I beg to move, That the Bill be now read a Third time.
I will keep my remarks brief, but I would like to remind the House once more of the important provisions before us. Finance Bill 2014 delivers measures that will help British businesses invest and create jobs, help British households work and save, and help to ensure that everyone in Britain pays their fair share of tax. The Bill builds on the strong foundations that we have secured in the past four years, safeguarding our economic stability, creating a fairer more efficient and simpler tax system, and driving through reforms to unleash the private sector enterprise and ambition that is critical to our recovery.
Let me focus first on growth and competitiveness. When this Government took office, we inherited an economy in crisis. We have had to make some tough choices, but we have delivered our economic plan. As a result, the UK economy is finally getting back on track. The deficit is shrinking, employment is at record levels and the our economy grew faster than that of any other advanced economy over the past year. To support the recovery, it is vital that the UK tax system attracts investment to this country and does everything possible to ensure that UK businesses can compete in the global race. That is why, in the corporate tax road map in 2010, we set out our ambition to give the UK the most competitive tax regime in the G20.
In my conversations with financial directors and tax advisers I am told again and again of the importance of a low headline rate and the signal it sends. I am proud to say that, as a result of this Government’s actions, the main rate of corporation tax will fall to 20% by 2015-16—not only significantly lower than the uncompetitive rate of 28% we inherited from Labour, but the lowest of any major economy in the world. It is vital for our national interest that we continue to have that low competitive rate. Altogether, by 2016, our corporation tax cuts for small and large businesses will be saving businesses £9.5 billion every year. These reforms have been a central plank of the Government’s economic strategy, and that strategy is working.
Competitiveness is not just about the rate of corporation tax. That is why this Bill will raise the annual investment allowance to £500,000 with effect from April 2014 to December 2015. This doubles the amount of investment on which firms can get up-front tax relief. More than 4.9 million firms will benefit, the vast majority of which will be small and medium-sized enterprises.
The Bill will also reduce business and household energy costs by freezing the carbon price support rate to £18 in 2016-17. The Government have also committed to maintain the freeze until the end of the decade, which will save businesses £4 billion by 2018-19. The Bill includes measures to give targeted support to the innovative sectors that will drive growth in the 21st century. We will legislate further to increase the generosity of the research and development tax relief for small businesses, with an increased rate of support for loss makers of 14.5%. This demonstrates the Government’s commitment to supporting research-intensive SMEs and start-ups and could support up to £1 billion of investment over the next five years. We will support social enterprise with a 30% tax relief, unlocking up to £500 million in additional investment over the next five years, and we are making permanent our successful seed enterprise investment scheme to support investment in start-ups and early-stage firms. Let me mention again the new theatre tax relief, which we have just debated, that recognises the unique cultural value that the theatre sector brings to the whole of the UK.
With low corporation tax rates, support for innovation and help for small business, Finance Bill 2014 sends the clearest possible message that Britain is open to multinational companies, open to entrepreneurs, open to investors: Britain is open for business.
Let me deal with fairness. While the Bill supports businesses, it also provides for individuals and helps families with the cost of living. We are delivering our
coalition commitment to raise the income tax personal allowance to £10,000 and we are going further to increase it to £10,500 in 2015-16. By April 2015, a typical basic rate taxpayer will be more than £500 better off than under the previous Government’s plans. Taken with previous increases, the Government will have lifted over 3.2 million people out of income tax altogether. That is real help for hard-working people.
The Finance Bill rewards those who want to save for the future. We recognise that people who rely on their savings income have seen low returns in recent years. From April 2015, the 10% starting rate of tax on savings will be abolished, and a 0% rate will be extended to the first £5,000 of savings income above the personal allowance. This will benefit 1.5 million people, over 1 million of whose total incomes will be below £15,500 a year. They will pay no tax on their savings income at all.
We are delivering our promise to recognise marriage in the tax system by introducing a new transferable tax allowance for married couples and civil partners, allowing spouses in households where neither partner is a higher or additional rate taxpayer and where one partner has not used up the full allowance, to pay tax on up to £1,050 less of their income from 2015-16.
Let me deal with some of the measures we are taking to tackle avoidance. The vast majority of individuals and businesses pay the tax that they owe, but there are some who continue to pursue unacceptable ways of reducing and delaying their tax bill. This Government are determined radically to reduce both the incentives and the opportunities for individuals and businesses to engage in abusive behaviour. This Government have taken unprecedented steps to tackle avoidance and abuse. Since 2010 we have legislated to close more than 40 tax avoidance loopholes, and we have made major strategic reforms such as introducing the United Kingdom’s first anti-abuse rule. As a result, the market for tax avoidance schemes is shrinking. The number of disclosures of tax avoidance schemes fell by nearly 50% between 2011-12 and 2012-13.
However, we are not complacent. That is why the Bill introduces a new requirement for users of avoidance schemes which have already been struck down by the courts, which fall within the scope of the DOTAS rules, or which are being counteracted by the general anti-abuse rule to pay the disputed tax up front. That will generate nearly £5 billion of revenue over the next five years, and ensures that those who knowingly enter avoidance schemes will not be able to hold on to the disputed tax. They will have to pay up front like most other taxpayers. We are also cracking down on high-risk promoters of tax avoidance schemes by imposing minimum standards of behaviour, supported by onerous information powers and stiff penalties for those who do not comply. Those measures demonstrate the Government’s continued commitment to swift, effective and targeted action to tackle avoidance and aggressive tax planning.
The Bill may be substantial, but it contains a number of provisions to clarify or simplify the tax system. It contains proposals to simplify the tax rules and administrative procedures for employee share schemes, and to merge the main and small-profits rates of corporation tax. Those changes will make it easier for small businesses to meet their tax obligations, and will give them greater certainty that their tax affairs are in order. The Bill also
follows a longer, more thorough process of policy development. In December 2013 we published more than 300 pages in draft legislation for comment, and we received more than 300 responses, which have improved the final legislation.
The Bill once again delivers on the Government’s commitment to unprecedented levels of consultation and scrutiny in the development of new tax proposals. It has also undergone 31 hours of scrutiny in the Public Bill Committee. Let me take this opportunity to thank and pay tribute to the Members on both sides of the House who served tirelessly on the Committee, as I did not have a chance to put all my thanks on record at the end of the Committee stage.
I particularly thank the Whips: my hon. Friend the Member for Hastings and Rye (Amber Rudd) provided invaluable help, and I also thank the hon. Member for Scunthorpe (Nic Dakin). I thank my hon. Friend the Member for Gosport (Caroline Dinenage) for her assistance in ensuring that inspiration flowed readily. I thank the members of the Opposition Front-Bench team, who probed diligently. We did not necessarily agree, and Ministers certainly did not accede to any of their endless requests for reports and reviews, but they put their case in, for the most part, reasonable terms.
I thank the hon. Members for Birmingham, Ladywood (Shabana Mahmood), for Kilmarnock and Loudoun (Cathy Jamieson) and for Newcastle upon Tyne North (Catherine McKinnell)—not forgetting, of course, the hon. Member for Nottingham East (Chris Leslie), who at least was there at the beginning and is here at the end. That is half the skill of dealing with a Finance Bill, as far as I can see.
I thank the Financial Secretary to the Treasury and the Economic Secretary to the Treasury for their help in setting out the Government’s case. I also thank my hon. Friends on the Back Benches, whose contributions were generally both valuable and brief: I am grateful for that.
I fear that my time is almost up, Mr Deputy Speaker, so I shall draw my remarks to a close. The 2014 Finance Bill rewards hard work, and restores our private sector’s competitiveness. It encourages investment, tackles avoidance, and helps those on low incomes. This is a Bill that takes difficult steps but delivers real change, and I commend it to the House.
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