Finance (No. 2) Bill

Debate between Rebecca Long Bailey and Antony Higginbotham

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

[Antony Higginbotham (Burnley) (Con)]

I agree with almost everything my hon. Friend the Member for North East Bedfordshire (Richard Fuller) said about corporation tax. It is a tax on success, and on this side of the House we are all naturally low-tax Conservatives—we believe fundamentally that businesses are most successful when they are left to innovate and grow, and can keep more of the money they earn. However, we also have to accept that that is not the only thing that drives businesses. Globally adaptable businesses that look around the world at where they are going to locate their next manufacturing plant or innovation look at myriad factors: the support available; the skills of the local population; and the infrastructure in place. All of those things cost money. As we have seen during the past 12 months, the Government have gone to great lengths to support businesses. In my constituency, 11,000 jobs have been supported by the furlough scheme. That is money that has helped businesses across Burnley and Padiham prepare and stay ready for when the economy reopens. We are also talking about £20 million in grants so that those same businesses can restart as soon as the economy opens up. All businesses understand that; they understand that responsibility comes with this and the taxation they pay enables them to take part in society in a meaningful way.

With all that in mind, I agree with the measures my right hon. Friend the Chancellor set out on corporation tax, as a low-tax Conservative. I do so because the Chancellor has struck exactly the right balance in making sure we secure the economic recovery first: we do not look at businesses now as they are just starting to reopen and get trading again and say, “Just because you are profitable, we are going to increase your tax rate immediately”; we look ahead and say, “When the economy has recovered and you are trading as you were pre-pandemic, that is when we will look for you to make a fair contribution to repay some of the support we have been able to put in place.”

In Burnley and Padiham, we are heavily reliant on small and medium-sized enterprises—those small innovators. As we recover from the pandemic, we often see the most SMEs and new businesses start up; people who used to work for one company and who may have been made redundant—something may have happened—then start their own businesses. That is why the small profits rate of corporation tax is so important, because it is the incentive those innovators and entrepreneurs need to start their business, to grow, to employ someone else.

We also have to recognise that one thing we have suffered from historically in the UK, for many, many years, is low productivity, and that has come from a huge lack of investment from businesses. If we are really going to level up across the country, we need to drive investment in growth and utilise the power the private sector has through whatever means are available to us. We know that since 2007-08 there has been a systemic lack of investment, driven by the uncertainty we have had, so that there is a pot of money that so many businesses are sitting on, waiting to be unlocked. That is where the super deduction will prove so important, because it encourages those businesses that have had a stockpile—that have lived with uncertainty for the best part of a decade and so have not been able to invest, as they have not had that confidence. As we emerge from the pandemic, the super deduction gives them the confidence to invest.

In Burnley, we are talking about aerospace manufacturers, automotive manufacturers and textile makers. The super deduction will help businesses transition to green technology, as we have spoken about. It will help aerospace businesses to move into HS2 and textile companies to move into weaving—we do still make textiles here in the UK.

All of these things will result in a high-skill, high-wage manufacturing economy here in the UK. So, yes, we need to keep the UK attractive to investment, job creation and new businesses, but we do that through a fair corporation tax system, lower rates for new businesses and using schemes such as the super deduction to drive investment into manufacturing jobs, which are going to be so vital for our future.

[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.