Finance Bill

Lord Tunnicliffe Excerpts

2nd reading & Committee negatived & 3rd reading
Tuesday 8th June 2021 Lords Chamber

[Lord Tunnicliffe (Lab)]

It is nice to rise to a few cheers. I am almost the penultimate speaker and there must be a sense of relief.

Let me begin by thanking the sub-committee of the Economic Affairs Committee on its report on new powers for HMRC. I must say that there was little surprise when the committee identified a number of shortcomings in how the Government had gone about their work in recent years. The report raises concerns that will sound familiar to many: the questionable timing of announcements, somewhat odd prioritisation of workloads and the often relaxed attitude towards best practice and evidenced-based policy-making. Given both the economic and moral case for cracking down on tax avoidance and other forms of non-compliance, the findings of the report are of concern.

We have taken note of the Government’s response and acknowledge that some of the recommendations expressed in the report are being or have been enacted. However, it is clear that there is more for both HMRC and Ministers to do if we are to close the loopholes and promote better behaviour. As always, we are confident that officials are doing everything they can to meet the targets set for them from above. It is a case of ensuring that departments are properly resourced and appropriately directed. When the Financial Secretary introduced the Bill in the House of Commons, he paid tribute to the work of officials in the Treasury and HMRC throughout the Covid-19 pandemic. He was right to praise them for the dedication and creativity that they have shown by turning new concepts into reality and putting money into people’s pockets in record time.

As the Opposition, we have not shied away from challenging the shortcomings of the various coronavirus support schemes or the Government’s wider handling of different aspects of the pandemic. However, as with the report on the powers of HMRC, any shortcomings rest ultimately with the politicians in charge. With a certain amount of bullying from within and without, some of the issues of Covid-19 support were addressed, but sadly some problems have still not been acknowledged and the patchwork of support has left many people in similar situations facing very different financial circumstances.

As we progress along the Covid road map, the Government will need to think carefully about when and how support is withdrawn from businesses and workers. It is also vital that lessons are learned to start closing the gaping holes that have been exposed in this country’s social security safety net.

The Financial Secretary referred to what he identified as three objectives underlying the Budget in March, all of which focused on defeating Covid-19 and rebuilding after it. We disagree fundamentally with his claim that his Bill will enact changes in taxation that will support all those objectives. Neither the Budget nor this Bill is sufficient to address the long-standing challenges to the British economy and to put us on a path to sustainable growth that would benefit all communities across the UK. Such challenges contributed to the UK having the worst downturn of any major economy at the height of the pandemic.

Despite our recent return to growth, which we welcome, and the continuing hard work of the British people, I worry that the Government’s lack of ambition on economic reform will hold us back vis-à-vis our international friends and competitors. The Chancellor’s last-minute decision to sign up to President Biden’s corporate tax proposals through the G7 communiqué is a clear example of his lack of ambition. The UK initially resisted the proposal, the only G7 member to do so, and while we witnessed a U-turn over the weekend, experts in the field have already identified potential loopholes.

Returning to the Budget and the Finance Bill, it is a shame that, rather than supporting front-line workers, the Government have essentially snubbed their heroic efforts in the past year and a half. We are all familiar with the paltry pay rise for NHS nurses, but other public sector workers have received poor pay settlements too. Rather than embracing opportunities around corporate tax, such as levelling the playing field for online and so-called bricks and mortar businesses, this Finance Bill enables a corporate super-deduction while freezing the income tax allowance. The latter will hit low-paid households that have been lifted out of income tax only in recent years. Rather than present proposals for welfare reform to put more money into government to ensure adequate funding for pupils to catch up with the education they lost during the multiple lockdowns, the Budget instead laid out plans to cut certain welfare benefits and slash departmental budgets. In sum, rather than delivering on warm words and promises on job creation, addressing the climate crisis or levelling up, the Finance Bill is merely a continuation of the political decision-making that has left so many feeling that the Government are not on their side.

The past year and a half has been tough for us all. We have had to make sacrifices and do things differently but Covid-19 has also exposed the very best of many: NHS staff, other key workers and those who played an active role in their local communities. However, there is also a need to help the unemployed back into work, address the ever-growing debt burden faced by many businesses and provide meaningful investments to put our economy and public services on a surer footing. This Bill and the Government’s broader economic policy do not meet those tests.

In the House of Commons, the Labour Party proposed several sensible amendments to make the legislation fairer. Rather than engage, the Government opposed measures to ensure that large multinationals pay their fair share, to increase transparency around the actual economic impacts of free ports, and to review the effectiveness of plans to prevent overseas entities funnelling dirty money through UK property. Think tanks and commentators of all political persuasions have been unimpressed by the lack of urgency on important issues such as these.

All that said, any noble Lord who has had the pleasure of participating in debates on Treasury statutory instruments will know that I am no fan of constitutional crises. It is not for the House of Lords to oppose the Finance Bill, and we have no intention of breaking that convention today. However, I was seized by the debate that broke out earlier about what we cover and the extent to which the Finance Bill creates cover for issues that arguably should be properly debated in legislation.

It is very interesting to sit back and see what the House of Lords does best. I think that the House of Lords, in a sense, divides its attention between the political and better legislation. I have been involved, over the past 11 years, with every bit of finance legislation that has gone through this House, usually at the junior level with stars helping me. What has emerged from that is the improvement that legislation has enjoyed in this House. It has been a really powerful step forward. It happens because thoughtful people bring up poor areas of legislation and, combined with the fact that the Opposition takes a political interest in it, focus is brought to bear on those areas and small changes and nuances are achieved. I think that the noble Lord, Lord Bridges, was in a sense referring to that, that the noble Lord, Lord Butler, was particularly referring to it, and that the noble Lord, Lord Forsyth, indicated some sympathy with it. I hope he and his committee might consider the extent to which the Government are starting to smuggle legislation that really should come to this House through the political process by hiding it in money Bills.

I also thought there were some interesting concerns about HMRC and the level of scrutiny. I headed a pretty large organisation; one of the problems with large organisations is the attractiveness of using your power to do things to people who are less powerful. Of course, you do it because it is good for you, but we need processes that test whether it really is. One of the worst problems in any complex society is that large organisations emerge because they are efficient but, because they are large, they have unreasonable power. We need proper, better processes—there was reasonable consensus on this during the Financial Services Bill we have just done—in the FCA, for political scrutiny, and better processes in the PRA.

On a more political point, I also felt that the concept from the noble Baroness, Lady Kramer, of the need for a more strategic approach from the Government was important. There have been lots of initiatives from this Government; we have disagreed with some and have supported others, but at no time have they seemed strategic. Two particular areas interested me. First, there is the failure to pick out sectoral initiatives; there are areas—I think the noble Lord, Lord Leigh, brought this out—in aerospace, for instance, where if we lose where we are now, no amount of money will get us back to the same place. There should be a stronger strategy for looking at where the weaknesses are. Secondly, there is this whole problem of debt; if debt is to be repaid—will it be?—it could become a millstone on the companies that should be bounding ahead. We need the best minds thinking about whether there is some way of turning that into equity, and so on.

There is much more to ponder. I hope that processes can be found for that pondering to be done in this House, and that we can be part of the legislative process. If anything makes the Government think, it is the fear of a vote going against them. I do not know whether anyone records this, but we do not actually like winning votes; we like persuading the Government to do good things because they are frightened of us winning votes. That is what happens—but anyway, I have something else to say.

It seems the Economic Affairs Committee’s conclusion that Ministers must do better applies more broadly than to tax avoidance policy. This Bill is yet another missed opportunity to grapple with the challenges our economy faces. Sadly, as is so often the case under this Administration, working families will pay the price for the Government’s lack of ambition.