Review of effects on public finances

Part of Finance (No. 3) Bill – in the House of Commons at 6:23 pm on 8th January 2019.

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Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 6:23 pm, 8th January 2019

As my hon. Friends have set out a number of times already today, this is a Finance Bill that continues the Government’s previous programme of austerity for the many while the very best-off people are protected. This Conservative Government chose to tie the hands of this House with regard to amending the Bill, so there are very few means we can adopt to have an impact on any of these measures. None the less, new clauses 2 and 4 would require the Government to at least review their regressive policy approach. I realise that I need to compress my remarks, so I will speak briefly to each of those new clauses and then to new clause 26, which pushes in the same direction, and new schedule 1, which in many respects exemplifies this Government’s slipshod approach, particularly to tax policy making.

New clause 2 would require a review of the likely efficacy or otherwise of the Government’s very minor changes to entrepreneurs’ relief set out in the Bill. Overall, it has been estimated that the revenue forgone through tax reliefs amounts to the same as all the revenue raised through corporation and council tax, business rates, fuel duty and stamp duty. A full £2.7 billion of that forgone revenue comprises entrepreneurs’ relief.

The official Opposition are committed to properly reviewing tax reliefs as forgone revenue, to ensure that they are appropriately targeted to achieve public policy outcomes. No such analysis has been conducted by this Government, including of entrepreneurs’ relief, despite the fact that there is little evidence that it promotes entrepreneurialism or productivity to any large extent. Indeed, just 6,000 people receive entrepreneurs’ relief on gains of more than £1 million. Independent bodies such as the IFS and the Resolution Foundation have thus been deeply critical of it. At the very least, we need to know whether the Government’s reforms in the Bill are anything more than cosmetic. That is what new clause 2 asks for.

Beyond the apparently limited changes to entrepreneurs’ relief, the Bill includes a number of cases where those with the broadest shoulders are exempted from their contribution to taxation. I will just mention three. First, a proportional rather than absolute value is used to exempt non-residents from the anti-enveloping rule, which means they will be less likely than residents to be subject to capital gains tax. That is a farce, given that the measure was meant to ensure a level playing field. Secondly, the Bill has a new discriminatory trading exemption for capital gains tax that is available only to non-UK investors. Finally, we see the imposition of longer investigatory time limits for offshore tax affairs for income and inheritance tax, but not for corporation tax, thus privileging those who can incorporate and large multinational corporations.

New clause 4 is an attempt to highlight the systematic bias in the Government’s approach by contrasting the level of interest paid on penalties incurred by tax avoidance promoters with the interest payable on student loans. I am sure that many Members have seen the research released by the TUC yesterday, which highlighted the fact that households are now subject to record levels of debt. The research indicated that, excluding mortgages, average debt per household shot up by £886 last year to a new peak of £15,385.

Peculiarly, some people have tried to criticise that analysis by pointing out that it includes student loan debt, but surely we should all be deeply concerned by the fact that so many young people face such a mountain of debt, which is what it feels like. As I am sure many Members have heard from their constituents, we now have a situation where former students work incredibly hard all year and try to pay off their loan, but it is larger at the end of the year than it was at the beginning because of the interest rate of 6.1%. Let us compare that with the current interest rate on late payment of penalties for promoters of tax avoidance schemes. That interest rate, I am sure Members will be interested to hear, is 3.25%. It is essential that the Government look into that carefully. We will not press new clause 4 to a vote, but we hope the Government will look into that in much more detail than they have up to now.

Under this Government, there is often one rule for the very best-off and another rule for everyone else. That is what we see when it comes to the loan charge, which is covered by new clause 26. The activities targeted by the loan charge were a form of tax avoidance, but the Government’s approach to dealing with them has been deeply unfair.