Finance Bill

Baroness Pitkeathley Excerpts

2nd reading & Committee negatived & 3rd reading
Tuesday 8th June 2021 Lords Chamber

[Lord Empey (UUP)]

My Lords, my noble friend Lord Forsyth referred to simplification. A 417-page Bill and 349 pages of Explanatory Notes to explain it—I know that most noble Lords will have read both from cover to cover—illustrates that we are not moving in the direction of simplification.

We now have a situation in this country where, because of our devolved settlements, significant economic barriers are being exercised in the devolved areas—particularly in Scotland, where taxation powers are broader than in the other devolved Administrations. But there is one thing that we are not doing: we are not explaining to the people in those regions where the money that the devolved Administrations spend comes from.

I have said before in this House that the devolved Administrations are a bit like giant ATM machines; when the cash stops coming out of the machine, those in the devolved areas simply say, “Well, Westminster didn’t give us enough”. We do not explain the arithmetic to the people in the devolved regions. That would not be a difficult exercise; all it would require would be for the Treasury, perhaps on an annual basis, to produce a short leaflet, or put it online, to show people where the money actually comes from. Local authorities often send out leaflets telling people how their taxes are spent but that does not happen nationally. There is a total absence of accountability to this Parliament for the funds given to the devolved Administrations. Vast sums of money are given over but there is absolutely no feedback or requirement to account for it. That is a perverse principle.

We talk about the pandemic and the rollout of the vaccines bringing our nation together, which I support and which is an excellent selling point. But when the biggest single element that affects the devolved Administrations is the money that they receive from the Treasury through block grants and Barnett consequentials, why do we not tell citizens in the devolved areas what the arithmetic is? It would not be a huge undertaking and it could be done on an annual basis. I suggest to my noble friend the Minister that the Chancellor might look at this. It is a simple exercise, but it would put in context what is actually going on in this country.

I want to refer to a matter that the noble Lord, Lord Dodds, raised on Clause 102, which deals with restrictions on the use of rebated diesel and biofuels. I mentioned the Explanatory Notes, at least some of which I have looked at. The background note at paragraph 33 states:

“This measure introduces changes that will remove the entitlement to use red diesel and rebated biodiesel from most sectors from April 2022 as part of the government’s strategy to meet the UK’s target of net zero carbon emissions by 2050.”

That is a laudable aim but, as the noble Lord, Lord Dodds, mentioned, there is a perverse effect relating to our power suppliers in Northern Ireland. They are legally and contractually required to have distillate back-up in the event of a crash of the gas supply, because there is a single source of supply, called SNIP, which comes from Scotland to Larne, in County Antrim. If anything were to go wrong with that pipeline—which, thankfully, has not happened in all the years it has been operating—it is perfectly legitimate to require the people who generate our electricity to have that back-up. It is the only power supplier in these islands that has that legal requirement placed on it.

Distillate means red diesel, so the effect of the measure in the Bill would be that 12,000 tonnes of red diesel which does not need to be burned would have to be burned by April 2022 and replaced with another 12,000 tonnes of white diesel, simply because one has dye in it and the other has not. There is no technical difference between the two fuels—they are just the same, but one has red dye in it and one does not. The systems would have to be purged and because the number of tankers allowed to bring fuel in per day is limited to eight for environmental reasons, it would take between three and four months to purge and then replace. I am no climate expert, but we will produce an additional 23,000 tonnes of carbon that could be left sitting there because that fuel supply is only for an emergency and, fortunately, has not had to be used.

I appeal to the Minister to take this matter back to his colleagues. I have no doubt that the legal obligation for our power suppliers to have this back-up is one of those things that people had not realised—both the noble Lord, Lord Dodds, and I were Energy Ministers in Northern Ireland, and I do not know whether I enforced it or if it is his fault—but it was the right thing to do. It might even have been the Deputy Speaker’s fault, because he was there before I was.

So I think it is just one of those things that had not been picked up, but its effects would be negative and perverse. It would mean extra costs for the consumer and have significant implications for our power suppliers because we are in an all-island market now; there is no similar requirement for power suppliers in the Republic of Ireland to have such a back-up, so they will automatically be more competitive when they are bidding to generate electricity to go into the grid. I appeal to the Minister to be kind enough to take this matter back to his colleagues and explain the difficulties. I am sure they can be dealt with and overcome.

I support the general principle, although there is no question that red diesel is abused. I also make the point that paramilitaries have been smuggling such products for 20 years—reasonably successfully so far, from their point of view—so to penalise the electricity consumer through no fault of their own would be perverse in the extreme.

By the way, it would be interesting to know—the Minister may not know this or he may not have the information at his disposal today, but he can let me know—if in fact he received any representations from the relevant department in the Northern Ireland Executive and, if so, when.

On a broader, general point, very few people in any of our lifetimes have seen anything like the last 18 months. There is no doubt that the Chancellor has been very vigorous in his attempts to ensure that our industries do not collapse, but I have to say to him that one industry that is in severe trouble, as the Minister will know, is the aviation and aerospace sector. I am a member of the APPG on Aerospace, and we had a well-attended meeting with the Minister, Robert Courts, just before I came into the Chamber. The sector is in despair because of the chopping and changing.

Aerospace is one of the key providers of high-quality jobs in the UK—over 100,000 of them, highly skilled and highly paid. It also provides apprenticeships, which are vital for the future. The uncertainties and the on/off process that is unfolding before us make it very difficult. Orders for aircraft have, naturally, gone down dramatically. We need more investment in reducing fuels, developing alternative means of propulsion and so on, but at present that whole supply chain is in dire straits. It is propped up by the furlough scheme, but that will not last for ever.

I appeal to the Government to get their house in order with regard to the aviation sector, and that means deciding when people can move around. I know these issues are difficult, but I have to say that a lot of the very good work that has been done is at serious risk of leading to high job losses. It is an area where this country in particular already has great leadership potential. In aerospace we are number two in the world, and there are not too many sectors of our economy about which we can say that. I appeal to the Minister to ensure that we protect this sector, which is so vital to the UK’s economy.

[The Deputy Speaker (Baroness Pitkeathley) (Lab)]

The noble Lord, Lord Moylan, has withdrawn, so I call the noble Baroness, Lady Neville-Rolfe.

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise with the unusual luxury of 10 minutes’ speaking time, given because we have only a dozen Back-Bench speeches on this crucial taxation issue. I hope that some Peers in your Lordships’ House who specialise on issues of poverty and inequality—indeed, on any issues at all—will join these debates in future. Taxation, or the lack of it, shapes our societies. As the richly informative and powerful speech of the noble Lord, Lord Sikka, outlined, decades of decisions about taxation have helped to give us our deeply unequal, poverty-stricken society. We have been taxing the poor and allowing large companies and rich individuals to get away without paying.

The noble Lord, Lord Leigh, suggested that your Lordships’ House may need more experts in tax, finance and business, but this is a far broader issue that needs a far broader input. I quote the American historian Albert Bushnell Hart:

“Taxation is the price which civilized communities pay for the opportunity of remaining civilized.”


It is clear now, on the streets of London, that there are strong and rich debates about how the people who benefit from the investments of this and previous generations—in roads, public buildings, electricity supplies, and the services that we all pay for such as schools, hospitals and policing—make a fair contribution to the maintenance and restoration of our degraded physical and social infrastructure, and the impacts of austerity that we see in potholed roads, closed libraries and inadequate social care provision. These are not technical issues, but are at the very foundation of our society.

Noble Lords might worry about where they get sources of information. I thank Tax Justice UK for an excellent briefing and for drawing attention to the work of the Women’s Budget Group, which has identified how women, people on low incomes and BAME communities will benefit least from the tax breaks in the Bill and bear the chief brunt of the scheduled spending cuts.

It is interesting that, in the debates so far, the failures of regulation and of culture in our financial sector have come up again and again. Noble Lords who took part on the then Financial Services Bill might reflect on this. The noble Lord, Lord Bridges of Headley, talked about umbrella companies, which is an area where the UK is world-leading in entirely the wrong direction. The noble Lord, Lord Butler of Brockwell, talked about the “many-headed Hydra” of tax-dodging schemes, as did the noble Lord, Lord Sikka, in great detail. The fact is that we have too large a financial sector, which is milking not just the UK but the entire world and particularly the global south. The centre of global corruption is on our doorstep.

It has been suggested that we all live in social media bubbles these days, but in your Lordships’ House I feel like I am in the vigorous Atlantic surf of strong disagreement on economic issues. I particularly disagree with the noble Lord, Lord Forsyth, and the noble Baroness, Lady Neville-Rolfe, about their entire economic commentary. The ways and means mechanism and its implementation have existed for many years and show how the rules of the game have changed and that the old economic approaches failed disastrously and gave us the global financial crash. We are finally looking differently at how the economy works and what it is for. The noble Lord, Lord Forsyth, and many others said that we need to get the economy going again and focusing on growth. I remind your Lordships’ House, in the country that is the chair of COP 26, that we cannot have infinite growth on a finite planet. That is not politics; it is physics.

The noble Baroness, Lady Neville-Rolfe, recommended some reading to us. I have some alternative reading to suggest, a book I reviewed this week in the House magazine by Professor Tim Jackson. He is quite a mainstream economist and his book Post Growth is well worth a read. I also pick up on the points of the noble Lord, Lord Bilimoria, which focused on the importance, as he sees it, of giant multinational companies. I stress that 61% of employment in the UK is in small and medium enterprises. The Government talk of levelling up, but I would rather talk about spreading out prosperity. The foundation of prosperity for every community in this land needs to be built on strong local economies of small independent enterprises and co-operatives—a different and stable kind of economic model.

Having set the scene, I turn to some details in the Bill. I take the point made by several noble Lords about the thickness of the paperwork but, when you look at the measures, you see that it is actually a modest Bill. It talks about tidying up some Northern Ireland and VAT Brexit issues—another reminder that Brexit is by no means done. There are some modest measures that noble Lords have referred to about plastics, red diesel and cycling—very modest again for the chair of COP 26, when you think about the need to act on the climate emergency. We also have an increase in stamp duty land tax for overseas purchases of residential property in England and Northern Ireland which, should your Lordships take an imaginary scan of the boroughs around where we sit today, might be best described as shutting the stable door after the horse has bolted.

The headline measure is a super deduction for the largest companies, many of which have done very well out of the great tragedy and suffering of the global pandemic. This is estimated to be going to cost the Treasury £25 billion. That would be a lot of social care or a large injection that our education sector so desperately needs. The Office for Budget Responsibility said that £5 billion of the spending that would be covered by this will be spent on previously planned investments. The Times reported that tax advisers specialising in capital allowances have pointed out that jacuzzies are listed as one investment that could receive a 130% rebate.

Perhaps we also need to think about what is not in this Bill. It is interesting that, despite widespread debate in society now, both in the Bill and in the debate around it in the other place, no amendment was put down about a wealth tax. There was no real discussion of it in the other place despite that now being a major topic of discussion among even some quite mainstream economists and certainly among the public.

Of course, there is a lot of discussion about the levels of corporate taxation, led not by the UK but by Joe Biden’s America. When I asked the Minister on 14 April about the US President’s plans, he effectively gave me a “no comment” response when I asked what the UK stance would be. I am pleased to see that we have now signed up to the US initiative. The noble Lord in his answer to my supplementary question then said something very interesting. He said the Government had always been one that wanted to reduce taxation wherever possible. Perhaps he might like to consider the words of the Chancellor in deciding to end the race to the bottom in corporation tax by increasing the headline rate to 25% in 2023 after Her Majesty’s Treasury found that the cut in the headline rate since 2010 did not drive inward investment. To quote the Chancellor, it

“might not be the most effective way to drive capital investment up”.

I also refer to the comments from the noble Lord, Lord Bilimoria, about those statistics. He referred to inward investment. I would say that that inward investment very often has been the selling off of the family silver, whether that is our water companies, publicly held land or, indeed, the family beds when it comes to selling off our care homes to the hedge fund industry.

If we did have, let us say, a wealth tax, where might it go? Despite the Government’s talk of an end to austerity, a £15 billion cut in annual government departmental spending is planned. These budgets are already cut to the bone and, of course, are being hit by the huge and continuing impacts of the pandemic.

There is some very useful information about who is paying and who is not. I have referred noble Lords to a report from the CAGE institute at the University of Warwick. In 2015-16, a quarter of people who had more than £1 million in taxable income paid less than 30% tax, while one in 10 paid just 11%—the same as a person earning £15,000 a year. This is a key issue.

I come back to the inequality and the poverty in our society, issues so well covered by the noble Lord, Lord Sikka. We are talking about capital gains tax and inequality in the way income is taxed. These issues are all missing from this Bill. They will need to be confronted soon.

[The Deputy Speaker (Baroness Pitkeathley) (Lab)]

My Lords, the noble Baroness, Lady Wheatcroft, and the noble Viscount, Lord Trenchard, have withdrawn, so I call the noble Baroness, Lady Kramer.