The Economy

Baroness Winterton of Doncaster Excerpts

Wednesday 22nd May 2024 Commons Chamber

[Bim Afolami]

Let me start by welcoming the shadow Minister’s remarks, and by saying that no one on the Government Benches—certainly not me—feels that times are not still tough for many millions of people. We are acutely aware of that, which is why we have worked so hard over the last few years to make the difficult decisions that are required for us to guide the country through the difficulties wrought by covid, the biggest pandemic in 100 years, and by the energy shock from the war in Ukraine. No one on this side of the House minimises the difficulties that people have gone through and that many are still going through.

Let me pick up a couple of points of fact. The hon. Lady quoted the IMF, and she mentioned selective quotations. I am afraid that she wins the prize on that one: the IMF was very clear about the fact that over the next five or six years, the UK will be the fastest-growing country in the G7 apart from North America. She also mentioned confusion. I think that she and her party are the ones who are confused: they are confused on the question of taxes. We have scored Labour’s tax plans, and they amount to an extra £2,094 over four years for the average person. Labour Members say that they want to grow the economy, and they say that they are pro-business—at least, that is what they tell business people outside the House—but they are putting in place a workers plan, led by their deputy leader, that will impose 70 new regulations on small businesses, far more power for trade unions and day-one rights on employment, and will ban flexible working. It will damage many of the things that make small businesses in this country successful.

Let me end by saying this: if we want a Government who will cut inflation further and grow the economy, we should not increase borrowing and increase taxes like the Labour party.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Treasury Committee.

[Dame Harriett Baldwin (West Worcestershire) (Con)]

I welcome the Minister’s statement, which was crammed with useful facts and statistics. Yesterday, our Committee met representatives of the IMF in private, and we had a very interesting and informative discussion. As for yesterday’s report, the IMF points out that none of this good economic news would be happening had it not been for decisions made in previous Budgets. In particular, it states that the Government

“have delivered several helpful measures over the last three budgets…investment tax reliefs for businesses to boost investment, an expansion of childcare, and active labor market policies.”

This good news is not happening by accident; it is happening because a plan is in place, and the plan is working. Does the Minister agree?

[Bim Afolami]

I do agree, but let me draw attention to a specific point that is often ignored. The Chancellor’s decisions over the last two fiscal events have set the country up for growth in the future. My hon. Friend mentioned the policy on business expensing; that was a £10 billion tax cut for business. She mentioned childcare policies; those have helped millions of working families up and down the country. It is because of the cumulative effect of a series of important measures that we are able to stand up here today and say that while we are not there yet, the economy is starting to turn a corner.

[Madam Deputy Speaker]

I call the Scottish National party spokesman.

--- Later in debate ---

[Bim Afolami]

I have been in correspondence with my hon. Friend a few months ago on this very question, and I would be happy to engage with him on it again.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I thank the Minister for his statement.

Finance (No. 2) Bill

Baroness Winterton of Doncaster Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

[Peter Aldous (Waveney) (Con)]

I am interested in clause 19, which sets out how the energy security investment mechanism will operate: the energy profits levy will cease if the six-month average prices for both oil and gas fall below certain thresholds. That provision follows on from the Chancellor’s announcement in his spring Budget that the energy profits levy would be extended to 2029, though it would be disapplied when energy prices return to normal. My interest in the issue stems from my role as a constituency MP—activity in the North sea energy sector is vital to the local economy—and from chairing the British offshore oil and gas industry all-party parliamentary group. I have no particular issue with the mechanisms in clause 19, though I am worried that the current short-term approach to fiscal policy for the oil and gas sector undermines other Government objectives—in particular, the objective of enhancing the UK’s energy security, which would bring new, well-paid jobs to coastal communities such as Lowestoft, and the objective of delivering our net-zero targets.

I acknowledge that the Chancellor has an unenviable role and faces a significant dilemma. He is, in many respects, between a rock and a hard place. He needs to balance the books, and to support those families who continue to struggle with the cost of living crisis. It is thus understandable that he looks to energy companies to pay more as oil and gas prices have risen. They have been at very high levels; however, it should be pointed out that they have now fallen back to long-term averages. There is a significant risk that in pursuing such a course, he could imperil the inward investment that is needed to create long-term, sustainable jobs in coastal communities for those very people who are struggling to make ends meet.

The North sea has been the UK’s economic saviour for nearly 60 years. Some might say that we are nearing the end of that particular story. That is not the case. The North sea is transitioning from being a source of fossil fuels to the long-term home of renewables. That transition needs to take place as quickly as possible, but in a smooth and seamless way. It requires a stable and long-term fiscal policy, which I am afraid we do not have at present. The decision to extend the levy for a further year was unexpected by industry and presents a significant further challenge to investor confidence.

Energy companies are making investment decisions on projects that quite often have timescales of the order of 40 to 50 years. The fact that in the UK there have been four fiscal changes in the past two years deters investment and deflects it elsewhere. Such businesses are globally footloose, and they will go to countries where the fiscal regime is favourable and has a large degree of certainty about it. In the past, the UK has ticked that particular box, but we are not doing so at present. It should also be emphasised that, as well as operating worldwide, those businesses have interests in a wide variety of energy technologies—not just oil and gas, but the low-carbon businesses of today and tomorrow: offshore wind, hydrogen, and carbon capture, usage and storage. If they find the fiscal regime unfavourable for oil and gas, they will invariably not invest in those renewables, which are so vital for our future.

The initial feedback following last month’s Budget is that those concerns are well founded: investment decisions are being delayed and funds could well be diverted elsewhere. Offshore Energies UK, which provides the secretariat for the British offshore oil and gas industry APPG, has identified that £200 billion of investment that was awaiting the green light may not now happen. Cornwall Insight concludes that prolonging the levy

“could weaken investor confidence, at a time when the UK is seeking record levels of investment to deliver the transition to net zero.”

We are at risk of imperilling the next chapter of the North sea—an ongoing story that can not only deliver economic regeneration, but provide over the remainder of this decade 50 GW of offshore wind, 10 GW of hydrogen, and four carbon capture, usage and storage clusters, as well as supporting the home-grown oil and gas industry and helping us to meet our decommissioning commitments. In short, it could unleash an enormous amount of economic activity that can cascade right around the UK. To be fair to the Government, clause 19 does seek to address those concerns, but I urge them to map out a long-term strategy for offshore energy, building on the success of the 2021 North sea transition deal. They are now adopting a similar course in the nuclear sector. We need to get back to doing the same in the North sea.

It is appropriate to comment on the Opposition’s alternative proposal to extend the windfall tax. There is a real worry in the energy industry that that could exacerbate the worries that I have underlined. Offshore Energies UK has highlighted that those proposals could lead to the loss of 42,000 jobs and the wiping out of £26 billion-worth of economic activity. A concern that I hope the Opposition will allay is that they are looking at removing the capital and investment allowances that are vital to securing inward investment.

We are where we are, and I fear that some damage has been done. However, there is work to do to rebuild the UK’s reputation as a prime destination for investment in the energy sector, and we need to get on with that task without delay. The industry has noted the Government’s commitment to honour the sunset clause, and I urge the two Ministers on the Front Bench—my hon. Friends the Members for Mid Worcestershire (Nigel Huddleston) and for Grantham and Stamford (Gareth Davies)—to provide the further reassurances that are needed to reinforce that message, both this afternoon in their responses and as the Bill progresses through Parliament.

The importance of ongoing and meaningful dialogue between the Government and industry cannot be overemphasised. In the period from 2012, after the last windfall tax, up to 2021, when the North sea transition deal was agreed, that interaction was very much taking place. It has been lost over the past three very eventful years, but it needs to be restored as quickly as possible. If it is, we can still embark on a new golden era for the North sea: an era of home-grown energy transition, not an outsourced one; of reindustrialisation, not deindustrialisation; and of enhanced energy security and economic prosperity.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

As my hon. Friend the Member for Ealing North (James Murray) set out in his opening speech, this Finance Bill and last month’s Budget are nothing but the last gasps of a dying, desperate Government. Neither does anything to address 14 years of Conservative economic failure, and as always with this Government, it is working people who pay the price, because taxes are still rising. The British people, already facing the highest tax burden in 70 years, will see tax rises in every single year of the forecast period. As much as the Government try, they simply cannot hide from that record: after a decade and a half of Conservative rule, people have less money in their pockets.

Unable to defend his own Government’s record, and unable to offer any plan to get the country out of the economic mess that his party has created, this Chancellor has resorted to undeliverable promises. The Chancellor ended his Budget last month with a £46 billion unfunded tax plan to abolish national insurance, which would put our economic stability at risk. That is even bigger than the unfunded tax cuts announced by the right hon. Member for South West Norfolk (Elizabeth Truss) in her Budget, which added hundreds of pounds to people’s mortgages.

In contrast, the Labour party has consistently said that we would reduce the tax burden on families. That is why we opposed the current Prime Minister when he wanted to increase national insurance two years ago, and it is why we supported the measures announced last month to bring national insurance down by an additional 2p.

Although on the surface this Bill leaves the basic and higher rates of income tax unchanged, let us be clear: this is a Government who have raised the tax burden to record levels, and taxes are continuing to rise. Because of the tax choices that this Chancellor has made, households will be, on average, £870 worse off. His decision to freeze tax thresholds will create 3.2 million new taxpayers by 2028, and 2.6 million more people will be paying higher rates. For every £5 that the Government are giving back to families, they will be taking an average of £10 in higher taxes under their plans, and they expect the British public to thank them for it.

While we will always call out the Conservatives for pickpocketing the British taxpayer, we do welcome their recent pickpocketing of Labour policies. Labour has long argued that if people make Britain their home, they should pay their taxes here too. However, the Prime Minister himself has said that scrapping the non-dom tax status would somehow end up costing Britain money, and the Chancellor previously tried to argue that the non-dom status supports jobs and that reforming it would damage long-term growth. I am delighted to say that the Prime Minister and the Chancellor have finally come around to the Labour party’s way of thinking, but it is not quite what it seems. I am not denying that Conservative Members have come a long way after years of opposing our plan to scrap the non-dom status, but there are still some gaping loopholes in the Government’s plans.

The discount in year 1 is unnecessary and unjustified, and particularly concerning is the loophole that will allow non-doms to exploit offshore trusts so that they can avoid inheritance tax. As my hon. Friend the Member for Ealing North made clear, these loopholes must be closed. I hope that the Minister, when he responds, will commit to closing these loopholes, so I wait with bated breath to hear what he has to say on this policy. If not, will he accept that the Conservatives are once again putting the interests of non-doms before those of ordinary British taxpayers and British businesses?

Let us take corporation tax, which clause 12 sets at 25%. All this Chancellor has had to offer British businesses is uncertainty. Despite promising to cut corporation tax from 19% to 15% in his 2022 leadership bid, he has increased it from 19% to 25%. In contrast, our shadow Chancellor has committed to capping the headline rate of corporation tax at its current rate for the whole of the next Parliament, and we would take action if tax changes in other advanced economies threatened to undermine UK competitiveness.

The Opposition will be supporting the energy security investment mechanism in clause 19 of the Bill before us, as it will help investors get the confidence they need. Likewise, we are committed both to strengthening the windfall tax to raise more revenue to support our country’s energy transition, and to giving as much certainty as possible to the companies affected. That is why our shadow Chancellor has made it clear that, under Labour, our one-off, time-limited energy profits levy will cease to apply by the end of the next Parliament.

We will not be opposing the Bill today, but we will be looking closely at the detail in the specific clauses in the coming weeks. However, let us be under no illusions: this is an exhausted and directionless Conservative Government who are out of ideas and out of time. All they have to offer are U-turns, unfunded promises and an ever-growing tax burden on working people and our constituents. In contrast, the Labour party’s offer to the country will be carefully costed and fully funded, and we will always put working people and British businesses first.

The Government have failed to reduce the tax burden, failed to boost business investment, and delivered only stagnation and chaos, whereas our economic plan is built on the pillars of stability, investment and reform: stability brought about by iron discipline, and guarded by strong fiscal rules, robust economic institutions and certainty on corporation tax; investment, working with the private sector, so that we can lead the industries of the future and make work pay; and reform, starting with our planning system, to tackle vested interests. The British people deserve better than this. The British people deserve change. I hope the Minister will agree with me that it is now time to call a general election as soon as possible.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Minister.

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

Baroness Winterton of Doncaster Excerpts

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

[Nigel Huddleston]

I beg to move, That the Bill be now read the Third time.

I am grateful to all right hon. and hon. Members who have participated throughout the Bill’s passage today, and to you, Madam Deputy Speaker, and the other Deputy Speakers for skilfully guiding us through the process. I also thank all the Clerks, all stakeholders and all the officials for their work on bringing the Bill to the Floor and delivering tax cuts to the people of the United Kingdom. I commend the Bill to the House.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

[James Murray]

As I have made clear throughout the Bill’s consideration, Labour supports the national insurance reductions that it seeks to deliver. I am disappointed, however, that Conservative MPs voted to block our new clause. Since the Chancellor announced the Conservatives’ plan to abolish national insurance contributions last week, Ministers have refused again and again—including today—to say how that will be funded or what impact it will have. We believe people deserve to know what impact the Conservatives’ £46 billion unfunded tax plan will have on pensioners and their pensions, on public services and on the health of our economy. Our new clause would have required the Government to come clean and be honest with the British public. Instead, Ministers have decided to vote against us and stick to their reckless and irresponsible unfunded tax plan.

It is still not clear how this reckless commitment to abolishing national insurance will be funded or what impact it will have on pensioners, pensions, public services, borrowing or the state of our economy. But what is clearer than ever is that the Conservatives are the party of reckless, irresponsible, unfunded tax plans that threaten our economy, our public services and the finances of households across the country. Only Labour will bring stability and the responsible approach our economy needs and only a general election will give the British people the chance to vote for change.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call Scottish National party spokesperson Kirsty Blackman.

Budget Resolutions

Baroness Winterton of Doncaster Excerpts

Tuesday 12th March 2024 Commons Chamber

[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Rosie Winterton)]

Before I call the shadow Secretary of State, I inform the House that we have 46 speakers this afternoon. I urge Back Benchers to stick to a maximum of seven minutes to start with; we will see whether that needs to be reduced later. That would be extremely helpful.

--- Later in debate ---

[Andrew Jones]

I did not see “Newsnight” last night, as I was here until very late. I was working away, as ever. Our benefits system has not held back the educational progress being made in England so, without having seen the programme, I suspect that other factors are involved.

The productivity of our public services remains below pre-pandemic levels, which suggests that the full value of budget increases is not being realised. It was, therefore, good to hear the announcement of a public sector productivity plan in the Budget. This important initiative has the potential to be a game changer. The National Audit Office suggests that a 5% increase in productivity is equivalent to a £20 billion budget increase.

The Budget detailed investment to upgrade IT in both the justice system and the NHS. The Chancellor revealed that 13 million hours are lost by doctors and nurses to outdated IT. The sheer scale of that is phenomenal, but not in a good way.

Governments of all colours have struggled with NHS IT for years, but the world is digitising. AI will change things even further and faster, and it is right to embrace these changes and secure the benefits they will bring. It is not just about the systems but about the processes used, and there is an attitudinal element as well. We have to think about how output will be achieved. In the world of government in the UK we tend to measure, then trumpet, inputs rather than outputs. That does not happen in the private sector. Moving that thinking into the policy and delivery teams so that they think more about outputs is critical in the longer term.

The most encouraging parts of the Budget tackle investment and productivity. Progress on those will create more wealth and better health for our future, which is why I will be supporting this Budget.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I have a feeling it might be helpful for me to put the clock on Members. We will start with an eight-minute time limit, after the SNP spokesperson.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. To ensure that I can keep the time limit relatively high, I am reducing it to seven minutes. I hope that will mean that we do not have to reduce it drastically later.

Building Societies Act 1986 (Amendment) Bill

Baroness Winterton of Doncaster Excerpts

2nd reading
Friday 19th January 2024 Commons Chamber

[Anna Firth]

I am grateful to my right hon. and learned Friend for his intervention. Nationwide does so much in all constituencies where there is a branch. My Nationwide in Leigh-on-Sea has a dedicated cost of living expert who is helping the most vulnerable members of our society navigate the challenges caused by the cost of living crisis. The branch is also going out of its way to ensure that people who are not as tech savvy as some of the rest of us, particularly the elderly—I have a very elderly constituency on in Leigh-on-Sea—get that extra help. They have tea and tech events, which are very popular, that teach people how to use online banking and apps to manage their money. Digital exclusion is a real problem in our society, and it is so encouraging that the building societies are doing so much more. I could wax lyrical about all the other things that the Nationwide is doing, but because of the Bill that is up next, I am not going to.

I will end on the need for face-to-face banking services. The banking hub is a very good model, but none of the banks will provide such a hub if there is a building society that provides face-to-face services. But one should not exclude the other. I have been campaigning on this issue, but this is a fitting moment to pay tribute to my hon. Friend the Member for Derbyshire Dales (Miss Dines) for her “Save Our Banks” campaign, which I wholeheartedly endorse.

I fully support the Bill and thank the hon. Member for Sunderland Central for introducing it. I hope it will ensure that building societies can do even more for their local communities, not just in Southend West but across the whole country.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

Loan Charge

Baroness Winterton of Doncaster Excerpts

Thursday 18th January 2024 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

I beg to move,

That this House is deeply concerned that HMRC has confirmed the suicides of 10 people facing the Loan Charge and that, despite the Morse Review, thousands face unaffordable demands, with the risk of further suicides; notes that HMRC has also confirmed 24 cases of serious harm, including 13 suicide attempts; believes that many people who used schemes were victims of mis-selling, and that in other cases employers and agencies pushed people into using them, yet HMRC is demanding all disputed tax from scheme users, not from those who recommended, promoted and operated the schemes; further notes that section 44 of the Income Tax (Earnings and Pensions) Act 2003 deems agency workers to be taxable as employees of those agencies and that HMRC should have collected tax from agencies at the time; criticises HMRC transferring the liability to individuals despite its own failures; observes that HMRC is pursuing open enquiries for schemes before 2011 despite the Morse Review; also notes that HMRC is seeking additional payments from those who settled; further believes that the Morse Review was limited and not genuinely independent of HM Treasury and HMRC; highlights the resolution proposed by tax professionals; calls on the Government to work with all parties to find a fair resolution and for a full independent investigation, including into the conduct of HMRC; and believes that taxpayer rights must be enshrined in law and enquiries closed after four years if HMRC fails to act.

Before we start the debate, on behalf of my party, I pass on our condolences to the family of Tony Lloyd. He served for a short time as the shadow Minister for Northern Ireland. I always found him to be very courteous and well informed, and he wanted to be well informed. He asked the right questions and was always prepared to engage, even though he often did not agree with some of the stands we took. He was always happy to engage with all the parties in Northern Ireland, and we pass on our condolences to his family.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I am slightly concerned that there is something wrong with the sound. Let us start again.

[Sammy Wilson]

Thank you, Madam Deputy Speaker. I hope that the point I was making about Tony Lloyd was picked up. I want to pass on the condolences of our party to his family, and I pay tribute to the work he did as shadow Minister for Northern Ireland.

I thank the Backbench Business Committee for granting the debate. It is a timely debate and I know that the many thousands of people across the United Kingdom who have been affected by the loan charge in a very detrimental way will be glad that it is being considered in this House. Over the past two weeks, we have been looking at the dramatic fallout of the Horizon scandal at the Post Office and, quite rightly, we have been focusing on what belatedly can be done to repay and to deal with that great injustice. I say to the House—I do not think that I am being overdramatic when I say this—that we are looking at another Horizon scandal, and the parallels are frightening.

First, because of the actions of a Government Department, 10 people in the United Kingdom have committed suicide and many others have attempted to take their own lives because of the pressure they were put under by officials and by statute passed by this Parliament. We have heard time and again in evidence to the loan charge and taxpayer fairness all-party parliamentary group of the disruption and disaster this has caused in many families.

Secondly, despite the fact that alarm bells should be ringing in the Treasury, no action has been taken. Indeed, some Ministers have even refused to meet the group. Others have simply put out the party line and regurgitated the excuses of His Majesty’s Revenue and Customs for what is happening.

[Sammy Wilson]

That is a point I want to come to.

We are seeing that once again Ministers are turning a blind eye, and these lessons should be learned. Apart from two examples of Ministers that I can think of, one of whom—a former Minister—is present, Ministers turned a blind eye for years. We then had the result, but it was not until an ITV programme brought this matter to the nation as a whole that action was taken.

We have had attempts by HMRC to justify what it has been doing. In the past, postmasters and postmistresses who had unblemished records for years were accused of being thieves. We are now being told that the people who HMRC is chasing today are—to use its words—“serial tax evaders”. Minister, I have to say that when I read the letter that you—

[Madam Deputy Speaker]

Order. The right hon. Gentleman knows that he does not address the Minister directly, but through the Chair.

[Sammy Wilson]

When I read the letter that the Minister sent to the joint chairs of the all-party group, he started by once again reminding us that

“As you are aware, disguised remuneration schemes are contrived tax avoidance arrangements that seek to avoid Income Tax and National Insurance contributions”.

It is almost like a warning: “Don’t be taking up these cases, because these are bad people that you are talking about.” That is exactly parallel to what we found with the Horizon scandal.

--- Later in debate ---

[Sammy Wilson]

That brings me to the very last point— I promise it is my last, Madam Deputy Speaker. I will simply list the points and other people can take them up and expand them later on. There are a number of issues the Minister must consider. First, while I have no evidence of this, we have been told that HMRC officials, just as Post Office officials were, are on commission for the money that they bring in through the loan charge. The Minister must confirm whether that is the case, because if so, it would act as a huge incentive for them to pursue individuals relentlessly.

Secondly, I trust that the Minister, in his new position, will challenge the Department’s lines on this matter. We need a greater challenge than we have had so far. Thirdly, I believe that the loan charge needs to be repealed because it is not fit for purpose and is having a detrimental effect. Fourthly, the employers and promoters must be pursued. Under the law, they were responsible for collecting tax from the employees. That is the basis on which tax demands are now being made of people—that they were employees, not self-employed.

Fifthly, of course we recognise that the Government have to collect tax when it is due, but the current method of pursuing this will not bring in tax revenue because people are going bankrupt. A group of professionals has proposed that the Government could claim back an affordable proportion of the tax that is owed. They would get at least some tax revenue out of it while stopping this relentless pursuit of individuals. In the longer run, I think we need a Bill of rights for taxpayers, and for tax fairness to be built into legislation, but that is a matter for a longer debate.

There are people who are suffering today because they are being battered by the cosh that HMRC officials are using on them to extract money that they do not have and which many of them do not believe they owe. I ask the Minister to grasp this nettle and ensure that we do not have another Horizon scandal.

[Madam Deputy Speaker (Dame Rosie Winterton)]

As colleagues can see, this is a very well-subscribed debate, with another debate to follow. In order to give equal time to Back Benchers throughout the afternoon, my advice—I would rather not put a time limit on—is that colleagues stick to about seven minutes. I am sure that Greg Smith will lead the way.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. Because some colleagues have taken slightly less than seven minutes, I have a bit of leeway. I do not want speeches to be extended massively, but if colleagues wish to speak for perhaps a couple of minutes more than seven, I would be content with that.

--- Later in debate ---

[Wera Hobhouse (Bath) (LD)]

What I am going to say will echo what has already been said this afternoon, but I want to add my voice to those of all Members, and particularly to those of my constituents, because Bath constituents have been affected, and I want to help them as much as I can.

The loan charge has destroyed lives. Of course businesses and individuals should pay their fair share in tax; however, much damage has been done to people who acted in good faith. They have been punished in an entirely inappropriate way, while those who were behind the schemes have got away scot-free. We must defend individual taxpayers, even if we think that they might have been ill advised in the first place. As we have heard, many were forced into the schemes and did not have a choice.

The Morse review concluded that the loan charge was not an appropriate or fair response to the use of payroll loan arrangements. It focuses on loans made many years ago. They were not taxable under the law as it was understood at the time, and HMRC did not act against them. As enacted, the loan charge means that income tax must be paid as if the outstanding amount were part of the income taxed in the current tax year. That does not account for changed financial circumstances, which is particularly relevant for freelancers. Those taxpayers pay much more than they would have if they had paid tax on the loan at the time.

The loan charge’s stated aim is to end tax avoidance schemes, which is understandable. We all want to ensure that people pay their share; however, the central injustice is that HMRC has pursued only the users of the schemes, who acted in good faith, instead of those who recommended, promoted and operated them. As a result, the loan charge is not even a deterrent. There has never been a conviction of those promoting loan schemes that are now subject to the charge. The people who were compliant and disclosed information on their tax returns have been hit the hardest. Nearly all respondents to a survey by the loan charge and taxpayer fairness APPG reported that the risks of payroll loan arrangements were not explained to them. Now some face tax bills as high as £400,000.

Families have broken down, and there have been suicides. People were made to feel like criminals, despite having entered into the arrangements following professional advice. Many have said that as contractors they had little or no choice but to enter the schemes. Many small and medium-sized company owners and directors were also impacted after following professional tax advice. Their staff now face redundancy. As well as the awful mental health impacts, which the hon. Member for Strangford (Jim Shannon) mentioned, tax bills of hundreds of thousands of pounds leave some with no option but to go bankrupt. In many cases, being declared bankrupt will prevent people from working again or paying tax.

None of that would have happened had HMRC identified the issue earlier, publicised the risks of payroll loan schemes and penalised those behind them. The nightmare now unfolding has echoes of the Post Office scandal, where individuals with no intent of wrongdoing were left with impossible choices. Livelihoods and lives are being destroyed while those running the schemes, who knew what they were up to, are getting away with it. In addition, Government bodies are magnifying the injustice, pursuing people with intimidation and making them fearful. We should put that right, rather than making this wrong even more wrong.

We urgently need a genuinely independent review of the whole loan charge, and a fair and final resolution for all. It is clear there is huge cross-party interest. It is in everyone’s interest to finally resolve this, not just for those facing overwhelming tax bills but for HMRC and the Government. The loan charge has not even achieved its intention. Instead, it represents a policy failure that has left thousands suffering. It is for all of us to act, and act quickly.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the spokesperson for the Scottish National party.

--- Later in debate ---

[Sammy Wilson]

Does the Minister accept that HMRC officials helped to service the Morse review, and restricted its grounds and parameters? The original of that review has not been disclosed, and we do not know how it was changed in the meantime. There are great doubts about whether or not the Morse review was ever an independent review, and ever came to conclusions that would have dealt with the issues and the unfairness we have been discussing today.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Before the Minister replies, I do want to say that I have given him more time than would normally be allocated for a Backbench Business debate. Several colleagues have tried to intervene, but do be aware that we have another important debate to follow. I am sure the Minister will be cognisant of that fact.

[Nigel Huddleston]

I thank you for that guidance, Madam Deputy Speaker. I will try to proceed through the comments, because I am keen to make a few more points.

The Morse review followed the normal process for such reviews, in terms of the secretariat and support being provided by Government Departments. I have heard the comments made today, but I do not believe a case has been made for another review. I always stand ready to listen, but I think that review stood up quite well. I do not think anybody has impugned the integrity of Lord Morse today, but that review was thorough and significant, and 19 of the recommended changes were implemented. It was a hugely impactful and very thorough review.

Many hon. Members have also made points about tackling promoters, and some individuals facing the loan charge feel rightly aggrieved at the promoters and enablers who facilitated the use of these schemes. Promoters of tax avoidance schemes are parasites on the tax system—let us be in no doubt about that. They cause untold misery to the people they tempt into using those schemes, which almost never deliver the tax savings that were promised. The Government have prioritised tackling promoters of tax avoidance schemes and have given HMRC additional powers to do so, as a result of which many promoters have stopped promoting those types of scheme. One individual involved in the promotion of schemes subject to the loan charge has already been convicted, and others are currently under criminal investigation for offences linked to the loan charge.

Through Finance Acts in 2021 and 2022, the Government also introduced powers that allow HMRC to take action more quickly against promoters. Those include the power to publish details of promoters of tax avoidance schemes and others involved in the implementation of such schemes. In 2022, for example, HMRC issued a penalty of £1 million to a promoter of disguised remuneration schemes, and provisions included in the Finance Bill currently progressing through this House will make it a criminal offence to promote tax avoidance schemes after HMRC has issued a stop notice under the promoters of tax avoidance schemes rules. I am very pleased to say that those measures are receiving support from all parties.

The Government also consulted last summer on measures to address non-compliance in the umbrella company market—again, many hon. Members have commented on that market today—including tackling the types of schemes we have discussed. We will respond to that consultation in due course, but I can let hon. Members know that I and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), the Minister for small business at the Department for Business and Trade, are already discussing what the next steps should be. In the meantime, HMRC will continue to use its full range of civil and criminal powers to disrupt the operations of promoters.

[Nigel Huddleston]

Very briefly, and for the last time.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I really am getting anxious—we do need to move on very quickly. I call Neale Hanvey, if he can be brief.

[Neale Hanvey]

I will be very brief, Madam Deputy Speaker. One of the key problems we have is the inflationary costs that are added to the loan charges. Will the Minister at least commit to look at those costs that are added on to the taxable sums?

--- Later in debate ---

[Nigel Huddleston]

The hon. Member will be aware that I cannot pre-empt the conclusions of the consultation or our response to it, but I hear his point.

Many Members have raised the personal and emotional impact of the loan charge on their constituents. This is something that I, the Government and HMRC do take very seriously. We recognise the distress that loan scheme users may feel when faced with large tax bills on their earnings, often many years after the event, which the scheme promoters wrongly told them they would be able to avoid. We are aware that some people who faced the loan charge have, very sadly, taken their own lives or harmed themselves. HMRC has made 10 referrals to the Independent Office for Police Conduct where a person has taken their own life, and following each referral, HMRC has conducted an internal investigation. Nine of the 10 investigations have concluded, and although no misconduct was found, HMRC is taking forward organisational learning from these matters to further strengthen the support provided in identifying individuals who need extra help. I completely understand the points raised by hon. Members and, indeed, I have myself heard about the emotional distress from individuals impacted by the loan charge. Colleagues have also commented on the nature and tone of interactions with HMRC in the past. Again, I have raised this with HMRC officials, and I will continue to make the point that they should adopt a more understanding tone.

Other points of clarification were raised by hon. Members, and I will endeavour to write to them because there were a few factual inaccuracies. For example, there is an appeals process—it is very important to make that point—and this is not an area in which criminal convictions are acted against the individuals. I will write to hon. Members because there is a lot to debate in this area, but it is very important to make sure that we do not scare people. For example, we must make it clear that there is an appeal process, and there is of course no cost for the appeal process. There are also other matters that I would like to make hon. Members aware of.

I am aware of the timing, Madam Deputy Speaker, and thank you very much for your patience during what has obviously been a very emotive debate today. Finally, I make an appeal. I would encourage those who still have disguised remuneration or loan charge liabilities to engage with HMRC. Thousands of people are still not engaging with it and are therefore not able to seek clarity or the support and guidance available, including emotional support, help from the Samaritans and other measures that HMRC has in place to identify and support vulnerable individuals. I repeat my thanks to hon. Members for their engagement, and I welcome continued engagement, including with the APPG and all MPs who have raised this topic with me on behalf of their constituents.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call Sammy Wilson, who has one minute to wind up.

Finance Bill

Baroness Winterton of Doncaster Excerpts

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

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

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

With this it will be convenient to discuss the following:

Schedule 12.

Clauses 31 and 32 stand part.

Schedule 13.

Clauses 33 and 34 stand part.

New clause 2—Review of measures to tackle evasion and avoidance—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the measures in sections 31 to 33 to tackle evasion and avoidance.

(2) The review under subsection (1) must include details of—

(a) the average sentence handed down in each of the last five years for the offences listed in section 31;

(b) the range of sentences handed down in each of the last five years for the offences listed in section 31;

(c) the number of stop notices issued in each of the last five years to which the measures in section 33 would apply; and

(d) the estimated impact on revenue collected in each of the next five financial years resulting from the introduction of the measures in sections 31 to 33.”

This new clause would require the Chancellor to publish details of the sentences given and stop notices issued in each of the last five years to tackle evasion and avoidance, as well as the revenue expected to be generated from the measures to tackle evasion and avoidance in this Act in each of the next five years.

New clause 4—Assessment of impact of Act on multinational profit shifting and tax competition between jurisdictions—

“(1) Within six months of the passage of this Act, the Chancellor of the Exchequer must carry out an assessment of the impact of section 21 and Schedule 12 of this Act on multinational profit shifting and tax competition between jurisdictions, and lay a report of that assessment before both Houses of Parliament.

(2) The report must consider the efficacy of the measures contained in section 21 and Schedule 12 in achieving the policy objective of combatting base erosion and profit shifting.”

This new clause would require the government to produce an assessment of the impact of the Bill’s “Pillar Two” measures, in order to ascertain whether these measures have been successful in achieving their policy aims.

New clause 5—Tax compliance reporting—

“(1) Within six months of the passage of this Act, the Chancellor of the Exchequer must carry out an assessment of the impact of sections 31 to 34 and Schedule 13 of this Act.

(2) The report must consider the capacity and ability of HMRC to enforce compliance with the measures contained in sections 31 to 34 and Schedule 13 of this Act, including setting out staffing arrangements within HMRC's Customer Compliance Group for undertaking enforcement work relating to sections 31 to 34 and Schedule 13 of this Act.”

This new clause would require the government to produce an assessment of the impact of the Bill’s tax evasion and avoidance measures. The assessment would need to examine whether the capacity and ability of HMRC was sufficient to properly enforce those measures.

New clause 7—Review of effectiveness of section 31 measures in preventing fraud involving taxpayers’ money—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, conduct a review of the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money.

(2) The review must evaluate the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money through comparison with the effectiveness of—

(a) other measures that seek to prevent fraud involving taxpayers’ money, and

(b) the approach taken in other countries.”

This new clause would require the Chancellor to review the effectiveness of measures in this Act to prevent fraud involving taxpayers’ money, and to compare them with other measures that seek to prevent fraud involving taxpayers’ money and the approach taken in other countries.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Clauses 21 and 31 to 34 and schedules 12 and 13 cover technical changes to pillar 2 of the international tax agreement—doubling the maximum sentence for the most egregious forms of tax fraud—the introduction of new powers to tackle the promotion of tax avoidance, and action against fraud in the construction industry scheme.

The UK’s tax gap is currently at an all-time low, at 4.8% of total tax liabilities. That is due to strong Government action to tackle all forms of non-compliance in the tax system, but we are never complacent. That is why we have introduced more than 200 measures since 2010, including 40 since 2021, to reduce the tax gap even further. The Government are taking action to ensure that individuals and companies pay the taxes that are due in the UK. We want to deter individuals from committing fraud in the first place. That is why we are doubling the maximum sentence for tax fraud.

The Government are also taking action against tax avoidance by introducing a new criminal offence of the promotion of tax avoidance and by expediting the disqualification of directors of companies that promote tax avoidance. The measures are designed to protect tax revenues, which are important for funding our vital public services.

It is also important to protect tax revenues from companies shifting profits offshore. That is why the UK implemented pillar 2 on 31 December 2023. We are updating existing legislation with technical amendments today to ensure that UK legislation is consistent with newly agreed guidance, to address further stakeholder comments to clarify terms, and to avoid unintended consequences.

Clause 31 strengthens our enforcement powers when it comes to tax offences. It doubles the maximum prison term, from seven years to 14 years, for individuals convicted of the most egregious cases of tax fraud. This applies to all taxes and duties administered by HMRC. It also increases the maximum penalty for counterfeiting from 10 years to 14 years. These measures demonstrate, I hope, the Government’s intent to crack down on tax fraud and to deter criminal actions that damage the public purse.

Clauses 32 and 33 and schedule 13 seek to target the promotion of tax avoidance, in order to protect taxpayers and reduce the damage inflicted on the public finances. Recent powers such as HMRC’s power to name promoters and their schemes, and its power to issue stop notices, are effectively disrupting promoters’ activities. None the less, a small number of promoters persist in attempting to sidestep the rules, so clause 32 and schedule 13 enable HMRC to act swiftly to seek the disqualification of directors and other individuals who control or exercise influence over companies involved in the promotion of tax avoidance. They enable the removal of those individuals from the avoidance market and will deter others from becoming directors of companies that promote avoidance.

In the Finance Act 2021, the Government introduced rules that allow HMRC to issue stop notices that require promoters to stop promoting specified tax avoidance schemes. Stop notices are an important deterrent tool, as failing to comply with a stop notice can lead to a substantial civil penalty. Clause 33 increases the consequences of failing to comply by introducing a new criminal offence, which will apply to promoters who continue to promote an avoidance scheme after receiving a stop notice. Creating a criminal offence signals the severity of this issue and reinforces the importance of complying with a stop notice.

Finally, clause 34 tackles serious non-compliance in the construction industry. The construction industry scheme requires contractors to withhold tax unless a subcontractor holds gross payment status. Most gross payment status holders are legitimate and compliant construction businesses but, in recent years, gross payment status has been used by organised crime organisations to facilitate fraud. This allows unscrupulous actors to compete unfairly against legitimate businesses. Clause 34 therefore strengthens the tests for gross payment status by adding VAT to the taxes with which subcontractors must demonstrate compliance. This measure is predicted to raise around £300 million over the next five years.

Each of these clauses helps to protect vital tax revenue used to fund our public services. They seek to deter taxpayers from knowingly defrauding the Government and encourage them to act against the promotion of tax avoidance. I therefore ask that clause 21, clauses 31 to 34 and schedules 12 and 13 stand part of the Bill.

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

I call the shadow Minister.

[James Murray]

I rise to speak to the new clauses in my name and that my hon. Friend the Member for Hampstead and Kilburn (Tulip Siddiq).

Clause 21 and schedule 12 relate to the implementation of pillar 2 of the OECD/G20 inclusive framework on base erosion and profit shifting. Labour supports this clause and schedule as they are intended to modify the existing multinational and domestic top-up taxes introduced in the Finance (No. 2) Act 2023, to make sure these new taxes work as intended. We have long supported the global deal on the taxation of large multinationals, as we want to see it working as effectively as possible.

We know that the OECD guidance on implementing the deal is coming out in tranches, so it is important that UK legislation is updated to reflect that. We recognise that, as with any global deal of this scale, its details are complicated and its implementation will take time, yet we have been clear throughout its development that we support the principle of a global agreement as a crucial step in making the tax system fairer, thereby helping to make sure that British businesses that pay their fair share of taxes are not undermined.

Indeed, nearly three years ago, in April 2021, I first set out in the Commons our support for a global deal to make that tax system fairer, to make sure that a level playing field is there for British businesses and to stop the international race to the bottom on tax for large multinationals. The Treasury Ministers at the time appeared at first lukewarm in backing plans emerging from the United States for a global deal. Eventually, however, the then Chancellor, now the Prime Minister, began to support the deal in public. We were glad that the current Prime Minister seemed to have come round, but I am not sure all his Back Benchers have. For instance, I wonder whether the hon. Member for North East Bedfordshire (Richard Fuller) would agree with the Prime Minister when he said:

“We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business.”

We agree with the Prime Minister on that point, but I just wonder whether everyone on the Conservative Benches does. I am reading some of their faces and I think the answer is clear. Could it be that the Prime Minister lacks support from prominent Back Benchers within his own party on a policy he is now championing? Surely not. But Treasury Ministers should rest assured that if their Back Benchers pull any tricks on clause 21, they will have our support for it to pass.

--- Later in debate ---

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

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

With this it will be convenient to discuss clause 27 stand part.

[Nigel Huddleston]

I will take clause 27 first. The changes that it makes clarify how VAT and excise legislation should be interpreted in the light of changes made by the Retained EU (Revocation and Reform) Act 2023, which came into effect on 1 January. The Act ends the supremacy and special status afforded to retained EU law in the UK. As we made clear when it was introduced, the Government are taking a bespoke approach to UK VAT and excise law. In line with the 2023 Act, clause 27 confirms that, for VAT and excise, it will no longer be possible for any part of any UK Act of Parliament or domestic subordinate legislation to be quashed or disapplied on the basis that it is incompatible with EU law. In other words, it will no longer be possible for businesses to rely on EU law where it is in conflict with domestic law. The measure also provides that UK VAT and excise law continues to be interpreted as Parliament intended, drawing on rights and principles that currently apply in interpreting UK law.

--- Later in debate ---

These changes are necessary to provide legal certainty for business and to ensure that the relevant regimes operate as intended. I therefore commend clauses 25 and 27 to the Committee.

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

I call the shadow Minister.

Finance Bill

Baroness Winterton of Doncaster Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[Relevant documents: Oral evidence taken before the Treasury Committee on 29 November 2023, on the Autumn Statement 2023, HC 286; oral evidence taken before the Treasury Committee on the afternoon of 28 November 2023, on the Autumn Statement 2023, HC 286; and oral evidence taken before the Treasury Committee on the morning of 28 November 2023, on the Autumn Statement 2023, HC 286.]

[Madam Deputy Speaker (Dame Rosie Winterton)]

I must inform the House that the reasoned amendment in the name of Drew Hendry has been selected.

--- Later in debate ---

[Nigel Huddleston]

As I outlined, I think the hon. Lady is hoping for measures to turn back the clock to when we were in the EU. We are not in the EU any more, and therefore the world is a different place. However, we are always keen to support and engage with the creative industries, and orchestras in particular. When I was at the Department for Digital, Culture, Media and Sport, we raised those issues again and again—actually, with considerable success—to enable orchestras and tourers to get across Europe, often by doing individual deals with individual countries, which we sometimes have to do now that we are no longer in the European Union.

I will now outline measures to support our employment-boosting agenda. The path to achieve this is clear: we must remove both barriers to work and incentives not to work. Perhaps most of all, though, we must ensure that hard work is rewarded. That is why our spring Budget announcements were so important. Let us take the abolition of the lifetime allowance. The Office for Budget Responsibility estimates that that will retain 15,000 workers annually and the Bill completes that change by removing the lifetime allowance from the statute book completely.

I now turn to the measures to simplify our tax system. Complex and inefficient taxes are one of the biggest restrictions on businesses. They often come at a high cost in terms of both time and capital. It is the Government’s duty to deliver a modern, simpler tax system and the measures in the Bill will help to do just that. Making full expensing permanent is a huge simplification for larger firms, but we are going further by expanding the cash basis for over 4 million smaller growing traders. This will simplify the process to calculate their profits and pay income tax. We have also listened closely to feedback from businesses and, as a result of that consultation, some of the main restrictions on using the cash basis will be removed. The simpler cash basis will be the default method for calculating profit, and businesses will therefore start on the simpler regime as standard. We will also be taking forward other technical small measures. Those will include improving the data that His Majesty’s Revenue and Customs collects from its customers. These measures will result in a trusted modern tax administration system.

We must also build a tax system that is fair and works for everyone. We cannot understate the role of tax in supporting our public services. Taxes pay for them directly and, through attracting investment, indirectly. We must all fairly play our part. The Bill will make promoting tax avoidance a crime in circumstances where persons continue to promote a scheme after the receipt of a stop notice. It will also enable HMRC to act more quickly to tackle promoters of tax avoidance by introducing a new power for HMRC to bring disqualification action against the directors of companies involved in promoting tax avoidance. We will also reduce the scope for tax fraud in the construction industry by amending the construction industry scheme. The amendment will add VAT to the gross payment status test. This means two things: that compliance will now be checked as part of this process, and that HMRC powers to remove gross payment status will be enhanced.

Of course, it is only fair that we also guard against over-collection of tax. The Bill addresses a concern here, too. It will do so by enabling HMRC to reduce the off-payroll working PAYE liability of a deemed employer who is responsible for ensuring that PAYE is calculated and sent to HMRC correctly. This will apply where that engagement is incorrectly treated as self-employed for tax purposes.

It also remains important that we are in lockstep with our international partners during such unprecedented times. In spring, we legislated to implement OECD pillar two in the UK, building on the historic agreement built by the Prime Minister, to a two-pillar solution to the tax challenges of a globalised digital economy. In the Bill, we are making technical amendments to the main pillar two rules identified from stakeholder consultation. That is to ensure that the UK remains consistent with the latest internationally agreed guidance.

The Bill builds on the autumn statement that focused on the long-term growth of the UK economy and sound economic policy. What a contrast to Labour’s fantasy economics, including £28 billion per year of additional spending without any idea where that money will come from—although we all know at heart that it will be taxpayers or through more debt, which is, of course, just deferred taxation. In contrast, this Finance Bill backs British businesses, rewards hard work, and supports a modern and simpler tax system. In doing so, it delivers on the Government’s commitments to prioritise economic growth, encourage business investment, nurture innovation and simplify our tax system to combat tax avoidance. For those reasons, I commend the Bill to the House.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

--- Later in debate ---

[James Murray]

I thank my hon. Friend for her intervention on that point, and we will certainly raise questions on her behalf in Committee to try to get clarity from the Government. As she rightly points out, clarity and certainty have been distinctly lacking from this Government over a whole range of topics. We will certainly press them on that in Committee.

As I was saying in response to the hon. Member for Poole (Sir Robert Syms), we will not be opposing many of the individual measures in the Bill, including those on capital expensing, on research and development and on tax avoidance and evasion, but they all serve to remind us just how much of a merry-go-round this Government have become and just how much they lack a plan for the future. A plan for the future is what has been sorely missing from this Finance Bill and from the autumn statement, and it is clear that the Conservatives are now incapable of offering one. With no stability, no real certainty and no plan for growth that works, businesses are left without the partner in Government that they need, and without the growth that our economy needs, working people are left worse off, with the tax burden set to rise to a peacetime high.

If Labour wins the next general election, we will overhaul and accelerate the planning system, modernise our electricity grid, attract far greater private investment, scrap and replace business rates, set out a road map for business taxation and boost skills and training across the country. We will do all that to get the economy growing and to make working people better off. That is the change our country needs. Without change, we would have a fifth term of the Conservatives, and what on earth would that mean for Britain? What would the Conservatives speak of as their achievements in this Parliament? Twenty-five tax rises, the highest tax burden in eight decades, taxes up £1,200 per household and two decades of pay stagnation, as well as a fall in real household disposable incomes—the first time that has ever happened in a Parliament. That is the record of the Conservatives. That is what they cannot hide from and that is why it is time for change.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Treasury Committee.

--- Later in debate ---

[Harriett Baldwin]

I can also attest to the fact that the hon. Lady is the second Labour Back Bencher in the Chamber. That brings the total to the two who are visible to me at this time on the Opposition Benches—[Interruption.] I think that the hon. Member for Mid Bedfordshire (Alistair Strathern) is also providing the shadow Parliamentary Private Secretary role. National insurance is indeed a terrible regressive tax as it stands and I wholeheartedly endorse any measures that reduce that burden and simplify things. The hon. Lady has pointed out that this is work in progress, but I think she should welcome the abolition of class 2 national insurance. That has simplified the national insurance system, and in the spring Budget we had the welcome simplification of the lifetime allowance charge. We also had a great simplification in childcare entitlement with the announcement of a much wider offer of free childcare. These simplifications have been broadly welcomed.

There are further welcome simplifications in this Finance Bill. The Financial Secretary to the Treasury was kind enough to write to me yesterday to summarise his principles for the simplification of the tax system. He wants tax rules that

“have a clear consistent rationale”.

He wants it to be

“easy for taxpayers to get their tax right”.

He wants taxpayers to be able to understand what they need to do “at key life cycle points”, and he wants a tax policy that

“does not…distort the decisions of taxpayers and result in poorly informed choices.”

In summary, the Government want

“the tax system to be simpler, fair and to support growth.”

The Financial Secretary’s letter, which we will be publishing on the Treasury Committee website this afternoon, also outlines further simplifications, which were in the remarks he made earlier. They include expanding the cash basis for small businesses, improving the design of Making Tax Digital, simplifying research and development tax credits, which we welcome, and simplifying capital allowances and making them more permanent. I will draw to the House’s attention to other measures for individuals that he did not highlight. There is an increase in

“the threshold for individuals with income taxed through Pay As You Earn to file a Self Assessment return to £150,000”.

That is important because more and more people would otherwise be caught by the freezing of the thresholds. From April 2024, that threshold will be abolished altogether. There are also simplifications for individual savings accounts in this Finance Bill, as well as measures to simplify customs processes. I think the Financial Secretary’s heart is in the right place on simplification, and there is no question but that R&D tax credits were being abused.

I draw the Financial Secretary’s attention to future opportunities for simplification while welcoming the fact that venture capital tax relief is being extended to 2035, as the Treasury Committee called for in our report. I would love to see the Financial Secretary focus on the unintended disincentives to taking on additional work and additional hours that exist throughout the tax system, at all sorts of income points. We have made huge strides on simplifying it for people on universal credit, making every extra hour of work pay, but once people get into the tax system, there are cliff edges and high marginal tax rates that deter them from working more. I will highlight two in particular.

First, the Treasury Committee is currently holding an inquiry on “Sexism in the City,” and we have had evidence on how we could improve some of those marginal tax rates. The child benefit taper was introduced 10 years ago with my wholehearted support. It was the right thing to do in 2013, but it is now time to look again at how it interacts with the free childcare offer. We should consider the opportunity for simplifying the tax system by getting rid of the taper altogether, as it is a terrible deterrent to the families who get caught.

A person with a lot of children, earning between £50,000 and £60,000, can have a marginal tax rate of over 100%. It has become far too complex, and it is deterring many women from taking on more work. With the childcare offer we now have, it is time to look again.

I also want to throw the evidence from our “Sexism in the City” inquiry into the mix. The City has the highest pay and, indeed, the highest pay gap in the country. Some of the best paid careers for women are in financial services, but we hear time and again that, because of the tax-free childcare cut-off at £100,000, some women are choosing to work less than a full week. The freezing of the thresholds is having side effects. As the Financial Secretary thinks ahead to next year’s fiscal events, I urge him to consider those two potential simplifications.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson.

National Insurance Contributions (Reduction in Rates) Bill

Baroness Winterton of Doncaster Excerpts

2nd reading
Thursday 30th November 2023 Commons Chamber

[James Murray]

The hon. Gentleman promoted me inadvertently, as I am the shadow Financial Secretary to the Treasury, but I thank him for his vote of confidence. Our point is that today’s tax cut, which we support, must be seen in the context of 13 years of the Conservatives in power: 13 years of economic failure, with 25 tax rises in this Parliament alone and the tax burden on course to be the highest since the second world war. Whatever the Chief Secretary to the Treasury might say, people across Britain are experiencing life very differently from how she paints it.

However welcome the measures in the Bill may be, they come after 25 tax rises in this Parliament alone. The British people will not be fooled. No matter what statistics the Government contrive or the gloss they try to put on their record, people across Britain need ask themselves just one question: do they and their families feel better off now than they did 13 years ago? The answer is a resounding no. At last week’s autumn statement, we learned not only that the tax burden is still on track to be the highest since the war and that inflation has been revised upward across the entire forecast period, but that growth rates have been cut for next year, the year after, and the year after that.

It took some gall for the Chancellor to say that he was delivering an “autumn statement for growth”—comments repeated today by the Chief Secretary to the Treasury—since the Office for Budget Responsibility reports that next year’s growth rate has been cut by more than half. Low growth has dogged our country for the past 13 years. The autumn statement makes it clear that the Conservatives still have no plan to get our economy growing as it should. Since 2010, under the Conservatives, GDP growth has been stuck at an average of 1.5% a year, down from 2% in the Labour years before. If the economy had continued to grow for the past 13 years at the rate it grew under Labour, it would be £150 billion larger—the equivalent of £5,000 per household every year.

As we all know, because of that low growth, the Conservatives have had to keep putting up taxes on working people. Low growth and high taxes have made people across Britain worse off. That is the reality of the past 13 years of the Conservatives in power. The Bill’s tax cuts cannot even remotely compensate for the damage they have done to our economy and the living standards of people across Britain.

Although we support today’s tax cut, we know that our country needs economic growth to make working people better off and to get our public services off the floor. That is the plan from Labour. We are the party of fiscal responsibility and of business, with a plan to make working people better off. Come the next election—it cannot come soon enough—people across Britain will look at the Conservatives’ record and the bleak achievements they will claim. In this Parliament, real disposable household incomes will have fallen the furthest, following 20 years of pay stagnation. Real average earnings are not forecast to return to their 2008 peak until 2028. Four million people have been dragged into paying tax, with 3 million more in the higher rate—the biggest hit to income on record. Next year, real-terms income will be 3.5% lower than it was before the pandemic. This the biggest tax-raising Parliament Britain has ever seen.

Whatever the Conservatives say or do, and whichever way they try to twist and turn, reality has caught up with them. We have been here before. We remember the Conservatives promising to cut income tax ahead of the 1997 election. Back then, people decided that it was too little, too late, coming as it did after 22 tax rises in that Parliament. As this Parliament approaches its end, today’s Conservative party is showing itself to be even more divided and desperate than in the late ’90s. As the next election draws nearer and the Conservatives try to cling on to power, the risk grows that they will get more desperate with their promises and more reckless with taxpayers’ money. Britain needs a plan to get the economy growing and make working people better off. That is what Labour is offering and why a general election cannot come soon enough.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Treasury Committee.

[Harriett Baldwin (West Worcestershire) (Con)]

I am not sure that I have ever heard a more grudging shadow Front Bench speech on measures that the Opposition support. They support them so wholeheartedly today that none of their Back Benchers has shown up to speak to them.

I endorse the measures in the legislation. The Chief Secretary is right to point to the turning point that the UK economy has reached this year, thanks to the steps taken a year ago to ensure that fiscal policy did not cut across the central bank’s aim to reduce inflation to its target. Thanks to that, inflation, which might have been as high as 13% last year, has fallen to 4.6%. That means that today, the earnings of the average UK worker are rising faster than the rate of inflation. We are seeing real earnings growth. That is the turning point that I am talking about.

The shadow Minister and the Chief Secretary both talked about the choices that the Chancellor could make on this occasion. In the evidence that the Treasury Committee took this week on the autumn statement, we saw the clear impact of the Chancellor’s choices on two long-standing challenges for the UK economy: slow productivity growth and the fact that not everyone has returned to work since the pandemic. When we get to the Finance Bill, I will expatiate further on the supply-side measures on the labour market and permanent full expensing, but today I will focus on the national insurance contributions element, which the Office for Budget Responsibility also considered to be a supply-side measure.

In the evidence that we took, we heard from the member of the Office for Budget Responsibility, Professor David Miles, that the choice to go for the national insurance contribution reduction in the autumn statement created a “definite positive” as an incentive to work. The OBR forecast that it will bring close to 100,000 full-time equivalent extra workers back into the workforce. That is so important. Paul Johnson from the Institute for Fiscal Studies noted in his evidence that, compared with a similar cut in income tax rates, a cut to national insurance is more progressive. It benefits people in work, but only on their earnings up to £50,000. That is important context for the choice that the Chancellor took.

I also welcome the simplification of taxes—a concept our Committee is committed to. Far too many things in our tax system act as disincentives to doing an extra hour of work. There are too many complicated withdrawal rates. The steps taken on class 2 and class 4 contributions represent a simplification of the tax system. Interestingly, we were told in our evidence session that the changes to class 2 and class 4 reduce

“the incentive for people to incorporate to gain a tax advantage.”

We should have a tax system that is broadly neutral on those two things.

Professor Miles told us that he thinks that the national insurance cuts are “unambiguously” a more positive incentive to work. The Office for Budget Responsibility does not see the measures as inflationary. He also said that

“some people at the margin who thought it perhaps was not worth working might now be persuaded to actively try to get a job”,

and that the measures will help retain people in the labour force.

To conclude my short remarks on the narrow measures in the Bill, I wanted to focus on the evidence that we have received on the choice that the Chancellor took on national insurance, and how that is very much focused on the structural challenges that the UK economy faces.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson.

--- Later in debate ---

[Rehman Chishti (Gillingham and Rainham) (Con)]

rose—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The hon. Gentleman was quite late in and did not hear the beginning of the right hon. Lady’s speech.

[Priti Patel]

Thank you, Madam Deputy Speaker.

As has been mentioned, the alignment with the tax-free threshold should also help with the future plans to simplify the tax system. We had a bit of a discussion on this last week, but it is important in today’s debate again to raise the prospect of simplifying the tax system—more should be done in that area—by merging income tax and national insurance together. That is why I am disappointed that more Opposition Members are not here to discuss it. Last week, we had a semi-healthy discussion about it. It is out of the scope of this Bill to table an amendment to bring those two taxes together, but I urge those on the Treasury Bench—I would also be happy to work with other colleagues on this—to consider taking that up in advance of the spring Budget. Much more can be done here. Such a move would simplify taxes for the entrepreneurs and self-employed even further. As we know, when we come to the end of the tax year they are constantly having to do all sorts of things to satisfy His Majesty’s Revenue and Customs.

In 2012, I asked the Treasury a written question on integrating those taxes, and the then Exchequer Secretary replied by stating:

“Since Budget 2011, the Government have engaged extensively with stakeholders to develop options for operational integration of Income Tax and National Insurance Contributions. As many stakeholders have recognised, this is a complex issue with potentially significant implications for employers’ payroll operations. The Government will provide an update on this work later in the autumn. As we have already made clear, this is a long-term reform on which the Government will proceed carefully.”

That was a long time ago—it was 11 years ago. Although this is a complex issue, I maintain that such a move would help to simplify the tax system. I know that the Treasury Committee has looked at this area, and my hon. Friend the Member for West Worcestershire (Harriett Baldwin) touched on it today. Such a move would help to make payroll much easier for businesses, and allow them to co-ordinate income and revenue in a much more straightforward way.

Although this next issue may not be directly within the Bill’s scope, it does relate to NICs. I would therefore like to take the opportunity to restate for Treasury Ministers the position on fiscal drag. The OBR forecasts show that a freezing of the NICs thresholds and the income tax thresholds will, relative to consumer prices index inflation, and after taking into account the tax cuts here, bring in an estimated £27 billion in the next fiscal year, 2024-25, with this rising to nearly £45 billion more for the Exchequer in 2028-29. The OBR is clear on that. Ministers know my views: as we go into spring next year, and as the economy grows and more revenues come in, I urge them to look at this area all over again.

This Bill is welcome. It is a positive step in the right direction, along with the entire autumn statement. I commend my colleagues for the work they have done on it. The speed at which the Government are acting to bring forward the benefits of the NI changes and get them into pay packets as early as possible is right; it is commendable and should be supported, as I hope it will be by all colleagues in the House. The Government must continue to look at further steps. We want more economic growth. We are pioneers when it comes to innovation and small business. We need to find other ways to lower taxes so that people can keep more of their earnings and, importantly, we ensure that our economy is match-fit for the future so that it continues to grow.

[Madam Deputy Speaker]

I call the shadow Minister.

--- Later in debate ---

[Nigel Huddleston]

I could not agree with my hon. Friend more. He has given me the opportunity to leap swathes of my speech, because he has put those important points incredibly well.

My hon. Friend the Member for West Worcestershire (Harriett Baldwin), who is my constituency neighbour and the Chair of the Treasury Committee, highlighted the importance of the autumn statement as a turning point, as articulated by the Chancellor, and the all-important supply-side measures in it that will help spur on business, create employment and generate incremental economic activity. As a result of the spring Budget and the autumn statement, the OBR has said that the economy is likely to be 0.5% larger. When we are talking about an economy of over £2 trillion, that is a huge incremental value to the UK economy.

Unfortunately, the spokesperson for the SNP, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), failed to recognise that we have addressed the cost of living to the tune of £100 billion in support. He also forgot that in the autumn statement we had an increase not only in the living wage but in benefits, aligned with inflation; in pensions; and in the local housing allowance rate, to the 30th percentile. That means 1.6 million families will be better off, gaining an average of £800 in support. It is not true to say that there were no cost of living support measures in the autumn statement.

My hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) recognised the considerable impact of those measures and the fact that they make a meaningful difference to his constituents. He raised issues about visas and students, which I am happy to discuss with him further.

As always, my right hon. Friend the Member for Witham (Priti Patel) articulated core Conservative values incredibly well. The autumn statement recognised the importance of spending every penny of taxpayers’ money incredibly carefully and responsibly, as well as ensuring that we are there to support people through the tax system wherever we can. She is right to be passionate about small businesses and entrepreneurs. Small Business Saturday takes place this weekend and I am sure many of us will be out supporting small businesses, not only on Saturday but in the run-up to Christmas and beyond.

The Opposition spokespeople peddled so many myths and untruths, I do not know where to start. [Interruption.] We addressed many of them in previous debates, so I will not hear from them. The way they react speaks volumes.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The Minister did not mean to say “untruths”, did he?

[Nigel Huddleston]

I take back that comment, Madam Deputy Speaker. There were some presumed facts that require challenge, as we saw earlier in the week. At one point, the shadow Chancellor claimed that the forecasts were going to be £40 billion smaller. The shadow spokes- people know full well, because it is stated by the OBR, that economic growth by the end of the forecast period is higher than it was in the spring forecast. [Interruption.] I am sorry if I have to explain that to Opposition Members—if a number is bigger than the previous one, then that means growth and not decline. We could possibly forgive that mistake if it were not made by the people trying to become the Chancellor of the Exchequer. It is extraordinary incompetence—a £55 billion difference is not something we can easily ignore.

As my hon. Friend the Chief Secretary to the Treasury pointed out earlier, we are pleased that the Opposition are supporting the national insurance cuts, but to combine that with their commitments on spending, to the tune of £28 billion, and then claim that there will not be an increase in debt is farcical. It is not true; we know that will happen, and we are seeing the same old Labour. As Margaret Thatcher said:

“The problem with socialism is that you eventually run out of other people's money.”

That was true then, and it is true now.

I thank hon. Members for their contributions. The Bill delivers a tax cut for 29 million working people, and I am pleased that it will be getting support from across the House.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I join the two Front Benchers in saying how deeply sad it is to hear the news that Alistair Darling has died. He was an incredibly well-respected, thoughtful and kind man who was devoted to public service. I know all Members will want us to send their condolences to his family.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).

Further proceedings on the Bill stood postponed (Order, this day).

National Insurance Contributions (Reduction in Rates) Bill: Money

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the National Insurance Contributions (Reduction in Rates) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase in the sums payable under any other Act out of money so provided that is attributable to:

(a) reducing the main primary percentage for Class 1 primary national insurance contributions to 10% (and reducing the percentage specified in regulation 131 of the Social Security Contributions Regulations 2001 to 3.85%),

(b) reducing the main Class 4 percentage for Class 4 national insurance contributions to 8% from tax year 2024-25, and

(c) removing the requirement to pay Class 2 national insurance contributions from that tax year.—(Mark Jenkinson.)

Question agreed to.

National Insurance Contributions (Reduction in Rates) Bill

Baroness Winterton of Doncaster Excerpts

Committee of the whole House
Thursday 30th November 2023 Commons Chamber

[Dame Rosie Winterton in the Chair]

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

I remind Members that, in Committee, Members should not address the Chair as Deputy Speaker. Please use our names when addressing the Chair. Madam Chair, Chair, Madam Chairman or Mr Chairman are also acceptable.

Clause 1

Reduction of Class 1 main primary percentage

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

[The First Deputy Chairman]

With this it will be convenient to consider the following:

Clauses 2 to 5 stand part.

The schedule.

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

Thank you, Dame Rosie, for that timely reminder. I shall briefly outline the clauses in the Bill. Clause 1 amends the Social Security Contributions and Benefits Act 1992, which applies to Great Britain, and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 to reduce the main primary percentage of class 1 national insurance contributions paid by employees from 12% to 10%. That is a tax cut worth an average of around £450 per annum for employees. Clause 2 amends the Social Security Contributions and Benefits Act 1992, which applies to Great Britain, and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 to reduce the main class 4 NICs percentage paid by the self-employed from 9% to 8%. That is a tax cut worth an average of around £350 per annum for the self-employed.

Clause 3 amends the 1992 Acts that apply to Great Britain and to Northern Ireland to remove the obligation on persons to pay class 2 obligations when their earnings exceed the lower profit threshold of £12,570 per annum. The small profits threshold is retained, with the result that self-employed persons with profits from a trade, profession or vocation above that level will be treated as having paid class 2 NICs and will continue to gain entitlement to contributory benefits.

Clause 4 introduces the schedule, containing transitional and consequential provisions. The schedule to the Bill includes changes that are consequential on clauses 1 to 3 of the Bill. The principal changes are the introduction of a blended rate of primary class 1 national insurance contributions for directors for the 2022-23 tax year and consequential repeals arising from clause 3 that removes the requirement to pay class 2 NICs. Finally, clause 5 gives the short title as the National Insurance Contributions (Reduction in Rates) Act 2023.

[The First Deputy Chairman]

I call the shadow Minister.

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

As we made it clear on Second Reading, we will be supporting the measures that it includes, I thank the Minister for setting out the details of its clauses. As we heard, clauses 2 to 5 and the schedule to the Bill implement a reduction in the class 4 rate, a removal of the requirement to pay class 2 contributions and various transitional and consequential provisions.

I wish to ask the Minister some questions about how the measures in clause 1 will operate and what their overall impact will be. May I put it on record that, as ever, I am grateful to the Chartered Institute of Taxation for sharing its views with us on the clauses in this Bill?

Clause 1 makes it clear that the Bill’s measures will apply from 6 January 2024. Of course, we want people to benefit from these changes as quickly as possible given the pressures that families across Britain are facing right now. We recognise though that with the Government having left this policy change until late November to announce, there is not much time left for payroll software to get ready for 6 January. I would be grateful if the Minister could confirm whether HMRC accepts that some employers’ payroll software will not be ready in time for 6 January. If so, how many employers does he anticipate being affected? In such cases, employers would have to pass on the benefit of any changes to employees in subsequent months. I would be grateful if the Minister could confirm how many employees he expects will be affected by this delay, and how long he expects them to have to wait to receive the delayed benefits.

Furthermore, we understand that many operators in the retail sector have a moratorium on releasing new software updates in the November to January period, given what a busy time that is for them. I would be grateful if the Minister could confirm whether he is aware of that. If so, what meetings has he already had with retailers to discuss this point and, if so, what has the outcome of those meetings been?

[The First Deputy Chairman]

I call the SNP spokesperson.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

Before I come to my point, may I add my own condolences and those of my party to the family and friends of the former Chancellor, Alistair Darling? Clearly, we were on very different sides of the fence, particularly on independence, which was heavily contested nine years ago, but he was a towering intellect and a very important figure in Scottish public life. As I say, we pass on our condolences to his family and friends.

My question is also on the operation of clause 1. HMRC has stated to the Treasury Committee that it is unable to cope with inquiries either in writing or by phone at the moment, and that it is under severe pressure. I, too, would like to know how the clause will be given effect by 6 January, and what measures the Government are taking to ensure that that happens.