Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.

Donate to our crowdfunder

Income Tax (Charge)

Part of the debate – in the House of Commons at 4:06 pm on 12th March 2020.

Alert me about debates like this

Photo of Sarah Olney Sarah Olney Liberal Democrat Spokesperson (International Trade), Liberal Democrat Spokesperson (Business, Energy and Industrial Strategy) 4:06 pm, 12th March 2020

Of course the big topic of this Budget had to be the coronavirus. We are facing the gravest health crisis in a century, and the Government have no greater responsibility at this time than to plan their response. I am aware that at this very moment we could be standing on the edge of an escalation in our response to this crisis. I am conscious that some people think that even to address other topics at this time might be seen as an indulgence, so I welcome yesterday’s news that the Government have immediate and effective plans to re-fund the response to the coronavirus. I particularly welcome the news that statutory sick pay will be available to help people who would not otherwise be eligible. Supporting people who are required to self-isolate during this crisis is as essential to dealing with the social impacts of the virus as the additional funding available to the NHS will be to dealing with the health impacts.

However, while a short-term injection of funds to address the immediate crisis might be an appropriate response to the coronavirus, the Chancellor appears to have extended this approach to the whole of his Budget. It was a litany of short-term emergency measures. His speech yesterday left a whole wasteland of ungrasped nettles. If this Conservative Government, at the beginning of a five-year Parliament with a majority of 80, cannot bring themselves to make some tough choices to re-programme our economy to meet the challenges of climate change, and to reset the course of this nation’s economic journey as we leave the European Union, when on earth will they?

The impact of business rates on town centre businesses is a matter of enormous concern in my constituency. We are seeing increasing numbers of empty shops and shopping parades across Richmond and Kingston. Town-centre shops are not on a level playing field with online retailers, who are taking increasing market share with goods that are routinely sold at below cost price. Bricks-and-mortar retailers are further disadvantaged by having to pay punitive levels of business rates calculated on the value of property that they operate out of, with no regard to their level of turnover. Major reform of business rates to maintain our town centres at the heart of our communities is long overdue and has been called for on many occasions by Members from all parts of this House. In our 2019 manifesto, the Liberal Democrats called for a landlord tax to be paid by those who receive the proceeds from the underlying value of the property. This would relieve small businesses of the burden of taxation altogether. It is precisely the kind of radical reform that is urgently required to save our town centres. There was much press speculation that the Chancellor might announce a measure of that kind in the Budget. It is therefore a huge disappointment to find that he has once again ducked the issue.

While the scrapping of business rates for the coming year to mitigate the effects of the coronavirus is surely welcome, it does nothing to resolve the long-term problem. The bills will return again in 2021, when businesses will face not only the after-effects of the coronavirus but the expiry of the transition period in our exit from the European Union. A short-term crisis measure does nothing to help businesses plan for the long-term or to build up resilience for the mixture of unexpected and self-inflicted shocks to the economy. I welcome news of a review of business rates and look forward to hearing its outcome, but it is disappointing that more was not done to grasp this opportunity now.

I have read the forecasts from the Office for Budget Responsibility, and I note that its economic outlook is informed by the assumption that the UK will make an orderly transition to a new trading arrangement with the European Union. Its forecast under those conditions is for a 4% downturn in GDP over 15 years. I was therefore surprised to hear so little mention of Brexit in the Chancellor’s speech. I know that the Prime Minister’s éminence grise has banned the use of the word, but to have so little reference to the major economic upheaval of our time in the first Budget after our departure from the European Union is nothing short of astonishing.

I am more sceptical than most about the Conservative Government’s promises of a bright new rainbow-filled future, but I nevertheless thought that there would be some opportunity that they would wish to take advantage of. We have thrown off the shackles, we are free to determine our own future—and we are going to stop charging VAT on tampons! Grateful as I am—and I am sure I speak for the rest of the female population—to save on average about £1 every year on the cost of my sanitary protection, I am somewhat surprised to find that this is the limit of the Government’s plans for our post-Brexit future. Is that really it? If I sound incredulous, it is partly because legislation to cut VAT on sanitary products was agreed by the European Parliament in 2018 and would have come into effect in 2022.

I accept that negotiations are ongoing, but I would be grateful if the Government gave the House an update at the earliest opportunity of their plans for the talks next week in the light of the coronavirus and an estimate of how that will affect their plans to conclude the negotiations for the new free trade deal by the end of the year. I repeat the call that the Liberal Democrats have previously made: the negotiations should be halted and an extension to the transition period agreed, to account for the time that will surely be lost over the spring and into the summer in the efforts to manage the virus.

The OBR report references the fact that the major boost to Government income from this Budget is the reversal of the planned cut to corporation tax that was due to be implemented this year. The Liberal Democrats called for that reversal in their 2019 manifesto, and I am pleased to see that the Chancellor took up our suggestion. While we would not wish to see taxes on business set at a punitive or discouraging level, we believe that businesses should pay their fair share towards an equal society.

For the self-employed, the biggest missed opportunity of this Budget was the failure to address the enormous issues presented by the planned implementation of the IR35 legislation in the private sector. An uplift in the minimum income level for class 4 national insurance contributions is no consolation to those who face losing their livelihoods as organisations refuse to take on contractors or source their contracts from overseas, to avoid the unnecessary burden that the legislation will impose. It is not too late to halt the implementation and conduct a thorough review of the costs and benefits of this legislation.

For all of us, the largest nettle that goes ungrasped is our response to the climate emergency. The Chancellor announced funding for many new road schemes across the country but little for mitigating measures to reduce carbon emissions. The plans announced for carbon capture and storage are pitifully inadequate, and not enough is being done to invest in electrical vehicle charging infrastructure.

It is a particular shame that the issue of carbon emissions from domestic homes was not addressed, as the barrier to real change on that is the lack of funding. If we are to meet the Government’s net zero target by 2050, we need to start a comprehensive programme of retrofitting insulation to domestic homes and to install more efficient forms of domestic heating. Such a move would have a beneficial impact on domestic energy bills everywhere and, in particular, would alleviate fuel poverty in many homes. I want to reiterate the Liberal Democrats’ support for the Government in dealing with the coronavirus challenge in the months to come—[Interruption.]