Oral Answers to Questions

Debate between Lord Hanson of Flint and David Gauke

Tuesday 9th July 2019 Commons Chamber

[David Hanson (Delyn) (Lab)]

8. What recent progress he has made on probation reform.

[The Lord Chancellor and Secretary of State for Justice (Mr David Gauke)]

I am pleased to have announced plans to streamline probation delivery, through the National Probation Service, to build on the role of the private and voluntary sectors in driving innovation and to better support skilled probation officers. These changes will allow the public, private and voluntary sectors to play to their strengths and ensure stronger supervision and support for offenders. We are now developing the commercial and operational frameworks that will underlie the future system, and we are planning for the transition. We are undertaking a full programme of market engagement to inform our plans, in addition to engagement with probation staff and trade unions.

[David Hanson]

By any stretch of the imagination, the changes to the probation service have been a shambles, fragmenting the system and increasing risk to the community at large. A simple “sorry” may also help the Minister’s answer, but will he give an indication of the cost of cancelling the current contracts next year? What will be the replacement costs for the state or other providers in taking over those services?

[Mr Gauke]

First, “Transforming Rehabilitation” introduced bold reforms, and steps have been taken to ensure there is more innovation within our system, but I recognise that significant elements of it are not working as needed, which is why we have made the changes.

On the right hon. Gentleman’s point about costs, it is worth bearing in mind that we originally expected to spend £3.1 billion on community rehabilitation companies over a seven-year period, and we now expect to spend £2.7 billion over the same period. In other words, over the lifetime of the contracts, we now expect to spend £405 million less on CRCs than originally forecast.

--- Later in debate ---

[Mr Gauke]

This is one of the rare occasions when I have to say that I disagree with my hon. Friend. For prolific offenders of minor crimes, it is my view that a non-custodial approach is the right one, but we need to ensure that that works effectively. That is why I have announced reforms to probation. One problem we have at the moment is that such offenders get a short custodial sentence, which only disrupts lives but does not allow any opportunity to do any work on rehabilitation.

[David Hanson (Delyn) (Lab)]

T3. I agree with the Secretary of State’s last point, but in order to achieve that he will need to reverse the trend that has seen a fall in drug and alcohol rehabilitation requirement orders from 170,000 five years ago to 120,000 this year. Will he look at that point?

[Mr Gauke]

I certainly will. We have recently announced an extension of the community sentence treatment requirement pilots. That is the direction that we need to be going in to address some of the substance abuse and mental health issues that often lie behind these prolific offenders who do cause great difficulties for society. If we want to reduce reoffending, we need to focus on that group and take effective, evidence-led measures.

Prisons and Probation

Debate between Lord Hanson of Flint and David Gauke

Tuesday 14th May 2019 Commons Chamber

[The Lord Chancellor and Secretary of State for Justice (Mr David Gauke)]

There is an important debate to be had about the involvement of the private sector and the voluntary sector in our justice system. It is right that we ask ourselves: how do we provide high-quality public services? How do we encourage innovation in order to raise standards? And how do we deliver the best possible value for money for the taxpayer? In answering these questions, there will always be debates about whether the private sector or the voluntary sector does too much or too little: do we make use of these sectors in the right way? Do we have the right incentives? And do we have the right supervision? In reaching a fair-minded conclusion, we should approach the evidence in a fair-minded way, looking at good and bad examples, and acknowledging where things work well and where they do not.

I have to say that such a balanced approach was entirely lacking in the speech we have just heard from the shadow Secretary of State. In a fairly lengthy speech, he had time to address this in a proper, balanced way. Instead, what we heard was simplistic, dogmatic and bombastic. The only thing anyone on this side of the House will remember about his speech is his abiding hostility to the private sector. Mind you, at least we will remember something from his speech, which, given his reputation, is more than he will ever do.

On prisons, the hon. Gentleman repeatedly made reference to the difficulties with HMP Birmingham. There is no doubt—I acknowledge this—that Birmingham was a failing prison and the standards at the time of the inspection were unacceptable. Her Majesty’s Prison and Probation Service had been working closely with G4S to try to resolve the issues, but it became increasingly clear that G4S alone was not able to make the improvements that were so badly needed. That is why we took the decision to step in, doing so at no additional cost to the taxpayer. It was right that we did that. The point I want to make is that where we believe it is right to step in and where we believe the private sector is not the right answer, we will step in.

[David Hanson (Delyn) (Lab)]

Can the Secretary of State just tell the House why it took an inspection by the prisons inspector to discover that G4S was failing in Birmingham and why this did not come from his own Department?

[Mr Gauke]

HMPPS did have concerns about how Birmingham was operating and the way it was working, and HMPPS was working closely with G4S to try to address this. It became clear, when the inspection was undertaken, that we were required to go further and that the level of intervention we had previously put in was insufficient. That is why we took the steps we did. We stepped in, putting one of our best prison service governors in charge, alongside a strong senior management team and 30 additional experienced staff. I would like to thank all of them for their hard work since we took that decision to turn around a complex and challenging establishment.

Oral Answers to Questions

Debate between Lord Hanson of Flint and David Gauke

Tuesday 12th March 2019 Commons Chamber

[David Hanson (Delyn) (Lab)]

T7. Youth justice funding has fallen from £145 million to £71 million in the past 10 years. Yesterday, the Local Government Association said, “No more.” Is it right?

[Mr Gauke]

My Department will continue to argue the case for spending our money sensibly and getting the best deal for justice.

Oral Answers to Questions

Debate between Lord Hanson of Flint and David Gauke

Tuesday 9th October 2018 Commons Chamber

[Mr Gauke]

We work across government on this matter and are considering a number of proposals across government, including with BEIS, on how we can encourage employers in this area, including on apprenticeships. Let me make a point I have made before: employers are increasingly looking at employing ex-offenders. We should all welcome that, and I would be supportive of any constructive steps to progress this.

[David Hanson (Delyn) (Lab)]

The biggest employer in Britain today is the Secretary of State and other Ministers, through themselves in their Departments and through the suppliers that they use. What steps has he taken to improve employment opportunities for offenders within his remit?

[Mr Gauke]

That is a good point. One thing we announced when I launched the education and employment strategy was the fact that the public sector—the civil service—was taking people on. We had a pilot in the north-west of England, which we are now extending to other parts of the United Kingdom. The Prison Service also takes on ex-offenders. The right hon. Gentleman is right to highlight this, and the public sector has a role to play in the area, too.

Oral Answers to Questions

Debate between Lord Hanson of Flint and David Gauke

Tuesday 10th July 2018 Commons Chamber

[Mr Gauke]

My hon. Friend raises several important points, and I will try to address one or two of them. On the need for us to work across Government, many issues are not just for the Ministry of Justice, but for the likes of the Department of Health and Social Care and the Department for Education. It is also the case that we want to work upstream, because if we can address the complex problems that exist, we can stop people committing crimes in the first place.

[David Hanson (Delyn) (Lab)]

Effective employment via the Through the Gate programme depends on effective community rehabilitation companies, which the Select Committee on Justice recently described as “wholly inadequate.” What plans does the Secretary of State have to fix community rehabilitation companies in Through the Gate?

[Mr Gauke]

The right hon. Gentleman is correct to say that the Through the Gate service needs to improve, and we are engaging with CRCs on that issue. We recognise it does not meet the standards we require, and it is important that we engage. We have been clear with the CRCs that they need to improve their performance, and we are in commercial negotiation with providers to secure the quality of services, including Through the Gate services, that we need.

Worboys Case and the Parole Board

Debate between Lord Hanson of Flint and David Gauke

Wednesday 28th March 2018 Commons Chamber

[Mr Gauke]

First, let me put on record my tribute to my hon. Friend for his tireless work on this case, as he has been a very strong advocate for the victims. On transparency, as I said, I hope that we can make progress in the course of the next few weeks. It is not for me to determine when the Parole Board will next look at John Worboys’ case, but I would be astonished if it were before we had new rules on transparency in place.

[David Hanson (Delyn) (Lab)]

Let me place on record, if I may, that Nick Hardwick is a decent man whom I have known for a long time professionally and personally. He has taken his resignation seriously today. With regard to the Secretary of State’s abolition of rule 25, he used the words “in its current form”. What areas of transparency does he expect still to be exempt?

[Mr Gauke]

The challenge in this—having seen in this case the decision notice by the Parole Board—is that there might be, for example, information provided by the prisoner to a psychologist, as part of the risk assessment, that is deeply personal. In order to have openness between, say, a prisoner and a psychologist, it must be possible for some of that information to remain confidential, so we cannot put everything out there. Indeed, there may be information relevant to victims that they would not want to be put into the public domain. As I say, a summary of the conclusions that the Parole Board has reached should be made available. The points made by Members on both sides of the House in saying that greater transparency is needed are absolutely right.

Parole Board and Victim Support

Debate between Lord Hanson of Flint and David Gauke

Tuesday 9th January 2018 Commons Chamber

[David Hanson (Delyn) (Lab)]

There is a third aspect to this, which is post-release supervision. Given that Dame Glenys Stacey, the chief inspector of probation, says that there is a fractured system, will the Secretary of State, as one of his first tasks, consider strengthening that post-release supervision system?

[Mr Gauke]

The right hon. Gentleman makes an important point, and I would certainly hope and expect that in this case the conditions will be stringent and rigorously enforced.

UK Economy: Post-Referendum Assessment

Debate between Lord Hanson of Flint and David Gauke

Monday 23rd May 2016 Commons Chamber

[Mr Gauke]

I shall try not to be drawn too much on the subjects of curry or Leicester City, although I of course congratulate Leicester City and look forward to their season, and possibly more, in the Champions League. Immigration policy for those outside the European Union is clearly a matter for this Government and for this House, and that will continue to be the case, whatever the result on 23 June.

[Mr David Hanson (Delyn) (Lab)]

Airbus, which employs 7,000 people across north Wales and north-west England and many thousands more elsewhere in the United Kingdom, has, with the full support of the trade unions, written to every employee of Airbus to explain to them why they should vote yes in the forthcoming referendum. Will the Minister confirm that the short-term and long-term risks outlined in today’s report are the very reason that companies such as Airbus have come off the fence to strongly support a yes vote on 23 June?

[Mr Gauke]

The right hon. Gentleman makes a good point. Businesses are perfectly entitled to write to their employees when they see a risk to the business that they undertake, and those consequences should be made very clear. It is striking how the concerns of individual businesses, big and small, about the consequences of leaving the European Union are consistent with some of the concerns that we have set out in the Treasury document—namely, that the UK would be poorer outside the European Union and that we are stronger, safer and better off within it.

Oral Answers to Questions

Debate between Lord Hanson of Flint and David Gauke

Tuesday 19th April 2016 Commons Chamber

[Justin Madders (Ellesmere Port and Neston) (Lab)]

13. What assessment he has made of which groups within the UK population will benefit from planned changes to corporation tax.

[The Financial Secretary to the Treasury (Mr David Gauke)]

Corporation tax cuts have been a central part of the Government’s economic strategy, and that strategy is working; there are 2.3 million more people in employment since 2010. The further cuts in the main rate announced at the Budget, which will bring it down to 17% by 2020, will benefit over 1 million companies, large and small. Lower corporation tax rates will support UK companies to invest and grow, creating jobs as they do so.

[Mr Hanson]

One of the justifications for the corporation tax cut was that businesses would pass it on to workers through the increase in the living wage. Evidence is now emerging that some companies intend to pocket the tax cut and squeeze conditions for their employees, so what steps do the Government intend to take to monitor that?

[Mr Gauke]

The cuts in corporation tax will result in greater investment in this country, and greater investment drives productivity growth, and productivity growth is what will drive higher living standards. Let us remember that it is this Government who have brought in the national living wage, and we have seen very large numbers of people see increases in their wages and salaries.

VAT Evasion: Internet Retailers

Debate between Lord Hanson of Flint and David Gauke

Thursday 14th January 2016 Westminster Hall

[Mr David Hanson (in the Chair)]

With due respect, I have had a release after 17 and a half years.

[Mr Gauke]

Yes, that is a very long sentence. I hope you are enjoying your new role, Mr Hanson.

I congratulate my hon. Friend the Member for Daventry (Chris Heaton-Harris) on securing this debate and setting out the case so well. I also congratulate my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) on his passionate speech. He is correct to say that I have met Mr Juretic and listened carefully to the points he raised.

I will turn to specific points, but first I want to acknowledge the important work that Her Majesty’s Revenue and Customs is doing in collaboration with other agencies, both in the UK and internationally, to tackle tax evasion, which, as the hon. Member for Wolverhampton South West pointed out, is what we are talking about today. Tackling tax evasion in all its forms is a priority for HMRC. Last year, HMRC collected and protected a record £26 billion in revenues from compliance activities and secured more than 1,200 prosecutions using intelligence, sophisticated risking systems and smart data.

The phenomenal growth in online sales in recent years, which we have heard about this afternoon, has made many people’s day-to-day lives much easier but presents significant challenges for HMRC. That is because the supply chains are often very complex and involve a number of different entities. Suppliers can be located overseas and their records are not always available alongside the goods. All those factors combined make it much more difficult to spot where tax and duty have been paid.

To make things more complicated, HMRC is looking for frauds taking place in the midst of large volumes of legitimate trade. It is far from our, or HMRC’s, intentions to get in the way of legitimate trade, so HMRC is mindful of the need to target its activities proportionately. Nevertheless, this is a significant issue that we are determined to tackle. Building on its expertise in tackling evasion, HMRC has brought together specialists from across the Department and established in spring last year a taskforce to tackle the specific customs and VAT frauds that we have been talking about. That taskforce currently has more than 75 live investigations open into businesses or entities suspected of flouting the rules, and that figure is expected to grow to 150 before the end of the 2015-16 financial year.

Retailers Against VAT Abuse Schemes has highlighted about 500 businesses that it alleges are complicit in these frauds in some way. My hon. Friend the Member for Daventry drew attention to that list, and other hon. Members have referred to it. I assure the House that HMRC has examined the RAVAS list closely. For reasons of taxpayer confidentiality, I am not in a position to know, let alone say, what conclusions HMRC has reached in respect of each of the companies listed by RAVAS. However, it would only be fair for me to say that one cannot assume every company on the list is non-compliant.

At this point, I should touch on VAT registration numbers, which a number of hon. Members raised, including the hon. Member for Ross, Skye and Lochaber (Ian Blackford). Not all sellers are required to be VAT-registered. Overseas sellers that supply goods, located outside the UK, have no requirement to be registered for UK VAT. If they are compliant, in those circumstances, they would pay import VAT at the border. Of course, that would be a sticking tax, as they would not be entitled to reclaim that VAT. There are complications in this area, and the absence of a VAT number does not, in itself, suggest that a seller is breaking VAT law.

[Philip Davies in the Chair]

The issue is if sellers are claiming to be outside the UK and selling from outside it, but are in fact storing goods in a warehouse in the UK and dispatching them from the UK to a customer here. That changes the circumstances, but I want to be clear that the absence of a VAT number does not necessarily mean that fraudulent activity is occurring.

HMRC is working jointly with other Government agencies, including carrying out joint visits with trading standards and sharing intelligence with UK Border Force, to address risks across the entire supply chain to ensure that all sellers who sell online pay all the taxes that are due. To give hon. Members a flavour of that work, in an operation just before Christmas, HMRC and trading standards seized goods worth half a million pounds. As HMRC’s programme of activity continues, and both its operational intelligence and understanding of fraud improve, it expects to make more interceptions and seizures of illicit goods.

I should stress the point about illegitimate and legitimate trade. HMRC has the powers to seize or detain all goods in a warehouse, for example, but it also has to think about the potential impact of its actions, for instance, on the end consumer. If HMRC were seizing goods that subsequently turned out to be there legitimately, I suspect many of our constituents would want to raise concerns.

We recognise the concerns that have been raised by compliant businesses. Clearly, it is very important that non-compliant businesses should not be allowed to establish any unfair advantage over compliant businesses, as that would distort competitiveness. Again, that point was rightly made by a number of hon. Members. Tackling these frauds is just as much about maintaining a level playing field for business as it is about collecting the tax and duty that should be paid.

That operational work is the first strand of HMRC’s work to tackle these frauds. The second strand is engagement with the online platforms on which goods are sold.

Oral Answers to Questions

Debate between Lord Hanson of Flint and David Gauke

Thursday 14th January 2016 Commons Chamber

[Mr David Hanson (Delyn) (Lab)]

6. What progress the Government are making on negotiating the removal of VAT on women’s sanitary products.

[The Financial Secretary to the Treasury (Mr David Gauke)]

I have written to the European Commission and to other member states setting out our strong view that member states should have full discretion over what rate of VAT they can apply to sanitary products, and that the matter should be considered in the context of the Commission’s action plan on VAT, which is now expected to be published in March

[Mr Hanson]

I am sure that the letter is very good, but I think the Minister should do more than that: I think that he should pursue the issue. When he does so, and when he succeeds—as I am sure he will—will he ensure that the money that he is currently providing from this unfair tax to finance domestic violence services is raised from general taxation? As a man, I think that it should be, so that the whole of society owns this problem.

Wales Bill

Debate between Lord Hanson of Flint and David Gauke

Wednesday 30th April 2014 Commons Chamber

[Mr Hanson]

What will happen to the people residing in England who, as the Minister’s hon. Friends have said, already use services in Wales such as the health service? Many people on the border who live in England use health and education services in Wales. Is it equitable that they do not pay the level of tax that might be levied by the Welsh Assembly in future?

[Mr Gauke]

As the right hon. Gentleman knows, the question of who is a Welsh taxpayer is dependent on who resides in Wales. I take it from what he says that he is opposed in principle to the devolution of income tax. He is nodding his head as if to say yes. He will be aware that his party has tabled an amendment suggesting that 15p, not 10p, should be devolved to the Welsh Government. I do not know how he reconciles his view with that of his Front Benchers.

[Mr Hanson]

I support my hon. Friends’ amendment to look at how this impacts across the board. The Exchequer Secretary must accept that there are people in Shrewsbury, Herefordshire and Worcestershire who use services in Wales. Would he support—I am not saying that I support this—a Welsh Assembly Government charging for services used in Wales and paid for by Welsh taxpayers but also used by English people who do not contribute to the Welsh tax burden for those services?

[Mr Gauke]

This is not about charging for public services. We have devolution of income tax in Scotland, where the issues that the right hon. Gentleman has mentioned may arise. I am surprised that, as a distinguished shadow Minister, he appears to be taking a position at odds with his own Front Benchers.

Changes to the Budget

Debate between Lord Hanson of Flint and David Gauke

Monday 11th June 2012 Commons Chamber

[Mr Gauke]

Again, I am grateful to my hon. Friend for his comments. We have listened to strong arguments and responded accordingly. That is what a sensible Government do—and I really must contrast that with the approach taken by the previous Government, in particular with regard to the 10p rate of income tax.

[Mr David Hanson (Delyn) (Lab)]

Does the Minister agree that business stability is important and that, for example, a caravan tax rate of 0%, 20% and 5% in six weeks is not good for business planning? Has he written to his hon. Friends who voted for those measures to apologise for hanging them out to dry?

[Mr Gauke]

Many Members on the Government Benches engaged with this issue in a constructive and thoughtful way, and helped us reach what I think was the right conclusion.

Tax Avoidance

Debate between Lord Hanson of Flint and David Gauke

Tuesday 17th April 2012 Ministerial Corrections

[Mr Hanson]

To ask the Chancellor of the Exchequer how many promoters HM Revenue and Customs (HMRC) has required to disclose tax avoidance schemes since May 2010; how many such schemes have been (a) investigated and (b) closed (i) since May 2010 and (ii) in each year since 2005; and how many schemes are under investigation by HMRC.

[Official Report, 19 October 2011, Vol. 533, c. 967-8W.]

Letter of correction from David Gauke:

An error has been identified in the written answer given to the right hon. Member for Delyn (Mr Hanson) on 19 October 2011.

The full answer given was as follows:

[Mr Gauke]

Since 1 May 2010 78 promoters have disclosed tax avoidance schemes under the Disclosure of Tax Avoidance Schemes legislation.

To remove any doubt about a scheme's effectiveness, legislation has been changed in relation to the following numbers of disclosed schemes in each year since 2005:

Finance (No. 3) Bill

Debate between Lord Hanson of Flint and David Gauke

Monday 4th July 2011 Commons Chamber

[Mr Hanson]

My hon. Friend makes a valuable point. She will know that the legislation passed by my right hon. Friend the Member for Edinburgh South West (Mr Darling) in the last Parliament allowed salaries of more than £1 million to be open to scrutiny, which would address the issue she mentions.

There is some merit in bringing this issue to the attention of the House, and I am grateful to my hon. Friend the Member for Hayes and Harlington for doing so. He will know that there are some issues to do with his amendment delaying corporation tax cuts, but I am grateful that he has addressed the issue and I hope the Minister will respond in due course.

Amendment 17 is about the enterprise investment scheme, which we support. In Committee, we asked the Minister whether he had state aid approval for the EIS and I would welcome an update on whether he has since made progress on that.

I have some sympathy with amendment 51, tabled by the right hon. Member for Gordon (Malcolm Bruce). On Second Reading and in the Committee of the whole House, we tabled amendments that mirrored his amendment in many ways, asking the Chancellor to produce before the end of September an assessment of the impact of taxation on ring-fenced profits, business investment and growth, including an assessment of the long-term sustainability of oil and gas exploration in the North sea. For the reasons mentioned by my hon. Friend the Member for Aberdeen North (Mr Doran), the way that the proposal was brought forward contained elements of surprise for the industry. There was a lack of consultation and there have been consequences. The right hon. Member for Gordon and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) both mentioned Statoil and the great impact that the decision has had on that company’s potential $10 billion—or £6.1 billion—investment in the North sea.

It is important that the Economic Secretary has had discussions—some potentially very exciting and energetic—with oil companies on these matters as part of her initiation into her role in government. I hope that she will ensure that she reports back. I also hope that the Minister will accept amendment 51, or at least accept an amendment in principle for the future.

Finally, although my hon. Friend the Member for West Bromwich East (Mr Watson) is not present today because of other matters, I very much welcome his amendment 9, which is part of this group. We raised the issue of video games tax relief in debates on the Finance (No. 2) Bill. However, we need to look at the issue again in detail, if only because the hon. Member for Wantage (Mr Vaizey) said when in opposition:

“We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years.”

He said that during the general election, on 13 April 2010. He is now the Under-Secretary of State for Culture, Olympics, Media and Sport, yet he has been sat on by the Chancellor of the Exchequer, who said in his Budget statement last June:

“In the current climate, with the deficit the size…all those reductions in tax must be more than paid for by other changes to business taxation, so we will not go ahead with the poorly targeted tax relief for the video games industry.”—[Official Report, 22 June 2010; Vol. 512, c. 175.]

My hon. Friend’s amendment 9 asks the Government to look again at the issue. I simply put on record the fact that, yet again, those in government said one thing during the election and something else afterwards. We need to encourage the video games industry so that we can compete on a global scale.

In summary, there are some useful amendments in this group. I cannot accept everything that the hon. Member for Amber Valley said, but the other amendments before us have some merit. I look forward to hearing what the Minister has to say.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

We have had an interesting and wide-ranging debate on this group of amendments, which propose a number of changes to the taxation of business. Let me start by reiterating our position on business tax. The first step in the Government’s plan for growth is a competitive UK tax system. In fact, the Government’s aim is to create the most competitive corporate tax regime in the G20, and we have been clear about how we intend to achieve that. Last November we published our corporate tax road map, setting out our plans for reform over the next five years and the principles underpinning those reforms. I am quite clear that if we are to provide business with the certainty that it needs to invest in the UK, tax reforms need to maintain stability, avoid complexity and ensure a level playing field for taxpayers.

Let me deal first with the amendments tabled by the hon. Member for Hayes and Harlington (John McDonnell), and in particular amendment 15, which deals with directors’ pay, and on which we saw an unlikely alliance between him and my hon. Friend the Member for Wycombe (Steve Baker) in defence of the interests of capital versus workers—if I can phrase it in a way that will please my hon. Friend but not the hon. Gentleman—albeit the highest paid workers. It is worth noting that both hon. Members have made many declarations of independence, and today was no exception. As I have said, a competitive tax regime is the foundation of our plan for growth, and the consequence of amendment 15 would be to delay the reduction in corporation tax.

The Government take the essence of the hon. Gentleman’s concern—directors’ remuneration—seriously; indeed, my right hon. Friend the Secretary of State for Business, Innovation and Skills raised it on 22 June in a speech to the Association of British Insurers, asking how we can ensure that directors’ remuneration is effectively linked to company performance. To help answer that question, the Government already have plans to consult in two relevant areas. In July, the Department for Business, Innovation and Skills will look at the narrative aspects of reporting directors’ remuneration, examining the provisions dealing with the disclosure of directors’ remuneration and making the link to company performance much clearer. In the autumn, the Department will explore other policy options related to the role of remuneration committees and company accountability to shareholders.

Turning directly to the proposals made by the hon. Member for Hayes and Harlington, let me first remind him that UK-quoted companies are already required to publish a directors’ remuneration report. That includes full individual details of each director’s pay, including salary and bonuses, share schemes and all other forms of remuneration. His proposal to make the remuneration vote binding in nature would raise difficulties, as such a vote would inevitably cut across contractual arrangements already entered into between the company and the director. That is why the vote is currently advisory in nature.

--- Later in debate ---

[Mr Gauke]

I have given way to the right hon. Gentleman on a number of occasions, and I think it is time to conclude.

I have explained why the assessment of the additional rate of income tax requested by my right hon. Friend the Chancellor must be prepared by Her Majesty’s Revenue and Customs. I have explained that the analysis the hon. Member for Hayes and Harlington seeks already exists, and I have explained why the Government’s approach to assisting the lowest-paid public workers is the right one. There is no need for these amendments, so I ask for them to be withdrawn.

[Mr Hanson]

What is clear is that my right hon. Friend the Member for Birkenhead (Mr Field) has exposed completely the fact that the Chancellor of the Exchequer promised one thing at the election and one thing in his Budget, and has not delivered on that promise completely. I know that we will return to that issue during the next few weeks and months.

On the issue of the Office for Budget Responsibility, I wish to press amendment 10 to a Division and I urge my right hon. and hon. Friends to support me in the Lobby.

Question put, That the amendment be made.

Finance Bill

Debate between Lord Hanson of Flint and David Gauke

Tuesday 28th June 2011 Commons Chamber

[Mr Hanson]

I remember the hon. Member for Redcar standing with the Deputy Prime Minister in front of a poster that said “Tory tax bombshell”. I find it amazing to hear the hon. Gentleman speak this evening as an apologist for the Conservative Government’s imposition of VAT on people in Britain.

New clause 10 calls for a review of the assessment of the impact of VAT on UK economic growth over the next three months. As Members know, last Tuesday we voted on a Labour motion, which was opposed by the Liberal Democrats, to cut VAT on a temporary basis to 17.5% while economic growth is restored. The Conservative party voted against that motion, which would have ensured that we had the VAT cut proposed today.

[Mr Gauke]

The right hon. Gentleman will be aware that tax law is made in Finance Bills. Given that we are debating such a Bill, will he explain why the official Opposition have not brought forward their own proposals, in a form that could be selected, to cut VAT on a temporary basis, or have they abandoned that policy?

--- Later in debate ---

[Mr Hanson]

I am afraid that every Labour Member believes that VAT is a regressive tax that hits the poorest hardest. When the Conservative party—

[Mr Gauke]

rose—

[Mr Hanson]

Wait. When the Conservative party—[Interruption.]

[Mr Hanson]

When the Conservative party, supported by Liberals who at the general election opposed VAT increases, imposes VAT increases, it does so on businesses and on jobs and hardest on the poorest people in our society. I will now give way to the Minister so that he can explain that.

[Mr Gauke]

The right hon. Gentleman says that every Labour Member opposes the increase in VAT. Will he explain, first, why so few of them voted against it last year and, secondly, why the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), according to Peter Mandelson’s memoirs, was in favour of raising VAT to 19%?

[Mr Hanson]

I have great respect for my right hon. Friend the Member for Edinburgh South West (Mr Darling), and he is a very good friend of mine, but the issue tonight is that no Labour Government increased VAT above 17.5%. Indeed, the same Chancellor of the Exchequer, my right hon. Friend, in similar circumstances to those that we face now, when there is pressure on jobs, on businesses and on incomes, temporarily reduced VAT to help hard-working families to cope.

--- Later in debate ---

[Mr Hanson]

The hon. Member for Caernarfon has not moved a new clause—the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) moved it. However, we will not be supporting it because it does not give an end date for the potential VAT reduction. It would be a permanent reduction. We want a review of the impact of VAT on business, jobs and living standards.

[Mr Gauke]

I am trying to understand the Labour party’s position. If it believed in the policy announced by the shadow Chancellor a week or so ago, it would want first to reduce VAT, and then to make a decision on when to increase it. I do not understand, therefore, why it is not supporting the new clause, which takes that first step—it does what the Labour party want to do.

[Mr Hanson]

I will try again, slowly. The new clause calls for a permanent cut in VAT to 17.5%. It does not do what my right hon. Friend the Member for Morley and Outwood wishes to do—what we voted on last Tuesday—which is to implement a temporary cut in VAT until we secure strong growth.

Finance (No. 3) Bill

Debate between Lord Hanson of Flint and David Gauke

Wednesday 4th May 2011 Commons Chamber

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to begin today’s proceedings by winding up today’s debate, or at least the first of our debates this afternoon, which was one of our debates this morning. It is on clause 4, which sets out the main corporation tax rate for the financial year beginning on 1 April 2011, reducing it to 26%. The measure introduces a further reduction of 1% for this financial year, in addition to the 1% cut that was legislated for last year. Further 1% reductions to the main rate will be made in each of the next three years, taking the rate to just 23% in 2014-15.

Those changes will lower the tax bill of around 45,000 companies that pay tax at the main rate, and of 40,000 companies that are taxed at the main rate but that benefit from the marginal relief. To explain that further, the changes will affect incorporated businesses that have profits of between £300,000 and £1.5 million that pay corporation tax at the main rate reduced by marginal relief, and those that have profits of more than £1.5 million that pay corporation tax at the main rate in full. As I said, clause 4 sets the rate at 26%—the adjustment to the marginal relief fraction is made in clause 6.

Clearly, a thriving private sector must be at the heart of our plan for growth. As we reduce spending, as we must if the UK is to live within its means, only the private sector can spearhead the recovery. We must therefore show that the UK has an attractive tax system and is open for business. This Government are taking action to show the international business community just that. The UK is the right place to do business, and our tax system is one reason why. Our priority is securing strong, sustainable and balanced growth, and clause 4 will help to see to that by supporting investment and by incentivising activity across the economy.

[Mr David Hanson (Delyn) (Lab)]

I realise that we debated this much earlier this morning, but much of our discussion was on the outcomes of this process. The Opposition do not object to the purpose of the corporation tax cut, but I would welcome clarity from the Minister. How many jobs does he believe will be saved because companies do not move abroad because of the cut, how many new jobs will the cut attract by bringing new investment into the country, and what growth does he expect to result from the investment that we are taking away? As was said last night, we are forgoing a considerable sum of corporation tax income, and I should like clarity on what the Minister believes will be the solid outcomes of that.

[Mr Gauke]

First, I warmly welcome what the right hon. Gentleman says about supporting the reduction in the corporation tax rate. In seeking to persuade investors to invest in the UK, it is important that we have a strong, solid, cross-party consensus that the UK should have competitive, low rates of corporation tax. To the extent that the official Opposition take a clear, supportive view of what the Government are trying to do, that is helpful to our ambitions, and I welcome it. I am keen to ensure that they maintain that position.

The right hon. Gentleman asked about the specific impacts and outcomes of the measure. If he will be patient and let me first set out why I think the steps that the Government have taken on corporation tax are helpful, I will say as much as I can about the likely outcomes later. I should also thank him for quoting at considerable length one of my speeches on this subject. I am tempted to refer him to his own speech when he quoted my speech, but that would be a little circular.

--- Later in debate ---

[Mr Gauke]

Let me turn to the impact of this measure. When the OBR analysed the corporation tax package that was announced in 2010, it made it clear that that would help with the cost of new capital investment in the UK. It expected that the recovery would be supported by business investment, and the reductions in corporation tax underpinned its forecast for strong business investment growth over the next five years. In June, the OBR increased its estimate for expected investment and gross domestic product in response to the corporation tax package. Its analysis was that the resulting 3% reduction in the cost of capital would

“promote a higher level of business investment…than would otherwise have been the case.”

In total, that resulted in a forecast of an additional £13 billion of business investment by 2016.

The right hon. Member for Delyn asked about particular businesses and sectors. However, the best way to run an economy is not the Government dictating from the centre. Running an economy is about providing a competitive environment in which businesses from all sectors can grow. Making sectoral forecasts tends to be difficult, and there are severe accuracy questions.

[Mr Hanson]

I am trying to be helpful and to seek clarity on what the Exchequer Secretary would regard as success, given the investment he is making through not collecting the previous level of corporation tax. In our discussions on the National Insurance Contributions Act 2011 before Christmas, an amendment was tabled to ensure an opt-out in certain parts of the United Kingdom. An assessment was made of the number of jobs that would be created by the measure. I am asking whether he has made a similar assessment with his officials of the potential of this measure to have an impact on growth and jobs in our economy.

--- Later in debate ---

[Mr Gauke]

Let me make this point. The hon. Gentleman talked about being in west Worcestershire. I was there two weeks ago for a meeting with local businesses. I met manufacturers who had full order books and were expanding, investing, welcoming the opportunity to expand their businesses and recognising that the Government were putting in place the conditions for strong private sector growth. It is through such growth that we can have sustainable public finances and we can afford to have the public services that we would all like. However, it is no good spending money that we do not have. The move towards a lower rate of corporation tax will enable us to have stronger, sustainable public finances and a dynamic private sector. It supports the Government’s ambition to achieve the most competitive tax system in the G20, and I therefore commend clause 4 to the Committee.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 10

Plant and machinery writing-down allowances

[Mr Hanson]

I beg to move amendment 6, page 6, line 22, at end add—

‘(14) The Chancellor shall publish, by 31 October 2012, an assessment of the impact of the changes to capital allowances on the UK economy.’.

--- Later in debate ---

[Mr Hanson]

Once again, Mr Evans, I welcome you and look forward to your time in the Chair as we debate clause 35 of the Finance Bill. You will of course be aware that we tabled an amendment to the clause that you have chosen not to select, which is your prerogative; we are relaxed about that. However, it is important that we test and discuss the issues in the clause with Ministers to examine its impact, as well as the impact of other changes that form part of this package of measures.

Our concerns centre on the effects of the various changes that have been made to child care support. Clause 35 introduces changes to the higher rate taxpayer relief for child care—an issue that caused some discussion in the last months of the previous Labour Government and will undoubtedly cause further discussion today. We need to look at the clause not only in its own context but in the light of the wider taxation and benefit policies that the Government are progressing. This is part of a number of measures that will address a range of issues to do with child care and families generally. I also want to consider some of the technical matters that outside groups have raised with me and with other hon. Members regarding the wording of the clause and, if I may slightly stray outside the scope of the debate, the wording of schedule 8, which is related to it and to which we will return in Committee in due course.

The background to clause 35 will be familiar to my right hon. Friend the Member for Edinburgh South West (Mr Darling) because it had its genesis in discussions that took place as part of the previous Labour Government’s proposals. Members will be aware that in 2009 my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), as Prime Minister, announced to the Labour party conference proposals that he brought before the House later that year regarding child care relief and basic rate relief.

In government, Labour’s plan was to use the savings from limiting child care relief to basic rate relief to fund an expansion of child care places for two-year-olds in England, with potential consequential reliefs and amendments for Wales, Scotland and Northern Ireland. There was some controversy and discussion on those matters. The Exchequer Secretary will be aware that there was extensive discussion in the Labour Government about those matters, and that under the leadership of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath, they settled on limiting child care relief to basic rate relief, with the purpose of funding an expansion of child care places for two-year-olds.

I would like clarification from the Exchequer Secretary today on—[Interruption.] Don’t worry, I am still here. The hon. Member for Crewe and Nantwich (Mr Timpson) will know that one picks up the occasional sedentary remark. Unless I reflect back on the last remark, it will not appear in Hansard, and on this occasion, I will not reflect back on it. As can be seen, Government Members have expressed an interest in my speech.

The Government have made changes to the Labour Government’s proposals on basic rate relief and the expansion of child care places for two-year-olds. Indeed, the Government’s proposals are markedly different on the child care element, to which the relief is linked. The Labour Government had planned some 250,000 child care places for two-year-olds from low-income families, although I accept that that was scaled down to about 65,000 child care places. The Government proposals before the Committee will increase from 10 to 15 the hours for the pilot of child care places for 28,000 children. There is a significant expenditure saving in clause 35, compared with the Labour Government proposals. I think that it is worth focusing on those issues today, because if the scope of the discussion that I have given is accepted, this measure cannot be divorced from the reasons why the Labour Government intended to undertake the purpose of clause 35 and what the current Government are now doing with that resource.

From January this year, value added tax will cost families with children an extra £450 a year on average. That is one of a range of measures on the table that will press hard on the ability of individuals to provide child care at affordable levels.

The Government are pressing ahead with the change that my right hon. Friend the Member for Kirkcaldy and Cowdenbeath proposed in government to pay for the trebling of the number of free child care places available to the most deprived two-year-olds. We accept that the relief, which is manifested in clause 35, was badly targeted. That is why we made those changes in government, and our proposal would have paid for more of the poorest in our society to have child care. I want the Exchequer Secretary to explain how the resultant savings from the proposals will be invested to support issues such as child care for people in our community.

At the same time, the Government are hitting family finances in other ways, such as through child tax credits and through child benefit being frozen, and indeed being cut for many people in the years ahead. The families who will be affected by this measure will soon be affected by other measures, particularly that on child benefit. The taxation changes in clause 35 need to be seen in the light of the decision to withdraw child benefit from April 2013 from households containing at least one higher rate taxpayer.

[Mr Gauke]

I am following the right hon. Gentleman’s speech closely. Will he clarify for the Committee whether the Labour party has a specific proposal on what the savings from this measure should be used for? Is it committed to using them for nursery places, or for something else?

[Mr Hanson]

As I have said, the Labour Government’s original proposal, which was announced by the then Prime Minister, was to use the resources saved from this badly targeted tax relief to support the extension of child care for two-year-olds in poorer families. Our purpose at the time was to expand the number of places to about 250,000. There were discussions in the Government, and the Exchequer Secretary knows that the figure we settled on was about 65,000 child care places. I understand that he proposes to stick to the pilot of 28,000 places, and I would be grateful for clarification on that, and to extend the number of hours to 15 hours per week. That is significantly less than what was proposed by the previous Government.

[Mr Gauke]

Does the Labour party remain committed to its proposals in government to use that funding for 65,000 child care places?

[Mr Hanson]

Actually, Ministers answer the questions and the Opposition ask them. I have been clear with the Exchequer Secretary about the proposal that we outlined in government, and that will be our view. We are potentially four years from government.

I am simply pressing the Exchequer Secretary to explain what the impact is of clause 35, and why there has been a significant change—unless he wishes to clarify that further—to the proposals announced by the previous Government on extending child care for two-year-olds. It is important that we know not just what the clause means, because it will restrict child care support for higher rate families. The purpose of our proposal in government was to expand child care arrangements for poorer and lower-income families. The Government are now squeezing the middle while—unless the Exchequer Secretary clarifies that the contrary is the case—not providing the same level of child care places that were originally proposed by the Labour Government.

This measure is coupled with a range of other measures, which are not before the Committee in clause 35, but which I hope you will give me the scope to touch on, Mr Evans. There are real-terms cuts to child benefit, which is frozen at £75.40 this year for families; the baby element of child tax credits, which is worth £545 a year, has been scrapped; benefits have been set on a permanently lower path of inflation; the basic and 30-hour elements of working tax credit have been frozen; and the second income threshold for the family element of child tax credit has been cut. Those measures all add to the pressures on child care responsibilities and on families.

--- Later in debate ---

[Mr Gauke]

Clause 35 makes changes to ensure that all recipients of employer-supported child care who joined schemes on or after 6 April 2011 receive the same amount of income tax relief as basic rate taxpayers. After all the talk about the attack on universality, it is worth pointing out that clause 35 ensures that everyone receives the same amount of income tax relief as basic rate taxpayers.

Reform of this provision was announced in 2009 by the previous Government. One might therefore have expected the Labour party to support the measure. When the right hon. Member for Delyn (Mr Hanson) spoke, it seemed likely that they would do so, but then we heard clearly and unambiguously from the hon. Member for Hackney North and Shoreditch (Ms Abbott) that she would oppose it—of course, she is a Front Bencher and a leading light within the Labour party, and she very nearly became its leader. The hon. Member for Easington (Grahame M. Morris), in a lengthy speech, condemned the measure, although he may in fact have been talking about another measure altogether, and the hon. Member for Denton and Reddish (Andrew Gwynne), in an important speech—his word, not mine—also set out his opposition.

It is striking that the Opposition are now walking away from a proposal of the right hon. and absent Member for Kirkcaldy and Cowdenbeath (Mr Brown) and a policy of the previous Government, just as they walk away from any attempts at economic credibility.

[Mr Hanson]

rose—

--- Later in debate ---

[Mr Gauke]

I look forward to seeing how Hansard transcribes, “this close”. I should point out, however, that the hon. Lady did stand under AV, and her votes probably contributed to the final result, so she can be pleased with that—we certainly are.

[Mr Hanson]

I want to make it clear to the Minister that I have said from the Dispatch Box that this measure had the support of the previous Labour Government, but it had that support on the basis, first, that through the funds saved it would provide child care places to the poorest in our community, and, secondly, that there would be no cuts to, or freezing of, child benefits. That support was also given in the context of the other measures that my hon. Friends have outlined today. There is a difference.

[Mr Gauke]

That is very clear, and I am grateful for that intervention. Clause 35 will result in a saving to the taxpayer of £100 million per year, because higher and additional rate taxpayers will no longer receive beneficial treatment. That target would not be met if the clause was defeated. The Opposition’s position is therefore very clear: they would spend this money on child care. That is an additional spending commitment that we will add to their considerable total of spending commitments. I understand that all additional spending commitments from the Labour party have to be cleared by the shadow Chancellor and the Leader of the Opposition, so I am sure that they have gone through that process. However, we note that additional spending commitment. We believe that we need to get the deficit down. I am sorry that the Labour party does not accept that, or at least does not have proposals to do it. We note also that even in this time of financial crisis in the public finances, it is making additional spending commitments.

National Insurance Contributions Bill

Debate between Lord Hanson of Flint and David Gauke

Thursday 13th January 2011 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right. Certain compliance problems would arise. Could we tell whether an address was for work or home? The scheme would become more complicated. Those claiming would need to ensure that they were in one particular postcode area or another, and there would be issues with boundaries. Distortions could be much greater than under the simpler scheme that we have introduced with essentially one boundary and three excluded regions. A host of difficulties would arise if we tried to follow the sub-regional route. Where would we draw the line? Would we end up considering boroughs, wards or polling districts? Exactly how would that work? We will revert to the matter later, but my hon. Friend is right.

Amendments 5 and 6 are aimed at providing flexibility to reduce the duration of the regional employer national insurance contributions holiday for new businesses. This would reduce the cost of the holiday to the Exchequer, and correspondingly reduce the benefit to new businesses. As I have explained, the Government want to target available resources to the regions most dependent on public sector employment. We do not intend to widen geographical coverage, and therefore have no need to find ways of reducing costs. We know that this scheme will reduce labour costs for new businesses, and has been widely welcomed by their representatives.

We have acknowledged that beyond this there is a good deal of uncertainty about exactly how the scheme will pan out in practice. However, introducing some flexibility to change the details of the scheme as proposed in these amendments would increase uncertainty for those who might potentially benefit, and could risk inhibiting decision making. This particular proposal could affect those who are already benefiting from the scheme, or those who are currently considering setting up a new business bearing in mind the Government’s policy. For example, a new business set up this month, which plans to take on employees towards the end of this year, would not get the full year’s holiday for these employees if we were to stop the scheme in September 2012.

I hope that the right hon. Member for Delyn would agree that we were right to start operating the scheme as soon as we could, in anticipation of legislation being passed. Had we not done so, the benefit to businesses would have been delayed, and new businesses that had planned to start operation might have delayed in order to benefit fully from the scheme. I am conscious of the fact that the scheme requires the consent of Parliament, and we have been very clear about that in our guidance to potential beneficiaries. We are not pre-empting the decisions of Parliament. However, I hope that hon. Members would agree that it would not be desirable to withdraw the benefits we had planned to give to entrepreneurs who have already decided to set up in business. That risk applies to these amendments, and I am advised that as drafted the amendment is insufficient to provide a mechanism for extending the holiday, and does not therefore meet the intended aim.

With the commitment I have made today on the reports, I hope that the right hon. Gentleman will withdraw new clause 1 and, in the light of my comments, not press amendments 5 and 6.

[Mr Hanson]

We have had a useful debate. I tabled the new clause and amendments to secure from the Exchequer Secretary a commitment that the expenditure that we are forgoing—some £940 million—will be monitored and reviewed for effectiveness, that a mechanism will be put in place by which we can judge where, for whom and how it is having a benefit, and that we will review take-up over the three years of the scheme. I am reassured that he has reaffirmed what he said in Committee and will produce information on take-up on a regional basis. I genuinely welcome that.

It might help if the Exchequer Secretary could indicate—he did not do this in his response—the current level of take-up of the scheme. In early December, at the end of the Committee stage, he mentioned that about 1,100 businesses had taken it up. One of our concerns was that his ambitious target of 400,000 over the duration of the scheme would not be met because of the slow take-up in the first six months. It would help initially if he could give that information now.

[Mr Gauke]

I am grateful to the right hon. Gentleman for letting me intervene. The latest number we have is 1,500, which has increased, obviously, from the 1,100 just before Christmas.

[Mr Hanson]

The key issue—this is one reason I have suggested an annual report—is that 1,500 is significantly less than the trajectory we would hope for and which is necessary to achieve a take-up of 400,000 by the end of the scheme. It is already six or seven months since the Exchequer Secretary announced the scheme, and we effectively have two years this September—until September 2013—before completion. A target take-up of 400,000 and today’s take-up of 1,500 show that the trajectory is not there.

I intend to withdraw the new clause—the Minister can relax in that knowledge and take it as a helpful contribution to the debate—but I hope he will still reflect on the fact that one reason we have asked for an annual report is to ensure that we are able to know every year what the trajectory of the take-up is and in which regions and sub-regions it is occurring. If, for example, by the end of 2011, 30,000 or 40,000 businesses have taken up the scheme, and there is a capacity of 400,000 and just two years left of the scheme, a considerable effort would be needed to generate those new businesses in the two years.

If the Minister does not want to build in failure to his scheme, he needs to monitor that and, if need be, consider the suggestions we will make later about expanding the scheme into other regions, such as London and the south-east, to ensure that the 400,000 take-up that he wants is met. I will make the case later, supported by my right hon. and hon. Friends, that high levels of public sector employment in London and the south-east region will be hit by public spending cuts; without the necessary debate on those issues generally, that will happen as much in London and the south-east as in north Wales, the north-west, Yorkshire, Scotland, Northern Ireland and other parts of the United Kingdom.

If we do not have the trajectory of take-up that the Minister anticipates, we might end up with a scheme that, after three years, does not deliver a take-up of 400,000. At the same time, colleagues in London and the south-east and eastern regions will have been impacted by public spending cuts, but their constituents will not have benefited from that scheme. In tabling the new clause and amendments, I was trying to give the Exchequer Secretary some flexibility to enable him to design the scheme, review it and bring back suggestions accordingly. More importantly, hon. Members on both sides of the House, including the hon. Member for Wimbledon (Stephen Hammond), whose constituency will not benefit from the scheme, can assess its impact.

We welcome the holiday and think it will have a positive impact, although it will not compensate for the things that my hon. Friend the Member for Luton North (Kelvin Hopkins) mentioned. We will have to consider what its outputs are, whether we achieve them and whether the scheme is successful, and we will return to these matters in parliamentary questions. I hope that the Exchequer Secretary will reflect on some of those issues before the Bill reaches another place. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Clause 3

Increased product of additional rates to be paid into National Insurance Fund

--- Later in debate ---

[Mr Gauke]

The Government are doing a great deal to help London. We need only consider the transport infrastructure as well as the fact that we are protecting investment in Crossrail, in upgrading the tube and in Thameslink. We are taking a number of steps. I think it is astonishing that Labour is complaining about the fact that some businesses will not receive a reduction in their national insurance contributions when its policy at the last general election was that businesses should be paying more.

It is very helpful to look at the well-remembered interview with the shadow Chancellor on the “Today” programme on 4 January, when he said that we need to get the structural deficit eradicated and that there was no argument about that. He recognised the existence of a structural deficit and did not particularly differ from the Government’s position on the size of the structural deficit. There was a disagreement on timing—I think he disagreed with his own policy on timing, but he disagreed with the Government’s, too. He said that the balance between public spending cuts—we do not know which of our proposed public spending cuts the Opposition support—and tax rises should be 60:40. I think that the proportion for tax rises was 40%, although it was not entirely clear.

The shadow Chancellor was asked by Evan Davis:

“In principle you would like VAT not to go up and instead, at some point, not now, National Insurance to go up by more?”

The shadow Chancellor’s response was, “Yes.” He said that that was the Labour party’s argument at the general election and that it was still its argument now, because national insurance is a better tax. That is the Opposition’s position—they want to increase employers’ national insurance contributions. They oppose all the cuts and they oppose our VAT increase, but they want to increase national insurance contributions. Yet when we have a Bill in this House that provides a reduction in national insurance in some areas, their biggest complaint is that they want to do it in more areas. How incredible is that? How lacking in coherence is that policy?

[Mr Hanson]

Will the hon. Gentleman tell the House why the net benefit of this Bill as a whole is a £1.42 billion increase in national insurance for employers, even after the thresholds he has introduced?

[Mr Gauke]

The right hon. Gentleman knows the state of the public finances that we have inherited. We have pursued the policy that we set out in our party manifesto before the general election and have reversed the most serious effect of Labour’s jobs tax. The Opposition’s policy is to go further—they want a bigger jobs tax. The increase in the rate for employers’ national insurance contributions, which is mitigated by the increase in the threshold, involves the rate going up from 12.8% to 13.8%—I say that for the benefit of any Labour Members, including the shadow Chancellor, who are not quite aware of that. To raise the same amount of tax as the VAT increase would have done, Labour would have had to increase that rate not just to 13.8% but to 16.7%. What do hon. Members think that the impact on the Thames Gateway, east London and jobs in Walthamstow would have been if we had pursued that policy, which the Labour party believes in? It does not have much by way of economic policy, but that is one of them.

--- Later in debate ---

[Mr Gauke]

That is the same Federation of Small Businesses that said that the Labour party’s policy to increase national insurance contributions would cost about 52,000 jobs just among its own members.

We have touched on the fact that labour markets are much bigger than ward, borough or constituency boundaries. It is not quite clear what the Labour party would do if it were to extend the scheme. Its policy seems to be that it would remove the scheme from some parts of the regions that would currently benefit. It is not quite clear how the Labour party would do that. I do not know—perhaps the right hon. Member for Delyn could explain—whether the plan is that the scheme would be available in Flint but not in Prestatyn. I am not quite sure what the Labour party has in mind. Perhaps it thinks that the scheme should be available in Oldham but not in Saddleworth. I really do not know what the Labour party wants to do with the scheme, but it clearly wants to increase national insurance contributions, not to reduce them, despite what we have heard this afternoon.

The NICs holiday is targeted at regions and countries with the highest proportion of public sector dependence, to encourage new businesses to start up and take on employees. Expanding the holiday to the whole economy would undermine the policy rationale. I therefore ask the right hon. Member for Delyn to withdraw the amendment.

[Mr Hanson]

We have had a very good debate, and my right hon. Friend the Member for East Ham (Stephen Timms) and my hon. Friends the Members for Walthamstow (Dr Creasy), for Luton South (Gavin Shuker), for Ilford South (Mike Gapes) and for Luton North (Kelvin Hopkins) have put the case strongly for their constituents to be included in the scheme.

The scheme does not do what is says on the tin. It will not fulfil the Minister’s objectives. It will not help regions and areas with the highest public sector employment. I reiterate for the House’s benefit that 23 of the top 100 constituencies in the country for public sector employment will not benefit from the scheme. The Minister knows that we have suggested alternatives, and my hon. Friend the Member for Luton South mentioned a range of ways that we could cut the cake to include London, the south-east and east, so that those areas of high deprivation with high public sector employment could benefit from the scheme. I am not satisfied with the Minister’s response. We need to ensure that the scheme is fair and equitable. I therefore intend to press the amendment to a Division.

Question put, That the amendment be made.

--- Later in debate ---

[Mr Hanson]

This is the fourth Treasury Bill that I have dealt with as Opposition Treasury spokesman in four months, and it is the fourth Bill that has reached this stage without a single amendment being passed, so I am continuing with my fine record of scrutiny but little success in making changes.

I want to be clear at the start that despite concerns about some aspects of the Bill, we support the broad thrust of the measures before us. I note, however, that despite the rhetoric about national insurance that occurred at the general election, the Bill takes through the national insurance contribution increase of 1%. I accept that the Minister has included in the Bill changes to the employers’ threshold, which will make a contribution towards those costs. However, even after that has taken place, the Bill still brings in a rise that will cost businesses about £1.4 billion a year. I make no complaint about that, because we proposed to do it at the election; my complaint is that there has been a lot of smoke and mirrors from the Government in their approach to national insurance.

[Mr Gauke]

As the right hon. Gentleman will know, the policy that we are pursuing is entirely consistent with what we set out in our manifesto. Given the position of his party and the shadow Chancellor on this, presumably they will be opposing the increase in the threshold for national insurance contributions that will be introduced very shortly.

[Mr Hanson]

The electoral rhetoric does not match the actuality of this Bill. The Minister has rightly said that threshold increases were trailed in the election manifesto, but £1.4 billion of extra expenditure on businesses is still being put forward in the Bill. I make no complaint about that, as it formed part of our manifesto commitments. However, we should examine the electoral rhetoric. During the election the Conservatives said, “Let’s Stop Labour’s Jobs Tax”, but they are still executing, through this Bill, some £1.4 billion-worth of extra costs on employers; again, we have no objection to that. We will look at all these matters in due course and make our judgments when we see the proposals that the Government bring forward. However, given what was said at the election, there is still a sting in the tail for employers in the small print of what the Minister has brought forward today.

My right hon. Friend the Member for Edinburgh South West (Mr Darling) announced in the pre-Budget statement on 9 December 2009 that we would increase national insurance contributions by 1%. However, in this Bill there is not only that increase but, side by side with it, the 2.5% increase in VAT that the Government have introduced. The Minister has put an extra £1.4 billion on national insurance and, at the same time, increased VAT. At least we were clear about our objectives in the election. However, we will support the Bill today.

We support the national insurance holiday, which engendered most debate in Committee and on the Floor of the House. We think it is important to consider measures that encourage business, but we disagree with the exclusion of London and the south-east and eastern regions. We have made the case on that issue and I hope that the Exchequer Secretary will reflect on it.

This debate has been very positive. I thank my right hon. and hon. Friends who have contributed, particularly those from London and the south-east and eastern regions. I thank my hon. Friend the Member for Nottingham East (Chris Leslie) and the Whip, my hon. Friend the Member for West Ham (Lyn Brown), for their help and support during the course of the Bill. We will not vote against the Bill this evening, but we will undoubtedly return to the scrutiny of it in another place shortly. Some of the arguments bear further repetition in Committee and on the Floor of the House there. Finally, I thank the Minister for his patience and co-operation. I look forward to seeing him on numerous occasions in the future.

National Insurance Contributions Bill

Debate between Lord Hanson of Flint and David Gauke

Tuesday 23rd November 2010 Commons Chamber

[Mr Gauke]

Compared with the plans that we inherited, the impact of the increase in threshold will be such that employers will pay £3 billion less in employer’s national insurance contributions. The overall reduction of the burden on employment will be £6 billion as a consequence of the overall package.

[Mr David Hanson (Delyn) (Lab)]

Will the Minister confirm, however, that about £1.4 billion is not being compensated for by the threshold? I want us to be clear. He says that he has offset the threshold, but he has offset only about £3 billion, not the whole amount of the rise.

[Mr Gauke]

The fact is that the Labour party would have raised the full amount. We are offsetting £3 billion, which will be most helpful for employers whose employees earn under £20,000. The package is good for employment and, given the fiscal mess that we inherited, I am very proud that this Government are able to reform national insurance contributions exactly as we set out in our manifesto at the general election, and in the coalition agreement.

As far as we can deduce it, the Labour party’s position is that it wants to do more to reduce the deficit by raising taxation and it does not believe in increasing VAT, which will bring in £13 billion a year. We can assume only that it would favour greater increases in national insurance contributions than it had already set out.

We are not going to take any lectures; this Government have managed to reverse a very painful and damaging policy that would have meant employers’ contributions rising for every single employee paying national insurance—and in a way that would have damaged jobs in this country.

--- Later in debate ---

[Mr Gauke]

A charitable entity that is located in one of the relevant regions and that carries on a trade, vocation or business will benefit. That is likely to apply to, for example, shops that are run by charities. Such entities must meet that criterion to benefit, but not all charities will necessarily do so.

[Mr Hanson]

Will the Minister tell the House, for the sake of clarity, how many businesses have to date applied for the holiday?

[Mr Gauke]

At this early stage, we have had around 1,000 applications, but we expect more as awareness of the policy becomes greater and as businesses contact their professional advisers. We are keen to publicise the policy, and I encourage hon. Members for any of the relevant regions to notify businesses in their areas. The Government and our policy aim to help businesses and those who want to start a business and get it going. In contrast, the previous Government increased such taxes. Start-up and existing businesses throughout the country faced rising taxes and employers’ national insurance contributions, which was a particularly deeply damaging tax.

The Bill is an important part of the Government’s plan to reduce Labour’s taxation, help those on the lowest incomes, and support private enterprise and employment in the parts of the country that need them most. It is a simple and important Bill, and I commend it to the House.

[Mr David Hanson (Delyn) (Lab)]

I am grateful to the Minister for his exposition of the Bill. We will test aspects of it in Committee and at other stages in its passage. As he said, it divides effectively into two parts. The first part is the increase in national insurance contributions by 1%, which we will support because we want to ensure that we protect services and support our economy. The second part introduces a three-year regional national insurance holiday for new employers. As the Minister said, many businesses will qualify for their first 10 employees in their first year of business; I shall return later in detail to the question of the regions and areas that will not qualify.

Let us first consider the national insurance contributions. The Minister rightly said that this policy was set out both in the Labour manifesto and elsewhere in the period before the general election in May. My right hon. Friend the Member for Edinburgh South West (Mr Darling), the then Chancellor, announced in the pre-Budget statement on 9 December 2009 that the previous Government would increase national insurance contributions by 1% to protect public services. We had a choice, and we were straight about it both before and during the election. Raising national insurance contributions was a tough decision, but we ensured that we would protect those earning less than £20,000 a year.

The Conservatives condemned that national insurance rise throughout the election, but—surprise, surprise!—they have now decided to go ahead with it. In the Conservative manifesto, which I have come to recognise is not worth the paper it was written on, the party committed itself to raising the thresholds for national insurance by £24 a week, the upper earnings limit by £29 a week, and the secondary threshold at which employers start paying national insurance by £21 a week. I look forward to seeing the details in the secondary legislation.

My intervention on the Exchequer Secretary showed that although the Government are raising the thresholds, there is still a shortfall of about £1.4 billion in employer national insurance contributions. The Labour party was open about that in the run-up to, and during, the general election, but the Conservative party was not. In my view, this is all smoke and mirrors.

[Mr Gauke]

Page 8 of our manifesto stated that we would

“raise the secondary threshold at which employers start paying National Insurance by £21 a week.”

The secondary legislation will increase the secondary threshold at which employers start paying national insurance by £21 a week, so we are doing exactly what we said in the manifesto.

[Mr Hanson]

But there were no caveats about a shortfall in the Budget proposals of about £1.4 billion. I think it is smoke and mirrors—and, as my hon. Friend the Member for Edmonton (Mr Love) said, it is coupled with the increase in VAT from next year. The VAT rise will impact more than three times as much as the increase to national insurance contributions would have done, and will affect 250,000 jobs.

--- Later in debate ---

[Mr Hanson]

I have said what I have said. We were open and honest during the election campaign, and we will support the rise proposed in the Bill, because we expected to do that. During the election campaign, the Economic Secretary and the Exchequer Secretary attacked the NIC rise without proposing the alternative that they have seen through in practice.

Let us put that aside, because the key issue before the House is the payment holiday. We do not believe that it is being proposed fairly, honestly or openly, and we do not believe that it will help the poorest and most deprived areas of the UK, which in great part are excluded from the scheme. Of the top 12 most deprived local authorities on the economic deprivation index, no fewer than seven will be excluded from the payment holiday. The seven boroughs of Hackney, Newham, Tower Hamlets, Islington, Barking and Dagenham, Haringey and Lambeth are excluded from the scheme.

In his written statement on 6 September, the Exchequer Secretary said:

“The Government are determined that all parts of the UK benefit from sustainable economic growth”.—[Official Report, 6 September 2010; Vol. 515, c. 1WS.]

If we are having a holiday from national insurance contributions, I do not understand how excluding those areas from the payment holiday will do that.

I want to challenge the Government’s logic. They claim that the reasoning behind the policy is that areas outside London, the south-east and the east are more reliant on public sector employment. Will the Exchequer Secretary confirm that that is his logic?

[Mr Gauke]

indicated assent.

[Mr Hanson]

The Minister has confirmed that. Tomorrow’s business leaders who want to start businesses in the constituencies of Oxford East, of Luton North, of Lewisham East, of Canterbury, of Southampton, Test, of Eltham, of West Ham, of North Thanet, of Hackney North and Stoke Newington, of Tooting, of Islington North, of Dulwich and West Norwood, and of Brighton, Kemptown will miss out. I mention those constituencies specifically because they are in the top 10% in the country with the highest percentage of public sector employment.

As the hon. Gentleman knows, there are 650 constituencies. His policy is supposed to help compensate for possible loss of employment in the public sector. Those concerns have been reflected today, and I pay tribute to the hon. Members for Portsmouth North, for Meon Valley and for Basildon and Billericay, who have defended their constituencies and raised their concerns about how the policy will be applied.

If there is to be a holiday, it can be applied in different ways. It could be applied regionally, as the Minister has done, or on the basis of unemployment levels or regional levels of public sector employment per constituency, instead of the blanket regional approach that the Minister has chosen.

Terrorist Asset-Freezing etc. Bill [Lords]

Debate between Lord Hanson of Flint and David Gauke

Monday 15th November 2010 Commons Chamber

[Mr Gauke]

Given the flexibility that we need, I believe that we have struck the right balance by allowing an interim arrangement on the basis of reasonable suspicion followed by a longer-term arrangement on the basis of reasonable belief. Sometimes, it is a question of timing and we may need to act first on freezing assets and subsequently to make an arrest—we must remember that after all, the vast majority of those in the UK who have been subject to a freezing order have gone on to be arrested. For example, if we limited the Treasury’s freezing powers to those charged or convicted, we could prevent the UK from co-operating with international partners when we are trying to prevent funding getting to international terrorists and terrorist groups. For those reasons, the Government remain convinced that the legal test as set out in the Bill—reasonable suspicion for an interim period of 30 days and reasonable belief for a final designation—strikes the right balance.

My hon. Friend the Member for Cambridge mentioned the role of the courts, which has also been raised by civil liberties groups. They have called for a mandatory court involvement in asset-freezing. They want freezing decisions either to be made by the courts or to be approved by them mandatorily, but the Government do not support those proposals. Decisions to freeze assets are national security measures taken on operational advice from law enforcement and intelligence agencies, and fall squarely within the remit of decisions that Ministers should and do make on other matters, such as prescription, deportation and exclusion. Ministers are accountable for their designations both to Parliament and to the courts.

We also do not believe that mandatory court approval for asset freezes is the right approach. Only a very small minority of asset-freezing cases—around 10% of current cases—concern people in the UK who have not been prosecuted for a terrorist offence. The remaining 90% of cases concern either individuals in the UK who have been prosecuted or individuals and groups overseas. Mandatory court approval would therefore add no value in those 90% of cases. Indeed, it might even be unhelpful. For example, overseas terrorist groups who do not currently challenge asset freezes would nevertheless have their designations subjected to mandatory court scrutiny.

My hon. Friend also mentioned written reasons. We heard today that the JCHR recommends that an express requirement to provide reasons for a designation, subject to public interest requirements of non-disclosure, be written into the Bill. The Committee’s reasons for that were eloquently put, but the Government are not convinced that an express obligation on the Treasury to provide reasons for a person’s designation is necessary. It is already a requirement of the basic principles of administrative law to provide reasons for a designation where possible, subject to public interest requirements. If this Government or any other were to write into a Bill all the Treasury’s obligations under administrative law, such a Bill would be considerably longer. I do not see that as desirable. The time available for parliamentary scrutiny should not be spent debating unnecessary provisions. I should also make it clear that there will be times when the Government cannot divulge the case against a person or the reason for a designation, such as when sensitive intelligence has been relied on for a decision and there is an obvious case for withholding information. None the less, where possible, the Government disclose information when that can be done without, for example, damage to a pending prosecution or to national security. There is no sensible reason to go beyond that and write such a requirement into the Bill.

The JCHR also sought to convince hon. Members that the Government should accept the principle set out in the House of Lords in the case of AF on the use of special advocates and closed-source material. It said that that principle should apply to asset-freezing provisions. I am sure that hon. Members have read Hansard and are aware of the debate on that in the other place. I can but restate the points that the Government made then. First, the courts have not considered whether AF applies in asset-freezing cases, and it is not the role of the Government to prejudge what the courts would say. Secondly, the Supreme Court will consider the wider application of AF (No. 3) in January 2011 when it hears the Tariq case. Thirdly, the Government are committed to ensuring that any challenge to a Treasury decision is heard fairly. Finally, the application of AF (No. 3) is part of a wider debate on the use of special advocates and intelligence material, and we have already announced that we will be considering the use of special advocates and closed-source evidence as part of a Green Paper next year.

There will be plenty of opportunity for the JCHR and other interested parties to relay their views as part of the consultation that informs that Green Paper. It is right and proper that the Government give all parties the option of commenting on such an important mechanism without prejudging the outcome.

The final matter raised by the JCHR is the question of transparency and accountability. The Bill strengthens transparency and accountability in two ways. First, we are enshrining in legislation the Treasury’s existing practice of presenting quarterly reports to Parliament on the operation of the powers in the Bill. That will guarantee transparency on the quarterly operation of the regime. Hon. Members will note that the most recent quarterly report was laid today. Secondly, we have written into the Bill that the operation of the regime should be independently reviewed nine months after the Bill is passed and every 12 months thereafter.

The JCHR maintains that the provision in the Bill for an independent reviewer does not go far enough and that the independent reviewer should be more independent of the Government—the right hon. Member for Delyn made that point in the debate. I am sure that that will be debated further in Committee, but the Government cannot accept the JCHR position. We are committed to effective scrutiny of the asset-freezing regime and the independence of the reviewer will be a principal objective of any appointment, but for Parliament to approve the independent reviewer would be a significant departure from standard practice. The appointment of the reviewer by the Government reflects the long-standing principle that Ministers are directly accountable to Parliament and the public for those whom they appoint and for the operation of the regime.

[Mr Hanson]

I tend to agree with the Minister, as I indicated in my discussions, but can he tell the House whether the reviewer for this piece of legislation is likely to be the same one as is currently in post, which is Lord Carlile, who is soon to be replaced by David Anderson QC?

[Mr Gauke]

I am grateful for the point that the right hon. Gentleman makes. The final decision on that is still to be made, so if he will just be a little patient, he will receive the answer in due course.

Finance (No.2) Bill

Debate between Lord Hanson of Flint and David Gauke

Monday 8th November 2010 Commons Chamber

[Mr Gauke]

I am grateful for that invitation. I am sure it will be small comfort to the hon. Gentleman, but I will accept the pronunciation “tiger” and concede that point. I am not sure that it would be terribly helpful if we were all in the same room to discuss these particular numbers. As I say, we are not convinced by the case made on these numbers. Of course, Members with constituencies that have a concentration of video game companies will want to make that case, but it is right for the Government to look at the economy as a whole and to bring forward policies that benefit all parts of the country and all sectors, including the video game sector. As I said in the meetings I have had with the hon. Member for Dundee West, there is no sense in which the Government are in any way anti-video games or think it is an antisocial issue or anything like that. It is a question of economic efficiency and where we believe the role of Government can be best used—and that is in providing a favourable climate for businesses.

I appreciate that the new clause and new schedule proposed by the right hon. Member for Delyn (Mr Hanson) are probing measures, but I would like to touch on a point made by my hon. Friend the Member for Dover (Charlie Elphicke). This relief is targeted at a specific sector and it would be considered to be state aid; as such, it would require notification to and approval from the European Commission. The new clause and new schedule would be effective from Royal Assent. As the Government would not be able to secure approval in such a short period, the provisions would create an illegal state aid. As I said, I understand that the amending provisions are probing, but the same issue applies to the previous Government’s proposals—and they, too, would have required state aid approval, which is worth putting on the record.

The new clause would create unjustified distortion and complexity in the corporate tax system. We do not think that such an intervention would represent good value for money for the Exchequer or be conducive to providing a simple and competitive tax system. The UK needs a tax system that supports all businesses, because it is the private sector across the board that will drive the recovery. I therefore ask the right hon. Gentleman to withdraw the new clause and new schedule.

[Mr Hanson]

I am grateful for the Minister’s clarification of the Government’s response. If we take into account the comments made by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), it is clear that the Government are not in favour of the principle of this type of tax relief rather than the practicalities of the suggestions in the amending provisions. I am disappointed about that. I remind the Minister again of what the Under-Secretary said. When asked during the election campaign whether the Conservative party was in favour of a games development tax break, he answered:

“emphatically, 100 per cent in support for game tax breaks. No ifs, no buts.”

That does not appear to be the Government’s position today, which disappoints me.

Perhaps at this point I should declare that PricewaterhouseCoopers helped me to draw up the new clause. I shall register that in due course.