Finance Bill

Part of Bill Presented — Constitutional Convention (No. 2) Bill – in the House of Commons at 1:49 pm on 21st July 2015.

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Photo of Shabana Mahmood Shabana Mahmood Shadow Chief Secretary to the Treasury 1:49 pm, 21st July 2015

As the Financial Secretary knows because we have already had such an exchange—I feel we are reliving our greatest hits—on a number of occasions in the past couple of years, our policy at the general election was our manifesto commitment not to go ahead with the corporation tax cut from 21% to 20%. We would not have gone ahead with that additional cut to 20%, but instead used all the money to pay for a cut to business rates this year and a freeze next year. It was a direct switch spend. We wanted to make a commitment to small and medium-sized businesses in our country to do something practical on business rates, but we needed to find a way to pay for that, and we chose to switch-spend in respect of the additional corporation tax cut. We of course lost the election, and the Government are proposing a further decrease of the corporation tax rate. We will support the corporation tax measures, but we will ask questions about what that means for the future direction of travel.

Following an intervention, the Financial Secretary mentioned the BEPS project. On corporation tax more generally, it is important—given how some companies seek to shift profits and game international taxation rules—to have international agreement. Concern has already been expressed in some quarters that some of the countries with which we need to do business and with which we need to agree international tax rules might start to see us as a tax haven. I disagree with such a characterisation, but there is such a risk in getting agreement within the OECD BEPS process. I would welcome it if Treasury Ministers could, in Committee, provide further details about what is happening and about how our friends in the BEPS process are reacting and responding to the Government’s proposal on the headline rate of corporation tax.

One measure we have already voted against relates to inheritance tax. Clause 9 introduces an additional residence nil-rate band for inheritance tax when a home is passed to the direct descendants of the deceased on or after 6 April 2017. The provision, which runs to more than 400 lines, is extremely technical, but it in effect allows parents to pass on a house worth £1 million to their children free of inheritance tax. We have made it clear that the focus of tax cuts should be to help people on middle and lower incomes and to tackle tax avoidance. The Treasury has admitted that 90% of households will not benefit from the Government’s inheritance tax policy. Their priority should be to help the majority of families and first-time buyers struggling to get a home of their own, rather than a further cut to the rate of inheritance tax at this stage.