Finance (No. 2) Bill

Debate between James Murray and Kit Malthouse

Report stage
Tuesday 20th June 2023 Commons Chamber

[James Murray]

I thank the hon. Lady, I think, for that intervention. I am trying to work out exactly what point was being made there, but I think the overall point is clear. There is concern from all sides at £1 billion a year of public money being spent on a blanket change, rather than something targeted at NHS doctors.

That failure to spend public money wisely is evident again in the Bill’s proposal to reduce air passenger duty for domestic flights, the impact of which our new clause 10 seeks to uncover. Again, at a time when public finances are under severe pressure, household budgets are being stretched in all directions and the cost of inaction on climate change grows by the day, it is baffling that a tax cut for frequent flyers is the Government’s priority for spending public money.

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

I just want to take the hon. Gentleman back, if I may, to the point he made on pensions. Can he not see the difficulty of having a specific regime for NHS doctors? For example, if he were to bring in a specific regime, would it apply to doctors who also work in the private sector? What would happen if an NHS doctor changed career and became an accountant? There are other areas where we have difficulty securing the services of public servants beyond a certain point, for example judges, prison governors or senior police officers. Is he proposing that each of those areas should have their own specific scheme and that therefore we should build a sort of rats’ nest of complexity around pensions?

[James Murray]

I thank the right hon. Gentleman for his comments, but I feel he is misguided in claiming that it is somehow only Labour calling for a doctors-only pension scheme to be investigated. I referred to the Chair of the Treasury Committee, but I could also refer to the current Chancellor—the current Chancellor—who less than a year ago suggested that we should go for a doctors-only scheme. All we are asking is for the current Chancellor to do what he told himself to do less than a year ago and investigate the possibilities. That is important, because that is how we spend public money wisely.

To return to air passenger duty, Ministers may try to point out, when we discuss it later in the debate, that the lower rate of domestic air passenger duty has been accompanied by the introduction of an ultra long-haul rate. But when taken together, the air passenger duty changes in the Bill are set to cost the taxpayer an additional £35 million a year. That cannot be the right priority for spending public money. In Committee, we tried to get to the bottom of why this tax cut is being prioritised.

Finance (No. 2) Bill

Debate between James Murray and Kit Malthouse

Committee of the whole House
Tuesday 18th April 2023 Commons Chamber

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

Thank you, Dame Rosie, for the opportunity to respond on behalf of the Opposition. I would like to speak to the amendments and new clauses in my name and that of my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare).

When we debated this Bill’s Second Reading at end of last month, we made it clear that what we needed was a plan to get us out of what the previous Chancellor rightly called a “vicious cycle of stagnation”. We need a plan for growth—a plan to raise the living standards of everyone in every part of the country—but this Government have failed to offer us one. That much was clear from the data published alongside the Budget, which showed that ours is the only G7 economy forecast to shrink this year and that our long-term growth forecasts were downgraded in the Office for Budget Responsibility report.

Since we last debated this Bill, further data has been published confirming our fears. Earlier this month, a report from the International Monetary Fund put the UK’s growth prospects this year at the bottom of those of the G20 biggest economies—a group that includes sanctions-hit Russia. After 13 years of economic failure, people and businesses across the UK deserve so much better than that. They deserve a plan for the economy that offers more than managed decline. So today, we begin by looking at some of the measures the Government are seeking to introduce in this Bill and explaining why their approach is letting Britain down.

First, let me speak to clauses 5 to 15, which address the rate of corporation tax, capital allowances and other reliefs relating to businesses. On those, one thing prized above all else is the need for certainty and stability. Businesses across the country want stability, certainty and a long-term plan, yet under the Conservatives corporation tax has changed almost every year since 2010. Furthermore, 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. It seems that the Conservatives are simply incapable of offering stability.

Let us start by looking at the main rate of corporation tax, which clause 5 sets at 25% for the financial year beginning in April 2024. The clause will mean that corporation tax will continue to be charged at the rate to which it rose at the start of this month. That rate, 25%, was first announced by the Prime Minister, when he was Chancellor, in his spring Budget 2021. One might think that sounds like a rare example of certainty, but, sadly, that is not the case. As we know, last September, the then Chancellor, the one who said our economy was trapped in a “vicious cycle of stagnation”, announced that the rise to 25% would be cancelled, leaving the rate at 19%. That was of course reversed just a month later, when the current Chancellor moved into No. 11, and confirmed that the rise to 25% was back on. So much for stability! But we are where we are, and if we are to assume that the current Chancellor’s plans will indeed go ahead—a bold assumption, I admit—the rise to 25% will now continue from April 2024.

With the rate of corporation tax being increased, it is particularly important to get capital allowances right. The Government should be focused on giving businesses certainty that will help them to plan and increase their investment in the UK economy. We need that certainty and greater investment—the UK currently has the lowest investment as a percentage of GDP in the G7—yet the approach in clause 7 is to introduce temporary full expensing for expenditure on plant and machinery for three years only. By making that change temporary, it only brings forward investment, rather than increasing its level overall. The Government’s own policy paper on this measure, 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.”

As the Office for Budget Responsibility has made clear, the Government’s approach will mean that business investment between 2022 and 2028 is essentially unchanged as a result of these measures. If anything, there is a very slight fall. Britain deserves better than this. As Paul Johnson of the Institute for Fiscal Studies said in response to this temporary tweak to the tax regime for businesses:

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

That is why we have tabled new clause 3, which would require the Chancellor to follow Labour’s lead by developing a wider plan for business taxes, which we believe is needed. As my right hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chancellor has set out—

[Kit Malthouse]

I wish to challenge the hon. Gentleman’s assertion about the notion of a window. We know that where taxation is concerned the creation of a window can often create an incentive to move quickly. For example, when there was a stamp duty window, we saw a significant number of transactions brought forward and take place. The Government are saying that they want to see very significant investment taking place. We know that British industry has accumulated a large amount of cash on its balance sheets. Why would the Government not create a particular incentive by saying, “Look, there is a deadline. If you get in now, we will give you this very generous tax break and then who knows what may happen in the future”? We must not forget that although the investment may absorb all of the profit for small businesses, it will, in effect, create a tax loss that is able to be carried forward beyond the window. So I do not understand his criticism of our having a window if, as the Government say, they want action now rather than in three years’ time.

[James Murray]

I thank the right hon. Gentleman for his intervention but I feel he rather misses the point. Surely having a temporary change merely moves investment around, rather than increasing its overall level, as the OBR has set out. We have the lowest investment as a percentage of GDP in the G7, so the importance of increasing investment should be agreed by Members in all parts of this House. We need a wider plan that will give that stability and certainty, which is exactly what my right hon. Friend the shadow Chancellor has set out. She has set out Labour’s mission to secure the highest sustained growth in the G7, which means that in government we would review the business tax system and set out a clear road map to provide that certainty and boost investment.

New clause 3 speaks to that, and perhaps the right hon. Gentleman would like to join us by voting for it later this evening. It would require the Government to follow our lead by initiating that review of business taxes that we want to see now. Such a review would make recommendations on how to give businesses more certainty about the taxes they need to pay, and how to make sure that the system of capital allowances operates effectively to incentivise investment. The new clause would require the review to be conducted, and recommendations on how to increase certainty and investment to be published, within six months of the current Finance Bill becoming law. I urge Ministers and, indeed, Back Benchers to accept and support new clause 3. If they do not, I at least encourage Ministers to give as much certainty as possible by making it clear what their plans for capital allowances are beyond the three-year period covered by clause 7.