Finance Bill

Debbie Abrahams Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[Harriett Baldwin]

The hon. Lady is the honourable exception that proves my rule. She is indeed engaging thoroughly in the debate from the void that is the Opposition Benches this afternoon. The tax on education is her party’s Front-Bench policy to add VAT to school fees. She may not be aware of that policy, but it is not a good one and I recommend that she use her influence to get her Front Bench to drop it.

Let me turn to the excellent remarks made by the Financial Secretary to the Treasury. It is the view of the Treasury Committee that the tax system in the UK is far too complicated. We were concerned earlier this year, as we mentioned in our report, about the abolition of the Office for Tax Simplification, because we want to see the Treasury team look at more ways in which it can simplify the tax system. We also published a report on tax reliefs that identified more than 1,000 tax reliefs in our tax system, many of whose impacts or costs to the Exchequer the Treasury does not even know. They really should be thought of as expenditure lines, and they should be looked at a bit more carefully. Some of the steps announced in these measures, and indeed in last week’s National Insurance Contributions (Reduction in Rates) Bill, will do some good in that regard, and I want to highlight those.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

In relation to what the hon. Member was saying about national insurance, would she like to comment on the fact that, overall, the richest fifth of households will be £1,000 better off on average by 2027 whereas the lowest fifth are set to gain only £200. Does that make it the progressive autumn statement that has been claimed?

[Harriett Baldwin]

I can also attest to the fact that the hon. Lady is the second Labour Back Bencher in the Chamber. That brings the total to the two who are visible to me at this time on the Opposition Benches—[Interruption.] I think that the hon. Member for Mid Bedfordshire (Alistair Strathern) is also providing the shadow Parliamentary Private Secretary role. National insurance is indeed a terrible regressive tax as it stands and I wholeheartedly endorse any measures that reduce that burden and simplify things. The hon. Lady has pointed out that this is work in progress, but I think she should welcome the abolition of class 2 national insurance. That has simplified the national insurance system, and in the spring Budget we had the welcome simplification of the lifetime allowance charge. We also had a great simplification in childcare entitlement with the announcement of a much wider offer of free childcare. These simplifications have been broadly welcomed.

There are further welcome simplifications in this Finance Bill. The Financial Secretary to the Treasury was kind enough to write to me yesterday to summarise his principles for the simplification of the tax system. He wants tax rules that

“have a clear consistent rationale”.

He wants it to be

“easy for taxpayers to get their tax right”.

He wants taxpayers to be able to understand what they need to do “at key life cycle points”, and he wants a tax policy that

“does not…distort the decisions of taxpayers and result in poorly informed choices.”

In summary, the Government want

“the tax system to be simpler, fair and to support growth.”

The Financial Secretary’s letter, which we will be publishing on the Treasury Committee website this afternoon, also outlines further simplifications, which were in the remarks he made earlier. They include expanding the cash basis for small businesses, improving the design of Making Tax Digital, simplifying research and development tax credits, which we welcome, and simplifying capital allowances and making them more permanent. I will draw to the House’s attention to other measures for individuals that he did not highlight. There is an increase in

“the threshold for individuals with income taxed through Pay As You Earn to file a Self Assessment return to £150,000”.

That is important because more and more people would otherwise be caught by the freezing of the thresholds. From April 2024, that threshold will be abolished altogether. There are also simplifications for individual savings accounts in this Finance Bill, as well as measures to simplify customs processes. I think the Financial Secretary’s heart is in the right place on simplification, and there is no question but that R&D tax credits were being abused.

I draw the Financial Secretary’s attention to future opportunities for simplification while welcoming the fact that venture capital tax relief is being extended to 2035, as the Treasury Committee called for in our report. I would love to see the Financial Secretary focus on the unintended disincentives to taking on additional work and additional hours that exist throughout the tax system, at all sorts of income points. We have made huge strides on simplifying it for people on universal credit, making every extra hour of work pay, but once people get into the tax system, there are cliff edges and high marginal tax rates that deter them from working more. I will highlight two in particular.

First, the Treasury Committee is currently holding an inquiry on “Sexism in the City,” and we have had evidence on how we could improve some of those marginal tax rates. The child benefit taper was introduced 10 years ago with my wholehearted support. It was the right thing to do in 2013, but it is now time to look again at how it interacts with the free childcare offer. We should consider the opportunity for simplifying the tax system by getting rid of the taper altogether, as it is a terrible deterrent to the families who get caught.

A person with a lot of children, earning between £50,000 and £60,000, can have a marginal tax rate of over 100%. It has become far too complex, and it is deterring many women from taking on more work. With the childcare offer we now have, it is time to look again.

I also want to throw the evidence from our “Sexism in the City” inquiry into the mix. The City has the highest pay and, indeed, the highest pay gap in the country. Some of the best paid careers for women are in financial services, but we hear time and again that, because of the tax-free childcare cut-off at £100,000, some women are choosing to work less than a full week. The freezing of the thresholds is having side effects. As the Financial Secretary thinks ahead to next year’s fiscal events, I urge him to consider those two potential simplifications.

Finance Bill

Debbie Abrahams Excerpts

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

On fraud, which was raised by the hon. Member for Ealing North, over the last three years HMRC has significantly increased the number of people working on R&D compliance to over 500. We have also announced policy measures to counter non-compliance in R&D schemes and will follow-up with a more detailed compliance action plan outlining of how HMRC will reduce error and fraud. That will be released in due course.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Following on from the comments of the hon. Member for Amber Valley (Nigel Mills) about the impact of the schemes and given the Federation of Small Businesses’ request for some publication about the impact of these tax reliefs on R&D levels, will the Minister also publish a report on their impact on different regions and subregions?

[Nigel Huddleston]

All taxes are kept under review, as are their impacts, so some of the calls for further analysis are not necessary because we do that as a matter of course. It is important to stress that many external studies have found that when full expensing has been introduced in other countries, it has been very effective in supporting investment. Of course, the OBR forecasts predict a boost of £3 billion each year. The analysis of the impact of the super-deduction is already taking place, but companies have 12 months from the end of their accounting period to amend their tax returns, so HMRC will not have complete data on the impact of the super-deduction until 2024. However, we will provide further analysis in due course.

My hon. Friend the Member for Erewash mentioned a whole range of real-world impacts from these measures and the previous measures, including the super-deduction, as well as, importantly, the annual investment allowance of £1 million, which affects the 99% of smaller businesses that can effectively benefit from full expensing. In the autumn statement, we announced full expensing for larger businesses: the top 1%, who conduct about 80% of full investment.

I am aware of time, but will cover a couple of other key points that were raised. My hon. Friend the Member for Erewash raised subcontracting. Again, we engaged extensively with stakeholders on this issue over the summer, and the Government have developed an approach that will allow the person taking the decision to do R&D to claim that relief. That was the preferred result of the consultation. However, an exception will apply in the important area that she mentioned of companies doing R&D—such as in a clinical trial—in the UK for another company that is ineligible for relief because, for example, it is an overseas customer. That is to make sure that the impact is there for everyone to benefit from. The hon. Member for Ealing North also mentioned partnerships; a corporate partner is eligible for full expensing, but an unincorporated partner is not. Again, the annual investment allowance of £1 million covers the investment needs of almost all unincorporated partnerships.

The hon. Member keeps harping on about taxes rising. I strongly advise him to look at his December payslip and compare it to the one he will get shortly. Maybe he will have the decency to come to me and tell me whether his tax is lower or higher. Each fiscal event needs to be taken separately. At the last one, the autumn statement, we cut taxes—national insurance is down 2p. [Interruption.] If the hon. Member does not believe me, I pose this challenge to him: if his payslip shows that his taxes are lower, perhaps he will do me the courtesy of coming to me and apologising, or give the difference to a charity, to put his money where his mouth is.

We do not believe that new clause 1 is necessary because the information has already been published in the tax impact and information notes alongside each change, which give a clear explanation of the policy objectives, along with details of the implementation costs for both HMRC and businesses. Therefore, the new clause is not necessary. I urge the House to reject it, and I commend clauses 1 and 2 and schedule 1 to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Schedule 1 agreed to.

New Clause 1

Review of reliefs for research and development

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the implementation costs of the measures in section 2 incurred by—

(a) HMRC, and

(b) businesses.

(2) The review under subsection (1) must include details of the implementation costs of all measures related to credit or relief for research and development that have been introduced since December 2019.”—(James Murray)

Brought up and read the First time.

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

Finance Bill

Debbie Abrahams Excerpts

Report stage
Monday 5th February 2024 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

May I ask colleagues in all parts of the House for some indulgence? Unfortunately, I was missed out on Report, but I very much wanted to speak about new clause 4, which I tabled. It is very close to my heart, and it is the reason why I became an MP. Specifically, it is about asking the Government to make an assessment of the public health effects of the Bill, particularly in terms of regional inequalities, the impacts on protected characteristics and the impact on the NHS.

I would first like to associate myself with the comments of my hon. Friend the Member for Ealing North (James Murray) about His Majesty King Charles. I wish him a very speedy recovery, and send best wishes to his family.

I had hoped that I might convince the Minister just a little more than I did in Committee about what a difference the assessment in my new clause would make. I am going to extend the arguments just a little more, if he will bear with me. I appreciate that I cannot do anything about the issue in this Bill, but perhaps he could think about it for the one we will have after the Budget, because I will be returning to this issue again. The proposal is not about changing anything in the Finance Bill; it is about publishing the Government’s evaluation of the impact of their policies, as announced in the autumn statement, on the health of our constituents as mediated through, for example, changes in poverty and socioeconomic inequalities. Ideally, that would have been done during the planning of the autumn statement, but given that that did not happen, my new clause would have provided the opportunity to make decisions based on an evaluation of the impacts on our health, including our children’s health.

Many Members will have heard about and read the report of the Academy of Medical Sciences on child health, which came out earlier today. In it, the UK has been revealed to have a stalling infant mortality rate, which is worse than 60% of that in similar countries. This is after a century during which infant mortality has been decreasing. The academy has put to us, as decision makers, that we need to be doing a lot better. My new clause would have helped the Government in their quest for transparency, fulfilling the Prime Minister’s promise on that, and restoring confidence in the Government and in politics more widely. It would also have allowed the Government to monitor their commitment to levelling up our health across the country and to tackling the appalling north-south divide.

I was director of public health research at the University of Liverpool along with Professor Dame Margaret Whitehead, who in 1987 published her report revealing for the first time the north-south health divide. It came out a few years after the Black report and it showed the causal relationship between poverty and health. Margaret took it a step further, emphasising socioeconomic inequalities, not just poverty, as the key driver of these health inequalities.

We have been building on that evidence base for the past 40 years or so. Many will have read “The Spirit Level” by Professors Richard Wilkinson and Kate Pickett which showed the universal relationship between socioeconomic inequality and educational attainment, social mobility, trust between communities—where has trust gone within our communities?—reducing crime and much more. The narrower the gap in socioeconomic inequalities, the better almost all societies across the world do on a whole host of measures including health and wellbeing.

Professor Sir Michael Marmot’s 2010 totemic “Fair Society, Healthy Lives” report set out six objectives across our life course of what we as a country need to do to address these socioeconomic inequalities and reduce health inequalities. He warned us in 2017 when we started to see life expectancy in England as a whole flatlining, which was accompanied by declining healthy life expectancy. We heard many questions in today’s Department for Work and Pensions orals about what we can do to get a fit and healthy labour force, and our inequalities are partly why we are in our current position. Professor Marmot also revealed that life expectancy for the poorest women and in the poorest areas was declining, and that we were one of three advanced economies in the world where this had been happening, along with the USA and Iceland. This is not a question of our having reached peak life expectancy; we are falling behind most of our competitors. He also revealed that health inequalities had increased and that there was an even starker north-south health divide.

Then covid hit. The same pattern of infection, ill health and death was seen with covid as was seen before the pandemic with other conditions. The same groups of people and the same areas were affected by covid as were affected by, for example, heart disease.

Last month Michael provided another update in his latest report, “Health Inequalities, Lives Cut Short”. He said in The BMJ a couple of weeks ago something that I asked the Prime Minister about last week:

“if everyone had the good health of the least deprived 10% of the population, there would have been 1 million fewer deaths in England in the period 2012 to 2019. Of these, 148,000 can be linked to austerity. In 2020, the first year of the covid pandemic, there were a further 28,000 excess deaths.”

Today, I see no evidence that policymakers have learned from or even understand this injustice, or its economic consequences. I urge them to watch a short film, “The Unequal Pandemic”, which shows the human cost of this inaction. Our experience of covid and these inequalities is not inevitable.

Today’s Academy of Medical Sciences report estimates that a cost of £16.13 billion a year could have been avoided by early childhood intervention. The relationship between population health and productivity is also well established. In its 2018 “Health for Wealth” report, the Northern Health Science Alliance argued that in order to improve our productivity and growth we must improve our health. It calculated that improving the health of the north to the level of the rest of England would increase productivity by £13.2 billion a year. It is in the economy’s and the Chancellor’s interest to undertake this health assessment of his measures. I appreciate that that is not going to happen in this Bill, but I would be grateful if the Minister would consider it for the next one.

I was grateful in the Finance Bill Committee for the Minister responding with a long list of data that the Government already collect on poverty, and so on. Unfortunately, he did not explain how these data were then analysed to assess the impact of his Government’s measures on, for instance, stricter social security sanctions, and how those would affect the current levels of children living in poverty, deep poverty and destitution, as described in the Joseph Rowntree Foundation “UK Poverty 2024” report. He did not explain if these data had been disaggregated to examine the impacts of these policies on different parts of the country, on disabled people or on people from ethnic minority communities, and he did not explain what scenario-modelling on poverty, deep poverty and destitution had been undertaken to understand whether more children will die before their first birthday because they had been born into a poor or destitute family. For each 1% increase in child poverty, an extra 5.8 babies per 100,000 livebirths will die before their first birthday.

Professor Sir Michael Marmot has asked us to provide hope—hope that we as politicians can recognise and understand that these inequalities must be addressed and that they are not inevitable, and I agree. I urge the Minister to really consider this, if not now, then in the next Finance Bill, and to come back with a set of proposals on how the Government are going to do it.

Question put, That the Bill be now read the Third time.