Budget Resolutions

Debate between Jonathan Reynolds and Gregory Campbell

Wednesday 6th November 2024 Commons Chamber

[Jonathan Reynolds]

I ask the right hon. Gentleman to look at the detail of our plans. From the data held by the Treasury, we can plan for how many firms will be affected, and it is a very small number. In most cases, given the existing inheritance tax nil-rate band, especially where property is involved or where there is a transfer from one spouse to another in the inheritance chain, the allowance is so great that it is already considerably in excess of the average claim for relief in this area.

The right hon. Gentleman is talking about a very small number of firms at the very large end. I think the revenue can be raised in a way that protects the kind of family firms he and I want to see continue to thrive. We all know there are cases where, for instance, people advertise the sale of agricultural land or certain types of investments specifically to avoid inheritance tax, which is not right. That is not good for business. We have to recognise that these fair and proportionate changes will pay for the last Government’s spending commitments. The changes will always have a benchmark for international competitiveness, in a way that the right hon. Gentleman should recognise rather than scaremonger.

At the Budget, as a statement of intent for our new industrial strategy, we saw the Chancellor make the first of many down payments with multi-year funding commitments for these areas of our economy. There will be significant tax relief for our world-leading creative industries, up to £0.5 billion for a brand-new life sciences innovative manufacturing fund, and nearly £1 billion for our aerospace sector to fund vital research and development into jet zero technology, which will boost industries in the east midlands, the south-west and Scotland. There is also £2 billion for our automotive sector, ensuring that the next generation of electric vehicles are designed, developed and built right here in the UK.

At the same time, we recognise that our industrial strategy’s success rests upon working in partnership with mayors and multinationals, councils and CEOs, unions and academics. That is why this Government are championing local growth plans—growth plans for the long term—to be delivered by strong local political leadership, which will work together with the Government to create the right conditions for success.

Crucially, our new industrial strategy will be international from the start, taking learnings from the best of what has been achieved globally so that we enable businesses of all sizes and sectors to thrive in our market. To that end, it will work in lockstep with our trade strategy and our twin-track approach to trade, acceding to the comprehensive and progressive agreement for trans-Pacific partnership and negotiating deals with the Gulf Co-operation Council and India, all to the benefit of British business.

Unlike the previous Administration, we are also making it much easier for UK firms to do business in and with Europe. Although the Opposition might not want to hear it, the EU is not just our closest trading partner but is still our largest trading partner, by quite some margin, yet the previous Government’s adversarial approach to working with the EU—all that incendiary rhetoric—was not conducive to good business. We are changing course, aiming to remove unnecessary barriers to trade, so that British companies will be able to operate more easily in France, Germany, Italy and across Europe.

We are making real progress. Earlier this month, the Prime Minister and the President of the European Commission issued a joint statement to deepen our co-operation on the economy, energy and security. We have agreed to regular EU-UK summits to strengthen our connections in all those areas, including the close business and investment ties that connect our economies.

[Mr Gregory Campbell (East Londonderry) (DUP)]

On the sectors that will benefit, does the Secretary of State agree that the hospitality sector would benefit more from some honesty and openness? The Government announced a 6% increase for people on the minimum wage, many of whom are employed in the private hospitality sector, but while our constituents will pay for that, the Treasury will benefit by hundreds of millions of pounds, because almost all those minimum wage earners will become taxpayers overnight.

Finance Bill

Debate between Jonathan Reynolds and Gregory Campbell

Committee: 1st sitting: House of Commons
Wednesday 11th October 2017 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I thank the Financial Secretary for introducing this group. This is an important debate, not only for the future of Northern Ireland, but for this country’s overall approach to taxation and devolution.

We know—we have discussed it frequently throughout this process—that our country faces a substantial tax gap. The official estimate of the UK’s tax gap is at least £36 billion, up from £33 billion in 2010, but that is at best a conservative estimate, given that the Government’s definition of the tax gap excludes convoluted corporate structures, which we know are used by multinationals to minimise their tax liabilities. The view that the tax gap is underestimated is shared by the Institute for Fiscal Studies and the Public Accounts Committee. I think that we all agree that that £36 billion, and possibly more, is money that should be used to fund our public services, and that everybody should pay their fair share.

Corporation tax is an important part of the UK’s tax revenue. In 2016-17, HMRC collected £56 billion in corporation tax receipts. Although it is important that we keep the rate competitive, particularly in the light of the UK’s exit from the European Union, it is worth noting that we face a law of diminishing returns in this regard. At 19%, the UK’s corporation tax rate is already one of the lowest in Europe. We should be confident that we do not need to plunge the rate to rock bottom in order to encourage businesses to invest and domicile here. The UK plays host to a wealth of resources that enable it to be globally competitive, including our legal system, our language, our time zone, our infrastructure, our regulatory bodies and, most of all, our people.

It is equally important that Northern Ireland is equipped with the tools to compete in that international landscape, as has been brought to the fore recently with the punitive tariffs aimed at Bombardier in the United States. As the Financial Secretary has explained, the corporation tax rate has already been devolved to the Northern Ireland Assembly, through the Corporation Tax (Northern Ireland) Act 2015. Now that that legislation has been decided, it is for Northern Ireland’s politicians to work together and use those powers to see where the line lies between a lower tax rate and the broader appeal of Northern Ireland as a business destination. At present, the decision has been that 12.5% best achieves those ends. It is not my intention to revisit those arguments today, and nor would it be appropriate to do so, given the reasons already outlined.

What is relevant, and the reason Labour has proposed new clause 2, is the relationship between that rate and the rest of the UK. The gap between 12.5% and 19% represents a significant potential for arbitrage between Northern Ireland and the rest of the UK. Some businesses might base their decisions on where to domicile purely with regard to taxation, and that is a risk that we accept—indeed, we already compete with the rest of Europe on that basis. Our concern is that the Government are introducing measures that could be exploited by companies that will seek to abuse the proximity between Northern Ireland and the UK simply to divert profits and benefit from a lower tax regime, which would benefit neither the UK nor Northern Ireland.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Gentleman spoke a few moments ago about the importance of competitiveness throughout Europe. Does he agree that the argument that he is making runs counter to the attempts to make Northern Ireland’s private sector business more competitive, when we have a difficult relationship with the Irish Republic and its very low corporation tax, which he has alluded to?