Finance (No. 2) Bill

James Murray Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I beg to move,

That this House declines to give a Second Reading to the Finance (No. 2) Bill because it derives from a Budget that failed to guarantee a pay rise for NHS workers after their unparalleled service over the last year; because it undermines the country’s economic recovery, targeting household finances by freezing income tax allowances before increasing the rate of corporation tax; because it does nothing to mitigate the effect on family finances of the sharp council tax rise in April; because it contains measures connected with a cut to social security later in the year; and because it fails to set out the ambitious plan for jobs and growth that is needed to help the country emerge strongly from the worst economic crisis of any major economy.

May I start by extending my deepest sympathies to Her Majesty the Queen and the royal family at this sad time? His Royal Highness the Duke of Edinburgh devoted his life to public service and, crucially, to his role as a supportive husband. My thoughts are particularly with the Queen as she mourns the loss of someone who has been at her side, or just behind her, for 73 years.

As this is my first time physically in the Chamber for well over a year, I would also like to put on record my thanks to Mr Speaker, the Deputy Speakers and the Speaker’s Office for doing so much to help all Members, particularly those of us like me with relevant medical circumstances, to take part virtually throughout the pandemic. Now, having recently had my second jab and having spoken to my doctor, I am glad to be here in person to speak today to this important Bill.

Like millions of others in this country, I feel so grateful to be benefiting from the brilliance of our NHS and GP staff, scientists, lab technicians, nurses and volunteers, but we know that the health crisis of covid-19 is very far from over and that the harm to jobs and the economy resulting from the outbreak is even further from being over. On the Chancellor’s watch, our country is enduring the worst economic crisis of any major economy, yet in his and the Government’s plan we lack the ambitious, confident modern approach we need to emerge from this crisis stronger.



The Budget in March and this Finance Bill should have been an opportunity to pull out all the stops to get the economy going. The Chancellor should have focused resolutely on supporting families, securing jobs and backing small businesses. The Government should have used this opportunity to make sure we invest in solutions to the problems that we have struggled with as a country for so long, from social care to the climate emergency and the housing crisis.

There are many missed opportunities in this Bill and the recent Budget to take on some of the big challenges to which our country is begging for a solution. Take high streets, for example. We are all acutely aware of the severe difficulties that high streets are facing because of covid and how well online delivery-based businesses have done during lockdown. We know that for years, high street businesses have struggled with business rates, while tech giants have paid very little tax by comparison, and we know that the outbreak has made that imbalance far worse. Now should have been the time to at the very least level the tax playing field for high street businesses and online firms, yet there was nothing on that in this Budget, no decisions were taken on the Government’s new tax day, and the Finance Bill is silent on this crucially important issue. That is just one example of how the Government have missed opportunities to support and shape our country for the better.

Instead, so much of what the Government have done will make the problems we face worse. This Government have the wrong priorities and the wrong values, and their Ministers are following failed approaches from the past that now lack much, if any, of the wider support they may once have claimed for them.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I agree with the hon. Gentleman that we need to level the playing field between high street businesses and online businesses. That is a very tricky thing to do, particularly when talking about business rates. What is his solution to that?

[James Murray]

I am very glad to have the hon. Gentleman’s support for our push for a solution. As he knows, the Government have been promising for some time to come forward with proposals on business rates, but we have nothing. We had the new tax day, when we were supposed to hear lots of announcements—nothing. We want to see something to help high streets, and we have not had anything. We need the Government to step up and offer a solution to the problem, which has bedevilled high streets for so long.

[Kevin Hollinrake]

rose—

[James Murray]

I will make a bit of progress.

High streets are just one example of how the Government have missed those opportunities. Ministers have shown that they simply do not have it within themselves to offer solutions to the challenge we face.

First and most immediately, the Government are taking money from people’s pockets. Families in all their many forms are the target of tax rises from this Government. People will suffer and our economy will stall if families see money taken from them when they need it most. It is unfair and economically illiterate, yet it is exactly what this Government are doing. Half the country will pay more next year, thanks to the provisions in this Bill to freeze income tax personal allowances.

At the same time, the Bill does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now. It supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need that help most. It tells us everything we need to know about the Government’s priorities: they raise taxes and cut help for families immediately and without a second thought, years before an increase in corporation tax. At the same time, they are letting some of the world’s biggest companies stop paying tax altogether.

If that was not bad enough, the Government are also choosing in this year of all years to take money from the pockets of NHS workers. We now know how hollow those claps on the doorsteps of No. 10 and No. 11 must have echoed around Downing Street. The Government are cutting NHS workers’ pay. Ministers are breaking their promises, and the Conservatives are showing how little they have learned from the awful experience of the last year.

If we add that NHS workers’ pay cut to the personal allowance freeze, the council tax hike and the cut to universal credit, the scale of the impact of the Government’s decisions becomes clear. To give an example, a newly qualified nurse living with their partner and two children in rented accommodation will lose more than £1,100 a year. Rather than supporting families out of this crisis, the Government are prioritising tax breaks for tech giants.

That tax break is being handed to big businesses through the so-called super deduction—the £25 billion tax break for companies that the Chancellor and the Minister say represents

“the biggest two-year business tax cut in modern British history”,

and that forms our second key concern about this Bill. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse. Economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”,

yet the Chancellor has done nothing to counter suggestions from industry consultants that the deduction could be used for luxury items, including jacuzzis.

The Government have also failed to address environmental concerns. With the deduction giving firms an incentive to buy new rather than existing assets, the Exchequer Secretary to the Treasury was recently unable to guarantee that the super deduction would be used to support green development. The Chancellor himself has seemed confused about the overall impact of the deduction, recently claiming that, as well as bringing investment forward,

“it will also increase the amount of investment”.—[Official Report, 9 March 2021; Vol. 690, c. 641.]

That claim comes despite the Office for Budget Responsibility revealing a week earlier that cumulative business investment over the next five years will be £8 billion lower following the Chancellor’s announcement of his new scheme than had been projected before.

Particularly with a tax cut of this size, it is crucial that we understand who it is helping and what it will achieve. The truth is, as we know, that companies can already benefit from the annual investment allowance, a 100% tax break on investment up to £1 million, which the Bill extends to the end of this year. The Treasury Committee concluded in its report “Tax after coronavirus” that the annual investment allowance

“appears well targeted to promote growth in small and medium-sized enterprises.”

With the existing allowance apparently well targeted at the growth of small and medium-sized businesses, and with such businesses standing to benefit only marginally from the new super deduction, we are left with an inescapable conclusion: the main beneficiaries of the Chancellor’s new scheme will be the big firms that need help least. No wonder TaxWatch has nicknamed this the “Amazon tax cut”—a giveaway from the Chancellor that could wipe out Amazon UK’s tax bill entirely.

[Christian Matheson (City of Chester) (Lab)]

I am grateful to my hon. Friend for talking about what has been identified as an Amazon tax cut. Has he noticed—and I get the impression from his contribution that he has—that most of the firms that will benefit from this are foreign-owned large tech firms that are not British, and most of the firms that will not benefit are the smaller British firms that will feel the wrong end of the Government’s policies? Does he not find it rather ironic that the Conservatives, who wrap themselves in the flag, are actually being entirely un-British and damaging British interests? They claim to be patriotic, but they are doing exactly the opposite.

[James Murray]

My hon. Friend makes a very important point and exposes again the hypocrisy in the Government’s approach. The fact is that, rather than helping families get through the tough times ahead, this Government are delivering a tax break for tech giants.

We know that Amazon workers have provided vital deliveries to millions of people across the country during lockdown. They need their rights at work to be protected and strengthened, and we all want that company to pay its fair share of tax. I see no one calling for a tax break for Amazon, yet that is exactly what this Government are providing. The Government would do well to learn from the new Biden Administration’s approach. The US Secretary of State has said that, rather than compete on lowering tax rates for corporations, the United States will focus on its

“ability to produce talented workers, cutting-edge research and state-of-the-art infrastructure”.

The new President has also been leading a drive to put in place a global minimum corporate tax rate. A spokesperson for the Treasury here has indicated that the UK might back those plans. Taken along with the Chancellor’s decision to raise corporation tax to 25%, this seems to be an admission by the Government that the last decade of Conservative corporate tax policy making has been totally wrong-headed. If that is the case, we welcome the Government’s admission, and it is vital that the UK plays a leading role in developing and implementing the proposals that President Biden is backing. We have not yet heard from Ministers on this matter in Parliament, however, so I urge the Exchequer Secretary to use her closing speech today as an opportunity to confirm to the House that she and the Chancellor back plans for a global minimum corporate tax rate and that they will do all they can to make this a reality.

While the initiative on international tax is being led by those overseas, closer to home the offer from this Chancellor of such a large tax break to companies will, of course, make people wonder what processes will be in place to prevent Ministers from intervening improperly on behalf of commercial interests in how decisions are made. The Chancellor is still refusing to properly account for his role in the Greensill scandal. To ensure public confidence in who will benefit from this £25 billion tax break, we strongly urge the Exchequer Secretary to today set out what new safeguards will be put in place to make sure that public money is not misused.

[Jim Shannon (Strangford) (DUP)]

Before the debate, I spoke to the shadow Minister about insurance companies. It has come to my attention that some insurance companies are unfairly using business interruption insurance premiums to punish businesses that had the foresight to take out said insurance before the pandemic. Insurance premiums are being increased dramatically. Does the shadow Minister agree that when it comes to supporting small and medium-sized businesses, we need to close the loopholes that insurance companies are notorious for using and ensure that the spirit is legislated for? Perhaps—just perhaps—this Bill might be the way to do that.

[James Murray]

The hon. Gentleman is right to draw attention to the fact that the Bill does everything for the big businesses that need the help most but does not do what is necessary to protect small and medium-sized businesses. I am sure that the Ministers present heard his points, and I hope that the Exchequer Secretary will respond to them in her closing speech.

Aside from all the concerns about the super deduction—from its potential for fraud, abuse and misuse to the fact that it offers to wipe out Amazon’s UK tax bill—the fact that the Government’s only national policy for growth and investment relies almost entirely on this tax break brings us to our third key concern about the Bill and the profound lack of ambition in the Government’s approach. There is simply no plan from the Government to make sure that we invest in what is needed for the future. The Bill follows a Budget of cuts. The OBR has confirmed that the Government will cut departmental resource spending plans by £15 billion a year from 2022-23 onward, and rather than bringing forward capital spending to invest in the green recovery that we need now, the Government have cut capital plans for this year by half a billion pounds.

Far from charting a course for the future, the Bill lacks any mention of a plan to tackle the big problems that we have faced in this country for a decade or more and that have in so many cases been brought into sharp focus by the covid outbreak. It is clear that over the past decade under this Government, our country’s social care system has been underfunded, with its workers chronically underpaid. Our country’s response to climate change has stubbornly lacked the urgency, ambition and scale that it needs. Our country’s answer to the housing crisis has been left to developers and speculators, leaving an entire generation let down and left behind. Investing in better social care, new green infrastructure and the council housing that we need would create jobs, improve lives and finally start to tackle the problems that our country needs to resolve.

The Conservatives have had more than 10 years to stand up to the challenges I have outlined, yet they have failed to do so. With the recent Budget and this Bill, they have proved themselves again unable or unwilling to do so. The Government’s whole approach is being exposed as one of failure rooted in the past and an inability to rise to the future. In fact, Conservative Ministers are continuing on the course that began in 2010—one that brought us a decade in which UK growth was below the average of all major economies and business investment fell to the lowest rate in the G7.

Our country’s economy will be £300 billion smaller in 2026 than was forecast at the start of the previous decade. At times during that decade, Ministers may have benefited from some international cover for their misguided and harmful choice of cuts rather than investing in growth in response to the financial crisis, but no more: a new international consensus has rapidly been gaining strength. As the International Monetary Fund’s head of fiscal policy said, our Government and others should use fiscal policy to beat covid and to stimulate our economies by reducing unemployment and restoring economic growth. That focus on growth, investment and jobs is at the heart of the approach set out by the shadow Chancellor, my hon. Friend the Member for Oxford East (Anneliese Dodds). Our framework will meet the challenges of our times—it is a responsible approach in which a balanced current budget over the economic cycle would never prevent us from protecting people and businesses during a crisis or making critical investments in our future.

As the Bill progresses through the House, we will look at the detail in respect of the points I have outlined so far, as well as on other measures in the Bill such as those relating to freeports. We want to see good jobs and economic growth in every part of the country, irrespective of whether an area has a freeport. We need long-term, locally led investment in every region and nation, and freeports will in no way compensate for Ministers’ inexplicable decision to scrap their industrial strategy and disband their industrial council just when we need a long-term plan to support our critical industries. Furthermore, with freeports elsewhere in the world having become magnets for organised crime, tax evasion and smuggling, we fear that at a time when HMRC is already overstretched Britain is not well placed to manage such risks.

In Committee, we will challenge the Government over their approach to tax avoidance and tax evasion more widely, following up our long-standing concerns that Treasury Ministers continue to drag their feet on tackling these problems. Although the Bill contains measures to tackle the promoters of tax avoidance and change the system of penalties, there is a clear sense that those measures are extremely limited in scope, rather than the comprehensive action that we need. Indeed, those changes are not even included in the Budget report costings, suggesting that their financial impact must be minimal.

We will use the next stage of consideration of the Bill to go through the detail of the measures it contains that seek to address the problem of plastic pollution and to increase the use of recycled content. The principle of a plastic packaging tax is one that we support, and because we want it to be as effective as possible we will ask Ministers to consider the detail of its operation in Committee. Overall, however, we cannot support this Finance Bill. The Bill, and the Budget that it follows, should have seized the opportunity to help people who are struggling now; to invest in good new jobs in every part of the country; and to be ambitious in finally getting to grips with social care, housing and other challenges that our country has faced for so long without solving. In fact, rather than supporting families out of this crisis and setting an ambitious plan for the future, the Government are prioritising tax breaks for tech giants.

If this Bill had been presented by Conservative Ministers 10 years ago, it would have been the wrong solution then; a decade later, their approach has not changed but the rest of the world has moved on. No longer will they find allies for their approach in international institutions, and the politics of the United States shows that the consensus around the world is shifting. The Government are out of step with economic reality. They are taking decisions that will push up taxes for people across our country while helping Amazon to reduce its tax bill. They are choosing to cut NHS workers’ pay while failing to fix our system of social care, and they are deciding to continue a decade of cuts to public services when we urgently need to invest in the future.

[Kevin Hollinrake]

Will the hon. Gentleman give way?

[James Murray]

I have only a few moments. The hon. Gentleman may speak later.

We will vote for our amendment and against the Bill, to make it clear to people in our country that we understand that people need to be spared the Bill’s tax rises; that Amazon does not need any favours; that NHS workers deserve our support, that we need good new jobs in every region in the nation; that the economy will grow only through responsible investment; and that we need to fix social care, the climate emergency and the housing crisis. Above all, people in our country need a Government who are on their side, and it is absolutely clear from the choices that the Bill and their Budget make, and the problems that they choose to ignore, that this Government fail that test.

[Madam Deputy Speaker (Dame Rosie Winterton)]

We now go to the Chair of the Treasury Committee, Mel Stride.

Finance (No. 2) Bill

James Murray Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[Jesse Norman]

The hon. Gentleman will be pleased to know that I maintain a strong dialogue, through officials, and from time to time in person, with the LITRG and I have no doubt that the input it has given has been carefully considered in this regard. If he would care to write to me with his specific concern, I would be happy to pick that up as well.

It is right that HMRC has powers to tackle fraud and abuse of the self-employment income support scheme and that the Government provide legal clarity that SEISS grants are liable for income tax in the year of receipt. Clauses 31 and 32 will allow payments made in support of individuals and businesses by the Government to meet their objectives as far as is possible. Opposition amendments 15 and 92 are already comprehensively addressed by existing policy, and I ask that Members do not press them to a vote. Clause 33 makes changes to ensure that the repayments of business rates relief are deductible for corporation tax and income tax purposes. This ensures that any repayments of support are dealt with appropriately.

Taken together, these measures will help the Government to continue to support individuals and businesses through the coronavirus pandemic, and they will also begin to put the public finances on a sustainable footing as we continue to move out of the pandemic. I therefore ask that clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86 stand part of the Bill.

[James Murray (Ealing North) (Lab/Co-op)]

I rise to speak to the provisions standing in my name and those of the Leader of the Opposition and my right hon. and hon. Friends. On behalf of the Opposition, I will begin our detailed scrutiny of this Bill today by considering the impact it will have most immediately and most widely on people across the UK through its cuts to the money that families, in all their many forms, have in their pockets.

The opening clauses, 1 to 5, focus on income tax, with clause 5 freezing the personal allowance from 2022-23 through to 2025-26. That is no small change; the effect of the clause will be to make half of all people in the UK pay more tax from next year, and that is not the only measure the Government are taking that raids their pockets. We know that this Bill will make families pay more through the income tax changes next year, but it also does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now, it supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need help most, and of course it comes as the Government are choosing, in this year of all years, to take money from the pockets of NHS workers.

[Sammy Wilson (East Antrim) (DUP)]

Does the shadow Minister accept that the total take in income tax from individuals across the United Kingdom as a result of that one measure in one year will be £10 billion, and the total take over the next five years will increase by 25%? On the basis of the tax paid now, 25% more income tax will be paid collectively by individuals as a result of simply freezing thresholds.

[James Murray]

I thank the hon. Member for setting out some of the figures about the impacts of the Bill. I can add to that by saying that if we take the freezes to the personal allowances, along with the cuts to NHS workers’ pay, the council tax hike and the cut to universal credit, the real scale of the impact of the Government’s decisions becomes clear. A newly qualified nurse living with their partner and two children in rented accommodation will lose more than £1,100 a year. It is plain wrong to hit families across the country in that way, but that sense of injustice is made all the more acute by the fact that that increase of costs to families comes years before any rise in corporation tax. At the same time, through the Bill the Government are letting tech giants stop paying tax altogether.

Last week, we voted against the Bill on Second Reading. Our reasoned amendment made it clear that key to the decision was its effect on family finances, through what it does and what it does nothing to stop. Today, we have the chance to stop the measure in the Bill that will make every income tax payer in the country pay more next year. We will seek a vote on clause 5, and I urge Conservative Members to join us in knocking this attack on families out of the Bill. By doing so, we would allow the Government to come back in their next Finance Bill with a fairer approach—one that does not put a misguided tax break for big business ahead of the money that families have in their pockets.

The other clauses that are being debated concern a range of other matters. Clauses 24 to 26 relate to the impact of covid on those benefiting from enterprise management incentives, cycle-to-work schemes and employer-provided coronavirus tests. Meanwhile, clause 31 exempts those receiving tax credits from paying income tax on the one-off covid-19 support scheme payment. Clause 32 clarifies the tax treatment of payments made under the self-employed income support scheme. Clause 33 provides for a relief where businesses repay covid support payments that are no longer required. Finally, clause 28 freezes the standard lifetime allowances for pensions immediately until 2025-26, while clause 40 does the same for the capital gains tax annual exempt amount and clause 86 does the same for inheritance tax thresholds.

Through our new clause 23, we ask that all the measures being considered today are considered for their effects on the finances of different households across the UK. We want to see a fair, progressive tax system in this country, so we want the Government to be transparent about the effect that their changes will have on people’s lives. The question of how changes affect the people of this country should always be the Government’s overriding concern when introducing changes to the tax system.

That is why our new clause would require that the Government analyse, review and be transparent about how their changes will affect households at different levels of income. It would further require Ministers to set out how the changes would affect people on the basis of age, disability, race, sex and other protected characteristics, and how they would affect people living in different nations and regions of the UK. There is significant evidence that women, those from black, Asian and ethnic minority communities, young people and disabled people have been disproportionately affected throughout the pandemic. The Budget report itself says:

“The economic impact of restrictions has not been felt equally. Staff in the hardest hit, largely consumer-facing sectors, such as hospitality, are more likely to be young, female, from an ethnic minority, and lower paid.”

It is therefore indefensible that not one of many supporting documents to last month’s Budget statement, nor the Bill, was an equality impact assessment.

Our new clause gives the Government a chance to right that wrong, but while that analysis is vital in setting out how different people will be affected by the Government’s choices, we know already that the biggest and most immediate impact of the changes in the Bill—and of the Government’s wider policy choices, on which the Bill is silent—will be to take money from the pockets of people across the country this month, this autumn and next year.

[Andrew Griffith (Arundel and South Downs) (Con)]

We hear from the hon. Gentleman that his party seeks to strike out the single largest intervention that will help the recovery, in the form of the super-deduction, which businesses have already told me is mobilising incremental investment. I would be fascinated to hear his view of new clause 7, which was put forward by many of his recent colleagues, including many of those who were on the Front Bench, to increase the rate of income tax to 55%. What does he think of that?

--- Later in debate ---

[James Murray]

The hon. Gentleman spoke about the super-deduction, but as that will be picked up in the next debate, I will focus now on the changes that are the subject of this debate.

Although we know that the Government will be making changes that affect different communities differently, the crucial point is that we know already what impact the Government’s policies will have this month, this autumn and next year. This month, households will feel the hit as the Government force local authorities to raise council tax in the middle of a pandemic, having broken their promise to give councils whatever was needed to help support people through the covid crisis.

This autumn, some of those families who need help will see the Government cut £20 a week off their universal credit, hitting them just as other covid support schemes are due to be winding down. This hit will come just when the Office for Budget Responsibility has predicted that unemployment will peak at 6.5%—2.2 million people—and this cut takes out-of-work support to its lowest level since the 1990s.

Next year, more than 30 million people in this country, including those earning only just enough to pay tax at all, will be forced to pay more as the freeze to income tax and personal allowances kick in. It tells us all we need to know about this Chancellor’s priorities that families will feel the impact of the Government’s choices years before businesses face an increase in corporation tax and at the very same time that some of the biggest firms in this country are offered a tax break that the Chancellor himself has boasted represents the biggest tax cut in modern British history.

We on the Labour Benches believe that our country needs a fair progressive tax system. We want to see greater investment in jobs, growth and addressing the long-term challenges that we face. We want to see families protected, not forced by this Government to shoulder the burden while tech giants see their tax bills reduced to nil. It is not just the Opposition who oppose the Government’s approach. Major international economic bodies such as the International Monetary Fund and the OECD agree that these tax rises on families are wrong. The hit to household finance is not only unfair but economically illiterate. Taking money out of people’s pockets now means that they will not spend it in small businesses or in local high streets, damaging the prospect of a recovery.

We will be voting for the Government to be clear and transparent about the effects of the measures in this Bill on all the different families and households across this country. While Conservative Members may not want to support all of our points, I would not be surprised if some did not feel deeply uncomfortable at the prospect of making families pay more through this Bill. We therefore hope to offer them a chance to join us in rejecting clause 5, halting this Bill’s plans to make all income tax payers pay more from next year and forcing the Government to think again about the fairer tax system our country needs.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

I am aware that time is short, so I will keep my remarks brief.

All of us will have been dealing with constituents facing real financial challenges over the past year. The past months have been unprecedented in their impact on family finances. People have lost jobs, been on furlough, and faced great uncertainty. It has been genuinely hard. Yet some sectors have done very well and seen growth, so the economic impact of the pandemic has fallen very unevenly. The economic consequences have also landed very quickly, but the response from the Treasury was equally quick. We are now facing the next stages of the crisis. Over the months ahead, we will be getting the economy moving again as quickly as possible, safely, so that we can get people back into work, and considering how the Government will pay for all the extra costs they have incurred.

As my right hon. Friend the Financial Secretary to the Treasury said, economists have predicted that the economy will have fully restarted by April next year. I think that that is right, based on my own business experience and on conversations with businesses in my constituency and beyond. It therefore makes sense to start the recovery of the public finances then, and that is what some of the measures in this Bill do. The question for me, though, is how to do this fairly and without choking off the recovery.

Let me focus on one measure: personal allowances. The increases that we have seen in personal allowances over the past decade have been a key ingredient in helping some of the least well-off in our society. The allowance has nearly doubled and is one of the most generous in the world. It has been part of the broader initiative, which has been a hallmark of the past 10 years, about making work pay. It is with some caution that we should consider changes, but I will be backing these changes and urge Members to reject the Opposition amendment on this measure. It is worth remembering that nobody’s take-home pay will be less than it is now, and that this is a measure that builds over time, as will the pace of the recovery. I note that the right hon. Member for Wolverhampton South East (Mr McFadden), who is not in his place, commented that it is a fairer way to raise revenue than some others, and I agree with his analysis.

The crisis support packages have been necessary and welcome, but they come with a huge cost. There is no compassion in letting debts build up for future generations to pay off. There is no stability for Governments in failing to tackle deficits.

--- Later in debate ---

Clauses 6 to 14 and schedule 1 raise revenue by increasing the main rate of corporation tax while keeping that rate competitive relative to our international peers and supporting an investment-led recovery through the introduction of a super deduction that is unprecedented in its generosity, and they should therefore stand part of the Bill.

[James Murray]

I rise to speak to the amendments and the new clause in my name, that of the Leader of the Opposition and those of my other right hon. and hon. Friends.

In the preceding debate, we saw how this Finance Bill will hit families, in all their many forms across the country, by making half of all people in the UK pay more tax from next year. As I made clear, the sense of injustice is made all the more acute by the fact that that increase in costs for families comes before any rise in corporation tax and that at the same time, through this Bill, the Government are letting tech giants stop paying tax altogether.

Clauses 6 to 8 make it clear that the proposed changes to corporation tax will come after increases to the income tax personal allowances, while clauses 9 to 14 centre on the so-called super deduction, a £25 billion tax break targeted at big corporations that the Chancellor has said represents

“the biggest two-year business tax cut in modern British history”.

That tax break forms the centre of the Chancellor’s strategy set out at the Budget, and it comes with a huge cost attached to it. We need to be absolutely clear who will benefit from it.

One thing is clear: that tax break is not targeted at small and medium-sized businesses. The truth is that such businesses can already benefit from the annual investment allowance, a 100% tax break on investment up to £1 million, which clause 15 extends to the end of this year. The Financial Secretary was very clear in his written statement of 12 November 2020, which announced the extension, that it:

“Simplifies taxes for the 99% of businesses investing up to £1 million on plant and machinery assets each year.”

Indeed, the Treasury Committee concluded in its report published in February, “Tax after coronavirus”, that the annual investment allowance

“appears well targeted to promote growth in small and medium-sized enterprises.”

The existing allowance is said to be well targeted at the growth of small and medium-sized businesses and, by the Financial Secretary’s own admission, it already benefits 99% of businesses, which will benefit only marginally from the new super deduction. Who does that leave? It is very clear who will be the main beneficiaries of the Chancellor’s new scheme. It will be a tax break for the 1%.

[Sammy Wilson]

Does the shadow Minister not accept, first, that large businesses are an important component of our economy and we need to increase productivity in those businesses as well as in small businesses, and secondly, that many large industries, such as the aviation industry, have been badly hit by the pandemic and would benefit from the kind of tax allowances proposed in the Bill?

[James Murray]

I thank the right hon. Gentleman for his comments, but as I have set out, the annual investment allowance already appears to serve small and medium-sized enterprises well. The super deduction that we are debating now is designed to help companies such as Amazon, which do not need any help with their investment. It is important that we see this in the context of those companies that have done well throughout the outbreak and are already avoiding much of the tax they should be paying. It is no wonder that Tax Watch has nicknamed this the “Amazon Tax Cut”. This giveaway from the Chancellor could wipe out Amazon’s UK tax bill entirely.

Analysis of Amazon’s accounts from 2019 shows that the corporation’s UK operations made pre-tax profits of £102 million. In the same year, it spent £67 million on plant and machinery, £80 million on office equipment, and £15 million on computer equipment. The super deduction would have enabled Amazon to deduct £211 million from the calculation of its taxable profits— more than enough to wipe out its entire tax liability twice over. It is truly astonishing that, faced with all the challenges of this outbreak, the Government see their priority as giving Amazon a tax break.

Here and around the world, people agree with us that investment in jobs and growth is what is needed. A tax break for tech giants that already fail to pay what they should is not the answer. That is why our amendment 79 would explicitly prevent the biggest tech firms from taking advantage of the Chancellor’s tax break, as well as other big firms that do not support workers’ rights and the living wage.

The Government should be improving the lives of Amazon workers, who have helped so many people with deliveries throughout the pandemic, not giving a huge tax break to their bosses. Amendment 79 would prevent Amazon and other tech giants from accessing the super deduction by preventing firms from doing so if they are liable for the digital services tax. When the Government set out their plans for the digital services tax, they made it clear that it would apply to businesses that provide social media platforms, search engines, or online marketplaces to UK users. The detail of that tax means that businesses will be liable when the group’s worldwide revenues from these digital activities are more than £500 million, and when more than £25 million of these revenues are derived from UK users.

We are clear that those big corporations that should be caught by the digital services tax are among those that absolutely should not be benefiting from the Government proclaim as the biggest business tax cut in modern British history. We know that Amazon has brazenly made it clear that it will dodge the bill from the digital services tax by passing the cost on to its marketplace sellers. The fact that it is not even paying the tax that was designed for it to pay makes the prospect of a further massive tax cut from the Chancellor even more galling.

Furthermore, as well as excluding big corporations on the basis of their being liable for the digital services tax, we are seeking to use our amendment to stop those big businesses that do not support workers’ rights and the living wage from accessing the tax break. Both conditions would also catch Amazon and would also require other big businesses—those that are not liable for the digital services tax—to respect the right to organise and collective bargaining, and to be certified, or be in the process of being certified, by the Living Wage Foundation as a living wage employer.

When firms stand to benefit from what the Chancellor has called the biggest business tax cut in modern British history, the very least the Government should require of them is that they pay their workers the living wage and respect workers’ basic rights to organise. Alongside this, we propose in amendment 80 that the Government require big firms benefiting from the Chancellor’s tax break to make a climate-related financial disclosure, in line with the recommendations of the Task Force on Climate-related Financial Disclosures.

Beyond the specific issue of how the biggest corporations are set to benefit from this tax break the most, we have also tabled new clause 24 to reflect the widely-held concerns about the impact of the super deduction on levels of tax avoidance and evasion. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse.

As I mentioned on Second Reading, economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”.

Minsters were unable to reassure us on this point when I raised it last week, so we are asking for the levels of tax avoidance and evasion arising from the super deduction to be reviewed and put transparently before this House.

It tells us everything about the Conservatives’ priorities that they are taking money from people’s pockets at the very same time as letting tech giants off paying tax altogether. This Government are proposing to wipe out some of the biggest corporations’ tax bills through a £25 billion boon, aimed at the biggest corporations, that the Chancellor has called

“the biggest two-year business tax cut in modern British history.”

In the face of a struggling economy, a tax break for tech giants that already do not pay enough tax should be the last thing on the Government’s mind. Instead, it is top of their list. They are wrong.

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

Will the hon. Gentleman give way?

[James Murray]

No, let me make some progress.

The Government are wrong, and that is why we will be voting to stop the Chancellor’s tax break going to the biggest tech firms or other big corporations that do not support workers’ rights and the living wage. We need a fairer tax system and we need investment in jobs and growth. This Government’s Finance Bill fails on both fronts. I urge Conservative Members to show that they understand this, support our amendments today and take a stand against the Amazon tax cut.

[Felicity Buchan (Kensington) (Con)]

I speak in support of clauses 6 to 14 and against the amendments. This Finance Bill needs to be a delicate balancing act. It needs to give immediate support to businesses and individuals while setting a path to rebalance our books in the medium to long term. In my view, these provisions on corporate taxation and the super deduction get that balance exactly right. The Bill defers the increase in corporation tax for two years and applies to only one in 10 businesses at 25%, but at the same time it turbocharges the incentives to invest in business now.

This country has had a perennial problem with productivity. We need to incentivise and encourage business investment. That business investment will help productivity, growth and innovation, and that is exactly what we need. The OBR has said that it anticipates that business investment will go up by a massive 10% as a result of this measure and, as my right hon. Friend the Minister mentioned in his introductory remarks, we will go from No. 30 in the OECD rankings for attractiveness for business investment to No. 1. That is what we need over the course of the next two years as we turbocharge this economic recovery. We need the economic recovery to be strong.

Finance (No. 2) Bill

James Murray Excerpts

Committee stage & Committee of the Whole House (Day 2)
Tuesday 20th April 2021 Commons Chamber

I therefore recommend that amendments 17 to 42 are made to clause 36, and that clauses 30, 36, 41, 115 and 117 to 121, as well as schedules 6, 7, 27 and 29 to 32, stand part of the Bill.

[James Murray (Ealing North) (Lab/Co-op)]

I will speak to new clause 29, tabled in my name and the names of the Leader of the Opposition and other right hon. and hon. Friends. It is timely to consider what the Government are doing to tackle tax avoidance and tax evasion today, with this month marking five years since the publication of the Panama papers. Those papers revealed the true global scale of tax avoidance and tax evasion and the need for comprehensive and effective action to tackle them. Of course, the clauses we are considering are far more limited in scope.

The Minister set out that clause 30 relates to the abuse of the construction industry scheme rules, clause 36 makes amendments to the corporation tax rules for hybrids and other mismatches and clause 41 amends the anti-avoidance rule when claiming relief for gifts of business assets. More widely, clauses 115 and 117 to 121 relate to other measures, including penalties for the promoters of tax avoidance and giving HMRC new powers to obtain information. We will not oppose those measures today.

However, our concern about the Government’s approach is centred not so much on what those clauses cover but what the Bill, and the Government’s approach more widely, fail to do. Our concern is that, faced with the challenges of tax avoidance and tax evasion, and with the public clearly wanting to see definitive action from the Government, Ministers have presented a Bill of measures that are relatively minor and technical. Indeed, as the House of Commons Library analysis of the Bill concluded, it would seem that the Exchequer impact of these changes will be minimal as they are not included in the Budget report costings.

The truth is that three Conservative Prime Ministers and five Conservative Chancellors have failed to tackle tax evasion and aggressive tax avoidance. The Government have repeatedly promised to act, but their proposals in the Bill fall far short of the change we need. That is why our new clause would require the Government to review the impact of provisions in the Bill relating to the levels of tax avoidance and tax evasion and the size of the tax gap, and to publish regular reports setting out their findings. The Government must not be allowed to hide behind warm words on this matter. They need to be transparent about the impact, or lack thereof, that their proposals will have.

We also welcome the amendment in the name of my right hon. Friend the Member for Barking (Dame Margaret Hodge), which seeks to treat promoters of tax avoidance schemes which are abusive as acting dishonestly for the purposes of criminal prosecution of tax offences. This kind of change is crucial if we are to shift towards more criminal prosecutions for the promoters of tax avoidance schemes, and to shift the gear of the Government’s approach.

At the moment, where tax avoidance has occurred, the system lands liabilities on the tax payers, who are usually not tax experts and may have been falsely told that a tax avoidance scheme is lawful. In contrast, the promoters of tax avoidance schemes are allowed far too often to get away with it. We therefore welcome any efforts to strengthen penalties for the promoters of failed tax avoidance schemes. But we have seen nothing from the Government today to raise the stakes and to make greater use of the powers HMRC already has to bring criminal prosecutions against the promoters of fraudulent tax schemes.

We know that HMRC recognises its power to use criminal investigation approaches to tackle the promotion and enabling of tax avoidance schemes, but in a letter the Financial Secretary sent me in January this year, he admitted that, since the formation of HMRC’s fraud investigation service in 2016, only 20 individuals have been convicted for offences relating to arrangements that have been promoted as tax avoidance. An average of around four people a year does not feel like a concerted effort.

[Catherine West (Hornsey and Wood Green) (Lab)]

My hon. Friend is making a great speech. Does he agree that it seems disproportionate that more people, in an adjusted sense, tackle benefit fraud than tackle big business or dodgy individuals who are taking money from the public purse?

[James Murray]

I very much agree. My hon. Friend makes an important point about the Government’s priorities, and about the lack of priority they give to going after the promoters of tax avoidance schemes and those who evade paying tax, in comparison to other actions in Government. We are seeking to put pressure on them today to address that imbalance.

HMRC’s criminal investigation policy states:

“Criminal investigation will be reserved for cases where HMRC needs to send a strong deterrent message”.

However, we know that fraud through the promotion of tax avoidance continues at scale, involving at least an estimated £20 billion in 2018-19, so it is hard to imagine why Ministers would not support a stronger deterrent message being sent by the greater use of criminal prosecutions.

Part of the answer may be the understaffing of HMRC. In a response on 11 January this year to a parliamentary question, the Financial Secretary admitted that the number of full-time equivalent employees at HMRC had fallen since 2010 from 67,553 to 58,467. That is a reduction of more than one in seven. The question of capacity in HMRC and the impact that that may have on its ability to tackle tax abuse must not be ignored. The Tax Justice Network refers to the fact that a member of staff in the compliance business stream at HMRC brings in on average over £900,000 a year on a £30,000 salary. It has pointed out that the Chancellor’s additional investment in HMRC staffing is directed towards tackling fraud related to covid spending, while previous funding increases have supported HMRC’s Brexit capacity. Its view is that the Chancellor must invest further in HMRC’s core compliance capacity.

Furthermore, beyond the questions around tackling the promoters of tax avoidance, the Bill is also silent on other important areas that need to be pursued, such as efforts to set up a register of overseas entities. Legislation is needed to establish a register that would show exactly who owns the foreign companies buying up British property. This would serve as a key part of any clampdown on money laundering.

The then Prime Minister, David Cameron, first announced plans for this in 2015, yet more than five years later, the legislation is nowhere to be seen. I bet he has not been in touch with Ministers for action over that. I would welcome the Minister using his speech at the end of this debate as an opportunity to explain whether the promised deadline of introducing legislation to set up a register of overseas entities by 2021 will be missed. If he is silent on this matter, we will take that as a yes.

I would like to use the opportunity of a discussion on tax avoidance to ask the Treasury ministerial team again to confirm whether the Chancellor backs plans for a global minimum corporate tax rate, as proposed by the US President. When I asked the Minister’s colleague, the Exchequer Secretary, to address this point during the Bill’s Second Reading last Tuesday, she did not respond, which I am sure was an oversight. I would therefore welcome the Financial Secretary addressing this question directly in his closing speech, to avoid any misperception that he and his colleagues are deliberately avoiding the question.

Our criticism of the Government in relation to tax avoidance and evasion centres not so much on what the measures in the Bill would achieve but rather on the ways in which the Bill and the Government’s wider approach fall short. The Government lack a tough and comprehensive approach to prosecuting the promoters of tax avoidance, to going after international money launderers and to pursuing those who seek to evade tax. We know that the impact of the measures in the Bill will be relatively minor and technical. The public deserve to have the Government present clearly and transparently what effect the measures in the Bill will have, and our new clause simply requires that their impact on tax avoidance, tax evasion and the size of the tax gap should be reviewed and laid in public before this House.

Throughout the Minister’s statements and comments, there is a clear pattern that the Government favour minor technical amendments to legislation on this matter, rather than upping their game and truly calling time on the practices that the public clearly want to see ended. Today they have an opportunity, by supporting our new clause, to show that they understand the need to be clear with the public, to recognise the need to strengthen their approach on this matter, and to commit to coming back with the resources and legislation that are needed to truly make a difference.

[Mr Andrew Mitchell (Sutton Coldfield) (Con)]

I want to make a few points, principally on amendment 77. Perhaps I can start by saying that I do not agree with the Opposition spokesman, who has just addressed the House so eloquently, that the Government have been slow to tackle tax abuse and tax fraud. I should, at the outset, draw the House’s attention to my entry in the Register of Members’ Financial Interests. I think the Government have been very good at tackling tax fraud, starting in 2010 when this Conservative Government first came into office. The reforms that were introduced by George Osborne, the Chancellor of the Exchequer, deliberately targeted tax abuse and set up a number of measures to try to ensure that we clamp down on it, as it is common cause on both sides of the House for us to do.

Where I do agree with the Opposition spokesman is in his reference to the Panama and paradise papers. That excellent work by journalists from, I think, The Guardian and the BBC exposed the fact that money laundering, dirty money and abuse in that sector were far more rampant than we realised. That is one of the reasons why the right hon. Member for Barking (Dame Margaret Hodge) and I have made so much of an effort in this House, along with colleagues on both sides of the House, to try to clamp down on money laundering and dirty money and ensure that we have sunlight as the best disinfectant on all of this. That is why we introduced the open public registers of beneficial ownership for the British overseas territories, and why we strove so hard to persuade the Crown dependencies—successfully, now—to introduce those same open registers. That is the way in which we stop kleptocrats, bent politicians, warlords and corrupt businesspeople from stealing from the Exchequer but also, of course, from Africa and Africans. That was the great benefit of the paradise and Panama papers: they showed so clearly the extent of what was going on.

I thought that the Financial Secretary made some very good points about amendment 77. In general, I do think that the Revenue has enough power over the private citizen in the laws of the land as they stand at the moment. However, the point I would make to the Financial Secretary—he has been most receptive in listening to the right hon. Member for Barking and me about this—is that eternal vigilance is required. As we have seen, and as amendment 77 draws attention to, there is an inequality of arms in this matter. Advisers who set up these schemes often have an aura of authority, because they are lawyers, accountants and professional people, which those whom they advise may not be.

I want more to be done to ensure that, where these bad schemes of tax evasion are put together by professional advisers, they do not get off scot-free while the people they put into these devices, or talk into going into them, take the rap. It is not right that they should just lose the fees that they earn, which I think is currently the position: we should toughen the financial penalties. The Minister handles these matters very well, and I know that he wants this to be more than a senior common room debate. I know that he is conscious of the balance between the rights of the individual and making sure that people are not able to evade tax. I know that he does think seriously about that, so I would just urge him to always keep an open mind on this issue.

This is a familiar theme. In this year of Britain’s presidency of the G7, we should remember the work that was done by George Osborne for the last G8, at which he championed the open registers that were introduced in Britain in 2016. It is a proud achievement of this Conservative Government that, at the last G8, they moved the world towards focusing on these illicit flows of money, and this year with the G7, I hope that the Minister will consider it important as well. I completely accept that we are not going to divide the Committee on amendment 77. What the Minister said about the amendment was extremely constructive and I hope he will feel it right for the House to return to this matter on very regular occasions, in pursuit of what unites us all: that people should pay their fair levels of tax.

Finance Bill

James Murray Excerpts

Report stage & 3rd reading
Monday 24th May 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

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

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to discuss the following:

New clause 6—Review of impact on corporation tax revenues of global minimum rate of corporation tax—

‘The Chancellor of the Exchequer must within six months of Royal Assent lay before the House of Commons an assessment of the effect on corporation tax revenues in 2022 and 2023 of a global minimum corporation tax rate set at 21%.’

This new clause would require the Government to publish an assessment of the revenue effect of a global minimum corporation tax rate of 21%.

New clause 12—Review of impact of Act on investment—

‘(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the changes on—

(a) business investment,

(b) employment,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must consider the following scenarios—

(a) the United Kingdom reaches an agreement with OECD countries on a minimum international level of corporation tax, and

(b) the United Kingdom does not reach an agreement with OECD countries on a minimum international level of corporation tax.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause would require a report on the effect of the changes in the Act on investment, comparing scenarios in which (a) the United Kingdom reaches an agreement with OECD countries on a minimum international level of corporation tax and (b) the United Kingdom does not reach an agreement with OECD countries on a minimum international level of corporation tax on various economic indicators.

New clause 22—Eligibility for tax reliefs—

‘(1) For the purposes of Clauses 9 to 14 and 109 to 111 no tax reliefs shall apply to companies registered or with subsidiary companies registered in countries or jurisdictions listed in the EU list of non-cooperative jurisdictions for tax purposes.

(2) The Secretary of State shall also have the power to list additional jurisdictions or countries as non-cooperative jurisdictions for the purposes of subsection (1) that he/she perceives to be non-cooperative jurisdictions for tax purposes.’

This new clause would stop companies registered, or with subsidiary companies registered, in tax havens from benefiting from the UK Government tax reliefs in this Bill.

Amendment 1, in clause 9, page 4, line 2, at end insert

“provided that any such company which has more than £1 million in qualifying expenditure must also make a climate-related financial disclosure in line with the recommendations of the Task Force on Climate-related Financial Disclosures within the 2021/22 tax year.”

This amendment would, in respect of companies with qualifying expenditure of over £1 million, add a condition relating to climate-related financial disclosure to the conditions that must be met in order for expenditure to qualify for super-deductions.

Amendment 29, page 4, line 2, at end insert

“provided that any such company must also not be liable to the digital services tax”.

Amendment 30, page 4, line 2, at end insert

“provided that any such company which has more than £1 million in qualifying expenditure must also—

(i) adhere to International Labour Organisation convention 98 on the right to organise and collective bargaining, and

(ii) be certified or be in the process of being certified by the Living Wage Foundation as a living wage employer.”

Government amendment 2.

Amendment 31, page 5, line 15, at end insert—

“(11) Expenditure shall not be qualifying expenditure under this section if it is incurred by a company which has at any time been involved in arrangements giving rise to a liability for diverted profits tax, or which would give rise to such a liability but for the effect of section 83 of Finance Act 2015.

(12) For the purposes of subsection (11), involvement in arrangements shall include being connected within the meaning of section 1122 Corporation Tax Act 2010 to any company involved in such arrangements.”

This amendment would bar multinationals with a history of corporate tax avoidance from accessing super-deductions.

[James Murray]

The vaccine has given us all hope, but we know that the health crisis from covid is far from over, and the impact on jobs, businesses and the economy resulting from the pandemic will be with us for a long time to come. People across our country and British businesses that have been struggling want to be able to get back on their feet. This Bill should have offered them the support they need to do so, but instead the Government chose to make half of all people in the UK pay more income tax, and its headline measure for businesses, quickly and with good reason, earned the nickname, “the Amazon tax cut”. This Amazon tax cut was proudly announced by the Chancellor as the new super deduction—a £25 billion tax cut that he has said represents the biggest two-year business tax cut in modern British history. What he was less keen to make clear is that this tax cut is not targeted at British businesses that have been struggling in the outbreak, but stands to benefit some of the biggest multinational tech firms that have done very well indeed over the past year or so.

As we have heard during previous debates on the Bill, small and medium-sized businesses can already benefit from the annual investment allowance. That allowance, extended by clause 15, offers a 100% tax break on investment up to £1 million, and we know that it will benefit almost all businesses already. The Financial Secretary to the Treasury has said exactly that. He stated very clearly in a written ministerial statement on 12 November last year that the annual investment allowance:

“Simplifies taxes for the 99% of businesses investing up to £1 million on plant and machinery assets each year.”

We pushed the Government on this matter in Committee of the Whole House, when the Financial Secretary claimed:

“The super deduction benefits all businesses that are in a position to take advantage of the eligible deduction it provides”.—[Official Report, 19 April 2021; Vol. 692, c. 764.]

He will know, however, that the 99% of businesses already benefiting from the annual investment allowance will benefit only marginally from the new super deduction.

The real winners of the super deduction were identified in Committee of the Whole House by my right hon. Friend the Member for Barking (Dame Margaret Hodge), who made the powerful argument that it will most benefit

“the companies with oven-ready capital investment plans, benefiting from the increased demand that they have enjoyed over the last torrid year—companies such as…the notorious tax avoider Amazon.”—[Official Report, 19 April 2021; Vol. 692, c. 751.]

As that phrase reminds us, Amazon already avoids paying much corporation tax in the UK at all by shifting profits to low-tax countries overseas—I will return to that point shortly—but it is depressing that, through his super deduction, the Chancellor is finishing the job Amazon started and wiping out the last little bit of tax it pays in this country.

As the House may remember, we asked the Government to look again at this matter in Committee of the whole House. Our amendment at that stage would have explicitly prevented the biggest tech firms from taking advantage of the Chancellor’s tax break, as well as other big firms that do not support workers’ rights and the living wage. At the time, the Financial Secretary to the Treasury objected to our amendment on the basis that it sought to

“restrict the relief only to certain companies”—[Official Report, 19 April 2021; Vol. 692, c. 742]

and that it imposed “burdensome conditions” on companies that want to benefit from it. That latter phrase told us plenty about the Government’s views on people’s rights at work. The conditions the Minister saw as “burdensome” are the rights to organise and to be paid a living wage. When even basic rights at work and a living wage are seen as burdensome, it is perhaps no wonder that this Government broke their promise to include an employment Bill in the Queen’s Speech earlier this month.

It is clear that we will need to push Ministers over workers’ rights on future days—from banning the shameful practice of fire and rehire to ending exploitation by rogue umbrella companies—as cross-party amendments tabled to this Bill by right hon. and right hon. Members seek to achieve. Today, we have made it very straightforward for the Government, through amendment 29, to focus specifically on preventing the very biggest tech firms—those companies liable to pay the digital services tax—from benefiting from the super deduction. This should be easy. Only a very small number of very large multinational firms that have done very well over the past year are liable for the digital services tax. The detail of that tax means that businesses are liable only when a group’s worldwide revenues from digital activities—such as providing social media platforms, search engines or online marketplaces—are more than £500 million, and when more than £25 million of these revenues are derived from UK users.

The vote on this amendment will come down to the very simple question of how Members of this House believe public money should be spent. As the Bill stands, the Government’s biggest business tax cut in modern British history will finish the job Amazon started, wiping out the last bit of tax it had to pay on the few parts of its business the profits of which it has been unable to shift overseas. A vote in favour of our amendment 29 would stop Amazon and a small number of similar firms benefiting from a giveaway of public money—public money that could be better spent for so many purposes, including to support British businesses that have been struggling throughout the past year. I urge Conservative Members to consider how they vote on amendment 29.

Before we come to that vote, I will turn to our new clause 23, through which we seek to push the Government finally to back President Biden’s plans for a global minimum corporation tax rate. I have explained how the Government’s super deduction will wipe out Amazon’s remaining tax bill in the UK, and how the amount it was due to pay in the first place was paltry compared with what it should be paying. Despite its business success in the UK, profit shifting to Luxembourg meant Amazon’s corporation tax contribution in the UK in 2019 was less than 0.1% of its turnover. People are fed up with large multinational companies avoiding their tax. It goes against the fairness that must be at the heart of our tax system, and in this year of all years, when so many British businesses are struggling to get back on their feet while Amazon’s business booms, it is clearer than ever that change is long overdue.

We have heard brazen claims from the Government about their work to combat international tax avoidance. In the debate in Committee of the whole House on this Bill, the Minister went so far as to claim that the Government have “led the international charge” in a number of ways, yet since the Biden Administration announced their proposals for a global minimum corporate tax rate, we have seen that, not for the first time, actions from the Government fail to match their words, with the UK now the only G7 country not to back the US plan. This is a once-in-a-generation opportunity to grasp the international agreement on the global taxation of large multinationals that has evaded our country and others for so long, yet rather than stepping up, our Government are stepping away.

[The Financial Secretary to the Treasury (Jesse Norman)]

The hon. Gentleman advances the extraordinary claim that the UK is the only country among the G7 not to have backed the Biden plan. Will he put in the Library the evidence for that claim?

--- Later in debate ---

[James Murray]

I am very happy to put in the Library references to comments from the other G7 countries indicating their support, but what I ask the Financial Secretary to do is put in writing the support from the UK Government for the plans proposed by President Biden, which he should be able to do today. He should act, because the British people want the Government to act. He need only look at polling carried out at the end of April by Yonder, formerly Populus, which showed overwhelming public support for action to tackle global corporate tax avoidance: three quarters of respondents thought that

“The UK should play a leading role.”

The polling also showed that less than a third of people

“trust Rishi Sunak and Boris Johnson to tackle global tax avoidance”.

The public are right to be sceptical, because the Government have shunned ample opportunities to come out in favour of President Biden’s plans; indeed, since we began debating the Bill, I have put them to the Financial Secretary and his colleagues three times. On Second Reading, I urged the Exchequer Secretary

“to confirm to the House that she and the Chancellor back plans for a global minimum corporate tax rate and that they will do all they can to make this a reality.”—[Official Report, 13 April 2021; Vol. 692, c. 197.]

She did not respond. In case his colleague’s lack of response was simply an oversight, I asked the Financial Secretary in Committee of the whole House

“to confirm whether the Chancellor backs plans for a global minimum corporate tax rate”—[Official Report, 20 April 2021; Vol. 692, c. 897.]

He refused to do so, saying only that the Government

“welcome the renewed commitment that the US Administration have made in this area”.—[Official Report, 20 April 2021; Vol. 692, c. 914.]

In a debate the following week, I put the question to him again, as simply and directly as possible:

“does the Chancellor back the plans proposed by the US President?”—[Official Report, 28 April 2021; Vol. 693, c. 415.]

The Financial Secretary replied:

“I do not think it is appropriate for Ministers to comment on tax policy in flight”.—[Official Report, 28 April 2021; Vol. 693, c. 418.]

It is very hard to conclude anything from that pattern of responses other than that the Government are not backing these proposals to succeed.

We know that much of the discussion around President Biden’s plans and the proposals formulated in recent years by the OECD and G20, with which his plans largely align, has centred on the so-called pillars 1 and 2 of any agreement. In broad terms, pillar 1 relates to where profits are taxed, while pillar 2 relates to a global minimum corporate tax rate. Both are important to developing a fairer tax system, both feature in President Biden’s proposals, and the Opposition want to see progress on each.

We have been trying to understand why the Government are so reluctant to get behind President Biden’s plans. There was a suggestion in the Financial Times last week that what the UK wants is more movement on where large multinationals pay taxes—pillar 1—before it will agree to support the President’s global minimum corporate tax rate, pillar 2. The paper quoted a UK Treasury official:

“The core UK proposition is that we’ve got to solve the digital tax issue…It’s not primarily about a minimum tax”.

To quote the chief executive of Tax Justice Network, that argument is “absolute nonsense”. Many commentators have joined him in taking a very sceptical view of what the UK claims its position to be; they point out that President Biden’s plans include steps to make progress on pillar 1, and that although any estimates are necessarily rough, pillar 1 would bring in only a few per cent. of the estimated £14 billion that a global minimum corporate tax rate at 21% under pillar 2 would raise.

A report by Bloomberg, however, implied that the real reason behind the Government’s position may be cynically to disguise their real agenda: a desire to keep alive the possibility of a race to the bottom in the future. That would be such a damaging and short-sighted approach. People are fed up with the race to the bottom. We thought that even the Chancellor had had a conversion when he admitted to the BBC’s “Today” programme around the time of the Budget that years of Conservative economic policy had failed, telling the BBC that

“there was an idea”

that corporation tax cuts

“could help spur investment, and what we’ve seen over the past few years is that we haven’t seen a step change in the level of capital investment that our businesses are doing as a result of those corporation tax decreases.”

After years of people being frustrated with tax avoidance by the biggest multinational companies, the new global deal finally within reach would be a game changer. It would raise billions of pounds a year for investment in our British public services and industry, it would stop British businesses being undercut by large multinational firms that shift their profits overseas, and it would change the behaviour of Governments around the world by calling time on the race to the bottom with tax rates. That is why a global minimum corporate tax rate is so important.

This is a once-in-a-generation opportunity. It would be a shameful failure for our Government, at the G7 meeting that we are hosting in Cornwall next month, to fail to lead on securing a global deal. It is crucial that we show support and help to build momentum behind the Biden Administration’s ambitious plans.

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That is what we are doing, and in doing it we are merely following a tradition and a pattern of leadership that this Government have exercised over many years, so let me just pick up some examples. We have seen leadership on base erosion and profit shifting; leadership in the G20 on a comprehensive global solution based on the two pillars we have described; leadership, now, in our presidency of the G7; before that, the diverted profits tax, the corporate interest tax restrictions and the requirements for large businesses to publish their tax strategy; even last year, the digital services tax; and, in the present Bill, a plastic packaging tax. We are constantly innovating to seek to improve the quality and payment of taxation and to ensure that tax is paid in the due amounts by those who are due to do so. That is what this Bill does, and that is why I commend these measures to the House.

[James Murray]

I thank so many Members for their contributions to this debate, which has focused on the importance of fairness in the tax system, supporting British businesses and the need for the Government to step up and help to strike a global deal to stop tax avoidance.

We heard from my right hon. Friend the Member for Barking (Dame Margaret Hodge), who spoke with great experience about how the UK should be a prominent voice leading the charge to support President Biden’s proposals. She said that deliberately allowing tax-avoiding large multinationals to benefit from the super deductions is unbelievably foolish. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke about the unfairness of certain firms getting a super deduction. We also heard passionate contributions from my hon. Friends the Members for Liverpool, Walton (Dan Carden), for Coventry South (Zarah Sultana), for Jarrow (Kate Osborne) and for Leicester East (Claudia Webbe) about their and the public’s disbelief that the UK appears to be blocking the best opportunity in a generation to strike a deal on global tax avoidance, especially with the UK hosting the G7 summit in June.

We also heard from Conservative Members. The hon. Member for South Cambridgeshire (Anthony Browne) seemed rather eager to welcome the fall from 21% to 15% as a minimum, rather than wanting to help the US Treasury, which has publicly said that “15% is a floor” and that we

“should continue to be ambitious and push that rate higher.”

The hon. Member for Devizes (Danny Kruger) spoke about backing Biden and backing Britain. That is what our approach seeks to do. His Ministers are backing Bermuda.

Unfortunately, the Minister gave no reassurance in his speech that the Government are committed to taking a lead on this once-in-a-generation opportunity for a global deal on tax avoidance by a few large multinational firms that undermine British businesses and fail to pay their fair share. We were hoping that, today, the Government might finally indicate their support for President Biden’s plans, but instead we heard more of the same nonsensical justification for inaction. Through the vote on our new clause, we will push them to review and be transparent about the impact that a global minimum corporate tax rate no lower than 21% would have.

We were also hoping that the Minister might have indicated his support for our very simple amendment that would stop Amazon and a few other tech giants from benefiting from the tax break that the Chancellor announced at the Budget. He and his colleagues failed to address that point, so we will seek a vote on that amendment to see if any Conservative Back Benchers feel uneasy at their Ministers effectively finishing the job that Amazon started, wiping out the last bit of tax that Amazon would have to pay on the few parts of their business whose profits they have been unable to shift overseas.

This debate has exposed the failure of this Bill and this Government to be on the side of the British people and of British businesses trying to get back on their feet. Ministers have resisted stepping up to the challenge of stopping a few large multinational firms that are not paying their fair share of tax. We urge any Government Members who are uncomfortable with the position that their Government are taking to join us in voting for new clause 23 and amendment 29.

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

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[James Murray]

People and businesses across our country need the Government to support them as they begin to get back on their feet after all the damage to people’s lives and livelihoods that the covid outbreak has brought. Six weeks ago, when we began to consider this Bill, it was clear that its provisions and those in the Budget that preceded it failed to provide that support.

We opposed the Bill on Second Reading, because far from helping people to get back on their feet, it would force half of all people in the country, including those earning only just enough to pay tax at all, to pay more from next year by freezing income tax personal allowances. That hit to household finances came alongside an immediate sharp council tax rise, a cut in universal credit later this year and a shameful real-terms pay cut for NHS workers after their unparalleled service over the last year and more. The sense of unfairness was made even more acute as the Bill, at the same time as hitting household finances, gave an immediate tax cut to some of the biggest multinational tech firms, which have done so well over the last year.

Throughout the Committee stage of the Bill, we tried to right some of these wrongs. We voted to reject the Bill’s plans to make all income tax payers pay more from next year, and we voted to stop the tech giants from benefiting from the Chancellor’s tax cut. We did not succeed in making changes to the Bill, despite giving Government Members today, in as straightforward a way as possible, another chance to exclude tech giants from their tax cut.

Throughout the debates on this Bill, we have also seen the Government reject opportunities to support decent, well-paid jobs, to end tax avoidance by large multinational firms and to back British businesses that have been struggling throughout the outbreak. It was telling that the Minister described workers’ rights and the prospect of paying a living wage as “burdensome conditions” when we suggested that they should be basic conditions of large companies taking the Government’s tax break.

As I said earlier today, it is no wonder that the promised employment Bill was absent from the Queen’s Speech earlier this month. The decision to drop it proves that the Government have no plan to tackle low pay or improve protections for working people. My colleagues and I will push the Government to honour their promises on workers’ rights and to go further, from banning the practice of fire and rehire, which has been deployed so shamefully during covid, to ending exploitation by rogue umbrella companies, as cross-party amendments tabled by right hon. and hon. Members earlier today sought to do.

It is also deeply frustrating and disappointing that, before today, Ministers had failed on three occasions since we began discussing the Bill to take up opportunities to back President Biden’s plans for a global minimum corporate tax rate. Today, they refused again, and they voted against our new clause, which would have required them to be transparent about the impact that a global minimum corporate tax rate on large multinationals would have in the UK. Britain should be taking a leading role in striking this global deal. It would bring in billions of pounds of tax every year, which could be invested in British public services and industry. It would level the playing field for British businesses that are currently undercut by a few large multinationals that shift profits overseas. It would also show the world that Britain believes in playing fair when we host the G7 summit next month.

The Government should have used the Bill to help people get back on their feet as we begin to emerge from covid. They should have been supporting British businesses that have been struggling throughout the outbreak. They should have begun building a country that lets neither workers be treated badly, nor a few large multinationals avoid paying their tax. Our tax system must have fairness at its heart, yet this Government are making households right across the country pay more tax, while letting Amazon pay no tax at all and leaving British businesses to be undercut by large multinational firms that shift their profits to tax havens overseas. That is not what our country needs. Those are not the actions of a Government who can claim to be on the side of the British people, and this is not a Bill that we can support.