Finance (No. 2) Bill

Drew Hendry Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give a Second Reading to the Finance (No. 2) Bill because it fails to make a much-needed reduction in VAT for the hospitality and tourism sectors; fails to reintroduce tax-free shopping for international visitors; does not establish a more progressive tax system by introducing a starter rate, in line with the Scottish Government’s approach; fails to introduce measures through the tax system that would help alleviate the cost of living crisis and reduce inequality; and fails to introduce tax relief measures to enable vital high-growth sectors, like the renewable sector, to grow the economy; and because it derives from a Budget which proposed to extend the Energy (Oil and Gas) Profits Levy, threatening the security of jobs in north east Scotland and the UK’s ability to achieve net zero.”

The Bill falls woefully short of the mark. The Scottish National party has tabled a reasoned amendment on Second Reading because, frankly, its provisions do not rise to the immense challenges faced by our constituents. The UK Government seem to operate under the illusion that the Tory Brexit cost of living crisis has come to an end, yet the reality on the ground, in homes across Scotland and the other UK nations, tells a different story. Indeed, a UK poll out today shows that 61% of people think the UK Government are not taking the measures required for the cost of living. The bad news for Labour is that they do not believe it is proposing the right things either.

The Bill, as it stands, is a stark testament to a Government who are—as we have heard, and I agree—out of touch, out of ideas and soon to be out of office. But let us be clear that the proposals in the Bill are insufficient to support households in Scotland, who continue to bear the brunt of disastrous decisions made in Westminster. The spring Budget brought devastating cuts to Scottish capital funding, yet there remains a pervasive silence among the Westminster parties about the true scale of cuts planned over the next Parliament to meet the arbitrary fiscal rules that they are both slavishly following. I note that the Labour Front Bench said “hee-haw” about public services funding over the coming years, despite the £20 billion hole that we know will lead to further misery in public services. There are elements in the Bill, such as the marginal increase in child benefit and the limited support for the film sector, which we can view as steps in the right direction, but they are but drops in the ocean compared with the vast needs of our communities.

For a UK Government who claim economic competence, it is astounding how little they understand about nurturing true economic growth, or enhancing productivity. Austerity has failed. It cannot be made to work, yet those in the Labour party continue to pretend that somehow it can. We agree with the Labour party that for every £5 coming out of the Budget for people, they are paying £10 back in, so the question that Labour Members must answer is: why are they not voting against Second Reading tonight? Why are they going to, once again, sit on their hands and allow the Bill to go through? As I have said, not a word on public services. The reality is a continuing decline in disposable incomes, a shameful record on inequality—the highest in any major European country—and a GDP per capita on its longest downward trajectory since records began. Moreover, the Chancellor’s measures are predicted to have a minimal impact on economic turnaround this year and it is highly probable that the Government will have overseen the worst Parliament for income growth in recent history.

Scotland has the highest wages in the UK, according to medium gross weekly incomes, thanks to the work of the SNP Government on promoting fairer wages and leading by example. However, the powers to avoid the scale of falling real incomes resides here in Westminster. That fall is unprecedented over the past six decades. Hundreds of thousands of people in Scotland and across the nations of the UK are locked in a vicious cycle of debt, with over 300,000 having missed a debt payment in the past year alone.

According to a report published recently by the Financial Conduct Authority, 7.4 million people across the UK are

“heavily burdened by their domestic bills and credit commitments.”

In January this year, nearly 6 million UK adults reported having no disposable income at all. The ongoing cost of living crisis continues to degrade living standards, with families struggling under the weight of high food prices, exorbitant mortgage rates and escalating energy costs that are pushing more and more households into debt. Food prices are about to spike yet again, and we can put that squarely down to Brexit—the love child of the Tory right, now adopted by the Labour party and the Liberal Democrats. A report from Allianz Trade suggests that controls to be introduced in May will increase import costs by 10% in the first year, imposing £2 billion of extra costs on UK businesses and exacerbating the cost of living crisis.

Food prices have already risen by more than a quarter since a couple of years ago owing to existing Brexit changes. This is a turbo-boost on top of what people have been facing. Where is the help for people as food bank queues grow longer and the ability to donate to those food banks dwindles? It is non-existent. Whatever the cost to households, whoever starves, “make Brexit work” seems to be the consensus of the Westminster parties, and especially this Tory Government. Even if we put aside our squandered EU membership, the fact is that they will not implement the basic food protections that other Governments have used and we have called for. This is Westminster negligence, and a failure to observe the basic values of fairness.

Particularly pressing is the escalating crisis of fuel poverty that grips many of our communities. How can it be right, in the 21st century, that there exists an energy poll tax of standing charges? In the highlands and islands, the electricity standing charge for households— the charge that has to be paid every single day, cold or warm—is 50% higher than it is in London. How can that be fair? Why have the UK Government sanctioned this blatant inequality? Should the Bill not be doing something to fix it?

This Bill could have provided for the scrapping of standing charges. The Government should be acting with urgency to start providing meaningful rebates for the people who live in the areas with the greatest degree of fuel poverty, including extreme fuel poverty—again, by the way, the highlands and islands. The irony is not lost on people living in an area that exports more than six times the amount of the electricity that it uses, and seeing massive tax returns going to the Chancellor’s Treasury while they suffer this injustice. At a bare minimum, the Bill could have ushered in legislation for a long overdue energy social tariff. Citizens Advice has reported a 14-fold increase in the number of clients seeking advice related to fuel poverty since 2019. The average fuel debt that clients present to Citizens Advice Scotland is now more than £2,300. That is not merely a statistic; it is a damning indictment of the current Government’s policies.

[Alison Thewliss (Glasgow Central) (SNP)]

My hon. Friend is making some excellent points about fuel poverty. When I conducted a survey of Dalmarnock residents about its impact, I found that it had a hugely detrimental effect on their health and wellbeing. They could not even invite family members round because their houses were cold and they could not afford to switch the kettle on to give them a cup of tea. Pensioners were going to bed together early because they could not afford to keep the heating on. Does my hon. Friend think the Government understand the dire consequences of fuel poverty for people who are living in it?

[Drew Hendry]

That is a very good point. I do not think that the Government understand what happens to people. I do not think they are paying attention to medical advice, such as an article in The Lancet drawing attention to the health deprivations that result from living in fuel poverty or extreme fuel poverty. They do not understand the effect on children’s learning and wellbeing over this period, or, ironically, the higher costs to public services as a consequence of fuel poverty: for instance, people have to rely on the NHS more because of associated health conditions. The Bill is doing nothing substantial to alleviate such dire circumstances.

Before I move on to other issues, I have to ask why the Bill has no updated actions to stop companies taking advantage of the cost of living crisis. For example, the Government are aware, as is the Financial Conduct Authority, that car insurance in the UK is now 34% higher, and that younger and older drivers have seen bigger premium increases than others. The claims rate is under 18%, premiums have increased by 34%, and average premiums for some age groups have jumped by over 50%.

Surprise, surprise: drivers in Scotland are among those who have seen their premiums rise the most. This time, however, it is something they share with Londoners. The Government cannot put that down to the fact that there are different market forces and so on, because insurance premiums have risen by only 2% in France, 5% in Spain and 6% in Italy, so what is going on? The Bill contains no action on end-of-contract scams by mobile and broadband operators either. The Government are allowing a punishing cost of living free-for-all to continue while they are distracted with feeding their culture wars and giving peerages to their pals and donors.

While the UK Government remain idle, pretending that the cost of living crisis has ended, the Scottish Government have taken proactive steps to tackle inequality and reduce child poverty. They have implemented game-changing policies such as the Scottish child payment, which has lifted 100,000 children out of fuel poverty, yet it is an uphill swim to protect families while Westminster makes the big and wrong decisions. Austerity continues to hinder necessary investments that are essential for Scotland’s burgeoning industries. Brexit has disastrously impacted on our economic activity, international standing and business confidence. Investment in the UK remains the lowest among the G7 countries.

It is common for the Tories, and indeed the Labour party, to say that there is no magic money tree when it comes to public finances, which is why they must always cut, cut, cut to follow their so-called fiscal rules. But here is the rub: the closest thing we had to a magic money tree was our EU membership, which could still be adding to our reserves. According to research by Bloomberg, Goldman Sachs, Cambridge Econometrics and others, around 5% of our annual GDP has been lost because of Brexit. If we had that back, it would generate well over £100 billion per year, generating a potential tax take for the Treasury of over £40 billion per annum. We could plug the holes—we do not have to be going through this—but that is not the path that has been decided for us. The Government have hacked the tree down to mulch, and all that they and Labour can do now is promise more cuts.

The Bill fails business and industry, too. The SNP has long advocated a £28 billion annual investment and a robust green industrial strategy to harness the full potential of the green transition. Labour used to agree—indeed, its advisers are annoyed that the party is not going forward with it—but it has reversed on that policy, as was confirmed earlier. Such an approach is essential if we want to meet our climate change targets. Indeed, as we stand at the moment—with Scotland as part of the UK—it is one of the few industries that the UK could take forward with gusto.

Despite the obvious needs, what have the UK Government done? They have only recently decided to boost funding in allocation round 6 for offshore wind projects—an effort still inefficient to meet the necessary targets. Following the failure of the fifth round of contract for difference allocations to secure any new products, it is unacceptable that the Government have failed to rectify the shortfall in deployed capacity, leaving us well behind our 21 GW target for the upcoming rounds.

This Bill is a testament to the UK Government’s ongoing failure to adequately invest in the renewables sector, thereby endangering our net zero targets, jeopardising energy security and stunting the long-term growth of Scottish communities. It is time for a drastic change, and we need a Government who will be aligned with the needs of the Scottish people in the future—an independent Scottish Government.

Where in the Bill is the action to help our tourism and hospitality industries? Selective cuts to VAT would have been a mechanism that could have been deployed to help those sectors, and it could and should have been used to help struggling high streets and town centres. Where is the VAT-free shopping that business organisations were crying out for?

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

I am grateful to my hon. Friend for giving way on the point about VAT-free shopping. We led the charge a number of years ago on the extra-statutory concession on the removal of VAT-free shopping at airports, which is crucial to Glasgow airport in my constituency. We even managed to get the hon. Member for Moray (Douglas Ross) to vote with us on that occasion, but we have still seen no action from this Government to conclude that. That is one of the excellent points in our reasoned amendment. Does my hon. Friend agree that it is the SNP that will be working for the people of Scotland, not this Government?

[Drew Hendry]

That is exactly right. This is one of the many things that the UK Government have been called on to do, but they have been deaf to industry asking for them and often begging for help on some of these issues.

This spring Budget has introduced disastrous cuts to Scottish capital funding, with the aforementioned conspiracy of silence that the Institute for Fiscal Studies identified permeating the halls of Westminster concerning the severity of cuts planned over the next Parliament. This Government’s legacy will undoubtedly be marked by the failures of their austerity measures, the calamitous aftermath of Brexit and the misguided policies—“misguided” is a very gentle word—of Trussonomics.

Austerity under the Tories has stripped our public services to the bone, exacerbated inequality and decimated living standards. This addiction to austerity, paired with the Government’s fiscal rules, has proved utterly ineffective at reducing debt, which as a percentage of GDP has tripled in the past 15 years. The House of Commons Library has revealed that the Scottish block grant is set to fall to its lowest-ever level as a percentage of UK Government spending in the history of devolution. Between 2023 and 2025, Scottish capital funding from the UK Parliament is projected to fall by 16.1% in real terms. These Tory cuts continue to wreak havoc across all areas of the UK, with councils across England on the brink of bankruptcy and many already in special measures.

Regrettably, austerity will not end with the demise of the Tory party, as the Labour party is also committed to these same spending plans and fiscal rules. Both the Tories and Labour are engaged in that conspiracy of silence. They have had the opportunity to talk about the level of austerity necessary, in their view, over the next Parliament, but their silence threatens to cripple the already underfunded public services across the UK. With an estimated further £20 billion of cuts needed, by their calculations, over the next Parliament, it is imperative that both Westminster parties come clean ahead of the general election about the level of austerity they intend to impose on Scotland and the rest of the UK. The public have a right to know the extent to which these parties plan to decimate our public services, should they come to office, and to be told explicitly which Departments will suffer the most severe funding cuts. We know that they are both in favour of increasing the privatisation of the NHS to facilitate their plans. Let’s hear the rest.

All we have here today is a zombie Bill from a zombie Government at the fag end of a zombie Parliament, with activity in this Chamber at record lows. The Chancellor’s recent spending plans not only cut funding in Scotland but extended taxes on Scotland’s natural resources, which, as we heard earlier from across the Chamber, have been funding the UK’s economy for so many years. The Government are offering little to stimulate growth in the Scottish economy, and it is abundantly clear that neither of the Westminster parties possesses the ambition required to invest adequately in our economy and reduce inequality.

In Scotland, the SNP is supporting people through the cost of living crisis by freezing council tax, which is already lower by hundreds of pounds a year than in the rest of the UK; by using progressive taxation to ensure that the majority still pay less income tax and the minority who can afford it pay a little more; by supporting working people; by ensuring a strike-free NHS with better-paid nurses and doctors, and committing to keep it in public hands, just like ScotRail, Scottish Water and more; and by helping families with 1,140 hours of free childcare, no tuition fees for students, and much more.

In Westminster, we have been given Brexit, a loss of more than £100 billion to the economy, a reduction in the available and skilled workforce, more than £100 billion of fraud and waste, ballooning and unfair electricity charges, higher fuel debt, higher food prices, higher mortgages, higher rent, higher insurance costs, and a betrayal over the £28 billion a year needed for the just transition to renewables while our natural resources are exploited to the hilt. Our ability to build new things such as hospitals and more has been sabotaged by enormous cuts to the budget for Scotland and more pressure on services to come.

Barnett consequentials are just that—consequentials of decisions in this place. They have consequences, and Scotland sees that. Scotland needs the powers to introduce our own comprehensive industrial strategy, invest robustly in high-growth industry, and effectively reduce poverty. The only path forward for Scotland is to have a Government who truly plan to fix the economy and tackle inequality, and that is through an independent Government in Scotland. I am delighted to have moved our reasoned amendment.

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate. When I got my copy of the Bill from the Vote Office, I was a bit worried that the middle 500 pages or so had been missed out. We are used to these Bills being somewhat thicker than this.

I am slightly nervous, Minister, that at this rate the Indians might catch up with us on the length of our tax codes. I hope that a large Finance Bill will be ready this autumn so that we can keep our lead. There are some potentially complicated rules coming, including the new nom-dom rules. We could also base the new inheritance tax on residency rather than domicile, and we also face the question of how on earth we will define “household” for the purposes of the high income child benefit charge? There probably is some meaty stuff to come, but it is fair to say that this Bill does not generate substantial excitement.

There is always a risk with reasoned amendments to a Finance Bill. If we voted for the SNP’s reasoned amendment, we would not get any income tax this year, which would probably do quite a bit of damage to public services—though imagine that might be popular with a few people.

I am slightly intrigued by the fact that, at a time when we are really struggling for tax revenues and to balance the books, anyone would prioritise reducing the price of a Rolex for very rich tourists. That is effectively what reintroducing tax-free shopping does: it saves a lot of money for very expensive tourist purchases. I have never been convinced of the attractions of reducing VAT for the tourism sector, because the problem is that it is a huge boon for hotel operators in London that has to be paid for by taxes elsewhere.

[Drew Hendry]

I am happy to educate the hon. Gentleman. If he would like to speak to any of the tourism organisations that have been calling for this change, he will find that it is a great way for them not only to cope with some of the increased costs they have just now, which are front-loading their business, but to encourage people to come and use their facilities. It is something that the tourism industry is very keen on, and I would be delighted to introduce the hon. Gentleman to some people who will educate him further.

[Nigel Mills]

It is a pity that the hon. Gentleman did not make the case for that in his own speech, when he barely touched on this issue. The point I was trying to make was that introducing that tax reduction would be a huge benefit to London hotels, which have high occupancy rates at a very high nightly rate, but then that money would have to be raised elsewhere in the country.

One of the advantages of Brexit—the hon. Gentleman might not like this—is we are now able to do differential tax rates by region. Therefore, if we wanted a tax rate targeted at boosting tourism, we could do it on a regional basis, looking at which have the lowest occupancy rates and the lowest employment rates. It would cost far less, and the reduction could be much smaller. We could boost investment where it is needed rather than where it is not. I suggest to the hon. Gentleman that looking at that would be more sensible than his proposal.

The hon. Gentleman is also criticising the lack of a starter rate. When we had a starter rate of income tax, from 1998 to 2008, it was for very low incomes. It was a 10p rate and it was charged on top of national insurance, which was also over 10% at that point. What we actually have now is income tax and national insurance starting at a much higher point. It is a 0% starter rate, which is a far better idea than introducing a new one, so I certainly will not be voting for the reasoned amendment, as it would be completely against the country’s interests.

The Minister mentioned the high-income child benefit charge. Strangely, the Bill increases the thresholds and promises a radical change at the start of the tax year after the next one, but it does not tell us what the Government are trying to achieve by that. We have rightly upped the starting point, but if we really want to go to a household calculation, either we should be very generous and have it start at £120,000, tapering up to £160,000—the equivalent of two incomes—or we risk making the situation worse by having a very big disincentive for second earners. If the new threshold were £100,000, rather than £80,000, a household with a second earner earning only £20,000 would be brought into the charge despite not being affected by it in the current financial year. I would not want to go down that line.

There is a very real risk that what sounds like a generous idea could have a very negative impact by discouraging second earners, whom I think we want to be encouraging with our childcare and other reforms. Before the Government publish the consultation, I urge them to think carefully about where they are pitching this. Surely there must come a point at which household incomes are pitched so high that almost no one will be paying the charge. What would be the point of all the complexity, uncertainty and cost of collecting it if it does not raise any money? We might be better off putting the 45p rate of income tax up by 0.5p, which would raise the same amount of money while losing all this complexity.

I think it would be better if, in Committee, the Minister introduced an automatic increase by inflation each year. It was a terrible mistake to keep the thresholds where they were. By far the simplest change would be to inflate the thresholds each year, so that we do not drag more people into the charge. Everyone would understand their position, which would be easier than trying to work out what on earth a “household” is for the purpose of this charge.

If we asked the Secretary of State for Work and Pensions, he would tell us that the formation and definition of households is one of the biggest areas of welfare fraud—people are pretending not to be a household to get extra benefits. It can be extremely hard to define a household and to enforce it. How much will it cost to work out who is or is not in a household? I suspect it will be so complicated to try to reintroduce a household definition within the tax regime that it never actually happens. If it does, it will probably cost more than it raises. I question whether it is sensible to retain this charge.

Turning to what is in the Bill, and given that we now have a large range of earnings, what is the Minister’s advice to people who are not sure whether they will earn more than £80,000 because they do not know what bonus they will receive in this financial year? Should they stick with the simple route, as many people have, of disclaiming child benefit so that they do not get caught by this tax at the end of the financial year, for which they need to save in case they have to pay it—it is a bit of shock when they get there—or should they go back to claiming child benefit on the off chance? Should they put the money in the bank and see whether they are entitled to it and, if it turns out that they have not earned more than £80,000, get to keep and spend some of it? We seem to have a position in which many households will not know until very late in the financial year whether they are caught by this. If they disclaim it, they will lose a benefit to which they are probably entitled; and if they do not disclaim it, they might receive a bill that they do not have the money to pay. We need some certainty on that position.

Finance (No. 2) Bill

Drew Hendry Excerpts

Committee of the whole House
Wednesday 8th May 2024 Commons Chamber

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

As we scrutinise the Finance (No. 2) Bill in detail, starting with clauses 1 to 4, we see that the legislation serves as a profound symbol of a Government who have run aground. The Bill starkly exposes the UK Government’s complacency in the face of the cost of living crisis that continues to devastate homes across Scotland and, indeed, the other nations of the UK. Households are still reeling from the catastrophic decisions made by this Westminster Government.

As we have heard from the Government, clauses 1 to 4 are about household incomes, but the Bill falls dramatically short of meeting the urgent needs in our communities. I am used to this place lacking in humanity, but where is the humanity? It is never shown on these domestic issues. People in our communities need and want help. They want to know how they will pay for their soaring mortgage bills, their food bills—up by more than a quarter in the past two years—their ballooning car insurance premiums, their energy bills, which are still nearly 60% higher than in the winter of 2021-22, according to Library research, and much else. The clauses before the Committee do not really get to that issue.

The shadow Minister is right to talk about the per capita GDP issue in the UK, which is an utter disgrace, but what is Labour’s plan? More Brexit, more austerity and more being wedded to the fiscal rules that got us into this place. This is a damp and ineffective piece of navel-gazing from folk who had the wrong idea in the first place. Time and again, that idea has failed, but they have repackaged it and put it forward once more. Austerity is bust. It does not work, and it is madness for both the Conservative party and the Labour party to continue pursuing it, but that is what they do. This broken institution is not listening to people.

Clauses 1 and 2 could have invested in the economy. The Minister talks about devolution, but instead of devolution of investment, we are getting the devolution of his cuts. The spring Budget slashed Scottish capital funding by 16.1%, severely restricting Scotland’s aspiration for new hospitals and more. I note that the shadow Minister was happy to quote the Institute for Fiscal Studies, and Labour and the Tories are both maintaining what the Institute for Fiscal Studies has called a “conspiracy of silence” on the magnitude of the cuts required in the coming Parliament.

The former Labour leader in Scotland, Kezia Dugdale, makes it clear in an article published today that voting for Labour in Scotland would mean that people have to pay for tuition fees, and possibly for prescriptions and personal care. They are likely to see fewer child poverty interventions such as the Scottish child payment, an SNP initiative that is already lifting 100,000 children out of poverty. If they vote for Labour, people in Scotland are likely to see those things scaled back. That is the reality of the future under Labour: more austerity. Voting for a compliant, so-called Scottish Labour will have real-life consequences for the people of Scotland.

Although we will support Labour’s new clauses 1 and 4, which would offer some scrutiny of what is going wrong with the Government’s policy, Labour is ultimately only slavishly following this horrible, extremist, worn-out and clueless Tory Government, who are hollowed out by their right wing. It is testament to a Government devoid of ideas and vision, in this fag-end Parliament characterised by minimal legislative activity, that the Bill contains a mere 26 clauses, compared with last year’s 352.

[Sir John Redwood]

Can the hon. Gentleman tell us why Scotland grows less quickly than England, despite having more public spending per head?

[Drew Hendry]

Had the right hon. Gentleman done any real research, he would know that the figures for the UK are skewed dramatically by the overheated economy of London and the south-east, which buck the UK trend. If he looks at the figures for all the counties of England, including those in the north of England, he will see how the Government are letting down the people of England across the piece. But of course he does not want to do that. He just wants to make a lazy characterisation of what is happening, saying nothing about people’s potential, which is being ignored and run down by this place, this Government and the official Opposition, who have no idea how to change that.

Clauses 1 to 4 aim to maintain the current rates of income tax, including the savings rates, for another financial year. However, they do little to mitigate the Government’s broader fiscal missteps. In contrast, Scotland’s progressive approach to income tax under the SNP— I almost choked when we heard about progressive taxation earlier—has not only shielded public services from Westminster’s austerity but enhanced them, generating approximately £1.5 billion in additional revenue. We are protecting those on lower incomes, because most people in Scotland pay less income tax and dramatically less council tax than people in England.

All the scare stories about people leaving Scotland because of its progressive policies have proved to be rubbish. The report from His Majesty’s Revenue and Customs has shown that more higher-rate taxpayers have moved to Scotland. The revenue that the Scottish Government are attracting supports a wide array of social benefits, from free prescriptions to university tuition, which significantly reduces the cost of living for Scottish residents. Those are all things that this Parliament would attack, and Kezia Dugdale has today posted a warning about what would happen if Labour got its hands on the Scottish Parliament.

[Ben Lake (Ceredigion) (PC)]

New clause 5, in my name, would require the UK Government to review the impact of the tax measures announced in the spring Budget on Wales, Scotland and Northern Ireland. The Committee will, of course, recognise that the nations and regions of the UK differ in key respects—in their strengths, their weaknesses and their needs. To a large extent, the UK tax system operates as though economic and social conditions are uniform across these isles, so I would like the Government to consider what impact this universal approach to central taxation is having on different parts of the UK, in the hope that a better understanding of such matters will help to inform and improve tax policy decisions.

The laudable ambition to level up the nations and regions of the UK is testament to the different circumstances prevailing across these isles. The Welsh tax base is different from others in the UK. Wages in Wales are much lower than the UK average, productivity is lower, and our proportion of elderly citizens is higher. We should ensure that the tax system reflects that reality and, at the very least, we should make sure that we fully understand the differential impact of tax decisions, whether it be the freezing of the personal allowance, reductions to national insurance contributions, or decisions on corporation tax, on different areas.

I concede, of course, that some fiscal devolution has taken place and that the Welsh Government have the power to set supplementary Welsh rates of income tax. However, these powers are not as advanced as those possessed by the Scottish Parliament, which allow the Scottish Government to create new income tax band thresholds to better tailor their tax system to the specific needs of the Scottish people.

A review of the impact of income tax policy specifically on Wales could include looking at how it interacts with the current Welsh rates of income tax and inform the debate on any further devolution of tax-raising powers to Wales in the future. Extending the reviews to other devolved nations would allow for a comparative study on how UK tax policy interplays with the different fiscal devolution settlements in place across these islands, which would also be to the benefit of future tax policy decisions and any Government levelling-up strategy.

--- Later in debate ---

With the greatest respect, I will turn to the comments made by the Scottish National party spokesperson, whom I know well and like very much. I think even he will regret making comments such as a “right-wing extremist Government”—he knows better than that. We are not a right-wing extremist Government.

[Drew Hendry]

Just to be clear, I was saying that the Tories have been hollowed out by the extremists on the right wing within their Government, not that we have an extremist right-wing Government—that is, of course, for people out there to make their mind up about.

[Nigel Huddleston]

I think the hon. Gentleman just dug even deeper there. As I say, I like him but I do not always like what he says. On income tax, I do not think that everybody in Scotland would share his enthusiasm for the Scottish tax system, given that the thresholds and rates are higher, to the tune of up to 5%.

Turning to my opposite number, the hon. Member for Ealing North (James Murray), I will try to avoid the déjà vu all over again—we seem to have the same debate again and again. Yet again we have heard a Labour party spokesman constantly talking Britain down, as if we are in some declinist environment of failure upon failure. That is not a characterisation of the UK, its economy or our constituents that I recognise. I wish he had greater optimism and enthusiasm, and could support the UK economy and the workers to a greater degree. After all, the UK is doing incredibly well.

The hon. Member for Ealing North was right to recognise that all of our constituents are facing extraordinarily difficult times, but he is wrong to believe that is something unique to the UK economy; it is as a result of the pandemic and the cost of living challenges, which have had an impact right the way around the world. Given the extraordinary circumstances that the whole developed world has found itself in, what is extraordinary is how the UK has performed so well. I wish he would recognise the great optimism and the potential future of the UK economy.

For example, the International Monetary Fund has forecast that this country will grow faster than Germany, France, Italy and Japan over the next few years to 2028-29. The hon. Gentleman should also recognise that since the Conservatives came to power in 2010, the UK economy has generated an average of 800 jobs per day. Since Brexit, the UK has gone up the global export league tables, from seventh to fourth. We are the second largest exporter of services in the world and have reached record levels of service exports recently. We have overtaken France to become the eighth largest manufacturer in the world. We have the third largest tech economy, after the United States and China. We have the largest film, TV and creative industries sector in Europe, and one of the world’s leading biotech and life sciences industries—again, it is the largest in Europe.

We are leading the world in renewables, with the first, second, third and fourth biggest offshore wind farms in the world. I could go on, but I will not detain the Committee too much longer, Dame Eleanor. If the hon. Gentleman could recognise just one or a few of those success stories, he might have greater confidence in the UK economy and be able to talk it up. Anybody aspiring to be in government must champion the UK around the world, instead of talking us down. Otherwise, the impact they would have on investment in the UK economy is appalling.

Let me deal with the scaremongering in what the hon. Member for Ealing North and others have been declaring in the past few days about national insurance and the impact on pensions—I found that behaviour deplorable. It could be complete scaremongering because, as we have said, he is not aware of how NI impacts health and pensions. The amount of money spent on pensions is about £130 billion. Welfare spending is £260 billion. NHS spending is £160 billion. That is far higher than the total amount paid for by NI. So to try to suggest some direct correlation and say that reducing NI puts pensions at risk all of a sudden is either economically utterly incompetent or it is sheer scaremongering—neither are particularly attractive attributes in somebody aspiring to be in government. I therefore hope that he will have the decency to take that back. As I said, this scaremongering of pensioners, from the whole Opposition Front Bench, is despicable, although we can perhaps expect it from the Opposition.

Moreover, it is utterly hypocritical, because when we had the NI debate not so long ago, the Opposition spokespeople, the Opposition Front Benchers and the Leader of the Opposition said that they supported our NI cuts, but when it came to a vote they did not. That should make the British people ask: why would the Opposition say one thing and do another. First, I should say that is not a surprise to me, but could it also be that at some future point they might hope to be in a situation where they could reverse that decision and say, “We did not actually vote for it, after all”? Again, they should be straight with the British public.

I thank hon. Members for their contributions—some more than others. The debates will continue, but I hope that I have explained why we do not accept the new clauses. I ask that the clauses we have put forward should stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

New Clause 1

Review of impact of section 2

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the expected impact of section 2 of this Act.

(2) The review must include analysis setting out the number of individual taxpayers facing a marginal tax rate in the tax year 2024-25 of—

(a) the basic rate of 20%, and

(b) the higher rate of 40%.

(3) For comparative purposes, the review must take account of—

(a) equivalent actual figures to those in subsection (2)(a) and (b) for the tax years 2021-22, 2022-23 and 2023-24, and

(b) equivalent projected figures to those in subsection (2)(a) and (b) for the tax years 2025-26, 2026-27 and 2027-28.”—(James Murray.)

This new clause requires a review of how many people will be liable to pay income tax at 20% and 40%, and would compare figures for the current tax year with those for the three preceding and three subsequent tax years.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Sir Christopher Chope]

No, I do not, because that would be capping corporation tax at far too high a level. I would like to see it reduced, ideally back to 19%, as soon as possible. I certainly would not support any notion that we should stick with a 25% rate for the duration of the next Parliament.

That intervention was interesting. If that is the purpose of the hon. Gentleman’s new clause, I think we can say that it is rather opaque, because it does not say, for example, “Between 2025 and 2030, corporation tax shall be set at the rate of 25%”. It says that there should be

“a review of the impact of section 12 of this Act.”

What would the review look at? One thing would be how the 25% rate of corporation tax provided for by section 12 had affected

“investment decisions taken by businesses”.

Surely we know—I think he said so in his remarks—that having corporation tax set at 25% adversely affects businesses making investment decisions, including decisions on whether to increase their investments, or whether to invest in the United Kingdom for the first time. It is because such adverse investment decisions have been taken by businesses that, as he accepts, we have low growth, coupled with rising taxes and a stagnant economy.

It surprises me that more of my colleagues do not wish to engage in this debate. I very much support those Government Members who believe that the Chancellor of the Exchequer’s main objective should be to grow our economy, rather than stifle it through high taxes and more regulation, which seems to be what is happening.

In a sense, the hon. Gentleman has answered his own question—high rates of corporation tax adversely affect investment decisions taken by businesses—so why do we need a review to establish that? How can he both want a review because he does not know the answer to that question, and be so confident about its results that he can announce today that corporation tax will be at 25% for the next five years? It seems a pointless exercise. One is left with the feeling that the main parties have very similar policies on many aspects of taxation.

[Drew Hendry]

That is what I have been saying.

[Sir Christopher Chope]

Both parties support very high levels of tax. They are not as high as the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) would like them to be, but who knows? If there is a Labour Government, then where Scotland leads on taxation, I am sure that the rest of the United Kingdom will follow. When he responds, I would like the Minister to take up the challenge from the hon. Member for Ealing North and tell us whether he supports 25% for the next four or five years. I would like him to say, “No, 25% is far too high. Perhaps we have to put up with 25% for 2025, but thereafter, if re-elected, we the Conservatives will reduce corporation tax steadily back to 19%, or even to 15%, as the Chancellor of the Exchequer aspires to do.”

[Drew Hendry]

I agree with the hon. Gentleman’s contention that there is no real difference between the Tories’ proposals and those of the Labour party—a point I have made many times. Does he agree that progressive taxation in Scotland has seen the majority of taxpayers pay less, and those who have a bit more pay more? More higher-rate taxpayers have moved to Scotland during that time, which has protected some of the services. That is not on offer on either side of this House.

[Sir Christopher Chope]

The hon. Gentleman misunder-stands the dynamic effects of taxation. I was privileged to be in this House when the then Chancellor of the Exchequer, the late Lord Lawson of Blaby, announced the dramatic reduction in the top rate of tax to 40p in the pound. As a consequence of that reduction, the overall tax yield went up. The burden on individuals was reduced, thereby causing them to work harder to retain their energies for what was happening in our economy, rather than taking their talents overseas. The hon. Gentleman talks about wanting a progressive tax rate in Scotland, but that leads to people becoming collectively poorer. We can see from recent statistics that the Scottish economy is stumbling and failing, because of the misguided policies of the Scottish National party.

That is a bit off the point of whether we support keeping corporation tax at 25%. I certainly do not, and I hope we get confirmation that the Government have aspirations to reduce corporation tax. When my hon. Friend the Minister opened the debate, he said that we need to be stable and predictable. He praised our system of complicated allowances against corporation tax. I would support more tax simplification. If we keep the basic rate down and reduce the allowances, that makes taxation simpler and reduces the need for extra people in His Majesty’s Revenue and Customs to deal with all that. It probably undermines the burgeoning accountancy profession, but that is not necessarily a bad thing.

Whatever happened to tax simplification? A specific committee was set up to deal with tax simplification and measures used to be brought before this House. That has all been abandoned in favour of evermore complex tax arrangements. Far from being stable and predictable, they are unstable and unpredictable because no one knows how those extra complications will be avoided or exploited by those affected. Hon. Members can tell that I am not a happy bunny on this issue, because we are not committed to reducing corporation tax in the long term. We do not seem to recognise the adverse impact that it has on our productive economy and our ability as a nation to grow that economy and thereby provide the extra revenue we need for public services.

I also despair that there are so few of my own colleagues who wish to reinforce the point and get the message out to our constituents and to businesses in our constituencies. That message is “Stick with us, because we find the current levels of corporation tax intolerable. We introduced them because of extraneous circumstances over which we say we had too little control, but do not worry: as soon as those extraneous circumstances are removed from the equation, we will revert to being a low corporation tax party.” Let us have an announcement to that effect today. In the meantime, however, let me say that if clause 12 is put to the vote, I shall vote against it, and I shall certainly vote against new clause 2 for the reasons I have given.

[Drew Hendry]

rose—

[The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)]

Order. Given that we are not really pressed for time today, unless Mr Hendry intends to speak for up to four hours—

[Drew Hendry]

I do not intend to do so.

[The Second Deputy Chairman]

Yes, I can see that.

As both candidates are present, I will now announce the results of the ballot held today for the election of the Chair of the Public Administration and Constitutional Affairs Committee: 290 votes were cast, two of which were invalid, and Dame Jackie Doyle-Price was elected with 161 votes. She will take up her post immediately. I congratulate her on her election. The results of the count will be made available as soon as possible in the Vote Office and will be published on the internet.

We now come to the four-hour speech from Drew Hendry.

--- Later in debate ---

[Drew Hendry]

Thank you, Mr Evans. I will do my best to accommodate your request, as usual.

I am grateful for the opportunity to speak to clauses 12 and 13. The fact is that these clauses maintain the status quo on corporate taxation while failing to support sectors in dire need, such as our hospitality industry, which has seen more than 500 closures in the past year alone. The SNP has repeatedly called for measures such as VAT relief for that sector to alleviate the pressures, but the UK Government have consistently ignored our calls, thus demonstrating a clear disregard for the economic challenges facing Scotland.

Where is the support for our town centres and high streets? Enterprise initiatives such as “VAT-free streets” could help to breathe new life into our vital centres. The SNP has called for urgent help, but again Westminster just shrugs its shoulders and ignores its responsibilities for the damage caused through its calamitous but—as we have seen, and it is worth repeating—unanimous devotion to a disastrous Brexit, to waste and to mismanagement.

The proposed energy security investment mechanism, adjusting the parameters for windfall taxes on the basis of oil and gas prices, represents a missed opportunity to genuinely bolster our energy security and accelerate our transition to net zero. Rather than leveraging these revenues to mitigate energy costs for households who, as I said in our previous debate, are struggling under the current punishing cost of living crisis, or to invest in sustainable growth—and probably the only industrial strategy available to us is investment in renewable energy—this mechanism is poised to jeopardise up to 100,000 jobs and hinder our environmental goals.

Moreover—and there is no hiding place—the Labour party’s screeching U-turn on the £26 billion a year required to stimulate the industrial green transition, which its members know their own advisers have said is the minimum required, and on its proposal to intensify the windfall tax to fund nuclear projects in England is entirely unacceptable, meaning the utilisation of Scotland’s resources for projects that contravene our national interests.

We will support Labour’s new clause 3, because at the very least it will show the opportunity that has been wasted, and the squandering of Scotland’s natural resources, in a clearer light. However, the Bill underscores a critical disconnect between the needs of the Scottish people and the actions of this Government, and indeed this place of Westminster. It is a Bill that perpetuates inequality, neglects economic innovation and leaves our most vulnerable citizens to bear the brunt of its failures.

Having debated these clauses today, let us be mindful of the stark reality: only a Government attuned to the aspirations and challenges of Scotland can genuinely deliver the change we urgently need. That Government should have all the powers to make the changes needed to represent the values of the Scottish people. That needs to be the Government of an independent Scotland that seeks to regain our equal seat at the centre of the European Union.

[Gareth Davies]

I was waiting for a four-hour speech and it never came—that was four minutes, but what a four minutes!

Let me thank hon. Members for their contributions to today’s debate. I will respond to some of the points that have been raised at the end of my remarks, but before doing so let me directly address some of the new clauses that have been tabled.

New clause 2 seeks the publication of a review into how the rate of corporation tax set by the Bill, as set out in clause 12, affects business investment and certainty, including what the effect would be of capping it at its current level over the next Parliament. I agree that it is important to regularly review and evaluate policy, and the Government keep all tax policy under review. The Office for Budget Responsibility produces regular forecasts, including of projected corporation tax receipts and business investment. These forecasts are based on the rates and thresholds that currently apply, and which clause 12 maintains from April 2025 to provide advance certainty to businesses. The latest of the forecasts already looks as far ahead as 2028-29 on the basis of the corporation tax rate, which currently stands at 25%, so no further action is required from the Government.

Finance (No. 2) Bill

Drew Hendry Excerpts

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve on this Committee with you in the Chair, Mrs Latham. I am pleased to respond on behalf of the Opposition in the Public Bill Committee stage of the Finance (No. 2) Bill.

As we have heard from the Minister, clause 5 increases the adjusted net income threshold for the high income child benefit charge from £50,000 to £60,000, with effect from the 2024-25 tax year. The clause also amends the rate at which the high income child benefit charge applies to individuals with adjusted net incomes of between £60,000 to £80,000 in a tax year, and contains an administrative easement to prevent backdated child benefit payments from triggering a charge in 2023-24.

As we all know, due to high levels of inflation during the current Parliament, families across the country have felt the impact of threshold freezes, particularly in relation to income tax. Millions of people will be paying income tax for the first time or paying it at higher rates as a result of high inflation and the frozen thresholds. Similarly, the fixed nominal thresholds for the high income child benefit charge mean that more and more people will have been affected by the charge as a result of inflation. The adjustment to the thresholds in this clause will therefore be a welcome step for many families, and brings the number of individuals affected by the high income child benefit charge closer to what Parliament envisaged when the policy was introduced in the Finance Act 2012.

Although we support the measures in the clause and will not oppose them, we would appreciate some clarification from the Minister on one point. In particular, we understand that subsection (2) effectively halves the rate of clawback in the calculation of the charge, so the child benefit is fully withdrawn when the relevant adjusted net income reaches £20,000 above the initial threshold —that is, £80,000. I am grateful to the Chartered Institute of Taxation for pointing out that, because the clawback happens across a wider range of incomes, some individuals will be caught out by higher marginal rates of tax and will therefore likely need to file a self-assessment return. Is the Minister concerned that that will introduce more complexity into the tax system, and if so, what is he doing to communicate these changes so that taxpayers are not caught out?

Finally, we understand that the Government will be moving the assessment of the charge to a household basis from April 2026. I would be grateful if the Minister confirmed when the Government will announce further details about the consultation on that change. Will he also set out the details of what he is doing to consult industry and professional bodies about it?

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Mrs Latham. We will not be opposing the clause, but I do want to make some comments about this paltry measure, which will help very few people in a cost of living crisis that the Conservative Government are trying to pretend is over and done with—in fact, they are saying that that is the case. That is not the reality for people in their homes across the nations of the UK.

The Minister said that the intention of this provision —I think I am quoting him correctly—was to allow people to “keep as much of their hard-earned money as possible.” That reflects incredibly badly on the way that this Government have conducted themselves by artificially boosting the cost of living through reckless actions such as Brexit and, of course, the mini-Budget. If they wanted to do something that was meaningful to help families, they could have copied the Scottish child payment in Scotland, which has lifted 100,000 children out of poverty. But no: they have decided to do this. They have also decided to keep the two-child limit on universal credit. That should be scrapped, and the Labour party should be joining in calls for that to be scrapped. The rape clause has no place in our society, and this measure will not go far enough to help families.

[Nigel Huddleston]

I thank my opposite numbers for their comments. I respectfully disagree with several of their points, and I will remind my opposite number, the hon. Member for Ealing North—as I do on almost every occasion—of the significant changes to the income tax threshold that the Conservative Government have brought in. It was £6,475 under Labour; it is now £12,570. That is a significant increase and it has taken many people out of paying income tax altogether, which is something we are very proud of.

The hon. Gentleman will be well aware that, as we have discussed on multiple occasions, the reason why taxes are higher than any of us would desire is the level of intervention required to support households and livelihoods during the pandemic and, more recently, the cost of living challenges since the invasion of Ukraine and the energy price shocks in particular. I would make a similar point to the hon. Member for Inverness, Nairn, Badenoch and Strathspey, who also made those points. I remind him that we have made interventions in cost of living support to the tune of about £100 billion. With respect, half a million people will benefit from the changes that we are introducing. HICBC is not a small amount. It is a meaningful amount of money for a large number of people, and it comes on top of the many other support measures that we have introduced.

I thank the hon. Member for Ealing North for pointing out the easements and the fact that there will be automatic backdating. Hopefully, that will be a relief and good news, and be positive for many families. Child benefit is normally backdated by three months, but because of the timing of the implementation, some could overlap two tax years. We are trying to make that simple and bring it into one tax year.

The hon. Gentleman mentioned the increase from £60,000 to £80,000 and the impact on marginal rates. The changes that were announced will reduce the total marginal effective tax rates, which includes income tax, employee national insurance contributions and HICBC, from about 64% to 53% for someone with, for example, two children. That is a good thing.

We recognise that high marginal rates introduce complexity to the tax system, but that needs to be weighed against other considerations when designing tax policy. The Government must ensure sure that they are committed to a fair tax system that supports strong public finances. Individuals will, as the hon. Gentleman pointed out, still be required to submit a self-assessment tax return to declare and pay their HICBC liability. However, the Government announced in July last year that we are taking steps to allow newly liable taxpayers to pay the HICBC through their tax code without the need to register for self-assessment. Further details on this improvement will be shared in due course.

The hon. Gentleman also mentioned the consultation on moving to a household basis. We will announce further details of the consultation in due course and, as with all tax policy, any changes would be considered as part of future fiscal events. The Chancellor announced that the Government will be consulting on moving the HICBC to a system based on household incomes, and that change will be delivered by April 2026. If the hon. Gentleman is patient, we will announce further details on that consultation in due course.

A point was made about communication. There have already been significant communications on the changes to HICBC. There has been a lot of online and offline activity from His Majesty’s Revenue and Customs, various Government Departments and others. The campaign to raise awareness also includes working with, for example, parenting platforms such as Bounty and Emma’s Diary, and issuing emails through third party partners, including childcare providers. The hon. Gentleman raised an important point about not just making the changes, but ensuring that everybody is aware of them, so that everybody who is intended to benefit is able to.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Reduction in higher CGT rate for residential property gains to 24%

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[James Murray]

As the Minister has set out, from 1 April 2025 the rates of theatre tax relief, orchestra tax relief, and museum and galleries exhibition tax relief will be set permanently at 40% for non-touring productions and 45% for touring productions and all orchestra productions. As we know, the so-called creative reliefs were previously set at 20% and 25% respectively. They were temporarily increased on 27 October 2021 to help the sector in its economic recovery from covid-19. As the Government’s policy paper notes, the rates were due to taper to 30% and 35% from April 2025. We welcome the fact that they will now be set permanently at 40% and 45% from next year.

We also note that, by way of these clauses, the Government are removing the 2026 sunset clause on the museums and galleries exhibition tax relief so that it becomes a permanent relief with no expiry date. In previous debates on earlier Finance Bills, I have asked the Minister to give clarity and certainty to the creative sectors, so I am pleased to say that that has been given to the UK’s world-leading theatres through these clauses. As I have said, we in the Opposition stand wholeheartedly behind the UK’s creative industries, and we will of course not oppose the measures set out today.

[Drew Hendry]

I briefly want to endorse the comments about these sectors requiring support. It is good to see some support for the sectors here, but we would like to see more in the future.

[Nigel Huddleston]

I do not have much more to add, other than to point out the strength of our creative industries in all four nations of the United Kingdom, which I am glad has been recognised across the Committee today. It is an incredible strength, and I am therefore pleased to hear today the very obvious cross-party agreement on continuing support for this vital sector.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clauses 17 and 18 ordered to stand part of the Bill.

Clause 20

Collective investment schemes: co-ownership schemes

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Tulip Siddiq]

We support the measures in clause 21 to raise the funds needed to tackle money laundering, fraud and other types of economic crime, but I cannot ignore the fact that the Government’s efforts to tackle economic crime have been a complete failure. Fraud and scams, for example, have rocketed under this Government, with at least £7.3 billion stolen directly from consumer bank accounts in the UK through fraud last year alone.

Last year, the Government published their fraud strategy to widespread criticism from industry for largely rebadging old measures and re-announcing existing national teams, such as the re-announcement on the replacement of Action Fraud from 2022. The consensus from experts in the industry is that the measures in the strategy will not significantly move the dial, as they do not establish a regulatory framework for tech companies and telcos to participate in the fight against fraud, including through data-sharing with financial services firms and enforcement agencies to enhance detection and prevention measures.

UK Finance, for example, has stated that it is increasingly difficult to understand the imbalance between the financial services sector’s contribution through the levy and that of other sectors that do not contribute but are known to be introducing risk into the same system. We also know that most scams originate on social media or via telecommunications networks yet those sectors do not face the same obligations regarding contributions, nor do they compensate victims defrauded through their platforms. Does the Minister agree with UK Finance? Does he accept that until the Government find a way to bring the tech giants to the table, efforts to tackle fraud and scams will continue to fail?

UK Finance has also raised concerns about the transparency of the levy and reporting on economic crime. On reporting for anti-money laundering purposes, I have heard from numerous City firms that, despite frequent requests, they receive little granular feedback on the impact their reports make. Does the Minister agree that better feedback and wider publicity around successes could help AML-regulated firms to see the value and importance of work in this area more clearly, keeping it at the forefront of their minds? What are the Government doing to ensure that happens?

[Drew Hendry]

This is a welcome move in principle and in targeting economic crime, but I would agree with the comments we have just heard—this does not shift things in the way that they need to be shifted in order to deal with the issue. It does not seriously tackle online crime, which is relatively rampant, with people being conned and funds being taken illegally. It does not really do much for fraud and economic crime and fails to tackle issues such as money laundering. There has still not been enough action on limited partnerships, for example, which continue to allow unknown individuals to funnel money through those mechanisms. Why are the Government not taking this issue more seriously than through these minor actions in the Bill?

[Gareth Davies]

I am grateful for the comments from Opposition Members. I think we all agree that we want to tackle these issues in the most serious way possible, with the most force. I am comforted by the comments from the Financial Action Task Force, which previously said that the UK has one of the strongest regimes when it comes to tackling economic crime. The levy specifically seeks to fund the tackling of anti-money laundering rather than fraud or sanctions, which I will come on to in a second.

It is appropriate to stress that the levy is a targeted measure on the anti-money laundering regulated sector, therefore the proceeds go towards tackling anti-money laundering. That is in the context of the economic crime plan 2, which covers up to 2026 and is backed by £200 million from the levy plus £200 million of Government investment. We are taking broader action on fraud in the technology sector specifically, not least through the online fraud charter, the Online Safety Act 2023 and the telecommunications fraud sector charter.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey mentioned sanctions evasion. We are cracking down on kleptocracy and sanctions evasion through the economic crime plan 2. The Office of Financial Sanctions Implementation actively monitors sanctions evasion every single day.

On corruption, the Foreign, Commonwealth and Development Office leads our efforts to support companies to tackle corruption and strengthen governance across the world. The Government are actively working with partners across the world to strengthen international standards, not least through the UN convention against corruption. In the UK, we also have the National Crime Agency’s international corruption unit. There is significant action to tackle fraud and corruption as well as sanctions evasion, but of course we can always do more and we are vigilant about that.

On the reporting and transparency of the levy, there was a reasonable question from the hon. Member for Hampstead and Kilburn and from the sector. There will be a report on the levy this year and it will be reviewed in 2027. We will engage with stakeholders leading up to that review.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22

Transfers of assets abroad

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Tulip Siddiq]

The Opposition support the changes that will assist with compliance checks by making online applications equivalent to paper applications. Has the Minister considered adding the online application as a service to the agent services accounts so that an agent can prepare and submit the claim on behalf of their client?

We also support the provisions for modifying the application of VAT for terminal markets, as that will allow for further reforms such as bringing trades in carbon credits within the scope of the Value Added Tax (Terminal Markets) Order. We feel that is a vital and necessary step in developing this important market.

We support the changes to legislation that governs the interaction between late payment interest and repayment interest for VAT. Has the Minister given any thought to reinstating HMRC’s ability not to charge interest on VAT errors where the supplier did not charge VAT, with no loss to the Exchequer because the customer could claim in full?

[Drew Hendry]

On clause 23’s minor VAT amendments, there is very little to disagree with. VAT should be paid where it is due, and HMRC should pay interest where it should pay interest. That is to be welcomed.

However, on Second Reading I pointed out the paucity of thought and imagination that had gone into providing real help for people across the nations of the UK, and the kinds of thing that the Government could have done but have not. The clause title, “Minor VAT amendments”, just highlights the problem with the entire Bill. The Government could have taken some action to deal with the issues for people in hospitality by cutting VAT and doing something meaningful for tourism, but no: they have chosen to make these minor adjustments. They could have used VAT as a mechanism for helping our high streets to create economic zones that could boost life back into vital high streets and centres. Instead, they have taken to tinkering with the VAT rules.

My question to the Minister is why there is such a lack of ambition in his Government. Is it that this is a fag-end Government in a fag-end Parliament that has run out of ideas, or is it just that they do not care?

[Nigel Huddleston]

The hon. Member for Inverness, Nairn, Badenoch and Strathspey has been charming until this point, and now he goes back to this. I know him very well; I am sure he does not mean it. First, he knows as well as anybody in this House that everybody who comes into Parliament cares: they care about their constituents and they care about the country. We are motivated to come here because we want to make the country a better place for our children and grandchildren.

I know that the hon. Gentleman occasionally gets rather vocal on some of these points, but I politely request that he be a little bit careful with some of his comments. I would never criticise the motivation, incentives or purposes of any colleague in this place. I may fundamentally disagree with some of their policies, but I will not disagree with their motivations. In saying things like “People don’t care” or “The Government don’t care,” I am afraid he is straightforwardly wrong.

[Drew Hendry]

I am very fond of the Minister, as he knows. We often have these back and forths, and I often have to rise to my feet to correct what he has said. I did not make any assertion about any individual; I was talking about his Government. I was very explicit about that. I just want to make that clear.

[Nigel Huddleston]

Yet again, I appreciate the hon. Gentleman’s trying to clarify, but I am a member of the Government and therefore I am afraid that I do take offence, direct or indirect. But that is a side point to the matters under discussion.

The hon. Gentleman is making fair and valid points about the support that has been given, but I repeat that this Government, like every Government around the world, have had incredibly difficult circumstances to deal with. I do not think that there is any doubt whatever that the support measures that we have put in place to support lives and livelihoods have been incredible and stack up pretty well when compared internationally. That includes cost of living support, as I have mentioned.

I know that the hon. Gentleman is a huge supporter of the tourism, hospitality and leisure industry. We have spoken about that many times, and I know that it is particularly important to Scotland, where it is a disproportionately larger share of the economy than in England, for example, although it is important and large across every single constituency in the UK—and I do mean every single constituency. But the hon. Gentleman is being a little bit rich, because he knows as well as I do that there are other measures beyond VAT to support the hospitality and leisure industry. Of course, in England we have extended the 75% business rates reduction to the retail, hospitality and leisure sector, but that has not been done in Scotland, nor has it been done to its full extent in Wales.

[Drew Hendry]

I am grateful to the Minister for allowing a bit of back and forth on this. It is generous of him to do so. He fails to mention that in Scotland, 100,000 businesses are lifted out of business rates altogether through the small business bonus scheme. The record in Scotland shows that we are supporting businesses, and those businesses are very prevalent in the tourism sector.

[Nigel Huddleston]

I acknowledge the efforts made by the Scottish Government to support various sectors, but as I say, on that particular item, the hon. Gentleman will know as well as I do that it is a key ask of the industry in Scotland for the Scottish Government to follow suit with England and elsewhere.

The hon. Member for Hampstead and Kilburn raised several points. Some were slightly out of the scope of the specific measures under discussion, including IT systems and other considerations, but I take on board what she says, as does HMRC, because there is a constant need to review and assess the scope of IT systems and so on. We do so on a regular basis; I spend a lot of time talking to HMRC about this, so I can assure the hon. Lady that the points that she raised are constantly under consideration. I will probably leave it at that.

Question put and agreed to.

Clause 23 accordingly ordered to stand part of the Bill.

Clause 24

Collective money purchase arrangements

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[James Murray]

I add my thanks to my colleagues in the Opposition: my fellow shadow Minister, my hon. Friend the Member for Hampstead and Kilburn; the Opposition Whip, my hon. Friend the Member for Gower; and, of course, the Back Benchers who have joined us for this lengthy Committee session. [Laughter.] I place on the record my thanks to all the House authorities and to third parties, particularly the Chartered Institute of Taxation, whose expertise is always greatly valued.

[Drew Hendry]

I, too, rise to pass on my thanks: to you, Mrs Latham, for chairing, and to all the staff and others who have been involved. Whether we agree or vehemently disagree—often, as we have seen today, there are big disagreements—we never forget those people who work hard to produce the documentation and supporting information in all the arms of Parliament, including the House of Commons Library. Thank you.

Question put and agreed to.

Bill accordingly to be reported, without amendment.