Finance Bill

Andy Carter Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

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

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

Before I start the debate, I should declare, to avoid any potential conflict or perception of conflict, that, with reference to my previously published entry in the Register of Members’ Financial Interests and my ministerial interests, I have recused myself from making ministerial decisions on issues relating to pillar two, which will be dealt with more than ably by the Exchequer Secretary to the Treasury, my hon. Friend the Member for Grantham and Stamford (Gareth Davies).

My right hon. Friend the Chancellor of the Exchequer delivered an autumn statement with a clear intention to strengthen the economy now and for the future. The Government proposed to do that by putting money back in people’s pockets and cutting taxes. The Finance Bill that we are debating today does just that. First, it supports British businesses by allowing them to invest for less, which will encourage innovation and enhance productivity. Secondly, its measures will improve and simplify our tax system, which will ensure that it is fit for purpose.

The Bill covers 36 different measures in total, some of which are more complex than others. Madam Deputy Speaker, you will be pleased—or perhaps displeased—to know that I do not intend to cover every one in detail in this opening speech. I would like to focus on some of the key themes and measures.

I will first detail the Bill’s measures to support British business. The Government understand the simple truth that a strong private sector drives economic growth. That growth in turn serves the public good by allowing the Government to invest in public services. Perhaps most importantly, it allows the Government to support the most vulnerable. That understanding has shaped our approach. That is why we are lowering business taxes: because it will incentivise investment and boost private sector growth.

The Bill’s first measure to achieve that will make full expensing permanent, allowing businesses to invest for less. As a result, the UK’s plant and machinery capital allowances will increase. It is effectively a tax cut to companies of over £10 billion a year—the most generous of any major economy. The benefits to the economy of the policy—just this measure alone—are that it will drive 0.1% GDP growth over the next five years, increasing to almost 0.2% in the long run, and it will unlock an additional £3 billion of investment per year. That is only one of many Government policies backing British businesses.

The Government also recognise the important role of research and development in driving both innovation and economic growth as well as the benefits it can bring to society as a whole. Therefore, we will merge two Government programmes: the research and development expenditure credit scheme and the small or medium enterprises scheme. That will have two key impacts: it will simplify the system and provide greater support for UK firms to drive innovation. Those changes will apply from April 2024 onwards.

The support does not stop there. The Government will also introduce greater support for loss-making R&D-intensive SMEs. We will also lower the R&D intensity threshold required to access that to 30%. That will help about 5,000 extra SMEs, and they will receive £27 per £100 of qualifying R&D invested. Let us be in no doubt that this is a major boost for innovators across the UK. These measures significantly increase support to R&D firms to about £280 million a year by 2028-29, and overall they will ensure the success of UK plc.

I will now outline the next measure to back British businesses. The Government will extend the sunset clause for two more programmes: the enterprise investment scheme and the venture capital trust scheme. Both will be extended to 6 April 2035. That will support young companies to raise capital for successful growth.

The Government applaud our world-leading creative sector—after all, it grew 1.5 times faster than GDP between 2010 and 2019. In response, a new measure to back British business will go even further through reforming tax reliefs to refundable expenditure credits for the film, TV and video games industries.

[Andy Carter (Warrington South) (Con)]

I am pleased to hear the Minster outline support that the Government are giving to the creative industries, which secures thousands of jobs around the UK, and particularly in the north-west of England, where we have seen a huge creative hub develop. Does he agree that it is not just about jobs, though? It is also about soft power, which the creative industries ensure goes right around the world, with great British TV and film. Does he also agree that we want to see that continue?

[Nigel Huddleston]

Yes. My hon. Friend makes an important point. The jobs and economic activity are hugely important, but we are known throughout the world for excelling in the creative sectors—we always have, and we always will. We can all be proud of the incredible creative talent in the UK. He is also right to highlight how it is spread right across the UK.

--- Later in debate ---

[James Murray]

I thank my hon. Friend for raising that point; she is a great champion for orchestras. It is only right, when we consider the details of the Bill in Committee, for us to push the Government to provide the certainty that is so often lacking from many of the measures that they propose.

I was talking about the reality from which the Conservatives cannot hide. The Chief Secretary to the Treasury, who is present, has been desperately trying to claim that the tax burden is going down. Three weeks ago, she claimed that

“taxes for the average worker have gone down by £1,000.”—[Official Report, 22 November 2023; Vol. 741, c. 360.]

Two weeks ago, she claimed:

“Taxes for the average worker will have gone down by £1,000 since 2010.”—[Official Report, 30 November 2023; Vol. 741, c. 1084.]

However, analysis conducted by the House of Commons Library makes it very clear that national insurance and income tax for the median earner will rise by well over £1,000—up from £6,112 in 2010-11 to £7,364 in 2024-25.

In an attempt to understand the tension between the Chief Secretary’s comments and the Library analysis, I wrote to her and also tabled written parliamentary questions. The Financial Secretary responded to both the letter and the questions with rather more careful wording, saying that

“an average worker in 24-25 will pay over £1,000 less in personal taxes than they otherwise would have done.”

He was careful to make it clear that the Government’s

“calculations are on a same-year basis against a counterfactual”,

and that this was not, in fact, a comparison over time, as that

“would include the effects of earnings growth on cash totals of tax due”.

I wonder whether the Chief Secretary’s statement that taxes for the average worker have “gone down by £1,000” may have inadvertently misled the House, given that her colleague’s written response to me tacitly admitted that the Government’s statistics do not refer to the actual taxes that a worker pays. When the Exchequer Secretary to the Treasury responds to the debate, perhaps he will tell us if he knows whether the Chief Secretary would like to correct the record. Whatever the Conservatives say—however they twist and turn—the truth is that people across Britain are feeling the squeeze, and life is very different from the picture that Ministers are desperately trying to paint.

I have already made it clear that we support a number of the individual measures in the Bill. We welcome, for instance, the measure in clause 1 to make full expensing permanent; we have been calling for that for some time. Welcome as it is, however, it simply cannot make up for the years of uncertainty that businesses have faced. When I meet businesses across the country, they are clear that they want stability, certainty and a long-term plan, but even during the time for which I have been shadow Financial Secretary—a period that has seen five different incumbents of the office that I shadow—business taxation and reliefs have been chopped and changed every year.

Let us take the annual investment allowance. At the start of this Parliament, it had been raised to £1 million on a temporary basis. That temporary basis was extended first by the Finance Act 2021 and again by the Finance Act 2022, and was then made permanent by the Finance (No. 2) Act 2023. During that time, of course, the super-deduction, which Members may recall, came and went entirely, and last year full expensing for expenditure on plant or machinery was introduced—but, again, only on a temporary basis for three years, before being amended yet again this year to be made permanent. Frankly, while the latest Treasury Ministers may say that full expensing is now permanent, how long any policy under this Government may last seems to be decided by the Conservatives’ internal battles rather than what is right for the country.

[Andy Carter]

The hon. Member has said that Labour will support the Bill today, and I welcome that, but I have been doing some calculations. Does he agree that if Labour remain committed to their £28 billion borrowing plan, debt will soar and they will break their own fiscal rules?

[James Murray]

The hon. Gentleman was desperate to make an intervention about fiscal responsibility, when just a year ago his party crashed the economy and sent interest rates soaring, and working families throughout the country are still paying the price. We on this side of the House take fiscal responsibility seriously. We want to have a fiscal lock in place, we want to get debt falling, and we want to get the economy growing. That is the difference between us and the Conservatives.

Clause 2 contains measures on research and development. In Committee we will probe the impact of those changes in greater detail, but it is clear straightaway that stability and certainty have been lacking here as well. We need only look at the changes in the current Parliament’s Finance Acts. The Finance Act 2020 raised the rate of the R&D expenditure credit from 12% to 13%. The Finance Act 2021 made changes to the amount of R&D tax credit that small and medium-sized enterprises could claim. The Finance Act 2023 again changed the rates of R&D tax reliefs, and that same year the Finance (No. 2) Act 2023 made yet further changes to how the relief operates. Now, of course, the Finance Bill before us introduces a whole new regime. Businesses making investment decisions yearn for stability and certainty, but after 13 years in office, the Government are proving themselves incapable of providing those crucial foundations for success.

We acknowledge, of course, that the tax legislation in Finance Acts needs to be kept updated, and that some change is not only inevitable but important in enabling legislation to function well. However, with this Government it is hard to avoid the sense that changes are being made without a long-term plan in mind. It looks very much as if there has been no long-term plan for capital allowances or research and development reliefs, and the same is true of tackling tax avoidance and evasion.

Although we welcome any measures to tackle tax avoidance and evasion, again there has been a busy history of legislation in this Parliament alone. The Finance Act 2020 made changes to the general anti-abuse rule, introduced to deter taxpayers from using tax avoidance schemes. That was followed by more changes to the rule in the Finance Act 2021, alongside other changes to the legislation covering avoidance. In the Finance Act 2022, a further round of changes were made to the legislation relating to avoidance, including on HMRC’s publication of information about avoidance schemes. Now, in 2023, we see the latest set of changes to the rules and penalties in respect of avoidance and evasion. While we will consider the detail of those changes in Committee, it is already clear that a long-term plan is very hard to see.

Stability and certainty are crucial foundations when businesses are making decisions about where to invest and where to create jobs. We in the Opposition hear that from business leaders day in, day out, across all sectors and in all parts of our economy. We know how much damage is done to economic growth and people’s standards of living when that stability and certainty are not there. We saw that at its most extreme last autumn, when the Conservatives crashed the economy and trashed their reputation in a matter of days, through a reckless disregard for our economic institutions and for working people’s security. But it is not just about last autumn; it is about 13 years of Conservative government. It is about the inability of the Conservatives to provide the stability, the certainty and the plan for the future that businesses and our economy need.