PARLIAMENTARY DEBATE
Finance Bill - 13 December 2023 (Commons/Commons Chamber)

I must inform the House that the reasoned amendment in the name of Drew Hendry has been selected.

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

Before I start the debate, I should declare, to avoid any potential conflict or perception of conflict, that, with reference to my previously published entry in the Register of Members’ Financial Interests and my ministerial interests, I have recused myself from making ministerial decisions on issues relating to pillar two, which will be dealt with more than ably by the Exchequer Secretary to the Treasury, my hon. Friend the Member for Grantham and Stamford (Gareth Davies).

My right hon. Friend the Chancellor of the Exchequer delivered an autumn statement with a clear intention to strengthen the economy now and for the future. The Government proposed to do that by putting money back in people’s pockets and cutting taxes. The Finance Bill that we are debating today does just that. First, it supports British businesses by allowing them to invest for less, which will encourage innovation and enhance productivity. Secondly, its measures will improve and simplify our tax system, which will ensure that it is fit for purpose.

The Bill covers 36 different measures in total, some of which are more complex than others. Madam Deputy Speaker, you will be pleased—or perhaps displeased—to know that I do not intend to cover every one in detail in this opening speech. I would like to focus on some of the key themes and measures.

I will first detail the Bill’s measures to support British business. The Government understand the simple truth that a strong private sector drives economic growth. That growth in turn serves the public good by allowing the Government to invest in public services. Perhaps most importantly, it allows the Government to support the most vulnerable. That understanding has shaped our approach. That is why we are lowering business taxes: because it will incentivise investment and boost private sector growth.

The Bill’s first measure to achieve that will make full expensing permanent, allowing businesses to invest for less. As a result, the UK’s plant and machinery capital allowances will increase. It is effectively a tax cut to companies of over £10 billion a year—the most generous of any major economy. The benefits to the economy of the policy—just this measure alone—are that it will drive 0.1% GDP growth over the next five years, increasing to almost 0.2% in the long run, and it will unlock an additional £3 billion of investment per year. That is only one of many Government policies backing British businesses.

The Government also recognise the important role of research and development in driving both innovation and economic growth as well as the benefits it can bring to society as a whole. Therefore, we will merge two Government programmes: the research and development expenditure credit scheme and the small or medium enterprises scheme. That will have two key impacts: it will simplify the system and provide greater support for UK firms to drive innovation. Those changes will apply from April 2024 onwards.

The support does not stop there. The Government will also introduce greater support for loss-making R&D-intensive SMEs. We will also lower the R&D intensity threshold required to access that to 30%. That will help about 5,000 extra SMEs, and they will receive £27 per £100 of qualifying R&D invested. Let us be in no doubt that this is a major boost for innovators across the UK. These measures significantly increase support to R&D firms to about £280 million a year by 2028-29, and overall they will ensure the success of UK plc.

I will now outline the next measure to back British businesses. The Government will extend the sunset clause for two more programmes: the enterprise investment scheme and the venture capital trust scheme. Both will be extended to 6 April 2035. That will support young companies to raise capital for successful growth.

The Government applaud our world-leading creative sector—after all, it grew 1.5 times faster than GDP between 2010 and 2019. In response, a new measure to back British business will go even further through reforming tax reliefs to refundable expenditure credits for the film, TV and video games industries.

I am pleased to hear the Minster outline support that the Government are giving to the creative industries, which secures thousands of jobs around the UK, and particularly in the north-west of England, where we have seen a huge creative hub develop. Does he agree that it is not just about jobs, though? It is also about soft power, which the creative industries ensure goes right around the world, with great British TV and film. Does he also agree that we want to see that continue?

Yes. My hon. Friend makes an important point. The jobs and economic activity are hugely important, but we are known throughout the world for excelling in the creative sectors—we always have, and we always will. We can all be proud of the incredible creative talent in the UK. He is also right to highlight how it is spread right across the UK.

The Minister is talking about creative industries, and the hon. Member for Warrington South (Andy Carter) talked about soft power, but I wonder whether the Minister will get on to the changes to other cultural tax reliefs included in the Bill. Among other proposed changes, the Bill will remove European economic area expenditure from qualifying costs for orchestral tax relief from next April. That will result in a significant long-term cut for orchestras that tour Europe frequently. Does he not see that orchestra tax relief—an important cultural tax relief—is working as it is and should not be amended to the detriment of those orchestras, which should be supported?

The hon. Lady makes an important point about the success of our creative industries, and particularly the music industry and orchestras. She will be well aware, though, that we are not in the European Union any more, so some of the EEA measures no longer apply. Instead, we have to be World Trade Organisation-compliant. That bring some challenges, but we are certainly there to support the industry across a whole range of measures. I have already mentioned some of them, but we are doing even more with targeted measures to support the sector, because we want to boost investment in three other areas: animated film, animated TV and children’s TV programmes. As a result, those will be eligible for a 5% uplift to a 39% credit rate.

The Association of British Orchestras has warned that, for some orchestras, the proposed changes to orchestral tax relief risk making European touring financially unviable. Given the financial and administrative burdens that the Government have already forced on orchestras through their botched Brexit deal, it seems ludicrous to create more difficulties for orchestras that are touring, especially as orchestra tax relief is working fine as it is. Does the Minister not accept—I know that he has had evidence on this—that the changes are unnecessary and damaging to orchestras?

As I outlined, I think the hon. Lady is hoping for measures to turn back the clock to when we were in the EU. We are not in the EU any more, and therefore the world is a different place. However, we are always keen to support and engage with the creative industries, and orchestras in particular. When I was at the Department for Digital, Culture, Media and Sport, we raised those issues again and again—actually, with considerable success—to enable orchestras and tourers to get across Europe, often by doing individual deals with individual countries, which we sometimes have to do now that we are no longer in the European Union.

I will now outline measures to support our employment-boosting agenda. The path to achieve this is clear: we must remove both barriers to work and incentives not to work. Perhaps most of all, though, we must ensure that hard work is rewarded. That is why our spring Budget announcements were so important. Let us take the abolition of the lifetime allowance. The Office for Budget Responsibility estimates that that will retain 15,000 workers annually and the Bill completes that change by removing the lifetime allowance from the statute book completely.

I now turn to the measures to simplify our tax system. Complex and inefficient taxes are one of the biggest restrictions on businesses. They often come at a high cost in terms of both time and capital. It is the Government’s duty to deliver a modern, simpler tax system and the measures in the Bill will help to do just that. Making full expensing permanent is a huge simplification for larger firms, but we are going further by expanding the cash basis for over 4 million smaller growing traders. This will simplify the process to calculate their profits and pay income tax. We have also listened closely to feedback from businesses and, as a result of that consultation, some of the main restrictions on using the cash basis will be removed. The simpler cash basis will be the default method for calculating profit, and businesses will therefore start on the simpler regime as standard. We will also be taking forward other technical small measures. Those will include improving the data that His Majesty’s Revenue and Customs collects from its customers. These measures will result in a trusted modern tax administration system.

We must also build a tax system that is fair and works for everyone. We cannot understate the role of tax in supporting our public services. Taxes pay for them directly and, through attracting investment, indirectly. We must all fairly play our part. The Bill will make promoting tax avoidance a crime in circumstances where persons continue to promote a scheme after the receipt of a stop notice. It will also enable HMRC to act more quickly to tackle promoters of tax avoidance by introducing a new power for HMRC to bring disqualification action against the directors of companies involved in promoting tax avoidance. We will also reduce the scope for tax fraud in the construction industry by amending the construction industry scheme. The amendment will add VAT to the gross payment status test. This means two things: that compliance will now be checked as part of this process, and that HMRC powers to remove gross payment status will be enhanced.

Of course, it is only fair that we also guard against over-collection of tax. The Bill addresses a concern here, too. It will do so by enabling HMRC to reduce the off-payroll working PAYE liability of a deemed employer who is responsible for ensuring that PAYE is calculated and sent to HMRC correctly. This will apply where that engagement is incorrectly treated as self-employed for tax purposes.

It also remains important that we are in lockstep with our international partners during such unprecedented times. In spring, we legislated to implement OECD pillar two in the UK, building on the historic agreement built by the Prime Minister, to a two-pillar solution to the tax challenges of a globalised digital economy. In the Bill, we are making technical amendments to the main pillar two rules identified from stakeholder consultation. That is to ensure that the UK remains consistent with the latest internationally agreed guidance.

The Bill builds on the autumn statement that focused on the long-term growth of the UK economy and sound economic policy. What a contrast to Labour’s fantasy economics, including £28 billion per year of additional spending without any idea where that money will come from—although we all know at heart that it will be taxpayers or through more debt, which is, of course, just deferred taxation. In contrast, this Finance Bill backs British businesses, rewards hard work, and supports a modern and simpler tax system. In doing so, it delivers on the Government’s commitments to prioritise economic growth, encourage business investment, nurture innovation and simplify our tax system to combat tax avoidance. For those reasons, I commend the Bill to the House.

I call the shadow Minister.

After 13 long years of the Conservatives in power, it is clear that, no matter what they try to do or say, they cannot escape the reality of their record in office. That reality is one of people across Britain being worse off, public services collapsing, and a Conservative party that puts its own interests before the country’s.

We now have a governing party barely able to govern and a Prime Minister barely able to lead, but at least the Chancellor is still following the Prime Minister’s example by trying to emulate his reverse Midas touch. Frankly, whenever the Chancellor talks about getting the economy growing, the country is pushed in the opposite direction. In his speech three weeks ago, he used the phrase “autumn statement for growth” seven times, and what did we see? The growth forecast for next year cut by more than half, cut again the year after that, and cut yet again the year after that. It seems that the Financial Secretary is getting in on the act, too. Today, he talked about what he has been doing to support growth, and what do we see? Figures out today confirm that the UK economy contracted unexpectedly in October, with GDP falling by 0.3%.

It is not just in relation to growth that the reverse Midas touch applies. Last month, the Prime Minister said:

“I want to cut taxes, I believe in cutting taxes.”

But what have we seen? Even after all the changes the Government have announced, the tax burden is still on track to be the highest since the second world war. The truth is that after 13 years of failure on the economy, the Conservatives are incapable of getting our country back on track. After 13 years, they do not have the determination or the plan to get us out of this doom loop where growth is low, taxes are high, public services are collapsing and families are worse off. Only Labour’s plan will bring stability and responsibility back to our public finances, give families the security they need and reform our public services for the future. Only Labour is ready to work with businesses day in, day out to get our economy growing, to create good jobs for the future and to make people across Britain better off.

There are a number of individual measures in the Bill that we have been calling for for some time; we will not oppose its Second Reading, and we look forward to considering it in detail in Committee. However, it is clear that the Bill and the autumn statement it follows are simply the latest chapter in 13 long years of Conservatives failing to get the economy growing and make working people better off. It is sobering and frankly staggering that, as the Resolution Foundation set out following the autumn statement, real average weekly earnings are now set to remain below their 2008 level until 2028. That is two full decades of pay stagnation. That is what happens when the Government cannot find a plan for growth that works.

To be fair, it is not for want of trying. The “autumn statement for growth” is the 11th attempt at an economic growth plan we have seen from the Conservatives. The problem is that the Conservatives simply do not have the ideas we need for our times, nor the focus on the country that the British people deserve from their Government. As Conservative MPs meet behind closed doors to plot their next leadership election, families across Britain are fed up of struggling and being squeezed, businesses yearn for stability and certainty, and our country misses out on the chance to fulfil its potential.

Of course, people across Britain are feeling the hit not just from growth being weaker and inflation more persistent than in similar countries, but from the 25 tax rises the Conservatives have already pushed through in this Parliament alone. There is, however, one small group of people who will continue to be protected from this Government’s tax rises on much of their income. That group of people is non-doms: those who live in Britain but do not pay UK taxes on their income from overseas. As we have long said, Labour believes it is only fair that if a person makes Britain their home, they should pay their taxes here. Closing the non-dom loophole—replacing that archaic status with a residence scheme like other countries have—could raise crucial funding to bring the NHS waiting list down. Yet today we have another Finance Bill from this Government that leaves the loophole open. The Government are continuing to help a few at the top to avoid paying their fair share of tax when they keep their money overseas, while letting families across the UK face a tax burden that is climbing to a post-war high. Whatever the Government say, that is the reality facing working people in Britain.

As the Resolution Foundation points out, any cuts to personal taxation announced in the autumn statement pale in comparison with previously announced tax rises through the freezing of national insurance and income tax thresholds. The Resolution Foundation concludes that the combined effect is an average tax rise of £1,200 per household, with almost every single person in the country who pays income tax or national insurance paying higher taxes overall. Across all taxes that the Government levy, the Resolution Foundation points out that

“despite the tax cutting rhetoric, the reality is that the tax burden is rising, with tax receipts as a share of the economy set to reach 37.7 per cent in 2028/29, the highest level in 80 years.”

That is the reality from which the Conservatives cannot hide.

My hon. Friend is making a great speech. He has been talking about the tax burden, and I raised the subject of cultural tax reliefs earlier. Another change in orchestra tax relief is that eligibility requires 10% of expenditure to be on goods or services that are used or consumed in the UK, rather than being incurred in the UK. The Association of British Orchestras has said that there is a lack of clarity about what orchestras will now be able to claim. This level of uncertainty is very unfair on UK orchestras, which have been through a turbulent time as a result of Brexit, covid and the cost of living crisis. Will my hon. Friend agree to raise that point with the Minister in Committee, to obtain some clarity and to enable Members to consider what these changes are doing? I appreciate that the subject is too complicated to be dealt with at this point.

I thank my hon. Friend for raising that point; she is a great champion for orchestras. It is only right, when we consider the details of the Bill in Committee, for us to push the Government to provide the certainty that is so often lacking from many of the measures that they propose.

I was talking about the reality from which the Conservatives cannot hide. The Chief Secretary to the Treasury, who is present, has been desperately trying to claim that the tax burden is going down. Three weeks ago, she claimed that

“taxes for the average worker have gone down by £1,000.”—[Official Report, 22 November 2023; Vol. 741, c. 360.]

Two weeks ago, she claimed:

“Taxes for the average worker will have gone down by £1,000 since 2010.”—[Official Report, 30 November 2023; Vol. 741, c. 1084.]

However, analysis conducted by the House of Commons Library makes it very clear that national insurance and income tax for the median earner will rise by well over £1,000—up from £6,112 in 2010-11 to £7,364 in 2024-25.

In an attempt to understand the tension between the Chief Secretary’s comments and the Library analysis, I wrote to her and also tabled written parliamentary questions. The Financial Secretary responded to both the letter and the questions with rather more careful wording, saying that

“an average worker in 24-25 will pay over £1,000 less in personal taxes than they otherwise would have done.”

He was careful to make it clear that the Government’s

“calculations are on a same-year basis against a counterfactual”,

and that this was not, in fact, a comparison over time, as that

“would include the effects of earnings growth on cash totals of tax due”.

I wonder whether the Chief Secretary’s statement that taxes for the average worker have “gone down by £1,000” may have inadvertently misled the House, given that her colleague’s written response to me tacitly admitted that the Government’s statistics do not refer to the actual taxes that a worker pays. When the Exchequer Secretary to the Treasury responds to the debate, perhaps he will tell us if he knows whether the Chief Secretary would like to correct the record. Whatever the Conservatives say—however they twist and turn—the truth is that people across Britain are feeling the squeeze, and life is very different from the picture that Ministers are desperately trying to paint.

I have already made it clear that we support a number of the individual measures in the Bill. We welcome, for instance, the measure in clause 1 to make full expensing permanent; we have been calling for that for some time. Welcome as it is, however, it simply cannot make up for the years of uncertainty that businesses have faced. When I meet businesses across the country, they are clear that they want stability, certainty and a long-term plan, but even during the time for which I have been shadow Financial Secretary—a period that has seen five different incumbents of the office that I shadow—business taxation and reliefs have been chopped and changed every year.

Let us take the annual investment allowance. At the start of this Parliament, it had been raised to £1 million on a temporary basis. That temporary basis was extended first by the Finance Act 2021 and again by the Finance Act 2022, and was then made permanent by the Finance (No. 2) Act 2023. During that time, of course, the super-deduction, which Members may recall, came and went entirely, and last year full expensing for expenditure on plant or machinery was introduced—but, again, only on a temporary basis for three years, before being amended yet again this year to be made permanent. Frankly, while the latest Treasury Ministers may say that full expensing is now permanent, how long any policy under this Government may last seems to be decided by the Conservatives’ internal battles rather than what is right for the country.

The hon. Member has said that Labour will support the Bill today, and I welcome that, but I have been doing some calculations. Does he agree that if Labour remain committed to their £28 billion borrowing plan, debt will soar and they will break their own fiscal rules?

The hon. Gentleman was desperate to make an intervention about fiscal responsibility, when just a year ago his party crashed the economy and sent interest rates soaring, and working families throughout the country are still paying the price. We on this side of the House take fiscal responsibility seriously. We want to have a fiscal lock in place, we want to get debt falling, and we want to get the economy growing. That is the difference between us and the Conservatives.

Clause 2 contains measures on research and development. In Committee we will probe the impact of those changes in greater detail, but it is clear straightaway that stability and certainty have been lacking here as well. We need only look at the changes in the current Parliament’s Finance Acts. The Finance Act 2020 raised the rate of the R&D expenditure credit from 12% to 13%. The Finance Act 2021 made changes to the amount of R&D tax credit that small and medium-sized enterprises could claim. The Finance Act 2023 again changed the rates of R&D tax reliefs, and that same year the Finance (No. 2) Act 2023 made yet further changes to how the relief operates. Now, of course, the Finance Bill before us introduces a whole new regime. Businesses making investment decisions yearn for stability and certainty, but after 13 years in office, the Government are proving themselves incapable of providing those crucial foundations for success.

We acknowledge, of course, that the tax legislation in Finance Acts needs to be kept updated, and that some change is not only inevitable but important in enabling legislation to function well. However, with this Government it is hard to avoid the sense that changes are being made without a long-term plan in mind. It looks very much as if there has been no long-term plan for capital allowances or research and development reliefs, and the same is true of tackling tax avoidance and evasion.

Although we welcome any measures to tackle tax avoidance and evasion, again there has been a busy history of legislation in this Parliament alone. The Finance Act 2020 made changes to the general anti-abuse rule, introduced to deter taxpayers from using tax avoidance schemes. That was followed by more changes to the rule in the Finance Act 2021, alongside other changes to the legislation covering avoidance. In the Finance Act 2022, a further round of changes were made to the legislation relating to avoidance, including on HMRC’s publication of information about avoidance schemes. Now, in 2023, we see the latest set of changes to the rules and penalties in respect of avoidance and evasion. While we will consider the detail of those changes in Committee, it is already clear that a long-term plan is very hard to see.

Stability and certainty are crucial foundations when businesses are making decisions about where to invest and where to create jobs. We in the Opposition hear that from business leaders day in, day out, across all sectors and in all parts of our economy. We know how much damage is done to economic growth and people’s standards of living when that stability and certainty are not there. We saw that at its most extreme last autumn, when the Conservatives crashed the economy and trashed their reputation in a matter of days, through a reckless disregard for our economic institutions and for working people’s security. But it is not just about last autumn; it is about 13 years of Conservative government. It is about the inability of the Conservatives to provide the stability, the certainty and the plan for the future that businesses and our economy need.

If we have crashed the economy and we do not have a long-term plan, why are you voting with us today? [Interruption.]

Yes, Madam Deputy Speaker, I took that question to be addressed to me rather than to you. We have made it clear that when it comes to the measures in the Bill for which we have been calling for some time, we welcome and will support them. We would not oppose measures that we have been calling for. However, given the Government’s chopping and changing year on year from one Finance Act to the next, it is desperately clear that there is no evidence of a long-term plan over the past 13 years, and no evidence of the plan that we need for the future. I hope that in a general election, when businesses and working people across the country look at the Conservative party and at the Labour party and ask themselves who has a plan to grow the economy and make working people better off, they will conclude that it is us.

May I make a further point about cultural tax reliefs? It seems to me that there is not quite enough understanding of the importance of this subject on the Government Benches. International touring is vital to the survival of many orchestras and makes up a fifth of earned income. That is a substantial proportion. My hon. Friend has talked of the changes that have been made, and all the flip-flopping. There is a strong economic and strategic case for incentivising touring in the European economic area for UK orchestras, because it boosts cultural exports and enhances the UK’s place on the world stage. That does not apply only to film and video, which the Minister has mentioned; our orchestras are world-class too. There is a move to limit the cultural tax reliefs, including orchestra tax relief. I am grateful to my hon. Friend for saying that that will be reviewed in Committee, but the key issue is the continuing importance of those cultural reliefs, and what the Minister has said today does not convince me that he understands that. I therefore fully support what my hon. Friend is saying.

I thank my hon. Friend for her intervention on that point, and we will certainly raise questions on her behalf in Committee to try to get clarity from the Government. As she rightly points out, clarity and certainty have been distinctly lacking from this Government over a whole range of topics. We will certainly press them on that in Committee.

As I was saying in response to the hon. Member for Poole (Sir Robert Syms), we will not be opposing many of the individual measures in the Bill, including those on capital expensing, on research and development and on tax avoidance and evasion, but they all serve to remind us just how much of a merry-go-round this Government have become and just how much they lack a plan for the future. A plan for the future is what has been sorely missing from this Finance Bill and from the autumn statement, and it is clear that the Conservatives are now incapable of offering one. With no stability, no real certainty and no plan for growth that works, businesses are left without the partner in Government that they need, and without the growth that our economy needs, working people are left worse off, with the tax burden set to rise to a peacetime high.

If Labour wins the next general election, we will overhaul and accelerate the planning system, modernise our electricity grid, attract far greater private investment, scrap and replace business rates, set out a road map for business taxation and boost skills and training across the country. We will do all that to get the economy growing and to make working people better off. That is the change our country needs. Without change, we would have a fifth term of the Conservatives, and what on earth would that mean for Britain? What would the Conservatives speak of as their achievements in this Parliament? Twenty-five tax rises, the highest tax burden in eight decades, taxes up £1,200 per household and two decades of pay stagnation, as well as a fall in real household disposable incomes—the first time that has ever happened in a Parliament. That is the record of the Conservatives. That is what they cannot hide from and that is why it is time for change.

I call the Chair of the Treasury Committee.

What an extraordinary experience that was. I have just listened for nearly 20 minutes to the hon. Member for Ealing North (James Murray) ranting on about tax hikes, but at the same time not proposing a single concrete economic policy. Indeed, Opposition Members have gone entirely AWOL. Where are they? There is no one on the Opposition Benches this afternoon. They are not going to oppose a single measure in this Finance Bill. I have scoured Wikipedia for any policy they might have come up with on taxation, and all I have found is that they are proposing an additional £28 billion in borrowing. That is simply more taxes for our children and grandchildren to pay in the future.

I have also spotted that the Opposition have two additional new taxes that they think would be a good idea. Those two taxes are the ones that were outlined by the shadow spokesman. The first is the non-dom taxation, which analysis shows would actually result in a net subtraction in tax revenue to the UK economy. Furthermore, they are proposing that we should be the only country in the world that taxes education, with a tax that would increase the cost to the state and again fail to pay for itself. So that was my scour of Wikipedia. I am now going to move on from discussing the Opposition rant to talk about the excellent points that the Financial Secretary to the Treasury, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston) has made.

I will give way to the hon. Lady.

I am standing in part to illustrate that I am here, because the hon. Lady just said that there was nobody on this side of the House. Well, here I am, and I have been intervening on both the opening speeches, so I hope she will take that back. Also, could she clarify what she was talking about when she mentioned a tax on education?

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

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

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

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

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

“have a clear consistent rationale”.

He wants it to be

“easy for taxpayers to get their tax right”.

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

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

In summary, the Government want

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

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

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

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

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

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

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

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

I call the SNP spokesperson.

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House, while approving the changes to taxation of tobacco in the Finance Bill and full expensing being made permanent, declines to give the Bill a Second Reading because it fails to make a much-needed reduction in VAT for the hospitality and tourism sectors, and fails to introduce measures through the tax system that would help alleviate poverty.”

It is a pleasure to follow the Chair of the Treasury Committee, on which I serve, even though she is at odds with the London School of Economics and the University of Warwick on non-dom status—we might return to that later.

The problem with this Bill is not so much what is in it but what is not in it. For example, full expensing is being made permanent, which is laudable and is to be supported, but the Minister and, indeed, the hon. Member for Ealing North (James Murray) did not mention that choices are being made that fail to support families, that make people poorer and that reduce community resilience and sustainability, which is no way to grow an economy. There was no mention of tackling the growing cost of living crisis that people face every day. There was nothing on rents, mortgages, food bills and, most of all, energy costs, as we go deeper into winter. The Minister is an affable person, but he has a brass neck as wide as the Dispatch Box to say that the Government are looking to invest in public services—I will come back to that in a moment.

Today, the Bank of England has told us that the proportion of mortgage balances in which the borrower is behind on payments is the largest in six years. The SNP asked for direct help for people: a £400 energy bill rebate, a social tariff on energy, a lower price cap, mortgage interest tax relief and help for tourism businesses through VAT adjustments. Of course, there could have been much more, but we got none of that from the Chancellor or from this place.

Instead, the Government turned a deaf ear to the inflationary costs for households, in addition to starving the public sector of funds. Councils in England are already going bust: Labour-controlled Birmingham, Hackney, Croydon and Slough; Conservative-controlled Northamptonshire and Thurrock; and Lib Dem-controlled Woking. The Local Government Association says that one in five councils—60 of them—is at risk of issuing a section 114 notice, but the Chancellor, while doing nothing to help families, is slashing public sector spending. Richard Hughes, from the Office for Budget Responsibility, has pointed out that there are £19 billion of public sector cuts coming:

“the real spending power of Government departments in England goes down by about £19bn over the forecast period”.

The Chancellor has also frozen capital spending, which has a direct negative impact on the spending available in Scotland. When Labour is asked what it would do differently, we hear only silence. There is no attempt by this place to protect public services. Scotland’s block grant has, over the past few years, been cut by 17% in real terms compared with 2010—the House of Commons Scrutiny Unit has given those figures. We all know that inflation running at 4.7%—do not forget that it was much higher last year, at 11.1%—means that any increase is dwarfed by inflation, so when Scotland’s block grant increases by just 1.4% next year, it is wiped out before it touches the sides. This is a savage real-terms cut for Scotland.

The Office for Budget Responsibility has said that living standards will be 3% lower in 2024-25 than they were before the pandemic, which is the largest reduction in living standards and the highest tax burden since the 1950s. There is zero growth forecast for the economy. The GDP figures from the Office for National Statistics show that for the three months to October 2023 there was no growth, and the economy actually contracted in October.

David Bharier from the British Chambers of Commerce says that this

“confirms the low-to-no growth cycle the UK economy is in.”

That, of course, takes us directly to the choices that this Government and this place have taken since Brexit. Labour, the Conservatives and the Lib Dems support Brexit, so the self-harm continues to cause difficulties.

The UK suffered a broad-based fall in both openness and competitiveness between 2019 and 2021. UK trade fell by 8%, compared with 2% in France. That is not my description; it comes from the London School of Economics. Our industries face severe challenges due to the Westminster-inflicted harm of Brexit, yet this place cannot point to a single benefit, beyond a made-up line about vaccines. Workforce shortages in tourism, hospitality, the NHS and care have all dramatically increased since Brexit—a Brexit that Scotland rejected and continues to reject. Yet for the people of Scotland, Westminster continues to show indifference.

The Institute for Fiscal Studies has pointed out that the 2p cut to national insurance in the National Insurance Contributions (Reduction in Rates) Bill is almost entirely eaten up by frozen tax thresholds, due to what is known as fiscal drag. Basically, this Government are giving with one hand and taking away with the other.

We have seen nothing on energy bills, which are due to rise again in January; nothing on food bills, while countries such as France and Canada take action; nothing on mortgages, on which the Government could have delivered some relief; and nothing to reduce VAT in a range of areas, where the Government could have taken action to help people and to ease inflation at the same time.

Although certain measures, such as full expensing being made permanent, are welcome, the biggest problem with this Bill is what it fails to address, and that is to help millions of households that are struggling with the cost of living. This place should have introduced a UK-wide version of the Scottish child payment to help families. It should have introduced a £400 energy bill rebate and a social tariff, and it should have provided for a household essentials guarantee.

The Government could have addressed unfair tax loopholes by abolishing the non-dom tax status. As I said, the University of Warwick and the London School of Economics reckon that would raise £3.6 billion per year. The Government could have done that and they could have decided to put a tax on share buy-backs, but instead they decided to set their sights on ill and disabled people, telling them to get back to work. It is worth remembering that, according to research in 2015 by the University of Liverpool and the University of Oxford, old-style incapacity assessments were “associated with” an extra 590 suicides across England between 2010 and 2013. This is a scandalous thing to bring to people at this time. Positive Money has noted that a windfall tax on the profits of the big four banks could have raised £20 billion in the first six months of this year, but the Government chose to do nothing.

The autumn statement delivered the worst-case scenario for Scotland and for our people. We needed proper funding for public services, but instead we face massive cuts—the health funding announced represents just 0.01% of the budget for 2024-25. We needed immediate help for people in our energy-rich country to pay for some of the highest energy bills across the nations of the UK.

By contrast, the SNP Scottish Government have ensured that people in Scotland pay less council tax than those in England, and we have frozen council tax for the next year in order to assist with the cost of living crisis. At the moment, people do not have to pay prescription charges or tuition fees, and they do not have to pay for eye tests. Under-22s and over-60s do not pay for bus travel. We also have the Scottish child payment and much more. In Scotland, we have used the limited social security powers we have to provide dignity, respect and support for people. Those are manifestations of the values of a progressive Government looking at every opportunity to help people who are struggling.

Imagine what would happen to all of that for the people of Scotland if this place had control of all of those issues, as Labour and Conservative Members want to happen. The Scottish Government are using all the levers at their disposal to help people through this cost of living crisis, but the implications of this Westminster fiscal event are clear; with the current reliance on Westminster for our capital grant allowances and limited borrowing powers, this place is stamping its austerity on Scotland. The path for Scotland is ever clearer: we need to be an independent country, to rejoin the EU and to have the ability to look after our own people.

It is a pleasure to speak in this debate. Let me start by declaring an interest in relation to clause 15, as I believe I am one of the Members who managed to discriminate against themselves via pension changes a decade ago and therefore will benefit from the tax changes in this Bill. I should therefore perhaps not touch on that any further.

Overall, there is nothing to oppose in the Bill. I will break the habits of this debate and try to speak about the Bill, rather than stuff that is not in it or might have been in it. I will try to address some of the clauses it contains. Clause 1 deals with the full expensing of expenditure on plant and machinery, a matter I raised in the debate on the autumn statement. I welcome the measure, which I hope will work to encourage greater capital investment across the UK economy.

However, we should not underestimate how fundamental a change in our tax system that measure is. We have built, over decades, a series of rules on how companies—and individuals too, but we are talking about companies for this purpose—get tax relief on the capital spend they make. A large amount of work has to go into tracking what is counted as revenue spend and what is counted as capital spend, but now there is no point in doing that work in respect of plant and machinery, because companies are going to get the same tax treatment either way round—so all that can go.

Then there are all manner of ways of getting that relief, be it through the main general pool for plant and machinery, the long-life asset pool or the short-life asset pool. We have different rules for cars, for environmentally-friendly assets and for environmentally-friendly cars. We should take a step back and ask, “Is it necessary to keep this whole complicated regime if, for the vast majority of spend, we are giving 100% tax relief in year 1 when that spend happens? Should we now look at striking away a load of that and just accept that we could have a very different regime?” Perhaps we should just accept the accounts depreciation for all the other assets that are not plant and machinery? I suspect that the loss to the Exchequer for accelerating tax relief on those things would be tiny, but it would take away a huge burden of having to follow a different set of rules.

We also ought to ask, “What do we mean for buildings?” We are now being generous for tax relief on plant and equipment, but not generous at all if a brand-new factory is built. Tax relief is given very slowly on that and even then not on the whole spend. Is that what we want? Or should we be trying to incentivise people to build brand new, modern, energy-efficient factories? We give very little tax relief for office buildings. We want more people to come back to work together in offices, so should we not be incentivising people to build brand-new offices in the right parts of the country, rather than giving no tax relief?

We end up driving an entire leasing industry, because a completely different tax treatment is given where assets are leased or rented, rather than bought outright in someone’s own name. Do we really intend that if someone finance-leases something, they get 100% relief up front? What happens with a hire purchase? All this stuff is so complicated. Having made this radical and expensive change, the Government should go away and think, “What is the future of tax relief for capital items in the UK? How do we incentivise the right form of spend?”

I wish to raise one other question for the Minister to think about. It is very likely that a lot of businesses will be unable to get full relief for this in the first year, because they just will not have enough profit to absorb all their capital spend being relieved in a year. The chances of a medium-sized business that buys a multi-million-pound printing press having multi-million-pound profits are low, so it will end up having a loss to carry forward. Such a business will get benefit in the fullness of time, but we will have restricted how much of its losses it can carry forward and use—if it is a business of a certain size, it can offset only up to £5 million. Do we really mean that now? Or do we mean that if a business has spent a load of capital and generated a big loss that is carrying forward, it should be able to relieve that as early as possible when it makes a profit? Do we need to revisit some of those restrictions we have introduced for sensible reasons in the past?

I urge the Minister to commission some work, now that he has made this big and expensive change, on what the whole regime should look like. Do we need all those hundreds of pages of rules and all the compliance effort that has to go in, for what will probably now be relatively small amounts of tax relief at stake in the grand scheme of things?

I wish to discuss a few other clauses. I wholeheartedly welcome the Bill’s anti-avoidance clauses. It is absolutely right to extend the punishments we give individuals who recklessly promote tax avoidance schemes that they ought to know do not work and in many cases do know do not work but carry on trying to sell. It is entirely reasonable to have the sanction of being able to disbar them from being a company director if they carry on doing that. There has been a lot of encouragement for the Government to go further on duties to prevent all manner of economic crimes, so I fully welcome these things.

In Committee, we could perhaps think about whether we are sure we have drafted that measure perfectly. A lot of tax advisers work through limited liability partnerships, but where someone is a member of a limited liability partnership that is promoting unacceptable tax avoidance, they will not be caught by these rules because they are not a director of a company that is doing it. Therefore, such a person will not be disbarred from remaining as the designated member of an LLP, because they are not a director of a company. Is that what we mean? Given that LLPs and their members have to be registered with Companies House, should we not broaden that sanction out to catch as many people as possible? Perhaps the Minister would think about whether we could make some extension to this, to ensure that we are catching everyone engaging in this industry, not just a small subset of it.

Clause 21 has further amendments on pillar two; at times, I think I am the only Back Bencher who supports pillar two. I will continue to support it but, as I said a year ago, the rules are fiendishly complicated. Anyone who tries to read clause 21 and the schedules that come with it will realise they contain an almost impenetrable set of rules for a relatively small number of situations, in relation to a simple principle about subsidiaries in tax havens that are paying less than 15% tax having their tax topped up to 15%, in order to discourage tax havens and the artificial movement of profit.

We have ended up with a hugely complicated shadow tax regime that every company with subsidiaries around the world will have to apply to every subsidiary they have. Even if they are in a respectable country with tax rates even higher than ours, they will have to work out whether they have accidentally managed to trip themselves below that rate. That cannot be what we intend, so can we try to find a way to filter out most of this work, so that we can catch the guilty but not make life miserable for the innocent?

With those few remarks, I welcome the Bill. The provisions are entirely sensible and I look forward to supporting them. I will have to vote against the SNP amendment, because I want the Bill to proceed today.

The Liberal Democrats do not support the Bill. It is a deception from the Government after years of unfair tax hikes on hard-working families.

The Conservatives talk about tax cuts, but there are no tax cuts. The autumn statement maintains the Government’s unfair stealth taxes through the freezing of tax thresholds, dragging millions of people into a higher band or into paying tax for the first time. Changes to national insurance rates will not even touch the sides after years of tax hikes and spiralling mortgages. Thanks to the Conservatives’ decision to freeze tax thresholds, next year someone on a typical salary of £35,000 will pay an extra £400 in tax, and someone earning a middle income of £65,000 will pay an additional £1,200. Meanwhile, the typical mortgage will go up by £220 per month. Nobody is better off after years of this Conservative Government.

Worse still was the deafening silence on health in the autumn statement. The Government should be using any additional tax revenue to tackle the crisis in our NHS, to give people the quality of care they deserve and to let more people return to work to grow our economy. We cannot fix the economy without fixing the NHS. OBR growth forecasts have been halved, largely because people are waiting for NHS treatment. It is a no-brainer that we need to treat the millions of people on NHS waiting lists and allow them to return to work, but this Conservative Government simply do not care.

The Bill offers nothing to households struggling amid the cost of living crisis. It fails to introduce a proper windfall tax on the super-profits of oil and gas producers. That revenue could be used to fund energy support for the most vulnerable, such as doubling the warm home discount and launching a proper home insulation scheme. It could also be used to invest in British farmers, to bring down food prices for the long term.

The Bill fails to reverse tax cuts for big banks, a measure that could fund support for vulnerable mortgage holders and renters. Worst of all, it takes none of the vital steps we need to grow the UK economy, such as launching an industrial strategy, reforming business rates and the apprenticeship levy, and reducing trade barriers for small businesses.

As other hon. Members have highlighted, the creative industries are a major driver of the UK economy and the Liberal Democrats are committed to ensuring their continued success. The Finance Bill has some implications for theatre tax relief, which plays a crucial role in enabling the development of new theatre productions. UK Theatre and the Society of London Theatre have raised concerns to the Treasury about these implications, which could damage how this essential relief operates. I urge the Treasury to work with representatives from the creative sectors to address these concerns and provide clear guidance on changes to the administration of theatre tax relief introduced in this Bill.

While the Liberal Democrats support of certain measures within the Bill, such as the extension of full expensing, we cannot support any legislation that arises from such a deceptive and unjust autumn statement. Ultimately, the Office for Budget Responsibility says living standards are forecast to be 3.5% lower in 2024-25 than their pre-pandemic level, which is the largest reduction in real living standards since official records began in the 1950s. Households across the country are crying out for real support from this Government, as well as action on the cost of living crisis and investment in our NHS, but all we have heard is more stale announcements that show just how out of touch the Conservative Government are.

I now have to announce the results of today’s deferred Divisions.

On the draft Representation of the People (Overseas Electors etc.) (Amendment) (Northern Ireland) Regulations 2023, the Ayes were 325 and the Noes were 154, so the Ayes have it.

On the draft Equality Act 2010 (Amendment) Regulations 2023, the Ayes were 464 and the Noes were 11, so the Ayes have it.

On the draft Representation of the People (Overseas Electors etc.) (Amendment) Regulations 2023, the Ayes were 324 and the Noes were 186, so the Ayes have it.

[The Division lists are published at the end of today’s debates.]

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.

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?

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.

I agree with a lot of what my right hon. Friend the Member for Witham (Priti Patel) said. I was in this House for 13 years of Labour Government. Twice a year, we had the autumn statement and Budget, and all taxes were reviewed. In not one of those fiscal statements did they change the arrangement for non-doms. Why? Because it brings in more money. I am therefore shocked at the criticism from those on the Labour Front Bench of their Chancellors when in government. What we have with the Opposition is the politics of the magic money pot. The magic money pot is called non-doms, and the Opposition think that it will pay for everything. It will not; because such people are internationally mobile, they will move. The best things to tax are things that do not move, such as property. People can move, and we will not get sufficient money in as a result.

The Government have done a lot of good things. Putting up the triple lock is the right decision to look after pensioners, but those who pay tax might, because their pension will go up, pay more tax. Putting up the living wage is a good thing, because we want a higher-paid economy, but as lower-paid workers’ pay goes up, they pay more tax. It is one of the features of the modern world that those in the most successful and highest-paid economies tend to pay more tax. Although the overall tax burden, because of the freeze, has gone up, we need to reverse that, and we have started the process in the autumn statement.

The Government have set out a good long-term plan, which is essentially based on increasing the incentives for business to invest. We have a problem in Britain on productivity. One way of getting productivity up is to get pay up and investment in machinery and equipment up. If we can do that, we can pay for the public services that we all want, on both sides of the House, in terms of better education, a better health service and better outcomes. However, that requires getting productivity up. One of the problems since 2008 has been that Britain has struggled with productivity. Whatever we do, whether it involves incentives, higher pay, or credits for research and development, if it gets productivity up, that has to be a good thing.

I welcome an awful lot of what is in the autumn statement, but we should not look at it as one event; it is part of a series of events brought in by the Chancellor that mean that our national debt is falling over the plan. Our yearly deficit looks like it will be in the 3% range rather than the 4% range. Even the trade gap looks like it is improving. Our economic situation does not look too bad, and when we look over the channel to the EU and the eurozone, our problems seem rather less than theirs, with some of those countries going into recession.

I, too, saw today’s GDP figures. I would caution against any flash estimate of GDP. The monthly figures bounce around. I spent six weeks on a Finance Bill Committee during the days of the coalition when every day those on the Labour Front Bench talked about the double-dip recession, which was revised away six months later. The key point is to do the right things for the economy, get productivity up and get the economy growing, and the other things will come right. They will certainly come right when a lot of data is in. Even the three-monthly GDP data is based on something like a quarter of the stats. It is constantly updated over years and months. We should not be too fixated on short-term figures.

One reason I think the economy will grow over the next 12 months is that living standards have gone from falling to rising. That means that ultimately the British consumer ought to come to the rescue of the British economy and get it growing, if the Government can keep a stable economic situation, and pay continues to outstrip inflation, which I am very optimistic about. Brent crude has fallen under $75, which means that gas prices are now barely above where they were before the invasion of Ukraine. That has improved since the autumn statement. Petrol prices are falling again. This morning, the 10-year bonds interest rate was under 4%. That is a sign that the pressure now is to lower interest rates. The overall Government economic policy is not only to balance the books and reduce taxation in terms of national insurance, which will help 29 million people, but to get interest rates down so that, when people come to refix their mortgages, they can do so at a more reasonable rate. Good progress has been made, but we will not be free with one bound; it will take Budgets, statements and steady persistence. That means not giving in to every request for extra spending, however worthy they are individually. I commend those on the Treasury Bench and the Chancellor of the Exchequer. He has put together a good package, and I look forward to what will happen in March.

Before I sit down, I will pay tribute to a Labour Chancellor, Lord Alistair Darling of Roulanish, who was a very modest but very competent man. He faced what would be anybody’s nightmare in the Treasury, with banks collapsing. I think that history will treat him well for his management of the economy at that very difficult time. He is missed by this House and I am sure the other place will miss him too.

I echo that tribute to Alistair Darling. I was in the House with him for many years. He was a great politician and an excellent Chancellor of the Exchequer.

David Simmonds will make the last Back-Bench contribution. We will then move on to the wind-ups. I anticipate at least one Division.

It is a pleasure to speak in this debate, having been here to listen to some incredibly insightful and useful contributions from so many colleagues. I will endeavour not simply to repeat those excellent points, but to focus on some additional ones that have been raised in the course of the debate. My hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, touched on something that is not in the autumn statement, but that I am sure those of us on the Government Benches will wish to seek further assurances about from Ministers: the tax on education proposed by the Opposition.

I represent a constituency in which there are five independent fee-paying schools, which have certainly been in contact with me to raise their concerns about the Opposition’s proposal. Every secondary school that serves my constituency, including the state-funded ones, is an independent school, because they are all academies. Every special educational needs and disability school that serves my constituency is an independent school, including those that have never been part of the state sector but came into existence as charitable organisations with a view to providing specialist SEND services. There are even stables in this country that provide equine therapy to non-verbal autistic children that, because they serve more than one child, are registered as independent schools with Ofsted.

The implications of the proposed policy, which it is said would raise £1.7 billion, would be additional VAT on fees paid by local authorities up and down the land and, more significantly from the Exchequer’s perspective, to bring a huge amount of VAT within scope of being reclaimed by that wide variety of institutions. I hope that Ministers will state with great clarity that it remains the policy of this Government that we support the excellence in our incredibly diverse independent sector, which includes both SEND and state-funded education.

We have been challenged to say what has been the biggest achievement of the Government in the past 13 years. For me, it is the thing that forms the backdrop to this Finance Bill and to my right hon. Friend the Chancellor’s autumn statement: the transformation in the number of people in our country who earn their own living through work. The Office for National Statistics data shows an incredibly clear trend in youth unemployment. Under the last Conservative Government, it was falling and falling; once Labour took office, it began to rise. Since this Government took office in 2010, the rate of youth unemployment has halved. That makes an incredible difference to both the financial wellbeing and, most importantly, the mental and physical health of our young people. It gives people prospects. It gives people hope. It means all our citizens have a stake in the economy of our country.

The same trends are replicated elsewhere. I remember what it was like as an employer trying to engage with the incredibly complicated systems under the last Labour Government, in which so many people were disincentivised to work—especially women who wanted to work part time and fit that around bringing up children. The changes in policy—particularly universal credit and really good childcare offers—have transformed the ability of people in this country to access the workforce over that period. While that has not always meant that those individuals are much better off, the fact that they are able to earn their own living and take pride in having a stake in our economy is incredibly important.

There are particular reasons why this Bill strikes me as important. I would like to develop the point made by my hon. Friend the Member for Amber Valley (Nigel Mills) about tax avoidance stop notices. I have a number of constituents who have been affected by the loan charge over the past few years, and it particularly concerns me to hear from them that, in some cases, they are still being contacted by businesses trying to sign them up to schemes of the kind that have already got them into significant financial trouble.

I enormously welcome the fact that the Government are taking steps to make sure that that behaviour can be brought to an end and that we do not see any more of our constituents trapped in financial situations not of their own making as a result of the marketing of organisations that should know that, while what they are doing is theoretically and perhaps technically within the law because a loan is free of tax, if it is not a genuine loan and not to be repaid during the person’s lifetime, it should be considered part of their remuneration for the purposes of taxation. I welcome the step that the Bill makes in that respect.

The second thing I particularly welcome is the abolition of the lifetime allowance charge. I have heard from a very large number of professionals across my constituency, especially in the NHS, but also in other types of businesses in the private sector. The impact of the lifetime allowance has been the loss of highly experienced staff from those organisations. These are generally people in their 50s and 60s who are at the peak of productivity and have an enormous amount to give, but face a financial cliff edge and are forced by that limit to make a decision to leave a career that, in many cases, they love and enjoy and in which they have much to contribute. In the NHS in particular, the change will enable experienced GPs, surgeons and consultants to return to the workplace or continue working at a higher level than they would have been able to in other circumstances. For that reason, it will benefit our public services enormously, both in productivity and by ensuring that waiting lists, which are already beginning to fall, come down much faster.

Let me turn to some of the measures designed to support our small businesspeople and the self-employed. In politics, the loudest voices in debates about the economy are often those of large corporations with substantial, well-funded public affairs departments. However, we also know from the ONS that around 70% of people employed in the UK economy are in an enterprise with fewer than five staff. The voices of those small businesses, which are the bedrock of our economy, are not heard collectively as often as the voices of big international businesses.

The measures to simplify and reduce national insurance for small businesspeople and the self-employed are enormously welcome, and not just because of the money that they put in people’s pockets—it is important for us to remember that point. We heard some scoffing and comments of “big deal” from the Opposition when the reductions in class 2 national insurance contributions were mentioned, but the reductions represent about a quarter of what most households in the UK spend on Christmas, or a significant contribution to a child’s school uniform, a summer holiday or maintaining the car. All of those things make a small difference individually and a big one collectively. They send a message to our lower-income but entrepreneurial people that we are a Government who are on their side and keen to get off their backs.

I will finish with two suggestions. The first—to develop again a point made by my hon. Friend the Member for West Worcestershire—is to tackle some of the cliff edges in our tax system. The abolition of the lifetime allowance charge is one example of that. It is clear that around the £100,000 income level—that is a significant sum of money, but one typically earned by many of the public sector professionals on whom services such as the NHS, GP practices and schools depend—many of the benefits of extra earnings begin to be withdrawn. The situation in which two earners on £99,000 a year, with a joint income of £198,000, can continue to enjoy the benefits of tax-free childcare, but if one earner goes to £100,001 a year, those benefits are completely withdrawn, creates a significant marginal tax rate for professionals with children.

I have heard from a number of constituents who work in public sector bodies, particularly the NHS, that they have had to scale back their hours or decline to take on additional waiting list initiative work funded by the Government because the impact of that cliff edge is so financially significant for them. Of course, we see the same impact at that point from the pensions taper. I suggest to my Front-Bench colleagues that, as we think about the public sector productivity strategy, we need to consider how to take out some of those cliff edges so that the people we are asking to work and contribute more, and who are in a position to make a transformational difference to some of our public services, have good financial incentives to do so.

Finally, the OBR has been mentioned a few times in the debate. There is a degree of controversy about whether it is the correct body to provide a view about the sound financial management of our national finances. Having spent a lot of time in the local government sector, it is striking to me that it is a legal requirement for councillors making decisions in any of our local authorities to have before them the financial and legal implications of the decision, whereas in this House we usually decide on policies in a crowded debate with a big row about what we should do and then, sometimes months later, have a scantily attended debate at which the financial implications of the policy are debated and agreed. We do not take the financial implications and the policy decision together. I suggest that Ministers should consider whether, in order to emphasise the sound financial management approach of a Conservative Government, in addition to statements such as those about compliance with the requirements of the European convention on human rights, we should seek to ensure that every Government policy and paper on which this House makes a decision states what the financial implications of that decision might be.

Coming back to the point about VAT on school fees, I will make a forecast: should there be a change of Government, we will find ourselves back in the position that we were in under Gordon Brown. The announcement will be, “We want to spend the extra £1.7 billion that we have assumed, but we can’t actually raise that in taxes because the policy doesn’t work in practice, so we’ll borrow it,” and the £28 billion will become £29.7 billion. In addition, the non-dom money will not be forthcoming, so the Government will say, “We’ll assume how much that might be when we get around to tackling that and add that on to the borrowing as well.” That is the reason why under Gordon Brown we spent something like 10% more in every year than we raised in tax revenue. As a measure to prevent future Governments from running our finances into the ground again, let us make sure that we have that clarity of financial rigour in the decision making of Parliament, so that when Members cast our vote, we all understand the implications for taxpayers of the policies on which we are making decisions.

I call Tulip Siddiq to begin the wind-ups.

This afternoon, we have been told that the measures in the Finance Bill and the wider autumn statement will deliver the growth that our economy urgently needs. Unfortunately, our leading economic institutions and economists do not seem to agree. Despite the Conservatives’ attempts to distract attention with headline figures, the independent Institute for Fiscal Studies has described their numbers as “sort of made up”. The Chancellor wants us to believe he is cutting taxes to give people back more of their pay packets, but the reality—as my hon. Friend the Member for Ealing North (James Murray) helpfully clarified for the Government—is an average tax rise for working people of £1,200, with nearly everyone who pays national insurance left with a bigger tax bill next year.

The Chancellor may want gratitude and praise for his recent interventions, but the reality is that growth forecasts have been cut for next year, the year after and the year after that. Meanwhile, the Bank of England is forecasting zero growth before 2025. The Conservative party might want us to believe that that is due to events outside its control and that things are starting to improve, but we learned just today from the latest GDP figures that growth fell in October, demonstrating that our economy is still going backwards despite all the warm words we have heard from Ministers. Taxes up, debt skyrocketing and the biggest hit to living standards ever recorded—that is the legacy of 13 years of Conservative government, however much they try to escape from the reality of their record. Only the Labour party has a clear plan to grow our economy by boosting wages, bringing down bills and making working people in all parts of the country better off.

As we have set out, there are a number of specific measures in the Bill that we support and, indeed, have long called for, so we will not oppose the Bill’s Second Reading. For example, we welcome the Government’s decision to heed the calls of industry and make full expensing for businesses permanent, because we know that if the UK is to turn a corner and we are to drive growth in the economy, we need to address our chronic lack of business investment.

While we wait for Committee stage to examine in great detail the decision to consolidate research and development tax relief schemes, it is worth noting that that is the latest of eight separate changes to the R&D regime that this Government have made since the last election. My hon. Friend the Member for Ealing North took us on a comprehensive tour of the constantly shifting tax policy we have seen from the Tories during this Parliament. It is now clear that by chopping and changing their business taxation and reliefs, from the annual investment allowance to the short-lived super-deduction, the Government have kept businesses guessing and not given them the confidence they need to grow.

The measures set out today do not scratch the surface when it comes to undoing the years of uncertainty for business and investors, while industry is crying out for stability and a long-term plan. The truth is that, despite the words of Conservative Members, the UK is now lagging behind our international competitors when it comes to private sector investment as a share of GDP, at a time when we cannot afford to drag our feet. It is Labour who will address this head-on with a comprehensive plan to boost business investment, working with our businesses to expand and compete with rivals in the US, Europe and Asia.

It is clear from this Finance Bill and the recent autumn statement that this Government lack the imagination, leadership and appetite to transform our economy after 13 years in power. Without that stability, certainty and long-term plan, our businesses will be left unequipped to deliver the growth that we so urgently need at this time. If we do not deliver that growth, the poorest in our society will pay the price as their living standards stagnate. The Government may want us to believe that our economy is turning a corner, but back in reality, millions of people are struggling to make ends meet.

The hon. Member for Ruislip, Northwood and Pinner (David Simmonds) asked what the greatest achievement of this Government is. Frankly, I think that is quite a dangerous question, but I will try to answer it for him anyway. Was it crashing the economy, or producing the shortest serving Prime Minister in the history of our country? Was it the tax burden being at its highest since the war, household incomes that will be 3.5% lower next year than before the pandemic or, my personal favourite, the latest growth forecasts showing us plummeting and plummeting even further? Was it—shall I turn to my own constituency—people having to make the choice between turning on the heating and eating? That is the reality facing people in the country after 13 years of a Conservative Government.

Will the hon. Lady give way?

I have one line of my speech left, but I will give way.

If, as the shadow Minister says, and I agree, the Bill is this bad, why is she voting for it?

We are not actually voting. [Interruption.] I think the hon. Member is slightly misguided, as we are not voting.

There are specific measures that we support, but, overall, we do not support the economic plan of this Government. If the Government are so sure about their economic plan, why do they not take their opinions to the public? Why do they not call a general election, and we will see who is smiling and smirking after that?

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

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

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

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

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

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

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

Will the Minister give way?

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

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

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

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

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

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

Question put, That the amendment be made.