Finance (No. 2) Bill
Jesse Norman ExcerptsMonday 19th April 2021
(3 years ago)
Commons ChamberRead Full debate Finance Act 2021 View all Finance Act 2021 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 19 April 2021 - large print - (19 Apr 2021)
The Financial Secretary to the Treasury (Jesse Norman)
The Government have delivered an unparalleled package of support during the covid-19 pandemic, providing over £352 billion for public services, workers and businesses. This response has been fair and balanced, with the poorest households benefiting the most from the Government’s interventions. It is now necessary to take steps to ensure the sustainability of the public finances and continue to fund our excellent public services. Our approach to fixing the public finances will therefore also be fair and balanced. The fairest way to put the public finances on a more sustainable footing is to ask all taxpayers to play their part, as well as asking those people able to contribute more to do so. That is why, in these parts of the Bill, the Government are legislating for freezes to the personal allowance, higher rate thresholds, the inheritance tax thresholds, the pensions lifetime allowance and the annual exempt amount in capital gains tax. The Government are also making sensible changes to the tax treatment of coronavirus support payments and exemption-related adjustments to account for the impact of the pandemic.
Given the number of speakers and amendments, I will try to keep my remarks relatively brief. Before I turn to the changes announced at Budget, let me touch on clauses 1 to 4. These are legislated for every year and are essential for the Government to be able to collect the right amount of income tax for the tax year 2021-22.
I come now to the clauses that legislate to maintain thresholds. These clauses are an essential part of a fair and responsible fiscal approach to fixing the public finances. Clause 5 maintains the income tax personal allowance and the basic rate limit at their 2021-22 levels from April 2022 until April 2026. This is a universal, progressive and fair measure being taken to fund public services and rebuild the public finances, and it ensures that the highest-earning households will contribute more. Indeed, the top 20% of highest-income households will contribute 15 times that of the bottom 20% of lowest-income households.
I shall now respond to amendments 2 to 4 and new clause 7, which relates to clause 5. Amendments 2, 3 and 4 seek to delay the decision to maintain the income tax personal allowance and higher rate threshold until April 2023. The Office for Budget Responsibility forecast that UK GDP will reach its pre-virus peak by the second quarter of 2022. The Bank of England forecast that it will happen at the beginning of 2022. In the light of those estimates, it is reasonable and fair for the Government to uphold the start of this policy from April 2022. Nobody’s take-home pay will be less as a result of this decision. For most taxpayers, any real-terms loss will be very small in 2022-23. I therefore urge the right hon. Member for Hayes and Harlington (John McDonnell) not to press the amendments to a vote.
New clauses 12 and 23 would require the Government to publish equalities impact assessments for all the measures in this debate, and new clause 8 would require the Government to publish an equalities assessment of existing income tax thresholds. New clause 8 would also require the Government to publish distributional analysis on two changes that do not constitute Government policy—namely, reducing the additional rate threshold to £80,000 and introducing a supplementary 50% rate of income tax for income above £125,000.
The Treasury carefully considers the equality impacts of the individual measures announced at fiscal events on those who share protected characteristics, in line with both its legal obligations under the public sector equality duty and its strong commitment to issues of equality. The Treasury already publishes comprehensive assessments of income tax threshold changes. Alongside the Budget, the Government have published detailed distributional analysis of the decision to maintain income tax thresholds, both at a household and on an individual basis. The new clauses therefore do little to provide meaningful additional analysis further to the Government’s existing comprehensive publications, and I therefore urge Members not to press them to a vote.
Clause 28 makes changes to maintain the pensions lifetime allowance at £1,073,100 until April 2026. This will limit the pensions tax relief available to those with the largest pension pots and supports the Government’s objective of a system of pensions tax relief that is fair, affordable and sustainable. Clause 40 maintains the capital gains tax annual exempt amount at its 2020-21 level of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements for the tax years 2021-22 up to and including 2025-26. Maintaining the annual exempt amount at a 2020-21 level is a responsible decision, consistent with the decisions that the Government have taken to maintain the value of the other main allowances over the same period.
Clause 86 maintains inheritance tax thresholds at their 2020-21 levels until April 2026. This means that the nil rate band will remain at £325,000 and that the residence nil rate band will remain at £175,000. The tapering of the residence nil rate band will continue to start when the net value of an estate is more than £2 million. Maintaining these thresholds is forecast to contribute almost £1 billion over the next five years to help to rebuild the public finances, but this approach still ensures that more than 94% of estates will not be liable for inheritance tax in each of the next five years. Taken together, this Government’s approach to thresholds across the tax system is clear evidence of a fair and consistent fiscal strategy to repair the public finances while continuing to invest in public services.
Clauses 24 to 26 make minor adjustments to exemptions to account for the impact the coronavirus pandemic has had on businesses and workers. Let me also address one proposal relating to clauses 25 and 26. New clause 11 would commission a review of the changes relating to the employer-provided cycles exemption. I am happy to reassure the Committee that the terms of that exemption have not changed and only a minor time-limited easement is introduced by this Bill. It is not therefore necessary to review the changes. Clauses 31 to 33 relate to the Government’s package of support payments for individuals and businesses during the pandemic. Clause 31 makes changes to ensure that the one-off £500 payment to eligible working tax credit claimants announced at Budget 2021 is not subject to income tax. This will ensure that the recipients of the tax credit benefit in full and that the payment meets its objective of providing additional support to low-income working households.
Jim Shannon (Strangford) (DUP)
Has the Minister had any discussion with the Low Incomes Tax Reform Group, which has indicated to me some of its concerns about how Her Majesty’s Revenue and Customs required claims from individuals? It is a delicate matter, but there is problem there. Has he had an opportunity to discuss it with the LITRG?
Jesse Norman
The hon. Gentleman will be pleased to know that I maintain a strong dialogue, through officials, and from time to time in person, with the LITRG and I have no doubt that the input it has given has been carefully considered in this regard. If he would care to write to me with his specific concern, I would be happy to pick that up as well.
It is right that HMRC has powers to tackle fraud and abuse of the self-employment income support scheme and that the Government provide legal clarity that SEISS grants are liable for income tax in the year of receipt. Clauses 31 and 32 will allow payments made in support of individuals and businesses by the Government to meet their objectives as far as is possible. Opposition amendments 15 and 92 are already comprehensively addressed by existing policy, and I ask that Members do not press them to a vote. Clause 33 makes changes to ensure that the repayments of business rates relief are deductible for corporation tax and income tax purposes. This ensures that any repayments of support are dealt with appropriately.
Taken together, these measures will help the Government to continue to support individuals and businesses through the coronavirus pandemic, and they will also begin to put the public finances on a sustainable footing as we continue to move out of the pandemic. I therefore ask that clauses 1 to 5, 24 to 26, 28, 31 to 33, 40 and 86 stand part of the Bill.
James Murray (Ealing North) (Lab/Co-op)
I rise to speak to the provisions standing in my name and those of the Leader of the Opposition and my right hon. and hon. Friends. On behalf of the Opposition, I will begin our detailed scrutiny of this Bill today by considering the impact it will have most immediately and most widely on people across the UK through its cuts to the money that families, in all their many forms, have in their pockets.
The opening clauses, 1 to 5, focus on income tax, with clause 5 freezing the personal allowance from 2022-23 through to 2025-26. That is no small change; the effect of the clause will be to make half of all people in the UK pay more tax from next year, and that is not the only measure the Government are taking that raids their pockets. We know that this Bill will make families pay more through the income tax changes next year, but it also does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now, it supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need help most, and of course it comes as the Government are choosing, in this year of all years, to take money from the pockets of NHS workers.
Jesse Norman
It has been a good debate and I thank all Members who have taken part. Let me pick up some of the key themes that were described, one of which is the impact on taxpayers of the measures the Government have taken to address and fix concerns about the public finances.
The hon. Member for Ealing North (James Murray) raised this issue. As he will be aware from wider conversation and scrutiny, the Bill places a burden of £40 a year on the average basic rate taxpayer and no increment in take home pay. We think that a balanced and fair approach is one that is widely based and progressive. As I indicated, the top 20% of tax-paying households pay 15 times that of the bottom 20%. He was asked by my hon. Friend the Member for Arundel and South Downs (Andrew Griffith) whether he supported new clause 7, which would raise tax to 55%, and his was an eloquent silence in response. I would be interested to hear in the next debate whether he does support new clause 7’s bid to raise the top rate of income tax to 55%, but I will come to that later.
The hon. Member for Glasgow Central (Alison Thewliss) raised the question of antibody tests. As she will be aware, antigen tests, which are subject to the relief in the Bill, are connected to employment, whereas antibody tests are not, which is why the relief does not extend to them. It is, however, fully open to the Scottish Government, who have capacity to raise tax revenue themselves, to fund antibody tests if they so choose. She has raised the issue and we can assess whether the Scottish Government wish to follow her lead in funding those tests.
The right hon. Member for Hayes and Harlington (John McDonnell) described the tax measures in the Bill as a stealth tax rise. It is an interesting version of a stealth tax rise that is announced in a Budget statement at the Dispatch Box in the House of Commons. He was right when he said earlier that there was an honest disagreement here, and that is what there is. The Government’s view is that there should be a progressive, broad-based approach to fixing the public finances that begins at an appropriate time once the recovery is under way, and that remains the case.
The hon. Member for Richmond Park (Sarah Olney) declaimed the delay in the corporate tax rise. I remind her, since everyone is widely quoting the Resolution Foundation, that it said that the Government
“rightly sought to boost the recovery before turning to fixing the public finances”—
and it was right. She was opposed to the measures relating to the freeze on pensions in the Bill and appealed to the experience of ordinary people. Since the amount in question is over £1 million and the average financial savings in this country are something under £7,000, and since the lifetime allowance is itself seven times the median pension pot, I think that she is not using a definition of ordinary people that will be shared by Members of this House.
My right hon. Friend the Member for Wokingham (John Redwood) talked about the uncertainty involved, and he is right. We are coming out of a pandemic. There is a degree of uncertainty in the economic situation. That is why the Government have delayed, in the way that the Resolution Foundation has applauded, raising tax on corporations in order to start to restore the public finances. That is why it is right that we have taken a fair and balanced approach to this topic.
The hon. Member for Leeds East (Richard Burgon) spoke in support of his 55% tax rate—not a view shared by the Labour Front Bench. I remind him that HMRC ran a study of the 50% tax rate a few years ago and discovered that it was inefficient, raised far less than had been expected and was distorting tax behaviour. That is not a good recipe.
The hon. Member for Streatham (Bell Ribeiro-Addy) was concerned about the progressivity of these measures, but, as she will see if she looks closely, both the UK tax system at the moment and the changes themselves are highly progressive.
The hon. Member for Strangford (Jim Shannon) raised the question about the risk of fraud in schemes. Of course, he is right to note that. He had some concerns about reclaims in the self-employment income support scheme. All I would say is that the scheme is well understood. It is very widely publicised. Guidance has been available on the internet and in many independent bodies for many months. If people have claimed income support through that scheme for which they are in fact not eligible, it is appropriate to reclaim the sum overpaid. That is the principle that we seek to apply elsewhere in the tax system because it, too, is a fair and equitable one.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clauses 2 to 4 ordered to stand part of the Bill.
Clause 5
Basic rate limit and personal allowance for future tax years
Question put, That the clause stand part of the Bill.
The Temporary Chair (Siobhain McDonagh)
With this it will be convenient to discuss the following:
Clause 6 stand part.
Clause 7 stand part.
Clause 8 stand part.
Amendment 11, in clause 9, page 3, line 35, leave out “130%” and insert “18%”.
This amendment would reduce the level of the capital allowance super-deductions to the current rate of 18%.
Amendment 79, page 4, line 2, at end insert—
“provided that any such company which has more than £1 million in qualifying expenditure must also—
(i) adhere to International Labour Organisation convention 98 on the right to organise and collective bargaining,
(ii) be certified or be in the process of being certified by the Living Wage Foundation as a living wage employer, and
(iii) not be liable to the digital services tax”.
This amendment would, in respect of companies with qualifying expenditure of over £1 million, add conditions relating to ILO convention 98, the living wage and the digital services tax.
Amendment 80, page 4, line 2, at end insert—
“provided that any such company which has more than £1 million in qualifying expenditure must also make a climate-related financial disclosure in line with the recommendations of the Task Force on Climate-related Financial Disclosures within the 2021/22 tax year”.
This amendment would, in respect of companies with qualifying expenditure of over £1 million, add a condition relating to climate-related financial disclosure to the conditions that must be met in order for expenditure to qualify for super-deductions.
Amendment 66, page 4, line 6, at end insert “, except general exclusion 6”.
This amendment would remove leased assets from the list of assets excluded from the super-deduction and special rate allowance introduced by Finance (No. 2 Bill).
Amendment 67, page 4, line 21, at end insert “, except general exclusion 6”.
See the explanatory statement for Amendment 66.
Amendment 53, page 5, line 15, at end insert—
“(11) The Chancellor of the Exchequer must, no later than 5 April 2022, lay before the House of Commons a report—
(a) analysing the fiscal and economic effects of Government relief under the capital allowances super-deduction scheme since the inception of the scheme, and the changes in those effects which it estimates will occur as a result of the provisions of this section, in respect of—
(i) each NUTS 1 statistical region of England and England as a whole,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland,
(b) assessing how the capital allowance super-deduction scheme is furthering efforts to mitigate climate change, and any differences in the benefit of this funding in respect of—
(i) each NUTS 1 statistical region of England and England as a whole,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland.”
This amendment would require the Chancellor of the Exchequer to analyse the impact of changes proposed in Clause 9 in terms of impact on the economy and geographical reach and to assess the impact of the capital allowances super-deduction scheme on efforts to mitigate climate change.
Amendment 78, page 5, line 15, at end insert—
“(11) Expenditure shall not be qualifying expenditure under this section if it is incurred by a member of a group which is required to publish a tax strategy in compliance with Schedule 19 of the Finance Act 2016, unless any tax strategy published in compliance with that Schedule after the coming into force of this Act includes any relevant country-by-country report.
(12) ‘Country-by-country report’ has the meaning given by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016.
(13) A country-by-country report is relevant if it—
(a) was filed or required to be filed by the group in compliance with those Regulations on or before the date of publication of the tax strategy, or would have been so required if the head of the group were resident in the United Kingdom for tax purposes, and
(b) has not already been included in a tax strategy published by the group.”
This amendment would require large multinationals accessing super-deductions to make their country-by-country reporting public.
Clause 9 stand part.
Clause 10 stand part.
Clause 11 stand part.
Clause 12 stand part.
Clause 13 stand part.
Clause 14 stand part.
Amendment 55, page 85, line 10, in schedule 1, leave out from “period if it is” to the end of line 30 and insert—
“a related 51% group company of that company in the accounting period as defined by section 279F of CTA 2010.”
This amendment would prevent the introduction of a new definition of “associated companies” for the purposes of the small profits rate and uses an existing provision instead.
Amendment 56, page 93, line 29, leave out paragraph 11.
See the explanatory statement for amendment 55.
Amendment 57, page 94, line 5, leave out sub-sub-paragraph (a).
See the explanatory statement for amendment 55.
Amendment 58, page 94, line 14, leave out sub-paragraph (3).
See the explanatory statement for amendment 55.
Amendment 59, page 94, line 22, leave out paragraphs 15 to 17.
See the explanatory statement for amendment 55.
Amendment 60, page 95, line 5, leave out paragraphs 20 and 21.
See the explanatory statement for amendment 55.
Amendment 61, page 96, line 44, leave out paragraph 30.
See the explanatory statement for amendment 55.
Amendment 62, page 97, line 22, leave out sub-sub-paragraph (e).
See the explanatory statement for amendment 55.
New clause 1—Eligibility for super-deduction—
“(1) Only employers that meet the criteria in subsection (2) shall benefit from the provisions relating to capital allowance super-deductions in sections 9 to 14.
(2) The criteria are that the employer—
(a) recognises a trade union for the purposes of collective bargaining with its workforce, and
(b) is certified by the Living Wage Foundation as a living wage employer.”
This new clause would ensure that only employers that pay their staff the living wage and recognise trade union(s) would be eligible to receive the capital allowance super-deductions.
New clause 2—Commencement of super-deduction provisions (report on the benefits)—
“(1) Sections 9 to 14 shall not come into force until—
(a) the Secretary of State has commissioned and published a report that sets out the expected benefits of the capital allowance super-deductions in this Act, and
(b) the report has been debated and approved by the House of Commons.
(2) The report in subsection (1) must consider what the economic and social benefits would be of making the capital allowance super-deductions contingent on employers meeting criteria relating to—
(a) reducing their carbon emissions,
(b) tackling the gender pay gap,
(c) paying the right amount of tax and not using avoidance schemes,
(d) paying the living wage to all directly employed staff, and
(e) recognising trade unions for the purposes of collective bargaining.”
This new clause would mean that sections 9 to 14 could not come into force until the Government had published a report examining the economic, social and environmental effect of the capital allowance super-deductions and that report had been agreed by the House of Commons.
New clause 6—Commencement of super-deduction provisions (report on existing capital allowances)—
“(1) Sections 9 to 14 shall not come into force until the conditions in subsection (2) are met.
(2) The conditions are—
(a) the Public Accounts Committee has reported on the effectiveness of the existing capital allowances listed in section 2(3) of the Capital Allowances Act 2001, and
(b) at least one week after the publication of the report in paragraph (a) both Houses of Parliament have agreed that sections 9 to 14 shall come into force.”
This new clause would set the following conditions before clauses 9 to 14 of the Bill come into force: that the Public Accounts Committee prepares a report on the effectiveness of existing capital allowances, and then that both Houses of Parliament approve the clauses coming into force.
New clause 9—Equalities impact assessment of capital allowance super-deductions—
“(none) The Chancellor of the Exchequer must, no later than 5 April 2022, lay before the House of Commons an equalities impact assessment of the provisions sections 9 to 14 of this Act, which must cover the impact of those provisions on—
(a) households at different levels of income,
(b) people with protected characteristics (within the meaning of the Equality Act 2010),
(c) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010,
(d) equality in different parts of the United Kingdom and different regions of England, and
(e) child poverty.”
New clause 13—Review of impact of sections 6 to 14—
“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by sections 6 to 14 and schedule 1 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the provisions on—
(a) business investment,
(b) employment,
(c) productivity,
(d) GDP growth, and
(e) poverty.
(3) A review under this section must consider the following scenarios—
(a) the United Kingdom reaches an agreement with OECD countries on a minimum international level of corporation tax, and
(b) the United Kingdom does not reach an agreement with OECD countries on a minimum international level of corporation tax.
(4) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a report comparing scenarios in which (a) the United Kingdom reaches an agreement with OECD countries on a minimum international level of corporation tax, and (b) the United Kingdom does not reach an agreement with OECD countries on a minimum international level of corporation tax on various economic indicators.
New clause 17—Review of impact on corporation tax revenues of global minimum rate of corporation tax—
“The Chancellor of the Exchequer must within six months of Royal Assent lay before the House of Commons an assessment of the effect on corporation tax revenues in 2022 and 2023 of a global minimum corporation tax rate set at 21%.”
This new clause would require the Government to publish an assessment of the revenue effect of a global minimum corporation tax rate of 21%.
New clause 19—Review of impact of sections 6 to 14 (No. 2)—
“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by sections 6 to 14 and schedule 1 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the provisions on—
(a) business investment,
(b) employment,
(c) productivity,
(d) GDP growth, and
(e) poverty.
(3) A review under this section must compare the estimated impact of corporation tax rate changes in this Act with the impact on investment from the changes to the corporation tax rate in each of the last 12 years.
(4) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics”
This new clause seeks a review of the estimated impact of corporation tax rate changes in this Act with the impact on investment from the changes to the corporation tax rate in each of the last 12 years on various economic indicators.
New clause 20—Review of impact of section 7—
“(1) The Chancellor of the Exchequer must review the impact of section 7 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the provisions on—
(a) the link between corporate profit rates and ownership, and
(b) the cost of re-introducing a small profits rate.”
This new clause seeks a review of corporation tax provisions on (a) the link between corporate profit rates and ownership, and (b) the cost of re-introducing a small profits rate.
New clause 21—Review of impact of sections 6 to 14 (No. 3)—
“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by sections 6 to 14 and schedule 1 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the provisions on—
(a) progress towards the Government’s climate emissions targets, and
(b) capital investment in each of the next five years.
(3) A review under this section must include—
(a) the distribution of super-deduction claims by company size, and
(b) estimated tax fraud.
(4) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Scotland,
(d) Wales, and
(e) Northern Ireland;
and ‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
This new clause seeks a report on the impact of the super deduction on (a) progress towards the Government’s climate emissions targets, and (b) capital investment in each of the next five years. A review under this section must include (a) the distribution of super-deduction claims by company size, and (b) estimated tax fraud.
New clause 24—Review of super-deductions—
“(1) The Chancellor of the Exchequer must review the impact of sections 9 to 14 and schedule 1 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act, and then annually for five further years.
(2) A review under this section must estimate the expected impact of sections 9 to 14 and schedule 1 on—
(a) levels of artificial tax avoidance,
(b) levels of tax evasion, reducing the tax gap in each tax year from 2021–22 to 2025–26, and
(c) levels of gross fixed capital formation by businesses in each tax year from 2021–22 to 2025–26.
(3) The first review under this section must also consider levels of usage of the recovery loan scheme in 2021.”
This new clause would require the Government to review the impact of the provisions relating to super-deductions and publish regular reports setting out their findings.
Jesse Norman
Clauses 6 to 14 and schedule 1 establish the charge and set the rate of corporation tax at 19% for the financial year beginning in April 2022, and establish the charge and increase the rate of corporation tax to 25% for the financial year beginning in April 2023. They also introduce a small profits rate at 19% for companies with profits of £50,000 or less, with marginal relief for companies with profits between £50,000 and £250,000; and they increase the diverted profits tax rate by 6 percentage points, in line with the increase in the main rate of corporation tax. Finally, they introduce a capital allowance super-deduction for investments in plant and machinery.
At 19%, the current rate of corporation tax is the lowest headline rate in the G20 and significantly lower than in the rest of the G7. However, given that the Government have used the full weight of the public finances to support businesses during the pandemic, protecting thousands of businesses with more than £100 billion-worth of support, it is right that, as the economy rebounds and businesses return to profit, they share in the burden of restoring the public finances to a sustainable footing. That is why the Chancellor announced at Budget that the rate of corporation tax will increase to 25% from April 2023, after the economy is forecast to recover to its pre-pandemic level.
While many businesses are struggling now and the Government are continuing to provide support for them, others are sitting on large cash reserves. To unlock those funds and support an investment-led economic recovery, from April 2021 until the end of March 2023 companies will be able to claim a 130% capital allowance super deduction on qualifying plant and machinery investments. This super-deduction makes the UK’s capital allowance regime truly world-leading, lifting the net present value of our plant and machinery allowances from 30th in the OECD to first.
Given the number of amendments and the number of speakers, I will try to keep my remarks relatively brief. Clause 6 sets the main rate of corporation tax at 25% from April 2023. The OBR forecasts that this will raise over £45 billion in the next five years. It should be noted that 25% is still the lowest headline rate in the G7—lower than in the United States, Canada, Italy, Japan, Germany and France. The clause also sets the main rate of corporation tax at 19% for the financial year beginning on 1 April 2022. That means the higher rate will not come into force until well after the point when the OBR expects the economy to have recovered to its pre-pandemic level.
To protect businesses with small profits from a rate increase, clause 7 and schedule 1 introduce a small profits rate for non-ring fence profits for the financial year beginning 1 April 2023. As a consequence, only around 10% of actively trading companies will pay the full main rate.
Clause 8 makes changes to increase the rate of diverted profits tax to 31% from 1 April 2023, along with apportionment provisions for accounting periods straddling the commencement date. This will maintain the current differential between the main rate and ensure the diverted profits tax remains an effective deterrent against profits being diverted out of the UK.
Clauses 9 to 14 make changes to encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow, and to make those investments now. Clause 9 introduces new capital allowances available for expenditure incurred by companies between 1 April 2021 and 31 March 2023. These include a 130% super deduction for new main rate plant and machinery and a 50% special rate first-year allowance for new special rate plant and machinery
Business investment fell by a record £12 billion between the first and second quarters of last year. Making capital allowances rates for plant and machinery investments more generous has the effect of stimulating business investment and enhancing productivity. As firms invest, they create new, or substitute better, assets for use in production. That increases labour productivity, as workers produce more output per hours worked through the use of new equipment that enables faster, higher-quality outputs.
The measure will greatly benefit British companies of all sizes, including those investing more than the £1 million annual investment allowance threshold, which are responsible for around 80% of total plant and machinery capital expenditure. The changes made by clauses 9 to 14 will allow all companies to reduce their taxable profits by 130%, or 50% up front, all in the first year—a cash-flow benefit powerful enough to encourage businesses to invest now. We expect the measure to cost around £25 billion over the scorecard period.
Opposition Members have tabled a number of amendments to clauses 6 to 14. Amendments 55 to 62 propose the removal of the associated companies rules that apply to the small profits rate. The rules will affect a small proportion of companies, but they are an essential feature of the regime to prevent profitable businesses from fragmenting in order to take advantage of a lower rate or creating unfair outcomes, and they were a feature of the previous regime on which these rules are based. In the absence of the rules, a consultant, for example, could provide his or her services through five companies with profits of £40,000 each and benefit from the small profits rate. I cannot believe that Opposition Members, or indeed any Member, would support that form of avoidance: restructuring in order not to pay the tax.
Several of the new clauses call on the Government to publish a review of the impact of these clauses and potential alternative policy approaches. The Office for Budget Responsibility considers the impact of policy changes in its fiscal forecasts and sets them out in its “Economic and fiscal outlook”, which is published alongside the Budget. Therefore, I can reassure Opposition Members that new clauses 17 and 20, which request reviews into the revenue impacts of a potential global minimum tax rate and the impact of the small profits rate, are not necessary.
New clauses 13, 19 and 21 request reviews into the investment and various economic impacts of clauses 6 to 14 across the UK. The economic impacts of the clauses have been reflected in the OBR’s forecasts published in its “Economic and fiscal outlook”, as were the impacts of reductions in the rate of corporation tax. The fiscal impact of any future agreement on international tax reform will be reflected in subsequent “Economic and fiscal outlook” documents.
Opposition Members have also tabled several amendments relating specifically to clauses 9 to 14. Amendment 11 would reduce the level of the super deduction to the current writing down allowance of 18% for main rate assets. That would have the effect of removing all the benefit conveyed by this groundbreaking new policy for shorter-life assets, while the benefit of a 50% first-year allowance for longer-life assets would remain. That would distort investment behaviour in favour of longer-life assets and reduce the positive benefits of the policy.
Various other amendments seek to restrict the relief only to certain companies, or require companies that claim the super deduction to meet more burdensome conditions than would be required for other first-year allowances. The super deduction is an intentionally broad-based tax relief, designed to ensure that as many companies as possible are able to benefit from this very generous policy, in order that they can invest in their own future to drive the economic recovery.
Regarding a new requirement for country-by-country reporting, I am pleased to say that this Government have championed tax transparency both at home and abroad. That is demonstrated by the requirement introduced in 2016 for large businesses to publish their annual tax strategy, containing detail on the business’s approach to tax and how it works with HMRC. However, the Government continue to believe that only a multilateral approach to public country-by-country reporting with wide international support would be effective in achieving transparency objectives and avoiding disproportionate impacts on the UK’s competitiveness, or distortions regarding group structures. The Government firmly believe that that should remain voluntary and that no further legislation is needed unless and until public country-by-country reporting is agreed on a multilateral basis.
New clauses 2 and 6 would have the effect of delaying the super deduction, but to delay the policy now would be highly irresponsible and would risk holding up the economic recovery that the policy will help to stimulate. The likely real-world effect of delaying the implementation of the super deduction would be that businesses would delay investment until they had certainty on whether the super deduction would be available. At a time when investment is most needed, delaying the implementation of the super deduction would thus have negative impacts on employment, growth and wages. Various other amendments would delay the measure, narrow its scope or replicate existing analysis and safeguards, and I urge the Committee to reject them.
Jesse Norman
I am grateful for the contributions that have been made to this debate. It saddened me, however, that Labour Members seemed to be reading off a single piece of paper in so many of their speeches. I encourage them not to follow the script slavishly but to actually think about what they say.
The hon. Member for Salford and Eccles (Rebecca Long Bailey) put the matter at its most plain when she argued that because 99% of businesses benefit from the annual investment allowance, it meant the super deduction benefited only the remaining 1%. Of course, that is completely wrong. The super deduction benefits all businesses that are in a position to take advantage of the eligible deduction it provides, and that is better than the annual investment allowance. The whole premise of the arguments advanced by the Opposition is wrong. The fact is that tax reliefs are an understood and established part of tax policy; they are not to be thought of merely as giveaways. A raft of international authorities have testified to the benefits of greater investment allowances, including full expensing, and our proposal goes some way beyond that. We need to see it in that context.
The UK already has a rather competitive intangibles regime, and the productivity challenge that we face as a country is focused on the tangible assets and therefore it is on those that this super deduction is aimed.
The hon. Member for Ealing North repeated the line about small businesses, but also asked whether the super deduction was somehow extremely vulnerable to exploitation by malfeasant tax actors. I can tell him that the deduction has been very carefully assessed and includes important exclusions, including as to related party transactions and second-hand assets. It also includes a new anti-avoidance provision, which is designed to give it additional protections.
It is true that this is a country that takes the question of tax avoidance and tax manipulation extremely seriously. The right hon. Member for Barking (Dame Margaret Hodge), who has been a great campaigner in this area, focused on that. Of course I cannot discuss individual taxpayers. No one knows what an individual company’s taxpaying arrangements are. She purported to know—that is her privilege—but I am not in a position to discuss that. None the less, I can tell her that it would be very bad policy indeed for any Government to base tax policy on a single employer or taxpayer. If she thinks that this country has been soft in any respect on tax, let me remind her that we have led the international charge on base erosion and profit shifting, on diverted profits taxes, and on the corporate interest tax restriction. We have put into law a digital services tax and are consulting on an online sales tax. That is not the action of a Government who take these things in any way other than very seriously.
I join my hon. Friend the Member for North East Bedfordshire (Richard Fuller) in emphasising, as he rightly did, that we need businesses to be as productive, effective and successful as possible, because they are the anchors of successful and effective employment and of the profit generation on which our tax base, and therefore the funding we need to support public services, rely. It does not follow from the fact that the Labour party is confused on corporate taxation that we should not have a policy that supports business in developing, investing and building our collective economic future.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clauses 7 and 8 ordered to stand part of the Bill.
Clause 9
Super-deductions and other temporary first-year allowances
Amendment proposed: 79, in clause 9, page 4, line 2, at end insert:
“provided that any such company which has more than £1 million in qualifying expenditure must also—
(i) adhere to International Labour Organisation convention 98 on the right to organise and collective bargaining,
(ii) be certified or be in the process of being certified by the Living Wage Foundation as a living wage employer, and
(iii) not be liable to the digital services tax”.—(James Murray.)
This amendment would, in respect of companies with qualifying expenditure of over £1 million, add conditions relating to ILO convention 98, the living wage and the digital services tax.
Question put, That the amendment be made.
Jesse Norman
I rise to speak in support of clauses 109 to 111, schedules 21 and 22 and amendments 43 to 52.
The clauses will act in support of the Government’s freeports programme, which is designed to unlock investment in eight regions of England so far, with more to follow in the devolved Administrations. At Budget, following an open and transparent bidding process, the Chancellor announced the locations successful in securing freeport status: East Midlands airport, Felixstowe and Harwich, Humber, Liverpool city region, Plymouth and South Devon, Solent, Teesside, and Thames.
Freeports will be national hubs for international trade, innovation and commerce, regenerating communities across the UK by attracting new businesses and spreading jobs, investment and opportunity. They will bring together ports, local authorities, businesses and other key local stakeholders to achieve a common goal of shared prosperity and opportunity for their regions. In doing so, they will help in the Government’s ambition—indeed, all of our ambition—to level up areas that have been left behind.
The Government’s freeports model enables the UK to take advantage of the benefits of leaving the European Union. The Government have drawn on examples of successful freeport programmes all over the world to develop freeports that will attract significant new investment and encourage development across the UK. The model will enable businesses in freeports to draw on benefits relating to customs, planning, regeneration and innovation, as well as the offer of targeted tax reliefs supported by the clauses in the Bill.
The Government have engaged extensively with ports, local authorities and industry, including through a consultation on the wider programme running between 10 February and 13 July 2020. We have also listened to feedback from a wide range of stakeholders to inform the development of an effective model that will benefit port areas across the UK.
For the reasons already outlined in the earlier debates, I will confine my remarks to the key points at issue. Clauses 109 to 111 give the Government the power to designate tax sites and, once sites have been designated, to provide relief within those sites for the acquisition of commercial purpose property and new plant and machinery assets, as well as relief on the construction or renovation of buildings.
Sammy Wilson
So far, no freeport has been designated in Northern Ireland, but one of the great fears is that because Northern Ireland remains within the single market rules of the EU, any such measures to set up a freeport could be contested by the EU and the Irish Government because they might give Belfast an advantage over Dublin, for example. How will that issue be resolved, given the terms of the Northern Ireland protocol?
Jesse Norman
The right hon. Gentlemen raised a very similar question with me on Second Reading and, as he knows, the Government are engaging very closely with the Northern Ireland Executive. I am not in a position to second-guess what the EU may or may not do in that regard, but we have been very clear that we want to put a freeport in Northern Ireland and we want it to be a strong offer comparable to the freeports available elsewhere in the United Kingdom. That is what we will be seeking to achieve.
Sir Bernard Jenkin (Harwich and North Essex) (Con)
In passing, I thank the Government for designating Freeport East, which includes Harwich in my constituency, as one of the freeports. I am struggling to find how the tax concessions in this Bill avail us of the new freedoms outside the European Union. Will my right hon. Friend identify how the freedoms in this Bill are in contention with the EU state aid rules on tax subsidies? Of course, that would not apply in Northern Ireland, where the EU state aid rules still apply. The Government might as well be completely honest about this: if there are advantages for England of being outside the EU that we do not have because Northern Ireland is still effectively inside the EU, let us hear about them, because we want to know that we have those advantages in England.
Jesse Norman
I think my hon. Friend has erred in his logic. It is perfectly possible for us to benefit from the flexibility of setting taxes, as we are, while being able to have a strong agreed offer that satisfies whatever rules may apply in Northern Ireland with the Northern Ireland Executive. They will be of different characters, but there is no reason to think that neither is possible.
Clauses 109 to 111 give the Government the power to designate tax sites and, once sites have been designated, to provide relief within them for the acquisition of commercial purpose property and new plant and machinery assets, as well as relief on the construction or renovation of buildings. These powers will enable the Government to move quickly to enable businesses to begin accessing the benefits of freeports as soon as is feasible.
The Government are committed to tackling non-compliance in the tax system, and freeports are not an exception to that. Anti-avoidance and evasion provisions are included in the Bill, and will be taken across further legislation for the individual tax reliefs. In addition, the Government will take further powers to create a robust system of monitoring in freeports and enable HMRC to request relevant information from businesses. This will ensure that public money is being used effectively in pursuit of the regeneration and development of freeport locations.
Clause 109 will enable the Government to designate the location of tax sites connected to any freeport in Great Britain. The tax reliefs made available as part of the Government’s freeports programme will apply only in these sites, and the Government intend to bring forward legislation to apply these reliefs in Northern Ireland at a later date.
Bidders submitted initial proposals for their tax sites during the bidding process. The Government allowed up to 600 hectares of tax site space to be proposed, across a maximum of three separate sites per freeport. Tax site proposals were also judged against a set of criteria relating to existing deprivation and unemployment, to ensure tax measures will have maximum impact in regenerating those areas. The Government will now work with the successful locations to approve their tax site proposals. Once the successful bids have completed the full tax site assessment process, the Government will designate the agreed areas as tax sites. From that point forwards, businesses will be able to claim and benefit from the tax reliefs.
Sir Bernard Jenkin
I am most grateful to my right hon. Friend; he is being very generous, though whenever I am tackled on a point of logic by a professor of philosophy, I wonder what is going on. But my question is quite an innocent one in this case. In Harwich, there are some businesses very near the tax sites which have been affected by Brexit and would benefit greatly from being included in the tax site. To what extent are the boundaries still adjustable, and is there an issue of principle regarding included businesses that could expand much more effectively? I am thinking of the particular example of a petrochemicals processing business, which exports substantially and would benefit very greatly by being in the tax site. It would generate many more jobs and much more wealth for the United Kingdom.
Jesse Norman
Of course, the circumstances for each individual freeport site will be, and I am sure are, very different. I cannot comment on the site my hon. Friend describes, but in general the emphasis of the legislation is very much on new investment and new development, rather than on existing or dead-weight investment. It may well be the case that there are businesses that would propose to make substantial new investments and, depending on the freeport in question, it may be possible for them to qualify for some of the benefits associated with that, but, again, it is not possible for me to comment on individual cases.
Clause 110 and schedule 21 will allow businesses in freeport tax sites in Great Britain to benefit from two new capital allowances: enhanced capital allowances and an enhanced structures and buildings allowance.
On clause 111 and schedule 22, the clause makes changes to provide for a new relief from stamp duty land tax for acquisitions of land and buildings situated in freeport tax sites in England that are used for qualifying commercial purposes. Relief will be available for purchases made from the date a freeport tax site is formally designated until 30 September 2026.
Amendments 43 to 52 amend the provisions introduced by clause 111 and schedule 22 to provide certainty that property investors using sharia-compliant alternative finance are able to benefit from stamp duty land tax relief in the same way as investors using conventional finance. That will be done by taxing the alternative finance intermediary’s acquisition as though it were an acquisition by the investor. The amendments ensure that the tax payable by someone using alternative finance is the same as that which would be payable were the property purchased using a conventional financial product.
Opposition Members have tabled two new clauses relating to clauses 109 to 111. Among other things, they would place additional eligibility criteria in respect of employment rights, equalities and the environment on the claiming of capital allowances and stamp duty land tax relief in freeports. It is important to say that freeports will deliver tangible benefits that will help to level up areas. By imposing those additional criteria, the new clauses would potentially delay the implementation of these measures by making freeports more complicated for businesses to navigate, and therefore reducing their impact and effectiveness. In any case, the Government have a very strong commitment to reducing carbon emissions, which is why this country was the first major economy to implement a legally binding net zero greenhouse gas emissions target by 2050. The Government will continue to ensure that the role of tax is considered alongside other policy measures needed to meet environmental goals.
As I have already indicated, freeports will also have an important role in reducing regional disparities. The rigorous assessment of bids that has been undertaken has ensured that tax benefits are available only in areas that require regeneration and would benefit from being a tax site, helping the Government to level up those that have been left behind.
New clauses 5 and 25 as tabled would have the following effect. New clause 5 would make the commencements of clauses 109 to 111 dependent on the Secretary of State publishing a report that would allow Members to assess the economic case for freeports, and on both Houses agreeing that report. New clause 25 contains a similar request for a review of the impact of clauses 109 to 111 and schedules 21 and 22, and for a report of that review to be laid before the House within six months of the passing of this Bill and once a year thereafter. A robust and transparent bid assessment process, using the criteria set out in the bidding prospectus, ensured that the eight English freeports so far granted all demonstrated a good or better economic case, including a strong economic rationale for their proposed tax site locations.
In the interest of transparency and accountability, the Government have also published a decision-making note that clearly sets out how sustainable economic growth and regeneration were prioritised in this process of assessment. The Government will publish costings of the freeports programme at the next fiscal event, in line with conventional practice. Imposing an additional economic incentive on top of what has been outlined would only risk delaying the delivery of the programme and therefore the associated benefits of the increased investment and employment.
Amendment 54 would make the commencement of a freeport tax site in any UK nation subject to approval by the three devolved Administrations. The hon. Member for Ceredigion (Ben Lake) has already introduced that. Let me say to him that tax is first and foremost a reserved matter unless it is specifically devolved. The UK Government have the power to set tax sites that offer reserved tax reliefs across the UK, and Ministers for the devolved Administrations have the power to set devolved tax reliefs. Devolved Ministers will be accountable to their Parliaments for the use of tax instruments under their control in a freeport tax site within their nation under the proposed plans.
The Government are determined to establish freeports across the UK, not just in England. That is why we are committed to continuing discussions with the Administrations in Scotland and Wales, when their new Governments have been established, and with the Northern Ireland Executive. The Government intend to have a freeport in each nation, and are determined to deliver that as soon as practicable. They will be national hubs for trade, innovation and commerce, regenerating communities across the country. They can attract new businesses and spread jobs, investment and opportunity to towns and cities up and down the UK, which will boost international trade and economic growth.
Sir Bernard Jenkin
I am most grateful. Well, it is the Committee stage of a Bill. The hon. Member for Ceredigion (Ben Lake) raised an issue that I had not considered before, which is that the provision of a freeport in a devolved nation might actually reduce the revenue being collected by that devolved Government. Has my right hon. Friend given consideration to that? I cannot see how that would actually happen, but will he give an assurance that there is a means of addressing that if it were to occur?
Jesse Norman
As far as I am aware, this is a very remote contingency and I see no evidence to suggest that it might be the case in the context that has been described, but I can certainly tell my hon. Friend that, when the Government engage with the Welsh Government, we will be sensitive and open to discussion of the potential economic effects of a freeport in Wales, as one might expect.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
It is a pleasure to speak for the Opposition on the clauses relating to freeports. I will speak to new clause 25 in my name and the names of my hon. and right hon. Friends. Before I turn to the detail of our new clauses in this group, I would like to say a little about Labour’s position on freeports and regional economic policy more generally.
Labour wants to see good new jobs created in every region and nation of the United Kingdom. We want to see genuine levelling up that hands power and opportunity to areas that have been deprived of them for too long. We want an economic policy that addresses the fundamental challenges facing our country and our constituents: ever widening regional inequality, low productivity and low wages in too many places; a social care crisis that threatens the dignity of older people; and an environmental crisis that threatens us all.
I am afraid that the Government’s approach to levelling up has been far less ambitious. We have seen regions and areas pitted against each other to bid for pots of money, only to find that Conservative Ministers overruled officials and handed funding to already wealthy areas. We have seen nothing to make up for the 11 years of a Conservative Government who have sucked funding and opportunities out of areas that they now say need levelling up. We have seen a total lack of ambition from the Government on supporting a recovery from the coronavirus crisis to build a stronger and more resilient economy. That brings me to freeports and the clauses that we are considering today.
I think we were all a little underwhelmed when the rabbit pulled from the hat at the end of the Chancellor’s Budget speech last month was the reannouncement of his freeports policy. The Opposition simply do not believe that freeports are the silver bullet for our post-Brexit economy that the Chancellor clearly hopes they are. In fact, the evidence is that freeports are likely to have relatively little impact on overall job creation and are far more likely to move jobs from one place to another. We want every area to flourish, whether or not they have a freeport. We know that Ministers are aware of this problem because they asked potential freeports operators to address it in their bids. Our new clause 25 would require the Government to produce an annual review of the impact of the freeports policy on job creation in freeport sites and across the country as a whole.
Jesse Norman
I would be grateful if the hon. Lady could tell us whether the Labour party’s position is to support freeports or not to support freeports.
Abena Oppong-Asare
I thank the Minister. I will approach that later in my speech, so I thank him for already guessing what I was going to say.
We really need some honesty and transparency from the Government on this. The estimates of the job creation benefits of freeports made by their advocates so far have been flimsy to say the least. We also need a proper assessment of the risk of job displacement. If freeports simply move existing economic activity around, they risk doing harm to the economic fortunes of neighbouring areas, with no net benefit to the country as a whole. Indeed, a 2019 report by the UK Trade Policy Observatory found that the main effect of freeports was to divert businesses into a port from a surrounding area, rather than creating new jobs, so it is not just Labour saying this; it is the experts saying it too. That may be especially problematic in areas where freeports are situated near a local authority, or regional or even national borders.
Our new clause would require the Government to report on tax avoidance and evasion and criminal activity in freeports and to set out the level of additional staffing and resources required by HMRC and other Government bodies. There are long-standing concerns that freeports allow or encourage tax avoidance and evasion, and there is international evidence that freeports have been used for criminal activity. For example, the OECD has stated that there is
“clear evidence that free trade zones are being used by criminals to traffic fake goods”.
The Financial Action Task Force has said that the lack of scrutiny can facilitate trade-based money laundering through relaxed oversight and a lack of transparency. The TUC and others have warned of the dangers to workers’ rights from deregulation in freeports. We need to take these concerns seriously. As a minimum, the Government should commit to trade union representation in the governance of freeports at local and national levels.
I will now make a few points about the clauses we are considering. First, on the cost of the tax reliefs being introduced, the Government have provided some information on the expected operational costs of HMRC but, as recently as last month, they were unable to estimate the reduced revenue that the Exchequer will receive as a result of these reliefs. I hope the Minister can address that. Clause 110 includes the enhanced capital allowance for plant and machinery spending at 100%, but that is less generous than the 130% super deduction. Presumably, for the period that they overlap, companies will need to consider whether they can claim the super deduction rather than this allowance.
The Chartered Institute of Taxation has raised a number of concerns about the operation of the stamp duty relief in clause 111. One issue is how exactly freeport tax sites will be designated and whether particular buildings can be identified as either in or out the boundary of the tax site. Can the Minister provide some clarity on joint ventures where there is both commercial and residential development? The Chartered Institute of Taxation points out that the clause, as currently drafted, excludes a common commercial arrangement from that relief. Finally, there is the issue of withdrawal of relief for subsequent non-qualifying activity. A small amount of non-qualifying use can potentially lead to withdrawal of all the relief. Is the Minister concerned that the risk of loss of the full relief in such circumstances could discourage investment?
To conclude, the Opposition have real concerns about the Government’s freeports policy. If it is going to succeed and bring the sorts of benefit that those on the Government Benches claim, we need to see more detail on the operation of freeports and how the Government plan to mitigate the risks. We need regular monitoring of the effectiveness and the impact on the country as a whole over the years to come, which is exactly what new clause 25 would require the Government to do. If the Government are confident in their policy, they should be confident in allowing scrutiny of how it works in practice. I call on them to support our new clause.
Jesse Norman
I thank colleagues, not least my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger), for a very entertaining and rowdy end to the debate. Let me pick up some of the points that have been raised on this important subject.
The hon. Member for Erith and Thamesmead (Abena Oppong-Asare) asked about expected revenue for freeports. As she will be aware, it is not really appropriate to comment on that at the moment. These tax sites have not yet been agreed. The revenues, or at least the associated tax costs, are very much site-specific. I am therefore not in a position to comment on that, but of course once the sites have been agreed, the appropriate estimates will be brought forward.
The hon. Member for Salford and Eccles (Rebecca Long Bailey) argued—indeed, it was a recurrent theme—that freeports would have the effect of watering down employment protections. The Opposition have no evidence for that viewpoint at all. There is no deregulatory agenda whatever with freeports. Businesses and freeports will have to abide by UK worker and environmental regulations, national minimum wage standards, workers’ rights and the rest of it, just as any other company would anywhere else in the UK.
The hon. Member for Gordon (Richard Thomson) raised the topic of freeports in Scotland. He did not remind the Committee, but he will be aware, that the Scottish Government originally rejected the idea of a freeport, then rather changed their tune when they saw the local reaction. I encourage him and the Scottish Government, whatever their complexion after the election, to step forward and engage with the Government so that we can agree a freeport in Scotland.
My hon. Friend the Member for Harwich and North Essex (Sir Bernard Jenkin) talked about the different elements, and was worried that somehow the offer had been watered down. I reassure him that, although he did not notice that the structures and buildings allowance is legislated for in the Bill, the employer national insurance contributions relief will be legislated for in a forthcoming Bill and the business rates relief will follow in due course.
My hon. Friend the Member for Thurrock (Jackie Doyle-Price) rightly talked about the magnificent port at Tilbury. I have visited it myself, and a thoroughly splendid and impressive thing it is too. Finally, my hon. Friend the Member for Bridgwater and West Somerset put in what I think we can all agree was a typically low-key and restrained performance, for which we very much thank him. He put me ineffably in mind of a great moment in a work of literature and film with which I am sure the House will be familiar: “Animal House”. There is a marvellous moment where John Belushi’s future senator John Blutarsky says, “Was it over when the Germans bombed Pearl Harbor?” There is a pause, and someone says, “Leave him, he’s rolling.” That is what I felt we should do with our dear friend the Member for Bridgwater and West Somerset. With that, I will sit down.
Ben Lake
It is a pleasure to close the debate this evening. We have had a very beneficial debate on two main points about freeports and regional economic development. We had a very good discussion about the merits or otherwise of freeports for the areas in which they are located, and although I think we will continue to discuss whether any growth of investment generated by the sites will be new, partially new or a substitute for or displacement of economic activity elsewhere, it has been a good debate nevertheless.
My final point leads on from the question of whether any growth in investment would be new or a reflection of displacement of activity from elsewhere. That is particularly important when it comes to the question of levelling up and addressing regional inequalities and disparities. We still need to discuss that further. One potential solution in Wales’s case, for example, may be to look again at the cap of just one freeport in Wales. Perhaps we should have at least two. I am looking to other Members—perhaps that is one way to address the disagreements we have had tonight.
Either way, we have had a very good and beneficial debate and although I do not want to press my amendment to a vote, I hope that the Minister will consider how the Government can better work with the devolved Governments to address some of these concerns and the need to co-ordinate policies for our economic development. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 109 to 111 ordered to stand part of the Bill.
Schedule 21 agreed to.
Schedule 22
Relief from stamp duty land tax for freeport tax sites
Amendments made: 43, page 231, line 8, at end insert—
“(ca) Part 3A makes provision about cases involving alternative finance arrangements,”
This amendment is consequential on Amendment 52.
Amendment 44, page 231, line 26, after “sites),” insert
“other than in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies,”
This amendment is consequential on Amendment 45.
Amendment 45, page 231, line 39, at end insert—
“3A In section 81ZA (alternative finance arrangements: return where relief withdrawn)—
(a) in subsection (1), after “arrangements)” insert “or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies”,
(b) in subsection (3) (as substituted by Schedule 17 to this Act), at the end insert—
“(c) where the relief was given under Part 2 of Schedule 6C, the last day in the control period on which the qualifying freeport land is used exclusively in a qualifying manner.”, and
(c) after subsection (6) insert—
“(6A) Terms used in paragraph (c) of subsection (3) which are defined for the purposes of Schedule 6C have the same meaning in that paragraph as they have in that Schedule (as modified by paragraph 10A of that Schedule).
(6B) Paragraph 10 of Schedule 6C (as modified by paragraph 10A of that Schedule) applies for the purposes of subsection (3)(c) as it applies for the purposes of paragraph 8 of that Schedule.”
“3B In section 85(3) (liability for tax), after “arrangements)” insert “or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies”.”
This amendment makes provision about returns, and liability to SDLT, in cases in which relief under Schedule 6C to the Finance Act 2003 (freeport tax sites, inserted by Schedule 22 to the Bill) is withdrawn in cases involving certain alternative finance arrangements.
Amendment 46, page 231, line 40, leave out “86(2)” and insert “86”
This amendment is consequential on Amendment 49.
Amendment 47, page 231, line 40, after “tax)” insert “—
(a) in subsection (2),”
This amendment is consequential on Amendment 49.
Amendment 48, page 231, line 41, after “sites),” insert
“other than in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies,”
This amendment is consequential on Amendment 49.
Amendment 49, page 231, line 41, at end insert “, and
(b) in subsection (2A), after “arrangements)” insert “or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies”.”
This amendment makes provision about the payment of SDLT in cases in which relief under Schedule 6C to the Finance Act 2003 (freeport tax sites, inserted by Schedule 22 to the Bill) is withdrawn in cases involving certain alternative finance arrangements.
Amendment 50, page 231, line 44, after “sites),” insert
“other than in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies,”
This amendment is consequential on Amendment 51.
Amendment 51, page 232, line 2, after “81(1A);” insert—
“(azab) in the case of an amount payable because relief is withdrawn under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 10A of that Schedule (alternative finance arrangements) applies, the date which is the date of the disqualifying event for the purposes of section 81ZA (see subsection (3) of that section);”
This amendment makes provision about interest on unpaid SDLT in cases in which relief under Schedule 6C to the Finance Act 2003 (freeport tax sites, inserted by Schedule 22 to the Bill) is withdrawn in cases involving certain alternative finance arrangements.
Amendment 52, page 235, line 25, at end insert—
“Part 3A
Alternative finance arrangements
Cases involving alternative finance arrangements
10A (1) This paragraph applies where either of the following applies—
(a) section 71A (land sold to financial institution and leased to person), or
(b) section 73 (land sold to financial institution and re-sold to person).
(2) This paragraph applies for the purposes of determining—
(a) whether relief is available under Part 2 of this Schedule for the first transaction, and
(b) whether relief allowed for the first transaction is withdrawn under Part 3 of this Schedule.
(3) For those purposes this Schedule has effect as if—
(a) references to the purchaser were references to the relevant person, and
(b) the reference in paragraph 3(2)(d) to land held (as stock of the business) for resale without development or redevelopment were a reference to land held in that manner by the relevant person.
(4) The first transaction does not qualify for relief under Part 2 of this Schedule except where it does so by virtue of this paragraph.
(5) In this paragraph—
“the first transaction” has the same meaning as in section 71A or 73 (as appropriate);
“the relevant person” means the person, other than the financial institution, who entered into the arrangements mentioned in section 71A(1) or 73(1) (as appropriate).”—(Jesse Norman.)
This amendment makes provision about the operation of Schedule 6C to the Finance Act 2003 (relief from SDLT for freeport tax sites, inserted by Schedule 22 to the Bill) in cases involving certain alternative finance arrangements.
Schedule 22, as amended, agreed to.
New Clause 25
Review of freeports
“(1) The Chancellor of the Exchequer must review the impact of sections 109 to 111 and schedules 21 and 22 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act and once a year thereafter.
(2) A review under this section must estimate the expected impact of sections 109 to 111 and schedules 21 and 22 on—
(a) job creation within the sites designated as freeports and across the UK as a whole,
(b) revenue from corporation tax and stamp duty land tax within the sites designated as freeports and across the UK as a whole,
(c) levels of artificial tax avoidance and tax evasion across the UK as a whole,
(d) levels of criminal activity,
(e) the necessary level of staffing for HMRC and the UK Border Force, and
(f) departmental spending by HMRC and other departments on enforcement.”—(Abena Oppong-Asare.)
This new clause would require the Government to review the impact of the provisions of the Act introducing freeports and publish regular reports setting out the findings.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Finance (No. 2) Bill
Jesse Norman ExcerptsTuesday 13th April 2021
(3 years ago)
Commons ChamberRead Full debate Finance Act 2021 View all Finance Act 2021 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Jesse Norman)
I beg to move, That the Bill be now read a Second time.
As you will be aware, Mr Deputy Speaker, the scrutiny of Finance Bills has lain at the centre of our parliamentary process for many centuries, ever since its origins in the 13th century, and it is a rare honour for me to bring this Bill forward today.
At the beginning of last month, my right hon. Friend the Chancellor of the Exchequer outlined a Budget with three key objectives: first, to protect jobs and livelihoods and provide additional support to get the British people and British businesses through the pandemic; secondly, to be clear about the need to fix the public finances once we are on the way to recovery and to start that work; thirdly, as we emerge from the pandemic, to lay the groundwork for a robust and resilient future economy. This Finance Bill enacts changes to taxation that support all those objectives.
I will come to the Bill itself shortly, but before I do so I want to pay tribute again to the work of the Treasury and Her Majesty’s Revenue and Customs over the past year and more. I can testify from personal experience that officials have worked around the clock throughout that period to get the covid schemes up and running, to make sure that they are as effective as possible, to tweak and extend them where they can and, by those means, to support millions of people and hundreds of thousands of businesses up and down the United Kingdom in the face of the worst peacetime economic crisis in recorded history. I will not say that this was their finest hour; they will have had many of those, as these are institutions that are arguably nigh on 500 years old. None the less, this has certainly been a time to which future historians will look back when they seek examples of exemplary public service.
It has been a privilege to work alongside officials at both Her Majesty’s Treasury and Her Majesty’s Revenue and Customs, and to see the great machinery of government working so well. I will, if I may, add one other word of scene-setting about the wider approach that we have taken to tax. It is a measure of the approach taken by the Treasury and HMRC and of our own strategic approach as a Government that, alongside these pandemic measures, we have also accelerated work to create a more effective and resilient tax system. Our goal, in simple terms, is to enhance the stability and effectiveness of the UK tax system, using last year’s announcement of a new 10-year tax administration strategy as the springboard.
We want a tax system that enhances productivity, especially across the long tail of our small and medium-sized businesses. Digitisation of the tax system provides a useful nudge to these firms to upgrade their use of information technology and the skills that it demands. We want a tax system that is more flexible, so that it is better able to adapt quickly to changing circumstances and to provide targeted support for businesses and individuals when needed. We want a tax system that is more resilient—both resilient itself and better equipped to strengthen the core resilience of the UK economy in the face of a future crisis. That transformation of our tax system is already under way, but, as the House will know, we have also taken steps to improve the process of tax policy development, most recently with the tax policies and consultations day we held on 23 March. By giving this wide array of consultations more profile, we hope to make the tax policy process still more collaborative and transparent and improve the quality of tax policy making.
Let me turn to the Bill. The House is well aware of the massive public health and economic shock that this country has experienced. The damage done by coronavirus to our economy and our society has been severe. More than 700,000 people have lost their jobs since March last year. The economy has shrunk by 10%, the largest fall in more than 300 years, and this country’s borrowing is the highest it has ever been outside wartime.
The Government’s response has been comprehensive and sustained, with the total package of support to the economy this year and next now estimated at £407 billion. That response is already showing its value. Thanks to that and to the rapid roll-out of vaccination, the Office for Budget Responsibility and other independent authorities now expect a swifter recovery than previously anticipated, with faster growth, lower unemployment, more investment and higher household incomes. Indeed, the OBR expects the UK economy to recover to its pre-crisis levels six months earlier than it did—in the second rather than the fourth quarter of 2022. In the words of the Resolution Foundation, if realised, this projected rate of unemployment,
“would be by far the lowest unemployment peak in any recent recession, despite this being the deepest downturn for 300 years.”
At the heart of our covid response is precisely that support for jobs, delivered through Her Majesty’s Revenue and Customs as the tax authority, with more than 11 million jobs furloughed between the beginning of the pandemic in March last year and February of this year. As the OBR outlined last month, without the additional measures at Budget, which included the extension of the coronavirus job retention scheme, unemployment would have peaked two quarters earlier and at a higher level. Indeed, it estimates that there would have been an additional 300,000 unemployed people in the fourth quarter of this year without these latest interventions.
The tax measures outlined in the Bill go further now to protect jobs and support the economy. We are extending the 5% reduced VAT rate until 30 September in order to protect 150,000 hard-hit hospitality and tourism businesses, which employ almost 2.5 million people. To help those businesses manage the transition back to the standard rate, VAT will then increase to an interim rate of 12.5% from October until the end of March.
For similar reasons, the Bill puts into legislation the temporary cut in stamp duty land tax with a residential SDLT nil rate band remaining at £500,000 in England and Northern Ireland until the end of June. This, again, will be followed by a phased transition back to the normal rate. From 1 July 2021, it will fall to £250,000 until the end of September, before returning to £125,000 on 1 October.
For any business that took advantage of the original VAT deferral new payments scheme, the Bill ensures that they will be able to pay that deferred VAT in up to 11 equal payments from March 2021, rather than by one larger payment due by 31 March 2021. For those businesses that have been pushed into losses, the trading loss carry-back rule is being extended from the existing one year to three years for losses of up to £2 million, which will deliver a significant cash-flow benefit for businesses.
As well as protecting jobs and livelihoods, the Bill takes important steps to strengthen the public finances. The damage done by coronavirus and the urgent need to respond to the crisis have created huge challenges for the Exchequer. The OBR’s fiscal forecasts show that this year the UK is expected to borrow a record amount: £355 billion. That is 17% of our national income—the highest level of borrowing since world war two. Borrowing is forecast to be £234 billion next year, which is 10.3% of GDP—an amount so large that it has only one rival in recent history, which is the level of borrowing this year.
It is our responsibility as a Government to balance the extraordinary support we are providing to the economy now with the need to start to fix the public finances, and the Bill strikes that balance.
First, the income tax personal allowance rises with the consumer prices index as planned to £12,570 from this month and will then be maintained at this level until April 2026. The House will recall that the UK has the highest basic personal tax allowance of any G20 country. A typical basic rate taxpayer now pays over £1,200 less in tax than in 2010. The higher rate threshold also rises to £50,270 from this month and will then be maintained at this level until April 2026. These changes are fair and progressive. It is important to note that the 20% highest income households will contribute 15 times that of the 20% lowest income households. An average basic rate taxpayer will be less than a pound a week worse off in 2022-23.
Secondly, the inheritance tax thresholds, the pensions lifetime allowance and the annual exempt amount in capital gains tax will also be maintained at their 2020-21 levels until April 2026. Maintaining the pensions lifetime allowance at current levels affects only those with the largest pensions—those worth more than £1 million.
Thirdly, the Government are providing businesses with over £100 billion of support to get through this pandemic, so our judgment has been that it is only fair to ask them to contribute to this overall recovery. The Bill therefore legislates for the rate of corporation tax paid on company profits to increase to 25% from 2023. Since corporation tax is charged only on company profits, businesses that may be struggling will, by definition, be unaffected.
The Government are also protecting small businesses with profits of £50,000 or less by creating a small profits rate, maintained at the current rate of 19%. The effect of this is that 70% of companies, or 1.4 million businesses, will not see an increase in their tax rate. There is also a taper above £50,000 so that only businesses with profits of a quarter of a million pounds or greater will be taxed at the full 25% rate—and that is itself still the lowest corporation tax rate in the G7. The increase is two years away, well after the point when the OBR expects the economy to have recovered, but it is important to legislate for this now in order to give businesses clarity about our future plans.
The next goal of this Budget has been to lay the foundations of our future economy as we emerge from the pandemic. If that economy is to support the creation of new jobs, to spur growth and to drive productivity forward, we need to encourage business investment now, so this Bill contains a highly innovative new super deduction measure, which is expected to lift the net present value of the UK’s plant and machinery allowances from 30th among the countries of the OECD to first.
In most cases, this measure will allow companies to reduce their taxable profits by 130% of the cost of investment they make, equivalent to a tax cut of up to 25p for every pound they invest. The super deduction is expected to be worth £25 billion during the two years it is in place, which would make it the biggest business tax cut in modern British history. The OBR has said that, at its peak in the financial year 2022-23, the super deduction is expected to bring forward an additional 10% of business investment, with a value of £20 billion.
Alongside a programme of national recovery, we also want to stimulate regional recovery. That is why this Bill also enables the Government to designate tax sites for freeports in Great Britain. Once approved, eligible businesses will be able to benefit from a number of tax reliefs, including an enhanced 10% rate of structures and buildings allowance, an enhanced capital allowance of 100% for companies investing in plant and machinery, and full relief from stamp duty land tax on the purchase of land or property—and to help them to invest and grow, the Bill maintains the annual investment allowance at the higher level of £1 million until the end of this year.
The House will also recall that these measures are supplemented by the Budget’s new Help to Grow: Digital scheme, which will assist smaller businesses in developing their digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software. This is all part of a package that the Institute of Directors has called
“a big win for SMEs.”
Sammy Wilson (East Antrim) (DUP)
It is significant that no freeport sites have been allocated in Northern Ireland. Will the Minister clarify whether all the measures that will be included in freeport status will be exempt from the state aid rules, which will still apply in Northern Ireland because of our association with the EU single market rules?
Jesse Norman
I am grateful to the right hon. Gentleman for his question. He will know that it is absolutely the Government’s intention to have a freeport in Northern Ireland, and that they are in discussion with officials and members of the Northern Ireland Executive to discuss precisely how it will work. I am not in a position to comment on how it will work, but certainly the expectation is that this should be a functioning, highly successful and effective freeport. It should enjoy a very attractive set of benefits that will benefit the companies involved and be comparable to the ones we will see elsewhere, although it is important to note that freeports are themselves a mixed bag. We have had a variety of different bids of different kinds to the competition that has been run.
All the measures we have taken in relation to business growth and investment are part of a package, which the Institute of Directors has called
“a big win for SMEs.”
I was also pleased to see that the Resolution Foundation said that the Budget
“rightly sought to boost the recovery before turning to fixing the public finances”.
That is an important point.
I have discussed the work we are doing to create a more flexible and resilient tax system, but the Finance Bill also includes important measures to make it fairer and more sustainable. As part of the United Kingdom’s commitment to be a global leader on tax transparency, the Bill allows for the implementation of OECD reporting rules for digital platforms. The rules will help taxpayers in the sharing and gig economies to get their tax right. It will also help HMRC to detect and to tackle non-compliance.
To build on the successful introduction of Making Tax Digital for VAT, the Bill will enable the extension of MTD requirements for smaller VAT businesses from April next year. It also makes widely welcomed reforms to the penalty regime for VAT and income tax self-assessment, so that it is fairer and more consistent as a system, and harmonises interest for VAT and income tax.
The Bill tackles promoters of tax avoidance through strengthening existing anti-avoidance regimes and tightening rules. Importantly, it introduces an exemption from income tax for financial support payments for potential victims of modern slavery and human trafficking, made by the UK Government and devolved Administrations.
Finally, let me turn briefly to how the Bill helps us to deliver the important commitments the Government have made on the environment and on carbon reduction. The new plastic packaging tax, first announced at Budget 2018, will encourage the use of recycled plastic instead of new plastic in packaging. For plastic packaging that contains less than 30% recycled plastic content, the rate of the tax will be £200 per tonne. This will transform the economics of sustainable packaging.
The last 12 months have delivered a grave shock to this country and its economy, but the Government have met that shock with a determined and sustained response. That work is not done. With this Finance Bill, we are continuing to support the lives and livelihoods of families and businesses up and down the land, while simultaneously setting the terms for an investment-led recovery. The Bill puts in place the foundations for a fairer and more sustainable tax system. It further enshrines commitments on the environment and the work we are doing to tackle climate change, and it begins the work to rebuild the public finances. For those reasons and more, I commend it to the House.
George Freeman
The hon. Member makes an interesting point that I relish responding to. My praise was for the Treasury in moving at pace to solve and sort a crisis incubated by the last Labour Government in leaving this country deeply vulnerable as a result of a whole series of measures put in place during the Blair and Brown years, not least the smash-and-grab raid on our pensions and the foolish and reckless deregulation. The Treasury moved quickly to solve a crisis, but I am not claiming, at the same time, that the Government of the day were not responsible for incubating that crisis. They are different points.
Jesse Norman
May I remind my hon. Friend of a fact that he will know well? The leverage ratio of the British banking system was 20 times equity for 40 years until the year 2000, after which it went up from 20 times to 50 times in seven years under a Labour Government.
George Freeman
I thank the Financial Secretary for pointing that out. I am tempted to remind everyone that the former Chancellor of the Exchequer and then Prime Minister sold the gold at a record low and various other things, but I shall not be distracted—I simply record that—and focus on this Budget. I will not list all the measures in it, but I want to highlight one or two that the people of Mid Norfolk and I particularly welcome and then highlight three points that we need to think about as we seek to drive a powerful recovery.
I particularly welcome the measures in the Budget for the self-employed, who, in the first part of covid last year, were hit hard. Many of them were living at risk, hand to mouth and on each month’s proceeds, without the stability of a company behind them.
There is also the support for apprenticeships and traineeships. In Norfolk, when the furlough ends, we are expecting to see between 30,000 and 50,000 unemployed. The Government have rightly moved quickly to make sure that a very powerful skills and training pathway package is in place, so that people who have left old jobs that have not survived this accelerated crisis—it has accelerated much of the challenge on the high street—can quickly find jobs in the new economy that we are creating.
I want to highlight the £700 million package for the arts, culture and sport. In particular, we need to support the artists and creative people at the heart of those industries, not just the buildings. It is that genius—that creativity—which is so key to the British instinctive creative spirit, that we need to support. Rather too many of our great artists are working in all sorts of jobs and seeing their artistic careers disappear. We need to make sure that we keep them busy and get them back to work.
On levelling up, I highlight the Government’s phenomenal package of support, rightly making the crisis not just a moment to prop up the pre-covid economy but to drive growth out. The 45 town deals and the eight freeports are genuinely transformational for places such as Teesside that have been left behind by successive Labour Governments, who ought to have been representing them better. There is the move of the UK infrastructure bank to Leeds, the levelling-up fund, the community renewal fund, the Help to Grow for SMEs, the future fund and the substantial commitment to net zero and the green infrastructure that we need for a proper recovery. This was a Budget not just to repair the damage of covid, but to lay the foundations for a more sustainable and sustained economic recovery, creating jobs and opportunities for generations to come. I welcome it particularly for that reason.
That financial package is allied with the extraordinary success of the UK life sciences community, and perhaps at this point I could, as a former life sciences Minister, pay tribute to its extraordinary work. In particular, there are the scientists at Oxford and AstraZeneca, to whom we owe so much, and in Norfolk, there is the work of the Norwich Research Park and the Quadram Institute, which has done pioneering work in some of the genetic sequencing. At the same time, I welcome the work of the vaccine taskforce, led by the redoubtable Kate Bingham, with whom I know the Financial Secretary has a strong working relationship. I am tempted to channel my inner William Hague and remember the time when he commended Yorkshire for having more gold medals in the 2012 Olympics than France. In fact, he went further, saying that Mrs Brownlee had won more gold medals than France in those Olympics, and I do not think any couple has done more for the UK health economy than the Financial Secretary and the head of the vaccine taskforce.
I genuinely believe that this package is responsible, responsive and lays the foundations for a resilient set of public finances. The challenge now is to get the growth that we need from the private sector to build a really sustainable recovery, and I want to turn to that and make three key points. First, if we are really to escape debt—the debt legacy from the crash in 2007-08 and the debt legacy from covid—and to build a clean, green, smart economy, we need not just to get back to ticking over with 2% to 3% growth; to get to 4%, 5% or 6% growth, we will have to be able to host, or incubate, economies growing at 100% a year. That is the key to growth in this economy. We cannot escape debt by building over the whole of the south of England or building over any last rural area around Cambridge. To support growth, we have to make sure that we grow the economies that will grow our economy, building back better one local economy at a time and one sectoral economy at a time. To avoid the boom and bust of the City, housing and retail cycles that have left us in this state, the Treasury is absolutely right to commit to the deep infrastructure investment for tomorrow’s growth sectors. I am delighted that after my short period in the wilderness, the Prime Minister has asked me back to lead his taskforce on innovation, growth and regulatory reform to look at where, as we come out of covid and seek to lay the foundations for this recovery, free from the European Union’s regulatory frameworks but still able to trade with its market, we may be able to strike a blow for bold innovation and regulation for innovation.
I want to highlight some sectors that are growing spectacularly and that, if we were to invest strategically, would help to grow our national economy in the same way. The broader bioscience sector includes not just pharmaceuticals but the bioeconomy sector of food, medicine and energy, and, in particular, areas where those three support each other. In Norfolk I recently sat in a Lotus built at Hethel Engineering Centre that was powered by a Formula 1 low-carbon biofuel made by genetically modified bugs breaking down agricultural waste. That is what I mean by bioscience and the bioeconomy. In this century, it is biology and bioscience that will drive growth globally, just as physics did in the last century and chemistry in the one before. We are a phenomenal powerhouse in the biosciences, and if we invest in that, support it and commercialise it better, we will grow the industries of tomorrow.
Similarly, in nutraceuticals, where pharmaceuticals meet food and nutrition, there is a whole range of new crops that support growth and crops that are drought resistant and disease resistant, such as crops we export to Africa to help drive sustainable development. In biosecurity, and plant, animal and human health, we share much of the genomic sequence with most of the animals that we rely on in our agricultural system. There are huge opportunities for us to breed out susceptibility to disease and traits that will lead to huge suffering. There is a huge opportunity to harness genomics for the benefit of animal welfare, as well as progressive agriculture, in artificial intelligence, in immunotherapy, in space, in biofuels, in carbon capture and storage, and in biodiversity investment. These are huge sectors that this country is poised to grow into substantial industries, creating jobs and opportunities for tomorrow. If we get the regulatory regime for this right, which Brexit gives us an opportunity to do, and, as the Treasury is doing, we invest in the deep infrastructure and create the right commercial environment, I genuinely think that this is a moment when we could unleash a new cycle of growth, so that we look back at this, yes, as a crisis, but also as an opportunity, such that future generations will thank us for getting us off the boom and bust cycle of over-reliance on short-termism, the City, housing and retail booms, and laying the foundations for serious global growth based on technology transfer.
Secondly, from the perspective of rural Mid Norfolk—not 40 miles from Cambridge but at times feeling like 100 miles, or 100 years, from it—the small towns are fundamental. That is why I welcome so much the 45 town deals in the Budget. I hugely welcome all of them and the work that is being done. However, it is vital that as the Treasury launches these funds, we also think about how we can make it easier for the places and communities that have often been left behind because they do not have the resources of a metro Mayor or the big capacity to access multiple Government funds. Somewhere in the mix is a role for what I might call local regeneration corporations—small, fleet of foot, locally place-based public-private partnerships with powers to access money for multiple funds and deploy them over a five or 10-year plan to drive transformational local change and to pull in private finance alongside public. They would have the powers to do some compulsory purchase, to move in quickly and regenerate land left fallow after covid, to embrace some of the opportunities of land value capture and tax increment financing, and to raise infrastructure bonds and finance. Many investors around the world would love to contribute to and have a stake in this British recovery. Many places around our country will not be able to access on their own sufficient finance from the Treasury. We need to make it easy for them to drive local engines of growth that will go on in decades to come, in a similar way to the successes of the London Docklands Development Corporation, the Tyne and Wear Development Corporation and the County Durham development corporation in the ’80s and ’90s, which were so transformational.
Contingencies Fund Advance: Covid-19
Jesse Norman Excerpts(3 years ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Jesse Norman)
Her Majesty’s Revenue and Customs will incur new expenditure in connection with the Government’s response to the covid-19 pandemic in 2021-22.
Parliamentary approval for additional resources of £765,000,000 for this new expenditure will be sought in a main estimate for Her Majesty’s Revenue and Customs. Pending that approval, urgent expenditure estimated at £765,000,000 will be met by repayable cash advances from the Contingencies Fund.
Further requests to the Contingencies Fund may be made as necessary to fund covid-19 activity delivered by Her Majesty’s Revenue and Customs.
[HCWS908]
Tax Policies and Consultations
Jesse Norman Excerpts(3 years, 1 month ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Jesse Norman)
I have today laid before Parliament “Tax policies and consultations—Spring 2021” [CP 404].
The measures set out in this Command Paper will shape the next steps in delivering the Government tax administration strategy, announced in July 2020. The Command Paper also includes a range of important policy announcements and updates which will support wider improvements in the tax system, including on business rates and environmental taxes, as well as measures to drive down non-compliance and enhance simplification.
By announcing these tax measures and consultations separately from the Budget, the Government are seeking to provide greater visibility and transparency for parliamentarians, tax professionals and other stakeholders, in order to increase the overall quality of tax policy and legislation.
Copies of the paper are available in the Vote Office and the Printed Paper Office and at: www.gov.uk/ government/publications/tax-policies-and-consultations-spring-2021.
[HCWS873]
Contingencies Fund (No. 2) Bill
Jesse Norman ExcerptsThursday 11th March 2021
(3 years, 1 month ago)
Commons ChamberRead Full debate Contingencies Fund Act 2021 View all Contingencies Fund Act 2021 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 11 March 2021 - (11 Mar 2021)
Richard Thomson (Gordon) (SNP) [V]
I will be brief. The concerns of Scottish National party MPs over certain covid-related Government procurements are well known and on the record, and we will continue to hold the UK Government to account for them. Nevertheless, whether the new clause is viewed through that particular lens or not, the fact remains that taken on its own terms it would greatly improve scrutiny, oversight and accountability, without creating any disproportionate impact on the Government or the overall efficiency of the spending process. Trying to equate the improvement in process that would result with an attack on business, as we have heard today, is frankly nonsense. It smacks of desperation, and I am certain that that is exactly how it will be seen.
The SNP will be supporting this amendment. If the Government have any care at all for transparency on these matters, and for being able to demonstrate that there is proper stewardship of public funds, there is frankly no good reason for them not to support it as well.
The Financial Secretary to the Treasury (Jesse Norman)
As you will be aware, Mr Evans, clause 1 provides for an increase in capital for the Contingencies Fund. It raises the limit from the standard 2% to 12%, providing a sum of approximately £105 billion for the financial year 2021-22 only.
We are all agreed across the House on the central importance of accountability to Parliament, but it is the Government’s very firm view that new clause 1 is not needed in order to achieve accountability. It is important to say again that supply processes continue to be used in the usual way with expenditure still subject to parliamentary scrutiny and a vote. This Bill simply permits an advance on expenditure that will be included in the main or supply estimates.
Let me set out four points that make this quite clear. First, the Contingencies Fund is about ensuring cash flow, restricting it to urgent services in anticipation of parliamentary provision becoming available and temporary funds required for necessary working balances. It is not additional spending; it is simply a cash advance to be repaid. It does not in any way preclude the scrutiny by Parliament of additional provision sought by a Department through the supply estimates, nor does it preclude the Comptroller and Auditor General from expressing his view on the regularity of departmental expenditure.
Secondly, each and every departmental accounting officer remains fully accountable for expenditure; and, of course, that expenditure will be audited by the NAO in the usual way as part of the annual reports and accounts of each Department. Transparency arrangements for ministerial directions—where they are sought under the requirements of the doctrine of “Managing Public Money”—will also continue in the usual way. Accounting officers are already required to publish any direction that they receive as soon as possible, unless there is a broader public interest in keeping it confidential.
Thirdly, the House has seen throughout 2021 that Departments must notify Parliament by way of a ministerial statement agreed with the Treasury where a commitment will be or has been entered into in advance of supply. I would like to make it clear that the mandatory WMS wording agreed with Parliament and the NAO already distinguishes whether this advance is a new service, new expenditure or simply a cash requirement ahead of a supply estimate.
I remind hon. Members that the Contingencies Fund is not a tool—some hon. Members have made this point—that Ministers can choose to use; it is not discretionary. It is managed entirely by the Treasury, and the accounting officer must ensure that advances are given in line with strict rules agreed between Parliament, the NAO and the Treasury. These rules are set out clearly in the published estimates manual. Every Department makes an application outlining the urgency of their case and how they plan to meet the listed requirement. It is worth mentioning that the NAO also audits the Contingencies Fund accounts, and that includes a full list of advances.
Let me turn to a couple of the points raised by Members in the debate. I did ask for questions on the Bill, but the hon. Member for Luton North (Sarah Owen) somehow found that difficult. She raised another irrelevant issue about public spending. She asked me about my own link. I assure her that I had nothing to do with the awarding of any contracts. As my hon. Friend the Member for South Cambridgeshire (Anthony Browne) pointed out, this is true for Ministers across the Government, according to the NAO.
The hon. Member for Hackney South and Shoreditch (Meg Hillier), who chairs the Public Accounts Committee, made a speech, wonderfully—and I thank her for it—on the Bill. I am very grateful. She asked whether the Bill is rushed through. The answer to that question is no, it is not. It is important to do it, we think, before the beginning of the new financial year. The same Bill was put through in March last year, and so it is here. She asked about Treasury controls. We fully, strongly believe in them. She recommends Ghanaian principles of public finance, but I am not sure I can follow her in that direction.
James Murray [V]
With the leave of the Committee, I will respond briefly to the debate and pick up on some contributions that hon. Members have made. My hon. Friend the Member for Luton North (Sarah Owen) made powerful remarks and drew our attention to how hollow the phrase of the former Prime Minister—that “sunlight is the best disinfectant”—now rings, given how the current Government have behaved. My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) spoke from great experience about the weakness of Parliament in scrutinising Government spending. She set out how the claims of bureaucracy from Government Members are misplaced and that, in fact, new clause 1 is about transparency and accountability. My hon. Friend the Member for Warrington North (Charlotte Nichols) set out clearly the consequences of vast sums being given to companies with no track record of delivery, underscoring why this really matters to people’s lives.
My hon. Friend the Member for Newport West (Ruth Jones) made it clear that the Government should listen and learn from the events of the past year and regain the trust of the public, while my hon. Friend the Member for Bradford West (Naz Shah) highlighted the Government’s shameful record on transparency, value for money and, crucially, the outcome of what is actually delivered. Finally, my hon. Friend the Member for Luton South (Rachel Hopkins) made some critical points on scrutiny leading to better government. She spoke from great experience of why it is so vital that the reporting of written ministerial directions is taken into account so that they can take responsibility for their decisions.
I thank the Minister for his comments, but I was disappointed that he did not use the opportunity to refute or respond to any of the comments about the Public Accounts Committee’s report on Test and Trace. I noted that despite some Government Members having spoken for a second time today, they still did not find time to justify and explain how the spending on Test and Trace has been value for money. The Minister fundamentally failed to address the inadequacy of current scrutiny arrangements, given what has happened over the past year.
As I made clear in my opening remarks, our new clause aims to introduce a new standard of transparency. We believe that it is urgently needed after the Government’s approach over the last year. I am not convinced by the Minister’s argument. I welcome the SNP group’s support for new clause 1 and we will seek a Division on it.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
Question put, That new clause 1 be read a Second time.
Contingencies Fund (No. 2) Bill
Jesse Norman ExcerptsThursday 11th March 2021
(3 years, 1 month ago)
Commons ChamberRead Full debate Contingencies Fund Act 2021 View all Contingencies Fund Act 2021 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 11 March 2021 - (11 Mar 2021)
The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the Bill be now read a Second time.
This is a technical measure that concerns cash management. Its purpose is to allow the Government to use cash advances to act swiftly and decisively to safeguard the people of this country, both from the impact of the covid-19 pandemic and from other unexpected events. But I would emphasise that money from the Contingencies Fund constitutes a cash advance, which will have to be repaid once a Supply estimate is voted through the House; it is not additional spending. It is important to be clear that the House will still be able to scrutinise and debate where resources have been allocated in the usual way when the Government publish the Supply estimates.
As hon. Members will be very much aware, Parliament provides the Government with the authority to expend resources in the form of capital and cash. However, the Government must also sometimes provide a swift financial response to national emergencies and other pressing events. That is why the Contingencies Fund exists. In the Contingencies Fund Act 1974, Parliament put a limit on the amount that could be issued from the fund at 2% of the previous year’s cash spend. That cap has normally proved to be sufficient to meet unexpected and sudden financial requirements, but we are not living in normal times at present, and uncertainty as to the impact of covid-19 has required a degree of flexibility in setting the cap.
As colleagues across the House will recall, a year ago, as the full implications of the pandemic started to emerge, the House agreed to change the limit on the Contingencies Fund from 2% to 50% of the previous year’s cash spend for the financial year 2020-21. That had the effect of raising the amount in the fund from a possible £11 billion to £266 billion. This cash advance has been invaluable to Departments in dealing with the unprecedented events that have been set in motion by the pandemic. In fact, over the past 12 months, requests from the Contingencies Fund have totalled over £210 billion. It has provided the cash for Government interventions to support businesses, to support frontline workers and to pay for the furlough and other schemes. In addition, it has provided the financial firepower to help the NHS through the crisis, and it has funded numerous other measures that have helped to safeguard lives and livelihoods throughout this extraordinarily difficult period. As is the case in every previous year, the fund has also paid out on business-as-usual requests.
This Bill again seeks to adjust the limit on the amount that can sit in the Contingencies Fund for the financial year ending 30 March 2022 to 12% of last year’s cash spend. I will set out the reasoning behind that decision. With the new cap, the amount in the fund will total £105 billion. By contrast, with the 2% cap—the normal percentage limit—the fund would have contained £17.5 billion. That is clearly a substantial sum, and it would be more than ample to deal with spending requirements in the normal run of things.
While the Government will provide Departments with suitable resources for the 2021-22 year, it is prudent to be prepared in cash terms. While the resounding success of the vaccination programme offers us light at the end of the tunnel, it is equally true that we must remain vigilant. The crisis is not over, and therefore the Government believe it is only right to retain flexibility on the amount in the Contingencies Fund. However, given the experience accrued by each Department over the last year in dealing with the virus, we can scale back the limit from 50% of the previous year’s cash spend to 12%. Once again, let me assure Members that the House will still be able to scrutinise and debate where resources have been allocated in the usual way when we publish the supply estimates.
This is a small and technical but important Bill that will allow the Government to deal with unexpected events over the coming year. It provides Departments with a mechanism to respond swiftly and decisively to emergencies and sudden, unpredictable needs so that they can safeguard our public services and support the wellbeing of people across the country. It does not impinge on Parliament’s right to scrutinise and question, but it does underline this Government’s commitment to do whatever it takes to protect lives and livelihoods in order to overcome this virus, and I commend it to the House.
Jesse Norman
I will not detain the House for long. By leave of the House, let me just say a couple of words. I thank all Members who have spoken so far. I thank the hon. Member for Ealing North (James Murray) for the Opposition’s support for this, but I think he was mistaken in relation to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who was making a point about the absence of any person on the Labour Front Bench during the debate. That has largely been a characteristic of this debate so far, and that is a pity. I thank the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) for his recognition of the way in which I and colleagues at the Treasury have leant into the difficult issues he raised in relation to the excluded. That does not bear directly on this debate, but the wider point he makes is welcome.
I am mindful that this debate has featured several contributions from Labour Members that have resolutely failed to engage with the substance of the Bill under discussion, and that is a particular shame. This is a party that talks about proper accountability but simply finds it impossible to exercise that accountability in the Chamber by asking the Minister questions. I hope that hon. Members will do that in the next stage of the debate, so that we can have a proper discussion about this. They have, after all, just had a long period of debate on the Budget in which any of the points they wished to raise—irrelevant to the Contingencies Fund Bill but relevant to that topic—could have been discussed. Instead, they have indulged in cheap and irrelevant political posturing, and that is a particular shame—all the more so as their contributions have had the effect of delaying an important and much needed debate in this House called by the Backbench Business Committee on International Women’s Day.
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).
Contingencies Fund (No. 2) Bill (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a),
That, for the purposes of any Act resulting from the Contingencies Fund (No. 2) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums to be issued out of, or paid into, the Consolidated Fund which is attributable to increasing, in relation to times before 1 April 2022, the percentage specified in section 1(1) of the Contingencies Fund Act 1974 to a percentage not exceeding 12%.—(David T. C. Davies.)
Question agreed to.
Oral Answers to Questions
Jesse Norman Excerpts(3 years, 1 month ago)
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Geraint Davies (Swansea West) (Lab/Co-op)
The Financial Secretary to the Treasury (Jesse Norman)
Once in every Parliament, the National Infrastructure Commission publishes a national infrastructure assessment. The first assessment was launched in July 2018, and the commission operates UK-wide.
Geraint Davies [V]
Wales has 5% of the population but it has had only 2% of the railway enhancement investment over decades, and it has the lowest household income. Given that HS2 will not pass through Wales, will the Minister and the Treasury look very carefully at providing a high-speed rail link between Bristol, Cardiff, Swansea and beyond—over 3 million people live there—in line with the Burns review, to help the agenda for levelling up and connecting the Union, and to give us our fair share of rail investment based on need?
Jesse Norman
I thank the hon. Member for his question. Of course, he will be aware that the benefits of HS2 are not, by any means, just restricted to the cities that are on its route; it is a national project of significance. More widely, Wales has done very well in the last Budget, if I might remind him more generally, with accelerated funding for the Swansea bay, north Wales and mid-Wales city growth deals, money for the hydrogen hub and, of course, £30 million towards the global centre of rail excellence in Neath Port Talbot. What I would say, though, is that of course we do now have a UK infrastructure bank, which will be looking at issues of infrastructure across the country, including in the devolved Administrations.
Tom Hunt (Ipswich) (Con)
Alexander Stafford (Rother Valley) (Con)
The Financial Secretary to the Treasury (Jesse Norman)
Improving transport connectivity across the UK is central to the Government’s levelling up agenda, and local residents across the UK will benefit from upgrades to infrastructure that improve everyday life as a result of the launch of the £4.8 billion levelling up fund. The Government have also maintained their commitment to already announced transport investment through the transforming cities fund and the roads investment strategy, and Budget 2021 confirmed capacity funding allocations for the £4.2 billion of intra-city transport settlements, so that the city regions receiving settlements can develop investment-ready transport plans to deliver on local priorities.
Robert Largan [V]
Politicians of all parties have been promising to build the Mottram bypass for more than 50 years. I am really pleased that Highways England and Balfour Beatty recently signed a contract to build the bypass, and a formal consultation has now been carried out on the detailed proposals, meaning that we are closer than we have ever been before to finally getting it built. Can the Minister assure me that the Government remain committed to building the bypass as soon as possible? The people of Glossop and Hadfield have waited long enough.
Jesse Norman
I thank my hon. Friend for his question. He has been a vociferous supporter of this scheme and I can happily confirm that the Government remain committed to upgrading the A57 so as to improve connectivity between Manchester and Sheffield. The development consent order is on track to be submitted shortly and construction is expected to start in early 2023.
Sally-Ann Hart [V]
Investing in improved transport infrastructure is well recognised by this Government as a necessity for turbocharging our economy and levelling up. Beautiful Hastings and Rye has some of the most antiquated road and rail infrastructure in the country, which discourages new businesses from locating there and inhibits economic growth. Network Rail is currently finalising a strategic business case for HS1. What steps is my right hon. Friend taking to ensure that funding will be available to finance such a vital project?
Jesse Norman
My hon. Friend will be aware that the strategic outline business case for the Kent and East Sussex coastal connectivity scheme includes proposals to extend HS1 services from Ashford International to Hastings and Rye. It is currently being taken forward by Network Rail and is due to be submitted to the Department for Transport in April 2021. It will then be reviewed by the Department and by stakeholders in Kent and East Sussex County Councils.
Simon Jupp [V]
Improving road and rail connections across all four nations of the UK will improve the quality of life for our communities and I am really looking forward to seeing the Hendy review this summer. However, there is no doubt that it will take the aviation sector longer than most to recover from the crisis. Taxes, including air passenger duty, need urgent reform to help the industry to get back on its feet. What plans does the Treasury have to remove the double charging of domestic air passenger duty, a call backed by regional airports including Exeter in my constituency and Newquay, which particularly rely on domestic flights to all corners of the United Kingdom?
Jesse Norman
The Treasury is committed to consulting on aviation tax reform. As part of that, we will consider the APD treatment of domestic flights. Unfortunately, the consultation has been delayed in recognition of the rather challenging circumstances that the aviation industry is currently facing, but we will update the House on this in due course.
Alexander Stafford [V]
Car ownership in Maltby in Rother Valley is lower than the national average and buses provide a vital lifeline. However, our services are severely lacking. You cannot get a direct bus between Maltby, my largest town, and Dinnington, my second largest town and, if you do take public transport, that five-mile journey takes almost an hour. What fiscal steps is my right hon. Friend taking to ensure that communities in Rother Valley are linked up, so that those without cars have the same opportunities to be economically active, to get to and from jobs and even to go shopping as those with cars?
Jesse Norman
It is no secret that bus services are close to the Prime Minister’s heart. The Government have committed to improving bus services and since the start of the pandemic have supported operators with more than £1 billion of funding, as well as with £120 million at the spending review for the delivery of new zero emission buses. The national bus strategy is due to be published soon and will start to set out this wider ambition. I am also pleased to note that Budget 2020 allocated £166 million to the Sheffield city region from the transforming cities fund to support local transport investment, including bus infrastructure.
Abena Oppong-Asare (Erith and Thamesmead) (Lab) [V]
To deliver transport connectivity in every part of the United Kingdom, we need long-term investment in infrastructure but, staggeringly, the OBR analysis reveals that the Chancellor has cut capital investment plans by half a billion pounds since last March. The Budget also made no mention of Northern Powerhouse Rail and slashed the Transport for the North budget by 40%. Can the Minister explain why the reality of the Budget on infrastructure investment is so far from this Government’s rhetoric?
Jesse Norman
I do not recognise the figures the hon. Lady has used at all. The facts are that this Government published the “National Infrastructure Strategy” in November, which set out plans for £300 billion-worth of public investment over the next few years, as well as supporting £300 billion of private investment. Since then, the Chancellor has announced the new UK infrastructure bank, which will further support the development of infrastructure and levelling up, and the development of our green infrastructure across the UK.
Mary Kelly Foy (City of Durham) (Lab)
Yasmin Qureshi (Bolton South East) (Lab)
The Financial Secretary to the Treasury (Jesse Norman)
The Government have announced that the self-employment income support scheme will continue until September, with a fourth and a fifth grant. This provides certainty to business as the economy reopens and it means that the self-employment income support scheme continues to be one of the most generous covid-19 support schemes for self-employment income around the world.
Andrew Gwynne [V]
That is welcome for those who qualify for it, but a year ago it was the Chancellor who said that he would do “whatever it takes” to protect people. There are still millions of self-employed people without any support since this crisis started and they will not forget that either. It is untenable. Why will Ministers not finally act and do whatever it takes to ensure that this important sector of the economy also has the chance to succeed post the pandemic?
Jesse Norman
I thank the hon. Gentleman for his question. Of course, we have put in place £407 billion-worth of support across the whole of the pandemic, which is an astonishing level of support for a very wide range of businesses and people across the country. In relation to the self-employed, he may not be aware, but I have bent over backwards to engage with different groups of the self-employed. Repeatedly, across different meetings, we have looked with the greatest care at the proposals that they have put forward to bring in people who may not be able to qualify at the moment. As the Chancellor mentioned, 600,000 people previously ineligible may now be eligible, including those newly self-employed in 2019-20.
Yasmin Qureshi [V]
The Government may well throw these figures about, but we know that 3.8 million self-employed people have had no financial support throughout this whole pandemic. Freelancers, small companies and other people across Bolton and this country want the Chancellor to recognise the fact that his continued silence is just not good enough.
Jesse Norman
In mentioning Bolton, the hon. Lady somehow neglected to mention the £22.9 million-worth of towns funding that Bolton has recently received. I thought that she might kick off with that. The answer that I gave was perfectly clear about the matter: we are bending over backwards to support people. We have leant into this issue as hard as we can and we will continue to do so.
Mr John Baron (Basildon and Billericay) (Con)
Greg Smith (Buckingham) (Con)
The Financial Secretary to the Treasury (Jesse Norman)
What a fantastically niche question from my hon. Friend, and how delighted I am to be able to answer it. He will know that scoring is a matter for the OBR. As the Budget policy costings in the Budget 2021 document set out, the costing for corporation tax has been adjusted to reflect behavioural responses to an increase in the rate of corporation tax. It is important to be clear that dynamic scoring can include a number of potential behavioural responses, such as adjustments to reflect the impact on the incentive to incorporate, on profit shifting, and on investment. If he is so minded, he can find further detail on page 196 of the OBR’s “Economic and fiscal outlook”.
Paul Blomfield (Sheffield Central) (Lab) [V]
Income Tax
Jesse Norman Excerpts(3 years, 2 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the draft Major Sporting Events (Income Tax Exemption) Regulations 2021, which were laid before this House on 11 January, be approved.
The draft regulations before us provide an income tax exemption for accredited non-resident individuals who perform duties or services in the UK in relation to the rescheduled UEFA Euro 2020 final tournament. The exemption will apply to any income that an individual receives for duties and services performed in connection with the UK-hosted matches of the final tournament between specific dates in June and July 2021.
The Euros 2020 final tournament ranks second only to the World cup in prestige in the world of football. From 11 June this year, the world’s attention will focus on this tournament, which will be held across 12 European cities as part of the celebration of the tournament’s 60th anniversary. In particular, there will be matches hosted at Wembley stadium in London and Hampden Park in Glasgow, as 24 nations compete to be the champions of Europe.
I am sure that hon. and right hon. Members will be aware of the Government’s commitment to making the UK an attractive location—perhaps the most attractive location for football—in which to host world-class events. Successive Governments have provided income tax exemptions for major sporting events of this kind. Following the success of the 2012 London Olympic and Paralympic games, which showcased the UK’s ability to host major events, statutory tax exemptions have been provided for other world-class events, including the 2013 and 2017 UEFA Champions League finals, the 2014 Glasgow Commonwealth games and the 2017 World Athletics championships. I am confident that Members across the House will agree that it is in keeping with Government policy to provide a similar exemption for this exceptional event.
The draft regulations make use of the powers introduced in the Finance Act 2014 that enable the Treasury to make regulations providing for an income tax exemption in relation to a major sporting event. As the UK continues to be at the forefront of hosting world-class events, I would like to emphasise that the policy conditions, as they are described in the Treasury, for providing a tax exemption are the same as those that have been applied for previous events.
Mr Deputy Speaker, you will be aware that a tax exemption is reserved only for the most exceptional events, with consideration on an event-by-event basis. In order to be considered for a tax exemption, an event must satisfy three conditions: it must demonstrate the highest level of world sport; it must be internationally mobile; and the granting of the exemption must be a necessary condition of a bid to host the event. I am positive that the House will agree that the UEFA Euros final tournament falls well within those criteria.
If I may, I will turn to the details of the regulations. An exemption from UK income tax will apply to non-resident players, officials and certain other UEFA-accredited individuals in respect of income arising in connection with the UK-hosted matches of the final tournament. The exemption will apply to income arising from duties and services performed in the UK between 1 June and 13 July. That allows for 10 days before the event commences, so that the exemption can cover any duties performed in connection with the matches held in the UK, such as advance planning or training camps.
The income tax exemption for the 2021 Euros supports our commitment to make the UK a global leader for world-class major sporting events and demonstrates what we can achieve across the breadth of the UK. I am sure that these regulations and the objective they serve will enjoy cross-party support. I hope colleagues will therefore join me in supporting these regulations, which I commend to the House.
Jesse Norman
It is testimony to the unifying quality of football as a game that we can have such a unanimity of view across the different nations of this country. I thank the hon. Member for Ealing North (James Murray) for the Opposition’s support. I also thank the hon. Member for Glenrothes (Peter Grant) for his and his party’s support; I am not going to comment on the relative order in the finals between England and Scotland, but we shall see. I thank very much the hon. Member for Strangford (Jim Shannon), who asks if we will consider a few more days of relief. I thank him for his question. He has put it on the record here in Parliament, and we will of course give it consideration.
It is a great sadness to me personally that it is unlikely that the England team will feature any members of the Hereford FC team, now making their way triumphantly towards the finals—I hope, in due course—of the FA trophy, but I can say that Members of this House will, I hope, have the joy of seeing players of the quality of a Kane, a Rashford, a Mount, a Calvert-Lewin and a McTominay. With that, I hope that we can all have a fantastic tournament, ably supported by our tax system.
Question put and agreed to.
Finance Bill 2021
Jesse Norman Excerpts(3 years, 2 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
The Finance Bill will be published on 11 March. Explanatory notes on the Bill will be available in the Vote Office and the Printed Paper Office and placed in the Libraries of both Houses on that day. Copies of the explanatory notes will also be available on gov.uk.
As usual, a full copy of the Budget resolutions will be made available after the Chancellor’s Budget statement on 3 March. This includes resolutions made under the Provisional Collection of Taxes Act 1968 for those measures that are expected to come into effect ahead of Finance Bill Royal Assent.
In line with the approach to tax policy making set out in the Government’s documents, “Tax Policy Making: a new approach”, published in 2010, and “The new Budget timetable and the tax policy making process”, published in 2017, the Government published draft legislation for Finance Bill 2021 on 21 July 2020 and 12 November 2020, which is available on gov.uk. The Government remain committed to legislating those measures published in July and November 2020, subject to confirmation at Budget in the usual way.
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Double Taxation Convention: United Kingdom and Sweden
Jesse Norman Excerpts(3 years, 2 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
A protocol to the Double Taxation Convention with Sweden was signed on 23 February. The protocol will give effect to certain OECD/G20 base erosion and profit-shifting recommendations that protect tax treaties against avoidance activities, ensuring that the UK’s double taxation agreement with Sweden meets the minimum OECD/G20 recommended standards. The text of the protocol is available on HM Revenue and Customs’ pages of the www.gov.uk website and will be deposited in the Libraries of both Houses. The text of the protocol will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
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