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Income Tax (Charge)

Part of the debate – in the House of Commons at 1:45 pm on 12th March 2020.

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Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury) 1:45 pm, 12th March 2020

This is a Budget in two parts: the urgent response required on covid-19 and the other actions the Chancellor proposes. While the SNP supports many of the actions to mitigate that and to support the NHS and business through the measures announced, they come in the context of a decade of austerity—of cuts to budgets and services and of pain for many of our constituents. The latter part of the Budget does not do nearly enough to resolve the many concerns we have about the UK economy. Indeed, in the wider context of Brexit, there are many challenges yet to be dealt with. The Chancellor has kicked a range of significant policies and changes into the long grass of the comprehensive spending review to buy Dominic Cummings more time to come up with some ideas.

In terms of what was announced on covid-19, we need to know exactly how these measures will translate into Barnett consequentials. The Scottish Government stand ready to take further actions. The First Minister confirmed earlier that Barnett consequentials on non-domestic rates will be passed on in full, but we need to know the precise numbers from the UK Government and we need to know that soon, because without that it is incredibly difficult. Our business rates regime is already more generous than the UK business rates regime, but we need to know those figures, so that the Scottish Government can put those actions in place.

I support what has been talked about in terms of support from banks and lenders. My right hon. Friend Ian Blackford wrote proactively to the banks to ask them to do that and I was glad that some have taken that up. I am glad also that there will be support from HMRC in terms of time to pay and other measures. I have had experience in my own constituency of HMRC being a wee bit too quick to move to close businesses down, so we welcome anything that can be done to reassure businesses, particularly those already in difficulty, that they will not be pushed out of business by these actions at this very vulnerable time.

The timing of the Budget further reveals the UK Government’s careless attitude to Scotland because the Scottish budget process has had to be carried out blindfold. The Scottish Government and our Cabinet Secretary for Finance, Kate Forbes, had to make their best guess going into the Scottish budget negotiations, which passed last week. It is wholly unacceptable that Scottish local authorities, which had a legal deadline of yesterday to set their budgets and council tax, had to do so without knowing precisely how much they would have to spend. Now that it has come, we find that Scotland’s budget next year will be lower in real terms than when the Tories first came to power. These proposals do nothing to redress the cumulative cuts or the short-changing of city and region deals, or to make available a proportionate share of the DUP’s bungs or the money owed to our police and fire and rescue services.

The Chancellor talked of change in his Budget yesterday and it is certainly change that we need. Economic growth in the UK is flat as a pancake. Yesterday’s ONS figures show that the UK’s economy has not grown at all in the last three months, while growth has been downgraded for three of the next four years, and that is before we even begin to account for coronavirus. The OBR suggests in its documents that a recession this year is quite possible, if the spread of coronavirus causes widespread economic disruption. Given how other countries are dealing with it just now, it is hard to disagree with that sentiment.

The Chancellor has made clear his intention to spend his way out of this crisis, which is very interesting. We have been told for years that there is no money, yet yesterday Sunak the Hedgefund sprang up, having found a magic bunch of gold rings. On these Benches, the SNP will not argue that the UK Government need to loosen their purse strings, but I am concerned that in practice it is simply not enough and not focused enough to counteract the last 10 years of austerity, which has ravaged our communities. It is a curious situation to find a Conservative Government, according to the Office for Budget Responsibility, in the position of setting out

“the largest sustained fiscal loosening since the pre-election Budget of March 1992” and on course to add

“£125 billion (4.6 per cent of GDP) to public sector net debt by 2024-25.”

Interest rates are low at the moment, but this leaves the Government very vulnerable to future rises in the years ahead.

The UK’s resilience has been weakened under sustained Tory cuts. Wages have barely grown in the last decade. The welfare state safety nets have been torn to shreds. Public services have struggled through chronic underinvestment and asset stripping, and some parts of the UK that have still not fully recovered from the 2008 financial crisis are ill-equipped to cope with a further recession. Coronavirus has the potential to have a lasting impact. I welcome the Chancellor’s commitment to fighting the virus. All of us on the SNP Benches are keen to do whatever we can to facilitate joint working between the Scottish and UK Governments. I make these comments in the spirit of providing the appropriate scrutiny to allow the Government to control the spread of disease. For the Chancellor’s policies to work in the way that he intends, he needs to expand the number of workers entitled to statutory sick pay. As things stand, people need to be qualified workers earning more than £94.25 a week. That rules out the 300,000 people on zero-hours contracts, who are likely to be most at risk of not taking adequate time off work.

For those who are eligible for sick pay, the Budget has done nothing to bring the UK in line with other OECD nations. People will still be expected to survive on less than £100 a week. As my colleague Ian Blackford highlighted yesterday, the contrast with what people are entitled to in other countries is stark. The Chancellor himself struggled to answer on the radio this morning whether that would be enough for him to live on, so we should not expect our constituents to live on it either. It will certainly not be enough for many people who find themselves suddenly unable to go out to work. Research by the Resolution Foundation shows that many workers face losing between 70% and 74% of their primary income. It is saying that this is a huge living standards shock.

The Chancellor has made temporary changes to the benefit regime to encourage those not eligible for sick pay to self-isolate, which is the right thing to do. However, I am concerned that the five-week wait for universal credit will still apply, potentially making the change functionally useless for that purpose. Claiming universal credit could also have the knock-on effect of making claimants lose entitlement to legacy benefits, such as tax credits. The minimum income floor is being removed temporarily, but that is cold comfort to someone stuck on UC permanently because they have already lost their entitlement to tax credits.

I am raising these issues today because my fundamental concern is that the UK benefit system is so broken and inadequate that people would rather go to work ill than try to negotiate it and risk pushing their families into poverty. I hope the Secretary of State will take on these comments seriously and reflect on how the UK Government strategy can be improved to effectively control the outbreak—he will know about that as a former Department for Work and Pensions Minister.

I also take this opportunity to raise the prospect of working across Governments to provide Scotland-specific solutions. My own constituency this week has already seen the cancellation of a 3,000-person conference. That means hotel stays cancelled and a knock-on effect on the Glasgow economy from people not eating out, using taxis or spending their money in shops locally. Bringing people to Scotland for business and pleasure is extremely valuable in both urban and rural areas. Coronavirus could have a devastating effect on many people’s livelihoods.

The Chancellor has full control over VAT powers. It would be possible to provide VAT relief for the hospitality sector, if he was minded to do so. We need to ensure that businesses are supported as much as possible and that plans are in place, post virus, to provide further expansionary measures. I understand that the UK currently has the second highest VAT rate for hotel accommodation in the EU, so it certainly makes some economic sense to drop the rate and support our tourism sector.

Coronavirus is certainly a factor in putting the UK’s economy in a perilous position, but we should be under no illusions: the conditions for a major recession were in place long before the virus began. The Prime Minister’s choice language on business has been well publicised, but the reality is that the UK has been an investment waste ground under the Tory party for some time. Firms have been holding off on investment since the Brexit vote in 2016 until they can be provided with some certainty about the future. The OBR said in its analysis that it would have expected investment to increase by 20% by now, but it remains stagnant. The chilling effect of trade barriers and a lingering threat of a no-deal cliff edge is unlikely to change that uncertainty, with the OBR factoring that into the next five years of its forecast and predicting that two thirds of the hit to productivity due to Brexit is still to hit. As the Red Book itself proclaims:

“The UK’s level of productivity has been lower than that of other advanced economies since the 1960s”,

and is

“20% lower than other major advanced economies such as the US, France and Germany”.

In Scotland, productivity has been on the rise since the SNP took office, growing at 0.9% a year, compared to 0.4% for the rest of the UK. We are already moving ahead in areas such as skills and developing the young workforce, tertiary education and attracting foreign direct investment. We have the highest proportion of employees —83%—paid at or above the real living wage, not this pretendy living wage, which embeds state-endorsed age discrimination. Universities are also collaborating to contribute to productivity, which is put at threat by ending Horizon 2020 funding and the collaboration and innovation that we have through the EU. I also ask about the future of Erasmus+, which brings so many people to this country and sends our people out into the world to experience the value that that can bring to their education, which they can bring back for productivity here in this country. We can do so much more with the full levers of a normal European nation state.

The Chancellor said yesterday that this is a Budget that “gets things done”, but with vital issues such as the shared prosperity fund being punted into the long grass, we still do not know exactly how he intends to get things done. European funding has been a steady source over many decades, with funds invested in our communities, building infrastructure and changing the lives of our people, yet we still do not know what will replace it. A vague paragraph on page 83 of the Red Book just will not cut it. We will not accept one penny less of the European funding that we had in the new shared prosperity fund.

There is a line in the Red Book that says:

“Funding will be realigned to match domestic priorities”.

I ask: whose domestic priorities? The Prime Minister’s? A man who thinks that we can build a bridge—or perhaps a tunnel, if we ask the Secretary of State for Scotland—through a 300-metre deep trench filled with dumped munitions? Or, rather, those of the democratically elected Government of Scotland, in partnership with Scottish local government? I certainly know who I would trust, and it is definitely not the blonde bombshell of Brexit.

Carbon capture and storage is another project marched off to the comprehensive spending review, with the potential of maybe a project, maybe by the middle of this decade, or maybe the end, maybe on two sites, and maybe with a fund of £800 million. This is absolute nonsense and does nothing for the people of the north-east of Scotland, who were led to believe in the run-up to the independence referendum that they would receive £1 billion for a plant at Peterhead, before David Cameron promptly pulled the plug when Scotland voted no.

This Government’s commitments to achieving net zero remain to be seen, with a meagre £10 million for policy development towards net zero, but £27 billion being spent on roads, and tinkering round the edges of challenges such as domestic heating and making our homes climate ready, rather than incentivising investment by cutting VAT on products for repairs and improvements to aid energy efficiency. We are coming up to COP26, as the Minister said. We need big ideas and we need the money behind them, because if this work is truly to be a success, we need to see a transformation, and that is not what this Budget promises.

For my constituents and for people across Scotland, this has been a tale of two Governments. On one hand, the Scottish Government have been consistently the grown-ups in the room, with a clear policy direction. They have launched the national performance framework, receiving international acclaim for the inclusive growth strategy. They have prioritised tackling inequality at the same time as growing the economy. They have taken an evidence-based approach to developing policies and, against the backdrop of austerity, have still managed to take bold action to provide investment in innovation through projects such as the National Manufacturing Institute Scotland and the Scottish National Investment Bank. Innovation supported by universities means that Glasgow builds more satellites than any city outside the United States. That does not happen by accident. The Scottish Government have reached out across nations to build relationships and pursue an internationalist, open and welcoming Scotland.

By contrast, the UK Government have brought a new era of political and economic isolation to Scotland. For all the bluster of getting Brexit done, it is still nowhere near a done deal. We still do not know exactly what the future relationship will look like. We still do not know what European funding will be replaced with, but we do know that the absolute best-case scenario, where we get a basic trade deal, could remove £9 billion from Scotland’s economy, and that is without taking into account the effects of reduced migration. Scotland has an ageing population and areas that have historically been concerned more with emigration than immigration. Our economy has benefited from inward migration in a multitude of ways, from food to culture, and not least the vast economic benefits that immigrants have brought to Scotland in choosing us as their home.

I cannot stress enough how devastating the UK Government’s new migration scheme stands to be for certain sectors in Scotland. The forecasts in the OBR’s book estimate a loss of HMRC income and national insurance rising to £1.5 billion in 2024-25 as a result of those changes. It is a political choice for this UK Government to insist on a unified immigration system, when other countries successfully run differentiated systems. It is not an economic choice, it is a political choice, and one that does not serve Scotland’s best interests.

The Chancellor has also missed a huge opportunity to redress some of the injustices that austerity has already brought upon us. He failed to scrap the two-child limit and the brutal rape clause, on which I have one small correction for the Labour Front Bench, which said to the Prime Minister that the rape clause affected 200 women; actually, it affected 510 women—510 women had to fill in a form to prove they were raped, so that they could get entitlement to tax credits. Failing to scrap the two-child limit and the brutal rape clause—this Budget gets it done. Failing to restore the value lost from the benefits freeze of the last four years—this Budget gets it done. Failing to improve the prospects for a lost generation of children who have grown up in Tory austerity Britain—this Budget gets it done. What is done to people by this Tory Government causes so much distress to so many. What do the Government have in their Red Book about this? They have £2.5 million dedicated to research into how best to support vulnerable children. Well, Mr Deputy Speaker, I would suggest that they stop making those children so vulnerable in the first place by their own policies.

Five years, three elections and several Chancellors ago, I stood for election to this place for the first time, on a manifesto advocating the scrapping of the tampon tax. The SNP was the only mainstream party in that election to call for such a policy. I am very proud of how the agenda has changed since I stood in the Committee that considered the Finance Bill and nervously talked about periods in front of a bunch of very senior and crusty Members of the House. The claim has been made that Brexit has delivered this move, but I would contend that it has been a movement of many people across these islands, of brilliant former colleagues such as Paula Sherriff, and of allies around the world. I wonder, Mr Deputy Speaker, if there were more women rather than men around those tables of power, whether we might have gotten rid of the tampon tax a very long time ago. There is yet to be a female Chancellor, and that is telling.

Moves have been made in Scotland for the totally free provision of sanitary products for women and girls, and this is great news not just from a financial perspective but because it goes a long way towards lifting the stigma of periods and menstrual health. It would be remiss of me not to mention also that the tampon tax fund goes towards funding services that prevent violence against women and girls. The Women’s Budget Group estimates that those services need at least £393 million per year to carry out their very important work. So will the Government now provide a source of funding to make up that shortfall?

I want to talk briefly about a couple of other measures in the Red Book. I am glad to see the alcohol review, because the current alcohol taxation system frankly makes absolutely no sense at all. If you look at the graphs for those different alcohol taxes, there is no logic to them at all.

I am glad to see £14 million more for Companies House, but I want to know whether the Government intend to make Companies House a relevant body for anti-money laundering regulations. If they do not do that, they will be chucking more money away and leaving the door wide open to money laundering and false registering.

There seems to be money proposed in the form of VAT relief to S4C, which I do not begrudge the Welsh media at all, but where is the equivalent relief for MG ALBA, which also needs that support?

This is not a Government who make things happen; it is a Government who things happen to. In the three and a bit years since the Brexit vote they have lurched through reshuffles, leadership battles, meaningless buzzwords and constitutional shambles. They promise change and prosperity like jam tomorrow, but they deliver very little. Yesterday’s Budget laid bare that, when the Tories want to turn on the taps, spending can flow like a river bursting its banks. The OBR suggests that there is so much infrastructure money gushing through that the UK Government are actually going to struggle to spend it.

Austerity has been cruel, damaging and entirely unnecessary. Scotland did not vote for austerity. Scotland did not vote for Brexit. Scotland did not vote for this Prime Minister, the Chancellor or Dominic Cummings. We reserve the right to have another vote, in which we can vote to put Scotland’s future in Scotland’s hands for all of our people.