Finance Bill

Debate between Baroness Finlay of Llandaff and Lord Agnew of Oulton

2nd reading & Committee negatived & 3rd reading
Tuesday 8th June 2021 Lords Chamber

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, we are here to debate the annual Finance Bill, introduced in the other place following the Budget on 3 March. My right honourable friend the Chancellor of the Exchequer outlined a Budget with three key objectives: first, to protect jobs and livelihoods and provide additional support to get the British people and British businesses through the pandemic; secondly, to be clear about the need to fix the public finances once we are on the way to recovery and to start that work; thirdly, as we emerge from the pandemic, to lay the groundwork for a robust and resilient future economy. This Finance Bill enacts changes to taxation that support all those objectives.

The House will of course be aware of the severe public health and economic shock caused by the pandemic; at its peak, the economy shrank by 10%, the largest fall in more than 300 years. The Government have responded with an extraordinary package of support for the economy which, taking into account measures introduced in the 2020 Budget, is now estimated at £407 billion for this year and last year. This has been essential. Thanks to it and the rapid rollout of vaccinations, the Office for Budget Responsibility and other independent authorities now expect a swifter recovery than had previously been forecast. Indeed, the OBR expects the UK economy to recover to pre-crisis levels six months earlier than it did previously—in the second, rather than the fourth, quarter of 2022.

Our first objective is protecting jobs and livelihoods. There are positive signals that we are now on the right path, but it is crucial that we continue to support the economy over the coming months and deliver on the Budget’s first aim of protecting jobs and livelihoods. That is why the tax measures outlined in the Bill go further to support the economy. We are extending the 5% reduced VAT rate until 30 September to protect almost 150,000 hard-hit hospitality and tourism businesses which employ over 2.4 million people. To help those businesses manage the transition back to the standard rate, VAT will then increase to an interim rate of 12.5% from October until the end of March.

The Bill ensures that any business that took advantage of the original VAT deferral new payment scheme will be able to pay that deferred VAT in up to 11 equal payments from March 2021, rather than by one larger payment due by 31 March 2021. For those businesses that have been pushed into losses, the trading loss carry-back rule is being extended from the existing one year to three years for losses of up to £2 million. This will deliver a significant cash-flow benefit for eligible businesses.

The Bill also puts into legislation the temporary cut in stamp duty land tax, with a residential stamp duty nil rate band remaining at £500,000 in England and Northern Ireland until the end of June. This will be followed by a phased transition back to the normal rate. From 1 July 2021, it will fall to £250,000 until the end of September, before returning to £125,000 on 1 October. This extension helps buyers and supports jobs which rely on the property industry.

As well as protecting jobs and livelihoods, the Bill takes important steps to deliver on the second of the Budget’s key objectives: to strengthen public finances as we emerge from the pandemic. The coronavirus response, as we all know, created unprecedented challenges for the Exchequer. The first outturn estimates from the Office for National Statistics show borrowing for last year is estimated to have totalled £300 billion, or 14.3% of GDP. As we continue our response to this crisis, borrowing is forecast by the Office for Budget Responsibility to be £234 billion this year, which is 10.3% of GDP. This means we are forecast to borrow more this year than during the financial crisis, an amount so large it has only one rival in recent history—last year. The Government need to balance this enormous support provided to the economy in the short term with the need to start to fix the public finances in the longer term. The Bill takes forward a number of measures to do this responsibly.

First, the income tax personal allowance will rise with the consumer prices index, as planned, to £12,570 from this month. This level will then be maintained until April 2026. The higher rate threshold also rises to £50,270 from this month and will then be maintained at this level until April 2026. These changes are a fair and progressive way to meet the fiscal challenge presented by the pandemic. For example, it is worth noting that the 20% highest-income households will contribute 15 times that of the 20% lowest-income households.

Secondly, the inheritance tax thresholds, the pensions lifetime allowance and the annual exempt amount in capital gains tax will be maintained at their 2020-21 levels until April 2026. Maintaining the pensions lifetime allowance at current levels affects only those with the largest pensions—those worth more than £1 million.

Thirdly, the Bill legislates for the rate of corporation tax paid on company profits to increase to 25% from 2023. Businesses have been provided with over £100 billion of support to get through this pandemic, so it is only fair to ask them to contribute to the overall recovery. Of course, since corporation tax is charged only on company profits, businesses that may be struggling will, by definition, be unaffected. The increase will not take effect until two years’ time, well after the point when the OBR expects the economy to have recovered. This measure protects small businesses with profits of £50,000 or less by including a small profits rate, maintained at the current rate of 19%. The effect of this is that 70% of companies, or 1.4 million businesses, will not see an increase in their tax rate.

The third goal of the Budget was to lay the foundations of our future economy as we emerge from the pandemic. This requires that the Government encourage business investment now, to help spur growth and drive productivity in the coming years. That is why the Bill contains the innovative new super-deduction measure. In most cases, this measure will allow companies to reduce their taxable profits by 130% of the cost of investment they make, equivalent to a tax cut of up to 25p for every pound they invest. It is expected to lift the net present value of the UK’s plant and machinery allowances from 30th among the countries of the OECD to first. This will bring forward investment; the OBR has said that, at its peak in the financial year 2022-23, the super-deduction will incentivise an additional £20 billion of business investment.

The Bill also contains clauses that will enable the creation of free-port tax sites. In these sites, businesses will be able to benefit from a number of tax reliefs, including a stamp duty land tax relief, an enhanced structures and buildings allowance and an enhanced capital allowance for plant and machinery. This tax offer will be combined with simpler import procedures and duty benefits in customs sites to help businesses trade, along with planning changes to give a green light to much-needed development and spending to invest in infrastructure. This comprehensive package will allow free ports to play a significant role in boosting trade, attracting inward investment and driving productive activity.

I have talked about how this legislation delivers on the core objectives of the Chancellor’s Budget. However, as might be expected in the annual Finance Bill, it also takes forward a number of other measures to progress the Government’s long-term aims to ensure a flexible, resilient and fair tax system. As part of the United Kingdom’s commitment to be a global leader on tax transparency, the Bill allows for the implementation of OECD reporting rules for digital platforms. This will help taxpayers in the sharing and gig economies get their tax right and help HMRC detect and tackle non-compliance. It will enable the extension of Making Tax Digital requirements to smaller VAT businesses from April next year, building on the successful introduction of Making Tax Digital for VAT businesses.

It implements reforms to the penalty regime for VAT and income tax self-assessment to make it fairer and more consistent, and harmonises interest for VAT and income tax. It tackles promoters of tax avoidance through strengthening existing anti-avoidance regimes and tightening rules. Importantly, it introduces an exemption from income tax for financial support payments for potential victims of modern slavery and human trafficking made by the UK Government and devolved Administrations.

I turn to how the Bill helps us deliver the important commitments the Government have made on the environment and carbon reduction. The new plastic packaging tax will encourage the use of recycled plastic instead of new plastic in packaging. For plastic packaging that contains less than 30% recycled plastic content, the rate of the tax will be £200 per tonne. This will transform the economics of sustainable packaging. To help tackle climate change and improve the UK’s air quality, the Bill reforms the entitlement to use red diesel from April next year. This will help ensure that the tax system incentivises users of polluting fuels such as diesel to invest in cleaner vehicles and machinery, or just to use less fuel.

To conclude, the coronavirus pandemic has presented an immense challenge to this country and delivered a dramatic shock to our economy. The Government have met that shock with a determined and sustained response, but the work is not yet done. This Finance Bill continues to support the lives and livelihoods of families and businesses. As we emerge from the pandemic, it will set the ground for an investment-led recovery and for strong public finances in the coming years. The Bill delivers a number of measures for a fairer and more sustainable tax system in support of the work needed to tackle climate change. For these reasons, I commend it to the House.

[The Deputy Speaker (Baroness Finlay of Llandaff) (CB)]

My Lords, I remind all in the Chamber that we are expected to be masked when seated.

Small and Medium-sized Enterprises: Student Work Placements

Debate between Baroness Finlay of Llandaff and Lord Agnew of Oulton

Monday 16th July 2018 Lords Chamber

[Lord Agnew of Oulton]

My Lords, we have already announced substantial funding for the T-level programme, and there are a number of key components of it, such as the technical knowledge and practical skills that are specific to a chosen industry or occupation, and an industry placement of at least 45 days in students’ chosen industry or occupation. In March of this year the Chancellor of the Exchequer announced a specific amount—I think it was £80 million—to assist SMEs in making these placements available.

[Baroness Finlay of Llandaff (CB)]

My Lords, does the definition of SMEs include small farms, so that students can get experience in farming and animal husbandry? We have a shortage of agricultural workers coming through and we know that very few young people who are not brought up in farming go on to enter agriculture at the moment, so there is a workforce need to give them high-quality experience. Would such support also cover indemnity for these farmers?

[Lord Agnew of Oulton]

My Lords, I certainly hope farmers are included, because that is how I started. At 13, I was put on by my father at 20p an hour and laid off without pay when it rained. One of the parts of the guidance we are preparing is on specific health and safety advice for industries where there is more exposure to heavy machinery, such as construction and, of course, agriculture. I therefore hope very much that young people will be involved in that.

Manifesto to Strengthen Families

Debate between Baroness Finlay of Llandaff and Lord Agnew of Oulton

Wednesday 9th May 2018 Lords Chamber

[Lord Agnew of Oulton]

My Lords, we recognise the value of family hubs. We have perhaps slightly shifted the emphasis with, for example, the introduction of 15 hours’ free childcare for the most disadvantaged children in this country. In the last two years participation has gone up from 58% to 71%, and 500,000 children now benefit from it. We believe that is a very effective mechanism to work alongside children and family hubs.

[Baroness Finlay of Llandaff (CB)]

My Lords, do the Government recognise the need for an alcohol strategy as part of maintaining family integrity, given the figures showing that when there is dependency there is physical abuse in over one-third of families, which falls to 10% during recovery programmes, while mental health issues in other family members presenting to clinical services fall from two-thirds of families to one-third when there are adequate programmes in place?

[Lord Agnew of Oulton]

My Lords, we recognise the damage that alcoholism can do to families. We estimate that there are some 200,000 children living in households where alcohol dependency is a problem. We have launched a number of initiatives: the DWP has announced a £4.5 million innovation fund aimed at local authorities to support them in implementing evidence-based interventions; there is a £1 million fund for the voluntary sector and not-for-profit organisations to take forward projects to build capacity nationally; and there is a £500,000 fund for the expansion of an existing helpline to increase the support available to children with alcohol-dependent parents.