Finance (No. 2) Bill

Rosie Winterton Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[Grahame Morris (Easington) (Lab)]

Thank you for the chance to speak in this debate, Madam Deputy Speaker. I was quite taken by the Financial Secretary’s remarks setting out the three pillars of tax: making it fairer, making it simpler and encouraging growth. I want to focus on the failure of the Budget, and of this Bill, to address the flaws in the Government’s policy on levelling up that affect my constituency, because Easington has suffered and continues to suffer as a result of Government policy.

I am delighted that the Exchequer Secretary is on the Treasury Bench, because I want to touch on some barbed comments that he made to me and to my good friend, my hon. Friend the Member for Eltham (Clive Efford), in relation to allegations about wealth taxes, in a debate on the Budget. However, the main point that I am trying to make is about the failure of the levelling-up fund and of the Government to identify the resources needed to meet their primary objective of investing in and regenerating the poorest communities and most fragile economies in order to close the economic equality gap in the UK.

I also want to make a suggestion to Opposition Front Benchers: to develop a White Paper on investment and regeneration as part of our Budget strategy to be ready for the first days when we take office, as the Conservative party has been absolutely disastrous on supporting the poorest communities. In a previous speech, I highlighted some alternatives that the Government and my party might want to consider.

The Budget and the Finance Bill are all about political choices over tax. I am a great advocate, having looked into the matter in some detail, of a proportional property tax to replace council tax. It would be a tax cut for more than 75% of households—actually, in my constituency it would be for 100%—which would benefit from an average annual tax saving of £900. Regional economies would effectively receive a £6.5 billion economic stimulus annually, so that levelling up, rather than being a Government investment scheme, would be a feature of the tax system each and every year. It would streamline tax collection and make it more efficient, saving local authorities £400 million a year and meeting the Government’s stated aim of simplification.

In the little time I have, I want to mention the impact on Horden in my constituency. My constituents in the village of Horden were very much involved in the partnership developing the levelling-up bid. Horden is one of the poorest communities not just in east Durham or County Durham, but probably in the whole country. A great deal of time and effort went into developing the bid.

Many of the problems that Horden and my constituency face have been fashioned by Government policy. Does anyone remember the introduction of the bedroom tax? It had significant consequences for my community that we are still living through today. Accent Housing, a social landlord, cancelled a multimillion-pound decent home investment scheme in Horden, citing the collapse in demand caused by the introduction of the bedroom tax: many of its tenants were renting two-bedroom properties and were single people. The consequence was that Accent sold on the properties in a fire sale, so we have a plethora of private landlords.

Sometimes making the wrong policy decisions, particularly on tax, is worse than doing nothing. To my mind, and in the experience of many of us, the Government gimmick of making levelling up a funding competition wastes time, money and resources that could be better spent in the community. There is no way to calculate the cost and time that have been lost on consulting on and raising expectations for the failed bids, but I want to point out to the Exchequer Secretary that all five bids from County Durham were rejected. These are resources that we can ill afford to lose after 13 years of austerity, and cuts of more than a quarter of a billion pounds in Durham’s budget. My constituents are lobbying and protesting at County Hall—and, I should add, the council is now a Conservative-led coalition.

Things are very difficult, and my constituents, like me and like many other people across the country, have lost what little hope, faith and trust they may have had that a Conservative Government and Conservative policies could work in their interest, or indeed the national interest. As we have seen through their recent leaders, the Government are often more preoccupied with their own self-interest and short-term agendas. I am pleased to say that Labour is a Government in waiting, and only a general election away from restoring competent government.

I am seeking a commitment in relation to investment and regeneration. I do not want any gimmicks or games. Labour has set out our mission for government, which will guide policy and everything we do, and I therefore ask that we do not create games and competition on something as important as investment in our communities. Resources should be allocated to those in the greatest need, and I hope that the shadow Minister can confirm that instead of chaotic competition, Labour will produce a clear, targeted commitment with the purpose of closing the economic gaps and disparities and strengthening regional economies. I look forward to campaigning on such a manifesto.

Let me end by once again thanking my constituents from Hordern who are protesting and lobbying at County Hall and making their voices heard. I say to them that what this Government have done to our community is not fair or right, but together we will win, we will secure investment, and we will secure a Government who care and who represent the people.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

Finance (No. 2) Bill

Rosie Winterton Excerpts

Committee of the whole House
Tuesday 18th April 2023 Commons Chamber

[Dame Rosie Winterton in the Chair]

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

I remind Members that in Committee, Members should not address the Chair as “Deputy Speaker”. Please use our names when addressing the Chair. “Madam Chair”, “Chair”, “Madam Chairman” and “Mr Chairman” are also acceptable.

Clause 5

Charge and main rate for financial year 2024

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

[The First Deputy Chairman]

With this it will be convenient to consider the following:

Clauses 6 to 10 stand part.

Amendment 26, in schedule 1, page 280, line 32, leave out

“a requirement relating to the making of the claim”

and insert

“the requirement to make a claim notification pursuant to either section 104AA, section 1045A or 1054A of CTA 2009 (as appropriate) or failed to provide the additional information as required by paragraph 83EA”.

This amendment would make clear that the power to remove a claim for R&D relief from a corporation tax return is only available to HMRC where a company has failed to make a claim notification (required pursuant to Part 1 of this Schedule) or to submit the additional information (required pursuant to paragraph 13 of this Schedule).

Government amendment 14.

That schedule 1 be the First schedule to the Bill.

Clauses 11 to 15 stand part.

Clauses 121 to 125 stand part.

That schedule 14 be the Fourteenth schedule to the Bill.

Clauses 126 and 127 stand part.

That schedule 15 be the Fifteenth schedule to the Bill.

Clauses 128 to 173 stand part.

Government amendment 12.

Clauses 174 to 222 stand part.

Government amendment 13.

Clauses 223 to 260 stand part.

Government amendments 15 to 20.

That schedule 16 be the Sixteenth schedule to the Bill.

Clause 261 stand part.

That schedule 17 be the Seventeenth schedule to the Bill.

Clauses 262 to 275 stand part.

That schedule 18 be the Eighteenth schedule to the Bill.

Clauses 276 and 277 stand part.

New clause 1—Statement on efforts to support implementation of the Pillar 2 model rules—

‘(1) The Chancellor of the Exchequer must, within three months of this Act being passed, make a statement to the House of Commons on how actions taken by the UK Government since October 2021 in relation to the implementation of the Pillar 2 model rules relate to the provisions of Part 3 of this Act.

(2) The Chancellor of the Exchequer must provide updates to the statement at intervals after that statement has been made of—

(a) three months;

(b) six months; and

(c) nine months.

(3) The statement, and the updates to it, must include—

(a) details of efforts by the UK Government to encourage more countries to implement the Pillar 2 rules; and

(b) details of any discussions the UK Government has had with other countries about making the rules more effective.’

This new clause would require the Chancellor to report every three months for a year on the UK Government’s progress in working with other countries to extend and strengthen the global minimum corporate tax framework for large multinationals.

New clause 3—Review of business taxes—

‘(1) The Chancellor of the Exchequer must, within six months of this Act being passed—

(a) conduct a review of the business taxes, and

(b) lay before the House of Commons a report setting out recommendations arising from the review.

(2) The review must make recommendations on how to—

(a) use business taxes to encourage and increase the investment of profits and revenue;

(b) ensure businesses have more certainty about the taxes to which they are subject; and

(c) ensure that the system of capital allowances operates effectively to incentivise investment, including for small businesses.

(3) In this section, “the business taxes” includes any tax in respect of which this Act makes provision that is paid by a business, including in particular provisions made under sections 5 to 15 of this Act.’

This new clause would require the Chancellor to conduct a review of business taxes, and to make recommendations on how to increase certainty and investment, before the next Finance Bill is published.

New clause 6—Review of energy (oil and gas) profits levy allowances—

‘(1) The Chancellor of the Exchequer must, within three months of the passing of this Act—

(a) conduct a review of section 2(3) of the Energy (Oil and Gas) Profits Levy Act 2022, as introduced by subsection 12(2) of this Act, and

(b) lay before the House of Commons a report arising from the review.

(2) The review must include consideration of the implications for the public finances of the provisions in section 2(3)—

(a) were all the provisions in section (2)(3) to apply, and

(b) were the provisions in section 2(3)(b) not to apply.’

This new clause requires the Chancellor to review the investment allowances introduced as part of the energy profits levy, and to set out what would happen if the allowance for all expenditure, apart from that spent on de-carbonisation, were removed.

New clause 7—Review of effects of Act on SME R&D tax credit—

‘(1) The Chancellor of the Exchequer must lay before Parliament within six months of the passing of this Act a review of the impact of the measures contained in this Act on the rate of inflation and on small businesses.

(2) The review must compare the regime for SME R&D tax credits and associated reliefs before and after 1 April 2023, with regard to the following—

(a) the viability and competitiveness of UK technology startup and scale-up businesses,

(b) the number of jobs created and lost in the UK technology sector, and

(c) long-term UK economic growth.

(3) In this section, “technology startup” means a business trading for no more than three years; with an average headcount of staff of less than 50 during that three-year period; and which spends at least 15% of its costs on research and development activities.

(4) In this section, “technology scale-up” means a business that has achieved growth of 20% or more in either employment or turnover year on year for at least two years and has a minimum employee count of 10 at the start of the observation period; and spends at least 15% of its costs on research and development activities.’

This new clause would require the Government to produce an impact assessment of the effect of changes to SME R&D tax credits in this act on tech start-ups and scale-ups.

New clause 8—Relief for R&D expenditure on data and cloud computing: assessment—

‘Within six months of this Act coming into force, the Chancellor of the Exchequer must publish an assessment of—

(a) the overall costs,

(b) the overall benefits, and

(c) the net cost or benefit

of extending relief of R&D expenditure to profit-making cloud computing services.’

New clause 10—Assessment of the impact of the de-carbonisation allowance—

‘(1) The Chancellor of the Exchequer must, within six months of this Act coming into force, publish an assessment of—

(a) the financial cost of the de-carbonisation allowance to the Treasury,

(b) the impact of the de-carbonisation allowance on overall investment in UK upstream petroleum production, and

(c) the revenue that the energy (oil and gas) profits levy would yield if neither the de-carbonisation allowance nor the investment allowance had effect in respect of investment expenditure.

(2) The assessment must cover the whole period that the allowance is in effect and also assess the revenue in each tax year.

(3) The assessment must include an evaluation of the impact of the de-carbonisation allowance and the investment allowance on the United Kingdom’s ability to meet its climate commitments, including—

(a) the target for 2050 set out in section 1 of the Climate Change Act 2008,

(b) the duty under section 4 of the Climate Change Act 2008 to ensure that the net UK carbon account for a budgetary period does not exceed the carbon budget, and

(c) the commitment given by the government of the United Kingdom in the Glasgow Climate Pact to pursue policies to limit global warming to 1.5 degrees Celsius and phase out inefficient fossil fuel subsidies.’

This new clause would require the Government to produce an impact assessment of the de-carbonisation and investment allowances under the Energy Profits Levy, including on tax revenues and the UK’s ability to meet its climate targets.

--- Later in debate ---

[Victoria Atkins]

I hope I have understood my hon. Friend correctly. I am always loth to draw direct comparisons, particularly at the Dispatch Box, between the way in which the US conducts its tax affairs and the way we do so, as the systems are different. He has alighted upon the changes that the previous President made. The current President has also indicated that he wishes to make changes, albeit perhaps in a different direction. I hope my hon. Friend will appreciate my being cautious before giving an answer. I do not know whether he is referring to the corporate alternative minimum tax and the global intangible low-taxed income provisions. If I may, I will write to him on this, because it is incredibly technical and I want to ensure that I answer him accurately.

Having taken that final intervention, I am very conscious that although this is a large piece of legislation, colleagues are rightly scrutinising it. I shall sit down now so that they have a chance to have their say on it. I ask that clauses 5 to 15, and 121 to 277, and schedules 14 to 18 stand part of the Bill.

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

I call the shadow Minister.

[James Murray (Ealing North) (Lab/Co-op)]

Thank you, Dame Rosie, for the opportunity to respond on behalf of the Opposition. I would like to speak to the amendments and new clauses in my name and that of my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare).

When we debated this Bill’s Second Reading at end of last month, we made it clear that what we needed was a plan to get us out of what the previous Chancellor rightly called a “vicious cycle of stagnation”. We need a plan for growth—a plan to raise the living standards of everyone in every part of the country—but this Government have failed to offer us one. That much was clear from the data published alongside the Budget, which showed that ours is the only G7 economy forecast to shrink this year and that our long-term growth forecasts were downgraded in the Office for Budget Responsibility report.

Since we last debated this Bill, further data has been published confirming our fears. Earlier this month, a report from the International Monetary Fund put the UK’s growth prospects this year at the bottom of those of the G20 biggest economies—a group that includes sanctions-hit Russia. After 13 years of economic failure, people and businesses across the UK deserve so much better than that. They deserve a plan for the economy that offers more than managed decline. So today, we begin by looking at some of the measures the Government are seeking to introduce in this Bill and explaining why their approach is letting Britain down.

First, let me speak to clauses 5 to 15, which address the rate of corporation tax, capital allowances and other reliefs relating to businesses. On those, one thing prized above all else is the need for certainty and stability. Businesses across the country want stability, certainty and a long-term plan, yet under the Conservatives corporation tax has changed almost every year since 2010. Furthermore, as the Resolution Foundation has pointed out, the introduction of the latest temporary regime for corporation tax represents the fifth major change in just two years. It seems that the Conservatives are simply incapable of offering stability.

Let us start by looking at the main rate of corporation tax, which clause 5 sets at 25% for the financial year beginning in April 2024. The clause will mean that corporation tax will continue to be charged at the rate to which it rose at the start of this month. That rate, 25%, was first announced by the Prime Minister, when he was Chancellor, in his spring Budget 2021. One might think that sounds like a rare example of certainty, but, sadly, that is not the case. As we know, last September, the then Chancellor, the one who said our economy was trapped in a “vicious cycle of stagnation”, announced that the rise to 25% would be cancelled, leaving the rate at 19%. That was of course reversed just a month later, when the current Chancellor moved into No. 11, and confirmed that the rise to 25% was back on. So much for stability! But we are where we are, and if we are to assume that the current Chancellor’s plans will indeed go ahead—a bold assumption, I admit—the rise to 25% will now continue from April 2024.

With the rate of corporation tax being increased, it is particularly important to get capital allowances right. The Government should be focused on giving businesses certainty that will help them to plan and increase their investment in the UK economy. We need that certainty and greater investment—the UK currently has the lowest investment as a percentage of GDP in the G7—yet the approach in clause 7 is to introduce temporary full expensing for expenditure on plant and machinery for three years only. By making that change temporary, it only brings forward investment, rather than increasing its level overall. The Government’s own policy paper on this measure, published on the day of the Budget, makes that clear. It says:

“This measure will incentivise businesses to bring forward investment to benefit from the tax relief.”

As the Office for Budget Responsibility has made clear, the Government’s approach will mean that business investment between 2022 and 2028 is essentially unchanged as a result of these measures. If anything, there is a very slight fall. Britain deserves better than this. As Paul Johnson of the Institute for Fiscal Studies said in response to this temporary tweak to the tax regime for businesses:

“There’s no stability, no certainty, and no sense of a wider plan.”

That is why we have tabled new clause 3, which would require the Chancellor to follow Labour’s lead by developing a wider plan for business taxes, which we believe is needed. As my right hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chancellor has set out—

--- Later in debate ---

I have one plea for the Minister. She understands that this Finance Bill has such a significant section dedicated to international taxation—the OECD rate of taxation—so I urge her to reflect on the comments that I and many others have made, which very much come from industry. I and many colleagues wrote to the Chancellor before the Budget back in March with a range of concerns. We have not yet even had a response to that letter. I think it is important that we see proper, considered responses to all the concerns that we have raised—that is absolutely appropriate. Before jumping headlong into implementation without proper timescales, without thinking through the consequences of what the provisions mean and with other jurisdictions acting independently and changing their own legislative parameters, will the Minister come back to this House with significant answers to my questions?

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

I call the SNP spokesperson.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to take part in a Finance Bill Committee of the whole House. I will raise a number of points, particularly in relation to the new clauses and to what the Minister said about them.

The right hon. Member for Witham (Priti Patel) mentioned tax simplification. During later consideration of the Bill, we will raise questions about the removal of the Office for Tax Simplification, what has happened to the Government’s assessment of the benefit of that office, whether we will have an issue with removing that office, and whether there will be a cost to the public purse or to businesses as a result of.

We will support Opposition new clauses 1, 3 and 6. We would also support new clause 10 if it were pressed to a vote. I will talk a little about new clauses 6 and 10 on requests for transparency. It is incredibly important that we have transparency about how allowances, tax and everything else put in place by the Treasury—and, in fact, by every Government Department—work. The Red Book that is produced at Budget time gives us a genuine idea and expectation of how much any measure—be it an investment allowance, a new tax measure, or something else—is expected to generate, but the UK Government are not terribly good at putting in place post-implementation reviews of such tax measures.

We do not have enough transparency on whether the tax measures put in place have actually achieved what the Government intended. In fact, I tabled a written question on this some time ago, and various Government Departments were unable to tell me even how many post-implementation reviews they had carried out and whether there were any that they had not carried out. It seems to me pretty fundamental that the Government should fulfil their role of calculating the cost or benefit and saying whether the projection has seemed accurate. It is all well and good for the Government to say, “This is going to raise £100 million,” but if they do not then assess whether it did, how can we be sure that a measure had the desired effect, particularly when it is something such as an investment allowance? We are not saying, “We don’t think there should be allowances”; we are saying, “We want the allowances that are put in place to actually work in the way that they are intended to work.” I have concerns about that.

New clauses 6 and 10 would require the UK Government and the Treasury to provide transparency on the allowances and their resulting outturn. It is particularly important to look at our climate change obligations. In fact, we have tabled an amendment specifically on looking at the entire Finance Bill through the lens of whether it will help us to meet our climate change and Paris agreement commitments. There is no point in this House agreeing to legislation that takes us further from the Government’s stated aims and legislative commitments on climate change. I am still of the opinion that the UK Government are fairly good at talking the talk on their climate change commitments but not at translating that into checking whether our climate change objectives will be hampered by the policies that are put in place.

During the Committee stage of the Advanced Research and Invention Agency Act 2022, for example, I requested that the new organisation be set up on a net zero basis from the beginning. Given that we have net zero targets, I do not think that it is unreasonable to ask for any new Government department to be set up on that basis and, at least, to not contribute in a negative way to our carbon outturns. As I said, we will support new clauses 6 and 10 if they are pushed to a vote.

New clause 8, which relates to clause 10, addresses the R&D spend on data and cloud computing. We have tabled a probing amendment on that, and although we do not intend to press it to a vote, I would appreciate it if the Minister were able—either today or at a future stage—to answer some questions. We have particular concerns about clause 10 as it relates to part 2 of schedule 1. The explanatory notes—a hefty document—state that:

“Expenditure on data licences and cloud computing services only qualifies for relief to the extent that the commercial use of that licence or service is restricted to the particular research and development activity to which the claim relates, and that the customer does not have a right to…ongoing use after the relevant research and development has ended.”

I appreciate the Government’s intention, but we have tabled new clause 8 because we are concerned that this will hamper anyone applying for the allowance in the first place, as they may want to continue to use that data licence and cloud computing after the research and development. Surely they are only doing the research and development because they think it will be profitable and positive for their company. I am concerned that they may choose not to make the investment or to apply for the allowance if they know that they will have to pay it back at a later stage if this does what the company surely wants to achieve, which is to make money.

This could have been done in a different way, by allowing companies the investment opportunity and the R&D allowance for the data licence and cloud computing, and then stopping the allowance at the point at which it begins to make money, rather than saying, “If this does begin to make money, you have to pay us back.” It would be great if the Minister could answer questions on that issue today, but if not, I am happy to receive information afterwards, so that we have clarity on the Government’s assessment of this.

Finance (No. 2) Bill

Rosie Winterton Excerpts

Committee of the whole House
Wednesday 19th April 2023 Commons Chamber

[Dame Rosie Winterton in the Chair]

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

I remind Members that, in Committee, they should not address the Chair as “Deputy Speaker”. Please use our name when addressing the Chair. “Madam Chair,” “Chair,” “Madam Chairman” and “Mr Chairman” are also acceptable.

Clause 18

Lifetime allowance charge abolished

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment 21, page 12, line 31, at beginning insert—

“(A1) This section applies to any person who it employed for an average of more than 15 hours per week by an NHS body.”

This amendment would limit the removal of the lifetime allowance charge to NHS staff.

[The First Deputy Chairman]

With this it will be convenient to discuss the following:

Amendment 22, page 12, line 31, after “charge” insert

“for a person to whom this section applies”.

This amendment is consequential on Amendment 21.

Amendment 23, page 12, line 36, at end insert—

“(3) The Treasury may by regulations specify a list of NHS bodies, or types of bodies, in respect of which this section applies.

(4) Regulations under this section—

(a) may specify different bodies, or types of bodies, in England, Wales, Scotland and Northern Ireland, and

(b) are subject to annulment by a resolution of the House of Commons.”

This amendment is consequential on Amendment 21 and gives the Treasury the power to define “NHS body” for the purposes of that amendment.

Clauses 18 to 24 stand part.

Amendment 27, in clause 25, page 18, line 23, at end insert—

“(4A) The arrangements must include that the Commissioners are required to provide to an individual their calculation of the appropriate amount under subsection (3).”

This amendment would require HMRC to provide recipients of the relief with a calculation of the payment so that it can be checked.

Amendment 28, page 18, line 26, insert—

“(5A) The arrangements must include procedures for the purposes of allowing an individual to—

(a) challenge the amount the Commissioners have determined to be the appropriate amount under subsection (3), and

(b) make a claim requesting that the Commissioners calculate and pay an appropriate amount in accordance with subsection (3) where the Commissioners have failed to make such a payment.

(5B) The individual must give notice to the Commissioners of any such challenge or claim no later than four years from the end of the relevant tax year as defined in subsection (1)(b).”

This amendment would enable a recipient of the relief to challenge the amount determined by HMRC if they think it is incorrect, and would allow someone not identified as eligible for the relief by HMRC to initiate a claim for it.

Amendment 29, page 18, line 41, at end insert—

“(8A) The arrangements must include a procedure for the Commissioners to correct, in accordance with section 9ZB TMA 1970, an individual’s personal return for the relevant tax year to include the appropriate amount paid under this section.”

This amendment would enable HMRC to correct the tax return of a recipient of a payment under the new section 193A FA2004, to reflect that the receipt of the payment has increased the recipient’s income for the year.

Clause 25 stand part.

New clause 4—Review of the impact of the abolition of the lifetime allowance charge—

“(1) The Chancellor of the Exchequer must, within three months of the passing of this Act, make a statement to the House of Commons on the impact of the abolition of the lifetime allowance charge introduced by section 18 of this Act and other changes to tax-free pension allowances introduced by sections 19 to 23 of this Act.

(2) The statement must provide the following information—

(a) the number of NHS doctors who will benefit from the policies referred to in subsection (1);

(b) the proportion of those benefiting from the policies referred to in subsection (1) who are NHS doctors;

(c) the number of people who are expected to—

(i) stay in work, and

(ii) return to work

as a result of the policies referred to in subsection (1);

(d) a breakdown of the figures in subsection (2)(c) by sector, including the number of people under subsection (2)(c)(i) and (ii) who are NHS doctors; and

(e) details of how a scheme that provided benefits equivalent to the policies referred to in subsection (1) only for NHS doctors could operate.”

This new clause requires the Chancellor to make a statement setting out the impact of the tax-free pension allowance changes in relation to NHS doctors, and to set out details of how an alternative scheme targeted at NHS doctors could operate.

New clause 5—Review of alternatives to the abolition of the lifetime allowance charge—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed—

(a) conduct a review of the impact of the abolition of the lifetime allowance charge introduced by section 18 of this Act and other changes to tax-free pension allowances introduced by sections 19 to 23 of this Act, and

(b) lay before the House of Commons a report setting out recommendations arising from the review.

(2) The review must make recommendations on how the policies referred to in subsection (1)(a) could be replaced with an alternative approach that provided equivalent benefits only for NHS doctors.”

This new clause requires the Chancellor to review the impact of the tax-free pension allowance changes and to recommend an alternative approach targeted at NHS doctors.

[Kirsty Blackman]

It is a delight to speak first in Committee of the whole House this afternoon. I had a few extra minutes to tweak my speech during the ten-minute rule Bill, as it is unusual for such a Bill to be opposed, and those extra few minutes will presumably have made my speech extra good. I am sure the whole Committee will listen very closely.

I rise to speak to amendment 21 in my name and in the name of my SNP and Plaid Cymru colleagues, but I will first talk about new clauses 4 and 5, which were tabled by the Opposition. The new clauses would require a review of the impact of the abolition of the lifetime allowance charge, with new clause 4 focusing on NHS doctors and new clause 5 looking more widely.

A significant number of questions have been raised in the House about the lifetime allowance and the problems it has caused, particularly for NHS doctors. I do not think any Opposition Member would consider that the solution to this problem is to abolish the lifetime allowance charge completely, which seems totally out of proportion. We have been raising this very serious issue for a number of years, but I never considered arguing against this solution because it never crossed my mind that the Government would do something quite so drastic or extreme.

New clauses 4 and 5 both ask for reviews, statements and information. Particularly pertinent is information on the number of NHS doctors who will benefit from the abolition of the lifetime allowance charge, as is a report containing recommendations in the light of a review of the effect of abolishing the lifetime allowance charge. The least the Government can do, if they are to make such a massive change to the lifetime allowance or the pension tax system, is provide us with as much information as possible so that we can consider all the potential and actual implications. We would then have all the information at our fingertips. The Government are able to access HMRC data in a way that the rest of us cannot, so we need details on the actual impact of these changes.

On the specific issue of NHS doctors, Torsten Bell of the Resolution Foundation has said that 20% of those who benefit from the change to the lifetime allowance work in the finance industry. He said that

“nearly as many bankers as doctors”

will benefit from this change. The Institute for Fiscal Studies has called it “bizarre”, stating:

“if this is aimed at doctors then it really is a huge sledgehammer to crack a tiny nut.”

That accords with our understanding.

Again, we agree that this significant issue for doctors needs to be fixed, but the Government are going about it in totally the wrong way. During the covid pandemic, we clapped NHS staff from our doorsteps. We recognise how difficult NHS staff had it working on the frontline during the pandemic, and how difficult they continue to have it. When other people were furloughed, they were working hard, day in and day out, to keep as many of us alive and healthy as possible, yet the Government are giving exactly the same break to bankers as they are giving to those who worked day in, day out to keep us all safe. That does not make sense. If we want to support our NHS, to ensure that we have the best possible public services and to give the NHS our vote of confidence, our backing and our support, we should recognise that those working in the NHS provide a vital public service and therefore deserve different treatment from those who work in the finance industry, for example, and who do not provide that level of public service.

I thank the Clerk of Bills, who was helpful in drafting these amendments. I knew what I wanted to do, but I was not quite sure how to do it, so I very much appreciated that assistance.

Amendment 21 would mean that the abolition of the lifetime allowance charge applies only to those employed by an NHS body for more than 15 hours a week, on average.

Finance (No. 2) Bill

Rosie Winterton Excerpts

Report stage
Tuesday 20th June 2023 Commons Chamber

[The Financial Secretary to the Treasury (Victoria Atkins)]

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

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Amendment (a) to new clause 4, at end insert—

“(2) The Treasury may by regulations amend subsection (1) by substituting a later date for the date for the time being specified there.”

Government new clause 5—Communications data.

New clause 1—Review of alternatives to the abolition of the lifetime allowance charge—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed—

(a) conduct a review of the impact of the abolition of the lifetime allowance charge introduced by section 18 of this Act and other changes to tax-free pension allowances introduced by sections 19 to 23 of this Act, and

(b) lay before the House of Commons a report setting out recommendations arising from the review.

(2) The review must make recommendations on how the policies referred to in subsection (1)(a) could be replaced with an alternative approach that provided equivalent benefits only for NHS doctors.”

This new clause requires the Chancellor to review the impact of the tax free pension allowance changes and to recommend an alternative approach targeted at NHS doctors.

New clause 2—Reports to Treasury Committee on measures to simplify tax system—

“(1) The Treasury must report to the Treasury Committee of the House of Commons on steps taken by the Treasury and HMRC to simplify the tax system in the absence of the Office of Tax Simplification.

(2) Reports under this section must include information on steps to—

(a) simplify existing taxes, tax reliefs and allowances,

(b) simplify new taxes, tax reliefs and allowances,

(c) engage with stakeholders to understand needs for tax simplification,

(d) develop metrics to measure performance on tax simplification, and performance against those metrics.

(3) A report under this section must be sent to the Committee before the end of each calendar year after the year in which section 346 (abolition of the Office of Tax Simplification) comes into force.”

This new clause would require the Treasury to report annually to the Treasury Committee on tax simplification if the Office of Tax Simplification is abolished.

New clause 3—Review of public health and poverty effects of Act—

“(1) The Chancellor of the Exchequer must review the public health and poverty effects of the provisions of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) The review must consider—

(a) the effects of the provisions of this Act on the levels of relative and absolute poverty across the UK including devolved nations and regions,

(b) the effects of the provisions of this Act on socioeconomic inequalities and on population groups with protected characteristics as defined by the 2010 Equality Act across the UK, including by devolved nations and regions,

(c) the effects of the provisions of this Act on life expectancy and healthy life expectancy across the UK, including by devolved nations and regions, and

(d) the implications for the public finances of the public health effects of the provisions of this Act.”

New clause 6—Review of business taxes—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed—

(a) conduct a review of the business taxes, and

(b) lay before the House of Commons a report setting out recommendations arising from the review.

(2) The review must make recommendations on how to—

(a) use business taxes to encourage and increase the investment of profits and revenue;

(b) ensure businesses have more certainty about the taxes to which they are subject; and

(c) ensure that the system of capital allowances operates effectively to incentivise investment, including for small businesses.

(3) In this section, ‘the business taxes’ includes any tax in respect of which this Act makes provision that is paid by a business, including in particular provisions made under sections 5 to 15 of this Act.”

This new clause would require the Chancellor to conduct a review of business taxes, and to make recommendations on how to increase certainty and investment, before the next Finance Bill is published.

New clause 7—Statement on efforts to support implementation of the Pillar 2 model rules—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, make a statement to the House of Commons on how actions taken by the UK Government since October 2021 in relation to the implementation of the Pillar 2 model rules relate to the provisions of Part 3 of this Act.

(2) The Chancellor of the Exchequer must provide updates to the statement at intervals after that statement has been made of—

(a) three months;

(b) six months; and

(c) nine months.

(3) The statement, and the updates to it, must include—

(a) details of efforts by the UK Government to encourage more countries to implement the Pillar 2 rules; and

(b) details of any discussions the UK Government has had with other countries about making the rules more effective.”

This new clause would require the Chancellor to report every three months for a year on the UK Government’s progress in working with other countries to extend and strengthen the global minimum corporate tax framework for large multinationals.

New clause 8—Review of energy (oil and gas) profits levy allowances—

“(1) The Chancellor of the Exchequer must, within three months of the passing of this Act—

(a) conduct a review of section 2(3) of the Energy (Oil and Gas) Profits Levy Act 2022, as introduced by subsection 12(2) of this Act, and

(b) lay before the House of Commons a report arising from the review.

(2) The review must include consideration of the implications for the public finances of the provisions in section 2(3)—

(a) were all the provisions in section 2(3) to apply, and

(b) were the provisions in section 2(3)(b) not to apply.”

This new clause requires the Chancellor to review the investment allowances introduced as part of the energy profits levy, and to set out what would happen if the allowance for all expenditure, apart from that spent on de-carbonisation, were removed.

New clause 9—Review of section 36—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact on the public finances of the measures provided for by section 36 of this Act (‘the section 36 measures’).

(2) The assessment must include details of any analysis by the Treasury or HMRC of—

(a) the amount of additional tax raised by the section 36 measures and,

(b) the number of individuals who are required to pay additional tax as a result of the section 36 measures.”

This new clause requires the Chancellor to review the impact of the measures in the Act that affect people with non-domiciled status, including by setting out how many people will be required to pay additional tax and how much this will raise in total.

New clause 10—Review of new bands and rates of air passenger duty—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes to air passenger duty introduced by this Act on—

(a) the public finances;

(b) carbon emissions; and

(c) household finances.

(2) The assessment under subsection (1) must consider how households at a range of different income levels are affected by these changes.”

This new clause requires the Chancellor to publish an assessment of this Act’s changes to air passenger duty on the public finances, carbon emissions, and on the finances of households at a range of different income levels.

New clause 11—Review of impact of tax changes in this Act on households—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes in this Act on household finances.

(2) The assessment in subsection (1) must consider how households at a range of different income levels are affected by these changes.”

This new clause requires the Chancellor to publish an assessment of the changes in this Act on the finances of households at a range of different income levels.

New clause 12—Review of Part 5—

“(1) The Treasury must conduct a review of the provisions of Part 5 of this Act (electricity generator levy).

(2) The review must consider the case for ending or amending the charge on exceptional generation receipts when energy market conditions change.

(3) The report of the review must be published and laid before the House of Commons within six months of this Act being passed.”

This new clause would require the Government to conduct a review into the energy generator levy with a view to sunsetting the levy when market conditions change.

New clause 13—Review of effects of Act on the affordability of food—

“The Chancellor of the Exchequer must, within six months of this Act being passed, lay before the House of Commons an assessment of the impact of the measures of this Act, and in particular sections 1 to 4 (income tax), on the ability of households to afford the price of food.”

This new clause would require the Government to produce an impact assessment of the effect of the Act on the affordability of food.

New clause 14—Review of effects of Act on small businesses—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, lay before the House of Commons a report on the likely impact of the measures of this Act on small businesses.

(2) The report must assess the effect on small businesses of any taxes charged under this Act, in the context of other financial pressures currently facing small businesses including—

(a) the rate of inflation, and

(b) b) the cost of energy.”

This new clause would require the Government to produce an impact assessment of the effect of the Act on small business with particular regard to inflation and the cost of energy.

New clause 15—Review of effects of Act on SME R&D tax relief—

“(1) The Chancellor of the Exchequer must lay before Parliament within six months of the passing of this Act a review of the impact of the measures in section 10 relating to research and development tax relief for small and medium-sized enterprises.

(2) The review must compare the impact of the relief before and after 1 April 2023, with regard to the following—

(a) the viability and competitiveness of UK technology start-up and scale-up businesses,

(b) the number of jobs created and lost in the UK technology sector, and

(c) long-term UK economic growth.

(3) In this section, ‘technology start-up’ means a business trading for no more than three years; with an average headcount of staff of less than 50 during that three-year period; and which spends at least 15% of its costs on research and development activities.

(4) In this section, ‘technology scale-up’ means a business that has achieved growth of 20% or more in either employment or turnover year on year for at least two years and has a minimum employee count of 10 at the start of the observation period; and spends at least 15% of its costs on research and development activities.”

This new clause would require the Government to produce an impact assessment of the effect of changes to SME R&D tax credits in this act on tech start-ups and scale-ups.

Government amendments 9 to 13.

Amendment 1, page 12, line 30, leave out clause 18.

Amendment 2, page 12, line 37, leave out clause 19.

Amendment 3, page 13, line 31, leave out clause 20.

Amendment 4, page 14, line 1, leave out clause 21.

Amendment 5, page 14, line 11, leave out clause 22.

Amendment 6, page 14, line 20, leave out clause 23.

Government amendments 14 to 16.

Amendment 22, in clause 115, page 74, line 10, at end insert—

“(1A) The Chancellor of the Exchequer must, within one month of this Act coming into force, lay before the House of Commons an assessment of the impact of extending the provision of subsection (1) to wine which—

(a) is obtained from the alcoholic fermentation of fresh grapes or the must of fresh grapes and fortified with spirits,

(b) is included in one or more of the United Kingdom Geographical Indication Scheme registers, and

(c) is of an alcoholic strength of at least 15.5% but not exceeding 20%.”

This amendment requires the Chancellor to lay before the House an assessment of the impact of providing comparable transitional relief to fortified wine made from fresh grapes, such as port and sherry, as has been made available to other forms of table wine.

Amendment 20, in clause 264, page 188, line 7, at end insert—

“(2) The Treasury may by regulations amend subsection (1) by substituting a later date for the date for the time being specified there.”

Amendment 23, in clause 278, page 198, line 9, after “costs” insert “and relevant investment expenditure”.

This amendment is linked to Amendment 24.

Amendment 24, in clause 278, page 198, line 12 at end insert—

“Where the generating undertaking is a generator of renewable energy, determine the amount of relevant investment expenditure and also subtract that amount.”

This amendment, together with Amendments 23, 25 and 26 would allow generators of renewable energy to offset money re-invested in renewable projects against the levy.

Amendment 25, in clause 279, page 199, line 21, at end insert—

“a ‘generator of renewable energy’ means—

(a) a company, other than a member of a group, that operates, or

(b) a group of companies that includes at least one member who operates a generating station generating electricity from a renewable source within the meaning of section 32M of the Energy Act 1989;

‘relevant investment expenditure’ means any profits of a generator of renewable energy that have been re-invested in renewable projects;”.

This amendment is linked to Amendment 24.

Amendment 26, in clause 279, page 199, line 26, at end insert—

“a ‘renewable project’ is any project involving the generation of electricity from a renewable source within the meaning of section 32M of the Energy Act 1989;”.

This amendment is linked to Amendment 24.

Government amendments 17 to 19.

Amendment 7, page 265, line 2, leave out clause 346.

This amendment would leave out Clause 346, which abolishes the Office of Tax Simplification.

Amendment 21, in schedule 16, page 399, line 27, at end insert—

“(2A) The Treasury may by regulations amend subsection 2(a) by substituting later dates for the dates for the time being specified there.”

The aim of this amendment is to enable the Treasury to extend the permitted period for multinational groups to make transitional safe harbour elections, reducing the compliance burden, in the event that other countries are slow to follow suit in implementing these rules.

[Victoria Atkins]

Let me first thank all right hon. and hon. Members who have taken part in debates on the Finance Bill so far. Today is Report stage, but there has been intense scrutiny of many measures in the Bill, not just line by line in Committee on the Committee Corridor but, importantly, in Committee of the whole House. I hope that I will hear from right hon. and hon. Members on some of those discussions.

We are focusing on a number of proposed amendments to the Bill, which I will address in turn. Many of the Government’s amendments focus on ensuring the proper functioning of the legislation in response to scrutiny from businesses, business representative groups, parliamentarians and feedback. Others take forward responses to substantive issues that have emerged during the Bill’s passage. This is an exercise of how scrutiny in this place works, and I hope it works well. I will address each Government amendment in turn in this part of the debate. To reassure colleagues, I want to listen to the debates that will follow on non-Government amendments and proposed new clauses, and I hope to deal with points raised by right hon. and hon. Members when I wind up.

Government amendments 9 and 10 seek to ensure that our policy of full expensing achieves its intended affect. The existing wording can result in balancing charges being incorrectly calculated by not applying the correct apportionment to the disposal receipts. This is a straightforward and necessary technical adjustment to a policy that will help businesses to invest with confidence and boost UK productivity.

Government amendments 11, 12 and 13 provide that both the decarbonisation allowance and the existing investment allowance in the energy profits levy work as intended. They correct unintended exclusions by revising definitions to ensure that the investment allowances apply throughout the UK, in UK waters and on the United Kingdom continental shelf.

Government amendment 14 is a minor technical amendment that concerns the lifetime allowance—specifically, in clause 23, which allows modifications of certain existing transitional protections to ensure that stand-alone lump sums can continue to be paid to those who are entitled. The amendment clarifies the tax treatment for any amount above the limited 5 April maximum. The amendment is required to avoid an unintended outcome that would otherwise arise as a result of the removal of the lifetime allowance charge, whereby those who are entitled to stand-alone lump sums may not have been able to access their full benefit. The amendment corrects that. We are grateful to members of His Majesty’s Revenue and Customs pensions industry stakeholder forum for raising the issue.

New clause 4 relates to the domestic minimum top-up tax, which is part of the global minimum tax agreement. That agreement protects against large multinational groups and companies using aggressive tax planning and shifting their UK profits overseas. The amendment simply puts beyond doubt that the commencement date for the domestic top-up tax aligns with the multinational top-up tax and the internationally agreed timings, and no earlier. The start date is for accounting periods beginning on or after 31 December 2023. We will discuss the global minimum tax agreement in more detail later, precisely because it is of particular interest to right hon. and hon. Members. I will respond to those further arguments and suggestions when I wind up.

--- Later in debate ---

Let me turn now to the administration of capital allowances, which we have discussed in previous debates. Those allowances will still pose burdens to businesses. Conservative Members must ensure that it is not a Conservative Government who are putting burdens on businesses, but that they do everything possible to bring down the tax base and the tax burden, and to simplify taxes for businesses.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I gently remind colleagues that if they want to intervene on a speaker, it is important that they are in the Chamber at the beginning of the speech, just in case the point that they wish to raise has already been made. It is also important to stay until the end. I call the SNP spokesperson.

[Stewart Hosie]

Before I turn to the new clauses and amendments before us, it is worth reminding ourselves briefly about the debate so far, not least that the Bill was derived from a Budget that had the stated intention of seeing the debt, borrowing and inflation all fall. As the Financial Secretary has said previously, debt servicing costs are down, and indeed they are—they are down from last November, but massively up from the previous year. She said that the fiscal targets are to be met. Again, indeed they are. The debt target in particular is forecast to be met in five years’ time measured against the fiscal charter, but it will be at 0.2% of GDP. That is £6 billion out of a GDP approaching £3 trillion. As I have said before, these are very fine margins.

Although it is true that having a weather eye on debt and deficit—the big macro-economic indicators—is important, so too is immediate help for families suffering from high inflation, high energy prices and spiralling mortgage costs. Those things, however, are all sadly absent from the Bill. That is important because the OBR has told us that living standards will fall by 6% over this fiscal year. That will be the largest two-year fall since Office for National Statistics records began in the 1950s. It is important because inflation is still at 8.7%, and it is far worse for certain essentials such as sugar, at nearly 50%. Remember that inflation was forecast to fall to 2.9% by the end of this year. Since then, it has been revised up to 5% by the end of this year. That means that the forecasts and the pain keep rising.

We know that real pay is not keeping pace with inflation. Troublingly, the Government are keeping their head in the sand regarding the inflationary impact of Brexit, ignoring even the former Bank of England Governor, Mark Carney, who could not have been clearer about the contribution Brexit has made to the soaring inflation we face.

I turn to the amendments and new clauses we are considering on Report. New clause 1 calls for a review of alternatives to the abolition of the lifetime allowance, and amendments 1 to 6 delete clauses associated with the abolition. On Second Reading, I suggested the need to probe this matter in Committee. The decision to remove the cap on lifetime pension allowances, which will cost around £3 billion, will benefit a tiny number of already pretty comfortably off or very well-off people. I also suggested that, if the measure was genuinely designed to lift certain categories of worker—doctors in particular—out of a pension and employment trap, the Government should, to be brutally honest, have come up with a much better and far narrower solution.

My hon. Friend the Member for Aberdeen North (Kirsty Blackman) also raised the matter in the Committee upstairs. She made the point that a significant number of questions have been raised in the House and elsewhere about the lifetime allowance and the problem it has caused, particularly for NHS doctors, but went on to quote Torsten Bell of the Resolution Foundation, who noted that 20% of those who will benefit from the change in the lifetime allowance work in the finance industry, meaning that nearly as many bankers as doctors will benefit. That surely cannot have been the intention. We are pleased to support new clause 1, because it seeks not simply a review, but a review that will make recommendations about how a more focused alternative could be delivered.

Amendment 7 seeks to remove entirely the abolition of the Office of Tax Simplification, and new clause 2 seeks reports based on metrics to measure the performance of tax simplification. We will support both if they are voted upon. My hon. Friend the Member for Dunfermline and West Fife (Douglas Chapman) provided some excellent context in Committee, arguing that

“the OTS achieved a significant amount during its 12 years of existence and, with greater ministerial support for its proposals, could have achieved much more.”—[Official Report, Finance (No. 2) Public Bill Committee, 18 May 2023; c. 136.]

He also quoted George Crozier of the Chartered Institute of Taxation, as many have done over many years, who said that there had been

“useful reforms to employee expenses and inheritance tax reporting,”

and that

“every Finance Act of the last decade has had measures in it which owe their genesis to the OTS, and which have made navigating the tax system easier for one group or another.”

My hon. Friend also made the rather important point that it was the independence of the Office of Tax Simplification that made it stand out from anything that can be provided in-house. We will back amendment 7 and new clause 2 if they are pressed to a Division.

If I may say a few words about Government new clause 4 and Government amendments 9 to 13, they appear to come under the category of tidying up and clarification. New clause 4 in particular ensures that both domestic and international top-up taxes commence at the same time, and the other amendments ensure that reliefs and charges operate as intended.

However, I am rather less sanguine about Government new clause 5. Ostensibly, it is required to deal with the situation where

“financial institutions are regarded as telecommunications or postal operators”.

For example, subsection (5) of Government new clause 5 suggests that paragraph 19(4) and (5) of schedule 36 to the Finance Act 2008 be removed, but paragraph (19)(4) says:

“An information notice does not require a telecommunications operator or postal operator to provide or produce communications data.”

That is a protection against the requirement to produce data in certain circumstances. Paragraph 19(5) defines “communications data”, “postal operator” and “telecommunications operator” as per the Investigatory Powers Act 2016—the very legislation that inserted those protections into schedule 36 to the Finance Act 2008 in the first place. Government new clause 5 not only affects the financial institutions regarded as telecoms or postal operators but, it would appear on my reading, removes protections in the Act for all telecommunications and postal operators not to be required to provide certain information in certain circumstances.

The Financial Secretary said she would answer questions at the end in her summing-up, and my questions are rather simple. What problem is Government new clause 5 designed to address? Why has a potentially significant amendment such as this come so late in the day? Is it even remotely appropriate that a criminal justice measure, the Investigatory Powers Act, should be amended in a potentially significant way through a late-delivered new clause on Report of a Finance Bill?

New clauses 3 and 8 to 14 call for reviews or reports of one form or another on the public health and poverty effects of the Bill, the oil and gas profits levy allowance, the impact of those with non-dom status, the bands and rates of air passenger duty, the impact of tax changes on households, and the effect of the Bill on the affordability of food and on small businesses. We are happy to look on those positively, although I am not certain that new clause 12 should really be opening the door to reducing the electricity generator levy. The Lib Dems have disappeared, but I would have said to the hon. Member for Tiverton and Honiton (Richard Foord), had he been in this place, that if one opens the door to a tax cut to the Tories, they by and large take it.

We will also support new clause 7, which requires a statement of progress on the pillar 2 reforms, seeking

“to extend and strengthen the global minimum corporate tax framework”.

It is important that we have a global minimum corporate tax framework, and I am not convinced by the arguments made by the right hon. Member for Witham (Priti Patel) about offering the opportunity for implementation to be delayed.

Again, the Lib Dems are not in their place, but I am also not yet convinced by new clause 15 because, while there are issues with the Government’s research and development framework, which I have raised before—namely, the stated intention to limit attributable expenditure for data and cloud computing licences—the new clause seeks to make the regime more restrictive and introduces the extraordinarily subjective viability clause in subsection (2)(a).

It is, however, true that none or few of the amendments and new clauses tabled substantially alter the Bill. It is also sadly true that none of the Government changes offer any hope of substantial help for the cost of living crisis any time soon. I fear that the Bill, and the Budget it derived from, will go down in the missed opportunity category.