Finance (No. 2) Bill

Gareth Davies Excerpts

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

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

With this it will be convenient to discuss the following:

Clauses 13 and 19 stand part.

New clause 2—Review of impact of section 12—

“(1) The Chancellor must, within three months of this Act being passed, conduct a review of the impact of section 12 of this Act.

(2) The review must consider how the rate of corporation tax provided for by section 12 affects—

(a) investment decisions taken by businesses,

(b) the certainty of businesses about future fiscal and market conditions.

(3) For comparative purposes, the review must include an assessment of how the factors in subsection (2)(a) and (b) would be affected by maintaining corporation tax at a rate no higher than that set out in section 12 until the end of the next parliament.”

This new clause requires the Chancellor to conduct a review of how the rate of corporation tax set by the Bill set out in clause 12 affects business investment and certainty, including what the effect would be of capping it at its current level for the next Parliament.

New clause 3—Analysis of the impact of the energy security investment mechanism—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish an analysis of the possible impacts of the energy security investment mechanism on—

(a) revenue from the energy profits levy, and

(b) investment decisions involving businesses liable to pay the energy profits levy.

(2) The analysis under subsection (1) must consider how the impacts in (1)(a) and (1)(b) would be affected by amending the definition of a qualifying accounting period, as set out in section 1 of the Energy (Oil and Gas) Profits Levy Act 2022, to be one that ends before the end of the next Parliament.

(3) In this section, the “energy security investment mechanism” means the mechanism introduced by section 17A of the Energy (Oil and Gas) Profits Levy Act 2022, as inserted by section 19 of this Act.”

This new clause seeks to establish the impact on revenue and investment decisions of the energy security investment mechanism being introduced, and how this impact would be affected in a scenario where end date for the energy profits levy was amended to be before the end of the next Parliament.

New clause 7—Review of impact of section 13 on small and medium enterprises—

“(1) Within 3 months of this Act being passed, the Chancellor of the Exchequer must lay before the House of Commons a report assessing the impact of section 13 on small and medium enterprises.

(2) The report under subsection (1) must consider the extent to which paying corporation tax at the small profits rate, rather than a higher rate, enables small businesses to manage cost pressures including those arising from—

(a) energy costs;

(b) staffing and recruitment costs;

(c) borrowing costs;

(d) raw material costs.”

[The Exchequer Secretary to the Treasury (Gareth Davies)]

We now move on to debate clauses 12, 13 and 19. Before I delve into the detail of the clauses, however, let me first briefly set out how they fit into this Finance Bill.

The Government remain focused on taking long-term decisions to strengthen the economy by driving productivity, increasing the number of people in high-wage, high-skilled jobs, and boosting investment. The Government are also ensuring that the tax system is as competitive as we can make it under very difficult economic circumstances. We have some of the most generous investment incentives among major economies, including full permanent expensing, which the OBR has forecast will generate almost £3 billion of additional business investment each year, or £14 billion over the next five years. It has forecast that that additional investment will increase GDP by 0.1% by the end of the forecast. In addition to full expensing, we have an internationally competitive corporation tax rate—the lowest headline rate in the G7—which this Bill legislates to maintain.

I will now turn to clauses 12, 13 and 19 in more detail. Clauses 12 and 13 set the charge for corporation tax from April 2025. This includes both the main rate and the small profits rate, as well as the thresholds at which those rates apply. The charge for corporation tax must be set every year. It is important to legislate annually in advance, as this provides certainty to large and very large companies that pay tax in advance on the basis of their estimated tax liabilities. These clauses maintain the current main rate of 25% and the small profits rate of 19%, as introduced in April 2023. Tax certainty is of great importance to businesses—I think that is something we can all agree on—and clauses 12 and 13 ensure that they will continue to benefit from stable and predictable tax rules. By maintaining the current rates, the Government have struck the right balance between remaining competitive and raising vital revenue.

Clause 19 makes changes to ensure that the energy profits levy will no longer apply if oil and gas prices return to historically normal levels for a sustained period of time. It does so by introducing legislation to give effect to the energy security investment mechanism, or ESIM. The EPL was introduced in 2022, at a time of near-record high oil and gas prices, but it is right that should those prices return to historically normal levels, the additional tax would cease to apply. The detail of how the ESIM operates was set out in the technical note published alongside the 2023 autumn statement; this Bill simply puts that detail on a legislative footing and provides for secondary legislation to legislate for the administrative details of how that check is made.

Current oil and gas prices are higher than normal, and OBR projections indicate that high prices will persist over the next five years. The ESIM is a mechanism that switches off the EPL if, for a period of six months, the average prices of both oil and gas fall below set thresholds. Those thresholds are currently $74.21 per barrel for oil and 50p per therm for gas, and are based on a 20-year historical average to the end of 2022—before higher energy prices began—and are adjusted each April based on the annual change in the preceding December’s consumer prices index. By providing certainty on the conditions under which the levy will be disapplied, the Government are supporting investor confidence in the sector and helping to protect domestic energy supply, the economy, and of course jobs.

Clauses 12 and 13 provide certainty to businesses by maintaining the current rates of corporation tax, and clause 19 has been welcomed by the oil and gas operators and their investors, with the ESIM providing the sector with certainty to support future investment in the UK—in jobs and in our energy security—while also ensuring fairness to taxpayers. I therefore commend these clauses to the Committee.

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

I call the shadow Minister.

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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.

[Sarah Olney (Richmond Park) (LD)]

The Bill maintains the small profits rate of corporation tax at 19%, but does the Minister not agree that this is a drop in the ocean compared with spiralling costs in energy, staffing, borrowing and a host of other areas? The Chancellor could have used the opportunity to give small businesses a boost by reforming business rates, or by helping them with their energy bills through a proper windfall tax. Does the Minister support new clause 7, tabled by the Liberal Democrats, which would ensure that the Government must lay before the House a review of the impact of the small profits rate to look at whether it really helps small businesses to manage their costs.

[Gareth Davies]

I will give the hon. Lady the courtesy of addressing new clause 7 in due course. She is right to highlight that the new rate for small businesses will keep around 70% of businesses in the country at 19% when those that are most profitable move to 25%, but look at the entire package of support for small businesses. It shows that the Government are supportive of our high streets and small business entrepreneurs across the country, whether that is through the increase in VAT thresholds, the 75% rate relief for retail, hospitality and leisure businesses, or all the support that we provided during the covid pandemic and throughout the energy shock, including the energy bill relief scheme and the energy bills support scheme. I put it to her that we are behind our small businesses. We regard them as the engine of our growth, and we will continue to do everything we can to support them. I will come on to new clause 7 in a moment, if I may.

New clause 3 would require a review of the possible impacts of the energy security investment mechanism on energy profits levy revenues, and on investment decisions in the oil and gas sector. It would require this assessment to be made on the basis of the end date of the EPL falling before the end of the next Parliament.

The Government have already published the tax information and impact note, which sets out the anticipated impact of the energy security investment mechanism—the ESIM. This indicates clearly that the mechanism will give operators and lenders to the oil and gas industry confidence in the fiscal regime while the EPL remains over the next Parliament. Based on the OBR’s current price projections, the ESIM is not predicted to trigger before the end of the EPL in March 2029, and is therefore expected to have no impact on EPL revenues. In addition, should there be interest in calculating forgone revenue if the EPL were to end in a particular year, the OBR has published projected EPL revenues over the forecast period, and the impact of the EPL ending early can be calculated from this publicly available information that is there for all to see.

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[Sir Christopher Chope]

Looking ahead to the next Parliament, and hoping that there will be a Conservative Government, can my hon. Friend say to all those in the business community who are watching eagerly that a 25% headline rate of corporation tax is too high, and that we want to lower it?

[Gareth Davies]

We agree. We want taxes to come down, but we are not going to announce tax decisions from this Dispatch Box outside fiscal events. It is clear for all to see that this Conservative Government believe in lower taxes. We have reduced national insurance contributions for 29 million people by some 30% in just the last six months, and the record is very clear on that.

[James Murray]

The hon. Gentleman says that the Government are not in the habit of making policy commitments outside the normal fiscal process. Does that mean the £46-billion unfunded black hole created by the promise to abolish national insurance is no longer a policy of this Government?

[Gareth Davies]

It is neither unusual nor incorrect for a Government, or any party, to set out a long-term ambition to let the public know where we stand on taxation and what we want to see in the future. In 2010, for example, we said that we wanted to increase the personal allowance for income tax to £10,000, and we met that. Actually, we exceeded it. It is now over £12,500, so a person in this country can earn £1,000 every month without paying any tax at all. That is a long-term ambition that we have delivered.

[James Murray]

The Minister is being generous in giving way. I notice that he is keen to talk about a long-term ambition to abolish national insurance. Yesterday, the Chancellor of the Exchequer said at Treasury questions that

“our policy is to abolish employees’ national insurance”.—[Official Report, 7 May 2024; Vol. 749, c. 437.]

Was the Chancellor wrong?

[Gareth Davies]

As I said, it is a long-term ambition. It is right for a party that is serious about governing to set a direction for the country. I know it is an unusual idea for the hon. Gentleman that having a plan for government is the right thing to do, but we have made it very clear to the British people that, if they vote for a Conservative Government at the next general election, their taxes will come down.

The amendments before the Committee propose that we publish information that is already publicly available. They are not needed, so I urge the Committee to reject them.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clauses 13 and 19 ordered to stand part of the Bill.

New Clause 2

Review of impact of section 12

“(1) The Chancellor must, within three months of this Act being passed, conduct a review of the impact of section 12 of this Act.

(2) The review must consider how the rate of corporation tax provided for by section 12 affects—

(a) investment decisions taken by businesses,

(b) the certainty of businesses about future fiscal and market conditions.

(3) For comparative purposes, the review must include an assessment of how the factors in subsection (2)(a) and (b) would be affected by maintaining corporation tax at a rate no higher than that set out in section 12 until the end of the next parliament.”—(James Murray.)

This new clause requires the Chancellor to conduct a review of how the rate of corporation tax set by the Bill set out in clause 12 affects business investment and certainty, including what the effect would be of capping it at its current level for the next Parliament.

Brought up, and read the First time.

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

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 7th May 2024 Commons Chamber

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

8. What fiscal steps his Department is taking to support small businesses.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Small businesses drive our economy, and we support them to thrive using levers across Government, whether through our small business rates relief, by increasing the VAT registration threshold, or providing reliefs such as the annual investment allowance.

[Stephen Crabb]

In England, many small businesses receive a 75% reduction in business rates thanks to action by this Conservative Government. In Wales, the Labour Administration have cut that level of support to 40%, meaning that excellent hospitality businesses such as Martha’s Vineyard in my constituency must find thousands of pounds more in tax. Does the Minister agree that that is not the way to support the tourism and hospitality sector at a challenging time, and that it is an example of the Labour party saying one thing here at Westminster and doing another where they are in government?

[Gareth Davies]

My right hon. Friend is right that in the autumn statement the Government extended retail, hospitality and leisure relief in England, essentially to cut tax for 230,000 businesses—a tax cut worth £2.5 billion. The Barnett formula allows the Welsh Labour Government to offer similar relief to Welsh businesses, and it is disappointing, if not surprising, that they have chosen not to.

[Helen Morgan (North Shropshire) (LD)]

On Friday, I visited the K C Jones Motor Repairs garage, a medium-sized business of very long standing in Oswestry in North Shropshire. One of the many challenges that it faces, alongside astronomical energy bills and a shortage of skilled labour, is the business rates that it needs to pay because it must have a high street presence in order for people to take their cars there. Will the Minister consider fundamental reform of business rates so that businesses that need a high street presence can continue to exist? At the moment, they are under huge pressure.

[Gareth Davies]

As I was saying, we have a 75% relief for most high street businesses. I encourage the hon. Lady to look at the package as a whole. We have increased the VAT threshold, bringing 28,000 businesses like the one she describes out of paying any VAT at all, on top of a range of other measures.

[Dame Andrea Jenkyns (Morley and Outwood) (Con)]

The cherished independent shops and restaurants that line the streets of Morley serve the lifeblood of our community. In order to safeguard the very heart of our local economy, what bold measures is the Department taking to counter the oppressive weight of skyrocketing business rates imposed by the financially reckless Labour-led Leeds City Council?

[Gareth Davies]

I know that my hon. Friend is a great champion of all businesses in Morley and across Leeds because I have seen it at first hand. I point out to her as well that the Government have reduced taxation on small businesses, we have increased the VAT threshold, and we have a 75% rate relief for retail, hospitality and leisure businesses, which she alluded to. It is this Conservative Government who are on the side of hard-working people and businesses across Morley and around the country.

[Wera Hobhouse (Bath) (LD)]

In the last decade, more than one music venue closed every week, including Moles in Bath. That has resulted in the loss of 4,000 jobs, 14,250 events, over 190,000 performance opportunities, £9 million of income for musicians and £59 million in lost direct economic activity. What are the Government doing to support small music venues?

[Gareth Davies]

We are doing a lot. We are increasing the VAT threshold, and we have a rates relief package. The recent spring Budget was one of the biggest packages supporting our cultural industries that this country has ever seen, and I encourage the hon. Lady to look at it.

[Mr Speaker]

I call the shadow Minister.

[Gareth Davies]

Banking hubs are driven by commercial organisations. Any area that loses bank branches is entitled to get a banking hub. Of course, we want to see more across the country, but we also have to recognise that banking has changed and the ways in which people bank have moved more towards digital, so it is right that commercial organisations take commercial decisions.

[Liz Twist (Blaydon) (Lab)]

10. What recent fiscal steps he has taken to help reduce regional economic inequalities.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

At the spring Budget, we built on the £15 billion of levelling-up commitments made since 2019. We announced a trailblazer devolution deal for the north-east mayoral combined authority and a £400 million extension to the long-term plan for towns.

[Liz Twist]

The cross-party Public Accounts Committee has revealed that the Government’s levelling-up funds were subject to a “worrying lack of transparency”, with rules for accessing funding changing while bids were still being assessed. Will the Minister therefore apologise to the 55 local authorities rejected for funding that were not told in advance that their applications had no chance of success?

[Gareth Davies]

This is the Government who implemented £15 billion of support for communities outside of London and the south-east, which is one of the reasons why median pay growth is higher in every region outside of London and the south-east. Of course, there is a robust methodology and criteria for selecting places for funding, and I encourage the hon. Lady to look at those criteria.

[Peter Gibson (Darlington) (Con)]

With the Darlington economic campus now having passed 750 employees and being well on its way to providing over 1,500 roles in my constituency, what assessment has my hon. Friend made of its contribution to the local economy, to reducing inequalities and to our levelling-up agenda?

[Gareth Davies]

The Darlington economic campus is an important part of this Government’s operations and of our Government estate, but it is also important to the people of Darlington, and not just in terms of the jobs it has created. Of course, it builds on the back of significant funding on my hon. Friend’s watch: the £22 million town deal and the £6 million as part of the shared prosperity fund. That is one of the reasons why the people voted to elect Ben Houchen just the other day.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Regional inequality may be made worse by my constituents facing having to pay again for funeral plans after they were sold fake funeral plans by Legacy funeral directors. Many simply cannot afford to pay for those plans again and, instead of having the funeral that their families wanted for them, they will only be able to have the free service offered by the council. Does the Minister agree that banks should offer more discretion when looking at victims of fraud, and will he meet with me to discuss this specific case further?

[Gareth Davies]

I am very sorry to hear of the circumstances that the hon. Lady has described. My hon. Friend the Economic Secretary, in whose portfolio this issue sits, will meet with her.

[Martin Vickers (Cleethorpes) (Con)]

For many years, coastal communities have suffered economic inequalities, and we all know that the best way of changing that is to create the conditions for investment and the jobs that go with them. Despite the good work that the Government have done, we still need more funding in areas such as Cleethorpes. Could the Minister outline what plans the Government may have for bringing forward further schemes in the near future?

[Gareth Davies]

It is right to acknowledge that funding has gone in. I completely appreciate the specific challenges that coastal communities face, but it is important to look at the package of measures to level up—not just funding such as the shared prosperity fund, levelling-up fund and towns fund, but the 13 devolution deals, 13 investment zones and 12 freeports. These are all packages and measures that will help areas such as my hon. Friend’s, but I will always keep his area in mind.

[Mrs Flick Drummond (Meon Valley) (Con)]

11. What fiscal steps he is taking to support households with the cost of living.

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[Carla Lockhart (Upper Bann) (DUP)]

T5. The consistently high price of fuel is making drivers dig deep just to go about their daily business. With a rise of 10p reported since the start of the year and the average cost of filling a family car now £82.50, what efforts will the Government make to help those people in my rural constituency and across the United Kingdom who have little or no access to public transport and are dependent on their vehicles for work and family life?

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The hon. Member is entirely right. That is why we froze fuel duty at the last fiscal event: a measure that costs £6.5 billion and will save the average driver £50.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

May I place on record my thanks to the Chancellor, who in his Budget devoted funds to Bournemouth for a police violence reduction unit? Does he agree that these units have a track record up and down the country of tackling knife crime by not just seeing extra police on the frontline, but engaging with schools to ensure that youths and students understand the folly of carrying a knife in the first place?

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[Ian Levy (Blyth Valley) (Con)]

Cramlington has a world-leading pharmaceutical company, Organon, which employs 700 people and produces medicine for the UK market as well as abroad, with a particular focus on women’s health. Will my right hon. Friend the Chancellor please meet me to discuss the impact on pharmaceutical investment?

[Gareth Davies]

My hon. Friend is absolutely right. The pharmaceutical industry is worth some £14 billion to our economy. I am pleased to tell him that the industry has seen a twelvefold increase in equity financing in just the past decade, and I would be pleased to meet him to discuss that further.

[Wera Hobhouse (Bath) (LD)]

Soaring rent costs are the biggest reason why my constituents in Bath are struggling. The average monthly rent in Bath and north-east Somerset has risen by more than £200 in the past three years. What support will the Government give to people who rent in the private sector?

Building Societies Act 1986 (Amendment) Bill

Gareth Davies Excerpts

Report stage
Friday 19th April 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Let me first congratulate the hon. Member for Sunderland Central (Julie Elliott) on reaching the Third Reading of her important Bill, which will help to ensure the future growth and success of the building society sector. She is a strong advocate for the sector, and has introduced a Bill that will help it to grow and compete with retail banks, so that it can continue to provide vital diversity to the UK financial services sector.

I also congratulate my hon. Friends the Members for East Kilbride, Strathaven and Lesmahagow (Dr Cameron), and for Milton Keynes North (Ben Everitt), and especially my hon. Friend the Member for Darlington (Peter Gibson), who I was delighted to join back in November to open the Darlington Building Society in the middle of town. I saw from him and the employees just how impactful they are in his community, and I am sure that they will go from strength to strength.

[Peter Gibson]

While the Minister is on his feet, I wonder whether he could outline to the House the gift he received from Robin Blair, our veteran fruiterer and vegetable trader in our historic market hall, who joined him on that opening day.

[Gareth Davies]

I was not expecting an intervention on that of all subjects, but I did enjoy the satsumas that were provided by the very nice gentleman, who I understand is an institution in the town of Darlington.

As I was saying, building societies are important to all our communities, not least mine in Grantham and Bourne. In Grantham I have the Nationwide Building Society, the Nottingham Building Society and the Melton Mowbray Building Society, a new branch of which is opening in Bourne in April.

Today I wish to outline a few things: first, the Government’s support for the mutuals sector; secondly, the importance of mutuals to our overall financial services sector; and, finally, how this Bill will further support the future growth and success of mutuals. The Government want to promote the growth of mutuals, which make a vital contribution to the UK economy. As outlined in the mutuals prospectus, there are over 9,000 mutuals operating throughout the country, with a combined annual turnover of some £88 billion in 2022, which equates to 3.5% of UK GDP. However, beyond their vital financial contribution to the UK economy, mutuals play an important role in supporting people across the country. Their unique ownership model means that these businesses are rooted in their local communities, and working to make society better.

It is for those reasons that the Government are committed to supporting the growth and success of the mutual sector. For example, last summer the Government amended the Credit Unions Act 1979 so that credit unions in Great Britain can offer a greater range of products and services. Moreover, as the hon. Member for Sunderland Central said, last year the Government supported the private Member’s Bill introduced by the hon. Member for Preston (Sir Mark Hendrick), which achieved Royal Assent in June 2023. The Co-operatives, Mutuals and Friendly Societies Act 2023 will allow the Treasury to pursue further secondary legislation to give co-operatives, mutual insurers and friendly societies greater flexibility in deciding what to do with their surplus capital and the restrictions on their assets. The Government continue to develop a modern and supportive business environment for mutuals. As part of that, we have asked the Law Commission to conduct reviews of the Co-operative and Community Benefit Societies Act 2014 and the Friendly Societies Act 1992.

Building societies are perhaps one of the best-known types of mutuals. There are 42 building societies operating throughout the country, providing mortgage and savings products to around 26 million members. They play an essential role in supporting their members in building savings habits and buying their own home, as the hon. Member for Bristol North West (Darren Jones) outlined. That cause is supported by Members from across the House, but particularly by the hon. Member for Sunderland Central, who has consistently championed the importance of supporting first-time buyers—not just in her constituency, but across the country.

Building societies are especially well represented in communities outside the south-east. For example, the Melton Mowbray Building Society provides vital support in all areas neighbouring my constituency, and I note that the Newcastle Building Society has a significant presence in the constituency of hon. Member for Sunderland Central. It builds on a 160-year history, and its amazing commitment to its members in the communities in which it operates remains strong. It has partnered with the citizens advice fund to provide expert advice to members, answering questions on a variety of important issues. She also has the Yorkshire Building Society in her constituency, which has done great work on financial literacy through its Money Minds programme.

It is clear that building societies contribute to the wellbeing of communities throughout our country, including in the constituency of the hon. Member for Sunderland Central. The Government are fully supportive of this private Member’s Bill, which will help the sector to compete more effectively with retail banks, so that building societies can continue to work.

This Bill is about enabling building societies to grow and compete with retail banks. We are achieving that by updating the legislation in three short ways. First, the Bill excludes three specified sources of funding from the 50% wholesale funding limit for building societies. This will provide them with greater flexibility in raising additional wholesale funding, while still operating within the mutual model. The detail of the funds will be further specified by the Treasury through secondary legislation in due course. Furthermore, the amendment in the name of the hon. Member for Sunderland Central means that the statutory instruments will be subject to the affirmative procedure, allowing for greater parliamentary scrutiny; that comes on the back of very constructive work from across the House. The amendment does not change the policy outcome of the Bill in any way, but simply amends the parliamentary procedure that will be followed when subsequent regulations are made.

Secondly, the Bill allows for the option of real-time virtual participation at building society meetings. This will improve meeting accessibility and promote wider membership engagement, should the members of any building society choose to permit virtual participation under their rules.

Finally, the Bill will provide His Majesty’s Treasury with the power to further align constitutional provisions. Specifically, it will align provisions in part 2 of the Building Societies Act 1986 on common seals and the execution of documents with modifications made to company law. This will remove outdated and burdensome legislative requirements, and update the 1986 Act, in line with modernisations made to company law.

In conclusion, the Government fully support the hon. Lady’s Bill. We recognise the importance of the building society sector, which supports people and communities across the country. I extend my thanks to the hon. Lady for introducing the Bill and for progressing it to Third Reading. She can be assured that the Government share the vision set out in the Bill for supporting the future growth and prosperity of the building society sector.

Finance (No. 2) Bill

Gareth Davies Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is always a pleasure to see you in the Chair, Madam Deputy Speaker. Let me begin by thanking Members from across the House for their contributions to the debate on this Finance Bill.

Before I address some of the specific points raised, let me briefly reflect on what this Bill is seeking to achieve. It is a Bill for a Budget that rewards work, and it sends a clear message to working people across the country that we support them. We want their work to pay and we want them to have more money in their pocket at the end of the working day. We want to continue to make this country a great place in which to live, work and invest; and to provide our key growth industries with the support and incentives they need to continue to thrive. Taken together, these policies will drive economic growth and productivity for years to come by focusing on workforce participation and stimulating business investment.

Despite going through an incredibly difficult time these past years, with a global pandemic and a war in mainland Europe, our economy has now turned the corner. Inflation is down from its peak of 11% to 3.2%; real wages are consistently rising; and, despite high interest rates, our economy is growing, because of the action that we have taken over the past few fiscal events and the plan that we have put in place—it is always important to have a plan, Madam Deputy Speaker—and this Bill continues our work to execute that plan.

The Bill will support hard-working parents by increasing the high-income child benefit charge threshold and taper, taking 170,000 families out of paying that tax charge, and with almost half a million families gaining an average of £1,260 towards the cost of raising their children. My hon. Friend the Member for Amber Valley (Nigel Mills) made thoughtful remarks about our intention to move to a household basis. We will absolutely take those remarks on board, as he mentioned, and we will be consulting on this issue shortly and his points will also be taken on board in that process.

My hon. Friend the Member for Cities of London and Westminster (Nickie Aiken) pointed out that the Bill will encourage investment in our world-leading creative industries—a key growth sector for the UK—with a new tax relief for UK-made independent films. It will permanently increase the rates of tax reliefs for theatres, orchestras, museums and galleries, backing British talent in film and on the stage, and we will always champion our creative industries, which remain the envy of the world. She raised points about specific challenges, particularly on immersive audiences. Production will qualify for theatre tax relief if the main purpose of the audience is to observe. Some level of audience participation will not necessarily disqualify a production, but it cannot be the main purpose. Further guidance will be issued by the Treasury, and I know that my hon. Friend the Financial Secretary to the Treasury would be happy to meet her to discuss the specific issues her constituents are facing.

My hon. Friend the Member for Waveney (Peter Aldous) has been a consistent champion for the oil and gas industry, and quite right too. He acknowledged that the Bill will provide more certainty to investors in the oil and gas industry, and the finance industry that lends for investment, by putting the energy security investment mechanism into legislation. The ESIM operates on the basic principle that it is only right that when prices of oil and gas come down to normal levels, so too should the tax on exceptional profits. That gives certainty to industry and also brings more fairness.

My hon. Friend the Member for North East Bedfordshire (Richard Fuller) made a typically constructive and, perhaps, creative speech, and made a number of points. In particular, his support for our national insurance contribution cuts was much appreciated. He is right to highlight an under-appreciated policy on auto-enrolment, which has seen 10.3 million people brought in to saving for a pension, with 86% of private pension savers now participating more than they were before. We will look closely and work with him on his specific suggestion relating to national insurance contributions to boost savings. We all want the savings culture in this country to grow and grow, and we are always open to suggestions.

The national insurance contributions had a separate Bill, but they continue to be a subject of debate in Treasury discussions. The Opposition’s suggestion that our ambition to remove the double tax on work is some kind of unfunded policy must be addressed. Let me be clear: this is an ambition; it is obviously not happening overnight. Let us look at what we have done over the past six months for hard-working people across the country: we have cut national insurance contributions by 30%, all while increasing pensions by 8.5%, and providing record funding for our NHS. Indeed, having an ambition in public policy is not new. In 2010 we set out a long-term ambition to raise the personal allowance to £10,000, which we did not just meet but exceeded, and it is now over £12,500, as acknowledged by my hon. Friends the Members for Amber Valley and for North East Bedfordshire.

It is important to set out a direction of travel for the British people, and to show ambition for what we want to do in government. Not only do Labour Members not have any long-term ambitions, but none of their ambitions seem to last very long. They talk about change, but the only change that the Labour party offers is a change in its own policies, week after week after week, and that’s just weak! Labour’s policies are so weak and vague that even its righteous moral compass cannot find a direction. However, there are a few glimmers of what a Labour Government might look like—what five years of hard labour might look like. For example, we know that under Labour’s embattled deputy leader and the trade unions, 70 new regulations will hamper the ability of businesses to hire, stifle their ability to grow, reduce job opportunities, and unleash waves of low-threshold, zero-warning strikes on hard-working British people. Labour calls it a new deal, but let us face it: it is a raw deal for business and workers across the country.

I have not even mentioned the things that the Labour party is doing today where it is in charge, so let us just quickly go through those: 20 mph zones, limited rates relief and longer NHS waiting lists, all in Labour-run Wales; a bankrupt council, adult social care budgets cut and council tax up by 21%, all in Labour-run Birmingham; and knife crime up, relentless National Union of Rail, Maritime and Transport Workers strikes and a cruel ultra low emission zone tax on motorists, all in Labour-run London. The House will forgive me if I will not take lectures from the Labour party.

To conclude, we are delivering a Finance Bill that will see us move forward with the Government’s plan to support long-term growth, encouraging people into work, boosting investment and ensuring that hard-working taxpayers keep as much of their money as possible. We on the Government Benches choose aspiration over envy and ambition over declinism. For those reasons and more, I commend this Bill to the House.

Question put, That the amendment be made.

Oil and Gas Decommissioning Relief Deeds

Gareth Davies Excerpts

Thursday 21st March 2024 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

At Budget 2013, the Government announced that they would begin signing decommissioning relief deeds.

Since October 2013, the Government have entered into 108 decommissioning relief deeds. Offshore Energies UK estimates that these deeds have so far unlocked approximately £11.8 billion of capital, which can now be invested elsewhere.

The Government committed to reporting to Parliament annually on progress with the decommissioning relief deeds. The report for the financial year 2022-23 is provided below.

Number of decommissioning relief agreements entered into: the Government entered into four decommissioning relief agreements in 2022-23.

Total number of decommissioning relief agreements in force at the end of that year: 105 decommissioning relief agreements were in force at the end of the year.

Number of payments made under any decommissioning relief agreements during that year, and the amount of each payment: three payments were made under a decommissioning relief agreement in 2022-23, for £16.2 million in total. These were made in relation to the provisions recognised by HM Treasury from 2015 onwards as a result of companies defaulting on its decommissioning obligations.

Total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments: 16 payments have been made under any decommissioning relief agreement as at the end of the 2022-23 financial year, totalling around £260 million.

Estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. HM Treasury’s 2023-24 accounts will recognise a provision currently estimated to be £254 million in respect of decommissioning expenditure incurred as a result of companies defaulting on their decommissioning obligations¹. The majority of this is currently expected to be realised over the next several years.

¹ This figure, which is an estimate at the last interim reporting period, is unaudited and takes into account payments made subsequent to the financial year covered by this written ministerial statement. The estimate is under review ahead of the year end reporting period and may be updated to reflect newer information.

[HCWS365]

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 19th March 2024 Commons Chamber

[Kim Johnson (Liverpool, Riverside) (Lab)]

15. What recent fiscal steps he has taken to help reduce the level of economic inequality between the north and south of England.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The Government continue to tackle regional economic inequalities and level up the United Kingdom. The Government are empowering local leaders through a range of devolution deals, regenerating places across the country and investing in vital infrastructure.

[Afzal Khan]

In response to this month’s Budget, the director of the Institute for Public Policy Research North has said that

“This Budget is the government’s admission that it has given up on levelling up this parliament, despite there being much left to do.”

Delivering on the Government’s levelling-up commitments would mean that my constituents would benefit from reduced social welfare dependency, increased earnings potential, and improved health and wellbeing. Does the Minister not think that my constituents and all citizens outside London and the south-east deserve the benefits that come with economic prosperity?

[Gareth Davies]

We are committed to levelling up, and are delivering on it across the country. Median pay growth has been higher in every region outside London and the south-east under this Government, and the hon. Gentleman’s constituency is receiving £19 million from round 1 of the levelling-up fund and £20 million from round 3. We have announced a Greater Manchester trailblazer devolution deal and a Greater Manchester investment zone, which will bring more jobs and prosperity for all of his constituents.

[Kim Johnson]

I have heard what Ministers have said this morning, and I must be living in an alternative universe. Liverpool has some of the most deprived wards in the country, which have experienced poverty and destitution over the past 14 years as a result of austerity. Some 300,000 people have accessed the household support fund, and while we are a resilient city and will continue to support those households, can the Minister explain what safety net will be put in place to support those in poverty and destitution when the household support fund ends in six months’ time?

[Gareth Davies]

The hon. Lady is right to highlight the fact that we have extended the household support fund for the most vulnerable. That is on the back of £96 billion of support during the energy crisis and nearly £400 billion of support through the global pandemic. I would just point out to the hon. Lady that the fundamental difference between Conservative Members and Labour Members is that we believe the best route out of poverty is through work, and our party is increasing employment.

[Derek Thomas (St Ives) (Con)]

Across Cornwall and the Isles of Scilly, most jobs are supplied by very small businesses, many of which fall below the VAT threshold. Given the economic inequalities around the region, the increase of the VAT threshold to £90,000 is very welcome, but the threshold being that low and the cliff-edge effect of going from zero to 20% have a chilling impact on growing small businesses and providing all-year-round jobs. Will the Minister consider introducing some sort of taper for that £90,000 threshold, and increasing the VAT threshold further—maybe in the region of £120,000?

[Gareth Davies]

My hon. Friend is right: we increased the VAT threshold for small businesses, which will benefit 28,000 businesses across the country. We feel that the £90,000 threshold strikes the right balance between managing public finances sustainably and supporting businesses, but as my hon. Friend knows, we keep these things under review.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

The port of Milford Haven in my constituency has been right out in front, taking a lead in investing in decarbonisation and showing how it can boost the economy of Wales and reduce inequality. Yesterday, it was told that its bid to the Government’s floating offshore wind manufacturing investment scheme—its port funding scheme—had been rejected out of hand. Will my hon. Friend ask his good friend the Chancellor of the Exchequer to meet me to talk about the important work being done at the UK’s leading oil and gas port, and about how the UK Government can support those efforts financially?

[Gareth Davies]

FLOWMIS is an incredibly important scheme in improving and enhancing our ability to expand floating offshore wind. We are a huge supporter of my right hon. Friend’s constituents and of the whole of Wales. If the Chancellor cannot meet him, I would be very happy to do so.

[Karl MᶜCartney (Lincoln) (Con)]

7. What assessment he has made of the impact of raising the high-income child benefit charge threshold on household incomes.

--- Later in debate ---

[Simon Baynes (Clwyd South) (Con)]

8. What fiscal steps his Department is taking to help increase the level of business investment.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

At the autumn statement in 2023, the Chancellor set out ambitious growth packages designed to boost business investment, including making full expensing permanent and a tax cut to companies of over £10 billion a year to ensure we have one of the most generous capital allowances in the world. With further growth-enhancing measures set out in spring Budget 2024, the Office for Budget Responsibility estimates that Government policy announced at the past three fiscal events is expected to increase the size of the economy by 0.7% by 2028-29.

[Simon Baynes]

Like my hon. Friend the Member for St Ives (Derek Thomas), I was delighted to see the increase in the VAT threshold from £85,000 to £90,000 in the Budget. That will help small businesses invest for the future, such as the Two Doves café and gift shop in Overton, which is popular with people from both Clwyd South and North Shropshire. However, given the vital importance to small businesses, will my hon. Friend prioritise increasing the VAT threshold again in the next fiscal intervention?

[Gareth Davies]

My hon. Friend comes to this House with significant business experience, so when he talks, we certainly listen, and I am delighted to hear that he was pleased with the VAT threshold increase. I can tell him that, in addition to what I said to my hon. Friend the Member for St Ives (Derek Thomas) about the £90,000 threshold, this level is higher than that of any EU member state and is the joint highest in the OECD. Many of his businesses will be among the 28,000 that will benefit from the increase, so we have no plans at this stage to change it.

[Andrew Gwynne (Denton and Reddish) (Lab)]

But the actual record of this Government over the past 14 years is abysmal. It is a fact that business investment has been consistently among the lowest in both the OECD and the G7, and now the Office for Budget Responsibility is forecasting a further 5% fall this year. Why?

[Gareth Davies]

Announcements in each of our last three fiscal events have enhanced our business investment environment for international investors: we have the second highest foreign direct investment stock in the world; we have some of the best universities in the world, which are attracting businesses; we have announced full expensing, which is a £10 billion-a-year tax cut; we have the lowest corporation tax in the G7; and we are reforming our energy grid, bringing investment into our net zero ambitions. We are reforming our systems, reducing our taxes, and encouraging investment.

--- Later in debate ---

[Mrs Flick Drummond (Meon Valley) (Con)]

18. What fiscal steps his Department is taking to support small businesses.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Small businesses drive our economy and we support them to thrive using levers across Government, whether that is through our small business rate relief, by increasing the VAT registration threshold, by providing reliefs such as the annual investment allowance or through various programmes offered by the British Business Bank.

[Dr James Davies]

The Welsh Government are increasing the burden on small businesses by reducing retail, hospitality and leisure business rates relief from 75% to just 40%, despite the UK Government rightly extending that relief in England in the Budget. That means that businesses in my constituency, such as the Little Cheesemonger, Now to Bed, Presents with a Difference and Tu Mundo, are all facing unsustainable business rates bills. One business has to find an extra £35,000 a year for business rates alone. What advice does the Minister have for small businesses in north Wales facing these onerous bills?

[Gareth Davies]

My hon. Friend is right that at the autumn statement, this Government extended the retail, hospitality and leisure relief in England—a tax cut worth £2.5 billion for small businesses. The Barnett formula applies to allow the Welsh Labour Government to offer similar relief if they want to. It is disappointing, if not surprising, that when given the opportunity, Labour decides not to cut taxes for working people.

[Paul Holmes]

Does my hon. Friend agree that one of the best steps that the Government can take to support small businesses in Eastleigh, Hedge End and Botley is through a package of business rate reductions? Will he outline to the House the progress the Government have made in this regard, which was desperately needed?

[Gareth Davies]

My hon. Friend is right. Business rate relief is a great way to support small businesses in Eastleigh and across the country. Our small business rate relief means that one third of all properties in England already pay no business rates at all. We have frozen the small business multiplier, protecting more than 1 million properties from a multiplier increase. As I was just saying, we are supporting high streets with our retail, hospitality and leisure relief.

[Mrs Drummond]

Just after the Budget, I met some of the small businesses in my constituency at the Flower Pots in Cheriton. While they were pleased with some of the Budget, they talked about improving productivity and growth by raising the VAT threshold far beyond £90,000, and possibly to £250,000. They felt that that would incentivise sole traders and small businesses to expand and work longer hours. They feel at present that growth is restricted because of the level of the VAT threshold. Has the Chancellor given any thought to increasing the threshold to improve productivity?

[Gareth Davies]

My hon. Friend is right to engage in the way that she is with her small businesses. We believe that the £90,000 threshold, which has just been increased, strikes the right balance between managing the public finances and supporting small businesses. I encourage her to look at the wider package of support that the Government are providing for small businesses, not least the business rate relief that I was just talking about.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Will the Minister have discussions with his counterparts in the devolved institutions to ensure that the likes of sole traders and small businesses see a reduction in bureaucracy to make them more profitable, offering more business opportunities to more people across the United Kingdom?

[Gareth Davies]

I can assure the hon. Gentleman that the Government engage frequently with our counterparts in the Northern Ireland Administration, and that will continue to be the case.

[Mike Amesbury (Weaver Vale) (Lab)]

According to the Federation of Small Businesses, two in three small businesses are suffering from late payments. We are now 14 years into a Tory Government. Why do the Government not follow Labour’s lead and strengthen the law on this?

[Gareth Davies]

We are acutely aware of this issue, and I have had meetings with the FSB. That is why the Chancellor has announced plans to improve the situation for small businesses. I am happy to outline that in writing to the hon. Gentleman.

[Alison Thewliss (Glasgow Central) (SNP)]

One of the requests from female-led businesses in my constituency, including Cùrlach and Rock’n Rollers, was for a VAT cut for hairdressing businesses. Can the Minister tell me why that was not considered in the Budget? These businesses are an important part of our high streets and they are often led by women, who have missed out significantly in the Chancellor’s Budget.

[Gareth Davies]

We of course support hairdressers, our high streets and women-run businesses, which is why we have extended the retail, hospitality and leisure relief to 75%. Cutting taxes for hard-working people is what the Conservative Government do.

[Helen Morgan (North Shropshire) (LD)]

14. What recent assessment he has made of the impact of his income tax policies on pensioners.

--- Later in debate ---

[Wendy Chamberlain (North East Fife) (LD)]

T2. The Fife whisky festival took place in Cupar earlier this month, and was a great success. The industry welcomes the freeze in alcohol duty, but notes that it is only for six months. When will the Government provide the longer term consistency that the industry needs?

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Our support for the Scotch Whisky Association is long-standing, and it was a pleasure to meet its representatives recently. We have frozen or cut duty for Scottish whisky in fiscal events going back many years. We are representing the Scotch Whisky Association in trade agreements, and that support will endure long into the future.

[Jill Mortimer (Hartlepool) (Con)]

T5. In response to the spring Budget, I have heard from constituents who feel that they may have been forgotten. Under the Conservatives, the number of pensioners living in absolute poverty has been slashed by 200,000 across the country, and we have protected the triple lock, but could my right hon. Friend please remind me of all the steps that his Department is taking to support Hartlepool’s pensioners, so that I can tell them on the doorsteps this weekend?

--- Later in debate ---

[Will Quince (Colchester) (Con)]

The proposed changes to wine duty will add huge costs and complexity to business. Further to my Westminster Hall debate, will my hon. Friend meet me and representatives of wine businesses to hear their concerns, and make permanent the easement that is due to end on 1 February next year?

[Gareth Davies]

My hon. Friend is talking about the largest and most significant reform of our alcohol duty system in 140 years. We are making it more simple by saying: the stronger the alcohol by volume, the more duty paid. We introduced the wine easement to give the wine industry two years to prepare for the changes. I continue to engage with the industry, and I will continue to engage with him.

[Sarah Owen (Luton North) (Lab)]

T8. Two years ago, P&O Ferries sacked 786 workers and replaced them with agency staff paid less than the minimum wage. After that fiasco, the Government promised to review all contracts with the company. Why is it that, since then, the Government have spent £900,000 directly with P&O Ferries? Why are the Conservatives so comfortable spending taxpayers’ money on rewarding the appalling treatment of working people?

Pillar Two: Addition of an Anti-abuse Rule

Gareth Davies Excerpts

Thursday 14th March 2024 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

On 15 December 2023, the UK, and over 135 members of the OECD/G20 inclusive framework on base erosion and profit shifting, agreed the third set of administrative guidance on the global anti-base erosion model rules (pillar two), which was published on 18 December.

This guidance includes a technical reform to close off certain transaction-based tax avoidance mechanisms.

These avoidance transactions are being marketed to taxpayers internationally with the aim of allowing them to exploit the transitional country-by-country reporting safe harbour, which is a temporary simplification contained in the model rules. The guidance confirms that a constituent entity cannot qualify for the transitional CBC safe harbour as a result of entering into such transactions.

In particular, section 2 of the guidance inserts paragraphs 74.1 to 74.31 into the safe harbours and penalty relief OECD guidance document—published in December 2022—to provide further guidance on the application and operation of the CBC safe harbour, and makes certain other changes, including amendments to paragraph 22 of that document.

As with any such agreement, it is for the Government to choose whether and how to legislate for these provisions.

The Government intend to apply these provisions from 14 March 2024 to prevent a loss of UK tax and will legislate in a future Finance Bill. The Government will consult with interested stakeholders on how the provisions are legislated, with a view to ensuring the legislation operates as envisaged without any unintended outcomes.

The OECD guidance on this rule was published at https://www.oecd.org/tax/beps/administrative-guidance-global-anti-base-erosion-rules-pillar-two-december-2023.pdf on pages 18 to 21.

[HCWS340]

National Insurance Contributions (Reduction in Rates) (No.2) Bill

Gareth Davies Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

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

For the second time this year, we are cutting taxes for 29 million working people across the country—something that is particularly remarkable in the aftermath of the worst pandemic in 100 years, the worst war in mainland Europe since 1945, and the highest energy spike since the 1970s. The Government have had to take difficult decisions to restore the public finances, and those decisions are starting to pay off. Our economy is growing, and debt is forecast to reduce. Inflation is down significantly, unemployment is at near-record lows, and wages are rising. As the outlook improves, our priority is to return money to working taxpayers while keeping the public finances on track.

We believe that the tax system should be fair and simple, and should reward hard work, yet the way we tax people’s income is particularly unfair. People who get their income from having a job pay two types of tax: national insurance contributions and income tax. People who get it from other sources pay only one. The result is a complicated system that does not support work as best it could. For that reason, the Bill will build on the changes to national insurance contributions in the autumn statement.

The Bill contains two measures: a reduction in the NICs employee class 1 main rate, and a reduction in the NICs class 4 main rate. Both measures are important. Allowing working families to keep as much of their hard-earned money as possible is a priority for the Government. The Chancellor has always been clear that when we can cut taxes, we will.

[Mr Louie French (Old Bexley and Sidcup) (Con)]

My hon. Friend is making a great speech, and I fully support the Government’s efforts to reduce the taxes of working people, alongside the pledge to increase the money going to pensioners through the triple lock. Does he agree that it is disgraceful that, while the Conservatives are working hard to cut taxes and help working people, Labour is increasing the share of council tax for all Londoners, and hitting drivers with charges of up to £12.50 per day thanks to the ultra low emission zone?

[Gareth Davies]

My hon. Friend is consistent in holding the administration in London to account. He is right: as we are still not out of the woods when it comes to the cost of living crisis, the Conservative party has made it clear that we disagree with the Mayor of London’s approach of making motorists poorer.

As I said, building on the changes in the autumn statement, we will once again be supporting working families by reducing the main rate of employee class 1 NICs by two percentage points to 8% on earnings between £12,570 and £50,270 from 6 April 2024. That will cut taxes for over 27 million employees. The average worker on £35,400 a year will save £450 a year, and the majority will see the benefit in their payslips at the start of the new tax year. Taken together with the cuts to NICs in the autumn statement, this tax cut is worth some £900 a year to the average worker.

In addition, we are implementing a further reduction in the main rate of class 4 NICs for the self-employed. The Chancellor announced in the autumn statement that the main rate of class 4 will be reduced from 9% to 8% from 6 April. Today, we are cutting the rate by an additional two percentage points from 8% to 6% from April 2024. That is a total cut of three percentage points in just six months. Combined with the abolition of the requirement to pay class 2, which was announced in the autumn statement, that will save an average self-employed person £650 a year, and benefit over 2 million people across the country.

Together with the autumn statement cuts, this is an overall tax cut worth some £20 billion per year—the largest-ever cut to employee and self-employed national insurance. Because of the action that we have taken, the average earner in the UK now has the lowest effective personal tax rate since 1975. The Government are committed to tax cuts that reward and incentivise work and that grow our economy sustainably and boost productivity. The Office for Budget Responsibility has said that the national insurance cuts announced in the spring Budget will increase the total hours worked by the equivalent of almost 100,000 full-time workers by 2028-29. Because of the cuts, just over 30,000 people will move into work. These reductions in tax will drive more people to seek employment. This is our plan for a simpler, fairer tax system that makes work pay.

[Alexander Stafford (Rother Valley) (Con)]

My hon. Friend is making a powerful Conservative speech about the importance of not just cutting tax but getting more people into work. Has the Department estimated how much more tax revenue will come in as a result of more people working because of these changes, so that we can show that lower taxes actually increase tax revenues for the Exchequer?

[Gareth Davies]

My hon. Friend is right to point that out. A fundamental benefit of reducing tax is that it improves growth in our economy, because more people will be in work and working longer hours. That obviously generates more productivity for our economy, and ultimately more tax revenues for the Exchequer. It is a fundamental Conservative principle that we want lower taxes, and we are delivering that today because it is fiscally responsible to do so, and we are able to do so.

[Anna Firth (Southend West) (Con)]

I am grateful to my hon. Friend for making such a powerful case for cutting taxes, a fundamental Conservative principle. The Bill will put £960 back into the pocket of the average worker in Southend, who earns £36,400, and will put £1,920 back into the pockets of a family in Southend with two people on the average wage. Does he agree that that is a considerable and welcome tax cut for hard-working people in Southend?

[Gareth Davies]

My hon. Friend is right to point that out. I would add to those figures: since 2010, we have lifted millions of people across the country, including in Southend West, out of paying any tax at all by doubling the point at which people start paying tax in our country. People can now earn £1,000 a month without paying any tax, and that is a great achievement of a Conservative Government.

Although I welcome the fact that Labour Members will apparently vote for our tax cuts today, I hope that they will forgive me for sounding slightly sceptical about their sudden conversion to the cause of lower taxes for working people. While they do not oppose the measures, they also did not propose them. In fact, Labour has consistently voted against successive Conservative-led tax cuts between 2010 and 2021, which delivered a doubling of the personal allowance, as I mentioned to my hon. Friend the Member for Southend West (Anna Firth). On the one hand, they bemoan the level of taxation, but cannot tell us a single tax that they propose to cut, or what the level of taxation would be under Labour. On the other hand, the shadow Chief Secretary to the Treasury, the hon. Member for Bristol North West (Darren Jones), described our ambitions to remove unfairness in the tax system as “morally abhorrent”. Labour Members still cannot tell us how they will pay for their many spending commitments. They are completely all over the place. It is only the Conservatives who truly believe in reducing taxes on working people.

[Richard Fuller (North East Bedfordshire) (Con)]

The Minister is giving a clear explanation of why the Conservatives want to cut tax, and the economic benefits of cutting taxes for working people. He will know that the origins of national insurance were basically a form of social insurance: having paid national insurance, it would look after us later in life. The Labour party took the insurance out and put the socialism in, which is why we have ended up with a system that is essentially the same as income tax. As we think beyond today’s welcome cuts to what is in the Opposition new clause, has the Minister thought about using any further cuts to go into the compulsory savings of individuals introduced under the coalition Government after 2010—essentially building, in place of a dependency state, a savings state built on Conservative principles?

[Gareth Davies]

Yet again my hon. Friend makes a valuable contribution. I commit to taking his idea away to consider, as we look at reducing the unfairness in the tax system in future and reducing national insurance contributions when it is prudent and responsible to do so.

The Labour party is completely all over the place on this. As a Conservative Government, we have delivered a clear message to the British people, and it is based on the delivery of the lowest personal taxation level since 1975. We have almost doubled the personal allowance, bringing the lowest earners out of paying any tax at all, and we have delivered a thriving jobs market, which is ultimately the best way to ensure that people are brought out of poverty.

[Clive Lewis (Norwich South) (Lab)]

I hope to speak a bit later on this. I may have a slight difference of opinion with the Minister on tax cutting, but I want to deal with the facts as I see them. He is making a great amount of noise about the tax-cutting vim and vigour that his party has had over the past 10, 20 or 30 years, or even longer than that—it is meant to be something that goes to the heart of the Conservative party—but according to the OECD, for every £1 generated in the UK, the Government collect 35.3p of it as tax. That figure is projected to keep on increasing to 37.7p by 2029, despite this 2% tax cut. Can the Minister explain how, if the Conservatives are the party of tax cuts, actual tax levels will in fact be going up, according to the OECD? How do the Government square that circle?

[Gareth Davies]

I am grateful for the opportunity to clarify that, because there has been a lot of noise from the Labour Benches, too. It is true that we have had to make some difficult decisions about overall taxation on the back of the pandemic, but today we are cutting taxes on work, because that is the way to grow our economy. As I said, we now have the lowest personal taxation level since 1975. Some taxes have gone up, absolutely—supported by the Labour party—as we have increased tobacco duty and other items, for example, but we are focused on ensuring that if people are in work and have a job, their tax level will be reduced. Today, that work of reducing tax on work continues. We are cutting taxes for millions of people across this country. That is why I commend the Bill to the House.

Wine Duty

Gareth Davies Excerpts

Tuesday 5th March 2024 Westminster Hall

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure to see you in the Chair, as always, Mr Henderson.

I congratulate my good friend, my hon. Friend the Member for Colchester (Will Quince), on securing the debate and on the attendance that he has achieved. I recognise the strength of feeling on this across the House and in particular in this Chamber today. I completely share his support for our broader alcohol sector. Not only is it a significant contributor to our gross national product, but I would suggest that it pays a little towards our gross national happiness. It is part of our heritage. From Shakespeare’s plays to our modern British sparkling wines, we have long recognised how life’s triumphs and trials—weddings, wet weather and the working day—can be soothed or celebrated with a glass of our favourite tipple. I recognise that.

In the past few weeks alone, therefore, I have for example met the head of the all-party parliamentary group on wine and spirits, my right hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady), and the highly active Wine and Spirit Trade Association to discuss how this remarkable industry’s potential can be truly uncorked. My officials have engaged with businesses and representatives of the UK industry up and down this country as part of budgetary processes that one might expect, from the more well-aged players such as Majestic Wine to the younger vintages such as Ambriel Sparkling.

On behalf of the Government, I am proud to represent our alcohol duty reform package and to present it to the House. We have introduced the biggest reform of alcohol duties for more than 140 years. We introduced a new, simplified alcohol duty system based on the common-sense principle of taxing alcohol by strength to modernise the existing duties, to support businesses and to meet our public health objectives. This is the first time that public health objectives have been inserted into the alcohol duty system.

That reflects four key principles, which it might be helpful for me to set out: the duty system should be fair to the producers that make and grow the drinks we enjoy; it should recognise the importance of jobs, and of pubs and their role in our national life; it should tackle the problem of harmful high-strength products being sold too cheaply; and it should support innovation and modern drinking trends, in particular today’s trend of moving towards lower-alcohol products. Our reforms do just that.

As part of the changes, which came into effect in August last year, we have supported our wine sector. Let me set out how we have done so. First, we removed the sparkling wine premium. My hon. Friend the Member for Meon Valley (Mrs Drummond) rightly spoke about our domestic growers, a really important part of our wine industry. I recently met the chief executive officer of WineGB. I can tell her that we have removed the English sparkling wine premium. Since 1 August 2023, sparkling wines attract less duty than they did under the previous duty system. That is one of the points that I want to make today.

In such a reform some duty has gone up for some sectors in the alcohol industry and some has gone down. For our domestic growers of English sparkling wine it has gone down significantly, even with the retail price index increase that we saw last year. That is the right thing to do for our domestic growers. It will ensure consistency in our system and build success for British wines, which my hon. Friend and I want to see.

Secondly, as has been extensively discussed today—I will come on to this in more detail and address some of the points that have been made—we introduced a wine easement for 18 months until February 2025. As a result, all wine between 11.5% and 14.5% alcohol by volume will be subject to duty as if it were 12.5% ABV. That means we have effectively given the wine industry time to adapt to the new system and allow wine producers to adapt their systems. I recognise completely that a shake-up of a system that has existed for more than 140 years will raise some eyebrows and cause change for a number of businesses, but we should be confident that the bureaucratic burden under the new system is manageable.

Every other product is already subject to duty based on our strength-based system. We have included, as my hon. Friend the Member for Colchester rightly pointed out, the weather impact of wine, and included cider, which is also subject to seasonal variability challenges. We are mindful of unintended consequences, as several right hon. and hon. Members have outlined, but to make the wine easement permanent, as my right hon. Friend the Member for Stevenage (Stephen McPartland) has called for, would go against the principle of the alcohol reform to move to a strength-based system that brings in the public health element. As I have already said, although the impact on wine is clearly being felt, we have provided an easement over a period of time that was decided in consultation with the wine industry in four rounds of consultation before the reform comes into being.

I can commit to my hon. Friend the Member for Colchester that we will monitor the reforms and their impact. We have outlined that three years after they come into effect, which is enough time for us to be able to assess them, we will conduct an impact assessment, which will allow His Majesty’s Revenue and Customs to gather the relevant information to understand any long-term impacts in the alcohol market. That commitment complements the broader fiscal approach, because at the last autumn statement we announced tax cuts that supported the alcohol and hospitality industry.

We froze alcohol duty for six months until 1 August 2024. We also announced a package of business rate changes and tax cuts worth £4.3 billion over the next five years. My hon. Friend the Member for Tewkesbury (Mr Robertson) was right to highlight the difficult time that our hospitality industry has gone through in recent times. That is why we extended the retail, hospitality and leisure relief scheme—a 75% relief—up to a cash amount of £110,000 per business between 2024 and 2025. In addition to the work being led by my colleagues at the Department for Environment, Food and Rural Affairs on their package of wine reforms, which will increase flexibility and innovation, the Government have announced a freeze to the small business multiplier for the fourth consecutive year, for 2024-25, protecting over 1 million ratepayers from a multiplier increase. That builds on the unprecedented support that we should never forget we offered the industry during the pandemic—some £16 billion of business rate support. We have also held the tax rate steady over the last three years, which has protected businesses from inflationary pressures at a cost of £14.5 billion to the Exchequer.

This Government have never given the sector reason to doubt our commitment to it, because it has received many cuts or freezes to duty over the last decade. I can tell my hon. Friend the Member for Colchester that the wine industry has benefited from cuts or freezes to wine duty at five of the last 11 fiscal events. Compared with 2015, wine duty is some 12% lower in real terms. That is something we can all raise a glass to.

Finally, I will address the comments by my right hon. Friend the Member for Witham (Priti Patel), who, rightly, has consistently raised the issue of red tape for businesses in the House. She specifically mentioned labelling. Overall, these reforms to our alcohol system simplify our tax duty. That is a Brexit freedom. Under the last slight change to our alcohol duty system in 1996, we had to take duty from the European Union, which was incredibly complicated, completely inconsistent, and did not include any provision for public health. Our easement gives businesses time to adapt to the new system and put in place measures to be able to administer it. Wine can still be labelled to 0.5% ABV. DEFRA has introduced guidance and an option to label to 0.1%, but I want to be really clear that that is optional.

I thank my hon. Friend the Member for Colchester for raising this important sector and this important issue. It is right that the Government’s fiscal approach continues to be scrutinised in this way. I am confident that this policy is the right one, not just for the wine industry, but for the whole of the United Kingdom.

Question put and agreed to.

Advanced Manufacturing

Gareth Davies Excerpts

Monday 4th March 2024 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Today the Government have announced over £360 million of joint Government and industry investment in 16 UK advanced manufacturing projects, securing highly skilled jobs, building a stronger economy and cementing the UK as a global leader in industries of the future.

This involves a combined industry and Government investment of almost £73 million in projects to accelerate the development of zero-emission vehicle technology in the UK, almost £200 million in projects to develop energy efficient and zero-carbon aircraft technology, and almost £92 million in life science manufacturing projects. The funding awarded is targeted to support the sectors where the UK is or could be world-leading and is designed to unlock investment from the private sector to help grow our economy.

The Chancellor is also announcing an up to £120 million increase to the green industries growth accelerator (GIGA) to support clean energy manufacturing. Around £390 million has been earmarked to expand UK-based supply chains for electricity networks and offshore wind sectors, and around £390 million for the carbon capture, utilisation and storage and hydrogen sectors. This is alongside the £300 million previously announced for UK production of the fuel required to power high-tech new nuclear reactors, known as HALEU.

The GIGA funding will enable the UK to seize growth opportunities through the transition to net zero, building on our world-leading decarbonisation track record. It forms part of the Government’s priority to grow the economy focusing on making the right long-term decisions for a brighter future by creating better-paid jobs and opportunity right across the country.

This follows £4.5 billion announced in the 2023 autumn statement to increase investment in strategic manufacturing sectors—auto, aero, life sciences and clean energy—across the UK for five years from 2025. This autumn statement announcement included £975 million in funding for the aerospace sector, and the Government have confirmed that this will be allocated to the Aerospace Technology Institute programme.

Alongside this, the Government are setting out further details of the £50 million apprenticeship growth sector pilot announced in the 2023 autumn statement. The pilot will boost funding for eligible providers delivering 13 high-value advanced manufacturing and engineering, green and life sciences apprenticeships standards, and will explore ways to stimulate training and break down barriers to delivery of high-quality training, with a particular focus on up-front capital investment costs.

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