Finance (No.2) Bill

Kirsty Blackman Excerpts

3rd reading
Thursday 23rd May 2024 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I very much liked the earlier comment, Madam Deputy Speaker, about your being a good example to women in this place and someone whom people look up to. I agree with that, and I wanted to begin by thanking you.

Let me now say something about the washing up of Finance Bills in general, and about this particular Bill in the context of washing up. It seems to me that I have spent a great deal of my time in Parliament dealing with Finance Bills, and I have also spent far too much time dealing with Finance Bills during the washing-up process. I do not know whether anyone remembers the Finance Act 2017, but because an election was called the Bill had to go through that process, and it was massively gutted beforehand. My problem was that I had tabled amendments to all the clauses that were now being removed, and I was somewhat unhappy about the fact that I had done a significant amount of work that would never see the light of day.

On that occasion I gave a speech that I think lasted more than 50 minutes, in which I spoke about every amendment I had tabled, but I can reassure that House that I will not be doing the same today. I have not tabled amendments to this Bill, and neither has my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry). In fact, I have come in at the last moment to take over from my hon. Friend, because, sadly, he had returned to Inverness before the Prime Minister made the announcement of the election, and there was no physical way for him to get back in time today. I appreciate the hard work that he has done during the Bill’s earlier stages. He is sorry that he cannot be here, and unfortunately I am a poor substitute, but I will do my best.

We will be voting against the Bill’s Third Reading. I am sure that no one will be surprised by that, given that we tabled a reasoned amendment on Second Reading and that this is consistent with the approach that we have taken throughout the Bill’s progress.

Let me say a little about the way in which Finance Bills—specifically this Finance Bill, and other recent Finance Bills—go through the House. There has been an ongoing issue with Ministers, including Chancellors, refusing to include “amendment of the law” resolutions. Refusing to include a Budget resolution for amendment of the law is a genuine constitutional change, and it has taken place without much of a fanfare—pretty much on the basis that it was done during that wash-up in 2017, or in the case of a Finance Bill that was introduced with a very tight timescale. After that, the resolution was never brought back, although it is important to Finance Bills and it is important for scrutiny purposes. I hope that, should they become a Government at some time in the future, the official Opposition will commit themselves to bringing it back.

I am also concerned about the fact that Finance Bill Committees continue not to take oral evidence. The Procedure Committee will be sick of hearing me talk about this, because I bring it up at nearly all its meetings, but the lack of oral evidence means that scrutiny is not as good as it could be. I appreciate that the Minister mentioned those who submit written evidence, but I do not think that that is an adequate substitute. I understand the argument of Ministers that Finance Bills are taken by a Committee of the whole House followed by Public Bill Committee sessions, but much of the stuff that is considered in the Public Bill Committee is extremely technical, and it would benefit Members to be able to question external organisations with real experience. The Association of Accounting Technicians, for example, would be able to give us a significant amount of information about how such measures would work. When Committees dealing with Bills with which I have been involved have taken oral evidence, Members have relied heavily on quoting that evidence throughout the progress of those Bills, and I think that this would greatly improve both the Finance Bill and its scrutiny.

Let me now turn to our specific concerns about this Bill. The Chancellor made a number of comments on Radio 4 yesterday morning, before the announcement of the election. One of the excellent journalists on the programme pushed him to say whether or not he felt he was better off now than before. The Chancellor did not answer that question, but the reality is that if we ask people up and down these islands what their biggest concern is at the moment, they overwhelmingly say it is the cost of living crisis. They are massively concerned about the fact that food, electricity and gas prices have gone through the roof, and about the extra money that they are having to shell out.

The Budget was an opportunity for the UK Government to recognise that concern, take it seriously, and do what we did in Scotland: we have put tackling child poverty front and centre of decision-making processes. We have the Scottish child payment, which has taken 100,000 children out of poverty. We are doing everything that we can to mitigate the UK Government’s policies, but the reality is that all we can do is mitigate, given that the block grant is the lowest percentage of UK Government spending that it has been since devolution. With capital budgets for the Scottish Parliament being slashed, we find that increasingly difficult, because we are not in control of all the levers. We are not in control of all our finances. We cannot increase the minimum wage to a proper living wage, rather than a pretendy living wage. We cannot scrap the two-child cap. We mitigate as far as we possibly can, but we do not have all the powers that we require.

People in Scotland are better off as a result of the decisions taken by the Scottish Government. They are getting a free university education, and they can go to the dentist for free; I cannot believe the low percentage of NHS dentists in the rest of the UK. People in Scotland can receive the Scottish child payment, and a higher number of children from deprived areas go to university in Scotland. There is a huge amount of good being done in Scotland, but it is being done by the SNP Government, who have one hand tied behind their back by Westminster.

The Chancellor’s refusal to say whether he felt better off shows the difference between the haves and the have- nots throughout these islands. If we ask people who come to receptions in Parliament—people who have high salaries—how they feel about the cost of living crisis, they might say that they feel it a bit, and that they will have slightly fewer holidays or slightly fewer cars, but they do not have to make decisions, every moment of every day, about every penny that they spend. They are not, like our constituents, lying in bed at night worrying about how they will pay the rent and electricity bills, and how they will manage to buy bread, potatoes or pasta.

The inflation figures announced yesterday do not show that things are better. They show that inflation is less high than it was, but does it really make a difference to those buying pasta that it has gone up by only 47%, rather than 49%, over the past few years, given that there has been a 25% overall increase in the cost of food, and that benefits and social security have not kept pace?

The UK Government had the opportunity to provide help with the cost of living crisis in the Budget, and they did not take it. They talk about the changes that they are making to national insurance and tax, but those changes impact only people who are working and earning above the thresholds, and a good chunk of them, particularly those on the lowest earnings, also get universal credit. There are major issues with universal credit, particularly for single people but also for those with larger families, because of factors such as the two-child cap.

The reality is that this UK Government had an opportunity to make a difference to people’s lives, and they refused to take it. They do not have the same priorities as us. We will always put Scotland first. We will always fight in this place against UK Government decisions that the people of Scotland are unhappy with. Whether under a Tory or Labour UK Government, we will do everything that we can to ensure that Scotland’s voice is heard. We will do everything that we can to disagree with legislation that the people of Scotland disagree with, and everything we can to work cross party when legislation is in the interests of the people of Scotland. I have made it very clear that we disagree with this legislation, and will oppose Third Reading.

National Insurance Contributions (Reduction in Rates) (No.2) Bill

Kirsty Blackman Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give a Second Reading to the National Insurance Contributions (Reduction in Rates) (No. 2) Bill because, while acknowledging that the measures in the Bill reduce the National Insurance Contributions (NIC) burden on some employees, it considers the Government should prioritise investment in public services spending over yet more cuts in spending which would be the result of lowering tax revenue by reducing NIC rates.”

The amendment stands in the name of my group leader, my hon. Friend the Member for Aberdeen South (Stephen Flynn); my colleague on the Front Bench, my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry); and myself and other SNP Members.

The Bill is the wrong measure at the wrong time. We are quite comfortable having clear water between us and the Conservatives. When it comes to tax, they have a different ethos and ideology from ours. What is distressing, though, is the fact that the Labour party seems wedded to some of the fiscal rules and public sector cuts that the Tories have introduced. In fact, it is difficult to see a significant difference between the two parties at this point, whereas SNP Members are making a clear statement that we do not agree with this measure. We do not think it is the right time to introduce it, and we think the focus should be on public services.

The national insurance cuts will have a disproportionately positive impact on higher earners and a disproportionately negative impact on lower earners. Lower earners, higher earners, middle earners and non-earners are all able to benefit from access to universal public services. They are able to benefit from accessing an NHS that is free at the point of use—in Scotland, that is, not in England, where people have to pay prescription charges. They are able to benefit from their children being able to go to schools and get educated, from colleges, from mental health services, and from potholes being filled and bins being emptied. Everybody can benefit from all of those things; those public services are universal. Cuts in public services and continued austerity mean that the lowest earners and those who are not earning lose out the most, because those public services mean more to them than they do to people who are earning £120,000 a year. There have already been 300,000 excess deaths in the UK from austerity—this cannot continue.

To give an illustration, the national insurance cut means that a band 2 NHS staff member will pay £343 less in national insurance next year than they did this year. For an MP, the national insurance cut is worth £1,320, nearly four times what that NHS staff member will get. For someone earning £11.44 an hour and working 20 hours a week, the national insurance cut means nothing—they do not benefit from that cut at all. It is almost the least progressive measure that the Government could have taken at this point. It also does not impact pensioners: they do not pay national insurance, so none of them will gain from this cut.

In Scotland, we are doing what we can to protect people’s incomes through a council tax freeze, whereas the UK Government are allowing a council tax hike. Someone who lives in Lancashire will pay £79 extra on their council tax next year; someone who lives in North Tyneside will pay £92.37 extra. That is not to mention the water rates, which are significantly different in England from what they are in Scotland.

It is not just us in the SNP who are saying this. I want to contribute several quotes from various organisations about the Chancellor’s budget, the ruin in public services that will result from it, and its disproportionate impact. The Joseph Rowntree Foundation said:

“Last year nearly 4 million people in the UK experienced destitution, including 1 million children. The number of people experiencing destitution has more than doubled in the last 5 years. A 2p cut in National Insurance will not help those who need it the most”.

Miatta Fahnbulleh, former chief executive of the New Economics Foundation, said:

“Key take away from #Budget24. Household incomes won’t recover to pre-pandemic levels until 2025. An entire Parliament where incomes will not have grown. That’s @RishiSunak’s record right there.”

Harry Quilter-Pinner, director of research and engagement at the Institute for Public Policy Research, said that this was a

“‘slash and crash’ budget that prioritised tax cuts now at the expense of crashing public services and investment in the future. This isn’t economically desirable, fiscally credible nor politically popular.”

Rachael Henry, head of advocacy and policy at Tax Justice UK, said:

“We have the sugar rush of tax cuts now that will be paid for by deep public spending cuts to come.”

Andrew Harrop, general secretary of the Fabian Society, said:

“High earning households will be up to £1,500 a year better off after two rounds of National Insurance cuts and the wealthy will see sizeable tax cuts on profits from property sales and ISA investments. Meanwhile low earners gain little or nothing from the tax changes, and many of the poorest will actually see their incomes drop with the scrapping of cost of living payments.”

Chris Thomas from the IPPR said:

“As of Autumn statement 2022, the government expected NHS revenue spending to be £180.4bn in 2024-5 and capital to be £12.6bn. For all the talk of NHS investment by CX just now, the Spring Budget 2024 expects equivalent figures to be £179.6 and £12.6bn”.

That is less—less money for the NHS than was announced in the autumn statement.

Victoria Benson, the chief executive of Gingerbread, said that

“we urgently need to see an uplift to Universal Credit to protect those on low incomes who have been struggling for too long”.

Alison Garnham, the chief executive of the Child Poverty Action Group, said:

“This was a Budget all but blind to buckling family budgets and broken public services and will leave a legacy of crumbling classrooms, cold homes, and empty tummies.”

Lastly, and most damningly, the Samaritans said:

“The Government has chosen to waste another opportunity to save lives today.”

In Scotland, we prioritise public services. In the SNP, we prioritise public services. Per 1,000 people in Scotland, we have 8.4 nurses or midwives, while England has only 6.3 nurses or midwives. Our nurses are also paid more than they would earn in England in an equivalent band, and those earning under £28,000 a year are taxed less than they would be if they lived in England. In NHS Scotland, we have 28.9 wholetime equivalent staff per 1,000 of the population, but NHS England has only 22.9 staff. We have put in place the baby box, which is a universal gift to new parents to provide extra support for their children. We have the Scottish child payment, which has kept 100,000 kids out of poverty. We have free buses for under-22s, eligible disabled people and the over-60s, and we have P1-5 free school meals.

What happened to those who are just about managing? This Government have done amazing things for them: they have managed to massively increase the number of people who are just about managing; and they have managed to tip so many people from just about managing into absolutely not managing and living in desperation. People want their bins to be collected, their potholes to be filled, their children to be educated and their NHS to be available when they need it. They want all these services to be available to them. The cuts that the Tories are making to public services will damage even further the society we are living in. People will lose the very little support measures that they have left, and I absolutely condemn this decision and this Bill.

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[Tulip Siddiq]

I will not take any lectures from a party that puts oil and gas companies ahead of working people. If the hon. Member wants to change his policy on oil and gas companies having priority over working people, he can intervene again, but somehow I do not think that it will change.

The last time the Conservatives implemented a proposal like this, just 18 months ago, they crashed the economy. In fact, the Chancellor’s plan to abolish national insurance contributions would cost more per year than the proposals in that disastrous mini-Budget. The Conservatives might deny it, but millions of people are still paying the price of their last ideological experiment: the typical family faces an extra £240 a month when remortgaging this year. The Chancellor’s commitment last week exposed a Conservative Government who are putting party first and country second.

Labour is under no illusions about the state of the public finances after 14 years of Conservative government. We know that if we are elected at the next general election, we will have to take tough decisions in government, but instead of the chaos and recklessness we have seen under the Conservatives, Labour will bring stability and security back to the economy. We will never make a commitment without first saying where the money will come from. We will always be honest with the public because that is the responsible approach.

I hope that the Minister, whom I like very much, will finally come clean with the British people in his response. I hope that he will finally break with his party’s irresponsible promises and endless spin. I hope that he will be honest and say that, as a result of decisions taken by his Government, the tax burden on working people is forecast to go up each year over the next five years, and that for every 10p extra that working people pay in tax under the Conservatives, they will get only 5p back. Most importantly, I hope that he takes the opportunity to be straight with the British people, as we have repeatedly asked him to do, by setting out exactly how his Government will pay for their unfunded £46 billion promise to abolish national insurance.

[Kirsty Blackman]

Will the hon. Lady give way?

[Tulip Siddiq]

No, I am finishing.

The British people deserve better. This is just another Conservative pledge without a plan. The Conservatives should call a general election now.

National Insurance Contributions (Reduction in Rates) (No. 2) Bill

Kirsty Blackman Excerpts

Committee of the whole House
Wednesday 13th March 2024 Commons Chamber

[The Second Deputy Chairman]

That was marginally longer, as the hon. Gentleman said. I call Kirsty Blackman.

[Kirsty Blackman]

Thank you very much, Mr Chair—hopefully that is an acceptable form of address to use. I want to speak about the Bill in general and some of our concerns about it. The reality is that this is the wrong measure at the wrong time, as I said on Second Reading.

Earlier, the hon. Member for Hampstead and Kilburn (Tulip Siddiq) spoke about her concerns about the SNP’s policies on oil and gas. She says that we are not putting workers first. Unfortunately, the Labour party’s plans for green investment in energy mean that 100,000 jobs will be lost in Scotland, which is very clearly not putting workers first—unless it is only workers in England who count—given that the money will go on nuclear power.

On the details of this Bill, the reality is that public services are creaking and really struggling. I have spoken to the Electoral Commission, which is concerned about whether it will even be able to deliver elections properly, given that mandatory voter ID has been introduced. The commission was able to co-opt people from other areas in order to ensure that all the recent by-elections were run properly. Will the Minister make it absolutely clear that if there is a general election this year—which there almost has to be; there certainly has to be one in the coming financial year—local authorities will have enough money and people to be able to deliver and service those elections? Will they have enough resources to be able to do that?

The 2022 autumn statement allocated more money to the NHS for 2024-25 than this Budget allocates, so it is a bit of a cheek for any Conservative Member to stand up and say that the Government are putting more money into the NHS. They are putting less money into the NHS than they proposed in autumn 2022. The consequentials that arise from the increase this year are actually less than the in-year consequentials that the Scottish Government had for the NHS in this current year, so it is a very minor increase, because it only works out to in-year terms—[Interruption.] Does the Chief Secretary to the Treasury, the right hon. Member for Sevenoaks (Laura Trott) want to intervene? It is ridiculous for the Government to say, “This extra money is going into the NHS” when it is demonstrably less than they intended to spend on the NHS back in autumn 2022.

The Bill is going to make changes to the national insurance rates, and those changes will disproportionately impact higher earners. The Minister was slightly disingenuous when he said that the changes represent a higher percentage for people on lower incomes. Yes, but that is significantly less money. A band 2 worker in the NHS will be getting a £341 reduction in their national insurance rate. An MP in this House will get four times that. How is it fair that somebody in this House who is, in the main, not struggling to make ends meet will get £1,300 when someone working in the NHS will get only £300?

NHS workers have seen exactly the same increase in their energy bills as we have. They have seen exactly the same increase in council tax—actually, no, they have seen a much higher increase in their council tax bills if they live in England compared with those who live in Scotland. They have seen the same 25% hike in food prices. Given that those on lower incomes spend more money on food proportionately than those on higher incomes, that 25% inflation in food prices disproportionately hits families who are earning less. Therefore, we need to give even more to those families, rather than saying, “Well, it’s a higher percentage of your income so you’re okay. You’ll be fine with £340, but those people who are earning 85 grand a year standing in the House of Commons deserve £1,300.”

The hon. Member for Norwich South (Clive Lewis) made a very good speech on this change, and as he said, it is the essence of trickle-down economics in action. The Government are hoping that if rich people get richer and inequality increases, those people at the bottom of the pile will somehow magically get richer as well. There are much better ways to do this. One of the worst things about this whole situation—apart from the fact that Labour Members are unwilling to oppose it—is the decimation of public services that will result from it. The fact is that we have had 14 years of austerity and that is set to continue. People are going to lose out on vital services. The NHS is absolutely vital. Every one of us has had some sort of interaction with the NHS, yet the Government are setting themselves up for decades of pay battles with staff members because they will be unable to give the pay uplift that people deserve. They are setting us up for the decimation of those services.

I mentioned in my Budget speech last week that £1 billion-worth of cuts have been made by local councils to arts funding. That means children cannot access arts education, cannot go to a local theatre with reduced-price tickets from their local council, and cannot access all these extra things. People are struggling to access the most basic services because local authorities are creaking at the seams, yet the UK Government’s priorities are to allow a 4.99% increase in council tax and to ensure that higher earners get £1,300 whereas those on the minimum wage of £11.44 an hour who work 20 hours a week see absolutely no benefit.

[Nigel Huddleston]

I probably will not respond to everything we have heard today, as we thoroughly addressed many of the issues in the Budget debate.

In response to the new comments, I assure the hon. Member for Aberdeen North (Kirsty Blackman) that we always ensure that the democratic process is adequately funded. She is dismissive of the £2.45 billion increase in NHS spending that was outlined in the Budget, but it is a significant amount and, as she is aware, it is a real-terms increase. I agree with the hon. Lady on the importance of arts, culture and the other areas she mentioned, which is precisely why the Budget had measures to extend tax reliefs.

My opposite number, the hon. Member for Ealing North (James Murray), asked about the logistics of implementing and executing the tax change. We understand the impact of policy changes, and I put on record how grateful we are for all those who have implemented and executed the recent changes so speedily and effectively. Employees whose employer is unable to make changes in time, and who have left their employment, may request a refund from HMRC. The Government are confident that the majority of software developers will be able to make changes to their payroll software in time for 6 April.

On the new clauses, we have outlined the policy today. The impact of any changes to policy would, of course, be subject to the usual public scrutiny of costs, including from the OBR. It is therefore not necessary to produce a report at this stage. The OBR’s “Economic and fiscal outlook” publication for the spring 2024 Budget includes an analysis of the impacts of threshold freezes, including on the number of people brought into paying tax. It is therefore not necessary to produce an additional report at this stage, so we do not believe new clause 1 is necessary.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 and 3 ordered to stand part of the Bill.

New Clause 1

Review of the effects of reducing employee and self-employed NIC contributions to zero

“(1) The Treasury must publish before the end of the parliamentary session in which this Act is passed an analysis of the effect of —

(a) replacing “8%” with “0%” in section 1(1) of this Act,

(b) replacing “1.85%” with “0%” in section 1(2) of this Act, and

(c) replacing “6%” with “0%” in section 1(3) of this Act.

(2) The analysis in subsection (1) must set out the expected impact of the changes in subsection (1)(a) to (c) on total receipts to the National Insurance Fund in each of the financial years from 2024/25 to 2028/29.

(3) The Treasury must request the Government Actuary to make an assessment of the consequences for the Consolidated Fund in each of the financial years from 2024/25 to 2028/29 of shortfalls in the National Insurance Fund that would result from a zero rate for employee and self-employed national insurance contributions.”—(James Murray.)

This new clause would require the Government, before the end of the current parliamentary session, to set out what the impact would be on total receipts from national insurance and overall public finances of reducing national insurance contributions for employees and self-employed people to zero.

Brought up, and read the First time.

--- Later in debate ---

[Kirsty Blackman]

We do not support this change. This cut disproportionately benefits those earning the most. We in the SNP recognise the value that the public sector provides. We believe it should be properly funded to deliver our vital public services, and we do not believe that they can cope with more cuts on the back of 14 years of austerity and the trials of Brexit and the pandemic. We want excellent public services for all, and we are not scared to make that absolutely clear.

Question put, That the Bill be now read the Third time.

Loan Charge

Kirsty Blackman Excerpts

Thursday 18th January 2024 Commons Chamber

[Sir David Davis (Haltemprice and Howden) (Con)]

In the interests of time I will try not to repeat all the self-evident truths that have been stated throughout this debate. The right hon. Member for East Antrim (Sammy Wilson) made a characteristically fluent exposition of the case. Everyone, from him through to my right hon. Friend the Member for North East Somerset (Sir Jacob Rees-Mogg), reiterated essentially the same point: all of a sudden, in the last few weeks, the public have become aware that huge state or quasi-state organisations put their own interests ahead of the interests of the public and, unfortunately, that is not abnormal behaviour. The right hon. Member for East Antrim quite rightly characterised that as being repeated in a high-handed and insensitive way by HMRC but, frankly, I think he understated the point.

Why do I think that? Because HMRC has referred itself to the Independent Office for Police Conduct over those 10 suicides and some other attempted suicides and self-harm. When dealing with Government Departments, that is as close as we get to a confession. Those at HMRC know they have done wrong, and they have known it for some time. They have known that the consequences of this have led to death and enormous harm to people, yet they have continued to do the same thing over and again. How on earth do they justify that when they look at themselves in the mirror?

The only thing I can come up with is that HMRC thinks this is a deterrent. Clearly, it will not raise that much money—three quarters of people will go bankrupt —so maybe it is a deterrent. If it is, that brings us to the next question that the right hon. Member for East Antrim raised: why does it not go after the promoters? The promoters exacted 18% to 20% of the incomes of these people in carrying out this scheme, so there is a large sum of money there—someone said hundreds of millions. It may even be that the victims of the scheme—that is the right word—thought that was the tax deduction, because it was of that order of magnitude. Why has HMRC not done that? We know that many of the organisations using those promoters and contractors were state organisations, including HMRC itself. That might be a reason—it does not want to embarrass itself. It might be because of that that it is complicit in covert advice to those contractors at the beginning. It is entirely possible that HMRC approved it, and those documents are hidden away in HMRC.

What is the answer? My right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) was not quite right in saying that HMRC is completely protected. There is one body—the Public Accounts Committee—that can get at this. One of the things that should come out of this debate is that the Public Accounts Committee should look at the documents —not the numbers—associated with those early contracts and see why they were done. That would be one way to get past the assertion made by my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) that we cannot deliver a practical outcome. That is one practical outcome that we can deliver.

The second practical outcome we can deliver among ourselves is to address the fact that this is retrospective taxation. As my right hon. Friend the Member for North East Somerset rightly pointed out, our country does not believe that people who undertake behaviour that is not illegal at one point in time should be prosecuted if it becomes illegal in future. That applies in spades to taxes.

One of the things I wanted to do early on in our collective campaign was to move a motion in the House at the beginning of the Budget, under the general motion that is normally put, explicitly to ban retrospective taxation. Let us guess what happened: since then, the Treasury has not moved a general motion. We always get narrow finance motions, which makes it difficult to change anything. I wrote to the Procedure Committee, which I gather is still concerned about this, to ask it to request the return of the general motion at the beginning of the Budget. Then, we could actually put it to the House. Back in those days, we probably did not have the 100-plus supporters that we now have. Today, we could probably carry that motion. I ask everyone taking part in this debate to support that—I might write around and ask everyone—and to write to the Procedure Committee to try to get that corrected. We can use our right of initiative, which we do not have much of anymore, to stop this explicitly.

[Kirsty Blackman (Aberdeen North) (SNP)]

I agree entirely on the amendment of the law resolution. In fact, whenever I have spoken on a Finance Bill since it stopped being common practice to use it, I have said that we should have an amendment of the law resolution. I appreciate what the right hon. Gentleman says about the Procedure Committee. As a member of the Committee, I can tell him that we have looked at this but, ultimately, it is the responsibility of the Government to make the change—they need to table the amendment of the law resolution. The previous Chancellor was clear that it was a small, technical change that he would not make.

[Sir David Davis]

Forgive me, but I have been here a long time. The Procedure Committee can do it—it can put it to the House and seek a Back-Bench motion. Guess what? We can move Back-Bench motions that instruct the Government. Some may remember that we did it on prisoner votes, and we won that day. It is about time that we exerted our own rights in this House on this matter.

The last point I want to make is that this whole thing was, if not precipitated, then certainly made worse by the 1999 move by the Government with what is now known as IR35. The complex rules associated with the IR35 triggered part of this behaviour pattern. What is interesting is that the behaviour of HMRC on IR35 pretty much mirrors its behaviour on the loan charge.

A large number of people out there, one of whom is in the Gallery today, have been oppressed by HMRC, frankly. They have an argument over money, let us say £70,000. They win in the first tribunal, so HMRC appeals. They win in the upper tribunal, so HMRC appeals again and takes them to court. The court, of course, then sends them back to the beginning and they do it again.

The House will remember a previous Backbench Business debate when we started the action against SLAPPs—strategic lawsuits against public participation—in which oligarchs use their huge financial power to destroy people. What is HMRC doing? Precisely the same thing. The Government are now moving to stop oligarchs doing what they do themselves, so we need to look at that too. IR35 is a disgrace. When a state organisation with infinite resources—actually, your tax money and mine—uses that power to overrule and reduce the ability of ordinary citizens to protect themselves, I am afraid it is behaving in a way similar to how countries behind the iron curtain used to behave.

--- Later in debate ---

[Kirsty Blackman (Aberdeen North) (SNP)]

I congratulate the right hon. Member for East Antrim (Sammy Wilson) on securing this important debate and I thank the Backbench Business Committee for making time for it.

To paraphrase the hon. Member for Strangford (Jim Shannon), this is an absolute mess. It is not an ethereal mess or something that is not happening to real people; it is happening to real people and affecting their lives today. We have a situation where the promoters and operators have faced no recourse. Tens of thousands of people have had their lives changed and torn apart, but HMRC has not been held to account for its behaviour. We must get to a point where there is a resolution. An end must be found, so that people do not have the sword of Damocles hanging over them.

First, on the promoters and operators, as has been said, there have not been any arrests or prosecutions, never mind convictions, of anybody who has been promoting or selling the schemes. Looking at debates from that time, the then Minister made it very clear that they were cracking down on schemes, not the individuals who use those schemes, and gave commitments that they were chasing promoters and operators. Whether Ministers were lied to by officials or knowingly came and told us something that was incorrect, I do not know, but we should never have been given those assurances, which were patently false.

There has been a consistent and concerted campaign of disinformation. MPs talking on behalf of their constituents, as well as MPs talking about the general issue, have been faced with disinformation. Whenever we have tried to find out information, we have been told stuff that is untrue, so I agree with the right hon. Member for East Antrim that we need to redouble our efforts. In fact, it is not even that we need to redouble our efforts, because doubling nothing still makes nothing; we need to make efforts to actually go after the promoters.

It is not only those promoters who promoted schemes back in the day, but the new ones that are springing up, along with other individuals and organisations that are taking advantage of people who are caught up in the loan charge scandal. People are being told, “Oh, you’re involved in the loan charge stuff—I can help you with that.” The person offering the help is then taking their money and running for the hills. That is still happening today, but those folk and those organisations are not facing any sanctions for their behaviour. The Government need to ensure they are taking action.

In many cases, the lives of individuals have been irrevocably damaged. Communication has been terrible and there have been contradictions throughout. Every Member who has talked about individual cases has said that people have been given conflicting information by HMRC. People were told, “If you pay this much, it will be fine,” but then they were told, “Actually, we’ve discovered we want another 50 grand from you,” or, “We need this,” or, “We are going to serve an APN,” or, “We’ve reopened tax year 2003.” As constituency MPs, we have all heard reports that people have been told conflicting information. Either every one of our constituents who has come to us about these issues is lying to us, or this is actually happening. I tend to assume that this is actually happening and that people have been mistreated by HMRC. That is a major concern.

It is impossible even for MPs to find out how much HMRC thinks people owe. There are times when I have had a settlement figure and an amount on behalf of a constituent, and then HMRC has chased that person again for other money later. As I said, it is a sword of Damocles hanging over people. They cannot ever get to the stage of resolution, because even if they settle, HMRC can come back and say, “Sorry, we miscalculated. We are going to chase you for another year.”

There is no point at which people can get out of this trap. I have spoken to so many constituents who—whether it was because of the loan charge or other things—reached the stage where they were terrified of opening envelopes that came through the door. Those of us who are dealing with constituents who are caught up in this know that they are terrified of opening any official-looking envelope, because it might be another demand for tens of thousands of pounds. It might be another demand for money that they do not have.

[Michael Fabricant (Lichfield) (Con)]

I am following the hon. Lady’s arguments and agree very much with her. Does she not agree that this is almost contrary to jurisprudence? There is no double jeopardy, so a person cannot be tried more than once for the same offence, yet HMRC, on those occasions, seemed to be doing just that.

[Kirsty Blackman]

I am concerned that we will not get to the end of this and that our constituents will never feel comfortable opening letters again. They will never get out of it.

The Minister needs to look not just at this issue as a whole, but at each individual case. It is very clear that there has been a disparity in the way that people have been treated. We were given the utmost reassurance that nobody would lose their home and nobody would be made bankrupt as a result of this. That was made utterly clear to us. I remember being in Westminster Hall when the Minister stood up and made those promises. Those promises have dematerialised completely. I have a constituent on universal credit whose only asset is his home, and he has been asked for tens of thousands of pounds—not tens of thousands of pounds over a 12 or 20-year period, but tens of thousands of pounds today. The only way that he can get that money is to sell his house. That is directly opposite to what the Minister told us at the time. We need to ensure that these changes are made.

Finally, a resolution to this is the most important point for me. This needs to end, so we need to get a resolution for individuals or for the whole group. People need to be absolutely confident that they will never again get through the door a terrifying demand from HMRC about something that they thought had been sorted out. If we get a proper resolution for each of those individuals —our constituents—we will have done our jobs as constituency MPs.

Council Tax and Stamp Duty Alternatives

Kirsty Blackman Excerpts

Wednesday 17th May 2023 Westminster Hall

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you for your diligence in chairing the meeting this afternoon, Mrs Harris. It has been a busy debate, so it has not been the easiest job.

I congratulate the hon. Member for Barrow and Furness (Simon Fell) on securing this debate. It is important that we discuss and think about the future of tax policy. Too often, there are only seven of us in the Chamber when tax policy is being discussed, so it is nice to see such a full room talking and thinking about the future of tax.

The situation in Scotland is similar but different: we have council tax and we have stamp duty, but it is now called the land and buildings transaction tax and is structured slightly differently. We introduced the LBTT in 2015, and it has been in place since then. The charge we pay in Scotland is more proportionate to the property price than stamp duty is in England, and we have a slightly different system that means that 40% of people who buy houses—it is separate from the additional dwelling supplement—do not pay any LBTT. Also, if a property is under £175,000—the majority of first-time buyers buy at that level—the LBTT is not payable at all.

[Helen Morgan (North Shropshire) (LD)]

On the point about stamp duty and similar taxes, does the hon. Lady agree that there is an opportunity to graduate those taxes to reflect the energy performance of a building so that we might encourage people to retrofit buildings and use the tax regime in a way that would meet some of our carbon targets?

[Kirsty Blackman]

I had not considered that before. It is very novel, and a good idea that should definitely be considered.

We are looking at council tax reform in Scotland. We agree that the system is not currently as fair as it could be. The Scottish Greens, along with the SNP and the Convention of Scottish Local Authorities, are planning short-term reforms and looking at how to approach long-term reforms to council tax. We also have a more proportionate system in Scotland for council tax. The hon. Member for Westmorland and Lonsdale (Tim Farron) talked about the amount that the highest payers pay, compared with the lowest payers. It is different in Scotland, where it is higher for those at the top.

Council tax is significantly less in Scotland, as my hon. Friend the Member for Glenrothes (Peter Grant) mentioned. Our properties are £600 less for a band E property on average across Scotland compared with England. The Scottish Government have committed to abolishing council tax for anyone under the age of 22. That flies in the face of what the UK Government are doing, which involves paying young people less, giving them less in benefits and, basically, disadvantaging them at every opportunity.

We also have a situation whereby people who were looked-after children on their 16th birthday will be eligible for a council tax reduction to zero until their 26th birthday. We have put that in place because we recognise the hardship that young care leavers feel in many areas of life, so things are slightly different in Scotland. We still do not have as fair a system as we would like, and we are still looking to reform it, but we are committed to making those changes.

Finance (No. 2) Bill (First sitting)

Kirsty Blackman Excerpts

Committee stage
Tuesday 16th May 2023 Public Bill Committees

[The Chair]

We are now sitting in public and the proceedings are being broadcast. I have a couple of preliminary announcements. Hansard colleagues would be grateful if Members could email their speaking notes to [e-mail]. Please switch electronic devices to silent. Jackets may be removed.

We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication. I call the Minister to move the programme motion standing in her name, which was discussed yesterday by the Programming Sub-Committee.

Motion made and Question proposed,

That—

1. the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 16 May 2023) meet—

(a) at 2.00 pm on Tuesday 16 May 2023;

(b) at 11.30 am and 2.00 pm on Thursday 18 May 2023;

(c) at 9.25 am and 2.00 pm on Tuesday 23 May 2023;

2. the proceedings shall be taken in the following order: Clauses 1 to 4; Clauses 16 and 17; Clause 26; Clauses 28 and 29; Schedule 2; Clauses 30 to 34; Schedule 3; Clause 35; Schedule 4; Clauses 36 and 37; Schedule 5; Clauses 38 to 44; Schedule 6; Clauses 45 and 46; Clause 49; Clauses 61 to 105; Schedule 10; Clauses 106 to 108; Schedule 11; Clauses 109 to 112; Schedule 12; Clauses 113 and 114; Schedule 13; Clauses 115 to 120; Clauses 313 to 315; Schedules 19 and 20; Clauses 316 to 320; Schedule 21; Clauses 321 to 324; Schedule 22; Clauses 325 to 331; Schedule 23; Clauses 332 to 345; Schedule 24; Clauses 346 to 352; new Clauses; new Schedules; remaining proceedings on the Bill;

3. the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 23 May 2023.—(Victoria Atkins.)

[Kirsty Blackman (Aberdeen North) (SNP)]

I will make a brief comment in relation to the programme motion. It is the convention of the House that a Finance Bill does not take oral evidence. That continues to be a significant issue for the knowledge of the Committee. Written evidence is very important, and everybody does their best to read it, but nothing quite compares to asking questions in an oral evidence session. The programme motion does not allow for oral evidence. The Government have made it clear on previous Finance Bills in previous years that that is because part of a Finance Bill is considered by the whole House and the rest is considered in Committee.

Given the extent of this Finance Bill and how incredibly complex it is, particularly when it comes to corporation tax, it would have been beneficial for the Committee to ask questions of experts. It would not have taken us past any potential dates. We could have scheduled an oral evidence session with, for example, the Association of Taxation Technicians and the Chartered Institute of Taxation, and taken evidence on the parts of the Bill that we are yet to consider in order to better understand what is in the Bill and the issues that it presents for professionals.

Although I will not oppose the Programming Sub-Committee’s recommendations in the programme motion, I raise my concerns, as I do for every Finance Bill Committee on which I sit, that oral evidence sessions would have made a positive difference. They would not have held up the machinery of government and the progress of the Bill, but they would have allowed us to make more informed decisions.

[Dame Angela Eagle (Wallasey) (Lab)]

It is a great pleasure to serve under your chairmanship, Ms McVey, I think for the first time. I have a great deal of sympathy with what hon. Member for Aberdeen North has just said, and I look forward to what the Minister has to say about it. It may well be that an innovation that has worked well in other Committees should spread to the Finance Bill. In the absence of any progress on that, I refer the hon. Member for Aberdeen North to the work of the Treasury Committee, of which I am a member, alongside one of her colleagues. We do extensive work pre and post Budgets and take a great deal of evidence. While it is not the same as having oral evidence to this Public Bill Committee, it is a pretty good alternative, and at the moment it is all we have.

--- Later in debate ---

[Dame Angela Eagle]

I am all in favour of people earning more money, but it is important that they are doing so in in real terms. Someone can earn more money in terms that do not take account of inflation, but they can actually be earning less. If the right hon. Gentleman talked to people and asked them whether they were any better off than they had been when this series of Governments came into office in 2010, he would find that people’s nominal salaries and wages might be higher in some cases, but a lot of them are worse off in reality because those earnings have not kept up with inflation. The point about the tax burden and fiscal drag makes that much worse.

[Kirsty Blackman]

On the point about how well-off people feel, does the hon. Member know that in 2008, 12% of people in the UK believed that their children would be worse off than them? Now, IPSOS has found that that number is up to 41%—some 41% of people now believe that their children will be worse off than them. Does she feel that that needs to be tackled, and that the Government are not taking it seriously?

[Dame Angela Eagle]

I agree, and the hon. Lady makes a valuable point. For societies to advance in a sensible, healthy way, succeeding generations must have optimism about things changing for the better. That also tends to lead to happier societies with people who are more likely to innovate and go the extra mile. We all want that so that we can rebuild prosperity for our nation in the years ahead in the new, more isolated circumstances in which we find ourselves, as a result of which we must remake the economic foundations of our country. I wonder how much fiscal drag helps us to do that, and I am interested to hear the Minister’s observations on how that approach will help.

There are other undesirable effects of threshold freezes of the kind encompassed by clause 1, including very high marginal tax rates for people in particular circumstances. We know from the Prime Minister’s tax return that he effectively pays 22% on his millions of earnings every year, if one combines the income tax that he pays with the way that he takes out his money through capital gains and in other areas. However, given the present tax thresholds and fiscal drag, there are people who will face marginal tax rates of 45% and 60%, which are very high—much higher than those that the Prime Minister faces.

The Treasury Committee is so concerned about that that we have begun an inquiry into spiky marginal tax rates and cliff edges. As you will know, Ms McVey, from having been Secretary of State for Work and Pensions, cliff edges and high marginal tax rates can often combine to create even greater losses of income. That is a disincentive to work harder, get more hours and move jobs when the increased wage may not compensate for the higher marginal tax rate, or a combination of the higher marginal tax rate and the cliff edge for a particular allowance. When we took evidence a few weeks ago, we discovered a marginal tax rate combined with a cliff edge that was over 100%.

There are issues surrounding the £50,000 threshold, at which point high earners start having child benefit clawed back. That has remained unchanged. It has not gone up; it is another frozen threshold. That is dragging far more people into the means test for child benefit than even the Conservative Chancellor George Osborne—we can say his name now, as he is no longer a Member of this House—intended when he introduced the policy. The Government should be aware of the combined effect of fiscal drag and unindexed rates on real people’s choices.

Freezes are a stealthy and arbitrary way to raise tax revenues. They often have a bigger impact on household incomes than more eye-catching discretionary measures do. They are particularly expected to have an impact on lower earners. By 2028, someone earning £20,000 will be £1,165 poorer under the current fiscal drag system than they would if income tax had been raised by 1%. There have been various calculations of how many pennies this stealth tax raises on the up-front rate of income tax, and they range from 3p to 4p per £1. I hope that the Minister will confirm that and try to justify why on earth the Government are raising money in that way, rather than being more transparent and up-front about rates of income tax. What will they do about the high marginal rates that the fiscal drag and frozen threshold system is landing our entire structure with? It is distorting the structure and making it very difficult to justify much of how it works for the future.

--- Later in debate ---

As the Minister has explained, the changes will apply to EMI options granted on or after 6 April this year, as well as EMI options granted before 6 April that have not yet been exercised. We know that EMI is a tax-advantage share scheme introduced in 2000, targeted at small and medium-sized companies to help them to recruit and retain key employees. We understand, as the Minister said, that following representations made in response to the call for evidence on EMI launched in 2021, the measure will remove administrative requirements for companies using EMI schemes and simplify the process to grant options, so we will not be opposing the clause. However, I look forward to the Minister’s specific comments in response to my questions on clause 16.

[Kirsty Blackman]

Like the Labour party, the SNP will not oppose this measure. These are positive changes. Particularly on EMI, the Government have listened to what companies are asking for, and making some of requested changes is important, particularly when it may not have been the Government’s initial intention to dos so. They have listened to the additional information that has come in and made that change as a result of the response from companies.

There are two sides to what happens in relation to employee share schemes. There is the experience that employers and companies have in relation to whether they are an EMI or a CSOP—it looks like that will be smoother for companies. There is also the experience that the employee has, and whether or not accessing those schemes works for their lives and what they intend to do. The right hon. Member for Knowsley (Sir George Howarth) has put forward a ten-minute rule Bill on the share incentive plan scheme, trying to ensure that lower-income workers can get access to the scheme and that the length of time that an employee is required to stay at the company before they can access their share ownership and benefits is reduced from five years to three years.

We know that the younger workforce these days are moving companies more quickly, and that is not necessarily a bad thing. Younger people are seeing the benefits of working for a number of different companies and building up a significant breadth of experience across companies, and they are more likely to job hop than my parents’ generation. As I said, it is not a bad thing; it is just a change in the way society works. As a result, share ownership schemes, in the way that they are written and organised by the Government, are less attractive to the younger workforce than they were to previous generations.

My key question is: what are the Government’s intentions for employee share ownership? Are they hoping to encourage and increase the amount of employees taking part in such schemes? It seems to me that 4,700 small and medium companies feeling good about EMI access is not all that many, and other companies that could benefit from it that may find there is not much in the way of interest among their employees because of the restrictions. Do the Government hope to make it more attractive for employees, or simply to make it slightly easier and more attractive for employers? If they hope to make it more attractive for employees, are they looking at the current restrictions and restraints on employee share ownership schemes and whether they work for the workforce of today, as opposed to just the workforce of yesterday?

I am incredibly positive about employee share ownership schemes. I do not necessarily think that every single company should use them, and I would certainly not push every single company in that direction. However, all companies that want to use them should have the flexibility to access them without red tape and bureaucracy, so removing some of that is helpful. Companies will be able to use them only if they get buy-in from their employees, which they can do only if the employee sees the benefit of taking part. It would be helpful to have an idea of the Government’s intentions—whether they plan to do any wider consultation or check in on the numbers, whether they have targets for employee share ownership and whether they plan to extend and increase it. It seems to me from clauses 16 and 17 that the Government are positive towards the schemes, but they have not gone quite far enough in increasing accessibility.

[Victoria Atkins]

If I may, I will answer the hon. Lady’s questions first. For the two schemes to work, we must help employers and employees to administer them and take advantage of them respectively. This is why we have made the changes that I set out.

We are mindful of the changes in the employment market that the hon. Lady described, and we looked very carefully at the gig economy. The issue is that many workers in the gig economy are not employed for tax purposes, so they fall outside the scope of EMI. Extending eligibility to the self-employed would go beyond the aims and objectives of EMI, because it is about employees having not just an earned income interest, but a full share investment in the business for which they work. There are complexities here, but we are mindful of how the modern economy is taking shape. That is why we will be launching a call for evidence shortly on non-discretionary share schemes, which are open to all employees of companies that opt in. I encourage her and others to participate in that call for evidence when it is launched.

The hon. Member for Ealing North asked about compliance, and he will know that HMRC takes compliance very seriously. Indeed, we have increased funding for compliance activities across the board. We want to ensure not only that officers can deal with particular forms of tax evasion or criminal activity, but that they can offer results across the board. I know that the answer will come to me shortly, but I commit to writing to the hon. Gentleman if it does not fall upon my shoulders before I sit down. I am very willing to take questions or interventions from any colleague on this matter, particularly from colleagues on this side of the House, because we fundamentally believe in entrepreneurship and capitalisation. We believe in spreading prosperity and wealth across the workforce, so it is not just the business owners but the employees that must profit.

--- Later in debate ---

[James Murray]

As we have heard, the clause introduces an income tax exemption for payments made by way of training allowances under the Jobs Growth Wales Plus scheme, which the Welsh Government introduced on 1 April 2022 to replace the traineeships and Jobs Growth Wales programmes in Wales. This is a training and employment programme aimed at 16 to 18-year-olds who are not in education, employment or training, and is designed to help them overcome any barriers that they may face in further training or employment.

As I understand it, the scheme has three strands: engagement, advancement and employment. Under the engagement strand, participants receive a training allowance of up to £30 a week; under the advancement strand, they receive £55 a week, and under the employment strand, individuals will be paid at national minimum wage for the age group. We understand that the training allowances paid under the scheme will be exempt from income tax. That was announced by the Financial Secretary to the Treasury in a written ministerial statement on 11 October last year. The objective of the measure is to clarify the tax treatment payments made by way of training allowances under the Jobs Growth Wales Plus scheme, and it will have retrospective effect from 1 April last year. We will not oppose the measure.

[Kirsty Blackman]

Will the Minister clarify how the payment has been treated in the interim period? I understand that back in October the Government announced their intention to treat it as exempt from income tax, but what has happened to the payments made since 1 April last year? Have the individuals been liable for income tax during that period? Will repayments or tax adjustments be required for those individuals because of the retrospective nature of the measure? Will the Government provide some clarity on how they intend to tackle those things to ensure that everybody has certainty about their tax treatment—that the individual who pays income tax has certainty about their tax treatment and that devolved Governments, when they are putting in place any of the allowances, are certain about the relevant income tax treatment in advance? We do not want uncertainty around something that is supposed to be positive for individuals.

--- Later in debate ---

[Victoria Atkins]

I am happy to be able to tell the hon. Lady that they were exempted. In terms of costs, I see the word “negligible” in the Exchequer impact assessment, so that is the administrative side effect of what we are trying to achieve to support efforts to train young people in Wales, which are commendable and for which I welcome the support. Clause 27, which I do not think we will debate, allows us to clarify the treatment of devolution payments via statutory instrument, which we are keen to do. Indeed, the hon. Lady will know that significant work with the Scottish Government, led by the Chief Secretary to the Treasury, is going on across the Treasury to underpin the arrangements for the fiscal framework.

[Kirsty Blackman]

Let me make sure that I understand what the Minister is saying. The Welsh payments were considered exempted, and this measure is just the legislation catching up with the treatment that they were being given anyway. Is that correct?

[Victoria Atkins]

I can confirm that.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.

Clause 28

Qualifying care relief: increase in individual’s limit

Question proposed, That the clause stand part of the Bill.

[James Murray]

As the Minister says, the clause increases the annual amount of care income that a recipient of qualifying care relief will receive that is not subject to income tax. Furthermore, the clause provides for the annual amount to increase in subsequent tax years in line with CPI. We know that qualifying care relief allows carers who look after children or adults, including foster carers, shared lives carers and kinship carers, to receive certain payments tax free, up to an annual limit. We know that the annual limit comprises a fixed amount for each household, plus a weekly amount for each child or adult being cared for.

Qualifying care relief is a tax simplification providing specific tax relief for care income as a replacement for apportioning and calculating full deductions for expenses. The relief allows carers to keep simpler records for their care activities and to use a simpler method of filling in the self-employed pages of their tax returns, as the Minister mentioned. We recognise that the clause increases the fixed and weekly amounts making up the annual limit to bring more carers out of income tax and simplify their tax reporting responsibilities. It also introduces CPI indexation.

We welcome the fact that the clause could provide a greater financial incentive for carers to join or stay in the care industry, potentially improving the recruitment and retention of carers in the future, so we will not oppose it.

[Kirsty Blackman]

First, given the inflation that we are facing, it is incredibly important that people who are caring, and taking on caring responsibilities, can afford to do so and are not forced to stop because of an impact on their income. This is a positive step. A not insignificant number of those who are cared for face a specific issue, such access to special diets, for which inflation has increased much more than even for food inflation. Individuals caring for anybody who is on a special diet will have seen a differentially large impact on their household spend specifically as a result of having to cater for those special diets. The changes being made therefore could not have come at a better time.

It is also positive to hear recognition for kinship carers, who are so often missed out in conversations about caring, even if people are taking on a formal role as kinship carers. We could not do without the significant amount of work that kinship carers do, so I am pleased, having previously had to argue in my council role for similar benefits for kinship carers as those that foster carers were receiving, that the Government have as a matter of course included kinship carers in the qualifying care relief, and ensured that the changes being made extend to them.

[Dame Angela Eagle]

I think that this measure will be welcomed across the Committee. As the Minister said, no one will vote against it. All of us know locally, from our constituency advice surgeries and our general work, the pressure that the entire care system is under. We know many of the things that are wrong with it and difficult in it, and how crucial it is to try to get it right, not least for the life opportunities of those people who are caught up in the system.

In the context of a welcome change, could the Minister explain the decision to index to CPI rather than RPI? The retail price index takes into account the costs of rent or housing in a way that I would have thought was directly relevant in this context. Why was it decided to use CPI rather than RPI for future indexation?

--- Later in debate ---

[James Murray]

As we have heard from the Minister, clause 29 introduces schedule 2, which makes provisions relating to the taxation of estates in administration and trusts. We understand that the clause implements the Government’s response to the “Income tax: Low income trusts and estates” consultation conducted by HMRC between April and July 2022. The response was published at the time of the spring Budget. The clause seeks to legislate for an existing concession on the administration of tax for trusts and estates.

We will not oppose this measure, but I ask the Minister to address concerns raised by the Chartered Institute of Taxation about the impact of this clause on trusts. It believes that the legislation takes a practical approach on estates, which will benefit both the personal representatives of the deceased and their beneficiaries. However, it believes there is less simplification in respect of trusts with low incomes, and that for some people, the administrative burden will actually increase. The institute has concerns about the way that trust income is taxed in two stages. First, the trustees report the trust’s income and pay tax on it. Secondly, when income is distributed to beneficiaries, they must report the income and pay any tax that remains due after credit has been given for the tax that was taken at the first stage.

The Chartered Institute of Taxation draws attention to the fact that although a £500 threshold, like that for estates income, is applied to the income accruing to the trustees of a settlement, that does not exempt the income in the hands of the beneficiaries. Where trustees have no liability to report or pay, basic rate taxpayers will have to pay the basic rate tax due on their income from the trust. Currently, they may not be filing a tax return at all, as their basic rate liability will have been met by the tax deducted by the trustees; this measure may mean that they now have to file a tax return. I would welcome the Minister’s thoughts on that point, and would be grateful for a response to CIOT’s concern that this measure, while described as a simplification, could impact on often vulnerable beneficiaries receiving modest amounts of income, who will now have greater compliance burdens.

[Kirsty Blackman]

I have a quick question on Government amendment 4. Will it change the application of schedule 2 and proposed new schedule 1C to the Taxation of Chargeable Gains Act 1992, or does it simply clarify what is intended anyway under those schedules? The amendment specifically mentions the property not being held for pensions purposes. I am trying to understand whether that was the original intention, or whether the amendment changes the intent of schedule 2 and of schedule 1 to the TCGA.

[Victoria Atkins]

On the simplification point, the replacement of the lower-rate band with the new tax-free amount supports our long-standing goal of a modern and simpler tax system. This is a simplification for low-income discretionary trusts, as income within the tax-free amount will no longer be taxed as it arises. The change also simplifies calculations when income distributions are made. The consultation last year outlined that where discretionary trusts make income distributions, the existing 45% credit given to beneficiaries with that income would remain, as would the continued need for trustees to top up their payments to HMRC to match that credit when the distribution is made. I am told that the Chartered Institute of Taxation agreed with that proposition, and the Association of Taxation Technicians saw that as largely a question of timing and did not see a particular issue with the principle.

The hon. Member for Ealing North asked about vulnerable beneficiary trusts. The measures are a simplification for those trusts, as for any other low-income trust, as there will no longer be the need to elect to have income taxed as if for vulnerable beneficiaries. Instead, the income will simply not be taxed as it arises. Most vulnerable beneficiary trusts are, indeed, discretionary trusts, and as I said earlier, both the Chartered Institute of Taxation and the Association of Taxation Technicians have opined on this. The measure does not affect the need for trust beneficiaries to consider their tax reliability on their trust income. On the hon. Member for Aberdeen North’s question, the amendment clarifies our intentions.

Finance (No. 2) Bill (Second sitting)

Kirsty Blackman Excerpts

Committee stage
Tuesday 16th May 2023 Public Bill Committees

[Dame Angela Eagle]

Of course not; otherwise, I am sure the Minister would be in a much worse situation than we find him in today. However, we will make that judgment after he has finished answering our questions. I genuinely welcome him to his position. It is a fantastic job, and he will be fascinated by it. He will wake up suddenly to realise that his job is to tax all vices, and how interesting that can be.

The Minister is inheriting a completely different regime of alcohol taxation from the one that is about to make an exit. As he heard from my hon. Friend the Member for Erith and Thamesmead, in principle, the Opposition are not opposed at all to the changes, but although there is that agreement, there is an awful lot of detail, potential issues and problems. He will find that definitional issues are not always easy, not least because if tax and duty are to be based on alcohol by volume, the manufacturers will switch the volumes around to get from one band into another. I am interested, philosophically, in what he thinks the right banding is to prevent too much of that.

The public policy reason for having that kind of duty system is, I presume, to persuade people gently that if they are to drink alcohol products with a higher percentage of alcohol in them, they will have to pay more tax, because in general higher-alcohol products are thought to have a greater effect on health than products with less alcohol. That was always the reason, philosophically, for moving to such a system. The Minister will find that, at the margins, manufacturers will try to ensure that their products are in a lower rather than a higher band, although some of the most glorious alcoholic beverages cannot begin to do that. I am thinking of spirits, such as whisky, which are much higher in alcohol.

If we look at the reaction of business and manufacturers to this change, there seems to be an equal division between those with higher alcohol by volume percentages, who find themselves in the higher-taxed bands, and those in the lower-tax bands, such as beer manufacturers. There is an inverse relationship between manufacturer satisfaction and where they are in the ABV bands. The beer and cider manufacturers are basically happy, whereas the wine and spirit manufacturers are less happy. Presumably the Minister will, if he has not already, have them in his office, making it quite clear to his face precisely what they think about that.

Issues other than definitional ones will come to bear on the new system, which will come into being on 1 August. I assume the entire system and HMRC are ready for that; it is a big change. The Minister is presumably confident that when 1 August comes along, the system will come into place seamlessly, and as the old system exits, the new system will appear. I assume he will confirm today that he is more than confident that this large change will come off without any problems. Obviously, we eagerly await his reassurance that there will not be some disaster as the new system comes in.

What, if any, work has been done on the implications for our export trade of changing the way we tax alcohol products? Obviously, countries have different ways of categorising products for tax purposes. I seek reassurance our deviating from a system that used to be EU-wide will not have any deleterious effect on our capacity to export what are often well-known products. I am thinking of not just Scottish whisky—we know how important that industry is to the Scottish economy, but other well-known products associated with this country, which we see when we are on holiday abroad. I assume that he is happy with that.

The OBR has said that it expects alcohol revenue to be £13.1 billion this year. Again, I assume the Minister is confident that the changes will not have an unpredictable effect on alcohol revenue. The OBR expects that to rise to only £15.8 billion by 2027-28. Given that we will have a 10.1% increase—I assume that will happen on 1 August, when the uprating happens—that seems like quite a small amount of increased revenue. I note the uprating is by retail price index when that suits the Government, because it means that they get more revenue, but we learned from our earlier conversations that they link by the consumer prices index when indexing something that gives money out. RPI makes some sense, but I just note that in passing.

Will the Minister talk about the transitional arrangement? There is quite a lot of worry in the trade about certain products that do not qualify for wine industry support. The more general rate is meant to be a transitional arrangement, lasting for the 18 months before the different ABV levels are brought it, in full force. Will he talk about draught relief? When I was Exchequer Secretary, there were big issues between the on-trade and the off-trade. It looks like the trade relief is trying to deal with some of the issues between the on-trade and the off-trade through tax. If I have understood correctly, it looks like there will be tax relief for the on-trade in order to balance out the price differential with the off-trade, and presumably to prevent people from loading up down the shop before they go into a pub. I assume it is an attempt to support the licence trade and the on-trade at the expense of the off-trade, given the “buy one, get one free” discounting that goes on in our supermarkets.

This may make the Minister very unpopular in the southern part of the country, but I note that there is still what is known as cider exceptionalism in the levels. Cider is taxed less than other alcoholic beverages, even though it is the same ABV as them. He might have an explanation for the cider exceptionalism. Now that we are not in the EU, he does not have the excuse that I had that: we could not do anything about cider exceptionalism because of EU rules. I note that he has decided to continue with cider exceptionalism. Perhaps he will tell us why. Does the Treasury prefer cider as a drink, or is there some terrible prejudice against beer that is being found out through this?

The changes introduce a huge range of different forms of taxation. Nobody objects to the principle, but there are quite a lot of anomalies. There are issues between the on and the off-trade, definitional issues, and issues surrounding revenue—why does it continue to be so flat, unlike the beer being taxed? I look forward to the Minister’s response, and I hope that he will not mind me leaping up if he says something that piques my interest, so that we can have a debate about it.

[Kirsty Blackman (Aberdeen North) (SNP)]

Who knew that a debate on alcohol would be so popular in this place? I will try to limit myself to the clauses that we are talking about, but I will mention a couple of general issues. In Committee of the whole House, we discussed our specific issues with rates. In particular, we discussed the concerns raised by the Scottish whisky industry. We gave our wholehearted backing to the amendment on the subject tabled by the right hon. Member for Orkney and Shetland (Mr Carmichael), because we had concerns about the changes and increases. However, as I said, that has already been discussed, so I will not major on that.

This is a direction of travel for which we have been calling for a very long time. We are pleased that the Government are moving towards applying differential tax rates based on the alcohol in beverages. I share the concerns raised just now about cider, and about exceptionalism for a certain type of product, rather than going simply by the alcohol by volume ratio. It would have been more sensible and fairer across the board to be more consistent.

It is pretty unusual for me to criticise explanatory notes, but those on this part of the Bill are not particularly good. They mention that 77 clauses relate to the changes to alcohol duty, but they give a very general explanation of what the clauses do, rather than a specific explanation of what each clause does. Therefore, we cannot see easily by looking at the explanatory notes what each clause is intended to do. For example, I will ask questions later about clause 87. The explanatory notes could have answered my questions, had an actual explanation been written in there, but the notes just say, “This is what we intend to do with the entirety of the alcohol regime,” rather than providing a commentary on each clause. I understand that a commentary on each clause would have been significantly more work, but presumably the Treasury has an idea of why it is putting forward each clause; it would not have cost it too much to expound on that in the explanatory notes.

--- Later in debate ---

[Gareth Davies]

Let me answer the point about guidance. I assure the hon. Lady as well as the hon. Member for Aberdeen North that guidance will be issued very shortly. The hon. Member for Erith and Thamesmead will be able to review that and it should answer a lot of the questions that she has just asked.

Let me repeat what I said about HMRC. The organisation has some incredibly hard-working staff who I have had the pleasure of meeting just in my first two weeks. As a Treasury, we have been preparing for this for quite some time. I have every confidence that our colleagues at HMRC are ready and waiting to implement the system. I have nothing further to add on this, so I urge that the clauses stand part of the Bill.

[Kirsty Blackman]

I have a brief comment about the guidance. I appreciate that a proportion of the stuff coming out is guidance so will not need to go through any parliamentary processes. However, some of the issues are to do with statutory instruments. Is the Minister satisfied that enough parliamentary time would be given for those, whether under the negative or affirmative procedure? Will they happen as quickly as possible? Clause 119 is about procedure and regulations. Will there be enough time for all that as well as for the less formal guidance coming through from HMRC?

[Gareth Davies]

We all take parliamentary scrutiny incredibly seriously and of course we will allow appropriate time for scrutiny of the Bill and all the guidance in the appropriate way.

--- Later in debate ---

[Kirsty Blackman]

Does the hon. Lady share my concern that the post-legislative review scrutiny that is supposed to take place in Government Departments does not always take place—and does not always take place timeously? Does she also share my sense of thanks to the Treasury Committee, which does get hold of and scrutinise the post-legislative review guidance? I am hoping that, as part of the Treasury Committee, she will be keen for the review to take place and for the information to go to the Committee so that it can do the appropriate scrutiny of whether the legislation has achieved what was intended.

[Dame Angela Eagle]

I agree with the hon. Lady’s comments about the potential role of the Treasury Committee, although I am not the Chair—I am only one modest member. She might want to have a word with the current Chair to ask whether that is appropriate. We are clearly all interested and want the system to work effectively. We do not, however, want to see a sudden reduction in revenue, unless that is because people have started drinking less high-ABV products, and are out running and being very healthy all of a sudden. In that case, they are going to live longer and put much less pressure on our NHS.

Will the Exchequer Secretary give an outline of the Treasury’s thoughts on when it will do a review? Will he also bear in mind the balance between having changes to definitions and those detailed things that make up the essence of a system such as this, which are required by negative and affirmative procedures in this House, and guidance, which does not get to be looked at in the House? That would ensure that his welcome comments about respecting the rights of this House to effectively scrutinise how the system beds in and evolves in the future are realised.

Will the Exchequer Secretary give us an undertaking that he will bear in mind the right of the House to have appropriate scrutiny rights over some of those things—not just shove everything into guidance, which does not have to come before the House at all?

--- Later in debate ---

[Abena Oppong-Asare]

The group of clauses sets out circumstances in which producers will be exempt from alcohol duty. Clause 72 sets out that alcoholic products, except for spirits, produced by an individual for their own personal consumption are not subject to alcohol duty. Clauses 73, 74 and 75 provide for alcohol duty to be remitted or repaid when the alcohol is used for research or experiments, where the product is spoilt or unfit for use, and where alcohol was used in the production of qualifying food products or beverages, such as chocolate and vinegar.

The next part of the group of clauses concerns exemptions from alcohol duty for spirits. Clauses 76 and 77 set out that alcohol duty will not be charged on any spirits contained in imported medical products or in flavourings. Clause 78 sets out some circumstances in which a person may receive spirits without the payment of alcohol duty, including where spirits may be used for art or manufacture. Clause 79 provides for alcohol duty to be remitted on spirits contained in imported goods that are not for human consumption. Finally, clauses 80 and 81 set out a penalty regime for people who make unauthorised use of exemptions, such as by claiming the medical exemption for goods that are then not used for medical or scientific purposes.

We do not take issue with the exemptions, so will not oppose the clauses, but will the Minister lay out in more detail how clauses 80 and 81 will work in practice, and whether there will be a monitoring system to ensure that unauthorised exemptions are prevented?

[Kirsty Blackman]

Alcohol hand sanitiser is obviously not for human consumption, but is it considered to be a medical item and so exempt under clause 76(2), or to be not fit for human consumption and so exempt under clause 79? However it is considered, will the Minister clarify that it is exempt from alcohol duty? Many of us had not often used it prior to 2020, but these days it is a significant part of our lives. It would be a concern if it received an alcohol duty charge, because it is part and parcel of keeping us safe and ensuring that we stop any further spread of covid or anything else.

[Gareth Davies]

As I set out at the beginning, the changes are largely administrative. To answer the question directly, there is no change whatsoever in terms of how the provisions are operationalised; they are carried over. The whole point is to consolidate the legislation in one place. I think our alcohol taxation system dates back to 1643, and the last change was in the 1990s. A lot of the changes are administrative, and the hon. Member for Erith and Thamesmead should take assurance from that.

--- Later in debate ---

[Kirsty Blackman]

As I said both in the Committee of the whole House and earlier today, I have a number of questions about clause 87, which relates to the post-duty point dilution of alcoholic products. The Minister mentioned that all the exemptions, some of the technical language, and some of the definitions mentioned in this part and in the previous part are carried over from the Alcoholic Liquor Duties Act 1979 and the Finance Act 1995. I understand that, but the post-duty point dilution changes are relatively recent; they have not been in place particularly long. The clause replicates section 55ZA of the 1979 Act, which I think was added to it in the last few years in relation to concerns that were raised about the post-duty point dilution.

The clause relates to products such as Bacardi Breezers and WKD blue. Hooch was a drink that existed when I was first able to drink alcohol. Basically, it is things that are mixers, in bottles. It was a significant issue because they were effectively being taxed at the wrong rate because they were being charged duty in advance of the dilution. They would have been liable for more tax had they been taxed after the dilution rather than before it. They were being taxed on the basis not of the sold product but of the created product, which was very different. I understand the Government’s intention in introducing the measure, but because it is a relatively new one that is simply being replicated in the new regime, I wonder how much information the Minister has about how well the change has worked. Has it actually done what was intended?

I am slightly unclear about the Government’s intention in relation to the clause. From reading the Bill, it looks like the intention is that no mixing can take place: no other liquids can be added to spirits. If a company adds orange juice to vodka and sells it, the tax rate will not be lower. Have we seen in practice that companies are not mixing? Are they paying the duty at a different point in the journey rather than not creating these products anymore? What effects have the Government’s previous changes had?

--- Later in debate ---

[Gareth Davies]

Let me respond to those questions in turn, but I will come to the post-duty point dilution last, if that is okay. I was asked about scrutiny in the first instance by the Labour spokesperson, the hon. Member for Erith and Thamesmead. The powers mirror those that we have already, and we are putting exactly the same procedures in place in the Bill, but I will outline, and give an example of, how the Government could use the powers.

The powers allow HMRC to make adjustments to the new reforms by regulation, if needed. It will have that flexibility, given the scale and novelty of the reforms. That is a sensible precaution to allow HMRC to make changes quickly if the reforms are not working as intended. Today, reviewing and tweaking as necessary have come up consistently. We are carrying over a lot of the legislation, and this is one power, in particular, that we are able to use.

The overarching policy is one of simplification and putting in place a simpler, streamlined process, where we have one single approval process for all alcohol products, to answer the hon. Member for Wallasey. She also asked about HMRC’s readiness and, as I have already said, I have full confidence in our colleagues at HMRC to be able to process the changes and—she also asked about this—to enforce the rules, regulations and laws we are putting in place. Furthermore, we are looking to deliver a digitised application process, which will happen at a later date, once robust systems are put in place. As she would rightly expect, we want to get that absolutely right for producers first.

Let me directly answer the question of post-duty point dilution. The hon. Member for Aberdeen North raised that with my predecessor in 2018, and she is a great champion of her constituent, who raised the issue with her. Following the question to my predecessor, we introduced post-duty point dilution specifically to address wine, I think. We now go further by extending the provisions to all alcohol products and not just wine. That goes back to the overarching principle that we are trying to impose a consistent, simplified approach to all alcohol categories. That is why we are doing it, and we believe that it is impactful. I have no anecdotes, but if I obtain any, I will certainly write to her.

[Kirsty Blackman]

I appreciate the logic behind the original measure and behind the change. Had I been the Minister, I would have been talking positively about the change and about the fact that we are moving from made-wine and wine to everything. He is right that this is a simplification and a good thing, and it will ensure that everyone ends up paying the right tax. He is playing it down a bit by saying that it was just about terminology changes. That is another of the issues I had with the explanatory notes, which could also have sung the praises of the changes that are being made, rather than simply describing them as minor terminology changes to tidy things up. This is a change in the application, and I am glad the Minister has confirmed and clarified that from the virtual Dispatch Box. That will make this change easier for people to understand when they read about it in concert with the Minister’s statements in Committee.

[Gareth Davies]

I always take constructive feedback on presentation and talking up the policies we are implementing, so I completely accept that. For the record, we believe this is a really important anti-avoidance measure, which will protect the integrity of the duty system we are implementing, and I want to be really clear about that.

Question put and agreed to.

Clause 82 accordingly ordered to stand part of the Bill.

Clauses 83 to 89 ordered to stand part of the Bill.

Clause 90

Denatured alcohol

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Kirsty Blackman]

I will follow up with several similar questions about dates, so that people have a level of certainty about when they will be expected to comply and when transitional provision will run out. On the temporary provision for wine in clause 115, I understand what the Minister said about how the strength of wine fluctuates depending on the time of the season when the grapes were grown or picked. After the 18 months, what does he expect to happen with this fluctuation? Does he think that wine producers will somehow regularise the alcohol percentage of the wine that they produce? I am not sure how they could do that; they cannot do it by dilution. How exactly might they do that, or does he expect that they will pay different rates depending on the percentage of each bottle? I am not hugely fussed about which he thinks will happen, but it would be interesting to know what the Government expect those wine producers to do.

The case that the Minister has laid out around transitional provision for wine makes sense. I understand that the measure will be brought in fairly shortly and does not give wine producers the time to make seasonal adjustments at this point, but this will give them time to make such adjustments before the end of the 18-month period.

In relation to the temporary provision on cider, my understanding from clause 116 is that the current relief is being extended until the new approvals process comes into place, so those who currently qualify to benefit from relief will continue to do so. The date that has been chosen is the date on which the approvals process comes into force, rather than the date on which the new rates come in. I understand from what was said earlier that the approvals process will come into place later than the rest of the Bill, and I wonder whether there is clarity on how much later. Do we have a date on which the process will kick in? If not, do we have a date for when we will know? That would at least mean that people knew that from September, for example, they would have a level of certainty about when the transitional relief will end and the new approvals process will begin.

Two different sets of dates have been chosen. Clause 120 is about commencement, and there is a level of flexibility built in. Can the Minister confirm when the majority of this part of the Bill will commence, and whether only the approvals process will lag behind? Given the dramatic change from one regime to another and the fact that there might be a significant change in rates—as he has made clear, however, there will not be a significant change in exemptions; only the calculation of rates will be changed—does he expect the new rates to be charged from day one? Let us say he picks 1 August; will the old rates be charged until 31 July and the new rates kick in on 1 August?

To prevent any fiddling of the rate, is there clarity about when people will pay it? Is there a risk that they might, for example, stop putting caps on bottles for a period of time to ensure that they are subject to the new rate rather than the old one? If so, is HMRC aware of that, and will it ensure that people pay the appropriate rate and can prove they are eligible for that rate?

There is quite a cliff-edge change. The rates will go up dramatically for some people; they will go down dramatically for other people; and for some people they will stay the same. For an awful lot of people, there will be a change. When the new regime comes in, we need to ensure that it is fair and is applied fairly, so that those who go out of their way to try to swizz the system are not allowed to benefit at the expense of those who are being sensible and paying the correct rates when and where they should be.

Finance (No. 2) Bill

Kirsty Blackman Excerpts

Committee of the whole House
Wednesday 19th April 2023 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment 21, page 12, line 31, at beginning insert—

“(A1) This section applies to any person who it employed for an average of more than 15 hours per week by an NHS body.”

This amendment would limit the removal of the lifetime allowance charge to NHS staff.

[The First Deputy Chairman]

With this it will be convenient to discuss the following:

Amendment 22, page 12, line 31, after “charge” insert

“for a person to whom this section applies”.

This amendment is consequential on Amendment 21.

Amendment 23, page 12, line 36, at end insert—

“(3) The Treasury may by regulations specify a list of NHS bodies, or types of bodies, in respect of which this section applies.

(4) Regulations under this section—

(a) may specify different bodies, or types of bodies, in England, Wales, Scotland and Northern Ireland, and

(b) are subject to annulment by a resolution of the House of Commons.”

This amendment is consequential on Amendment 21 and gives the Treasury the power to define “NHS body” for the purposes of that amendment.

Clauses 18 to 24 stand part.

Amendment 27, in clause 25, page 18, line 23, at end insert—

“(4A) The arrangements must include that the Commissioners are required to provide to an individual their calculation of the appropriate amount under subsection (3).”

This amendment would require HMRC to provide recipients of the relief with a calculation of the payment so that it can be checked.

Amendment 28, page 18, line 26, insert—

“(5A) The arrangements must include procedures for the purposes of allowing an individual to—

(a) challenge the amount the Commissioners have determined to be the appropriate amount under subsection (3), and

(b) make a claim requesting that the Commissioners calculate and pay an appropriate amount in accordance with subsection (3) where the Commissioners have failed to make such a payment.

(5B) The individual must give notice to the Commissioners of any such challenge or claim no later than four years from the end of the relevant tax year as defined in subsection (1)(b).”

This amendment would enable a recipient of the relief to challenge the amount determined by HMRC if they think it is incorrect, and would allow someone not identified as eligible for the relief by HMRC to initiate a claim for it.

Amendment 29, page 18, line 41, at end insert—

“(8A) The arrangements must include a procedure for the Commissioners to correct, in accordance with section 9ZB TMA 1970, an individual’s personal return for the relevant tax year to include the appropriate amount paid under this section.”

This amendment would enable HMRC to correct the tax return of a recipient of a payment under the new section 193A FA2004, to reflect that the receipt of the payment has increased the recipient’s income for the year.

Clause 25 stand part.

New clause 4—Review of the impact of the abolition of the lifetime allowance charge—

“(1) The Chancellor of the Exchequer must, within three months of the passing of this Act, make a statement to the House of Commons on the impact of the abolition of the lifetime allowance charge introduced by section 18 of this Act and other changes to tax-free pension allowances introduced by sections 19 to 23 of this Act.

(2) The statement must provide the following information—

(a) the number of NHS doctors who will benefit from the policies referred to in subsection (1);

(b) the proportion of those benefiting from the policies referred to in subsection (1) who are NHS doctors;

(c) the number of people who are expected to—

(i) stay in work, and

(ii) return to work

as a result of the policies referred to in subsection (1);

(d) a breakdown of the figures in subsection (2)(c) by sector, including the number of people under subsection (2)(c)(i) and (ii) who are NHS doctors; and

(e) details of how a scheme that provided benefits equivalent to the policies referred to in subsection (1) only for NHS doctors could operate.”

This new clause requires the Chancellor to make a statement setting out the impact of the tax-free pension allowance changes in relation to NHS doctors, and to set out details of how an alternative scheme targeted at NHS doctors could operate.

New clause 5—Review of alternatives to the abolition of the lifetime allowance charge—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed—

(a) conduct a review of the impact of the abolition of the lifetime allowance charge introduced by section 18 of this Act and other changes to tax-free pension allowances introduced by sections 19 to 23 of this Act, and

(b) lay before the House of Commons a report setting out recommendations arising from the review.

(2) The review must make recommendations on how the policies referred to in subsection (1)(a) could be replaced with an alternative approach that provided equivalent benefits only for NHS doctors.”

This new clause requires the Chancellor to review the impact of the tax-free pension allowance changes and to recommend an alternative approach targeted at NHS doctors.

[Kirsty Blackman]

It is a delight to speak first in Committee of the whole House this afternoon. I had a few extra minutes to tweak my speech during the ten-minute rule Bill, as it is unusual for such a Bill to be opposed, and those extra few minutes will presumably have made my speech extra good. I am sure the whole Committee will listen very closely.

I rise to speak to amendment 21 in my name and in the name of my SNP and Plaid Cymru colleagues, but I will first talk about new clauses 4 and 5, which were tabled by the Opposition. The new clauses would require a review of the impact of the abolition of the lifetime allowance charge, with new clause 4 focusing on NHS doctors and new clause 5 looking more widely.

A significant number of questions have been raised in the House about the lifetime allowance and the problems it has caused, particularly for NHS doctors. I do not think any Opposition Member would consider that the solution to this problem is to abolish the lifetime allowance charge completely, which seems totally out of proportion. We have been raising this very serious issue for a number of years, but I never considered arguing against this solution because it never crossed my mind that the Government would do something quite so drastic or extreme.

New clauses 4 and 5 both ask for reviews, statements and information. Particularly pertinent is information on the number of NHS doctors who will benefit from the abolition of the lifetime allowance charge, as is a report containing recommendations in the light of a review of the effect of abolishing the lifetime allowance charge. The least the Government can do, if they are to make such a massive change to the lifetime allowance or the pension tax system, is provide us with as much information as possible so that we can consider all the potential and actual implications. We would then have all the information at our fingertips. The Government are able to access HMRC data in a way that the rest of us cannot, so we need details on the actual impact of these changes.

On the specific issue of NHS doctors, Torsten Bell of the Resolution Foundation has said that 20% of those who benefit from the change to the lifetime allowance work in the finance industry. He said that

“nearly as many bankers as doctors”

will benefit from this change. The Institute for Fiscal Studies has called it “bizarre”, stating:

“if this is aimed at doctors then it really is a huge sledgehammer to crack a tiny nut.”

That accords with our understanding.

Again, we agree that this significant issue for doctors needs to be fixed, but the Government are going about it in totally the wrong way. During the covid pandemic, we clapped NHS staff from our doorsteps. We recognise how difficult NHS staff had it working on the frontline during the pandemic, and how difficult they continue to have it. When other people were furloughed, they were working hard, day in and day out, to keep as many of us alive and healthy as possible, yet the Government are giving exactly the same break to bankers as they are giving to those who worked day in, day out to keep us all safe. That does not make sense. If we want to support our NHS, to ensure that we have the best possible public services and to give the NHS our vote of confidence, our backing and our support, we should recognise that those working in the NHS provide a vital public service and therefore deserve different treatment from those who work in the finance industry, for example, and who do not provide that level of public service.

I thank the Clerk of Bills, who was helpful in drafting these amendments. I knew what I wanted to do, but I was not quite sure how to do it, so I very much appreciated that assistance.

Amendment 21 would mean that the abolition of the lifetime allowance charge applies only to those employed by an NHS body for more than 15 hours a week, on average.

[Aaron Bell (Newcastle-under-Lyme) (Con)]

We all respect the hard work of NHS staff, but why does that argument not equally apply to, say, senior police officers?

[Kirsty Blackman]

An awful lot of people work hard. The specific issue that many of our constituents have raised is in the NHS. I have not been approached with this concern by senior police officers, but I have been approached by NHS doctors. If the hon. Gentleman feels particularly strongly about senior police officers, he could table an amendment so that people employed in the wider public sector, or in the police service, can be included in this measure. I think both police officers and NHS staff could be included, but it would be ridiculous to include everyone, no matter how little they do for the public good.

[Anthony Browne (South Cambridgeshire) (Con)]

Not only NHS staff and senior police officers but state school headteachers, senior civil servants in our local authorities, air traffic controllers and senior Government scientists are affected by the lifetime allowance. In fact, about half the people affected work in the public sector. If the hon. Lady follows her rationale, she would end up with a completely different tax regime for public sector pensions. Does she think that would be fair for private sector workers?

[Kirsty Blackman]

Given how much we have relied on our public sector, and given how unwilling this Government are to come to the table on pay negotiations, it would be totally reasonable for this House to say, “Our public sector is incredibly important. We want to support our public sector workers, and therefore we want to give them differential access to lifetime allowance exclusions.”

Amendment 22 is consequential on amendment 21. Amendment 23 would allow the Secretary of State to specify which NHS bodies, or types of bodies, are covered, given that the NHS is structured in different ways in England, Scotland and throughout these islands. It makes sense for the Secretary of State to make that decision.

The amendments cover NHS staff who work, on average, at least 15 hours a week so that they cover all the NHS staff who have come to us with pension concerns, particularly doctors but also other senior NHS staff. I have a large teaching hospital in my constituency, and there is another hospital just over the boundary. There is a medical school too.

[Anthony Browne]

Will the hon. Lady give way?

[Kirsty Blackman]

Not just now.

A significant number of doctors live and work in Aberdeen, and a number of them have come to me with concerns about the pension regime. One of them did not realise that he was about to hit the lifetime allowance until his accountant came to him and said, “This is how much you are required to pay in tax.” He had tipped over into this additional tax because he had taken on hours to teach junior doctors and medical students how to be better doctors. He had taken those extra hours on at the request of the hospital. This was because the immigration laws and rules have meant that a number of our doctors are struggling to jump through the hoops that the UK Government have put in a place or they are feeling that the Home Office is particularly against doctors coming from other countries.

That constituent had been asked to take on those hours as a result of the changes in some of the departments. He had willingly taken on those hours because he knows how important continuing professional development is in the NHS and how important it is to have a new generation of doctors coming through, but he had then been hit with a massive tax bill as a result. When I met him, he said to me, “I do not want to take on any more teaching as a result of what has happened to me. The amount I have been taxed means that the teaching costs me money. I don’t see why I should be asked to do this when I am training the next generation of doctors.”

[Anthony Browne]

I am glad that the hon. Lady recognises the dangers of high levels of taxation in discouraging people from work, as I believe those on both sides of the House can agree on that. Her amendment mentions the NHS and people who work for “an NHS body”. What does she think about this applying to GPs? The overwhelming majority of GPs do not actually work for the NHS—they are self-employed or work for their partnerships. Does she think that GPs should be excluded from this legislation as well?

[Kirsty Blackman]

That is one reason why our amendment 23 would allow the Secretary of State to make those specifications, so that all the people considered to be working for NHS bodies—GPs are commissioned by NHS bodies—are included. The measure was intended to allow that level of flexibility. If I had not intended to allow that level of flexibility, we would not have tabled amendment 23 to allow the Secretary of State that flexibility. We referred to NHS bodies and specified a number of hours so that someone who works for the significant majority of their time in private practice and private systems, and perhaps works an hour or so every few months for the NHS, would not be caught by this measure. The intention is that those people who work for a significant amount of their time in contributing to the health of the population, making people better and well, ensuring that they stay healthy and live longer lives, are recognised and given the opportunity to benefit from this measure.

My understanding, from everything that the Government have said previously about this, is that one of the biggest concerns in this area relates to NHS doctors. If the Government feel that there are other significant areas of the public sector where people could and should benefit, I look forward very much to the Minister standing up and explaining all of those. I am sure I will be asking further questions about this in Committee.

The lifetime allowance was in place for a reason and it does not work in relation to senior NHS staff, but it does work in relation to those places where people are not contributing to the health and wellbeing of our population and where people have not been on the frontline during the past few years, working under immense pressure for the public good. SNP Members will therefore vote against clause 18 standing part of the Bill if we have a vote on that. That clause is about the abolition of that lifetime charge. We do not agree that that should apply to everyone. The Government need to bring in a bespoke scheme to solve this problem, rather than applying it to everybody, no matter how much money is involved and how little public service they provide for that income that they receive. I ask the House to support amendment 21, which stands in my name and those of my colleagues.

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman). We are covering clauses 18 to 25, which will remove the pension tax barriers to remaining in work that highly skilled and experienced individuals across the public and private sectors, including senior NHS clinicians, are facing. The clauses also ensure that the tax regime works appropriately for the winding up of collective money purchase schemes and legislates to provide taxpayer-funded top-up payments for up to 1.2 million of the lowest earners in net pay pension schemes.

--- Later in debate ---

[Andrew Griffith]

My hon. Friend makes exactly the point that I was making, and does so extremely well. It is wrong for us in this House to seek to assign to ourselves the ability to judge the virtuous nature of people’s activity. I am sure that an accountant in the private sector works as diligently as an accountant seeking to drive value for money and the best medical outcomes in the NHS. With the greatest respect, I think that the hon. Member for Aberdeen North goes a little too far in seeking to “unbake” the wonderful cake of our mixed economy health system, which involves contributions from the private sector, private forensic laboratories and private diagnostic machines, and the wonderful work of our clinicians, and administrative, ancillary and domiciliary staff, who are mostly in the public sector. As I have said, her approach is the wrong basis on which this House should proceed.

Clauses 18 to 23 will reform pension tax thresholds to remove the current disincentives for highly experienced individuals to remain in the labour market or even to return to the workforce to build up their retirement savings. Currently, there are limits placed on the amount of tax-relieved pension savings individuals can make each year and an additional second restriction that applies to the total. That is an unusual feature of the tax system, where almost every other allowance is on an annual basis. The Government listened to stakeholders from across the public and private sectors, who have said that the annual and lifetime allowances can influence the timing of retirement and act as a barrier to remaining in the workforce.

The changes made by these clauses will increase the annual allowance from £40,000 to £60,000 and remove the lifetime allowance charge from 6 April 2023. The changes will ensure that pensions tax does not act as a barrier to staying in or returning to work, and will eliminate the chilling impact that the mere fear of triggering an extra tax charge has, even for those who are not immediately subject to falling foul of the cap. Much as the opposition parties may not wish to hear this, these changes command support across the economy. The Guild of Air Traffic Control Officers told us that pension taxation risks causing its members to reject tasks essential for the safe and efficient operation of air traffic control in the United Kingdom.

Dr Vishal Sharma of the British Medical Association has said that this is

“an incredibly important step forward”.

He said that the abolition of the lifetime allowance will mean that

“senior doctors will no longer be forced”—

his words—

“to retire early and can continue to work within the NHS, providing vital patient care.”

The Forces Pension Society said that this is a positive development and that it had been lobbying for it for several years. It said that these changes will help keep our streets safe. Marc Jones, chairman of the Association of Police and Crime Commissioners, confirmed that, as it relates to the police, they

“will be a game changer for thousands who love their jobs and do not want to retire.”

To support those who have left the labour market to return and build up their retirement savings, these clauses will also increase the money purchase annual allowance from £4,000 to £10,000 from April 2023. This will enable more individuals who have previously retired to return to the workforce and to continue to build their savings. In line with these headline reforms, there are also technical changes. They increase the minimum tapered annual allowance from £4,000 to £10,000 and the adjusted income level required for the annual tapered annual allowance to apply to an individual from £240,000 to £260,000.

[Kirsty Blackman]

While the Minister is talking about all the public sector individuals who will benefit as a result of these changes, he has not made the case for why this should apply to bankers. Why should bankers receive this exemption from the lifetime allowance? What benefit will the country get as a result?

[Andrew Griffith]

I am sure that the significant number of people—over half a million—who depend on jobs in the financial sector, including in places such as Edinburgh, one of our great financial centres, are listening with consternation to the politics of envy. The hon. Lady singles out individual professions and invites us to set separate tax policies on the basis of a particular profession. That would be entirely wrong. If she had been listening very carefully—I understand that she wanted to get in, because this is a debate and is the opportunity to do so—she would have heard that I was talking about the annual tapered allowance. That is a feature in pensions policy that is there entirely to ensure that it continues to have a progressive nature. A banker who is earning £260,000 a year can get only a reduced amount. They cannot avail themselves of the same annual allowance as the hon. Lady’s friends, colleagues and those she seeks to represent in our public services. I can assure the House that this is not a charter for bankers. In fact, the annual tapered allowance remains unchanged in its operation. We are updating the thresholds here today.

Unless the hon. Lady wishes to withdraw her amendment at this point having heard the strength of our arguments, I will now turn briefly to the remaining clauses that we are debating today, covering collective money purchase pension arrangements and relief relating to net pay arrangements. Collective money purchase is a new type of pension arrangement. Clause 24 will prevent any unintended tax consequences should a collective money purchase scheme wind up. It will ensure that members and their dependants can receive payments and transfer funds without incurring an unauthorised payments tax charge—I do not think that that should be controversial for the House.

Finally, clause 25 relates to the introduction of top-up payments for the lowest earners—another highly progressive measure—who sit within net pay pension schemes. There are two main methods of giving pensions tax relief. Although they provide the same outcomes for most individuals, lower earners can have different levels of take-home pay depending on how their pension scheme is administered for tax purposes, and the Government believe they are right to rectify that.

Clause 25 makes changes to ensure that eligible low-earning individuals whose income sits below their personal allowance receive a taxpayer-funded top-up payment so that they will have broadly similar take-home pay regardless of how their pension scheme is administered for tax purposes. The hon. Member for Ealing North (James Murray) has tabled some amendments in this respect, and I wrote to him yesterday to provide some of the comfort that I think he was looking for. They were well-intentioned amendments, and I hope that the letter I have sent him gives him some of the satisfaction that he seeks. Fundamentally, we do not disagree with what he is trying to achieve, and it has the support of those who have been agitating for low-income earners. That measure could benefit an estimated 1.2 million low earners who save into an occupational pension under net pay arrangements.

In conclusion, as I have set out, we know that there is a problem that needs to be tackled. It is a fact that individuals are choosing to retire early to prevent incurring pension taxes. The changes today, which have been widely welcomed by sectoral representatives across the economy, will ensure that we can retain our most skilled and experienced workers in all sectors while also simplifying and improving the pension arrangements for millions of households. I therefore urge Members to accept that clauses 18 to 25 should stand part of the Bill.

--- Later in debate ---

[Andrew Griffith]

I thank my hon. Friends for their contributions to this debate. It has been brief, and I will try to keep my remarks brief, too. The Government do not want any doctor to retire early because of the way that pension taxes work, but as my hon. Friends have said, the issues that these changes address go much wider than doctors and affect workers across the economy. Nobody should find themselves having to reduce their work commitments due to interaction between their pay, their pension and the tax system. It is detrimental not just to those individuals who feel compelled to retire earlier than they would like, but also to the economy, and with them goes their often irreplaceable knowledge and experience.

My hon. Friend the Member for Poole (Sir Robert Syms) reminded us that today is a bad day for the purveyors of golf equipment, because this measure will allow people to come back into work. More than anything, we should be talking about the patients and others who will benefit, as well as the benefit to the economy from doctors, consultants and workers across sectors continuing to pay tax at their normal rate for those extra years.

My hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell) conjured up the image of how it would oh so wonderful to be a fly on the wall for the recent conversations between the hon. Members for Ilford North (Wes Streeting) and for Ealing North (James Murray) in respect of this policy. We took our cue from the hon. Member for Ilford North, who called the cap “crazy” and said that removing it would “inevitably save lives”. I find it remarkable that that is no longer the position of the official Opposition.

My hon. Friend the Member for Amber Valley (Nigel Mills) talked about the fiendishly difficult position of trying to create a special scheme. Though we take the amendment of the hon. Member for Aberdeen North (Kirsty Blackman) in good faith, she nevertheless conjures up an “Animal Farm” tax policy, where we hit GP practices, people who work in hospices and adult and social care, mental health consultants, those who work in air ambulances and medical charities, and give preference to NHS finance directors over long-standing public servants elsewhere in the sector. I could not make those unequal choices, and I am surprised that she and her party feel able to do so.

Finally, my hon. Friend the Member for South Cambridgeshire (Anthony Browne), who speaks with such great knowledge on matters financial, reminded us of the fundamental principle. We could call it the Starmer principle: what is good for the Leader of the Opposition should be good for everyone.

Since this is part of the fundamental economic debate, I will conclude by reminding my hon. Friends what happened the last time Labour had its chance to put its hand on the economy: the then Chief Secretary to the Treasury left a note saying that there was no money left. [Interruption.] I have answered the questions from the hon. Member for Ealing North, and I was kind enough to write to him about the matters that he raised with me.

[Kirsty Blackman]

The Government have been battling manfully to attempt to retrofit a justification to a policy that was unveiled like a rabbit out of a hat on Budget day. We have been speaking about doctors’ pensions in this Chamber for years, and suddenly it turns out it is actually about air traffic controllers, senior police officers and others who were not being mentioned, because the Chancellor has made the decision to abolish the lifetime allowance. The Minister was continuing to try to pull at the heartstrings by mentioning NHS doctors and consultants in every second sentence as if they are the only ones who will benefit from the £1 billion tax cut that is being made, and as if we should all support this change because it is for our NHS heroes, but actually it is not just for our NHS heroes.

The Government have chosen to implement this in the widest, most ham-fisted way. If the current policy of the lifetime allowance was so bad, why did it take the Conservative Government 10 years to change it? Why did it take them so long to decide this was so horrific that they had to get rid of it? Why, if they cannot possibly have a scheme that allows for one profession or one public service to be treated differently, did they allow the scheme for judges to continue for such a long period of time? If that was so discriminatory and cannot possibly be replicated for NHS doctors, why have they only realised this in the last few months? Their arguments do not stack up. Therefore, we will do what we intended to do, which is to press amendment 21 to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Jamie Stone]

You’re dead right—I stand corrected by my right hon. Friend. Tourists love it and it contributes a huge amount to the Exchequer. It matters passionately to my constituents and to me. If I do nothing else for my constituency, I will try to boost the economy in every way I can because every job counts. I rest my comments with that.

[Kirsty Blackman]

I fear that, if I was to talk about the names of all the distilleries in my constituency, the debate would be much shorter than if the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) were to do so. In fact, I have much more of a tendency to drink gin than whisky, although other spirits are available.

It was interesting to hear the words “economically fragile”. That is an incredibly good point. Rural depopulation is a real issue. The Scottish Government are doing what we can to ensure that it does not continue, but if the UK Government keep working against what we are doing to encourage people to live and stay in our rural communities, we will have a real problem. That is not a small thing.

We tabled our amendments because we specifically wanted the word “whisky” on the Order Paper and we wanted to make the case in relation to whisky. However, I will not be pushing our amendments to a vote, and will support that of the right hon. Member for Orkney and Shetland (Mr Carmichael) because I concede that his is better. I am always happy to do that in such situations.

The reality is that Scotch whisky is 4.9% of the Scottish economy. Some £8.1 billion can be attributed to the sale of alcohol, around 60% of which comes from whisky exports. The numbers stated by the right hon. Member about how the differential rates work and how much people are taxed on those 14 units were incredibly interesting. The Government’s purpose is to make money from some of the alcohol measures, but there is also a population behaviour change intention behind what they do with tax on spirits and alcohol, particularly the allowance on draught beer. They have different taxes to encourage a change of behaviour, or differential behaviour in people. The Government may intend to use this tax to shift some of the population, but they are actually discouraging people from buying the very spirits that a huge amount of our livelihoods relies on. It is the case that 90% of spirits in the UK are produced in Scotland. The Government’s measures therefore have a massive negative impact on Scotland.

The average price of a bottle of Scotch whisky is £15.22 at a supermarket in Scotland. Following the new alcohol duty plus the VAT, £11.40 of that £15.22 will go to the Treasury. That is such a significant amount, and does not compare with other alcohol. I appreciate what the Government are trying to do on draught, and it is important that they have laid out their rationale for doing so—that was very helpful—but this is incredibly unfair and risks damaging those economically fragile areas, particularly in rural Scotland. Those areas have already suffered as a result of Brexit, with people’s reduced ability to freely move here.

I want to raise a small flag with the Minister in relation to the Public Bill Committee. When we come to that stage, I will be raising questions around clause 87, which is on post-duty point dilution of alcoholic products. I know there have already been problems in relation to that, so when we come to that stage of the Committee, I would appreciate Ministers being absolutely clear about their reasons for the changes in clause 87. If they are able to lay out those reasons clearly, that will reduce the number of questions I am likely to ask.

In summary, we support the amendment proposed by Liberal Democrat Members. We agree with the Scotch Whisky Association and think that the increase in duty is unfair and hits spirits, particularly Scotch whisky, unfairly. We want to stand up for our constituents, our constituencies, rural Scotland and Scotland as a whole in supporting the amendment.

[Abena Oppong-Asare]

I rise to speak, on behalf of the Opposition, to the clauses that are related to the tax treatment of devolved social security benefits and the new alcohol duty regime.

I will address clause 27 briefly. Clause 27 introduces a new power to enable the tax treatment of new or new top-up welfare payments, introduced by devolved Administrations, to be confirmed as social security income through secondary legislation. That will allow the UK Government to confirm the tax treatment of new or new top-up payments within the new tax year rather than be subject to the UK parliamentary timetable.

I note that the income tax treatment of social security benefit is currently legislated for in part 10 of the Income Tax (Earnings and Pensions) Act 2003, and that this clause will introduce a new power to add new benefits to the table of taxable benefits included in the Act. I can see that the clause is largely administrative. Therefore, the Opposition do not take issue with the clause and will support it.

I will now move on to the clauses concerning the new alcohol duty regime. The Bill contains 77 clauses establishing a new structure for alcohol duty, but we will discuss just some of those today, before moving to consider the remainder in Public Bill Committee.

Labour agreed with the principles behind the alcohol duty review. We want to see the alcohol duty system made simpler and more consistent. We recognise that there is a balance to be struck between supporting businesses and consumers, protecting public health, and maintaining a source of revenue for the Exchequer. We have consistently raised concerns about the Government’s rushed and confused messaging on this area.

Before I come to the clauses and schedules, I want to paint a brief picture of the context behind the changes. Back in October 2020, the Government announced a call for evidence, seeking views on how the alcohol duty system could be reformed. At the time, they said this would make the system

“simpler, more economically rational and less administratively burdensome on businesses and HMRC.”

However, what we have seen since then is indecision, U-turns and delays.

Businesses and consumers had to wait until September 2022 for the Government’s response to the alcohol duty consultation. What ensued was chaos. In the shambolic mini-Budget that crushed the British economy, the then Chancellor announced a freeze on alcohol duty that was due to come into force in February 2023, but then the new Chancellor scrapped the freeze in October’s autumn statement. Fast forward to December, and I was back standing at the Dispatch Box responding to another Government’s U-turn, that time deciding that the freeze was back in place until August 2023.

The Government have now confirmed that the freeze will end in August and a new system of alcohol duty will be put in place. Alcohol duty rates will be adjusted in line with inflation and moved to a system that links duty rates to alcohol by volume. Clause 47 sets out the new regime, while clause 48 and schedule 7 specify the new adjusted rates of alcohol duty for different drinks. I note that some sectors are concerned about these changes—particularly wine producers and Scottish whisky producers, as the right hon. Member for Orkney and Shetland (Mr Carmichael) highlighted.

The reason the Tories have hit people and businesses with stealth taxes is that they have failed to get the growth that our country needs and have failed to get a grip on inflation. That is what makes the boasts of halving inflation so hollow. Prices are already soaring, hitting industries with steep tax rises.

Finance (No. 2) Bill

Kirsty Blackman Excerpts

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

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I call the SNP spokesperson.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to take part in a Finance Bill Committee of the whole House. I will raise a number of points, particularly in relation to the new clauses and to what the Minister said about them.

The right hon. Member for Witham (Priti Patel) mentioned tax simplification. During later consideration of the Bill, we will raise questions about the removal of the Office for Tax Simplification, what has happened to the Government’s assessment of the benefit of that office, whether we will have an issue with removing that office, and whether there will be a cost to the public purse or to businesses as a result of.

We will support Opposition new clauses 1, 3 and 6. We would also support new clause 10 if it were pressed to a vote. I will talk a little about new clauses 6 and 10 on requests for transparency. It is incredibly important that we have transparency about how allowances, tax and everything else put in place by the Treasury—and, in fact, by every Government Department—work. The Red Book that is produced at Budget time gives us a genuine idea and expectation of how much any measure—be it an investment allowance, a new tax measure, or something else—is expected to generate, but the UK Government are not terribly good at putting in place post-implementation reviews of such tax measures.

We do not have enough transparency on whether the tax measures put in place have actually achieved what the Government intended. In fact, I tabled a written question on this some time ago, and various Government Departments were unable to tell me even how many post-implementation reviews they had carried out and whether there were any that they had not carried out. It seems to me pretty fundamental that the Government should fulfil their role of calculating the cost or benefit and saying whether the projection has seemed accurate. It is all well and good for the Government to say, “This is going to raise £100 million,” but if they do not then assess whether it did, how can we be sure that a measure had the desired effect, particularly when it is something such as an investment allowance? We are not saying, “We don’t think there should be allowances”; we are saying, “We want the allowances that are put in place to actually work in the way that they are intended to work.” I have concerns about that.

New clauses 6 and 10 would require the UK Government and the Treasury to provide transparency on the allowances and their resulting outturn. It is particularly important to look at our climate change obligations. In fact, we have tabled an amendment specifically on looking at the entire Finance Bill through the lens of whether it will help us to meet our climate change and Paris agreement commitments. There is no point in this House agreeing to legislation that takes us further from the Government’s stated aims and legislative commitments on climate change. I am still of the opinion that the UK Government are fairly good at talking the talk on their climate change commitments but not at translating that into checking whether our climate change objectives will be hampered by the policies that are put in place.

During the Committee stage of the Advanced Research and Invention Agency Act 2022, for example, I requested that the new organisation be set up on a net zero basis from the beginning. Given that we have net zero targets, I do not think that it is unreasonable to ask for any new Government department to be set up on that basis and, at least, to not contribute in a negative way to our carbon outturns. As I said, we will support new clauses 6 and 10 if they are pushed to a vote.

New clause 8, which relates to clause 10, addresses the R&D spend on data and cloud computing. We have tabled a probing amendment on that, and although we do not intend to press it to a vote, I would appreciate it if the Minister were able—either today or at a future stage—to answer some questions. We have particular concerns about clause 10 as it relates to part 2 of schedule 1. The explanatory notes—a hefty document—state that:

“Expenditure on data licences and cloud computing services only qualifies for relief to the extent that the commercial use of that licence or service is restricted to the particular research and development activity to which the claim relates, and that the customer does not have a right to…ongoing use after the relevant research and development has ended.”

I appreciate the Government’s intention, but we have tabled new clause 8 because we are concerned that this will hamper anyone applying for the allowance in the first place, as they may want to continue to use that data licence and cloud computing after the research and development. Surely they are only doing the research and development because they think it will be profitable and positive for their company. I am concerned that they may choose not to make the investment or to apply for the allowance if they know that they will have to pay it back at a later stage if this does what the company surely wants to achieve, which is to make money.

This could have been done in a different way, by allowing companies the investment opportunity and the R&D allowance for the data licence and cloud computing, and then stopping the allowance at the point at which it begins to make money, rather than saying, “If this does begin to make money, you have to pay us back.” It would be great if the Minister could answer questions on that issue today, but if not, I am happy to receive information afterwards, so that we have clarity on the Government’s assessment of this.

--- Later in debate ---

[Sarah Olney (Richmond Park) (LD)]

I rise to speak on behalf of the Liberal Democrats to new clause 7, tabled in my name, which would require the Government to produce an impact assessment of the effect of changes to small and medium-sized enterprise research and development tax credits on the UK tech industry and on long-term economic growth.

The Conservatives’ constant flip-flopping on tax and investment rules and their badly targeted incentives have not achieved the growth they promised, or are promising. Just last week, the International Monetary Fund predicted that the UK economy would contract by 0.3% this year, making us the worst-performing major economy. Prolonged weakness in business investment and productivity are a major barrier to economic growth, and if the Government want to boost innovation and drive long-term sustainable growth, they need to implement effective and well-designed policy on tax and investment.

The Federation of Small Businesses calls research and development tax credits for SMEs the most effective industrial policy of the last 10 years, enabling small businesses to develop cutting-edge products and foster competition and innovation within industry. The Government’s decision to dramatically slash R&D tax credits has therefore come as a blow to thousands of businesses. The Chancellor’s new policy of targeting tax breaks at research-intensive firms has been celebrated by the life sciences industry, but many other industries will fall outside the 40% intensity threshold. The Institute of Directors has also warned that targeting tax credits at research-intensive firms could lead to less innovation across the economy more widely.

We need to incentivise companies across all sectors to innovate, and particularly to encourage those that have not habitually been innovators. The manufacturers’ organisation Make UK has warned that further damage has been caused by the Conservatives’ chopping and changing on tax credit policy, which leaves businesses struggling to keep up and weakens business confidence. On Second Reading I urged those on the Treasury Bench to reconsider their policy and to reinstate the R&D tax credits for SMEs in full, and I am disappointed to see a lack of movement in that area.

The Liberal Democrats would introduce the kinds of incentives that have been proven to boost productivity, such as tax breaks for training to ensure that employees can continue to develop their skills, both for their own benefit and for the benefit of their employers; allowances for digital investment, to enable businesses to invest quickly and early in the newest digital tools in order to make productivity gains; and, most importantly, encouraging proper, ambitious, bold investment in energy efficiency. Whether for switching a fleet to electric cars or installing solar panels, reducing demand for energy is essential not only for decarbonising our industrial sector, but for bringing down production costs.

The need for targeted incentives for energy efficiency has been underlined by the ongoing energy cost pressures that businesses are experiencing, and the Conservatives’ decision to slash energy support for businesses by 85% will force countless shops, pubs and restaurants to pass increased costs on to their consumers, further fuelling inflation. The Liberal Democrats have repeatedly called on the Government to do more to tackle rampant inflation by supporting businesses with their energy bills. Amidst Government inaction, last month the rate of inflation in the UK jumped to 10.4%, driven largely by the cost of food and alcohol in hospitality venues. I urge the Government to look again at their policy on energy support and tax incentives offered to business, to tackle inflation, to stimulate economic growth and to drive productivity across all sectors.

[Kirsty Blackman]

The hon. Lady is making an important speech on new clause 7. I did not mention this in my speech, but we will support the new clause if it is pressed to a Division today.

[Sarah Olney]

I welcome the Scottish National party’s support for our new clause.

I ask the Government to accept the Liberal Democrat amendment proposing an impact assessment on the changes to R&D tax credits. It is essential that this policy is kept under review and its impact on the UK’s tech industry and long-term economic growth is monitored if we are to ensure that the UK becomes the powerhouse of technical innovation it so badly needs to be if we are to drive the productivity we need to increase growth across all economic sectors.

--- Later in debate ---

[Victoria Atkins]

I thank all Members for a most interesting debate. It is not often that the public—if people have been watching this debate—are able to see us scrutinise measures in this way. Committee debates often take place in rooms off the Committee Corridor, and although they are sometimes available for public consumption, it is very helpful when they happen on the Floor of the House. I am genuinely grateful to all who have contributed.

I am afraid I cannot resist picking up, very gently, the points made by Opposition Members about the role that my hon. Friends have been playing during this Committee stage in scrutinising legislation. This is exactly what Members of Parliament are supposed to do. Their job—your job, dare I say it to Members—is to scrutinise our legislation, and I welcome that. It may well be that Opposition Members have highlighted a fundamental difference between the Labour and Scottish National parties and the Conservative party: we have the intellectual self-confidence to hold these debates, and to debate policy. [Laughter.] Opposition Members may laugh, but we know how difficult internal debate has been in the Labour party. It has meant inquiries by the Equality and Human Rights Commission, it has meant a Labour MP being protected by the police in order to attend her own party’s conference, and I understand that a member of that party is currently being ostracised because her views on what a woman is differ from those of the Leader of the Opposition. So we on this side of the House do welcome debate, and we are able to conduct it properly and professionally within the rules of this Chamber.

[Kirsty Blackman]

rose—

[Victoria Atkins]

I will not give way, because I know it has been a busy day for the SNP. [Interruption.] I will not say any more.

My right hon. Friend the Member for North West Hampshire (Kit Malthouse) rightly raised the subject of the corporation tax increase, but so, significantly, did Opposition Members. They have made much play of the tax rate, and I thought it important just to remind everyone why we are where we are.

The Government borrowed an additional £14 billion in 2020-21 and 2021-22 to fund the response to covid. I cannot imagine that any Opposition Member—including those on the Front Bench—actually disagreed with, for example, the furlough scheme, which protected more than 11 million jobs and companies throughout the country. However, that enormous sum has to be repaid. In response to the energy crisis, the Government have provided just over £100 billion to help households and businesses with higher energy bills in 2022-23 and 2023-24. That has contributed to a significant increase in our public debt, which is forecast to reach 100.6% of GDP in 2022-23, the highest level since the 1960s.

That has happened precisely because the Government have responded to the pandemic, to the international crisis in Ukraine and, importantly, to the knock-on effects that that has had on our cost of living. I cannot imagine that Labour Members really begrudge the support that we are providing—more than £3,000 for every household, including households in their constituencies, to help those people with the cost of living.

However, as my right hon. Friend rightly pointed out, we also believe in the principles of sound money. In the autumn statement, my right hon. Friend the Chancellor explained that some very difficult decisions had to be made. Indeed, even with the increase in the rate to 25% that was originally announced by the Prime Minister when he was Chancellor, we will still have a corporate tax system that remains one of the most supportive of business anywhere in the world, with the lowest headline rate of corporation tax in the G7, the joint most generous capital allowances regime for plant and machinery in the OECD, thanks to the full expensing in this Bill, and the joint highest uncapped headline rate of R&D tax relief support for large companies in the G7. That is in addition to the features of the corporate tax system that make the UK an attractive location as a global hub, including having the largest tax treaty network in the world, mitigating the risk of double taxation. I point out for the sake of clarification that at 25%, the rate of corporation tax will be lower than at any time before 2010 under the last Labour Government.

I will move on to the provisions in relation to pillar two. My right hon. Friend the Member for Witham (Priti Patel) raised some important questions, including about capital flight. We have looked carefully at this and I understand why she is asking about this. I hope she will be reassured that this has been at the forefront of negotiators’ minds as we have looked at this agreement. The rules contain defensive measures to prevent capital flight. If a country does not implement them, the top-up tax will be collected by other countries instead, so there is no incentive to move or escape from these rules.

My right hon. Friend also asked about the Chartered Institute of Taxation’s view that this measure might raise less than expected. Again, I hope she will be reassured that the costing for pillar two was certified by the Office for Budget Responsibility and published at the autumn statement. The estimates are that pillar two will raise £2 billion a year by 2027-28. This includes revenue arising from UK-headquartered groups that are subject to low tax on their foreign operations, the diminished incentive for groups to shift their profits out of the UK and the qualified domestic minimum tax.

My right hon. Friend also asked about Japan. It has passed its legislation and it is implementing this in April next year, three months after we are legislating for. I hope that that timeframe gives her some comfort. I also note that 40 countries have implemented or announced pillar two or a similar rule, and I am told that they make up around 60% of global GDP. It is precisely because of the interlocking nature of the rules that revenues will be taxed at 15%, no matter where they are shifted. I am going to move on to three new clauses that I have a feeling might be the cause of contention and therefore Divisions tonight, but I will happily write to the hon. Member for Aberdeen North (Kirsty Blackman) about her point on data licences, because I want to reassure her on that.

On new clause 1, the Government are committed to sharing expertise on implementation and to co-ordinating our efforts internationally. We are playing an important and active role in the design of pillar two rules and we are achieving the delicate balance between having rules that are effective in tackling profit shifting and being proportionate. It would not be appropriate to provide a running commentary on international discussions ahead of the agreed outcomes of these meetings, which are published by the OECD, including in the administrative guidance to the rules published in February. We therefore say that the new clause is unnecessary and we urge colleagues to vote against it if it is pushed to a Division.

New clause 3 would require the Government to conduct a review of the UK’s business tax regime. This is business as usual for the Treasury and the Government. We have done, and continue to undertake, significant work to understand the impact of tax incentives on business investment. The tax plan published at spring statement 2022 set out the Government’s vision for using the tax system to incentivise investment in capital assets and in research and development, and we have set out detailed information on the Exchequer, macroeconomic and business impacts of these policies at the Budget. The evidence for this continuing work lies in both the full expensing policy in clause 7 and the increase to the annual investment allowance in clause 8, both of which I trust the Opposition will support.

I remind colleagues that the full expensing policy is equivalent to a £27 billion tax cut for businesses over three years. It saves eligible businesses 25p in tax for every £1 they invest. That is the Conservative approach to sound money, and that is what we will do to help grow our economy. The impact of our plan to halve inflation, to grow the economy and to reduce debt is demonstrated in the rising confidence of finance executives, as reported in the recent Deloitte survey. Do not listen to the doom-mongers opposite; listen to British businesses.

Turning to new clause 6, the Government expect the energy profits levy to raise just under £26 billion between 2022-23 and 2027-28, helping to fund the vital and unprecedented cost of living support orchestrated by this Government. This includes the impact of the investment allowance. HMRC regularly publishes estimates for the cost of various tax reliefs where relevant data is available and identifiable in tax returns. For example, estimates for the cost of the investment allowance against the supplementary charge and the first-year allowance of the ringfencing regime are regularly included in that publication. HMRC intends to make a cost estimate for the investment allowance against the energy profits levy in due course.

We have always been clear that we want to see significant investment from the sector to help protect our energy security. Oil and gas accounted for 77% of the UK’s energy demand last year and, as set out in the energy security strategy, the North sea will still be a foundation of our energy security, so it is right that we continue to encourage investment in oil and gas. Supporting our domestic oil and gas sector is not incompatible with net zero 2050, as we know we will need oil and gas for decades to come.

As the energy crisis in the UK has shown, constraining supply and dramatically increasing prices does not eliminate demand for oil and gas. A faster decline in domestic production would mean importing more oil and gas at greater expense, potentially resulting in additional emissions, especially in the case of gas.

On the climate targets, the Treasury carefully considers the impact of all measures on the UK’s climate change commitments as a matter of course. It should be noted that the Government have made the UK a climate leader and have reduced emissions faster than any G7 country over the last 30 years. We are on track to deliver our carbon budgets and on course to reach net zero by 2050, creating jobs and investment across the UK while reducing emissions.

I hope I have been able to reassure Members. I have genuinely enjoyed the scrutiny they have brought to this important piece of legislation. I urge the Committee to reject new clauses 1 to 3 and 6 to 10, and amendment 26. For the reasons I set out at the beginning, I commend Government amendments 12 to 13 and 15 to 20.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clauses 6 to 10 ordered to stand part of the Bill.

Schedule 1

Relief for Research and Development

Amendment made: 14, page 283, line 27, at end insert—

‘(3) In section 1057 (R&D relief for SMEs: tax credit only available where company is a going concern), after subsection (4C) insert—

“(4D) For the purposes of this section, where a company (“A”) is a member of the same group as another company (“B”) and A’s latest published accounts were not prepared on a going concern basis by reason only of a relevant group transfer, the accounts are to be treated as if they were prepared on a going concern basis.

(4E) For the purposes of this section—

(a) a “relevant group transfer” is a transfer, within the accounting period to which the latest published accounts relate, by A of its trade and research and development to another member of the group mentioned in subsection (4D);

(b) A and B are members of the same group if they are members of the same group of companies for the purposes of Part 5 of CTA 2010 (group relief).”’ —(Victoria Atkins.)

This amendment would make an amendment to section 1057 of the Corporation Tax Act 2009 that is equivalent to the amendments being made by the Bill to sections 104T and 1046 of that Act.

Schedule 1, as amended, agreed to.

Clauses 11 to 15 and 121 to 125 ordered to stand part of the Bill.

Schedule 14 agreed to.

Clauses 126 and 127 ordered to stand part of the Bill.

Schedule 15 agreed to.

Clauses 128 to 173 ordered to stand part of the Bill.

Clause 174

Amount of covered tax balance

Amendment made: 12, page 119, leave out lines 4 to 8.—(Victoria Atkins.)

This amendment omits Step 4 in clause 174(1). That Step is unnecessary as it duplicates the effect of provision in clauses section 175(2)(e) and 176(2)(i).

Clause 174, as amended, ordered to stand part of the Bill.

Clauses 175 to 222 ordered to stand part of the Bill.

Clause 223

Adjustments

Amendment made: 13, page 163, line 19, at end insert—

‘(10) Where the covered tax balance of an investment entity includes an amount allocated to it under section 179(1) or 180(3)(a) (allocation of tax imposed under controlled foreign company tax regimes), only so much of its covered tax balance as is not comprised of amounts allocated under those sections is subject to adjustment under this section.’.—(Victoria Atkins.)

This amendment prevents adjustments being made to the covered tax balance of an investment entity in relation to amounts of controlled foreign company tax allocated to the entity (to avoid the same adjustments being effectively made twice).

Clause 223, as amended, ordered to stand part of the Bill.

Clauses 224 to 260 ordered to stand part of the Bill.

Schedule 16

Multinational top-up tax: transitional provision

Amendments made: 15, page 395, line 8, leave out paragraph (a) and insert—

‘“(a) assets are transferred from one member of a multinational group to another member of that group,

(aa) either—

(i) the Pillar Two rules do not apply to the transferor for the accounting period in which the transfer takes place, or

(ii) an election under paragraph 3(1) (transitional safe harbour) applies in relation to the transferor for that period, and’.

This amendment provides for the anti-avoidance provisions in relation to intragroup transfers to apply to transfers from a member of a multinational group until that member is fully subject to the Pillar Two regime.

Amendment 16, page 395, line 17, leave out “beginning of the commencement period” and insert “relevant time”.

This amendment is consequential on Amendment 15.

Amendment 17, page 395, line 19, leave out from “transfer,” to end of line 24 and insert “and”.

This amendment is consequential on Amendment 15.

Amendment 18, page 395, line 27, leave out from “assets” to end of line 32.

This amendment is consequential on Amendment 15.

Amendment 19, page 395, line 32, at end insert—

‘(3A) For the purposes of this paragraph “the relevant time” means the later of—

(a) the date of the transfer, and

(b) the commencement of the first accounting period in which—

(i) the Pillar Two rules apply to the transferee, and

(ii) an election under paragraph 3(1) (transitional safe harbour) does not apply in relation to the transferee.

(3B) Where the relevant time is after the date of the transfer—

(a) the value of the assets at the relevant time is to be adjusted to reflect—

(i) capitalised expenditure incurred in respect of the assets in the period between the date of the transfer and the relevant time, and

(ii) amortisation and depreciation of the assets that, had the transfer not occurred, would have been recognised by the transferor if the transferor had continued to use the accounting policies and rates for amortisation and depreciation of the assets previously used, and

(b) the tax paid amount in relation to the transfer of the assets is to be adjusted to reflect the matters referred to in paragraph (a)(i) and (ii).’

This amendment is consequential on Amendment 15.

Amendment 20, page 398, leave out lines 36 and 37 and insert—

‘(3A) Information derived from qualified financial statements as to revenue or profit (loss) before income tax must be adjusted—

(a) as the information was adjusted for the purposes of its inclusion in a qualifying country-by-country report in relation to the territory, or

(b) if the information was not included in such a report, as it would have been adjusted had it been included in such a report.

See also paragraph 6 which provides for circumstances in which further adjustments are required to profit (loss) before income tax and circumstances in which adjustments are required to qualifying income tax expense.’—(Victoria Atkins.)

This amendment makes it clear that in determining whether the transitional safe harbour provisions apply for the purposes of multinational top-up tax, revenue and profits are to be as stated in a country-by-country report, or adjusted as if they were included in such a report.

Schedule 16, as amended, agreed to.

Clause 261 ordered to stand part of the Bill.

Schedule 17 agreed to.

Clauses 262 to 275 ordered to stand part of the Bill.

Schedule 18 agreed to.

Clauses 276 and 277 ordered to stand part of the Bill.

New Clause 1

Statement on efforts to support implementation of the Pillar 2 model rules

‘(1) The Chancellor of the Exchequer must, within three months of this Act being passed, make a statement to the House of Commons on how actions taken by the UK Government since October 2021 in relation to the implementation of the Pillar 2 model rules relate to the provisions of Part 3 of this Act.

(2) The Chancellor of the Exchequer must provide updates to the statement at intervals after that statement has been made of—

(a) three months;

(b) six months; and

(c) nine months.

(3) The statement, and the updates to it, must include—

(a) details of efforts by the UK Government to encourage more countries to implement the Pillar 2 rules; and

(b) details of any discussions the UK Government has had with other countries about making the rules more effective.’—(James Murray)

This new clause would require the Chancellor to report every three months for a year on the UK Government’s progress in working with other countries to extend and strengthen the global minimum corporate tax framework for large multinationals.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Finance (No. 2) Bill

Kirsty Blackman Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[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.