The debate on the Queen’s Speech concluded on Thursday 24 October with speeches focused on the economy. As is typical with Queen’s Speech debates most contributions were broad-brush with plenty of political knock-about on show. This summary picks out the tax-related contributions in particular.
Chancellor of the Exchequer Sajid Javid said that since 2010, because of the Conservatives’ actions such as the rise in the minimum wage and tax cuts, the average person working full-time on the minimum wage is around £3,500 better off a year. He went on to say Labour’s tax rises would ‘hit hard-working families’ and that their tax avoidance plans contain a £2.5 billion ‘mistake’, according to the IFS. Javid contested Labour’s claims that 95 per cent of people would face no income tax hikes under Labour, noting it proposes ‘more than 20 new tax hikes’. “We will raise wages; Labour will raise taxes”, he charged.
Tom Tugendhat said the Conservatives have cut the taxes of 32 million working people and cut taxes on businesses that are generating growth and employment for the people of this country.
Former Tax Minister Mel Stride, who had been elected chair of the Treasury Select Committee the previous day, said the Committee should look into the interaction of the universal credit taper and the income tax regime, because for some lower-income families with children that leads to marginal tax rates of 70 per cent or more. “That is unjust and something on which the Committee may wish to focus,” he said. He praised the work of Conservative MP Fiona Bruce in this area. Bruce, along with a number of other Conservative MPs, launched a report in January calling for the tax system to better recognise the contribution parents make to society, including those parents who choose to stay at home with their children, or who care for elderly or dependent relatives. (We reported a debate on the report here.)
Stride also called for “fairer taxation internationally for those online businesses, which create value through internet platforms such as search engines in social media and marketplaces. People expect them to be taxed fairly. It is a matter not of avoidance, but of having a tax regime that is fit for the 21st century.”
Harriett Baldwin, also a former Treasury minister, and one of those Stride defeated in the Treasury Committee contest, remarked that about £1 in every £10 of public spending is funded by the financial services sector. Instead of 20,000 extra police, we would be able to pay for only 18,000 extra police if those tax revenues were not there, she said. Instead of 40 hospital expansions, we would be able to pay for only 36 if those tax revenues were not there, she went on.
Kevin Hollinrake, another unsuccessful contestant in the week’s Treasury Committee battle, observed that larger companies—Amazons, Tescos and Starbucks—are able to take competitive advantage of the tax system, as a consequence, the growth rate of SME start-ups has started to falter. He said: “New rules are coming in to try to level the playing field, such as the diverted profits tax, but we must do more to ensure that everybody in the business environment pays their fair share of tax. That is how we build a fair and level playing field, encourage more SMEs to start up and scale up, and become a more productive economy. That is how we get a bit less capitalism, but a lot more capitalists.”
Craig Mackinlay, a chartered tax adviser, claimed the reductions in corporation tax in recent years are a ‘driver in making sure that Britain remains a place to do international business’. MacKinlay called for ‘a debate about liberating our tax system to make sure that risk versus reward is properly in place’. He wants the Chancellor to consider tackling ‘fiscal drag’, such as on inheritance tax, where the £325,000 limit has remained unchanged since 2009.
Mackinlay called for a more strategic approach to tax from the government: “We should treat tax not as though it is one move at a time; we need to play it strategically. We have done lots to improve the stamp duty system by getting rid of the rather hated “slab system” some years ago, but we are now seeing the additional 3% second property surcharge and, with the rates that exist at higher levels, a reduction in the tax take. We saw an increase in the tax take when we reduced the higher rate of income tax from 50p to 45p, and I propose that we can do the same with stamp duty.”
Mackinlay also complained that ‘hundreds of thousands’ of properties are ‘stuck in second ownership owing to the application of penal CGT rates to those who own second properties but do not rent them out’.
Nigel Mills, another former tax professional, supports an idea from David Nieper Ltd, an employer in his constituency, which would like to have some extra support ‘so that small and medium employers can sponsor young people from the area through university courses that their businesses need, in return for those young people working in the businesses afterwards’ (and therefore reduce the ‘brain drain’ to the south-east of England). Perhaps a version of the R&D tax credit turned into a skills tax credit could help in that situation, he suggested.
Mills also mooted greater use of tax-varying powers within England. He said he could not see any reason why we could not have a lower corporation tax rate in the midlands and the north, to encourage business investment in those areas rather than just in the south-east. He also floated a different business rates regime and lower air passenger duty to boost connectivity into regional airports.
Shadow Chancellor John McDonnell complained that austerity was not economic necessity, rather it was always a political choice. He blamed austerity for causing a rise in infant deaths from poverty and the deaths of homeless people. He said the reality was that more than three million people are missing from the unemployment rate because they report themselves as ‘economically inactive’, we have over 2.5 million people counted as employed even though they work fewer than 15 hours a week and there are 3.7 million people in insecure work.
On the Conservatives, McDonnell said they “took the view that they would never let a crisis go to waste, so they used it as the excuse to cut the taxes of the corporations and the rich. They have made £47 billion in cuts to our public services and, on their plans, they will have given away £110 billion in tax cuts to the corporations by 2022.” He said a report by the think tank Reform showed that outsourcing contracts wasted £14.3 billion of taxpayers’ money in the last three years. Nothing in this Queen’s Speech even acknowledges these rip-offs, let alone promises action to reverse them, he said, adding that the Queen’s Speech did not address ‘the scandal of the industrial scale of tax avoidance and money laundering that is staining the reputation of our country’. The registration of overseas entities Bill, which will create a register of controlling owners of overseas legal entities that own UK land, is nowhere to be seen in the Queen’s Speech, three and a half years after the Government first committed to it, he said.
Wolverhampton MP Pat McFadden complained that the Government is now committed to cuts in corporation tax, which will cost the Exchequer billions of pounds a year. That money could be used to support working-class communities across the country, he suggested. ‘My constituency has already suffered from benefit freezes and tax credit cuts, which hurt low-income families,’ he said. Not going ahead with the proposed tax cuts would give us a fund of £4 billion to £5 billion a year to create a long-term fund for smaller cities and towns, he suggested.
Vernon Coaker said: “It cannot be right that multinational companies are shifting a growing share of profits offshore—£600 billion in the past year alone. Then we turn to the people who HMRC pursues for a few pounds that they owe, or the Benefits Agency pursues for a few pounds that they owe. That is not the sort of society that people want. That is not the sort of society that people think is fair.”
John Grogan praised the Employee Ownership Association for a recent report calling for a national strategy on employee ownership. “Seven per cent. of firms, including John Lewis, are employee-owned. The report suggested giving tax advantages, and making funds available when there are succession problems and so on, to create employee-owned funds. That could transform our economy, because such firms tend to be firms where there is higher productivity.”
Ruth Jones criticised the government for failing to deliver fair tax for motor homes. She explained: “New motor homes registered after 1 September 2019 are no longer subject to a commercial vehicle tax band in the United Kingdom; for the purposes of vehicle excise duty, they are now taxed as cars, and the tax payable on first registration has been increased by 705%.”
Liberal Democrat Treasury spokesperson Sir Edward Davey focused his remarks on Brexit and the environment. He said the Lib Dems “want to celebrate responsible business, and our policy of remaining in the EU is phenomenally popular with responsible business. It gives us a remain bonus to invest in our public services and our economy, to make them fairer and to equip them for the future.”
SNP Treasury spokesperson Kirsty Blackman accused the government of failing to support green technologies and urged MPS to vote for the SNP’s amendment to the Queen’s Speech motion, which regrets the government’s intention to use the Immigration Bill to end freedom of movement within Europe, arguing that freedom of movement should be maintained irrespective of whether the UK remains an EU member state.
Her SNP colleague David Linden said ending freedom of movement could cost Scotland £2 billion in tax revenues. He explained: “When we do an analysis of the tax taken from EU citizens in Scotland, it shows that there will be a 4.7% reduction in Scotland’s revenue by 2040 if EU migration falls by 50%, as is projected following Brexit. So there is a hit to the economy from the immigration Bill, which will be bad for Scotland.”
Former Lib Dem Leader Tim Farron said as taxpayers, the British people collectively bailed out the banks a decade ago, and the banks have repaid taxpayers by closing down branches on every high street and in every village in the country.
MPs voted by 293 votes to 311 to reject a Labour amendment ‘respectfully regretting’ that the Queen’s Speech “fails to rebuild the UK economy, tackle the housing crisis, further pushes public services into crisis and contains no vision to bring this divided country back together” and calling on the government “to bring forward a plan to rebuild the economy so that it works in the interest of the many, not just handing out rewards to those at the top; and… to address the climate emergency by bringing forward a green industrial revolution to decarbonise the economy and boost economic growth.”
The SNP amendment was rejected by 64 votes to 310 before MPs backed a simple government resolution thanking the Queen for her ‘Gracious Speech’ by 310 votes to 294, a rare parliamentary voting success for the government in the current environment.
The full session can be read here.