Budget Resolutions
Thursday 1st November 2018
(6 years ago)
Commons ChamberRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts
16:59 - The House divided: - Ayes: 246 / Noes: 313 - Question accordingly negatived.
17:15 - The House divided: - Ayes: 314 / Noes: 31 - Question accordingly agreed to.
17:29 - The House divided: - Ayes: 312 / Noes: 295 - Question accordingly agreed to.
Mr Speaker
I inform the House that I have selected the amendment in the name of the Leader of the Opposition. As I intimated earlier, approximately 77 Members want to speak and I know that the Front Benchers will do their best to tailor their contributions to take account of the extent of interest in the House.
The Secretary of State for Housing, Communities and Local Government (James Brokenshire)
This week’s Budget was a Budget for our proud public services, jobs, housing, opportunity and enterprise, and a brighter future for every part of our country. Above all, it was a Budget dedicated to the British people and their tireless efforts to rebuild the economy and to bring it back from the brink and the chaos under the last Labour Government. Let us not forget what a mountain we have had to climb.
Thanks to the Labour party, we are running the highest budget deficit in peacetime, with the Government having to borrow £1 for every £4 they spent. It has been difficult to turn that around, but the families and communities that make up this great country can be confident that their hard work and the Government’s balanced, long-term approach have paid off.
Robert Halfon (Harlow) (Con)
I strongly welcome the measures in the Budget, particularly those to help small shops on our high streets—they will transform our high streets. Will my right hon. Friend set out what the Budget and the Government are doing to ensure that we have more affordable and social housing?
James Brokenshire
I am grateful to my right hon. Friend for his early intervention. I intend to cover several housing announcements, but he rightly underlines the Government’s commitment to build the homes that our country needs. We want councils, housing associations and the private sector to build, thereby meeting the challenges and problems that the broken housing market has presented. The Government are determined to fix that.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
If the Secretary of State is serious about house building, where is the funding in the Budget for the Bakerloo line extension, which would provide not only vital transport infrastructure for south-east London, but bring with it house building—private house building as well as 5,000 social housing homes and 2,000 genuinely affordable, London living rents?
James Brokenshire
I am grateful to the hon. Gentleman for highlighting transport infrastructure. The additional £500 million that the Chancellor announced for the housing infrastructure fund is firmly about investing in that infrastructure to deliver the housing agenda. I will come on to an announcement in the Budget about London and investment in transport infrastructure. It may not be the one that the hon. Gentleman was looking for, but support for the docklands light railway, unlocking housing growth in that part of London, was an important announcement.
The results speak for themselves: the economy has been growing for eight years, over 3.3 million more people are in work, wages are growing at their fastest pace in almost a decade, the deficit is down, national debt is falling, and the number of households where nobody works is down by almost 1 million. Those are huge strides that we risk at our peril. It has taken eight years to secure those hard-won gains, and it is clear that the Labour party would undo all that good work.
The Government are not content with just clearing up Labour’s mess. We have to live within our means, but we have bigger ambitions. We want to build a country in which there is opportunity for all and no one is left behind.
Neil Gray (Airdrie and Shotts) (SNP)
The Secretary of State repeated what the Chancellor said on Monday—that the wage growth enjoyed in the past year was the best in the decade. Does he accept that that is easy to say, given that the past decade has been the worst for wage growth in 210 years?
James Brokenshire
I underline to the hon. Gentleman that we have seen that wage growth but there has also been employment growth. Three million jobs have been created under the Government and the Red Book forecasts the creation of 800,000 more.
The important measures in Monday’s Budget that backed our public services, including the NHS in its 70th year, that cut income tax for millions and increased the national living wage, and that ensured that we are open for business and investing in our future, deliver our promise. The Budget delivers for families and communities and provides a major boost for the quality local services on which we all depend.
When I was appointed to this role, I said that I could not be more proud to represent those communities and the dedicated people working so hard on their behalf in local government, and I meant it. I am under no illusion about how challenging it has been for councils to deliver in recent times as they contributed to helping us to put the economy back on its feet. In recognition of that, we have given local authorities more control over the money they raise, for example, through our plans for increased business rate retention from 2020. We know that the pressures on services have been growing, including around social care.
Stephen Timms (East Ham) (Lab)
I want to take the Secretary of State back to what he said about the position the Government found themselves in in 2010, when of course, his former right hon. Friend, George Osborne, promised to eradicate the deficit by 2015. They failed to do that, and now there is no target date at all in the Budget for eradicating the deficit. Why that dramatic change?
James Brokenshire
I have to say in the nicest possible way that it is a bit rich for the right hon. Gentleman to make that point. Labour’s spending plans would cost £1,000 billion. It is an extraordinary sum of money, and all the people up and down the country would bear the cost of the debt for borrowing.
Charlie Elphicke (Dover) (Ind)
My right hon. Friend is making a typically powerful speech. Will he tell the House how the measures in this Budget will help young people on to the housing ladder, particularly as since 2001 home ownership levels have halved for people aged between 16 and 35?
James Brokenshire
My hon. Friend makes an important point. The steps under this Government have led to an increase in home ownership, and the first time buyer rate has started to increase under this Government. This has been a challenge and initiatives such as Help to Buy have been important in realising that ambition and the aspiration for people to be able to own their own home. There is also the investment in social and affordable housing through our specific £9 billion programme, which is firmly focused on that.
I want to come back to my point about local government and the pressures we recognise have been growing especially around social care. That is why I am delighted that the Chancellor committed around £1 billion of extra funding for local services, with a strong focus on supporting some of our most vulnerable groups. That includes £650 million for adult and children’s social care; £240 million of that will go towards easing winter pressures next year, with the flexibility to use the remainder where it is most needed for either adult or children’s services. That is on top of the £240 million announced last month to address winter pressures this year.
In addition, the Budget pledged an extra £84 million over the next five years to expand our successful children’s social care programmes to more councils with high or rising numbers of children in care, and an extra £55 million is being made available for the disabled facilities grant in England in 2018-19. This new funding will allow councils to take immediate action to deliver the services their residents need while protecting them from excessive council tax bills.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
As a member of the Housing, Communities and Local Government Committee and having been an elected councillor for the last decade, I have become all too aware of the devastation wrought on local government by the continuing cuts in previous Budgets. Does the Secretary of State not agree that the Chancellor has missed a massive opportunity to reverse those cuts so that local government can provide those much needed services?
James Brokenshire
If the hon. Gentleman looks at what the Budget is delivering—I have already referenced the additional funds being provided around social care, which we have seen as one of the pressures—over the last two years the budget has been going up in real terms. [Interruption.] I hope that, as a member of the Select Committee, he would recognise that. I pay tribute to the work local government has done up and down the country in delivering quality local services, against the backdrop of the challenges we have had to deal with as a consequence of the actions of the last Labour Government, and there are serious—[Interruption.]
Madam Deputy Speaker (Dame Eleanor Laing)
Order. Does the House not want to hear the Secretary of State? [Hon. Members: “No.”] I thank hon. Members; that is a straight answer. Hon. Members do not want to hear the Secretary of State, but I tell them that while I am here this will be done fairly and everyone will get a chance to be heard, even the Secretary of State.
James Brokenshire
Thank you very much, Madam Deputy Speaker.
There are serious long-term decisions to be made about the social care system and how we place it on a sustainable footing, not least how we ensure that health and social care are better aligned. I am working closely with the Health Secretary on this and we will be publishing our Green Paper on the future of social care shortly.
The Budget also provided a further £420 million to help councils to carry out repairs on our roads—money that will help to improve access to workplaces, high streets and other community facilities. I will have more to say about overall funding for local government when I publish the provisional local government finance settlement later this year.
Alison McGovern (Wirral South) (Lab)
I thank the Secretary of State for giving way, just as I was grateful to him for meeting my constituents from New Ferry, but when they heard the Budget on Monday and heard about the investment he is talking about for potholes, they felt abandoned once again. There was nothing in the Budget for the people in New Ferry, who face absolute devastation, as the Secretary of State knows well.
James Brokenshire
I am very conscious of the particular issue the hon. Lady highlights to the House, and indeed I greatly appreciated the opportunity I had to meet her constituents, to hear their stories and to hear about the impact the devastating incident has had on that community. I am still considering what the options are, to see how the regeneration can be provided and work can be conducted with the local authority, so I very much look forward to continuing to remain in discussion with the hon. Lady on what I know is a very serious and significant community issue.
Mr Clive Betts (Sheffield South East) (Lab)
Will the Secretary of State give way?
Mr Betts
Obviously the £650 million for social care is welcome, but does the Secretary of State accept the Local Government Association figures that the gap next year is actually £2.6 billion? Has he any concerns at all about comments from leaders in East Sussex, Surrey, Somerset and Lancashire, all Conservative county councils, that they are facing a cliff edge that they are likely to fall over at some stage unless the Government take more dramatic action?
James Brokenshire
There has been a recognition of the important step that has been taken in the Budget with the additional funding provided for adult and children social care and how that will make a difference. I will of course look carefully to the future in discussions I will have, through the spending review, on long-term financial support for our local government sector, the innovation and real value I see in local government—what it delivers for our local communities—and I will remain a proud champion for local government. But, as I said, local authorities also have a huge role to play in helping us to build the decent, affordable, secure homes that families and communities so desperately need and deserve. As the Prime Minister has said, this is our biggest domestic priority.
David Morris (Morecambe and Lunesdale) (Con)
Does not my right hon. Friend agree that more money has gone into services over the years and into communities, but these accusations of cuts are directly as a result of Labour’s great recession?
James Brokenshire
As I said at the outset of my speech, we have had to make those difficult decisions and I know so many people have contributed to this—the British public up and down the country. This Budget is indicating how we are now turning things around and looking positively at what our country can be and what it can do, and how we should be optimistic about our future.
Julian Knight (Solihull) (Con)
I look forward to welcoming my right hon. Friend to Solihull on Friday. Has he seen the report in today’s Times that there has been a surge of activity in UK house building over the last three months, with the greatest number of new homes signed off since the global crash? Is the truth not that Britain is building again, and just because of this Government’s policies?
James Brokenshire
The National House Building Council figures published today are very encouraging about the levels of building activity. We must build the homes our country needs, and we are firmly putting in place a number of steps and measures to help deliver on that. I know there is more to do, but we should recognise that progress is being made. We need to continue to see everyone building across the economy, because as a country we have failed to build enough homes over the decades under successive Governments. As a result, the most basic of needs—a place to call home—is out of reach for many, particularly our young people.
That is changing, thanks to this Government. Since 2010 we have delivered more than 1 million new homes and helped nearly half a million families get on to the housing ladder through Help to Buy and the right to buy, and we are taking action to ban the unjustified use of leaseholds on new homes, crack down on rogue landlords, ban unfair letting agent fees and cap deposits, and end rough sleeping for good.
We should contrast that with the record of the Labour party; not only did housing become more unaffordable under Labour, but under the current Labour leadership it has consistently voted against the reduction in stamp duty, which has helped more people get on to the housing ladder.
James Cartlidge (South Suffolk) (Con)
A key part of the housing market is the second-hand market, of course. First-time buyers are now making a strong comeback because of the brave measures we took in relation to buy-to-let landlords—changing the stamp duty and the way we treat interest—which means that first-time buyers are now not only on a level playing field but in many parts of the country have the upper hand again.
James Brokenshire
My hon. Friend highlights some of the important steps that have been taken and the impact that they are starting to have, but we know there is much more to do. We know that we need to be bolder and much more radical if we are to fix our broken housing market, make it fairer and match Harold Macmillan’s record by delivering the 300,000 homes a year that families and communities need. That ambition was set out back in 1951, and we will do it again.
This Budget does that and more. By building on the Chancellor’s commitment last year to a five-year, £44 billion housing programme, it reaffirms this Government’s commitment to restoring the dream of home ownership, most notably by securing the future of Help to Buy past 2021 and ensuring that the new scheme is targeted at first-time buyers, who need it most, and includes regional property price caps through to 2023. With most first-time buyers now exempt from paying stamp duty following last year’s Budget, benefiting more than 120,000 buyers so far, this year’s Budget went a step further by extending that relief to all first-time buyers of shared ownership properties worth up to £500,000 and making it retrospective. That is good news for anyone who aspires to own their own home.
Ultimately, however, there is no way we can help more families to get on to the housing ladder without getting Britain building and getting local authorities to play their part. That is why the Chancellor’s confirmation that we are removing the biggest barrier—the Government cap on how much councils can borrow to build more—is such a game changer. It will free up councils to deliver around 10,000 homes a year. It has been great to see how warmly this has been welcomed by councils up and down the country, and how ambitious they are about making the most of this opportunity to deliver the next generation of council housing. We are also supporting housing associations to deliver at scale and pace, with the Chancellor’s announcement of the next wave of deals with nine housing associations, worth £653 million, which will deliver a further 13,000 affordable housing starts by March 2022.
Wera Hobhouse (Bath) (LD)
Will the Secretary of State acknowledge that if we are really going to address the housing crisis we need to build between 50,000 and 100,000 new social homes for rent, and that this Budget is not delivering on keeping that promise? Will he consider giving councils the first right of refusal on public land and allowing them to purchase it at current use value rather than at the development price?
James Brokenshire
I am sorry if the hon. Lady does not recognise the important steps that are being taken in the Budget, including allowing councils to borrow in order to invest in new housing growth, our commitment to our affordable homes programme and our long-term deals with housing associations, all of which are making a difference.
Giles Watling (Clacton) (Con)
My right hon. Friend will be aware that we are attempting to build three new garden communities across north Essex. That will necessitate building the infrastructure to go with them. What is he doing to assist us in that endeavour, which will of course supply some of the houses that are needed in north Essex?
James Brokenshire
I very much welcome the authorities that are coming forward with ideas for garden towns and villages, which will be an important part of the vision of a home becoming a reality for more people and of meeting our intent to provide 300,000 new homes per year. I would point my hon. Friend to the housing infrastructure fund, which is focused on delivering the infrastructure and support that allows housing growth to take place. It is important to recognise the additional support that the Chancellor has provided for that initiative in the Budget.
Councils and housing associations undoubtedly have a lot to contribute when it comes to helping us to build more homes more quickly, as do our small and medium-sized builders, which is why Monday’s Budget bolstered continuing efforts to support their revival and market diversification with £1 billion of new guarantees implemented by the British Business Bank. I am grateful to my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) for his review of the vital issue of build-out rates, which was published on Monday. He has not found evidence to suggest that our large house builders are engaged in speculative land banking, but he recommends reforms to the planning system on very large strategic housing sites. I look forward to studying his report in more detail, and I will respond more fully in the new year.
Whether through further reforms to planning or securing the future of Help to Buy, we are helping families, communities, buyers and renters in the private and social sectors, both now and in the long term, and in the process we are changing lives. As I have said before, this is not just about building more homes; it is about building stronger communities. Those communities need to know that the right infrastructure, transport links and other essential services are in place to support new developments. It was therefore great to see the Budget boosting the housing infrastructure fund by £500 million, bringing the total funding to £5.5 billion and potentially helping to unlock 650,000 homes. It was also great to see the Budget providing £291 million of grant funding for vital infrastructure on the docklands light railway in east London, which will ease pressure on existing services in the area and generate more than 18,000 homes.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The Secretary of State mentioned communities. One of the greatest threats to our communities right across the UK is the continuing closure of bank branches, and I am disappointed that that was not addressed head-on in the Budget. Nevertheless, I give credit where it is due: the Budget did mention the decaying of our town centres. Will he tell us whether Her Majesty’s Government will give a fair wind to the Private Member’s Bill introduced by the hon. Member for Ochil and South Perthshire (Luke Graham) to tackle the banking issue?
James Brokenshire
I will certainly refer that private Member’s Bill to the colleagues who have direct responsibility for those issues. I think the hon. Gentleman’s broader point was about the vibrancy of our high streets. Banks, post offices, shops and other businesses are intrinsic to creating the sense of a community hub. Our high streets are the heart of our communities, and they are greatly valued. We need vibrant high streets where commerce and communities meet and where people from all backgrounds can come together. I think that is recognised across the House.
It is concerning for many people to see our high streets struggling as shopping habits change, which is why this week’s Budget made it a priority to champion them and help them to adapt, with a significant £1.5 billion package of support. That includes a cut to business rates for small retailers worth almost £900 million over two years, reducing their bills by over a third and amounting to an annual saving of up to £8,000 for a wide range of independent shops, pubs, restaurants and cafés. But we are not just providing short-term relief for our retailers; we are also setting out a long-term vision for our town centres, with a £675 million future high streets fund to help councils transform their high streets by making the necessary improvements to infrastructure and transport and by redeveloping underused retail space into homes to help to secure their future.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
The Secretary of State is laying out his plan for towns, but does he not agree that the plan needs to be inclusive and give young people something positive to do? Youth services have seen massive cuts of more than 60% in real terms since 2010. This Budget does not seem to be investing in young people. Should it not be doing so?
James Brokenshire
I certainly acknowledge the need to ensure that we are inclusive and that we are thinking about the next generation, and there are opportunities for that in what we are seeking to achieve on our high streets and in the creation of jobs, growth and opportunities. A sense of aspiration and ambition resides firmly at the heart of our approach as a Government. We are seeing youth unemployment coming down, and we are creating a sense of ambition and opportunity. I want to underline the huge benefits that the Government are delivering.
Dame Cheryl Gillan (Chesham and Amersham) (Con)
The Secretary of State makes a powerful point about maintaining our communities, and he will know that this Budget contains the starting elements of the arc between Oxford and Cambridge via Milton Keynes, which has the potential for more than 1 million houses being built across that swath of middle England. Does he agree that, in building those 1 million homes, we must be cautious that we do not sacrifice fragile environments such as the Chilterns area of outstanding natural beauty, which could easily be buried under concrete if the project is not planned exceedingly carefully and the necessary protections are not put in place?
James Brokenshire
I am grateful to my right hon. Friend for underlining that arc of opportunity between Oxford and Cambridge—I know that it is very relevant to her and her constituency. We are giving the matter careful consideration and working with colleagues in the Treasury and the Department for Transport on bringing it together. This is about how we can unlock opportunity, about creating transport infrastructure and housing, and about jobs and growth, but it is also about doing it carefully, thoughtfully and sensitively. I understand the relevant point that she has raised, and we will obviously continue to do that work as we look to unlock the area’s potential in a thoughtful way.
I am confident that the measures for the high street, which include a relaxation of planning rules to support mixed-use businesses and extra support for local leaders, will see our high streets flourishing again at the heart of our communities.
We have come a long way since the dark days of Labour’s great recession. With this Budget, we are seeing the hard work of the British people paying off and paving the way for a better future. As the next chapter of our islands’ story unfolds, we will be free to chart our own destiny and seize the opportunities that that brings. We will be delivering on the things that matter most to our families and communities: more homes, world-class public services, help for the most vulnerable, and hope for our high streets. Our best days lie ahead of us. It will be a positive future that is not for the few or for the many, but for everyone.
Several hon. Members rose—
Madam Deputy Speaker (Dame Eleanor Laing)
Order. Before I call the Opposition spokesman, I say to Members that it will be obvious that more people are indicating that they wish to speak than there will be time for this afternoon. We will start with a limit of seven minutes, but that will be significantly reduced as time goes on. However, the limit does not apply, of course, to Mr Andrew Gwynne.
Andrew Gwynne (Denton and Reddish) (Lab)
I beg to move an amendment, after “tax year 2019-20” insert
“provided that the condition in paragraph (2) of this resolution is met.
(2) The condition in this paragraph is that the Chancellor of the Exchequer has, no later than 5 April 2019, laid before the House of Commons a distributional analysis of—
(a) the effect of reducing the threshold for the additional rate to £80,000, and
(b) the effect of introducing a supplementary rate of income tax, charged at a rate of 50%, above a threshold of £125,000.”
We have had the fiction and now it is time for the fact. It is a pleasure to open the final day of the Budget debate for the Opposition. This Budget was sold as ending austerity, but it does not do that remotely. It is a Budget of failure; a Budget of broken promises.
Labour is not opposed to any modest benefit—however modest that may be—for lower and middle-income earners, but that measure is the only one that puts some money in their pockets. We also need to support those who do not reach the lower threshold, which is why we support a real living wage, and the restoration of sectoral collective bargaining and trade union rights. However, putting more money into the pockets of higher earners is obviously wrong, which is why the next Labour Government will increase taxes on only the very wealthiest—people with incomes in the top 5% and the corporations that have had a tax cut under the Tories.
Bim Afolami (Hitchin and Harpenden) (Con)
Will the hon. Gentleman clarify what the Opposition would regard as “the very wealthiest”?
Andrew Gwynne
The hon. Gentleman was clearly not listening. It is in our amendment and was in our manifesto at the last general election. We mean the people in the top 5% of incomes, and Labour’s amendment sets out the changes to income taxation that we would introduce in order to achieve that.
Eddie Hughes (Walsall North) (Con)
Does the hon. Gentleman accept that the people who are in the income bracket that he describes are likely to be the most mobile and will therefore simply take their wealth somewhere else?
Andrew Gwynne
It is interesting that Conservative Members seem not to want a fair taxation system whereby those who have done the best out of society can pay back into society.
Janet Daby (Lewisham East) (Lab)
Does my hon. Friend agree that the Welfare Reform Act 2012 and the Welfare Reform and Work Act 2016 caused £34 billion of cuts, resulting in 14 million people, including 4 million children, living in poverty? The Government have reduced the deficit by taking from the poor instead of from those who have much more—the wealthy.
Andrew Gwynne
My hon. Friend is absolutely right. Whatever this Government say, austerity is far from over for the people who require our help through the social security system.
Turning to communities, it was only a few weeks ago, in a speech that began with the Prime Minister dancing across the stage, that we were told that austerity is over. After almost a decade of cuts that have made life difficult for families across the country, I expect that many people welcomed the news coming out of Birmingham and breathed a sigh of relief. No longer would they have to visit food banks after work because they could not afford to eat. No longer would they feel unsafe in their neighbourhoods after 21,000 police officers had been cut. No longer would too many people be left shivering in the cold, unable to afford somewhere to live and with nowhere to turn. No longer would local councillors be worrying about balancing their books, about providing care for vulnerable children, or about ensuring dignity for the elderly people who need the care that their councils should be providing.
Fast-forward to the Budget presented to the House this week, and many people will have been left bitterly disappointed. This is not an end to austerity, but merely more of the same. Two thirds of the welfare benefit cuts planned by the Government will still happen, and headteachers will still be forced to write begging letters to parents to pay for the basics. No wonder that the “little extras” referred to by the Chancellor—a frankly insulting term to schools at a time when the independent pay review body has said that they do not have the resources to give any pay rises to their staff—were so badly received. Teachers’ pay is down £4,000 in real terms since 2010, and headteachers are writing to parents to ask for donations just to keep services at current levels.
Leo Docherty (Aldershot) (Con)
This Budget has delivered a tax cut for 32 million people. Can the hon. Gentleman clarify Labour’s position, because the shadow Chancellor says that he supports that but the Leader of the Opposition says he does not? What is Labour’s policy?
Andrew Gwynne
As I was speaking about education, the hon. Gentleman must try harder, go to the back of the class and pay attention. Some £1.3 billion of cuts—
Madam Deputy Speaker (Dame Eleanor Laing)
Order. I said that we would be fair to everyone and that means Mr Gwynne, too.
Andrew Gwynne
Thank you, Madam Deputy Speaker.
As I was saying, £1.3 billion of cuts next year are hard-wired into the system—[Interruption.] The Secretary of State for Housing, Communities and Local Government can shake his head, but the statistics come from the Tory-led Local Government Association. The cuts will devastate councils that are already struggling. Austerity is certainly not over for local government. Councils were the first and perhaps the easiest target of the coalition Government, and they have had to endure some of the largest cuts across the public sector.
Andrew Gwynne
No, I am going to make some progress.
After all, by cutting funding to councils, Ministers have shifted the blame on to councillors, including Conservative councillors. Councils of all political persuasions and none are now at breaking point. The effects of that on our communities are plain to see across the country. More than 500 children’s centres have shut down and 475 libraries have closed. Support for disabled children has been stripped away—for example, the transport that helped them to get to school to learn like their friends. Support for older people has been slashed, with 1.4 million older people now not getting the necessary help with essential tasks such as washing and dressing. Bus routes have been cut. Our roads are in disrepair, and before the Government laud the £420 million for potholes, I must point out the £1 billion backlog created by this Government’s cuts. Swimming pools, leisure centres and community spaces have closed. Bin collections have been reduced. Youth clubs have closed. Planning departments have been stripped out. Trading standards offices have been slashed, leaving more people at risk of fraud or dodgy goods. Streetlights have been turned off to save money.
Ruth George (High Peak) (Lab)
We see the impact of all those cuts in Derbyshire, where elderly people are not receiving care packages, early help for children is being cut and libraries are threatened. Does my hon. Friend agree that the cuts are actually contributing to long-term growth in the numbers of older people in hospital and children being taken into care? The cuts are not only cruel, but a false economy.
Andrew Gwynne
My hon. Friend is absolutely right, because all this does is shunt costs on to other parts of the public sector. That is not a sustainable way of continuing. Sadly, I could give many more examples, yet the Government’s answer to these problems is not to drop the £1.3 billion cut to funding next year, nor to properly address the crises in social care and children’s services, but to offer mere crumbs from the table, which will do little to fix the problem that has been created.
Charlie Elphicke
I am listening to the hon. Gentleman’s speech with great interest, but he has not answered the question put to him by my hon. Friend the Member for Aldershot (Leo Docherty). The shadow Chancellor says that he supports the tax cut and the Leader of the Opposition says that he does not. Where does the hon. Member for Denton and Reddish (Andrew Gwynne) stand?
Andrew Gwynne
Let me make it very clear. In case the hon. Gentleman has not realised, this is not a Labour Budget. A Labour Budget would look very different. We will not vote today to restrict extra money for the lowest paid in our country, and when we have a Labour Government offering hope for the future, a Labour Budget will rectify the giveaways to the top.
The Chief Secretary to the Treasury believes that the Government have not cut local government budgets, but the fact is that, since 2010, spending power—the Government’s preferred measure—has fallen by 28.6%, which includes the 49.1% cut to central Government grants for local authorities. Yes, local authorities have been given new powers to raise funds, but the reality is that a 1% council tax increase in her area raises significantly more than a 1% council tax increase in mine. She can shake her head, but if she does not understand that areas whose properties are predominantly in bands A and B do not raise the same amount as areas with properties in higher council tax bands, perhaps she should not be Chief Secretary to the Treasury.
I will make the position clear, because Treasury Ministers appear to have found these calculations very difficult. The Chief Secretary to the Treasury told “Newsnight”:
“We are not making cuts to local authorities. What we have done is give them more revenue raising powers so that decisions can be taken locally.”
I am happy to give Government Front Benchers the calculations provided by the Tory-led Local Government Association and by the National Audit Office. The Institute for Fiscal Studies has gone further and provided an analysis of how the cuts have fallen across the country:
“the most deprived authorities, including Barking & Dagenham, Birmingham and Salford, made an average cut to spending per person of 32%, compared to 17% in the least deprived areas, including Warwickshire, Wiltshire and Dorset.”
These hardest-hit councils have been dealt a second blow by the Government’s reliance on council tax to fund the struggling social care sector, as they are unable to raise anything like enough through the social care precept compared with councils in wealthier areas.
The Secretary of State for Housing, Communities and Local Government can shake his head, but this year Tameside Metropolitan Borough Council, one of the two authorities that make up my constituency, has a £16 million social care funding gap. One per cent. on council tax in Tameside brings in £750,000. The Tamesides of this world are never able to fill that social care gap from council tax, and that is what is so unfair.
Instead of providing the much-needed reform of social care, this Budget has once again shown a Government committed to sticking-plaster solutions. There is no Green paper and no long-term plan. Just as the £1.3 billion cut hits next year, the Government will need to find £1.5 billion just to keep social care running. Behind these figures are real people who need help, and the Government sit idly by.
Sadly, the Government’s small contribution to alleviating this crisis will for many people be far too little, and, for many councils, far too late. One of the most sacred values and duties of any Government is to ensure that the most vulnerable in society are protected. With overspending on children’s services hitting a new high of £800 million a year, the Chancellor’s pledge of £84 million for just 20 councils—I am interested to know which 20 councils they are—comes nowhere close to addressing the national crisis. Both crime and the fear of crime are rising in our neighbourhoods, yet this week’s Budget offers not a single extra penny for neighbourhood policing. The National Audit Office and the Select Committee on Home Affairs are warning that, without funding, our police service is teetering on the edge of collapse. The number of police officers has already fallen by 21,000 since 2010, and the independent police watchdog is warning that
“the lives of vulnerable people could be at risk.”
But instead of fixing the problem, the Treasury sees fit to play fast and loose with public safety with a £165 million raid on pensions. We are now in an unprecedented situation where police chiefs are threatening legal action against this Government.
The chief constable of Greater Manchester police has warned that upcoming budget cuts could take officer numbers back to levels last seen in 1975, wiping out the 50 additional officers funded by this year’s council tax precept. Another 600 officers need to be cut, on top of the 2,000 we have already lost, because of this Government’s mess on pensions.
Mike Amesbury (Weaver Vale) (Lab)
The police and crime commissioner for Cheshire has written to me to say that austerity is far from over there and that funding pressures mean 250 police officers might be cut from the frontline in that patch alone.
Andrew Gwynne
If Conservative Members really cared about the safety of our citizens, and about the soaring crime in some of our communities, they could have fixed it by stopping the police cuts.
The Budget shows that this is not a Government who are interested in public safety, in our children’s future, in our elderly, in our public sector workers—our doctors, our nurses, our teachers, our police officers, our firefighters—or in the disabled. Indeed, they are not interested in our constituents.
Politics is always a question of priorities, and this Government have clearly got their priorities wrong. Since 2010 they have handed out £110 billion in tax giveaways to the richest and to corporations, but the services on which most people rely have been cut to the bone and to breaking point. In the coming days and weeks—as children’s centres and libraries remain closed, as roads continue to go without repair and as crime continues to rise—people will recognise that the Prime Minister’s promise to end austerity has been broken. In fact, it was a mirage from the start.
We need a fresh approach: a real end to austerity, investment in our communities, and a Government intent on rebuilding Britain for the many, not the few.
Mr Kenneth Clarke (Rushcliffe) (Con)
I have listened to many Budget speeches but when I listened to this year’s I was taken by surprise, in a rather cheering way. I came here expecting that we were going to hear how the Chancellor had solved the problem of raising some taxation to help pay for the very welcome £200 billion given to the NHS. I sat there listening to him deliver an excellent speech, cutting taxation and increasing public expenditure. It was an open and expansive Budget based on a courageous Budget judgment that I had not seen coming—I welcome that and wish it every success. It was of course based on spending all the unexpected surprise of the extra tax revenues that the Office for Budget Responsibility forecasts had produced—or had already delivered—and on spending everything anticipated in the forecasts in order to keep us on track to eliminate debt.
I welcome bold decisions, and I hope this one succeeds, but I am afraid I am going to express a little caution, as someone needs to, even in the Chamber of the House of Commons. I have seen many Budgets and the reaction is quite predictable: all my right hon. and hon. Friends have joined in welcoming every piece of good news, as I do. The money for health and social care was very much needed, and I welcome what has been done for small businesses and city centres—I could go on, but my seven minutes does not allow me to cover all the good news in the Budget. But somebody has to express caution, but I do not do so as a party pooper; I am not going in for all the gloom and foreboding of the Institute for Fiscal Studies and Standard & Poor’s, the rating agency. But as the Labour Opposition are in my personal opinion so completely useless on an occasion like this—all they do is greet an expansive and popular Budget by saying, “Oh, it’s nothing compared with the vast sums we would spend in future”—it is probably as well that we do express some caution.
All I would like is for my right hon. Friend the Chief Secretary, who I believe is going to wind up the debate, to reassure me that we are proceeding with some care. Many political judgments involve taking risks. Very few political judgments and policy judgments give an obvious answer, which is fine. A courageous Minister takes some of those risks, but they do have to be aware of them and to anticipate what they would do if they started to materialise, and I hope my right hon. Friend will be able to do that.
The reasons for my reservations are, simply expressed, that the very welcome news about the tax revenues recently may not last. We have had windfall revenues in the past, and nobody quite understands why we have these windfalls now, so I think a little caution is called for before we start anticipating that they are going to carry on in that way.
As for forecasts, I never spent the money in forecasts, because all economic forecasting, at any time, is extremely fallible and extremely difficult. I do not think I know of a time when it has been more impossible than now. I have only seven minutes, so I am not going to be able to dilate about Mr Trump’s trade wars, problems of Chinese debt, the emerging problems in many emerging markets, the reckless nature of the Italian Government they have elected and, above all, the uncertainty of Brexit, which dominates us. All this makes the task of economic forecasting almost impossible, so we should not spend the money it looks as though we might be getting without having at the back of our minds some idea of what we are going to do if it does not work out.
Sir Edward Leigh (Gainsborough) (Con)
My right hon. and learned Friend is right to pour cold water on economic forecasts. What did he think of the Treasury forecast before the referendum which warned that if we voted for Brexit, there would be an
“immediate and profound economic shock”?
Mr Clarke
The Treasury took some welcome measures to ease that shock, stepping in with an emergency cut in interest rates and expansionist measures to mitigate the problem. One problem with forecasting is timing. If we get a hard Brexit, I do not think my hon. Friend will be dismissing quite so lightly the forebodings of the Treasury. I agree that some of the leading figures in the remain campaign turned the whole thing into a bit of a farce by talking about Budgets putting up taxes and so on in two or three months’ time, but I did not echo that and nobody else did. Also, it was not as bad as most of the quite dishonest arguments being put forward by the leave campaign about the millions of Turks who were coming here, but I will leave that to one side.
The Brexit deal will have consequences for our immediate economic future. I want a soft Brexit, if we have to leave. I want no new barriers to our trade and investment and no new customs arrangements; I want regulatory convergence and open borders to continue with our major market, but we may not get there—no one knows. I have added in all the other uncertainties in the global economy at the moment. We are all being sustained by an American boom, which may be quite short lived, as these fiscally induced booms usually are. Recession is not impossible in the next two or three years, and we have to make sure, first, that we avoid it and, secondly, that we are prepared for the warning signals when they come.
So I hope I can be persuaded that the Chancellor has retained some firepower in case the economy risks going off, and I hope he will manage expectations. We are all enjoying this Budget, but the key public spending decisions are going to be in the public expenditure round in 2019 and 2020. Nobody should be led to expect that vast sums are necessarily going to be forthcoming then, and we need to manage expectations.
What slightly worried me were what I thought were presentational errors made in the run-up to this Budget. Had I been Chancellor, I would not have agreed that £200 billion for the health service should be announced on an inconsequential date a few months ago and then have been left with the Budget to explain how we pay for it. If we had put the two together, the health service spending would have been the highlight of this Budget, because it is a very welcome and very important decision. The public were braced to pay something towards it. The first reaction is that some other taxpayer should pay, but we could have given ourselves more firepower and maintained our direction on debt by raising some taxes towards it. But they are the only reservations I raise.
Budgets often are popular at first but they are forgotten by Christmas—even mine. What matters is where the economy is in two or three years’ time, and I hope the Chief Secretary will tell me that the Government have not lost sight of that.
Neil Gray (Airdrie and Shotts) (SNP)
It is a pleasure to speak for the SNP on the final day of debating the 2018 Budget and to follow the right hon. and learned Member for Rushcliffe (Mr Clarke), who is always a hard act to follow. I hope I might be able to provide some detail on the caution that he was unable to deal with in the time available to him.
Today, we focus on families and communities. Where better to start in that regard than by detangling the Chancellor’s spun lines on family budgets. Pay growth is continuing to falter. We have had the worst decade of wage growth in 210 years, making it easy for the Chancellor to say that a modest rise in regular pay rates is the highest in 10 years. Even if that level were to be sustained—and that is unlikely unless there is a significant change regarding the UK’s productivity crisis—it is unlikely that pay rates will return to pre-crisis levels until the middle of the next decade. No wonder we have growing rates of in-work poverty. This Government are failing to make work pay.
Just take the announcement on universal credit, by which I am bitterly disappointed. It did not live up to anyone’s expectations. It did not match the ambition set by the hon. Members for South Cambridgeshire (Heidi Allen) and for Plymouth, Moor View (Johnny Mercer) on work allowances alone. Like me, they wanted work allowances to be fully restored to pre-2015 levels. The Chancellor failed to do that and failed to tackle the other ways in which universal credit is failing utterly. He reinstated just half the cuts to just one part of the cash cow that is universal credit, which the Treasury has milked dry. Indeed, even the right hon. Member for Haltemprice and Howden (Mr Davis) yesterday welcomed the investment but quickly said that more will need to follow. I agree: very much more will need to follow.
Luke Graham (Ochil and South Perthshire) (Con)
Will the hon. Gentleman give way?
Neil Gray
I will in just a minute. I shall give way only a couple of times as I am conscious of the fact that other Members wish to speak.
Yesterday, the Prime Minister said that 2.4 million people are to benefit by up to £630 a year from Monday’s changes. That was pure spin. What she should have said is that those families will be up to £630 less worse off. The Secretary of State for Work and Pensions herself said that universal credit is costing people £2,500 a year, and the Resolution Foundation said that that figure applies to 3.2 million households. Even if we are to believe the Prime Minister’s figures, for 2.4 million people the income cut from universal credit will be reduced to at least £1,700 a year. The rest of the 3.2 million households will still see a cut of £2,400 a year.
Luke Graham
Does the hon. Gentleman agree with the chief executive of the Joseph Rowntree Foundation, who welcomed the Chancellor’s move to increase funding and said that it would make universal credit
“a tool for tackling poverty”
and for easing the burden on low-income families?
Neil Gray
Of course, what the hon. Gentleman does not mention is that before the Budget the Joseph Rowntree Foundation was calling for the work allowances to be fully restored to pre-2015 levels, so I shall take what the hon. Gentleman has to say with a pinch of salt.
That cut of £2,400 a year is before we look at the cuts in other areas of universal credit that will swallow up any gains made from the Chancellor’s announcements on Monday. According to the House of Commons Library, the benefit freeze is going to cost low-income families just short of £5 billion next year alone. That one-year cut via the benefit freeze is worth more than the entire work allowance investment announced by the Chancellor for the next four years, which will be worth £3.8 billion. It is your typical Tory giving half with one hand and taking back double with the other. It is not an end to austerity; it continues to ingrain austerity. Little wonder, then, that the Government’s own expert adviser on social security, Sir Ian Diamond, has said that the next phase in the universal credit roll-out could push thousands into hardship or even out of the benefits system altogether. For shame!
Stephen Lloyd (Eastbourne) (LD)
Given what the hon. Gentleman has said, will the Scottish National party support the Lib Dems and vote against the tax cut for those earning more than 50 k? That £1.3 billion could be put into the work allowance to make it back up to what it was before George Osborne slashed it in 2015.
Neil Gray
The hon. Gentleman will see what we do later this evening. He will also see what we do with our reasoned amendment to the Finance Bill, which will be coming next week.
The Resolution Foundation has done a cumulative analysis of all the tax and social security decisions from 2015 to 2023. It shows that the people in the first five income deciles—the five poorest groups of people in the UK—are set to lose out by between £100 and £500 a year, on average and in real terms. Of course, some families will continue to get hammered to an even greater extent, as I have already pointed out. The top income deciles, however, will all see an increase in their incomes. So when the Chancellor chose to bring forward a tax cut that disproportionately benefits higher earners the most—instead of stopping the benefit freeze, which is the single biggest cash grab from low-income families, or stopping the most draconian cut to universal credit, which is the disgusting two-child cap, which targets children with austerity—it was clear that his priorities were skewed. He keeps up an income squeeze on the many to pay for the biggest tax cuts for the few. That might have been a line from the shadow Chancellor, but of course Labour is supporting this disgrace.
The tax shambles that Labour has got itself into was compounded yesterday by Scottish Labour putting out a statement asking the Scottish Government to do the exact opposite of what the Labour Front-Bench team here wants to do on tax. For Scottish Labour, it is the old Groucho Marx line: “Those are my principles and if you don’t like them, well, I have some more in London.” Of course, the Scottish Government are already plotting a different, progressive path on taxation, leaving 70% of all taxpayers paying less this year than in 2017-18. I am confident that that will continue in next week’s budget.
Let me return to the impact that Tory austerity is having on families. The OBR has warned that unsecured debt has risen as a share of household income. In other words, people are relying more on loans and credit cards to stay afloat. We know that from the evidence that the Trussell Trust and Citizens Advice have provided about food bank use and people seeking help. The OBR falls just short of saying that the growth outlook is dependent on an unsustainable debt-fuelled increase in consumption, but even its need to mention that in the report should be a warning to the Government and their Front-Bench team. Their squeeze on living standards and family incomes is pushing people into debt, and that has not just social but economic consequences.
Most fundamentally, we should struggle to believe that any of the Budget will be delivered anyway. The OBR has struggled to do its analysis because the Government failed to provide the figures in time. I wonder why that was the case. The Chancellor himself essentially said that his Budget was a wish list—and a wish list that is entirely contingent on Brexit. The OBR’s blue book quotes studies from the Centre for European Reform and the Centre for Economic Policy Research that say that, by the middle of 2018, the UK economy was 2% to 2.5% smaller than it would have been had it not been for the Brexit referendum. In other words, the Brexit referendum itself almost halved the already slow annual economic growth enjoyed by the UK. I doubled checked this with the Library, and UK annual GDP is around £2 trillion, so 2% to 2.5% of that is worth £40 billion to £50 billion. That is £40 billion to £50 billion lost from the UK economy thanks to David Cameron’s failed Brexit gamble and the Vote Leave campaign that broke the rules. The Schadenfreude for the Prime Minister, who claimed that austerity was over, is further compounded by the fact that the estimated cost of ending austerity ranged from £19 billion for the IFS to £31 billion for the Resolution Foundation. Had there been no Brexit, the Chancellor could have ended austerity while staying within his own fiscal rules and still had enough money to fix the roof while the sun was shining.
On Monday, the Chancellor let us all believe that the space he had to loosen the Tories’ vice-like grip on the financial purse strings was down to austerity economics. Let us have a little look at what the Chancellor did not say on Monday and provide bit of the cautionary detail referred to by the right hon. and learned Member for Rushcliffe. Many Tories point to cuts to corporation tax as the reason for greater-than-expected tax receipts. Sadly for them, that does not appear to be the case. Last year, the IFS discussed recent trends in corporation tax receipts and said:
“Weak investment post Brexit is forecast to boost receipts in the short run because it is expected that firms will make less use of tax-deductible capital allowances.”
Analysis in the Financial Times in April last year made basically the same point:
“Companies can offset some of their investments against their profits to reduce their tax bill. The idea is to give them a tax incentive to make more investment. For this reason the OBR has a rule of thumb that a 1 per cent increase in business investment leads to £50m less in tax receipts…But business investment fell by 2 per cent in 2016, according to the ONS. This was good news for the public finances, which received more in corporation tax revenue, despite being bad news for the overall economy.”
Neil Gray
I am just about to wind up.
Business investment has continued to slow since 2016. The Office for National Statistics said it was down 0.5% in quarter 1 of this year and down 0.7% in quarter 2. What does the ONS reckon is a factor in that? Business investment is being held back because of Brexit. Of course, business investment is doing rather better in Scotland, with FSB Scotland’s quarter 1 2018 report quoting increases in business investment of 1.1% quarter on quarter. Perhaps that is the reason that the Chancellor has held back nearly £16 billion in fiscal headroom and refused to end austerity in this Budget. As the right hon. and learned Member for Rushcliffe said, the Chancellor knows that the fiscal position he has found himself in is neither intentional nor necessarily one to aspire to, because it is at least partially down to weak business investment. More austerity is not the answer. Austerity has failed and continues to fail, and as we know the Chancellor has little intention of ever creating that mythical Budget surplus.
As ever, this Budget is about choices; to govern is to choose after all. The Chancellor chose not to end austerity. Most departmental budgets are set to get hammered in the spending review. The Chancellor chose not to properly fix universal credit. Billions of pounds of cuts to low-income families will continue. The Chancellor chose not to use nearly £16 billion that he had spare; he has presumably squirreled that away as a further Brexit down payment. However, the Chancellor chose to bring forward a multi-billion pound tax cut which will disproportionately benefit those on higher incomes the most.
Now people in Scotland have their chance to choose. Can we really afford to keep ourselves aligned to this austerity-driven Brexit Britain, which is driving up poverty through this Government’s paucity of ambition for our people and isolating us from the rest of the world, or will we choose to regain the powers of independence and the power to choose the future for ourselves?
Justine Greening (Putney) (Con)
I want to refer to some of the local issues that I hope this Budget can address for my own community, with a particular focus on Putney High Street, Roehampton High Street, Southfields village and, of course, Danebury Avenue, also in Putney. I could make a long speech on my broader views on this Budget, on the need for reform of the Treasury, and on how the OBR forecast has changed so significantly. I could make a speech on the fact that probably one of the biggest challenges in British politics is the seesawing of resources in and out of public services and the resulting inability of those services ever to plan properly for the long term. However, that is probably a speech for another day.
What I want to do today is focus on the issues in my local community. It is fair to say that for most of us, the problem of rent and rates, and the impact that they have not just on local businesses but on local shops, local restaurants and bars is really acute. That is particularly true in London, where the sense is that rent and rates only ever go up during the good times, but when we hit more difficult times my local businesses never see them come down. As a result, we have inflated rateable values that then give a legacy of high rates and rents that feeds forward into the future.
High streets are facing a significant structural challenge as they move from being, historically, transaction centres where people went to buy things to being social centres. What people and communities get out of the high street has significantly changed, and it will not change back. I particularly welcome the initial ideas that the Chancellor set out in relation to a digital sales tax, but I encourage the Treasury to bring those proposals forward sooner rather than later and to properly understand what taxation looks like in the context of the high street when we know that, in the future, high streets will be social centres rather than transaction centres.
I have a business improvement district in Putney. I am sure that the announcement of the future high streets fund—the £675 million that will be available to communities to improve and support high streets—is extremely welcome and necessary. This is not the first time that, locally, we have asked for funds to improve our high street. The council itself is putting in £640,000 of investment to improve Putney High Street, to improve the experience of shoppers and pedestrians, and to improve traffic flow. I have to say that, when we asked City Hall for investment in our local community, our bid was not seen as a high priority. I am delighted that the Government recognise that communities such as mine need investment to support the high street to keep going and make a transition. I ask the Secretary of State, or perhaps the Chief Secretary when she winds up the debate, simply to make sure that they do not make the mistake of giving any of that £675 million to City Hall. If that happened, I can only assume that, yet again, my community would be de-prioritised for investment in our local high streets. Instead, the money should be given directly to local councils to make the decisions that they know are important to improve high streets such as those around Roehampton, Putney and Southfields—the community that I am so proud to represent.
May I also ask the Secretary of State to look at whether that £675 million can be brought forward and invested sooner rather than later so that it can make an impact now, rather than in several years’ time? I have looked at the phasing of the fund, and my personal view is that high streets need support now, not later.
I do, of course, welcome the announcement that businesses whose properties have rateable values of £51,000 and lower will see business rates cut by a third. That will help 90% of properties, but, again, I say to the Secretary of State that, for those of us representing communities in London, we will have a disproportionate number of the properties in that final 10%—the businesses that are not covered by that measure. I ask him to continue to look particularly at how businesses in London can continue to thrive. We do not want to be a place where independent shops literally cannot afford to start up and survive. Even some of our high street chains are finding it hard, as we can see with the loss of Marks & Spencer in Putney.
May I also add to the communities part of this debate and say that I very much recognise and welcome the steps that the Government and the Treasury are taking on affordable credit? They are absolutely vital to help a whole generation of often young people, but also people on low incomes, to make sure that they do not pay through the nose for the kind of credit that the rest of us are used to having.
May I ask the Secretary of State to make sure that, at the very least, the Government get out of my way so that I can get my Creditworthiness Assessment Bill through this House with all-party support? Last Friday I came here to try to move my Bill on to its next stage, and it was opposed by an MP and by Government Whips. I ask the Government that, the next time I bring the Bill to the House on 23 November, Government Whips do not object to its being moved forward. It could help 15 million renters across our country get better access to more affordable credit. It is vital that the Bill is passed, as it could have a big impact.
In his opening speech, the Secretary of State set out how we want to support people who have the dream of home ownership, but if they cannot build up a credit history, even with the reliable rental and council tax payments that they make every month, it fundamentally does not allow them to make the case to lenders that they should the best credit opportunities on offer. It really is time for the Government and the House to pass a Bill that can genuinely make rent count. As someone representing a community where perhaps 50% of households rent, I can say that this is absolutely crucial to making sure that this is not just a Government who help people to get by, but a Government who help people to get on.
Edward Miliband (Doncaster North) (Lab)
I am glad to follow the right hon. Member for Putney (Justine Greening). I want to focus on housing, which was where she ended her remarks. In particular, I want to focus on what the Secretary of State said in his opening speech, which is that this is the biggest domestic policy priority for the Government.
We should begin with a moment of candour. If we are looking across the piece at policy failures of Governments of both parties, we can see that this is the biggest single failure over the last generation. I am proud of some of the things that the previous Labour Government did, but we did not build enough homes, and this Government have not done so either.
I am serving on a social housing commission run by Shelter. It comprises residents of Grenfell Tower and people from across the political spectrum, such as Baroness Warsi and Lord O’Neill from the other place, and is precisely designed to try to fashion a new cross-party consensus on these issues.
Reading the Budget, I was encouraged by some of the measures in it. It mentions the broken housing market, to which the Secretary of State also referred today. I must confess that I am old enough to remember when such talk was part of living in a Marxist universe, but it is genuinely good that things have changed. It is a positive step that the Government have lifted the local authority borrowing cap, and indeed that they are providing housing associations with some money to build. They say that their measure on council house building will mean that 10,000 council homes are built each year, and that the housing association measure will lead to 13,000 being built over three years. The question at the heart of any analysis of this Budget on housing is: is that enough? I argue that it is not nearly enough.
Let me provide some context to this. The Secretary of State said that he wanted to be like Macmillan. Indeed, I think all of us can praise what Harold Macmillan’s Government did. Let me tell the House about the scale of building in that era. The 1951 to 1955 Government built an average of 193,000 social homes each and every year. That is more than this Government have built in the last seven years. Each and every year, the 1955 to 1964 Government built 116,000 homes, the 1964 to 1970 Government built 143,000 homes, and the 1970 to 1979 era saw the building of 116,000 homes. We are way off that.
David Morris
Does the right hon. Gentleman not agree that the Macmillan era was post-war, when Britain was bombed out and we had the Marshall fund to back us up?
Edward Miliband
I will get to the question of funding and whether it is an investment in the future. The figures I have read out are actually flattering to the era since 1979. I am genuinely saying that this a cross-party failure, because under the right to buy we have sold off 2 million homes since 1979—far more than we have built.
The question is, what do we do? My argument is that this is not just about a change in policy. It is actually about a change in the whole philosophy on social housing. I argue that there are three principles that have been in effect since ’79 and need to be replaced. These principles were brought in by the ’79 Government, but have not fundamentally changed.
The first principle is that the market will provide; the market will build. We know from experience, despite the many efforts of different Governments, that the structural barriers in the market such as developers, incentives to build for the high end of the market and the cost of land mean that the market will not provide sufficient housing at the scale and speed required. There is no historical evidence to suggest otherwise. Indeed, the figures show that it is not in the private sector that the failure to build is most pronounced compared with the 1970s; it is actually in the social housing sector.
The thing that we have all missed is that the social housing sector is the bedrock of an effectively functioning housing market. In other words, it does not just benefit those who live in social homes. It benefits everybody, because it is more likely to keep prices down and avoids some of the problems that we see in the private rented sector. The Government have to be fair and recognise—at least at the level of principle—that saying the market will build will not cut it any more, and that the Government need to play a substantial role when it comes to building.
Mr Betts
My right hon. Friend is making a valuable point. I think it was the last Housing Minister but four—now the Prime Minister’s chief of staff—who accepted that social house building provides continuity to the construction industry, as it does not go up and down with the cycles of the private sector. That is very important for maintaining skills in the industry in the long term.
Edward Miliband
My hon. Friend makes an important point.
The second principle is that we need to acknowledge that the Government have come to see social housing as a residual for the neediest in our society, but that was not the origin of social housing. It was a tool to meet the needs of middle and lower-income families. That is particularly relevant today, given that 2016 figures from Shelter show that 78% of private renting households cannot afford to buy, even with Help to Buy. Why should the choice for those families be confined to the often substandard and highly expensive private rented sector? They should have a chance of social housing too. As one of my fellow Shelter commissioners—who happens to be a Conservative—puts it, we need to think again of social housing as meeting aspiration and need. That is a fundamental change, but it was part of the original vision of everyone from Nye Bevan to Harold Macmillan.
The third principle relates to the intervention by the hon. Member for Morecambe and Lunesdale (David Morris)—the question of where we put our money. Essentially, the choice that has been made since Lady Thatcher has been to put money into housing benefit and various subsidies including Help to Buy. What we have again missed is that investing in housing is investing in an essential part of our infrastructure. Dare I say it, it is as much a part of our essential infrastructure as transport—including High Speed 2—or schools and hospitals, and it is value for money because of the return on that investment.
In case hon. Members do not take my word for it, they can listen to Lord Porter, the Conservative chair of the Local Government Association. I have only just discovered Lord Porter—an important discovery. On Monday he proposed that we build not 10,000 but 100,000 social homes a year, saying:
“The gains are enormous. Investments in social housing could generate returns up to £320bn over 50 years, helping countless families along the way by creating local jobs and building homes people need and can afford.”
The reason I talk about those principles is that they drive the scale of the response. If we recognise the principles of the limits to the market, who social housing should be for and the that fact there is a return on investment—that to borrow to invest in social housing is a sensible move for the country—we will be led to a much bigger response than we saw in the Budget. As I said, it is good that the Government have changed course in a number of respects, but this is an era for boldness, not incrementalism, and I am afraid that the scale of boldness required is not in the Budget.
I will end by discussing why this really matters. It is actually about Brexit—I am sorry about that. The vote to leave was in part a cry of pain about the loss of hope and the loss of a sense of community. We should not idealise the past, but social housing was absolutely part of that. But this is not just about nostalgia. It is about whether people’s kids and grandkids will have a better life. And here’s the thing: in a world and a country where we seem divided on everything, this issue unites remain voters and leave voters, young people and old people, people in the south and people in the north. Whatever happens with Brexit, we need to bring the country together. I can think of nothing more likely to unite people across the divides than long-term investment in social housing, but it needs to be at scale. Incrementalism is not enough; we need a bolder offer. It is there in our history, from Bevan to Macmillan, and we need a Government who will discover it.
Several hon. Members rose—
Madam Deputy Speaker (Dame Eleanor Laing)
Order. I am afraid that I have to reduce the time limit to five minutes.
John Stevenson (Carlisle) (Con)
It is a pleasure to follow the right hon. Member for Doncaster North (Edward Miliband). He made an interesting speech, although I think he missed out one aspect that I will touch on.
I want to refer to the macroeconomic situation. The Government’s priority has been to reduce the deficit and to see debt falling as a percentage of GDP—something with which I completely agree and is definitely the right approach. We also have to recognise that the business cycle does exist, and that we are probably closer to the next recession than we are further from the previous one. We need robust finances to deal with and cope with that, as and when it comes. To a certain extent, the problem was in many respects created by the last Labour Government before the great recession when they were borrowing £40 billion a year at a time they should have been running a balanced budget. Had they actually been doing so, we would now be in surplus.
I support and encourage the Government’s aims because strong finances give a strong platform for the future. Indeed, strong finances require a strong economy. Government policy should be directed towards achieving this—it should be an economy for everyone. I will therefore concentrate on two specific things that I believe can help. First, we need to rebalance the economy and the country, which the right hon. Member for Doncaster North did not mention. The second issue is housing, which he did mention. These areas are interlinked as local government can and should play a key role in both.
The reality in our country is that we have a southern-dominated economy, and we have to acknowledge that there is underperformance by the regions to a certain extent. We do not want to diminish the success of the south—far from it, given its benefit to our economy overall—but we have to recognise that there is an underperformance in other parts of the country.
Julian Knight
I think that my hon. Friend is talking about productivity. Does he recognise that if we are to ensure that we have sound public finances in the future and that the debt-to-GDP ratio falls, we will need to increase our nation’s productivity, which means investing in the regions so that we bring up our national wealth?
John Stevenson
I completely agree—the central theme of my speech is exactly that. We have to recognise the success of the south of England and also make sure that other parts of the country are equally successful and drive the productivity goals that we all want.
There is a housing imbalance that we have to acknowledge as well. The south-east and the south are where we find housing pressures regarding demand and price. I shall therefore come on to how we can, I hope, address this, although I have to accept, acknowledge and support the initiatives that the Government have already brought in to help places like Carlisle. Tax cuts; raising the living wage above inflation; a job creation machine that is taking unemployment back to 1970s’ levels—these policies have helped the job security of the people of Carlisle, whose living standards have actually increased.
We have also seen the Government’s northern powerhouse initiatives. I commend the work of the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry), who is responsible for the northern powerhouse and takes a very positive and active approach to his role. The city growth deals also benefit various parts of the country. The Government’s borderlands growth initiative has been extremely welcome and well supported right across my region. Indeed, five councils are actively working together and have made a very positive submission to the Government. I look forward to reaching the heads of agreement in the new year and seeing some decent finance going into the region to help to support growth and productivity.
I believe that we can achieve so much more, however. Devolution is a Conservative principle. We want more powers devolved down to the regions—tax-raising powers, but also more responsibility for local government. We should be proactively promoting the unitisation of local government so that we have unitary authorities up and down the country. I am a great supporter of elected mayors. We have had success in that regard in the north of England, and I would like to see it spread right across the whole region. To take Cumbria as a simple example, we have seven councils and 400 councillors for half a million people, which is a completely ridiculous situation that is badly in need of reform. The difficulty is that while everybody in Cumbria recognises the need for reform, they cannot agree on what that reform should be. That is where central Government can help by giving a lead.
I want the Government to start to think more radically. Thinking about education, should we be saying to all schools in the north of England that they should become academies? We need to make sure that skills initiatives are locally based so that they are relevant to the local economy, not necessarily the national economy. The industrial strategy should be beefed up, for example so that we have a far more robust energy policy—again, that is very relevant to Cumbria. Should there not be financial incentives so that people who want to invest look to the regions and the north, rather than always to the south and London? How can we alter capital allowances, the planning laws, VAT, rates and national insurance to incentivise people to invest in the north? Of course, infrastructure spending can improve the economic performance of the regions. In my area, an application has been put in for housing infrastructure funding that would unlock the possibility of 10,000 new homes.
If businesses invest in the north, people will move to the north—they move to where there is economic activity. That would spread wealth and create a more balanced economy. People will move to the north rather than the south, relieving housing pressures down in the south. We will then have a stronger economy that produces better public services and a more balanced country. Government policy has recognised much of this, but I encourage Ministers to be more radical in recognising that local government can be a driver of change and a positive influence. I will certainly support the Government in taking a far more radical approach.
Helen Hayes (Dulwich and West Norwood) (Lab)
This is a Government fiddling around the edges when comprehensive reform is needed, and announcing figures with a flourish in the hope that no one will notice that the sums are inadequate.
When the Chancellor spoke of the end of austerity, my constituents across Dulwich and West Norwood wondered what he was talking about. Lambeth Council, one of the councils serving my constituency, has already lost six in every 10 of the pounds it had to spend in Government grant in 2010, but it faces a further £43 million of cuts over the next four years, which is more than it currently spends on recycling, parks, libraries, children’s centres, roads, pavements and community safety combined. Further cuts can come only from services that are already stretched to the limit. When the Chancellor and the Prime Minister speak of ending austerity but make no pledge to reverse the cuts to local government funding, it should not come as a surprise that councillors across the country of all parties, including thousands of Conservative councillors, react with total incredulity and disbelief. The Government have outsourced austerity to local government in an utterly shameful way.
Adult social care services across the country are at breaking point. The Housing, Communities and Local Government Committee has seen evidence of care home and home care providers handing back contracts to councils that they cannot afford to run, and we know that 1.4 million vulnerable people who are in need of care are not receiving any care at all. A lack of social care capacity continues to present huge challenges for the NHS, both in terms of acute hospital admissions and delayed discharge, and to create misery for countless families who are battling to secure the care that their vulnerable loved ones need. Into this system the Government have announced the injection of some short-term funding to address winter pressures, but there is no short-term fix for care homes that have closed. Dealing with that requires months of planning, refurbishment, recruitment and training, which can be delivered only if there is long-term certainty about funding.
The funding for 2019-20 announced this week in the Budget also falls far short of the £2.6 billion that is widely accepted as the funding injection required just meet current social care needs, and more funding is required to plan for and meet the expanding care needs of our ageing population. Social care funding needs comprehensive reform if we are to create a system that can look after everyone who needs care with the dignity and compassion that any of us would expect for our loved ones. It is testament to a Government mired in internal division and thinking only of how to avoid short-term defeats that they are not up to the challenge of reforming social care and can only find inadequate, piecemeal, short-term sticking plasters.
Children’s services in many local authorities are struggling to fulfil their statutory obligations, still less to proactively support families who may be at risk. There is a crisis of recruitment and retention in children’s social work because of the risks involved in working in a system that is stretched to the limit. Yet the Chancellor’s Budget speech did not even mention this vital frontline service. Schools in my constituency are making extraordinarily difficult decisions to cut teaching assistant and teacher posts in order to make inadequate levels of special educational needs and disabilities funding stretch further, and to sustain extra-curricular activities. School staff are going above and beyond every day to sustain the quality of our local schools. On the Friday before half-term, I and many other parents at my youngest daughter’s school were in tears as we said goodbye to a deputy headteacher with more than 20 years’ service who had taken voluntary redundancy because the school could no longer afford her post. When the cuts are striking at the heart of school communities in this way, the Chancellor’s announcement of a pitiful amount of funding for “little extras” is simply insulting.
Last Friday, I joined a police response team in Southwark on their late shift. We spoke of the huge challenges of increased knife and gun crime and gang violence, moped and cycle-enabled robberies, which particularly affect secondary-age children, and increased burglary. Last night there was a double shooting in my constituency. Members of the team told me how their job is being made harder by cuts in police numbers; by the closure of our local magistrates and youth court, which means that they have to travel much further to attend court to give evidence; and by the larger numbers of people in mental health crisis for whom they end up being the first port of call. Yet the Chancellor announced not a penny of extra funding for neighbourhood policing or for the criminal justice system.
Overshadowing the whole Budget is Brexit, which will create chaos for our economy, cause many businesses to grind to a halt, and drastically shrink the tax receipts that we need to fund our public services. This Budget is a cynical attempt to create positive headlines in the midst of Brexit gloom. My constituents see austerity as it is, because they are living with its consequences every single day. Saying it is over does not make it so. That will require comprehensive reform, and a commitment to empower local government and fund public services that can be delivered only by a Labour Government.
David Morris (Morecambe and Lunesdale) (Con)
Morecambe has had more money given under this Conservative-led Government since 2010 than it has ever seen before. We have had delivered, by a Conservative-led Government and a Conservative county council, £130 million for a link road, £11 million for sea wall defences, £4 million recently for a bridge upgrade, and a collective package of upgrades to schools and NHS services that has tipped over into well over £1 billion-worth of spending in my area. That is not to be sniffed at, and it has been happening for years. Recently the Chancellor decided to award Morecambe £100,000 for a feasibility study for a new Eden project—Eden Project North—to be built there on a marine basis. That would be a huge game-changer for Morecambe. It would solve all the problems that Morecambe has, and there are very few of them left to go. This shows Government intention to invest in a seaside community that was on its uppers under a Labour Government.
My people in Morecambe are very proud of their town, and they are really happy about what this Government have done. We have 3.3 million more people in work. The UK economy has grown in 22 consecutive quarters since the great Labour recession. Some £7.2 billion has been given to first-time buyers through the Help to Buy equity loan scheme—that cannot be a bad thing—and 94,000 social housing tenants have been helped to buy their homes since 2010, which is more than in the Labour years.
There are more people in work and earning a living wage in Morecambe than Lancaster. Jobcentre workers told me recently that 87% of steady full-time jobs are now in Morecambe, compared with 72% in Lancaster. That was the other way around for many generations. We have had a port upgrade in Heysham, where I live, because the port accepts that Brexit is not a problem and that we will be getting more trade.
Universal credit was rolled out in Morecambe two years ago, and it has been very successful. Gary Knowles, the local Department for Work and Pensions manager, and his excellent team at the jobcentre have a very low percentage of problems, given the high demand from applicants who want to sign up for UC in the Morecambe area. The minimum income floor does not apply for a 12-month period under UC, and that now applies to the self-employed. As a former self-employed man, I should know what that means. The Government have given an additional £1.7 billion to increase the work allowance by £1,000 a year, which will mean an extra £630 per year for 2 million households.
I turn to the high street, and at this point I have to refer to my interest: I used to be a shopkeeper. Shops have always been sprouting up out of town, and there is a reason for that—the shops in town centres are too small for the capacity of businesses. However, niche businesses do flourish there. This Government have looked at that and lowered the rates so that shops can flourish. Again, that cannot be a bad thing.
This Conservative Government have never let Morecambe down, and this Conservative MP has never let Morecambe down. Things have got better under this Conservative MP than they ever did under the Labour Government, when money was flowing out of the coffers and my town went down the pan. Morecambe is open for business and getting better, and during my tenure we will show what the north-west is made of.
Mr Clive Betts (Sheffield South East) (Lab)
As I understand the overall spending figures in the Budget, apart from for the NHS, there is no real-terms increase in spending. If we have austerity this year and no increase in spending next year, how can austerity be ending next year? That is a fairly obvious question; perhaps someone on the Government Front Bench can answer it.
Local government has had more spending cuts than any other area of the public sector since 2010. We have a situation where the Local Government Association says there is a £2.5 billion funding gap for social care, and the Government are proposing in this Budget to put £650 million into it, leaving a £2 billion gap. In other words, constituents up and down the country will find more cuts to their social care services next year. That is inevitable.
There are not only problems with social care. Because councils are having to find more and more from their budgets to fund care for the elderly, people with disabilities and looked-after children, they are having to spend less and less on other important services—for example, parks and open spaces, which are really important, or doing food inspections of restaurants and takeaways, which some local authorities have now given up completely. The money for the high street is welcome, but where are the local authority officers who will do the local plans and the regeneration schemes that will put the money to good effect? The challenges of rogue landlords and increasing homelessness require local authority officers. Cuts are being made there, so there will be less money for those services also.
In my city of Sheffield, those national figures translate through. We will probably get an extra £4.6 million for social care on a one-off basis—it will not continue—but the current spending gap in the city’s budget for next year is £35 million. By 2020, the council will continue to have to use reserves on an unsustainable basis. Sheffield is not in as bad a position overall as many Conservative county councils, which are already saying that if something urgently is not done, Northamptonshire will be the first council to go over the cliff edge, and others at some stage will follow. That lesson really ought to be learned by Ministers.
It is not just local authorities that are left with problems in this Budget. Where is the money for schools? There is not a single mention of the revenue budget for schools. I had an email from Simon Smith, the chair of governors at Woodhouse West, which is a primary school in a relatively deprived part of my constituency. He said:
“Year on year reductions in funding, coupled with rising staff costs, are meaning that the school is moving… to submitting a deficit budget this financial year; followed by increasing six figure deficits in future years.”
He draws attention to the fact that the challenges are not just inside schools. More and more parents in that sort of community are coming to the school with problems and difficulties that used to be addressed and helped by other agencies, but those agencies have now also had their funding cut, so parents are relying on the school even more to help them in that situation.
Where is the money for the police? There is not a single penny for our neighbourhood policing. We have excellent neighbourhood policing in my constituency. The two inspectors who have dealt with it over the years—Dave Struggles and his predecessor, Jason Booth—have been brilliant, but they will say that with only three quarters of the officers they had in 2010, they cannot keep people as safe as they used to. That is the simple reality that we have to face up to and that the police are having to face up to.
I welcome the lifting of the housing revenue account cap. We recently had a conversation in the Communities and Local Government Committee with the Minister for Housing, the hon. Member for North West Hampshire (Kit Malthouse). The challenge for local authorities will be not merely to build the 100,000 homes that I hope we will see eventually, but to keep up the standard of homes that the last Labour Government brought in with the decent homes standard and to improve on that standard. Again, the revenue costs of that are nowhere addressed in this Budget.
The Prime Minister promised that austerity was over. The Chancellor said that austerity was coming to an end. The reality for my constituents is that not only has austerity not ended, but the end of austerity is not even in sight.
Mrs Kemi Badenoch (Saffron Walden) (Con)
It is a pleasure to speak in this debate and to highlight the measures in the Budget that will be most welcomed by my constituents.
Many of my constituents will be thrilled by the increase in the personal allowance threshold, the higher rate threshold and the national living wage. I never tire of reminding people that I am a low-tax Conservative, and any Budget that gives 32 million people a tax break certainly gets my vote. Despite the mocking of Opposition Members, the funding for potholes is something that many of my constituents have been asking for repeatedly. The damage and cost to vehicles and the environment are enormous, and if they are not fixed soon, that will only decrease road safety and cost the Government and the taxpayer so much more later. It is right that we are spending that money.
Another issue that I must take the opportunity to highlight is crime and policing. My constituents want to see more money spent in this area, because our families and communities want to feel safe. I am glad the Chancellor referenced that in his speech, and I know that residents across Essex will be awaiting a very generous review of the police funding settlement this December.
I strongly welcome the extra £500 million for the housing infrastructure fund, so that councils can deliver 650,000 more homes. I am pleased that Chelmsford City Council is already shortlisted to receive a £5.7 million investment, to help with the Beaulieu station and north-east bypass projects, which are expected to deliver £250 million to the local economy and support more than 3,500 jobs. I pay tribute to the hard work of my hon. Friend the Member for Chelmsford (Vicky Ford). We have been working together to promote those schemes, to the mutual benefit of our constituents. I also look forward to helping Uttlesford District Council in its bid for housing capacity funding to help deliver the infrastructure we need to provide for three new garden communities in the coming years.
Last year’s abolition of stamp duty on homes up to £300,000 has led to an 11-year high in the number of first-time buyers, with over 120,000 people being helped by this measure. I welcome the fact that stamp duty is now also being abolished for first-time buyers of shared ownership, because that was the type of property that helped me on to the housing ladder. I would not have what I have today without having had a shared ownership property, and I am glad that this option is being extended to even more people. I am also glad this will be backdated to cover those who have purchased shared ownership properties since last year’s Budget. I also welcome the fact that Help to Buy is being extended by two years, up to 2023, which will help so many more young people to own their own home. As well as helping people to get on the housing ladder, this change will diversify home ownership. So many of our towns and villages will become retirement homes without an influx of younger people bringing their skills and talents to our area, and these measures are to be welcomed.
This year, like last year, I joined my right hon. Friend the Member for Harlow (Robert Halfon) to lobby for fuel duty to be frozen. I congratulate him on his tireless campaigning on this issue, and the Chancellor on agreeing to our request. In the Chancellor’s own words, freezing fuel duty again will have
“saved the average car driver £850 and the average van driver over £2,100.”
This is important because it affects not just motorists but their families, and continuing the freeze will help to keep their bills and their overall cost of living low.
Finally, I welcome the digital services tax and the way the Chancellor has chosen to implement it. A constituent who runs an online business visited me at my surgery with concerns about an online sales tax for small business trading. He felt that an online sales tax for small businesses could be very damaging for him and his family, and he was worried that start-ups run by couples from the homes where they live and work would be affected. Small businesses such as PVC Tube Online in Great Dunmow drive our local economies, and their owners face risk and uncertainty to grow their companies and to provide a better tomorrow for their families. I am therefore delighted that this digital services tax will target only the world’s wealthiest companies with global revenues of at least £500 million. The revenues raised will be money available to spend on our public services, so that families across the country can see more investment in their communities. Addressing the huge profits that the biggest companies make through their activity in the UK recognises the changing nature of the digital economy and the issues that accompany that, and this tax is a stepping stone to addressing those issues properly.
This Government are looking to the future and at how we can solve the problems of the 21st century. This is a forward-looking Budget, and I will be voting for it later today.
Sir Vince Cable (Twickenham) (LD)
I want to develop a point that was made by the right hon. and learned Member for Rushcliffe (Mr Clarke), who said that for many people the Budget was actually a pleasant surprise—it has promised them tax cuts and spending increases—but that in doing so the Chancellor is taking a big risk with an economy that is not particularly strong. It is not particularly strong because, as the Treasury forecast shows, the growth rate looking forward is abysmal—it is about 1.5%, which is one of the worst in the developed world—and that is quite apart from the poor growth at the moment.
The growth rate is also based on a fundamentally optimistic assumption. Quite apart from the lag on growth caused by Brexit at the moment, the assumption in the Treasury forecast is that the Government will land a deal, and not just a deal but a good deal, with a smooth transition to a trading arrangement not greatly different from the present. Well, it might happen—pigs might fly—but it is optimistic and, if that expectation is not realised, the economy has very little resilience. We have very high public debt, as the Government acknowledged. The domestic savings ratio is appalling—I think it is the worst in the developed world and is now negative. The corporate sector is heavily leveraged, as Governor Carney pointed out the other day. All of this is reflected in the current account deficit, forecast to be 4% of GDP, which is one of the worst in the developed world. If something goes wrong, there is no longer an inflow of capital and the exchange rate falls; we have had a devaluation of 17% since the referendum and we will have another one.
The main criticism I have of the Budget is that it may have seemed comforting, but the Chancellor did not actually confront the real issue that we have to face: how do we have a mature debate about how to end austerity? That is going to involve people paying more tax, and the issue is how we do it, and how we do it in the fairest and most efficient way. As the hon. Member for Sheffield South East (Mr Betts) has pointed out, we have not really got to the end of austerity, or even to the beginning of the end of it.
For most parts of public spending, there is a continued squeeze. That is true of schools. We did partially protect them under the coalition, but that is no longer happening. Colleges, which are necessary to deliver the Government’s training and apprenticeships, have been cut to pieces. Local government is potentially in an appalling situation. That means a squeeze on social care, which means that the money going to the health service will be wasted because it will have to accommodate lots of elderly people who should be at home. Bankrupt councils, many of them Tory county councils, will be forced to raise council tax, so we will get a tax increase, but it will be a tax increase by stealth, rather than by confronting the matter openly.
Layla Moran (Oxford West and Abingdon) (LD)
On the schools point, does my right hon. Friend agree that the wording the Chancellor used in relation to money for the “little extras” was insulting to teachers, who, day in and day out, find that they have to reach into their own pockets to deliver the basics in schools?
Sir Vince Cable
My hon. Friend is absolutely right. I am amazed that the Chancellor is not even aware of this. Many mainstream schools have seen cuts in teaching assistants, teachers, curriculums and so on. This will be compounded because there is nothing in the spending envelope that offers any hope that the problem is going to be dealt with.
That leads on to the question about how tax should be raised. The Government have offered tax cuts in the form of lifting the tax threshold for low earners and for middle earners. In principle, lifting the tax threshold is an attractive policy. I like to think that I was the author of the one we introduced in government. It was strongly resisted by the Conservatives at the time, but they have subsequently adopted it and claimed credit for it. The attraction was not just that poorer people pay less tax, but that the marginal rate of tax is removed when they move out of the welfare system, which encourages work.
In an ideal world, everybody should have a tax cut, but there is an issue about priorities here. Extending the tax cut to the upper threshold is, frankly, something that the country simply cannot afford. At a time when universal credit is being only partially financed following the cuts made by the Osborne Budget three years ago—only about half of that cut has been reinserted—that should be the priority. It is absolutely wrong that priority has been given to lifting the upper tax threshold. Because the two proposals are amalgamated in the Budget statement, I and my Lib Dem colleagues—and, I hope, others—will vote against this.
Beyond that, what this country now needs above all is a mature, grown-up debate about how the end of austerity will be managed. It is going to involve higher taxes for almost everybody—obviously, mostly at the top end, but there is going to have to be a general increase in taxation. I am afraid that the Chancellor’s pretence that we can have our cake and eat it is not realistic. It will rebound on him and on the Government.
Charlie Elphicke (Dover) (Ind)
The test of any Budget is: does it take us closer to where we want to get to in 10 years’ time? It seems to me that one of the most important things to do over the next few years, and one of the dreams that so many Conservative Members have had for so many years, is the dream of a balanced budget. Once again, this appears to be a little bit like the apple of Tantalus. I am concerned about that because I believe, as the fiscal conservative I have always been, that we need to head towards a balanced budget.
Achieving a balanced budget has been delayed, but I am glad that we are still heading in that direction. The OBR says of the Budget policy decisions:
“Taken together they turn the £3.5 billion surplus…forecast for 2023-24 into a £19.8 billion deficit.”
It also says of the balanced budget objective:
“Had there been no fiscal loosening in the Budget, the objective would have been achieved in 2023-24.”
As it is, achieving that objective by 2025-26, it says, “looks challenging”. That is still an important aim. We must bear in mind that debt interest payments each year are about £52 billion and measures in the Budget will increase those payments by about £1 billion in future years. Opposition Members argue for ever more increases in spending, but I argue that it is better to ensure restraint, continue on our current track and aim for a balanced budget sooner rather than later.
We must also think about the kind of country we want to build. We want to build an enterprise powerhouse and a country that supports enterprise, small businesses and the self-employed. That is why it is important to make things easier for small business people and not to sandbag the self-employed with extra taxes and regulations, instead supporting them and ensuring that their enterprise is backed.
We must be the party of home ownership. Home ownership matters. As I said in an intervention, since about 2001, home ownership among people aged 16 to 34 has halved. We need to increase it. Meanwhile, the number of those renting has gone from about 10% to 20%. We must offer our young people better than a life of renting, and give them the chance to get on the home ownership ladder and build up a stock of wealth in a lower-tax country that ensures that hard work is rewarded.
Giles Watling
Does my hon. Friend recognise that the recent reduction in corporation tax oxymoronically produced more tax in the coffers? It is worth reducing the tax.
Charlie Elphicke
My hon. Friend is right: if we cut the rate we up the take. We must support small businesses most of all because, since about 2000, small enterprises and businesses have created 4 million new business jobs. Big business has created just 800,000 jobs, so small businesses are the enterprisers and job creators that take our country forward and turbocharge our economy.
If we are to have more public spending, it is important to ensure we have public service reform. We must look at how public services are delivered and ask ourselves whether they can be delivered more efficiently. Are there activities that Government should do more of? Are there activities they should do less of? Why do we not have, alongside the Office for Budget Responsibility, an office of spending responsibility, or even a Budget committee so that the House can consider such matters and press individual Departments to embrace reform and fiscal rectitude?
We also need higher investment. It is all very well having a culture in which we get lots of people with low skills to do low-value-added jobs that lead to no productivity. Why are we not encouraging more investment in more equipment that can be operated by fewer, more highly skilled people who are better paid and drive our productivity forward?
I must take issue with the comments of the right hon. Member for Twickenham (Sir Vince Cable) about how it is all indebted and about the corporate sector—that is absolute rubbish. Some £750 billion on corporate balance sheets has not been spent. There is a conundrum as to why that money is not being invested. We must consider the possibility of time-limited, perhaps very generous, investment allowances to get those corporates to invest in our economy, and to drive the investment and productivity gains that we need.
We need more competition in this country. Why do we put up with Openreach and its appalling service? Why has it not been unbuckled from BT with a strong investment target? Why do we have an oligopoly of banks and of big energy providers, and why have we not taken action on that? We need a bit more trust-busting from the Government and a bit more backing for the consumer interest over the corporate interest.
The Conservative party should be the party of small enterprise and investment. It should be the party that champions the consumer interest and is tough on corporatism and tough on the causes of corporatism. We also need to be the green and environmental party, which is why in the spending review we need a step change in investment in electric car charging points because it is not good enough. Only when we get that straight will big corporate car fleet buyers start to buy the cars that would then go into the second-hand market, so that this country can have the electric future on our roads that it should have.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. As colleagues can see, a great number of Members still wish to get in, so after the next speaker I shall reduce the time limit to four minutes.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
This is a deeply uncertain time for our politics and economics, and as my right hon. Friend the Leader of the Opposition said, the challenge for this Budget should be to rebuild Britain and, as the Prime Minister promised, to end austerity. We also need to heal some of the deep divides that face our country, which all of us should care about. Against those challenges this Budget fails, and I will highlight three areas in which that is the case. First, the Government—particularly the Treasury—should be more worried about what will happen to growth in our economy over the next few years. Economic growth of around 1.5% a year over the next few years is far from the 2.5% average long-term growth that we have had for 60 years, and that will have long-term consequences for the wealth that we need for public services, and for our families’ incomes. That growth is also unbalanced. The latest figures show growth of 3% in London, while the north-east economy shrank by 1%. Towns are growing at only two thirds the rate of cities, and many town economies are shrinking. This is not just about needing to invest in our high streets, it is about the jobs and investment we need in towns and communities across the country, in the north as well as in the south, at a time when the focus of major transport capital investment is stuck on Crossrail and High Speed 2 rather than being on the networks that we need around our country.
Secondly, the Budget does not end austerity, and I particularly wish to highlight cuts to policing. The Home Affairs Committee called for urgent increases in investment in policing, but instead, by failing to fund pensions increases and contributions, the Government are cutting funding for policing by about £420 million. That is at a time when recorded crime is up by a third and arrests are down by a quarter. That means that more criminals are getting off, and the consequences of failing to support our police are frankly becoming dangerous, with serious impacts on public safety, community cohesion, criminal justice and confidence in policing, which, once lost, is hard to regain.
The third area I want to highlight is the failure to tackle child poverty and growing divisions across our country, because the Budget gives half the money to the richest 10% of households in the country at a time when the poorest 10% face having their incomes cut. Ten years ago I put child poverty legislation before Parliament, and it enjoyed cross-party support as it aimed not just to halve child poverty but to end it. The Government have ripped up that cross-party consensus.
Tomorrow I will go to a café in Airedale library where councillors and community leaders are putting on free lunches for children. It is half-term, and they realised that some of the kids going to the library were ravenous when they were getting some of the café leftovers. Without free school meals, their parents were unable to put a hot meal on the table, and those children were going hungry. This is 2018, and it should shame us that that is happening in our country.
The Government are going ahead with more than £1 billion in real cuts to tax credits and benefits for the poorest families this coming year, at the same time as choosing to spend a similar amount of money on tax cuts for higher rate taxpayers, including those earning more than £100,000 a year. A lone parent with a four-year-old who works part time could be nearly £3,000 worse off after those changes, whereas high earners will end up more than £1,000 better off. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, we should support extra help for basic rate taxpayers, whether through the tax system or child benefit, but at a time like this, cutting taxes for higher rate taxpayers is the wrong approach. It means that millions of the lowest-paid workers will not benefit at all because they do not pay enough tax, while millions of the highest-paid workers will benefit the most. Hundreds of pounds are being taken from the parents at Airedale library, while hundreds of pounds are being given to people on £100,000 a year, who have benefited the most. It is simply wrong. The Prime Minister promised to those are “just about managing”:
“When it comes to taxes, we’ll prioritise not the wealthy, but you.”
She has done the opposite. It is wrong. This Budget should be about making us all stronger and the whole country better off. Instead it does the opposite.
Derek Thomas (St Ives) (Con)
The Budget contains many good measures for families in my constituency. I am grateful to be able to take part in this important debate, and I have listened to much of what has been said. I will try not to add to what has already been said but instead identify issues that have not yet been covered.
Families rightly want to feel secure in their homes, and I have three asks that I think could help. The first relates to the use of existing stock. It is still the case, even in west Cornwall, that many properties are not lived in. They are not second homes or holiday lets; they are literally abandoned. I would like the Department and the Chancellor to consider ways of giving councils the incentive to refurbish them to provide homes for local families and give them security of tenure.
Secondly, just before they lost the election in 2010, the Labour Government introduced the infrastructure levy on house builders. That has had a devastating effect, discouraging builders, particularly small builders, who want to provide housing. For local families, it adds a huge amount of money to the sale of a house. It would therefore be good if the Budget were able to scrap that charge imposed on both house buyers and the sector.
Finally on housing, many of my constituents appreciate the move across to universal credit from the previous set of benefits, but those who struggle to manage their budget would prefer their rent to be paid directly to the landlord. Will the Chancellor look at how that could be more easily done when it is in the interests of the tenants themselves?
Families live in communities, and parish and town councils run our local communities. The scrapping of business rates on public toilets, which Cornish MPs have fought for since 2015 when I was first elected, will be of enormous benefit to my local parish and town councils. In my constituency alone that measure will be worth £120,000, which can now be spent on local services that will benefit families and other people living in our parish and town council areas. I will play my part in making sure that that legislation goes through.
I have been calling for the rate cut for small businesses for some time, and I am grateful for the positive impact that it will have on towns in my constituency. My right hon. Friend the Member for Putney (Justine Greening) covered that issue very well, so I will not say any more about it.
I was disappointed in the Budget in one respect. It is right that families have access to good sporting facilities, so I was hoping to hear something about the stadium for Cornwall. For 10 years in Cornwall, we have worked to try to put together a scheme worthy of Government support. I believe I did everything I could, along with all Cornish MPs and others, to convince the Chancellor to provide the £3 million we need to give us a 6,000-seater stadium or the £5 million to give us a 10,000-seater stadium. Cornwall does not have a centre where sports can be played easily. Part of the proposal is to extend outreach to every corner of the county, improving the health and wellbeing of children and their families. What more can my colleagues and I do, with the people of Cornwall, to convince the Government that the money is needed and deserved, and that the scheme provides value for money? It could be that, among all the other priorities, the stadium for Cornwall slipped the attention of the Chancellor. I am grateful for the opportunity to remind the Treasury team of this worthy cause and look forward to positive guidance on how we can achieve the stadium for Cornwall.
Dame Margaret Hodge (Barking) (Lab)
This Budget reflects traditional Tory values that will deepen poverty and inequality and do nothing for struggling families. I will provide three examples: the Government chose to put more money into mending potholes than they granted to our cash-starved schools; they chose to prioritise the motorist over a sustainable future for our planet; and they chose to give away more in tax to those who need it least and ignored those who need most support. Labour should have no truck with that approach. We should pledge to reverse the tax and benefit changes.
Regrettably, most politicians shy away from an honest conversation about the need to raise enough money through tax to fund good-quality public services. We cannot keep promising excellent schools, effective policing and compassionate care if we refuse to raise the necessary money through taxation. We cannot keep pretending that punishing the wealthy is the solution to underfunding. We need to demonstrate value for money. We need a fair system in which big corporations do not get away with paying minimal tax on their profits. We also need a truthful conversation with voters about how much we need to raise in tax to fund public services.
I regret that the Government have not used the Budget to build on Parliament’s determination to have greater transparency in British tax havens, so that we know who owns what and where. Following the money is an essential tool to help ensure that everybody pays their fair share. MPs welcomed the Government’s concession on British overseas territories. However, we must now deal with the anomaly of Britain’s Crown dependencies. The right hon. Member for Sutton Coldfield (Mr Mitchell) and I visited Guernsey and the Isle of Man and held positive discussions with elected politicians, and we will soon visit Jersey. Our purpose is persuade the Crown dependencies to co-operate with the UK and agree to publish public registers. Should they not co-operate, however, Parliament must use its powers to insist that they do so. Parliament expressed its views on this issue clearly. We must now ensure consistency and transparency in all UK jurisdictions.
Finally, I had hoped to welcome the digital services tax, but the Government’s proposal is little more than a public relations stunt. The Red Book projects that it will be 2022-23 before we raise just £400 million from this tax. A recent Tax Watch report calculated that in 2017, Google, which paid only £49 million in corporation tax, should have contributed £356 million, and that Facebook, which paid only £16 million, should have paid £127.5 million. Just two companies, Google and Facebook, should have paid £480 million in 2017, far exceeding the £400 million the Government estimate they will get some five years down the line from all large digital corporations. Hardware companies such as Apple and Microsoft will not be covered by the tax. Video and audio platforms, such as Netflix and Spotify, will not be caught either. Airbnb and Uber will argue that their marketplaces are not online. Even Google and Facebook will be able to exclude some of their profits.
The tax gives us far too little, far too late. It is an exercise in media management designed to persuade taxpayers that we are all treated equally. It leaves undisturbed the continuing scandal of billions lost to the public purse by the deliberate actions of giant global digital companies. This behaviour is an enduring outrage, and we on the Labour Benches will continue to argue for fair taxation.
Leo Docherty (Aldershot) (Con)
I am very pleased to be called to speak in this important debate.
I welcome the Budget very much, especially the cut in business rates, which will have a hugely positive impact on many businesses in my constituency. One such business in Aldershot is the butcher Alf Turner, a long-standing establishment founded in 1956. Madam Deputy Speaker, you will know that it is not only Budget week, but UK Sausage Week. I am pleased to report that Paul Turner, the proprietor of Alf Turner, is a supreme sausage champion, having won the UK Sausage Week award for best traditional sausage. Last night he said to me:
“The cuts to business rates from Monday’s Budget are fantastic news for local family-run businesses like mine. Keeping local shops open can only serve our local communities.”
I draw attention to that because the real point is that Paul’s business is successful not because the Government are helping it, but because the Government are letting it get on with what it does best: making great sausages. It creates a superb product that local people choose to buy and is now available nationally. The lesson is the importance of choice. When freedom of choice is allied with the free flow of capital and labour, and protected by property rights and the rule of law, we have a flourishing free market. That is the great genius of our economy and many economies in the west.
Bim Afolami
Could my hon. Friend illuminate the House by saying what he fears would happen to small businesses such as the ones in Aldershot that he mentioned if they were subject to the programme of huge tax rises and nationalisation proposed by Labour?
Leo Docherty
I am grateful to my hon. Friend for that intervention. The wholesale economic devastation that would be the consequence of Labour’s nationalisation plan—I do not know whether it has a plan to nationalise sausage production, but I hope not—would be clear. We have to make the case for the free market. In this day and age, it is astonishing that Labour Front Benchers espouse an ideology that totally opposes the free market.
The shadow Chancellor is a self-declared Marxist. The House will know that in 2006 he said:
“I’m honest with people: I’m a Marxist”.
He said of the 2008 crash:
“I’ve been waiting for this for a generation”.
In 2017, he stood in front of Communist flags at a May Day parade in London, and just this year he attended the Marx 200 conference in London, at which he claimed:
“Marxism is about the freedom of spirit”.
Eddie Hughes
I understand that Alf Turner served for 20 years in the Royal Army Service Corps—in complete and stark contrast to the shadow Chancellor.
Leo Docherty
I am very grateful for that intervention. Absolutely—it puts those two sets of values into stark and very worrying contrast.
The free market is not an ideology but an inevitable human condition, which Conservative Members rightly espouse. We must call out at every turn the Marxist ideology of Opposition Front Benchers, and we must also reflect that those who had the unpleasant experience of living in countries with the devastating experience of the doctrine of Marxism being applied in reality, such as the Soviet Union, have bitterly regretted it. Shadow Front Benchers and the shadow Chancellor would do very well to read the moving autobiography of Elena Gorokhova, “A Mountain of Crumbs”, which describes the devastating famines of the 1920s and the wholesale shortages of foodstuffs in the Soviet Union in the 1980s, which meant that when she went to the United States, she was simply amazed by the range and variety of foodstuffs on the shelves of the supermarkets there.
Before I conclude, I would be happy to take an intervention from an Opposition Front Bencher if they wish to deny that the shadow Chancellor is a self-declared Marxist. There is no movement from them, so the record will show that they are happy to confirm this depressing fact. We must reject the Marxist ideology of the current Labour party and rejoice in the bright future of the free market that we have in our country, burnished by free choice, a growing economy and the freedom to choose.
Mr George Howarth (Knowsley) (Lab)
It is a pleasure to follow the hon. Member for Aldershot (Leo Docherty). I think it would be fair to describe his speech as a bit of a mixed grill, but perhaps I should move on.
In a Westminster Hall debate on Tuesday, the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks) (Rishi Sunak), talked about local government cuts since 2010. He said that they had been mitigated by what he referred to as “core spending power”, which had gone up by 2% this year and over previous years. He went on to say:
“The idea that the funding formulas do not take account of deprivation or the differing ability of areas to raise council tax is totally erroneous.”—[Official Report, 30 October 2018; Vol. 648, c. 332WH.]
Note that he said not just “erroneous”, but “totally erroneous”. I want to spend a moment looking at the veracity of that statement. He must know that the Government’s grant cuts since 2010 have hit those councils with the greatest need the hardest. Knowsley’s cut to “core spending power”, as he puts it, amounts to £485 per person, compared with the average for England as a whole of £188.
Ms Marie Rimmer (St Helens South and Whiston) (Lab)
Knowsley is one of the most poorly resourced areas in the country. Indeed, it suffers from one of the highest levels of income deprivation. Does my right hon. Friend agree that the impact on the streets is dangerous and sickening?
Mr Howarth
I very much agree, and if I have time, I will come on to say more about that.
This is not just about what I or those in local government are saying about why the Under-Secretary’s comments were—I was going to use the word “misleading”—an example of sophistry. Independent analysis from the University of Cambridge says that there are
“significant inequalities in cuts to council services across the country, with deprived areas in the north of England and London seeing the biggest drops in local authority spending since 2010.”
As councils all point out, that is because—again I quote from the study—
“These local authorities tend to be more reliant on central government, with lower property values and fewer additional funding sources, as well as less ability to generate revenue through taxes.”
It would not be permissible for me to say too much more about the effect of what the Minister said, but the truth is that it was not a proper portrayal of what is taking place, and his analysis of the grant system was plain wrong.
In the time that remains, let me say a few words about the consequences of this situation in the Liverpool city region, starting with Knowsley. The impact for the people in Knowsley, which has been the hardest hit of all local authorities anywhere, is that we have had our grant cut by £100 million since 2010. Children’s social care needs are rising faster than the resources for dealing with them, with a £3 million gap currently projected, and the increases announced last week barely scratch the surface of that gap. The same applies to adult care, for which demand is growing, yet the resources are just not there to meet it.
Since 2010 in the Merseyside police force area, we have lost 1,000 police officers. As the chief constable said, the service is reaching breaking point—it is a chief constable saying that. There has been a 14% rise in crime over the last 12 months. Similarly, 50% of the grant for fire and rescue services has been taken away since 2010. The number of firefighters has fallen from 927 to 580. Fire deaths are up by 10%.
The worst aspect of these cuts in services, as the Minister was unwilling to concede on Tuesday, is that the people who can least bear the brunt of them are among some of the poorest in the country. Frankly, what the Government have done to public services in the Budget is shameful.
Bim Afolami (Hitchin and Harpenden) (Con)
It is a pleasure to speak in the debate. First, I would like to address the measures in the Budget that relate to the digital economy, including the digital services tax. I declare an interest: I am a former corporate lawyer —I was even more fun when I was doing that. Someone who deals with international transactions and contracts learns that international tax treaties are very complicated and were designed for a time before the current technological revolution. The UK Government are leading the way in clamping down on the admittedly difficult and perhaps unsavoury practices of multinational tech firms. Of course, the digital services tax will not deal with that completely, but it is a step in the right direction. As I say, we are one of the first Governments in the world to do anything like this, and I commend it to the House.
Turning to my constituency, I want to address the measures relating to the high street. We all know that the high street has been under significant pressure over the past few years. Whenever I speak to the owners of small independent shops in both Hitchin and Harpenden, they say that business rates are a significant problem, so I look forward to telling them this weekend about the cut of a third in their business rates, if their rateable value is under £51,000. That measure will be of huge benefit to my independent shops and I commend it to the House.
Even more important than the cut in business rates is the £675 million future high streets fund because it will help to enable our local authorities and local areas to take leadership and act on their own initiative to reshape their high streets to deal with the modern world and its challenges. I urge the Chief Secretary to the Treasury, who is sitting on the Treasury Bench, to make sure that this money gets to local councils as soon as possible so that we can get on with making improvements.
Gareth Johnson (Dartford) (Con)
Does my hon. Friend agree that the Budget’s tax cuts will also help the high street by ensuring that regular people have more money in their pockets to spend in high street shops, thereby improving the whole economy?
Bim Afolami
I thank my hon. Friend for that intervention. I was coming to tax cuts because, particularly in relation to the high streets, they are a classic piece of positive Conservative economics that will increase demand and help consumer spending, and thereby help the high street. I commend the Chancellor and the Treasury team for putting the policy forward in the Budget.
On tax cuts more broadly, if someone is one of the 1.74 million people who, in only the last two years, the Government have taken out of tax altogether, that side is against them; this side is for them. If someone is one of the 25 million basic rate taxpayers who have saved more than £1,000 in real terms since 2010, that side is against them; this side is for them. If someone has the temerity to want to earn over £50,000—yes, there are people who want to do that—that side is against them; this side is for them. The Budget not only backs the NHS with the biggest cash increase in its history, not only backs the high street and not only backs working people up and down this country, but backs Britain. This party backs Britain; the other side does not.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. As colleagues will have noticed, there have been a number of interventions, which have extended people’s time. When that happens, it prevents others from speaking, and I am afraid that after the next speaker, I will have to reduce the time limit to three minutes.
Dan Jarvis (Barnsley Central) (Lab)
It is a privilege to speak in this Budget debate and to represent my constituents in Barnsley and right across the Sheffield city region. I am proud to represent these communities, but I have come to learn that it is not in the halls of Westminster or the corridors of Whitehall that decisions on many of the issues that affect our communities should be made. Decisions on important issues, such as our public transport system, on how our schools, colleges and universities work together and on where best to invest in our infrastructure, should, where possible, be made locally.
Through devolution, it should be a collective endeavour between the Westminster national Government, combined mayoral authorities and local authorities across our country to work relentlessly together to prepare our people for the challenges of the 21st century. The world has never been more challenging. It is fraught with risk and complexity, but at the same time it is full of opportunity. Technology now connects the far reaches of the planet in ways unimaginable just a generation ago. In reality, however, this is a country where too many of our communities do not believe their best days are in front of them, where too many believe they are being failed by cuts to their vital public services, and where many of our communities feel as though they are ignored because of where and who they are. That is a tragedy. It is also a waste of the ingenuity and potential of so many people.
Along with many others, I am working to grow our economy and connect our talented people to opportunity. With Brexit on the near horizon, in the Sheffield city region, this work is taking shape, and we are making progress. A story is emerging in south Yorkshire that shows that ours is a region that is resurgent, which is hugely significant because for far too long it has been an area characterised by the decline of heavy industry. Now, for the first time in a generation, we are witnessing a growth in advanced manufacturing and highly skilled engineering jobs.
It is this spirit of endeavour and innovation that underpins our work to develop a global innovation corridor to connect our businesses, researchers and urban centres and our international airport in Doncaster to create transformational economic growth, but we are doing it with our hands tied behind our backs. We are served by an outdated and antiquated transport network of trains, buses and trams. The north has so much potential, but it needs the Government to realise and unlock that potential. The northern powerhouse offered a framework to do this, but it requires all of the Government to strain every sinew to reduce the inequalities that exist between north and south.
The Government’s commitment to develop new local industrial strategies is welcome, but to tackle the structural inequalities locked into the regions of this great country, we must make structural changes to the way we prioritise investment. In short, actions speak louder than words, and sadly the Budget is yet another missed opportunity.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
The Budget of Monday past has been welcomed by many but clearly not by all. I have been asking myself: what will it do for the constituents of Ayr, Carrick and Cumnock? It contains a range of measures that will benefit not just my constituents but the whole of Scotland. The Scottish Government will benefit from a funding boost of almost £l billion. I know my constituents will welcome this increase, and I am sure they will keep a weather eye on how it is spent by the Scottish Government. I hope it will be spent on people projects and not pet projects. Indeed, by 2020 the Scottish Government’s block grant will have grown to over £32 billion before adjustments for tax devolution—a real-terms increase over this spending review period.
Those of my constituents who, like me, enjoy a dram will very much welcome the freeze on spirit duty. I was pleased to see the concerted efforts of Scottish Conservatives and others recognised by the Chancellor. Indeed, he was listening—I am sorry for doubting him. I know that the industry in Scotland will welcome the freeze.
I also know a few individuals in Ayr, not least Messrs Brown and McLoughlin, who enjoy a wee dram and I am sure that they will raise a glass as a result of the freeze on spirit duty. I am not linking the two measures in drinking and driving, but the freeze on fuel duty will always be most welcome, particularly in the rural areas of Scotland.
The national living wage, introduced by a Conservative Government, will now increase to £8.21 per hour.
David Linden (Glasgow East) (SNP)
Will the hon. Gentleman give way on that point?
Bill Grant
I am sorry; no. That measure means that 117,000 of the lowest paid in Scotland will enjoy an increase in their take-home pay. [Interruption.] That is fine. [Interruption.]
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Can we not have that conversation across the Chamber? We all want to be included.
Bill Grant
Thank you, Madam Deputy Speaker. The measure is very much to be welcomed and, thanks to an earlier than planned increase in the personal allowance, the average Scottish worker will enjoy a £130 tax cut.
I know that, like me, some hon. Members were concerned about the transition period for households moving on to universal credit, and I very much welcome the financial support that the Budget delivers. I sense in the House today that not everyone is entirely happy with that, but again, the Chancellor has been listening.
Tax barriers have been removed in the North sea oil industry to allow further investment, and our fishing community will get the welcome, albeit rather small, £10 million as we move forward and improve our fishing industry post Brexit. However, I would welcome further investment in the fishing industry to improve the quality of the fleet in Scotland as we leave the European Union.
There are many good things in the Budget that will help us. We have the small business bonus scheme in Scotland, but that could be improved. We need to address the problems of our high streets: we can no longer watch buildings decaying year after year. We need earlier interventions to prevent the decay of our high streets, which are part of our future. We will not stop change: the internet and out-of-town shopping are here to stay, but I welcome the Chancellor’s recognition of the need for support for the high street.
Stephen Timms (East Ham) (Lab)
The hon. Member for Ayr, Carrick and Cumnock (Bill Grant) touched on universal credit and I want to focus my remarks on that. There were significant changes in the Budget, which go some way to repairing the great damage of George Osborne’s 2015 cuts. Those changes will make a big difference particularly for families with children who rent their home.
However, the Budget does not affect those features of universal credit that plunge people into debt, forcing them to get behind with their rent and compelling them to use food banks at the start of their universal credit claim. The biggest of those factors is still the five-week delay between applying for universal credit and being entitled to benefit. Ministers can defend that gap only in the case of people who have a month’s salary cheque in the bank just before they claim.
The latest annual survey of hours and earnings shows that almost one in seven employee jobs are paid weekly. On top of that, there are fortnightly-paid jobs. What are those people supposed to do during the five weeks when they are waiting for their universal credit to be paid? I have asked Ministers that question repeatedly, but they simply do not have an answer.
It is extraordinary that it has been proposed to apply the five-week gap to people who are being migrated from existing benefits to universal credit. They do not have a salary cheque in the bank, but have been dependent on benefits, perhaps out of work on ill health grounds, claiming employment and support allowance, for a long time. They will be migrated on to universal credit, and it has been proposed that they too will have a five-week gap when they get no support at all.
The Chancellor announced a two-week run-on for previous benefits. That will not apply to tax credits and, particularly for those on ESA, there will still be a three-week gap. What are people supposed to do in that time? The Government are saying to them, “We’re changing the system and, as a by-product, you will get no help at all for three weeks.” Where can that idea have come from? How can Conservative Members, who, I am sure, meet—as we all do—people struggling to make ends meet from one payment period to another, have come up with the idea that people get no help for three weeks? Ministers need to address that urgently.
Sir Edward Leigh (Gainsborough) (Con)
The Budget is tactically clever and, indeed, wise, but it may be strategically dangerous. That is where I join the right hon. Member for Twickenham (Sir Vince Cable) and my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke).
Of course, we all have our own priorities for Government spending. I have campaigned for the Ministry of Defence and I support the measures in the Budget for that. There have been local campaigns on potholes, particularly in a rural county such as Lincolnshire. We have been campaigning for more money for schools, and we all welcome the announcements on that.
However, by 2023-24 the Government will be spending another £30 billion a year. Indeed, by the end of the Parliament the Government will take 38% out of the economy, which is exactly what Gordon Brown took out of the economy at the end of his Chancellorship.
I might be the last Gladstonian Liberal left in this place, or indeed one of the few Thatcherites left in it, but I do believe that the way to deal with the economy and provide for everybody is to try and bring down the deficit and start to repay debt. I want to hear from the Chief Secretary when she sums up the debate that we have not reneged on our promise—the Conservative promise—to start repaying debt, and I would like to know from her when she is going to start doing it.
Whatever we spend, the Labour party will of course always promise to spend more, and I was amused that the shadow Chancellor thinks that the rich now earn just a bit more than he earns. We are never going to set the economy right, particularly in the context of Brexit, unless we fix the roof while the sun shines. We do not want that jibe turned on us; we do not want people to say in future “Yes, the economy was doing fairly well, you were creating a record number of jobs—particularly youth jobs—and all these good things were happening and all the prognoses about Brexit were not proved correct, but when the sun was shining, did you fix the roof?” So I want to be assured by the Government that they are going to get this right. Unless we do this, we could be in severe difficulties, because all economies are cyclical.
Frankly, I do not think the main problem facing the economy is Brexit. I think it will be alright on the night; we will sort it, and some deal will be achieved. We will achieve some sort of free trade area. I do not believe that the prophets of doom about Brexit will be proved correct, but I do believe that we have to get the economy right, and that in terms of health spending—I use the national health service, like everybody else—we cannot just bung ever more tens of billions of pounds into it. We have to ensure that there is competence and efficiency in our public services, so we need a good strong, free enterprise, low tax, deregulated Conservative economy.
Mhairi Black (Paisley and Renfrewshire South) (SNP)
The Tories have a habit of announcing policies that are backed by arguments that, in a sentence, quite often can sound reasonable. However, the minute we scratch beneath the surface we see that every policy is soaked in ideology and backed by mistruths that are unrecognisable in the real world. I want to give a few examples.
We have had umpteen debates in this House explaining in great detail why universal credit is not fit for purpose as it stands. Even this month I have had constituents live off nothing but £70. The Chancellor has announced a boost to the work allowance as an answer to these problems, and he expects credit for that, but, again, if we scratch beneath the surface, we find that this boost only reverses half of the cuts that were made in the 2015 Budget.
Secondly, Tories often say that the best way out of poverty is through work. They preach that they were the Government who introduced a “living wage” and they arrogantly pat themselves on the back for raising it in this Budget. Again, if we scratch beneath the surface we discover they have introduced nothing of the sort. They have slightly increased the minimum wage, which still does not meet the cost of living. No amount of rebranding will make anyone forget that. Further, we see nothing in this Budget to address the age discrimination that is entrenched in the minimum wage structure.
David Linden
In the Budget the Government have managed to increase the minimum wage for apprentices to just £3.90 an hour. Given that that lot on the Conservative Benches will not do anything on this, will my hon. Friend join me in making sure they devolve relevant legislation to Scotland so we can deliver a fair day’s work for a fair day’s pay?
Mhairi Black
Funnily enough, I could not agree more, and I have to say as a 24-year-old that I would challenge any Member to justify why I should be paid less than anyone else in this place. If the law does not apply to me, why should it apply to anyone else out there?
My third example is the two-child cap. This is the claim that really sticks in my craw. If it were true that the Chancellor is supporting families, he would not make women prove they were raped in order to get benefits for their children. I see that not many Tories are giving me eye contact at the minute. Over 73,000 households are receiving less tax credits than before and the Government’s response was that people on welfare need to make decisions about the number of children they may or may not have. That statement is as barbaric as it is downright stupid; it is nothing more than an ignorant, cruel and deliberate misconception to hide behind.
Mhairi Black
I will not.
Life does not happen like that. There is no telling how or when an individual’s circumstances will change, and this Government know that. It is children who are paying the price.
I want to mention the very people I am sure the Chancellor would love to forget—those WASPI women who refuse to disappear quietly. I have noticed that any time we on these Benches highlight problems such as WASPI or universal credit, we are told to use our shining new powers in the Scottish Parliament to fix them. Let us take universal credit as an example. The Scottish Government listened to the experts who said that fortnightly payments would be much more flexible for claimants. We used the little influence that we have to at least try to make the system slightly better for people. Actually, few people are aware that the Scottish Government have to pay Westminster for the luxury of trying to protect people from the very worst of these policies. So I am afraid that I will take no lectures from the Conservative and Labour parties, which fought tooth and nail to make sure that Scotland did not get the powers required to fix these problems. We were told that employment law and pensions were too important to be devolved and that we were better together, so do not dare to turn around and say that Scottish people should fork out more money to plug holes in policies they did not vote for in the first place.
Let us be clear that this Budget delivers austerity and simply gives it a different name. If this is “better together”, then the Scotland I want to live in is, and deserves, better than this.
Giles Watling (Clacton) (Con)
It looks like our economy is once again defying the naysayers. UK growth has an inexorably upward direction, which is to be encouraged, and debt as a percentage of GDP is down, thanks to the hard work and perseverance of the British people. The deficit is at its lowest level since 2001, and productivity growth has accelerated and is now running ahead of the forecasts made in the spring statement. It is growing at its fastest rate since 2016. In spite of this, however, productivity is still below the average seen in the financial crisis.
We all know that infrastructure is vital to supporting jobs and economic growth and to improving people’s quality of life. That is why I am delighted that this Budget sets aside £28.8 billion for the biggest ever strategic investment in roads, and I want to see our share of that coming to Clacton-on-Sea. This is in addition to the £740 million for the nationwide roll-out of digital infrastructure, which means that by 2021 the Government will be investing £9 billion a year more in infrastructure than they were in 2015. The old saying, “Down good roads wealth flows” still holds true even when those roads are increasingly electronic. While celebrating that achievement, however, I am concerned that there was no new money in the Budget for rail. That is disappointing, because one of the most pressing issues in Clacton is the dreadful rail service there. My constituents want to see a service that is regular, quick and clean.
Let me move on to some of the other issues that the residents of the constituency of Clacton raised with me before the Budget. The introduction of the digital services tax, which I support, has been a prominent issue. As a member of the Digital, Culture, Media and Sport Committee, I know that these huge corporations make massive profits, and it is right that they should pay a fair share for our public services. It is wrong that previous Governments did not get a grip on this.
I thank the Chancellor for the ongoing freeze on beer duty—I am probably not alone in that—but I am somewhat disappointed, having joined my constituents in campaigning for a cut in the duty. I recognise that a freeze is better than an increase, but I will continue to lobby for a reduction, in order to protect pubs as vital community centres.
It should be borne in mind that the pub is part of the great British way of life, and a great place to share and enjoy company. Loneliness is one of the burgeoning issues that we face today, and I would argue that the demise of so many of our treasured village pubs across the country has contributed to this blight. People do not have to drink alcohol when they go to pubs—they can drink anything they like—but they are a place to go to. A problem shared is a problem halved. The pubs in Clacton receive plenty of support from me personally, but one man can only do so much! There is certainly much greater scope for the Government to intervene in this sector.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
After listening to the rosy picture painted by the Secretary of State for Housing, Communities and Local Government when he opened today’s debate, I had to wonder what planet he is living on, because austerity is definitely not over for my constituents and my city. It is not even close to coming to an end. In response to the Budget, the director of the Institute for Fiscal Studies said:
“If I were a prison governor, a local authority chief executive or a headteacher I would struggle to find much to celebrate. I would be preparing for more difficult years ahead.”
The Prime Minister stood up in Birmingham and made a promise that turned out to be nothing more than hollow rhetoric. For the people of Birmingham, austerity rolls on. Our city has had around £700 million cut from its budget since 2010. In fact, the Government found more money in this Budget for adult social care for the whole country compared with what Birmingham has had cut from its budget since they came to power in 2010. By 2020-21, we will have to find an additional £120 million of cuts to our budget. I do not think that my community of Birmingham, Ladywood has that much left to lose or much more that can be cut. I wonder how we are supposed to keep our city and our corner of British society functioning given the scale of cuts that we have faced. We have seen a total degradation—a decimation—of our public realm, and that has had profound consequences not just for my constituents, but for our country as a whole.
For my constituents, that degradation of the public realm has led to the removal of the things that enable a sense of human flourishment and wellbeing and things that allow a degree of comfort or enjoyment, such as libraries, leisure centres, parks, clean streets, and community and voluntary groups. The disappearance of all those things in Ladywood, which has the highest unemployment rate in the country and all the attendant problems of child poverty that follow, means that community life and individuals’ lives are reduced simply to surviving and enduring. That is unconscionable and immoral in one of the richest countries in the world, but it is entirely a result of political choices made by this Government.
The degradation of the public realm also has profound consequences for us as a country. All the things that enable people to come together and form relationships and friendships are part of our shared common life. If that is taken away, we start to tear apart the ties that bind our nation together and, in an era of anger, greater division and rising populism and nationalism all around the world, that choice is profoundly wrong. This is not just about economics; this is about the tearing apart of the things that keep our country together. We need and deserve more than this.
Mike Wood (Dudley South) (Con)
This Budget is good for communities and families in the west midlands. On top of the £250 million that the county has already received from the transforming cities fund, it will get another £72 million to boost prosperity and spread wealth across the region by increasing productivity. Families will also have extra money in their pockets at the end of every single month thanks to the introduction, a full year ahead of schedule, of the changes to income tax thresholds and personal allowances that were promised in our manifesto last year.
In the limited time available, I want to focus on our pubs, which was touched on by my hon. Friend the Member for Clapham—[Hon. Members: “Clacton.”] Of course, I mean my hon. Friend the Member for Clacton (Giles Watling). Despite mentioning pubs, I have not had a drink so far today; that was purely an end-of-the-week brain melt. For too long, British beer and British pubs were seen purely as part of the problem, whereas there is now an increasing recognition of their economic input. Pubs contribute £26 billion to our economy every year, and pubs across the country employ nearly 1 million people, almost half of whom are under 25. As I am sure the Chancellor will be all too aware, the sector generates £13 billion in tax.
However, the sector has been under enormous pressure. The years after Gordon Brown introduced the hated beer duty escalator saw an even higher than trend rate of pub closures and a reduction in the number of people drinking beer in pubs, rather than buying it in supermarkets.
Mike Wood
I have only a few seconds.
The measures announced on Monday—a freeze in beer duty and a third off business rates—are expected to help up to 19,000 pubs to be between £3,000 and £8,000 a year better off. The British Beer and Pub Association reckons that will safeguard 3,000 jobs in the sector, which in turn means that more people will be earning an income and paying taxes—this will almost certainly cover the costs. This is a good Budget for beer, a good Budget for pubs and a good Budget for Britain.
Sir Mark Hendrick (Preston) (Lab/Co-op)
At the 2010 general election, the Conservative party promised to eradicate the deficit by 2015. Now the Government have no target for getting rid of the deficit at all. Billions have been cut from our public services over the past eight years, and we still face a budget deficit of £52 billion and a national debt that has nearly doubled since the Conservatives came into government in 2010. The Government have borrowed £670 billion over the past eight years, and my local councils, the Conservative-led Lancashire County Council and Labour’s Preston City Council, are both at breaking point because of cuts.
Turning to the tragedy of universal credit, since June 2018, 71 constituents have written to me expressing the immense problems that many of them are facing due to the transition to universal credit. I will give just one example. Stuart obtained a three-month sick note from his GP due to illness. The jobcentre then started to apply for jobs on his behalf, despite his illness. He then had to wait five weeks before he received his first payment, because of the transition. That is a disgrace, and it is happening to many people across the country who are ill, disabled and, in many cases, destitute.
One of my many local food banks distributed more than 2,000 food parcels in August, up from its normal distribution of more than 1,000 food parcels. I am reliably informed that more than half of those food parcels were given out because of benefits issues, and I am also told that the majority of those issues are because of the transition to universal credit.
The Guardian reports today that my constituency of Preston is the most improved city in the UK, which is welcome. A lot of that is due to the hard work of the public and private sectors, which are working together for the benefit of Prestonians with the encouragement of the city council. However, that has happened in spite of Government policies, not because of them. Many commercial properties in the city centre are unoccupied, derelict and neglected, despite the good work of the business improvement district to stimulate the local economy. Homeless people occupy empty shop doorways, and in the past eight years I have seen a huge increase in the number of people begging on the main street, Fishergate.
This cannot continue. This is still austerity, despite the protestations of the Chancellor and the Prime Minister. It should end now.
Kirstene Hair (Angus) (Con)
This Budget is good news for our United Kingdom, good news for Scotland and good news for Angus, with an extra £950 million for Scotland.
Following tireless campaigning from me and my Scottish Conservative colleagues, I am pleased to see a freeze on spirits duty for the second year running, providing much support for our iconic Scotch whisky industry. It is fantastic news for distilleries around Angus, whether it is Gin Bothy in Glamis, Arbikie vodka or Glencadam distillery in Brechin.
In rural areas such as my constituency, ensuring that motoring is kept affordable is vital, because of the poor transport links. So I was pleased, as chair of the all-party group on fair fuel for UK motorists and UK hauliers, to see the Government recognise that and freeze fuel duty for the ninth consecutive year; we have saved our motorists £1,000 since 2010.
Not only have we saved people money at the petrol station, but we have saved taxpayers in their pay packet. By making changes to the personal allowance, we have ensured that basic rate taxpayers have an extra £130 in their pocket, and since 2010 they are £1,200 better off. This Government are working to ensure that those in society who need it the most are able to keep more of their hard-earned money, which, as Conservatives, we know is better in our pocket than spent by the state.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
What does the hon. Lady have to say about House of Commons Library figures showing that the Conservatives have cut the Scottish Government budget by 6.9%, when over similar years the Irish Government’s tax revenue rose by 32%?
Kirstene Hair
I thank the hon. Gentleman for his intervention, but it is as false as the SNP Twitter feed, because in fact if we look at the figures, we see a £552 million increase.
As I was saying, it must be noted that the change that the Government are making to the higher rate tax threshold, increasing it from £46,350 to £50,000, is not helping out those in Scotland, because of the SNP-led Government. In Scotland, those earning £50,000 will now pay at least £1,000 more in tax. We are talking here about people working in our health system, in our police and in our higher education system. SNP Members are quick to commend them but then they tax the back off them.
This Budget was welcome news also because of the £150 million ploughed into the Tay cities deal, which will benefit my constituency. It shows exactly what the Scottish people want to see: Scotland’s two Governments working together for the better of our country. I also welcome the funding going into our fishing industry. Only Scottish Conservatives are standing up for that industry; an extra £10 million is going into the technology and methodology fund. SNP Members want to drag our fishermen right back into the hated common fisheries policy.
There is nothing in this Budget that those SNP Members would have agreed to, and nothing that the Chancellor could have offered in this Budget would have allowed them to vote for it. I very much hope that when they troop through the Lobby they know that they are voting against a tax break for the hard-working, against a fuel duty freeze, against a spirit duty freeze, against £150 million going into the Tay cities region, against NHS funding and against extra funding for universal credit. They should put their constituents before their party.
Mr Steve Reed (Croydon North) (Lab/Co-op)
Just two weeks ago, a group of Ministers sat on the Treasury Bench and launched the Government’s cross-departmental loneliness strategy. They were right to do that, because, as the Prime Minister says, this major public health issue has as big an impact as obesity or smoking, and affects up to one in five adults often or always. As part of that strategy, the Under-Secretary of State for Digital, Culture, Media and Sport, the hon. Member for Chatham and Aylesford (Tracey Crouch), promised that we could look forward to a loneliness test in respect of major decisions in future. Disappointingly, there is not one with this Budget. So I thought I would do the job for the Government and review its impact on loneliness to see whether the fine rhetoric we heard in this Chamber two weeks ago has been followed up with action.
The loneliness Minister, speaking with refreshing honesty, admitted that past cuts had “inadvertently” made loneliness worse—here is how. Since 2010, Government funding cuts have led to the closure of 428 day centres, 1,000 children’s centres, 600 youth centres and 478 public libraries. Those are all spaces where people can go and loneliness can be tackled. Government funding cuts have also led to the loss and closure of lunch clubs and befriending services; the loss of funding for voluntary and community groups and for community centres; and care visits being shortened in time and reduced in number, and being denied to 1.4 million older people. Again, those are all services that help to tackle and prevent loneliness. So has all that come to an end in this Budget, now that we have a loneliness strategy? Sadly, I do not think it has, because according to the Institute for Fiscal Studies, over the next three years we can look forward to an average cut of 3.1% each year in the local government funding from which all those services are funded. There is no end to austerity there.
While Ministers have been trumpeting £650 million extra for social care, they have neglected to point out that the previously announced £1.3 billion cut is still going ahead. Rather than more money for social care, then, we are looking forward to another £650 million cut in services.
In my borough, Croydon, we have a very high number of children seeking asylum. The Government’s severe underfunding of asylum services means that the support that those children need does not even exist yet. Isolation is of course a major problem for a child living in a country without their family or members of their social network. Even among that group, loneliness is going to get much worse.
Despite the fine words in the loneliness strategy launched just two weeks ago, the Budget will result in more and deeper cuts to all the services that tackle or prevent loneliness. I have to ask: what is the point of a cross-departmental group of Ministers sitting on the Front Bench to trumpet their new loneliness strategy if the Chancellor comes along and trashes it with his Budget just two weeks later? No wonder the Government dare not apply a loneliness test to the Budget—it is a test they would fail.
Ross Thomson (Aberdeen South) (Con)
The oil and gas industry, not just in Scotland but across the length and breadth of our United Kingdom, employs hundreds of thousands of people, providing skilled jobs and contributing not only to our economy but to our nation’s energy security. The Conservative Government have already taken unprecedented action to support this crucial industry, with tax breaks for the North sea worth more than £2 billion. We now have one of the most competitive tax regimes in the world. There is an awful lot of life left in the North sea: according to a University of Aberdeen report, there are potentially 17 billion barrels equivalent of oil to extract. To maximise the North sea’s full potential, ongoing support will be required to sustain this vital industry and the thousands of jobs that depend on it.
Scottish Conservative MPs have raised the industry’s profile at the highest levels of Government. Recently, I was pleased to welcome my right hon. Friend the Chief Secretary to the Treasury to my constituency, where we met representatives from Oil & Gas UK and visited Aberdeen harbour, where the Minister was given a fascinating insight into the level of activity at the port. Thanks to UK Government funding through the Aberdeen city region deal, the harbour expansion is progressing well. This is an exciting time for the harbour, and its expansion is a clear signal that Aberdeen is open for business. It opens up huge opportunities for oil and gas decommissioning, as well as for welcoming new cruise ships to our city.
Alongside my Scottish Conservative colleagues, I have been lobbying the Chancellor and the Treasury at every opportunity, so I am delighted that the Chancellor announced in his Budget statement that he will keep the headline tax rate in the North sea at its current level, despite the oil price rising. That will ensure the highest level of support for the sector by the UK Government, which is great news for jobs, for families, for the economy and for the communities of the north-east of Scotland. As the industry emerges from the worst downturn in its history, the Budget is a vote of confidence in Aberdeen and the North sea, which is why I commend it to the House.
Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)
Just a few weeks ago, during the Conservative party conference, the Prime Minister told us that austerity was over. Like many others, I was a little optimistic, thinking that the massive cuts to and huge financial pressures on our public services and local councils were finally coming to an end. This week’s Budget demonstrates that my optimism was misplaced. This Tory Government remain out of touch with the misery that they have inflicted on public services and local councils throughout the UK. The Chancellor now tells us not that austerity is over, but that it is coming to an end. This is, indeed, a broken-promises Budget.
Since 2010, there have been huge cuts to our public services. The grant to the Welsh Government has fallen by 7.2%, which means that Wales has around £4 billion less to spend than it would have had if its budget had kept pace with inflation.
We constantly hear the Government’s rhetoric about the financial position that they inherited. They constantly try to push a myth by referring to “Labour’s great recession” or a similar nonsense term. However, unfortunately for the Government, the people of this country will not fall for that. The British people know only too well that the 2008 financial downturn was a global one and did not originate in this country. Furthermore, although Gordon Brown had influence, as indeed do all Prime Ministers, causing a global financial downturn is a little bit outside the scope of their power.
The reality is that austerity has been the political choice of this Government and the coalition Government in 2010, based on political ideology. As I mentioned, the Welsh Government have had a huge cut since 2010, and although they tried to protect Welsh councils in the early years of austerity, Welsh local councils now face a very difficult financial situation. Some £4 billion less in the Welsh budget has a drastic impact on public services and local councils in Wales. Further cuts in my area will likely mean a significant reduction in street cleansing, grass cutting and highways maintenance, as well as the closure of civic amenity sites, a reduction in the budget for libraries and youth services, a significant reduction in school budgets and school initiatives, and the closure of leisure centres and community centres.
Let us make no mistake: these cuts and many more like them across the UK are the result of this Tory Government’s austerity agenda. I was a councillor for more than 20 years, so I fully appreciate that local councils are at the forefront of service delivery in our communities. They are having to make hugely tough decisions about cutting local services, but they are decisions over which they really have very little choice, owing to the harsh austerity inflicted by this Government. The Budget does not signal the end of austerity; the only thing that it delivers for families and communities is more cuts and misery.
Alex Burghart (Brentwood and Ongar) (Con)
Before I come to my main speech, I wish to refer to some comments made by my hon. Friend the Member for Aldershot (Leo Docherty) about Marxism and sausages. During my hon. Friend’s speech, the hon. Member for Bootle (Peter Dowd), of whom I am perpetually fond, shouted from a sedentary position, “How were the sausages in Soviet Russia?” Let me tell him that they were awful—awful. They were so bad that they were made with wood chipping. It was said that the people of Soviet Russia preferred to eat sausages that had gone off because they at least knew that they had been edible at some point. That was what Marxism did to the sausage; that was what Marxism did to the people of Russia.
The truth is that it is the free market that brings prosperity to us all. There was much in this Budget to encourage and help the free market on which the prosperity of my constituency is based. We are a constituency in Essex that is built on the hard work of small and medium-sized enterprises, which will benefit greatly from measures to help entrepreneurs, the reduction of business rates by a third, and the new fund to help our high streets. This is hugely appreciated by the hard-working people of my constituency.
The Chancellor also announced some very good news that we have perhaps become too acclimatised to in this House. Employment in this country is at record levels. That is not something that we can gloss over lightly. The actions of this Government since 2010 have enabled more people to go to work and earn more money so that they can support their families, pay their taxes, and help their communities and public services to thrive. That is something of which we should be proud. The work of this Government will see the deficit reduce from over 10% to—in 2023-24—less than 1%.
Debt as a proportion of GDP is falling. One of the things that we should care about most is the legacy that we leave in the long term. When I was born, the debt-to-GDP ratio was about 35%. When the Labour party took power, it was slightly higher. By the time Labour left office, it had more than doubled. If this generation cannot reduce that figure, we are simply piling burdens on to our children and our grandchildren.
Eleanor Smith (Wolverhampton South West) (Lab)
The Chancellor of the Exchequer said that his Budget was for the strivers, the grafters and the carers. As I listened to his words I thought, “This isn’t a Budget for the striving, grafting and caring women I have known in my life.” This is not a Budget for the women who make up 77% of the NHS workforce—the cooks, cleaners, nurses, midwives and doctors who struggle every day to keep the NHS running. Nor is it a Budget for the 1 million hard-working women stuck on chronically low pay whom I represented at Unison, who worry that their jobs are now insecure as zero-hours contract work increases. It certainly is not a Budget for the hard-pressed women of Wolverhampton, who come to my office with their concerns and problems, desperate for help because of eight years of austerity.
Does the Chancellor of the Exchequer realise that 87% of the impact of Government tax and benefit changes since 2010 has fallen on the shoulders of women? It is women who are most affected by austerity and whose lives are made ever harder by the Tory cuts forced on councils? It is women, along with their children, who continue to bear the brunt of this Government’s austerity. There was no mention in the Budget of the scandal that 33% of 12 million British children now live in poverty. One million of these children are in working households, and 120,000 children are officially homeless and living in temporary accommodation.
The women of this country will not be impressed by the money that the Chancellor is giving schools for “little extras”—£10,000 for junior schools and £50,000 for secondary schools, which have had an 8% cut in real-term funding and now cannot cover many basic expenses. Some 18,000 schools now face funding cuts. There was nothing in the Budget for further education colleges, where women can access an education that could give them a second chance in life. This part of our education provision is now crumbling due to the Government’s lack of support.
Finally, let me turn to the WASPI women who protested at Monday’s Budget from the Gallery—a generation of women made worse off by the former Chancellor. These women thought that they could retire after a lifetime of work but were not given any notice that equality with men meant taking money away from women. One hundred years after women won the right to vote, this Government still expect them to do as they are told and accept this unequal treatment.
Whatever the Prime Minister or the Chancellor of the Exchequer say, austerity is not over, nor is it coming to an end. Austerity will end only when we have a Labour Government.
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
I am delighted to support this Budget, which delivers for my constituents in the Scottish borders and all people across Scotland.
Scotland is lucky enough to have two Governments, but their economic records could not be so far apart. Others have spoken very well about what the UK Government are delivering for Scotland, and I want to focus my remarks on how the Scottish Government are failing to deliver for Scotland. The Scottish Government are completely failing to use their vast array of powers to grow the economy north of the border. The hon. Member for Airdrie and Shotts (Neil Gray) tried to put a glossy shine on the Scottish Government’s economic record, but I am going to set out some facts to the House.
Last year, the Scottish economy grew at less than three quarters of the rate of the United Kingdom’s economy. By 2022, the Scottish economy will be over £18 billion smaller as a result of the low growth under the SNP Scottish Government, and Scotland has had the slowest business growth of any country or region in the United Kingdom since 2016. Shamefully, there are now fewer businesses in my constituency than there were in 2015, and the blame for that lies squarely at the door of the nationalist Government in Edinburgh, with their anti-business policies and obsession with raising taxes, as well as the uncertainty that exists in every part of Scotland over the threat of another independence referendum, which Nicola Sturgeon, the First Minister of Scotland, refuses to take off the table. Scotland now has the highest business rates in Europe, and everyone earning over £26,000 is paying more tax than they would in other parts of the United Kingdom.
I understand that SNP Members are planning to vote against the Budget today, so let me remind the people of Scotland just what SNP Members are voting against. They are voting against a tax cut for over 2.4 million Scots; against a pay rise for 117,000 hard-working Scots on the national living wage; against freezing fuel duty for Scottish motorists and businesses; against a £200 million boost to the whisky industry secured by Scottish Conservative MPs; and against a commitment to growth deals, including the borderlands growth deal. SNP Members like to pretend they are standing up for Scotland. The Scottish Government like to pretend they are standing up for Scotland. The only people standing up for Scotland are the Scottish Conservatives in this House.
Mike Hill (Hartlepool) (Lab)
On Tuesday, I attended the Westminster Hall debate on a five-year plan for mental health, which resulted from the excellent report by and work of the all-party parliamentary group on mental health. I highlighted the fact that in Hartlepool there is currently no walk-in centre for people in crisis, and the crisis service itself is so stretched that I have heard reports that people in crisis are waiting for two hours or more to access help. Many of those people in crisis in Hartlepool are young people. I just hope that the money promised by the Chancellor for mental health services will help to provide better access to crisis services for my constituents.
That service sits alongside our local acute trust, which provides over 50 services from our local hospital and is in deficit to the tune of millions of pounds. Indeed, it has just been announced that there is a repairs backlog of £48.9 million in the trust. That is a ticking time bomb, but it is the result of an understandable focus on supporting and propping up frontline services.
Following the loss of Sure Start, an excellent pre-educational programme, children in Hartlepool lack vital support, despite the best efforts of the local council and the NHS. Sadly, we have some of the most deprived wards in the country. We have in-work, third-generation household poverty. If it were not for food banks, charities and council interventions, especially during school holidays, many of our kids would go hungry.
As for local government, the Chancellor has seemingly put extra funding into adult and children’s services and social care but, in all honesty, he continues to choke the life out of our councils and public services. This Budget does nothing to end austerity, and by promising jam tomorrow, the Chancellor only perpetuates it. There is no money for policing and no money for further education. My constituents are dogged, determined, and deserve a damn sight better.
Alex Chalk (Cheltenham) (Con)
I rise to support this Budget—a Budget that allows our country to say with confidence, after staring into the economic abyss 10 years ago, that our best days lie ahead.
We are talking today about families and communities. In that vein, before drilling into the specific measures in the Budget, it is helpful to take stock of how far we have come in respect of jobs. Why is that? It is because there are some in this House who are in danger of forgetting what unemployment means for families and communities. It means misery, lack of self-esteem and wasted potential. It means hollowed-out communities and a grinding, corrosive sense of despair. Unemployment in our country is just 4%. In Cheltenham, it is under 2%. Yet in France it is 9% and in the eurozone it is 8%. In April 2010, there were 2.5 million unemployed people in our country, over 900,000 aged between 16 and 24, with a lack of opportunity and a lack of life chances. This country is turning that around.
There is no true economic strength without fairness too. It was the right decision in the Budget to raise the national living wage, which will go up by nearly 5% to £8.21 per hour. That will deliver an extra £690 to a full-time worker, while ensuring that businesses can thrive and expand. Raising the personal allowance one year early to £12,500 will save a typical basic rate taxpayer £130.
Stronger families mean healthier families. We should be in no doubt about the steps that this Government have taken to invest in the NHS. The figures are stark, and they are so great that it is sometimes hard to take them in. Some £122 billion is spent annually today, but by 2023 that figure will go up to £149 billion—the largest peacetime investment in history. In Cheltenham, that is over and above the £39 million capital investment in Gloucestershire’s hospitals.
Stronger families need good housing too. That is why I welcome the measures in the Budget to help turn derelict retail outlets into homes. Before carving up the countryside, we should look to meet as much of our housing need as possible from brownfield sites. With every challenge comes an opportunity, if we have the vision and energy to seize it, and that is the opportunity that arises from the changes in retail. We can consolidate our shopping districts, rebalance our town centres and make them vibrant and prosperous.
On education, there is more to say and much I want to discuss. At the comprehensive spending review, we need to look at how we can support those with the greatest needs. But overall, the careful stewardship of this economy and the hard work of the British people mean that tough decisions have been made—the right ones—and the future for our country is bright.
Richard Burden (Birmingham, Northfield) (Lab)
The thing that struck me while listening to the Chancellor on Monday and to Government Members today is the yawning chasm that exists between the picture they paint and the reality for my constituents—the people who come to my office for help day in, day out. The reality of their lives is illustrated as well as anything else by the numbers who are currently turning to food banks.
Several food banks serve my constituency. The biggest, the B30 food bank, is run by the Trussell Trust. It distributed 7,501 emergency food parcels in the last year, which is up by a third from the year before. This is a picture that led the Bishop of Birmingham, the Right Rev. David Urquhart, to comment two months ago:
“In one of the richest countries in the world, it is a scandal that people go to bed hungry and families have to choose between eating and heating.”
That is the reality of too many people living in Birmingham today.
Around a third of the people who come to the food bank are in work, but their incomes mean that they cannot make ends meet. In work, on a low income or out of work, 54% have had to turn to the food bank because of delays and changes in benefits—yes, this is an area where universal credit is live. I want to echo the powerful points made by my right hon. Friend the Member for East Ham (Stephen Timms). He talked about not only the problems with the delays built into the universal credit system, but the way that the system interacts—or rather, does not interact—with legacy benefits, which means that more and more people are coming off legacy benefits, with their claims cancelled, and yet are not receiving any support under universal credit for weeks. That spirals them into debt, and the consequence of that can be seen in the figures for those using food banks.
In the short time I have left, I want to say one further thing. It is not just a failure to fund public services that is the problem; it is the fact that the advice and support that have been there in the past from the statutory sector and the voluntary sector for people in need are simply not there any more. Without that lifeline, what could be a problem is becoming a crisis for too many families in this country. That is why I appeal to the Chancellor and those on the Treasury Bench that if they really want to bring austerity to an end, they need not just to fund our public services properly—important though that is—but to ensure that they fund the advice and support mechanisms in our voluntary sector and our statutory sector, so that people get the support they deserve.
Robert Courts (Witney) (Con)
This is a Budget that delivers: it delivers for the country, for the people of West Oxfordshire and, most importantly, for the communities and families living in West Oxfordshire. I mention those communities and families simply because those people will judge the success or failure of this Budget or any other Budget not on the GDP figures or the facts in the Red Book, but on their actual lived experience and the difference the Budget makes to their lives.
When we look at the background this Government have managed to create and the foundations that this Budget lays, we see that they are very promising. We have employment at the highest level since 1975, with 3.3 million more jobs since 2010 and unemployment falling by a third. There are record numbers of new businesses, which means more jobs and more wages, with all of the hope and the promise that they bring. We also see borrowing at its lowest level for 20 years and the national debt falling. This is all underpinned by the favourable business and taxation policies that this Government have made possible.
When we look forward to the future, we must look at an economy and a Budget that will increase growth. In the future, as we leave the European Union, the decisions we take will be in our hands, and the decisions we take here will govern the success or otherwise of this country in the future. Because we will be responsible for our own decisions, we can have great hope in looking ahead—hope that we will have higher wages, more cash in families’ pockets and more money for the public services we all value so much.
Housing and homes are a major issue, and I will dwell on them very quickly, if I may. The stamp duty cut has already raised the threshold to £300,000, which has helped 121,500 more people to get the homes they want and to get themselves on the housing ladder. I welcome the measures in this Budget that will extend that to shared ownership for properties up to £300,000, which will get even more people on the housing ladder. I would like to go further and have more reforms of stamp duty to ensure that people can downsize if they so wish, and to untie the housing market so that people can move and have the homes they want so much.
I wish that I had longer than three minutes to expound on the good things in this Budget. There is so much good stuff—[Interruption.] I am glad to see that everybody on the Labour Benches agrees. Ultimately, there is a choice: between the jobs and the work that this Government are offering and mortgaging our children’s future with a trillion pounds of debt, as the Labour party is offering. I welcome this Budget.
Hywel Williams (Arfon) (PC)
The hon. Member for Brighton, Pavilion (Caroline Lucas) has already pointed out that the environment rated no mention at all from the Chancellor. I would add that, as ever, Wales remains an afterthought, and it was hardly mentioned in the Budget. Our planned transformative and green infrastructure projects—rail electrification, opening old lines, and tidal power generation—have all been swept away, while the entire Welsh Government roads budget has been blown on a 12-mile stretch of motorway through the precious Gwent levels. The word “austerity” may have been scratched out of the Prime Minister’s dictionary, but the people of Wales will be feeling its impact for years to come, and over everything looms the cloud of Brexit.
The figures are hugely worrying. In 2016, gross value added per head in Wales was 72.7% of the UK figure—in fact, the lowest figure in the UK—and between 2014 and 2017 the proportion of people on relative low income was highest in Wales, at 20%, while the lowest figure was in the south-east of England, at 12%. Above all, the fact that over a third of our children in Wales are living in poverty is a continuing national disgrace. The gross disposable household income per head in Wales was £15,835 in 2016, which was 81.5% of the UK average. Between 1999 and 2016, Wales had the third lowest percentage increase in gross disposable household income per head of all the UK countries and regions—in other words, we are falling behind.
Universal credit is only partly in force in Wales, at 11% of potential claimants. I note, however, that it has not been rolled out in the most intensely Welsh-speaking areas, such as my own. In fact, the wonderful universal credit system just cannot cope with treating our two languages equally. According to Community Housing Cymru, tenants on the new system now owe more than £2 million in unpaid rents, even though a quarter of those now in arrears were managing to keep up with their rents before they were transferred to universal credit. Changes to personal allowances have already been discussed. The Welsh economy is badly skewed towards the low-wage sector, so the Chancellor’s kindly treatment of higher rate tax payers will have a more limited effect on incomes in Wales, and will potentially have a huge effect on the Welsh Government’s new tax-raising powers. Given the gross national and regional disparities and inequalities in Wales and the UK there is much uncertainty ahead, and we can expect little from this Budget and this Government.
James Cartlidge (South Suffolk) (Con)
As you return to your Chair, Mr Speaker, I return to the 1950s. There has been a lot of talk about austerity, but when our historians speak about austerity they focus not on public spending but on living standards and wages. In 1950, we spoke about the fact that there was rationing and people had low disposable incomes—we did not focus only on levels of public spending. Indeed, in 1950 we spent 6% of GDP on defence. The point is what is happening to living standards where it really matters.
Just before the Budget we heard the fantastic news that this country is now experiencing its fastest wage growth for almost a decade. [Interruption.] The hon. Member for High Peak (Ruth George) chunters, but if she reads coverage of those wage statistics in The Guardian, she will see they have been analysed to see why that is happening. The conclusion is that it is due to competition between firms for workers—in other words, wage growth is coming from the unemployment miracle that we are delivering. Indeed, in the Budget the extra money that the Chancellor was able to deploy comes from the fact that the OBR has revised employment figures up for this country. That is not a magic money tree—that is literally the hard work of the British people paying off, and more tax revenue coming in to support higher spending.
In a country which, compared with other similar northern European countries, has not had as high an average GDP per head as it could have had, what can we do to sustain those higher wages in the years to come so that we can in turn sustain higher public spending in the only way possible? The answer is competitive taxes, so that we do not eat into people’s take-home pay, we have sensible levels of public spending, and above all, we keep borrowing and debt under control.
If we followed the Labour party we would decimate that growth in wages because taxes would surge, eating into take-home pay. Investment would fall as businesses would be less confident if faced with a return to ’70s-era socialism. Above all, my biggest problem with what Labour Members offer with their increase in debt is that if they push up public spending as they promise, yes, public spending austerity will fade briefly, but it will return as we go from feast to famine, as we have done so many times before through boom and bust. What will happen to austerity? It will be forced on the next generation with higher debt. That is a gutless and cowardly approach to public finances. The right approach is sensible, prudent, conservative economics, based on markets and a sensible balance between low taxes and targeted public expenditure on priorities such as the NHS, and that is why I will be voting for the Budget tonight.
Mary Glindon (North Tyneside) (Lab)
I speak as co-chair of the cross-party drugs, alcohol and justice group, and as a member of the all-party group on alcohol harm. With dozens of alcohol-related deaths across the UK every day, those two groups decided that, rather than wait ages for the Government’s alcohol strategy, we would launch our own alcohol charter that advocates achievable steps to improve support for those in need, protect public health, and cut crime and disorder. It has the support of 30 relevant organisations, and I urge hon. Members to add their support by signing early-day motion 1682.
Despite the Chancellor’s claims of record funding for the NHS, I was disappointed that he failed to take the opportunity in the Budget to reduce alcohol harm. Instead, it seemed that he had been wooed by pre-Budget pleas for him to cut beer duty, such as the claims plastered on Westminster tube station that such a measure would protect our pubs. Cuts in duty do not benefit pubs because supermarkets continue to undercut pub prices, and big brewers retain the savings. We do not protect people or pubs by allowing supermarkets to sell alcohol more cheaply than water for vulnerable people to drink at home alone or on our streets.
Colin Shevills of Balance North East highlighted the fact that cheap alcohol places a huge burden on our communities, the NHS and our public services in our north-east. He also referred to the findings in a survey by north-east pub landlords, which found that cheap supermarket alcohol, rather than alcohol taxes, is the main reason to blame for the closure of our local pubs. It is particularly alarming that in the past five years cuts to alcohol duty have cost the Treasury about £4 billion. The Government estimate that the cost will rise to £8 billion during the next five years. That money could fund 34 million emergency ambulance call-outs or over half a million social care packages. Furthermore, figures show that, if the level of alcohol consumption remains unchallenged, it is set to cost the NHS £17 billion in the next five years.
From pub landlords to health organisations, there is strong agreement that we need a minimum unit price to help to combat the sale of cheap alcohol in shops and the impact that has on our communities. The Chancellor needs to listen to those groups and cross-party advice, and rethink his strategy on alcohol to support our great local pubs and to prioritise alcohol harm reduction.
Luke Graham (Ochil and South Perthshire) (Con)
I rise to support the Budget. I will start with two points on the criticism and rebuttals we have received from the SNP.
First, universal credit has received a lot of criticism. I think every single Member knows that there are improvements to be made to universal credit. That is what the Budget does. It allocates more money to universal credit. It puts the SNP at odds with the chief executive of the Joseph Rowntree Foundation and the Trussell Trust, who both recognise the improvements to universal credit, which will help to tackle poverty more effectively.
Secondly, on tax, where the SNP tax changes delivered £20 a year for the most vulnerable, a pathetic 38p a week, our Budget delivers £130 a year, which is £1,200 for the basic rate income taxpayer, helping people who need it most.
The SNP talks about having a different path and attracting more people to Scotland, but here is the interesting thing. They want to bring more people in. I will give them a hint about how to do that: do not tax our doctors, our teachers and our servicemen and servicewomen more than everywhere else in the United Kingdom.
What does the Budget deliver for Scotland and for Ochil and South Perthshire? It gives £950 million extra for the block grant, which is a real and cash increase. It delivers a spirits freeze, which helps companies in Menstrie, Madderty and Kinross in my constituency. It delivers £550 million more for the NHS, which even the SNP recognises is a positive thing and, if devolution works correctly, there will be £43 million more for business rate relief to help our high streets in Crieff and Alloa, £41 million to improve roads across Perth and Kinross and Clackmannanshire, and £87 million more for social care. Those are positive steps in the Budget, and that is before I even mention the £150 million of new money that is being allocated in the Tay cities deal. The Budget will also deliver a crackdown on tax avoidance, including VAT, and measures on the hidden economy and on offshore tax compliance.
Some of the smaller measures in the Budget have been lost. It expands the operations of the British Business Bank in Scotland by allocating personnel on the ground to help our businesses to access more patient capital. In addition, it allocates £1.6 billion to strengthen science innovation, with £235 million for quantum technologies and £20 million for fusion power, which is a subject very close to my heart.
We on the Government Benches want to empower people. We do not want to tie them to dependency. The Budget provides more support for the most vulnerable and more opportunity for all. That is why I support it in this House.
Danielle Rowley (Midlothian) (Lab)
A lot of Opposition Members have talked about how austerity is not over and about how the Government’s rhetoric on that is empty. I would say something different: how can the Government claim that austerity is over, is coming to an end or whatever it is they are saying, when they do not even know what it is? After the Prime Minister told us that austerity is over, I asked the Chancellor what his Department’s definition of austerity is and how his Department measures austerity. I was keen to ensure that she was referring not just to halting her Government’s devastating cuts to public services, but to their huge social security cuts, which must be ended and reversed if austerity is really to be ended. The reply from the Treasury simply stated:
“The Chancellor will set out the government’s plans for the economy and public finances in detail at Budget.”
But he did not explain what austerity is. Far from clarifying what it is, he did very little to back up the Government’s empty words on ending it. So if they cannot even define what they mean by austerity, let alone make any significant steps towards ending it, that is just further proof that the Budget is empty rhetoric.
However, let me tell the Government what austerity means to my constituents in Midlothian. For young workers, austerity from this Government and the Scottish Government is going to mean further decimation of their services. Yes, the Government recently made small increases to the national living wage, but it is not a real living wage. Pay for 16 and 17-year-olds is being raised from £4.20 to £4.35, yet they are still doing the same job as people who are older than them and getting paid much less for it.
If paid employment is to provide a reliable route out of poverty for women in my constituency, action must be taken to address the continued gender inequalities in the labour market. Nothing from the Chancellor in his Budget was aimed specifically at improving the position of women in the economy. We had the WASPI campaigners in here because they were completely overlooked. I am fed up of listening to the Scottish Conservatives today, who have gone on and on about their representations to the Treasury and their standing up for Scotland, when they have done absolutely nothing about split payments, which I have raised time and again. It is an absolute disgrace.
I will not be supporting a Budget that does nothing to tackle the urgent issues of climate change and homelessness, has nothing for the WASPI women, youth services or the decimated women’s services, and does nothing to tackle period poverty.
Eddie Hughes (Walsall North) (Con)
It is a pleasure to be called early in the debate, Mr Speaker—or at least a little earlier than I thought I might be called. The right hon. Member for Twickenham (Sir Vince Cable), who is no longer in his place, seemed to have a bit of a downer on optimism. As I feel powered by optimism, I felt affronted by that idea. In the west midlands, we voted for Brexit because we are completely optimistic about what the future will hold for us, and I completely endorse the Budget, because it puts us on a great footing to make the most of those opportunities when we leave the European Union.
One thing about Conservatives is that they invariably poll high in people’s consideration of who is best to run the economy, because we do it so well. That is not just because of the things we see in this Budget. If we look back to 2010 and compare it with 2019, we see that there will be a 93% increase in the tax-free allowance, which will have gone from £6,475 to £12,500—when you represent a constituency with an average income of £27,000, changes like that are significant. People are not continuing to vote Conservative because of what we do in a single Budget; they are continuing to do so because they see a trajectory and they see us making life better for them year on year.
Why I am optimistic about the future? Because this Budget allocates £1.6 billion to ensuring that this country stays at the cutting edge of technology and innovation. I went to see Professor Kai Bongs—clever guy, clever name—at the University of Birmingham. He is leading on quantum technology. His team are working on gravity sensors. This might seem a bit abstract, but gravity sensors will help us to see beneath the ground for construction projects. Invariably, people do not get price certainty with construction projects because they do not know completely what is in the ground. Imagine if this country developed technology that allowed for that certainty and then created products that were sold throughout the world. We did it with DNA—identified at the University of Leicester and now used in 120 countries for DNA profiling. We can do it again with other technologies because we believe in our country. We know we have the people to lead us into the future, and it is tiring and depressing to hear people on the Opposition Benches talk down this country, when I know that our future is bright.
Mr Pat McFadden (Wolverhampton South East) (Lab)
It is a pleasure to follow my parliamentary neighbour, the hon. Member for Walsall North (Eddie Hughes), though he will not be surprised to learn that I take a slightly different view of the Budget.
The backdrop to the Budget was a singular political claim made a month ago at the Conservative party conference that austerity was over. Every Government is responsible for the consequences of its policies, but with that claim the Prime Minister and her Government took particular responsibility for every closed library, every universal credit rent arrears, every service denied to people.
Let us look, then, at what the Budget really did. The Chancellor used an unexpected increase in tax revenues to fund the health service for the next few years—I welcome extra money for the health service, of course, although by historical standards the rate is unexceptional —but he did not end austerity in other services. Let us take schools, for example. In the first decade of this century, under a Labour Government, there was a 65% increase in funding per pupil. Since 2010, there has been a reduction of 8%. That is a difference between a Labour Government and a Tory Government. When the schools budget is cut, it is a cut in opportunity and in social mobility, there is a reduction in the potential of people to make the most of their talents and it reinforces inequality.
The same is true of crime. The greatest freedom people can have is to go about their daily business free from the fear of crime. In the west midlands, we have lost 2,000 officers. We have seen a 21% increase in violent crime, a 17% increase in crime involving offensive weapons and a 23% increase in sexual offences, and now we are faced, because of pension changes, with the prospect of losing another 450 police officers. This is an attack on people’s freedom, and it strikes the poorest in our society more than others. So the Budget does not present an end to austerity.
There is a particularly absurd nature to the claim: it is being made as we are about to commit an act of enormous economic self-harm. The country needs hope, but the tragedy of Brexit is that, having scapegoated Brussels, immigration and others, we are, in the act of leaving, making it much more difficult to give the country that hope and a plan for the whole country.
Julian Knight (Solihull) (Con)
It is a great pleasure to follow the right hon. Member for Wolverhampton South East (Mr McFadden).
I had the dubious pleasure of reporting on nearly 20 Budgets and countless pre-Budget reports in my time as a journalist. Gordon Brown used to stand at the Dispatch Box with his clunking fist and talk about golden rules, fiscal balance and investing for the long term, and the horror show was always in the Red Book. As a journalist, I knew that to see what was in the Budget I had to look in the Red Book.
For days now, journalists across the country have been poring over the Red Book looking for holes similar to those they have found in many other Budgets over the years, but they have failed to do so because the Chancellor has adopted what I would call—pardon the pun—retail policies to address some of the major issues that people in this country face. For example, in 2015 my constituency was the only place in the country with increased footfall in the town centre on the year before, but that was reversed in 2016-17. Our main shopping centre, the Touchwood shopping centre, is now having to invest in the night-time economy, and for the first time I am starting to see empty shops on the high street, so the change in business rates is hugely welcome.
Another of my local high streets, in Shirley—a long, 1960s, straight-line, very old-fashioned high street—is being redeveloped through the intermingling of community resource and people living and being brought into the local area. For example, we have extra care living and other such developments, as we look to a future that is designed not specifically around retail, but around how the high street interacts with our lives. The retail fund of £675 million is therefore hugely welcome.
The right hon. Member for Doncaster North (Edward Miliband) made a mainly good speech, which was perhaps too focused on social housing. We need to look at housing in the round. We have to increase the supply of housing in this country. For years, housing has been distended, which in many respects has damaged our economy. That will happen even more now that house prices are so high, because houses have become so unattainable. We therefore need to increase supply.
We have to admit that a deficit of 82% is still too high. It leaves us less able to face a global recession, but we made a decision in 2010 that we would basically try to follow a middle way. We get out of that through productivity—the other way would be inflation, which none of us wants. Productivity is the only way in the long term, and the Budget develops that.
Sarah Champion (Rotherham) (Lab)
Today is exactly two years after the Government promised to introduce a timetable to ratify the Istanbul convention. That important international convention aims to prevent domestic violence and, crucially, to underpin that with support services for victims. The Prime Minister has rightly prioritised tackling violence against women, but what does the Budget contain that shows a commitment to preventing violence against women and girls? Absolutely nothing. The stark evidence on the underfunding of victim services is harrowing. Rape Crisis, the largest national provider of specialist sexual violence services, has a waiting list of over 6,000 people. According to Women’s Aid, on a typical day, 94 women and 90 children are turned away from refuges due to a lack of space. A Council of Europe study shows that England provides only 67% of the recommended capacity for sexual assault referral centres, which are critical in offering services to victims.
When it comes to costing violence against women and girls, there are three areas of consideration: first, the lost economic output of women forced to miss work as a result of mental and physical injuries sustained during an attack; secondly, the cost to the Treasury of providing services that prevent and respond to violence against women and girls—for example, health, police, courts and specialist advocates; and thirdly, the physical and emotional cost to victims, which is a loss to both the individual and society.
Last month I asked the Treasury whether it had made an assessment of the cost of violence against women and girls. It never answered, but passed me to the Home Office, which said that its most recent estimate is nearly a decade old. That suggests that there is no sustained attempt to understand the economics of violence against women and girls.
However, there is more recent research by Professor Sylvia Walby. Taking her 2014 research and adjusting for inflation, the cost of violence against women and girls in this country stands at £23.7 billion per annum. From that we can extrapolate the cost per constituency of not preventing violence against women and girls. In my constituency, the cost is £32.7 million every year. In the Chancellor’s constituency, it is £39.1 million every year.
If the Chancellor looks carefully at the research, he will see that we can do more by investing in support services. Thereby we do the morally right thing, but also the economically right thing. Will the Government please put their money where their mouth is and ensure that all Departments prioritise this?
Lee Rowley (North East Derbyshire) (Con)
It is a pleasure to follow the hon. Member for Rotherham (Sarah Champion), who made a powerful speech.
I welcome many elements of the Budget: the relief for business rates; the reduction in tax on the personal side, and help for coalfield communities such as mine. Those sorts of changes and the economic environment that the Government have created in the past eight years have allowed us to become so attractive that even in a historically challenging part of my constituency like Barrow Hill, there is now the opportunity for Spanish train manufacturers to come and open factories that could create hundreds of jobs. I very much welcome what the Government have done in this and previous Budgets.
Today, we have talked a lot about the challenges in our fiscal policy and the problems in our budget. I would like to draw attention to several points made by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) and by my hon. Friend the Member for Gainsborough (Sir Edward Leigh), who is not in his place. The macroeconomic indicators are moving in the right direction. Our deficit is reducing and our debt is finally going down, but by the end of the period covered by the predications in the Red Book we will still be spending more than we take in as a country, and we will have done so for 20 years.
The challenge we face in western democracies such as ours is that we spend in the good times, we spend in the bad times and we spend in the in-between times. Whatever our views are about spending—I recognise that there are respectful and different views in all parts of the House about the levels of spending we need—we cannot continue to spend in the way we are without paying for it. We are writing cheques in this House without any responsibility for how we are going to cash them. We talked a moment ago about the morality of some of the decisions we have made here. I think the morality before us now is that of not continuing to load problems on to our children and our grandchildren.
The hon. Member for Birmingham, Northfield (Richard Burden) is no longer in his place, but he made a powerful speech about the yawning chasm between certain elements and communities in our country. In my view, there is a yawning chasm between what we are deciding to do here and now, and the money we are choosing to spend, and the people who will have to pick up the tab and pay for that in 20 or 30 years’ time. In the limited time I have left, I would like to draw attention to a number of countries that have decided to say, “Wherever we are and whatever Government we have, we should put in place fiscal rules that mean that should not happen.” Chile did it, the United States tried to do it—not very well, honestly—and Switzerland has done it through its debt break. We should consider fiscal changes that ensure we do not load a lot more debt on to our children and grandchildren in years to come.
Ms Marie Rimmer (St Helens South and Whiston) (Lab)
I am pleased to follow the hon. Member for North East Derbyshire (Lee Rowley).
This Budget is a missed opportunity. It does not even offer key services the respite they need from relentless cuts, let alone the investment they need to redress the damage done by eight years of austerity. We need to put the record straight: Labour paid off more debt than any previous Administration on record. Capitalism fuelled the global financial crisis; it was Gordon Brown who saved this country from recession. We were on our way through the recovery route, but this Government chose the austerity route to pay off the debt, with ordinary people paying the highest price. Is it paid off? No, and as it slips it grows for the next Budget. The Chancellor says that if there is a no-deal Brexit there will be a need for another Budget, and the blame will shift to the EU. What is the cost of Brexit to date? Centre for European Research analysis shows that it is already costing the public purse £500 million a week, and the economy is already 2.5% smaller than it would have been if we had chosen to remain.
The Budget is a wasted opportunity. The invaluable emergency and life-saving services such as the fire service and police have been stripped to the bone. By the end of this decade the Tories will have inflicted a 50% real-terms cut on the Merseyside fire and rescue service since 2010. As a result, we have gone from having 1,000 firefighters to having 620 across Merseyside—the fire service is stretched beyond limits. The Government need to stop and evaluate the magnitude and impact of the cuts today. They need to be halted; they are dangerous.
The National Audit Office says that Merseyside police numbers have been slashed by 31%. Merseyside has been the third worst hit force under this Government. We are seeing crimes spike and charges plummet around the country as our police struggle to keep up with the demand for their services and the justice system creaks. The chief constable for Merseyside has stated this week that the impact of the cuts will be “crippling”. The Government need to listen and act. The British justice system, acclaimed the world over, is creaking.
The Government are hacking away at our public services in a way that is without precedent: families suffering, wage stagnation, cuts to benefits, 40% of universal credit recipients in work. My constituency ranks high in income deprivation, mortality rates for 29 to 44-year-olds are growing in comparison with those of other age groups, and suicide rates are the highest in the country. We need a Government who care, who invest in people, and who are prepared to accept responsibility and meet needs first.
Ian Murray (Edinburgh South) (Lab)
I should like to speak about the Budget by referring to a number of tests. The first test is to ask what it will do for growth in this country. Even the Office for Budget Responsibility expects growth of only 1.6% by 2023, which would be the lowest medium-term growth rate since records began and a historically low growth rate for this country even since world war two.
The second test is to ask whether the Budget is a spending splurge, as the Government keep suggesting. Well, it certainly is not. As many of my hon. Friends have said, if we strip the extra NHS spending out of the Budget, we can see that all the other departmental budgets are either flat or going backwards in real terms. The Institute for Fiscal Studies has also said that if we strip out spending on the NHS, we see that the Budget does nothing to reverse any of the cuts that we have seen over the past eight years.
That leads us to the claim that austerity is dead. Is this indeed the end of austerity? It is not. It is the start of the Government saying that it is the end of austerity. This is the same Government who said in 2010 that the deficit would be removed by 2015, so we can believe the Prime Minister saying that. However, the Prime Minister saying that this is the end of austerity means that she is admitting that austerity existed. As my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) said, every cut that we see across the country now lies at the door of this Prime Minister and No. 10.
Let us look at the priorities being given to tax changes. The Government could easily have brought forward the personal allowance extension for the lower paid and left the upper end as it was, but they have chosen to spend the majority of that personal allowance extension on the very richest in society. That was the wrong thing to do at a time when the deficit looks as though it will never be eradicated under the Government’s long-term plan. Let us also look at the corporation tax cuts. The Government could have said that they would not take forward the 2p corporation tax cut that they announced in the 2017 Budget, because they already have the lowest corporation tax in the G7 and do not need to take that money. It could have been put towards truly ending austerity.
Let me finish with the biggest lie in Budget history. There is no Brexit deal dividend in this Budget. That was a lie by the Chancellor. Even Standard & Poor’s has said that if there is a no-deal Brexit, unemployment will double, every household will be £3,000 a year worse off, inflation will peak at 5% and the recession will be as long as the one that followed the financial crisis. That is not a Brexit deal dividend. That is the Government’s dereliction of duty towards the economy of this country.
Several hon. Members rose—
Mr Speaker
Order. If colleagues wish to help each other, it is not obligatory for them to speak for the full three minutes. I know that they all believe in equality.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
The Chancellor spoke—I hope that this was a throwaway phrase—about “little extras”. For me, the Budget is about the little extras that he could have introduced but chose not to. For instance, when announcing the increase to the national living wage, he could have chosen to extend it to the 1.9 million under-25s who are unable to claim it. That would have put more money in their pockets that could be spent on the high street to help the ailing shops that are struggling under this Conservative Government.
The Government could also have chosen to give a little extra help to local authorities, such as my own in Stoke-on-Trent. We have lost on average £653 per person over the past eight years. Compare that with the figure for Cheshire East Council, which is just £120. There is a massive disparity between rural counties and the cities, which need more help. The Government could also have chosen to address the chronic underfunding of our further education system. The deputy principal of Stoke-on-Trent College was outraged at the fact that the Chancellor did not even mention higher or further education in his speech. The funding cap of £4,000 means that the services provided for many of the pupils in my constituency simply cannot continue.
Those little extras pale in comparison with what I think is the most rancid part of this Budget, however. As my hon. Friend the Member for Edinburgh South (Ian Murray) pointed out, if the Government had wanted to, they could have decoupled the increase in the personal tax allowance from the threshold for the personal allowance for higher earners. Instead, we have had a piece of parliamentary sleight of hand. This is economic blackmail, and it is downright wrong. It is absolutely wrong that my constituents will benefit by about £10 a month—frankly, that will get wiped out in the next round of council tax increases that will be needed to fill the budgetary black holes left by this Government—while we in this House will vote ourselves a tax cut of about £500 this evening, and people earning more than £90,000 will find themselves almost £1,000 a year better off. That is not economic literacy; it is economic devastation for this country.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
The Chancellor said on Monday that this was
“an economy working for everyone.”—[Official Report, 29 October 2018; Vol. 648, c. 654.]
But the facts tell a different story. Families up and down the country—families who have been at the sharp end of cuts to our public services—know the cold, hard truth of the past eight years of Conservative rule. The richest 10% are set to gain 14 times more in cash terms next year than the poorest 10% of our households. Growth is set to be below 2% in every forecast year—that is almost unheard of—and the figures for the UK are now 60% below the G20 average. UK manufacturing has fallen to its lowest level since 2016 and is well below the pre-Brexit forecast.
What about children and young people? Some wards in my constituency now have 40% of children growing up in poverty. This year, 3.1 million children with working parents will be below the official breadline, and much of the 1 million increase since 2010 is due to the Government’s benefits policy changes. The cuts’ impact on children was brought home to me when over 100 teachers from Hounslow visited Parliament a few weeks ago. When they were asked what issues were having an impact on attainment in their schools, two thirds said mental health, over half said food poverty, and many referred to difficulties at home. That shows the stark reality of families under strain, and children are now feeling that strain due to not having a decent place to live, the resources with which to study, food to eat, or time with parents who work shifts day and night to make ends meet.
The value of child benefit has fallen by 17% since 2009 while the value of the state pension has risen by 54%. Some estimates suggest that up to 1,000 Sure Start centres may have been shut since 2010, with bigger cuts in disadvantaged areas. The hit goes further than schools and is affecting young adults. Last year, around 2.2 million learners aged 19 or over participated in some form of Government-funded further education, which is a decrease of 29% since 2011. Children and young people are now being hit hardest by the Government’s choices. The test of an economic policy is about both who wins and who loses and, as the Government win plaudits from the wealthiest, it is our job to speak for the those who cannot speak for themselves and to call for a fairer future for the next generation.
Ged Killen (Rutherglen and Hamilton West) (Lab/Co-op)
When the Prime Minister addressed the Conservative party conference, she said that austerity was over. On Monday, the Chancellor said that the
“the era of austerity is…coming to an end.”—[Official Report, 29 October 2018; Vol. 648, c. 653.]
We can argue about the semantics, but the reality was captured by something the Prime Minister said some time ago: “Nothing has changed.”
We have also seen little to undo the cuts that have stripped away local services in our communities. Having been a councillor during some of the worst years of this Government’s austerity, I can tell the Chancellor that there is no more fat to trim in local government and no more “efficiencies” to be found. This Budget does little to reverse almost a decade of underinvestment that has brought councils to the brink, including Tory-run Northamptonshire County Council, which has been pushed into bankruptcy.
This is a broken-promises Budget, with its most reassuring moment being the WASPI protest in the Gallery. Those women should not have to protest in Parliament; the Government should be listening to them. I have been working closely with 1950s-born women in my constituency over the past few months, and I have heard some heart-breaking accounts, including stories of women who have died while waiting to receive their state pension. However, I have also seen steely determination and their unwavering commitment to continue fighting for what is rightfully theirs. The issue is not going away and these women are not going away, and the Government had better listen sooner rather than later.
Of course, many WASPI women will have to turn to universal credit while they wait for their state pension. The Chancellor completely lacks contact with reality on that issue, as does the hon. Member for Ochil and South Perthshire (Luke Graham). He pointed out that more money has gone in, but there is not enough money. What do the Chancellor and the hon. Gentleman expect me say to my constituents on universal credit who come to my surgeries, struggling to get by? Do I tell them that is all right, and that more money is going into universal credit and austerity is coming to an end?
We heard the chorus of Tory MPs chanting along with the Prime Minister at yesterday’s PMQs as she rhymed off things that have gone up under her Government, but I noticed a few things missing from the list: child poverty up; food bank use up; and homelessness up. This Budget does absolutely nothing for my constituents and I cannot possibly support it.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
The Chancellor had the opportunity to strengthen the economy, invest in jobs and guide us towards a brighter future. What did we get? A wasted opportunity, a timid response and an overwhelming feeling of, “Really? Is that all?” This is a broken-promise Budget that prolongs austerity.
We have seen wages continuing to stagnate for most workers and falling for the lowest-paid workers. Let us not forget those long years of the public sector pay freeze, when nurses, police officers, firefighters, teachers and the rest of our public service heroes were treated so contemptuously by Ministers. For all the Chancellor’s boasting about the number of jobs in the economy, the reality is that there is an explosion in low-paid jobs, insecure jobs, part-time jobs and jobs with zero-hours contracts. That is what people in Slough tell me every week.
Behind the economic figures lies the human cost. The price of austerity is not paid by Ministers; it is paid by the poorest and most vulnerable members of our society. Look at the growth of food banks, which provide emergency food aid to people in desperate need. In my constituency, volunteers provide food for people in Wexham, Cippenham, Langley and central Slough. They are supported by the generosity of people across the constituency, including through supermarkets, schools and faith-based institutions. I applaud that spirit of altruism and humanity, but why should anybody in modern Britain need emergency food aid?
In Slough we have a Labour council, which has managed its budgets well. It seeks to provide excellent services and to protect those most in need. Our Labour councillors in Slough do an excellent job, and they are dedicated public servants, but they are not magicians. They cannot magic up money from the magic money tree when the Chancellor and the Government have made it vanish.
Back in December 2010, the BBC reported that Slough Borough Council would be the hardest hit of all the neighbouring—predominantly Tory—councils in Berkshire. Since then we have seen increasing pressure on budgets, particularly in social care, and an increase in child poverty. According to the charity End Child Poverty, there are more than 11,000 children in poverty in Slough—one in three local children—and that child poverty is rising.
Slough councillors tell me that, by March 2019, the number of people in temporary accommodation will be 70% higher than in April 2018. We have seen a 300% increase in people living in temporary accommodation since 2014. The good people of Slough would be forgiven for thinking that the Chancellor is all smoke—
Alison McGovern (Wirral South) (Lab)
I rise primarily to raise on behalf of my constituents a glaring injustice: the lack of funds for rebuilding New Ferry. Members will remember the horrific explosion in my town in March 2017. To date, the Government have not committed anything like the funds they have handed over to Salisbury, or anything like the funds they have handed over to Belfast for the destroyed Primark. The people of New Ferry are bitterly angry, and their voice must be heard by Ministers on the Treasury Bench.
I listened to what Conservative Members said about tax cuts, and I recognise what is happening. This is just what the American Republicans do. They want big tax cuts for the wealthy, so they choose some so-called middle class profession and, as part of their package of big tax cuts for the wealthy, put in a nugatory amount for those who seem to be in the middle. They persuade the nation that we should have tax cuts on that basis, and they hide what they are doing—handing back huge amounts to the already wealthy—by dressing it up as money for the middle class.
In this Budget we are talking about pennies a week for people on average incomes, and when that is seen alongside the impact of universal credit, everything gets worse for people in the middle. It is not good enough to say that we cannot do better on universal credit when we are giving away £2.8 billion in one year, 84% of which goes to the top half of the distribution, with 34% of that going to the top 10%. That is a regressive measure, and if we believe in progressive politics, we should stand against it and say that what we need is a truly progressive tax system and proper funding for our public services.
Several hon. Members rose—
Mr Speaker
Order. The shadow Chief Secretary will be called no later than 4.40 pm, so the two remainers—the remaining speakers—must divide the time between themselves. [Interruption.] I do not know whether they are remainers or leavers.
Mrs Madeleine Moon (Bridgend) (Lab)
Austerity is not over for those who are terminally ill. Those with pancreatic cancer, three out of four of whom will die within a year, and those with motor neurone disease, one third of whom will die within a year and half of whom will die within two years, cannot access terminal illness benefits under the current regulations until a doctor decides that they have six months or less to live—that is nonsense. Universal credit, employment and support allowance, and personal independence payments are a nightmare to negotiate for people who have a short time left to live. My ten-minute rule Bill will address this anomaly. It was supported by the Conservative party in Scotland and it will come before this House on 23 November. I hope we will finally make sure that those who are terminally ill have a chance of justice and of dignity as they head towards death. I hope we will ensure that they have a chance to put in place the things that will allow them to stay and live at home with their family, so that they have a chance of dignity in dying, which this Government seem determined to prevent them from having. I recognise that others want to get in at this late stage, so I will stop at this point.
Several hon. Members rose—
Stephen Lloyd (Eastbourne) (LD)
Thank you very much, Mr Speaker. In the short time allocated, I will focus on the universal credit side of the Budget. In 2015, George Osborne made a dreadful mistake, cutting out from universal credit £3 billion per annum from the work allowance. Since my re-election in 2017, I, like my Lib Dem colleagues, have constantly been advocating a restoration of that work allowance element, so that work really does pay—it would not do so without that. For a year and a half, the Conservative party has been constantly pushing back to say, “Work does pay. We do not need to restore the work allowance.” I am glad that finally, on Monday, the Chancellor listened to us and restored £1.7 billion, albeit not all the work allowance that George Osborne had cut.
A number of Opposition Members have discussed this, but I say to the Conservatives that rather than give a substantial tax cut for those at the top end of salaries, people like us and many others, why not put that £1.3 billion, which is the equivalent in respect of the people earning over £50,000, £60,000, £70,000 and 80,000 a year, back into the rest of the work allowance so that it restores what George Osborne catastrophically cut all those years ago? That would mean, first, that work would pay properly within UC, which the Lib Dems agree with—even Labour did years ago, when I was in coalition. Most importantly, it would mean that people earning under £15,000 a year, who were shockingly ignored by this Government in the Budget on Monday, would get some of the tax cut that would be part of the larger work allowance. I believe this House would support that. If the Government do not do that, the Lib Dems would certainly be voting against them on this. So I say to the Chancellor and to the Conservative party: fully restore the work allowance to what it originally was by not giving the extra £600 or £700 a year to the highest paid in this country. That is the right thing to do and I urge the Chancellor to listen.
Peter Dowd (Bootle) (Lab)
I am glad to see the Chief Secretary to the Treasury in her seat today, as she could not get one on Monday. I wish to comment on what a number of Members have said. The right hon. and learned Member for Rushcliffe (Mr Clarke) asked, in a rather perplexed way, why the Government were spending all the headroom. The answer is: because they are up the creek. My hon. Friend the Member for Dulwich and West Norwood (Helen Hayes) talked about the problems her local authority has because of the Government’s austerity plans. My hon. Friend the Member for Sheffield South East (Mr Betts) spoke similarly, as did many other Members.
The hon. Member for Dover (Charlie Elphicke) said young people need to be better off; well, that is why young people are voting Labour. Rather bizarrely, the hon. Member for Aldershot (Leo Docherty) talked about sausages and Marxism; I hope his sausages are more sizzling than his speech was.
My hon. Friend the Member for Barnsley Central (Dan Jarvis) made the case for devolution. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) talked about how women have been most affected by austerity. [Interruption.] Conservative Members may want to laugh at that sort of thing, but we take that very seriously. My hon. Friend the Member for Rotherham (Sarah Champion) made a similar case. The theme was there throughout the debate: austerity has not ended and will not end under a Tory Government.
When I entered Parliament, I believed that a primary role of this House was to hold the Government to account. I looked at the parliamentary website to check out my assumption, and found that it says:
“Parliament works on our behalf to try to make sure that Government decisions are…open and transparent”—
that is a foreign land for this Government—
“by questioning ministers and requesting information”
and
“workable and efficient”—
not a concept routinely associated with this Government—
“by examining new proposals closely and suggesting improvements”.
However, the Government have systematically treated the House in the most contemptible way. All Members should be worried. First, the Government stitched up Committees with a Tory majority, even though they are a clapped-out minority Government who are not fit to govern. Secondly, they have obstructed substantive scrutiny of three Finance Bills in a row by not permitting any amendments to the law, which is unprecedented. Thirdly, behind closed doors they agreed a billion-pound deal with another minority party, without proper parliamentary scrutiny or the signatories to the deal being held to account by this place. Fourthly, without precedent they did not provide my right hon. Friend the Leader of the Opposition with the traditional advance copy of the Budget statement. That is wrong. Fifthly, the Chancellor did not even have the courtesy to attend the House when my right hon. Friend the shadow Chancellor opened the debate on Tuesday afternoon. That is simply disrespectful, not to the individuals but to the protocols of the House.
The power grab by Ministers continues in the Budget resolutions—for example, in resolution 79, which is worryingly designed to give Ministers the ability to amend key tax legislation ahead of Brexit without parliamentary oversight. That is unprecedented and wrong and we will vote against it. We will continue to raise this egregious contempt for Parliament through any means we possibly can.
As for the Budget itself, the Prime Minister offered an end to austerity, but the promise has turned out to be as hollow as a Halloween pumpkin. The Chancellor claimed it would be a Budget for
“the strivers, the grafters and the carers”—[Official Report, 29 October 2018; Vol. 648, c. 653.]
but the spectre of austerity continues to haunt the country, and will do for many years to come.
Peter Dowd
No, I will not.
There is nothing in the Budget for teachers, police officers and local government workers. There is not a penny for most frontline services, while local council funding is being cut by £1.3 billion next year alone. The Government have broken all their economic targets. They keep setting their own work, but they are marked an F grade every single time. Economic growth has been sluggish and is set to stay below 1.6% for the next five years. Productivity remains 15% lower than in other developed economies and the Government are doing nothing about it. Regional economic disparity is vast. Public sector investment is more than £18 billion lower than in 2010—[Interruption.] The hon. Member for Aldershot talked about Marxism and brutal regimes. This is a man who has been to Saudi Arabia many times. That is the sort of brutal regime that he should be worrying about. It is an absolute disgrace.
Public sector investment is more than £18 billion lower than it was in 2010. That is not talking down the economy; that is talking up the truth. If austerity is over, why then is the Chancellor pressing ahead with a further £7 billion of social security cuts? The Health Foundation says that the money for the NHS is not enough. There is, of course, no mention of the £12 billion of outstanding loans and deficits that the NHS has had to use to get by.
On social care, the £650 million announced is less than half what the King’s Fund estimates is needed. Our children’s services are in meltdown. The additional money announced for universal credit is only half what was cut in 2015, and the list goes on and on. There is, of course, no shortage of gimmicks in the Budget. The introduction of a digital services tax is, I am told, already sending the tech companies into a frenzy. My right hon. Friend the Member for Barking (Dame Margaret Hodge) says that it is media management.
In the labour market, one in nine workers across the country is in insecure work. Many are relying on credit cards to survive. As my hon. Friend the Member for Bradford South (Judith Cummins) reminded us earlier this week, since 2008 only one in 40 net jobs created has been full time. There was no mention of that particular fly in the ointment by the Chancellor. Eight years of austerity have ripped through our society and our communities, driving in-work poverty and inequality, and further entrenching the economic crisis caused by greed and avarice. Therefore, in that context, we will not stand in the way of more income for low and middle earners; they deserve some respite from the Government. That is unlike the Liberal Democrats, who evidently will be voting against their own flagship tax policy set out in their manifesto.
The Opposition’s amendment to resolution 1 sets out our progressive taxation policy, which we laid out in our manifesto in 2017, of increasing taxes for the top 5% to help pay for improvements in public services, which we all need and which many people across the country need. This amendment highlights our tax reforms, which would shift the emphasis on to the wealthy few, while guaranteeing no further increases of tax on anyone earning less than £80,000. Labour will challenge the Government every step of the way to introduce a more progressive taxation system despite their rigging of Parliament. This is yet another broken-promise Budget that does nothing to end the slowest recovery since the great depression.
Austerity has damaged our economy, weakened our recovery and divided our society. It has made poor people poorer, made them angry, made them fearful, and made them distrustful of the politicians on the Government Benches who they feel do not stand up for them against powerful lobbies. Austerity has made the richest richer; that cannot be right and that cannot be just. It is not in the national interest. Government Members have made a point of claiming that they are not ideological, that they are pragmatists. Let them prove their pragmatism and their open-mindedness. If they are so confident of their policies, so sure of their convictions, then quite simply let them support our amendment. What do they have to fear?
The Chief Secretary to the Treasury (Elizabeth Truss)
I am delighted to be here to close the Budget debate. We have had a very good debate over the past few days. To be honest, though, I am just extremely grateful to be able to get a seat on the Front Bench, because, let us be honest, that has not been guaranteed over the past week.
Elizabeth Truss
I am afraid that I only have 10 minutes. The hon. Member for Bootle (Peter Dowd) did not give way, so I am not going to be able to either.
This is a Budget that will help working families and that will grow our economy, and I am pleased to say that it has been welcomed from all quarters—from the cider drinkers of Somerset, to the whisky drinkers of Scotland and Britain’s motorists, who will see better roads and a continued freeze on fuel duty, which was mentioned by my hon. Friend the Member for Saffron Walden (Mrs Badenoch).
Families have had their taxes cut and their wages hiked, and the FSB says that we are firmly on the side of Britain’s small businesses. The Resolution Foundation has welcomed our changes to universal credit, and even the shadow Chancellor has welcomed our tax cuts, saying that our measure
“will put more money in people’s pockets”
and inject more demand into the economy. It is just a shame that his party does not agree. I can almost hear Momentum sharpening their pitchforks. But I want him to know that all is not lost because, shadow Chancellor, you have friends on this side of the House. You might have to sit on the Home Secretary’s knee, but there is space for you on our Front Bench.
It is not an accident that we have seen an additional £100 billion coming into the public purse in this Budget. Contrary to what the right hon. Member for Twickenham (Sir Vince Cable) suggests, this is not a fluke or luck. It is because of the decisions that this Government have taken since 2010: reforming the welfare system, cutting taxes for people, and cutting corporation tax to bring more investment into our economy and get more business start-ups going. What happened on the Opposition Benches? Well, Labour Members opposed all those measures, tooth and nail. They opposed our welfare reforms that got more people into work; they opposed our corporation tax cuts that brought more tax into the public coffers; and they opposed our measures to improve skills and education that have meant that our children are doing better.
Instead of Labour Members realising the error of their ways, they have come up with even more extreme policies. They want to create a socialist superstate controlled by the politicians at the top of the Labour party. Their eye-watering spending pledges would mean £1,000 billion more in tax and borrowing, job-killing tax hikes on hard-working families, and the relentless talking down of everything that is good about our country. If we listened to Labour, there would be fewer jobs, lower wages and less money to spend on public services, so we refuse to listen to this catalogue of envy and despair.
Instead, we have delivered a positive, aspirational Budget, giving people more control over their own money. We have put £630 a year for families into universal credit. We are cutting taxes for those on the basic rate by £130 this year, making people £1,200 better off. And we are raising the higher rate threshold so that people do not start paying higher rate tax until they earn £50,000. This is not about giving tax cuts to millionaires; these are people on medium incomes who were dragged into the top rate of tax under the Labour Government.
At the same time, our strong economy means that we can fund the services on which everyone relies, which is why this Budget has included extra money for defence, schools, the health system and local authorities, and we are going to spend this money in a way that delivers results. The hon. Member for Bootle talked about children’s services. Not only are we giving councils an extra £650 million to pay for adult and children’s social care; we are also rolling out programmes such as “No Wrong Door” in North Yorkshire. That programme has meant fewer children in care, fewer ending up in trouble with the police and fewer ending up in accident and emergency. It is a great example of how, by spending money in the right way, we can cut long-terms costs for the taxpayer and, more importantly, ensure that our children get the best possible start in life.
I also want to applaud the hon. Member for Rotherham (Sarah Champion) for what she said in this debate. I applaud her for her bravery in standing up against those gangs targeting young women in her area. I am very happy to discuss in the spending review the issue that she raised.
As well as addressing the immediate issues we face, this Budget backs entrepreneurs to take risks, make investments and grow their operations. We have slashed business rates by a third, which has been welcomed by my hon. Friends the Members for St Ives (Derek Thomas), for Aldershot (Leo Docherty) and for Solihull (Julian Knight). We have cut corporation tax to the lowest level in the G20. We have increased capital allowances from £200,000 to £1 million. What all that means is that companies want to grow, want to invest in Britain and want to take more people on. It means more jobs for people across this country. It means higher wages. We are now seeing real wages rise for the three quarters of people who are employed in the private sector. It also means that we are able to afford money for our public services. We are launching 10 new development corporations across the country, so we will not just have Canary Wharf—we will have Canary Wharf in the north and all other parts of the country. We are creating a special economic zone in Teesside, with new freedoms to grow.
But this is not just about cold, hard cash; it is about realising people’s aspirations, dreams and hopes for the future. It is about being able to afford a holiday or a car, and it is about more opportunities for young people emerging from our schools and our colleges.
Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)
This is a good Budget and I will, without any question, support it enthusiastically tonight. However, there is the issue of the starting date for the reduction to £2 for fixed odds betting terminals. This is clearly not something we can deal with this evening, but I wonder whether my right hon. Friend would give an undertaking that we will certainly return to it in time for the Finance Bill.
Elizabeth Truss
I thank my right hon. Friend for his point. We have brought the date forward for FOBTs by six months. I do not believe that it is an issue for the Finance Bill, but I am certainly happy to discuss with him what more we can do.
Whereas we are making sure that young people emerging from our schools and colleges have opportunities, and that people are able to fulfil their dreams and aspirations, Labour Members would kill those dreams.
Elizabeth Truss
They are driven by pessimism, by envy and by spite. The reality is that they would rather see people kept in their place than succeeding.
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. The hon. Lady knows as well as I do that you cannot stay on your feet if the Minister is not going to give way. [Interruption.] You do know that. Oh come on now, you could not have done that six months ago.
Elizabeth Truss
I have only two minutes left, Mr Deputy Speaker, and I am afraid I cannot give way. Labour’s tax hikes would cost jobs and its war on enterprise would crush the very people who make this country great.
The past eight years have been tough, but Monday’s Budget marked a new era. It is about more jobs than ever before. It is about businesses succeeding. It is about wages going up. It is about people keeping more of what they earn. It is about people feeling better off in their everyday lives. This is a Budget for a confident, optimistic British future that puts more money in people’s pockets, frees enterprise to invest, and paves the way for a high- growth, high-aspiration post-Brexit Britain. I commend this Budget to the House.
Question put, That the amendment be made.
Mr Deputy Speaker (Sir Lindsay Hoyle)
I am now required under Standing Order No. 51(3) to put successively, without further debate, the Questions on each of the Ways and Means motions numbered 2 to 80, on the motion on Finance (Money), and on the motion on which the Bill is to be brought in. These motions are set out in a separate paper distributed with today’s Order Paper. I must inform the House that, for the purposes of Standing Order No. 83U, and on the basis of material put before him, the Speaker has certified that in his opinion the following motion relates exclusively to England, Wales and Northern Ireland and is within devolved legislative competence: motion 3, on Income Tax (main rates). Should the House divide on this motion it will be subject to double majority voting.
The Deputy Speaker put forthwith the Questions necessary to dispose of the motions made in the name of the Chancellor of the Exchequer (Standing Order No. 51(3)).
2. CORPORATION TAX (charge for financial year 2020)
Resolved,
That (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 charging corporation tax for the financial year 2020.
3. Income tax (MAIN RATES)
Resolved,
That for the tax year 2019-20 the main rates of income tax are as follows—
(a) the basic rate is 20%,
(b) the higher rate is 40%;
(c) the additional rate is 45%.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
4. Income tax (Default and savings rateS)
Resolved,
That—
(1) For the tax year 2019-20 the default rates of income tax are as follows—
(a) the default basic rate is 20%;
(b) the default higher rate is 40%;
(c) the default additional rate is 45%.
(2) For the tax year 2019-20 the savings rates of income tax are as follows—
(a) the savings basic rate is 20%;
(b) the savings higher rate is 40%;
(c) the savings additional rate is 45%.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
5. Basic rate limit and personal allowance for tax year 2019-20
Question put,
That—
(1) For the tax year 2019-20, the amount specified in section 10(5) of the Income Tax Act 2007 (basic rate limit) is “£37,500”.
(2) For the tax year 2019-20, the amount specified in section 35(1) of the Income Tax Act 2007 (personal allowance) is “£12,500”.
(3) Accordingly, for the tax year 2019-20—
(a) section 21 of the Income Tax Act 2007 (indexation of basic rate limit and starting rate limit for savings) does not apply in relation to the basic rate limit, and
(b) section 57 of the Income Tax Act 2007 (indexation of allowances) does not apply in relation to the amount specified in section 35(1) of that Act.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
Description of wine or made-wine | Rates of duty per hectolitre £ |
|---|---|
Wine or made-wine of a strength not exceeding 4% | 91.68 |
Wine or made-wine of a strength exceeding 4% but not exceeding 5.5% | 126.08 |
Wine or made-wine of a strength exceeding 5.5% but not exceeding 15% and not being sparkling | 297.57 |
Sparkling wine or sparkling made-wine of a strength exceeding 5.5% but less than 8.5% | 288.10 |
Sparkling wine or sparkling made-wine of a strength of at least 8.5% but not exceeding 15% | 381.15 |
Wine or made-wine of a strength exceeding 15% but not exceeding 22% | 396.72” |
1. Cigarettes | An amount equal to the higher of— (a) 16.5% of the retail price plus £228.29 per thousand cigarettes, or (b) £293.95 per thousand cigarettes. |
2. Cigars | £284.76 per kilogram |
3. Hand-rolling tobacco | £234.65 per kilogram |
4. Other smoking tobacco and chewing tobacco | £125.20 per kilogram” |
Band | Daily rate | Weekly rate | Monthly rate | Half-yearly rate | Yearly rate |
|---|---|---|---|---|---|
A | £1.53 | £3.83 | £7.65 | £45.90 | £76.50 |
B | £1.89 | £4.73 | £9.45 | £56.70 | £94.50 |
C | £4.32 | £10.80 | £21.60 | £129.60 | £216.00 |
D | £6.30 | £15.75 | £31.50 | £189.00 | £315.00 |
E | £9.00 | £28.80 | £57.60 | £345.60 | £576.00 |
F | £9.00 | £36.45 | £72.90 | £437.40 | £729.00 |
G | £9.00 | £45.00 | £90.00 | £540.00 | £900.00 |
B(T) | £2.43 | £6.08 | £12.15 | £72.90 | £121.50 |
C(T) | £5.58 | £13.95 | £27.90 | £167.40 | £279.00 |
D(T) | £8.10 | £20.25 | £40.50 | £243.00 | £405.00 |
E(T) | £9.00 | £37.35 | £74.70 | £448.20 | £747.00 |
Band | Daily rate | Weekly rate | Monthly rate | Half-yearly rate | Yearly rate |
|---|---|---|---|---|---|
A | £2.04 | £5.10 | £10.20 | £61.20 | £102.00 |
B | £2.52 | £6.30 | £12.60 | £75.60 | £126.00 |
C | £5.76 | £14.40 | £28.80 | £172.80 | £288.00 |
D | £8.40 | £21.00 | £42.00 | £252.00 | £420.00 |
E | £10.00 | £38.40 | £76.80 | £460.80 | £768.00 |
F | £10.00 | £48.60 | £97.20 | £583.20 | £972.00 |
G | £10.00 | £60.00 | £120.00 | £720.00 | £1,200.00 |
B(T) | £3.24 | £8.10 | £16.20 | £97.20 | £162.00 |
C(T) | £7.44 | £18.60 | £37.20 | £223.20 | £372.00 |
D(T) | £10.00 | £27.00 | £54.00 | £324.00 | £540.00 |
E(T) | £10.00 | £49.80 | £99.60 | £597.60 | £996.00” |
Carolyn Harris (Swansea East) (Lab)
On a point of order, Mr Deputy Speaker. There are sad reports that the Minister for Sport, the hon. Member for Chatham and Aylesford (Tracey Crouch), has resigned as a direct result of the Chancellor of the Exchequer’s Budget. Will someone on the Treasury Bench confirm whether that is true? If it is, I want to put on record my support for the Minister’s work and to thank her for the job she has done. Will the Chancellor confirm to the House whether this is the first time that a member of the Government has resigned during the votes on a Budget as a direct result of a Chancellor’s policies?
Mr Deputy Speaker (Sir Lindsay Hoyle)
As the hon. Lady is well aware, that is not a point of order for the Chair, but it is now on the record for all to know.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
On a point of order, Mr Deputy Speaker. On Tuesday, the Home Office told the Home Affairs Committee that there would be additional checks by employers on EU citizens in the event a no-deal Brexit. However, the Home Secretary appears to have told the media yesterday that there would not be any such checks and that there would be a transition. Today it appears that No. 10 has told the media both that there will be no checks, and also that free movement is starting straight away, and that planning is continuing so nothing is certain. Have you heard anything from the Home Office about whether a Minister will come to the House to clarify this chaotic mess? With five months to go, will you use your offices to ensure that somebody either from the Home Office or from No. 10 tells us what on earth is going on?
Mr Deputy Speaker
There are a couple of things to say. First, that matter is now on the record, ensuring that everyone is aware of it. Secondly, the power lies with the Chair of the Home Affairs Committee to invite Ministers, the Home Secretary or whoever back before the Committee to make a clarification. People will have noted what is being said, and I am sure that we will get an explanation before long.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Further to that point of order, Mr Deputy Speaker. This is not the first time that the Home Affairs Committee has received misleading, contradictory evidence from Home Office Ministers. It is deeply unacceptable that information is not being clarified by a statement to the House or in a letter to the Committee, but appearing in mysterious email communications with outside organisations and to the media. What can we do to get a Minister here to explain what on earth is going on at the Home Office?
Mr Deputy Speaker
There are obviously many alternative options and avenues to go down, such as an urgent question on Monday. I know that the Chair of the Home Affairs Committee will not leave the matter at that, and I think that different approaches will be being used by Monday.
Robert Courts (Witney) (Con)
On a point of order, Mr Deputy-Speaker. The hon. Member for Bootle (Peter Dowd) complained of not having advance sight of the Budget. If my understanding is correct, that is only the convention for the spring statement, not for the Budget. Can you confirm that advance sight has only happened once in 20 years of Budgets, 13 of which were covered by Labour Budgets?
Mr Deputy Speaker
The Government decided not to provide an advance copy, so that was a Government decision. What people will believe is the norm, they will believe, but others will say that it is not the norm. For clarification, somebody said on Facebook that the Opposition did not receive a copy but I did, and unfortunately for the person who said that, I am the Chairman of Ways and Means, and the Budget has been delivered to the person in that position for over 100 years. It was not delivered me to personally, but to the office that I hold.
Lyn Brown (West Ham) (Lab)
Mr Deputy Speaker, you have given me some information that I did not know before.
Finance (No. 3) Bill
Monday 12th November 2018
(6 years ago)
Commons ChamberRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts
22:25 - The House divided: - Ayes: 279 / Noes: 302 - Question accordingly negatived.
22:42 - The House divided: - Ayes: 304 / Noes: 279 - Question accordingly agreed to.
Mr Speaker
I inform the House that I have certified clause 3 of the Bill as relating exclusively to England, Wales and Northern Ireland on matters within devolved legislative competence.
I inform the House, moreover, that I have selected the amendment in the name of the official Opposition.
The Financial Secretary to the Treasury (Mel Stride)
I beg to move, That the Bill be now read a Second time.
When our party first came to office after the great crash, after the years of borrow and spend, our country was close to the abyss. We inherited then the greatest deficit in our peacetime history, a deficit of a magnitude that posed a real and present danger to every one of us, to every man, woman and child in our country and, indeed, to generations yet to come.
This was a deficit greater even than that created by another profligate Labour Government decades before that party reduced our country to scampering cap in hand to the International Monetary Fund for a bail-out, because they had brought us to the point of bankruptcy. It is the Conservative party that has once again—just as we did then—brought our country back from the brink and into better times.
Mel Stride
I will make a little progress.
What does this history teach us? Is it that that Marxism provides the answers, as the Labour leadership would have us believe; that fomenting the overthrow of capitalism, as the shadow Chancellor put it, can lead to prosperity; or that high taxation, nationalisation, the blatant sequestration of private capital and borrowing on a scale hitherto unimagined might provide us with the answers or some easy way out? No, the lesson is rather more prosaic but, none the less, noble: that living within our means matters; that those who work hard for their money should get to keep more of it; that the taxman should be held back from the pay packets of those who create and strive; that those parts of our country that have, for too long, felt neglected and left behind should once again be included and heard; and that economies, our communities and our very liberty thrive if we are freed from the burdens of the excessive state interference advocated by the Labour party.
Leo Docherty (Aldershot) (Con)
My right hon. Friend may not have read “Economics for the Many” by the shadow Chancellor, but he will not be surprised to learn that in that book the shadow Chancellor says that the fact that Labour’s figures do not add up is “largely irrelevant.” Does he agree that that shows a shocking disregard for the economic future of our great country?
Mel Stride
My hon. Friend is entirely right. Of course, it is easy to make pledges when in opposition. Indeed, in the run-up to the last general election the Leader of the Opposition appeared to pledge the abolition of student fees, only to discover that the measure would cost around £100 billion and is totally unaffordable.
Karen Lee (Lincoln) (Lab)
Will the Minister confirm the total cost to the Exchequer of corporate tax reliefs in the last financial year?
Mel Stride
What I can confirm to the House is that in reducing corporation tax from 28% to 19% since 2010, we have increased the yield from corporations, not just by a few per cent. but by 50% over that period. We are now talking about taxation, so let us ask: what is Labour’s plan? It is to put taxes up to 26% for large companies and to 21% for small businesses, which would be a full 50% increase in tax bills for large companies and a 25% increase in tax bills for smaller companies.
Charlie Elphicke (Dover) (Ind)
I thank my right hon. Friend for making that important point. Does it not underline the fact that if we cut the rate, we up the take? Does it not also show that Labour’s plans would result in reduced revenues, meaning more spending, more borrowing and more debt, which would take us back to the brink once again?
Mel Stride
My hon. Friend is entirely right; there is no doubt that if you keep on putting up taxes, as Labour says it will do and would be forced to do if, heaven forbid, it was ever to form a future Government, because its numbers do not add up, you end up killing the goose that lays the golden egg.
Sir Edward Leigh
My right hon. Friend is an excellent Minister, knocking on the door of the Cabinet, so I am sure he will agree with everything—[Interruption.] I know he is one of us, too. Is he slightly concerned that we are increasing spending by £30 billion a year up to 2023 and that we are taking out of the state the same proportion as Gordon Brown took out? As a fellow traveller in the Conservative cause, can he convince me that he is committed, as I am and those on our Benches are, to reducing government debt?
Mel Stride
I can assure my hon. Friend that we are indeed reducing government debt. The Office for Budget Responsibility has forecast that in each year of the coming period we will be reducing debt as a percentage of GDP. We have of course met our two intermediate targets a full three years early. We are fiscally responsible, which is why we are in a position to be able to support our public services in the very significant way that we are doing.
Ruth George (High Peak) (Lab)
The Conservative party came to power in 2010 promising to eliminate the deficit by 2015. Not only has it not done that, but it has doubled this country’s debt and brought public services to their knees. Is the Minister claiming that this project has been a success?
Mel Stride
The hon. Lady will know that the deficit was up at about 10%—£150 billion a year—at the time we inherited the mess that her party left us with. That deficit has now reduced by a full 80%, to below 2% of GDP, and will go down further as we move forward. Now, let me make some progress.
As I was saying, these are the economic facts of life and, as a great lady once said:
“The facts of life are conservative.”
Under this Conservative Government, sound finances are being restored. The future is brighter, bringing with it our increased commitment to our public services, most notably to our highest priority of all, our national health service. Thanks to the commitment of this Government and the hard work of the British people, we are now entering a new era. The deficit is fading, real wages are rising, the debt is declining and better times are returning. We now have a near record level of employment, with unemployment at a 40-year low, and we have halved youth unemployment since 2010. Central to this progress is my right hon. Friend the Chancellor’s Budget and this Bill.
This Bill introduces a tax cut for 32 million people, through bringing forward by a year our manifesto commitment to increase the personal allowance to £12,500 and the higher rate threshold to £50,000.
Vicky Ford (Chelmsford) (Con)
Will my right hon. Friend confirm that this means there will be a tax cut for the lowest earners in our society?
Mel Stride
My hon. Friend is absolutely right; a large proportion of the tax cut that has been delivered is in the form of a significant increase in the personal allowance—that amount someone can earn before they pay any tax—and that of course has benefited the low paid very significantly and will continue to do so.
Rebecca Pow (Taunton Deane) (Con)
Will the Minister also confirm that this Government are raising the living wage—the national living wage—and that that really is giving people more money? Although that might be difficult for businesses, it is really beneficial for our constituents.
Mel Stride
My hon. Friend characteristically makes an important and insightful point. The national living wage, which this Government brought into being, was raised by 4.4% last year and will be raised by a full 4.9% in the coming year. That is well ahead of inflation, which is why in respect of net income those in the lower deciles of the income distribution have benefited disproportionately compared with those at the top end. I remind the House that the wealthiest 1% pay some 28% of all income tax that the Exchequer receives.
Chris Philp (Croydon South) (Con)
Perhaps I can amplify the Financial Secretary’s point about the minimum wage. Since 2010, the national minimum wage, or living wage, has gone up by 38%. When that is combined with the increase in the personal allowance, somebody who works full time on the minimum wage is 44% better off post tax, and inflation over that period was around 25%. Is that not delivering for those on the lowest incomes?
Mel Stride
My hon. Friend is absolutely right. The Labour party will tax and tax, borrow and borrow and spend and spend. The Conservative party is reducing the tax burden. Collectively, we have now taken more than 4 million people out of tax altogether, which has disproportionately helped those on lower incomes.
John Redwood (Wokingham) (Con)
In the third quarter, the UK rate of growth was three times the rate of growth in the eurozone. Is that the wonders of the Brexit vote, or something else?
Mel Stride
That is the wonders of the management and proper stewardship of the economy. It is about taking a balanced approach to our economy, which is getting the debt and the deficit down and restoring our country’s reputation for financial stability and confidence. That is now coming through to the point where we can start to take away some of the pressures of tax and of public expenditure as we move forward to more positive times.
Charlie Elphicke
Does that not underline the fact that we can have strong public services and strong investment in the NHS only if we have a strong economy? It is because of the difficult decisions that the Government have taken over the past few years that the economy and the job market are so strong that we are able to make the investment in the NHS that the Labour party would not have been able to make.
Mel Stride
My hon. Friend is entirely right. Let us take employment: in this country we have a near record level of employment, we have a near record number of women employed, and we have the lowest level of unemployment since the 1970s. What is Labour’s record? Every single Labour Government in history have left office with unemployment higher than when they started. That is a simple fact. [Interruption.] It may be an inconvenient one, but it is a simple fact none the less.
The tax cut in the Bill is worth £9.5 billion. That means more money in people’s pockets. Since 2015, some 1.7 million more people have been taken out of tax altogether. The saving to the average taxpayer has been more than £1,200 since 2010.
Wes Streeting (Ilford North) (Lab)
What the Financial Secretary has neglected to mention but the Treasury Committee has heard clearly is that in respect of the long-run impact of the tax and benefit changes under this Government since 2015 alone—putting the coalition to one side—it is clear that their successive policies have left the wealthy better off and the very poorest worse off. That is deeply regressive and unjustifiable and it is why the Bill should not be supported.
Mel Stride
Hopefully, the hon. Gentleman will welcome the announcement that the Chancellor made in the Budget that we will provide a £1,000 uplift to the universal credit work allowance, which will be worth, when we reach full roll-out, a total of £630 million for 2.4 million recipients of that benefit.
Alex Chalk (Cheltenham) (Con)
Does the Financial Secretary agree that were we to go back to the situation in 2010, when people had to start to pay tax after their first £6,750-odd, that would mean that ordinary, hard-working taxpayers would have to pay an additional £1,000 in tax and would therefore have less money to meet their day-to-day priorities?
Mel Stride
My hon. Friend is right. The problem with Labour’s approach to taxation, and to personal taxation in particular, is that it is a huge discouragement to going out and creating wealth and jobs and the kind of economy that supports the vital public services that Members from all parties wish to see prosper.
Kevin Hollinrake (Thirsk and Malton) (Con)
Will my right hon. Friend confirm that, for somebody on the minimum wage, if we combine the increases in the national living wage with the increased personal tax threshold, somebody in full-time work is £3,955 a year better off in cash terms than in 2010?
Mel Stride
My hon. Friend, as usual, makes a very significant point, which is that by increasing the national living wage by, as I said earlier, 4.4% last year, and by 4.9% coming up in April next year, and by raising that personal allowance to take more and more people out of tax altogether, we are supporting the lowest paid in our country.
Rachel Maclean (Redditch) (Con)
Does the Minister agree that, as well as taking people out of tax, with a whole raft of policies this Government are helping wages increase? In Redditch, for example, there has been a 35% increase in median weekly payments to full-time employees, which means that Redditch workers have more money in their pockets.
Mel Stride
My hon. Friend is right. For the past six months, we have seen rising real wages, and the latest data show that they have been rising faster than at any time in the past 10 years, so we are the party that is fixing the economy and improving living standards.
Siobhain McDonagh (Mitcham and Morden) (Lab)
I thank the Minister for giving way. Does he agree that abolition of certain restrictions in the labour market, such as payment between assignment contracts, would also increase people’s wages? Will he be making a statement on the Taylor review and its contribution to this debate?
Mel Stride
This debate is not the place to make pronouncements about the Taylor review. The Government are considering the Taylor review and the way in which people are working. There are a number of aspects in the Budget that relate to the taxation elements of the way that people work, but we will come back in the fullness of time with a full response to the Taylor review.
Chris Stephens (Glasgow South West) (SNP)
Just on wages, there was a lack of clarity in the Budget in relation to the public sector pay cap. Can the Minister confirm that every Department is budgeting for 1.5% this year?
Mel Stride
As the hon. Gentleman will know, we have made, within this year, more finance available to various Departments, and the Chancellor was very clear about that in the Budget. He was equally clear that there will be a number of decisions to be made in the spending review next year relating to all the Departments across Government.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I am sorry to burst the Minister’s balloon, but if things are as rosy as he says, why is the UK economy not only at the bottom of the G7 for growth forecasts, but at the bottom of all EU countries for projected growth?
Mel Stride
I do not think that the hon. Gentleman is entirely right. I do not think that we are at the bottom of the G7 growth table at this precise moment—I think that we are some way off the bottom. He mentioned the important element of growth, and the forecast from the Office for Budget Responsibility is that our economy will continue to grow for the next five years and, of course, we come into this period on the back of five years of continuous growth.
Mel Stride
If there are no other interventions, I will take one from my hon. Friend for the third time.
Charlie Elphicke
I thank the Minister for my hat trick of interventions and for being so generous. I was looking at the amendment in the name of the Scottish National party in relation to VAT and the policing situation in Scotland. Can he confirm to the House that this VAT muck-up is entirely the responsibility and fault of the SNP? It should take responsibility and apologise for it.
Mel Stride
My hon. Friend is right: the Scottish National party will know that when it took the decision to reorganise fire and police in Scotland, it was fully aware and cognisant of the fact that that would mean that VAT was not recoverable. It really is thanks to the Members on the Conservative Benches who represent Scottish constituencies who have made the case so strongly to the Treasury that we were able to change that situation going forward. Perhaps I may now be able to make a little progress.
We have, of course, also announced that we are freezing fuel duty for a ninth year in succession and increasing the living wage by 4.9% from April. In this Bill, we deliver a freeze on the duty on beer and spirits, keeping living costs down and supporting our pubs. Our freezing duty on spirits comes as a direct consequence of Conservative Members representing their constituency interests in the industry.
Mr Bob Seely (Isle of Wight) (Con)
I support so much of this Budget, which was superb, with the cut in business rates and, especially, the beer duty freeze. Will the Minister agree to meet me and pub owners from the Isle of Wight, because there is still a problem with the way that publicans—small business owners—are being treated by the big pub companies, especially Enterprise Inns, which has quite an aggressive business style that is pushing many of my local pubs into bankruptcy? Is there more that we can do on the pubs code?
Mel Stride
I thank my hon. Friend for that important intervention. I know what a doughty supporter he is of the high street, and pubs in particular. We do of course, as a Government, support and have frequent conversations with organisations such as the British Beer and Pub Association. However, I would be very happy to meet him, as he requests, to have that discussion.
This Bill will provide additional relief from stamp duty for first-time buyers who enter into a shared ownership arrangement, and will back-date this relief to benefit those who entered into their purchase on or before the date of the Budget. We will continue to champion home ownership, as well as backing hard-working people and bearing down on the cost of living.
For every Member of this House, the high street lies right at the heart of the communities that we serve. High streets hold within them the very essence of the best of the human spirit—community, creativity, individuality and a collective purpose. They are the places we come together to work, to shop, to socialise, to support, to celebrate, and to invent and create, and this Government wish to see them thrive. That is why we have announced a two-year reduction in business rates of one third for smaller retailers, meaning that up to 90% of high street retailers will benefit. It is also why, in this Bill, we will legislate to allow for the further reduction of corporation tax from 19% to 17% in 2020, helping businesses both large and small. As tax rates have declined—as we have discussed—the corporation tax yield has increased by 50% since 2010. Backing our high streets means backing Britain, and this Government will play their part in this great endeavour.
This Bill will support businesses through the introduction of key allowances and enhancements to important tax reliefs. The structures and buildings allowance will provide a vital tax break for those businesses investing in new commercial property. The annual investment allowance will be increased from £200,000 to £1 million for the next two years, ensuring that companies have a critical additional incentive to invest.
For businesses concerned with deep-sea oil extraction, we will allow for the transfer of their historical tax history, ensuring that jobs, expertise and businesses involved in the North sea are preserved—a measure that the shadow Treasury Minister, the hon. Member for Norwich South (Clive Lewis), described as “corporate welfare” and said should be voted down. That position should be evidence enough that Labour has truly given up on Scotland, something that the Conservative and Unionist party will never do. On the Opposition Benches we have Labour Members who have given up on hard-working people, SNP Members who have given up on our precious Union, and Liberal Democrat Members who have just given up.
This Bill is also about fairness. It introduces a number of important measures that will further clamp down on tax avoidance and evasion. The House will know that this Government have an outstanding record with regard to the collection of tax. We have one of the lowest tax gaps in the world—far lower than was the case under Labour. In fact, the additional revenue raised by having our tax gap at its current level, compared with that in 2005-06 under the last Labour Government, is enough to pay for every policeman and policewoman in England and Wales.
Collecting tax also matters because where taxation goes uncollected, others who do the right thing are required to pay still more, our vital public services go without, or we have to increase borrowing and the burden is passed on to our children. Tax avoiders, whether the largest corporates or the wealthiest best-advised individuals, diminish us all. This Government will continue to clamp down on avoidance, evasion and non-compliance. Specifically, this Bill brings in measures further to address corporate profit fragmentation, whereby companies reduce their tax burden by artificially shifting around their revenues. In the Bill, we will ensure that non-residents pay tax on the capital gains they make on UK commercial property. The Bill also strengthens our diverted profits tax, which has already brought in and protected £700 million since 2015.
This House will know that we have announced a digital services tax, so that large multinational businesses such as search engines, social media platforms and online marketplaces pay their fair share in tax—right here in the United Kingdom.
Stewart Hosie (Dundee East) (SNP)
I want to ask the Minister a technical question. Given that the digital companies’ turnover and, indeed, profits are substantial, why have the Government been so modest in seeking to achieve only a £400 million tax take from those companies?
Mel Stride
As the hon. Gentleman will know, the scope of this tax is very clearly targeted on businesses that make substantial value in the United Kingdom as a consequence of the interaction of UK users and the digital platforms they trade across. He will know that there is a small number—relative to the size of the UK economy—of important businesses that are therefore within the scope of the measure. A figure of 2% is very much in line with the kind of figures that the EU was looking at or is continuing to look at—[Interruption.] From a sedentary position, the hon. Member for Oxford East (Anneliese Dodds) is talking about 3%, but she is not actually comparing like with like, because different revenues would be in scope under the two different approaches. The short answer is that this has to be proportionate: it is about levelling the playing field. Along with this particular measure, we have also announced that, for our high streets, we will be reducing business rates by a full one third for 90% of smaller retailers.
Mr Alister Jack (Dumfries and Galloway) (Con)
Does my right hon. Friend agree with me that the growing tax gap between Scotland and the rest of the UK is in fact a tax on aspiration and that it discourages higher earners from wanting to work north of the border?
Mel Stride
My hon. Friend is right. If we look at some of the relieving measures on tax that have been provided to Scottish taxpayers, we can see that they come by way of the increases in the personal allowance that this UK Government have made. He is absolutely right to highlight the fact that Scotland is becoming more of a high tax jurisdiction.
David Linden (Glasgow East) (SNP)
The Minister’s colleagues in the Scottish Parliament stand up week in and week out to ask for more money for public services, so if the Conservatives will not put up tax, where does the money come from or do they cut services?
Mel Stride
I will tell the hon. Gentleman where some of the money comes from. I will tell him where £700 million has just come from, and that is the Barnett consequentials following from the recent Budget.
Mary Creagh (Wakefield) (Lab)
If the Minister is serious about introducing a digital services tax, why did he not just introduce it overnight? When we look at the Red Book, we see it says that the income and the delivery of this policy are both high risk. If he is serious about taxing the digital giants that are offshoring their money, why is he giving them a couple of years to make provision elsewhere? [Interruption.]
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Can we not have these conversations across the Chamber at the other end of the Chamber? It really is distracting.
Mel Stride
The hon. Lady will know that we are a first mover: we are one of the first countries in the world to take this approach. She will also know that this is a complicated tax and a tax that we absolutely have to get right. I have already spoken about the restricted scope of this tax. We want to make absolutely certain that it works and that it does not discourage technology companies from coming to this country, as they do in their droves under the economic policies of this Government.
Vicky Ford
Given that digital companies know no borders, does the Minister agree that, while we take this first step to introduce taxes on international digital companies, it is important to continue to work with our neighbours and others across the world on an international effort to do so?
Mel Stride
My hon. Friend is totally right. We have been in the vanguard of efforts conducted through the European Union, the OECD and the G20 to come up with a multilateral approach on this matter. That is the preferred option of the Government, and rightly so, because it obviates the problems that one would otherwise have with aspects of double taxation. It is helpful if we all move together, and that is still our aspiration, but we have said that if we do not get that multilateral agreement within the next year or so, we will move ahead with our measure.
Mr Jim Cunningham (Coventry South) (Lab)
The Financial Secretary may be going to touch on this, but I will ask him the question anyway. He has not said much about investment in climate change technology. There is a lot of concern among scientists about the effect of climate change. Can he give us any indication of how the Government are investing in this technology?
Mel Stride
We are investing hugely, and the evidence is there that we are succeeding. We have had a 43% reduction in carbon emissions since 1990. We are still pursuing, committed to and confident that we will meet our 80% reduction target by 2050. There are measures in the Bill, for example, to provide a tax relief for those who charge their cars through the businesses for which they work. We will continue to be very forward-leaning on the issue of the environment.
Mary Creagh
On that point, the Government’s failure to introduce a latte levy on single-use disposable coffee cups and bottles or to introduce a tax on virgin plastic until 2022 means that 700,000 tonnes of plastic packaging will be thrown away before 2022. Is that what the Financial Secretary means by making sure that the polluter pays in tackling climate change?
Mel Stride
What I mean by our environmental credentials in that area is that we are consulting, as the hon. Lady will know, on the amount of packaging that contains recyclable plastics. We see that not only as informing what we will subsequently do but as helping to change behaviour, much as the sugar levy changed behaviour in the sugar-based drinks sector. We have a very strong record in this area. We have already done a number of things in the public health area, and we will also make progress on the environment.
Rebecca Pow
On that point, I was pleased to see in the Budget that there is money for the planting of millions of trees. That will have a huge impact not only on ameliorating the effects of flooding and on health and wellbeing, but in terms of the carbon that those trees will take in, which will affect climate change.
Mel Stride
My hon. Friend is right to highlight that commitment, which will see 11 million trees planted as a direct consequence.
Our country faces the great challenge and opportunity of leaving the European Union. Some say that Brexit has been so all-consuming that we are not capable of seeing beyond it—that we are not able to lift our eyes to the future because we are too fixated with the challenges delivered by the past. However, Conservatives are better than that. On the eve of the D-day landings one of the greatest pieces of legislation passed by this House—Rab Butler’s Education Bill—received Royal Assent. Even war did not stop us then.
As we take our country forward to a world beyond austerity, beyond the toughest of times, beyond the sacrifices that have been endured and, indeed, beyond Brexit itself, our country will show that we are capable of not just enduring but thriving, and that no challenge is too great for us and no opportunity is beyond our reach. This Bill, following this Budget, sets us firmly on that path. I commend it to the House.
Peter Dowd (Bootle) (Lab)
I beg to move an amendment, to leave out from “That” to the end of the Question and add:
“this House declines to give the Finance (No. 3) Bill a Second Reading because it derives from the 2018 Budget which confirmed the continuation of austerity and tax cuts for the wealthiest, failed to introduce a fair taxation system which protects middle and low earners but requires a greater contribution from the top 5 per cent of highest income earners, implied real terms per capita cuts for unprotected departments between 2019-20 and 2023-24, failed to halt roll-out of Universal Credit with planned social security cuts still to come, failed to raise the funding needed for mental health services, failed to provide the long-term funding needed for long-term adult social care, failed to provide adequate school funding, failed to address the funding gap that local councils face, failed to end the funding crisis facing public services, with police, teachers, nurses and doctors having no reassurances that the public sector pay squeeze will end in 2019, failed to tackle child poverty and growing inequality across our country, failed to tackle the fact that 87 per cent of the impact of the Government’s tax and benefit changes since 2010 has fallen on the shoulders of women, failed adequately to address climate change and delayed the much-needed reduction in the maximum stake for fixed-odds betting terminals until October 2019, and because the Bill is not based on an amendment of the law resolution, thus restricting the House’s ability to properly scrutinise and improve the Bill.
I have to give credit to the Financial Secretary to the Treasury: he managed to keep his face straight throughout his delivery. We had lots of flowery words from him, and I am surprised that we did not have phrases in his cliché-ridden speech such as “sunny uplands”, “green shoots of recovery” and “the end of the rainbow”. Why were those clichés not in his speech as well?
We have been asked to scrutinise a Finance Bill under the most difficult circumstances the Government could create, short of barring the Opposition from actually attending the House. The timetable set for the Bill meant we were expected to table amendments on Second Reading before the Bill had even been published—an abuse of power. To add insult to injury, printed copies of the explanatory notes to the Bill only arrived in the Vote Office earlier today. How busy Members are expected to provide proper scrutiny under these conditions is beyond me. It is an abuse of power. Worse still, the Government’s refusal to table an amendment to the law for the third Finance Bill in a row means that we will be unable to meaningfully amend this proposed legislation following Second Reading. As I said in my speech on the Budget resolutions, that is unprecedented. It is another abuse of power.
Last week, the President of the United States fired his Attorney General to undermine an investigation against him. Mr Trump also barred a journalist asking legitimate questions from the White House. Perhaps he gave the Prime Minister the odd tip on how to side-step conventions and constitutional process. Stitching up Committees with a false majority, obstructing scrutiny of the Finance Bill and giving a £1 billion bung to a minority party to keep the Prime Minister’s Government alive are further abuses of power. In any other country, we would use a word for this behaviour: malfeasance, plain and simple.
This is a desperate state of affairs, especially given how much the Bill is in need of change. The Government’s policies announced in the Budget fail to tackle a single one of the great challenges now facing this country after eight years of austerity. Most notably, this Bill of broken promises fails to end austerity, as the Prime Minister said it would during her conference speech—once she had finished gyrating. As our reasoned amendment points out, this promise has been broken: £4 billion of Tory social security cuts are still on their way. Only half the money cut from universal credit work allowances was returned to the programme. There was nothing on the social security freeze or the two-child limit.
Kevin Hollinrake
The hon. Gentleman mentions the reasoned amendment, which refers to the long-term funding of adult social care. Two Select Committees, the Health and Social Care Committee and the Housing, Communities and Local Government Committee, recommended a social insurance system in their inquiry’s report. Is he willing to support that cross-party recommendation as a solution to the future funding of adult social care?
Peter Dowd
The hon. Gentleman needs to speak to his own Government about cross-party support. My party cannot discuss these issues in this Chamber, let alone outside it. He would be better off engaging with his own Government on these matters.
What we have in the Budget is more spent on potholes than on our schools, not a penny more for everyday policing or fire services and nothing to begin to unravel the 40% budget cuts that have taken place across local authorities.
Michael Tomlinson (Mid Dorset and North Poole) (Con)
My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) asked a very straightforward question, and I am going to give the hon. Gentleman another chance to answer it. Will he, as suggested by my hon. Friend, engage in cross-party support—yes or no?
Peter Dowd
It is not in the Finance Bill. Frankly, the hon. Gentleman should worry more about the 8% cut to per pupil school funding in his constituency than trying to get me to answer questions that the Government should be answering.
Vicky Ford
On police funding, when the Government proposed hundreds of millions of pounds of additional funding for the police by raising the police precept, why did the Labour party vote against it? [Interruption.]
Peter Dowd
From a sedentary position my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) says that one in four policemen have gone from his constituency. That is similar to what has happened in my constituency and, I suspect, in the hon. Lady’s constituency. There is not one penny more of day-to-day spending in the Budget. She should be asking her Government why the police are still being underfunded.
Ruth George
Does my hon. Friend agree that the huge rise in council tax for council tax payers on every level of income is a highly regressive form of tax? In my Derbyshire constituency, people are having to pay more council tax for fewer police.
Peter Dowd
“Regressive” and “Conservative Government” go in the same sentence pretty easily.
The Budget does not move us towards parity for mental health services. It does nothing to end the crisis in social care, to which the hon. Member for Thirsk and Malton (Kevin Hollinrake) referred, or in children’s services. It gets worse as the days go on. The Budget was a continuation of austerity under anyone’s definition, and the Bill is a written testament to that broken promise.
Charlie Elphicke
As ever, the hon. Gentleman is very passionate. May I just take him back to the question put by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake)? Will he support that generous and very sensible proposal? Does he think that that is the right way to go about things?
Peter Dowd
Look, we are always prepared to look at any idea, but we are trying to deal with the problem today. We are trying to deal now with the hundreds of thousands of elderly people who are not getting the service they are entitled to.
Alex Chalk
Back in 2010, at the height of the crisis the hon. Gentleman’s party left us with, it was a Labour Chancellor, Alistair Darling, who said that Labour would close the deficit by 2020. That will not now happen until 2025. How can the hon. Gentleman credibly suggest that this is an austerity Budget?
Peter Dowd
That is remarkable coming from an hon. Member who is a member of the party that promised us all that the deficit would be gone by 2015.
Mr Jim Cunningham
The Government have apparently suggested that we should have a cross-party talk to resolve the issue of social care. They were offered that chance by the Labour Government before the 2010 election and they turned that opportunity down. Let us set the record straight. Tory Members talk about Labour Governments leaving office with high unemployment, but the Major Government left 3 million people unemployed. We introduced the minimum wage, and they said it would lead to 3 million people unemployed.
Peter Dowd
National living wage—the clue is in the title—but what the Government have proposed is not a living wage.
The Chancellor did not use the phrase “climate change” once during his hour-long speech—it felt longer than an hour, I’ll grant you that—despite the recent Intergovernmental Panel on Climate Change report, which warned that we only have 12 years to avert climate catastrophe. The Government cling to their woeful plastic straws initiative, but the only measure in the Bill addressed to the 100 corporations that produce 71% of our global emissions was yet another tax break. That is the sort of stuff that the Government should be tackling. This is for the oil industry. The Government have really got to get to grips with its approach to climate change. This oversight is catastrophic. History will remember the Government’s failure to tackle the greatest threat to humanity—that does not overstate it.
Meanwhile, the vulnerable suffer. The Government reneged on their promise to tackle the social devastation wreaked on our communities by fixed odds betting terminals, causing the resignation of yet another Minister. It has since become apparent that they reneged after lobbying by the gambling industry, in spite of the known link between these machines and people taking their own life. Here we have it: the Chancellor of big business pays little regard to the tragedy of lives lost to this awful addiction, as long as the gambling industry can keep making a return and continue its donations to the Conservative party—a fact.
So what remains in the Bill when all these pressing issues have been left out? There has been much discussion about the Government’s change to tax thresholds in clause 5. Let me make our argument clearly: after eight years of austerity, we will not stand in the way of any change that will put additional income into the pockets of low and middle earners, regardless of how that is brought about—[Interruption.] We have said that time after time. However, Labour’s policy remains that we believe we should be taxing the wealthiest more to deliver the end of the austerity that the Tories have failed to provide. We will therefore table an amendment to clause 5 setting out our tax proposals. These proposals would protect everyone earning below £80,000 a year— 95% of the population—from any further tax increases, while ensuring that the top 5% of our society pay their fair share. We call on the House to support our amendment in the Committee of the whole House.
Colin Clark (Gordon) (Con)
Will the hon. Gentleman concede that 1 million people will be lifted out of the higher rate of taxation and that many of them are consultants working in hospitals, GPs, senior police officers and senior council officers? Does he not recognise that that is a good thing?
Peter Dowd
The hon. Gentleman really must listen more—[Interruption.] I will send him a signed copy of my speech; he might learn a thing or two.
We believe in building a coalition of the many—a broad, democratic movement of 95% of the public—to spread prosperity across the furthest reaches of our country. We cannot in good faith increase taxes on those who have struggled for eight long years while the richest continue to accrue even more wealth.
Vicky Ford
I thank the hon. Gentleman for giving way—I was listening. What does he intend to do to individuals earning over £80,000 a year?
Peter Dowd
Actually, we set out our tax policies in “Funding Britain’s Future”, and I will send a signed copy to the hon. Lady for her to have a look at. Perhaps Government Members can have a tutorial with Sir Roger Scruton and tease out some of the issues.
On Brexit, yet again, we have seen the Government using our exit to hand themselves broad powers, indefinitely. This is a continuation of the theme that I described—of a Government’s demand for power, even though they are clueless about how to exercise it.
Charlie Elphicke
The whole House understands that the hon. Gentleman is very enthusiastic about raising the rates of taxes for richer people, but does he not remember that the experience of reducing the top rate of tax from 80% to 60%, and then from 60% to 40%, was that more money was brought into the Treasury on each occasion? Labour’s plans to increase taxes will mean less money for the Treasury and less money for the NHS.
Peter Dowd
International evidence does not show that, but let me give the hon. Gentleman a figure. The top 1% have received an increase in share of total income—from 5.7% in 1990 to 7.8% in 2016-17. That was identified by the Institute for Fiscal Studies.
Nigel Huddleston (Mid Worcestershire) (Con)
What I do not understand—if the hon. Gentleman really believes this—is why, for 99.3% of the time that the last Labour Government were in power, the top rate of income tax was 40%, whereas for the duration of this Government, it has been either 45% or 50%. Does Labour say one thing in power and a completely different thing in opposition for purely opportunistic, party political and vote-winning purposes?
Peter Dowd
A Conservative Member of Parliament talking about opportunism! It is not quite as bad as the Liberal Democrats talking about opportunism, I grant you, but there we are—[Interruption.] I think the hon. Gentleman should worry about working people in his constituency who, overall, are £800 a year worse off after the longest fall in wages since the Napoleonic era—I suspect that one or two Government Members were here at the time. The Prime Minister has stood staring at the Brexit menu for two years while her Cabinet devours itself in the queue behind her.
Kevin Hollinrake
According to the economist David Smith, if Labour policies at the last election had been implemented, people who were earning between £100,000 and £120,000 a year would have been paying, on that element of their earnings, a marginal rate of taxation of 72%. Does the hon. Gentleman feel that that is a fair burden of taxation on earners at that level?
Peter Dowd
In the context of a fair taxation system, as set out in “Funding Britain’s Future”—which, again, I exhort the hon. Gentleman to look at—we look at everything, and we will look at everything, unlike the Government.
The indecisiveness that I referred to means that the Government have to try to amass as much power as possible so that, if the Prime Minister cannot make her mind up, our hands are tied in a constitutional sense. It seems that, when Tory Brexit theocrats talked about wanting to take back control, they wanted us to give it to them. We cannot allow such a vast power grab to take place from a Government who have shown such disregard for our constitution already.
Turning to another issue, I draw the House’s attention to the measures that are supposed to address tax avoidance—hope springs eternal. Once again, these are simply inadequate. They are a series of half-measures that leave so much room to wriggle, they must have been written by the Prime Minister. The Government promised us a full public register of beneficial owners. Where is it? I have looked through the Bill numerous times—I have to admit, it was painful—and I can see no reference to it. It is yet another broken promise.
We have been waiting for two years for the Government to act to tackle burning injustices, yet they seem more focused on fanning the flames. Again, we find ourselves being forced to debate a Bill that is heavy on rhetoric, as evidenced in the speech from the Minister, and light on content. No wonder the Government will not let us amend it. They are scared that we would put something useful in it and add some policy to the lacuna that is there now.
Siobhain McDonagh
Does my hon. Friend agree that a response to the Taylor review would be the start of something real and possible and the abolition of payment between assignment contracts?
Peter Dowd
I refer my hon. Friend to the response given by the Minister earlier. We are prepared to look at all proposals.
Vicky Ford
The shadow Minister just said that the Bill is light on content, but it is 315 pages long. I have just read his Labour party document “Funding Britain’s Future”, which is eight pages long, three of which are footnotes. What am I missing, sir?
Rachel Maclean
The hon. Gentleman talks about the policy on tax collection, so surely he will welcome the Government’s innovative approach to unexplained wealth orders. These measures have already been implemented. They are an innovative approach to capturing people who seek to avoid our tax system, and they are bringing wealth into the Treasury. Surely he can find something to welcome in that.
Peter Dowd
They have been so successful that the Government have only used them once.
Mr Jim Cunningham
The Bill might be thick, but it is low on content when it comes to public sector funding for public sector pay—we notice that that is for the spending review—and it is very light on content in relation to the Taylor review and people on zero-hours contracts.
Peter Dowd
My hon. Friend, who is a great advocate for his constituency, is spot on. Some 4.5 million children—7,000 per constituency—are living in poverty in the UK. Conservative Members should concentrate on sorting out that kind of problem. That is what the Government should be focusing on.
Rebecca Pow
The hon. Gentleman just talked about spurious rhetoric, but I want to take him back to what he said about climate change, because he completely misses the point. The Government are doing more on climate change than any before them. A great deal of it is being done by the Department for Business, Energy and Industrial Strategy, the Department for Environment, Food and Rural Affairs and the Foreign and Commonwealth Office—it is about joined-up thinking. We have the 25-year plan, the Agriculture Bill, the green growth strategy and the electric car strategy, and measures in the Budget draw this together. The plastics tax is one very good example of how seriously we take the issue.
Peter Dowd
Investment in renewables is down. The idea that the Government are green is itself green—it is a pathetic claim.
The Government promised us a public register of beneficial ownership. I have asked before: where is it? It is another broken promise. I call on the House to support the amendment to give the people of the United Kingdom action on the great challenges facing our nation, which the Government appear incapable of addressing and which have been ignored for too long.
I end on the note I started on: the abuse of power. It was once said that:
“Worse than a corrupt government is an incompetent one, not least because having the second characteristic does not exclude the first”.
Given the way the Government have behaved over the ability of Parliament to do its job, that notion is becoming closer and closer as the days progress. It should be deeply worrying to any democrat.
John Redwood (Wokingham) (Con)
I have declared my business interests in the Register of Members’ Financial Interests.
In the third quarter of this year, the United Kingdom economy grew considerably faster than the euroland economy, which is very welcome. It is a timely reminder that since 2010, under first the coalition and then the Conservative Governments, we have seen conditions created in which there has been rapid jobs growth, a general expansion and improvement in profitability and investment, and some return to the better growth rates we saw before the crash at the end of the last decade.
We also see, however, that in the third quarter the United States economy grew considerably faster than the United Kingdom economy, and the reason is simple. The US has decided on a bold tax reform and reduction programme, which has injected a large amount of extra money into the economy, allowing families and individuals to spend more of their own money without having to give so much to the state, and allowing companies to keep more of their profits. As a result, more American corporations have repatriated their profits to the US, where they then pay the reduced tax rates and either invest that money, give wage rises or better remunerate their shareholders to encourage yet more investment. That model is clearly working. The tax reductions are the main reason the US has experienced much better growth this year than either the EU or the UK.
The Government should not be complacent. While we have so far had a long-lasting and moderate-paced recovery, which is welcome, and a very good jobs recovery, which is extremely welcome, although it gets little credit from the Opposition, policy now is too restrictive. We have an exceptionally tight monetary policy—the tightest of anywhere in the advanced world. We have had two interest rate rises; the ending of all new quantitative easing; the removal of all special facilities from the Bank of England to the clearing banks to lend more money for enterprise and good purposes; much stricter rules to commercial banks that have been very effective in leading to big reductions in new car loans and mortgages for the higher-priced properties; and of course the attack on the buy-to-let sector in the 2016 Budget. This is quite a big monetary tightening.
At the same time, there is still a tough fiscal tightening. What worries me—and clearly the Chancellor, too, given some of the actions in the Budget—is that the fiscal tightening was even tighter this year than was planned. Between the March figures and those in this Budget, an extra £12 billion was taken out of the economy and put into the public sector, mainly through extra tax revenues, but also a bit through the shortfall in the planned spending increases. That is quite a severe extra negative adjustment to impose on an economy that we are already trying to throttle with a very tight monetary policy. I fear that the relatively good growth figures of the third quarter will be slowed by these twin actions.
Now let me praise the Chancellor. He is absolutely right to say that the fiscal squeeze was getting too tight and to take action to try to relax the involuntary fiscal squeeze next year, but he is not doing anything much this year. I would like to see something over the winter as well, because the involuntary tightening is unreasonable. That said, the measures he has introduced to relax the fiscal position a bit are very welcome. With my colleagues on these Benches, I strongly welcome the early fulfilment of the promise on tax thresholds. It was a bold promise, and it is good to see it met, as it is a good way of allowing many more hard-working individuals and families to keep more of the money they earn.
Julian Knight (Solihull) (Con)
Does my right hon. Friend also recognise that the idea that people on the higher rate of tax are somehow storing their money away in the Cayman Islands is an absolute nonsense. These are hard-working people—often people such as locum GPs and deputy headmasters. Normal working people are being caught in this tax trap.
John Redwood
That is right. Many people who have been relatively successful and got to more senior positions are now being caught by quite penal taxes. I would like to see, in either this or a future Budget, more progressive work done to cut the tax rates to raise more revenue. That has come out very well so far on the Government Benches. We all strongly support what the Government have done on corporation tax rates, which have come down a long way and are coming down further. That boldness has been rewarded with a 50% increase in revenue—an increase that the Opposition do not want. They want to put the rate back up to avoid that increase in revenue. [Interruption.] They nod and say it would not happen, but it does happen. It happens every time they get into office: they put the rates up, tax revenue falls, and we have to come in and lower rates again, but we also have the problem of dealing with the extra borrowing.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I cannot wait until half-past nine when I get to wind up the debate. I say again: causation and correlation are not the same thing. Every independent assessment of what has happened to corporation tax over the last few years, such as that by the Institute for Fiscal Studies, very clearly shows that the reductions in corporation tax have been very expensive and cost this country a great deal of revenue.
John Redwood
We disagree.
Let us take another tax where very clearly a lower rate has produced a lot more revenue: the higher rate of income tax. Labour wisely kept the highest rate of income tax at 40% throughout most of its time in government, knowing it was the way to attract people with money into the country, to attract investors and entrepreneurs, and to encourage people to take more risks. It set a more penal rate just as it left office, as a kind of tax trap for the Conservatives. When the Conservative Chancellor eventually summoned up the courage to lower the rate from 50% to 45%, there was a big surge in revenue.
As one of my colleagues has already pointed out, there was an even bigger surge in revenue when a previous Conservative Government cut the rate from 80% in two stages to 40%. The amount of tax went up in cash terms and in real terms, and the amount of tax paid as a proportion of the total by those on the top rate went up. It was a win, win, win. I would urge the Chancellor to reconsider reducing it back down to 40% because he would collect more revenue and provide that stimulus to enterprise.
I hope that the Government will think again about a couple of tax rises that have been deeply damaging to our economy. The first is the rise in car tax, or vehicle excise duty. The graph showing car sales and output in the UK was increasing progressively between the Brexit vote and the spring Budget of 2017, but it then fell very sharply, and we now have a serious problem. The tax attack on diesel cars, allied to the threat of more controls on diesels, has been particularly damaging. Governments of both persuasions have gone out of their way to attract a lot of inward investment, and new investment, in diesel output and diesel vehicles. They encouraged that, only then to kick the props away and make such investment very difficult.
Julian Knight
Germany has started to row back and introduce “clean diesel”.
John Redwood
Indeed. Modern diesel engines are much cleaner, and are comparable to petrol engines. The Government have damaged our industry needlessly, and that, along with the squeeze on car loans, has led to a sharp drop in car output, which is not welcome.
The other issue is stamp duty. The Government have cut it for many people, which is extremely welcome, and I am pleased that they are continuing the trend so that houses can become more affordable for those who do not own them. However, we need to think about people who are trying to buy a different house, perhaps to move up the property ladder in expensive parts of the country; we need to think about the impact of transactions at the dearer end on chains and on people buying cheaper houses; and we need to think about the workloads of removal firms, estate agents, decorators and so forth.
I think that the Government have overdone the tax attack at the top. The market has become ossified, and they must be losing quite a lot of revenue. As the Red Book shows, they are having to scale back the stamp duty revenue forecast, and I am sure that that is to do with the damage that the tax attack has done in relation to the more expensive properties.
Bob Stewart (Beckenham) (Con)
Personally, I consider stamp duty to be daylight robbery. The Government do nothing for it; they just take money from people who are trying to get a home.
John Redwood
I agree. I do not think we will reach the happy position that my hon. Friend and I would like to see, with no stamp duty at all, but I think we could make a great deal of progress by introducing a more realistic stamp duty rate so that people could fulfil their dream of moving up in the world on the housing ladder, or go the other way and buy a smaller home or one in a cheaper location. At present, those penal stamp duties are getting in the way of all kinds of mobility and the fulfilment of aspiration. Surely we should be helping people to fulfil their aspirations, and the wish to live in the right home in the right place is an important part of that.
I strongly welcome the relaxation of austerity in the public sector. We did need more money for health services—I certainly needed it for the hospitals and surgeries in my part of the world—and for social care. More needs to be done, but there has been a bit of progress. I also strongly welcome the extra money for road improvement and maintenance, although, again, more needs to be done.
John Redwood
We want more housing for more people. There are people who need homes, and I am very much in favour of helping to provide them. The Government have many programmes relating to house building and more affordable housing, and that is all very welcome.
However, we need to continue the progress. We need to look at the defence budget, the social care budget, and the schools budget. Certainly, in both the West Berkshire Council and the Wokingham Borough Council areas—parts of which are in my constituency—we need more for our local schools. They are at the back of the queue for funds nationally, and the amounts that we are receiving are simply not enough to sustain the quality of service that we need to supply.
There is one big issue overhanging this debate that few people ever seem to mention. I would like us to have access to the £39 billion that some people want to spend on the European Union withdrawal agreement. We do not owe that money, and I do not think we will get anything out of a 21-month additional period for an argument with the EU about the future relationship. If we cannot secure a good future relationship by March, I do not think it will be easier to do so once we have given all the money away, and signed and sealed a deal on it.
I urge the Government to regard the £39 billion as something that we Leave voters voted to take back control over, and to spend on our priorities. What a transformation we would see both in our public services and our economy if, instead of signing that money away in a withdrawal agreement in the naive hope that it will produce something better—which it will not—we spent it on our priorities. We could have tax cuts with a tax cost, not just tax cuts to raise more revenue in the instances that I have described; and we could have quite a lot of extra money for our schools, hospitals and defence, and our other priorities, much more quickly. We know we have access to that £39 billion over a two to three-year period, because we know the Chancellor has costed it all and made provision for it. Most of it would be spent during the period, which, over that time, would provide a 2% boost for our GDP. That would be an extremely welcome addition, and it would be rather like what the United States of America is trying to do through easier monetary and fiscal policies than those that we are following.
I want a true end to austerity. I am with the Prime Minister in saying that we must end austerity, because ending it means more money for our schools, hospitals and other priorities. As I have explained, we can afford that, if only we do not keep on giving all this money to rich countries that do not want a free trade agreement with us. However, I also want to end austerity for all the people who work in the private sector, and that is about more tax cuts.
So, Government, well done so far; but be bolder, show more courage, and then you will create a much more prosperous country.
Kirsty Blackman (Aberdeen North) (SNP)
It is great to be back here, speaking in another Finance Bill debate—especially when we know that yet another is likely to be just around the corner, in March, if there is a no-deal Brexit and there then has to be what the Chancellor euphemistically calls “a fiscal event”.
As we heard from the hon. Member for Bootle (Peter Dowd), this Budget was a continuation of austerity. We continue to have the benefits freeze, we continue to have the rape clause, and we continue to have cuts in Government Departments. The Scottish Government fiscal resource block grant allocation will have been cut by 6.9% in real terms between 2010-11 and next year, and the Barnett allocation for health has not been passed on in full, despite repeated assurances from the Government that it would be.
Next week we will get into the nitty-gritty of the Finance Bill. Breaking with the tradition so far in the debate, I am going to talk a lot about the measures that are in the Bill, and about some of the aspects that concern me. I shall talk a fair bit about process as well. As the hon. Member for Bootle said, there have been real issues in relation to process, in this Bill more than in previous Finance Bills.
Paper copies of the Bill were not made available until Wednesday, when the House was in recess and those of us who do not live in London were mostly not in London. I had to go to the people in the Vote Office and ask them to post a copy to me. They did post it to me, which was terribly kind of them. However, I had already had to ensure that the Scottish National party’s reasoned amendment was tabled before I had seen any copy of the Bill, let alone a paper copy. The process was not fit for purpose. It is not right that we should have to table amendments before seeing a Bill, and I implore the Minister to ensure that it does not happen again. If it does, we will protest even more vociferously.
There are other issues relating to process. The Chartered Institute of Taxation has said:
“Just 37 of the 90 substantive clauses in the Bill, and 12 of the 19 lengthy schedules, were included in the draft bill published for consultation over the summer.”
It is unusual for so few measures to be consulted on, but what is even more unusual is the timescale. The Government are expecting external organisations to digest clauses that they have never seen before and then to comment on them, in advance of the Committee of the whole House, which we expect to be on Monday and Tuesday next week. Having had the Bill in their hands for less than a week and a half, they will be expected to make serious suggestions for improving it. Let us not forget that the purpose of the scrutiny is to try to make the legislation better. In fact, the Government have pointed out that two measures in the Finance Bill exist to correct errors made in previous years. The Government made errors in previous years when there was a more lengthy consultation process for most of the measures, so I contend that there are likely to be even more errors in this Finance Bill, given that it has not had external scrutiny due to tight timescales.
On that point—the Minister probably knows what I am going to say now—we need to have evidence sessions in the Public Bill Committee. If we are not going to have enough time for appropriate scrutiny in writing that is provided to MPs in advance, it is even more important, especially this year, that external organisations give evidence in the Public Bill Committee. I will move an amendment to that effect when we come to the programme motion. Members across the House have voiced support for the Committee taking public evidence. The problems raised by the Government regarding the fact that we will already have had Committee of the whole House by that point are realistic ones when it comes to the measures going before a Committee of the whole House, but we would still benefit from scrutiny of the measures that are going to Public Bill Committee. If the Minister could find a way, through the programme motion, for the Public Bill Committee to begin with an evidence session including organisations such as the Chartered Institute of Taxation and the Association of Accounting Technicians, it would be incredibly appropriate and even more necessary than usual this year.
As is noted in the Opposition amendment, there is no amendment of the law resolution, which means that any amendments to the Budget have to be tight in relation to the Budget resolutions. That means that we table an awful lot of amendments saying, “We’re calling for a review into this”, and then the Government stand up in the Public Bill Committee and say, “Why would we do a review? You’re only calling for a review. You’re not calling for anything tangible.” But we cannot call for anything tangible because the Government have tied our hands. I have made this point before and I will make it again: the Government must remember that they will not be in government forever. When they are in opposition and the same thing is being done to them, they will be standing up and complaining about it. They have caused this problem and opened these floodgates, and it is really bad for transparency and scrutiny if they keep behaving like this.
Clause 5 is about the personal allowance and the basic rate allowance, and the Government have chosen not to separate out the reserved and devolved matters in this clause. Now, I get that we have not had this devolved situation for particularly long, so this may be an oversight by the Government, but I implore them to ensure that in future years these matters are dealt with in separate clauses. It would be easy for them to do that. Indeed, it would also be easier for Mr Speaker, because he would be able to certify one part as English votes for English laws and not the other part, which is a reserved competency in relation to the personal allowance. This would make scrutiny and read-across better. It would just be a better process of making tax law if these two things were separated out. I ask that these points are taken into account the next time we have a Finance Bill, whether that is in March, October or November next year.
I sit on the European Statutory Instruments Committee, which is currently looking at the proposed negative instruments—it is riveting, honestly. As with lots of the legislation that is coming through just now, the Brexit clauses in the Bill allow the Minister further delegated powers. In fact, one of these clauses allows the Government to set spend for a new tax in relation to current pricing, without saying what that spend would be—I think that is around clause 80. The right hon. Member for Wokingham (John Redwood) talked about taking back control, but parts of this legislation allow the Government more control and more unfettered power. It would actually be more sensible for this House to take decisions over how much spending should be allocated in this regard, rather than giving Ministers more control.
As hon. Members would expect, I am going to mention fixed odds betting terminals. The Government say that they cannot lower the stakes from April next year because it would not give companies enough time to prepare adequately for the changes required, yet they expect companies to prepare adequately for Brexit by April next year, despite not actually having told companies what Brexit will involve. If the Government are serious about making changes to fixed odds betting terminals, they need to stop listening to the lobby on this and start taking into account the public health benefits of the changes.
Karen Lee
Does the hon. Lady agree that the delay in introducing the cut to the maximum stake on fixed odds betting terminals will lead to an increased number of people developing gambling addictions, getting into debt and, in the case of problem gamblers, even taking their own lives?
Kirsty Blackman
I agree with the hon. Lady. There is a clear health impact to lowering the stakes. Making the changes in April, rather than next October, will have a genuine impact on the health of a huge number of individuals.
Richard Graham (Gloucester) (Con)
I am very clearly on the record as having supported changing the tariff that people can spend on fixed odds betting terminals from £100 to £2; it is absolutely the right thing to do. Let me be clear that it is quite extraordinary for a Labour Member to stand up and start lecturing the Government on having made an incredibly important and valuable change to legislation that rights the wrong of this fixed odds betting terminals—
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. Mr Graham, you have been here long enough to know that we have short interventions; you do not need me to tell you that. If you want to speak, I will put you on the list, but we must have short interventions.
Kirsty Blackman
I should say that I am not from the Labour party. The Government’s reasoning for the delay is what concerns me, especially when it is completely the opposite of the reasoning they are using about Brexit, where they are saying, “It’s fine. Everybody has heaps of time to prepare—loads of time.”
I thank the Government for the changes to transferable tax history. They have worked very well with the industry to ensure that late-life oil and gas assets can be exploited for longer. I first raised this issue in March 2016, so I am very glad that the Government are now moving on it. However, this is not the whole picture. It is appreciated that this change has been made, as it will have a small but positive effect. I am pleased that this measure has come through, but we still have not seen the oil and gas sector deal, nor have we seen proper unequivocal support for carbon capture and storage. I want the Government to make louder noises about carbon capture and storage, and they need to after pulling the rug from under the feet of the industry three years ago. They need to be even louder and more vociferous in their support because the industry has been stung. The companies that were keen to take part in carbon capture and storage have been stung by the decisions of the previous Chancellor, so the Government need to be as clear as possible about support for carbon capture, utilisation and storage, which is a real industry for the future.
Alan Brown (Kilmarnock and Loudoun) (SNP)
My hon. Friend correctly said that we have not seen an oil and gas sector deal. Is that not disgraceful considering that the Red Book shows that, over the lifetime of this Parliament, the industry is going to bring in an extra £6 billion of tax revenue. Instead, the Chancellor stood up and bragged that he is holding the tax at the current level for the oil and gas industry, instead of actually working to get an oil and gas sector deal?
Kirsty Blackman
The sooner that deal can be announced and that commitment can be made by the UK Government, the better for the industry. Confidence is still shoogly just now, and although that confidence is rebuilding, we need clear commitments for the industry and the clear support of the UK Government so that the industry feels more secure and takes decisions on investment and exploration. That is why signing a sector deal as soon as possible would be hugely appreciated.
More generally, one of the things that infuriates and frustrates me about this UK Government particularly is that they think that if they stand up and invent a new definition for something, it will immediately become true. They have decided that if they say “living wage” instead of “minimum wage”, people will actually be able to live on it. That is not how it works. People still cannot live on it, even if the Government call it a living wage, and that is especially the case for the under-25s, who are not eligible for the living wage. It does not cost someone who is 24 less to live than someone who is 25. The Government need to get rid of those differential rates.
The UK Government say that they have ended austerity. By anyone else’s definition, they have not ended austerity. Just because they say, “We’ve ended austerity,” it does not mean that they have actually ended austerity. There are still cuts to Government Departments. There is still the benefits freeze. We still have all those issues.
Kirsty Blackman
Not just now. In terms of the economic growth forecasts that the OBR has apparently made—
Kirsty Blackman
I am not taking any more interventions.
The OBR has made economic growth forecasts on the basis of a smooth and orderly Brexit. It has not made economic growth forecasts on the basis of us crashing out in a no-deal scenario, so its forecasts are only worth anything if the Government can strike a deal, as the Chancellor knows, which is why he has spoken about another fiscal event coming.
Frictionless trade is not frictionless just because the Government call it frictionless. If a good has to be stopped at the border, if somebody has to fill in an additional form or if there is any delay, that is not frictionless trade. Just because the Government say, “This is frictionless trade,” it does not mean that it is actually frictionless trade.
The Government need to improve their processes around the Finance Bill. This year has been the worst in terms of those processes, and they have to improve. The Government could do that by ensuring that we take evidence at the Public Bill Committee.
The Government have to actually do the things they say they are doing. If they say they are going to give Scotland the Barnett consequentials for health, they should give it the Barnett consequentials for health. If they say they are ending austerity, they should end austerity. If they say they are putting in place a living wage, they should put in place a living wage.
Lastly, if the Government are talking about tax cuts, they need to look at the situation in Scotland. The figures I have from the Library say that around half of taxpayers in England pay more than they would if they lived in Scotland, and that half of taxpayers are the people who earn the least, not the most. The UK Government should look at what the Scottish Government are doing and learn some lessons.
Several hon. Members rose—
Mr Deputy Speaker
Order. We have 29 Members wishing to speak. There is no time limit, but Members should remember that we want to get everybody in.
Alan Mak (Havant) (Con)
It is a pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman).
I welcome the Bill, which implements a Budget that helps individuals and families in my constituency and across the whole country to keep more of the money they earn and helps the businesses in my constituency and across the rest of the UK to invest and grow. This is a Budget that secures the public finances and helps us to repair the damage caused by the Labour party. More importantly, it helps us to prepare for the challenges ahead. As the fourth industrial revolution accelerates, it is important that we help our start-ups and our scale-ups and our engineers, innovators and entrepreneurs. This Budget does all those things.
Ultimately, this Budget will improve our productivity, so that as we leave the European Union, this country is fit for the future and in the best possible position to seize the opportunities presented by new technologies, new industries and new sectors and to support the entrepreneurs who create so much of the wealth that drives our growth and funds our public services.
This Budget builds on the financial and economic stability that we have built over the past eight years. It is a Budget that builds on rising wages, rising employment, a growing jobs market and the rising productivity that has allowed this country to maintain its top 10 position in the World Economic Forum’s competitiveness index. It is a Budget that allows us to seize on our strengths and improve our productivity as we leave the European Union.
This Budget contains measures that will help individual taxpayers in my Havant constituency. It increases the personal allowance to £12,500, allowing us to meet an important manifesto commitment one year early. It raises the higher rate threshold to £50,000, which helps not only the entrepreneurs and small business owners who are prevalent in my constituency but many of our senior public servants to keep more of the money they earn and have more disposable income, so that they can make choices for their families and their own future. That is important to Government Members at least, so despite the pressure in our public services, I welcome the tax cuts in this Budget.
Alan Brown
The hon. Gentleman mentions entrepreneurs. He will be aware that universal credit ends after one year for self-employed people. Can he tell me how that helps entrepreneurs?
Alan Mak
In 2017, we had a record number of start-ups in this country, with 660,000 new businesses, up from just under 600,000 in 2015. This Budget, along with the package of measures being introduced, helps entrepreneurs across the piece. I look forward to more entrepreneurs starting their own business in this country, as I and other Members have done across the country. The work allowance measure helps those who want to get off benefits and into work, and I welcome it.
James Cartlidge (South Suffolk) (Con)
My hon. Friend is making an excellent point. Does he agree that the whole point about being an entrepreneur is not to be reliant on benefits, but to invest in a business, grow it and succeed, so that people can stand on their own two feet and support others, including those they employ?
Alan Mak
My hon. Friend makes a characteristically powerful point. I know that he is an entrepreneur who has started his own business, as I have.
Measures such as the cut to corporation tax will make our country even more competitive. When we started cutting corporation tax in 2010, we embarked on a journey that will allow this country to become one of the most competitive in the G20, with the lowest possible rate of corporation tax. I welcome that measure.
Karen Lee
When the hon. Gentleman says, “despite the pressure in our public services,” does that mean he thinks it is acceptable that we have lost 21,000 police staff and so many nurses and that people wait in ambulances outside A&E for four hours or more? Is that acceptable?
Alan Mak
I thank the hon. Lady for her intervention. I actually said that it was despite the pressures on our public finances, rather than our public services. We have to get the balance right between cutting taxes for our hard-working taxpayers and investing in our public services. She will know that the Government have announced an increase of £20 billion a year for our NHS—a step that I welcome—but we can only invest that money in our NHS and our public services if we are creating the wealth in the first place. It is the measures in the Budget, including those that cut corporation tax, that will allow us to generate that wealth. It is the measures we have implemented since 2010 that allow us to cut corporation tax.
Leo Docherty
Does my hon. Friend agree that the slashing by one third of business rates for small businesses, which are the backbone of our economy, is further good news for business and is to be welcomed?
Alan Mak
I welcome my hon. Friend’s intervention. He is absolutely right that small businesses in his Aldershot constituency and in my constituency are the backbone of our economy. We want more of those small businesses. That is why we had a record number of start-ups in 2017, which I very much welcome.
The changes to corporation tax in the Budget will increase the take-up of entrepreneurship, increase entrepreneurs’ ability to start a business and ensure that the marginal rate on them is much lower. We will have the lowest rate of corporation tax in the G20, and we will maintain that ultra-competitive edge as we leave the European Union. The OECD’s evidence suggests that the more we cut corporation tax, the higher the rate of revenue we get for our economy. This is a welcome step that will turbo-charge our economy as we leave the European Union.
Finally, Havant is known for its engineering and manufacturing prowess. Manufacturers such as Dunham-Bush, Lewmar and Kenwood export from Havant to countries all around the world. The reforms to the capital allowance rate and the increase in the annual investment allowance will allow them to buy the machinery, plants and technology they need to expand and grow. I welcome the Bill, because this Budget helps taxpayers to keep more of the money they earn, it helps our businesses to grow and it prepares our country to seize the opportunities of the new technologies of the future.
Emma Dent Coad (Kensington) (Lab)
I am glad to see that those on the Government Benches have stopped making fun of our SNP colleagues’ accents. Of course, as a Londoner, I do not have an accent, do I?
I will address finance for housing in London, where many of the problems we experience are common across the nation, and I will begin by giving a little history. In 1966, leading modern movement architect Richard Seifert completed his iconic Centre Point commercial building on Tottenham Court Road. There were no takers for office space at the asking rate, and Harry Hyams, the developer, refused to lower it. This is an important historical point and it was very much debated at the time. It was empty until 1975—the developer got it wrong.
In an area near Soho where homeless people gather, it was inevitable that the building would be occupied for a period. The charity Centrepoint—ironically named after the building—was set up in a nearby church to tackle the problem of street homeless young people. Recently, a huge redevelopment of this building has been completed, with a change of use to residential.
Centre Point Residences is prime residential property next to a Crossrail station. The conversion is magnificent—if you like that kind of thing. However, it was reported two weeks ago that the developer had been unable to sell half the flats at the price he wanted, so he has taken them off the market completely, saying that he had already covered construction costs and leased the retail spaces at ground level—there was “no point” trying to sell. He got his timing wrong. Half the flats will remain empty long term, and there is no incentive to sell or rent them out.
This is the ultimate irony: homeless people line the streets in their hundreds—many, as we know, are servicemen—and they are ever more visible and desperate as winter approaches. Meanwhile, there are a recorded 20,000 empty homes in dark buildings across the capital, and 15,000 high-end properties on the market, and that does not count those taken off the market. Centre Point Residences is a monument to developer greed, and its empty homes distort the market further. It is obscene.
Meanwhile, the chief executive of Persimmon has been able to make a hasty retreat from his job to save the company embarrassment, with a £75 million bonus. Persimmon—which has a very mixed reputation, to put it politely—benefits hugely from Government grants via Help to Buy—another alarming example of the trickle-up economy.
What has the Chancellor done to address these issues in the Budget? He has given a few small inducements for new shared-ownership buyers, including no stamp duty; an extension of Help to Buy; further inducements to convert retail to residential; removal of the borrowing cap for council building programmes; and funding for housing associations. Most of, if not all, those schemes have problems: some inflate housing prices, and a majority still rely upon developers for delivery. The housing revenue account housing cap will apply only to council housing not already transferred to housing associations. That is about half.
In Kensington, in London and in other areas where property is expensive, the delivery of social rented housing still relies upon selling private high-value property, but this market has failed spectacularly. If we leave the provision of housing to the vagaries of the market, with no inducements to ensure people will ever live in the homes built, we will never house our homeless. If we leave disposal of new homes to the conscience of developers, we will never house our homeless.
Let us look briefly at the tax breaks that encourage people into private home ownership, for better or worse, all at the taxpayer’s expense. Council tax, based on 1991 values, is effectively a subsidy to landlords. Capital gains tax relief costs the country about £6 billion a year. The lack of property tax costs, apparently, £11 billion a year. The right-to-buy subsidy costs £2 billion a year. We also have shared-ownership subsidy, tax relief for buy to let, and Help to Buy, which pushes prices up, and indeed even subsidises second homes for those earning six-figure sums.
We need a thorough and honest review and a frank discussion about these subsidies—who in reality they are helping—and whether there are better ways to spend taxpayers’ money to provide stable homes for our families, not embarrassing pay-outs to chief executives.
We need a thorough review and a frank discussion of the role and practice of housing associations, now self-styled “developers with social purpose”, and their management of existing and new buildings. We need to get a grip on construction companies offering apprenticeships, for which many quite simply do not have the capacity, let alone the will. A billion pounds in apprenticeship levy lies unspent. We cannot build without builders. We need a nationwide needs assessment to inform our house building. Evidence is a better guide to housing need than developer greed.
On matters of concern in relation to work being carried out, or not, post Grenfell, the Chancellor’s Budget speech mentioned tax 34 times and housing 10 times, but there was not a single mention of Grenfell—not one. Now, residents are very anxious about the possible effects of toxic soil, after a report in The Guardian some weeks ago.
Emma Dent Coad
I do agree. There are 151 households, many of whom I see, and many of them are experiencing deteriorating mental and physical health, so it does not help that, throughout all this, the council has continued its—shall we say?—reputation-covering exercise.
I was present at a council meeting in mid-October, when the council denied knowing about the report on toxic soil, which had been made in February. Two weeks later, the council admitted it did know about the report. That is eight months of inaction, followed by its usual opaque practice, misrepresentation or, some would say, lies. Now there will be soil toxicity tests, but no funding for this, and it will not happen straight away. The council is going to “think about” screening tests on affected residents, but not straight away. Why is this failing and untrustworthy council still in control of Grenfell-affected people and services? My neighbours want an answer, as do I.
I also live there. I have a veg plot within the radius of the soil tested and have been enjoying it all year. Public Health England’s advice is to wash and peel home-grown vegetables, but how do you peel lettuce? We were told the “Grenfell cough” could be caused by anxiety. Five people I know are coughing blood. Now we are told the “Grenfell cough” is real, but we knew that.
The council stated publicly that no housing blocks in Kensington and Chelsea had combustible cladding, but the truth is that we have two with combustible render. The council is trying to minimise bad publicity, while deciding to strip the combustible envelope, as winter approaches. Residents are scared, upset and angry. Communication is appalling. Last week, the council said that there was no start date to this work. Today, it has said Wednesday.
The council applied to the Government for £50 million for the Grenfell recovery plan, including a lot of this work, but there has been not a penny from the Chancellor. If the Government do not trust the council, why would my constituents?
I have been working with fire safety specialists to try to get a grip on the spectrum of issues related to our current situation. The £400 million announced earlier this year for cladding replacement in council buildings was welcome, but it is not enough. Who will pay for the shortfall? Residents who have bought flats in new developments, some under Government schemes, face bills of tens of thousands of pounds. They do not have it. Who will pay for that?
Around London and nationwide, there are social tenants whose buildings have been unclad. Some are in for a second freezing winter. Who will pay their fuel bills? How many elderly and frail people will we lose this winter because they are too afraid to turn up the heating? Not a penny more has been allocated for this. Is that what the end of austerity looks like? I commend the work of Fuel Poverty Action and various local groups that are campaigning hard on the matter. Money must be found. This is a public health emergency. Cold kills.
That brings me to the work of updating or reinstating fire safety and building regulations. I spend a lot of time with specialists in these fields, too. I will be frank: I heard the policing, fire and Grenfell Minister speaking last week on this issue, and it seems that there is no action now. The Government are thinking about it, but we desperately need some movement on this, and there is no commitment even to upgrade building regulations long term. We are instead informed that the industry will deal with this; the industry will pay. I think the industry will pay itself. I am not convinced we are getting anywhere anytime soon on this, and that is completely unacceptable.
In this midst of this housing crisis, the Secretary of State for Housing, Communities and Local Government has decided to reinstate the much discredited architectural style wars of the 1980s. This is my period; I started as a journalist at that time and I went through that battle. Pitching neo-classical pastiche against the modern movement will not solve our housing crisis. That is a battle of style over substance, and it is based on snobbery and elitism. I have written a dissertation and a half on this very subject. This is a thinly disguised class war. I sincerely hope that the Secretary of State realises that this is based on fallacy, before we start to see poorly constructed Noddy’s Toy Towns such as Poundbury dumped on our green belt. I would be happy to give Members a full lecture on this one day—just let me know.
Architectural style wars are a distraction from the real issue of providing well-designed, well-constructed homes to suit the needs of desperate families, single people, our elderly and people with specific physical needs. There is nothing in the Budget to fix the unholy mess that we are in, post Grenfell. There is nothing in the Budget to address the dishonesty and greed that have been allowed to flourish in the housing and construction industry, and without such provision we cannot tackle the serious housing crisis that we are facing. Distraction techniques and platitudes will not save lives. Shame on you all.
Chris Philp (Croydon South) (Con)
It is a great pleasure to speak in this debate. The Financial Secretary to the Treasury got it right in his introduction—I can see he agrees with that—when he set the financial scene and reminded us of the history of the past eight or so years. When this Government came into office in 2010, we faced an economic crisis of almost unprecedented scale. At around 10% of GDP, the deficit was running out of control and unemployment was at a record high. Over the past eight years, the coalition and then the Conservative Government have worked hard and tirelessly to get our public finances back under control. It has not been an easy task. Had we listened to Labour Members, who frequently challenge our agenda, the deficit would still be extremely high and the debt would be a great deal higher than it is now—[Interruption.] The shadow Minister says from a sedentary position, “You’re joking”, but I have lost count of the number of measures of fiscal responsibility that the Opposition have voted against over the past eight years. Had Labour’s programme been adopted, the deficit and the debt would both be far higher than they are today.
Next year, borrowing is going to be down to about 1.4% of GDP, and it will be down to 0.8% by 2023. Critically, the debt as a proportion of GDP has been falling since 2016. The consequence of not getting our deficit and debt under control is that we pay far more in interest payments. Even today, we are paying around £45 billion a year in interest payments, but if the debt were any higher, as it would have been under Labour’s programme, those debt payments would be higher and the interest rates on that Government debt would be a great deal higher as well. That would mean having much less money to fund vital public services.
Hand in hand with the deficit reduction programme goes the Government’s track record on jobs. The unemployment rate has decreased from around 8% in 2010 to around 4% today, and it is now at a 43-year record low. It has never been lower in my lifetime. To those who say that the jobs that are being created are not high-quality jobs, I would say that 80% of them are full time, and I would remind those who say that they are all zero-hours jobs that only 3% of the jobs in the UK economy involve zero-hours contracts.
This track record of financial responsibility over the past eight years has now enabled a certain amount of fiscal loosening, providing extra money to be spent on public services. Both Opposition Front-Bench spokesmen said that austerity was continuing, but let us look at the Red Book. The cumulative effect of all the Budget measures being announced will result, in 2023 alone—the final year of the forecast period—in a £27 billion fiscal loosening relative to the measures that were in place before. There is no way that anyone can describe a £27 billion a year fiscal loosening as a continuation of austerity. In any case, it is not austerity. Austerity implies that it was a choice. It was not a choice; it was a necessity—
Chris Philp
The hon. Gentleman says that it was a choice, but it was not. We simply cannot go on spending way more every year than we raise in tax revenue, because we would eventually lose the confidence of the bond market, as this country did in 1976. At best, we would end up saddling the next generation with a gigantic bill that they would have to pay off. There is nothing noble, ethical or moral about spending more than we can afford and sending the bill to the next generation.
If we look at the fiscal loosening in the Budget, we can see that the NHS is the principal beneficiary, to the tune of £20 billion a year by the end of the forecast period. More immediately, the Ministry of Defence gets an extra £1 billion and the universal credit system gets an extra £1.7 billion. The shadow Chief Secretary to the Treasury specifically mentioned universal credit in his characteristically lively speech earlier. I remind him that the universal credit system massively strengthens work incentives. Before, we had a system in which effective marginal tax rates were often running at 90% and in which there were cliff edges at 16 and 32 hours, after which people would actually get less money for working more hours.
The Resolution Foundation has carried out research on this. I understand that its chief executive is the former economic adviser to the right hon. Member for Doncaster North (Edward Miliband), and even he says that the total fiscal cost of the universal credit system, with these changes, will be higher than the cost of the old benefits system that it is replacing. So it is going to cost more public money than was being spent before. Universal credit’s track record of getting people off benefits and into work is better than the track record of the benefits system it is replacing. I think that universal credit has been properly funded. It might need a bit of fine tuning in some areas to do with the way in which some of the dates work, and I have spoken to Ministers about some technical changes that could be made. As a whole, however, I believe that the system is fully funded and that it will work.
Chris Stephens
The hon. Gentleman believes that universal credit is fully funded, but has he seen the evidence from DWP staff who are saying that they are spending so much time answering telephone calls that they cannot go through and answer the online journals from claimants? Does he not think that there is a problem there?
Chris Philp
When we introduce any new system that involves 5 million recipients, there will inevitably be some level of operational teething problems. These teething problems are on nothing like the scale of those we saw in the early 2000s when Gordon Brown rolled out tax credits and there was unmitigated chaos for some years.
I have had direct experience of universal credit in my own constituency. Croydon South is the joint highest constituency in the country—with Great Yarmouth, I think—for universal credit roll-out, with 43% of claimants now on universal credit. I estimate that around 4,000 Croydon South constituents are now in receipt of universal credit, and in the past six months I have had 21 complaints or problems raised by constituents. That is obviously 21 too many, but viewed in the context of about 4,000 recipients, it would appear that the teething problems are limited in their extent.
Chris Philp
The growth in the use of food banks is of course a phenomenon that we have seen across western Europe. After the Budget, people on universal credit will be £630 a year better off than they were before—[Interruption.] The hon. Lady shakes her head, but that is a simple fact: the allowance has been increased. As I was saying a moment ago, the Resolution Foundation has found that the Government will be spending more money on universal credit following the Budget changes than would have been the case under the old benefits system. I would further point out that the track record of getting people off benefits and into work is better under universal credit than it was under the old benefits system. The way to combat poverty and create prosperity is to get people into work.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I am listening carefully to the hon. Gentleman, but he does not seem to be aware that many of the people on universal credit are working.
Chris Philp
I realise that many people on universal credit are working. It is, by definition, an in-work benefit. The point I am making is that it is encouraging more people to take more hours, and it is encouraging people who are not working at all—[Interruption.] I would be happy to take another intervention from the hon. Lady, but perhaps she would like to listen to the answer to her first one. Universal credit is encouraging people who are not working at all to get into work, which is why unemployment is at a 43-year low. A legitimate question that she might ask is whether work is paying enough. This Government have successively increased the level of the minimum wage. This Budget increases it to £8.21 as of next April. That is up from £5.93 in 2010, which is a 38% increase. As I said in my intervention on the Financial Secretary, when we combine that with the increase in the personal allowance, from some £6,500 to £12,500 from next April, the post-tax income of someone on the minimum wage working full time—40 hours a week—has gone up by 44% over that eight-year period. Over the same time, inflation was 25%. So the personal allowance changes and the minimum wage increase have helped people on low incomes more than any other group. That is why income inequality is at a significantly lower level today than it was in 2010.
I turn for a moment to Labour’s plans. Inevitably, they involve spending a great deal of money—more money than contemplated even in the Budget. There is no great merit in spending more than we can afford today if we send the bill to our children and our grandchildren, saddling them with debt and burdening the Exchequer with very high interest charges, which are already high, at some £45 billion a year. As for Labour’s mass nationalisation programme, which it says is fiscally neutral, I point out that the last time we had mass nationalised industries—up to the 1980s—they tended to be grossly loss-making and required taxpayer subsidy, rather than generating revenue for the Exchequer. To assume that a mass nationalisation programme would be fiscally neutral is a dangerous assumption.
It seems to be assumed that the only measure of a Government’s effectiveness—or compassion—is the total amount that they spend. Of course it is important to fund public services properly, but it is the outcomes that matter, rather than the amount of money spent. Gordon Brown’s mistake was always to confuse spending money with success, when what actually matters is outcomes.
In education, for example, 86% of pupils are now in schools rated good or outstanding, compared with 68% in 2010. Notwithstanding any points that may be made about the funding levels in schools—and finding room to spend more is always welcome—the fact is that children are getting a better education today than they were eight years ago, according to Ofsted, which we can agree is an impartial observer. To the extent that the opportunity to loosen fiscally allows us to spend a little more, especially on services such as the police, it will of course be extremely welcome.
When the SNP leader replied to the Budget, he made some points about Brexit and the risks it poses. Some 61% of Scotland’s exports go to the rest of the UK, and only 17% go to the European Union. The single market that is of the most importance to Scotland, by a factor of about 4, is the United Kingdom single market—[Hon. Members: “Hear, hear.”] I see that view has support from my colleagues. That is the single market that the SNP should focus on most, because it is the one on which their prosperity most depends.
As many hon. Members wish to speak, I shall conclude shortly—[Interruption.] However, I would not want to disappoint Opposition Front Benchers by concluding too soon, so before doing so I wish to thank the Chancellor for the business rate change that he announced in the Budget. Cutting business rates for 90% of the high street—any business with a rateable value of less than £52,000—is a welcome move, and will do something to level the tax playing field. High street stores, which use real estate intensively, suffer a tax disadvantage relative to online companies. Online multinational companies also use lawful, but creative mechanisms so that they do not pay as much corporation tax as our high street shops. The business rate cut for smaller shops will really help them and I strongly welcome it.
One measure on entrepreneurship that I commend to the Chancellor for future Budgets is something that is close to my heart. Before being elected, I set up and ran businesses for 15 years. I set up the first one when I was 24 and floated it on AIM four years later—[Interruption.] I thank Opposition Front Benchers for promoting my career, but I am happy where I am. In setting up and growing that business and others, we benefited from all kinds of relief, including the enterprise investment scheme and entrepreneurs relief. I particularly commend the seed enterprise investment scheme, which is very effective in getting money into complete start-ups—companies being started from scratch. It is a very effective tax break for getting individuals to invest in greenfield start-up companies. I should declare an interest as my wife recently set up a company that used SEIS to raise capital. The limit is low—£150,000 per company—but it is very effective in getting individuals to make investments. The fiscal cost is quite low: according to Treasury figures it is about £110 million a year. I suggest that future Budgets may have scope to increase the £150,000 per company limit to encourage further significant investment in start-ups at relatively low fiscal costs—I can see the shadow Chief Secretary getting his pen out to write this down. I commend that idea to the Chancellor for future budgets.
I thank the Chancellor for the welcome business rate cut. I commend him and the Financial Secretary for delivering record high employment, record low unemployment and getting our public finances firmly back under control. Had we listened to the Opposition Front-Bench team, we would still be facing financially ruinous debt bills. It will be my pleasure to vote for the Second Reading later tonight.
Sir Vince Cable (Twickenham) (LD)
I wish to say a few words in support of the amendment in my name, about the economic context and specifically on some of the tax measures. Everything we are talking about, whether on the tax side or the spending side, depends on the overall performance of the economy and economic growth. This year, we have had fluctuations from one quarter to another, but the assumption is that growth is about 1.5%. According to the independent OBR, it will continue at about that rate for the next five years. As the hon. Member for Aberdeen North (Kirsty Blackman) reminded us, that not terribly optimistic picture is based on optimistic assumptions about the outturn of the Brexit negotiations that may of course not be realised.
There are two underlying reasons why the British economy is growing at just over what it was for the whole of the post-war period up to the financial crisis. One is the serious problem of productivity—a problem that has existed since the financial crisis. A paper was published this morning by analysts from Stanford and Nottingham who looked at why productivity performance is so poor at the moment. After an exhaustive survey, they found that the problem was that high-performing companies in the UK, in productivity terms, had fallen back very badly. The main reason is that those high-performing companies do a lot of a trade, in particular with the single market, and uncertainty has caused their performance to deteriorate. That is reinforced by the second element in the slowing of growth, which is poor business investment—less than half of 1% in terms of fixed business investment last year, and that is clearly a function of the uncertainty that is hanging over the economy because of the Brexit exercise.
I suspect that quite a lot of Members thought that the Finance Bill would be some light relief from the Brexit debate, but unfortunately it hangs over everything. It is the elephant in the room and it explains the economic problems that we face. There was an interesting debate between Conservative Members that, because of the adversarial way we discuss things, was rather glossed over. The hon. Member for Gainsborough (Sir Edward Leigh) and, in the Budget debate, the right hon. and learned Member for Rushcliffe (Mr Clarke) expressed the strong view that the Chancellor was taking too many risks and the Budget should have been a good deal tighter than it was. Today we heard the exact opposite argument from the right hon. Member for Wokingham (John Redwood)—that it was far too tight and should have been more relaxed. It was an important debate, and it would be interesting to know how Ministers will combat the arguments from those formidable people.
I will highlight one particular aspect of that debate. This is not a party political point—it happened in the coalition—but the Government continue to refer to the deficit as if it is the same as Government borrowing. Well, of course it is not. The Government borrow for different reasons. They borrow to cover the current deficit and they borrow for investment. Just as companies borrow to invest, the Government sensibly do so. The problem with the current trajectory, as I understand from the Red Book, is that we are potentially heading for yet another squeeze in capital spending. Perhaps the Paymaster General can correct this, but my understanding is that CDEL, which is awful Treasury speak for capital spending, is due to fall next year, 2019-20, as a consequence of the attempt to maintain borrowing at moderate levels while at the same time expanding the current Budget. Perhaps he will enlighten us, because if it is true we are doing potentially serious damage to infrastructure that has been starved of capital for many years, as well as to public sector housing and much else.
I would also like clarification on the overall tax burden of the economy. There is a sleight of hand in this Budget. On the one hand, the Government have given tax cuts, but on the other hand—as a consequence of the squeeze on local government spending, which continues unabated and is having a severe impact on local services—council tax will almost certainly have to rise because councils are severely stretched and are providing inadequate services. In some cases, they are approaching bankruptcy and cannot meet their legal obligations. It is not restricted to any one party but, by and large, Conservative county councils are in this position.
Council tax will have to rise, and, in some cases, it probably should have risen earlier. There is nothing in the Red Book that tells us how much revenue local authorities actually get from council tax. That is rather an important figure, and it is important that we see a future projection, which would give us a much clearer picture of what is happening to taxation. On the one hand, the Government are offering direct tax cuts, and on the other they are offering increases in council tax, which at least in income terms is one of the most regressive taxes of all.
The Government have provided substantial additional funding for the national health service for several years ahead, and rightly so, but there is no such guarantee for personal care beyond next year. That matters, because the shortfall in care will fall on the NHS.
Several Conservative Members have been bobbing up and down to ask why we do not take a cross-party approach to this problem. Of course we should—this is a long-term problem—but memories are short, or maybe they are recent Conservative Members, because there have been repeated attempts at cross-party agreement on personal care financing. There was an attempt before 2010, which the then Conservative spokesman, Andrew Lansley, pulled out of on the grounds that it constituted a death tax. We then had another attempt in the coalition, when Andrew Dilnot did an authoritative piece of work for us. We reached a consensus and both sides of the coalition agreed to it, and then, come 2015, the key implementation measures were not introduced, so we are back where we were before. Ten years later, and after several attempts at cross-party consultation, there has been no progress, which is why care funding is in such terrible difficulty.
Chris Philp
I have been looking at the Red Book while the right hon. Gentleman has been speaking. He asked two questions. First, he asked about council tax receipts, which will be £34 billion this year and are forecast to rise to £40 billion in 2023-24. Secondly, he asked about CDEL, which is £50.2 billion in the current financial year and is forecast to rise to £65.5 billion by 2020-21.
Sir Vince Cable
I think there are separate sets of figures, but I thank the hon. Gentleman for his clarification. His first point is particularly interesting, and I thank him for his rapid desktop research. His figures suggest there is potentially a very big tax increase in the pipeline, which is one of the assumptions in the Budget that was not spelled out on Budget day.
Kirsty Blackman
Last year’s Red Book explicitly mentioned the impact of immigration and population change on public sector borrowing, and it said that, as the population increased with net migration increasing, public sector net debt would fall. Does the right hon. Gentleman share my concerns about the likely impact of a future immigration Bill on the public finances?
Sir Vince Cable
Yes. All the evidence we have shows that net migration has had a positive effect not only on the economy, in per capita terms, but on Government revenue because, by and large, these are young people who work and pay tax revenue to the Government. I totally share the hon. Lady’s concerns about future immigration legislation.
Kevin Hollinrake
The right hon. Gentleman spoke earlier about cross-party consensus on social care. Is he aware of the joint report of the Health and Social Care Committee and the Housing, Communities and Local Government Committee? One of its recommendations was for a social care premium—social insurance of the type used in Germany—to solve this problem. There are no Liberal Democrats on those Committees but will his party nevertheless support such a cross-party approach?
Sir Vince Cable
That was at the heart of the Dilnot proposals that Lib Dem Ministers sponsored and supported in government. If that is the idea, we do not have any problem.
On the income tax changes, and particularly the lifting of the higher-rate threshold at a cost of about £1.3 billion, I certainly do not regard people on £50,000 a year as rich—they have a lower income than we do, among other things—and, in an ideal world in which there was plenty of tax revenue and the economy was booming, lifting the threshold would be perfectly reasonable, but given other priorities it is a bad choice. As it happens, that £1.3 billion is equal to the shortfall between the amount of money the previous Chancellor took from universal credit two years ago and the amount that was reinstated this year. Filling that shortfall would be a much better use of the funding.
Julian Knight
Has the right hon. Gentleman thought about the effect of fiscal drag on productivity? The fact is that, as more people get into the higher-rate tax bracket, the less productive they may become, which lowers tax receipts and lowers productivity in the economy.
Sir Vince Cable
It is a good policy, in general, to eliminate fiscal drag, and the Government should do that. But it is a question of priorities, and the disparity between standard-rate taxpayers, who stand to gain £130 a year from this measure, and upper-rate taxpayers, who stand to get £800 a year, reflects the Government’s priorities, which are completely wrong.
It would be less bad if the Chancellor had been willing to tackle something that he acknowledges is a problem, which is the expense of the reliefs given to higher-rate taxpayers through the pension system. He described the pension tax relief, which costs the Treasury £25 billion a year, as “eye-wateringly expensive”. We started to approach it in coalition, and, in a difficult fiscal situation, this is something that the Government should be addressing here, but they are not. However fair-minded we want to be to all groups of taxpayers, it is very clear that this is a political gesture. The social priorities are completely wrong.
It is very welcome that there has been a big relief for shopkeepers and others through the business rates system, but it does not address the underlying problem that business rates are a bad tax—they tax improvement in property. The Liberal Democrats and some of the think-tanks have been associated with another proposal, and it would not be difficult to replace the business rates system with a tax on commercial landowners. That would be a much simpler system, as there are far fewer landowners than there are people who pay commercial rates. It would be much more equitable, and it would not discourage business improvement. Currently if a factory installs machinery, it makes itself eligible for higher commercial rates. This is a thoroughly bad system, and extreme Treasury conservatism is why the problem is not being addressed.
One thing the Government have done, which is positive, is attempt to deal with the digital sector, but I reinforce the point made by the hon. Member for Dundee East (Stewart Hosie) that the magnitudes involved are very small. We are talking about £5 million next year, rising to £440 million, in a context where the National Audit Office, not a political body, has estimated that the retail sector in the UK had lost £9 billion of revenue as a result of competition from internet platform companies—in essence, we are talking about eBay and Amazon. The disproportion is enormous and the measure, although welcome, is very weak.
To conclude, there are a lot of small, sensible things in this Budget—I do not want to be grudging about them—but the big picture is dire, and the big Budget judgment, which is about giving priority to reducing income tax, is fundamentally wrong.
Colin Clark (Gordon) (Con)
It is an honour to follow the right hon. Member for Twickenham (Sir Vince Cable), who had government experience at the Department for Business, Energy and Industrial Strategy and therefore will support what is clearly a Finance Bill supporting business and the economy.
I rise to support the Bill and to recognise that this Government are focused on the economy. I declare an interest, as a business investor and business person. Hon. Members have applauded growth forecasts; employment has been revised up and wages are set to rise. I think we can all recognise that these are obviously good things. The OBR can give us all comfort that the estimates are independent and therefore scrutinised. Economic growth is vital to our public services and for household incomes, and it is what delivers living standards for all our citizens.
I wish to focus on income tax. The Chancellor has fulfilled our promise to raise the personal allowance to £12,500 and increase the higher rate threshold to £50,000. Nearly 1 million fewer people will pay the higher rate of income tax. We have a responsibility to ensure that the tax burden is fair and that the economy grows—surely that is what the purpose of government is. Conservative Members want to see the whole cake grow; we do not want to see just bigger and bigger slices taken of a smaller cake. We should not demonise the wealth creators, the job creators and those who drive the economy.
The £50,000 threshold benefits many public sector employees, such as headteachers, consultants, GPs, senior council officers, senior police officers and senior nurses. The threshold lifts 1 million people out, including middle management, engineers and pilots—the list goes on and on. As the right hon. Member for Twickenham said, these are not the fabled rich, who are condemned. How this measure is not progressive is beyond me.
Colin Clark
I thank the hon. Lady for the intervention. I think she will be well aware that many people in the public sector, including those in hospital management, and those who may go on from being nurses to being in hospital management, are paid substantially more than £50,000.
The OBR is concerned about this next issue. My hon. Friend the Member for Dumfries and Galloway (Mr Jack) asked the Financial Secretary about tax divergence, which is very much the crunch, as it has the potential to affect my constituency. The Financial Secretary mentioned that 1% of the population are paying 28% of tax—in Scotland, that constitutes 19,500 taxpayers. The OBR recently reported to the Treasury Committee that the number of higher taxpayers is lower in Scotland than it estimated, and this has actually cost Scotland between £550 million and £700 million in respect of the original estimate. The OBR said:
“It implies that a much lower share of UK-wide income tax is coming from Scottish taxpayers.”
That means the Scottish economy is more vulnerable to losing higher rate taxpayers, which is a serious consideration, because it affects the growth of the Scottish economy. As Scotland is part of the United Kingdom, it should concern us all. The Scottish economy is clearly vulnerable to the loss of these higher rate taxpayers, and it would look as though they are already beginning to move; they are already beginning to react to the divergence.
The OBR gave evidence on how people, for tax purposes, could change their behaviour. It talked about
“a relatively high income individual with a property in Scotland and one elsewhere in the UK, writing to HMRC to say, ‘I live more than half the year”
somewhere else. That would mean that their tax would be paid elsewhere in the UK. Here is the absolute proof that cutting tax rates increases the tax take. As was said by my right hon. Friend the Member for Wokingham (John Redwood), who is no longer in his place, if there is tax divergence, people will vote with their feet. They are already doing that, as we are seeing the tax take falling in Scotland. [Interruption.] Would the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) like to intervene? No, he would not. Labour should look closely at Scotland and it should be a lesson on why not to raise taxes.
Chris Stephens
The hon. Gentleman needs to be careful with this argument, which I have heard expressed before. Is he seriously encouraging people to engage in tax avoidance?
Colin Clark
It is interesting that the hon. Gentleman talks about “tax avoidance” because there is no tax avoidance in this. If we are losing people who would be paying higher tax rates in Scotland because they are choosing not to move to Scotland or they are registering their addresses in England because they spend a lot of their time in England, that is a loss to Scotland, because Scotland is getting greater tax independence. It is interesting that Scottish National party Members will talk about tax avoidance, because this is the demonisation of people who are paying a higher rate of tax. They are not the enemy; they are the friends of the Scottish economy.
Chris Stephens
Is the hon. Gentleman seriously suggesting that people in Scotland should register themselves in England in order to pay less tax? With all due respect to him, I would have to say that many of us would view that as tax avoidance. [Interruption.]
Colin Clark
As my colleagues are saying from a sedentary position, these people are being driven away. The actions of the Scottish Government are leading to divergence in tax rates between Scotland and England, and that is damaging the Scottish economy.
Stephen Kerr (Stirling) (Con)
Why does my hon. Friend feel that the SNP Government in Scotland are so against aspiration?
Colin Clark
I do not know and I really cannot understand it. Now that the Scottish Government are getting tax independence, one would think that they would want to grow the entire economy, instead of damaging parts of it. This should be a salient lesson that tax divergence is damaging; making your country uncompetitive will hurt services. It will cost higher rate taxpayers in Scotland £2,000 to £3,000 more per £100,000 of income. That means that a consultant in Newcastle may not choose to come to Aberdeen Royal Infirmary, which supports my constituency, and that would be very damaging for the public services.
The Finance Bill stimulates the economy; lower taxes will grow the economy. The hon. Member for Aberdeen North (Kirsty Blackman) is no longer in her seat, but she mentioned a transferable tax history, which is estimated to stimulate the oil and gas industry by £30 billion of investment. I consider that an enormous figure, not a small change. Fiscal stability will benefit the oil and gas industry, and we are grateful to the Chancellor that that is still the target of this Government. Slashing business rates, as the Chancellor has promised, will benefit businesses. However, of course, slashing business rates is not going to happen in Scotland, because that is a devolved matter; the north-east of Scotland got half of the increase in tax, which is damaging businesses in my constituency and other north-east constituencies. Buildings in the north-east of Scotland are being demolished because empty building rates—
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Am I hearing the hon. Gentleman right? Is he completely ignoring the some 100,000 small businesses that have benefited from paying no business rates at all because of the Scottish Government’s small business bonus?
Colin Clark
I remind the hon. Gentleman that businesses in the north-east of Scotland—large employers there—are considering knocking down warehouses and large offices, which are not redundant, as they are still fresh and good buildings. That is happening in the north-east of Scotland. One such building in my constituency, which had 2,500 office workers, may well be lost very soon.
Colin Clark
I shall carry on speaking to you, Mr Deputy Speaker, rather than to the hon. Gentleman, who speaks from a sedentary position. I would welcome the Chancellor’s business rates commitments—
Drew Hendry
I am keen to see how the hon. Gentleman provides evidence to support these accusations that people are knocking down buildings and fleeing their country.
Colin Clark
I could recommend to the hon. Gentleman that he reads the famous The Press and Journal, which I was in just under a year ago, standing in front of a building that had just been knocked down and which used to house 500 people in an office—I shall send him a signed copy of it. Buildings are being demolished in the north-east of Scotland.
Colin Clark
That must be of enormous importance to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry).
I shall support the Bill and the UK economy. Most importantly, I shall support a Finance Bill that supports jobs.
Faisal Rashid (Warrington South) (Lab)
I wish to focus on two main issues that have already been mentioned by quite a few Members. The centrepiece of the Budget and, in turn, the Bill is the Chancellor’s decision to bring forward the increases to the income-tax thresholds, which has been praised by many Members today. From April 2019, the income tax personal allowance will increase to £12,500 and the higher-rate threshold will increase to £50,000. These increases will come a year earlier than planned, and the thresholds will then be frozen for a year.
Since his announcement, the Chancellor has been basking in praise from Conservative Members for his generosity, when in reality it is a relatively meagre giveaway. In its post-Budget analysis, the Institute for Fiscal Studies highlighted the fact that had the Chancellor allowed the thresholds to increase in line with inflation, as they do by default, they would have reached £12,390 and £48,590 respectively by 2020. That clearly shows that the Chancellor’s income tax commitment is little more than a tokenistic attempt to sustain the myth that the Government are ending austerity. He would have us believe that these policy changes are designed to benefit the low and middle-earners in this country, but once the empty rhetoric is stripped away, the reality is quite different.
Extensive post-Budget analysis from a variety of organisations all comes to the same clear conclusion: the raising of the income tax thresholds will disproportionately benefit the wealthiest individuals and families. Resolution Foundation analysis clearly shows that 84% of gains from the income tax cut will flow into the top half of the income distribution, and almost half will go to the top 10% of households alone. Although both basic-rate and higher-rate taxpayers will benefit from the increases in some way, the scale of the benefit is drastically different. According to the IFS, the typical basic-rate taxpayer will gain £21 per year in 2020-21, while in the same timeframe the typical higher-rate taxpayer will gain £156 per year. That sum is the only meagre offering in the Budget for those people who have borne the brunt of eight years of benefit cuts and pay freezes.
To make matters worse, for some the increase in the personal allowance, coupled with the Government’s inaction on pension tax relief, will mean that they will lose out on the tax relief on their pension contributions. Ahead of the Budget, campaigners including Age UK, Now: Pensions and two former Pensions Ministers, Steve Webb and Ros Altmann, wrote to the Chancellor to urge him to use the Budget and Finance Bill to take action to set straight an inconsistency in the tax rules. According to the Low Incomes Tax Reform Group, together the higher personal allowance and increased contribution rate will mean that the minimum pension contribution for someone earning £12,500 will now cost them £323.40—an increase of £64, or a week’s food shopping for a family or a tank of petrol for the family car. The inconsistency already affected more than 1 million people; with the Budget changes, it will now impact many more.
The Chancellor’s refusal to use the Budget to rectify the issues facing low earners who have fallen victim to a pension lottery is just one of many examples of inaction in the Budget. The Chancellor also failed to use the Budget to halt the roll-out of universal credit; to provide the long-term funding that is desperately needed for social care and mental health services; to end the funding crisis facing public services; and to address the funding gap facing local authorities. That is to name but a few.
Another main issue is the police cuts, with 21,000 fewer police officers. Just in Cheshire, where my constituency is, £60 million has been cut from the police, with a further £12 million to come. The police and crime commissioner and acting chief constable wrote to me a couple of weeks ago to say that it will be very difficult to sustain those cuts and provide the services. It is important that we provide security for our communities. If we do not, it will be difficult for people to come to this country and to invest, as well. It all depends not only on how we create economic activity but on how we provide a safe environment. That is absolutely key. I urge the Government to increase police funding.
Use of food banks is increasing. As the hon. Member for Aberdeen North (Kirsty Blackman) said so eloquently, just saying that austerity has ended does not mean that it has ended, unless the right action is taken and policies put in place. How can we say that austerity has ended when the use of food banks is on the rise, crime is rising, homelessness is rising, NHS waiting times are increasing and councils are struggling? We are talking about the basic services provided by councils—what can they do? Councils are going bankrupt. The Government need to look into that. Austerity has not ended.
Along with my Labour colleagues, I will continue to urge the Government to adopt a fair taxation system. This Finance Bill is nothing more than half measures and tax giveaways. It does nothing to address eight years of economic failure and it fails to include measures that would create a truly progressive tax system, address tax avoidance and close the tax gap. It is time for radical reform of our entire tax system. Only then can we truly transform our economy and ensure a fairer taxation system that shifts the emphasis on to those best able to afford it. Sadly, as it stands today under a Tory Government, we are left with a Finance Bill that will disproportionately affect those people who are already struggling to make ends meet.
Alex Chalk (Cheltenham) (Con)
What a pleasure it is to follow the hon. Member for Warrington South (Faisal Rashid), but I profoundly disagree with what he has just said. In his last point, he referred to eight years of economic failure, but nothing could be further from the truth. It is worth pausing for a moment to consider some key figures. In 2010, this country was spending a total of £700 billion or so a year and bringing in just £548 billion of tax revenue. In other words, a full £152 billion was borrowed. Fast forward eight years, and this country will spend £842 billion in the next financial year. Why? Because the economy has grown by 17% in that time. Crucially, of that £842 billion, a full £810 billion will be raised in tax revenues. In other words, that £152 billion deficit has shrunk, and shrunk dramatically. The reality is that a country that in 2010 was staring into the abyss can now look forward to a future and say, “Our best days are ahead.” Had this country not got on top of its finances over the past eight years, it would have been not the rich who would have suffered but the poor, the needy, the vulnerable and the hungry. If we look at countries such as Greece and Venezuela that have lost control of their finances, we see that it is the poorest in society who suffer most.
It is important to note a point that increasingly seems to be lost but should not be, and that is how far we have come in respect of employment. The country risks taking it for granted. We have 3 million more jobs than in 2010. In 2010, unemployment had gone up by half a million; that is half a million people whose futures were curtailed, whose opportunities were reduced and whose dreams were eroded. Unemployment means misery, lack of self-esteem and wasted potential. It means hollowed-out communities and a corrosive sense of despair. We should reflect on the successes that have happened since 2010.
Unemployment in our country today stands at just 4%. In Cheltenham, it is under 2%, compared with the rate in France, which is 9%. It is 8% in the eurozone. In Italy, youth unemployment stands at 32%. When I speak to young people in my constituency—last week over the recess, I was speaking to young people at St Mark’s Junior School—I am able to say that, as they grow up and reach the age of 18, I want them to be in a position where they can choose whether to go to university, which is fine, or whether to have an apprenticeship, which is also fine, but, if they want to go into the world of work, driving true social mobility, there also are opportunities for them to do so.
Danielle Rowley (Midlothian) (Lab)
The hon. Gentleman talked about success. Unemployment may be falling, but in-work poverty is rising much more quickly. Is that a success?
Alex Chalk
Income inequality is declining. Any poverty is, of course, something that we want to address, but the best route out of poverty is through employment. If we were to ask individuals whether we should turn the clock back to 2010 when we had half a million more people unemployed, I do not think that they would choose to do so. The reality is that there is no true economic strength without fairness.
I must take issue again with the point made by the hon. Member for Warrington South. He suggested that raising the personal allowance a year early to £12,500, resulted in only “meagre” benefits—that was his expression. For the average family in my constituency, two wage earners each earning the average wage of about £28,000, that will mean a combined addition to the family budget of £260 a year. Does he want to stand up and seriously suggest that that is a meagre benefit? Does he? It is not a meagre benefit. It is more money in people’s pockets to focus on their priorities—on support for their children, support for their futures and support for their daily lives.
Strong families and strong communities require strong healthcare. It is important to note what managing the economy—taking a balanced approach—means for healthcare. It was the Leader of the Opposition who suggested during the last election that a 2.2% increase in health spending would make the NHS the “envy of the world”. Well, it is this Government who will be spending 3.4% above inflation every year. The figures are stark: the total budget will go from about £122 billion a year today to £149 billion a year in 2023—a real-terms increase above inflation of £20.5 billion a year.
Alex Chalk
It is critically important that we do not have a cap for those people who want to become nurses. One thing I found very depressing when I was first elected back in 2015 was that people wrote to me saying, “I want to become a nurse, but I can’t become a nurse, and yet the trust is off taking trips to other parts of the world to recruit nurses from overseas, while I cannot do it here in the UK.” That is something that we should not allow to continue. It is important that the money is spent in the communities that require it. In Cheltenham at the moment, trust managers want to shift all general surgery facilities from Cheltenham to Gloucester, but, as 58 clinicians wrote only today, that would be a mistake. It would be unsatisfactory for care in the whole of Gloucestershire, and I am calling on the trust to think again.
There was also £400 million for potholes, which is a priority for my constituents and something that I take very seriously as well. That is an extra £8 million or so for Gloucestershire. I also welcome the measures to safeguard businesses in our high streets. We all know that they are facing increased pressures, but to take a third off the business rate bill of small businesses in my constituency is a shot in the arm for our high streets and is something of which we can be proud. When I went round high streets in Cheltenham over the weekend, the news from the Chancellor was welcomed. Businesses could look towards a future with real optimism. The scope to roll out these measures is only provided by managing the economy fairly and sensibly. We do not take measures simply because we take some pleasure in eradicating the deficit for the sake of it; we do so because we want to create opportunity in our society. We want to say to our young people, “Be brave and be bold about the future because it is an exciting future.” A country that loses control of its finances loses control of the prospects of its young people. That is why I take pride in what the Chancellor has delivered and why we can say in confidence across this House that the United Kingdom’s best days lie ahead.
Carolyn Harris (Swansea East) (Lab)
I rise to speak today to express my sheer frustration at the refusal of this Government to change the implementation date for the stake reduction on fixed odds betting terminals. A six months’ delay from April 2019 to October 2019 may appear to be a short period, but in that six months, the bookies stand to gain nearly £1 billion profit, while many families will lose a loved one.
The industry has known about the stake reduction since April this year, yet, arrogantly, it has made no plans to alter the technical capacities of the machines, and we have to ask ourselves why. Why has it refused to authorise the necessary changes? Why has it refused to accept the moral argument that these machines are dangerous? And how has it been able to use a flawed report, funded by it and structured only to support its argument, to convince this Government to stall the implementation date? Every day snippets appear in the press suggesting that things are not as they should be when it comes to this decision. Private conversations with no opportunity for scrutiny seem to have had more influence than the evidence of the all-party group on FOBTs, the Church, the voluntary sector and, most importantly, the families of those affected and the gamblers themselves.
Unfortunately for this Government, the strength of feeling right across this House regarding this shocking decision to delay the stake reduction will have consequences that may make their position very uncomfortable. I urge the Treasury to accept that it is wrong; that the decision that it has made is immoral; and that people’s lives are more important than the bookies’ profits. However, if the Government are not prepared to do the right thing, I and 76 Members across this House are prepared to do so. We will table a new clause and an amendment after the Second Reading debate tonight to ensure that the real story behind these dreadful machines is heard on the Floor of this House.
Thank you, Mr Deputy Speaker, for giving me this brief opportunity to raise this issue about which I am passionate and to which I am committed.
Julian Knight (Solihull) (Con)
Thank you, Mr Deputy Speaker, for letting me speak a bit earlier than I expected. It is a great pleasure to be called so early and I will not abuse that generosity by speaking for too long, because I know that many colleagues want to speak in the debate. I just wish to cover a few areas that have come up in the debate and the Budget more generally: first, the higher rate tax thresholds, which have been mentioned by many hon. Members; secondly, corporation tax and small businesses; thirdly, debt, which my right hon. Friend the Member for Wokingham (John Redwood) spoke about so interestingly; and, finally, fuel duty and car taxes more generally, which is pertinent to my constituency, with its 9,500 car workers.
On the higher rate tax, I was interested in what was said by the right hon. Member for Twickenham (Sir Vince Cable), who is no longer in his place. There is an amendment in the name of all the Liberal Democrats and it is good to see them here this evening in such numbers. The amendment mentioned the
“provision for a £1.3 billion tax cut for higher earners”.
I pressed the right hon. Gentleman to explain what that would actually mean for productivity and for what we term fiscal drag, a term first used when Gordon Brown was Chancellor of the Exchequer. It happened in the early part of the Labour Government, which came to office in 1997, and was eased over time. In 2010, it was decided, as an issue of morality, that we would also freeze the higher rate of income tax at the threshold. The reality is, however, that in the long term that has quite a damaging effect on the economy. It means that people are being brought into the higher rate of tax who really should not be there. I know that in my constituency there will be, for example, deputy headteachers, locum GPs and middle managers in local government who are paying the higher rate of tax. They would not have done so within the last generation, but they do now.
When people—this applies in the private sector as well—who pay the higher rate of tax are offered any extra work or overtime, they make a calculation: “Do I take that or do I trade that off against what my tax will be as a result of this?” If people are being charged too much tax at this marginal rate, that reduces productivity, and that, in itself, has a damaging effect on the economy. As my hon. Friend the Member for Dover (Charlie Elphicke) mentioned, in 1987, the then Chancellor, Nigel Lawson, lowered the rate of tax from 60p in the pound to 40p in the pound—and guess what? We actually took more tax in as a result.
This is a fundamental point that also applies to corporation tax. Labour Members have made their views very clear in that they would like a restitution of the rate of 26% for large businesses and 21% for small businesses. However, with regard to corporation tax, the proof of the pudding is in the eating—that is, employment. As my hon. Friend the Member for Cheltenham (Alex Chalk) said, the unemployment rate in the UK is 4%. I grew up in a town in the north of England in the 1980s, when the unemployment rate was about 25%. We went through a horrendous recession in our light industrial town. We could not even dream of a rate of 4% at that time. In the EU, unemployment is 8%, on average, and it is 9% in France. My hon. Friend also mentioned Italy and Spain. Think about all those lost opportunities and lost lives through high unemployment. This beds down in communities—I have seen it for myself. The way in which we bring about a culture of work and of higher employment is fundamental to the development not just of productivity but of our society itself.
Alex Chalk
Does my hon. Friend agree that unemployment has such a crushing effect on self-esteem and self-worth, and that that is one of the key reasons we should celebrate increased employment—not just for the sake of statistics but because of the individuals whose life chances lie behind them?
Julian Knight
I thank my hon. Friend for his intervention—that is absolutely true. If someone is unemployed for 18 months, they are often unemployed for the very long term—for the rest of their life, in some instances. It ruins lives, shortens lives and makes those lives more miserable.
The way in which we have approached corporation tax is absolutely correct. On small business rate relief, my hon. Friend, again—I do not wish to just copy his speech—talked about how that had been very well received in his business community and on his high street. It is a blessed relief that will bring a much-needed boost to our small businesses and to our high streets, which we have to nurture. We cannot have the high street of just the bookmaker, the pub next door, and the charity shop—although charity shops do very valuable work. We need diversity in the high street, not just in terms of retail but living space, opportunity, health and social services.
On debt, as I said in the Budget debate, with a ratio of 82% to GDP, we really should not give ourselves a pat on the back. It is not a good place to be at all. It makes us less likely and less able to effectively withstand the winds of global recession that happen on a cyclical basis. However, we have chosen a path by which, over time, we bring that under control. There are two ways to reduce the GDP-to-debt ratio: through productivity or inflation. The choice of British Governments, for years and years, was inflation. Inflation is a fool’s errand: it destroys living standards and destroys savings. The second approach is productivity. I am really pleased to see in the Red Book that many elements of this Budget really focus and home in on productivity, but we need to keep that going. We need a step change in our economy in this respect.
I turn to what I call car taxes. As the vice-chair of the APPG on fair fuel, and the former chair of said august APPG, I am absolutely delighted to see the freeze in fuel duty. However, I want to make a point about diesel cars in this respect. That is not, obviously, just because my constituency has 9,500 workers in this sector and 93% of the engines that come off the track are diesel cars. We have seen a 45% fall in diesel sales, and that hurts the Exchequer.
This problem originated in Wolfsburg. The irony is that the Germans are now changing their approach with regard to diesel, so the originators of the difficulty within the diesel market are now looking at the market and saying, “Hold on a minute—we need to ensure that clean, modern diesels are supported.” We have a higher excise duty on modern, clean diesels. According to the AA, 270 of the diesel cars currently tested are now within tolerance in that respect. If we have this disincentive, people will hold on to their older cars for longer. These cars can run for a quarter of a million miles—I know; I have one. That means that the older EU5 and EU4 engines will stay on the road longer and pollute more. We need to get really smart about this and construct the tax system to support all modern petrol and diesel engines while, at the same time, aiding the transition towards new technologies.
On the Budget as a whole, it is quite remarkable to note, as a former personal finance journalist, how we used to have a merry time pulling Budgets apart. We could almost guarantee that, by the end of the first day, we would have something to go at the Government on. With this one, that is not the case. That is a testament to the Chancellor and the team. I will be absolutely delighted to vote for this Bill tonight.
Karen Lee (Lincoln) (Lab)
Living standards in this country are a national disgrace. The “little extras” Budget did nothing to address society’s systemic issues and continued to prioritise the few over the many. Perhaps the Minister does not appreciate that the future is not brighter if you are standing in a queue at a food bank.
After eight long years of austerity, our public services are deprived of proper funding. Our fire service, NHS, police service and education services are all at breaking point, and “little extras” are simply not enough. While the taxation system continues as it is, with Conservative policies only tinkering around the edges, we will not see a substantial redress of economic inequality in this country. Put simply, the top 10% of the population own 44% of the nation’s wealth. Who does this country’s economy work for? Some in society have suffered eight years of austerity, and some have not. If the Government’s policies are benefiting the few more than they are benefiting the many, we have a systematic issue at the heart of society. Our economic system resembles what the economist Piketty would describe as “useless for growth”. It perpetuates further inequality over time and creates low social mobility, ingraining and preserving the status quo. The rich get richer and the poor get poorer, widening economic inequality.
Labour has a different outlook that sees real value in working people and offers them a fair deal by not raising taxes for 95% of workers but instead fairly raising taxes for the 5% who prosper the most in society. It acknowledges corporations’ role in society and expects them to pay their fair share, raising an estimated £19.4 billion for the public purse. It is not afraid of tackling the very wealthiest and commits to a comprehensive anti-tax avoidance plan—a plan that will work for those who are prepared to pay their fair share of tax and a society that will reap its benefits. This funding will be distributed to all the areas that all of society will benefit from: a properly funded NHS, free university education, a national education system, and a national transformation fund. Labour will rebuild Britain and make this Government’s destructive austerity programme an ideological choice of the past. This is how we will radically change society; this is how we will end austerity; and this is how the Labour party, when—not if—we are in government, will offer a fair deal for everybody in our society.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
It is a great pleasure to speak in this debate not only to support the Bill, but to associate myself with the comments of my right hon. Friend the Financial Secretary to the Treasury, who unfortunately is no longer in his place. In his opening remarks, he mentioned some words by the late Baroness Thatcher, and on reflecting on that, it is clear to me that some things never change. From what we have heard this evening, it is clear that the Labour party would still have the poor poorer as long as the rich were less rich. As I say, it is a great pleasure to speak in the debate. I will keep my remarks brief, as many other colleagues—from across the House, I am sure—will want a chance to speak about the great things this Government have included in the Bill.
Just two short weeks ago, we heard a Budget from the Chancellor of the Exchequer, and the Bill delivers on a number of promises made in that Budget. Key among these is that this Conservative Government are cutting taxes for hard-working people and lifting the lowest paid in our society out of income tax altogether. Our increase in the personal allowance will mean that, in 2019-20, basic rate taxpayers will pay about £130 less tax than in 2018-9 and £1,205 less tax than in 2010-11, when the coalition Government came to power.
Unfortunately, as I pointed out in the Budget debate just two weeks ago, my constituents will be unable to benefit from the raising of the higher threshold, as the SNP Government in Edinburgh would rather punish the strivers and the grafters—the policemen, teachers, entrepreneurs and wealth creators—than reward them, as we do. Instead, the tax gap between Scotland and the rest of the UK is growing wider and wider, with the Scottish Government squeezing out every penny.
Patrick Grady (Glasgow North) (SNP)
I am sorry the hon. Gentleman is having to get used to speaking from the Back Benches again, after his tremendous turn from the Front Bench in the UK Youth Parliament, but I am sure that, if he keeps up this line of complimenting the Government, it will not be long before he is back there. Does he not accept that the reality of the progressive tax reforms agreed by the Scottish Parliament as a whole—not just by the SNP Government—is that most people in Scotland are actually paying slightly less tax than they were this time last year? [Interruption.]
Andrew Bowie
As is being said from a sedentary position behind me, I think the total amount of money by which somebody in Scotland will be better off, if they are below a certain level, is about £24 a year. What the SNP is doing is punishing aspiration and stopping people—[Interruption.] As is being shouted from behind me, it is gesture politics. The SNP is punishing the entrepreneurs and the wealth creators that we need to attract to Scotland, especially to the north-east of Scotland. I could go on, but I will not because I have a lot to get through.
We are hearing exactly what we heard two weeks ago from the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry)—doom and gloom. This is the politics of gripe and grievance, and SNP Members cannot even find it within themselves tonight to welcome the huge strides that we have taken in supporting the oil and gas sector since 2014. I share the frustration of the hon. Member for Aberdeen North (Kirsty Blackman) about the oil and gas sector, although I would say that that is an issue for the Department for Business, Energy and Industrial Strategy, rather than the Treasury right now. But no reference was made to the welcome given by Oil and Gas UK or indeed by individual companies in that sector for our commitment to the stable regulatory and fiscal regime that, since 2014, has made the North sea one of the most attractive basins in the world in which to invest. I think that is something all representatives from Scotland, especially from the north-east of Scotland, should celebrate and thank this Government for.
As well as slashing income tax for millions of people, the Bill will implement a number of indirect tax cuts, such as the freezing of duty rates on beer, on ciders and most of all on whisky. This is a measure that we Scottish Conservatives have lobbied on relentlessly, and it will be a great boost to our local breweries and distilleries, such as Deeside Brewery in Banchory and Royal Lochnagar at Balmoral, both of which I have the honour of representing in this place.
There are freezes to support our haulage sector—heavy goods vehicles duty will be frozen for 2019-20. I am sure the importance of this freeze to the British haulage industry will be obvious to everyone as we prepare to leave the European Union. I have a dream that one day these vehicles will be able to transport Scotch whisky, which we as a Government are supporting; Aberdeen Angus beef from farms that are championed by the Conservatives, but abandoned by the SNP; and Peterhead haddock fished from this new sea of opportunity, with us out of the common fisheries policy, being delivered by this Government, along the Aberdeen western peripheral route, if the Scottish Government ever manage to resolve the mess they have got into on that road and do so without wasting even more of Scottish taxpayers’ hard-earned cash.
Kirsty Blackman
If we do get this wonderful Aberdeenshire produce—it is the best in the world, I would suggest—on to lorries and they drive down to Dover but are then not able to cross the channel, what does the hon. Gentleman expect will happen to the Peterhead haddock?
Andrew Bowie
The hon. Lady has no faith in this Government to deliver a deal that is going to result in frictionless trade, and that surprises me. It surprises me that she does not have the faith that I have in this Government to deliver the deal that I think will be coming and result in frictionless trade between ourselves and the European Union, just as we have frictionless trade right now.
The measures in this Bill are exactly what the Government should be introducing to support our economy at a time when it has its fair share of challenges to overcome, but that is also rich with opportunities. For this reason, I will be supporting the Bill tonight. We are supporting aspiration, encouraging growth and creating jobs, with unemployment at its lowest level since the 1970s. We are making Britain an attractive place in which to invest, and we are helping the lowest paid.
I was struck by what my hon. Friend the Member for Cheltenham (Alex Chalk) said about speaking to the next generation. He spoke about the huge strides we have taken and about the strength of the economy since 2010. As the hon. Member for Glasgow North (Patrick Grady) mentioned, on Friday, I was privileged to address the UK Youth Parliament and listen to its Members. This Chamber was packed with enthusiastic, passionate, committed and driven youngsters. We owe it to them to leave this economy in a better state than the one in which we found it in 2010, and to create opportunities, not lumber them with debt, as the 40 unfunded spending commitments made by the Opposition since the general election would do.
Quite frankly, Labour Members should be ashamed of themselves for the reckless way in which they trot out commitments without recognising that we have to pay for them and the damage that they would reap on the next generation. I am proud to support a Government who are refusing to do that and who, with this Bill, are committed to helping the working people of this country. This is the party of the working people of this country—all of this country—and I am proud to give the Bill my support tonight.
Chris Stephens (Glasgow South West) (SNP)
It is a pleasure to follow the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie). He has proved for me the point I came to when I was listening to the Financial Secretary and putting together my remarks for this debate. Politics is a mixture of rhetoric and reality. It was two years ago at that very Dispatch Box that the former Chancellor, George Osborne, announced that austerity was over, and now the current Chancellor tells us that austerity is coming to an end.
The rhetoric we have heard during the past two weeks has led me to conclude that many Conservative Members are modern-day Warleggans. They remind me of the scene when Captain Poldark—he is no doubt viewed by Conservative Members as some sort of Marxist-Leninist—asked the landowners to cut the price of grain, and George Warleggan said, “Well, if I cut the price of grain, then my profits will decrease, and if my profits decrease, then I won’t have enough money to give provision for the poor.” There it is: modern day Conservativism found in a period drama.
The reality is that, by any measure, this Budget and this Finance Bill benefit the rich on the backs of the very poor. The Resolution Foundation has told us in its research that those in the bottom 30% of the income distribution will on average gain less from the work allowance and income tax changes than they will lose through the benefits freeze. Indeed, a low-income family with children will lose £210 next year as a result of the benefits freeze.
Let us discuss universal credit and the broken social security system in this country. The money announced for universal credit changes is mainly to do with managed migration. Two weeks ago, the Social Security Committee in the Scottish Parliament heard evidence from the Crookston Community Group in my constituency. An eight-year-old boy in my constituency was stopped by a teacher and asked why he was taking so many tomato ketchup sachets. His answer was so he could take them home and put them in boiling water to make soup for him and his family. That makes me want to weep, but it is not a special case. Suzanne McGlone of the Crookston Community Group said:
“While this incident would shock most people, it is actually the lower end of the scale.”
That is the reality of the current social security system.
On top of the cuts, the litany of evidence about the pressures faced by beleaguered staff in the Department for Work and Pensions is coming to fruition. I tabled a parliamentary question, and I got the answer during this debate. I asked a simple question: how many workers in the Department for Work and Pensions are currently dealing with the national tier telephony service? I was advised that 400 staff are now dealing with phone calls. To put that into perspective, according to parliamentary answers, 4,504 DWP staff are chasing social security fraud. That is an unbelievable comparison. DWP staff are telling us that they are having to deal with so many telephone calls from claimants that they are unable to process online journals. What does that mean? It means payment delays, rising food bank use and more people getting into poverty.
Stephen Kerr
I recognise the passion with which the hon. Gentleman approaches this subject, but perhaps he can enlighten the House as to why, after it was agreed that social security powers would be devolved to the Scottish Parliament and the Scottish Government in Edinburgh, it is taking so long for the SNP Scottish Government to get to grips with the issues of social security.
Chris Stephens
I have just given some examples of how broken the UK social security system is. If the hon. Gentleman seriously believes that any devolved Government could address the mess of the social security system in the UK within weeks, he is kidding himself on.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The hon. Member for Stirling (Stephen Kerr) is clearly unaware that there are 4,000 people, not 400, chasing rather than helping. I heard Gaelic mentioned today, and he should know that the word “Tory” comes from the Irish Gaelic “Air an Toir”—pursuers. That is what they are doing in the DWP—pursuing people mercilessly, rather than helping them, as my hon. Friend pointed out.
Chris Stephens
My hon. Friend is quite right. Conservative Members try to divide people on the basis that Conservatives are for aspiration and the rest of us are not. According to the Conservative party, there are the undeserving and the deserving poor. No one deserves to be poor in this country, and that should always be the case.
Danielle Rowley
I held a debate recently in Westminster Hall about split payments, and I asked the Minister answering the debate what support was going to the Scottish Government and what money there was to help create a different system in Scotland. I have yet to receive an answer. I also asked the Treasury how it defines austerity, and it could not give me an answer. What does the hon. Gentleman think about that?
Chris Stephens
I thank the hon. Lady for that, because the point is well made. I was at the Westminster Hall debate she secured, and she gave an excellent speech on why we need split payments in universal credit. The reality is that the Scottish Government want to do split payments, but the Department for Work and Pensions is trying its best not to. That is despite the Work and Pensions Committee, of which I am a member, telling it that it should engage positively with the Scottish Government. The Department should perhaps use what is happening in Scotland as a pilot, which it could then roll out across the UK. Where individuals are subjected to domestic abuse and go through the universal credit system without split payments, the hon. Lady and I have a very real fear that that domestic abuse will become worse.
Chris Stephens
Not at the moment.
We have heard warm words about rising wages from those on the Government Benches, but there has been no mention whatever of the fact that 4 million people are in insecure work. There has been complete silence about the Taylor review and what measures the Government will introduce as a result. The reality is that low pay and poorer living standards are on the rise.
As I said, there are 400 people dealing with telephone calls in the Department for Work and Pensions, but 4,504 chasing DWP social security fraud. There are also 400 people employed across the UK by the national minimum wage compliance unit. How are we going to chase these rogue employers if there are only 400 staff chasing up compliance with the minimum wage?
That brings us nicely to the issue of public sector pay and whether there is a public sector pay cap. Earlier, I made an intervention on the Minister. I did not really get an answer, and I do not think that anyone who has raised this issue in the last few weeks has got an answer. The reality is that the public sector pay cap is still in place across UK Government Departments. Why is it still in place? Under freedom of information, we now know that the departmental permanent secretaries got together in February this year and agreed the joint position across all UK Government Departments that there would be a pay rise of 1% to 1.5% for public sector workers. I find that extraordinary, because there are 200 separate pay negotiations across UK Government Departments, so how about a bit of efficiency and small Government from those on the Conservative Benches? Let us reduce the number of pay negotiations from 200. If the departmental permanent secretaries can agree one negotiation, there can surely be one negotiation with the trade unions.
Those on the Scottish Conservative Benches have made a number of, shall we say, interesting observations today. I was interested in the elaborate tax avoidance scheme suggested by the hon. Member for Gordon (Colin Clark): if someone is a higher rate taxpayer in Scotland, they should consider registering themselves somewhere else in the United Kingdom. That is tax avoidance by any description.
Stephen Kerr
On a point of order, Madam Deputy Speaker. The hon. Gentleman is making comment on the speech given by my hon. Friend the Member for Gordon (Colin Clark), who is being reported as having said something he did not say. The hon. Gentleman should not be permitted to say that. How can that be corrected?
Madam Deputy Speaker (Dame Eleanor Laing)
I appreciate the hon. Gentleman’s point, but it is a point of debate, not a point of order for the Chair. It is, I am very glad to tell the House, not my responsibility to adjudicate between Members who sit on the Government Benches and Members who sit on the Opposition Benches on particular points of fact. The hon. Member for Glasgow South West (Chris Stephens) is in order in the eloquent speech he is making.
Chris Stephens
Thank you very much, Madam Deputy Speaker. Hon. Members can read Hansard tomorrow and come to their own conclusions.
Scottish Conservatives were complaining earlier about office closures. I find that fascinating from a political party that has put a meat cleaver to the jobcentre network and a meat cleaver to HMRC offices across the UK. You really could not make it up.
Angus Brendan MacNeil
My hon. Friend makes an absolutely fascinating point about the Conservatives calling for the richest to relocate to avoid tax. Continuing that logic, they should say that those earning less than £33,000 in England should register in Scotland. We know that the many get the deal in Scotland, but they speak for the few, as ever.
Chris Stephens
My hon. Friend makes a fascinating observation, but I think he will be disappointed by the response from the Scottish Conservatives. It will not be on their crib sheet, so I am sure they will not agree.
Stephen Kerr
To be clear, my hon. Friend the Member for Gordon (Colin Clark) did not ever, at any time, suggest that Scottish taxpayers should relocate. He was simply pointing out the consequences that might flow from the growing tax gap between Scotland and the rest of the United Kingdom.
Chris Stephens
I am not sure whether that was an intervention or a point of order, Madam Deputy Speaker. Suffice to say, once again, that I will allow hon. Members to read Hansard tomorrow morning and reach their own conclusions.
In this centenary year of the women’s vote, what is missing from the Bill and the Budget most of all is anything for women born in the 1950s. That is a disgraceful omission. I am delighted that the Work and Pensions Committee has agreed to my suggestion to hold an inquiry so that we can get to the bottom of helping women born in the 1950s to get justice, to get their pensions and to get compensation.
We were told that austerity is over. It is not. We were then told it is coming to an end. It is not. For the poorest and most vulnerable in our society who have had to pay the price of austerity, austerity must end. That is why I will not be supporting a Second Reading for the Finance Bill.
Jack Brereton (Stoke-on-Trent South) (Con)
It is a pleasure to speak on Second Reading.
After all the years of hard work since 2010, and the necessary repair of the public finances after the catastrophic failures of the last Labour Government, this Budget was a turning point for our country. The Government are meeting their fiscal rules three years early and the deficit has been reduced to its lowest level since 2001. Debt has started its first sustained fall in a generation. The Bill reflects the success of that hard work and it rewards the British people for what they have achieved.
No Government have money of their own, only taxpayers’ money. It is right that hardworking taxpayers be allowed to keep more of their own money now that the economy is back on track; people in Stoke-on-Trent have more money in their pockets due to the measures in the Bill. It is also right that a new path is set for the public finances that reflects the huge efficiencies and fiscal improvements that have been achieved. Combined with Brexit, the Bill means that after eight years of hard work to get out of the mess left behind by the Labour Government, those of us on the Conservative Benches can focus on the measures that will take our country forward to a global future in the decades ahead.
What a contrast in approach: a Conservative party working to take us forward to the 2070s against a Labour party scheming to take us back decades to the 1970s. In his initial remarks, the shadow Minister, who is no longer in his place, tried to say that the Conservatives are not a party of opportunity. I would like to ask him what he would say to my constituents, as well as millions across the country, who were subjected to a life of dependency and worthlessness under the last Labour Government and who are now in work thanks to Conservative policies.
At a time of momentous change as we deliver on Brexit, the Government’s continuing commitment to sound economic management is to be welcomed. There are continuing efforts to make the tax system fairer, with anti-avoidance measures to ensure that legitimate reliefs are not abused. In addition, there are measures to increase the generosity of certain reliefs and exemptions where they encourage behaviours that are beneficial to the economy and to society. For example, the quintupling of the annual investment allowance, from £200,000 to £1 million, is a strong response to the very temporary uncertainty that Brexit might bring.
That measure is hugely welcomed by manufacturers in Stoke-on-Trent South, as it will be across the country. Indeed, when I visited Walkers Nonsuch Toffee last week, it was very clear that these measures will see it invest in more new machinery to build on the great success it is experiencing. I can tell you, Madam Deputy Speaker, that I very much enjoyed tasting some of its products on my visit. A family business since 1894, it exports England’s finest toffee from my constituency right around the world, with many of its largest growing markets in South Korea, Australia and China. Equally, I welcome measures such as the 60% increase in the charity small trading tax exemption limit to £8,000 and £80,000 depending on turnover, and the extension of the first-year allowance for electric car charging points for four years. While there is a case to be made for having reliefs and exemptions to encourage beneficial outcomes, there is also a clear case for increasing taxes on harmful and detrimental behaviours. That is why I welcome the action on white, high-strength ciders and continuing strong fiscal disincentives to smoking, both of which are having major impacts on the lives of individuals, public health and our NHS.
In addition, I welcome the measures for a new tax on the largest online companies to ensure that they pay a fair share. That is very important for the revival of our town centres, as is reducing taxes on smaller retailers and putting in place funding for the town centres in places such as Longton and Fenton, which I hope will benefit from the additional funding for the conversion of some of the empty units.
For areas such as Stoke-on-Trent, which is made up of six historic market towns with a strong manufacturing tradition, opportunities have arisen for a sustained revival. The Office for National Statistics last week reported that
“around half of total production growth in Quarter 3 was driven by manufacturing.”
That is very good to see and suggests that the slippage in quarters one and two was anomalous to a longer-term trend of manufacturing growth under this Government. Goods exports are also back in quarter 3 to a position where they are rising faster than service exports, which is a positive sign for a country that needs to rebalance our national economy to areas where people are skilled and proud to make things. No manufacturers are more skilled and proud than the local advanced manufacturers of Stoke-on-Trent.
Moving on to trade and our global approach, we need to ensure that trade is more international as we move through Brexit. Global Britain starts from a solid economic base, underpinned, of course, by the attraction of a world-renowned, trusted, legal system and sound rules of governance. As a country that plays by the rules, the UK is a great partner to trade with and a great place to invest in. I know that the Government will rightly enter all trade negotiations in a spirit of optimism and generosity in offering free and fair rules-based trade deals. There are great opportunities ahead.
In Stoke-on-Trent, despite manufacturing making up 15% of the economy, I am afraid that we do not export enough of the fantastic products that we make, falling well behind our statistical neighbours in the rest of Staffordshire. Far too often, historical trade beyond the EU has been occurring by chance rather than from concerted efforts to promote British products. Brexit must lead to opportunities to broaden trade and especially to help smaller businesses in places such as Stoke-on-Trent to export more, and it is pleasing to see the Department for International Trade ramping up its efforts in these global markets. We can look to open up new channels for inflows and outflows of foreign direct investment, particularly to facilitate UK direct investment in sales and distribution operations beyond the EU, and look to strengthen our presence in key markets of the USA, the Commonwealth, South America and south-east Asia, which promise many opportunities for Stoke-on-Trent’s fantastic export offer.
There is much to be positive about in the Government championing free and fair trade, but it is inescapably the case that some of our competitors, in an effort to boost their state-aided, quasi-private businesses, do not always play by the rules. So, where we are rightly open to proffering carrots, we must also be pretty clear that we will keep a few sticks if the agreed rules with our new trade partners are not kept. I know from correspondence I have had with Department for International Trade Ministers and, indeed, the Prime Minister, that this is very much the case and the intention, moving forward.
Global Britain is our future and we must be prepared for that future so that we can seize the opportunities available on the world stage. The Bill certainly moves us forward to that future. Through a fairer tax system, growth deals, city deals, sector deals, local funds, transport projects, devolved funding and international trade support for local businesses on the world stage, this Government are ensuring that no part of the United Kingdom is left behind and, as part of that agenda, I am very happy to support the Bill tonight.
Bambos Charalambous (Enfield, Southgate) (Lab)
It is a pleasure to follow the hon. Member for Stoke-on-Trent South (Jack Brereton). This Finance Bill does not address the fundamental funding problems in our communities and public services. During the Chancellor’s Budget speech, he told us that the era of austerity was nearly over. He told us about the money for the “little extras” for our schools and that all would be rosy as he increased tax thresholds. Perhaps he was too distracted thinking up bad jokes to fully appreciate the effect of his Budget and policies, which mean that for many people the era of austerity is far from over. The Budget did not provide the substantial funding our public services need to be reliable and decent, and failed to invest properly in our public services. This is quite clearly a continuation of austerity.
My borough of Enfield has seen its funding cut by £161 million since 2010, which is well over 50% of its government funding, with other cuts still to come, and it is not alone. Like Enfield, most councils have been cut to the bone. Demand-led pressures on areas such as children’s services and adult social care will mean the council having to cut already-reduced services. Enfield has been affected by damping. The Government, having worked out what it needed, decided to take money away and move it elsewhere. I ask the Minister: when can we have that money back to fund the services that Enfield needs, and which the Government agree it needs? For such councils, austerity is not over, but will carry on for years to come. Is he pleased to see councils failing—councils such as Northampton—and going bust on the Government’s watch? The Government can fix this but choose not to.
Policing remains under-resourced. Last week, a 98-year-old man was seriously assaulted in his home in my constituency and now lies seriously ill in hospital, and today I learned there had been a stabbing near Arnos Grove station. What does the Minister have to say about the increase in crime and the cuts to policing in my constituency and across the country? Is austerity over for them? Yesterday, I spoke to the two police officers and one police community support officer charged with policing one ward of 10,000 people in my constituency. Does the Chancellor think that is sufficient? I invite him to come and listen to the concerns of local residents, victims of crime and those who live in fear. Why isn’t anything being done to reverse these cuts? Is the Minister happy with the level of police funding?
Education is another area of failure for the Government. The idea that £400 million for so-called “little extras” goes anywhere near addressing the funding crisis in schools is insulting. I am a school governor at Eversley Primary School in my constituency, and I am missing a governors meeting tonight to take part in this debate to let the Government know how schools are suffering with their budget cuts. In my conversation with the headteacher earlier today, she told me that the school was facing a £500,000 budget deficit next year and was now relying on the donations of parents and staff to pay for resources. Eversley is an outstanding primary school and is not alone in my constituency in facing a funding crisis that is a direct result of the Government’s policies. If the Minister does not believe me, he is welcome to meet me and headteachers in my constituency to look at their budgets for next year. He suggests there is more money for schools, but does he realise there are more children in our schools than ever before?
Even for school meals, the Government have taken no account of the increase in food prices or inflation since 2010, meaning that the budget for producing free school meals for all pupils from reception to year 2 has remained the same for more than eight years at £2.30 per meal. That makes it harder to provide a nutritious meal for children in their early school years. How is that joined up with the Government’s strategy on tackling childhood obesity? If the Chancellor wants to know where to find additional funding for education, he could look at the Education and Skills Funding Agency, which last year spent £17 million re-brokering failing academies to other academy chains. Why is there no scrutiny of this shocking waste of taxpayers’ money?
As my hon. Friend the Member for Swansea East (Carolyn Harris) mentioned so eloquently, in an attempt to shore up and support bookmakers, the Chancellor decided to give them more time to make more profits from fixed odds betting terminals—and thus more revenue for the Treasury—thereby condemning hundreds of people to the abject misery brought on by gambling addiction, with many suffering great personal harm and some committing suicide. What a shocking state of affairs.
There was no help in the Budget either for people on universal credit. The £1.7 billion put back in by the Government is less than a third of the £7 billion taken out. That is no help to a local resident losing £58 per week as she migrates from family tax credits to universal credit. The amount she is losing is going towards funding the tax cuts in the Budget. The Minister spoke of fairness in his opening speech. Where is the fairness for her?
The Chancellor issued a caveat in his statement, saying that the Budget would be all off if there were a no-deal Brexit. What the Bill aims to do is give the Government sweeping powers to amend tax legislation in such an event. It is another attempt at a power grab, which is something that we have become used to with this Government. Once again, Parliament is being sidelined.
The Government’s economic failure will continue with this Finance Bill. The Bill and the Budget are not fair. They are failing our communities by not replacing the police officers whose numbers have been cut since 2010, by not giving local authorities the funds that they need, by not providing what is needed for our schools, and by not helping the most vulnerable in our society.
A fair taxation system is for the common good, and should underpin shared prosperity through universal services. The Bill does not offer a progressive and fair tax system, and it means more austerity for the vast majority of the people. The Minister forgets at his peril that the people who benefit from tax cuts are also the people who are asked to make donations to cover the funding cuts in their children’s schools, who experience the burglaries that police no longer attend, who have seen a deterioration in public services, and who are worse off under universal credit. Austerity is not over for them either.
The Bill is not fair. It does not help our communities, including the most vulnerable, and it is not fit for purpose.
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure to follow the hon. Member for Enfield, Southgate (Bambos Charalambous). Although I do not agree with all his views, I thought that the way he put them across was clear and impassioned, and I congratulate him on that.
I must draw the House’s attention to my entry in the Register of Members’ Financial Interests, because I want to focus most of my remarks on business and I was in business for most of my life before entering Parliament, but I will begin by touching on other elements.
As the co-chair of the all-party parliamentary group on poverty, I particularly welcome the measures relating to the personal allowance and the increase in the national living wage. When combined, those measures mean that people who are in full employment and earning the minimum wage will be £3,955 a year better off in cash terms than they were in 2010, which will transform many lives. We simply could not continue with a situation in which the Government were supporting business through tax concessions and tax credits; it is right for business to stand on its own two feet. I hope that the national living wage will increase at some point, as it must if we are to reach a real living wage. The gap is narrowing, but our aspiration should be to ensure that, in a prosperous society, everyone prospers.
I also welcome the extra measures for universal credit, which were called for by many Conservative Members. The extra £2 billion a year will make a big difference to a system that is already working well in many ways. It is not without its faults, and we need to focus on the areas in which it is not right as well as those in which it is, but it, too, will make a huge difference. It was introduced in Ryedale, in my constituency, early in 2017. There were initial problems with some of the payments, but following measures that the Government introduced at the end of that year, most of them have been alleviated.
The 33% rate reduction for many businesses is welcome, as is the fund for investment in our high streets. However, the main issue affecting the retail environment is not the level of business rates, but the migration of consumers from shopping in retail premises to shopping online. We cannot simply cut business rates to deal with that problem. The Chancellor’s contribution is welcome, but we need other measures, too. At some point, we will need a structural review of the business rates system for retail premises. There is no doubt that online retailers pay a much smaller proportion of their turnover in business rates than retail high street premises—about four times less.
Local authorities also need to do their bit. Too often, they are giving permission for out-of-town shopping centres. Consent has been given to four in York, all of which will offer free parking. The city centre car parks run by the local authority are charging £2.50 an hour, which is massively disadvantaging businesses in the city centre. Businesses were telling the local authority that this was going to happen many years ago, and it has had a devastating effect on many high street businesses.
I am most pleased with the Government continuing their corporation tax reductions; it is absolutely the right thing to do. I am also pleased that they are continuing provisions such as entrepreneurs’ relief, the seed enterprise investment scheme and the new enterprise incentive scheme. The Opposition think, “We can simply increase corporation tax. It’s a victimless crime. We’ll collect all this extra money and then the corporations will pay.” That is not how it is. When the Opposition speak on these issues, whether about requisitioning parts of businesses or taxing companies more, they remind me of the Churchill quotation—that some people look at private enterprise as a tiger to be shot or a cow to be milked, when it is actually
“the strong horse that pulls the whole cart.”
And that is the reality.
The Opposition simply want to raise corporation tax, and they think that corporations will just pay and that will be it. Of course they will pay extra tax, but the consequence in a competitive market is that prices will go up. At the end of the day, all consumers pay all taxes. The reality is that excess returns in a competitive marketplace get competed away right down to the cost of capital. Therefore, if we put up corporation tax, the pre-tax profit has to rise to ensure the same return on a post-tax basis. All that will happen in a competitive market—most of our markets—is that prices will go up and the consumer will pay. That is the reality, so I welcome the reduction in corporation tax because it encourages inward investment in this country.
Not all our markets are competitive and not all our enterprise is in competitive markets, so I welcome the fact that we have brought forward a digital services tax for one market that is not competitive—the huge technology giants that are dominating the landscape and not paying their fair share of taxes. It cannot be right. Those companies benefit from the fact we have a well-funded education system, hospitals, welfare system, social care system and pensions system. They cannot just trade in this country, switch the profits to a foreign jurisdiction and avoid tax. It is absolutely right, historic and brave that the Chancellor has acted on this, outside an agreement with the OECD. It would clearly be better if we worked internationally, but it is right to take this first step.
There is one area where the market is not competitive and which I am heavily involved in as the co-chair of the all-party parliamentary group on fair business banking and finance—that is, the relationship between business and banks. Some 90% of business lending is dominated by the four biggest banks—Royal Bank of Scotland, Lloyds, Barclays and HSBC—but when something goes wrong, there is no way on earth a small business can compete with a bank when trying to resolve disputes. It simply cannot be right that these banks can use their financial power in order not to be held accountable when something goes wrong with their own customers. We have seen many cases and have talked about this issue before in Parliament. I know that this is not part of the Finance Bill, although I would very much have liked it to be.
The Chancellor has said that he will support the recommendations of the Financial Conduct Authority to expand the Financial Ombudsman Service from its current jurisdiction of £150,000 compensation limit to £350,000, but most cases we deal with in the all-party group are in the millions of pounds. I am delighted that the Chancellor has just walked in while I am talking about this issue. There is a very good example in an article by Jonathan Ford in today’s Financial Times. The bank sold Arthur Holgate & Son—a company turning over £2 million—an unsuitable interest rate hedging product, sending it under; it went into administration. How on earth is Arthur Holgate & Son supposed to deal with that and take Barclays to court? The company was offered £311,000 in compensation, but it eventually managed to insure the legal fees for the court action and got a settlement off Barclays of £10 million. Most companies that have gone through this process simply do not have the funds to take a bank to court. That cannot be right.
Stephen Kerr
I pay tribute to my hon. Friend for the work he does in the APPG on fair business banking. Many thousands of small and medium-sized businesses were mistreated by the banks during the period that we often discuss in the Chamber. Does he agree that it is vital for capitalism in this country and the enterprise economy that justice is done and seen to be done for them?
Kevin Hollinrake
My hon. Friend is right. Capitalism depends on a fair and level playing field, and that is not where we are at the moment. As well as the expansion of the Financial Ombudsman Service, which we fully support, our all-party group proposes the introduction of a financial services tribunal that works in pretty much the same way as an employment tribunal. A company could take a bank to court without standing the costs of that bank, with full powers of disclosure, and justice could be seen to be done, which is critical.
Jonathan Reynolds
The hon. Gentleman knows that I share his view on this issue, and I commend his work as chair of the all-party group. There is considerable agreement on both sides of the House that this needs to be resolved, and it is not a satisfactory position. As we have the Chancellor in the Chamber—or we did; he has disappeared—may I ask the hon. Gentleman whether he agrees that the will of the House on this issue should not be underestimated?
Kevin Hollinrake
I agree with the hon. Gentleman. This will come sooner or later, and we should grasp this opportunity. It is clearly in the interests of businesses that they should be able to seek resolution fairly in the courts. The courts are all about dispute resolution. Anything else is an alternative, and it cannot be right. There is a saying that the High Court is open to everyone, just like the Ritz hotel. We cannot have that situation.
We need a fair and level playing field. We need businesses to be able to take a bank to court if they have a valid dispute. That is good for the banks; it gives them certainty about what the rules are, and they can get adjudication on key questions that they will want the answer to. It will give confidence to borrowers, and businesses will borrow more, which is good for UK plc. As well as the fine things that Treasury Ministers are doing through the Finance Bill, I urge them to look at this issue and seek to introduce a financial services tribunal at the earliest opportunity.
Siobhain McDonagh (Mitcham and Morden) (Lab)
I would like to raise two issues related to the Budget, one of them good news and one of them bad, and I would be grateful if the Minister responding to the debate addressed both.
For the good news, I refer to a brilliant article about a range of desperately needed changes in the gig economy by Pippa Crerar in The Guardian on Friday. Her article suggests that we will finally see the end of exploitative “pay between assignment” contracts. In theory, those contracts guarantee a basic level of pay when an agency worker is between assignments and out of work. The reality is that staff are often held on those contracts even if they have been working in the same job for years, without such a gap between assignments.
The Communication Workers Union has led the way, striking a deal with BT that will see thousands of employees taking home the pay packets they deserve from BT call centres. Pippa’s article suggests that we will see the end of these deceitful contracts once and for all. Will the Minister confirm whether that is correct and, if so, what the timeframe for action is? When can we expect a comprehensive response to the Taylor review, which is now long overdue?
My reason for speaking today, however, relates to a different form of exploitation. Like many Members across the House, I was utterly dismayed to learn that the Government do not plan to introduce the new maximum stake of £2 for fixed odds betting terminals until October 2019, and their choosing to bow to pressure from the gambling industry, rather than listen to the legitimate concerns of one of their own Ministers, speaks volumes about just how badly misplaced their priorities are on this matter.
I do not come at this as somebody who is not used to gambling or who comes from a family that does not like to gamble. For most of my childhood, I could be seen on racecourses and dog tracks with my Irish family, who kept greyhounds, and my dad, to the last week of his life, spent his retirement with a copy of the Daily Mirror on the table in an attempt to spot the winners. But betting shops today are not about a fiver each way on the 3 o’clock at Cheltenham, as individuals are staking up to £300 a minute on FOBTs. That could not be further from the reality of my childhood or my dad and uncle’s lives.
Through FOBTs, bookmakers have facilitated a form of gambling at its most irresponsible, addictive and exploitative. With 43% of FOBT users thought to be problem or at-risk gamblers, it is no surprise that these machines have been called the “crack cocaine” of gambling. Even the Government have described them as a “social blight”.
We already know that FOBT machines can have a truly devastating impact on the lives of individuals, but they are even worse than that. In my constituency of Mitcham and Morden, they come hand in hand with a worrying range of related problems for my local area, because as FOBTs have grown more prevalent in the betting shops around the town centre, the culture of reckless gambling they promote has contributed to an epidemic of drinking, drug taking and antisocial behaviour.
In many cases, that activity now takes place inside the betting shops and bookmakers have become hubs for illicit activities and antisocial behaviour. That has seen local businesses suffer and driven customers away from a town centre that has so much to offer, but which some now worry has become less safe.
Just this week, I have had to write to one of the bookmakers in Mitcham town centre, Betfred, concerning reports of drug use, drug dealing and stolen goods being sold inside the shop. Mitcham town centre, like many town centres, faces many challenges in the retail sector, but it is not helped by the attraction of people to these bookmakers in a confined area at the same time that the number of police has fallen. No longer do we have a safer neighbourhood town centre team of police, so the behaviour gets worse and more women do not want to bring their children to the town centre, as they would see street drinking, brawling and men urinating in the street.
I am sure that my constituency is not unique in experiencing those issues. Betting shops are disproportionately clustered around some of the most deprived parts of the country, and the proliferation of FOBTs has served only to exacerbate many existing problems. That is why I must urge the Government seriously to reconsider their decision to delay the implementation of the £2 maximum stake: the longer it takes to bring an end to this horrible and exploitative form of gambling, the more unnecessary harm will be done to vulnerable individuals and to our town centres.
Implementing the new maximum stake might not bring an immediate end to the problems facing our communities, as those problems might already have gripped them too tightly, but it represents a vital step in the right direction—a step that we should not hesitate to take any longer.
Eddie Hughes (Walsall North) (Con)
It is a pleasure to follow the hon. Member for Mitcham and Morden (Siobhain McDonagh), not least because I shared a platform with her during the Conservative party conference. It was great that she took the opportunity to attend the party conference and I felt a bit of a convert to her cause with regard to the reassessment of some green-belt land that might not otherwise really be described as green belt.
Anyway, that is obviously a topic for another day, as is, possibly, the subject of fixed odds betting terminals. My son, Sam, used to manage a Betfred, and he would occasionally regale us with stories of the people who came in. The store would be empty all Sunday afternoon, then someone would come in for the last hour of the day and blow £400 or £500 on one of those machines in an hour. That would make keeping the shop open all day worth while. I am not making a political point here, but it was the Labour Government who introduced the legislation that gave us fixed odds betting terminals. Personally, I think it is to be celebrated that this Government are going to see their demise, or at least a reduction in the stake to £2. Whether that happens at one point or another, I am personally glad that it is happening at all.
Actually, none of that was what I wanted to talk about this evening. I want to talk about a slightly abstract topic. I understand that it was Tiberius, the second Roman emperor, who said that it was the duty of a good shepherd to shear his sheep but not to skin them. I say “his sheep”, because obviously they were not so politically correct in those days. He obviously meant “his or her sheep”. I understand that that maxim is on the wall in No. 11 Downing Street, although I have not been privileged enough to go in and see it for myself. Perhaps my hon. Friend the Member for Chichester (Gillian Keegan) can confirm that for me.
How do I know that to be true? I read it in an excellent textbook, “Taxation: Policy and Practice”, by Andy Lymer. Andy is professor of taxation at Birmingham University, and I went to see him recently in order to educate myself. I think it is the duty of all MPs to adopt continuing professional development and to ensure that we understand something about the topics that we are talking about, although in my case it is clearly a very small something.
Anyway, the point was well made by Tiberius: we should not overtax our people. He clearly knew what he was talking about because, when he left office in 37 AD, the were 3 billion sesterces in the Treasury. I have no idea whether that is a lot of money, but 3 billion of anything sounds like quite a lot. He was clearly a man who knew what he was doing. I understand that he achieved that by limiting his wars with neighbouring factions and ensuring that he operated a good diplomatic policy. Perhaps those are other Conservative principles that we can adopt more these days.
Now, why am I going on about this? It is because the tax-free threshold in 2010 was £6,745, and this party is now going to increase it to £12,500. I believe that I represent the most deprived constituency represented by a Conservative MP, so it is incredibly important to my constituents that they will now find themselves £1,200 a year better off. That will have a significant impact on their lives. How many of them are there? The House of Commons Library could not give me specific details, but it told me that approximately 499,000 people will be taken out of the tax bracket because of that change, and 8% of taxpayers are in the west midlands, so that translates to approximately 40,000 people in the west midlands who will not be paying tax as a result of this above-inflation increase for the year 2019-20. For the following year, 2020-21, there will be a further 12,500 people in the west midlands not paying tax. That is hugely significant.
The Mayor for the west midlands, Andy Street, welcomed the Budget as
“a £100 million vote of confidence”
in the west midlands. Why would he say that? It is because approximately £70 million is being given to transport infrastructure across the region, and a further £20 million is being given to help the region to cement its position as a global leader for connected and electric vehicles. That is the future and it is very exciting to see. This Government are making sure that they link up elements of policy. There will be taxation changes for businesses that provide electric charging points at work. Clearly, there is more to be done. In order for people to adopt the new technology, they will need to be able to charge electric vehicles very frequently, so we need to make sure that there are charging points in many convenient locations, but this is certainly a step in the right direction.
The other measure I welcome for my constituents is the stamp duty relief for first-time buyers. I understand that for the previous financial year 270 of my constituents benefited from that relief to the tune of approximately £1,100 each. Again, that is no small potatoes for my constituents. The Government are continuing to support my constituents and to leave the money in their pockets so they can choose where best to spend it.
I encourage the Treasury Front-Bench team to adopt Tiberius’s maxim and continue to shear the sheep, not skin them—it is good Conservative policy.
David Linden (Glasgow East) (SNP)
It is always a pleasure to follow the hon. Member for Walsall North (Eddie Hughes), although I sometimes wonder how one can follow that. It was certainly very interesting.
I want to touch on a point made by the hon. Member for Thirsk and Malton (Kevin Hollinrake). I congratulate him on receiving Royal Assent for his private Member’s Bill. It was good to see in the Red Book that the Parental Bereavement (Leave and Pay) Act 2018 is moving forward. He spoke at length about business; I know he is a doughty champion for that. He would do well to look at what the SNP Government in Scotland have done in lifting 100,000 small businesses out of business rates since 2008. They have been doing that for 10 years, so the Scottish Conservatives can come north on occasion to see that.
I rise to support the reasoned amendment in the names of my right hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) and other hon. Friends from the Scottish National party. As the Bill derives from the Chancellor’s recent Budget, I want to make a couple of comments more widely about the Budget—and what was missing from it—before moving on to talk specifically about clause 5.
One minor benefit of not being able to speak in the Budget debate was that I had time during the weekend that followed to take the temperature of my constituents concerning the Budget. The general feeling on Shettleston Road is that austerity is far from over, and that is something that my hon. Friends and I hear week in, week out at our Friday surgeries. The Budget in fact prolongs austerity. The Prime Minister said that austerity was coming to an end, but the Budget failed every single test when it comes to the claim that the end of austerity is now in sight.
For example, there were no transitional measures to support the WASPI women, such as Anne Dalziel from Garrowhill. Anne received no notice from the DWP about the changes to her state pension age and is one of the many women in this country who have been shafted time and again by the British Government. To give an example of just how arbitrary the changes are, Anne has friends who were also born in 1953 and they received their state pension in 2016, but because Anne was born on 23rd December, her pension age was deferred three years to 2019. There were no measures in the Budget to help Anne Dalziel, and it is little wonder that the WASPI women in the Gallery staged their protest in the way they did. They have wholehearted support on these Benches.
Likewise, there were no measures in the Budget to halt and fix the roll-out of universal credit, which is due to be unleashed on my constituency next month and will undoubtedly cause social and financial misery just in time for Christmas. The amazing work that has been done by my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) on Inverness, where universal credit has already been rolled out, shows the deep damage it has caused. The fact that the Government will not listen to my hon. Friends and halt the roll-out of universal credit in Glasgow, especially at Christmas, shows how mean they are.
Alison Thewliss (Glasgow Central) (SNP)
My hon. Friend’s constituents, like mine, visit Shettleston job centre. Does it concern him as much as it concerns me that someone making a claim there on the first day universal credit rolls out—5 December—will not be entitled to any money until 9 January?
David Linden
My hon. Friend is absolutely right. Of course, one reason that we share that jobcentre is that the British Government, in their wisdom, closed Bridgeton jobcentre in her constituency, in addition to closing Parkhead jobcentre and another six jobcentres in the city of Glasgow. Although Conservative Members paint a rosy picture about the work they are doing in their local communities, the work we see in Glasgow shows that they are absolutely out of touch and are pulling the rug from under our constituents’ feet.
Clauses 61 and 62 address gaming duty. My hon. Friend the Member for Inverclyde (Ronnie Cowan) has campaigned on fixed odds betting terminals. Like other hon. and right hon. Members, I was genuinely sorry to see the hon. Member for Chatham and Aylesford (Tracey Crouch) resign from the Government, but she was right to do so. The reality is that fixed odds betting terminals have become a massive public health issue in our constituencies. I see that in Baillieston Main Street, where we have three betting shops lined up next to each other. The proliferation of these terminals is undoubtedly one of the worst things for public health. Whether it is the knock-on effect of depression, debt or even suicide, it is clear that fixed odds betting terminals need to be considered through the prism of public health, and not Treasury revenue.
Ronnie Cowan (Inverclyde) (SNP)
Does my hon. Friend agree that the Government moved to delay the stake reduction until October 2019 after a report by KPMG was circulated in the Treasury? KPMG has said that the report was written to meet the specific terms of reference agreed with the Association of British Bookmakers. Does he agree that the Government should take this opportunity to move swiftly to implement a £2 maximum stake in April 2019?
David Linden
My hon. Friend has been campaigning on this far longer than I have, and he has a strong track record of pursuing the issue.
Jim Shannon (Strangford) (DUP)
I reinforce what the hon. Member for Inverclyde (Ronnie Cowan) said. Many Members on both sides of the House, including DUP Members, want to see the change made in April 2019 because, during the six-month period proposed by the Government, as many as 300 people could commit suicide due to their addiction. The hon. Member for Glasgow East (David Linden) mentioned health and, from that point of view, the change needs to come sooner. The industry has had plenty of time to sort it out; it does not need more time.
David Linden
The hon. Gentleman’s intervention comes before 10 o’clock, which is quite unusual. In all seriousness, he is absolutely spot on. We all know the considerable influence of the DUP when it comes to marching through the Lobby with the Government. What he has said tonight should be heard on the Treasury Bench. The Government cannot count on the support of the DUP when it comes to delaying the reduction in the maximum stake from £100 to £2, which should send a very strong message.
I believe that in the coming days and weeks we will see a groundswell of support not just among Opposition Members but among Conservative Members, too, because this is not, and should not be, a party political issue. This is an issue of public health, and hopefully the Government will see sense in the coming weeks and not try to have a fight on the Floor of the House, but do the right thing by our communities.
On the so-called national living wage, the under-25s were, yet again, mugged by this Government. They are still excluded from the national living wage, which in itself is simply a con trick. The national living wage is not a real living wage, and it falls far short of the true living wage set by the independent Living Wage Foundation.
Over the course of the debate so far, and I suspect over the course of the evening to come, we have heard Scottish Tories say how wonderful this Budget is, but I challenge those Members: whether it is in Banff and Buchan, Bannockburn or Prestwick, can they seriously go to their local high school and say to the children who will be going on to do an apprenticeship that they think they are worth only £3.90 an hour? The reality is that, by marching through the Lobby to support this Finance Bill, they are saying that is right. The fact that none of them has sprung to their feet to say that they think £3.90 an hour is an adequate rate of pay for a fair day’s work sends a message.
In clause 5, somewhat predictably, the Government seek to give a handout to high earners. The Chancellor’s Budget gave basic rate taxpayers an extra £21 a year, compared with £156 a year for those on the higher rate. In contrast, the SNP Government have introduced progressive taxation in Scotland, where we have the powers to do so. Seven in 10 taxpayers in Scotland will pay less tax this year than they paid in 2017-18 on a given income, but it is right that those on higher incomes—that includes us as Members of Parliament—should pay a modest amount more in tax. I am perfectly comfortable with that as a concept because I know that investment in housing and in decent public services cannot be done on the cheap. It is right that those of us who earn higher salaries should pay a little more to support better public services for the good of everyone in society and our communities. But what is before us today gives tax cuts to high earners and that is just not right.
In essence, this Bill was about choices for the British Government. They have chosen to give tax cuts to high earners and to do nothing for the WASPI women; they have chosen not to give under-25s equality and a fair day’s pay for a fair day’s work; they have chosen to plough ahead with universal credit, despite it being fundamentally flawed and leading to reductions in household incomes; and they have chosen to perpetuate austerity right across these islands. But the Chancellor is not the only person with choices to make because, with each passing day, the people of Scotland are realising that they, too, will soon have a choice to make. They can choose to stay in an inherently unequal, unfair United Kingdom which is riddled with austerity and heading over the cliff edge of a hard Brexit, or they can choose an independent Scotland free from the obsession with austerity economics that so epitomises this Finance Bill. It is for that reason that I cannot support the Bill this evening.
Stephen Kerr (Stirling) (Con)
It is, as always, a pleasure to listen to the hon. Member for Glasgow East (David Linden), who treats the House to the usual rendition from the Scottish nationalists of why they stand for independence—in truth, that is all they stand for.
I rise to make a short contribution in this debate on the Second Reading of the Finance Bill, and I will restrict my comments to clause 61. I am mindful that I did not agree with my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) on the issue of safe standing at football matches, but I have nothing but admiration for the principled stand she has taken on the matter of resetting the maximum stake for fixed odds betting terminals to £2, with that measure to be effective by next April at the latest. I completely agree with her position, which is why I have been willing to attach my name to future amendments to this Bill brought forward by friends. Apparently its implementation will take so long, but I really do not believe that that stands up to scrutiny. The Government currently say that it needs to be put in place for next autumn, but I really believe it does not need to take that long.
The simple fact of the matter is that the longer we wait to implement this measure, the more damage is being inflicted on the most vulnerable people in our society. Some 43% of the people using fixed odds betting terminals are either problem or at-risk gamblers, and when we consider that 230,000 sessions on these machines in a single year resulted in losses of more than £1,000 each session, we see that any further delay in reducing the maximum stake to £2 is not justifiable in societal terms. It is also not justifiable in terms of the time that is really needed to make this adjustment happen. It is not justifiable in terms of the ongoing social costs, with the misery that occurs when individuals lose control of their decision-making faculty to a gambling addiction. And I simply cannot accept, on the grounds of any sort of morality that I would wish to be associated with, that the special pleading of the betting firms should take any sort of a priority over the damage inflicted on society, on families and on children by those who are suffering from gambling addiction and for whom these machines are an outlet.
The startling statistic is that for every second of every day these machines cost their players £57 in losses. There are 33,000 of these fixed odds betting terminals in betting shops across the UK. A helpful live ready-reckoner on the website of the all-party group on fixed odds betting terminals calculates to the second how much has been lost on these machines since the Government first called for evidence on what the maximum stake for these terminals should be. That happened way back in October 2016, and the last time I checked, which was earlier today—so after 749 days—this figure is in excess of £3.7 billion. I am not prepared to stand by—I could not do so as a matter of conscience—and do nothing when action is required. The Government have already accepted that that action is necessary and described these machines in the most disparaging terms, so I ask simply that the measure be implemented in April, at the soonest point.
Perhaps a justification will be put forward that somehow it will cost the Treasury lost revenue, but at what price? Are we really saying that there is not a more productive use for these billions of pounds of economic activity in our country? I think that there is. We should not underestimate the devastating effects of the vice-like grip of an addiction such as gambling. The Government should act now to do what they have already resolved to do—not in 12 months’ time, but by April next year at the very latest.
Jim Shannon
Is it not a fact that the sector and industry have had 18 months to get themselves ready for this? They knew it was coming and should have got their house in order. They do not need any more time.
Stephen Kerr
The hon. Gentleman is quite right. Reference has already been made to the KPMG report, which was provided at the instigation of the Association of British Bookmakers. KPMG itself advised that that report
“should not therefore be regarded as suitable to be used or relied on by any other person or for any other purpose”
because its terms and scope were determined by KPMG’s client, the Association of British Bookmakers. Paddy Power Betfair wrote to the Prime Minister because it was so shocked that the report could be used as a credible source for decision making, saying that some of the assumptions in it were unrealistic.
Overcoming addiction is not simply a matter of exercising willpower. Addiction robs people of the power to decide for themselves. We in this House have the power to take the necessary measures that will protect the most vulnerable people, the most vulnerable families and the children of those families. I very much hope that the Government will take the decision to do that earlier.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
I was accused earlier by the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) of being a bit miserable in my Budget speech—of failing to point out the good things in the Budget. Well, it is pretty easy to be miserable with a miserable Budget, but I did welcome the freeze on whisky duty and the support for electric vehicles, among other things. There were slim pickings, but I did my best to be positive wherever I possibly could. But how rich is it to hear that accusation from those on the Government Benches? They would rather turn to stone than welcome the fact that Scotland’s crime level is at a 42-year low; welcome the best accident and emergency performance in the UK; or welcome that 100,000 small and medium-sized businesses pay no business rates at all, thanks to the Scottish Government’s small business bonus. And what about the 70% of people in Scotland who are now paying less tax, or the lowest-paid people who are paying less tax? Or our record social house building programme, with council houses being put in place to fill the Government’s deficit?
It is clear for all to see that austerity lives on for those who can least afford it. In delivering this Bill, the Government continue their attacks on the poorest in our society. In my response to the Budget, I recounted many ways in which the Government are failing to deliver for Scotland—for our workers, industry and people. My hon. Friend the Member for Aberdeen North (Kirsty Blackman) said earlier that the Chancellor admitted that the Government would need to look at “a different approach” on the economy; if and when the Prime Minister fails to secure a deal with the European Union, this Bill will not be worth the vellum it is printed on.
After a decade, Tory austerity is far from over. Scotland’s block grant for 2019-20 is down £2 billion in real terms compared with 2010-2011. The paltry £2.7 billion for universal credit does nothing for people currently struggling and goes nowhere near reversing the years and billions of pounds of social security cuts that people have endured. After five and a half years of this failed experiment in the highlands, after seeing the misery that people have endured on universal credit in Inverness and the surrounding area, and after having ignored not just me but all the agencies, including the Government’s own support agencies, this Government should hang their heads in shame that they are not doing something to help people instead of continuing to punish them in this way.
In contrast, the Scottish Government are helping those on low and modest incomes. This Tory Budget gives tax cuts to the richest. The Scottish Government, in the face of austerity, are building an economy of the future, with measures to unlock innovation and productivity. They do that while the Government in Westminster recklessly pursue, at the very best, a bad Brexit for the nations of the UK—actually it is looking more like a disaster that they are pursuing. The Tories should accept that the only way to minimise the damage to jobs, the economy and business is to stay in the customs union and the single market.
As my hon. Friend the Member for Aberdeen North asked earlier, where is the oil and gas sector deal? After £350 billion in tax revenues, the industry deserves better; it needs the sector deal. The news of yet another nuclear failure with the withdrawal of Toshiba underlines the fix that this Government are in over their Paris climate change commitments. Having betrayed Peterhead and having pulled the rug from under the industry three years ago, incidentally wasting £100 million in the process, this Government must now make a proper serious commitment to carbon capture and storage.
David Duguid (Banff and Buchan) (Con)
I am sure the hon. Gentleman will join me in welcoming the commitment of the Department for Business, Energy and Industrial Strategy not only in at least considering the sector deal for oil and gas, but, on the subject of carbon capture and storage, in looking at a project in St Fergus, just off the coast of Peterhead in my constituency. It looks like being part of a Scotland-wide cluster, because the system is already connected by a pipeline from St Fergus to Grangemouth.
Drew Hendry
I thank the hon. Gentleman for his intervention. Indeed, I do welcome the work at St Fergus. It perhaps would have been proper to point out that the Scottish Government are also driving that St Fergus development. It perhaps also would have been appropriate to point out that the funding that has been put forward by BEIS is one tenth of what was removed three years ago. Three years after the point at which it could have taken advantage of world-leading cutting-edge technology, it thinks it is good enough to put in a tenth of the funds and hope that that lip service will pay dividends. It just will not wash.
Drew Hendry
I will give way to the hon. Gentleman later.
This Government also continue to fail the young. [Interruption.] Thank you for that direction, Mr Speaker. I will do my best to keep the pace going.
This Government also continue to fail young people. They could have ended wage discrimination, but they chose instead to keep punishing them. Those young people deserve the same pay for the same work and they deserve a real living wage. As my colleagues pointed out earlier, there is nothing—nothing—for the women born in the 1950s who were short-changed on their pension entitlements. It is no wonder that the argument for an independent Scotland has never been stronger. The Tories’ obsessions make the case for us in Scotland.
I do want to refer to the hon. Member for Stirling (Stephen Kerr), because we rarely agree on anything, but the one thing that we do agree on tonight is fixed odds betting terminals. Delaying the reduction of stakes in fixed odds betting terminals is a disgrace; it will only take more money from vulnerable addicts and put it in the pockets of the bookies and those with vested interests. It is a disgrace that is felt right across this House. Research from Landman Economics has shown that the average fixed odds betting terminal user loses £192 a month, with the average user of a machine capped at £2 a spin losing just £22 by comparison. There is no justification for delaying this action.
It is also clear, from this very debate, how the Tories want to muddy the waters on tax avoidance, as they have on the IR35 changes. If they are not pointing the way to tax avoidance, even when they look to clamp down on it they miss the mark, as we can see with the implementation of the IR35 changes. The loopholes absolutely need to be closed. However, the employers and agencies benefiting most from these schemes have, for the most part, got away with it. With HMRC implementing stringent measures on many who were duped, many are now fearful of being forced to repay immediately with no provisions that reasonable time will be allowed and a payment scheme be made available. Folk are genuinely worried about becoming bankrupt.
Austerity lives on for those who can afford it least. The Prime Minister and the Chancellor spin the line that austerity has ended, or is ending; well, maybe, depending on who you hear it from. But everyone knows, even their rare supporters, dwindling though they are, that that is just a toom tabard of a statement—another Government rebranding exercise. My constituents are making the choice between putting food on their tables and heating their homes. They have had enough of it. Those on universal credit with spiralling debt because they do not know when the next payment is coming, or whether, if it does, it will be correct, have had enough of it.
Universal credit impacts on other communities. After five and a half years, we know the truth. As the OBR Budget document details, the changes to the work allowance reverse only half of the cut that was made to it in the 2015 Budget. Are we seriously expected to cheer this Government for putting back in less than half of what they removed, after years of punishing those who could afford it least? Millions of people have been dragged through this system already, with misery, heartache and poverty—and what have they been told? They have been told that the system works—that they are all wrong—but there are now voices joining theirs.
Even in the Minister’s small concessions, he is admitting this Government’s failure. They should be utterly ashamed of what they have inflicted on people. If Ministers had a shred of decency, they would come to the Dispatch Box and apologise to my constituents and to the far too many others who have had to endure the roll-out of universal credit. Let us not forget that these people will not be benefiting from transitional funding announced in the Budget; instead they are left trying to piece together their lives following the impact on their families, sometimes shattered by this move. They are left wondering how on earth a Government supposed to provide them with a safety net to which they and their families have contributed are left counting pennies while those who have the most still avoid paying their share.
For those to be transitioned to universal credit, £1 billion for the transition does not even touch the sides of what is needed. If this Government were serious about mitigating the impacts, they would migrate people to universal credit without expecting them to process a new application. People who need universal credit support simply do not have anything spare to get them through the transition weeks, be it two weeks or five weeks.
Then there is the new funding for universal support to be announced. I will welcome that; any support is better than none. But again it is more fudge, because, as anyone who has any idea about this mess knows, most of the issues people experience with universal credit are long-running and ongoing well after the initial application. So where is the fund for ongoing universal support? While that was omitted from this Bill and by this Government’s PR machine, the chief executive of Citizen’s Advice made it very clear in her letter to the Work and Pensions Committee when she said:
“Our current agreement does not include funding to provide support to people once their claim is complete.”
Of course, I hear the Government’s other rhetoric that for most people the process is simple and problem free.
I do not want to see any more people in tears in my constituency office. I do not want to see any more families struggling to get along. I do not want to see any more families going to food banks and having to prostrate themselves to get what is essentially a handout in order to keep them going when they should be properly protected under a decent social security system that any forward-thinking country would have. Perhaps that country should indeed be an independent Scotland.
Charlie Elphicke (Dover) (Ind)
It is always a pleasure to follow the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), who always paints such an uplifting picture of the country for the House.
It seems to me that the people I represent in my constituency know that the best cure for deprivation is a job. There is no doubt that this Government have had massive success in creating so many jobs since they have been in office. That is in sharp contrast to the toxic inheritance left by the previous Government.
The ultimate test of any Finance Bill is: what path does it set for the future of the country and what vision does it set for the next steps? Yes, the people I represent in Dover and Deal know that we have done well in creating jobs and creating new prosperity, but it is also important that we are a compassionate party and that we care for and look after the least well-off. It goes beyond just getting a job; it is important that we reduce the burden of taxation on those who are the least well-off.
That is why it is so important that the personal allowance has been increased to £12,500. I have long argued—since 2010—that we should increase the personal allowance and take people out of taxation altogether. I am really glad that we have come to a time when it is at such a high level. That is good for the least well-paid and good for taking people out of tax altogether.
I welcome the measures on universal credit. It is welcome that the Chancellor has listened carefully to the representations made by me and many other Conservative Members that we should look after those who are the least well-off. In many ways, universal credit improvements and the better funding of universal credit is the best way to reduce the incidence of taxation on the least well-off. It is the most targeted way of helping people, and I welcome that.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
I agree with the hon. Gentleman that properly funded universal credit and taking the lowest-paid out of tax are important, but does he agree with me that the billions of pounds we are going to spend giving the top 10% a tax cut would have been better spent on the low earners he mentions?
Charlie Elphicke
I am going to come on to that in one moment, but I will just finish this point.
When talking about the importance of compassionate Conservatism and the vision we as the Conservative party should have of looking after the least well-off, it can never be right to put jobs ahead of people’s lives. That has been well settled on the Conservative Benches. Let us not forget that it was on these Benches that important legislation such as the Ten Hours Act was pioneered well over a century and a half ago. It was on these Benches that so much of our health and safety legislation was pioneered and put through. It was on these Benches that we made the argument that jobs should never come ahead of people’s lives.
That is why I join my hon. Friend the Member for Stirling (Stephen Kerr), who spoke movingly some moments ago, in saying that we cannot delay the action that is needed on fixed odds betting terminals beyond next April. It cannot be right to delay this, and it certainly cannot be right to do so on the basis of a bogus report. It has been said explicitly that that was not what the report was intended to be for or to do.
For that reason, we need to come together as a House and collectively persuade the Government to think again and accept that we should bring this in from April 2019, as has long been planned. In my constituency of Dover and Deal, addiction is a big problem for many people. Whether it is to alcohol, drugs or gambling, addiction is a big problem. It is the responsibility of this House—and, in my view, this has long been settled as a responsibility of compassionate Conservatism—to look after and care for those who suffer from addiction, so I think it is the right thing to do.
It is important that this is not simply about protecting the least well-off, helping them to have more money and protecting them from exploitation, but about making sure that we can power ahead as a country. It is important that powering ahead as a country is at the heart of this Bill. We need to get big business investing, because it has not been investing; it is sitting on about £750 billion of cash balances. We need to get big business investing in the future of this country. It should not be relying on low-skilled labour from overseas; it should be investing in kit, investing in people and investing in skills. That will ensure that our nation has much greater productivity and a more highly skilled home-grown workforce so that our countrymen will be able to do better and earn more in the years to come. That is important for investment.
It is also important that we back the entrepreneurs—the job creators. Who are they? The figures are clear. Since 2000, 4 million jobs have been created by small and medium-sized enterprises, whereas big business has created only 800,000. The obvious thing to do is to back small businesses—the entrepreneurs—with tax cuts and deregulation and by making it easier for them to get on and do well. That is why it would never be right to increase taxes on small businesses, because that would hold people back. It would never be right to increase the regulatory burden on small businesses, because that would make it harder for them to succeed. Nor would it ever be right to allow big banks to prey on small businesses and to litigate them into bankruptcy, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) movingly said in his speech. That is why we need to ensure that there is a financial tribunal system to protect small businesses from being exploited by the oligopoly of big banks.
While we are about it, we ought to think about putting the consumer back in charge and back in the driving seat, by taking action to break up the big energy companies and the big banking oligopoly. We should make sure that we have more competition in this country. We should unbundle Openreach to ensure that we have much better, faster internet access. It is a disgrace the way Openreach carries on, cutting off villages. However, it does not just do that; when people change connection, half the time they have to wait half a month for the connection to be made, because of Openreach’s galactic incompetence. The company is more interested in investing in sports rights than in infrastructure; indeed, it does invest more in sports rights than in its infrastructure, and that has to change as well. If it were a stand-alone company, I am absolutely certain that that would be the case.
So, yes, the Conservative party should be the party of enterprise and of the small businesses that drive the economy, that create the jobs and that have created the jobs over the last 15 years. Yes, we should be the party of compassion for the least well-off. Then, however, I am challenged by the hon. Member for Stoke-on-Trent Central (Gareth Snell), who says, “Should you not be in favour of increasing taxes on the richest, on businesses and all the rest of it?”
Gareth Snell
I fear that the hon. Gentleman is misrepresenting what I said. I did not say that the Government should be raising taxes; they should simply not be cutting taxes, which is a very different thing.
Charlie Elphicke
The hon. Gentleman seems to be muddled: is he a tax raiser or a tax cutter? It seems to me that the evidence of history is really clear. Back in 2006, I wrote a paper for the Centre for Policy Studies saying that we should halve the rate of corporation tax, which then stood at over 30%. I basically said that that would pay for itself, because if we cut the rate, we up the take. I made the case that we would have more revenues than were coming in at the time if we halved the rate to less than 20%. Since then, that policy has been put into action, and that has turned out to be the case: if we cut the rate, we up the take. In the 1980s, they cut the higher rate of tax from 80% to 60% and then to 40%. Each time the rate was cut, what happened? The tax take rose. That is why we ought to be looking at how we can reduce the burden of taxation in areas where we can raise more taxes.
There are some cases where we increase the burden of taxation and see revenues falling. We can see that in what has happened with stamp duty land tax on very high-value properties: we freeze the market, and we see lower revenues as a result.
Alan Brown
If cutting taxes always brings in more revenue, how come every measure in the Red Book on cutting tax shows that it will cost the taxpayer money? Either the Treasury does not know what it is doing in its predictions, or it is putting cause and effect together wrongly.
Charlie Elphicke
The hon. Gentleman actually makes a very fair point. The Treasury has a classic modelling system. I have always argued for a dynamic modelling system and the history books are on my side. The dynamic modelling system is the right way forward. It is the right approach to take, because history teaches us that if we reduce the rate of taxation, the revenues go up. That is elementary. That is obvious. Everyone on the Conservative Benches understands that. That is well settled: it was settled back in the 1980s.
It is important that we are compassionate and that we care for the least well off. Having a steady economy, with increased jobs and increased prosperity means that we have more money to invest in public services. However, we also need to inspire and support the entrepreneurs—the job creators. We need to be on the side of the consumer and ensure more competition in a more dynamic economy. Finally, we need to embrace the industries of the future. Let me talk briefly about electric cars.
Why is the adoption of electric cars so slow? The answer is that people are worried about their car conking out and being stranded in the middle of nowhere. We need a step-change in how we manage infrastructure and charging points. We need to make sure that infrastructure is not just in people’s workplaces, which is welcome, but across the land. Until that happens, there will not be the mass adoption of electric cars. We need to make that more viable and possible, because then big company car fleets will go electric. As soon as they do, that will cascade through the marketplace. The one thing we need to do more work on—the Treasury needs to do more work on it—is getting more investment in infrastructure for charging and electric cars. That way offers a real chance for our country to be less polluted so that the air we breathe is cleaner and our environment is better as well as ending our addiction to fossil fuels and our dependence on unstable countries around the world, thereby enjoying much greater energy security here in Britain.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
I am pleased to speak in support of the measures in the Bill. I have previously spoken of a number of reservations about some of its measures. I wish to record my disappointment at the timetable for changes to fixed odds betting terminals. I believe the wait is too long. We can take some comfort from the fact that, while the Government did not oversee their introduction, it is this Government who will see the stake plummet to £2, but not on a timescale that I would have wished for.
I believe the Bill is well matched to our nation’s present circumstances and will do much to benefit my constituents in Ayr, Carrick and Cumnock. Scotland will benefit from the personal allowance being increased by the UK Chancellor to £12,500. That is almost double what it was when we came into power. The Scottish Government do not set that allowance, but they do set the tax bands, which are more numerous. We hear often that there is a tax saving for a certain band. That is indeed correct: it amounts to £24 a year for some, which equates to less than 50p a week—not over-generous. The Scottish Government have it within their gift to vary the tax rates and thresholds of non-savings and non-dividend income for Scottish taxpayers. I await with interest their budget next month, which will be a challenge for the Scottish Government. [Interruption.] Every budget is a challenge. My personal budget is a challenge. Presently, Scotland is the highest taxed part of the UK for income tax and the highest taxed part of the UK in which to run a business.
Kirsty Blackman
What does the hon. Gentleman say to the half of English taxpayers who would pay less tax if they were to live in Scotland?
Bill Grant
I take the hon. Lady’s point, but I understand that the saving she refers to is very modest to the tune of £24 a year for some, which equates to less than 50p a week. It is a step in the right direction, but a very small step and hardly a progressive tax system. As one whose mother cleaned other people’s houses and made beds at Butlin’s on Saturdays, I am not minded to accept lectures on poverty from Scottish National party Members.
I disagree with the suggestion that the Budget failed to provide funding for a social security system that treats people with dignity and respect. The Chancellor was listening. The entire ethos of the evidence-based and empowering system of universal credit is that work should always pay, and that work brings with it dignity and respect. No one can disagree with that. The dignity of work is important to all constituents in all parts of the United Kingdom.
The Bill will facilitate an additional £1.7 billion per annum being invested to increase work allowances by £1,000 from April 2019. I hear Opposition Members cry “More!” Everyone’s an Oliver—they want more, more. That “more” has to be earned and this Government have an economy that works and is earning more.
Bill Grant
I am happy to join you.
Some 2.4 million households will keep an extra £630 of income per annum, and I am sure that those who need support will continue to receive it. It is no longer a wicked system where if someone wants to work beyond the 16 hours, they lose money.
Alison Thewliss
The hon. Gentleman says that it is no longer a wicked system, but it is a wicked system for those who have more than two children. Why does he think it is justifiable to take so much money out of the mouths of kids in his constituency?
Bill Grant
The system is set, and it is what is affordable to the taxpayer. You have to plan your children and what you can afford to bring up, as I planned—[Interruption.] It is not a crime to plan—[Interruption.] It is not a crime to plan your children and how you manage those children, and whether you have one—[Interruption.] That is the choice of the individual; it is not the choice of Government.
Alison Thewliss
Is the hon. Gentleman aware that this benefit will apply to all children, regardless of when they were born, and could not reasonably have been planned for from next year? Is he also further aware that the social security system is supposed to be a safety net for us all and not meant to punish people for the circumstances they are in?
Bill Grant
I thank the hon. Lady very much for that intervention—I do not agree with what she says. It is a safety net—it is a security net. My family have benefited from it. Nobody is saying they want to dismantle the welfare system. It has to be a manageable and affordable welfare system for the taxpayer and it must support the individual, as it does—[Interruption.] Thank you very much.
I have previously in this House expressed my delight at the freezing of duties for beer and whisky. That was agreed on, and we certainly found common ground across the Floor. We all like a dram and I am delighted that duties were frozen, particularly given that businesses in Scotland, not least in the whisky industry, will benefit from that freeze.
Having been a smoker, I was among those who noted an increase in duty, but I believe that this increase is fair. Together with the introduction of a duty on heated tobacco, this may guide people and cause them to reflect on their smoking or vaping habits in future, with the obvious health benefits. As one who has given up, I would advocate giving up smoking, whether vaping or conventional smoking, and that way the Chancellor will not get people with the extra duty. I realise that for many, that can be challenging, but giving up smoking is the best way to avoid tax on cigarettes. [Interruption.] It is lawful tax avoidance, as the hon. Member for Glasgow South West (Chris Stephens) said.
Similarly, the modest increases in vehicle excise duties for cars, vans and motorcycles to bring them in line with RPI inflation from 1 April 2019 may cause people to think about the type of vehicles that they own. People do not need to drive a gas-guzzler that consumes a lot of fuel, and there is the cost of fuel. They could improve the environment and increase the amount of money in their pocket. It would have a positive effect on the environment. The freeze on heavy goods vehicle excise duty for 2019-20 will, however, assist many small and medium-sized businesses throughout Scotland and the UK.
Opposition Members have sought to criticise the Chancellor for the suggestion that the Budget may need to be revised upon our leaving the EU. I do not see any logic in a notion that a reappraisal would be unhelpful after our country has left the EU. Surely such a reappraisal is entirely sensible and pragmatic, if it is indeed needed. The Opposition seem to concentrate on the same old chestnuts, but I would prefer that we concentrated on the little acorns in the Bill—for out of these little acorns, oak trees will grow. They will help the UK to flourish and austerity will indeed become a thing of the past, if we are all self-disciplined and unite behind the Chancellor, his Budget and this Bill.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Mr Speaker, thank you for letting me close today’s debate on the Finance Bill. The Bill represents a significant moment for this country. We have been told that austerity is over. It should be a time to rejoice. As Labour Members who have warned for eight years that austerity was the wrong choice, we should surely welcome the Bill. But the problem is, on examining the Government’s plans, you can claim that austerity is over only if you are willing to ignore the Prison Service, local government, schools, social care for vulnerable young people, social care for vulnerable older people, the police, the armed forces, those on low incomes, young people and women. I could go on, but I will not. It is enough to say that any economic policy that continues cuts to Government Departments and the squeezing of those on low incomes is not offering something new; it is simply offering more of the same.
The tragedy—the real, genuine tragedy—for those of us who were here in 2010 to listen to the emergency Budget that began austerity is that it simply has not worked. The British public have had all the pain, only to find out that there is no gain. I urge anyone who has participated in this debate to reread George Osborne’s speech in that 2010 Budget, because we know that the deficit was not eradicated by 2015 and that the retention of the triple A rating, said in that debate to be sacrosanct, does not even get a mention in a ministerial speech these days. Instead, economic growth is now the lowest in the post-war era and UK business investment the lowest in the G7. We have had eight years not even of stagnant wages, but of falling wages.
With respect, are these not the fundamentals? When we discuss a Finance Bill, should these factors—the ones that impact directly on our constituents—not be the ones we focus on? Eight years of austerity have left too many people in this country poorer, unsafe and too uncertain of their futures. It was a reckless policy that in my view directly contributed to the result of the Brexit referendum and the further chaos the Government now find themselves in. I want a Finance Bill that properly addresses these things and puts them right, but instead we have a Finance Bill that does none of these things, a Bill that offers the country nothing new—and in some areas nothing at all.
I second the concerns raised by my hon. Friend the Member for Bootle (Peter Dowd) about the way the Government have gone about the whole process of presenting the Bill. It might sound like parliamentary chicanery, but it is important. In an unprecedented move the Government did not allow us to table real amendments to the Finance Bill. By failing to move an amendment to the law resolution, they have limited the scope of amendments and new clauses only to the subject matter of the resolutions already tabled by the Government. The hon. Member for Aberdeen North (Kirsty Blackman) referenced this in her speech. In doing so, they have restricted the rights of every Member, Conservative Back-Bench Members included.
This procedure has only been used by Chancellors six times in the last century and only when a Finance Bill was tabled close to an election: Churchill in 1929, Healey in 1974, Brown in 1997, Osborne in 2010 and the current Chancellor last year in 2017—probably the only time the Chancellor has been mentioned in the same breath as Churchill. We know why these restrictions have been applied. The Government are running scared of the House of Commons and, most of all, their own Back Benchers and perhaps their allies in the Democratic Unionist party.
Time and again, the Government have used the Brexit process as a pretext for a power grab, transferring powers to the Executive without any thought for constitutional checks and balances. I ask hon. Members to have a look at clause 89, rather innocently named, “Minor amendments in consequence of EU withdrawal”. In that clause, Ministers are giving themselves the power to amend tax law outside any normal due process. That will go on the statute book with no sunset clause or limitation of any kind. It is reckless, unprecedented and unnecessary, but it is indicative of the Government’s whole approach to Brexit: grab powers first, make decisions later.
That said, I have, as ever, enjoyed listening to today’s debate. We have had some good speeches and the usual mix of slightly spurious claims and downright incorrect statements from the Government Benches. It seems we will never get Government Members to listen to the IFS on the cost of their corporation tax cuts, but it also seems that the Financial Secretary, whom we are all tremendously fond of, has chosen today to repeat his claim that unemployment rose under every Labour Government. I am afraid that, unfortunately for him, that is just not true.
While listening to the debate, I have taken the liberty of doing some research for the Financial Secretary. I can tell him that he need look no further than the very first Labour Government, who took office in January 1924. There was a general election in December of that year, something we are not in favour of. The very first Labour Government reduced unemployment from 11.9% to 10.9%: those figures are widely available. It is true that the Labour Government of 1945 had to deal with demobilisation following the end of the second world war, but they did found the national health service, build a million homes and still satisfy the legal definition of full employment, so I think we can say that they were the greatest Government in British history.
I must also place on record that the claim made by the hon. Member for Aldershot (Leo Docherty)—I am not sure whether he is still in the Chamber—about the book edited by the shadow Chancellor, my right hon. Friend the Member for Hayes and Harlington (John McDonnell), is simply not correct. I think that the hon. Gentleman was trying to quote the economist Simon Wren-Lewis, who accused the Prime Minister of lying when she gave a similar quote in the House of Commons. I ask for that to be recognised and I ask Members to reflect on its incorrect use.
Several Conservative Members referred to the increase in NHS spending. I felt that there was a slight lack of recognition of the fact that it is predicated purely on an improved forecast for the tax revenues. It is not money in the bank and, remarkably, the Chancellor chose to blow most of it in one go. That may not have been prudent.
I listened intently to the right hon. Member for Wokingham (John Redwood). He said many things that I thought were fundamentally wrong about Brexit and tax policy, but he did make some interesting comments about monetary policy. There has, I feel, been insufficient recognition that austerity has been accompanied by an unprecedented period of ultra-loose monetary policy. The Bank of England cut interest rates to record lows, and then introduced quantitative easing as a form of “life support” when they could not go any lower. We have not discussed that enough, and we have certainly not discussed enough the distributional impact that it implies.
The Bank has essentially compensated for Government austerity by pumping money into the economy to increase consumption and investment, while the Government have done the opposite. We would say that the lack of sustained growth under the Government’s stewardship has meant that we have not yet been able to unwind that policy, so that, at present, if we need it again it is not available to us. That is why, today, we are even more badly placed to deal with the next recession, when it comes.
As ever, I was slightly frustrated by the speeches of the hon. Member for Croydon South (Chris Philp) and others who made no distinction between Government borrowing for investment and Government borrowing to pay for day-to-day spending. As the International Monetary Fund itself has pointed out, if debt is accrued to finance investment, and if that investment will generate stronger tax revenues than the cost of borrowing, it is entirely sustainable. Debt as a percentage of GDP does not tell us much without reference to when that debt needs to be serviced, and at what cost, relative to the growth of taxes that have to pay for it. The public finances are not like a household’s finances, and every Member needs to remember that. The worst legacy for the next generation is a failure to grow the economy as we could. It is nonsense to talk about burdening future generations with debt when they are exactly the ones who would benefit from that long-term investment.
Some excellent speeches were made by Labour Members. My hon. Friend the Member for Kensington (Emma Dent Coad) made an important speech about housing and homelessness. She emphasised that, apart from increasing first-time buyers relief, the Bill does little to encourage house building or to tackle the UK’s housing crisis. As she said, many of the Government’s initiatives, such as Help to Buy, cause substantial problems in themselves. She also updated the House on the Grenfell situation, and I pay tribute to her for all her work on behalf of her constituents and the nation in that regard.
My hon. Friend the Member for Lincoln (Karen Lee) spoke with passion about what austerity has done to living standards in this country. There is no better example of that than the impact of universal credit. Let us not forget that the £1.7 billion promised for universal credit is only a third of the £7 billion cuts in the social security system that were already scheduled. The hon. Member for Glasgow South West (Chris Stephens) made that point well. Let me tell Conservative Members, with complete sincerity, that I am kept awake at night by the casework that I receive on universal credit, and I do not believe that I am the only one.
Chris Philp
Does the shadow Minister accept the Resolution Foundation’s analysis, published after the Budget, that said that the total fiscal cost of the amended universal credit will exceed that of the preceding benefits? That is, more money is going into universal credit now than even was the case before.
Jonathan Reynolds
I have seen that analysis. The Resolution Foundation said that the cost is greater, so the question for the hon. Gentleman is this: if more money is going in and so many people are still losing out, what terrible choices have the Government made to produce a situation as bad as that?
My hon. Friends the Members for Swansea East (Carolyn Harris) and for Mitcham and Morden (Siobhain McDonagh) mentioned the Government’s shameful delay in limiting the maximum stake for fixed odds betting terminals. Many Members, including me, see the damage done in our constituencies by these machines every week. They both gave forceful and persuasive speeches, but I am hopeful that the will of the House on this matter is clear and that the Government will be forced to do the right thing, especially given several speeches by Conservative Members. My hon. Friend the Member for Enfield, Southgate (Bambos Charalambous) gave a powerful testimony about what austerity has meant in his borough. I only hope that his school governors’ meeting was quorate without him.
There was a lively exchange on the environment. I do not think it is unreasonable to say that, given the potential catastrophe we face—as outlined in the Intergovernmental Panel on Climate Change report published in October—this Finance Bill is unsatisfactory. I sat in Mansion House in June, listening to the Chancellor promise that the UK would be leading the way on green finance, but we have yet to see any tangible evidence of the Government’s intentions on the statute book. We are lagging behind our European counterparts, which already have mandatory climate disclosure laws, and those that have issued their own sovereign green bonds. This just does not seem to be a priority for the Government.
The good news for all my colleagues is that they can join me tonight in voting for Labour’s reasoned amendment, which declines to give this Bill its Second Reading on the basis that it continues the austerity policies that have caused so much damage, and instead proposes a progressive taxation system, real funding for public services, greater public investment and a halt to the roll-out of universal credit.
I say to colleagues across the whole House, is it really unreasonable in Britain today for people to want to take their children into a city centre without having to explain to them why so many people are now sleeping on the streets? Is it really unreasonable to believe that, if we really had a strong economy, thousands of our fellow citizens would not be dependent on food banks to get by? And is it really unreasonable to believe that, when a Government present a Finance Bill, their priorities should be those most in need, not those who are already better off? We do not think that any of those things are unreasonable, so we will vote against the Finance Bill tonight. We know that this country does not just need new ideas; it needs new hope for the future. The Bill sadly offers neither and it does not deserve the endorsement of the House tonight.
The Exchequer Secretary to the Treasury (Robert Jenrick)
I thank all right hon. and hon. Members across the House who have contributed to this wide-ranging debate. The shadow Chief Secretary to the Treasury managed the unusual feat of opening the debate without mentioning a single measure in the Finance Bill, although he did brandish a very thin pamphlet, which we were told contained all the answers to the Labour party’s spending commitments. A number of important issues have been raised across the House tonight, and I will do my best in the time available—and as swiftly as possible—to respond to as many as I can.
Two weeks ago, the Chancellor was able to present a Budget that followed five years of economic growth, with the deficit cut by four fifths, the lowest levels of unemployment, the highest levels of employment in my lifetime, real wages rising and real wages rising fastest among the lowest paid. It was a Budget in which, as a result of responsible management of the public finances—meeting the serious challenges we inherited in 2010 in a serious way—we were able to invest the highest levels in our economic infrastructure for more than 40 years, including £460 million more a week than the last Labour Government for our roads, railways and broadband. The Budget increased funding to the NHS by £20.5 billion a year in real terms; froze fuel, beer and spirits duty once again as a result of sustained lobbying and support from Members on the Government Benches, including my friends from Scotland; and—above all—provided a tax cut for 32 million people.
My hon. Friends the Members for Croydon South (Chris Philp) and for Cheltenham (Alex Chalk) and many other Government Members welcomed our action to support the high street and to enable town centres to adapt and evolve to new circumstances and continue to be the cornerstones of thriving communities. That action includes a reduction in business rates for 30% of smaller retailers, investment in transformation and infrastructure through the £675 million future high streets fund, and planning reforms to make it easier, cheaper and quicker to create businesses and work places in town centres and to create homes—planning reforms that are now, it seems, opposed by the Labour party.
My hon. Friend the Member for Croydon South made an interesting suggestion about the seed enterprise investment scheme. In the Budget, we reaffirmed our commitment to the world-class incentives we have as a country to encourage investment, promote wealth creation and make this country the best place in the world to be an entrepreneur, such as continuing entrepreneurs’ relief and continuing EIS and SEIS, as my hon. Friend suggested.
My hon. Friend the Member for Dover (Charlie Elphicke) and many other Government Members welcomed our sustained commitment to reducing corporation tax again—now to 17%—and noted that our decision to reduce it from 28% had not, as was suggested, reduced receipts to the Treasury, but had in fact increased them by 55%. My hon. Friend the Member for Gordon (Colin Clark) made the case, as he regularly does, that we want to grow the economy and support the people out there who are creating small businesses. This Budget and this Finance Bill are for them.
Alan Brown
I thank the Minister for giving way. If reducing corporation tax brings in more money, why has the Red Book never shown that, and why is the Treasury not able to provide any modelling that shows an increase in revenues from that reduction?
Robert Jenrick
I think I have already explained that the facts speak for themselves. Receipts from the reduction in corporation tax have increased by over 50%. That measure was opposed by the SNP and the Labour party.
My hon. Friend the Member for Solihull (Julian Knight) represents many people who work in the automotive sector, which we want to support. He asked about vehicle excise duty. In this Bill, as he knows, we are legislating to increase support for low-emission taxis and have brought that measure forward by a year. We have also increased support for electric charge points, to help the further roll-out of electric vehicles, as other hon. Members across the House have suggested. As I discussed last week with the chief executive of Jaguar Land Rover, who supported this strongly, we intend to review the consequences of the new worldwide harmonised light vehicle test procedure on vehicle excise duty and report back in the spring.
The right hon. Member for Twickenham (Sir Vince Cable) spoke of the need to incentivise further business investment, particularly at this important moment in the Brexit negotiations. I am sure he will welcome the increase in the annual investment allowance from £200,000 to £1 million, which will encourage businesses across the country, including manufacturers, to invest in new plant, new machinery and digital technology and raise their productivity, as well as the new structures and buildings allowance, which started on Budget day.
The Budget laid out a whole range of measures—exactly the ways forward that the right hon. Gentleman suggested—to increase productivity, which is the only sustainable way to improve living standards in this country, including the largest ever investment in our strategic road network and investment in our skills base, including the introduction of T-levels, encouraging apprenticeships and the national retraining partnership.
Theresa Villiers (Chipping Barnet) (Con)
I very much welcome the money in the Budget for repairing potholes. Does the Minister agree that it is vital that our great capital city gets its fair share of that funding?
Robert Jenrick
I certainly do. Some Opposition Members were snobby about potholes, but those of us in the real world know that potholes matter. They affect people’s working lives, and we want to fix that problem. In answer to my right hon. Friend, Barnet will shortly be receiving £690,0000 for potholes.
The hon. Member for Aberdeen North (Kirsty Blackman) and many others welcomed the transferable tax history, which we announced in the Budget and which she advocated. She was strongly supported by our Scottish Conservative colleagues. The oil and gas industry is a national economic asset and one that we want to support. It supports 280,000 jobs across the Union, but particularly in north-east Scotland. In the Budget, the Chancellor reaffirmed our commitment to strong, competitive and predictable taxation, so that the industry—which is, as the hon. Lady said, still fragile—can continue to strengthen in the years ahead.
Many of my hon. Friends, including my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), welcomed the introduction of the increase in the personal allowance and the increase in the higher-rate threshold—a tax cut for 32 million people, more than 1.5 million more working people taken out of tax altogether and achieving an increase in the personal allowance by more than 90% since 2010, which is a promise made in our manifesto and a promise delivered in the Budget.
My hon. Friend the Member for Walsall North (Eddie Hughes), as well as quoting Tiberius—I am yet to know whether Tiberius is quoted in No. 11; perhaps the Chancellor will invite my hon. Friend round for a cup of tea—was absolutely right to say that the Bill takes forward the measures in the last Budget to create a stamp duty relief for first-time buyers in other properties and extend it to those in shared ownership. That encourages and increases the dream of home ownership to a new generation.
As the Financial Secretary said at the beginning of the debate, the Bill also makes a number of changes to make our tax system fairer, and many Members across the House welcomed the new digital services tax. Some asked why we do not go further and faster, but let us remember that we will be the first major economy to create a tax of this nature. We are genuinely leading the international community and we hope to lead a multinational agreement, but the UK, under the leadership of the Chancellor, will lead the way. With those measures and others in the Bill, we will continue to close the tax gap, which is at its lowest ever and lower than in any year of the last Labour Government.
The hon. Member for Wakefield (Mary Creagh), at the beginning of the debate, and other hon. Members later, asked what action we are taking to support the environment and on climate change. One such measure, of course, is our proposed plastics packaging tax—again, leading the world by creating an innovative tax that encourages the producers of plastic packaging to take responsibility and change their packaging, and building on great Conservative environmental taxes of the past, such as the landfill tax created by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke).
My hon. Friends the Members for West Aberdeenshire and Kincardine (Andrew Bowie) and for Moray (Douglas Ross), among others, said very clearly—this is an important dividing line in British politics—that we are excited about the future of this country, and want to support and invest in science and technology and in research and development to drive the economy forward. From the Labour party, we heard no ideas as to how to grow the economy. We heard about more spending and higher taxes, but nothing about how to create wealth and make our country more prosperous. We heard only ideas that we know have failed in the past.
Let us be clear: a vote against the Bill tonight would be a vote against enabling investment and new jobs in the north-east of Scotland and a vote against the transferable tax history, which the hon. Member for Aberdeen North says she has campaigned for and advocated over many years. It would be a vote against further investment in manufacturing to raise productivity, which Opposition Members have said should be a national priority, and a vote against the increase in the annual investment allowance. It would be a vote against extending the stamp duty land tax relief for first-time buyers to those who want to live in shared-ownership properties, something advocated by my hon. Friend the Member for Walsall North. A year ago, the Opposition voted against our first policy in this area. Today, we know that more than 120,000 people across the country have benefited from that stamp duty relief. Surely the Labour party will not make the same mistake again.
Anyone who votes against the Finance Bill tonight will be voting against further actions to close the tax gap and to make it harder to evade and avoid taxation, and against making our tax system fairer. It would be a vote against a tax cut for 32 million people, and a vote against taking more than 1.5 million of our fellow citizens out of income tax altogether.
The Bill will make the UK more competitive, more innovative and more entrepreneurial. It will deliver lower taxes and put more money into the pockets of our British working public. It will make our economy and our country stronger, and I commend it to the House.
Question put, That the amendment be made.
Proceedings | Time for conclusion of proceedings |
|---|---|
First day | |
Clauses 5, 6, 8, 9, 10 and 38 and Schedule 15; Clauses 39 to 42; any new Clauses or new Schedules relating to tax thresholds or reliefs | 3 hours from commencement of proceedings on the Bill on the first day |
Clauses 68 to 78 and 89 and 90; any new Clauses or new Schedules relating to the subject matter of those clauses. | 6 hours from commencement of proceedings on the Bill on the first day |
Second day | |
Clauses 61 and 62 and Schedule 18; any new Clauses or new Schedules relating to remote gaming duty or gaming duty | 3 hours from commencement of proceedings on the Bill on the second day |
Clause 15 and Schedule 3; Clause 16 and Schedule 4; Clauses 19 and 20; Clause 22 and Schedule 7; Clause 23 and Schedule 8; Clauses 46 and 47; Clause 83; any new Clauses or new Schedules relating to tax avoidance or evasion | 6 hours from commencement of proceedings on the Bill on the second day |
Finance (No. 3) Bill
Monday 19th November 2018
(6 years ago)
Commons ChamberRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 19 November 2018 - (19 Nov 2018)
19:40 - The Committee divided: - Ayes: 292 / Noes: 10 - Question accordingly agreed to.
19:57 - The Committee divided: - Ayes: 262 / Noes: 293 - Question accordingly negatived.
20:12 - divided: - Ayes: 287 / Noes: 292 - Question accordingly negatived.
20:27 - divided: - Ayes: 34 / Noes: 290 - Question accordingly negatived.
22:20 - divided: - Ayes: 271 / Noes: 295 - Question accordingly negatived.
22:34 - The Committee divided: - Ayes: 41 / Noes: 296 - Question accordingly negatived.
Kirsty Blackman (Aberdeen North) (SNP)
I beg to move amendment 6, page 2, line 24, leave out subsection (4).
This amendment would take out provisions removing the legal link between the personal allowance and the national minimum wage.
The Chairman of Ways and Means (Sir Lindsay Hoyle)
With this it will be convenient to discuss the following:
Clauses 5 and 6 stand part.
Clauses 8 to 10 stand part.
Clause 38 stand part.
That schedule 15 be the Fifteenth schedule to the Bill.
Clauses 39 to 42 stand part.
New clause 1—Additional rate threshold and supplementary rate—
“The Chancellor of the Exchequer must, no later than 5 April 2019, lay before the House of Commons a distributional analysis of—
(a) the effect of reducing the threshold for the additional rate to £80,000, and
(b) the effect of introducing a supplementary rate of income tax, charged at a rate of 50%, above a threshold of £125,000.”
New clause 2—Impact of provisions of section 5 on child poverty and equality—
“(1) The Chancellor of the Exchequer must review the impact of the provisions of section 5 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the impact of the changes made by section 5 on—
(a) households at different levels of income,
(b) people with protected characteristics (within the meaning of the Equality Act 2010),
(c) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010,
(d) different parts of the United Kingdom and different regions of England, and
(e) levels of relative and absolute child poverty in the United Kingdom.
(3) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
New clause 3—Review of the effectiveness of entrepreneurs’ relief—
“(1) Within twelve months of the passing of this Act, the Chancellor of the Exchequer must review the effectiveness of the changes made to entrepreneurs’ relief by Schedule 15, against the stated policy aims of that relief.
(2) A review under this section must consider—
(a) the overall number of entrepreneurs in the UK,
(b) the annual cost of entrepreneurs’ relief,
(c) the annual number of claimants per year,
(d) the average cost of relief paid per claim, and
(e) the impact on productivity in the UK economy.”
New clause 7—Review of changes to entrepreneurs’ relief—
“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to entrepreneur’s relief by Schedule 15 to this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the effects of the provisions on business investment,
(b) the effects of the provisions on employment, and
(c) the effects of the provisions on productivity.
(3) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact on investment of the changes made to entrepreneurs’ relief which extend the minimum qualifying period from 12 months to 2 years.
New clause 8—Review of geographical effects of provisions of section 9—
“The Chancellor of the Exchequer must review the differential geographical effects of the changes made by section 9 and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This new clause would require a geographical impact assessment of income tax exemptions relating to private use of an emergency vehicle.
New clause 9—Report on consultation on certain provisions of this Act—
“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).
(2) Those provisions are—
(a) section 5,
(b) section 6,
(c) section 8,
(d) section 9,
(e) section 10,
(f) Schedule 15,
(g) section 39
(h) section 40,
(i) section 41, and
(j) section 42.
(3) A report under this section must specify in respect of each provision listed in subsection (2)—
(a) whether a version of the provision was published in draft,
(b) if so, whether changes were made as a result of consultation on the draft, and
(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”
This new clause would require a report on the consultation undertaken on certain provisions of this Act – alongside new clauses 11, 13 and 15.
New clause 18—Review of public health and poverty effects of Basic Rate Limit and Personal Allowance—
“(1) The Chancellor of the Exchequer must review the public health and poverty effects of the provisions of section 5 to this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the effects of those provisions on the levels of relative and absolute poverty in the UK,
(b) the effects of those provisions on life expectancy and healthy life expectancy in the UK, and
(c) the implications for the public finances of the public health effects of those provisions.”
New clause 19—Personal allowance—
“The Chancellor of the Exchequer must, no later than 5 April 2019, lay before the House of Commons an analysis of the distributional and other effects of a personal allowance in 2019-20 of £12,750.”
This new clause would require a distributional analysis of the effect of increasing the personal allowance to £12,750.
Kirsty Blackman
What a pleasure it is, Mr Deputy Speaker, to speak first in this debate. I very much appreciate the way the selection has worked out in my favour today. I rise to speak to amendment 6 and new clauses 7, 8, 9 and 19 in my name and the names of my SNP colleagues. For the avoidance of doubt, should the Opposition press new clause 1, new clause 3, or new clause 18, we will support them.
As I am sure that you, Mr Deputy Speaker, and those on the Treasury Bench will be unsurprised to hear, I would like to start by raising my concerns about the process. It is the case that the personal allowance is reserved while matters relating to the upper limit of basic rate taxation are devolved. I therefore have issues with the way that clause 5 is constructed. I request, as I did on Second Reading, that in future years these two sections of the Finance Bill are split and considered separately. I hope that the Minister and officials will take that on board in drafting future Finance Bills. It would make the debate cleaner and easier to follow for MPs and for those outside the House. As I have said previously, there are real issues with the way that the House scrutinises both tax and spending measures, and this would be a simple change that would ensure that better scrutiny could be brought to bear on these matters.
Amendment 6 would take out provisions removing the legal link between the personal allowance and the national minimum wage. The legal link between the two was put in place to kick in in years where the personal allowance was below £12,500. I have two concerns with the removal of this link. First, we have no guarantee that the personal allowance will not in future be reduced to less than £12,500, because this House cannot bind a future House of Commons and a future Government might decide to reduce, rather than increase, the personal allowance.
Alison Thewliss (Glasgow Central) (SNP)
I of course support my hon. Friend’s point on increasing the minimum wage for under-25s. Is she aware that the gap between the rate for 16 and 17-year-olds and the higher rate has widened over the past three years?
Kirsty Blackman
I am not surprised that that has happened, because any Government who believe that a 16-year-old can live on less than an over 25-year-old are not going to make rational decisions in relation to pay for those at the younger end of the age spectrum. It would be a very good move if the UK Government were to change their policy and move to a situation where 16 and 17-year-olds, and those all the way up to 25, and in fact those over 25, were paid an amount they could actually live on, rather than an amount that does not enable them to buy the day-to-day essentials.
Richard Graham (Gloucester) (Con)
This is a small, but I think important, point: does the hon. Lady accept that that minimum level is exactly what it says—a minimum level? Many people, including my apprentice, earn far more than that, but if we set the level much higher, we are likely to reduce the number of opportunities available to 16 and 17-year-olds.
Kirsty Blackman
I do not believe that that is true. I know somebody who went for a job interview, and at the end of it they were offered the job. The person offering them the job actually said, “How old are you, because I want to see how little I can pay you?” Those decisions are being taken because of the discriminatory nature of the way the minimum wage is set. What we should have—and this is an argument I have made to the Government on a huge number of occasions on a number of different things—is a situation where those on the bottom of the pile are protected first, and then we should get rid of discriminatory practices where people might discriminate against 16 and 17-year-olds. I would raise the bar, rather than lower it; that is generally an argument I have made to the UK Government.
New clause 19, which we hope to push to a vote today, proposes that the Chancellor brings forward a report that analyses the distributional and other effects of a rise in the personal allowance to £12,750 in 2019-20. It is Scottish National party policy that the personal allowance be raised to £12,750. Given the increasing, and staggering, levels of in-work poverty, given the UN report criticising the UK Government’s implementation of austerity, and given the fact that millions of families across the UK have savings of less than £100, increasing the personal allowance even by a small amount will have an impact on the individuals and families who are struggling the most.
It is no incentive to work if we know that when we work we will still not be able to get out of all-consuming poverty. We need a UK Government who recognise that those who earn the least are suffering the most. In Scotland, the SNP has recognised that and we have made progressive changes to the tax system.
I do not want to live in a country where children are going hungry. The UK Government have got their head firmly in the sand on this issue. I do not understand how they can continue along this track when we are having people come into our surgeries in tears because they have not eaten in days.
Mr Jim Cunningham (Coventry South) (Lab)
The hon. Lady is right. There are probably between 3 million and 4 million people in this country on poverty wages and a large number of them are driven to use food banks. Food banks were introduced for people waiting to get their refugee status sorted out, not for this purpose. Does the hon. Lady agree that they have, however, now become an institution in this country?
Kirsty Blackman
I absolutely agree and will come on to food banks, but on refugees and those seeking leave to remain in the UK, these are the people I see in my surgeries in the highest levels of poverty. They cannot work because the UK Government are not allowing them to, even though they have a valid immigration application. Concerns have been raised with me about individuals whose children are literally starving as a result of the UK Government saying that they cannot work or have recourse to public funds. This is a hostile environment that is impacting directly on the lives of children. The UK Government need to rethink. The bar should be set where children are not starving as a result, and then we can take action against those who are trying to swizz the system.
The only decent meal that some children receive is the meal that they have at school. The UK Government cannot continue to say that food bank use is increasing in European countries too, as if that somehow makes it okay. They have a responsibility to step up and to change the tax system, the minimum wage and the social security system to ensure that no child ever goes hungry.
Our new clause 7 would require a review of the impact on investment of changes to entrepreneurs’ relief, which extend the minimum qualifying period from 12 months to two years. Given that we have Brexit hanging over us and the massive uncertainty that that brings, putting another hurdle in the way of businesses is probably not the right course of action. Both the Chartered Institute of Taxation and the Association of Taxation Technicians have raised concerns about the unintended consequences of the change. I believe that a review is the only sensible option going forward. The Treasury regularly makes tax changes, but it does not regularly review their effectiveness, even after they have been in place for a number of years, and when it does it rarely makes those reviews public. It is all well and good to think that something may have a certain effect, but it is necessary to check whether the intended effect has come about. If such changes are made, a review should be undertaken regularly—certainly in the following two years—and it should be made public, in the interests of transparency and good policy making, so that everybody can see not just that the change has taken place, but what its effect has been, so that we are up front and honest and everybody is clear.
New clause 8 concerns the geographical effect of clause 9. The UK Government often fail to recognise the rurality of many of Scotland’s communities, and I am not clear that this change will not have a significant effect on those in our most remote communities. These are places where it is hard to get the staff we need for our life-saving services and where depopulation is a real and ever-present concern. They are also places that will be hit incredibly hard by ending freedom of movement. Given the hit to our crofters over the convergence uplift that was supposed to be given to rural communities in Scotland but was allocated elsewhere, it is clear that the UK Government are not prioritising our rural communities. They need to sense-check any such proposals and change them to ensure that they do not cause further difficulty for those living in our most remote areas, not just in Scotland but in other areas of the UK where being far from centres of population is an issue.
New clause 9 would require a report on the consultation undertaken on certain provisions of the Bill. Glyn Fullelove, the chair of the Chartered Institute of Taxation’s technical committee, has been critical of a number of measures in the Bill that were not previously consulted on, saying:
“The effects of inadequate scrutiny in the past are visible in the amount of tinkering in the new Bill”.
That is something I raised on Second Reading. He goes on:
“would all these tweaks have been necessary if there had been adequate consultation and more thorough scrutiny in the first place?”
If the Government intend to take back control, they need to ensure that control is in the hands of MPs, with adequate advice provided by expert stakeholders. It cannot be appropriate for tax changes to be drafted by officials and put into a Bill by the UK Government, with no opportunity for stakeholders to give oral evidence, no amendment of the law resolution and a total lack of a review of these clauses. That is not a sensible way to run anything, let alone a country. I have severe concerns about this part of the Bill. My concerns are mostly about transparency and process, as well as the lack of scrutiny of many of the measures.
In relation to the changes to personal allowance, the Government have not been progressive. We would expect that from a Conservative Government, but if they look up the road in Scotland, they will see that the changes that we have made have benefited the people at the bottom of the pile. The UK Government need to do more to benefit those people.
Lastly, the UK Government need to take seriously the fact that the personal allowance is not devolved to Scotland but the basic rate is, and changes need to be made. I would appreciate it if the Minister committed to considering making changes in the drafting of the Bill to separate out the devolved and reserved issues, so that we can have proper debates and better read-across, so that we can have transparency in the discussion of tax and spend in this place and so that we can make better laws as a result.
Julian Knight (Solihull) (Con)
It is an enormous pleasure to speak in this Committee stage of the Finance (No.3) Bill, and it is an even greater pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman) in today’s debate. There are always many responses to a Budget and a Finance Act, and people often look at them and pull them apart over time. In this case, however, I think most people would say that the Budget and Finance Bill have been tremendously well received among financial commentators and many pressure groups. One of the areas that have been most well received is the bringing forward by a year of the increases to personal allowances. The increase to £12,500 for basic rate taxpayers and £50,000 for the higher—40p—taxpayers will make a direct impact on the lives of 32 million of our fellow residents.
Leo Docherty (Aldershot) (Con)
Is my hon. Friend absolutely delighted, as I am, that this means that a basic rate taxpayer is paying some £1,200 less in tax, on an annual basis, than they were in 2010?
Julian Knight
My hon. Friend is correct. The very recent change will benefit basic rate taxpayers to the tune of £120 a year—a direct tax cut for millions of hard-working Britons—and that is to be welcomed.
Rebecca Pow (Taunton Deane) (Con)
Does my hon. Friend—I nearly called him my right hon. Friend, but he is not yet; perhaps he will be in the future—agree that the difference in the figures is stark? The personal allowance was £6,475 when this policy kicked in in 2010, and it has gone way up to £12,500. Surely, that is of huge benefit to the people we want to give more money to.
Julian Knight
I thank my hon. Friend for that short intervention. She makes a really good point, and it is almost the next point that I was going to make. The personal allowance will have nearly doubled in just eight short years. That is against a backdrop of trying to get the public finances under control from a debt of £152 billion a year—11% of GDP—which is an astronomical level outside wartime. It represents a real achievement for the Government to have been able to put this amount of money into the pockets of millions of hard-working Britons each year, so that their living standards can rise, despite the difficult decisions we have had to make.
Members from all parts of the House will probably know that I am no particular lover of the Liberal Democrats, and I am pleased to say that in my constituency of Solihull, we are now 24,000 votes ahead of them. However, I pay tribute to them in one respect. In the 2010 coalition agreement, we took on board what the Lib Dems had been proposing, and it was an excellent idea. I am pleased that the Conservative party was open enough to take on that idea and follow it through, from the coalition agreement, to raise those standards of living and raise personal allowances. I pay tribute to that sort of ideas process from the coalition. We have carried it on, as we see it as a key way in which to reduce inequality and expand opportunity.
Alex Chalk (Cheltenham) (Con)
My hon. Friend talks about the incentives created by reducing the tax on individuals, but does he agree that this has an impact on businesses, too? Where high street businesses such as my local ones in Cheltenham now have a lower tax burden, with one third coming off their business rates, that provides an incentive for them to take on new employees, grow their business and deliver a more prosperous high street?
Julian Knight
My hon. Friend is completely correct. The realities are that the more tax people keep in their pockets—the more of their earnings they keep, without that money going through the Government filter—the more efficient it is, the better it is for the economy, and the better it is for what is known as the multiplier effect through a local economy. My hon. Friend’s on-the-ground view, reported here in Committee, is testament to why the process really benefits high streets and wider local economies.
Rebecca Pow
My hon. Friend has not yet touched on this, but the Government have kept down the corporation tax rate. Does he agree that in areas such as the south-west, where productivity is on average lower than it is in the rest of the country, it is crucial that we leave more money in local businesses so that they can invest, which will help with skills and eventually raise productivity?
Julian Knight
My hon. Friend is absolutely correct. Not only does cutting corporation tax increase the tax take, as we know, but in the round it allows companies to employ more people—I think that it has made a major contribution to the jobs miracle in this country—which then feeds through the taxation system and the multiplier and into the economy more widely, thereby boosting growth and productivity, plus the tax take down the line.
The abolition of stamp duty for first-time buyers of shared ownership properties worth more than £300,000 is an important step for our economy and for strivers in our country. We all know the difficulties that come about in respect of home ownership. I got my first home when I was 31—many years ago, I hasten to add—but I had to buy outside London to get on to the ladder. Even then, people were making enormous sacrifices to find their way on to the property ladder.
Frankly, the situation that I faced is nothing compared with what younger people face now. Not only is it now more difficult in respect of having the income required to get the amount of loan needed to buy, but many people have to rely on what is known as the bank of mum and dad. All that has a damaging effect on equality in our society and the passing down of wealth through the generations if we end up in a situation where those who gain housing wealth do so only if their fathers or mothers had that housing wealth themselves.
Alex Burghart (Brentwood and Ongar) (Con)
My hon. Friend is giving an important speech. Does he agree that in this context it is extremely important that we have embarked on the biggest programme of house building since the 1950s?
Julian Knight
That is exactly right. The point may not be specifically germane to the amendments we are debating, but my hon. Friend is absolutely correct about the context. This is just part of one strand of the strategy that we have to bring about an increase not only in home ownership but in the number of properties available to rent and basically for housing throughout the country. We know from the number of households that are forming that we need to build much more than we are building. This measure is part of considering the issues in the round, so I congratulate the Government in that respect.
We are now seeing the effects of things such as Help to Buy and of measures that—pardon the pun—build on Help to Buy, such as the abolition of stamp duty for shared ownership properties worth more than £300,000. According to the Financial Times—such an august newspaper that it never actually employed me—the rate of home ownership among first-time buyers is now at its highest in a decade. There is a long way to go before we get anywhere near where we were in the 1980s, for instance, but it has been a remarkable turnaround compared with where we were in 2010. The abolition of stamp duty for these properties sends a strong message, not only to people in shared ownership homes but to people more generally, that opportunities are out there and that we will help them by not imposing stamp duty.
Let me turn to tax fairness for individuals, which, I think, overarches the clauses and amendments to the Bill. We would not know this from hearing some of the arguments in this place, but the tax gap in the UK is one of the lowest in the developed world. That does not mean that there is not more to be done. Although we took some first steps in this Budget with internet companies and with organisations such as Amazon, everyone recognises that we need to go further, and we hope to move together in an international context to ensure tax fairness.
Since 2010, we have seen a cracking down on evasion—for example, in film investment schemes and schemes that collectively invest in property to avoid stamp duty. There has been a real concentration by Her Majesty’s Revenue and Customs and Treasury Ministers to ensure that people are aware that everyone should be paying their fair share in society. The hon. Member for Aberdeen North (Kirsty Blackman) mentioned tax equality and how much people are paying at the top end. I find it very telling that the top 1% in our society currently pay 28% of the tax, whereas the top 10% pay 60% of the tax. People would not believe that given the discussions that go on so often. However, this Government have done more towards closing that tax gap and towards ensuring equality in the tax system than anyone else in my lifetime. They have been very laser-like in their focus, and they should be congratulated on that.
Stephanie Peacock (Barnsley East) (Lab)
Does the hon. Gentleman agree that that gap will get wider if answers to my written questions are correct? In answer to a parliamentary question that I tabled, the Government admitted that the majority of their tax cuts would go to upper-rate taxpayers. Is that not exactly why we need the Government to publish the distributional impact of the tax cuts they are making?
Julian Knight
I am afraid that I really do not see the hon. Lady’s point. What I do see is the fact that we are giving tax cuts to 32 million people across the board, and, instead of being so churlish, the Labour party should welcome that.
Leo Docherty
Does my hon. Friend agree that the hon. Lady should check Hansard to see my question of a few moments ago in which I said that, since 2010, a basic rate taxpayer will pay £1,200 less in tax, which clearly shows that this Government are on the side of the hardest working?
Julian Knight
My hon. Friend answered the hon. Lady’s intervention better than I did, so I do welcome what he said.
Let me sum up. In its treatment of tax thresholds and stamp duty, the Bill lays out a fairer tax system. It is a tax system predicated on a better society, and it is a system where people who can pay have to pay their fair share, but where that is achieved without being punitive and without, frankly, trying to put dogma over the reality of the situation.
Peter Dowd (Bootle) (Lab)
I am glad to have this opportunity to debate the issues surrounding new clauses 1, 2 and 3 in my name and the names of others in the Committee of the whole House, and to discuss them in the context of the Government’s attempts to distract attention from their woes. We have just had a lesson in voodoo economics from the hon. Member for Solihull (Julian Knight).
Members need to pay attention to Labour’s proposals in relation to new clauses 1, 2 and 3, but I must first point out that, in response to the Government’s authoritarian restrictions on amending this Bill, we had asked whether the entire legislation could be debated on the Floor of this House. That would at least have ensured a scintilla of constructive discussion among Members on the whole Bill. Alas, our request was denied by the Government, and we are left yet again asking for reviews and assessments as set out in our new clauses. It is important none the less to get these issues about child poverty out into the open. The Government increasingly seek to implement their austerity agenda—for that is what it is—behind closed doors. They will no doubt see our new clauses as an irritant that would highlight the differences between a slash-and-burn approach to public services by the Government juxtaposed with a policy of investment, renewal and rebuilding from this party based on a fair taxation system, as identified in our new clauses.
The Government have practised their manoeuvres in Committees that they have stitched up to give themselves the majority, which they do not deserve, and they do not have the guts to allow proper amendments to their Bill. No Minister has had the decency to defend that position and it is pretty pathetic. The electorate did not give them that mandate, but they arrogantly take it in any event, so it is important that we debate and tease out the issues that we have set out in new clauses 1, 2 and 3.
Leo Docherty
The hon. Gentleman mentions tax cuts. Will he describe whether the Opposition support the tax cuts laid out in the Bill?
Peter Dowd
The hon. Gentleman was that busy talking about sizzling sausages and Marxism last week that he did not hear what I had to say. Now, it is not for me to constantly repeat myself—although I know the Tories do it all the time—so I suggest he reads last week’s debate in Hansard.
Luckily, I am pleased to see that even these mendacious measures are not enough to prevent this Government from a slow-motion collapse. The twists and turns continue. If the weekend reports in the media—specifically The Sunday Times—are anything to believe, if this House votes against the deal, No. 10 has a
“dark strategy to twist arms.”
So what is the cunning plan? Well, No. 10 seeks to
“encourage a crash in financial markets after losing a first vote in the hope this stampedes MPs into voting for it a second time”.
This is ordinarily known as extra-parliamentary activity. The fact that the media are actually putting that scuttlebutt into print, however bizarre, simply shows the desperation in No. 10, so it is important that we do tease out the issues, as we will with new clauses 1, 2 and 3, but this situation bears witness to the siege mentality now at pathological—some might even say clinically obsessive—levels in Downing Street.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
I am sure that my hon. Friend, like me, was glued to the television at 10 o’clock last night, watching a documentary “A Northern Soul”, about a man called Steve living in poverty in Hull and his inspiring work to help the children living in that city. I therefore give my hon. Friend my wholehearted support in particular for new clause 2, which would provide for a tax impact assessment to look at how we can genuinely help people like Steve who have suffered so badly under this Government.
Peter Dowd
My hon. Friend is right. I am afraid that the Government are in denial over the question of child poverty; I will come back to that point shortly.
Quite simply, the Prime Minister and those around her have lost the plot; and there have been plenty of plots recently. This Government would not know progress if it stared them in the face, which is why we need new clauses 1, 2 and 3. It is little wonder that the Government have presided over eight years of economic ineptitude that have seen our tax system and society becoming increasingly unequal.
As I said on Second Reading, Labour will not stand in the way of any change that would put additional income into the pockets of low and middle earners. Maybe that answers the question of the hon. Member for Aldershot (Leo Docherty), so he might not have to look at Hansard. Low and middle earners have borne the brunt of the economic failure of this Government and we will not take that cash out of their pockets. However, we believe that the richest in our society and those with the broadest shoulders should pay more tax to help support our public services and finally end austerity. This is not a controversial view, at least among the morally orthodox.
Leo Docherty
The hon. Gentleman mentions tax increase. If Labour were to put in its plans for a wholesale renationalisation of major parts of our economy, how much extra tax would the average British taxpayer be paying?
Peter Dowd
Dear, dear—none. The hon. Gentleman really has to take his nose out of the Tory voodoo economics book, widen his horizons and look at Labour’s “Funding Britain’s Future”.
One only needs to look at our European neighbours to see that the rate of tax on higher earners in this country is relatively low compared with Germany, France, Sweden and even Ireland. To set the ball rolling, Labour’s new clause 1 would require the Chancellor to lay before the House a distributional analysis of the effect of reducing the tax threshold for the additional rate to £80,000 and introducing a 50% supplementary rate for those earning more than £125,000 a year.
These are Labour’s policies, committed to in Labour’s very, very popular manifesto of 2017. They will put—[Interruption.] I know that Government Members do not like to hear this, but these policies will put the country on a much fairer fiscal footing, ensuring that the wealthy pay their fair share for the restoration of our social fabric, which is crumbling after eight years of gruelling Tory austerity.
The fact is that since the financial crash a decade ago, the very rich have only become richer. The Institute for Fiscal Studies identified that the top 1% have received an increase in share of total income from 5.7% in 1990 to 7.8% in 2016. In response to the hon. Member for Aldershot, it is no wonder they are paying more taxes—they have had the biggest share of total income.
Rachel Maclean (Redditch) (Con)
Does the hon. Gentleman not accept that this Government are determined to tackle these important issues of income inequality, to the point where income inequality and inequality of disposable income are now at their lowest level since before the financial crisis, when his party were managing the economy?
Peter Dowd
Well, they are not making a very good job of it—there are 4 million people in poverty. That is the fact. Conservative Members can deny that until they are blue in the face, but that is the reality.
Let us move on to the issue of infant mortality. Infant mortality has risen for the first time since the 1990s, when the Tories were last in government, and, as I indicated, there are 4.5 million people living in poverty. That is a fact, and they should not pretend otherwise. They should at least have the guts to admit that their policies have got us into this situation.
This stark contrast in living standards has been driven by the Government’s remorseless austerity agenda, which has chopped away at our fiscal checks and balances. By narrowing the tax base while continuing austerity, they have entrenched poverty and inequality across the nations and regions, leaving vulnerable groups—particularly women—worse off.
Louise Haigh (Sheffield, Heeley) (Lab)
My hon. Friend is making a really important point, and it is reflected in the changes to life expectancy that we have seen over the last eight years. Life expectancy for the poorest women in Sheffield has fallen by four years since the Conservatives came to power in 2010. Is that not a further reflection of the devastating impact of austerity on inequality in this country?
Peter Dowd
Quite simply, it is shameful—it is as simple as that.
New clause 2 would require the Treasury to undertake an equalities impact assessment of the changes to the personal allowance and its impact particularly on child poverty. This assessment will include households at different income levels, groups protected by the public sector equality duty and the regions and nations—this is the Labour party speaking for the whole of the United Kingdom.
Such an assessment is needed now more than ever. The Social Metrics Commission recently found, as I indicated before, that 4.5 million children are living in poverty in the United Kingdom. That is shameful. The Government claim that none of this matters as long as parents are finding work, which ignores the fact that work is no longer a sustainable route out of poverty. Indeed, the Joseph Rowntree Foundation found that more than two thirds of children in poverty live in a working family.
We know that the assessment set out in new clause 2 will further justify the United Nations special rapporteur’s investigation into this Government’s policy of austerity last week. The poverty envoy found that the policies of austerity had inflicted “great misery” on our citizens, and he went as far as to say that the “fabric of British society” is falling apart as a result. That is absolutely damning.
Alex Chalk
The hon. Gentleman is talking a lot about the politics of austerity. The United Kingdom last lived within its means in 2001. Under a Labour Government, when would the United Kingdom next live within its means?
Peter Dowd
I do not accept the premise of these trumped-up ideas from voodoo economics presented by the Tory party. The reality is that the report was absolutely damning. It was absolutely devastating, and Government Members should be ashamed that somebody from the United Nations should come to this country and objectively lay out the facts as they are.
Sadly, in true Trumpian style, the Government chose to ignore the UN special rapporteur. Live on “Channel 4 News”, the Financial Secretary to the Treasury buried his head in the sand, saying
“there is a…strong push to reduce poverty”.
Well, it is not getting pushed hard enough. The Financial Secretary refused to acknowledge that there are 1.5 million people living in destitution, despite repeated questioning. A cursory look at this Government’s policies demonstrates that, for eight years, they have felt it was reasonable to punish the poorest to let the bankers off the hook. How can this Government be so out of touch?
I now turn to new clause 3. According to HMRC’s own statistics, over £400 billion a year is spent in tax reliefs. Entrepreneurs’ relief costs £2.7 billion a year alone, and benefits only 52,000 people.
Alex Chalk
The hon. Gentleman is very generous in giving way a second time. If Labour Members were to get back into power, would they change the tax system so that people had to pay tax from £6,750, as in 2010? Does he agree that that would cost working people an additional £1,000-plus a year?
Peter Dowd
I suggest that the hon. Gentleman reads the shadow City Minister’s article on LabourList, which sets that out very clearly.
Peter Dowd
My hon. Friend will send the hon. Gentleman a copy and he will sign it—and Conservative Members might actually learn something. I know it is difficult for my hon. Friends to grasp the concept that Conservative Members might learn something, but they actually might.
Entrepreneurs’ relief costs £2.7 billion a year alone, and benefits only 52,000 people. This bloated relief—and it is bloated—is overwhelmingly spent on a small number of wealthy individuals, with 6,000 claimants receiving relief on gains of over £1 million. I will repeat that: 6,000 claimants receive relief on gains of £1 million. It is no wonder then that the IFS and the Resolution Foundation have called for it to be scrapped. Clause 38 and schedule 15 represent yet another Conservative half-measure.
Rachel Maclean
As a former entrepreneur, as in my entry in the Register of Members’ Financial Interests, I did not benefit from this particular relief, but many in that community do benefit from it. Does the hon. Gentleman believe that this should be scrapped, which would penalise people who start businesses in this country and go on to employ people who then pay taxes and put food on the table for their families? Is the position of the Labour party to be completely anti-entrepreneurs?
Peter Dowd
The Treasury has not reviewed the relief and does not know whether it is working, but it has chucked £2.7 billion—I repeat, £2.7 billion—at a relief that affects only 52,000 people. There is something not quite right with that. I get that and my hon. Friends get that, but Conservative Members are in denial about it, as they are about child poverty.
Leo Docherty
Given that the hon. Gentleman is against relief for entrepreneurs, will he tell the Committee whether he is also against small businesses being relieved of their rates, with business rates being slashed by one third? [Interruption.]
Peter Dowd
Out of courtesy I will respond to the hon. Gentleman. What we want is a fair taxation system, which is completely and utterly alien to the Government. It is as simple as that.
Stephanie Peacock
My hon. Friend pointed out that the Government are in denial on child poverty. That is absolutely clear in my constituency in Barnsley, where 6,000 children live in poverty. Does he agree that poverty is a political choice caused by the Conservative party?
Peter Dowd
My hon. Friend is right, and for the Tories that choice comes first, second and third, and it always will.
On one hand the Government are lengthening the qualifying time for investors from one year to two, but on the other hand they are ensuring that shareholders will be protected from falling below the 5% threshold needed to claim the relief when a company is sold. It is hard to see how this confused measure will tackle the growing cost of the relief.
Naturally, the Opposition, the Resolution Foundation and the IFS are not the only ones who have found this measure perplexing to say the least. The Chartered Institute of Taxation has raised deep concerns about its retroactive nature, its lack of clarity and the likelihood that the reforms will hit small businesses the hardest—the businesses that the hon. Member for Redditch (Rachel Maclean) no doubt had in mind in her intervention. Far from making the relief more equitable, this measure will instead insulate wealthier claimants who can rely on expensive tax advisers to navigate red tape, ensuring that the cost of the relief will continue to bloom.
The cost of corporate welfare has risen steadily under this Conservative Government. In fact, I would go so far as to say that it is the one form of welfare that Government Members support. In contrast, the Labour party is committed to undertaking a full and comprehensive review of corporate tax reliefs when—not if—we reach government. That is why we have tabled new clause 3, which would require the Government to undertake a full review of entrepreneurs’ relief. The review would consider the overall number of entrepreneurs in the United Kingdom, the annual cost of the relief, the cost per claim and the impact of the relief on productivity in the UK—productivity that is 15% below our comparators in the G7 and 35% below the Germans. The Government should be getting to grips with that fact, not fiddling around with entrepreneurs’ relief.
Government Members should ask themselves how they can justify the amount of money going to 52,000 people while our public services are falling into disrepair. This relief is clearly in need of urgent review to ensure that the taxpayer is not being ripped off. They should be clear that if they choose to vote against new clause 3, they are voting against the interests of taxpayers across the country. Again, this is £2.7 billion for 52,000 people.
I hope that Government Members will support our new clauses 1, 2 and 3, for the reasons that I have outlined. This authoritarian Government of the rich, by the rich, for the rich have lost all credibility to manage the affairs of this country. They no longer know what they stand for, nor do they have the courage to find out. This Bill of broken promises takes us no further forward in meeting this country’s mounting challenges, so I call on Members throughout the House to support Labour’s proposals to create a fairer society and a fairer tax system. If we are unable to change the Government’s course, we will challenge the Bill at every step of the way, notwithstanding the authoritarian shackles put on us by this authoritarian Government, and we will use it to put an end to this aimless and divided Government.
Richard Graham
It is a pleasure to follow the hon. Member for Bootle (Peter Dowd), although there were moments during his speech when I found myself wondering whether history was being rewritten in a remarkably creative way.
The changes that the Government have proposed come against a background of remarkable achievement in cutting the deficit by four fifths, reducing the unemployment rate to its lowest since the 1970s, giving 32 million people tax cuts and taking 1.7 million out of income tax altogether. Some of those things were denied by the hon. Gentleman, who claimed at one point that the rich were only getting richer. I think it therefore falls to me to offer a few statistics to put his comments into context.
The first comes from the Institute for Fiscal Studies analysis of what went on under the previous Labour Government. The hon. Gentleman, who is chuntering with his colleague the shadow Chancellor, should focus on that IFS analysis. The independent analysis from the IFS shows very clearly that on most measures income inequality during the 13 years of the previous Labour Government went up. Part of the reason for that was explained, helpfully, by the hon. Member for Norwich South (Clive Lewis) in an interesting interview with The Guardian the other day. He pointed out that the attitude of the previous Labour Government was, to quote the former deputy Prime Minister, Lord Mandelson, “intensely relaxed” about the filthy rich. The hon. Member for Norwich South rightly went on to say that during the 13 years of the Labour Government:
“The huge fortunes of those at the very top…were left almost untouched.”
That is why the work done by this Government, which for example includes scrapping child benefit in 2013 for those earning over £50,000, has led to the lowest tax gap for a very long time. The percentage of income tax paid by the top 1% has doubled under the Conservative Government. The hon. Member for Bootle therefore needs to think hard about that IFS analysis. Income inequality went up under the 13 years of the Labour Government and it has gone down in eight years under the Conservatives.
There are other points worth highlighting. For example, people on lower and middle incomes actually have more money in their pockets now than at the start of the financial crisis under the previous Labour Government. The gap, as I pointed out, between those on the lowest and highest incomes is lower than it was when the Labour Government left power in 2010. In fact, income inequality is now close to its lowest point since 1986. That is a remarkable achievement. Over the past 30 years, which include 13 of a Labour Government, income inequality narrowed sharply under this Conservative Government.
Labour Members have made a lot of points about employment, so it is worth highlighting that the growth in employment benefits most the poorest 20% of households. The employment rate is now up by more than seven percentage points on where it was before the financial crisis under Labour in 2007. Thanks to the national living wage, the income of the lowest earners has actually grown by almost 5% since 2015, higher than at any other point across the earnings distribution. The actual situation today in our economy for those working is therefore very different from that painted by those on the Opposition Benches and by the hon. Gentleman.
A crucial and major difference between the Labour party and the Government is on taxing business. The uncomfortable truth for Opposition Members who would like to tax business more is that since the Government cut corporation tax in 2010 receipts have gone up by 50%, generating an extra £20 billion in 2016 over what was generated in 2010. The extra £20 billion we found for the NHS above inflation for this five-year period does not come from nowhere; it comes from increased receipts and growth in the economy. That extra £20 billion raised from corporation tax, as a result of cutting corporation tax, is one of the critical economic differences between those on the Government side of the House and those on the Opposition side. The Opposition still believe that if they tax businesses more they will get more tax. The truth, however, is that if we tax businesses less we incentivise business and entrepreneurs, generating more tax receipts to put into our vital public services.
Julian Knight
Does my hon. Friend recognise that £20 billion happens to be exactly the same amount of extra money that the Government have pledged to put into our national health service?
Richard Graham
Exactly. The figures are a coincidence, but my hon. Friend is absolutely right to highlight that we are putting the same amount of extra money into the NHS—the largest ever amount invested into our national health service.
Leo Docherty
My hon. Friend is painting a very lucid picture of how the Government differ from the Opposition with regard to tax, but does he agree that that also applies to our approach to private property? The discussion that the Labour party is having about the wholesale renationalisation of major parts of our economy is deeply alarming, and it should come clean to the public about how much that would actually cost.
Richard Graham
My hon. Friend is absolutely right. The remark made by the shadow Chancellor earlier that the public—all our constituents—would have to pay zero extra to fund the widespread nationalisation of all the utility companies, the train companies and anything else was really quite extraordinary. To be honest, I would be surprised if somebody did not raise that on a point of order in terms of misleading the House and the nation, because clearly those figures are a mile away from what independent analysts have calculated.
Rachel Maclean
Has the shadow Chancellor not been on record stating that it does not matter if his sums do not add up, and that it is largely irrelevant, which demonstrates my hon. Friend’s point?
Richard Graham
My hon. Friend is absolutely right. As she knows well, the truth of the last Labour Government—during their 13 years—was that although they promised no more boom and bust, they gave us the biggest bust in peacetime history as a result of wildly overspending. I am afraid the net result of that is, as always, that the poorest feel the effects worst. In my constituency of Gloucester, 6,000 people lost their jobs during the great recession under Labour. Only since the Conservative Government came back have we seen employment rise sharply and youth unemployment and unemployment fall sharply.
Jonathan Reynolds
I will not repeat the debate that we always have about a global financial crisis not being solely contained in the UK, but on the earlier intervention that the hon. Gentleman took, the shadow Chancellor is not on the record as saying that his sums do not add up and that that does not matter. Let us remind the Committee that the only party that published costings of its policies at the election was Labour. It is genuinely misleading the Committee to claim that the shadow Chancellor said anything other than that.
Richard Graham
I thank the hon. Gentleman for his intervention, but will he confirm to the Committee what I heard the shadow Chancellor say earlier in answer to a question from one of my colleagues? He said that there would be zero additional cost to the taxpayer from the enormous, widespread renationalisation policy of Labour; will the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) confirm that there will not be a single penny of additional cost?
Jonathan Reynolds
The shadow Chancellor did not speak from the Dispatch Box. I think the hon. Gentleman is thinking of the shadow Chief Secretary, my hon. Friend the Member for Bootle (Peter Dowd)—the two should not be confused. On nationalisation, I think the point that my hon. Friend was trying to make is that we can simply look at British history to see how this works. If we take an asset into public ownership and the return from that asset is greater than the cost of the borrowing to take it on, there is no net cost to the taxpayer, and certainly, income tax will not have to rise to cover that.
The Chairman of Ways and Means (Sir Lindsay Hoyle)
Order. We are not having a debate on party policy. We have amendments and clauses before us and we are straying from them—I know you wanted to get through your speech very quickly, Mr Graham.
Richard Graham
You are entirely right as always, Sir Lindsay. It was helpful to have it exposed that there is clearly a significant difference of opinion between the shadow Chief Secretary and the shadow Chancellor on whether there will be any additional costs from the policies of the Opposition—[Interruption.] I have taken a lot of interventions, so I will cease from taking them so that I can come, as you suggested Sir Lindsay, to a rapid closure, which I am sure will be welcomed by Opposition Members.
Having made the crucial point on our approach to investment in business, let me finish on the annual investment allowance, which is a crucial part of the Budget and the clauses under discussion. This is important because it encourages businesses to invest in expensive technology that, over time, will allow them to grow and employ more people. I could give a dozen examples from my constituency of where this has been true. To give it some flavour, I will highlight just one area. The hon. Member for Stalybridge and Hyde will know, having visited China with me last week, how far we have gone in increasing our exports to China. From Gloucester alone, we are exporting a huge number of manufactured goods, including the landing gear on all Airbus aircraft.
Peter Dowd
If the hon. Gentleman is so sure of his position, what is wrong with providing for a review of the effectiveness of entrepreneurs’ relief, as new clause 3 would do?
Richard Graham
The hon. Gentleman is kind to mention that, but the fact is that we on the Government side of the House believe strongly in incentivising the entrepreneurs. They are the ones producing the technologies of the future—Fintech, Edtech, every sort of tech—and the reason why this country has seen more investment in technology in London alone in the last year than Germany, Spain, Ireland, the Netherlands and France put together. These incentives to businesses are what generate the additional tax revenue I highlighted earlier.
The changes to gambling tax are among the most significant measures proposed. These are fundamentally about what is morally right, and I am delighted that the Government have found a way to do the right thing, not just by reducing the maximum stake for fixed odds betting terminals from £100 to £2, but by introducing it rapidly and by raising the remote gambling duty from 15% to 21%. If I could make one request of the excellent Minister, it would be that he consider other ways to reduce the amount of online gambling advertising and to raise more tax revenue from it.
This is an important discussion. Some of the facts offered earlier by the Opposition were completely astray from reality, and I strongly support what the Government are doing to incentive business, encourage more people into work and, above all, benefit the lowest earners. It is worth finishing with one last statistic from the OECD: the proportion of jobs that are low-paid is at its lowest level in this country for at least 20 years. That is a significant achievement on which we can hope to build yet further in the future.
Sir Vince Cable (Twickenham) (LD)
I wish to say a few words about amendment 18, which would remove clause 5. I spoke on this at length on Second Reading, so I do not need to say a great deal.
The difficulty with clause 5 is that it combines two very different measures, the first being to lift the low earners threshold. As the hon. Member for Solihull (Julian Knight) reminded us a few minutes ago, this was a policy that I and my colleagues pursued in government, and it is not something I at all disagree with. The second, however, is a much more substantial measure to lift the tax threshold for middle earners. I do not pretend for a moment that people at the higher rate threshold are rich people—at the bottom end, they are paid less than Members of Parliament—but we need to get beyond the headlines and look at the actual numbers.
The lower threshold is to be lifted by £650, and 20% of that is £130, so the people solely on standard rate tax will get £130 in their pocket as a result of this measure. Of course, that is welcome. It is about a 2% increase, which is roughly in line with inflation, and is unquestionably a good thing. For the high earners threshold, however, we are talking about much bigger sums of money—a £3,650 increase in the threshold. Multiplied by 20%, and we are talking about £730, but of course high earners also benefit from the standard rate threshold increase. Add the two together and we have got £860. This measure, which is badged as a measure to help low earners, helps low earners to take home £130 a year and high earners £860 a year. On no conceivable measure could that be described as some enlightened policy for helping the low paid.
Having said that, I should add that there are things that the Government could have done as part of the policy of reducing fiscal drag. I fully understand the need at the margin to stop people being dragged into higher tax rates, and something could have been done to offset that. The Chancellor himself has acknowledged that there are extremely expensive and lavish tax reliefs on pension contributions for upper earners, which cost the country about £25 billion a year. I think that if he had chosen to offset the upper-rate threshold measure by some reduction in pension tax relief for the high paid, such that it neutralised it, many of us would have thought that that was quite a reasonable way of making progress, but he did not, despite the urgent need for revenue.
In an ideal world we would be looking at tax cuts for everyone, but we are not in an ideal world. There are issues of priorities. As several Conservative Members have reminded us—former Chancellors, among others—we are living in a world of severe fiscal restrictions, despite the proclamation of the end of austerity. There are other purposes for which the money could have been better used. We are talking about £2.8 billion in the first year, tapering to about £1.7 billion a year, of which roughly half is for the upper rate threshold. We can all think of many, many ways of spending that money, but for me the priority would have been fully restoring the cuts in universal credit that were made two years ago. The Government have partly done that, but with the additional sum of £1.3 billion, the Chancellor could have returned universal credit to the levels at which it was placed two years ago, in the Osborne Budget. The money could also have been used to end the benefits freeze a year early. The continuation of that freeze means that the poorest 30% in the population are being dragged down as a result of the Budget, but ending the freeze a year early could have offset that. Obviously there are many other purposes for which the money could have been used, but those would have been my priorities.
This measure, politically, was obviously intended to enable the Chancellor to proclaim that the end of austerity is not just about public spending, but about cutting taxes. There is nothing wrong with that general proposition, but the problem is that it is dishonest: that is not what is actually happening. The revenue line in the Red Book shows clearly that as a result of revenue measures, council tax will rise by £6 billion over the next five years—that it will rise by considerably more than income tax is being cut. What, essentially, is happening is that as a result of the reduction, or the freezing, of spending on support for local councils, the councils are making up their revenue through council tax increases to the maximum extent allowed. The Government, according to their own numbers, believe that council tax revenue will rise by £6 billion to about £40 billion. That, as I have said, more than cancels out the income tax cuts, most of which in any case accrue to higher-rate earners. So this is not a tax-cutting Budget at all. It is, indirectly, a tax-raising Budget, and I hope that that will be pointed out to members of the Government when they use such rhetoric in future.
I simply wish to move my amendment, and we will seek to oppose clause 5 stand part.
Leo Docherty
It is an honourto follow the right hon. Member for Twickenham (Sir Vince Cable).
I welcome the Bill. As we consider the amendments, we are faced with a stark choice that faces all politicians and members of the public when they consider the basic question of how we manage our economy and how we manage tax and spending. It is the stark choice between responsibility and recklessness. If we cast our eyes back over the last eight years, we see the benefits of the responsible, balanced approach of the Conservatives. Since 2010 the deficit has decreased by 80%, and the economy has grown for eight consecutive years, by a total of 17%. Unemployment is at its lowest rate since 1975—the year before I was born—and the Government are managing to boost public spending while simultaneously cutting tax. I am particularly pleased about the almost doubling of basic-rate tax relief: those on the basic rate are paying £1,205 less every year than they were paying in 2010, which is a tremendous step forward.
Julian Knight
The increases in the minimum wage and the living wage have also had a fundamental impact on the earning capacity of people at the lower end of the income scale in our society.
Leo Docherty
Absolutely, and the bottom line is that that allows more people to spend more of their own money doing what they want. That is what this Government deliver.
Grant Shapps (Welwyn Hatfield) (Con)
Does not the rise in the tax-free allowance from £6,475 to £12,500 also mean that the tax collector will no longer have to waste time chasing and trying to track down people who are earning the basic salary to secure very small amounts that probably cost more to collect than they constitute in receipts?
Leo Docherty
My right hon. Friend has made a very good point. The rise is not just good for the taxpayer, but good for the Government.
This balanced, responsible approach is in stark contrast to the reckless and ideologically driven approach of the Opposition. Members will probably need no reminding that in 2016 the shadow Chancellor declared, “I am a Marxist”. He pursues—well, let us call it a policy of half-based Marxism mixed with 1970s-style union militancy.
Rachel Maclean
Does my hon. Friend recall that, along the same lines, the Labour Opposition were preparing for capital flight and a run on the pound, and does he share my alarm at that prospect?
The Chairman of Ways and Means (Sir Lindsay Hoyle)
Order. May I share my wisdom with you both? The debate is about the clauses and new clauses before us. Members tried to go down this route once before. The new clauses are quite clear, and the clauses are quite clear. I am sure Mr Docherty wishes to stick to that, and I am sure Members will not tempt him again.
Leo Docherty
You are absolutely right, Sir Lindsay. I certainly will not be tempted to stray from the clauses and new clauses that we are considering.
It is, of course, important to consider the approach to ownership of private property that the shadow Chancellor and his party laid out last year in a document that Members can obtain from the Library, entitled “Alternative Models of Ownership”.
Leo Docherty
It is relevant because it puts renationalisation at the front and centre of the Labour party’s economic policy. Regrettably, there are no figures in the document. That is because the cost of renationalisation, calculated by the Centre for Policy Studies, would be £176 billion: £6,471 for every single household. That is a deeply alarming fact.
That approach was given further voice when, just last week, the shadow Chancellor made a speech at an event hosted by Red Pepper. He discussed his broad economic approach, and his approach to tax and private property. He promised that the Labour manifesto would be even more radical than the last. This is relevant because, referring to Labour’s approach to the private ownership of land, the shadow Chancellor said:
“One of the big issues we’re now talking about is land, how do we go about looking at collective ownership of land”.
The Chairman of Ways and Means (Sir Lindsay Hoyle)
Order. We have strayed completely from where we should be. If the hon. Gentleman wants a debate on the Opposition, he needs to wait until the right moment. Today is not that moment. This is about the new clauses that we are discussing, and what he is talking about is not relevant. I have allowed him a little leeway, but we have now strayed too far. I would like him to concentrate on the new clauses.
Leo Docherty
I am grateful to you, Sir Lindsay. I will come back more pertinently and conclude by bringing the debate back to the effect on small businesses. I hugely welcome the cut in business rates in the Finance Bill.
Julian Knight
Enterprise relief is the subject of one of the amendments. Does my hon. Friend agree that it is wrong-headed to say that only 52,000 people would benefit from the said changes proposed in the Bill? Does he agree that we should take account of the fact that many employees and others will benefit from entrepreneurs bringing about these businesses, and does he therefore support the changes to enterprise relief?
Leo Docherty
I am wholehearted in my support for the changes to entrepreneurs’ relief. I was in my constituency of Aldershot on Friday, visiting one of the many small and medium-sized enterprises that are the backbone of our economy there. Gemini Tec is one of the leading manufacturers of short circuit boards in the country, and that business is successful because of the entrepreneurs who have been driving it forward for the past 40 years. They do not ask any special favours from the Government. Indeed, they want the Government to keep out of their way and let them thrive. However, if the Government can in some way create an ecosystem and an atmosphere, through measures such as entrepreneurs’ relief, that is wholeheartedly to be commended. We have a tradition of tremendous innovation and creativity—not least in Aldershot, north Hampshire, the Blackwater Valley and Farnborough—and this drives a lot of the job creation that we are now seeing in this country. As I have said, this has led to the lowest rates of unemployment since 1975, the year before I was born.
Ruth George (High Peak) (Lab)
Does the hon. Gentleman believe that money to support entrepreneurs is being well spent through the Government giving an average of £450,000 in entrepreneurs’ relief each to just 6,000 entrepreneurs? Does he acknowledge that the Government will take £1.5 billion off the 300,000 small businesses that will lose out through the universal credit minimum income floor, which the Government are driving through?
Leo Docherty
This is not a debate on universal credit. This is actually about job creation. That is the more important point when it comes to entrepreneurs’ relief.
Kirsty Blackman
New clauses 3 and 7 both ask the Government to say exactly what the effect of entrepreneurs’ relief will be. Does the hon. Gentleman agree that it would be best for reliefs to be targeted to ensure that the most jobs are created, the most people benefit and the most businesses can grow as a result of the changes? Does he therefore agree that it would be good for the Government to explain why their proposal is better than any other proposals?
Leo Docherty
Of course the best way to measure the effect of this is in employment growth. I expect these changes to further deepen the positive impact and the positive growth in employment that we have seen recently. Having considered these amendments, I am delighted to welcome the Bill wholeheartedly. Government Members must be confident about supporting our balanced approach, in contrast to the reckless and ideologically driven approach of the Labour party. We must consider this not just in economic or fiscal terms, but in human terms. Free-market capitalism has been one of the greatest forces that the world has ever seen. It has lifted 1.5 billion people out of poverty in the past 30 years. We should be confident about that, and we should be confident in our balanced and responsible approach. I am delighted to welcome the Bill this evening.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Before I speak to my new clause 18, I want to gently chastise the hon. Member for Gloucester (Richard Graham). He is not in his place at the moment, but I am sure that someone will respond to this for him. He very inappropriately raised quite selective data on inequalities, a subject that I spent nearly 20 years working on before I came to this place. He should know that we are the seventh most unequal country of the 30 developed countries in relation to income inequality. By some measures, we do worse than others, but overall, economic equality is not just about income; it is also about pay and wealth. We need to be mindful of this fact, and selectively reporting data is not a practice that we should be indulging in.
I should like to declare an interest as the chair of the all-party parliamentary group for health in all policies and as a fellow of the Faculty of Public Health, following more than 20 years of national and international work in this field prior to becoming an MP. It is lovely to see you in the Chair, Madam Deputy Speaker. New clause 18 would require the Government to commit to undertaking an assessment of the effects of the personal taxation measures in the Budget—including changes in the personal allowance and the higher rate threshold—on poverty, on the public’s health, including their life expectancy and healthy life expectancy, and in turn on public services.
The reason I have tabled this new clause is that, over the past eight years or so, I have seen the gains made under the previous Labour Government being totally reversed by this Government. Those gains included the reduction in the number of children and older people living in poverty and the improvements in health including an increase in our life expectancy and reductions in health inequalities. As the UN’s special rapporteur on extreme poverty and human rights, Philip Alston, said on Friday, the cuts and reforms introduced in the past few years have brought misery and torn at our social fabric. He went on:
“British compassion for those who are suffering has been replaced by a punitive, mean-spirited and callous approach”.
As I mentioned in my point of order earlier, I am afraid the Under-Secretary of State for Exiting the European Union, the hon. Member for Spelthorne (Kwasi Kwarteng) demonstrated this exact point in his comments on the “The Andrew Marr Show” yesterday. The lack of humanity he showed in his response to the plight of Emily Lydon, who is being forced to sell her home because of issues with transitioning on to universal credit, shamed not only himself and the Government of which he is a Minister, but this whole House.
Peter Dowd
Does my hon. Friend agree that the massive cuts in the public health budgets that are now controlled by local authorities have simply made matters considerably worse in the public health field?
Debbie Abrahams
My hon. Friend is totally right. Those budgets were ring-fenced to start with, but they are now absolutely emaciated. This is stopping us doing the prevention work that we should be doing. We made massive investments in public health, and they were having a real impact in terms of health gain. I am afraid that that is now going by the bye.
We know that there are 14 million people living in poverty in the United Kingdom, 8 million of whom are working—the highest level ever. It is fine for Conservative Members to speak on a positive note about employment rates, but they should be asking themselves why we have such high levels of in-work poverty. That, too, brings shame on us. Two thirds of the 4 million children living in poverty are from working households. How on earth are young people expected to learn and to excel at school if they are constantly hungry?
Alison Thewliss
The hon. Lady might not have had a chance to read it yet, but the all-party parliamentary group on infant feeding and inequalities, which I chair, produced a report that came out last week. It found that even working families are now struggling to meet the cost of infant formula, so they are having to stretch it out, to the detriment of their children’s health. So this problem is starting even before children go to school, because babies are not getting the nutrition that they need.
Debbie Abrahams
That is absolutely right. I will come on to some of the really worrying figures about how, from birth, our children are being affected because of the poverty that they are experiencing.
What about disabled people? Disabled people are twice as likely to live in poverty as non-disabled people because of the extra costs that they face around their disability. We have seen their social security support become absolutely emaciated. Given that we are the fifth richest country in the world, that is shocking—absolutely shocking. Four million disabled people are already living in poverty, with many now continually finding that they are becoming more and more isolated in their own homes.
Since 2015, as analysis from the Institute for Fiscal Studies and others has shown, those who are in the lowest income decile have lost proportionately more income than any other group as a consequence of personal taxation and social security changes. That is the important thing. My new clause is not just about taxation. We cannot see that in isolation from how we then ensure, as a country, that we are supporting people on low incomes—and that support is completely inadequate. What was put forward in the Budget does not go anywhere near repairing the damage that was done in the summer Budget of 2015.
Last month’s Budget produces only marginal gains to the household income of the poorest, while reducing the number of higher-rate taxpayers by 300,000. The Government’s regressive measures have done nothing to reduce the gap between the rich and the poor. When cuts to household incomes are combined with the cuts to public spending and services, the impact is even more dramatic, and again with disproportionate cuts to Government funding to towns and cities across the north, as evidence has repeatedly shown.
The effects of all this on life expectancy are now being seen, with health gains made over decades now falling away. Life expectancy has been stalling since 2011, and it is now flatlining, particularly in older age groups and for older women. In the same week—the very same week—that these data came out last year, the Government actually increased the state pension age. We know that our life expectancy is flatlining. For women—think about the 1950s-born women—it is going backwards, yet we are still putting up the state pension age. What is going on?
On top of this there are regional differences in how long people will live, with these health inequalities reflecting the socioeconomic inequalities across the country. Life expectancy for men in Windsor and Maidenhead stands at 81.6 years, while in my Oldham and Saddleworth constituency it is 77. Even within these areas, there are differences in how long people will live. Again, in the Windsor and Maidenhead local authority area, the life expectancy gap is 5.8 years for men and 4.8 years for women, while in my constituency it is 11.4 years for men and 10.7 years for women. These health inequalities are reflected right across the country. The gains Labour made in reducing health inequalities are now being reversed.
Similarly, the Royal College of Paediatrics and Child Health reported last month that infant mortality has started to increase for the first time in 100 years. Four in 1,000 babies will not reach their first birthday in the UK, compared with 2.8 in the EU. These are the unacceptable consequences of austerity. I welcome the Department of Health and Social Care commissioning Public Health England to investigate the causes of this declining health status, but it is very late in the day. Public health specialists—renowned epidemiologists such as Professor Sir Michael Marmot, Professor Martin McKee and many others—have been calling for this for the past 18 months. We already know from the work that they have been doing that they are pointing the finger towards austerity. It is imperative that in addition to stopping austerity, and the misery and poverty that is being wrought, we tackle the inequalities within and between regions and communities.
An analysis of the effects of the Budget’s personal taxation measures is part of this, but it should not be seen in isolation. This would be outside the scope of the Bill, but the Government should be doing an analysis of their social security and public spending cuts. Reducing the gap between the rich and the poor is not just good for the economy. As evidence from totemic reports such as “The Spirit Level” shows, life expectancy then increases, as well as educational attainment, social mobility, trust, and much more. Fairer, more equal societies benefit everyone. Inequalities are not inevitable—they are socially reproduced and they can be changed—but to tackle them in all their forms takes commitment, it takes courage, and it takes leadership.
Jack Brereton (Stoke-on-Trent South) (Con)
It is a pleasure to speak in this part of the debate. I really do think that this is the best Finance Bill that we have seen in some years. I return to the point that I made on Second Reading: Governments do not have their own money, only taxpayers’ money. It is absolutely imperative to remember that and to remember that taxes are paid in the expectation that they will be spent wisely and necessarily. Where the Government can find a way to enable taxpayers to keep more of their own hard-earned money, they should do so.
Helping families in constituencies like mine better to meet the costs of living is absolutely critical. I am therefore a strong supporter of clause 5, raising the personal allowance for us all and the scope of the basic rate to more of the middle earners who have previously been dragged into higher rates of taxes than they should have faced. These are not the top earners, but will often be the likes of middle management, senior nurses, or lower-rank inspectors in the police, and they have previously been penalised by this punitive higher rate of tax.
The increase in the personal allowance is the latest in a line of such increases. This will mean that a typical basic-rate taxpayer will pay £1,205 less tax in the next tax year than they did in 2010-11. Importantly, the increase to £12,500 comes a year earlier than planned. That can happen because the public finances are in a better shape than had been predicted, thanks to the hard work of the British people and the sound fiscal management of my right hon. Friends the Chancellor and the Chief Secretary, and the Ministers on the Front Bench. They know that taxpayers’ money is taxpayers’ money, and they have rightly allowed taxpayers to keep more of it as soon as it has been possible to do so, as we see in these clauses. This is combined with inflation coming back under control and wages rising again in real terms. The lowest paid have not only been taken out of income tax altogether but enjoy an increased national living wage.
Leo Docherty
I share my hon. Friend’s thoughts about the increase in the personal allowance. Does he agree that one of the very significant positive things in this Finance Bill is also the—I am sorry; I will let him continue.
Jack Brereton
I thank my hon. Friend for his comments.
As I was saying, allowing taxpayers to keep more than it would have been possible to do previously is combined with inflation coming back under control and wages rising again in real terms. The lowest paid have not only been taken out of income tax altogether but enjoy an increased national living wage, thanks to this Government. We are seeing the lowest paid paying less tax but also bringing home more money. The annual earnings of a full-time—
Alison Thewliss
Does the hon. Gentleman not accept that the national living wage is not actually a wage that one can live on, and that it does not apply to those under the age of 25? In fact, the gap for those aged 16 and 17 has been going up every year.
Jack Brereton
The national living wage is a critical part of ensuring that some of the lowest paid in our society earn much more and take home more pay. Earnings for a full-time minimum-wage worker will have increased by £2,750 since it was introduced in April 2016.
Leo Docherty
I am very grateful to my hon. Friend for giving way and giving me another chance. He mentioned inflation. Does he share my view that the fact that the annual deficit has been reduced by 80% since 2010 is another very significant piece of progress with regard to inflation?
Jack Brereton
I agree with my hon. Friend’s comments, which show the responsible approach we on this side of the House have taken to the economy, compared with the approach the previous Labour Government took.
Jack Brereton
And now the hon. Gentleman is going to tell us about Labour’s future approach if they ever get back into office.
Peter Dowd
As the hon. Gentleman is talking about borrowing, does he agree that the Tory party in the last eight years has borrowed more money than all Labour Governments put together?
Jack Brereton
The hon. Gentleman will have seen the figures that show that debt is now coming down to lower levels than ever before, and we have seen the deficit back under control after the failings of the previous Labour Government who got us into an horrendous mess that working families in this country ended up paying for.
We are now seeing the numbers of low-paid workers at a record low, and we are seeing low taxpayers now paying record low levels of tax. The astonishing turnaround achieved in making work pay, not least through tax measures like those before us today, means that the Office for Budget Responsibility has now revised up its assumptions for the trend labour market participation rates and revised down its estimate of the equilibrium rate of employment. As the Treasury rightly highlights in the Red Book paragraph 1.15, both of these revisions raise the level of potential output, which is good news for the sustainability of the labour market boom which has undoubtedly been the greatest achievement of the policies pursued by this Conservative Government.
Ruth George
Would the hon. Gentleman not agree with the Institute for Fiscal Studies that the cumulative impact of personal tax and benefit reform since 2015 has been that the bottom two thirds of society is far worse off and that the only people who are better off under this Government’s policies are the top third?
Jack Brereton
I totally disagree. We have seen increases in the national living wage and reduced tax in this Budget, and further measures in this Budget to support UC.
Vicky Ford (Chelmsford) (Con)
Does my hon. Friend agree that the fact we should be looking at is the fact reported by the OECD that the proportion of jobs that are low paid is at the lowest level for the past two decades? We should be celebrating that.
Jack Brereton
That is absolutely right. We should be looking at those figures, not some of the figures being used by Opposition Members, who want to keep people on a level of pay that is lower than it would ever be, because they want to keep people out of work and keep people in the workless society we saw under the previous Labour Government.
We on this side of the House have made work pay, and the long-term benefits of doing so are clear in the expansion of our non-inflationary production potential. The last time unemployment was so low, 40 or more years ago, there were massive peaks in inflation. The contrast with today is stark and we should be proud of our work as a country in digging ourselves out of the mess left by the Labour party.
For people in Stoke-on-Trent making work pay has added to the renaissance of our fine, proud city and its industries, and the situation is the same in once-forgotten manufacturing towns across the country, which are seeing a revival in real jobs for real levels of take home pay. Indeed the ONS estimates that real household disposable income per head was 4% higher in quarter 2 of 2018 than at the start of 2010, and the OBR expects it will increase by a further 3.2% by the end of 2023. At the same time, income inequality is down, and is lower than it was in 2010. To refute a number of the claims made from the Opposition Front Bench, the number of children in absolute low-income poverty has fallen since 2010.
Peter Dowd
I hear what the hon. Gentleman says, but if he is so convinced of his policies in relation to the issues he is talking about, why will he not support the provision in section 5 of the Act of an impact assessment on child poverty and equality? What has he got to fear?
Jack Brereton
The reason is that the facts show that the number of children living in absolute poverty has fallen since 2010 and will continue to fall, because of the policies of this Conservative Government.
Vicky Ford
Does my hon. Friend agree that for every £1 those on low income pay in tax, £4 of public spending goes towards them, whereas for those on higher income, for every £5 they pay in tax they receive only £1 back in public spending, and that is because we are a fair society, which means that well-off people contribute to helping those on lower incomes?
Jack Brereton
I thank my hon. Friend for those comments, which show that the highest earners are paying their fair share, while the lowest paid in society are being supported as much as we can. That is what this Government have been doing: reducing taxes for the lowest paid in society and ensuring that the lowest paid can be paid more.
I reject many of the views of the hon. Member for Oldham East and Saddleworth (Debbie Abrahams). She made some comments about statistics and then used statistics in her own way. I will also refer to the G7 by saying that only in the UK and Japan have the lowest paid seen their wages grow in that time, and income inequality is lower than it was previously.
Debbie Abrahams
On a point of order, Dame Eleanor. The hon. Member for Stoke-on-Trent South (Jack Brereton) suggests that I have used statistics inappropriately. I can cite all my sources of evidence; can he?
The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)
Order. The hon. Lady knows that that is not a point of order for the Chair; it is a point of debate, and, as I have said many times in here—and so has Mr Speaker—fortunately it is not the duty of the Chair to decide between one set of statistics and another. It all depends on how one applies the statistics, and the hon. Lady is perfectly at liberty to intervene on the hon. Member for Stoke-on-Trent South (Jack Brereton), as is he to take an intervention from her, where they can continue the argument between them, but I will take no part in it.
Jack Brereton
Thank you, Dame Eleanor. The statistics I have used show that income inequality is lower than it was before the crash, and this is all alongside our continuing to reduce the deficit and debt, and meeting our targets three years early, while continuing to invest more in our vital public services. This responsible approach to public finances has seen our economy and the number of jobs boom, compared with the spiralling-out-of-control economy under Labour.
I was pleased that the Minister with responsibility for high streets—the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry)—visited my constituency on Friday and talked about some of the measures we are taking in this Budget to support towns like Longton and Fenton in my constituency, helping to address some of the issues on the high street. I hope we can get some of the £650 million pot announced in the Budget to convert many of their empty premises back into use and help with business rates to ensure that retailers with a rateable value of under £51,000 will receive relief, as that will be hugely welcome by the smallest retailers in our towns.
I also want to comment on some of the views expressed by Opposition Members about entrepreneurs’ relief. I was shocked that some of the views were so anti-business and anti-enterprise. We must condemn those views, which are damaging businesses in constituencies up and down the country.
Peter Dowd
The hon. Gentleman must not misquote. We are looking for an assessment of entrepreneurs’ relief, and if he believes that what he suggests is good value for money for taxpayers he would support a review of that relief. What is wrong with that?
Jack Brereton
I just wanted to talk about the relief in Stoke-on-Trent as well. Entrepreneurs’ relief in my constituency will help many businesses that are starting up. We have some fantastic retention rates in Stoke-on-Trent; we have some of the highest new business start-up retention rates in the country, and that relief is critical in helping those businesses.
The measures introduced in the Budget to increase the time period from 12 to 24 months will help to ensure that it is businesses that are genuinely contributing to our economy that will receive the relief, making a huge contribution to the development of new technologies and innovation that we so much support in our economies throughout the country.
The proposed reductions in corporation tax in the Budget and the relief on capital allowances, which my hon. Friend the Member for Gloucester (Richard Graham) spoke about, will also be a huge support for many of the businesses in my constituency, particularly manufacturers. Around 15% of the economy in Stoke-on-Trent is made up of manufacturing businesses. Those measures will be a huge support for those businesses, increasing the amount of machinery and equipment that they can buy. Increasing relief on capital allowances and the investment allowance up to £1 million will help more of those businesses to buy new equipment and invest in the plant in their factories. I welcome that measure, which will help not just those manufacturing businesses, but the huge number of businesses up and down the country that produce that machinery and the workforces in those industries, which are so valued up and down the country.
Rachel Maclean
Does my hon. Friend agree that when we are talking about support for businesses, through entrepreneurs’ relief and all these other measures, we are talking not just about the people who own those businesses, but about the people working in them who have a job because of these measures?
Jack Brereton
Absolutely, and we want to see the number of those workers and the opportunities and jobs in those industries continue to grow. That is why it is so shocking to hear views from the Opposition that would damage the jobs miracle that we have seen over the last few years in this country.
Wages are rising, inflation is stable, unemployment has been so low for so long that the Office for Budget Responsibility believes that the equilibrium rate has fallen, income inequality is down and disposable income is up. This is the extraordinary record of making work pay. It is a huge economic success story, after the financial meltdown that the Labour party presided over. I want to see the success continue, and I know that to do so this House must support the Bill. I shall continue to do so, not least because of the concrete measures it contains for putting money in the pockets of Stoke-on-Trent’s very many hard-working people.
Thelma Walker (Colne Valley) (Lab)
I begin by reflecting on the purpose of our society—the purpose of our communities, locally and nationally. The great Labour Prime Minister Clement Attlee said:
“No social system will bring us happiness, health and prosperity unless it is inspired by something greater than materialism.”
I agree with Clement Attlee. To me and many others in this House, the aspiration is to create and be part of a community and society that cares for one another and enables everyone to succeed in life, in whatever form success takes—a society that is safe and secure from cradle to grave and that provides accessible healthcare, quality housing, outstanding education and secure employment. A Government’s ultimate goal should be the wellbeing of its citizens, and there is much evidence to suggest that higher levels of wellbeing can lead to higher levels of job performance and productivity and greater job satisfaction. That is the society I want to live in.
Unfortunately, to say that that is not a reality under the current Government is an understatement. This Finance Bill does nothing to deliver the people of this country’s wellbeing. On new clause 2, a UN report just last week told us that the Government have inflicted “great misery” on our people, with
“punitive, mean-spirited and often callous”
austerity policies, driven by a political desire to undertake social re-engineering rather than by economic necessity. This is from the United Nations poverty envoy. We are told that levels of child poverty are
“not just a disgrace, but a social calamity and economic disaster”.
The Budget was an opportunity to make some attempt to right those wrongs. Did it offer full and fair funding for our teachers and education service? No. Did it offer reassurance for those suffering the consequences of the cruel and callous roll-out of universal credit? No. Did it attempt to put an end to the causes of homelessness and destitution? No. Did it commit to funding our police services to help halt the massive increase in violent crime? No. Did it commit to funding our local councils, suffering 50% cuts, which are damaging the very fabric of our society? No. Did it do anything to relieve the hardship felt by so many women across our country? No.
Some 14 million of our citizens—our people; a fifth of the population—are living in poverty. One and a half million are destitute, with no money for even basic essentials. Up to 40% of children will be living in poverty by 2022. This Finance Bill is about lip service and rhetoric—pretending to care about the poor and vulnerable, but doing nothing substantial to address the misery and suffering felt by so many in our society. There is so much poverty and inequality in our country, and our country has never been more miserable or divided—divided geographically, generationally and economically. We have poverty in our cities, towns and villages, but under this Government there is a poverty of compassion, a poverty of empathy and a poverty of insight into what real, ordinary people’s lives are like.
My mum said to me a few years before her death, having lived through the depression in the 1930s and survived the Manchester blitz in the second world war: “I’m glad I’m at the end of my life and not at the start when I look at what this Government are doing to our society. They’re punishing people for being poor”. Enough now. The people of this country have had enough. Labour will keep up the pressure and fight for those who are stuck in poor-quality housing, those who are struggling to feed their families and those who are not yet old enough to understand what poverty is and how it may impact their life. They deserve better.
I would like to finish with a quotation from the philosopher Thomas Paine:
“It is error only, and not truth, that shrinks from inquiry.”
It is interesting that the Government are currently facing so many questions and inquiries, both within this House and beyond.
Alex Burghart
It is an honour to speak in this debate and to follow the hon. Member for Colne Valley (Thelma Walker).
One of the most striking things about the Chancellor’s Budget speech was the moment in history that it reflected. As the Committee will know, in 2010 the Government—the coalition Government, as then was—inherited the largest peacetime deficit in our history, yet the Chancellor was able to stand at the Dispatch Box and say that the deficit had fallen by four fifths, from just under 10% to 1.9%, and that it would be less than 1% by 2023-24. This is an extraordinary achievement, not of this House or even this Government, but of the British people, who, yes, have had to cut their cloth to make it happen. However, it has been an essential task, yet sometimes, listening to some hon. Members, we can be led to believe that it could have been wished away, that it did not matter or that it was something that the Conservative party invented.
But that is not so. The deficit is a real, serious thing. The deficit is the debt that we pass on to our children and to our children’s children. It is the debt that we have not cleared ourselves. We have a responsibility to the future. We have a responsibility to pass on a natural environment that is not polluted and we have a duty to pass on an economy that is not polluted.
Kevin Foster (Torbay) (Con)
I am listening to my hon. Friend’s opening remarks with great interest. He is right to talk about the importance of tackling the deficit, yet we sometimes hear comments from the Opposition about debt going up. If they are so concerned about the level of debt, can he confirm to me how many deficit reduction measures he believes they have supported?
Alex Burghart
I thank my hon. Friend for his comments. I believe that the answer to his question is none, but I stand to be corrected.
Alongside the Budget, we heard the remarkable news last week that wage growth is at its highest level for a decade. That welcome return to growth benefits people in my constituency and around the country. In addition, we have the best employment figures in my lifetime. Sometimes, we are given the impression that such figures are idle statistics that mean nothing—that the Government are just chirruping on about that silly little thing, employment—but employment is not a marginal thing. Employment is what gives our constituents the opportunity to work, to support their families, to play their part in society and to have independence and choice. It is the greatest gift that the economy can bestow.
I always enjoy Finance Bill debates, because I am a genuine fan of the hon. Member for Bootle (Peter Dowd). I assure Hansard that I am not being sarcastic when I say that I genuinely enjoy his company and his speeches. Over the years we have shared in the House, we have enjoyed some debates on the Beatles, on Plutarch and on sausages. Today, I shall add to that list by picking him up on voodoo economics.
The hon. Gentleman has accused us of voodoo economics when it comes to reducing corporation tax and thus bringing greater revenue into the Exchequer. I encourage him, in the spirit of friendship, to go and talk to some of the businesses that have onshored to the UK to take advantage of our extraordinarily competitive corporation tax rates. That is why people are coming to this country to do business. It is why they are choosing to raise revenue here and pay taxes here. That is good for them, it is good for our economy and it is good for the people who use our public services. I respectfully suggest that if anyone wants an example of voodoo economics, they should look to the attempt to dig up the dead and rotting corpse of socialism, reinvigorate it with magic spells and have it wandering the streets, looking to bring rack and ruin. We find real voodoo economics in the suggestion that it will cost nothing to renationalise a range of utilities and services. As my hon. Friend the Member for Aldershot (Leo Docherty) has pointed out, it will not cost nothing; it will cost at least £176 billion. Contrary to what the shadow Chancellor says, it will not pay for itself. It will be paid for by British taxpayers.
Leo Docherty
My hon. Friend is making an eloquent speech. He is right to point out the voodoo economics surrounding the Labour party’s plan for nationalisation. As he has said, we are not simply talking about the fact that it will cost £176 billion across the whole country; if we divide that up per household, my constituents in Aldershot are deeply alarmed at the prospect of having to pay £6,471 for this madness.
Alex Burghart
I imagine that they are; they have every right to be very concerned—nay, furious—about it.
Several clauses in the Finance Bill have been misrepresented. They put more money in people’s pockets and make more money available to businesses, not for the sake of some blind ideological exercise, but because Conservatives know that growth matters most to our economy. We would all like to have more money for public services today, but if we get that additional money by raising taxes, there will be less money in the economy and, ultimately, less revenue, so less money for public services. The only way to increase the size of the slice of the pie that goes to public services is by increasing the size of the pie. The only way to do that effectively is by giving people opportunities to spend more of their own money, and by giving businesses opportunities to set up, survive, grow, employ people and share wealth.
Peter Dowd
The hon. Gentleman refers to things being virtuous. I am sure that he believes that new clause 1 is virtuous, in that it sets out an assessment of the effect of reducing the threshold for the additional rate to £80,000, which is the Labour party’s policy. If he wants the facts and the evidence, why does he not support new clause 1, which will enable us to get all the facts and the evidence? Then we can have another debate, in which we can talk about Plutarch and Cicero until the cows come home.
Alex Burghart
I would certainly take up the hon. Gentleman’s offer to talk about Cicero, but I am sure that I would be ruled out of order.
The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)
For the sake of clarity, no—Cicero is always pertinent to everything.
Alex Burghart
Cicero, as the hon. Gentleman knows, was one of the great minds of the Roman senate, and I can say with full certainty what he would have made of new clause 1. He would have said that it was a waste of time. We can rely on the Treasury to keep us informed of all the ins and outs of Government policy. We do not need additional laws and additional bureaucracy to achieve that. I know that the hon. Gentleman is a great lover of reviews. We have sat in many Committees together over the years, and he has tabled amendments calling for review upon review, which Parliament has always, sadly, declined to accept.
Kevin Foster
I am very much enjoying my hon. Friend’s speech. Does he agree that many analyses must have been done in the Treasury between 1997 and 2010 about why it was sensible to keep the tax rates as they were? The highest earners now pay slightly more, in terms of percentage rate, than they did throughout most of Labour’s 13 years in government, except for the last couple of months. It is quite strange to hear Labour Members’ enthusiasm for this type of taxation now that they are in opposition.
Alex Burghart
As ever, my hon. Friend puts it extremely well. “Wise after the event” might be one of the Labour party’s mottos.
I am pleased to welcome, in clauses 41 and 42, further improvements to stamp duty to help more people to get on the housing ladder and buy the homes that they so richly deserve. Those measures will put more money into the system and encourage the building of more homes, to allow us to progress down the route of building what must be built for the home owning democracy.
Alongside that, I was pleased to see an additional £1.7 billion being put into universal credit, to give the poorest people in society more money in their pockets—money that benefits them and flows straight into the economy. I take this opportunity to thank my right hon. Friend the Member for Tatton (Ms McVey), who is not in her place, for her service as Secretary of State for Work and Pensions. She did her job extremely well. It was under her leadership that a number of improvements were made to universal credit and this decision to put an additional £1.7 billion into the service was concluded. That Secretary of State bore her unfair share of personal criticism while she was in that job; the person rather than the issue was often played. Although I fully take on board the remarks made by the hon. Member for Colne Valley (Thelma Walker) about the desire of that great Labour Prime Minister Clement Attlee for a caring society, when I have seen and heard some of the slander thrown at my right hon. Friend the Member for Tatton, I have had to wonder whether all parts of the left are really as caring as Clement Attlee would have had them.
Rachel Maclean
Does my hon. Friend agree with Cicero on this point: when you have no basis for argument, you should abuse the plaintiff?
Alex Burghart
My hon. Friend quotes Cicero far better than I ever could, and I regret only that she did not do so in the original Latin—we can hope for such things next time.
John Howell (Henley) (Con)
I am not going to quote Cicero, although I am perfectly able to do so, but I think the debate needs to progress as it should do. Is the cut in stamp duty, particularly for shared ownership schemes, going to have a major impact? Has my hon. Friend done any assessment of how much that is going to affect the people who are trying so desperately hard to get on to the housing ladder in his constituency and in mine? Does he have anything to support this argument?
Alex Burghart
I have no doubt that a cut in stamp duty will help homebuyers across the country, in my hon. Friend’s constituency and in mine. I am lucky to represent a constituency in Essex, near London. Our area has much to recommend it, but the price of housing is high. We are going through a programme of home building, reflecting the Government’s broader ambitions. I know from knocking on doors and speaking to young people and their parents that it is difficult to get on that housing ladder. Every incremental improvement that this Government can make on things such as stamp duty helps to make the dream of home ownership a reality for those young people and their families.
Neil O'Brien (Harborough) (Con)
On my hon. Friend’s point about incrementalism, does he recognise that the welcome cut in stamp duty for first-time buyers comes on top of ending the crazy slab-based system of stamp duty land tax which was built up under Gordon Brown? This Government got rid of it, so that we no longer had a situation where paying £1 more for a house triggers a tax increase that could be worth thousands and thousands of pounds.
Alex Burghart
My hon. Friend is too modest; I know not only that it was an excellent reform brought about under a Conservative Administration, where we went from the LEGO building-block approach to stamp duty that he described to something much smoother and more pristine, but that he was working in the Treasury at the time and was instrumental in bringing about that excellent reform. It has made stamp duty not only fairer, but much more sensible for anyone seeking to buy a property.
Let me turn to business, clause 38 and the necessary additional relief being given to entrepreneurs. As a number of hon. Members have made clear, these are people who are looking to start businesses, so as to employ people, and to create an economic dynamism in their communities and their areas. I go back to remarks made by my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) about how he has seen employment and business growth in his area. I was having a conversation earlier with another hon. Friend from the north-east, where the Conservatives again have seats in Parliament—that is no accident. We have seats in Parliament in the north-east because of the record levels of jobs growth and business growth that have happened in those constituencies since 2010. Voters understand success and successful policies when they see them, which is why people such as my hon. Friend are capable of winning seats such as Stoke-on-Trent South. This happened because of the enormous benefits of Conservative policy since 2010.
A measure in the Budget that has meant a great deal to my area has been the substantial improvement in business rates. As I say, Brentwood and Ongar is a hive of Thatcherite prosperity. It has a huge number of small, medium-sized and large enterprises within its boundaries, most of which have been built by the sweat of local people, and are the product of good, old-fashioned British graft and nous. People in my area are proud of their high streets and want to see them do well. They want their local retail areas to be bustling and thriving. These measures are an enormous shot in the arm for those smaller businesses, which add not only vibrancy and character, but employment and economic opportunity to our local areas. I cannot praise them highly enough.
In conclusion, this is a Budget to help the people who drive the economy. It is a Budget for the businesses that help drive the economy. It offers dynamism to the economy. It will help deliver the growth we need to grow our revenues and our public services, and offer a future for our children which has jobs and is not shackled by an enormous debt left by the previous Government.
Ruth George
With such disagreement on statistics between hon. Members on both sides of the House, it would be helpful to refer to an impartial observer from the United Nations who has spent the past two weeks going across the United Kingdom and looking at our levels of poverty and the associated political choices. It is a damning indictment of not just our country but our Government that he concluded:
“The experience of the United Kingdom, especially since 2010, underscores the conclusion that poverty is a political choice. Austerity could easily have spared the poor, if the political will had existed to do so. Resources were available to the Treasury at the last budget that could have transformed the situation of millions of people living in poverty, but the political choice was made to fund tax cuts for the wealthy instead.”
I find that absolutely shocking in this day and age, given that there is so much evidence on this, not just from the likes of the Institute for Fiscal Studies, but in every region and on every street in our country. I live in a relatively affluent constituency, but I have had thousands of constituents come to me suffering from poverty.
Lyn Brown
I am grateful to my hon. Friend for mentioning this, because the rapporteur came to my constituency last week and I sat through a harrowing three hours listening to the testimonies of people who are really in need and suffering. So I am genuinely grateful to her for raising this issue now.
Ruth George
I find it hard to believe that any of us, as Members of Parliament who are seen to be compassionate and caring people who represent our constituents, do not have struggling constituents coming to them. A single parent came to me who has had to give up his job because his child is disabled. He has found that he is going to lose the disability element of child tax credit and will be £1,500 a year worse off. He said, “This Government says that it will protect the most vulnerable in society. If they cannot protect disabled children, who is more vulnerable? Who are these people that they claim to be protecting?” Answers are there none.
As I said, the Institute for Fiscal Studies has shown that since 2015, the overall impact of tax and benefit reforms has hit the poorest two thirds of the population. They are the ones who have lost out—the poorest have lost out by a shocking 10% of their income. The only section of society to have gained is the richest third. The only difference the Budget will make to the incomes of the poorest 10% is that instead of their losing 10% of their income, they will now lose 9.8%. I am sorry, but when we are the fifth richest economy, that is just not good enough.
The previous speaker, the hon. Member for Brentwood and Ongar (Alex Burghart), praised the previous Secretary of State for Work and Pensions, the right hon. Member for Tatton (Ms McVey). Admittedly, she argued for Budget redistribution to people on universal credit, but the increase in the work allowance gives £630 a year to 2.4 million families. That will not make anyone better off: 3.2 million families were due to lose an average of £2,500 a year; now, those families will lose an average of £2,100 a year. The Budget will not make those people better off; it will make them very slightly less worse off.
When 14 million people—a fifth of the population—are in poverty, what do the Government have to say to them? What do they have to say to the 4 million people who live 50% below the poverty line, or to the 1.5 million who are destitute? Are they proud of those figures? Are they proud to meet people like my constituent Billy, who is doing his best? He suffers from a disability and has taken on some self-employed work, with tax credits. He has done his very best and recently took on an afternoon shift with Royal Mail, delivering the Christmas post. He has just found out that when that job ends after Christmas, he will be put on to universal credit. Because of the minimum income floor, he will have absolutely no income whatsoever to see him through until the months when he can work again as an entertainer. What do the Government have to say to people like Billy? How is he supposed to get by? He has sought to do his best and to do what the Government have asked people to do—go out and get a job—but people like him are punished for it.
When 8 million working people are in poverty, that is not a benefit to them. Two thirds of children living in poverty are in working households. Does the hon. Member for Brentwood and Ongar think that their parents’ employment is a gift? These children are still in poverty. Employment is a benefit only where it can lift a household and children out of poverty.
Alex Burghart
I fully respect the hon. Lady’s position on welfare—I often think it is a gift to the Government that she does not serve on the Front Bench—but it is slightly absurd to suggest that people are not better off in work. They are better off in work. We would all like people to earn more money in work, but to suggest, as Opposition Members often do, that work is no benefit is ludicrous. Work does help. It is a route out of poverty. The first stage of getting into work is not the conclusion of the journey.
Ruth George
I am afraid that for constituents like mine, about whom I was speaking earlier, work is not a route out of poverty. For them, trying a temporary job and moving into work is a fast route on to universal credit and into absolute poverty.
In spite of all the promises made to the House when cuts to universal credit were forced through after the 2015 Budget, not everyone will be protected as they move from legacy benefits to universal credit. Not even half the people who transfer from legacy benefits to universal credit will be protected from the average £2,100-worth of cuts. Managed migration has been delayed and reduced, and the criteria for transferring people from legacy benefits to universal credit have been widened so much that 4 million people will move on to universal credit naturally, with no protection whatsoever. Fewer than 3 million people will move over under managed migration. That is contrary to the promises that were made to the House when those cuts were brought in.
Some absolute anomalies in universal credit will seriously increase the amount of child poverty, which is why at the very least the Government have a duty to measure the impact of the provisions in their Budget. Some 3.2 million children are due to be affected by the two-child limit, and 1.4 million of those children live in families with four children or more, who will lose an average of £7,000 a year. That is a huge amount of money, which no family with children can afford to lose, much less the poorest and those households bringing up children on such low incomes. According to the Office for Budget Responsibility, £3.2 billion will be taken off people with disabilities by 2023.
What about the self-employed? The Government claim to support entrepreneurship, but their entrepreneurs’ relief enables 6,000 people making profits of more than £1 million on the sale of their business to benefit by an average of almost half a million pounds each. That costs this country and its economy £2.7 billion. People starting out in self-employment, on low earnings, such as my constituent Billy, are among the 430,000 who will lose an average of £3,000 a year, mostly because of the minimum income floor.
Neil O’Brien
Is the hon. Lady calling for entrepreneurs’ relief to be completely scrapped?
Ruth George
I believe that the relief should be reviewed, which is what new clause 3 would require. We could then see its impact on the most well off and on the poorest, and in particular its impact among those who aspire to be entrepreneurs and who aspire to bring themselves out of—
Ruth George
That is what the new clause would require. If the Government wanted us to abolish entrepreneurs’ relief and had given us a Finance Bill that we could actually amend, and if they had the courage to put their policies to votes on the Floor of the House and to give us any alternative, other than to amend the Bill to require reviews, we would gladly do so. Perhaps the Minister could indicate from his sedentary position whether he is prepared to allow the Committee to make such an amendment to abolish entrepreneurs’ relief.
The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)
Order. It is not for the hon. Lady to ask questions of the Minister at this point. When the Minister is speaking, she might wish to try to intervene at that point, but she cannot require the Minister to answer her question at this point. She can expect him to answer it when he addresses the Committee later. Having said that, if the Minister wishes to jump up at this point, I will not stop him. It is an interesting matter.
Mel Stride
I was just going to say that, as the hon. Lady will know, all amendments need to be in scope and that that is ultimately a decision for Mr Speaker. I am sure that he has taken the appropriate decisions in this case—[Interruption.]
Ruth George
My hon. Friend the Member for West Ham (Lyn Brown) has just said from a sedentary position that the Government have set the parameters for the scope of amendments in this Bill. The same happened with the previous two Finance Bills that they brought to the House. They have not allowed any substantive amendments to the Bill. They will not allow their policies to be tested on the Floor of the House, because those policies have been found wanting in terms of redistribution of wealth from the best off in our society to the poorest. It is actually the poorest who pay 42% of their income, while the richest pay just 34%. How is that fair?
This Budget has done nothing to support the poorest people. After raising VAT to 20%, the Government have doubled insurance tax and are raising council tax across the country by 5% a year, hitting the poorest in our society and hitting those who can afford it the least. They are also hitting those who are homeowners with universal credit. We have heard that the Government aspire to support homeowners, so why is it that, under universal credit, 74% of people who lose out are actually homeowners? They have seen their clawback of income nearly doubling from 39% under the Labour Government to 63% under this Government, and it is going up to 75% for taxpayers.
If the Government disagree with our analysis that this Budget is not helping people in poverty and that it is actually entrenching the serious divides and the serious destitution and poverty within our society, they should prove their case by supporting our amendment for an equalities impact assessment. But they have form on this. I have been calling for an equalities impact assessment of universal credit changes since 2015 and since I first came to this House, and it has been refused. They are now refusing to hold one in this Budget. Anyone would think that this Government had something to hide. I know from people around my constituency, which is relatively affluent, that it is not just the poorest people who are appalled at the level of food bank use, the level of homelessness and the level of evictions that are being inflicted on the poorest people in our society. People across my constituency are writing to me, imploring me to stand up for the poorest, because otherwise we are poorer as a society.
Rachel Maclean
It is a pleasure to follow the hon. Member for High Peak (Ruth George). I rise to speak in favour of the Bill and against the Opposition amendments. I will start by correcting a comment that I made earlier. Just to correct the record, let me say that I incorrectly said—I apologise to the House—that the shadow Chancellor was on record saying that the fact that Labour’s numbers did not add up was largely irrelevant. I offer my apologies as it was not the shadow Chancellor who said that, but a Labour party adviser who wrote it in a book that was endorsed by the shadow Chancellor.
Peter Dowd
The actual author of that article called the Prime Minister a word that would be unparliamentary if that is what he said. He called her that particular word. If the author is calling the Prime Minister a particular word, should the hon. Lady not accept the fact that the author did not say that?
The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)
Order. The hon. Gentleman is rightly respecting parliamentary language. Rather than refer to language that is unparliamentary, if he simply wants to say that the alleged author of those alleged words denies them, he is at liberty to do so.
Peter Dowd
Thank you very much, Dame Eleanor. That is precisely what I wanted to say.
Rachel Maclean
I thank the hon. Gentleman for his intervention, but I fear that we are getting bogged down and dragged into areas that I do not wish to go into, given that I do not have very much time. I merely wish to make the point that Labour’s record demonstrates its disregard for managing public finances responsibly. What it also does, as we have heard from Members, particularly from those on the shadow Front Bench, is help us to see their approach to entrepreneurs—those people who sacrifice and work, sometimes for decades, to start businesses. They seek to attack and punish those people who often put their lives on the line and who often take considerable sacrifices to start businesses. Those entrepreneurs up and down the country may not be paying themselves for many, many years because they have to meet the payroll of their workers. We see the approach from the Opposition to those people. We are talking about entrepreneurs’ relief that will come to fruition only when that entrepreneur wishes to sell or dispose of part of a business that may have lasted over a lifetime during which they have paid tax, contributed to our economy and created jobs.
Rachel Maclean
I am sorry, but as much as I enjoy debating with the hon. Gentleman, I will not take any more interventions because I do not have much time and I have taken one already.
We have heard a lot of philosophy tonight. I will not quote Cicero again, but I will draw the House’s attention to the Jewish philosopher Maimonides who said more than 2,000 years ago that the greatest form of social justice and charity is to start a business and to create jobs. Therefore, I reject the Opposition’s amendment on the entrepreneurs’ relief. However, we should definitely keep it under review, and I am absolutely sure that the Treasury will do so because we on the Government Benches want to ensure value for taxpayers’ money in all the things that we do. We recognise that we are spending not the Government’s money, but our constituents’ money, and we need to do that carefully.
I now wish to address the movement on the tax thresholds, because this relates to a fundamental Conservative value.
Rachel Maclean
I am sorry but I will not give way. I only have a couple of minutes left. Please forgive me.
The movement on the tax thresholds is a fundamental point at the heart of our Conservative philosophy, which is freedom of the individual to spend their own hard-earned money how they wish. What this Budget and this Finance Bill are doing is taking people out of tax. A basic rate taxpayer will pay £1,205 a year less than in 2010, when Labour left office, and that is, effectively, a pay rise for those people, leaving them with more money in their pockets.
Let me say this to the Opposition: they often talk about how they want people to pay more tax. Well, people are free to pay more tax voluntarily, but, surprisingly enough, that is not often what people do. What we do see as a result of our tax policy of lowering tax rates is a greater tax take coming into the Exchequer. We see that fundamental principle illustrated time and again because of the policies advocated and enacted by the Government. It is right to lower the tax thresholds for low and middle-income earners. In fact, the shadow Chancellor and the shadow Chief Secretary do not even oppose that; they agree that we should keep those tax thresholds low. We need look no further than corporation tax, as those receipts are up 50% to £53.6 billion because of the lowering of the rate that has happened under this Government. That is £53.6 billion more for this Government to spend on strong public services up and down the country.
Anneliese Dodds (Oxford East) (Lab/Co-op)
Surely, the hon. Lady is aware that just about every analysis that has been done regarding the reason for the increase in corporation tax revenue says that it is due not to the reduction in rates, but to factors such as the banks’ return to profitability after the financial crisis, so it is not right to link the two.
Rachel Maclean
I do not accept those comments because we have seen new businesses in my constituency and in the constituencies of many other hon. Members. In Redditch, we have record rates of business start-ups because of measures in this Budget, this Finance Bill and other Budgets. I am a great supporter of the Bill because it will drive more revenue into the Exchequer that I would like to see spent on strong public services in Redditch.
Mel Stride
May I say what a pleasure it is to serve under your chairmanship, Dame Eleanor?
Let me first pick up on some of the comments made by the hon. Member for Aberdeen North (Kirsty Blackman), speaking from the Scottish National party Front Bench. She raised the issue of the higher rate threshold in clause 5 and asked whether the Bill might be organised in a slightly different manner. The most important thing is that we have put forward the information in a simple and straightforward way. As I am sure she is aware, the rise to the basic rate limit is dealt with in clause 5(1), with the amendment to £37,500 in the Income Tax Act 2007. That of course gets added to the personal allowance. The higher rate threshold is UK-wide for both dividends and savings income, which is what the amendment to the Income Tax Act deals with and focuses on.
Clause 5(2), Dame Eleanor—as I know you and other Members of the House will be aware, having read this Bill in significant detail—deals with the rise in the personal allowance to £12,500, which once again is a UK-wide scope. Therefore, it is appropriate that it is in a clause that is not subject to the provisions of English votes for English laws.
Clause 5(4)—I notice the hon. Member for Aberdeen North looking at this quite closely—also breaks the link between the personal allowance and the national minimum wage, which is once again a UK-wide measure. On the hon. Lady’s very specific point, it is appropriate that all these measures are contained within one clause.
The hon. Lady also mentioned the national minimum wage and the level at which it is set for those aged 16 to 24. She will know that a review is currently being conducted by the Low Pay Commission, which will report in spring 2019, although the commission has said in the past that increases up towards the level of the national living wage—which is what I think the hon. Lady is seeking—may have a detrimental impact on the level of employment. Of course, this Government have overseen a halving of the level of youth unemployment since 2010, something of which we are justly proud.
The hon. Lady brought up the issue of raising the personal allowance to £12,750, in line with her party’s new clause 19. The important point is that we have been able to raise the personal allowance from around £6,500 in 2010 right the way up to £12,500, taking about 4 million of the lowest paid out of tax altogether. That comes at huge cost, and the estimated cost of going still further, to the level that hon. Lady suggests, would be of the order of £1.5 billion. For that reason, we believe that the very significant rise that we have put in place is proportionate and should be welcomed by many of the lowest income earners, whom the hon. Lady quite rightly seeks to protect.
The hon. Lady raised the issue of poverty, as did a number of other hon. and right hon. Members. I remind the Committee that there are 1 million fewer people living in absolute poverty than in 2010, including 300,000 children. It is also the case that there are two thirds of a million fewer children living in workless households. We have heard a great deal about the importance of employment and our record on employment, with virtually the highest level of employment in our history and the lowest level of unemployment since the mid-1970s. Work is a very important route out of poverty and we have a strong record in that respect.
A number of Members mentioned entrepreneurs’ relief. The hon. Member for Aberdeen North suggested that the shift from the one-year to the two-year qualifying condition might actually impose a hurdle to entrepreneurship—I think that was the expression she used—but we see it as important that we at least have entrepreneurs who are not in and out within a period of 12 months, but who are actually there for the longer term. Of course, the Labour party seems to be entirely hostile to the whole notion of an entrepreneurs’ relief, which is not surprising given the general approach it seems to take towards business.
John Howell
Will my right hon. Friend comment on the fact that entrepreneurs’ relief is aimed at securing longer-term investment? This country has been very used to short-term investment, but it has done nothing for us. We need people to invest in the longer term.
Mel Stride
My hon. Friend is exactly right. This is why we also have the enterprise investment scheme and the seed enterprise investment scheme, and why we have made this change to entrepreneurs’ relief. An interesting fact is that of those who benefit from the entrepreneurs’ relief, around a third go on to reinvest in further businesses, so those tax savings are being reinvested in further economic activity.
I turn to the comments of the hon. Member for Bootle (Peter Dowd), who made a number of important points—or, should I say, he made a number of points about important matters? That might be slightly more to the point. However, I agree entirely with my hon. Friend the Member for Brentwood and Ongar (Alex Burghart), who is no longer in his place; I have a great affection for the shadow Minister, particularly the Plutarch and Cicero quotes of which he is most fond. In fact, I will share one with him that does not apply to him in any way, of course:
“Any man can make mistakes, but only a fool persists in his error.”
I think that is probably more appropriate to the leader of his party than to the hon. Gentleman himself.
The hon. Gentleman raised the issues of the amount of tax burden shouldered by the wealthiest in the country. I remind him that under this Government the wealthiest 1% pay a full 28% of all income tax; it was about 24% when the Labour party was in power. As my hon. Friend the Member for Gloucester (Richard Graham) pointed out, the lowest 20% of earners have benefited the most since 2010, from the combination of changes to tax, the national living wage and other factors.
The hon. Gentleman mentioned the UN rapporteur and my appearance on Channel 4. I have to point out that the rapporteur produced, I think, a 24-page report based on around two weeks’ fact-finding in this country. The Government’s view is that the conclusions drawn were disproportionate to say the least. The hon. Gentleman suggested that I did not answer the questions put to me on that particular occasion, which I dispute. However, it is indisputable that he failed to answer the question of my hon. Friend the Member for Cheltenham (Alex Chalk) as to exactly what the Opposition would do with the personal allowance, given the exception that they are taking to our tax measures in the Budget.
Debbie Abrahams
Can the Minister recollect whether there has been a UN report in the last eight years that this Government have agreed with?
Mel Stride
Well, I am not here to debate UN reports of any description and whether the Government agree with them, other than to make the point that this particular report is rather disproportionate, given the remarks that I made earlier about what has happened to absolute poverty and children of workless households and so on.
Kirsty Blackman
This has been an interesting and wide-ranging debate, although I cannot say that I share the enthusiasm of the First Deputy Chairman of Ways and Means (Dame Eleanor Laing) for Cicero.
I want to pick up the comments of Government Members about hard-working people. They regularly use that term to mean people who are earning above the higher rate threshold, and it sounds as though they are saying that people who are on the minimum wage—people who are retail workers, hospitality workers, carers, cleaners—do not work hard, when in fact they do. They work incredibly hard, and our lives would not be the same if it were not for those people working incredibly hard on the minimum wage. We will push new clause 19 to a vote for that reason.
Lastly, I beg to ask leave to withdraw amendment 6.
Amendment, by leave, withdrawn.
Question put, That the clause stand part of the Bill.
The Temporary Chairman (Sir George Howarth)
With this it will be convenient to discuss the following:
Clauses 69 to 77 stand part.
Amendment 10, in clause 78, page 51, line 32, after “may”, insert—
“(subject to section (Review of expenditure implications of Part 3))”.
Antecedent to new clause 10.
Clause 78 stand part.
Amendment 14, in clause 89, page 66, line 30, at end insert—
“(1A) The Chancellor of the Exchequer must, no later than the date provided for in subsection (1C), lay before the House of Commons a statement of the circumstances (in relation to the outcome of negotiations with the EU) that give rise to the exercise of the power.
(1B) The statement under subsection (1A) must be accompanied by—
(a) an assessment of the fiscal and economic effects of the exercise of those powers and the circumstances giving rise to them;
(b) a comparison of those fiscal and economic effects with the effects if—
(i) a negotiated withdrawal agreement and a framework for a future relationship with the EU had been agreed to, and
(ii) the United Kingdom had remained a member of the European Union;
(c) a statement by the Office for Budget Responsibility on the accuracy and comprehensiveness of the assessment under paragraph (a) and the comparison under paragraph (b).
(1C) The date provided for in this subsection is—
(a) a date which is no less than seven days before the date on which a Minister of the Crown proposes to make a motion for the purposes of section 13(1)(b) of the European Union Withdrawal Act 2018 and after the passing of this Act, or
(b) a date which is no less than seven days before the date on which a Minister of the Crown proposes to make a motion for the purposes of section 13(6)(a) of the European Union Withdrawal Act 2018 and after the passing of this Act, or
(c) a date which is no less than seven days before the date on which a Minister of the Crown proposes to make a motion for the purposes of section 13(8)(b)(i) of the European Union Withdrawal Act 2018 and after the passing of this Act, or
(d) the date on which this Act is passed,
whichever is the earliest.”
This amendment requires the first use of the powers intended to modify tax legislation in the event of a no deal Brexit to be accompanied by a statement of the circumstances and a comparative analysis of their impact, accompanied by an OBR assessment.
Amendment 15, page 66, line 30, at end insert—
“(1A) No regulations under this section may be made until the Chancellor of the Exchequer has laid a statement before the House of Commons setting out—
(a) a list of the powers in relevant tax legislation that the Treasury has acquired since June 2016 in connection with the United Kingdom’s withdrawal from the European Union,
(b) a list of the powers in relevant tax legislation the Treasury expects to acquire if—
(i) a withdrawal agreement and a framework for a future relationship with the European Union have been agreed to, or
(ii) the United Kingdom has left the European Union without a negotiated withdrawal agreement.
(c) a description of any powers conferred upon the House of Commons (whether by means of the approval or annulment of statutory instruments or otherwise) in connection with the exercise of the powers set out in subsection (b).”
Amendment 22, page 66, line 30, at end insert—
“(1A) The Chancellor of the Exchequer must, no later than a week after the passing of this Act and before exercising the power in subsection (1), lay before the House of Commons a review of the following matters—
(a) the fiscal and economic effects of the exercise of those powers and of the outcome of negotiations for the United Kingdom’s withdrawal from the European Union giving rise to their exercise;
(b) a comparison of those fiscal and economic effects with the effects if a negotiated withdrawal agreement and a framework for a future relationship with the EU had been agreed to;
(c) any differences in the exercise of those powers in respect of—
(i) Great Britain, and
(ii) Northern Ireland;
(d) any differential effects in relation to the matters specified in paragraphs (a) and (b) in relation between—
(i) Great Britain, and
(ii) Northern Ireland.”
Amendment 7, page 67, line 1, leave out subsection (5) and insert—
“(5) No statutory instrument containing regulations under this section may be made unless a draft has been laid before and approved by a resolution of the House of Commons.”
This amendment would make clause 89 (Minor amendments in consequence of EU withdrawal) subject to affirmative procedure.
Amendment 20, page 67, line 2, at end insert—
“(5A) No regulations may be made under this section unless the United Kingdom has left the European Union without a negotiated withdrawal agreement.”
Amendment 2, page 67, line 13, at end insert—
“(7) This section shall, subject to subsection (8), cease to have effect at the end of the period of two years beginning with the day on which this Act is passed.
(8) The Treasury may by regulations provide that this section shall continue in force for an additional period of up to three years from the end of the period specified in subsection (7).
(9) No regulations may be made under subsection (8) unless a draft has been laid before and approved by a resolution of the House of Commons.”
Clause 89 stand part.
Amendment 8, in clause 90, page 67, line 16, after “may”, insert—
“(subject to subsections (1A) and (1B))”
This amendment is antecedent to Amendment 9.
Amendment 9, page 67, line 18, at end insert—
“(1A) Before proposing to incur expenditure under subsection (1), the Secretary of State must lay before the House of Commons—
(a) a statement of the circumstances (in relation to negotiations relating to the United Kingdom’s withdrawal from the European Union) that give rise to the need for such preparatory expenditure, and
(b) an estimate of the expenditure to be incurred.
(1B) No expenditure may be incurred under subsection (1) unless the House of Commons comes to a resolution that it has considered the statement and estimate under subsection (1A) and approves the proposed expenditure.”
This amendment would require a statement on circumstances (in relation to negotiations) giving rise to the need for, as well as an estimate of the cost of, preparatory expenditure to introduce a charging scheme for greenhouse gas allowances. The amendment would require a Commons resolution before expenditure could be incurred.
Clause 90 stand part.
New clause 10—Review of expenditure implications of Part 3—
“(1) The Chancellor of the Exchequer must review the expenditure implications of commencing Part 3of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) No regulations may be made by the Commissioners under section 78(1) unless the review under subsection (1) has been laid before the House of Commons.”
This new clause would require a review within 6 months of the expenditure implications of introducing a carbon emissions tax. It would prevent Part 3 coming into effect until such a review had been laid before the House of Commons.
New clause 11—Report on consultation on certain provisions of this Act (No. 2)—
“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).
(2) Those provisions are—
(a) sections 68 to 78,
(b) section 89, and
(c) section 90.
(3) A report under this section must specify in respect of each provision listed in subsection (2)—
(a) whether a version of the provision was published in draft,
(b) if so, whether changes were made as a result of consultation on the draft,
(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”
This new clause would require a report on the consultation undertaken on certain provisions of this Act – alongside new clauses 9, 13 and 15.
New clause 17—Review of the carbon emissions tax (No. 2)—
“Within twelve months of the commencement of Part 3 of the Act, the Chancellor of the Exchequer must review the carbon emissions tax to determine—
(a) the effect of the carbon emissions tax on the United Kingdom’s carbon price in the context of non-participation in the European Union emissions trading scheme, and
(b) the effect of the carbon emissions tax on the United Kingdom’s ability to comply with its fourth and fifth carbon budgets.”
The Exchequer Secretary to the Treasury (Robert Jenrick)
In these parts of the Bill, we make sensible preparations for our exit from the European Union. While right hon. and hon. Members across the House may well disagree on Brexit, I would hope that all would wish to see us prepare as carefully as possible so that we can maintain the stability of the tax system; provide as much certainty for the taxpayer as possible; in respect of carbon pricing, meet our commitments to the environment; and do all those things in all eventualities, including in the event of no deal, which is clearly not the Government’s preference but remains a possibility.
At Budget, the Government announced essential provisions to ensure that the tax system can continue to function in any outcome.
Neil Gray (Airdrie and Shotts) (SNP)
The Minister talks about preparations for no deal. In the OBR’s “Blue Book”, it quoted assessments made by economists who suggested that the economy had already shrunk by between 2% and 2.5% since the referendum, and the Library has suggested that that has cost the UK economy anywhere between £40 billion and £50 billion. Does he agree with that assessment, and what work has been going on in the Treasury to account for it?
Robert Jenrick
What I can tell the hon. Gentleman is that the economy has been growing for eight years—for five years, in every successive quarter. Unemployment is at its lowest rate in my lifetime and employment is at its highest. The British economy is sound and robust, and that is exactly why in the Budget the Chancellor was able to make the tax cuts for 32 million of our citizens and the increased spending on the NHS.
Robert Jenrick
I will not give way again at this stage, but I could come back to the hon. Gentleman later.
The changes that we have outlined in these clauses will, I hope, signal that the UK is committed to maintaining stability and certainty for taxpayers and for businesses across the economy, especially in respect of the environmental tax provisions that I will talk about in a moment. Clauses 69 to 78 will allow the Government to introduce a carbon emissions tax to replace the EU emissions trading scheme—the ETS—in the event of no deal. Clause 90 will allow for essential preparatory expenditure to begin work on a domestic emissions trading scheme in the event that one is required. Clause 89 will introduce a power to make minor technical amendments to UK tax legislation—essential for maintaining the continued effect of the tax system.
Let me turn first to clauses 68 to 78 with respect to the carbon emissions tax. These clauses will take effect only if the UK leaves the European Union in 2019 without a deal. The clauses will give the Government the power to introduce a no-deal carbon emissions tax. The rate for 2019 would be set at £16 per tonne of carbon dioxide equivalent, and the tax would cover the same electricity generators and industrial businesses that currently participate in the EU ETS. The tax would provide the same protections against carbon leakage as the EU ETS. Operators would pay the tax only on emissions of carbon dioxide and other greenhouse gases emitted above an allowance set for each installation in advance of the tax year. This is in line with the EU ETS system of free emissions allowances.
In effect, the carbon emissions tax would seek initially to replicate the effects of the EU ETS as closely as possible, in the event of no agreement. This is important, as I hope hon. Members in all parts of the House will agree, for two reasons: first, because we want to provide certainty for businesses and for the energy industry to enable them to make investment and business decisions with confidence, as the industry has asked us to do; and secondly, because maintaining a carbon price is a key component of meeting our legally binding climate change commitments.
Dr David Drew (Stroud) (Lab/Co-op)
Does the Minister accept that now that the Government have greater freedom of operation, this is fairly timid? We have an emissions crisis in this country, as we do across the rest of the world. Why are the Government not being more ambitious in trying to bear down on emissions, as seen in the Intergovernmental Panel on Climate Change report?
Robert Jenrick
I appreciate the point the hon. Gentleman makes, but perhaps he has missed the argument I have tried to make, which is that this is not prejudging the later outcome of how we should handle our carbon pricing as we leave the EU; it is trying to ensure that in the unlikely event, which the Government wish to avoid, of a no-deal Brexit we can maintain the system as close as possible to the present one. We chose the price of £16 because that is broadly the same as where the EU’s floating price has been in recent months. Of course the price has floated very widely from as low as £6 to as high as over £20, so making that assessment is not a precise exercise, but we believe that £16 is a reasonable figure to maintain stability, and that seems to have been well received by the industry and environmental groups.
Clause 90 is about preparatory expenditure. Alongside preparing for no deal, the Government are developing long-term alternatives to the EU emissions trading scheme. As set out already in the outline political declaration on the future relationship between the EU and the UK, we are considering options for co-operation on carbon pricing, including, if possible, linking a UK national greenhouse gas emissions trading system with the EU ETS. Clause 90 will allow Departments to begin preparatory expenditure on a UK ETS, which is included in the Bill, to prepare for a linked or unlinked domestic trading scheme. It does not mean, as I said earlier, that a final decision has been made as to which option to implement, but it does ensure that all the options are kept open and we can proceed with the kind of planning that one would expect.
I shall now turn briefly to amendments 8, 9 and 10 and new clause 10 tabled by the SNP. Amendments 8 and 9 propose that the Government must table a statement on the circumstances that require expenditure in the case of clause 90 and an estimate of the expenditure to be incurred and that the House would come to a resolution to approve that expenditure. New clause 10 and amendment 10 would require the Chancellor to review the expenditure implications of the carbon emissions tax and lay a report of that review before the House within six months of the passing of the Bill, and no regulations could be made by the commissioners unless that had taken place.
A statement of circumstances, as required by amendments 8 and 9, is in our opinion unnecessary. We are legislating because the UK is leaving the EU, and as part of that we have to prepare a domestic ETS, as mentioned in the outline political declaration, and for a carbon emissions tax only in the event of no deal.
More importantly, with all these amendments, the Finance Bill is not and has never been the place for detailed questions of expenditure. The Finance Bill is primarily a Bill about tax. Parliament gets other opportunities to review and vote on departmental expenditure, and if that is important to the hon. Member for Aberdeen North (Kirsty Blackman), I suggest that she direct her scrutiny to the estimates process when it arises in due course.
New clause 17 would require the Chancellor to review the carbon emissions tax to determine its effect on the UK carbon price and the UK’s ability to comply with its fourth and fifth carbon budgets. We are confident that the carbon emissions tax would be similarly effective to the EU ETS, and I can assure Members that there are already robust requirements to report on progress towards the UK’s emissions reductions targets. For example, the Climate Change Act 2008 provides a world-leading governance framework that we certainly support. First, it ensures that the Government are required to prepare and lay before Parliament an annual statement of emissions, setting out the total amount of greenhouse gases emitted to, and removed from, the atmosphere across the UK and the steps taken to calculate the net UK carbon accounts. Secondly, the independent Committee on Climate Change is required to prepare and lay before Parliament an annual report on the Government’s progress towards meeting the UK’s carbon budgets, which the Government are required to respond to. Thirdly, the Government are required to prepare and lay before Parliament a statement setting out performance against each carbon budget period and the 2050 target. We believe that, taken together, these are strong existing mechanisms, which are respected and understood, to ensure that we monitor and report to Parliament on greenhouse gas emissions. I therefore urge hon. Members to reject new clause 17.
Let me turn to amendments 2, 7 and 21 to clause 89, which deals with minor amendments in consequence of our EU withdrawal. We need to ensure that the tax system continues to work effectively and that we maintain stability and certainty, including in the event that the UK leaves without a deal. To allow us to do that, clause 89 will allow minor technical amendments to be made to UK tax law to keep it working as it does now and to update it to continue to work with changes made to other areas of law on account of EU exit. Clause 89 will provide the Government with the power to make such minor amendments.
These are, I stress again, minor and technical changes that are absolutely necessary to maintain the continued effect of tax legislation in the unlikely event of no deal. I can reassure the Committee that the power is not being taken to make changes to do anything other than ensure that existing tax legislation continues to have effect in the event of no deal. It will not be used to change tax policy or the tax paid by taxpayers. To reassure the Committee of that, I have placed a list of changes that the Government intend to make under the power in the Library and sent a copy to the shadow Chief Secretary to the Treasury.
Vicky Ford
I thank the Minister for reaffirming that it is not the Government’s intention to leave with no deal. It is the intention to leave with a deal. On tax, there seemed to be some confusion over the weekend about the draft withdrawal agreement. Some people seemed to suggest that the UK would be bound into the EU tampon tax for a further five years. Can he confirm that under the withdrawal agreement, VAT on goods sold after the transition period will be subject to rates set by the British Government, not EU law?
Robert Jenrick
My hon. Friend, who is always well informed, is correct on both counts.
Vicky Ford
I thank my hon. Friend for confirming that from the Dispatch Box. Does he therefore agree that, before jumping to conclusions about what the draft withdrawal agreement says, colleagues should instead look at No. 10’s response to Steerpike’s 40 so-called horrors and at the true facts and answers from the lawyers who negotiated it before coming up with their own concerns?
Robert Jenrick
I would obviously advise all right hon. and hon. Members to read the withdrawal agreement, unlike the Leader of the Opposition, and not to rush to conclusions. The document produced by No. 10 to which my hon. Friend refers, which rebuts over 40 suggested flaws in the agreement, was very instructive, and I certainly found it helpful.
To finish on this point, I re-emphasise that I have laid before the House a comprehensive list of the changes that will need to be made to tax legislation. I advise right hon. and hon. Members who are interested to take a look at it. They will see that the changes are indeed minor and technical items that are not, I hope, controversial.
Amendments 14 and 22 would require the Government to publish an economic and fiscal analysis of the effects of our exit from the European Union before using the powers in clause 89. I can reassure the Committee that the Government have already confirmed that before we bring forward the vote on the final deal, we will ensure that Parliament is presented with the appropriate analysis in good time to make an informed decision. The Chancellor set that out in his letter of 23 August to the Chair of the Treasury Committee, a copy of which is in the public domain. He said that that analysis would look at the economic and fiscal effects of leaving the EU.
To provide Members with further detail today, I can confirm that that analysis will bring together evidence from across the Government, insight from external stakeholders and a range of data and analytical tools. The analysis will consider the long-term costs and benefits of moving to new trading relationships with the EU and the rest of the world. Having considered the amendment and spoken to several right hon. and hon. Members, I am happy to confirm that the baseline for this comparison will be the status quo—that is, today’s institutional arrangements with the EU. The analysis will consider a modelled no-deal scenario, or World Trade Organisation terms; a modelled analysis of an FTA scenario; and a modelled analysis of the Government’s proposed deal. Each will be compared against the status quo of the current institutional arrangements within the EU.
Amendment 14 would not require the analysis to be published until after the Bill receives Royal Assent. As a result, the Bill would not be binding on the Government until after the meaningful vote had taken place. I hope that the commitment that the Government have made today and the conversations that I have had with Members from across the House will provide reassurance that we will publish an appropriate analysis—the analysis that right hon. and hon. Members seek—in good time before the meaningful vote.
I turn briefly to the OBR’s role, which is mentioned in amendment 14. The House will know that the OBR’s remit is clearly defined in the Budget Responsibility and National Audit Act 2011, and that the amendment, which asks the OBR to assess our analysis of the effects of a deal, goes beyond its statutory responsibilities. That would set an undesirable precedent, with Parliament being able to commission specific pieces of work from the OBR on an ad hoc basis outside the clear and bounded remit set in the OBR’s charter. That would effectively transform the OBR into a parliamentary budget office, fundamentally changing its purpose and potentially damaging its credibility. Such a decision should be taken only after a full and frank debate on its own merits.
The House will be aware that the Treasury Committee, which is headed by my right hon. Friend the Member for Loughborough (Nicky Morgan), has appointed Sir Stephen Nickell, formerly of the OBR, to provide an independent view of the Government’s analysis. My officials have already had initial conversations with Sir Stephen about the scope and scale of his review, to ensure that we can provide him and his team with the necessary information in due course. I hope that that gives further reassurance to Members that scrutiny, of the nature that they seek, of the Government’s work will be undertaken by the Treasury Committee.
Furthermore, the OBR has already published a detailed review of the approach taken in the analysis provided across Whitehall, comparing it with other academic publications since the referendum. We believe that extending the OBR’s remit, as proposed by amendment 14, would require the OBR to analyse alternatives to Government policy. That would draw the OBR into political debate and expose it to a significant risk to its credibility and that of the UK’s fiscal framework. It remains highly unlikely that the OBR could, in the time available, go beyond the points it has already made in its discussion paper in any assessment of the Government’s analysis, bearing in mind its capacity and modelling today.
As for the effects of the power mentioned in amendment 20, I hope that my previous assurances will reassure right hon. and hon. Members that the Government intend to use the power not to introduce tax policy changes, but merely to secure the continued effective operation of the tax system. I hope that my right hon. and hon. Friends who sought this amendment will see that we have listened and engaged and that the reassurances that I have provided today achieve the amendment’s purpose. I therefore urge them not to proceed with their amendments.
I turn to amendment 15, which calls for the Government to provide a list of powers in relevant tax legislation that the Treasury has acquired since June 2016, or that it expects to acquire, relating to any EU exit scenario. All such powers have been passed as primary legislation. They have been scrutinised by this House and were voted through accordingly. As with all legislation, that which relates to these powers is in the public domain, should anyone wish to examine it. I do not think that it is necessary to reprise this list. I hope that hon. Members will see that amendment 15 is therefore entirely unnecessary, and I encourage them not to proceed with it.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
It is lovely to see you in the Chair, Dame Rosie, and thank you for calling me to speak for the Opposition on our second grouping, which includes clause 89. As the Minister has helpfully explained, this group deals with the operation of tax law in the UK after our withdrawal from the EU, with a consequential set of Brexit-related amendments. This week, we have all seen the complete chaos the Government have unleashed on the country with their disastrous handling of the Brexit negotiations. We are just months away from the UK’s exit, and it seems the Conservative party remains as divided as ever over what to do next. As the Leader of the Opposition explained in his address to the CBI earlier today, this proposed Brexit deal offers no certainty at all and in many ways is the worst of all worlds, offending remain and leave voters in equal measure. So after two years of negotiations, we are teetering dangerously close to a no-deal Brexit, which should simply never have been an option. It would be bad for individuals, for businesses and for the economy, and Labour will do all we can to prevent it.
As we have said repeatedly, Labour wants the Government to negotiate a comprehensive and permanent customs union that gives the UK a say in future trade deals and ensures that there will be no hard border in Northern Ireland. We would protect workers’ rights, block any race to the bottom and negotiate a strong single-market relationship that gives businesses continued access to European markets for goods and services.
I would like to think that we are heading for a more stable time, but that seems unlikely. I was appalled to read press reports at the weekend that Downing Street’s alleged strategy is to encourage a crash in the financial markets should the deal fail to pass through Parliament, to pressure MPs into voting for it a second time. I can only hope that those reports were false. We should never forget that the markets reflect people’s savings, investments and pensions. They should not be used as a political device by the Conservative party.
It is also worrying that the Government are steadfastly using Brexit to substantially transfer powers from Parliament to the Executive. The Opposition have warned about this repeatedly, throughout the passage of each piece of legislation connected to the UK’s withdrawal from the EU. We should be deeply worried about this unprecedented transfer of powers.
We see another example in this Bill. In clause 89, which is rather innocently named “Minor amendments in consequence of EU withdrawal”, Ministers give themselves the power to make amendments to tax law outside the normal due process. Good checks and balances make for good government, which is why the Opposition have tabled a series of amendments that would help to address the democratic deficit that the provisions in the Bill would create, if passed unchecked. We do not believe it is possible to make a democratic case for the transfer to the Treasury of powers to make changes to tax law in perpetuity, which is why Labour’s amendment 2 proposes a sunset clause to the Brexit powers that the Bill will confer on the Treasury. It would ensure that those powers can only be used within two years of the passage of the Bill. Surely that offers sufficient time for the Government to use them as is required.
As the Minister outlined, the Government’s case is that during our withdrawal from the EU there may be a situation in which some elements of tax law need changing urgently or at short notice. However, we do not believe that there is a case for the powers, unless the UK crashes out of the EU with no deal. The agreement of a deal, with an attached transition period, should provide room for preparation, without the need to furnish the Executive with powers to make changes to the law unilaterally.
The number of Treasury-related statutory instruments that are currently being passed to create a new financial regulatory regime proves the point. Although it has been far from ideal for Ministers and their shadows, the use of secondary legislation is an improvement on the taking of such decisions behind closed doors in the Treasury.
Kevin Hollinrake (Thirsk and Malton) (Con)
The hon. Gentleman said earlier that in his relationship with the European Union he would expect to have a say in trade deals by being part of a customs union, but even when we were full members of the European Union and it agreed the Comprehensive Economic and Trade Agreement with Canada, his party refused to vote for that deal in this House. How on earth does he think that that will work on a completely third-party, third-nation basis?
Jonathan Reynolds
I am happy to take that point, which although a little outside the remit of the Bill is none the less interesting. For us, the relationship that we would seek with the EU would be based quite simply on a solid cost-benefit analysis of what is in the UK’s best interests. If we look at the various options on offer, given that half the world is already in a regional trading bloc or a customs union of some sort, it is absolutely clear that what we would risk losing by losing frictionless trade with the European Union would never be gained by external trade deals with the rest of the world. A customs union is therefore the right way to go forward. Were the UK to enter one, we clearly could not have a situation in which we were unilaterally exposed to the deals that the EU did with other countries without having a say, so it is a pretty logical position. That does not mean that those deals would always receive the backing of all parts of this House. Elements of those deals might be unacceptable.
The point about sovereignty, which comes from Brexiteers in the main, is so important, because people say, for instance, “Let’s not do a customs union, let’s do a deal with Donald Trump’s America,” but would our constituents really accept unilateral access to the NHS for American healthcare providers? Of course they would not. Would our constituents accept hormone-treated beef in the supermarkets? Personally, I do not think they would. The question is always about the balance between what is in the proposed economic relationship and the political oversight that should go with it. That position is fairly logical and straightforward.
James Cartlidge (South Suffolk) (Con)
The hon. Gentleman has just said that he would have a customs union and a say in those trade deals. How would we have a say if we were in a customs union run by the European Union yet not in it anymore? I do not understand that.
Jonathan Reynolds
We are not proposing to remain in the customs union but not be a member of the EU. We are discussing joining a new customs union that we would negotiate with the European Union. I will say to the hon. Gentleman—I do not think that I am revealing any secrets here—that for a large number of Conservative MPs and, indeed, perhaps for the Treasury itself, that is their preferred solution; they are just not in a position to negotiate that or to request that because of the parliamentary arithmetic of the Conservative party. It does also have the very substantial benefit of our being able to honour our commitments under the Good Friday agreement. That is something that should have been a much bigger part of the referendum negotiations, and it should certainly be a paramount concern for this House going forward. I will get back to the Finance Bill, but I hope that that allays the concerns of Conservative colleagues and makes it quite clear what we think the relationship should be going forward.
James Cartlidge
How would the hon. Gentleman have a say? This would be a customs union with the European Union which we would have left. How would he have a say in it? We would not have a vote anymore.
Jonathan Reynolds
That is what we are proposing that we would negotiate. That is the entire basis of the proposal. I have no doubt that such an arrangement was on offer and may still be on offer from the European Union. The hon. Gentleman is well-informed and I always look forward to his contributions in these debates. I am sure that he has contacts as we do in other European Parliaments or perhaps in the Commission itself. If he does some investigations, he will see that that was always a preferred option for many people and it is, without question, the right way of going forward for the national interest of this country.
Kevin Hollinrake
The hon. Gentleman mentioned earlier in his remarks that a certain deal might be a betrayal of the leave voters. There were plenty of myths flying about during the referendum campaign, but one area that probably was quite plausible was that if we left the European Union, we would be able to do independent trade deals—not through the European Union, but independent bilateral trade deals. Does he not see that his customs union would effectively mean that we could not do independent trade deals and that would be a real betrayal of leave voters who expect to be able to do exactly that?
Jonathan Reynolds
I think quite the reverse. What leave voters were promised was that the economic relationship would not leave anyone worse off and, in effect, would not be ruptured at all. That was the promise made in explicit terms by leading leave campaigners. Where there were concerns that motivated that leave vote, they were heavily about sovereignty and also about immigration. I do not think that the specific trading relationships that this country has with other parts of the world were a particularly paramount issue in the campaign. I know that it is a sensitive issue for leave campaigners to talk about the fact that immigration was a big part of that campaign, but, without question, it was in my constituency. In terms of that future trading relationship, it is by far the best thing to focus on what is simply in the best economic interests of the country once we leave the political side of the European Union with all of the objections that leave voters had to it. I do not think that leaving in such a way that preserves the best of our economy, minimises the disruption and honours our commitments under the Good Friday agreement is a betrayal at all. Many people want to see that economic relationship continue, even if they were of a position and a viewpoint that we are leaving the political side of the European Union with all that entails.
I will now get back to amendment 15, Dame Eleanor, before we are all rightly admonished for straying from the Finance Bill. The measure lays out a stipulation to provide clarity around which powers in relevant tax legislation have been transferred to the Treasury since June 2016 in connection with the UK’s exit. It also covers the powers that the Treasury expects to acquire, and, most importantly, it requires Ministers to set out a timeline for when these powers are to be returned to Parliament—I think the Minister missed off that last point in his speech.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
My hon. Friend is doing a good job on amendment 15, but I think that he has missed the good news of my hon. Friend the Member for Streatham (Chuka Umunna) following his tenacious work. It looks like we have some movement on amendment 14 from the Government, and we will get these impact assessments before the meaningful vote. Will my hon. Friend, the shadow Minister, comment on the fact that the last time we saw such a thing was in the horrors of the Reading Room? We were shown that in every region of our nation, even in London where my own seat is, every sector of our economy will be worse off under every form of Brexit. Will he comment on that?
Jonathan Reynolds
I thank my hon. Friend for that intervention; I always welcome good news from my hon. Friend the Member for Streatham. Yes, it is very welcome that the Government have conceded on this point, reflecting the parliamentary arithmetic. I am not sure that they did it voluntarily, until they saw the names on the Order Paper. Transparency about the consequences of different types of Brexit arrangements has to be a good thing, because the country and all Members of this House should be as well informed as possible. It is extremely pleasing to see the Government concede on this point.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I also pay tribute to the work of the hon. Member for Streatham on this issue. I was happy to support him, as he has led a very valid endeavour that I hope will inform our decision making in the weeks to come.
Will the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) confirm that if these assessments indicate quite clearly that the status quo offers the best economic prospects for every part of the British state, the Labour party will support the status quo as the preferred Brexit option as we approach the next few weeks?
Jonathan Reynolds
The points I made about transparency are relevant, as every Member of this House will make different assessments. We all know that Brexit is not just an economic concern; political concerns about sovereignty and issues such as immigration form part of the decision that each of us would make. But it has to be a good thing for every part and region of the UK to have the maximum degree of transparency on the economic options available to us. Surely, transparency is the best way forward.
I return to amendment 15, which goes to the heart of what I was trying to articulate—that is, our concerns about the unprecedented power grab that this Government are undertaking. The Government have spent the last two years seizing all manner of tax powers with no regard to the constitutional role of this House. Meanwhile, Ministers have refused to honour any level of transparency, and outline once and for all a clear list of the powers that the Treasury has acquired since the referendum in June 2016 and those it expects to acquire by the time the UK leaves the EU. Amendment 15 would address this and oblige the Chancellor to publish a comprehensive list of the powers the Treasury has acquired and the powers it will then expect to acquire, and to state when we might see those powers returned to the House, where they surely belong.
Amendment 21 would provide a further important element of accountability. This would oblige the Government to deliver a review of the impact of using the powers conferred by clause 89 on tax receipts. This amendment would deliver greater transparency around the true impact of the Brexit deal that the Government have negotiated. It is vital that we have that data available so that we can discuss this in depth and quickly identify if a particular impact has occurred.
In amendment 22, the Opposition are also calling for a review of the Brexit powers being handed to the Treasury. This amendment would require the Chancellor to publish a statement assessing how the powers handed to the Treasury in this Bill would be applied respectively to Great Britain and Northern Ireland. We tabled this amendment because we need urgently to establish whether these powers will cause disparity in the treatment of Northern Ireland in comparison to the rest of the UK. Members may ask why there is urgency on this point, but it is clear from the draft withdrawal agreement that under the so-called backstop arrangement Northern Ireland will maintain a regulatory alignment with the European Union. This is the case in particular in relation to EU customs law, but it also applies to compliance with elements of single market regulation in areas such as the technical regulation of goods, agricultural production, environmental regulation, state aid and other areas of north-south co-operation between Northern Ireland and the Republic. Northern Ireland will also be included in parts of EU VAT and excise regimes and in the EU single electricity market, so Northern Ireland’s compliance with EU rules and regulations will be enforced by the EU Commission and the European Court of Justice.
With this in mind, it is clear that the powers handed to the Treasury by this legislation may not be applicable to Northern Ireland in the legal and regulatory areas under which EU authority remains supreme. We therefore seek a review of where each of the powers being granted to the Treasury can be applied in the event that the Prime Minister’s draft agreement successfully passes. This is clearly a very important amendment, and one which we hope Members of the Democratic Unionist party will also see value in passing. We therefore call on all Members of the House to look carefully at amendment 22 and support it in the Lobby.
Finally, new clause 17 would require the Government to publish a review of the effectiveness of introducing a UK carbon emissions tax in the event of a no-deal Brexit, in terms of helping the UK to meet its carbon emissions targets and carbon reduction commitments. The new clause builds on Labour’s commitment to ensure that 60% of the UK’s energy comes from zero-carbon or renewable sources by 2030.
It is worrying that making provisions for collapsing out of the European emissions trading scheme and all the benefits and economies of scale that it brings is one of the scant mentions of green issues in this Finance Bill. Our exit from the European Union cannot be used as an excuse to take a step back from action on climate change, as was outlined starkly in the report published last month by the Intergovernmental Panel on Climate Change. As I highlighted in my Second Reading speech last week, we are already lagging behind our European counterparts on green finance, as they are forging ahead with sovereign bond funds and mandatory climate disclosure laws. Our new clause would ensure that the Government were held accountable for making progress on reducing emissions, without using Brexit as an excuse to stall.
Joseph Johnson (Orpington) (Con)
I have arrived late to the debate, relatively speaking, having been detained by the trains in my previous role.
I wish briefly to address amendment 14, tabled by the hon. Member for Streatham (Chuka Umunna). We stand at a critical moment in our nation’s post-war history, and the decisions we take in the next few days and weeks will shape not just what happens over the next few months and years but our entire lifetimes. It is vital that we take these decisions in full possession of the facts and that we are answering the right questions. I believe amendment 14 will help us to do exactly that.
The Government are attempting to frame the choice before us in a binary way: the Prime Minister’s deal or no deal at all, which is effectively vassalage as rule takers on the one hand, or chaos and disruption on the other. As I said in my resignation letter last week, I believe that to present the country with this narrow choice represents the single greatest failure of British statecraft since the Suez crisis in the 1950s, for neither choice is in the national interest. Amendment 14 rightly seeks to expose this for what it is and will make clear everything to full public scrutiny. Both options—deal and no deal—are significantly worse for the UK than our present arrangements, and the amendment will make that clear by requiring the Government to be transparent.
Any serious appraisal of a major policy change needs to measure the costs and benefits against a clear economic baseline. Indeed, the Green Book—the Treasury manual on how to appraise policies, programmes and projects—states clearly that the Government’s preferred course of action must always be assessed against a “do nothing, business as usual” benchmark. If the business as usual option—in this case, staying in the EU—were not to be included in any such appraisal, the process would be contrary to the Government’s own manual, in addition to being clearly below the standard applied in any well-run business.
I am worried and concerned that it appears to have taken an amendment that the Government would have been in no position to overturn to secure their commitment that this full appraisal will eventually be published in time for it to be fully considered by Members of this House before the meaningful vote. Members need to know detailed information about this appraisal. We need to know the impact, region by region and sector by sector, because the impact, as hon. Members have made clear, will vary sharply around the country. We also need to know which groups in society will suffer the most, relative to other courses of action available to us as a country. I would be grateful if the Minister, in his winding-up speech, could confirm that that will form part of the appraisal that the Government publish and that the OBR will provide an independent assessment of the Government’s appraisal.
If we have learned anything from the chaos of the past 30 months, it is that facts are sacred. This debate has been characterised by falsehoods and misinformation from day one. It is extraordinary that we have now had to force the Government, at this relatively late stage, to publish the vital information necessary for an informed public debate. Some may say that this horse has long bolted, but I say it is better late than never. I believe that amendment 14 will go some way to righting this wrong.
Given that the reality of Brexit has proved to be so far from what was once promised during the campaign, the democratic thing to do is not just to accept amendment 14, as my hon. Friend the Minister has done, and to publish the like-for-like economic analysis showing how costly this Brexit will be, but to give the public the final say about whether they really want to proceed on this hopeless basis.
Chuka Umunna (Streatham) (Lab)
It is a pleasure to follow the hon. Member for Orpington (Joseph Johnson), who kindly spoke in favour of amendment 14. The amendment is in my name and in those of the right hon. Member for Broxtowe (Anna Soubry) and 70 other Members from all parts of the House. I want to take this opportunity to thank all the Members who have supported this amendment.
As the Minister said, what we were seeking to do with this amendment to clause 89—as he says, the clause allows the Government to make amendments to UK tax law—is to ensure that this House is provided with all the information needed for it to come to an informed decision. The Prime Minister made a very important admission last week, both outside No. 10 and in this House, where she moved on from the falsehood that has been peddled by too many, which is that this House has only two choices: the withdrawal agreement that has been presented by the Government, or leaving without an agreement at all. She moved on from that to the very clear choice that we now know faces this country: no Brexit, no deal or the agreement that the Government are putting forward. As may already have been said in this debate, this is arguably the biggest decision that this House will be making since the second world war, and it is absolutely vital that we are provided with the requisite data in order to come to an informed decision.
For the benefit of the record, our amendment seeks to make the exercise of the powers sought in clause 89, which the Minister mentioned, subject to the publication of a proper economic impact assessment of, and comparison between, each of the three scenarios the Prime Minister has set out before any meaningful vote on the withdrawal agreement takes place under the provisions of the European Union (Withdrawal) Act 2018. It is true, as the Minister said, that this Bill is likely to become an Act after the meaningful vote, but the amendment we have tabled is worded in such a way that its provisions will need to have been complied with before the meaningful vote in order for the powers under clause 89—to keep the tax system running in the event of no deal—to be usable.
I want very quickly to explain why we felt it was necessary to table this amendment and to deal with the three principal objections, which have been made in the House before, standing in the way of providing the information that this House needs to make a decision.
Kevin Hollinrake
I think it was Mark Twain who first said, “You should never make predictions, particularly about the future”. The hon. Gentleman refers to these forecasts as data, but does he accept that they are not data? They would simply be predictions, and as predictions they are inherently unreliable because they cannot take into account the reaction of business to the different scenarios we may be in. Does he accept that they are simply a forecast and cannot be relied on as facts?
Chuka Umunna
The hon. Gentleman intervened at precisely the moment when I was about to deal with that point, which is one of the three objections that are raised to our being provided with this important information. I will go through each of them, and I will address his point.
The first argument that is usually put up as to why the House should not be provided with the relevant economic impact assessments, which the Government are producing internally in any event, is that publishing that analysis would undermine the ongoing negotiations. That is clearly ridiculous. The leaking of the cross-Whitehall economic impact assessments by BuzzFeed in January had no obvious impact on the Government’s negotiating position vis-à-vis the European Commission, and frankly it is not as if those on the other side of the negotiating table will not have access to similar economic forecasts and models so that they can come to similar conclusions.
Luke Graham (Ochil and South Perthshire) (Con)
The hon. Gentleman talks about statistics. Does he not agree with me that many Members—this is shared across the House—use statistics as a drunk man uses a lamppost: for support, rather than illumination? Will he join me in trying to strengthen the Office for Budget Responsibility, so it can have more resources and ensure the statistics presented to the House are objectively verified?
Chuka Umunna
I have to say that when I gave way to the hon. Gentleman I did not imagine I would actually end up agreeing with what he said. He pre-empts my final point, which is that I understand the general worry about the accuracy of official forecasts. The bottom line is that we are never going to get forecasts that are 100% accurate, but we have to work with a certain number of assumptions to make policy, as I am sure he will discover if he has the privilege of serving in government.
On the point he makes about the OBR, I was quite careful in how I drafted the amendment. Its powers and capacity from a resource point of view are circumscribed, but there is no reason why we should not change the statutory remit of the OBR. At the very least, for those who worry about the accuracy of forecasts, we could see whether the OBR would be prepared to do an evaluation on the methodology and the techniques it uses to produce the forecasts by the Treasury.
Dr Sarah Wollaston (Totnes) (Con)
Does the hon. Gentleman agree that this issue relates not just to future forecasting? The Health and Social Care Committee has been hearing that hundreds of millions of pounds are already being spent by pharmaceutical companies on no-deal contingency planning—money that would be far better invested in our NHS.
Chuka Umunna
I could not agree more with the hon. Lady.
I will finish by saying this: the reason we tabled the amendment, and why I think so many colleagues on all sides of the House supported it, is because ultimately it is an assertion of parliamentary sovereignty. If the House were denied this really important information in order to come to a considered informed view, it would make a mockery of the argument that says the reason for withdrawing from the European Union is to assert parliamentary sovereignty.
I did not expect to be in this position at the beginning of today. I am grateful to the Minister for making this important concession and for making the promise, at the Dispatch Box, that we will get the economic impact assessments that we sought to secure through the amendment. Given the firm commitment he has made to the Committee, I will not be pressing the amendment to a vote. I would like to take this opportunity to thank all Members who supported it. Ultimately, we have done this because we think it is important that our constituents understand why we make the big decision that we are going to have to make in the next few weeks.
Justine Greening (Putney) (Con)
I was a signatory to amendment 14 because I think that good policy making needs good evidence at its heart. That is what the amendment sought to do. I think we all recognise that the debate on our future relationship with the European Union has often been characterised by facts that have turned out not to be facts, and, far too often, by lofty ideals and phrases that have had little meaning to back them up in practice. It is now time, as we come to possibly the most crucial parliamentary debate in 50 or 60 years, for Members to have the information they need to be able to take an informed decision—and, dare I say, for members of the public to have the information they need to be able to convey to their own Members of Parliament what they think about that information and why they want their MP to vote accordingly.
I welcome the statement the Minister made at the beginning of this debate, in which he set out his plans to provide more information to the House. Along with the rest of the Treasury, he will play a vital role in ensuring that we have an informed debate. I was one of those MPs who earlier this year went to the Reading Room—I actually went three times—to wade through the Treasury analysis. I would like a similar level of detail so that, again, Members are able to analyse the impact of the three different choices facing our country, as the Prime Minister has now set out: whether we have the deal that she proposed, whether we leave effectively with no deal, or whether we keep the existing deal with the European Union. I would like a level of analysis that includes a sectoral split in relation to the different impacts of the different deals on different sectors, as well as a regional and geographical split, so that we, as Members of Parliament representing very different communities in very different parts of the country, can really understand what the geographical impact of Brexit and the options will be.
I would like the analysis perhaps to go beyond what we originally had from the Treasury, so that we can understand what the impact on GDP might be for employment and jobs. There will be many MPs who do not believe that unemployment is a price worth paying for some of the options on the table. I believe that MPs and communities have a right to be informed about the risks to local jobs before casting their votes in favour of different options. Of course, we need to see, for all the options, the impact on public finances, both in the short and longer terms. I know that the Minister has in mind a period of 15 years for forecasting. I think that that is absolutely necessary for us to see not just the immediate shorter-term effect, but the medium and longer-term structural impacts of any route forward on our economy.
Kevin Hollinrake
I know that my right hon. Friend is in favour of a people’s vote that would have three different options—deal, no deal, or remain—but as she will concede, it was difficult enough to explain the different implications to people in the first referendum, even with a binary choice, and there were a lot of different opinions about those implications. How easy does she think it will be to explain what the outcomes and implications of all those three different options might be?
Justine Greening
I have no doubt that at the last election, at which my hon. Friend was elected, there were many different candidates on his ballot paper, and I do not think that his constituents were prevented from making the very fine choice they made. They were quite capable of working their way through the different options. This House has MPs representing very different parties and communities, and again, the electorate have been perfectly capable of working their way through what, as we all know, are often very lengthy and different party manifestos. Like any election, this is a choice about the future. There are different choices, just like in any election, and we should not limit the choices to two just for the sake of it. Arguments can be made for having a two-choice referendum, but saying that it is too complicated for the British public is not one that holds in practice. This is a British public who regularly choose between many different alternatives and indeed, in some elections, are sophisticated enough to vote tactically to get the outcome that they want.
My proposal, as my hon. Friend may be aware, is that people have not just one but two other choices. That will enable them to pick their own compromise, because it is clear to me that this House will not be able to reach a compromise and will just vote against all the different paths. I have no doubt that we will come back to that debate and I very much respect the different views that people have in this House. This is an important debate and we need to get a route forward. I simply reflect on the fact that my view remains as it was back in July. Regrettably perhaps, this House is gridlocked, and my advice now, as it was back then, is that, rather than ignoring that fact, we have to confront it as a Parliament, however difficult that is. We need to make a proposal on how to get through it, so that ideally, we do not reach that moment of crisis when we have seen every single option ahead of us on Brexit voted down.
I was quite surprised, when the Treasury did its previous impact assessment, that more MPs did not go to the Reading Room to look at it. As I understand it, about 60 MPs out of 650 booked themselves time to look through the analysis. It is crucial that MPs look at it. I thought it was important to do so, but clearly if MPs find it hard to go to the Treasury, the Treasury must go to MPs. I would very much recommend that that analysis be sent out to every Member and, if he can, that the Minister finally sets out what he means by publishing analysis “in good time”. If Members have parliamentary questions to submit, clearly it is important that the House should have time to scrutinise it all properly.
Kirsty Blackman
I rise to speak in favour of SNP amendments 7 to 10 and new clauses 10 and 11. I would also like to mention amendments 14, 15, 22, 20 and 2 and new clause 17, all of which we would be comfortable supporting, if any of them are pushed to the vote.
There has been a lengthy discussion across the Committee on trade deals. People are confusing free trade agreements and trade deals. It is perfectly possible to make arrangements that improve the flow of trade without signing an FTA; they are two very separate things. It is not understood widely enough that any trade agreement between countries involves compromise. Whatever is signed up to between, let’s say, the UK and the USA will involve the UK having to give some things away as well as gaining something.
The consultation on trade deals looked at trade deals with New Zealand and Australia, with the comprehensive and progressive agreement for trans-pacific partnership, and with the US. However, despite the fact that UK Government Members have talked about how important our trade is with countries such as South Korea and how fast it has grown, the Government have not consulted on that and they did not do so because we have those trade deals already, as a member of the EU. That is why our trade has grown so quickly with South Korea.
Thank you for your indulgence, Dame Rosie. I will move now to the actual subject of the debate. Our amendment 7 asks that clause 89 be subject to the affirmative resolution procedure. I appreciate that the Minister has put a list in the Library, and I will take a look at the list of tax changes he proposes to make under the clause, but I am on the Committee that is sifting the statutory instruments the Government are bringing forward, and some of those SIs that the Government think should be taken under the negative procedure should never have been so proposed. Some are fairly dramatic changes to the law—to powers or new institutions, for example—and yet are being put to the statutory instrument sifting Committee as negative instruments.
I hope that the Minister will forgive me, but I do not trust the Government to introduce only measures in the category that we believe should be subject to the negative procedure. I will look carefully at that list, but I will still press amendment 7, because, given my experience of Ministers, I do not yet have the level of comfort that I need.
Robert Jenrick
I hope that in due course the hon. Lady will have an opportunity to read the letter that is in the Library and see that these are truly minor technical amendments, changing, for example, a reference to the EU to a reference to the EU and the UK, and a reference to euros to a reference to pounds sterling. I hope that, in due course, she will be comfortable with those minor technical changes.
Kirsty Blackman
As I have said, I will definitely read the letter. However, I draw the Minister’s attention to the House of Lords Committee that met, I understand, on 17 November—or possibly not, as that was at the weekend, but very recently—to discuss the Finance Bill 2019. Someone drew my attention to an article by Wendy Bradley, which talks about HMRC’s powers and about power creep. Wendy Brady says that
“it is incumbent on Parliament to determine whether the powers it has given HMRC are sufficient and being exercised correctly”.
That, in my view, is important in relation not just to HMRC, but to the powers of the Treasury and the powers of Ministers. I think it important for Parliament to consider what delegated authority we are handing over, whether to the Minister, to the Treasury, to the Chancellor, or to HMRC directly. As I have said before, the Government do not adequately review these matters, publicise those reviews and repeat them regularly. It is important to have a handle on this, especially now, when so much delegated authority is being given to various institutions. It is important for someone to have an idea of how much power has been taken away from Parliament and ceded to those institutions and for there to be a regular review of whether it is still necessary for it to be in their hands.
Let me now say something about the release of the analysis and the changes that the Minister has said he will make. I praise the hon. Member for Streatham (Chuka Umunna) for his work and his amendment and for creating the real change that we have seen in the Government’s position today. It is important for us to be able to support and trust that analysis—to believe that it is accurate. Mention of the OBR was positive in that regard, because people trust that the OBR is an impartial observer of these matters.
The hon. Member for Ochil and South Perthshire (Luke Graham) initiated a debate in Westminster Hall about the OBR’s remit, and I found it incredibly interesting. I learnt a huge amount about the workings of other organisations around the world. We do not have an organisation that reviews Government policy impartially across the board because the OBR’s remit is so tight, being confined to scrutiny of budgetary matters. I was pleased to support the hon. Gentleman that day. Widening the OBR’s remit would be extremely useful, because, as I have said, people out there trust the OBR to get this right.
A status quo baseline against which all the options should be compared is important, and I am pleased that the Minister referred to it. What was said about whether the analysis will be produced in good time was also important, especially given the lack of time that we had to scrutinise the Bill and the short period during which it was in our hands before we had to talk about it on Second Reading. It was only published on the Wednesday, and then we had to stand up and talk about it on the Monday. Let me say again that if the Government want us to trust, they need to gain that trust, and they must therefore produce legislation in what is actually good time, rather than what they say is good time.
Obviously, everything in the Bill is a prediction. Everything in the Red Book is a prediction for future years. Everything that the Government predict, in terms of their tax take for the changes to entrepreneurs relief or anything else in the Red Book, is a prediction. We have to work on that basis, but we must have the best possible predictions, and, as I have said, they must be looked at by an impartial observer so that we can be absolutely sure that they are as close to accurate—or as close to a best guess—as they can possibly be.
Jonathan Edwards
A number of Members have talked about the upcoming votes being the most important votes that we will ever undertake as Members of Parliament. Does the hon. Lady therefore agree that it is vital that the independent assessment should be published in the public domain, so that our constituents can understand the decisions that we are making? We should not have to have one of those Reading Room scenarios, as we did with previous assessments.
Kirsty Blackman
I agree. The Reading Room provided for the cross-Whitehall analysis was not fit for purpose, in that I could not go there and mull over the papers in the way that I would normally do. Generally, if I am presented with a Finance Bill, for example, I will sit at home and read it. That is what I like to do on a Saturday night. I will sit at home and read these things. We have to be able to access any analysis that is published in a way that suits us, and releasing it publicly would be the best possible way to do this. Another reason for doing that is that the external stakeholders could provide their comments in the best possible way, so I entirely support the hon. Gentleman’s suggestion.
New clause 11 asks for a report on the consultations that have, or have not, been carried out in relation to the tax measures. As I said on Second Reading, not enough of the tax measures in the Bill were consulted on this year. I understand that there were more such consultations in previous years. If we do not want the Government to have to row back next year because they have screwed something up as a result of inadequate consultation, it will be important for these tax measures to be published and consulted on and for us to get the expert advice that we need from the stakeholders.
Clause 90 is just bizarre. I read it, and then I had to go back and read it again because I could not believe that a clause would give the Government the power to spend whatever they liked. It does not cap the spend on the emissions reduction trading scheme’s preparatory expenditure. I was genuinely confused about how the Government could propose that. The clause will give the Government carte blanche. Our amendment 9 and our new clause 10 ask for a Commons resolution and an expenditure review before that expenditure can take place. We think it reasonable—and I am sure the general public would think it reasonable—that if the Government want to spend money on something, they should tell us how much they intend to spend.
The Government are spending money to stand still. This is a cost, and the Government have to spend the money for things to be exactly the same after Brexit as they are today. It is a cost that we would not have if we were not leaving the European Union. The Minister talked about the estimates process. I am pleased that he is as interested and excited by the estimates process as I am. I talk on the estimates whenever I possibly can. There are two parts to the estimates process: one in February and the other in July. I am not sure whether this money counts as in-year spend or as part of next year’s spend. We might be able to discuss it in February, which would be great, because at least that would be before we leave the EU. However, if it is classed as next year’s expenditure, we might not be able to discuss it until July, by which point the money will have been spent.
Patrick Grady (Glasgow North) (SNP)
We can discuss this all we like during the estimates process, but does my hon. Friend agree that it is incredibly difficult to actually vote on any of this? Despite all the promises made when the English votes for English laws system was introduced, it really is impossible for Members of Parliament to have a say on specific aspects of Government spending through the estimates process.
Kirsty Blackman
That is absolutely the case. The Minister’s comments about the lack of ability to scrutinise spend in the Finance Bill were incredibly illuminating. The reality is that we cannot adequately scrutinise or amend spend anywhere. I was talking to some people about the Budget process and the Finance Bill in the last couple of weeks, and about how the two fit together. I explained that we discuss tax in the Finance Bill, but that we do not discuss spend until the estimates process. Some spending measures will come through, at which point we will sanction them. For example, if the immigration Bill comes forward, we would imagine that it would have some spend associated with it, and we will debate that spend at that time. But a huge proportion of the billions of pounds that the Government spend on a regular basis is only ever discussed during the departmental estimates, which we cannot amend or change. I do not understand how we can have a Parliament that is supposed to be so powerful and supposed to be taking back control when we do not have control over Government spend, which is surely fundamental to how the Government behave.
Grant Shapps
I rise briefly to address clause 89, which is on an amendment to tax legislation in consequence of EU withdrawal, and to make one specific comment to the Minister that I hope he will take on board and do something about.
I chair the all-party parliamentary group on general aviation, which has as its membership 177 Members from across this House and other place. There is a particular issue that I am very keen for the Minister to know about in relation to pilot training. According to Boeing, the world will need 790,000 more pilots in the next 20 years. The UK, with English as our language and with our history in aviation, should be in an absolutely key place to train new pilots, but there is a massive problem: in this country, people have to pay for that training themselves. It costs about £100,000, and then the Government charge £20,000 VAT on top of that. The all-party group has taken up this issue with the Chancellor of the Exchequer. He tells us that it is tracked into EU regulations and there is nothing that we can do about it during our time within the EU. However, I want to make an impassioned plea to the Minister to have a really good think about what we could do with regard to clause 89.
It is clear and obvious—one need only travel on an aircraft anywhere to realise this—that the pilots in this country, and indeed worldwide, but in this country generally, are nearly all male, nearly all middle-class and nearly all from backgrounds where families might say, “I’ll tell you what—we’ll remortgage our home and let you go and spend £120,000 on learning to be a commercial pilot.” That puts off too many people from too many hard-to-reach sections of society. That puts off a lot of people, particularly women, who we want to persuade into these very well-paid STEM—science, technology, engineering and maths—jobs, which really should be the future for this country.
Sir Roger Gale (North Thanet) (Con)
The ambassador for the all-party group is Carol Vorderman, who has probably done more than any other single living person to try to encourage young women to take up aviation as a profession, but the young women she is trying to persuade are hitting the buffers all the time because they are coming up against this cost. That is driving our trainee pilots overseas to places like Spain, which does not have the VAT, when we ought to be training them at home. Should this not be taken on board by the Treasury?
Grant Shapps
My hon. Friend is absolutely right. This is a crazy situation. We are driving pilot training out of the UK, but English is the language of the air and should be our natural advantage. Our ambassador for the all-party group Carol Vorderman regularly reminds us that she wanted to go into the Air Force but was rejected, not through any lack of knowledge, STEM education or mathematical ability, but because she was a woman. It cannot be right that our Government are not able to address this.
I am very hopeful that the Minister will take on board clause 89, which will allow the amendment to tax legislation in consequence of leaving the EU, to do what other EU countries have somehow already managed to do—such as Spain, which does not charge VAT on pilot training. This gives us an enormous opportunity as a country to take a big chunk out of the global pilot training market, which should be, in effect, a massive export for the UK.
While we are on the VAT issue, I have one other point. This country has the ability to lead aviation into a much quieter, cleaner and more environmentally friendly future. The future of aviation eventually is to have electricity in planes—electric planes—but that will not happen without having the same dedication and enthusiasm that this Government and the previous one showed towards electric vehicles transferred to electric aviation.
This is a revolution in aviation that is coming, but it would be very encouraging if we saw the UK lead the way, and, again, this is in no small part down to how VAT is treated, in terms of not only pilot training but the inquiry, investigation, research and development that goes into electric aircraft.
The all-party group is starting a STEM aviation working group headed by a fantastic woman called Karen Spencer from Harlow College. It has the aviation STEM college at Stansted airport, where it is training 294 youngsters this year and over 500 young people next year in STEM aviation qualifications. I encourage the Minister to go and see it for himself. I believe that if we work together on this we can make aviation a much more inclusive profession, and it starts with clause 89 and what can be done under these amendments to tax legislation in consequence of EU withdrawal.
Vicky Ford
I too wish to speak about clause 89, which allows the Treasury to make minor amendments to tax legislation after we have left the EU.
EU tax issues are often extremely controversial. I think back to EU tax decisions I have seen in the past, such as the decision not to introduce a financial transaction tax, which this side of the House always strongly objected to but the other side would strongly have proposed at a European level. We objected to it because we felt it would have unintended economic consequences. Then there were the changes to the VAT MOSS—mini one-stop shop—situation for digital tax for small businesses. These decisions were taken without deep consultation or deep impact assessments, but were then found to have a huge number of unintended consequences. There were also the controversial issues to do with VAT on tampon taxes that sometimes came back.
Anneliese Dodds
It is important that Members are not misled, and it is important to say for the purposes of accuracy that a number of EU countries are looking to move forward with a financial transactions tax through the open method of co-ordination that I know the hon. Lady is very well aware of through her expert knowledge of the EU.
Vicky Ford
That brings me back to the point I was making: EU taxation matters can be hugely controversial, partly because decisions affecting tax at an EU level are often unanimous decisions, and therefore it would be very difficult for one member state to change them if a decision has gone wrong. Because they are so controversial it is worth thinking about the delegation of powers given to Ministers here. Indeed, during my time looking at European matters, I long argued for the concept of better regulation before decisions were made. People should be consulted and impact assessments published. Only after the assessments have been made public and the views of stakeholders who might be affected taken into consideration should decisions be made.
That is why I sit on ESIC, the European Statutory Instruments Committee, to which the hon. Member for Aberdeen North (Kirsty Blackman) referred. It was a Committee that I argued we needed. She suggested that when it decides to change a negative instrument to an affirmative instrument, that is because of some controversy with the Government’s decision, but by establishing that Committee, under the excellent chairmanship of my right hon. Friend the Member for Derbyshire Dales (Sir Patrick McLoughlin), we can ensure extra transparency in these complex decisions. I genuinely believe that we should think carefully before giving delegated powers to Ministers. However, clause 89 is very much about making minor decisions. It is tightly worded, and I do not believe that the amendments tabled by Opposition Members are necessary, as they would cause over-complexity. Amendments under clause 89 would be necessary, were we to leave the EU without a deal.
I am absolutely convinced that leaving the EU without a deal is not in the interests of this country, and I am glad to hear Ministers confirm that. However, I would also be glad to hear Ministers confirm that they will give Members a great deal more detail about the impact assessments of a no-deal scenario and a deal scenario, and also how that compares with remaining a member of the European Union, before our final vote on the withdrawal agreement, so that we can all be fully apprised of the impacts and make our decisions wisely.
Kevin Hollinrake
I want to speak first to amendment 14. The hon. Member for Streatham (Chuka Umunna) is no longer in his place, but he said that all the choices before us were the worst possible choices and worse than the deal that we have today. I was certainly not someone who campaigned to leave the European Union—I have my reservations about our departure from an institution of which we have been a member for effectively 45 years—but we should not ignore the opportunities that lie ahead of us.
I do not look at these things through rose-tinted spectacles, but many years ago, following protests by those concerned about the impact on their livelihoods of imports from India by the East India Company and the successful lobbying of their Members of Parliament, legislation was introduced from 1700 called the Calico Acts, which banned all imports of calico—rough-cotton cloth—from India. That gave rise to the industrial revolution, because at that point we could not produce enough calico, so Watt linked his steam engine to Hargreaves’s spinning jenny and mass production resulted.
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
The hon. Gentleman mentions the historical Calico Act. He does know that it also impoverished the people of India, rather than just creating the industrial revolution.
Kevin Hollinrake
The hon. Gentleman may well be aware of that fact, but that is not the point that I was making. I am not keen to impoverish people from any nation; the point is that what happened gave rise to a huge opportunity. Amendment 14 looks at one side of the equation, as if we can rely on a Treasury forecast simply as fact. It does not take into account the other side of the equation, which is that business will respond to the future framework that it is part of. There are concerns about the future, but there are also opportunities.
I want to talk mainly about clauses 68 to 78, which concern our carbon emissions. The hon. Member for Stroud (Dr Drew) seemed to imply that we were not succeeding at reducing our carbon emissions, but actually the UK is fifth in the world in the climate change performance index, a German-based index published every year by Germanwatch. We are ahead of many countries that people might think would be ahead of us, including France, Italy and Germany. I cannot say that our climate change credentials are second to none, but they are second to those of only four other countries. Every other country that we might mention—other than, I think, Norway, Sweden and Lithuania—is behind us on that performance index. We are performing admirably in carbon emissions, but we need the right mechanisms to enable us to continue that success. The carbon emissions tax that the Exchequer Secretary to the Treasury described earlier is a good framework to ensure that the carbon price is right and business has stability in the undesirable event of a no-deal situation.
Vicky Ford
Does my hon. Friend agree that stability in the carbon pricing regime is as important as any other area of business legislation? That is why it is important that we deal with the devil in the detail in the Bill.
Kevin Hollinrake
My hon. Friend makes a good point. Above all, business is looking for stability. It is absolutely right that in the worst-case scenario, in which we end up with no deal, we have a stable framework to enable us to manage our future trading relationship with the European Union.
Vicky Ford
Does my hon. Friend agree that although the clause is helpful in giving some stability, it does not give anything like the level of stability that would be delivered by a negotiated exit?
Kevin Hollinrake
It is hugely important that we have the negotiated exit that we all want. No deal is the worst possible option, and it is not where we want to go. Nevertheless, we cannot take no deal off the table.
I return to my key point about our future energy emissions and ensuring that we reduce our carbon emissions wherever we can. We are world leaders in moving our electricity production away from coal, which we have committed to phasing out by 2025, and into gas.
James Heappey (Wells) (Con)
My hon. Friend has done an awful lot of research into the energy mix that we might require to achieve those targets. Does he agree that carbon pricing sends an important signal to ensure that the phase-out of coal is delivered on time and that other technologies—such as gas and renewables—come online to enable us to hit those targets?
Kevin Hollinrake
My hon. Friend is absolutely right. He has a great deal of knowledge in this area, too, and I absolutely defer to it. This discussion about the most energy-efficient way to produce our electricity has run throughout my parliamentary career. I know that my hon. Friend is not a big fan of shale gas, but there are petroleum exploration and development licences right across my constituency. Over the last three years I have not had a frack-free day; in fact, I spent some time out in Pennsylvania looking at shale gas exploration out there. The US has used shale gas to excellent effect in reducing its carbon emissions.
James Heappey
My hon. Friend is very kind to give way a second time. The issue is not necessarily where the gas comes from, but the fact that it is an important part of our future generation capacity and it is, for now, indispensable to the delivery of heat. Whether it is delivered onshore or elsewhere is not necessarily the important part of that debate.
Kevin Hollinrake
It is interesting; my hon. Friend says that the point is not where gas comes from, but imported gas has a larger carbon footprint. That is particularly true if it is put in large ships that go from Qatar to the UK, in which case its temperature has to be reduced to about minus 156 °C in order to liquefy it. If we produce gas domestically, its carbon footprint is much smaller, and that is why shale gas makes sense. As he knows, we import about half our gas, but by 2030 we will be importing about 70% of it. It makes sense to produce something that we would otherwise have to import. On that point, I am happy to conclude, and I am grateful for the opportunity to speak.
Question put and agreed to.
Clause 68 accordingly ordered to stand part of the Bill.
Clauses 69 to 78 ordered to stand part of the Bill.
Clause 89
Minor Amendments in consequence of EU withdrawal
Amendment proposed: 22, page 66, line 30, at end insert—
‘(1A) The Chancellor of the Exchequer must, no later than a week after the passing of this Act and before exercising the power in subsection (1), lay before the House of Commons a review of the following matters—
(a) the fiscal and economic effects of the exercise of those powers and of the outcome of negotiations for the United Kingdom’s withdrawal from the European Union giving rise to their exercise;
(b) a comparison of those fiscal and economic effects with the effects if a negotiated withdrawal agreement and a framework for a future relationship with the EU had been agreed to;
(c) any differences in the exercise of those powers in respect of—
(i) Great Britain, and
(ii) Northern Ireland;
(d) any differential effects in relation to the matters specified in paragraphs (a) and (b) in relation between—
(i) Great Britain, and
(ii) Northern Ireland.”—(Jonathan Reynolds.)
Question put, That the amendment be made.
Finance (No. 3) Bill
Tuesday 20th November 2018
(6 years ago)
Commons ChamberRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 20 November 2018 - (20 Nov 2018)
The Exchequer Secretary to the Treasury (Robert Jenrick)
I beg to move amendment 16, page 44, line 23, leave out “1 October 2019” and insert “1 April 2019”.
This amendment provides for the increase in the rate of remote gaming duty to take effect from 1 April 2019 instead of 1 October 2019.
The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)
With this it will be convenient to discuss the following:
Amendment 11, page 44, line 23, leave out “1 October 2019” and insert “the prescribed date”.
Government amendment 17.
Amendment 12, page 44, line 25, leave out “1 October 2019” and insert “the prescribed date”.
Amendment 13, page 44, line 32, at end insert—
“(4) In this section, ‘the prescribed date’ means the date prescribed in regulations made by statutory instrument by the Secretary of State
(5) The Secretary of State may not make regulations under subsection (4)—
(a) to prescribe a date before 1 October 2019, and
(b) unless regulations under section 236 of the Gambling Act 2005 have been made that amend the definition of sub-category B2 gaming machines so as to define such machines as having a maximum charge for use of no more than £2 with effect from a date no later than 1 April 2019.
(6) In this section, “sub-category B2 gaming machines” has the meaning given in regulation 5(5) of the Categories of Gaming Machine Regulations 2007/2158.”
Clause stand part.
Clause 62 stand part.
That schedule 18 be the Eighteenth schedule to the Bill.
New clause 12—Review of public health effects of gaming provisions—
“(1) The Chancellor of the Exchequer must review the public health effects of the provisions of section 61 of and Schedule 18 to this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the effects of those provisions in reducing the negative public health effects of gambling, and
(b) the implications for the public finances of the public health effects of—
(i) those provisions,
(ii) the operation of the law relating to remote gaming duty and gaming duty if those provisions were not given effect.”
This new clause would require a review of the public health effects of gaming provisions.
New clause 13—Report on consultation on certain provisions of this Act (No. 3)—
“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).
(2) Those provisions are—
(a) section 61, and
(b) Schedule 18.
(3) A report under this section must specify in respect of each provision listed in subsection (2)—
(a) whether a version of the provision was published in draft,
(b) if so, whether changes were made as a result of consultation on the draft,
(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”
This new clause would require a report on the consultation undertaken on certain provisions of this Act – alongside new clauses 9, 11 and 15.
New clause 16—Review of remote gambling duty—
“(1) The Treasury shall undertake a review of the increase in the rate of remote gambling duty introduced in section (Remote gambling duty (rate)) of this Act.
(2) The review shall consider, in particular, the effects of the rate increase on—
(a) the public revenue,
(b) betting shops, and
(c) gambling related harm.
(3) The Treasury review must include independent advice on the feasibility and impact of bringing forward the date of the increase in remote gaming duty to 1 April 2019.
(4) The Treasury review of the effects of the rate increase in remote gambling duty under subsections (2) and (3) must also take into account any effects of reducing to £2 the maximum stake on B2 machine games with effect from 1 April 2019.
(5) The Chancellor of the Exchequer must lay a copy of a report of the review under this section before the House of Commons no later than 28 days after this Act is passed.”
This new clause requires the Treasury to review the feasibility and impact of bringing forward from October 2019 the implementation of an increase in remote gambling duty, which is linked in paragraph 3.68 of the Budget 2018 Red Book to the implementation of a £2 maximum stake on B2 machine games (fixed-odds betting terminals).
Robert Jenrick
As you have just described, Dame Eleanor, we begin today’s consideration of the Finance Bill with clauses 61 and 62 and schedule 18. The parts of the Bill that we are about to discuss concern rates of remote gaming duty and other gaming duty measures. Gambling policy more generally and its related legislation, such as the Gambling Act, are matters for the Department for Digital, Culture, Media and Sport and lie outside the scope of a Finance Bill, but I want to explain both the fiscal measures in this Bill and how they interact with wider important matters, such as fixed-odds betting terminals.
Turning briefly to clause 62 and schedule 18, which deal with changes to gambling duty accounting periods, this Government are committed to reducing administrative burdens on businesses and to making the tax system more effective, efficient and simpler. The changes will bring gaming duty paid by land-based casinos in line with other gambling duties. They will allow casinos to roll forward losses and will remove the requirement to pay duty on account, reducing administration for businesses and for Her Majesty’s Revenue and Customs. The changes are expected to have a negligible impact on the tax take from casinos, which will continue to be subject to a tax structure that ensures that the most successful casinos pay up to 50% of their profit to support public services. That take will total £250 million to the Exchequer in the current financial year.
Sir Peter Bottomley (Worthing West) (Con)
I hope to speak later if possible, but this is a rare example of when parliamentary arithmetic has got the Government to do something that will be good for them and good for the population. I pay tribute to the hon. Member for Swansea East (Carolyn Harris), the chair of the all-party parliamentary group on fixed odds betting terminals, who has led a cross-party group over the years—this is not just about those who have come in lately—to ensure that the arguments are right, as well as the parliamentary arithmetic.
Robert Jenrick
I praise my hon. Friend for his role in this matter, and I will come in due course to the hon. Member for Swansea East and other colleagues who have played a decisive role in these events.
In deciding on a date for implementation, the Government were obliged to consider not just those who would have been harmed by FOBTs, but the impact on wider society—the tens of thousands whose livelihoods would be at risk following the new stake. Stakeholder evidence varied considerably, but it was widely acknowledged that there would be a significant impact, whether as a result of the cap in itself or because the decision to change the cap would bring forward wider changes that were already likely to occur in a sector undergoing a great deal of change as a result of new technology. The Government have not wavered from their commitment to set a £2 stake and considered the best way to mitigate the negative impacts of the policy on the individuals and their employers, giving them time to prepare for the impact if possible. Accordingly, my right hon. Friend the Secretary of State for Digital, Culture, Media and Sport published a written statement confirming that a £2 maximum stake will be implemented from April 2019, and we have tabled Government amendment 16 to reflect that.
I will now briefly describe the events leading up to this point. When we announced the decision to reduce the stake, implementation in April 2020 was a date that I discussed with the hon. Member for Swansea East when she came to the Treasury in late spring to talk about the matter. A decision was then taken by the Department for Digital, Culture, Media and Sport to consult informally with stakeholders and it was then proposed in the Budget to bring forward the date to October 2019. The decision was, I believe, intended in good faith to represent a balance between expeditiously bringing an end to the harm caused by FOBTs and enabling those working in the sector to prepare for the implications for them. None the less, it became abundantly clear that a large number of colleagues disagreed and wished to see the stake change implemented sooner, which is exactly what we have done.
I am grateful for the counsel and the campaigning zeal of a number of Members on both sides of the Chamber, including my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith), the hon. Member for Inverclyde (Ronnie Cowan) and, of course, the hon. Member for Swansea East, whom I respect and whom I have enjoyed working alongside throughout this process.
I admire my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch), who was an outstanding Sports Minister and is a great Member of Parliament. She clearly played a decisive role in the Government’s decision to reduce the stake in the first place and, indeed, to do so expeditiously in April 2019. I have always believed that, in politics as in life, all we have is our reputation, and she chose her principled belief that this change must be implemented as soon as possible over her role in government. I respect that, and I am sure Members on both sides of the Committee do so, too.
Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)
I fully accept what the Minister says about the reputation of my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch), but does he agree that these things should not have necessitated her departure when she was doing such a good job? I do not expect the Minister to express an opinion, just that it would have been better otherwise.
Robert Jenrick
I clearly hear my right hon. Friend’s point, and I have fairly set out the chain of events that led to this moment. As I said, I enormously respect my hon. Friend the Member for Chatham and Aylesford and her decision. When I was first elected to Parliament, an elderly constituent sent me a quote by John Quincy Adams:
“Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost.”
On this occasion, of course, my hon. Friend is not alone, and I am grateful for her work in this area.
Government amendment 17 complements Government amendment 16, both of which relate to amendments 12 and 13. As I have just set out, the Government recognise the strong will of the House that the implementation date for the new maximum stake for fixed odds betting terminals be brought forward to April 2019. The Treasury has been clear throughout the process that we do not seek to use the issue of FOBTs to increase Exchequer revenues, but we do have a responsibility, which I hope Members on both sides of the Committee will recognise, to protect the public finances and to ensure that we have the means to fund our public services. The cost of eliminating the damage caused by FOBTs must not be paid for by our having fewer doctors, fewer teachers and fewer people working in mental healthcare.
Paul Masterton (East Renfrewshire) (Con)
I welcome this change. In my constituency there are betting shops sandwiched between pubs and chemists giving out substitution treatments. Does the Minister not agree that the savings to the public purse from preventing people from falling into problematic debt, and preventing highly addicted people from falling into other troubles and needing to rely on the NHS and other services, will be far greater than the tax received from these gambling machines?
Robert Jenrick
My hon. Friend makes an important point that has been raised by many others and that I am sure was a significant contributor to the decision of the Department for Digital, Culture, Media and Sport to take this action.
The point I am making is a separate one; that in making the decision to reduce the cap on FOBTs, we want to ensure that the Exchequer can protect its revenues so it can continue to fund public services. To do so, clause 61 increases the rate of remote gaming duty to 21% from 15%, and amendment 17 complements amendment 16 by ensuring that both changes are implemented at the same time in April 2019.
Throughout this process the Treasury has been clear that we want to raise only a commensurate sum of money to protect public services, and that we want to ensure that both the stake change and the change in taxation occur at the same time. That is exactly what we intend to do. This increase applies to anyone who offers online games of chance to UK players, including online roulette, online poker and online slots. This change should ensure that we take decisive action on FOBTs without having to cut services or raise taxes on those outside the gambling sector. To recognise this, I ask the Committee not to press amendments 12 and 13 and to support Government amendment 17.
New clause 12 would require the Chancellor to prepare a report describing the public health effects of the gambling clauses in this Finance Bill, for publication before the House within six months of Royal Assent. The Government take the impact of gambling on individuals’ health seriously, which is why we have listened to Members on both sides of the House and taken the action we have on FOBTs. This summer the Gambling Commission published a well-received paper on how to measure gambling-related harms, setting out how it intends to move forward in such a large and vital area of analysis. I hope that colleagues on both sides of the Committee agree that the Gambling Commission should be left to carry out its important work in this area without the Treasury attempting to carry out its own competing analysis on the very limited effect on public health of a change in accounting periods, which is what the new clause would bring into effect.
Graham P. Jones (Hyndburn) (Lab)
I welcome that assessment, but does the Minister accept that the assessment needs to look at the various forms of gambling and that it also needs to consider the amount of gambling advertising presented to people on our television screens?
Robert Jenrick
As a parent and as a citizen I am concerned, like the hon. Gentleman is, about the amount of gambling advertising on television and elsewhere, but that is not a matter for the Finance Bill; it is a matter for the Department for Digital, Culture, Media and Sport and for the Gambling Commission.
As I have just described, new clause 12 would achieve only the Treasury producing a very limited analysis of the public health impact of the change in accounting period set out in the Finance Bill. I therefore urge the Committee not to press new clause 12.
New clause 13 proposes a report on the consultation undertaken on the detail of clause 61 on remote gaming duty and of schedule 18 on gaming duty. Although we have had much debate on the content and implications of clause 61, it is in fact very simple: it is a rate change, and the Government would not normally consult on such a change. I reassure the Committee that we have gone over and above the usual convention in such cases. The increase was originally proposed in May 2018, and my officials, alongside the Department for Digital, Culture, Media and Sport, have since worked with interested parties on its detail. We believe we are in a good position.
I fully reassure the Committee that the change made by clause 61 was consulted on last year. In addition, schedule 18 was published as a clause in the draft Finance Bill in July 2018. It has therefore been subject to scrutiny and comment by stakeholders ever since. I hope my comments will reassure the Committee that there is no need for a further report into our consultation on these issues, and I therefore ask that new clause 13 not be pressed.
New clause 16 returns to an issue with which I began this debate. The new clause asks for a review of the feasibility of bringing forward the rise in remote gaming duty in clause 61 to April 2019. As I have tried to reassure right hon. and hon. Members, we have already covered these matters—they were considered before my right hon. Friend the Chancellor tabled amendments 16 and 17, which will bring forward the date to April 2019—and I therefore respectfully ask that new clause 16 not be pressed.
I look forward to listening to the contributions of right hon. and hon. Members to this debate. The Government amendments to these clauses represent the action on FOBTs that the country demanded and for which Members on both sides of the House have campaigned assiduously over many years. The changes will now be delivered as expeditiously as possible and in a fiscally responsible manner that protects public services. I commend these changes to the Committee.
Clive Lewis (Norwich South) (Lab)
Well, where to begin? I can sum up the Minister’s speech as, “Nothing to see here.”
Before I move on to the detail of this issue, I want to pay tribute to Members on both sides of the House who forced the Government to bring forward the FOBT stake reduction from October 2019 to April 2019, which will be implemented through the amendment before the Committee. Particular recognition goes to my hon. Friend the Member for Swansea East (Carolyn Harris), who is to be warmly congratulated on her tireless work for social justice, in all its incarnations, and to my hon. Friend the Member for West Bromwich East (Tom Watson), the shadow Secretary of State, who is not in the Chamber, but has spoken about this issue many times from the Dispatch Box.
Graham P. Jones
My hon. Friend is making a powerful point. If the gambling industry was so concerned about employees, perhaps it ought to have given consideration to the number of single-staffed bookmakers that have arisen because of FOBTs. We are talking about young and vulnerable female staff working late at night in the bookmaking industry. It is too late for the industry to complain about the staff now when it did not care about them in the first place. Does he share that view?
Clive Lewis
My hon. Friend makes his excellent point well, and I agree with it entirely.
Page 11 of that report describes what “at risk of closure” actually means. It means that once the £2 cap is implemented, just under half of those shops would make a net annual profit of £20,000 or less. Are we seriously to believe that a net profit of £20,000 a year is terminal? KPMG did not think so. The report concludes that these shops would not close, but would simply be “less profitable”. The threat was not to our constituents’ jobs, but to corporate profits. Can the Minister assure Members that the Treasury will never again seek to justify resisting evidence-based policy on the basis of secret reports and clandestine meetings?
By choosing to take such an approach, the Treasury ignored the recommendation in the May 2018 gambling review that the £2 limit should be adopted within nine to 12 months. Let us remember that that policy was designed to reduce the harm caused by gambling addiction. The evidence of harm associated with FOBTs is overwhelming, with that harm disproportionately felt by the poorest in our society. Put simply, there are twice as many betting shops in the poorest 55 boroughs of the UK as there are in the most affluent 115.
Even in narrow economic terms, viewing the delay as merely a reduction in tax income to the Exchequer makes little sense. As we have heard today, the social cost of addiction, crime and debt that accompanies the ever-increasing losses on FOBTs is estimated by the Centre for Economics and Business Research to cost the UK £1.5 billion a year. It has an impact on many aspects of social welfare, including employment, mental health and financial stability, so the awful human cost, about which we have heard so powerfully, is matched by an economic cost that we all bear as a society and as an economy as well. Perhaps the Minister would address whether the Government have factored into any of their fiscal calculations the prospect of alleviating the cost to public services, given a decline in gambling-related harm and crime?
Of course, the most important reason for an immediate stake reduction is a moral one—an issue of social justice that must be resolved. Lives are being destroyed, and this policy change is a milestone on our journey to tackle this harm. Labour Members are proud be part of taking that step forward, and we will keep striving to carry on making these changes until eventually we get to the bottom of what the gambling industry actually is: something that preys on people’s vulnerabilities. Labour Members recognise that quite clearly.
Mr Duncan Smith
I want to summarise some of the issues relating to the amendments standing in my name and those of many others, including, most importantly, my hon. Friends the Members for Swansea East (Carolyn Harris) and for Inverclyde (Ronnie Cowan)—they are hon. Friends in this case, although I am not sure they will want to be pursuing that one further. This genuinely was a very cross-party process. Interestingly, the list of names of Members who support the amendments tells us everything we need to know about the strength of feeling that existed in the House.
We accept the Government’s change, to which I shall come back in a moment, but it is worth reminding ourselves that this process has had a long gestation. I remember having conversations with my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) probably two years ago, at least—
Mr Duncan Smith
It was a long time ago, and even then we discussed the specific problems with fixed odds betting terminals, along with wider issues. There was this long process of gestation, and then the hon. Members for Swansea East and for Inverclyde got involved and the all-party group was formed. I congratulate them on managing to get things on to a much more even keel in respect of this being a cross-party process, in which I played a part.
We arrived at the point when we had finally persuaded the Government, with massive internal support from my hon. Friend the Member for Chatham and Aylesford, that it was necessary for us to make this change, given that these machines, although not alone in this, were peculiarly addictive. It was accepted that they led to a higher level of addiction and had dramatically changed the nature of betting shops. Years ago, when gambling was liberalised under a previous Government, I said, given my involvement in some of the studies, that I thought that was a mistake. When it comes to widening and liberalising gambling, the situation is not like in any other industry. It really is not just about jobs and businesses, because change involves people making decisions that are not about positive life outcomes. Thus, the situation needs to be treated separately. I remember the discussions about super-casinos, when I said that I was appalled by the idea that establishing a super-casino would somehow regenerate a town. I said, “It won’t regenerate the town. It will make it descend, and everything will then hinge around the behaviour of people in and around the massive casino.” That is by the by; liberalisation became the process.
I was really pleased when the Government finally agreed to reduce the stake to £2. My goodness, what a peculiar argument we had. We heard the Gambling Commission and the gambling industry asking many times why we would not go to £30 rather than £2. The slow extraction of teeth in this process was fascinating to behold. The worst bit for me and, I am sure, for my colleagues, was hearing the endless testimony about the families’ lives that had been blighted by this terrible addiction. Even though I was opposed to FOBTs, I had not been aware of the real human harm being caused, because one does not see it, but, as my hon. Friend the Member for Chatham and Aylesford knows, that was the real driver behind why we wanted to act. It was really quite moving to hear the stories at first hand and to see families’ dedication to never allowing others to get into such a situation.
I was really proud of my Government for making the decision and accepting that there was a need for change. We thought the process was done. I argued for making the change this October, because there was no point in hanging around. I thought that we did not need to worry about the gambling industry, because it would make whatever changes were necessary and it gets a lot of money anyway, so I was not that bothered about it. I remember the discussion about why we were not acting in October, and we reluctantly agreed that perhaps 1 April would give the industry time. The next thing we heard was that the date had gone back to 1 April 2020 —the following year—which was never agreed.
All of a sudden, the Government then said that they had agreed to make the change in October 2019, which they said was an advance of six months, and we said was a delay of six months. We established that the gambling industry would make well over a billion pounds during that six months. The real problem was why there was a delay, as it was clear that, as the hon. Member for Norwich South (Clive Lewis) said on behalf of the Opposition, the gambling report said nine to 12 months, and nine to 12 months from the date of the original decision took us to approximately April or May the next year. All that was part of the consideration. We had debates about why the date had gone back and, although I will not make a big thing about this, I did say to my right hon. and hon. Friends in government that they needed to put it back to 1 April. At the time of the Budget, their date was rejected.
Carolyn Harris (Swansea East) (Lab)
May I say what a pleasure it is to speak today, Dame Eleanor? I am delighted to say that the Members who tabled and put their names to the amendments and new clause will not press them to a vote because—in case anybody has not heard—the Government finally saw sense and backed down on the implementation date for the reduction of stakes on fixed odds betting terminals. [Hon. Members: “Hear, hear!”] Thank you.
I stand instead to make a point: the power of the Back Benchers cannot be ignored. This House is fortunate to have so many Members, on all Benches, who are prepared to put principle before both profits and politics. I pay tribute to the many colleagues in this place and the other, and I pay special tribute to the hon. Members for Inverclyde (Ronnie Cowan) and for Strangford (Jim Shannon), to the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), to the hon. Member for Worthing West (Sir Peter Bottomley) and to the wonderful hon. Member for Chatham and Aylesford (Tracey Crouch), whose principles led to her resignation. I thank them all for their support, dedication and downright determination to force the Government’s hand.
The result has been a long time coming, but this issue has demonstrated the very best of this House, where politicians of all persuasions came together, united in seeking to make sure that the Government were held to account for their reluctance to put people’s lives ahead of company profits. The Government had so many opportunities to do the right thing, but they seemed determined to pander to the whim of an industry set to make nearly £1 billion of profit in the six-month period between April and October 2019. It is regrettable that it took strong-arm tactics by Members to convince them to make the change and that they did not come to a principled decision on the morality of the problem—the devastation that these machines have caused to individuals, communities and families.
Bob Stewart (Beckenham) (Con)
I thank the hon. Lady and everyone who has played a part in this campaign. Is it not tragic that it has taken this House 17 years to sort out the matter? We are congratulating ourselves on having achieved something, but, in those 17 years, we are fully aware of the lives that have been wrecked by our inactivity. Thank goodness that we have got it right now.
Carolyn Harris
I certainly agree with the hon. Gentleman.
May I just say that I cannot thank the Government? As much as I respect and like the Minister, I can say only one thing: learn lessons from this and never underestimate the power of principle.
Tracey Crouch
I wish to take only a few minutes of the Chamber’s time on amendments 11, 12 and 13, which I signed, and on the Government’s amendments 16 and 17 that relate to the reduction in stake for fixed odds betting terminals and the increase in remote gaming duty.
I am relieved that the Chancellor reconsidered his position on the timeframe for the increase for RGD and therefore the reduction in stakes from £100 to £2. Although it was not technically necessary to link the two, the whole House does, I think, understand the financial challenge that the Treasury faces and therefore the need for fiscal responsibility.
The Government made the right decision to reduce stakes on B2 machines as part of their gambling review, not least because it was proven throughout the review that players of these machines have the highest rates of problem gambling and that 32% of players are considered at risk of harm. Concerns around problem and harmful gambling were further amplified by the location of B2 gaming machines in areas of high deprivation. The review also found that those who are unemployed are more likely to most often stake £100 than any other socioeconomic group.
Although the review looked at very many aspects of gambling, it was right that there was a wider public and parliamentary focus on FOBTs and that we took decisive action. The impact assessment made it clear that we expected an implementation date within nine to 12 months and the Government’s amendments honour that expectation.
I am grateful that the Chancellor listened to the House on this matter, although I am sorry that it needed the much louder collective voice for the message to be heard. All that needs to be said has been said, except my personal thanks to the 3,000-plus people who have contacted me since my resignation, the faith leaders who spoke out, the 100-plus colleagues who put their name to the all-party group’s amendments and the brilliant Clerks who helped to craft them.
I have just one other question for the Minister, and it relates to new clause 12. Although the new clause is very limited and there is already a strong framework within the Gambling Commission, I ask that, as an extra protection, the Minister consider supporting this additional review today.
I have no intention of shadow-boxing the new Minister, my hon. Friend the Member for Eastleigh (Mims Davies), who is a friend and will be excellent in her job, but others have noted that there are many challenges on gambling, including harm to children, online harms and advertising. The review sets out many recommendations to tackle those issues, and I look forward to watching her progress with interest.
I have met many people over the past few years who themselves have been addicted to gambling or who have lost loved ones to gambling. The treatment services that are there for them are very good and are run and supported by excellent people, many of whom are volunteers, but they are still the Cinderella service. I am pleased that the Health Secretary has continued his interest in this matter. I am sure that new clause 12 will help further that public health aspect.
I am in no doubt that what this Government have done today with these amendments will save lives from devastation and that is surely what we all go into politics for.
Ronnie Cowan (Inverclyde) (SNP)
I rise to speak to new clauses 12 and 13. We are all fully aware that the Government have declared their intention to introduce a new £2 maximum stake on fixed odds betting terminals, as has been documented already this afternoon. Getting the Government to this stage has not been easy, but thankfully they have seen the light. After considerable cross-party pressure, they have also agreed that the date of implementation will be in April 2019. That is extremely welcome news, and it came about because they were forced to look at the evidence gathered by the all-party group on FOBTs and not rely on the flawed KPMG report that was steered by the bookmakers’ parameters.
I now expect the Government to do the decent thing and amend the Bill accordingly. This would not have happened without the superb work and commitment of the hon. Member for Swansea East (Carolyn Harris), the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) and the hon. Member for Chatham and Aylesford (Tracey Crouch). That brings us nicely to new clause 12, entitled, “A review of public health effects on gaming provisions”, which stands in my name. Not that long ago, gambling was restricted to on-course and off-course bookmakers. Other types of gambling existed, but, for the majority of people, casinos were the stuff of James Bond movies, while bingo and the football pools were once a week and deemed to be sociable and aspirational.
Over time and with the advent of new technology, the face of gambling has changed. Through our mobile phones, we have access to gambling 24 hours a day, every day of the year. The first and most obvious outcome is that there is no cooling-off period. Gamblers caught up in the heat of the moment will not run out of races or be asked to leave the premises; quite the reverse, pernicious advertising with offers of free spins and money-back guarantees are used as bait to lure the most vulnerable gamblers, and eventually many are hooked. When I googled “Gambling Clinics UK”, the first two hits on the list were not organisations offering me help, but paid-for adverts for casino sites.
Graham P. Jones
I am very grateful to the hon. Gentleman for giving way. He is making a very powerful point, and I did not want to interrupt him mid-flow, but will he add to that list of problems the misuse of gambling accounts? That needs to be looked at, because gambling accounts are misused so that people become addicted. When people fall away and manage their addiction, they are dragged back in through gambling accounts, and that should be something that this House considers.
Ronnie Cowan
I absolutely agree with the hon. Gentleman. A second point is that there are dormant betting accounts with money in them but we cannot access them. If that money could be released and freed up for gambling care, there would be more money in the pot to do some good.
Meanwhile, our TVs are haunted by advertising aimed at the most vulnerable. We even have products aimed at grooming children to be the next generation of gamblers. The gambling industry has to ask itself some very serious questions about its marketing strategy. I wish to thank Hamleys toy store for moving swiftly to remove a product deemed undesirable from its shops across the UK when I brought it to its attention. Our children must be protected. For the majority of adults, gambling is fun.
Paul Masterton
I thank the hon. Gentleman for giving way and also for all the work that he has done as part of the all-party group. Does he share my concern about the number of apps aimed at young children, which are effectively based around the concept of gambling? Although they may not be what he or I would consider to be gambling, the sort of behaviour and the risk-reward elements involved seem to ingrain that behaviour from a very young age, which is deeply concerning.
Ronnie Cowan
It is particularly disturbing when we know that people are sitting back and designing these apps in precisely that manner. They know exactly what they are doing, but they do not seem to have any conscience that will stop them from doing it.
For the majority of adults, gambling is fun—if it is under control. Many people can set a limit and not go beyond it. While I would pay for a ticket to a concert or a rugby match, their chosen form of expenditure for entertainment is gambling, and I am not questioning their choice. However, when we offer a licensed product that has the potential to damage the customer, we need to take steps to ensure that the possibility of damage and the consequences of that damage are as limited as possible. Gambling-related harm caused by an addiction to gambling is as much a public health issue as damage caused by drugs and alcohol, but it is not always seen that way.
Paul Blomfield (Sheffield Central) (Lab)
The hon. Gentleman, together with every Member who has spoken so far, joined me at the launch of Gambling with Lives, a charity set up by two of my constituents who lost their son to suicide as a result of gambling addiction. Does the hon. Gentleman recognise the significance of suicide as a consequence for many who are addicted to gambling, given that half those who are addicted consider suicide at some stage? Set within the range of public health issues, this simply underlines the powerful points made by every Member so far.
Ronnie Cowan
I categorically agree with the hon. Gentleman’s sentiments. I will briefly touch on that matter later. It is a very sensitive subject; the wonderful new organisation, Gambling with Lives, should not have to exist in the first place, but we all recognise the terrible need for it.
People with drug or alcohol addictions are often more visible in society. Problematic gamblers often seem to be living perfectly normal lives, even to those closest to them, yet we know that suicide due to gambling debt and/or addiction is all too common.
Tracey Crouch
Further to the point made by the hon. Member for Sheffield Central (Paul Blomfield), it is worth remembering that Thursday will be the anniversary of Jack Ritchie taking his own life. It is therefore really important that we think about suicide as an important issue in this debate. It is certainly one of the issues that drove my position for many years.
Ronnie Cowan
I thank the hon. Lady for making that point.
A report issued by the Gambling Commission in August 2017 found that more than 2 million people in the UK are either problem gamblers or are at risk of addiction, that the number of over-16s deemed to be problem gamblers has grown by a third in three years and that at-risk gamblers are most likely to be aged between 16 and 24. The National Problem Gambling Clinic—there is only one—is based in Fulham, under the watchful eye of Henrietta Bowden-Jones. I have visited the clinic, but I wonder how many Ministers with responsibility pertaining to gambling have? I believe that the Health Secretary has and all credit to him for doing so. The evidence is out there, but we must go looking for it.
GamCare tells me there are plans to create a gambling clinic in Leeds. I applaud that and hope that such a network can be built across the UK. That brings us to funding. The current funding model is not adequate or robust enough. Relying on a voluntary levy means that long-term planning is, ironically, a gamble. The practicality of a statutory levy must be investigated and realistic sums of money must be guaranteed if we are to take the necessary action to support and guide those affected by problematic gambling.
The new legislation around fixed odds betting terminals is proof that with the proper evidence, a little persuasion and the desire to do the right thing, this Government can improve the situation. That is why the Scottish National party is calling for a review of the public health effects of gaming provisions and a report to be laid before the House of Commons within six months. Only by gathering valid data from independent sources can the Government take an evidence-based approach to gambling legislation and thus ensure that the industry can continue, while fulfilling its moral duty to protect vulnerable gamblers.
Sir Peter Bottomley
Early-day motion 61 of the 2016-17 Session, tabled on 23 May 2016, welcomed the all-party parliamentary group on fixed odds betting terminals, and early-day motion 174 in this Session welcomed the re-establishment of the group. I pay tribute to those who have supported the group from outside, including those who campaigned non-stop to reduce the number of victims of the pernicious spread of fixed odds betting terminals.
Although this situation started during the time of the last Labour Government, none of us was awake to what was happening. Although Labour can take responsibility, we should all share it for allowing that to happen. We can also share some of the credit for the way in which the Government, without too much pressure, disregarded the rather wishy-washy advice of the Gambling Commission, which proposed a minimum stake of “£30 or less”. I hope that the commission will review why it did not come forward with a straightforward recommendation of £2.
There was a time when the Government announced that they would bring the stake down to £2, but it was likely that that would take place in April 2020. Then the announcement came that the change would be introduced in October 2019, prompting the resignation of my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch), because although the newly announced date was an improvement on the expected date of 2020, it was not as good as it could have been. We all ought to recognise that a combination of events—the powerful way in which my hon. Friend expressed her view, both inside Government and outside Government, having to change her status to do that, and the way that the Government recognised the reality of parliamentary arithmetic—means that we can now welcome the fact that the terrible effect of these high stakes will be reduced earlier than it otherwise would have been.
Graham P. Jones
I agree with the hon. Gentleman wholeheartedly. I am sure that he would add that our concern extends to the people of Northern Ireland, who are not covered by the measure and where this affliction persists.
Sir Peter Bottomley
The hon. Gentleman raises a point that I was going to come on to indirectly, but I will now make it directly. These fixed odds betting terminals were not allowed in betting shops in the Republic of Ireland, so how could the Association of British Bookmakers go around thinking that it was normal? That leaves open the question that he has raised: how can we make sure that people in Northern Ireland get the change they need? If it is a devolved matter and we need a Northern Ireland Government to solve the problem, I do not have an instant solution.
Jim Shannon (Strangford) (DUP)
Yes, it is a devolved matter and it would take the Assembly to make those decisions. We do not have a working Assembly, as the hon. Gentleman knows. In the meantime, therefore, nothing happens in relation to legislation that is passing here. It is my intention, after discussions with the Minister involved and with the support of the House, of course, to try to ensure that this legislation is Northern Ireland-bound, as it should be.
Sir Peter Bottomley
The Committee will recognise the importance of what the hon. Gentleman has said, and I am very grateful for it.
Some of the tactics used by the betting shop owners have been disgraceful. I hope that some investigative journalist will write it up, page by page, date by date, and explain how it has been counterproductive for these companies’ own shareholders. GVC, which in March this year confirmed the takeover of Ladbrokes Coral, will pay £800 million less because of the date of the change to £2. Three years ago, William Hill’s share price was about 400p a share. At the time of the discussion about whether the fixed odds betting terminal limit would come down to £2 either in October next year or in April the year after, its share price fluctuated between 300p and 220p per share. It is now less than 180p. For every month it went on with its campaign, it destroyed the value of its shareholders’ stake in the companies that were taking profits—as was the Treasury, in tax—from these unbelievably unjustified machines.
When Paddy Power said that these machines were not needed for betting shops, other gambling companies should have paid attention. When people write up this failure of lobbying and the counterproductive tactics used, I hope that they will take it as a role model. We need a word to describe Parliament asserting itself to Government, but another two words to respond to the way in which Government have reacted to that, and those words should be, “Thank you.”
Patricia Gibson (North Ayrshire and Arran) (SNP)
I rise to speak in support of new clause 12. I begin by thanking the hon. Member for Swansea East (Carolyn Harris) and my hon. Friend the Member for Inverclyde (Ronnie Cowan), who have done a power of work on this issue.
I very much welcome the UK Government’s decision to abandon the delay in implementing a maximum £2 stake on fixed odds betting terminals. It is a cause of great regret that this delay was even considered,
“due to commitments made by others to those with registered interests”,
according to the former Minister, the hon. Member for Chatham and Aylesford (Tracey Crouch), to whom I pay tribute for the stand that she has taken on this issue throughout. It is truly disappointing that it has taken so long to achieve the reduction in the maximum stake for these machines—so much time, despite the cross-party support for it across the House, and the loss of a Minister. Parliament has the power to do good, and when it decides to do good it should do so as quickly as it can without fuss or drama—even more so when vulnerable people’s lives literally depend on it.
Like many Members, I am sure, I have a particular constituency interest in this issue. In North Ayrshire, most of which I represent, there are 137 of these machines in 37 betting shops, with £5 million lost in 2016 alone. Two problem gamblers take their own life every single day in the UK. Any delay to serve vested interests would be unforgiveable. Many of us have been profoundly impatient, but I am really grateful, as so many people are, that this Government have at last seen sense and that these machines, which truly are the crack cocaine of gambling, will now be the focus of targeted action.
Conducting a public health review of gaming provisions is absolutely the right thing to do. Gambling-related harm is simply not accorded the attention that it needs. It is a profoundly serious public health issue, and a public health approach is essential. New clause 12 would require a review of the public health effects of gambling. Public health and gambling are issues that cannot be separated, and that is why new clause 12 is so important.
I used to work in a high street bookmaker, long before the advent of fixed odds betting terminals, and despite what bookmakers might tell us now, I have yet to meet a bookmaker who is living in poverty. These shops are open simply to house these machines. Bookmakers might talk about the threat to jobs posed by the reduction in the maximum stake, but the biggest threat to jobs in the betting industry is the use of self-service machines for people to put their bets on, which does away with frontline staff.
The Gambling Commission has pointed that out that any public health approach needs to address not only those who have lived with the addiction of gambling for some time, but the effects on young and vulnerable people. According to the Gambling Commission, children and young people need a specific focus among those who are potentially vulnerable. Their needs are different, and we may need a different approach to reducing gambling-related harm. We have heard today about apps targeted at children. Primary prevention efforts can be targeted at young people, often aiming to reach them before they have gambled. Treatment for young people with gambling problems needs serious and separate consideration from adult treatment. In most cases, it is likely to require a lower threshold for intervention and other co-occurring problematic behaviours to be addressed.
It is also essential that a public health approach addresses the effects of gambling on the families and close associates of gamblers and on the wider community, as well as on those who suffer harm from their own gambling. The approach needs to recognise that a successful strategy cannot focus solely on individual gamblers, but needs to encompass products, environments, marketing and the wider context in which gambling occurs. It needs to understand that restrictions on, or interventions related to, any of those aspects can form part of a balanced approach, backed up by accurate, objective, accessible and understandable information. It should seek to ensure efficient distribution of resources for prevention and treatment based on need.
It is important to remember that we are not starting from scratch. Vital work in this field has already been done by the Gambling Commission, among others. We know that most people gamble responsibly with no difficulties. However, some individuals experience significant harm as a result of their gambling. It is estimated that there are around 373,000 problem gamblers in England, 30,000 in Scotland and 27,000 in Wales. According to the Gambling Commission, those estimates are likely to be conservative. For problem gamblers, harm can include higher levels of physical and mental illness, debt problems, relationship breakdown and, in some cases, criminality. It can also be associated with substance misuse.
In many cases, it is difficult to attribute those negative effects solely or directly to gambling, but according to the Gambling Commission, the association is far too strong to ignore. Younger males and people from certain social and ethnic groups are potentially more vulnerable than others. About 1.7 million individuals in England, 180,000 in Scotland and 95,000 in Wales are classified as being at risk of problem gambling. There are also some gamblers who would not be classified as problem or at-risk gamblers, but who may on occasion experience harm as a result of their gambling.
Gambling-related harms are not all directly health harms, but many of the harms, such as debt, are connected with poor health status. A public health approach is absolutely integral to any war on the effects of problem gambling. All the evidence suggests that this is a significant public health issue. It has not yet received the attention it should have relative to other population-level concerns, but that is now in order—the time has come.
Alison Thewliss (Glasgow Central) (SNP)
My hon. Friend is making a very good point about the public health impact. Does she agree that people in some of the communities that she and I represent are already struggling with multiple deprivation, and gambling being concentrated in their areas only makes that worse and worsens their life chances?
Patricia Gibson
Absolutely. There is a correlation between multiple social deprivation factors and problem gambling, which is why certain communities have a higher concentration of betting shops housing these machines—the crack cocaine machines of gambling—than there otherwise would be.
I say to the Minister, and I know he is listening, that we absolutely and urgently need a review of the public health effects of gaming provisions. On that basis, I urge the House to support new clause 12—
Patricia Gibson
I was about to finish, but obviously I will let the Minister speak.
Robert Jenrick
Before the hon. Lady concludes her remarks, may I draw her attention to two things? I am told that Public Health England has been asked by the Department of Health and Social Care to inform and support action on gambling and its related harms as part of its follow-up to the DCMS review of gaming machines and social responsibility. Public Health England is also being commissioned by the Gambling Commission to do an evidence review on problem gaming, which I hope will go some way to answering the questions that she and others have raised today.
On new clause 12, which the hon. Lady raised—other hon. Members have also done so, including my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch)—I am content for the Government to support it, but I would simply say that it is very limited in scope. I would not want to raise expectations that it will achieve all of the goals that the hon. Lady seeks. However, that, allied to Public Health England’s work, will perhaps help to continue the public debate on this matter.
Patricia Gibson
I am glad that the Minister has given us that clarification. As he says, I would be more comfortable with a broadbrush approach encompassing lots and lots of factors, such as I those I set out in my speech. However, I have listened to what the Minister has said, and I will certainly give it some thought.
Jim Shannon
I thought the hon. Member for Torbay (Kevin Foster) was going to go before me, but he has not bobbed, so he is obviously not going to. I always follow in his footsteps—I am always glad to do so, by the way, as he knows—but on this occasion I miss his comments, which I am sure would be more than helpful to us.
We are all very aware of the reason for these amendments. It is tremendous to be in the Chamber among many Members from across the House who are of the same opinion, including—he will forgive me if I say this, but I have to say it—perhaps a wee bit belatedly, the Minister, who is also committed to where we are on this.
If she does not mind my saying so, I would like to commend the hon. Member for Chatham and Aylesford (Tracey Crouch) for her principled stand, her courage and what she has done to make this happen. The commitment she has shown does my heart good and does the heart of everybody else good. By the way, I am not surprised that she said 3,000 people had contacted her afterwards. I did not have 3,000 people contact me afterwards, but I had a large number and, for the record, every one of them commended the hon. Lady for her obvious commitment. The reason for the amendment is simple: the need for a massive lowering of stakes is clear.
I also thank my good friend, the hon. Member for Swansea East (Carolyn Harris), for all her endeavours through the all-party group on FOBTs, which has done tremendous work. The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) and the hon. Member for Inverclyde (Ronnie Cowan) have also endeavoured, through the APPG, to ensure all that hard work came to fruition.
The one thing that sits in my mind is this: why was it important to have those six months slip back from October to April? It is very simple: as has been said, 300 lives—maybe more—were saved. That is a fact.
I am mindful that last week we had the Gambling with Lives event, which the hon. Member for Sheffield Central (Paul Blomfield) referred to. I thank him for initiating that event. I was very glad to be there with other Members and to support him. There were two people there who I knew long before the start of this FOBT campaign, which began about 18 months or two years ago. They are Mr and Mrs Peter Keogh from Enniskillen, who lost their son, Lewis, to a gambling addiction and who even today feel the heartache of that event.
It is for those people that we do these things. It is for our constituents whose lives will be saved because of it, and for those who have lost loved ones and feel the great pain of the loss of someone close to them, that today we can collectively make this legislative change in this House. That is why we make the effort.
The Government accept that they need to lower the stakes; they accept that damage has been done to individuals and families; they accept the fact that the ability to bet as much as £100 every 20 seconds on electronic casino games such as roulette is shocking; and they accept the campaign by anti-gambling campaigners that highlights the fact that machines let people lose money too quickly, leading to addiction and social, mental and financial problems.
The Minister responded to the previous speaker, the hon. Member for North Ayrshire and Arran (Patricia Gibson), about things we must address, including online gambling and how it is promoted on TV. At this early stage, I would also like to put down a marker about scratchcards. I was just telling a story to my hon. Friend the Member for South Antrim (Paul Girvan). One day, I saw a lady with two children in a shop. She probably did not have £5 to spare. She was ahead of me in the queue and she put down £5. I was not being nosy, but her wallet probably only had two fivers in it, yet she spent £5 on scratchcards. She went outside to rub the numbers off them and by the time I went outside I saw that not one of the cards was successful.
I thought to myself, “How very sad.” That lady was probably looking at her financial needs for that week being provided by the turn of a scratchcard, which did not deliver. Other things need to be done, but I look forward to the things that the Minister referred to in his intervention on the hon. Lady.
Those arguments had all been accepted, but rather than looking at the human cost it appears that the Government wished to shore up the finances and allow thousands more people to gamble everything away. The situation is like cancer research finding a cure to cancer and the NHS saying, “Well, we have all the chemotherapy, which needs to be used, so we won’t pay for the life-saving drugs until stocks are down. We can’t afford to do this.” That is horrific. I say to the Minister, with respect, that the more I see of this Government's ability to put blinkers on and look only at one aspect—the pounds and the pence—rather than at the entire argument about the need to lower stakes, the more disheartened I become.
The Salvation Army, which deals with the problems that gambling brings to the community, has said:
“It is well acknowledged that FOBTs have caused concern across the political and social spectrum. FOBTs have been labelled the ‘crack cocaine’ of gambling. One gambler told us that he spent £2,000 a day on FOBTs at bookies without being challenged.”
Paul Girvan (South Antrim) (DUP)
I appreciate my hon. Friend’s reference to the Salvation Army. One of the other issues that I have major concerns about—I wonder whether my hon. Friend agrees—is the accounts of people being given a line of credit of £1,500 without any credit checks on their ability to pay it back. People have been given a £1,500 line of credit and unfortunately it ends up being a potential noose—and I mean that—around their neck. That problem is arising and it is caused by those who do not do checks. Any other financial industry would do checks to ensure the person had the ability to pay the money back.
Jim Shannon
I thank my hon. Friend for his wise intervention.
The Salvation Army also says:
“Another man who became homeless as a result of his addiction and who was helped by the Salvation Army lost over £30,000 on gambling machines.”
I do not think that there is one Member in this Chamber who would not be able to recollect a story of this kind from their constituencies. It is the story of the man who plays on a FOBT machine on a Friday night and puts all his wages on it, before going home to his wife, who is looking for the money to buy the groceries, and their children. Those are the stories of real life; those are the stories of addiction; and those are the stories that we want to stop in this Chamber today.
That is why we are keen for the Government to implement as soon as practicable the proposed maximum stake limit of £2 for FOBTs. It is of some concern that in the Budget the timeframe for implementation was to have been delayed to October 2019. We note that some campaigners said it would be possible to implement it in April 2019 and that the Government have acceded to that. That apparent delay was deeply disappointing. The right hon. Member for Chingford and Woodford Green referred to the amendment with over 100 Members’ names on it. What changed the Government’s opinion was those 100 names from across the Chamber. I am very pleased that we have achieved that change.
I agree with the change and I ask the Government simply to do the right thing. They seem to have been held to ransom by the gaming industry. Therefore, it should not have surprised me to see how the EU—I use this comparison; I am sure many Members will understand it—has held this proud nation of the United Kingdom of Great Britain and Northern Ireland to ransom, and how our Government have capitulated at the cost not of £400 million, the estimated lost tax revenue, but £39 billion, and, most importantly, the sovereignty of Northern Ireland and the sanctity of the Union.
You may not believe that the two are linked, Dame Eleanor, but they are. You may not believe that that should be mentioned in this debate, but it has been. The Government’s decision making is as flawed here as it is in selling Northern Ireland and the backstop. Do the right thing, stop allowing gambling addictions to destroy families and protect people from themselves, in the same way that people must wear a seatbelt whether they want to or not. Step in and step up. I support the amendment and I look forward to working with hon. Members to do even more in this Chamber to address gambling addiction in the years to come.
Amendment 16 agreed to.
Clause 61
Remote Gaming Duty: Rate
Amendment made: 17, page 44, line 25, leave out “1 October 2019” and insert “1 April 2019”.—(Gareth Johnson.)
This amendment is consequential on Amendment 16.
Clause 61, as amended, ordered to stand part of the Bill.
Clause 62 ordered to stand part of the Bill.
Schedule 18 agreed to.
New Clause 12
Review of public health effects of gaming provisions
“(1) The Chancellor of the Exchequer must review the public health effects of the provisions of section 61 of and Schedule 18 to this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the effects of those provisions in reducing the negative public health effects of gambling, and
(b) the implications for the public finances of the public health effects of—
(i) those provisions,
(ii) the operation of the law relating to remote gaming duty and gaming duty if those provisions were not given effect.”—(Ronnie Cowan.)
This new clause would require a review of the public health effects of gaming provisions.
Brought up, read the First and Second time, and added to the Bill.
Clause 15
Offshore Receipts in Respect of Intangible Property
Question proposed, That the clause stand part of the Bill.
The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)
With this it will be convenient to discuss the following:
That schedule 3 be the Third schedule to the Bill.
Clause 16 stand part.
That schedule 4 be the Fourth schedule to the Bill.
Clause 19 stand part.
Amendment 19, in clause 20, page 12, line 26, at end insert—
“(8) The Chancellor of the Exchequer must, no later than six months after the passing of this Act, lay before the House of Commons a review of the effects of the changes to the controlled foreign companies regime made by this section.
(9) In circumstances in which the United Kingdom has left the European Union without a negotiated withdrawal agreement, the review in subsection (8) must consider the impact of this on those changes.”
Clause 20 stand part.
Clauses 21 and 22 stand part.
Amendment 3, in schedule 7, page 223, line 27, in schedule 7, at end insert—
“(5) The Treasury shall by regulations require that a CGT exit charge payment plan be published on a public register.”
This amendment would require the beneficiary of a trust entering a CGT exit charge payment plan to provide information about the source of its income on a public register.
Amendment 4, page 227, line 13, at end insert—
“(2B) The Treasury shall by regulations prescribe a CGT exit charge payment plan be published on a public register.”
This amendment would require the beneficiary of a trust entering a CGT exit charge payment plan to provide information about the source of its income on a public register.
That schedule 7 be the Seventh schedule to the Bill.
Clause 23 stand part.
That schedule 8 be the Eighth schedule to the Bill.
Clauses 46 and 47 stand part.
Amendment 23, in clause 83, page 60, line 8, at end insert—
“(8) No regulations made be made under this section unless the Chancellor of the Exchequer has laid before the House of Commons a report on how the powers in this section are to be exercised in each of the scenarios in subsection (9).
(9) The scenarios to be considered in the report under subsection (8) are—
(a) if either of a—
(i) negotiated withdrawal agreement, or
(ii) framework for the future relationship with the European Union have not been ratified under section 13 of the European Union (Withdrawal) Act at the time of the United Kingdom ceasing to the a member of the European Union, and
(b) if both of a—
(i) negotiated withdrawal agreement, or
(ii) framework for the future relationship with the European Union have been ratified under section 13 of the European Union (Withdrawal) Act at the time of the United Kingdom ceasing to the a member of the European Union.”
Clause 83 stand part.
New clause 5—Impact analyses of the anti-avoidance provisions of this Act—
“(1) The Chancellor of the Exchequer must review the impact of—
(a) section 15 and Schedule 3,
(b) section 16 and Schedule 4,
(c) sections 19 and 20,
(d) section 22 and Schedule 7,
(e) section 23 and Schedule 8,
(f) sections 46 and 47, and
(g) section 83
of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the impact of those provisions on child poverty,
(b) households at different levels of income,
(c) the impact of those provisions on people with protected characteristics (within the meaning of the Equality Act 2010), and
(d) the impact of those provisions on different parts of the United Kingdom and different regions of England.
(3) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland.
“regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of the tax avoidance provisions of the Bill on households with different levels of income, on child poverty, people with protected characteristics and on a regional basis.
New clause 6—Analysis of effectiveness of provisions on tax avoidance and evasion—
“(1) The Chancellor of the Exchequer must review the effectiveness of—
(a) section 15 and Schedule 3,
(b) section 16 and Schedule 4,
(c) sections 19 and 20,
(d) section 22 and Schedule 7,
(e) section 23 and Schedule 8,
(f) sections 46 and 47, and
(g) section 83
of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the effects of the provisions in reducing levels of artificial tax avoidance,
(b) the effects of the provisions in combating tax evasion, and
(c) estimates of the role of the provisions of this Act in reducing the tax gap in each tax year from 2019 to 2022.”
This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effectiveness of the provisions of the Bill in tackling artificial tax avoidance and tax evasion, and in reducing the tax gap.
New clause 14—Review of effectiveness of provisions on tax avoidance—
“(1) The Chancellor of the Exchequer must review the effectiveness of the provisions of this Act relating to tax avoidance and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) In this section, “the provisions of this Act relating to tax avoidance” means—
(a) section 15 and Schedule 3,
(b) section 16 and Schedule 4,
(c) sections 19 and 20,
(d) section 22 and Schedule 7,
(e) section 23 and Schedule 8,
(f) sections 46 and 47,
(g) section 83.
(3) A review under this section must consider in particular—
(a) the effects of those provisions in reducing tax avoidance and evasion,
(b) the effect of those provisions in inducing new tax avoidance measures unanticipated by the Act, and
(c) estimates of the efficacy of the provisions in reducing the tax gap in each tax year from 2018-19 to 2028-29.”
This new clause would require a review of the effectiveness of provisions on tax avoidance.
New clause 15—Report on consultation on certain provisions of this Act (No. 4)—
“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).
(2) Those provisions are—
(a) section 15 and Schedule 3,
(b) section 16 and Schedule 4,
(c) sections 19 and 20,
(d) section 22 and Schedule 7,
(e) section 23 and Schedule 8,
(f) sections 46 and 47,
(g) section 83.
(3) A report under this section must specify in respect of each provision listed in subsection (2)—
(a) whether a version of the provision was published in draft,
(b) if so, whether changes were made as a result of consultation on the draft,
(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”
This amendment would require a report on consultation undertaken on certain provisions of this Act – alongside new clauses 9, 11 and 13.
The Financial Secretary to the Treasury (Mel Stride)
It is a great pleasure, again, to serve under your chairmanship, Dame Eleanor. The Government have always been clear that while taxes should be low, they must be paid, and that is exactly what we have delivered. Since 2010, we have secured and protected over £200 billion by clamping down on tax avoidance, evasion and non-compliance, and we have reduced the UK’s tax gap to less than 6%, which is one of the world’s lowest. In fact, if we were running at the level of the figures achieved under the last Labour Government in 2005-06, we would be deprived of sufficient income to employ every policeman and policewoman in England and Wales, so bringing in tax most certainly does matter.
We have led the way internationally in this respect, playing a leading role in the OECD’s base erosion and profit shifting project, and taking unprecedented action to secure funding for our vital public services and to ensure that everyone pays their fair share. It is worth reflecting on the fact that we do not just collect tax for the sake of collecting tax, because very few people enjoy paying tax. We do it for a purpose, which is to keep our financial affairs in good order and to fund the doctors and nurses in our national health service, and so on.
Kevin Foster (Torbay) (Con)
Does the Minister agree that we sometimes use tax to alter behaviour—for example, on tobacco and alcohol—as well as purely for funding? That is why measures to prevent the evasion of those duties are so vital to achieving public health gains, in addition to the obvious points in terms of the Treasury.
Mel Stride
My hon. Friend is entirely right. One thinks, for example, of the sugar levy to improve public health and to make sure that our young people, in particular, move towards a healthier diet. Tax can certainly have an effect in that respect. As my hon. Friend said, there is also the duty on cigarettes, tobacco, hand-rolling tobacco, and alcohol to make sure that as well as just raising revenues, we change behaviour in a way that is conducive to the public good.
Bob Stewart
My right hon. Friend has not mentioned fairness in taxation. That is another principle that we must use for taxation. Fairness implies that the people who have the least pay the least and that those who can afford it pay more. I am quite sure that the Government are fully aware of that point when raising taxation.
Mel Stride
I thank my hon. Friend for that important intervention. He is absolutely right: fairness has to be the heart and soul of any progressive taxation system, along with competitiveness—we want to keep rates down—and the importance of tax being paid, as I have been elaborating on. On his specific point, we were of course able to announce in the recent Budget—this forms part of the Bill—the increase in the personal allowance, which is now up to £12,500. Bear in mind that in 2010 the personal allowance was about £6,500. The personal allowance is, of course, the amount that an individual can receive by way of earnings without those earnings falling due to income tax. Any increase in the personal allowance does indeed have a disproportionately beneficial impact on the lowest-paid in our country. Since 2010, in fact, we have now removed some 4 million people in total from tax altogether.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Whatever the merits or otherwise of increasing the personal allowance, which we support in the Bill, surely the Minister recognises that the gain for every person taken out of the bottom rate of income tax in the personal allowance is worth double to people paying the top rate of income tax. Clearly, if someone is paying the top rate of income tax, every £1 of the personal allowance is a greater saving than at the basic rate.
Mel Stride
The hon. Gentleman says he supports our changes to the personal allowance in the Budget, but that was not reflected on Second Reading, when the Labour party voted to reject our tax measures. Indeed, it has been widely critical of our measures to reduce taxation for some 32 million people up and down the country. He will probably be tired of my rehearsing the very important fact that the wealthiest 1% are paying 28% of income tax—a far higher proportion than when Labour was in power, when the figure was 24%.
Mel Stride
It might be an answer the hon. Gentleman does not like, but it is most certainly an answer.
Jonathan Reynolds
Is it not a fact that everyone in the Chamber, because they pay the top rate of income tax, will disproportionately benefit from the rise in the personal allowance, because every pound of it will be taken out of income on which we pay that top rate? Clearly, then, the gain to all of us as top rate taxpayers will be greater than for people paying only the bottom rate of income tax.
Mel Stride
As I have already said, not only do the wealthiest in our society pay a very large proportion of all tax, but under this Government we have seen significant increases in the national living wage. It rose by 4.4% last April, and through the Bill—I am proud to say—we are putting on to the statute book an increase next April of 4.9%. That is well in excess of inflation and will help the very people that both our parties are committed, in our different ways, to assisting—although our measures are more practical than those suggested by the Labour party.
James Cartlidge (South Suffolk) (Con)
On the point about the higher rate, it was my experience as an employer that if, say, a member of sales staff paying basic rate tax did very well in a given month, got commission or a bonus and as a result experienced a sudden, sharp increase in their tax that month, it reduced the incentive on them next time. I welcome the changes to the higher rate because of the impact on incentives and therefore on productivity and so on.
Mel Stride
My hon. Friend makes an important general point about taxation. As we know, very high taxation has a number of undesirable impacts, not just on individuals and businesses, but on the economy and, through that, the general tax take and our ability as a society to fund our public services, and one of those impacts is that which he rightly raises: the disincentive to go out and produce and create the wealth upon which we all depend. It is the duty and mission of this Government, generally across the piece, to keep taxes as low as possible.
Since 2010, the Government have introduced more than 100 measures to combat avoidance, evasion and non-compliance, but this alone is not enough. To support these measures, it is vital that HMRC be well funded and well staffed. That is why we have invested an extra £2 billion since 2010 in HMRC and why we have 24,000 members of HMRC staff dedicated to tackling avoidance, evasion and non-compliance.
Chris Stephens (Glasgow South West) (SNP)
How many of those 24,000 members of staff are employed in the HMRC’s wealthy unit, which, as the Minister knows, is the key driver in tackling tax avoidance?
Mel Stride
It is one of the key drivers in tackling tax avoidance and the tax gap—the tax gap occurs not just with individuals but with large corporations and small businesses. I do not have the precise number, but I am happy to write to the hon. Gentleman with that information. What I can tell him is that, at any one time, about 50% of the largest 200 businesses in the country are under investigation, not necessarily because they have done anything wrong but because, logically, HMRC should be looking particularly carefully at the businesses that are making the largest profits and generating the most.
This investment is paying off. In 2017-18 alone, HMRC secured and protected more than £30 billion in additional tax revenues which otherwise would have gone unpaid. That was a year-on-year increase of £1.4 billion.
We know that some large multinationals have been able to avoid tax by exploiting gaps and mismatches in the international tax system. International leadership was required to address the situation, and that is exactly what the Government have provided. We were at the forefront of the OECD’s base erosion and profit shifting project, which agreed major reforms to the international tax system, and we have taken the lead in implementing these recommendations in domestic legislation. We have also been a strong supporter of the EU anti-tax avoidance directive, and we have helped to shape the common approach that it provides for tackling avoidance in the European Union.
Bob Stewart
I thank my right hon. Friend for giving way to me again. For the sake of fairness, we must of course ensure that multinational companies making profits in our country contribute properly to the economy of the country. I hope very much that we can somehow link the profits made in the United Kingdom very closely to the amount of tax that is paid. At the moment some international companies are behaving appallingly in the way in which they handle their tax affairs, and we must sort that out.
Mel Stride
As always, my hon. Friend has made a critical and important point. I took him to be alluding, at least, to the issue of technology businesses—typically, social media businesses, search engines and certain online marketplaces—which, while making substantial profits in our country as a consequence of the interaction of UK users with the digital platforms that they host, are not paying a commensurate level of tax. That led the Chancellor, in the recent Budget, to announce our move towards a digital services tax, whereby we will not be addressing a question of avoidance—it is important to make that point—but will be bringing the international tax regime into the 21st century, so that we can tax profits not just on the basis of where the bricks and mortar may be, where the staff may be, where the intellectual property may reside or where the commercial risks and decisions are being taken, but on the basis of where this particular type of value generation is occurring.
While we have said that we will seek to move forward in a multilateral manner, because we recognise the dangers of double taxation in the event that we move unilaterally, we have made it very clear that we will introduce this measure ourselves as a first mover, or one of the first movers, of the leading countries in the world. We think that it is only right, and we believe that the public feel that it is only right, for these very large businesses to pay an appropriate level of tax.
Eddie Hughes (Walsall North) (Con)
The Minister says that members of the public would expect that. Can he give some examples of intangible assets, so that people watching the debate at home in Willenhall and Bloxwich can be better informed?
Mel Stride
That is a very good question. In the case of the digital services tax, we are no so much talking about intangible assets, although elements of the Bill—indeed, clauses in this group—relate to ensuring that profits are not artificially shifted as a result of money being moved around in respect of such assets. Here we are talking more about digital platforms, and a particular method of value creation that results from the interaction of UK users with those platforms. However, in terms of intangible assets and intellectual property we might think, for example, of the rights of a particular business based in the UK to carry on business using the branding, know-how and knowledge of a particular piece of intellectual property held in a low or no tax jurisdiction. Any royalties moved from the UK out to that low or no tax jurisdiction will be a form of profit shifting that might be artificial and simply designed to reduce a corporation’s tax bill, which is why we have particular measures in this Bill to address exactly that situation.
Chris Stephens
The Minister gave me a written answer yesterday to a parliamentary question about higher rate Scottish taxpayers who register themselves elsewhere in the United Kingdom. He responded by saying that Her Majesty’s Revenue and Customs holds no data on that. On reflection, does he not think that HMRC should be tackling those trying to avoid tax, specifically the higher rate tax in Scotland?
Mel Stride
The hon. Gentleman will, of course, be very aware of the devolution of various elements of our tax system to Scotland, and the issue he identifies is fundamentally driven by the different relative rates of taxation in Scotland and in the rest of the United Kingdom. I would argue that it is incumbent upon the Scottish Government to do as the UK Government do where these matters are reserved, which is to keep taxes as low as possible. I know that Conservative Members representing Scottish constituencies are most keen to deliver that for their constituents.
As we announced at the autumn Budget in 2017, the Government are legislating in this Bill to tax income from intangible property held in low-tax jurisdictions to the extent that it is income that relates to UK sales. Today some large multinationals are able to unfairly reduce their tax bill by arranging to hold their intangible property in offshore entities. That is unacceptable, and we are now going further to level the playing field. Clause 15 requires multinationals that continue to earn intangible property income in low-tax jurisdictions to pay UK income tax on the proportion of that income that relates to UK sales.
Tax avoidance is not limited to large multinationals of course; businesses of all shapes and sizes attempt to unfairly shift UK profits to jurisdictions where they expect to pay less tax or perhaps no tax at all, so clause 16 introduces carefully targeted anti-avoidance rules to prevent these UK businesses from avoiding UK tax by shifting their profits to lower-tax jurisdictions. The clause targets contrived arrangements that, in broad terms, aim to avoid tax by transferring the profits of a UK’s business offshore in a way that would not be agreed between independent parties.
James Cartlidge
I very much agree with my right hon. Friend on this point. Is it not also true that our small and medium-sized enterprises, particularly those that are currently struggling, perhaps including high street businesses, do not have a cat in hell’s chance of running such schemes? They do not hide their profits and they do not mix and match around territories, so we need a level playing field.
Mel Stride
My hon. Friend is absolutely right. The tax avoidance activities that I am describing are way beyond the reach of many businesses of a certain size up and down the country. Thinking particularly of our high street businesses, we have a duty to ensure that fixed costs in the form of taxes represented by business rates are reduced to the extent that they can be, and the Chancellor was able to announce a 30% reduction in business rates for those smaller retailers that typically populate our high streets. That was an extremely important move as we work, through our future high streets fund and other approaches, to enable our high streets to transition and become more vibrant and successful places.
Luke Graham (Ochil and South Perthshire) (Con)
The Minister is talking about business rates. As a result of the Government’s action, Scotland should receive about £43 million in additional Barnettised revenues. What work will he be doing with the devolved Administration to ensure that that will help high streets in Scotland as much as the Government are helping high streets elsewhere in the UK?
Mel Stride
As a UK Government, we are always happy, and indeed keen, to work co-operatively with the devolved Administrations, including the Scottish Government, as my hon. Friend suggests. Ultimately, however, these will be decisions for the Scottish Government to make. It will be for them to decide how to spend the revenues that will come through by way of additional funding via the Barnett formula. I can only suggest once again—I think this echoes my hon. Friend’s thoughts—that the best way forward is to keep taxes down and, in the case of Scotland, to have a country that is known for low taxation, rather than gaining a reputation for higher taxation.
Clauses 46 and 47 address the use of contrived arrangements that seek to avoid stamp duty on shares. The Government are aware that some corporate groups are transferring shares to connected companies for an artificially low consideration. The clauses create a targeted marketed value rule for transfers of listed shares to connected companies. This rule will prevent the use of artificially low consideration by charging stamp taxes on shares on the higher of the market value of, or the sum paid for, the shares transferred.
The Bill also re-emphasises our commitment to leading the way in implementing internationally agreed initiatives to combat tax avoidance. Clauses 19, 20 and 23 make changes to the UK’s rules on controlled foreign companies, hybrid mismatches and corporation tax exit charges to ensure that they comply with the EU’s anti-tax avoidance directive. The UK is a strong supporter of the objectives of the directive, as it will ensure that member states take a common approach to tackling tax avoidance. The UK’s rules are already comprehensive, and they already meet or exceed most of the requirements set out by the directive, but some limited changes are needed to ensure that we are fully compliant in all areas.
Stewart Hosie (Dundee East) (SNP)
On a point of clarity, the Minister has said that stamp duty on shares will be charged at either the market rate or the actual rate, whichever is higher. Will he confirm that shares will still be able to be sold below the market rate so long as the tax is paid on a marked market basis? Is that correct?
Mel Stride
The Bill will ensure that businesses that typically trade in and acquire shares pay the correct level of stamp duty on those shares, rather than paying a certain market rate having transferred the shares, perhaps internally to another company in the same group, in return for shares from that other company that had been valued at a lower level compared with the original purchase price of the original shares. By doing that, some companies have been exploiting a loophole and paying less stamp duty than they would otherwise have done. In case the hon. Gentleman is wondering, the distinction between the two clauses relating to this matter is that one relates to paper shares and the other to the electronic trading of shares in that manner.
Amendment 19 would provide for a review of the changes required to the controlled foreign company rules, which protect against the artificial diversion of profits from UK companies to low-tax jurisdictions, including with regard to the impact of a no-deal scenario. While the Government always keep the general tax system under review, a specific review of those provisions would be disproportionate. They are minor changes to ensure that the UK’s anti-avoidance rules on controlled foreign companies are fully aligned with the direction with which the UK agreed during negotiations on the anti-tax avoidance directive, and there is no need for a review.
Clause 83 enables the introduction of new international rules requiring tax advisers to report to HMRC certain cross-border arrangements that could be used to avoid or evade tax. That information will allow HMRC to build up the full picture of such arrangements. Following a consultation next year, the Government will introduce secondary legislation containing further details of the rules. We have played a leading role in designing that approach, which forms part of our ongoing work to champion international tax transparency and to tackle offshore tax avoidance and evasion.
Amendment 23 would require the Government to publish a report on how clause 83 will be exercised under various EU exit scenarios before making the proposed regulations. However, the Government are already committed to a formal consultation on the proposed regulations, and all practical aspects of implementing the regulations and EU exit will be taken into consideration as part of that consultation.
As we depart from the EU, we must continue to honour existing commitments. That is why we are allowing capital gains tax in respect of exit charges to be paid in instalments. Exit charges can arise on unrealised capital gains when a trust ceases to be UK resident, or if a non-resident individual either ceases to trade through a UK branch or agency or moves trading assets abroad. Exit charges ensure that tax cannot be avoided by moving assets overseas. Clause 22 retains those rules. However, when such entities choose to move their place of residence within the European economic area, they will now be given the option to defer the payment of tax, paying in six equal annual instalments with interest, which will not reduce the amount of tax that is due.
Opposition amendments 3 and 4 would require the beneficiary of a trust that pays capital gains tax on an instalment basis to provide information about the source of its income in a public register. That requirement is disproportionate and unnecessary. Migrating trusts seeking to use the scheme will have paid UK tax, so their income sources will have been declared to HMRC. Information about the nature of the trust’s assets will also be held on the trust register, which applies to trusts with a UK tax liability and is available to law enforcement agencies. Consequently, there is no need for further reporting.
New clause 5 would require the Government to carry out a review of the equality impact of some of the Bill’s anti-avoidance provisions. The tax information and impact notes published alongside the measures already set out the impact of anti-avoidance measures in the Bill on those sharing protected characteristics. In general, they show that HMRC does not expect the measures to have notably different impacts on people according to their protected characteristics.
New clauses 6 and 14 would require the Government to publish a review of the effectiveness of the Bill’s provisions to tackle tax avoidance and tax evasion, and to reduce the tax gap. Such a review is unnecessary. The Government keep all taxes under review and will continue to measure and publish annual statistics on the tax gap. I have little doubt that those statistics will continue to show that the tax gap is lower than at any time under the previous Labour Government.
New clause 15 would require the Government to publish a report on the consultation that we have undertaken on some of the measures in the Bill. The Government are committed to creating a more predictable and stable tax system. Our move to a single fiscal event timetable and the new tax policy-making process ensure that there is more time available to consult on new tax changes. In July, we published draft legislation or detailed technical notes on the majority of the measures covered by the clauses in this group to allow for consultation with interested parties. However, that approach is simply not appropriate for all tax avoidance and evasion measures. Publishing draft legislation can give those targeted by legislation the opportunity to make provision to sidestep it. Although I agree with SNP Members that consulting on tax legislation is important, I do not agree that it is necessary for us to produce a report.
Conservative Members will continue to be ever mindful of the simple fact that wealth and money do not belong to the Government. In fact, there is no Government money, only that which is generated by hard-working people right across our country. As such, we recognise that we have a duty to keep tax as low as possible to reduce its burden, most especially on the poorest in our society, and so protect living standards and nurture a thriving economy.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is a pleasure to participate in this debate and to follow the Financial Secretary to the Treasury. I will speak to Labour amendments 3, 4, 19 and 23 and to new clauses 5 and 6.
As other Opposition Members have noted, it is disappointing, to say the least, that the Government have been unwilling to allow proper scrutiny and challenge of their proposals in this Finance Bill, as they have failed to introduce an amendment to the law resolution. Members will be aware that this approach has been used six times in the past century, each time necessitated by Budget provisions needing to be passed quickly.
Anneliese Dodds
Indeed. When we are unable to table amendments on provisions within a Budget, it is a severe restriction on the House’s ability appropriately to challenge the Government’s policies. In any case, if the Government can muster backing for their approach to prevent a change in policy, they can do so.
Kevin Foster
If the Labour party is so committed to scrutiny of this Bill, how come the Opposition Benches are virtually empty? The hon. Lady says that it is because Labour Members cannot table amendments, but they could come along and make speeches.
Anneliese Dodds
The hon. Gentleman has made the point for himself. It is precisely because we do not have the ability to table meaningful amendments that we are in this position. I am sure that he is aware that, when it was possible for Labour Members, often with other Members, to table meaningful amendments to Finance Bills, there was a huge amount of participation, such as when amendments were tabled on country-by-country reporting. Sadly, despite those amendments, we have not yet seen the change in Government policy that we would have liked. When the House is given the power, we exercise it; when we are not given the power, we are unable to exercise it.
As “Erskine May” sets out very clearly, in these circumstances, the only permissible amendments are
“strictly limited to what is authorized by the specific resolutions on which the bill is founded.”
Because of those restrictions, the Opposition cannot expand the scope of measures against tax avoidance and evasion beyond the very limited scope presented in the Bill.
There is a whole host of areas in which the Government should be taking action but where the Bill is completely silent. There has been no new approach from the Conservative Government on the verification of information supplied by companies when they register, despite widespread evidence of tax avoidance and money laundering being facilitated through the registration of fake companies via Companies House.
On shell companies, the Government have provided only a consultation on partnerships rather than action, and they have failed to use to any great extent their legal ability to impose fines on partnerships that fail to provide beneficial ownership information. Despite their consultation on a new offence of failure to prevent economic crime finishing more than a year ago, we still appear to have no more progress on that. Although our Government now have, as I mentioned, the legal means to require country-by-country reporting wholesale, following that amendment to a Finance Bill two years ago, when we were able properly to amend the Bill, they have refused to take up that option.
Despite this catalogue of failure, the Government continue to talk up their record. We saw this elevated to the level of farce last night, when Conservative central office—I assume—released a graphic on Facebook with the laughable claim that Labour had just voted against cracking down on tax avoidance. Labour has consistently advocated much stronger measures on tax avoidance than this Government have done. Indeed, the weakness of measures in the Bill is one of many reasons why we oppose it. The graphic included a background of palm trees, presumably a bizarre reference to our overseas territories. It is bizarre, given the woeful lack of action by our Government in this regard.
Chris Philp (Croydon South) (Con)
Would the shadow Minister like to join me in congratulating the Government on having reduced the tax gap from 8% under the last Labour Government to 6% today, which is the lowest level in the developed world?
Anneliese Dodds
I will go on to talk about the assumptions that the Government currently use to calculate that tax gap, and the hon. Gentleman will learn that their claims to have massively reduced the amount of tax avoidance through that measure are potentially questionable, to say the least. Perhaps after we have had that discussion, we will see whether he still holds to that assessment.
Julian Knight (Solihull) (Con)
While we wait for the hon. Lady to congratulate the Government on closing the tax gap, will she recognise that many of the steps taken in the Bill have to be taken in a way that is mindful of how international tax systems work and how we need to ensure that the tax we are gathering does not lead to companies leaving the UK and trading to it from international jurisdictions?
Anneliese Dodds
Of course we need a business-friendly tax environment, but we should also recognise, just as I find when I talk to many international businesses, as I do in my shadow ministerial position, that the vast majority of businesses want to be compliant. Sadly, a small number of firms are not necessarily complying with the letter of the law and some are also not complying with the spirit of the law. That is leading to a situation where our public services are starved of the funding we need, which has a huge impact on business, as I am sure the hon. Gentleman is aware through his discussions with businesses in his constituency.
Let me return to the matter of overseas territories, which strangely appear to be referred to in pictorial form in material released by Conservative central office. This Government were forced kicking and screaming by this House to require our overseas territories to produce public registers of beneficial ownership, but I understand that all that has happened since the vote that forced that change in policy is one conference call, leading to a vague commitment to convene a technical working group—but it is not going to meet until 2019. So we have had many months since that vote in this House but almost no action. In addition, rather than fulfil the commitments the Opposition were given that our Government would work with Crown dependencies towards transparency, tax treaties were presented to this House last week that included no such provisions whatsoever.
The Minister has, as ever, opined that his Government have reduced the tax gap, and indeed other Members have just referred to that. I am sure, however, that he will not illuminate us with the fact that his Government’s tax gap measure excludes the costs of profit shifting and that it starts from the assumption that companies are declaring the correct amount of tax, which surely begs the question. The tax gap for this Government is assessed on the basis of whether Her Majesty’s Revenue and Customs has found errors or evidence of avoidance on tax returns, an approach that has rightly been criticised by the Public Accounts Committee, given that it leads to a situation where much of the tax lost through avoidance simply does not count as part of the tax gap. The Government’s tax gap does not appear to include cases of avoidance or evasion that do not fall under existing legislation, so it fails to capture numerous loopholes that continue to be exploited simply because they are exactly that: loopholes.
Chris Philp
Did I detect a sigh when the hon. Lady gave way? She is questioning the basis of the tax gap as a sign of progress, so let me try a different statistic that she might feel better about. The amount of corporation tax collected has gone up from £35 billion a year to £55 billion a year; is that not evidence that these tax-raising measures are effective?
Anneliese Dodds
I am always delighted to hear from the hon. Gentleman, but when he talks about the tax-gap measurement, he is talking about his Government’s tax-gap measurement, not one that is universally accepted. In fact, it is quite the opposite, and many alternative measures suggest that much larger amounts of tax are being avoided and, indeed, that larger sums could be rectified if tax evasion was dealt with. Yet again, we hear this comment about the cut to the corporation tax rate. I am sorry to sound like a stuck record, but I have to remind the hon. Gentleman that every expert commentator on this matter has intimated that the rise in the corporation tax take is not because of the cut to the rate and that, in fact, had the rate not been cut, more revenue would have accrued to the Treasury. As I will go on to discuss, that revenue could have been used to support public services and social security for our constituents.
James Cartlidge
The hon. Lady will be sighing a bit more when I point this one out. It is very kind of her to give way. She said that the tax take has not gone up because of the rate cut, and she is absolutely right: above all, the reason the tax take has gone up is that the economy has been growing very strongly.
Anneliese Dodds
I am sorry that the hon. Gentleman views as a badge of pride the recent growth statistics. I would never talk down the British economy—it has a huge amount of promise—but I am deeply concerned about the fact that our growth statistics, particularly for the future, have been revised down. For next year and the following year, I believe that they are 1.6% and 1.4%, so they have been revised down. In the past, in normal times, we would have viewed growth statistics of that kind as a failure. Of course I am pleased that our economy is finally growing again—it was, of course, growing when Labour left office—but I am none the less deeply disappointed that we are not reaching the same levels of growth as many of our competitor countries.
Several hon. Members rose—
Anneliese Dodds
With the Committee’s permission, I shall continue with my comments.
We need a far more serious and engaged approach to countering tax avoidance and evasion. Our amendments are an attempt to provide that—at least within the scope of the limited measures in the Bill. First, with amendments 3 and 4, we are calling for public registers for beneficiaries of trusts who have relocated or plan to relocate to other EEA countries and who seek to defer their corporation tax exit charges, or those relating to capital gains tax, through a payment plan, as the Minister intimated. The Government’s action in this policy area has been necessitated by recent decisions of the European Court of Justice, which considered the compatibility of member state exit charges with article 49 of the treaty on the functioning of the European Union.
As the Minister intimated, the measures in the Bill will enable those who adopt an exit charge payment plan to pay in six equal instalments, albeit with interest. Given that this approach is necessitated by EU law and applies to individuals and trustees who move to another EU or EEA country, and given that some Government Members sadly flirt recklessly with the prospect of a no-deal Brexit, I would have expected the Government to explain what might happen in this policy area as our relationship with the EU changes. That was not the case in respect of the information about these measures that we were given; nor does anything in the Bill lead us towards greater transparency for trusts, which is desperately needed.
As of January this year, all trusts that pay beyond a very modest level of tax have had to register with HMRC through its trust registration service, but that is a private register, not a public one. The new iteration of the EU’s anti-money laundering legislation will require changes in the UK approach. First, it makes business-like trusts and those managed in the EU subject to reporting requirements, so potentially enlarging the category of trusts that have to register. Secondly, it enables parties with a legitimate interest to access information about those trusts—not just law enforcement agencies as currently—although the decision on who qualifies as having such a legitimate interest will be under the discretion of member states. Finally, this new legislation requires trusts owning EU companies to disclose full information about trustees, settlors and beneficiaries.
Helen Goodman (Bishop Auckland) (Lab)
My hon. Friend is making a fantastically good forensic case this afternoon, but I am still not sure whether I fully grasp the point. Is she saying that the Government have still not set out how they intend to collaborate with the European Union on information sharing for tax purposes, and/or is she saying that this will be an excuse for a lighter tax regime in this country and in the other EU member states, which will no doubt be taken into account when the future framework is being negotiated?
Anneliese Dodds
I am very grateful to my hon. Friend for her comments. In fact, I will go on to say both, because that is precisely our concern. So far, the Government have been incredibly vague about what commitments they will make on tax matters in relation to preventing avoidance and evasion. Furthermore, we have had some very, very unhelpful comments—to put it extremely mildly—from the Government about whether they might seek to undercut the rest of the EU on tax matters. I know that my hon. Friend follows these matters very closely, as she does money laundering matters, where I argue that we have not been clear enough about how we will collaborate with others into the future.
Our new clause 5 is directed at another Government blank spot: the distributional impact of their tax measures. It would require an equality impact assessment of the Government’s tax avoidance measures in relation to child poverty, household income levels, people with protected characteristics, and our nations and regions. That assessment is necessary because of the continuing leakage from our tax system owing to avoidance as well as evasion. Failure to deal with avoidance has put pressure on the rest of the tax system, which, as I have just mentioned, has been exacerbated by unnecessary tax cuts to the very best-off people and to profitable corporations. As many independent observers have noted, these tax cuts have tended to benefit the very best-off people and often men rather than women, while £4 out of every £5 cut from Government budgets has fallen on women’s shoulders. The Women’s Budget Group has shown how, out of all household types, lone mothers have been the hardest hit by cuts to services and tax and benefit changes, followed by lone fathers and single female pensioners. Among lone mothers, it is black and minority ethnic women who have lost the most.
Bim Afolami (Hitchin and Harpenden) (Con)
Is the hon. Lady suggesting that we should have differential tax rates for men, women and different ethnic groups?
Anneliese Dodds
I am grateful for the intervention, because it enables me to make the answer clear. Absolutely not. We are asking for something very simple. Sadly, it is something that this Government have not been willing to provide, which is the information about tax incidence. We do not have that information to the extent that the House needs. The process of analysis has been left to bodies such as the Women’s Budget Group and the Child Poverty Action Group. They have to crunch the data. That is an activity that should be carried out by Government, so that we as Members are able appropriately to scrutinise their policy and practice. We do not have that information at the moment.
James Cartlidge
The hon. Lady is being very generous in giving way. As a rejoinder and as a follow-up to the intervention by my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), that is not the point he was making. He is saying that the implication is that, to change the system, we would need to have discriminatory tax policies to effect a different impact. We cannot just assess it; for it to be different in practice, the measures, by definition, would also have to be discriminatory.
Anneliese Dodds
I fear that the hon. Gentleman has yet again made the point for himself. This Government’s approach to taxation so far has affected different groups disproportionately. We can call that discrimination, unequal impact or whatever we like. The fact is that we found out about that not through Government figures, but due to analysis conducted by other bodies. We had a lengthy debate about this during the last Finance Bill, and I am very happy to run through all the arguments again. I suggest, however, that it might be easier for him to read analysis by those expert bodies, which will make the point more eloquently than I could.
Rachel Maclean (Redditch) (Con)
The hon. Lady is extremely generous in giving way. I wonder whether she will accept a point made by a member of one of the groups about which she is speaking—that is, by a woman. Does she accept that there are more women in work now due to this Government’s measures, making women better off compared with the legacy left by her party’s Government, of which I accept she was not a member?
Anneliese Dodds
I appreciate the hon. Lady’s comments, but is she aware that under her party’s Government, moving into work is sadly no longer the route out of poverty for huge numbers of working women? For example, two thirds of children living in poverty are in working households. Previously, someone who could obtain a job with enough hours would be able to climb out of poverty. That is no longer the case in the UK. Furthermore, as I just mentioned, those who have analysed the impact of tax and benefit changes on different genders have shown very clearly—it is simple to look at the statistics—that £4 out of every £5 cut by this Government have been cut from the pockets of women and from the services that women use.
Anneliese Dodds
The hon. Lady can shake her head at me, but she should shake her head at the Women’s Budget Group, which has shown this very clearly.
Chris Stephens
On seriously tackling the tax gap and the lack of analysis that the hon. Lady is identifying, could one of the reasons possibly be the meat cleaver that was taken to the HMRC office network, meaning that there is now a lack of local knowledge? Also, should not the Government employ as many people to tackle tax avoidance as they do for Department for Work and Pensions social security fraud?
Anneliese Dodds
I know that the hon. Gentleman has worked on the issue of cuts to HMRC’s capacity, as have many Members across the House. I will return to that important issue soon, because sadly the reality does not reflect the rather rosy picture that we were provided with by the Minister on that subject.
I return to the distributional impact of this Government’s tax measures. We had an interesting discussion about fairness following some comments by the hon. Member for Beckenham (Bob Stewart), who is no longer in his place. The Minister intimated that he was in favour of a fair tax system and said that the wealthiest people pay a large proportion of all tax. He is absolutely right: the wealthiest people do pay a large proportion of income tax. That is because of how wealthy they are. However, if we look at the impact of the tax system on different income groups, we find—I should not say “we” because it is the Office for National Statistics that has discovered this—that the best-off 10% of people pay less of their income in tax than the worst-off 10%. I note that the Conservatives did not contest this statistic when it was mentioned in the House yesterday. Surely that is a ringing indictment of their approach to taxation.
Chris Philp
I am delighted that the shadow Minister has given way once again, without sighing this time. The poorest in society are not in tax at all thanks to the increase in the threshold. The richest 1% do indeed pay 28% of tax, but they only earn about 12% of all income, so she will see that the amount of tax they pay is a great deal higher than their share of income.
Anneliese Dodds
It is always a pleasure to hear from the hon. Gentleman, who is always a very friendly face. Sadly, however—I feel bad doing this—I do have to correct him on two of the points that he mentioned. He stated that the poorest people will not pay any tax at all. That is simply not the case. Of course, they will pay—[Interruption.] No, no—he said “any tax”. Let us be clear: of course, large numbers of very badly off people pay a lot of value added tax, which is a regressive tax, even with the exemptions that apply to it.
In addition to that, increasing numbers of low-income people across this country are now paying council tax, many of them for the first time, because of the swingeing cuts that the hon. Gentleman’s Government have delivered to local authorities’ budgets for council tax relief. So we now have very large numbers of very-low-income people being taken to court because they are unable to pay their council tax. That situation is novel in our country but some might say it approximates things that happened back in the 1980s, which I am sure that the hon. Gentleman is too young to remember but which the history books have certainly not forgotten.
We also need a thorough understanding of how the failure to tackle tax avoidance affects our different regions, given that austerity’s impact on incomes has been strongest in areas that were already struggling economically. We need a thorough impact assessment of the impact that the failure to deal with tax avoidance is having on child poverty. Yesterday Ministers tried to deflect attention from their record on poverty by using only figures on absolute poverty. They never speak about the measure that is instead used by most academics and experts—relative poverty—because they know that more children are now living in relative poverty under their watch: almost a third of children, in fact. The problem is such that the chief executive of the Child Poverty Action Group has described the Conservative Government as being “in denial” on child poverty.
I will explain why we need to look at relative poverty. We should not look simply at whether people are destitute, as measured by absolute poverty, even though, sadly, many are having to resort to food banks for bare necessities; we also need to look at what people’s incomes are in relation to the living standards that everyone else enjoys. That is why the concept of relative poverty measures whether people are poor in relation to median-income people. Relative poverty matters because it shows whether people can afford to live a decent life.
Anneliese Dodds
No, it does not. Absolute poverty measures whether people can afford the bare necessities of life. To be able to participate in society—in their communities—they cannot fall so massively behind the median income. We are talking about families whose children cannot go to birthday parties for their friends because they cannot afford a card and a present. For me, that is a failure of our society, and it is to do with relative poverty, not absolute poverty. Over 4 million children in this country are classified as living in relative poverty, and that number is rising, not diminishing.
Anneliese Dodds
I will press on for now.
Labour’s new clause 6 would require a review of the Government’s measures presented in this Finance Bill on tackling avoidance, evasion and the tax gap. It would enable us to consider whether the Government’s reactive approach is sufficient, when many of us suspect that it is anything but. Here we are reminded of one of the biggest gaps in this Bill. Despite much fanfare in the Budget, and indeed in the Minister’s comments just now, there is no digital services tax presented in this Finance Bill. Instead, there will be a consultation on the Government’s approach. Of course, even what is in that consultation is less stringent than European-level proposals, and it includes giant loopholes in its safe harbour and double threshold elements.
The hon. Member for Walsall North (Eddie Hughes)—who is still in his place, which is fantastic—talked about the regime for intangible assets. He is absolutely right that we need tax authorities to deal with these issues more appropriately. When I think about the major strides that have been made on taxing profits arising out of those intangible assets, I think of the cases that have been taken by the European Commissioner for Competition against Starbucks and others. She showed, for example, that Starbucks’ intellectual property relating to its roasting processes was not based in the Netherlands, as it claimed, and that that was just a ruse to avoid tax.
Bim Afolami
Does the hon. Lady accept that, when we are dealing with the complexity of international tax treaties, judicial precedent and the rule of law, and given that those treaties and lots of judicial precedent were established at a time when we did not have multinationals in the way we do now, it is only prudent to consult properly before we put measures in place? Does she also accept that this Government have been a leader, according to the OECD and the IMF, in dealing with the problem that she outlines, and that she is not being fair at all?
Anneliese Dodds
I am grateful for the hon. Gentleman’s intervention. However, I am sorry to point out that he is slightly behind the times when it comes to the operation of tax treaties. Those are now multilateral, following the development of the OECD’s multilateral instrument, which aims to amend tax treaties for all signatories, including the UK, in a thorough manner.
Bim Afolami
I thank the hon. Lady for giving way again. The whole point is that this is all a work in progress, as she would accept.
Anneliese Dodds
That appears to be a slightly different point from the one the hon. Gentleman was making a moment ago. None the less, I agree that this is a work in progress. Sadly, our Government and Conservative Members in other jurisdictions have not always been promoting that process. I gently remind him that his colleagues in the European Parliament have consistently voted against measures that would increase tax transparency and have consistently not supported attempts to hold inquiries into, for example, the Panama papers and the Luxembourg leaks. I hope that, at some point, they will catch up with the need for more tax transparency and enforcement. Perhaps he could encourage them; that would be enormously helpful.
It is positive to see in this Finance Bill that the Government have adopted some of Labour’s proposed measures in our tax transparency and enforcement programme. They have finally seen the light on giving HMRC back preferred creditor status. They appear to be undertaking some action against umbrella agencies exploiting the employment allowance. They also appear to be looking towards creating an offshore property levy, although it is unclear to me, even following the Minister’s comments, how appropriately that will be targeted, given that it lacks the precision of Labour’s proposed oligarch property levy. But there are few additional measures in the Bill beyond what is already required by either the EU or the OECD, showing an abject lack of ambition and commitment from this Conservative Government.
Underlying all this, as the hon. Member for Glasgow South West (Chris Stephens) said, is the Government’s failure to appropriately staff HMRC to deal with tax avoidance and evasion and their determination to press ahead with its reorganisation, despite evidence that it is haemorrhaging experienced staff. Some additional money has been provided, which the Minister referred to in his speech. However, we still lack clarity on exactly where that money will go. The Government have committed to provide 5,000 additional customs staff. I still do not know where they will go. We are looking at a situation where, due to the regional reorganisation, there will not be a single HMRC hub along any of the south coast or beyond the central belt. Where customs officials will go is very unclear.
In addition, any additional money that is being provided by the Government, or at least much of it, will in any case just backfill what has been sucked out through the recruitment costs necessitated by the need to replace staff who have been lost due to the reorganisation process.
Rachel Maclean
The hon. Lady is painting a very negative picture, which I think is a shame. She should give this Government some credit for the fact that they have collected £71 billion more tax than would have been the case, given the tax regime, under Labour. That is £71 billion that has been collected. We all want to go further, but will she not welcome that money, which has gone into our public services?
Anneliese Dodds
I discussed a few moments ago how many of those measures are in fact disputed. It would be interesting if the hon. Lady could break down that figure. I suspect many of us would not agree that it reflects an accurate representation of the tax lost. In fact, as I mentioned, when profit shifting is taken into account, that figure is likely to be much larger.
I am very positive about the potential of our economy, and the potential of our tax officers, but I think they are being presented with an impossible task. I have talked to many of them—dozens of them—and they are very concerned about the future. They want to do a decent job, but they are being prevented from doing so a lot of the time, sadly, due to the Government’s determination to press ahead with this reorganisation programme.
Eddie Hughes
Is the hon. Lady aware that, following the Government’s consultation on their intentions for an increased tax take on intangible assets, they have introduced an allowance of £4 million to make amendments to computer systems and to employ more staff so that they can monitor compliance with these new tax regimes? Will she welcome that?
Anneliese Dodds
I am grateful to the hon. Gentleman for his intervention but, as I have said, some of the new staff coming in are replacing other staff who have been lost. In fact, when we look at those data, we see that over 17,000 staff years of experience in HMRC have been lost through redundancy. I find that many more experienced specialised staff are talking about leaving our Revenue in the future if the Government press ahead with their reorganisation scheme.
Mr Jim Cunningham (Coventry South) (Lab)
We have raised this many times and the hon. Member for Glasgow South West (Chris Stephens) has raised it as well. The Government are reducing the number of tax offices, in actual fact. They are closing the offices in Coventry. I do not know about the constituency of the hon. Member for Walsall North (Eddie Hughes), but people are having to go a long distance—16 miles to Birmingham—to deal with their tax problems.
Anneliese Dodds
As always, my hon. Friend has made an important point. We are seeing the loss of many experienced staff in these offices, which is not only a problem for HMRC, but an enormous problem for local economies.
Over the past couple of months, I have visited 10 of the locations where HMRC offices have either already closed or are set to close, and I must say that there is huge concern about the implications for those local areas. They are often ones where it takes a long time to travel to other destinations and where it is impossible to travel to work to the new regional centres. As a result, we are losing much expertise within our Revenue service.
That is reflected in the statistics from surveys of HMRC staff. We see that HMRC staff morale is incredibly low, but we have no recognition of that by the Government or any understanding of the implications of that for the services that HMRC provides. Indeed, as Members have mentioned, that would become even more of a problem if HMRC had to attempt to sort out the customs and VAT chaos that would be caused by a no-deal Brexit.
Our uncertain future relations with the EU are at the root of the penultimate Opposition amendment that I will speak to, amendment 23. The amendment requires a consideration of the implications for cross-border tax information sharing of no deal and of the Government’s withdrawal Bill arrangements. The European Scrutiny Committee asked for
“the Government’s view on the value of continued UK participation in the wider system of exchange of information created by the DAC Directive”—
the directive on administrative co-operation—
“after the post-Brexit transition period ends, and how it will seek to secure the desired level of cooperation when it becomes a third country for the purposes of EU law.”
The Financial Secretary to the Treasury, who is sitting on the Front Bench again today, sent a letter in response at the end of April. On this point, however, his letter simply said that
“the Government recognises the value of the exchange of information in tackling tax avoidance and evasion and will address procedures for ongoing administrative cooperation, including the exchange of information framework set up—”
under the directive—
“within the scope of the wider EU exit negotiations.”
It is one thing recognising the value of information exchange, but it is quite another ensuring that it will continue. We really need clarity from the Government, not only about administrative co-operation but about other forms of information exchange.
For example, will the Government continue to participate in the code of conduct group, potentially with observer status? I have asked about that repeatedly, but as of yet I have received no answer. Will we participate in the pan-EU database including information about trusts, which I referred to and which is due to be created as a result of the new iteration of the anti-money laundering directive? Will we continue to share information about tax rulings, those sweetheart deals concluded between HMRC and large taxpayers, which are not available to smaller taxpayers and which in some cases have rightly caused uproar when details of their provisions have leaked out?
The hon. Member for South Suffolk (James Cartlidge) referred to the need for a level playing field. Surely that applies in spades when it comes to transparency on tax rulings, so I am very disappointed that his Government have not yet provided that transparency. It is not clear how they will share that data with the EU27 in the future.
The Conservatives’ mood music on this issue so far has been worrying. Not only has the Chancellor damaged relations with the EU27 by threatening to turn our country into a tax haven, but his party’s MEPs—[Interruption.] He has. A number of Government Members are claiming, from a sedentary position, that that never happened, but many Opposition Members will recall precisely when he made those kinds of threats. I have talked to many colleagues from different political parties in EU27 countries who viewed those comments—
Anneliese Dodds
I will give way when I have finished my sentence. I am so pleased that the right hon. Gentleman is so excited about participating in this debate. As I have said, I have talked to many politicians in EU27 countries who interpreted those comments—discussing a shift towards a Singapore-style model—as a threat. Of course, often when Government Members talk about a Singapore-style model, they omit to mention the huge amount of social housing, for example, in that nation, and other aspects of its business model. I suspect they have a rather different approach in mind when they talk about it.
Sir Hugo Swire
The hon. Lady, who speaks for the Opposition, said she can specifically say when my right hon. Friend the Chancellor made these assertions or claims. When were they made?
Anneliese Dodds
I would be more than happy to look up that reference and send it to the right hon. Gentleman immediately. I regret that he cannot remember his own Chancellor’s words and that he is unaware that there have ever been comments from his Government suggesting that the UK may at some point shift towards a Singapore-style model. I regret that he is unaware of the comments that have so soured our relationship with the EU27, because I know that they have caused enormous problems for us. They have presented a picture of our country as seeking to undermine and undercut tax arrangements in the rest of the EU27. For that reason, it is enormously important that those comments should be counted.
If the right hon. Gentleman believes that his Government will no longer use that threat, I will be very pleased to hear it, and I would suggest that he perhaps has conversations with those members of his Government who have advocated that point of view.
Anneliese Dodds
I will not give way, because I fear that the Committee is losing patience with the length of my comments. [Hon. Members: “More!] It is wonderful to see so much interest in the topic of taxation; I only wish that were always the case.
The Conservatives’ mood music on this issue has been worrying, as I have said. As I have referred to previously, the Conservatives’ MEPs have consistently either voted against or abstained on EU-level measures to promote tax transparency, and the Conservative Government were, sadly, unwilling to meet representatives from the European Parliament’s Panama papers investigative committee when they came to the UK.
Our amendment 23 would force these issues into the open and require a proper consideration by Government of how they could act to ensure proper data sharing, in order to combat tax avoidance and evasion. It is paralleled by our amendment 19, which would require the Government to undertake a review of our controlled foreign companies regime, with particular consideration of how it would be affected in the event of a no-deal Brexit.
The Conservative Government appear to treat countering tax avoidance as a game of whack-a-mole, rather than the long-term strategic approach that is surely required. As a result, we wish to press new clause 5 and amendment 23 to a Division.
In conclusion, the Government have no long-term plan for protecting the revenue on which our public services rely and appear to have no clear idea of how they will co-ordinate, or otherwise, our measures on tax avoidance with the EU27. A different approach is needed and my party stands ready to implement it as soon as we get the chance.
Kevin Foster
It is a pleasure to speak in this debate, which is not the first I have ever taken part in on tax avoidance. We have all had some enjoyable banter across the Chamber, but I think it is worth paying tribute to the hon. Member for Oxford East (Anneliese Dodds) for the sheer number of interventions she was prepared to take when she knew they would be challenging. Not many Front Benchers are happy to do that, so it is worth putting it on record.
I spent two years as a member of the Public Accounts Committee, which looked at the details of HMRC’s performance and in particular what work was being done to ensure that the taxes we set by law in this Parliament are collected. We need to be clear about what we are talking about when we talk about tax avoidance. In theory, someone who has an ISA savings account avoids some tax. That is not what we are talking about. What we are talking about is those who seek to use lawful methods, but stretch them to the point of incredulity.
Helen Goodman
The hon. Gentleman has just made the absolutely ludicrous and childish suggestion that buying an ISA is engaging in tax avoidance. For the avoidance of doubt, does he believe that HMRC includes ISAs in its calculation of the tax gap?
Kevin Foster
Normally I thank Opposition Members for their interventions, but that really was quite churlish. My point was that when people transfer their money from an ordinary savings account to an ISA they do not pay tax on the income from their savings, so guess what? They avoid a level of income tax. That is something we all think is right. It is how we incentivise saving and how many millions of people in this country save. So yes, tax is avoided but perfectly legitimately. That is not the point I am making, as the hon. Lady full well knows.
James Cartlidge
My hon. Friend is spot on: an ISA is technically a form of tax avoidance. The point, however, is that what irks our constituents is when international companies and others take advantage of avoidance schemes that may be lawful at the time, but which no normal citizen could in any way take advantage of—unlike an ISA, which is commonly available.
Kevin Foster
I thank my hon. Friend for that intervention, which gets to the point of the debate. Tax avoidance is when people create a very complex legal structure, for example having something offshore and routing it through a shell company. That is what we are targeting. People will look to minimise their tax liability; that is natural. I am talking about when it is clear that fictional legal companies are being created that do pointless activity or pretend to do something that is not being done, or when a value transaction is actually nothing more than just a wooden dollars transaction made with the intention of avoiding stamp duty or a liability. That is the point being made. We could go through the record of the Opposition before 2010 if we really wanted to, but we should focus on the issue itself. Tax havens did not just appear the day David Cameron walked into Downing Street—far from it.
The PAC looked at Google’s affairs. Before I sat on the PAC, I thought that a double Irish might be a drink and that a Dutch sandwich might be something involving Edam cheese. Actually, they were both ways in which corporations sought to avoid tax and route their profits into tax haven jurisdictions where the level of tax paid versus GDP was rather suspicious, or into islands, particularly Bermuda, where the amount being declared versus what the real economic activity was likely to be was rather suspicious. I will talk more about intangible property areas in a minute. The Dutch sandwich was an idea created by the Dutch Government to try to get IT firms to invest in the Netherlands. That was perfectly reasonable as something that they would look to do, but courtesy of some loopholes, people were allowed to transfer profits through from activity elsewhere. The result was not investment and jobs in the Netherlands, but significant levels of tax avoidance.
In the Public Accounts Committee, we used to be very keen on hearing more details about and having more of a focus in HMRC on where genuine tax evasion had taken place—where people had lied and hidden assets in offshore jurisdictions and not declared them. That is not about people using some clever trick; they had just lied to evade tax. It was vital that penalties followed on from that once it was discovered. If people constantly avoided prosecution, it almost sent a message that if someone is caught, they can just pay up. However, I am conscious that we are not discussing that area of the law today.
It was interesting to go through the House of Commons Library report on today’s debate and particularly to look at some statistics on where the tax gap comes from. The report mentions that in 2016-17, small businesses were part of the tax gap. However, there were also large businesses, and criminals were in third place—depriving us of billions of pounds of taxation revenue—which is why I welcome some of the measures that the Government are looking to bring in as part of the Bill.
For me, the big one is the provisions on intangible property. Clause 15 looks really simple—it is two lines—but schedule 3, which is the meat of the proposal, really starts to get into some of the detail. How the provision is enforced and how it works will be interesting, but I welcome the fact that we are moving to bring it in. As my hon. Friend the Member for Walsall North (Eddie Hughes) said, it is worth making a point about what intangible properties we are talking about. We are certainly talking about things such as adverts on Facebook and adverts on a search engine being pushed to the top, when someone searches for a particular brand or product. In the debate on the previous of group on amendments, there was an example where someone looking for help with gambling found that—guess what?—“How to help you gamble” was boosted to the top of a search engine’s results, because a particular company had paid for that to happen. That is the type of intangible asset that we will look to target.
Rachel Maclean
My hon. Friend has considerable expertise in this area and I welcome him updating the House. He mentioned some unintended and wholly undesirable consequences of this type of intangible property. Will he enlighten us on whether there are also some beneficial aspects of intangible property, given that the UK is a centre for tech creativity and dynamism and that these are the industries of the future?
Kevin Foster
That is what we have to balance in considering this new tax, because we do not want to shut down the entrepreneurial spirit in many companies and see such provision affecting those who are looking to set out for the first time to get a business going and perhaps to do something that changes the marketplace and really makes a difference. Some of the largest tech companies literally grew out of someone’s garage 10 or 20 years ago. Twitter did not exist when I joined the Conservative party. Facebook did not exist when I first stood for a local council back in 2002. We can see the way that those companies have grown and exploded. We do not want to set up a tax that knocks back genuine entrepreneurialism, but we also have to have a debate about how we ensure that there is a level and fair basis of taxation.
Reference was made earlier to high streets. The point is that a small shop in the centre of a town is paying business rates, collecting VAT, paying its staff and paying corporation tax, and we have to get to a point at which economic activities are fairly taxed. If a large online platform is taking millions of pounds in revenue and paying next to nothing, that is when the annoyance comes and there is a sense of unfairness.
We must have a mature debate on the future of tax in the online space, where activity is much more moveable. My hon. Friend was right to allude to that. These industries can shift much more easily than those that need a physical presence to trade and reach out to customers. A digital service company could be based in New Zealand, and we could all be using its services today from this building via smartphones, tablets or a standard internet link, in a way that would have been unimaginable 30 years ago.
We have to distinguish between genuine activity—for example, paying a company in New Zealand for a website design service—and a fake transaction or transfer of profits, where no one did anything other than raise an invoice in a convenient jurisdiction, into which the money was paid, even though all the economic activity was done elsewhere, the reason being there was an opportunity to avoid a layer of taxation. In such cases, one might see structures set up that link the corporate shell in that jurisdiction to another jurisdiction that is a tax haven or a place with a very low rate of taxation. The Dutch sandwich, which I mentioned earlier, started out as a good idea to encourage tech investment and ended up as a way to reroute profits and, when combined with the so-called double Irish, as a way of strongly minimising taxation liabilities.
Sir Hugo Swire
My hon. Friend is making some extremely good points with which I agree, but it is not only online companies such as Amazon that we need to work out how best to tax, but others, such as offshore gambling companies, that retain huge revenues generated by doing things in this country. Is he convinced that the thinking is going on in the Treasury on a root-and-branch reform of all taxation? It seems to me we are trying to play catch-up but that the world is changing quicker than our ability to tax this changing economy.
Kevin Foster
I thank my right hon. Friend for his thoughtful intervention. Obviously, I cannot speak for the Treasury, as a mere Back Bencher—[Interruption.]. I appreciate the confidence that my hon. Friend the Member for Walsall North has in me, but I cannot speak for the Treasury. I do not want to say too much about gambling taxation, given that we have just debated it, but we do need to look at the situation in the round, so my right hon. Friend was right to mention it.
My right hon. Friend is a distinguished Member of the House. He has been here for I think 17 years, during which time the economy has changed remarkably. Who would have thought back then that companies such as Woolworths would have faced a challenge from online competitors? Who would have thought that every one of us would be sat in this Chamber with a device that would allow us to buy the entire contents of a department store, order virtually anything we want, and access casino-like gambling opportunities for which not that long ago we would have had to make a trip to Monaco? We now have that all in our pockets—we can literally walk out of the Chamber and do it.
I share my right hon. Friend’s concern, but the economy is moving on. As I said in response to my hon. Friend the Member for Redditch (Rachel Maclean), we must not destroy the good, and we have to be careful not to chuck out the baby with the bathwater. The Treasury will have to look at that. The nature of work is changing, too, and that raises not only challenges for employment rights, but questions of how we tax fairly, given that it will be less and less the case that there is a big employer with lots of staff who are paid regularly, to which it is easier to apply restrictions.
James Cartlidge
I was waiting patiently for my hon. Friend to get back to what he thought intangible property was. Is he aware that proposed new section 608H(1) in schedule 3 to the Bill states:
“In this Chapter ‘intangible property’ means any property except…tangible property”?
Kevin Foster
Yes, it is an interesting one. I suspect that if I dealt with that intervention fully, I would be like the vicar in the church who has 10 minutes to unpack the Holy Trinity in an easy and understandable way—[Interruption.] I appreciate my hon. Friends’ confidence in my abilities.
Kevin Foster
I will deal with the intervention made by my hon. Friend the Member for South Suffolk (James Cartlidge) and then I shall give way to my hon. Friend the Member for The Wrekin (Mark Pritchard).
The idea is that something intangible is something that we cannot see and cannot hold, whereas something tangible is something that we can literally have in our hands, such as a phone or the copy of the Bill that I am holding now, or something that we can wear. Something that is intangible can be something that we own and to which we have a right. A classic argument about something intangible once concerned a Star Wars computer game, of all things: if I busily bought lots of things in that game using money, and someone else playing the game then sent their forces, which they had bought, to raid that property, would my property be being stolen? That is an interesting legal argument, although it must be said that some people might have a little too much time on their hands if they can become so involved in a discussion of a Star Wars computer game.
There are things that we own but, of course, there are also our own identities and profiles. You probably do not want me to go too far down this path, Ms Dorries, but we have previously had debates about information that is created online, and a data trail can become an asset that is worth money.
Mark Pritchard
I am in danger of making one intervention in three—or three interventions in one—but let me develop the theological point raised by my hon. Friend. Steam, ice and water are, of course, all the same: they are three in one, and one in three. I hope that that clarifies his point.
Kevin Foster
I am very grateful. I am sure that a student of divinity is about to fire off an email to me and my hon. Friend saying, “Actually, I am not quite sure that that is the case,” but it is great to hear my hon. Friend’s explanation of how the “three in one” in the case of water could apply to the Holy Trinity. Nevertheless, a detailed unpacking of the Holy Trinity is not listed for consideration on today’s Order Paper, and I should be talking about anti-avoidance measures—[Interruption.] I am glad to hear that the hon. Member for Bootle (Peter Dowd) thinks that the former would be more interesting. I am sure that at some point he will accuse me of giving a sermon in this place, although I will probably not be covering that subject at the time.
My hon. Friend the Member for South Suffolk rightly pointed to the measure in which intangible property was defined. It is also worth while for us to consider some of the exemptions, and how their working will be monitored by the Treasury. I am conscious that the Minister is not present, but I am sure that those who are currently on the Treasury Bench will note my remarks.
Proposed new section 608J states:
“Section 608A does not apply in relation to a person for a tax year if the total value of the person’s UK sales in that tax year does not exceed £10,000,000.”
How will we make sure that we do not suddenly see lots of taxed persons with £9,999,999.99 who seem to know each other quite well, or at least seem to be engaging in similar activities? I understand that the provision is well intentioned, and I understand the need for a de minimis level so that we target the larger companies that are intended to be deal with. I also understand—this takes me back to the intervention from my hon. Friend the Member for Redditch—that smaller companies should not suddenly be burdened with having to deal with a very large piece of legislation. However, I should like to know how we can ensure that this does not become a way of avoiding tax.
Proposed new section 608L, which is on page 187 of the Bill, is entitled “Exemption where foreign tax at least half of UK tax”. Again, how can we be sure that that taxation provision is genuinely met so that it does not become an avoidance mechanism?
Most of the changes in the Bill are welcome, however. As we leave the European Union, I would expect that we will still seek to co-operate. I do not think any of us would argue that it would make sense for us not to ensure that we share information to prevent the excessive avoidance or evasion of taxation, just as we have sought to work with jurisdictions such as Liechtenstein, which is not in the EU but has a treaty agreement with us on sharing information to prevent tax avoidance. I am also interested in following the consultation on the digital services tax, which will consider how we can introduce it without snuffing out the entrepreneurialism that we wish to see.
I am conscious that I have detained the Committee for about 19 minutes—[Hon. Members: “More!”] I hear the requests from SNP Members, who are obviously keen to hear a lot more from me, but, sadly, I must disappoint them on this occasion.
This has been a worthwhile debate. Intangible property is a key area for the future, in terms of not just the straight issue of ensuring that one or two large corporations are not avoiding tax we might think that they are due to pay, but opening up the whole debate of how we arrange tax as we move into a digital economy, when we are less likely to have physical things we can put our hands on in respect of taxable activity.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
The shadow Minister claimed earlier that our Chancellor has said that he wants to make the UK into a tax haven. For the sake of clarity and for the record, has my hon. Friend ever heard the Chancellor say that?
Kevin Foster
I have certainly heard my right hon. Friend the Chancellor talking about ensuring that Britain has competitive tax rates, that Britain is a competitive and good place to do business, and that we have a fair balance between raising taxation to pay for our public services and also ensuring that our tax system encourages rather than stymies economic activity in this country.
We heard earlier about the reactions of the EU27. I would point to the Republic of Ireland, which has a lower corporation tax rate than us. If we were to move towards the Republic of Ireland’s rate, it would be somewhat strange for it to say, “How dare you copy us.” This is not about encouraging a tax competition. States in Europe, whether they are inside or outside the EU, will look to provide the conditions for growth in their countries, and it is absolutely right that that is what the Chancellor and Treasury team in this country are looking to do. I certainly praise them for that. This is not about becoming a tax haven, although we might reflect on the fact that, judging by the actions of the Scottish National party and the Scottish Government, they are trying to turn England into a tax haven by shoving up tax rates in Scotland.
With that, I will draw my remarks to a close. I welcome what I see in this Budget. I do not think that the Opposition amendments and new clauses are necessary, for the reasons the Minister outlined at the Dispatch Box. This welcome Bill will bring in more tax, deal with avoidance and, at the same time, help to push our economy forward.
Alison Thewliss
The renowned Nobel laureate in economics Joseph Stiglitz has said that what we measure shapes what we strive to pursue. I tabled new clauses 14 and 15, in my name and the names of my hon. colleagues, to ensure that we are effectively striving to pursue the reduction in the tax gap and to consult fully on the provisions of this Bill. I support very much what the hon. Member for Oxford East (Anneliese Dodds) said and support her new clause 5 and amendment 23. She made some excellent points, most of which I fully agree with and endorse. I will not repeat what she said, however, as she made her points very clearly; she did a fantastic job in putting across the Labour party’s view.
It was bizarre to watch Government Back Benchers tie themselves in knots yesterday in opposing new clause 7, tabled by my hon. Friend the Member for Aberdeen North (Kirsty Blackman), in relation to entrepreneur’s relief. If the UK Government are confident that their policies are effective, they must not be afraid to review them. Indeed, reviewing them is all we can do under this Bill; as the hon. Member for Oxford East said, we are limited in what we can do here. So we do propose a review on that.
Likewise on the provisions on tax avoidance, we must gauge our progress by continually measuring the value and effectiveness of those policies. The hon. Member for Torbay (Kevin Foster) mentioned the Dutch sandwich. I am sure that was sensible when proposed and I am sure that the Dutch Government then looked at it and decided that actually it was not working. They then will have reviewed the policy and looked at the detail and clamped down on that loophole; I am sure they must have done that as otherwise it would still be an issue. Likewise, this Government should do better at reviewing their policies, testing them, seeing how effective they are and making changes as a result.
Our proposal is in the spirit of achieving better, more robust policies in the future. We should also look to the world to see where the best polices are and see what we can do to adapt them, and we should collaborate with our near-neighbours in Europe, particularly to make sure we are not allowing companies to move around at will seeking the best policies to save money, rather than paying the taxes that they ought to.
There are many reasons why HMRC does not always collect the tax that it ought to be paid, whether through criminal activity, through evasion or avoidance or just through human error, and there is much more that can be done to address that. While a greater focus on the non-compliance of corporations is welcome, there is still ample opportunity to avoid paying into the system, and we need to look at that very seriously.
The SNP has long argued that the tax system is unnecessarily cumbersome and complicated. There are layers and layers of regulations and exemptions, which lead to loopholes appearing. The system seems to get more complex every year when we look at the Finance Bill, and there also appear to be armies of tax avoidance specialists seeking to exploit whatever gaps they can find.
Chris Stephens
Was my hon. Friend not astonished when the Minister admitted that no data is held on any of the higher-rate Scottish taxpayers who are registering themselves elsewhere in the UK, as peddled and promoted by the Scottish Tories last week?
Alison Thewliss
That is indeed astonishing, and if it is a problem, the Government ought to be looking at it. People living in Scotland should pay the appropriate amount of tax, because that is the price we pay for living in a civilised society. That is what the Minister said in his speech earlier. We also have to look at what we get for our taxes in Scotland. We get a better, fairer society, which is good for us all. All the academics in this field recognise that a fair society is better for us all.
Last year, this Government opposed my amendment to the Sanctions and Anti-Money Laundering Bill that would have increased the transparency of Scottish limited partnerships by ensuring that those partnerships had bank accounts. We are still waiting for a response from the Department for Business, Energy and Industrial Strategy on the consultation that closed on 23 July this year.
Hannah Bardell (Livingston) (SNP)
I served on that Bill Committee with my hon. Friend, and the work that she did was excellent. Does she share my concern about the damage being done to Scotland’s reputation by Scottish limited partnerships? The partnerships are nothing to do with the Scottish Government, they have not been legislated for in Scotland and we have no power over them there, but they are doing serious damage to Scotland’s reputation internationally, and the UK Government need to act.
Alison Thewliss
This Government absolutely do need to act on this issue. It cannot be right that something we have no control over becomes a noose around our neck when it comes to our reputation internationally. I expect this Government to come forward with something on this soon, because their not doing so allows this to continue to happen. The Herald, whose journalist David Leask has been a constant campaigner on this issue, has reported that
“in the year to March 2016, 95% of SLPs were set up by offshore tax havens.”
That ought to ring alarm bells for this Government, given the likely sums of money involved in these tax havens. I have tabled more parliamentary questions on this today, but the last time I checked, no fines had been issued to those SLPs that have not yet registered a person of significant control. Even pursuing those fines against SLPs could have brought large sums of money into the strapped Treasury coffers, never mind dealing with the underlying lack of transparency surrounding SLPs.
It is no secret that SLPs are being abused to carry out crimes abroad and launder money and that the anonymity they provide enables all this, but this Government are simply not doing enough to stop it. There was some progress after the Salisbury attack, and there was talk of clamping down specifically on Russian dirty money, but we have not yet seen that happen. We need to know what the Government’s plans are, because we cannot allow this to continue. I commend to the Minister the investigation on Uzbekistan by David Leask and Richard Smith, because the sums of money and levels of corruption involved are absolutely hair-raising.
The SNP has put forward many sensible proposals to crack down on tax evasion and avoidance, but they have been rejected by this Government time after time. No action has been taken on enforcing the people of significant control rules governing SLPs. No action has been taken on the alternative investment market loophole that allows families to register homes as business properties, effectively overriding inheritance tax. No action has been taken to make online retailers liable for tax avoidance when they falsely classify their goods as gifts. And no action has been taken to create a legal framework to combat tech firms who avoid corporation tax by registering implausibly low profits in the UK.
Hannah Bardell
On top of all that inaction, does my hon. Friend share my concern about the centralisation of HMRC offices? Highly skilled staff will lose their jobs because of this Government’s centralising agenda. In my constituency, more than 1,000 jobs are being moved from West Lothian to Edinburgh, which will create huge issues.
Alison Thewliss
I agree that that loss of expertise is a huge issue. I have a constituency interest, because many of these centralised offices end up being in Glasgow Central, but this also comes at a significant cost to the taxpayer. It is no secret that city centre office space in Glasgow is expensive, and there would be greater benefits in keeping those services in areas such as the Clyde Gateway, which is also in my constituency but much cheaper, or in Livingston. That would provide better value for money for the taxpayer than having them all in city centre offices.
Luke Graham
I thank the hon. Lady for giving way. She is making some good points about decentralisation. Would the SNP join me in looking at some of the Scottish Government’s new powers? Instead of basing offices in Dundee, offices should be located in more affordable areas, such as Clackmannanshire or Perth and Kinross.
Alison Thewliss
Dundee is affordable. There is a balance—[Interruption.] The hon. Gentleman is not listening, but there is a balance here. We need local infrastructure, transport and so on to support such things, but there is an argument for doing all that. It used to be UK Government policy to decentralise large office blocks, but they have cut that back over the years, and offices are now disappearing. He can give me no lectures about that. There are countless examples of the UK Government cutting offices. So many jobcentres in the city of Glasgow have been cut that my constituents now have to take two buses just to get to one, and I do not see any Scottish Conservatives standing up for that.
Helen Goodman
I congratulate my hon. Friend the Member for Oxford East (Anneliese Dodds) on a tour de force. I know she really is on top of this subject, having worked with her on the Sanctions and Anti-Money Laundering Act 2018. I thought her speech this afternoon was very impressive.
I will speak to new clauses 5 and 6, which stand in the name of my right hon. Friend the Leader of the Opposition and deal with tax avoidance and evasion. I am sure Members on both sides of the Committee recall what happened on 1 May 2018, when there was a cross-party move, spearheaded by Back Benchers, to introduce public registers in the overseas territories. The Government, in the form of the Minister for Europe and the Americas, conceded that this was a change that should be made. We had tabled an amendment that would have required similar public registers in the Crown dependencies, but the right hon. Gentleman said he would prefer to take a voluntary approach and asked me not to press the amendment. In the spirit of co-operation I agreed not to do so. Today I ask the Government what progress they have made with the Crown dependencies on that voluntary approach. In public, the Crown dependencies are going around saying how delighted they are that the pressure is completely off and how nobody in this House is interested in having similar public registers for the Crown dependencies as for the overseas territories.
That is relevant to this tax debate because the OECD has estimated that, across the OECD countries, the tax lost to the secret jurisdictions is between $100 billion and $240 billion. An independent researcher, Tax Research LLP, has estimated that this country’s tax loss is £18.5 billion a year, which is a significant sum. I know the Treasury thinks everything is going well, but it is not so flush that it can just wave away £18.5 billion.
I thought I had better follow up with Ministers and ask what they were doing, so about three months later I asked the Foreign Office what discussions it was having with the Crown dependencies. This is the answer I received:
“The Foreign and Commonwealth Office is not responsible for UK engagement with the Crown Dependencies regarding existing beneficial ownership arrangements, and has therefore not had any discussions with the Crown Dependencies on this issue.
The Ministry of Justice is the UK Government Department responsible for the UK’s wider constitutional relationship with those jurisdictions.”
So obviously I asked the Ministry of Justice what it is doing to pursue public registers of beneficial ownership with the Crown dependencies. It said:
“The Crown Dependencies are not part of the UK.”
Okay, even I have latched on to that one. It continued by saying that they are self-governing and that:
“The Ministry of Justice manages the constitutional relationship between the UK and the Crown Dependencies. Ministers and officials routinely discuss a range of matters…but it is not my Department’s role to make specific recommendations”
on company registers of beneficial ownership. It went on to say:
“The Ministry of Justice also liaises with the Home Office as the lead UK Department for arrangements on sharing beneficial ownership information”
Blah-de-blah. Finally, it said:
“The Government intends to use its best endeavours, diplomatically”
—by which is meant, “Let’s hit the ball back over to the Foreign Office”—
“and with international partners, to promote public registers of company beneficial ownership as the global standard.”
That will not do. We were made a promise by Ministers on 1 May. This move would help us significantly to reduce tax avoidance.
I also asked Ministers at Treasury oral questions what their estimate was of the amount of money that would flow in from the changes we had made on the overseas territories—this was the part where we had a consensus. I asked that because I could not see anything in the Red Book on it. The Minister said, “Oh well, this was all pie in the sky. We have not done any work on it.” This is why new clauses 5 and 6 are really sensible. The fact is that if Ministers stand up and offer legislation or make promises but do not follow through, there is no point in this House doing anything. That is why requiring impact assessments in the legislation will enable us to keep track of what Ministers are doing and where they have got to. That is why I urge them to do this. It is in their interests, as they will be able to use the impact assessments to keep track and to manage their officials, who are doubtless beavering away to the best of their ability, given the political direction that they are getting.
Earlier, we debated distribution and the impact of the Budget. It is disappointing not to get information about the distributional impact of the Chancellor’s measures. For many years, the Treasury Committee was instrumental in ensuring that distributional analyses were undertaken. I am not clear where we are on this, but I urge Ministers to publish the proper distributional analyses. That will facilitate informed public debate, rather than the exchange of prejudices. I am sure that that is ultimately what Ministers want.
Eddie Hughes
It is a pleasure to follow the hon. Member for Bishop Auckland (Helen Goodman), although I have to say that the contribution from the hon. Member for Glasgow Central (Alison Thewliss) was the speech by an Opposition Member that most excited me, not least because I wrote a paper on blockchain for the think tank Freer, where I considered the merits of the technology and how it might help us to improve the efficiency of government. I am delighted to say that on Thursday I am going to have lunch with Dr Craig Wright, one of the people associated with the creation of bitcoin, which celebrated its 10th birthday recently. I understand that the Government and the Treasury Committee have given some consideration to the use of crypto-currencies and crypto-assets and how they might be appropriately governed in the future. That is the job of the Government. They have to keep pace with improvements and diversity in technology and understand where money is being used and created, to make sure that their tax take is optimised while observing the general principle of low taxation. The second Roman emperor, Tiberius, said that a good shepherd shears his sheep but does not skin them. I think that is an appropriate maxim for us to follow, but sometimes the Government’s problem is that they need to find the sheep in order to shear them.
Patricia Gibson
I rise to speak in support of new clauses 14 and 15. The need for improved transparency over UK public finances is urgent and the case is compelling, which is why I was keen to speak on those new clauses. I note the other provisions dealing with tax avoidance that have been put forward and about which much has been said today.
There has been far too little consultation on the Bill with stakeholders, but what we do know is that we desperately need greater transparency over the UK’s public finances. I am deeply disappointed that amendment 24 was not selected, as there are particular issues of transparency around those companies that deliver public buildings at public expense. Particularly those engaged in public-private partnership projects need to be more open. There would have been cross-party support for that amendment, but the SNP was not asked to support it, which is a shame.
PPP projects need to be transparent and more accountable to the public in order to protect the public finances. They are a perfect demonstration of why that accountability and openness are so essential. So I have concerns about what is not in the Bill. We cannot talk in any context about openness in public finances without talking about the private finance initiative, and I believe that there is cross-party support to have that conversation. This was a Tory policy embraced by Labour. Indeed, George Monbiot has called the PFI situation:
“A racket, the legacy of 13 years of New Labour appeasement, triangulation and false accounting.”
The scheme was so enthusiastically embraced by the previous Labour Administrations, it was like a grand love affair. Scotland was not just the testing ground for this disaster—the first PFI project in Britain was the Skye bridge project—it also has a far higher proportion of such projects than anywhere else. Writer Gerry Hassan has pointed out:
“Scotland has 40% of PFI schools with 8.5% of the population.”
Why is that? Could it be that, like the poll tax, Scotland became the testing ground for the PFI nightmare? It certainly looks that way, although if anybody wants to contradict that, I am quite happy to hear what they have to say.
It is unacceptable that PFI companies often inhabit the shadows. Their tax arrangements need to be sufficiently transparent and open so that we can have proper transparency in our public finances and we can be confident that those being paid very lucrative sums—way over the odds for public buildings—are in turn paying their due in taxes and have financial arrangements that are transparent and open to the public. That is why these new clauses are important and why they need to be included in the Bill.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
Is the hon. Lady aware that, in England, PFI schools under the control of local authorities can be taken away from the local authority and forced to academise, but the debt—the liability—stays on the books of the local authority? Does she believe that that is transparent and fair?
Patricia Gibson
It is absolutely not transparent and it is yet another example of how PFI has been nothing short of a disaster. It is our local authorities, our schools and our hospitals that are paying the price.
Carol Monaghan (Glasgow North West) (SNP)
My hon. Friend, like me, is a teacher by profession and has had to deal with working in a PFI school. Often these schools have been developed by companies that have questionable tax policies and produce a substandard product that parents, pupils and teachers have to deal with, and local authorities are saddled with the debt for many years to come.
Patricia Gibson
My hon. Friend makes an excellent point. I am just about to go on to talk about not only the crumbling PFI schools that we are now left with and which the local authorities are paying for—there is no transparency and accountability on these contracts—but alleged criminality that has taken place around these contracts in my constituency of North Ayrshire.
Alison Thewliss
I share my hon. Friend’s frustration with this. When I was a councillor in Labour-run Glasgow City Council, if we wanted to see a contract, we had to go and sit in a room and read the contract; we could not even take it away. When the council discovered that the company had managed to build IT and home economics rooms without ventilation, it cost the council a fortune to reopen the contract and get those things put right.
Patricia Gibson
Again, my hon. Friend points to the lack of accountability and the hotchpotch—the rushed contracts put together by PFI, which benefited somebody, but did not benefit our local authorities or our children, and they do not benefit the patients in hospitals.
There is no better example of the need for new clauses 14 and 15 than North Ayrshire Council in my constituency. This Labour-run council had a PFI process that was severely flawed and was uncovered by local journalist Campbell Martin. Some have even insisted that criminal activity was involved, since while the council appeared to have two bids for construction projects—therefore seeming to provide the genuine competition required by EU procurement rules—in fact, the evidence suggested that one of those bids was from a subsidiary of the other company submitting a bid, so there was actually no competition at all. The Labour council was made aware of this before the contracts were awarded, but awarded them regardless. In the opinion of one ex-detective, the evidence showed
“criminality from start to finish.”
Another former officer stated that a common law crime of forgery and uttering should have been pursued. Right there we see the need for more transparency. I for one would like to see more transparency on the tax arrangements of such companies, as this is very much in the interests of the UK’s public finances.
All this information relates to a public-private contract now costing taxpayers over £1 million every month in North Ayrshire. Add to that the schools that are crumbling across cities such as Edinburgh, and we have real questions about these PFI firms. For projects of a capital value of £4 billion in Scotland, we will repay £22 billion, with our schools spending 8% of their budgets on paying off these Labour PFI debts. Can we really allow any lack of transparency around the tax affairs of such companies?
It is absolutely essential that there is more transparency around how UK public finances finance public sector projects. The tax affairs of these companies and their wider financial affairs need to be open to scrutiny because they build or have built our public assets. I urge the Committee to support new clauses 14 and 15.
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
I want to discuss the clauses in the Bill that seek to tackle tax avoidance and evasion. Combined, these measures will seek to raise billions of pounds for our public services by further clamping down on this serious matter. My hon. Friend the Member for Walsall North (Eddie Hughes) identified clearly that these measures will raise much needed extra money for our public services.
Rather than raising taxes for businesses, this Government are focusing on making sure that tax liabilities are paid. They have a strong track record of clamping down on those seeking to avoid paying their fair share. This Budget builds on that track record, with no fewer than 21 measures to protect revenue and bring in more tax by tackling fraud, avoidance and unfair outcomes.
On a related point, I very much support the introduction of a new digital services tax, which is not technically a measure designed to tackle tax avoidance, but which will nevertheless make our tax system more fair and fit for purpose in the digital age. The Chancellor is right to try to find a global solution, but in the meantime this measure is a step in the right direction that will make the tax system fairer for small businesses in high streets in my constituency in the Scottish borders that are struggling to compete with the likes of online giants such as Amazon. Of course, in Scotland, these businesses are also struggling with the high tax regime imposed on them by the SNP Scottish Government in Holyrood.
Other clauses in the Bill, such as those to ensure that HMRC is a preferred creditor in business insolvencies, that more tax is paid to the public purse and that we crack down on insurance companies routing services through offshore territories, are certainly welcome.
Jim McMahon
Does the hon. Gentleman accept, though, that the trade-off with the digital sales tax and the relief being offered to some premises in town centres just is not enough? Take, for instance, the former Textiles Direct unit in my local shopping centre, which has been empty for some time, but has a rateable value of £500 per square metre. Compare that to the Amazon warehouse near Manchester airport that pays just £44 per square metre. How can it be right that the gap is so large?
John Lamont
Clearly, I cannot speak about the circumstances in the hon. Gentleman’s constituency, but these measures are clearly a step in the right direction. I know the number of businesses in my constituency that contact me. They are competing with online businesses and other digital platforms to provide the same or similar types of services. It is just not fair when businesses are able to run very profitably, making a big turnover from a garage or attic, when at the same time the same service or shop on the high street is paying significantly higher business rates. Of course, in Scotland, we have the additional challenge of the additional taxes that businesses are having to pay through the Scottish Government’s high-tax agenda.
Luke Graham
I refer the Committee to my entry in the Register of Members’ Financial Interests.
Several provisions in the Bill will help to deal with money laundering and tax avoidance, and I want to touch on a few of them, as well as on some of the comments that have been made by Labour and SNP Members, but first I would like to echo some of the Minister’s comments about tax in general. Conservative Members pride ourselves on having a low-tax but fair system that rewards work and enterprise, but ensures, in all things, that when someone has a tax liability, they should indeed pay it.
Tax should be low right across the United Kingdom. One of my Scottish colleagues referred to charges for higher-rate taxpayers in relation to the movement of residency between Scotland and England. As I am sure that SNP Members will appreciate, it is not just higher-rate taxpayers who are affected. As has been well documented over the past few months, anyone earning over £26,000 in Scotland is now worse off than if they were anywhere else in the United Kingdom. In fact, it had to be confirmed by one of the senior generals in the British military that because of the SNP’s changes, men and women in the British armed forces would pay more tax in Scotland than they would anywhere else in the world. These changes are disadvantaging my constituents and companies.
The counter-argument is that somehow those tax changes will make things fairer for my constituents, that they are providing huge opportunities, and that we should be ashamed of ourselves for not doing more. As my hon. Friend the Member for Walsall North (Eddie Hughes) said, the tax changes introduced by this Conservative Government have increased constituents’ income by £1,250. The tax changes made by the SNP in Scotland have given my constituents 38p a week. That is it—all this change, all this cost and all this disadvantage for 38p a week. If the SNP Government are going to make changes, they must make real changes that make people’s lives better and follow some of our copybook.
A key point has been raised about Scottish limited partnerships. I sat on the Committee that considered last year’s Finance Bill, and when we discussed that matter with several Opposition Members, I voiced my support for changing these partnerships. We saw a change in the law in 2017, and there are now disclosure requirements for those in a limited partnership, but I want to ensure that the context of these partnerships is understood. They were originally enabled under the Partnership Act 1890, and then confirmed again in 1907 by Scottish, English, Welsh and Northern Irish MPs, so this measure was not somehow imposed in Scotland.
Alison Thewliss
Does the hon. Gentleman acknowledge that the regime of persons with significant control has not been enforced to any extent? SLPs owe the UK Government £2 billion in fines. Would he not welcome that money for his constituents?
Luke Graham
I thank the hon. Lady for her intervention. Whenever we have made a law, we should enforce it. I recognise the Government’s contribution through investing more money in HMRC, but another key area is Companies House, where a lot of this information is held. I would argue that it certainly could do with extra resources to ensure that things can be properly cross-referenced. A number of issues in my constituency have revolved around significant control and ownership of different corporate entities across the United Kingdom. Companies House would benefit from additional resourcing to help to tackle some of these issues.
The hon. Member for North Ayrshire and Arran (Patricia Gibson) talked about PFI schemes. She was very critical of Labour’s schemes when it was in administration in Edinburgh. It is important that the SNP takes some responsibility for the fact that it has been in power for over a decade, as the implementation and management of a number of these PFI schemes was overseen by the SNP. Although they have now converted to the PPP scheme, there are still a number of criticisms, including of the healthcare facility in North Ayrshire. It is right to be critical, but that criticism should be even-handed.
Luke Graham
I will just make a bit more progress.
The successes that we have seen from this Government include lowering corporation tax, which has led to record income from corporation tax, and collecting an additional £185 billion of revenue since 2010, which we would not have been able to achieve were it not for the Government’s tightening of tax and tax avoidance measures.
The Conservative party prefers to have a low-tax and fair system. Some of the measures in the Bill are specifically fit for purpose in this more globalised and complicated economy. For example, schedule 4 is on profit fragmentation, which means that Government can focus on where profit is earned rather than getting caught between the different jurisdictions in which corporate bodies lie.
Clause 83, on international tax enforcement, is particularly important. Before I came to this place, I worked in international finance. With multinational companies, it is very difficult to track where income is earned and where it will finally end up, and that may not be due to deliberate action by such companies. New tax enforcement measures that give HMRC and the Treasury additional powers of disclosure will be very valuable and will increase transparency in our tax system.
The hon. Member for Oxford East (Anneliese Dodds), who is no longer in her place on the Labour Front Bench—
Luke Graham
I appreciate that; I am sure that it will be well recorded in Hansard.
I, too, was an active participant on the Sanctions and Anti-Money Laundering Bill, and I agreed with the hon. Member for Oxford East on many points, especially about looking at the actions taken on overseas territories and Crown territories. In accepting some of the amendments, the Government committed to a course of action, and I am sure they will be pushing that through.
Tax collection is one of the most important duties of the Government. Whether in central Government, the devolved Administrations among the nations or, indeed, down in local authorities within the devolved Administrations and right across the United Kingdom, tax collection and record keeping are incredibly important. I welcome some of the measures introduced by the Government to increase the resourcing to HMRC. I would hope to see from right hon. and hon. Members the sharing of best practice and that we ensure that some of the people working for our tax collection authorities around the United Kingdom are going right around the United Kingdom. A number of local authorities need additional support and help with tax collection, and the sharing of best practice in technology, to ensure that they are actually collecting the tax revenues they are due.
I have two local authorities in my constituency, Perth and Kinross Council and Clackmannanshire Council, both of which face very extreme council funding issues in terms of raising local funds and cuts imposed by Edinburgh. When we look at the local services that have had to be cut as a result of the reduction in funding from Edinburgh, despite the increase in the Scottish block grant, we see that it is having a significant impact on education services, health services and local street services in my constituency. I would hope that even SNP Members could put pressure on the devolved Administration to make sure that they focus on proper tax collection, and also on proper tax expenditure.
As I have said, action taken by this Government has helped to bring in over £185 billion of additional tax revenue that we would not otherwise have been able to collect. Corporate tax revenues have also increased.
A key point has been raised—many Labour Members have spoken about it—about inequality when talking about absolute and relative poverty. This is important to note, because I think that the House should look at more objective statistics. In last night’s debate, I talked about strengthening the OBR to make sure that we can have credible statistics that Members on both sides of the House recognise, acknowledge and accept.
One key aspect of that is to look at the Gini coefficient, which has been recognised as a measure of inequality for a long time. If we look at the Gini coefficient in 2010 compared with where we were in 2016-17, we see that there has been a reduction in the coefficient, which means an improvement in the living conditions of people in the United Kingdom. Inequality has actually reduced according to the Gini coefficient.
Luke Graham
I think that is a good thing that should be welcomed, as I am sure the hon. Gentleman agrees.
Jim McMahon
Statistics can always be massaged to fit the agenda of the person citing them, but what cannot be escaped is the fact that increasing numbers of people are queuing up to use food banks because they cannot afford to feed their families and put food on the table. That is my measure of whether this country is doing well. How does the hon. Gentleman respond to that?
Luke Graham
The hon. Gentleman proves my point. He disregards an objective Gini coefficient statistic, which is accepted worldwide, and instead puts forward a subjective view on food banks that is widely contested across the House.
I would say that the increase of food banks is a major issue that we have covered extensively in debates in the House. However, taking those on the lowest incomes out of income tax altogether, getting more people into work and introducing the national living wage are the kind of measures that really do improve things for the poorest in society, and they are exactly what the Government are delivering. Our Budget has not only prioritised expenditure elements—I welcome a city deal in my region, the Tay region, with £150 million of extra expenditure—but focused on how to get more tax collected.
As I said at the outset, it is important that we have a low-tax system that is also a fair system, and that the people who should pay tax are paying the right amount.
Kevin Foster
I am listening to my hon. Friend’s speech with great interest. What are his thoughts about intangible assets, which we were talking about earlier? Does he agree that we really need to address such issues and to start considering how we can make sure that tax is both collected and fair?
Luke Graham
I thank my hon. Friend for his intervention and I could not agree more. Intangible assets are becoming an increasing part of the global economy. Just a few years ago, I did a study in relation to the Prince’s Accounting for Sustainability project. When we looked at some of the figures, they clearly showed that up to 80% of the value of the Standard & Poor’s 500 index in the United States was being held in intangibles. In considering some of the accounting standards and taxation measures that we are introducing, we could be missing up to 80% of that value, which would not then be reflected in the share price or indeed in the tax revenues that could be captured. I agree with my hon. Friend that we should look at those measures.
Without giving the Prince’s Accounting for Sustainability project too much of a push here in the Chamber, I will say that a number of the reports that it has put forward, in partnership with businesses in the United Kingdom and internationally have been really positive. They look at how we can capture some of the value of intangibles, but they also consider human and social capital. The organisation has published a number of reports, and I encourage Members to read them, because they could help to inform our policy making not only on the digital services tax, but when it comes to evaluating the impact and true value of some of the companies and enterprises across our country. It does not matter whether it is the small enterprise on our high street or, indeed, the new multinational that is capturing funds from around the world. It is about our identifying value and then being able to show to shareholders, Government and the local community the social, human and physical capital contributions that are being made to our economy.
Some people find Budget debates dry, but I find them incredibly exciting. The hon. Member for Aberdeen North (Kirsty Blackman) said last night that she enjoyed a good read of the Budget documents at home—I could not agree more. This Budget gives us plenty to read and plenty of food for thought, which is why I will support the Bill today.
Chris Philp
It is a huge pleasure to follow my hon. Friend the Member for Ochil and South Perthshire (Luke Graham), who is always an incredibly eloquent and articulate commentator on matters financial.
I am delighted to see that news of my speech has spread to the office of the shadow Chancellor, the right hon. Member for Hayes and Harlington (John McDonnell), and that he has come to the Front Bench especially to hear it. I am delighted that he has chosen to come to the Chamber for this purpose; I eagerly await the imminent arrival of the Chancellor as well.
I want to speak to new clauses 5 and 6, which were tabled by the shadow Minister, the hon. Member for Oxford East (Anneliese Dodds). Their substance would require more analysis and reports on various aspects of the Government’s programme in the areas of avoidance and evasion. However, as so often in life, action and results speak much louder than reports and words. The Government’s actions and the results they have achieved are far more powerful than any call for evidence or any call for a report can demonstrate.
The hon. Lady posed some questions about whether the tax gap is the best measure. It is an internationally accepted measure and it provides for consistent comparison over time, so it is a good way of consistently comparing the record of one Government with that of another. There may be other measures, but it is at least a consistent measure and it is also a good way to compare different countries, as well as to make comparisons within a country over time.
The current tax gap in the United Kingdom is 5.7%, which is extraordinarily low by comparison with other major countries and significantly lower than it was when Labour was in office, when it was between 8% and 10%. Whatever quibbles the hon. Lady may have about the things that are included or excluded, what is clear is that the tax gap is low compared with what it was under Labour and low by comparison with other countries. That is not surprising.
Chris Philp
But before I lay out the reasons why it is not surprising, I will give way to my hon. Friend.
James Cartlidge
My hon. Friend is making an excellent speech on what action is happening, but does he agree that one thing not captured in the statistics is what I would call positive inducement as opposed to avoidance? If there are competitive rates of tax, people are encouraged to avoid avoidance and conduct legitimate activity by paying a standard tax.
Chris Philp
My hon. Friend is quite right. Having low and competitive rates of tax does attract people to this country, who then pay corporation tax they otherwise would not pay. I will come on to precisely that point in a few moments.
The reason I was explaining why it was not surprising that our tax gap has reduced is that the Government have taken quite a large number of measures to combat tax avoidance and tax evasion since 2010. In this Budget alone, there are 21 such measures. I was rather disappointed that by voting against the Budget on Second Reading, Opposition Front Benchers were expressing their disagreement with those 21 anti-avoidance and anti-evasion measures.
Anneliese Dodds
I fear, very sadly, that the hon. Member did not hear what I said on that point earlier. It is because those measures are far too weak and do not go far enough that we are voting against them. I set that out very clearly in my previous remarks.
Chris Philp
I am not sure that that is a very good basis for voting against something. A move forward is a move forward. I have yet to hear a detailed and coherent set of proposals that would take these measures further forward. I am sure that those on the Treasury Bench are always eager to receive ideas on measures that would raise revenue. If the hon. Lady wanted to propose ideas on the Floor of the House, I am pretty sure she would find a ready audience. One such measure, the diverted profit tax, has directly raised £700 million since 2015. In addition, it is interesting that businesses talk about not just the direct effect of the diverted profit tax. Some companies, realising that they might be caught by the diverted profit tax, choose to change their behaviour and effectively choose to pay ordinary corporation tax in a more compliant way. That does not appear in the diverted profit tax figures, but it is none the less successful in changing behaviour.
Anneliese Dodds
I am very grateful to the hon. Member for giving way; he is being very generous. I would like to mention, however, that I did refer in my speech to Labour’s tax transparency and enforcement plan. In fact, I referred to three cases where the Government have rightly learned from that plan, which is fabulous, and are either completely or partially adopting some of our suggestions. There are, however, many other areas where they need to take action. They should look at our plan and learn.
Chris Philp
The fact that the Government have adopted three measures shows that they are not only a Government who listen and adapt, but a Government who have taken more than 100 anti-avoidance and anti-evasion measures since 2010. That is a record the Government can be proud of, although there is always more that can be done. I will come on to one idea later.
The hon. Lady suggested in her very long and at times entertaining speech—perhaps inadvertently entertaining, but it was entertaining—that the Government had not shown leadership in the area of organising international co-operation to combat tax evasion. She also said it was a concern that we are leaving the European Union as we might lose that as a forum in which to combat tax evasion and tax avoidance. The most effective forum is the OECD’s BEPS initiative—the base erosion and profit shifting initiative. The UK Government have been a leader in this area—for example, on action five, which limited the deductibility of interest payments against corporation tax. That is another area where the UK Government have shown genuine global leadership.
Kevin Foster
Listening to my hon. Friend’s speech, I can see exactly why the shadow Chancellor rushed to the Chamber to enjoy it. On global co-operation, what does he make of the many treaties we have signed with other jurisdictions, such as Liechtenstein, which have allowed us to get hold of tax information and ensure there cannot be places where British taxpayers hide?
Chris Philp
That is an example of one of the many areas where we have taken action. Getting information from that jurisdiction and, I think, Switzerland has helped us to combat people who are not paying the tax they should. The proof of the pudding is ultimately—I can see the flood of hon. Members on to the Opposition Front Bench continuing—in the eating. The fact is that the amount of money collected in corporation tax has gone up from £35 billion to £55 billion.
The hon. Member for Stalybridge and Hyde (Jonathan Reynolds), who was in his place earlier, shook his head when that point was made and referred to an IFS report, which he said made the point that if corporation tax rates were higher, they would raise more money. I have had the opportunity to look up that report since then. The article was in The Guardian, which is hardly a Conservative or right-wing newspaper—it may be too right wing for the shadow Chancellor, but it is not too right wing for me—and although any amount of money that might be raised in the short term is one thing, it goes on to say the IFS stated that “substantially less” will be raised in the medium term as companies respond by investing less.
The hon. Member for Oxford East asked what the intellectual backing was for suggesting that lowering tax rates increases revenue. That backing comes, of course, in the form of the Laffer curve, named after Professor Arthur Laffer, who made the case very coherently that lowering rates can increase the take—my hon. Friend the Member for Solihull (Julian Knight) made this point earlier—by encouraging investment and encouraging companies to relocate to a jurisdiction where there are lower rates of tax. That is no theoretical thing—[Interruption.] It is not only a theoretical thing, but a practical thing.
Since the Government introduced lower rates of corporation tax, a number of companies have chosen to take advantage of them by locating into the UK. Most recently, in August this year, Panasonic moved its European headquarters from Amsterdam into the United Kingdom, and clearly, competitive rates of tax were part of that. Back in 2012, when the former Chancellor, George Osborne, set this course, a whole number of companies announced that they were locating back into the UK, including Aon, which located here from the United States, Starbucks, which located its corporate HQ here from the Netherlands, and WPP, which located its corporate HQ here from the USA. More recently, Unilever considered moving its corporate HQ out of the UK to the Netherlands, but there was a huge shareholder revolt and it chose to stay here. Those are practical examples of a competitive tax system in action. That is part of the reason why the tax yield has gone up so considerably.
Alex Chalk (Cheltenham) (Con)
Not just companies but entire sectors and industries might be attracted to come here. The UK film industry is so buoyant and world-leading in very large part because of the benign tax environment that it can enjoy.
Chris Philp
My hon. Friend is right to draw attention to the way in which very favourable tax systems can indeed attract companies to this country. We should be proud of the fact that we are attracting the world’s leading companies to the United Kingdom.
I am sorry to refer to the speech by the hon. Member for Oxford East so often, but it was a very full speech and there was a great deal to reply to. She suggested that the Chancellor of the Exchequer said that our plan was to become a tax haven. He never used the words “tax haven”, but he did say that we could be a tax competitive economy. There is nothing to apologise for in saying that we will be a tax competitive economy and attract companies to locate here. If there is a tax haven in Europe, it is Luxembourg, so the hon. Lady should reserve her ire for that jurisdiction.
Anneliese Dodds
I am very grateful to the hon. Gentleman for giving way; he is being very generous. I have not been reserved in showing my ire for Luxembourg; in fact, I have campaigned for a long time in relation to its tax practices. I am very glad that he has given me the opportunity to respond on this point, because I looked up exactly what the Chancellor did say. He was asked by the newspaper Die Welt in January 2017 whether the UK would become a “tax haven” for Europe, and he responded that the UK could be “forced” to abandon its European economy with European-style taxation. When the Prime Minister’s spokesperson was asked if she agreed with this assessment, she confirmed that the Prime Minister was in agreement and would stand by him.
Chris Philp
The words “tax haven” were not his, and what he clearly confirmed in response was the he intended to create a tax competitive economy, which we can all be proud of, and I will certainly support him in creating it.
I feel that I should move on—although I will happily take more interventions—to new clauses 14 and 15, which were spoken to by the hon. Member for Glasgow Central (Alison Thewliss), the SNP’s Front-Bench spokesman. In her speech, she drew attention to the importance of transparency, and she was right to do so. We have already made significant moves on limited companies and limited liability partnerships. Persons of significant control now have to be disclosed on the Companies House register, and I fully agree with her that that should be comprehensively enforced.
Alison Thewliss
The problem is that it is not being comprehensively enforced. About £2 billion is due in fines from SLPs. If the Government are not going to collect £2 billion, why on earth are they putting forward austerity cuts? They could have that money easily.
Chris Philp
It will not have escaped the hon. Lady’s notice that by the fifth year of the five-year period there is a fiscal loosening of £30 billion—that is hardly austerity—and that the NHS will receive a huge amount of extra money, including the NHS in Scotland via Barnett consequentials. I think that we can say very clearly that this was not an austerity Budget. I agree, however, with her more serious point. As my hon. Friend the Member for Ochil and South Perthshire said, where a law is passed, it should be properly enforced, and if there is more scope to enforce this law, it should certainly be done.
A further legislative measure was announced over the summer in relation to transparency. By 2021, we will start recording the ultimate beneficial ownership of property owned by companies, which is an important measure, because some properties, particularly very expensive, high-end properties, are often owned in offshore companies, but there is currently no transparency in respect of who owns those companies. As of 2021, we will know who the ultimate beneficial owners are, and that will also create an interesting taxation opportunity that I strongly commend to the Financial Secretary.
At the moment, when an ordinary property is bought or sold by an individual, it triggers residential stamp duty, but when a transaction takes place whereby the company owning the property is sold, no residential stamp duty is paid, because, as far as the Land Registry is concerned, no change of ownership has taken place. At the moment, we have no visibility over any change of ultimate beneficial ownership, because it is not registered, but from 2021 we will, because that change will have to be registered. I suggest, for a future Budget, that a change of ultimate beneficial ownership should trigger a stamp duty charge as though for a direct change of ownership, as would happen if any of us bought a property. That would yield significant extra residential stamp duty.
I will give an example. I am aware of a transaction in Belgravia, not far from here, that took place two or three years ago. It was a collection of luxury houses developed by an offshore company—based in the Cayman Islands or British Virgin Islands—and sold to a Chinese gentleman for £110 million, but he did not buy the property and therefore no stamp duty was payable. He bought the offshore company and no stamp duty was paid. Had that change of ultimate beneficial ownership been registered and had stamp duty been payable, a stamp duty charge of about £16 million would have been crystalised for the Exchequer’s benefit.
I suggest we collect that sort of money in the future. Of course, that property is liable for annual taxation on envelope dwellings, because it is held in a company, but that only levies at a rate of £226,000 a year, so the payback period is 73 years, and most of these properties are traded more frequently than that. I challenged the hon. Member for Oxford East earlier to come up with some ideas for raising revenue and combating non-compliance. There is my idea. I hope that a future Budget adopts it and takes it forward.
I will conclude—I know the shadow Chancellor wants to hear more, but I have to disappoint him—by briefly addressing Government clauses 15 and 16 on intellectual property charges and charges in relation to fragmented profits. This is an extremely important area, because a number of large corporates are using intellectual property charges to spirit away profits attributable to UK operating activities.
Most notoriously, Starbucks used this about five or six years ago. It managed to extract almost all its UK profits by levying an intellectual property charge in relation to its beans. It said the beans were special beans and had a very high charge on them, and it managed to register pretty much zero UK profit. That is precisely the kind of intellectual property charge that these measures are designed to combat. An arm’s-length, third-party intellectual property charge cannot possibly result in zero profit for the company paying that charge, and it is right that the Government are taking further action.
Multinationals take their profits out of the UK and into, typically, the Luxembourg, Swiss or Caribbean jurisdictions, and intellectual property charges are more often than not the means by which they do so. I strongly commend clauses 15 and 16 for taking direct action to prevent avoidance measures that have undoubtedly cost the Exchequer. I think that I have spoken long enough about these clauses, which I shall be extremely happy to support if there are Divisions in 10 minutes’ time.
Paul Masterton
It is a pleasure to follow my hon. Friend the Member for Croydon South (Chris Philp), although, as ever, the problem with following him is that he has done such a thorough and detailed job of going through the minutiae of pretty much every single piece of the Bill that there is not a huge amount left for me to say. However, I will do my best and raise a few points that I know are particularly important to people and businesses—particularly small businesses—in East Renfrewshire.
One reason why these measures are so important comes back to the perception of fairness. Action to deal with tax avoidance and evasion is important because people often perceive that they are playing by the rules and doing everything right, while other guys—often the big guys with lots of money, who can afford to pay the “big four” huge sums—are able to find clever ways of reducing their tax liability.
There have been many examples of companies diverting profits, in a way that is not fair and is not right, to other jurisdictions with much lower tax levels to save themselves money. They are taking money that was produced when taxpayers in this country went into their shops and bought their goods, supporting them and their products, but that money is not being kept in our economy or reinvested in our economy. It is being shunted offshore to other jurisdictions, where it is swept up and often manoeuvred around other areas, particularly when a global business is moving it around to prop up less competitive and less successful parts of that business offshore.
Since 2010, an extra £180 billion or so has been brought in as a result of some of the measures that we have introduced. That is a huge amount, which is being reinvested in the country in which it was produced. It means more money for our schools, hospitals and small businesses—the sort of money that can give people a bit of a break.
I want to touch briefly on the new clause tabled by the hon. Member for Glasgow Central (Alison Thewliss). She talks frequently, and with a great deal of knowledge, about Scottish limited partnerships—rightly, I think, because they are being increasingly scrutinised and are coming under the spotlight. They have been around for a long time, and previously no one paid much attention to them—no one really understood what they were being used for. They fall within a slightly odd grey area in terms of the Companies Act 2006. In my former job as a pensions lawyer, they were used as a vehicle to allow companies to put an extra step between them and an investment. They helped companies to reduce their tax in relation to employer contributions that they had made through the sweeping round of funds.
That was a legitimate funding mechanism, but there is no doubt that because of where Scottish limited partnerships sit in relation to the wider tax system, they are being used pretty unscrupulously. A lot more stuff has been coming out about them, and I think that the hon. Lady is right to go on probing and testing to establish whether their proper use is being properly enforced and checked.
Alison Thewliss
I am glad that the hon. Gentleman agrees with me about Scottish limited partnerships. Does he also agree that the whole scope of the issue needs to be investigated, and that the Government need to bring their consultation report back? It is clear that when one loophole is closed another opens, and there seems to be some evidence that people are now moving to Northern Ireland to try to get around the rules. The Government must do something very soon before people jump over and do something else.
Paul Masterton
The hon. Lady has highlighted the key point that I made at the beginning of my speech about highly trained and well-paid accountants. The Government are always playing catch-up because she is right: what happens is that a loophole is identified, it takes quite a long time to get a measure to close it through the process, and by then everybody has already moved on to the next thing. We need to get better at pinpointing—almost like in a game of chess, thinking two moves ahead and saying, “If we close this down, where are they going to move next?” These people working in the private sector are able to find these money-saving methods, so there is no reason not to have people working in government thinking along the same lines.
I support what the Government are doing to reduce the tax gap. It is important to bring in the extra money that is properly due in this country by closing loopholes and stopping the feeling that the big corporate guy is getting away with something while I, the guy struggling with my own small business, am paying what is due. There is a real sense of unfairness in the practices that these measures are designed to tackle, and I look forward to supporting them in four and a half minutes’ time.
James Cartlidge
It is a pleasure to be called to speak on this important subject of anti-avoidance, and to follow my hon. Friend the Member for East Renfrewshire (Paul Masterton). I will take up his underlying point about fairness. There are incredibly important measures in the Bill in relation to avoidance that also deliver other more positive outcomes. I am referring to the area of capital gains tax.
Earlier we discussed exit charges and CGT, but there is also an important measure in relation to foreign ownership of UK property. Non-residents will now have to pay CGT on the sales of UK commercial property, and under the way that property structures can operate, residential property could also be covered.
Anti-avoidance measures can have a positive impact. We should not underestimate the huge impact of inflows of foreign investment in pushing up property prices in this country, particularly in London, and thereby spreading out through the south-east and around the rest of the country.
Matt Warman (Boston and Skegness) (Con)
Does my hon. Friend agree that this is not simply about pushing up the value of property, but about changing the nature of neighbourhoods, and that there is a social dynamic as well as a purely financial one?
James Cartlidge
My hon. Friend makes a good point, and there are stats to prove this. In March, King’s College London published statistics estimating that foreign investment into the UK housing market had driven up prices in London by 20% over the last five years. That is a huge impact.
James Cartlidge
I am happy to take another intervention from a Lincolnshire MP—two on the trot.
Mr Hayes
My hon. Friend is making an important point. The measures in this clause are part of a suite of policies that allow us to deal with the abuse of international multinational monopoly capitalists, who are skewing our economy against the interests of our people and altering the character of both our economy and our society.
James Cartlidge
It is always interesting to hear attacks on capitalists from this side of the House. I simply say in terms of the way the property market has gone that we have often focused in the debate on housing on increasing the supply of homes—the statistics just published on new housing supply are incredibly positive—but I have been a mortgage broker and involved in the property sector, and I remember what happened in the wake of the crunch. The impact of fiscal and monetary policy and the stimulus we have had, and measures that have encouraged inward investment, have also been detrimental. We must not forget, as many people might, that in 2011-12 when the euro was facing an existential crisis—who knows, at some point in the future that might well return—huge inflows of capital came into UK residential property, particularly in London, pushing up prices and impacting on first-time buyers.
Having covered that specific point, I welcome anti-avoidance measures in this area. We need a level playing field, and not just in the same way that other anti-avoidance measures give a level playing field for small businesses; we need them for first-time buyers and those in Britain seeking to get on to the housing ladder. I support these measures and the others in the Bill.
Mel Stride
We have had a good, rounded and full debate, and I thank all Members for their contributions. I wish to touch briefly on the amendments and new clauses moved this evening. New clause 5 calls for a review of the impact of the clauses in this group on child poverty, on households at different levels of income, on those with protected characteristics and on the different parts of the United Kingdom. As I have stated, the Government already provide impact and distribution assessments and analysis in the Budget, as well as tax impact information and notes on individual tax measures.
Finance (No. 3) Bill (Second sitting)
Tuesday 27th November 2018
(5 years, 12 months ago)
Public Bill CommitteesRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 November 2018 - (27 Nov 2018)
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
Peter Dowd (Bootle) (Lab)
I beg to move amendment 17, in clause 7, page 5, line 2, at end insert—
‘(8) The Chancellor of the Exchequer must review the effect of the provisions in this section on the motor vehicle industry in parts of the United Kingdom and regions of England and lay a report of that review before the House of Commons within six months of the passing of this Act.
(9) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office of National Statistics.’
This amendment would require the Chancellor of the Exchequer to review the impact of clause 7 on the automotive industry, broken down by nations and regions.
The Chair
With this it will be convenient to discuss the following:
Amendment 18, in clause 7, page 5, line 2, at end insert—
‘(8) The Chancellor of the Exchequer must review the effect of the provisions in this section on the availability and uptake of optional remuneration arrangements relating to cars and vans and lay a report of that review before the House of Commons within six months of the passing of this Act.’
This amendment would require the Chancellor of the Exchequer to review the impact of Clause 7 on the uptake of optional remuneration schemes relating to cars and vans.
Amendment 19, in clause 7, page 5, line 2, at end insert—
‘(8) The Chancellor of the Exchequer must review the effect of the provisions in this section on tax receipts and lay a report of that review before the House of Commons within six months of the passing of this Act.’
This amendment would require the Chancellor of the Exchequer to review the revenue effects of Clause 7.
Amendment 22, in clause 7, page 5, line 2, at end insert—
‘(8) The Chancellor of the Exchequer must review the effect of the provisions in this section on the vehicle hire sector and lay a report of that review before the House of Commons within six months of the passing of this Act.’
This amendment would require the Chancellor of the Exchequer to review the impact of clause 7 on the UK vehicle rental sector.
Clause stand part.
Peter Dowd
I hope everybody had a refreshing lunch and that not too much claret was drunk.
Peter Dowd
That is a nice start to the afternoon. I will turn to amendment 17 to 19 and 22 which, I must say at this stage, we will also push to a vote unless we have the acquiescence, capitulation or otherwise of the Minister after he has heard my words of wisdom. I hope he has even more divine intervention and inspiration this afternoon from his officials telling him to agree with me.
Clause 7 introduces further reforms to optional remuneration arrangements for cars and vans. The measure seeks to make two changes to the current regime, as outlined in the Treasury’s policy paper. First, it is designed to
“ensure that when a taxable car or van is provided through OpRA, the amount foregone, which is taken into account in working out the amount reportable for tax and National Insurance contributions purposes, includes costs connected with the car or van (such as insurance) which are regarded as part of the benefit in kind under normal rules”.
Secondly, this measure is also expected to
“adjust the value of any capital contribution towards a taxable car when the car is made available for only part of the tax year.”
I imagine that the Treasury’s line is that this seeks to ensure that the value of this benefit is connected only to cost, but we are concerned that these changes may further complicate pre-existing optional remuneration arrangements that are already in place for employers and employees to utilise company cars and vans. That in turn may be a deterrent, as some employers may consider that it is too much hassle or too bothersome, and that there is too much red tape, when it comes to offering such a scheme. Similarly, employees may decide that the risks and liabilities of taking up the offer of a company car or van scheme may be too high, and that under these circumstances both rentals and automotive sales may fall.
To put it as succinctly as I can—I accept that I am prone to being succinct, which is a fault of mine—the Opposition do not believe that it is in the interest of our economy, which is heavily reliant on the automotive sector for jobs, or that of workers, to make it harder for them to use a company car or van through an optional remuneration scheme. That is why we have tabled amendment 17, which would amend page 5, line 2 of the Bill and insert:
“The Chancellor of the Exchequer must review the effect of the provisions in this section on the motor vehicle industry in parts of the United Kingdom and regions of England and lay a report of that review before the House of Commons within six months of the passing of this Act”
as linked to the nations.
I accept that Government Members must recognise the clear link between automotive sales and their use as company cars or vans in optional remuneration arrangements. Work vehicles make a significant contribution to the automotive industry’s more than £82 billion annual turnover and £20.2 billion of value added.
Bambos Charalambous (Enfield, Southgate) (Lab)
Does my hon. Friend agree that further complicating the optional remuneration arrangements for employees who wish to use a company car or van could have an effect on the automotive sector as a whole? That would be terrible.
Peter Dowd
It would be. That goes to the heart of the point. We want to tease this issue out and have a review. I know we have raised a million and one issues for review, but that is as much as we can do in the current climate. That is what we want to do: we want to tease all these matters out.
Anneliese Dodds (Oxford East) (Lab/Co-op)
Does my hon. Friend agree that a review would enable us to tease out some of the matters that were presented to us and to explore some of the expert information that has been provided to us? For example, the Institute of Chartered Accountants in England and Wales tax faculty said that the clause will lead to a tax charge so, for example, emergency repairs will be initially paid for or arranged by an employee and then met by the employer. If we had a review, we could look into that matter and others in more detail.
Peter Dowd
That organisation is always helpful, and it points us in the direction that the Government should go in. That goes to the point I am making.
Many proposals have come back to bite us, so we need a proper review to see how they are bedding in. For example, according to the Society of Motor Manufacturers and Traders, the automotive industry employs 168,000 people directly in manufacturing, and more than 856,000 are employed across the wider industry. It accounts for 12% of total UK exports of goods, and invests £3.65 billion each year in automotive research and development. More than 30 manufacturers build in excess of 70 models of vehicle in the UK, supported by 2,500 component providers and some of the world’s most skilled engineers. The automotive industry represents 1% of all employment in the UK and 7% of all manufacturing. It is also one of the few industries in the United Kingdom that has had a huge productivity increase since the financial crisis. The manufacturing of motor vehicles went from 5.4% of UK manufacturing in 2007 to 8.1% in 2017. Those figures do not, however, reflect the role that the automotive industry play in communities across the nations and regions of the UK, and the impact that a fall in sales or rentals relating to optional remuneration might have.
Alex Sobel (Leeds North West) (Lab/Co-op)
My hon. Friend is making an excellent speech in support of the communities around the country that are reliant on motor manufacturing, which include Tyne and Wear, Derby, Swindon and Merseyside. Does he think that the Government should undertake and publish a proper impact assessment on the communities that will be affected by the changes outlined?
Peter Dowd
Yes. That links to others issues. For example, my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) is having issues with the car factory in his constituency, where 200 jobs are threatened. These issues are all linked. When the industry is under threat, or there is a potential threat, even if it is not actually visible, we must take steps to ensure it does not appear on the horizon. Our proposal would help that process.
For example, the west midlands has by far the largest number of motor vehicle manufacturing employees of any UK region or country. There are 54,000 employees in the industry working in the west midlands. That is about one third of all motor industry employees in Great Britain. We have to take into account the fact that if fewer companies offer optional remuneration arrangements, that could directly affect jobs in that region. The Government’s job is to plan and—they said this in their industrial strategy—to ensure we are prepared for all eventualities. Our proposal helps with that preparation.
The second-largest region for automotive manufacturing is the north-west, where my constituency is located. It employs 24,000 people and accounts for 7% of the total industry and 1% of all employment. I recognise that a slowdown in automotive sales could be related to a fall in the use of company cars and vans, and could cost workers their jobs. Members from Scotland, where the automotive industry accounts for around 4,000 jobs and 2% of the total UK manufacturing sector, and Members from Wales, where the automotive industry accounts for 9,000 jobs, feel the same. Similarly, any fall in the sale of rental cars and vans used in optional remuneration arrangements will have an impact on foreign direct investment into the UK, as there are now no British-owned mass car manufacturers operating in the United Kingdom. It comes back to the point made by an hon. Member about foreign direct investment. We do not want to put it off.
Clive Lewis (Norwich South) (Lab)
Given the sounds being made by the car makers Nissan over Brexit uncertainty, it would be a most foolish approach if those safeguards were not taken, and if there were no proper impact assessment or analysis of the industry.
Peter Dowd
My hon. Friend is right. To some extent, that is part of the concern we have had about impact assessments and financial reviews on industry generally in relation to Brexit. This is part of the tapestry or mosaic of issues that we always have to keep to the fore if we are to protect jobs. All parties have said that they want Brexit for jobs and the economy. We have said it time after time, and this completely fits in with our policy of trying to protect jobs and our economy. Let us look to the future of how this might impact on an important part of our industry, rather than leaving it to chance.
The domestic automotive market is home to foreign volume car manufacturers, with other companies specialising in commercial or luxury brands, including Honda, which has almost doubled production at the Swindon plant—£240 million of investment into the Burnaston site was announced in March 2017. Jaguar Land Rover invested £400 million in a new engine plant, equipment and the expansion of its design centre in 2015. In October 2016, Nissan announced that it would produce two new models in Sunderland. Members on both sides of the Committee understand that uncertainty in an industry such as the automotive industry, which plans 10 or 15 years in advance, can be disastrous and cost jobs. We need only to look at the current uncertainty around Brexit, as I have indicated, to see that this is clearly the case. Large automotive companies express concern on a daily basis. My colleague the hon. Member for Oxford East receives regular representations from companies in her area who are deeply concerned about the future of the industry in the UK, and any fall in use of company cars will not add further confidence.
I accept that Government Members may accuse me of scaremongering, but figures from Her Majesty’s Revenue and Customs showed that 940,000 employers paid benefits in kind—tax on a company car—in 2016-17. That was a 2% fall on the 960,000 recorded the previous financial year. The decline is not isolated—the number of company cars has decreased over the last 10 years.
Clive Lewis
As I sit here listening to my hon. Friend describe the obscure way in which this tax is being implemented, I wonder whether it would it be fair to call it a stealth tax.
Peter Dowd
My hon. Friend makes a valid point. One could argue that it is a stealth tax, although I think what the Government have introduced is more like an incompetence tax. I am not sure they know the consequences of what they have unleashed, but I suspect my hon. Friend’s use of the term “stealth tax” is pretty apposite.
We all know that employers will have invested in vehicles in good faith on the basis of those calculations, together with the comment from HMRC that that was the correct way to calculate charges. It is therefore to be expected that they will feel let down and perhaps even blindsided by these changes. The more I think about it, the more I think they will consider what the Government are introducing as a bit of a stealth tax.
The ICAEW found that, where vehicles with allowed private use are provided to employees under OpRAs, the clause will impose unexpected increases in tax and national insurance charges on employees and employers respectively. The only way to avoid those charges will be for the employer to dispose of the vehicle. That is likely to result in the employer receiving lower than expected proceeds if the vehicle is owned outright, or suffering financial penalties if the vehicle was acquired under an ongoing contract. It may also upset the employer-employee relationship, which might ultimately lead to both employee and employer leaving the scheme entirely.
That concern led the Opposition to table amendment 18, which we will press to a vote. The amendment seeks to insert the following subsection:
“The Chancellor of the Exchequer must review the effect of the provisions in this section on the availability and uptake of optional remuneration arrangements relating to cars and vans and lay a report of that review before the House of Commons within six months of the passing of this Act.”
In effect, it would require the Chancellor to publish a review of the impact of these changes on the number of employees choosing to enter into optional remuneration arrangements. The amendment goes to the heart of the Opposition’s concern that the Government’s constant tinkering and fiddling deters people from taking up such schemes and, no doubt, other schemes.
That feeds into the wider criticism of the Treasury—and Ministers, I have to say—as backed up by the Chartered Institute of Taxation, regarding the constant need to rework and reform measures. The perception is that this is happening all the time. That takes us back to the point raised by the Scottish National party’s spokesperson about the need to tease out these issues in advance and put them into the domain. Let us tease them out and try to get a little bit of sense out of the mix. This amendment goes to the heart of our concerns, and this tinkering and fiddling about just confuses things more.
It is telling that the changes have come about not because of a new onus to reform optional remuneration schemes for the benefit of employees and employers, but rather to clean up the mistakes made in the previous Finance Act. In practical terms, that is what has happened. The Opposition have consistently called for the Government to take a more considered approach to taxation, including the introduction of Public Bill Committee witness sessions, as mentioned both previously and today. Were these concerns and those of the tax experts and advisers who have to implement the change taken seriously, Ministers would not have to come back to the House to redo their homework on every Finance Bill. This is my fourth Finance Bill—excluding the Taxation (Cross-border Trade) Bill—and that seems to be a regular occurrence. Instead, Ministers should be able to get it right first time, not just in relation to consultation but in enabling us to help them do their job.
The Chair
Order. You have made quite a few generalised remarks about consultation, Mr Dowd. It would be appreciated if you could keep your speech to the points of the amendment.
Peter Dowd
Thank you, Ms Dorries. The Minister considered the number of people who will be affected by the measure—1 million—to be rather small. The measure will have a disproportionate impact on van drivers and those who have company cars. The Treasury’s impact assessment shows that the majority are male and, no doubt, from various backgrounds. The Opposition want to get these changes right, which is why we are pushing for the Minister to report back to the House after six months and to offer clear evidence as to why they have had a negative impact on the number of employees able to use a company car or van under these schemes.
Given the lack of knowledge shown by small and medium-sized enterprise employers and employees when it comes to changes to optional remuneration schemes, it is hard to understand how the introduction of these measures will not incur additional expense for both. In fact, in its response to the consultation on the new measures, ICAEW found:
“The new clause introduces additional costs which will change the cost model on which the acquisition finance model was based.”
The Opposition therefore have a healthy scepticism for the Treasury’s figures on the revenue raised from these changes, because it is clear that there will be an additional cost.
In an effort to gain further clarity of the revenue effects of this measure, the Opposition have tabled amendment 19, which we will invoke later. The measures in clause 7 are part of the Minister’s clean-up operation to fully implement the wholesale reform of optional remuneration schemes introduced in the previous Bill. The reforms are aimed at targeting employers and employees who might use salary-sacrifice schemes for the purposes of tax avoidance. With that in mind, the review should consider the changes in the context of wider Government reform of optional remuneration schemes and include the impact of the changes to this specific scheme on the total revenue.
Turning to the vehicle rental sector, an increasing number of the company cars and vans offered by optional remuneration schemes are, in fact, rentals. That means that any changes to these schemes will have consequences for the vehicle rental sector. That is why we have tabled amendment 22, which would insert the following in line 2 of clause 7:
“The Chancellor of the Exchequer must review the effect of the provisions in this section on the vehicle hire sector and lay a report of that review before the House of Commons within six months of the passing of this Act.”
Kirsty Blackman (Aberdeen North) (SNP)
Many of the points that I was going to make have been covered by the hon. Member for Bootle. However, a few things require to be dwelt on for more time or should be looked at from a slightly different angle.
When I first became aware of the Opposition’s amendments, I did not think that it was a tack that they should take. However, when I looked into the information behind them and at the detail, I discovered that it is actually a very sensible tack to take, for a number of reasons. I note the comments about the 4,000 Scottish jobs that could be affected. It is important to note the number of jobs that could be affected by any changes to this area, particularly through tweaks to the benefit-in-kind system.
I also point out the number of new car registrations, which the Society of Motor Manufacturers and Traders has on its website. There has been a 7.2% fall in the year to date, which is incredibly significant. If the Government are thinking about ensuring that companies have those up-to-date cars with the lowest emissions, it is really important that companies are incentivised to ensure that their employees drive an up-to-date fleet, rather than older cars.
The other thing to note is that registrations in October 2018 were at their lowest level since 2013, which is significant. We might expect low numbers when we were coming out of a recession, but there has been a significant drop in registrations over the past year. It is important that the Government think about this wider context when making these decisions.
It is particularly important to note the impact of these changes on the industry, given the context of Brexit and the concerns raised by the car industry. Now is not a good time to consider making changes that are likely to negatively impact the automotive industry, particularly given the nature of its supply chains, which are so integrated with European Union countries. There is the potential for those supply chains and those manufacturing businesses and jobs to move wholesale to the EU, rather than the integrated supply chains that we have now being maintained. It is important to note that wider context when making any changes, because the Bill will not act in isolation; it will have to operate in the context of whatever potential economic hit will come from Brexit.
On the ICAEW’s comments about the potential for an accidental charge following emergency repairs, I agree with the hon. Member for Bootle that the Government might need to amend the Bill further in order to make it workable, so that it does what they intend it to do. If we are not going to listen to the utmost experts on this issue, what is the point in having the consultation? If we are to have a consultation, it will be meaningful only if the Government listen and actually make the suggested changes. These people are the experts and negotiate the tax system on a daily basis, so they are the ones who can highlight potential problems.
To expand on that a little bit, I totally accept that protecting the Treasury is important in the changes being made, and that the Government are attempting to protect the Treasury from problems that it did not necessarily foresee when it created the Bill in the first place. However, there are changes to the Finance Bill every year. As the hon. Member for Bootle said, this is the fourth Finance Bill Committee that I have served on, and every year there seem to be different changes to benefit in kind issues. I understand that the Treasury is trying to protect itself, but if there is an immensely complex tax system and it is changed every year, it is difficult for people to comply with the legislation, even those who are trying to do so. I think that the Government need to think more carefully and do some sort of sensible review, as suggested by the Opposition, into the whole landscape of benefit in kind issues and then make changes in one go, so that they are easily understood and can be complied with them. As I said earlier, there is no point having a tax system if people do not understand it and cannot pay the tax because they do not understand how they are supposed to comply with the system.
That also has a knock-on effect on the automotive industry. If it is too difficult for employees to claim the relief that they are supposed to be able to claim, or to have the benefit in kind accepted as such, as they are supposed to, it means that fewer companies will be willing even to attempt to comply with the legislation. I think that it is really important, in terms of the new vehicles and ensuring that the Government can collect the correct tax.
In relation to whether or not this is a stealth tax, I would certainly say that there are stealth changes being made to these taxes, and not ones that have been widely publicised or understood well enough by individuals having to go through the system. If the only way to comply with tax changes is to ensure that you have a very good tax lawyer or tax adviser in place, then I would suggest that the system is a bit too confusing. It should be easier for people to jump through the hoops that are in place, and constant changes by the Government are not helping.
I will speak briefly to the proposed amendment. The explanatory notes, on pages 14 and 15, state that this was first proposed in the autumn statement 2016 and put through a technical consultation. The Government are having to make changes in relation to the anomalies that were raised. The Government decided to take action to protect the Exchequer at the first opportunity. Although this was consulted on, the Government did not see the potential pitfalls in the way they put forward the legislation. Therefore, either the consultation was deficient or the Government’s ability to listen to the consultation responses was deficient. There was certainly an issue with the process.
I am pleased that the Government have changed their ways—or have said that they will—about the number of Finance Bills we are going to have in any given year, especially as I have served on four Finance Bills since 2016, and I only avoided one in 2017 because a general election was called. That seems to me to be too many tax changes in any year, given that we still have all the changes happening on a significantly more than annual basis. I think the Government need to take a step back in some of these situations and have a much more wide-ranging look at the issues, particularly in relation to benefits in kind. Every single year there are changes in the benefits in kind legislation in the Finance Bill, which every year we have stood up and debated.
First, we need to look at the whole system of benefits in kind and then make decisions about the entire system that are easily understood by people. People are much more likely to comply if they can actually understand the legislation. If there are constant changes, that makes it is much more difficult for people to jump through the hoops they are supposed to jump through and to pay the correct tax that they are supposed to pay.
Secondly, in relation to the impact on the automotive industry, I am particularly pleased that the Labour party has put forward the amendment about the different regions and nations of the UK. It is really important that we consider the differential impact, not least in the context of Brexit. Areas where there is significantly more manufacturing, such as the north of England, are likely to be hardest hit by the economic shock resulting from Brexit. That is shown across the Whitehall analysis papers. If they are being hit by that, we do not want them to be hit by other things. Doing that analysis on a regional basis is really important.
Mel Stride
I thank the hon. Members for Bootle and for Aberdeen North for their contributions to the debate.
Clause 7 makes two changes to ensure that the optional remuneration arrangement—OpRA—rules for cars and vans work as intended. First, the clause addresses an anomaly in the OpRA legislation. Under current legislation, the value of any connected costs is not included when calculating the value of the amount foregone. That was not the original policy intention. It is important to note that we are not looking at new measures as such; we are looking at closing loopholes and ensuring that the original legislation passed in 2017 operates as intended. The clause ensures that the value of the amount forgone includes any costs connected with the taxable car or van, such as servicing and insurance. The clause also ensures that the value of the deduction available for a capital contribution is adjusted if a company car is made available for only part of the tax year. Again, that brings the original intention of the legislation into effect.
Kirsty Blackman
The Minister said that an oversight was made in relation to the legislation as drafted. Does he share my concern that the Government should not be making oversights in tax legislation and agree that, in fact, the process we have for scrutinising tax legislation is therefore deficient?
Mel Stride
I certainly accept the hon. Lady’s contention that oversights are never acceptable—of course they are not. As I set out, there was significant consultation and scrutiny of both the policy measure and the detailed legislation. Unfortunately, on this occasion the two issues being highlighted here did not come to the appropriate attention in the drafting of the 2017 legislation. If the hon. Member for Aberdeen North is saying that there was insufficient scrutiny, I do not believe that was the case, given the large amount of scrutiny applied in this circumstance.
The changes are expected to affect a small proportion of the 1 million or so individuals who are provided with a company car or van for private use. The average cost of the changes for those affected has been estimated at between £120 and £140 a year in extra tax. There will also be a slight increase in national insurance contributions for employers, in line with the original policy intent. The Exchequer yield from the changes is estimated to be negligible, but by stopping the growth of separate arrangements, significant amounts could be protected.
The hon. Member for Oxford West and Abingdon suggested that the issue of emergency repairs needed to be looked at in greater detail. That is already covered by the legislation. As the explanatory notes state, the clause
“does not affect the operation of sections 239(1) and (2) in relation to other payments or benefits. For example, should an employer reimburse an employee for costs incurred (such as replacing a tyre), the exemption in section 239(2) will still apply.”
HMRC will also ensure that that is reflected clearly in the guidance.
Peter Dowd
I want to bring some of the points I raised to the attention of the Minister again. He talked about consultation. Let us not take the totality of the automotive industry, because it is a big industry. What about Arval, which is a leasing company? Did the Government think, “We are going to make changes to leasing and rental arrangements, so let’s consult those companies directly affected”? Were any of those companies, many of which are quite big businesses, consulted on the measures?
Mel Stride
As I said, there were 259 written responses from employers, tax professionals and representative bodies, 77 from individuals, and 18 meetings with a wide range of employers, tax professionals and representative bodies, including two with the ICAEW. Officials had face-to-face meetings with more than 100 employers. There was pretty extensive engagement. The Government are constantly liaising very closely with industry. I know that the Exchequer Secretary recently met, for example, the chief executives of Vauxhall and Jaguar Land Rover in Ellesmere Port, and discussed a variety of important issues. The measures in the Bill were not raised on that occasion, but if the suggestion is that we are not close enough to industry and to businesses, I can assure the hon. Member for Bootle that we are.
The hon. Gentleman talked about the potential impact of the measures on the tax yield. I will use his figures—always a slightly risky thing to do, but I will on this occasion. [Interruption.] That may be unfair. He suggested that the tax yield per company car is, on average, £2,638. It is estimated that in the order of 10,000 individuals of the 1 million company car users in the UK will be affected by the ironing out of the deficiencies in the 2017 legislation—10,000 individuals will be adversely impacted by now having to pay the correct tax rather than being able to rely on the deficiencies in order to legitimately avoid that tax. That equates to about £20.6 million of forgone taxation, if every single one of those 10,000 were, as a consequence of the changes, to drop having a company car.
Of course, there are two points to make here. One is that the vast majority will not do that, so it will be a figure well below £20 million per year, and the other is that it will be offset by the additional taxation brought in by those who will no longer be absolving themselves of taxation as a result of the deficiencies in the 2017 Act. With regard to the impact on tax that the hon. Gentleman raises, I suggest that that underpins the Treasury’s view that the impact will be negligible.
The Government have already published a tax information impact note on clause 7, in line with normal practice. As set out in that note, as I have already said, clause 7 simply corrects two anomalies in the existing legislation. These changes affect only a very small number of people who have been taking advantage of the loopholes, so it will not have a significant impact on any of the areas addressed by the amendments. I therefore call on the Committee to reject the amendments tabled. I commend the clause to the Committee.
Peter Dowd
I want to pick up on a couple of points. We keep coming back to the fact that the Minister seems to brush aside the woeful lack of consultation aimed specifically at leasing companies. They are the ones dealing with this day in, day out. They are the ones who draw up the contracts. They are the people who the Government should be going to. I do not know whether the Government have been to those particular companies, but in future maybe that is something they should consider. If they have, and if I were to have conversations with those companies in future, I would check that they were aware that the Government did discuss this with them because, if that is the case, they appear to have been asleep on the job. I do not know whether that is the case, but I am sure we can check with them; I am certainly happy to check with them.
That goes to the heart of the issue about consultation. It is happening time after time that the Government are rushing through this legislation, and having huge amounts of tax legislation is complicating things as time goes by. The Bill before last, I think—I have lost track of them—was the largest Finance Bill we had ever had. I think that was before the election. It was an attempt to ram through a whole load of proposals that, fortunately, the Opposition at that point were able to stop.
I do not think 10,000 people being affected by this is a small number. It may be a small number in proportion to the number of people who could have been affected by it, but 10,000 people affected is a fair old whack. I am sure that if I were standing here saying that Labour was going to take £150 or £200 off 10,000 people, the gasps of outrage from Conservative Members would be palpable.
The other thing worth noting is that I think an awful lot of people entered into these arrangements in the best of good faith, and the Minister talking about them “taking advantage” of the tax loophole was maybe an unfortunate phrase. I do not want to pick him up on that point, but it is important to note that the vast majority of people affected by this entered into these arrangements with the best intentions, and I do not suspect that they were in any way trying to find any loopholes. They would have been advised of these arrangements by their employers or by leasing or rental companies, and I do not think it would have been on the basis of, “Here’s a tax dodge; here’s a tax loophole; go down this path.” It is important that we try to put that into context.
Mel Stride
I will briefly respond to those comments. I congratulate the hon. Gentleman, because he is about to tease out from me, as he likes to term it—his term “teasing out” has gone into the parliamentary lexicon—the specific issue of consulting leasing companies and listening to their views, which we also feel is important. The draft legislation was subject to technical consultation between 6 July and 31 August 2018. One of the written responses we received was from the British Vehicle Rental and Leasing Association, so we certainly had input from it.
On the hon. Gentleman’s point about those 10,000 people affected, I think two things. First, I certainly accept, and I think I said so in my remarks, that this was not tax avoidance, but a deficiency in the way the tax legislation has been brought into effect. In no way am I casting any aspersions on the activities of those who have benefited from that deficiency. Secondly, this is not about going out and taking money off 10,000 people —I think that was the expression the hon. Gentleman used. It is just about ensuring that the tax rules we introduced in 2017, which operate effectively for the vast majority of taxpayers, apply to everybody, rather than almost everybody.
Peter Dowd
I beg to move amendment 14, in clause 11, page 7, line 39, at end insert “but only if the requirement in subsection (3) is met.
‘(3) The amendment made by subsection (2) may only have effect if the Chancellor of the Exchequer has laid before the House of Commons a forecast of the effect on the public revenue of that amendment coming into effect in the tax year 2019-20 and subsequent tax years.’”
This requires a review of the revenue implications of the provisions of this clause to be reported to the House of Commons before this section can have effect.
The Chair
With this it will be convenient to discuss the following:
Amendment 15, in clause 11, page 7, line 39, at end insert “but only if the requirement in subsection (3) is met.
‘(3) The amendment made by subsection (2) may only have effect if the Chancellor of the Exchequer has laid before the House of Commons a report of a forecast of the effect of that amendment coming into effect on pension benefits to which the exemption in section 307(2) of ITEPA 2003 applies.’”
This requires a review of the effect on pension benefits of the provisions of this clause to be reported to the House of Commons before this section can have effect.
Amendment 16, in clause 11, page 7, line 39, at end insert “but only if the requirement in subsection (3) is met.
‘(3) The amendment made by subsection (1) may only have effect if the Chancellor of the Exchequer has made a statement to the House of Commons detailing discussions between Her Majesty’s Government and the Charity Commission regarding the provisions of this section.’”
This requires a statement to the House of Commons on discussions between the Government and the Charity Commission on this clause.
Clause stand part.
Peter Dowd
The explanatory notes state:
“This clause will amend the tax exemption which provides for employer paid premiums into life assurance products and employer contributions to certain overseas pension schemes to be paid free of tax. Currently, premiums and contributions are only exempt from tax if the beneficiary is the employee or a member of the employee’s family or household. This clause will allow the beneficiary to be any individual or registered charity.”
The explanatory notes go on in some detail, and I exhort hon. Members to read them because they are pretty important and give context to the clause. They state:
“The amended exemption will also allow employees to nominate a registered charity, which is consistent with existing government policy of providing tax relief on charitable donations.”
We tabled a number of important amendments to the clause to ensure it does not create any unforeseen issues with regard to charitable giving, which all parties have long supported. Amendment 14 requires the Government to review the revenue effects of the clause before it comes into effect. That is merely a matter of good practice. It seems that the Government are no longer willing to provide the Opposition with the full information that we need properly to scrutinise the measures they are introducing through Budget legislation, nor the legal means by which to amend them.
We are not asking for much—merely a simple statement setting out the cost of any measures introduced. We were kind enough to perform that exercise for our Conservative colleagues in our “grey book” ahead of the 2017 election, as they all know. It is a fantastic read, I have got to say, and I am happy to sign any copies of it. Unfortunately, the Government did not return the favour.
We are not alone in calling for such information. The amendment reflects the advice of the Chartered Institute of Taxation and the Institute of Government, whose report, “Better Budgets: making tax policy better”, states:
“we have heard that the exceptional processes around tax policy making—in particular, secrecy, more limited scrutiny and challenge, and the power of the Treasury—have led to an ever-lengthening tax code, beset by a series of problems: confusion for taxpayers, poor implementation, political reversals and constrained options.”
That just about sums up what we have been saying today. The report sets out 10 steps to make tax policy better. Again, I ask hon. Members to look through it. It says, for example, that the Budget process should contain fewer measures, and that those should be better thought-out and capable of being implemented efficiently by HMRC, with politicians making informed decisions. It asks for:
“Greater stability in the areas of the tax system where taxpayers—individuals and business—need to make long-run decisions. A tax system that commands public support—and is robust enough to raise the money we need to finance the state we want.”
We are particularly interested in step 9, in relation to this amendment:
“Enhance Parliament’s (and the public’s) ability to scrutinise tax proposals…Parliament needs to do a better job at scrutinising Finance Bills”.
That theme continues throughout the report. It sets out in some detail—I will not go into that now—the issues around the unclear value for money, which is also repeated time and again in the Public Accounts Committee report for 2015-16.
We believe that the amendment, which requests a Government analysis of the cost of these new relief proposals, would help the Government to progress towards enhancing parliamentary scrutiny of the measures that they are introducing, as described in the report that I mentioned. After all, we know that the clause will have some revenue effects as it would introduce a tax relief, under certain circumstances, where there was not one before. It is also in the Government’s interest, surely, to provide such a figure, as that would show the impact of their attempts to boost charitable donations, for example. The Government may, of course, be attempting to support additional revenue streams for charities, but we must consider the wider aims of charities.
The original intention of the big society, for example, was to slash formal public expenditure as part of the proposal—whether it did is a matter of conjecture—but there is a question about how the Government plan to pay for the measures introduced in the clause. I note that the Chancellor is currently unable to pass any tax increases for fear of the immediate loss of support from the Brexiteers, but it is important that we focus our attention on the impacts of continued or further relief being introduced in the clause. If the measure introduced in the clause had been in our manifesto platform, revenue effects would have been included in the costings, and we ask the same of the Government. Let us put the figures in; that is what the amendment seeks to do.
Amendment 15 is an important one, which requires a review of the effects of the provisions of the clause on pension benefits to be reported to the House of Commons before the section takes effect. The precise impact of the provisions on pension benefits is unclear, and I hope the Minister can clarify that. As she will know, our current pension system operates an “exempt, exempt, taxed” system. The House of Commons Library explains that system well in its briefing on reform of pension tax relief. I will quote a bit of it, because it is important:
“The tax treatment of pensions follows an ‘exempt, exempt, taxed (EET) model’…Pension contributions by individuals and employers receive tax relief and employer contributions are exempt from national insurance contributions”,
and it goes on,
“but individuals are able to take up to 25% of their pension fund as a lump sum on retirement.”
I quote that only to give a flavour of the context. Under the previous arrangements for the tax-exempt employer-provided pension benefit, some taxation would have been paid on employer contributions to certain overseas pensions systems, where the beneficiary was an individual or a charitable organisation which was not one of those listed in the original Income Tax (Earnings and Pensions) Act 2003. Those tax-exempt beneficiaries were listed on that legislation as follows:
“‘Retirement or death benefit’ means a pension, annuity, lump sum, gratuity or other similar benefit which will be paid or given to the employee or a member of the employee’s family or household in the event of the employee’s retirement or death.”
The amendment poses a question about the impact on the overall pensions benefits if taxation is not being paid because of the exemptions the clause introduces, and asks whether an analysis of that impact has been done and, if not, why the Treasury has not looked into the matter. The clause makes a broad reference to overseas pension schemes, and it would be helpful if the Minister listed which schemes the clause would affect, and specified where they are actually based overseas. The overseas element is important, especially in the light of the Government’s decision not to uprate the state pensions of British overseas residents, which, in many cases, leaves many older people abroad destitute.
The current system of pension taxation clearly has many inequalities, which means that the way that taxation is applied to pension benefits tends to favour the wealthiest. Top rate tax payers only have to contribute 60p of every £1 saved. Meanwhile, those on low incomes have to pay 80p for every £1 saved. That is a factor in the pensions system.
Kirsty Blackman
Will the hon. Gentleman clarify that when he says Charity Commission, he also means OSCR, which is the relevant body in Scotland?
Peter Dowd
Yes, I agree to that point of clarification. That is the intention. The Charity Commission and the Scottish body would no doubt recognise the seriousness of this problem, and in their strategy for dealing with fraud, they make the following point:
“The commission continues to see, and has to act on, serious problems arising in charities in relation to poor financial management and inadequate financial controls, accounting and record keeping. In 2010-11, out of 1,912 completed compliance assessment cases, the proportion involving serious concerns about fraud, theft and other significant financial and fundraising issues increased from 16% the previous year to 26%.”
Figures for subsequent years can be found in the commission’s annual publication “Tackling abuse and mismanagement”. The commission goes on to say:
“The National Fraud Authority in its annual fraud indicator report of 2012 estimated annual losses of £1.1 billion, or 1.7% of annual charity income during 2010-11.”
There is therefore a problem, because that is cash not going where it was intended. The impact of fraud and financial crime on a charity, particularly smaller charities, can be significant, going beyond financial loss and the impact of the financing of a charity’s planned activity. These crimes cause distress to trustees, and so on, and have an adverse effect on the charity. It is important to deal with them, says the Charity Commission.
If the Treasury is going to offer tax incentives for charitable donations, it is vital that the proper safeguards are in place to ensure that tax forgone does not act as an incentive to other risks. For example, from my understanding, the Charity Commission holds the only centralised list of registered charities; therefore a clear procedure for HMRC and the Charity Commission to communicate would be necessary to guarantee tax exemption. That is important.
Bambos Charalambous
My hon. Friend is making an excellent speech and raising some excellent points. Does he agree that there is a need for further transparency on how these proposals were put together by the Treasury? Does he agree that there is a case for a public register of charities that benefit from this tax exemption?
Peter Dowd
If the Government decided to listen to us and undertake such a review, they would have the ability to tease out—to use that phrase—to check, to put into the mix all these important issues. We do not claim to have absolute authority on how this should be done, which is why we think wider consultation and an extensive review are absolutely appropriate. We all want the £1 that someone gives to a charity to go to the charity, and not be siphoned off in some fashion.
What procedures does HMRC already have in place for instances in which a nominated beneficiary turns out not to be a registered charity, but the person who nominated it assumed that it was? It is an important question, and it surely presents ethical issues if someone chooses to donate their benefits on the basis of fraudulent information. That is not what we want. Clearly, in the event of their passing on that information, it would not be changeable. Does HMRC plan to apply tax in those circumstances?
This will be made all the more difficult by the Government’s repeated attacks on the Charity Commission, which has been attacked time and again. Six years of cuts have led it to repeatedly warn that its ability to properly regulate the charity sector is being limited. We must take that factor into account. As reported by Devex, the news website for the global development community:
“The commission has a staff of 290 and a budget of £21 million, and while budgets have declined, the number of charities it oversees has grown by around 5,000 since 2009. The charity income it regulates has jumped from £52 billion in 2010, to more than £74 billion in 2017.”
Former Charity Commission board chair William Shawcross wrote in a 2014 report that,
“our funding position remains unstable, a matter which has been recognised by many in the charitable world and which I have raised with Government. We cannot absorb unending cuts to our budget and may have to consider alternative sources of funding.”
What assessment has the Treasury made of the impact of this measure on the struggling, underfunded commission? I hope that this matter was discussed with the Chancellor when the clause was prepared. I do not expect so, but I hope that it was.
Finally, it is clear that the measure could represent yet another injection into some private schools that operate as charities under Charity Commission guidelines. That has been recently confirmed by the House of Commons Library, which stated:
“The Government has stated that there are about 1,300 independent schools which are registered as charities and that there is a great variation in size of school across the sector: There are approximately 2,300 independent schools in England, ranging in size from the very small…Many of them are very small…The fees range from £20k per year in a prestigious day school…to far smaller amounts…Similarly, quality varies from world-leading education to some small, poorly-resourced schools”.
What assessment has the Treasury made of the amount of tax that will be forgone owing to the nomination of those particular schools?
Clive Lewis
I thank my hon. Friend for his scintillating speech, which is so full of detail and which I think everybody appreciates. Far be it from me to be a class warrior, but given yet another tax giveaway to the independent schools, which he mentioned, many Opposition Members would say that it is high time that those independent schools had their charitable tax status ended, and that omitting them from this measure would be a good start to that process.
Peter Dowd
In relation to the amendment, it is important to ensure that, where charitable donations are given—whomsoever they are given by and to—the giver knows, in good faith, that the cash that they give will go towards genuine charitable purposes. That is the key issue. Whether the definition of “charity” is open to debate in relation to any organisation is another matter. The key, and the point I think my hon. Friend is trying to make, is that charities really ought to be charities.
We hope that a statement on the discussions between the Charity Commission and the Chancellor would address some of these issues. It continues to be a big issue in this country that people who can afford to pay their taxes should pay their taxes. It is important that anybody who gives to a charity can rest assured that their charitable donation, won through their hard work, will be used with the best intentions. Our amendment would, in all good faith, ensure that.
Kirsty Blackman
The Committee will be glad to hear that I will speak only briefly. I am happy to support the Opposition’s amendments. I want to focus on amendment 16, which deals with the communication that is needed between HMRC and the charities regulator. That is incredibly important. We need such communication for individuals to be assured that their money will go to the right place and that the correct tax exemptions exist for that.
Amendment 16 would require the Chancellor to make a statement to the House
“detailing discussions between Her Majesty’s Government and the Charity Commission regarding the provisions of this section.”
If the Minister is minded not to accept the amendment, which is very sensible and the provisions of which it would be easy for the Government to carry out, is he willing to write to Opposition Members about the discussions between the charities regulators in England and Scotland and the Government, the nature of those discussions and the advice the Government have received from charities on the potential impact of the clause? Will he also cover the eloquent point made by the hon. Member for Bootle about ensuring that protection from fraud is built into any changes that are made under the clause?
If the Minister is minded to accept the amendment, that would be grand. If he is not, will he commit to contacting us with those details so that we are aware of the discussions the Government have had and we can be both comforted that our constituents who decide to give their benefits to charity can do so knowing they are less likely to be the victims of fraud as a result, and aware that HMRC is across the issue and ensuring that people do not unintentionally become victims as a result of the changes?
Sir Robert Syms (Poole) (Con)
I must admit that I am a little surprised by the clause, because it looks to me like the Treasury is giving away money. These days, many people are in pension schemes and, when they die, there is some money. That might go to a relative, but they might wish for it to go to a charity. The Government are being big hearted—dare I say big societied—with the clause, in that they want the individual who goes to meet their maker to leave some of their resources to a charity that is dear to their heart.
My guess is that Cats Protection and various dog charities will be the biggest beneficiaries of the clause, but it will come down to either an employer making a judgment depending on what their employee wanted, or, in the process of probate, a solicitor taking a decision that a particular charity should get that money. In most cases, we probably are not talking about multi-millionaires, and sadly, not enough people have sufficient pension or death benefits. We are probably talking about small sums of money. The simplest solution, given that there is already quite a wide definition, is to widen that definition a little more to allow someone who cares passionately about heritage or pets or some inner-city regeneration scheme to direct the money to their cause rather than to Her Majesty’s Treasury.
I am a bit worried about Treasury Ministers being so generous in introducing the clause, but it probably makes sense on better regulation terms—on reducing some of the red tape when people end up dying. It will give a little more scope for people to dispose of the money that they have earned, because they have worked all their lives for that pension, and when they die, I think it not unreasonable that they should leave it to the cause that they particularly want to support.
Mel Stride
I thank the hon. Members for Bootle and for Aberdeen North for their contributions, as well as my hon. Friend the Member for Poole for his congratulations, which should largely be for me, because I am the Tax Minister and this is, after all, a tax measure, but we will leave it at that.
Clause 11 makes changes to modernise the tax exemption for premiums paid by employers to provide their employees with retirement and death benefits in life assurance products or certain pension schemes. Employers can provide death benefits for an employee through a life assurance policy or a retirement benefit through pension schemes. The employee will receive a pension out of those payments when they retire, or they can name a beneficiary to receive any payment of retirement benefit after they die.
Currently, most premiums or contributions paid by employers into these schemes are exempt from income tax. However, for certain types of scheme, as we have been discussing, this is the case only if the beneficiary is the employee, a member of the employee’s family or a member of their household. “Family” and “household” cover spouses, civil partners, parents, children and their spouses or civil partners, and dependants, domestic staff and the employee’s guests. The premiums paid by the employer for these schemes are treated as a taxable benefit in kind, if the eventual beneficiary is not covered by this definition, such as a charity or a friend. The changes made by this clause make the exemption fairer by extending it to cover premiums for policies where the beneficiary is any individual or a charity. The legislation will apply to premiums paid from 6 April 2019.
I will deal with amendments 14 and 15 together. Amendment 14 would require a review of the revenue implications of the provisions of the clause, to be reported to the House before this change can have effect. Amendment 15 would require a review of the effect on pension benefits of the provisions of the clause, to be reported to the House before this change can have effect. These amendments are unnecessary.
As with other tax measures, the Government have already published a tax information impact note for this measure. This shows that the changes are expected to have a negligible impact upon the Exchequer. Premiums paid by employers to almost all UK pension schemes and overseas pension schemes are already covered by separate tax exemptions, which apply regardless of who the beneficiary is. Therefore, the change introduced by the clause applies only to certain niche overseas pension schemes and employer-financed retirement benefit schemes.
The hon. Member for Bootle asked for specific examples of which schemes fell within the scope of this particular measure. I am afraid that we are unable to provide that information, because it depends what the terms and conditions state within each scheme.
In essence, this is a welcome change, but it affects a small number of schemes and a relatively small number of individuals. As a result, our assessment, supported by the Office for Budget Responsibility, is that the revenue implications are negligible. I think that answers the question raised by the hon. Gentleman on what the impact will be on the Exchequer and whether this has been taken into account. It certainly has been looked at and agreed upon by the Office for Budget Responsibility. The impact on pension benefits will therefore also be relatively minor. This change simply ensures that the benefits-in-kind rules apply in the same way across pension schemes and life assurance policies. I therefore urge him not to press his amendments.
Amendment 16 would require a statement of the House on discussions between the Government and the Charity Commission on this clause. HMRC does, of course, liaise with the Charity Commission and others, wherever appropriate, so such a statement would not be necessary. However, it might be helpful if I explain the position in relation to charities. The exemption will apply only where the beneficiary is recognised by HMRC as a charity for UK tax purposes. These will include charities registered with the Charity Commission in England and Wales, the Office of the Scottish Charity Regulator and the Charity Commission for Northern Ireland. The hon. Member for Aberdeen North asked whether I might write to the Committee with further information on discussions that may have been held, and I would be happy to do that. In the first instance, it might be helpful if she were to write to me, setting out exactly what she would wish me to respond to.
Not all charities need to be registered in England and Wales. Some are exempt or excepted from registration, but most charities will be recognised by HMRC in order to claim tax relief such as gift aid. Employers will need to check with the charity that it is either registered or recognised as a charity for UK tax purposes when it is named as a beneficiary.
I hope that explains the position and that the hon. Member for Bootle might consider withdrawing the amendment.
Peter Dowd
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 11 ordered to stand part of the Bill.
Clause 12
Tax treatment of social security income
Peter Dowd
I beg to move amendment 2, in clause 12, page 9, line 7, at end insert—
‘( ) The Chancellor of the Exchequer must review the revenue effects of the provisions in this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the revenue effects of Clause 12.
Peter Dowd
I know people are going to be terribly disappointed that this is my last contribution today. Other colleagues must have an opportunity to have their say. The disappointment is palpable, but I must push on.
The clause deals with the tax treatment of social security income. Again, I refer to the explanatory note, which provides a helpful introduction to the clause:
“The Scottish government is introducing five new social security payments: young carer grant; best start grant; funeral expense assistance; discretionary housing payments; and carer’s allowance supplement.”
It goes on:
“The government is also confirming the tax treatment of another four social security benefits: the council tax reduction scheme, discretionary housing payments and the flexible support fund, overseen by the UK Government, and the discretionary support scheme, overseen by the Northern Ireland Executive.”
Furthermore:
“Social security benefits are administered by a number of different UK government departments and the devolved administrations. The tax treatment of social security benefits is legislated for within income tax legislation. The tax treatment of new benefits should be confirmed when each one is introduced.”
The note continues:
“The Scottish government’s fiscal framework underpins the powers over tax and welfare that are devolved to Scotland through the Scotland Act. This states that ‘any new benefits or discretionary payments introduced by the Scottish Government will not be deemed to be income for tax purposes, unless topping up a benefit which is deemed taxable such as Carer’s Allowance’.”
This, in part, relates to social security changes made by the Scottish Government, which is a matter for Scotland to decide. We also note that this ensures that some new social security payments are not subject to additional taxation, which is a sensible approach that will make the finances of many on the lowest incomes as simple as possible. We would, however, like to query the decision to make the carer’s allowance supplement taxable.
The equality impact assessment for the clause suggested that the carer’s allowance supplement will be confirmed as taxable. That is a supplementary payment to carer’s allowance, which is a taxable benefit paid by the UK Government. The majority of recipients of care allowances are women, so more women than men will receive the carer’s allowance supplement in Scotland. In effect, it looks as though the only additional social security payment being denied the tax exemption is the one that will primarily affect women. Perhaps the Minister will elaborate on why that is the case. It appears to stem from the fact that the UK carer’s allowance is itself taxable—a UK Government decision that is likely to have the very same gender impacts.
The Women’s Budget Group has demonstrated on numerous occasions that women are already disproportionately affected by the Government’s policies in relation to the years of austerity. Its research shows that 86% of the austerity burden was and is being borne by women. That is eight long years during which our mothers, sisters and daughters have borne the brunt of those cuts, and now here we are with yet another measure that will disproportionately affect women more than men. A member of the Women’s Budget Group, Dr Angela O’Hagan, helped put this into context when she said:
“Budget processes have increasingly become the conduit for discriminatory policies, such as the UK Government’s rape clause and the cumulative attacks on welfare income especially among poorer women and women of colour. It is essential that external voices such as UK Women’s Budget Group are engaged and heard, and that the Government’s budget processes are opened up to closer scrutiny for their impact on equalities groups and their potential to advance equality through more effective allocation of public finances and more equitable means of raising government revenue.”
I suggest that had the Government allowed more scrutiny of the clauses and sought consultation as per the normal procedure before they came to office, these issues might have been ironed out during the Bill’s development. Instead, these negative gender impacts are squirreled away in policy papers on particular and specific clauses after it is too late to do anything about them, with the right properly to amend already denied to the Opposition by the Government through their refusal to table an amendment of the law resolution.
I hope the Minister will explain why this discrepancy has been included in the Bill and make moves to rectify it immediately. Time and again, we have called for an equality impact assessment of the Budget to flag these matters up, and every time that has been denied by the Government, who appear to want to slip these inequalities through. We will continue to hold them to account on every single one.
The amendment also relates to the matter of the Government’s behaviour regarding consultation and would require a review of the revenue effects of the clause. In the policy paper on the clause, the Government list the Exchequer impact as negligible. We have heard that several times today, so will the Minister enlighten us as to what “negligible” means in cash terms? It is not necessarily going to be “negligible” on an individual basis for those affected by this proposal. It would be helpful to have a band of figures starting, presumably, at zero and going up the scale. We hope that a proper review of the revenue effects of this measure would be made available for the purposes of good practice alone. I continue to refer Members to the “Better Budgets” report helpfully provided by the Institute for Government and the Chartered Institute of Taxation. The report states that
“the Treasury and HMRC should publish the evidence base behind measures and the assumptions on which costings are based, and ensure that these are appropriately detailed.”
Clearly, that was not the case with this measure. I have already spoken to the Committee on this point, but it is essential that the Government begin to change their behaviour towards the scrutinising of legislation, especially when it places further burdens on women. These proposals have already taken their toll and will continue to do so, unless we stand up and do something about it.
Kirsty Blackman
This is a process question for the Minister about going forward and ensuring that we scrutinise legislation in the best way. It would have been helpful if, in the explanatory notes, there had been some comment provided by the Scottish and Welsh Governments because both measures involve making changes that affect devolved benefits.
Given the devolved and reserved aspects of many of the matters we are discussing, I again make the case for a geographical split in the changes that the clause makes. There could have been specific Scottish, Welsh, RUK or whole UK sections, which would have made effective scrutiny easier. I emphasise that it would have been incredibly helpful to have that. I suggest for next year’s Finance Bill that, if the Government make changes of this nature, they could make both changes to ensure the most appropriate scrutiny.
I am happy to support the Opposition amendment. The hon. Member for Bootle made a powerful case about the gendered impact of the social security changes of recent years and the fact that women have been disproportionately hit by them. We do not want to see those changes exacerbated by a tax system that amplifies the issues faced by women as a result of the Government’s policies on social security. I am comfortable supporting the Opposition’s amendment and I plead with the Minister to consider making the changes that I have requested for future years.
Anneliese Dodds
It is an enormous pleasure to be in this Committee with you in the Chair, Ms Dorries, and to make my first brief speech here. I would like clarification from the Minister on the specific issue of tax treatment of council tax reduction schemes. Subsection (5) on page 8 of the Bill refers to “a” council tax reduction scheme, stating that
“Payment under a council tax reduction scheme”
is exempt from income tax. However, page 26 of the explanatory notes refers to
“the” council tax reduction scheme.
I am sure that colleagues will know that there is no longer one council tax reduction scheme across the UK, since central Government decided to top-slice that form of social security and devolve the design of it to different local authorities, albeit with the stipulation that the protection should be maintained for older people. Only a very small number of local authorities still provide full council tax relief, including council tax relief for low-income families. I am enormously proud that Oxford City Council is one of those.
Central Government have washed their hands of responsibility for this benefit. They have refused to provide figures on take-up, for example, in response to parliamentary questions that I have tabled. They have also refused to provide figures on the number of low-income people now being taken to court because they cannot pay council tax, because they are no longer provided with the relief. I am not cavilling over semantics when I ask the Minister to make crystal clear that the exemption from income tax provided in the Bill will apply to all council tax reduction schemes, not to some particular version of those schemes that the Government might wish to focus on.
Related to that, I heard a very worrying rumour that the Government might seek spuriously to argue that funds spent on council tax relief for families by local authorities should not be counted in central Government’s assessment of local authorities’ expenditures, because they are, in theory, discretionary. I disagree fundamentally with that position, because it would penalise those authorities that support the worst off. It would be helpful if the Minister confirmed that, just as I hope he will confirm that council tax relief for families is viewed as legitimate in the Bill, and for income tax purposes, it will be viewed as legitimate expenditure when it comes to the allocation of central Government support for local authorities.
Mel Stride
I start by addressing the specific points raised by the hon. Members for Aberdeen North and for Oxford East. On the explanatory notes and the value or otherwise of a specific reference to input from the Scottish Government, I will certainly be happy to look at that in the future. I assure the hon. Member for Aberdeen North that there were significant discussions on these measures between the Treasury and Scottish officials in the appropriate manner. On the technical point raised by the hon. Member for Oxford East around “the” scheme versus “a” scheme, the information I have is that the scheme came into force in April 2013. However, I will look into her specific question about whether the measures apply to “a” scheme or “the” scheme. I am afraid that I do not immediately have an answer to that, but I will get back to her as soon as I can.
Clause 12 clarifies and confirms the tax treatment of nine social security benefits. The income tax treatment of social security benefits is legislated for in part 10 of the Income Tax (Earnings and Pensions) Act 2003, which provides certainty about existing benefits and needs to be updated when new benefits are introduced. For example, the Scottish Government are introducing five new payments following the devolution of powers, including the young carer grant, the discretionary housing payment and the carer’s allowance supplement. Other payments covered by the clause have been in operation elsewhere in the UK for some time, such as the council tax reduction scheme and the flexible support fund, but are not yet covered clearly in legislation.
The changes made by clause 12 ensure that such payments are taxed appropriately, and that that is clear in legislation. The clause clarifies and confirms that such payments are exempt from tax, with one exception—the carer’s allowance supplement—which is taxable. That is in accordance with “The agreement between the Scottish Government and the UK Government on the Scottish Government’s fiscal framework”, which states:
“Any new benefits or discretionary payments introduced by the Scottish Government will not be deemed to be income for tax purposes, unless topping up a benefit which is deemed taxable such as Carer’s Allowance.”
Amendment 2 would require the Chancellor of the Exchequer to review the revenue effects of the clause and lay a report of that review before the House within six months of the passing of the Bill. Such a review is unnecessary. The Government have already published a tax information and impact note for this measure, and our assessment, supported by the OBR, is that the Exchequer effects are negligible.
On the carer’s allowance supplement, which was introduced in Scotland in 2018, as a general rule benefits are taxable if they replace lost income. The carer’s allowance has therefore always been taxable. The vast majority of those receiving the supplement have income below the personal allowance and would therefore not be expected to pay any income tax. That is an important point in respect of the point made by the hon. Member for Bootle. I will not dwell on each payment covered by the clause, but I reiterate that eight of these payments are exempt from taxation. HMRC has not and will not collect any tax from these payments.
As the tax information and impact note sets out, the taxation of the carer’s allowance supplement is expected to have negligible Exchequer effects because, as I have said, the vast majority of those carers receiving the additional payment do not earn sufficient income to pay any income tax at all. However, any income tax receipts from that will of course go to the Scottish Government.
The Committee will also know that taxable social security income is aggregated and reported to HMRC through self-assessment after the end of the tax year. This is an important point in the context of the amendment. That income will not need to be reported until January 2020. A review would therefore be impractical only six months after the Bill’s passing. I therefore ask the Committee to reject the amendment. I commend the clause to the Committee.
Peter Dowd
We will not push the amendment to a vote. However, I push the case to the Government that, while these amounts of money may be negligible to the Treasury or to HMRC, if the measure affects a particular woman who is already under the stresses and strains of helping a relative, it is important that we give them as much latitude as we possibly can. Whether we like it or not, this will be perceived as a continued attack on women who continue to be the biggest assistants to relatives—yet again, it is an attack on those people who are doing a caring role.
Mel Stride
Once again, divine inspiration has arrived and I can confirm that the CTR is a reference to multiple schemes—so it is “a” rather than “the”. The measure therefore covers all those schemes.
Peter Dowd
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 ordered to stand part of the Bill.
Clause 13
Disposals by non-UK residents etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 23, in schedule 1, page 147, line 34, at end insert—
21A The Treasury must by regulations require that a list of persons not resident in the United Kingdom whose gains are brought into charge by the changes made to TCGA 1992 in this Schedule be published on a public register.”
This amendment would require a public register of those subject to capital gains tax as a result of the provisions in Part 1 of Schedule 1.
Amendment 24, in schedule 1, page 147, line 34, at end insert—
21A The Chancellor of the Exchequer must review the revenue effects of the changes made to TCGA 1992 in this Schedule and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the revenue effects of the changes to capital gains tax as a result of the provisions in Part 1 of Schedule 1.
Amendment 34, in schedule 1, page 147, line 34, at end insert—
21A The Chancellor of the Exchequer must review the expected revenue effects of the changes made to TCGA 1992 in this Schedule, along with an estimate of the difference between the amount of tax required to be paid to the Commissioners under those provisions and the amount paid, and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the changes made to capital gains tax in Schedule 1.
Government amendment 1.
Amendment 29, in schedule 1, page 167, line 47, at end insert—
Part 2A
Review of effects on property prices
118A (1) The Commissioners must, within three months of the end of the tax year 2019-20, provide information to the Treasury on the basis of the exercise of their functions in relation to the changes made in this Schedule about the effects of the changes on the matters specified in sub-paragraph (2).
(2) Those matters are—
(a) residential property prices in the United Kingdom, and
(b) the proportion of residential property in the United Kingdom owned by persons not ordinarily resident in the United Kingdom.
(3) The Chancellor of the Exchequer must, within six months of the end of the tax year 2019-20, undertake a review of the information supplied in accordance with sub-paragraph (1) and lay a report of that review before the House of Commons.”
This amendment would require the Chancellor of the Exchequer to review the effects of the changes in Schedule 1 on residential property prices and foreign ownership of residential property.
That schedule 1 be the First schedule to the Bill.
Mel Stride
Clause 13 and schedule 1 introduce provisions, with effect from April 2019, to tax non-residents on the gains they make on UK commercial property and to extend the charge on residential property. That levels the playing field between UK resident and non-resident investors in UK land and buildings. The modern OECD model tax treaty gives the jurisdiction in which land and buildings are located the primary right to tax income and gains from those land and buildings. Historically, non-residents have not been subject to UK tax on the gains they make on UK land and buildings. That has been the policy of successive Governments over several decades. The Government have steadily revised the UK’s approach in recent years. In 2013, we introduced a targeted tax on gains relating to property within the charge of the annual tax on enveloped dwellings. In 2015, the Government went further and brought in certain non-residents’ gains on the sale of residential property owned directly.
Those 2013 and 2015 changes were a substantive reform to the taxation of non-residents investing in UK property. Now that the charges have been in place for several years, it is the right time to take a more comprehensive approach. Clause 13 achieves that by extending a charge to the gains made by non-residents on commercial property and expanding the scope of the existing residential charge by removing the carve-out for widely held companies. To ensure that transactions that are essentially sales of UK land are taxed, and to reflect the commercial reality of many large property transactions, the clause introduces a charge on indirect disposals of UK property. That charge will apply to gains made on the disposal of an interest in an entity that derives 75% of its value from UK land.
The Government recognise that these reforms are extensive, and recognise the value that investment in UK land and buildings brings to the United Kingdom. The clause implements the rules in a way that minimises disruption and avoids unintended consequences. Non-resident companies will pay corporation tax on all the chargeable gains they make on UK land and buildings, creating a single cohesive set of rules. Those taxpayers who are exempt from UK tax on the gains that they make for reasons other than their residence, for example pension funds and qualifying charities, will continue to be exempt. Steps have been taken, using principles currently applied to UK funds, to ensure that these and other investors are not disadvantaged where they invest in UK property via funds.
In legislating for this policy, the clause restates, in a simplified form, the main charging provisions for the taxation of capital gains. Other than implementing the policy, this makes no changes to the existing law. It significantly and permanently simplifies the legislation and aids taxpayers’ interpretation of the law.
Government amendment 1 will remove a redundant subsection of the Corporation Tax Act 2009. That subsection currently ensures that corporation tax is not charged on gains that are subject to capital gains tax. As I have set out, clause 13 will introduce a single cohesive set of rules charging companies corporation tax on all the chargeable gains they make on UK land and buildings, which means that this subsection is no longer required.
Amendment 23 would require a public register of those subject to capital gains tax as a result of schedule 1. The categories of person who will be brought into scope by clause 13 and schedule 1 are absolutely clear. I have set that out to the Committee today and it is set out in detail in the schedule. The Government do not, as the amendment would require, identify specific individuals or companies that are brought within the scope of particular tax charges; it would be inappropriate to do so.
Anneliese Dodds
I am grateful to the Minister for that explanation. As he stated, this clause and schedule are intended to perform a variety of functions to level the playing field—the number of times that he used that phrase was interesting—between UK and non-UK residents when it comes to the payment of corporation and capital gains tax on gains from disposals of interest in UK land. They include, as he mentioned, the removal of the charge to tax on ATED-related gains, with ATED standing for the annual tax on enveloped dwellings. As was mentioned, these changes follow on from the imbalance in the tax treatment of the disposal of interests in property by individuals as against companies, artificial or otherwise, which has been gradually rectified over recent years.
Part 3 of the Finance Act 2013 introduced ATED as a principle and the concept of enveloped dwellings so that there would be a capital gains tax charge on non-natural persons who had owned properties worth more than £500,000, subject to a range of exemptions. That was followed three years ago by the extension of capital gains tax on gains arising on the disposal of UK residential property interests by certain non-resident persons, including individuals, trustees and closely held companies. However, that was not accompanied by a levelling of the playing field in relation to non-residential property wealth—land and commercial property—until now, although for reasons that I will explain, these measures are wanting in their current form, in particular because they involve a so-called trading exemption, to which I note the Minister, unless I misheard him, and he is normally very clear, did not refer in his comments. I shall speak first about that main and very significant problem with the clause and schedule, before moving on to describe the amendments in relation to them.
In an ideal world, we as the Opposition would have sought to remove the trading exemption for enveloped structures to avoid capital gains tax. Indeed, that is what some of the amendments that we had tabled set out to do. I completely understand why they were ruled out of order. There is absolutely no criticism of the decision to do that. I am sure that it was because of the restrictions imposed on us because of the Government’s failure to table an amendment to the law resolution, which my hon. Friend the Member for Bootle has already referred to. However, that trading exemption threatens to emasculate this measure.
I am sure that members of the Committee will be aware that almost all the measure’s projected yield is expected to derive from non-resident companies when they dispose of UK commercial property such as offices, factories, warehouses, shops, hotels, leisure facilities and agricultural—
The Chair
Order. Amendments 26 and 27 were not selected because they are charging, not because of a lack of an amendment of the law resolution.
Anneliese Dodds
I am grateful for the clarification. I am sorry if I got the situation wrong, and it is helpful to have heard that. However, I understand that it is appropriate for me to discuss the substantive matters in the clause, even if we do not have amendments tabled on them. Other hon. Members have done that, so I will continue to do so before I move on to my amendments, if that is acceptable. I am sorry if I mischaracterised the position and the decisions that were taken.
Anneliese Dodds
To continue with reasons why the trading exemption is illegitimate to our mind, as I mentioned before, the yield that has been described as arising from the measure is expected to derive from non-resident companies disposing of the whole range of different types of UK commercial property that I listed. Unlike residential property, most of which is owned by individuals, almost all major UK commercial property is held by large corporates or collective investment schemes or trusts.
Those large corporate investors in property are sometimes known as property envelopes, which reflects the fact that the companies’ principal purpose is to operate as a synthetic wrapper for owning land. Since the property envelope has full title to the land, any individual or other corporate owning the property envelope—for example, by owning its shares—is the ultimate or indirect owner of the underlying land.
Typically, when selling the property, the ultimate owners do so indirectly, by selling their interests in the property envelope, rather than by a direct sale of the property itself. That form of disposal is often known as an envelope disposal, since the property envelope has full title to the land, and the transfer of its shares to a new owner is tantamount to a conveyance of the property to new ownership. There are often tax reasons for that form of conveyance, since the transfer of shares, rather than land, does not attract any stamp duty land tax charge, which results in a substantial saving for the purchaser.
Recognising that situation, the consultation on the proposed measures proposed charging non-UK residents capital gains on disposals of their interest in property envelopes in the same way as if they had sold the actual land. The consultation document proposed that a property envelope would be defined as a property rich entity if it had UK property assets that represented 75% or more of the value of the entity’s total assets, as the Minister mentioned. Given that the vast majority of high-value UK commercial property is owned through a property envelope, that element of the rules, which I will refer to in future as the anti-enveloping rule for ease of discussion, is critical to the measure securing significant yield.
In response to the consultation responses that the Government received, the draft legislation includes an exception to the charge on disposals of property envelopes if the property owned in that envelope is being used in an ongoing trade that continues after the disposal takes place. In effect, that means that non-residents who make a disposal of shares in a property envelope will not be subject to any charge, provided that the property is being used for a trade.
That condition will be met if the property is being used as an office, a factory, a warehouse, a shop, a hotel, a leisure facility, in a farming trade or for any other similar commercial purpose—I am sure the Committee gets my drift. As such, the exception is surely entirely contrary to the stated rationale for the measure, which is to ensure that non-residents are taxed on gains from the disposal of commercial property in the same way as UK residents. Again, I remind the Committee that the Minister used the phrase “having a level playing field” several times in his remarks. Commercial property will, almost by definition, be used in a trade.
I am sure that the entire Committee will be scratching their heads and asking why the change occurred. Well, there were 120 respondents in all to the consultation, a number of which focused on one question only, many of which came from the most significant actors in this arena, namely the big four and large property concerns, including representatives from the real estate and collective investment scheme sector.
The Government response to the consultation states:
“Many respondents were concerned by”—
what they described as—
“the ‘cliff-edge’ nature of the 75% property richness test. They noted that fluctuations in the value of property and other assets could lead to cases where an entity strayed in and out of property richness. Some were concerned that real-estate rich trades such as retail and hotel chains and utility companies could fall to be property-rich, or that investors in these trades might be concerned that they were, and be forced to go to lengths to explore the rules and test their situation, often finding that there was no impact. To ameliorate this, a number of respondents asked for a trading exemption to make it simple for smaller investors to understand when the rules did not apply to them. They noted that the main policy aim was to tax UK land, not interests in retailers or utility companies.”
The Government response went on to say that,
“the government will agree to add a trading exemption. When a disposal is made of an interest in an entity that is trading both before and after the disposal, as for connected parties under the Substantial Shareholdings Exemption rules, then it will not be considered to be an indirect disposal of an interest in UK land”—
That is, it will not be treated as an enveloped disposal.
“Although the government does not intend to provide a specific exemption for infrastructure, a trading exemption should also deal with instances where the infrastructure disposed of is in use as part of an ongoing trade being disposed of alongside it in the arrangement.”
Surely, that exemption will undermine the overall intent of the measure. First, the main target of the legislation is enveloped disposals of commercial property made by non-residents. Almost all commercial property will, as I mentioned before, by definition, be used in a trade. The examples of commercial property given in the consultation document—offices, shops, industrial units and hotels—are all examples where the property is used in a trade, yet these disposals will be outside the scope of the new rules, provided that the sale is an enveloped one, and that the trade continues under its new ownership.
That is in clear contrast to the situation for UK residents. An equivalent disposal made by a UK resident is chargeable to tax, unless it meets specific conditions laid out in those substantial shareholding exemption rules—the SSE rules, which the consultation response referred to. The original consultation document was clear that non-residents would be able to benefit from the substantial shareholding exemptions in the same way as UK companies. However, the response document, as I just described, goes further than that: it grants a blanket exemption available only to non-residents and in circumstances much wider than the SSE.
Frankly, I very much doubt that many property envelopes or large investors involved in them would go to the lengths of requiring ongoing trades in their ownership—say, a popular hotel—to close while they are selling that commercial property, just so that they can have the joy of paying stamp duty land tax. If the Government think otherwise, perhaps they can enlighten us, but I think the chances of that are fairly slim. That appears to be what would be necessary in order for them to be caught by this measure. Perhaps the Minister can enlighten us, if I have got that wrong.
This trading exemption undermines any claim that the measure creates a level playing field with comparable UK businesses, and also provides an avoidance opportunity that, worryingly, even UK businesses could exploit, if they arrange for their UK property to be held through chains of offshore envelopes. That is surely something that our Government cannot stand by and facilitate, yet they seem to be doing so—albeit unwittingly, I am sure.
The Government’s stated reason for making this change is to help smaller investors, but if that is the aim, surely it would be more appropriate to include an explicit small-investor exemption that would not apply to larger capital gains.
Kirsty Blackman
I will speak relatively briefly. It is always difficult to follow the hon. Member for Oxford East, who is leading for the Opposition on these measures. I concur with her comments about the Labour amendments—the Scottish National party will be happy to support them. Foreign ownership of properties and the impact on price is pertinent and relevant to the SNP proposal.
On amendment 34, the explanatory notes are incredibly difficult to follow. By the time we get to “ggg” in the explanatory notes, things become very difficult to refer to. If there is another explanatory note of that length in future years, it would be useful if the staff could come up with a better numbering system. As I say, it is difficult to refer to those sections when we are going around the alphabet for the third time.
The public register proposed by Labour is an interesting idea and, in principle, the Scottish National party is in favour. As I said, transparency is important when encouraging everybody to pay the correct amount of tax, because if tax owed is publicly known—the calculation of the tax gap is pertinent to this topic—people are more likely to pay. The Government should say clearly, “This is the amount of tax owed, this is how hard we are chasing it down and, as a result, this is the tax gap.” It bothers me that the Government say regularly that the UK tax gap compares favourably with that of other countries. It does not matter whether it compares favourably with other countries: any tax gap is a bad thing and, if one exists, the Government clearly need to work to ensure that they are reducing it as far as possible. Given the issues that have been brought up by Opposition Members and by many external organisations, it is clear that the Government could do more to reduce the tax gap. It is not good enough to say, “We are doing quite a good job, and therefore we should stop here.” The Government need to be able to say, “We are doing the best job on reducing the tax gap that we possibly can.”
On foreign ownership and the residential property price, I was disappointed that the Labour amendment on landholdings was not accepted—I understand the reasons why it was not allowed, but I would have been keen to debate it. There are specific Scotland-related issues not so much about residential property—that is an issue in Scotland but not to the same extent as it is in London—as about other landholdings. That is a significant problem in the Scottish context. Foreign ownership of those landholdings concerns a huge number of people in Scotland.
Regarding the benefits of transparency, the SNP has called for measures to reduce tax avoidance, and the Government have talked a good game about things like Scottish limited partnerships after a huge amount of pressure from the Scottish National party. However, we are still waiting for action. If the Government say they are doing positive things to reduce tax avoidance, they need to follow through. Rather than just producing a consultation, they need to take the required action to reduce the numbers of people who are abusing Scottish limited partnerships. We need the Government to be seen to be serious in this regard, and to take the action they have promised to take. The House operates on trust, and throughout my time in this place, I have seen a number of Opposition amendments withdrawn because ministerial teams from all Departments have given assurances. If the Government do not take action soon on Scottish limited partnerships, they risk seriously eroding that trust and may end up in a situation in which ministerial assurances, and particularly assurances from Treasury Ministers, are not accepted because the Government have not followed through previously.
The income tax, national insurance contribution and capital gains tax gap sits at about £13.5 billion, which is a significant amount of money. If any changes are being made to those taxes, and particularly to CGT, it is reasonable to ask about the impact on the tax gap, and reasonable for the Government to have those figures at their fingertips. They should be able to say not just what the impact is on the total tax take from any changes, but also what the impact is on the tax gap.
If the Government are talking about cracking down on tax avoidance, it is important that they prove to us that the tax gap is being reduced. It is not good enough to just say, “We think this measure will reduce tax avoidance.” The Government need to tell us by how much they will reduce tax avoidance. They need to be clear on the impact of those changes before they introduce them.
I intend to push amendment 34 to the vote if we have the opportunity to do so. I would be happy to support the Labour party on their amendment. I would also like to seek further assurance and a clarification from the Minister in relation to the pursuit of tax avoidance reduction measures, and a commitment from him that the Government will follow through on the tax avoidance reduction commitments they make today.
Mel Stride
I thank the hon. Members for Oxford East and for Aberdeen North for their contributions. I compliment the hon. Member for Oxford East on arraying a mass of highly technical questions on a very technical area. I will do my best to answer her them, but I will write to her accordingly if I am unable to do so. She accurately mapped out the process that we have been going through for a number of years, moving into the space of the appropriate taxation of non-resident entities when it comes to property transactions. She recognises, as I do, that it is the right direction of travel, and that it is right to introduce the measures set out in clause 13, although she has several concerns about the detail.
The hon. Member for Oxford East dedicated a specific section of her remarks to the issue of property-rich businesses and the trading exemption. She gave some examples where she felt that this would be an inappropriate exemption, around both the general principle of the exemption for trading purposes and the specific threshold figure of 75%. She used the expression “cliff edge” to refer to what there might be around that number.
On the basic principle, this measure seeks to avoid the circumstances whereby a business—a significant supermarket chain, for example—might be sitting on a substantial amount of land and might even have banked some land for future development. However, the business’s principal purpose is the purchase and sale of a variety of goods, with that being the core of the particular business being looked at. Were a sale of that business under those circumstances to occur, it would seem appropriate that the investors in that business—where it was consequently below the 75% threshold—would not fall within the measures due to the taxation measures that we have been considering.
As to the specific figure of 75%, it is the same issue as the 25% threshold figure that the hon. Member for Oxford East raised in relation to whether individual investors would fall within these measures, or whether they would be expected to know or not know about the property richness of the business in which they were investing—we inevitably run into a generalised problem with figures, which is that we have to choose one. There will always be a debate about whether 75% is the right figure, or indeed 25%. However, a figure has to be applied, to make it scientific and rigorous.
Then there is the question of what we have done to ensure that 75% and 25% are the right figures, as opposed to figures that we have just plucked out of the air. That leads us to the extensive consultation that has been undertaken in respect of the Bill, with some 80 responses around the measures raised by the hon. Member for Oxford East. As I would say of all tax measures, this one included, they are kept under continuous review by the Treasury, so it is quite possible that we will return to these matters in future legislation, specifically on the issue of thresholds.
The hon. Member for Oxford East spent some time referring to the amendments and the question of whether there should be a register of those who fall within the scope of these capped measures. There is a basic principle here that just feels right to me, which is that the Government should not be in the business of holding up individuals to the public as falling due for particular types of tax. Once you start moving into that kind of space, it feels rather disproportionate and a little authoritarian, if I may say so. It is right to resist that urge.
I was going to raise one other matter in that context, which is important, and that is that the hon. Member for Oxford East referred—she very kindly did this for me although I did not do so in my opening speech—to the implementation of a register of beneficial owners of overseas entities owning or buying property in the UK. We will bring that in by 2021, and the register will be the first of its kind in the world. That underscores the importance of transparency to this Government.
Sir Robert Syms
Is the amount of revenue raised in this area more or less than was raised under the previous Labour Government?
Mel Stride
If I interpret my gallant and hon. Friend’s question as relating to the specific issue of overseas holdings of UK land and properties and paying CGT on the transactions they are in, I would be fairly confident in saying that we will be raising more. Indeed, through time and through dealing with the measures I identified earlier, I strongly suspect that the answer is yes. I am seeing nods of an inspirational kind from over my left shoulder, so I can reassure him that is indeed the case.
The hon. Member for Oxford East also raised the effect of these measures on the market and the suggestion of a review to look at price effects. The Office for Budget Responsibility has already done such an analysis and concluded that these measures would have a negligible effect on price. She also raised the issue of taxation treaties, particularly Luxembourg, which is a fair point because there are instances when the international taxation treaties—the bilateral treaties between ourselves and other tax jurisdictions—do not quite fully accommodate the measures we are looking at here. I know we are actively engaged in the specific case of Luxembourg to seek changes to those arrangements to make sure they facilitate the measures we are looking at here.
With regard to TIINs, I must say that I do not have the same confusion as the hon. Member for Oxford East. I am not making a specific point, other than that I have not noticed it, but I will look at it again. The relevant TIIN is the one entitled “Capital gains tax and corporation tax: taxing gains made by non-residents on UK immovable property”, which was last updated on 7 November 2018.
The hon. Member for Aberdeen North had several points to make, particularly about the tax gap. She suggested that there might be some complacency on the part of the Government, and that it might be assumed that, because we already have a world-beating tax gap level, we are not pushing forward with further measures. I can reassure her that that is not the case. Indeed, the Bill contains several measures that further bear down on the tax gap, of which this is one. It will build our tax base and further enhance our ability to raise tax, which of course is very important. The point I would make is that we have both the legislation, some of which I have referred to, and several other practical measures that the Government are bringing in that are driven by HMRC —for example, making tax digital, which is an approach to bearing down on the tax gap when it comes to the operations of smaller companies in the United Kingdom.
I hope that has covered the majority of the issues raised, but I would be happy for the hon. Members for Oxford East or for Aberdeen North to write to me if they would like me to respond to any other issues.
Anneliese Dodds
I am grateful to the Minister for those comments, but I would like to clarify a few points, so that we are not talking at sixes and sevens. In relation to the trading exemption, the point is not that it would exempt certain categories of business as opposed to others, but that it would exempt those businesses that are trading before and after the disposal, so it introduces a new concept that is not applied to UK-resident investors to the same extent. That is what is relevant, rather than whether we are talking about a supermarket or not. That would be relevant to the property richness test, but the trading exemption is a separate element of the Bill that I was trying to push on.
In relation to the 25%, the Minister always valiantly attempts to support his Government’s policies. He is right that a figure must surely be attached to any numerical proposition in a Bill. He tried to do that here and said that 25% had been arrived at. The suggestion was that any figure could be contested. Again, it is not the specific value of that figure that is problematic, but what the figure refers to. My contention was that the Government should focus not necessarily on the proportion of the gain, but on the value of the gain. His Government have decided to focus not on the value but on the proportion. As I said, 25%—or rather, 20%—of a gain could be £1 million, which is a tremendously large value, but it could be a smaller proportion if it is just 20%.
Kirsty Blackman
Does the hon. Lady agree that having both of those in the Bill would be useful, so we could have the 25% figure or gains over £200,000, or any such figure as the Government deemed appropriate?
Anneliese Dodds
The hon. Lady is absolutely right. The Government are quite keen on double thresholds in other contexts, so this is a case where a double threshold could be introduced if they were concerned about protecting those small investors. One could have both a measure related to the proportion of the gain and one related to the value of the gain. That could be very sensible.
I am grateful to the Minister for his comments on tax treaties, but I was trying to get at whether he feels that the reference in the legislation—I cannot remember the exact term used in the explanatory notes, but it is something like referring to the “intent” or “spirit” of the tax treaty, rather than the letter—is sufficiently legally watertight. I am concerned that it would not be, because many people who have moved their tax affairs to Luxembourg to avoid tax are quite adept at reading just the letter and not conforming with the spirit, when they want to.
Finally, in response to the question from the hon. and gallant Member for Poole—
Anneliese Dodds
I am a new Member and I am always getting my fingers rapped about how to refer to other Members. I never want to upset anyone, so I hope I have not upset the hon. Gentleman.
If we look at the proportion of the commercial property market owned by non-UK investors, we see that there has been a change over time. We should surely consider that when we look at the impact or otherwise of Government policy, as well as the absolute amount of tax revenue that will go up since absolute figures go up because of inflation and so on. I do not wish to try the patience of the Committee, so we will not press our amendments to a vote.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Kirsty Blackman
I am willing to try the patience of the Committee in this instance.
Amendment proposed: 34, in schedule 1, page 147, line 34, at end insert—
“21A The Chancellor of the Exchequer must review the expected revenue effects of the changes made to TCGA 1992 in this Schedule, along with an estimate of the difference between the amount of tax required to be paid to the Commissioners under those provisions and the amount paid, and lay a report of that review before the House of Commons within six months of the passing of this Act.”—(Kirsty Blackman.)
This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the changes made to capital gains tax in Schedule 1.
Finance (No. 3) Bill (Seventh sitting)
Thursday 6th December 2018
(5 years, 11 months ago)
Public Bill CommitteesRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 6 December 2018 - (6 Dec 2018)
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
Clive Lewis (Norwich South) (Lab)
I beg to move amendment 108, in clause 57, page 40, line 12, at end insert—
“(10) The Chancellor of the Exchequer must review the revenue effects of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the revenue impact of Clause 57.
The Chair
With this it will be convenient to discuss the following:
Amendment 109, in clause 57, page 40, line 12, at end insert—
“(10) The Chancellor of the Exchequer must review the expected effects on levels of CO emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of clause 57 on CO2 emissions and climate change targets.
Amendment 110, in clause 57, page 40, line 12, at end insert—
“(10) The Chancellor of the Exchequer must review the expected effects on the volume of traffic on the roads of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of clause 57 on road congestion and traffic levels.
Amendment 111, in clause 57, page 40, line 12, at end insert—
“(10) The Chancellor of the Exchequer must review the expected effects on air quality standards of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of Clause 57 on air quality standards.
Clause stand part.
Clive Lewis
It is a pleasure to serve under your chairmanship, Mr Howarth. I am pleased to have the opportunity to speak to the clause and our amendments. As the Minister might outline shortly, the clause provides for changes to certain levels of vehicle excise duty, which I will refer to as VED, by amending the Vehicle Excise and Registration Act 1994, which will now be known as VERA—there are lots of acronyms in this.
Changes to the rates are due to take effect in relation to vehicle licences taken out on or after 1 April 2019. VED is chargeable on vehicles, dependent on various factors, such as vehicle type, engine size, date of first registration, carbon emissions data—indirectly—and other emissions’ impacts, such as air quality and public health. I will not go through all the changes to the various excise duty rates as they apply to the different types of vehicle covered by the clause. At this stage, I will simply note that they are relatively small.
The amendment would require the Chancellor to review the revenue impact of the clause and to publish the findings. That would allow the House, not to mention the drivers of those classes of vehicle and the public at large, to understand the impact on the public purse. Without such an assessment, neither the Government nor indeed Committee members would know how much additional money was available to redirect into measures to help drivers—in particular those on low incomes—to take up cleaner vehicles to the benefit of the natural environment and public health. Will the Minister tell us whether the Government have undertaken any such assessment? If so, will he commit to publish it? If they have not, will he undertake to do so?
The amendment would require the Chancellor to review the impact of the clause on carbon dioxide emissions and the UK’s climate change targets, and to publish that analysis. As the Minister might confirm, road transport accounts for 22% of total UK carbon dioxide emissions—a major contributor to climate change. The European Union has agreements with motor manufacturers that aim to reduce average CO2 emissions from new cars. Colour-coded labels, similar to those used on washing machines and fridges, are now displayed in car showrooms, showing how much CO2 new models emit per kilometre. However, as traffic levels are predicted to increase, road transport will continue to be a significant contributor to greenhouse gas emissions.
Given that light vehicles and other vehicles covered by the clause contribute substantially to carbon and greenhouse gas emissions, will the Minister explain why no such climate impact assessment has been carried out? How will the Government take a lead internationally in the fight to keep average atmospheric temperatures below 1.5° C in the absence of full monitoring and measurement of all greenhouse gas emissions from all sources? He will surely also need to apply “polluter pays” disincentives in the form of increased taxes, for example, including relevant changes to VED.
Finally, will the Minister give a commitment that any such planned or future increase in VED will be recycled into helping drivers to adopt low-emission fuel alternatives, such as electric vehicles or, in future, hydrogen-powered vehicles—that is particularly important to help drivers who must use their vehicles for work purposes as well as for leisure activities—or, where convenient, into helping public transport alternatives, which are rarely available in some parts of the country and many rural areas?
Amendment 110 would require the Chancellor to review the impact of the clause on road congestion and traffic levels and to publish the results. Vehicle use affects our whole quality of local life: traffic can be dangerous and intimidating, dividing communities and making street life unpleasant, while air pollution and traffic noise can make urban living uncomfortable. As the Institute for Fiscal Studies points out, taxing only fuel consumption and car ownership, no matter how the taxes are differentiated by emissions and engine size, cannot result in anything approaching an optimal tax, because neither is a good proxy for the impact of car use on congestion.
Many journeys occur on relatively empty roads. Those journeys are overtaxed because the congestion cost imposed on other road users is minimal. Rural road users are overtaxed relative to those who regularly drive in towns during busy periods. The result is too much driving in towns relative to the amount of driving in less congested areas, and the build-up of noxious fumes and climate-changing pollution. Those adverse impacts are in addition to the disruption for all drivers, who are less able to move freely and go about their business or other driving activities efficiently and without wasting so much time stuck in their vehicles. Not only is that personally frustrating and a contributor to so-called road rage, but the impact on economic and social productivity should be minimised. Will the Minister therefore explain why there has been no assessment of the impact of the clause on road congestion and traffic levels, or publish any that has been carried out?
Amendment 111 is similar, requiring the Government to assess the impact of the clause on air quality standards. As the Minister must be aware, air pollutants in transport include nitrogen oxide, particles, carbon monoxide and hydrocarbons, all of which have a damaging impact locally on the health of people, animals and vegetation. Air quality in the UK might be slowly improving, but many areas still fail to meet the health-based national air quality objectives and European limit values, particularly for particles and nitrogen dioxide.
In town centres and along busy roads, vehicles are responsible for most local pollution. Vehicles of all types tend to emit more pollution during the first few miles of a journey, when their engines are warming up. Although new technology and cleaner fuel formulations will continue to cut emissions of pollutants, these benefits are being eroded by the increasing number of vehicles on the road, including motorcycles, and the number of miles driven. Can the Minister please explain why he does not believe that any such assessment, as set out in our amendment, is necessary to understand the impact of the clause on such a critical aspect of road use?
Amendments 108 and 111 also allow us to address a particular aspect of the total revenue impact and the impact of the measure on air quality: the specific amount raised from VED in London and the extra amount that would be raised as a consequence of the clause, and the consequent impact on air quality.
Alex Sobel (Leeds North West) (Lab/Co-op)
Are our amendments not particularly important in the light of fact that the Government have been taken to court three times by ClientEarth for failing European air quality standards and have lost three times?
Clive Lewis
My hon. Friend makes a very valid point. The point has not been lost on many people, including in my own city of Norwich, where some people are part of a court case against the Government on this issue and on others relating to climate change. It is something that many people are concerned about, especially given the impact on very young children, who are often lower to the ground and closer to the fumes. I welcome the point my hon. Friend has raised.
This issue is directly relevant, because an element of VED revenue take, including the extra amount raised by the clause, is ring-fenced to provide a fund of about £500 million for air quality. Londoners are contributing to this, in common with the rest of the country. The Government have allocated about £255 million of that funding for clean air zone implementation and another £220 million for the clean air fund, including supporting measures to soften the impacts of clean air zones on the poorest and on small businesses. They also allocated an extra £20 million to £25 million in the Budget for city air quality measures.
London, however, is excluded from all that funding. The Government previously said that this is because London received a generous air quality settlement in 2015 under the then Mayor, who is now better known as the failed former Foreign Secretary. Frankly, that is an absurd claim, and I hope the Minister will not stretch his credibility by repeating it to the Committee today. In reality, the Government reduced the revenue grant by a far greater amount than any extra funding for air quality, reducing it from £700 million to nothing in this financial year. The Mayor’s office received no air quality funding from the Government as part of the last comprehensive spending review. Unlike other cities, London is not getting help to implement the ultra low emission zone, and nor can the Greater London Authority access the mitigation funding to help small businesses and low-income people in other cities to meet new vehicle emission standards. That is perverse.
In addition, that predates the changes to VED, which Londoners are contributing to, and ignores the fact that, quite frankly, the current London Mayor has far greater ambition on air quality than his predecessor did. London is introducing the first, biggest and most ambitious clean air zone—the ultra low emission zone—on 8 April 2019. This is an essential part of the national air quality plan to achieve compliance with our legal obligations.
Anneliese Dodds (Oxford East) (Lab/Co-op)
Is my hon. Friend aware that my city, Oxford, is due potentially to be the first city in Europe with a zero emissions zone? We need more support for such initiatives from the Government—more than has been forthcoming up to this point.
Clive Lewis
Yes, I was aware of that. Labour local authorities in Oxford and across the country do fantastic work on the issue, but they often do so in isolation and with limited support from central Government. The Government should really be getting behind them, given the severe impact that poor air quality can have, not just on children, but on all of us—it is now believed to be connected to the onset of Alzheimer’s and other degenerative diseases.
The London Mayor has proposed a targeted scrappage scheme that uses camera data to ensure that only vehicles that are regularly in the ultra low emission zone receive scrappage funding. The proposal meets the criteria set out in the five-case model in the Treasury’s Green Book and has a positive business case ratio.
Will the Minister confirm that none of the general VED revenue will be spent in London, because the Treasury plans to give it to Highways England to maintain strategically important roads outside London? Strategically important roads in London are maintained by Transport for London without any Government support or a share of VED income. Frankly, I suspect that any assessment made under our amendments would reveal that money is available from the proceeds of VED, which of course will rise under the new rates proposed in clause 57. I am also confident that any assessment under amendment 111 would show that reducing harmful emissions in London is vital to our national effort on climate change and air quality, let alone the fact that it would address the suffering of ordinary people in our most congested city.
It is fair to say that there is a strong suspicion that the Government’s political refusal to support Londoners owes more to Londoners’ refusal to support them at the ballot box than to the best interests of the city or the country as a whole. If the Minister wants to dispel that impression, will he clarify what share of VED revenue comes from London now and what share he expects to come from London after the passage of the Bill?
Bambos Charalambous (Enfield, Southgate) (Lab)
I am a London MP and my constituency borders the North Circular road. The Mayor has introduced a low emission zone for part of the road, but more is needed to reduce emissions. Does my hon. Friend agree that funding from this measure should go towards introducing low emission zones in other parts of London as well?
Clive Lewis
Yes, I do. I do not think that there is a lack of ambition from the Mayor of London or from local authorities around the country; ultimately what holds them back is a lack of resources. Will the Minister commit to using the revenue to offer London the same air quality funding that is being made available to other parts of the country, to ensure that ultra low emission zones are a success?
The Exchequer Secretary to the Treasury (Robert Jenrick)
It is good to be back, Mr Howarth. As we have heard, clause 57 will make changes to vehicle excise duty rates for cars, vans and motorcycles with effect from 1 April 2019. As announced in the Budget, those rates will increase in line with the retail prices index from that date. As a result, they will have remained unchanged in real terms since 2010, with additional significant incentives for ultra low and zero emission cars. That comes on top of the Government’s decision to freeze fuel duty rates for the ninth successive year, which by April 2020 will have saved the average car driver £1,000 compared with the pre-2010 escalator.
Cars first registered on or after March 2001 pay VED based on their carbon dioxide emissions; 87% of those cars will pay no more than £5 extra in 2019-20. From April 2017, a reformed VED system was introduced that strengthens the environmental incentives when cars are first purchased, with all cars paying a standard rate in subsequent years. The standard rate will increase by £5 only. Expensive cars with a list price of more than £40,000 pay an additional supplement for five years of paying the standard rate. That will increase from £310 to £320, so it is only a modest increase, and it will affect about 7% of new car purchases. Finally, the flat rate for vans will increase by £10, and for motorcyclists there will be no more than a £3 increase in rates. We believe that those are modest, incremental changes, which protect the public finances but also pay careful attention to the cost of living for motorists.
Kirsty Blackman (Aberdeen North) (SNP)
I appreciate that the Minister is providing all this information in answer to issues raised by the amendments. Given that he has all the information, it would be great if he just put it into a review, as the amendments would require, so that we could see it written down in six months’ time.
Robert Jenrick
I take the hon. Lady’s point, but the information is mostly already in the public domain. It is not clear to me what information is not available. With respect to air quality, the Government will very shortly publish our ambitious clean air strategy. I encourage her and other hon. Members who, perfectly understandably, want to scrutinise our clean air commitments to pay attention to that document and scrutinise the Environment Secretary at that point. No doubt he will come to the House to make an announcement on the strategy.
The hon. Member for Norwich South also mentioned London. London already has a separate comprehensive funding settlement from the Department for Transport, which includes measures to deliver compliance with legal air quality limits. The Mayor has significant powers to take additional measures. Londoners also receive further funding for ultra low emission vehicles such as taxis. Indeed, measures in the Bill support the uptake of ultra low emission taxis. We took those measures a year early, as we will discuss later, and they have had a significant impact on the number of taxis on the streets of London. There are now between 500 and 600 electric or ultra low emission taxis that did not exist at the beginning of the year, incentivised by the measures taken by the Treasury. We are also supporting low emission buses and charging infrastructure. The Committee has already discussed the £200 million public investment in charging infrastructure, which we hope will spur at least a further £200 million of private investment. That will support charging infrastructure in all parts of the United Kingdom.
I hope hon. Members respect the fact that we consider the funding settlement for London’s roads as separate from that for the rest of the United Kingdom. That is a long-standing convention. We occasionally provide additional money. For instance, in the Budget the Chancellor provided more than £400 million for potholes. He included London in that, so London boroughs are able to take advantage of that money, but in general the funding settlement for London’s roads is separate from the negotiation with respect to Highways England.
I urge the Committee to reject the amendments, as I believe the reports they would require are unnecessary. The changes outlined in the clause will ensure that the Government continue to support motorists with the cost of living while ensuring that they continue to make a fair contribution to the public finances. As a result of our decision to hypothecate VED revenues, we will see a major increase in investment in our strategic roads, which I hope will benefit everyone in all parts of the United Kingdom. I therefore commend the clause to the Committee.
Clive Lewis
I thank the Minister for trying to answer some of our questions, but I still find myself with questions. It seems that there is a basic issue of transparency here. If, as he is saying, the Department for Transport has given certain funding to London—I am sure that is true—it would do no harm to make transparent what other funding is going to other parts of the country, so that the figures can be compared and contrasted to ensure that London is getting its fair share. The Mayor of London clearly does not believe that it is getting its fair share. It is the capital city—it has a large population, many vehicles on the road and a high population density—and all that is being asked for here is transparency.
On the issue of there being no assessment of the impact of the clause on road congestion on traffic levels, the Minister said that VED has a limited impact on that, but that is quite an arbitrary statement. Taxes have two effects: they can raise revenue and they can change behaviour. It is normally one or the other, but there are variations and it is sometimes a bit of both. I do not think it is beyond the ken of the Government to assess the potential impact of the VED increases on congestion levels, given that we have all agreed that air quality in this country is in a pretty poor state. Tens of thousands of people are dying prematurely or are adversely affected every single year.
To echo the sentiment of the hon. Member for Aberdeen North, it would not be too much trouble to write a report along the lines that we have asked for and make it available to Parliament. So go on, please.
Robert Jenrick
The hon. Gentleman tempts me, but on this occasion I will resist his request. On the two issues he raises, the clause is not increasing VED; it is simply allowing it to rise with RPI, so the clause has no revenue impact; the public finances assume that VED and many other duties will rise with RPI, so its impact will be negligible. This is not a substantial or material increase in VED. I really do not think there would be any value in having a review.
On the wider question of roads funding, all this information is in the public domain. The settlement with respect to roads for London is in the public domain, as is the settlement for the roads fund. Which roads will then be funded through the roads investment strategy, which will be set out in the middle of next year, will be in the public domain. All these investments are highly transparent, as one would expect. That information is available to all hon. Members, should they wish to view it.
Sir Robert Syms (Poole) (Con)
My observation is that an awful lot of money is spent in London, compared with the regions of this country, whether the north-west or south-west. There may be a very good reason for that—London is a very important city for our nation—but I would not be inclined to vote even more money to London, bearing in mind that it has the biggest infrastructure project in Crossrail, to which the Government have already given £300 million extra. If there is any special pleading, it really ought to be for the shires and counties of this country, which probably need a bit more money for potholes, rather than clean air.
Robert Jenrick
My hon. Friend makes a very important point. It is certainly important to me, as a midlands and northern MP. The Government have made a significant effort both to increase the levels of public investment in infrastructure over the course of this Parliament to the highest levels in my lifetime—the highest level since the 1970s—and to redress the regional imbalance. Over the course of this Parliament, for example, investment in transport will be highest in the north-west of England, and London and the south-west will be among the lowest. There is a great deal more to do, not least because London has the ability to raise significant amounts of money from local government, which has co-funded projects such as Crossrail. My hon. Friend makes an extremely valid point.
Clive Lewis
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 57 ordered to stand part of the Bill.
Clause 58
VED: taxis capable of zero emissions
Clive Lewis
I beg to move amendment 112, in clause 58, page 41, line 16, at end insert—
‘(6) The Chancellor of the Exchequer must review the revenue effects of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.’
This amendment would require the Chancellor of the Exchequer to review the revenue impact of Clause 58.
The Chair
With this it will be convenient to discuss the following:
Amendment 113, in clause 58, page 41, line 16, at end insert—
‘(6) The Chancellor of the Exchequer must review the effects on the taxi and private vehicle hire sectors of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.’
This amendment would require the Chancellor of the Exchequer to review the impact of Clause 58 on the taxi and private car rental industry.
Amendment 114, in clause 58, page 41, line 16, at end insert—
‘(6) The Chancellor of the Exchequer must review the effects on levels of CO emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.’
This amendment would require the Chancellor of the Exchequer to review the impact of this measure on CO2emissions and climate change targets.
Clive Lewis
I am pleased to be speaking—again—to our amendments relating to clause 58, on vehicle excise duty and taxis capable of zero emissions. The clause seems to rectify an obvious mistake made by the Treasury during the 2017 Budget, which saw electric vehicles fall into the luxury vehicle segment of the new VED regime for cars costing over £40,000.
VED rates are based on carbon emissions, and zero-emissions vehicles below £40,000 have a zero standard rate and a first year rate. Standard rate on zero-emissions vehicles above £40,000 is currently £310 a year for the first five years. To include electric vehicles in that policy was clearly a major oversight by the Treasury in last year’s Budget. The correction, although somewhat late in the day, is none the less welcome and, indeed, essential if we are to seriously encourage the uptake of electric vehicles, specifically taxis.
Anneliese Dodds
I am sure that my hon. Friend is aware that back then, Opposition Members warned about the potential unintended consequences of those measures, including for the private hire and taxi industries. Those warnings were not heeded at the time. It is rather frustrating that they have only now been dealt with.
Clive Lewis
My hon. Friend makes a very good point; that is one lost year of support.
To include electric vehicles—ah, I have already said that. I will recap, though. [Laughter.] To include electric vehicles in that policy was clearly a major oversight by the Treasury in last year’s Budget. The correction, although somewhat late in the day, is none the less welcome and, indeed, essential if we are to seriously encourage the uptake of electric vehicles, specifically taxis.
That is particularly pertinent as local regulations are tightening around clean air and greenhouse gas emissions, as we have seen with the implementation of the ultra low emissions zone in London. Amendments 112 to 114 require the Government to undertake a review that we believe is essential to understand the consequences of the clause, which range over the impact that it is likely to have on the Exchequer, on the taxi and private car rental industry, and on CO2 emissions and climate change targets. Amendments 112 and 113 focus on the economic impact of the clause, both on the Exchequer and on taxi and private car rental companies. Can the Minister provide an assessment of the revenue implications of the measure?
Similarly, while we understand from the published documents relating to the clause that industry response to the Government consultation was supportive, will the Treasury do further analysis of the potential economic impact on taxi companies and the private car rental industry, should the change come into effect? The Minister may wish to resist the amendments, but regardless of any legal obligation, will he commit to conducting such an analysis and presenting it to the House in due course?
Amendment 114 refers to carbonisation and improving air quality. It would seem, in that respect, that taxis are low-hanging fruit. They are used frequently, often in urban areas with poor air quality. Similarly, according to the Mayor of London, drivers stand to benefit from lower fuel costs—by around £2,800 a year—and from avoiding present and future congestion and air quality charges. We believe, however, that the Government have failed to put in place necessary fiscal incentives to encourage the transition to the electric vehicles needed to ensure a reduction in CO2 emissions. Simply removing the excess tax for luxury vehicles, as the clause would do, does not go far enough to encourage the uptake of zero-emission vehicles.
The primary driving forces behind the reluctance to take up electric vehicles are cost and an anxiety about range. The costs of electric vehicles are explained by high manufacturing costs, specifically of their batteries. The anxiety about range affects taxi drivers far more than private vehicle owners or private car hire companies, as they do not have access to the range in the ultra-low emissions vehicle segment of the market for mid-range to luxury. That is due to licensing conditions, as they need to fulfil accessibility requirements. In London, for example, that means that many drivers are mandated to buy a London-style hackney taxi in many districts. Will the Minister agree to assess the impact of clause 58 on CO2 emissions and the UK’s climate change targets, and whether that policy goes far enough in encouraging the purchase of zero-emissions taxis?
I have a few questions on the clause. At present, a grant of £7,500 is available for new zero-emissions taxis. We believe that the Government should be looking to increase available grants and encourage the transition to electric vehicles, specifically taxis, in areas outside Greater London. There are currently only a few limited pots of funding, not all of which are available for taxis, and they are largely skewed towards Greater London.
Similarly, the Government have yet to invest a penny of the £400 million charging fund announced in the 2017 Budget, half of which should be public money, with the other half contributed by the private sector, as we have already heard. Will the Minister tell us whether the issue that the clause seeks to rectify will aid the Government in finally setting up the charging fund that they promised to deliver to encourage the use of zero-emissions vehicles? Will he give us a clear timetable of when that fund will be operational? Will he commit that he or another relevant Minister will come back to the House with more detail when it is due to launch?
Available charging infrastructure is a requirement of accelerating the transition. Outside London and a few select places, availability is poor. Drivers face a postcode lottery that is a barrier to electric vehicle growth. For example, there are more chargers available in the Orkney Islands than in Blackpool, Grimsby and Hull combined. Even if grants are available, drivers in some areas will be unable to perform their work using EVs, due to the unavailability of charging infrastructure. It could therefore be argued that even if the Government increased grants and ensured that availability, poverty of EV infrastructure would mean that a majority of taxis would not be in a position to benefit from the change suggested in clause 58. Will the Minister comment on that? What assessment has been undertaken of the availability and adequacy of the infrastructure, and what steps are being taken to ensure that it does not undermine the good intentions behind the clause? Although the current situation is a mistake, it should not have happened in the first place. The measure is important in seeking to undo the bias created by classing zero-emissions taxis as luxury vehicles, and in encouraging the uptake of zero-emissions vehicles.
We will support the clause—we ask only that the Government assure us that the right analysis will be done to assess the impact of the measure on the Exchequer, the companies that will be affected, and the environment. We urge the Government to take such matters into consideration. I hope the Minister can give us some assurance on those points.
Robert Jenrick
I thank the hon. Gentleman for those questions. I hope that I can answer them all and reassure him. Clause 58, as we have heard, makes changes to ensure that purpose-built taxis that are capable of zero emissions do not have to pay the VED supplement applicable to expensive vehicles, which are those with a list price of more than £40,000. Having listened to representations on the issue, the Government announced in March that the exemption for such taxis would be brought forward a year earlier than planned.
We do not believe that the purchases of many vehicles, if any, were adversely affected. For example, the London Electric Vehicle Company, which manufactures these vehicles, had sold almost no vehicles by the time of the announcement and has subsequently sold more than 500 vehicles—I do not have the exact figures but I am happy to supply them to the hon. Gentleman—so from the time of our announcement in early March to the present day, the incentives have clearly made a significant difference in stimulating the market. We do not believe that many purchases, if any—I will confirm that point—were disadvantaged as a result of this matter, which was an unintended consequence of the earlier policy.
An exemption will encourage the transition to ultra-low and zero-emissions taxis. The figures show that, certainly in London, there has already been a significant take-up in vehicles, although it is less in other parts of the United Kingdom. I believe that the manufacturers are now targeting other cities, including Manchester and Nottingham—my nearest city—to improve their air quality. We want to see that rolled out as soon as possible in all part of the United Kingdom.
It will make the system fairer. The Government recognise that a number of technical requirements exist for purpose-built taxis, including, as the hon. Gentleman said, access for disabled passengers and turning circles, meaning that only a limited number of options are available. Most other motorists have a range of vehicles available to them, many costing less than £40,000, and can therefore choose not to pay the supplement.
In passing, the hon. Gentleman mentioned other private hire vehicles. Our argument—a valid one, I think —has always been that there are a range of other options available to drivers of private hire vehicles. They do not have to purchase a vehicle costing over £40,000. That would be a choice because they want to enter a particular segment of the market. Those driving a registered London taxi do not have that discretion. Therefore, it would not be right for drivers buying a taxi capable of zero emissions to pay the VED supplement targeted at cars at the luxury end of the market. As the supplement is only due from the second licence onwards, this means that almost all taxi drivers who have purchased an eligible taxi from April 2018 will never have to pay the supplement. This will save those drivers up to £1,600 in total.
The changes made by the clause will provide the power to exempt purpose-built zero-emissions taxis from the supplement for expensive cars, through regulations. This will enable the Government to apply the exemption to further models as they become available in the future.
I will turn briefly to the amendments tabled by the hon. Member for Norwich South. Amendment 112 would require the Government to review the revenue effects of the changes made by the clause. The Government have already published a tax information impact note, in line with normal practice, which sets out that the revenue impact of the changes will be negligible. Amendments 113 and 114 would require the Government to review the effect of the clause on the taxi and private hire sectors, and the impact on carbon dioxide emissions and our carbon budgets. The measure applies to purpose-built taxis only, enabling a quicker switch to greener models by saving drivers that £1,600. It is not expected to have an impact on the number of taxis on the roads, but it is intended to increase the proportion of those that are capable of zero emissions. By strengthening the incentive to purchase such taxis over conventionally fuelled alternatives, the measure is expected to have a small positive impact on our ability to meet our fourth and fifth carbon budgets, although isolating its impact would be challenging and uncertain. I am not sure what value, if any, that analysis would provide. Again, these impacts were covered in the published tax information and impact note. I respectfully urge the Committee to reject the amendments, on the grounds that they are unnecessary.
The hon. Gentleman asked important questions about electric vehicle charge points. Clearly it is important for taxi drivers in London, and indeed in any other part of the United Kingdom, to know that the relevant charge points are available to them. Range anxiety is just as valid, if not more so, for a taxi driver as it is for a private citizen. Significant investment is underway in London, particularly for fast charge points, which are critical for taxi drivers, so they do not have to spend hours waiting to recharge or top-up their vehicle. The Mayor of London is leading that effort and making good progress.
With regard to the charge point infrastructure fund, which I spoke about in relation to the previous clause, we are close to appointing a fund manager and expect it to be launched in January or February. I am happy to write to him with more details and to inform him when it is launched, but I expect that to be at the very beginning of the new year.
Clive Lewis
There is £200 million in public money and £200 million in private money. Will the Minister confirm whether the £200 million in private funding has actually arrived and is available for the Treasury to spend on EV infrastructure?
Robert Jenrick
The answer is that the fund has not actually been launched yet. We are committed to the £200 million, but we will not know until the fund is launched the amount of private capital we are able to crowd in as a result of that. I am happy to write to the hon. Gentleman with more detail about that. As I said, I expect in the first two months of the new year to be in a position to launch the fund and to inform hon. Members across the House of its detail, should they wish to direct businesses in their constituencies that are interested in this area to it. With that, I commend the clause to the Committee.
Clive Lewis
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 114, in clause 58, page 41, line 16, at end insert—
“(6) The Chancellor of the Exchequer must review the effects on levels of CO2 emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”—(Clive Lewis.)
This amendment would require the Chancellor of the Exchequer to review the impact of this measure on CO2 emissions and climate change targets.
Question put, That the amendment be made.
Clive Lewis
I beg to move amendment 115, in clause 59, page 44, line 9, at end insert—
“(11) The Chancellor of the Exchequer must review the revenue effects of the changes made to the HGV Road User Levy Act 2013 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the revenue impact of Clause 59.
The Chair
With this it will be convenient to discuss the following:
Amendment 116, in clause 59, page 44, line 9, at end insert—
“(11) The Chancellor of the Exchequer must review the effects on levels of CO2 emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the HGV Road User Levy Act 2013 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of Clause 59 on CO2 emissions and climate change targets.
Amendment 117, in clause 59, page 44, line 9, at end insert—
“(11) The Chancellor of the Exchequer must review the expected effects on the volume of traffic on the roads of the changes made to the HGV Road User Levy Act 2013 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of Clause 59 on road congestion and traffic levels.
Amendment 118, in clause 59, page 44, line 9, at end insert—
“(11) The Chancellor of the Exchequer must review the expected effects on air quality standards of the changes made to the HGV Road User Levy Act 2013 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of Clause 59 on air quality standards.
Clause stand part.
Clive Lewis
I begin by welcoming the long overdue change to the heavy goods vehicle road user levy. As the Minister will no doubt lay out, the clause will differentiate the rates paid by efficiency, rewarding freight operators for using less polluting trucks on the UK’s roads.
Department for Transport statistics show that HGV traffic has grown on average by 2.3% per year since 2008, making it the second fastest growing type of traffic in that period. That has resulted in HGV traffic increasing, on motorways and rural A roads in particular, to an overall 17.1 billion vehicle miles. Inevitably, that has had an enormous impact on greenhouse gas emission and climate change targets, road congestion and traffic levels, road safety, and air quality—the key issues on which our amendments are based.
Amendment 115 would require the Chancellor to review the revenue impact of the clause. We believe that there is an urgent need for a financial assessment of the measure, as the freight sector has been left in the dark about the overall impact of these tax reforms. The Department has failed to publish any conclusions from its call for evidence, which closed in January. We therefore argue that it is the Treasury’s responsibility either to produce the evidence and conclusions or to undertake any new research that is needed.
We believe the analysis should focus on the costs and benefits of remaining on a time-based charging system rather than one based on distance. Will the Minister tell us what comparative analysis has been undertaken to date by Government, and agree either to publish it or to commission the relevant work and publish it in due course?
The analysis should also assess how well the HGV road user levy reflects the costs imposed by road freight on other road users, the road network itself and society at large. Metropolitan Transport Research Unit research, issued in April 2017 and sponsored by the DFT, suggests
“that a very significant amount of the real marginal costs imposed by the largest HGVs is not being met.”
That has led to poor economic efficiency and a misallocation of scarce resources. Will the Minister undertake a review of the real marginal costs imposed by the latest HGVs so that we may assess their relative economic efficiency?
Similarly, when considering the overall revenue effect of differing levels of road user levy for different categories of heavy goods vehicles, we believe it is important to factor in the huge disparity between the costs of wear and tear on road surfaces caused by HGVs and those caused by cars and lighter vehicles. The Campaign for Better Transport estimates that the standard 44-tonne HGV does 100,000 times more damage to road surfaces than a Ford Focus.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
One hundred thousand times!
Clive Lewis
Yes. An update of the DFT’s mode shift benefit values technical report in 2015 doubled previous estimates of the cost per HGV mile to road infrastructure. Campaign for Better Transport research suggests that HGVs are paying for only 11% of their UK road infrastructure costs, predicting a shortfall of about £6 billion.
Will the Minister tell us whether the Government have made their own such estimate during the development or passage of the Bill, or does our amendment give them the opportunity to assess it for the first time? Will he produce a fresh assessment of the cost shortfall that the new HGV road user levy rates will leave for other road users and taxpayers in general to pick up? In any case, will he give us the Government’s view of whether the total revenue raised will reflect a fair share of the total tax take from road users, as compared with that of those who drive smaller vehicles? In the Chamber, many MPs complain about potholes and funding for them. The statistics give a clue as to where in part the responsibility lies for so many potholes on our roads.
Bambos Charalambous
As the driver of a Ford Focus, I want to clarify something. Does my hon. Friend agree that yes, a greater proportion of the money ought to go towards repairing potholes, because that will leave more money available for schools and other resources?
Clive Lewis
My hon. Friend makes an interesting point from his Ford Focus. The issue is that there is a massive externality that those HGVs are causing on our roads. No one wants to see HGV businesses go out of business, but everyone in Committee would agree that it is right for people to pay the appropriate level of tax for the damage that they cause to our road infrastructure. If they are to be subsidised, that subsidy ought to be transparent, so that we can appreciate and make a proper assessment of the value that HGV companies contribute to our economy, while taking into account the externalities that they create as well, because there are impacts on other tax areas where the Government would need to spend—he mentioned schools, and there are hospitals and so on and so forth.
Amendment 116 would require the Chancellor to review the impact of the clause on CO2 emissions and climate change targets. As I have described, the use of HGVs has increased hugely in recent years. Inevitably, that has had an adverse effect on the UK’s greenhouse gas emissions. Studies from the Government’s own 2017 freight carbon review proved that HGVs are also disproportionately responsible for pollution when compared with other road vehicles. In 2014, HGVs were estimated to account for about 17% of UK greenhouse gas emissions from road transport, and about 21% of road transport nitrogen oxide emissions, while making up only 5% of vehicle miles. Will the Minister confirm those figures?
Clearly, if we are to stay in line with EU emissions targets, which have themselves been agreed at the necessary level to ensure that we meet our Paris climate agreement targets, CO2 emissions from HGVs must drop by at least 15% by 2025, and be at least 30% lower by 2030. Will the Minister agree to conduct an analysis of just how far the changes in the clause go towards the country’s ability to meet our climate targets? Will he also consider addressing the generality of the need to meet those targets with either taxation of the sector, or other measures that the Government might put in place to meet our obligations and to safeguard our shared environment?
Amendment 117 would introduce a similar requirement to review the impact of clause 59 on the overall volume of traffic on roads, which is fairly self-evidently a major contributory factor to road traffic congestion. The Centre for Economics and Business Research estimates that congestion will cost the economy as much as £307 billion by 2030. Similarly, the latest INRIX figures show that the UK currently ranks as the fourth most congested developed country, and the third most congested in Europe.
Will the Minister tell us what assessment the Government have made of the economic—not to mention environmental —impact of traffic congestion? I hope he will agree that it is undeniable that the increase in HGV traffic is contributing to the problem. Is he willing to undertake a formal assessment of the impact of HGVs on overall road congestion and traffic, which in turn clearly has a significant impact on the economy? If he intends to resist the amendment, perhaps he will tell us what assessment the Government have made to date and how it informed their choice of the relative levels of taxation that the clause sets for more or less polluting vehicles.
The amendment also addresses the important issue of road safety. The volume of traffic is clearly relevant to road safety outcomes. The Campaign for Better Transport’s analysis of Department for Transport road safety statistics shows that HGVs are twice as likely to be involved in a fatal collision on minor roads as they were 10 years ago. In 2016, HGVs were almost seven times more likely than cars to be involved in fatal collisions on minor roads, despite making up just 5% of overall traffic miles. There has been little or no improvement in recent years in the rates of fatal collisions involving HGVs either on motorways or on A-roads. In 2014, HGVs were involved in almost half of all fatal collisions on motorways, although they accounted for only 11.6% of the miles driven on them. Will the Minister tell us whether, in the course of considering the relative levels of taxation for different types of HGV, the Government have made any assessment of the impact on road safety of HGVs on motorways and A-roads across the UK? In developing the clause, did they consider whether the tax system for vehicles might in any way be used to improve the safety record of HGVs?
Amendment 118 would make equivalent provision in relation to air quality standards. In launching its call for evidence about the HGV road user levy, the DFT conceded the importance of working
“with industry to update the Levy so that it rewards hauliers that plan their routes efficiently, to incentivise the efficient use of roads and improve air quality.”
As the results of the consultation are yet to be published, I ask the Minister whether the Treasury is able to review whether the changes proposed in clause 59 will succeed in encouraging an improvement in air quality standards.
If the Minister does not intend to accept the amendment, perhaps he will tell the Committee whether, and when, the Government intend to publish the evidence they have gathered, and their formal response to it, for scrutiny by the House and the public. Perhaps he will also confirm that the evidence that they have gathered to date shows that, nationally, 20% of lorries are now driving around completely empty and only 36% are full by volume. Not only is that a highly inefficient use of scarce road space, but it exacerbates the existing problem that more than 40 towns and cities in the UK have already exceeded air pollution limits set by the World Health Organisation. Can he confirm that air quality standards will be assessed when looking at the important impacts of the HGV road user levy? Can he give us any timetable or detail?
The Committee will note that our amendments have a similar theme. Perhaps I can ask the Minister to outline in general terms what assessment or review of the success of these measures the Government have planned, what impacts they will consider, how they will measure them and how they will publish their results. I also reiterate my point about the Government’s various calls for evidence that relate to the measure in clause 59. Will he commit to publishing the evidence received and giving a formal response from the Government? We often hear about evidence-based policy making, but as legislators we, too, need to hear that evidence if we are to agree to the legislation that implements that policy.
I look forward to the Minister’s response to our amendments, but I want to make one final argument about the clause itself. While it is to be expected that the reforms in clause 59 will lead to improvements in fuel efficiency and reductions in pollution from HGVs on Britain’s roads, we believe that those reforms are incomplete and unsatisfactory because the HGV levy will continue to be charged according to time spent on UK road networks. It is widely acknowledged that the existing time-based charging system is inefficient and not cost-effective. As it stands, the current daily charge bears no direct relationship to the amount of use of the network and therefore the system does not incentivise efficient use of the network. To improve economic efficiencies, there should be a direct relationship between taxes per mile travelled and the marginal cost that a distance-based charging system can provide.
Sir Robert Syms
Apart from paying the levy, the road haulage industry pays considerable sums of tax on fuel; it therefore pays quite a lot into the Exchequer for the provision of roads. I would make another important point: almost every good that we have in this country travels at some point on a road haulage vehicle. Almost all of what someone buys in a supermarket for Sunday lunch travels in such a vehicle. There is no such thing as a painless tax. If we raise the cost of vehicles delivering goods in this country, the costs are raised for supermarkets and businesses and that is passed on in the form of higher prices and inflation. There is a balance to be struck.
The other point is that the British economy has been growing since 2009-10. As it grows, there are more vehicles on the road, and that is a difficulty. The real way to deal with climate change is probably to crash the economy, so that unemployment shoots up and vehicles come off the roads. It is a problem that, if we have the economy growing, there are more vehicles on the road. On the whole, the solution is technological, both in the development of the levy—the hon. Member for Norwich South made one or two suggestions for that—and also in the engines and the information that people get this days. There has been a big improvement. The biggest incentive that there ought to be for the industry is to replace vehicles more regularly because, in the end, that will probably have more impact on climate change.
I do not think that the solution to this problem is to increase costs. There are technological solutions that I am sure will come to help with all of our concerns about climate change.
Kirsty Blackman
If we are going to disincentivise people from using HGVs or charge them more for using HGVs, we need to make sure that we have a positive route with alternative methods of transport. There has been a massive increase in the number of light goods vehicles, which is negative if we end up with older diesel models.
We could develop the rail freight network. I understand that it is pretty difficult for those who are looking to increase rail freight to get time on the lines because of the number of passenger trains. Solutions to assist that would be very helpful in ensuring that freight is moved around the UK in the least carbon-emitting way possible.
Subsection (6)(b) relates to Euro 6. It describes the definition of Euro 6, saying that it is as in the EC directive. I am keen for the Government to lay out what would happen about the development of new standards after Brexit and any transition period. Is it their intention that we would have our own standards on vehicle emissions? If so, how much does the Minister believe it will cost to assess vehicles? What would be the cost of UK-EU regulatory divergence, which will result in issues for car manufacturers?
Alternatively, do the Government intend that we should not diverge from using the European Commission directive standards? Obviously technology is developing and there will be new standards to which we should peg our decisions on tax rates. If the UK Government plan not to have their own assessment centre, with regulatory divergence, do they plan to continue to follow EC directives? What preparation are the Government making in that case to scrutinise or comment on the directives, given that we will not be in the room after Brexit, and will therefore not be able to influence the standards, either to support our car manufacturers or secure the best standards for the British public and get improved air quality?
I understand that the Minister may not have the answer at his fingertips, but I hope he can say something.
Robert Jenrick
I shall try to respond to the many points that have been raised. My hon. Friend the Member for Poole in part answered the challenge from the hon. Member for Norwich South as to whether hauliers pay their fair share. It is worth remembering that they pay a range of taxes, as my hon. Friend pointed out. They pay the levy that we are discussing and vehicle excise duties. They also pay tax on fuel. Taken as a package, hauliers pay a considerable amount of tax. British hauliers as an industry are highly taxed, going by European and international comparisons. The reforms mean that some hauliers will pay more. The VED system is based on both weight and axles, so to some extent it reflects wear and tear on the roads, although I appreciate the point made by the hon. Member for Norwich South that HGVs make a significant impact on the roads. I did not realise it was 100,000 times that of a Ford Focus, but that puts things in perspective.
The hon. Gentleman asked whether the HGV levy was specifically hypothecated to tackle such issues as potholes and strategic roads. It is not. However, as I have described, the VED system will be, which will significantly increase the amount of investment that the country makes in roads at every level: £28.8 billion is the spending envelope for roads investment announced by the Chancellor in the Budget, and £25 billion of it will be spent on strategic roads in the road investment strategy that will be announced later next year. That will be about 170% of the first road investment strategy, so there is almost double the amount of investment going into roads to tackle congestion and improve strategic roads in all parts of the country.
The hon. Member for Aberdeen North made a valid point about the European standards. It is our intention to remain closely aligned to those. That seems sensible and it is our intention in a number of respects, such as climate change, emissions and carbon budgets, as is indeed set out elsewhere in the Bill. For example, we have not yet made a final decision on carbon trading, but we shall monitor it and review the matter. If I can give the hon. Lady any further information I will write to her to set out the position of the Department for Transport.
On the broader question of why we are not using the VED system for HGVs to encourage greater take-up of zero-emission or ultra-low emission HGVs, it comes back to the point made by the hon. Lady: currently there are very few commercially available ultra-low emission alternatives for HGV drivers, which prevents the broad uptake of new vehicles. Clearly, we would like to do all we can to stimulate the market and see rapid progress, but we have to be mindful of that. Through the Road to Zero strategy that was published earlier this year, the Government have committed to working with the industry to reduce HGV greenhouse gas emissions significantly by 2025. The strategy sets out the Government’s plans to use a variety of different tools to meet that commitment.
The hon. Member for Norwich South made a number of important points about HGVs and road safety. I will write to him on that and find out what information I can about DFT’s work, because it is important that we take note and see what can be done to improve road safety, particularly as the number of vehicles going down smaller roads and country lanes as a result of online shopping is becoming more important. Through the Road to Zero strategy and other initiatives, DFT is paying attention to how we can improve the last mile of delivery to tackle air quality and reduce the number of vehicles on our roads.
The clause introduces a lower rate of HGV levy for vehicles that meet the latest emission standard, and a higher rate for vehicles that do not. As we have discussed, the change will incentivise hauliers to move to cleaner, less-polluting vehicles. It is only right that everyone plays their part in protecting our natural environment so that we leave a cleaner, greener Britain for our children. HGVs currently account for approximately 20% of harmful nitrogen oxide emissions from road transport but only 5% of total miles travelled, so they will play an important part in tackling the problem.
The changes made by the clause will reduce HGV levy rates by 10% for vehicles that meet the latest emission standards, reflecting the fact that they generate 80% less NOx emissions than the older HGVs. The clause will also increase rates by 20% for HGVs that do not meet those standards. Many hauliers will pay less as more companies move to cleaner lorries—we have introduced it to improve air quality and not to raise revenue.
On amendments 115 to 118, to which the hon. Member for Norwich South spoke, the Government have published a tax information impact note outlining the impact assessment of these reforms, including the forecasted revenue effects, which have been certified by the Office for Budget Responsibility. I believe those amount to £25 million over the scorecard period. These reforms to the HGV levy are part of wider action by the Government to tackle challenges in the areas highlighted by the amendments. Isolating the impact of the HGV levy reforms would be extremely challenging and, I suspect, of limited use, as they cannot be separated from other actions the Government is taking in these areas.
The Government’s draft clean air strategy sets out an annual reporting process for the monitoring of air pollution, which is the appropriate mechanism for assessing the effectiveness of those changes and others over time, rather than introducing a new method to review it, as proposed by the amendments. I therefore urge the Committee to reject the amendments. The changes outlined in the measure will ensure that both foreign and domestic HGVs play their part in meeting the Government’s air quality targets.
Clive Lewis
I thank the Minister for his contribution. I note that he was unaware of the 100,000 figure between the damage caused by an HGV compared with the damage caused by a Ford Focus. Have the Government made any assessment of whether HGVs currently cover the cost of the impact they have on UK road infrastructure? It sounds like they have not, but the Treasury should be able to amend VED or the taxation system that it will use in order to better reflect that.
To pick up on some of the comments made by the hon. Member for Poole, we are talking about externalities. Everyone wants to see everybody pay their fair share, and I am aware that haulier companies pay not just the excise for HGVs, but road tax and fuel tax. So do drivers of Ford Focuses: they also pay their fair share of tax, including income tax and other taxes as well. We all pay our fair share of tax, but if HGVs are damaging the roads to that extent and having such an impact in terms of road traffic accidents, that calls into question whether they are paying excise duty appropriately, and whether that excise duty is a genuine reflection of the cost that those HGVs are exacting on society and on our road systems.
Robert Jenrick
In my earlier remarks, I did not respond to the hon. Gentleman’s questions on the calls for evidence. We did a call for evidence before we introduced the levy in 2014 and, at that point, the time-based levy was the preferred method among those who responded. That was the reason why we alighted on that methodology. The call for evidence on the reforms, which he also asked me about, will be published next month—further information that he may wish to scrutinise when it is published. As I said earlier in response to my hon. Friend the Member for Poole, we believe that HGV drivers pay their fair share through the levy, through VED and through fuel duty. However, we will of course keep the matter under review.
Sir Robert Syms
If a road haulier sends a vehicle with a load to a city in the north, the profit it makes is on the load back. If that vehicle runs empty, the haulier has higher costs. Therefore, if that vehicle is empty, the road haulier’s manager is not doing his job properly—they have not been able to find a load—or the vehicle is going from one factory or depot to another to pick up a load. It is inevitable that there will be some empty vehicles, but that is not the fault of the road haulage industry. They would love their vehicles to be full.
Robert Jenrick
My hon. Friend makes an important point. Technology will improve that situation in time, as he said in his earlier remarks, but we will keep this matter under review. However, we respectfully ask that the amendments be rejected.
Question put, That the amendment be made.
Finance (No. 3) Bill (Ninth sitting)
Tuesday 11th December 2018
(5 years, 11 months ago)
Public Bill CommitteesRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 December 2018 - (11 Dec 2018)
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question negatived.
Kirsty Blackman (Aberdeen North) (SNP)
I beg to move amendment 105, in clause 79, page 53, line 26, leave out from “tax” to end of line 28.
This amendment would delete paragraph (b) of section 36A(7), which is being inserted into the Taxes Management Act 1970.
The Chair
With this it will be convenient to discuss the following:
Amendment 139, in clause 79, page 53, line 28, at end insert—
“(7A) But an assessment under subsection (2) may not be sought by the Commissioners unless they are satisfied that the liability to tax is in excess of £50.”
This amendment establishes a de minimis threshold for the extended time limits of £50.
Amendment 140, in clause 79, page 53, line 42, at end insert—
“36B Public register of persons affected by change made by section 36A(2)
It shall be the duty of the Commissioners to publish a register of persons liable to tax by virtue of the provisions of section 36A(2).”
This amendment requires HMRC to create a public register of those paying tax as a result of the extended time limit.
Amendment 106, in clause 79, page 54, line 1, leave out “2013-14” and insert “2019-20”.
This amendment would mean that new section 36A does not apply retrospectively.
Amendment 107, in clause 79, page 54, line 5, leave out “2015-16” and insert “2019-20”.
This amendment would mean that new section 36A does not apply retrospectively.
Amendment 141, in clause 79, page 54, line 6, at end insert—
“(6) The Chancellor of the Exchequer must review the characteristics of persons affected by the changes made by this section to TMA 1970 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(7) A review under subsection (6) must in particular consider those persons in relation to their—
(a) age,
(b) income,
(c) legal status, and
(d) primary language.”
This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 79.
Amendment 142, in clause 79, page 54, line 6, at end insert—
“(6) The Chancellor of the Exchequer must, in respect of each tax year from 2013-14 onwards, review the revenue effects of the changes made by this section to TMA 1970 and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the revenue effects of the main provisions of Clause 79 in respect of each tax year.
Amendment 143, in clause 79, page 54, line 6, at end insert—
“(6) The Chancellor of the Exchequer must review the effects of the changes made by this section to TMA 1970 on incentives on persons to comply with requirements imposed by the Commissioners, whether under TMA 1970 or otherwise, and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effects of the main provisions of Clause 79 on incentives to comply with tax rules.
Clause stand part.
Amendment 144, in clause 80, page 55, line 19, at end insert—
“(6) The Chancellor of the Exchequer must review the characteristics of persons affected by the changes made by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.
(7) A review under subsection (6) must in particular consider those persons in relation to their—
(a) age,
(b) income,
(c) legal status, and
(d) primary language.”
This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 80.
Amendment 145, in clause 80, page 55, line 19, at end insert—
“(6) The Chancellor of the Exchequer must review the revenue effects of the changes made by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 80.
Clause 80 stand part.
Kirsty Blackman
Once again, it is a pleasure to be in the Finance Bill Committee, where everything is calm, smooth, predictable and a little different. However, I hope the Minister will go away from predictability and choose to agree to the Scottish National party’s amendments 105, 106 and 107.
We have tabled the amendments because of representations we received from the Chartered Institute of Taxation’s low incomes tax reform group. On amendment 105, the group believes there is nothing to prevent Her Majesty’s Revenue and Customs from relying on proposed new section 36A(7)(b) to claim, for example, that owing to internal resource constraints, it was unable to make the assessment within the normal time limits, which is the argument used for the introduction of the measure in the first place. That could render the safeguard provided in subsection 7(a) ineffective.
If paragraph 7(b) is to be retained, the low incomes tax reform group recommends that “reasonable” be defined clearly, possibly by the Minister here, but preferably on Report. For example, we consider it reasonable for HMRC to make any assessment no later than within 30 days of receiving the relevant information, rather than, in effect, within a variable time period that potentially depends on the size and complexity of the dataset received. We ask for that provision to be deleted, as the group believes it is unnecessary.
Amendments 106 and 107 would ensure proposed new section 36A did not apply retrospectively. Again, the low incomes tax reform group fails to see how the Government can claim that these rules do not have a retrospective impact, since subsection (5) makes it clear that the changes apply to 2016-16 and subsequent years, or 2013-14 where the loss of tax is brought about carelessly. The original consultation stated in paragraph 4.13 that
“the new legislation will not apply retrospectively”,
so to effect the legislation as intended, subsection (5) should be amended such that the rules apply only from tax year 2019-20 onwards.
We want HMRC to consider carefully the language used in taxpayer communications, to minimise distress to the taxpayer in any communications about the changes. As a minimum, HMRC should provide taxpayers with guidance on any relief that may apply to offset any potential liability, and avoid at all costs language that is not appropriate for a taxpayer who conducts their affairs in good faith.
Amendment 107 is about the retrospective nature of the clause. The Government have talked throughout the Committee about having done what they feel is adequate consultation. We have challenged that many times, and so have the official Opposition. If the Government consult and then do something different from what they consulted on, they need to lay out why or, at the very least, justify why they are doing something different from what they consulted on. If they hold a consultation on something and ask experts to get in touch with the information they think would make the best possible legislation, the Government need to consult on what they intend to do, not make changes to that legislation as it comes through.
I hope the Minister looks carefully at the amendments we have put forward. If he gives reassurances that he will look at this before Report to ensure that the Bill applies as intended, and that it does not have clauses that muddy the waters and apply provisions retrospectively, I would be keen not to push the amendment to a vote. However, that would require the Government to make it clear that they will consider the matter before Report and consider tabling their own amendments so that the tax professionals, who best know how the legislation will be applied, will have comfort that it is workable and will achieve what the Government intended. I will not speak any longer, because I know that the Committee has to move on, but I would appreciate some comfort from the Minister on that issue.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is a pleasure to see you in the Chair again, Ms Dorries. I agree with many of the comments of the hon. Member for Aberdeen North. I will first speak to our amendments that push in a similar direction to the Scottish National party’s, before moving on to those that highlight other shortcomings of the clause.
To address the effect of the extended time limits on vulnerable taxpayers, our amendment 139 would introduce a de minimis threshold of £50 for the extended time limits, pushing in a similar direction to SNP amendments 105, 106, 107, 137 and 138. It follows the advice of the Chartered Institute of Taxation’s low incomes tax reform group, which raised concerns about the clause. Its written evidence states:
“LITRG remain deeply concerned about the impact of these changes on low income, unrepresented taxpayers.”
Our amendment seeks to restore a sense of balance to the new procedures set out in the clause. Given the serious restrictions on amending this legislation, which we have raised many times in this Committee, we are not able wholly to reform the process, but we think our amendment would improve the clause by making a moderate change that has been requested by groups that have lobbied Committee members. LITRG’s written evidence continues:
“In order to reduce the impact of the measure, the Government should introduce a de minimis threshold for the extended time limits to apply. For example, the approach taken by HMRC in assessing trivial amounts under the Worldwide Disclosure Facility (WDF), e.g. where the net amount due after applicable reliefs is no more than £50, may be suitable.”
Why might a de minimis threshold be necessary? LITRG points out that the changes
“only affect those who have acted non-deliberately and they erode the distinction…between those who take reasonable care and those who are careless.”
It further notes:
“Threatening letters from HMRC cause a great deal of unnecessary distress”—
particularly to vulnerable people who may not understand why they have been contacted. Surely it would be sensible to focus HMRC’s resources on dealing with large-scale tax evasion, rather than on people—especially older people—who may accidentally have failed to pay a very small amount of tax. I hope that the Minister will consider accepting amendment 139 in the spirit in which it was intended: as a genuine improvement that would protect vulnerable people.
Amendment 140 would introduce a public register of companies included under the changes. It relates to Labour’s wider policy, which we have pushed several times in this Committee, of having a public register of offshore trusts. It would be wonderful if the Government decided that they wanted to accept that policy now. Perhaps they will do so in this potentially final sitting. Who knows? We can always hope.
To further address the potential effect on vulnerable people, amendment 141 would require the Chancellor to review the impact of the changes in relation to characteristics including age, income, primary language and legal status. That would help us to better understand how they may affect individuals or organisations, because we need to get a sense of who the measures focus on and who HMRC will be chasing as a result. It is essential that all tax owed is paid, but given the impact on the Exchequer of the large tax breaks and sweetheart deals that the Government have engaged in, it seems unlikely that the measures will affect those who have avoided the largest amounts of tax. It would be helpful if we understood more about that, which is what our amendment pushes for.
In its briefing, LITRG has some interesting information about this point. It says:
“Many people assume that ‘offshore’ tax matters relate only to the wealthy. However, 24% of daily enquiries to the charity Tax Help for Older People in September 2018 were related to the Worldwide Disclosure Facility. The average age of the callers was 76 and they had small amounts of foreign bank interests and/or pensions.”
It continues:
“In our experience and from insight garnered from THOP, the vast majority of taxpayers who have undisclosed liabilities related to offshore investments will want to be compliant upon simply being made aware of the error”.
LITRG also makes a point about accessibility for non-native English speakers:
“Migrants, whose first language is unlikely to be English and who may therefore struggle to navigate the complex rules on the taxation of offshore income and gains, are another group likely to be affected because they are more likely to have offshore investments prior to their arrival in the UK.”
The measures are significant because they change the conventions on how long taxpayers would anticipate having to save information about their tax affairs. The LITRG briefing states:
“The measure adds complexity to the question of taxpayer certainty on when a tax year is ‘closed’ and impacts on a taxpayer’s record-keeping obligations—effectively requiring people to keep records for 12 years just in case they need to make a disclosure to HMRC. This is well beyond the current statutory time limit for keeping records.”
Most of us, I think, would assume that seven years is the normal period for which one would be sure to keep those records, and 12 years is a significant extension. The Government’s equalities impact statement on the proposals makes no attempt to understand how those different individuals would be affected. We think it is necessary for the Government to look carefully at the question.
As to amendment 142 and amendment 145, which pushes in the same direction, more information is necessary about the proposed revenue effects of the clause. We have spoken many times in Committee about the importance of publishing full and transparent information on policy changes, to allow for proper opposition. We have often felt that there has not been adequate scrutiny of the Bill. Of course, I am saying this on the day that was set for the meaningful vote, which has been cancelled, when we were hoping for a chance to scrutinise another area.
The policy papers accompanying the clause point to “negligible” revenue effects from the change, for at least three years, along with some costs, also described as negligible. I have said many times that it is essential that all tax due should be paid, but one must wonder what the Government are doing when they say that there will be only a negligible impact on revenue from the changes, given the scale of the wider tax gap, and the avoidance going on in certain sectors. It would be helpful to have more information about that, so that we can understand why the Government are prioritising in this direction.
We also need an understanding of the measures in relation to incentives to comply with tax rules, which is what amendment 143 would provide for. The issue is once again eloquently set out by LITRG, which states:
“the proposals erode a general feature of the current law that the circumstances leading to the error determine the length of time which HMRC have in order to raise a discovery assessment. The incentive to take reasonable care is therefore reduced under the proposals, because an individual will have the same time limit applicable when they make a non-deliberate error, whether or not that error is careless.”
So it seems that, according to the experts, the changes may make it less likely that HMRC will collect its full due of tax, and that, instead, incentives not to comply will be created. It would be helpful to hear the Minister’s comments on the LITRG assessment. What provisions have the Government put in place to ensure that incentives are not weakened by these measures? If the Government have not put policies and protocols in place, they should accept the amendment and conduct the review the Opposition ask for.
Amendment 145 would apply a review of revenue effects to clause 80, which is similar to what amendment 142 would do. The two clauses need to be taken together, because both impose longer time limits, in relation to income tax and inheritance tax. However, a big area has arguably been missed out—corporation tax. As I understand it, both measures taken together are forecast to raise £15 million in the scorecard up to 2022-23, which is, as I have said, a quite small amount. We feel that that could be because of the decision to restrict this measure to income tax, inheritance tax and capital gains tax, and not to apply it to corporation tax.
That is peculiar, because there was a commitment in the consultation document to potentially apply the extended time limit to corporation tax as well, dependent on the result of the consultation. The consultation document stated:
“given that many offshore structures involve corporate entities, the government is considering, and would welcome views on, applying this proposal to CT”.
Doing so would have made a lot of sense, because there is currently exact alignment between assessing time limits for companies and individuals—four years for innocent error, six years for carelessness and 20 years for deliberate error or fraud.
However, the Government’s response to the consultation, issued this summer, said that, while the extended time period for assessment will apply to income tax, inheritance tax and capital gains tax, the Government would, as a result of feedback, not apply the measure to corporation tax at this stage. That leads to many surprising anomalies. In the future, assuming that these measures are enacted, HMRC will have at least 12 years to investigate the affairs of small, unincorporated businesses involved in offshore transactions, but it will have only four years to do so if identical transactions are undertaken by corporates. A small sole trader or partnership whose business involves offshore transactions will be subject to investigation for at least 12 years, while a huge company such as Google or Amazon that is engaged in similar activities will have finality after just four years, unless fraud or carelessness are involved.
At this stage we surely need to know why the Government decided to reject a longer assessment period for corporation tax. There were only 11 responses to the consultation in total, including from some very large firms that work with very large corporates. The response document stated that
“the majority of respondents were not in favour of applying ETL—
extended time limits—
“to corporation tax (CT) and raised concerns about the possible impact on increasing administrative costs if this was done.”
The document said that “12 years of uncertainty” were
“a particular concern for corporates with complex affairs.”
It added that some existing anti-avoidance measures relating to offshore structures do not apply to corporates—it did not state which ones, and corporates are generally subject to more stringent anti-avoidance rules for offshore transactions than individuals—and that applying them would create inconsistencies.
The response document also noted that respondents were concerned about the 12-year time limit applying to those groups subject to controlled foreign company—CFC—rules, even though such rules are designed to apply only to the most egregious avoidance structures, so not the kind that would be targeted by this measure. The document states:
“CFC legislation applies to corporates and their offshore subsidiaries. The application of a 12 year assessment time limit was seen by the majority of respondents as creating major complications for corporates with CFCs who might need to keep records for each subsidiary for many years as a precautionary measure.”
[Interruption.] Ooh, I am about to be beamed up. Anyway, I will continue. In the light of those concerns, the Government said in the response document that they would not apply the extended time limits to corporation tax.
The rationale offered for extended time limits for income tax, inheritance tax and capital gains tax in the original consultation document was that the existing time limits are inadequate for HMRC to investigate the full facts, because of the complexity of offshore structures. At the same time, the response document says that the reason the measure will not be applied to companies is that the affairs of large companies are so complex that it would represent an unacceptable administrative burden for them to be subject to the same time limits as smaller, unincorporated businesses. I hope the Committee is picking up on some of the paradoxes in this response document.
The response document also asserts that applying extended time limits to companies would create inconsistencies, yet at the moment, as I mentioned, assessing time limits for individuals and companies are aligned. It is this measure that creates the inconsistency by making small businesses subject to new time limits three times longer than those applicable to corporates.
In practice, complex offshore structures are rarely used by small businesses. However, they are routinely employed by multinational enterprises as a way of minimising their tax—for example, the type of structures known to be used by the likes of Google and Amazon that put their profits into territories where no or little tax is paid. Having extra time to investigate the affairs of such companies seems a proper response to their use of these offshore structures, yet they will be unaffected by the new extended time limit rules. On the other hand, small, unincorporated businesses will be subject to them, as well as, potentially, elderly individuals with few resources to draw on to fully understand the complex impact of tax rules.
As well as being unfair, the exception for corporates provides an easy way around the rules. Simply transferring an existing offshore structure into a corporate body means the measure will have no impact. This arguably makes the measures a trap for the poorly advised, while having no impact on those from whom any yield might be expected to derive—multinational enterprises and the wealthy, who can create corporations to avoid potential investigation.
Because of the limits within which the Bill has been set, we cannot directly table an amendment that would push in the direction of including corporates. However, we do ask for a review of revenue impacts because it would enable us to get further into the question of how much revenue this measure could raise as against other measures.
The Financial Secretary to the Treasury (Mel Stride)
It is a pleasure to serve again under your chairmanship, Ms Dorries. I thank the hon. Ladies opposite for their contributions, and I will deal with some of the specific points that were raised and then deal in more general terms with the measures and the amendments.
The hon. Member for Aberdeen North raised the issue of retrospectivity. I can assure her that the Law Officers have confirmed that there is nothing retrospective about the measures in the clause. It is the case that no investigation that has been closed, for example, will be reopened as a consequence of the measures here. At the point that the measures come into effect, no one who is, at that point in time, out of scope of the changes would be brought into scope.
On the issue raised by the hon. Members for Aberdeen North and for Oxford East on consultation, we held a public consultation on the details of the reform on 19 February 2018. The consultation closed on 14 May, and the response to the consultation and the draft legislation were published on L-day, on 6 July.
The hon. Member for Oxford East raised the issue of the de minimis amount and referred to LITRG. It is not true that we are not securing significant amounts from the most wealthy, whether individuals or corporations. For the last year for which we have records, 2017-18, HMRC secured £1 billion in tax from the wealthiest individuals and £9 billion from the largest and most complex businesses operating in the UK—tax that would otherwise have gone unpaid.
The hon. Member for Oxford East also raised at length the important issue of why corporation tax is not included along with inheritance tax and income tax. As she said, we consulted on this aspect at some length. The vast majority of responses did not support extending the measure to corporation tax and raised a number of new practical and legal issues with such an extension. The hon. Lady identified some of them, although I know she was not persuaded by the arguments that were put. However, there were a number of them.
For example, the rules that identify offshore issues were not designed for corporates and would result in a wide range of genuine commercial transactions being caught that were never considered when the rules were originally designed. Tax indemnity agreements on the sale or purchase of businesses could also be affected retrospectively, as a 12-year time limit was never anticipated. The 12-year time limit could create major complications for corporates with control of foreign companies—the hon. Lady spoke about that at length. Some corporates are also subject to other rules, such as the senior accounting officer rule, so it was seen as unnecessary to extend the measure to such companies.
The hon. Lady also specifically mentioned Google and Amazon, or a similar type of business, in this context. She should not overlook the fact that we are right at the forefront of looking at a digital services tax to make sure that those companies pay their fair share of tax in the United Kingdom.
Anneliese Dodds
Will the Minister explain whether those firms were strongly in favour of the measures that have been taken in relation to them and others, such as the diverted profits tax, or whether they have argued against them, potentially in consultations? Is consulting those who may, or whose clients may, have a revenue hit as a result of the measure and only listening to them really the appropriate way to make policy?
Mel Stride
I was making a slightly different point. It was not so much about what the response may or may not have been—I do not know the answer to that, regarding the measure that is under consideration by the Committee—but rather about our push to make sure that just those companies pay the appropriate level of taxation in the United Kingdom. Frankly, I think the businesses themselves want to be seen to be paying a fair level of tax. That is the impression that I get from the Treasury perspective. We are not on the back foot on this; we are very much on the front foot, pushing within both the OECD and the European Union to make sure that we can come up with a multilateral solution, which has particular advantages over going it alone. However, we have made it clear, as the Chancellor set out in the recent Budget, that in the event that there is not a multilateral solution, we will of course act unilaterally by 2020.
Kirsty Blackman
Before the Minister goes on to his next point, can I bring him back to the issue of retrospectivity? I am concerned that the Government’s definition of retrospectivity seems to be different from that of the CIT and the LITRG. Will the Minister write to me with his definition of retrospectivity in advance of Report, so that we can see whether we should press the amendment at that time?
Mel Stride
Yes, of course. I would be very happy to do that and in some detail. As I have already suggested, the general point is that those businesses that would not be in scope of these new arrangements, at the moment that they come into effect, would remain out of scope of these arrangements. That is the important point, I think, but I will certainly write to provide further detail.
My final point is about whether we are going soft on larger businesses, which I think was the overarching implication of the hon. Member for Oxford East. She should bear it in mind that at any one time, about half the 210 largest businesses in the United Kingdom are under active investigation. That does not mean that they are doing anything wrong—it may be far from it—but I sincerely believe that HMRC are very good at making sure that those businesses are thoroughly engaged with, particularly the large ones, because that is where a lot of yield lies.
Anneliese Dodds
We are not talking about whether those large businesses are taxed at all, are subject to new tax measures or are investigated at all. What we are talking about are the time limits for that investigation. There is an anomaly in what the Government are presenting between the time limits for corporates against individuals. Surely that is what needs to be addressed.
Mel Stride
I am reflecting the fact that while corporation tax is not covered by these measures, that is not the same thing as saying that we do not have an appropriate regime overall for making sure that large businesses pay their fair share. I was giving some examples such as the diverted profits tax, common reporting standards and all sorts of things, including base erosion and profit shifting, that the hon. Lady will know feed into that particular argument.
To turn to the generality of the measures, clauses 79 and 80 make changes to help ensure that everyone pays the tax they owe. Individuals under inquiry by HMRC for offshore non-compliance will now face assessment for 12 years of back taxes for income tax, capital gains tax and inheritance tax. It applies only to cases where tax losses arise in respect of offshore matters or offshore transfers.
Those clauses will affect only individuals with offshore structures who are not paying the correct amount of tax. The measure is not retrospective as it does not give HMRC the power to reopen any currently closed cases. It is right and fair that everyone pays the tax they owe. It can take longer for HMRC to establish the facts where offshore non-compliance is involved. In some complex offshore cases, tax cannot be collected as the time limits for HMRC to assess the tax run out before the facts can be established.
The changes made by clauses 79 and 80 will ensure that HMRC is able to deal with offshore cases effectively, where the facts are often difficult to establish. The time limit for assessment by HMRC will be extended for non-deliberate behaviour from four years in ordinary circumstances and six years in cases where there was carelessness, to 12 years. The time limit for assessment will remain at 20 years for deliberate behaviour. This measure will help to prevent individuals from avoiding a full investigation by HMRC because of the difficulty in assessing information on offshore structures and investments.
The new extended time limits will not enable HMRC to assess any tax that can no longer be assessed under current rules at the time the legislation comes into force. That was the point at the heart of the concerns expressed by the hon. Member for Aberdeen North. The new time limits will not apply where HMRC has received information in accordance with certain international agreements from other tax authorities, on the basis that it was reasonable to expect an assessment to be made within the existing time limit. The clauses will raise £30 million by 2024.
Amendment 105 would unbalance the safeguards that ensure that the new time limits only apply if HMRC already has the information to make an assessment and could reasonably make it within the current time limits. If the amendment was passed, HMRC could receive information on a tax compliance case that it would be unable to act on. If, for example, information was provided from overseas immediately before the end of the current time limit, HMRC would be timed out of collecting the lost tax. That could incentivise slow responses from overseas intermediaries when partner jurisdictions gather information in response to HMRC requests.
Amendments 106 and 107 would change the years for which the clause would have effect. Where loss of tax is brought about carelessly, that would change from 2013-14 to 2019-20, and where brought about in any other case from 2015-16 to 2019-20. The amendments would water down the Government’s commitment to tackling offshore non-compliance now and delay, for at least a further four years, the additional time that the provision gives HMRC, so that the time limits would only begin to extend from tax year 2023-24. The Government are clear that the provision should start helping HMRC’s compliance work as soon as possible.
Amendment 139 would insert a de minimis threshold of £50 tax loss before the time limit applied. As currently drafted, the clause ensures that HMRC has the time necessary to conduct complex investigations. It is right therefore that HMRC can collect the tax due, regardless of the amount, once it has been calculated. It would be fundamentally unfair if the de minimis principle applied to offshore cases but not to onshore cases.
Anneliese Dodds
Forgive me, but is there a 12-year time limit for onshore cases for individuals?
Anneliese Dodds
I am grateful to the Minister for very generously giving way again. He said that it would be unfair to create an anomaly between the tax affairs of those with offshore and onshore business, but we have just established that there is not a 12-year time limit for those onshore. Is there not therefore an anomaly?
Mel Stride
This is probably a classic case of me speaking too quickly and the hon. Lady not being given the fair opportunity to digest exactly what I said, which I will repeat, because it is a slightly different point. We are talking about the £50 de minimis, not the 12-year extension. I will reiterate exactly what I said for the hon. Lady’s benefit, so she is absolutely certain that I am not bamboozling her on this point. I said that it is right therefore that HMRC can collect the tax due, regardless of the amount, once it has been calculated. It would be fundamentally unfair if the de minimis principle—I am referring to the £50 threshold—applied to offshore cases but not to onshore cases. In other words, it is her amendment that would create the anomaly.
Anneliese Dodds
I thank the Minister for allowing me to comment on this again. We are surely talking about very different cases. One deals with the normal process of tax collection and investigation, which most individuals assume would apply for seven years, and people need to keep papers for that long. The other is fundamentally different, and deals with the extension of the time limit to 12 years. If we were to do that onshore, then we may also wish to introduce a de minimis for that process, which would, as his measure introduces, go back between seven and 12 years. That is a point that needs to be made.
Mel Stride
I sense that the hon. Lady might have accepted my earlier point that my reference was actually to the £50 de minimis rather than the time limit. She has now introduced another argument, which she prosecuted during her opening remarks—that somehow we should not have a difference in the amount of time to investigate such matters pertaining to whether they are offshore or onshore-related. The whole crux of what we are doing rests on the, I think, fair belief that offshore transactions are less transparent. Those situations are more complicated and often involve dealing with different jurisdictions and intermediaries in order to establish the information that is required for HMRC to carry out its duties. That lies at the heart of why there should be a longer period for offshore entities than for those that are onshore.
Anneliese Dodds
I was talking about the application of a de minimis. I was trying to say that, if the Government were looking, for example, to extend the investigation period for domestic tax affairs beyond the existing time limits, they might even wish to consider a de minimis of £50. I was cognisant of the de minimis—my confusion was caused by the Minister’s remarks. He seemed to suggest that having a de minimis only in relation to offshore tax affairs and not to domestic affairs would be peculiar. We are talking about a de minimis only in those cases of that very long period, not in relation to general tax affairs. I would never say that we should have a de minimis on tax generally, which would mean that we could not pay tax on anything—VAT and so on. That is not what I suggested at all.
Mel Stride
This is probably a discussion for another day, in the sense that the hon. Lady is asking that, in the event that we revisit the issue of the time limits for onshore investigation, we should on that basis consider her amendment anew, because it might dispense with the different treatment between onshore and offshore. We might come to that in another world on another occasion, in another Finance Bill.
I am anxious to make progress—the hon. Member for Bootle sits there looking like he has got all day, but we have to make progress. Amendments 141, 142 and 143 on clause 79, and amendments 144 and 145 on clause 80, would require the Government to review the impact and effectiveness of the clauses within six months of the passing of the Act. Such reviews, however, would not have the intended effect: no data in relation to the characteristics of persons affected, the revenue effects of the changes, or the effects of the changes on incentives on persons to comply, will be available after six months. That is because it is unlikely that a full assessment of any relevant cases will be conducted within the six months after Royal Assent. Thus a report would likely be impossible or meaningless.
On that basis, I commend the clauses to the Committee.
Kirsty Blackman
If the Minister writes to me with the comments about retrospectivity, it may be that we will not press our proposal to a Division on Report, but I will not press it now in anticipation of receiving that letter.
Anneliese Dodds
I appreciate the Minister’s remarks, but we believe there is still an anomaly, and we remain concerned about the potential treatment of elderly taxpayers and so on. We will press our amendments to the vote.
Kirsty Blackman
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 139, in clause 79, page 53, line 28, at end insert—
‘(7A) But an assessment under subsection (2) may not be sought by the Commissioners unless they are satisfied that the liability to tax is in excess of £50.’—(Anneliese Dodds.)
This amendment establishes a de minimis threshold for the extended time limits of £50.
Question put, That the amendment be made.
Anneliese Dodds
I beg to move amendment 146, in clause 81, page 55, line 39, at end insert—
“(3A) No regulations may be made under this section unless the Commissioners have issued guidance on the conditions necessary for an officer of Revenue and Customs to be satisfied that the requirement for security is necessary for the protection of the revenue (for the purposes of the provisions of regulations made in accordance with the duty in subsection (2)).”
This amendment would require the Revenue and Customs Commissioners to issue guidance on how it is determined that security is necessary for the protection of the revenue.
The Chair
With this it will be convenient to discuss the following:
Amendment 147, in clause 81, page 56, line 25, at end insert—
“(3A) No regulations may be made under this paragraph unless the Commissioners have issued guidance on the conditions necessary for an officer of Revenue and Customs to be satisfied that the requirement for security is necessary for the protection of the revenue (for the purposes of the provisions of regulations made in accordance with the duty in sub-paragraph (2)).”
This amendment would require the Revenue and Customs Commissioners to issue guidance on how it is determined that security is necessary for the protection of the revenue.
Amendment 148, in clause 81, page 56, line 44, at end insert—
“(4) The Chancellor of the Exchequer must review the effects of the changes made by this section on the construction industry and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effects of the provisions of Clause 81 on the construction industry.
Clause 81 stand part.
Anneliese Dodds
The overall aims of the clause appear sensible, providing HMRC with powers to make secondary legislation to require a person to provide security for corporation tax liabilities and construction industry scheme deductions that are or may be liable to HMRC. Under the clause, failure to provide security when required will be a summary offence and a person who has committed it will be subject to a fine.
As I understand it, securities may be required where a taxpayer has a poor compliance record, and in phoenix-type cases where a business accrues a tax debt, goes into liquidation or administration and the person responsible for the operation of the business sets up again, with the risk of running up further tax debts. Sadly, we have seen far too many of those cases.
The measure is effectively an extension of HMRC’s powers to require security in relation to some areas of business tax—the powers it has currently—to include VAT and PAYE, as well as national insurance contributions, insurance premium tax and some environmental and gambling taxes.
The Government maintain that the clause will be specifically targeted at the minority of businesses that seek financial gain from non-compliance with their tax obligations rather than those that are genuinely unable to pay. They argue that it will not affect those who are managing their debts with HMRC under agreed time-to-pay arrangements with which they are complying—we have touched on that subject previously.
The Government argue that the power will apply only where an HMRC officer considers that the provision of a security is necessary to protect revenue. None the less, we believe that the changes merit further scrutiny, and therefore have tabled a number of amendments.
Amendment 146 seeks to introduce a requirement for HMRC officials to issue guidance on their use of securities to protect revenue. It is a probing amendment that seeks to clarify the circumstances under which a security will be requested for revenue protection. We do not in principle object to the measures being taken to protect revenue—they appear essentially sensible—but we seek to understand better the scope offered to HMRC officials in making such a judgment or, conversely, the guidance they are offered by the Department in making such a decision.
Will the Minister clarify what guidance will be offered and undertake to publish it later? After all, in the Government’s consultation, the feedback was pretty clear. The feedback document stated:
“Most respondents wanted to see clear guidance put in place to support the introduction of the securities and ensure that securities will only be used where it’s appropriate and proportionate to do so. Two thought that legislation should be expanded to provide the rules under which the securities regime should operate.”
How have the Government responded to that point? It is clear that more transparency is needed.
With amendment 147, which follows the previous one, we are likewise seeking to determine what guidance HMRC commissioners would receive. As I said, we do not object in principle to the use of securities to protect tax revenues; we simply seek to understand how and when they will be applied and whether the guidance is determined by Government policy or subject to the discretion of officials. I hope the Minister will either provide that information to the Committee or accept our amendment, which would ensure that further information is provided before these powers are enacted.
The policy papers relating to the clauses suggest that that is necessary. They state:
“Experience from the existing securities regime has shown that, when used in a carefully targeted manner, securities can be very effective in changing the behaviour of non-compliant businesses and protecting future revenues against the risk of non-payment. Currently these powers apply only to certain taxes and duties.”
We need to understand how these powers will be targeted and which criteria will be used. I hope the Minister will respond to that reasonable request.
Through amendment 148, we seek to understand how the new measure will affect the construction industry. As I said, this is an extension of the security deposit legislation to the construction industry scheme and companies chargeable to corporation tax. The documents on the impact of the policy do not discuss the construction industry in detail. The expectation should be that anyone avoiding tax should pay, but it is clear that providing a security could reduce capital stock in some companies, so we need a sense of the impact on those who may be required to pay a security. Again, that was reflected in the Government’s consultation, which stated:
“Several respondents commented specifically on the implications for insolvency and commented that HMRC should give careful consideration in cases where viable businesses were struggling financially and a security could force the business into insolvency. Similarly, respondents did not want the use of securities to limit the rescue environment for financially distressed businesses. One respondent suggested that before extending the security deposit regime, HMRC should commission independent research into its current approach and the effect that demands for a deposit have on struggling businesses.”
The context is that HMRC has lost a large number of its experienced staff, who might have had expertise in security regimes in relation to other taxes. Therefore, we need to know what the impact is likely to be on businesses that may have to deal with HMRC officers who have less understanding of the construction industry than previously would have been the case.
Finally, I note that we are informed by the tax information and impact note that HMRC will need to make changes to its IT systems to process the new security cases. The cost of the changes is estimated to be in the region of £840,000. It will also incur operational costs currently estimated to be in the region of £5 million. Those costs seem fairly high to me. I hope the Minister will explain why they are of such a significant magnitude.
Kirsty Blackman
Very briefly, if the Labour party chooses to press these amendments to a vote, we will support it, because we think that what it is trying to achieve is very sensible.
Mel Stride
I thank the hon. Member for Oxford East for her questions, most of which I will come to in my general statement on the clause. It is good to hear that she broadly welcomes the general thrust of what we are doing. I think she said that amendments 146 and 147 are probing amendments, and raised various issues about the guidance. Of course, those who are to be affected by the measures will have a right of appeal—they will be able to go to a tribunal to dispute the imposition of advance payments. During the period of dispute, the payment is not required to be made. That is an important point. They will also be invited to comment with HMRC—and have a right to do so—on the proposed level of payment being sought during the process by which it is determined. If their circumstances change at any point in the process or thereafter, that is an opportunity for further discussion and potentially change in the amounts that might be involved. I will pick up one or two other points on guidance in my general remarks.
Anneliese Dodds
In the light of the Minister’s response, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 81 ordered to stand part of the Bill.
Clause 82
Resolution of double taxation disputes
Kirsty Blackman
I beg to move amendment 137, in clause 82, page 58, line 9, leave out from “section” to “may” in line 10.
This amendment provides for all regulations under the new power to be subject to the affirmative procedure.
The Chair
With this it will be convenient to discuss the following:
Amendment 138, in clause 82, page 58, leave out lines 13 to 17.
This amendment is consequential on Amendment 137.
Amendment 149, in clause 82, page 59, line 15, at end insert—
“128D Review of effects of EU withdrawal
(1) The Chancellor of the Exchequer must review the expected effect on the exercise of the power to make regulations under section 128A in the event that—
(a) the UK leaves the European Union without a negotiated withdrawal agreement,
(b) the UK leaves the European Union following a negotiated withdrawal agreement.
(2) The Chancellor of the Exchequer must lay a report of the review under subsection (1) before the House of Commons within two months of the passing of the Finance Act 2019.”
This amendment would review the impact of the main powers under clause 82 in the event the UK leaves the EU under (a) no deal or (b) a withdrawal agreement.
Amendment 150, in clause 82, page 59, line 15, at end insert—
“128D Review of revenue effects of section 128A regulations
On each occasion the Treasury exercises the power to make regulations under section 128A, the regulations (or, as the case may be, the draft regulations) must be accompanied by a statement by the Chancellor of the Exchequer of the expected revenue effects of the regulations.”
This amendment would require any regulations to be accompanied by a statement on expected revenue effects.
Clause stand part.
Kirsty Blackman
I will come to amendments 137 and 138, but first I would like to speak briefly to Labour amendments 149 and 150.
We have seen the complete and total shambles over the past 24 hours—and not just over that period, but over the past two years. The past 24 hours have highlighted where we are in relation to EU withdrawal. Various people are suggesting that no deal is more and more likely, so it is incredibly important we know the potential effects of any changes that the Government propose to make to legislation in the event of a negotiated deal or no negotiated deal. We have a clear idea of the effect of retaining the status quo, which is the Scottish National party’s preferred position, and the revenue effects would be much easier to calculate. We are comfortable supporting Labour’s amendment 149 on that subject and amendment 150, which is about the expected revenue effect of the regulations.
I turn to the two SNP amendments. Amendment 138 is consequential on amendment 137, so I will focus on amendment 137. Given what has happened in recent times, trust in the Government is possibly at its lowest ever point. We are being asked to agree to give the Government power to make changes without going through proper scrutiny procedures. The Government are basically asking us to trust them, and we feel that we cannot trust pretty much anything they say right now, so more scrutiny is sensible.
When people who support leave talk about the European Union referendum and Brexit, they talk about taking power away from faceless bureaucrats in Brussels and returning it to Parliament. A lot of the legislation that is being considered just now does not return that power to Parliament in any meaningful way, and it does not allow Parliament proper scrutiny of the range of things that could come through. We are talking here about just one small area, but that problem has been highlighted in a huge number of things that have come out of the European Union (Withdrawal) Act 2018. There is massive concern from members of the general public, who now understand what Henry VIII powers are—we are in unprecedented times. There has been a power grab from the Scottish Parliament, and this is one more small thing the Government are trying to do to take power away from where it should sit.
Given that the Government cannot command a majority in the House; given that they folded on SNP amendments to the Bill—that was, clearly, because the SNP amendments were wonderful, rather than because the Government did not have a majority—and given that they cannot get legislation through, the level of Executive power needs to be tested. We need to make the Government use their majority if they want to get powers through the House, rather than relying on the fact that because they are the Government, they can do what they like. That is why the SNP has tabled amendment 137, which would require the Government to ensure that more of the regulations made under clause 82 go through the proper scrutiny procedure, rather than relying on the Treasury to make some of them without proper scrutiny.
Anneliese Dodds
I will speak briefly to the clause. The hon. Lady has set out the SNP’s reasons for tabling amendments 137 and 138. The official Opposition agree with those reasons, and it seems highly sensible to require regulations to be subject to the affirmative procedure. We have argued for that consistently in relation to our future relationship with the EU and the no deal process. We are concerned about the wholesale power grab that unfortunately appears to be continuing apace. We would support SNP Members if they decided to press their amendments to a vote.
We have tabled two amendments, and I am pleased to hear that the SNP support them. Under the Prime Minister’s proposed withdrawal agreement, the UK would initially, at least, continue to align itself with EU regulations, but little information has been provided alongside the clause to indicate how the Prime Minister’s Brexit deal would impact on Council directive 2017/1852, particularly if there was divergence later on. Similarly, the Treasury’s policy note offers no guidance about whether the EU’s resolution mechanism would be upheld for all future double taxation disputes in the event of a no deal Brexit.
That is of a piece with the general lack of information about the Government’s anticipated future relationship on tax matters with the EU. I have consistently asked whether we would seek to be a member of the code of conduct group, for example, and I have had no indication of the Government’s views on that matter. With that in mind, the Opposition have tabled amendment 149, which would require the Chancellor to publish a review of the impact of the powers under clause 82 in the event that the UK leaves the EU under a no deal Brexit or under the current withdrawal agreement—or whatever it becomes. It is unclear whether it will be changed or whether assurances will simply be produced in relation to it. Whatever happens, we may or may not be voting on it at some point, hopefully in the near future. Amendment 149 would require the Treasury to offer a clear indication of how the EU’s dispute resolution mechanism for double tax disputes would be maintained, and the likelihood of the different possibilities.
Amendment 150 would require the Chancellor to undertake a review of the revenue effects of the measure. The Treasury policy note states that the measure will raise no revenue and will have no economic impact on taxpayers. That is rather hard to believe, given that even the most benign change to the tax system can have far-reaching and unseen consequences. They may be unpredictable, but surely it would be better to say that than to say that the change will have no impact. The Chancellor would therefore be required to outline in the review the possibility of any unforeseen economic impacts, and the revenues that are likely to be raised from this measure after the Treasury makes regulations to use the powers.
Sir Robert Syms (Poole) (Con)
Had we had a meaningful vote today—we are not going to have one—I would have voted with the hon. Members for Oxford East and for Aberdeen North. However, I find it a little strange that those who intend to vote against the agreement should criticise the Government for a no deal Brexit, because ultimately that is not the Government’s position.
There are about 800 statutory instruments for leaving the European Union. About 600 of them are negative, and a hundred and something are affirmative. It is perfectly possible for the Opposition to pick any number of negatives to pray against. If the Opposition have a problem with something, they can pray against it when it appears on the Order Paper and get a debate. There is a remedy for hon. Members’ concerns, but the reality is that so many of these things are modest and technical, and there are more important matters of principle for us to discuss. I do not think we want to spend a lot of time in this Committee or others debating minor, technical issues.
Kirsty Blackman
I am on the European Statutory Instruments Committee, as are other Committee members. Sifting the proposed negative statutory instruments and changing some of them into proposed affirmatives has been a really interesting and useful process, which has shown us that the Government do not always make the right decision. Something like that for the long term would probably allay some of our concerns.
Sir Robert Syms
I come back to my basic point that there are certain matters of principle that are good for parliamentary debate, and there are minor, technical matters, such as those dealing with the Inland Revenue. I am not sure that debating the latter would bring much to the sum of human happiness. I also make the point that, although the Conservative party does not enjoy a majority in the House of Commons, the Scottish National party does not enjoy a majority in the Scottish Parliament, so we are all sort of in the same boat.
Peter Dowd (Bootle) (Lab)
I take the hon. Gentleman’s point about technical matters and grander principles. However, given that the Government have not allowed us to amend the law in any significant way, the Committee is left at this point poring over the detail—the grander principles are being brushed aside by the Government. We are unable to scrutinise the Bill at the grander level or at the specific level.
Sir Robert Syms
The hon. Member makes his own point. We have discussed Budgets and Finance Bill Committees before. The Bill has been on the Floor of the House and will go back there. There will be endless debates, and I am perfectly sure that he and his formidable Front-Bench team will be able to make their points when the Bill goes back to the House. Ultimately, the Government have taken a perfectly pragmatic view, and I look forward to the Minister’s reply.
Mel Stride
An interesting observation: as soon as “EU” appears in a clause, we suddenly have more interest from the Committee than for other measures. Ms Dorries, I will endeavour not to stray into too much detail around the pros and cons of the current deal and the White Paper and all that kind of stuff, and will stick to the clause.
The clause enables the Government to make changes to bring into force the regulations and administrative provisions necessary to comply with the EU directive on tax dispute resolution mechanisms within the European Union. Double taxation arises when the same profits are taxed twice by two different tax authorities. It can create serious obstacles for businesses operating across borders by creating excessive tax burdens, leading to inefficiencies and an economic disincentive to trade. An effective tax dispute resolution system can help to alleviate double taxation.
The UK is a signatory to the convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises within member states of the European Union, known as the arbitration convention. The UK has also entered into bilateral tax treaties with every EU member state for the purpose of eliminating double taxation. Following a review, it was concluded that the mechanisms currently provided for in bilateral tax treaties and the arbitration convention might not achieve the effective resolution of double taxation disputes between member states in all cases in a timely manner. Consequently, the directive was adopted to build on existing systems. The UK supported the aims of the directive and agreed the adopted text in 2017.
The powers contained within the clause are necessary to enable the Government to introduce secondary legislation to implement the directive. Some proposed amendments would apply the draft affirmative procedure to all regulations made under the clause. As it stands, the Bill ensures that the scrutiny procedures applying to the exercise of each power are appropriate and proportionate. The primary purpose of these powers is to give effect to an EU directive that has already been published. The exercise of the powers will therefore be a largely technical exercise—a point made by my hon. and gallant Friend the Member for Poole (Sir Robert Syms), who also raised the important point that Committee members who wish to further debate a negative SI can of course can pray against it—to transpose the agreed text into UK law. It would not be appropriate to apply the affirmative procedure to all the regulations.
An amendment has also been tabled that asks for a review of the effect on the exercise of the power contained in the clause of the UK leaving the EU with or without a negotiated withdrawal agreement within two months of the Finance Act 2019 being passed. The Government’s intention is for a negotiated withdrawal agreement to apply to the UK, and therefore an implementation period, so that we can use the powers in the clause to implement the EU directive. As a responsible Government, we are also planning for the unlikely event of leaving the EU without a deal. Given the reciprocal nature of double tax dispute resolution, it is difficult to see how legislation implementing the directive can work in a no-deal scenario, but we do not think it would be beneficial to commit to producing a report so close to EU exit, and before the transposition deadline of the directive in June 2019.
A further amendment asks for a statement by the Chancellor on the revenue effects of the exercise of the power under the clause. The Government intend to publish a tax information and impact note for the draft regulations. That will include an assessment of the expected revenue effects of the regulations. I am pleased to say that my hon. and gallant Friend the Member for Poole thoroughly approves of the tax information and impact notes regime which, as he knows, is rigorous and helpful. As a result there will be no need for the Chancellor to make an additional statement to the House.
Kirsty Blackman
I do not have much to add other than that I still want to press amendment 137 to a vote.
Anneliese Dodds
Briefly, the Minister referred to TIINs. I wonder whether, for the next Finance Bill, he will commit to ensuring clear linking from the Bill website to the different TIINs so that we can quickly see which one applies to each clause. It has been quite a waste of time having to search for them randomly.
As to the question whether the provisions should be examined using the affirmative procedure or should have to be prayed against using the negative procedure, I take on board the points made by the hon. Member for Poole. However, we all know that, when measures are dealt with by the affirmative procedure by default, much greater attention needs to be given to them. That is the reality. Generally, I fear that attention is not always paid to matters that may superficially appear technical but that, when one delves into them, may be discovered to have a concrete impact on different groups. Even with the affirmative procedure, the level of debate on taxation matters has, I would argue, traditionally been quite limited. I note that, for the first time in Parliament’s history, we have recently had votes in relation to tax treaties. I was pleased that we motivated those votes, yet UK tax treaties with other countries have never been subjected to proper scrutiny in the House.
Many matters covered by Delegated Legislation Committees are not purely technical. In fact, this has been talked about by my hon. Friend, who represents Leeds—help me out. [Hon. Members: “Stalybridge!”] I am sorry, I am not great at the memory game. In talking recently about some of the no-deal planning, my hon. Friend the Member for Stalybridge and Hyde has been talking about the potential for some of those measures to have such a significant impact that the Government themselves are not au fait with it. Given the time allotted, they seem to expect the Opposition to pass them with a rather cursory glance. I am afraid, therefore, that the suggestion that we already have a failsafe system for dealing with some of those significant matters is simply incorrect, so if the SNP presses amendment 137 to the vote, we shall support it. However, we will not press our amendments.
Mel Stride
Perhaps I may quickly respond, Ms Dorries, just to say that on the important matter of the TIINs, and the link from the website, I know that the hon. Lady raised that on a previous clause, and I should be happy to look into it for her. If she has any specific ideas that she would like to put to me in that respect, I should be grateful to receive them.
Finally, on the matter of negative SI procedure, and prayers against such measures, in the event that we have an effective, strong, organised, united and well led Opposition, I am sure that that will not be beyond them.
Question put, that the amendment be made.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I beg to move amendment 151, in clause 84,page 62, line 5, at end insert—
“(11) The Chancellor of the Exchequer must review the effectiveness of the remedy introduced by this section, together with section 85, and lay a report of that review before the House of Commons within one year of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effectiveness of the new statutory remedy one year after its adoption into law.
The Chair
With this it will be convenient to discuss amendment
Amendment 152, in clause 84, page 62, line 5, at end insert—
“(11) The Chancellor of the Exchequer must review the expected effect of the remedy introduced by this section, together with section 85 on corporation tax receipts and lay a report of that review before the House of Commons within one year of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of the new statutory remedy on corporation tax receipts.
Clause stand part.
Clause 85 stand part.
Jonathan Reynolds
It is lovely to see you in the chair again today, Ms Dorries. I will speak to clause 84 and our amendments which, as you described, also cover clause 85, which is a supplementary clause.
Clause 84 relates to a somewhat historic issue—the payment of advance corporation tax known as ACT. ACT was payable when companies distributed dividends to shareholders before main corporation taxes were due. These payments could then be offset in profit and loss calculations potentially to reduce the overall tax bill. ACT was abolished under Gordon Brown’s tenure as Chancellor in 1999 to prevent its abuse mitigating revenues to the Exchequer, and to encourage reinvestment rather than excessive dividend payments.
However, there are some legacy cases relating to ACT claims. The clauses are the result of a legal judgment from the Supreme Court test case that impacts those claims—that of Prudential Assurance Company Limited and HMRC on 25 July 2018. This case gave rise to a number of judgments in relation to ACT. I will not read it in full—
Jonathan Reynolds
I know. Prudential put the case that it was entitled to compound rather than simple interest on the repayment, given that some of the tax that was levied, it claimed, was in breach of EU law. However, the Supreme Court disagreed with this analysis and subsequently found in favour of HMRC. The amounts at stake are very significant—they were listed as £4 billion to £5 billion according to media reports at the time. Therefore, the Supreme Court decision is clearly welcome when public finances are under such severe pressure.
The test case has helped to clarify outstanding issues relating to ACT. It is important that the Statute book reflects this decision and is fully up to date to remove any uncertainty for taxpayers with historic claims. It is an additional bonus that the Supreme Court decision has not created a further liability for HMRC in repaying compound interest.
However, we must be clear whether this change, while it relates to a legacy tax, will have any impact on current taxation matters. This is especially pertinent when it relates to corporation tax receipts.
Labour has tabled two amendments. We may not necessarily press them to a Division, but they will be useful to our discussions. Amendments 151 and 152 would, respectively, call on the Government to review the effectiveness of this new statutory remedy one year after its adoption into law and review its impact on corporation tax receipts. These reviews would play an important role in judging the overall impact of the judgment. As I have outlined, the liabilities at stake are very significant. It is essential that we have a clear understanding of whether the provision will give rise to any changes in revenue collection. I call on Members to look at the amendments and ensure we have the clarity and transparency needed to scrutinise the measure in full.
Is the Minister aware of any further issues that may relate to historic ACT claims that we should be aware of? Given that the numbers at stake are so large, we seek reassurance that no other potential liabilities could arise for HMRC in relation to legacy challenges.
Mel Stride
I thank the hon. Gentleman for his contribution. On his specific question of whether any other issues related to ACT might give rise to liability to HMRC, I am not immediately aware of any, but I will write to confirm whether that is the case.
The advance corporation tax or ACT system, which was repealed as long ago as 1999, has been found to be unlawful in certain circumstances. Clauses 84 and 85 provide a new legal remedy for claims against HMRC in limited circumstances. A number of cases involving ACT have been argued before the courts over a lengthy period. This litigation continues but it is now clear that some ACT was paid unlawfully.
Earlier this year, the Supreme Court overruled an earlier decision of the House of Lords from 2007. That has created uncertainty as to what remedies might be available where unlawfully paid ACT was repaid or set against corporation tax before claims against HMRC were started. The law requires that in those cases there needs to be a remedy. The courts are able to consider that but, given the uncertainty, it is desirable for Parliament to consider what that should be in order to provide a fair and balanced outcome.
Jonathan Reynolds
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 84 ordered to stand part of the Bill.
Clause 85 ordered to stand part of the Bill.
Clause 86
Voluntary returns
Jonathan Reynolds
I beg to move amendment 153, in clause 86, page 64, line 45, at end insert—
‘(9) The Chancellor of the Exchequer must review the effectiveness of the changes made to the Taxes Management Act 1970 and the Finance Act 1998 by this section and lay a report of that review before the House of Commons within one year of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effectiveness of the provision for voluntary tax returns.
The Chair
With this it will be convenient to discuss the following:
Amendment 154, in clause 86, page 64, line 45, at end insert—
‘(9) The Chancellor of the Exchequer must review the revenue effects of the changes made to the Taxes Management Act 1970 and the Finance Act 1998 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effectiveness of the provision for voluntary tax returns.
Amendment 155, in clause 86, page 64, line 45, at end insert—
‘(9) The Chancellor of the Exchequer must review the resources that Her Majesty’s Revenue and Customs needs to implement the measures in this section relating to tax returns delivered otherwise than in pursuance of a requirement to do so and lay a report of that review before the House of Commons within two months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the HMRC resourcing needed for the provision for voluntary tax returns.
Clause 86 stand part.
I call Anneliese Dodds to move amendment 153—[Interruption.] I am sorry: Jonathan Reynolds.
Jonathan Reynolds
Thank you, Chair. The most exciting clauses have been taken from me. I am very grateful to have been allowed to take this on voluntary returns. On occasion, individuals submit returns to HMRC before a statutory notice requiring the return has been delivered. That applies to many different types of individuals, including those carrying out an income tax self-assessment, and individuals on PAYE who believe they are due a return.
HMRC has historically accepted such returns, given that it would be a considerable drain on resources to reject them and ask taxpayers needlessly to resend them. However, following a ruling by the first-tier tribunal in April 2018, it has been decided that that policy is not supported by law. Therefore, to ensure that the practice can continue, we understand the clause will bring about the legislative change needed so that the position is supported in law. An HMRC appeal is under way because it is possible that this could invalidate historical returns if it is refused by a higher court.
We are talking about significant numbers of returns, as was revealed during the tribunal hearing by HMRC. The Government receive about 350,000 returns of this type each year. Those are in the main from PAYE taxpayers who do not need to complete the self-assessment return but who are seeking a repayment. In its statement accompanying the case, HMRC stated:
“This policy provides a mutually beneficial administrative arrangement for customers and HMRC. The alternative would be that HMRC would have to reject returns submitted voluntarily, issue a formal s8 notice and the customer would have to resubmit the return. This would add unnecessary administrative burdens to both customers and HMRC, causing unnecessary delay in HMRC processing returns, claims and repayments.”
As part of the ambition to put the customer at the heart of what HMRC does, it has introduced a simple assessment for 2016-17 onwards, to enable HMRC to send customers with straightforward tax affairs a simple assessment notice of their liability, without the need for them to resubmit a self-assessment return. It expects that this will significantly reduce the number of voluntary returns it receives each year, and PAYE customers who are not already in self-assessment will not need to complete a self-assessment tax return to get a refund. HMRC also has long-term plans to abolish annual tax returns as part of the Making Tax Digital strategy.
As we are near the end of the Committee, I do not think we need to go through the long history of issues relating to Making Tax Digital, but we have made these points many times before, both in this Committee and in previous Finance Bill Committees. For smaller businesses, Making Tax Digital will add a significant reporting burden by requiring them to switch from one report a year to four. Making Tax Digital will still be being implemented in April 2019, coinciding with our departure from the EU, and putting a significant compliance burden on businesses if there are also VAT changes.
In addition, according to HMRC’s own figures, a shocking 4 million calls to HMRC went unanswered in 2017. As my hon. Friend the Member for Bootle said in the previous Finance Bill Committee, if people call up to pay their taxes, they should be able to get through. Given that the deficit has not yet been eliminated, one would think that the Government would welcome people voluntarily ringing up to pay more tax. Therefore, this change to legislation seems sensible. It would avoid any further costs or administrative pressures on HMRC at an already challenging time for the organisation. I can only imagine the enormous burden it would present if the historical treatment of 350,000 returns was judged to be invalid.
We need more insight into how HMRC resources might be affected to ensure that this measure does not have any unintended consequences. Therefore, Labour has tabled three amendments to give us the information needed to assess this properly. Amendment 153 would require the Government to review the effectiveness of this provision for voluntary tax returns within one year. It seems that the process of submission for voluntary tax returns is working reasonably effectively at present. This review would allow us better to understand whether moving into a more formal framework has any potential negative impacts.
Amendment 154 would allow us to make the same assessment, but with regard to the effects on revenue. If the provision has any impact on tax collection, it is important that it is quickly identified and remedied.
Finally, amendment 155 would require the Government to review the HMRC resourcing needed for the provision of voluntary tax returns by publishing a document to that effect within one year. As I have outlined, HMRC has faced severe cuts at a time when demands are increasing across several fronts—particularly as the UK leaves the European Union. Therefore, it is critical that we understand whether there will be any further draws on HMRC resources over the course of the provision’s implementation. I urge hon. Members to support the amendments and Labour’s efforts to guarantee that we have an HMRC that functions effectively, both for taxpayers and for tax collection.
Mel Stride
Clause 86 makes changes to HMRC’s ability to treat tax returns sent involuntarily like any return on a statutory basis with retrospective and prospective effect. It is necessary because these returns have been accepted and treated in the same way as any other tax return received by HMRC for more than 20 years using its collection and management powers. However, a tax tribunal ruled earlier this year that this policy was not supported by the law.
HMRC receives about 600,000 voluntary tax returns each year. They are voluntary because they are made without any requirement or request from HMRC to do so. People in businesses send them in because they want either to pay tax or to make tax repayment claims. HMRC has always accepted those returns and treated them like any other return. This policy is helpful for taxpayers who send in returns because they are concerned that their affairs are not up to date. If HMRC did not accept voluntary returns when a taxpayer sent in a return, it would have to formally ask them for a return, and they would need to refile it.
Amendments 153 and 154 would require the Government to publish reports about the effectiveness and revenue effects of the clause. Such reports are unnecessary. The purpose of the clause is not to change existing practice but to give it legal certainty. Reporting on its impact is therefore unnecessary, as there will be no change in either practice or revenue. Amendment 155 would require the Government to lay a report into the resources that HMRC needs to implement the clause. The clause will have no impact on HMRC’s resources and will not change HMRC’s practice of accepting returns sent in on a voluntary basis. I therefore commend the clause to the Committee.
Jonathan Reynolds
I wish to press the amendment to a vote.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss the following:
New clause 15—Review of late payment interest rates in respect of promoters of tax avoidance schemes—
“(1) The Chancellor of the Exchequer must review the viability of increasing any relevant interest rate charged by virtue of the specified provisions on the late payment of penalties for the promoters of tax avoidance schemes to 6.1% per annum and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) In this section, “the specified provisions” means—
(a) section 178 of FA 1989, and
(b) sections 101 to 103 of FA 2009.”
New clause 16—Review of late payment interest rates in respect of promoters of tax avoidance schemes (No. 2)—
“(1) The Chancellor of the Exchequer must review the appropriateness of any relevant interest rate charged by virtue of the specified provisions on the late payment of penalties for the promoters of tax avoidance schemes and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) In this section, “the specified provisions” means—
(a) section 178 of FA 1989, and
(b) sections 101 to 103 of FA 2009.”
New clause 17—Review interest rate equalisation—
“(1) The Chancellor of the Exchequer must review the viability of equalising any relevant interest rate charged by virtue of the specified provisions for the specified purposes and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) In this section—
“the specified provisions” means section 101 of FA 2009,
“the specified purposes” means the charging of interest for—
(a) late payment, and
(b) repayment.”.
Mel Stride
Clause 87 is designed to clarify legislative provisions in relation to interest charged by HMRC across several tax regimes. The changes will ensure that the provisions apply as Parliament intended, and provide legal certainty for HMRC and taxpayers.
New clauses 15 and 16 would require the Government to report on the level of interest charged on penalties for promoters of tax avoidance schemes, and specifically on the viability of increasing interest rates on the late payment of penalties for those promoters. That is not necessary and, in explaining why, it may be helpful if I set out the rationale behind the rates.
Interest is charged on these penalties in the same way as it is charged on other overdue payments to HMRC; it is not affected by what the penalty is for. The penalty itself is designed to be the punitive measure tackling tax avoidance promoters. Interest is designed simply to give commercial restitution on all amounts that are paid late and, as such, it is currently set at 3.25% across HMRC and is linked to the Bank of England base rate. Reviewing the level of interest charged on overdue promoters’ penalties would therefore be of limited value in addressing avoidance.
New clause 17 would require the Government to report on the viability of equalising late payment and repayment interest on penalties charged under the promoters of tax avoidance scheme rules. Charging different rates of interest to those paid out is similar to commercial practice and in line with the policy of other international authorities. A higher rate of repayment interest would over-compensate those who pay the wrong amount. A lower rate of late payment interest would be an insufficient deterrent and unfair to the majority, who pay on time. The difference encourages people to pay the right amount at the right time to HMRC.
I urge the Opposition not to press their new clauses and I commend clause 87 to the Committee.
Jonathan Reynolds
As the Minister has said, the clause relates to two legislative changes that would alter the way that interest can be charged and paid on tax under section 178 of the Finance Act 1989, as well as setting interest rates for certain purposes, including retrospectively for diverted profits tax, and providing for interest to be charged under section 101 of the Finance Act 2009 on particular penalties for PAYE from 6 May 2014.
The charging of interest is an important source of revenue to the Exchequer. It is a fundamental principle that the same rules apply to all taxpayers and there may therefore be circumstances in which it is appropriate to charge interest on late payments in the same way that HMRC offers interest on tax refunds that exceed a period of one tax year. That charge is an important tool and deterrent for tax avoidance and late payments.
The diverted profits tax in particular, which was introduced in 2015 as the so-called Google tax, is at least a step in the direction of ensuring that large multinational companies pay their fair share. As the Committee has discussed in previous clauses, certain multinational companies, through dint of their presence in multiple jurisdictions and the armies of tax planners at their disposal, have used a variety of tactics to minimise their tax obligations. While we welcome DPT as step in the right direction, the public are clear that more action should be taken.
My hon. Friend the Member for Oxford East spoke in depth about DPT in an earlier sitting of the Committee. She explained that the diverted profits tax focuses on two forms of tax avoidance. The first is where a company with a UK-taxable presence uses arrangements lacking economic substance to artificially divert profits from the UK. The second is where a person carries out activities in the UK for a foreign company that are designed to avoid creating a permanent establishment through which they would be taxable. The Minister promised to lay before the House a report on the impact on revenue made by the mechanics of the application of DPT. When that information is made available, the Opposition will carefully consider it to assess the efficiency of the diverted profits tax. It must be considered in the round, in the light of the incoming digital services tax, which will struggle to be effective if it is not carefully planned around the unique structure of digital companies across multiple jurisdictions.
In relation to PAYE penalties where interest may be chargeable, I ask the Minister to provide further clarity around the changes. While I reiterated previously that there must be a fair and equal application of the rules, interest and penalty charging can cause serious hardship for individuals, especially when applied retrospectively for unintentional and unwitting errors committed by the taxpayer. Can the Minister elaborate on what consultation has taken place with low-income groups on the provision, to give us a sense of whether an impact assessment has been carried out? To which sections do the retrospective aspects of the legislation apply?
In the current situation with the 2019 loan charge, which stretches back over many years having been applied retrospectively, there is ample evidence that it causes serious hardship for individuals who, in some cases, say that they have been induced into such a scheme by a third-party, without full knowledge of its application. We must therefore exercise the utmost caution when applying any retrospective rules that cover individuals. I was pleased to read, however, that the legislation allows for interest charging on promoters of tax avoidance, in line with section 101 of the 2009 Act. We must ensure that we are pursuing promoters with the full force of the law, to tackle the root causes of avoidance and evasion.
The Opposition have therefore tabled a number of new clauses to the Bill. New clause 17 would require the Chancellor to review the viability of equalising HMRC’s late payment interest rate with the repayment interest rate. The new clause attempts to address a clear imbalance and perceived unfairness in the current interest rates set by HMRC. As it stands, if a taxpayer owes HMRC tax and is late in paying it, a charge of 3.25% interest is added. That is in stark contrast to HMRC’s own repayment rate, which, when paying things back, stands at just 0.5%. That double standard is exacerbated by the Government’s recent raising of late payment interest rates for all taxpayers by 0.25%.
The ACCA accountancy body has described that imbalance over late payments as “simply unfair,” and called for a level playing field to ensure that HMRC sets the same late payment rate as it charges. That is certainly something that the Opposition believe that the Government should review because it is ultimately a question of fairness. There should not be one rule for taxpayers and another for HMRC, as that simply breeds dissatisfaction with the tax system and those who enforce it.
Labour Members are committed to a tax system with justice and fairness at its heart, and we recognise the Government’s clear failings on the handling of HMRC’s powers, which were recently recorded extensively by the Lords Economic Affairs Committee. I hope that all sides of the House will consider supporting this review.
The Opposition’s new clause 16 would require the Chancellor to review the interest rate on late payment of penalties for the promoters of tax avoidance schemes. New clause 15 would require the Chancellor to consider raising the interest rate on late payment of penalties to 6.1%. The introduction of penalties for the promoters of tax avoidance schemes is relatively new. However, it is rather depressing to think that the promoters of tax avoidance schemes, who are then issued penalties, will pay less interest on late payments than the interest currently applied to student loans. Surely it says something about the Government’s priorities that they would allow a lesser interest rate on the late payment of penalties by those who advertise and encourage people to use tax avoidance schemes than the 6.1% interest rate that is charged to students in the UK.
New clause 15 would instead force the Chancellor to review the interest charged on late payments of penalties by the promoters of tax avoidance schemes and consider raising them to 6.1%. This would act as a deterrent when it comes to the late payment of penalties and it would also force the Government to consider the absurdly high interest rates that student loans are currently subject to. I call on Members to support the Opposition’s amendments on these issues today, to ensure that HMRC can operate fairly and effectively. I would also be grateful to hear some clarity and reassurance from the Minister about the retrospective elements of this legislation.
Mel Stride
There is no need for consultation on this measure because, as the hon. Gentleman will know, it was just putting beyond doubt what has been established practice over a very long period. He raised the issue of retrospection. The measure is retrospective, inasmuch as it is putting beyond doubt the fact that these rates were appropriate in the past. We are just bringing the long-standing practice out of any sense of uncertainty.
The hon. Gentleman suggested that the loan charge was retrospective. It is not, because the arrangements entered into under the loan charge scenario were always defective. They never worked at the time when they were entered into, and therefore the tax was due in the past. It is being collected in the present.
Anneliese Dodds
In that case, when advisers advised individuals to undertake these schemes, were they promoting illegal schemes? It would help to have a clear answer on that.
Mel Stride
They were in many cases promoting schemes that did not work and were defective, and in many cases promoting schemes that had been taken through the courts by HMRC—and, in a case involving Rangers football club, through the Supreme Court. On each occasion, they have been found defective.
Anneliese Dodds
The Minister says those schemes were defective; is he saying that they were illegal?
Mel Stride
I am saying that the schemes were taken through the courts and were found defective; they were found not to work. As this is the third exchange between us, let us be clear about what lies at the heart of the way in which these schemes operate. If as an employer I said to an employee, “Instead of paying you normal earnings, from which you would pay your national insurance and your income tax—as the employer, I would pay the national insurance—I will pay you by way of a loan. You and I know it is not really a loan, as there is no intention of you ever repaying it. I may well send that loan to an offshore trust”—as many of these schemes do—“before sending it back to you. The consequence is you pay no, or next to no, tax, because it is treated as a loan, not earnings or income.” That lies at the heart of these schemes. That model never worked, and the schemes were always defective at the time they were entered into.
Anneliese Dodds
However, those taxpayers who are required to face the loan charge have been told that they have done something illegal. I am asking the Minister whether those who advised them to undertake these schemes were advising them to do something illegal, because the advisers have not faced anything as a result of this, whereas the taxpayers have.
Mel Stride
The enablers and promoters of those schemes have been subject to various pieces of legislation, going back a number of years. In almost every Finance Act, or every year, there has been legislation clamping down on them. They are subject to a penalty of up to £1 million as a consequence of that kind of behaviour. Where they have acted inappropriately, the legislation is there, and HMRC has the powers to pursue them.
Question put and agreed to.
Clause 87 accordingly ordered to stand part of the Bill.
Clause 88
Regulatory capital securities and hybrid capital instruments
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 156, in schedule 19, page 315, line 15, at end insert —
“Part 4
Statement on consultation
“22 The Chancellor of the Exchequer must lay before the House of Commons a statement on the consultation undertaken on the provisions of this Schedule no later than two months after the passing of this Act.”
Amendment 158, in schedule 19, page 315, line 15, at end insert —
“Part 4
Review of revenue effects
“22 The Chancellor of the Exchequer must review the revenue effects of the provisions introduced by this Schedule and lay a report of that review before the House of Commons with twelve months of the passing of this Act.”
That schedule 19 be the Nineteenth schedule to the Bill.
Mel Stride
The Government are making changes to the tax rules for the hybrid capital instruments that are issued by some companies to raise funds. One of these changes is made by clause 28, which we have already discussed. Taken together with clause 88, it ensures that these instruments are taxed in line with their economic substance, and that the tax rules take account of forthcoming changes in financial sector regulation. The new rules cover issuances by companies in any sector, and replace rules covering regulatory capital instruments issued by banks and insurers.
As I explained when introducing clause 28, some companies raise funds by issuing instruments referred to as hybrid capital, which sit close to the border between debt and equity. This distinction between debt and equity is important for the UK tax system. In particular, coupon payments on instruments that are considered to be debt are typically deductible for tax purposes, whereas dividends paid on equity instruments are normally disallowed. However, determining the correct treatment for hybrid instruments can be problematic by its nature, and this can lead to uncertainty for companies. This is particularly difficult for the financial sector, where banking and insurance companies are required by industry regulators to hold a certain amount of capital. The instruments issued to raise this capital must contain certain features to allow for loss absorbency in the event of financial strain. Existing rules aim to provide certainty of treatment for these instruments issued by banks and insurers.
Clause 88 and schedule 19 make changes to the taxation of hybrid capital instruments, most of which have effect from 1 January 2019. Our overall aim is to ensure that all hybrid capital issued by any company that is in essence debt continues to be treated as debt for tax purposes. In June 2018, the Bank of England finalised its approach to setting a minimum requirement for own funds and eligible liability, or MREL. The Bank set out how it will use its powers to require firms to hold a minimum amount of equity and debt with a loss absorbing capacity from 1 January 2019. This will allow the Bank of England to ensure that shareholders and creditors absorb losses in times of financial stress, allowing banks to keep operating without recourse to public funds.
For global, systemically important banks operating in the UK, the MREL requirements take effect from 1 January 2019. Eleven other UK banks and building societies will need to meet these requirements from 1 January 2020. The instruments banks are permitted to issue to meet these new requirements include types of hybrid capital instruments that are not covered by the existing rules. Alongside updating the rules to take account of these new requirements, we have also taken this opportunity to conduct a wider review of hybrid capital instruments. We are providing coupon deductibility for all instruments issued by any company, provided that they are in essence debt, even if they are accounted for as equity. These are also elective, so HMRC will be able to monitor their use closely to ensure that they are not abused. If HMRC detects abuse, we will not hesitate to take whatever action is necessary, including further legislative change, in order to counter it.
Clause 88 and schedule 19 provide for the revocation of the existing rules for hybrid capital instruments issued by banks and insurers. They will be replaced by new rules for hybrid capital instruments issued by any sector. This will provide tax certainty for the issuers and holders of hybrid capital instruments. These instruments are issued by a small number of companies, primarily in the banking, insurance, utilities and telecoms sectors. The new rules apply from 1 January 2019, when existing rules are revoked. However, we have delayed the revocation of certain specific aspects of the rules for instruments issued before that date to allow banks and insurers time to consider the impact of the changes and to restructure their debt, if necessary.
In order to identify whether changes made by this clause and clause 28 were needed, we had to wait until the Bank of England published its MREL rules in June 2018. These new rules apply from 1 January 2019, and meant that changes to our tax rules were needed by the same date. The Finance Bill timetable meant that it was not possible to conduct a full public consultation, but officials consulted advisers who collectively represented those most likely to be impacted by the changes being made by the schedule. Officials also consulted with the Bank of England and the Prudential Regulation Authority.
Amendment 158 proposes that we publish a review of the revenue effects of the changes being introduced by this schedule. The policy paper published by HMRC on 29 October 2018 clearly states that the Exchequer impact of changes being introduced by this clause will be negligible. Furthermore, to apply the new tax rules, issuing companies must submit an election in respect of each instrument by September 30 2019, or within six months of issuing a new hybrid capital instrument. That will allow HMRC to closely monitor the use of the rules and ensure they are not being abused. If HMRC detects abuse, it will not hesitate to take whatever action is necessary. I commend the clause and the schedule to the Committee.
Jonathan Reynolds
I rise to make my final speech to the Committee on clause 88. [Hon. Members: “Shame!”] I know; it is a shame. The fun must end, but there will always be another Finance Bill.
The clause is enticingly named “Regulatory capital securities and hybrid capital instruments”. As the Minister just told us, it will introduce new tax rules for loan relationships that are hybrid capital instruments. According to the Bill’s explanatory notes, it will also revoke regulations dealing with the taxation of regulatory capital. The clause and schedule refer to the issuance of instruments by companies and financial institutions that contain debt and equity-like features, which, in investment terms, are more commonly known as convertible bonds.
Convertible bonds are having something of a renaissance, as some investors argue that they are well suited to current market conditions, especially the potential rise in interest rates. Practically, a convertible bond pays a fixed coupon, like a debt, but gives the holder the right to exchange the instrument for equity on redemption. In uncertain times for the markets, the appeal is clear: the investor is exposed to a fixed income-type risk in terms of downside, while being able to participate in an equity-like upside. That risk profile has been especially popular in recent years. Subsequently, 2018 has been the year of the highest convertible bond issuance since 2007.
If issuance is on the rise, it is important that investors understand what they are buying and the precise risk profile of how the instruments will perform in different market conditions. It is also important that any tax mismatches are corrected, so the Exchequer is not missing out. That brings us to the substance of the clause.
Hybrid instruments present a taxation challenge, precisely because they change in nature throughout their duration. The distribution of profits would not attract the same tax treatment as interest payments. For financial institutions, that problem was solved by legislation that related to capital requirements—the Taxation of Regulatory Capital Securities Regulations 2013.
Given that the issuance of different hybrid securities was required by a more recent exercise in assessment of loss-absorbing liabilities by the Bank of England in June 2018, the change forms part of a comprehensive review across sectors to remove tax uncertainty. That is timely, given the rising popularity in other sectors of issuing convertible debt, which I referred to earlier. It is important that the Exchequer does not miss out on any revenue as a result of uncertainty. I understand that the Taxation of Regulatory Capital Securities Regulations will be revoked for that reason and replaced by a new taxation policy for hybrid capital instruments, which will be applied across all sectors.
My first question for the Minister is how confident he feels that HMRC and financial taxpayers will have time to comply with the new rules. What consultation has taken place, and what guidance will be made available to those for whom the regulations are changing? The Bank of England’s changes, which demand the issuance of new instruments, will take effect from January 2019. The timeline feels extremely tight from a compliance perspective, if the tax rules are changing only now to accommodate the modification.
We are discussing a comprehensive and detailed set of changes that will affect huge amounts of capital from financial institutions. The technical note published by HMRC on 29 October goes into some depth about the changes, but the Opposition believe that further insight must be given on what feedback and concerns were raised by those who will be affected by the measure. We therefore tabled amendment 156, which would require the Government to make a statement on what consultation there has been on schedule 19.
Amendment 158 goes further by obliging the Government to publish a review of the revenue effects of the measure. According to statistics from Scope Ratings, the European issuance of hybrid bonds from non-financial corporates alone reached more than €10 billion in the first four months of 2018. Together with issuance from financial institutions, we are talking about an enormous source of revenue. We need to understand whether the reforms have been effective.
In connection with that, I ask the Minister to clarify how the stamp duty rules will apply to the measure. The technical note explains that
“The hybrid capital instruments rules provide an exception from all stamp duties on the transfer of these instruments.”
However, it goes on to stipulate conditions under which it might apply. Objectively, it seems that where the instrument is converted to equity, it should be subject to stamp duty, like ordinary shares, but the technical note seems to apply a number of contingencies. I would be grateful if the Minister clarified that one way or the other. I call on hon. Members to support the amendments and ensure that we have transparency on a potentially crucial issue of revenue for the Exchequer.
Mel Stride
I thank the hon. Gentleman for his contribution. He raised the issue of whether those affected by the measures in the clause will have time to adjust and take on board the new regime. I can assure him that we are confident that is the case, albeit, for the reasons I gave in my opening remarks, we were not able to have a full consultation on these measures given the timing as between consideration of the Finance Bill and the decisions taken by the Bank of England.
Specifically on that point, the Bank held a public consultation on the MREL rules, but the outcome was not published until June 2018. The rules apply from 1 January 2019 and any changes to our tax laws are necessary before then. The Finance Bill timetable means it is not possible to put that out for public consultation on the clause. We consulted on those measures with a number of those who will be affected, so we did what we could in the time available.
As to the hon. Gentleman’s question regarding stamp duty exemptions, those will continue to be in force as under the current regime.
Question put and agreed to.
Clause 88 accordingly ordered to stand part of the Bill.
Schedule 19
Taxation of hybrid capital instruments
Amendment proposed: 156, page 315, line 15, schedule 19, at end insert —
“Part 4
Statement on consultation
“22 The Chancellor of the Exchequer must lay before the House of Commons a statement on the consultation undertaken on the provisions of this Schedule no later than two months after the passing of this Act.”—(Jonathan Reynolds.)
This amendment would require the Chancellor of the Exchequer to make a statement on the consultation undertaken on the measures introduced by Schedule 19.
Question put, That the amendment be made.
Mel Stride
On a point of order, Ms Dorries. I will be very quick; we are now due in another place for yet another round of Treasury stuff. I thank you and your co-Chair, Hansard, the Doorkeepers, our Whips, our Parliamentary Private Secretaries, my hon. Friend the Member for Poole, our officials—particularly Liam Mulroy and Calum Boyd in my office—and our Bill team at the Treasury. I also thank everybody on the Committee for having made this such a smooth and productive session.
Peter Dowd
Further to that point of order, Ms Dorries. I thank you and the House staff—the Committee Clerks, the Doorkeepers and Hansard—as well as everybody involved in consideration of the Bill, including my colleagues.
Question put and agreed to.
Bill, as amended, accordingly to be reported.
Finance (No. 3) Bill
Tuesday 8th January 2019
(5 years, 10 months ago)
Commons ChamberRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 8 January 2019 - (8 Jan 2019)
16:52 - The House divided: - Ayes: 294 / Noes: 312 - Question accordingly negatived.
18:23 - The House divided: - Ayes: 292 / Noes: 314 - Question accordingly negatived.
18:39 - The House divided: - Ayes: 303 / Noes: 296 - Question accordingly agreed to.
18:57 - The House divided: - Ayes: 292 / Noes: 303 - Question accordingly negatived.
19:53 - The House divided: - Ayes: 289 / Noes: 312 - Question accordingly negatived.
20:09 - The House divided: - Ayes: 288 / Noes: 311 - Question accordingly negatived.
Peter Dowd (Bootle) (Lab)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dame Eleanor Laing)
With this it will be convenient to discuss new clause 5—Review of public health and poverty effects—
‘(1) The Chancellor of the Exchequer must review the public health and poverty effects of the provisions of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the effects of the provisions of this Act on the levels of relative and absolute poverty in the UK,
(b) the effects of the provisions of this Act on life expectancy and healthy life expectancy in the UK, and
(c) the implications for the public finances of the public health effects of the provisions of this Act.’
Peter Dowd
I rise to speak to new clause 1 in my name and that of my right hon. Friend the Leader of the Opposition and other Members.
In opening for the Opposition today, I shall start with a few general comments on the Bill before moving on to my substantive remarks on child poverty and equality. First, I must mention the new schedule the Government have tabled, at this late stage, on intangible fixed assets. It is yet another example of the Government’s absolute contempt for parliamentary processes—a result of their desperation to cling to power. Although the Chancellor announced this proposal at the Budget, the introduction of this detailed schedule at this stage of the Bill guarantees that Members are denied the opportunity to scrutinise it properly. It circumvents the Public Bill Committee process, which was created to ensure that technical measures such as this one receive forensic and detailed analysis. This is no way for any Government to conduct legislation. With that in mind, perhaps the Minister could explain why this measure has been included at the final stage of this Bill, denying Members the opportunity to properly scrutinise it. Is it a deliberate decision to once again circumvent parliamentary process? Will he consider withdrawing the schedule and including it in the next Finance Bill later this year, ensuring that it receives the proper parliamentary scrutiny it actually warrants?
It appears that Ministers are hellbent on starting this new year in the same fashion that they ended the last—by treating Members of this House as a peripheral part of the law-making process, bypassing parliamentary processes and breaking long-established conventions. The vast majority of Members in this House are fed up to the back teeth with the Government’s attempts to avoid parliamentary scrutiny.
Simon Hoare (North Dorset) (Con)
Given the heinousness of the charges that the shadow Minister has laid against Her Majesty’s Government, I presume that this is further grist to his party’s mill for a no-confidence vote. When will that be tabled and debated in this place?
Peter Dowd
My hon. Friend is absolutely right. We are here debating the Finance Bill and the Government’s dreadful performance in bringing legislation to the House for much-needed scrutiny. They seem to be incapable of doing that. They seem to be incapable of doing very much these days.
Has it not occurred to the Government that had they entered this place in a spirit of co-operation, they might not have suffered defeat after defeat on this legislation? This Finance Bill is the product of a Government on the run—a Tory party totally consumed by its Brexit civil war, unable and unwilling to posit even the feeblest domestic agenda here for fear of upsetting its nasty, hard-right faction. The Prime Minister’s speech about fighting burning injustices has turned to ash. Her claim that she would end austerity lies in tatters. She occupies our highest public office, and yet the public have no confidence in her—neither do many of her own Back Benchers, for that matter.
Meanwhile, the view is even worse from the Treasury. The Institute for Fiscal Studies said that the Chancellor was gambling with the public finances at this Budget, and it seems that even before the Bill has left this place, he has already lost that bet. The Office for National Statistics recently blew a £12 billion hole in the Chancellor’s spreadsheets by returning student debt to the Government’s books.
So one has to wonder, what is the point of the Tory party—unable to deliver a competent Brexit deal, unable to secure our economic future, unable to meet its own fiscal rules, and unable to deliver a domestic policy programme? It is a party still reliant on the old dogmas of neoliberalism and austerity, unable to see the evidence of its failures. An example of this absurd neoliberal dogma came over the break when, as we heard today, the Transport Secretary awarded a ferry contract to a company with no ferries. If he is looking for expertise in this matter, perhaps I can invite him down to Merseyside, where we have been running ferries since 1330, very successfully—and they are publicly run, I have to say. I invite him to have a go on a ferry up the River Mersey and get the feel for how it works, basically. He will have diplomatic immunity and will not be thrown overboard—I can guarantee that as well.
Mr Jim Cunningham (Coventry South) (Lab)
Did my hon. Friend notice yesterday that the Government are beginning to backtrack on universal credit? Although they say they will introduce it for 10,000 people, in essence they are backtracking. He may also have noticed the announcement today by an independent organisation that we need to build something like 3 million social houses, not in the private sector, over a 10-year period. Does he agree that that should be looked at and done through council housing?
Peter Dowd
My hon. Friend is right, and the reality is that we are not going to get it from the Conservative party—it is as simple as that. It seems incapable of doing anything that is in any way constructive for the social fabric of our country.
The Government now pick and choose whichever target provides cover for their devastating treatment of children across the UK, including—when it suits them—using the very targets that they themselves scrapped. That is why new clause 1 is so important. The Government can no longer be allowed to ignore the plight of millions of children across the country.
The statistics do not lie. They show quite clearly that, prior to the Conservative Government coming to power in 2010 with their Liberal Democrat partners, child poverty in the UK was falling. The new Social Metrics Commission, which draws on the widest possible set of poverty measures, states concretely that there are now half a million more children living in relative poverty than there were just five years ago. The whole country knows that austerity is to blame, and we all know who introduced austerity—it was the Government.
Alison Thewliss (Glasgow Central) (SNP)
I completely agree with the point that the hon. Gentleman is making. Does he agree that the two-child cap, which will apply to all new universal credit claimants from 1 February this year, and other measures that the Government are pushing mean that up to an additional 3 million children will apparently go into poverty?
Peter Dowd
The hon. Lady is right. The Government appear to want to put misery upon misery on families and children.
Despite the claims from Conservative Members, austerity was not some necessity nobly chosen by the Government of the day, but a political and ideological choice—it is as simple as that. If it was the only option, why did the United States not embark on a similar venture? Why did the likes of Germany and France not undertake a similar level of spending cuts, or Japan, or, for that matter, Australia? [Interruption.] Conservative Members are chuntering, but those are the questions that we need answering.
Kevin Foster (Torbay) (Con)
The shadow Minister referenced public spending in the United States of America. Is he seriously arguing that we should look to adopt its system of welfare and healthcare spending?
Peter Dowd
The hon. Gentleman knows that I am not saying that. He can twist his party’s policies if he wants, but he should not twist Labour’s policies.
Mr Jim Cunningham
We should remind those on the Government Benches that the crash, if we want to call it that, actually started in America with the Lehman Brothers and that the Obama Administration pumped $80 billion into the motorcar industry. The rest is history, as we say.
Peter Dowd
My hon. Friend makes an excellent point and backs up the point that I was making.
Those countries acknowledged a hard economic fact that appears to have stumped this Government: we cannot cut our way to growth. That has failed repeatedly, from its early use under US President Herbert Hoover, which turned the stock market crash into the great depression, to the International Monetary Fund programmes that have been imposed in developing countries and the economic and social devastation inflicted on Greece. This Government’s austerity agenda is yet another failure to add to that list. They have missed every economic target they have set, and it is the poorest in society who have paid the price.
Chris Elmore (Ogmore) (Lab)
It is interesting to listen to my hon. Friend’s informed explanation of how austerity has not worked across history. Does he agree that up until the 2010 general election, because of the fiscal stimulus put in place by the Chancellor Alistair Darling and the Prime Minister Gordon Brown, those first two quarters were successive periods of growth, and the economy fell off a cliff because of the austerity introduced by the Conservative party?
Peter Dowd
My hon. Friend is right. The economy thereafter, with the help of the Liberal Democrats, started to go down the pan. To this day, we have not recovered, and the Government’s own figures indicate that this will go on for many more years. We will have more of the same, and it is not working. When will they learn the lesson? They seem to be incapable. Even the IMF recognises the failure of austerity and has called for increased public spending to offset the negative economic effects of Brexit.
Simon Hoare
I am grateful to the hon. Gentleman for this fascinating tour de force on the period since 2010. If the Labour party in government was doing so fantastically well, growth was going so well and its economic management was prized highly by the electorate, why did it lose the general election in 2010 and then in 2015? If all was going so well, why did it lose?
Peter Dowd
I am sure the House would be delighted to hear my psephological analysis of the general election, but we are talking about the Finance Bill. You are very generous, Madam Deputy Speaker, but I do not think even you would be sufficiently generous as to hear my psephological comments.
Madam Deputy Speaker (Dame Eleanor Laing)
It gives me great pleasure to agree with the hon. Gentleman. He was doing very well on new clause 1.
Peter Dowd
Thank you, Madam Deputy Speaker.
The UN special rapporteur has concluded that the rising level of child poverty is a result of political choices, underpinned by the Government’s callous austerity agenda. I will draw my comments to a conclusion because I know that lots of Members want to comment on how dreadful the Government are, how they try to stitch up Committees, how they do not allow us to have proper debates and how—for the first time since Winston Churchill introduced the notion—they have circumvented the amendment of the law motion. They talk about bringing back control to the House of Commons, but they are bringing back control to about two or three people on the Front Bench, and that does not include the Treasury Ministers.
The Finance Bill before us is yet another Bill of broken promises. It offers further tax reliefs for the rich and for multinational corporations, and it prolongs austerity for yet another year, condemning many families and many children to abject poverty. Labour’s new clause 1 would require the Government finally to assess the impact of their economic policies on the most vulnerable in our society. It would require the Government to face up to their responsibility to come and explain to this House why they are not yet changing their economic policies, despite the obvious evidence that they are doing dreadful—I repeat, dreadful—damage to this country and to our communities.
Vicky Ford (Chelmsford) (Con)
I am grateful, Madam Deputy Speaker, for the opportunity to speak at this stage of our proceedings. I am extraordinarily concerned about new clause 1, because it would delay the implementation of clause 5, which is a key part of the Bill because it sets the very level at which people in this country start to pay tax. If we are to address the issues that affect those in our country on the lowest incomes, the best way to help them will to be allow them to keep more of their money in their pockets.
That is why a key part of this Government’s economic strategy has been to make sure, year after year, that those on the lowest incomes are able to keep more of what they earn and to help themselves to build their way out of poverty. That means that 34 million people in this country are paying less tax than previously, and many millions of people have been taken out of tax altogether. This was the No. 1 recommendation of the tax reform commission, which I worked on back in 2006, and I am absolutely delighted that it was among the first steps taken first by the coalition Government, then by the 2015 Government and now by the 2017 Government. This Finance Bill means that raising the level before anyone pays tax to £12,500 is being introduced faster than we ever thought possible.
Mrs Anne Main (St Albans) (Con)
Given the Front-Bench speech that we heard from the Opposition, it is worth noting that the allowance was only £6,475 when Labour left power, but is now £12,500 under this Conservative Government.
Vicky Ford
Absolutely. That is exactly the point, because we know that the best way to address poverty is to make sure that more people can earn their way out of poverty. That does not work for everyone, but for those who can do so, this makes a significant difference, and that is exactly why poverty is now at record lows.
Bob Stewart (Beckenham) (Con)
According to Department for Work and Pensions figures, there are 1 million fewer people in absolute poverty since 2010, with 300,000 fewer children in the same situation.
Vicky Ford
Absolutely. That is exactly the point: absolute poverty is now at record lows. That also has an impact on children—my hon. Friend made that point— because the number of children living in workless homes has fallen to the lowest level since records started.
Maria Caulfield (Lewes) (Con)
Would not the situation for working families be even worse under a Labour Government, with the proposal announced at the Labour party conference of £500 billion of public spending, which would mean a doubling of VAT, a doubling of national insurance, a doubling of income tax and a doubling of council tax? They are not my words, but those of a Labour MP, the hon. Member for Nottingham East (Mr Leslie).
Vicky Ford
I thank my hon. Friend for that precise contribution. I cannot understand why the Labour party has voted against increases to the level at which people start to pay tax, because helping people to keep more of their earnings in their own pockets is fundamental to increasing house ownership and to building a fairer economy.
Simon Hoare
I trust that my hon. Friend’s question was not a rhetorical one, but perhaps I can try to answer it. As far as socialism is concerned, it is absolutely fine until Labour Members have run out of other people’s money to spend. That is why they are opposed to these things.
Vicky Ford
I thank my hon. Friend for that point.
I also want to talk about fairness. Yes, it is true that the provision also increases the rate at which people start to pay a slightly higher rate of tax, but the biggest impact is on those on the lowest level of tax. That is why the tax gap—the difference between the highest and lowest levels of income—has actually fallen. The ratio of the average income of the top fifth to that of the bottom fifth of households has fallen, after taking into account all benefits and taxes.
Peter Dowd
The hon. Lady has got two facts wrong. First, we did not vote against these proposals, as she suggested. Secondly, I was actually talking about the new schedule, not clause 5. If she is going to attack us, she should get her facts right, for goodness’ sake.
Vicky Ford
Perhaps this should be better drafted on the amendment paper, because the Opposition’s explanatory statement clearly refers to the “impact of clause 5”.
I agree that one should always take impacts into consideration, but I strongly believe that the issue raised by the hon. Gentleman of needing to address poverty is best addressed by allowing this Bill to go forward today, especially the elements that involve raising the level at which people start to pay tax, so that they can keep more money in their own pockets. That is fundamental to building a fairer economy, to having a lower gap between those on the highest incomes and those on the lowest incomes, and to encouraging more people in this country to take up the work opportunities available to them under this Conservative Government, with the continuing growth of the economy.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
It gives me great pleasure to speak to new clause 5, which is in my name and those of colleagues. As I have previously stated, I declare an interest as chair of the all-party group on health in all policies, and as a fellow of the Faculty of Public Health, following 20 or so years of national and international work in this field.
Under new clause 5, the Chancellor
“must review the public health and poverty effects of the provisions of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act…A review…must consider…the effects of the provisions of this Act on the levels of relative and absolute poverty in the UK”.
There has been a lot of talk about absolute poverty levels, and we would of course welcome any reductions in absolute poverty levels. Those are the most severe levels of poverty, when people are unable to meet basic physiological needs, such as for food, water and shelter. However, relative poverty is a really important measure that we must reflect on, so I want to stress that the review would look at both relative and absolute poverty in the UK. I also want the review to assess
“the effects of the provisions of this Act on life expectancy and healthy life expectancy in the UK, and…the implications for the public finances of the public health effects of the provisions of this Act.”
Yesterday, the Government announced their new 10-year plan for the NHS. In his statement to the House, the Health Secretary talked about the importance of reducing health inequalities—absolutely, I could not agree more—and how we need to reduce the demands on health services. I do hope that the Government will take new clause 5 seriously as an opportunity to ensure that their policies actually meet the objectives they have set out, because it will help to do exactly that.
As important as the 10-year NHS plan is to improve our nation’s health, overwhelming evidence shows that the most important thing we can do is to reduce the poverty and inequality that too many of our citizens face today. The most effective way to do that is to focus upstream by assessing policies, as they are developed, for their effects on poverty, inequality and, ultimately, the health of our citizens. That was why I tabled the new clause.
As the UN special rapporteur on extreme poverty and human rights said recently, the cuts and reforms introduced in the past few years have brought about misery and torn at the social fabric of our country. There are 14 million people living in relative poverty in the UK, 8 million of whom are working. That is the highest level ever—I advise those who may not be familiar with the most recent data to refer to the Joseph Rowntree Foundation report published last month. Two thirds of the 4 million children living in poverty are from working households. How are young people who are living in extreme poverty and who are hungry going to excel at school?
What about disabled people? They are twice as likely to live in poverty as non-disabled people, because of the costs associated with their disability. As we heard from Labour’s Front-Bench spokesman, policies on not just taxation but public spending and particularly social security are having a devastating impact on disabled people, and that includes universal credit. More than 4 million disabled people are living in poverty today. They are increasingly isolated and confined to their homes, and I am afraid that the situation is going to get worse, because we have had no real confirmation from the Government of how they will protect disabled people in relation to universal credit.
As analysis from the Institute for Fiscal Studies and others has shown, the lowest income decile has lost proportionately more income than any other group since 2015 as a consequence of personal taxation and social security changes. Last autumn’s Budget had only marginal impacts on the household income of the poorest, while reducing the number of higher rate taxpayers by 300,000. The Government’s regressive measures have done nothing to reduce the gap between the rich and poor.
Last week’s Fat Cat Friday heralded the fact that top executives now earn 133 times more than their average worker; it was 47 times more in 1998. In the first three days of January, FTSE 100 bosses earned what an average full-time worker will earn in a year. That is the unequal society that this Government have allowed to run rampant.
When cuts to household incomes are combined with the cuts to public spending and services, the impact is even more dramatic. We have seen disproportionate cuts in Government funding to towns and cities across the north. The effects of all this on life expectancy are now being seen, with gains made over decades falling away. Life expectancy has been stalling since 2011 and is now flatlining, particularly in older age groups, for older women and in deprived areas.
The regional differences in how long people live reflect the socioeconomic inequalities across the country. People may be aware of these figures, because I mentioned them when I spoke in November, but life expectancy for men in the Windsor and Maidenhead local authority, which covers the Prime Minister’s constituency, stands at 81.6 years, while in my Oldham and Saddleworth constituency, it is 77 years.
Even within those areas there are differences in how long people will live. In Windsor and Maidenhead, the life expectancy gap is 5.8 years for men and 4.8 years for women, while in my constituency there is an 11.4-year difference for men and a 10.7-year difference for women. We should really concentrate on those figures. Those health inequalities are reflected across the country.
Inequalities in life expectancy are mirrored by inequalities in healthy life expectancy—how long somebody can be expected to live in good health. Healthy life expectancy at birth across local authority areas varies by 21.5 years for women and 15.8 years for men. In addition, according to the Office for National Statistics, women’s healthy life expectancy at birth decreased by three months between 2009 and 2011. How have the Government responded? They have actually increased the state pension age: people are living shorter lives, and living shorter lives in good health, but we are increasing the time they will be expected to work.
The gains Labour made in reducing health inequalities are now being reversed. The recent Royal College of Paediatrics and Child Health report showed that infant mortality has started to increase for the first time in 100 years. Four in 1,000 babies will not reach their first birthday in the UK, compared with 2.8 in the EU. Those are the unacceptable consequences of austerity.
Last month’s report by Public Health England investigating these inequalities in life expectancy confirmed what many of us have been saying: austerity has wrought misery and poverty, and has ultimately brought an early death for too many. If the Prime Minister is committed to tackling burning injustices and ending austerity, she needs to commit to her policies being independently assessed for their effects on poverty, inequality and public health, as my new clause outlines.
Reducing the gap between rich and poor benefits not just those who are lifted out of poverty. As the International Monetary Fund’s report five years ago showed, if we increase inequality, we reduce growth, and if we reduce inequality, we increase growth. Trickle-down economics has been shown not to work. As evidence from totemic reports such as “The Spirit Level” shows, society as a whole benefits from decreased inequality, with increases in life expectancy, educational attainment, social mobility, trust between communities and much more. Fairer, more equal societies benefit everyone. Inequalities are not inevitable; they are socially reproduced. They are about political choice, and they can be changed.
Several hon. Members rose—
Madam Deputy Speaker (Dame Eleanor Laing)
Order. Before I call the next speaker, I should take the opportunity to inform the House—this is not very exciting; it is just to set the record straight—that some names that were intended for amendments to the Agriculture Bill were added in error to amendments to this Bill. [Interruption.] I did warn the House that it is not very exciting, but it is important to keep the record straight. For the sake of clarity, let me tell the House that the name of Mike Gapes should not appear on new clause 1, and the name of Kerry McCarthy should not appear on new clauses 10, 17, 8 and 18, and amendments 39 to 41. Having got that important matter straight, I will happily call Mr Kevin Foster.
Kevin Foster
Thank you, Madam Deputy Speaker. Hearing your announcement that the hon. Member for Ilford South (Mike Gapes) is not in fact a signatory to new clause 1 has, of course, completely changed my view. Clearly that has changed the whole speech I was about to give.
It is useful to be here for this debate on new clauses 1 and 5. I found the speech by the hon. Member for Bootle (Peter Dowd) of interest, as always. I know from one of our previous exchanges in the Chamber he will be very disappointed to hear that I am not going to give that promised talk on unpacking the holy trinity today. Even in the two hours available, that is probably not quite something that I can effectively manage. I am, however, going to go through an issue on which Members across the House generally have strong views and about which they are passionate: how we best tackle equality issues so that our policies are effective in ensuring that those who are in poverty have a route out of it.
It was not in pure jest that I made a comment in my intervention on the shadow Minister about spending levels in the United States. People talk about the US not having gone down the austerity route, but instead having had a spur or fiscal stimulus. To spend the same as the US, we would have had to make significant cuts to the public sector to get down to US levels of social spending, and in particular healthcare spending. The US has bizarre outcomes from its healthcare system: it spends more of its GDP on healthcare while achieving worse outcomes. No one in the House would wish to implement that system in this country given that failing of spending more and, bluntly, getting a lot less. It is therefore bizarre for that spending to be cited as a great stimulus. It most certainly was not. The US was still spending far less than us after our programme of austerity to bring the deficit under control.
Kirsty Blackman (Aberdeen North) (SNP)
Is that not a slightly bizarre argument? I think the Opposition are trying to ask the Government to take into account in the review the priorities we have, rather than the Government’s priorities. For example, they may be putting policies in the Finance Bill to raise taxes to do something specific, whereas we are asking them to look at public health impacts.
Kevin Foster
New clause 1 says what it says: it asks the Chancellor to produce a review of the impact of provisions and to lay a report of that review before the House. It does not require anything to be done. It does not set out a detailed list of policy changes and how they would be paid for. I do not really see where the hon. Lady is coming from. Members can generally debate all matters that are put before the House, what they believe their impact will be and whether they will make a difference.
I have to say—my Scottish colleagues like to raise this point—that in some areas, for example the Scottish education system, it would be interesting to look at how help is being provided to children so that they have a route out of poverty. In the past, the Scottish education system was one of the highest rated in the world, but I think the Scottish National party has now pulled Scotland out of the global rankings—not because it is going up them, it is safe to say. We can certainly have reviews both ways, and it will be interesting to hear whether comments from SNP Members reflect the impact that aspects of Scotland’s domestic policy, for which it has been responsible for most of the past decade, have had on some of the statistics they wish to complain about.
I welcome the fact that the Bill again increases the earnings that someone can receive before becoming an income tax payer.
Kevin Foster
In a moment—I did not intervene on the hon. Lady.
Again, those with the lowest incomes will be able to keep more of what they earn. The days when earning £6,500 was considered enough for someone to start paying tax have disappeared. We were actually able to bring forward the increase in tax-free earnings for millions of people. That is a positive measure, which really makes work pay and helps the lowest earners the most.
Debbie Abrahams
What will be the effects of the Government’s increase in the personal allowance on the life expectancy of citizens of this country?
Kevin Foster
Any policy that encourages people to be in work and keep more of what they earn, and allows them to save, will help improve their overall health. One of the things that most improves someone’s life outcomes is being in employment. [Interruption.] It is bizarre to be heckled for saying that.
Luke Graham (Ochil and South Perthshire) (Con)
My hon. Friend is giving an insightful speech. One impact of the Government’s policies is the improvement in our Gini coefficient, which is widely recognised as an objective international measure of inequality. According to that objective international measure, our inequality has reduced since 2009-10. Nothing is perfect, but it seems that the direction of policies is working.
Kevin Foster
As always, my hon. Friend makes a well argued and succinct point. He demonstrates the positive difference that Government policies are making for his constituents and the UK as a whole. It must be said that that difference is being made by a whole package of policies, not just by the Bill. I know that a range of measures will help tackle the health inequalities in my patch, including intervention, better services, better urgent care, ensuring that we realise the benefits of technology in primary care, dealing with things such as rising obesity, ensuring that people have proper diets and continuing the welcome decrease in the smoking rate. It is bizarre that those who can least afford to smoke end up being impacted most by it, worsening already poor health inequalities.
The Bill is welcome. I do not think either new clause brings much to the debate, other than highlighting that people want reviews and statistics. With a genuine review, we think about our policy conclusions at the end, yet we hear Opposition Members say, “We want a review—but by the way, here are all our conclusions about the policies we believe should be adopted, even though we can’t really outline how we would pay for them, other than with a massive borrowing splurge that would need to be paid for by a future generation.”
It is welcome that, as has been pointed out, the number of people in absolute poverty is at a record low —1 million fewer people overall and 300,000 fewer children are in absolute poverty. [Interruption.] We hear a groan, but those are the statistics—the sorts of statistics the Opposition seek through their new clauses. The number of children living in workless homes has fallen to its lowest since records began. Being in work makes a positive difference to people’s lives.
Kevin Foster
If the hon. Lady wishes to argue with that, I am only too happy to give way.
Debbie Abrahams
No, I would like to ask the hon. Gentleman whether he believes in policy-based evidence or evidence-based policy. He seems to be talking about policy-based evidence. His argument is absolutely facile. He has no evidence to support it. It is absolutely ridiculous.
Kevin Foster
For policy-based evidence, we need only look to those who continue to argue that the Leader of the Opposition and the shadow Chancellor should be leading this country, despite the increasing evidence of what their economic policies would do to this nation. Anyone who takes a trip to Caracas will see the outcome there, and still some argue that we should bring those policies to this country. [Interruption.] It is lovely to be heckled all the way through my speech. I sometimes do it myself.
It is somewhat strange for the Government to be accused of not basing their policies on evidence by a party that crashed the UK economy eight years ago, and to continue to hear the excuse that the financial crash merely happened because of bankers in the United States, despite it being a former Labour Prime Minister who, just before the problem with the banks, predicted that a golden era for the City of London was about to start and set up the regulatory system that so badly failed to prevent this country from being exposed to the financial risks and shockwaves. It is somewhat strange to get that lecture on evidence, when there is plenty of evidence of what went wrong a decade ago, when we were left needing to make savings that Labour was planning to make anyway.
Kevin Foster
Absolutely. We could spend a long time analysing the decision to flog the gold reserves. It was the same Chancellor who claimed to have abolished boom and bust—to be fair, he was right: he managed to end the boom at the end of his term, although he did very little to take us away from the bust. The economic cycle is still there, and those who pretended it did not exist were deluding themselves. They kept betting that things would always go up and then things started to go down.
The other thing that has made a difference in Torbay, whose economy has many jobs in the service sector, the hospitality industry and the care sector, is the introduction of the national living wage, because of which many people have had a salary increase. It is easy for an Opposition to pledge all sorts of things, but it is very different to actually deliver in government an income rise for the lowest earners. More people are being paid more than the national living wage—local employers in Torbay are paying beyond that level to attract the staff they need, given the fall in unemployment. We cannot say that the Government’s fiscal policies have had nothing to do with that; they have made a positive difference to the lives of people in my community and others across the UK.
Colin Clark (Gordon) (Con)
Does my hon. Friend agree that it is this Government who are trying to build a fairer economy and that, in my constituency and his, the gap between the highest and the lowest incomes has fallen since 2010?
Kevin Foster
Absolutely. It is worth remembering, when we hear how the Opposition want to tax people and what our tax policies are, that the highest earners in this country are paying a higher percentage today than they did for all but the last few weeks of the previous Labour Government. The claim that the Government are being much more generous to the highest earners through income tax is completely false. Sadly, my hon. Friend now represents the highest-taxed part of the United Kingdom. I refer to the work of the SNP in making Northumberland a tax haven from its policies, which have hit a range of people on middle incomes. I am concerned that the impacts in Scotland of that policy will see its representatives here in Westminster blaming those impacts on Bills such as this one, when they are due to policies that the SNP, not this Parliament, has imposed on the Scottish people.
Kirsty Blackman
The Scottish Government’s Budget ensures that 90% of businesses will pay less in business rates than they would if they were anywhere else in the UK. Does the hon. Gentleman believe that his Government should change their policies to match Scotland’s?
Kevin Foster
I certainly do not believe that the Westminster Government should change their policies to match the SNP’s income tax raid on middle earners and those who drive the economy. On business rates, anyone who has sat through my speeches on the high street will know that I have taken the view for some time that we need to look at how we tax the high street in future. The era of large corner premises being the most profitable place to sell goods and wares is long gone. I have to say that I do not think I will be looking at the SNP’s record for much inspiration when it comes to the question of how to stimulate the economy and boost people’s earnings.
Luke Graham
The hon. Member for Aberdeen North (Kirsty Blackman) made a point about being able to lower business rates in Scotland. That has been fantastic. Will my hon. Friend join me in thanking the Chancellor for putting more than £40 million into the Scottish budget so that we could fund such a business rate cut?
Kevin Foster
Absolutely. That support was very welcome. However, one of the issues that I am surprised SNP Members do not want to be raised—although perhaps it is not a surprise, when I think about what would be said—is what the impact would be in all these areas if the Bill included a border between England and Scotland, making it harder for business to be done between those two parts of our great United Kingdom. What would be the impact on the economy if Scotland had to experience SNP Members’ overall economic and fiscal policies? Surprisingly, I do not think that they want that kind of analysis to be included in the review.
Colin Clark
I was quite surprised by what my constituency neighbour the hon. Member for Aberdeen North (Kirsty Blackman) said. She is well aware that the north-east of Scotland—its very engine room, and the area that she represents—has ended up picking up half the business rates in Scotland. Does my hon. Friend agree that it is dangerous for business rates to damage particular parts of the economy and to unbalance it disproportionately, whether in Scotland or in England?
Kevin Foster
I could not have put it better myself. If business rates unbalance the economy, that is clearly a real issue. It is no surprise that two years ago, when voters in the north-east of Scotland—which is, as my hon. Friend says, the powerhouse of Scotland’s economy—had to decide which party would be the best to drive forward economic policies and represent their interests, the area, funnily enough, suddenly turned quite a pleasant shade of blue, with only a dot of yellow in the middle. That reflected the confidence of those voters in this Government’s policies.
I am conscious that I have been speaking for a little while, and that others wish to contribute. Let me end by saying that I do not believe the two new clauses add anything to the Bill. They were tabled by Members who regularly like to give us policy-based evidence, and who advocate a form of economic management for the country that has failed many times in other countries. There is no reason why it would not fail again here if they were given the chance to implement it. I hope that the House will not accept the new clauses, but will accept that the Bill will make a difference to working families across the country, will help to drive our economy forward, and will have a positive effect on the country overall.
Vernon Coaker (Gedling) (Lab)
I support the two new clauses. Unlike the hon. Member for Torbay (Kevin Foster), I think that they are very measured. They simply ask the Government to review the impact of the Bill on poverty and inequality.
I do not know what other Members think, but let me describe what I think the vast majority of people in all our constituencies believe, and what they believe this Parliament should be saying and doing. They believe that the current levels of inequality in our country are simply and utterly unacceptable. They believe that the levels of child poverty are simply and utterly unacceptable. They are not interested in someone being able to tell them that there are 2 million children living in terrible poverty, or 1,850,000 children living in absolute or, indeed, relative poverty. That is what those people are sick of, and what I am sick of, and what this Parliament should be reflecting.
Across the country, people are asking, “Can you not do any better? Can you not do something about the fact that there are still pensioners in one of the richest countries in the world who cannot heat themselves properly in cold weather, including at Christmas?” They are asking, “What is Parliament doing when we see children living in absolute poverty who cannot afford to go to school, with shoes and clothes and food being given to them as an act of charity by people in those schools?” They are not interested in whether the figures have gone up by 0.5% or down by 1%. They are interested in what this Parliament is doing about it, and what we are saying.
All these new clauses do is say to the Government, “If you believe, for example, that clause 5, through allowing people to keep more of their income when in work, addresses some of those issues, let’s have a review to see whether or not that is the case.” That is what people would expect.
I am sick of this myself. When I drive around, not just my constituency but the country, I see enormous wealth. I am not talking about people who have worked hard and done well, which we all want to see; I am talking about massive accumulated wealth—not just income—with people able to afford to pay astronomical sums on different ways of life, while half a mile down the street there is a kid in a household that cannot afford to put any proper food on the table.
Catherine West (Hornsey and Wood Green) (Lab)
Does my hon. Friend agree that it is terrible to think of all the many places in the country where there are so many more food banks, and that the year-on-year increase the Trussell Trust has told us about is deeply worrying?
Vernon Coaker
That is right. Every Member of this House would no doubt say, “Isn’t it great that there are food banks and so many volunteers at them?” I agree with that; I agree that it is good to see in communities across this country, in every part of the UK, so many people who volunteer their time with others donating to them. What I object to is that food banks, which are there as a charity, are used as an instrument of public policy—they are used as a way of tackling poverty. What on earth have things come to in 2018 and 2019 when food banks are a public policy mechanism for dealing with poverty? They are supposed to be charitable organisations for people who have somehow slipped through the net, not places where someone at the DWP sends people with tokens. That is an absolute outrage, and this Parliament should be seething about it. In saying that, I do not decry the volunteers; this brings the very best out of people, but—goodness me—is that public policy now?
That is what the Minister should be addressing. The challenge that I think every Member of this House would make to the Government would be to ask what is being done to address these issues. We do not want some academic debate about a bit of research here or there which means that the hon. Member for Torbay can say, “There’s 1,000 fewer here and 2% less there.” The levels of poverty and inequality in our country are a fundamental disgrace; why are the Government not raging about that and doing something about it through their Budget?
Laura Smith (Crewe and Nantwich) (Lab)
Does my hon. Friend agree that when he speaks to the food bank volunteers they say to him that they do not want to be doing this work as it should not be necessary because people should be able to pay for the food for their families without having to rely on handouts? They do not want to be volunteering for this because this problem should not exist in 2019.
Vernon Coaker
I agree with my hon. Friend.
In my relatively brief contribution I just want to ask the Government why there is disagreement about these perfectly reasonable new clauses that ask the Government to review the impact on poverty and inequality. When the Minister responds, will he say whether he refuses to keep under review any of the budgetary measures to be implemented through this Finance Bill to see whether they impact on poverty and inequality? Is that honestly what he is saying? If he is not saying that, why cannot he accept a new clause that is asking him to review this? Who disagrees with looking at whether our Government’s policies are actually tackling poverty and inequality? I find this absolutely incredible.
The Minister can say that this is all rhetorical nonsense, but let us see what he says about how he intends to review the impact of the Government’s policies. For example, he knows that one of the key challenges for Government policy is that, despite what they have tried to do, the number of working people in poverty is increasing. That is a policy challenge. It is not a Labour-Tory thing; it is a policy challenge. If the Minister simply retrenches on this, he is not acting as a Minister of the Crown or a Government Minister responsible for our country; he is acting as a Tory party politician, and that is not what a Minister of the Crown should be doing.
Martin Whitfield (East Lothian) (Lab)
I find it sad to have to ask this, but does my hon. Friend agree that perhaps the reason why the Government will not accept the new clauses is that they would provide the evidence that these policies are wrong and that they are harming our citizens?
Vernon Coaker
I agree. I am not sure if the Minister is listening, but that is the point. Surely the Government would want to know whether their policies were working, so that they could do more of them. And if their policies were not working, all of us would want the Government to change tack.
Poverty and inequality should be at the heart of everything the Government do and of everything this Parliament demands. All that the new clauses and amendments are doing is saying to the Government, “Look at what your policies are doing. Look at the impact out there. What are you doing to tackle the utterly unacceptable inequality, child poverty and increased use of food banks that we see in our country? How are your policies going to address this?” That is the purpose of the new clauses, which I totally support.
Helen Whately (Faversham and Mid Kent) (Con)
It is a pleasure to follow the hon. Member for Gedling (Vernon Coaker). In fact, I agree with some of the sentiments that he has expressed. The level of poverty is still unacceptable, and that makes me unhappy. I am also unhappy about the level of inequality across the country and in my own constituency, but I want to support a Government who are doing something about it, not just through words but through actually taking steps to make these things better.
I have enormous respect for the hon. Member for Oldham East and Saddleworth (Debbie Abrahams), who introduced her new clause 1 earlier. It proposes a review of the impact of clause 5 on child poverty and equality—that is, the impact of raising the level of the personal allowance after which people start paying tax. She also spoke to new clause 5, which proposes a review of the public health and poverty impact of the whole Act. It is enormously tempting to say yes, we should do this. All of us in this Chamber care enormously about poverty and inequality levels. I have a background in healthcare, and I feel very strongly about reducing health inequalities. I am also conscious of the different life expectancies within my own constituency, which are substantial, but we must be careful not to be lured into a sense that reviewing a specific part of an Act will give us an accurate picture of all that is being done and of its impact on, for example, reducing health inequalities.
Debbie Abrahams
I want to reciprocate by expressing my respect for the hon. Lady and for the work that she does in this place on mental health. I have huge experience in this area. I spent more than 20 years working on health inequalities and specifically on the assessment of policies to ensure that we get them right. That is part of the reason that I came into Parliament, and I know that this can be done. As my hon. Friend the Member for Gedling (Vernon Coaker) said, if we are all so committed to reducing poverty and inequality, let us assess our policies before they are implemented, to ensure that they do just that.
Helen Whately
I thank the hon. Lady for her intervention, but we should be a little cautious about assessing a particular bit of policy in isolation without considering other policy areas, because that might result in false information. For instance, if we examined a specific bit of Government spending, it may appear to be doing a fantastic job, but if we do not consider the counter-effect and the money that is being taken away from people elsewhere, it does not provide the whole picture and might lead to poor policy decisions.
I want us to look at the overall impact of Government policy in the round. For example, we should look not only at the impact of raising the personal tax allowance, which is positive because it enables people on low incomes to retain more of what they earn, but at where the Government are investing money. For health inequalities, we should look harder at the extra £20.5 billion going into healthcare and the impact of the NHS long-term plan, published yesterday, which has a particular focus on directing funding to reduce inequalities and increasing funding for primary and community care. Those things will particularly help those in the most deprived areas and those with some of the worst health outcomes.
I know that it is enormously controversial, but universal credit—I will probably get booed by the other side of the Chamber—is helping people into work and is doing so hand in hand with an economy that is strong overall, leading to unemployment in my constituency halving since 2010.
Dr Philippa Whitford (Central Ayrshire) (SNP)
I totally support what the hon. Lady is saying about importance of inequalities and health inequalities, but does she not recognise that two thirds of children in poverty have a working parent? People are trapped in low-paid work, and they are still poor, and she knows from her time on the Health and Social Care Committee that poverty is the biggest driver of ill health and health inequalities.
Helen Whately
I recognise that there is poverty in working families, but I do not agree with her use of the word “trapped”. It is important to ensure that people are in work, because that is the best way out of poverty, and then to ensure that we support people to raise their earnings. One way of doing that is through the support available through the jobcentre when people resume universal credit, which now tends to help people to move up and earn more money, and the other is by looking at the wider economy. As the hon. Lady will know, the minimum wage has risen and is rising, but we are also seeing wages rising independent of the minimum wage as a result of a more productive economy. What is actually key to a better level of wellbeing and fewer people being in poverty is having more people in work, which is the case, and a more productive economy, which means that people earn more. We can achieve that through driving up skills and technology, increasing exports and a swath of other things that would take me into a whole other conversation.
Mrs Main
My hon. Friend has mentioned some of the benefits of having a working parent or family member, but it also sets an enormously good example for the children. Children brought up in workless households have low aspirations and ambitions when it comes to obtaining work themselves, so somebody being in work is not just about money, it is about psychological and educative factors, too.
Helen Whately
My hon. Friend is absolutely right. While education standards are rising in our schools—readings levels, for example, are increasing substantially, leading to better opportunities for children—low levels of aspiration are still a problem and, as the teacher I was speaking to at a primary school in a deprived area said the other day, raising young people’s aspirations is key.
Laura Smith
I am completely insulted by the point made by the hon. Member for St Albans (Mrs Main). I grew up in in-work poverty. My parents were working, and I saw them struggle day in, day out, but I assure the House that my aspirations were not stopped. It may do some Members good to understand what people living in such conditions have to go through day in, day out, and Members should not patronise people when they simply do not understand the situation.
Helen Whately
I thank the hon. Lady for her contribution and for the example she sets. Although she has described a very tough childhood, she is a role model and is playing her part in Parliament.
To be clear, what I said was from a conversation with a teacher, who is doing a very good job in a very deprived school, about her experience. The hon. Lady’s experience might be different but, from this teacher’s experience, although there is so much she can do to help children learn to read, write and perform better in their education, what would make the next difference for those children is for their aspirations to be raised and for them to have a sense of the opportunities for them beyond their needs and environment.
Helen Whately
I have already taken an intervention from the hon. Lady, so she has had a chance to make her point.
Vicky Ford
Does my hon. Friend agree that making sure people can keep more of their earnings before they pay tax, introducing the national living wage and reducing the very high taper rate for people on legacy benefits will all contribute to helping people to get out of the in-work poverty trap?
Helen Whately
My hon. Friend is absolutely right, and she reminds me of a constituency case, before universal credit, of a mum who was looking to raise her income but who was coming up against a threshold. If she worked more than 16 hours a week, she would not benefit, so she was trapped in poverty—the hon. Member for Central Ayrshire (Dr Whitford) used the word “trapped” earlier—because it did not make sense for her to increase her hours of work.
Luke Graham
My hon. Friend is making an important point about aspiration. In this House we often get caught on economics and money, but social capital is just as important. In many communities right across the United Kingdom, we need to be helping people to see the true opportunities, both inside and outside their communities, to allow them to realise their true potential. It is important that we consider the social alongside the monetary in all these debates.
Helen Whately
I absolutely agree and that is one reason why we have to look at policies in the round. I completely support the policy of taking people out of income tax, but let us look not just at that. Let us look, for example, at the strong economy, at the opportunities that gives people and, beyond that, at the strength provided by having a family and community around people, which also provides the social capital to be able to make the most of their lives.
Sir Oliver Heald (North East Hertfordshire) (Con)
Does my hon. Friend agree that the challenge for Parliament changes over time? In the Labour years we were very concerned in Parliament about the number of workless households—there were 3 million then. There are now a lot more people in work, but there is this issue, which has been rightly raised, of the quality of that work, of the skills involved and of whether it rewards people adequately. That is the new challenge, but we are making progress.
Helen Whately
I thank my right hon. and learned Friend for his intervention.
The hon. Member for Gedling spoke earlier of his frustration. He did not want people to talk about changes in percentages and there being perhaps a few fewer people in poverty, but actually the numbers do matter. The numbers tell us what is happening, and the numbers are moving in the right direction, which is really important. The fact that the numbers are moving in the direction of our having fewer workless households should not be sniffed at or dismissed. Achieving that has been a challenging job, and it has involved a significant effort from many people.
Helen Whately
I think I should conclude my remarks, as I am aware that I have been speaking for a while.
New clauses 1 and 5, which call for reviews on specific aspects, have been advocated in a way that suggests that one side of the House cares more about poverty, for instance, than the other, but that is not the case at all. Members on the Conversative Benches care very deeply about poverty and equality within society.
What really matters is the track record of governing parties in these areas. I would raise these questions with the House. Which party in government oversaw an increase in unemployment from 5% to 8%? Which party left office with nearly 4 million workless households? Which party left office with rising absolute poverty? All of us know that it was Labour.
In contrast, under this Government, we have more than 3 million more people in work, the lowest unemployment since the 1970s, 600,000 fewer children living in workless households, falling absolute poverty and rising wages. When it comes down to it, this is what matters—getting right those policies that improve people’s lives, reduce inequality, reduce poverty and make life better for everybody. That is what we should all be backing.
Simon Hoare
It is a pleasure to follow my hon. Friend the Member for Faversham and Mid Kent (Helen Whately).
I rise to oppose new clause 1, and I do so for these reasons. If any Members were so inclined, they should please come and visit my constituency of North Dorset. If they visited North Dorset, they could easily be forgiven for thinking that everything in the garden was rosy. There are pretty villages, attractive market towns, lush fields, healthy-looking cattle grazing and a strong local economy where unemployment is virtually zero. If Polly Toynbee or the hon. Member for Bootle (Peter Dowd) were to arrive in North Dorset and say to me, “Simon, would you take me to your most deprived ward?” I could not, because I do not have one, but I know that I have pockets of deprivation and of poverty in each village and market town in my constituency.
One of the big challenges facing any suite of financial policies is recognising that poverty manifests itself in various ways and guises, but right the way across our nation. It is, I would suggest, far easier to identify large pockets of urban deprivation and poverty. The real public policy challenge is also to recognise and address those of rural poverty, often in sparsely populated areas where the instinct—maybe it is part of the rural community DNA—is slightly to shy away from asking the state, either local or national, for support and to demonstrate a strong sense of resilience and smaller communities trying to work together, although that is no excuse for any Government to shy away from focusing like an Exocet on trying to deliver policies that help to address rural poverty.
I am motivated by this every day. I know the figures move around, but the average national salary for the UK is in the region of £24,000 or £24,500 per annum, as I understand it. In North Dorset, when I was first elected in 2015, the figure was £16,500 and it has just risen to about £18,000, but rural jobs always pay less, if people are in the agricultural sector, food production or the hospitality trade. In those rural areas we do not have those big, high-paying employers. That is why we should always focus on trying to deliver support.
Laura Smith
I find myself agreeing with what the hon. Gentleman is saying about rural poverty. I am an MP in Cheshire, and our local food bank expresses real concern about the rise in the number of people who live in rural areas having to access the food bank. He is right about pride, and another relevant group is elderly people, who often will not access help and support, so it is important to mention rural poverty.
Simon Hoare
I am grateful to the hon. Lady for her intervention. I am not entirely sure whether her support of me or my support of her has damaged her career more than it has damaged mine. We will leave our respective Whips to adjudicate on that. Nevertheless, she is absolutely right, and she is absolutely right to highlight that often incredibly annoying sense of pride when a retired person comes to an advice surgery. I say, “Look, we can try to help you to get this, that and the other,” and they say, “No, I don’t want to, Mr Hoare. I don’t think it is right. I have never asked the state for anything.” There is some locked-up pride among some of our retired citizens and we must forever say to them that the state in all its manifestations is there to provide. The second duty of the state, after keeping the country safe, is to provide that safety net that delivers self-respect and the opportunity for people to live with some semblance of dignity and happiness, particularly in their later lives.
Those in later life are a group that is often hard to reach. They will never be contacted through the digital economy; they need to be outreached to. I make the point again—I know the hon. Member for Crewe and Nantwich (Laura Smith) will agree with me—that one of the great challenges in sparsely populated rural areas is that outreach is often harder, because there is not that dense concentration such that at almost every door one knocks on in an area one would say “Yes, this is the area that requires most attention.”
Vicky Ford
I thank my hon. Friend for painting this clear picture of rural poverty, but pockets of poverty occur in urban constituencies such as mine, too. Does he agree that poverty is about not only how much someone earns but the cost of living? That is why it is so important that we focus not just on the relative poverty measures that the Labour party focuses on, but on reducing absolute poverty, which is the measure that this Government have succeeded in dealing with.
Simon Hoare
My hon. Friend is absolutely right to pinpoint the cost of living. Opposition spokesmen sometimes dispute this, but it is more expensive to live in a rural area. It is more expensive to heat one’s home. Travel costs are higher, usually in the absence of public transport, meaning that the running of a car is not a luxury but a necessity if one is to access even the most basic of public or retail services.
Simon Hoare
If the hon. Gentleman will forgive me, I will not, because I want to refer to the speech by the hon. Member for Gedling (Vernon Coaker). I hope that he will not think it is untoward for me to say this, but the passion with which he delivered his speech was powerful and incredibly compelling. He struck on a point that I was going to make and on which I had jotted down a note or two, and it is a point I have been making in recent speeches around the place. I often admire the Labour party—
Simon Hoare
There is always a “but”, though. [Interruption.] My right hon. Friend the Financial Secretary to the Treasury says that my career has definitely gone now. I did not even know that I had a career, so that is going to be interesting.
There is usually no embarrassment on the Labour side at talking with passion about the burning injustices that we see in all our constituencies and having a clear determination to do something about them. There is no inhibition at all on the Labour side. On my side—I say this as somebody who has been a member of our party since 1985—I occasionally find that we get slightly inhibited about talking from the heart. Other Members have referred to this. We can bandy the statistics about—relative or absolute, percentage this versus percentage that, up, down, more in this, fewer than the other—but it does not matter, because if someone is poor, the statistics do not affect them: they are poor. They want to know that their elected representatives, locally, in this place and those in Whitehall are doing their damnedest to make their life just a little better.
I make this plea to my colleagues on the Treasury Bench: we on the Conservative Benches do not talk enough about the whys of politics. We talk a lot about the whats, but we do not say why. We find homelessness gut-wrenchingly upsetting. We find the closing down of hope, aspiration and life expectancy intensely moving, and we burn with the desire to help. It certainly motivates me every morning to get out of bed and to do my best for my constituents in whatever way I can by supporting policies that I fundamentally believe have the power to make our local economy, and therefore my constituents’ lives, better. If anybody in this House is not motivated by that fundamental political passion to stir up the soul to go and do something about it, I say to them with the greatest of respect that they should not be here. That, I think, must be our principal function. Members from both sides of the House want to arrive at a place where aspiration, hope and opportunity are available for as great a number of our citizens as we can possibly facilitate.
We also want to make sure that the economy is buoyant. Why? Because warm words butter no parsnips. The emotional speeches may salve our consciences, but we need the economic policies that deliver the taxes and pay for the safety net below which, I am determined, none of my constituents should, or will, ever fall on my watch. We need to be ever vigilant to make sure that our economic policies are delivering that growth.
Martin Whitfield
I am very grateful to the hon. Gentleman for giving way. I say with the greatest respect that he is making a very good speech for the two new clauses. The knowledge gained from reviewing policy implementation feeds into the decisions that go forward, so, at this stage, I invite him to support the two new clauses.
Simon Hoare
The hon. Gentleman is—what’s the phrase?—pushing his luck on that. I think that the divide here will be on the theoretical and the practical. I am always conscious that we can go to any Minister’s office, or any Department, or any local council, and find gathering dust, spiders and dead flies on many a window sill reports, reviews and assessments of this, that and the other, and they have a pretty short shelf life. I would much prefer to spend Government time focusing on delivering those policies of hope and growth.
Simon Hoare
The hon. Lady has winked at me in such a beguiling way that of course I will give way to her.
Laura Smith
I would just like to put it on the record that I absolutely did not.
Laura Smith
It was just a northern smile; that was all.
Does the hon. Gentleman not see that he has massively contradicted himself? His speech, as my hon. Friend the Member for East Lothian (Martin Whitfield) has said, would indicate that he should really be supporting these new clauses, and yet, when pushed on it, he is not. Does he not agree that that is why people in the outside world become frustrated with politicians who are very good at speaking in one way, but who act in another?
Simon Hoare
It was all going so well, wasn’t it? I agree with the hon. Lady that many people become incredibly frustrated when a Minister of any political persuasion delivers a speech that makes them think, “Something good is going to flow from this”, but then very little has actually happened when they come to think about it.
I would prefer to do the doing rather than the reviewing. I do not need a whole series of reviews to tell me that there are poor, deprived people who live in North Dorset. I do not need tables of statistics to tell me that I am going to hold the Government to account to ensure that policies are delivered to provide support for those who need it, to encourage a ladder of expectation and aspiration for those who wish to scale it, and to put policies in place to ensure that we remain a civilised and humane society. I do not need a whole bookcase of learned treatises to tell me this. It was strange that the hon. Member for Gedling made exactly that point—that he did not need a whole load of statistics and reviews—when that is actually what new clauses 1 and 5 are calling for.
I do not need these pieces of paper to tell me that it is the first duty of a Government of any colour—even if it were the hon. Member for Bootle (Peter Dowd) sitting on the Government Benches and my right hon. Friend the Minister sitting on the Opposition side—to try to ensure that the economy grows and that opportunities are presented.
Rachel Maclean (Redditch) (Con)
As well as not needing to do these reviews, does my hon. Friend agree that we should be looking at our track record—at what has actually happened when it comes to getting the deficit and the debt down? Surely that is what people will be looking at. What gives them the most comfort that we will be able to deliver on our promises in the future is that we have delivered on them in the past.
Simon Hoare
My hon. Friend is right, but I think people will look at it differently. I think that most people in this country come to an evaluation of an Administration, irrespective of which party happens to be in power, based on whether they and their family group feel more secure, more prosperous and more confident about their opportunities, and on whether they can see that the opportunities for the next generation of their family are going to be deeper and wider than those presented to them when they were making their first choices.
Victoria Prentis (Banbury) (Con)
If I may say so, my hon. Friend is making the speech of his life. In a finance debate, it is particularly good to hear a speech about burning injustices, and I agree with him that this is the right place to be having this debate. In turn, does he agree with me that employment is at the base of dealing with all those injustices?
Simon Hoare
My hon. Friend is right. I think that the hon. Member for Crewe and Nantwich (Laura Smith) slightly misheard my hon. Friend the Member for St Albans (Mrs Main). My hon. Friend the Member for St Albans said precisely what the hon. Member for Crewe and Nantwich said, which was that although the hon. Member for Crewe and Nantwich was in a tight or low-income household, it was a house of work.
Simon Hoare
Of course, but let me just finish this point with my hon. Friend the Member for Banbury (Victoria Prentis).
Where did we all learn that it was normal and expected to get out of bed in the morning, have a bit of a wash and a tidy-up, get ourselves to school and then on to work, and all the rest of it? It was from our parents. Growing up in Cardiff, I can remember large council estates where worklessness was endemic, and where the welfare state had not been that support, safety net or springboard, but had instead become a way of life for too many people. If that is the case, how on earth can we expect anybody to learn the work ethic?
I chaired the all-party parliamentary group for multiple sclerosis, which two years ago held an inquiry into people with MS who were in work and wanted to stay in work. Without reducing employability to a utilitarian argument, for people to feel that, even with a painful degenerative condition, they could still play an active, productive role in their family’s life, in the life of their community and thereby in the life of the economy nationally, had a huge impact on their mental health. I therefore entirely agree with my hon. Friend the Member for Banbury, who speaks with great passion on this issue.
An understanding of employment and the benefits that flow from it has to be rehearsed again and again by Treasury Ministers and other Ministers. We take this for granted, possibly because it is in our DNA and possibly because it is the only thing that we have ever known, but we must be conscious that there are others in our country who have not. We should be advocates, apostles, evangelisers and any other word one could think of in shouting from the rafters the strong benefits of employment.
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
Does my hon. Friend agree that not only has employment benefited but, since 2010, this Government have delivered a reduction of 661,000 in the number of children living in workless households—so over half a million young people are now growing up in a home where they are getting those lessons on the importance of work—and have also reduced the number of children living in absolute poverty by 200,000?
Simon Hoare
My hon. Friend helps me and my hon. Friend the Member for Banbury by amplifying the point.
I said earlier that I was born and brought up in Cardiff. One of my abiding memories was of my late grandmother, who was born in 1908, and what motivated her throughout the whole of her life. She was the daughter of Irish immigrants. When she was at school—a Catholic primary school called St Patrick’s in Grangetown —a teacher brought a child to the front of the class, theatrically held their nose, and said, “Boy, go home, you smell.”
I can remember, in different circumstances in the 1970s, my Catholic primary school in Cardiff called St Mary’s. It was the school that my mother had gone to as well. It drew from a mixed economic demographic. There was a family with three children—I can see them now. If I sound emotional on this point, it is because I am. I am emotional because I can remember—although this may sound entirely preposterous and pompous—how I felt as an eight or nine-year-old, as I was, seeing this family. The mother always looked underfed. The father always looked harassed to death. The children, one of whom was in my class, had a colour of poverty. They had a smell of poverty. Poverty has a smell about it. It has a posture about it. It says, “We are beaten.” At the age of eight, nine or 10, I can remember looking at my classmate and thinking, “What can I do?” I realised that I could do nothing apart from provide a bit of friendship and support, and I did it as best I could, as I am sure that anybody would.
But that impotence of an eight-year-old has disappeared, and I can now stand here as a 49-year-old—[Interruption.] Yes, only 49—I know. I have had a hard life—that is what I tell my wife, anyway. I burn with the sense of injustice that the hon. Member for Gedling expressed. We are all in a position in this place where we are not impotent—we can actually do something about this. If I thought that Her Majesty’s Government were not as committed as I am on this issue, I would be in the Lobby with Opposition Members, but I do not think that. I think that the strategy of the Finance Bill is right. Our values and our principles must shine through. I urge Treasury Ministers and other Ministers to talk a little more about the why of what we are doing in our politics and a little less about the percentages and statistics.
Kirsty Blackman
I want to talk about a few issues, many of which have been brought up during the debate. The first is the subject of new clauses 1 and 5, both of which I support, and the way in which they have been written. I stress to the Government, and particularly to the hon. Member for Torbay (Kevin Foster), that the reason why the new clauses call for reviews is that we have no amendment of the law resolution, which means that we cannot put forward more robust amendments that ask the Government to do things. If we could have tabled more robust amendments, we would have done so, and I am sure that the Labour party would have done so as well. The Government have chosen to hamstring us and, as I have said before, when Conservative Members are sitting on the Opposition Benches, they will regret this behaviour. The fact that they chose not to move an amendment of the law motion makes it much more difficult for us to table any substantive amendments, but we are doing our best.
The things that we have managed to do during these Finance Bill debates are unparalleled in the Scottish National party’s history. We have managed to have two substantive amendments accepted to the Bill. I had two amendments accepted to the previous Finance Bill, but they were particularly minor. These ones are much more substantive and call for reviews. One of those amendments fits nicely in this section of our proceedings, as it relates to the public health effects of gambling. I am pleased that that amendment continues to be in the Bill, and I look forward to the Minister bringing forward that review in the next six months, as we have called for him to do.
There are various reasons why a Government can choose to change or introduce taxes. They can choose to have a tax to raise funds for the Government. They can choose to have a tax relief to encourage positive behaviour, or a tax to discourage negative behaviour. They can choose to have a tax to do one of the things that the Opposition and the hon. Member for North Dorset (Simon Hoare) have been keen to talk about. They can choose their priorities. They can choose to have a tax system that aims to reduce child poverty, reduce inequality and increase life expectancy, and we are asking for that to be the Government’s focus when they are setting taxes.
The Government should be looking at the life chances of the citizens who live on these islands and doing what they can to improve those life chances. That is the most important thing—it is why these reviews are being asked for. Whether or not the taxes that the Government have set are appropriate, we are asking for a change of focus and a change of priority, and I think the hon. Member for North Dorset was agreeing with that.
Mhairi Black (Paisley and Renfrewshire South) (SNP)
Forgive me if I am stating the obvious, but do we not also need these reviews because we have Brexit coming up, and we have to be able to reflect on and evidence things?
Kirsty Blackman
That is correct. One of the difficult things about looking at the potential outcomes of Brexit is that those stats do not exist. It is all well and good to talk about the fact that there are reviews sitting on shelves gathering dust, but we need stats. We need stats to be able to prove that Government policy does what it says on the tin.
The Minister can stand up and say, “This policy will raise £100 million for the Government,” but I would like to see not only the working beforehand, but the review afterwards that proves that the policy did what the Government intended it to do. I have been clear on a number of occasions that I do not think the Government do enough of that evidencing. The reviews being asked for would allow the Government to provide us with that evidence. Evidence written by the Government, rather than an independent individual, is still a legitimate thing that we can look at. The hon. Member for Torbay seemed to suggest that we would doubt information were it to come from the Chancellor of the Exchequer—surely not! It would be good for him to provide that.
I want to talk about a few things that the SNP has been doing in Scotland and the changes we have chosen to make to not only our tax system, but other systems, and particularly those that affect the issues raised in new clauses 1 and 5. We have mitigated the bedroom tax, which has been a major factor in us having the lowest child poverty rate of any country in the UK. We have increased the number of people from disadvantaged areas who are going to university. We are making major changes to the care system for looked-after children. Those young people have had some of the poorest life chances in the past, and what the Scottish Government are doing on that is hugely important for ensuring that their life chances are improved.
We have increased the pregnancy and baby grant to £600. We are improving access to childcare, and we have the baby box scheme. We are the best country in the UK at paying the living wage—not the pretendy living wage, but the real living wage. People working in Scotland are more likely to be paid the living wage than those working in England. About half of taxpayers in England pay more than they would if they lived in Scotland, and that is the half of taxpayers who are earning the least. We think that that is a progressive measure that is assisting people to get out of poverty.
Luke Graham
The hon. Lady is bringing out the successes of the SNP Administration in Edinburgh, but does it not still stand that, after a decade in power and with powers over taxation and healthcare, men and women in Scotland live for two years less than other people in the United Kingdom? In fact, we have the lowest life expectancy in the whole United Kingdom. There may be some successes—I support those on care—but certainly on the one thing that matters most, which is keeping people alive the longest, the SNP is an abject failure.
Kirsty Blackman
We have not had taxation powers for 10 years, and we do not have the full range of powers. For example, we do not have the full range of powers over public health, so we do not have in Scotland powers such as the public health taxation measures—the sugar tax—that were brought forward in the previous Budget. We do not have the full range of powers, and if Scotland were to be an independent country, with the full range of powers, we would be putting the things we are discussing today at the heart of our Government’s agenda. Our Government have done this and we will continue to do this—we are pushing for fairness.
I will wrap up, because I am aware that I am relatively short of time, but I want to talk about the people who are the poorest and, by the way, the most disadvantaged by the way in which this society is set up. Following the changes to universal credit, those in the bottom 30% of incomes will gain less from the work allowance than they will lose in the benefit freeze. The benefit freeze is costing them more than the changes to the work allowance will give them. Those people, who have no recourse to public funds, are the poorest individuals I see coming through my door, and this Government have caused that situation. This Government have caused a situation in which asylum seekers have got absolutely nothing. This is about the very poorest people, who have got the worst life chances as a result, and this Government are completely failing to do anything to support them or to improve their life chances. This is about people on disability benefits, who are really struggling, and at every turn, this Government have made their lives worse, rather than better. This is about lone parents, who are disadvantaged as a result of universal credit. This is about the increases in food bank usage.
The Government talk about people working their way out of poverty. I do not understand how people can have hope when they do not have enough to eat.
The Financial Secretary to the Treasury (Mel Stride)
I thank everybody who has made a contribution in this very important debate. There have been some extremely passionate and well-argued speeches.
Part of the debate has been exemplified by the hon. Member for Gedling (Vernon Coaker) and my hon. Friend the Member for North Dorset (Simon Hoare), who spoke in effect about who cares about these issues. We need to recognise that Members on both sides of this House—I include the Opposition in my remarks—care very deeply about whether our fellow citizens in our great nation are impoverished, are in dire straits, do not have enough to make ends meet, do not have enough to feed their children, or have children who do not have the opportunities in life that we wish for our children in turn. Those things matter considerably, and I congratulate my hon. Friend on the quality of the speech he delivered, particularly in that respect.
Something else that lay at the heart of the debate between the hon. Member for Gedling and my hon. Friend the Member for North Dorset, is whether the numbers matter. Do the figures matter? I think it was the contention of the hon. Member for Gedling that, in a sense, the figures do not matter. In a curious way, that is rather at odds with the notion of supporting new clause 1, because it calls for more figures to inform our decisions. In one sense, of course, the figures do not matter, because what matters is the condition of the people who live in our country. However, figures do matter when it comes to formulating the policy responses we need to address the situation, and if we are, in any meaningful way, to chart the progress, or otherwise, that Governments—ours and the Labour Governments who preceded us—have made on this extremely important issue.
Debbie Abrahams
I do not know whether the Minister is aware of this, but the European Commission does this sort of analysis every year on its programme of policies, so it is not that this cannot be done. Its work covers not just quantitative but qualitative data, which relates to the points my hon. Friend the Member for Gedling (Vernon Coaker) made. There needs to be more than what the Government are doing—they do not know what the impacts of their policies will be.
Mel Stride
I think I have been misunderstood, and I apologise to the hon. Lady if I was not clear enough. I am certainly not saying that data does not matter—quite the opposite. What I am saying is that we need to have the right kind of data for the exercise to be meaningful and worth while.
New clause 1 would require the Chancellor to report on the impact of changes to the personal allowance and the higher rate threshold on households of different levels of income, on child poverty, on equality and on those individuals with protected characteristics. New clause 5 would require the Chancellor to report on the Bill’s effect on child poverty, life expectancy and public health.
Let me first address the question of the Treasury’s compliance with its public sector equality duty, as referenced in new clause 1(2)(c). Equality and fairness continue to lie right at the heart of the Government’s agenda, and we take our compliance with this duty deeply seriously while deciding policy. That means that Government decisions are explicitly informed by the evidence available of the implications of those decisions for those sharing protected characteristics. I have no hesitation in saying that the Treasury complies with the public sector equality duty.
Further provisions in new clauses 1 and 5 call for the publication of different forms of analysis for clause 5 and for the whole Bill in turn. The Government have been, and continue to be, transparent—more transparent than any other. Changes to the tax system are always accompanied by a tax information and impact note, and each Budget is accompanied by detailed distributional analysis.
TIINs, in particular, are relevant to the questions discussed today. These notes provide Parliament and taxpayers with information on the expected effects of changes to the tax system, and form a vital part of the Government’s commitment to transparency and accountability around tax decisions. In the context of clause 5, for example, the TIIN already sets out the impact on groups of taxpayers according to their age, gender and income tax band, and this data is readily available to HMRC through tax returns.
Vernon Coaker
That is the point: the assumptions on distributional analysis are assumptions. What we want is to see whether those assumptions turn into reality.
Mel Stride
I will come to the very issue that the hon. Gentleman rightly raises.
Clause 5 will benefit households across the UK. Due to the information collected by HMRC through tax returns, we have various pieces of information on geographical distribution, as sought under new clause 1(2)(d). That is an important point, because much of the information being requested is actually already available.
In addition, the distributional analysis published by the Treasury already sets out the impact of tax changes on households with different levels of income. To be completely clear, the analysis shows how the living standards of households in each tenth of the income distribution will be affected by the decisions the Chancellor and Prime Minister have taken since they took office in 2016. Not only does the analysis meet the intention of new clause 5(2)(a) regarding the effects of the Government’s tax changes on different households, it actually goes beyond that by including changes to welfare and spending on public services, and by considering changes in addition to those announced at each fiscal event since the autumn statement in 2016.
There is, as I suggested at the outset of my remarks, much that we can agree on across the House. Child poverty, public health, life expectancy and inequality are among the greatest issues of our age. We have got on with the job. Absolute poverty rates are at record lows. One million fewer people are in poverty now than under Labour. I say to the hon. Member for Gedling that 1 million is indeed a number, but for every one of those million, their lives have been enhanced. That includes 300,000 fewer children in poverty than under Labour. As we know, the best route out of poverty is through work. There are 3 million more people in work now than in 2010, with 637,000 fewer children in workless households. That is a record of which we should be proud. I urge the House to reject the new clauses.
Peter Dowd
If I may rephrase St Augustine, who said “O Lord, make me chaste, but not yet,” what we have here is a Government saying, “O Lord, make me charitable and compassionate, but not just now. Let’s do it in the future.” It comes to something when the British Government, with an expenditure of approximately £840 billion a year, say that it will be difficult to get statistics, either qualitative or quantitative, from which they can make policy. That is how it seems to me, but I tell you what: every day when I am in my constituency I see people who are homeless. What have the Government done about that? Nothing. I see food banks opening up all the time. What are the Government doing about that? Absolutely nothing. What are the Government doing about the 24% of homeless people who are from the LGBT community? Absolutely nothing. And then we heard the dross coming out—that is what it is, dross—about intergenerational worklessness. The Joseph Rowntree Foundation—through evidence, through statistics, through analysis—found that that was not a significant factor in homelessness. So we hear all this talk about charity, compassion and working together, but I am afraid it does not wash when it comes from the mouths of Tories.
Question put, That the clause be read a Second time.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Sir Lindsay Hoyle)
With this it will be convenient to discuss the following:
New clause 7—Review of effect of carbon emissions tax on climate targets—
“The Chancellor of the Exchequer must review the expected effect of the carbon emissions tax on the United Kingdom’s ability to meet its internationally agreed climate targets and lay a report of that review before the House within six months of the passing of this Act.”
New clause 12—Review of expenditure implications of Part 3—
“(1) The Chancellor of the Exchequer must review the expenditure implications of commencing Part 3 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) No regulations may be made by the Commissioners under section 78(1) unless the review under subsection (1) has been laid before the House of Commons.”
This new clause would require a review within 6 months of the expenditure implications of introducing a carbon emissions tax. It would prevent part 3 (carbon emissions tax) coming into effect until such a review had been laid before the House of Commons.
New clause 13—Report on consultation on certain provisions of this Act (No. 2)—
“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).
(2) Those provisions are—
(a) sections 68 to 78,
(b) section 89, and
(c) section 90.
(3) A report under this section must specify in respect of each provision listed in subsection (2)—
(a) whether a version of the provision was published in draft,
(b) if so, whether changes were made as a result of consultation on the draft,
(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”
This new clause would require a report on the consultation undertaken on certain provisions of the Bill – alongside New Clause 11, New Clause 14 and New Clause 15.
New clause 19—Review of powers in consequence of EU withdrawal (No. 2)—
“(1) The Chancellor of the Exchequer must, no later than a week after the passing of this Act and before exercising the power in section 89(1), lay before the House of Commons a review of the following matters—
(a) the fiscal and economic effects of the exercise of the powers in section 89(1) and of the outcome of negotiations for the United Kingdom’s withdrawal from the European Union giving rise to their exercise;
(b) a comparison of those fiscal and economic effects with the effects if a negotiated withdrawal agreement and a framework for a future relationship with the EU had been agreed to;
(c) any differences in the exercise of those powers in respect of—
(i) England,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland;
(d) any differential effects in relation to the matters specified in paragraphs (a) and (b) in relation between—
(i) England,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland.”
This new clause would require a review of the economic and fiscal impact of the use of the powers in section 89 in the event of no deal and in event of a withdrawal agreement passing.
Amendment 16, in clause 78, page 51, line 32, after “may” insert
“(subject to section (Review of expenditure implications of Part 3))”.
See New Clause 12.
Amendment 1, in clause 89, page 66, line 38, at end insert—
“(1A) The Chancellor of the Exchequer must, no later than a week after the passing of this Act and before exercising the power in subsection (1), lay before the House of Commons a review of the following matters—
(a) the fiscal and economic effects of the exercise of those powers and of the outcome of negotiations for the United Kingdom’s withdrawal from the European Union giving rise to their exercise;
(b) a comparison of those fiscal and economic effects with the effects if a negotiated withdrawal agreement and a framework for a future relationship with the EU had been agreed to;
(c) any differences in the exercise of those powers in respect of—
(i) Great Britain, and
(ii) Northern Ireland;
(d) any differential effects in relation to the matters specified in paragraphs (a) and (b) in relation between
(i) Great Britain, and
(ii) Northern Ireland.”
This amendment would require the Chancellor of the Exchequer to review the fiscal and economic effects of the exercise of the powers in subsection (1) before exercising those powers.
Amendment 13, page 67, line 7, leave out subsection (5) and insert—
“(5) No statutory instrument containing regulations under this section may be made unless a draft has been laid before and approved by a resolution of the House of Commons.”
This amendment would make Clause 89 (Minor amendments in consequence of EU withdrawal) subject to the affirmative procedure.
Amendment 7, page 67, line 19, at end insert—
“(7) The provisions of this section only come into force if—
(a) a negotiated withdrawal agreement and a framework for the future relationship have been approved by a resolution of the House of Commons on a motion moved by a Minister of the Crown for the purposes of section 13(1)(b) of the European Union (Withdrawal) Act 2018, or
(b) the Prime Minister has notified the President of the European Council, in accordance with Article 50(3) of the Treaty on European Union, of the United Kingdom’s request to extend the period in which the Treaties shall still apply to the United Kingdom, or
(c) leaving the European Union without a withdrawal agreement and a framework for the future relationship has been approved by a resolution of the House of Commons on a motion moved by a Minister of the Crown.”
This amendment would prevent the Government implementing the “no deal” provisions of Clause 89 without the explicit consent of Parliament for such an outcome. It would provide three options for the provisions of Clause 89 to come into force: if the House of Commons has approved a negotiated withdrawal agreement and a framework for the future relationship; if the Government has sought an extension of the Article 50 period; or the House of Commons has approved leaving the European Union without a withdrawal agreement and framework for the future relationship.
Amendment 8, page 67, line 19, at end insert—
“(7) The provisions of this section shall not come into force until the House of Commons has come to a resolution on a motion made by a Minister of the Crown agreeing its commencement.”
Amendment 14, in clause 90, page 67, line 22, after “may” insert
“(subject to subsections (1A) and (1B))”.
See Amendment 15
Amendment 15, page 67, line 24, at end insert—
“(1A) Before proposing to incur expenditure under subsection (1), the Secretary of State must lay before the House of Commons—
(a) a statement of the circumstances (in relation to negotiations relating to the United Kingdom’s withdrawal from the European Union) that give rise to the need for such preparatory expenditure, and
(b) an estimate of the expenditure to be incurred.
(1B) No expenditure may be incurred under subsection (1) unless the House of Commons comes to a resolution that it has considered the statement and estimate under subsection (1A) and approves the proposed expenditure.”
This amendment would require a statement on the circumstances (in relation to negotiations) giving rise to the need for, as well as an estimate of the cost of, preparatory expenditure to introduce a charging scheme for greenhouse gas allowances. The amendment would require a Commons resolution before expenditure could be incurred.
New clause 18—Review of effects on measures in Act of certain changes in migration levels—
“(1) The Chancellor of the Exchequer must review the effects on the provisions of this Act of migration in the scenarios in subsection (2) and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) Those scenarios are that—
(a) the United Kingdom does not leave the European Union,
(b) the United Kingdom leaves the European Union without a negotiated withdrawal agreement,
(c) the United Kingdom leaves the European Union following a negotiated withdrawal agreement, and remains in the single market and customs union,
(d) the United Kingdom leaves the United Kingdom on the terms of the draft withdrawal agreement of 14 November 2018.
(3) In respect of each of those scenarios the review must consider separately the effects of—
(a) migration by EU nationals, and
(b) migration by non-EU nationals.
(4) In respect of each of those scenarios the review must consider separately the effects on the measures in each part of the United Kingdom and each region of England.
(5) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of effects on measures in the Bill of certain changes in migration levels.
Jonathan Reynolds
This group of amendments relates to the tax and fiscal implications of the UK’s withdrawal from the EU.
Throughout the last year Parliament has been asked to approve a series of Bills giving the Government the power to deliver every type of Brexit deal conceivable, and this Finance Bill is no different. I said when closing the Second Reading debate on the Bill for the Opposition that this approach was one of “give us the powers now and we will make the decisions later,” and as it currently stands Brexit represents the biggest transfer of power to the Executive in modern constitutional history. That is disappointing for anyone who thought Brexit would see greater powers for this Parliament, but it is also a recipe for very bad decisions, and there is a classic culprit in this Finance Bill in the form of clause 89. Innocently named “Minor amendments in consequence of EU withdrawal”, it gives the Government power to amend tax legislation without any of the usual due process in the event that the UK leaves the EU without a deal.
The Government always tell us—I am sure they will do so again—that this is simply a safeguarding provision that we will never have to use, but all of us here today know that as it stands the Government have absolutely no chance of getting their deal through, because that deal does not deliver the basics of what this country needs. It does not deliver smooth, low-friction borders for manufacturing and supply chains, nor does it deliver market access for financial services. It also fails to resolve the big question: after we leave the EU, will we prioritise market access or trade autonomy? Because of that, we will almost certainly end up in the backstop arrangements, a halfway house without any say for the UK—the very worst of all worlds.
The new clauses and amendments are therefore of seminal importance, and I am extremely grateful to the Chair of the Home Affairs Committee, my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), for laying amendment 7 before the House today. It is clearly a cross-party amendment, supported by the Chairs of the Treasury, Exiting the European Union and Business, Energy and Industrial Strategy Committees, but it has the Opposition’s support because it offers Parliament a chance to make a clear statement rejecting a no-deal outcome—a statement that cannot come soon enough.
Anyone pretending that crashing out without a deal is simply about resorting to World Trade Organisation schedules is dangerously misinformed. As The Economist magazine said last month:
“A no-deal Brexit is about a lot more than trade—it would see many legal obligations and definitions lapse immediately, potentially putting at risk air travel, electricity interconnections and a raft of financial services”.
It would mean tariffs on trade with the EU, but it would also affect trade beyond the EU as all our current trade agreements negotiated as an EU member would immediately cease to apply. Agriculture, aerospace, the automotive sector—all these major sectors of our economy—would face potentially irreparable damage, and while tariffs may be reduced over time, excise duties and health checks on food, plants and livestock cannot be reduced so easily. Researchers at Imperial College London have calculated that just two minutes more transit time per lorry at Dover and the Channel tunnel translates into a 47 km traffic jam, and for perishable items like food, delays of that magnitude simply could not be sustained. When we add to that higher prices through tariffs and further inflationary pressure from another inevitable fall in the value of the pound, it is a recipe for significant pressure on living standards. That is why the Opposition say that no deal is not a real option.
There has been some suggestion that the Government might accept amendment 7.
Mr John Baron (Basildon and Billericay) (Con)
Does the hon. Gentleman not acknowledge that by ruling out preparations for no deal one is in effect tying the hands of one’s negotiating team, which in effect makes a trade deal—which we all, I think, would prefer to leaving on WTO terms—more difficult to achieve and therefore makes leaving on WTO terms more likely?
Jonathan Reynolds
The facts are as they are. It is far too late for that. Everyone knows the position that this country is in. The Government have run down the clock. They lost their majority through a general election that they did not need to call, and it is far too late to start applying the logic that might have applied several years ago. Because of that, our vulnerability is evident for everyone to see. No one should underestimate the likelihood of a no-deal outcome at this stage. No one should be pretending, through semantics or parliamentary chicanery, that we might be able to present no deal as a way of giving us greater leverage in negotiations. I am afraid that the Government have got us to the point of ruin if that is the strategy that Conservative Members wish to pursue.
Kevin Brennan (Cardiff West) (Lab)
Given that the Business Secretary said in the House earlier that no deal should not be contemplated, and that my hon. Friend is outlining the possibility of the Government accepting amendment 7, would it not be right for the Government to say clearly at the end of business today that they are ruling out no deal because it would be so damaging to this country?
Jonathan Reynolds
I absolutely agree with my hon. Friend. We all know that several members of the Government take that view, even though they may not be able to say it on the record. They are quite clear as to what no deal would mean, and they would not contemplate going down that route. It would be far simpler and far better to get to a position where ruling out no deal was clearly the Government’s intent.
New clause 3 would oblige the Government to publish a review of the fiscal and economic effects of the exercise of the powers in clause 89, as well as the differences between exercising those powers in Great Britain and in Northern Ireland. As we edge closer to the reality of crashing out without a deal, clause 89 is not simply hypothetical. We are now just two and a half months away from the UK’s exit without an agreement. It is therefore of critical importance that we have a full and transparent view of the implications of a clause of this kind.
Crispin Blunt (Reigate) (Con)
I am afraid that the hon. Gentleman is going to have to do a bit better than this. He talks about crashing out without a deal, but he needs to get into the detail of the implications. Perhaps he is going to start talking about planes, but amazingly, the planes are going to keep flying. Amazingly, we are still going to have drugs supplied into the United Kingdom. He needs to get down into the detail of exactly what the implications will be, because if we are faced with the reality of no overall agreement, there will be a barrow-load of minor agreements to ensure that the common interests of the United Kingdom and the European Union survive the transfer to WTO terms on 29 March with minimum impact on the citizens of the EU and the UK. It is time he got real and stopped this nonsense—
Jonathan Reynolds
Thank you, Mr Deputy Speaker.
I have just talked about some of the consequences of crashing out without a deal. I have talked about relationships, about tariffs on products and about the legal definitions under the common agreements that this country has undertaken with other European countries. We all know this—the information is readily available—so I am not quite sure what point the hon. Gentleman is making. I think he is aware of the dangers of taking this course of action.
Mr Kenneth Clarke (Rushcliffe) (Con)
With respect, it is quite right to concede that some of the fears being raised about no deal are grossly exaggerated, but the problems are quite real enough. If we leave with no deal, we will be the only developed country in the world that has no trade agreement at all with anybody and that is having to fall back on WTO rules, which are made to sound marvellous by the Brexiteers but which do not actually amount to very much. We will also be erecting new barriers to trade and investment around the borders of the United Kingdom, including along the Irish border, and that is bound to disadvantage our economy very seriously indeed.
Jonathan Reynolds
The Father of the House is as accurate as ever. Some colleagues are pursuing a dangerous argument that all our trading relationships with countries that are not in the EU are somehow currently under WTO terms, which is an absurd misconception. We have entered into trade agreements as a member of the EU that account for something like 16% of our goods exports.
Regardless of the significant impacts of a no-deal outcome, we could go further and say that to leave the EU having not secured a deal—an acrimonious departure —would damage our relationship with our most important trading partner for years to come and fundamentally undermine our credibility on the world stage. I cannot see how any serious-minded Member of this House could understand that that would not be of severe consequence for the United Kingdom, which is why it is so important that this House makes a clear statement today about the dangers of no deal.
John Redwood (Wokingham) (Con)
Can the hon. Gentleman name a single country that has a free trade agreement with the EU that will not transfer it to the UK under the novation procedures?
Jonathan Reynolds
We simply do not know the answer to that question. I always listen to what the right hon. Gentleman has to say in Treasury and Finance Bill debates, but he is one of the archetypal Members who come to the House and pursues what I call the BMW argument: “Everything will be fine because we buy BMWs and everyone will give us what we want.” That argument is still being pursued in these debates, but it has been proved completely untrue by the stage of the negotiations that we are at. It is simply not good enough to say, “It will all be alright on the night. Everyone will transfer over the benefits we currently have. It will be as straightforward as that.” If that were case, the Government would not be in this morass and the country would be in a far better position.
Chris Philp (Croydon South) (Con)
First, is it not the case that the UK and, indeed, the entire EU currently trade with major economies, such as the USA and China, under WTO terms? Therefore, while not desirable, they can be made to work. Secondly, if we adopt the shadow Minister’s approach and rule out no deal, we have no choice but to remain in the EU or to accept whatever the EU sees fit to give us, which is not a great negotiating position.
Jonathan Reynolds
I thoroughly agree that what the Government have got us into is not a great negotiating position, but that is because the negotiations have been driven by the best interests of the internal politics of the Conservative party. If the national interest had been considered, we would be in a completely different place.
Trade can exist on WTO terms. It is not that the UK would somehow no longer be a trading nation, but that is not the test of good Government policy. The test is to consider the ramifications of that decision and to decide whether it is in the UK’s best interests, but I cannot believe that anyone would look rationally at what a no-deal outcome means and say, “I would find that acceptable for this country.”
Kate Hoey (Vauxhall) (Lab)
Does not my hon. Friend think that it would be irresponsible for any Government not to be making contingency plans for WTO rules in these circumstances? Does he also agree that the Irish Taoiseach has in the past few days looked for the first time at making some changes to his intransigent approach to the backstop, precisely because the Republic of Ireland would suffer so much more from WTO terms than the United Kingdom?
Jonathan Reynolds
The merits of the Government undertaking contingency measures are different from the political case that we must consider, which is whether we would find it desirable to undertake a course of action that would mean that we had to use those contingency measures. The focus of the debate in this Finance Bill should be a seriously hard-headed look at the consequences of no deal, and there should be a statement from Members on both sides of the House that that is not what we seek for the UK and that we do not believe that it is possible.
Jonathan Reynolds
I will take an intervention from the hon. Member for Dover (Charlie Elphicke), and I may come to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) if the intervention is good enough.
Charlie Elphicke
The hon. Gentleman is making an interesting speech. My concern is with how he can support undermining the making of contingency preparations that are in the national interest, which is the effect of amendment 7. It is just the wrong thing to do, and the Labour party ought to be more responsible than that.
Jonathan Reynolds
I completely disagree with the hon. Gentleman, and a little humility from Conservative Members on the point about responsibility for the Brexit negotiations would be appreciated. For my entire lifetime, this country’s European policy has been dictated by the internal politics of the Conservative party. Every Conservative Prime Minister in my lifetime has been brought down by the issue of Europe. To suggest that any other political party or actor in this country needs to have more regard for the national interest, when it is the Conservative party that has never been able to do so, is not something I will take.
Daniel Kawczynski
Bearing in mind that 95% of the world’s growth over the coming decades will come from outside the European Union, what assessment has he made of the opportunities that will be afforded to the United Kingdom by our being able to tailor-make bilateral trading agreements?
Jonathan Reynolds
I am extremely glad that that issue has come up, because the opportunities created by growth outside the EU have no relationship to our membership of the EU, and could possibly be undermined by our leaving the EU. If we want to compete in competitive emerging markets around the world, what better way is there to do so than from within the single market? I would wager with the hon. Gentleman that a country like Germany will do far better from that growth around the world through its continued membership of the European Union than we will. I am afraid that it is because of such statistics, which have no bearing on serious Government policy or reality, that this debate has got to where it is, but I will move away from a wider debate on Brexit and return to the Finance Bill before you tell me to do so, Mr Deputy Speaker.
I will now come to clause 89 and the relationship between Great Britain and Northern Ireland. Under the draft withdrawal agreement it is widely accepted that, under the backstop arrangements, Northern Ireland will remain in regulatory alignment with the European Union, which would be particularly the case for EU customs law but it would also apply to compliance with elements of EU single market regulation in the technical regulation of goods, state aid and other areas of north-south co-operation between Northern Ireland and the Republic. Of course, Northern Ireland would be included in parts of the EU VAT and excise regimes and in the single electricity market.
With that in mind, it is clear that the powers handed to the Treasury by this Bill may not be applicable in Northern Ireland in the legal and regulatory areas under which EU authority would remain. We are therefore seeking a review that clearly sets out any difference in application of these powers in respect of Great Britain and Northern Ireland, and I urge Members on both sides of the House to support new clause 3.
New clause 7 relates to clause 90 on establishing an emissions reduction trading regime. It would require the Government to review the expected effect of the carbon emissions tax on the UK’s capacity to meet internationally agreed climate targets. There has never been a more critical time to take urgent action on climate change to avoid environmental catastrophe. The report from the UN Intergovernmental Panel on Climate Change, published in October 2018, shows that we have just 12 years left to make unprecedented changes to prevent global warming increases above 1.5° C. Our exit from the European Union must not be used as an excuse to step back from action on climate change. Worryingly, clause 90 contains one of the Bill’s very few passing references to environmental issues, and our review, proposed in new clause 7, would ensure that the Government are held accountable for making progress on reducing emissions without using Brexit as an excuse for stalling.
This is evidently a Government in chaos, seemingly without any plan or strategy at all. The new clauses and amendments in this group would improve both the Finance Bill and the process by which we leave the European Union. They are sensible, proportionate and timely, and I commend them to the House.
Nicky Morgan (Loughborough) (Con)
I realise that time is short and that many hon. and right hon. Members want to speak on this group, which shows the appetite of Members on both sides of the House to have their say on this critical issue. There is a deep frustration that debate was curtailed last month before we got to the meaningful vote on the Prime Minister’s draft withdrawal agreement.
I rise to support amendment 7, which was tabled by the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) and to which I have added my name, and amendment 8.
Nicky Morgan
I have great respect for my hon. Friend, but I think that it would have been better to have had this debate in 2016 rather in 2019, because the honest truth is that the Brexit that some Members on these Benches and some people out in the country say that they want was not outlined in any way, shape or form in the 2016 referendum. I refer to one Member, who said at the time, “Only a madman would leave the single market.” Yet now, that is exactly what he is proposing should happen.
I do not agree with my hon. Friend the Member for Basildon and Billericay (Mr Baron) about the advantages of WTO, and I will tell him why: if it was so good, Members who are backing the WTO option—a no-deal option—would not be so keen to get into negotiating free trade agreements so quickly with countries around the world. I do not know whether it was my hon. Friend, but one Member just now talked about trading with America and China, yet free trade agreements with America and China are touted all the time by those in favour of Brexit as agreements that need to be negotiated as quickly as possible.
The honest truth is that to make trade work around the world, all countries will seek to enter into agreements with countries they want to trade with in order to lift or to lower tariffs and non-tariff barriers. That is what we have done, very successfully, in our relationship with the European Union since we joined over 40 years ago.
Mr Baron
My right hon. Friend is being very gracious and I very much appreciate that.
Many of us in this place—I would like to think the majority of us—would prefer a good trade deal to WTO. That is not inconsistent, but I think what my right hon. Friend misses is that on a bad deal versus WTO we have got to get the balance right, because the EU has had such a bad track record on negotiating trade deals. We trade with the rest of the world on WTO terms very profitably and very successfully, even though many of us would prefer a good trade deal.
Nicky Morgan
Trade deals are immensely complicated. While Members know how I voted in 2016, I accept that this country will be leaving the European Union on 29 March—with regret, I have to say, but I do accept it—but one of the debates that we have not even started to have is how the House is going to approach the approval of trade deals. I can tell my hon. Friend that this is a real worry to those who are going to be negotiating those agreements. We saw with the Transatlantic Trade and Investment Partnership just how politically contentious that agreement was, even though it did not even reach the House as an agreement. We are going to spend the next few decades in the House negotiating and approving trade deals, which everybody, for various constituency reasons, will have problems with.
Sir Nicholas Soames (Mid Sussex) (Con)
My right hon. Friend is making an extremely powerful argument. Does she recall that the trade deal between America and Canada, which was a “willing buyer, willing seller” trade deal, took many, many years? The idea that this is some wonderfully easy, smooth, simple process is, frankly, rubbish.
Nicky Morgan
I have great respect for my right hon. Friend, and on this issue he speaks much good sense, as always. I hope that right hon. and hon. Members will listen to what he has to say. I am conscious of the time, so shall move on.
Over the past two years, we have heard it said in the House that no deal is better than a bad deal. I have to say that no deal is a terrible deal and it would be a gross dereliction of the responsibility of Members of this House to inflict no-deal on our constituents.
Nicky Morgan
I am afraid I am going to make some progress. My hon. Friend will be able to intervene on other Members.
Those who wanted Brexit talked often about the taking back of control. I have not had time to watch the film broadcast on Channel 4 last night, but I understand that that was a key part of it. As I have said before, it is right that control should come back to this Parliament, and it is right and it is time for Members of Parliament on all sides to make it clear to the Government that a no-deal Brexit outcome is absolutely unacceptable.
It will have been noticed that many of those who have put their names to amendment 7 are Chairs of Select Committees. The Treasury Committee took evidence in December—I am grateful to all Committee members, who have varying views on Brexit—and we produced a unanimous report. One thing that was made very clear is that, compared with today’s trading arrangements, and assuming no change to migration arrangements, our GDP would take a 7.7% hit on a modelled no-deal scenario. That is greater than the impact of the 2008 financial crisis. Members who have been in the House since 2010, and perhaps just before, will know the impact of the financial crisis on our constituents.
Finally, as a wise general said to me a few weeks ago, Britain is renowned for its confidence and competence. Currently, we are demonstrating neither. A no-deal Brexit will completely destroy any reputation we have for confidence and competence. The Government decided to put off the meaningful vote, although hopefully we will get it either this week or next. It is time for Members of Parliament on all sides to start ruling out options that would be deeply damaging to our country. That is what amendment 7 and 8 are about, and I will be delighted to support them both, should they be voted on.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
It is a pleasure to follow the right hon. Member for Loughborough (Nicky Morgan), because although we represent different parties and disagree on many issues, and although we will take different positions on the Prime Minister’s deal when it comes to a vote, on this issue we agree. I rise to speak to amendment 7 and to support amendment 8.
We agree on the dangers of no deal to the country. I tabled amendment 7 because I am really worried that delays, drift or brinkmanship mean that there is now a serious risk that we will end up crashing out of the EU with no deal in just 80 days’ time. I am worried that we could come to the crunch and Parliament would not have the powers to stop it happening. We have a responsibility not just to stand by. I believe that the Government should rule out no deal but, if they will not, Parliament must make sure that it has the powers to do so if it comes to the crunch.
Amendment 7 has support from across the House. It has been signed by Chairs of cross-party Committees—it has the support of the Chairs of the Treasury Committee, the Exiting the European Union Committee, the Liaison Committee and the Business, Energy and Industrial Strategy Committee and others, too—and it is supported by those with a wide range of views on the best way forward. It is supported by those who support the Prime Minister’s deal and those, like me, who do not, and it shows that those who take a wide range of views on the best way forward have come together to say that we should rule out the worst way forward.
Charlie Elphicke
Just to clarify, does the right hon. Lady herself intend to support or oppose the Prime Minister’s deal?
Yvette Cooper
As I just said, and as I said when I spoke in the debate before Christmas, I am opposed to the Prime Minister’s deal. It is a blindfold deal that does not address some of the policing and security challenges, as well as customs union issues for manufacturing. I accept, though, that we take different views on that throughout the House. There are very different perspectives and views, which is why the opportunity to come together and rule out no deal is such an important one.
Yvette Cooper
I will give way in a second. I am conscious of the time, so let me set out what the amendment would do and I will then of course give way to the hon. Gentleman.
The amendment applies to clause 89 of the Bill, which the Government say they need for minor amendments to tax-raising powers in the event of no deal. In practice, clause 89 is drafted much more widely than that, but that is the point that the Government have made. The amendment says that, if the Government want to use clause 89 powers to implement no deal, they first need to give Parliament a vote on no deal and to have Parliament’s support for no deal. The amendment provides a safeguard to make it harder for the Government to go ahead with no deal without even going back to Parliament.
Yvette Cooper
The amendment provides a parliamentary safeguard. It does not, in itself, solve any of the many Brexit issues that we have, but it does provide an additional parliamentary safeguard that says that the Government cannot use the powers in clause 89 to implement no deal without first coming back to Parliament to ask for permission and support for a no deal. The hon. Gentleman is right that there may be other powers that the Government may choose to use. There may be other issues that they may choose to pursue, but this is our opportunity within this Bill to address these powers. That is why it is an important one to come around.
I have heard four sets of objections to the amendment. Some say that it is irresponsible; that it is somehow holding the Government to ransom on powers that they need. Some say that it is undesirable and perhaps even unpatriotic because they think that no deal is a good outcome and should not be ruled out. Some say that it is unnecessary because the Prime Minister’s deal is the best way forward. Some suggest that it is unstrategic because we need the threat of no deal to force a decision one way or another. I want to take each of those objections in turn because each of them is wrong.
First, on the charge that this is an irresponsible amendment, the amendment does not affect the normal Treasury and Government operations; those carry on as normal. It simply requires the Government to get Parliament’s permission if they want to use these powers to pursue no deal. Even if there is deadlock, the amendment provides a way forward. Let us suppose that Parliament votes against any deal that is put and also votes against no deal, and the Government still desperately want to use the clause 89 powers. In that event, they could follow paragraph (b) of the amendment if they still want to use the powers they need to apply to extend article 50. So in fact, this is an extremely responsible amendment. The irresponsible thing to do would be just to stand back and hope for the best, or to stand back and allow the Government to drift towards no deal without any attempt to put the safeguards in place to prevent that from happening.
The second objection is from those who think that no deal is a good option, or at least a good enough option not to rule it out. That is reckless. The damage to manufacturing industry, on which many of our constituencies rely, would be too serious. One local factory has said to me that the cost of its imports will double in price if we go to WTO tariffs. Another has told me that its European parent company would be under pressure to switch production to continental factories to avoid delays. Burberry has hundreds of jobs in my constituency, making clothing that is sold all over the world. It has written to me about the risks and concerns about delays to its supply chain. Its letter says:
“My hope in writing to you is that you will work with your colleagues across Parliament to ensure that there is no scenario possible where a No-Deal Brexit is a possibility.”
That is what I am doing.
Rachel Reeves (Leeds West) (Lab)
I thank my right hon. Friend for for tabling this amendment, which is so important. The Business, Energy and Industrial Strategy Committee has taken evidence from a number of businesses in the past few weeks, including Nestlé, Toyota and Airbus. Each one of them, and many others too, have said that the most dangerous thing would be to leave the European Union without a deal, which would have catastrophic impacts on their businesses and on the people who work for them. For that reason alone, anything that we can do to avoid a hard Brexit and going on to WTO rules, as some Members suggest, is the most important thing. This amendment at least helps to provide some safeguards to stop that from happening.
Yvette Cooper
My hon. Friend is exactly right. This is about dealing with risk, delays and increased costs. There is the risk that border delays will hit tight cross-border supply chains, but the CBI also estimates that the impact of WTO tariffs will mean a £4 billion to £6 billion increase in costs on our exports. The Environment Secretary—the leave campaigner himself—has said that WTO tariffs on beef and sheepmeat will increase by over 40%.
Mr Baron
The right hon. Lady is being very generous in giving way, but may I encourage her to temper her dire warnings about WTO terms? There were many forecasts and predictions from business organisations, the Bank of England and the International Monetary Fund about the disastrous consequences if we voted to leave the EU in 2016, including predictions of 500,000 extra unemployed by Christmas 2016. Those predictions did not materialise because investment is about comparative advantage such as low taxes and more flexible labour market practices. That is what determines investment at the end of the day.
Yvette Cooper
I am not drawing on macroeconomic predictions about the overall impact on the economy, although I note that there are predictions of a 9% reduction compared with the level at which we might otherwise be. I am actually focusing on the microeconomic impact on individual businesses across the country of simply seeing those costs go up. That is a real impact of the tariffs. It is not about confidence, levels of investment and so on; it is about the real impact of those costs on consumers, manufacturers, exporters and importers that is the real consequence of WTO tariffs.
Ms Angela Eagle (Wallasey) (Lab)
I am sure my right hon. Friend has noticed that the Office for Budget Responsibility said in its report on the recent Budget that there has been a loss of 1.5% of GDP since the referendum, and that the uncertainty was likely to make that worse, at least in the medium term. This Parliament has a duty to ensure that we mitigate that as much as possible, which is why I will be supporting her amendment.
Yvette Cooper
My hon. Friend is right that we have a responsibility not to make life harder for our manufacturers, which face huge pressure and huge international competition. We also have a responsibility not to make life harder for our consumers, who could see significant increases in prices. The British Food Importers & Distributors Association warns that WTO rules could mean that food prices go up by over 20%.
Crispin Blunt
The hon. Member for Leeds West (Rachel Reeves) has just cited Nestlé, which is a Swiss company. The right hon. Lady will be aware that Britain and Switzerland, which is able to make arrangements for the future, negotiated an agreement on 14 December 2018 to be able to continue trade, even if there is no agreement between the UK and the EU. Once this House has rejected the withdrawal agreement, that is exactly where the European Union and the United Kingdom will be. We will need to make the best of the situation in which we find ourselves. That is precisely why both sides will, under article 24 of the general agreement on tariffs and trade, move towards a free trade agreement to ensure that we do not put tariffs in place at all after 29 March. That is where we should be and those are the realities that are going to descend once we are through the “Project Fear” phase.
Yvette Cooper
The same cheery optimism that the hon. Gentleman and others have expressed that everybody will suddenly magically come to an agreement once we are through this phase and if we are on WTO terms is exactly the same cheery optimism they had that we were going to end up with a deal by now—and we have not, because it is actually a lot tougher than hon. Members suggest. The reality is that we are going to have a big hike in prices in April if we have no deal, and that has consequences for our manufacturers, businesses and consumers right across the country.
Anna Soubry (Broxtowe) (Con)
I shall be supporting the right hon. Lady’s amendment. She talks about the manufacturing sector and I believe that there are a number of manufacturing jobs in her constituency. Has she heard any argument that falling back on WTO rules would ensure that those critical, just-in-time supply chains are able to continue, and does she agree that this issue is very important to the many millions of people across the country who rely on those just-in-time supply chains, because if we fall back on WTO rules, it is they who will be losing their jobs, not hon. Members?
Yvette Cooper
I completely agree with the right hon. Lady. What I am saying just comes from listening to employers in my constituency who have told me that they have bought all the storage capacity they can find in order to stockpile, but they cannot stockpile more than 10 days’ worth of some of their products, and they are really concerned about the impact of the delays on just-in-time technology.
John Redwood
Does the right hon. Lady agree, in wanting to promote stronger and better industry once we have left, that the Government should set zero tariffs on all imported components, which we would be free to do, which would make them cheaper from non-EU countries and preserve zero tariffs for EU components?
Yvette Cooper
It is not clear to me how that strengthens our negotiating position with countries all over the world that might then keep their tariffs extremely high on our goods. The whole point is that, if we crash out on WTO terms, it undermines our negotiating power. Whether one thinks that is about negotiating with the EU or negotiating with other countries, we are weakening our position abroad.
We also have the impact on the NHS, which is spending £10 million on fridges: it will have to put more money into this which could be put into patient care. The police have warned that we will be less safe. They and the Border Force would immediately lose access to crucial information that they check 500 million times a year to find wanted criminals, dangerous weapons, sex offenders and terror suspects. We will not be able to use European arrest warrants to catch wanted criminals who fled here having committed serious crimes abroad. We use those warrants 1,000 times a year to send people back to face justice in the countries where those crimes have been committed. If those 1,000 suspects commit more crimes here, MPs will need to explain to the victims why we took away the power from the police to arrest and extradite them by tumbling into no deal.
Mr Speaker
Order. I am listening to the right hon. Lady, as always, with great interest and enormous respect, but may I just very gently point out that we need to hear from other Members with amendments in the group and from the Minister? I am not certain how many more Members we need to hear, but my guesstimate is at least four, and we have 31 and a half minutes.
Yvette Cooper
Thank you, Mr Speaker. I apologise to anybody else who wants to intervene, but I will not take any further interventions and try to conclude my remarks.
Some of those who say they support no deal have said that it is unpatriotic to rule it out. I understand that there are strong emotions, but I hope we could be more respectful of each other than that, because I believe that it is patriotic to stand up for manufacturing, for families who may be on the breadline and face increases in food prices, for our NHS, and for British citizens abroad who could lose their rights.
The other objection that people have raised is that this is unnecessary because the Prime Minister’s deal is the one they want as the way forward. I simply disagree, but I think the reality is not about my view but the view in the House: there is not, at this stage, support for the Prime Minister’s deal, and I do not think there could be. We have to be able to respond to what happens next.
Finally, I have heard some say that they want the imminent threat of no deal to persuade people to back the Prime Minister’s deal, if not now, then later. But brinkmanship in Parliament is not the way to resolve this and get the best deal for the country. This is too serious for us to play a massive Brexit game of chicken. The country cannot afford to wait to see who blinks first.
I hope that Ministers, as may have been rumoured, will accept this amendment and accept the principle behind it. The Government should get agreement on a deal before 29 March, get explicit agreement on no deal before 29 March, or, if that fails, commit to seeking an extension of article 50, so that there is time to sort this out. The amendment does not solve the Brexit challenges that we have ahead and the many intense debates that we will no doubt have about the best way forward, but it gives us an opportunity to rule out the worst way forward and to do so in a way that is calm, measured and sensible. That is why I hope that amendment 7 will have support from across this House.
Several hon. Members rose—
Sir Oliver Letwin (West Dorset) (Con)
Thank you, Mr Speaker. I rise to support amendment 7, to which I am a signatory.
My right hon. Friend the Member for Mid Sussex (Sir Nicholas Soames), who is sitting next to me, and I have calculated that we have been in the House, collectively, for 56 years, and we have only ever, either of us, voted once against the Conservative Whip. This will be the second time that we will both be voting against the Conservative Whip, and I want to explain why. First, I want to say one thing about what this amendment is not. The right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) and my right hon. Friend the Member for Loughborough (Nicky Morgan) gave eloquent expositions, but what they did not mention is that, in contrast to some things that have been suggested, it has no impact whatsoever on the Government’s ability to prepare for Brexit—it is about what the Government do after Brexit.
Secondly, clause 89 is an item that those of us who have been Ministers for a number of years will recognise as an “abundance of caution” clause. Some group of lawyers somewhere stuck in the bureaucracy clearly alerted Ministers to the possibility that they did not have certain unspecified powers and said it would be a good idea to have some unspecified powers in case the lack of unspecified powers turned out to be important. I do not think therefore that this amendment, in itself, will be likely to have a huge impact, if any, on the Government of this country.
That brings me to the question of why I am supporting this amendment. The answer is that it is most extraordinarily important to make it clear to the Government that it is not just this amendment. It is the precedent that this amendment sets, which is that on any power taken in any Bill in relation to the exit of the UK from the EU, if there is a majority in the House today and there continues to be a majority against no deal, it will be possible to bring forward similar amendments. It is my proposal that we should indeed do that. I want to make it abundantly clear to those of my hon. Friends who are thinking of voting against the Prime Minister’s deal, which I shall be supporting, that the majority in this House, if it is expressed tonight, will sustain itself, and we will not allow a no-deal exit to occur at the end of March.
My last point is on why I am so passionate about not allowing such an exit. Many Members, including the Father of the House, have spoken eloquently about the long-term dangers to our economy of WTO trading and so on. My right hon. Friend the Member for Wokingham (John Redwood), for example, very much disagrees with that. I do not take a particular view about that. My preference is for a continued free trade deal with the EU, which is by far our largest trading partner, but in contrast to some, I do not want to argue that there would be a disaster in principle if we were on WTO terms. I do not believe it would be disastrous. I think it is suboptimal but not disastrous.
For five long years, I was in charge of the resilience of this country. During that period, I saw many examples of our civil service, military and security apparatus being prepared or not being prepared for certain issues that closely affected the wellbeing of our country. That is one reason why two years ago I passionately argued—my right hon. Friend the Member for Wokingham will recall an occasion a year ago when I made that argument even more forcefully—that the Government should undertake serious preparation for a no-deal exit. That would have had the effect that some of my hon. Friends mentioned. It would have altered our negotiating position. It was not done.
I have been in awesome detail through the papers produced. I have listened to the briefing for Privy Counsellors. I have consulted senior officials across Whitehall. I know what the RAG ratings of red, yellow and green mean—nothing. I know what it is actually to have prepared for dealing with the gas interconnectors, the electricity interconnectors and the many other details concerned.
Some of my hon. Friends and others in the country believe they can assure that under circumstances where we wreck the deal, refuse to make all the payments that the EU is expecting and falsify its expectations of a reasonable departure, the EU will then reasonably set out to work with us in a calm and grown-up way to ensure a smooth departure. It may be so. I am in no position to deny that it will be. I do not make lurid projections. Anybody who believes that they know it will be so is deluded.
I do not believe that we in this House can responsibly impose on our country a risk that may be severe or serious short-term disruption, for the sole purpose of gratifying the possibility that we avoid certain eventualities that certain Members of Parliament would prefer to see avoided and on which nobody in this country ever voted because they were never asked to vote on it. Under those circumstances, I will be voting with the right hon. Member for Normanton, Pontefract and Castleford against my own Government and very much against my own will, and I will continue to do so right up to the end of March, in the hope that we can put paid to this disastrous proposal.
Mr Speaker
The right hon. Gentleman’s succinctness is a textbook of how to help the House, and I hope it will now be closely studied.
Kirsty Blackman
In the interests of time, I will be very brief. I want to make it clear to the House that the SNP intends to push new clause 18 to a vote. I will briefly speak to some of the other new clauses and amendments that we have put forward. A couple of them relate to the expenditure implications of the UK now having to take charge of carbon and greenhouse gas taxes. They are about making sure that the Government are clear with the House about why they are spending this money and about the money they intend to spend before they do so. This is an additional cost that would be associated with the UK leaving the EU, which is a concern of ours. Obviously, we would not have to spend this money if we remained in the EU.
Nick Boles (Grantham and Stamford) (Con)
I will be very brief, not least because my right hon. Friends the Members for Loughborough (Nicky Morgan) and for West Dorset (Sir Oliver Letwin) have described much better than I ever could why I am going to support amendment 7, which I signed almost while it was hot off the presses before Christmas. The one point I want to address is the question that has been raised, and indeed the accusation that has been made, that in doing so I and other Conservative Members are breaking faith with our constituents and somehow breaking a manifesto commitment. I believe this to be utterly wrong, and also a rather disgraceful suggestion to make.
In the referendum campaign on our membership of the European Union, I supported and indeed voted remain. However, the argument of my colleagues who voted and campaigned for leave that I found most powerful and most emotionally impactful was that Parliament is sovereign and should take control of all the decisions that affect the lives of my constituents. That was the argument that the leave campaign made that I found the most difficult to resist and the most difficult to say was worth compromising for the sake of our membership of the European Union. It is therefore somewhat extraordinary that the very same people who made that argument so eloquently and effectively during the referendum campaign should somehow have the temerity to criticise me or other hon. and right hon. Members for doing what we believe is right in the interests of our constituents and in the national interest.
Mr Kenneth Clarke
I cannot think of a single leading Conservative Brexiteer who would have changed his opinions on membership of the EU in the slightest had the remain side won the referendum. They made it quite clear that they had no intention whatever of abandoning their long-held, quite sincere views, which they would have carried on arguing in this House and voting for. Does my hon. Friend share my view?
Nick Boles
The Father of the House is completely right. I have to say—I am sure the same is true of him—that I rather admire them for it. I admire my hon. Friend the Member for Stone (Sir William Cash) for making the same arguments passionately and with principle for 40 years—longer, practically, than many Members have been alive.
I want briefly to address the question of the Conservative manifesto commitment. I should point out that quite large chunks of the Conservative manifesto were junked by the Prime Minister during her own election campaign, so I do not know quite why we have elevated it to be a sort of Moses-style tablet. Nevertheless, it contained a sentence saying that we maintain that no deal is better than a bad deal. I agree, and I agreed then, in my hospital bed, when I agreed to stand as a candidate in the election, that that was the right position for the Government to take. As my right hon. Friend the Member for South Dorset (Sir Oliver Letwin)—West Dorset; apologies to the people of Dorset—explained, it was entirely right for the Government to want to prepare for no deal. Unfortunately, as he pointed out, they failed to do so.
However, what we did not say in that manifesto is that no deal is better than any deal; we said no deal is better than a bad deal. I remind my hon. Friends that we have a deal; it is a deal that the 27 nations of the European Union have agreed, that the Prime Minister, who recently won a confidence motion in the Conservative party, and her Cabinet have endorsed and advocate, and that, at the last count, about 200 Conservative Members, including myself, intend to support when the vote is finally put. It is simply not possible to suggest that by saying that I will not countenance no deal, I am breaking that manifesto commitment. We do not have a bad deal; we may have a deal that you, individually, do not like —not you, Mr Speaker, but individual hon. and right hon. Members—but nobody can claim that we do not have a deal that it is reasonable for Conservative Members to support. It is therefore reasonable for us to say that, at this late stage, with the Government having prepared as woefully as they have for no deal, we will on no account countenance a no-deal Brexit.
Finally, I join my right hon. Friend the Member for West Dorset in very clearly saying this: I will vote on any motion, on any amendment, on any piece of legislation, proposed by whomsoever in this House to ensure that we leave the European Union on 29 March with a deal or not at all.
Several hon. Members rose—
Mr Speaker
Order. Just before I call the next Member, we must hear from the Minister, and the Opposition Front Bench should really have the chance, very briefly, to comment on its own lead new clause before we come to the vote.
Mr Chris Leslie (Nottingham East) (Lab/Co-op)
I will be brief, Mr Speaker. I will want to move amendment 8, which stands in my name and in those of many hon. Members on both sides of the House. In many ways, it complements amendment 7, which was tabled by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper).
Amendment 8 would institute a commencement motion for the powers that the Treasury is seeking. Clause 89 might have been wrapped up as fairly minor and inconsequential, but essentially the Government are asking for pretty whopping permission to start legislating for no-deal arrangements. At this stage in the game, I really do not think that right hon. and hon. Members should be delegating our powers entirely to Ministers in this way without question. I know it is difficult for the right hon. Member for West Dorset (Sir Oliver Letwin) to rebel for a second time, on amendment 7, but I would like to persuade him to do so for a third time on amendment 8. A commencement motion is an important adjunct so that we can give the House and hon. Members the chance to express how they wish Brexit to go forward—so that we have the opportunity to express our view. A commencement motion would allow hon. Members the chance to do just that.
As things stand—certainly if the Government’s Brexit proposal is negatived next week—there could be 21 days or perhaps another seven days before anything is voteable on in this place. My own view is that before we start delegating powers to Ministers on these issues, or indeed on others, we need to start saying that enough is enough. Hon. Members need a chance to help to guide the way forward. There are many different views on these particular issues—the hon. Member for Grantham and Stamford (Nick Boles) has his particular preference and I have mine—but we need to provide for ourselves the time and the space to express them. Amendment 8 would simply provide for a commencement motion.
I hope that the Minister will recognise there is a strong cross-party opinion that we need now to give voice to Parliament. We cannot just drift into a no-deal situation. Parliament does want to take back control. He should concede and accept the amendment now.
The Exchequer Secretary to the Treasury (Robert Jenrick)
I am grateful to all right hon. and hon. Members for the debate.
Delivering the deal negotiated with the EU remains the Government’s central priority. It is neither our preference nor our expectation that we will leave the EU without a deal. However, as a responsible Government, we must prepare for all scenarios. In the Budget, we furthered that commitment by confirming an additional £500 million of funding in 2019-20, taking the total Government investment on preparing for EU exit to over £4 billion. At the Budget, to help to ensure that the tax system can continue to function under any EU exit outcome, we announced a series of modest, sensible provisions, which included a power to make necessary minor technical amendments to UK tax legislation. It also allowed, as we have heard, for the Government to introduce a carbon emissions tax to replace the EU emissions trading system in the event of no deal. By including those measures in the Finance Bill, our foremost motivation is to provide certainty to taxpayers—the kind of certainty that one would expect from any responsible Government.
Let me turn to amendment 7, which was tabled by the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper). Prior to proceedings in the Committee of the whole House, which considered clause 89, I placed a list of changes envisioned under the clause in the House of Commons Library. Right hon. and hon. Members who have taken the trouble to review the list will see that they are indeed minor technical changes, and out of minor and technical changes, these are the most minor and technical. Since then, we have received no indication from any Member to the contrary. Clause 89 is simply prudent preparation to provide our taxpayers with the certainty they deserve.
As I made clear, the Government do not want or expect a no-deal scenario. That was why we negotiated the withdrawal agreement, which will see us leave the EU in a smooth and orderly way on 29 March and sets the framework of our future relationship. As we heard from my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) and my hon. Friend the Member for Grantham and Stamford (Nick Boles), the best way of avoiding a no-deal scenario, if that is of grave concern to Members, is to support the withdrawal agreement next week.
Dr Sarah Wollaston (Totnes) (Con)
Will the Minister clarify his last sentence? Is he saying that if the deal is voted down next week, it will become the Government’s stated objective to deliver no deal?
Robert Jenrick
The point I have just made is that the law of the land is that the UK will leave the European Union on 29 March, and nothing contained in amendment 7 will change that. As I will come on to say, the only difference that the amendment will implement is to make the UK somewhat less prepared for that eventuality. The purpose of clause 89 is to provide taxpayers and—
Sir Oliver Letwin
I am grateful to my hon. Friend, who is doing a valiant job—I do not envy him. Does he accept that although, as he says, the law at present is that we will leave on 29 March, the House of Commons, with the House of Lords and Her Majesty, has the ability to change that provision?
Robert Jenrick
The House of Commons has the right to make the law, but the law as it is today is that we will leave on 29 March. The point I am making is that, whatever the intentions of the right hon. Member for Normanton, Pontefract and Castleford and those who may wish to support amendment 7, all that will be achieved by supporting it is denying our citizens and taxpayers the degree of certainty that we wish to give them.
Robert Jenrick
I will give way one last time, but I have only a couple of minutes.
Mr Clarke
I, too, extend my sympathies to my hon. Friend, who drew the short straw of responding to the debate. He is trying very eloquently to minimise the significance of the whole thing, but of course he realises there are big issues behind this. Can he tell us what contingency arrangements the Treasury has made for the fiscal impact of leaving with no deal, and its likely impact on our trade, our manufacturing industry and so on? He must concede that the published figures for future deficits, debts and so on will be made utterly meaningless if we leave with no deal, and a fiscal crisis will occur. Is the Chancellor planning the emergency Budget he will probably require?
Robert Jenrick
My right hon. and learned Friend and constituency neighbour tempts me to go into areas that I should not, but the Chancellor has said that we will be prepared and that we have fiscal room available—that was what he stated in the Budget, as certified by the Office for Budget Responsibility. My right hon. and learned Friend appears to be making the case for prudent preparations in case of a no-deal scenario, which is all that clause 89 seeks to achieve.
Robert Jenrick
I will give way one last time to my hon. Friend—I apologise to the right hon. Lady, but I only have a couple of minutes.
David T. C. Davies
With all due respect to my hon. Friend’s Department, is it not the case that it published a series of figures about the economic disaster that was allegedly going to occur if we voted to leave the European Union, although none of that has happened, and that what we have here is an attempt to blackmail the Government into not going ahead with a decision that was taken after a majority of the population voted to leave the European Union?
Robert Jenrick
We are leaving the European Union. We wish to do so with a deal. The House will vote on the deal next week, but we must and will prepare for all scenarios.
Robert Jenrick
I give way to the right hon. Lady because, of course, amendment 7 is hers.
Yvette Cooper
Will the Minister confirm that he will still be able to use clause 89 powers if he either gives the House a chance to vote on no deal or, alternatively, takes the opportunity to apply for an extension of article 50?
Robert Jenrick
Clause 89 would give the Government the ability to provide certainty to taxpayers now. That is what we want to ensure. We do not want to inhibit the ability of HMRC and the Government to provide that critical certainty. Who would want to do that? Who would want to diminish certainty for taxpayers at this time? The right hon. Lady listed a number of businesses. Those businesses want certainty, and by supporting her amendment, we would diminish that certainty and our preparedness—admittedly only modestly—for a no-deal scenario.
We will not be deterred from making sensible preparations—the public expect us to do so—and using the Finance Bill to prevent or frustrate preparation for any eventuality is unwise and irresponsible. I therefore urge the House to reject all the amendments and new clauses tabled against clauses 89 and 90 so that we give our constituents and taxpayers across the country the degree of certainty they deserve.
Mr Speaker
Order. If the right hon. Gentleman feels able and willing to express his views in a minute, I will be delighted to hear him—I hope he will not be offended—but otherwise I will call the Opposition Front-Bench spokesperson.
Sir Vince Cable
Thank you for your indulgence, Mr Speaker. I just want to say a few words in support of amendments 7 and 8. They are Brexit-neutral, in the sense that they require the House to approve any change, but of course they relate primarily to no deal. The fiscal issues, as the right hon. Member for West Dorset (Sir Oliver Letwin) explained them, were arcane and rather gentle. I tabled a more brutal amendment that was not called.
In the 30 seconds left, I want to relate an incident from this morning, when I went to the ferry port at Portsmouth. It is very clear that the Government are totally and utterly unprepared for the chaotic impact that there will be on the road system, including access to the naval base, if a no-deal Brexit occurs. Despite repeated requests from the council and others, the Department for Transport and the Ministry of Defence are refusing to co-operate, and the police now say that the M3 motorway will have to be closed from Winchester to Basingstoke in order to provide a lorry park. Repeated efforts to get Ministers to respond have not been heeded. A meeting was held for 19 regional MPs last week, but only one attended, so I am taking on the job of representing a no-deal Brexit. It is a task I undertake with all the enthusiasm of an arsonist trying to put out a bushfire, but I will do it.
Jonathan Reynolds
This has been a significant and important debate. In fact, it is clear that the House desires a longer and broader debate—that point was well made by the Chair of the Treasury Committee. No deal is some people’s preferred outcome, and they are the same people who told us that doing a deal would be the easiest thing in history. They were wrong then and they are wrong now. I feel that the case against the unilateral use of these no-deal powers has been comprehensively made, and I urge all Members to vote for our amendments, because that is best for jobs, prosperity and the national interest.
The Minister of State, Department for Transport (Jesse Norman)
On a point of order, Mr Speaker. I understand that in the previous debate there was some unhappy and unfortunate talk about the potential for the M3 to be closed in connection with a lorry park. I want to put it on the record, from the Government’s perspective, that the Government have absolutely no intention whatever of closing the M3 in connection with a lorry park. Therefore, the record should stand corrected as from now.
Mr Speaker
I am very grateful to the hon. Gentleman for what he has said, which is on the record and will be widely observed.
Mr Marcus Jones (Nuneaton) (Con)
On a point of order, Mr Speaker. Several media outlets are quoting that I have signed a letter to the Prime Minister saying that I will vote against a no-deal Brexit. I would like to put it on the record that this is not correct. Can you advise me whether it is in order for a Member of this House to put another Member’s name to a letter when they have not given their consent to doing so? Given the febrile environment at the moment, can you make the point to the media that they should check their facts before they publish such information?
Mr Speaker
The hon. Gentleman arrogates to me almost superhuman powers if he thinks that I can advise the media upon the imperative of first checking facts before printing a story. I appreciate his confidence in me, but I fear that he has an assessment of my capabilities that is sadly unmatched by the reality. Nevertheless, he has put his point on the record, and doubtless he will circulate it more widely amongst the people of Nuneaton.
New Clause 2
Review of the effectiveness of entrepreneurs’ relief
“(1) Within twelve months of the passing of this Act, the Chancellor of the Exchequer must review the effectiveness of the changes made to entrepreneurs’ relief by Schedule 15, against the stated policy aims of that relief.
(2) A review under this section must consider—
(a) the overall number of entrepreneurs in the UK,
(b) the annual cost of entrepreneurs’ relief,
(c) the annual number of claimants per year,
(d) the average cost of relief paid per claim, and
(e) the impact on productivity in the UK economy.”—(Anneliese Dodds.)
This new clause would require the Chancellor of the Exchequer to review the effectiveness of the changes made to entrepreneurs’ relief by Schedule 15.
Brought up, and read the First time.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
New clause 9—Review of changes to entrepreneurs’ relief—
“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to entrepreneur’s relief by Schedule 15 to this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider—
(a) the effects of the provisions on business investment,
(b) the effects of the provisions on employment, and
(c) the effects of the provisions on productivity.
(3) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact on investment of the changes made to entrepreneurs’ relief which extend the minimum qualifying period from 12 months to 2 years.
New clause 10—Review of geographical effects of provisions of section 9—
“The Chancellor of the Exchequer must review the differential geographical effects of the changes made by section 9 and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This new clause would require a geographical impact assessment of income tax exemptions relating to private use of an emergency vehicle.
New clause 16—Personal allowance—
“The Chancellor of the Exchequer must, no later than 5 April 2019, lay before the House of Commons an analysis of the distributional and other effects of a personal allowance in 2019-20 of £12,750.”
This new clause would require a distributional analysis of increasing the personal allowance to £12,750.
New clause 17—Review of changes to capital allowances—
“(1) The Chancellor of the Exchequer must review the effect of the changes to capital allowances in sections 29 to 34 and Schedule 12 in each part of the United Kingdom and each region of England and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the changes on—
(a) business investment,
(b) employment, and
(c) productivity.
(3) The review must also estimate the effects on the changes if—
(a) the UK leaves the European Union without a negotiated withdrawal agreement
(b) the UK leaves the European Union following a negotiated withdrawal agreement, and remains in the single market and customs union, or
(c) the UK leaves the European Union following a negotiated withdrawal agreement, and does not remain in the single market and customs union.
(4) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact on investment, employment and productivity of the changes to capital allowance in the event of: Brexit with no deal; Brexit with single market and customs union membership; Brexit without single market and customs union membership.
New clause 24—Review of changes to capital allowances (No. 2)—
“(1) The Chancellor of the Exchequer must review the effects of the changes made by sections 29 and 30 of this Act within six months of the passing of this Act.
(2) A review under this section must include an assessment of—
(a) the cost to the Exchequer of these changes,
(b) changes to business behaviour that are likely to arise as result from these changes, including (but not limited to) levels of business investment in buildings, plant and machinery, and
(c) the impact of these changes on businesses in regions of England.
(3) A review under this section must compare these assessments, so far as practicable, with an assessment of the impact of replacing non-domestic rates in England with a tax on the value of commercial land.
(4) In this section, “regions of England” has the same meaning as that used by the Office of National Statistics.”
This new clause would require the Government to assess the effects on businesses and the public finances of new capital reliefs introduced by this Act and require the Government to compare these reliefs with replacing business rates with a tax on commercial land values.
Amendment 12, in clause 5, page 2, line 24, leave out subsection (4)
This amendment would delete provisions removing the legal link between the personal allowance and the national minimum wage.
Government amendment 2.
Amendment 34, in schedule 15, page 297, line 42, leave out “29 October 2018” and insert “6 April 2019”.
Amendment 34, along with Amendment 35, would remove the retrospective effect of the new qualifying conditions for entrepreneurs relief.
Government amendment 3.
Amendment 35, in schedule 15, page 298, line 10, at end insert—
“(6) In relation to disposals on or after 29 October 2018, the amendments made by this Schedule to the definition of “personal company” do not apply in relation to any day before 29 October 2018.”
See Amendment 34.
New clause 4—Review of late payment interest rates in respect of promoters of tax avoidance schemes—
“(1) The Chancellor of the Exchequer must review the viability of increasing any relevant interest rate charged by virtue of the specified provisions on the late payment of penalties for the promoters of tax avoidance schemes to 6.1% per annum and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) In this section, “the specified provisions” means—
(a) section 178 of FA 1989, and
(b) sections 101 to 103 of FA 2009.”
This new clause would require the Chancellor of the Exchequer to review the viability of increasing interest rates on the late payment of penalties for the promoters of tax avoidance schemes to 6.1%.
New clause 15—Report on consultation on certain provisions of this Act (No. 4)—
“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).
(2) Those provisions are—
(a) section 15 and Schedule 3,
(b) section 16 and Schedule 4,
(c) sections 19 and 20,
(d) section 22 and Schedule 7,
(e) section 23 and Schedule 8,
(f) sections 46 and 47,
(g) section 83.
(3) A report under this section must specify in respect of each provision listed in subsection (2)—
(a) whether a version of the provision was published in draft,
(b) if so, whether changes were made as a result of consultation on the draft, (c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”
This new clause would require a report on the consultation undertaken on certain provisions of the Bill – alongside New Clause 11, New Clause 13 and New Clause 14.
Government new clause 6—Intangible fixed assets: restrictions on goodwill and certain other assets.
New clause 8—Review of changes to Oil activities and petroleum revenue tax—
“(1) The Chancellor of the Exchequer must review the effect of the changes to Oil activities and petroleum revenue tax in sections 36 and 37 and Schedule 14 in Scotland and the United Kingdom as a whole and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the changes on—
(a) business investment,
(b) employment, and
(c) productivity.”
This new clause would require the Government to review and publish a report on the investment, employment and productivity impact of the Bill’s fiscal measures on the North Sea sector.
New clause 11—Report on consultation on certain provisions of this Act—
“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).
(2) Those provisions are—
(a) section 5,
(b) section 6,
(c) section 8,
(d) section 9,
(e) section 10,
(f) Schedule 15,
(g) section 39,
(h) section 40,
(i) section 41, and
(j) section 42.
(3) A report under this section must specify in respect of each provision listed in subsection (2)—
(a) whether a version of the provision was published in draft,
(b) if so, whether changes were made as a result of consultation on the draft, and
(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”
This new clause would require a report on the consultation undertaken on certain provisions of the Bill – alongside New Clause 13, New Clause 14 and New Clause 15.
New clause 14—Report on consultation on certain provisions of this Act (No. 3)—
“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).
(2) Those provisions are—
(a) section 61, and
(b) Schedule 18.
(3) A report under this section must specify in respect of each provision listed in subsection (2)—
(a) whether a version of the provision was published in draft,
(b) if so, whether changes were made as a result of consultation on the draft,
(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”
This new clause would require a report on the consultation undertaken on certain provisions of the Bill – alongside New Clause 11, New Clause 13 and New Clause 15.
New clause 23—Review of income tax revenue—
“(1) The Office for Budget Responsibility must review the revenue raised by income tax within six months of the passing of this Act.
(2) A review under this section must consider revenue raised by—
(a) the rates of income tax specified in sections 3 and 4, combined with
(b) the basic rate limit and personal allowance specified in section 5.
(3) A review under this section must also consider the effect on revenue of—
(a) raising each of the rates of income tax specified in sections 3 and 4 by one percentage point, and
(b) setting the basic rate limit for the tax years 2019-20 and 2020-21 at £33,850.
(4) A review under this section must also include a distributional analysis of the effect of introducing the policies specified in paragraphs (3)(a) and (3)(b).
(5) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.”
This new clause would require the OBR to estimate how much money would be raised by increasing all rates of income tax by 1p and freezing the higher rate threshold.
New clause 26—Review of changes made by sections 79 and 80—
“(1) The Chancellor of the Exchequer must review the effects of the changes made by sections 79 and 80 to TMA 1970, and lay a report on that review before the House of Commons not later than 30 March 2019.
(2) The review under this section must include a comparison of the time limit on proceedings for the recovery of lost tax that involves an offshore matter with other time limits on proceedings for the recovery of lost tax, including, but not limited to, those provided for by Schedules 11 and 12 to the Finance (No. 2) Act 2017.
(3) The review under this section must also consider the extent to which provisions equivalent to section 36A(7)(b) of TMA 1970 (relating to reasonable expectations) apply to the application of other time limits.”
This new clause would require the Treasury to review the effect of the changes made by sections 79 and 80 and compare them with other legislation relating to the recovery of lost tax including specifically the loan charge provisions of Schedules 11 and 12 to the Finance (No. 2) Act 2017.
Government new schedule 1—Intangible fixed assets: restrictions on goodwill and certain other assets.
Government amendments 4 to 6.
Amendment 22, in clause 53, page 34, line 14, at end insert—
“(5) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this section and lay a report of that review before the House of Commons within one year of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of the revised rates on cider and wine on public health.
Amendment 23, in clause 60, page 44, line 17, at end insert—
“(3) The Chancellor of the Exchequer must review the effects of a reduction in air passenger duty rates from 1 April 2020 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(4) A review under subsection (3) must in consider the effects of a reduction on—
(a) airlines,
(b) airport operators,
(c) other businesses, and
(d) passengers.”
This amendment would require the Chancellor of the Exchequer to review the effects of a reduction in air passenger duty.
Amendment 36, in clause 79, page 52, line 24, leave out “12 years” and insert “8 years”.
Amendments 36 to 45 would reduce the time limits HMRC have to make an assessment of income tax or capital gains tax (Clause 79) and inheritance tax (Clause 80) to eight years, rather than 12 years, where there is non-deliberate offshore tax non-compliance.
Amendment 37, page 52, line 27, at end insert—
“(2A) Where the loss of tax is brought about carelessly by the taxpayer, an assessment may be made at any time not more than 12 years after the end of the year of assessment to which the lost tax relates. This is subject to section 36(1A) above and any other provision of the Taxes Acts allowing a longer period.”
See Amendment 36.
Amendment 38, page 53, line 22, after “(2)” insert “or (2A)”.
See Amendment 36.
Amendment 39, page 53, line 28, at end insert—
“(7A) An assessment may also not be made under subsection (2) or (2A) if—
(a) before the time limit that would otherwise apply for making the assessment, information is made available to HMRC by the taxpayer on the basis of which HMRC could reasonably have been expected to become aware of the lost tax, and
(b) it was reasonable to expect the assessment to be made before that time limit.”
See Amendment 36.
Amendment 40, page 53, line 34, at end insert—
“(8A) Subsection (7A) will not apply in cases where the taxpayer is subsequently found to have failed to provide all relevant information available to HMRC, or to have provided misleading information.
(8B) For the purposes of subsection (7A), whether information has been made available to HMRC is to be determined in line with section 29(6) above.”
See Amendment 36.
Amendment 41, page 53, line 35, after “(2)” insert “or (2A)”.
See Amendment 36.
Amendment 25, page 54, line 1, leave out “2013-14” and insert “2019-20”.
This amendment, alongside Amendment 26, would mean that new section 36A of the Taxes Management Act 1970 did not apply retrospectively.
Amendment 26, page 54, line 5, leave out “2015-16” and insert “2019-20”.
This amendment, alongside Amendment 25, would mean that new section 36A of the Taxes Management Act 1970 did not apply retrospectively.
Amendment 42, in clause 80, page 54, line 19, leave out “12 years” and insert “8 years”.
See Amendment 36.
Amendment 43, page 54, line 20, at end insert—
“(2A) Where the loss of tax is brought about carelessly by a person liable for the tax (or a person acting on behalf of such a person), proceedings for the recovery of the lost tax may be brought at any time not more than 12 years after the later of the dates in section 240(2)(a) and (b).”
See Amendment 36.
Amendment 44, page 55, line 2, at end insert—
“(7A) Proceedings may also not be brought under this section if—
(a) before the last date on which the proceedings could otherwise be brought, information is made available to HMRC by a person liable for the tax (or a person acting on behalf of such a person) on the basis of which HMRC could reasonably have been expected to become aware of the lost tax, and
(b) it was reasonable to expect the proceedings to be brought before that date.”
See Amendment 36.
Amendment 45, page 55, line 8, at end insert—
“(8A) Subsection (7A) will not apply in cases where a person liable for the tax (or a person acting on behalf of such a person) is subsequently found to have failed to provide all relevant information available to HMRC, or to have provided misleading information.
(8B) For the purposes of subsection (7A), whether information has been made available to HMRC is to be determined in line with section 29(6) TMA 1970.”
See Amendment 36.
Amendment 27, in clause 82, page 58, line 9, leave out from “section” to “may” in line 10.
This amendment would provide for all regulations under the new power (EU double taxation directive) to be subject to the affirmative procedure.
Amendment 28, page 58, leave out lines 13 to 17.
See Amendment 27.
Amendment 18, in schedule 1, page 148, line 34, at end insert—
“21A The Chancellor of the Exchequer must review the expected revenue effects of the changes made to TCGA 1992 in this Schedule, along with an estimate of the difference between the amount of tax required to be paid to the Commissioners under those provisions and the amount paid, and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the changes made to capital gains tax in Schedule 1.
Amendment 17, in schedule 2, page 177, line 21, at end insert—
“Part 1A
Review of effects on public finances
17A The Chancellor of the Exchequer must review the expected revenue effects of the changes made to capital gains tax returns and payments on account in this in this Schedule, along with an estimate of the difference between the amount of tax required to be paid to the Commissioners under those provisions and the amount paid, and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the changes made to capital gains tax in Schedule 2.
Amendment 29, page 177, line 42, at end insert
“unless the amendment relates to a disposal of an asset or assets resulting in a capital loss between the completion date of the disposal in respect of which the return is made and the end of the tax year in which the disposal is made.
(2A) In that case, an amendment may be made to take into account any capital losses which have arisen after the completion date and within the same tax year.”
This amendment would allow UK residents to submit an amended residential property return where a capital loss on non-residential assets is incurred after the completion of the residential disposal and within the same tax year.
Amendment 19, in schedule 5, page 211, line 45, at end insert—
“Part 2A
Review of effects on public finances
34A (1) The Chancellor of the Exchequer must review the revenue effects of this Schedule and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) The review under sub-paragraph (1) must consider—
(a) the expected change in corporation tax paid attributable to the provisions in this Schedule, and
(b) an estimate of any change, attributable to the provisions in this Schedule, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.”
This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of Schedule 5.
Amendment 21, in schedule 6, page 221, line 26, at end insert—
“13 The Chancellor of the Exchequer must review the expected change to payments of Diverted Profits Tax and any associated changes to overall payments made to the Commissioners arising from the provisions of this Schedule, and lay a report of that review before the House of Commons within 6 months of the passing of this Act.’
This amendment would require the Chancellor of the Exchequer to review the effect on public finances of the diverted profits tax provisions in the Bill.
Anneliese Dodds
As my hon. Friends have set out a number of times already today, this is a Finance Bill that continues the Government’s previous programme of austerity for the many while the very best-off people are protected. This Conservative Government chose to tie the hands of this House with regard to amending the Bill, so there are very few means we can adopt to have an impact on any of these measures. None the less, new clauses 2 and 4 would require the Government to at least review their regressive policy approach. I realise that I need to compress my remarks, so I will speak briefly to each of those new clauses and then to new clause 26, which pushes in the same direction, and new schedule 1, which in many respects exemplifies this Government’s slipshod approach, particularly to tax policy making.
Anneliese Dodds
I do not believe I can, as I have been told that I have to proceed quickly.
For many years, the Government failed to take action, before clamping down purely on taxpayers and doing little to nothing to the enablers of this form of tax avoidance. I hope the Minister will be clear about this. He has talked about the promotion of defective schemes. When taxpayers are described as having done something illegal, which is what HMRC has said about the behaviour of those subject to the loan charge, why will the Government not say that those who promoted those schemes also promoted something illegal? They use this language about defective systems. I am sorry, but that is pusillanimous. Those who were unwittingly led into schemes that are now described as illegal must themselves be able to take action against those who wrongly advised them.
I hope that the Minister will look at that very carefully and accept the new clause. If he does not, I hope that he will accept my backstop, to coin a phrase, and have a meeting with me. I am glad he has intimated that he may be willing to do so to talk about how we can better help people who have ended up in a very difficult situation—some of them with their eyes wide open, but many of them not realising the impact of these schemes.
Nicky Morgan
I rise to speak briefly—I know time is short in this debate—about new clause 26. For the avoidance of doubt among those on the Treasury Bench, I will not be supporting the new clause, but, as Chair of the Treasury Committee, I want to put on the record some concerns about the loan charge on behalf of the many individuals who have contacted the Committee and of the Committee members who have expressed concerns about it. I hope that Ministers will listen and engage with MPs across the House on this issue.
The Committee has raised concerns about the loan charge in evidence sessions with my right hon. Friend the Chancellor, and with HMRC and the Chartered Institute of Taxation. As the hon. Member for Oxford East (Anneliese Dodds) said, it is right that people should pay their fair share of tax on their earnings, and we do not support anything that seeks to get around that. It is right that HMRC should act swiftly and firmly to close down such avoidance schemes.
However, tax law sets out time limits within which HMRC can open inquiries and make tax assessments. Normally, those time limits take account of whether a taxpayer has taken reasonable care to comply with their tax obligations, has been careless or has deliberately decided not to comply. They are seen as valuable taxpayer protections, giving a degree of certainty that takes appropriate account of taxpayer behaviour.
It is certainly concerning to me—I am not sure I can speak on behalf of the whole Committee, but I think it is fair to say that I speak on behalf of many of its members—that HMRC’s contractor loan settlement opportunity requires people who want to put their affairs straight to waive those protections, with the threat of the loan charge looming over them. It is not clear why it is necessary for that settlement opportunity to pressure people into paying tax for years that HMRC calls “not protected”—years where HMRC is out of time—even though it may have had the information it needed to open inquiries or raise assessments at the proper time.
Dame Cheryl Gillan (Chesham and Amersham) (Con)
I support the way in which my right hon. Friend is addressing new clause 26, on which I find myself in a similar position to her. Although we want people to pay the correct taxes, I have constituents who may face losing their homes over this, after entering into what they thought were perfectly legal and allowable arrangements. Does she agree that the Treasury must address that?
Nicky Morgan
I very much agree with my right hon. Friend. It will probably turn out that most of us have constituents who are affected in that way. There are some who perhaps did know what they were doing when they entered into these tax arrangements, and some who clearly did not. It is absolutely right that the correct tax is applied, but, equally, it cannot be right that people are facing serious situations that will undermine their financial security and also their mental health.
John Redwood
Is my right hon. Friend aware that not only did quite a few people take advice, but they notified the Revenue of what they were doing and no objections were made at the time?
Nicky Morgan
Yes, I absolutely agree with my right hon. Friend. That was raised in the Westminster Hall debate led by my fellow Committee member, my hon. Friend the Member for Wycombe (Mr Baker).
I say to the Minister that it is troubling to hear that tens of thousands of people who want to settle with HMRC before the 5 April deadline have yet to receive calculations from HMRC. It is impossible for them— I think it would be for most of us—to settle large bills within a matter of months if they do not know what they will be asked to pay, let alone if they cannot start to make arrangements for how to pay them. These individuals need to know how much they have to pay, and I ask Treasury Ministers to step in and make clear what will happen to those people if they do not hear from HMRC by 5 April.
I will leave that with Ministers. I hope they can tell that there are MPs on both sides of the House who are concerned about this. By working together, we can make sure that the right tax is paid, but also that people are treated fairly.
Kirsty Blackman
I am aware that we are fairly short of time, so I will not rerun many of the things I said in Committee—I am sure the Minister and those on the Opposition Front Bench will be delighted to hear that.
I want to highlight a few of the SNP amendments and new clauses in this group. We have a couple of new clauses asking once again whether the Government’s provisions will do what they intend. For example, we want them to review the changes to entrepreneurs’ relief. We also want them to look at the changes in relation to emergency vehicles, because we are particularly concerned about the potential rural impact. Those who have emergency vehicles in rural areas may have more cause to use them outside work time than people who use them in cities. We felt that that issue was not drawn out enough in Committee or in the information the Government provided previously.
New clause 17 is about Brexit analysis. It is important to note that, since the Brexit vote in June 2016, over $1 trillion has been pulled from UK equity funds, which is obviously a really large number. In any changes or preparations the Government carry out in relation to Brexit, therefore, they should note the impact on the economy, which, according to the Bank of England, has cost individual families £900 each so far, and there is also the impact on financial services, for example, which have historically been very strong in the UK.
New clauses 15, 11 and 14 again ask the Government to provide information through consultation reports. It is important that the Government tell us the consultation they did on the draft clauses they brought forward. On the ones they did not bring forward, why did they not do so?
On that point, I should mention that the Government have included a new schedule in this group. That is a relatively unusual thing for the Government to do at this stage, given that they could have included the schedule in the original Bill or brought it forward in Committee. Because the new schedule was not brought forward in the initial stages, the explanatory memorandum provided by the Government does not include details about it. It would have been helpful if it had been considered at an earlier stage or if the Members who sat through the Bill Committee had been notified that it was likely to come forward. Presumably, the Government knew about it before the Christmas recess, and it did not just appear out of the ether. That process could be improved.
The main thrust of my contribution in the short time I have remaining is about the removal of the link between the personal allowance and the minimum wage. I understand that the Government have removed it on the basis that the personal allowance has now reached £12,500 and that they therefore believe they do not need to keep the link. I understand why they are making that case, but if that link had been kept, with the Government required to do a review if the personal allowance threshold was set at less than £12,500, future Governments would have continued to be bound by it. That would have meant that the protection the Government felt was necessary for people on the lowest incomes would still be there in the future. I understand that the Government do not intend to reduce the personal allowance, but that protection could have been left in place without the law causing any problems. That is something I am concerned about.
It is particularly concerning when the living wage the Government have put in place is not a real living wage, but a pretend living wage. It also does not apply to anyone under 25, which is an issue the SNP has raised over and over again. Just because someone is 24 does not mean that their living costs are less than they would be if they were 26—they could have the same number of children and live in exactly the same accommodation. However, the Government believe that it is okay to pay them less just because they are under that age threshold. That is exacerbated by the fact that the minimum wage increases the Government have introduced this year increase by a higher percentage—not just a higher monetary value—the minimum wage received by those who are over 25. The gap is widening: those who are over 25 are getting a bigger increase in the minimum wage, while there is a smaller increase for the younger age groups. The Government need to take seriously the fact that they are saying apprentices are worth pennies, frankly, and that 16 and 17-year-olds are worth far less than people under the age of 25. We raised our concerns in Committee in relation to the removal of the number. I do not think it would have cost the Government anything to leave in the link to protect future generations.
Mrs Main
I wanted to have more time to be able to say what a great job the Government have been doing: a 43-year low for unemployment rates, 1,000 jobs a day created and bringing in the personal allowance upgrade even earlier. We do not have time to go through all that, but I believe that getting people into work and out of poverty is the way forward for many families.
The Government were absolutely right to target business rates as a way of helping the high street and small businesses, with a cut of 33% in rates for businesses with a rateable value of under £51,000. In areas like mine with high property values, however, it is not having the impact the Chancellor might have hoped. The new rate simply provides a cliff edge that penalises successful businesses in areas that are plagued by high property values. We must devise a system that helps small businesses and pubs to thrive, not just those with a low retail value. I recently met pub owners in my constituency who have been hit extremely hard by business rates. I have cut out an awful lot of my speech, but I am pleased to say that I have secured a Westminster Hall debate on this matter next Tuesday. I look forward to exploring the matter further with a Minister. Pubs in areas such as St Albans are seeing massive hikes in business rates, not the help that was intended.
Time is pressing, but I want to touch on new clause 26 tabled by the right hon. Member for Kingston and Surbiton (Sir Edward Davey). I have serious concerns about the retrospective nature of the tax being collected. Several of my constituents have raised cases with me and I am extremely concerned about how the process has been handled. Many make the case that this was not illegal tax evasion; they were advised to use the scheme as a way of keeping more of their own money. It is worth remembering that these people are not employees. They take on more risk, with no sick pay, maternity pay or other forms of support offered to an employee. I want to give a couple of personal examples, because I think that is key and we have so little time.
One of my constituents, who worked as an IT professional in the FinTech industries, is being pursued for £900,000 by HMRC for the loan charge. He is extremely worried—many are on the brink emotionally—and this has put him and his family under considerable stress. He had been advised that what he had done was lawful and he considered it to be so. He told me, worryingly, that he tried to settle the case with HMRC for about £700,000, but that that had been rejected. Many people who find themselves in tax difficulties manage to make negotiated settlements with HMRC. It appears that this particular group of people are being treated very unfairly and are being left in the very difficult situation of not knowing exactly how much they owe or how quickly they have to pay.
Colin Clark
Other colleagues will be aware that the oil industry had a lot of contractors who were using what effectively turned out to be disguised schemes. Does my hon. Friend agree that there is a duty on HMRC? We have heard today from another hon. Member that customers should not be unduly disadvantaged if they have not managed to settle their claim to date, because after 5 April it will be significantly more.
Mrs Main
Exactly. I have also been advised by a former constituent, who, despite no longer living in the UK, is being pursued by HMRC for thousands of pounds of unpaid tax. Another person was advised that this mechanism truly was lawful and it has come as a huge shock to his financial planning that he is left in this position.
There are reportedly over 1,000 people being pursued for unpaid tax. No one is disputing that people should pay tax that is due. The issue is the way it is being requested. People have been badly advised. They have never been able to check whether anything they were doing was illegal, because they were being advised that it was not illegal at the time. It is a loophole that has now been closed.
Luke Graham
My hon. Friend is making a very valid point. One of my constituents, an IT contractor, was advised by his own accountant. A review would be very helpful in ensuring that people receive proper advice, so that laws can be followed and taxes collected.
Mrs Main
My hon. Friend is exactly right. There are many versions of that story. I have constituents who say that HMRC was made aware of these arrangements but no objection was raised until many years later. That has to be fundamentally wrong. What more due diligence can anyone do?
I will conclude, because I know the right hon. Member for Kingston and Surbiton wishes to speak. The huge pressure and distress—even suicidal thoughts—that this measure has put in people’s minds is totally unacceptable. I say to the Minister: if we do nothing else tonight, can we accept new clause 26? There is a clear ambiguity in the law that applied at the time—perhaps clarity has been provided now. The fact that people cannot negotiate a reasonable settlement even though they acted in good faith at the time, and are being pursued to the point of the destruction of their careers, homes, family lives and marriages, is completely unacceptable. We clearly need a review, and I hope the Minister takes that on board and accepts new clause 26. If it is pressed to a vote, I shall vote for it.
Sir Edward Davey (Kingston and Surbiton) (LD)
I thank the hon. Member for St Albans (Mrs Main) for her passionate speech. I also thank the right hon. Member for Loughborough (Nicky Morgan), who chairs the Treasury Committee, and right hon. and hon. Members from across the House, who have campaigned as a Parliament against this measure and supported new clause 26. It is my wish to divide the House on the new clause if the Minister does not accept it.
Let me make it crystal clear from the start that I support the Treasury’s aim of closing tax loopholes and stopping tax avoidance. The introduction of loan charges in the Finance Act 2017 to stop future abuse was correct, and the review my new clause proposes would not seek to prevent the Treasury from stopping that abuse from the 2016 Budget announcement. Instead—somewhat inelegantly, due to the rules of Finance Bill debate—new clause 26 aims to focus the minds of Treasury Ministers on the gross unfairness of the way the 2017 Act went about closing an unacceptable tax loophole.
I believe that the review envisaged in the new clause would reveal the unfairness of the retrospective nature of the current loan charge legislation in two ways. First, it would show how that retrospective nature is even more severe than non-retrospective but backward-looking proceedings for the recovery of lost tax elsewhere in our tax legislation. Secondly, it would show that the test of reasonableness included in proposed new section 36A, if applied to the loan charge, would in fact prevent any retrospective tax collection from the loan charge.
Let me remind the House why the Treasury should, after the review, ditch the retrospective nature of this measure, delay April’s implementation and amend the charge so it focuses only on payments made after 2016. It is because the loan charge, as introduced, offends against the rule of law. It is the sort of taxation that led the barons to rebel against King John and gave birth to Magna Carta. It is simply not acceptable for a Government to introduce a law that makes illegal something someone did years ago, when that action was considered legal. That is a clear principle.
Ruth Cadbury (Brentford and Isleworth) (Lab)
I thank the right hon. Gentleman for giving way— I realise time is short—and for tabling new clause 26, which I, too, support. Does he agree that it is unreasonable for people to be expected to have kept records going back 20 years when they were reassured at the time that the scheme was legitimate?
Sir Edward Davey
The hon. Lady is absolutely right, and I thank her for her support. Let us remember that these people—our constituents—were given professional tax advice and behaved in a way they thought was right and lawful at the time.
Tommy Sheppard (Edinburgh East) (SNP)
I fully support the right hon. Gentleman’s comments and will vote for new clause 26 if it is pressed to a Division. I wonder whether he will reflect briefly on my concern that some people who support the Government’s position have implied that, in seeking justice and fairness for our constituents, we in some way condone tax avoidance. In fact, the opposite is the case—we say that there should not be tax avoidance or evasion. The real culprits in this are not the individuals who were conned and duped by professionals into taking out these schemes and now face bankruptcy, but the firms that designed and sold them the schemes in the first place, some of which are still operating.
Sir Edward Davey
The hon. Gentleman is right on all the points he makes. When my hon. Friend the Member for Eastbourne (Stephen Lloyd) tabled the early-day motion that got cross-party support when this campaign was getting going, those were exactly the points he made. We all condemn tax avoidance and support the Treasury, but this retrospective approach to taxation is simply unacceptable.
Crispin Blunt
I congratulate hon. Members and hon. Friends on their speeches and wholly agree with them. It is grossly unfair that one of my constituents, a contractor between 2004 and 2006, is expected to repay tax from this period. It goes against the whole principle of fairness and surely would not survive any challenge in the European Court of Human Rights.
Sir Edward Davey
Indeed. HMRC knew about these tax schemes for years and took no action. They were widely used—as we have heard, right hon. and hon. Members from around the House have constituents affected—and widely advertised and yet were ignored by the tax authorities. People could only take some public sector positions if they agreed to be paid via these schemes, and it emerged ahead of the Westminster Hall debate that even some HMRC contractors were paid through such a scheme.
Wes Streeting (Ilford North) (Lab)
I am grateful to the right hon. Gentleman for tabling the new clause. I found HMRC’s answers to the Treasury Committee wholly unsatisfactory. There remain serious questions to be asked of the promoters of these schemes, of the employers, including public sector employers, who promoted them to contractors, and also of HMRC. If people were given tax advice and followed it, and if HMRC was aware of these schemes but did not take action in any previous tax year, how on earth could any reasonable person have concluded that they were doing anything wrong?
Sir Edward Davey
I totally agree, and I am grateful for the hon. Gentleman’s intervention.
Sir William Cash
It is not often that I agree with the right hon. Gentleman, as he knows, but I strongly agree with him on this issue. Retrospective legislation is bad in principle. This is an unjust provision, unreasonable and unfair, and I urge the Government to take note of the arguments put forward.
Sir Edward Davey
Having taken that wonderful intervention, I bring it to the House’s attention that the hon. Member for Wellingborough (Mr Bone) has signed my new clause. It is bringing the House together at a time when elsewhere it is divided.
I end on what this loan charge and its retrospective nature have meant for our constituents. It has caused misery. It has affected people’s lives, their health, their families. It has caused gross misery. Some people believe they will have to go bankrupt if they are forced to pay, or that they might lose their homes, and that is why the House is united against this retrospective action. I really hope that the Minister will get to his feet, accept the new clause, go ahead with the review and bring it back before the end of the tax year, so that the House can see it and vote on it.
Bambos Charalambous (Enfield, Southgate) (Lab)
I rise to speak in support of new clause 2. I was staggered to learn that entrepreneurs’ relief costs the Treasury an estimated £2.7 billion, and this to allow people selling companies worth up to £10 million to keep half the money they would otherwise pay in capital gains tax.
I was even more surprised to learn that this tax relief was concentrated among a few very wealthy individuals, with 6,000 people making gains of over £1 million and averaging £450,000 in tax relief each. This relief is only benefiting the very wealthy and should be reviewed as to its effectiveness. If it is scrapped, the £2.7 billion could be used to fund schools buckling under the pressure of funding cuts and provide huge investment in special educational needs and children and adolescent mental health needs. It could also go some way to funding children’s services and social care in local authorities and policing.
This is not the only area where the Government are giving away money that could otherwise be put to better use. Under amendment 22, in the name of the hon. Member for Aberdeen North (Kirsty Blackman), the Government are being asked to review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979. The Alcohol Health Alliance has stated that the Government’s own figures show that alcohol duty cuts from 2013-14 have cost the Treasury £4 billion, which is the equivalent yearly cost of employing over 100,000 teachers. The figure is expected to rise to £9.1 billion by 2024. Considering the pressures on budgets as a result of austerity, that is not an insignificant amount.
The freeze on duty on beer, spirits and cider for 12 months from February 2019 is in effect a cut, as it is not keeping in line with inflation. Indeed, it has not done so for six of the last seven years. Cheap alcohol has a tremendous effect in causing damage to people’s health, the economy and wider society. Alcohol is the leading risk factor in respect of the deaths of people aged 15 to 49. In England alone, there are more than 1 million hospital admissions and 24,000 deaths related to alcohol every year. That is a clearly an impact that the Government need to consider when they set duties on beer, spirits and cider. Cuts in alcohol duty have a double effect. They reduce revenue for the Treasury, which in turn reduces the amount of funding for the NHS, while simultaneously increasing demand and costs in the NHS by encouraging the consumption of cheap alcohol. I therefore ask the Government to review the impact of the alcohol duty freeze on public health.
Liz Twist (Blaydon) (Lab)
Does my hon. Friend agree that the stories we hear from our constituents suggest that some of them are not only afraid of losing their homes and livelihoods, but are actually having suicidal thoughts because of the pressure that is being put on them to pay the money?
Bambos Charalambous
That is an excellent point, which I was about to make myself. While the large accountancy firms have gone unpunished for creating tax avoidance schemes for big banks, those individual contractors are bearing the brunt of HMRC’s powers. I have been informed by the Loan Charge Action Group of suicides, bankruptcies and relationship breakdowns as a result of the stress involved in their dealings with HMRC. The group has said that many of the people being pursued by HMRC unwittingly signed up to loan-based schemes, but the promoters of the tax avoidance vehicles have not been targeted.
I ask the Minister to reconsider these measures and to ensure that people are not punished when they should not be.
Mel Stride
Given the limited time that is available to me to summarise a debate that has covered a large number of amendments and new clauses, I shall confine my remarks principally to the issue that has been raised most frequently, which relates to new clause 26. The new clause requires the Government to lay before the House a report reviewing the effects of changes made by clauses 79 and 80 no later than 30 March 2019. While I should note that such a report will come too soon for the measures to have had a real effect, the Government of course remain committed to setting out the rationale for their policies as well as their impact, and in that spirit we will not oppose the new clause.
I do, however, echo many of the comments made by Members about what these schemes are truly about, which is gross aggressive tax avoidance. The way in which disguised remuneration typically works is that, instead of an employer’s paying an employee by way of a salary in the normal way, which attracts PAYE income tax and employees’ and employers national insurance, the payment is made as a loan. Typically, those so-called loans, which are not really loans at all—there is no intention of ever repaying them—are routed out via an offshore trust in a low or no-tax jurisdiction, and then routed back to the United Kingdom to be received by the end recipient. That is extremely unfair. It is unfair to our public services, because we have a duty as a Government to collect the tax that is due to fund them, and it is unfair to the vast majority of taxpayers who do the right thing, which is not to get involved in aggressive tax avoidance schemes in the first place and to pay their fair share of tax.
One issue that has been raised on a number of occasions is the question of whether HMRC’s loan charge arrangements are themselves retrospective. They are not retrospective because, critically—this is where I take issue with the right hon. Member for Kingston and Surbiton (Sir Edward Davey)—at the time when they were entered into they were defective. No matter how far we go back, the scheme typically—I have described the way it works—was defective. It did not work then, it does not work now and the tax is due.
These schemes have been taken through the courts on many occasions. A scheme used to the benefit of Rangers Football Club was taken to the Supreme Court—the highest court in the land—and was found to be defective.
Mel Stride
I will not, simply because I have two minutes and 30 seconds left and I want to cover some of the other issues raised this evening.
However, as I have said, the Government will accept this new clause. It is absolutely right that, when HMRC deals with the public, it has a strict duty of care, a duty of proportionality and a duty to be as sympathetic as it can be relevant to the circumstances of those with whom it is dealing. In my dealings with HMRC, I have made those points forcefully clear. As the right hon. Gentleman will know, HMRC has recently come forward to say that those earning £50,000 or less—which is over twice the average national salary of somebody working in our country—will automatically be granted, without requirement for additional paperwork, a minimum of five years’ time to pay as an arrangement to settle their affairs. Of course for those who come forward before April there is effectively in most cases no penalty as such; they will simply be required to pay that tax which was due in the past—and it was always due in the past—plus the interest that is rightly applied.
I have less than a minute left and want to say a little about amendment 12, tabled by the hon. Member for Aberdeen North (Kirsty Blackman), on the national minimum wage lock. She will know that, because we have increased the personal allowance now to £12,500 for every year of the forecast period, there will be no necessity for that lock to be in place. She makes the point that there could be a projection beyond that point. That will be a matter for a future Government of course and it is not for this Parliament to bind its successors.
I conclude on the suggested entrepreneurs’ relief review and new clause 2, which the hon. Member for Oxford East (Anneliese Dodds) spoke to. We had a review that was published in December 2017, which reported on this particular matter, and it showed that a third of those using entrepreneurs’ relief went on to reinvest in new businesses and half of those who were aware of entrepreneurs’ relief said that it significantly influenced their decision to enter into an entrepreneurial activity. It is an important element of the business tax landscape and we will of course, as we do with all taxes, keep that relief under review.
In the six seconds I have left, I urge that the House accepts the Government new clauses and, with the exception of new clause 26, rejects the Opposition amendments.
Madam Deputy Speaker (Dame Rosie Winterton)
I will now suspend the House for no more than five minutes in order to make a decision about certification. The Division bells will be rung two minutes before the House resumes. Following my certification, the Government will table the appropriate consent motion, copies of which will be made available in the Vote Office and will be distributed by Doorkeepers.
Madam Deputy Speaker (Dame Rosie Winterton)
I can now inform the House that I have completed certification of the Bill, as required by the Standing Order. I have confirmed the view expressed in the Speaker’s provisional certificate issued on 7 January. Copies of my final certificate will be made available in the Vote Office and on the parliamentary website.
Under Standing Order No. 83M, a consent motion is therefore required for the Bill to proceed. Copies of the motion are available in the Vote Office and on the parliamentary website, and have been made available to Members in the Chamber. Does a Minister intend to move the consent motion?
The Lord Commissioner of Her Majesty’s Treasury (Craig Whittaker)
indicated assent.
The House forthwith resolved itself into the Legislative Grand Committee (England, Wales and Northern Ireland) (Standing Order No. 83M).
[Dame Rosie Winterton in the Chair]
The Second Deputy Chairman of Ways and Means (Dame Rosie Winterton)
I remind hon. Members that, if there is a Division, only Members representing constituencies in England, Wales and Northern Ireland may vote on the consent motion. As the knife has fallen, there can be no debate. I call the Minister to move the motion.
Motion made, and Question put forthwith (Standing Order No. 83M(5)),
That the Committee consents to the following certified clause of the Finance (No. 3) Bill:
Clause certified under Standing Order No. 83L(2) (as modified in its application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland and being within devolved legislative competence
Clause 3 of the Bill, as amended in Committee and the Public Bill Committee and on Report.—(Mel Stride.)
Question agreed to.
The occupant of the Chair left the Chair to report the decision of the Committee (Standing Order No. 83M(6)).
The Deputy Speaker resumed the Chair; decision reported.
Third Reading
Mel Stride
I beg to move, That the Bill be now read the Third time.
Eight years ago, our country’s finances were in peril. For far too long, Labour had spent and borrowed more than our country could afford. The deficit was at a peacetime high and debt was spiralling out of control. [Interruption.] I would not keep repeating it if Labour Members had learned their lesson, but they clearly have not, so they need to be told. This Government came into office knowing that we had to rise to the challenge of working with the British people to bring expenditure back under control and to once again live within our means, and we have done just that, with the deficit now four fifths lower than it was when we came into office and debt beginning its first sustained fall in a generation.
But bringing down the deficit alone was not the limit of our endeavour. The manner in which we did so was equally important: reducing the deficit, yes, but remaining committed to funding our vital public services, giving tax cuts to millions of strivers right up and down the country, and building a tax system that rewards and incentivises business and growth—prudent but pro-business, and deeply invested in the idea that those who work hard should be rewarded. The results are clear to see: 3.3 million more people in work since 2010, unemployment at its lowest level since the 1970s, wages growing, and the rate of absolute poverty at a record low. This Bill continues that work.
At the heart of the Conservative ideal is the firm belief that people know how to spend their money better than Government do, and that those who work hard deserve to be rewarded. The best way for Government to serve that ideal is to cut taxes, especially for those on low and middle incomes—to get out of the pockets of the British people and let them decide what they do with the money that they have worked so hard to earn. When this Government came into office, the personal allowance was at £6,475 and the higher rate threshold was at £43,875. We were elected to raise those thresholds to £12,500 and £50,000 respectively. In this Bill, we deliver on that commitment not just in line with our manifesto but a full year early—at the earliest affordable opportunity. Those changes mean that, compared with 2015, we have cut taxes for 32 million people, with an additional 1.7 million people paying no tax at all, and nearly a million fewer people having to pay the higher rate of income tax. We are also making sure that the extra money in people’s pockets goes further. It is for that reason that we are freezing fuel duty, freezing air passenger duty on short-haul flights in real terms, and freezing the duty on beer, cider and spirits.
Also central to the mission of this Government is our steadfast support for business—our instinctive and deep-rooted understanding that it is never Government who generate the wealth and taxes that fund our vital public services, but the innovation and hard work of millions of people right up and down our country. The achievements of our businesses have been very significant, yet despite that, productivity has been subdued since the financial crisis, and business investment in our country, while strong, is lower than we would like it to be to make the most of the opportunities that lie ahead.
That is why in this Bill we are taking substantial action to boost private sector investment. We have introduced, at the request of the CBI, a new capital allowance for qualifying non-residential structures and buildings that will support business investment and improve the international competitiveness of the UK tax system. From 1 January, we are increasing the annual investment allowance to £1 million for two years, providing additional support for firms to invest and grow. Not least because of the relentless lobbying of my Conservative colleagues who represent constituencies in Scotland, we are legislating for a groundbreaking transferable tax history mechanism for late-life oil and gas fields.
A core pillar of this Government’s approach to taxation is a belief in fairness—that everyone should pay what they owe when they owe it. This Government have an outstanding record in this area. We have protected more than £200 billion in revenue that would otherwise have gone unpaid since 2010, and we have introduced more than 100 avoidance and evasion measures since that time.
In this Bill, we continue that work, taking action against multinationals that keep their intangible property in low-tax jurisdictions in order to avoid UK tax; tackling profit fragmentation, whereby companies reduce their tax burden by artificially shifting their revenue; and cracking down on multinationals that attempt to erode the tax base—a tax system where enterprise is rewarded but everyone pays their fair share and our public services get the funding that they need.
I have been proud to take this Bill through the House. It provides a tax cut for 32 million people. It backs British businesses, introducing with measures to boost private sector investment and support jobs and growth, to ensure that our country is the country in which enterprise can thrive. I understand that the Labour party does not agree with every aspect of the Bill but will not divide the House on Third Reading, which is positive. Those on the Government Benches support tax cuts for millions of hard-working people. We support business growth and investment. We support job creation, and we are the side of the House to ensure that taxes are fair and paid. I commend the Bill to the House.
Anneliese Dodds
This has been a Finance Bill of highs and lows. One high was the Government finally listening, albeit only when they were pushed to do so by the prospect of losing a vote, as we have just seen in relation to the loan charge. Another high was the fact that we saw the House seize the initiative to act to protect our country from the negative consequences of a no-deal Brexit for our economy and for our safety and resilience, as set out by the right hon. Member for West Dorset (Sir Oliver Letwin) in what I thought was an extraordinary speech.
I understand that the vote a couple of hours ago on the amendment tabled by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) was the first time that a Government have been defeated at this late stage of a Finance Bill since the summer of 1978. At that stage I was only four months old, so I cannot exactly say that this is the only time I have seen a Government defeat on a Finance Bill in my lifetime, but I suspect it was the first time for many other Members. It was an appropriate defeat, because it shows that this House has adopted responsibility when our Government have sadly been unwilling to do so.
All this has happened in a context where Government have systematically attempted to reduce the opportunities for this House to influence the Finance Bill. Conservative Ministers’ decisions over recent years to prevent the House from substantively amending Finance Bills have been unprecedented. They have become a new norm and reflect the lack of confidence that this Government have in arguing their convictions. Surely that, above all, is the case with the Government’s approach in this Finance Bill, which preserves austerity for the many while the very best-off people and profitable corporations continue to benefit, our productivity gap yawns, regional inequalities widen and we see the creation of unprecedented phenomena in this country, such as the fact that getting into work is no longer the ticket out of poverty that it once was.
We have seen this Government’s unwillingness even to gather the figures and evidence about how their measures will affect child poverty or public health, in a context where life expectancy is for the first time going down in some of our communities. We have seen them bowing to lobbying pressure and introducing loopholes to protect many overseas investors from measures intended to level the playing field between them and domestic investors. Finally, we have seen the extraordinary contortion of a new schedule being inserted into the Bill just before Christmas to introduce a new tax relief for profitable corporations, not only very late in the day but without any information whatsoever about the cost that it will pose to the public purse. Indeed, we will not get that information before the measure is implemented.
The Government are spendthrift when it comes to profitable companies and the very best off, but miserly when it comes to the worst off. I see those on the Government Front Bench adopting a rather pantomime-style response to that. I am sorry to say that the overall package in this Finance Bill supports that contention, as do the figures, if only we could have them in front of us now.
Despite the considerable problems with this Bill, given the fact that it now contains provisions that militate against a no-deal scenario—surely the most significant risk currently to our economy and indeed to our security—we cannot and will not oppose it. I want to end by thanking all the civil servants and indeed staff of this House who have worked so hard on this Bill, and who have helped us in the Opposition—[Interruption.] I see that the Minister wants to thank them, too. I also want to thank all my hon. Friends who have contributed to our debates on this Bill.
Kirsty Blackman
It is great to have the chance to speak on the Third Reading of my fifth Finance Bill. Given my relatively short time in the House, that shows just how many Finance Bills we have had.
There is much this Government do that I would criticise, but I will start with three things that I am pleased are in this Finance Bill. The first, which the Minister mentioned, is the transferrable tax history. To be clear, I was calling for that when there was only one Scottish Conservative Member of Parliament in this place. Actually, I think there has been cross-party work on the transferrable tax history. I think the Government have worked well with industry in bringing it forward, and I am pleased that they have done so. I am really pleased that it is in the Bill, and I think it will make a big difference to the North sea in particular, given the fact that we can extract oil and gas from the North sea for a longer period as a result of the changes made. The jobs associated with that will be secured, which is particularly important for my constituents and those in constituencies around the north-east of Scotland, so I am pleased it is in the Bill.
I am also pleased that clauses 92 and 93 are in the Bill. Clause 92 was accepted by the Government in relation to tax avoidance. It was tabled by the SNP, and it requires a review of the effects of the provisions in reducing tax avoidance and evasion. The Government will have to bring forward this review within six months of the passing of the Act, and we look forward to them doing so. The Government chose to accept two of our amendments, neither of which I was involved in the debates on, so I am a little bit disappointed about that. My hon. Friend the Member for Glasgow Central (Alison Thewliss) led on this part of the debate, and my congratulations go to her on getting this through.
Clause 93 was also accepted as an SNP amendment. It was the result of the excellent work of my hon. Friend the Member for Inverclyde (Ronnie Cowan) on fixed odds betting terminals and the general work he has been doing on the public health impacts of gambling. Earlier, I made the point that we sometimes put in tax measures to discourage behaviour that we do not want to happen—for example, a harmful behaviour. I am really pleased that the Government will, as a result of the SNP’s pressure, bring forward a review of the public health impacts of gambling and the changes made. When the Government are taking decisions about gambling and gaming duties, they should always be thinking about the public health impacts and have them front and centre of any explanatory memorandum for future Finance Bills.
I am not going to be overwhelmingly positive; I have some negatives as well. The process for this year’s Finance Bill has been particularly—[Interruption.] Shambolic, yes. It has been particularly shambolic and inadequate, because the Government have failed to consult on as many of the measures as they should have done. They did not put them forward in draft format, so companies and organisations were not able to make known their concerns or suggest ways in which the Bill could be changed to make it better. I fear that that is not good for scrutiny. Changes were introduced in this Finance Bill to correct errors made in previous Finance Bills or to strengthen provisions that were inadequate in previous Finance Bills. Again, I am concerned that, because of the process this year, we will see more of that in future years.
The other thing that is particularly poor in this Finance Bill—this is a real contrast with the decisions made in Scotland—are the tax changes. Tax changes that have been made on things that are devolved to Scotland, which I none the less feel able to criticise, are not the ones that I feel should have been made, because they are not made from the progressive point of view that we would like. The tax changes we are making in Scotland are on a much more progressive basis, and the Government would do well to look at what we are doing in Scotland. In England, about half of taxpayers pay more than they would if they were in Scotland, and those taxpayers are the ones at the lower end of the income spectrum. They are the people we think we should be supporting, rather than the people at the top end of the income spectrum.
I have just a last couple of points. Better scrutiny of the process is always required. I have called repeatedly for the Finance Bill to be subject to evidence sessions in Committee, and I will continue to make that call of the Government until they capitulate, because Finance Bill Committees should hear evidence. The other half of this—the spend process—has been improved very slightly, but it has not been improved nearly enough, and we need better and more adequate scrutiny of Government spend before it happens, rather than just doing it through the estimates process.
Lastly, I would like to take this opportunity to thank my hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black), who was with me in Committee, as well as two members of staff, Jonathan Kiehlmann, who was involved in this, and Scott Taylor, without whose help I could not have gone through the Finance Bill Committee or the stages we are at now. I would like to offer my specific thanks to them.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Finance (No. 3) Bill
Wednesday 9th January 2019
(5 years, 10 months ago)
Lords ChamberRead Full debate Finance Act 2019 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 8 January 2019 - (8 Jan 2019)
Finance (No. 3) Bill
Thursday 7th February 2019
(5 years, 9 months ago)
Lords ChamberRead Full debate Finance Act 2019 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 8 January 2019 - (8 Jan 2019)
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I thank the Economic Affairs Finance Bill Sub-Committee for its close consideration of the draft version of the Bill before the House today and its subsequent reports on HMRC powers and making tax digital. The sub-committee’s findings made for very informative reading, and the Government have carefully studied each of the recommendations. On 22 January, the Financial Secretary to the Treasury wrote to the chairman, my noble friend Lord Forsyth, setting out a comprehensive response to these reports. My noble friend is disappointed that he is unable to attend this debate but he is ably represented by other members of the sub-committee, who we will have an opportunity to hear from. I am pleased to confirm to the House that the Government have accepted the majority of the sub-committee’s recommendations in whole or in part.
Before I turn to the main measures enacted in the Bill, I shall briefly set out the broader economic and fiscal context. In October, the Chancellor delivered a Budget which reflected the Government’s commitment to build a stronger, fairer and more resilient economy. The economy has grown every year for the past eight years, and it is expected to continue to grow every year of the OBR’s forecast. There are 3.4 million more people in work since 2010 and employment is at a record high of 32.5 million. We have higher employment and lower unemployment in every region and every nation of the United Kingdom. Since 2010, almost 75% of the fall in unemployment has been outside London and the south-east, with the biggest fall in Scotland. Real regular wages have risen for eight consecutive months, and wages are now growing at their fastest pace in over a decade, putting more money into the pockets of hard-working families, supported by the national living wage.
We understand that the only sustainable way to improve real wages and living standards is through boosting long-term productivity. At the Budget, the Chancellor set out a number of measures to support that ambition, including, as I will come to, a new structures and buildings allowance which will be enacted in this Bill. The Government’s commitment to restoring the health of public finances is stated and we have now reached a turning point. The deficit has been reduced by four-fifths from its post-crisis peak and debt has begun its first sustained fall in a generation. Borrowing and debt are both lower in every year of the forecast than they were in the spring and, at the Budget, the OBR forecast that the Government met both their interim fiscal targets in 2017-18, three years early. However, debt remains too high. It is around £65,000 for each household, so it is important that we continue to take our balanced approach to fiscal policy, which has enabled debt to fall while supporting public services, keeping taxes low and investing in Britain’s future.
At the heart of the Government’s economic and fiscal policy is a desire to improve living standards for ordinary people. That is why we have taken concrete steps to help hard-working taxpayers by allowing them to keep more of their own money. At the Budget, the Chancellor announced that the Government would deliver on their manifesto commitment to increase the personal allowance and higher rate tax threshold a year ahead of schedule. The Bill enacts that change, introducing a tax cut for 32 million people and increasing the personal allowance and higher rate threshold to £12,500 and £50,000 respectively. This means that a typical basic-rate taxpayer will pay £130 less in income tax in 2019-20 than during this tax year.
The Government also announced that the living wage will increase by 4.9% from this April. The Bill takes further steps to keep living costs down for hard-working people by freezing fuel duty for the ninth year in a row, and by delivering a freeze on the duty on beer and spirits and a real-terms freeze on air passenger duty for short-haul flights.
The Government continue to champion home ownership and are committed to making housing more affordable for first-time buyers through direct spending and changes to the tax system. In the previous Finance Bill, the Government legislated for a first-time buyers’ relief on stamp duty. This has already been used to help first-time homeowners in more than 120,000 transactions. In this Bill, we will help take this a step further by expanding that relief to first-time buyers who enter a shared ownership arrangement, and will backdate this relief to benefit those who entered into their purchase on or before the date of the Budget.
The Bill also enacts new measures to encourage business investment and ensure that the UK maintains its status as one of the best places in the world to start a business. The Government have consistently backed business, including by cutting corporation tax to 17% in 2020. The Bill builds on that foundation, continuing to support businesses by introducing key allowances to important tax reliefs. The new structures and buildings allowance, which came into effect from Budget Day, will provide a vital tax break for those businesses investing in new commercial property. The annual investment allowance will be increased from £200,000 to £1 million for the next two years, ensuring that companies have an additional incentive to invest. Businesses will also benefit from a new good will relief in the intangible fixed assets regime.
The Bill also introduces a new transferable tax history mechanism for late-life oil and gas fields. This will support businesses, jobs and expertise in our vital deep-sea oil industry.
The Bill supports the Government’s commitment to a fair and sustainable tax system by introducing new measures to tackle tax avoidance and evasion. The Government have always been clear that taxes should be low, but they must be paid. This is what has been delivered. Since 2010, we have secured and protected over £200 billion by clamping down on tax avoidance and evasion, and have reduced the UK’s tax gap to less than 6%, which is one of the lowest in the world. The Bill continues that commitment to clamping down on avoidance, evasion and non-compliance. Specifically, it enacts provisions to ensure that non-residents pay tax on capital gains they make on UK commercial property and targets more contrived avoidance and evasion by clamping down on those who artificially lower their tax bill through profit fragmentation, whereby companies reduce their tax burden by artificially shifting their revenues around. The Bill also strengthens our diverted profits tax, which has already brought in and protected £700 million since 2015. These measures and others like them demonstrate the Government’s enduring commitment to ensuring that tax is paid, protecting essential revenue for our vital public services.
This Government have made real progress since 2010 in building a stronger and more resilient economy, but we recognise that there is still more to do. We remain committed to supporting our businesses, boosting productivity, reducing living costs for hard-working people and ensuring that tax is paid where it is due. The Bill supports the Government in these ambitions. I commend it to the House and I beg to move.
Lord Tunnicliffe (Lab)
My Lords, our discussion on this Finance Bill takes place at one of the most interesting—we must not lose sight of the fact that that is a Chinese curse—and unpredictable times in British politics in living memory. During our debate on the state of the economy late last year, the noble Lord, Lord Higgins, noted that he had spoken on 60 Budgets. He observed that the Statement from which the Bill derived took place in the most uncertain economic situation of them all. If he thought that things were uncertain three months ago, I am not sure how he would describe the current situation.
We have a Government in paralysis, having been consumed by Brexit. This has been apparent on legislation for some time, but it is unusual to see that paralysis extend to a Finance Bill. Indeed, having lost a Minister after the Culture Secretary overruled her policy on maximum stakes for fixed-odds betting terminals, the Chancellor was forced to perform another of his Budget U-turns. Having alienated Back-Benchers and partners in the DUP, Government Whips accepted multiple opposition amendments rather than risk losing votes at a critical point in the Brexit process. Having failed to rule out a chaotic no-deal Brexit, the Government were defeated on a Finance Bill measure for the first time since 1978. As the Times journalist Matt Chorley likes to remind us, this is not normal.
There are plenty of other reasons why these are not normal times. The Government opted to use a rare parliamentary procedure—used just six times in the past century—to restrict the right of MPs to table amendments on Budget announcements that are not covered by specific tax changes. As my Commons counterpart, Peter Dowd, commented at Second Reading, the Government’s timetable for the Bill required amendments to be tabled before the legislation had even been published. Printed copies of the Explanatory Notes were provided to MPs only on the day of the debate. Several MPs called this an abuse of power. I am sure noble Lords will agree that this is not how financial matters should be handled. Thankfully, we have had more time to consider the Bill’s contents and to reflect on its passage through the other place.
Before I turn to the tax measures in the Bill, I want to say a quick word about the broader approaches of both this Government and your Lordships’ House when it comes to legislation. Over the past year, your Lordships’ House has spent many hours discussing the Government’s attempts to hoard hitherto unseen delegated powers in order to deliver Brexit. This Bill, like almost every other we have considered during the current Session, seeks to take vague and far-reaching powers to amend laws—this time, in the event of a no-deal Brexit.
The Government’s approach has been labelled an unprecedented transfer of powers to the Executive, but to take wide-ranging powers to amend taxation without proper representation truly is without parallel. We are therefore pleased that the amendment in the name of Yvette Cooper was passed at Commons Report stage. While it does not rule out a no-deal Brexit, it ensures that the Government have to seek parliamentary approval for such an outcome should they wish to utilise the Clause 90 powers. Importantly, the vote demonstrated that there is no Commons majority for falling off a cliff edge in seven weeks’ time.
During the past eight years, we have become accustomed to the Chancellor—whether Mr Osborne or Mr Hammond—extolling the virtues of prudence. But last October, the British people were assured that,
“their hard work is paying off, and the era of austerity is finally coming to an end”.—[Official Report, Commons, 29/10/18; col. 653.]
Despite these warm words, and an overdue injection of cash into the NHS, the autumn Budget marked no such turning point. As my noble friend Lord Davies of Oldham and other noble Lords observed in November, the 2018 autumn Budget can be more accurately described as Mr Hammond’s tearing up of his predecessor’s long-term economic plan.
The Office for Budget Responsibility noted that, having missed their original target for eliminating the deficit, the Government’s new aim of balancing the public finances by the mid-2020s,
“appears challenging from a variety of perspectives”.
Forecast GDP growth, while up on March 2018, is “modest by historical standards” and in any event, only the result of a Budget giveaway. It is worth reminding ourselves that the OBR forecasts were predicated on an orderly Brexit, something that is far from certain at the present time. Indeed, the Government’s own economic analysis suggests a no-deal Brexit would have a catastrophic impact on the UK economy. It is a course of action that no Chancellor should support.
While the Cabinet insists that austerity is over, departments continue to have their budgets squeezed. While it is true that there is a spending review to come, there is little prospect of that exercise pleasing dedicated public servants working in the prison service, local government, schools, social care, the police or the Armed Forces. Reforms to universal credit which return just one-third of the scheduled cuts will do little to improve the lives of benefit claimants. Britain deserves better.
Not only did the Budget fail to end austerity, it failed to crack down on tax avoidance and evasion too. Before elaborating, let me first thank the Economic Affairs Finance Bill Sub-Committee for its work on this Bill. The sub-committee published two helpful reports on the Government’s failures in relation to making tax digital for VAT and the need for HMRC to adopt a more sophisticated approach to those who choose not to pay their fair share of tax. This Bill is a series of half measures. It provides no evidence that Ministers will honour their commitment to introduce a full public register of beneficial owners ahead of the 2020 deadline. While the loan charge introduced in 2017 is a means of tackling certain tax avoidance schemes, HMRC has targeted individuals who joined such schemes in good faith rather than those who enabled their very existence. I therefore welcome the Government’s decision to accept a cross-party amendment to review the effects of changes made by Sections 80 and 81, including comparing them to the provisions in Schedules 11 and 12 to the Finance (No. 2) Act 2017.
This Finance Bill resulted from a Budget full of positive rhetoric but short on workable solutions. It does not take an observer long to conclude that the Government are so consumed by Brexit that they are unable to deal with other major issues of the day, such as tackling climate change and tax avoidance. The Bill therefore amounts to a missed opportunity. Nevertheless, the political situation in the Commons means that it has come to us in slightly better shape than anticipated. With opposition amendments inserted into the legislation, it is now for departments to undertake a series of important reviews. Ministers must listen to and implement their findings.
Lord Morrow (DUP)
My Lords, in the time available to me, I would like to address an amendment tabled by some 20 Members of Parliament on Report in the other place. The amendment asked the Chancellor to review the effective marginal tax rate placed on low-income families in the UK. The amendment was not selected or debated, but I hope that by raising it today I can give expression to a matter that the other place clearly wanted to address in relation to the Bill. In doing so, I note that this is a matter which has caught the attention of noble Lords from other parties who would have liked to be here today to speak to it.
The effective marginal tax rate is the amount of any additional pound that someone would earn on top of their current income that would go to the Exchequer in the forms of tax, national insurance and lost benefits. It is a key measure of aspiration. If you know that if you work harder you will keep most of the additional money that you earn, there is an incentive to do so and take your family to better things. If, however, you know that most of the additional money you earn will go to the Government, the incentive to earn your way to better things will be substantially eroded.
It is always good to run an economy in which hard work is incentivised. This, however, becomes an imperative when dealing with low-income working families. Of all people, these are the ones we want to aspire and know that hard work can deliver. Indeed, they are the very people to whom the Prime Minister pledged herself on the steps of Downing Street in July 2016. It is therefore of huge concern to me that it is this income group in particular that our current fiscal arrangements do more to deprive of aspiration than any other.
The CARE and Tax and the Family report, The Taxation of Families— International Comparisons 2017, which was published last year, and the Manifesto to Strengthen Families report, Making Work Pay for Low-Income Families, published by MPs this year, show that low-income families in receipt of tax credits face a marginal effective tax rate of some 73%. This means that the families in question get to keep just 27 pence from every additional pound earned, with 73 pence going to the Exchequer in the form of tax, national insurance and lost benefits. A low-income family in receipt of tax credits, housing benefit and council tax benefit meanwhile faces a staggering effective marginal rate of 96%, meaning that they get to keep just four pence in the pound, with 96 pence going to the Exchequer in tax, national insurance and lost benefits.
If we placed a higher rate of tax of 73%, or—perish the thought—of 96%, on the rich, there would very properly be a national outcry. This, however, is the effective marginal tax rate that we place on low-income families. Rather than empowering these working families to raise themselves up, we push them down and trap them in relative poverty. Of course, I appreciate that some regard has been given to this problem and that under universal credit the 96% rate will come down to 80%. However, I find no comfort in this at all. Eighty per cent is higher than anywhere else in the developed world, and the 73% rate actually increases to 75%.
At this point some might say, “Hang on, is the effective marginal rate not just the inevitable consequence of providing benefits? If you don’t like the effective marginal tax rate, the simplest solution would be to abolish benefits”. I am absolutely not advocating that.
While I acknowledge that if you give benefits you create a marginal rate as income rises and those benefits are withdrawn, the problem I seek to highlight today is that our effective marginal rates are much higher than those anywhere else in the developed world. If we use OECD data to compare the way in which all OECD countries treat a one-earner married couple with two children on 75% of the average wage, the marginal effective tax rate that they face in the UK—that 73%, the lowest of the above rates—is already the highest of any country anywhere in the developed world. The OECD average is just 33%. This poses a very important question that I would like to set before the Minister today. If other developed countries—all of which have effective benefits systems—can have an average effective marginal tax rate of 33%, rather than 73%, so can we. As Fiona Bruce, the Member of Parliament for Congleton, urged recently in another place, “So must we”.
Interestingly, the 73% figure is also very high in the history of the UK. In 1990, the effective marginal rate on such a family was just 34%, practically the same as the OECD average marginal effective tax rate on such families today. The Manifesto to Strengthen Families report concludes that our unusually high effective marginal tax rates are the result, first, of Mrs Thatcher’s failure to accept the proposal of the noble Lord, Lord Lawson, for fully transferable allowance for married couples, and then Gordon Brown’s decision to remove the additional person’s allowance and married couple’s allowance in 2000. The effect was that, from that point onwards, the income tax system made no provision for family responsibility and had to compensate for that by inflating benefits. It is the withdrawal of those inflated benefits, on top of an income tax rate that ignores family responsibility, that creates our confiscatory marginal rates as the inflated benefits are withdrawn.
One response to this problem would be for the Government to try to find more money to further reduce the universal credit taper rate. While that would be welcome, a recent Centre for Policy Studies report shows that for those earning above their personal allowance, it would reduce the effective marginal tax rate to only 66%. This would mean that low-income families would continue to lose more of every additional pound earned to the Exchequer than they would take home. While I would not oppose attempts by the Government to look for more money to reduce the taper rate, I submit that this strategy does not really address the presenting problem.
Rather than looking for new money to help these low-income working families, what is really required is to look at distributing the current money allocated to help those families in a different way, so that it comes partly through the tax system rather than wholly through the benefits system. This would create two mutually reinforcing downward movements on the effective marginal tax rate. First, the income tax element of the effective marginal tax rate would fall as a result of households with family responsibilities being taxed less. Secondly, the benefits element of the effective marginal tax rate would fall as a result of there no longer being a need to inflate benefits, because of the prior change in the tax rate on those families. This would mean that when benefits were withdrawn, they would not create the confiscatory effective marginal rates experienced at present.
This is the central conclusion of the Manifesto to Strengthen Families and the Make Work Pay report. It is a conclusion to which the Government must now give their urgent attention because, ironically, although the very highest effective marginal rates will fall slightly under universal credit, people will become more aware of our confiscatory marginal rates than they were under tax credits. Under tax credits, if someone works overtime this month or takes a second job, it will affect their tax credit entitlement only next year and will not be clearly identifiable with the increased income. By contrast, under universal credit, working more hours or taking another job will affect the amount of credit received next month. The link between working more and receiving less will therefore be much more immediate and apparent. This will make our marginal rate problem much more difficult to sustain.
I am very glad that, although this matter was not debated on Report in the other place, it was the subject of a 90-minute debate a week later. I am delighted that in responding to the debate, the Financial Secretary to the Treasury, Mel Stride, the Member of Parliament for Central Devon, said:
“I will respond directly to the overarching request made of me this morning, which is that I go back to the Treasury with the report and the comments made in this debate and look genuinely and deeply at the issues raised. I can give an unequivocal commitment to do precisely that”.—[Official Report, Commons, 16/1/19; col. 399WH.]
I put on record in this place that, although I should have preferred the amendment moved on Report on effective marginal tax rates to have been accepted, I very much welcome that commitment. Can the Minister advise the House on what stage that promised investigation has reached? If it has not yet been concluded, there are those in this House who are also eagerly awaiting the outcome of those reflections. This is a matter requiring the Government’s urgent attention.
Baroness Quin (Lab)
My Lords, I am pleased to take part in the debate, although it must be said that the wider context, described so well by my noble friend Lord Tunnicliffe, is dramatic and alarming.
Brexit hangs like a pall over everything, not least over this Budget and the previous two. To fund Brexit, £3 billion was announced in the 2017 Budget and £1.5 billion in the previous Budget. The Chancellor warned that austerity would continue for five more years if Britain leaves the European Union with no deal and that an emergency Budget would be needed in that situation. Given this, I implore the Government to take no deal off the table—particularly given the views of industry and trade unions, as well as the clear views expressed through Motions passed in this House and the passing of the Spelman/Dromey amendment in the other place. Like my noble friend Lord Tunnicliffe, I welcome the fact that during the course of its Budget deliberations, the Commons passed the amendment tabled by Yvette Cooper. Obviously, that is now on the record.
However, I want today to raise a narrow specific point of which I gave the noble Lord, Lord Bates, prior notice, having met him earlier this week to raise my concerns. Obviously, I know that we in this House cannot amend the Budget, but by raising this issue I hope that Ministers will look sympathetically on ways to resolve it. I am pretty confident that if the full implications had been known earlier, it would have been raised by some honourable Members in the other place.
The issue relates to the museums and galleries exhibition tax relief brought in by the Government. Overall, it is a good scheme, but the way it is written is also a good example of unintended consequences. Before I continue, I declare a relevant interest in the register as the chair of the strategic board of Tyne & Wear Archives & Museums, one of our major regional arts organisations. I am proud to be associated with such an innovative and entrepreneurial organisation. It does great work in Tyneside schools in some of our least well-off areas, and has an excellent management team with whom it is an absolute pleasure to work. In accordance with the government-commissioned Mendoza review on the functioning of museums, and very much in accordance with the Government’s express wish to see museums form partnerships with other organisations, Tyne & Wear Archives & Museums set up TWAM Enterprises to manage exhibitions. The organisation is funded by four Tyneside local authorities, with Newcastle University operating as a charity.
However, in adopting this structure, TWAM has found itself, much to its surprise, ineligible for museums exhibition tax relief. I should stress that TWAM had changed its structure before the tax relief regulations came into effect. It had done so because it was a good thing to do and because it felt that that would accord with government priorities. Ironically, TWAM took part in the government consultation which took place before the museums exhibition tax relief regulations were brought in. As the Minister knows, but perhaps the House as a whole does not, the regulations stated that for an organisation to benefit, it had to be funded either by a local authority or by a charity. Unfortunately for TWAM, it was funded by both a local authority and a charity. In some ways you could say that it was doubly eligible for tax relief, but so far it has been deemed ineligible for such relief.
We have had discussions with officials from the Treasury and HMRC, and DCMS, which is obviously concerned about this issue. They were all were sympathetic when we raised a number of possibilities in our meetings, such as using the Interpretation Act 1978, which I certainly was not familiar with before this issue was raised. The Act gives guidance on interpreting how legislation should be implemented:
“In any Act, unless the contrary intention appears … words in the singular include the plural”.
We wondered whether that might mean that, given that TWAM is funded by a local authority and a charity, it could be covered by the 1978 Act.
Incidentally, as far as I am aware, no other organisation has inadvertently fallen foul of the regulations in the way Tyne & Wear Archives & Museums has. However, if the regulations are unamended, that might inhibit other museums in forming the kind of partnerships they have said they are in favour of. That point needs to be borne in mind. Certainly, this seems an absurd situation that is contrary to common sense.
It could be said that TWAM should change its structure again. However, that would be a time-consuming and costly process, involving legal advice and so forth. Given that TWAM is funded by public money, it seems crazy to have to spend that money on changing its structure when TWAM clearly fulfils the spirit—if not the actual letter—of the regulations. To have to do that at a financially challenging time is very hard. I do not want to widen the argument to the whole issue of local government finance, but since 2010 TWAM has seen a 60% reduction in funding from local authorities. It is because the organisation is innovative and recognised as such by the Arts Council that it has continued to build on the excellent service it provides to our area.
In conclusion, I know that the Minister is fully aware of the importance of museums and the cultural sector generally to the north-east economy. He knows too how successfully our museums have engaged with the different communities in the area. I am sure that he does not want difficulties to be imposed on museums, so I hope he will be able to respond positively to my remarks.
Lord Turnbull (CB)
My Lords, the principle of financial privilege means that this House has no powers in relation to the structure of tax, its rates and its incidence. It can, however, examine the way in which the tax system is administered, its governance and the compliance burden on different types of taxpayers. This time last year the Economic Affairs Committee, of which I am a member, through its Finance Bill sub-committee, looked into the plans to roll out Making Tax Digital. We found that, while HMRC might have been ready, a lack of communication and testing meant that many taxpayers would not be, especially to meet the requirement to submit returns quarterly. We recommended that the plans be reduced in scope and taken more slowly. To their credit, the Government took our advice and confined the first phase only to VAT and only to businesses with a turnover greater than £85,000. It was promised that there would be no further changes before 2020.
In my view, we helped to avoid a train wreck that would have damaged relations between HMRC and small traders and unincorporated businesses. It might have been nice if Treasury Ministers had said: “Do you know what? You did us a good turn there”. What remains is the undertaking not to extend the scheme before 2020. This is now only about 13 months away—not much time to digest the lessons of progress to date and to get taxpayers and software suppliers ready. The danger is that in next month’s Budget there will be an announcement simply reintroducing in their original form the proposals that were delayed. Instead, the EAC recommended delay until 2022 and the publication of a long-term plan setting out the next phases of this important initiative.
HMRC needs to look again at whether all the information it is seeking—not just total revenue and total spending but the invoices behind them—is really needed and needs to be submitted quarterly, even by very small businesses. The original turnover threshold was £10,000—less than the personal allowance—which, in my view, made no sense whatever. The estimate of costs to the taxpayer provided in the original plans carried no conviction and was strongly criticised by many witnesses to our inquiry. We are still waiting for those costings to be updated.
Two areas in the Finance Bill now before us raise issues about HMRC powers. As well as looking at them specifically, the committee decided to look at the balance of powers more generally, and in particular at whether the balance between clamping down on avoidance and treating taxpayers fairly remained appropriate. Many concerns have been raised, particularly by individual, unrepresented taxpayers. HMRC has been tasked by Ministers and Parliament with collecting more of the revenue that is due. The committee endorses this, although many people are struck by the contrast between a tougher approach for individuals and the more leisurely pace of progress on the taxation of the giants of the digital world.
If HMRC is to be equipped with greater powers and to take a more robust approach, it should logically follow that governance and safeguards should keep pace. In fact, we found the opposite. Paragraph 14 of the EAC’s report observes that the 2016 changes to the charter under which HMRC operates,
“increased taxpayers’ obligations and reduced HMRC’s”.
For example, accelerated payment notices and follower notices have no right of appeal to a tribunal. The committee observed:
“Whenever a new power is introduced or an existing power significantly extended it should be accompanied by a right of appeal against the exercise of the power, not just against the underlying tax liability ”,
Where taxpayers wish to challenge the lawfulness of HMRC’s decisions and there is no right of appeal, they may do so only through the High Court in judicial review, which makes proceedings much more expensive. The committee recommended legislation to give the First-tier Tribunal for tax the power to conduct judicial reviews.
The first extension of powers in the current Bill is to require records to be held for up to 12 years where offshore issues are involved. The justification for this large extension is weak and poorly targeted. Drawn into its scope may be compliant taxpayers with small pensions from time spent working abroad or with overseas properties. The committee considered this proposal to be unreasonably onerous and disproportionate to the risk.
The most contentious issue raised with the committee was the loan charge: a proposal to claw back tax lost from disguised remuneration schemes. I should make clear that the EAC supports the efforts to drive out artificial DR schemes. We rejected the arguments put forward to us that, so long as each step in a scheme was legal, no tax would be payable. This means that we accept HMRC’s argument that, where a series of transactions is contrived and artificial and has no purpose other than to produce a tax advantage, it should not be regarded as effective in reducing tax.
Taking action to bring DR schemes to an end from now on is entirely right. The issue is about how much back tax should be reclaimed. Many taxpayers feel that reclaiming unpaid tax from any past years is retrospective in effect. Mr Mel Stride, the Financial Secretary to the Treasury, vigorously denies that there is retrospection. He argues that tax was always due and still is, and that, using the great mantra of the day, “nothing has changed”. The tax payable is simply being collected.
There are two problems with this argument. First, if the tax was payable, why did HMRC make no effort to collect it at the time? There are many cases where taxpayers informed HMRC that they were in DR schemes, and cases where HMRC raised no queries and closed the return for the year. I am no lawyer, but I understand that there is a principle in law called estoppel, where a person is precluded from asserting facts or rights that are contrary to their previous actions. Perhaps that should apply to HMRC, which had opportunities to require tax to be paid but failed to act on them.
The second problem is that HMRC’s approach fails to take account of the circumstances in which many taxpayers found themselves in DR schemes. They were not affluent, well-advised celebrities who should have known better, but staff whose employers, some even in the public sector, transferred them to different employment contracts that required them to enter into loan schemes. There is resentment that HMRC seems to be targeting individual taxpayers rather than the employers and promoters of such schemes.
The loan charge was approved by Parliament—the other place—in 2016: another example of legislating in haste with inadequate thought to the consequences. The realisation that all is not right has now dawned on the other place, which is evidenced by the amendment to this Bill on Report by Sir Edward Davey requiring the Government to report back by 30 March on the effects of the loan charge scheme. I hope that the Government will use the opportunity created by the amendment to take up the EAC’s recommendation to exclude from the charge loans in years when a taxpayer disclosed their participation in a scheme to HMRC, and for years that otherwise would have been closed. To reduce the likelihood of retrospection, the committee recommended that HMRC should make a clear public statement as soon as it begins an investigation into a potential tax avoidance scheme.
I will end on a more positive note. The final recommendation of the EAC’s report, accepted by the Government, was that there should be a new powers review, so I hope we can restore a better balance between HMRC and the taxpayer and provide a better system of oversight and accountability in how HMRC uses its powers.
Viscount Chandos (Lab)
My Lords, I thank the Minister for his courteous introduction to the Second Reading of this Bill, which follows on from the debate on the Budget report in November—perhaps a rather more popular event in the calendar of your Lordships’ House than today’s proceedings. I also draw the attention of noble Lords to my entries in the register.
Even if the principal measures in the Bill and the economic issues surrounding them have therefore already been extensively debated, I welcome the chance for noble Lords to review them again while the Bill enjoys its rapid passage through this House. It is undoubtedly right, as the noble Lord, Lord Turnbull, has just said, that as a money Bill it should not be capable of amendment by your Lordships. I cannot help thinking that the Government Front Bench, based on its expressions of outrage that other legislation is subject to proper detailed scrutiny and amendment by your Lordships, may believe that the convention covering money Bills should also apply to the avalanche of Brexit-related legislation that threatens to bury Parliament in the weeks—or, more likely, months—to come.
This is a modest Bill from a Government with very much to be modest about—a holding measure designed to mark time while we pass through the maelstrom of Brexit. There is,
“no sign of a long-term strategy”,
concluded the IFS in the immediate aftermath of the Budget. This is nevertheless also an historic Bill in one respect, as my noble friend Lord Tunnicliffe has already said. It is the first Finance Bill for more than 40 years on which the Government have been defeated—through the amendment moved by my right honourable friend Yvette Cooper, which is now included in Clause 90(7). Like many other Members of your Lordships’ House, I welcome this important, if perhaps symbolic, expression of Parliament’s determination to ensure that our departure from the EU is not a disastrous crashing out. Even if that was not as strongly reinforced by the House of Commons’ votes last week as it could have been, I am confident that the wisdom and judgment of the majority of Members of that House will ensure that we will not leave the EU without a deal.
Even though the Prime Minister today returns to Brussels for, in all likelihood, another pummelling in her misconceived attempt to renegotiate the withdrawal agreement to satisfy the unsatisfiables in her party, today in your Lordships’ House we can have a day off from the relentless grind of Brexit—but only up to a point, Lord Copper, since even if Brexit is not in the foreground of this Bill, it is an inescapable gloomy background to our economic situation.
Advocates of a hard Brexit—members of the Donald Tusk mutual admiration society—persistently argue that the prospect of Brexit has had no adverse economic effect on the UK. This claim is as suspect as their nonchalant dismissal of the economic impact of crashing out. The UK slipping from being one of the fastest-growing G7 economies to the slowest has been widely highlighted, yet the Government have proudly boasted of a fractional increase in the projected growth in GDP in 2019 from 1.3% to 1.6% while lowering some long-term projections to a depressing and monotonous sequence of 1.4%, 1.4%, 1.5%, 1.6%, all based on a presumption of an orderly exit from the EU.
We should remember that these figures are for overall GDP. Since 2005, the UK population has been growing at a rate of 0.6% to 0.8% per annum, and this trend is expected to continue, whatever changes there may be to the immigration regime, so GDP per capita is forecast to come in at under 1% per annum year in, year out. That is hardly a scenario in which it is possible to be confident about any increase in disposable income for most people who have suffered 10 years of stagnant earnings or for any increase in spending on public services. The independent commentator IHS Markit has written that it is the,
“weakest growth spell for six years”,
and at the same time it estimated that growth in the fourth quarter of 2018 could have fallen to as low as 0.1%. How confident is the Minister that even these dismally low projected growth rates from 2019 to 2023, on which the Finance Bill is based, will be achieved?
In January, the purchasing managers’ index for manufacturing fell to 52.8%, the second-lowest level since July 2016, while even more ominously, in the light of the Government’s casual neglect of the services sector in its proposed future relationship with the EU, the equivalent for services was announced last Friday to have dropped to 50.1% against consensus expectations of 51%. That is a hair’s breadth away from implying negative growth in what is 80% of the UK’s economy.
Of course there are other factors that lie behind this economic malaise, of which a decade of stalled productivity growth from an indifferent starting point is foremost. Despite the Minister’s protestations, there is little or nothing in the Bill that begins to address the scale of this problem, particularly in relation to the even more depressing position on productivity growth in most regions and nations outside of London and the south-east. I feel a degree of ambivalence about pressing the Minister further on the actual or likely deterioration of economic indicators since the Budget Statement and your Lordships’ debate in October; I fear giving the Government any encouragement to reverse their declared “ending of austerity”—even if that is more in their fevered imagination than something being implemented where economic deprivation is at its most acute.
A clear understanding of where we are and accurate figures for the national accounts are an essential starting point for good policy decisions, whatever level of confidence may be felt in this Government’s ability to make good decisions even with accurate figures at their disposal. Will the Minister confirm that the implications of the ONS’s decision in December to change the accounting treatment for the student loan book will not lead to any tightening of fiscal policy, at least in the short term, since the underlying position has not changed? The cynical manipulation by the Government of both the carrying value of loans and the treatment of outrageously high interest charges was a case of creative accounting of which even the board of Patisserie Valerie would be embarrassed. The estimated impact of the accounting changes proposed by the ONS would be to increase the deficit in the current year from £40 billion to £52 billion and by 0.6% per annum of GDP thereafter. However regrettable the Government’s past treatment of student loans has been, the overdue correction of the accounting treatment must not cause harm either to the UK economy as a whole or, vitally, to the position of the higher education sector.
I end by drawing the attention of the Minister to the point made from his own Benches by the noble Lord, Lord Horam, during the November debate on the Budget report, to which he made no response. As the noble Lord pointed out, there are an estimated 1,200 different tax reliefs, costing the Exchequer up to £400 billion per annum. I have highlighted in previous debates in your Lordships’ House the indefensible reliefs in the area of inheritance tax, on which the Office of Tax Simplification is due to report in the next few months. Will the Government will take a much more concerted and focused approach to examining the effectiveness of these tax reliefs and the scope for a substantial increase in revenue for the Exchequer?
Baroness Kramer (LD)
My Lords, this is one of those occasions when much of the work has been done for me by the excellent preceding speeches. If we go back to the Budget that underpins this Finance Bill, I agree completely with the noble Viscount, Lord Chandos, that it was not an announcement of the end of austerity; that was some clever PR language. If we look, we can see that it comprised a number of short-term fixes for crises in social security and social care, and a scattering of money for potholes, schools and the police. Past cuts in universal credit from 2015 were only halved, not removed, and further welfare cuts were left in place. Other than for the protected budgets of the NHS, defence and overseas development, every department continues to face cuts of the equivalent of 3% per person up to 2023. Austerity is definitely ongoing; the Budget was not an end of austerity by the greatest stretch of the imagination. Even though core protected areas such as the NHS got additional money, that was a completely lost opportunity to put in a dedicated future source of revenue for the NHS with something like the 1p in the pound that we called for in hypothecated financing for the NHS and social care. There was so much that the Government could have done and nothing like the end of austerity that they advertised.
In that Budget and the Finance Bill I very much support the cuts in the threshold for low-income earners but, as I said at the time, I find it incomprehensible that the threshold has been raised for the kick-in of the higher rate of tax, in effect giving a break to higher-income earners. I do not understand why the Government thought it was either necessary or important, because everyone I have talked to who is going to benefit from that increase in the higher-rate threshold—I suspect that many people in this House know individuals in the same situation—would much rather that funding had gone to help people who are homeless on our streets in extraordinary numbers, or who have been suffering from universal credit. I have friends who have suffered enormously from the five-week hiatus before they get their first payment, practically living on handouts. We have so many fundamental issues in this country that to make a cut such as that at this point in time seems incomprehensible. I even noticed that Westminster Council—a Conservative council if ever there was one—is asking band H ratepayers on a voluntary basis to double the amount of council tax that they pay in order to help homeless people in crisis in Westminster. That basically says to the Government that they have completely misunderstood where the British public are on an issue such as this.
I agree completely with the noble Baroness, Lady Quin, and the noble Viscount, Lord Chandos. The noble Baroness talked about the pall that Brexit hangs over everything. We will undoubtedly have a new Budget and Finance Bill at some point in the near future, no matter what happens, other than a decision not to proceed with Brexit. Whatever form of Brexit that we proceed with, as discussions earlier today made clear, it is having such a wide impact on the economy as a whole that this issue will have to be completely revisited shortly, which makes this debate frustrating because we know that change is coming very rapidly.
I endorse every aspect of the speech of the noble Lord, Lord Turnbull. I also have the privilege to be a member of the Finance Bill Sub-Committee of the Economic Affairs Committee and to pursue its two investigations into making VAT digital and into the powers of HMRC, and I am glad that there will be an opportunity to debate those in great detail in this House. Because of that, I am not going to add anything more on making VAT digital, other than to say that it is beyond me why HMRC has not understood the plight of SMEs facing the changes that are coming upon them with pretty much no warning, no testing and relatively limited opportunity to even be able to cope. In the long term it is actually a very sensible change, but implementation matters—something that this Government frequently miss—and implementing badly, too early and without proper preparation under- mines even the most sensible of policies.
I shall focus for a couple of minutes on the loan charge. I share what I read as the outrage of the noble Lord, Lord Turnbull, on this issue. That outrage is widely felt, with more than 120 Members of the other place—completely cross-party; there is no partisan aspect to this—signing an Early Day Motion in protest, and then the Motion tabled by my colleague in the other place, Sir Edward Davey, to force the Government into reviewing the impact of what they are doing.
People do not entirely understand that the massive impact of the loan charge action by HMRC stems from the move in the UK towards outsourcing. Local government, government departments including HMRC, and public bodies such as the BBC, under pressure, sought to cut their costs by no longer employing people on a range of tasks but outsourcing the work to self-employed contractors. They did not do it because they were going to change the people doing these activities but because they saw there was a tax arbitrage. They would be freed from paying national insurance contributions and those who were self-employed could take advantage of a variety of tax schemes, which meant that they could reduce their hourly rates because they reduced their tax liability. In that way, local government and government departments, including HMRC, the BBC and others, were able to bring down their costs.
It is absolutely outrageous that the Government are now turning on these individuals, who basically had no option but to follow the pattern offered to them in order to continue to work. If you were a social worker, you were made redundant and were told that you could continue to be a social worker, provided that you signed up with one of three agencies and signed the forms it gave you. You could have the same job back on Monday and do the same activity for the same take-home pay. None of those people knew they were being put into some kind of disguised remuneration scheme. The real question is: why did their employers not know this? Consider the IT consultants who work for HMRC; anybody who was not part of one of these loan schemes would price themselves out of the opportunity to win the work. The situation is absolute nonsense.
To me, this is a very good example of a weakness that occurs because Finance Bills are not properly scrutinised in this House. When these schemes were identified as disguised remuneration in 2011, the change—the prohibition, in a sense—was initially to be forward-looking, which makes absolute sense. I agree with the noble Lord, Lord Turnbull, that these schemes were not appropriate and I think we all agree that they should have been brought to an end. However, in 2017, with almost no scrutiny or discussion and with pretty much nobody in the other place realising what they were doing, the change in the language effectively allowed the Government, or HMRC, to behave retrospectively. I know it says this is not retrospective, but I think it is, by any definition.
People are now being told that they owe taxes for the past 20 years, which are all to be paid in one year. If they manage to negotiate a deal, they might have five years to pay. For most, the sums they owe are bigger than their entire income. They certainly do not allow them to continue to pay a mortgage or to eat; many of the people are retired. We are in the most extraordinary circumstances. These are small people and the Government must take this opportunity to take the burden off those folks. According to the Loan Charge Action Group, there are 100,000 ordinary people, who we would know and recognise, who work in our communities, who suddenly find themselves falling foul of this law.
What makes this even more outrageous is that if people appeal against this process and reach the end stage—getting a final notice from HMRC and trying to appeal that—they might find themselves paying not only the back tax or penalty but a 60% surcharge on the penalty. To discourage appeals, if you appeal and lose, you pay HMRC a penalty for having brought the appeal in the first place. This is absolutely outrageous and needs to be fixed, so I hope that everybody here, including those on the Government Front Bench, will put a great deal of pressure on Mel Stride to recognise the problem and deal with it promptly.
Lord Davies of Oldham (Lab)
My Lords, this has been an excellent debate, although the participation numbers are a long way below the usual ones. That is a reflection of the exhaustion which Brexit has brought on noble Lords as we have discussed whether we can see the future of the economy with any accuracy at all in the context of that issue. I think a number of noble Lords are holding their weapons ready for the point which the noble Baroness, Lady Kramer, referred to; we cannot be far off another Budget and a clear economic Statement which will take account of whatever deal the Prime Minister succeeds in bringing back to the nation before 29 March.
The Minister sought to put a number of issues in context—a context that I could scarcely recognise. When will the Government face up to the many failures in their economic strategy of nearly a decade? Their long-term economic plan disappeared as a concept embraced by their Members of Parliament and noble Lords, but a great many of its characteristics have persisted. In particular, the Government still follow a broad strategy of considering austerity to be good for the nation. It was directed, in the first instance, at clearing up the deficit, which was meant to be cleared by 2015. The latest target date appears to be somewhere around 2025. However, the OBR and a number of interest groups in the country think that remains a challenging target. It is a measure of the Government setting out a clear objective and falling many years short of reaching it.
The Government have presided over the slowest recovery since the 1920s. The key indicators of investment, growth and productivity still place us among the lowest of the advanced economies. The Minister referred to the growth rate of 1.6%. My goodness, what an achievement. It is lower than in any other advanced country and a long way below the levels of economic growth to which we had been accustomed before the financial crash. The Government have had nearly a decade to recover from that calamity, but have precious little to show for it.
We consider that the alternative strategy is obvious. We need to borrow in order to invest, so that instead of being starved of resources—particularly in respect of the regional imbalance of resources from the Government—our economy will be able to get the resources necessary for growth. There is no doubt that austerity is not yet over. This Bill offers tax cuts for the richest members of our society and welfare cuts for the less fortunate. We are facing the challenges of Brexit with low investment, low wages and low productivity. The Minister mentioned the recent increase in wage rates, but that is the first year in which the Government have been able to say that for a decade. It is quite clear that the Government’s progress is very slow.
Meanwhile, our public services are suffering. Our Armed Forces have had severe cuts; our police numbers are drastically down, while violent crime is up. But contrast the restrictions on public sector pay with what happens in the private sector. Last year, the chief executives of FTSE companies averaged an 11% pay increase on what was a pretty big number beforehand. When will the Government face up to the fact that they cannot expect to build a good society unless they build a fair society? In the real world, outside the FTSE top earners, homelessness has doubled, use of food banks has increased significantly and the number of rough sleepers has increased, and not just in our northern towns and cities, where it is sometimes suggested so many are neglected, but in London itself. Even Westminster has seen growth in these numbers.
The report of the United Nations special rapporteur on extreme poverty and human rights condemns the UK as a two-speed society, where the very richest flourish yet there are many in poverty. Two-thirds of children growing up in poverty are in households where there is at least one earner. That says something about the payment of wages at the lower end of society. I suggest it will not do for the Government to do anything other than take considerable responsibility for creating this situation. The rapporteur went on to say that it was absolutely scandalous for so many children to be poor in a 21st-century economy. It reflected “a social calamity” for our country and “an economic disaster”.
That is what we think in Her Majesty’s Opposition. We will halt the rollout of universal credit, which has been identified so accurately by noble Lords in this debate; particularly the noble Lord, Lord Morrow, who identified for the Minister some pretty challenging figures on how the Government address low-income families and those dependent on benefits. I hope the Minister will respond to what was, after all, an extremely detailed and significant contribution.
The Government’s record shows little success in improving productivity. I have stood at this Dispatch Box for the past 10 years opposite a succession of Ministers, including Ministers who certainly knew what they were talking about on productivity. They were not able to persuade their Governments and their colleagues to do anything about the appalling levels of British productivity that have sustained through to today. It means that, although the Government have put money into apprenticeships—there is much criticism in industry and commerce about the nature of these apprenticeships and the funding for them—they also slashed the improvement of vocational skills, for which they were directly responsible, and hammered the further education colleges. Although we have seen universities make considerable progress in tackling the tuition fees issue, FE colleges have had a devastating onslaught from this Government. It is clear that they are the biggest losers in education spending.
That is to say nothing of the fact that schools are stressed by inadequate resources. In an economy which needs new schools, it is depressing that adult learners—people who recognise that they need to improve their skills and change the potential of their economic role in society—are down from 5.1 million to 1.9 million. The Government should be ashamed of that figure. If the Government is serious about the tax take, it is clear we need a well-resourced HMRC.
I very much enjoyed the contribution of the noble Lord, Lord Turnbull. He asked specifically about loan charge schemes, and he also identified that the digitisation of tax was misdirected when it expected organisations with such small turnovers to be able to cope. The whole position needs to be rethought. We have a report coming out shortly, to which the noble Lord, Lord Turnbull, referred, but nevertheless, this is pretty obvious incompetence by the Government in this area.
The Government also have a very poor record on climate change. Their response has been to cut support for solar energy and slash the subsidies for onshore wind. This is done against a background where we all know that climate change is going to make big demands on the resources of our society. We are also all obliged to look through a glass darkly on the question of Brexit and its implications for the economy.
I am not expecting the Minister to respond on the Brexit issue at great length today. In the other place, they are going to get another dose next Wednesday. Many noble Lords have indicated that they have said pretty much all that can be said about Brexit. But we still have not entered the final act and cannot, at this stage, predict exactly what it will be. The one prediction we all hope will not be fulfilled is to crash out of the European Community without agreement.
My noble friend Lady Quin asked a specific question of the Minister on the taxation position of a museum. Having been a Member of the other place, she knows as well as anyone here that it is not within the power of this House to render a ready solution to this by any direct action we can take. Nevertheless, I hope the Minister can give some response.
I thank all noble Lords who have participated. I particularly appreciated the contributions of my noble friend Lord Chandos. He did what I thought was necessary at this stage in the debate: he looked at the wider issues to which the Government need to respond. The Minister has got quite a lot to answer, and I am sure he is looking forward to the opportunity as much as we are looking forward to listening to him.
Lord Bates
What a kind invitation from the noble Lord. I hope not to disappoint.
The noble Viscount, Lord Chandos, expressed the hope that we might get a day off from the relentless grind of Brexit. I am afraid that we were not quite able to deliver. Brexit was mentioned in the contributions of the noble Lords, Lord Tunnicliffe, who opened, and Lord Davies, as he wound up, and in between by the noble Baronesses, Lady Quin and Lady Kramer. They talked about the uncertainty of the times and the noble Lord, Lord Tunnicliffe, said that these were not normal times—to which the answer, which they have heard many times, is therefore to remove the uncertainty and back the deal, so that we can move on to negotiating the future economic relationship with our friends in the European Union. We could also then remove the necessity to plan for no deal, Yet, so long as no deal remains even as a possible option, it would be remiss of any Government acting responsibly not to plan for that eventuality—although we hope with all our hearts that that outcome does not occur.
This has been an excellent debate and I therefore want to use what time I have available simply to address some of the points raised during the course of it. First, the noble Lord, Lord Davies, talked about income inequality. I should say that income inequality is now lower than it was in 2010 and lower than at any point under the previous Labour Government, in which he was a distinguished Minister. Compared with 2010, there are 1 million fewer people, including 300,000 fewer children, in absolute low income. Moreover, in the context of this legislation the Government’s policy continues to be highly redistributive. In 2019-20, households in the lowest income decile will receive over £4 in public spending for every £1 they pay in tax, while those in the highest income decile will contribute on average over £5 in tax for every £1 that they receive in public spending.
The noble Viscount, Lord Chandos, asked about the reclassification of student loans and its impact. After its review of the treatment of student loans in government finances, the Office for National Statistics has decided that some of the spending on student loans will be included in the deficit when the money is first lent to students. This is a technical accounting decision by the ONS and, although the noble Viscount was very critical of it, I stress that we operate on independent advice in this respect. We support the independence of the ONS and commend its diligence in recognising this.
The noble Baroness, Lady Kramer, talked about Making Tax Digital. I will come back to some of the points raised by the noble Lord, Lord Turnbull, in this respect. She focused on the specific impact on SMEs, on behalf of which she has been a consistent advocate. As the noble Lord, Lord Turnbull, mentioned, that is why only businesses with a taxable turnover above the VAT threshold, which is currently £85,000, will be in the scope of Making Tax Digital. The noble Lord is of course a former distinguished Permanent Secretary at the Treasury, among other things, and he talked about the work done by the committee. He said—I think I have this right—that it would be nice if a Minister were to say, “You did us a good turn there” when the committee advised on making changes and delaying implementation. Having been given that invitation, I am very happy to say that it did a good job there. It did a good turn not just in giving advice to the Government but for small businesses, in terms of how they will be affected.
With respect to all noble Lords, I think that the House will have found the technical analysis of marginal tax rates by the noble Lord, Lord Morrow, very thought-provoking. I will want to take that away and reflect further on it with colleagues. However, the Government are committed to making work pay. The noble Lord said that hard work should be incentivised, and we can all echo that. He said that it was a key measure of aspiration; again, I think we would echo that. In fact, it was part of the rationale for the introduction of universal credit.
The Budget announced that the personal allowance would be increased to £12,500. We are also investing an additional £1.7 billion per year in universal credit to increase the work allowance for working families and disabled claimants. The national living wage will rise to £8.21 from April 2019. In total, it will have delivered a pay rise of £2,750 for a full-time minimum wage worker since its introduction in 2016.
I am hesitant about reading out more such responses, not because they are not right but because I sense that the mood of the House and, certainly, our mood on the Front Bench—my noble friend Lord Young is with me—is that the noble Lord’s analysis is worthy of further consideration. I am delighted that the Financial Secretary to the Treasury and Paymaster-General said in response to the Budget debate that he would write substantively and reflect on that matter. I will take back to him the noble Lord’s contribution today to ensure that that response encompasses some of the points which he has raised.
A number of comments were made on the health of the economy. The noble Viscount, Lord Chandos, talked about the wide range of allowances and then criticised me for not responding to my noble friend Lord Horam in the Budget debate on his point about the 1,200 allowances which exist. Allowances have been used by successive Governments to incentivise right behaviour in certain areas. This Budget is no different, because it increases the annual investment allowance to £1 million for two years, thus significantly increasing the amount of relief given to businesses that do the right thing by investing in their own businesses and therefore increase our productivity—which the noble Lord, Lord Davies, was concerned about—and increase our tax revenues and growth.
One of the allowances referred to related to the issue raised by the noble Baroness, Lady Quin, whom I thank for giving me advance notice. She declared her interest as the chair of the board, but I should declare an interest as having been a beneficiary of the museums of Tyne and Wear as a child and as an adult. I am a frequent visitor to the Shipley Art Gallery, which is a fantastic treasure trove of different art, from old masters to modern, contemporary and regional art, as well as crafts and ceramics. I have enjoyed that since I was taken there as a child at school—education is a key part of it. Anything which enhances the wonderful town of Gateshead, which she and I care for, and its cultural heritage—which is not just the Shipley but the Baltic Centre for Contemporary Art, the Sage, a music centre and the Angel of the North—is welcome. It really is becoming a cultural centre.
The noble Baroness came up with some innovative suggestions as to how the Interpretation Act 1978 could be invoked in the matter that she raised. We have looked carefully at that, and my advice is that the existing legislation is unambiguous and cannot be interpreted in any other way. Any changes would require primary legislation. However—the former Permanent Secretary will be watching carefully what I say here—I think that the spirit and intention behind that measure were clear. Manifestly, it was intended that organisations such as the Tyne & Wear Archives & Museums should be able to benefit from it. The challenge I ask her to leave me with—I have already commenced informal discussions with the Financial Secretary to the Treasury—is how we go about correcting that. Clearly, if it requires primary legislation, which is the current advice, that limits our options as to how quickly we can move, but if there are other ways to do it, we would want to do so. I know that the noble Lord, Lord Davies, echoed his support for efforts in that area and I give her a commitment that it is an anomaly that we want to resolve.
The noble Baroness, Lady Kramer, talked about local authorities. I am conscious that time is short, but loan charges is a hugely important issue that was also raised by my noble friend Lady Noakes in the Budget debate. I wrote to her, and copied in the noble Baroness, Lady Kramer, having gone back to the department and looked again at it. There is no requirement on an individual who is not an employee to use a disguised remuneration loan scheme. The tax system expects people to take responsibility for their own tax affairs and if an arrangement looks too good to be true, then it probably is. Hundreds of thousands of people work and pay tax as self-employed workers or through their company without using highly contrived tax avoidance schemes.
The noble Lord, Lord Turnbull, drew attention to what was new Clause 26. The Government chose to accept new Clause 26 during the passage of the Bill and will lay a report in line with the requirements of that new clause no later than 30 March—that is probably going to be a busy day in Parliament. The report will include a comparison with the time limits for the recovery of lost tax relating to disguised remuneration loans. HMRC is working to help people put things right but can only help those who come forward, so we encourage people to come forward. For those people who settle, there are schemes, depending on the income threshold, whereby people can make those tax settlements over a five to seven-year period. As for why taxpayers do not have the right to appeal against advance payment notices and follower notices, Parliament granted HMRC these powers to discourage tax avoidance. Advance payment notices prevent tax avoiders gaining an economic advantage by holding money during the time it takes to complete lengthy tax litigation. Importantly, these rules in no way affect a taxpayer’s right to appeal their tax liability.
The noble Baroness, Lady Kramer, and the noble Lord, Lord Turnbull, spoke about future plans for Making Tax Digital. The Government set out a vision for modernisation of the tax system through Making Tax Digital in 2015 and our vision remains unchanged. There will be no further Making Tax Digital mandation until the system has been shown to work well. The sub-committee recommended an independent review of HMRC’s powers. The Government agree that HMRC has to balance the collection of tax with important taxpayer safeguards—again, this was raised by the noble Baroness, Lady Kramer, and the noble Lord, Lord Turnbull. The powers review was a major project designed to support the merger of Her Majesty’s Customs and Excise and the Inland Revenue. It took seven years and concluded in 2012. There has been no such fundamental change to the department since which might justify a further review. However, the Government keep the tax system under review and note the sub-committee’s recommendation to update the power review in line with principles about the digital age.
I have tried to address noble Lords’ questions. I will review the record of the debate, which has been of a very high quality with lots of points of insight, and if I have missed anything, I will follow up in the usual way and write to those who spoke in the debate. I beg to move.
Royal Assent
Tuesday 12th February 2019
(5 years, 9 months ago)
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