Labour force vote on income tax allowance freeze

MPs have approved the March 2021 Budget Resolutions following four days of debate in the House of Commons. A report on the first two days of debate features on the CIOT website here. Below is a report on the final two days of debate, which took place on Monday and Tuesday this week (8-9 March).

The debate saw a shadow minister declare a ‘watershed’ in Conservative tax policy with the Chancellor ‘burying’ the idea that corporation tax cuts spur business investment, raising receipts.  Ministers, meanwhile, emphasised the government’s support for jobs, growth and business investment through both the continuation of furlough and SEISS, and incentives such as the CT ‘super deduction’. Labour forced a vote on the resolution to freeze income tax thresholds but ultimately all 80 of the government’s resolutions passed.

Before the final day of debate started former cabinet minister David Davis (Conservative) raised a point of order to say that by not including an amendment of the law resolution, in effect, “the Government have shut down the rights that the House has enjoyed for more than 100 years.” “The result is that Members’ hands are tied when it comes to effectively amending the Finance Bill,” he added. An amendment of the law resolution allows MPs to table amendments that deal with tax administration and relief provisions not otherwise provided for by the specific Ways and Means resolutions. The Deputy Speaker said there is not much he can do about it.

Contributions during the two days of debate have been grouped below broadly by topic, rather than chronologically.

Day one full debate is here.
Day Two full debate is here.

Corporation tax

The Economic Secretary to the Treasury John Glen told MPs that even after the proposed corporation tax (CT) increase the UK will still have the lowest CT rate in the G7. Before that increase kicks in, we are making the tax treatment of losses more generous by allowing businesses to carry back losses of up to £2 million for three years, and we are reviewing the eight per cent surcharge levied on bank profits to ensure that the sector remains ‘globally competitive’, he said. The super deduction will mean our business investment tax regime leads the world, he claimed.

However Shadow Economic Secretary Pat McFadden argued that the Budget marked a watershed in taxation policy on the part of the Conservative Party because “for years, we have heard the mantra that lower taxation rates would lead to increased revenue by stimulating more economic activity”. Now, he observed, the Government says by raising corporation tax rates, it hopes to bring in an extra £17.2 billion in a few years’ time. McFadden quoted Rishi Sunak’s post-Budget interview on the BBC Today radio programme in which, he said, the Chancellor had buried the argument of his predecessors. On that BBC show, McFadden highlighted, Sunak had said: “the vast majority, if not all, of that increase in corporate tax receipts is probably more likely due to the cyclical recovery in corporate profits, which took a real hammering in the last crisis”.

Continuing on his theme, McFadden said that the Chancellor had gone on to say on the same programme that: “There was an idea that they”— CT cuts — “could help spur business investment. And what we’ve seen over the past few years is that we haven’t seen a step change in the level of capital investment that businesses are doing as a result of those corporation tax decreases.” “So there it is,” said McFadden. “Thatchernomics and Osbornenomics buried in full public view by Rishinomics—no more Laffer curves; no more pretending that tax cuts always magically lead to more revenues; no more tax bombshell posters; “Singapore-on-Sea” laid to rest by Budget 2021.”

Lib Dem Leader Ed Davey welcomed the Chancellor’s ‘sharp U-turn’ on corporation tax because our economy and our national finances are both in ‘a terrible state’.

There was little criticism of the CT increase during the debate. The closest to a critic on the Conservative benches was former party leader Sir Iain Duncan Smith who hoped that the Government will have time to review the CT rate and be ‘very careful’ about the effect of that further down the road. The DUP’s Ian Paisley said he would welcome a cut in corporation tax in Northern Ireland to help it ‘outpace the tax haven that is the Republic of Ireland’.

In general, Conservative MPs who might have been expected to make the case for lower rates preferred instead to praise the ‘super deduction’. Stephen Hammond said that a more generous treatment of tax losses and the announcement of the super deduction will help many companies to invest in exactly the capital formation that they will need for the future. The super deduction will allow companies to cut their tax bills by up to 25p for every £1 they invest in new machinery over the next two years, bringing forward capital investment and replacing older, dirtier machines with newer, more efficient ones, said Neil Parish.

George Freeman remarked that the Budget has been welcomed by the CBI, the FSB, the Institute of Directors and all the key trade bodies, which, he said, speaks volumes for the confidence of boardrooms in this country in this Chancellor and in this Budget. Rob Roberts commented that delaying the CT rise and implementing the ‘excellent’ super deduction plan allows businesses to invest with confidence now, helping us build back better sooner and ensuring that we pay back the cost of the support schemes at a point when we have higher employment and a more stable economy.

Suzanne Webb called the super deduction the biggest business tax cut in modern British history. Elliot Colburn and Ruth Edwards both said it would boost investment. James Wild said the super deduction is very welcome, but he urged the Treasury to look at the concerns of the National Farmers Union that many firms will not be able to benefit from investment in new farm technology.

Sir Geoffrey Clifton-Brown was one of the few Conservatives who referred directly to the CT rise. He said no one wants to see taxes rise, but in these difficult circumstances it is right to even up the burden between individual and corporation tax.

For Labour, Shadow BEIS Secretary Ed Miliband pointed to the OBR which says that the super deduction ‘does not affect the long-run level of the…capital stock’. It will make a difference to the timing of business investment, but in fact, according to the OBR, business investment is expected to fall significantly in 2023 and 2024, Miliband highlighted. Shadow DCMS Minister Alison McGovern asked how focusing on ‘tax breaks for big firms’ solved the underlying structural issue of poor childcare, which is one of the biggest drags on productivity in the UK. Ruth Jones accused the Government of cutting taxes for businesses with no safeguards to ensure that corporation tax is still paid.

R&D was a focus for a number of Conservative MPs. Chris Skidmore was glad that the Government has set a target of spending 2.4 per cent of GDP on research and development by 2027, but noted that we currently spend only 1.8 per cent. Compared with other countries—China spends 2.1 per cent of GDP, the US spends 2.8 per cent, Germany spends 3.1 per cent, South Korea spends 4.5 per cent and Israel spends 4.9 per cent —'we are falling behind in the global race when it comes to R&D’. We must now focus on leveraging in private R&D spend, which is currently around £30 billion a year and needs to rise to £70 billion by 2027. Although R&D tax reliefs follow the Frascati manual, they are currently limited to staffing costs, materials and software, he said, adding that we urgently need to include data, education and skills in that package.

Two former Conservative leaders also weighed in on R&D. Iain Duncan Smith said that R&D tax credits encourage greater growth and there is huge scope for us to release some businesses through deregulation. Theresa May said she was concerned that the Government “have simply adopted the Treasury orthodoxy that if we wish to encourage investment by business, all we do are capital allowances.” She wants the Treasury to stop more consultations on R&D tax credits and ‘just get on and do something’. We could extend the definition of R&D expenditure or increase the rate, but we must act, she said. Human capital is increasingly what we must invest in, she added.

VAT and duties

There was support for the continuation of the VAT reduction for hospitality, holiday accommodation and attractions. Some MPs wanted it to go further. James Wild (Conservative) said there is a strong case to consider extending the lower 12.5 per cent VAT rate, which applies from October, on an ongoing basis. Richard Thomson (SNP) welcomed the temporary VAT cut but said stopping it on 30 September will not be helpful. It should continue for the full year, he said.

Another Conservative, Caroline Nokes, said there was a measure of disappointment in the personal care sector that the VAT reduction, ‘which we have seen so fantastically extended to hospitality’, was not also extended to that sector. From the Labour benches, Carolyn Harris offered a similar view, saying the personal care sector was overlooked in the Budget and she would like it to get help from VAT.

Some MPs wanted more to be done to help pubs. Jonathan Gullis (Conservative) suggested the new rate of duty for draught beer, defined as beer sold in containers of over 20 litres, could be set at a lower rate, reducing the price gap between cheap supermarket booze and a beer at the pub. Kenny MacAskill (SNP) backed a proposal from the Social Market Foundation that would have allowed for a variation in alcohol duty rates, loading a modest increase on to the off-sale trade to ensure that there could be a reduction for the on-sale trade. Do that or give pubs a reduction in VAT, he said.

Steve Double (Conservative) said a recent report highlighted that one in three households in Cornwall rely on tourism and hospitality for some of their income. Therefore, it was vital that the Chancellor delivered further support for businesses in the sector so that they can not only survive through the coming weeks, but be ready to reopen and bounce back quickly, he said. While the further business rate grants to support airports through the coming months were very welcome, he encouraged the Treasury to look further at what could be done to support aviation through cutting air passenger duty in the near future. Double was also disappointed about the removal of the relief on red diesel. This is particularly going to hit very hard the quarrying and mining sector, which is another very important sector for Cornwall, he said. The fact is that for some of the heavy gear needed, particularly in mining and quarrying, there just are not alternative clean bits of machinery available on the market yet, he said.

The freeze in fuel duty will prevent increased costs for struggling commuters and businesses during this crucial time, said James Grundy. His Conservative colleague Natalie Elphicke remarked that the Government’s commitment on fuel freezes is welcome, yet the transition to new fuel such as the electric car also needs to take place in rural and coastal areas.

Personal taxes

Conservative MPs hardly mentioned the freezing of the income tax personal allowance but opposition MPs were strongly critical, and opposed this resolution in a vote at the end of the debate (see below).

Lib Dem Leader Ed Davey said that by freezing the personal income tax allowance for years, the Conservatives are targeting tax rises on the lowest paid. Former Shadow Chancellor John McDonnell called the tax threshold freeze “a real-terms pay cut for millions of workers”.

Other Labour MPs also weighed in. Ian Byrne said the Budget brings 1.3 million people into paying income tax for the first time, hits families with council tax rises of about five per cent and continues to exclude many from any government support at all. The freezing of the personal allowance against inflation is a ‘stealth tax increase’ that will hit workers on the lowest incomes the hardest, said Emma Hardy. Kerry McCarthy and Maria Eagle made similar points.

Jon Trickett bemoaned that while we have £8 million being taken by ‘stealth’ because of the income tax changes, we have a third of key workers now paid less than the living wage, 10 million people are currently working in precarious employment and 14 million people are living in poverty, partly because the wealth in UK is located in a handful of large corporations and a few thousand very wealthy people which the Chancellor is not taxing enough.

One Conservative who did mention the personal allowance was Sir Paul Beresford, who claimed his Mole Valley constituents understand the wider economic reasons for the freezing of tax thresholds from next year as well as for the large but delayed increase in corporation tax.

Property taxes

Stamp duty land tax (SDLT) and business rates were both raised during the debate.

Conservatives praised the continuation of the SDLT cut announced by the Chancellor. Mark Eastwood said the extension of the stamp duty holiday would help the furniture industry. Derek Thomas said it will have helped in many parts of the UK, but asked the Treasury to consider the impact on areas such as Cornwall, where the housing market was already strong, but where house prices have not helped many local families, despite the stamp duty cuts.

On business rates, Damien Moore (Conservative) praised the 100 per cent rates relief until June, which moves to two thirds for the rest of the year, because it provides not only support, but certainty for businesses. Tapering the support will mean that businesses face no ‘cliff edge’, he said. Another Conservative, James Grundy, said that business rates must be reformed because in the North, they are so high as a proportion of earnings that businesses pay an effective tax rate of up to 70 per cent, compared with 20 per cent for those in the South.

From the SNP benches Richard Thomson said that the Chancellor should have followed the Scottish Government’s policy on business rates, a £1 billion package that not only cuts the poundage rate, but offers 100 per cent relief not just until June, but for the next 12 months for retail, tourism, hospitality, newspapers and the vital aviation sector.

Freeports

Views on freeports mostly split along party – and to an extent geographical – lines. Conservatives and MPs with a freeport in or near their constituency were mostly positive about them. Others less so.

On the Tory benches Ruth Edwards praised the Budget for turbo-charging whole regions through a new network of freeports. Suzanne Webb said the eight freeports will encourage free trade and bring investment to all regions of the country through lower taxes and cheaper customs. With the towns fund, other investments and a freeport agreed, the Government have finally aligned the stars and recognised Scunthorpe’s potential, said Holly Mumby-Croft.

Gareth Johnson said freeports are at their best when they incorporate an element of manufacturing within the perimeter, rather than simply being an import/export location. If raw goods can be brought to the freeport, assembled and exported, that offers the best opportunity for job creation and for the port itself. Mark Menzies wants the Government to ensure that enterprise zones do not, as a consequence of the development of freeports and some of the other strategies unveiled in the Budget, become the poor relation.

For Labour Shadow Chief Secretary to the Treasury Bridget Phillipson doubted the Chancellor’s claim in 2016 that freeports would deliver 80,000 new jobs, noting that rather simplistic economic modelling underpinned these claims, simply taking the total number of existing jobs in free zones in the US and scaling it down for our smaller population and for our smaller labour force. The truth is that there is little evidence that freeports create new jobs, she said. Instead, they simply risk moving them around, with the additional risk that deprivation is intensified in the areas just beyond the immediate vicinity of the freeport. They do not make companies more productive. They do not increase demand for the goods in the wider economy or increase the tax take for the Treasury. There are real concerns about tax evasion and the risk of smuggling associated with freeports. With HMRC left increasingly overstretched over the past 10 years, she fears our country is not well-placed to manage these new risks.

Shadow BEIS Secretary Ed Miliband took a similar view.  He said freeports have been tried for 30 years and that ‘all the evidence is that, at best, they may displace economic activity from one area left out of prosperity to another a few miles away’. The freeport presents an interesting opportunity, and it could play a part in our recovery, although many economists question what, if any, real benefit freeports bring, said Alex Cunningham. Tonia Antoniazzi was unimpressed that English freeports are receiving £26 million each, whereas Wales has been offered only £8 million.

The Green Economy

This was another area where views split along party lines. Conservative MPs led the cheers for the environmental measures in the Budget while opposition members were disappointed the Chancellor hadn’t done more.

Opening the final day of Budget debate on Tuesday, BEIS Secretary Kwasi Kwarteng said the government will create new industries and support sectors as they transition to a low-carbon, sustainable and competitive future. We are backing the development of hydrogen hubs in the Tees Valley, establishing four carbon capture and storage clusters across the next two decades, investing in the Aberdeen energy transition zone and the global underwater hub and providing a support package of more than £2 billion to Britain’s incredible auto industry, he said. The UK will end fully its contribution to climate change by 2050, he promised. The UK infrastructure bank will provide a global centre of excellence and advisory support for net zero projects across the country.

His fellow Conservative Philip Dunne welcomed the green finance measures, extending the Bank of England’s remit to reflect the transition to net zero Britain, which the Environmental Audit Committee had specifically called for. The major boost to business investment through the super deduction capital allowance will help business to invest in newer, cleaner technology, he added. Simon Baynes said the Budget helps to cement the UK as a world leader in offshore wind. Andrea Leadsom claimed the UK’s green economy could become a ‘bigger jewel in our crown than UK financial services is today’.

Shadow BEIS Secretary Ed Miliband spoke about what he termed the next crisis - the climate emergency, saying the Budget rejects a green stimulus and cuts green spending. The failure on the green homes grant and on green manufacturing is all part of the same problem, said Miliband. Sam Tarry was disappointed that there is no new investment for green recoveries in key industries, including automotive, aerospace and steel. Darren Jones said a failure to stimulate the growth of the green economy is just part of the failure of the Budget to meet the scale of the unemployment challenge.

Tanmanjeet Singh Dhesi criticised the UK Infrastructure Bank, saying what we need is an investment bank capitalised at £20 billion over five years at least, with regional investment banks in every region to invest in green businesses. “We need an institutional champion for green businesses and jobs. Instead, we got a get-rich-quick scheme for investors.”

For the SNP Deidre Brock said there is an aim of net zero by 2050, but no practical strategy about how to get there. Should the VAT system not be altered to encourage green home upgrades? she asked. She said the Chancellor has said his freeports will support green fast-growing industries, which is not something that anyone else thinks, but it is indicative of this Government’s attitude that someone else will sort things out.

Business (general)

Business Secretary Kwasi Kwarteng said the Budget presents a ‘dynamic and generous’ plan to help businesses to get up to speed after the pandemic. But he faced a pincer movement from former PM Theresa May and former Business Secretary Greg Clark, who both defended the previous government’s industrial strategy, which is being dropped by the current administration. “Will he acknowledge that the battery manufacturing innovation centre and the Faraday challenge, which galvanised the move to providing batteries for electric vehicles, were part of the industrial strategy, as was vaccine manufacturing? Can he explain why it is thought appropriate to abolish that strategy? Is it not better to have a plan, rather than no plan?” asked Clark. But Kwarteng said that while he commended ‘a lot’ of Clark’s work the now abandoned 2017 industrial strategy ‘was a pudding without a theme’. The Government will publish an ‘innovation strategy’ in the summer and set out details to support sectors, places and technologies in the ‘innovation strategy’, said the minister.

Conservative MPs praised the government’s announcements to help business, particularly the Help to Grow scheme.  Culture Secretary Oliver Dowden set the tone, saying Help to Grow will help 100,000 small and medium-sized businesses to get online or expand their digital businesses. He said the UK was cementing our position as the ‘tech powerhouse of Europe’. Mark Pawsey said Help to Grow will make a huge difference to the performance of small and medium-sized businesses up and down the country.

Andrew Bowie praised a ‘pro-business Budget. It is a Budget building the foundations to prepare to build back better and build back greener and a Budget that delivered for the entire UK’. Marcus Fysh claimed the business rates and VAT exemptions and the increase in capital allowances in this Budget will set us in very good stead to grow our way back into being able to have the revenue that we all want for our public services and to repair the public finances. Angela Richardson believed the restart grants along with continuing the business rates holiday and extending the cut in VAT so that it remains at five per cent for a further six months, is a ‘genuine springboard’.

We must do more to ensure that our rules and regulations are pro-competition post-Brexit, said Theresa Villiers, which means crafting our regulation so that it treats businesses equally, including start-ups and innovative disrupters, rather than entrenching advantage for market incumbents.

On the Labour side of the House Julie Elliott said that while any investment in digital skills is welcome—from the boot camps announced last year to the announcement of help to fund software upgrades and training for SMEs—it seems that the Chancellor is looking at ‘sticking plasters’ rather than at solving the issue of digital inequality. Chi Onwurah warned if the Government allow our small businesses to go bankrupt, the demand we will see after this pandemic ends will be met by big national or international chains and fire-sale venture capitalists, not the local businesses that our economy and communities need.

Lib Dem Leader Ed Davey said that, whether it is the OBR report of this Budget or other analysis, the evidence so far shows that the UK’s recovery will be weaker than that of other countries, because this Government chose to erect new barriers to trade with Brexit and hit our exporters with the biggest rise in red tape ever, just as British businesses are struggling with the deepest recession for 300 years.

Economic support and welfare

Ministers once again took the opportunity to set out what the government is doing to support businesses and jobs. Culture Secretary Oliver Dowden said the furlough scheme, business grants and support for the self-employed have been a lifeline. Economic Secretary to the Treasury John Glen said the desire to safeguard businesses has been this Government’s guiding mission since the first days of the pandemic. According to official statistics, insolvencies last year were ranked 25 per cent below 2019 levels. But while the pandemic continues, it is only ‘morally right’ that we do all we can to support the hardest-hit firms, said Glen. We are also providing targeted support to the sectors that have found themselves at the sharp end of the pandemic, he said, and the new restart grants will help get ‘shops bustling, hairdressers snipping and fitness centres buzzing again’.

On the Conservative backbenches Tom Randall said the Chancellor’s interventions have helped to save jobs, and he and the Treasury ‘should be commended on their work’. Dr Neil Hudson claimed the support for training and upskilling communities in the Budget will make a huge difference. Elliot Colburn said extending furlough to September, extending the five per cent VAT cut for six months, extending universal credit and working tax credit for six months, ‘will help families and businesses through the final months of the pandemic and on the road to recovery’.

However some had concerns. Chris Grayling wanted the Chancellor to look again at helping people who have missed out on support over the past 12 months especially those who pay themselves through dividends, and said the travel and tourism sector cannot continue with borders shut to the degree that they are now, and called for financial help for zoos.

Karen Bradley was also concerned that the self-employed who are employed through a limited company have not had any support. Bradley called on the Government to support the wedding industry, explaining that wedding venues are too large to qualify for business rates relief. They have no turnover, so the VAT reductions do not help them, and they do not serve food, so Eat Out to Help Out could not help them. The MP pleaded with the Government to consider finding some way to help wet pubs (that do not serve food).

On SEISS, Sir Robert Neill cautioned that while it is good that new entrants will now be able to get involved with the 2019-20 tax return and get support, there is real concern that some applicants will have to wait until mid to late April before they can apply for the next, fourth, SEISS round. Given that the last payment from round three was in December, people will have gone for some four months in effect without any income.

We must ensure that that support for freelancers remains in place even after restrictions are lifted, said Giles Watling.

For Labour, Shadow BEIS Secretary Ed Miliband said the world of work is characterised by deep divisions of power, which meant some workers were safe and some were not in the pandemic. Miliband said that, according to the OBR, even by 2025 unemployment never even gets back to pre-crisis levels. On welfare, the Budget tells people on universal credit that they need to go back to living on £74 a week from September, just as unemployment starts to peak.

Kate Osamor said this Government has ‘torn holes in our welfare safety net’.

The Joseph Rowntree Foundation predicts that the cut in universal credit and tax credit will plunge a further 500,000 people into poverty, complained Clive Efford. What we needed was a revision of the welfare state that will fit the needs of the gig economy and lift people out of poverty, not trap them in it, he said.

Some Labour MPs praised the extension of CJRS and SEISS. Nick Smith welcomed what he called the Chancellor’s long-overdue announcement of an extension to the furlough scheme, saying this will help to avoid an economic cliff edge this spring. Andrew Gwynne welcomed the fact that more people are now eligible for the self-employment income support scheme, but that still leaves millions without anything.

But the emphasis was more on what hadn’t been done. The Chancellor waited too long to extend furlough, causing uncertainty for businesses and workers, and newly announced support for the self-employed has been described by ExcludedUK as ‘too little too late’ for the three million workers so far excluded from financial help during the pandemic, said Margaret Greenwood.  Navendu Mishra said the Budget ‘fails yet again’ to go far enough for the three million self-employed excluded from financial help during the pandemic.

John McDonnell said anyone voting for this Budget will bear a ‘mark of shame’ for throwing another 500,000 people into poverty when the Government cut the £20 a week in universal credit from the poorest families in our community, a mark of shame for yet again failing to provide even that meagre uplift to disabled people living in poverty on legacy benefits and a mark of shame for failing to tackle the low level of sick pay.

On SEISS, shadow DCMS minister Alison McGovern said bringing newer entrants into the scheme was welcome, but analysis by the Musicians’ Union suggests that around 23 per cent of its members are still left out in the cold. On the fifth round of SEISS, she was concerned that it may take until much later in the year for normal work patterns to resume and in which two thirds of people are self-employed.

SNP MPs made similar points. Richard Thomson said the furlough is not without its cost to employers, and together with the SEISS it still fails to reach too many people. The party’s deputy Treasury spokesperson Peter Grant bemoaned that the Budget does not say nearly enough about permanent support for the millions of families who are living in poverty, or about supporting millions of small businesses and self-employed people who continue to be excluded.

Marion Fellows said people claiming legacy benefits will not even see the £20 universal credit uplift; 60,000 Scots, including 20,000 children, will be left in poverty and forced to choose between heating and eating in a cynical attempt to force people on to universal credit. Steven Bonnar agreed that by not providing a corresponding uplift for those on legacy benefits, more than two million people have been left to face increased costs.

Other comments

Chris Evans complained about a lack of prudence by government. He cited NAO statistics that show from April 2017 until the end of 2020, central government departments have recorded at least £5 billion in accounting losses. For example, HMRC racked up over £470 million in departmental losses from 2017 to 2020. According to HMRC’s own planning assumption, total fraud and error arising from the coronavirus job retention scheme cost anything in the region of £2 billion to £3.9 billion. So far, only £10 million has been recovered and any more is unlikely to be claimed back, said Evans. The £5 billion in accounting losses over three years could have built 10 new hospitals, he said.

We need more wealth creation in the country, but wealth creation is not the same as growth, said Dr Liam Fox. Fox hoped future Budgets meet the Conservative tradition of not just tax reform, but tax simplification, because those are the things that will make a market economy work better. We cannot fund the public services we want to see unless we have an efficient capitalist economy working at its maximum level, he said.

Greg Smith said this is a Budget that is ‘honest’ about the level of national borrowing, but which understands that the path to recovery must come from growth.

It is right that we look at corporation tax and do more on capital gains tax, said Stella Creasy. There are people trading shares in UK companies through tax havens who are not paying it. However, there is no point raising money if we are not going to invest in people, she said.

A number of opposition MPs are unhappy about the government’s ‘levelling up fund’. When it comes to the levelling up fund, typically there is a lack of clarity regarding the formula and criteria for making the awards, said Emma Lewell-Buck (Labour). Despite the slogan ‘levelling up’ and whatever the criteria the Government eventually publish, it has chosen to allocate funding in a way that favours affluent areas over those of greater need, feared Stephanie Peacock (also Labour).

There are particular concerns from Welsh MPs. Beth Winter (Labour was angry that the levelling-up fund will be centrally managed. That goes against the express position of the Welsh Government and is contrary to previous announcements by the UK Government, she said. Plaid Cymru’s Westminster Leader Liz Saville Roberts said Welsh local authorities will now bid for funding from a smaller pot in direct competition with the entire UK. Instead of a Wales-wide economic development agenda, the UK Government have divided Wales, by breaking its economy into 22 competing units.

Gerald Jones highlighted that the community renewal fund is £220 million across the whole UK, so a population share for Wales would be only around £11 million. The levelling-up fund is £4.8 billion over four years, with £600 million in the Budget for 2021-22, so Wales’ population share is £30 million. Based on the very limited information that the Government have provided, a reasonable assumption of what Wales might get from these two funds next year is around £40 million to £45 million, compared with, on average, the £375 million each year that Wales received in recent years from European structural funds. He said: “Clearly this is just not good enough.”

Virendra Sharma urged the Government to tackle inequalities, properly fund social care and give NHS staff the pay rise they truly deserve.

Bell Ribeiro-Addy complained that the Treasury Red Book barely mentions inequality—in fact, just once. Yet again, no equality impact assessment was published alongside the resolutions, she said.

Closing speeches

Closing the four days of debate for the government, the Chief Secretary to the Treasury Steve Barclay said the Budget prepares the country for an investment-led recovery. The Chancellor will boost productivity through schemes such as Help to Grow. Barclays said the Budget protects jobs and livelihoods and provides additional support to get the British people and businesses through the crisis. It is ‘clear and honest’ about the need to fix the public finances once we are on the way to recovery. And the Budget begins the essential work of building our future economy, including by providing the opportunity to level up across the country.

Shadow Chief Secretary to the Treasury Bridget Phillipson said the Budget does not even come close to resolving the problems the UK faced going into the pandemic. There is no plan for jobs, no plan to rebuild our economy and no industrial strategy, she said. At the point at which the furlough scheme is due to end and joblessness peaks, what do the Government plan to do? They plan to cut social security at a time when families will need it the most, sucking demand out of our economy in the process, she predicted.

Budget resolutions

At the close of the debate MPs voted on the 80 Budget Resolutions tabled by the government. All were voted through. On only one of them was a division forced by the Opposition – resolution 5, which freezes the income tax basic rate limit and personal allowance after 2021-22. This was passed 360-274.

Budget resolutions provide interim authority for taxes to be collected by the tax authorities. These resolutions are needed for each provision imposing a new tax, renewing an annual tax, increasing or widening the burden of an existing tax, or for other provisions that need to be in operation before the Finance Bill is enacted. A Finance Bill is required within five months to give permanent legal effect to the resolutions. In the unlikely event of the Government missing this deadline, the Exchequer would have to return to taxpayers all revenues collected under this temporary authority. (For more on the Budget and Finance Bill process see this House of Commons briefing.)

(All resolutions below were resolved)

  • Income tax (charge)
  • Income tax (main rates)
  • Income tax (default and savings rates)
  • Income tax (starting rate limit for savings)
  • Income tax (starting rate limit for savings)
  • Corporation tax (charge and main rate for financial years 2022 and 2023)
  • Corporation tax (small companies rate)
  • Rate of diverted profits tax
  • Capital allowances (super-deduction etc)
  • Extension of temporary increase in annual investment allowance
  • Capital allowances (oil and gas)
  • Capital allowances (extensions of leases for reasons related to coronavirus)
  • Temporary extension of periods to which trade losses etc may be carried back
  • Corporation tax (R&D tax credits)
  • Extension of social investment tax relief
  • Income tax (workers’ services provided through Intermediaries)
  • Income tax (payments on termination of employment)
  • Income tax (cash equivalent benefit of a zero emissions van)
  • Income tax (enterprise management incentives)
  • Income tax (cycle to work)
  • Income tax (coronavirus tests in 2021-22)
  • Income tax (coronavirus tests in other years)
  • Income tax (statutory parental bereavement pay)
  • Standard lifetime allowance (2021-22)
  • Standard lifetime allowance (future years)
  • Pension schemes (collective money purchase benefits)
  • Construction industry scheme
  • Covid-19 support scheme (working households receiving tax credits)
  • Self-employment income support scheme
  • Deductions for voluntary repayments
  • Repeal of provisions relating to the Interest and Royalties Directive
  • Payments made to victims of modern slavery etc
  • Hybrid and other mismatches
  • Corporation tax (relief for losses and other amounts)
  • Corporate interest restriction (minor amendments)
  • Northern Ireland Housing Executive
  • Capital gains tax (annual exempt amount for 2021-22)
  • Capital gains tax (annual exempt amount for future years)
  • Capital gains tax (hold-over relief for foreign-controlled companies)
  • Plastic packaging tax
  • Inheritance tax (nil rate band etc)
  • Stamp duty land tax (reduced rates on residential property for temporary period)
  • Stamp duty land tax (increased rates for non-resident transactions)
  • Stamp duty land tax (housing co-operatives etc)
  • Annual tax on enveloped dwellings (housing co-operatives)
  • Annual tax on enveloped dwellings (repayment claim)
  • Value added tax (temporary 5% rate for hospitality and tourism)
  • Value added tax (temporary 12.5% rate for hospitality and tourism)
  • Value added tax (extending digital record-keeping to all businesses)
  • Value added tax (deferring payment by reason of the coronavirus emergency)
  • Value added tax (refunds to S4C)
  • Customs duty (removal of steel to Northern Ireland)
  • Hydrocarbon oil duties (restriction of use of rebated diesel and biofuels)
  • Rates of tobacco products duty
  • Vehicle excise duty (rates)
  • Vehicle excise duty (rebates where higher rate of duty paid)
  • HGV road user levy (extension of suspension)
  • Rates of air passenger duty
  • Amounts of gross gaming yield charged to gaming duty
  • Rates of climate change levy (future years)
  • Rates of landfill tax
  • Carbon emissions tax (repeal)
  • Freeports (designation of sites)
  • Freeports (capital allowances)
  • Freeports (stamp duty land tax)
  • Penalties (failure to make returns etc)
  • Follower notice penalties
  • Late payment interest and repayment interest (value added tax)
  • Promoters of tax avoidance schemes
  • Disclosure of tax avoidance schemes
  • Penalties for enablers of defeated tax avoidance
  • The general anti-abuse rule (partnerships)
  • Licensing authorities (requirements to give or obtain tax information)
  • Information-gathering powers
  • Implementation of OECD model rules on the gig economy
  • Unauthorised removal or disposal of seized goods
  • Temporary approvals etc pending reviews or appeals
  • Replacement of the London Interbank Offered Rate (LIBOR)
  • Powers of the Treasury to amend legislation relating to banks
  • Incidental provision etc


The full text of the resolutions can be viewed here.


 

 

Posted in: Budget 2021
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