Finance (No. 2) Bill

Richard Fuller Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[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.

[Richard Fuller (North East Bedfordshire) (Con)]

In enumerating all those countries, the Minister has covered approximately 20% of the global 100 multinationals. There are still 80 that are not covered by the countries that she has mentioned, the most important of which is of course the United States, which is having tremendous problems in fulfilling its signature to the agreement with the OECD. Can she say at the Dispatch Box whether she will be open to accepting an amendment in Committee, if such a provision is not in the Bill, to the effect that the United Kingdom will implement these changes only when all the major OECD countries have done so?

[Victoria Atkins]

I regret that I cannot undertake to do so. As my hon. Friend will know, we have had to scorecard the impact of this measure, and I have looked carefully into the implementation dates precisely because of the concerns that right hon. and hon. Friends have raised. I understand why my hon. Friend cites the US, but the United States already has rules that require US-headquartered groups to pay a minimum level of tax on their foreign activities.

We believe very strongly that acting alongside others is crucial to meeting the aims of this global reform. I know that there are certain points of tension with particular sectors, but we can point—perhaps in Committee, if not now—to examples of our ability to shape the rules in order to answer the very reasonable needs and requests of sectors that are so critical to the UK economy.

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[James Murray]

As we have said several times, we will set out our plans in our own time. But let us be clear, if the hon. Member has concerns over capital gains tax, he might want to talk to those on his own Front Bench, because they raised it in the last Finance Bill by cutting the annual exempt amount. I suggest he talks to his colleagues before he raises questions with us.

[Richard Fuller]

Will the hon. Gentleman give way?

[Ian Murray]

I am going to make some progress. I will give way to the hon. Gentleman in a moment.

Rather than a long-term permanent change, this change is for only three years. It only brings forward investment rather than increasing overall investment. The Government’s own policy paper on temporary full expensing, published on the day of the Budget, makes that clear. It says:

“This measure will incentivise businesses to bring forward investment to benefit from the tax relief.”

Meanwhile, the OBR forecast makes it clear that business investment between 2022 and 2028 is essentially unchanged as a result of these measures. If anything, there is a very slight fall. So let us be clear about the implication here: the Conservatives’ inability to provide long-term certainty means that measures in this Bill will bring no overall increase in business investment. That is not good enough. That is why, as part of Labour’s mission to secure the highest sustained growth in the G7, in government we would review the business tax system and set out a clear road map to provide certainty and boost investment. We believe that our economy’s long-term underperformance on capital investment needs long-term measures to be put in place as part of a tax framework that supports and incentivises investment.

Alongside stability and certainty, a key principle in our tax system is one of fairness. The importance of fairness in the tax system applies to individual taxpayers and to businesses too. We in the Opposition want to make sure that British businesses face a level playing field, and that is why we have for so long pressed the Government to back an ambitious global minimum tax rate for large multinationals. A global minimum would help to stop the international race to the bottom. It would help to stop British businesses that pay their fair share of tax being undercut by large multinationals that do not, and it would help to raise revenue to support British public services.

We are therefore glad to see provisions in this Finance Bill that will, as part of the international agreement fostered by the OECD, ensure that large multinationals pay a minimum level of 15% tax in each jurisdiction in which they operate. We have raised the need for such an international deal many times with the Government. It was in fact nearly two years ago, on 13 April 2021, on Second Reading of an earlier Finance Bill, that I first raised with Treasury Ministers the question of a global minimum corporation tax rate. In that debate, I pressed Treasury Ministers to confirm to the House that they and the Chancellor of the time backed plans for a global minimum corporate tax rate, and that they would do all they could to make it a reality. Ministers appeared lukewarm, so I pressed them again in subsequent debates on 20 April and 28 April, urging them to make a clear statement of support in favour of a global deal. They held back from doing so.

At the time, the Ministers’ response seemed to lend credibility to a report by Bloomberg that implied that the real reason behind the Government’s position might have been to disguise their real agenda—namely, a desire to keep alive the possibility of a race to the bottom in the future. In the end, however, plans by President Biden to set the global minimum rate at 21% did not receive wide enough support and a figure of 15% was agreed. That figure was welcomed by the then Chancellor, who began to support the deal in public. Now, however, the deal faces a new front of challenges, as the Minister acknowledged earlier in her comments. Her Back Benchers have begun to be open in their hostility towards the implementation of the deal.

[Richard Fuller]

The hon. Member is a very thoughtful man. I think one of the reasons that he might be hearing some questions from Conservative Back Benchers is that he has just positioned himself as the advocate for the policy that our Front Benchers are now implementing. I have a question of substance for him on his research. He has just mentioned the original position of 21%, and has been clear in saying that what business wants is clarity, so can he give us some clarity? Is it the intention, if there is a future Labour Government, that they will press OECD countries for an increase in that 15% to achieve the 21% that he has been advocating?

[James Murray]

It is always nice to have an intervention from the hon. Gentleman. We very much miss his being in his position on the Government Front Bench. The debate over the OECD agreement has been going on for several years. President Biden wanted 21%, but there was lukewarm support for that from this Government and we ended up with 15%. Our challenge now, frankly, is to make sure that the likes of the hon. Gentleman do not get in the way of its implementation, because we want to see this global deal in place and Britain playing its part.

The hon. Gentleman’s intervention was timely as a reminder of the opposition coming from Conservative Back Benchers. In fact, this is an issue that I have raised with the Treasury Minister before. She might remember that on 7 February I asked her if the Government would keep their promise to implement the multinational top-up tax in the UK this year. We wanted reassurance that the Prime Minister’s weakness in the face of his Back Benchers would not leave us missing out on this landmark global deal. The Minister might recall that she brushed aside concerns that her Back Benchers might oppose these plans, only for concerns to be raised moments later by the right hon. Member for Witham (Priti Patel). The former Home Secretary, who was here earlier, went on to write a piece in The Daily Telegraph on 24 February arguing against the Government’s approach. In that piece, she claimed:

“In the House of Commons, those now turning their attention to all this are beginning to bridle.”

We believe it is crucial to get this legislation in place, so I hope the Minister can reassure us today that those parts of the Bill that introduce a multinational top-up tax will not be bargained away in the face of opposition from Conservative Back Benchers.

A fairer and more certain tax system, underpinned by a long-term economic plan, is crucial to helping businesses invest and grow, but an ambitious plan for growing our economy must go much further, and we have made it clear that this would be Labour’s first mission in government. At the heart of our plan to grow the economy, to create jobs and wealth, and to make everyone in our country better off is the partnership we would build between Government and business. We understand, as do businesses, that growth comes from the Government supporting private enterprises to succeed in the industries of the economy of the future.

That is why our green prosperity plan is so important, as it would provide catalytic public investment to crowd in private sector investment and to grow our clean energy capacity and green industries across the country. We would support growth in the digital economy and the life sciences, we would update our planning system to remove barriers to investment, and we would improve access to capital for new and growing businesses. We would make sure that, under Labour, the Government and business work together and invest together, for the good of everyone in every region and nation of the UK.

This task is urgent, because the world economy is changing and other countries are pulling ahead. According to the CBI, we are investing five times less than Germany, and roughly half of France and the US, in green industries. The Institute of Directors has said that, on its present path

“the UK will find itself left behind in the accelerating race to lead the green economy.”

The Society of Motor Manufacturers and Traders said, following the Budget:

“There is little…that enables the UK to compete with the massive packages of support to power a green transition that are available elsewhere.”

From President Biden’s Inflation Reduction Act in the US to the programmes coming out of Europe, Asia and Australia, the rest of the world is chasing the opportunities of the future. We need to be in that race too. Once we are, the opportunities will be ours for the taking. Our British businesses already excel in so many sectors and, with the right support, we could be a world leader in the new and growing industries of the future, making full use of our geography, our advantage in high-tech sectors and our world-leading universities.

What British businesses and families need now is a credible, ambitious plan from the Government to grow the economy and to make everyone in every part of our country better off. The failure to do that is perhaps the greatest failure of this Finance Bill and this month’s Budget. The Conservatives have had 13 years, and they have failed. As long as they stay in power, the vicious cycle of stagnation stays too. It is time for a new Government who will get us off this path of managed decline and make sure that people and businesses in Britain succeed.

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[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.

[Richard Fuller]

I do not want to disagree with my hon. Friend, but we on these Benches must stop being grateful when some of our businesses are exempted from increased taxation. We are the party that believes people know best how to spend their own money. We should be arguing for the widest spread of low taxes. He is talking about history, and the other aspect of corporation tax is the ability to attract capital. Back in the 1970s and ’80s, the largest source of capital to support our businesses was from a domestic pool of capital, but now we are competing for an international pool of capital. What effect does he think this increase in corporation tax will have on our ability to tap into those competitive global markets?

[Craig Mackinlay]

I do not think that was a criticism from my hon. Friend, but I was trying to be kind and find some good news in what is a fairly miserable story on corporation tax. He makes a good point: the world potentially has an almost limitless amount of global capital looking for a home, and I want that home to be here, and having a lower headline rate of corporation tax would be a very good way of achieving that. I want to develop the argument about the complication we have now added to the system.

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[Richard Fuller (North East Bedfordshire) (Con)]

It is a pleasure to follow the hon. Member for Arfon (Hywel Williams). I am obviously not as familiar as he is with the arrangements between Wales and the Treasury, but I think he made his points very clearly. Another thing he said—I think I caught him correctly—was about taxation not being fair enough, or sufficient. I might have slightly more disagreements with him on that.

It is a pleasure to be called to speak in this debate. As you said, Mr Deputy Speaker, this is a debate without limit. Due to my concern, shared by many hon. Members, about the complexity of our tax code, I was tempted to read out the tax code from cover to cover, but reading out all 23,000 pages might test even your patience. I will not do so this year.

It was interesting to listen to the two opening speeches. The measures in this Finance Bill go back to the Budget, and we should not lose sight of the tremendous job the Chancellor did with that Budget. At a time when there were so many competing pressures on the public purse from Conservative Back Benchers, let alone from the Opposition, it is a tribute to the Treasury and its officials that they were able to craft a Budget that has, so far, stood the test of time.

The Opposition have been scrambling to find reasons to disagree with the Budget and have alighted on one: the pension changes. That is interesting because I distinctly remember responding to a debate from the Dispatch Box in which there was pressure from all political parties —from Scottish nationalists and, I think, representatives from Northern Ireland, and definitely from Labour and Conservative Members—to make precisely the change that the Government announced in the Budget. The Labour party obviously has nothing substantive to say in opposition to the Budget, which is a tribute to Treasury Ministers.

I enjoy my encounters with the shadow Minister, the hon. Member for Ealing North (James Murray). I remember the first thing he said on my appointment to the Treasury, which was that I should be sacked. The record will show that he did not quite get what he wanted, but I am pleased our relationship has improved over time.

I gently say to the hon. Gentleman that, if the Labour party wants to be treated seriously in the run-up to the next general election, the time has passed when it can say, “Just wait and see.” It is reasonable for Members to ask him to be clear on whether Labour intends to harmonise capital gains tax with income tax, but he dodged that question. It is quite reasonable, as we are discussing the global minimum corporation tax, to ask whether Labour intends to push for the 15% rate, if it is enacted, to go up. Perhaps Labour can, in the winding-up speech, answer some of the questions put by my hon. Friend the Member for South Thanet (Craig Mackinlay) and me.

One of the Bill’s most important aspects is whether it meets the challenges of today and prepares us for the challenges of tomorrow. I told my voters at the 2019 election that this country had one of the highest rates of taxation since the 1960s, and it has since gone up because of the implications and effects of the covid support measures.

This is difficult and uncomfortable territory for Conservatives. Our intention and objective should be to lower taxation. Too rarely, in this House of Commons, do we hear voices for lowering taxation. It seems to be completely beyond the pale for the Labour party even to consider that there might be a time when it is right to lower taxes. Labour would certainly never dream of lowering taxes for those foolhardy enough to earn more than £50,000 a year. Correct me if I am wrong, but I do not see a shadow Minister standing up to say, “Hold on a minute. We are in favour of people earning more than £50,000, and there may be a day when we cut their taxes.” We do not hear that from Labour, because it relies on making people not like the fact that people can make a lot of money.

That is a huge change from the days of Tony Blair and new Labour. In those days, Tony Blair recognised that the British people liked the idea that, if they could not make a lot of money themselves, perhaps their children would start a business and make some money, or get a good career—yes, in the health service—and make a lot of money. That is what the Labour party then stood for. Because it understood that natural instinct that people want their kids to have a better future and, if they make it, to be able to keep more of their money to make a better future for their families in turn, the Labour party under Tony Blair caught the attention of the British electorate. It is clear that the Labour party under the current leader will go into the next election with nothing like the agenda new Labour stood for in 1997. [Interruption.] Labour Front Benchers say that we have not seen the manifesto. Why are they waiting? If the Labour party manifesto is so good, let’s see it; let us not hide behind it. [Interruption.] Don’t tempt me too much.

On clause 2 and the main rates of income tax, I reiterate a point made by my hon. Friend the Member for South Thanet, who talked about the 60% marginal rate. The Treasury would be wise to look at that anomaly again. There is still time, perhaps not in this Budget, but certainly in a future Budget, to come forward with some simplification.

On corporation tax, the Government were caught, and my hon. Friend the Member for Amber Valley (Nigel Mills) made a reasonable point. There is a difference between the tax-raising powers we may wish to have and the signalling effect it will have for the attraction of international capital. The headline rates of corporation tax are usually what result in investment decisions getting a green or red light from multinationals.

On the OECD mutual multinational top-up tax, I welcome that the Government are at least putting in measures in the Bill. Perhaps that is not the right place, as my hon. Friend the Member for South Thanet said, but it is important that the UK has some response. It is, however, potentially foolhardy for us to progress at a pace that creates a competitive disadvantage for us. Many Members talk about the desire for economic growth and that is great, but economic growth comes because a country offers an environment that attracts international capital and talent, and part of that is how much tax people will pay. If the Labour party heralds the fact it wants to tax individuals at the highest rate possible—and to take away an exemption, when people might come here for the first time, to stop them being double taxed—and Labour party policy is to raise corporation tax to high levels, that sends all the wrong signals. I worry about that in relation to the multinational top-up tax. So let us not progress those measures in the UK ahead of our main competitors.

The right hon. Member for East Ham (Sir Stephen Timms) has left his place, but he asked questions about the abolition of the Office of Tax Simplification, a decision made during my time at the Treasury. He made some good points about how that office provided some points about tax simplification when it was allocated the task and I have no concerns or criticisms about the work it did but, if a Government of any stripe are serious about tax simplification, I do not think that process was going to achieve that objective. My view was it would be better to embrace that as a whole-Government effort. I hear the right hon. Gentleman’s concerns about no one being in charge if everyone is in charge, but that was never the intention, of course; the intention was to move to have someone in the Treasury directly in charge to look at tax simplification on a much more holistic basis, rather than take the case-by-case approach of the OTS. That was the rationale last year. It would be fair for Front Benchers to give an update on that, but I thought I would mention that for the benefit of the right hon. Gentleman, for whom I have enormous respect.

I want to mention something that is not in the Bill but which we need to think about. On achieving net zero, we have made tremendous strides by asking our corporations to start accounting for carbon in their annual account reporting. We need to harness the power of the private sector if we are going to achieve our net zero goals. I saw reports in The Times that there are going to be some announcements tomorrow that may affect this, but we perhaps did not see enough from the Government about what the plans are on carbon taxes in the UK. If we want to achieve a social objective, the introduction of a carbon tax would be one effective way of doing it. If that could be combined with reductions in general corporation tax, it would be a helpful move. It cannot be done all of a sudden, but it would be an interesting addition to the mix for the Government.

I thank my right hon. and hon. Friends on the Front Bench for the Budget and these measures, and should I be selected by the Whips—it is a safe bet that that will not happen—I look forward to debating it line by line in Committee.