Finance (No. 2) Bill

Bell Ribeiro-Addy Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[Richard Burgon (Leeds East) (Lab) [V]]

I wish to speak to my new clause 7, which would require the Government to publish an assessment of the effect on tax revenues of introducing a 55% income tax rate on income over £200,000.

The coronavirus crisis has not only shone a spotlight on the deep inequalities in our society and their deadly consequences, but deepened them. Deep inequalities scar our nation. As we come out of this pandemic, if we are to learn the lessons and build a more equal, less divided and more inclusive society, then we need to address decades of failing tax policy. Ensuring higher taxes on those on the very highest incomes has an important role to play in building that fairer society. Since Thatcher, the Tory mantra has been that low taxes on the rich benefit everyone, but years of keeping taxes low for the very rich did not in fact boost economic growth; instead, it allowed inequality to run completely out of control. That has been proven by new research by the London School of Economics and King’s College London showing that reducing taxes on the rich leads to higher income inequality that has an insignificant effect, in any positive fashion, on economic growth or unemployment.

In short, trickle-down economics has been a lie. Now is the time to acknowledge that and address it by creating a fairer tax system. My amendment calling for a new 55% income tax rate would target those on very high incomes of over £200,000 per year—the richest part of the top 1%, or about 300,000 people. The current highest income tax rate is just 45% for those earning above £150,000—not much more than for those earning £50,000. Yet 40 years ago the average top income tax rate for the wealthy OECD member countries was 62%. The top income tax was 60% even under Margaret Thatcher, so perhaps even the Thatcherites on the Government Benches will consider offering their support for the amendment. This increase would affect less than 1% of the population—about 200,000 people, according to HMRC.

There has been huge suffering in our society over the past year, yet the very wealthiest in our society—the billionaires and the super-rich—have exploited this crisis to further line their pockets. We cannot go on layering inequality on top of inequality. Now is the time to act. Publishing an assessment of the effect on tax revenues of introducing a 55% income tax rate on income over £200,000 would be an important stepping-stone towards building a fairer and better society. That is why I would like to press my new clause 7 to a vote.

[Bell Ribeiro-Addy (Streatham) (Lab) [V]]

I speak in support of amendment 15 and new clause 8 in my name, and amendments and new clauses in the names of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and my hon. Friend the Member for Leeds East (Richard Burgon).

My amendment 15 is tabled with the aim of highlighting the importance of the so-called £20 uplift for tax credit recipients from the covid-19 support scheme, and the damage that the Government’s decision to not continue this beyond September will cause. In March 2020, the Chancellor announced a temporary uplift of £20 per week to universal credit via the standard allowance of the working tax credit basic element for the 2020-21 financial year. A one-off payment is being made to tax credit recipients to cover a six-month period from April to September 2021 to continue this support.

As Members will know, payments from the covid-19 support scheme for working households receiving tax credits are being introduced under the Coronavirus Act 2020. Clause 31 introduces an exemption from income tax for payments made to tax credit recipients. My amendment 15 would require the Government to publish an equalities impact assessment of the provisions of clause 31, which must cover the impact of the provisions on households at different levels of income, people’s protected characteristics, equality in different parts of the United Kingdom and regions of England, and child poverty. That is because while the £20 per week top-up will temporarily be retained, helping some 6.5 million families for a further six months, this does not allay the fears that families will have going into next winter. Rather, it is clear to almost everyone—Action for Children, Child Poverty Action Group, Save the Children, the Joseph Rowntree Foundation, the trade union movement and so on—apart from the Government that the £20 increase and the associated tax relief, as per clause 31, should be made permanent and paid to all claimants, given that poverty levels were already too high pre-pandemic. Extending the £20 uplift is vital because struggling families cannot keep afloat without it, but that will be as true in six months as it is now.

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[Sarah Olney [V]]

I wish to speak to clauses 6 and 7 relating to the rates of corporation tax and also to the super deduction.

Businesses everywhere, of all sizes and in many different sectors, have had an extremely challenging year. As we hopefully move into a time when business as usual can return, I know that Members in all parts of this House are united in wanting to support businesses to flourish once more. But this has also been a year of unprecedented demand on the public finances. Much of that money has been directed towards households in the shape of our furlough and SEISS schemes to ensure that incomes can be sustained and, in turn, to maintain revenue for those businesses providing essential services. Many businesses have seen increases in revenue this year as indirect competitors have been forced to close or prevented from making their goods and services available. Any business that provided a digital or delivery service found an unexpected increase in demand compared with those that provided an in-person service.

Why should the businesses that have profited from the pandemic not pay their share in restoring the public finances that have been expended on supporting us all through this difficult time? The Liberal Democrats have called for an excess profits, or windfall tax so that those businesses that have done well can contribute their share to the recovery. This could most easily be done by an immediate increase in corporation tax whereby only those companies that have remained profitable would pay it. Instead, the Government propose a sharp rise in corporation tax in 2023. This delayed increase will give larger companies time to rearrange their affairs, potentially limiting the amount of revenue that can be captured by the planned rise. It will create an artificial boost to the economy in the short term as profits are brought forward, to be reported against the lower tax rates of the next couple of years.

The Government’s changes to corporation tax rates come when the global nature of trade presents a major challenge to national autonomy on tax rates. The Liberal Democrats are in favour of higher corporation tax rates to ensure that businesses are paying their fair share. The challenge to implementing this has always been that we are in competition with other countries attracting investment by setting lower tax rates. I am interested to hear how the Government plan to react to the plans by the new Biden Administration in the United States to set a global floor for corporation tax rates. This is a fantastic opportunity to introduce a fairer and more progressive tax regime in all nations and reduce the options for corporations to reduce tax. I very much hope that the Government will sign up to the Biden plan and set an example to the rest of the world.

The Chancellor’s most eye-catching announcement in the Budget was the super deduction available to businesses over the next two years to get back 130% of the cost of new plant and machinery. I know that this will benefit many businesses, but I fear that the impact will be more limited than at first appears. First, it creates a cliff edge in investment, especially when coupled with the tax increase in the third year. Secondly, many manufacturing businesses invest for the long term and plan their capital expenditure in 10-year cycles, so a two-year incentive will not make a big change to investment plans. Thirdly, a great deal of equipment is leased rather than bought outright, so investment incentives like these will make no difference.

It would have been a better policy if the expenditure recovered could have included measures to get our economy to achieve net zero carbon emissions or have included expenditure on training and development to help us to build the high-skill economy that we need. These expenses could then have been claimed by a far wider number of businesses in many different sectors and made a genuine contribution to future prosperity and green growth.

The Government need to be clear about their business tax policy so that businesses have time to plan and an understanding of how tax policy interacts with an overall strategy to support enterprise and productivity. Many of our business owners feel a real loyalty to their communities and will maintain those connections regardless of the tax rates, but they need to know that this continues to be a country that welcomes entrepreneurs and supports small businesses. Much more can be done in our tax system to support small and medium-sized enterprises, and I regret that the Government have not taken the opportunity to do this. The Liberal Democrats would introduce a tax cut for SMEs and quadruple the annual employment allowance to allow small businesses to employ up to five people without paying any national insurance contributions. The Government have shown a lack of commitment to small and growing businesses in this Bill and no strategy for private sector growth.

The Liberal Democrats oppose the corporation tax clauses in the Bill because they mean that profitable corporations are not paying their fair share as we recover from this pandemic and the overall provisions do not provide the support we need for small businesses.

[Bell Ribeiro-Addy [V]]

I shall speak in favour of new clause 9 in my name, and the amendments and new clauses in the names of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and the Labour Front Bench.

The thread that weaves through these amendments and new clauses is utter outrage at plans for big corporations, including big firms that do not support trade union rights, that pay below the living wage or that avoid tax, to benefit from the Chancellor’s astonishing super deduction tax break giveaway. In particular, new clause 9 would require a meaningful equality impact assessment of capital allowance super deductions that must cover the impact of those provisions on households at different levels of income; people with protected characteristics; the Treasury’s compliance with the public sector equality duty; and equality in different parts of the UK and different regions of England.

For most of us, one of the key consequences of the pandemic has been to illuminate far-reaching health and socioeconomic inequalities in many countries. However much this Government try to conjure otherwise, it is just a statistical and factual truth that, as a result of years of cruel Conservative austerity followed by the callous Conservatives’ handling of the covid crisis, the pandemic’s impact has fallen disproportionately on the most vulnerable individuals and along gendered, ethnic, occupational and socioeconomic lines.

Inequalities in people’s protection from and ability to cope with this pandemic and its tremendous societal costs have stressed the importance and urgency of the societal changes needed to protect population health and wellbeing. According to the statement issued by independent experts of the special procedures of the United Nations Human Rights Council, condemning the Commission on Race and Ethnic Disparities’ report:

“The reality is that People of African descent continue to experience poor economic, social, and health outcomes at vastly disproportionate rates in the UK.”

Women—particularly the poorest women, black, Asian and minority ethnic women, disabled women, lone parents and young women—not only have been badly hit by the pandemic, but have suffered for years under this Government’s brutal austerity onslaught. Yet, coming in at an enormous £12 billion for 2021-22, the Chancellor’s announcement of a super deduction on purchases of capital goods by businesses was one of the largest spending items in the spring Budget. In fact, some argue that it is one of the largest single-year tax giveaways ever enacted by a Government. And who will it benefit? Although the Chancellor claimed in his speech that the Government’s response to covid had been “fair”, women, those on low incomes and those from BAME backgrounds stand to benefit the least from the untargeted tax breaks for large companies through the super deduction. We know that more businesses—and larger ones—are owned by men than by women. As such, it is important to recognise there are many potential equalities impacts to business taxation.

Incentives such as the super deduction are biggest for large firms and the Financial Secretary to the Treasury has admitted that only 1% of firms will benefit this year, as the rest are within the annual investment allowance. How can the Government justify the fact that under this Bill the rich and big business will be treated to mouth-watering tax giveaways and reliefs, despite unclear evidence about whether that will actually create the investment needed?

The Women’s Budget Group argues that this provision is likely to have “substantial deadweight costs”, bringing forward investment rather than generating new investment. The group also raised the point that it is unnecessarily limited to investment in “plant and machinery”, thereby excluding training and other human capital investments, and missing opportunities regarding the transition to a lower-carbon economy that recognises the economic benefits of spending on the social infrastructure that our public services provide. This goes to the crux of the problems with this Finance Bill, and with the Government’s lack of vision for a green recovery based on intersectional socialist economics and progressive taxation.

[Ben Lake (Ceredigion) (PC)]

It is a pleasure to speak in this debate, Sir Charles. I rise to speak in support of amendment 53, which I hope will encourage the Government to bring some rigour and meaning to their rhetoric of levelling up and the use of taxpayers’ money.

In a Budget that confirmed £17 billion of spending cuts, relative to March 2020 plans, the Chancellor’s decision to announce the super deduction, equivalent to forgoing approximately 20% of the UK’s corporation tax revenues, was certainly a bold one, particularly as the Financial Secretary noted in November 2020 that the existing annual investment allowance already covers 99% of all UK businesses. The House has heard this evening that the super deduction is a major tax break for the top 1% of UK businesses. We have also heard many concerns that it is a blunt tool in need of significant refinement if its perceived benefits are to be targeted to those in greatest need of support. I also point to concerns that the super deduction will disproportionately benefit London and the south-east of England and that it flies in the face of the Government’s commitment to level up the UK economy.

I draw the House’s attention to a finding from the Centre for Progressive Policy, which has calculated that, although the super deduction could amount to a tax break worth up to £513 for London residents, it would be worth only half as much in Wales, whose sum benefit is the second lowest of the UK nations and regions, with only Northern Ireland benefiting less on this measure.

I am afraid that I disagree with other hon. Members who have suggested that the super deduction might, on the contrary, actually benefit and address regional inequality. My fear is the opposite—that the super deduction will, at best, lock in existing regional inequalities and, at worst, exacerbate rather than address the UK’s geographical economic imbalance. That is why Plaid Cymru wishes to amend the Bill to require that the Chancellor considers the impact and geographical extent of the super deduction across all the UK’s nation and regions and would support calls made by other hon. Members this evening that measures should be introduced to establish a deeper evidence base for these changes. Similarly, given the urgent need for climate action and the retooling of the economy for a net zero future, this amendment also requires the UK Government to consider the super deduction’s impact on efforts to mitigate climate change.

I hope that the Government will incorporate guarantees such as these into the Bill to ensure that we truly do rebuild back better from the pandemic, rather than resuscitate the UK’s deeply flawed pre-pandemic economy. Failure to do so would make it clear that their rhetoric of support for all nations, for the levelling-up agenda and for climate action are no more than fine words and lofty intentions.