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.

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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.

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[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.

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[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.