Finance (No. 2) Bill

James Murray Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

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

I am grateful for the chance to respond on behalf of the Opposition in this Second Reading debate.

The Finance Bill follows last month’s Budget, in which the record of the Conservatives’ time in office was laid bare. After 14 years, the Conservatives have shown what they can deliver for the British people: higher taxes, falling living standards and lower economic growth. The truth is that after 14 years, they are out of time, out of ideas and out of touch with reality. They are out of time because whatever they say or try to do now, it is too late to repair the damage that they have done to the economy and to people’s standard of living. The Conservatives may now have implemented a reduction in national insurance—a cut that we support—but that comes amid a tax burden that is set to rise to its highest level in 70 years, and to rise in each and every year of the forecast period. The Government simply cannot escape the reality that under their plans, for every £5 they are giving back to families, they will be taking £10 in higher taxes. Giving with one hand and taking twice as much with the other—that is the reality of life under the Conservatives.

The Government are not just out of time, but out of ideas. In the Budget from which this Finance Bill came, the Conservatives performed what may be the biggest U-turn of this Parliament yet, and there is some tough competition on that. After years and years of the Conservatives opposing tooth and nail our plan to scrap non-dom status, the Chancellor stood in this Chamber last month and adopted our approach as his own. I recall the Financial Secretary’s immediate predecessor, the right hon. Member for Louth and Horncastle (Victoria Atkins), being a particularly passionate defender of non-dom status. I remember her declaring less than a year ago, during the Committee stage of a previous Finance Bill, that

“We have come to the conclusion that non-domiciled status is right”.––[Official Report, Finance (No. 2) Public Bill Committee, 16 May 2023; c. 44.]

How times change!

Despite the Government’s apparent U-turn, we have learned since the Budget through our careful analysis of the Government’s plans that loopholes remain in their approach to abolishing non-dom tax status. Alongside an unnecessary discount in year 1, there is a loophole that appears to have been intentionally designed to allow non-doms to stash money away in offshore trusts, so that they can avoid being subject to inheritance tax, as any other member of the public is. Those loopholes must be closed, because if a person makes their home and does their business in Britain, they should pay their taxes here, too. People will look at those loopholes and rightly conclude that despite the Budget’s U-turn, this Prime Minister just cannot bring himself to sort out the non-dom problem once and for all.

[Richard Fuller]

If I may say so, the hon. Gentleman is clutching at straws. There may be a few hundred million pounds here or there in what the Government propose doing to tighten up supposed loopholes, but as he is aware, the Labour party wants £28 billion spent on its green investment. Which taxes will he raise to pay for that?

[James Murray]

I fear that the hon. Gentleman is slightly out of date. Going into the general election, we have set out very clearly our plan to invest in the transition that we need in our energy supply and our economy, and how we would pay for that—through a strengthened windfall tax, alongside prudent investment. He may scoff at what we say about the non-dom tax loopholes, but we are talking about £1 billion in the first year and £2.6 billion over the course of the next Parliament. That money should go to our public services, rather than intentional loopholes allowing some people to get away with paying hundreds of millions of pounds less in tax.

The Conservatives are not just out of ideas, but out of touch with reality. They made that very clear in last month’s Budget, from which this Finance Bill arose. At the end of his Budget speech, the Chancellor made an astonishing £46 billion unfunded commitment—leaving a gaping hole in the public finances—when he pledged to abolish national insurance altogether. Since then, Government Ministers have had countless opportunities to row back from or U-turn on that commitment, but they have been determined not to. Earlier today, the Prime Minister had three chances to rule out cuts to the NHS, cuts to the state pension or tax rises to pay for his £46 billion unfunded tax cut. Each time, he refused to do so.

[Nigel Huddleston]

Will the hon. Gentleman give way?

[James Murray]

I will in a second. It is quite astonishing that the Conservatives are content to go into the general election with a £46 billion black hole in their plans, and that they refuse to say whether that £46 billion commitment will be funded by tax rises elsewhere or cuts to spending. I give way to the hon. Gentleman, so that he can confirm exactly how the Government will pay for that £46 billion black hole.

[Nigel Huddleston]

I very rarely intervene from the Dispatch Box, but I cannot help myself this time. The hon. Gentleman and I have had multiple conversations about this. He cannot differentiate between an aspiration and a policy commitment. His £28 billion was a policy commitment; what we have laid out is an aspiration. They are two different things.

As for the hon. Gentleman’s scaremongering about the possible hit to pensions or the NHS, he knows full well that those suggestions are absolutely not true, because national insurance does not wholly pay for health, benefits, or indeed pensions. He is either scaremongering or exhibiting complete and utter financial illiteracy. Total spending on the NHS is over £160 billion, and welfare spending is over £260 billion, massively dwarfing the total amount raised by national insurance. He either does not understand that, or is irresponsibly scaremongering, because he has known for a long time that national insurance and other payments are topped up by general taxation. He should know better.

[James Murray]

I thank the hon. Gentleman for his mini-speech. I feel I may have touched a nerve. He talks about people being scared; yes, I think people are scared when they hear the Government making a £46 billion unfunded spending commitment and not saying how they will pay for it. When the previous Prime Minister made an unfunded tax cut commitment of a similar order of magnitude, we know what havoc that caused in the economy, and people are still paying the price in higher mortgage payments and rent payments. I will just say to the hon. Gentleman that I gave him a chance to rule out cuts to the NHS or the state pension, or tax rises elsewhere, to pay for this black hole. I am not quite sure if he did that—maybe he has not got the line from his boss in No. 10 Downing Street—but the truth is that until the Government rule those things out, people will rightly worry about the impact his unfunded commitment will have on the economy.

The pledge the hon. Gentleman was speaking about sounds like exactly the sort of pledge that the right hon. Member for South West Norfolk (Elizabeth Truss) would approve of, because it comes to almost exactly the same amount as her Government’s unfunded tax cuts. Of course, the previous Prime Minster has been touring the TV studios and talking to newspaper journalists in recent days, saying, among other things, that people who claim that she crashed the economy are

“either very stupid or very malevolent”.

I wonder if the Minister would like to intervene to say whether he shares that view. No? He is not leaping to his feet now. I would have thought he would; I would have thought that Treasury Ministers would want to put as much distance as possible between themselves and the previous Prime Minister. Instead, with their £46 billion unfunded commitment, they seem determined to be a tribute act. Frankly, whatever the previous Prime Minister says, people across Britain know what impact her time in office is having on all of us, as we face higher mortgages and higher rents as a direct consequence of her economic recklessness.

That is the context in which we are debating this Finance Bill. The context is one of a Government who are out of time, out of ideas and out of touch with reality, and of a country that is feeling the impact of 14 years of Conservative economic failure. Even a simple clause such as clause 2, which sets the main rates of income tax, highlights the impact on ordinary people of decisions taken by this Government. Although the basic and higher rates of income tax are unchanged by this Bill at 20% and 40%, the tax burden on working people is rising as a result of the income tax personal allowance and the higher rate threshold being frozen from 2021-22 to 2027-28. Those tax thresholds would ordinarily have risen this April, but instead they are in the middle of a six-year freeze. According to the Office for Budget Responsibility, which I assume the Minister has respect for, these freezes will create 3.7 million extra taxpayers by 2028-29 and mean that 2.7 million more people will be paying the higher rate.

The truth is that, even taking into account any reductions to national insurance rates, the freezes in thresholds and the rises in council tax mean that by the end of the forecast period, the average family will still be £870 worse off. As the Resolution Foundation noted at the time of Budget, despite the reductions in national insurance, there will still be a net rise of £20 billion a year by 2028-29 in personal taxes. It pointed out that those over the state pension age, who do not benefit from national insurance cuts, will be particularly badly hit, and will face an average tax rise of £960 a year. The reality has been summed up by Paul Johnson, the director of the Institute for Fiscal Studies, who said following the Budget:

“This remains a parliament of record tax rises.”

That is the record of the Conservatives in government.

[Dr Luke Evans]

There is a certain Leader of the Opposition who, when standing for their post, said that as part of their No. 1 pledge, which was for economic justice, they would increase income tax for the top 5% of earners and reverse corporation tax cuts. If the hon. Gentleman’s party was voted into government, would it stand by that pledge? That too would increase the tax burden significantly.

[James Murray]

I am sorry, but I did not quite follow the hon. Gentleman’s question. I can, however, respond to the general point that I think he was making. We have been very clear that this is a Parliament of record tax rises. The tax burden is set to be the highest in 70 years, and we think that the tax burden on working people should be lower. However, we would only ever support tax rises if they were responsible, and done on a basis of economic security and stability.

[Dr Evans]

Will the hon. Gentleman give way?

[James Murray]

I will make some progress, because I have made that point quite clearly.

The tax burden has been pushed to a record high, and we have also seen a record number of changes and U-turns on tax rates and reliefs under this Government. That applies not just to personal taxation, but to tax rates and reliefs relating to businesses. Let us consider the Chancellor’s approach to the rate of corporation tax, which the Bill sets at 25% in clause 12. In July 2022, during his leadership bid, the current Chancellor pledged to cut the headline rate of corporation tax from 19% to 15%, yet when he became Chancellor just three months later, one of his first acts was to U-turn on what he inherited and to commit to raising that tax from 19% to 25%. He has been typical of the Conservatives in lacking any certainty, predictability or consistency, and we know how damaging that is to businesses that are trying to make investment decisions.

As the shadow Chancellor set out, if we win the next general election, we will bring back certainty by capping the headline rate of corporation tax at its current rate of 25% for the whole of the next Parliament. We would take action if tax changes in other advanced economies threatened to undermine UK competitiveness. We believe that the current rate of 25%—the lowest in the G7—strikes the right balance between what our public finances need and keeping our corporation tax competitive in the global economy. We also recognise the importance of stability and predictability in the reliefs available to businesses. We have seen a great deal of chopping and changing in capital allowances in recent years—indeed, this is a rare example of a Finance Bill from this Government that does not change the annual investment allowance or expensing regime.

We have made it clear that if we win the next general election, we will publish a road map for business taxation in our first six months in office, to give businesses the stability, predictability, and long-term plan that is so important to those making investment decisions. We have been pushing for a proper windfall tax on the profits of oil and gas companies operating in the North sea. The Government, despite initial opposition, U-turned on that and adopted some of our proposals with the introduction of the energy profits levy. Ahead of the general election, we have set out our plans to make the windfall tax stronger, and to raise more revenue to support our country’s energy transition, but it is also right that we give as much certainty as possible to those companies affected.

[Mary Glindon (North Tyneside) (Lab)]

Does my hon. Friend agree that we need a domestic oil and gas sector and offshore energy sector to deliver for the economy, to deliver energy security, and to bring in the investment needed for transition? After all, the North sea has powered our economy and our country for decades, and it can do so for decades to come.

[James Murray]

My hon. Friend is right to say that it is important that we offer as much certainty as possible to those companies affected. We recognise that by its very nature, the windfall tax is expected to be a one-off levy in response to extraordinary profits, and will ultimately come to an end. We have set out that if we win the next general election, the energy profits levy will end no later than the end of the next Parliament. We also fully support the energy security investment mechanism in clause 19, and the signal that it gives, which helps with investor confidence in the UK’s offshore energy sector.

We will not oppose the Bill on Second Reading, and we look forward to detailed consideration of its clauses in Committee. However, the wider context in which the Bill has been published lays bare the record of the Conservatives in government. That record is one of falling living standards for people across Britian, and the highest tax burden in 70 years. It is one of economic stagnation, from a party that is out of ideas and has been unable to provide the stability that businesses need. It is also one of recklessness with the public finances, both when the previous Prime Minister crashed the economy, and now that the current Prime Minister has made a £46 billion unfunded pledge to scrap national insurance. It is time to turn the page and turn a corner—time to give British people the chance to change our country’s Government by calling a general election.

--- Later in debate ---

[Richard Fuller]

My right hon. Friend has voiced the concern that I know will rest on the conscience of my hon. Friend the Minister, and he is right to add that. May I put a second conscientious point to the Minister—this point was also made by the shadow Minister, the hon. Member for Ealing North (James Murray)—which relates to the scoring for contaminated blood? That was not included in the Budget, which will have disappointed a considerable number of Members of Parliament from all parts of the House. It would be helpful if the Chancellor came forward with some view on that. Will my hon. Friend look at that?

Thirdly, will the Minister be encouraged by the words of my right hon. Friend the Member for Wokingham (John Redwood) and his analysis of the charges imposed on the Treasury by the Bank of England as a result of the quantitative tightening policies? The UK’s policies on quantitative tightening are exceptional. Few other central banks—many of which indulged in the bizarre quantitative easing policy 15 years ago, after the financial crash under the last Labour Government—do it, and it is now a real charge that has real effects on the real economy in the country. The exceptional way in which we are treating quantitative tightening charges—essentially, we take them on the books, the Treasury gets charged for it, and it has to go into the scoring that the OBR and others do—does not go on in other European countries. There is discretion on how it can be put across, and in the US the charges are absorbed but the Government are not charged. That is an important policy point, and I would be interested to hear whether the Minister would accept an amendment on that in Committee, although I think not.

Prosaically, or simply, HMRC has been in the headlines for not answering phone calls and for saying it would go on holiday. I am pleased that the Minister reversed that straightaway, and I know many taxpayers will be pleased about that. Many who will be looking to fill in their self-assessment forms will be surprised that they cannot download form SA100—they have to call HMRC to download a copy, whether or not they want to file it by paper. That seems a little odd, if HMRC’s phonelines are under pressure. Will the Minister, who has been responsive on points to date, look into that?

I will turn to the shadow Minister’s speech—I like him too. As he in his own mind “prepares for government”, he and his colleagues may wish to get a better grasp on reality. When he rightly talks about the importance of setting clarity for investment, it is important that those looking at investment think that those in charge of the public finances know what is going on. He talked about record tax rises under this Government. Let me ask him these questions. Did he disagree with funding of the furlough programmes? Did he disagree with the energy price support? Did he disagree with the increase in funding for the NHS? Did he disagree with record numbers of police officers? If he did not disagree with any of those, he would recognise, if he had a grasp on reality, that he would have to fund those through increased taxation or increased—[Interruption.] He has an answer, so would he like to come in? [Interruption.] Mr Deputy Speaker, I thought he had an answer.

[James Murray]

The hon. Gentleman is asking me what I disagree with. I disagree with the low growth that has been true of this Government. I disagree with billions of pounds being wasted in covid fraud and in other ways by the Government. I disagree with how the Government are now overseeing the highest tax burden in 70 years and have no plan to get the economy growing. That is what I disagree with.

[Richard Fuller]

The hon. Member mentioned growth rates, fraud and the record tax burden. I was making a point about the record tax burden, and he cannot respond to that challenge by repeating that he is concerned about it. He talked about low growth—he should go to Germany or France, which have lower growth than the UK. He should go to the majority of G7 countries, where he will find lower growth than in the UK. He is mistaking—[Interruption.] Would he like to intervene again? No.

I am trying to be helpful, obviously. The hon. Member and the shadow Treasury team wish to be taken seriously, but he will know that the points about growth are difficult to work through, with western economies not growing as fast as they have done. The UK is growing faster on average than other countries, and he needs to give some credit for that rather than just say that low growth is the case.

More importantly, if the hon. Member and the Labour party believe in furlough, the energy price schemes, the record increase in NHS funding and more police—they supported most of those programmes—they must recognise that those must be paid for in government, and that means hard choices. What the Prime Minister and the Chancellor have done is make those hard choices. Making people feel bad about historical hard choices is not a policy for a future Government.

--- Later in debate ---

[James Murray]

We seem to be engaging in an unexpected back-and-forth. The hon. Gentleman did not mention covid fraud. As he might know, we have set out our plans for a covid corruption commissioner. Would he support that—yes or no?

[Richard Fuller]

Of course, everyone supports cracking down on fraud, and I would be very happy—[Interruption.] If I may, I would be happy to look at the Labour party’s specific proposals. But the hon. Member will also know that when the Labour party talks about fraud, particularly when it comes to personal protective equipment and the furlough programmes, it conflates two things. For example, with the coronavirus loan programmes, Labour is conflating moneys that have not repaid because businesses have gone bust, or because companies have not paid them back yet, with moneys that have been lost fraudulently. When I look at his proposals, I want to ensure that when Labour talks about the amounts that have been lost, they relate to actual examples of fraud and not to the ways in which, in a difficult situation where people’s businesses could have been closed, money was given out by the Treasury to others. If that is the case, I am happy to look at that.

My second point to the Opposition—before I get on to what I want to say—is that I hold no torch for the former Prime Minister, my right hon. Friend the Member for South West Norfolk (Elizabeth Truss), but when the hon. Member and his colleagues talk about crashing the economy and about people’s mortgage rates, as I think the Leader of the Opposition did at Prime Minister’s questions, may I gently urge them to look at the Bernanke review that has just been completed on Bank of England forecasting? That has a number of important points about how the Bank of England could improve its forecasting. It also compares interest rates for the seven central banks that Ben Bernanke, the former head of the US Federal Reserve, has used as his comparators—in figure 12 in the report. If the hon. Member looks at that, he will see that UK interest rates in 2019 were in the middle of the pack, UK interest rates in 2020 were in the middle of the pack, UK interest rates in 2021 were in the middle of the pack, UK interest rates in 2022 were in the middle of the pack and UK interest rates in 2023 were in the middle of the pack. UK interest rates as we enter 2024 are in the middle of the pack. It is simply not true to say that something exceptional happened to UK interest rates in any part of this Parliament. Again, if the hon. Member wishes to be taken seriously in government, he needs to get a grip on reality, not on fantasy.

I will now turn, if I may, to the things that I would like to say. [Laughter.] I did promise the Whips that I would take only 10 minutes, so I promise to take only 10 minutes, from now. Clause 12 sets the corporation tax rate. I see my friend the hon. Member for Mid Bedfordshire (Alistair Strathern) in his place on the Opposition Benches. I think that both he and I are pleased that Government and Opposition Front-Bench Members have made clear their commitments for full expensing. That is particularly important to the people of Bedfordshire because there is a potential investment pending in his constituency. I would like to put on record our thanks to the two Front-Bench teams for setting out the clear future framework for how that will work.

Let me turn to income tax rates in clause 2, because it is important to look at the history. As my hon. Friend the Minister mentioned, the record of successive Conservative Governments from 2010 for working people in this country is strong. He mentioned the increase in the personal allowance from £6,475 in 2010 to £12,570 this financial year. That is a 21% real increase. However, my hon. Friend did not mention the change in the minimum wage, which has gone up from £5.80 in 2010 to the living wage now of £11.44. That is a 23% real increase in wages. Higher wages for working people and lower taxes for those on lowest incomes is a very strong record.

However, my hon. Friend needs to look at the higher rate threshold, because in 2010 it was £37,400, and now it is £37,700. In today’s money, the 2010 amount would be set at £59,800. In essence, there has been a 37% decrease in earnings when people hit the higher threshold. It may not be popular politically, but economically such a substantial differentiation in the way we tax people on middle and high incomes from those on low incomes has long-term implications. After the Budget, people who have retired, have been thrifty and saved money and have a private pension now find themselves complaining that, although they are getting their increase in the basic pension—or maybe not—they are being dragged into the higher rate of taxation. Successive Conservative Governments have rewarded work—they have wanted people to work hard, be entrepreneurial, and grow their businesses and the economy—so please, can we look at the ways in which that particular threshold should change?

Quite rightly, the Prime Minister and the Chancellor have indicated that they wish to simplify taxation on working people. That is completely consistent with the long-run approach of the Conservatives to taxation on work. The aspiration to reduce national insurance is an excellent way of looking at that. Unlike the Opposition, I would say that there is a difficulty in politics of finding times to make quite significant changes. This may be such a time—I know that Ministers will be looking at this—partially because we have quite significant issues of overall taxation that we need to reduce, but there is the opportunity for other reasons as well. Reallocation of existing taxes is easier when the tax burden is exceptionally high. I am a low-tax Conservative. I recognise, unlike some, that when we buy things, we have to pay taxes on them. But we know that this tax rate is unusually high, and we know that we will reduce that tax burden. It is a propitious time to look at ways of reducing national insurance contributions over the next five years.

The Budget forecasts fiscal drag to be £28 billion to £33 billion per annum for the next three or four years. There is an ethical and moral case for wanting to give back more money to people by reducing national insurance contributions. However, my proposal is for the Government to consider not that national insurance reductions should go directly into pay packets, but that national insurance contributions should be added to people’s long-term savings through compulsory savings schemes. Many countries have recognised that the idea of state pensions being based upon the “never, never” is not a secure way to provide for long-term pensions. We have never really grasped the nettle in this country—Singapore did it right at the start and Australia did it in the 1990s. There is an opportunity for us to build on the work that Sir Stephen Webb did in the coalition Government through changes to national insurance contributions. That would ensure that working people are the first generation to have a truly secure pension that is their money, where they do not have to rely on the vagaries of what a particular Chancellor of the day might do to pensions, and they would have only one tax on their wages during their career. Finagling people in other parties like to increase taxes, and having two taxes to increase gives them more flexibility. An opportunity would be provided to extend the savings stake—the way that people save for things—beyond providing for their retirement, so that they could, as they do in Singapore, put money into their first home. By looking in a new way at how we treat citizens in this country, we could move towards a savings state and away from a socialist never-never state. I leave my hon. Friend the Minister to consider those comments.

Draft Major Sporting Events (Income Tax Exemption) (2024 UEFA Champions League Final) Regulations 2024

James Murray Excerpts

Tuesday 16th April 2024 General Committees

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

It is a pleasure to serve in Committee with you in the Chair, Sir Robert.

As we heard from the Minister, the draft regulations will provide an exemption from income tax on individuals as a result of their involvement in this year’s UEFA champions league final at Wembley stadium. The final of the competition is set to take place on Saturday 1 June, but as the statutory instrument sets out, the exemption will apply for those eligible from the period of 28 May to 2 June. To benefit from the tax relief, as well as being non-UK residents, individuals must be accredited by the organisers of the final, UEFA, and of course any income accrued must arise from their involvement in the event.

As with previous similar regulations relating to other world-class sporting events, such as those the Minister mentioned, I and my colleagues in the Opposition will support the Government’s efforts to ensure that the appropriate arrangements are in place. I put on the record again our continued support for Britain hosting world-class sporting events. The UK continues to play host to the very best of global sport, and it was a particular pleasure to see the UEFA European championships recently awarded to the UK and Ireland in 2028. This year, it will be fantastic to see my home city—my neighbouring borough, in fact—host the champions league final at Wembley. I know that so many people across the UK, in particular young people, will be inspired by the ability of footballers from our country and beyond at Wembley. I am sure that Arsenal and Manchester City fans will be hopeful of seeing their teams get through the remaining rounds of the tournament.

The Opposition will not oppose the draft statutory instrument. I am sure that the Minister will join me in wishing the very best of luck to the English teams remaining in this year’s edition of the UEFA champions league.

HMRC Self-Assessment Helpline

James Murray Excerpts

Wednesday 20th March 2024 Commons Chamber

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

(Urgent Question): To ask the Chancellor of the Exchequer to make a statement on the Government’s decision to close the HMRC self-assessment helpline every year between April and September.

[Mr Speaker]

You have good news, Minister.

[The Financial Secretary to the Treasury (Nigel Huddleston)]

Thank you, Mr Speaker.

I thank the hon. Member for Ealing North (James Murray), and others, for raising the important issue of HMRC’s customer services and its plans to provide better services for taxpayers.

As Members probably know, His Majesty’s Revenue and Customs has announced that it is halting planned changes to its helplines, but aims to encourage more taxpayers to self-serve online. It has listened to the feedback and recognises that more needs to be done to ensure that all taxpayer needs are met, while also encouraging those who can to make the transition to online services. Making the best use of online services allows HMRC to help more taxpayers, and to get the most out of every pound of taxpayers’ money by boosting productivity. HMRC helpline and webchat advisers will always be there for taxpayers who need support because they are vulnerable or digitally excluded, or have complex affairs. I recognise that such reassurances were not communicated clearly enough yesterday.

Of course, the pace of this change needs to match the public’s appetite for managing their tax affairs online. The changes in the self-assessment VAT and PAYE helplines announced by HMRC will therefore be halted while it engages with stakeholders, which means that the phone lines will remain open as usual. HMRC will now work with stakeholders—including me—while continuing to encourage customers to self-serve and gain access to the information that they need more quickly and easily by going online or to the HMRC app, which is available 24/7.

[James Murray]

I thank the Minister for his response, but the question that I am tempted to ask is, “Who on earth is running the Treasury?”

This morning, just after we had requested the urgent question, we found out that the Chancellor had told HMRC to “pause” this change. That is a U-turn of quite extraordinary speed and indignity, following HMRC’s announcement yesterday that it would be permanently closing its self-assessment helpline altogether for half the year, from April to September. This morning a Treasury source said

“ministers have halted this change immediately”,

implying that those Ministers had been taken by surprise by the announcement. Can the Minister tell us whether any Treasury Ministers had any involvement in the decision announced yesterday, or whether HMRC’s announcement was made without any ministerial involvement?

In announcing the closure of the helpline, HMRC’s second permanent secretary and deputy chief executive said that the changes would

“allow our helpline advisers to focus support where it is most needed—helping those with complex tax queries and those who are vulnerable and need extra support.”

Can the Minister confirm that HMRC’s plans to help those who are vulnerable and need extra support are now in tatters after the Chancellor’s chaotic U-turn? I note that reports of the Chancellor’s position refer to a “pause” of the change, rather than a scrapping of it altogether. Can the Minister confirm that the self-assessment helpline will now remain fully open this year? If this plan is merely paused, will HMRC still be looking at months-long periods of closure of the helpline in the future?

It is clear that yesterday’s announcement of the helpline’s closure came not as part of a comprehensive, orderly or effective plan to help customers to move online, but rather as a panicked response to the collapse of HMRC’s service levels to an all-time low; and it is clear from today’s chaotic U-turn that this Government are fundamentally unstable, and have given up on serious governing.

[Nigel Huddleston]

I am sure the hon. Member is aware that HMRC is a non-ministerial Department. Ministers set strategy and work closely with the Department on operations and communications. It is important to recognise that 67,000 people work for HMRC. They go to work every day and try to do the right thing, and it is important to recognise that many people there work very hard.

The overall strategy is absolutely right and I completely support it, and I will give the hon. Member an example of why we need to encourage and support the move to online services. In 2022-23, HMRC received more than 3 million calls on just three things that can easily be done digitally: resetting online passwords, getting one’s tax code and getting one’s national insurance number. That involves almost 500 people working full time to answer just those calls, and such resources could be redeployed. The hon. Member can be reassured that those who are not digitally savvy and those with difficulties will always be able to access services, including telephone services.

Oral Answers to Questions

James Murray Excerpts

Tuesday 19th March 2024 Commons Chamber

[Jeremy Hunt]

I have nothing to add to my hon. Friend’s brilliant list of statistics, except to cite another independent organisation, the International Monetary Fund, which says that in the next five years this country, under Conservative leadership, will grow faster than France, Germany, Italy and Japan.

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

The British people are paying the price for 14 years of Conservative economic failure, with lower wages, higher taxes and public services on their knees. Time and again, the Conservatives hide behind international factors and take no responsibility for their failures. Yet figures from the OECD confirm that the UK is the only G7 advanced economy now in recession and, according to the IMF, our economy is forecast to have the second slowest growth in the G7 this year. So can the Chancellor tell us: why is the UK so far behind other major economies under the Conservatives?

[Jeremy Hunt]

Well, it is not, because it is actually growing faster than France, Germany and a bunch of other countries. However, I am glad that the hon. Gentleman mentioned 14 years, because we can look at what has happened under 14 years of Labour in Wales, where unemployment is higher, NHS waiting lists are longer, school standards are worse and growth is lower. What is Labour’s reaction to that terrible record? It has just promoted the Economy Minister to First Minister.

National Insurance Contributions (Reduction in Rates) (No. 2) Bill

James Murray Excerpts

Committee of the whole House
Wednesday 13th March 2024 Commons Chamber

[Nigel Huddleston]

I outlined the purpose of the Bill in my earlier speech. It is a short and clear Bill with a very clear purpose. It is our desire to move quickly in order for the changes to take effect from 6 April 2024. I sense Members’ desire to move quickly in cutting people’s taxes, and I will detain the Committee no longer.

[James Murray]

I fear that my speech may be marginally longer than the Minister’s, but I can assure you, Mr Chair, that it will not be too lengthy, because, as I made clear on Second Reading, we will support the national insurance reductions that the clauses in the Bill seek to deliver.

Clause 1 seeks to reduce national insurance contributions by reducing the main rates of employee class 1 and self-employed class 4 contributions, as well as the reduced rate that applies to a historic group of married women and widows. Clause 2 seeks to amend the calculation of annual maximum contributions and is effectively consequential on clause 1. Clause 3 sets out that the Bill will come into force on 6 April.

I would like the Minister to answer a couple of questions when he responds. Will he set out what conversations he has had with employers and payroll software developers about whether they will be ready to implement the provisions in this Bill from the start of the next financial year? I think I heard the Exchequer Secretary, the hon. Member for Grantham and Stamford (Gareth Davies), say on Second Reading that he was confident that a majority of employees would receive this tax cut at the beginning of the financial year, but is the Minister confident that every relevant employee will indeed receive the cut to national insurance in their first pay cheque of financial year 2024-25?

More widely, we support what this simple Bill seeks to achieve, so we will support all three clauses being approved by this Committee of the whole House.

--- Later in debate ---

[Nigel Huddleston]

I probably will not respond to everything we have heard today, as we thoroughly addressed many of the issues in the Budget debate.

In response to the new comments, I assure the hon. Member for Aberdeen North (Kirsty Blackman) that we always ensure that the democratic process is adequately funded. She is dismissive of the £2.45 billion increase in NHS spending that was outlined in the Budget, but it is a significant amount and, as she is aware, it is a real-terms increase. I agree with the hon. Lady on the importance of arts, culture and the other areas she mentioned, which is precisely why the Budget had measures to extend tax reliefs.

My opposite number, the hon. Member for Ealing North (James Murray), asked about the logistics of implementing and executing the tax change. We understand the impact of policy changes, and I put on record how grateful we are for all those who have implemented and executed the recent changes so speedily and effectively. Employees whose employer is unable to make changes in time, and who have left their employment, may request a refund from HMRC. The Government are confident that the majority of software developers will be able to make changes to their payroll software in time for 6 April.

On the new clauses, we have outlined the policy today. The impact of any changes to policy would, of course, be subject to the usual public scrutiny of costs, including from the OBR. It is therefore not necessary to produce a report at this stage. The OBR’s “Economic and fiscal outlook” publication for the spring 2024 Budget includes an analysis of the impacts of threshold freezes, including on the number of people brought into paying tax. It is therefore not necessary to produce an additional report at this stage, so we do not believe new clause 1 is necessary.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 and 3 ordered to stand part of the Bill.

New Clause 1

Review of the effects of reducing employee and self-employed NIC contributions to zero

“(1) The Treasury must publish before the end of the parliamentary session in which this Act is passed an analysis of the effect of —

(a) replacing “8%” with “0%” in section 1(1) of this Act,

(b) replacing “1.85%” with “0%” in section 1(2) of this Act, and

(c) replacing “6%” with “0%” in section 1(3) of this Act.

(2) The analysis in subsection (1) must set out the expected impact of the changes in subsection (1)(a) to (c) on total receipts to the National Insurance Fund in each of the financial years from 2024/25 to 2028/29.

(3) The Treasury must request the Government Actuary to make an assessment of the consequences for the Consolidated Fund in each of the financial years from 2024/25 to 2028/29 of shortfalls in the National Insurance Fund that would result from a zero rate for employee and self-employed national insurance contributions.”—(James Murray.)

This new clause would require the Government, before the end of the current parliamentary session, to set out what the impact would be on total receipts from national insurance and overall public finances of reducing national insurance contributions for employees and self-employed people to zero.

Brought up, and read the First time.

[James Murray]

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

[The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)]

With this it will be convenient to consider new clause 2—Review of effects of frozen thresholds—

“The Treasury must lay before the House of Commons within three months of the passing of this Act a report which sets out its forecasts of the change to the number of people paying national insurance contributions as a result of the thresholds for payment of national insurance remaining frozen over the period 2023/24 to 2027/28, rather than rising in line with CPI.”

[James Murray]

As I made clear in the previous debate, we support the national insurance reductions that the Bill seeks to deliver. However, the Chancellor followed the announcement of these reductions in last week’s Budget speech by pulling a rabbit out of his hat that, frankly, left us shocked and deeply concerned.

The Chancellor closed his Budget statement by committing the Conservative party to an unfunded £46 billion tax plan. It is quite incredible, and it tells us everything we need to know about the state of the Conservative party that he would use his last Budget before the general election to promise a plan that leaves a £46 billion hole in the public finances, that puts family finances at risk, and that raises the prospect of higher tax bills for pensioners across the country.

People across Britain are still paying the price for the reckless and unfunded tax plans in the disastrous mini-Budget, so it beggars belief that the very top of the Conservative party—the Prime Minister and the Chancellor —now want to go into the general election with an unfunded tax plan even greater than we saw in the autumn of 2022. We know just how damaging and irresponsible the Conservatives’ unfunded tax plans are for the British economy and for families across the country. Yet for a week now, and in Parliament today, Ministers from the Prime Minister down have been unable to say how this £46 billion tax plan will be funded.

People deserve answers. Are the Conservatives planning to increase taxes, including on Britain’s 8 million taxpaying pensioners? Are they planning to increase borrowing? Are they planning to cut our vital public services to pay for their £46 billion black hole? Ministers are refusing to answer, so our new clause 1 will force them to do so.

--- Later in debate ---

[Owen Thompson (Midlothian) (SNP)]

Will the hon. Gentleman give way?

[James Murray]

No, I am going to make some progress.

The public deserve to know whether the Prime Minister’s commitment to abolish national insurance means tax hikes for pensioners, even higher borrowing, cuts to important public services, or all of the above.

[Richard Fuller]

I hate reading and I probably will not be able to read this out either, because my eyes are not good. The shadow Minister talked about what the Chancellor said at the end of the Budget, so let me tell him that he said the following about any further cut:

“When it is responsible, when it can be achieved without increasing borrowing and when it can be delivered without compromising high-quality public services”. —[Official Report, 6 March 2024; Vol. 746, c. 851-52.]

So what problem does the shadow Minister have with cutting taxes on working people?

[James Murray]

The problem we have with the Chancellor’s announcement is that he has said that in the next Parliament he wants to abolish NI contributions. [Interruption.] The Prime Minister said that on the Saturday following the Budget. The Prime Minister and the Chancellor have again and again, in emails to party members and in interviews with media outlets, made it clear that that is what they want to do. I appreciate that some Treasury Ministers have been flip-flopping a bit when they have been out on their media rounds and have not entirely been able to toe the party line. But going into the general election, I would listen to what the Prime Minister and the Chancellor are saying, and if they are saying that they want to abolish NI and create a £46 billion black hole in the public finances, they should stand up here and defend that to the people of Great Britain today.

The reckless way in which the Conservatives announced their unfunded tax plan and then refused to give any more details exposes the risk of five more years of them in power. It is clear the Conservatives will happily gamble with the public finances and yet again leave working people being forced to pay the price. As they have been unwilling to explain how their plan will be funded, we will today vote to force the Government to come clean on the impact of their £46 billion tax plan on the state of public finances.

[Owen Thompson]

I am very interested in this and am listening carefully to what the hon. Gentleman is saying, but I am struggling to understand whether he is for or against the proposed cut in NI. It would be helpful if he would be clear on that. It sounds as though he is saying that the Opposition do not support it, but if that is the case, why would they not have come through the Lobby with us in opposing it?

[James Murray]

I am happy to provide clarification for the hon. Gentleman. We have had an extended debate about this today, where we have made it clear on several occasions that we support the Government’s cut in NI, because we believe that the tax burden on working people is too high and we want to see it come down. What we do not support is an unfunded £46 billion tax plan that the Chancellor has committed the Conservative party to. That is the subject of our new clause that we are debating now, and I look forward to his joining us in voting for it in a few moments.

[Andrew Gwynne (Denton and Reddish) (Lab)]

My hon. Friend is making an important point, not least because, to all intents and purposes, the Chancellor’s ambition is to abolish NI altogether. That unfunded tax cut requires a 6% increase in income tax just for us to stand still, unless something is going to give. Do national insurance qualifying years not count towards how much state pension someone is entitled to get? So how do we recalculate one’s entitlement to state pension if the qualifying years do not exist because NI does not exist?

[James Murray]

I thank my hon. Friend for that important intervention, setting out just some of the problems created by this reckless plan that the Conservatives have put out into the public domain and are refusing to explain or withdraw.

We know that if the Chancellor’s proposal to merge national insurance and income tax were to be followed, it would push up income tax by 6.5%, meaning pensioners would pay, on average, £800 more a year. My hon. Friend also makes important points about the impact of the plan on eligibility to the basic state pension. Again, Members on the Government Front Bench have not answered those questions. They had nothing to say on any of those points, which are concerning people across the country, when they responded earlier.

We have tabled new clause 1 because it will force the Government to come clean about these issues. Ministers are refusing to stand at the Dispatch Box to explain how they will fund their £46 billion black hole or to withdraw their policy entirely. New clause 1 will force them to set that out. Because they have been unwilling to explain how they will fund their plan, we will force them to come clean on its impact on public finances.

[Keir Mather (Selby and Ainsty) (Lab)]

Not only is there concern about where the funding would come from, but in the Treasury Committee just now the Chancellor refused to rule out increasing income tax in order to fund the abolition of NI contributions. The House of Commons Library has said that merging NICs and income tax would require an 8% increase in the basic and higher rates of income tax. What will that do for the long-term future of the UK economy?

[James Murray]

I thank my hon. Friend for bringing us that update from the Treasury Committee about what the Chancellor has been saying. Again, we can see the Chancellor being reckless by talking about merging national insurance with income tax without having a second thought for what impact that would have on hard-pressed taxpayers, particularly pensioners. Pensioners do not currently pay national insurance on their earnings and would be hit by a tax increase as a result of national insurance and income tax being merged. That is another example of how reckless these plans are, and how reckless it is for Treasury Ministers to refuse to stand up and explain how their plans would be funded.

The public deserves to know. If Ministers vote against our new clause or they refuse to come clean, then the British people will have it confirmed, yet again, that the Conservatives cannot be trusted with the economy, public finances or the finances of households across our country.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

Thank you for calling me, Mr Evans—surely it is long overdue that it should be Sir Nigel, but we will go with Mr Evans for today.

I stand to move new clause 2 in the name of my hon. Friend the Member for Richmond Park (Sarah Olney). Hon. Members will see that the effect of new clause 2 would be fairly short in its compass. It would compel the Treasury to report to this House its forecasts of the change to the number of people who are set to pay national insurance contributions as a result of the thresholds for payment remaining frozen until 2028, instead of increasing in line with the consumer prices index, which would be the case otherwise. The Chancellor and other Ministers have spoken today about the pride the Government take in what they are doing. In the interests of transparency, the Government should have no difficulty accepting new clause 2. I am sure it is merely an inadvertent omission that those measures are not part of the Bill already.

It is apparent that comments made by the Chancellor, the Prime Minister and others about the idea of abolishing national insurance altogether have started a debate, as we have seen this afternoon. It is a substantial commitment to make—£46 billion—and we do not yet know where that money would come from. That is maybe not the novelty that it used to be, certainly before the mini-Budget. However, it offers us an opportunity to think a little bit about the nature of national insurance as a tax, because it is quite distinct in its composition and operation.

In practical terms, functionally, national insurance is more or less like any other tax, in as much as money is paid into the Exchequer and fills the coffers, and then is spent as the Government or Governments see fit—in relation to health, policing, transport, Ministers’ legal fees or whatever else it is going to be.

As a matter of intent and purpose, however, national insurance is identifiably different from the other taxes we pay. More than any other levy, it is the symbol of our shared obligations—what we owe each other as a society and as communities in support throughout our lives. The point of national insurance is that we pool and share resources geographically and generationally. We pay our stamp on each payslip, trusting that, when the time comes for us to retire, someone else will continue to pay taxes that will fund our pensions.

Let us remember that the roots of this tax are in Lloyd George’s Budget, and that the introduction of national insurance came with the introduction of the pension. That is why we have the legacy of the link between national insurance and pensions, which was pointed out by the hon. Member for Denton and Reddish (Andrew Gwynne) in an intervention. That is significant. These are matters that must be clarified before we undertake a change of this sort.

At the heart of any healthy liberal democratic society, there is the idea that we have lasting obligations to one another. We have obligations to those we know, to those we do not know, to generations that are older than us, and to those who are yet to be born. We can be bound by policies with which we disagree, and sometimes we must pay taxes for things that we dislike or that we feel we do not need. That is the system in which the national insurance contribution has a demonstrably significant and different impact than other taxes. It is part of the tapestry of government and public life in this country.

This is perhaps just pulling at a thread, but the Minister and, indeed, people in all parts of the House would be well advised to consider exactly what they may be unravelling by pulling at this thread. Full transparency from the Government on the effect of freezing national insurance contributions in the way that has been proposed should be an important part of this debate as it proceeds.

--- Later in debate ---

[James Murray]

As I have made clear throughout the Bill’s consideration, Labour supports the national insurance reductions that it seeks to deliver. I am disappointed, however, that Conservative MPs voted to block our new clause. Since the Chancellor announced the Conservatives’ plan to abolish national insurance contributions last week, Ministers have refused again and again—including today—to say how that will be funded or what impact it will have. We believe people deserve to know what impact the Conservatives’ £46 billion unfunded tax plan will have on pensioners and their pensions, on public services and on the health of our economy. Our new clause would have required the Government to come clean and be honest with the British public. Instead, Ministers have decided to vote against us and stick to their reckless and irresponsible unfunded tax plan.

It is still not clear how this reckless commitment to abolishing national insurance will be funded or what impact it will have on pensioners, pensions, public services, borrowing or the state of our economy. But what is clearer than ever is that the Conservatives are the party of reckless, irresponsible, unfunded tax plans that threaten our economy, our public services and the finances of households across the country. Only Labour will bring stability and the responsible approach our economy needs and only a general election will give the British people the chance to vote for change.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call Scottish National party spokesperson Kirsty Blackman.

National Insurance Contributions (Reduction in Rates) (No.2) Bill

James Murray Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

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

Let me start by saying that the official Opposition will support the national insurance reductions before us. We have long said that the tax burden on working people is too high and should come down in a responsible way. In fact, when the now Prime Minster was pushing through a national insurance increase two years ago, we opposed it. Labour has consistently said that we want taxes on working people to be lower. Just as we supported the reductions in national insurance in January, we support the further measures announced in the Budget last week that are before us today.

The truth is, however, that neither the national insurance cuts nor anything else in the Budget changes the fact that people across Britain are worse off under the Conservatives. The Government are giving with one hand, but are taking far more with the other. Figures from the Office for Budget Responsibility show that for every £5 that working people will get back from the Government’s national insurance cuts, they will be losing a total of £10 thanks to the Conservatives’ tax plan. That tax plan will leave the average household £870 worse off and will drag 3.7 million more people into paying tax by 2028-29. Last week’s Budget confirms that, even after the changes we are considering today, the tax burden will continue to rise in each and every year of the forecast period, with the UK still set to have its highest tax burden in 70 years. That is the reality of Britain under the Conservatives, and that is why people across the country are saying it is time for change.

The national insurance reductions in the Bill were mentioned by the Chancellor toward the end of his Budget statement last Wednesday. The cuts had of course already been confirmed in the media by Government sources in the days before, so they came as no surprise. Many of us in the Chamber were wondering whether the Chancellor would follow the time-honoured tradition of ending his Budget by pulling an unexpected, and as yet unannounced, rabbit out of the hat. It turns out he did have a rabbit, but even after all the chaos of the Conservatives over the past few years, many of us could not quite believe what we were hearing: the Chancellor’s big pitch to the British people in the last Budget before the general election was a £46 billion unfunded tax plan.

As people across Britain continue to suffer the impact of the disastrous mini-Budget of 2022, the Conservative Chancellor announced that he would go into the general election with a plan to abolish national insurance, leave a £46 billion hole in the public finances, put family finances across the country at risk, and create huge uncertainty for pensioners. It is frankly the height of irresponsibility for the Chancellor to use the opportunity of last week’s Budget—an opportunity that should have been used to set out a long-term plan to grow the economy—to follow in the footsteps of his reckless predecessor with a £46 billion unfunded tax cut.

In fact, though, perhaps my comment is unfair to the Chancellor’s predecessor, because even he now seems to be critical of the current Chancellor’s approach. Yesterday, the right hon. Member for Spelthorne (Kwasi Kwarteng) told the BBC’s “Politics Live” that he thinks the Chancellor should indeed spell out how he will pay for the abolition of national insurance. It is quite something when the Chancellor who crashed the economy after his disastrous mini-Budget publicly calls on the current Government to be more responsible.

The truth is that promises of unfunded tax cuts have nothing to do with growing the economy, and everything to do with propping up a weak Prime Minister who is desperately trying to survive in a divided Conservative party. This reckless behaviour shows that the Conservatives are blindly putting party first and country second. For the good of the economy and of the millions of hard-working people who are still paying the price for the disastrous mini-Budget, I urge Treasury Ministers when they respond finally to come clean about how they will pay for their £46 billion unfunded tax plan.

Over the past week, we have seen Ministers struggle with that question. The day after the Budget, the Secretary of State for Work and Pensions implied that he did not feel the need to explain how the commitment would be funded as it was only “an aspiration”. On Sky News that day, the Exchequer Secretary to the Treasury seemed to think that the Conservatives do not need to explain how they will fund their promise as it may “take several Parliaments”.

The position of the Prime Minister and Chancellor is clear, however. In an email to his party members on Budget day, the Chancellor confirmed that abolishing national insurance would be a priority for the next Parliament, if the Conservatives win. The next day, he suggested that that could be achieved by merging national insurance into income tax, a move that raises the prospect of a huge tax hike for pensioners. On the Saturday after the Budget, the Prime Minister confirmed again that abolishing national insurance would be a priority for the Conservatives in the next Parliament, if they are still in Government.

Let us be clear: this is a £46 billion unfunded tax plan. It is a plan that comes from the top of the Conservative party about what they would do in the next Parliament. It comes straight out of the same playbook as the Conservatives’ disastrous mini-Budget that crashed the economy. This unfunded plan is yet more chaos and recklessness from the Conservatives. Only Labour will bring stability and security back to the British economy.

If Treasury Ministers disagree that their party is the reckless party, they can clear this up today by explaining how they will pay for their £46 billion tax cut. Will it be funded by higher income tax? Will it be funded by cuts to public services? Will they push up borrowing? The Conservatives’ unfunded tax plan blows a £46 billion hole in funding earmarked for the state pension and the NHS. They need to come clean today about what that means for people’s tax bills, pensions and public services.

To be fair, the Chancellor has at least hinted how he thinks that the Conservatives could pay for the abolition of national insurance: his proposal to merge national insurance with income tax. Of course, taking that route and replacing the revenue from employee and self-employed national insurance contributions with greater basic and higher rates of income tax would mean rates of income tax going up by 6.5%. That would hit all income tax payers and cause particular alarm for pensioners. Under the Chancellor’s planned merger, pensioners—who do not currently pay national insurance—could see an average tax hike of about £800 each. A retired pensioner with an income of £25,000 from a mix of private and state pension paying an extra 6.5% on their income above the personal allowance would see their income tax bill rise by more than £800.

Furthermore, national insurance contributions are what determine people’s entitlement to the basic state pension. The Conservatives’ plan to abolish national insurance in the next Parliament would sever the link between contributions and pension entitlement. Will the Minister explain, under their plan to abolish national insurance, how people will know what their future entitlement to the state pension will be? What would be the basis for state pension entitlement without employee national insurance contributions? Does their plan mean the end of the state pension as we know it? I hope that the Minister will take this opportunity to give clear answers to all those questions, or else confirm that the Conservatives have dropped their unfunded plan to abolish national insurance altogether.

[Alexander Stafford]

I have a lot of respect for the hon. Gentleman. He comes from a professional background, and, compared with most people on the Labour Benches, normally knows what he is talking about. However, I want to follow his logic when it comes to what he claims is a reckless potential abolition of national insurance. If abolishing all national insurance is reckless and will lead to the country going to hell in a handcart, as he so wants to portray it, why is Labour not opposing a reduction in national insurance? Surely, if he does not oppose a reduction in national insurance, his argument completely falls down, because that means that national insurance can be got rid of.

[James Murray]

I thank the hon. Member for his intervention—I think. He misses the point. The commitment by the Chancellor, the Prime Minister and, I think, the Treasury Ministers, although they seem to oscillate a little in their position, is to get rid of national insurance entirely—to abolish it at a cost of £46 billion—but they are refusing to say how that would be funded. We saw what happened in autumn 2022 when unfunded tax cuts were proposed by the Conservative Government: it crashed the economy and pushed up people’s mortgages and rents. That is the risk of the Conservatives to the British people, that is the risk to the economy, and that is why we need a general election.

If the Conservatives want to move on from this discussion, they should give assurances on the matter when they respond to the debate. If they do not give those assurances and are not able to distance themselves and rule out their plan to abolish national insurance, we will know that they have essentially given up on governing, are incapable of acting responsibly, and are putting their party before the country with their reckless plans.

As I said at the start of my speech, we will support the Bill because, after 14 years of the Conservatives and 25 tax rises in this Parliament alone, the tax burden on working people is too high. Labour wants the tax burden on working people to come down in an economically and fiscally responsible way. However, let us be clear about the context of this Bill and the changes it makes to national insurance. Even with the Bill’s national insurance cuts in place, households across Britain are set to be an average of £870 worse off as a result of the Conservatives’ tax plans, and the tax burden in the UK is still set to rise to its highest in 70 years.

To make people better off and support public services, we need a plan to get the economy growing. We needed last week a Budget with a long-term plan to bring about growth and help to rebuild our public services. That is what the country needs, and that is what Labour is offering with our plan to grow the economy through stability, investment and reform. That is not what we saw last week, however. According to the British Retail Consortium, the Chancellor did

“little to promote growth and investment”.

The British Chambers of Commerce said this morning:

“the UK stills lacks a clear industrial strategy to unlock long-term growth.”

Faced with a record tax burden, failing public services and no plan for growth, we see the Conservatives grasping desperately for positive headlines by announcing a reckless, irresponsible and unfunded £46 billion tax plan.

I wonder whether the former Prime Minister, the right hon. Member for South West Norfolk (Elizabeth Truss), approves of this plan. Maybe she feels outdone, with this unfunded tax plan coming in at £1 billion more than hers. Either way, the conclusion is clear: chaos and recklessness are the currency of the Conservatives. Only Labour will bring stability, security and responsibility back to the economy, and only a general election will give the British people the chance to vote for change.

Coastal Tourism and Hospitality: Fiscal Support

James Murray Excerpts

Thursday 22nd February 2024 Westminster Hall

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

It is a pleasure to see you in the Chair, Mrs Cummins. I congratulate the hon. Member for North Devon (Selaine Saxby) on securing this debate on fiscal support for the tourism and hospitality industries in coastal areas. I put it on the record that, like her, I have benefited greatly from my conversations with Kate Nicholls at UK Hospitality.

I am pleased to respond to the debate on behalf of the Opposition. Hon. Members have spoken passionately about the importance of hospitality and tourism, the jobs they bring to local economies, the vitality they bring to our local areas and the enjoyment they bring to all our lives. As we have heard, the tourism and hospitality industries have been hit by a series of challenges, from covid to the cost of living crisis. The Opposition are clear that hospitality and tourism are vital to the UK economy and need a Government who are ready and able to help them thrive.

In 2019, the economic output of tourism-related industries was estimated at £134 billion, of which £74 billion was estimated to be generated directly by tourism. Those figures are respectively equivalent to 6.6% and 3.6% of the whole economy. Additionally, as I mentioned in a Westminster Hall debate a few weeks ago, on fiscal support for the hospitality sector hospitality provides 3% of the UK’s economic output, and billions in tax revenues for the Treasury.

Hospitality and tourism are important industries for communities across the country. As we have heard from the hon. Member for North Devon and others, they are especially critical to coastal areas. Coastal communities are particularly reliant on tourism and hospitality for employment and income. When the economy is not working as it should, those communities are more likely to suffer deprivation and unemployment. VisitBritain data shows that 10% of inbound tourists in 2019 visited England’s coasts and beaches, and those most likely to journey to the coast were on visits lasting a week or longer. That figure is higher in Wales, Scotland and the south-west of England. Such trips are vital to people’s livelihoods right across the UK.

In my west London constituency, we have no coasts that I can praise in this debate. But may I put it on record that when I occasionally leave Ealing North, I enjoy visiting coastal areas across the country, including Oban on the west coast of Scotland and Saltburn, Whitby and Staithes in North Yorkshire, and visiting my family on the south coast of England from Brighton to Fareham and Littlehampton?

Many hospitality and tourism businesses in coastal communities are finding it harder and harder to succeed, with high inflation, rising rents and the burden of business rates. At the same time, their customers find that they have less money to spend on enjoying what seaside hotels, pubs, cafés, restaurants and so on have to offer, as people have seen their wages flatlining while taxes and the cost of living climb relentlessly. Today’s debate is rightly an opportunity to recognise the central role of hospitality and tourism in British life, but it is also an opportunity to make it clear that those industries need a Government who will support them to thrive.

Labour will revitalise the hospitality and tourism industries. We will help coastal communities to get back on their feet after 14 years under the Conservatives. It is clear that the antiquated system of business rates is doing the industries no favours. As I set out in the debate on fiscal support for the hospitality sector a few weeks ago, hospitality and tourism businesses in coastal areas may have had hope when they heard the Government’s promise of a fundamental review of the business rates system in their 2019 manifesto. However, that review never materialised, and trade groups representing consumer-facing businesses have expressed their dismay at the Government’s inaction on that promise. In March last year, the Federation of Small Businesses responded to what the Government were doing on business rates by saying that

“the 2019 Manifesto commitment to hold a fundamental downward review of business rates has not happened…these changes do not amount to the fundamental overhaul the system needs, to reduce the chilling impact of a regressive tax that you pay before even earning a penny in turnover, let alone profit.”

We will not stand by while businesses struggle from year to year, facing uncertainty. As the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), has set out, if Labour were in Government we would scrap and replace business rates, shifting the burden away from hospitality and retail businesses, which continue to shoulder a heavy burden compared with those operating primarily in the digital economy.

Our new system would incentivise investment, promote entrepreneurship and reward businesses that move into empty premises. It would help the hospitality and tourism industries once again to thrive. Our plan to revitalise Britain’s tourism and hospitality industries is clear, so in advance of the spring Budget, I would be grateful if the Minister explained what representations he or the Government have taken from businesses in coastal communities, and what measures they are considering offering to address the points that hon. Members have set out today.

I am sure that many people across coastal towns will be interested to hear the Minister’s response, but whatever he says, we know that last week’s news about the economy being in recession will further have added to the sense of gloom facing hospitality and tourism in coastal areas, and indeed businesses in every sector in every region and nation of the UK. That is why our plan to get the economy growing is so important, to make sure that the tourism and hospitality industries in our coastal communities can thrive once again.

Draft Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024 Draft Tax Credits, Child Benefit and Guardian's Allowance Up-rating Regulations 2024

James Murray Excerpts

Wednesday 7th February 2024 General Committees

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

It is a pleasure to serve on the Committee with you, Sir Charles. I welcome the opportunity to address, on behalf of the Opposition, the measures laid out in the two statutory instruments.

First, as we heard from the Minister, the draft Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024 give effect to the annual re-rating of national insurance contributions limits and thresholds for the purposes of calculating class 1 NICs liability for the coming tax year. As we also heard, the regulations allow for payments of a Treasury grant not exceeding 5% of the estimated benefit expenditure for 2024-25 to be made into the national insurance fund, while also making provision for Northern Ireland. Finally, the regulations extend the availability of the zero-rate relief on secondary class 1 contributions for employers of veterans for the tax year 2024-25.

Members will recall that at the autumn statement 2022 the Chancellor announced, as the Minister said, that national insurance contribution thresholds that are in line with income tax will be fixed at their 2023-24 levels until 2027-28. As the Office for Budget Responsibility pointed out at the time, the freeze to national insurance thresholds and limits meant that

“all the main personal tax thresholds are now frozen in cash terms across our entire forecast period”

through to 2027-28.

The freezes to allowances, limits and thresholds provide the context for why the Chancellor’s boasting about the cut in the rate of national insurance at the autumn statement 2023 rings so hollow. As Paul Johnson from the Institute for Fiscal Studies said, the changes made at the statement

“won’t be enough to prevent this from being the biggest tax-raising parliament in modern times.”

The truth is that after 25 tax rises in this Parliament alone, the tax burden remains on course to be at its highest since the second world war.

One of the central reasons for that is the freeze to income tax and national insurance thresholds through to 2027-28. That fiscal drag means that, on average, personal taxes will go up by £1,200 per household even after the 2% cut to national insurance in January. The Government are, in effect, giving with one hand while taking with the other. Indeed, after the autumn statement the IFS noted that tax reductions announced in November would give back

“less than £1 of every £4 that is being taken away”.

I have heard the Minister say several times in previous debates that Members should compare our December and January pay slips; frankly, I am more concerned about the post-tax income for low and middle earners than I am for MPs. The truth is that even people in this place on very good salaries will see their tax burden rise as a result of the Government’s freezes to thresholds, but the impact on low and middle earners is stark. Does the Minister agree with consumer finance expert Martin Lewis on this? Mr Lewis recently said that even with the reduction in national insurance, people on incomes of between £12,500 to £26,000 will be worse off, looking at this year in isolation, as a result of threshold freezes and fiscal drag. Does the Minister agree with that or does he think Mr Lewis is mistaken?

On a point of clarification, I understand that last year, through the Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2023, the Government made provisions for classes 2, 3 and 4 national insurance contributions. Will the Minister explain the procedural reasoning for why such provision has been omitted from this year’s regulations?

Secondly, the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024 set the annual rates of working tax credit and child tax credit and the weekly rates of child benefit and guardian’s allowance for the coming financial year. Amid a damaging cost of living crisis, we support the increases, as any help for people who are struggling in the face of persistently high energy, food and housing costs is particularly needed at this time. We know that 8 million households received their final means-tested cost of living payment this week. That support has been critical for millions across this country, including many children. I know from my constituency that many people continue to struggle to provide for themselves and their families. I would therefore be grateful if the Minister could share with us his assessment of the impact of the end of the cost of living payment on levels of child poverty.

Oral Answers to Questions

James Murray Excerpts

Tuesday 6th February 2024 Commons Chamber

[Nigel Huddleston]

I hear the House’s concern about this issue, on which we had a debate not so long ago. Of course, the suicides the hon. Gentleman mentions concern us, and independent reviews have taken place. However, I want to provide the House and anybody listening with reassurance that the best thing to do if people have concerns is to engage with HMRC, because very generous and long-term plans can be put in place to help people to repay. As I said, there are fears out there—there is a bit of scaremongering—that homes are being taken over or people are having to give up pensions. That is not the case. Engagement with HMRC to establish reasonable time to pay would therefore be reassuring for many of the people who fear much worse consequences. My appeal is to engage with HMRC.

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

The Government’s approach to the loan charge has become a nightmare for ordinary people across the country who are the victims of mis-selling and facing financial ruin. The torment and devastating reality is the clearest possible proof that the Government need to think again. Those facing the loan charge ordeal cannot bear to hear yet again that the Morse review is the final word on this matter. Will the Minister finally agree today to commission a new, truly independent review?

[Nigel Huddleston]

We had an independent review in 2019 under Lord Morse. The Government accepted 19 of its 20 recommendations. The review has taken place, but as I have said repeatedly, I am challenging HMRC and listening to colleagues. If action needs to be taken, I will take it, but I do not believe that there is a case for another review, because we have already had one, and the Government have already taken action.

Finance Bill

James Murray Excerpts

Report stage
Monday 5th February 2024 Commons Chamber

I have outlined the case for each of the Government amendments, and I therefore urge the House to accept them.

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

In speaking to new clause 6, which relates to permanent full expensing, I remind the House of the context in which this Finance Bill was published. It followed the Chancellor’s statement on 22 November last year, in which he claimed that he was delivering an “autumn statement for growth”. Members will remember, however, that the same day, the Office for Budget Responsibility confirmed that growth forecasts had been cut by more than half for the coming year, cut again for the year after that, and cut yet again for the year after that. Independent analysts confirmed that even after all the changes that the Government had announced, personal taxes would still rise. They are set to rise by £1,200 per household by 2028-29, with the tax burden on track to be the highest since the second world war.

That was the context in which this Bill was published: flatlining wages, higher taxes, higher mortgage payments and worsening public services—all the product of 14 years of Conservative economic failure. Our country needs change. A critical part of making that change will be to get our country’s growth rate up. We need a plan for growth, to make people across Britain better off, and to ensure sustainable funding for our public services. Labour has been developing our plan for growth by working hand in hand with businesses across the country and across the economy.

We know how highly businesses that are considering investing in the UK rate stability, predictability and a long-term plan. For that reason, we welcome the fact that, as our new clause 6 highlights, the Bill makes full expensing permanent. Permanent full expensing is something we have long called for, as a policy that can support greater business investment and economic growth. Because Labour knows how important stability and predictability are to businesses, the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), announced last week that Labour is committed to maintaining permanent full expensing in the UK tax system, as well as the annual investment allowance, if we win the next general election. The shadow Chancellor has made this commitment to offer businesses certainty for the years ahead. Businesses considering plant and machinery investment across Britain can be confident that the tax treatment of that investment would not change with a Labour Government.

Of course, there is still a general election to face, so I use this opportunity to invite the Minister to put on the record whether the Conservatives will follow our lead by confirming that should they win the general election, they will maintain permanent full expensing. I am sure many businesses would welcome the certainty that would come from knowing both the main parties are going into the election fully committed to keeping permanent full expensing. I urge the Minister, when he responds, to confirm whether that will be his party’s policy going into the general election.

After all the chopping and changing we have seen in capital allowances in recent years, the Minister needs to make the commitment explicit. As I mentioned during earlier stages of the Bill, the annual investment allowance had been temporarily raised to £1 million when this Parliament began; that temporary basis was extended by the Finance Act 2021, again by the Finance Act 2022, and then made permanent by the Finance (No. 2) Act 2023. Meanwhile, over the course of this Parliament, the super-deduction came and went. Last year, full expensing for expenditure on plant and machinery was introduced on a temporary basis for three years. In this Bill, the Government are finally making it permanent. After so much instability, a commitment from Treasury Ministers at the Dispatch Box that the Conservatives, like Labour, will commit to maintaining permanent full expensing feels like the least they can do.

Our new clause 6 would require the Chancellor to publish not only an assessment of the impact of permanent full expensing, but a consideration of what other policies would support its effectiveness. We believe this is important to ensure that business investment is supported as much as possible. The Opposition have begun to set out what some of our policies would be if we won the next general election. As the shadow Chancellor has set out, if we were in government, we would consider the outcome of technical consultations on whether leased assets can be included in full expensing and on simplifying the UK’s capital allowance regime. I would be grateful if the Minister updated us on the progress of those consultations.

Last week, the shadow Chancellor also made clear the commitment that if Labour wins the next general election, we will ask HMRC to produce simple and comprehensive guidance making clear which assets are eligible for each type of capital allowance. That guidance would give businesses clarity over how their investments will be treated, and businesses will be able to use it as a single point of reference when making investment decisions. Will the Minister confirm whether the Government have considered taking such steps, or making such a commitment?

To give further certainty, the Shadow Chancellor has also said that in government, Labour would explore the greater use of rulings and clearances. Under such an approach, businesses would be able to get a written ruling from HMRC about the tax treatment of potential investments, making clear, for instance, whether they qualify for full expensing or other capital allowances. We know that businesses benefit from other countries’ tax administrators being able to provide such rulings and clearances. As certainty is crucial to encourage investment in Britain, I would be grateful if the Minister confirmed whether the Treasury has asked HMRC to consider the greater use of rulings and clearances for investment, and, if so, what its conclusion has been.

Of course, any policies on expensing or other capital allowances sit under the headline rate of corporation tax. It is hard to conclude anything other than that the Conservative party is rather unclear and confused about its approach to corporation tax rates in the UK. For evidence of that, we need look no further than the current Chancellor: in July 2022, during his leadership bid, he pledged to cut the headline rate of corporation tax from 19% to 15%, yet when he became Chancellor just three months later, one of his first acts was to promise to raise the tax instead from 19% to 25%. It is no wonder that businesses, and indeed Conservative Back Benchers, find it so hard to understand the Conservatives’ policy on corporation tax rates.

Let me be clear about the certainty we would offer if we won the next general election. As the shadow Chancellor has set out, we believe the current rate of 25% strikes the right balance between what our public finances need and, as the lowest rate in the G7, keeping our corporation tax competitive in the global economy. That is why we are pledging to cap the headline rate of corporation tax at its current rate of 25% for the whole of the next Parliament. We would take action if tax changes in other advanced economies threaten to undermine UK competitiveness. That choice provides predictability and has a clear rationale. That is the pro-business choice and the pro-growth choice. The promise to cap corporation tax at 25% is clear from us. Again, to offer businesses as much certainty as possible, will the Conservatives follow our lead and also pledge, today, to cap corporation tax at 25% for the next Parliament?

These commitments—to cap corporation tax, to maintain permanent full expensing and to keep the annual investment allowance—will all form part of the road map that we would publish in the first six months of a Labour Government, setting out our tax plans for businesses for the whole of that Parliament. That would put stability, predictability and a long-term plan at the heart of our approach. To give businesses as much certainty as possible, I would be grateful if the Minister confirmed whether a corporation tax cap at 25% and keeping full expensing in place will be in the Conservative party manifesto too.

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

I was interested in what the shadow Minister was saying about what would happen if other countries changed their corporation tax. As he will know, Mr Trump, the former President, has said that he would cut US corporation tax, potentially from 21% to 15%. Given such examples, does the hon. Gentleman anticipate that a Labour Government would look to cut the headline rate of corporation tax, as we would be looking at a significant tax cut by the world’s largest economy?

[James Murray]

I thank the hon. Gentleman for his intervention. As we have made clear, we would take action if tax changes in other advanced economies threatened to undermine UK competitiveness, but the headline commitment from us is to cap corporation tax at 25% for the duration of the next Parliament. I recall that in earlier consideration in this debate, he and I had an exchange about permanent full expensing, so I hope he will welcome our commitment to maintaining permanent full expensing if we are in government. Perhaps he will put pressure on his Front-Bench colleagues to join us today in making that a cross-party commitment from the House.

New clause 7 focuses on the multipliers used to calculate higher rates of air passenger duty. As we have discussed at earlier stages of the consideration of this Bill, clause 24 makes no changes to band A rates, while in band B, the reduced, standard and higher rates will increase by £1, £3 and £7 respectively. In band C, the reduced, standard and higher rates will rise by £1, £2 and £6 respectively. In each of those three bands, which cover international travel to a range of destinations, a simple principle is followed: if the duty for passengers on economy flights goes up, the duty for those flying business class and by private jet goes up too. In the domestic band, however, which covers flights within the UK, that simple principle of fairness does not apply. Instead, under the Bill, for domestic UK flights, the reduced rate of APD rises by 50p and the standard rate rises by £1, yet the higher rate is unchanged. Let me be clear what this means in plain English: from 1 April, passengers flying economy and business class within the UK will see their taxes rise, whereas passengers taking exactly the same flights by private jet will enjoy a tax freeze. Although the changes kick in on 1 April, this is no April fools’ day joke, although the Prime Minister may be laughing; it is the result of a hidden loophole that that the Conservatives have introduced. We discussed this matter in Committee, when the Exchequer Secretary tried to provide an explanation for this unfairness. He said that APD rates are

“uprated by a forecast of RPI and those rates are then rounded to the nearest pound.”

As for the different rates I highlighted in Committee, he said:

“It largely depends on how they”—

the rates—

are rounded to the nearest pound; the actual rate is determined by whether the figure is rounded down or up.”––[Official Report, Finance Public Bill Committee, 16 January 2024; c. 34-35.]

I know that the Exchequer Secretary always tries to give me a straight answer—let me put it on the record that I genuinely appreciate his efforts to do so—but I fear that his explanation in Committee may have been unintentionally misleading or, at the very least, only partial. Since that Committee stage, the House of Commons Library has given me information confirming that it does not tell the full picture to say that the duty rates are, as the Minister claimed,

“uprated by a forecast of RPI and those rates are then rounded to the nearest pound.”––[Official Report, Finance Public Bill Committee, 16 January 2024; c. 34.]

In fact, my understanding is that the Minister’s statement applied only to the reduced rates of air passenger duty. Those are indeed adjusted each year in line with forecast RPI and rounded to the nearest pound. However, the standard and higher rates are not calculated by separate reference to RPI; rather, they are generally set as multipliers of their respective reduced rates. For instance, the standard and higher rates in band B are set as 2.2 and 6.6 times the band B reduced rate respectively, rounded in both cases to the nearest pound.

--- Later in debate ---

[James Murray]

I begin by wishing His Majesty the King the very best for a speedy recovery. My colleagues and I are thinking of him and the royal family at this time, and we wish him a swift return to full health.

Throughout consideration of the Bill, the Opposition have made it clear that it contains a number of measures for which we have been calling for some time. For instance, we welcome the Government finally making full expensing permanent after so many years of chopping and changing capital allowances; we have made it clear that we will maintain that policy if we win power this year. We have also made it clear that we will maintain the system of R&D tax credits introduced by the Bill—again, after so many years of this Government chopping and changing the design of the scheme. In both cases, that is because we prize stability and predictability for businesses; they have made it clear to us that they value that greatly.

We know that providing certainty is a critical factor in boosting business investment and economic growth. If Labour won the next general election, we would put that certainty and stability at the heart of our approach in government by publishing a road map in the first six months, setting out our business tax plans for the whole Parliament. We have set out our approach to full expensing and to corporation tax, so I am disappointed that the Minister was not able to give us a clear guarantee that the Conservatives will maintain full permanent expensing and cap corporation tax at 25% for the whole of the next Parliament. Businesses can have confidence, however, that both of those commitments are locked in with Labour.

Of course, there are provisions in the Bill of which we have been critical, not least the fact that it freezes tax for passengers flying around the UK on private jets, while hiking taxes for everyone else who is flying economy or business class. Also, the Government admit that some provisions will need to be returned to and corrected. That is a far from ideal position to be in before a Bill has even become law. We know this is the case because, towards the end of last month, HMRC admitted that the way in which the Government have legislated to remove the lifetime allowance has

“created unintended consequences for members with multiple pension schemes”.

HMRC says that further legislation will be necessary to fix three areas in schedule 9 relating to the abolition of the lifetime allowance. That clearly indicates rushed legislation that runs the risk of creating problems for all involved. The legal firm Wedlake Bell, for instance, has said:

“The proposed new tax regime replacing the LTA at breakneck speed from 6 April 2024 is very risky for all parties including trustees, administrators, members and indeed HMRC itself.”

More widely, our concern with this Bill, as with the autumn statement it followed, is that the Conservatives cannot hide or move on from their 14 years of economic failure. Those 14 years of failure have left economic growth languishing and people across Britain worse off. Last November’s autumn statement for growth was the 11th attempt at an economic growth plan from the Conservatives. The truth is that the Conservatives are incapable of getting our country back on track. We need a general election so that Labour can offer the change and the plan that families and businesses across Britain need.

[Mr Deputy Speaker (Mr Nigel Evans)]

I call the Chair of the Treasury Committee.