Finance (No. 2) Bill

Debate between John McDonnell and Christine Jardine

2nd reading
Tuesday 16th November 2021 Commons Chamber

[John McDonnell]

I raised in my Budget speech the lack of confidence in the Government’s commitment to levelling up overall and even to defining what it means, and I mentioned the importance of the need for a bit of levelling back because of the scale of the cuts that have been endured over the past 11 years.

I make the general point that there is currently a level of insecurity and uncertainty, and a questioning of politics overall and of whether the people can trust any politician. I thought that with a Budget and a comprehensive spending review the Government would at least be able to set out their plans and bring forward the measures in the Finance Bill so that we would at least know where they are going, which might give us some security or confidence that the Government at least have some sense of direction. I do not think it is there—it is certainly not in the Bill. We can take some humour from this situation. The Chancellor certainly led with his chin in respect of the proposals to cut the bankers’ levy and the tax on flights and champagne. No one could blame the shadow Front-Bench team coming forward and taking the rise out of what was quite obviously a bankers’ Budget.

Let me comment on a number of the key issues that have been raised in the debate so far. If the Budget was about the end of austerity, high skills, high wages and so on, the Bill flies in the face of all that. The hon. Member for Glenrothes (Peter Grant) talked about how people have been treated in respect of other announcements; how can the Government argue that the Bill is about high wages when they are freezing tax bands, introducing national insurance increases and cutting universal credit? All those things hit earners.

Something fundamental at the heart of this Bill—it was at the heart of the Budget, too—is the Government’s refusal to take on the imbalance between the taxation of wealth and the taxation of earnings. We have seen it in the Government’s setting out of proposals some time ago on reforming capital gains tax but their failure, yet again, to do it in this legislation. Given that the argument over the need to ensure that we tax on capital and wealth as well as on levels of earnings has been won, the proposal that I thought would be in this Bill was to ensure that taxation on earnings and on capital gains were brought into line. The amount that that would bring in to the Government was initially recalculated at £14 billion, but I see that the TUC’s figure is £17 billion. That could have resolved the issues in social care. That would have ended austerity for large numbers of our population.

The Government argue that, in the Bill, they are doing something about the taxation of earnings from dividends, but it is negligible in comparison with what is needed and it sends out a similar message that they are willing to penalise earners, but, at the same time, allow others who earn their money from wealth to walk away.

The reason that the bank levy offends is not just that it is going back to the days of the crash and the scurrilous role that the banks played in enabling that to happen—the profiteering at all our expenses; it is because what the banks have is the best insurance policy in the world. It is an insurance policy, backed up by the UK Government, that no matter what they do, no matter how much they fail, they will never be allowed to fail because the Government will always step in and bail them out. An additional levy was placed on the banks to make sure that they paid something back from the crash, and also that they paid something in return for the guarantee that they were given. What we find now is that the amount that they have paid so far does not even pay off some of the damaging costs that fell to taxpayers as a result of their wild speculation that brought about the crash.

One matter that has been raised in the debate—the Exchequer Secretary has also mentioned it—is that of tax reliefs and the extension of the annual investment allowance. I can understand why the Government have done that, but what I cannot understand is why they have done that as well as introduce the super deductions. The Government’s argument is that 99% of the business investment that is undertaken will be covered by the annual investment allowance, but to then go on and give a super tax deduction of 130% flies in the face of that argument. If we look at the record of tax reliefs, most of which, historically, have never been reviewed by the Treasury, we see that they mount up year after year, decade after decade. Some of them go back nearly a century, but they are never reviewed, and that is often with scandalous effect. On the entrepreneurs’ allowance, even the Government had to accept that that was an abuse of an allowance. People were walking away with large amounts of benefits without in any way demonstrating their entrepreneurial skills. It is the same with the patent box.

Let me now come to the tonnage tax. I have been lobbying on that now for nearly 15 years. The tonnage tax was introduced by John Prescott—by the way, I hope that all of us will send our best wishes to him in the hope that his recovery from the severe stroke that he had is going on apace—as part of a strategy to revive British shipping. The purpose of it was to give a tax allowance to shipping companies so that they would then employ more UK seafarers, and employ them on a decent wage as well. Year after year, we argued about it with the Government—the Labour Government got into this one as well. Large amounts of money were going to these shipping companies, but the jobs were not appearing. In fact, we were losing UK seafarer jobs. Seafarers were largely being recruited from abroad, and in some instances were not even being paid the minimum wage. The tonnage tax was linked to the training of officer cadets, not ratings, and a limited number of officer cadets were recruited by the shipping companies. As a result of lobbying—I was there in a meeting with the Minister—we did get a bit of flexibility, whereby if a company was not recruiting officers, it was able voluntarily to recruit ratings and still qualify for the tax.

Let me just explain to the House the tonnage tax figures. The tonnage tax was introduced in 2000-01. Its cost—£2.165 billion. How many jobs do hon. Members think have been created, that we know of, for £2.165 billion? Does anyone want to intervene with a figure? All we know about, on the record, is 75; that is £28 million a job.

[Christine Jardine (Edinburgh West) (LD)]

Almost as good as they get!

[David Linden]

That’s about as much as Geoffrey Cox gets!