Finance Bill

Baroness Laing of Elderslie Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution
Monday 27th April 2020 Commons Chamber

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Thank you, Mr Speaker. May I echo the Financial Secretary’s comments about the hard work that you and the parliamentary authorities have gone to, to ensure that these proceedings could go ahead? Of course, as the Opposition we are well aware of the need for Government to have a legal basis to continue levying taxes, and we approach this Bill very much in that spirit.

Many of the clauses in this Finance Bill were written many months ago, with a large number of them involving relatively minor fixes to existing tax legislation—not exactly the vegetable waste and pig swill that the Financial Secretary referred to in his colourful and wide-ranging perorations, but none the less in large part delivering technical aspects of already announced policies. In fact, overall, this Bill presents a picture of continuing the business as usual of the last 10 years.

However, it is unthinkable that we will go many months before additional fiscal measures will need to be brought in by this Government. There will be an urgent need to stimulate the economy as and when we move out of the lockdown, and when boosting consumption will not threaten to damage disease containment. Other measures may well be needed to help alleviate some of the numerous supply-side problems caused by the current dislocation.

Finally, of course, we will need to deal with the considerable burden created by the costs necessarily incurred in fighting coronavirus. Subsequent Finance Bills will need to be very different from this one, and I want to use the time I have available to spell out why. We will need new approaches to taxation generally, the social contract with business, funding public services, the climate crisis and tax reliefs. I will deal with each area briefly in turn.

First, we of course need a different and fairer approach to tax. The Bill largely continues the previous framework, with its reductions in the tax paid by the very best-off people, while support for the worst-off has been reduced. The Financial Secretary will, I am sure, be aware of the Institute for Fiscal Studies analysis of the distributional consequences of successive Budgets since 2010. As of 2019, for example, due to changes in tax and social security, the poorest 10% of households have seen losses of 11% of their income, on average, as a direct result of reforms. Among those with children, the losses amount to 20%: that is £1 out of every £5 being removed from low-income families with kids. Large numbers of frontline careworkers fall into that category. We know from recent research by the Resolution Foundation that half of careworkers are not paid the real living wage, and tens of thousands appear to be paid even below the national minimum wage. They deserve better. In contrast, the best off 10% of people have seen losses of only 2% in their incomes due to tax and social security changes since 2010.

As all in this House will remember, George Osborne maintained that, in his recovery, 80% of the reduction in debt should come from cuts to spending and only 20% from tax changes, yet the latter went alongside cuts in income tax, inheritance tax and capital gains tax for the very best-off people.

There is already a lively debate about how we should deal with the costs incurred by the coronavirus. The academic consensus is that decisions taken to load the cost of debt on to spending cuts in the 2010s made our recovery slower than it would have been otherwise, so it was the slowest not only in a generation but in eight generations, and slower than in many other countries. I am not saying that to castigate the Government; I am saying it because we will need to adopt a radically different approach to future Finance Bills from that seen over the last 10 years.

We are currently feeling the impact of that decade’s fiscal approach very keenly, especially when it comes to UK households’ resilience. A quarter of UK families entered this crisis with less than £100 in savings—making it impossible for them, for example, to buy a new cooker or get their car fixed—and almost 2 million households did not even have a cooker in their home in the first place. As and when we return to what will be a very different normality, we must have building up financial resilience at the core of future Finance Bills. That will mean instituting a more progressive tax system, with those with the broadest shoulders contributing to services that benefit us all.

Secondly, we will need a new social contract with business. As discussed at length during the statement, huge numbers of businesses are currently struggling like never before. We have already discussed the Government’s economic package today, and I must emphasise again that there is a very strong expectation from the public that public support must translate into protecting jobs, not the extraction of value into already deep private pockets.

We have called for the Government to consider the examples of other nations, such as France and Denmark, as well as that of the Labour Government in Wales, when approaching the bail-out of different large firms. Jobs must be retained, workforces must be supported, and we should expect and require good corporate behaviour going forward. That means a ban on public funds being passed into tax havens or doled out immediately in dividends, no share buy-backs on bailed out companies, and a commitment to improvements in environmental performance in future.

We also need a renewed focus on dealing with the enablers of tax avoidance and evasion. I regret that we still do not see that when it comes to those who facilitated disguised remuneration loan arrangements, while those who received such arrangements continue to be affected by the loan charge.

The Bill rightly rows back on the Government’s previous ill-advised commitment to cut corporation tax further to 17%, by maintaining it at 19%. The OBR estimated that a cut to the latter rate would reduce receipts by £5.4 billion a year in three years. Recent reductions in corporation tax have not boosted investment in the UK. It was clear that such a reduction simply could not be afforded in current circumstances, and we therefore welcome that element of the Bill. When we talk to businesses, as I am sure Government Members do regularly, rates of corporation tax are not the headline reason for locating in the UK. Other factors are far more important, such as workforce development and training, logistical factors such as transport, and—critically—business rates, which are a key issue for many companies in our nation.

There is, of course, an imbalance in the taxation of those businesses based in fiscal property compared with internet-based businesses—the division between bricks and clicks. The Bill details the digital services tax—a new 2% tax on the revenues of search engines, social media platforms and online marketplaces that derive value from UK users. We welcome that tax to the extent that it recognises the comparative under-taxation of many digitally provided services, but we are concerned about the restricted scope of the measure. It means, for example, that Amazon will continue to pay a lower rate of tax in relation to revenue than many high street bookstores and other retailers. In addition, it fails to fill the gulf in unpaid corporation tax from many of the largest technology firms. TaxWatch UK has suggested that the UK is losing £1.3 billion in corporation tax from just five of those firms, and the digital services tax would make up less than half of that.

The current crisis suggests that digitally based businesses will amount to an even larger part of our economy in the years to come, so we need to get this right. Above all, our Government need to be more explicit about their discussions with international partners about the move to a formula-based corporation tax system. Given the ability of those firms to shift profits between countries, we must work with other countries to apportion taxing rights better.

The OECD’s anti-base erosion and profit shifting project was a good start, but it failed sufficiently to inform countries in the global south. I hope Ministers will be more forthcoming in future about what they are doing to seek that international consensus, not least given current hostility from the US towards multilateral approaches in a number of areas. This topic is controversial, and we need to hear more than just that our nation is engaged in those discussions.

I hope Ministers will be more forthcoming in their approach when it comes to local government finance, which is crucial in providing public services—from social care, to helping the homeless, to providing areas for leisure and play. Local authorities will be crucial in helping to rebuild the economy after this period, through their work on economic development.

My third point concerns the need for the Government to commit to a proper, deep and wide review of local government finance that takes account of the full impact of the crisis in terms of extra expenditure and forgone income, and which considers business rates and council tax in the round. We still only have a commitment to yet another restricted review of business rates. Surely we can be more ambitious in that area, as the need for a deeper review is now very strong. The goal must be to provide certainty and stability about the provision of local public services.

An additional area where action is needed is tackling the climate crisis. Survey evidence, albeit tentative at this stage, suggests a renewed appetite from the public to grasp the challenges posed by the need to decarbonise. The Bill makes small moves in the right direction. It incrementally increases vehicle excise duty, using emissions as a benchmark—the Chief Secretary to the Treasury mentioned that—and it introduces the world- wide harmonised light-duty vehicles test procedure, a UN-established vehicle testing procedure, in an attempt to prevent the gaming of emissions standards by vehicle manufacturers. We encourage the Government to adopt a steady replacement of all testing procedures within that framework. More broadly, we need a far stronger shift in taxation to disincentivise carbon production. The previous Finance Bill continued implicitly to support fossil fuels in a number of areas, and this one only sets the scene for some elements of the promised new plastics tax and the new emissions controls that will be necessary. Given that we have declared a national climate emergency in this very House, we need far stronger action in subsequent Finance Bills.

Finally, we fail to see in the Bill any substantive change in the Government’s approach to tax reliefs. This is essential. Public funding will be under pressure, so we must choose very carefully what we subsidise through these reliefs.

The incidence of tax reliefs has increased over recent years, yet there is little thorough oversight of their impact. Labour has called repeatedly for a thorough review of tax reliefs, but this Bill does not deliver one. As public finances come under substantial pressure, that position is no longer sustainable.

The National Audit Office’s recent report on tax expenditure showed that the Government are not reporting costs of over two thirds of reliefs; that must change. Alterations are made in this legislation to entrepreneurs relief—that was right to state—but the Institute for Fiscal Studies has suggested that the £1 million limit is still too generous. Furthermore, it does not achieve its principal aim of boosting investment, with the IFS stating:

“If one of the aims of reduced capital gains tax rates on business assets is to incentivise individuals to invest more in their businesses, this evidence suggests they are not working.”

We must ensure that corporate tax reliefs are focused on employment retention and promotion, and the provision of public goods. That is as essential for entrepreneurs relief as for the hundreds of others that continue to receive little public scrutiny.

There are many measures in the Bill that are sensible, that tidy up anomalies and that make life easier for taxpayers and HMRC, and we welcome them. But, as I have said, in many ways this feels like a Finance Bill for a different age. Subsequent Budgets and Bills will need to recognise the need for a much more resilient household financial situation and much more resilient public services, and will need to move away from the demand-sapping, confidence-stripping approach that has characterised the response to the last crisis. We stand ready to work with the Government where we can to achieve that new approach.

[Madam Deputy Speaker (Dame Eleanor Laing)]

We now have to introduce a formal time limit of five minutes. Members in the Chamber will be able to observe the clock, but I strongly advise Members who are participating virtually to have a timing device nearby that they can see, because, due to necessity, the five-minute time limit will be very thoroughly enforced.

[Mel Stride (Central Devon) (Con) [V]]

The economic backdrop to this Finance Bill is among the most challenging that this country has ever faced. The Office for Budget Responsibility, for example, in the scenario that it put forward, suggested a 35% contraction in the economy followed by a rapid bounce back—the so-called V-shaped recovery. Whether that is realistic or not remains to be seen, but it is the case that the Government have some significant control over two areas of policy that will determine whether we come back with a V-shaped recovery or not: the timing and nature of our exit from the lockdown.

On timing, as the House will be aware, the Government have put forward five tests, one of the most important of which is the fifth test, which is that we should extract ourselves from lockdown but in a manner that does not cause a second flare-up of the virus, which happened with the flu pandemic of 1918. This is critical; if the Government get it wrong and we do have that second surge in the virus, it will be a catastrophe for our economy and we will have not a V-shaped recovery, but at best a double-dip recession of some magnitude. It is therefore very important that the Government be allowed the time and space to take those decisions, and that we are patient with them.

Secondly, on the nature of our withdrawal, it is important that we have transparency. As the Chair of the Treasury Committee, I urge the Government to engage with businesses on the broader elements of the plan, so that they can both input and adjust accordingly. The element of which the Government have control, of course, is the support they are providing to the economy, at considerable scale and pace. The Chancellor is to be congratulated on that, but with scale and pace come hard edges to policy and challenges in delivery. Examples of both that the Government should focus on are, first, making sure that, for the self-employed who work through their own companies, dividends that result from self-employment can count when it comes to assessing the furlough amount that they can qualify for. Secondly, on delivery, we heard from the Chancellor earlier about bounce-back loans. I welcome those a great deal, but we also need to ensure that the banks are on notice that we expect them to deliver on the coronavirus business interruption loans and the other loans concerned. Through the Treasury Committee, I have had conversations with the British Business Bank and also written to the banks on its lending panel to urge them to come forward transparently and provide us with data on how much money is going out the door relative to the number of applications on a daily basis. I call on the Financial Secretary to the Treasury and the Government to row in behind us and ensure that transparency, because what gets measured tends to get done.

Let me turn to two specific points in the Finance Bill. The first is the changes that the Financial Secretary to the Treasury has just outlined in respect of entrepreneurs relief. He is right to make those changes; it is a relief that is not fit for purpose. However, there are £24 billion-worth of reliefs every year relating to businesses, and at a time when we need economic growth encouraged at every single turn, it is imperative that the Treasury examines all £24 billion-worth of those reliefs and makes sure that they are all fit for purpose.

Secondly, I was particularly pleased to see such a large number of clauses relating to the digital services tax. It is not right that search engines, online marketplaces and social media platforms should not be paying a fair level of tax in our country. It is not a case of evading tax; it is a case of the taxation system not being adequate for the 21st century. We cannot assess national taxation rights on property, on where people are, on where the management are or on where the intellectual property resides; we must do it on where value is created. These measures are a big step in the right direction. I urge the Financial Secretary to stick to his guns. He will face great pressure from the United States in particular, but in the absence of an international approach to this matter, it is vital that we take action.

I think my five minutes are now up, and I am very aware of your exhortation, Madam Deputy Speaker, so I will conclude, except to say that I will be supporting the Second Reading of this Bill.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Exactly five minutes; I commend the right hon. Gentleman. I call Alison Thewliss, who, as her party spokesperson, is asked to speak for no more than 10 minutes.

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[David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con) [V]]

It is a real pleasure to be able to connect to you and to the House of Commons today, Madam Deputy Speaker, and to take part in the Second Reading debate on the Finance Bill. I wish to begin by echoing comments made by the Chair of the Treasury Committee in relation, first, to those who receive a significant part of their income through dividends. I believe that there must be the possibility for the furlough scheme to accommodate a calculation of income that is based on those dividend receipts—that is used for many other income calculations. The second point is that we need to ensure that the banks are playing their part. I receive a lot of emails from the banks telling me what a great job they are doing, but I receive even more emails from constituents about the bureaucracy and difficulty that the banks are putting their way in respect of securing not just the loan guarantees, but wider loans.

I wish to raise two specific points, one of which is access to cash. I raised that in my contribution to the Budget debate on 16 March, which seems like a lifetime ago. The second relates to the Roadchef employee benefits scheme, which the hon. Member for Glasgow Central (Alison Thewliss) mentioned and which is particularly relevant in my constituency. We are seeing during this crisis that access to cash is even more important than it would be in so-called “normal” times. People need cash, often to get others to buy their weekly shop or to get them to do other tasks, or simply to have the reassurance of having cash at home in order to meet unforeseen circumstances. That is why this remains such an important issue.

As I highlighted when I spoke previously, the average cash transaction is £10 or £20. When someone is paying £3 to get £10, that creates a huge distortion in the ability to have cash. It impacts on the most vulnerable in our communities, and that is why I welcomed the fact that the Chancellor has said that he will legislate to ensure access to cash, but that has to be on a fair basis. It has to be on the basis that there are not disproportionate charges and that cash is accessible across the whole of the United Kingdom, particularly in rural areas.

I represent one of the largest rural constituencies in the UK, so I welcome the fact that LINK has made some announcements on how it might approach the issue. I also welcome the fact that NoteMachine, the second largest provider of cash machines—it does so on a charge basis—has indicated that it would go back to free charging if the significant change of a return to the previous interchange rate was put in place. I therefore urge the Chancellor and Treasury Ministers to actively consider making that change, which would make a real and significant difference to people’s ability to access cash machines and to do so on a free basis. The crisis has shown more than ever the need for people to be able to access cash.

I will move on to the issue of the Roadchef employee benefits trust. I will not give a detailed outline of the issue, because it has a long history. I know that the Financial Secretary was able to meet the chairman of the trustees and the hon. Member for Airdrie and Shotts (Neil Gray), who has done so much to pursue the issue. I have a service station in my constituency that you may have used yourself, Madam Deputy Speaker. It is now called Annandale Water, but it was previously under the branding of Roadchef. Roadchef set up the first tax-exempt, all-employee share ownership scheme of its kind, but unfortunately the former chief executive of Roadchef plundered that trust, causing all sorts of difficulties, not least that it was not registered in—

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. I hope that the right hon. Gentleman is drawing to a close.

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[Richard Burgon (Leeds East) (Lab) [V]]

The coronavirus pandemic is the greatest crisis that most of us have ever lived through, so the values of solidarity, co-operation and support for—[Inaudible.]—are more important than ever at this critical time. In his March Budget speech, the Chancellor said that we were entering this crisis from a position of economic strength; for millions of people, that could not be further from the truth, and nor was it the case for our public services. A decade of austerity and a 40-year period dominated—[Inaudible.]

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. I hesitate to interrupt the hon. Gentleman—I do not know whether he can hear me—but the sound quality is very bad. Let us try again to see whether it improves; if not, I will have to move on to the next speaker and come back to the hon. Gentleman.

[Richard Burgon]

A decade of austerity and a 40-year period dominated by marketisation, deregulation and privatisation has left us less prepared to deal with this crisis—[Inaudible.]

[Madam Deputy Speaker]

Order. To be fair to the hon. Gentleman, I am going to interrupt him, because the House cannot properly hear what he is saying. I judge it would be better if we could come back to him later in the proceedings.

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[Sir Edward Davey (Kingston and Surbiton) (LD) [V]]

Today’s economic crisis is the worst and most alarming of our lifetimes. Never since the second world war has Britain’s economy faced such damage and uncertainty. I recognise just how difficult it is for Treasury Ministers, the Bank of England and other policy makers trying to tackle this crisis, but the Liberal Democrats agree with the Leader of the Opposition that we need a public debate about how the lockdown can be phased out in due course. I would add to that that we need a really mature debate about how economic policy will help in the economic recovery. Indeed, whether it is in the immediate solutions, the emergency packages or the preparations for that recovery, Liberal Democrats believe that economic policy must be guided by three key objectives: producing a fairer society; building a more sustainable economy; and restoring our reputation as a country that is outward-looking and internationalist.

Economic policy must tackle Britain’s unequal society, so exposed in this crisis, including the poor pay of people in the care sector, the problems with the universal credit system and the low levels of statutory sick pay. All these problems show that we must do far more to increase social justice in our country, and I believe that they show that we should look more seriously at proposals for a universal basic income.

Alongside greater fairness, we must move our economy much faster towards net zero so that we address the climate emergency in the recovery. I am pleased that the Government are talking about this, but we need urgently to debate specific policy proposals to make sure that the new economy that we must build is genuinely low carbon. We are seeing how fast the Government can move in a crisis; well, there is a climate crisis and we need to move just as fast to tackle that, too.

We must also work with other countries to ensure that the recovery is as strong as possible, and deepen international co-operation, especially with our closest allies. We cannot allow this crisis to move us back from support for free and fair trade, even where we adapt trade to secure an improvement in our biosecurity. We must remember how the recovery from the second world war was driven so much by agreements such as Bretton Woods and by growth in international trade.

I have already commented widely elsewhere on the Chancellor’s emergency packages. The business loan scheme has just been too slow and although today’s micro-business loan scheme is welcome, it is very late. I urge the Chancellor to go further and look at the Liberal Democrat plan for new online marketplaces for these Government-backed business loans. Using existing platforms such as Funding Xchange, Funding Options and Alternative Business Funding, businesses could fill in just one form and those applications would be sent immediately to lenders whose lending policies show that they are much more likely to say yes, so the businesses could get the cash more quickly. If we do not see businesses getting the cash quickly, we will see more businesses fail.

The element of the Government’s emergency package that I would most like to talk about today is the challenge facing local authorities. The Government’s help so far just is not sufficient to help councils on the frontline of this crisis, which are so crucial to helping vulnerable people and businesses. Councils are having to increase spending dramatically just at the time when their income is also being slashed—from a huge loss in income from parking and services such as leisure centres, to real concerns that council tax income will fall significantly too.

May I ask the Treasury today to commit to the principle that for councils across the country it will not just fund extra crisis-related spending in full but provide grant funding to cover these dramatic losses in revenue? Just as the Chancellor wrote off the debts of NHS trusts as part of his emergency assistance, will he now look at reducing or writing off councils’ debts? Writing off housing debts could help stimulate a council house building boom in the recovery. Writing off debts linked to spending on special educational needs and disabilities would help our schools recover, too.

When it comes to planning the recovery, may I ask Treasury Ministers to consider three key issues? The first is how the furlough scheme is wound down to make sure that we protect jobs. We must prevent staff who are furloughed today from becoming staff who are laid off tomorrow. The second is that in the recovery we must achieve a historic and dramatic rise in both private and public investment in green technology and climate-friendly infrastructure. After solving the current international crisis, let us solve the next global crisis—the climate crisis—that we all know is facing us.

Finally, over the thorny issue of Brexit and the transition period, I once again urge the Minister to recognise that this crisis and its immediate aftermath is exactly the wrong time to add to the uncertainty, the cost and the loss of markets that businesses are already facing. Surely suspending the Brexit talks and seeking an extension to the transition period is just economic common sense.

This Finance Bill will pass its Second Reading, but the Chancellor must do far more to ensure that Britain’s economy after this crisis is fairer, greener and more outward-looking to the world.

[Madam Deputy Speaker (Dame Eleanor Laing)]

The hon. Member for Leeds East (Richard Burgon) is still having some technical difficulties. Although we are not able to see him in action, we have his photograph and are able to hear him.

Finance Bill

Baroness Laing of Elderslie Excerpts

Report stage & Report stage: House of Commons & Report: 1st sitting & Report: 1st sitting: House of Commons
Wednesday 1st July 2020 Commons Chamber

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

I beg to move amendment 18, page 53, line 28, leave out “before the end of 2025” and insert—

“within a year of Royal Assent and annually thereafter”

This amendment would require the Government to report on the DST annually.

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to discuss the following:

Amendment 19, page 53, line 29, at end insert—

“(2) Any review made under (1) must include an assessment of the effect of the DST on tax revenues.”

This amendment would require any report on the DST to include an assessment of the effect of the DST on tax revenues.

New clause 5—Digital Services Tax: review of effect on tax revenues—

“(1) The Chancellor of the Exchequer must make an assessment of the net effect on tax revenues of the introduction of the Digital Services Tax and lay a report of that assessment before the House of Commons within six months of the passing of this Act.

2) This review must also include an assessment of the revenue effect of the Digital Services Tax on tax payable by the owners and employees of Scottish Limited Partnerships.”

This new clause would require a Government assessment of the effect on tax revenues of the DST, and in particular the change in revenues associated with Scottish Limited Partnerships.

New clause 33—Requirement on groups to publish a group tax strategy including a country-by-country report—

“(1) A group which is not required to publish a tax strategy in compliance with Schedule 19 of the Finance Act 2016 shall be deemed to be so required.

(2) Any tax strategy published by a group in compliance with that Schedule must include any relevant country-by-country report.

(3) “Country-by-country report” has the meaning given by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016.

(4) A country-by-country report is relevant if it—

(a) was filed or required to be filed by the group in compliance with those Regulations on or before the date of publication of the tax strategy, or would have been so required if the head of the group were resident in the United Kingdom for tax purposes, and

(b) has not already been included in a tax strategy published by the group.”

(5) The Treasury must make regulations to bring this section into operation no later than 1 April 2021.

This new clause would require all groups subject to the DST to publish a group tax strategy, including a country-by-country report. Such a report would include information about the group’s global activities, profits and taxes.

I should draw the attention of the House to the fact that a corrected text of new clause 33 has been published this morning. The version that was initially published inadvertently omitted the concluding subsection.