Finance (No. 2) Bill

Nigel Evans Excerpts

Committee of the whole House
Wednesday 8th May 2024 Commons Chamber

Question proposed, That the clause stand part of the Bill.

[The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

Clauses 13 and 19 stand part.

New clause 2—Review of impact of section 12—

“(1) The Chancellor must, within three months of this Act being passed, conduct a review of the impact of section 12 of this Act.

(2) The review must consider how the rate of corporation tax provided for by section 12 affects—

(a) investment decisions taken by businesses,

(b) the certainty of businesses about future fiscal and market conditions.

(3) For comparative purposes, the review must include an assessment of how the factors in subsection (2)(a) and (b) would be affected by maintaining corporation tax at a rate no higher than that set out in section 12 until the end of the next parliament.”

This new clause requires the Chancellor to conduct a review of how the rate of corporation tax set by the Bill set out in clause 12 affects business investment and certainty, including what the effect would be of capping it at its current level for the next Parliament.

New clause 3—Analysis of the impact of the energy security investment mechanism—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish an analysis of the possible impacts of the energy security investment mechanism on—

(a) revenue from the energy profits levy, and

(b) investment decisions involving businesses liable to pay the energy profits levy.

(2) The analysis under subsection (1) must consider how the impacts in (1)(a) and (1)(b) would be affected by amending the definition of a qualifying accounting period, as set out in section 1 of the Energy (Oil and Gas) Profits Levy Act 2022, to be one that ends before the end of the next Parliament.

(3) In this section, the “energy security investment mechanism” means the mechanism introduced by section 17A of the Energy (Oil and Gas) Profits Levy Act 2022, as inserted by section 19 of this Act.”

This new clause seeks to establish the impact on revenue and investment decisions of the energy security investment mechanism being introduced, and how this impact would be affected in a scenario where end date for the energy profits levy was amended to be before the end of the next Parliament.

New clause 7—Review of impact of section 13 on small and medium enterprises—

“(1) Within 3 months of this Act being passed, the Chancellor of the Exchequer must lay before the House of Commons a report assessing the impact of section 13 on small and medium enterprises.

(2) The report under subsection (1) must consider the extent to which paying corporation tax at the small profits rate, rather than a higher rate, enables small businesses to manage cost pressures including those arising from—

(a) energy costs;

(b) staffing and recruitment costs;

(c) borrowing costs;

(d) raw material costs.”

[The Exchequer Secretary to the Treasury (Gareth Davies)]

We now move on to debate clauses 12, 13 and 19. Before I delve into the detail of the clauses, however, let me first briefly set out how they fit into this Finance Bill.

The Government remain focused on taking long-term decisions to strengthen the economy by driving productivity, increasing the number of people in high-wage, high-skilled jobs, and boosting investment. The Government are also ensuring that the tax system is as competitive as we can make it under very difficult economic circumstances. We have some of the most generous investment incentives among major economies, including full permanent expensing, which the OBR has forecast will generate almost £3 billion of additional business investment each year, or £14 billion over the next five years. It has forecast that that additional investment will increase GDP by 0.1% by the end of the forecast. In addition to full expensing, we have an internationally competitive corporation tax rate—the lowest headline rate in the G7—which this Bill legislates to maintain.

I will now turn to clauses 12, 13 and 19 in more detail. Clauses 12 and 13 set the charge for corporation tax from April 2025. This includes both the main rate and the small profits rate, as well as the thresholds at which those rates apply. The charge for corporation tax must be set every year. It is important to legislate annually in advance, as this provides certainty to large and very large companies that pay tax in advance on the basis of their estimated tax liabilities. These clauses maintain the current main rate of 25% and the small profits rate of 19%, as introduced in April 2023. Tax certainty is of great importance to businesses—I think that is something we can all agree on—and clauses 12 and 13 ensure that they will continue to benefit from stable and predictable tax rules. By maintaining the current rates, the Government have struck the right balance between remaining competitive and raising vital revenue.

Clause 19 makes changes to ensure that the energy profits levy will no longer apply if oil and gas prices return to historically normal levels for a sustained period of time. It does so by introducing legislation to give effect to the energy security investment mechanism, or ESIM. The EPL was introduced in 2022, at a time of near-record high oil and gas prices, but it is right that should those prices return to historically normal levels, the additional tax would cease to apply. The detail of how the ESIM operates was set out in the technical note published alongside the 2023 autumn statement; this Bill simply puts that detail on a legislative footing and provides for secondary legislation to legislate for the administrative details of how that check is made.

Current oil and gas prices are higher than normal, and OBR projections indicate that high prices will persist over the next five years. The ESIM is a mechanism that switches off the EPL if, for a period of six months, the average prices of both oil and gas fall below set thresholds. Those thresholds are currently $74.21 per barrel for oil and 50p per therm for gas, and are based on a 20-year historical average to the end of 2022—before higher energy prices began—and are adjusted each April based on the annual change in the preceding December’s consumer prices index. By providing certainty on the conditions under which the levy will be disapplied, the Government are supporting investor confidence in the sector and helping to protect domestic energy supply, the economy, and of course jobs.

Clauses 12 and 13 provide certainty to businesses by maintaining the current rates of corporation tax, and clause 19 has been welcomed by the oil and gas operators and their investors, with the ESIM providing the sector with certainty to support future investment in the UK—in jobs and in our energy security—while also ensuring fairness to taxpayers. I therefore commend these clauses to the Committee.

[The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)]

I call the shadow Minister.

[James Murray]

Thank you, Mr Evans, for the opportunity to speak on behalf of the Opposition to new clauses 2 and 3, which are in my name and that of my hon. Friend the Member for Hampstead and Kilburn (Tulip Siddiq).

Earlier this afternoon, we pressed the Government on the impact of tax rises, particularly stealth tax rises, on families and pensioners. Of course, it is not only taxpayers and their families who are struggling to make ends meet under the Conservatives. Businesses in Britain are struggling too, and when I meet those from businesses across all sectors, of all sizes and in different parts of the country, they are clear that they want a Government who support them to succeed and grow. What the people I speak to from businesses want from Government, first and foremost and above all else, is stability, predictability and a plan for growth. Stability is greatly prized by businesses, which want to make decisions about investment and growth, which are critical to creating jobs and making people across Britain better off.

--- Later in debate ---

[Drew Hendry]

rose—

[The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)]

Order. Given that we are not really pressed for time today, unless Mr Hendry intends to speak for up to four hours—

[Drew Hendry]

I do not intend to do so.

[The Second Deputy Chairman]

Yes, I can see that.

As both candidates are present, I will now announce the results of the ballot held today for the election of the Chair of the Public Administration and Constitutional Affairs Committee: 290 votes were cast, two of which were invalid, and Dame Jackie Doyle-Price was elected with 161 votes. She will take up her post immediately. I congratulate her on her election. The results of the count will be made available as soon as possible in the Vote Office and will be published on the internet.

We now come to the four-hour speech from Drew Hendry.