“(1) Part 5 of F(No.2)A 2023 (electricity generator levy) is amended as follows.
(2) In section 280 (key concepts), in subsection (1), in the definition of “relevant” (as in relevant generating station)—
(a) omit the “and” after paragraph (a), and
(b) after paragraph (b) insert “, and
(c) to the extent it is not comprised of qualifying new generating plant (see section 311A);”.
(3) After section 311 insert—
“311A Meaning of “qualifying new generating plant”
(1) Generating plant is “qualifying new generating plant” if it is new generating plant commissioned as part of a qualifying project that meets the new investment condition.
(2) The new investment condition is met in relation to a qualifying project if on
(3) The Treasury may by regulations provide for cases in which qualifying projects are to be treated as meeting the new investment condition.
(4) “Qualifying project” means a project to commission—
(a) new generating plant for—
(i) a new generating station, or
(ii) an existing generating station which (as a result of the project) is to be wholly or substantially comprised of new generating plant, or
(b) new generating plant that increases the generating capacity of an existing generating station.
(5) Subsection (6) applies where new generating plant that increases the generating capacity of an existing generating station replaces existing generating plant.
(6) Only so much of the new generating plant as represents generating capacity in excess of the capacity of the generating plant it replaces is to be regarded as qualifying new generating plant.”
(4) In section 313 (definitions in this Part), in the table, at the appropriate place insert—
|“qualifying new generating plant
This new clause introduces an exemption from the Electricity Generator Levy for new generating plant in respect of which no substantive decision to proceed with the project had been made before the day of the Autumn Statement.
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 1—Review of effectiveness of section 31 measures in preventing fraud involving taxpayers’ money—
“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, conduct a review of the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money.
(2) The review must evaluate the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money through comparison with the effectiveness of—
(a) other measures that seek to prevent fraud involving taxpayers’ money, and
(b) the approach taken in other countries.”
This new clause would require the Chancellor to review the effectiveness of measures in this Act to prevent fraud involving taxpayers’ money, and to compare them with other measures that seek to prevent fraud involving taxpayers’ money and the approach taken in other countries.
New clause 2—Review of reliefs for research and development—
“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the implementation costs of the measures in section 2 incurred by—
(a) HMRC, and
(2) The review under subsection (1) must include details of the implementation costs of all measures related to credit or relief for research and development that have been introduced since December 2019.”
This new clause would require the Chancellor to publish a review setting out the total implementation costs of all changes to research and development reliefs in the current Parliament.
New clause 3—Review of measures to tackle evasion and avoidance—
“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the measures in sections 31 to 33 to tackle evasion and avoidance.
(2) The review under subsection (1) must include details of—
(a) the average sentence handed down in each of the last five years for the offences listed in section 31;
(b) the range of sentences handed down in each of the last five years for the offences listed in section 31;
(c) the number of stop notices issued in each of the last five years to which the measures in section 33 would apply; an
(d) the estimated impact on revenue collected in each of the next five financial years resulting from the introduction of the measures in sections 31 to 33.”
This new clause would require the Chancellor to publish details of the sentences given and stop notices issued in each of the last five years to tackle evasion and avoidance, as well as the revenue expected to be generated from the measures to tackle evasion and avoidance in this Act in each of the next five years.
New clause 4—Review of public health, inequality and poverty effects of Act—
“(1) The Chancellor of the Exchequer must review the public health, inequality and poverty effects of the provisions of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) The review must consider—
((a) the effects of the provisions of this Act on the levels of relative and absolute poverty across the UK including devolved nations and regions,
((b) the effects of the provisions of this Act on socioeconomic inequalities, and on population groups with protected characteristics as defined by the 2010 Equality Act, across the UK including devolved nations and regions,
((c) the effects of the provisions of this Act on life expectancy and healthy life expectancy across the UK including devolved nations and regions, and
(d) the implications for the public finances of the public health and NHS effects of the provisions of this Act.”
New clause 6—Assessment of the impact of permanent full expensing—
“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the measures in clause 1 of this Act on—
(a) business investment, and
(b) economic growth.
(2) The review under subsection (1) must—
((a) assess the impact of full expensing being made permanent, and
(b) consider what other policies would support the effectiveness of the measures in clause 1 of this Act.”
This new clause would require the Chancellor to publish an assessment of the impact on investment and growth of the measures in this Act to make full expensing permanent, and to consider what other policies could support the effectiveness of permanent full expensing.
New clause 7—Review of multipliers used to calculate higher rates of air passenger duty—
“(1) The Chancellor of the Exchequer must, at the next fiscal event, publish a review of the multipliers used to calculate higher rates of air passenger duty for each destination band.
(2) This review must propose options for introducing a multiplier to link the higher rate and the reduced rate within the domestic band.
(3) The Chancellor must, at the next fiscal event, make clear what changes, if any, he will implement as a result of this review.”
This new clause would require the Chancellor to publish a review of the multipliers used to calculate the higher rates of air passenger duty, and to propose options for introducing a multiplier to link the higher rate and the reduced rate within the domestic band.
Government amendments 1 to 6.
The Government’s aim is to grow the economy for the good of everyone, and our tax system is a key part of that. For households, higher taxes mean less financial freedom and less choice in how they spend their money. For businesses, they can mean less growth and investment, and that means fewer jobs for workers. That is why we need to grow our economy to create jobs and give ourselves the financial headroom to reduce taxes and remove the barriers to private sector investment. We must have a tax system that is supportive of business.
At spring Budget 2023, the Chancellor set out his approach for a highly competitive business tax regime. By announcing generous tax incentives combined with a rate of corporation tax that remains the lowest in the G7, the Government ensured that the UK is one of the best places in the world for businesses to grow and invest, but we should not be satisfied with simply being one of the best. This Bill therefore marks our next step in making the UK the best place in the world to do business.
We are taking huge, ambitious steps to make that a reality in the autumn statement and in the Bill. For example, no other major economy has made full expensing permanent. That is a major step in encouraging more investment by giving a huge tax relief to those who invest. Alongside that, we have introduced a generous new regime for research and development carried out by companies. We are now going further to encourage even more investment by introducing new clause 5, which will exempt receipts from new electricity generating projects from the electricity generator levy.
I will address each amendment in turn, looking first at the details of new clause 5. The electricity generator levy was introduced following the energy crisis to ensure that energy companies with extraordinary returns contribute more towards vital public services and support for households. However, we must balance that against ensuring that the UK remains a brilliant place to invest in renewables. The new clause makes changes to the EGL that will exempt receipts from new electricity generating projects from the levy. It will ensure that all generators in scope of the levy will benefit from the exemption if they choose to proceed with investments in new generation capacity and make a substantive decision to go ahead with a project on or after
I turn to Government amendments 1 to 3. To ensure that the research and development tax relief clauses in the Bill work as intended, the Government are proposing technical amendments to the R&D clauses. The Bill introduces a new enhanced support for R&D-intensive small and medium-sized enterprises, such as those in our vital life sciences sector. From April 2024, the R&D intensity threshold will be reduced from 40% to 30%.
Amendments 1 and 2 make changes to ensure that R&D-intensive companies get the relief as intended. Amendment 1 removes two situations where a company would appear less R&D-intensive than it actually is. These issues were raised with us by an industry stakeholder, for which I am grateful. To avoid abuse and to protect the scheme for genuinely R&D-intensive companies, the ratio is worked out at a group level. Currently in the legislation, companies within groups that charge each other for services could have costs double counted and therefore reduce their R&D intensity. The amendment will fix that. The Government do not want to exclude companies from relief because of legitimate commercial arrangements that do not affect the underlying true R&D intensity of the business.
On top of providing more support for R&D-intensive companies, the Bill will simplify and improve our R&D reliefs by merging the R&D SMEs scheme with the R&D expenditure credit. To ensure that those clauses work as intended, the Government propose technical amendments to the R&D clauses. Companies and accountants wanted the merged scheme to be implemented on an accountancy period basis as that makes claims simpler and delays the merged scheme for the majority of current R&D expenditure credit claimants. It therefore gives them a bit more time to prepare.
The new rules for contracted-out R&D will ensure that the company making the decision to do the R&D and bearing the risk is the one that gets the relief. However, that means that, as currently drafted, there could be temporary situations when two companies are in a contractual relationship and one moves into the new R&D tax credit system ahead of the other. For a limited period of time, that could result in situations where both parties could claim on the same R&D or neither could claim, as was raised by stakeholders. Amendment 3 ensures that the legislation works as intended. For temporary double claims, the R&D credit will go to the claimant in the old system until both have started new accounting periods. To avoid a temporary gap where no company can claim, the legislation will be amended to ensure that subcontractors can claim where their customer is still in the old system.
I want to clarify the definition of “contracted out R&D”, as some stakeholders have been concerned that the legislation allows a company to claim for a contract as R&D if it merely thinks that R&D will take place. That is not the case. The word “contemplating” has been deliberately used because, in legal terms, it means that the company will know that specific actions are being considered, planned and required for the R&D to take place, rather than just generally thinking that it will take place. The Government will publish updated guidance for comment this week, to help companies understand the new rules.
The Bill has a package of groundbreaking reforms to reliefs for the creative industries. Amendments 4 to 6 ensure that claims for the creative industries’ tax reliefs are submitted with the required information to effectively administer the reliefs, while removing a potential disadvantage for companies. The Government are legislating in the Bill to introduce an additional information requirement for claims to the creative reliefs. Companies will have to provide additional information to support their claims, which will help protect the reliefs from fraud and error.
As the legislation is currently drafted, a claim is invalid if the required information is not provided. Where that information relates to connected party transactions, His Majesty's Revenue and Customs cannot verify that it is complete and correct at the point the claim is submitted. If it is discovered at a later date that required information related to connected party transactions was omitted, that would lead to the whole claim being treated as invalid and no relief being granted. A company may then be out of time to resubmit its claim. To prevent companies from being disadvantaged in this way, the amendments fix the additional information requirement to allow HMRC to specify the consequences of failure to provide information in regulations. That will ensure that entire claims are not automatically invalidated in cases where the claimant company has not provided HMRC with all the information related to its connected party transactions within the time limit.
I have outlined the case for each of the Government amendments, and I therefore urge the House to accept them.
In speaking to new clause 6, which relates to permanent full expensing, I remind the House of the context in which this Finance Bill was published. It followed the Chancellor’s statement on
That was the context in which this Bill was published: flatlining wages, higher taxes, higher mortgage payments and worsening public services—all the product of 14 years of Conservative economic failure. Our country needs change. A critical part of making that change will be to get our country’s growth rate up. We need a plan for growth, to make people across Britain better off, and to ensure sustainable funding for our public services. Labour has been developing our plan for growth by working hand in hand with businesses across the country and across the economy.
We know how highly businesses that are considering investing in the UK rate stability, predictability and a long-term plan. For that reason, we welcome the fact that, as our new clause 6 highlights, the Bill makes full expensing permanent. Permanent full expensing is something we have long called for, as a policy that can support greater business investment and economic growth. Because Labour knows how important stability and predictability are to businesses, the shadow Chancellor, my right hon. Friend Rachel Reeves, announced last week that Labour is committed to maintaining permanent full expensing in the UK tax system, as well as the annual investment allowance, if we win the next general election. The shadow Chancellor has made this commitment to offer businesses certainty for the years ahead. Businesses considering plant and machinery investment across Britain can be confident that the tax treatment of that investment would not change with a Labour Government.
Of course, there is still a general election to face, so I use this opportunity to invite the Minister to put on the record whether the Conservatives will follow our lead by confirming that should they win the general election, they will maintain permanent full expensing. I am sure many businesses would welcome the certainty that would come from knowing both the main parties are going into the election fully committed to keeping permanent full expensing. I urge the Minister, when he responds, to confirm whether that will be his party’s policy going into the general election.
After all the chopping and changing we have seen in capital allowances in recent years, the Minister needs to make the commitment explicit. As I mentioned during earlier stages of the Bill, the annual investment allowance had been temporarily raised to £1 million when this Parliament began; that temporary basis was extended by the Finance Act 2021, again by the Finance Act 2022, and then made permanent by the Finance (No. 2) Act 2023. Meanwhile, over the course of this Parliament, the super-deduction came and went. Last year, full expensing for expenditure on plant and machinery was introduced on a temporary basis for three years. In this Bill, the Government are finally making it permanent. After so much instability, a commitment from Treasury Ministers at the Dispatch Box that the Conservatives, like Labour, will commit to maintaining permanent full expensing feels like the least they can do.
Our new clause 6 would require the Chancellor to publish not only an assessment of the impact of permanent full expensing, but a consideration of what other policies would support its effectiveness. We believe this is important to ensure that business investment is supported as much as possible. The Opposition have begun to set out what some of our policies would be if we won the next general election. As the shadow Chancellor has set out, if we were in government, we would consider the outcome of technical consultations on whether leased assets can be included in full expensing and on simplifying the UK’s capital allowance regime. I would be grateful if the Minister updated us on the progress of those consultations.
Last week, the shadow Chancellor also made clear the commitment that if Labour wins the next general election, we will ask HMRC to produce simple and comprehensive guidance making clear which assets are eligible for each type of capital allowance. That guidance would give businesses clarity over how their investments will be treated, and businesses will be able to use it as a single point of reference when making investment decisions. Will the Minister confirm whether the Government have considered taking such steps, or making such a commitment?
To give further certainty, the Shadow Chancellor has also said that in government, Labour would explore the greater use of rulings and clearances. Under such an approach, businesses would be able to get a written ruling from HMRC about the tax treatment of potential investments, making clear, for instance, whether they qualify for full expensing or other capital allowances. We know that businesses benefit from other countries’ tax administrators being able to provide such rulings and clearances. As certainty is crucial to encourage investment in Britain, I would be grateful if the Minister confirmed whether the Treasury has asked HMRC to consider the greater use of rulings and clearances for investment, and, if so, what its conclusion has been.
Of course, any policies on expensing or other capital allowances sit under the headline rate of corporation tax. It is hard to conclude anything other than that the Conservative party is rather unclear and confused about its approach to corporation tax rates in the UK. For evidence of that, we need look no further than the current Chancellor: in July 2022, during his leadership bid, he pledged to cut the headline rate of corporation tax from 19% to 15%, yet when he became Chancellor just three months later, one of his first acts was to promise to raise the tax instead from 19% to 25%. It is no wonder that businesses, and indeed Conservative Back Benchers, find it so hard to understand the Conservatives’ policy on corporation tax rates.
Let me be clear about the certainty we would offer if we won the next general election. As the shadow Chancellor has set out, we believe the current rate of 25% strikes the right balance between what our public finances need and, as the lowest rate in the G7, keeping our corporation tax competitive in the global economy. That is why we are pledging to cap the headline rate of corporation tax at its current rate of 25% for the whole of the next Parliament. We would take action if tax changes in other advanced economies threaten to undermine UK competitiveness. That choice provides predictability and has a clear rationale. That is the pro-business choice and the pro-growth choice. The promise to cap corporation tax at 25% is clear from us. Again, to offer businesses as much certainty as possible, will the Conservatives follow our lead and also pledge, today, to cap corporation tax at 25% for the next Parliament?
These commitments—to cap corporation tax, to maintain permanent full expensing and to keep the annual investment allowance—will all form part of the road map that we would publish in the first six months of a Labour Government, setting out our tax plans for businesses for the whole of that Parliament. That would put stability, predictability and a long-term plan at the heart of our approach. To give businesses as much certainty as possible, I would be grateful if the Minister confirmed whether a corporation tax cap at 25% and keeping full expensing in place will be in the Conservative party manifesto too.
I was interested in what the shadow Minister was saying about what would happen if other countries changed their corporation tax. As he will know, Mr Trump, the former President, has said that he would cut US corporation tax, potentially from 21% to 15%. Given such examples, does the hon. Gentleman anticipate that a Labour Government would look to cut the headline rate of corporation tax, as we would be looking at a significant tax cut by the world’s largest economy?
I thank the hon. Gentleman for his intervention. As we have made clear, we would take action if tax changes in other advanced economies threatened to undermine UK competitiveness, but the headline commitment from us is to cap corporation tax at 25% for the duration of the next Parliament. I recall that in earlier consideration in this debate, he and I had an exchange about permanent full expensing, so I hope he will welcome our commitment to maintaining permanent full expensing if we are in government. Perhaps he will put pressure on his Front-Bench colleagues to join us today in making that a cross-party commitment from the House.
New clause 7 focuses on the multipliers used to calculate higher rates of air passenger duty. As we have discussed at earlier stages of the consideration of this Bill, clause 24 makes no changes to band A rates, while in band B, the reduced, standard and higher rates will increase by £1, £3 and £7 respectively. In band C, the reduced, standard and higher rates will rise by £1, £2 and £6 respectively. In each of those three bands, which cover international travel to a range of destinations, a simple principle is followed: if the duty for passengers on economy flights goes up, the duty for those flying business class and by private jet goes up too. In the domestic band, however, which covers flights within the UK, that simple principle of fairness does not apply. Instead, under the Bill, for domestic UK flights, the reduced rate of APD rises by 50p and the standard rate rises by £1, yet the higher rate is unchanged. Let me be clear what this means in plain English: from
“uprated by a forecast of RPI and those rates are then rounded to the nearest pound.”
As for the different rates I highlighted in Committee, he said:
“It largely depends on how they”— the rates— are rounded to the nearest pound;
the actual rate is determined by whether the figure is rounded down or up.”––[Official Report, Finance Public Bill Committee,
I know that the Exchequer Secretary always tries to give me a straight answer—let me put it on the record that I genuinely appreciate his efforts to do so—but I fear that his explanation in Committee may have been unintentionally misleading or, at the very least, only partial. Since that Committee stage, the House of Commons Library has given me information confirming that it does not tell the full picture to say that the duty rates are, as the Minister claimed,
“uprated by a forecast of RPI and those rates are then rounded to the nearest pound.”––[Official Report, Finance Public Bill Committee,
In fact, my understanding is that the Minister’s statement applied only to the reduced rates of air passenger duty. Those are indeed adjusted each year in line with forecast RPI and rounded to the nearest pound. However, the standard and higher rates are not calculated by separate reference to RPI; rather, they are generally set as multipliers of their respective reduced rates. For instance, the standard and higher rates in band B are set as 2.2 and 6.6 times the band B reduced rate respectively, rounded in both cases to the nearest pound.
The use of multipliers within bands would at least mean that if the reduced rate went up in any particular band, the higher rate should go up too, and there would be a sense of fairness to the system. The problem is that that is not the case, because there is a loophole that applies to the rates in the domestic band. The loophole means that the higher rate in the domestic band is not linked by way of a multiplier to the reduced rate in that band, but rather is linked to the reduced rate in band A, and is equal to the higher rate in that band.
I realise that some of these calculations are complex, and the terminology runs the risk of being confusing, so again let me be clear about what this means in plain English. For international flights, when the rate of duty for economy class passengers goes up, the rate of duty for private jet passengers goes up too. If that had been true for domestic flights, then this year the rate of duty for private jet passengers would be going up, following the rise in the economy rate. However, the loophole means that this link does not exist, so this year duty is going up for passengers flying economy class within the UK, and is frozen for those flying by private jet.
Our new clause 7 would require the Government to consider and respond to options for closing that loophole. It would require the Government to review the multipliers used to calculate air passenger duty rates, and to consider options for introducing a multiplier to link the higher and reduced rates within the domestic band. Taking that course of action would close the domestic flights loophole that will see private jet passengers benefit from a tax freeze this year, while everyone else flying economy and business class sees a tax rise.
I very much hope that the Government will accept both our new clauses. They will ensure that Ministers consider the loophole in air passenger duty that has given private jet passengers a tax freeze while everyone else is paying more, and consider what else is needed to make permanent full expensing as effective as possible. We believe that the Government must do all that they can to provide a stable and predictable environment that encourages business investment and boosts economic growth. During this debate I have set out our approach to providing that stability and predictability, including our commitments to cap corporation tax at 25% for the whole of the next Parliament, if we win the general election, and to maintain permanent full expensing. In the interests of giving businesses as much certainty as possible, I urge the Minister to say whether the Conservatives will join us by going into the general election with both those commitments from his party too.
I have declared my business interests in the Register of Members’ Financial Interests.
I rise to support the Government’s new clause 5. I think it is good that they are considering what more they can do to promote investment in the United Kingdom’s generating capacity. We import far too much power already, especially when the sun does not shine and the wind does not blow, and on the basis of the Government’s ambitious forecasts and targets for much more of our energy to be delivered by electricity, I think that the position will get a lot worse quite quickly. Anything that the Government can do to encourage that additional investment in generating plant will be very welcome.
We will, of course, need a similar positive approach to grid and cable, because the more we electrify, the more we will need to convey that power from the rather remote locations where much of it comes from to the parts of the country that will need it. So my only worry about new clause 5 is that I am not sure it goes far enough. I think it is helpful in this limited number of cases, but I trust that the Chancellor, when it comes to the Budget—quite soon, on
That whole area needs considerable review, because we need to take seriously the fact that we are short of energy overall. We are short of electricity generating capacity and short of the means to route power from generation to use, and it would be an important stimulus for the British economy if we produced more of our own energy and generated more of our own electricity, and if we were thinking about having a surplus to export again instead of all too often being cruelly reliant upon imports of liquid natural gas and electricity, particularly from the continent.
I would also like briefly to refer to new clauses 4 and 6. They are wide-ranging new clauses that invite the Government to make assessments or reviews of features of this legislation, but they also wish to broaden it out to get the Government to review the impact of their general fiscal strategy on equalities, on investment, on the state of the corporate sector and on inequalities in our society. I am quite sure that the Government will be reviewing all those things as a matter of course, as this is often a continuous process. Indeed, many of the items covered in this request for special review are already reported on and form part of the normal process of policy preparation, and rightly so. If the Minister were to tell me that he would be grateful if I did not vote for these new clauses, I would have no problem with that—I am not sure that it would help to embody them in the legislation anyway; I think it would be a bit of an abuse of the legislation—but the Government need to respond to the general thirst for knowledge that these new clauses represent, and to understand that there are some serious issues here that need to be returned to. I trust that the Chancellor will return to them at the Budget.
Looking at the fiscal impact that these new clauses cover, I trust that in the preparation of the Budget we will have analysis in the Treasury of these particular measures, which are still going through from the last time, but I also hope that the Government will review the extraordinary losses of the Bank of England—I think that they have already run up to £34 billion in the current financial year. These are losses that the Treasury, and therefore the taxpayer, have to pay as they are incurred, and that is completely unacceptable. It imposes strains on the public accounts and on the Treasury at a time when we really do not need them and when we need that money for other purposes.
There are two simple measures that the Bank could take to stem the magnitude of those losses. First, it should not be selling bonds at a big loss in the market. The European Central Bank is not doing this, although it has a similar problem with a portfolio of very expensively acquired bonds. There is also the issue of the running losses on these holdings where the Bank of England is paying the full, much enhanced, short-term interest rate following its increases in it. This now greatly exceeds the revenue on the bonds because the Bank paid far too much for the bonds and there is a very low rate of interest on them. Those running losses are a problem. I think the Bank should look at what the European Central Bank is doing, in paying different interest rates on reserves held under this system so that it does not have such a large running loss.
Can my right hon. Friend tell me if I have got this right? In the commentary ahead of the Budget, we talk about wiggle room and the Office for Budget Responsibility forecast and about £5 billion or £10 billion here and there, but I think I heard him say that this matter was completely out of the control of the those on the Treasury Bench and this Parliament; that the Governor of the Bank of England could unilaterally decide to crystallise losses on whichever extent of bonds he wished to, and then put that loss into the calculations of the Chancellor of the day; and that the Chancellor would then have to work around that in order to work out what the fiscal expenditure, public expenditure and taxation would be. Is that actually the case? It sounds mightily undemocratic to me.
That is an interesting point of debate, but my understanding of the constitutional position is that it is not as bad as my hon. Friend is suggesting because all the bonds were acquired with the express permission of the then Chancellor of the Exchequer. The Bank of England’s website says that the bond portfolio is held on behalf of the Treasury. Successive Chancellors of the Exchequer—beginning with the Labour Chancellor who first undertook quantitative easing and carried on by successive Conservative Chancellors—all signed an agreement with the Bank to say that they would indemnify against loss. So, given that the Government and this Parliament empowered the purchase of the bonds and now take responsibility for any losses on them, it seems perfectly reasonable for there to be a proper conversation about whether we want to take the losses.
I see nothing wrong with us here challenging the idea that, uniquely among the big quantitative easing programmes, it is the Bank of England that not only insists on selling the bonds at big losses but gets reimbursed. The ECB does not sell them in the market at big losses. The Federal Reserve Board sells them in the market at big losses but gets no money back; it simply puts on its balance sheet that it has lost a lot of money and takes the view that, as it is a central bank, it does not really matter if it loses a lot of money, because central banks create money and it is therefore not like a normal commercial business. So I hope that Ministers will look at this as part of the general assessment that is being invited by these new clauses.
I hope also that Ministers will look at the expenditure items in the overall accounts covered by new clause 4 on the public finances, because there has been a marked decline in public sector productivity in the years 2020 to 2023. It was quite without precedent in my experience of following public finances over the years, and this very sharp decline represents at least a £30 billion loss to our system, in that it now costs at least £30 billion a year more to run the group of public services covered by these figures than it did before the collapse in productivity. On top of that, there has also been the need for much bigger sums to cover inflation. This is not the inflation figure; this is the real loss figure from the productivity.
We are all sympathetic to the difficulties that lockdown and the transition out of lockdown caused, and there was bound to be disruption. Our public services were badly affected by that, as children could not go to school and hospitals were disrupted by covid, but that is now some time behind us and it seems perplexing that we cannot get those public services back to 2019 levels of productivity. I hear comment that maybe artificial intelligence will do it and that there needs to be a big investment in computers. Well, that should be on top. All that I am saying to the Government is that we can surely get back to 2019 productivity levels using techniques from 2019, which was very much pre-artificial intelligence and before the latest round of computerisation. Again, this is a big area that needs to be looked at as part of any review of the public finances.
The third area, which is also very large and very much in the news today, is that even more people in our country do not feel they can go back to work and that they need help at home because they are no longer able to work. The Government are working on some important programmes, through the Department for Work and Pensions, to show people that through a combination of part-time flexible working and working at home with proper support and training, and maybe with additional financial support to help them, they could go back to work for part of the time and make a contribution. We desperately need them, and I think their lives would be more rewarding. They would also be better off because we now have a benefits system that means it is always better to work. This should be a cross-party matter, because it is a problem that our nation as a whole faces. We can enrich those people’s lives, help to reduce the burden on the taxpayer and improve the net income of those concerned. Again, this involves many billions.
My point in making these three simple points apparent to the House is that there are very large sums of money indeed involved in bond losses and productivity, which we need to review because that would help in the formation of the next Budget. It would create more headroom, both for the tax cuts that we need if we are to promote growth, and for improved public service provision in the areas where the shoe is still pinching. I trust that will be part of any review that might emerge from these new clauses, or from the spirit of these new clauses. I hope that my right hon. Friend the Chancellor is thinking about this, as we will have a Budget hard on the heels of this Finance Bill, which came out of the autumn statement. In these conditions of recovery, and given the need for faster growth, I welcome having more than one Budget a year, and the fact that we may have three fiscal events quite close to each other, if all goes well. They must promote growth and reduce taxes, and this is a good start.
I welcome new clause 5, but can we please have more? Can we please look at the headroom that I think I have helped to identify?
I am sure that the people suffering through the rampant cost of living crisis across the nations of the UK hoped that if the Government tabled a new clause today, it would address their struggles in paying their rent, their ever-increasing mortgages, their higher food bills, thanks to Brexit, and their even higher energy bills after the cap was adjusted in January. The Government tabled only new clause 5 and, as I said on the Ways and Means motion, we have no opportunity to amend it.
The electricity generator levy disproportionately impacts Scotland’s renewable sector. The SNP welcomes the fact that new clause 5 will exempt new renewable projects from the EGL, but as noted by the chief executive of Scottish Renewables, though the autumn statement introduced new measures such as the EGL exemption, they are
“not enough on their own. We urgently need consistent policies to provide an environment which will enable businesses to invest at the scale needed right now.”
A pledge to invest £28 billion a year in the green energy transition might be a good thing, but it seems to be off the table not only for the UK Government but—
Order. I wish to make a short statement.
I know the whole House will wish to join me in expressing our sympathy with His Majesty the King following this evening’s announcement. Our thoughts are, of course, with His Majesty and his family, and we all send him our very best wishes for his successful treatment and speedy recovery.
Thank you, Mr Speaker. Obviously, it is entirely appropriate to have paused for that statement. I was unaware of the news brought to the Chamber, but it is clearly significant. Our thoughts are with the royal family at this time.
As I was saying, we need consistent policies to help the renewables sector, and we are not seeing that either from the Tory Government, who have run out of ideas, or from the Labour party, which makes promises and then ducks responsibility for what is required.
We would have liked new clause 5 to flesh out the Chancellor’s promise, made in the autumn statement, to take up to £1,000 a year for up to 10 years off the electricity bills of people living near new generation equipment. We have not heard that today, so we do not know what schemes are coming up.
As I intimated earlier, I would have liked to table an amendment on this point: if new clause 5 is applicable to people living next to new generation equipment, what about those who already live among generation equipment in, for example, the highlands and islands? We have the coldest climate in the UK. Most people are off the gas grid, so we have higher average bills than the rest of the UK. We pay the highest standing charge for electricity, 40% more than here in London, and because of UK Government policies, we have the highest level of fuel poverty in the UK, yet we export six times more electricity than we use in the highlands. It would have been entirely appropriate for the Minister to agree to introduce a highland energy rebate, to put some of that contribution back into the pockets of people across the highlands and islands who are struggling because of those conditions.
The hon. Gentleman is making a very good point that rings true in my constituency, too. Of course, the problem is made more difficult still because of the other costs faced by people living in our constituencies, such as delivery charges and the cost of other services. Even a tube of toothpaste can cost a little more the further away it is from the big urban centres. That makes the problem a lot worse.
The hon. Gentleman is absolutely right, and I welcome his support for the campaign I am trying to start in order to get justice for people across the highlands and islands. He mentions other costs; of course, rural properties are often larger and less insulated. That does not mean that people in those properties have more money; it just means that their property was built that way, centuries or decades ago. That brings higher costs. Many of the factors affecting people across the highlands and islands could be mitigated by a highland energy rebate.
New clause 4, tabled by Debbie Abrahams, would require the Chancellor to review the public health, inequality and poverty effects of the Bill, and to publish a report within six months of the Bill being passed. It is regrettable that it looks as if the new clause will not be pressed to a Division tonight, but the SNP would have supported it. We believe that a requirement to consider the implications for equality, poverty and health should be included in every Bill for which that would be relevant.
As I said, people are suffering from a cost of living crisis fuelled by decisions made in this Parliament. Mortgages are going up as a direct result of the disastrous mini-Budget, and now food costs are going up. Of course, there is more to come, as the Brexit regulations kick in at the end of April. Not only are prices going up, but they will rise even higher from May as businesses across the UK face more red tape. Of course, we are already seeing our highest energy bills ever. Meanwhile, we are doing what we can with our limited powers in Scotland. We already have lower council tax and, of course, we are introducing a council tax freeze. A poll out today shows that nearly 70% of the public approve of this policy.
New clause 6 would require the Chancellor to publish an assessment of the Bill's impact on investment and growth and of the impact of making full expensing permanent, and to consider what other policies could support the effectiveness of permanent full expensing. Given that full expensing is expected to cost £1 billion to £3 billion a year, after an initial £10 billion a year for the first three years, the policy deserves some scrutiny.
Since full expensing was announced in the autumn statement, the SNP has supported its being made permanent, as this would give business greater certainty and would simplify the tax system. However, it is vital that Members be fully informed, so that this Parliament can assess the effectiveness of this policy and whether it encourages investment in assets such as plant and machinery, as it is designed to do, or whether that is at the expense of other forms of investment. Full expensing is a rare point in the autumn statement on which we agree, but as I have said time and again, the Bill has failed. People are struggling through a cost of living crisis, and they want to know what help they will get now, while they are struggling because their household expenses are going through the roof.
People want investment in clean energy, and a just transition from oil and gas. We will need oil and gas for a period, but that transition should be safeguarded. The United States is providing hundreds of billions of dollars in initial support for new green technologies, such as hydrogen. The European Union has made similar high-level investments, yet the UK Government and the Labour party are dawdling on the issue, wasting the opportunity for us to lead across the world. Like so many Bills, this Bill ignores the needs of the people of Scotland, so it is little wonder that they are on the inevitable path to independence.
It is interesting to take part in such a debate. It is disappointing to hear Labour describe itself as the pro-business party, given that it is asking businesses to increase wages, recognise unions, accept collective bargaining and restrict labour flexibility, as well as increasing bureaucracy and telling businesses where to invest. To me, that is a wolf in sheep’s clothing.
Turning to the Bill and the amendments, it is extraordinary to hear the spokespeople on both Opposition Front Benches talk about expensing becoming permanent. That is exactly what the Bill intends to do; the minute we get Royal Assent, expensing will be permanent. On Second Reading, the Minister said it would be permanent and, as soon as the Bill is enacted, that will be in place and on the statute book, which is welcome.
Amendments 1 and 2 make points about full expensing. Those amendments will ensure that the UK’s plant and machinery capital allowances will increase and there will be a tax cut of about £10 billion a year, which will help to drive up growth across the whole United Kingdom, specifically in our manufacturing sectors. From the point of view of those in south Devon, that tax cut is worth having. It will help to drive growth and attract investment and innovation across the country, not just in the industrial heartlands we speak about so often.
There are often international comparisons made on research and development. Amendment 3 offers us the opportunity to drive innovation and economic growth. Merging the research and development expenditure credit scheme and the small and medium enterprise research and development relief scheme achieves that rare thing that we so often fail to do in Government: simplify the tax code and provide greater support for UK firms. We should all welcome that.
It is worth stating the impact of the changes in the Bill that will support loss-making small and medium-sized enterprises by reducing the intensity threshold by 10%, from 40% to 30%. That is expected to help 5,000 further SMEs, and they will receive £27 per £100 of qualifying research and development funding invested. That is an extraordinary amount of support—in the region of £280 million a year by 2028-29—and it will be welcomed by small businesses across the country. The Bill also extends the sunset clauses until April 2035 for two more programmes—the enterprise investment scheme and the venture capital trust—which is welcome.
Clauses 4 and 5 outline support for the creative sector. One of our unsung success stories is how well the UK creative industries have done because of this Government’s extraordinary tax cuts, which have helped TV, film, music and video games thrive in this country. Between 2010 and 2019, that industry has grown by an extraordinary one and a half times, creating thousands of jobs across the country and attracting millions—if not billions—of pounds of investment and spurring on growth. That sets the benchmark.
As a Government, we need to help all industries, not just the creative industries, by reducing the tax burden and ensuring we can find ways to support them. I make a plug for the tourism and hospitality sector, which the Minister knows I often mention. In the future, I hope we will be able to do the same for the tourism and hospitality sector as we have done for the creative industries through a VAT reduction.
I support the Government amendments to the Bill. I welcome the intent of this Finance Bill, which is helping to ensure that work pays, ensuring that the tax burden for businesses is going down, and creating a landscape that will attract the investment and opportunities that we so desperately need in this country.
On behalf of myself and my Liberal Democrat colleagues, I express our sympathies to the King and his family, and our hope that his treatment will prove to be successful.
I will speak to amendments 1, 2 and 3, in addition to new clause 5. To reiterate, the Liberal Democrats are not supportive of the Bill, which is a deception from the Government after years of cruel tax hikes on hard-working families. The legislation maintains the Government’s unfair tax rises on working families through the freezing of income tax thresholds, fails to invest properly in our public services, such as the NHS, and takes none of the vital steps needed to grow the UK economy. Some of the measures in the Bill have worthy aims, but the context is important from the outset.
Amendments 1, 2 and 3 make further changes to the new R&D regime defined in the Bill. While the changes may be necessary and sensible clarifications, just last week, colleagues in the other place, sitting on the Economic Affairs Committee, reported their concern
“that the number of significant R&D changes made in the last 5 years has led to a perception of instability in the UK’s R&D tax relief regime and undermined the intended incentive effect of the relief.”
What businesses need more than anything is certainty and stability. The Government’s chopping and changing on R&D is indicative of a wider failure to create a stable and settled environment in which business can flourish.
Perhaps the clearest example of that has been the scrapping of the UK’s industrial strategy and the disbanding of the independent body overseeing it. This short-sighted step has robbed businesses of the stability they need to grow. The constant changes to the R&D relief regime are a clear example of how that lack of foresight and stability can undermine the aim of economic growth. Once again, I urge the Government, even at this late stage, to relaunch an industrial strategy. A proper industrial strategy can create the conditions for sustainable growth, including through effective and clear incentives for R&D investment, especially among SMEs, and ensure that the UK’s regulatory, R&D and tax frameworks are geared towards fostering innovation.
New clause 5 introduces an exemption to the energy generator levy for new plant investments. The Liberal Democrats believe that, although this may help to strengthen investment in renewable energy and contribute towards our net zero targets, the Government’s own assessment of the measure notes that it is unlikely to affect the retail price of electricity for households as energy prices remain tied to gas prices.
The Bill, and the autumn statement from which it arose, does nothing to help families with soaring energy prices or to put a proper windfall tax on the oil and gas giants. The Government continue to sit on their hands as businesses and families struggle with energy price inflation. A windfall tax on the super-profits of oil and gas producers could raise significant revenue which could have paid for a targeted package of support for those worst affected by the energy crisis, by doubling the warm home discount and investing in an emergency home insulation scheme. It remains clear that November’s autumn statement and the Finance Bill both represent a missed opportunity to address the crisis in energy prices.
To conclude, while the Liberal Democrats are supportive of certain measures within the Bill, such as the extension of full expensing, we cannot support any legislation that arises from such a deceptive and unjust autumn statement. Ultimately, British households are seeing the biggest fall in living standards since the 1950s, and households across the country are crying out for real support from the Government, for action on the cost of living crisis and investment in our NHS, but all we have heard is more stale announcements from a Conservative Government who are completely out of touch.
I concur with the comments made by others about King Charles, on my behalf and that of the Democratic Unionist party and his loyal subjects in the United Kingdom of Great Britain and Northern Ireland—especially Northern Ireland. I pray, as I know you do, Mr Deputy Speaker, as well as others in the Chamber, for King Charles and for the royal family. I pray for a speedy recovery to his health. I pray, as we all pray, to the great healer, omnipotent over all, that his family will know the peace of the Lord as they support him at this time.
I thank all those who have contributed to this Bill debate, and I thank you, Mr Deputy Speaker, for giving me the chance to participate. Understandably, much of the Bill focuses on the measures that are needed to deliver the autumn statement. The Minister understands that—I would like to welcome him to his place. As he knows, I hold him in great respect, and look forward to his responses at the end of this debate.
For every public sector pay rise that is rightly awarded, money must be raised, and therefore we all support the principle of this Bill in theory. However, in practice, not many of us want to sign off on a Bill that raises taxes for those who are struggling at present. Obviously, as prices have risen, obligations have gone up correspondingly. Northern Ireland has been seeking a complete removal of the air passenger duty as a way of enhancing our connectivity and our attractiveness to international business investment. As a result, the rise in APD is disappointing. I know what the Minister’s response will be. We are all aware of what the renewal of Stormont means: it means that we can look at this matter ourselves. None the less, the renewal of the Assembly has also highlighted the issue of the allocation of finances. It is clear that an overhaul of the funding formulas for Northern Ireland is necessary to meet the need in the long term.
Before I left the office this morning, I heard the Secretary of State for Northern Ireland on the radio saying that he hoped that a new funding formula would be found for Northern Ireland. We on the Northern Ireland Affairs Committee have also put forward that view. It is matter that involves all parties. The hon. Members for Belfast South (Claire Hanna) and for North Down (Stephen Farry) join us in wanting the same. That is three of the political parties in Northern Ireland that want that formula. There are also labour Members who support the view, along with a number of Conservatives with some concerns. We are all pushing for a formula similar to the Welsh system. If that comes into place, we in Northern Ireland would benefit, and that is only fair and right. I am highlighting this because if we as a party wished to do something about air passenger duty in the Northern Ireland Assembly, or if a cross-party group were wishing to do the same, we would need to have that formula in place. As I say, we are looking for fair funding for the future.
The £3.3 billion that has been made available now is money that many of my constituents believe has been withheld, and that is welcomed. Ever mindful of the positivity that came out of the debate last week, I say let us be positive in looking forward—
Order. The hon. Gentleman understands that he has caught my eye and I have caught his. May I gently remind him that we are talking about the Government’s new clauses and amendments at the moment? There is a Third Reading debate ahead in which more measures can be raised if necessary, but, at the moment, will he please concentrate on the matter in hand?
I knew when I saw you looking at me, Mr Deputy Speaker, that you were going to tell me to get back on to the subject. I was about to do so. I thank you for that very kind reminder. You spoke to me in a very nice way, which was much appreciated.
I did refer to new clause 7 and air passenger duty, so I will quickly return to that. When I looked at a number of these issues addressed in the Bill, I could see a very clear and obvious theme: air passenger duty to rise in line with the retail price index; plastic packaging to rise in line with the consumer prices index; aggregate levy in line with RPI; tobacco levy in line with RPI plus 2%; and vehicle excise duty for cars, vans and motor bikes in line with RPI. So it continues and, to be honest, that seems to be understandable.
However, what is clear in the Finance Bill is that, although these things rise by RPI or CPI—I understand how the system works—the Government have again chosen to ignore the needs of the working middle class. I wish to make this point. I have done so in every finance debate, Mr Deputy Speaker. I have taken every opportunity I can to bring up this matter. I am seeking the support of the Minister on this. Indeed, I have asked the Minister about this on a number of occasions, so he knows about the issue. It is about the middle-class families who need that extra bit of help. They are paying their tax, but the £40,000 and £50,000 a year threshold is not helpful. If we wish to address the issues of new clause 6 in relation to permanent full expensing and the issue of air passenger duty—the things that people want—then we also have to address the issue of the threshold as well.
I gently say to the Minister that, when it comes to how we help our squeezed middle class—I am not talking about the very wealthy—can he look at changing the threshold? I ask the Minister for a direct response on that. I do not want him to talk about the higher income benefit charge or any other mitigation. I just want him to help us understand why those who pay into the tax system do not get as much as they should when they are struggling in a way that families back in 2013 could not have imagined. The Government know that to be the case—I think the Minister knows it to be the case—so when it comes to legislation that helps us to represent all of the people of this United Kingdom of Great Britain and Northern Ireland, let this Bill tonight be one that does just that.
I wish to thank right hon. and hon. Members for contributing to this debate. I shall respond to as many of the points as I can, and also talk to the amendments that have been moved. On new clause 1, I agree that we must prevent fraud and ensure that all taxpayers pay their fair share. To help achieve that, the new maximum sentences for the most egregious examples of tax fraud, the new criminal offence on the promoters of tax avoidance, and enhanced director disqualification powers will come into force on Royal Assent of this Bill. That will all help.
At 4.8% of total liabilities, the UK’s tax gap is at the joint lowest rate ever recorded and has remained low and stable. The UK’s tax gap compares favourably with that of our international partners. HMRC has already published performance updates that provide information on its compliance performance every quarter, so we believe that this new clause is not necessary.
New clause 2 is pretty much the same as the new clause 1 rejected in Committee of the whole House. As I have said previously, we believe that the provision is unnecessary, as the information has been published in the tax information and impact notes alongside each policy change. That gives a clear explanation of the policy objective together with details of the implementation costs for both HMRC and businesses.
New clause 3 would require the Government to publish details of sentences given and stop notices issued to tackle evasion and avoidance in the past five years, as well as revenue expected to be generated by measures in this Bill to tackle evasion and avoidance in each of the next five years. However, HMRC publishes information on the number of custodial sentences received for tax compliance offences and the average sentence length in its annual reports and accounts. The 2023-24 annual report and accounts will be published this summer, providing a full overview of HMRC’s performance. The Government also publish a list of tax avoidance schemes subject to a stop notice on gov.uk, with the most recent report published on
New clause 4 would require the Government to report on the likely impact of the measures in the Bill on public health, inequality and poverty—matters that concern us all and that we discussed in Committee. Existing mechanisms already effectively monitor and assess Government policies in those areas, rendering the amendment redundant. Departments such as the Department of Health and Social Care and its arm’s length bodies diligently evaluate policies to enhance health up and down the country. Through the Office for Health Improvement and Disparities and the National Institute for Health and Care Research, they address health inequalities and provide robust evidence for policy development. Various Government units, such as the Cabinet Office equality hub, contribute to levelling-up opportunities and ensuring fairness. The Government Equalities Office, the Race Disparity Unit, the Disability Unit and the Social Mobility Commission all focus on different equality dimensions to guide and support inclusive policy development across the country. We therefore do not believe that new clause 4 is necessary.
On new clause 6, I agree that it is important to regularly review and evaluate policy, and to be transparent, which my right hon. Friend John Redwood also highlighted. His Majesty’s Revenue and Customs has published a tax information and impact note setting out the impact of the measure, including the economic impact, and the Office for Budget Responsibility has already conducted and published extensive analysis on the investment and growth impact of full expensing. That is available in its “Economic and fiscal outlook—November 2023”, which therefore negates the need to publish a separate assessment in six months’ time. The impact of permanent full expensing will be monitored through information collected from tax returns, and through regular communication with businesses and representative bodies.
New clause 7 would require the publication of a review of the multipliers used to calculate the higher rates of air passenger duty that apply to larger private jets. I appreciate that there are some challenges in understanding them, but I assure James Murray that there is no attempt to mislead or give inaccurate information to the House. The tables are available, and I will provide him with one. The Government review the rates of taxes and reliefs, including APD, annually to ensure that they are appropriate and reflect the current state of the economy. As has been the usual practice since APD was introduced in 1994, rates are announced over 12 months in advance to provide airlines with sufficient notice.
Some of the challenges with the calculations, and the point about rounding to the pound, have arisen because in April 2023 we cut APD on domestic flights by 50%, but not the rate for private jets, which therefore remained equal to that on short-haul international flights. The Bill provides for the uprating of APD rates by forecasted RPI in 2024-25, rounded to the nearest pound, and then of course there are the multipliers. Some of this is the sheer mathematics of ensuring that we do not have disparities. Current APD rates ensure that passengers in private jets pay significantly more tax than passengers on commercial flights. For example, in 2024-25, the higher rate for domestic private jet passengers will be more than 10 times the economy rate. Since the Government keep all rates, including all APD rates, under regular review, new clause 7 is unnecessary. I note the appeal of Jim Shannon, which I have heard before.
The Minister knows that I am particularly fond of him, but if he has heard my request before, let us now have action.
We always try to act; I cannot do everything, though. I note the hon. Gentleman’s comments. In a similar vein, my hon. Friend Anthony Mangnall raised the importance more broadly of the tourism, hospitality and leisure sector, and of the creative sector. He is absolutely right. Measures in the Bill and elsewhere will support all those sectors. Of course, business rates relief is vital to the tourism, retail, hospitality and leisure sector. My right hon. Friend the Member for Wokingham made a range of comments, some outside of my direct remit. I assure him that I will raise his points, which ranged from bonds to public sector efficiency—a vital area—with colleagues in the Department.
I was somewhat entertained by the comments of the Labour spokesman, the hon. Member for Ealing North, who was effectively asking me to commit to Conservative party policies as enthusiastically as he does, which is quite a turn up for the books. Of course, we welcome Labour’s support for the policies that we have announced, but there is clear blue water between the Labour party and the Conservative party in terms of principles about the size and scale of Government and the level of taxation. We have seen Labour’s flip-flopping over the £28 billion. I am not sure what the policy is today. It was rather rich of him to ask for commitments from me, given the flip-flopping that is so prevalent in every area of Labour policy.
At one point, the Labour party was supportive of Brexit. Now I do not know. Are Labour Members against it? Were they supportive of Jeremy Corbyn being Prime Minister, or do they not want him in the party? Are they in favour of nationalisation, or against it? Are they in favour of private sector involvement in the NHS, or against it? In a whole host of policy areas, we have seen persistent, perennial flip-flopping from the Opposition. I literally have goldfish whose commitments I would trust more than those from the Labour Front Bench. On those points, we will have to respectfully agree to disagree.
As I said, new clause 5 and the six amendments that the Government have tabled will help to ensure that the changes in the Bill apply as intended, and deliver a vital policy to protect renewable investment. They will make the tax environment more easily understood by business and protect vital tax revenue used to fund our public services. I therefore urge that they be added to the Bill. The six new clauses tabled by the Opposition seek to get the Government to publish data and information that is already being published through other sources, as I have outlined. I therefore urge the House to reject them.
Question put and agreed to.
New clause 5 accordingly read a Second time, and added to the Bill.