Finance Bill

Baroness Kramer Excerpts

Monday 16th July 2012 Lords Chamber

[Baroness Kramer]

My Lords, because of the way in which legislation progresses through the Commons and through this House, I feel that all of us present tonight have discussed all the issues contained in the Bill on numerous occasions. I have to confess to a small temptation just to say, “Please refer to speeches I made earlier”. It means that I shall be brief and just hit on the few issues that I wish to highlight.

To me, the most important measure in the Bill is the raising of the starting threshold for income tax to £8,105 this year and to more than £9,000 next year. Two million low-income earners will have been taken out of paying income tax altogether by this and previous lifts in the threshold and, as the Minister said, some 24 million middle and low-earning income tax payers will have seen their income tax bills reduced by about £330. This has to be right. It moves us well on the way to a starting threshold of £10,000, as set out in the coalition agreement. As a Liberal Democrat, I see it as a significant move towards a threshold that, in essence, starts above the minimum wage, with the notion that there is a relationship between earnings on the minimum wage and the point at which income tax starts. I believe that that has to be right as a major incentive into work and a major measure to tackle long-term poverty.

Cutting taxes significantly at the bottom end of the earnings spectrum is now pretty much taken for granted as the right thing to do across all the parties. I only have a short memory, but I remember all the debates not long ago when this looked pretty revolutionary. The Labour Party chose not to do it in what were considered to be times of plenty, so the fact that it is now being achieved in times of austerity will, I hope, embed this type of philosophy across all the things that we do, no matter which party we come from, as we look at taxation in the future. This is one of the most progressive tax strategies that Governments have adopted in recent years. It has the character of a permanent change and to me is far more effective than the one-off one-year VAT cut that has sometimes been proposed by Labour—which, interestingly, would help the richest members of our community the most.

The Bill also continues to strengthen support for business. I am particularly pleased with the increased incentives for small businesses, new start-ups and entrepreneurs. However, I ask the Government to look at extending the enhanced capital allowances regime to small businesses more widely than just to those in the enterprise zones. I am a member of the All-Party Parliamentary Group on Rebalancing the British Economy, an excellent group that I recommend to the House. Of all the evidence that the group has heard, I have been most struck by that given by Brompton Bicycles, a firm that sells a conventional product but is successful in large part because its manufacturing processes are at the cutting edge of technology. UK small businesses desperately need to accelerate their adoption of new manufacturing technologies to compete and grow. They may not be high-tech in their products, but to be high-tech in their manufacturing tends to make them much more competitive and effective. Incentives to invest in these new processes for small businesses are crucial and I encourage the Government to put this high on their agenda.

The tax avoidance measures in the Bill are very welcome and, I would say, long overdue. Stamp duty has been a particular concern of mine because avoidance by the wealthy is so unfair to the ordinary house buyer. The Bill clamps down on some schemes that use domestic corporate structures to avoid stamp duty, though, in my reading it has not yet eliminated what I would call the Cayman Islands problem—the number of properties that are now already in Cayman Islands trusts or will be put into them in future, avoiding not just stamp duty but also capital gains and inheritance tax. I hope that the Government will make a move on that very soon because it remains a significant loophole and a real sore to every taxpayer who pays up on stamp duty.

Economic growth overshadows all fiscal and economic debates. I am therefore pleased that the Funding for Lending scheme was launched last week by the Treasury and the Bank of England. However, it strikes me as extraordinary that the Treasury and the Bank of England have had to set up a scheme in such a way that banks can get discounted loans only by actually maintaining or increasing lending. That tells you that that they have responded to just about nothing else. To me, that underscores the argument for banking reform, which, hopefully, will be a major occupation for this House after Christmas.

This is a sensible Bill that has been produced in difficult times and I very much hope that we will see it pass.