Finance Bill

Gavin Williamson Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[Priti Patel (Witham) (Con)]

I praise and congratulate my right hon. Friend the Chancellor of the Exchequer on bringing forward the Bill. As we have previously discussed, it will implement the important measures set out in the autumn statement.

We have already debated some of the key measures that were included in the National Insurance Contributions (Reduction in Rates) Bill, which was considered in the other place yesterday. I do not want to go over the arguments on fiscal drag and lower taxes, as I have set out my views previously, but I commend the Government for bringing forward those measures quickly and in the right way, as they will go some way to easing the tax pressures the public are feeling.

My right hon. Friends on the Front Bench are well versed in my views on the tax burden, so I will not go on about how about I feel about that or measures we can bring in going forward. However, I would like to press them to ensure that we think about long-term provisions and that the next Finance Bill goes further by raising thresholds for income tax, including for higher-rate taxpayers, and for national insurance.

It is worth noting that in the Budget after the general election of summer 2015, the then Chancellor outlined plans to increase the tax-free threshold to the equivalent of 30 hours’ pay at the national living wage. The new £11.44 national living wage rate for 2024 commences in April, so if the tax-free threshold rose to cover 30 hours per week next year, that would equate to £17,000 to £18,000, rather than remaining at £12,570 through to 2028, as currently planned. I press my right hon. Friends to keep that under review—thankfully, all tax measures are under review—and to prioritise uplifts to those thresholds, because we believe in enabling people to keep more of their earnings.

At the same time, when we see GDP figures not growing as fast as they could, as we have today, it is important to focus on how we can grow the economy much more, and with that people’s incomes. We want to see more growth in those GDP figures, but they represent the impact of high interest rates and what they mean for inflation. High interest and inflation have placed a burden on businesses and households. The Bill outlines reductions in business taxation that are well timed and well placed but, as ever, they need to be kept under review. Businesses grow the economy by employing more people, which helps economic growth, and that is the space where we, as a Government and a country, want to be.

It will not surprise my right hon. Friends on the Front Bench that I wish to speak to certain clauses, as I have spoken about clauses on business taxes in the past. I want to focus on the provisions in clause 21 and schedule 12 of the Bill, on pillar two and the global minimum corporation tax measures that we are adopting. I have been on record about this previously, but the Minister is also well aware of my long-standing concerns over the implementation of pillar two measures. Binding ourselves to pillar two undermines our fiscal sovereignty and risks deterring investment into our country. I labour this point because we have just seen the publication of our GDP growth forecasts. Obviously there will be revisions in our growth forecasts, even by financial institutions, and we should be mindful of that, but this measure undermines our competitiveness. It is known that some 130 countries have signed up to pillar two, but, unlike the UK, barely a quarter of them are implementing it at the end of the year. Given our economic backdrop and GDP forecasts, I would rather see a delay in the implementation of this measure.

A written parliamentary answer earlier this month shows that just 30 countries are implementing this measure at the same time as we are. They will be followed by Japan in April, and then Guernsey, the Isle of Man, Jersey, Hong Kong and Singapore from January 2025. We also know that the US, our big economic ally, is not likely to implement the measure, so by pressing ahead with this fiscal measure, we are basically limiting the scope that we give ourselves—oxygen, basically—to develop and grow.

When the Finance (No. 2) Act 2023 went through Parliament last year, it contained more than 150 clauses, which were spread over two parts, with a further five schedules, covering 170 pages in total. Many of us remember carrying those weighty tomes into the Chamber and flicking through all the pages. There was a large and complex change in tax laws. But despite that legislation being passed in the summer, this Bill makes even further changes to pillar two and the domestic top-up levels. Clause 21 and schedule 12, which cover those changes, span 55 pages and include multiple amendments to the Finance (No. 2) Act passed only a few months ago. I recall saying that the amendments alone would generate more complexity to the system. I say politely to those on the Front Bench that the 55 pages here point to the complex nature of the matter. The fact that we are amending something that went through the House not that long ago says it all.

No impact assessment has been provided of these measures, which give effect to the accounting periods beginning on or after 31 December 2023. Companies and partnerships will be impacted by the changes coming into effect in less than three weeks’ time, even though the Bill will not receive Royal Assent until next year. We must be cognisant of the burdens that we are again putting on businesses. I am no fan of accountants, but by putting more burdens on to businesses, we are increasing their dependency on accountants and on process, which we should be freeing them from. I ask the Minister to provide us with further details as to why these changes are needed when the previous Finance Act was passed only earlier this year, and with an impact assessment of them.

I would like to understand the merits of the global minimum income tax, and I hope that, in the same way that all tax is under review, Ministers will consider removing all the provisions from our statute book in due course, because other countries will not follow suit or are delaying implementing some of these measures.

I wish to comment on clause 2, relating to research and development tax credits. It merges the current R&D expenditure credit with the small and medium-sized enterprises scheme. These tax credits help and support businesses to invest and take risks, and, importantly, to innovate and grow, set up jobs and employ people. I have previously raised the concerns that some businesses have about the complexity of claiming them and the processes that they experience. I am aware of many businesses that have spent more than a year having their claims investigated, with multiple rounds of questions and inquiries from HMRC officials. There are many live cases, which I will not reflect on now, but previous Treasury Ministers have committed to hold discussions on them.

[Sir Gavin Williamson (South Staffordshire) (Con)]

I thank my right hon. Friend for giving way. In Staffordshire, which is a manufacturing powerhouse, R&D tax credits are vital in driving productivity in manufacturing businesses. Does she agree that it would be good to hear those on the Front Bench make a commitment to reviewing and slimming down that scheme, so that it actually gets those small businesses embracing it and getting the investment that we need?

[Priti Patel]

My right hon. Friend is spot on. The scheme was set up for a very good reason, which is, effectively, to support entrepreneurism and innovation and to grow businesses. Now we are seeing those businesses saddled with bureaucracy and burdens. What is worrying is the number of small businesses that have been under investigation by HMRC for over a year, as that is now having a detrimental impact on their performance. As a representative not just of Witham, but of Essex as a whole, I can see businesses that have now come together to make wider representations to HMRC and the Treasury about that. I hope that those on the Front Bench will learn from some of these experiences and look at how we can evolve and adapt the process, so that the scheme can revert back to its original premise of supporting businesses. As I have said many times, the only way is Essex. Essex is a county of entrepreneurs and they are the ones who are feeling the pressures.

In his summing up, will the Minister outline the operational aspect of these changes? In particular, what interactions is he having with HMRC about some of the cases that have been under investigation for more than a year, and the impact that that is having on those smaller businesses? At the end of the day, they are SMEs that are not able to grow their businesses because of these inquiries and investigations. Naturally, that has an impact on the profits that they can then reinvest in their businesses.

I also wish to make a few comments on air passenger duty and the provisions in clause 24. Many of us in this House have spoken about air passenger duty for many years. I have been a long-standing campaigner for reform of this tax to encourage and support economic growth. It is ironic that we are having this debate on a day when the GDP figures have come out as they have. I believe in globalisation—in the sense of more global competition—and in our being more open to the world when it comes to those global dynamic markets.

We should also make travel more competitive and affordable for families, especially as they are struggling with the impact of the cost of living. Reforms that have taken place under previous Conservative Chancellors have been welcome. I query the small increase in the APD rates for 2024-25 in the Bill. Back in the summer, in his speech on net zero, the Prime Minister pledged to scrap plans for new taxes on flying, but the Bill provides for an increase in APD rates, ranging from 50p to £6 per flight. Although they are small increases, they are still increases. They are lower than the rate of inflation planned for and assumed in previous Government statements and OBR forecasts, which is to be welcomed. Therefore, any clarification on what is happening with APD going forward is welcome. Again, that is important for certainty and also for forecast purposes.

On the subject of air travel, I am disappointed that the autumn statement and this Finance Bill do not contain reforms to end the so-called tourism tax. I was one of the few Members to speak on that during the Humble Address debate. If we look at London, our great city, we can see that, at this time of the year, it is a magnet for tourism and for people coming from overseas. It is great for our businesses, great for our country and great for our brands—our British brands and our small brands. Our tourism sector and shopping and retail businesses are losing out to their European competitors as a result of the removal of the VAT refund and the VAT-free shopping and arrangements that had previously been in place. I think that we can reintroduce those measures. In the last debate, those on the Front Bench committed to looking at dynamic modelling in this area, and some external reviews of the potential revenue base. It would be a boost for business and jobs, and we should be looking at all measures to boost economic growth and competition. There are plenty of reports and studies out there. I do not want to labour the point; I know that those on the Front Bench will be aware of them.

It is winter, and we are heading towards a spring fiscal statement. Since 2010, the Government have consistently kept fuel duty down, cutting and freezing rates. This is an opportune moment to remind the public what the Government have achieved on that alone, because it is very important. Families, businesses and households depend upon it, and I very much hope that we will continue to stand up for the measures that we have put in place historically. I urge the Government to commit to maintaining the 5p reduction, and perhaps even to go further where there is fiscal headroom. Finding fiscal headroom is difficult, but sometimes—I say this as a former Treasury Minister—it can be found when we really look for it.

As the Bill passes through the House and is subject to further scrutiny, I know that my colleagues on the Front Bench and the Chancellor of the Exchequer, who is dedicated to dealing with the difficult fiscal challenges that we face, will be focused on unleashing future growth by reducing taxes and, importantly, empowering the very businesses that employ people and keep people in their jobs for long-term economic security.