Finance Bill

James Murray Excerpts

2nd reading
Monday 28th November 2022 Commons Chamber

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

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give a second reading to the Finance Bill because, notwithstanding the importance of increasing the energy (oil and gas) profits levy, it raises taxes on working people through its freeze of the personal allowance threshold; because it fails to take advantage of other sources of revenue, such as ending non-domiciled tax status and further reducing the tax allowances available to oil and gas companies; and because it derives from an Autumn Statement which fails to set out plans to arrest the 7 per cent fall in average living standards forecast over the next two years, and to grow the UK economy, including through replacing business rates, supporting start-ups, giving businesses the flexibility they need to upskill their workforce, investing in clean and renewable energy, insulating homes across the country, and creating jobs in the green industries of the future.”

After 12 years of economic failure from the Conservatives and 12 weeks of economic chaos, we now have this Finance Bill from a party that is holding Britain back. It is a Bill from a party that has, of course, lost any claim that it might once have tried to lay to economic competence; but more than that, it is a Bill that shows a party making the wrong choices time and again, and a party with no plan to grow our economy and halt the decline in living standards.

As people across the country know, the Conservatives’ economic failure is hitting households hard. We are living through the longest period of earnings stagnation for 150 years, with real wages lower this year than when the Tories came to power in 2010. Living standards are forecast to fall by 7% over the next two years—the biggest fall on record, taking incomes down to 2013 levels. No wonder the director of the Institute for Fiscal Studies described the forecast drop in disposable income as “simply staggering”. This will truly feel like a lost decade for people across the United Kingdom: a decade of low growth, with incomes now set to fall back to where they were a decade ago.

I know that Conservative Members are desperate to make out that global factors are entirely to blame for the economic reality of today, but although no one denies the deep impact of covid and of Putin’s invasion of Ukraine, it is simply not credible—and it is frankly insulting—to pretend that the occupants of Downing Street, now and over the past 12 years, have had nothing to do with the mess that we face. It was decisions taken by the Conservatives in office that left us uniquely exposed to the inflationary shock of oil and gas prices rising—they took misguided and damaging decisions to shut down our gas storage, to stall on nuclear power and to ban renewable technologies such as onshore wind—and it was decisions taken by the Conservatives in office that have denied the UK the opportunity to grow our economy over the past 12 years as we could and should have done.

[Richard Fuller]

Will the hon. Gentleman please check his facts? If he looks at the period from 2010 to just before the covid pandemic and compares the UK’s average rate of growth with that of our OECD competitors, particularly the G7, he will find that the UK outstrips all of them bar the United States and Germany.

[James Murray]

I seem to be engaging more with the hon. Gentleman now that he is on the Back Benches than when he was briefly on the Front Bench. If he looks at the statistics, he will see that, over the last 12 years, the UK’s growth rate has been a third lower than the OECD average, and a third lower than it was during the previous Labour years. I will take no lessons from him or his colleagues on the need for economic growth.

I take this opportunity to give the previous Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), some rare credit. At least he took responsibility for the mess he inherited from his colleagues when he confirmed that our economy is stuck in a “vicious cycle of stagnation.” On that point, he was absolutely right.

Over the Conservatives’ 12 years in power, as I said to the hon. Member for North East Bedfordshire (Richard Fuller), the UK economy grew a third less than the OECD average and a third less than during the previous Labour years. What is more, we are now the only G7 economy that is still smaller than before the pandemic. Over the next two years, we are forecast to have the highest inflation in the G7 and the worst economic growth of any country in the G20 except Russia.

What is more, we are the only country in the G7 whose governing party chose to inflict profound damage on its own economy. Although the Prime Minister and the Chancellor refuse to take responsibility, the British people can see through them and will hold them to account. What the British people want and need is a Government who will get on and do the right thing without having to be pushed, dragged and forced into doing so. That is one reason why people across the country have been so exasperated by the Government’s reluctance at every turn to implement a windfall tax on oil and gas producers’ huge profits this year.

My right hon. Friend the Member for Leeds West (Rachel Reeves) first called on the Government to bring in a windfall tax in January. It took five months of pushing the Government along a painful journey to get them to act. In those months, Conservative Ministers tried to defend their position, saying that oil and gas producers were struggling. They said a windfall tax would be “un-Conservative”, and the current Prime Minister said it would be “silly” to use this money to offer people help with their energy bills. Conservative MPs voted against a windfall tax three times, and then, when they finally realised their position was untenable, they did a U-turn.

Even then, having been dragged kicking and screaming into introducing a windfall tax, the current Prime Minister coupled it with a massive tax break for the oil and gas giants. This tax break will be given to the oil and gas giants for doing the things they were going to do anyway, which helps to explain why some of them have paid zero windfall tax in the UK this year, despite record global profits.

Despite having another go at windfall tax legislation with this Bill, the massive tax break is still there. It is set at a level that will, to quote the explanatory notes,

“maintain the overall cumulative value of relief”.

This tax break leaves billions of pounds on the table. These profits—the windfalls of war—could go towards helping people facing the difficult months ahead. This tax break is set to cost the taxpayer £80 billion over five years. This tax break was brought in by decisions that this Prime Minister took when he was Chancellor, and it is staying thanks to the decisions of the Chancellor he appointed from No. 10. What clearer evidence could there be that, no matter which Conservative goes through the revolving door of Downing Street, it is all more of the same?

All we get from the Conservatives is the same vicious cycle of stagnation. This doom loop has been dragging wages down, forcing taxes up and hitting public services, all of which come round again and keep economic growth low.

[Jonathan Edwards]

I agree with many of the hon. Gentleman’s points. Much of the narrative around the autumn statement and the Budget is about restoring market credibility after the implosion of the previous Administration. In reality, the one thing we could do to restore market credibility is to have a more sensible trading relationship with the European Union. There is no hope from the Government, but will the Labour party offer us that hope?

[James Murray]

Later in my speech I will talk about our plan for growth, which will involve fixing the holes in the Brexit deal with which the Conservatives left the European Union. Alongside other measures, it is important to make sure that the deal has a proper plan for growth that is sorely lacking from this Government.

This Finance Bill is a bill in more ways than one, because as well as being legislation, it represents a bill landing on working people’s doormats. It is a bill that working people are being forced to pay for the Government’s failure. Working people are paying for the Tories’ decisions that, for the last 12 years, have held back the economy, and for the last 12 weeks have crashed it.

This Bill freezes the income tax personal allowance, which will leave an average earner paying over £500 more income tax a year by 2027-28. In the autumn statement, the Government announced a council tax bombshell that will force a £100 tax rise on families in the average band D house from next April. As a result of all the tax measures announced in this Parliament, middle-income households will see their tax bill rise by £1,400. That is what it looks like when working people are made to pay the price.

It is all the more galling for people to be asked to pay more when the Conservatives are so slapdash with public money. Today, new figures show that the current Prime Minister wasted a staggering £6.7 billion on covid payments to businesses and individuals that were fraudulent or mistakes. Despite wasting public money so carelessly, he is now happy to put up taxes on working people across the country.

It could have been different had the Government made fairer choices. The Government could have chosen to close the unfair private equity loophole that gives hedge fund managers a tax break on their bonuses. They could have chosen to reverse their tax cut for banks. Perhaps they have forgotten what their position is, having voted for the cut at the start of the year, before U-turning on it a few months ago and then, more recently, U-turning again.

The Government could have finally chosen to scrap non-dom tax status, an outdated and unfair tax break that costs the taxpayer £3.2 billion a year. A tax break for non-doms should have no place in the UK in 2022. As if evidence were needed that this tax break belongs in a different era, the law makes it clear that people can inherit non-dom status only from their father, unless their parents were unmarried. More fundamentally, this loophole ignores the principle of fairness that should be at the heart of our tax system. If a person makes Britain their home, they should pay their taxes here.

There are theories going around about why the Government are so reluctant to modernise the tax system and abolish the non-dom tax break. Perhaps the Minister will be able to confirm at the end of the debate, or in writing afterwards, whether the Prime Minister has been consulted on the option of abolishing non-dom tax status. Perhaps he can confirm whether the option was ever considered. When the current Prime Minister was Chancellor, did he recuse himself from discussions on this matter? I see the Exchequer Secretary to the Treasury acknowledging my request, so I look forward to his response either later today or in due course.

We know that the Conservatives’ choices on tax are deeply unfair, but we also know that the lack of economic growth is the deep root of the rising tax burden in the UK. Over the last 12 years, the UK economy has grown a third less than the OECD average and a third less than during the previous Labour years. We are now the only G7 economy that is still smaller than it was before the pandemic, and over the next two years we are forecast to have the lowest growth of any country in the G20 bar Russia.

A plan for growth has been missing for a decade, and its absence is having a greater impact than ever. In its report this month, the OBR confirmed that measures announced at the autumn statement will make no difference to growth in the medium term. The CBI’s director general, Tony Danker, put it starkly following the autumn statement:

“There was really nothing there that tells us that the economy is going to avoid another decade of low productivity and low growth”.

We cannot afford another decade like the last. We cannot afford another decade of being held back, another decade of lost growth. That is why Labour’s plan is so crucial to raising wages and living standards, supporting and sustaining public services and driving business investment and job creation in the decade ahead.

[Karin Smyth (Bristol South) (Lab)]

My hon. Friend is making an excellent speech, in stark contrast to what we have heard from the Conservative party. It is about people, working people and building back better. Does he agree that, for the people, particularly young people, who lost out so much during covid and are now facing another decade of low growth, we are particularly disappointed about the lack of support for further education and colleges to support the skills agenda for both 16 to 18-year-olds and adults who desperately need retraining and skills? That is starkly absent from what we have heard from this Government.

[James Murray]

I thank my hon. Friend for her contribution. She is a great advocate for investment in skills training and making sure that young people have opportunities in the decade ahead, which they have been denied in the last decade under this Conservative Government. The points she makes fit well within a wider plan for growth, which is at the heart of what Labour Members are proposing and pushing the Government to adopt.

That plan is wide ranging. It covers business rates being replaced with a fairer system that makes sure that high street businesses no longer have one hand tied behind their back. It relies on us implementing a modern industrial strategy to support an active partnership of government working hand in hand with businesses to succeed. Labour’s start-up reforms will help to make Britain the best place to start and grow a new business. Small businesses will benefit from our action on late payments and we will give businesses the flexibility they need to upskill their workforce. As I mentioned, we will fix holes in the Brexit deal so our businesses can export more abroad. Crucially, our green prosperity plan will create jobs across the country, from the plumbers and builders needed to insulate homes, to engineers and operators for nuclear and wind. We will invest in the industries of the future and the skills people need to be part of them. That is what a plan for growth should look like. As John Allan, the chair of Tesco, said recently, when it comes to growth, Labour are the

“only…team on the field.”

The truth is that the need for an effective plan for growth has exposed the emptiness and exhaustion of the Conservative party. All we have to show from 12 years of Cameron, May and Johnson is chronic economic stagnation.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The hon. Gentleman knows that he should not refer to existing colleagues by name.

[James Murray]

I apologise, Madam Deputy Speaker. All we have to show from those three former Conservative Prime Ministers in the last 12 years is chronic economic stagnation. This autumn, the Conservatives tried desperately to make their economic strategy work, but their decisions crashed the economy, imposed a Tory mortgage premium, put pensions in peril and trashed our reputation around the world. Now they are trying again. We face tax hikes on working people, the biggest drop in living standards on record and growth still languishing at the bottom of the league. It seems that Conservative MPs are beginning to realise they have come to the end of the road and their time is up. In a timely echo of the popular TV show, hon. Members from Bishop Auckland to South West Devon are declaring: “I’m a Tory, get me out of here.” It seems the Conservative party is finally beginning to realise what the rest of us already know: the Tories are out of time and out of ideas, and Britain would be better off if they were out of office.

Our amendment makes it clear that, although Ministers have been dragged, kicking and screaming, into action on oil and gas giants’ windfall tax, this Finance Bill fundamentally fails the UK economy and comes from a Government holding the British people back. Be in no doubt: the mess we are in is the result of 12 years of Conservative economic failure. With this Bill, they are loading the cost of their failure on to working people. The Government still have no plan to grow the economy and to stop the fall in living standards that is filling people across the country with dread. We need a Government with a plan to get our economy out of this doom loop, to support businesses to grow and to raise living standards again. We simply cannot afford another decade of the Conservatives. Now is time for change, now is the time for them to get out of the way, now is the time to let Britain succeed.

Finance Bill

James Murray Excerpts

Committee stage
Wednesday 30th November 2022 Commons Chamber

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I call the shadow Minister.

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

Thank you, Madam Deputy Speaker, for this opportunity to consider the details of the Bill and speak to the amendments and new clauses in my name and that of my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare).

As we have heard from the Minister, the first three clauses of the Bill relate to the energy, oil and gas profits levy—or, as everyone in the country apart from Conservative Ministers calls it, the windfall tax. It has been a painful journey to get this windfall tax on the statute book. As I set out on Second Reading, it took five months for the Government to finally support the principle of a windfall tax after my right hon. Friend the Member for Leeds West (Rachel Reeves) first called on them to introduce one in January this year.

The current Prime Minister, who was Chancellor at the time, was dragged kicking and screaming into introducing a windfall tax before the summer, but even then he decided to couple it with a massive tax break for oil and gas giants. We do not believe it is right to let that large untargeted and unnecessary tax break continue. It is a tax break that the current Prime Minister introduced and that has left some oil and gas giants paying no windfall tax at all this year. That is why we have been pressing the Conservatives to remove that loophole.

We have also pressed the Government to strengthen the windfall tax by raising its rate from 25% to 38%, a move that would align the overall rate with the taxation of oil and gas profits in Norway. We have also pressed them to extend its period of impact by backdating it to January 2022, the month when the shadow Chancellor first proposed it, and by extending it to 2027-28. We therefore welcome at least some strengthening of the windfall tax in clause 1, which increases its rate to 35%, and clause 3, which extends the period it affects to the end of 2027-28. These clauses do not go as far as we have proposed. They fall short of our plans to increase the rate of the windfall tax to 38% and to backdate it to January 2022, but they do confirm a frequent and recurring pattern when it comes to the windfall tax: Labour leads with the ideas while the Tories object, only ultimately to be dragged kicking and screaming into a U-turn.

Clause 2 highlights one respect in which the Government are still resisting following our lead. In that clause, they have made changes to the rate at which additional investment expenditure is calculated. As the explanatory notes make clear, this rate has been carefully set to

“maintain the overall cumulative value of relief for investment expenditure”.

Let us be clear what this means. The rate of the windfall tax might be going up, but the Government are making sure that the tax break for oil and gas giants is safe. As we see time and again, even when the Government are forced to legislate on a windfall tax, they cannot bring themselves to do it properly.

It is for this reason that we have tabled new clause 2, which would require the Chancellor to publish an assessment of the revenue that is estimated to be generated by the windfall tax and show how much more it would raise if it were backdated to January 2022, if it were increased to 38% and if the additional investment expenditure were reduced to zero—a move that would remove at least some of the oil and gas giants’ tax break. We urge hon. and right hon. Members from all parts of the Committee to support this new clause and help us to push the Government for a stronger and more effective windfall tax that no longer includes such a huge giveaway to the oil and gas giants.

Clause 4 of the Bill concerns tax relief for expenditure on research and development. As we have heard from the Minister, the clause reduces the additional deduction for R&D costs incurred by small and medium-sized enterprises and reduces the rate at which qualifying losses can be surrendered by such companies. At the same time, it increases the rate of R&D expenditure credit, which is mainly claimed by large companies. On this side of the House, we recognise the need to support R&D as a crucial part of driving growth in our economy. It is critical for the Government to have in place a system of R&D tax relief that is effective, that provides as much certainty as possible for businesses to make the investments that our economy so badly needs, and that provides crucial support to key growth sectors in the UK.

--- Later in debate ---

[James Murray]

On Second Reading on Monday, the Opposition made it clear that this Bill comes from a Government who have made the wrong choices time and again. In this Bill, the Conservatives have chosen to freeze the income tax personal allowance, which is the latest of the Government’s stealth taxes and will leave an average earner paying more than £500 a year more in income tax. Yet while raising stealth taxes on working people, they have also chosen to leave billions of pounds on the table by maintaining a tax break given to oil and gas giants for doing the things they were going to do anyway.

Furthermore, as we have discussed several times, this is a Bill that leaves non-dom tax status unaffected. The Prime Minister has chosen to preserve a £3.2 billion tax break for UK residents on their overseas income—a tax break that should have no place in the UK tax system in 2022. I ask the Minister, for a third time this week, to answer my various questions on this matter, including whether the Prime Minister was consulted on the option of abolishing non-dom tax status.

On Second Reading, we made it clear that the Government could have taken fairer choices in this Bill. In Committee, we gave hon. Members a chance to vote against the stealth tax rise on working people, but Conservative MPs refused to do so. We gave hon. Members a chance to press the Prime Minister and the Chancellor on ending tax breaks for the oil and gas giants but, again, Conservative MPs refused to do so. We are disappointed that, having had these chances to improve the Bill, we are debating the same unamended Bill we had on Monday.

As well as the unfair choices that this Bill makes, we also know it comes from a Government with no plan to grow our economy or halt the decline in living standards. Over the past 12 years, the UK economy has grown by a third less than the OECD average—a third less than during the Labour years before. We are now the only G7 economy that is still smaller than it was before the pandemic, and over the next two years we are forecast to have the lowest growth of any country in the G20, bar Russia. In the coming two years, living standards are forecast to fall by 7%—the biggest fall on record—taking incomes down to the levels of a decade ago.

The truth is that a plan for growth in the UK has been missing for a decade and its absence is now having a greater impact than ever. That is why we have used the debate on this Finance Bill not only to argue in favour of the fairer choices Labour would take when it comes to taxation, but to set out our plan to escape the doom loop of Conservative economic failure and incompetence.

Under Labour’s plan, we would grow the economy, including by replacing business rates with a fairer system to support high-street businesses; by implementing our modern industrial strategy to work hand in hand with businesses to succeed; by supporting start-ups, so that Britain becomes the best place to start and grow a new business; by fixing the holes in the Brexit deal so our businesses can export more abroad; and by creating good jobs across the country with our green prosperity plan, while making sure people have the skills they need to work in the industries of the future.

Twelve years of the Conservatives has given us chronic economic stagnation. Their reckless incompetence earlier in the autumn crashed the economy, imposed a Tory mortgage premium, put pensions in peril and trashed our reputation around the world. Now, our country faces tax hikes on working people, the biggest drop in living standards on record and no prospect of our growth rate rising from its position at the bottom of the league. We cannot afford another decade like the last, and I urge all hon. Members to join us in voting against this Finance Bill today.