Finance (No. 2) Bill

Debate between Sarah Olney and Gareth Davies

Committee of the whole House
Wednesday 8th May 2024 Commons Chamber

[Gareth Davies]

I was waiting for a four-hour speech and it never came—that was four minutes, but what a four minutes!

Let me thank hon. Members for their contributions to today’s debate. I will respond to some of the points that have been raised at the end of my remarks, but before doing so let me directly address some of the new clauses that have been tabled.

New clause 2 seeks the publication of a review into how the rate of corporation tax set by the Bill, as set out in clause 12, affects business investment and certainty, including what the effect would be of capping it at its current level over the next Parliament. I agree that it is important to regularly review and evaluate policy, and the Government keep all tax policy under review. The Office for Budget Responsibility produces regular forecasts, including of projected corporation tax receipts and business investment. These forecasts are based on the rates and thresholds that currently apply, and which clause 12 maintains from April 2025 to provide advance certainty to businesses. The latest of the forecasts already looks as far ahead as 2028-29 on the basis of the corporation tax rate, which currently stands at 25%, so no further action is required from the Government.

[Sarah Olney (Richmond Park) (LD)]

The Bill maintains the small profits rate of corporation tax at 19%, but does the Minister not agree that this is a drop in the ocean compared with spiralling costs in energy, staffing, borrowing and a host of other areas? The Chancellor could have used the opportunity to give small businesses a boost by reforming business rates, or by helping them with their energy bills through a proper windfall tax. Does the Minister support new clause 7, tabled by the Liberal Democrats, which would ensure that the Government must lay before the House a review of the impact of the small profits rate to look at whether it really helps small businesses to manage their costs.

[Gareth Davies]

I will give the hon. Lady the courtesy of addressing new clause 7 in due course. She is right to highlight that the new rate for small businesses will keep around 70% of businesses in the country at 19% when those that are most profitable move to 25%, but look at the entire package of support for small businesses. It shows that the Government are supportive of our high streets and small business entrepreneurs across the country, whether that is through the increase in VAT thresholds, the 75% rate relief for retail, hospitality and leisure businesses, or all the support that we provided during the covid pandemic and throughout the energy shock, including the energy bill relief scheme and the energy bills support scheme. I put it to her that we are behind our small businesses. We regard them as the engine of our growth, and we will continue to do everything we can to support them. I will come on to new clause 7 in a moment, if I may.

New clause 3 would require a review of the possible impacts of the energy security investment mechanism on energy profits levy revenues, and on investment decisions in the oil and gas sector. It would require this assessment to be made on the basis of the end date of the EPL falling before the end of the next Parliament.

The Government have already published the tax information and impact note, which sets out the anticipated impact of the energy security investment mechanism—the ESIM. This indicates clearly that the mechanism will give operators and lenders to the oil and gas industry confidence in the fiscal regime while the EPL remains over the next Parliament. Based on the OBR’s current price projections, the ESIM is not predicted to trigger before the end of the EPL in March 2029, and is therefore expected to have no impact on EPL revenues. In addition, should there be interest in calculating forgone revenue if the EPL were to end in a particular year, the OBR has published projected EPL revenues over the forecast period, and the impact of the EPL ending early can be calculated from this publicly available information that is there for all to see.

Finance Bill

Debate between Sarah Olney and Gareth Davies

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

[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.