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Finance Bill

Part of the debate – in the House of Commons at 5:38 pm on 27th April 2020.

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Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury) 5:38 pm, 27th April 2020

I welcome the shadow Chancellor to her role. She is the first woman ever to do the job. I wish her all the best and look forward to working with her.

Time is tight, so my remarks will not cover all my thoughts on this 186-page Finance Bill. It seems to me that each Finance Bill tries to fix the errors of those that preceded it, and this is no different. It would be useful to have the opportunity to take public evidence on the Finance Bill, because if ever there was a time to ensure that the measures and reliefs proposed by the UK Government are appropriate, it is now. If we are to believe that austerity is over, this Finance Bill must be followed by a recovery package that grows our economy in an inclusive way and protects the most vulnerable.

The UK Government continue to short-change Scotland. We are seeing the limitations of the Barnett formula writ large. The UK promised £242 million for regional deals in the Budget, but we have not yet made up for the £400 million shortfall relative to the money that the Scottish Government are putting in. Scotland is still waiting for Scotland’s £5.8 billion of the DUP’s Brexit bungs and the £175 million of VAT owed to Police Scotland the Scottish Fire and Rescue Service.

Clause 12 gives Ministers the power by regulation to exempt certain social security benefits from income tax, which is fair enough, but far more extensive measures are required to address the flaws in the social security system. The welfare cap set out in the Budget is surely now set to be breached, and instead of setting a new cap, as he is required to do, the Chancellor may want to consider whether it is a useful tool in the first place.

People who have never had to rely on benefits to put food on the table and meet their rent are suddenly finding out just how pitiful the UK social security system is. A letter from 50 campaigners led by the Child Poverty Action Group and the Bishop of Durham has highlighted the fact that tens of thousands of the 1.5 million households that have applied for universal credit will lose out due to the size of their family. I have been saying, ever since the two-child limit was proposed in 2015, that no one can predict their circumstances. The letter states:

“Even in normal times, no parent can be sure that their financial security will withstand unpredictable events such as illness, bereavement or redundancy. Certainly no parent could have had foresight of Covid-19, and so planned their family size accordingly.”

I urge the Chancellor and the Financial Secretary to the Treasury to bring forward measures to remove the two-child limit and end the unfairness being meted out to families in need.

This UK Government have failed to go far enough for workers. The cut to employers’ national insurance goes only a third of the way that we demanded towards the £2,500 in the Tories’ own manifesto commitment. Younger workers will continue to suffer state-sanctioned age discrimination, and this is really a missed opportunity to introduce a real living wage for all. The Chancellor previously claimed that he would do whatever it takes to help people affected by the coronavirus crisis, and the UK Government must follow through on that commitment and strengthen welfare provision so that people get the help they need now. They must scrap the five-week wait, turn the loans already given into emergency grants and ensure that all new claimants are given automatic grants to prevent millions being plunged into debt and poverty. If the UK Government had listened to our calls to introduce a universal basic income at the start of this crisis, the huge difficulties people are now facing could have been avoided.

I also support the calls from the Low Incomes Tax Reform Group, Age UK and the TUC for action on the net pay pensions issue. Due to a flaw in the tax system, around 1.7 million lower-income workers, mostly women, are being unfairly charged 25% more for their pensions as a result of the way in which their employer pension scheme operates. I ask the Government to look at this.

Firms are already finding it difficult to access cash, not least because of the limitations of the UK Government’s coronavirus business interruption loan scheme. Part 4 of the Finance Bill lays out plans to grant HRMC preferential status in insolvency procedures from December this year, and measures to make directors personally liable for a company’s tax liabilities where HMRC considers avoidance is taking place or where there is evidence of phoenixism or tax abuse via insolvency. I very much want to see companies and their directors take their responsibilities seriously and to avoid phoenixism wherever possible, but I am not alone in questioning whether this is the correct approach. R3, the Association of Business Recovery Professionals, wrote to the Chancellor last September:

“While extra money for HMRC in insolvency procedures may appear positive, it means less will be going back to trade creditors, pension schemes, and consumers. This will hurt the economy in the long run. Poor returns from insolvency procedures can jeopardise the health of other businesses, can make creditors more likely to vote down rescue proposals, and can trigger further insolvency. The government’s policy increases the chances of this happening.”

Coronavirus has brought this issue into sharp focus. UK Finance estimates that this policy could hit lending by at least £1 billion per annum. Furthermore, if HMRC gobbles up the largest amount first, there will be very little left for unsecured creditors such as small and medium-sized enterprises. Examples include the contractors and clients of a building company, food suppliers and parents who have paid upfront for a nursery that has gone bust. Why should creditors—real people in the real economy—lose out on much-needed pay-outs because of the vague notion of giving value to the taxpayer? The City of London Law Society also highlighted, in a letter in September last year, that this proposal erodes protections and would put the UK at a competitive disadvantage, so I urge the Chancellor and the Financial Secretary to the Treasury to give further thought to this measure. What would help to prevent phoenixing would be to tackle this matter at Companies House, giving it the full powers under anti-money-laundering legislation to carry out due diligence, rather than simply nodding companies through. This would protect consumers and other businesses that end up losing out.

The Scottish National party welcomes the Bill’s attempts to counteract tax avoidance laid out in clause 64 on anti-avoidance. The UK Government must urgently introduce a robust and transparent system of company registration in order to combat money launderers’ attempts to register entities for illicit and avoidance purposes. The UK Government must act to tackle the ongoing improper use of Scottish limited partnerships through a proper reform of Companies House. In reference to clause 72 of the Finance Bill, relating to properties and trusts, will the Chancellor also update the House on what has happened to the Registration of Overseas Entities Bill, which seems to have disappeared?

The SNP will support a fit-for-purpose digital services tax. We agree that it is unfair that huge multinational online firms pay less in tax than small high street businesses, but the devil will be in the detail, as the shadow Chancellor laid out. Firms may seek to get around measures, which is where good evidence comes in. The UK Government must be a step ahead of, rather than several steps behind, those companies that seek to evade paying their fair share. It is regrettable that the UK has failed to implement the measure alongside international partners, despite countries such as France, Spain and Italy seeking to introduce similar measures.

The Finance Bill is another example of the Tories yet again failing to support the oil and gas sector when it needs support to transition to a greener future. The oil and gas sector has generated £334 billion in net tax revenues to the Government since 1970-71, but the Tories have failed again to support it in its time of need. Promising a sector deal within the term of this UK Parliament is just not good enough; the sector needs fiscal support, and it needs it right now. OGUK chief executive Deirdre Michie has said:

“OGUK will be pressing the case for a COVID-19 resilience package to governments in the coming days which will focus on protecting the supply chain, jobs and our ability to continue to reposition ourselves for the future.”

I urge Government Front Benchers to listen carefully to that plea.

I also encourage UK Government Ministers to do all they can to finally deliver justice for the former Roadchef workers who have been waiting for decades for their employee benefit money. My hon. Friend Neil Gray has offered one solution via early-day motion 268; the other solution would be for HMRC to act reasonably in recognising that the employee benefit trust was non-taxed at its establishment and negotiating positively with the trust to allow payments to happen quickly.

Our economy does not need Ministers to be given trade war powers. To protect jobs, we believe that the Brexit transition should be extended by two years. Clause 94, “International trade disputes”, will amend the Taxation (Cross-border Trade) Act 2018 as follows:

“In section 15(1)(b)…(import duty: international disputes etc), for ‘is authorised under international law’
substitute ‘considers that (having regard to the matters set out in section 28 and any other relevant matters) it is appropriate’”.

What that amendment means, in short, is giving the UK Government the right to abrogate from international agreements and engage in trade wars at the whims of a Brexiteer Government, which is really not what we need right now. The Government need to decipher whether that is really what they mean by the clause.

The UK Government should ask the EU today for the maximum two-year extension to the transition period. An extended transition will keep the UK as close as possible to the EU and provide an opportunity to rethink the future relationship. The Scottish economy just cannot afford the double hit of covid-19 and the growing likelihood of no deal, or at the very best a hard Brexit deal, in eight months’ time.

The SNP seeks to work constructively with all parties on the Finance Bill. We know that voting will be a challenge and that proceedings will be very different this year. The UK Government have a majority, but they do not have a monopoly on wisdom. They should listen carefully to ideas from every part of this House and from people across the country.