Finance Bill

Lord Tunnicliffe Excerpts

2nd reading & 3rd reading & Committee negatived
Tuesday 20th December 2022 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I begin by welcoming the noble Lord, Lord Harlech, to his place for what I think is his first piece of Treasury legislation. I get the impression that he will probably end up with an awfully large number of Treasury SIs: meet the cast that he will face, all three of us.

I will not make many comments on previous speeches but I will just pick up the comment of the noble Baroness, Lady Kramer, about the industrial situation. I have spent large parts of my career in industrial relations negotiations, and she is absolutely right that there has to be a compromise. I say that because anything else would be disastrous for the nation and for the Tory Party. The one result that would be utterly unacceptable is that the Government break the nurses. All my experience says to me that good deals always have compromise in them. I used to say, rather cynically, “A good negotiation is where both sides go away equally miserable.” It is very dangerous to win an industrial dispute; it is absolutely essential that people come out of a dispute respecting each other and seeing a common future, rather than a common conflict.

Anyway, turning to this very exciting Bill, I reassure the Minister that we will not oppose its passage. As I understand the rules, we cannot anyway, but I just assure him that I am going to obey the rules. However, that does not mean that we think this is a good Finance Bill—far from it. Under the Conservative Party’s stewardship, the UK economy is seemingly lurching from crisis to crisis. A decade of low growth has giving way to no growth, with the Office for Budget Responsibility predicting a long and brutal recession. Yes, the economy is estimated to have grown by 0.5% in October, but that does not offset the 0.8% contraction in September. The OBR has suggested that the coming recession could reduce living standards by an unprecedented 7% over the next two years. This will worsen an already crippling cost of living crisis, making many people’s day-to-day existence even tougher than it is now. It is difficult, I think, for us to really grasp just how awful it must be to be in the lower-income sections of society, particularly those sections that are unable to find employment even in these times.

Of course, the Treasury would have us believe that the current circumstances are solely a consequence of global events. We have always acknowledged that Putin’s invasion of Ukraine has impacts here, as well as abroad, and that the global economic picture has shifted in recent times. However, the Government’s attempts to shift blame elsewhere simply do not hold up to scrutiny. The UK is the only G7 economy which has yet to return to its pre-pandemic level. Over the last 12 years, the UK economy has grown by one-third less than the OECD average and one-third less than during the last Labour Government. For the next two years, we are forecast to have the second lowest growth in the G20. Only sanction-hit Russia is expected to perform worse than the UK.

While we are impacted by global events, we appear to be suffering primarily from poor Downing Street decision-making. The result is that we find ourselves in what former Chancellor Kwarteng called a “vicious cycle of stagnation”. His September mini-Budget was supposed to bring that to an end, facilitating a “virtuous cycle of growth”. We were told that the economy would start firing on all cylinders, creating better-paying jobs and funding world-leading public services. Instead, its incompetent presentation spooked the financial markets, crashed the economy and, in doing so, made mortgages and rents significantly more expensive. September’s experiment severely damaged both public confidence and our international reputation. It also blasted a hole in the public finances, requiring future cuts to already struggling services. As the former Chancellor has finally acknowledged, it was a dreadful intervention and came at the worst possible time.

We may now have another Prime Minister and Chancellor, but their first fiscal event—the Autumn Statement—was focused solely on repairing the damage done by their predecessors. That means it fell short of addressing the public’s concerns across a whole range of areas. It did not sufficiently address the growing crisis in social care; it did not do enough to provide skills and job opportunities to young people, and it did nothing to shift the view of a growing number of businesses that the Government have no plan for growth. The Minister does not need to take my word for that; he needs merely to consider the response of the Confederation of British Industry, whose director-general said that

“there was really nothing there that tells us the economy is going to avoid another decade of low productivity and low growth”.

With so many households concerned about growing food and energy bills, this Finance Bill will serve only to give them a larger tax bill too. The freezing of the income tax personal allowance will leave average earners paying over £500 a year more income tax by 2027-28. Many councils will avail themselves of the ability to raise council tax by a higher percentage, with families in the average band D house paying around £100 extra from next April. Taken collectively, all the tax measures announced during this Parliament will leave middle-income households paying £1,400 more each year.

All the while, the Government have once again refused to address the loophole in the energy windfall tax, which means that some oil and gas giants are not paying a single penny more, despite record profits. Ministers’ decision not to properly tax the windfalls of war leaves a potentially valuable source of income untapped, with the burden of funding public services placed on working people instead. This is not fair, and neither is the decision not to scrap the outdated and unfair non-dom status.

A Finance Bill introduced by a Labour Government would look very different. Our plan for growth is wide-ranging, from business rates reform to investment in the industries of the future and the skills that will underpin them. We would introduce a proper industrial strategy, working together with businesses to get the economy growing in a fairer and more sustainable way. While the current Conservative Government try to undo the damage caused by the last one, we will continue putting forward our plan for growth—a plan which led the chairman of Tesco to say that Labour is the

“only … team on the field”.

Our current economic struggles are not rooted in the US Federal Reserve or the Kremlin; they are the result of a lost decade in which successive Conservative Governments have prioritised short-term fixes rather than formulating a long-term vision for growth. Decisions are frequently based on how to get past the next Back-Bench rebellion or through the next leadership election, rather than serving the national interest.

If we carry on as we are, all signs point to another lost decade. What would that mean for working people? Energy giants and non-doms would continue to be let off the hook, while personal taxes go up. Disposable incomes would continue to fall, but energy bills will continue to climb ever higher. Public services would continue to struggle, while vested interests take in ever-larger profits. This Government’s policies no longer speak to the public’s priorities. Only Labour has the ambitious, bold but practical plan to build a fairer, greener Britain.

--- Later in debate ---

[Lord Harlech (Con)]

I will have to disagree with the noble Baroness. I did not say that councils were not going to increase council tax rates but that we expect them to show restraint.

The issue of public sector pay was raised by the noble Baronesses, Lady Bennett and Lady Kramer, and the noble Lord, Lord Tunnicliffe. The Government have accepted the recommendations of the independent pay review bodies for the NHS, teachers, police and the Armed Forces for 2022-23. This delivered the highest uplifts in nearly 20 years, with most awards targeted towards the lower paid. Pay awards for 2023-24 will be determined by the normal pay-setting process, and the Government will be seeking recommendations from pay review bodies where applicable. It is important that public sector employers can recruit, retain and motivate qualified people, and this is a key consideration for pay review bodies when they make their recommendations to government. Pay awards this year must also strike a careful balance between recognising the vital importance of public sector workers while delivering value for the taxpayer and being careful not to drive prices even higher in future through contributing to a wage-price spiral.

On the energy profits levy, which was raised by the noble Lord, Lord Tunnicliffe, and the noble Baronesses, Lady Bennett of Manor Castle and Lady Kramer, the Bill is part of our plan to deal with the international pressures caused by the challenges of Putin’s invasion of Ukraine, inflation and the hangover from the pandemic. The changes to the energy profits levy will make sure that the oil and gas companies that have been gifted extraordinary profits pay their fair share of tax. Combined with the electricity generator levy, these taxes will raise £55 billion over the next six years from companies that could not have expected such enormous profits. The investment allowance remains at its current value to allow companies to claim around £91 of tax relief for every £100 of investment.

I recognise that the Opposition disagree with this step, but it is our firm belief that businesses must be able to invest. The weaponisation of energy by Putin has made it abundantly clear that we must ensure our energy security over the coming years. This is how we will do it. Again, I remind noble Lords that our changes mean that the headline rate of tax for companies in this sector will increase to 75%—triple what other companies will pay when the corporation tax rate increases to 25%.

[Lord Tunnicliffe (Lab)]

Does the Minister deny the almost obvious fact that none of these big oil companies is going to pay a penny more? He correctly explained how they will get to that not paying a penny more, but the tax is having no impact.

[Lord Harlech (Con)]

I do not have a crystal ball so I cannot say whether there will be an impact but we want to be careful not to disincentivise investment to move away from fossil fuels.

[Lord Tunnicliffe (Lab)]

My understanding is that the present investment programmes that they had before this tax came out just carried forward, with a limit but well behind, the relief on so-called investment— because it is not fresh investment—which will offset any extra tax that they are likely to pay. I do not know whether my Liberal Democrat friends agree with that analysis but I am sure that it is either true or very close to true.

[Lord Harlech (Con)]

I am sorry; I do not understand the question.

The noble Lord, Lord Tunnicliffe, raised the issue of non-dom status. It is important to recognise that non-doms play an important role in funding our public services through their tax contributions. In the year ending 2021, the most recent full year for which we have data, non-doms were liable to pay £7.9 billion in UK income tax, capital gains tax and national insurance. What is more, they have invested £6 billion in investment schemes since 2012, which is why we are taking a careful and considered approach.

As the Chancellor told the Commons Treasury Select Committee, we will continue to look at such schemes. Indeed, the Government keep all aspects of the tax system under review; this includes the non-dom regime. I reiterate that, if you look at this package as a whole, we have not tried to protect wealthier people—quite the opposite. We are protecting the most vulnerable and asking those who have more to contribute more. In 2017, permanent non-dom status was ended.

I turn to the question from the noble Lord, Lord Rogan, about the rollout of the energy bills support scheme in Northern Ireland. The Government have confirmed that all households in Northern Ireland will receive a single payment totalling £600 to help with their energy bills, with payments starting in January. This will be made up of £400 of support under the Government’s energy bills support scheme in Northern Ireland and £200 of support under the alternative fuel payment scheme, which will go to all households in Northern Ireland irrespective of how they heat their home.

Energy policy in Northern Ireland is the responsibility of the Northern Ireland Executive and Assembly. However, in their absence the UK Government have stepped in to ensure that households do receive support. The UK Government have worked closely with Northern Ireland electricity suppliers, the distribution network operator, and the utilities regulator, in designing the scheme.

In conclusion, as we are all aware, the UK is facing challenging headwinds. Despite having experienced the third-highest growth in the G7 over the past 12 years, behind only the US and Canada, economic times are tough. The Government have chosen to take difficult decisions needed to support public finances, providing stability and certainty to markets, and providing the foundation for future growth. The OBR has confirmed that the recession is shallower, inflation has reduced and roughly 70,000 jobs have been protected as a result of these decisions. This small autumn Finance Bill will help to deliver these outcomes and, importantly, will do so in a fair way. It forms an essential part of our plan for the economy, now and in the future. For these reasons, I commend this Bill to the House.