Finance (No. 2) Bill

Clive Efford Excerpts

2nd reading
Tuesday 16th November 2021 Commons Chamber

[The Financial Secretary to the Treasury (Lucy Frazer)]

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

On Sunday, MPs across the House remembered all those who died in conflict. It is now 76 years on from the time we started to rebuild our country from the devastation of world war two. The bombs that rained down during that war caused enormous loss of life. They tore our cities apart. In London, air raids wrecked or razed to the ground some 116,000 buildings, and in Liverpool and Bristol tens of thousands of buildings were damaged or destroyed.

While the war left a mark on the nation that lasts to this day, those dark years were followed by a period of reconstruction and renewal. In 1951, the iconic Royal Festival Hall opened in London as the centrepiece and legacy of the Festival of Britain. In the 1960s, Liverpool built its extraordinary Metropolitan Cathedral, while the iconic Severn bridge was constructed near Bristol.

Today, we are living in very different times, and we have thankfully not experienced such devastation here again, but we share some parallels with our wartime predecessors. As we emerge from the pandemic, our cities’ buildings may remain intact, but jobs, families and livelihoods have been at risk, and some have been damaged by the worst economic shock in 300 years. It is right, therefore, that we too now rebuild and turn our attention to creating a better future for this country and its people. Last month, the Chancellor started that work. His Budget set out our plans for the stronger economy that will allow Britain to succeed: an economy of stronger growth, stronger employment and stronger public finances, with higher wages, high skills and rising productivity. This Finance Bill will achieve that.

Before I turn to the Bill’s main measures, I will talk about its context. Our economic situation has improved since the last Finance Bill. We have moved away from emergency support to focusing on our recovery, which is now well under way. In fact, the economy is expected to bounce back to its pre-covid levels by the turn of the year—earlier than was expected in March—while our economic plan to safeguard jobs, livelihoods and businesses has worked. As a result, we can now invest in better public services, in jobs and skills, and in levelling up the country so that we open opportunity to everyone everywhere.

However, we should not forget that debt is still at its highest level as a percentage of GDP since the early 1960s and is set to pass £1.3 trillion. While this level of borrowing is still affordable, it leaves us vulnerable if another crisis hits, so we must continue to create a stronger economy that can withstand financial shocks. That is why the Chancellor announced a new charter for budget responsibility, with two fiscal rules that will keep us on the right track.

I want to focus on three aspects of the Budget in this Finance Bill: support for people, support for businesses and growth, and some underlying aspects of fairness. This is a Government who put people first, and this Bill’s measures complement the wider action we took in the Budget to support individuals and working families right around the country. We have reduced the universal credit taper rate and increased the national living wage so that work really does pay. We have continued our fuel duty freeze, helping to lower the cost of everyday life. We have announced that public sector workers will receive fair and affordable pay rises across the whole spending review period.

This Bill will improve people’s lives by backing the businesses that generate jobs and growth. In March, we extended the temporary £1 million level of annual investment allowance on plant and machinery assets. The allowance was due to revert to its previous level of £200,000, but as the Chancellor said:

“Now is not the time to remove tax breaks on investment”.—[Official Report, 27 October 2021; Vol. 702, c. 283.]

This Bill extends the £1 million level until the end of March 2023, encouraging firms to invest more and invest earlier.

While the changes to business rates that we announced in the Budget will encourage more firms to grow and invest, the Bill will also help the UK’s financial services industry became even more successful. In the March Budget, we said we would increase the corporation tax rate to 25% from 2023, for which we have now legislated. However, to make sure that our banks stay internationally competitive while still paying their fair share of tax, this Bill sets the bank surcharge rate at 3%. In addition, we are increasing the bank surcharge annual allowance from £25 million to £100 million, a move that will help smaller, challenger banks.

The Bill also supports another important industry—shipping. It does this by making our tonnage tax regime simpler and more competitive, and by rewarding companies that adopt the UK red ensign.

Finally, we should not forget that our cultural industries also contribute to our economic success. This Bill therefore extends the tax relief on museum and gallery exhibitions for another two years until the end of March 2024, and it doubles the tax relief for theatres, orchestras, museums and galleries until April 2023, to revert to the normal rate only in April 2024. This tax relief for culture is worth a quarter of a billion pounds.

Tax is of course central to our economic health and to funding the public services that make people’s lives better, but the way we collect tax must be fair and simple too, and the measures in this Bill will help us to achieve that. As Members will be aware, we are tackling the social care crisis with a new UK-wide 1.25% levy on national insurance contributions. This Bill will increase the tax rate on dividends by the same amount, so that those receiving this income will also contribute in line with employees and the self-employed.

[Clive Efford (Eltham) (Lab)]

Can the Minister tell the House just exactly how much of that national insurance increase is going to go to social care?

[Lucy Frazer]

The hon. Member will know that this has been set out. First, the money will go to the NHS, and then afterwards it will be going to social care. It is absolutely essential that we do that. £12 billion will be collected and will be going through to our social care services, as well as to the NHS.

--- Later in debate ---

[Clive Efford]

Will the Minister give way again?

[Lucy Frazer]

I will just carry on to my next point, which is that there will be an increase in the social care budget in the spending review period.

A fairer tax system also means tackling those who avoid paying their share. A new economic crime levy will help to fund measures that will prevent criminals from laundering money in the UK. It will apply to about 4,000 businesses and bring in £100 million. The Bill also contains tougher measures to prevent promoters from marketing tax avoidance schemes. In addition, it includes sanctions to tackle tobacco duty evasion, which costs the Exchequer an estimated £2.3 billion a year. The Bill also clamps down on electronic sales suppression, a form of tax evasion in which a business deliberately manipulates its electronic sales records to reduce its recorded turnover and corresponding tax liabilities.

--- Later in debate ---

[Clive Efford]

I am grateful to the Minister for giving way again; she is being very generous. It is important that we nail down the issue of where the national insurance increase is going. The Minister said earlier that it was going to the NHS and then it was going into social care, but it cannot be spent twice, so when will that money be switched, and what level of cuts will the NHS face then in order to shift that money into social care?

[Lucy Frazer]

I find it disappointing when people talk about cuts when actually there is significant investment—record amounts—going into the NHS. This Budget highlighted not just £5 billion for the diagnostic centres the Department of Health and Social Care will be operating around the country, but £9 billion for covid support, and the hon. Gentleman will know that £36 billion was put into the NHS before that—a significant sum. So it is dangerous when people talk inappropriately about cuts. There are not any cuts; this is investment going into the NHS.