 2022 and supported 2 million jobs. By announcing £1 billion of new reliefs for the UK’s world-leading creative industries in the Spring Budget, we have signalled our commitment to ensuring the sector’s continued growth. We will make current tax reliefs for theatres, orchestras, and museums and galleries permanent, at a rate of 45% for touring theatres and for museum and gallery touring productions, 40% for non-touring productions and 45% for orchestras.

We will also further support the UK’s independent film sector through a new UK independent film tax credit at a rate of 53% for films with a budget of up to £15 million. Our support does not stop there. We are also legislating for an energy profits levy price floor, which will, in effect, repeal the energy profits levy if the six-month average for both oil and gas is at or below a set threshold. Doing so was the sector’s major ask at Spring Budget 2024 and will unlock billions of pounds of investment.

Thirdly, I turn to the property package in the Bill. These measures will not only encourage more transactions in the housing market but boost supply and opportunities for home ownership for first-time buyers, as well as making the property tax system fairer. Cutting the higher rate of capital gains tax on property from 28% to 24% will encourage landlords and second home owners to sell their properties. However, we need to make sure that the tax system is fair, which is why we are abolishing multiple dwellings relief. External evaluations have shown no strong evidence that it was meeting its original objective and there were clear instances of abuse. We are also amending rules so that individuals buying a leasehold residential property through a nominee or bare trustee will be able to claim first-time buyers’ relief on their stamp duty land tax bill. That change will ensure that victims of domestic abuse are not unfairly penalised if they wish to buy their first homes anonymously.

Finally, I turn to the tax system. We want a simple and modern tax system, and we need to close loopholes where they exist. We are amending two primary VAT interest provisions in legislation, to ensure that they apply to all cases intended by the policy. We are also closing a loophole that allows individuals to avoid tax by moving assets abroad via a company.

This Finance Bill boosts our vital industries, rewards hard work, drives forward home ownership and continues to build a fairer, simpler and more modern tax system. It reinforces this Government’s commitment to prioritise economic growth, and, in turn, it will help deliver a brighter future for this country. I beg to move.

10:14

[Baroness Hazarika (Lab) (Maiden Speech)]

My Lords, it is my huge pleasure, although a bit of a scramble, to be making my maiden speech on the very last day of this Parliament. However, I have always liked cutting it fine in life. Indeed, I should thank the Prime Minister for calling this snap election because, as a journalist, I do respond well to a deadline. I am also very pleased to be making this important speech indoors; I do have an umbrella just down here.

The economy will take centre stage as citizens ponder who to vote for over the next six weeks, so I am very grateful to be able to contribute to this important debate. Before I address some of those points, I would like to thank everyone here in this House for being so patient and so kind since my introduction two weeks ago. I especially thank Black Rod, the House staff, the wonderful doorkeepers and the catering staff for making my friends and family feel so welcome. It was a day they will never forget. I would like to think that the sight of me in my ermine taking my oath was their highlight but, as they have all confessed, it was the visit to the gift shop. They have spoken of little else since. Sadly, my father is not in good health, but he was so well looked after here. Black Rod said to me, “He will not be a burden. He will be very much welcomed”; that meant the world to us.

I am incredibly proud to have been able to get agreement that my title would be Baroness Hazarika of Coatbridge. I grew up in Coatbridge in the county of Lanarkshire, near Glasgow. My father was the local GP there for many, many years. It was tough for my parents when they first arrived from a different country. People were very curious. One of my dad’s patients said to him, “What are you?” “A Muslim”, he replied. “Aye, but what kind? A Rangers Muslim or a Celtic Muslim?” That is about all the football banter you will get from me for the rest of my time in this House.

My mum and dad came from Assam in India, where the tea comes from. Many of you will have enjoyed a cup of Assam tea. It is an area to the north of the country where it rains a lot and they are fighting for independence. My parents fancied a real change of scene so they moved to Scotland, an area where—you get the picture. I am immensely proud to be the first person of Indian Assamese heritage to enter British politics. I thank everyone for all the good wishes I have had from so many people in India.

I am so glad that my parents chose to settle in Coatbridge. They say that to be Scottish is a gift and I very much believe that to be true. I feel truly humbled by my parents’ courage. Theirs is the classic story of the immigrant. They came here in the 1960s to work and build up the NHS, with £3 in their pocket, in a cold climate, yet they built such a good and happy life here for me and my brother. I pay tribute to them as first-generation immigrants for their work ethic, decency, good humour and desire to make friends with people from all different backgrounds—qualities that I hope to replicate in this House. On the big day, my father’s former receptionist, Monica, messaged me to say, “Ayesha, they are so very proud of you, but they do still wish you had become a doctor”.

I also wish to put on record my appreciation to my sponsors, my noble friends Lord Dubs and Lady Kennedy of The Shaws. They have introduced me to individuals who embody the best of humanity and who have very much inspired my politics. I would also like to thank my noble friends Lady Smith of Basildon and Lord Kennedy of Southwark, as well as their brilliant advisers, for all their support and advice. I have been here for only two short weeks but I have already been struck by how warm and courteous noble Lords from all across the political spectrum have been to me. I really thank you all for that.

It is so heartening to see that, although there is much spirited disagreement in this Chamber on so many issues, there is also a great deal of consensus and cross-party collaboration on so many others. The quality of the discussions, the rich and varied experience of so many noble Lords, and the focus on the big arguments and policy over just the raw politics make me feel immensely privileged to be here. In an era of polarisation and division, driven particularly by social media, it is important to show that, in this Chamber, although we may come from many different political tribes and none, as the late Jo Cox said, we have more in common. Although I am so proud to be here on these Benches, I have always enjoyed working across the political divide, whether in drafting policy on women and equality issues or on my Times Radio show, on which many noble Lords have appeared.

In that spirit, as we examine the Finance Bill at Second Reading, I welcome many of the measures that have been outlined, particularly the tax breaks for the creative industries, theatres, orchestras and the arts. However, I also make the important point that people all over the country, from different earning brackets—bar the super-wealthy—share a common lived experience: they are really struggling with their personal finances right now. It is of course a good thing that inflation has come down. This morning, we see a much-welcome reduction in the energy price cap, but fuel and food bills are still high compared with where they were. People are struggling with soaring mortgages, rents and childcare costs. Taxes are at their highest level in 70 years. For many in this great country, everyday life has become a financial endurance test.

As we draw proceedings to a close here today ahead of the general election, we must recognise and be honest that this is the first Parliament in modern history to see a fall in household incomes, according to the Resolution Foundation. Whoever wins the election, they must address the feeling of so many people out there that, no matter how hard they work, things are stacked against them; that, on a structural level, the economy does not work for them and their families. We must speak up for those hard-working people and small businesses.

I conclude by saying how happy, humbled and excited I am to be here with noble Lords. It is a great privilege and honour to be able to serve my country in Parliament. I hope I will live up to it; I know I will try, and provide a voice for people who are less fortunate than us. I look forward to working with noble Lords and learning from the great collective wisdom that resides within this House.

10:22

[Lord Davies of Brixton (Lab)]

My Lords, it is such a pleasure to follow the maiden speech of my noble friend Lady Hazarika, of Coatbridge—Ayesha Hazarika. We must all congratulate her on a tremendous speech; hers is a particularly tough act to follow. It is clear from her speech and biography that she has a sound political background, but she also has, to use Denis Healey’s memorable word, a hinterland—more experience.

I am particularly pleased to welcome my noble friend as a fellow resident of Brixton and a fellow graduate of the University of Hull, where she studied law. My recollection—it is a long time ago—is that the law students were particularly serious and I am glad to say that she breaks that convention. Clearly, they are important influences, but I suspect that most noble Lords will be keen to talk to my noble friend about her appearances on “Have I Got News For You”.

She has demonstrated that she will be a popular speaker. People may well come for the jokes, but they will stay for the serious political points being made. To conclude this part of my speech, it is important that she is here, particularly on this side of the Chamber, representing an underrepresented group: people under 50.

I turn now to the content of the Bill. I have found that speaking on finance Bills, even though there is nothing we can actually do, is the ideal opportunity to seize the attention of the Minister and, through her, the officials, on points which perhaps do not get sufficient coverage. I want to talk about Clause 24 on collective money purchase arrangements. I can read the Explanatory Notes, but when I try to understand what the amendment does, my mind glazes over. I do not know whether the Minister has a better understanding of what it does, but I think it illustrates two points.

First, the Government have still to get their act together on the introduction of this new type of pension scheme. Many of us with considerable experience on pensions believe that this is important for the future development of pension coverage across the economy, yet we are still getting these regulation-making powers. It is important to understand that this does not make any actual changes but, principally, creates further regulation powers, and we will have to wait for the regulations to understand what will happen. Will the Minister accept that it is a matter of priority to get this law straight, so that people can get on with introducing these important new types of schemes?

The second point, which is narrower, is contained in the heading “Collective money purchase arrangements”. Nobody in the pensions arena talks about collective money purchase arrangements; they always talk about collective defined contributions schemes. That is what they are, yet for some bizarre reason, lost in the policy-making process, we have ended up with them legally being described as collective money purchase arrangements—which in fact is a misleading title. The whole point of collective defined contribution schemes is contained in the objective of providing a pension. Calling them collective money purchase schemes gives the appearance that they are simply savings arrangements, with the infamous freedom of choice when people get to retirement. What people want is pensions. Adopting this terminology is grossly misleading about where this area of policy has to go.

The ship has sailed; it is in the legislation—I think there were 300 references to collective money purchase arrangements in the pensions Bill—but I say to the Minister that the Treasury and the Pensions Regulator together need to get a clear understanding of the terminology here. This initiative is about providing pensions; it is not about money purchase.

10:27

[Baroness Kramer (LD)]

My Lords, I welcome the noble Baroness, Lady Hazarika—talk about getting in under the wire in this Parliament. It was a brilliant maiden speech, in both tone and content, and it seemed to me that it reflected someone intending to challenge, but with respect, and that surely is the very best of this House. I very much look forward to hearing her in the next Session. One of the great joys for all of us here is that we know we will be back.

I will also use this opportunity to pay my respects to the Minister, the noble Baroness, Lady Vere. She has served with real vigour in her role and mastered an incredibly complex portfolio. If anyone doubts that, they should listen to today’s speech from the noble Lord, Lord Davies of Brixton. She has always treated all of us on our Benches with courtesy, even in the rough and tumble of politics. We do not know what will happen in the coming election, but I thought it was important to mark our appreciation of the service that she has given on this portfolio.

I will turn to the topic of the day. This is definitely a No. 2 Finance Bill, and it is mostly a tidying up exercise. I am so glad that I do not have to pursue the point raised by the noble Lord, Lord Davies—I leave that to the Minister to cope with—but, knowing the noble Lord, it is a significant point, and it is worth a follow-up.

I am particularly pleased with the support in the Bill for the creative industries. Most of the measures that are being dealt with in a wash-up process are relatively minor. We dealt with the key elements of the last Budget in numerous debates on many pieces of previous legislation and Statements, so I have decided that my comments will be fairly brief because we have behind us a whole queue of legislation, and people will be anxious to move forward.

The Government keep using phrases, as they talk about the economy, such as “turning the corner” and “returning to normal”. If the Government think that the economy has returned to normal, they really have absolutely no understanding of normal people’s lives. People are facing relentless cost of living pressures and, when I am on the doorstep, I find there is a general horror at the collapse of so many public services. I will not detail those, but I say to the Minister: if this is the new normal, my sense on the doorstep is that people do not want it.

The freezing of tax thresholds has squeezed people on low and modest incomes in some of the harshest times, while oil companies really got away with it thanks to loopholes in the windfall levy; and today in this Bill, they were handed some additional goodies. Again, when I am out on that doorstep, the anxiety about the state of the NHS and social care is dominating so many people’s minds, and we have come to a terrible pass when the police are told not to arrest criminals because we cannot provide prison places. We heard today about the new energy cap—that is, obviously, good news. But people will still pay on average £400 more for their energy in a year than they did before the pandemic—and, frankly, any benefits on that side look as though they will be stripped away by the behaviour of the water companies. I looked at the applications that they made to Ofwat; it looks like my personal bill will go up by something like £350 a year. Today, I read the assessment of bonuses going to senior managers within the water companies—they amount to £54 billion for this year. The Government are completely hapless in trying to deal with these issues, and I hope that we will get some real change following the election.

In the corporate sphere, which underpins our economy, we have low and stagnant business investment and productivity. We face worker shortages and a shortage of skills. Trade has diminished significantly. We have ongoing trade weakness—for a country that lives or dies by trade. The emergency summit this week on the Stock Exchange is just one example of the worsening scarring of Brexit. We hear that our problems are caused by the pandemic and Ukraine—that is true—but the biggest and most persistent scarring is coming from Brexit and that is worsening, not easing.

My party will fight for a fair tax strategy, a proper industrial strategy and an apprenticeship scheme that actually works. We will rebuild exports, including to our former markets in Europe. I say to the Minister that, as we come to the end of this Session, there is hope for our economy. We are right to try to take an optimistic and positive line, but we cannot rebuild our economy until her party leaves office.

10:33

[Lord Livermore (Lab)]

My Lords, it is a pleasure to take part in this debate on the Finance Bill. I begin by congratulating my noble friend Lady Hazarika on her genuinely brilliant maiden speech. Her experience, warmth and great humour were evident from her contribution. She will be a huge asset to your Lordships’ House, and I very much look forward to her future contributions to debates such as this. I join the noble Baroness, Lady Kramer, in paying tribute to the noble Baroness, Lady Vere, for her incredible command of the detail in such a complex brief, and particularly for her good spirit and kindness to me in all our exchanges across these Dispatch Boxes.

This Finance Bill follows the March Budget, which laid bare the Government’s record on the economy over 14 years: higher taxes, falling living standards and lower economic growth. Yet despite their record, the Government have now set off on some kind of victory lap, with the Chancellor and Prime Minister patting themselves on the back. But Ministers popping champagne corks will not sit well with families across Britain as they continue to struggle with the cost of living.

When the Prime Minister claims that the economy is “back to normal”, what the British people hear is a Government who are out of touch with the realities on the ground. When he claims that the economy has “turned a corner”, he should try telling that to the 6.4 million households who last year saw their rent increase or had to remortgage, or the 950,000 families whose mortgage deal is due to expire before the end of this year. When he claims that the plan is working, he will rightly be asked whether that is the same plan that means this will be the first Parliament ever with living standards lower at its end than at its start; a plan that means real household incomes will have fallen by £250 per person in that time; a plan that means our economy is now smaller per person than it was when the current Prime Minister entered office; and a plan that means our economy is now forecast by the OECD to grow by just 1% next year, weaker than every other G20 country except Russia.

The Government say that what the British economy now needs is more of the same—more of what they have delivered over the past 14 years: the highest tax burden for 70 years; the average household £870 worse off; national debt at its highest since the 1960s; families paying hundreds of pounds more every month on their mortgage bills; and economic growth on the floor. Now committed to delivering more of the same and having crashed the economy, the Government are intent on rerunning the disastrous Liz Truss experiment.

At the end of his Budget speech in March, the Chancellor announced a £46 billion unfunded plan to abolish national insurance contributions. Two months on, and despite countless opportunities to clarify their plans, there are still no answers from Ministers on how they will pay for it. What services will they cut? What other taxes will they put up? What changes will they make to pensions? Replacing national insurance revenues with higher rates of income tax would mean an income tax increase of 8%—a tax bombshell aimed squarely at Britain’s pensioners. Britain cannot afford to repeat that ill-fated experiment.

We have said consistently over the course of this Parliament that taxes on working people should be lower. Two years ago, when the current Prime Minister tried to increase national insurance, we opposed it. We supported the previous cut to national insurance, and we supported the measures announced in the Budget to bring it down by a further 2%, but those measures come in the context of a rising, not falling, tax burden. The tax burden is now set to rise every single year for the next five years, making this the biggest tax-raising Parliament since the Second World War. As Paul Johnson, the Director of the Institute for Fiscal Studies, said:

“This remains a Parliament of record tax rises”.


We are under no illusions about the scale of the challenge we may inherit if we are fortunate enough to form the next Government, nor the scale of the task in rebuilding our economy. Our plan is built on three pillars of stability, investment and reform: stability underpinned by strong fiscal rules and robust independent institutions—the Treasury, the Bank of England and the Office for Budget Responsibility; investment in partnership with business, embodied in a modern industrial strategy, and a new national wealth fund providing the catalytic investment to unlock private sector investment for our towns, cities and regions; and reform, starting with our planning system, the single biggest obstacle to growth in this country.

Rather than believing the Prime Minister’s claims that the British economy has turned a corner, the questions the British people will ask at this general election are simple. Do they and their families feel better off than they did 14 years ago? Do our hospitals, our schools and our police work better than 14 years ago? Frankly, is there anything in Britain that works better than when this Government came to office 14 years ago? The choice at this election is clear: five more years of chaos that will continue Britain on a path of economic decline or stability with a changed Labour Party that can offer hope and a long-term plan to make working people better off. It is time to turn the page to start a new chapter for Britain’s economy.

10:39

[Baroness Vere of Norbiton (Con)]

My Lords, I am enormously grateful for the contributions of noble Lords in this relatively short debate, and for the kind words of the noble Baroness, Lady Kramer, and the noble Lord, Lord Livermore. It has been an extraordinary seven and a half years as a Minister in your Lordships’ House. I have enjoyed almost every minute of it and I hope for many more.

I pay tribute to the noble Baroness, Lady Hazarika; her maiden speech showed warmth, wisdom and wit. She has yet to discover that it can indeed rain inside your Lordships’ House, despite the best efforts of our maintenance teams. She was introduced just two weeks ago—I know that because I was a supporter at somebody else’s introduction on the same day. This maiden speech is a worthy down payment on many more to come, and I am sure that we will all welcome her insightful and interesting interventions.

I will be relatively brief in my response, because I am well aware that there is much to get through today, but it is worth reflecting on a couple of points that were raised. Many noble Lords talked about the cost of living and living standards. As I said in my opening remarks, we recognise that things are still too tough for too many and we are very focused on improving that. However, again, we must remember that, over this Parliament in particular, the economy has faced an unprecedented series of shocks—shocks the like of which have not been seen for a generation—so it is also worth looking at the longer view. The OBR forecast from March 2024 states that real household disposable income per capita, a measure of living standards adjusted for inflation, is estimated at £1,700 higher in 2023-24 than it was when we came to power in 2009-10. It is the case that income has risen. I accept that the unprecedented challenges that have happened over this Parliament have put a dampener on things, but the forecasts now show that real household disposable income will increase. We also know that real wages are rising faster than inflation.

We remain very sympathetic to all the pressures felt by people, families and communities across the country. That is why all noble Lords will welcome the movement of the energy price cap today. It is worth reflecting on the input that the Government have had over the last few years: £94 billion in help with the cost of living is worth an average £3,300 per household across 2022-23 to 2023-24. That built on the support that the Government put in place, at very short notice, to ensure that millions of people had sufficient money to get them through the pandemic and that hundreds of thousands of companies could come out of the pandemic in a strong fashion.

I have noted before, and will again, that all these interventions were supported by the Front Benches opposite. In many cases, those Benches asked for much more money. Guess what? More money costs. The noble Lord, Lord Livermore, says that taxes should be lower—of course they should be lower; I agree 100% and cannot complain about that. But you can have lower taxes only if you control spending. Demanding much more money will not lead to lower taxes, and I suspect the country will realise that too.

The noble Baroness, Lady Hazarika, noted the impact of changing the income tax thresholds. Following the NICs cuts announced in the Autumn Statement and the spring Budget, plus the above-average increases to thresholds since 2010, an average worker on £35,400 will pay over £1,500 less in personal taxes this tax year than they would otherwise have done. A UK employee can earn more money before paying income tax and social security contributions than an employee in any other G7 country. We still have a relatively low-tax system compared to other major economies, but we would like that tax to fall further and we have a plan in place to do that. We have said that we will do it as we can afford to do it. It will have absolutely no impact on pensions. No doubt we will hear that a lot in the general election, but I cannot quite get my head around where that suggestion came from, because it is not the case.

I warmly welcomed the contribution from the noble Lord, Lord Davies of Brixton. My officials and I will take back his comments on the terminology. On what Clause 24 does, I am advised that the Pension Schemes Act 2021 introduced legislation to allow these schemes to operate in the UK, but this clause resolves tax issues related to transferring survivor benefits in these schemes to ensure that these transfers are authorised and do not incur tax charges. I think that is fair. It will ensure that the Royal Mail Group, which was one of the first providers of these schemes, is able to launch its scheme as planned. We are taking more regulation-making powers, because the Government’s policy intention has always been that payments made from a collective money purchase pension scheme and wind-up should be treated as authorised payments, and there were various powers available.

As I said in my opening remarks, this Bill ensures that hard work is rewarded, encourages investment in our economy and improves the outlook for prospective home owners. Its measures will deliver the long-term economic future that I know all noble Lords want for this country and provide stability in uncertain times.

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