Finance (No. 2) Bill

James Murray Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

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

I beg to move,

That this House declines to give the Finance (No. 2) Bill a second reading because, notwithstanding the introduction of the multinational top-up tax and electricity generator levy, it fails to introduce a targeted scheme to address pension issues affecting NHS doctors, instead making blanket changes to tax-free pensions allowances which, as they will cost around £1 billion a year and benefit only those with the biggest pension pots, should not be the priority, and because it derives from a Budget which failed to set out an ambitious plan for growing the economy.

Six months ago the previous Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), described our economy as being stuck in a “vicious cycle of stagnation”, and on that one point he was absolutely right. To his credit, unlike many of his colleagues, he at least took responsibility, on behalf of the Conservative party, for more than a decade of economic failure.

However, although the previous Chancellor was right to point to our country’s economic stagnation, the prescription that he and the previous Prime Minister offered was nothing short of disastrous. They set the UK economy on fire, and people are still paying the price as a Tory mortgage penalty does lasting damage to the living standards of working people; yet the current Prime Minister and Chancellor expect praise for being better than the arsonists who preceded them. Could the bar seriously be any lower? British families and businesses deserve so much better than that. After 13 years of economic failure, people and businesses across the UK deserve a plan for the economy that offers more than managed decline.

[Anthony Browne (South Cambridgeshire) (Con)]

I fear that the hon. Gentleman may know what I am about to say. Is he aware that, according to the International Monetary Fund, economic growth in the UK—GDP, either per capita or in terms of constant prices—has grown faster than economic growth in France, Germany, Italy and Japan, faster than the G7 average, faster than the EU average and faster than the euro area average? That is quite a record, and one to be proud of, so it is not a case of 13 years of economic failure. I invite the hon. Gentleman to pay tribute to the Government’s success in ensuring that our economy grows faster than the economies of all those other countries that have faced similar international challenges.

[James Murray]

Just two weeks ago, we were promised a Budget for growth. Let us now look at the data that was published alongside that Budget. It shows that ours is the only G7 economy that is forecast to shrink this year. Our long-term growth forecasts were downgraded in the Office for Budget Responsibility report.

[Anthony Browne]

Will the hon. Gentleman give way?

[James Murray]

No, I am going to finish what I am saying before I give way again.

That data confirms that we are suffering the worst falls in household incomes in a century. The hon. Gentleman need look no further than the OBR report alongside the Budget, which make it very clear that this Government have little or nothing to be proud of when it comes to our economy. Across the UK, people and businesses want to get on with making our country better off, but we are being held back by a Government who are out of energy and out of ideas. That much is clear from the Bill that is before us today, which seeks to implement some of what the Government have promised.

Of course, consideration of any Bill on Second Reading must include what it omits as much as what it contains. Let us start with the fact that this Bill contains no mention of introducing stealth tax rises for working people, although we know that that is exactly what the Government are doing. We know that in the Budget of March 2021 and in the Finance Act that followed it, the then Chancellor, now the Prime Minister, froze the basic rate limit and personal allowance for income tax for four years. In the recent autumn statement of 2022 and in the Finance Act that followed that, the current Chancellor extended those freezes by a further two years. Now, following this month’s Budget, the OBR has made it clear that the Government’s six-year freeze in the personal allowance will take its real value in 2027-28 back down to its level in 2013-14. What is more, in a double whammy, families across the country will be hit next month by the Tories’ council tax bombshell, a move that will take the bill for a typical band D property above £2,000 for the first time. Look beyond the rhetoric from the Conservatives, and the reality is clear: their stealth taxes are hitting working people hard.

However, while the tax burden for working people is up, important measures that we have been calling for to make the tax system fairer are nowhere to be found in the Bill.

There is nothing in it to close the loopholes in the windfall tax on oil and gas giants, which we have been urging the Government to do for so long. Of course, we have been pressing for an extension of the energy price freeze for many months, and we were glad that the Government followed our lead in the Budget, but it is wrong that they are still leaving billions of pounds of windfall profits for oil and gas giants on the table when those windfalls of war should be helping to support families through the cost of living crisis.

[Matt Rodda]

My hon. Friend is making an excellent point. Does he agree that the pressures that are, as he rightly said, felt by many families are also felt by our hard-working small businesses, which face extreme pressures on their costs, suppliers and energy costs? Does he agree that the Government seem to have forgotten about them?

[James Murray]

My hon. Friend is a real champion for small businesses in his constituency and beyond. We meet small business owners all the time, and they tell us that what they want are stability, certainty and a long-term plan from the Government, but none of that is evident in the Bill.

Something else that is missing is any legislation to tackle non-dom tax status. Non-doms are getting another reprieve from the Government. Labour believes that those who make Britain their home should pay their taxes here, but while families across the UK face higher taxes year on year, the Government are helping a few at the top to avoid paying their fair share of tax when they keep their money overseas. The non-dom rules that allow this to happen cost us more than £3 billion every year, and ending that outdated, unfair loophole could fund the biggest expansion of the NHS workforce in a generation.

For most people, ending non-dom status is a no-brainer, although we know that some opinions to the contrary do exist. Last week, for instance, we learnt of a blog published by Evelyn Partners, a wealth management firm which supplies accountancy services to the Prime Minister. In that blog, the firm makes it clear that it

“would prefer not to see further tinkering with the system”,

and feels that non-doms

“will welcome some continuing stability.”

I am tempted to paraphrase Mrs Merton’s legendary quip by asking, “Prime Minister, what first attracted you to this non-dom-supporting firm of accountants?”

The Prime Minister’s accountants have not only welcomed Government inaction over non-doms; they have welcomed the changes to tax-free pension allowances in part 1 of the Bill. As the shadow Health Secretary, my hon. Friend the Member for Ilford North (Wes Streeting) has made clear, we have long been calling for a targeted scheme to deal with the pension issue facing doctors, which is forcing some of them to retire early. We had thought that a sensible, targeted approach might even gather cross-party support. Indeed, the Health and Social Care Committee made the same call last year, when the current Chancellor was its Chair. In its report published last July, it said:

“The government must act swiftly to reform the NHS pension scheme to prevent senior staff from reducing their hours and retiring early”.

However, now that he has moved into No. 11 Downing Street, the right hon. Member for South West Surrey (Jeremy Hunt) has failed in one of the most important responsibilities of being Chancellor, which is to spend taxpayers’ money wisely.

The Conservatives could have included in the Bill a targeted scheme to encourage doctors to work overtime and not to retire early, but instead they have introduced an expensive blanket change that will benefit all those with the biggest pension pots. This approach fails the test of providing value for money. In the middle of a cost of living crisis, a blanket giveaway for some of the most well-off is the wrong way to spend more than £1 billion of public money a year. As the British Medical Association has said, a scheme targeted at doctors could be introduced at a fraction of the cost. The policy is ostensibly about keeping people in work, yet as Paul Johnson, the director of the Institute for Fiscal Studies says, it will cost in the region of £100,000 per job retained. We voted against the policy last week, and as our amendment today explains, the Government’s approach is a key reason for our declining to give this Finance Bill a Second Reading.

[Hywel Williams (Arfon) (PC)]

Does the hon. Gentleman agree that the Government’s proposal will have a differential effect geographically, when comparing economies with low wages such as my own in Wales with London and the south-east, for example, and that that is hardly conducive to levelling up?

[James Murray]

I thank the hon. Gentleman for his comment. The geographical impact of policies should always be considered, but we should also ensure that the Government consider targeting sectors. Rather than having a scheme that applies to everyone with a large pension pot, let us have a targeted scheme for NHS doctors, which is something we can all agree on.

Alongside the changes to the taxation of individuals’ pensions, this Finance Bill includes measures that will affect the taxation of businesses. Disappointingly, but unsurprisingly, there is no sign of the fundamental reform of business rates once promised by the Conservatives. The Bill does, however, include changes to corporation tax and allowances. In fact, making changes to corporation tax and allowances is something the Government have become quite experienced in. Under the Conservatives, corporation tax has changed almost every year since 2010, and as the Resolution Foundation has pointed out, the introduction of the latest temporary regime for corporation tax represents the fifth major change in just two years. Businesses deserve better than this. When I meet businesses across the country, they are clear that they want stability, certainty and a long-term plan, yet after 13 years in office, this Government are incapable of providing those crucial foundations for success.

The truth is that Conservative MPs have become deeply inward-looking and riven by division, and their default when faced with difficult choices is to put party before country. No matter what they say, this means that Conservative Ministers are simply incapable of providing stability and certainty in government. We can see that reality in the policies they announce. As Paul Johnson of the IFS said in response to the latest temporary tweak to the tax regime for businesses:

“There’s no stability, no certainty, and no sense of a wider plan.”

Indeed, we can see that by looking at the Government’s decision to allow temporary full expensing for expenditure on plant and machinery. We know how important it is to get capital allowances right as the rate of corporation tax is being increased, yet, as the Office for Budget Responsibility reveals, the Government’s approach will make no difference whatever to medium-term levels of business investment. Rather than a long-term permanent change, this change is for only three years. As a result, it only brings forward investment rather than increasing its overall level.

[Craig Mackinlay (South Thanet) (Con)]

The hon. Gentleman has talked about certainty and stability, and they are qualities that I would have some sympathy with, but can he rule out, here and now on the Floor of the House, that it is not going to be Labour’s plan under any circumstances to harmonise capital gains tax with income tax?

[James Murray]

As we have said several times, we will set out our plans in our own time. But let us be clear, if the hon. Member has concerns over capital gains tax, he might want to talk to those on his own Front Bench, because they raised it in the last Finance Bill by cutting the annual exempt amount. I suggest he talks to his colleagues before he raises questions with us.

[Richard Fuller]

Will the hon. Gentleman give way?

[Richard Fuller]

The hon. Member is a very thoughtful man. I think one of the reasons that he might be hearing some questions from Conservative Back Benchers is that he has just positioned himself as the advocate for the policy that our Front Benchers are now implementing. I have a question of substance for him on his research. He has just mentioned the original position of 21%, and has been clear in saying that what business wants is clarity, so can he give us some clarity? Is it the intention, if there is a future Labour Government, that they will press OECD countries for an increase in that 15% to achieve the 21% that he has been advocating?

[James Murray]

It is always nice to have an intervention from the hon. Gentleman. We very much miss his being in his position on the Government Front Bench. The debate over the OECD agreement has been going on for several years. President Biden wanted 21%, but there was lukewarm support for that from this Government and we ended up with 15%. Our challenge now, frankly, is to make sure that the likes of the hon. Gentleman do not get in the way of its implementation, because we want to see this global deal in place and Britain playing its part.

The hon. Gentleman’s intervention was timely as a reminder of the opposition coming from Conservative Back Benchers. In fact, this is an issue that I have raised with the Treasury Minister before. She might remember that on 7 February I asked her if the Government would keep their promise to implement the multinational top-up tax in the UK this year. We wanted reassurance that the Prime Minister’s weakness in the face of his Back Benchers would not leave us missing out on this landmark global deal. The Minister might recall that she brushed aside concerns that her Back Benchers might oppose these plans, only for concerns to be raised moments later by the right hon. Member for Witham (Priti Patel). The former Home Secretary, who was here earlier, went on to write a piece in The Daily Telegraph on 24 February arguing against the Government’s approach. In that piece, she claimed:

“In the House of Commons, those now turning their attention to all this are beginning to bridle.”

We believe it is crucial to get this legislation in place, so I hope the Minister can reassure us today that those parts of the Bill that introduce a multinational top-up tax will not be bargained away in the face of opposition from Conservative Back Benchers.

A fairer and more certain tax system, underpinned by a long-term economic plan, is crucial to helping businesses invest and grow, but an ambitious plan for growing our economy must go much further, and we have made it clear that this would be Labour’s first mission in government. At the heart of our plan to grow the economy, to create jobs and wealth, and to make everyone in our country better off is the partnership we would build between Government and business. We understand, as do businesses, that growth comes from the Government supporting private enterprises to succeed in the industries of the economy of the future.

That is why our green prosperity plan is so important, as it would provide catalytic public investment to crowd in private sector investment and to grow our clean energy capacity and green industries across the country. We would support growth in the digital economy and the life sciences, we would update our planning system to remove barriers to investment, and we would improve access to capital for new and growing businesses. We would make sure that, under Labour, the Government and business work together and invest together, for the good of everyone in every region and nation of the UK.

This task is urgent, because the world economy is changing and other countries are pulling ahead. According to the CBI, we are investing five times less than Germany, and roughly half of France and the US, in green industries. The Institute of Directors has said that, on its present path

“the UK will find itself left behind in the accelerating race to lead the green economy.”

The Society of Motor Manufacturers and Traders said, following the Budget:

“There is little…that enables the UK to compete with the massive packages of support to power a green transition that are available elsewhere.”

From President Biden’s Inflation Reduction Act in the US to the programmes coming out of Europe, Asia and Australia, the rest of the world is chasing the opportunities of the future. We need to be in that race too. Once we are, the opportunities will be ours for the taking. Our British businesses already excel in so many sectors and, with the right support, we could be a world leader in the new and growing industries of the future, making full use of our geography, our advantage in high-tech sectors and our world-leading universities.

What British businesses and families need now is a credible, ambitious plan from the Government to grow the economy and to make everyone in every part of our country better off. The failure to do that is perhaps the greatest failure of this Finance Bill and this month’s Budget. The Conservatives have had 13 years, and they have failed. As long as they stay in power, the vicious cycle of stagnation stays too. It is time for a new Government who will get us off this path of managed decline and make sure that people and businesses in Britain succeed.