Finance (No. 2) Bill

(Limited Text - Ministerial Extracts only)

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

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.

--- Later in debate ---

[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.