Finance (No. 2) Bill

Bob Stewart Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Chancellor heralded these proposals two weeks ago as “a Budget for growth”, and thank goodness, after 13 years of a stagnating economy and with the OECD confirming that we are the only G20 economy that will shrink this year, with the exception of Russia—what a record. It is completely shameful.

I want to talk about the proposals on childcare and the extension of the free childcare entitlement, which is aimed at boosting growth and getting more parents of young children, particularly women, back into work. That is a welcome ambition. At the moment, about 1.7 million women are prevented from taking on more hours of paid work due to childcare issues, representing an estimated loss of £30 billion to the economy every year. Those numbers are as true now as they were before the Budget, because although the £1 billion tax cut for people making large tax savings on their pensions comes into effect straight away, the implementation of the free childcare arrangements is still a long way off being delivered. Parents will not receive the full benefits of the scheme until September 2025; a child who is two today will not see any of that entitlement.

The policy also risks embedding inequalities and widening the attainment gap. I worry that the Government are missing an opportunity to truly tackle the issues that are dragging growth in our economy, by not supporting parents into work, and are compounding the inequalities in our society, which are also holding people back from reaching their full productive potential. Some 80% of families earning less than £20,000 a year will not benefit from any of these entitlements—only one in five will. The north-east has the highest rate of child poverty in the country. One in five children live in workless households, and 38% of children live in households where someone has a disability, which might mean that they are unable to work. Yet those children will not receive any of this entitlement. We know that the poorest children are, on average, 11 months behind their peers when they start school. Leaving them out of this policy will just embed that inequality further. I fear that the policy confirms what we already know: levelling up is no more than a billboard announcement. If we scratch the surface, we find that there is very little underneath.

Even on the Government’s own terms, the childcare entitlement falls short. If it is about getting parents back into work, why are those who want to train as nurses, paramedics, teachers or midwives, and those who want to be apprentices, not entitled to this childcare support? Parents are trapped in low-paid work and low-skilled jobs. They dare not take time out to train because if they do so, they will lose any childcare support that they might be entitled to.

As Chair of the Petitions Committee, I know that childcare is an issue that has been raised with us time and time again, with thousands and thousands of petitioners signing petitions calling on the Government to think again. Although the Government do seem to have finally listened, it is far from job done. The provision offered covers only term time—38 weeks of the year—so for the rest of the year parents need to find the money to pay for childcare. The long-standing problem with the Government’s free childcare offer that is already in existence has been baked into these new provisions, with the risk that prices will be driven up even more.

The Government acknowledge that we have one of the most expensive childcare systems in the world. According to the Women’s Budget Group, the current provision already falls short by £1.8 billion. The new proposals from the Government have a projected £5.2 billion shortfall—the shortfall is increasing, along with the promises. Without proper funding, childcare providers will have to drive up prices, because for every hour that they provide for which there is a shortfall in funding they have to find the money to top up the rest. We must be honest here: it is parents who are picking up the tab, because the hours that parents are paying for cost far more as a result. This really should not have to be said, but crashing the childcare sector and taking money out of the pockets of hard-working parents are the absolute opposite of helping our economy to grow.

[Bob Stewart (Beckenham) (Con)]

I thank the hon. Lady for allowing me to intervene. I am getting a few cases now of people who are going to the Government to get the voucher for childcare, but the Government are taking far too long, which means that those people miss the deadline for giving the voucher to the local council—Bromley Council—so that they can get funded. This is a real problem, and it is increasing in my view.

[Catherine McKinnell]

I thank the right hon. Gentleman for raising his concern. That is just one of a number of complexities in the childcare system that are holding parents back. Adding more complexity in the system, which I fear some of these reforms will do, will only compound those problems. Parents, who are so busy, so stressed and so under pressure trying to work and bring up their children, are having to navigate the various Government offers of childcare. They call these offers free, but parents have to pay for so many hours. They also say that it is tax-free, but it is no such thing and parents need to apply for it and get the money back. It is an incredibly complex system. We could provide a much more simplified system that truly helps parents to reach their full potential and that also helps their children to reach their full potential in a quality early years environment.

That brings me to my next point, which, again, reflects my genuine concern about the Government’s proposals. To make up for the inadequate funding that the Government know they are providing, they are looking to cut corners and, I fear, to drive down quality. Against the advice of parents, providers and childcare experts, the Government are proposing to amend the ratio for two-year-old children from one adult for four children to one adult for five children. I wonder whether the Prime Minister or the Chancellor has ever tried looking after four two-year-olds, but add another into that mix and it does not get any easier. Significant investment is required in training to enable staff to manage that larger workload. Furthermore, comparing us with other countries that have much higher regulatory and training standards for their early years education staff is just a false comparison.

I urge every Member to listen to parents such as the Steepers, who, tragically, lost their son while he was at nursery. They brought a petition to Parliament to raise awareness of the danger of increasing the ratios, because they are desperate that no parent will ever face the same pain. Nobody supports a reduction in childcare quality or safety, but many warn that that is what these changes will bring. The risk is as well that it will only compound the current challenges in the early years workforce, who are leaving in their droves. Seventy five per cent. of nursery and pre-school staff have said that they are likely to leave the sector if their childcare provider increases the ratios. They are already underpaid and under pressure. Adding another child into the mix will only tip them over the edge. That will not help the Government’s target of finding 39,000 extra childcare staff to meet the needs of the new provision. That explains the delay in bringing it in, because the Government face a mammoth task to build up the workforce.

The only attempt I can see to tackle this—other than reducing the ratios, which people have said and I believe will have the opposite effect—is giving bonuses to prospective childminders. Here is the deal: if someone signs up as an individual, as people have for many years, they will get a bonus from the Government of £600. However, if they sign up with a private childcare agency, of which there are currently six in the country, all listed with hyperlinks to their websites on the Government website, they will get a double bonus of £1,200.

I asked the Prime Minister why the Government are driving people to go through an agency rather than sign up directly with their local authority. The answer I got was:

“I think it is a reflection of the fact that it is through intermediaries, so there are additional costs.”

That rather sums up how backward this policy is; there is £10 million allocated to it, and we could get two for the price of one if we cut out the middleman. Why the Government are doubling bonuses for people who sign up with agencies, I do not know. The Prime Minister has promised to write to me with answers and I eagerly await his response.

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[Priti Patel (Witham) (Con)]

It is an honour to follow the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), because I wholeheartedly support the principle of getting more parents into work and, importantly, we both became Members of Parliament at a similar time, when we both had small children. There is a clear understanding that the childcare system in this country has been dysfunctional and unaffordable for too long. I was a Minister in a Government who developed the policy of tax-free childcare, and we wanted to simplify it. I think she made some important references to simplification and making childcare much more accessible to and practical for parents—we need that.

I say that because our country and our economic prosperity are built not on the foundations of government, high taxes and regulations, but on the ingenuity of the human spirit and the British public going out to work and contributing. That is effectively what we need to be doing. Our economic strength comes from the entrepreneurial spirit of businesses—obviously, I say that as an Essex MP—and from the nation’s wealth creators: our army of hard-working businesses. I come from a small business background myself—people know that I have worked overseas and all the rest of it. That is what builds economic foundations and protects us, allowing us to weather economic hard times.

We must recognise, of course, that we have seen economic hard times—certainly in my decade in this place—and we are not out of the woods; we have high levels of inflation. We also have challenges in the banking system, which could have long-term repercussions. We want to get the economy growing, and for the Government to meet their pledge to grow the economy, create more better-paid jobs—we all believe in better-paid jobs—halve inflation and reduce the national debt, we need businesses such as those in Essex. My hon. Friend the Exchequer Secretary to the Treasury is a Suffolk MP, and I am adding the entrepreneurial eastern region. We have to give people the bandwidth to invest. We need them to feel confident about the strength of our economy and that businesses will do a great deal to invest.

Of course, Governments do not create jobs—we need to recognise that—but they can help to generate growth. That is why we need the right economic foundations, fiscal framework and supply-side reforms—about which we do not talk enough—to encourage free enterprise. So many of us in this place are old enough to remember that that was the approach that lifted our country out of the economic doldrums in the 1980s. As I said in the Budget debate, there are many positives in the Budget, but there is a strong sense among the business community that the Budget and the Bill could have gone further, and that we need to think about future-proofing where we as a country go on the economy and, as many of my hon. Friends have said, about addressing the high tax burden, which curtails our economic freedoms.

I could make many references to one great Conservative, the late Baroness Thatcher, who said:

“Our challenge is to create the kind of economic background which enables private initiative and private enterprise to flourish for the benefit of the consumer, employee, the pensioner, and society as a whole.”

For me, those are the basic tests by which we should judge a Budget and a Finance Bill. Do they support private investment and enterprise? Do they ensure that we are internationally competitive? Do they help households and businesses by giving them economic freedoms?

I will touch on some measures that have already been mentioned. On the rise in corporation tax, there are measures to provide more relief, which can be welcomed, but I do not believe in increasing taxes and then providing relief to compensate for them. Too many risks come with relief. It can create complexities in the tax system, and small businesses in Essex will have to employ armies of lawyers, tax accountants and specialists. I just disagree with that; I do not think it is right, as I said in the Budget debate. I believe that we need a simplified tax code underpinned by lower taxes. We have been talking about that for years in this House but we struggle to deliver it. Of course, businesses are frustrated by that because they are the ones that have to pay the costs of it. Entrepreneurs and small businesses are subject to more regulatory costs and more restrictions, which stifles innovation. We need to do much more in that space.

The OECD minimum rate of corporation tax is a hugely complex change to our tax system that has so far progressed with very limited scrutiny, I am afraid. Given the extent of the 159 clauses, that scrutiny may happen in Committee, as colleagues have said. I hope the Minister can assure me that the time allocated to those clauses in Committee will reflect their complexity, and that key sections will be considered by the whole House, because we are deeply concerned about the impact of the change on the UK’s economic future. I have concerns about the administrative costs of those measures for businesses. We need to look at the change in more detail, given that businesses are already paying above the 15% tax rate. That is of great concern.

[Bob Stewart]

Small businesses in my constituency are complaining hugely about the fact that they will have to employ more and more accountancy hours in order to do their work. It is a real problem because it costs them more and more money.

[Priti Patel]

My right hon. Friend is absolutely right, and that brings me to a point that I hope the Minister will seek to address. The Government’s impact assessment suggests that the costs could be around £13 million initially, and then an additional £8 million annually to maintain. This is a total underestimation. When the lawyers, tax accountants and everything else—the layer cake—is included, the cost will be phenomenal. For example, the insurance sector believes that its compliance costs will increase by a minimum of 20% to 25%. Others say the increase could be as high as 40%. These are business costs—I do not need to spell them out any further.

To quote the Government, the effectiveness of the policy

“depends on a high degree of consistency of the implementation in different jurisdictions”.

It has already been said this afternoon that although we are pressing on with implementation, other countries are not. As my hon. Friend the Member for South Dorset (Richard Drax) said, the EU has granted many member states the right to delay for up to six years. The US is not going to implement it at all. We know exactly what the White House and the US House Committee on Ways and Means have said. If the UK progresses ahead, how high a degree of consistency can we expect elsewhere? In America, the House Committee on Ways and Means is threatening retaliatory measures against any countries that attempt to collect additional taxes from US corporates. We need to understand the implications across Government, because this is about not just the Treasury but the Department for Business and Trade. What impact will the Bill have on the prospects of a UK-US trade deal?

Finally, we are legislating before a final international agreement has been reached. As we know, negotiations are ongoing in respect of several measures, not least the infamous international dispute resolution, which seems to have plagued most Government policy in many other areas. We are signing up to a deal when we do not know whether it will be so loosely policed that China and other countries can game it without thinking about the wider implications. I know that the Minister will pick up these points, and I thank the Front-Bench team and the Chancellor for their strong engagement on all these issues.

I wish briefly to touch on the point that has been made about the Office of Tax Simplification. Much more work needs to be done in this policy area. At the end of the day, it applies to issues such as personal taxation rates. We on this side of the House are Conservatives and believe in allowing people to keep more of what they earn, and we trust them to make more informed choices about how they spend their money. Notwithstanding not just this Finance Bill but previous ones, it is fair to say that since 2010 we have lifted many of the lowest-paid out of income tax by increasing the tax-free allowance to £12,570. We should be proud of that. It has doubled under us and, along with the introduction of the national living wage, we have helped those on low incomes, which is absolutely the right thing to do.

The previous Finance Act that we passed froze the tax-free allowances and respective tax bands until 2028. I want to see so much more done in this policy area to give people more freedoms and to let them keep more of the income they earn, rather than having the state continuously robbing Peter to pay Paul and then reallocating so much public money in difference schemes.

We now face a real problem with fiscal drag that we have to address. Middle-income earners have already faced the impact of fiscal drag, with little change in the 40% higher-rate threshold in recent years. We also know that in 1990-91 there were 1.7 million higher-rate income tax payers out of 26.1 million, which was less than 7% of all earners. Now there are 5.5 million higher-rate income tax payers out of 34 million, which is 16% of all earners. As Members can work out, over the past 30 years we have gone from one in every 14 income tax payers paying the higher rate to one in every six. That is very significant, so this is one area that I would say to the Government, to Treasury Ministers and to the Prime Minister has to be kept under review.

To conclude, I encourage Government Front Benchers to drive forward everything that will promote free enterprise and to look at good tax cuts that will really help people, including those who, quite frankly, are struggling: low-income earners in particular, but also small businesses around the country. This is not just about the large corporates, but those that employ people in our communities. Those businesses are the backbone of our communities and our societies, and if we do more of that, we will have stronger economic freedoms to grow our economy and make our country more prosperous again.

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[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I wanted to start by saying a few words about the late Baroness Betty Boothroyd, because I think I may be the only Member currently in the Chamber who was here when she was Speaker. She was an extraordinary, indomitable, wonderful, tough and completely terrifying person to a new young MP—one of the 101 Labour women elected in 1997. She smashed her way through every glass ceiling that ever stopped her. She was a working-class woman, proud of her roots and of who she was, and she would let nothing get in her way.

Betty led a very different House of Commons. When you came here in the morning, you did not know what time the House would go on to in the evening. You would be terrified to get one of the invites to her many social occasions; you had to be sure you had the appropriate outfit on the back of your door in case she did invite you. Woe betide anyone who did not respond to her invites within 48 hours, because the invite would be promptly withdrawn. I do not know whether it is apocryphal, but rumour had it that she stood at the door of her social evenings and watched you come in, and if you were not appropriately dressed, you were asked to leave.

I have one last story about Betty. It was an extraordinary time in 1997, and we were all invited by Queen Elizabeth to go to Buckingham Palace. I do not know whether my right hon. Friend the Member for Doncaster Central (Dame Rosie Winterton) recalls it, but we arrived terrified. I walked into a room and I saw Betty Boothroyd. I knew that I knew her, so I could talk to her. At that point, another Labour MP who is no longer in this House turned to the Duke of Edinburgh and asked him to take a photograph of me, Betty and himself. I thought I was going to die—at least, I thought I was going to stop breathing. Everybody was silent, until Betty opened her arms and sprang into a rousing chorus of “A Nightingale Sang in Berkeley Square”, while one of the Duke’s aides took him away so that he would no longer be offended. She was a character, and we all came along behind on her coattails.

Just because Betty achieved, it does not mean that everybody could achieve. We know that the number of working mothers in our economy is in decline in the 21st century. At a time when we know that we need more people in the workforce, mothers are not entering it because they cannot afford to do so, even if they want to carry on working to develop their skills, they hope for a better career in the future or they simply need the money.

Something that makes all of our constituents cynical about politicians and Government is when much is promised and little is delivered. When my friend Natasha and her husband Pete were watching the Budget, hoping for help with childcare costs for their two-year-old son Noah, they found none. They pay more in childcare than they pay on their mortgage. There will be many women who, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said, find nothing in these proposals that is going to assist them, because they really click in in September 2024 and September 2025. We could cynically ask whether those dates have been arrived at because they will be after the general election and the current Chancellor may not have to deliver on the promises.

More worryingly, the Sutton Trust has found that only 20% of the poorest third of families will benefit from the proposals. Those are the women and the families who need to work to improve their chances. We all agree that working is the best way out of poverty, or at least that it should be. In September 2024, there will be 1,369,000 children between the ages of nine months and two years. This scheme benefits only 600,000 of them, and more—729,000 of them—will have no benefit from these proposals.

However, it is not just the mums and the families who are going to have a problem. The nurseries—the providers themselves—already have problems. We know that 5,400 nurseries have closed since 2021, because they simply could not make up for the increasing cost of gas, electricity and staffing or for the fact that the current free hours are not free to the provider. It costs about £7.49 an hour to keep a child in a nursery, but that is only subsidised to the tune of £5.50 by the Government’s plan. Promises have been made that the difference will be made up to prevent more nurseries from closing.

The money offered by the Government for the current proposal is £240 million, but the Women’s Budget Group says it will cost £1.8 billion, and that famously Trotskyist organisation the CBI reckons it will cost £1.6 billion. The Women’s Budget Group believes that the total cost in September 2025 will be £9.4 billion. The amount paid by the Government will be £4.2 billion, so it will need more than half as much again to make the scheme work. We are either going to collapse the nurseries that currently exist because they will not have anybody to cross-subsidise with, or the places will not be there for those children.

It is not about the mums and it is not about the nursery, so is it about the staffing? Our childcare works on the back of very young women being paid very little. One in eight of the staff in our nurseries is paid £5 an hour because they are too young for the national living wage. That is how nurseries manage to keep going.

[Bob Stewart]

I entirely endorse what the hon. Lady says. A lot of nurseries in my constituency are coming to me saying, “The people we employ are just not getting enough money and we can’t afford to give them more. Please, please help.”

[Siobhain McDonagh]

I completely agree with the right hon. Gentleman. I am sure that, like me, he gets emails from parents who are absolutely desperate because nurseries are closing at short notice and no alternatives are available. We think we have a problem in outer London, but the problem in Newcastle is even tougher.

Some 90,700 staff have left the profession since 2018. The Women’s Budget Group—we thank it for all its efforts in getting these details—believes that for the Government to meet their plan, they need 38,000 more childminders and nursery workers. That does not happen by magic. It requires intervention. It requires the intervention of the businesses, but also the intervention of Government. We know, and we have known for years, that children benefit from the most well-qualified and well-trained staff. Well-qualified and well-trained staff need to be paid properly. Childcare should not be the service that is provided on the back of the least well educated and the least well paid.

Finance (No. 2) Bill

Bob Stewart Excerpts

Committee of the whole House
Wednesday 19th April 2023 Commons Chamber

[James Cartlidge]

We have had pensions and energy, and we conclude with alcohol, and of course one other minor matter is covered. We are specifically debating clauses 27, 47, 48 and 50 to 60, and schedules 7 to 9, which cover powers to clarify the tax treatment of devolved social security benefits—that is the measure not relating to alcohol—as well as the change to alcohol duty and the introduction of two new reliefs for alcohol duty.

Clause 27 introduces a new power to enable the tax treatment of new payments or new top-up welfare payments introduced by the devolved Administrations to be confirmed as social security income by statutory instrument. The changes made by clause 27 will allow the UK Government to confirm the tax treatment of new payments or new top-up payments introduced by the devolved Administrations within the tax year, rather than their being subject to the UK parliamentary timetable.

I will now turn to the main issue of alcohol duty, and specifically clauses 47 and 48, which set out the charging of alcohol duty, and schedule 7. In line with our plan to manage the UK economy responsibly, we are reverting to the standard approach of uprating the previously published reformed rates and structures by the retail price index, while increasing the value of draught relief to ensure that the duty on an average pint of beer or lower-strength cider served on tap in a pub does not increase. Most importantly, these clauses introduce the Government’s historic alcohol duty reforms: the biggest overhaul of the alcohol duty system in over 140 years, made possible by our departure from the European Union.

The current alcohol duty system is complex and outdated. The Institute for Fiscal Studies has said that our system of alcohol taxation is “a mess”; the Institute of Economic Affairs has said that it “defies common sense”; and the World Health Organisation has said that countries such as the UK that follow the EU alcohol rules are

“unable to implement tax systems that are optimal from the perspective of public health.”

As such, at Budget 2020, the Government announced that they would take forward a review of alcohol duty. This legislation is the culmination of that review, and makes changes to the overall duty structure for alcohol. It moves us from individual, product-specific duties and bands to a single duty on all alcoholic products and a standardised series of tax bands based on alcoholic strength.

The clauses we are debating today repeal and replace, with variations, the Alcoholic Liquor Duties Act 1979 and sections 4 and 5 of the Finance Act 1995. Specifically, clause 47 provides for alcohol duty to be charged on alcoholic products, clause 48 explains where the rates of alcohol duty can be found—that is, in schedule 7—and schedule 7 itself provides the standard or full rates of alcohol duty to be applied to alcoholic products. This radical simplification of the alcohol duty system reduces the number of duty bands from 15 to six, and has only been made possible since leaving the EU. Now, thanks to the Windsor framework, I can confirm that these reforms can now also be implemented in Northern Ireland. The new alcohol duty structures, rates and reliefs will take effect from 1 August this year, which brings me to the new reliefs.

[Bob Stewart (Beckenham) (Con)]

As a member of the Campaign for Real Ale, may I ask the Minister whether that means beer that is not very strong will come down in price?

[James Cartlidge]

That is an excellent question from my right hon. Friend. As he will appreciate, there is obviously a difference between the duty and the price—we control the duty. As I am about to explain, we are doing everything possible, and I hope he will be interested, because I know that members of CAMRA have great fondness and support for our brilliant pubs up and down the country.

The first of the two new reliefs, which is our new draught relief, applies to alcoholic products under 8.5% alcohol by volume intended to be sold on draught. This draught relief is historic, because as Members will remember, in the EU, we had a thing called the EU structures directive. Under that directive, as a country, we could of course vary our alcohol duty—we could increase it, decrease it or whatever—but what we could not do was charge differential duty between the on trade, meaning pubs, and the off trade, meaning supermarkets, retail and so on. For the first time, we will have that differential draught relief, and I am pleased to confirm that in the Budget, we brought forward two very important measures in relation to that relief. It had been anticipated that we would set the draught relief at 5%, but the Chancellor confirmed in the Budget that it would be increased to 9.2%. I can therefore confirm to my right hon. Friend the Member for Beckenham (Bob Stewart) that as a result of that increase in the draught relief, when the new system comes in this August, the duty on the average pint of beer or lower-strength cider that people buy in pubs will still be frozen.

More importantly, we have issued our Brexit pubs guarantee. As I say, this change would not have been possible in the EU, and we are using this opportunity to send a very powerful message to our pubs: to guarantee that from August onwards, the duty on a pint in a pub will always be lower than the duty on the equivalent in a supermarket.

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[James Cartlidge]

There are spirits that will benefit from the differential—not spirits served from what I think are called optics, but spirits served on tap. There are mixers served on tap that will benefit from a more generous differential duty. On spirits, I am more than happy to set out further detail when I respond to the relevant amendments, because I think they are specifically focused on Scotch whisky, and I understand the concerns there.

I just want to finish my point on our Brexit pubs guarantee. Just to underline what we are doing, we are giving pubs a new permanent competitive advantage. We are levelling the playing field against supermarkets. Following the difficult times that pubs have had with the pandemic and higher energy costs, that hopefully gives them a new narrative for their communities with more positive times to look forward to ahead. That is what we want for our pubs. As my right hon. Friend the Member for Bexleyheath and Crayford (Sir David Evennett) said, they are so important for our communities and our economy. We continue to do everything possible to back the great British pub.

[Bob Stewart]

It seems that we will finish early tonight, in which case I am going straight to the Jolly Woodman in my constituency. I hope I will be able to tell it that the price of its beer will come down. Is there any possibility that there can be a differentiation to encourage real ale, speaking as a member of the Campaign for Real Ale?

[James Cartlidge]

I hope my right hon. Friend is welcomed with open arms in the Jolly Woodman, having given it fulsome promotion. I might make do with Strangers Bar downstairs. Real ales will benefit from the differential duty, particularly those served on tap. There are lower rates for those with lower alcohol by volume, which will hopefully encourage innovation. I hope that will support our craft brewers, not least with the second relief, which replaces and extends small brewers relief with a small producer relief applying to alcoholic products under 8.5% ABV produced by those making less than 4,500 hectolitres of alcohol per year. That will be precisely those sorts of craft brewers.

Clauses 50 to 53 introduce the new draught relief and clauses 54 to 60 provide for the new small producer relief. Taking each clause in turn quickly—I will canter through them—clause 50 explains that alcohol duty is charged on qualifying draught products at the reduced rates shown in schedule 8. Clause 51 sets out the eligibility criteria for draught relief. Clause 52 defines repackaging for the purposes of draught relief and introduces a penalty for repackaging that is not authorised. Clause 53 provides assessment and penalty consequences for a person repackaging qualifying draught products in a way not allowed under clause 52. Clause 54 provides for discounted rates to be charged on all small producer alcoholic products and explains how the discounted rate is calculated. Clause 55 defines small producer alcoholic products.

Clause 56 introduces the criteria for determining whether premises used to produce alcoholic products are small production premises. Clause 57 explains the alcohol production amount used for the purposes of determining eligibility for the duty discount and calculating the duty discount for small producer alcoholic products. Clause 58 sets out the circumstances, other than not meeting the eligibility conditions, in which alcoholic products are not small producer alcoholic products. I hope hon. Members are all following. Clause 59 and schedule 9 set out how to calculate the duty discount used to determine the discounted rate for small producer alcoholic products, and clause 60 allows the commissioners to assess alcohol duty that is due in circumstances where the small producer rate has not been applied correctly. The remaining clauses concerning alcohol duty will be debated in the Public Bill Committee.

Finance (No. 2) Bill

Bob Stewart Excerpts

Report stage
Tuesday 20th June 2023 Commons Chamber

I turn to the example of a young father of, say, three children who is doing well at work and who gets a promotion taking his income above £50,000 for the first time. We might think this would be unadulterated good news but, actually, the tax system will send him a message that this is perhaps not such a wise thing, because he will immediately go into the upper tax threshold and his marginal rate of tax will be 40%. He will get the extra 2 percentage point national insurance surcharge as well. If he has a student loan, 9% might be taken off the outstanding balance. And of course child benefit will start to taper. For a father of three children, that could mean a marginal withdrawal rate of a further 29%. Our potential go-getter would be left with only 20% of the pay rise he had been awarded, and this applies to the kind of people we want to encourage to take on pay rises and extra work because it is good for the economy.

[Bob Stewart (Beckenham) (Con)]

I am ignorant about tax affairs, but trying to sort it out might make it even more complicated.

[Harriett Baldwin]

My right hon. Friend highlights that this is not an easy task. The point I am trying to make with my amendments, which I hope he will support, is that, by abolishing the Office of Tax Simplification, we lose not only a source of valuable advice on how to simplify the tax system but the message that we want to do so, which I know the Chancellor wants to convey.

Higher up the income scale, the £100,000 income bracket triggers the withdrawal of the very welcome steps we have taken on tax-free childcare and the personal allowance. This means that a family with two children in full-time childcare, if they happen to live in London, would be better off earning £99,999 than earning more than £150,000 because they would have a more than 100% withdrawal of extra earnings in that income bracket, which is very distorting. It provides disincentives to work, and we see that obstacle to economic growth reflected in the workforce numbers produced by the Office for National Statistics.

The Chancellor agrees that

“the tax system is overcomplicated and the trend of ever more complication must be reversed.”

It is surprising that, on coming to office, he chose not to reverse the abolition of the Office of Tax Simplification. It was established in 2010, and it was given a ringing endorsement by the Treasury in its 2021 statutory review. Disbanding the independent champion for simpler tax sits very uncomfortably with the Government’s insistence that tax simplification is a priority.

However, the most important factor in securing tax simplification in practice would be for the Chancellor to take on the personal responsibility for simplification that he pledged to take, which brings me to the Treasury Committee’s new clause 2. We have heard that, while the Treasury and HMRC focus on new taxes, the Office of Tax Simplification did important practical work seeking to simplify the existing tax system. We also heard in our evidence session that the Office of Tax Simplification did good work listening to taxpayers to understand how the complexity of the tax system works against them. The reports of the Office of Tax Simplification were published very transparently, unlike the private advice given to Ministers, and they facilitated parliamentary scrutiny of tax simplification efforts.

The Chancellor told us that he intends to be a Chancellor who makes “progress on tax simplification.” I welcome the simplification of the lifetime allowance, which the Opposition opposed earlier, but the Committee wants the ability to hold him accountable for that. Under new clause 2, the Treasury would report to the Committee annually on the Chancellor’s promise to simplify taxes.