Finance (No. 2) Bill

Debate between Nigel Mills and Michael Tomlinson

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak on this nice, brief and moderate Bill. I suspect the Bill that finally clears the House in the next couple of weeks will be a little thinner. I am not sure that I welcome the change to printing the Finance Bill in one block, rather than two; it feels worse.

My speech will focus on the content of the Bill rather than on trying to start the general election campaign, which does not technically begin until tomorrow, but I am sure I heard the hon. Member for Bootle (Peter Dowd) say that Labour wants tax to be a higher proportion of GDP than the Government currently have it. If that is a Labour manifesto pledge, I suspect it will appear on more leaflets for Conservative candidates than for Labour candidates. The only real way of achieving it is to raise income tax, national insurance or VAT, none of which will be popular with the electorate.

For coherence, I will address the Bill’s measures in order. First, there is a moderate measure that will allow employers to offer their employees up to £500 of pensions advice, and associated advice such as the impact on tax bills, tax-free. Where there are problems with people’s understanding of how the pensions system works, of how much they will have in their retirement and of how much they need to save and how they should save it, any effort we can make to encourage them to take more advice, and get good advice—the earlier, the better—has to be right. I welcome increasing the tax relief from £150 to £500.

Clause 31 addresses interest restrictions for corporates, which will be allowed to claim tax relief on interest only up to 30% of their earnings before interest, taxes, depreciation and amortisation. Before coming to this place, I spent many years advising large corporates on their corporation tax bills. I wrestled with the many efforts that have been taken to get the allowed interest deduction down to a sensible level. There are well over half a dozen different anti-avoidance measures, such as allowable purposes, thin capitalisation rules and the worldwide debt cap. We have had all manner of attempts to get to the right answer, but successive Governments—Conservative, Labour and coalition—saw it as a competitive advantage for the UK to try to attract inward investment from holding companies by having a generous interest deduction.

It is right to recognise that, in an era when large multinational corporations have been gaming the global tax system to a ridiculous degree, we cannot allow our system to be exploited by excessive interest deductions, especially where they are not real commercial interest costs to the worldwide group. It makes sense for us to get in line with the global consensus that the interest limit should be 30% of EBITDA. The House should approve the measure to provide some scrutiny of the downside impact of how we attract international investment.

How many businesses that employ large numbers of high-skilled people are here for the interest deduction that we effectively allow on profits earned across the world? What impact will that have on where those businesses choose to locate in future? I hope the impact is zero and that, because we are such a great place to do business and employ people, businesses do not come here to chase generous tax deductions, but it will be interesting to see the impact of this policy change.

The rules are complicated, and there are some sensible exemptions for infrastructure investment. We need to encourage private companies to invest in UK infrastructure, and our regime is not all that generous—we do not give tax relief for large amounts of industrial building, which can have a large infrastructure cost. We should reform those rules, too, to make sure that we have a competitive regime so that, if a multinational company is looking to invest in infrastructure, the UK is the place to do it, not somewhere else for tax purposes.

I welcome the deemed domicile rules that the Minister outlined. People out there who try to understand tax cannot understand why rich people can avoid tax because of where their father was born. We have had that strange historical system since the colonial days. It should be absolutely clear that people who are born here should pay all their taxes here, and people who have lived here for a long time should be paying the same taxes. The idea that a person can move and live here for 40 years, or even be born here, and avoid certain taxes is a ridiculous way of exploiting our tax regime, and I welcome the steps to change that.

Clause 71 introduces the soft drinks levy, about which I have raised concerns in previous debates. I welcome taxes on unhealthy activities, and we have lots of taxes on alcohol and tobacco for sensible reasons. We have an obesity crisis, and it is perfectly right to consider taxes on unhealthy foods and drinks. A sugar tax makes sense, but when a consumer sees a product they want to buy in a supermarket they should be able to see something that says, “This product is so unhealthy for you that it is taxed, so you will pay more for it.” That is how to get behavioural change. Someone walking down the aisles of a major supermarket should think, “A can of full-sugar cola is 10p dearer than Diet Coke because it is unhealthy, so I will buy the Diet Coke.” That should also apply to ridiculously sized portions of cake, to sweets that are very bad for you and to all those other unhealthy things that we eat. We should try to structure a sales tax on unhealthy products to get the behavioural change we want.

There are many reasons why the Government have chosen to go down the route of targeting a particular product, but there is a real danger that the market for cola is so complicated that the consumer might not know that the charge even exists. I happened to be in a supermarket over the weekend looking at the varying prices of cola. I am quoting Tesco because it is my nearest supermarket—I should declare an interest because my wife works there—and I can buy a 2-litre bottle of Tesco own-brand cola for 55p, a 2-litre bottle of Pepsi for £1.25 or a 2-litre bottle of Coke for £1.66, or two for £2.50. We are adding 18p a litre, so how a consumer will know from the varying prices, never mind all the promotions, which of those colas is the bad one and which one they should be avoiding is not entirely clear. Looking at the prices for smaller quantities, a 600-mililitre bottle of Pepsi is 99p, which is about the same as a 2-litre bottle.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

My hon. Friend is making a cogent argument, but does he not welcome the targeted nature of the fund? The levy will go to the Department for Education to help all our children in all our constituencies to have healthier lifestyles. Does he welcome that, even if he has concerns about other aspects?

[Nigel Mills]

I welcome more funding to help children to be healthy and more funding for sports. I especially welcome the fact that the largest employer in my constituency, Thorntons, as part of the Ferrero group, gives big funding to school sports. More funding for healthy activities for children has to be a good thing. I am a little nervous about hypothecating taxes for individual spending, because there is a real risk that it would lead to a complicated tax system. It is a little like giving with one hand and taking away with the other. I welcome the fact that we are raising such spending, although I would not want to link it directly to a tax.