Income Tax (Charge)

Alison Thewliss Excerpts

Thursday 4th March 2021 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP) [V]]

It is just under a year since I stood up and made a speech in response to the 2020 Budget in a Chamber packed to the gunnels with MPs. The notion of delivering a Budget speech from my front room was absolutely unthinkable, along with many things we have adapted to over this past year, when we have seen economic shocks as well as personal and social ones. Phrases we rarely, if ever, used before are now in constant use: face coverings, social distancing, extended households, and furlough.

I appreciate that the Government had to move quickly to provide support in a rapidly changing and deadly pandemic. Choices were constrained by the circumstances, and large sums of money were rapidly moved to protect businesses from the worst economic crash any of us, we hope, are likely to see in our lifetimes. There is great hope on the horizon with the advancement of the vaccination scheme, but we cannot tell how long this crisis will last. The Chancellor and the Prime Minister have form in telling the public it will all be over by the summer, then by the autumn, by Christmas and by spring, so we need to caw canny with what lies ahead.

As I have said consistently, arbitrary cut-off dates in the support schemes are deeply unhelpful. The last cut-off for furlough planned for last year resulted in people losing their jobs as employers just could not manage the additional costs. Six months on, the only thing that has changed for businesses is an additional burden of debt and bills, with VAT deferrals coming back online soon. Businesses’ income has not increased, and adding to their employers’ costs is not risk-free. We on the SNP Benches support an extension to the furlough scheme for as long as it is necessary, in all countries of the UK. We also support the extension to the self-employment income support scheme, as announced by the Chancellor, but it does not go nearly far enough, leaving millions of people still locked out of covid support. The cliff edge in the fifth SEISS grant for those above or beneath the 30% drop in turnover seems incredibly unfair and incredibly steep. The Chancellor said yesterday that he will do “whatever it takes” to rescue our economy. He said that a year ago too and it is cold comfort to those who are yet to see a penny piece in support from his Government. The excluded have been mentioned over 1,000 times in Parliament by the gaps in support all-party group and reports from the Treasury Committee and the Business, Energy and Industrial Strategy Committee. Solutions have been offered to this Government and it is unacceptable that the Chancellor continues to ignore these cries for help.

The Chancellor made much of the Office for Budget Responsibility’s forecasts of a quicker than anticipated recovery, but it struck me that the key considerations of the OBR’s forecasts should not necessarily be the forecasted numbers themselves, but the uncertainty around those numbers. It is that uncertainty that the Chancellor needs to respond to. The OBR has been clear on the unrealistic nature of the Government’s spending plans. The Treasury envisages only a 2% increase in spending after five years. That was already planned pre-pandemic and does not really capture the potential legacy costs of covid for our public services. The UK Government are planning further cuts of £3 billion to departmental budgets on top of the £12 billion cuts announced in November. The OBR describes the Government’s ability to meet those cuts while dealing with the pandemic as

“a significant source of uncertainty”.

I cannot stress enough how much I feel that the Chancellor cutting his way out of the crisis is the wrong way to go. The Chancellor said that once we are on the way to recovery we will need to begin fixing the public finances, but I object to that characterisation of the issue. Public finances are not something that get broken and need to be fixed; they should meet the needs of our population, not the other way around.

All countries around the world have stretched every sinew to save lives in this pandemic. As we see from the US and our European neighbours, the Chancellor ought to use the powers that he has open to him to stimulate growth and provide an investment-led recovery. The Scottish Government have outlined an ambitious five-year infrastructure plan with a particular focus on affordable housing. They are managing to do that even with a 5% cut to their capital budget. The Chancellor had an opportunity to reverse that and refused to do so yesterday. We have called on the Chancellor to provide a £98 billion fiscal stimulus to kickstart this investment-led recovery, with investment focused on creating jobs, boosting incomes and a green recovery. Instead, it looks like the Tories are returning to form and pursuing a contractionary policy against all better judgment. That approach did not help us to recover quickly from the 2008 recession and it certainly will not help us now. The risks of a long-term return to austerity are clear: we face stagnant productivity and years of lost growth. Public services have been cut to the bone. There is no doubt that without the previous 10 years of austerity our public services would have been in a much better position to deal with the impact of the pandemic.

The OBR’s analysis of the Budget explicitly cites

“higher rates of infection, hospitalisations, and deaths”

in the UK as a driver of economy inactivity. Its figures are stark. The UK’s GDP fell 9.9%, the worst in the G7. One in five UK residents contracted coronavirus. One in 150 were hospitalised. One in 550 died—the fourth-highest mortality rate in the world. Under this Government, the pandemic has hit the UK’s economy harder than other major economies and yet the Chancellor continues to underfund our precious NHS, which is expected to return to its pre-covid spending plans after March 2022.

We in the SNP are calling for the Chancellor to look to Scotland for inspiration. The Chancellor should match the Scottish Government’s £500 thank you payments to the NHS. He should prioritise a pay rise for health and care staff, and increase NHS funding to Scottish levels per head, which would deliver an extra £35 billion for the NHS in England and an extra £4 billion for NHS Scotland in Barnett consequentials. We need to shockproof our NHS for the future and make sure that those who have served on the frontline of this pandemic know how much we value their contribution.

Throughout the pandemic, the voluntary sector has been instrumental in ensuring our communities are resilient enough to weather the many emerging challenges, including food security, tackling rough sleeping, combating loneliness, improving digital connectivity or finding safe places for those experiencing domestic abuse. Increasing gift aid temporarily from 20% to 25%, making it easier to claim for small donations, would be a real boost to the sector. I ask the Government to consider that for the upcoming Finance Bill.

A choice has been made in this Budget not to place the burden of the debt on those who can afford it the most. The Treasury said that this is not the time for new fiscal rules, but instead announced the intention to start a consultation at the end of the month. They have kicked the can further down the road. I think the Chancellor has done that for two reasons. First, by doing it outside the Budget process he will avoid the fiscal analysis and proper scrutiny a Budget would face. Secondly, he is giving high earners enough time to shift savings into ISAs or other tax-free schemes. We are already seeing financial advice cropping up on how people can avoid the coming tax hikes.

The Chancellor’s message of fairness rings hollow if he is only buying time to protect himself from scrutiny and to give high earners a head start to hoard their wealth. Instead, we have seen a stealth tax rise for ordinary earners. The personal allowance, after which people start to pay income tax, will rise from £12,500 to £12,570 from 6 April, but will then be frozen until 2026 rather than rising with inflation. That is a tax rise in real terms—the OBR says that it will bring 1.3 million people into the taxation system, with households that earn least the hardest hit.

I want the Chancellor to bring forward measures to tackle child poverty and boost household incomes. As page 14 of the Red Book recognises:

“The economic impact of restrictions has not been felt equally. Staff in the hardest hit, largely consumer-facing sectors, such as hospitality, are more likely to be young, female, from an ethnic minority, and lower paid.”

But the UK Government have done nothing in the Budget to tackle the problem they have identified.

Conditionality in universal credit is forcing people out to work and putting their health at risk unnecessarily. The Government could establish a real—not a pretendy—living wage at the real Living Wage Foundation rate. They could end no recourse to public funds, increase statutory sick pay and match the Scottish child payment throughout the UK. They could ditch the Tory public sector pay freeze and make the £20 uplift to universal credit permanent.

The Chancellor could extend support to those on legacy benefits, including many people who are disabled and carers, who have been completely forgotten by the Tories. He could scrap the benefit cap and remove the two-child limit and the pernicious rape clause, which forces so many families into poverty and increasing numbers of women into making heartbreaking choices like terminating a third pregnancy. What a cruel, wicked Government this is.

As things stand, we face a six-month cut-off date for the uplift to universal credit that will coincide with the end of furlough, the end of mortgage payment holidays and a likely peak in unemployment. The Chancellor has accepted that the uplift is a lifeline for families through the pandemic, so why does he plan to rip it away at the worst possible time? If nothing else, I expected the Chancellor to understand the importance of the social security system as a safety net that allows for a flexible labour market. If he wants people to be able to retrain and equip themselves to face a post-pandemic world, he needs to provide the support to enable that.

We are seeing the Tories shy away from redistributive policies during the worst recession that we are likely to see in our lifetimes. History is reporting itself yet again, as we in Scotland watch with horror a Tory Government that we did not vote for trying again to balance the books on the backs of those who can afford it the least.

It is often the case that the people most affected by austerity policies are women. During the pandemic, women have shouldered the disproportionate burden of caring duties and are more likely to have switched to part-time work, and they are more likely to struggle in the scramble for jobs when things start to open back up again. They are more likely to have already been impacted by the welfare reform before the pandemic began. I had hoped to see some commitment from the Chancellor on the disproportionate economic impact that women have felt over the past year, but there was not even as much as a patronising pat on the head for mums in his speech yesterday.

It is undeniable that our labour market is heavily segregated by gender, and some of the sectors that are dominated by women have been the most affected by covid restrictions. For example, the childcare sector employs mostly women and is vital for ensuring that many more women can go back to work. It has been struck by lockdown restrictions to the extent that the Institute for Fiscal Studies has questioned the sector’s long-term sustainability as demand changes and unemployment increases after the furlough.

The hair and beauty industry is also a large employer of women and is heavily supported by women’s money. I have met staff from salons in my constituency, as have, I am sure, many others in the House. Hundreds of jobs for women are on the line if the Government provide no support. Chopping VAT for the sector, as demanded by the Save Our Salons campaign, would be a real boost to a sector where it is feared that many will not survive this crisis.

My colleagues and I have previously asked the Treasury to look at VAT reductions for specific sectors or economic areas. We have called for and welcomed the VAT cut for hospitality and tourism, and would have preferred the 5% rate cut to last longer so that the sector could really see its benefit. That is particularly true for the music and events sector, which has not been able to sell many tickets this past year.

VAT cuts for repairs to buildings would help to end the scourge of derelict buildings in my constituency and many others, and encourage investment in our built environment rather than demolishing and rebuilding. VAT cuts could also be used to boost investment in energy efficiency measures, thereby contributing to our net zero ambitions.

The Tories long claimed that all sorts of things would be possible after Brexit, but now that we have left the EU, Budgets are coming and going with no regard to those issues. Not only have Scotland’s industries suffered after Brexit, but we are not even seeing the promised targeted tax cuts, which could lead to real benefits in our economy.

I am sure I was not the only one to notice that the Budget made scant mention of Brexit, which will be of little consolation to Scotland’s shellfish industries and the countless others affected by delays to exports and charges applied to imports. The OBR did not miss this, though, and says that

“we now expect the temporary near-term disruption to EU-UK goods trade to reduce GDP by 0.5 per cent in the first quarter of this year. This reflects both that exports appear to have been hit harder than imports and that the trade disruption will affect UK supply chains.”

It does not rule out further disruption either, as well as a long-run loss of productivity of 4%.

The SNP has called on the Chancellor to mitigate some of the damage done by Boris’s botched deal by providing a Brexit compensation package for Scotland in line with the EU’s €1.5 billion for Ireland. Scotland’s community stands to be battered further by some of the impacts of Brexit. We have seen the end of EU structural funding, and the threat of a shared prosperity fund controlled from Whitehall, bypassing our democratically elected Scottish Parliament. There are madcap money-spinning schemes such as the Boris bridge through the Beaufort’s dyke munitions dump, rather than schemes that our communities want and need, with local jobs focused on a green and sustainable recovery.

Scotland’s ambitions to grow our tax base and maintain the long-term funding for public services are massively undermined by the hostile environment for immigration. Brexit and the pandemic have conspired to stop people moving to Scotland. The Tories are actively and brutally cutting migration to satisfy their own arbitrary targets, and Scotland’s economy will suffer for it. I was absolutely furious to hear the Chancellor talk about attracting in highly skilled IT professionals, as outlined on page 62 of the Red Book, because he seems to forget that there are already many people here whom the Home Secretary has tried to deport for the heinous practice of making a legitimate amendment to their tax returns. Highly qualified migrants, many of whom work in IT already and who have made their home here, have been treated abysmally by this Government. Having heard how their friends and relatives have been treated, bankrupted and made to feel like criminals, many will not want to come here. The rule 322(5) scandal is still affecting people today, including my constituents. I urge the Chancellor to listen to organisations such as the Migrants’ Rights Network, and fix this injustice once and for all.

On a whole host of issues, the economic illiteracy of this UK Tory Government knows no bounds. Further polling out this morning shows that 71% of people in Scotland believe that we would fare better outwith the UK, with 53% already backing independence. We face a choice of two futures in Scotland, and I hope that soon we will have the opportunity to take matters into our own hands.

[Mr Deputy Speaker (Mr Nigel Evans)]

The time limit is now introduced.