Finance Bill

Debate between Nigel Huddleston and Matt Rodda

Committee of the whole House
Wednesday 10th January 2024 Commons Chamber

[Nigel Huddleston]

My hon. Friend is right to point out the timing element with both full expensing and R&D; I will come on to R&D in a moment, because I think that is the £55 billion figure he mentions, but these measures, particularly the full expensing, will of course have a long-term impact over a long period of time. The cost is up-fronted, but the benefit is over a long period, and anyone who has worked in business understands that. He is right to point out the anomaly, and it is a very important point because a lot of people probably would not understand it, but the fact that the OBR has highlighted the incremental impact on the economy overall shows that there is a clear and transparent net benefit. The timing of the impact changes, but we are talking about additional investment right away, because we will be giving businesses the confidence to be able to make those decisions and invest immediately.

[Matt Rodda (Reading East) (Lab)]

I appreciate the Minister’s comments so far. Can he confirm how many times policy has changed in this important area since 2019? While he is making some further points today, it seems that Government policy has changed quite erratically, and that in itself is difficult for businesses to respond to when they are looking for certainty in planning for the long-term.

[Nigel Huddleston]

I agree that certainty for business is pivotal, but with both full expensing and R&D the Government, the Chancellor and others have been indicating the direction of travel for some time and therefore giving increased certainty. As I have said, it was mentioned a while ago that we intended to pursue the policy of full expensing when the economic circumstances allowed, and now they do. R&D, which I will come to in a minute, has been discussed for quite a long time and is the result of extensive co-operation with industry.

It is also the reality, though, that Government policy needs to change in response to the nature of a changing economy and to things such as digital, the cloud and so on. When it comes to other investments, we need to make sure that new and emerging policy areas are covered as well. We have seen today, as we saw in the autumn statement, a very clear direction of travel from the Conservative side of the Chamber, which is about incentivising businesses and cutting taxes. Permanent full expensing also simplifies the capital allowances regime overall, as companies can claim the full cost in year one, reducing the need to claim writing-down allowances year on year.

Turning to clause 2 and schedule 1, the Government have also announced the closure of the R&D tax relief review launched in 2021—the point I was just making to the hon. Member for Reading East (Matt Rodda)—alongside a set of changes to simplify and improve the system. Clause 2 makes changes to merge the current R&D expenditure credit and SME schemes for expenditure in accounting periods beginning on or after 1 April 2024, simplifying the system and providing greater support for UK companies to drive innovation.

The merged scheme will have an above-the-line mechanism similar to the R&D expenditure credit, with a rate of 20%. That will make the benefit more visible and easier for companies to factor into their investment decisions. Additionally, small and medium enterprise lossmakers will now be able to carry forward their losses rather than having to surrender them, which will give a total benefit of up to £45 per £100 of R&D expenditure.

There will also be a reduction in the rate at which the merged scheme credit is taxed for lossmakers, from 25% to 19%. That is worth around £120 million per annum to non-intensive lossmakers and will increase the up-front cash benefit for lossmakers. Subcontracting rules in the merged scheme will allow the company taking the decision to do R&D to claim relief on contracted-out R&D. That approach is based on the current SME scheme, which was identified as the best option in the consultation we delivered, and has been refined further following engagement with industry last summer.

Subsidy rules will also be removed, allowing SMEs to claim relief for work for which they receive a grant of a subsidy. This represents an increase in generosity for SMEs as well as being a major tax simplification.

The Government are also legislating for enhanced support for loss-making R&D-intensive SMEs. That was announced at spring Budget 2023 and will benefit 23,000 SMEs a year by providing further support to the most R&D-intensive SMEs while merging the current schemes. The Government are promoting the conditions for enterprise to succeed. Companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D intensity.

At the summer statement, the Government announced several improvements being made to that enhanced support. The R&D intensity threshold is being lowered to 30% from 40% from April 2024, meaning that around 5,000 more companies will benefit from the support. A one-year grace period is being introduced, providing greater certainty by ensuring that companies that dip under the 30% threshold will continue receiving relief for one year. The same subcontracting rules as the merged scheme will apply to this enhanced support, further helping to simplify the system with one set of rules that both SMEs and larger companies will follow.

Overall, R&D reliefs will support an estimated £55 billion of business R&D expenditure in 2028-29—a 25% increase from £44 billion in 2021-22. Expenditure on R&D reliefs is forecast to increase in every year of the scorecard period. We will also restrict nominations and assignments for R&D relief payment. That measure ensures that genuine businesses get the payment for their R&D claim directly, rather than receiving it through an agent, and is designed to benefit genuine claimants and reduce non-compliance.

Subject to limited exceptions, no R&D tax credit payments will be made to nominee bank accounts, and any R&D tax credit payments must be paid directly to the company that claims for the R&D, so claimants will now receive their payments directly, giving them more control. That will ensure that the person claiming the relief has better oversight of the claim and receives the money into their account quicker. Claimants will also be clearer on exactly how much money is being charged by their agents, rather than just receiving a net amount after fees have been deducted. That builds on previously announced measures and policy changes to help to ensure greater company control over R&D claims.

The Government are committed to making the UK the best place in the world to do business. Full expensing and R&D tax relief support businesses to grow and invest, which will boost productivity and economic growth. That remains the key way to raise everybody’s living standards and to fund high-quality public services throughout the UK. I commend clauses 1 and 2 and schedule 1 to the Committee.

Gambling Advertising in Sport

Debate between Nigel Huddleston and Matt Rodda

Thursday 19th March 2020 Commons Chamber

[Matt Rodda (Reading East) (Lab)]

I am grateful to the Minister for giving way on that point. I appreciate the point he is making about gambling being a legal activity. One thing that struck me in the speech by my hon. Friend the Member for Swansea East (Carolyn Harris), which was so eloquent and detailed, was the sheer, overwhelming presence of gambling advertising, particularly when it comes to young and vulnerable people. My son, who is now at university, used to play FIFA20, or its predecessors. Many children do, and the fact that this advertising is accessible to children is deeply worrying. It is also worrying that it is so ubiquitous at sports grounds, where young people are bombarded by it. Will the Minister say something about the way in which the Government could scale back the level of advertising?

[Nigel Huddleston]

I thank the hon. Member for his comments. He may be tempting me to pre-empt the conclusions of the gambling review that we will be conducting, and I will say more about it later. However, that review will be forthcoming—it was in the manifesto—and we will all have plenty of opportunity to look further into these issues. I cannot say too much more on the specifics at the moment, but I understand the point he is making.

It is true that operators are spending far more on advertising. Research has indicated that operators have increased their spend on advertising and marketing significantly in recent years. It would be easy to assume that that has led to increased rates of gambling or of problem gambling, but, according to the Gambling Commission, the percentage of those who gambled in the last year was 47%, which was 1% less than the percentage who gambled in 2016, and rates of problem gambling have remained relatively steady, at below 1% for the past 20 years. Before the hon. Member for Swansea East intervenes, as I know she will on that point, let me say that that is too high—that is one thing we agree on. We continue to keep a careful eye on the evidence, but more advertising does not seem to lead to more people gambling or more people suffering from gambling problems.

However, there are clearly legitimate concerns about problem gambling. I am pleased that the industry has listened to concerns, such as those raised by the hon. Lady, and has acted to some extent: it has extended existing restrictions on pre-watershed advertising to include live sport—the so-called “whistle-to-whistle ban” that she mentioned.

Protecting children and other vulnerable people from gambling harms is a priority for the Government. Gambling advertising, like alcohol, is already governed by strict rules to ensure that it is not targeted at children and is not of particular appeal to them. Where advertising breaches these rules, the commission can and does take action.

We know that millions of people gamble each year and that nearly 7% of the population bet on sport last year. Most of those people will suffer no harm, but gambling does carry risks. That is why, as part of the last gambling review that took place between 2016 and 2018, we secured a commitment from industry to fund a multimillion-pound safer gambling advertising campaign to highlight the risks and encourage safer gambling behaviours.

Of course, advertising is not the whole story; sponsorship is an important source of income for sporting teams and bodies, as the hon. Member for Swansea East mentioned. The Gambling Commission has been clear that operators must undertake their sponsorship activities in a socially responsible way. The FA has strict rules about the size and placement of operator logos and has taken action when those have been breached. Logos cannot feature on shirts worn by youth team players and on merchandising, including shirts in children’s sizes. Paddy Power’s stunt with Huddersfield led to the FA fining the club.

[Nigel Huddleston]

The hon. Lady is making a fair point and, as I said, I am sure that all these things will be considered in the gambling review. The remit of the review has not yet been scoped, but she will have strong opinions on it—of that I have no doubt.

[Matt Rodda]

The Minister is being extremely gracious to other Members in giving way. Perhaps the review might consider the family nature of watching sport in Britain because, in many cases, families are going to football or to other sport together, and the adults and children are wearing replica shirts together. They are watching the team together, so the presence of the gambling logo is ubiquitous—it is everywhere. I hope that he can address that issue in his review and take it very seriously, because it is easy for children to inadvertently be exposed to logos or attractive advertising, which can affect their perception of gambling very seriously.

[Nigel Huddleston]

The hon. Gentleman makes an important point. One of the great joys of sport is that it can be a family activity, and we want to minimise any dangers that can be the unintended consequences of participating or observing those activities.

The gambling industry has committed to developing and adopting a new code of conduct for sponsorship activities by the end of 2020. We and the Gambling Commission will be reviewing its efforts closely to ensure that they go far enough. As I have mentioned, we have committed to reviewing the Gambling Act 2005 to make sure that it is fit for the digital age. We will announce further details in due course, but I assure the hon. Member for Swansea East that the Government and the Gambling Commission will not put our work to minimise harm on hold while the review takes place. We will always act on the evidence to prevent harm.

We have already delivered on our manifesto commitment to ban credit card gambling, and we have made it mandatory for operators to be part of GAMSTOP, the national online self-exclusion scheme.