Finance (No. 2) Bill

Debate between Lord Mackinlay of Richborough and Richard Drax

2nd reading
Wednesday 29th March 2023 Commons Chamber

[Craig Mackinlay]

My hon. Friend speaks a truism that should not need to be spoken from the Conservative Benches, as it should be patently clear.

A sole trader who is running a good little business and doing quite well might be knocking on the door of £100,000 in profits—I would have thought that is not an unusual amount for some in the south-east of England, even in the building trades. Too many of them will say, “I’m not going to pay 60%, plus 2% national insurance. I will work four days a week and spend the fifth day on the golf course.” We are losing out through the 60% rate.

Ministers will not be surprised by my objection to corporation tax being increased from 19% to 25%.

[Richard Drax]

Raising corporation tax from 19% to 25% is a 31% increase. That figure is not often used.

[Craig Mackinlay]

My hon. Friend makes a very good point. This 6 percentage point increase is actually very big in percentage terms.

The corporation tax increase is in clauses 5 and 6, and corporation tax has a story in this country. I went back to April 1973, a mere 50 years ago, and it was at 42% in those days. Corporation tax has generally fallen over time, both in the Conservative years and under the Labour Administration between 1997 and 2010. Peculiarly, the Labour Administration even introduced a 0% rate on small profits up to £10,000 between 2000 and 2006. I was more vigorously in practice at the time, and the 0% rate was a bizarre move that caused a rash of incorporations, which people did not need the wisdom of Solomon to foresee. The rate was deemed to be malused, shall we say, so things changed again.

Under us, since 2010, the maximum rate of corporation tax has reduced from 28% to 19%, and what have we seen? We used to have discussions about Laffer-curve economics, to which I am an adherent. There is a sweet spot at which reducing the rate raises more tax. That was behind the thinking of George Osborne, a previous Chancellor. I would not say that I agree with everything he did—I think he meddled rather too much with the tax system; hence, we now have a tax code that runs to about 23,000 pages—but he believed that reducing corporation tax would increase returns, which is exactly what happened. The money we are looking to raise to pay for the NHS, and to do all the good things that public services provide for us, was being delivered through a lower corporation tax rate. Is it any surprise that Ireland decided to put this on steroids by taking corporation tax down to 12.5%? The rate per head of receipt in corporation tax is four times the rate in the UK. Ireland’s corporation tax returns are way in excess of what is raised from one of our primary taxes, VAT.

We lived through the 19% rate era, however, which was very welcome. It attracted international business and, on the other side of this, made domestic businesses think that the risk reward was better and they therefore took their business forward. We had a lot of complications in the old days, when we had marginal rates and businesses had to go from the lower small company rate to the bigger company mainline rate. It was a complicated calculation, and my hon. Friend the Financial Secretary referred to that. It was not only that that was complicated; those with a number of associated companies had to divide the limits, and it was a dreadfully complex calculation. She said clearly that the lower rate of 19% will remain for companies on up to £50,000 of profits, which is welcome and will catch a lot of the numbers as a percentage of the entirety registered at Companies House, so many companies will not be affected.

Euro Area

Debate between Lord Mackinlay of Richborough and Richard Drax

Tuesday 21st July 2015 Westminster Hall

[Craig Mackinlay (South Thanet) (Con)]

I pay particular tribute to my right hon. Friend the Member for Wokingham (John Redwood) for bringing this issue into the public arena. The words of the five presidents need to get out there.

The euro needs to work. It exists much as I foresaw, many years ago. In ’99, when the first 11 got together to have it as their currency—the number has expanded to 18—I foresaw the problems that would arise. On the Floor of the House this morning we heard that we have an adverse balance of payments situation, not least because sterling is strengthening thanks to difficulties in the eurozone. The situation may provide the impetus we now need even more to look rather further afield to our friends and the growing markets outside the EU, which are untainted by the euroland crisis and are more linked to the dollar world.

Some years ago, an insurance company had the strapline, “We never make a drama out of a crisis.” It seems to me that whenever there is a crisis, in the EU generally and in euroland in particular, there is an attempt to make an opportunity out of it. However, it is not used as an opportunity to argue for what we would say is sensible—that perhaps the EU ought to do less; the argument is always that the EU wants more. I suppose that is the new logic. If there is a single currency, then given the pressures and strains of such divergent economies, the logic will be what the five presidents have come up with: there has to be more of the same, and words like “divergence”, “difference”, “independence” and “democracy” have no place in that.

My right hon. Friend mentioned that there are five presidents across the EU. Dombrovskis is the Vice-President for the Euro and Social Dialogue—I must say I had not heard of him before—and his words encapsulate what the situation is moving towards:

“The Economic and Monetary Union has been strengthened in recent years, not least in the light of the financial and economic crisis. Yet it remains incomplete.”

These people want more. They want a competitiveness authority so that there are common wage agreements across borders and a European deposit insurance scheme. Then they claim that Europe needs strengthened democratic accountability. I truly wonder how the people of Greece can reconcile the idea of strengthened democratic accountability with what they have just gone through.

[Richard Drax]

My right hon. Friend the Member for Wokingham made the point that we should not get in the way, because things are going down a path that he rightly identified as the correct one under the circumstances. Perhaps I am being naive, but should we not be screaming from the rooftops, “Stop,” for all the reasons my hon. Friend the Member for South Thanet (Craig Mackinlay) has just mentioned—should we not tell them to get out of this experiment before millions more suffer?

[Craig Mackinlay]

My hon. Friend makes a good point. Unemployment in many parts of euroland is now beyond any measure we have seen in respectable parts of the western world since the crises of the 1930s. For Greece, sadly, that unemployment is perhaps here to stay for a generation, if not more.

I mention Greece, but the people who need to ask themselves where they are going—perhaps they have not yet read the five presidents’ document—are of course the people of Germany. The recipe that the presidents propose is one of massive fiscal transfers guaranteed by the German taxpayer. Such transfers may work in the United States, and the people of Texas may be happy to support their colleagues, friends and family in Dakota, but I wonder whether that really holds true between Germany and Greece, which describes its supposed friends and colleagues in Germany in terms that I have not heard for a very long time.

I again pay tribute to my right hon. Friend the Member for Wokingham, but we need to recognise that what the presidents propose beyond 2017 requires a grand treaty change for the eurozone. If that is for them, fine, but it is certainly not for Britain. We have an opportunity to wrap together what we require, which is a proper treaty change to get a relationship that is in tune with the British people—a return to the free trade and friendship that we thought the EU was all about. Perhaps 2017 can be an excellent year for those who feel as many of my Conservative colleagues do, and they are in tune with many people outside this place and across the country.

I ask the Minister to consider that in the round. A crunch time has come, and it is obvious what our European colleagues want. They have not asked their people, and they dare not ask their people, but it is clear that this is becoming a Euro-state that is not right for Britain. I am in favour of a new relationship that I hope can be found for the good of Europe and for the good of Britain.