Finance Bill

Sarah Olney Excerpts

Committee of the whole House
Wednesday 10th January 2024 Commons Chamber

Lastly, I commend the shadow Minister, the hon. Member for Ealing North (James Murray). I did not like his speech on the first group, but I thought that his speech on the present group was very good and very reasonable. He made a very important point, which I am sure the Government will want to look at, on failure to comply with stop notices, and the requirement—proposed, I think he said, by a third party—for some sort of judicial approval before a notice is issued. At the moment, the Bill basically says that HMRC, undefined, can issue such notices. That really is quite a significant further expansion of HMRC’s responsibilities. The shadow Minister referred to a good point: more protection is needed for those who might be caught by such notices. I am sure that those on the Government Front Bench always listen to points made on both sides of the House, but I thought that I would commend that point from the shadow Minister.

[Sarah Olney (Richmond Park) (LD)]

I will speak to new clauses 4 and 5, tabled in my name. I reiterate that the Liberal Democrats do not support the Bill, which is a deception from the Government after years of tax hikes on hard-working families. It arises from an autumn statement that contributed to a record fall in living standards by maintaining the Government’s stealth tax on working families through the freezing of income tax thresholds. Some of the measures under consideration today may have worthy aims, but that wider context must be noted.

New clause 5, tabled in my name, would require the Government to produce an assessment of the impact of the Bill’s tax evasion and avoidance measures. That assessment would specifically need to include a review of whether the staffing of the compliance functions of HMRC is sufficient to implement the new measures. That follows the revelation to me in answer to a parliamentary question last year that almost 2,300 HMRC tax compliance staff are still working on matters relating to our exit from the European Union and covid-19 schemes. That means that thousands of staff who would usually be working on recovering taxes or dealing with other issues are instead being redeployed to manage the Government’s mishandling of the pandemic and the Brexit deal.

It is alarming to see civil servants being moved from one crisis to another—an indication of a Government in non-stop firefighting mode. We have known for a long time that HMRC is an organisation beset by understaffing issues. Last year, the Institute of Chartered Accountants in England and Wales said that such chronic understaffing is not only causing unacceptable delays to businesses and families but hindering activity and actively hurting our economy. With that knowledge, can we have faith that HMRC will be properly equipped to put the measures in the Bill into action?

While the measures in clauses 31 to 34 and schedule 13 may have worthy aims of combating tax avoidance and fraud, the knowledge of those shortcomings makes it very difficult to have confidence in the capacity of HMRC, and in particular its compliance functions, to administer the measures effectively. I therefore urge the Government to accept new clause 5, and support the Liberal Democrats in ensuring that HMRC is fully equipped with sufficient staff to tackle tax avoidance properly.

New clause 4, also in my name, concerns the Bill’s pillar 2 measures, in clause 21 and schedule 12. It would require the Government to produce an assessment of the impact of those measures, examining whether they have been successful in achieving their policy aims. As Liberal Democrats, we strongly believe in the need for a fair international system that tackles corporate tax avoidance and evasion for the benefit of all countries. We welcome the pioneering work that has taken place under the auspices of the OECD for the formation of a fairer international tax system. The measures in clause 21 arise from that process and enable the UK’s adoption of the income inclusion rule and domestic minimum top-up tax rule. As such, they are to be welcomed; however, issues remain.

Most crucially, we believe that the global minimum corporation tax rate set at 15% under the deal remains too low. Liberal Democrats have called on the Government to help negotiate an increase to 21%, as originally proposed by the US under President Biden. Organisations such as Oxfam have highlighted that the 15% minimum rate still leaves many developing countries at a disadvantage, as they will continue to face unfair competition from tax havens. It is extremely disappointing to see the Government’s failure to back a rate of 21%, despite having raised UK corporation tax to 25%. The significant progress that has been made should not be obstructed or diluted, but if we are serious about pursuing the goal of a fairer global tax system, we must also take the time to ensure that the best path is being followed.

[Nigel Mills]

I understand the intent of what the hon. Member says. Could she explain how the review could be done within six months of the Act being passed, given that no business will have filed a tax return with any adjustments in until well after that period? Indeed, half the world probably will not have introduced the measure by that stage. Would that not be a bit of a premature assessment? Would we not risk that assessment showing no progress and then strengthening the arguments of those who would like to repeal it? It would probably be quite a bad assessment to do at that stage.

[Sarah Olney]

I welcome the hon. Member’s intervention, and—dare I say it—I completely agree with him. Of course, one is constrained by what one can amend in legislation, but I would like to see that as the start of an ongoing process of review. Let us be honest, it is an innovative proposal, not just because it requires an international co-operative effort, but because that very effort is innovative. It is therefore something that we as a sovereign Parliament should be keeping very much under review as the work continues.

I briefly note that the Finance Bill has implications for theatre tax relief, which plays a crucial role in enabling the development of new theatre productions in the UK. UK Theatre and the Society of London Theatre have raised concerns with the Treasury about those implications, which could damage how that essential relief operates. I therefore urge Ministers to liaise with those groups and particularly to provide assurance that international touring will not be hampered due to the Bill’s definition of UK expenditure. That is certainly an area that would benefit from scrutiny in Public Bill Committee.

Although the Liberal Democrats support certain measures in the Bill, such as the extension of full expensing, the Bill as a whole does not have our support, arising, as it does, from an unjust and deceptive autumn statement. I urge hon. Members to support the amendments tabled in my name, in particular new clause 5, which would hold the Government to account to ensure that HMRC is properly resourced to allow it to implement the measures in the Bill.

[Gareth Davies]

I thank hon. Members from across the House for their contributions. I will speak relatively briefly but will try to address some of the points raised. I will deal last with the new clauses, and in the meantime address some of the questions from the hon. Member for Ealing North (James Murray) from the official Opposition. He asked about pillar 1 and the progress being made. This Government fully support pillar 1 and are keen to maintain momentum on its progress as soon as possible. He should take comfort from the recent publication of the substantially agreed text of the multilateral convention. That demonstrates progress, but as I say, we are not complacent on that and are keen to see further progress as soon as possible.

The hon. Gentleman very reasonably asked for more information on sentencing and the action taken by HMRC. I will give him some data. Last year, there were 240 prosecutions. Within that, there were 218 convictions, and 130 of those were custodial sentences and 110 were suspended sentences. That equates to a 90% success rate for HMRC. The hon. Gentleman is right that the average length of a custodial sentence is 24 months. We want to extend a maximum sentence for two reasons: first, to make it clear that we consider fraud and all fraudulent activity some of the most serious crime possible because of its impact on public finances; and secondly, because if the maximum sentence increases, we expect all sentences to rise, as sentences are judged relative to the maximum sentence. However, I stress that it is the Sentencing Council that issues the guidance to judges and it is ultimately judges and the courts who rightly decide what sentences are given to those found guilty.

The hon. Gentleman asked about safeguards for stop notices, and he is right to highlight that that is an important measure for HMRC. I can tell him there have already been 20 stop notices issued since HMRC started issuing them just a year ago, but there are robust governance processes and safeguards in place, including review and appeal rights. However, any criminal sentences are decided by the courts and it is the Sentencing Council that will decide on that. I will look carefully at the other questions he has raised and ask for a written response. If we have that data, I commit to writing to him with that information.

My hon. Friend the Member for North East Bedfordshire (Richard Fuller) has rightly and consistently raised his questions and concerns on pillar 2. I can tell him that the UK is implementing pillar 2 in time and alongside EU member states, Japan and Canada, which I think he would agree are all peers. He asked about China. China has not announced implementation plans for pillar 2, but it is a member of the inclusive framework of countries that are in negotiations right now on pillar 2 and we are monitoring that very carefully, as he would expect. The US Administration have always supported both pillars 1 and 2 and have been one of the strongest advocates for them; as he will know, in 2017, the United States introduced its own domestic version of pillar 2, requiring those companies with foreign income to pay a minimum level of taxation.

The punchline, to answer my hon. Friend’s ultimate question, is that already the agreement has been put in place to ensure that, by 2025, 90% of multinationals will be in play, so we are confident in the robustness of that agreement. He asked about the loan charge; I do not believe that is in scope for this debate, but the Financial Secretary to the Treasury will follow up with him and engage with him and the loan charge and taxpayer fairness all-party parliamentary group in due course.

I will briefly address the new clauses that have been laid down. I will deal with new clauses 2, 5 and 7 together, as they all relate to tax avoidance and evasion, and then I will address new clause 4. New clause 2 would require the Chancellor to provide a report on the average sentence and range of sentences given to offences being amended in clause 31, the number of stop notices issued that clause 33 would apply to and the impact of those clauses on tax revenues. New clause 5 would require the Chancellor to carry out an assessment of the impact of clauses 31 to 34 and schedule 13 on HMRC’s compliance activities and new clause 7 would require the Chancellor to review the effectiveness of the provisions of clause 31 in combating fraud involving taxpayers money.

Let me say straight out of the gate that I agree it is important that we regularly review and evaluate policy. However, the new clauses are unnecessary, as HMRC already publishes detailed information about its compliance and performance on a regular basis. As I have said, the UK tax gap is already at an all-time low of 4.8% and will remain low and stable, given the measures that we are implementing. Every year, HMRC publishes information on the number of custodial sentences received for tax compliance offences and the average sentence length in HMRC’s annual report and accounts. The 2023-24 annual report and accounts will be published this summer, providing a full overview of HMRC’s performance. As most of that information is already publicly available in routine HMRC publications, the assessments legislated for by the new clauses are unnecessary, in our humble view.

New clause 4 would require the Government to report an assessment of the technical changes to pillar 2 introduced in clause 21 and schedule 12. It would consider the efficacy of the technical changes and their impact on multinational profit shifting and tax competition between jurisdictions. The Government consider that such a report is not necessary because the amendments in the Bill are technical changes to enhance the pillar 2 legislation that received Royal Assent just last year. Those amendments simply help to ensure that the policy objectives of the legislation are met fairly and effectively, reflecting both new international guidance and stakeholder comments. Ultimately, it is about avoiding unintended consequences in legislation that has already been passed. Of course, the Government will monitor pillar 2’s overall impact as businesses begin to respond to its implementation around the world—130 countries are privy to it.

I hope to have reassured Members that the additions in new clauses 2, 4, 5 and 7 are not necessary. For the reasons that I have set out, I urge the Committee to reject them. I commend clauses 21 and 31 to 34, and schedules 12 and 13, to the Committee.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Schedule 12 agreed to.

Clauses 31 and 32 ordered to stand part of the Bill.

Schedule 13 agreed to.

Clauses 33 and 34 ordered to stand part of the Bill.

New Clause 2

Review of measures to tackle evasion and avoidance

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the measures in sections 31 to 33 to tackle evasion and avoidance.

(2) The review under subsection (1) must include details of—

(a) the average sentence handed down in each of the last five years for the offences listed in section 31;

(b) the range of sentences handed down in each of the last five years for the offences listed in section 31;

(c) the number of stop notices issued in each of the last five years to which the measures in section 33 would apply; and

(d) the estimated impact on revenue collected in each of the next five financial years resulting from the introduction of the measures in sections 31 to 33.”—(James Murray.)

This new clause would require the Chancellor to publish details of the sentences given and stop notices issued in each of the last five years to tackle evasion and avoidance, as well as the revenue expected to be generated from the measures to tackle evasion and avoidance in this Act in each of the next five years.

Brought up and read the First time.

Question put, That the clause be read a Second time.

Finance Bill

Sarah Olney Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

The Liberal Democrats do not support the Bill. It is a deception from the Government after years of unfair tax hikes on hard-working families.

The Conservatives talk about tax cuts, but there are no tax cuts. The autumn statement maintains the Government’s unfair stealth taxes through the freezing of tax thresholds, dragging millions of people into a higher band or into paying tax for the first time. Changes to national insurance rates will not even touch the sides after years of tax hikes and spiralling mortgages. Thanks to the Conservatives’ decision to freeze tax thresholds, next year someone on a typical salary of £35,000 will pay an extra £400 in tax, and someone earning a middle income of £65,000 will pay an additional £1,200. Meanwhile, the typical mortgage will go up by £220 per month. Nobody is better off after years of this Conservative Government.

Worse still was the deafening silence on health in the autumn statement. The Government should be using any additional tax revenue to tackle the crisis in our NHS, to give people the quality of care they deserve and to let more people return to work to grow our economy. We cannot fix the economy without fixing the NHS. OBR growth forecasts have been halved, largely because people are waiting for NHS treatment. It is a no-brainer that we need to treat the millions of people on NHS waiting lists and allow them to return to work, but this Conservative Government simply do not care.

The Bill offers nothing to households struggling amid the cost of living crisis. It fails to introduce a proper windfall tax on the super-profits of oil and gas producers. That revenue could be used to fund energy support for the most vulnerable, such as doubling the warm home discount and launching a proper home insulation scheme. It could also be used to invest in British farmers, to bring down food prices for the long term.

The Bill fails to reverse tax cuts for big banks, a measure that could fund support for vulnerable mortgage holders and renters. Worst of all, it takes none of the vital steps we need to grow the UK economy, such as launching an industrial strategy, reforming business rates and the apprenticeship levy, and reducing trade barriers for small businesses.

As other hon. Members have highlighted, the creative industries are a major driver of the UK economy and the Liberal Democrats are committed to ensuring their continued success. The Finance Bill has some implications for theatre tax relief, which plays a crucial role in enabling the development of new theatre productions. UK Theatre and the Society of London Theatre have raised concerns to the Treasury about these implications, which could damage how this essential relief operates. I urge the Treasury to work with representatives from the creative sectors to address these concerns and provide clear guidance on changes to the administration of theatre tax relief introduced in this Bill.

While the Liberal Democrats support of certain measures within the Bill, such as the extension of full expensing, we cannot support any legislation that arises from such a deceptive and unjust autumn statement. Ultimately, the Office for Budget Responsibility says living standards are forecast to be 3.5% lower in 2024-25 than their pre-pandemic level, which is the largest reduction in real living standards since official records began in the 1950s. Households across the country are crying out for real support from this Government, as well as action on the cost of living crisis and investment in our NHS, but all we have heard is more stale announcements that show just how out of touch the Conservative Government are.

[Mr Deputy Speaker (Mr Nigel Evans)]

I now have to announce the results of today’s deferred Divisions.

On the draft Representation of the People (Overseas Electors etc.) (Amendment) (Northern Ireland) Regulations 2023, the Ayes were 325 and the Noes were 154, so the Ayes have it.

On the draft Equality Act 2010 (Amendment) Regulations 2023, the Ayes were 464 and the Noes were 11, so the Ayes have it.

On the draft Representation of the People (Overseas Electors etc.) (Amendment) Regulations 2023, the Ayes were 324 and the Noes were 186, so the Ayes have it.

[The Division lists are published at the end of today’s debates.]

Autumn Statement

Sarah Olney Excerpts

Wednesday 22nd November 2023 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

This statement is a deception from the Chancellor after years of unfair tax hikes. Under this Conservative Government, economic growth is flatlining and public services are on their knees. This year, 400,000 people are still on NHS waiting lists, having been on them when the Chancellor made last year’s autumn statement. These people have been cruelly let down. In his statement last year, the Chancellor said:

“you do not need to choose either a strong economy or good public services.”—[Official Report, 17 November 2022; Vol. 722, c. 856.]

Will he look the British people in the eye and admit that he has given them neither?

[Jeremy Hunt]

I think that the hon. Lady should be careful with her language when she is saying things like that. I am very clear when it comes to growth. We have grown faster than any major European economy since 2010. Yes, while interest rates are higher—as they need to be, because we are bringing down inflation—growth is more subdued, but if the hon. Lady listens to, for example, those in the International Monetary Fund, who are independent commentators, she will hear them say that when we have got inflation back down to target, we will have higher growth than France, Italy and Germany. When it comes to the NHS, we put an extra £3.3 billion into the NHS budget in the autumn statement last year. With doctors’ strikes happening in most of the period since then, it has been difficult to make progress on waiting lists, and I hope that the hon. Lady will address her comments to those doctors if she is going to be consistent.

Economic Growth

Sarah Olney Excerpts

Tuesday 14th November 2023 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

It is a pleasure to speak in this King’s Speech debate on securing economic growth; I only wish the Government had offered us something in His Majesty’s Gracious Speech that would turn that vision into a reality. This Conservative Government have wrecked the economy, and they continue to make everyone else pay for it. They have given tax breaks to big banks and the oil and gas giants while the rest of us have suffered higher taxes, higher mortgage bills and spiralling inflation. The King’s Speech revealed a Government with absolutely no interest in tackling the cost of living crisis. There was nothing to address food price inflation, nor to support struggling households with their soaring mortgage payments, and it ignored the need to protect the most vulnerable from high energy bills this winter.

If there is one thing that all parts of the political spectrum can agree on, it is that the UK needs to grow its economy. Under the Conservatives, so much of the UK’s potential is going untapped, with anaemic growth, weaker investment and falling living standards. Years of stagnating growth look set to persist, with the most recent figures showing that our economy has flatlined, as household budgets are squeezed by higher interest rates. It could not be clearer that the Government’s approach has failed.

Unprecedented economic challenges have only been compounded by a Conservative Government who have no cohesive economic strategy, and who have chopped and changed time after time. A perfect example is the Prime Minister’s decision to row back on crucial green commitments—a decision that not only jeopardises our fight against climate change and keeps families stuck in draughty homes paying higher energy bills, but destroys the certainty that businesses need to invest in a greener future. It moves the goalposts, throwing into question carefully crafted business plans. What a colossal wasted opportunity for the climate, green growth and new jobs, and this is yet more proof that this Government do not have a plan—not for our planet or for our economy.

If the UK is to keep up with our international partners, we urgently need to restore business confidence and boost investment in growth industries. At the heart of the Liberal Democrat plan to achieve this is an ambitious industrial strategy, which would co-ordinate policy across key areas and set strategic objectives, such as supercharging green technologies, creating good local jobs and boosting international trade. It would create stability, give the private sector clear investment signals and revitalise business conditions by equipping our workforce with the skills it needs, investing in key infrastructure, encouraging the adoption of digital technology and creating financial markets that truly work for all businesses. Yet at every opportunity, the Government refuse to set a clear direction of travel or to implement a cohesive long-term industrial strategy, and this King’s Speech was no different.

One piece of legislation I was pleased to see is the Pedicabs (London) Bill, and I congratulate the hon. Member for Cities of London and Westminster (Nickie Aiken) on all her work in securing this commitment from the Government. This Bill will create a regulatory framework for rickshaws. While the intention for this legislation may be to control the unruly service that operates in central London, I believe that rickshaws could be a real game changer for those in my constituency and elsewhere who cannot access active travel. This could be a particular benefit as an interim transport solution across Hammersmith bridge, which has been closed to motor traffic for almost five years. I was pleased to meet the hon. Member for Copeland (Trudy Harrison) when she was a Minister in the Department for Transport to discuss the potential opportunities for rickshaws in my constituency. Now that the Bill has finally been introduced, I would welcome a further meeting with the Department for Transport to discuss the possibility for Hammersmith bridge and the surrounding areas to run a pilot scheme for a new licensed pedicab service.

Of the 21 Bills offered in this King’s Speech, there was not a single piece of legislation to tackle the crisis facing our NHS and nothing to ensure that the 7.8 million people on waiting lists can access treatment. Mental health is one of the top issues in my constituency, and I know that many of my constituents are deeply disappointed that plans to reform the Mental Health Act 1983 have seemingly been scrapped. My constituents were also looking to the King’s Speech to provide a solution to the sewage crisis polluting our waterways, but it completely fails to introduce measures that would stop water companies pumping sewage into rivers and oceans, and it fails to introduce a new tougher water regulator to hold water companies to account.

In my constituency of Richmond Park, Thames Water has become synonymous with poor-quality work and dubious environmental practices. Alongside failing to attend burst water mains for days and taking weeks to repair relatively simple issues, the company is spending millions on a project intended to replace water from the River Thames near Ham and Petersham with highly treated sewage in times of drought. Given the company’s history of frustrating business practices and an appalling environmental record, how are my constituents supposed to trust Thames Water to do its job? How will the Government ensure that the agencies responsible for monitoring Thames Water have the powers needed to hold it to account?

I hope that the King, on his 75th birthday today, has received some decent gifts and is enjoying a special day, because I am afraid that his Government have nothing to offer the families and businesses across the UK that are crying out for change. There is no plan for economic growth, no plan to protect our natural environment and no plan to tackle the crisis facing our NHS. This shows a Government that are out of ideas and will soon be out of time.

Financial Services Reforms

Sarah Olney Excerpts

Tuesday 11th July 2023 Commons Chamber

[Andrew Griffith]

I absolutely agree with my hon. Friend. The local government pension scheme is a huge opportunity for this country. In many cases, it is already very progressive. It is investing in local opportunities and allocating its capital to the sort of private growth assets that we wish to seek. With £365 billion under management, an increased rate of progress towards asset pooling, which, as the Government have made clear, should attract at least £50 billion, will provide the scale to invest well on behalf of beneficiaries. That is a great opportunity for us all.

[Sarah Olney (Richmond Park) (LD)]

The number of companies listed on the London stock exchange has plummeted to such an extent that the market value of Apple is now greater than the entire FTSE 100. Recently, Cambridge-based chip giant Arm decided to list in New York rather than in London. Does the Minister think that the Mansion House compact will reverse the trend of British-based companies deciding to list elsewhere?

[Andrew Griffith]

Yes.

Mortgage Charter

Sarah Olney Excerpts

Monday 26th June 2023 Commons Chamber

[Jeremy Hunt]

I thank my hon. Friend for his comment. The level of stamp duty is, as with all taxation measures, kept under review. We make decisions at the time of fiscal events, whether autumn statements or spring Budgets, and we will continue to do that.

[Sarah Olney (Richmond Park) (LD)]

The root cause of soaring interest rates—other than the shambles of the mini-Budget—is the Government’s failure to control inflation. The Prime Minister took personal responsibility for halving inflation this year. Will the Chancellor explain why the Government are refusing to take obvious steps to tackle inflation such as reinstating energy support for farmers and businesses, cutting import costs for small businesses and bringing down the NHS waiting list to alleviate the squeeze on our workforce?

[Jeremy Hunt]

I find it strange that the hon. Member should be criticising the Government’s failure to tackle inflation when her party is suggesting a multi-billion-pound package of mortgage support that would increase inflation. I must say that the Liberal Democrats are positioning themselves brilliantly as the pro-inflation party.

Mortgage Market

Sarah Olney Excerpts

Tuesday 13th June 2023 Commons Chamber

[Andrew Griffith]

I thank my hon. Friend who does a wonderful job of advocacy for her constituents, including those who seek to buy their first home. This Government, through a variety of measures to support householders in general, have helped more than 800,000 people, of all types, to purchase a property since 2010. That represents a city of approximately the size of Liverpool, such is the scale of the endeavours. It is of course important that we get the nation building, and part of that is about providing the economic stability whereby people are willing to make investments for the longer term.

[Sarah Olney (Richmond Park) (LD)]

The Government’s economic mismanagement has caused low growth, soaring food bills and record mortgage costs. Millions of hard-working people are being penalised for getting a foot on the housing ladder, in places such as Mid Bedfordshire, the area with the third highest share of mortgage holders in the country. The Minister mentioned the support from the mortgage interest scheme. [Interruption.] In this time of hard-pressed families, will his Government commit to converting that from a loan to a grant?

Finance (No. 2) Bill

Sarah Olney Excerpts

Committee of the whole House
Tuesday 18th April 2023 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

I rise to speak on behalf of the Liberal Democrats to new clause 7, tabled in my name, which would require the Government to produce an impact assessment of the effect of changes to small and medium-sized enterprise research and development tax credits on the UK tech industry and on long-term economic growth.

The Conservatives’ constant flip-flopping on tax and investment rules and their badly targeted incentives have not achieved the growth they promised, or are promising. Just last week, the International Monetary Fund predicted that the UK economy would contract by 0.3% this year, making us the worst-performing major economy. Prolonged weakness in business investment and productivity are a major barrier to economic growth, and if the Government want to boost innovation and drive long-term sustainable growth, they need to implement effective and well-designed policy on tax and investment.

The Federation of Small Businesses calls research and development tax credits for SMEs the most effective industrial policy of the last 10 years, enabling small businesses to develop cutting-edge products and foster competition and innovation within industry. The Government’s decision to dramatically slash R&D tax credits has therefore come as a blow to thousands of businesses. The Chancellor’s new policy of targeting tax breaks at research-intensive firms has been celebrated by the life sciences industry, but many other industries will fall outside the 40% intensity threshold. The Institute of Directors has also warned that targeting tax credits at research-intensive firms could lead to less innovation across the economy more widely.

We need to incentivise companies across all sectors to innovate, and particularly to encourage those that have not habitually been innovators. The manufacturers’ organisation Make UK has warned that further damage has been caused by the Conservatives’ chopping and changing on tax credit policy, which leaves businesses struggling to keep up and weakens business confidence. On Second Reading I urged those on the Treasury Bench to reconsider their policy and to reinstate the R&D tax credits for SMEs in full, and I am disappointed to see a lack of movement in that area.

The Liberal Democrats would introduce the kinds of incentives that have been proven to boost productivity, such as tax breaks for training to ensure that employees can continue to develop their skills, both for their own benefit and for the benefit of their employers; allowances for digital investment, to enable businesses to invest quickly and early in the newest digital tools in order to make productivity gains; and, most importantly, encouraging proper, ambitious, bold investment in energy efficiency. Whether for switching a fleet to electric cars or installing solar panels, reducing demand for energy is essential not only for decarbonising our industrial sector, but for bringing down production costs.

The need for targeted incentives for energy efficiency has been underlined by the ongoing energy cost pressures that businesses are experiencing, and the Conservatives’ decision to slash energy support for businesses by 85% will force countless shops, pubs and restaurants to pass increased costs on to their consumers, further fuelling inflation. The Liberal Democrats have repeatedly called on the Government to do more to tackle rampant inflation by supporting businesses with their energy bills. Amidst Government inaction, last month the rate of inflation in the UK jumped to 10.4%, driven largely by the cost of food and alcohol in hospitality venues. I urge the Government to look again at their policy on energy support and tax incentives offered to business, to tackle inflation, to stimulate economic growth and to drive productivity across all sectors.

[Kirsty Blackman]

The hon. Lady is making an important speech on new clause 7. I did not mention this in my speech, but we will support the new clause if it is pressed to a Division today.

[Sarah Olney]

I welcome the Scottish National party’s support for our new clause.

I ask the Government to accept the Liberal Democrat amendment proposing an impact assessment on the changes to R&D tax credits. It is essential that this policy is kept under review and its impact on the UK’s tech industry and long-term economic growth is monitored if we are to ensure that the UK becomes the powerhouse of technical innovation it so badly needs to be if we are to drive the productivity we need to increase growth across all economic sectors.

[Caroline Lucas]

I rise to speak in support of new clause 10, which stands in my name and addresses the decarbonisation allowance first announced by the Chancellor in the autumn statement and now legislated for in this Bill. Although in principle the decarbonisation allowance may sound innocuous or even useful, it is in fact an outrageous subsidy that sees the taxpayer paying companies to decarbonise their activities.

Under this scheme, a company spending £100 on so-called “upstream decarbonisation”—in other words, reducing emissions from the process of extracting oil and gas that then goes on to be burned—is eligible for £109 in relief. We should remember that these companies have themselves admitted that they have

“more cash than we know what to do with”,

and earlier this year they recorded obscene, record profits, with BP’s profits more than doubling to £23 billion and Shell reporting annual profits of more than £32 billion, all while millions of UK households face unbearable choices between basic needs and desperately struggling to make ends meet.

In his Budget statement, the Chancellor recognised what he called the enormous pressures on family finances, with some people remaining in real distress, yet even with the decision to freeze the energy price guarantee at £2,500 as of this month, bills will still rise by almost 20% and 7.5 million households will be in fuel poverty. It is utterly perverse that in this context the Government have decided to hand the climate criminals—those who have profited from the spoils of war—yet another subsidy. These are, at bottom, political choices.

The Chancellor may say, in response to my amendments, that we should be endorsing the decarbonisation allowance to cut emissions from the oil and gas sector, but that ignores the economic reality of the situation and the reality of our planetary boundaries, with upstream decarbonisation doing nothing to mitigate the end result of the fossil fuels choking our precious planet. I am afraid that, in the face of worsening climate impacts, paying companies to power oil rigs with wind turbines or to monitor emissions to detect leaks simply does not cut it. Even more alarming is the provision in the Bill for the decarbonisation allowance to support carbon capture. That UK taxpayers would pay oil and gas companies to capture their emissions in order to allow them to continue production—essentially, to continue business as usual—is a shocking violation of the “polluter pays” principle.

If the Government were seriously looking at reducing production emissions, they would, for example, be looking to bring forward an outright ban on flaring by the end of 2025 at the very latest—I remind Members that flaring has been banned in Norway since 1971—or they would be strengthening the lamentable targets in the North sea transition deal from a 50% reduction in emissions by 2030 to at least a 68% reduction, as proposed by the Committee on Climate Change in its balanced pathway, both of which have been called for by the Environmental Audit Committee, of which I am a member. Yet in their response to the EAC’s report on “Accelerating the Transition from Fossil Fuels and Securing Energy Supplies”, the Government roundly rejected both recommendations, maintaining that the existing targets in the North sea transition deal are “sufficiently ambitious”.

This is not a Government who are serious about cutting emissions from production, and they are certainly not serious about the climate crisis. New clause 10 recognises that the decarbonisation allowance is just one of the handouts to fossil fuel companies that have been introduced under the energy profits levy. It would require the Government to produce an assessment of the cost of the decarbonisation allowance to the Treasury and, crucially, its impact on overall investment in oil and gas production. It would also reveal how much money would be raised through the energy profits levy without the enormous gas giveaways in the form of both the investment allowance and the decarbonisation allowance, as well as assessing their impact on delivering our crucial climate targets.

At this point, I would like to say a few words in support of new clause 6, which would require the Chancellor to conduct a review of the decarbonisation allowance and its impact on public finances, although it is important to note that the amendment is somewhat narrower in not requiring an assessment of climate impacts as well. The Government are very transparent about the fact that the investment allowance is directly aimed at encouraging companies to pump more money into oil and gas extraction in the UK by allowing them to claim £91.40 for every £100 invested. That policy runs directly counter to the advice of the world’s leading scientists on what is needed to keep 1.5° within reach, with the UN Secretary-General calling for a cessation of

“all licensing or funding of new oil and gas”

at the recent launch of the Intergovernmental Panel on Climate Change’s “AR6 Synthesis Report”, and the report itself being clear that emissions from existing fossil fuel infrastructure already exceed the remaining carbon budget for 1.5°.

The bottom line is that our climate simply cannot take any new oil and gas licences. As I have said time and again, new licences would also fail to deliver energy security. With the oil and gas sold on global markets to the highest bidder, they will not bring down bills in the UK and will inevitably come at a huge cost to the taxpayer. Indeed, if we take just one example, Rosebank, the UK’s largest undeveloped oilfield, the costs become clear. Rosebank is enormous. At triple the size of the neighbouring Cambo oilfield, it would produce more emissions than 28 low-income countries combined or, to put it another way, it would produce the carbon dioxide equivalent of running 58 coal-fired power stations for a year. If developed, its owners will be gifted a £3.75 billion taxpayer-funded subsidy from the Government to the estimated £4.1 billion project. The Norwegian state-owned company Equinor, which made a staggering £62 billion last year, contributed just £350 million while pocketing enormous profits.

--- Later in debate ---

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

What an interesting debate it has been. I have found myself slightly amused numerous times by comments from Conservative Members, especially when have they tried to make out that theirs is the party of low taxes, when taxes as a share of GDP are heading to a post-war high. The public are not stupid. A recent poll in The Spectator showed that the public associate the Conservative party with higher taxes. The reason is that the Conservatives keep putting their taxes up.

Another problem that I have seen play out this afternoon as I have sat here is that the Conservative party is inherently divided. Different parts of the governing party are pulling in different directions. That is seen in the seven Chancellors we have had since 2010. As different factions have taken over the leadership, those seven Chancellors have pulled the party in different ways, creating uncertainty. Uncertainty is one of the key things that businesses say leads to a lack of investment. It is not just businesses telling us of the problem of uncertainty, but economists. They tell us about the difficulty with uncertainty and why the UK is uniquely impacted by a lack of investment.

Torsten Bell said that if we go back to 2010 when the Conservatives first came to power—13 long years ago—we initially see a relatively good bounce back from the financial crisis, but then

“we basically miss out on all of the investment growth that other countries saw in the second half of that decade. We flatlined, everyone else soared. In so far as there was a global boom going on, that is when it happened. We did not see that. There have been some revisions to the data recently that make the bounce back from the pandemic on business investment less grim than they looked before, but they are still pretty bad.”

That is one economist. Another economist, Professor Coyle, said:

“Tax will make a difference, but it is not the only thing that matters, and surveys of employers tend to highlight poor infrastructure”—

something that anyone who spends any time travelling by rail around the north is only too aware of—

“and lack of skills, which we’ve already been talking about. Lining up all the different things that matter is obviously part of the challenge—so, consistency”—

that word again—

“and making the system work as a whole.”

Another economist, Paul Johnson, said:

“The lack of consistency in policy is clearly a problem. Something that we talked about—perhaps it is not the right place to talk about it—is that the political instability is a problem for companies looking to invest”.

Seven Chancellors and a divided governing party that does not know which direction to take the economy and our country. Businesses are seeing that, voting with their feet and choosing not to invest in the UK. Professor Coyle went on to say:

“If you look at the past decade or so, what has been happening to firms, even within a given industry, is that the dispersion of productivity has increased. There are some very productive firms. Their productivity growth has slowed down, but they are pulling further and further ahead of…the rest. Firms that are operating outside London and the south-east tend to be the ones in the low productivity part of that distribution.”

As we have said before, the issue goes back to infrastructure. The constant under-investment in Northern Powerhouse Rail, with different Prime Ministers making decisions about whether we will or will not have it, will have an impact on business investment and influence whether businesses choose to invest in our country.

Professor Coyle went on to say:

“I do not mind whether it is called an industrial strategy or not, but we need some kind of long-term perspective—some kind of strategic approach to managing the economy.”

Hear, hear, Professor Coyle. I agree and so does the Labour party, which is why the Labour party has a long-term plan for growth in the country and why I am speaking in support of new clause 3. If businesses cannot have certainty from the governing party or understand which Chancellor is going to introduce which measure in what way, or which faction is the latest to take over the governing party, then they need that certainty from the Labour party, because they are really struggling.

I have met with local businesses in my constituency and they gave me a very clear message: it is incredibly difficult. The Chancellor may boast—boast, ha!—that we are not in a technical recession, but try telling that to the small businesses in my constituency that are finding life incredibly difficult. As we walk around different high streets, we can see the number of shops that are closing. Although the review of business rates does not go as far as the Labour party wants—we want to get rid of business rates altogether—hopefully Members from across the House can support such a fundamental review. Let us look at what we can do to support businesses, especially small businesses. I am sure each and every one of us has been lobbied hard by the Federation of Small Businesses and heard directly from small businesses about how difficult they are finding things.

I will comment briefly on new clause 7 about research and development tax relief, which is proposed by Liberal Democrat Members. It is well worth reading the TaxWatch report into the levels of fraud associated with R&D tax reliefs. We may want to support businesses with R&D tax reliefs—I am not saying that we should not do that—but we need to take the issue of fraud more seriously. The OBR predicts that the total cost of R&D reliefs will increase from £6.8 billion in 2021 to £9.2 billion in 2026-27, but fraud and error in that scheme totals over £1.1 billion in the last three years.

[Sarah Olney]

The hon. Member makes an excellent point about fraud and error. Does she agree that removing the tax breaks entirely is a sledgehammer to crack what is ultimately quite a small nut? Further attempts to crack down on fraud and error would be a much more constructive way to approach the issue she raises, rather than scrapping the tax relief entirely.

[Emma Hardy]

I never for one moment suggested we should scrap the tax relief entirely, but we definitely need to do something about fraud. When we have businesses ripping off the taxpayer for £1.1 billion—money that is desperately needed for our public sector, hospitals and infrastructure—we need to take the issue seriously and not brush it under the carpet. R&D claim firms continue to hard sell opportunities to claim refunds, often to companies that should not qualify.

We have issues with the tax gap, which is around £32 billion. That tax gap continues to increase and the tax fraud gap stands at £14.4 billion. That is a heck of a lot of money. If they were serious about wanting to reduce taxes, I would have thought Government Members would want to tackle tax fraud. I have raised the issue with the Minister in a previous debate and I know she is aware of it, so will she outline the steps being taken by HMRC and HM Treasury on the important work of reducing tax fraud and simplifying our tax system?

While we are talking about tax simplification, and as a teaser for the debate tomorrow, it seems strange that the Government wish to abolish the Office of Tax Simplification. That seems a rather strange thing to do when they seem so keen on having tax simplification, but maybe we can continue that discussion tomorrow.

Finance (No. 2) Bill

Sarah Olney Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

Households across the country are under immense financial pressure. Mortgage bills are up, the cost of the weekly shop is up, taxes are up and energy prices are up, yet the Bill offers no immediate help with the cost of living.

The Prime Minister has repeatedly promised to halve inflation this year, but the Bill does nothing to deliver on that goal. Instead of using the measures available to tackle rampant inflation, the Government are forcing countless shops, pubs and restaurants to pass increased costs on to their customers by slashing energy support for businesses by 85%. The price of clothes, food and a drink at the local pub will all go up because the Government are cutting support. Recent statistics emphasise the direct impact that increased costs for businesses have in fuelling inflation.

Last month, the rate jumped up to 10.4%, driven largely by the cost of food and alcohol in hospitality venues, but that jump was not mirrored globally. Inflation eased to 6% in the United States and to 8.5% in the eurozone, so why is the UK suffering from persistently higher rates of inflation than other large economies? The Government would like to pin the blame solely on external factors, but they are actively choosing not to tackle rising prices by supporting businesses with their energy costs. If the Government wish to be congratulated when inflation falls, they must also take responsibility when it rises.

The impact of the Government’s failure to tackle inflation is not only felt through increased prices in the shops. Earlier this month, the Bank of England raised interest rates for the 10th consecutive time, causing further misery for millions of mortgage holders who face soaring monthly payments. In my constituency alone, 15,000 mortgage holders are now vulnerable to soaring costs because of the Conservative chaos.

The Government could be doing so much more to support families with the immediate pressures of the cost of living. The Minister claims the Government are extending support with energy bills, but that is simply not true. People will pay more for their energy this year than they did last year, not less, even though gas prices are falling. In three months’ time, there will be no extra help in place whatsoever—the £400 discount is also gone. Fuel poverty will get worse, not better.

The Liberal Democrats would cut energy bills by £500, taking them back to the level they were at last April. The Government even had unspent funds available to do that, but they simply chose not to. The Liberal Democrats would also introduce targeted support for the most vulnerable households by doubling the warm home discount and the winter fuel allowance, as well as setting up an emergency home insulation programme to bring energy bills down in the long term. To fund additional support, we would implement a proper windfall tax on the super-profits of the oil and gas giants by raising the rate and abolishing the fossil fuel investment loophole—fair taxation that would redistribute windfall profits to directly benefit households.

Not only have the Government failed to get a grip of the cost of living crisis; they are hitting hard-working families with unfair tax rises, penalising people for every extra pound they earn at a time when wages are already declining in value. Meanwhile, households have seen no benefit from the increased taxes they pay. Schools and hospitals are stretched to breaking point, with no room left in their budgets to cover essential running costs, let alone to fund vital repairs to crumbling infrastructure. The Bill completely ignores our crumbling public services, condemning them to further decline.

The Chancellor has spoken of re-engaging economically inactive people in the labour market, but the Government have no plans to fix NHS backlogs and social care staff shortages, which is essential to reduce the nearly 2.5 million workers out of work due to ill health. They cannot fix workforce problems with people with ill health if they do not fix the NHS and social care. The Government just do not seem to get that.

Above all, the Bill fails yet again to implement measures that would deliver strong, sustainable and fair growth for the UK economy. Business investment in the UK is the lowest in the G7. We urgently need to boost private sector investment in our businesses to get on the path to sustained growth. The Conservatives’ policy on that has failed badly. The lack of industrial strategy and their constant flip-flopping on tax and investment rules have not achieved the growth they promised us.

The business community has been vocal about the damage caused by the Government’s decision to scrap research and development tax credits for SMEs in the autumn statement. I was therefore disappointed by the lack of movement in that area in the Bill. I urge Treasury Ministers to reconsider their policy and to reinstate the R&D tax credits for SMEs in full. Such incentives are vital to enable small businesses to fully explore the opportunities opening up, particularly in the digital sphere, artificial intelligence and robots, and to ensure that the UK can continue to be a powerhouse of technical innovation.

The Government should also explore other tax incentives proven to boost productivity, such as tax breaks for training, digital investment and upgrades to energy efficiency. Instead, we have another temporary measure that fails to give businesses the confidence to make investment plans for the future.

Despite its 450 pages, the Bill offers nothing to support households or businesses with immediate cost of living pressures. Families are looking to the Government for support, but they are met with unfair tax hikes and crumbling public services, all the while being left to suffer the effects of rampant inflation, soaring interest rates and declining wages. The Liberal Democrats are calling for more support with energy bills, both for households to deal with the cost of living and for businesses to help curb inflation. We are calling for a proper plan for fair and sustainable economic growth, and urgent action to clear NHS backlogs and to ensure that those suffering from ill health are able to access the care that they need to return to the workforce. The Bill fails to address those points, and the Liberal Democrats will vote against it.

Silicon Valley Bank

Sarah Olney Excerpts

Monday 13th March 2023 Commons Chamber

[Andrew Griffith]

I am not going to offer my hon. Friend that guarantee, as that would not be prudent or the right thing to do. I can guarantee that this Government will do everything possible to reconcile the needs of protecting customers, protecting financial stability and protecting the taxpayer. It is of great note that we were able to do that in this transaction, and if such an issue were ever unfortunately to reoccur, all our energy would be devoted to precisely the same ends.

[Sarah Olney (Richmond Park) (LD)]

I very much welcome the purchase of Silicon Valley Bank UK by HSBC this morning, not least because I am a former employee of a company that had exposure to the bank on both sides of the Atlantic and whose chief executive officer was one of the signatories to the letter sent to the Chancellor on Saturday. Statements were made by the UK bank on Thursday and Friday, and if depositors had relied on the assertions made in those statements, and if the purchase had not gone through this morning, those depositors would have incurred losses. Will the Minister confirm whether that constitutes a breach of the regulations? If it does, will there be any sanctions for people identified as having committed those breaches?

[Andrew Griffith]

I am delighted that the hon. Lady’s constituents benefit from the certainty. It was a terrible weekend for everybody who was a depositor or who was in some way dependent on SVB UK. That is why it was so important that we not just achieved this outcome and that the regulatory structure and laws laid down by Parliament allowed us to do so, but that we were able to act decisively. I welcome the fact that another great British bank, HSBC, has stepped in, and I wish it and all the employees well.

It would be inappropriate for me to comment on particular things that were said. Fortunately, we are in the position that every depositor has been made whole, and therefore that issue does not arise.