Finance Bill

James Murray Excerpts

Committee of the whole House
Wednesday 10th January 2024 Commons Chamber

[Nigel Huddleston]

I agree that certainty for business is pivotal, but with both full expensing and R&D the Government, the Chancellor and others have been indicating the direction of travel for some time and therefore giving increased certainty. As I have said, it was mentioned a while ago that we intended to pursue the policy of full expensing when the economic circumstances allowed, and now they do. R&D, which I will come to in a minute, has been discussed for quite a long time and is the result of extensive co-operation with industry.

It is also the reality, though, that Government policy needs to change in response to the nature of a changing economy and to things such as digital, the cloud and so on. When it comes to other investments, we need to make sure that new and emerging policy areas are covered as well. We have seen today, as we saw in the autumn statement, a very clear direction of travel from the Conservative side of the Chamber, which is about incentivising businesses and cutting taxes. Permanent full expensing also simplifies the capital allowances regime overall, as companies can claim the full cost in year one, reducing the need to claim writing-down allowances year on year.

Turning to clause 2 and schedule 1, the Government have also announced the closure of the R&D tax relief review launched in 2021—the point I was just making to the hon. Member for Reading East (Matt Rodda)—alongside a set of changes to simplify and improve the system. Clause 2 makes changes to merge the current R&D expenditure credit and SME schemes for expenditure in accounting periods beginning on or after 1 April 2024, simplifying the system and providing greater support for UK companies to drive innovation.

The merged scheme will have an above-the-line mechanism similar to the R&D expenditure credit, with a rate of 20%. That will make the benefit more visible and easier for companies to factor into their investment decisions. Additionally, small and medium enterprise lossmakers will now be able to carry forward their losses rather than having to surrender them, which will give a total benefit of up to £45 per £100 of R&D expenditure.

There will also be a reduction in the rate at which the merged scheme credit is taxed for lossmakers, from 25% to 19%. That is worth around £120 million per annum to non-intensive lossmakers and will increase the up-front cash benefit for lossmakers. Subcontracting rules in the merged scheme will allow the company taking the decision to do R&D to claim relief on contracted-out R&D. That approach is based on the current SME scheme, which was identified as the best option in the consultation we delivered, and has been refined further following engagement with industry last summer.

Subsidy rules will also be removed, allowing SMEs to claim relief for work for which they receive a grant of a subsidy. This represents an increase in generosity for SMEs as well as being a major tax simplification.

The Government are also legislating for enhanced support for loss-making R&D-intensive SMEs. That was announced at spring Budget 2023 and will benefit 23,000 SMEs a year by providing further support to the most R&D-intensive SMEs while merging the current schemes. The Government are promoting the conditions for enterprise to succeed. Companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D intensity.

At the summer statement, the Government announced several improvements being made to that enhanced support. The R&D intensity threshold is being lowered to 30% from 40% from April 2024, meaning that around 5,000 more companies will benefit from the support. A one-year grace period is being introduced, providing greater certainty by ensuring that companies that dip under the 30% threshold will continue receiving relief for one year. The same subcontracting rules as the merged scheme will apply to this enhanced support, further helping to simplify the system with one set of rules that both SMEs and larger companies will follow.

Overall, R&D reliefs will support an estimated £55 billion of business R&D expenditure in 2028-29—a 25% increase from £44 billion in 2021-22. Expenditure on R&D reliefs is forecast to increase in every year of the scorecard period. We will also restrict nominations and assignments for R&D relief payment. That measure ensures that genuine businesses get the payment for their R&D claim directly, rather than receiving it through an agent, and is designed to benefit genuine claimants and reduce non-compliance.

Subject to limited exceptions, no R&D tax credit payments will be made to nominee bank accounts, and any R&D tax credit payments must be paid directly to the company that claims for the R&D, so claimants will now receive their payments directly, giving them more control. That will ensure that the person claiming the relief has better oversight of the claim and receives the money into their account quicker. Claimants will also be clearer on exactly how much money is being charged by their agents, rather than just receiving a net amount after fees have been deducted. That builds on previously announced measures and policy changes to help to ensure greater company control over R&D claims.

The Government are committed to making the UK the best place in the world to do business. Full expensing and R&D tax relief support businesses to grow and invest, which will boost productivity and economic growth. That remains the key way to raise everybody’s living standards and to fund high-quality public services throughout the UK. I commend clauses 1 and 2 and schedule 1 to the Committee.

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

Let me start by briefly considering the context in which we are debating clauses 1 and 2. As we know, the Bill follows the Chancellor’s statement on 22 November last year, in which he claimed that he was delivering an “autumn statement for growth”. As the Committee may remember, the Office for Budget Responsibility confirmed on the same day 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 the Government had announced, personal taxes would still rise. In fact, personal taxes are now 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. Despite people across the country paying so much in tax, public services are collapsing, the NHS is on its knees, and more and more families are struggling to make ends meet.

That was the context in which we considered the Bill on Second Reading just before Christmas: 13 years of Conservative economic failure had left people across Britain worse off. The only thing to have changed since then is that we now face 14 years of Conservative economic failure. It may be a new year, but those in the governing party face the same cold truth: nothing they can say or do now can repair the damage that they have done to our economy.

People in businesses across Britain deserve so much better. As a foundation of better management of the economy, our country needs and deserves stability, certainty and a long-term plan. It is for that reason that, although we welcome the fact that clause 1 makes full expensing permanent, which we have long called for, it simply cannot make up for the years of uncertainty that businesses have faced. Businesses need stability and predictability to help them plan for growth, and their long-term planning has been held back because the Government have been chopping and changing business taxes and reliefs year after year, with no evidence of anything resembling a long-term strategy.

[Richard Fuller]

I was very pleased to hear the shadow Minister say that the Opposition welcome the full expensing. That helps, but maybe he can go further to clarify. In new clause 6, tabled in his name, the Opposition are calling for a review of all business taxes and reliefs, which would include full expensing. He will know, as will the hon. Member for Mid Bedfordshire (Alistair Strathern) who is sitting behind him, that there is a particular potential investment decision in our county. Will the shadow Minister make it explicit that the Labour party’s intention is to include in its manifesto for the next election a commitment to maintaining full expensing?

[James Murray]

As I have said, we have long been calling for full expensing, and we welcome the fact that it is being made permanent. I do not mean to sound jokey in my response—I am deadly serious when I say this—but if the hon. Gentleman wants to know what a Labour Government would do if we got into office, there is one way to see that eventuality come about: we could have a general election sooner rather than later, instead of dragging things on throughout the course of 2024.

Frankly, the country needs to move on from the current Government. Just look at their record on capital allowances since the last general election. The hon. Member for North East Bedfordshire (Richard Fuller) spoke about certainty and the need for stability, but let us look at the changes that have happened to capital allowances over the past four or five years. As I mentioned on Second Reading, back at the beginning of this Parliament, the annual investment had been raised to £1 million on a temporary basis. That temporary basis was extended by the Finance Act 2021, extended 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 entirely. Last year, full expensing for expenditure on plant or machinery was introduced but only on a temporary basis for three years.

Now, of course, Treasury Ministers are amending what their predecessors announced last year by making full expensing permanent. Although we welcome that policy, I wonder how long it will last. Frankly, I wonder how long any policy can be expected to last under this Government, when they are led—in the loosest possible sense of that word—by such a weak Prime Minister. If we accept clause 1 at face value, we welcome its principle of making full expensing permanent, as that is something that we have long called for. I will focus the rest of my questions on some of the specifics of the Government’s approach.

As ever, I am grateful to the excellent team at the Chartered Institute of Taxation for all their thoughts on the detail of what the Government have proposed in this clause and others. I know that one matter of interest to the chartered institute was the fact that, at the autumn statement, the Government said that they would publish a technical consultation on leased assets. I would be grateful if the Minister told us when that will be published.

Furthermore, both the Chartered Institute of Taxation and the Association of Taxation Technicians—to which I am also grateful for its thoughts on the detail of the Bill—have queried which companies and assets are eligible for full expensing. I would be grateful if the Minister clarified which assets are outside the scope of full expensing, and whether the Treasury will publish a detailed list of what does and does not count as plant and machinery. I would also be grateful if he told us how many firms will not be eligible for full expensing because they are partnerships. I know that many who take an interest in this matter would welcome clarity on that.

In clause 2, the Government propose changes to the system of tax credits for research and development. As with their approach to business taxation and capital allowances, the Government have failed to deliver any sense of stability when it comes to R&D tax credits, despite certainty and predictability being so crucial to businesses that are making investment decisions. That much is clear when looking at the list of changes that we have debated in Finance Bills over the course of the current Parliament alone: the Finance Act 2020 changed the rate of R&D expenditure credit; the Finance Act 2021 changed how much R&D tax relief small and medium-sized enterprises could claim; the Finance Act 2023 again changed the rates of R&D tax relief; the Finance (No. 2) Act 2023 changed further how the relief operates; and now, the Finance Bill before us changes the system of reliefs yet again. We accept, of course, that some change is necessary and important to enable legislation to function well, but that does not seem to be what we have seen. What we have seen is a Government incapable of providing stability, predictability, and the long-term plan that businesses need to invest and grow. It is clear that after 14 years in office, the Conservatives are incapable of providing that crucial foundation for our economic success.

[Matt Rodda]

My hon. Friend is making an excellent point, which comes to the nub of the argument: the Government are not capable of providing business with the certainty it needs. That is such a tragedy, because so many wonderful emerging industries in the UK which have incredible potential need that certainty, as indeed do other businesses.

[James Murray]

My hon. Friend is absolutely right. So many businesses in the UK that are keen to invest, grow, and make people across Britain better off are being held back by the lack of stability and certainty from this Government. I cannot help but notice that the Government recognise the symptoms of the problem—that a lack of stability and certainty is indeed a problem for economic growth—but they are simply unable to provide a response to that problem, and provide the long-term plan that Britain so desperately needs.

We know that so much chopping and changing without any clear long-term plan has had a cost for our economy, by undermining prospects for investment, innovation and growth. Indeed, the Institute of Chartered Accountants in England and Wales has shared with us the view of its members that there is a lack of confidence when claiming R&D tax relief within the UK, and their belief that

“this has arisen due to the various changes made to the rules in quick succession over the past few years.”

We also know, of course, that having so many changes one after the other has a direct impact on taxpayers as well as businesses, as the public finances bear the costs for all the impacts on His Majesty’s Revenue and Customs in terms of IT systems and staffing. Our analysis of HMRC policy papers suggests that the changes made and proposed within the current Parliament have had a cumulative impact on operational costs for HMRC of more than £60 million. That sum is likely to include a substantial waste of taxpayer money as a result of so many piecemeal changes rather than coherent and lasting reform.

In order to be clear and transparent on the costs of all the Government changes to R&D tax credits, we have tabled new clause 1. The new clause would require the Chancellor to publish a review setting out the total implementation costs of all changes to research and development reliefs in the current Parliament. I hope Ministers will accept that straightforward new clause, but if not, I look forward to Government Members who would be interested in such transparency joining us in supporting it. Furthermore, if Ministers are not prepared to vote for the new clause or accept it, I would be grateful if they could at least commit to writing to me with the figures that our new clause requests.

Turning to the substantive impacts of clause 2, we should be clear about what the clause does. In the autumn statement, the Chancellor said that the Government were

“creating a new, simplified R&D tax relief that combines the existing R&D expenditure credit and small and medium-sized enterprise schemes.”—[Official Report, 22 November 2023; Vol. 741, c. 325.]

We have heard similar words from the Minister in this debate. In reality, though, the Government’s plans still effectively maintain two separate schemes: although they seek to merge the two existing schemes, they continue to provide additional support for R&D-intensive SMEs through the existing SME scheme, rather than its forming part of the new merged scheme. Although we recognise that R&D-intensive SMEs may need extra support, the Chartered Institute of Taxation has pointed out that the Government’s plans are

“less a merger than the shifting of most SMEs into a revised scheme based on an ‘RDEC’ approach, with the SME scheme remaining for a smaller group of R&D intensive SMEs.”

The Association of Taxation Technicians has pointed out the impact this may have, saying that

“the introduction of new rules to define R&D intensive SMEs and the possibility of companies moving in and out of the two regimes as their expenditure profile changes will arguably result in an overall increase in the complexity of the R&D relief regime, rather than simplification.”

As I said, we recognise that R&D-intensive SMEs may need additional support, but I would be grateful if the Minister could explain why the Government have chosen to continue operating a separate scheme to provide that support, rather than delivering it as part of the new merged scheme.

Alongside understanding the Government’s intention regarding the design of the new regime, I would also like to question the Minister about the timescales for implementing the measures in clause 2. In the policy documents associated with the autumn statement, it was clear that the new regime would apply from April 2024 onward. In the Bill, however, schedule 1, which clause 2 introduces, makes clear that the changes will apply from an “appointed day”—a day to be appointed by the Treasury in regulations. I would be grateful if the Minister could confirm in his reply what that appointed day will be. Is it 1 April 2024, or will it be a later date?

As April is less than three months away, if the appointed day does indeed fall within that month, is the Minister confident that that leaves enough time for proper consultation, and for any new systems and processes to be put in place by businesses, agents, software providers and HMRC? If, instead, the appointed day is later than April 2024, those affected need to know what is happening. I hope the Minister will be able to provide clarity on that question today; otherwise, sadly, this seems to be yet another example of continued uncertainty for businesses from this Government.

Finally, we know that the Government are concerned about the level of non-compliance with the R&D tax credit schemes. In their policy paper published in November about the merging of the current schemes, they wrote:

“Further action may be needed to reduce the unacceptably high levels of non-compliance in the R&D reliefs, and HMRC will be publishing a compliance action plan in due course.”

Tackling non-compliance is of course very important, so I would be grateful if the Minister could confirm in his reply when HMRC will be publishing the promised compliance action plan.

I am also very aware from meetings I have had with smaller businesses that they often face a great deal of confusion over the guidelines associated with R&D tax credits. Whereas larger businesses will typically have the resources and institutional capacity to navigate those rules, I am concerned that smaller businesses often do not, and may find themselves having to pay for expensive consultants to help them understand them.

HMRC could have a role to play in supporting small firms with clarity about the guidelines on R&D tax credits, as well as, of course, in its role in tackling genuine fraud. Indeed, the Startup Coalition—an organisation that advocates for policies to support innovative firms in the UK—has highlighted the need for HMRC to improve, and has called for improved

“transparency around adjudicating whether activity is R&D to provide certainty for firms.”

The ICAEW has made similar points, stressing the need for guidance and education and making clear that

“the new rules will significantly affect all sizes of companies including those smaller entities with limited professional tax resource.”

I therefore urge the Minister to make sure that any plan for improving compliance with the rules also focuses on making the rules easier to comply with wherever possible, and on working with small, innovative firms to help give them the certainty they need to thrive.

To conclude, Labour will not be opposing either of the clauses, but I urge Treasury Ministers to accept our new clause 1 and, when they reply, to respond to the specific points that I have raised. More widely, it is clear from their approach to capital allowances and R&D tax reliefs that the Conservatives are incapable of providing stability and a long-term approach. Their failure is letting down businesses across our country who stand ready to play their part in growing the economy and making people across Britain better off.

[Maggie Throup (Erewash) (Con)]

I am delighted to be able to speak in Committee on the Finance Bill, which I believe emphasises the Conservative principles of encouraging entrepreneurs, free enterprise and innovation. Many in this Chamber will know that I do not have a traditional finance background, but I did run my own business for 19 years, which I think qualifies me to identify when fiscal measures are really going to help business. That is what I see in the Bill, especially clauses 1 and 2, which I will speak to today.

First, I will take the opportunity to speak in favour of clause 1, which will support UK business by making full expensing permanent. In the spring Budget 2023, the Chancellor introduced major reforms to the system of capital allowance by replacing the super-deduction system with three years of full expensing. The new measure, which was initially put in place until 1 April 2026, allows companies to claim the full cost of their expenditure on plant or machinery against tax when the business investment is made. That measure was well received by businesses across the UK, as my hon. Friend the Minister has already stated; he quoted a number of large plcs, but the measure has also allowed a number of Erewash-based businesses to benefit and prosper.

Dales Fabrications Ltd previously claimed a super-deduction, the predecessor of full expensing, on a very significant piece of machinery. It sounds quite complicated to me, but it is a 4-metre press break with lots of bespoke options. The benefits of the super-deduction were of such significance that the business purchased additional and highly beneficial tooling concurrently with the machine. The now chairman of the business said to me:

“In reality, we would have inevitably deferred that additional tooling purchase without the super deduction, thus meaning we wouldn’t have had 100 per cent of the benefits of our new machinery from day one and would have been effectively denied access to some types of work that went beyond typical industry-standard sizes.”

The owner of another business, Millitec, said:

“Super deductions are really good and a real incentive for us to invest.”

The successor of the super-deduction, which means being able to expense fully the cost of plant and machinery on a permanent basis, as proposed in clause 1, will undoubtedly continue to be a huge incentive for businesses across the UK to invest in their futures and in UK plc. I know from speaking to my local businesses that they really welcome this, and see it as one way to be able to expand and grow their business. However, I have a question for my hon. Friend the Minister. The terminology of plant and machinery is very broad, so when he responds could he provide some clarity for my Erewash businesses about what is defined as plant and machinery, to help them understand what is in scope? For example, does it extend to IT equipment? I think that having a better understanding of the terminology will really help businesses of all sizes to take full advantage of what is on offer.

The contents of clause 1 shows that the Government are on the side of business. Ahead of the autumn statement last year, 200 businesses—including AstraZeneca, which was so instrumental in the covid vaccine roll- out, and Toyota, a major employer of many of my constituents—wrote a joint letter to my right hon. Friend the Chancellor asking for the 1 April 2026 expiry date to be removed, so making full expensing permanent. Today, by supporting clause 1 and making full expensing permanent, we are backing businesses and helping them to succeed. It also shows that the Government are listening to businesses and making sure they are putting in place measures that will really help them grow their business.

Clause 1 will provide businesses with the biggest tax cut in modern history, worth over £10 billion a year, making the UK capital allowances regime one of the most generous in the world. Since the introduction of temporary full expensing in April 2023, the UK has become an appealing place to invest. The UK has had the second highest investment growth in the G7 and three times that of the US. Making full expensing permanent can only perpetuate that growth. Will my hon. Friend say when he winds up whether plans are in place to extend full expensing to plant and machinery that is either leased or hired? Those two options are often the only affordable ones for businesses with big ambition, but limited capital.

Let me turn to clause 2 and schedule 1. The Bill will simplify research and development rules by merging the small and medium-sized enterprises and the R&D expenditure credit schemes. Whether it is trialling and distributing the successful covid vaccines, which helped us defeat covid-19, or testing and developing new innovations that will enable us to meet our net zero targets, R&D businesses play a vital role in growing our economy. At the spring Budget 2023, my right hon. Friend the Chancellor announced enhanced support for R&D-intensive SMEs worth around £500 million per year, a consultation on the potential merged R&D tax relief scheme and support for those loss-making R&D businesses. As a result, the measures in this Bill show the Government’s unwavering support for R&D businesses.

Specifically, clause 2 and schedule 1 will help reduce bureaucracy and ensure that taxpayers’ money is spent as effectively as possible by simplifying the R&D tax system. That will stop many businesses having to navigate the complex transition between the two existing schemes. It is anticipated that the reduction of the intensity threshold in the R&D-intensive businesses scheme from 40% to 30% from April this year will allow around 5,000 extra SMEs to qualify for an enhanced rate of relief. A one-year grace period will also be introduced, providing certainty for companies dipping under the 30% threshold that they will continue to receive relief for one year. This is a vital measure for so many R&D-focused businesses, which inherently have peaks and troughs of activity. Taken together, these changes will provide £280 million-worth of additional relief per year by 2028-29 to help drive innovation in the UK.

--- Later in debate ---

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

I call the shadow Minister.

[James Murray]

I rise to speak to the new clauses in my name and that my hon. Friend the Member for Hampstead and Kilburn (Tulip Siddiq).

Clause 21 and schedule 12 relate to the implementation of pillar 2 of the OECD/G20 inclusive framework on base erosion and profit shifting. Labour supports this clause and schedule as they are intended to modify the existing multinational and domestic top-up taxes introduced in the Finance (No. 2) Act 2023, to make sure these new taxes work as intended. We have long supported the global deal on the taxation of large multinationals, as we want to see it working as effectively as possible.

We know that the OECD guidance on implementing the deal is coming out in tranches, so it is important that UK legislation is updated to reflect that. We recognise that, as with any global deal of this scale, its details are complicated and its implementation will take time, yet we have been clear throughout its development that we support the principle of a global agreement as a crucial step in making the tax system fairer, thereby helping to make sure that British businesses that pay their fair share of taxes are not undermined.

Indeed, nearly three years ago, in April 2021, I first set out in the Commons our support for a global deal to make that tax system fairer, to make sure that a level playing field is there for British businesses and to stop the international race to the bottom on tax for large multinationals. The Treasury Ministers at the time appeared at first lukewarm in backing plans emerging from the United States for a global deal. Eventually, however, the then Chancellor, now the Prime Minister, began to support the deal in public. We were glad that the current Prime Minister seemed to have come round, but I am not sure all his Back Benchers have. For instance, I wonder whether the hon. Member for North East Bedfordshire (Richard Fuller) would agree with the Prime Minister when he said:

“We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business.”

We agree with the Prime Minister on that point, but I just wonder whether everyone on the Conservative Benches does. I am reading some of their faces and I think the answer is clear. Could it be that the Prime Minister lacks support from prominent Back Benchers within his own party on a policy he is now championing? Surely not. But Treasury Ministers should rest assured that if their Back Benchers pull any tricks on clause 21, they will have our support for it to pass.

Oral Answers to Questions

James Murray Excerpts

Tuesday 19th December 2023 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

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

Throughout the pandemic, people across the country made extraordinary and heart-wrenching sacrifices, yet as they did so, a small minority were instead making millions of pounds by ripping off the taxpayer. With conflicts of interest, defective goods and exorbitant profit margins, it has been greedy and grubby and this Conservative Government have enabled it all. As taxpayers, we want our money back, so Labour will create a covid corruption commissioner to chase down every pound we can. Does the Minister have any idea just how angry people are that our country has been taken for a ride?

[Laura Trott]

The hypocrisy is absolutely astonishing. During the pandemic the shadow Chancellor wrote that the strategy of turning to big-name UK manufacturers was not delivering the supply that was needed. Yes, we procured things very fast—we needed to do that to get things to the frontline—and we are trying to get back every single penny that was lost to fraud, but we make no apology for doing whatever we could to get PPE to the frontline as quickly as possible.

[James Murray]

The Minister’s response really does not reflect the seriousness of the situation. This is not just one bad apple; this is a rotten culture that goes to the very top, with £8.7 billion lost on wasted PPE and £7.2 billion lost to covid fraud. That is £15.9 billion of public money gone at a time when people and public services are struggling. Can the Minister remind the House who was Chancellor at the time that all of this was signed off?

Finance Bill

James Murray Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

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

After 13 long years of the Conservatives in power, it is clear that, no matter what they try to do or say, they cannot escape the reality of their record in office. That reality is one of people across Britain being worse off, public services collapsing, and a Conservative party that puts its own interests before the country’s.

We now have a governing party barely able to govern and a Prime Minister barely able to lead, but at least the Chancellor is still following the Prime Minister’s example by trying to emulate his reverse Midas touch. Frankly, whenever the Chancellor talks about getting the economy growing, the country is pushed in the opposite direction. In his speech three weeks ago, he used the phrase “autumn statement for growth” seven times, and what did we see? The growth forecast for next year cut by more than half, cut again the year after that, and cut yet again the year after that. It seems that the Financial Secretary is getting in on the act, too. Today, he talked about what he has been doing to support growth, and what do we see? Figures out today confirm that the UK economy contracted unexpectedly in October, with GDP falling by 0.3%.

It is not just in relation to growth that the reverse Midas touch applies. Last month, the Prime Minister said:

“I want to cut taxes, I believe in cutting taxes.”

But what have we seen? Even after all the changes the Government have announced, the tax burden is still on track to be the highest since the second world war. The truth is that after 13 years of failure on the economy, the Conservatives are incapable of getting our country back on track. After 13 years, they do not have the determination or the plan to get us out of this doom loop where growth is low, taxes are high, public services are collapsing and families are worse off. Only Labour’s plan will bring stability and responsibility back to our public finances, give families the security they need and reform our public services for the future. Only Labour is ready to work with businesses day in, day out to get our economy growing, to create good jobs for the future and to make people across Britain better off.

There are a number of individual measures in the Bill that we have been calling for for some time; we will not oppose its Second Reading, and we look forward to considering it in detail in Committee. However, it is clear that the Bill and the autumn statement it follows are simply the latest chapter in 13 long years of Conservatives failing to get the economy growing and make working people better off. It is sobering and frankly staggering that, as the Resolution Foundation set out following the autumn statement, real average weekly earnings are now set to remain below their 2008 level until 2028. That is two full decades of pay stagnation. That is what happens when the Government cannot find a plan for growth that works.

To be fair, it is not for want of trying. The “autumn statement for growth” is the 11th attempt at an economic growth plan we have seen from the Conservatives. The problem is that the Conservatives simply do not have the ideas we need for our times, nor the focus on the country that the British people deserve from their Government. As Conservative MPs meet behind closed doors to plot their next leadership election, families across Britain are fed up of struggling and being squeezed, businesses yearn for stability and certainty, and our country misses out on the chance to fulfil its potential.

Of course, people across Britain are feeling the hit not just from growth being weaker and inflation more persistent than in similar countries, but from the 25 tax rises the Conservatives have already pushed through in this Parliament alone. There is, however, one small group of people who will continue to be protected from this Government’s tax rises on much of their income. That group of people is non-doms: those who live in Britain but do not pay UK taxes on their income from overseas. As we have long said, Labour believes it is only fair that if a person makes Britain their home, they should pay their taxes here. Closing the non-dom loophole—replacing that archaic status with a residence scheme like other countries have—could raise crucial funding to bring the NHS waiting list down. Yet today we have another Finance Bill from this Government that leaves the loophole open. The Government are continuing to help a few at the top to avoid paying their fair share of tax when they keep their money overseas, while letting families across the UK face a tax burden that is climbing to a post-war high. Whatever the Government say, that is the reality facing working people in Britain.

As the Resolution Foundation points out, any cuts to personal taxation announced in the autumn statement pale in comparison with previously announced tax rises through the freezing of national insurance and income tax thresholds. The Resolution Foundation concludes that the combined effect is an average tax rise of £1,200 per household, with almost every single person in the country who pays income tax or national insurance paying higher taxes overall. Across all taxes that the Government levy, the Resolution Foundation points out that

“despite the tax cutting rhetoric, the reality is that the tax burden is rising, with tax receipts as a share of the economy set to reach 37.7 per cent in 2028/29, the highest level in 80 years.”

That is the reality from which the Conservatives cannot hide.

[Barbara Keeley]

My hon. Friend is making a great speech. He has been talking about the tax burden, and I raised the subject of cultural tax reliefs earlier. Another change in orchestra tax relief is that eligibility requires 10% of expenditure to be on goods or services that are used or consumed in the UK, rather than being incurred in the UK. The Association of British Orchestras has said that there is a lack of clarity about what orchestras will now be able to claim. This level of uncertainty is very unfair on UK orchestras, which have been through a turbulent time as a result of Brexit, covid and the cost of living crisis. Will my hon. Friend agree to raise that point with the Minister in Committee, to obtain some clarity and to enable Members to consider what these changes are doing? I appreciate that the subject is too complicated to be dealt with at this point.

[James Murray]

I thank my hon. Friend for raising that point; she is a great champion for orchestras. It is only right, when we consider the details of the Bill in Committee, for us to push the Government to provide the certainty that is so often lacking from many of the measures that they propose.

I was talking about the reality from which the Conservatives cannot hide. The Chief Secretary to the Treasury, who is present, has been desperately trying to claim that the tax burden is going down. Three weeks ago, she claimed that

“taxes for the average worker have gone down by £1,000.”—[Official Report, 22 November 2023; Vol. 741, c. 360.]

Two weeks ago, she claimed:

“Taxes for the average worker will have gone down by £1,000 since 2010.”—[Official Report, 30 November 2023; Vol. 741, c. 1084.]

However, analysis conducted by the House of Commons Library makes it very clear that national insurance and income tax for the median earner will rise by well over £1,000—up from £6,112 in 2010-11 to £7,364 in 2024-25.

In an attempt to understand the tension between the Chief Secretary’s comments and the Library analysis, I wrote to her and also tabled written parliamentary questions. The Financial Secretary responded to both the letter and the questions with rather more careful wording, saying that

“an average worker in 24-25 will pay over £1,000 less in personal taxes than they otherwise would have done.”

He was careful to make it clear that the Government’s

“calculations are on a same-year basis against a counterfactual”,

and that this was not, in fact, a comparison over time, as that

“would include the effects of earnings growth on cash totals of tax due”.

I wonder whether the Chief Secretary’s statement that taxes for the average worker have “gone down by £1,000” may have inadvertently misled the House, given that her colleague’s written response to me tacitly admitted that the Government’s statistics do not refer to the actual taxes that a worker pays. When the Exchequer Secretary to the Treasury responds to the debate, perhaps he will tell us if he knows whether the Chief Secretary would like to correct the record. Whatever the Conservatives say—however they twist and turn—the truth is that people across Britain are feeling the squeeze, and life is very different from the picture that Ministers are desperately trying to paint.

I have already made it clear that we support a number of the individual measures in the Bill. We welcome, for instance, the measure in clause 1 to make full expensing permanent; we have been calling for that for some time. Welcome as it is, however, it simply cannot make up for the years of uncertainty that businesses have faced. When I meet businesses across the country, they are clear that they want stability, certainty and a long-term plan, but even during the time for which I have been shadow Financial Secretary—a period that has seen five different incumbents of the office that I shadow—business taxation and reliefs have been chopped and changed every year.

Let us take the annual investment allowance. At the start of this Parliament, it had been raised to £1 million on a temporary basis. That temporary basis was extended first by the Finance Act 2021 and again by the Finance Act 2022, and was then made permanent by the Finance (No. 2) Act 2023. During that time, of course, the super-deduction, which Members may recall, came and went entirely, and last year full expensing for expenditure on plant or machinery was introduced—but, again, only on a temporary basis for three years, before being amended yet again this year to be made permanent. Frankly, while the latest Treasury Ministers may say that full expensing is now permanent, how long any policy under this Government may last seems to be decided by the Conservatives’ internal battles rather than what is right for the country.

[Andy Carter]

The hon. Member has said that Labour will support the Bill today, and I welcome that, but I have been doing some calculations. Does he agree that if Labour remain committed to their £28 billion borrowing plan, debt will soar and they will break their own fiscal rules?

[James Murray]

The hon. Gentleman was desperate to make an intervention about fiscal responsibility, when just a year ago his party crashed the economy and sent interest rates soaring, and working families throughout the country are still paying the price. We on this side of the House take fiscal responsibility seriously. We want to have a fiscal lock in place, we want to get debt falling, and we want to get the economy growing. That is the difference between us and the Conservatives.

Clause 2 contains measures on research and development. In Committee we will probe the impact of those changes in greater detail, but it is clear straightaway that stability and certainty have been lacking here as well. We need only look at the changes in the current Parliament’s Finance Acts. The Finance Act 2020 raised the rate of the R&D expenditure credit from 12% to 13%. The Finance Act 2021 made changes to the amount of R&D tax credit that small and medium-sized enterprises could claim. The Finance Act 2023 again changed the rates of R&D tax reliefs, and that same year the Finance (No. 2) Act 2023 made yet further changes to how the relief operates. Now, of course, the Finance Bill before us introduces a whole new regime. Businesses making investment decisions yearn for stability and certainty, but after 13 years in office, the Government are proving themselves incapable of providing those crucial foundations for success.

We acknowledge, of course, that the tax legislation in Finance Acts needs to be kept updated, and that some change is not only inevitable but important in enabling legislation to function well. However, with this Government it is hard to avoid the sense that changes are being made without a long-term plan in mind. It looks very much as if there has been no long-term plan for capital allowances or research and development reliefs, and the same is true of tackling tax avoidance and evasion.

Although we welcome any measures to tackle tax avoidance and evasion, again there has been a busy history of legislation in this Parliament alone. The Finance Act 2020 made changes to the general anti-abuse rule, introduced to deter taxpayers from using tax avoidance schemes. That was followed by more changes to the rule in the Finance Act 2021, alongside other changes to the legislation covering avoidance. In the Finance Act 2022, a further round of changes were made to the legislation relating to avoidance, including on HMRC’s publication of information about avoidance schemes. Now, in 2023, we see the latest set of changes to the rules and penalties in respect of avoidance and evasion. While we will consider the detail of those changes in Committee, it is already clear that a long-term plan is very hard to see.

Stability and certainty are crucial foundations when businesses are making decisions about where to invest and where to create jobs. We in the Opposition hear that from business leaders day in, day out, across all sectors and in all parts of our economy. We know how much damage is done to economic growth and people’s standards of living when that stability and certainty are not there. We saw that at its most extreme last autumn, when the Conservatives crashed the economy and trashed their reputation in a matter of days, through a reckless disregard for our economic institutions and for working people’s security. But it is not just about last autumn; it is about 13 years of Conservative government. It is about the inability of the Conservatives to provide the stability, the certainty and the plan for the future that businesses and our economy need.

[Sir Robert Syms (Poole) (Con)]

If we have crashed the economy and we do not have a long-term plan, why are you voting with us today? [Interruption.]

[James Murray]

Yes, Madam Deputy Speaker, I took that question to be addressed to me rather than to you. We have made it clear that when it comes to the measures in the Bill for which we have been calling for some time, we welcome and will support them. We would not oppose measures that we have been calling for. However, given the Government’s chopping and changing year on year from one Finance Act to the next, it is desperately clear that there is no evidence of a long-term plan over the past 13 years, and no evidence of the plan that we need for the future. I hope that in a general election, when businesses and working people across the country look at the Conservative party and at the Labour party and ask themselves who has a plan to grow the economy and make working people better off, they will conclude that it is us.

[Barbara Keeley]

May I make a further point about cultural tax reliefs? It seems to me that there is not quite enough understanding of the importance of this subject on the Government Benches. International touring is vital to the survival of many orchestras and makes up a fifth of earned income. That is a substantial proportion. My hon. Friend has talked of the changes that have been made, and all the flip-flopping. There is a strong economic and strategic case for incentivising touring in the European economic area for UK orchestras, because it boosts cultural exports and enhances the UK’s place on the world stage. That does not apply only to film and video, which the Minister has mentioned; our orchestras are world-class too. There is a move to limit the cultural tax reliefs, including orchestra tax relief. I am grateful to my hon. Friend for saying that that will be reviewed in Committee, but the key issue is the continuing importance of those cultural reliefs, and what the Minister has said today does not convince me that he understands that. I therefore fully support what my hon. Friend is saying.

[James Murray]

I thank my hon. Friend for her intervention on that point, and we will certainly raise questions on her behalf in Committee to try to get clarity from the Government. As she rightly points out, clarity and certainty have been distinctly lacking from this Government over a whole range of topics. We will certainly press them on that in Committee.

As I was saying in response to the hon. Member for Poole (Sir Robert Syms), we will not be opposing many of the individual measures in the Bill, including those on capital expensing, on research and development and on tax avoidance and evasion, but they all serve to remind us just how much of a merry-go-round this Government have become and just how much they lack a plan for the future. A plan for the future is what has been sorely missing from this Finance Bill and from the autumn statement, and it is clear that the Conservatives are now incapable of offering one. With no stability, no real certainty and no plan for growth that works, businesses are left without the partner in Government that they need, and without the growth that our economy needs, working people are left worse off, with the tax burden set to rise to a peacetime high.

If Labour wins the next general election, we will overhaul and accelerate the planning system, modernise our electricity grid, attract far greater private investment, scrap and replace business rates, set out a road map for business taxation and boost skills and training across the country. We will do all that to get the economy growing and to make working people better off. That is the change our country needs. Without change, we would have a fifth term of the Conservatives, and what on earth would that mean for Britain? What would the Conservatives speak of as their achievements in this Parliament? Twenty-five tax rises, the highest tax burden in eight decades, taxes up £1,200 per household and two decades of pay stagnation, as well as a fall in real household disposable incomes—the first time that has ever happened in a Parliament. That is the record of the Conservatives. That is what they cannot hide from and that is why it is time for change.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Treasury Committee.

National Insurance Contributions (Reduction in Rates) Bill

James Murray Excerpts

Committee of the whole House
Thursday 30th November 2023 Commons Chamber

[The First Deputy Chairman]

I call the shadow Minister.

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

As we made it clear on Second Reading, we will be supporting the measures that it includes, I thank the Minister for setting out the details of its clauses. As we heard, clauses 2 to 5 and the schedule to the Bill implement a reduction in the class 4 rate, a removal of the requirement to pay class 2 contributions and various transitional and consequential provisions.

I wish to ask the Minister some questions about how the measures in clause 1 will operate and what their overall impact will be. May I put it on record that, as ever, I am grateful to the Chartered Institute of Taxation for sharing its views with us on the clauses in this Bill?

Clause 1 makes it clear that the Bill’s measures will apply from 6 January 2024. Of course, we want people to benefit from these changes as quickly as possible given the pressures that families across Britain are facing right now. We recognise though that with the Government having left this policy change until late November to announce, there is not much time left for payroll software to get ready for 6 January. I would be grateful if the Minister could confirm whether HMRC accepts that some employers’ payroll software will not be ready in time for 6 January. If so, how many employers does he anticipate being affected? In such cases, employers would have to pass on the benefit of any changes to employees in subsequent months. I would be grateful if the Minister could confirm how many employees he expects will be affected by this delay, and how long he expects them to have to wait to receive the delayed benefits.

Furthermore, we understand that many operators in the retail sector have a moratorium on releasing new software updates in the November to January period, given what a busy time that is for them. I would be grateful if the Minister could confirm whether he is aware of that. If so, what meetings has he already had with retailers to discuss this point and, if so, what has the outcome of those meetings been?

[The First Deputy Chairman]

I call the SNP spokesperson.

[Nigel Huddleston]

I thank hon. Members for their questions. I can assure them that HMRC is engaging with industry and providing relevant guidance to support it to deliver the changes on time. We expect the majority of companies to be able to do so, particularly in this era, when many of the changes can be made on various systems. The Government are confident that the majority of software developers will be able to make changes to their payroll software in time for the 6 January deadline.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 5 ordered to stand part of the Bill.

New Clause 1

Review of effects of Act

“(1) The Treasury must lay before the House of Commons on the day on which this Act is passed a report which sets out forecasts of—

(a) the changes to the amount of national insurance contributions deducted from the annual income of a full-time worker earning the national living wage as a result of the measures in this Act over the period 2023/24 to 2027/28, and

(b) a comparison with the changes to the amount of national insurance contributions deducted from the annual income of a full-time worker earning the national living wage 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.

(2) The report in subsection (1) should also set out the costs to (i) businesses, and (ii) government , of implementing the changes in this Act, and compare them to the costs of—

(a) implementing a 1.25% point increase in national insurance contributions in April 2022, and

(b) implementing the reversal of the increase in paragraph(a) in November 2022.”—(James Murray.)

This new clause would require a review of the effects of the Bill if enacted over the period 2023/24 to 2027/28, on someone earning the national living wage, compared with the effect of national insurance thresholds being frozen, and a comparison of the expected implementation costs of this Bill with those of implementing and repealing the Health and Social Care Levy Act 2021.

Brought up, and read the First time.

[James Murray]

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

Thank you, Dame Rosie, for the chance to address our new clause 1. Before I do so, may I ask whether the Minister would commit to writing to me with detailed responses to the questions that I raised in our debate on the previous group? We did not get them in his response just now, so perhaps he will commit to writing to me with them as soon as possible.

Our new clause would require the Government to be honest about the impact of the changes made by the Bill when considered not just in isolation but in the wider context. Subsection (1) would require the Treasury to explain how the taxpayer or someone earning the national living wage would be impacted by the combined effects of the changes in the Bill and the freezing of national insurance thresholds at their 2022-23 level over the period 2023-24 to 2027-28.

We asked for confirmation of that, because our analysis shows that a full-time worker on the national living wage will pay an estimated £70 more in national insurance next year, even with the cut in the Bill, as a result of the thresholds being frozen. What is more, the full impact of the Government’s freezing of national insurance thresholds will be that by 2027-28—again, even with the cut in the Bill—a full-time worker on the national living wage will pay £160 more a year in tax. Can the Minister confirm whether he accepts our calculation? If he does not, I assume that he will accept our new clause and publish the data; otherwise, people will rightly be left wondering what it is the Government have to hide.

Should the Government choose to accept our new clause, subsection (2) would require them to come clean on some of the implementation costs to businesses and the Government of what the Chartered Institute of Taxation described last week as the “national insurance roller-coaster” in recent years.

If the Government are not prepared to accept our new clause, perhaps the Minister will again commit to writing to me with details of the implementation costs of the changes made by the Bill, of the 1.25 percentage point increase in national insurance contributions in April 2022, and of the reversal of that increase in November 2022. If he will not, I would be grateful if he could explain why not, again to prevent people from wondering what it is the Government have to hide.

[Nigel Huddleston]

I hope that I can give the hon. Member some assurances. A worker on the national living wage will save £165 next year from the national insurance cut, and thanks to above-inflation increases in the NIC starting threshold since 2010, a full-time worker on the national living wage will pay £400 less in national insurance contributions next year than they otherwise would have. That includes the historical increase to the national insurance contributions starting thresholds in July 2022 by this Government—the largest ever increase to a personal tax starting threshold. The national minimum and living wage rates are set on advice from the independent Low Pay Commission. Rates for 2025-26 and beyond will be set in future years.

The cost to HMRC of implementing and reversing the health and social care levy was £5 million. The cost to implement this rate reduction is not yet known as the project to deliver the change is in delivery, though HMRC does not expect it to be significant. In answer to the hon. Gentleman’s previous question, I will be delighted to write to him.

[James Murray]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Schedule agreed to.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

--- Later in debate ---

[James Murray]

As the Opposition have made clear throughout today’s proceedings and on many other occasions, we believe that taxes on working people are too high. We have long said that we want taxes on working people to come down when they can be cut in an economically and fiscally responsible way.

While we confirm our support for the Bill, we repeat our call for the Government to be honest with the British people. The Conservatives should be honest about the inescapable truth facing families across the UK: the tax burden in Britain is still on course to reach its highest level since the second world war. As a result of the Conservatives’ decisions on personal taxation in this Parliament, households will be left facing an average tax rise of £1,200. Looking across all taxes, we now know that, by the end of the decade, they will have risen by the equivalent of an astonishing £4,300 for every household in the country.

As we have set out today, a clear pattern runs through the Conservatives’ time in office: whatever they do, they keep making working people worse off. While we support the Bill, it is clear that the Conservatives are incapable of delivering what Britain truly needs: a plan to get the economy growing and make working people better off. That is what Labour is offering. In last week’s debate on the autumn statement, when discussing the general election, the Economic Secretary to the Treasury said that we should “bring it on”. On that point, we whole- heartedly agree.

National Insurance Contributions (Reduction in Rates) Bill

James Murray Excerpts

2nd reading
Thursday 30th November 2023 Commons Chamber

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

Whatever the Chancellor said last week and whatever the Chief Secretary to the Treasury said today, the truth is that the Conservatives cannot hide from the facts when it comes to the level of taxation in Britain today. The inescapable truth facing families across the UK, and the truth that the Government cannot hide from, is that under the Conservatives, the tax burden in Britain is on course to reach its highest level since the second world war. As the Resolution Foundation made clear in its blunt analysis of measures in the autumn statement, personal taxes are going up, not down.

Any cuts to personal taxation announced last week are more than eclipsed by hikes in tax that this Government had announced before; the freezing of national insurance and income tax thresholds for six years is now expected to cost taxpayers £45 billion. They are not just giving with one hand and taking with the other; it is worse than that. As I said last week, it is as if the Conservatives have nicked someone’s car but then expect them to be grateful when they pay for the bus fare home.

[Alun Cairns (Vale of Glamorgan) (Con)]

Does the hon. Gentleman recognise the context in which the autumn statement was made? Was he not a cheerleader for the furlough scheme and the financial support provided during covid and the energy price shock? Does he recognise that that needed to be recovered but, because of the difficult decisions we have taken, we are now in a position to reduce taxes?

--- Later in debate ---

[James Murray]

The context in which the autumn statement was made was 13 years of Conservative economic failure. There have been 25 tax rises in this Parliament alone and the tax burden is set to rise to its highest since the second world war. That is the context that the British people are facing, and that is the context in which the autumn statement was made.

The impact on people across Britain is brutal. As a result of the Conservatives’ decisions on personal taxation, households will be left facing an average tax rise of £1,200 from the Government. Looking across all taxes, we know that, by the end of the decade, taxes in the UK will have risen by the astonishing equivalent of £4,300 for every household in the country. That is the context in which we are debating the Bill’s Second Reading.

Let me make it clear for the benefit of the Chief Secretary to the Treasury that Labour welcomes the cut in national insurance that the Bill includes. We believe that taxes on working people are too high, and we have long said that we want to see them come down when they can be cut in an economically and fiscally responsible way. We will support the Bill, but we believe that the Government need to be honest with people. The Conservatives need to be honest and admit that they are responsible for the biggest hit to living standards on record, and that this has been the biggest tax-raising Parliament that our country has ever seen.

This is not the first time we have debated national insurance rates in this Parliament. Just over two years ago, I stood here, opposite the Financial Secretary’s predecessor —more accurately, his predecessor’s predecessor’s predecessor’s predecessor—to debate Second Reading of the Health and Social Care Levy Bill. That Bill introduced, in 2022-23, a 1.25 percentage point increase in national insurance contributions for employees and employers—an increase that we rightly described at the time as

“a new tax on working people and their jobs.”—[Official Report, 14 September 2021; Vol. 700, c. 845.]

Hon. Members may recall that when the Government published that legislation, their own tax information and impact note on that tax rise confirmed:

“There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”

We opposed that legislation, and it was clear to a wide coalition, including the Federation of Small Businesses, the British Chambers of Commerce, the CBI and the TUC, that it was the worst possible tax rise at the worst possible time.

As time went on, the then Chancellor—now the Prime Minister—realised that he had made a mistake. He tried to make a partial U-turn in last year’s spring statement by increasing national insurance thresholds, yet the Institute for Fiscal Studies quickly pointed out that that move would not undo damage already done. Its director, Paul Johnson, confirmed:

“Almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this parliament’s reforms to income tax and national insurance contributions, despite the tax-cutting measures announced today.”

Later last year, the 1.25 percentage point national insurance rise was finally reversed, yet, as we know only too well, any benefits that many families may have hoped to gain from that U-turn were rapidly eclipsed by the Tory mortgage penalty, following the Conservatives’ catastrophic mishandling of the economy. The impact of that recklessness is still with us today, as mortgage holders across the country face a hit of £220 a month when their current deals end.

The truth is that whatever the Conservatives do, they keep making working people worse off. That has been true over the 13 years that they have been in power, it has been true over the past two years of changes to national insurance, and it will be true after the Bill becomes law.

The Chief Secretary to the Treasury has been trying desperately to paint today’s national insurance cuts as the answer to the cost of living crisis. Last week, she claimed that

“taxes for the average worker have gone down by £1,000”.—[Official Report, 22 November 2023; Vol. 741, c. 360.]

I believe she repeated that claim today, yet analysis by the House of Commons Library makes it clear that national insurance and income tax on the median earner will rise from £6,112 in 2010-11 to £7,364 in 2024-25. Will she confirm—or will the Financial Secretary confirm on her behalf—whether she stands by her earlier remarks and explain exactly how those figures were calculated? The experience of people across Britain is very different from the picture that she is trying to paint.

[Richard Graham (Gloucester) (Con)]

Perhaps the answer to the question of the shadow Chief Secretary to the Treasury is that the income tax starting point has doubled from around £6,000 to more than £12,000. That provides the extra £1,000 take-home pay every year that he is puzzled about.

[James Murray]

The hon. Gentleman promoted me inadvertently, as I am the shadow Financial Secretary to the Treasury, but I thank him for his vote of confidence. Our point is that today’s tax cut, which we support, must be seen in the context of 13 years of the Conservatives in power: 13 years of economic failure, with 25 tax rises in this Parliament alone and the tax burden on course to be the highest since the second world war. Whatever the Chief Secretary to the Treasury might say, people across Britain are experiencing life very differently from how she paints it.

However welcome the measures in the Bill may be, they come after 25 tax rises in this Parliament alone. The British people will not be fooled. No matter what statistics the Government contrive or the gloss they try to put on their record, people across Britain need ask themselves just one question: do they and their families feel better off now than they did 13 years ago? The answer is a resounding no. At last week’s autumn statement, we learned not only that the tax burden is still on track to be the highest since the war and that inflation has been revised upward across the entire forecast period, but that growth rates have been cut for next year, the year after, and the year after that.

It took some gall for the Chancellor to say that he was delivering an “autumn statement for growth”—comments repeated today by the Chief Secretary to the Treasury—since the Office for Budget Responsibility reports that next year’s growth rate has been cut by more than half. Low growth has dogged our country for the past 13 years. The autumn statement makes it clear that the Conservatives still have no plan to get our economy growing as it should. Since 2010, under the Conservatives, GDP growth has been stuck at an average of 1.5% a year, down from 2% in the Labour years before. If the economy had continued to grow for the past 13 years at the rate it grew under Labour, it would be £150 billion larger—the equivalent of £5,000 per household every year.

As we all know, because of that low growth, the Conservatives have had to keep putting up taxes on working people. Low growth and high taxes have made people across Britain worse off. That is the reality of the past 13 years of the Conservatives in power. The Bill’s tax cuts cannot even remotely compensate for the damage they have done to our economy and the living standards of people across Britain.

Although we support today’s tax cut, we know that our country needs economic growth to make working people better off and to get our public services off the floor. That is the plan from Labour. We are the party of fiscal responsibility and of business, with a plan to make working people better off. Come the next election—it cannot come soon enough—people across Britain will look at the Conservatives’ record and the bleak achievements they will claim. In this Parliament, real disposable household incomes will have fallen the furthest, following 20 years of pay stagnation. Real average earnings are not forecast to return to their 2008 peak until 2028. Four million people have been dragged into paying tax, with 3 million more in the higher rate—the biggest hit to income on record. Next year, real-terms income will be 3.5% lower than it was before the pandemic. This the biggest tax-raising Parliament Britain has ever seen.

Whatever the Conservatives say or do, and whichever way they try to twist and turn, reality has caught up with them. We have been here before. We remember the Conservatives promising to cut income tax ahead of the 1997 election. Back then, people decided that it was too little, too late, coming as it did after 22 tax rises in that Parliament. As this Parliament approaches its end, today’s Conservative party is showing itself to be even more divided and desperate than in the late ’90s. As the next election draws nearer and the Conservatives try to cling on to power, the risk grows that they will get more desperate with their promises and more reckless with taxpayers’ money. Britain needs a plan to get the economy growing and make working people better off. That is what Labour is offering and why a general election cannot come soon enough.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Treasury Committee.

Draft Resolution of Central Counterparties (Modified Application of Corporate Law and Consequential Amendments) Regulations 2023 Draft Financial Services and Markets Act 2023 (Resolution of Central Counterparties: Partial Property Transfers and Safeguarding of Protected Arrangements) Regulations 2023 Draft Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023

James Murray Excerpts

Tuesday 28th November 2023 General Committees

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

It is a pleasure to serve on this Committee with you as Chair, Mr Paisley, and to make brief remarks in relation to these three statutory instruments on behalf of the Opposition.

I begin by thanking the Minister for outlining the detail of the regulations. Throughout the debates on the Bill that became the Financial Services and Markets Act 2023, it was my hon. Friend the Member for Hampstead and Kilburn (Tulip Siddiq), as shadow Economic Secretary to the Treasury, who set out the Opposition’s support for reforms designed to minimise the financial stability risks that central clearing parties, or CCPs, pose to individuals and businesses in the UK, which will be achieved through the introduction of a new CCP resolution regime, as the Minister has set out.

I am glad to confirm that we in the Opposition support the three statutory instruments that we are considering today, which relate to the delivery of legislative reforms that we supported in the Financial Services and Markets Act 2023. We support the regulations put forward today in their attempt to make sure that contractual arrangements crucial to a CCP’s operation are adequately protected when the Bank of England exercises resolution powers, as well as making sure that necessary company law modifications and amendments are made.

The Opposition also support the regulations put forward to expand the supervisory powers of the FCA over payment firms and electronic money institutions following the UK’s departure from the EU. Although our support is clear, I have a few questions for the Minister about how the FCA’s significantly expanded remit will be delivered in practice.

When the Minister responds, I would be grateful if he could set out what the Government are doing to make sure that the FCA’s greater powers are accompanied by greater accountability. Could he also explain what steps the Government are taking to make sure that additional FCA requirements on payment firms and EMIs are proportionate and that they do not hamper innovation in the UK’s world-leading payments sector?

Thank you, Mr Paisley.

Autumn Statement Resolutions

James Murray Excerpts

Wednesday 22nd November 2023 Commons Chamber

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

Today, the Chancellor confirmed what the British people already know—that there is nothing the Conservatives can say or do to hide their 13 years of failure. Government Members may have been patting each other on the back during the Chancellor’s statement, but the British people will not be celebrating. After everything that we have heard today: taxes will still be at their highest during peacetime; inflation is forecast to be higher in the years ahead than it was according to the Office for Budget Responsibility’s forecast in March; mortgage payments will still be rising for millions as their deals end; and after 13 years of low growth, we are still on a path of decline, with economic growth forecast for next year slashed by more than half.

Nothing that the Conservatives have said today will overcome the damage that they have done over the past 13 years. Nothing that they have said will overcome the cost of living crisis that families across the country are facing. Household incomes will still be 3.5% lower next year in real terms than before the pandemic, the biggest hit to living standards on record. Inflation has been upgraded in every year of the forecast period, with prices now set to be 7% higher at the end of the forecast period than the OBR forecast them to be in March. The truth is that working people are worse off under this Conservative Government.

I am sure the Chancellor will want people to focus on his announcement of a cut in the main rate of employee national insurance, but, frankly, coming after 25 tax rises in this Parliament alone, it is insulting to suggest that the British people will be fooled. Under the Conservatives, the tax burden is set to increase by £4,300 per household. Let us not forget, that, just two years ago, the Chancellor and the now Chief Secretary to the Treasury walked through the Division Lobby to put national insurance up. They may wish to forget that, but the British people will not. It is as if the Tories have nicked your car, but expect you to be grateful when they pay for your bus fare home.

After 13 years of low growth, and with taxes already at their highest level in more than 70 years, the British people will see straight through this Government’s desperate attempts to woo them. It had been rumoured that the Government were planning to cut inheritance tax in this statement. Of course, people want to be able to pass on what they have worked hard for to their children, but in the middle of a cost of living crisis, when families face rises in mortgage costs, in prices across the board, and in NHS waiting lists, we simply could not understand how the Conservatives saw that tax cut for the wealthiest 4% as a priority. The truth is that this would have been the wrong tax cut—

[Harriett Baldwin (West Worcestershire) (Con)]

On a point of order, Madam Deputy Speaker. Is it appropriate for the Opposition spokesman to be talking about measures that were actually not announced today?

[Madam Deputy Speaker (Dame Eleanor Laing)]

That is a perfectly reasonable point of order and I am grateful to the hon. Lady for raising it. I was listening carefully to the hon. Gentleman’s speech and had begun to think to myself, “That’s strange. The hon. Gentleman is addressing a point that was not in the Chancellor’s statement.” However, I have not stopped him, because—[Interruption.] I do not need any help, thank you very much. I have not stopped the hon. Gentleman because this is a very wide-ranging debate, and I have made the assumption that he was using an example of something that the Government decided not to do. Possibly he was about to state his agreement with the Government, or something along those lines. I was waiting to hear what he had to say.

[James Murray]

Thank you very much for your guidance, Madam Deputy Speaker. In fact, I was about to say that we welcome the fact that the Government appear to have finally realised that it would have been the wrong tax cut at the wrong time. I am sorry that it makes the hon. Lady so uncomfortable to talk about this, because, frankly, it speaks volumes about this Government’s instincts that they entertained that plan for so long.

My central point is that Government should not be wasting time daydreaming about an inheritance tax cut. With inflation still double the Bank of England’s target, they should be resolutely focused on what they can do now to tackle the cost of living crisis. The truth is that anything they offer now is far too little, far too late. The Conservatives simply cannot tackle the cost of living crisis that their fingerprints are all over.

Ten years ago, the Conservatives slashed energy efficiency programmes, after which insulation rates plummeted by 92%. As a result, millions of households across the country have had to pay energy bills £500 a year greater than they should be.

Last year, the Conservatives’ utterly reckless approach to the economy set off market chaos and interest rate rises. The Bank of England has said that those re-mortgaging will see their monthly payments rise by £220, and 1.5 million families will be hit by this Tory mortgage penalty next year.

[Harriett Baldwin]

All our constituents who pay mortgages are concerned about the increase in rates. Did the hon. Member hear the Governor of the Bank of England accept yesterday, as he has in earlier Treasury Committee sessions, that it is the Bank of England taking independent decisions to tackle inflation that has led to those increases? The hon. Member is wrong to label them “Tory” mortgage increases.

[James Murray]

The Opposition accept the independence of the Bank of England, unlike some Government Members, but frankly that was a fairly shameless attempt by the hon. Member to distance herself from what the Government did to the economy last year in their disastrous mini-Budget. The British people will not forget, as they are still paying the price.

[Dame Angela Eagle]

My hon. Friend is making some important points. Does he agree that, if it is the decisions of the Bank of England that have halved inflation, as the Opposition think, the Government cannot go around claiming credit for it?

[James Murray]

As always, my right hon. Friend makes an important point. The Government are trying to have it both ways. When inflation goes up, it is someone else’s fault. When it comes down, they claim the credit. I think that we can trust the British people to see through whatever way they try to distort the truth.

[Dr Liam Fox (North Somerset) (Con)]

Will the hon. Member give way?

[James Murray]

No, I will make some progress.

The truth is that the Conservatives’ fingerprints are all over the cost of living crisis, and it would be ludicrous for anyone to expect the prime suspect to be asked to solve the crime. It is clear that we cannot trust the Government with the cost of living crisis. It is also clear that we cannot trust them with our money. No wonder they want to run from their record in office when they have wasted taxpayers’ money so badly. The levels of fraud and waste on their watch make the 25 tax rises over this Parliament all the more galling, and even harder for hard-pressed families to stomach. From the £7.2 billion of public money that was lost on fraud during the pandemic to the £50 million spent on a new helicopter for the Prime Minister to make the short trips that he is so fond of, it is clear that the Conservatives are incapable of spending public money wisely.

Labour will set up an office of value for money as part of our pledge to put fiscal and economic responsibility at the heart of our approach if we win the next election. On that foundation, we will get the economy growing after 13 years of stagnation, as we know that economic growth is the key to making people across Britain better off. Had the UK economy grown since 2010 at the same rate that it did under Labour in the years before, it would be £150 billion bigger today—£5,000 more for every household, every year. That is why Labour’s plan to provide the stability, certainty and critical infrastructure improvements that businesses value so greatly is so important.

Our new fiscal lock, which the Conservatives voted against last week, will strengthen the Office for Budget Responsibility, helping to ensure that the disastrous mini-Budget of this time last year could never happen again. Our new road map for business taxation will give businesses from the UK and around the world the certainty and predictability that they need to invest in Britain. That need for certainty has been behind our calls to make full expensing permanent, which the Government have finally announced—though with this Government, businesses may well be left wondering how long their latest position will last. While small businesses and the retail, hospitality and leisure industries will no doubt welcome any further help with business rates, again the Government have failed to provide the fundamental reform promised at the general election.

Where the Conservatives have failed, Labour will deliver. Our proposals to overhaul the planning system will fast-track the decisions that we need to deliver clean energy, critical infrastructure, and the factories and workplaces of the future. Our national wealth fund will provide catalytic public investment to leverage three times as much private sector investment into jobs and industries across our country. Our approach will be one of a pro-business, pro-worker Government, ready to grow Britain’s economy and make working people better off. Governments in other countries around the world know that businesses want their support in growing new industries and making the transition to a low-carbon economy. As the chief executive of the UK Sustainable Investment and Finance Association said just yesterday, the Chancellor needs to

“urgently set out the UK’s overdue response to the”

US approach

“and similar measures in other jurisdictions, such as the EU, Canada and Japan”.

The truth is that through their lack of ideas, lack of ambition, and lack of the industrial strategy that we need, the Government are holding British businesses back. Ministers are making Britain the outlier, while the Governments of similar nations around the world are supporting their national industries to attract jobs and investment. The Conservatives cannot deliver what our economy needs, and people and businesses across Britain know that it is time for a change. Even the Prime Minister has conceded that our country needs change. Maybe that is why he still has misplaced confidence in the Conservatives: he thinks that because they have changed their Cabinet so much and so often, they must be on to a good thing. It is true that their record on changing who is sat around the Cabinet table is remarkable. To have had five Prime Ministers, seven Chancellors, and an astonishing 16 Housing Ministers is noteworthy—but not, of course, for the right reasons.

The problem for the Conservatives is that whatever they try to do now, they know, and the British people know, that they cannot be the change that we need. Nothing can compensate for the damage that they have already done. What on earth will they put on their election leaflets, I wonder? Will they say, “We may have increased taxes 25 times, but things will be different now—honest!” or will they say, “Don’t worry—0% growth is actually better than what it could have been.”? Maybe they will play it straight with something like: “We may have failed for 13 years, but we’d like another chance.”

We all know that that simply will not wash. The Conservatives are out of touch and, increasingly, out of time. After 13 years, working people have had enough of paying higher taxes, enough of seeing their wages stagnate, enough of their public services falling apart, and enough of Britain’s economy falling behind. The change that our country needs can only come from our changed Labour party—one that is ready to serve, ready to get the economy growing, and ready to make people across Britain better off. The truth is that people in our country should be given the chance to get Britain its future back. That is why a general election cannot come soon enough.

Oral Answers to Questions

James Murray Excerpts

Tuesday 14th November 2023 Commons Chamber

[Bim Afolami]

As the hon. Member knows, the reason why we are in this position is that there is a global phenomenon. We are doing what we can. We are working closely with the Bank of England and, over time, due to the policies of the Chancellor, the Prime Minister and this Government, interest rates will come down.

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

I welcome the hon. Member for Mid Worcestershire (Nigel Huddleston) to his post as Financial Secretary.

It has been a year since the Conservatives crashed the economy. In 2023 so far, 1.5 million fixed-term mortgages have expired, leaving working people facing sky-high increases in their mortgage costs. For people living in Wellingborough, for example, this Tory mortgage penalty means that households are paying another £190 a month on top of everything else in a cost of living crisis. The truth is that working people are paying the price for the Conservatives crashing the economy last autumn. Does the Economic Secretary think that is fair?

[Bim Afolami]

I thank the shadow Minister for his kind words, at least in relation to me.

It is important to recognise that in the eurozone, the United States and the UK there have been broadly similar increases in inflation and interest rates. We as a Government are confident that our policies will bring those down in due course.

Plastic Packaging Tax on Imports: HMRC Enforcement

James Murray Excerpts

Tuesday 17th October 2023 Westminster Hall

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

It is a pleasure to speak with you in the Chair, Mr Davies.

I congratulate the hon. Member for Amber Valley (Nigel Mills) on securing this debate on HMRC’s enforcement of the plastic packaging tax on imports. I am pleased to respond on behalf of the Opposition.

As Opposition Members made clear throughout the introduction and implementation of the plastic packaging tax, we support it as a tool to tackle plastic pollution. The tax was introduced in April last year to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging. By applying a tax on products that contain less than 30% of recycled plastic, the tax was expected to create greater demand for recycled plastic, which in turn would stimulate increased recycling and collection of plastic waste, diverting it from landfill or incineration.

Of course, today’s debate has focused on the enforcement of the tax on imported plastics by HMRC. I understand that in 2022-23, the first year in which the tax applied, 48% of the plastics declared as being subject to it were flagged as plastics imported into the UK, so I would be very interested to hear the Minister’s response to the points made by the hon. Member for Amber Valley about ensuring that the tax is applied correctly to imports and making sure that there is a level playing field for UK businesses.

More widely, as we make the transition to more sustainable plastics, we know that concerns have been expressed in the agricultural sector, among domestic manufacturers and in the wider business community about how they will adapt to the changing policy context. Indeed, I know that the hon. Member for Amber Valley has spoken before about his concerns about the way in which silage film was unexpectedly added to the list of items caught by the plastic packaging tax in guidance published in late 2021. He pointed out at the time that that meant that industries had not prepared for the change and that the cost would fall directly on farmers at a very difficult time for them. That point was also made by the National Farmers Union, which successfully secured a change of course by the Government, with HMRC concluding early in 2022 that silage film fell under an exemption from the tax.

Clearly, it would have been less disruptive if the Government had taken their ultimate position in the first place, rather than publishing guidance and then changing their mind. I would be grateful if the Minister could set out some detail about what the Treasury and HMRC have learned from the experience, and what they are doing more widely to work with the agricultural sector and businesses in the broader economy to assist with the transition to more sustainable plastics.

Furthermore, although it is important to tackle less sustainable packaging products from overseas, it is also important that we build resilience here in the UK and have a clear, stable policy environment to encourage investment in our country. I was therefore concerned to note that, in response to the Government’s recent announcement that they would consult on a new, mass-balance approach to chemical recycling, the British Plastics Federation noted that a

“lack of clarity to date has prevented companies from investing in the UK and some have looked elsewhere to build facilities.”

As the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), set out last week, we believe that Britain must rebuild its domestic resilience across the economy. We must make more here in Britain while developing robust supply chains so that we are less exposed to global shocks. A clear, stable policy environment is critical to encouraging companies to invest in productive capacity here in the UK, and it is therefore crucial in securing the jobs and economic resilience that such investment would bring, so I will be grateful if the Minister can explain what the Government are doing to support private investment in the production of sustainable plastics here in the UK.

Mortgage Prisoners

James Murray Excerpts

Wednesday 28th June 2023 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Robertson.

As we have heard, this debate on mortgage prisoners takes place in the context of wider concerns about mortgages, as mortgage payers are being hit by increases in interest rates. People who have done the right thing by saving for a deposit and then buying a home now face their payments going up by hundreds of pounds a month through no fault of their own. The interest rate rises are affecting millions of families with mortgages, both those with a variable rate deal who are impacted month on month and those with a fixed-rate deal that has recently expired or is about to do so. The impact of the rises is being felt beyond mortgage payers and their families, as private renters are also often suffering an increase to their rent as a knock-on impact of higher interest rates.

Today’s debate focuses on a particular group of mortgage payers: mortgage prisoners, who face the impact of the recent increases in interest rates on top of the historic uncompetitive rates of the deal they are on. We all know how much fear and hardship rising mortgage payments can cause, so I commend the hon. Member for West Dunbartonshire (Martin Docherty-Hughes) for securing the debate. I also commend the work of Rachel Neale and other campaigners on this issue. I listened very carefully to the hon. Gentleman as he set out his points and talked about his constituent Chris and his family. I welcome the contributions of other Members, including the hon. Member for North Norfolk (Duncan Baker) and my hon. Friend the Member for Feltham and Heston (Seema Malhotra), who mentioned her constituent Mr Masood. They set out much of the detail of the situation facing mortgage prisoners.

As we heard, there are around 200,000 mortgage prisoners in the UK. That is the number estimated by Money Saving Expert, and it aligns broadly with the calculation by the Financial Conduct Authority of around 195,000 mortgage holders in closed books in 2021. Mortgage prisoners face being hit by the same interest rate rise as other mortgage payers, but without even having had the option to move to a cheaper rate deal in the past. We know how much stress, anxiety and hardship soaring mortgage payments cause to so many people across the country. The debate has given us a chance to focus on how particularly acute that is for mortgage prisoners who are already stuck on an uncompetitive deal. I very much look forward to hearing the Minister’s response to the points raised by so many Members about mortgage prisoners.

I would also like to take this opportunity, briefly, to once again urge the Treasury to follow through on the broader plan we set out in recent days to help mortgage holders through the difficult times that so many are facing. Action for all mortgage payers is desperately needed, as banks are withdrawing mortgage deals and the average household is facing a hike of almost £240 a month on their mortgage. Across the UK, 13 years of economic failure has left us exposed. We have the highest inflation in the G7, and UK households are paying almost £100 a month more in mortgage payments than those in other European countries. Millions of households need help now, so it is deeply frustrating that the Government are refusing to make measures to help households mandatory.

[Martin Docherty-Hughes]

I am going to challenge the shadow Minister on some of the points I made earlier. Do his Front Benchers agree that we need a moratorium on evictions and a cap on standard variable rates? Will he pledge to support a cross-party vehicle for those on closed books to pivot back into the mainstream market—yes or no?

[James Murray]

I thank the hon. Gentleman for setting out those points, and I add my voice to the call on the Minister to set out the Government’s position. We are pushing for a wider response to help mortgage holders across the piece, but the Government are in a position to respond to the hon. Gentleman’s points.

I want to use this opportunity to talk briefly about the wider impact of the mortgage rate increases on mortgage holders across the market. The plan that we set out in recent days would require lenders to allow borrowers to switch to interest-only mortgage payments and lengthen the term of their mortgage period, reverse support measures when the borrower requests, and put in place more protection for mortgage holders from repossession proceedings. We would instruct the FCA to ensure that mortgage holders’ credit scores are not affected.

I also want to focus briefly on renters, who need to be part of the conversation about mortgage holders. They are being impacted by the increase in mortgage rates, and the Chancellor did not mention them on Monday. Will the Minister take this opportunity to refer to them?

The rise in interest rates as a result of the UK’s being particularly exposed to inflation will see us paying more on our mortgages than our European neighbours. That undermines the fundamental security that families across the UK need. We therefore urge the Government to follow our plan so that people across the UK are protected. I look forward to the Minister’s response to the points we have made about mortgage prisoners.