Finance (No. 2) Bill

Peter Grant Excerpts

2nd reading
Tuesday 16th November 2021 Commons Chamber

[Lucy Frazer]

I will just carry on to my next point, which is that there will be an increase in the social care budget in the spending review period.

A fairer tax system also means tackling those who avoid paying their share. A new economic crime levy will help to fund measures that will prevent criminals from laundering money in the UK. It will apply to about 4,000 businesses and bring in £100 million. The Bill also contains tougher measures to prevent promoters from marketing tax avoidance schemes. In addition, it includes sanctions to tackle tobacco duty evasion, which costs the Exchequer an estimated £2.3 billion a year. The Bill also clamps down on electronic sales suppression, a form of tax evasion in which a business deliberately manipulates its electronic sales records to reduce its recorded turnover and corresponding tax liabilities.

[Peter Grant (Glenrothes) (SNP)]

I am pleased to hear about the Government’s commitment to taking on those who make money by promoting tax avoidance schemes. One such scheme that has been on the go for a long time is the loan charge. Can the Minister give us an update on progress towards bringing to account not the thousands of small-time self-employed people who have been caught, but the big players in that scandal? How many people have actually been surcharged or prosecuted for promoting loan charge schemes?

[Lucy Frazer]

I am grateful to the hon. Member for that question because I appreciate, since being in this role, that the loan charge is an issue that has affected many people across the country and that many MPs feel very strongly about. I have spent quite a considerable amount of time already talking about this issue not to only the chief executive officer of Her Majesty’s Revenue and Customs, but to officials. I have also had the opportunity to meet HMRC officials who are dealing with the vulnerable people who may be subject to the loan charge and to ask questions about how they are treating them.

The hon. Member makes a really good point, because the real perpetrators in relation to the loan charge are those who offer these schemes and getting people on low pay into them. An issue I have raised directly with HMRC is how we can further prosecute and bring these people to justice. Unfortunately, I understand that many of them are located offshore, but we will be doing everything we can to ensure that those who are responsible for promoting this are brought to justice.

This Bill deals with those who try to get out of paying tax, but it also creates a simpler and easier system. Its measures make capital gains tax easier to navigate, doubling the window for reporting and for paying CGT on residential property from 30 days to 60 days. This will give people longer to work out what they owe and make it less likely that they will make a mistake. For businesses, we are creating a simpler tax system through reforms to basis periods, leading to a simpler, fairer and more transparent set of rules for the allocation of trading income to tax years.

There is no doubt that the pandemic has cast a long shadow over this country and our finances, but just as our wartime predecessors rebuilt from the blitz, now is the time to open a new chapter in our national story—one of economic growth and renewal, and with it, transformed lives.

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[James Murray]

As my hon. Friend rightly points out, investing in education is critical to the future of our country and the next generation. We heard the Minister say how uncomfortable she feels talking about cuts, but that is the reality of 11 years of Conservative government. No matter how they try to massage the announcements they are making now, the truth is that if we compare 2021 with 2010, we can see the impact that 11 years of the Tories has had on our public services.

At a time when working people are facing rising prices and flatlining wages, it shows the Tories’ true colours that they are prioritising a tax cut for bankers. To rub salt in the wound, as the IFS has pointed out, the cut in air passenger duty will flow through the UK emissions trading scheme and push up electricity prices at home. It was shocking to hear the Chancellor announce a cut in air passenger duty just days before COP26, and it is shocking that his tax cut for banks will cost the public finances £1 billion a year by the end of this Parliament.

That cut will see the corporation tax surcharge for banking companies slashed from 8% to 3%, with the allowance for the charge raised from £25 million to £100 million. It is worth reminding ourselves why that sector-specific tax was first introduced. As the policy paper published alongside the Budget—I am sure the Minister has read it—sets out clearly, the charge has been levied on banks to reflect

“the risks that they pose to the UK financial system and wider economy”

and to recognise

“the costs arising from the financial crisis.”

When the surcharge was introduced 10 years ago, in the wake of the financial crisis, the Government at the time seemed to recognise that banks had an implicit state guarantee due to their central position in the UK economy, and that that guarantee should be underpinned by greater tax contributions. Yet, as Tax Justice has pointed out, the Office for Budget Responsibility found in 2019 that £27 billion of Government expenditure on bailing out the banks was still outstanding. It seems that the Government are determined to push ahead with a cut to the surcharge, despite the fact that it will not even have fully repaid the public money spent on banks during the financial crisis, let alone provided any insurance against a future crash. We will question Ministers on that further in Committee.

We will also use that chance to press Ministers on other parts of the Bill, including those that introduce the residential property developer tax and measures relating to money laundering and tax avoidance. We support the principle behind the residential property developer tax, which will be levied on the largest developers in the residential property sector. It is right that those responsible for putting dangerous materials on buildings should pay towards the very significant costs of removing unsafe cladding, but it would be a mistake to assume that levying that tax alone will mean that the cladding scandal will in any way come to an end.

The tax is expected to raise £2 billion over 10 years, yet the Housing, Communities and Local Government Committee has estimated that addressing all fire safety defects in every high-rise or high-risk residential building could cost up to £15 billion. What is more, extreme pressures on labour and materials mean that the cost of fire safety works could rise significantly, all but wiping out the money raised from the new tax proposed in the Bill.

The bottom line is that leaseholders living in buildings with potential fire risks and facing huge remediation costs need to know how those costs will be met in full and that the necessary work will be done without delay. There are plenty of people involved in this scandal who should be paying to fix it, but leaseholders are absolutely not among them.

We also support the principle behind the economic crime levy to raise money from the anti-money laundering regulated sector to pay for measures in the economic crime plan to help tackle money laundering. As the director of the Centre for Financial Crime and Security Studies has said, a

“key challenge for the UK Government’s response to financial crime is a lack of investment in capabilities to respond to its policy ambition.”

We hope that the funding from the levy will go some way towards increasing the capacity in government to tackle economic crime, although we will press Ministers on whether it is enough.

[Peter Grant]

Does the shadow Minister agree that, as part of the drive to deal with money laundering, there is also a need for significantly greater transparency so that the people who buy up huge swathes of property in London, for example, are openly identified and any illegal money that has been laundered in that way is much harder to hide?

[James Murray]

The hon. Gentleman makes an important point. Alongside funding, of course, there are also changes to the law that would strengthen the UK’s ability to fight economic crime. Top of the list must be putting in place a public register of the beneficial owners of overseas entities that own UK property. Such a register would bring much needed transparency to the overseas ownership of UK property and help to stop the use of UK property for money laundering.

So, where is the register? In 2016, Prime Minister David Cameron first announced plans to make it a reality. In 2017, the “National Risk Assessment of Money Laundering and Terrorist Financing” confirmed that property continued to be an attractive vehicle for criminal investment, particularly high-end money laundering. In 2018, a draft Bill to set up a register of overseas entities was published. In 2019, a Joint Committee of MPs and Lords published their pre-legislative scrutiny of the Bill and the Government published their response. In that response, published in July 2019, the Minister responsible, the hon. Member for Rochester and Strood (Kelly Tolhurst), said:

“Knowing who ultimately owns and controls a company is an important part of the global fight against corruption, money laundering and terrorist financing.”

We agree. The Minister committed to

“turn this Bill into an Act, and to deliver an operational register in 2021.”

However, since that Government response was published in July 2019—and since, as it happens, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) became Prime Minister, at the end of that very month—the desire to see the register put into place seems to have lost its energy.

Ministers are legally required by the Sanctions and Anti-Money Laundering Act 2018 to report to Parliament annually on the progress that has been made toward putting such a register in place. In 2020, a ministerial statement was indeed published, but any commitment to the register being operational by 2021 had by then been dropped. This year’s ministerial statement, published on 2 November, barely mentioned the register, arguing:

“The overseas entities register is one of a number of proposed corporate transparency reforms”.

The statement focused mainly on other changes and, in fact, barely mentioned the register, ending with that dreaded phrase:

“The Government intends to introduce legislation to Parliament as soon as parliamentary time allows.”

It is astonishing that the Government feel that the need for the register is becoming less urgent. The Pandora papers confirmed how overseas shell companies secretly buy up luxury property in the UK, and how much transparency is needed to help to tackle money laundering.

What are we meant to conclude from the fact that the appointment of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) as Prime Minister in July 2019 coincided perfectly with a change in direction by the Conservatives away from a commitment to make transparent the ownership of overseas companies buying up UK property? What could possibly be the connection between overseas individuals investing in UK property through anonymous companies and the current occupant of 10 Downing Street? Why on earth would anyone in Government not want to introduce the transparency that their own colleagues have said in the past is crucial to tackling high-end money laundering?

I am sure that later in the consideration of the Bill, we will return to the matter of anti-money laundering. At later stages, we will also consider the effectiveness of measures in the Bill to tackle tax avoidance, as that is an important matter for us and the public. In the Opposition, we have long been pushing for the Government to do more to tackle tax avoidance, and while any action on that is welcome, including the measures in the Bill, we do not believe they go far enough. Crucially, as well as the regulations that are needed, the Government must invest in the resources that Her Majesty’s Revenue and Customs needs to tackle the problem effectively.

The Budget papers confirm that HMRC is set to receive a

“£0.9 billion cash increase over the Parliament”.

However, as TaxWatch has pointed out,

“the vast majority of this will not go towards tackling tax fraud, but rather to deal with the additional complexities surrounding the UK’s departure from the European Union.”

We know that effective investment in tackling tax avoidance can bring in much more than is spent, so it is crucial to make sure that that is not ignored by the Government. We will return to this important matter in later stages of the Bill. We will return to that point because the principle at the heart of our tax system must be that everyone plays by the rules and pays their fair share. That principle needs to be stated and supported, as under this Government, with this Budget and this Finance Bill, our country is moving further and further away from that ideal.

Labour’s vision of the economy is this: invest in good modern jobs with decent pay and conditions in every part of the country; support small businesses and high streets from being undercut by large multinationals who do not pay their fair share of tax; and buy, make and sell more in the UK to use every lever we have to support British industries to succeed. That is how we begin to rebuild and strengthen our economy after a decade of low growth, with no end in sight. That is how we make sure people have more money in their pockets for them and their families, and how we increase tax revenues to invest in public services.

But that is not what we are getting from this Government. The low growth they are responsible for means that taxes have had to go up. Faced with a choice of which taxes to raise, the Tories have shown the British people their true colours. Millions of families across the country are already being hit by the Tories’ decision to cut universal credit. From next April, working people across the country will pay more, as their income tax personal allowance is frozen and their national insurance contributions are hiked up. Yet from the April that follows, banks will see the tax they have paid since the financial crisis cut by £1 billion a year by the end of this Parliament. That is the choice the Tories have made: taxes on working people will go up, while taxes on banks will be cut. For people who are working hard but finding things tough, the Tories have nothing to offer except a tax rise.

Fairness is the one of most British values there is, yet it is one this Government just do not get. The Tories are spending all their time protecting themselves, when they should be looking out for the British people. Labour would grow the economy. We would invest in the future. We would make sure working people were never again the first to feel the brunt of tax rises that this Tory Government are forcing on their shoulders.

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[Peter Grant (Glenrothes) (SNP)]

It is my great pleasure to contribute to this debate. Today, 16 November, we mark the feast of St Margaret Atheling, Queen of Scots, one of our two national patron saints and, like the rest of us, an adopted Fifer. For those not familiar with it, I recommend a read through her life story, because a surprising amount of it has lessons that are as relevant today as they were nearly 1,000 years ago, when she was alive. For example, Margaret was revered for her generosity to the poor. She is said to have regularly gone into the streets dressed in poor clothing and given food to the hungry and money to the poor. She clearly believed that earthly power has no legitimacy unless it is used in the interests of others. We might want to bear that in mind in the decisions we take later today, and indeed every day, in this place.

I wish to look at some aspects of the Finance Bill, and at who it benefits and who it damages. I go back to the question I raised with the Minister earlier about prosecutions and penalties against promoters of the loan charge. I was disappointed that the Minister did not answer the question as to how many such penalties had been applied. I would have thought that, if it was that important to the Government, they would have made sure that their officials put that information into the briefing for today. I have no issue with people who deliberately went into loan charge agreements knowing that they were wrong and that they were doing that only to dodge their rightful tax liabilities going through the full legal process. However, a lot of people who signed up to the loan charge did so because they did not understand it or because they were assured by paid tax advisers that it was all okay, and a lot of them did it because they would have lost their jobs if they had not. They get hounded to the ends of the earth—some of them literally get hounded to death—yet very few of the people who made millions out of these schemes have ever been brought to justice. The victims in my constituency have serious doubts as to whether any of the real villains of the piece will ever be brought to justice or indeed whether this Government have any intention of doing that.

When we look at the impact of this Finance Bill, and of the Budget statement it is based on, we must not let ourselves be hoodwinked by the massive impact of other announcements that have been flipped through by the Government in other ways over the past six months or so to try to make it look as though their Budget was not quite as savage as it was. We must recall the £1,000 a year cut in universal credit; the ending of the pensions triple lock, leaving our pensioners more at the mercy of rampant inflation than they were before; and the national insurance hike, which has been trumpeted as the saviour of the health and social care sector, whereas the reality is that, for several years at least, very little of it indeed will go into improving the availability of social care in England. It might be there in three or four years, but this is not a crisis that is going to be there in three or four years—it is a crisis that has been there and has been ignored for far too long.

Of course, sometimes when the Government want to increase taxes, they like to find sneaky ways to increase taxes on low-paid workers in a way that does not make it obvious what they are doing. All they have to do to achieve that is to do nothing. There is nothing in this year’s Finance Bill about the thresholds for the different rates of income tax. There is nothing in it about the level of income at which someone first becomes liable to pay income tax, because they have left it exactly as it was last year in cash terms. With people likely to face inflation of 4%, people on low incomes will either take a real-terms cut in wage of 4%, or if they get enough of an increase to match inflation the Chancellor will say, “Thank you very much. I’ll have a bigger cut of it for myself than I had before.” People on low earnings who are already struggling need an increase of 4% to stand still and to continue to struggle.

The 1.25% increase in the national insurance charge might not seem to be that much; 10p or 50p an hour below the proper living wage might not seem to be that much, but it soon adds up. Take, for example, someone working 40 hours a week on the Government’s new minimum wage of £9.50 an hour, and paying income tax and national insurance according to the rates and thresholds set out in the Bill. Those are exactly the people the Government say the Budget is designed to help. They are exactly the people for whom work is supposed to pay. Now, take the same person but this time getting the real living wage of £9.90 an hour, let their personal allowances and national insurance thresholds keep pace with inflation, and scrap the national insurance increase, leaving it at 12%, instead of 13.25%. The difference in their take-home pay is £800 a year. That does not seem much to those of us lucky enough to be on an MP’s salary, but for those who are just about managing to get through to the end of the week, another £800 a year in their pocket—or £800 taken out of their pocket by the Budget—makes a significant difference. The impact of this year’s Tory cuts alone—they are cuts, no matter what the Minister might say—is that those people are suffering a pay cut of almost 5% in real terms.

We have not even started to look at the more fundamental issues referred to by my hon. Friend the Member for Glasgow Central (Alison Thewliss) and why we need a complete rehash of the entire tax system. Why should somebody who, by an agreed definition, is earning only enough to live on pay income-based taxes at all? Why do we not set tax and national insurance thresholds to match the proper living wage so that the tax authorities have no claim whatsoever on the wages of those earning only just enough to keep them and their family alive?

The Government may well say that times are difficult, that tough choices must be made and that we cannot afford to inflation-proof tax allowances this year, but the tax allowances of some have been inflation-proofed and more—not individuals but businesses that are, for example, lucky enough to be able to afford to buy a casino. In clause 80, on page 63, we see changes to the thresholds for the various rates of gaming duty: the tax that casino operators pay in what is termed the gross gaming yield, which is the difference between the stakes that people pay in and the winnings they take out. It is in effect an income tax on casinos and similar places. Lo and behold, the tax thresholds for casinos are going up by 5.4%, which is higher than the rate of inflation that the Chancellor expects to see. That is on top of their inflation-busting increase last year. They have had an increase of 8.7% over just two years.

To put that into context, a casino with a gross gaming yield of £10 million a year will pay £100,000 less in tax next year than it would have last year, while the poor souls working their tails off in the casino kitchen keeping the clients fed and watered will be paying higher taxes. How can it be right that a casino owner pays £100,000 less in tax while the people whom they employ on low pay in their kitchens and catering departments have to pay increased tax? That is not a necessity; it is a deliberate political choice, and it is the wrong choice.

If only other businesses had as much to celebrate as the casino industry clearly does. Hospitality businesses are—quite rightly—being told to adapt their business models so that all their workers get paid a fair living wage. I have had some quite difficult conversations with hospitality businesses in my constituency that are not happy at that. But why on earth do the Government think it is also the right time to tell them that they must pay more tax on every single job that they create? Why on earth is it right to tell them that the rate of VAT that they will pay next year will be 60% higher than this year? It is ridiculous.

I am not saying that we should not take difficult decisions. The UK’s finances, like those of many western democracies, are in a seriously difficult place. The Minister said that levels of debt and borrowing are affordable. They are—just about—but they certainly are not sustainable. We must turn that around quickly. Difficult decisions need to be taken, but the problem is that, far too often, the Government are happy to take decisions that are difficult for other people but not at all difficult for their friends, chums and millionaire donors. The economic impact of the covid pandemic has almost certainly been made much worse because of their total lack of planning on the economic impact of the action needed. That means nearly all the Government’s support schemes had to be thrown together at almost no notice, which inevitably means they did not achieve what they were supposed to achieve. Very few of them achieved optimal results from day one. Too many people, several million of them, were excluded from support altogether, and almost all the schemes that were implemented turned out to carry levels of fraud risk that were far higher than they needed to be. Billions of pounds of public money has been lost to fraud that would have been avoided if the Government had prepared better in advance.

The economic damage of the pandemic could have been lessened, although we accept it almost certainly could not have been avoided completely, but the economic damage of Brexit could have been avoided completely if, in 2016, people had been told the truth of what it would involve. Let us not forget that the Government’s analysis is that the self-inflicted damage of Brexit is likely to be twice as bad as the economic damage of the covid pandemic.

To a much larger degree than the Government will admit, the tax rises on the poor contained in this Finance Bill are the price of a Brexit that, let us not forget, was rejected by almost two in three voters and every single local authority area in Scotland. If that is the price for Scotland to remain part of the United Kingdom, it is a price I do not believe the people of Scotland are willing to pay any longer.

Interestingly, a standard form of wording that I do not see in this Bill is, “Extent. This Bill shall apply to Scotland.” I do not expect it to be too much longer before those words are no longer part of any legislation passed by this House.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call John McDonnell.

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[Christine Jardine (Edinburgh West) (LD)]

It is a pleasure to follow the right hon. Member for Hayes and Harlington (John McDonnell). I rise to my feet on behalf of the Liberal Democrats to say that we cannot support this Finance Bill, which derives from a Budget that missed a vital opportunity to help struggling families in this country. Instead, it hammers them with tax hikes, empty words and broken promises. It is completely out of touch and offers nothing to help them with the energy bills that they will face this winter. Worse than that for me, the Bill sends a clear message to children and their parents that they are worth less to this economy than investment bankers and banks. Far from providing the support that families needed when we are facing a cost of living crisis, this Finance Bill will provide less in extra catch-up funding for schools than it does in tax cuts for big banks. There will be just £1 of extra catch-up funding for each child, compared with £6 a day in tax cuts for each banker. That brings the £1.8 billion new catch-up money offered to just £5 billion, one third of what the Government’s own advisers said was necessary to allow our children to catch up on the many millions of hours that they have in total lost in their classrooms over the past 18 months, which threaten, according to official figures, to leave them losing anything up to £46,000 in income over the course of their lifetime. Putting bankers before children tells us everything we need to know about the priorities in this Bill.

People who have worked hard, paid their taxes and played by the rules are seeing their incomes squeezed through no fault of their own. They are being crippled by tax hikes and their benefits have been slashed—all in the face of skyrocketing bills. We should be demanding a fair deal for families and an investment in future generations: support for vulnerable families, more investment in our children’s education and more funding for tackling the climate emergency. Instead, we see an end to the £20 uplift to universal credit, nearly half the minimum wage rise clawed back through the increase in national insurance, no help with energy bills, the Chancellor’s announcement on universal credit taper giving back just one third of what he snatched away, and millions of families with no help at all.

When it comes to the climate, while COP26 was getting under way in Glasgow and we were all looking for something that would send a clear message that saving the planet was a major priority, what did we get? We got a reduction in air passenger duty, which will do nothing at all to help to reduce carbon emissions.

This Bill offers nothing of what we would like to see for the people of this country. It offers nothing, either, for the businesses, because it fails to deliver on the Government’s promise to reduce business rates through a fundamental review of the system, leaving companies with no long-term support as they cope with the impact of the pandemic and new international trade barriers. The business rates announcement will not abolish the skewed and complicated system, which only benefits property landlords and not the hard-working business owners who rent from them. Even the tax cuts for businesses investing in green energy for properties are only set to benefit commercial landlords, not our high street shops, whose owners will really pay the bill.

Businesses have been hit hard by endless Government disasters, the handling of the pandemic and a new mountain of red tape introduced post Brexit. However, I cannot agree with the hon. Members for Glasgow Central (Alison Thewliss) and for Glenrothes (Peter Grant) that the answer to all that is an independent Scotland.

[Peter Grant]

Oh, go on, go on.

[Christine Jardine]

Not this time. On that point, I cannot agree, because there have been Governments in this place that have done wonderful things for Scotland, not least of which was to deliver devolution, and we have learned in Scotland over the past 14 years that moving the Government to Holyrood does not guarantee it will be any better. On behalf of my colleagues in the Liberal Democrats, we will not support the Finance Bill and we will support the Labour amendment.