Thank you, Dame Rosie, for calling me at this point. We are discussing this Finance Bill still against a backdrop of problems with our energy security, the climate crisis and the cost of living crisis. Sadly, despite the rapid turnover in personnel in recent weeks and months at No. 10 and No. 11 Downing Street, there are still no signs in this Bill that the Government have any inclination to go about getting to grips with those three crises and challenges of our age.
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The theme of the autumn statement, in as much as it had one, was fiscal consolidation, through a combination of fiscal drag and—where there were not direct spending cuts—spending increases in cash terms only, which failed to keep pace with inflation and therefore represented cuts in real terms. In discussing the autumn statement resolutions on Monday 21 November, I pointed out that there were a few measures the Chancellor could have taken if he genuinely wished to place the burden of an increased tax take on the shoulders of those best able to carry it.
One such possible measure we drew attention to was how non-domiciled UK residents could be taxed. In that regard, we particularly welcomed seeing new clause 8, on non-doms, on the amendment paper. According to the London School of Economics, the UK’s non-doms receive at least £10.9 billion-worth in offshore income and capital gains each year, which they are not required to report to His Majesty’s Revenue and Customs or to pay tax on in the UK. Instead, those who enjoy that status can pay an annual charge of either £30,000, if they have been here for at least seven of the previous nine tax years, or £60,000, if they have been here for a least 12 of the previous 14 tax years. Those are inconsequential sums, given what would, in most cases, have had to have been paid if those earnings had been subject to UK rates of taxation.
The non-dom status is anomalous. The rules originate from Britain’s colonial history, and those with that status are entitled to claim a special tax treatment not available to ordinary taxpayers on this “remittance basis”. That means that even though they might spend most of their time in the UK, and might even have lived here for several years, unlike other UK residents they can avoid paying tax on their investments by locating them offshore.
A joint study by the University of Warwick and the London School of Economics showed that on average a non-dom using the remittance basis tax break has about £420,000 in unreported income and capital gains, which is more than 10 times their UK investment income and gains, which do not receive a tax break. That highlights the scale of what is being missed out on. The LSE estimates that if this loophole had been closed, £3.2 billion would have been raised for the public purse. It is inexplicable that this status is still allowed to exist, so we firmly believe that the Treasury should be looking at carrying out its own analysis of the matter, in line with new clause 8, and that future policy decisions should be informed by that.
I turn to new clause 2 and windfall taxes. We very much believe such taxes have their place, although we have concerns about the disjointed manner in which they seem to be being applied across the energy sector and about the fact that the Government seem to have given no consideration to applying a similar tax on other industries, outside the energy sector, that are also experiencing significant increases in profits as a result of current market conditions.
With a windfall tax we need to make sure that the revenues being taken are proportionate and are not harming investment, particularly in renewables, where we will find our energy security and where we can make a significant impact on the reduction in emissions that we all know we need. Amendments 2 to 4 and new clauses 2 and 1 would not necessarily lead to the gathering of all the information we would like, but they would contribute considerably to the evidence base needed to properly assess the policy of the windfall tax and how effective it has been. On that basis, those provisions meet with our approval.
New clause 7 calls for the Chancellor to publish an assessment of the provisions of this Bill on economic growth, on the UK economy as a whole, on individual nations and regions, and on average incomes. If the last two Conservate Administrations had any kind of thought base on which they were trying to establish their credentials, it was growth, whether that was in terms of levelling up or the ill-fated “dash for growth” that saw the rest of us who were not supporters of the previous Prime Minister risibly being tarred as being somehow part of an “anti-growth coalition”.
SNP Members might be sceptical in many ways about some of the intentions behind these initiatives and their efficacy, but as a broad point of principle, taking steps to share prosperity and wealth more fairly and to encourage a more even and sustainable pattern of growth are objectives to be welcomed. It seems unclear, to me at least, where this current Administration stand on these matters, because if anything, given some of their choices, it looks as though the UK Government seem much more intent on the tired old strategy of squeezing every last drop of growth they can possibly get out of London and the south-east in preference to encouraging other local economies to grow and develop to their fullest possible extent. New clause 7 and the information it would bring would enhance the evidence base on that.
Finally, one thing I hope we can all agree on is that a key driver of an effective growth strategy is the effective use of R&D incentives. The UK as a whole has lagged behind its major competitors, such as France and Germany, in the proportion of GDP invested in R&D. In achieving
growth, an increase in well-targeted R&D is important, but it is important to recognise that you do not fatten the pig the day before market. This is a long-term objective that needs to be followed if we are to start getting the benefits that R&D should be able to bring in innovation, new jobs, the driving of exports and all the other virtuous cycles we would expect.
Even in a picture of a UK lagging behind major industrial competitors, the story within the UK is shockingly imbalanced. Again, it is almost as though there were a vortex effect sucking R&D into London and the south-east. Scotland punches above its weight in many respects, but there are other regions of England to consider, and Wales achieves only about half the R&D that we would expect it to get on the basis of its population share. So in a UK that is already underperforming in R&D, there are significant imbalances, which are again distorting the regional and national growth picture. So it is perfectly reasonable that we should understand which businesses are benefiting from R&D credits, what areas these businesses are in and where they are geographically located. New clauses 3 and 4 would help to build that evidence base, which can help us to judge whether the Government are achieving their intentions on R&D.
I will draw my remarks to a close simply by observing that this is a poor Bill that fails to meet the trials of the present. It does not set us on the course we should be trying to set ourselves on to meet the challenges of the future.