High-income Child Benefit Charge

Debate between Anneliese Dodds and Jesse Norman

Tuesday 3rd September 2019 Westminster Hall

[The Financial Secretary to the Treasury (Jesse Norman)]

It is a great pleasure to serve in this reconvened Parliament under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for South Thanet (Craig Mackinlay) very much for calling this debate and drawing attention to this important issue, and for his thought-provoking and expert speech, which very much reflected his professional experience as well as his political commitments. I very much welcome that. He raised a lot of issues, and a wide range of issues were raised by the hon. Members for Strangford (Jim Shannon), for Glasgow Central (Alison Thewliss) and for Oxford East (Anneliese Dodds). I will come to all those. Let me address some of them in my opening remarks and then come to the specific questions that were raised.

As you will know, Mr Hollobone, child benefit was introduced in 1977. It has always been, and it remains, a universal benefit payable to individuals who are responsible for what is referred to as a qualifying child or children. Before 2013, there had been significant growth in the use of the benefit—rightly and importantly so; of course, that is why benefits exist—but it was recognised that, at a time of austerity, there was an anomaly, in that more than £1 billion a year was being spent in child benefit on higher-rate taxpayers. That was felt to be not merely imprudent from a financial standpoint but morally problematic. It would mean, as it were, taxing working people on low incomes to pay for the child benefit of those who earned considerably more.

If it is true that, as the hon. Member for Oxford East said, it is now Labour policy to remove the high-income child benefit charge—she was perfectly clear about it, so I think it is true, but she is welcome to correct me if it is not—the Labour party needs to ask itself whether it thinks it appropriate to tax the wider population, including working people on low incomes, to pay the child benefit of those who earn considerably more. We also note that the cost to the Exchequer of such a policy is of the order of £1 billion to £1.5 billion.

[Anneliese Dodds]

I am grateful to the Minister for giving away. He is well aware that we opposed the measure at the time, as we did many other elements of the Government’s programme. We also criticised the tax cuts given at the same time to the highest earners and to profitable corporations, which in their magnitude over time were more substantial than what we are talking about now.

[Jesse Norman]

That is an ingenious attempt to link two issues that, in and of themselves, are not connected. One can have a policy on high income tax earners and the payment of child benefit to them and one can have an entirely separate policy about other aspects of the tax system. The question remains whether it is morally appropriate to give the benefit to those people, and the judgment in 2013 was that it was not the right thing to do. That was an important consideration.

If the hon. Lady is concerned about the wider picture, I remind her that—I think I am right in saying this—the top 1% of taxpayers pay a higher percentage of tax now than at any other point in our history.

[Anneliese Dodds]

rose—

--- Later in debate ---

[Anneliese Dodds]

Thank you, Mr Hollobone. I merely state that the Minister is correct in relation to income tax, but not in relation to other taxes.

[Jesse Norman]

The judgment made in 2013 was that it was appropriate to claw back some of the money paid to people on higher incomes and that everyone should make a fair contribution to removing the deficit while supporting those on the lowest incomes. I think that was the right judgment. Of course, for a minority of claimants where either they or their partner earn more than £50,000 in adjusted net income, there is a requirement to pay the tax charge or to opt out of receiving child benefit payments and therefore not pay the charge.

It is a fair criticism, made eloquently by my hon. Friend the Member for South Thanet and others from across the House, that the charge does not take into account overall household incomes, so it is possible—and it does happen—that a single parent earning more than £50,000 is liable to the charge while a couple each earning up to £50,000 is not. That is because, as he said, the charge is a tax, calculated in accordance with the principles of individual taxation at the individual level alongside other tax policy. Here we have one of those difficult decisions for the Government about what is the right thing to do. The judgment made in 2013 was that it was better to take that approach than to base a charge on household incomes, because that would require HMRC to assess annually both household composition and the incomes of everyone in the 8 million or so households eligible for child benefit, which would effectively introduce a new means test, creating a substantial administrative burden on both the state and families. That is the dilemma.

The effect of the charge is to introduce a high marginal tax rate. That is an unattractive aspect of the policy; we should be clear about that. If I may say so, it is not a salutary lesson in how not to withdraw a benefit, because the alternatives of not levying the charge at all or levying it on a cliff edge rather than by gradual withdrawal are worse. It is open to others to take the view that one of the alternatives is better, and my hon. Friend may do so, but not subject to the fiscal constraints in which we have operated.

A series of questions were raised about HMRC communications. As my hon. Friend recognised, the Revenue and Customs took considerable steps to raise awareness of the higher income child benefit charge. It wrote to about 800,000 affected families when the charge was introduced. It also ran a high-profile advertising media campaign and included a prominent message about the charge in 2 million letters to pay-as-you-earn-only higher rate taxpayers. There was a considerable communication process.

Today, to respond to the question from the hon. Member for Strangford, information on the charge is included in packs for new parents telling them how to claim child benefit. The front page of the child benefit application form includes a prominent message about the charge to help people make a decision on whether they should claim and be paid child benefit, about the importance of claiming even if they do not receive payments, and about the important issue of eligibility, which was rightly highlighted in the debate. Guidelines are available online formally through gov.uk and through innumerable organisations and groups.

As my hon. Friend the Member for South Thanet mentioned, individuals who pay the charge need to make a self-assessment tax return and may face a failure to notify penalty if they do not. I think he will know that HMRC announced a review of cases where a failure to notify penalty was issued for three tax years. It reviewed 35,000 cases and responded by reviewing the amount for over 6,000 people.

There are many other points to cover in the short time that remains. My hon. Friend said that 500,000 people have been forced into self-assessment. I am happy to write to him on that. As he will be aware, the current number paying the charge through tax returns is 293,000. Of course, there are some 40 million people in pay-as-you-earn. He also said that the charge has dragged 1.2 million people into the system. I am not quite sure about that, but if he wants to contact me, I will be happy to assist him further.

The hon. Member for Glasgow Central said that the charge is a gendered policy. I do not think that is true at all, and many other aspects of Government policy do not reflect anything like that position, as she will be aware. For example, there is extensive work in supporting women as entrepreneurs and women in business.

Income Tax

Debate between Anneliese Dodds and Jesse Norman

Wednesday 3rd July 2019 Commons Chamber

[Jesse Norman]

It is hard to make swingeing criticism of the idea of reliefs and then not indicate any that a Labour Government would propose to abolish. It raises the question whether the Labour party is serious about this. The hon. Gentleman described these reliefs as “corporate welfare” and giving away millions of pounds to large companies. All companies benefit that have qualifying investments and are subject to UK taxation in the way indicated; it is not just larger companies. Many of the reliefs he describes are negligible and therefore should not necessarily be the target of extensive review. He talks about the reduction in corporation tax as though it is a bad idea but neglects the fact that significantly more corporation tax has been raised following these reductions.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I am grateful to the Minister for being willing to give way. I am sure he is aware of the evidence repeated over and again by the bodies that have looked into this that the reason for increased corporation tax take was not the reduced rate of corporation tax—rather, it related to the return to profitability of banks and so forth. It was not related to the reduction in rate, and just about every authoritative study that has looked at this has suggested that.

[Jesse Norman]

Those companies’ return to profitability was the result of proper, prudent financial management. I remind the hon. Lady that in the specific case of the financial sector, the bank levy has taken billions of pounds a year more from the banks than the Labour tax that it replaced. I do not think her view has credibility.

The hon. Member for Bootle criticised the timetable, but it is designed specifically to keep uncertainty to a minimum. Far from the suggestion that it would create more uncertainty, the point of my saying that qualifying expenditure on new builds or renovations for which all contracts for the physical construction works were entered into on or before 29 October 2019 will be eligible for relief is precisely to give very clear direction to future investment. I do not agree with many of the points that he made.

Cycling: Gilligan Report

Debate between Anneliese Dodds and Jesse Norman

Tuesday 4th September 2018 Commons Chamber

[Jesse Norman]

That is absolutely right. I would not have expected a man geographically located as my hon. Friend is to fail to pick up the linkages. The fascinating point here is that, although some things are being funded at the moment through energies at a civic level, there are opportunities nevertheless—and we have seen this through other pots of funding—for smaller authorities to take the opportunities that this whole sequence of events requires, but they have to step forward. One thing that we are trying to do with our local cycling and walking infrastructure plans is to reward and encourage local authorities that are prepared to think creatively and constructively about these opportunities in the way that they take these things forward.

It is important to say that I personally am very strongly committed to increasing cycling and walking and making our roads safer for vulnerable uses, and of course that includes cyclists, pedestrians, horse riders and the rest. When the cycling and walking investment strategy was launched in April 2017, it was an attempt to gather together and create a coherence out of a wide range of existing pots, the purpose being to proclaim an ambition to make cycling and walking a natural choice for short journeys or, indeed, as part of a longer one. Interestingly, the Gilligan report says that there are many advantages to cycling, as the hon. Members for Oxford West and Abingdon and for Cambridge have mentioned. Cycling always brings cheaper travel, better health, better air quality, increased productivity, increased footfall in shops, better community and lower congestion, and it creates vibrant and attractive places and communities. These are all things that Andrew Gilligan recognises in his report.

It is striking that Andrew Gilligan’s report rams home the point that cycling is a serious mode in all these cities, particularly in Oxford and Cambridge—less so in Milton Keynes, although the figures are rising—but he says that it is not taken seriously enough. It has been suggested that the Government do not take cycling seriously enough, which I certainly do not think is true; we take cycling very seriously. The report also points to the importance of local leadership. Now, Oxford has a growth deal and Cambridge has a city deal, so there is plenty of scope for those local authorities to continue to show leadership in responding to the kind of challenges that have been articulated by Andrew Gilligan in his report.

[Anneliese Dodds]

I am grateful to the Minister for giving way in the limited time he has left. I just wanted to make the point that Oxford City Council has a cycling champion and it is doing the very largest amount it can within the existing funding packet. To do more, it really does need funding, so will he please give us an intimation of where that additional funding will come from?