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

Priti Patel Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[Priti Patel (Witham) (Con)]

There is quite a lot to say after the contributions from both Front Benchers, which I will come to in a minute. I welcome the opportunity to speak in this important debate. I support the reduction in the rate of national insurance. I will use my time to discuss longer-term tax reforms that should be introduced.

Before I speak to the cuts and changes to national insurance that are the basis of this important Bill, I will, if I may, make some observations on the debate thus far having heard both Front Benchers. This is a very serious issue; we are speaking about fiscal matters that affect all our constituents across the United Kingdom, at a time when we should be really honest with the British people. We should level with them: taxes have gone up. I do not think that they want to hear trivial arguments from this House about who is outscoring whom. A degree of maturity is needed right now, because these have been difficult times, post-pandemic and off the back of Russia-Ukraine and everything that has followed. We need to look at what is being proposed in a constructive way. The irony of today’s debate—I will touch on wider public spending—is that tomorrow we will be here talking about estimates. Given the book and the numbers that I have gone through this morning, a lot more can be done to ensure that Government spending is much more efficient, but we will save discussion that for tomorrow.

This is an important Bill. It follows clearly the decisions that previous Conservative Chancellors have taken to reduce the taxes taken from national insurance. Members who review the details of successive Budgets since May 2010 will note that the Government have progressively reduced the national insurance tax burden in recent years—Members may recall that the employee threshold level was £5,725 back in 2010, so that has been the trend. Two years ago, the increase in the primary threshold jumped from £9,568 to align with the tax-free threshold—with which I like to think we in this House are all familiar—of £12,570 in 2022-23. That 2022 change alone has already put around £330 per person back into the pockets of hard-working families. The changes at the autumn statement—which, if I remember rightly, were well debated on the Conservative side of the House, while the Opposition were a little absent—meant that average earners would be around £900 better off.

Alongside that, I also welcome the reduction in NICs for those who are self-employed. As an Essex MP, the majority of my constituents are self-employed. Over 80% of my constituents work in self-employed small and medium-sized firms. Those who are self-employed and pay class 4 contributions, including many of my constituents, make a huge contribution to our economy. We should reflect on that. More always needs to be done—that is fact—to grow the economy, on supply-side reforms, and to stimulate employment, but the measure is huge for those people because it gives them security in employment, and that is a fundamental principle that we should all work to. It is a big difference and tax cut.

The impact of raising the income tax-free threshold from the £6,475 in 2010 to £12,570 today was significant because it was worth over £1,000, or 20% of the £6,095 increase. The £900 average from the cuts to national insurance in the last two fiscal events is significant. We should all recognise what that means not just for the economy but for the money in people’s pockets. Those measures will have helped taxpayers to keep around £2,400 more of the money they earn. Let me be frank: that is not just good; it is valued and welcome. As colleagues have already touched on, those are timeless Conservative values that fulfil our mission to deliver economic freedoms and lower taxes, notwithstanding the tax backdrop of recent years.

I listened to the Labour Front Bencher, the hon. Member for Ealing North (James Murray), and I always welcome his contributions and enjoy our debates. Our approach to national insurance and easing the burden contrasts with what we saw under the previous Labour Governments, when we saw increases. We need to work collectively to be on the side of hard-pressed families right now. That is absolutely crucial. I could go back to the Budgets of Gordon Brown and list some of the calamities that took place, but what is the point? We have to speak about the fiscal—[Interruption.] No, we have to speak about the fiscal footprint that we have now, about the Budget resolutions that we voted on last night, and about this Bill in particular. It is really important that we stand by our record, our commitment to lowering taxes on income, and our ambition to go further.

This will be a debate—I have no doubt about that. I have stood in this Chamber before saying that we should go further on tax reforms, and I believe that. I have even suggested previously that we look at merging NI and income tax, and previous Conservative Governments have looked at that as well. As all Members know, including Opposition Front Benchers, it is not straightforward; it is complicated, and some of the points that have been raised today indicate why. However, I believe that we have to continue on this pathway. Without recapping the Budget debate that we have had in recent days, it contains important fiscal measures that mean that the public will be better off, including the fuel freeze, but the direction of travel is also important. Treasury Front Benchers hear a lot from me and other Members about this issue, and I know they would like to go further in reducing the tax burden. They know my personal views on public spending, which I believe is far too high right now and needs addressing, but we also need to think about long-term reform.

If I may, I will touch on the ambition expressed by the Chancellor to end the double taxation on jobs, and the suggestion that national insurance is either phased out or subject to reform. I have been a long-standing campaigner for lower and simplified taxes, and I am on the record as having even looked in the past at a merger. George Osborne looked at that during his chancellorship, as did the Office of Tax Simplification—that is well documented and on the record. Although those plans were not taken forward because of the complexities I have touched on, it is important that those debates continue, because we need to simplify our tax system in this country. As Conservatives, we must always look to do that; we must always stand up for not just lower taxes, but simplifying the tax system. I say that as the new tax year is due to begin, with people still getting letters from His Majesty’s Revenue and Customs. For businesses in particular, the burdens that they face and the complexities involved in tax returns are mind-blowing.

Both national insurance and income tax are taxes on income, and the thresholds at which they are both paid are now aligned at £12,500 per year. That is something that we need to look at—I have made that point before. My hon. Friend the Member for North East Bedfordshire (Richard Fuller) touched on the contributory principle of national insurance as set out in the National Insurance Act 1911 and further measures following the second world war. Those measures were brought in to support health and medical benefits and unemployment benefits, and the receipts raised are paid into the national insurance fund investment account. That distinction in the way that national insurance is raised and dealt with, compared with other taxes—which end up in the consolidated fund—has stood the test of time. I think all Treasury Ministers, those on the Front Bench today and others, recognise that. That distinction is ingrained in the fabric of our tax system and the thoughts of many of our constituents.

We are now starting the debate about lower taxes and how we can simplify the tax system, and I genuinely believe that this is an important Bill. It is a very important signal in terms of supporting the self-employed and hard-pressed families around the country, and the Government’s direction of travel is very welcome. Through this debate, we are starting to provide a clear, distinct Conservative way forward and Conservative approach. We have had debates over the past week about high-tax, high-spending policies; those debates and discussions are not going to go away. Public spending is over £1.2 trillion. We have to be mature in the debates we have in this House, and about how as a Government we prioritise public investment but spend taxpayers’ money wisely. I am pleased that this Bill has been brought forward, and I hope it will start a positive direction of travel when it comes to reducing the overall tax burden on hard-pressed families.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the SNP spokesman.

--- Later in debate ---

[John Redwood (Wokingham) (Con)]

I have declared my business interests in the Register of Members’ Financial Interests.

I welcome the reduction in the tax on jobs. The level of overall taxation in our country is too high. The reason it is so high is primarily the huge expenditure the country, by general agreement, incurred to tackle the covid lockdown. This is why I find the Opposition’s criticism of this Government’s tax record so difficult to grasp. After all, they wanted us to lock down tougher and they wanted us to lock down for longer. While a lot of money was rightly offered by this Government to individuals and companies to replace their lost incomes —colossal expenditure on a scale we have never seen before—Labour wanted to spend more on those causes, as well as wanting the lockdown to go on for so much longer.

What we demonstrated was that if we lock down a country for a year or more, stop a very large number of people earning their livings or livelihoods at all, and close down a large number of companies for the duration and maybe for longer, it is an extremely costly process. Of course, we needed to offset that to prevent a complete collapse in the economy and to sustain some lifestyles for those who otherwise would have no income. So we as a nation have this burden of extra expenditure, which we are now having to tackle by tax levels that are higher than we like.

We are at this very important point where the higher taxes are all in place—some of them are doing their job, and some of them will disappoint because higher tax rates do not always deliver the extra revenue that Treasury and OBR planners seem to think they will—and the Government are rightly saying, from the autumn statement through this Budget and on to future fiscal events, as they are now called, that we want to get back to getting the level of taxation and the burden of the rates down. It does not mean that we want to reduce the amount of taxation—indeed, the Government, understandably, want to collect a lot more taxation, as do the Opposition—but the fundamental policy debate is about how best to do that, and it is surely right that we are going to have a more prosperous economy and more public expenditure can be afforded if we have tax levels that promote growth, particularly if we reduce the taxation that is otherwise a big burden on work, on enterprise and innovation, and on small companies and the self-employed.

I am delighted that the self-employed have been included in the national insurance cuts in both the autumn statement and this Budget, but I still think the Government need to reform or push back the changes they made to IR35. We have lost 800,000 self-employed over the covid period. Some of that is because of the damage the covid lockdown has done, but some of it is deliberate tax policy in telling people that they cannot be self-employed, or so undermining the credibility of their status as self-employed in the eyes of others that they do not get the contracts they used to get from businesses that are nervous about the tax issue.

I urge my hon. Friends on the Front Bench to find time to look again at the second part of the self-employment package. I welcome the national insurance part, but I think we need to look at IR35, because we need that extra capacity. It would be good to get back some or all of those 800,000, and to add many new ones—younger ones—to that crucial army, because I am sure all Members in the House, being honest, would agree that the self-employed make such a valuable contribution in our constituencies.

[Priti Patel]

Does my right hon. Friend share my view that over the decades we have seen such a fall or drop-off in individuals starting their own business, younger people in particular, because of these concerns about the tax burden, how regulated it is and how difficult it is? By dealing with the whole long-standing issue of IR35, we could open up a new marketplace and encourage a new generation of entrepreneurs and small business leaders to come in and really help to grow the economy.

[John Redwood]

I largely agree with my right hon. Friend, but if we look at the numbers, I think the fall-off was from 2020 to 2024. Prior to that, with good Conservative policies and lower taxes, we were growing the self-employed army very noticeably, and it was making a very important contribution to general growth and the way all our local communities are serviced. It is so often self-employed people who allow us to make personal contact in a way that large companies do not seem to want any more. They are the people who turn up in the evening or at the weekend, if necessary, to get work done, and they are the people who wrestle with the increasingly impossible streets created by Labour and Liberal Democrat councils, which make it more difficult for them to get their vans around.

Wine Duty

Priti Patel Excerpts

Tuesday 5th March 2024 Westminster Hall

[Will Quince]

I thank my right hon. Friend for his intervention. He is right to champion the cause of the Wine Society, which is based in his constituency. There is both a significant cost implication and an administrative burden for such organisations, so the impact of these changes should not be understated.

The easement that is set to end on 1 February 2025 will affect wine businesses ranging from major retailers such as the big supermarkets to specialist retailers such as Majestic. However, as my right hon. Friend has just alluded to, there are also thousands of independent wine merchants who have all said that having to implement fully the strength-based system would impose significant costs, running to many millions of pounds, both in the short term and once the necessary systems are established.

[Priti Patel (Witham) (Con)]

I thank my hon. Friend for giving way and for his great speech. We are constituency neighbours and he knows that it is not just wine merchants that will be affected but thousands of wine businesses across the UK. We have a strong and flourishing wine sector, but this regime has failed to meet one of the original key objectives that the Treasury sought to establish, which was to make the system easier to administer. Instead, unit labelling and ABV is putting a burden on producers and merchants, which means that they face pricing and cost implications. Does my hon. Friend agree that this is increasing red tape at a time when the Government should be doing much more to reduce it and ease the costs and the burdens of regulation for businesses?

[Will Quince]

My right hon. Friend and constituency neighbour is absolutely right to raise that issue, and she has long championed cutting the red tape and bureaucracy that British businesses face. As my right hon. Friend the Member for Stevenage (Stephen McPartland) said, this unintended consequence means that business faces not just extra cost but the significant administrative burden that comes with cost and time. My right hon. Friend the Member for Witham (Priti Patel) is right to point out that the new system is not simpler or fairer and that it has a huge cost implication.

Coastal Tourism and Hospitality: Fiscal Support

Priti Patel Excerpts

Thursday 22nd February 2024 Westminster Hall

[Selaine Saxby]

I thank my hon. Friend and neighbour for his contribution; it is as if we both speak to the same group! I agree entirely with his contribution, as I so often do. I am very keen that Devon hospitality businesses, right the way across and down the peninsula, can benefit, and that the Minister will hear our asks.

We cannot underestimate the pandemic’s impact on businesses. The hospitality sector came out of covid-19 heavily indebted. I hope that the financial sector can look at what more can be done to support hospitality businesses to repay their debts, which currently stand at £8 billion in bank debt and £2 billion in landlord debt. The pandemic harmed hospitality businesses and made their recovery much more difficult.

Although I warmly welcome the small business rate relief that was introduced in the autumn statement, which provided some support, up to two thirds of hospitality businesses find themselves excluded—not due to generating immense profits, but because they operate in larger premises in high-footfall areas. Consequently, the impending 6.7% rise in business rates and skyrocketing wage costs present a daunting prospect for the survival of many businesses.

While I applaud the Government’s commitment to creating a higher-wage economy, it is crucial to acknowledge the unique challenges faced by hospitality businesses, especially those based in coastal areas like my North Devon constituency, which are often small in scale, seasonal and working to tight margins. These businesses anticipate a 17% increase in staffing costs from April, with 98% of them expressing concern about how to manage the impact of the upcoming national living wage hike. Many of the businesses that should have benefited the most from the small business rate relief actually face wage rises in the hospitality sector that far exceed the business rate relief itself.

We are already seeing hospitality businesses contracting their hours and reducing the number of staff they employ or the hours that they work. Far too many of our pubs are now open at weekends only or cannot find chefs, so have some nights without food service, which reduces their profitability even further.

Although the national living wage hike was warmly welcomed by the hard-working teams who work across our hospitality businesses, it is a headache for business owners, who themselves frequently earn significantly less than the national living wage, due to the extensive hours they work and a reliance on their businesses’ ever- declining profitability to pay their wage. Far too many of our hospitality businesses face a crunch this April. Too many of the sums that we do up here rely on a 35-hour working week. Hospitality is a 24/7 business, and in remote coastal areas with low unemployment, such as my North Devon constituency, many members of staff are also much younger. The increase in the national living wage will hit those businesses particularly hard.

One key ask today is for a cut in the lower rate of employer national insurance contributions to 10% and consideration of increasing the threshold in order to share the burden of this policy between business and Government, but the biggest ask from my hospitality businesses across North Devon—I had the pleasure of chatting to many landlords in some of the fabulous pubs back home during the recess—is because their VAT burden is too high. In the hospitality sector, VAT is significantly higher than it is elsewhere in Europe, putting us at a competitive disadvantage. During covid, we saw huge success from the reduction in VAT for the hospitality sector. In that time, 70% of hospitality businesses benefiting from the VAT cut passed it on to consumers, in order to keep prices low. A hugely successful local pub shared its figures with me. With a turnover of just over £1 million, it is paying 25% in tax just in VAT and employment taxes. That is a quarter of a million pounds going to the Exchequer before payment of bills and wages, and payments to suppliers, are even considered.

Last year, we lost 3,000 hospitality venues in the UK, and I am concerned that if the Government do not take further action to share the burden of this tax cost, we may lose even more this year. Unfortunately, there is one recent case in my North Devon constituency; Broomhill Estate is closing due to VAT costs. I thank Alex Kleiner for all his work and for letting me know how much of an impact a reduction in VAT from 20% to 15% would have made to his business. I heard directly from Alex, a business owner, that there would have been three benefits: a reduction in absolute VAT; an impact on cashflow; and an uplift in footfall because of more attractive pricing, although that is harder to quantify. He said in

“4 out of the past 7 quarters 5% VAT reduction would have completely offset my electricity bill.”

Unfortunately, in this instance any changes to VAT will come too late for such an important landmark in North Devon.

Although I know that it is a big ask, I hope that the Treasury might again consider a reduction in the VAT rate for the hospitality and tourism sectors—to 12.5%—as that would help them to overcome the above inflation increases in tax and the national living wage, avoid further inflationary price spikes and unlock investment. The measure aligns with international standards, stimulating tourism and offering domestic tourists a more affordable alternative to travelling abroad. I am confident that not every publican and hotelier is wrong in telling me that this is the one measure that would help them the most. A cut—even a temporary one—would be a boost.

For so many coastal communities, their tourism industry has changed since the hotels were built in the Victorian era. Many have large properties that may not benefit from all-year-round occupation, particularly in those communities where swathes of the tourist attractions, shops and restaurants have closed for the winter because of the VAT threshold issue. Hospitality businesses rely on space to host people and therefore have larger premises in high-footfall areas. Businesses in the industry will often hit the upper rateable value band at a far lower turnover or profitability than others. The hospitality sector pays 2.5% of turnover on business rates, which is 10 times that of banks and insurers. I hope the Treasury is looking at the introduction of a cap on the increase in the large property business rates multiplier at 3% in England, aligning with the expected inflation rate in April. Additionally, I hope the devolved Administrations in Scotland and Wales pass on the benefits of that relief in full.

[Priti Patel (Witham) (Con)]

I thank my hon. Friend, first, for securing the debate and secondly, for her compelling fiscal case for the reforms that, frankly, are essential. We have been here in recent weeks talking about the same thing. In addition to fiscal measures, does my hon. Friend agree that we need supply-side reforms for coastal communities? Many of our constituents in coastal communities feel isolated. She has spoken about labour market shortages. We need to make sure that we have public services, NHS doctors, education, employment and banking facilities in those communities that serve their purpose, make those places healthy and help them to thrive, therefore increasing the footfall for the hospitality trade as well as the employment market for hospitality.

[Selaine Saxby]

I could not agree more with my right hon. Friend that there are many asks for our coastal communities; I have spared the Minister the rest of mine this afternoon. While I am here, however, it would be remiss of me not to mention alcohol duty. The freeze on that duty at the autumn statement was welcome, but it does not directly help our much-loved pubs, which have reported significant price increases from brewers and other producers despite the freeze. A reduction in VAT would leave the choice to pass on and/or reinvest in the hands of the retailer and not with the multinational brewery in the case of alcohol. I have continuously supported the Campaign for Real Ale’s campaign, as it would play a crucial role in stopping our many vibrant pubs and hospitality businesses going under. Whatever the scheme, a reduction bringing us in line with the clear majority of our European neighbours—permanently or even temporarily—would be a lifeline for our hospitality venues.

While talking about great pubs, I will take the opportunity to highlight The Bell Inn at Chittlehampton, as well as Chittlehampton Village Shop, which serves excellent tea and cake; both are finalists in the Countryside Alliance awards, and voting is now open for anyone who would like to help them along.

The potential of the hospitality sector to contribute to economic growth cannot be overstated. UKHospitality’s economic evidence submitted to the Treasury outlines the conditions required for growth, estimating the creation of 500,000 new jobs by 2029 and an annual growth rate of up to 6%. I hope the Treasury will carefully examine the evidence and arguments presented, recognising the immense potential that the hospitality and tourism sector holds for the UK. By supporting the sector, we not only ensure the prosperity of businesses but contribute to increased tax revenues that fund essential public services.

I am hugely reassured to see the Financial Secretary to the Treasury, my hon. Friend the Member for Mid Worcestershire here today, as he has been to see us and understands so much more about our tourism and hospitality sector, particularly in remote coastal locations such as my beautiful North Devon constituency. I hope that may influence some of those critical Budget decisions.

Hospitality Sector: Fiscal Support

Priti Patel Excerpts

Wednesday 31st January 2024 Westminster Hall

[Priti Patel (Witham) (Con)]

It is a pleasure to serve under your chairmanship, Ms Bardell. I congratulate the hon. Member for Stirling (Alyn Smith) on securing a very important debate.

The tourism and hospitality sector in Essex is valued at just over £3.5 billion, and supports over 60,000 jobs. In the debate thus far, we have heard about the enormous contribution made by the sector across the United Kingdom. With the spring Budget approaching, it would be remiss of me not to make my representations to the Minister and His Majesty’s Treasury; I want to press the Treasury, and outline why further fiscal measures are needed in support of the hospitality sector and wider areas.

Across Essex, but specifically in my constituency, there is a strong case for lowering the tax burden on hospitality. We have already heard that is also the case for other parts of the country. We all have fantastic businesses in our constituencies; mine specifically has Colchester Zoo, the Langford Museum of Power, the Tiptree Tea Rooms—which most colleagues will know about—and many other venues, including a lot of hospitality and wedding venues, which did receive support from the Government throughout the pandemic. I pay tribute to those businesses because they have not only been resilient during the pandemic, but learned to adapt so that they can continue to grow and diversify.

Leisure businesses and attractions clearly suffer from volatility in the economy, and it is important that we do everything possible to support them, hence my modest call—and the collective modest call—for changes to the tax regime that we know would make the difference between businesses closing and surviving.

But although this is about surviving, it is also about thriving and growing; we already know about the impact on retail in our town centres and we have seen pressures in our local communities, but we need the sector to be vibrant and thriving. Central to that—and I make no apology to the Minister for saying that this is what we need—is a better labour market strategy. We have heard about labour shortages throughout this debate. I have been consistent, in my time not just in Parliament but in Government, in saying that I do not think it is right to associate or link our trade deals with automatic visas and some of the schemes proposed; I think we should have a better labour market strategy. We have to invest in the sector, grow the talent and pay people properly. We have a real epidemic of low wages in hospitality, and that is simply not good enough.

I would welcome the Government considering the whole issue of business rates, and I have also made representations on this previously. The freeze in the small business rates multiplier has been welcome, and I think it is vital, but we need a strategic, longer-term approach so that businesses can plan ahead, invest in the bricks and mortar of the properties they buy or lease, and look at how they can grow. With that, the 75% rates relief is welcome, but when reliefs of that size are removed, it clearly places seismic pressures on cashflows. We have to look at the sector from a basic day-to-day perspective and think about what this means for cash flows. Hospitality businesses operate with very tight margins, and they are having to absorb so many costs that they automatically pass on to their customers. I know that the Minister and the Treasury have heard me speak about this issue before, but we really need to look at it.

The case for reducing VAT has been made very clearly and I support it; we have seen so many issues around VAT levels, and their impact on hospitality and tourism. I absolutely support the case made by the hon. Member for Westmorland and Lonsdale (Tim Farron) for reducing VAT on shopping and tourism; there is really big argument for that. VAT is complex and we need to do much more to simplify our tax system, as the Minister has heard me say many times. We need a tax system that supports tourism and hospitality.

I am a great believer in encouraging overseas visitors to our amazing country—more so than perhaps other countries in the world. In Essex, we are always open for business, and one of our prized assets is of course Stansted airport. I praise its 24% growth in passenger numbers last year to nearly 28 million. It has massive and exciting expansion plans—I have also always supported expansion at Heathrow airport—and should be commended for supporting employment and apprenticeships. We need our airports to attract more tourism not just to Essex but to Britain; this is about the health and wellbeing of our country. I am therefore making the case to the Minister and pressing the Government yet again to re-examine their approach to tax-free shopping for overseas visitors, and to duty free at arrivals and air passenger duty—there is a long-standing argument in that regard. The case for tax-free shopping has been made many times in this Chamber and the main Chamber, and it will bring in huge dividends.

It is important to reflect, with the spring Budget coming up—that is why we are having this debate and everyone is making representations. I genuinely believe in making changes, as they could result in another £4 billion into our economy on the shopping side of things, but the principle of cutting tax and reducing the tax burden is also one of the most effective ways in which we can grow and support the hospitality sector, and that means more growth and more sustainability.

I urge the Minister and the Chancellor to take the maximalist approach—using the fiscal levers at their disposal to really support these businesses across all constituencies of the United Kingdom. They are the backbone of our economy and many of our communities, so of course we want them to thrive and grow.

[Hannah Bardell (in the Chair)]

We now come to Front-Bench speakers, who have around 10 minutes each, which should allow the sponsoring Member to sum up at the end.

--- Later in debate ---

[Priti Patel]

The Minister mentioned UKHospitality and Kate Nicholls and the way they have come together. Clearly, there are problems with labour markets in the hospitality sector, and there have been for many years—it is not a new phenomenon. What are the barriers to UKHospitality and the Treasury working together to create a labour market strategy for the hospitality sector?

[Nigel Huddleston]

Again, these are ongoing conversations across multiple Government Departments. In my former capacity as tourism Minister, I certainly had extensive conversations. There were sub-working groups at UKHospitality identifying areas for further work. That has had some impact, including through apprenticeship schemes. My right hon. Friend was absolutely right to highlight this issue. We have debated Brexit, which probably goes slightly beyond the current remit, although I understand the impact—and, by the way, the opportunities that come from that. My right hon. Friend is right that we need to focus on the domestic skills agenda. The hospitality and leisure sector contributes to one in five new jobs, so it is absolutely pivotal to that.

If hon. Members will forgive me, I will try to get through some of my speech—and not try your patience too much, Ms Bardell—because I am not even on page 1 yet.

Draft Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2023

Priti Patel Excerpts

Wednesday 24th January 2024 General Committees

[Nigel Huddleston]

My hon. Friend has embarrassed me, because he just summarised my eight pages of notes in one paragraph. He is absolutely correct. If we do not do this, hundreds of thousands of businesses across the country—those with a rateable value of between £15,000 and £51,000—would effectively have to pay far higher rates than they otherwise would, and that is the core purpose of the discussion today. I should probably sit down there, but I will carry on just a little bit for the edification of others who probably do not get the principles as keenly, enthusiastically and quickly as my hon. Friend.

The secondary purpose of the regulations is to extend the scope of the small business multiplier to include unoccupied properties, charities and properties on the central list—which I will explain in a moment—with a rateable value below £51,000 and which do not currently receive full rates relief. This will level the playing field for all types of properties, promoting consistency in the system; in other words, it is a simplification. Those properties that move to the small business multiplier for the first time will also receive a tax cut worth around £5 million in total per year.

Hon. Members may appreciate a very brief reminder of the business rates multiplier and what it is. The multiplier is the tax rate used to calculate business rates. The relevant multiplier is multiplied by the yearly rental value of a property, known as rateable value, to calculate its business rates bill before any reliefs are applied. As I have mentioned, there are two multipliers in operation—the small business multiplier and the standard multiplier. The legislative default is for both multipliers to rise by consumer price index inflation each year, but the Government took action at autumn statement 2023 to freeze the small business multiplier for the fourth consecutive year, protecting over 1 million ratepayers from an increase in bills.

The regulations must be made as a result of the passing of the Non-Domestic Rating Act 2023 in October.

[Priti Patel (Witham) (Con)]

Would my hon. Friend acknowledge that these regulations, and the overarching principle on business rates that he is leading, are helping to secure more jobs in our communities, particularly in constituencies like Witham, where small and medium-sized businesses are at the forefront, with a presence on the high streets, recruiting and employing people? That is, of course, vital to our economic health and wellbeing.

[Nigel Huddleston]

I thank my right hon. Friend for her comments. I know, and have experienced in many debates, what a champion she has been for small businesses, including in her constituency. She is absolutely right: we want to ensure that the tax level is appropriate but not overly burdensome. Some reliefs that we have given in retail, hospitality and leisure over the past years have been precisely to ensure that such businesses can operate on a level playing field, operate efficiently, and create jobs, economic activity and the all-important tax revenues that we need for a sustainable economy. At the heart of the matter is business success and jobs—my right hon. Friend is absolutely right—and that is what this Government are laser-focused on delivering.

The Non-Domestic Rating Act implemented important reforms to the business rates system, which were announced following the 2020 business rates review. The headline measure of the Act was more frequent revaluations. It also introduced a new improvement relief for those who raise the value of their properties through qualifying improvements and several other measures. Most relevant to this debate, the Act made a series of changes to the administration of the business rates multiplier to streamline and improve the system. One such change granted the Government the power to set the threshold for which properties pay which multiplier in secondary legislation; and as these new reforms will come into force from the 2024-25 financial year, the Government must bring forward these regulations in order to maintain the threshold for which properties pay which multiplier at its existing level: £51,000 rateable value.

If the regulations were not passed, the small business multiplier would instead only apply to businesses in receipt of small business rates relief, which would constitute a tax hike for hundreds of thousands of businesses whose properties have a rateable value of between £15,000 and £51,000—exactly the point made by my hon. Friend the Member for Torbay.

The regulations also widen the eligibility for the small business multiplier, including unoccupied properties, charities and central list properties within its scope for the first time. That brings those properties in line with occupied properties, maintaining consistency across the entire system. The proposal to bring unoccupied properties and charities within the small business multiplier was initially made in the technical consultation following the business rates review, and the Government committed to the change in the summary of responses to that document in March 2023. To promote consistency, we have decided to bring properties on the central list—the centrally managed list of properties that span multiple local authorities areas, including, for example, utilities pipelines—within the scope of the small business multiplier. There are a relatively small number of such properties, but we believe this point of consistency is important.

What this instrument does therefore is very simple: the regulations continue and extend Government policy, setting the threshold for which all property types pay the small business rates multiplier at below £51,000, unless they are subject to full relief. Properties of £51,000 or above will be subject to the standard multiplier. In short, the regulations will largely maintain the status quo for the vast majority of ratepayers. The £51,000 threshold will remain where it has been for the past six years. The regulations will ensure continuity under the legislative reforms made by the Non-Domestic Rating Act 2023, and I therefore commend them to the Committee.

Finance Bill

Priti Patel Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[Priti Patel (Witham) (Con)]

I praise and congratulate my right hon. Friend the Chancellor of the Exchequer on bringing forward the Bill. As we have previously discussed, it will implement the important measures set out in the autumn statement.

We have already debated some of the key measures that were included in the National Insurance Contributions (Reduction in Rates) Bill, which was considered in the other place yesterday. I do not want to go over the arguments on fiscal drag and lower taxes, as I have set out my views previously, but I commend the Government for bringing forward those measures quickly and in the right way, as they will go some way to easing the tax pressures the public are feeling.

My right hon. Friends on the Front Bench are well versed in my views on the tax burden, so I will not go on about how about I feel about that or measures we can bring in going forward. However, I would like to press them to ensure that we think about long-term provisions and that the next Finance Bill goes further by raising thresholds for income tax, including for higher-rate taxpayers, and for national insurance.

It is worth noting that in the Budget after the general election of summer 2015, the then Chancellor outlined plans to increase the tax-free threshold to the equivalent of 30 hours’ pay at the national living wage. The new £11.44 national living wage rate for 2024 commences in April, so if the tax-free threshold rose to cover 30 hours per week next year, that would equate to £17,000 to £18,000, rather than remaining at £12,570 through to 2028, as currently planned. I press my right hon. Friends to keep that under review—thankfully, all tax measures are under review—and to prioritise uplifts to those thresholds, because we believe in enabling people to keep more of their earnings.

At the same time, when we see GDP figures not growing as fast as they could, as we have today, it is important to focus on how we can grow the economy much more, and with that people’s incomes. We want to see more growth in those GDP figures, but they represent the impact of high interest rates and what they mean for inflation. High interest and inflation have placed a burden on businesses and households. The Bill outlines reductions in business taxation that are well timed and well placed but, as ever, they need to be kept under review. Businesses grow the economy by employing more people, which helps economic growth, and that is the space where we, as a Government and a country, want to be.

It will not surprise my right hon. Friends on the Front Bench that I wish to speak to certain clauses, as I have spoken about clauses on business taxes in the past. I want to focus on the provisions in clause 21 and schedule 12 of the Bill, on pillar two and the global minimum corporation tax measures that we are adopting. I have been on record about this previously, but the Minister is also well aware of my long-standing concerns over the implementation of pillar two measures. Binding ourselves to pillar two undermines our fiscal sovereignty and risks deterring investment into our country. I labour this point because we have just seen the publication of our GDP growth forecasts. Obviously there will be revisions in our growth forecasts, even by financial institutions, and we should be mindful of that, but this measure undermines our competitiveness. It is known that some 130 countries have signed up to pillar two, but, unlike the UK, barely a quarter of them are implementing it at the end of the year. Given our economic backdrop and GDP forecasts, I would rather see a delay in the implementation of this measure.

A written parliamentary answer earlier this month shows that just 30 countries are implementing this measure at the same time as we are. They will be followed by Japan in April, and then Guernsey, the Isle of Man, Jersey, Hong Kong and Singapore from January 2025. We also know that the US, our big economic ally, is not likely to implement the measure, so by pressing ahead with this fiscal measure, we are basically limiting the scope that we give ourselves—oxygen, basically—to develop and grow.

When the Finance (No. 2) Act 2023 went through Parliament last year, it contained more than 150 clauses, which were spread over two parts, with a further five schedules, covering 170 pages in total. Many of us remember carrying those weighty tomes into the Chamber and flicking through all the pages. There was a large and complex change in tax laws. But despite that legislation being passed in the summer, this Bill makes even further changes to pillar two and the domestic top-up levels. Clause 21 and schedule 12, which cover those changes, span 55 pages and include multiple amendments to the Finance (No. 2) Act passed only a few months ago. I recall saying that the amendments alone would generate more complexity to the system. I say politely to those on the Front Bench that the 55 pages here point to the complex nature of the matter. The fact that we are amending something that went through the House not that long ago says it all.

No impact assessment has been provided of these measures, which give effect to the accounting periods beginning on or after 31 December 2023. Companies and partnerships will be impacted by the changes coming into effect in less than three weeks’ time, even though the Bill will not receive Royal Assent until next year. We must be cognisant of the burdens that we are again putting on businesses. I am no fan of accountants, but by putting more burdens on to businesses, we are increasing their dependency on accountants and on process, which we should be freeing them from. I ask the Minister to provide us with further details as to why these changes are needed when the previous Finance Act was passed only earlier this year, and with an impact assessment of them.

I would like to understand the merits of the global minimum income tax, and I hope that, in the same way that all tax is under review, Ministers will consider removing all the provisions from our statute book in due course, because other countries will not follow suit or are delaying implementing some of these measures.

I wish to comment on clause 2, relating to research and development tax credits. It merges the current R&D expenditure credit with the small and medium-sized enterprises scheme. These tax credits help and support businesses to invest and take risks, and, importantly, to innovate and grow, set up jobs and employ people. I have previously raised the concerns that some businesses have about the complexity of claiming them and the processes that they experience. I am aware of many businesses that have spent more than a year having their claims investigated, with multiple rounds of questions and inquiries from HMRC officials. There are many live cases, which I will not reflect on now, but previous Treasury Ministers have committed to hold discussions on them.

[Sir Gavin Williamson (South Staffordshire) (Con)]

I thank my right hon. Friend for giving way. In Staffordshire, which is a manufacturing powerhouse, R&D tax credits are vital in driving productivity in manufacturing businesses. Does she agree that it would be good to hear those on the Front Bench make a commitment to reviewing and slimming down that scheme, so that it actually gets those small businesses embracing it and getting the investment that we need?

[Priti Patel]

My right hon. Friend is spot on. The scheme was set up for a very good reason, which is, effectively, to support entrepreneurism and innovation and to grow businesses. Now we are seeing those businesses saddled with bureaucracy and burdens. What is worrying is the number of small businesses that have been under investigation by HMRC for over a year, as that is now having a detrimental impact on their performance. As a representative not just of Witham, but of Essex as a whole, I can see businesses that have now come together to make wider representations to HMRC and the Treasury about that. I hope that those on the Front Bench will learn from some of these experiences and look at how we can evolve and adapt the process, so that the scheme can revert back to its original premise of supporting businesses. As I have said many times, the only way is Essex. Essex is a county of entrepreneurs and they are the ones who are feeling the pressures.

In his summing up, will the Minister outline the operational aspect of these changes? In particular, what interactions is he having with HMRC about some of the cases that have been under investigation for more than a year, and the impact that that is having on those smaller businesses? At the end of the day, they are SMEs that are not able to grow their businesses because of these inquiries and investigations. Naturally, that has an impact on the profits that they can then reinvest in their businesses.

I also wish to make a few comments on air passenger duty and the provisions in clause 24. Many of us in this House have spoken about air passenger duty for many years. I have been a long-standing campaigner for reform of this tax to encourage and support economic growth. It is ironic that we are having this debate on a day when the GDP figures have come out as they have. I believe in globalisation—in the sense of more global competition—and in our being more open to the world when it comes to those global dynamic markets.

We should also make travel more competitive and affordable for families, especially as they are struggling with the impact of the cost of living. Reforms that have taken place under previous Conservative Chancellors have been welcome. I query the small increase in the APD rates for 2024-25 in the Bill. Back in the summer, in his speech on net zero, the Prime Minister pledged to scrap plans for new taxes on flying, but the Bill provides for an increase in APD rates, ranging from 50p to £6 per flight. Although they are small increases, they are still increases. They are lower than the rate of inflation planned for and assumed in previous Government statements and OBR forecasts, which is to be welcomed. Therefore, any clarification on what is happening with APD going forward is welcome. Again, that is important for certainty and also for forecast purposes.

On the subject of air travel, I am disappointed that the autumn statement and this Finance Bill do not contain reforms to end the so-called tourism tax. I was one of the few Members to speak on that during the Humble Address debate. If we look at London, our great city, we can see that, at this time of the year, it is a magnet for tourism and for people coming from overseas. It is great for our businesses, great for our country and great for our brands—our British brands and our small brands. Our tourism sector and shopping and retail businesses are losing out to their European competitors as a result of the removal of the VAT refund and the VAT-free shopping and arrangements that had previously been in place. I think that we can reintroduce those measures. In the last debate, those on the Front Bench committed to looking at dynamic modelling in this area, and some external reviews of the potential revenue base. It would be a boost for business and jobs, and we should be looking at all measures to boost economic growth and competition. There are plenty of reports and studies out there. I do not want to labour the point; I know that those on the Front Bench will be aware of them.

It is winter, and we are heading towards a spring fiscal statement. Since 2010, the Government have consistently kept fuel duty down, cutting and freezing rates. This is an opportune moment to remind the public what the Government have achieved on that alone, because it is very important. Families, businesses and households depend upon it, and I very much hope that we will continue to stand up for the measures that we have put in place historically. I urge the Government to commit to maintaining the 5p reduction, and perhaps even to go further where there is fiscal headroom. Finding fiscal headroom is difficult, but sometimes—I say this as a former Treasury Minister—it can be found when we really look for it.

As the Bill passes through the House and is subject to further scrutiny, I know that my colleagues on the Front Bench and the Chancellor of the Exchequer, who is dedicated to dealing with the difficult fiscal challenges that we face, will be focused on unleashing future growth by reducing taxes and, importantly, empowering the very businesses that employ people and keep people in their jobs for long-term economic security.

National Insurance Contributions (Reduction in Rates) Bill

Priti Patel Excerpts

2nd reading
Thursday 30th November 2023 Commons Chamber

[Priti Patel (Witham) (Con)]

I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on his remarks. He provided a lot of sensible context for this debate and I will address some of his helpful points shortly.

It is very unusual to talk about fiscal matters, or fiscal legislation, to an almost empty Chamber. It is unheard of during my time in Parliament. As my hon. Friend will know, back in 2010, after the financial crisis, when we had to consider the long-term economic plan to build back our economy and to restore fiscal competence, there were many long, heated debates, and rightly so, in which proper scrutiny was given not just to Bills and legislation but to an exposition on the state we were in and how we needed to get ourselves back on to an even keel by growing the economy through Conservative policies.

That brings me to today’s theme. Conservative policies have, over the last decade, helped to restructure the economy, rebuild our country and create jobs and economic growth. They have made us stand tall in the world once again. I remember, in 2010, 2011 and 2012, looking at our financial ratings with a degree of despair. Thank goodness we are no longer in that state, which I think we all welcome.

I welcome this Bill and thank the Treasury and, in particular, my right hon. Friend the Chancellor for bringing it forward. Any measure that brings down the tax burden should be welcomed, because it represents a positive and constructive step in the right direction for our constituents. Our constituents are taxpayers and, ultimately, they want to keep more of the money they earn, and they want to know that the Government are spending their money responsibly.

Reducing the class 1 primary rate from 12% to 10% will put money into people’s pockets from 6 January—the sooner, the better. I commend the Government for bringing forward this vital fiscal measure. I am disappointed that there are not more colleagues here to debate it, but that is just how Parliament is right now.

The £450 benefit to a worker on the average salary will make an important difference to households. My hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) put it succinctly when he spoke about what it means for households at this time of year and for domestic budgets and spending.

I am particularly pleased to see the elimination of the class 2 rate and the reduction of the class 4 rate, which will help the self-employed from the start of the new financial year. I never tire of coming to this Chamber to say that I represent a constituency and a county of entrepreneurs. We are self-starters. We are self-made people. We are very proud of the contribution that the people of Essex make to our country. They are net contributors to His Majesty’s Treasury, which is all the more reason why they should get a tax cut.

As a Government who believe in enterprise, economic growth and letting people stand on their own two feet, we should do everything possible to support the self-employed and sole traders. It is hard work being a sole trader and being self-employed. We know about the regulatory burdens and pressure that HMRC puts on sole traders and the self-employed in particular, but they are the backbone and the engine of our economy; they are the lifeblood that creates jobs.

Some 80% of my constituents are employed by small and medium-sized enterprises—that is 20 percentage points higher than the national average—and we want them to continue to thrive and grow, as is right and proper. They are the embodiment of the entrepreneurial spirit that our country needs to create growth. I sometimes feel that we do not always give them the voice they need. It is easy for the big companies that can lobby central Government Departments to get their voices and representations heard. We are here for our constituents as their MPs. Even at business questions this morning, Members spoke about three family-run businesses. That is who we should be supporting.

We have seen a reduction in the number of self-employed people from around 5 million just before the pandemic to just over 4 million this year. That is why I believe we must back them, support them and encourage their growth. We should hold out that ladder of opportunity. Where they need help and support, we should back them as a Government and as a country.

I always come to this House to give a shameless plug for family-run and self-employed businesses in my constituency. It is also important that we buy British and support local firms in our country and in our constituencies. It is important to remember that the self-employed contribute an estimated £278 billion to the economy, and the fiscal and supply measures will make it easier for them to trade.

The ability to do business, to trade and to set up a business are so important. Lower taxes will mean that more people want to give it a go and set up a business. They are the ones taking a risk, so they are the people we should back and support. If we want to be healthy, competitive and drive growth, these are the very people who innovate and invest in new technology and do things that are edgy and somewhat different, while providing vital services to so many of our constituents and being pioneers in certain sectors. That is why keeping taxes down should be at the core of our mission in government.

As we have already aligned the class 1 and class 4 thresholds, to match the tax-free threshold on income tax, we all welcome that the burden of national insurance contributions has been reduced for the self-employed. That is why I am disappointed that there are not more Opposition Members present.

[Dominic Raab (Esher and Walton) (Con)]

My right hon. Friend is making a brilliant speech. I totally agree with her on the NICs paid by employees and the self-employed. In Esher and Walton, the average employee will receive a tax cut of £589 a year, benefiting 50,000 people. She is right that we are here to give a voice to the ambitions and aspirations of local people in our constituencies. Aside from the Labour Benches being totally empty, there is not a single Liberal Democrat Member here. Is it not churlish that, at this particular time, they are not doing more to support people on low and middle incomes?

[Priti Patel]

My right hon. Friend is right about that; his observation is spot-on. He will recall that, as I said in my opening remarks, when we have been in this Chamber to discuss important fiscal and economic measures, it has more often than not been to a full House. It is appalling that when the Government are backing working people and doing the right thing for them by putting more money in their pockets, the Opposition are all hiding. They are failing to recognise something that their constituents will benefit from. The Opposition should be giving a positive voice and supporting it, because it means more jobs and growth in every constituency across the country. As parliamentarians, we should all welcome that.

[Rehman Chishti (Gillingham and Rainham) (Con)]

rose—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The hon. Gentleman was quite late in and did not hear the beginning of the right hon. Lady’s speech.

[Priti Patel]

Thank you, Madam Deputy Speaker.

As has been mentioned, the alignment with the tax-free threshold should also help with the future plans to simplify the tax system. We had a bit of a discussion on this last week, but it is important in today’s debate again to raise the prospect of simplifying the tax system—more should be done in that area—by merging income tax and national insurance together. That is why I am disappointed that more Opposition Members are not here to discuss it. Last week, we had a semi-healthy discussion about it. It is out of the scope of this Bill to table an amendment to bring those two taxes together, but I urge those on the Treasury Bench—I would also be happy to work with other colleagues on this—to consider taking that up in advance of the spring Budget. Much more can be done here. Such a move would simplify taxes for the entrepreneurs and self-employed even further. As we know, when we come to the end of the tax year they are constantly having to do all sorts of things to satisfy His Majesty’s Revenue and Customs.

In 2012, I asked the Treasury a written question on integrating those taxes, and the then Exchequer Secretary replied by stating:

“Since Budget 2011, the Government have engaged extensively with stakeholders to develop options for operational integration of Income Tax and National Insurance Contributions. As many stakeholders have recognised, this is a complex issue with potentially significant implications for employers’ payroll operations. The Government will provide an update on this work later in the autumn. As we have already made clear, this is a long-term reform on which the Government will proceed carefully.”

That was a long time ago—it was 11 years ago. Although this is a complex issue, I maintain that such a move would help to simplify the tax system. I know that the Treasury Committee has looked at this area, and my hon. Friend the Member for West Worcestershire (Harriett Baldwin) touched on it today. Such a move would help to make payroll much easier for businesses, and allow them to co-ordinate income and revenue in a much more straightforward way.

Although this next issue may not be directly within the Bill’s scope, it does relate to NICs. I would therefore like to take the opportunity to restate for Treasury Ministers the position on fiscal drag. The OBR forecasts show that a freezing of the NICs thresholds and the income tax thresholds will, relative to consumer prices index inflation, and after taking into account the tax cuts here, bring in an estimated £27 billion in the next fiscal year, 2024-25, with this rising to nearly £45 billion more for the Exchequer in 2028-29. The OBR is clear on that. Ministers know my views: as we go into spring next year, and as the economy grows and more revenues come in, I urge them to look at this area all over again.

This Bill is welcome. It is a positive step in the right direction, along with the entire autumn statement. I commend my colleagues for the work they have done on it. The speed at which the Government are acting to bring forward the benefits of the NI changes and get them into pay packets as early as possible is right; it is commendable and should be supported, as I hope it will be by all colleagues in the House. The Government must continue to look at further steps. We want more economic growth. We are pioneers when it comes to innovation and small business. We need to find other ways to lower taxes so that people can keep more of their earnings and, importantly, we ensure that our economy is match-fit for the future so that it continues to grow.

[Madam Deputy Speaker]

I call the shadow Minister.

Autumn Statement Resolutions

Priti Patel Excerpts

Wednesday 22nd November 2023 Commons Chamber

[Priti Patel (Witham) (Con)]

I am pleased to follow the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier). She has made some important points, some of which I will come on to shortly. I am grateful to my right hon. Friend the Chancellor of the Exchequer for his statement. As we go through the details of the announcements and the delights of the OBR forecast, there will be much discussion in the forthcoming debates. I always take the view that Budgets and fiscal events, some of which I have been part of in the past, need to address three crucial challenges: whether they support the economic freedom of our constituents; whether they empower businesses and enterprise to create economic growth, as it is the private sector, not the state, that grows the economy—I will come on to state spending shortly; and whether they manage the public finances in a sound and sustainable way.

I suspect that you, Mr Deputy Speaker, like me are old enough to remember the great Conservative Budgets from the 1980s delivered by Geoffrey Howe and Nigel Lawson—you do not need to agree with me on that right now. They set the benchmarks that any Chancellor, especially a Conservative one, should look to and follow to get the right balance of creating economic growth and sustaining the public finances in a suitable, sustainable and measured way. It should always be the mission of a Conservative Government to ensure that people can keep more of what they earn; it is right that the Chancellor used that statement a number of times and spoke about the fiscal measures he is introducing to ensure that that happens.

Of course, businesses and people spend their money far more effectively, efficiently and productively than the state, which is why low-tax economies are also naturally the fastest growing ones. A lower tax burden would mean more money in the pockets of our constituents to provide for themselves and their families. Having listened to speeches made by those on the Opposition Benches, it is fair to say that we would all agree that we want all our constituents to be well-off, financially and economically, for their families and their futures. A lower tax burden would also mean more money available to businesses to invest and expand. The Chancellor touched on some measures, and I shall do so shortly, on jobs and higher salaries. Naturally, this leads to more resources for economic growth. That is also why I fundamentally believe the Government should look to bring the levels of personal taxation down. The Chancellor mentioned that today, but I might suggest a few cheeky measures to say what more we can do on that, as more can be done.

Today’s autumn statement marks—these might actually be the words of the Chancellor—a major moment when the Government and the country change gear and focus on how to drive growth in the decade ahead with the a package of tax measures, while seeking to ensure that inflation continues to fall. That is absolutely right. There are different ways in which it can be achieved, and the Chancellor has outlined the ways in which he wants to make sure that it happens.

On the measures announced today, naturally I support cutting the main rate of national insurance contributions—the infamous NICs—from 12% to 10%. It was refreshing to not only address but go as far as abolish class 2 contributions for the self-employed. That will have implications and the devil is in the detail, as touched on by the hon. Member for Hackney South and Shoreditch, including issues of interoperability, such as how that will relate to and engage with the pensions system, technical measures and delivery. That is a fact of life. I do not want to be pointed, but HMRC and DWP use two different systems that are not always interoperable; I am a former DWP Minister and a former Treasury Minister, so I have seen that in action. I urge the Government to pay attention to the delivery of that measure, and I have no doubt that the Public Accounts Committee will be watching very closely as well.

On reducing the tax burden, my colleagues on the Treasury Bench will expect me to say that I maintain, fundamentally, that we can do more to freeze income tax levels. I know Treasury Ministers have heard me and indulged me on that subject before. Back in 2010, the measures around the tax-free threshold and increasing the higher rate threshold were a significant way to help families directly, in a sustainable way. I point to that example because it did not lead to a fall in inflation. Of course, the inflationary measures we see now—external measures, such as the war in Ukraine and energy prices—are different, but I will continue to lobby the Government relentlessly because I want to see a shift in tax-free and higher rate allowances.

That is important in the context set out by the OBR today, which states:

“Tax changes in this Autumn Statement reduce the tax burden by 0.7 per cent of GDP but it still rises in every year to a post-war high of 37.7 per cent of GDP by 2028-29. Income tax increases explain most of the increase in this forecast, rising from 10.2 per cent of GDP this year, to 11.3 per cent in 2028-29”.

Those increases are driven by, dare I say it, the threshold freezes in income tax rates and the nominal earnings growth that will come from that. The implications are self-evident: more of our constituents will pay more income tax, there is the infamous fiscal drag and more people will move into higher rate bands, so ultimately 400,000 more people will pay the additional rate.

[Dame Meg Hillier]

Does the right hon. Lady agree that will create a burden for those people who will then have to complete a tax return? In addition, there will be an impact on child benefit, so there is a double whammy once people hit the higher threshold, if they have children.

[Priti Patel]

The right hon. Lady is correct and makes an important point. I do not want to be boxing the ears of my hon. Friends on the Treasury Bench today, which is their day, but I sound like a broken record on this subject. I would go for complete streamlining and simplification of the tax system, even on NI, where I would like to see measures such as the merger of income tax and NI. I would love to see a simple system where we do not have the burdens of bureaucracy. Even when we spoke about full expensing in the Budget, the business and regulatory implications are pretty vast. The childcare measures are very good and encouraging, but from, a personal perspective, even more complexities are being introduced to the system and we, as Conservatives, could do much more to streamline that.

[Ian Blackford]

I encourage the right hon. Lady on what she said about the integration of tax and national insurance. Although such measures are not without their complications, they can be overcome, so perhaps there should be some work across the House to examine that issue. Let us make things simpler and more straightforward for all our taxpayers.

[Priti Patel]

We could have a separate debate on a single income tax and all sorts of other measures. I would like to see tax transparency as well. I am so old-fashioned that I think we should be able to follow every pound of Government expenditure, and that there should be far greater transparency for the public in that regard. I am sure that the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier) would support that, too, from her perspective as Chair of the Public Accounts Committee. I do not say these things lightly. In this modern day, when we have much greater digitalisation and access to information, our constituents naturally also want to see more transparency in that area, especially while the Government are investing in artificial intelligence and all sorts of other things, including bots. His Majesty’s Revenue and Customs could be run by bots before we know it, although on that basis alone we might get more efficient telephone conversations and call handling. None the less, more needs to be done, and we should welcome that.

I will move on to a couple of other measures, but just while we are on the subject of taxation and revenues, I wish to make a point about the savings that can be made from Government efficiencies. This matter has not been addressed today, but the Chancellor did touch on it. There is much more work that needs to be done in this area, although I appreciate that this is an autumn statement and not a full-fat Budget. For the spring in particular, this is one area where we can do much more in boosting state productivity. The Chancellor always mentions the P word—productivity—but in 2021-22, just as an illustration, the Government delivered £4.4 billion-worth of efficiency savings. In monetary terms, that was significant, but it represented just 0.4% of public expenditure —a drop in the ocean. For the benefit of our constituents, let me say that that is £1 for every £250 spent. Again, much more needs to be done in that area.

Let me continue on the theme of hard-pressed taxpayers. This was not mentioned today, but at previous fiscal events I have voiced support for the fuel price escalator. I believe that we should do much more to back our motorists and make sure that the 5p cut in fuel duty, which was introduced in 2022, is maintained. There is some important signalling that we can do as a Government to ensure that the UK’s 37 million drivers are not seen as a cash cow. We must back them and continue to remain on their side.

That brings me to business taxes. Our economy relies on private enterprise. I am an Essex MP, and Essex is the county of entrepreneurs. Some 80% of my constituents work for small and medium-sized enterprises, which is 20% higher than the national average. We are proud of those SMEs, but we really need them to keep their head above water. That is why we must always support businesses —small businesses as well as big businesses. It is the small businesses that are the engines of economic growth.

I am proud to represent a county where we have businesses that are hungry to innovate and invest, and I want the Government to free them from the shackles that hold them back. A lot of that is regulation and red tape; and there is far too much of that. I have previously called for a freeze of the small business rate multiplier, and I am pleased that the Chancellor has agreed. That in its own right will have some benefits. I know that it has been reinstated for another year, along with other retail and hospitality measures. Retail and hospitality are burgeoning and important sectors that can help to boost our struggling high streets.

I welcome the continuation of business support with full expensing, which I have touched on, but there should be greater clarity over how that will operate, what it will mean for businesses, and the burdens that it will place on the sector. Will firms have to employ an army of accountants who will eat into their business expenses? Reducing overall taxes on businesses is, of course, welcome. It will help firms to invest, to create jobs and to boost supply, which is incredibly important.

When I call on businesses to invest, that also means that we must do much more to get them to invest in skills. Skills and productivity are the biggest challenges that we face. I would, at some stage, like to press those on the Treasury Front Bench on why we are still not committing ourselves to a labour market strategy around some of the key sectors where we know we have shortages in skills growth. When it comes to specialist sectors, we want to be the hub for technology, innovation and science, so we need to consider what more we can do. We also need to consider the work that is required around the green economy. As a former Home Secretary, I can say that we rely far too heavily on migration to fulfil our labour market needs. For the past five years, even when in Government, I have consistently and continuously called for that to be addressed. It sits with the Treasury, not just the DWP, and I urge the Chancellor to make good on those calls. I have discussed it with him several times.

I want to speak about the importance of the energy sector. The Chancellor touched on connectivity to the national grid in today’s autumn statement. I am an Essex MP. Off the coast of the east of England, we have enormous potential when it comes to increasing our energy security, because we have been successful in producing renewable energy offshore. We are effectively a hub in the east of England, where we have had investment. Efforts to develop the sector and increase renewable energy are welcome, and we are proud of the work that has taken place, but we are now suffering from the lack of strategic planning.

Windfarms have received consent and been developed without serious thought being given to interoperability and connection to the network and to the grid. That has resulted in one of the most deeply unpopular policies from central Government, which is now affecting the whole of the east of England: the National Grid’s plan to cover the east of England countryside with over 100 miles of pylons and overhead power lines. Our constituents do not support that. I am fully aware of what the Winser review says, and of the prospect of support—financial bribes, as my constituents call it—for local residences, but we need to ensure that there is proper engagement.

We are putting forward alternatives to pylons, and offshore options that we want to work with the Government to develop. That would support our renewables sector, bringing further skills to our region and our country. Ultimately, we have to address the issue of local constituents feeling frustrated. They resent that this is being done to them, rather than it being their suggestions and some of the local investment being taken into consideration. There is a sense that decisions are being made in an opaque way and that their views are being ignored. I would welcome better dialogue and consultation from the Government on this.

The Chancellor touched on the fact that devolution deals are under way. This is a work in progress for us in Essex. I would very much like to engage with the Treasury and the Government on what a greater devolution deal would mean for our fantastic county, particularly when it comes to investment in skills and infrastructure. Devolution deals can promise the earth, but central Government have to deliver the goods, and it has to translate into a return on the investment locally. In Essex, we are net contributors to the Treasury, so we can apply the multiplier effect and work out where we are getting the benefits, and where we are not getting our return on the investment. We should have further discussions on that.

I welcome the direction of travel in the autumn statement. The Chancellor has opened the door to sound economic principles of lower taxes. I welcome the support for business, which is fundamental. I urge everyone on the Government Front Bench to continue to look at ways to lower taxes, including personal taxes. Times have been tough for the British public. We want to ensure that all our constituents are able to keep more of the money that they earn, and ultimately have a secure economic future.

Economic Growth

Priti Patel Excerpts

Tuesday 14th November 2023 Commons Chamber

[Priti Patel (Witham) (Con)]

It is a pleasure and an honour to contribute to the debate. I congratulate His Majesty on delivering the King’s Speech last week, following in the footsteps of his late, great mother and undertaking his constitutional duties to Parliament and our country. I also wish him a happy birthday today.

With the autumn statement just eight days away, it is clear that we need to see ambitious fiscal measures introduced to complement the economic growth provisions outlined in the King’s Speech. Tackling inflation has rightly been one of the Government’s priorities: we understand the corrosive effects of inflation on the economy, economic growth and households around the country. We need the rate to fall further, to manageable levels, but we must also increase supply through reforms and lower business costs to ultimately help bring down inflation.

There are many measures I would like to touch on in the time I have available. One, which I spoke about earlier this year, is the 5p reduction in fuel duty that the Chancellor maintained in the spring, which was incredibly welcome. Such measures are essential, as they can make a huge difference to households and businesses across the country. Against an inflationary backdrop—although we know it is decreasing—this matters because it helps to bring costs down across the whole economy and, importantly, can help businesses and motorists. I say that as an MP from Essex, where we are proud of white van man and where drivers come into London, in particular. Let us not forget that there are other pressures on motorists in London because of the additional burdens they now face, such as the ultra low emission zone.

Alongside that, there is the issue of business rates, which I often speak about. They are a fixed cost to businesses, but actually impede growth on our high streets. As we know, our high streets and town centres are struggling for many reasons. If addressed in a considered way by Government, a freeze in the business rates multiplier can help small businesses and firms to keep their costs down. I press the Government to maintain the freeze in the multiplier and look at reforms to lower the cost burden of business rates, which is having such a corrosive impact.

Some 80% of my constituents are employed by SMEs, which is 20% higher than the national average. We are very proud of that. Essex is an entrepreneurial county and we are risk takers. We like running our own businesses and being self-employed, but that means that the share of the burden on those smaller businesses is much higher. As Conservatives in government, we must always look to tackle that.

To return to my other favourite subject, the Government are aware of my concerns about the OECD plans for minimum levels of corporation tax and the way the Government are rolling them out. I fundamentally maintain the position I have taken on this issue, and the Chancellor of the Exchequer has given me assurances over the assessment and analysis that will be carried out of its impact. We touched on this during discussions about the Finance (No. 2) Act 2023, but those measures will make our country less competitive. They will have an overall impact on businesses, foreign direct investment and investment in our country, so I will want to press Ministers on the reviews of them going forward.

I also maintain my position on income tax. The tax system needs to be simplified and fairer, and we need to reduce the burdens on families and businesses, including levels of personal taxation. One of the core missions of the Conservative party is to support economic freedom and liberty by cutting taxes, ensuring people can keep more of what they earn and encouraging the development of a property-owning democracy, which has been a topic of discussion in the Chamber this afternoon.

Universally, we in this Chamber know we need reforms on planning and that we need to do more on social housing, as well as growing housing across the country in a sustainable and suitable way. People are struggling and the cost of owning property, or even getting a foot on the housing ladder, is astronomical, so we need to do more. I could go on to other statistics, but in the interest of time I will raise another couple of local issues.

In Essex, we are crying out for infrastructure investment. I will happily write business cases to the Treasury on dualling the A120 and expanding the A12. We have had a tremendously successful programme of investment on the great eastern main line because of a business case that went to the Treasury 12 years ago. We are proud of that, and that growth is now paying off.

I want to press the case on pylons and the Winser review. In Essex, we have concerns, which the Treasury must listen to, about the implications of the review. I support the wider measures on energy production and the introduction of the Offshore Petroleum Licensing Bill, but more needs to be done.

To conclude, I welcome the framework of measures, but we have to look at the detail on supporting supply-side reform, lowering taxes for businesses, making sure our economy grows in a sustainable way and dealing with the challenges of inflation, so that we ensure our economy grows for decades to come.

Oral Answers to Questions

Priti Patel Excerpts

Tuesday 14th November 2023 Commons Chamber

[Gareth Davies]

Fuel duty is a major cost for households and businesses. We recognise that. That is why in the spring Budget 2023, the Chancellor extended the 5p temporary duty cut. That was a £5 billion saving for motorists, worth £100 for the average motorist, but we always keep these things under review.

[Priti Patel (Witham) (Con)]

23. What steps he is taking to support economic growth in Essex.

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

As my right hon. Friend knows, the Government are committed to supporting economic growth all over the country, but particularly in the wonderful county of Essex. The recently announced £1.1 billion long-term plan for towns will, for example, provide £20 million of flexible funding over 10 years to Clacton, and there are many other measures.

[Priti Patel]

I welcome my hon. Friend to his new role. I hope that he will know not only that the only way is Essex, but that Essex is a net contributor to the Treasury. We want more economic growth in Essex. In a week’s time, we will have the autumn statement, so may I give a message to those on the Treasury Front Bench? May I appeal to the Chancellor in particular to look at lowering the rates of personal and business taxation, particularly the areas of business rates, corporation tax and all aspects to do with enabling people to keep more of the money they earn?

[Bim Afolami]

My right hon. Friend tempts me to make tax policy. What I will say to her is that she will know that the Chancellor always keeps these things under review, as do the Government. Indeed, we have a fiscal event shortly.