Finance Bill (Second sitting)

Debate between Harriet Cross and Gareth Davies

Committee stage
Tuesday 28th January 2025 Public Bill Committees

[Gareth Davies]

I am afraid I have not taken the time to read the academic reports, but I greatly value and emphasise the work of the OBR, which the Conservatives established in government. The new Government have taken it forward and are already seeking to bolster its impact on the Treasury’s work. If the hon. Lady will forgive me, it is the OBR’s work that I look at, and that work says that this budgetary measure is highly uncertain. As I was pointing out, that leaves questions for markets and for the Labour parliamentary party when it comes to which taxation will have to go up and what spending will be cut if that figure is not met. I will leave that to the Minister to address.

[Harriet Cross (Gordon and Buchan) (Con)]

Regardless of the uncertainty, we know from the projections that, although the tax intake should peak at about £6 billion, it tails off by the end of the period to £95 million—a huge difference. By the time this spending and the costs have been worked into the system, no matter what happens in terms of uncertainty, at the end of that tax period there will be a huge amount of money that was in the system, but which now has to be filled. This policy, if implemented, will mean that there is a hole in the system at the end of the ’29 period that will need to be filled in some way.

[Gareth Davies]

That is a very good point—if only I had included it in my speech. That is a classic example of an intervention that adds to the content of the debate on behalf of all those who will be impacted by this measure. It is important to look at the projections over the five-year period on a year-by-year basis. It will be no surprise to the Minister that I look at them very carefully. I look at the timing of when the measures generate revenue, and when they do not. I could provide lots of examples of places where questions need to be asked of this Budget—indeed, we have been asking them today.

In claiming the 100% relief on foreign income and gains, an individual forfeits their eligibility for a whole host of allowances available to normal UK taxpayers, including the personal allowance'; yet even those who were previously taxed on a remittance basis for non-UK income and gains would still pay tax on their UK earnings, just like everybody else. That was surely an uncontroversial element of the old regime, which did not require any attention, so why have the Government taken it upon themselves to make the tax treatment of UK income less favourable as a condition of claiming the new 100% relief—which we of course welcome?

The biggest concern that has been raised with me regarding these new reliefs by the likes of the now-famous Chartered Institute of Taxation, which many of us have referred to, is the requirement to itemise and actively claim each income and gain. As far as I can recall, the technical note that we produced alongside our proposals in March 2024 did not insist on that level of specificity and detail, which is quite onerous on those applying. As a basic matter of fairness, it seems wrong that the window for making a claim is so much less than the 12 years available to HMRC to issue a compliance check, and even more so when the ability to make a consequential claim to correct an error is restricted.

The Budget claims to introduce a regime that is simpler and internationally competitive, as the Minister outlined in his speech, but those two requirements are neither of those things. I would be very grateful if the Minister can explain what exactly the benefit of doing things in that way are.

The main departure from our proposals comes with clause 38 and schedule 8, which introduce financial limitations for overseas workday relief. Is that to compensate for the additional year in which the relief will now be claimable? How significant does the Treasury expect the impact of the alteration to be? I would be grateful if the Minister can indulge me by outlining an explanation on those points.