Our consideration having been completed, I shall now suspend the House for no more than five minutes in order to make a decision about certification. The Division bells will be rung two minutes before the House resumes. Following my certification, the Government will table the appropriate consent motion, copies of which will be made available in the Vote Office and will be distributed by Doorkeepers.
I can now inform the House that I have completed certification of the Bill, as required by the Standing Order. I have confirmed the view expressed in my provisional certificate issued on
I remind the Committee that although all Members may speak in the debate, only Members representing constituencies in England, Wales and Northern Ireland may vote on the consent motion.
That the Committee consents to the following certified clauses and schedules of the Finance Bill:
The occupant of the Chair left the Chair to report the decision of the Committee (
The Deputy Speaker resumed the Chair; decision reported.
I beg to move, That the Bill be now read the Third time.
I remind the House just how important the measures contained in the Finance Bill are for the success and prosperity of people in this country. It is about putting more money back into the pockets of all the people who work so hard, but sometimes struggle to make ends meet. It is about helping our businesses to grow and succeed, to invest and create jobs, and it is about protecting the nation’s finances by taking action to stop any individuals or businesses that seek to evade or avoid tax.
The Bill has been thoroughly debated for weeks, including with me as the Minister during the past two days. I therefore want to take a moment to thank hon. Members on both sides of the House for their excellent scrutiny of it and for the insightful and wide-ranging debate that has taken place during its passage through the House.
It is worth noting a couple of breakthroughs for which the Bill will be long remembered. The first is the amendment that was moved last night by Caroline Flint on public country-by-country reporting, which the Government supported. The welcome degree of cross-party consensus cemented the UK’s position of international leadership on this issue. It is also worth noting the long and successful campaign by Paula Sherriff and others that has brought significant progress on the issue of VAT on sanitary products. There are a number of other important measures, some of which we have debated today, and we have made important Government amendments to ensure that things work as they should.
I pay particular thanks to my predecessor, my right hon. Friend Mr Gauke, for his excellent work. Indeed, he did the lion’s share of the work in steering the Finance Bill through each of its stages. I also thank my hon. Friends the Members for East Hampshire (Damian Hinds) and for West Worcestershire (Harriett Baldwin) for setting out the Government’s case at different stages. I express my general appreciation to all hon. Members who have contributed to the Bill.
The Bill means that we will do more to help hard-working individuals and families, more to help businesses large and small, and more to safeguard the nation’s finances. Above all, it will ensure that we move forward into the new future from a position of financial strength in our economy. I therefore commend it to the House.
I pay tribute to the Financial Secretary for the way in which she has led the final stages of the Bill and to Rebecca Long Bailey, who has led for the Opposition. She took over in difficult circumstances and has handled it with great composure and competence.
It is clear to many people in the Commons today that this is a right bourach of a Bill, as we would say in Scotland. Not long after the Government voted down the SNP’s new clause on Scottish limited partnerships last night, the distinguished commentator and author Ian Fraser took to Twitter to say:
“Now we know @theresa_may’s pledge to ‘reform capitalism’
was so much hot air”.
Indeed it was hot air. The only people smiling as a result of the Government’s opposition to our new clause are the criminals and tax evaders who will benefit so much from it.
The Government’s opposition to our new clause on oil and gas, which like our new clause on Scottish limited partnerships had much external support as well as support in the House, shows that they are ill fitted to lead the oil and gas sector into the future. It does not end there. The Government continue to victimise Scotland’s emergency services in respect of VAT, to press ahead with reforms that are compromising the provision of affordable private sector rented accommodation and to ignore the harm they are doing to micro and small businesses with their so-called tax reforms. The list could go on. It becomes clear that the SNP will oppose the Bill.
A great deal has happened politically since the March Budget and during the passage of the Finance Bill. Therefore, on Third Reading, when we are invited to consider the Bill in the round, we should ask ourselves how this set of composite tax measures and forecasts for revenues and budget deficits fits into what the Bank of England thinks is a rather revised picture today, although its gloom is probably exaggerated.
We also had a very significant event from the Government themselves over the summer recess, which has not been reported to this House or debated in this House, but which should not go without comment: the Chancellor of the Exchequer gave his consent for the creation of up to £170 billion of additional money and for the Bank of England to buy large quantities of Government debt and substantial quantities of corporate debt, making available a lot of cheaper money to the banks. As a result of that needless monetary relaxation—there was absolutely no evidence at the time that the economy had suffered an output or retail sales shock in the way that the Bank foolishly thought was happening—we see that interest rates have been driven down. In particular, longer-term interest rates, which are the Government’s price of borrowing, have been driven down, and so we now must imagine that the Budget arithmetic has changed quite a lot in a very favourable direction, as there is now presumably a substantial reduction in the forecast interest rate costs for Her Majesty’s Government over the balance of this year and into the next financial year, assuming that those programmes of aggressive bond buying continue to depress the rates in the way that is clearly planned.
At some point the Government need to explain why they endorsed the Bank of England’s very aberrant view. The Government’s forecasts for the economy, which are the thought behind this perfectly sensible Budget that we are in the process of approving, look forward to the UK economy growing by 2% this year and by 2.2% next year. The Bank of England now says that the British economy will grow by only 0.8% next year. I have no idea why the Bank thinks that, but it would of course change the arithmetic, and instead of us welcoming this Budget with an even smaller deficit, because of yield compression and cheaper borrowing, we should be worrying at this juncture about the shortfall in revenues next year on the back of a much-revised Bank of England forecast. Clearly revenues will be down by quite a lot next year if growth is to be only 0.8% rather than the 2.2% that was the premise of this Budget.
I fully support the Treasury’s March view. It is extremely likely that the British economy will grow by 2.2%. I do not have my own model but I understand how the Treasury model works and I do not think that the underlying assumptions behind the model for the March forecast were unrealistic. I do not think that they have fundamentally changed as a result of the events of the summer, with, perhaps, the one exception that if the Bank perseveres with injecting anything like £170 billion into the economy, growth could be even better than the Government were expecting, because that is a far bigger monetary stimulus than they clearly had in mind when they constructed the March Budget.
The Bank of England needs to be careful. One of the curious things about the timing of its decision was that it made that announcement before we saw the real economy figures for the first eight weeks after the Brexit vote. Those figures turned out to be perfectly reasonable. They were not negative in the way that the Bank had thought. The Bank also made the injection of money just after some very important figures came out, ones that it had obviously read in a different way from me.
If we read the money supply growth figures and credit growth figures for the second quarter of the current calendar year, we will see that they started to accelerate. We had pretty steady 5% growth for quite a long period, which was giving us a combination of low or no inflation and 2% or so growth, but then those figures suddenly accelerated to around 7% or 8%. It is therefore even more bizarre that, on the back of those numbers, the Bank of England should suddenly decide to try to pump so much money into the economy, at a point where it looked as if the commercial banking system was sufficiently strong and confidence had returned sufficiently to mean an even faster rate of money growth than the one that was achieving 2% growth overall.
I am not suggesting that we need to drop this Budget because of that very large monetary stimulus, but the House should be aware that a very large monetary stimulus has been added at exactly a point where we had a perfectly sensible Budget based on perfectly sensible assumptions. The Government also need to be very careful before authorising any further monetary stimulus given what look like perfectly satisfactory numbers.
How could the Bank be that wrong—it is quite difficult to understand—and why did the Government endorse its strange interpretation? It says two things. It says that a Brexit vote could damage trade. Well, the one thing we seem to know from the very relaxed timetable the Government are proposing for getting us out of the EU is that in all probability we are going to be trading under existing single market arrangements this year and next year. There will not, therefore, be any damage to trade. I do not think there will be any damage to trade when we are out, but we are going to be trading under the current arrangements for the forecast period, so it is very difficult to see why we would knock anything off GDP because of trade. Indeed, we should be adding quite a lot in relation to trade, because clearly exports will rise quite a lot on the back of a much weaker pound.
The other thing it says is that there will be an effect on confidence. We have seen from recent surveys that there was a very short term hit to the confidence of big business executives who did not like the result of the referendum, but there was no hit to the confidence of consumers. They went out and spent more in the shops immediately after the Brexit vote than they were spending before. We saw, in the following month, that many senior company executives regained a lot of their lost confidence because they saw they were wrong and that the customers were returning to, or staying in, the shops. They are buying cars and new houses. Confidence has not collapsed, something the banks seemed to think would happen.
I urge those on the Treasury Bench to think about these matters extremely carefully. The very long procedure on the Finance Bill means that, in all probability, we are approving a Bill that was constructed in what the Bank of England thinks were very different economic times. I think the economic forecast and the economic times of March are very similar to the ones we should now accept, and I urge the Government to take that view. The House needs to note, if it is the view of the House, that on top of a Budget that has a reasonably relaxed fiscal stance compared with intentions a few years ago—something I am quite happy with—we now have a very large monetary injection. The Government need to be aware of what that might mean.
I thank the Minister and her Treasury colleagues, past and present, for their progress of the Bill through the House. I thank my own shadow Treasury colleagues, past and present, for their hard work in holding the Government to account. I thank my shadow Treasury team staff for their hard work on the Bill in the interesting times in which we have found ourselves. The Clerks deserve a mention for being pestered every five minutes by members of my staff—indeed, by the staff of other hon. Members, too. I make special mention of all Members who have worked very hard on the Bill and participated in a number of extremely thoughtful and interesting debates.
The Opposition will not be supporting the Bill on Third Reading. Although it contains some measures that we support, we simply cannot vote in favour of a Bill that does nothing to address the underlying issues in our economy. It has unfairness at its very core. I will, however, run briefly over the areas where we have found some consensus across the House.
First, there is the need to zero-rate VAT on women’s sanitary products. Many Members across the House spoke in support of this yesterday. I appreciate the Government’s sympathy with the campaign by my hon. Friend Paula Sherriff. I place on record once again my congratulations to my hon. Friend who, along with many women outside this place, has campaigned tirelessly on this issue. Unfortunately, we still had to divide the House, as the Minister refused to put down a firm date for implementation of the zero rating. I hope the policy will not be kicked into the long grass once the Bill has completed its passage through Parliament. I know the Minister supports the general principle of the policy and I am sure that my hon. Friend the Member for Dewsbury will be very quick to call the Government out should they try to avoid taking this matter forward responsibly.
We have also found a broad level of agreement on country-by-country reporting. I am pleased that the Government saw fit to accept the amendment tabled by my right hon. Friend Caroline Flint. Again, I put on record my thanks and congratulations to my right hon. Friend for her hard work and determination on this issue. The amendment stated that the Government “may” exercise their powers in this regard. However, I hope that the Government “will” exercise their powers in that regard, and I shall follow their progress very closely.
We support the Government’s steps towards closing the so-called Mayfair tax loophole, even though they did not accept our amendment to provide that all carried interest would be subject to income tax—but that, unfortunately, is where the consensus ends.
One of the biggest problems facing the economy at the moment is low rates of investment. Investment by businesses has already fallen for the last two quarters and investment by Government is scheduled to fall in every year of this Parliament. Overall investment as a share of GDP is lower now than it was in 2007—despite rising profits to companies and an all-time low cost of borrowing for the Government.
The Government maintained in yesterday’s debate that cuts to the headline rates of corporation tax and capital gains tax contained in the Bill would incentivise business investment, but they did not convince me or my hon. Friends that that would actually be the case. When we debated the cut to corporation tax yesterday, I provided some helpful figures to demonstrate that it is not clear that reductions will deliver the investment that the country desperately needs. For the benefit of Members who were not in the Chamber yesterday, I shall briefly recap.
The House of Commons Library analysis shows that business investment was higher in the year 2000 when corporation tax was at 30% than it was in 2015 when it was a full 10% lower. There is no obvious correlation between a low rate of corporation tax and high rates of business investment. Furthermore, corporations are not in need of cash in most cases. Figures provided by the House of Commons Library show that the UK corporation industry was sitting on cash reserves totalling £581 billion last year, so something is clearly precluding them from investing in the future. Frankly, the measures in this Bill will do nothing to change that behaviour.
Because of this lack of investment, productivity in the UK has fallen. Every hour of work in Britain produces one third less than every hour worked in Germany, the US or France, while real wages have fallen by 10% since 2008. That is simply not good enough—it is not good enough for British workers; it is not good enough for the economy; and it is not good for our sense of national pride. We need investment in infrastructure, in skills, in innovation and in industry. Labour is committed to providing £500 billion-worth of investment: £250 billion will be Government capital spending; and £250 billion will come from the national investment bank.
The national investment bank, along with regional banks, would transform regional economies and rebuild our financial system. Government capital expenditure would be used to improve vital infrastructure such as transport, housing and energy supply. Those are the kind of policies that businesses need to thrive, and I hope that the Government will consider them. They have not put such policies into the Finance Bill, but they have the power to put them into further pieces of legislation as this Parliament progresses.
The Bill fails to address the long-term pressures facing the UK’s energy supply industry and fails to deliver on our climate change targets, as agreed just a few months ago by Amber Rudd, now the Home Secretary. The renewable energy sector, as we heard in the previous debate, has been consistently undermined by this Government, and the Bill before us today does nothing to provide the stability or support that this industry craves.
Earlier today, we debated a specific amendment on the VAT treatment of energy-saving materials in the hope that the Government would make it clear in statute that the proposed solar tax hike would not go ahead. Unfortunately, the Government would not agree to our new clause and as such the insecurity for this industry continues. Furthermore, the Bill still makes sweeping changes to the climate change levy, which could seriously undermine its efficacy. In Committee of the whole House, we tabled an amendment calling for a review of the impact of the climate change levy on carbon emissions, but we were unfortunately defeated in the Lobbies. The change will go ahead with no assessment of whether the somewhat altered levy will do its job. That, too, is just not good enough from the British Government.
Over the weekend, we saw China and the United States ratify the Paris climate deal. Together they are responsible for 40% of the world’s carbon emissions, so that marks a huge step forward in climate change responsibility. Our Government, however, have not ratified the treaty, and have rowed back on almost all their green commitments since the election. I will not list them again, as it is an extensive list, but the Bill does nothing to tackle the issue of climate change head on, and, we believe, weakens measures that are already in place.
As for the key issue of tax avoidance, I must reiterate our view that the Government’s piecemeal approach of slowly introducing new little schemes and penalties is simply not enough. As I said yesterday, we need to see real commitment to an overarching strategy that provides genuine “legal teeth” to tackle the tax avoidance industry. At a time when our public services are tearing at the seams as a result of increased demand and a lack of resources, it is not acceptable for people to be allowed to avoid paying their taxes. It is time for tax avoiders to understand that being part of our society means paying one’s fair share towards the upkeep of that society. Labour has set out its stall with its tax transparency and enforcement programme, much of which was reflected in the amendments that we tabled yesterday. I hope that the Minister took some of our suggestions on board.
It is disappointing, to say the least, that the Government did not see fit to accept our new clause proposing a wide-ranging review of the UK tax gap and its causes. They have to appreciate that we must design a system that will really challenge the tax avoidance industry. We must overhaul our tax laws so that they are based on broad principles that will make avoidance difficult. A full public inquiry would expose the perversity of the industry, and would signal to the world that we are serious about stamping out tax evasion and avoidance wherever they may flourish.
Let me end by saying this. Labour wants to build a high-investment, high-wage economy. It wants to build an economy that will allow the UK to be a country of the future, leading the way on research and innovation; an economy in which everyone pays their fair share, and support is provided for those who need it; an economy and a society of which the British people can be proud. However, that can be done only with a Government who are committed to making it happen. We do not believe that the Bill will achieve those goals, and we will therefore vote against it this evening.
Question put, That the Bill be now read the Third time.
The House divided:
Ayes 303, Noes 250.
Division number 61