Finance Bill

Kirsty Blackman Excerpts

Tuesday 12th September 2017 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I am grateful for the opportunity to speak in the debate on behalf of the Scottish National party. The SNP submitted a reasoned amendment to the Finance Bill because we believe that it is a wholly inadequate response to the economic challenges faced by Scotland and the UK. Our reasoned amendment is on the Order Paper, but it has not been taken, and I have noted that.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The hon. Lady will, I hope, be aware that the amendment was not selected, so it should not be debated. I am sure she will want to return to the main business of the House.

[Kirsty Blackman]

I thank you for that, Madam Deputy Speaker. I just wanted to briefly mention that we did table the amendment, but I will not debate it. You will be happy to know that it is not part of the substance of my speech.

As the hon. Member for Bootle (Peter Dowd) mentioned, the House gave a Second Reading to the European Union (Withdrawal) Bill last night. That Bill, the Government tell us, is intended to transcribe EU law into UK law so that there will be minimum fuss on the day the UK leaves the EU, but it fails pretty miserably. The UK’s position is that the UK will leave the customs union, the single market and arrangements for freedom of movement. The economy of these islands will suffer as a result, but the UK Government have not taken that seriously in the Finance Bill, or at any other stage so far.

This Finance Bill derives from the most muddled of processes. The business that comes through this House is pretty difficult to understand and chaotic at times, but this Bill has been one of the most impressive examples. We had the Budget back in March, and the original Finance Bill was published on 20 March. I remember that because it was my birthday, and receiving a Finance Bill was a wonderful birthday present—I was delighted. The Second Reading of that Bill was on the day when the Prime Minister, in her wisdom, announced that she was calling a general election, so she upset a fair few of her colleagues that day, as well as making the debate slightly different from how it was supposed to be.

The further stages of that Finance Bill were a complete and total guddle. Then we had the election, and the Government lost their majority. We have ended up with this bodged-together Bill, based on the remains of what was put forward back in March. My concern is that by the time Third Reading of this Finance Bill comes round, we will be about eight months from the Budget that created it. That is an incredible length of time, and I can prove it.

I draw the House’s attention to some of the assumptions made in the March 2017 Budget. First, let us look at the Office for Budget Responsibility predictions for inflation—Members should remember that the Finance Bill is written on the basis of those predictions, as well as other measures. The OBR predicted that the quarter 1 figure for inflation would be 1.9% and that the quarter 2 figure would be 2.4%. Actually, the quarter 1 figure was 0.2% higher, at 2.1%, and the quarter 2 figure was 0.3% higher, at 2.7%. That means that the money people have to spend is going less far than was predicted in March—the things that people buy are getting more expensive.

At the spring Budget, the OBR had predicted that average earnings would grow by 2.9% in quarter 4 of last year and by 3% in quarter 1 of 2017, but they actually grew by only 2.8%—1.1% less—in quarter 4, and by 2.4%—0.6% less—in quarter 1. That means that people have less money to spend on goods, which we have already said are more expensive.

Perhaps most tellingly, though, the OBR predicted that real household disposable income would drop by 0.2% in quarter 1 of this year. In fact, it dropped by 1.4%—by significantly more than the prediction on which basis the measures in this Finance Bill were created. As I said, that shows that people have less money to spend. Folk are feeling the squeeze, and the situation is worse than was predicted by the OBR when these Budget measures were written.

I spoke on behalf of the SNP on Third Reading of the previous Finance Bill. I would add, for Conservative colleagues, that only four people spoke in that debate, and one quarter of them were from the SNP, so it is grand that Conservative Members are taking the moral high ground today, but they did not pitch up for the last debate. When I ended my speech then, I said:

“I hope that in the next Parliament, the new Government will recognise the financial impact of Brexit on household budgets and jobs. I hope we see real changes that take into account the effects of Brexit.”—[Official Report, 25 April 2017; Vol. 624, c. 1056.]

So far, I have been completely disappointed.

In Scotland, our Government have recognised the combined impact of inflation and wage stagnation, and we have committed to removing the public sector pay cap. That is part of the reason why we voted with the Labour party on termination payments. We do not feel that now is the time to be squeezing people’s incomes further and to make such changes, and we will be looking to scrutinise them in Committee.

[John Redwood]

Is the hon. Lady aware that there was also a sharp upward spike in inflation in Germany and the United States of America, and that the main underlying cause was, of course, energy prices and world commodity prices?

[Kirsty Blackman]

It frankly does not matter what the inflation figures there were. What matters is that people here are feeling the squeeze, that people here are finding that things are more expensive, and that people here are finding that their wages have not gone up. That is the concern; that is what we are discussing here.

On the subject of investing, our programme for government in Scotland involves creating a national investment bank to support economic growth and to invest in business research and development. We hope to channel finance where it can do the most good. The Government here have the national productivity investment fund. We are still not entirely clear where all that money will be spent and how it will be spent, and I look forward to seeing what will happen. I hope that the UK Government can look at similar measures to the ones the Scottish Government are looking at in relation to the Scottish national investment bank, which will ensure that investment and economic growth are in the right places.

[Stewart Hosie]

Would it not be better for this Government, instead of allocating spending into the next Parliament, to spend that money now and invest in something like a national investment bank so that they and other bodies will have the ability to mitigate the damage a hard Brexit will cause?

[Kirsty Blackman]

I agree with my colleague. Given the uncertainty that businesses are facing and their concerns, now is the time to make those decisions and to try to raise the confidence of businesses. This is a real issue, and one that the Government have dodged.

When we debated the Ways and Means resolutions, I mentioned the proposals on museums and galleries, which are in clause 21. I raised the fact that the Value Added Tax (Refund of Tax to Museums and Galleries) (Amendment) Order 2017 has not, as far as I am aware, been laid yet. On 17 July, in response to a written question from my hon. Friend the Member for Glasgow Central (Alison Thewliss), the Government said that that would happen as soon as possible, but as far as I am aware the motion has not yet been tabled. If the Minister gets the chance later, I would very much appreciate it if he said when he does plan to lay the order, because that would be very useful for museums and galleries.

[Alison Thewliss (Glasgow Central) (SNP)]

I have asked some questions about this. My hon. Friend will be aware that organisations such as the Glasgow Women’s Library have had extensive refurbishment work done to their properties, and the VAT refund they can claim will mean quite a lot to small organisations that have made investments in their facilities.

[Kirsty Blackman]

I thank my colleague for that intervention, and I note that the Minister is paying attention.

[Mel Stride]

I think it is the case that that statutory instrument has been laid today, but in the event that it has not, I will chase it up.

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[Kirsty Blackman]

I very much appreciate the Minister taking that action. I thank my hon. Friend the Member for Glasgow Central for her tenacity in repeatedly bringing this matter to his and to my attention.

I need to flag up the issue of carbon capture and storage. I have already said that the way in which this Finance Bill has been produced has been a complete guddle. The issue of carbon capture and storage highlights the very worst of the UK Government’s Treasury and how it has behaved in the past. Because the Treasury and the previous Government went, in effect, above the head of the Department of Energy and Climate Change, the £1 billion ring-fenced budget that was in place was pooled with no warning, and carbon capture and storage was left dead in the water. The Scottish Government have recognised the importance of carbon capture and storage to our future energy strategy, and they are providing money to explore the possibility of reviving the project. It is really important that Scotland prioritises projects such as this and that they proceed. This is one of the clearest examples I can remember of the Treasury completely ignoring advice from officials and, indeed, from Ministers. I hope that this Treasury makes different decisions from those of the previous Treasury and moves forward in a more collegiate manner. Particularly because this is now a minority Government, the Treasury can no longer behave how it likes and get away with it. It needs to talk to people and listen to their answers.

Last time I spoke about this, I mentioned the provisions in clause 64, which is about errors in taxpayers’ documents. I raised with the Minister my concern that people will lose out as a result of employing somebody who they think is qualified to help with their tax return, but is in fact not qualified. I was not clear—I am still not clear from this Bill—about exactly how the process will work and whether people will be unduly penalised for something that was not their fault. I look forward to exploring that matter further in Committee with the Minister. I hope that he has heard what I have said and will provide appropriate responses.

This would not be a proceeding on a Finance Bill if I did not bring up the issue of VAT on police and fire services. In its first three years, Scotland’s police force paid £76.5 million in VAT. Highways England, a national body, does not pay VAT. London Legacy, a national organisation, is exempt from VAT. The Tories must now reverse their damaging imposition of VAT on police and fire services, which uniquely applies only in Scotland.

I am looking forward to the Committee stage of this Bill so that we can debate in detail the Government’s lack of action on squeezed households. Whatever happened to the Prime Minister’s support for “just about managings”? Conservative Members talk all the time about how they are reducing inequality and what a great thing that is, but I want to mention the median income for non-retired households—that sounds incredibly technical. In 2007-08, the median income for non-retired households was £28,817. In 2015-16, the figure was lower: £28,481. These stats are from the UK Statistics Authority. It is all well and good for Conservative Members to say that household income is rising, but the income of working households is not rising, and it has not risen for the best part of a decade. That is why people feel like their incomes are squeezed. It is why people are looking at their bank balances and worrying whether they can afford to pay the bills at the end of the month.

[Ross Thomson (Aberdeen South) (Con)]

The hon. Lady says that we have to protect the income of hard-working households, yet although the First Minister had made a promise not to increase basic rate income tax, she now, in her programme for government, talks about increasing it, which will hurt the very people whom the hon. Lady is talking about protecting.

[Kirsty Blackman]

I do not think that the hon. Gentleman read the programme for government very well—he might want to go and have another look at it.

This Finance Bill is derived from a Budget that did not have inclusive growth and fairness at its heart. If the Chancellor wishes to increase productivity, he could do more to ensure that people receive fair pay for the hours that they work. He could do more to ensure that any growth in the economy is spread equally and that those at the bottom of the pile get a leg-up, as well as those at the top of the pile. He could properly tackle the precarious economic position that young people find themselves in. He could remove the inequity in VAT for police and fire services in Scotland. Lastly, and most importantly at this time, he could fight against a hard Brexit that drags us out of the single market and the customs union.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call Mr Mark Harper.

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[Kit Malthouse]

That is a very good and broad point, and I could talk for a long time about it—[Hon. Members: “Go on.”] I wish. It is definitely my perception, and the evidence certainly shows, however, that the operation of capital is becoming more and more sluggish across the western world.

As I said earlier when I mentioned those top 500 companies, capital is incredibly sluggish, particularly in the EU. In this country it has long been said that that is partly the fault of the housing market, in which so much private capital is tied up because we like to own our homes. In other countries, such as Germany, where that is not the case, capital may be more dynamic, and there may be more capital for investment. Whatever the problem—and we think there is a problem—Governments have a role in unlocking and lubricating the capital that is out there.

I think that both the enterprise investment scheme and the small enterprise investment scheme are good and worthy. Over the last couple of years, however, I have been pressing for them to be deregulated so that it becomes easier for people to invest, and they will not need an accountant, a lawyer and pre-approval from the Revenue to achieve—in the case of the EIS—modest tax reliefs and benefits in the future. We need a scheme that recognises the quasi-charitable nature of giving. I would like to see a system in which people who invested in a business would receive 100% tax relief up front, and then, if they ended up owing capital gains tax, would pay the tax. That would be a nice problem to have. When I have started my businesses, the last thing on my mind has been whether there is any capital gains tax to pay. What has been mostly on my mind has been raising the money, getting going, paying the staff, finding an office, and all the rest of it. I think that such a system would be simple, easy and understandable, and would encourage a great deal more investment in the drugs, therapies and technologies that we need for the future.

The Government have a patient capital review on the cards. It kicked off about a year ago under the chairmanship of Damon Buffini, who, as Members will know, is one of those much benighted private equity guys, and I shall be pressing the Government, hopefully, for its conclusion quite soon.

The second thing that we must bear in mind about the signal that we send with the change in dividend taxation concerns young people. We have talked a good deal about home ownership for young people, but their ability to access assets in general is something that should trouble us all. Those assets include shares. It might be a good idea to give young people an incentive by suggesting that it would be beneficial for them to build up small share portfolios. The Government will say, quite rightly, that they can start individual savings accounts, and of course they can. Dividends are tax-free in an ISA, and given that the ISA allowance rose to £20,000 a year in April, it is possible to accumulate huge amounts of money. The problem with ISAs, however, is that most people hold significant amounts of cash in them. There is no limit to what can be held in a cash ISA, and far too much money in ISAs is held in cash rather than being invested in the productive economy. People should be sent signals that they should be investing in companies.

[Kirsty Blackman]

Is not the problem that young people do not have enough money to save, rather than not enough different methods of saving? There is a lack of money in the system. Wages are not rising and inflation is increasing, and young people cannot afford to save because they are spending too much on rent and they are in precarious jobs.

[Kit Malthouse]

As I have said, part of the problem is related to housing. However, the Government have made huge strides in trying to increase the take-home pay of the lowest paid. There is the rise in the personal allowance, which will increase even further. There is the national living wage, which has raised wage rates altogether. There is the apprenticeship scheme, which is giving young people a route to higher-paid jobs by giving them more and more skills. There are plenty of things that can be done.

There will be no overnight solution, but once the Government manage to move young people up the income scale, and as they get older and more money accretes to them, we should encourage them to think about saving—not just about home ownership but about saving for their futures. We are doing that in the case of pensions: through auto-enrolment, we are making employers responsible for instilling in young people the idea that they should be joining pension schemes. I am trying to think in decadal terms about the signals that we send about the operation and dynamism of capital in this country. Unless we start planting some acorns now, we will not have oaks to sell in 20 or 30 years’ time, as we have been able to do in the case of all the companies that have been founded in the last couple of hundred years.

The second issue that the Bill raises in my mind is the nature of the tax system in general. This Finance Bill is incredibly thick for what is actually a relatively short Bill, because the complexity of it is incredible. In some of its measures, the Government are rightly closing loopholes, such as through the disguised remuneration rules, and when we look at them we suddenly realise that our tax system has become a game of 3D chess, whereby the Government are engaged with business and individuals in a constant cat and mouse game around what has become a Byzantine system that is choking economic growth and development and distracting entrepreneurs and others far too much from their day-to-day work of creating wealth and jobs. Most small businesspeople I know spend far too much time on compliance costs, with taxation regulations, and this Bill illustrates that in no uncertain terms.

The Bill also illustrates that it is going to become ever harder for the Government to tax the new economy. We have heard talk today of the fourth industrial revolution, and even in my working lifetime of 20-odd years the nature of work has changed almost completely, as has the way we work. My business is almost entirely cashless. There are vast corporations that operate without cash, and that trade in one jurisdiction, fulfil in another jurisdiction, bank the money in a third, and pay tax in a fourth. Chasing this money around, combined with this incredibly complicated system, is going to become harder and harder. Part of the reason for this Bill, as the Minister said, is to maintain the sustainability of the tax base. The Government are worried that it is getting away from them; it is like a wild horse straining at the leash or reins, and galloping off across the field given half a chance. [Interruption.] Leash or reins; I do not know what we hold a horse with.

All of this means that we are going to have to do some pretty heavy fundamental thinking over the next couple of decades about the way we tax. We often talk about how much we tax, but rarely talk about how we tax. How are we going to tax these enormous corporations that are bigger than nations? How are we going to make it fair between them and small businesses? How are we going to tax a changing economy of individuals, who might have four, five or six different jobs, with somebody in this country perhaps performing a job in another country, but doing it digitally? All of these matters raise questions, and it is perhaps becoming harder to tax in a direct way and easier to tax in an indirect way.

I have talked in this House before about the notion of getting rid of business rates— which are biased against small businesses, and certainly small retail business on the high street, and which favour the massive internet companies—of getting rid of corporation tax, which is hard to collect and for which compliance is not great, and of thinking about moving to an easy, collectible turnover tax. A huge company like Amazon, which is completely electronic and totally cashless, could pay its turnover tax every day: at the end of the day it knows how much money it has made, and the computer can tell how much tax there is and transfer the money across to the Government. That would be an enormous win.

The advent of the cashless society means it is much easier to track people’s turnover, and to take that little clip that the Government want to pay for all the services we need. In time—perhaps not in my political lifetime, but in the future—we might even move to a situation where there are no direct taxes on individuals, and where tax becomes voluntary, with people paying it as part of their spending, in the form of indirect taxes through VAT, duties and so forth. Certainly that is the tax that those at the lower end pay; the only tax those who earn less than £11,000 will pay is indirect, such as VAT, which they pay voluntarily when they spend. These are the broad themes we are going to have to think about over the next couple of decades if we are going to be able to raise the money to pay for the services the country rightly needs.

While welcoming the Bill, therefore, I would like the Minister, certainly as the Budget approaches, to think in decadal terms about the foundations we need to create now for a sustainable tax base and a vibrant economy for the future.

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[Colin Clark (Gordon) (Con)]

I rise to welcome the Finance Bill and to recognise the success of this Government’s financial policy, and I am delighted to follow the eloquent speech of my hon. Friend the Member for North West Hampshire (Kit Malthouse). Opposition Members often endeavour to play down the United Kingdom’s economic success—three million jobs have been created nationally since 2010—but my constituency has blazed a trail in the north-east of Scotland. In Gordon, which is to the north-west of Aberdeen, unemployment is at 1.6%, which is up from 0.8%, but the past few years have been painful for the big north-east employers: the oil and gas industry and the service companies that support it. Many jobs have been lost in the sector, and particularly hard hit have been the people who live elsewhere in the UK, but the green shoots of recovery are beginning to show. I am sure the Minister will join me in welcoming Oil & Gas UK’s economic report, which shows that confidence and investment are returning.

I have visited the European offshore oil and gas exhibition, which is on the boundary of the Gordon constituency. The hon. Member for Aberdeen North (Kirsty Blackman) had to point out to me that it was being held just inside her constituency, but she is welcome to visit the new £400 million Aberdeen exhibition centre, which has been built in my constituency. The exhibition displays a showcase of many Aberdeenshire and Aberdeen-based companies, and the technology is breathtaking. The sector has made it a priority to be outward-looking, exporting equipment and skills to wherever there is oil and gas and, increasingly, renewables. It is imperative that oil and gas are at the heart of the Government’s industrial strategy and at the top of their fiscal priorities.

A key part of our recovery is attracting investment to the UK continental shelf, and Oil & Gas UK recognises that the UK’s fiscal policy puts it in the top quartile of places to do business. Coupled with competitive corporation tax and attractive levels of personal income tax, companies and skilled professionals are choosing to operate in the UK. I thank my right hon. Friends the Members for Forest of Dean (Mr Harper) and for Wokingham (John Redwood) for highlighting the oil and gas industry in their speeches. The Government’s fiscal policy is key to the continued prosperity of many areas in the UK that depend on oil and gas. Without a raft of attractive tax policies, we would risk a brain drain, and the oil industry moves rapidly, so the availability of facilities and skilled employees is essential. It is therefore disappointing that the Scottish Government’s empty property rates policy has led to the tearing down of properties in my constituency.

[Kirsty Blackman]

I do not know whether the hon. Gentleman has seen the Finance Secretary’s announcement today about the Barclay review, but it would be a good idea for him to have a look at it, particularly the part about property rates for new empty properties.

[Colin Clark]

I welcome that intervention. Considering how long I have been sitting here, I will have to read it after I have left the Chamber.

The UK oil and gas industry employs 300,000 people—largely well-paid workers who contribute to the Exchequer. It underpins a highly skilled workforce and invests vast amounts in training and R and D, such as at the centres that the hon. Lady and I have visited. I ask the Minister to look closely at the tax history of oil assets, their transferability, how that will affect decommissioning and how best to promote the UK to be decommissioning experts for offshore oil and gas.

SMEs are the bedrock of the UK economy, and, like my hon. Friend the Member for North West Hampshire (Kit Malthouse), I am a businessman and must declare an interest here. At £200,000 a year, the value of the annual investment allowance is significant for small to medium companies. Instead of the spending that the Opposition would have us do, the allowance encourages investment, leading to more jobs, and it is important that the Treasury concentrates on investment in our economy. I ask the Minister to consider widening the AIA to include facilities, potentially creating local construction jobs.

Finally, whisky is a mainstay of the Scottish economy and probably the most popular export—very popular in the bars of this House. My constituency is home to several distilleries and, along with the rest of the north-east of Scotland, produces malting barley, but the constituency of my hon. Friend the Member for Moray (Douglas Ross) clearly takes the title of having the most distilleries. Perhaps the Minister will look fondly on the whisky and spirits industry when sampling Scotland’s greatest export, so I have a suggestion: if I invite the Treasury team to partake of the distilleries in my constituency and in those of my hon. Friends the Members for Moray and for Banff and Buchan (David Duguid), perhaps the Finance Bill will not be so painfully long.

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[Jack Brereton (Stoke-on-Trent South) (Con)]

There have been a number of excellent and informed speeches today by Conservative Members and I am very pleased to follow my hon. Friend the Member for South Thanet (Craig Mackinlay).

Owing to the economic policies of the Conservatives, we have seen our national economy and the economy in Stoke-on-Trent South prosper. Nationally, the International Monetary Fund has upgraded the growth forecast to 2% from 1.5% and we have got Labour’s crippling deficit under control, having cut it by two thirds. However, we must complete the job to get our finances fully back on track. Labour’s plans would only lead to the deficit doubling. Labour would spend more than our constituents can afford and re-inflict the misery of its financial crisis on our constituents.

We must continue to build on the recovery of our economy by creating jobs and opportunities for the people of my constituency and by helping businesses to create better quality jobs. We have already seen 3 million more jobs nationally, many of them in areas like Stoke-on-Trent. An all-time record 32 million people are now in work nationally. That was never seen in Stoke-on-Trent under Labour. We had years of Labour Members and Labour Governments being elected to this place, and what did we see for it? Nothing—only more debt, more people unemployed and more people subjected to years of misery.

The Conservatives believe in aspiration and the ability of individuals to achieve and prosper. We help those who are just about getting on and we provide the support they need to achieve. What we are seeing in Stoke-on-Trent South is that the Conservatives are starting to address the legacy of decline left by Labour. We Conservatives have been helping businesses and making work pay. That has been key to our economic recovery in Stoke-on-Trent, as it has been nationally. Rather than leaving people dependent on benefits, as Labour did for so many years, we are ensuring that an increasing number of people are in jobs. There is growing employment and prosperity.

Instead of a life on benefits, there is now a living wage, which is improving people’s quality of life. The national minimum wage has been increased from £5.93 in 2010 to £7.50 today. That is a 26% increase. That change to the minimum wage has added £3,200 per year to the gross wages of someone in full-time work on the minimum wage since 2010. At the same time, the top 1% pay 28% of all income tax—more than was ever seen under Labour—and income inequality is at a 30-year low. That has incentivised more people to get into work and stay in work. No longer are people better off out of work and on benefits than in work. That, in turn, is reducing the pressures on our national welfare bill and helping to get our deficit under control.

The median tax bill in Stoke-on-Trent South fell from £2,000 to £1,520 between 2011 and 2015. That means that, on average, workers have more than £500 more in their pockets than when Labour was in power.

[Kirsty Blackman]

As I said earlier, median household disposable income has not increased; in fact, it is lower than before the financial crash. We have had 10 years of no increases in real household disposable income. The hon. Gentleman cannot say that just because people’s tax has been reduced, their disposable income has increased. That is not how it works.

[Jack Brereton]

This is about keeping more of the money that people earn in their pockets, rather than it going into taxes.

It is a huge success that there are now more families in which parents are working, ensuring that our children and future generations have examples to look up to. It is a shocking indictment of Labour’s failures in government that so many children were living in households where no one went to work. We are doing more to support working families. We are increasing the amount of free childcare to 30 hours per week for three and four-year-olds, as well as introducing 15 hours per week for disadvantaged two-year-olds. The success we have seen is due to Conservative Governments’ financial policies. That is no more evident than from the enormous reductions in unemployment in my constituency.