Finance Bill

Baroness Winterton of Doncaster Excerpts

Committee stage
Wednesday 30th November 2022 Commons Chamber

Question proposed, That the clause stand part of the Bill.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Amendment 4, in clause 2, page 3, line 3, at end insert—

“(3) The Chancellor of the Exchequer must lay before the House of Commons reports setting out—

(a) an assessment of the revenue that is generated by the energy (oil and gas) profits levy in the period to which the report relates,

(b) an assessment of the revenue that would have been generated in the period to which the report relates if the investment allowance had not been in effect, and

(c) the names of companies that have made use of the investment allowance and the revenue that would have been generated by them during the period to which the report relates if the investment allowance had not been in effect.

(4) The first report under subsection (3) shall be laid as soon as practicable after the 1 January 2023, in respect of the period 26 May 2022 to 1 January 2023.

(5) Subsequent reports under this section shall be laid every three months thereafter, and in respect of the period since the last report.”

This amendment would require the Government to produce an assessment of how much revenue would be generated by the Energy Profits Levy if the relief for investment expenditure had not been in effect, and to produce a quarterly report assessing how much revenue has been forgone because of the investment expenditure relief.

Clause 2 stand part.

Amendment 3, in clause 3, page 3, line 14, at end insert—

“(3) The Chancellor of the Exchequer must, within six months of this section coming into force, lay before the House of Commons an assessment of the revenue that would have been generated if, in section 1 of the Energy (Oil and Gas) Profits Levy Act 2022 (charge to tax), in subsection (3) (which sets out the accounting periods by reference to which the tax is charged), in paragraph (a), for ‘26 May 2022’, there had been substituted ‘6 October 2021’.”

This amendment would require the Government to produce an assessment of how much revenue would be generated by the Energy Profits Levy if it had been introduced on 6th October 2021.

Clauses 3 and 4 stand part.

Amendment 2, in clause 5, page 4, line 6, at end insert—

“(5) HMRC must contact every individual affected by the provisions of this section to inform them whether, as a result of the provisions of this section—

(a) they have become liable to pay the basic rate of income tax (when they were not previously so liable);

(b) they have become liable to pay the higher rate of income tax (when they were not previously so liable); and

(c) how much additional income tax they will pay as a result of the change.”

This amendment would require HMRC to contact every individual who become liable to pay standard tax or move from standard to higher rate, and how much additional tax they will have to pay as a result.

Clauses 5 to 9 stand part.

Amendment 5, in clause 10, page 7, line 23, at end insert—

“(8) The Chancellor of the Exchequer must, within six month of this section coming into force, and quarterly thereafter, lay before the House of Commons an assessment of the impact of the changes in this section on—

(a) the Secretary of State’s ability to meet the duty set out in section 1 of the Climate Change Act 2008,

(b) air pollution in the United Kingdom, and

(c) the provision of electric vehicle infrastructure and public transport in the United Kingdom.”

This amendment would require the Chancellor to produce quarterly assessments of the impact of the removal of VED exemption for electrically propelled vehicles on the UK’s climate change duties, air pollution and EV infrastructure and public transport.

Clauses 10 to 12 stand part.

New clause 1—Assessment of the impact of the investment allowance—

“(1) The Chancellor of the Exchequer must, within six months of this Act coming into force, publish an assessment of—

(a) the revenue that the energy (oil and gas) profits levy will yield,

(b) the revenue that the energy (oil and gas) profits levy would yield if the investment allowance did not have effect in respect of investment expenditure, and

(c) the revenue that the energy (oil and gas) profits levy would yield if the investment allowance did not have effect in respect of expenditure on decarbonisation by oil and gas companies.

(2) The assessment must cover the whole period that the levy is in effect and also assess the revenue in each tax year.

(3) The assessment must include an evaluation of the impact of the investment allowance on the United Kingdom’s ability to meet its climate commitments, including—

(a) the target for 2050 set out in section 1 of the Climate Change Act 2008,

(b) applicable carbon budgets made pursuant to section 4 of the Climate Change Act 2008, and

(c) the commitment given by the government of the United Kingdom in the Glasgow Climate Pact to pursue policies to limit global warming to 1.5 degrees Celsius.”

This new clause would require the Government to publish an assessment of the impact of the investment allowance on revenue raised by the Energy (Oil and Gas) Profits Levy, including investment by oil and gas companies in UK oil and gas extraction and upstream decarbonisation. The assessment should also cover the impact of the investment allowance on the UK’s ability to meet its domestic and international climate targets.

New clause 2—Review of revenue from the Energy (Oil and Gas) Profits Levy—

“(1) The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of the revenue estimated to be generated from the Energy (Oil and Gas) Profit Levy in each of the financial years 2021-22 to 2027-28.

(2) In addition to an evaluation of the revenue forecast to be raised by the Levy, the assessment must include an evaluation showing the estimated revenue that would have been raised if each of the following had been the case—

(a) the qualifying accounting period specified in section 1(3) of the Energy (Oil and Gas) Profits Levy Act 2022 had begun on 3 January 2022,

(b) the rate of the levy had been increased to 38% under this Act, and

(c) the amount of additional investment expenditure had been reduced to 0% by this Act.”

This new clause would require the Chancellor of the Exchequer to publish an assessment of estimated revenue from the energy (oil and gas) profit levy in financial years 2021-22 to 2027-28, and set out how these figures would be affected if levy were backdated to 3 January 2022, and if the rate of levy was increased to 38%, and the amount of additional investment expenditure reduced to 0%, by this Act.

New clause 3—Research and Development tax relief policy—

“(1) The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of research and development tax relief for small or medium-sized enterprises.

(2) The assessment must include the Chancellor’s assessment of the effectiveness of R&D tax reliefs and plans he has to further reform of R&D tax reliefs.”

This new clause would require the Government to publish an assessment of their view on the effectiveness of R&D tax reliefs for small and medium-sized enterprises and their intentions for any further reform.

New clause 4—Research and Development tax relief fraud and waste—

“(1) The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of research and development tax relief for small or medium-sized enterprises.

(2) This assessment must include the following, in respect of each tax year since 2018–19—

(a) an evaluation of the amount of money that has been incorrectly deducted as a qualifying cost, or incorrectly paid as a tax credit, as a result of—

(i) fraud, and

(ii) error,

(b) set out, in relation to sums incorrectly deducted as a qualifying cost, or incorrectly paid as a tax credit—

(i) how many investigations have taken place,

(ii) how many prosecutions have been brought,

(iii) how many prosecutions have resulted in a conviction, and

(iv) how much money has been reclaimed.”

This new clause would require the Government to publish a statement on error and fraud in the SME R&D tax reliefs, including details of what actions they have taken in response.

New clause 5—Assessment of the impact of changes to the basic rate limit and personal allowance for tax years 2026-27 and 2027-28—

“The Chancellor of the Exchequer must, within three months of this Act coming into force, publish an assessment of the expected impact on an average earner of the provisions of section 5 (Basic rate limit and personal allowance for tax years 2026–27 and 2027–28).”

This new clause will require the Chancellor of the Exchequer to publish an assessment of the impact on average earners of the decision to freeze the basic rate limit and personal allowances for tax years 2026/27 and 2027/28.

New clause 6—Impact assessment of measures in the Act—

“(1) The Chancellor of the Exchequer must, within three months of this Act coming into force, publish an assessment of the impact of the provisions of this Act.

(2) This assessment must consider the effects of the provisions of the Act on—

(a) different regions and nations of the United Kingdom,

(b) people with different protected characteristics under the Equality Act 2010, and

(c) people with a range of different incomes.”

This new clause will require the Chancellor of the Exchequer to publish an assessment of the impact of the measures in this Act on people in different parts of the United Kingdom, and on groups of people with different protected characteristics and incomes.

New clause 7—Assessment of the impact of measures in the Act on growth—

“(1) The Chancellor of the Exchequer must, within three months of this Act coming into force, publish an assessment of the impact of provisions of this Act on economic growth.

(2) This assessment must consider the forecast impact of measures in this Act on growth of—

(a) the UK economy as whole,

(b) the economy of different regions and nations on the UK, and

(c) average incomes in the UK.”

This new clause will require the Chancellor of the Exchequer to publish an assessment of the impact of measures in this Act on growth in the UK economy, as well as its impact on growth in different regions and nations of the UK, and its impact on growth of average incomes.

New clause 9—Assessment of investment relief on compliance with the climate change target for 2050—

“The Chancellor of the Exchequer must, within six months of this section coming into force, and quarterly thereafter, lay before the House of Commons an assessment of the impact of the effect of the relief for investment expenditure provided in sections 1 and 2 of the Energy (Oil and Gas) Profits Levy Act 2022 on—

(a) the Secretary of State’s ability to meet the duty set out in section 1 of the Climate Change Act 2008, and

(b) the additional quantity of carbon dioxide that will be generated in the United Kingdom.”

This new clause would require the Chancellor to produce an assessment of the impact of the relief for investment expenditure in relation to the Energy Profits Levy on the Secretary of State’s ability to meet the target of ensuring that the net UK carbon account for the year 2050 is at least 100% lower than the 1990 baseline. And produce a report each quarter detailing how much additional CO2 has been produced because of the investment expenditure relief.

New clause 10—Review of effect on small businesses—

“(1) The Chancellor of the Exchequer must lay before Parliament within six months of the passing of this Act a review of the impact of the measures contained in this Act on small businesses.

(2) The review must consider in particular the impact of those measures on the ability of small businesses to—

(a) meet their energy bills,

(b) minimise their debt,

(c) pay their rent,

(d) remain solvent, and

(e) employ staff.

(3) The review must include an assessment of the number of small businesses which will become liable to register for VAT as a result of the measures contained in this Act.

(4) In this section, ‘small businesses’ means any business which has average headcount of staff of less than 50 in the tax year 2022-23.”

This new clause would require the Government to produce an impact assessment of the effect of the Act on small businesses.

[The Financial Secretary to the Treasury (Victoria Atkins)]

It is a pleasure to represent the Government in this important Committee. At the autumn statement, my right hon. Friend the Chancellor set out the significant economic challenges that we face and our plan to ensure that we have economic stability, encourage growth and protect our public services. Securing fiscal sustainability in a responsible and balanced way inevitably requires some difficult decisions. We do not shy away from that, but we have sought to ensure that the heaviest burden falls on those with the broadest shoulders.

The Bill’s first three clauses relate to the energy profits levy. Clause 1 increases the rate of the levy and addresses consequential technical matters. It will ensure that oil and gas companies benefiting from extraordinary profits due to exceptionally high prices will continue to pay their fair share of tax. As hon. Members will know, the Government introduced the levy in May this year as a temporary surcharge on the extraordinary profits being made on the oil and gas sector, driven by global circumstances.

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[Victoria Atkins]

We introduced the expensive car supplement some time ago, and a great many of the cars that the hon. Gentleman has described would fall into that category, particularly if they were bought new. Notwithstanding his assertion, there is no ideological reason for this. We are very conscious of the pressures on the majority of road users, and although, as the hon. Gentleman fairly pointed out, the use of SUVs has increased, that certainly does not mean that everyone who buys a third-hand or fourth-hand SUV is among the wealthiest in society. So we have tried to balance the rights and interests of those who are already paying car tax and also of those driving electric vehicles, who we think, after a certain period of time, should be contributing more towards the tax system than they do at the moment.

As I was saying, clause 11 deals with company car tax rates in order to provide businesses with the certainty they need to plan in relation to vehicle provision. Finally, clause 12 simply sets out the short title of the Bill in the usual manner for such legislation. I hope that hon. Members will not have anything to say about that, but I look forward to any comments on clause 12. I have stuck to the Bill itself because I want to listen to those hon. Members who have kindly put down amendments, which will be debated now. I will attempt to answer some of those challenges, questions and points as I wind up the Committee stage of the Bill in due course.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I call the shadow Minister.

[James Murray (Ealing North) (Lab/Co-op)]

Thank you, Madam Deputy Speaker, for this opportunity to consider the details of the Bill and speak to the amendments and new clauses in my name and that of my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare).

As we have heard from the Minister, the first three clauses of the Bill relate to the energy, oil and gas profits levy—or, as everyone in the country apart from Conservative Ministers calls it, the windfall tax. It has been a painful journey to get this windfall tax on the statute book. As I set out on Second Reading, it took five months for the Government to finally support the principle of a windfall tax after my right hon. Friend the Member for Leeds West (Rachel Reeves) first called on them to introduce one in January this year.

The current Prime Minister, who was Chancellor at the time, was dragged kicking and screaming into introducing a windfall tax before the summer, but even then he decided to couple it with a massive tax break for oil and gas giants. We do not believe it is right to let that large untargeted and unnecessary tax break continue. It is a tax break that the current Prime Minister introduced and that has left some oil and gas giants paying no windfall tax at all this year. That is why we have been pressing the Conservatives to remove that loophole.

We have also pressed the Government to strengthen the windfall tax by raising its rate from 25% to 38%, a move that would align the overall rate with the taxation of oil and gas profits in Norway. We have also pressed them to extend its period of impact by backdating it to January 2022, the month when the shadow Chancellor first proposed it, and by extending it to 2027-28. We therefore welcome at least some strengthening of the windfall tax in clause 1, which increases its rate to 35%, and clause 3, which extends the period it affects to the end of 2027-28. These clauses do not go as far as we have proposed. They fall short of our plans to increase the rate of the windfall tax to 38% and to backdate it to January 2022, but they do confirm a frequent and recurring pattern when it comes to the windfall tax: Labour leads with the ideas while the Tories object, only ultimately to be dragged kicking and screaming into a U-turn.

Clause 2 highlights one respect in which the Government are still resisting following our lead. In that clause, they have made changes to the rate at which additional investment expenditure is calculated. As the explanatory notes make clear, this rate has been carefully set to

“maintain the overall cumulative value of relief for investment expenditure”.

Let us be clear what this means. The rate of the windfall tax might be going up, but the Government are making sure that the tax break for oil and gas giants is safe. As we see time and again, even when the Government are forced to legislate on a windfall tax, they cannot bring themselves to do it properly.

It is for this reason that we have tabled new clause 2, which would require the Chancellor to publish an assessment of the revenue that is estimated to be generated by the windfall tax and show how much more it would raise if it were backdated to January 2022, if it were increased to 38% and if the additional investment expenditure were reduced to zero—a move that would remove at least some of the oil and gas giants’ tax break. We urge hon. and right hon. Members from all parts of the Committee to support this new clause and help us to push the Government for a stronger and more effective windfall tax that no longer includes such a huge giveaway to the oil and gas giants.

Clause 4 of the Bill concerns tax relief for expenditure on research and development. As we have heard from the Minister, the clause reduces the additional deduction for R&D costs incurred by small and medium-sized enterprises and reduces the rate at which qualifying losses can be surrendered by such companies. At the same time, it increases the rate of R&D expenditure credit, which is mainly claimed by large companies. On this side of the House, we recognise the need to support R&D as a crucial part of driving growth in our economy. It is critical for the Government to have in place a system of R&D tax relief that is effective, that provides as much certainty as possible for businesses to make the investments that our economy so badly needs, and that provides crucial support to key growth sectors in the UK.

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[Sir Robert Syms]

I am glad the hon. Lady is irritated by my comments, because I think I am right. We want a very successful oil and gas industry. My constituency is on top of the Wytch Farm oilfield, which has been going for 40 years. Most of my constituents do not know they are on top of an oilfield, so they keep writing to me about oil and gas. The reality is that we will need oil and gas over the next 30 or 40 years. Apart from power, many products derive from oil and gas.

Oil and gas is a very successful industry for the United Kingdom. The hon. Lady and I probably disagree on most things, but we need to ensure that we keep the industry growing, which will create lots of jobs. This very successful industry creates a lot of wealth, which does not undermine the fact that many oil companies are now investing heavily in renewables. The North sea investments of Shell and many other major companies are consistent with decarbonisation. What we can do in producing more North sea oil and gas and in decarbonising a lot of that production is very exciting.

That is my main concern for the Minister. This has been a difficult year for the Government, partly because of worldwide factors. I look around the world and see shipping costs falling and inflation starting to tail off. I hope there will be peace in Ukraine, and I hope the Ukrainians win, which may well improve the economic situation over the next two years. The Treasury needs to be flexible in how it looks at the situation. When I listen to Opposition Members, I feel they have a very inflexible view of the oil and gas industry that I think would do us great damage. I am glad the Government are in listening mode, and I hope they listen further to the comments of Back Benchers.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I should have reminded colleagues that when we are in Committee I am to be referred to as “Chair” or “Dame Rosie”.

I call the SNP spokesperson.

[Richard Thomson (Gordon) (SNP)]

Thank you, Dame Rosie, for calling me at this point. We are discussing this Finance Bill still against a backdrop of problems with our energy security, the climate crisis and the cost of living crisis. Sadly, despite the rapid turnover in personnel in recent weeks and months at No. 10 and No. 11 Downing Street, there are still no signs in this Bill that the Government have any inclination to go about getting to grips with those three crises and challenges of our age.