This is the second of a series of reports on the progress of this year's Finance Bill, as it goes through its various parliamentary stages.
This report covers the first four sittings of the standing committee on the Bill, which sat on Tuesday 24 and Thursday 26 April, and made only slow progress. As previously noted, these reports focus on the aspects of the debates most relevant to the CIOT and our members, which is primarily the technical elements of the Bill, although the reports will aim to give a flavour of the main issues debated, which will often be more political.
A note on the stages the Finance Bill goes through appears here.
Links to the various debates are available here.
Finance Bill Standing Committee – Sitting 1 – Tue 24 Apr (am)
Clause 2 - basic rate limit for income tax
Not much of technical interest. Mostly speeches by Labour MPs about people suffering from government tax increases and other austerity measures, primarily focusing on those on the threshold of the higher rate of income tax who are being drawn into the higher rate by fiscal drag. Notionally the discussion was on clause 2 (basic rate IT limit) but debate was far more wide-ranging, from the cost of living to the relative merits of different taxes for helping those on lower incomes.
Finance Bill Standing Committee – Sitting 2 – Tue 24 Apr (pm)
Clause 2 (continued), clause 3 (personal allowance for under-65s)
Again, debate focused on the effects of the Government's fiscal policies, rather than technical scrutiny of the Finance Bill measures. In theory the discussion was about the personal allowance for people of working age (clause 3). Session interrupted by two divisions in the House as well as two in the committee. Inbetween Owen Smith MP (Shadow Exchequer Secretary and Labour's lead spokesperson on the committee) spoke at length, mostly about the effect of measures not in the Finance Bill on people on low and middle earners which, he argued, outweighed the increases in the personal allowance. There was a brief contribution from Lib Dem John Pugh calling on the Treasury Committee to do more retrospective assessment of tax changes. The rest of the time saw three Labour MPs give scathing assessments of the effects of the Government’s policies on those in poverty.
Finance Bill Standing Committee – Sitting 3 – Thur 26 Apr (am)
Clause 3 (continued)
Once again, slow progress. Debate notionally on clause 3 (the personal allowance for people of working age) continued but did not conclude. The double dip recession, regional pay and a Conservative MP’s efforts to give up smoking were among the diversions. Ongoing disputes over the cost of cutting the 50p rate and the wiping out of the personal allowance increase by other measures made a reappearance. The sitting concluded midway through the Labour spokesman’s winding up speech.
Finance Bill Standing Committee – Sitting 4 – Thur 26 Apr (pm)
Clause 3 (continued), clauses 5 and 6 (corporation tax main rate)
Slightly faster progress. Labour’s spokesman Owen Smith concluded his summing up on clause 3 (personal allowance for under-65s) and the committee then approved clause 3 and rejected a Labour amendment proposing a review of “the overall impact on families of this section compared with other measures the Government is introducing”.
Owen Smith then opened the debate on clauses 5 and 6 (corporation tax main rate). His arguments were essentially (a) that the Chancellor is a ‘one club golfer’ betting the farm on CT, and (b) that business confidence has collapsed because there is no belief the Government will deliver growth. There was much back and forward over the relationship between cutting CT and growth, with Labour unconvinced that there is much of one. While sceptical of its impact, Labour did not oppose the CT cut, arguing that the economy needs all the stimulus it can get. Two Labour amendments to the CT clauses were pushed to the vote, calling for reviews on the impact of CT on business investment, and growth and jobs. Both were rejected as the committee divided again along party lines. Clauses 5 and 6 were approved.
There were three speeches of note from the backbenches during the debate on CT, with Conservatives Nigel Mills and Charlie Elphicke, both former tax professionals, once again making interesting contributions. Mills called for radical reform (simplification) of CT – preferably using the OTS - and said he might table amendments to do this at Report Stage. He advocated allowing companies to file a single tax return, rather than them having to file dozens of separate returns. He also drew on his professional experience, explaining how he used to compare various tax regimes and their attractive features: “One of the problems with the United Kingdom is that we could probably tick most of the criteria [but] there had to be a tick with a little star in brackets next to it beside phrases such as, “Yes, we exempt capital gains on sales of overseas companies, but that is quite complex and we have difficult rules on what a share is.”
Elphicke said rules should be made more purposive – pursuing substance over form: “ensure that companies that are trading here and have trading revenues here pay their fair share of tax in this country.” We should ask: “is that person paying tax somewhere on that deduction or are they paying no tax at all?” Mills said he had some sympathy with Elphicke’s argument. Elphicke, in turn, agreed with Mills’ suggestion that we remove “the arcane definitions that enable businesses to argue that they are not within the charge to UK tax.”
Inbetween, Labour MP Fabian Hamilton drew on his experience running a small business to speak about the frustration felt by small business owners at the level of bureaucracy they face. He said that they spent a lot of time not selling products but filling in forms and dealing with inspectors. Forget CT, he said, the biggest problem was being able to make a profit at all and collect money owed (problems with bad debt).
David Gauke’s speech winding up the debate was a now familiar defence of the Government’s strategy of CT cuts as “an advertisement for investment and jobs in Britain”. He quoted favourable remarks from the tax and business community about the Government’s corporate tax strategy. He accused Labour of drifting away from business and from the centre ground.
The week's decisions by the standing committee
Tuesday 24 April
Amendment 8 (Lab Treasury team)
Clause 2, page 2, line 27, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact of the setting of the basic rate limit on increasing the number of higher rate income tax payers and place a copy of the review in the Library of the House of Commons.’.
Vote: Ayes 13, Noes 19
Amendment 9 (Lab Treasury team)
Clause 2, page 2, line 27, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact that setting the basic rate limit will have on average tax rates paid by total income and a copy of the report shall be placed in the House of Commons Library.’.
Vote: Ayes 13, Noes 19
Clause 2 (basic rate limit for 2012-13) stand part
Approved without a division
Thursday 26 April
Amendment 10 (Lab Treasury team)
Clause 3, page 2, line 33, at end add—
‘(3) The Chancellor of the Exchequer shall review the overall impact on families of this section compared with other measures the Government is introducing and place a copy of the review in the Library of the House of Commons.’.
Vote: Ayes 13, Noes 15
Clause 3 (personal allowance for 2012-13 for those aged under 65) stand part
Approved without a division
Amendment 4 (Lab Treasury team)
Clause 5, page 4, line 12, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact of the corporate tax structure including the principal rates and investment allowances on the level of business investment, and place a copy of the review in the Library of the House of Commons.’.
Vote: Ayes 13, Noes 15
Amendment 11 (Lab Treasury team)
Clause 5, page 4, line 12, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact of the corporate tax structure on different sectors and place a copy of the review in the Library of the House of Commons’.
Amendment withdrawn
Amendment 12 (Lab Treasury team)
Clause 5, page 4, line 12, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact of the corporation tax rate on growth, jobs, and investment in the economy, and produce a plan for jobs and growth, which he shall lay before the House of Commons.’.
Vote: Ayes 13, Noes 15
Clause 5 (main CT rate for 2012) stand part
Approved without a division
Amendment 5 (Lab Treasury team)
Clause 6, page 4, line 19, at end add—
‘(4) The Chancellor of the Exchequer shall review the evidence in favour of using reductions in the headline rate of corporation tax as a means of promoting long term international competitiveness and place a copy of the review in the Library of the House of Commons.’.
Amendment withdrawn
Clause 6 (CT charge and main rate for 2013) stand part
Approved without a division
George Crozier
CIOT External Relations Manager
Wednesday 2 May 2012
