Finance (No. 2) Bill

Baroness Laing of Elderslie Excerpts

Tuesday 1st April 2014 Commons Chamber

[Shabana Mahmood]

I will not for the moment. I will make some more progress—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Too many conversations are going on around the Chamber that have nothing to do with the speech being made by the shadow Minister. Members ought to have the courtesy to listen to the hon. Lady.

[Shabana Mahmood]

Thank you, Madam Deputy Speaker. I am not surprised that Government Members do not want to hear about their secret £145 million tax cut for investment managers.

--- Later in debate ---

[Shabana Mahmood]

My hon. Friend makes a powerful point. His experience as a constituency MP is exactly the same as mine. Almost every business that comes to see me at my surgery is struggling with its business rates and energy costs.

What does the Bill say about the top rate of income tax? Well, it remains at 45p. This Government have given an average tax cut of more than £107,000 to the 8,000 millionaires in our country. They seem to think that if they keep talking about the increase in the personal allowance, they will make people forget that the combined impact of the tax and benefit changes is that a typical household is £900 a year worse off, and that the richest in our country are getting an absolutely huge tax cut. The Government are desperate to be able to claim that the 50p rate raised as little money as possible because they want to make it easier for themselves to justify their decision to give a tax cut to the wealthiest at a time when ordinary families are really struggling.

The Government’s own assessment claims that the cost of cutting the rate to 45p, excluding all behavioural changes, was over £3 billion. To justify the tax cut, they argued that most of the potential revenue would be lost as a result of tax avoidance. Government Members were very excitable about the Government’s record on tax avoidance, which I will come to in a moment. But surely a Government as proud as they are of that record would have taken some targeted anti-avoidance measures to stop people avoiding the 50p rate. Instead, they ducked the opportunity.

The Government also claim that tax revenues rose after they cut the top rate of tax, but both the Office for National Statistics and the OBR have said that many of the highest earners moved their income and delayed their bonuses by a year after the 2012 Budget to benefit from the lower top rate of tax. That shifting of income will have cost the Treasury millions of pounds in lost revenue. When the deficit is high it cannot be right to cut the top rate of tax. The next Labour Government will put that rate back to 50p while we get the deficit down.

There was some excitement on the Government Benches about the Government’s record on tax avoidance. Although they like to pretend that that record is strong, it is nothing to write home about. The DOTAS—disclosure of tax avoidance schemes—measures were introduced by a Labour Government in 2004. Every time Government Members stand up and take credit for those measures, I shall pass on their thanks to the previous Labour Administration, who introduced them.

The Government have made a number of assumptions in their calculations of the value to the Exchequer of extending the accelerated payment scheme to both DOTAS and the general anti-abuse rule. Although HMRC is successful in about 80% of the cases it litigates, I find it hard to see why the same 80% success rate has been applied to potential cases under the GAAR when a case on the GAAR has yet to go to court. We will scrutinise the Government’s numbers in Committee: they have a history of overestimating the impact of their avoidance measures. We have spoken a lot today about the Swiss deal, which raised £2.3 billion less than expected. I am sure that the Exchequer Secretary will not—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The House is too noisy. If hon. Members listen quietly, perhaps the hon. Lady will be able to come swiftly to the end of her speech.

[Shabana Mahmood]

Thank you, Madam Deputy Speaker. I will bring my remarks to a conclusion, but I want to give the Exchequer Secretary an opportunity to intervene and explain to the House why he got the numbers so wrong on the Swiss tax deal. He is shaking his head, which implies to me that he is not prepared to stand up for his own record or admit that he has a history of overestimating his numbers. We will look at the numbers closely in Committee.

The Government had an opportunity with the Bill to provide help in the here and now. That is an opportunity they have failed to take. We will be voting against the Bill and in favour of our reasoned amendment, which lists the measures that we believe are necessary to tackle the cost of living crisis and make sure that people on lower and middle incomes start to see the benefits of recovery. We will seek to improve the Bill in Committee and try to persuade the Government to change course, but from what we have heard today and what we are no doubt about to hear from the Exchequer Secretary, I fear that the Government are so blind to the lives of ordinary working people that they will refuse to take the opportunity to do so.

--- Later in debate ---

[Mr Gauke]

The Labour party presided over the greatest recession that this country has seen for more than a century, which had an impact on people’s living standards. It is now up to this party and this coalition Government—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Surely the House wants to listen to the Minister. A little quieter.

[Mr Gauke]

After the mess we inherited, how do we ensure that we build up the economy and get the sustainable growth that will increase living standards? The answer is set out in this Finance Bill.

It is worth pointing out the measures in the Bill that the Labour party will vote against this evening. There is the annual investment allowance, which will help manufacturing and other businesses up and down the country. It means that nearly 5 million businesses will get 100% relief on capital expenditure. That was welcomed by the hon. Member for Houghton and Sunderland South. Labour Members will vote against that. There are the reforms to R and D tax credits, which will help businesses to start up. [Interruption.]

[Madam Deputy Speaker]

Order. I am not going to ask any more polite questions. The House must listen to the Minister. Stop talking among yourselves.

[Mr Gauke]

Thank you, Madam Deputy Speaker.

Labour Members will oppose the R and D tax credit. There are the reforms to the carbon price floor, which will help manufacturing industry and ensure that the UK is not uncompetitive. They will vote against that, against the interests of businesses in their constituencies.

On the issue of pensions flexibility, the shadow Chief Secretary to the Treasury, the hon. Member for Nottingham East (Chris Leslie), said that the debate following the Budget was diverted by the attention on annuities, but it is fair to say that the Leader of the Opposition was not diverted by annuities in his response to the Budget. Since then, we have seen confusion from the Labour party. Labour Members have said that they are worried that people will spend recklessly and that that will create a burden on the public finances. They should know something about that, but they should not judge other people by their standards. The truth is that the Labour party does not trust the public with their money and that that feeling is mutual.

On the subject of avoidance, the Bill’s measures mean that £9 billion in additional revenue will be collected over the next five years. Avoidance will be tackled as a consequence of the Bill. It is also worth pointing out that HMRC’s yield over the course of this Parliament will be almost double its yield over the course of the previous Parliament. That is the progress that we have made on tax avoidance and evasion.

We are helping with the cost of living. There are hon. Members, including on the Opposition Benches, who have long campaigned for their constituents who have relatives in the Caribbean or south Asia. We are helping with air passenger duty, but Opposition Members will be voting against that measure.

On the starting rate of income tax for savers, we are cutting a 10p rate, not doubling a 10p rate. That will mean that 1 million more people will no longer pay tax on their savings. Opposition Members will be voting against that.

The personal allowance will increase to £10,000 this year and £10,500 next year. Opposition Members will be voting against that. Were they to succeed, the personal allowance in 2015-16 would be not £10,500, but £9,880. That would mean that millions of people would pay £124 a year more in tax as a consequence of the way that Labour votes.