Finance Bill

Bridget Phillipson Excerpts

Report stage & Report: 2nd sitting & Report: 2nd sitting: House of Commons
Thursday 2nd July 2020 Commons Chamber

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

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

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

New clause 2—Review of changes to entrepreneurs’ relief—

“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to entrepreneur’s relief by section 23 and Schedule 3 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment, and

(c) productivity.

(3) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and ‘regions of England’ has the same meaning as that used by the Office for National Statistics.”

This new clause would require a review of the impact on investment of the changes made to entrepreneurs’ relief.

New clause 4—Structures and buildings allowances: review—

“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by section 30 and Schedule 5 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment,

(c) productivity, and

(d) energy efficiency.

(3) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

‘regions of England’ has the same meaning as that used by the Office for National Statistics.”

This new clause would require a review of the impact on investment of the changes made to structures and buildings allowances in Schedule 5.

New clause 17—Review of geographical effects of provisions of Sections 28 to 31—

“The Chancellor of the Exchequer must within twelve months of the passing of this Act lay before both Houses of Parliament a report assessing the differential geographical effects, broken down by nation and NUTS 1 statistical region, of the changes made by sections 28 to 31 of this Act.”

This new clause would require a geographical impact assessment of the clauses of the Bill relating to reliefs for business.

Amendment 1, in clause 36, page 34, line 29, at end insert—

“(13) The Chancellor of the Exchequer must, no later than 5 April 2021, lay before the House of Commons a report—

(a) analysing the fiscal and economic effects of Government relief under the Enterprise Investment Scheme since the inception of the Scheme, and the changes in those effects which it estimates will occur as a result of the provisions of this Section, in respect of;

(i) each NUTS 1 statistical region of England and England as a whole,

(ii) Scotland,

(iii) Wales, and

(iv) Northern Ireland;

(b) assessing how the Enterprise Investment Scheme is furthering efforts to mitigate climate change, and any differences in the benefit of this funding in respect of—

(i) each NUTS 1 statistical region of England and England as a whole,

(ii) Scotland,

(iii) Wales, and

(iv) Northern Ireland;

(c) evaluating the lessons that can be drawn from the effects of the Enterprise Investment Scheme with respect to the encouragement of both private and UK Government-backed venture capital funds in the devolved nations of the UK.”

This amendment would require the Chancellor of the Exchequer to analyse the impact of the existing EIS and the changes proposed in Clause 36 in terms of impact on the economy and geographical reach; to assess the EIS’s support for efforts to mitigate climate change; and to evaluate the Scheme’s lessons for the encouragement of UK Government-backed venture capital funds in the devolved nations.

[Bridget Phillipson]

New clause 27 calls on the Government to lay a review before Parliament considering all the tax reliefs within this Act, their effect on taxation revenue and the effectiveness of systems to evaluate these reliefs and to ensure value for money. We know that there are real problems with how the Government monitor tax reliefs. Thanks to the outstanding work of the National Audit Office and its report from February this year, we can see how unwieldy the system has become over the past decade and how much this is costing the public purse. It shows that there are currently 362 tax reliefs, which support Government economic and social objectives. This is a huge financial undertaking. The cost of tax reliefs for 2018-19 is estimated to be £155 billion.

The National Audit Office notes that this is not money that would simply be recouped in tax if these reliefs were abolished, but that is not the point that we are seeking to make. We on the Opposition Benches do not doubt that sometimes the outcomes from tax reliefs can be positive and that they can drive positive social and economic behaviour. The problem, as the NAO’s report makes plainly clear, is that we simply do not know enough about this, because the Government are failing to properly monitor and evaluate their effectiveness.

Of the 362 tax reliefs, only 111 have been costed by Her Majesty’s Revenue and Customs, and only 15 have had published evaluations since 2015. At the same time, on the Government’s watch, their cost has been rising since 2010. In normal times, such an enormous cost, without corresponding effective oversight, would be an area of real concern. As the Office for Budget Responsibility identified in July 2019, tax reliefs are considered to be a new fiscal risk to public finances, due to the Government’s not knowing their full cost and the lack of transparency built into the system. But of course we are not in normal times; we are living through an incredible economic crisis. The lack of effective monitoring and evaluation is hard to justify when our public services are under such enormous strain. The inattention shown by Ministers over the past decade must change and we need a much greater focus on ensuring value for money.

In Committee, we touched on one area where I ask the Minister to respond further today, namely the social investment tax relief, an area also pressed by my hon. Friend the Member for Ilford North (Wes Streeting) and my Front-Bench colleague my hon. Friend the Member for Liverpool, Walton (Dan Carden). What further consideration has the Minister given to extending this relief from April 2021 to April 2023? Will he update us on what further consideration the Treasury has given to this arising from discussions we held in Committee? This important aspect has been raised by many charities. I know that the Minister is sympathetic to the concerns they raise and I am sure they will be grateful for any further updates he might be able to provide in this area.

Our new clause paves the way for a greater focus on value for money, by establishing a more systematic and transparent way for the Government to evaluate the cost of tax reliefs and to empower Parliament to scrutinise this more effectively. The limiting scope for amendments to the Finance Bill set by the Government means that we have been able to opt only for a review of the tax reliefs contained in the Bill. Many changes to tax reliefs—for instance, on the entrepreneurs’ relief and the annual allowance—will potentially have a significant impact on tax revenues. In other areas, there are concerns about whether tax reliefs are being abused.

TaxWatch UK has highlighted particular concerns about the future of research and development tax credits, given the evidence of abuse in recent years. It is therefore right that there is greater transparency and that Parliament can properly scrutinise whether the measures proposed by Government are having their intended effect. The Minister attempted to address some of these concerns in Committee, saying that the Government kept all these reliefs under review and that he has proposed a more systematic evaluation programme for tax reliefs. We would welcome any progress towards such a system. However, if the picture was so rosy, I doubt whether the National Audit Office would have painted such a concerning picture in its report. I also look forward to the Public Accounts Committee’s report on this issue to find out whether it agrees with his assessment or what further insight it might be able to offer.

None the less, this amendment attempts to get to a wider point, which is that Parliament currently has few proper and meaningful opportunities to scrutinise tax reliefs on an ongoing basis. The Minister will know of the 2017 joint report by the Institute for Fiscal Studies, the Institute for Government and the Chartered Institute of Taxation entitled “Better Budgets: Making tax policy better”. It states that the information publicly available to Parliament on the costs and benefits of tax expenditure is not sufficient for it to assess their value for money, pointing out:

“Although taxes constitute almost 40% of national income, Parliament has little standing support to help look at tax legislation, support general inquiries on tax issues or help with post-implementation reviews.”

The report had a clear recommendation:

“Increase support to Parliament on tax issues”.

That means going beyond the support currently available and the opportunities that exist, in Finance Bill Committees, through the Treasury Committee, through Public Accounts Committee and through other work in this House, and instead embedding a proper system so we can assess the value for money of past tax measures. That is hardly controversial. As the Resolution Foundation points out, the Governments of Canada, Australia and New Zealand produce annual tax expenditure statements, which can be accompanied by parliamentary debate.

We want to see improved scrutiny of whether money is being well spent, to ensure that the system is fair and helps those who need it most. When all the benefits and tax reliefs are taken into consideration, the Government provide more support to the richest fifth of non-retired households than to the poorest fifth, and that gap has grown since 2010. This is in part due to the system of tax reliefs that has flourished under this Government and previous Conservative Governments and is clearly not based on any genuine notion of fairness.

Today, as we grapple with the looming jobs crisis, the question of fairness is paramount. We need to create a recovery from coronavirus that benefits everyone in our society, from young to old and right across every region and nation. The Opposition do not doubt the scale of the challenge. Our public finances are enormously stretched, our public services have been pushed to the brink by the pandemic, and there is a risk of unemployment on a scale not seen since the 1980s. We have yet to hear anything about the economic support package that we need: a back-to-work Budget to help those at the sharp end of the looming jobs crisis—a Budget that creates jobs, supports people back into work and properly invests in our young people so that they have the opportunities they deserve at this challenging time.

--- Later in debate ---

[Jesse Norman]

If my hon. Friend is asking questions, he ought to stay for the next debate, because he is abusing the privilege of this debate. I thank him for his suggestion of a revenue-raising possibility for the Government; we take all those in great heart.

[Bridget Phillipson]

Could the Minister say a little more about the social investment tax relief? I am not aware that he responded on that point.

[Jesse Norman]

The hon. Lady is absolutely right. Let me address that. As she knows, the relief remains in place until next year. Even its doughtiest supporters would agree that so far it has not been anything like as effective as anyone would have liked or as had been projected or anticipated. Only £11.2 million has been raised under it in the period 2014 to 2018-19.

We are looking at it closely. As I mentioned in Committee, I am in discussions with leading figures across the social investment world about whether we can get some more visibility on the sources of funds that would use such a relief and the sources of projects that those funds would support. If we do not get that and we cannot have that in a slightly more concrete form, it looks like quite an empty request, but there may be other things that we can do to support social investment. As the hon. Lady knows, I have written a book on the big society. It is an area that I care deeply about, so I am happy to respond and I am grateful for her question.

[Bridget Phillipson]

We do not intend to divide the House on the new clause, but I will make a few brief points in response to what the Minister has said. I am glad that he shares our assessment that the current situation and system are unwieldy, and therefore we look forward to seeing real progress in that area. Frankly, it is not good enough that of those 362 tax reliefs, only 15 have had published evaluations since 2015, at a time when costs have risen.

During these extraordinary times, we need to see much more from the Government, not just on tackling tax avoidance, as we discussed at some length yesterday. There needs to be a renewed focus on taxpayer value for money, with greater opportunities for scrutiny of tax reliefs in this place and from external experts. Although we are not seeking to divide the House, I hope that we will see progress in that area. It is an issue to which we intend to return. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

[Madam Deputy Speaker (Dame Rosie Winterton)]

We will have a three-minute suspension.

--- Later in debate ---

[Bridget Phillipson]

I begin by thanking my colleagues in the shadow Treasury team for their work throughout the journey of the Bill and the Minister and his colleagues for their responses to many of the questions and concerns that we have raised. I also put on record our thanks to the Clerks for all their work. They have helped us so much during the progress of the Bill in difficult and dangerous times for them. The House of Commons Library staff have, as ever, been incredibly helpful and professional and I record our thanks to them as well.

I am grateful to all hon. Members who have contributed to our discussions about the Bill. I am delighted that we have heard such a range of contributions, not least from hon. Members on the Opposition Benches. It is rather disappointing, however, that we have not heard from a single woman from the Government Benches today. I do not know whether it is men-only Thursday on the Tory side when it comes to the Finance Bill, but given that we know the impact of the coronavirus pandemic on women in particular will be profound, I hope that we might be able to set that straight when we continue our discussions of this nature on Wednesday. Women are more likely to have lost their jobs or to have been furloughed during the crisis and, sadly, despite many of the changes that we have seen in our society, they often shoulder the burden of childcare.

As I have repeated throughout the progress of the Bill, it does not recognise the scale of the challenge we face. I appreciate what the Minister said, but it is a Finance Bill for a different age. We have consistently warned of the looming threat of mass unemployment since the beginning of the pandemic. As the days go by, that is becoming a reality. This month, the OECD reported that the UK is set to face a slump in its GDP that will outstrip the falls of France, Italy, Germany and the US.

Young people are about to enter the worst jobs market in more than a decade. Those who entered the jobs market in 2008 will know what a challenge that is, but this will be worse still. The class of 2020 have no part-time retail and hospitality jobs to fall back on while they look for their first job. For young people, completing their education is supposed to be a step on the ladder, but for many this year, it will involve falling down a snake.

Airbus, TM Lewin, easyJet and SSP Group are all large employers that have announced that they will be making thousands of redundancies. At least 12,000 jobs have been lost in the last three days alone; the real number is doubtless higher still. In every case it is a tragedy for those affected, because it means thousands more jobseekers having to rely on meagre social security payments to provide for their families and thousands more jobseekers needing to sign on when demand at jobcentres will already be very high and when recruitment in many sectors has already frozen indefinitely. It is not just young people, however, who will be affected. I think especially of older workers who will need additional support to retrain and reskill during this time.

We recall the devastation of mass unemployment in the 1980s that scarred communities like mine for far too long. The pain was acute and the social and economic damage was lasting and real. I have long believed that Government can and must be a force for good, but this is a political choice. While the lockdown restrictions are slowly easing, the threat of coronavirus is far from gone. It will take much longer for businesses to operate at their usual capacity. We recognise that protecting our economy would be an immense challenge for any Government, but to meet the challenge, we will need ambitious, decisive and swift action.

When we hear that update from the Chancellor next Wednesday, we will need a full back-to-work Budget with a resolute focus on jobs. It is more important than ever that those with broadest shoulders pay their fair share, so that we can raise revenues to fund the schemes and the vital frontline workers we need to get us on the road to recovery and revive our public services.

The Finance Bill is a series of tweaks and corrections. Rather than raising revenue, it extends and expands tax reliefs and tinkers with, rather than ends the entrepreneurs’ relief. Netflix, Amazon Prime and other high-grossing streaming services will be unaffected by the digital services tax, for all we welcome its introduction in its limited scope. As it stands, the digital services tax will create up to £440 million in annual revenue, when the UK in fact loses £1.3 billion in corporation tax to five of the biggest UK tech firms each year. That is £1.3 billion that could go towards helping schools to enable children to return safely in September, towards more nurses and more doctors, towards creating new jobs, towards decarbonising our economy and towards funding more public health research, which this pandemic has shown we desperately need.

We have sought to improve the Bill in Committee and on Report, introducing amendments so that the Government could review their policies against their effects on job creation, on poverty, on a green recovery and on measuring the cost of tax reliefs. We have sought to entrench greater scrutiny of policies that may well need to be revised in what is becoming an unprecedented economic downturn. Again, the Government have defeated our amendments. We fear that their approach highlights that they have not yet recognised that they will need to go much further in protecting our economy. The Prime Minister’s plans for economic revival are mere repetitions of existing spending, announced wearing a different hard hat in a different tractor. They are a Government who run the economy by repetition, not innovation.

Labour has consistently approached this crisis constructively, and we will try to keep doing so. In this time of crisis, I urge the Government to rethink their approach and to show meaningful dedication to economic recovery next week. We know that the furlough scheme has provided a lifeline to thousands of workers, but that work is not yet done. There can be no room for a sense of pride or complacency. If the Government fail to provide a full stimulus package before October, the 1 million people who lost their jobs in March and April will have been unemployed for six months, and not enough will have been done to support demand and create new jobs.

We again call for a back-to-work Budget that is rigorous, takes into account the differing needs of sectors and regions and gives the right level of support to workers old and young, rather than taking a one-size-fits-all approach. We need a full Budget that supports viable businesses—a Budget that is future-facing in promoting green jobs, reskilling older workers and investing in our young people, because infrastructure is more than just bricks and mortar. We need a Budget that honours the sacrifices the British people have made during this crisis. The future success of our country depends on it.