Finance (No. 2) Bill

Debate between James Murray and Rushanara Ali

2nd reading
Tuesday 16th November 2021 Commons Chamber

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

I beg to move the amendment in my name and those of hon. and right hon. Friends including the Leader of the Opposition and the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves):

That this House declines to give a Second Reading to the Finance (No. 2) Bill because it does nothing to help people who are struggling with the rising costs of living, who are being hit by the cut to universal credit, or who are facing a rise in National Insurance Contributions and a freeze in the Income Tax Personal Allowance from next April, because it nonetheless cuts taxes for banking companies and derives from a Budget that will see the tax burden rise to its highest level in 70 years and announced cuts in air passenger duty for UK domestic flights, and because it fails to set out a plan to grow the UK’s economy, fundamentally reform business rates, and create better jobs for the future.

I am grateful to have the opportunity to set out the view of the Opposition on the Second Reading of the Bill, which comes at a time when people across the UK are seeing the cost of living, from electricity to food prices, going up and up; when businesses are trying to get back on their feet after 18 months of struggle; and when our country needs leadership to build a new net zero economy with jobs for the future. Yet let us look at what the Government are doing: putting up taxes on working people while cutting them for banks; giving up on fundamental reforms to business rates that would give our high streets the backing they need; and failing to invest in the new jobs of the future that would turn the challenge of net zero into an opportunity for our country’s economy to grow.

The truth is the Tories will never put working people first. I stood here two months ago arguing that the Government were wrong to hike up taxes on working people with their national insurance rise when those with the broadest shoulders should be paying more, and yet what we have before us today is a tax cut for banks. That tells us everything we need to know about the Tories when in power. They do not seem to care whether something is fair for people in this country, except of course when they think something is unfair to one of their own, and then they simply change the rules to suit themselves. The British people are seeing through the Government’s approach: people are seeing that this Government are more concerned with protecting themselves than with protecting the economy and people’s quality of life.

The foundation of any Government’s approach to the economy must be a plan for growth. With a growing economy, we have the chance to create new jobs with better wages and conditions in every part of the country, but without growth it gets ever harder to meet the challenges we face. Let us look at the record of this Government. As the shadow Chancellor my hon. Friend the Member for Leeds West told the Chancellor right after the Budget, it is clear what direction we are going in under the Conservatives. In the first decade of this century, despite the financial crisis, Labour grew the economy by 2.3% a year. In the last decade to 2019, however, even before the pandemic, the Tories grew the economy at just 1.8% a year. In the future, things look even worse. The Office for Budget Responsibility has said that by the end of this Parliament the UK economy will be growing by just 1.3% a year. This low growth is hitting people in their pockets: data from the Office for National Statistics show that average yearly wage growth has fallen from 1.6% in the decade to 2010 to 0.5% in the decade since 2010. We do not have much to look forward to, either, with the Institute for Fiscal Studies saying that over the next five years, real household disposable income is expected to grow by just 0.8% a year, well below the historical average.

Low growth is becoming a hallmark of the Tories in power. What they fail to realise is that with the right investment, the challenges we face can become opportunities for growth. In no part of our lives is that more evident than our response to climate change. Labour has said that we would invest an additional £28 billion every year for the rest of this decade in transforming our economy—from new jobs building batteries for electric vehicles, to manufacturing and maintaining wind turbines, and finally insulating our homes to get energy bills down. With investment on the scale we need, and with Labour’s pledge to buy, make and sell more in Britain, we would turn an urgent, critical response to the climate emergency into an opportunity for new jobs with decent pay and conditions in every part of our country.

In every part of our country, too, we see shops and high streets struggling to get back on their feet after the last 18 months. We should turn their urgent need for support into a chance to fundamentally overhaul the system of business rates, which has had its day. Business on high streets across the country know that the business rates system is broken and that fundamental change is long overdue. We know that, too, which is why we have pledged to scrap business rates and replace them with a new system of business taxation fit for the 21st century, which would incentivise investment, reward businesses moving into empty premises and encourage environmental improvements. Crucially, under our new system, no public services or local authorities would lose out, and online businesses would pay a fairer share.

We thought the Conservatives also knew that change on that scale was needed. We thought they might understand the need for an overhaul of the system, as their 2019 manifesto promised to reduce business rates through

“a fundamental review of the system.”

We thought they might even have meant it: in 2020, the Treasury began a consultation on what it said would be the fundamental review that its Ministers had promised. Yet in last month’s Budget, the Chancellor decided to ditch any prospect of fundamental reform under this Government.

Measures in the Budget for next year may be welcome, but no matter how the Chancellor tries to spin it, the promise of fundamental reform from this Government is over. As the chief executive of the British Retail Consortium put it, what the Government have offered

“falls far short of the truly fundamental reform that is needed and was promised”.

That manifesto promise of a fundamental reform of business rates has been broken, just as the promise not to raise national insurance was broken a month before.

We have a Government who are breaking their promises and failing to set out a plan to grow the UK’s economy and create better jobs for the future. Growing our economy would mean more jobs and higher tax revenues to invest in public services, but if the UK economy had grown at the same rate as other advanced economies over the last decade, we could have had £30 billion more to invest in public services without needing to raise taxes. Yet under the Tories, lower growth means that taxes need to go up. Last month’s Budget saw taxation rise to its highest level for 70 years.

Crucially, the decisions about who should shoulder the burden of tax rises tell us everything we need to know about the Tories when they are in power. The Tories are making life harder for half the population through their personal allowance freeze, for all working people through their national insurance tax rise, and for struggling families through their cut to universal credit, yet they are making life easier for bankers by cutting taxes on banking companies, and for frequent flyers by cutting air passenger duty on domestic flights. A banker flying between London and Leeds is getting a double tax cut, but someone working in the airport where that flight lands is getting a double tax rise.

[Rushanara Ali]

Does my hon. Friend agree that it is scandalous that the Government have only just agreed to restore schools expenditure to its 2010 level, despite a shortfall of £10 billion for catch-up notwithstanding requests from the former catch-up tsar? If we are serious about improving productivity in this country, we need to invest in our kids and in skills. Government expenditure falls far too short, and that will damage the future of our economy.

[James Murray]

As my hon. Friend rightly points out, investing in education is critical to the future of our country and the next generation. We heard the Minister say how uncomfortable she feels talking about cuts, but that is the reality of 11 years of Conservative government. No matter how they try to massage the announcements they are making now, the truth is that if we compare 2021 with 2010, we can see the impact that 11 years of the Tories has had on our public services.

At a time when working people are facing rising prices and flatlining wages, it shows the Tories’ true colours that they are prioritising a tax cut for bankers. To rub salt in the wound, as the IFS has pointed out, the cut in air passenger duty will flow through the UK emissions trading scheme and push up electricity prices at home. It was shocking to hear the Chancellor announce a cut in air passenger duty just days before COP26, and it is shocking that his tax cut for banks will cost the public finances £1 billion a year by the end of this Parliament.

That cut will see the corporation tax surcharge for banking companies slashed from 8% to 3%, with the allowance for the charge raised from £25 million to £100 million. It is worth reminding ourselves why that sector-specific tax was first introduced. As the policy paper published alongside the Budget—I am sure the Minister has read it—sets out clearly, the charge has been levied on banks to reflect

“the risks that they pose to the UK financial system and wider economy”

and to recognise

“the costs arising from the financial crisis.”

When the surcharge was introduced 10 years ago, in the wake of the financial crisis, the Government at the time seemed to recognise that banks had an implicit state guarantee due to their central position in the UK economy, and that that guarantee should be underpinned by greater tax contributions. Yet, as Tax Justice has pointed out, the Office for Budget Responsibility found in 2019 that £27 billion of Government expenditure on bailing out the banks was still outstanding. It seems that the Government are determined to push ahead with a cut to the surcharge, despite the fact that it will not even have fully repaid the public money spent on banks during the financial crisis, let alone provided any insurance against a future crash. We will question Ministers on that further in Committee.

We will also use that chance to press Ministers on other parts of the Bill, including those that introduce the residential property developer tax and measures relating to money laundering and tax avoidance. We support the principle behind the residential property developer tax, which will be levied on the largest developers in the residential property sector. It is right that those responsible for putting dangerous materials on buildings should pay towards the very significant costs of removing unsafe cladding, but it would be a mistake to assume that levying that tax alone will mean that the cladding scandal will in any way come to an end.

The tax is expected to raise £2 billion over 10 years, yet the Housing, Communities and Local Government Committee has estimated that addressing all fire safety defects in every high-rise or high-risk residential building could cost up to £15 billion. What is more, extreme pressures on labour and materials mean that the cost of fire safety works could rise significantly, all but wiping out the money raised from the new tax proposed in the Bill.

The bottom line is that leaseholders living in buildings with potential fire risks and facing huge remediation costs need to know how those costs will be met in full and that the necessary work will be done without delay. There are plenty of people involved in this scandal who should be paying to fix it, but leaseholders are absolutely not among them.

We also support the principle behind the economic crime levy to raise money from the anti-money laundering regulated sector to pay for measures in the economic crime plan to help tackle money laundering. As the director of the Centre for Financial Crime and Security Studies has said, a

“key challenge for the UK Government’s response to financial crime is a lack of investment in capabilities to respond to its policy ambition.”

We hope that the funding from the levy will go some way towards increasing the capacity in government to tackle economic crime, although we will press Ministers on whether it is enough.