The debates on the Budget this week were understandably held with the COVID-19 outbreak foremost in the minds of MPs. Conservatives generally praised the Budget and the goal of ‘levelling up’ the UK, while Labour said COVID-19 exposed the impact of the Conservatives’ 10 years of austerity. The Government announced a 12-month delay to the introduction of off-payroll working changes.
This report focuses on tax and related contributions in the debate though it includes some broader remarks.
The four days of Budget debate closed on Tuesday with the passing of the Budget resolutions. Resolution 7 (Income tax (workers’ services provided through intermediaries) was withdrawn with ministers saying they would bring it back amended. The remaining 62 resolutions were all passed without a vote.
Ahead of the debates this week, Labour criticised the Government’s decision not to move an amendment of the law resolution because it affects the ability of the Opposition and other MPs to table amendments to and scrutinise the Finance Bill. The Government replied that the Budget was moved on an income tax motion, rather than on a change to the law, because that has been done with previous Budgets.
The Chief Secretary to the Treasury Steve Barclay announced that the Government are postponing the reforms to the off-payroll working rules IR35 from April 2020 to 6 April 2021. Barclay said: “This is a deferral in response to the ongoing spread of COVID-19 to help businesses and individuals. This is a deferral, not a cancellation, and the Government remain committed to reintroducing this policy to ensure that people who are working like employees, but through their own limited company, pay broadly the same tax as those employed directly.”
Minister for Health Edward Argar was unconvinced by Labour MP Kevin Brennan’s suggestion that universal basic income should be considered for people who work as freelancers or who are self-employed for the duration of the COVID-19 crisis, saying the Budget announcements were enough. Conservative John Redwood intervened to suggest help for the hospitality, travel and leisure industry with some type of ‘revenue-sharing’ with the Government for the period of the coronavirus crisis. Argar said DCMS continues to have discussions with those industries.
The Chancellor committed £6 billion of extra spending to support the NHS over the lifetime of this Parliament, in his Budget. Argar explained that the money includes starting work on 40 new hospitals, 50,000 more nurses, and 50 million more appointments in primary care. Peter Grant of the SNP intervened to say that the OBR based its longer-term debt forecasts on the assumption that 20 per cent of those capital promises will never actually happen. On the Budget announcement on the taper in doctors’ pensions (and those of other high earners), Argar claimed it will take up to 96 per cent of GPs and up to 98 per cent of NHS consultants out of the scope of the taper based on their NHS income.
Economic Secretary to the Treasury John Glen (pictured) told MPs: “We will redouble our efforts to clamp down on tax avoidance and evasion. The vast majority of taxpayers in this country—businesses and individuals alike—pay their correct taxes on time and expect others to do the same. For that reason, the Government will give HMRC more funding to tackle non-compliance and secure an extra £4.4 billion of revenue that is not currently obtained. Every penny that HMRC can recover will mean more money for frontline public services.”
Secretary of State for Transport Grant Shapps claimed the Budget was a blueprint for a ‘more connected, more prosperous and more equal Britain’. Labour’s Chris Bryant intervened to say that people in the hospitality industry are ‘terrified’ that their businesses will be closing forever in two to three weeks’ time and they cannot even claim for insurance because the Government will not formally close them. Conservative Kevin Hollinrake intervened to say a lot of income to businesses will be lost forever and urged the Government to put in place a package of financial support based on grants, ‘not merely business loans’.
Labour frontbench speeches
Shadow Treasury Minister Anneliese Dodds said we needed an emergency Budget even before coronavirus came along because we had “three months of zero per cent growth up to January, we have had the lengthiest squeeze on living standards in this country since Napoleonic times, and we have had the slowest recovery from an economic crisis for 100 years.” We need to recognise how our response to coronavirus is being made harder because of changes that have occurred over recent years, she added, saying: “We needed a long-term plan for social care before this crisis. We needed the 100,000 staff we are missing from our NHS before this crisis.”
Shadow Chief Secretary to the Treasury Peter Dowd said many millions of people still have no financial certainty from the Government and the Conservatives bear a huge responsibility for the parlous state of ‘our public realm’. If you were to look back at the last 10 years, the Government have underspent on infrastructure—far less than three per cent of GDP—every single year, said Dowd. We have had the slowest recovery for a century in this country, and we have had the Bank of England’s chief economist Andy Haldane describing a pay ‘disaster’, he said. Dowd pointed out slightly sarcastically that the word 'review’ is mentioned no fewer than 117 times in the Red Book, which has only 120 pages in it, including the blank ones.
Shadow Health Minister Justin Madders said it remains unanswered how the extra funding for NHS and social care because of coronavirus will be precisely allocated. He criticized the Budget for not addressing the issue of social care, and added that we need a guarantee that all social care staff will receive statutory sick pay. He warned about the impact on councils of coronavirus, saying: “It is likely that the knock-on economic effect will severely impact on council finances. Fewer people will use services that they currently pay for, such as leisure facilities, and it is likely that council tax collection rates will drop. There will almost certainly be unanticipated expenditure from covering staff sickness, and that is before we get to social care.”
On the government advice to avoid pubs, restaurants and theatres, Shadow Transport Secretary Andy McDonald criticised the lack of financial support for them and whether the Government will ensure that insurers do not plead force majeure and avoid their liabilities. McDonald spoke in favour of the French Government announcement that electricity, gas and rental bills would be suspended – why not here? The fuel duty freeze continues and there are no measures to reduce the cost of public transport, compounding the failure of recent years, he continued.
Conservative backbench speeches
David Mundell reflected on the foot and mouth crisis in the early 2000s, saying a lesson from that experience is that small businesses need grants not loans. He welcomed the Budget announcement on business rates relief but was disappointed that it is capped. He has some doubts about how flexible HMRC will be in practice based on their pattern of behaviour. He made an appeal directly to the Scottish Government: “The way that our business rates system in Scotland works for the hospitality industry, and particularly hotels, is still not right.” Ahead of the Budget, he wrote to the Chancellor, together with 15 Conservative colleagues, the Association of Convenience Stores and the British Retail Consortium about access to cash, saying eight million people in our country are not ready to cope with a cashless society.
Government measures to suspend business rates and refund sick-pay payments for smaller firms are welcome, but the Government need to be ready to provide more emergency payments to support those businesses, said Neil Parish.
Greg Clark, a former Secretary of State for Business, enthused about the extra funding for R&D, including a commitment to private investment through an increase in the R&D tax credit. He noted that coronavirus is not included among the conditions in some business-continuity insurance and asked the Government to act on that.
Welcoming the Budget announcement on R&D, Robert Courts said that for many years, this country has lagged behind others in the amount of GDP it puts into research and development. This has meant that we have problems with productivity, and that in many of the areas in which we excel, such as the high-tech areas of the economy, we are not doing as well as we could.
Aaron Bell especially welcomed the commitment that more R&D funding will go to universities outside London, the east and the south-east of England. Bell claims the fuel duty freeze will make a huge difference to hard-working people. The axing of the ‘reading tax’ on digital books, newspapers and academic journals from 1 December 2020 will make a huge difference to people with disabilities who struggle to read or handle printed books, and remove a barrier to literacy for children and young people, 45 per cent of whom now prefer to read on a digital device.
Chris Grayling said keeping fuel prices as low as possible is enormously important to this country’s self-employed, as they seek to keep their businesses afloat. Grayling played up the role of a low-tax economy in reducing unemployment in the past decade.
Laura Farris welcomed the GP pension relief, saying it will bolster frontline services at this critical time, increase the availability of GP appointments, enhance staff retention and boost morale.
Selaine Saxby said the freezing of spirit, beer and cider duty was warmly welcome, as was the extension of the business rates discount to £5,000.
Even with the ONS adjustments, the budget deficit will be under two per cent this year which gives us at least some room for manoeuvre to deal with COVID-19, said Sir Robert Syms.
We must not see a surge of money going into investment and then a famine in a few years’ time, remarked John Stevenson, adding: “Governments do not create wealth; it is business and the private sector that do so. [I] hope that we see some reform of the taxation system to make it efficient and fair, and making a real contribution to the economy—less tinkering, more simplicity.” He used the example of IHT, saying it is not a tax that raises a huge amount of income for the Treasury, but, through some simplicity and with some changes, it could be fairer and at the same time generate more money.
The Budget was unequivocally pro-business because it increases employment allowance, cut rates and made provision for start-up and scale-up loans, said Miriam Cates.
Jonathan Gullis said that as we learn to adapt to the consumer changes brought about by the digital revolution, it is absolutely right and correct for the Government to step in and take action to protect the hearts of our towns and cities.
On COVID-19, Kevin Hollinrake said: “We need to say to businesses and consumers—and if we do not, it will cost us the amount anyway—what the German Finance Minister said a week ago: that, as far as possible, no company should get into existential trouble and no job should be lost as a result of this crisis.”
Peter Aldous said it is important that the Government are flexible and prepared to adapt and vary policy to meet challenges that will suddenly present themselves.
Labour backbench speeches
Jack Dromey said MPs must work together to ensure that, nationally and internationally, a global recession does not happen, and does not become a global depression. On the Budget, he said it is important that we see further significant moves, of the kind that the Society of Motor Manufacturers and Traders has called for, on tax-free electric vehicles—£5,000 off VAT on vehicles alone—which would greatly boost the production and sale of electric vehicles. He spoke about a German scheme in 2008 that created a fund to pay workers up to 60 per cent of their foregone net wages if factory production were temporarily cut. The scheme allowed employers to cut production temporarily without cutting jobs, thereby maintaining vital capacity.
Afzal Khan welcomed the Government’s £500 million hardship fund to help local authorities deal with the coronavirus outbreak but remains concerned that thanks to a decade of austerity and cuts, local authorities lack the capacity or resources effectively to distribute that funding. He said the social security system was “punitive, complex and as mean as it has ever been”.
After 10 years of austerity and a severe lack of ambition, the Budget comes nowhere near to making up for past cuts, said Alex Cunningham. He agrees with the Union of Shop, Distributive and Allied Workers when it says that the Budget does not address working family poverty.
Last week’s Budget will double government borrowing, and it is proof that the Government’s austerity agenda, ‘which brought unnecessary pain and suffering to millions’, was a failure, remarked Mohammad Yasin. Money cannot fill the 100,000 workforce vacancies, including 43,000 nurses and 10,000 doctors, who we need right now, he added. The £76 billion rise in overall spending by 2023-24 will be paid for largely by borrowing, paving the way for soaring debt and probable tax rises. He finds it astonishing that social care has been ‘ignored’ again in this Budget.
Bambos Charalambous worries that with the new financial year for councils a fortnight away, there is still no mention of the public health grant.
Zarah Sultana said a ‘market approach’ to the COVID-19 outbreak will condemn working-class people to decimation. Sultana said we should give statutory sick pay to all workers at a decent rate, suspend rent, mortgage and utility payments, support local authorities and food banks to distribute food, equip our NHS to deal with the emergency by bringing hospital cleaners in-house and paying them the real living wage, requisition private hospitals and repurpose manufacturing plants.
Paul Blomfield noted that across the public sector as a whole, real-terms spending per person will remain about eight per cent below 2010 levels in the next financial year. Also he worries that a 50 per cent reduction in international students starting in September could produce a loss of £1.9 billion.
The inadequacy of statutory sick pay was a recurring theme among Labour MPs. Ruth Cadbury said the Government’s work on statutory sick pay will not be enough to pay council or housing association rents (and people will end up in arrears). Yasmin Qureshi said full sick pay is needed to cover the entire period for which someone is in self-isolation, and of course if they are then diagnosed with the virus. Yvette Cooper said the current system of universal credit, of statutory sick pay or of any of ‘those tinkering measures’ just will not cut it in dealing with the implications of COVID-19. The Government should guarantee decent sick pay for all workers, suspend rent, mortgage and utility bills, make private healthcare facilities available for our NHS rent-free, ban evictions, end sanctions, scrap the five-week wait for universal credit and consider rolling out a basic income, said Ian Byrne.
On Friday, more than 100 parliamentarians from several parties joined Helen Hayes in writing to the Secretary of State for Health and Social Care to ask him to guarantee full pay for social care workers who have to self-isolate because of covid-19. This commitment has already been made to NHS workers and contractors.
Ruth Jones believes the social security system has lost its way. We need to rebuild it from the principles on which it was founded: supporting people rather than policing them, and alleviating poverty rather than forcing people into it.
Stephen Kinnock pointed out that the Government’s ‘so-called levelling up agenda’ reflects what many economists, politicians and commentators have recognised for many years. But the Budget is really a continuation of the city-centric model on which the British economy is based. The most critical part of rebalancing our economy must be a commitment to a modern manufacturing renaissance, he suggested.
Rachel Hopkins said the Budget focuses on levelling up the market at the expense of the social infrastructure that serves people across the country. The Budget does nothing to address regional investment inequality and accepts the outdated status quo of London receiving £410 more investment per passenger than the east of England, she complained.
The additional £360 million of funding promised for Wales is welcome, but much more is needed, especially given that the UK Government clawed back £200 million from Wales on a recalculation only earlier this year said Gerald Jones.
Alex Sobel said this current crisis reinforce the fact that we must also ramp up UK production and UK ownership of production and have more British-owned firms.
Peter Grant fears that many small and valued businesses will close and never reopen because of the economic impact of coronavirus. Grant forecast that many people face being thrown on to the mercy of a social security system that was utterly unfit for purpose before this crisis and will be even more unfit to deal with the challenges that it will face.
On Brexit, Grant said in an environment of coronavirus, surely the Government will now finally admit that enshrining the end of the transition period—December 2020—in law was an act of criminal recklessness. He closed by saying the fiscal settlement between the UK Government and the devolved Governments—needs to be completely revised, because it does not give the Scottish Government the flexibility they need to respond to the coronavirus crisis.
Chris Stephens was disappointed that there were no more concessions for those caught up in the Loan Charge. Stephens said: “I hope the Government will also be a bit more specific about the measures they want to introduce to tackle the promotion of tax avoidance. I am not the only Member who is concerned about the reduction in staff at HMRC over the past 10 years.”
He is alarmed that some large multinational employers do not pay company sick pay from day one. Some pay it on day four and some pay it on day seven, leaving the state to pick up the tab. The statutory sick pay of other European countries far outstrips what is on offer in the UK, he complained.
Treasury spokesperson Stephen Flynn said statutory sick pay is currently £94.25. It pales into insignificance in comparison to what is on offer in other European countries and world partners. Flynn said we need to look seriously at the possibility of the Government becoming the insurer of last resort to protect all businesses. The MP complained there ‘not a peep’ in the Budget in relation to oil and gas—not a single mention—despite the fact that the price has been plummeting for a number of weeks.
Lib Dem Wera Hobhouse spoke about people in the gig economy or on zero-hours contracts, saying we need a welfare system that can ‘act fast’ without delays in payment and processing - ‘no delays at all’.
Separately, Hobhouse remarked that the fuel duty freeze in the past 10 years has not resulted in an increase in people taking public transport but in an increase in cars on the road and fewer people using public transport.
Jim Shannon, DUP, was concerned about the fact that there was no mention at all of air passenger duty. He welcomed the £210 million in the Budget to establish Treasury officials in Northern Ireland. “The tax threshold has dropped, and there is no additional tax on red diesel—assistance that makes a difference for many things. I sincerely appreciate the Chancellor’s efforts in this uncertain time, but we need a whole UK approach. Just as in other times of national crisis the regions pulled together, so must we also do that. The Government intend to ensure that someone’s postcode does not dictate the help and assistance given, and neither should it dictate their income tax. Let us get this right.”
Stephen Farry, Alliance, said there is an issue with our ability to replicate the welcome 100 per cent rates relief for small businesses in Northern Ireland, but ‘that needs to happen’.