Finance (No.2) Bill 2017-19 Committee of Whole House Day One

5 Jun 2018

Liveblog on the first day of committee stage debate on the Finance Bill, with debates on clauses on the bank levy, SDLT for first time buyers and income tax treatment of armed forces‚ accommodation allowances.

You can read more about the Bill here (CIOT report) and here (Parliament website). Text of the Bill and other related documentation can be read here.

You can watch the debate via Parliament Live here.

The first debate on the Bill (second reading) took place on Monday 11 December, You can read the CIOT's report here.

NB. The notes below are contemporaneous and not checked against Hansard. We cannot guarantee that no errors have crept in and we advise on checking any passage against Hansard before repeating it.

The bank levy

Selection of amendments Clause 33 (bank levy), Schedule 9 (bank levy) (both Government) + amendment 1 & NC3 [Labour] - require the Government to provide a separate analysis of the impact of Part 1 of Schedule 9 nearer to the time of proposed implementation in 2021 and to seek the separate agreement of the House of Commons to commencement in the light of that review + NC1 [Labour] - requires the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims, the revenue effects of the changes made in 2015 and the comparable effectiveness of the bank payroll tax + NC2 [Labour] - requires HMRC to prepare a public register of banks paying the bank levy and the amount they have paid + NC11 [SNP] - requires the Government to carry out a review of the bank levy, including its effects on inclusive growth and inequality

The debate

The Financial Secretary to the Treasury (FST), Mel Stride, opened the debate by outlining the provisions on the Bank Levy, which will restrict the scope of the levy to UK (not global) profits while - he argued - ensuring that the UK has a strong, stable and globally competitive banking sector. The measures will restrict the levy to the UK profits of UK and global headquartered banks (until now, UK banks were charged on their worldwide profits). The government has proposed a phased reduction of the levy to 0.1% by 2021. A tax on profits will ensure that the government benefits from a recovery in the profitability of the banking sector.

Mr Stride noted that a move to tax bank profits was a sign of the improving economy and the steps taken to improve banking regulation since 2010. Robert Jenrick (Conservative) noted tax raised from the banking sector has increased from £53 billion to £71bn. Welcoming this, the FST said a further £25 billion in additional tax revenue was forecast by 2022/23. The FST said the measures will increase the tax contribution of the banking sector to £4.6 billion by 2022/23. By 2023, over £44 billion in 'additional' bank revenues will have been raised.

Moving Labour's amendment, Shadow Chief Secretary to the Treasury Peter Dowd said it was appropriate to consider the wider political and ideological contexts behind the government's decision to restrict the bank levy. He suggested that the measure represented a 'tax break for banks' and that this measure, together with the wider Finance Bill, would do little to solve the UK's economic problems. He said Labour backed a higher bank levy and that the government would benefit from adopting Labour's tougher approach on banking profits.

Mr Dowd said Labour's new clause 1 would require a review of the levy, estimate the extent of revenue lost from previous reductions in 2011 and 2015, calculate how much extra revenue Labour's 'Bankers Bonus Tax' would have raised in revenue and establish a public register for the levy.

Stephen Kerr (Conservative) said he welcomed the moves in the Bill, saying that they were a fair way to create a level playing field between UK-domiciled and non UK-domiciled banks. He suggested that successive Conservative-led governments since 2010 had also sought to ensure that banks contributed more than just tax receipts to the UK economy.

Kirsty Blackman (SNP) spoke to the SNP's new clause 11 and the other amendments proposed by the Labour Party. She criticised the tone of the debate so far. Ms Blackman said the SNP stood on a manifesto pledge to reduce the bank levy and to introduce a tax on bank bonuses. She described Labour's new clause 1 as 'utterly sensible' for opening up to public scrutiny the impact of the bank levy. Ms Blackman added that the SNP amendment would promote inclusive growth, noting her party's support for more progressive options for taxation (in a nod to the Scottish Government's budget last week). The SNP would support Labour's new clause 1 if pressed to a vote.

James Cartlidge (Conservative) focused his contributions on Labour's new clause 3, arguing that the measures proposed failed to recognise the increase in tax revenues from the banking sector since the global recession. These taxes had brought in 'significantly more' revenue, were helping to pay down the deficit and enabling investment in public services. Karin Smyth (Labour) chose to focus her intervention on how money raised through the bank levy could be spent on apprenticeships and training, but said the government had instead chose to focus on a 'tax giveaway' for the banking industry.

Robert Courts (Conservative) said it was fair that banks pay their 'fair share' towards the economy and the tax yield, but that it shouldn't restrict their ability to lend and inject liquidity into the market. A changing global regulatory regime meant that it was necessary to look at reforming the levy. He pointed out that the 'economic paradox' of tax meant that the country needed to focus less on the tax rate and more on the revenue that was generated. This was part of a sensible approach to taxation since 2010.

Kent Labour MP Rosie Duffield used her speech to criticise Kent County Council for cuts to children's services, arguing that if the Government had not cut the bank levy there would be more money for such services. Emma Hardy, a Labour MP from Hull, made a similar case in relation to underfunding for Hull City Council, putting particular emphasis on cuts to Sure Start.

The minister, Mel Stride, wound up this part of the debate, responding briefly to the speeches made. He accused Peter Dowd of having failed to answer questions put to him during his speech. He agreed with Kirsty Blackman that banks needed to be discouraged from risky behaviour. This was what stress testing was all about, he said.

Clause 33 stand part was passed without a vote. Schedule 9 was opposed and put to a vote, being passed by 313 votes to 258. Labour's new clause 1 (review of the bank levy) was defeated 260-313 in a vote. Other amendments and new clauses were not moved.

Stamp duty land tax and income tax treatment of armed forces‚ accommodation allowances

Selection of amendments

Clause 40 (Higher rate for additional dwellings), Schedule 11 (Stamp duty land tax: higher rates for additional dwellings), Clause 41 (Relief for first-time buyers), Clause 8 (Exemption for armed forces‚ accommodation allowances) (all Government) + amendments 2 & 3 [Labour] - provide that the power to make regulations in consequence of the exemption from income tax in respect of payments of accommodation allowances to, or in respect of, a member of the armed forces may not be exercised so as to increase any individual‚ s liability to income tax + NC4 [Labour] - requires a review to be published prior to the Autumn 2018 Budget on the impact of the relief for first-time buyers, including its effects on house prices and on the supply of housing + NC10 [Labour] - requires an annual report on the operation of the relief for first-time buyers, including information on the beneficiaries and effects on different aspects of housing supply + NC5 [Labour] - requires that regulations setting conditions relating to the availability of the income tax exemption in relation to armed forces‚ accommodation allowance shall be subject to the affirmative procedure

[Debate to end at latest six hours from commencement of proceedings on the Bill

The debate

Debate on these areas was begun by the Financial Secretary, Mel Stride. The minister was pressed on the cost of the measure assisting most first time buyers with their stamp duty. He said that the benefit for the average first time buyer would be around £1700. He was also asked about the OBR's assessment that the measure would increase house prices by 0.3%. He responded that that did not take into account the supply side changes being made by the Govenment. Housing supply would be higher in the 2020s than in any previous decade, he claimed. Labour MPs pressed the minister on regional effects in an effort to argue that the measure would mostly benefit London and the South East. The minister did not answer directly but said 80% of first time buyers would benefit from the measure. The minister then turned to other changes to stamp duty, explaining that they would be closing down an avoidance opportunity. He then turned to clause 8, saying armed forces accommodation allowance would be free of both income tax and national insurance,

For Labour, Shadow Financial Secretary Jonathan Reynolds said we were in a housing crisis. The Government's measures fell woefully short of what is needed, he said. Abolition of SDLT for first buyers up to £300,000 had been a Labour manifesto promise, he said, but the party had said it should only be introduced with measures to increase supply, otherwise it would simply help inflate the housing bubble, pushing prices up. A Conservative MP intervened to say the Government was taking measures to increase supply. Mr Reynolds disagreed that the government measures would have any meaningful effect on housing supply. A Labour intervention highlighted that when Labour proposed the measure the then Chancellor had dismissed it as a gimmick.

On clause 8, Mr Reynolds said Labour was concerned that this manoeuvre was designed to push armed forces personnel into the private rented sector. The MoD has a target to sell off 30% of its estate by 2040, he said. He highlighted an arrangement involving Allington Homes as an example of government mismanagement of military housing stock. Forcing service families into the private rented sector would reduce their security of tenure and their quality of life, he argued. He claimed the government was seeking short-term savings without realising the repercussions. Labour had concerns over both the detail and a lack of safeguards, hence the amendment calling for a review of the measure.

Robert Courts (Conservative) said the armed forces accommodation allowance change was important and welcome. With an RAF base (Brize Norton) in his constituency he said that many in the armed forces would choose to live outside a base, particularly if a partner has a civilian job.

Sandy Martin (Labour) argued that tax incentives aimed at house buyers were in fact going into the pockets of housebuilders such as Persimmon.

Alison McGovern (Labour) argued against the cut to SDLT for first time buyers, on the basis that, firstly, it would fail against the Govenment's own targets, and secondly, it was simply the wrong policy priority for the country. She said the OBR's verdict was predictable. The value of the tax cut would not accrue to first time buyers but to those who already own property, she argued. It was a 'charter for inequality'. She argued that constituencies outside the south east would benefit very little. She said the Budget would not increase the housing infrastructure fund until 2019-20.

Kevan Jones (Labour) said his experience was modern members of the armed services want choice on accommodation, but this measure (clause 8) was the wrong way of doing it. He could not understand why this was being done in advance of a 'new housing model' being brought forward. The Government were doing this without any thought on increasing the supply of housing near military bases, he complained. When Australia had introduced such an allowance it was done over a period of ten years, he said. On SDLT, Mr Jones said it was clear where the money was going - to London and the south east. The measure would increase inequality, he argued. What was needed was large scale, direct government intervention to increase supply of social housing, he said. Also, local government needed stronger compulsory purchase powers for empty properties.

John Spellar (Labour) said the SDLT cut for first time buyers would leave existing owners of housing the main beneficiaries. The effect of increasing liquidity in a tight market would be to raise prices, he said. Like a number of other Labour MPs, Mr Spellar argued that London and the south east were benefiting disproportionately from a number of government policies, including the SDLT cut.

Lloyd Russell-Moyle (Labour) said the measures in the bill were far too little, far too late. He said he trusted the OBR figures rathe than 'books that were cooked in the Treasury'. Like other Labour MPs he said the key to tackling the housing crisis and getting young people onto the housing ladder was supply-side measures. Very few properties in his Brighton constituency cost less than £250,000 he said. These weren't affordable to people earning below the average wage, he argued.

Ruth George (Labour) criticised the Help to Buy scheme for simply raising house prices and the profits of housebuilders.

Financial Secretary Mel Stride again wound up the debate with a brief summation. He said it was lamentable that this policy (SDLT cut for first time buyers) that helps the young was one that Labour derided.

Clauses 40 and 41 and schedule 11, and clause 8, were passed without opposition. Labour forced a vote on new clause 4 (review of the impact of the relief for first-time buyers).which was defeated 313-226. Other new clauses and amendments were not moved.

Day One of committee stage concluded at 11.20pm. Day Two will be liveblogged on these pages tomorrow.

George Crozier and Chris Young, CIOT External Relations Team