The Economy

Richard Fuller Excerpts

Wednesday 22nd May 2024 Commons Chamber

[Bim Afolami]

I am afraid I disagree with the hon. Lady on points of fact. I have already set out so many statistics that show that things are significantly improving in the economy, and at a faster rate than that experienced by most of our competitors in Europe. I completely disagree with her assessment.

[Richard Fuller (North East Bedfordshire) (Con)]

The Minister was right to update the House on the positive progress that we are making with inflation; right to make the point that people are continuing to find economic difficulties, and that we need to stick with the Prime Minister’s plan; right to point out the terrible risks to the economy posed by the Labour party’s polices on labour markets and taxes; and right to say that there have been external factors, and that policies to tackle one-off external factors are different from one’s policies looking forward.

This Government have ended the period of quantitative easing, or printing money, and moved to quantitative tightening, or paying back money. The IMF’s report says that, by 2025, the balance sheet for the Bank of England should be settled. Will the Minister look at the longer-range forecasts that the Office for Budget Responsibility has put out, and see what flexibility they provide for the Government to cut taxes or increase expenditure?

[Bim Afolami]

I thank my hon. Friend for a characteristically thoughtful and informed question. I will indeed look at what he said about the Bank of England’s balance sheet being settled by 2025, and I will talk to him about that in due course.

Finance (No. 2) Bill

Richard Fuller Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

[Nigel Huddleston]

The right hon. Gentleman will be aware that, back in 2010, the tax-free allowance was, I think, £6,475. Actions taken by this Government since then have increased the tax-free allowance to more than £12,500, a significant real-terms increase, which means that take-home pay is higher than it otherwise would have been. When taken in combination with other measures, it is a really important move.

Furthermore, I am sure the right hon. Gentleman would not want to detract from the significant changes in national insurance, which have put money back into people’s pockets. We have eliminated by a third a whole category of taxation—national insurance—and that will help working people in this country as well.

[Richard Fuller (North East Bedfordshire) (Con)]

Just to reinforce this point about the increase in thresholds, the Minister says that it has been a significant real-terms increase, but it is actually a 21% increase, which is very significant indeed. My question is on the part of the HICBCs that were announced in the Budget but that he did not quite mention, which was the plan from 2025-26 to base the benefit on the household budget rather than the individual budget. Can he just reassure the House that His Majesty’s Revenue and Customs will be up to speed to be able to implement that part of what the Chancellor has outlined?

--- Later in debate ---

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

I am grateful for the chance to respond on behalf of the Opposition in this Second Reading debate.

The Finance Bill follows last month’s Budget, in which the record of the Conservatives’ time in office was laid bare. After 14 years, the Conservatives have shown what they can deliver for the British people: higher taxes, falling living standards and lower economic growth. The truth is that after 14 years, they are out of time, out of ideas and out of touch with reality. They are out of time because whatever they say or try to do now, it is too late to repair the damage that they have done to the economy and to people’s standard of living. The Conservatives may now have implemented a reduction in national insurance—a cut that we support—but that comes amid a tax burden that is set to rise to its highest level in 70 years, and to rise in each and every year of the forecast period. The Government simply cannot escape the reality that under their plans, for every £5 they are giving back to families, they will be taking £10 in higher taxes. Giving with one hand and taking twice as much with the other—that is the reality of life under the Conservatives.

The Government are not just out of time, but out of ideas. In the Budget from which this Finance Bill came, the Conservatives performed what may be the biggest U-turn of this Parliament yet, and there is some tough competition on that. After years and years of the Conservatives opposing tooth and nail our plan to scrap non-dom status, the Chancellor stood in this Chamber last month and adopted our approach as his own. I recall the Financial Secretary’s immediate predecessor, the right hon. Member for Louth and Horncastle (Victoria Atkins), being a particularly passionate defender of non-dom status. I remember her declaring less than a year ago, during the Committee stage of a previous Finance Bill, that

“We have come to the conclusion that non-domiciled status is right”.––[Official Report, Finance (No. 2) Public Bill Committee, 16 May 2023; c. 44.]

How times change!

Despite the Government’s apparent U-turn, we have learned since the Budget through our careful analysis of the Government’s plans that loopholes remain in their approach to abolishing non-dom tax status. Alongside an unnecessary discount in year 1, there is a loophole that appears to have been intentionally designed to allow non-doms to stash money away in offshore trusts, so that they can avoid being subject to inheritance tax, as any other member of the public is. Those loopholes must be closed, because if a person makes their home and does their business in Britain, they should pay their taxes here, too. People will look at those loopholes and rightly conclude that despite the Budget’s U-turn, this Prime Minister just cannot bring himself to sort out the non-dom problem once and for all.

[Richard Fuller]

If I may say so, the hon. Gentleman is clutching at straws. There may be a few hundred million pounds here or there in what the Government propose doing to tighten up supposed loopholes, but as he is aware, the Labour party wants £28 billion spent on its green investment. Which taxes will he raise to pay for that?

[James Murray]

I fear that the hon. Gentleman is slightly out of date. Going into the general election, we have set out very clearly our plan to invest in the transition that we need in our energy supply and our economy, and how we would pay for that—through a strengthened windfall tax, alongside prudent investment. He may scoff at what we say about the non-dom tax loopholes, but we are talking about £1 billion in the first year and £2.6 billion over the course of the next Parliament. That money should go to our public services, rather than intentional loopholes allowing some people to get away with paying hundreds of millions of pounds less in tax.

The Conservatives are not just out of ideas, but out of touch with reality. They made that very clear in last month’s Budget, from which this Finance Bill arose. At the end of his Budget speech, the Chancellor made an astonishing £46 billion unfunded commitment—leaving a gaping hole in the public finances—when he pledged to abolish national insurance altogether. Since then, Government Ministers have had countless opportunities to row back from or U-turn on that commitment, but they have been determined not to. Earlier today, the Prime Minister had three chances to rule out cuts to the NHS, cuts to the state pension or tax rises to pay for his £46 billion unfunded tax cut. Each time, he refused to do so.

--- Later in debate ---

[Richard Fuller (North East Bedfordshire) (Con)]

I wholeheartedly support the Bill. I have a couple of points to make to the Minister, and a couple of responses that the shadow Minister might be interested to hear. In response to the point made by my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) on the loan charge, the Minister said that he was not minded to accept an amendment, but would always listen. I like the Minister. He will be aware that the loan charge has created significant concerns and problems for people. He will be aware that the loan charge policy has been in place for a long time and has not made the progress anticipated initially. May I say to him that it is time to draw a deadline on that policy and for HMRC to find a different way to provide resolution and, may I say, relief to those affected?

[Sammy Wilson]

Would the hon. Gentleman accept that the policy has not only failed to bring in the revenue that the Government intended, but led to a number of people committing suicide because of the pressure put on them by HMRC?

[Richard Fuller]

My right hon. Friend has voiced the concern that I know will rest on the conscience of my hon. Friend the Minister, and he is right to add that. May I put a second conscientious point to the Minister—this point was also made by the shadow Minister, the hon. Member for Ealing North (James Murray)—which relates to the scoring for contaminated blood? That was not included in the Budget, which will have disappointed a considerable number of Members of Parliament from all parts of the House. It would be helpful if the Chancellor came forward with some view on that. Will my hon. Friend look at that?

Thirdly, will the Minister be encouraged by the words of my right hon. Friend the Member for Wokingham (John Redwood) and his analysis of the charges imposed on the Treasury by the Bank of England as a result of the quantitative tightening policies? The UK’s policies on quantitative tightening are exceptional. Few other central banks—many of which indulged in the bizarre quantitative easing policy 15 years ago, after the financial crash under the last Labour Government—do it, and it is now a real charge that has real effects on the real economy in the country. The exceptional way in which we are treating quantitative tightening charges—essentially, we take them on the books, the Treasury gets charged for it, and it has to go into the scoring that the OBR and others do—does not go on in other European countries. There is discretion on how it can be put across, and in the US the charges are absorbed but the Government are not charged. That is an important policy point, and I would be interested to hear whether the Minister would accept an amendment on that in Committee, although I think not.

Prosaically, or simply, HMRC has been in the headlines for not answering phone calls and for saying it would go on holiday. I am pleased that the Minister reversed that straightaway, and I know many taxpayers will be pleased about that. Many who will be looking to fill in their self-assessment forms will be surprised that they cannot download form SA100—they have to call HMRC to download a copy, whether or not they want to file it by paper. That seems a little odd, if HMRC’s phonelines are under pressure. Will the Minister, who has been responsive on points to date, look into that?

I will turn to the shadow Minister’s speech—I like him too. As he in his own mind “prepares for government”, he and his colleagues may wish to get a better grasp on reality. When he rightly talks about the importance of setting clarity for investment, it is important that those looking at investment think that those in charge of the public finances know what is going on. He talked about record tax rises under this Government. Let me ask him these questions. Did he disagree with funding of the furlough programmes? Did he disagree with the energy price support? Did he disagree with the increase in funding for the NHS? Did he disagree with record numbers of police officers? If he did not disagree with any of those, he would recognise, if he had a grasp on reality, that he would have to fund those through increased taxation or increased—[Interruption.] He has an answer, so would he like to come in? [Interruption.] Mr Deputy Speaker, I thought he had an answer.

[James Murray]

The hon. Gentleman is asking me what I disagree with. I disagree with the low growth that has been true of this Government. I disagree with billions of pounds being wasted in covid fraud and in other ways by the Government. I disagree with how the Government are now overseeing the highest tax burden in 70 years and have no plan to get the economy growing. That is what I disagree with.

[Richard Fuller]

The hon. Member mentioned growth rates, fraud and the record tax burden. I was making a point about the record tax burden, and he cannot respond to that challenge by repeating that he is concerned about it. He talked about low growth—he should go to Germany or France, which have lower growth than the UK. He should go to the majority of G7 countries, where he will find lower growth than in the UK. He is mistaking—[Interruption.] Would he like to intervene again? No.

I am trying to be helpful, obviously. The hon. Member and the shadow Treasury team wish to be taken seriously, but he will know that the points about growth are difficult to work through, with western economies not growing as fast as they have done. The UK is growing faster on average than other countries, and he needs to give some credit for that rather than just say that low growth is the case.

More importantly, if the hon. Member and the Labour party believe in furlough, the energy price schemes, the record increase in NHS funding and more police—they supported most of those programmes—they must recognise that those must be paid for in government, and that means hard choices. What the Prime Minister and the Chancellor have done is make those hard choices. Making people feel bad about historical hard choices is not a policy for a future Government.

[James Murray]

We seem to be engaging in an unexpected back-and-forth. The hon. Gentleman did not mention covid fraud. As he might know, we have set out our plans for a covid corruption commissioner. Would he support that—yes or no?

[Richard Fuller]

Of course, everyone supports cracking down on fraud, and I would be very happy—[Interruption.] If I may, I would be happy to look at the Labour party’s specific proposals. But the hon. Member will also know that when the Labour party talks about fraud, particularly when it comes to personal protective equipment and the furlough programmes, it conflates two things. For example, with the coronavirus loan programmes, Labour is conflating moneys that have not repaid because businesses have gone bust, or because companies have not paid them back yet, with moneys that have been lost fraudulently. When I look at his proposals, I want to ensure that when Labour talks about the amounts that have been lost, they relate to actual examples of fraud and not to the ways in which, in a difficult situation where people’s businesses could have been closed, money was given out by the Treasury to others. If that is the case, I am happy to look at that.

My second point to the Opposition—before I get on to what I want to say—is that I hold no torch for the former Prime Minister, my right hon. Friend the Member for South West Norfolk (Elizabeth Truss), but when the hon. Member and his colleagues talk about crashing the economy and about people’s mortgage rates, as I think the Leader of the Opposition did at Prime Minister’s questions, may I gently urge them to look at the Bernanke review that has just been completed on Bank of England forecasting? That has a number of important points about how the Bank of England could improve its forecasting. It also compares interest rates for the seven central banks that Ben Bernanke, the former head of the US Federal Reserve, has used as his comparators—in figure 12 in the report. If the hon. Member looks at that, he will see that UK interest rates in 2019 were in the middle of the pack, UK interest rates in 2020 were in the middle of the pack, UK interest rates in 2021 were in the middle of the pack, UK interest rates in 2022 were in the middle of the pack and UK interest rates in 2023 were in the middle of the pack. UK interest rates as we enter 2024 are in the middle of the pack. It is simply not true to say that something exceptional happened to UK interest rates in any part of this Parliament. Again, if the hon. Member wishes to be taken seriously in government, he needs to get a grip on reality, not on fantasy.

I will now turn, if I may, to the things that I would like to say. [Laughter.] I did promise the Whips that I would take only 10 minutes, so I promise to take only 10 minutes, from now. Clause 12 sets the corporation tax rate. I see my friend the hon. Member for Mid Bedfordshire (Alistair Strathern) in his place on the Opposition Benches. I think that both he and I are pleased that Government and Opposition Front-Bench Members have made clear their commitments for full expensing. That is particularly important to the people of Bedfordshire because there is a potential investment pending in his constituency. I would like to put on record our thanks to the two Front-Bench teams for setting out the clear future framework for how that will work.

Let me turn to income tax rates in clause 2, because it is important to look at the history. As my hon. Friend the Minister mentioned, the record of successive Conservative Governments from 2010 for working people in this country is strong. He mentioned the increase in the personal allowance from £6,475 in 2010 to £12,570 this financial year. That is a 21% real increase. However, my hon. Friend did not mention the change in the minimum wage, which has gone up from £5.80 in 2010 to the living wage now of £11.44. That is a 23% real increase in wages. Higher wages for working people and lower taxes for those on lowest incomes is a very strong record.

However, my hon. Friend needs to look at the higher rate threshold, because in 2010 it was £37,400, and now it is £37,700. In today’s money, the 2010 amount would be set at £59,800. In essence, there has been a 37% decrease in earnings when people hit the higher threshold. It may not be popular politically, but economically such a substantial differentiation in the way we tax people on middle and high incomes from those on low incomes has long-term implications. After the Budget, people who have retired, have been thrifty and saved money and have a private pension now find themselves complaining that, although they are getting their increase in the basic pension—or maybe not—they are being dragged into the higher rate of taxation. Successive Conservative Governments have rewarded work—they have wanted people to work hard, be entrepreneurial, and grow their businesses and the economy—so please, can we look at the ways in which that particular threshold should change?

Quite rightly, the Prime Minister and the Chancellor have indicated that they wish to simplify taxation on working people. That is completely consistent with the long-run approach of the Conservatives to taxation on work. The aspiration to reduce national insurance is an excellent way of looking at that. Unlike the Opposition, I would say that there is a difficulty in politics of finding times to make quite significant changes. This may be such a time—I know that Ministers will be looking at this—partially because we have quite significant issues of overall taxation that we need to reduce, but there is the opportunity for other reasons as well. Reallocation of existing taxes is easier when the tax burden is exceptionally high. I am a low-tax Conservative. I recognise, unlike some, that when we buy things, we have to pay taxes on them. But we know that this tax rate is unusually high, and we know that we will reduce that tax burden. It is a propitious time to look at ways of reducing national insurance contributions over the next five years.

The Budget forecasts fiscal drag to be £28 billion to £33 billion per annum for the next three or four years. There is an ethical and moral case for wanting to give back more money to people by reducing national insurance contributions. However, my proposal is for the Government to consider not that national insurance reductions should go directly into pay packets, but that national insurance contributions should be added to people’s long-term savings through compulsory savings schemes. Many countries have recognised that the idea of state pensions being based upon the “never, never” is not a secure way to provide for long-term pensions. We have never really grasped the nettle in this country—Singapore did it right at the start and Australia did it in the 1990s. There is an opportunity for us to build on the work that Sir Stephen Webb did in the coalition Government through changes to national insurance contributions. That would ensure that working people are the first generation to have a truly secure pension that is their money, where they do not have to rely on the vagaries of what a particular Chancellor of the day might do to pensions, and they would have only one tax on their wages during their career. Finagling people in other parties like to increase taxes, and having two taxes to increase gives them more flexibility. An opportunity would be provided to extend the savings stake—the way that people save for things—beyond providing for their retirement, so that they could, as they do in Singapore, put money into their first home. By looking in a new way at how we treat citizens in this country, we could move towards a savings state and away from a socialist never-never state. I leave my hon. Friend the Minister to consider those comments.

Oral Answers to Questions

Richard Fuller Excerpts

Tuesday 19th March 2024 Commons Chamber

[Jeremy Hunt]

That is absolutely what we are trying to do. Film and TV is a good example here, as it has now become an offshoot of the technology industry. Films such as “Barbie” have been filmed in Hertfordshire but have the look of the Californian sunshine; they can withstand the British rain because of the use of high-tech devices that simulate Californian sunshine, even in my right hon. and learned Friend’s constituency. What he sets out is our absolutely our plan and we will stick with it.

[Richard Fuller (North East Bedfordshire) (Con)]

In response to covid, this Government introduced the furlough scheme, and delivered and funded the world’s first vaccine. In response to the energy price spike, this Government introduced comprehensive support for families. The Office for Budget Responsibility, so beloved of the shadow Chancellor, had its long-range forecast for 2025 to 2028 showing GDP increasing every year, GDP per capita increasing every year, average earnings increasing every year in real terms and productivity increasing in real terms. So does the Chancellor agree that when the shadow Chancellor says that we face a 1979 moment, she is right: a choice between a Labour party still in hock to its union bosses and a Conservative party committed to growth?

[Jeremy Hunt]

I have nothing to add to my hon. Friend’s brilliant list of statistics, except to cite another independent organisation, the International Monetary Fund, which says that in the next five years this country, under Conservative leadership, will grow faster than France, Germany, Italy and Japan.

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

Richard Fuller Excerpts

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

[James Murray]

No, I am going to make some progress.

The public deserve to know whether the Prime Minister’s commitment to abolish national insurance means tax hikes for pensioners, even higher borrowing, cuts to important public services, or all of the above.

[Richard Fuller]

I hate reading and I probably will not be able to read this out either, because my eyes are not good. The shadow Minister talked about what the Chancellor said at the end of the Budget, so let me tell him that he said the following about any further cut:

“When it is responsible, when it can be achieved without increasing borrowing and when it can be delivered without compromising high-quality public services”. —[Official Report, 6 March 2024; Vol. 746, c. 851-52.]

So what problem does the shadow Minister have with cutting taxes on working people?

[James Murray]

The problem we have with the Chancellor’s announcement is that he has said that in the next Parliament he wants to abolish NI contributions. [Interruption.] The Prime Minister said that on the Saturday following the Budget. The Prime Minister and the Chancellor have again and again, in emails to party members and in interviews with media outlets, made it clear that that is what they want to do. I appreciate that some Treasury Ministers have been flip-flopping a bit when they have been out on their media rounds and have not entirely been able to toe the party line. But going into the general election, I would listen to what the Prime Minister and the Chancellor are saying, and if they are saying that they want to abolish NI and create a £46 billion black hole in the public finances, they should stand up here and defend that to the people of Great Britain today.

The reckless way in which the Conservatives announced their unfunded tax plan and then refused to give any more details exposes the risk of five more years of them in power. It is clear the Conservatives will happily gamble with the public finances and yet again leave working people being forced to pay the price. As they have been unwilling to explain how their plan will be funded, we will today vote to force the Government to come clean on the impact of their £46 billion tax plan on the state of public finances.

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

Richard Fuller Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[Gareth Davies]

My hon. Friend is right to point that out. I would add to those figures: since 2010, we have lifted millions of people across the country, including in Southend West, out of paying any tax at all by doubling the point at which people start paying tax in our country. People can now earn £1,000 a month without paying any tax, and that is a great achievement of a Conservative Government.

Although I welcome the fact that Labour Members will apparently vote for our tax cuts today, I hope that they will forgive me for sounding slightly sceptical about their sudden conversion to the cause of lower taxes for working people. While they do not oppose the measures, they also did not propose them. In fact, Labour has consistently voted against successive Conservative-led tax cuts between 2010 and 2021, which delivered a doubling of the personal allowance, as I mentioned to my hon. Friend the Member for Southend West (Anna Firth). On the one hand, they bemoan the level of taxation, but cannot tell us a single tax that they propose to cut, or what the level of taxation would be under Labour. On the other hand, the shadow Chief Secretary to the Treasury, the hon. Member for Bristol North West (Darren Jones), described our ambitions to remove unfairness in the tax system as “morally abhorrent”. Labour Members still cannot tell us how they will pay for their many spending commitments. They are completely all over the place. It is only the Conservatives who truly believe in reducing taxes on working people.

[Richard Fuller (North East Bedfordshire) (Con)]

The Minister is giving a clear explanation of why the Conservatives want to cut tax, and the economic benefits of cutting taxes for working people. He will know that the origins of national insurance were basically a form of social insurance: having paid national insurance, it would look after us later in life. The Labour party took the insurance out and put the socialism in, which is why we have ended up with a system that is essentially the same as income tax. As we think beyond today’s welcome cuts to what is in the Opposition new clause, has the Minister thought about using any further cuts to go into the compulsory savings of individuals introduced under the coalition Government after 2010—essentially building, in place of a dependency state, a savings state built on Conservative principles?

[Gareth Davies]

Yet again my hon. Friend makes a valuable contribution. I commit to taking his idea away to consider, as we look at reducing the unfairness in the tax system in future and reducing national insurance contributions when it is prudent and responsible to do so.

The Labour party is completely all over the place on this. As a Conservative Government, we have delivered a clear message to the British people, and it is based on the delivery of the lowest personal taxation level since 1975. We have almost doubled the personal allowance, bringing the lowest earners out of paying any tax at all, and we have delivered a thriving jobs market, which is ultimately the best way to ensure that people are brought out of poverty.

--- Later in debate ---

[John Redwood]

No, I do not think that is the main point. I think the two main points are the ones I have made—the covid lockdown and the tax regime affecting the ability to set oneself up. I will meet the hon. Member a little of the way, because I do think that the 2021 reforms in particular put companies off dealing with the self-employed, and the self-employed often need business from other companies, as well as directly from the public, and that has been a problem. If he and his party are seriously interested, they should look at the 2017 and 2021 reforms, which I think they supported, to understand how they have backfired. That is a good example of the OBR and the Treasury thinking that they can get more money out of the self-employed by forcing more of them to be employed but ending up with a far less successful economy with far fewer people working.

[Richard Fuller]

It is an absolute pleasure to listen to my right hon. Friend. I want to reinforce his point about IR35 so that our colleagues on the Government Front Bench are clear about how important this is. He talked about how Labour in the past supported those measures, but does he share my concern that perhaps Labour has now recognised that those changes to IR35 have backfired and that it would be disastrous for the Conservative party to go into the next election not having made those changes while the Labour party is offering to do so?

[John Redwood]

I will not join my hon. Friend in suggesting that it could be disastrous to go into the election—I hope that, when we get to the election, it will be looking rather better. But I do agree that it would be great to have sorted out the IR35 taxation mess before we get to the election—after all, there could still be many months of happy Conservative Government ahead if that is the Government’s wish—as that would be a much better outcome. Failing that, it would be good to put it in the manifesto, but the self-employed would be quite right to say to the Conservatives, “If you have now got to the point of putting it in the manifesto because you think it needs changing, why didn’t you just fix it?”

Oral Answers to Questions

Richard Fuller Excerpts

Tuesday 6th February 2024 Commons Chamber

[Nigel Huddleston]

Over the past few years, we have helped to support our high streets by freezing multipliers and, importantly, targeting further relief at the retail, hospitality and leisure sector. Frequent revaluations are now par for the course, because of the recent changes we have made.

[Richard Fuller (North East Bedfordshire) (Con)]

Last July, following a debanking scandal, I wrote to the Economic Secretary to the Treasury about the risks of implementing so-called diversity, equity and inclusion policies. Far from being inclusive, their implementation has often been divisive, yet Labour put such policies at the heart of its financing and growth strategy just last week. Will my hon. Friend assure us that he will give clear direction to the Prudential Regulation Authority and the Financial Conduct Authority to avoid all the risks of so-called DEI policies?

[Bim Afolami]

I thank my hon. Friend for his question. I am studying those policies carefully. I am concerned about certain aspects of what is proposed, and I will be discussing the matter with the PRA and the FCA to make sure that we have sensible policies on this matter.

Finance Bill

Richard Fuller Excerpts

Report stage
Monday 5th February 2024 Commons Chamber

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

In speaking to new clause 6, which relates to permanent full expensing, I remind the House of the context in which this Finance Bill was published. It followed the Chancellor’s statement on 22 November last year, in which he claimed that he was delivering an “autumn statement for growth”. Members will remember, however, that the same day, the Office for Budget Responsibility confirmed that growth forecasts had been cut by more than half for the coming year, cut again for the year after that, and cut yet again for the year after that. Independent analysts confirmed that even after all the changes that the Government had announced, personal taxes would still rise. They are set to rise by £1,200 per household by 2028-29, with the tax burden on track to be the highest since the second world war.

That was the context in which this Bill was published: flatlining wages, higher taxes, higher mortgage payments and worsening public services—all the product of 14 years of Conservative economic failure. Our country needs change. A critical part of making that change will be to get our country’s growth rate up. We need a plan for growth, to make people across Britain better off, and to ensure sustainable funding for our public services. Labour has been developing our plan for growth by working hand in hand with businesses across the country and across the economy.

We know how highly businesses that are considering investing in the UK rate stability, predictability and a long-term plan. For that reason, we welcome the fact that, as our new clause 6 highlights, the Bill makes full expensing permanent. Permanent full expensing is something we have long called for, as a policy that can support greater business investment and economic growth. Because Labour knows how important stability and predictability are to businesses, the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), announced last week that Labour is committed to maintaining permanent full expensing in the UK tax system, as well as the annual investment allowance, if we win the next general election. The shadow Chancellor has made this commitment to offer businesses certainty for the years ahead. Businesses considering plant and machinery investment across Britain can be confident that the tax treatment of that investment would not change with a Labour Government.

Of course, there is still a general election to face, so I use this opportunity to invite the Minister to put on the record whether the Conservatives will follow our lead by confirming that should they win the general election, they will maintain permanent full expensing. I am sure many businesses would welcome the certainty that would come from knowing both the main parties are going into the election fully committed to keeping permanent full expensing. I urge the Minister, when he responds, to confirm whether that will be his party’s policy going into the general election.

After all the chopping and changing we have seen in capital allowances in recent years, the Minister needs to make the commitment explicit. As I mentioned during earlier stages of the Bill, the annual investment allowance had been temporarily raised to £1 million when this Parliament began; that temporary basis was extended by the Finance Act 2021, again by the Finance Act 2022, and then made permanent by the Finance (No. 2) Act 2023. Meanwhile, over the course of this Parliament, the super-deduction came and went. Last year, full expensing for expenditure on plant and machinery was introduced on a temporary basis for three years. In this Bill, the Government are finally making it permanent. After so much instability, a commitment from Treasury Ministers at the Dispatch Box that the Conservatives, like Labour, will commit to maintaining permanent full expensing feels like the least they can do.

Our new clause 6 would require the Chancellor to publish not only an assessment of the impact of permanent full expensing, but a consideration of what other policies would support its effectiveness. We believe this is important to ensure that business investment is supported as much as possible. The Opposition have begun to set out what some of our policies would be if we won the next general election. As the shadow Chancellor has set out, if we were in government, we would consider the outcome of technical consultations on whether leased assets can be included in full expensing and on simplifying the UK’s capital allowance regime. I would be grateful if the Minister updated us on the progress of those consultations.

Last week, the shadow Chancellor also made clear the commitment that if Labour wins the next general election, we will ask HMRC to produce simple and comprehensive guidance making clear which assets are eligible for each type of capital allowance. That guidance would give businesses clarity over how their investments will be treated, and businesses will be able to use it as a single point of reference when making investment decisions. Will the Minister confirm whether the Government have considered taking such steps, or making such a commitment?

To give further certainty, the Shadow Chancellor has also said that in government, Labour would explore the greater use of rulings and clearances. Under such an approach, businesses would be able to get a written ruling from HMRC about the tax treatment of potential investments, making clear, for instance, whether they qualify for full expensing or other capital allowances. We know that businesses benefit from other countries’ tax administrators being able to provide such rulings and clearances. As certainty is crucial to encourage investment in Britain, I would be grateful if the Minister confirmed whether the Treasury has asked HMRC to consider the greater use of rulings and clearances for investment, and, if so, what its conclusion has been.

Of course, any policies on expensing or other capital allowances sit under the headline rate of corporation tax. It is hard to conclude anything other than that the Conservative party is rather unclear and confused about its approach to corporation tax rates in the UK. For evidence of that, we need look no further than the current Chancellor: in July 2022, during his leadership bid, he pledged to cut the headline rate of corporation tax from 19% to 15%, yet when he became Chancellor just three months later, one of his first acts was to promise to raise the tax instead from 19% to 25%. It is no wonder that businesses, and indeed Conservative Back Benchers, find it so hard to understand the Conservatives’ policy on corporation tax rates.

Let me be clear about the certainty we would offer if we won the next general election. As the shadow Chancellor has set out, we believe the current rate of 25% strikes the right balance between what our public finances need and, as the lowest rate in the G7, keeping our corporation tax competitive in the global economy. That is why we are pledging to cap the headline rate of corporation tax at its current rate of 25% for the whole of the next Parliament. We would take action if tax changes in other advanced economies threaten to undermine UK competitiveness. That choice provides predictability and has a clear rationale. That is the pro-business choice and the pro-growth choice. The promise to cap corporation tax at 25% is clear from us. Again, to offer businesses as much certainty as possible, will the Conservatives follow our lead and also pledge, today, to cap corporation tax at 25% for the next Parliament?

These commitments—to cap corporation tax, to maintain permanent full expensing and to keep the annual investment allowance—will all form part of the road map that we would publish in the first six months of a Labour Government, setting out our tax plans for businesses for the whole of that Parliament. That would put stability, predictability and a long-term plan at the heart of our approach. To give businesses as much certainty as possible, I would be grateful if the Minister confirmed whether a corporation tax cap at 25% and keeping full expensing in place will be in the Conservative party manifesto too.

[Richard Fuller (North East Bedfordshire) (Con)]

I was interested in what the shadow Minister was saying about what would happen if other countries changed their corporation tax. As he will know, Mr Trump, the former President, has said that he would cut US corporation tax, potentially from 21% to 15%. Given such examples, does the hon. Gentleman anticipate that a Labour Government would look to cut the headline rate of corporation tax, as we would be looking at a significant tax cut by the world’s largest economy?

[James Murray]

I thank the hon. Gentleman for his intervention. As we have made clear, we would take action if tax changes in other advanced economies threatened to undermine UK competitiveness, but the headline commitment from us is to cap corporation tax at 25% for the duration of the next Parliament. I recall that in earlier consideration in this debate, he and I had an exchange about permanent full expensing, so I hope he will welcome our commitment to maintaining permanent full expensing if we are in government. Perhaps he will put pressure on his Front-Bench colleagues to join us today in making that a cross-party commitment from the House.

New clause 7 focuses on the multipliers used to calculate higher rates of air passenger duty. As we have discussed at earlier stages of the consideration of this Bill, clause 24 makes no changes to band A rates, while in band B, the reduced, standard and higher rates will increase by £1, £3 and £7 respectively. In band C, the reduced, standard and higher rates will rise by £1, £2 and £6 respectively. In each of those three bands, which cover international travel to a range of destinations, a simple principle is followed: if the duty for passengers on economy flights goes up, the duty for those flying business class and by private jet goes up too. In the domestic band, however, which covers flights within the UK, that simple principle of fairness does not apply. Instead, under the Bill, for domestic UK flights, the reduced rate of APD rises by 50p and the standard rate rises by £1, yet the higher rate is unchanged. Let me be clear what this means in plain English: from 1 April, passengers flying economy and business class within the UK will see their taxes rise, whereas passengers taking exactly the same flights by private jet will enjoy a tax freeze. Although the changes kick in on 1 April, this is no April fools’ day joke, although the Prime Minister may be laughing; it is the result of a hidden loophole that that the Conservatives have introduced. We discussed this matter in Committee, when the Exchequer Secretary tried to provide an explanation for this unfairness. He said that APD rates are

“uprated by a forecast of RPI and those rates are then rounded to the nearest pound.”

As for the different rates I highlighted in Committee, he said:

“It largely depends on how they”—

the rates—

are rounded to the nearest pound; the actual rate is determined by whether the figure is rounded down or up.”––[Official Report, Finance Public Bill Committee, 16 January 2024; c. 34-35.]

I know that the Exchequer Secretary always tries to give me a straight answer—let me put it on the record that I genuinely appreciate his efforts to do so—but I fear that his explanation in Committee may have been unintentionally misleading or, at the very least, only partial. Since that Committee stage, the House of Commons Library has given me information confirming that it does not tell the full picture to say that the duty rates are, as the Minister claimed,

“uprated by a forecast of RPI and those rates are then rounded to the nearest pound.”––[Official Report, Finance Public Bill Committee, 16 January 2024; c. 34.]

In fact, my understanding is that the Minister’s statement applied only to the reduced rates of air passenger duty. Those are indeed adjusted each year in line with forecast RPI and rounded to the nearest pound. However, the standard and higher rates are not calculated by separate reference to RPI; rather, they are generally set as multipliers of their respective reduced rates. For instance, the standard and higher rates in band B are set as 2.2 and 6.6 times the band B reduced rate respectively, rounded in both cases to the nearest pound.

--- Later in debate ---

[Richard Fuller]

Can my right hon. Friend tell me if I have got this right? In the commentary ahead of the Budget, we talk about wiggle room and the Office for Budget Responsibility forecast and about £5 billion or £10 billion here and there, but I think I heard him say that this matter was completely out of the control of the those on the Treasury Bench and this Parliament; that the Governor of the Bank of England could unilaterally decide to crystallise losses on whichever extent of bonds he wished to, and then put that loss into the calculations of the Chancellor of the day; and that the Chancellor would then have to work around that in order to work out what the fiscal expenditure, public expenditure and taxation would be. Is that actually the case? It sounds mightily undemocratic to me.

[John Redwood]

That is an interesting point of debate, but my understanding of the constitutional position is that it is not as bad as my hon. Friend is suggesting because all the bonds were acquired with the express permission of the then Chancellor of the Exchequer. The Bank of England’s website says that the bond portfolio is held on behalf of the Treasury. Successive Chancellors of the Exchequer—beginning with the Labour Chancellor who first undertook quantitative easing and carried on by successive Conservative Chancellors—all signed an agreement with the Bank to say that they would indemnify against loss. So, given that the Government and this Parliament empowered the purchase of the bonds and now take responsibility for any losses on them, it seems perfectly reasonable for there to be a proper conversation about whether we want to take the losses.

I see nothing wrong with us here challenging the idea that, uniquely among the big quantitative easing programmes, it is the Bank of England that not only insists on selling the bonds at big losses but gets reimbursed. The ECB does not sell them in the market at big losses. The Federal Reserve Board sells them in the market at big losses but gets no money back; it simply puts on its balance sheet that it has lost a lot of money and takes the view that, as it is a central bank, it does not really matter if it loses a lot of money, because central banks create money and it is therefore not like a normal commercial business. So I hope that Ministers will look at this as part of the general assessment that is being invited by these new clauses.

I hope also that Ministers will look at the expenditure items in the overall accounts covered by new clause 4 on the public finances, because there has been a marked decline in public sector productivity in the years 2020 to 2023. It was quite without precedent in my experience of following public finances over the years, and this very sharp decline represents at least a £30 billion loss to our system, in that it now costs at least £30 billion a year more to run the group of public services covered by these figures than it did before the collapse in productivity. On top of that, there has also been the need for much bigger sums to cover inflation. This is not the inflation figure; this is the real loss figure from the productivity.

We are all sympathetic to the difficulties that lockdown and the transition out of lockdown caused, and there was bound to be disruption. Our public services were badly affected by that, as children could not go to school and hospitals were disrupted by covid, but that is now some time behind us and it seems perplexing that we cannot get those public services back to 2019 levels of productivity. I hear comment that maybe artificial intelligence will do it and that there needs to be a big investment in computers. Well, that should be on top. All that I am saying to the Government is that we can surely get back to 2019 productivity levels using techniques from 2019, which was very much pre-artificial intelligence and before the latest round of computerisation. Again, this is a big area that needs to be looked at as part of any review of the public finances.

The third area, which is also very large and very much in the news today, is that even more people in our country do not feel they can go back to work and that they need help at home because they are no longer able to work. The Government are working on some important programmes, through the Department for Work and Pensions, to show people that through a combination of part-time flexible working and working at home with proper support and training, and maybe with additional financial support to help them, they could go back to work for part of the time and make a contribution. We desperately need them, and I think their lives would be more rewarding. They would also be better off because we now have a benefits system that means it is always better to work. This should be a cross-party matter, because it is a problem that our nation as a whole faces. We can enrich those people’s lives, help to reduce the burden on the taxpayer and improve the net income of those concerned. Again, this involves many billions.

My point in making these three simple points apparent to the House is that there are very large sums of money indeed involved in bond losses and productivity, which we need to review because that would help in the formation of the next Budget. It would create more headroom, both for the tax cuts that we need if we are to promote growth, and for improved public service provision in the areas where the shoe is still pinching. I trust that will be part of any review that might emerge from these new clauses, or from the spirit of these new clauses. I hope that my right hon. Friend the Chancellor is thinking about this, as we will have a Budget hard on the heels of this Finance Bill, which came out of the autumn statement. In these conditions of recovery, and given the need for faster growth, I welcome having more than one Budget a year, and the fact that we may have three fiscal events quite close to each other, if all goes well. They must promote growth and reduce taxes, and this is a good start.

I welcome new clause 5, but can we please have more? Can we please look at the headroom that I think I have helped to identify?

Draft Public Offers and Admissions to Trading Regulations 2023 Draft Securitisation Regulations 2023 Draft Financial Services Act 2021 (Overseas Funds Regime and Recognition of Parts of Schemes) (Amendment and Modification) Regulations 2024 Draft Data Reporting Services Regulations 2023

Richard Fuller Excerpts

Wednesday 17th January 2024 General Committees

[Bim Afolami]

I thank my right hon. Friend for that point, and I shall respond in the following way. Under the smarter regulatory framework, the broad approach is that Parliament—in this instance, this Committee—passes secondary legislation under the auspices of FSMA. Then, the detailed rulebook—which is, believe it or not, more detailed than this statutory instrument—comes in through the operation of the FCA. My right hon. Friend made a point about the consultation process. The consultation process can be long or short. I would expect that, as with various other measures under the Edinburgh reforms, the consultation process for statutory instruments as detailed as these will be quite short. We are looking for it to happen this calendar year. I do not want to be more precise than that, but I expect it to happen this calendar year.

[Richard Fuller (North East Bedfordshire) (Con)]

I want to follow up on the comment from my right hon. Friend the Member for East Yorkshire on the role of the FCA. The Minister will be aware of the concerns of Members on the Government Back Benches about the speed with which regulators perform their duties, how much we pass on to them, and how much we trust them to fulfil the will not just of Parliament but of our representatives. That applies to the FCA. I do not expect the Minister to comment on that directly, but can he assure the Committee that he will use his position to ensure that the FCA is kept on track in implementing the reforms at pace?

[Bim Afolami]

I will surprise my hon. Friend by commenting directly on what he has said. Like him, I have spent a long time thinking carefully about the role of the FCA and other regulators and the speed with which they discharge their duties. We give them a lot of work to do, but we also hope that that work is conducted as quickly as possible. The FCA has made improvements in that regard, but it is my job to ensure that it works as quickly as possible. When it comes to the Edinburgh reforms, under which these reforms sit, the Chancellor has been very clear that one of my key jobs is to deliver: not just to say that we are doing things, but to ensure that those things come into practice. I am very focused on that.

There are three types of DRSPs: first, approved reporting mechanisms, which report details about transactions in financial markets to the FCA on behalf of investment firms; secondly, approved publication arrangements, which publish trade reports to the public; and, thirdly, consolidated tape providers, which collate trading data from a variety of sources and publish it in a single live data stream. The draft regulations establish a new framework for the regulation of DRSPs, under which the FCA will make the detailed requirements in its rulebook, as we have discussed.

The instrument also delivers the Edinburgh reforms’ commitment to establish a regulatory framework for a UK consolidated tape. Currently, there are no consolidated tapes in this country, which means that market participants must go to various sources to get a cross-market view of trade data. That makes it expensive, burdensome and difficult for investors to access the data they need to make informed investment decisions in the UK. That is why, as part of the wholesale markets review, the Government consulted on legislative changes to facilitate the emergence of a consolidated tape in this country. There was broad support for the Government’s proposals, which this instrument delivers. A tape that collates data from multiple sources into one continuous live stream will make it easier for market participants to meet best execution requirements and manage risk. That will make UK markets more attractive and competitive.

The draft Securitisation Regulations 2023 establish a new legislative framework that replaces inherited EU law on securitisation. The introduction of the securitisation regulation in 2019 directly addressed financial stability deficiencies that arose after the global financial crisis. The Treasury conducted a review of the securitisation regulation in 2021. The review aimed to bolster securitisation standards, to increase investor protections, and to develop securitisation markets to facilitate real economy lending. The new framework established by the draft regulations will allow the financial services regulators—the FCA and the Prudential Regulation Authority—to make and further reform the firm-facing rules for securitisation with more agility and proportionality. The regulators will consider taking forward reforms in line with the outcomes of their own consultations and the 2021 Treasury securitisation review, which were received positively by industry.

The instrument also takes forward other reforms identified by the 2021 review. Those reforms include boosting the UK securitisation market’s competitiveness by no longer subjecting certain overseas firms to UK requirements when investing in UK securitisation. That will make overseas firms’ requirements more proportionate and increase their incentives to invest in UK securitisations, while also removing extraterritorial supervision issues for the regulators. I want the Committee to be clear on that point. The instrument also facilitates UK firms’ participation in international securitisation markets, which should benefit our industry.

The draft Public Offers and Admissions to Trading Regulations 2023 deliver a key recommendation—perhaps the key recommendation—from Lord Hill’s listings review to fundamentally overhaul the prospectus regime, and they mark a significant step in the Government’s reforms to make our capital markets more competitive. The current prospectus regulation, as outlined by Lord Hill and industry at length in his review, is inflexible and slows the raising of capital, which is the purpose of our capital markets. The instrument creates a new framework that requires companies raising capital to publish information that is relevant and useful for investors, while removing unnecessary barriers to such information. The new regime will mean that companies raising capital are required to publish a prospectus, except where they meet a series of exceptions—for example, where a security is traded on an exchange, or where the offer of securities is fewer than 150 investors. That means that, in practice, we are removing the need for a prospectus to be published in many situations. Just so that colleagues appreciate this, the purpose of that is absolutely not to reduce information for investors but to ensure that the right level of information is appropriate for the right type of investors for the right businesses.

The instrument also establishes a new regime for securities “admitted to trading’” on a regulated market or a multilateral trading facility, and creates a new regulated activity of operating an electronic system for public offers of certain securities that are above £5 million. By removing the €8 million threshold for a prospectus, which effectively acted as a blockage for certain private-capital raising, firms can raise larger amounts of capital more easily and more quickly.

That will allow firms raising money outside of capital markets—for example, through crowdfunding platforms, which has grown in popularity over recent years—to continue to do so, but do so in a more targeted way. The FCA will be given new rule-making responsibilities to set rules that apply directly to firms, such as when a prospectus is required. That will create a simpler and more effective regime.

I will now turn to the final instrument, the draft Financial Services Act 2021 (Overseas Funds Regime and Recognition of Parts of Schemes) (Amendment and Modification) Regulations 2024—I will take away from this the need to perhaps shorten the length of the names of such regulations.

This instrument amends the statute book to support the implementation of the overseas funds regime, which is a new route allowing overseas funds from equivalent countries or territories to be recognised for the purposes of marketing participation in such funds to UK retail investors. This instrument ensures that, where appropriate, funds recognised under the overseas funds regime are treated in the same way as other recognised funds. These changes are technical, but they are necessary to allow the overseas funds regime to operate as policy intends, ahead of the first funds being recognised under it. This will be critical to continue to support a competitive funds sector for UK investors.

In closing, the first three of these SIs replace key parts of assimilated EU law, putting in place new frameworks tailored to the UK as the Government deliver a smarter regulatory framework in financial services. The final instrument, as I have outlined, makes technical changes across the statute book to support the effective implementation of the overseas funds regime and the functioning of fund recognition. I hope that the Committee will join me in supporting these regulations, and I commend them to the House.

Finance Bill

Richard Fuller Excerpts

Committee of the whole House
Wednesday 10th January 2024 Commons Chamber

[The Financial Secretary to the Treasury (Nigel Huddleston)]

This Government’s aim is to grow the economy for the good of everyone by removing barriers to private sector investment and delivering a tax system that is supportive of business. At the spring Budget 2023, the Chancellor set out his approach for a highly competitive tax regime. By announcing a package of generous tax incentives, combined with a rate of corporation tax that remains the lowest in the G7, this Government have ensured that the UK continues to be one of the best places in the world for businesses to grow and invest.

The Bill marks our next step in making the UK one of the most competitive tax systems among major economies by enhancing the support that the corporation tax system provides to businesses that drive growth by making long-term investments. It meets the Government’s commitment to introduce permanent full expensing, as announced at the autumn statement, solidifying our international competitiveness and creating the certainty that businesses have told us they need in order to confidently invest. The Bill will also drive UK business innovation by merging the existing research and development expenditure credit scheme with the small and medium enterprise scheme. Merging those schemes will simplify and improve the system for supporting cutting-edge research and development.

Turning first to clause 1, at spring Budget 2023, the Government introduced two new temporary first-year capital allowances for qualifying expenditure on plant or machinery. The first was a 100% first-year allowance for so-called main rate expenditure, known as full expensing, which allows companies to write off the full cost of plant and machinery in the year that the cost is incurred. The second was a 50% first-year allowance for expenditure on special-rate assets such as lighting systems, thermal insulation and long-life assets, allowing companies to write off half the cost of an asset in the year that it is incurred, with the remaining balance written down at 6% in every year afterwards.

The Chancellor was clear that his long-term ambition was to make those new reliefs permanent once the fiscal and economic conditions allowed, and at the autumn statement he confirmed that he was able to do just that. Clause 1 delivers that ambition, making both full expensing and the 50% first-year allowance permanent by removing the end date of 31 March 2026. That means that companies will be able to permanently benefit from full expensing. It solidifies our position as joint top of the rankings of OECD countries with regard to plant and machinery capital allowances, and means we are the only major economy with permanent full expensing.

The change will give companies the certainty they need to make long-term investments, and responds to calls from the CBI, Make UK, Energy UK and 200 other business groups and leaders, and from companies including BT Openreach, Siemens and Bosch, which have said that making the policy permanent would be the single most transformational thing the Government could do for business investment and growth. According to the Office for Budget Responsibility, it will generate almost £3 billion of additional business investment each year and £14 billion over the course of the next five years. The forecast is that GDP will be 0.1% higher by the end of the forecast period and slightly below 0.2% higher in the long term as a result.

[Richard Fuller (North East Bedfordshire) (Con)]

I applaud the Government’s initiative to make full expensing permanent, but of course we know there will be a general election within the next 12 months. Has my hon. Friend heard from the Opposition whether, if they were to be in Government, they would maintain it?

[Nigel Huddleston]

My hon. Friend is incredibly knowledgeable about this area through some of his previous business and ministerial experience, and that is a question I am intrigued to hear answered by the Opposition shortly. I believe it is vitally important, because the whole point is to give businesses the confidence to invest in the long term, and certainty is key to the investment decisions being made.

--- Later in debate ---

[Richard Fuller]

Further to that point, does my hon. Friend not think, as I do, that it is an aspect of a responsible Opposition to be clear, right now as we are debating this in this House, what they would do were they to be in Government?

[Nigel Huddleston]

I think my hon. Friend is kicking off what is likely to be a long debate over the course of the next year, but an important one for our constituents and businesses. The economy will play a pivotal part in discussions this year. It is very clear what we are doing: we are implementing vital changes, asked for by business and in response to business, to provide that business certainty and an environment in which they and therefore our constituents can thrive. I do not think any of us want to put that at risk. However, without the clarification and confidence from the Opposition about what they might do, these issues will be raised and the uncertainty can persist. We on the Government side of the House are committed to this, and my hon. Friend is right to make that clear.

--- Later in debate ---

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

Let me start by briefly considering the context in which we are debating clauses 1 and 2. As we know, the Bill follows the Chancellor’s statement on 22 November last year, in which he claimed that he was delivering an “autumn statement for growth”. As the Committee may remember, the Office for Budget Responsibility confirmed on the same day that growth forecasts had been cut by more than half for the coming year, cut again for the year after that, and cut yet again for the year after that. Independent analysts confirmed that, even after all the changes the Government had announced, personal taxes would still rise. In fact, personal taxes are now set to rise by £1,200 per household by 2028-29, with the tax burden on track to be the highest since the second world war. Despite people across the country paying so much in tax, public services are collapsing, the NHS is on its knees, and more and more families are struggling to make ends meet.

That was the context in which we considered the Bill on Second Reading just before Christmas: 13 years of Conservative economic failure had left people across Britain worse off. The only thing to have changed since then is that we now face 14 years of Conservative economic failure. It may be a new year, but those in the governing party face the same cold truth: nothing they can say or do now can repair the damage that they have done to our economy.

People in businesses across Britain deserve so much better. As a foundation of better management of the economy, our country needs and deserves stability, certainty and a long-term plan. It is for that reason that, although we welcome the fact that clause 1 makes full expensing permanent, which we have long called for, it simply cannot make up for the years of uncertainty that businesses have faced. Businesses need stability and predictability to help them plan for growth, and their long-term planning has been held back because the Government have been chopping and changing business taxes and reliefs year after year, with no evidence of anything resembling a long-term strategy.

[Richard Fuller]

I was very pleased to hear the shadow Minister say that the Opposition welcome the full expensing. That helps, but maybe he can go further to clarify. In new clause 6, tabled in his name, the Opposition are calling for a review of all business taxes and reliefs, which would include full expensing. He will know, as will the hon. Member for Mid Bedfordshire (Alistair Strathern) who is sitting behind him, that there is a particular potential investment decision in our county. Will the shadow Minister make it explicit that the Labour party’s intention is to include in its manifesto for the next election a commitment to maintaining full expensing?

[James Murray]

As I have said, we have long been calling for full expensing, and we welcome the fact that it is being made permanent. I do not mean to sound jokey in my response—I am deadly serious when I say this—but if the hon. Gentleman wants to know what a Labour Government would do if we got into office, there is one way to see that eventuality come about: we could have a general election sooner rather than later, instead of dragging things on throughout the course of 2024.

Frankly, the country needs to move on from the current Government. Just look at their record on capital allowances since the last general election. The hon. Member for North East Bedfordshire (Richard Fuller) spoke about certainty and the need for stability, but let us look at the changes that have happened to capital allowances over the past four or five years. As I mentioned on Second Reading, back at the beginning of this Parliament, the annual investment had been raised to £1 million on a temporary basis. That temporary basis was extended by the Finance Act 2021, extended again by the Finance Act 2022, and then made permanent by the Finance (No. 2) Act 2023. Meanwhile, over the course of this Parliament, the super-deduction came and went entirely. Last year, full expensing for expenditure on plant or machinery was introduced but only on a temporary basis for three years.

Now, of course, Treasury Ministers are amending what their predecessors announced last year by making full expensing permanent. Although we welcome that policy, I wonder how long it will last. Frankly, I wonder how long any policy can be expected to last under this Government, when they are led—in the loosest possible sense of that word—by such a weak Prime Minister. If we accept clause 1 at face value, we welcome its principle of making full expensing permanent, as that is something that we have long called for. I will focus the rest of my questions on some of the specifics of the Government’s approach.

As ever, I am grateful to the excellent team at the Chartered Institute of Taxation for all their thoughts on the detail of what the Government have proposed in this clause and others. I know that one matter of interest to the chartered institute was the fact that, at the autumn statement, the Government said that they would publish a technical consultation on leased assets. I would be grateful if the Minister told us when that will be published.

Furthermore, both the Chartered Institute of Taxation and the Association of Taxation Technicians—to which I am also grateful for its thoughts on the detail of the Bill—have queried which companies and assets are eligible for full expensing. I would be grateful if the Minister clarified which assets are outside the scope of full expensing, and whether the Treasury will publish a detailed list of what does and does not count as plant and machinery. I would also be grateful if he told us how many firms will not be eligible for full expensing because they are partnerships. I know that many who take an interest in this matter would welcome clarity on that.

In clause 2, the Government propose changes to the system of tax credits for research and development. As with their approach to business taxation and capital allowances, the Government have failed to deliver any sense of stability when it comes to R&D tax credits, despite certainty and predictability being so crucial to businesses that are making investment decisions. That much is clear when looking at the list of changes that we have debated in Finance Bills over the course of the current Parliament alone: the Finance Act 2020 changed the rate of R&D expenditure credit; the Finance Act 2021 changed how much R&D tax relief small and medium-sized enterprises could claim; the Finance Act 2023 again changed the rates of R&D tax relief; the Finance (No. 2) Act 2023 changed further how the relief operates; and now, the Finance Bill before us changes the system of reliefs yet again. We accept, of course, that some change is necessary and important to enable legislation to function well, but that does not seem to be what we have seen. What we have seen is a Government incapable of providing stability, predictability, and the long-term plan that businesses need to invest and grow. It is clear that after 14 years in office, the Conservatives are incapable of providing that crucial foundation for our economic success.

--- Later in debate ---

As I have made clear, we will not be opposing the clauses being considered in this debate, but I look forward to the Minister’s response to the detailed questions that I have raised in relation to them.

[Richard Fuller]

I wish to raise just a couple of points. Let me turn to the issues of pillar 2 and the moving forward of the Government’s policy on that in clause 21 and schedule 12. Obviously, that relates to changing the decision maker on the taxation rates for multinationals operating in this country from the British Government, elected by the British people, to the determinations of an international organisation through treaty.

As we move forward, it is important to be aware of the changing context. Hon. Members, particularly those from the Conservative Benches, have raised in the past the issue of who else is coming along to this particular minimum tax global party. We already know that China, one of the major economic actors in the world, is not part of the OECD, will not be complying with us and will not be part of these regulations. First, I am interested in any updates the Minister may have on those views about China. Secondly, it is clear that there will be an election in the United States later this year and that there is a significant difference in opinion between the Republican party and the Democrats about whether they will enact the US’s part in the taxation policies of pillars 1 and 2—particularly in pillar 2. Given that there is a reasonable chance—some say it is better than a 50:50 chance—that there may be a change in Administration in November and the United States could then withdraw from participation in the OECD process, can the Minister, in his summing up, give some reassurance to those Conservative Members who, although always supportive of the Prime Minister, may just want to make sure that we have clarity on what we would do in the eventuality that neither of the two major economies in the world—the United States and China—are taking part in this particular global minimum tax from multinationals.

I would also be interested to hear from the Minister—perhaps not from the Dispatch Box today, but separately with the taxation Minister—where the definition of certain words is moving in the Treasury and HMRC when it comes to tax avoidance and tax evasion. I recall that, many years ago, the difference was that tax evasion was illegal and that tax avoidance, while perhaps not what the HMRC wanted to happen, was legal. We see in the Finance Bill references to tax avoidance that imply that it is illegal. I worry that there is insufficient clarity, from HMRC’s perspective, on the difference between tax evasion, which is illegal, and tax avoidance, which is legal but perhaps not desirable. Perhaps the Minister could give some clarity on that.

All those on the Treasury Bench will be aware of the persistence of the concerns about the loan charge and other aspects of tax avoidance schemes, which HMRC has gone to court over, winning in certain actions and then deciding to apply blanket solutions to cases where there has never been a finding of fact in a court regarding the particular schemes. My specific question—I hope that this is within scope, Dame Rosie; you will tell me if it is not—is why we have not brought HMRC’s approach on tackling the loan charge to a conclusion. People have been pursued for far too long in an area that is far too grey. It would be interesting if the Minister had an update on that.

Oral Answers to Questions

Richard Fuller Excerpts

Tuesday 19th December 2023 Commons Chamber

[Richard Fuller (North East Bedfordshire) (Con)]

Will the Chancellor update the House on how he plans to move forward with some of the key recommendations from Lord Harrington’s review into foreign direct investment in the UK?

[Jeremy Hunt]

I am happy to do that. In fact, I hosted a reception for Lord Harrington and the people responsible for that review last week. We will start by increasing the budget of the Office for Investment so that it can give a more bespoke service to potential overseas investors.