Finance (No. 2) Bill

Richard Drax Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[Victoria Atkins]

As the right hon. Gentleman knows, I am bound by collective responsibility, so I can neither confirm nor deny what the Secretary of State for Scotland may or may not have said. I do not know, but I certainly intend to continue to support the Scotch whisky industry. [Interruption.] My hon. Friend the Exchequer Secretary to the Treasury reminds me that the changes will be coming in in August. We want to work constructively with industry on this.

Another opportunity is in delivering a better connected country. As announced in the autumn Budget 2021, the Bill delivers a package of air passenger duty reforms that will bolster air connectivity across the UK through a 50% cut in domestic air passenger duty. Set at £6.50, the new domestic band will benefit more than 10 million passengers from April. The reforms will also align with UK environmental objectives by adding a new ultra-long-haul band, ensuring that those who fly furthest and have the greatest impact on emissions incur the greatest duty.

The Bill will also take forward measures to support sustainable public finances, helping to provide the stability and confidence that underpin the economy and supporting businesses and households across the country. Despite energy prices having come down since they reached historic heights after the invasion of Ukraine, we know that many families and businesses still feel the strain. The only sustainable solution to the link between the cost of gas and the price paid by customers for all electricity is to reform the energy market and reduce the reliance on gas generation, so as we announced at the autumn statement, the Government are now legislating for a tax on the extraordinary returns of electricity generators resulting from the spike in gas prices driven by Russia’s illegal war in Ukraine. It is forecast to raise approximately £14 billion over the next five years, to help to fund public services and interventions to support households and businesses with increased energy bills.

To further ensure that businesses pay their fair share of tax, the Government will also legislate to protect the UK tax base against aggressive tax planning by large multinational businesses, and to reinforce the competitiveness of the UK; I know that this is a matter of interest to several right hon. and hon. Friends. The Bill will implement OECD pillar two in the UK, which builds on the historic agreement of over 135 countries to a two-pillar solution to the tax challenges of a globalised and digital economy. The global minimum tax—pillar two, as it is called by those who speak accountancy language—will ensure that multinational enterprises pay a minimum 15% rate of tax in each jurisdiction in which they operate, meaning that those companies operating in the UK contribute their fair share to sustainable public finances.

[Richard Drax (South Dorset) (Con)]

Can the Minister tell the House how many countries have signed up to this mad, mad move?

[Victoria Atkins]

I am sensing from my hon. Friend that perhaps I have to convince him. I can tell him that 135 countries have signed the agreement.

My hon. Friend’s question may well extend to implementation; I know from listening to colleagues that there are concerns about that. We are acting in unison with other countries. EU member states are legally obliged by a directive to implement the measure by 31 December this year. Things are moving very fast. Germany published its draft legislation last week, showing its full intent to implement the directive; it joins Sweden and the Netherlands in doing so. Other countries implementing to the same timescale include Japan, Korea and Canada. In its Budget yesterday, Canada made the point that

“the multilateral framework for the global minimum tax regime is now being put in place.”

I understand the concerns that colleagues have raised about implementation and the timing thereof, but we are very much working in unison with other countries. Importantly, because of the position that we are taking, we can help to shape the rules.

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[Craig Mackinlay]

My hon. Friend speaks a truism that should not need to be spoken from the Conservative Benches, as it should be patently clear.

A sole trader who is running a good little business and doing quite well might be knocking on the door of £100,000 in profits—I would have thought that is not an unusual amount for some in the south-east of England, even in the building trades. Too many of them will say, “I’m not going to pay 60%, plus 2% national insurance. I will work four days a week and spend the fifth day on the golf course.” We are losing out through the 60% rate.

Ministers will not be surprised by my objection to corporation tax being increased from 19% to 25%.

[Richard Drax]

Raising corporation tax from 19% to 25% is a 31% increase. That figure is not often used.

[Craig Mackinlay]

My hon. Friend makes a very good point. This 6 percentage point increase is actually very big in percentage terms.

The corporation tax increase is in clauses 5 and 6, and corporation tax has a story in this country. I went back to April 1973, a mere 50 years ago, and it was at 42% in those days. Corporation tax has generally fallen over time, both in the Conservative years and under the Labour Administration between 1997 and 2010. Peculiarly, the Labour Administration even introduced a 0% rate on small profits up to £10,000 between 2000 and 2006. I was more vigorously in practice at the time, and the 0% rate was a bizarre move that caused a rash of incorporations, which people did not need the wisdom of Solomon to foresee. The rate was deemed to be malused, shall we say, so things changed again.

Under us, since 2010, the maximum rate of corporation tax has reduced from 28% to 19%, and what have we seen? We used to have discussions about Laffer-curve economics, to which I am an adherent. There is a sweet spot at which reducing the rate raises more tax. That was behind the thinking of George Osborne, a previous Chancellor. I would not say that I agree with everything he did—I think he meddled rather too much with the tax system; hence, we now have a tax code that runs to about 23,000 pages—but he believed that reducing corporation tax would increase returns, which is exactly what happened. The money we are looking to raise to pay for the NHS, and to do all the good things that public services provide for us, was being delivered through a lower corporation tax rate. Is it any surprise that Ireland decided to put this on steroids by taking corporation tax down to 12.5%? The rate per head of receipt in corporation tax is four times the rate in the UK. Ireland’s corporation tax returns are way in excess of what is raised from one of our primary taxes, VAT.

We lived through the 19% rate era, however, which was very welcome. It attracted international business and, on the other side of this, made domestic businesses think that the risk reward was better and they therefore took their business forward. We had a lot of complications in the old days, when we had marginal rates and businesses had to go from the lower small company rate to the bigger company mainline rate. It was a complicated calculation, and my hon. Friend the Financial Secretary referred to that. It was not only that that was complicated; those with a number of associated companies had to divide the limits, and it was a dreadfully complex calculation. She said clearly that the lower rate of 19% will remain for companies on up to £50,000 of profits, which is welcome and will catch a lot of the numbers as a percentage of the entirety registered at Companies House, so many companies will not be affected.

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[Richard Drax (South Dorset) (Con)]

Every time my late father—bless him—heard me speak, all he said was, “Too long, Richard,” so on that basis I shall be brief. It is a pleasure to follow the right hon. Member for East Ham (Sir Stephen Timms). I refer to my entry in the Register of Members’ Financial Interests. I will speak, probably for no more than five minutes, about the corporation tax rise and the international minimum level of 15%.

I turn first to the corporation tax rise. I have huge respect for the Chancellor, as I do for the Ministers on the Front Bench, so I do not want this point to be taken incorrectly, but during his 2019 leadership campaign, he proposed reducing corporation tax to 12.5%—the rate that, I believe, the Republic of Ireland has now. Corporation tax in the UK will now rise from 19% to 25%, which may look like a 6% rise, but is actually a 31% rise. I totally accept that smaller companies will not be affected, and I accept that there are various capital allowances that larger companies can go for, but as many colleagues have said, why complicate an already complicated tax system? Why not just keep it simple? As a former soldier, I remember the acronym KISS: keep it simple, stupid. I wish sometimes that politicians would do that.

I am very surprised that the international agreement on the minimum level of tax—the OECD scheme—is being pushed through in the Bill. I find that quite extraordinary, because the two do not sit comfortably together. Many Conservative Members and some Opposition Members fought very hard to get control of our country back by leaving the EU, so that we could have our own laws, our own taxes, our own money and so on. I am therefore completely bamboozled by this, and have yet to hear a very good reason why we are signing up to the very thing we were trying to escape: something that enables an unelected multinational organisation to affect how we set our own taxes. As my hon. Friend the Member for Amber Valley (Nigel Mills) said so well, why can we not set and control our taxes? Surely we could have dealt with this on our own.

I find this move, which will subject us to a tax rate set outside our country, to be really extraordinary, and I will have great difficulty in supporting the measure on Third Reading. The Government have said that the effectiveness of the policy

“depends on a high degree of consistency in the implementation in different jurisdictions”.

The Financial Secretary listed a whole mass of countries in answer to a question I asked earlier, but as I understand it, countries including Singapore, Hong Kong and Thailand have announced that they will be delaying implementation until 2025. I also understand—I hope I am correct—that the EU has broken a commitment that was agreed internationally by giving smaller member states a six-year delay before they, too, will have to implement the measure. That will disadvantage the competitiveness of UK-based multinationals against their EU rivals.

I remember campaigning for Brexit: it was a great thing. We were going to become an offshore, Singapore, low-tax, let’s go, gung-ho place, and create business, create jobs and create wealth. That is what the Conservative policy is, so what on earth are we doing? We are signing ourselves up to a package that could once again see British courts overruled by foreign ones. The industry—I have read much about it in the press—has also called for the policy to be delayed, because UK growth will be stunted by unnecessarily burdensome administrative costs for business.

All this is being put forward in a rush. There was no mention of these plans either in the Chancellor’s Budget statement, unless I missed something, or in the accompanying Red Book and costings document. HM Treasury documents confirm that the Government still intend to implement pillar two this year. Why are we having such minimal scrutiny of something with so huge a potential effect on the ability to attract business to this country? I thought that that was exactly what we wanted to do.

The role of a Government, particularly a Conservative one, is to create an infrastructure in which business can thrive. One of the key levers for that is low taxes—the lower, the better. On the whole, as the Exchequer Secretary well knows, the lower the taxes, the more money comes rolling into the Treasury.

The size of all this has already been mentioned. I have in front of me two massive documents. Pillar two takes up 169 pages of the Bill, across 156 clauses and five schedules. The Finance Act 2022 ran to only 222 pages, including schedules, and had 104 sections in total.

I really do ask the Government to rethink. I know that Opposition Members have already commented with glee that people like me are leaping up to oppose this measure. Yes, of course we are, because we are Conservatives. I have been here for 13 years; on three or four occasions during that time the whole House has agreed to a proposal, and every single time it has been wrong, so for me that is the clearest guide that something has gone seriously wrong here.

Let me say to the Ministers on the Front Bench that it is in the best interests of the United Kingdom to delay implementation of pillar two until 2025, or, even better, to bin it altogether.

Finance (No. 2) Bill

Richard Drax Excerpts

Report stage
Tuesday 20th June 2023 Commons Chamber

[James Murray]

I will leave matters for the Welsh Government to the Welsh Government to set out their position. We are trying to challenge the position of the UK Government on air passenger duty.

Whatever the UK Government say, the reasoning behind air passenger duty changes have been hard to come by. In Committee, we wanted to understand why the cost of domestic flights is so high up the agenda of this Government under this Prime Minister. I asked the Minister whether, if someone were to travel by helicopter around the UK, for instance from London and Southampton, that would be subject to air passenger duty. I could equally have asked if that would be the case if someone were to get a helicopter ride from London to Dover. At the time, the Minister clarified that there is no air passenger duty other than on fixed-wing aircraft, so that anyone wanting to make short hops in a helicopter can rest assured that this tax would not apply.

I also asked the Minister whether, if someone travelled on a private jet around the UK from, say, London to Blackpool, what rate of air passenger duty would apply in that case. The Minister confirmed that private jets will not benefit from the domestic air passenger duty cut—something the Chancellor may want to let his neighbour on Downing Street know. Finally, I asked the Minister what rate of air passenger duty would apply if someone lived in the UK but was travelling to another home of theirs, let us say in Santa Monica, California. The Minister did not say at the time whether such a flight would attract the ultra long-haul rate, but my understanding is that it would not, so anyone on the Government Benches who needs to fly to their Los Angeles home will not be hit.

It is clear from the Tories’ approach that they have no idea how to spend public money wisely, and that their judgment over what to prioritise is at odds with the British people. Under the Conservatives in this Parliament alone, people across Britain have faced 25 tax rises and 12 interest rate rises. Yet the Tories think the priorities for taxpayers’ money in the middle of a cost of living crisis should be tax cuts for frequent flyers and for those with the very largest pension pots. The truth is that under the Conservatives, working people always end up paying the bill.

[Richard Drax (South Dorset) (Con)]

On the Government Benches, we get tired of hearing from the Opposition Benches about taking taxpayers’ money. This is money the poor taxpayer is having to pay in the first place and should not be taxed on. So far as pensions are concerned, surely the aim for all of us is to have, if we can afford to, sufficient money to live free of the state and off the state at the end of our years, thereby allowing taxpayers’ money to be effectively used for those who really do need it.

[James Murray]

I thank the hon. Gentleman for his intervention. At one point I thought he was touching on a point that we might agree on, which is that spending public money is about priorities. It is about making choices on how to spend public money wisely. That is important at any stage for any Government, but in the middle of a cost of living crisis, when household budgets are being stretched and people are facing mortgage payments going up relentlessly, it is more important than ever that we prioritise the spending of public money and spend taxpayers’ money wisely. That is really at the heart of the argument I am making. We need a fairer tax system in this country, but time and again the Conservative Government have ignored chances that were in front of them to do something about it. Our new clause 9 relates to the Government’s approach to non-dom tax status—the £3.2 billion a year loophole that the Prime Minister called “that non-dom thing”.

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[Priti Patel (Witham) (Con)]

I am grateful for the opportunity to speak to amendment 20, tabled in my name, which has the support of more than 25 right hon. and hon. Members.

It is not breaking news that I remain concerned about the introduction of a global minimum corporation tax. We have debated the issue in the House, in Committee— Ministers, the Chancellor and colleagues, including the hon. Member for Ealing North (James Murray), the Opposition spokesperson, are aware of my views—but I think it is right that we have the right level of scrutiny of the policy because I have concerns about the implementation, which I have raised consistently.

Before I come to the range of concerns about the policy, I will touch on the remarks made by the Chair of the Treasury Committee, my hon. Friend the Member for West Worcestershire (Harriett Baldwin). She spoke about the need for business certainty, which is crucial, as did the hon. Member for Ealing North. I believe that the implementation of this tax policy creates challenges for businesses and for business certainty. As she highlighted, it also exacerbates the complexities that businesses face when it comes to administering these policies. There are also implications for capital allowances.

[Richard Drax]

I congratulate my right hon. Friend on amendment 20. The only certainty that the Opposition can offer to businesses is that taxes will be so high that businesses will fail—that is about the only thing the Opposition can do. So far as this measure is concerned, can she tell the House what the Americans think of the idea? Where are they in their thinking?

[Priti Patel]

I thank my hon. Friend for his support for the amendment and for his comments. As we have discussed previously—I was going to touch on this—the United States is not in a position to introduce the policy. It is a fact—politics in the US is like politics here or anywhere in the world—that the Republican party has made it abundantly clear that it will not allow this policy to go through. It wants to go further and to bring in legislation that will put retaliatory measures in place against countries that impose the new tax and burdens on US businesses and multinationals.

Returning to the amendment, I will come on to some specifics with regard to the dialogue I have been having with the Minister and the Chancellor on this subject. It is right that we scrutinise the policy, which the amendment seeks to do. It is right for the Government to pursue international agreement to address the complex tax arrangements, which hon. Members have referred to, that exist with multinational corporations and businesses operating in multiple jurisdictions. That is vital and makes sense.