Finance (No. 2) Bill

Miriam Cates Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[John McDonnell]

Following on from my right hon. Friend the Member for Barking (Dame Margaret Hodge), I find it almost incredible that we are having this debate at all, given what we know about the track record of abuse of this type of tax deduction, as she so eloquently pointed out. The Minister is right to suggest that amendment 11, tabled in my name and those of other right hon. and hon. Friends, would have the effect of removing the provision of capital allowance super deductions.

There has been considerable evidence, and concern, from economic think-tanks and Committees of this House that tax reliefs have failed to deliver their stated objectives and, worse, that they have often had unintended consequences through the creation of perverse incentives. Members have raised example after example in recent years, including the entrepreneurs allowance, the patent box and the tonnage tax, all of which have not only failed in their objectives but lined the pockets of company directors and shareholders, exactly as my right hon. Friend said. Accountants, lawyers and others have been using them effectively for tax avoidance. The scope for perverse incentives and unintended consequences is even greater with these super deductions. If the Chancellor wants a sweetener to go alongside his corporation tax rises, surely at a time of rising unemployment it is more urgent to incentivise job retention through a temporary cut to employers’ national insurance contributions rather than introduce what has been described as this dog’s dinner of untargeted super deductions in clauses 9 to 14.



Unlike Ministers, in dealing with business, I do not believe in a something-for-nothing culture. If the Government are giving tax breaks to businesses, the Government, as guardians of the public purse and the public interest, should demand something in return. New clause 1, in my name and those of other hon. and right hon. Members, asks simply that, in return for companies being eligible for these super deductions, they should pay their workers the real living wage and should recognise trade unions for collective bargaining purposes—two simple things that reflect that they are responsible employers.

I regret very much the Minister’s reference to these as “burdensome” requirements. Paying a decent wage and recognising trade unions are not a burden, but actually things that enhance the role of an individual company. As has been said in debate after debate, even by Government Ministers, in many instances the greater involvement of the workers in a company increases productivity. These are just low barriers for companies to pass. It does not take long to recognise a trade union or to be accredited as paying the living wage. Companies that do not currently meet these extra criteria could easily do so during the passage of this Bill and its enactment.

I also back the Front-Bench amendments in the name of the Leader of the Opposition, and I pay tribute to my hon. Friend the Member for Ealing North (James Murray). He is right that companies such as Amazon that dodge their taxes and evade their responsibilities to their workers should not be given tax breaks on top. The Chancellor of the Exchequer made much of his compact with unions and business groups over the furlough scheme. This modest new clause 1 puts in legislation the approach I am putting forward. I believe that it is within the spirit of that relationship between Government, trade unions and employers, and I just urge the Government to think again about accepting it.

New clause 2, in my name and those of other hon. and right hon. Members, combines a request for an evidence base for super-deductions in respect of capital allowances and to explore what economic benefits could be derived from attaching social and environmental conditions to the receipt of super deductions. I heard one hon. Member in this debate say that the Treasury monitors these policies and does indeed review them; unfortunately, it does not.

Historically, tax reliefs have been introduced, and over the years an accumulation of tax reliefs have never been reviewed and never really been tested for their effectiveness in the way they should be. The Office for Budget Responsibility stated in its March “Economic and fiscal outlook” that the super deductions, as others have said, are expected to cost at least £25 billion in total between 2021-22 and 2023-24. This is a huge commitment, and it is surely in the public interest that we have an assessment of policies’ effectiveness and also ensure they deliver on social and environmental goals.

In new clause 6, I seek to create an evidence base on which this House can assess the merits and drawbacks of the super deduction policy. The Public Accounts Committee has previously looked into the operation of UK tax reliefs, and its findings painted a worrying picture. These reliefs already cost more than £100 billion a year in forgone tax, and HMRC does not even know how many reliefs exist or monitor their cost, let alone their effectiveness. Let me quote my right hon. Friend the Member for Barking, who is the former Chair of the Committee. She said:

“HM Treasury and HM Revenue and Customs…do not keep track of those tax reliefs intended to influence behaviour. They do not adequately report to Parliament or the public on whether reliefs are working as intended and what they cost and whether they represent good value for money.”

She went on:

“HMRC does not effectively monitor changes in the cost of tax reliefs so is slow in identifying instances where a relief is being exploited for a purpose”

beyond what Parliament intended. I think that is an accurate but damning indictment and one that should concern the whole House, but especially Treasury Ministers.

New clause 6 specifically recommends that the Public Accounts Committee is tasked with reviewing the effectiveness of existing capital allowances and that this House then votes on the clauses that provide for super deductions in the light of that evidence. I urge the Government to get a grip on the whole process of tax reliefs. We have seen how they can be abused. We have seen how ineffective they can be. We have also seen an industry develop, with accountants and lawyers who have profiteered from tax reliefs that the Government have introduced over decades. To add now to that abuse of taxpayers’ money in this way, I deeply regret. I urge the Government to think again. I give the Government this warning: in a few years’ time, if the Bill goes through as it is now, I bet we will be returning to this debate with example after example of how this system has been abused, to all our cost.

[Miriam Cates (Penistone and Stocksbridge) (Con) [V]]

I wish to speak to the numerous amendments and new clauses relating to corporation tax changes and the new super deduction.

As the previous speaker, the right hon. Member for Hayes and Harlington (John McDonnell), will no doubt keenly remember, raising corporation tax was one of the pillars of Labour’s 2019 manifesto. We frequently hear Labour Members expressing the view that big businesses should pay their fair share of tax. I completely agree, and that is why I fully support the Government’s proposals to increase corporation tax with a new maximum rate of 25% for those businesses with profits of over a quarter of million pounds from April 2023. Unlike a rise in income tax or national insurance, which affects taxpayers in a blanket way regardless of personal financial circumstances, corporation tax is only paid when profits are made—no profit, no tax due. And where profits are made, it is of course absolutely right that a proportion of those profits is returned to the taxpayer, because without the infrastructure, education, security and health services that the state provides, those businesses would clearly be much less profitable.

Members across the House like to champion small and local businesses, and rightly so. These businesses will, in the vast majority of cases, continue to pay the lower rate of corporation tax. In my constituency, we have 2,890 registered businesses, with 88% having fewer than 10 employees. These are not the kind of companies that generally make profits exceeding a quarter of a million pounds a year. The corporation tax rise will only affect the very largest and most profitable businesses. In fact, only 10% of businesses will pay the new higher rate. The Government are right to delay the increase until 2023, as it gives companies time to plan as we emerge from a period of uncertainty, but it is wrong to say that the impact of the pandemic means that the change should not take place at all. Yes, many businesses have struggled during the pandemic, but some businesses have prospered hugely, often due to circumstances for which they can take no credit. Online traders and the big supermarkets have seen their revenues increase substantially purely because other retailers have been legally forced to close. It is therefore right for the Exchequer to recoup some of those additional revenues through taxation. These measures must therefore pass without the proposed amendments, some of which could allow large businesses to restructure to avoid the high rates of tax.

We all want UK businesses to be profitable, but we also want those profits to result in higher wages, better training and reinvestment in our economy so that profits can be shared fairly across society and not just concentrated among shareholders or the most highly paid executives. In other words, we need businesses to be more productive. Low productivity has been a thorn in the flesh of the UK economy for some time. The proposed super deduction is therefore exactly the measure we need to encourage the reinvestment of profits through large-scale investment, turning crisis into opportunity and setting UK businesses on a new path to innovation, productivity and growth. The OBR has predicted that this will increase business investment by 9% and lift us from 30th in the OECD’s world rankings for business investment to first. This is the right moment for this incentive, when many businesses have been forced to pivot or have seized opportunities presented by the pandemic, and now is the time to invest. That is why I oppose the amendments to the super deduction clauses, which would ultimately delay and reduce its effectiveness.

Our economy is an ecosystem, with the private sector, the public sector, our communities, individual employees and employers existing interdependently in a multitude of symbiotic relationships. Each element of this ecosystem has obligations and responsibilities to the other parts. For businesses, these responsibilities include paying fair levels of tax and making investment decisions in the best interests of our whole society. It is the Government’s role to encourage businesses to act for the common good. The unamended measures in this Bill will be successful in doing just that.

Finance Bill

Miriam Cates Excerpts

Report stage & 3rd reading
Monday 24th May 2021 Commons Chamber

[Miriam Cates (Penistone and Stocksbridge) (Con) [V]]

It is a pleasure to speak on Report of the Finance Bill. Over the past 14 months, the Government’s main concern has been to protect the UK from the worst impacts of the global pandemic. We have seen a comprehensive public health response to slow the spread of coronavirus, and more recently to deliver mass vaccinations on an unprecedented scale, but the Government have also delivered a comprehensive financial response to secure jobs and livelihoods, and to protect the economy. This response has been hugely successful and the most recent Office for Budget Responsibility forecast suggests that the UK economy will recover six months earlier than previously thought. However, essential though this financial response has been, it has cost the taxpayer £407 billion, the majority of which has been debt. This year, we have borrowed a staggering 17% of GDP.

As we emerge from the pandemic, it is imperative that we begin to plan how that debt will be repaid and the deficit reduced. One of the tools at our disposal is to raise levels of taxation, and it is right that any increases should fall on the broadest shoulders. While many small and medium-sized enterprises in my constituency have struggled this year, some of the UK’s biggest businesses have made significant profits. It is only large, often international, companies with profits of over a quarter of a million pounds a year that will be required to pay the highest rate of corporation tax, as stipulated by clause 6.

It is not only the UK that is reconsidering business taxation. Current global efforts to update corporation tax frameworks in response to modern challenges are ongoing, and we have seen reports today of those international negotiations and the positive steps that are being taken to address the current practice by some multinational companies of shifting profits to low-tax jurisdictions. I absolutely support the efforts to end that practice, but I oppose new clause 23, which would compel the Government to publish, within six months of enactment, a review of the impact on corporation taxation revenues of a global minimum rate. Since those matters are still subject to international negotiation, any assessments mandated by the new clause would be purely speculative and a complete waste of resources.

Taxation is not a penalty and should not be an ideology. It is a tool—a mechanism that we can use to ensure that the state can afford to pay for the infrastructure and services that citizens expect. Taxation levels must balance the requirements of those services with the rights of individuals and businesses to have as much agency as possible over their own financial resources. There is no absolute right or wrong level of taxation. Tax rates should change with the times and challenges we face.

The Opposition have spent the past year calling for more taxpayers’ money to be spent on supporting businesses, welfare and health, and they have often rightly framed that demand in moral terms, highlighting the impact of the pandemic on those who have been hardest hit. But all resources are limited, even the state’s. Just as public spending has a moral dimension, so does public debt. It is morally wrong to leave difficult decisions for future generations, rack up eye-watering interest payments for our children and grandchildren, and risk the security of our economy. That is why we must have a plan for reducing our debts. Increasing corporation tax for the largest businesses is an important part of that.

I said that taxation policy is a tool—a mechanism for raising money—but it can also be a catalyst for growth and investment. With the introduction of the super deduction and freeports, which will be discussed when we debate the next group of amendments, I am confident that, unamended, this Finance Bill will kick-start our recovery and help businesses across the country to build back better.

[Zarah Sultana (Coventry South) (Lab)]

I remember when the pandemic first hit and the Chancellor said that we would all be in it together. Well, the reality has not turned out that way. It has been the story of the many and the few. For the many, it has meant food bank use rocketing—it is up 33% on a year ago. Universal credit claimants have doubled in my constituency and child poverty now affects more than one in three children in Coventry South—nearly 7,000 kids in my constituency alone—and nearly 4.5 million across the country.

While the majority have struggled with falling wages, unemployment and rents that they cannot afford, for a wealthy few it has been a bonanza. Last week The Sunday Times rich list revealed a record growth in UK billionaires, of whom there are now 171 in total. Their wealth stands at £600 billion—up nearly 25%. Amazon, which this year has raked in record revenues of £38 billion across Europe, paid nothing in corporation tax. This is not just a broken economic model—it is not just unfair and unequal—it is rigged. It is redistribution, but not in the way that we might traditionally understand: it is taking from the many and giving it to the few. That is what is happening when we see that food bank use is up 35% and billionaire wealth is up 25%. This Conservative Government not only refuse to tackle that but aid and abet it.

There is nothing in the Bill to tackle the tax loophole that means that income earned through wealth, owned overwhelmingly by the rich, is taxed at a lower rate than income earned through work. There is nothing in the Bill to fairly tax the obscene profit that companies such as Amazon have made during the pandemic, with the Government refusing to embrace a windfall tax. There is nothing in the Bill to provide the necessary investment in Her Majesty’s Revenue and Customs to tackle tax avoidance and evasion by the super-rich and big businesses. Instead, the Government are standing by as the tax gap stands in excess of £35 billion.

What is in the Bill is £15 billion more in annual cuts to Government Departments and a super deduction tax cut in capital spending that the rich are already reported to be using to purchase jacuzzis. To top it all off, there is the Tory Government’s refusal to embrace plans to tackle global tax avoidance. The plans put forward by the US could prevent the likes of Amazon, Google and Facebook from dodging tax and refusing to pay their fair share, and end the race to the bottom on corporate tax rates. Even at a moderate rate of 21%, such a measure could raise £13.5 billion for the UK Treasury, according to Tax Justice UK.

We should not really be surprised by the Government as they are on the side of big business and the super-rich. For a decade they have been cutting taxes while cutting the budgets of schools and hospitals throughout the country. They are also funded by a third of UK billionaires and, of course, they are led by the super-rich, too—not just an old Etonian Prime Minister who complains that his £150,000 salary is not enough, but a Chancellor who went from an elite private school to Oxford to investment banking, before becoming the wealthiest Member of Parliament in this House and using his power to cut the services of the working class.

Instead of this rigged and rotten system, we could make the super-rich pay their fair share to fund our public services and end poverty for all. That is the least the Government should be doing, so they should back the plan for a global minimum corporation tax. They should also back my proposed new clause, which would shine a light on the scandal of tax dodging. Instead of entrenching inequality, the Government could be building an economy for all.