Finance (No. 2) Bill

David Linden Excerpts

2nd reading
Tuesday 16th November 2021 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to speak on Second Reading of the second Finance Bill of the year. I welcome the Financial Secretary to the Treasury to her place, although I feel obliged to express my sadness that I will not spend the next few weeks in the company of the right hon. Member for Hereford and South Herefordshire (Jesse Norman), who has just left the Chamber. I am sure that he will not miss my constant references to Scottish limited partnerships, but I put the new Minister on notice that I expect her to be the one to fix that issue once and for all.

We on the Scottish National party Benches will of course propose worthy amendments—that will get voted down and ignored—in trying to make the very best of this flawed Finance Bill process, as the UK’s horribly complex tax system obtains yet another layer. I call again for the Finance Bill Committee to be allowed to take evidence. It remains baffling to me that although all the other legislative Committees in this place take expert evidence, the one that will directly affect the lives of everyone and every business in the country does not. That must change.

If the Finance Bill Committee took evidence, perhaps the UK Government would make fewer mistakes. Parts of the Bill correct oversights and errors, such as clause 83 and schedule 11 concerning the plastic packaging tax, about which I raised concerns in the passage of the previous Finance Bill. That measure is due to come into force in April next year, but the explanatory notes state that the changes in this Bill are

“to ensure that the tax…meets”

previously “announced policy objectives” and “works as intended”—well, I hae ma doots. I note that there are also measures to deal finally with the issue of second-hand cars in Northern Ireland—another bit of Brexit red tape that was not written on the side of the bus.

There is no doubt that we are facing a cost-of-living crisis and this Finance Bill provided the biggest possible opportunity for the Government to improve the lives of people across the UK. Instead, however, we see in schedule 6 that the Chancellor has seized the opportunity not to redistribute wealth, but to cut taxes for his banker pals, paid for by slashing universal credit, increasing national insurance and scrapping the pensions triple lock.

Ministers are keen to try to claim that the minimum wage is, in some way, a living wage, but it is not. This week is Living Wage Week and the real living wage rate has risen from £9.50 to £9.90 and to £11.05 in the city of London from today, so the UK Government proposals do not even keep pace with the real living wage, based on the cost of living.

I am proud that I have lots of real living wage employers in my constituency, because they see the benefit to their employees of paying a fair wage—they retain staff better and those staff are happier in their work—and they are right across a full range of sectors. There are 2,400 living wage employers in Scotland, including, in my constituency, Bike for Good, Pure Spa, Thenue housing association and a club that has obtained legendary status in the past couple of weeks: Firewater, on Sauchiehall Street. All of them pay their staff a fair wage and do their bit. I encourage the Government to become a living wage employer with the real living wage, because it would help so many people if they took a lead on that, as the Scottish Government and local authorities in Scotland have done.

[David Linden (Glasgow East) (SNP)]

I pay tribute to my hon. Friend’s work on campaigning for a fair wage for all, regardless of age. Will she join me on calling on the Government to extend that pay equality to apprentices? We have seen that with such things as the business pledge in Scotland, but unfortunately, this Government continue to think that apprentices can be paid less than £4 an hour, which is absolutely shocking.

[Alison Thewliss]

My hon. Friend is absolutely right to point that out. I do not know how the Government think that apprentices are supposed to live and pay their bills on the meagre wages set as their minimum wage. In fact, through the years of this Tory Government and since Labour brought in the minimum wage, the rate between the lowest-paid—those youngest workers entitled to the minimum wage—and those at the highest end of that age distribution has increased. That gap is growing wider and wider every single year, and it is a scandal, frankly, that people are being discriminated against solely on the basis of age. The Government should put that right.

It is a grim time for many people in this country and things are not optimistic for many businesses either. As the Minister mentioned, the March Budget gave notice on increasing corporation tax and extended the annual investment allowance until the end of March 2023. These measures, however, come in the context of a national insurance hike—a tax on jobs—that the Federation of Small Businesses estimates might have a 7% marginal rate for some. This should have been scrapped and the employment allowance increased, if the Chancellor was serious about helping business owners and employees.

Hospitality and tourism firms, having been hit the hardest during the pandemic, will not retain their 12.5% VAT rate beyond March. Many did not benefit at all from the reduced rate during the pandemic, because they were not able to trade, and to hike VAT back up to 20% just as the tourist season begins next year seems absolutely daft. The UK Government seem to be playing catch-up with Scotland. The Chancellor’s plan to cut hospitality and business rates next year is less than what they are offering now and far below the 100% relief that the Scottish Government are already offering to those businesses this financial year. That is in addition to the hugely successful small business bonus scheme, which takes many businesses out of business rates altogether.

The tax reliefs in clauses 16 to 22 for businesses in the culture and arts sector that have struggled so much in the past year are welcome, but keeping the VAT reduction could provide an incentive to get people back through the doors of our galleries, theatres, music venues and funfairs.

My SNP colleagues and I have long argued in this House that more should be done to tackle economic crime and I was interested to see some measures in the Finance Bill that deal with this area of policy. Part 3 provides a framework for the Government to issue a new tax to tackle economic crime. This UK Tory Government have failed time and again to tackle tax avoidance and economic crimes—that is not a matter entirely of inadequate legislation or resources, but of woefully poor enforcement.

Under the plans set out in the Bill, all undertakings that fall under money-laundering regulations and have a revenue of over £10.2 million will be subject to the new economic crime levy. Although I support the broad principles, I have some concerns about how this will work in practice, because placing more of a burden on businesses might not exactly have the desired effect. The Law Society of England and Wales has stated its opposition to the levy, stating that it is “an additional tax” on anti-money laundering regulators and against the “polluter pays” principle. The Association of British Insurers has concerns that insurance firms, a very low risk area for money laundering, may be disproportionately hit by the measure, which could result in reducing access to insurance for vulnerable consumers. This is another area where more evidence needs to be taken to be sure that the intended effect of the Government’s measures is actually what transpires.

The Treasury Committee, which I am proud to sit on, has taken a lot of evidence in our inquiry on financial crime and it would be wise of the Government to take heed of that before progressing further with this measure. It would also be useful to know the Government’s full timetable and resourcing plan for Companies House reform. By tightening up company registration, giving Companies House AML responsibilities—as they should have—increasing the comically low fee for company registration and actually enforcing their own laws, the Government could bring in much more money and lose less of it through the complex schemes that Companies House currently facilitates.

When I asked the small business Minister—the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully)—in a written parliamentary question recently how much money has been raised by fines on Scottish limited partnerships that have not registered a person of significant control in the past three years, I received a response that stated that one fine had been levied in 2020-21. One fine—is that it? The last time I asked, in March last year, 948 SLPs had not filed PSC information by 31 January 2020. That figure was 2,019 in January 2019 and 7,078 in January 2018. Ministers may claim that this looks like an improving picture, but what is more likely to be happening is that people are moving those business around to similar structures in Ireland or into other vehicles such as trusts. To be clear, Companies House rules state:

“Anyone who does not respond to…notices within one calendar month, or gives false information, commits a criminal offence. They could receive a 2 year prison sentence, a fine or both.”

As far as I can establish, none of the firms that fell foul of the law was fined, apart from one, and no one got the jail. I ask again: how much money are the UK Government forgoing by not enforcing their own rules? What is the damage to our reputation, and to Scotland’s reputation, from being associated with money laundering and criminality that this UK Tory Government are failing to prevent?

The SNP is calling for a root-and-branch review of the tax system, which is much too complex and has too many places to hide and move things around. The UK Government have not confirmed whether any of the money raised by their proposed tax will be used to tackle tax avoidance. I would welcome some clarity on that point today.

Part 5 contains provisions to tackle tax avoidance, which is an issue that I have raised again and again, so I am pleased to see that some limited steps are being taken. The Bill will give HMRC powers to publish information on individuals who promote tax avoidance schemes. We support that approach in principle, but I note the concerns that the Chartered Institute of Taxation has raised about the drafting. HMRC says that it is targeting “the most egregious promoters” who flout the rules, but CIOT is concerned that the definitions of “promoter”, “relevant proposal”, “relevant arrangements” and “connected person” set a low bar.

The Bill’s wording also extends considerable latitude to HMRC officers: an authorised officer need only “suspect” that a scheme falls within the definition for people to be publicly named and shamed. I have constituents who have been named and shamed under minimum wage regulations and who have found it very difficult to challenge that and recover their reputation.

CIOT is also concerned that in future HMRC could use the measure more widely than is being proposed. I appreciate that the Bill makes provision for HMRC to retract and amend published information that has been shown to be incorrect, but it would be much better if we could have some assurances that it will get it right the first time, and some assurances about how the scheme will be resourced.

Lastly, I want to speak about an issue that has been literally close to home in the past few weeks. The eyes of the world have been on my constituency in Glasgow Central as it hosted the COP26 summit on climate change. The summit was an opportunity for the Government to show global leadership and grasp the opportunities that a green economy can provide, but the reality is that the only thing green about the Bill is the paper it is printed on. The Government’s ambivalence towards a just transition is writ right through it.

We need a comprehensive plan that understands the impact of our taxation choices on our emissions—a green OBR, perhaps, to hold this Government to account. The Government have given the Financial Conduct Authority and the Bank of England responsibilities in that area, but are taking none themselves in the Bill. Nowhere is that clearer than in the cut to domestic air passenger duty, which the Red Book says will lose the Government £30 million to £35 million a year in revenue. People do not have many options when they fly long-haul—despite what the Proclaimers say, few people would walk 500 miles and walk 500 more—but within these islands they do have the choice between getting on a plane and getting on a train. It is already much, much cheaper to fly in many circumstances. Cutting APD while allowing train fares to rise again and again is absolutely no way to incentivise people to take more climate-friendly options.

The Bill makes provision for global shipping companies to receive tax breaks for flying the red ensign. Tonnage tax is a complicated scheme that allows companies to disregard profits for tax purposes, creating a very low-tax environment. Would it not have been better to link tax breaks to emissions rather than to waving the British flag, to incentivise the green technologies required to transform shipping, and to take a lead on the issue?

Scotland is delivering action to secure a net zero and climate-resilient future in a way that is fair and just for everyone. We are committed to a just transition to net zero by 2045, with an ambitious interim target of a 75% reduction by 2030. The Bill’s purpose allegedly covers delivery on the commitments made in the 2020 White Paper on energy and the Prime Minister’s 10-point plan, contributing to the Government meeting their legally binding obligations to achieve net zero carbon emissions by 2050, but in reality there is very little in it to help Scotland to achieve our climate change goals. Indeed, in many ways it holds us back.

There is no reversal of the decision to scrap investment in a carbon capture and storage facility in the north-east of Scotland; it looks as if that investment will instead go to Tory marginals in the red wall. That is the worst type of pork barrel politics. The Acorn project at St Fergus would have been a world-leading example of a just transition project, but once again the people of Scotland have been let down by the Tories at Westminster. Neither is there any commitment to help to develop emerging wave technologies, which might well move abroad without the correct support, and there are no measures in the Bill to reform the transmission charging scheme, which costs wind farms in Scotland to plug into the grid while it pays companies in the south-east of England to connect. When I asked the Chancellor about that recently, I got blank looks and blah blah blah in return.

The Bill makes clear once again the UK Government’s lack of interest in Scotland’s commitment to tackling climate change. Schedule 14 makes provision to change VAT rates for freeports; it is disappointing to see no commitment to the fair work conditions and net zero ambitions put forward by the Scottish Government for a green port scheme. Scottish Ministers have engaged in good faith to try to improve a UK Government policy while further progressing our climate change goals: the Scottish Government wanted to take the freeport policy and augment it to work in the best interests of workers and the environment. Who could argue with that, other than Government Members? The Scottish Government have been ignored and sidelined by this UK Government. It is just not good enough.

This UK Tory Government cannot be trusted to act in the interests of Scotland. I look forward to the day when there is a Government who can and will act in those interests, using the levers of taxation powers to benefit our people, make our businesses grow and protect our environment for the future. Only independence can give Scotland that Government.

--- Later in debate ---

[Christine Jardine (Edinburgh West) (LD)]

Almost as good as they get!

[David Linden]

That’s about as much as Geoffrey Cox gets!

[John McDonnell]

Don’t tempt me.

Those are the only figures that we have, but I thought that we should be generous and say that there were, on average, 25 jobs a year at least. We do not know, as all we have is the figure of 75. In the case that there were 25 jobs a year, we are still talking about, at best, £4 million to £5 million a job in subsidies for the British shipping companies. I do not know what other Members think, but there is an issue of productivity here, is there not? That is the sort of problem that we have when we get into relying on tax reliefs to stimulate the economy and jobs growth.

Let me make a final point on tax reliefs. As the hon. Member for Glasgow Central and my hon. Friend the Member for Ealing North have said, the failure to link these tax reliefs to the achievement of net zero means that we are undermining the ability of the Government to intervene effectively in the economy in order to ensure that we are all signed up to tackling climate change.

I also thought that the Government were going to come forward with amendments in legislation to prevent companies with any record of tax avoidance from being able to qualify for tax reliefs at all, but that is not in this legislation. We are therefore in a situation where we are giving tax reliefs to companies that we know have in the past engaged in tax avoidance. Of course we all welcome the tax avoidance measures that the Government have introduced, but this legislation is an incredibly slow, incremental development. We need to go so much further, with full transparency and enforcement.

When we are trying to enforce against tax avoidance, the one thing that we must not do is open up opportunities for new forms of tax avoidance, but the Office for Budget Responsibility, the UK Trade Policy Observatory and the TUC have said that the introduction of freeports is the new opportunity for tax avoidance schemes, for the displacement of jobs from one area to another with no overall benefit, and—this is exactly what the TUC is saying—for the undermining of trade union rights; and we know what that will do for workers.

I have welcomed the Government’s investment in HMRC. I was sitting here years ago when the first major cuts to HMRC were introduced, and we saw the results. It was an undermining of the work to address tax avoidance and evasion. However, as other hon. Members have said, unfortunately the new jobs have gone into chasing compliance issues as a result of covid, and not into increasing the operation to address tax avoidance.

Those are the issues that I just wanted to comment on. I actually came here to make one specific point and put forward one proposal with regard to local government, but as there are not people rampaging to speak in the debate, I thought that I could at least comment on some wider points.

The point I wanted to make is about what is happening with regard to local authority finance. I thought that as part of the Budget, the comprehensive spending review and then this Bill, the Government would bring forward what has been promised for some time now—a fairly radical reappraisal of local government finance with the potential for reform that would provide local authorities with the resources, as well as a relatively independent source of income, that would then embody their ability to engage in genuine levelling up across our society, as raised by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams). But the figures show that local government funding from central Government grant is about £16 billion a year lower today than it was in 2010. Cumulatively, that is a reduction over that 11-year period of £100 billion in central Government support for local government.

That means that before we can even talk about levelling up, we need levelling back. We need to give councils the power to invest in local services in their communities again. The hon. Member for Broadland (Jerome Mayhew), who is not in his place, raised the importance of the Budget for local communities, and I agree. This Bill should be doing that, but apart from the occasional grant to individual communities—on, unfortunately, a sort of pork barrel basis—there does not seem to be an overall strategy to enable it to happen. As I said during the Budget debate, we have seen the impact, with the cutting of funding for nearly 900 children’s centres, 940 youth centres, 738 libraries, and 1,200 bus routes. Local government was mentioned only once by the Chancellor in the Budget speech. There was no acknowledgement of what councils have endured over the past 10 years—that includes Tory, Labour, Lib Dem and SNP councils—or the debt crisis that is now engulfing many town halls in our country.

I was hoping that we would at least get the opportunity of some resolution of the debt problem of local councils within the Finance Bill, or would have the opportunity to prepare amendments to enable that to happen. Creatively, we will see whether we can bring amendments forward in that way, but that is made more difficult by the amendment to the law motion not being brought forward by the Government. Many councils across the country are in debt. In recent years, three section 114 notices have been issued, in the case of Tory as well as Labour councils, and dozens more have applied for and received emergency Government loans.

Some time ago, as part of their pushing local authorities to try to seek alternative local funding sources, but also as part of their commercialisation agenda, the Government forced councils into a position where many of them sought to compensate for the lack of Government funding by borrowing from the Public Works Loan Board to buy investments with revenue-producing potential. Some of those investments have proved to be risky misjudgments. Admittedly, this has happened across the board, with all political parties in control in different council areas, but the Government have to take some responsibility for the mess, because they have forced those local authorities into that sort of speculative behaviour, which is also beyond their levels of experience and expertise.

In addition, there has been a complete lack of oversight from both the Department for local government, under its various names over recent years, and the Public Works Loan Board, which has lent the money to those councils. The accounts of the Public Works Loan Board reveal that over £2.8 billion was lent last year and over £3 billion was generated in interest income. That is extraordinary: it is robbing Peter to pay Paul.

Councils are under huge financial pressures, and they now owe £71 billion in debt to the Public Works Loan Board. I want to see whether we can amend this legislation to reduce the interest rates to councils. The Bank of England base rate is still 0.1%, so every pound spent on interest by councils—it is the same for central Government—is £1 less spent on social care, children’s services, street cleaning, bin collections or whatever. The average interest rate charged by the Public Works Loan Board is 3.57%. That is 36 times higher than the Bank of England base rate. What we need in the longer term is stronger oversight of loan applications and for the Public Works Loan Board to charge interest at the Bank of England base rate.

In the meantime—this is why I was hoping that the Government would move somewhat in this legislation—to deal with the high interest rates and the high levels of debt, we need some form of debt jubilee for local councils. That could be a zero rating on all existing loans before we move to the Bank of England base rate on all new loans. More expansively, it could recognise the failure in recent years from central Government to oversee and the impact of Government austerity cuts, which have led to the debt crisis in local government. The Treasury arguably should fund a partial debt write-off for councils. With more than £70 billion in principal debts, plus interest rates, even a 20% write-off could free up nearly £15 billion for local councils to spend in the coming years.

That is the proposal I wanted to argue for in this debate. It would be welcomed cross-party in local government and would relieve many local councillors from the appalling decisions they will have to make in the coming months between increasing local council taxes and, more importantly for many of them, another round of cuts in public services, because of the high interest rates they are having to pay and the interest charges that are falling upon them.

The final point I will make in this Budget debate is to return to the points that a number of Members have made. This Finance Bill does not seem to relate to the Government’s strategy overall, and it certainly does not relate to the needs of our communities. I worry that after the experience of covid, people are looking increasingly to the Government to provide leadership. This Budget, the comprehensive spending review and certainly this legislation do not provide that. The Bill will increase the levels of concern and insecurity that unfortunately are impacting on our communities. I find it a disappointing piece of legislation, and I hope that by way of amendment we might be able to improve it. In that way, we might at least meet some of the challenges our communities face, tackle some of the poverty and deprivations, end austerity and maybe give a bit more hope to the communities we represent.