Finance (No. 2) Bill

John McDonnell Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab) [V]]

Budgets and their associated Finance Bills give practical meaning to the political aims of Governments. Manifestos and the rhetoric of party-leading Members and eventually the Queen’s Speech are the mechanisms used to describe the society that the governing party aims to construct, but it is its Budgets and its Finance Bills that are the tools by which the foundations of that society are laid. What we can discern from this Finance Bill is that, despite all the rhetoric from the Prime Minister, and all the personalised, personally signed social media promotions by the Chancellor, the society they want to build back to and to return us to is, in essence, the same pre-covid society of insecurity and inequality that left us so vulnerable to the pandemic.

I have heard the Prime Minister and the Chancellor claim that we have only been able to meet the demands of a pandemic because of the so-called strength of the pre-covid economy, so it is worth reminding ourselves what the pre-covid economy was like. Some 4.2 million of our children were living in poverty—30% of children in this country. Rough sleeping had more than doubled. Food banks were handing out 1.5 million food parcels a year. Nearly a million people were working on zero-hours contracts. Going into this pandemic, the NHS had suffered the longest funding squeeze in its history and there were 100,000 vacancies, including 40,000 nurse vacancies. Social care was even worse, with £8 billion taken out of social care budgets since 2010 and, according to Age UK, 1.5 million of our older people not getting the care they needed. The existential threat of climate change was effectively ignored, with the Government hopelessly off target to secure even the modest goal of net zero emissions by 2050.

We cannot stand by and let this Government return us to all that. If this Finance Bill is to have any relevance whatsoever, it must address those issues, but also the impacts and challenges presented by the pandemic, which has exacerbated many of those issues of the pre-covid economy.

Unemployment is forecast to hit 6.5% this year. Introducing the furlough scheme without conditions enabled fire-and-rehire employers to cut wages and conditions of employment. Low wages and inadequate sick pay have resulted in around 750,000 households being behind on their rent or their mortgage, and millions more are behind on basic household bills. With the eviction ban ending on 31 May and, realistically, no action on debt from the Government, we risk a surge in evictions leading to more homelessness.

Public services remain stretched, in many areas to near breaking point, getting through only by the commitment and dedication of often underpaid and still undervalued staff. Half of all care workers earn less than the living wage—the real living wage. As my hon. Friend the Member for Ealing North (James Murray) said from the Front Bench, the Government clapped for our key workers, yet now they are rewarding millions of them with a pay freeze or an insulting 1% rise. Inequality was rising before the pandemic, and the pandemic has only widened it.

The Government’s response, contained in this Finance Bill, has nothing to do with building back better. Some have suggested that, because the Government have been forced by the pandemic into large-scale spending and borrowing and corporation tax rises are now mooted, the Chancellor is implementing the policies advocated by Labour in its 2019 manifesto. Nothing could be further from the truth. It is not the rhetoric that is important; it is the substance. Without structural change in our economy that fundamentally shifts the balance of power and wealth in favour of working people, our society will simply replicate the inequality and injustices of the past.

This Finance Bill demonstrates that it is largely the same old Tories and the same old Tory policies taking us back—building back, but not better for the many. If we look at the evidence from the Budget and in this Bill, far from addressing the mounting poverty in our society, the Government are not only cutting universal credit but freezing the tax thresholds of the low paid and doing nothing for those who do not even earn enough to reach the threshold.

On low pay, the Government have already failed to meet George Osborne’s much-heralded target of a minimum wage of £9 an hour by 2020, and they are imposing a pay freeze on many of the very people who have helped to see us through the pandemic. To compound that disregard for people struggling to get by on poverty pay, there is also nothing in the Bill that discourages employers from using brutal fire-and-rehire tactics to force through permanent wage cuts.

The timings of the Bill’s tax proposals betray the reality of the Government’s attitude to inequality. The Bill pushes through a tax threshold freeze for low and middle earners but delays corporation tax increases, which there is already speculation could be dropped in a pre-election giveaway to business at some stage in the future. Plus, the Bill contains no action to fulfil the much-publicised proposals to equalise the rate of capital gains tax with income tax. The Government have talked about levelling up, but Tax Justice UK’s analysis demonstrates that 1,600 of the wealthiest Londoners made more in capital gains than the entire north of England. Instead, the Bill proposes super deductions tax reliefs—a huge giveaway of £25 billion to large corporations.

As we have debated in this Chamber, tax reliefs have a long history of corporate abuse and failure to meet their stated objectives. I remind Members of the cross-party debates we have had on the issues around the entrepreneurs allowance, the patent box and the tonnage tax, to name just a few of the allowances that have failed to deliver and been open to abuse. Unless legislative protections are put in place, there will be huge opportunities for tax abuse and waste, and a level of corporate looting that could make the billions at stake in the crony contracts and the Greensill scandal look like chicken feed in comparison.

Similarly, previous track records demonstrate that the Bill’s proposals for freeports will, unless strictly regulated, open up a vista of tax abuse, wage undercutting and the drainage of investment from surrounding regions. It cannot be right that the Government’s freeports will be in place before the Office for Budget Responsibility has done any assessment of their merits. As Tax Justice UK has pointed out, the Treasury does not even have confirmed costs for this policy, despite the Government already announcing the eight freeport sites.

Also, nothing exposes the vacuity of the Bill more than its real failure to address the existential threat of climate change with firm action. There is nothing in the Bill that dictates this priority and the scale of investment and action needed to address the crisis of climate catastrophe that we now face. If there is one thing that people have maybe begun to learn in recent months, it is that the promises of the Prime Minister and the policies of the Chancellor do not generally coincide either with reality or, as some have alleged, with the truth.

This Finance Bill evidences starkly the level of corporate capture of this Government. This is a Finance Bill for the corporations, not the people. Before the much-heralded corporation tax rises ever happen, corporations will be compensated with huge tax reliefs, including the massive £25 billion tax giveaway to corporations paid for by tax rises on working people. At the same time, £15 billion of cuts each year in departmental budgets will continue the austerity that has undermined our public services over the last decade. So, far from building back better, this Finance Bill lays the foundations for widening inequality and continuing a low-pay, insecure work economy, complemented by huge potential for tax abuse and with crony capitalism virtually embedded in our economy.



The test of the Government’s purpose in the Bill will be their attitude to the amendments that will be inevitably be tabled to protect the lowest paid from the stealth tax increases of threshold freezes; to ensure that tax reliefs are not used as methods of tax abuse; to make unearned wealth taxed at the same rate as income from work, as was proposed by the Government; and to prevent ministerial interference, tackle low pay and exploitation and ensure that responsibilities to tackle climate change are upheld. From their attitude to those amendments, we will see whether this Government are a Government for the people or, as I suspect, a Government for the corporations.