Finance Bill (First sitting)

Tulip Siddiq Excerpts

Committee stage
Tuesday 16th January 2024 Public Bill Committees

[Nigel Huddleston]

Clause 11 extends the sunset clause for the enterprise investment scheme and the venture capital trust scheme to April 2035. The schemes will continue to support thousands of early-stage, innovative companies each year and ensure that they have access to the investment they need to develop and grow.

The enterprise investment scheme and venture capital trust scheme provide a range of generous tax reliefs to investors to encourage investment into higher risk, early-stage companies, which face the biggest challenges in accessing finance. This will encourage entrepreneurship in the future. The schemes are world-leading in terms of their generosity, with more than £3.4 billion of funds raised across the two schemes in the tax year 2021-22 alone. This extension will ensure that the schemes continue to support the growth of early-stage companies.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under you, Mr. Paisley. As the Minister has set out, clause 11 extends the availability of the enterprise investment and venture capital trust tax reliefs to shares issued by eligible companies and VCTs by 10 years to 2035. The Opposition welcome the Government’s long overdue decision to take action and extend the schemes, given that the original sunset clause of April 2025 was fast approaching.

Both the EIS and VCT schemes remain crucial funding lifelines for the UK’s start-up community and the uncertainty created by the previous sunset clause deadline has risked hampering investor confidence in backing our high-growth firms. We also know from the latest HMRC data that between 2021 and 2022, nearly 4,500 businesses accessed more than £2.3 billion of funds through the EIS scheme—the highest number since it was introduced. As the Minister will probably know, the ScaleUp Institute has described the relief as pivotal in driving the supply of early-stage risk capital to some of the UK’s most exciting companies.

It is worth noting that the 2025 sunset clause, at which point the schemes were due to be revived, was due to a request from the European Commission to ensure compliance with European Union state aid rules. Given the importance of ensuring that investors are able to plan years in advance when developing a forward pipeline of investments, the Government should have listened to business and tackled the investment uncertainty caused by this potential expiry date far sooner following our departure from the EU. Although people were concerned about the prospect of the schemes expiring, there are those in the VC community who saw the review triggered by the sunset clause as an opportunity to improve the operation of the EIS and VCT schemes, which remain extremely complex. It is crucial that, beyond simply pushing the sunset clause back 10 years, the Government take an active interest in improving these vital schemes, including by delivering the simplification measures that many are calling for to ensure that more companies and more investors can benefit from the tax reliefs available to them.

I can confirm that the Labour party supports clause 11, which is a necessary intervention to ensure that investors can continue to invest with confidence in UK start-ups, but does the Minister acknowledge that we have an urgent need for a Government who listen to business early on, and who create the stable investment climate that we need to deliver growth in our economy, and who do not leave that until the last minute?

[Nigel Huddleston]

I am afraid that I respectfully disagree with the hon. Lady. We see clearly from feedback from the industry that it very much welcomes the changes. Actually, it is quite transparent throughout the Bill that we are backing business right across the UK. Richard Stone, chief executive of the Association of Investment Companies, has said:

“It’s excellent news that the Chancellor has committed to extending VCTs’ sunset clause…The extension…will help provide certainty to investors and businesses and enable VCTs to continue supporting UK growth companies.”

The British Private Equity & Venture Capital Association has said:

“It is hugely positive that the Chancellor has EXTENDED THE EIS AND VCT SCHEMES until 2035.”

The changes were not subject to a formal consultation, but were part of engagement with industry that Treasury officials and Ministers conduct on an ongoing basis. We are listening to business all the time; we make appropriate changes all the time, and the measures in clause 11 prove exactly that point. The hon. Lady is trying to score political points, but in highlighting some of the scare tactics, she is proving exactly why business can be confident in this Government, and should be somewhat fearful of the Opposition.

The clause will ensure that the EIS and VCT schemes continue to support thousands of early-stage companies each year in raising the funding that they need to succeed. I therefore urge that the clause stand part of the Bill.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12

Relief for payments of compensation by government etc to companies

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

[Nigel Huddleston]

I should probably explain to anybody wondering about the musical chairs that we have two Ministers here, because the clauses are split across ministerial responsibilities. I explain that for Members and anybody watching—the millions who, I am sure, are watching on television across the world.

Clause 12 is on a very important and newsworthy point, but it also shows that the matter that it deals with has received considerable attention for some time: it makes changes to ensure that all claimants of compensation from a range of Post Office schemes related to the Horizon IT scandal are treated similarly. It will align the tax treatment to ensure that claimants who chose to set themselves up as companies obtain tax relief comparable to that available for claimants set up as individuals.

Following the Horizon IT scandal, a number of schemes were set up to provide compensation to the individuals affected, and although most sub-postmasters are individuals, some set themselves up as corporate entities. Individuals have been exempted from paying income tax, national insurance contributions and capital gains tax on compensation that they received under the schemes that have been announced, which are being legislated for separately, but the Government are determined that postmasters affected by the Horizon IT scandal will receive the compensation that they deserve, regardless of how they arrange their business structure. The clause therefore exempts from corporation tax compensation payments made under the Post Office historical shortfall scheme, the group litigation order schemes, the suspension remuneration review and the Post Office process review scheme. The legislation will align the taxation of onward payments of compensation with that of compensation to individual recipients.

The clause will impact the relatively small proportion of compensation recipients who are structured as corporate entities, but to those impacted it is extremely meaningful. The approach taken in the legislation is consistent with tax principles and precedents, as well as the tax treatment of separate Post Office compensation schemes set up in response to the Horizon IT scandal.

[Tulip Siddiq]

I would like to spend a long time debating the claim that business is fearful of the Opposition, but I do not feel that this is the right time.

[Nigel Huddleston]

We will have that debate another day.

[The Chair]

And I will not allow it!

[Tulip Siddiq]

Given the shocking details of the Post Office scandal, which has rightly been the subject of significant parliamentary debate in the last few days, it will come as no surprise that the Opposition strongly support the measures in clause 12, which is designed to bring parity to the taxation of compensation payments received by all sub-postmasters who were victims of that shameful episode. It is quite plainly unjust for sub-postmasters structured as a corporate entity to receive less in compensation than individual claimants, or for that compensation to disappear back to the Exchequer through tax on onward payments to the directors of those entities, who are the victims.

The clause also rightly addresses the inexplicable difference that there has been in tax treatment depending on the route that victims have taken to seek damages from the Post Office, be it through the group litigation order scheme, the Horizon shortfall scheme, the suspension remuneration scheme or the Post Office process review scheme. I thank the campaign groups, such as Tax Policy Associates, that have led the charge over the past year for their dogged efforts to highlight the outrageous proportion of sub-postmaster compensation that was set to disappear in tax. Given last week’s welcome announcement from the Prime Minister that all victims of the Post Office scandal will now be exonerated and compensated in full, it is even more critical that the tax exemptions in clause 12 are implemented at pace. More broadly, the Government must ensure that the complexities of taxing compensation are not allowed to stand in the way of delivering justice to victims of future scandals. We will not oppose the clause.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Paisley. Justice, accountability and compensation for those affected and wronged are required at speed on all aspects of the Post Office-Fujitsu-Horizon scandal. That is why we will support clause 12: to ensure that the fullest possible reparations are made to those who suffered through false accusation, incarceration and worse. The scandal has gone on for far too long, and highlights the worst of Westminster’s indifference and delay, even when presented with overwhelming evidence of wrongdoing. That, along with all other aspects of the scandal, must be dealt with as quickly and thoroughly as possible.

--- Later in debate ---

Clause 13 will extend the time limit for a company to notify HMRC of a grant of EMI options from 92 days following the date of grant to 6 July following the end of the tax year in which the grant was made. The change will apply to options granted on or after 6 April 2024. Tens of thousands of individuals are granted EMI options annually, so this measure ensures that companies are given a longer time in which to submit an EMI notification of a grant of options. Individuals will not need to do anything differently. The change is likely to result in fewer late notifications and less possibility of options being disqualified. That will improve how the scheme works for individuals who receive EMI options.

[Tulip Siddiq]

As we have heard, clause 13 extends the time limit within which employer companies have to notify HMRC that they have been granted EMI options from 92 days after the grant was made to 6 July following the end of the tax year in which they were granted. This change is designed to simplify the process, and so increase small businesses’ ability to benefit from recruiting and retaining staff. It is one of a number of measures that were called for in submissions to a 2021 consultation on the EMI scheme, which cited the overly complex process for notifying HMRC and the need to extend the notification period. We will not oppose the clause.

[Nigel Huddleston]

I thank the hon. Lady again for her contribution and support. There are many relatively small and highly technical changes that we are making through the Bill, and this is one of them. On paper, it can look somewhat technical and confusing, but it is really meaningful, and I appreciate the fact that the hon. Lady and Opposition Members acknowledge that. The clause supports small and medium-sized businesses in recruiting and retaining key talent by simplifying the process to grant EMI options. For the reasons we have outlined, I urge that the clause stand part of the Bill.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

Provision in connection with abolition of the lifetime allowance charge

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

--- Later in debate ---

[Nigel Huddleston]

Clause 19 widens access to the growth market exemption—a relief from stamp duty and stamp duty reserve tax—so that it better supports SMEs and growth businesses to raise capital. It does that by lowering transaction costs, which will support our economy by boosting growth in innovative sectors. The relief will now be available to smaller, innovative growth markets, instead of being restricted to markets operated by large stock exchanges.

The growth market exemption was introduced in 2014 with the aim of boosting investor participation in equity growth markets and improving the conditions for growing companies to raise equity financing. Initially, three UK markets and one Irish market were able to access the exemption. Since then, another 10 markets across the EU and European economic area have applied for and gained access to the exemption, meaning that UK SMEs have greater access to capital.

Previously, in order to be recognised by HMRC as a qualifying growth market, markets that are referred to as “multilateral trading facilities” had to be operated by a “recognised stock exchange” such as the London or Aquis stock exchanges. Once that condition was met, markets also had to meet one of two additional conditions: either the majority of companies on the market had to have a market capitalisation of less than £170 million, or the market’s rules of admission had to require companies to demonstrate at least 20% compounded annual revenue or employment growth over the three years preceding their admission.

However, the requirements have not been updated since the exemption’s introduction in 2014, despite considerable developments in how markets are regulated. Investment firms that are not of the same size and scale as the large stock exchanges can run multilateral trading facilities that are recognised as small and medium-sized enterprise growth markets by the Financial Conduct Authority but, as a result of the current stamp taxes on shares legislation, are barred from accessing the growth market exemption.

The changes made by clause 19 allow multilateral trading facilities that are regulated by the Financial Conduct Authority and run by these smaller investment firms to access the growth market exemption, provided that they meet one of the two additional requirements. That will ensure fairness in the current application of the exemption and increased competition in the market, leading to greater choice for SMEs that are seeking to access finance. That will, in turn, boost growth in UK SMEs.

Clause 19 also updates the market capitalisation condition by increasing the level up to which a majority of companies listed on the exchange can be capitalised from £170 million to £450 million. That change reflects the modern market and demonstrates the Government’s commitment to helping innovative SMEs to grow.

[Tulip Siddiq]

As the Minister said, clause 19 amends the qualifying criteria to increase access to the growth market exemption relief on any stamp duty or stamp duty reserve tax that is otherwise owed on trades made in UK incorporated companies. The Government have stated that these proposals will update the growth market exemption eligibility to reflect the modern market, ensuring that there is greater fairness in the application of the tax relief and giving greater choice for businesses considering where to list their shares for trading.

We in the Opposition are hugely supportive of efforts to boost our ailing capital markets and are committed to delivering a world-leading listings regime in the UK, building on recent regulatory reforms and ensuring that our scale-ups can access the equity finance they need. We are supportive of the objectives of the clause, but questions remain about what impact the changes will have in practice.

For example, it would be helpful to understand from the Minister how many additional growth markets will potentially be eligible for a stamp duty exemption due to the increase in the capitalisation threshold from £170 million to £450 million. By far and away the largest growth market the exemption applies to is the London stock exchange’s alternative investment market, which, according to the latest data, had an average market capitalisation of £126 million in the summer of 2022. Given that the largest and most established market to benefit from the exemption appears to be well under the original threshold, it remains unclear what difference the change will make. What are the Minister’s views on that?

We do not oppose clause 19, but it is a minor tweak that will not deliver the sea change in the availability of growth capital that British businesses urgently need. Does the Minister plan to do more to increase the availability of growth capital for our businesses?

[Nigel Huddleston]

I thank the hon. Lady for her comments and questions. Any market that meets the requirements will be able to apply to HMRC to take advantage of the exemptions. The UK’s financial service industry is dynamic and innovative, so it is important that future markets are not restricted by legislation that has not been updated in almost a decade. It is also a question of fairness: it is right that smaller, innovative markets are not barred from the exemptions, for the reasons that she and I outlined. At the moment, there is one market that is likely to benefit—Archax, a digital asset market—but the point of the changes is that other markets could benefit in future and, because of the dynamism in such markets, we need to plan ahead. We cannot anticipate what may come up, so we do not want to restrict options for future growth.

Clause 19 updates the scope of the growth market exemption, reflecting changes that have taken place since its introduction back in 2014. The clause allows the exemption to meet its initial aims more effectively by ensuring fairness in its application, increasing competition, boosting liquidity and facilitating growth. I therefore commend the clause to the Committee.

Question put and agreed to.

Clause 19 accordingly ordered to stand part of the Bill.

Clause 20

Capital-raising arrangements etc

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

--- Later in debate ---

Prior to its removal, the 1.5% charge on issues was regarded as an expensive obstacle for listed companies wishing to raise capital from overseas investors. It had a negative impact when such companies issued shares, including on the acquisition or takeover of other companies. By permanently removing the charge, the Government are supporting the competitiveness of UK capital markets and making it clear that we are open for business. The changes took effect on 1 January 2024, which ensured that the 0% charge continued seamlessly following the changes made by the REUL Act taking effect.

[Tulip Siddiq]

The Labour party supports the clause, which is a necessary intervention to ensure that UK companies previously able to rely on the direct effect of EU law are not left at a disadvantage to international counterparts when issuing UK shares and securities on overseas exchanges. The legal certainty and the removal of the potential 1.5% charge will be welcomed by UK firms considering listing on overseas exchanges. It is vital that our tax system remains internationally competitive.

However, our priority in government will be to overhaul our domestic capital markets to ensure that high-growth British companies critical to the future growth of the economy choose to list here in the UK instead of opting for exchanges in the US and Asia. The UK currently lags far behind competitor jurisdictions, and the Government must work in partnership with industry and regulators if we want to regain our status as a top global listings destination.

Although I do not have any issue with the exemption confirmed by clause 20 and schedule 11, I urge the Minister to ensure that, beyond recent changes to the listings rules, he prioritises listening to industry voices such as the Capital Markets Industry Taskforce about the solutions that are desperately needed to resuscitate our own domestic markets.

[Nigel Huddleston]

I will not stray into a broader debate; we will have that, I am sure, on Third Reading or at another point. I made my points on the broader economy earlier, but I gently request that the Opposition stop talking the UK economy and UK businesses down. By doing so, they are talking down the workers and companies in their own constituencies.

This measure is designed to ensure the competitiveness of the UK’s code in relation to financial services, by providing certainty that unwelcome frictions will not be reintroduced for UK companies that wish to operate globally. I commend the clause and the schedule to the Committee.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Schedule 11 agreed to.

Clause 22

Rates of tobacco products duty

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

--- Later in debate ---

[Gareth Davies]

Clause 26 enables regulations to be made exempting foreign vehicles, or foreign vehicles that meet certain conditions, from vehicle excise duty. In the first instance, the power will be exercised to provide for a three-year exemption in respect of Ukrainian plated and registered vehicles belonging to individuals granted visas under the various visa schemes introduced in relation to the conflict in Ukraine.

As of 27 November, around 193,900 Ukrainians had entered the United Kingdom since the beginning of Russia’s illegal, unprovoked invasion of Ukraine in February 2022. The Government understand that a significant number have brought vehicles with Ukrainian number plates with them. Gov.uk guidance states that usually such vehicles must be registered and taxed with the Driver and Vehicle Licensing Agency if the keeper becomes resident or stays longer than six months. However, in advance of making regulations, the Department for Transport has already announced the exemption from VED for individuals in the UK under the family, sponsor and extension Ukrainian visa schemes driving vehicles with Ukrainian number plates.

The clause will ensure that individuals fleeing war in Ukraine who have not yet registered their vehicles in the UK do not face costs and administrative burdens associated with vehicle taxation and registration while they are temporarily in the United Kingdom. I commend the clause to the Committee.

[Tulip Siddiq]

I welcome clause 26, which gives the Government the power to exempt certain foreign vehicles from paying vehicle excise duty. I note the Government’s long overdue plans to regulate for a three-year tax exemption for cars belonging to Ukrainian refugees arriving in the UK under a visa scheme due to the appalling conflict in their country. I am confident that I speak for all members of the Committee in supporting that change in position, but in reality the intervention has come far too late to prevent many refugees from paying eye-watering bills.

Many Ukrainians have been forced to pay thousands on expensive insurance policies or replacement car parts due to having non-compliant cars, despite the fact that other temporary UK residents, such as overseas students and workers, have had no such problems. Most disturbingly, we have heard examples of refugees who have decided to drive their vehicles back to Ukraine and abandon them in the middle of a war zone to avoid UK registration fees that they cannot afford. The Department for Transport and the Government acted shamefully slowly in addressing the problem, despite the efforts of colleagues from across the House and campaigners to bring it to their attention over the past year.

We welcome the fact that action has been taken and we support clause 26, but I think the Minister should apologise on behalf of the Government to Ukrainian refugees that such a ridiculous situation was allowed to go on for so long.

[Drew Hendry]

The SNP welcomes the clause, but I echo the final comment by the hon. Member for Hampstead and Kilburn: why has this taken so long?

I and many others have written to Ministers about the issue in order to make lives easier for people who have come here from Ukraine for safe haven. It is easy to forget the difficulties facing people who are fleeing a war zone and have come for the respite and hospitality that people have displayed—particularly in Scotland, where some 260,000 Ukrainian refugees are being sponsored at the moment. While welcoming this belated measure, I ask that the Government look very carefully at how they can make lives easier across the board for people who are flee war zones such as Ukraine and seek safe haven here.

It is very important that we keep Ukraine in our minds just now. It would be very easy for it to drift off the news agenda or out of our minds, but Ukrainians are still under attack every single day. We must keep them in our minds, in every part of our business.

Finance Bill

Tulip Siddiq Excerpts

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

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

I rise to speak to the clauses relating to VAT and excise, beginning with clause 25, which restores the full tax rebate for machines and appliances that use non-gas heavy oils and bio-blends for commercial heating purposes. The Government have said that this is to correct an anomaly brought about by the April 2022 changes to the Hydrocarbon Oil Duties Act 1979, which mean that machines using kerosene have benefited from a full rebate while those using other types of heavy oil were made ineligible for lower duty rates when used for heating.

The Government have said that their April 2022 tax changes were intended to reduce the use of gas fuels and to make progress against the UK’s climate commitments. However, perversely, under the current system companies receive a tax penalty for using next-generation renewable fuels such as hydrotreated vegetable oil for heating, instead of kerosene, despite the fact that HVO produces nearly 90% less greenhouse gas emissions. I therefore support clause 25, which seeks to correct that unintended error and restore equivalent tax treatment for the use of non-gas heavy fuels for commercial heating. However, let us be clear: the correction will have a limited impact on businesses across the UK facing rocketing heating bills as the cold starts to bite this winter.

We also know that it is often the scandalous lack of grid connections that forces many businesses, particularly in rural areas of Scotland, to operate their machines off grid, using heavy oils and biofuels. Changing tax incentives, although significant, will not deliver the overhaul our energy system needs to become a clean energy superpower. After 13 years of mismanagement, our energy grid is on its knees, with new developments forced to wait up to 15 years for a new connection and more than £200 billion of privately funded energy projects stuck in limbo.

Labour will prioritise reforming the grid, overseeing the largest upgrade to our national transmission infrastructure in a generation and accelerating connections for those who are forced off grid. We cannot afford to keep dragging our feet any longer. The Government claim they are serious about delivering the transition and boosting the use of clean energy sources, but the neglect of our grid infrastructure has been shocking. We know that the significant increase in both clean power generation and clean industry that the UK will need to reach net zero will require four times as much grid infrastructure in the next seven years as has been built in the past 30. Although the Opposition do not oppose clause 25, which is a welcome correction, ensuring that tax incentives for non-gas heavy fuels remain consistent is the bare minimum we should be expecting from the Government on this vital issue.

I move on to clause 27, which seeks to clarify UK primacy on VAT and excise law following the passage of the Retained EU Law (Revocation and Reform) Bill. The Government’s draft legislation seeks to ensure that in relation to VAT and excise law it will no longer be possible for any UK Act of Parliament or domestic subordinate legislation to be quashed or disapplied on the basis that it was incompatible with retained EU law. The Government state that this measure will

“ensure the stability of the VAT and excise regime”,

providing legal certainty for businesses. Labour, unsurprisingly, supports the objective of this legislation; ensuring that firms have clarity over how the VAT and excise regimes should be interpreted following the UK’s departure from the EU is crucial to retaining business confidence. However, following the Government’s public consultation, which concluded in November, it remains entirely unclear whether the measure achieves its stated objective of reducing the complexity for businesses of interpreting the VAT regime.

In its consultation response, the Chartered Institute of Taxation highlighted a number of concerns about the proposals, pointing out that the significant complexity in interpreting this draft legislation risks undermining the certainty it seeks to deliver. Specifically, the CIOT points out that the distinction drawn in the legislation between disapplication and the quashing of UK law as a result of EU law, and interpretation,

“might in practice be insufficient to achieve the desired result”.

Consultation feedback also pointed out that the measures in clause 27 do not make it clear how far higher courts are intended to be bound by prior case law from the Court of Justice of the EU, thus creating uncertainty for businesses and advisers.

Although taking a “bespoke UK approach” to VAT and excise legislation is welcome in principle, the draft legislation also fails to address the fact that the removal of the reliance on EU provisions will create significant gaps in UK legislation where our domestic rule book did not fully transpose EU directives. It is not just tax experts that have sought to draw attention to this issue through the Government’s consultation; the industry body for the banking and finance sector, UK Finance, has warned over and over again that the draft legislation

“does not appear to adequately address”

the complexity of the VAT landscape

“thereby sustaining a high degree of uncertainty for industry and the prospect of settled interpretations of VAT law being disturbed.”

The trade body pointed out that although EU VAT law includes a clear VAT exemption for intermediary services in connection with bank accounts, the exemption has not been implemented in UK law. With business no longer able to rely on the direct effect of EU law, material changes to VAT exemptions in the financial services sector will come into effect. That is just one example from my own shadow brief, but it highlights the additional uncertainty that this “clarifying” draft legislation has already created for business. Despite the clear message from tax experts and industry in the consultation, it seems that the proposals are at best problematic. It is of particular concern that the Government seem to have ignored that feedback and ploughed on, with not a single amendment made to the draft legislation.

Detailed guidance is needed to address the significant issues that have already been raised regarding clause 27 and to ensure it meets its objectives. Labour will not oppose the measure as we remain supportive of it in principle, but urgent clarity is needed as it will come into effect from the beginning of this year. The shock that a Government measure designed to provide “legal certainty and stability” has raised more questions than answers has slightly worn off for those of us obliged to follow the circus on the Government Benches on a daily basis.

To conclude, we will not oppose the two clauses, but the detail of the proposals continues to raise questions about the competence of the Government. From being able to afford low-carbon fuel and avoid crippling heating bills to having certainty over the VAT regime, UK businesses deserve far better. After 13 years of leadership, we need a Government who can provide the confidence that businesses desperately need, using the clean energy sources of the future to drive growth and investment across the country.

[Sir Mike Penning (Hemel Hempstead) (Con)]

It is a pleasure to have sat through the Committee stage of the Bill and to hear the Government talk about the advantages we have from Brexit. I am pleased to hear that the Government have looked, and continue to look, extensively at the taxation system—in particular at the interpretation of VAT, as mentioned in this clause.

One interpretation of VAT in this country massively affects people who are visually impaired and those who cannot read, perhaps because of dyslexia: there is no VAT on books, but the Treasury apply VAT at 5% to audiobooks. If that interpretation of VAT is to be taken as far as it possibly can, I am disappointed that disabled people are not being protected within the structure of the Bill, in the way that they have been for many years.

Years ago, when I was disabilities Minister, I was told that VAT changes could not happen because we were in the EU. We are no longer in the EU and we can set our VAT rates as we would like. It would be fundamentally good if the Government came forward with an interpretation of VAT that said that people who rely on audiobooks, through no fault of their own, do not have to be penalised by VAT at 5%. I am not talking only about the visually impaired—I declare an interest: I am dyslexic and rely on audiobooks, although not completely. People who do not read Braille are being punished as well.

The Government continue to look at new taxation rules and new ways of making sure that people do not get around the taxation system, and it is clear that they are looking at the implementation of VAT. What better spring present for those who rely on audiobooks than for the Minister to say that he will meet me, talk about the issue further and perhaps look at the early-day motion in my name?

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 2) Regulations 2023

Tulip Siddiq Excerpts

Monday 8th January 2024 General Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under your chairship, Ms Fovargue. We support the regulations, which amend the list of high-risk third countries to reflect the changes made to the Financial Action Task Force list.

I heard what the Minister said about the Cayman Islands and its progress, and have just one question to ask him about it. It is welcome that, five years after the Sanctions and Anti-Money Laundering Act 2018 legislated for public registers in the overseas territories, the Cayman Islands has finally announced that it will introduce company registers, but I worry that the registers will not be made fully public. There will be a filter that allows access only by those who can demonstrate a “legitimate interest”. Does the Minister share my concern? Will he work with his counterparts in the Cayman Islands and the other overseas territories to ensure that they raise their standards where they may be lacking?

[Bim Afolami]

I thank the shadow Minister for supporting the regulations. It is incumbent on me to make two key points to address her question about the Cayman Islands. First, a country’s being taken off the list reflects that it has now satisfied what the Financial Action Task Force has set out for it, that it has worked hard and has evidenced how it is doing that. The point about ownership lists and whether a legitimate interest is required is a fair and interesting one, but it has not triggered the Financial Action Task Force to say that the Cayman Islands is not largely compliant. That is the first point. The second is that this is always evolving and no country in the world is perfect. Illicit activity is a scourge that we are trying to remove from our financial system, so we continue to work with the Cayman Islands to make sure it does everything it can.

[Tulip Siddiq]

I draw the Minister’s attention to Transparency International’s warning that the requirement to demonstrate a legitimate interest could limit access for civil society organisations and journalists, who in recent years have been key in uncovering corruption and money laundering. That is my point when I ask about access to the registers. Does he share my concerns about that?

[Bim Afolami]

I am happy to look into that. The UK and various overseas territories, not just one in particular but across the whole landscape, have been working at official level technically to improve access and visibility in terms of beneficial ownership. The UK, when Lord Cameron was Prime Minister, was a leader in doing that internationally, and we will continue that work. I am happy to continue discussing with the hon. Lady what more we can do in respect of the Cayman Islands.

I listened carefully to the hon. Lady’s speech, and it is the Government’s view that the amendment will ensure that UK legislation remains up to date and in line with international standards. It is clear that money obtained through corruption or criminality is not welcome in the UK and should not be welcome anywhere. That is why we are playing such a leading part in the Financial Action Task Force.

The new procedure for dealing with the problem will enable regulations to allow the UK to automatically reflect changes agreed by the Financial Action Task Force in our own list. In the event that the Government choose to deviate from the list, such updates will need to proceed through a draft affirmative SI.

Oral Answers to Questions

Tulip Siddiq Excerpts

Tuesday 19th December 2023 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Before I ask my question, I want to convey the apologies of the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves). She is delivering the eulogy at Alistair Darling’s funeral today.

I want to say a few words about Alistair Darling—I am sure you will agree, Mr Speaker—a dedicated public servant, who was respected across both Houses. He led the country’s economic response to the global financial crisis with integrity, honesty and sound judgment, and we will all miss him. [Hon. Members: “Hear, hear!”]

As my hon. Friend the Member for Manchester, Withington (Jeff Smith) just said, nearly 6,000 bank branches have closed since 2015, and only 30 banking hubs are up and fully running. That has left countless people financially excluded and affected lots of small businesses. I ask the Minister once again: will he accelerate the roll-out of banking hubs properly? Why are his Government not doing anything to reverse the decline of the great British high street?

[Bim Afolami]

I agree with the hon. Lady’s words about Lord Darling and echo the words of my right hon. Friend the Chancellor.

On bank branches, I will repeat my position: it is important that the Government do not decide when a branch opens and when it closes, but it is a concern when communities are left without appropriate access to cash. That is why we were the first Government to legislate for access to cash, as we did earlier this year, and that is why I believe we should speed up the roll-out of banking hubs. I am working with the industry on ways in which we can do that.

[Tulip Siddiq]

If the Minister is serious about protecting the future of the great British high street, will he back Labour’s pledge, which has been welcomed by Cash Access UK and the wider sector, to guarantee face-to-face banking in every community and give the FCA the powers it needs to roll out hundreds of banking hubs across the country?

[Bim Afolami]

As the hon. Lady knows, the industry leads the roll-out of banking hubs. We are supporting it—I say this again—to speed that up as much as possible. I have not seen the Labour pledge—I suspect that I will not support it—but it is important that the industry hears the views of constituents and Members from across the House and that we speed up the roll-out of banking hubs in communities that need them.

Finance Bill

Tulip Siddiq Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

This afternoon, we have been told that the measures in the Finance Bill and the wider autumn statement will deliver the growth that our economy urgently needs. Unfortunately, our leading economic institutions and economists do not seem to agree. Despite the Conservatives’ attempts to distract attention with headline figures, the independent Institute for Fiscal Studies has described their numbers as “sort of made up”. The Chancellor wants us to believe he is cutting taxes to give people back more of their pay packets, but the reality—as my hon. Friend the Member for Ealing North (James Murray) helpfully clarified for the Government—is an average tax rise for working people of £1,200, with nearly everyone who pays national insurance left with a bigger tax bill next year.

The Chancellor may want gratitude and praise for his recent interventions, but the reality is that growth forecasts have been cut for next year, the year after and the year after that. Meanwhile, the Bank of England is forecasting zero growth before 2025. The Conservative party might want us to believe that that is due to events outside its control and that things are starting to improve, but we learned just today from the latest GDP figures that growth fell in October, demonstrating that our economy is still going backwards despite all the warm words we have heard from Ministers. Taxes up, debt skyrocketing and the biggest hit to living standards ever recorded—that is the legacy of 13 years of Conservative government, however much they try to escape from the reality of their record. Only the Labour party has a clear plan to grow our economy by boosting wages, bringing down bills and making working people in all parts of the country better off.

As we have set out, there are a number of specific measures in the Bill that we support and, indeed, have long called for, so we will not oppose the Bill’s Second Reading. For example, we welcome the Government’s decision to heed the calls of industry and make full expensing for businesses permanent, because we know that if the UK is to turn a corner and we are to drive growth in the economy, we need to address our chronic lack of business investment.

While we wait for Committee stage to examine in great detail the decision to consolidate research and development tax relief schemes, it is worth noting that that is the latest of eight separate changes to the R&D regime that this Government have made since the last election. My hon. Friend the Member for Ealing North took us on a comprehensive tour of the constantly shifting tax policy we have seen from the Tories during this Parliament. It is now clear that by chopping and changing their business taxation and reliefs, from the annual investment allowance to the short-lived super-deduction, the Government have kept businesses guessing and not given them the confidence they need to grow.

The measures set out today do not scratch the surface when it comes to undoing the years of uncertainty for business and investors, while industry is crying out for stability and a long-term plan. The truth is that, despite the words of Conservative Members, the UK is now lagging behind our international competitors when it comes to private sector investment as a share of GDP, at a time when we cannot afford to drag our feet. It is Labour who will address this head-on with a comprehensive plan to boost business investment, working with our businesses to expand and compete with rivals in the US, Europe and Asia.

It is clear from this Finance Bill and the recent autumn statement that this Government lack the imagination, leadership and appetite to transform our economy after 13 years in power. Without that stability, certainty and long-term plan, our businesses will be left unequipped to deliver the growth that we so urgently need at this time. If we do not deliver that growth, the poorest in our society will pay the price as their living standards stagnate. The Government may want us to believe that our economy is turning a corner, but back in reality, millions of people are struggling to make ends meet.

The hon. Member for Ruislip, Northwood and Pinner (David Simmonds) asked what the greatest achievement of this Government is. Frankly, I think that is quite a dangerous question, but I will try to answer it for him anyway. Was it crashing the economy, or producing the shortest serving Prime Minister in the history of our country? Was it the tax burden being at its highest since the war, household incomes that will be 3.5% lower next year than before the pandemic or, my personal favourite, the latest growth forecasts showing us plummeting and plummeting even further? Was it—shall I turn to my own constituency—people having to make the choice between turning on the heating and eating? That is the reality facing people in the country after 13 years of a Conservative Government.

[Drew Hendry]

Will the hon. Lady give way?

[Tulip Siddiq]

I have one line of my speech left, but I will give way.

[Drew Hendry]

If, as the shadow Minister says, and I agree, the Bill is this bad, why is she voting for it?

[Tulip Siddiq]

We are not actually voting. [Interruption.] I think the hon. Member is slightly misguided, as we are not voting.

There are specific measures that we support, but, overall, we do not support the economic plan of this Government. If the Government are so sure about their economic plan, why do they not take their opinions to the public? Why do they not call a general election, and we will see who is smiling and smirking after that?

Draft Major Sporting Events (Income Tax Exemption) (World Athletics Indoor Championships Glasgow 24) Regulations 2023

Tulip Siddiq Excerpts

Monday 11th December 2023 General Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under your chairship once again, Mr Dowd.

As we have heard from the Minister, the regulations provide individuals with an exemption from income tax on income resulting from their involvement in the 19th World Athletics indoor championships, which are to be held in Glasgow. There have been similar regulations for other world-class sporting events, and the Opposition have supported the Government’s efforts to ensure that appropriate arrangements are in place. I put on record the Opposition’s continued support for Britain’s hosting world-class sporting events. The UK continues to play host to the very best of global sport. Having been the only girl on the all-boys football team throughout school, it was a particular pleasure for me to see that the 2028 European football championships were recently awarded to all four of our nations, alongside the Republic of Ireland.

In 2024, it will be fantastic to see the great city of Glasgow, which I was in last week, host the world indoor championships, and there will inevitably be a clamour to attend. So many people across the UK, particularly young people, will be inspired by the sporting ability of competitors in Glasgow from our country and beyond, so what is the Minister doing to ensure that everyone who lives in Glasgow gets a fair opportunity to purchase tickets, and is not left out of a great sporting event taking place in their town?

The Opposition will not oppose the statutory instrument, and I am sure that the Minister will join me in wishing the very best of luck to the British athletes selected for next year’s world indoor championships.

Draft Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No. 2) Order 2023 Draft Financial Services and Markets Act 2023 (Benchmarks and Capital Requirements) (Amendment) Regulations 2023 Draft Financial Services and Markets Act 2023 (Consequential Amendments) Regulations 2023

Tulip Siddiq Excerpts

Tuesday 5th December 2023 General Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Dowd.

As I said during the legislative debates on the Financial Services and Markets Act 2023, when the Minister’s predecessor was in post, the Labour party is supportive of reforms to replace retained EU legislation with new bespoke domestic rules where it makes sense to diverge in the interests of the UK economy.

I can confirm today that the Labour party remains supportive of the regulations amending retained EU law in relation to certain prudential requirements on credit institutions, long-term investment funds and elements of the Payment Accounts Regulations 2015. This also extends to regulations that will introduce changes to the implementation of Basel 3.1 capital rules, including extending the implementation period and reintroducing the SME supporting factor. I am also supportive of the regulations put forward to exempt crypto firms that are subject to money laundering regulations from the Financial Conduct Authority’s new restrictions on the industry’s ability to authorise financial promotions.

Overall, we agree with the draft regulations. I have just two questions for the Minister, on changes to capital requirements. Given that the Prudential Regulation Authority is proposing to remove the SME supporting factor when it confirms its final rule, are the Government not reintroducing a measure that the PRA plan to abolish subsequently? If so, what reassurances can the Minister give me that if the PRA goes ahead with its plan, the UK’s SME lending market will not be left at a significant competitive disadvantage against its European counterparts due to the increased cost of capital?

If the Minister is happy to answer those questions—or write to me later—the Opposition are happy to give the draft regulations our full support.

National Insurance Contributions (Reduction in Rates) Bill

Tulip Siddiq Excerpts

2nd reading
Thursday 30th November 2023 Commons Chamber

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Before I start, I want to say that we have heard during the debate that former Labour Chancellor Alistair Darling has died at the age of 70. I am sure Members will agree, no matter which side of the House they sit on, that he was a man who cared deeply about people across the country, and that our thoughts are with him and his family today.

The Government may want our constituents to believe that they are easing the burden on their pay packets, but the reality is that households have not given the state this much of their earnings since the 1940s. Despite the warm words that we have heard today on tax cuts, households are now paying £4,000 more a year than they did under the previous Labour Government. This is a crippling tax burden for those struggling to make ends meet through the cost of living crisis. Despite today’s commitment to reduce NI, as a result of the Tories’ decisions on personal taxation, working people are left facing an average rise of £1,200 since 2010. So although Labour supports the measures put forward today to lighten the load that NICs are placing on our constituents, we should see this announcement for what it is: a cynical attempt to draw voters’ attention away from the fact that, under this Government, their living standards are going down and taxes are going up, while their wages continue to stagnate.

As the British people already knew, the promises made today cannot compensate for the damage that has been done. The measures announced today are equivalent to handing back £1 for every £8 of the Conservatives’ tax rises since 2019. The freeze in the personal allowance threshold means that a couple on an average wage will still be a staggering £350 worse off per year, regardless of cuts to personal taxation. The wider freezing of current thresholds has confirmed that an additional 4 million of the poorest in society will now pay income tax by 2029.

The scorecards for last week’s autumn statement are now in, and our leading independent economists do not seem that impressed. The OBR has confirmed, following the Chancellor’s announcement, that real household disposable incomes will drop by 7% next year. As my hon. Friend the Member for Ealing North (James Murray) noted, the head of the Institute for Fiscal Studies has also given a damning verdict, stating that the NICs reductions that we have been debating today “pale into insignificance” compared with the threshold freezes announced by the Chancellor. According to the latest International Monetary Fund forecast, the UK will have the slowest growth in the G7 next year. The Bank of England has confirmed that there will likely be zero growth in the economy until 2025. Those are not figures that the Government should be proud of.

If that economic backdrop were not bad enough, our constituents are also left worrying about how to pay for their mortgage and avoid having to sell the family home due to the reckless actions of this Government. Working families will see an average increase of £220 a month in mortgage costs because of the Tory mortgage bombshell, and 1.5 million households are also set to suffer as they desperately try to re-fix their mortgage deals next year. The Chancellor and other Conservative Members may want us to believe that the economy has turned a corner and that the cost of living crisis is over, but millions of people are still struggling to make ends meet. So of course we welcome the tax cut being debated today, but it is a drop in the ocean for working families who are still bearing the brunt of this Government’s economic decisions.

Despite the desperate smoke and mirrors we have seen from the Chancellor, it is now clear that this Government do not know how to find the solutions to address the fundamental challenges facing this country right now—all the challenges that our constituents are facing day in, day out. After 13 years of failure, it is time that the Government got out of the way and let Labour deliver its plan for the economy and how to grow it again, get wages rising again and get Britain its future back. For all the warm words that we have heard today, if the Conservatives sincerely believe in their policies, they should ask the general public and call a general election as soon as possible.

Autumn Statement Resolutions

Tulip Siddiq Excerpts

Wednesday 22nd November 2023 Commons Chamber

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Listening to the Chancellor today, one would believe that the economy has turned a corner and the cost of living crisis is over. The truth is that after 13 years of economic failure, millions of people are struggling to make ends meet. Some of the comments we have heard from the Government Benches show just how completely divorced the Government are from the reality of working people’s lives.

We hear heartbreaking stories every single day from our constituents about how they skip meals to pay higher bills, with the price of food up 30% in the past two years, electricity up 40% and gas prices up 60%. We hear how they are struggling with the highest tax burden this country has seen in 70 years. The freezing of current thresholds has confirmed an additional 4 million of the poorest in society will now pay income tax by 2029. We hear from constituents worrying about where to find the money to pay their mortgage, to avoid having to sell their family home due to the reckless actions of this Government. Millions continue to pay the price of the Tory mortgage penalty. Working families will see an average increase of £220 a month in mortgage costs because of Tory economic failure and 1.5 million households are also set to suffer as they re-mortgage their deals next year.

[Dr Fox]

If it is because of the Government’s economic mismanagement that the Bank of England’s rates are at 5.25%, why is the American rate at 5.5%?

[Tulip Siddiq]

I think the right hon. Gentleman is trying to absolve himself of the fact that it was his former Prime Minister and Chancellor who crashed the economy of this country. He just needs to go to his constituents and, I tell you what, they will provide him with the answer at the next election.

The OBR revealed today that household incomes will still be 3.5% lower next year in real terms than before the pandemic hit. To put that in context, it is the biggest hit to living standards since records began, as my hon. Friend the Member for Hemsworth (Jon Trickett) neatly summarised in his speech. My hon. Friend the Member for Wallasey (Dame Angela Eagle) brilliantly articulated, as she always does, the biggest insult to working people, which is that in return for their hard-earned contribution, their reward is crumbling public services. The Conservatives’ mismanagement of the economy has left our public services on their knees, with people unable to get hospital appointments and waiting lists 7.8 million people long.

According to the latest IMF forecast, if people have not seen it, the UK will have the slowest growth in the G7 next year. Today, we learnt that growth in the economy has been downgraded not only for next year, but for two years after that. As British people already know, the promises made today cannot compensate for the damage that has already been done. The measures announced today are equivalent to handing back £1 for every £8 of the Conservatives’ tax increases in 2019 alone. The freeze in the personal allowance threshold means that a couple on an average wage will still be £350 worse off per year, even after all of today’s announcements. After 13 years of economic failure, the Chancellor is asking people to be grateful and telling them that their lives will suddenly improve, despite the Government’s continuing to make them worse off. So the question is this: do people feel better off today than they did 13 years ago? I think our constituents know the answer.

Before I sum up the powerful contributions to the debate that we have heard from the Labour Benches, it would be remiss of me not to welcome the hon. Member for—[Interruption]—the hon. Member for Hitchin and Harpenden (Bim Afolami). Excuse me for forgetting, but he is the fourth Economic Secretary I have shadowed in two years. I know he is an ambitious young man, but he will have a very hard job trying to get the title of the most charismatic Economic Secretary I have shadowed so far. The right hon. Member for Salisbury (John Glen) has earned that. I shall watch the new Economic Secretary to see how he performs in his job. If there are any words of wisdom he wants from me, he is welcome to contact me. I hope he lasts longer than his predecessors.

I am grateful to my Labour colleagues for their important contributions. My hon. Friends the Members for York Central (Rachael Maskell) and for Hackney South and Shoreditch (Dame Meg Hillier) rightly talked about the huge demand for social housing. Private renters are paying the price of Tory failure, along with mortgage holders. My right hon. Friend the Member for East Ham (Sir Stephen Timms) rightly argued that we need to go further on the consolidation of defined contribution pension funds and questioned whether the Government are rushing their reform of work capability assessments. My hon. Friend the Member for Hornsey and Wood Green (Catherine West) gave an important speech on the complete failure of the Government to strengthen adult social care. My hon. Friend the Member for Stockton North (Alex Cunningham) powerfully raised the plight of rising child poverty and once again raised the need for a hospital in his local area.

A Labour Government will always prioritise supporting working people. We will deliver an ambitious plan for growth that meets the scale of the challenge that we face—to turn around the UK economy. Labour will get Britain building again. We will deliver a robust industrial strategy on a statutory footing that will in turn deliver high-skilled, high-paying jobs across the country. We will close unfair tax loopholes to ensure that we can support our schools and hospitals with the investment that our people are crying out for. We will scrap the non-dom tax status loophole, which costs the Exchequer £3 billion in revenue. That money will help us to reduce the NHS waiting list and provide free breakfast clubs for all children of primary school age.

Labour is leading the charge on unlocking investment in high-growth firms. Through our national wealth fund, a Labour Government will work in partnership with industry to deliver the investment that our businesses need to scale up and deliver growth across the economy. We will empower industry to invest, alongside our Labour Government, in the industries that are crucial to Britain’s success, such as hydrogen, electric battery factories, wind and nuclear, and we will do so in a way that meets our fiscal rules. We will set the fund a target to ensure that for every pound that Labour puts in, we leverage three times as much in private investment. That is because we believe in growing the economy. We want to raise living standards, and we will fund our public services better.

The Tories have claimed that they have a plan for growth, but forecasts are down. They claim to be reducing debt, but it remains at record levels. Despite their claim to be reducing taxes, the tax burden will be the highest since the war. After 13 years of failure, this Government cannot deliver a serious plan to address the fundamental challenges faced by our constituents and the country. All they can do now is take their record to the voters, and call a general election.

--- Later in debate ---

[The Economic Secretary to the Treasury (Bim Afolami)]

I am delighted to bring today’s debate on the measures in the autumn statement to a close, and also to pay tribute to my shadow, my good friend the hon. Member for Hampstead and Kilburn (Tulip Siddiq). I am very glad to follow in the footsteps of Members as eminent and as good at this job as my right hon. Friend the Member for Salisbury (John Glen). He was excellent in his job, and I am happy to follow his example.

[Tulip Siddiq]

I miss him!

[Bim Afolami]

Don’t miss him; he’s still here.

Make no mistake, Madam Deputy Speaker: this is an autumn statement for growth—one that supports entrepreneurs, cuts business tax, rewards work and brings prosperity to every corner of our wonderful country, and one that the OBR says will permanently increase the size of our economy. [Interruption.] That is what the OBR says. As my right hon. Friend the Chancellor said this afternoon, the Government understand that a successful economy depends less on the decisions and diktats of Ministers than on the “energy and enterprise” of its people, and that is the thrust of this autumn statement. It is about a Government taking action that reduces the burdens on businesses, while also empowering people and getting Great Britain growing and moving again.

But the context really matters. We are only able to pursue these policies now because of what the Government, under our Prime Minister, have achieved up to this point. We have brought inflation down from 11.1% to 4.6%, meeting the Prime Minister’s pledge, and we are on track to meet the 2% target by the middle of 2025. The OBR has confirmed that the measures announced today will make inflation next year lower than it would otherwise have been. We have achieved this while growing our economy, which is already bigger than it was pre-pandemic, contrary to what was often said on the Opposition Benches in debates in recent weeks and months. Our economy has grown faster than many of our competitors since 2010, which is when this Government first came into office.

Oral Answers to Questions

Tulip Siddiq Excerpts

Tuesday 5th September 2023 Commons Chamber

[Mr Speaker]

I call the shadow Economic Secretary to the Treasury.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Last week, the Government admitted that their planned introduction of food import checks from the EU would lead to an increase in inflation, hitting the pockets of ordinary people during the worst cost of living crisis in our lifetimes. In the Labour party, we believe that a bespoke veterinary agreement would cut red tape from business and avoid pushing costs on to ordinary people. Are the Government planning to negotiate a veterinary agreement, and if not, why not?

[Jeremy Hunt]

I gently say to the hon. Lady, who I have a lot of time for, that the last thing business wants is the upheaval of a huge renegotiation of our trading arrangement with the EU, which is the largest tariff-free free trade deal by volume in the world.