LIVEBLOG: Finance (No.2) Bill – report stage

The Bill received its third reading immediately after conclusion of report stage.

The Speaker decided that all new clauses and amendments will be grouped together for debate (more here).

Topics covered at Report Stage included the domestic top-up tax; communications data; pensions; tax simplification; public health and poverty effects; review of business taxes; multinational top-up tax; energy (oil and gas) profits levy de-carbonisation allowance; share exchanges involving non-UK incorporated close companies; air passenger duty; impact on households; electricity generator levy; effect on affordability of food; effect on small businesses; SME R&D tax relief; capital allowances; alcohol duty; VAT and deposit schemes. 

Our preview of report stage, including descriptions of all government and non-government amendments* and new clauses, can be found here.

^{(*Amendment 8 by Daisy Cooper (Lib Dem) on the subject of alcohol duties, has not been selected for debate).}

Liveblog

The Financial Secretary to the Treasury (FST) Victoria Atkins began the debate for the government, welcoming the input of MPs from across the House and for their 'intense scrutiny' of the Bill.

She said the government's amendments would ensure the 'proper functioning' of the Bill, making technical adjustments and responding to concerns and feedback from MPs, businesses and other external organisations.

The FST then set out the intentions of each of the government's amendments (see here for a description of the amendments). She also acknowledged the interest of backbench Conservative MPs in the government's proposals for the global minimum tax and domestic top-up tax and said that she would return to these in her closing remarks later in proceedings.

Conservative MPs, led by Priti Patel (Con) are seeking to delay introduction of the multinational top-up tax and to allow the Treasury to to extend the permitted period for multinationals to make transitional safe harbour elections in the event that other countries are slow to implement the tax.

Shadow Financial Secretary Treasury James Murray moved the opposition's new clauses and amendments. He focused his opening remarks on the abolition of the lifetime allowance, saying the government could have found a fairer and less costly approach that the 'blanket' abolition proposed by the government. Murray said that the proposals put forward by the government were not an appropriate use of public money and that a more focused approach would have been preferable.

Kit Malthouse (Con) suggested that Labour's alternative policy could lead to 'a rat's nest of complexity around (public sector) pensions' with bespoke schemes for high earners across many different professions. Murray said that a bespoke scheme for NHS doctors, as proposed by the opposition, had been endorsed by figures including the chair of the Treasury Select Committee (Harriett Baldwin) and by Chancellor Jeremy Hunt prior to his appointment.

The Shadow FST also suggested that the government's cut to Air Passenger Duty - 'a tax cut on frequent fliers' was another inappropriate use of scarce public funding. 

Murray then accused the government of having the wrong priorities for the public finances and had been making the wrong choices amid a cost of living crisis, focusing instead on 'tax cuts for frequent fliers and those with the largest pension pots'. He added that the government had presided over said 25 tax rises and 12 interest rate rises while in office and had 'ignored' chances to create a fairer tax system.

The Shadow FST then said focused his remarks on non-domiciled status and Labour's new clause 9, saying it was a 'patriotic point' that those who choose to make Britain their home should pay their taxes here. But he said Ministers were instead 'hiding behind the non-dom loophole'.

Murray then spoke to the energy profits levy, arguing that the government could be doing more to close loopholes, and to the implementation of the global minimum tax. He welcomed implementation of the agreement  but warned that the opposition of Conservative MPs seeking to block its introduction represented an 'astonishing act of self-sabotage on our public finances'. He signalled Labour would back the government if the amendment proposed by backbench Conservative MPs is pressed to a vote. 

He argued in conclusion that the government was unable to provide stability and certainty to the economy.

Treasury Select Committee chair Harriett Baldwin (Con) spoke to the amendments put forward by cross-party MPs on the committee. 

She began by quoting the Chancellor's comments to the committee, when he described the tax system 'is far too complicated'. She then gave examples of complexity in the tax system which had made it expensive and difficult for HMRC to administer and for taxpayers to understand. She said the committee had found 1,180 reliefs in the tax system, many of which were misunderstood, and then spoke about the 'crippling' burdens imposed by the VAT system and the £85,000 VAT threshold which could hamper business growth. Baldwin then spoke about cliff-edges in the tax system, which have a detrimental effect on household incomes and provide an 'obstacle to economic growth'.

Kit Malthouse (Con) suggested that complexity could lead to the 'gaming' of the system by accountants and tax planners. Baldwin recognised his remarks and warned about the cost of being able to access tax and accountancy advice.

Baldwin said that by abolishing the Office for Tax Simplification (OTS), the government was losing a source of 'valuable advice on how to simplify the tax system' and that it sat uncomfortably with the government's aim of simplifying the tax system.

As Baldwin moved her amendment that would require the Chancellor to report to the Treasury Select Committee on the progress being made to simplify the tax system in the absence of the OTS, FST Victoria Atkins intervened to offer to write to the committee each year with such an update. Andrea Leadsom (Con) said 'concrete examples' of simplification would be crucial in any information provided to the committee. 

Debbie Abrahams (Lab) said that her new clause 3 would assess the impact of the Bill on poverty, inequalities and health, arguing that it could support the government's levelling up agenda by helping to reduce inequalities. Abrahams then gave examples of the impact of public spending decisions on her constituency in Oldham, comparing this with budget reductions in Conservative held seats and the issues that this has created as a result of 'political choices'.

Speaking on her own amendment 20 to delay the introduction of a global minimum corporation tax, Priti Patel (Con) said she “remains concerned” about the tax, including its effects on business certainty, as well as increasing complexity. She said the US have “made it abundantly clear” they won’t be bringing in the tax and could even put in place “retaliatory measures” against countries that do.

Patel called for greater consistency in policies to provide certainty for businesses, including in the fields of oil and gas and renewable energy, but that the proposed global tax was “wrong for a number of reasons”. “These are complex changes and they will be challenging to enforce. I think it’s anti-competitive (and) it undermines our fiscal sovereignty. We don’t want to undermine our ability to be a low-tax global beacon of free trade.”

Patel added that other countries could find loopholes to circumvent the legislation and, while the UK “does follow rules”, “the same cannot be said” for the other nations involved in the proposed tax, including those involved in human rights abuses.

She added that following correspondence from the Chancellor today, she would not be moving the amendment to a vote.

SNP spokesperson Stewart Hosie said the decision to remove the lifetime allowance for pensions will cost £3 billion and benefit a "tiny, tiny number of already pretty comfortable or very well-off people", while nearly as many bankers as doctors will benefit from the changes.

On tax simplification, Hosie said his SNP colleague Douglas Chapman had quoted from the CIOT's George Crozier, who argued that the Office of Tax Simplification "had achieved a significant amount over its 12 years of existence and with greater ministerial support... could achieve so much more." He also praised the OTS's independence as a key feature which would need to be considered in future simplification work.

Hosie added that it was "sadly true" that none of the changes to the bill offered any help to those struggling with the cost of living crisis, calling it a "missed opportunity".

Alun Cairns (Con) said the clauses around alcohol duties looked to simplify the system while protecting public health and the hospitality sector, which could now be administered "thanks to Brexit". He said that encouraging people to drink alcohol more in pubs than at home, which he called a "hangover" from Brexit, showed the importance of the publican trade. He added that it was safer to drink at pubs, where those drinking to excess can be "monitored and encouraged to think otherwise". Cairns also praised the employment opportunities at pubs and bars, especially for young people.

He said "decanted" alcohol, that which is served on-site but consumed off-site, introduces a "whole new complexity" as they do not enjoy the higher relief. "I cannot understand why we are now introducing a different tax rate for those who are served on the premises but maybe consume at home," he added. He said decanted drinks equate to 0.1% of sales in pubs and sometimes can be drunk partly on premises and partly off, which creates a "onerous" situation for owners in terms of tax relief. He also called for greater consultation with the industry.

Also speaking on simplification, Nigel Mills (Con) said: "We do need to find a system whereby we can simplify our tax regime because it has got ever more complicated." He warned that eventually taxes will "fall over" as they begin to contradict and work against each other.

On the global minimum tax, Mills spoke to his amendment that the permitted period for multinationals to make transitional safe harbour elections is extended. He said its important that the UK takes the lead on this as its overseas territories have "behaved the naughtiest" in terms of taxation. "Our constituents do not want to see large multinational corporations hiding their profits in low-tax jurisdictions," he added.

The FST began her concluding speech by praising the scrutiny of the bill in the House. She said she and the Chancellor are "deeply committed" to tax simplification and would look to engage with the whole House on the issue, but would not be reversing the decision to abolish the OTS. She did, however, promise a "systematic review" of HMRC guidance, a consultation on expanding the cash basis and simplification measures through the bill itself including the £1 million limit to the annual investment allowance. 

Following an intervention from Dame Andrea Leadsom (Con), the FST said the Government would be looking at changes to cliff-edges. This is a complicated area, she told the House. She was not in a position to commit to the metrics that the government would use to measure progress in this area but she would come back to the committee when the government have "a settled package which we think will address the concerns of the committee but also the wider concerns beyond simplification such as fairness and encouraging growth."

The FST said she recognised the concerns and 'thoughtful considerations' of the Treasury Committee. She committed that the government would report yearly to the committee "to provide an overarching summary of the government's progress on simplification", starting this tax year.

On the global minimum tax, the FST explained that, if the UK opts not to impose the rules, "the tax will still be collected, but by another jurisdiction. This is why we are determined to introduce Pillar Two from 31 December this year." Despite praising the work done on amendment 20, she said the government would not support the amendment, instead providing regular updates on Pillar Two implementation, including revenue forecasts. She added that "very few" nations will be given longer to implement the rules, but they are not in the same "economic situation" as the UK, whereas similar sized economies were working to the same timeframe as the UK.

The FST emphasised that even when the global tax is implemented, the UK will retain its sovereignty to set its own corporate tax rate, which is still the lowest in the G7, along with "tax levers" such as R&D credits.

On the lifetime allowance, the FST insisted the measure would protect the NHS by preventing earlier retirements by doctors, while she said the changes to alcohol duties were designed to promote consumption of alcohol in pubs, and therefore drinks consumed off-site would not enjoy the same level of relief. On passenger duty, she said the measures were intended to help families visit each other around the UK.

Votes

Government new clauses 4 and 5 were agreed to and added to the bill without division.

Government amendments 9-13 and 14-19 were also agreed without division.

Labour's new clause 7 was defeated by 296 votes to 202.

Labour's amendment 1 was defeated by 294 votes to 192.

Third reading

The FST moved the Bill, noting that its contents would assist in the delivery of the government's overarching agenda. She thanked all of those involved in the preparation of the Bill, including officials in government, parliament, HMRC, MPs and staff members.

James Murray responded on behalf of the opposition, offering thanks on terms similar to the FST and emphasising the CIOT for the 'invaluable support and evidence for us and all members of the House'.

He said that the Bill could have been a chance to make the tax system fairer after '13 years of low growth, stagnant wages and 25 tax rises' and accused the government of failing in its responsibilities. Stewart Hosie (SNP) said he doubted that the measures in the Bill would deliver economic growth.

The Bill was agreed to by MPs, bringing proceedings to an end. The Bill is now expected to head to the House of Lords where it will be debated, but not amended.