Finance (No. 2) Bill

Rachel Hopkins Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[Rebecca Long Bailey [V]]

I will limit my comments to the super deduction which, as we have already heard today, will be one of the largest single-year tax giveaways ever enacted in the UK. Arguably, some companies’ corporation tax bills will be wiped out entirely for a couple of years.

My right hon. Friend the Member for Hayes and Harlington (John McDonnell) has already said that the Public Accounts Committee found that tax reliefs cost more than £100 billion a year in forgone tax, but HMRC does not know how many reliefs exist; nor does it monitor the efficacy of such reliefs. That is staggering. Can we be confident that HMRC will know what effect the super deduction will have, and who will actually benefit from it? Many of my small and medium-sized enterprises in Salford would love a super deduction, but sadly it will not benefit them. The Financial Secretary to the Treasury told the House last year that the enhanced annual investment allowance of £1 million already covers the capital expenses of 99% of businesses in the UK, so it seems that this super-relief will overwhelmingly benefit only 1% of extremely large businesses.

I would have no problem if such businesses desperately required the relief in order to protect jobs or to invest in our local economies, but let us look at some of the potential beneficiaries. Amazon has benefited from the pandemic, seeing its sales jump by 50%. According to TaxWatch, the company’s latest accounts show that they spent £66.8 million on plant and machinery, £80.4 million on office equipment and £15.3 million on computer equipment in the same year, so the 130% super deduction could entirely account for the pre-tax profits of the company even before any deductions of staff pay awards.

Similarly, many energy and water companies find themselves also able to wipe out their tax bill. United Utilities spent £1.275 billion on property, plant and equipment in the past two years, compared with a current tax liability of just under £89 million. Electricity North West stated that covid has had a limited impact, and it had a tax bill of £45 million for 2019-20 while investing £449 million in property, plant and equipment. For both companies, it would only take a small proportion of the capital investment to be spent on plant and equipment to use the super deduction to eradicate their tax bill, too.

Do these buoyant companies really need a super deduction? The answer is no. In the absence of any clear conditions specifying the use of such savings or providing a wider social benefit, such as increasing salaries for workers, investing in decarbonisation or reducing costs for end consumers, I struggle to see the benefits being passed on to anyone other than shareholders.

I hope that the Government support amendment 11 and new clauses 1, 2 and 6 in the name of my right hon. Friend the Member for Hayes and Harlington and others, as well as the Labour Front-Bench amendments, because there are companies that do need support to help them recover from the pandemic. There is a real need to support long-term, patient investment by industry, but the untargeted nature of this relief, without conditions, is not the best use of public money. In fact, it borders on the obscene.

[Rachel Hopkins (Luton South) (Lab) [V]]

I shall speak in support of the amendments in the name of the Leader of the Opposition and those in the name of my right hon. Friend the Member for Hayes and Harlington (John McDonnell). The Budget and Finance Bill represent the Government taking steps towards further structuring our economy on insecure, precarious work and deregulation, which will widen income and wealth inequality.

The Government’s unambitious plan provides neither a foundation for rebuilding our economy nor a plan to tackle the climate emergency that my constituents have called for. They have announced a future cut to social security and a real-terms pay cut for public sector workers at the same time as introducing a super deduction tax cut for big businesses, allowing firms to write off 130% of the value of qualifying capital investment against their taxes.

When we look across the Atlantic to the US, we see a stark contrast. The Biden Administration have committed to fast-tracking a $1.9 trillion Government-led stimulus package, which is about 10% of the annual output of the US economy and which contained no promises of future deficit reduction. That is alongside a forward-looking plan to spend a further $2 trillion on infrastructure. Biden’s spending plan, in proportion to GDP, is three times the size of the UK’s.