National Insurance Contributions (Reduction in Rates) (No.2) Bill

Gareth Davies Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

I beg to move, That the Bill be now read a Second time.

For the second time this year, we are cutting taxes for 29 million working people across the country—something that is particularly remarkable in the aftermath of the worst pandemic in 100 years, the worst war in mainland Europe since 1945, and the highest energy spike since the 1970s. The Government have had to take difficult decisions to restore the public finances, and those decisions are starting to pay off. Our economy is growing, and debt is forecast to reduce. Inflation is down significantly, unemployment is at near-record lows, and wages are rising. As the outlook improves, our priority is to return money to working taxpayers while keeping the public finances on track.

We believe that the tax system should be fair and simple, and should reward hard work, yet the way we tax people’s income is particularly unfair. People who get their income from having a job pay two types of tax: national insurance contributions and income tax. People who get it from other sources pay only one. The result is a complicated system that does not support work as best it could. For that reason, the Bill will build on the changes to national insurance contributions in the autumn statement.

The Bill contains two measures: a reduction in the NICs employee class 1 main rate, and a reduction in the NICs class 4 main rate. Both measures are important. Allowing working families to keep as much of their hard-earned money as possible is a priority for the Government. The Chancellor has always been clear that when we can cut taxes, we will.

[Mr Louie French (Old Bexley and Sidcup) (Con)]

My hon. Friend is making a great speech, and I fully support the Government’s efforts to reduce the taxes of working people, alongside the pledge to increase the money going to pensioners through the triple lock. Does he agree that it is disgraceful that, while the Conservatives are working hard to cut taxes and help working people, Labour is increasing the share of council tax for all Londoners, and hitting drivers with charges of up to £12.50 per day thanks to the ultra low emission zone?

[Gareth Davies]

My hon. Friend is consistent in holding the administration in London to account. He is right: as we are still not out of the woods when it comes to the cost of living crisis, the Conservative party has made it clear that we disagree with the Mayor of London’s approach of making motorists poorer.

As I said, building on the changes in the autumn statement, we will once again be supporting working families by reducing the main rate of employee class 1 NICs by two percentage points to 8% on earnings between £12,570 and £50,270 from 6 April 2024. That will cut taxes for over 27 million employees. The average worker on £35,400 a year will save £450 a year, and the majority will see the benefit in their payslips at the start of the new tax year. Taken together with the cuts to NICs in the autumn statement, this tax cut is worth some £900 a year to the average worker.

In addition, we are implementing a further reduction in the main rate of class 4 NICs for the self-employed. The Chancellor announced in the autumn statement that the main rate of class 4 will be reduced from 9% to 8% from 6 April. Today, we are cutting the rate by an additional two percentage points from 8% to 6% from April 2024. That is a total cut of three percentage points in just six months. Combined with the abolition of the requirement to pay class 2, which was announced in the autumn statement, that will save an average self-employed person £650 a year, and benefit over 2 million people across the country.

Together with the autumn statement cuts, this is an overall tax cut worth some £20 billion per year—the largest-ever cut to employee and self-employed national insurance. Because of the action that we have taken, the average earner in the UK now has the lowest effective personal tax rate since 1975. The Government are committed to tax cuts that reward and incentivise work and that grow our economy sustainably and boost productivity. The Office for Budget Responsibility has said that the national insurance cuts announced in the spring Budget will increase the total hours worked by the equivalent of almost 100,000 full-time workers by 2028-29. Because of the cuts, just over 30,000 people will move into work. These reductions in tax will drive more people to seek employment. This is our plan for a simpler, fairer tax system that makes work pay.

[Alexander Stafford (Rother Valley) (Con)]

My hon. Friend is making a powerful Conservative speech about the importance of not just cutting tax but getting more people into work. Has the Department estimated how much more tax revenue will come in as a result of more people working because of these changes, so that we can show that lower taxes actually increase tax revenues for the Exchequer?

[Gareth Davies]

My hon. Friend is right to point that out. A fundamental benefit of reducing tax is that it improves growth in our economy, because more people will be in work and working longer hours. That obviously generates more productivity for our economy, and ultimately more tax revenues for the Exchequer. It is a fundamental Conservative principle that we want lower taxes, and we are delivering that today because it is fiscally responsible to do so, and we are able to do so.

[Anna Firth (Southend West) (Con)]

I am grateful to my hon. Friend for making such a powerful case for cutting taxes, a fundamental Conservative principle. The Bill will put £960 back into the pocket of the average worker in Southend, who earns £36,400, and will put £1,920 back into the pockets of a family in Southend with two people on the average wage. Does he agree that that is a considerable and welcome tax cut for hard-working people in Southend?

[Gareth Davies]

My hon. Friend is right to point that out. I would add to those figures: since 2010, we have lifted millions of people across the country, including in Southend West, out of paying any tax at all by doubling the point at which people start paying tax in our country. People can now earn £1,000 a month without paying any tax, and that is a great achievement of a Conservative Government.

Although I welcome the fact that Labour Members will apparently vote for our tax cuts today, I hope that they will forgive me for sounding slightly sceptical about their sudden conversion to the cause of lower taxes for working people. While they do not oppose the measures, they also did not propose them. In fact, Labour has consistently voted against successive Conservative-led tax cuts between 2010 and 2021, which delivered a doubling of the personal allowance, as I mentioned to my hon. Friend the Member for Southend West (Anna Firth). On the one hand, they bemoan the level of taxation, but cannot tell us a single tax that they propose to cut, or what the level of taxation would be under Labour. On the other hand, the shadow Chief Secretary to the Treasury, the hon. Member for Bristol North West (Darren Jones), described our ambitions to remove unfairness in the tax system as “morally abhorrent”. Labour Members still cannot tell us how they will pay for their many spending commitments. They are completely all over the place. It is only the Conservatives who truly believe in reducing taxes on working people.

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

The Minister is giving a clear explanation of why the Conservatives want to cut tax, and the economic benefits of cutting taxes for working people. He will know that the origins of national insurance were basically a form of social insurance: having paid national insurance, it would look after us later in life. The Labour party took the insurance out and put the socialism in, which is why we have ended up with a system that is essentially the same as income tax. As we think beyond today’s welcome cuts to what is in the Opposition new clause, has the Minister thought about using any further cuts to go into the compulsory savings of individuals introduced under the coalition Government after 2010—essentially building, in place of a dependency state, a savings state built on Conservative principles?

[Gareth Davies]

Yet again my hon. Friend makes a valuable contribution. I commit to taking his idea away to consider, as we look at reducing the unfairness in the tax system in future and reducing national insurance contributions when it is prudent and responsible to do so.

The Labour party is completely all over the place on this. As a Conservative Government, we have delivered a clear message to the British people, and it is based on the delivery of the lowest personal taxation level since 1975. We have almost doubled the personal allowance, bringing the lowest earners out of paying any tax at all, and we have delivered a thriving jobs market, which is ultimately the best way to ensure that people are brought out of poverty.

[Clive Lewis (Norwich South) (Lab)]

I hope to speak a bit later on this. I may have a slight difference of opinion with the Minister on tax cutting, but I want to deal with the facts as I see them. He is making a great amount of noise about the tax-cutting vim and vigour that his party has had over the past 10, 20 or 30 years, or even longer than that—it is meant to be something that goes to the heart of the Conservative party—but according to the OECD, for every £1 generated in the UK, the Government collect 35.3p of it as tax. That figure is projected to keep on increasing to 37.7p by 2029, despite this 2% tax cut. Can the Minister explain how, if the Conservatives are the party of tax cuts, actual tax levels will in fact be going up, according to the OECD? How do the Government square that circle?

[Gareth Davies]

I am grateful for the opportunity to clarify that, because there has been a lot of noise from the Labour Benches, too. It is true that we have had to make some difficult decisions about overall taxation on the back of the pandemic, but today we are cutting taxes on work, because that is the way to grow our economy. As I said, we now have the lowest personal taxation level since 1975. Some taxes have gone up, absolutely—supported by the Labour party—as we have increased tobacco duty and other items, for example, but we are focused on ensuring that if people are in work and have a job, their tax level will be reduced. Today, that work of reducing tax on work continues. We are cutting taxes for millions of people across this country. That is why I commend the Bill to the House.

Wine Duty

Gareth Davies Excerpts

Tuesday 5th March 2024 Westminster Hall

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure to see you in the Chair, as always, Mr Henderson.

I congratulate my good friend, my hon. Friend the Member for Colchester (Will Quince), on securing the debate and on the attendance that he has achieved. I recognise the strength of feeling on this across the House and in particular in this Chamber today. I completely share his support for our broader alcohol sector. Not only is it a significant contributor to our gross national product, but I would suggest that it pays a little towards our gross national happiness. It is part of our heritage. From Shakespeare’s plays to our modern British sparkling wines, we have long recognised how life’s triumphs and trials—weddings, wet weather and the working day—can be soothed or celebrated with a glass of our favourite tipple. I recognise that.

In the past few weeks alone, therefore, I have for example met the head of the all-party parliamentary group on wine and spirits, my right hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady), and the highly active Wine and Spirit Trade Association to discuss how this remarkable industry’s potential can be truly uncorked. My officials have engaged with businesses and representatives of the UK industry up and down this country as part of budgetary processes that one might expect, from the more well-aged players such as Majestic Wine to the younger vintages such as Ambriel Sparkling.

On behalf of the Government, I am proud to represent our alcohol duty reform package and to present it to the House. We have introduced the biggest reform of alcohol duties for more than 140 years. We introduced a new, simplified alcohol duty system based on the common-sense principle of taxing alcohol by strength to modernise the existing duties, to support businesses and to meet our public health objectives. This is the first time that public health objectives have been inserted into the alcohol duty system.

That reflects four key principles, which it might be helpful for me to set out: the duty system should be fair to the producers that make and grow the drinks we enjoy; it should recognise the importance of jobs, and of pubs and their role in our national life; it should tackle the problem of harmful high-strength products being sold too cheaply; and it should support innovation and modern drinking trends, in particular today’s trend of moving towards lower-alcohol products. Our reforms do just that.

As part of the changes, which came into effect in August last year, we have supported our wine sector. Let me set out how we have done so. First, we removed the sparkling wine premium. My hon. Friend the Member for Meon Valley (Mrs Drummond) rightly spoke about our domestic growers, a really important part of our wine industry. I recently met the chief executive officer of WineGB. I can tell her that we have removed the English sparkling wine premium. Since 1 August 2023, sparkling wines attract less duty than they did under the previous duty system. That is one of the points that I want to make today.

In such a reform some duty has gone up for some sectors in the alcohol industry and some has gone down. For our domestic growers of English sparkling wine it has gone down significantly, even with the retail price index increase that we saw last year. That is the right thing to do for our domestic growers. It will ensure consistency in our system and build success for British wines, which my hon. Friend and I want to see.

Secondly, as has been extensively discussed today—I will come on to this in more detail and address some of the points that have been made—we introduced a wine easement for 18 months until February 2025. As a result, all wine between 11.5% and 14.5% alcohol by volume will be subject to duty as if it were 12.5% ABV. That means we have effectively given the wine industry time to adapt to the new system and allow wine producers to adapt their systems. I recognise completely that a shake-up of a system that has existed for more than 140 years will raise some eyebrows and cause change for a number of businesses, but we should be confident that the bureaucratic burden under the new system is manageable.

Every other product is already subject to duty based on our strength-based system. We have included, as my hon. Friend the Member for Colchester rightly pointed out, the weather impact of wine, and included cider, which is also subject to seasonal variability challenges. We are mindful of unintended consequences, as several right hon. and hon. Members have outlined, but to make the wine easement permanent, as my right hon. Friend the Member for Stevenage (Stephen McPartland) has called for, would go against the principle of the alcohol reform to move to a strength-based system that brings in the public health element. As I have already said, although the impact on wine is clearly being felt, we have provided an easement over a period of time that was decided in consultation with the wine industry in four rounds of consultation before the reform comes into being.

I can commit to my hon. Friend the Member for Colchester that we will monitor the reforms and their impact. We have outlined that three years after they come into effect, which is enough time for us to be able to assess them, we will conduct an impact assessment, which will allow His Majesty’s Revenue and Customs to gather the relevant information to understand any long-term impacts in the alcohol market. That commitment complements the broader fiscal approach, because at the last autumn statement we announced tax cuts that supported the alcohol and hospitality industry.

We froze alcohol duty for six months until 1 August 2024. We also announced a package of business rate changes and tax cuts worth £4.3 billion over the next five years. My hon. Friend the Member for Tewkesbury (Mr Robertson) was right to highlight the difficult time that our hospitality industry has gone through in recent times. That is why we extended the retail, hospitality and leisure relief scheme—a 75% relief—up to a cash amount of £110,000 per business between 2024 and 2025. In addition to the work being led by my colleagues at the Department for Environment, Food and Rural Affairs on their package of wine reforms, which will increase flexibility and innovation, the Government have announced a freeze to the small business multiplier for the fourth consecutive year, for 2024-25, protecting over 1 million ratepayers from a multiplier increase. That builds on the unprecedented support that we should never forget we offered the industry during the pandemic—some £16 billion of business rate support. We have also held the tax rate steady over the last three years, which has protected businesses from inflationary pressures at a cost of £14.5 billion to the Exchequer.

This Government have never given the sector reason to doubt our commitment to it, because it has received many cuts or freezes to duty over the last decade. I can tell my hon. Friend the Member for Colchester that the wine industry has benefited from cuts or freezes to wine duty at five of the last 11 fiscal events. Compared with 2015, wine duty is some 12% lower in real terms. That is something we can all raise a glass to.

Finally, I will address the comments by my right hon. Friend the Member for Witham (Priti Patel), who, rightly, has consistently raised the issue of red tape for businesses in the House. She specifically mentioned labelling. Overall, these reforms to our alcohol system simplify our tax duty. That is a Brexit freedom. Under the last slight change to our alcohol duty system in 1996, we had to take duty from the European Union, which was incredibly complicated, completely inconsistent, and did not include any provision for public health. Our easement gives businesses time to adapt to the new system and put in place measures to be able to administer it. Wine can still be labelled to 0.5% ABV. DEFRA has introduced guidance and an option to label to 0.1%, but I want to be really clear that that is optional.

I thank my hon. Friend the Member for Colchester for raising this important sector and this important issue. It is right that the Government’s fiscal approach continues to be scrutinised in this way. I am confident that this policy is the right one, not just for the wine industry, but for the whole of the United Kingdom.

Question put and agreed to.

Advanced Manufacturing

Gareth Davies Excerpts

Monday 4th March 2024 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Today the Government have announced over £360 million of joint Government and industry investment in 16 UK advanced manufacturing projects, securing highly skilled jobs, building a stronger economy and cementing the UK as a global leader in industries of the future.

This involves a combined industry and Government investment of almost £73 million in projects to accelerate the development of zero-emission vehicle technology in the UK, almost £200 million in projects to develop energy efficient and zero-carbon aircraft technology, and almost £92 million in life science manufacturing projects. The funding awarded is targeted to support the sectors where the UK is or could be world-leading and is designed to unlock investment from the private sector to help grow our economy.

The Chancellor is also announcing an up to £120 million increase to the green industries growth accelerator (GIGA) to support clean energy manufacturing. Around £390 million has been earmarked to expand UK-based supply chains for electricity networks and offshore wind sectors, and around £390 million for the carbon capture, utilisation and storage and hydrogen sectors. This is alongside the £300 million previously announced for UK production of the fuel required to power high-tech new nuclear reactors, known as HALEU.

The GIGA funding will enable the UK to seize growth opportunities through the transition to net zero, building on our world-leading decarbonisation track record. It forms part of the Government’s priority to grow the economy focusing on making the right long-term decisions for a brighter future by creating better-paid jobs and opportunity right across the country.

This follows £4.5 billion announced in the 2023 autumn statement to increase investment in strategic manufacturing sectors—auto, aero, life sciences and clean energy—across the UK for five years from 2025. This autumn statement announcement included £975 million in funding for the aerospace sector, and the Government have confirmed that this will be allocated to the Aerospace Technology Institute programme.

Alongside this, the Government are setting out further details of the £50 million apprenticeship growth sector pilot announced in the 2023 autumn statement. The pilot will boost funding for eligible providers delivering 13 high-value advanced manufacturing and engineering, green and life sciences apprenticeships standards, and will explore ways to stimulate training and break down barriers to delivery of high-quality training, with a particular focus on up-front capital investment costs.

[HCWS307]

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 6th February 2024 Commons Chamber

[Daniel Zeichner (Cambridge) (Lab)]

16. What recent fiscal steps he has taken to help tackle regional economic inequalities.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

This Government are committed to supporting all parts of the United Kingdom. In October we announced the £1.1 billion long-term plan for towns, which gives 55 towns up to £20 million of endowment-style funding. We are delivering an ambitious programme of investment zones and devolution deals, we ae continuing to support local growth through the UK shared prosperity fund and we are investing billions to improve local transport connections in our regions outside London.

[Daniel Zeichner]

By their own measures, the Government are failing on almost half of their levelling-up missions in the east of England. Meanwhile, the Cambridge sub-region, which is a net contributor to the Exchequer, has vital transport projects on hold or awaiting finance. When will the Treasury stop stalling growth and give power back to the regions, which know best what needs to be done in their area?

[Gareth Davies]

This Government are committed to levelling up by boosting growth, raising living standards and spreading opportunity throughout the country in several different ways. The hon. Gentleman talks about giving more power to local areas, and he will know that the Cambridgeshire and Peterborough Combined Authority is getting a £97 million devolution deal. He will also know that Cambridge received some £14 million as part of the shared prosperity fund to spend on local projects. I reject his assertion; the people of Cambridge are benefiting from this Government.

[Danny Kruger (Devizes) (Con)]

The way to reduce regional inequality is to ensure that growth happens everywhere across the country. One way to do that is to support small and medium-sized enterprises and community enterprises, which are particularly located in under-served regions. I commend the Government for the recovery loan scheme, which has been a lifeline to many small businesses and community enterprises. Can the Minister tell us whether that scheme is likely to be renewed? Hundreds of millions of pounds of private investment is waiting on the Government to make a decision.

[Gareth Davies]

My hon. Friend has a long history as a great champion for community organisations. I will write to him on his specific question.

[Dr Luke Evans (Bosworth) (Con)]

17. What recent progress he has made on raising the level of the national living wage.

--- Later in debate ---

[Kenny MacAskill (East Lothian) (Alba)]

T5. With winter still upon us and fuel bills still rising, Ofgem is advising that the level of domestic energy debt is approaching £3 billion. When people cannot meet their current bills, how can they possibly be expected to meet that level of arrears? Is it not time to fund a debt write-off scheme, as proposed by National Energy Action and other fuel poverty campaigners, before hypothermia and misery worsen?

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The Government continue to work with Ofgem. In fact, I met the chief executive officer very recently. Ofgem continues to monitor the levels of energy debt to ensure that consumers are protected. The hon. Gentleman will know that, last year, the Chancellor announced measures to ensure that households with prepayment meters paid no more than those with standard meters, and that is on the back of the energy price guarantee, which effectively paid 50% of people’s household energy bills.

[Sir Sajid Javid (Bromsgrove) (Con)]

The Chancellor will be aware of a proposal from the World War Muslim Memorial Trust to establish a memorial at the National Memorial Arboretum, honouring an estimated 750,000 Muslims who have fought for the British armed forces, with tens of thousands of them paying the ultimate sacrifice. Previous Budgets have supported memorials that honour those who have given us the freedoms that we enjoy. May I ask the Chancellor to personally consider this proposal and help make it a reality?

--- Later in debate ---

[David Duguid (Banff and Buchan) (Con)]

Last June the Exchequer Secretary announced the energy security investment mechanism, and I welcomed the announcement in last November’s autumn statement that the floor price would rise with inflation from April. How and when will that be legislated for, and will he look at alternative ways of setting that floor price, other than the 20-year reference period that is already used?

[Gareth Davies]

The energy security investment mechanism was designed, as my hon. Friend points out, to give more certainty not only to the oil and gas sector, but to investors, ensuring that the energy profits levy is disapplied when prices return to historically normal levels. To provide additional certainty, on the back of urging from him and the industry, we have agreed to legislate for ESIM and will be announcing that shortly.

[Imran Hussain (Bradford East) (Lab)]

Regardless of what the Chancellor tells us, the reality remains that people in Bradford are worse off after 14 years of this Government. Healthcare, GPs and dentists are less accessible, homes are more expensive, colder and riddled with mould, jobs are less secure and badly paid, with stagnating wages, and household savings have been wiped out by rising food, water, energy and fuel bills. Ahead of the last Budget he will deliver before the general election, will the Chancellor apologise for 14 years of disaster that have devastated our communities?

[Peter Gibson (Darlington) (Con)]

Can my hon. Friend tell me how many staff are now employed across the eight Departments based at the Darlington Economic Campus? What progress is being made on naming the new building “William McMullen House”?

[Gareth Davies]

I can tell my hon. Friend that 750 staff are employed across all Departments at the Darlington Economic Campus. The Treasury’s aim is to reach 355 full-time staff by March 2025, and we are on track to meet that target. The official name of the campus will be decided closer to the 2025-26 delivery date and will be consulted on by the Government Property Agency, but we have heard very clearly his suggestion of William McMullen House, and we will consider that in due course.

[Dame Diana Johnson (Kingston upon Hull North) (Lab)]

The Chancellor knows jolly well that in April 2023 Sir Brian Langstaff made his final recommendations on compensation for those infected and affected by the contaminated blood scandal. The Chancellor also gave evidence in July to Sir Brian and said that work was under way. In December, this House voted for a compensation body to be set up. I would like the Chancellor to answer my question, please, not a junior Minister, and explain exactly what is going on in the Treasury, what work is being undertaken and whether there will be an announcement in the Budget.

Future of UK Capital Markets

Gareth Davies Excerpts

Tuesday 30th January 2024 Westminster Hall

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a pleasure to serve under your chairmanship, Ms Nokes. I congratulate my right hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on securing the debate, and I thank him for his remarks about our capital market system, which I will address in some detail.

I am grateful for the opportunity to set out the key role that capital markets play not just in our UK economy, but in wider society, which I have long spoken about not just in this House, but in my career in financial services before coming into politics. No matter the size of the company or how many countries it operates in, behind every major listed company are thousands or even millions of investors who own a stake in that company, and own a stake in a country. A FTSE 100 or S&P 500 stock will be owned by teachers, nurses, firefighters and lots of other regular people who, by owning stocks through their pensions, have a stake in the success of the company and the wider economy, and a means to benefit when both those things do well. It is an extension of what Noel Skelton, a former Member of Parliament for Perth, said in the 1920s when he talked about a property-owning democracy. It is the idea that if people have a stake in our economy, they become more engaged with the economic outcomes of the country, which in turn become more equitable, because they engage and affect normal people in more prescient ways. In that way, strong capital markets that people can easily access, interpret and utilise can be an incredible tool for broad-based engagement with our economic systems.

As my right hon. Friend alluded to, capital markets also have a more immediate impact through the allocation of capital, facilitating investment, which drives growth and jobs, and creating investor returns. That helps to build a market that is buzzing with opportunity and optimism and attracts the best and the brightest, bringing new energy and ideas to our economy, all of which drives economic activity in every part of the country. It is worth pointing out that of the about 1 million people employed in the financial services industry, two thirds are outside our capital city. That is not always appreciated.

However, London is an international powerhouse in its own right, with a foreign exchange market three times the size and a derivatives market about 50% bigger than those of the United States, making the UK a genuine global hub for investment. In 2021, more than £17 billion of capital was raised for firms in the UK—a 15-year high. Over 120 deals were completed in that year alone. Of course, we have not been immune to the limited IPO activity caused by market turbulence across 2022 and 2023, yet in 2023 the London Stock Exchange raised more capital than Frankfurt and Amsterdam—the two largest exchanges in the European Union—combined.

More importantly, this Government recognise that there is always more we can do to improve our markets and make them even more open and competitive. My right hon. Friend mentioned that the first step on our reform journey was, as the Economic Secretary to the Treasury stated in a speech last week at Bloomberg, to diagnose the problem—to acknowledge that there was a problem and then seek a way to fix it. That started with Lord Hill’s 2020 UK listings review, alluded to by my right hon. Friend the Member for Vale of Glamorgan, which builds consensus on how to boost IPOs and capital raising on UK capital markets. He will be aware that in 2021, at Mansion House, we launched the wholesale markets review to consider how we could use our new-found regulatory freedoms to make UK markets more competitive.

Next came our solutions to the problems that we had diagnosed. I am happy to say that reform has progressed across all those areas, not only in our legislation and our regulatory regimes, but in the culture and mindset of the Government and of regulators, which is not to be underestimated. The Financial Services and Markets Act 2023 delivered the wholesale market review’s most urgent changes. As a result, firms can now trade in the most liquid market and get the best price for investors. We have also set statutory growth and competitiveness objectives for our regulators and introduced new accountability mechanisms to ensure delivery against those objectives. Following the passage of FSMA 2023, we are taking forward a host of new initiatives, such as the digital securities sandbox, which will test the use of distributed ledger technology in trading and settlement. That is just one of a huge range of reforms coming in the near future.

The result of those reforms is that after three and a half years, we are now within sight of making the UK’s public markets match fit again, which my right hon. Friend and I both seek. But he is right that we must go further and use this as an inflection point to ensure that we are delivering on the promise and opportunity presented by our capital markets. That is why we are taking further steps now and supporting companies through every stage of their investment lifecycle.

First, we will ensure that companies can scale up effectively so that they are primed and ready for listing. To do that, as my right hon. Friend alluded to, we are establishing a world first—a new class of exchange. The private intermittent securities and capital exchange system—catchily named Pisces for short, thankfully—will be established by the end of this year. He asked for assurance, and I can assure him on that timing. The Pisces platform will give private companies better access to capital markets and break down the artificial regulatory cliff edge between public and private markets. This development will allow investors to take advantage of the structural shift to private markets, rather than suffer from it.

Secondly, we want to ensure that, when companies choose to list, the process is as easy and frictionless as possible. A fortnight ago, the Economic Secretary took the UK’s new prospectus legislation through Parliament, paving the way for the FCA to complete its entire rewrite of the prospectus regime’s rulebook to deliver on the recommendations of the Hill and Mark Austin reviews, which my right hon. Friend the Member for Vale of Glamorgan referred to. That will boost the operating environment for our capital markets in two important ways: it will increase the pool of investors participating in capital raises, and it will enable firms to raise larger sums of capital more quickly.

Finally, we want to ensure that, once listed, companies are matched with the best investors for their offering. We welcome the FCA’s commitment to consult on the changes to the unbundling rules this spring. That was a recommendation of Rachel Kent’s investment research review. Subject to the outcomes of that consultation, the FCA will make relevant rules in the first half of this year. We aim to revive the research market by delivering more efficient and accurate pricing, in particular for small and medium-sized enterprises.

In the autumn statement, the Chancellor announced his plans to explore options for a NatWest retail share offer this year, and a wider ambition to get the public buying more shares. My right hon. Friend the Member for Vale of Glamorgan rightly said that we should get Sid investing again. For those who do not know, that is a reference to an advertising campaign that only Members of a certain vintage will appreciate—it is entirely lost on my private office.

I will move on quickly to some of the wider issues. My right hon. Friend talked about Charlie Geffen’s accelerated settlement taskforce, which will upgrade our back-office operations for the 21st century.

This year will mark substantial progress in all three of the investment cycle stages that I have set out. Alongside the regulatory reforms, the Government are looking to reverse the trend of British investors—both institutional and individual—shifting away from investing in UK equities. As my right hon. Friend points out, the statistics are pretty stark. They have been on a downward trend for many years, and that is particularly evident in our pension funds. As he rightly said, at Mansion House the Chancellor began the process of announcing the Mansion House compact, which will see 11 major defined-contribution pension schemes allocate at least 5% of their default funds to unlisted equities, unlocking capital investment in high-growth companies. With the pension reforms now in train, we expect the pension pot of a typical DC saver to increase by as much as £16,000 over the course of an average career.

This agenda is underpinned by a commitment to openness, competitiveness, growth, dynamism and innovation in financial services, as first set out by the then Chancellor, now Prime Minister, in 2021. When those principles are properly applied, they have an impact far beyond financial markets. They can be a way to open the doors of our boardrooms to a far wider range of people, democratising our capital markets and inspiring individuals throughout the country to take an active interest in our markets, while making sure that more people have experience and an understanding of the risks and rewards that are such a vital component of our capital markets.

Our capital markets in this country are a source of great pride, including to me, having worked in them. It is right that we all feel pride in the UK capital market structure, but I want more people to speak with pride about our stocks—the stocks that they own today or may own in the future. Our capital markets have helped shape the country that we live in. They have helped us make this country more prosperous, they have created more jobs and they have made us more competitive overseas. The Government are working to ensure that that remains the case for many years to come by making our markets more attractive, competitive and, crucially, accessible. I am proud to be taking forward that important work with colleagues from across the House, and to have been able to speak about it today under your chairmanship, Ms Nokes.

Question put and agreed to.

Public Services in Cornwall: Funding

Gareth Davies Excerpts

Monday 15th January 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

I congratulate my hon. Friend the Member for St Austell and Newquay (Steve Double) on securing the debate. He is undoubtedly a strong advocate for his corner of the country and for his constituents. I can think of few greater champions for Cornwall, or for the funding of public services there, than him and my hon. Friends the Members for St Ives (Derek Thomas) and for Truro and Falmouth (Cherilyn Mackrory). I very much value my hon. Friends’ contributions, knowledge, and insights on the local issues they have outlined tonight, and I will do my best to address some of their specific concerns.

Dealing first with local government finance, I certainly recognise that inflation is higher than when budgets were set at the last spending review in 2021. This is true on a global scale, and it presents challenges throughout the world and, of course, throughout our constituencies and communities. Reliable, high-quality public services always matter, but they mean even more to us in challenging times such as these, and in dispersed populations and rural and coastal areas where one’s nearest neighbour might be half a mile away, they can be a real lifeline. The Government are working to ensure that those services are well funded: the provisional 2024-25 local government finance settlement makes up to £64.1 billion available to local governments, an increase of up to almost £4 billion in core spending power on last year. In Cornwall, that has resulted in an almost 7% increase in core spending power. My hon. Friends the Members for St Austell and Newquay and for St Ives have pointed to the rural services delivery grant, which is now £95 million, the highest it has ever been. That fund is distributed to the top quartile of authorities, ranked by super-sparsity, but I take my hon. Friends’ point about its scale, and I will be very happy to take that away to my colleagues at DLUHC.

Our coastal communities are vital to the UK’s economic and environmental wellbeing, as well as being home to hundreds of thousands of people, but as my hon. Friend the Member for St Austell and Newquay has pointed out, they face particular challenges. That is why we have supported so many places along our coast, from the beaches of Cornwall to the bays of Stornoway. Eleven of the 12 freeports across the UK are based in coastal areas, with each receiving up to £26 million in Government funding over the next few years, as well as potentially hundreds of millions of pounds in locally retained business rates to upgrade local infrastructure and stimulate regeneration across coastal communities.

My hon. Friends have mentioned the UK shared prosperity fund. I recognise and commend my hon. Friend the Member for St Austell and Newquay for his advocacy for that fund, which has supported many of our coastal communities and provides—as he says— a significant £132 million to Cornwall and the Isles of Scilly, reflecting their share of previous European structural funds. Local leaders are already using that money to deliver ambitious plans for what they call good growth, while the Government have allocated almost £100 million to the towns fund and the future high streets fund to support Cornwall Council’s ambitions to encourage more economic regeneration and strengthen pride in place. I know that my hon. Friend would like more certainty on the future of the UK shared prosperity fund, which he has asked for tonight. While I hope he can understand that I cannot give him that certainty right now, I recognise his council’s enthusiasm to build on the strong start it has made, and I know he will continue to be a very strong advocate on behalf of his council in this place.

Recognising the importance of transportation in rural areas such as Cornwall to help boost productivity, we have also committed some £32.5 million to local highways maintenance and funding potholes. We went further in the spring Budget last year, with an extra £5 million for that endeavour. Through Network North, further funding totalling £3.6 million has been committed to Cornwall in both 2023 and 2024, with later allocations still to be determined. It is not just Cornwall’s roads that we are funding: last year, we awarded Cornwall Council £50 million from the levelling-up fund for the Mid Cornwall Metro. That transport project will provide new hourly direct train services to improve the current links between four of Cornwall’s largest urban areas, so as well as enjoying some of the best views one can get from a train anywhere in the country, residents will be better connected to employment, education and key services. Local leaders have pushed for that metro service, and this Government are very happy to support it, because we are committed to giving more power to local leaders—who, after all, know the needs of their areas almost as well as the local MPs do.

To that end, the recent level 2 devolution deal for Cornwall, announced at the autumn statement of 2023, provides Cornwall with new funding and powers to support local services. This will help Cornwall to maintain the skills that local people need and help bring clean energy to the region’s shores. There were initially discussions, as my hon. Friend pointed out, about a level 3 deal, which would have seen a directly elected Mayor introduced with further powers and an investment fund. However, as he pointed out, Cornwall Council decided that a level 2 deal was preferable at this point in time, and I of course completely respect that decision. After all, it is up to local people to decide and for us to support them, and that is what we have done on this deal and on other local matters of importance.

My hon. Friend mentioned policing. Because of decisions taken by this central and local government, funding for the policing system will rise nationally by some £842 million in 2024-25, distributed according to population sparsity. Devon and Cornwall police will receive up to £230 million in core settlement grants, but I appreciate what he said about the police funding formula. He will know that a review commenced in 2021, which is continuing to carry out engagement. He may wish it to speed up, and I know he will make representations to my colleagues at the Home Office accordingly.

My hon. Friend was completely right to point out the great many people who in recent times have wanted not just to visit Cornwall but to set up a home and raise a family there. Demand for housing is therefore increasing from permanent and part-time residents who want to buy. However, a lack of affordable housing is causing acute concern—house prices are high relative to incomes when compared nationally—and we understand that. The temporary and emergency accommodation budget has also become increasingly strained in recent years. To address that concern, the Government are committed to building more affordable homes. As recommended at the 2021 spending review, we are investing £11.5 billion between 2021 and 2026 through the affordable homes programme, which is the largest cash investment we have seen in a decade. I also note that Cornwall Council has been supportive of Government plans to enable local authorities to increase the council tax premium on second homes by up to 100%. It is believed that this could provide £20 million of additional revenue. There is always more to do of course, so it is critical that we continue to have open conversations as we are doing tonight.

Finally, let me address the comments on SEND from my hon. Friend the Member for Truro and Falmouth. Nationally, the Government are committed, and have committed, to addressing this. At the last spending review, we committed £2.6 billion to create 30,000 new school places for young people with SEND. It is our hope that this will lead to fewer people having to be transported long distances, as she described, to access the right educational settings. Again, there is more to do, and I know that the Department for Education, which leads on this policy area, is progressing more wholesale reforms of the SEND system. I would be happy to have the relevant Minister from the Department for Education write to her on Cornwall specifically.

I have spoken at length about what we are doing for Cornwall, but let me finish by recognising Cornwall’s contribution to our country. I would not be the first MP from Grantham to recognise its virtues. Were I to walk on the sandy shores of Constantine bay, I would be following in the very large footsteps of a certain greengrocer’s daughter, although I am reliably informed that Watergate bay in the constituency of my hon. Friend the Member for St Austell and Newquay is also worth a visit. Cornwall is not just home to incredible natural beauty, delicious pasties, irresistible ice cream and thrilling surfing. More importantly, it is home to some of the finest people our country has ever known. While I have listed the many facts and figures set out by this Government, we should never forget that behind them are thousands of wonderful Cornish people. They could not be better represented than by my hon. Friend, whom I look forward to continuing to work with long into the future.

Question put and agreed to.

Finance Bill

Gareth Davies Excerpts

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

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

With this it will be convenient to discuss the following:

Schedule 12.

Clauses 31 and 32 stand part.

Schedule 13.

Clauses 33 and 34 stand part.

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.”

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.

New clause 4—Assessment of impact of Act on multinational profit shifting and tax competition between jurisdictions—

“(1) Within six months of the passage of this Act, the Chancellor of the Exchequer must carry out an assessment of the impact of section 21 and Schedule 12 of this Act on multinational profit shifting and tax competition between jurisdictions, and lay a report of that assessment before both Houses of Parliament.

(2) The report must consider the efficacy of the measures contained in section 21 and Schedule 12 in achieving the policy objective of combatting base erosion and profit shifting.”

This new clause would require the government to produce an assessment of the impact of the Bill’s “Pillar Two” measures, in order to ascertain whether these measures have been successful in achieving their policy aims.

New clause 5—Tax compliance reporting—

“(1) Within six months of the passage of this Act, the Chancellor of the Exchequer must carry out an assessment of the impact of sections 31 to 34 and Schedule 13 of this Act.

(2) The report must consider the capacity and ability of HMRC to enforce compliance with the measures contained in sections 31 to 34 and Schedule 13 of this Act, including setting out staffing arrangements within HMRC's Customer Compliance Group for undertaking enforcement work relating to sections 31 to 34 and Schedule 13 of this Act.”

This new clause would require the government to produce an assessment of the impact of the Bill’s tax evasion and avoidance measures. The assessment would need to examine whether the capacity and ability of HMRC was sufficient to properly enforce those measures.

New clause 7—Review of effectiveness of section 31 measures in preventing fraud involving taxpayers’ money—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, conduct a review of the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money.

(2) The review must evaluate the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money through comparison with the effectiveness of—

(a) other measures that seek to prevent fraud involving taxpayers’ money, and

(b) the approach taken in other countries.”

This new clause would require the Chancellor to review the effectiveness of measures in this Act to prevent fraud involving taxpayers’ money, and to compare them with other measures that seek to prevent fraud involving taxpayers’ money and the approach taken in other countries.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Clauses 21 and 31 to 34 and schedules 12 and 13 cover technical changes to pillar 2 of the international tax agreement—doubling the maximum sentence for the most egregious forms of tax fraud—the introduction of new powers to tackle the promotion of tax avoidance, and action against fraud in the construction industry scheme.

The UK’s tax gap is currently at an all-time low, at 4.8% of total tax liabilities. That is due to strong Government action to tackle all forms of non-compliance in the tax system, but we are never complacent. That is why we have introduced more than 200 measures since 2010, including 40 since 2021, to reduce the tax gap even further. The Government are taking action to ensure that individuals and companies pay the taxes that are due in the UK. We want to deter individuals from committing fraud in the first place. That is why we are doubling the maximum sentence for tax fraud.

The Government are also taking action against tax avoidance by introducing a new criminal offence of the promotion of tax avoidance and by expediting the disqualification of directors of companies that promote tax avoidance. The measures are designed to protect tax revenues, which are important for funding our vital public services.

It is also important to protect tax revenues from companies shifting profits offshore. That is why the UK implemented pillar 2 on 31 December 2023. We are updating existing legislation with technical amendments today to ensure that UK legislation is consistent with newly agreed guidance, to address further stakeholder comments to clarify terms, and to avoid unintended consequences.

Clause 31 strengthens our enforcement powers when it comes to tax offences. It doubles the maximum prison term, from seven years to 14 years, for individuals convicted of the most egregious cases of tax fraud. This applies to all taxes and duties administered by HMRC. It also increases the maximum penalty for counterfeiting from 10 years to 14 years. These measures demonstrate, I hope, the Government’s intent to crack down on tax fraud and to deter criminal actions that damage the public purse.

Clauses 32 and 33 and schedule 13 seek to target the promotion of tax avoidance, in order to protect taxpayers and reduce the damage inflicted on the public finances. Recent powers such as HMRC’s power to name promoters and their schemes, and its power to issue stop notices, are effectively disrupting promoters’ activities. None the less, a small number of promoters persist in attempting to sidestep the rules, so clause 32 and schedule 13 enable HMRC to act swiftly to seek the disqualification of directors and other individuals who control or exercise influence over companies involved in the promotion of tax avoidance. They enable the removal of those individuals from the avoidance market and will deter others from becoming directors of companies that promote avoidance.

In the Finance Act 2021, the Government introduced rules that allow HMRC to issue stop notices that require promoters to stop promoting specified tax avoidance schemes. Stop notices are an important deterrent tool, as failing to comply with a stop notice can lead to a substantial civil penalty. Clause 33 increases the consequences of failing to comply by introducing a new criminal offence, which will apply to promoters who continue to promote an avoidance scheme after receiving a stop notice. Creating a criminal offence signals the severity of this issue and reinforces the importance of complying with a stop notice.

Finally, clause 34 tackles serious non-compliance in the construction industry. The construction industry scheme requires contractors to withhold tax unless a subcontractor holds gross payment status. Most gross payment status holders are legitimate and compliant construction businesses but, in recent years, gross payment status has been used by organised crime organisations to facilitate fraud. This allows unscrupulous actors to compete unfairly against legitimate businesses. Clause 34 therefore strengthens the tests for gross payment status by adding VAT to the taxes with which subcontractors must demonstrate compliance. This measure is predicted to raise around £300 million over the next five years.

Each of these clauses helps to protect vital tax revenue used to fund our public services. They seek to deter taxpayers from knowingly defrauding the Government and encourage them to act against the promotion of tax avoidance. I therefore ask that clause 21, clauses 31 to 34 and schedules 12 and 13 stand part of the Bill.

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

I call the shadow Minister.

--- Later in debate ---

[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.

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 19th December 2023 Commons Chamber

[Cat Smith (Lancaster and Fleetwood) (Lab)]

1. If he will make an assessment of the potential merits of introducing landfill tax relief for local authorities who are responsible for hazardous waste after companies go into liquidation.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

A very merry Christmas to you and your staff, Mr Speaker. Landfill tax provides an economic incentive to manage waste more sustainably, which has contributed to a 90% reduction in local authority waste sent to landfill in England since 2000. However, it was not intended to act as a barrier to the remediation and redevelopment of contaminated land. In the autumn statement the Government announced the land remediation pathfinder fund, which will provide £78 million of targeted support to local and mayoral authorities.

[Cat Smith]

Happy Christmas, Mr Speaker. For two weeks now the old Supa Skips site in Lancaster has been burning, and it looks as if Lancaster City Council will be left to pick up the tab for the clean-up. Some of that money has to be spent on landfill tax. Will the Minister meet me and Lancaster City Council to discuss what options are open to my local council to ensure that local ratepayers are not left footing the bill for rogue companies that walk away from sites, such as Supa Skips?

[Gareth Davies]

As I mentioned in my previous answer, the landfill tax has been hugely successful but it was never intended to act as a barrier to remediation. The fund that was announced in the autumn statement will be open for bids in early 2024, and I encourage the hon. Lady’s local authority to apply through the normal way. Secondly, there is an ongoing review into the landfill tax, and reform of current exemptions are within scope of that review. Our belief is that the fund may offer more targeted support in the way that she desires.

--- Later in debate ---

[Jack Brereton (Stoke-on-Trent South) (Con)]

17. What steps his Department is taking to help increase the level of business investment.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

In the autumn statement, the Chancellor announced an ambitious growth package that will boost business investment by making full expensing permanent, by removing barriers to business investment, by reforming our inefficient planning system, by speeding up electricity grid connection times and by making £4.5 billion available for strategic manufacturing sectors over the next five years, among other measures.

[Jack Brereton]

I thank the Minister for that response. It is very welcome to see full expensing, which will help businesses to invest in the plant and machinery and the technology that are needed. It would also help the ceramics sector, in particular, if it were exempted from the emissions trading scheme. Will my hon. Friend speak to the Chancellor about the possibility of exempting the ceramics sector from the ETS, which would help to give the sector the breathing space to invest in productivity and energy efficiency gains?

[Gareth Davies]

I can think of few greater champions for Stoke’s ceramics sector than my hon. Friend. We recognise that carbon leakage is a significant risk for the ceramics sector, so I can offer him two pieces of information. First, we provide free allowances to the ceramics sector under the ETS. Secondly, just yesterday we announced that ceramics will be included in the UK’s carbon border adjustment mechanism.

[John Penrose (Weston-super-Mare) (Con)]

18. If he will make an estimate of the potential impact of a carbon border adjustment mechanism in the form recommended by the Commission for Carbon Competitiveness on fuel duty.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The Government have announced that they will implement a CBAM from January 2027. The UK CBAM will place a carbon price on some of the most emissions-intensive industrial goods imported to the UK and will ensure that the UK’s decarbonisation efforts lead to a true reduction in global emissions, rather than simply displacing carbon emissions overseas. The delivery of a CBAM will be the subject of further consultation in 2024.

[John Penrose]

I congratulate the Minister. A CBAM is the cheapest and most future-proof way to save the planet and UK manufacturing jobs at the same time, but some of the details look troubling. Why have some manufacturing industries been left out entirely? Why are others arriving late, so they will be vulnerable to dumping? And how will he ensure that this is not just a tax and price rise for already hard-pressed families and businesses?

[Gareth Davies]

I recognise and thank my hon. Friend for his work as chair of the Commission for Carbon Competitiveness. I will directly address his two main questions. On speed, implementation by 2027, at the latest, will allow the Government to engage with businesses to ensure that they are well prepared, but next year’s consultation will provide more information on timings. We have identified eight sectors that have the greatest exposure to carbon leakage, from both a trade and an emissions perspective.

[Nigel Mills (Amber Valley) (Con)]

20. What progress he has made on the introduction of investment zones.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Since the spring Budget, the Government have announced seven of the eight English investment zones and confirmed the location of four places eligible to host investment zones in Scotland and Wales. The Government are committed to ensuring that funding and tax sites go live in the 2024-25 financial year.

[Nigel Mills]

I welcome the investment zone in Nottinghamshire and Derbyshire. Will the Minister confirm that some of the benefits of these zones are not only available in the small number of large sites but are available to any business across the whole zone to apply for?

[Gareth Davies]

My hon. Friend is right to recognise the east midlands investment zone, which will bring significant benefits across the region in the advanced manufacturing and green industry sectors. I am pleased to tell him that it started with a £9.3 million anchor investment and, over time, will leverage some £323 million in private investment, supporting 4,000 jobs overall.

[Theresa Villiers (Chipping Barnet) (Con)]

21. What steps he is taking to reduce inflation.

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

The life sciences sector is worth £2.4 billion to the Northern Ireland economy. What steps have been taken, with counterparts in the Northern Ireland Assembly, to increase funding for employment within this worthy sector?

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The hon. Gentleman is quite right that life sciences is one of the key growth industries for this country. I would be happy to meet him to discuss all the things we are doing for the sector, particularly in Northern Ireland.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

Our economy continues to be impacted by the war in Ukraine and denial across the Black sea, and we now must brace ourselves for further economic shocks as global shipping avoids the Red sea. Does the Minister agree that we should be protecting these shipping lanes? Our Navy is now too small by half to protect our maritime interests, so will he now look at investing in our surface fleet to protect our economy?

UK Emissions Trading Scheme and Carbon Leakage

Gareth Davies Excerpts

Monday 18th December 2023 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The UK is taking rapid action on industrial decarbonisation to meet net zero. This includes the use of carbon pricing through the UK emissions trading scheme (UK ETS). This action creates risk of carbon leakage as not all jurisdictions are moving at the same pace. Carbon leakage is the movement of production and associated emissions from one country to another due to different levels of decarbonisation effort through carbon pricing and climate regulation. It can undermine efforts to reduce global emissions and curtail private investment in decarbonisation—compromising efforts to limit global warming to 1.5°C.

The best solution to carbon leakage is an international one. The UK and many others around the world are working to reduce carbon leakage risk by pushing for ambitious climate action. But progress on international solutions takes time.

The Government therefore consulted on a range of potential domestic carbon leakage mitigation measures. The consultation “Addressing carbon leakage risk to support decarbonisation” ran from 30 March 2023 to 22 June 2023. It covered potential policies including a carbon border adjustment mechanism (CBAM), product standards, and other policy measures to help grow the market for low-emission products, as well as emissions reporting that could support the implementation of carbon leakage policy more broadly.

After careful review and giving thorough consideration to the potential implications, the Government have today published a summary of responses and Government response to the consultation, and confirm that:

The Government will implement a CBAM by January 2027. The UK CBAM will place a carbon price on some of the most emissions-intensive industrial goods imported to the UK from the aluminium, cement, ceramics, fertilizer, glass, hydrogen, iron and steel sectors.

A CBAM will ensure that UK decarbonisation efforts lead to a true reduction in global emissions rather than displacing carbon emissions overseas. It will give UK industry confidence to invest in the knowledge that its decarbonisation efforts will not be undermined.

The UK CBAM will work cohesively with the UK ETS to ensure imported products are subject to a carbon price comparable to that incurred by UK production.

The UK ETS Authority has today also published a consultation on the approach to UK ETS free allocation. The UK Government will work with the UK ETS Authority on interactions between a CBAM and provision of free allowances under the UK ETS.

The CBAM will be designed so that other countries which also have a carbon price will see the CBAM liability on their goods adjusted accordingly.

The scope of the CBAM will be kept under review, and delivery will be subject to further consultation in 2024.

The UK CBAM will be designed in compliance with the UK’s international obligations.

Alongside a CBAM, Government will work with industry to establish voluntary product standards that businesses could choose to adopt to help promote their low carbon products to consumers.

The Government will also seek to develop an embodied emissions reporting framework that could serve future carbon leakage and decarbonisation policies.

Voluntary standards and the embodied emissions reporting framework will be subject to further technical consultation in 2024.

The summary of responses and Government response to the consultation are available here: https://www.gov.uk/government/consultations/addressing-carbon-leakage-risk-to-support-decarbonisation. A copy of the document will be deposited in the Libraries of both Houses.

[HCWS146]

Finance Bill

Gareth Davies Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

What a great pleasure it is to close this debate on the Finance Bill on behalf of the Government. I want to thank my hon. Friend the Financial Secretary, who is new in post, and to recognise the work of his predecessor and my constituency neighbour in Lincolnshire, my right hon. Friend the Member for Louth and Horncastle (Victoria Atkins), who carried out a great deal of work on this Finance Bill in the run-up to the autumn statement.

I will address a number of the points raised in this very good debate—it was lacking on quantity, but high on quality from a number of sources—but before I reflect on the comments, let me reflect on the Bill. Be in no doubt but that this Finance Bill will mean that companies will pay less tax if they invest more. It will simplify and strengthen tax reliefs to bolster innovation, and it makes the tax system fairer and more secure. Taken together, the measures contained in it will strengthen our economy and create more opportunities for more rewarding work in every corner of this country.

I will now turn to the comments made by a number of colleagues. I will start with my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, who has carried out significant work on the tax simplification programme with her Committee. The Government are clear that we want the tax system to be simpler and fairer, and to support growth. As she mentioned, the Financial Secretary has written to her just this week setting out the progress we are making on simplification. This autumn statement, and the Finance Bill in particular, has a number of measures, not least the capital allowances and the R&D expenditure credit consolidation. This a step in the right direction, but we are not complacent and we will continue to go further.

I was heartened to hear cross-party support for full expensing. That is in the context of the lowest headline rate of corporation tax in the G7, but the autumn statement announcement, and the provision in the Bill, is a £10 billion-a-year effective tax cut, called for by the IFS, the CBI, the IOD, Make UK, and many other businesses across the country. It is also in conjunction—this is not in the Bill—with a business rates package that will see a freeze for more than 90% of rate payers in this country.

The hon. Member for Richmond Park (Sarah Olney) made a comment about the oil and gas sector. Let me be clear: this Government have resolute support for our domestic oil and gas sector, and its 210,000 jobs. She called for a “proper tax” on oil and gas companies, and I can tell her that we already have one of the highest rates of windfall tax in the world. The energy price levy strikes the right balance between providing support for families and businesses through an energy crisis—namely through the energy price guarantee, which effectively paid 50% of people’s energy bills—while also encouraging investment to bolster our energy security. Conservative Members want to see the sector’s profits reinvested to support our domestic economy, our jobs, and our domestic energy security. Investment allowances within the EPL help to do that, and the energy security investment mechanism, which I announced in June, will help to provide banks with certainty in their modelling as they provide financing to the oil and gas sector, and as they are part of the transition to net zero.

Along with SNP Members, the hon. Member also said that she would like an increase in tax on banks, but she failed to mention that tax on banks has increased in recent times from 27% to 28%. She failed to mention that the tax revenue contribution from banks has increased significantly from £17 billion in 2010, to more than £33 billion today. That helps to pay for our NHS, our education, our defence, and many other public services that we all rely on. We want our banking system to be internationally competitive, and to keep the 1 million jobs that it employs stable and secure.

Many Opposition colleagues have mentioned living standards, and they are right. Conservative Members care deeply about that issue. That is why as part of the autumn statement, we increased the state pension by 8.5% as part of the triple lock which, by the way, has brought 200,000 pensioners out of poverty since it was introduced by a Conservative Prime Minister. We have also uprated benefits by 6.7%, and uprated the local housing allowance, which will benefit 1.6 million households across the country. That was on the back of a £289 billion welfare budget. Under this Government 400,000 children have been brought out of absolute poverty, and we have seen the Government step in with significant support through two global shocks of covid and the energy price spike, with £500 billion of support to get people through.

[Drew Hendry]

Will the Minister give way?

[Gareth Davies]

I will not give way. We are going to proceed I’m afraid; the hon. Gentleman has had his chance.

I pay tribute to my right hon. Friend the Member for Witham (Priti Patel) who has great consistency when it comes to reducing the tax burden. She has made clear her views on our tax system, and we agree with her. We have a keenness to bring taxes down, but we will do it in a responsible way that is in line with sustainable public finances. She also made clear her consistent campaign on pillar 2, and we are very alive to her concerns. I am pleased that the Chancellor recently met and wrote to her, following the two fiscal statements. I understand her concerns about sovereignty, and I assure her that the pillar 2 provisions do not impact on sovereignty or indeed on competitiveness. The provisions in the Bill are technical amendments that we will discuss in more detail as it goes into Committee.

Finally I thank, as always, my hon. Friend the Member for Poole (Sir Robert Syms) for his positivity about our economy, which does not always get reported. For me, his critical point was about looking at the long-term performance of the economy, not just at the provisions we are putting in place. Instead of looking month by month by month, we should look at long-term provision.

In conclusion, in January this year, the Prime Minister set out his priorities for the Government. Three of them were economic and, since then, we have seen our inflation cut in half and our economy is expected to grow in every year of the OBR’s forecast period. That is half a decade of uninterrupted growth. Because we are reducing borrowing, debt is now forecast to fall. Put simply, we have turned a corner, and it is because of the actions of this Government, this Prime Minister and this Chancellor.

This is a Conservative approach through supply-side reform, and it is in stark contrast to the Labour party’s debt-driven ambitions. We know that its plans to borrow some £28 billion every year for green initiatives will put at risk the great progress that we and the British public have achieved. The independent Institute for Fiscal Studies has issued a stark warning for Labour’s plans. It said they will increase inflation and drive up interest rates, leading to more debt, higher rates, higher inflation, fewer jobs and more tax. That is the Labour party’s playbook. We cannot let that happen, and we will not.

We want an economy driven by enterprise, and by workers and by businesses throughout this country who push and strive, making us more competitive abroad and resilient at home. We want a tax system that pushes up businesses and workers who want to succeed, not that pulls them down when they do succeed. The autumn statement was a statement for growth, investment, work and reward. The measures in the Bill will deliver much of that, so I strongly commend the Bill to the House.

Question put, That the amendment be made.