Energy (oil and gas) profits levy

That—

(a) provision may be made increasing the rate at which energy (oil and gas) profits levy is charged to 35%,

(b) provision may be made reducing the percentage in section 2(3) of the Energy (Oil and Gas) Profits Levy Act 2022 (amount of additional investment expenditure) to 29%, and

(c) (notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills) provision may be made for and in connection with extending the period for which the levy has effect until 31 March 2028.

The Question is the first Ways and Means motion on the Order Paper. At the conclusion of the debate, the Question on that first motion will be put to the House. I will then put forthwith the Questions on the remaining Ways and Means motions and the money resolution. I remind the House that the scope of the debate is the content of the autumn statement, as well as the motions on the Order Paper.

It is a privilege to open the second day of debate on the autumn statement for the Government. Last Thursday, my right hon. Friend the Chancellor presented this House with a plan to tackle the cost of living crisis and rebuild our economy—a statement that was honest about the challenges we face and fair in its response. His three priorities, and the priorities of this Government, are simple: stability, growth and public services. The people of this country need us to take the difficult decisions on their behalf, and that is what we will do.

In yesterday’s debate, we heard how our plan leads, among other things, to lower energy bills, higher long-term growth and a stronger NHS and education system. The subject of today’s debate is sustainable public finances and taxation, and the House will understand if I focus my remarks on those aspects of the statement.

For the record, and as the Chancellor revealed, the Office for Budget Responsibility judges that the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2%. GDP then falls in 2023 by 1.4%, before rising by 1.3%, 2.6% and 2.7% in the following three years. The OBR says that higher energy prices explain the majority of the downward revision in cumulative growth since March. It also expects a rise in unemployment from 3.6% today to 4.9% in 2024, before it falls to 4.1%.

One of the most salient points, and an issue we cannot and will not ignore, is inflation. Last week, the Chancellor called inflation “the enemy of stability”, noting its impact on mortgages, household bills, businesses and unemployment. We are experiencing very high levels of inflation, the primary cause of which, according to the OBR, is global factors. Those who question that should remember the following: yes, inflation is high in the United Kingdom, but it is higher in Germany, at 11.6%, in Italy, at 12.6%, and in the Netherlands, at 16.8%. The reality is that the pandemic is still casting an economic shadow, with the lasting impact on supply chains having made goods more expensive. As Members will understand, this has been significantly exacerbated by Putin’s illegal invasion of Ukraine.

Given that the Government since 2012 have broken virtually every fiscal rule they have set themselves, why should we pay a blind bit of attention to this new fiscal rule? Why would we believe anything that those on the Tory Front Bench say about their fiscal rules, which are brushed aside as and when they feel like it?

I always enjoyed intervening on the hon. Gentleman when he was a shadow Minister and I was a Back Bencher, and I have great respect for him. The Opposition may want to airbrush from history the extraordinary events of recent years—the pandemic and now the invasion of Ukraine—but any Government would have to adjust to those circumstances. These were not minor events; they were once-in-a-generation events, and they have had a huge impact.

Overall, the autumn statement delivers a consolidation of £55 billion, with just under half from higher taxation and just over half from spending reductions. The consolidation ensures that excessive borrowing does not add to inflationary pressures and push interest rates up further. In the short term, we are taking difficult decisions to make sure that fiscal policy keeps inflation in check, but doing it in a compassionate way that still provides support to the most vulnerable.

I thank the Minister for giving way; he is being very generous. The OBR says that Her Majesty’s Revenue and Customs compliance measures and chasing social security fraud against the Department for Work and Pensions will bring in £2.8 billion, but the Green Book says that social security fraud is £2.2 billion, which suggests only £0.6 billion coming in from tackling tax avoidance and evasion. Why is that figure so low, when the estimate is £70 billion of tax avoidance and evasion?

The hon. Gentleman asks a perfectly good question. He will be aware that we have made huge progress on closing the tax gap, which effectively means that we are making huge progress on cracking down on tax avoidance. There is always further to go, but we have scored significant savings from those measures over the forecast period.

The upshot is what the Chancellor rightly called a “balanced path to stability”. We are tackling inflation to help all our constituents with the cost of living, while at the same time providing the stability that business needs to be able to invest and grow. We want low taxes and sound money, but sound money has to come first.

What worries me about the Budget is the lack of focus on how the economy will grow in subsequent years. If we have an austerity Budget, public investment is falling; exports are falling because of Brexit; and consumer spending is going to fall because household budgets are being crushed by the cost of living crisis. That leaves business investment. Are businesses seriously going to invest when all other areas of growth are collapsing?

I am grateful to the hon. Gentleman. The key issue for growth at the moment is inflation. What on earth do we think is causing consumers to rein back spending? The answer is that this year, this country will have to find an additional £150 billion to pay for the higher cost of energy—that is the equivalent of an entire NHS. Yes, we are taking difficult decisions, but that is the best way to ensure that we get inflation down, in partnership with the independent Bank of England, and build the platform of stability that businesses need to grow and invest. On the point about Brexit, if it was causing the problems, why do the Netherlands and Germany have higher inflation? He should think about that.

On tax, the House will have heard the Chancellor say that we will be fair by asking those who have more to contribute more, and by avoiding tax rises that most damage growth. That means, for example, that while some taxes are rising, we have not raised headline rates of taxation. Tax as a percentage of GDP, meanwhile, will increase by just 1% over the next five years.

On personal taxes, we are reducing the threshold at which the 45p rate becomes payable from £150,000 to £125,140, which means that those earning £150,000 or more will pay just over £1,200 more a year. At the same time, we are maintaining at current levels the income tax personal allowance, the higher rate threshold, the main national insurance thresholds and the inheritance tax thresholds for a further two years until April 2028.

In the summer leadership contest, the Prime Minister set out his plan to see a dramatic cut to the 20p tax rate at the end of this decade. Is that ambition still held by the Prime Minister and the Chancellor?

As I have said before, my hon. Friend is a champion for his constituents. In oral questions, he raised an important point about tax on fuel and he now mentions tax on income. We face an extraordinarily difficult position and I am sure that even he would agree that inflation is the ultimate tax. Inflation undermines savings, hits the poorest the hardest and hits the entire economy in every part of the country. We have had to take difficult decisions on income tax, but of course, in future fiscal events, we will announce what we will be doing with taxes.

The current tax changes include the fact that the dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024. The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024. Those are not insignificant changes, but they still leave us with more generous core personal allowances than countries such as Germany, Ireland, France and Canada.

To make our motoring system fairer, we have also decided that electric vehicles will no longer be exempt from vehicle excise duty from April 2025. We are keeping previously announced cuts to stamp duty to support the housing market, but only until 31 March 2025, following which we will end the measure.

Moving to the all-important business taxes, we have decided to freeze the employer’s national insurance contributions threshold until April 2028, but we will retain the employment allowance at its higher level of £5,000. That means that the smallest 40% of all businesses—the ones that are crucial to our growth—will still pay no NICs at all.

On VAT, we already have a registration threshold more than twice as high as the EU and OECD averages, but we will maintain it at that level until March 2026. We will implement the internationally agreed OECD pillar 2 global corporate minimum tax rate to make sure that multinational corporations pay the right tax in the right place. At the same time, we will take further steps to tackle tax avoidance and evasion. Further to the intervention of the hon. Member for Glasgow South West (Chris Stephens), that will raise an additional £2.8 billion by 2027-28.

The Minister is being generous on these points. Of the 6,000 additional staff who are estimated to be going to HMRC and DWP, what is the split between the new posts that are going to DWP and those that are going to HMRC?

In my short time in this job, I have tried to cram a lot of facts into my head, but I do not have that split immediately to hand. I will write to the hon. Gentleman after raising the matter with my officials.

To return to windfall taxes, in that context, we will increase the energy profits levy from 25% to 35% from 1 January until March 2028. We have also decided to introduce a new temporary 45% levy on electricity generators to reflect the fact that the way our energy market is structured also creates windfall profits for low-carbon electricity generation. Together, those taxes will raise more than £14 billion for the public purse next year.