Finance Bill

Debate between Nusrat Ghani and Daisy Cooper

Committee of the whole House
Tuesday 10th December 2024 Commons Chamber

[The Chairman of Ways and Means]

As colleagues will notice, the Speaker’s Chair is vacant, so I remind Members that the Chair should be addressed as Madam Chair or Madam Chairman. I call the Liberal Democrat spokesperson.

[Daisy Cooper (St Albans) (LD)]

I commend the Government for looking at capital gains tax as a potential source of revenue to get public services back on their feet, but we Liberal Democrats believe there was a better way of doing it. Right now, capital gains tax is unfair for everyone. Most people already pay too much capital gains tax when they sell a property or a few shares because the system does not account for inflation over the time they have owned them. At the same time, a tiny number of super-wealthy individuals—the top 0.1%—are able to exploit the capital gains system as effectively one giant loophole to avoid paying income tax like everyone else.

According to the latest HMRC statistics, 12,000 multimillionaires used the loophole to pay less than half the top rate of income tax on their combined £50 billion of income. Instead of raising capital gains tax across the board, we Liberal Democrats would have liked to see the Government properly reform CGT to make it much fairer. To provide a comparison, under the Labour Government’s proposals, the main rate of capital gains tax for basic rate taxpayers is being increased from 10% to 18% and, for higher and additional rate taxpayers, from 20% to 24%. According to the Government’s own statistics, the change will raise about £2.5 billion per year by 2029 to 2030. Under the Liberal Democrat proposal, we would have separated out capital gains tax from income, raised the tax-free allowance, provided a new allowance for inflation and had three different rates of capital gains tax. That would have raised £5.2 billion, more than twice the Government’s proposals.

As colleagues will hear, key to our proposal is the reintroduction of indexation—effectively, an allowance keeping people from paying tax on gains that are purely the result of inflation. That would be fair for ordinary people selling a family home or a few shares, but it would also incentivise long-term investment by ensuring that taxpayers are not penalised due to inflation if they hold their assets for a long period of time.

To summarise, the Liberal Democrat proposals for reforming capital gains tax would be fairer and would raise twice as much. The Institute for Fiscal Studies said our proposals would move CGT in a “sensible direction”. Our new clause 1 is incredibly simple. It would require the Government to produce a report setting out the impact of the changes to capital gains tax under the Bill on investment and on the disposable income of people in different income brackets. The objective behind the new clause is to illustrate to the Government that there is a fairer way to reform capital gains tax and to encourage the Government, in the spirit of constructive opposition, to look at our proposals in future years.

--- Later in debate ---

[The Chairman of Ways and Means]

I call the Liberal Democrat spokesperson once again.

[Daisy Cooper]

At the heart of the debate is a stark injustice, understood by every man, woman and child on the streets of Great Britain. In the last few years, oil and gas giants have made eye-watering profits—in many cases, they are profits that they did not expect to make—and they have made them off the back of Putin’s brutal invasion of Ukraine and global supply chain issues that caused energy prices to soar. At the same time, people have seen their living standards drop and their energy prices soar. In too many cases, people have had to choose between heating and eating.

We Liberal Democrats were the first party to call for a tax on oil and gas windfall profits back in October 2021, but it was not until May 2022 that the previous Government eventually introduced the energy profits levy. It was half-hearted and woefully late. If it had been brought in when we had called for it, there would have been additional revenue to reduce people’s energy bills and launch an emergency home insulation scheme, reducing energy consumption, which would have been good for the climate, and reducing people’s bills, which would have been good for their pockets.

The previous Government effectively let oil and gas giants off the hook, by initially setting the energy price levy at just 25% and putting in place a massive loophole in the form of the investment allowance. That allowed the oil and gas giants to get away with vast sums at taxpayers’ expense, with the excuse of investments that they would have made anyway. In essence, the Conservatives gave them tax relief on polluting activity when they should have been doing everything to raise funds to reduce people’s bills and urgently insulate homes.

Thanks to the investment allowance—the big loophole—in 2022, Shell admitted that it had paid zero windfall tax despite making the largest global profit in its 115-year history: a profit of £31 billion. As some colleagues in the Committee have referred to, energy prices have come down since those record levels of 2022, but the oil and gas producers have still seen huge profits. In 2023, Shell saw its profit come down from £31 billion, but it still made £22.3 billion.