Thank you, Madam Deputy Speaker, for this opportunity to consider the details of the Bill and speak to the amendments and new clauses in my name and that of my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare).
As we have heard from the Minister, the first three clauses of the Bill relate to the energy, oil and gas profits levy—or, as everyone in the country apart from Conservative Ministers calls it, the windfall tax. It has been a painful journey to get this windfall tax on the statute book. As I set out on Second Reading, it took five months for the Government to finally support the principle of a windfall tax after my right hon. Friend the Member for Leeds West (Rachel Reeves) first called on them to introduce one in January this year.
The current Prime Minister, who was Chancellor at the time, was dragged kicking and screaming into introducing a windfall tax before the summer, but even then he decided to couple it with a massive tax break for oil and gas giants. We do not believe it is right to let that large untargeted and unnecessary tax break continue. It is a tax break that the current Prime Minister introduced and that has left some oil and gas giants paying no windfall tax at all this year. That is why we have been pressing the Conservatives to remove that loophole.
We have also pressed the Government to strengthen the windfall tax by raising its rate from 25% to 38%, a move that would align the overall rate with the taxation of oil and gas profits in Norway. We have also pressed them to extend its period of impact by backdating it to January 2022, the month when the shadow Chancellor first proposed it, and by extending it to 2027-28. We therefore welcome at least some strengthening of the windfall tax in clause 1, which increases its rate to 35%, and clause 3, which extends the period it affects to the end of 2027-28. These clauses do not go as far as we have proposed. They fall short of our plans to increase the rate of the windfall tax to 38% and to backdate it to January 2022, but they do confirm a frequent and recurring pattern when it comes to the windfall tax: Labour leads with the ideas while the Tories object, only ultimately to be dragged kicking and screaming into a U-turn.
Clause 2 highlights one respect in which the Government are still resisting following our lead. In that clause, they have made changes to the rate at which additional investment expenditure is calculated. As the explanatory notes make clear, this rate has been carefully set to
“maintain the overall cumulative value of relief for investment expenditure”.
Let us be clear what this means. The rate of the windfall tax might be going up, but the Government are making sure that the tax break for oil and gas giants is safe. As we see time and again, even when the Government are forced to legislate on a windfall tax, they cannot bring themselves to do it properly.
It is for this reason that we have tabled new clause 2, which would require the Chancellor to publish an assessment of the revenue that is estimated to be generated by the windfall tax and show how much more it would raise if it were backdated to January 2022, if it were increased to 38% and if the additional investment expenditure were reduced to zero—a move that would remove at least some of the oil and gas giants’ tax break. We urge hon. and right hon. Members from all parts of the Committee to support this new clause and help us to push the Government for a stronger and more effective windfall tax that no longer includes such a huge giveaway to the oil and gas giants.
Clause 4 of the Bill concerns tax relief for expenditure on research and development. As we have heard from the Minister, the clause reduces the additional deduction for R&D costs incurred by small and medium-sized enterprises and reduces the rate at which qualifying losses can be surrendered by such companies. At the same time, it increases the rate of R&D expenditure credit, which is mainly claimed by large companies. On this side of the House, we recognise the need to support R&D as a crucial part of driving growth in our economy. It is critical for the Government to have in place a system of R&D tax relief that is effective, that provides as much certainty as possible for businesses to make the investments that our economy so badly needs, and that provides crucial support to key growth sectors in the UK.
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However, we also firmly recognise the need for public money to be spent wisely. We know that this Government have overseen a surge in fraud and error, so we have tabled new clause 4, which would require the Government to make clear the extent of fraud and waste in relation to R&D tax reliefs for SMEs, alongside details of what action they have taken in response. In the autumn statement, the changes that are being legislated for in this Bill that relate to R&D tax reliefs were described as being a step towards a new, simplified scheme. We believe there is an urgent need for a new scheme that tackles fraud and supports R&D, so we have tabled new clause 3, which would explicitly require the Government to publish details of the Chancellor’s plans for reform. We know that firms in key growth sectors such as life sciences are anxious to know what the Government are planning, and they deserve a straight answer as soon as possible, given the uncertainty that the changes in the Bill create. We urge hon. Members across the House to support new clause 3 today to help to make this happen.
I will address clause 5 in a moment, as we will be seeking a vote on that part of the Bill. First, I will make a few remarks relating to some of the remaining parts of the Bill. We will not be opposing the other clauses in the Bill, but I would like to raise questions that arise in relation to some of them about what the Government’s wider plans might be. For instance, in clause 6, the additional rate threshold is lowered. We support a fairer tax system that sees those with the broadest shoulders paying their fair share. I would be grateful if the Minister could confirm that, as a result of clause 6, the Government expect the additional rate threshold to rise if and when the personal allowance begins to rise again. Our
understanding of the proposed legislation is that it would reduce the extra tax paid by top earners as a result of future decisions to increase the personal allowance, even if such a decision was intended to help lower earners. Can the Minister confirm whether that is the case? Likewise, in relation to clause 10, which removes the VED exemption for electric vehicles, we urge the Government to set out more clearly where this decision sits within a wider strategy to increase the take-up of electric vehicles.
I turn now to clause 5, on which we will be seeking a vote. We know that clause 5 represents the latest stealth tax on working people from this Government. Freezes to the income tax personal allowance that this Government have implemented will leave an average earner paying over £500 more in income tax a year by 2027-28. That is what it looks like when working people are being made to pay the price for the Conservatives’ economic failure over the past 12 years and their economic chaos of the past 12 weeks.
It is all the more galling for people to be asked to pay more when the Conservatives are so slapdash with public money. Earlier this week, new figures showed that the current Prime Minister lost £6.7 billion to covid fraud as a consequence of ignoring warnings about the lack of basic checks. Extraordinary sums of public money are now in the hands of fraudsters, organised criminals and drug gangs. It is more galling still for working people to be asked to pay more tax when the Government are refusing to make the fairer choices on taxation that are staring them in the face. The truth is that as a result of this Bill, working people will be hit by stealth tax rises while UK residents with non-dom status will not be asked to pay a penny more on the income they earn overseas. We believe that non-dom status is a fundamental unfairness in the tax system. It leaves the public purse missing out on £3.2 billion a year. We believe that if you make Britain your home, you should pay your taxes here.
On Second Reading, I asked Ministers to confirm, at the end of the debate or in writing, whether the Prime Minister had been consulted on the option of abolishing non-dom status. I asked them to confirm whether abolishing non-dom status was ever considered as an option for this Bill. I asked whether, when the current Prime Minister was Chancellor, he ever recused himself from discussions on this matter. I thought I saw the Exchequer Secretary to the Treasury acknowledge my request. However, when the Financial Secretary, who is here today, closed the debate, she neither answered my questions nor promised to write to me. I am sure that was an inadvertent oversight, so I ask her to correct it today, either by answering my questions directly or by agreeing to write to me with answers following today’s debate.
We know the Finance Bill derives from an autumn statement with no plan for growth. We know it makes unfair choices and raises stealth taxes on working people while failing to end the tax break that benefits oil and gas giants and doing nothing to stop those who benefit from non-dom status dodging millions of pounds in tax.
As I set out, hon. and right hon. Members on both sides of the Committee have the opportunity to vote against clause 5 on the personal allowance freeze, to vote for our new clause on the windfall tax and to vote to support businesses that want to grow by supporting our new clause on R&D.
I hope Members will join the Opposition in supporting fairer choices on the tax system in our country and in pressing the Government on the urgent need for growth in our economy.