Finance (No. 2) Bill

Pat McFadden Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I would like to begin by echoing the tributes made from all sides of the House in recent days to the Duke of Edinburgh, Prince Philip. It is a testament to the endurance of his public life that you would have to be almost 80 years old to have any real memory of a time when both he and Her Majesty the Queen were not at the pinnacle of the monarchy. On behalf of my constituents, I would like to send Her Majesty and the royal family our deepest condolences at this most difficult time.

Turning to the debate, it is a pleasure for me to respond on behalf of the Opposition. I thank all Members on all sides of the House, who made very wide-ranging contributions today, and some of them, Madam Deputy Speaker, related to the Bill before us. We have heard excellent contributions on a wide range of issues, including the move away from diesel, climate change, local recovery bonds, the taxation of covid tests, those excluded from Government help schemes, the arts and cultural sector, the aviation sector, the Help to Grow scheme, freeports and regional inequality—or, as the Government call it, levelling up.

On the latter, we heard of the urgent need for action because of years of neglect. Now, I hate to pose an awkward question, but I have been scratching my head and I have to ask: who has actually been in power for the past 11 years? Who presided over that neglect? Who was it who cut billions of pounds from local authority budgets over the past decade? Who was it that abolished the regional development agencies that were responsible for regional development in the first place? Who was it that downgraded Sure Start, and attacked the opportunities and life chances of some of the lowest-income children in the country? I really think that we should be told who it was who presided over the neglect that has spurred the Government to these policies today. I admit that it is a neat trick to pretend that you have only been in power for a year, but the truth is that it has been 11 years. What the Government are now trying to do is fix their own mistakes to repair damage that they caused in the first place.

Now, I admit it must be a relief to the Treasury Ministers to attend the debate today and to be able to shelter on the Front Bench for a few hours, to get some respite from calls from David Cameron. They can tell him that they were in the Chamber and they had their mobiles switched off as he worked his way through the whole Department. If I am right, the Minister responding is one of the few people in the Treasury who has not yet received a call from the former Prime Minister, but he might still be working his way through the list. Right now in the Treasury there are no doubt officials cowering behind doors, hoping that the former Prime Minister does not have their phone number. If he does get through, they can give him the new excuse we heard today: that the new Government loan schemes on which he has been lobbying have nothing to do with the Treasury. Ignore all the press releases, ignore all the tweets, ignore the Instagram videos, ignore the invitations to “Ask Rishi”. It turns out that the case for the defence is that it is all somebody else’s responsibility. But that will not wash—it will not wash at all.

At the heart of the Finance Bill are the tax changes set out in the Budget. As we established during the Budget debates a few weeks ago, those tax changes turn on its head decades-long conservative orthodoxy, not just because tax rates are going up but because the expectation is that alongside rising tax rates will come rising revenues. The projections are set out in the Red Book on corporation tax, thresholds for income tax and the other measures laid out in the Bill.

The Red Book estimates and the Bill lay to rest the argument set out by Conservative politicians from Margaret Thatcher to George Osborne that cutting rates rather than raising them leads to an overall rise in revenues. Indeed, the argument advanced at the core of this Finance Bill—that corporation tax rates should rise and businesses should be compensated by an increase in investment allowances—is the exact mirror image of the argument used by the previous Chancellor to justify the cuts he made to corporation tax. At that time, we were told that all those reliefs and allowances were too complex and that they could be cut to help fund a cut in corporate tax rates; now, the opposite argument is being advanced. Osbornomics are officially buried by Rishnomics in this Finance Bill.

That is all, of course, at the level of policy and ideology. What about the practical level—the practical effect? The freezing of personal allowances will bring an extra 1.3 million taxpayers into the system over the next few years. I thought it might be helpful to illustrate the effect of some of the proposals on a particular constituency, so I picked one at random: Hartlepool. The proposals mean that 34,000 basic rate taxpayers in Hartlepool will face a tax increase before corporations have had to pay a single extra penny toward the costs of the pandemic. In Hartlepool, there are 11,732 households on universal credit. The decision to withdraw the £20 a week uplift from them later this year will cost them collectively almost £12 million extra over the following 12 months. That is what these changes mean in one constituency. That is what they mean to families around the country.

The Bill also sets out plans for the new system of investment allowances, which are related to the recovery loan scheme recently launched—I underline this—by the Treasury. The Treasury cannot escape ownership of this one. What will the Treasury system be to accredit lenders under the new recovery loan scheme? Will it just be for regulated lenders? How will it test the capital adequacy of the institutions involved? How will it avoid a repeat of accrediting for the scheme a lender who is on the brink of collapse?

Of course, the overall judgment on the Budget and the Finance Bill must be by the test of how it gets us through what is happening now and the foundations it lays for the future, and the Bill deals with only one phase of that. On the extension of many of the emergency measures put in place since the beginning of the pandemic, we called for many of those measures in the first place, and they are obviously necessary while we are still in the teeth of the fight against the virus. By that, I mean of course the extension of the furlough scheme, the help for the self-employed and so on. Those interventions cost considerable sums of money, but the social and economic cost of not doing them would have been far, far greater. Governments can act in times of crisis to help the country through. Indeed, if a Government did not do so, we would have to wonder what they were for. But in addition to that immediate crisis help, there is a longer-term rebuilding job to be done. We are going to need strong, job-creating growth if we are to recover from the past year. The economy will not come back exactly as it was before the first lockdown. The pandemic has exposed deep inequalities in society. It has shown the stark reality of what many key workers are paid. It has laid bare the vulnerabilities of our society and the very different circumstances of those who could work from home and those who had no choice but to go to work day after day, no matter the risk to themselves and their families.

In terms of other changes, the pandemic has been described as the “great acceleration”—10 years’ change crammed into one. The way we shop, work, pay for things, educate children, deliver healthcare and much else has been changed, probably forever. Technology and change apply to everyday life as never before. How do we make the most of these trends? How do we ensure that people are equipped for the economy that comes out of this pandemic and that these changes do not simply exacerbate existing inequalities? Those are the urgent questions facing politics today.

Expectations have been changed about what Governments can do, not only here but in the United States, as we have seen in recent weeks, and across the world. This will change the shape of the political argument in the future—not a return to the same old argument about tax and spend, but an argument instead about who can best equip the country for the future, who can rebuild the best and who can deliver the transition to greener jobs, heal the inequalities that have been exposed by the pandemic and help children to recover from the education that has been lost.

The Finance Bill is silent on those challenges, as was the Budget. That is why it is a job only half done. It puts tax increases in place for the next few years that hit family finances before corporations, and it does so with no plan for the recovery that the country needs or one to rebuild the public realm—the public square—to make it more resilient in the future. That is why we have tabled the reasoned amendment on the Order Paper. The second half of that job—what the country has to do—is still to come, and that will be where the argument over the best economic future for the country and how we truly recover from the events of the past year is played out.