Finance Bill

John McDonnell Excerpts

Report stage & 3rd reading
Monday 24th May 2021 Commons Chamber

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

I have to say that my right hon. Friend the Member for Barking (Dame Margaret Hodge) has eloquently put forward the case for these proposals, both those from the Opposition Front Bench, which I fully support, and her own, but I think she has been too kind to the Government. Like her, I have sat for over two decades listening to the sophistry from Conservative Ministers explaining the various complications of doing anything to tackle tax avoidance, and they have been dragged kicking and screaming to take what little action there has been. I have also sat here year on year while they argued that cuts in corporation tax were the way to increase investment. Now, at least, they have admitted that they were wrong on that.

However, instead of cutting corporations’ taxes by cutting corporation tax, they are now simply doing it through the super deductions. These are super tax deductions to super tax avoiders. We can name them: Amazon, Vodafone, Virgin, Starbucks and many others. I sat in the Chamber when the global crash happened over a decade ago, and we discovered the intricate corporate structures that the banks used to avoid their taxes—the shell companies based in tax havens from the Channel Islands to the Caribbean. Barclays bank had more than 100 subsidiary companies located in the Cayman Islands alone. As these corporations became increasingly financialised, they became increasingly unprincipled about paying their dues to society.

I have tabled a simple amendment saying that super deductions should not go to companies that are failing to fulfil their duty as taxpayers in our country and that are using tax havens. The reason is simple: these corporations benefit from the workers they employ, and the taxes are needed to pay for their education and training. It is ironic that we are also often using our tax system to subsidise the low pay that these corporations pay their employees. They also benefit from the infrastructure. That is why they should be paying their way within our country itself.

In this struggle over the last 20 years or so, it is worth paying tribute to those who have campaigned so hard: my right hon. Friend the Member for Barking and all those activists, academics and journalists. I pay tribute to groups in the UK such as: Tax Justice Network; UK Uncut, which took direct action; Tax Justice UK; and those journalists and researchers who helped to expose the Panama papers and the Paradise papers. One of those journalists was the Maltese investigative journalist Daphne Caruana Galizia. She was assassinated in 2017 for the work she did to expose tax avoidance and money laundering.

My new clause 22 is very straightforward: no company should be eligible for the tax reliefs in the Bill if they are located, or have subsidiary companies located, in tax haven jurisdictions. The most authoritative list of tax havens or secrecy jurisdictions is the European Union’s blacklist of non-co-operative jurisdictions for tax purposes. That should be the basis of our approach. We are outside the EU now, so we must go further. Subsection (2) gives the Secretary of State powers to list additional jurisdictions that do not co-operate in disclosing information to Her Majesty’s Revenue and Customs. In this way at least we can ensure that we are not, in effect, acting as subsidisers for tax avoiders or laundering tax reliefs into their coffers. It is a simple amendment.

I support the Labour Front Bench amendments and the other amendments that would have a similar effect, but I have had enough. I am sick to death of sitting here listening to excuses from Ministers about failing to act when so much needs to be paid through a fair taxation system. So many of our constituents are having to endure continuing austerity because of the lack of tax revenues. They are living in poverty, unfortunately, as a result of the failure to have a fair taxation system that redistributes wealth in our country.

[Danny Kruger (Devizes) (Con)]

I rise with great enthusiasm for the proposals set out by the Government, in particular on the super deduction. We heard from my hon. Friend the Member for Wimbledon (Stephen Hammond) about the benefits that super deduction will bring to tax receipts eventually and to growth in the immediate term for our national finances.

I want to talk quickly about a benefit that will be felt locally in Devizes. I spoke today to the boss of Wadworth brewers, the brewers behind the legendary 6X and Bishop’s Tipple, with which you will be familiar, Madam Deputy Speaker. They are not tax avoiders, as the right hon. Member for Hayes and Harlington (John McDonnell) just described them; they are local employers who drive growth and employment in my constituency. They will use the super deduction to invest in more buildings, more jobs, more brewing and more beer in Wiltshire, and I am absolutely delighted to welcome the proposal on their behalf.

There is a real problem that the super deduction proposal seeks to address, which is that, sadly, low corporation tax has not driven the sort of private sector investment we need. I therefore support the rise in corporation tax, which will be imposed on profits on the biggest firms. We live in a topsy-turvy world where we see Joe Biden proposing 15% corporation tax, the Labour party proposing 21%, and my Conservative Government proposing 25%. I recognise the value of that, however: we have to pay the bills of the pandemic somehow and I appreciate that this is the right way. We will still have the lowest corporation tax in the G7. That will make us, with the super deduction and the other measures that have been set out, the best country in the world in which to invest and to bring a business.

Let me finish by stating my support for the world-leading efforts the Government are making to ensure that big tech pays its fair share of tax. We have just heard from the right hon. Member for Barking (Dame Margaret Hodge) that she thinks we should back Biden. I think we should back Britain. We should back what this country and this Government are doing to lead the debate on fair taxation. The key challenge for us is to ensure that the tax that is gathered through whatever global agreement we can make is paid in the right places; it would be a bit of a shame if we achieve a global minimum tax that was all paid in California. I welcome what the Government are doing, and I look forward to the Minister’s response and to the announcements that I hope will be forthcoming ahead of the Cornwall summit. I absolutely back everything the Government are doing through this Bill.

--- Later in debate ---

[John McDonnell [V]]

I am glad you are sitting down, Madam Deputy Speaker, because I do not want to shock you. I want to see if we can try something different tonight. Let us try and undertake some rational policy making. Let us try and base policy on evidence, shall we?

I have tabled a number of amendments—Nos. 24, 25 and 26—as a humble seeker after truth, basically, because I do not think the Government have made the case for freeports. I also think that the risks of this policy are huge. It could accelerate tax avoidance in this country on a massive scale and cause economic damage to the neighbouring areas of freeports. We are shovelling huge tax giveaways to corporations and developers for, as far as I can see, literally no return to society.

In its analysis of the Chancellor’s Budget, the Office for Budget Responsibility said of freeports:

“Further details have been announced in the Budget but came too late to be incorporated into our forecast.”

The OBR have therefore not made a comment—we await it. Freeports were not assessed by the OBR. However, it is not just the OBR that does not know the answer about the effects of freeports; neither do the Government. My hon. Friend the Member for Oxford East (Anneliese Dodds) asked the Treasury on 16 March what estimates it had made of the total annual cost of tax reliefs granted to the freeports. The Chief Secretary to the Treasury replied on 22 March to say—rarely have I seen this from a ministerial response—that

“it is not appropriate to comment on estimates at this stage.”

This is in the middle of policy making! He continued:

“they will therefore be scored at a future fiscal event.”

Therefore, what we are being asked to do tonight is sign off a blank cheque that will be filled in at a later date.

This is just irrational. Shoddy policy making on this scale is becoming all too familiar with this Government, but this is a bit of a shocker. It is just not good enough, so it would be really useful if tonight the Minister took us through the answers to a few simple questions. What are the annual costs of the proposed tax reliefs when the freeports are set up? What is the estimate of increased economic growth that will come from them? What is the estimate of increased job creation stimulated by the freeports? What is the estimate of increased tax revenues to the Exchequer as a result of this policy? And, to reinforce that, where is the evidence? If there are answers to those questions, where have they come from? Have they been independently assessed?

We are asking questions about the future, but we should look back, because this is not a new policy. Those of us who have been in the House a while—and that does not take long—can recognise this as a rebranding of the enterprise zones policy that the Conservative party wheeled out in the 1980s under Michael Heseltine and also in the last decade, when George Osborne fronted it up. Let me remind the House what the Public Accounts Committee said in May 2014. Its report was pretty damning about George Osborne’s enterprise zones, describing them as “particularly underwhelming”. The Committee criticised the Government for over-optimistic claims about job creation. The job numbers did not materialise—it is as simple as that. The Centre for Cities think-tank found that the jobs that were created were “overwhelmingly low skilled” and therefore low paid.

Enterprise zones were not just a disaster; they raised people’s hopes and shattered them in many areas around the country, and in many ways led to some of the disillusionment with politics and Government overall. Tax breaks for corporations in underinvested areas just does not make an industrial strategy. My view is that the Government should be investing, but in a planned upgrading of the infrastructure of this country, not making areas fight for scraps in this form of pork barrel politics.

The Conservatives’ strategy of tax breaks for developers and big business as a way of stimulating growth failed in the 1980s and again in the 2010s, and it risks failing again in the 2020s. The Government are asking us all to take a leap in the dark, and having twice before witnessed that leap in the dark, I think the result will be the same—it will be failure. I know that a number of Members, including some Ministers, have said it will be different because of Brexit and claim that being outside the EU gives greater freedoms than were available to enterprise zones, but if that is the case, why can they not quantify them and put that evidence in front of the House, in some form of rational policy making? The UK Trade Policy Observatory, based at the University of Sussex, has pointed out that as UK import tariffs are already low, any further tariff reduction would

“have next to no benefits”.

I am pleased that Labour’s Front-Bench team is behind new clause 25, which my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare) moved eloquently, as it is welcome. If passed, it would at least have the effect of creating a robust framework for the House to assess the success or failure of freeports policy, but surely no Members of this House who consider themselves to be serious, rational policy makers can vote for something like this proposal, which is so lacking in any evidential base.

[Jacob Young (Redcar) (Con)]

It is a pleasure to follow the right hon. Member for Hayes and Harlington (John McDonnell), although he will forgive me for not taking any economic advice from him. He talks about economic assessment with no sense of self-awareness that he was the man responsible for the 2019 Labour party manifesto. I believe I am the first Member to speak who shall represent a freeport area, so, on behalf of the people of Teesside, may I say thank you to the Government for designating us a freeport zone?

I wish to speak against new clause 25, which would only delay the implementation of our new freeport policy. I direct Members to my recently updated entry in the Register of Members’ Financial Interests, as a member of the new—currently shadow—Teesside freeport board. If we consider the intentions behind new clause 25, we will see that they are ones that Teessiders know all too well. Labour never wanted our new freeports, despite them being in places such as Redcar and Cleveland, Middlesbrough and Hartlepool, places that Labour used to say it cared about. True to form, new clause 25 is the Labour party in desperation to see our freeport policy fail, so that it can simply say, “I told you so.”

The same attitudes were shown in Labour’s position on the EU referendum, and the people of Teesside have already shown them how they feel about that. Our new freeport in Teesside will create 18,000 jobs over the next five years, and since the freeport designation in the Chancellor’s Budget, we have already seen the announcement of more than 2,000 jobs coming to Teesside, with GE picking Teesside as the destination for its new wind turbine blade manufacturing, supporting the Government’s plan for a green industrial revolution. Adding more bureaucracy, form filling and complications through new clause 25 would only delay those new jobs and prevent us from getting on with the task at hand, which is the transformation of Teesside.

In Redcar and Cleveland we are proud of our area’s industrial heritage and the vital role the steelworks and foundries have played in the past, providing those raw materials to build the railways, ships and bridges that were once the envy of the world, and in many cases still are. The fires in our furnaces were the beating heart of the industrial revolution, and now with hydrogen, wind power and carbon capture all promised and planned within our freeport zone, it will be Teesside’s innovation and technology that leads our green industrial revolution.

When Labour lost Hartlepool, the front page of The Northern Echo held a column from a former Labour MP saying that Labour needs to listen. Well, now would be a good time to start, but instead, here we are again, with the public supporting our freeport policy and Labour voting against it. Labour Members may not want any election advice from me, but I have some for them anyway: stop dwelling on problems and start looking to the potential and to solutions. Stop standing in the way of our freeport policy and work with us to make it a success. Stop talking Teesside down and start helping us to turn it around, and vote against new clause 25 tonight.

--- Later in debate ---

[Catherine West (Hornsey and Wood Green) (Lab)]

I rise to speak briefly in support of Labour’s new clause 24. We are often told, are we not, that the boldest measures are the safest. Unfortunately, the Government seem to have done a bit of a U-turn, or failed to be bold, going from a promised 3% to 2% on their non-residence surcharge. That is a hugely missed opportunity. It could really have helped the London property market, holding to account the wealthy as opposed to so many of those who struggle to get on to the property ladder.

I also want to talk about the register of overseas entities. First, I echo the words of my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier), who talked so movingly about those in housing need in her constituency. That is something that many of us in London see, day in, day out, in our surgeries. In my case, I think of particular companies that, after properties are built, purchase a number of different apartments, selling them, for example, to the far east. Even people who have saved and saved cannot afford to purchase an apartment in that block, as opposed to those who buy an apartment to hold as an investment, even keeping it empty at a time when we have such desperate housing need. The Treasury should consider clamping down on this practice.

On the wider point that this measure could address if it were not so shy, consideration should be made of the cost of assets and the fact that the huge inflation of assets does not help savers or the young. There are so many young people in desperately insecure employment who will never get on to the housing ladder unless we start to address this terrible situation. We also know that with low interest rates it is almost impossible to save the amount of deposit that is needed. The Help to Buy scheme, which in some parts of the country has worked quite well, has not worked particularly well in many of our neighbourhoods. It simply has not been able to touch the sides of what is needed.

The second point I want to make on the amendment on the register of overseas entities is, once again, how disappointing it has been that we have failed to hold to account those abroad who seek, for various reasons, to hide their financial interests in the UK. We look at this in the context of the Sunday Times rich list from last Sunday, where we see 24 new billionaires in the UK while 4.3 million children in the UK are living in poverty. That desperately needs to be addressed, yet it is five years since David Cameron first promised, when he appointed his anti-corruption tsar, to actually do something about corruption and overseas finance. Instead we have this go-slow, whether on having proper credentials for registering businesses at Companies House, on some of the measures in the Bill or on going from 3% to 2%. Who stands to benefit from that? It is not our constituents; it is people abroad who clearly have some kind ear of the Government. That desperately needs to be addressed.

Having read Catherine Belton’s book “Putin’s People”, I hope the Minister is able dispel my fear regarding its allegation that £1 million has gone to the Tory party from Mr Temerko, who is a very wealthy Ukrainian businessman. That money is tied to a corrupt regime where the courts will do the bidding of the Government in Russia. That money is tied up. We should not be beholden to these people; we should be standing up to them.

I also want, while I am talking about the register of overseas entities, to comment briefly on the terrible situation with Belarus in the last 24 hours. The Treasury needs to be much more campaigning. I know that working for the Treasury is all dry facts and figures, but look at how important its work has been in saving our economy and saving our workers. Well, let us now look at how revolutionary it could be in holding to account some of the corrupt regimes that have their money tied up in London’s economy. Will the Minister look at whether he can work with the Foreign, Commonwealth and Development Office to bring forward sanctions against state-owned enterprises—some of which continue to have UK subsidiaries, such as BNK UK, which is the UK arm of the Belarusian state oil company—and outline how the Government can plan to stop the Belarusian Government from using the London stock exchange to raise money and sustain Mr Lukashenko’s grip on power? Furthermore, how can the Treasury, working together with the Foreign Office, examine the evidence for further sanctions against individuals who support and help to sustain the regime, such as Mr Mikhail Gutseriyev, who was mentioned today in the urgent question? I hope that the Treasury will work together with the FCDO to right this wrong.

Finally, a statistic to finish these few words. Despite the sanctions imposed last year by the Foreign Secretary, with which I agree, there are fewer Belarusian entities sanctioned now than in 2012. Only seven entities are currently designated, compared with 32 under EU sanctions in 2012. In the space of 12 months, this dangerous regime has stolen an election, employed brutal repression against its own people and hijacked a civilian airliner. I feel as though our economy is facilitating that, and we simply cannot let that pass. I beg that with the mention of the overseas register, the Treasury will work hand in glove with the FCDO to bring these people to book, and to establish a genuine and committed economy that, at its heart, cares about human rights.

[John McDonnell [V]]

We are at a stage in the Bill’s progress that is almost like a wash-up. We are trying to make last-minute appeals to the Government for action on a number of key issues, and all the appeals to the Government so far by the right hon. Members for Haltemprice and Howden (Mr Davis) and for Chingford and Woodford Green (Sir Iain Duncan Smith), my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier), the hon. Members for Brighton, Pavilion (Caroline Lucas) and for Richmond Park (Sarah Olney) and others are on worthy causes that should be addressed, as are the amendments from the Labour Front Benchers.

We must remember the context of the Government’s surcharge policy. It was to spike the approach that the Labour party was making about a levy on overseas ownership, on exactly the grounds laid out by my hon. Friend the Member for Hackney South and Shoreditch about the desperate need for housing and to prevent housing from being used continuously as an investment asset for profit, rather than to put roofs over the heads of our families. I wholeheartedly support and welcome all those appeals, but even if with my Catholic upbringing I believe in the powers of conversion, I somehow doubt we have been able to convert the Minister to a sufficient level for him to accept the amendments. I hope to be surprised, but I doubt it.

I tabled amendment 23 not in the hope of converting the Conservative Government, but to enable me to express justifiable anger about the Government’s approach. The Government are attempting to legislate for a real-terms pay cut that will affect millions of low-paid workers through the freeze in the tax threshold. Those include many of my constituents who have had to make ends meet on 80% of their wages for much of last year. Yesterday—this has already been referred to—it was galling to see the other side of the coin. The Sunday Times rich list showed that during the pandemic more billionaires have been created in the UK than at any time in the past 33 years. The levelling-up policy that appeared last year was the levelling up of millionaires into billionaires.

The Chancellor should have used the occasion of the Budget and this Bill to level up capital gains tax to income tax rates, for example. It cannot be right that we tax work more than we tax income from wealth. Ahead of the Budget it was rumoured that the Chancellor was considering equalising capital gains tax and income tax. That would have been a much fairer way of raising revenue than increasing taxes for people on low and average wages, which the Government’s proposals on tax thresholds will do.

Child poverty has been mentioned, and in my constituency 42% of children are growing up in poverty—a figure that has sadly increased each year since 2015. Child poverty is often a consequence of low pay. The majority of children living in poverty in my constituency live in working households. We should be doing everything we can not just to protect but to boost the incomes of the low paid, not drag them into taxation or increase the taxes on them. The Bill will cut the income of someone working full time on the minimum wage. We know that 2 million workers rely on universal credit to top up their low pay, yet in a few months, the Government are going to cut universal credit by £20 a week.

Poverty has been rising in this country, and whether it is the £20 cut to universal credit, the stealth tax in the Bill, or this year’s paltry increase in the minimum wage, the Government’s actions will increase poverty still further, and increase suffering as a result. My amendment would ensure that the tax thresholds for the personal allowance and the higher rate were kept in line with inflation, as per the Income Tax Act 2007. I tabled it because I wanted to draw attention not to Labour party policy but to Conservative party policy, because in the last general election the Conservative manifesto pledged:

“We promise not to raise the rates of income tax”.

The manifesto continued:

“This is a tax guarantee that will protect the incomes of hard-working families across the next Parliament.”

I just hope that Conservative Members will have the good grace at least to acknowledge that clause 5 of the Bill breaches that pledge, and that incomes are not protected. More of people’s incomes will be hit by income tax, and that is especially harsh on the millions of public sector workers who now face from this Government a pay freeze, a 5% rise in council tax and now this stealth tax rise on their income tax.