Finance Bill

Debate between Ian Lavery and Charlie Elphicke

Tuesday 3rd July 2012 Commons Chamber

[Charlie Elphicke]

What I have set out also highlights the previous Government’s role in failing to regulate and, it seems, in indulging in a bit of market manipulation pressure of their own. I do not think that is acceptable. In her scene setting, the shadow Minister was basically saying, “What happened at Barclays is outrageous; therefore we need to do this.” What I am saying is that we should be careful what we wish for, because banks need enough capital to lend to small businesses, to create the jobs and money that we need to expand the economy and make this country a great success in the next 10 years, building Britain back up to the sort of success that we saw in the ’80s.

[Ian Lavery (Wansbeck) (Lab)]

New clause 13 is extremely important and deals with the bank bonus tax for youth jobs. It is an admirable new clause.

It is indisputable that the financial services industry is an essential part of our economy, but equally, there must be an acceptance that the industry—the banks and the financial institutions—needs to pay its way. The June 2010 Budget announced that a levy based on banks’ balance sheets would be introduced from 1 January 2011. Labour supports the bank levy, but we want to go further. We want to repeat the bankers’ bonus tax, which brought in an estimated £3.5 billion. We can argue about net and gross, as the hon. Member for Dover (Charlie Elphicke) explained; however, as far as we on this side of the House are concerned, the bankers’ bonus tax brought in £3.5 billion. Despite slight increases in the rate of the levy, the Government’s failure to repeat Labour’s bank bonus tax—and, in the meantime, create more than 100,000 jobs for young people—means that the banks simply received tax cuts last year and will do so in future years. It is wholly unacceptable, when we have a double-dip recession, for us to allow banks off with fortunes and tax cuts year on year.

In the last financial year, the amount raised by the bank levy was just over half the amount raised by Labour’s bank bonus tax—£1.8 billion, compared with £3.5 billion. The Chancellor’s spending review plans have simply failed. The Government’s austerity measures have led to the flatlining of growth in the economy, resulting in long-term youth unemployment spiralling to record levels. In the last year it has gone up by 112%, while the number of young people out of work for over a year has gone up even more, by around 156%. That is the result of the Government scrapping the future jobs fund, immediately after they came to power, without putting a viable alternative in place. They had no idea what would replace the fund or how on earth they would be able to create any employment, for young people in particular. The Work programme started only a year later, in June 2011, and we all know now, from people coming to our surgeries, about the difficulties that the workfare and other programmes have created.

That is why we are calling for Labour’s youth jobs guarantee, which would redress the Government’s scrapping of the future jobs fund. On a cautious estimate, we believe that the bank bonus tax could raise at least £2 billion this year, which the Government could use to build thousands of affordable homes and introduce the real jobs guarantee for young people who are long-term unemployed.

As part of Labour’s five-point plan for jobs and growth, the real jobs guarantee would cost £600 million, and would provide a six-month job for every 18 to 24-year-old who had been on jobseeker’s allowance for 12 months or more. We estimate that it could assist up to 110,000 people in that category. The Government would pay full wages directly to the business, which would cover 25 hours of work per week at the minimum wage. That would equate to about £4,000 per job. In return, the employer would be expected to cover the young person’s training and development for a minimum of 10 hours a week. The ultimate objective would be the opportunity of a permanent job at the end of the six months. New clause 13 would tackle the issue of youth unemployment, and make the banks pay their way.

Finance Bill

Debate between Ian Lavery and Charlie Elphicke

Monday 2nd July 2012 Commons Chamber

[Charlie Elphicke]

I agree. There has been a climate in which it is somehow acceptable to avoid taxation and I made many speeches in Committee about how that culture is unacceptable and needs to change.

It is up to us to send a clear message, as Members of all parties, that tax avoidance is wrong. That was why I intervened on the shadow Minister earlier to say that the message sent by politicians who use personal service companies is deeply corrosive. They should all pay a fair share of taxation and should not try to avoid it in that way, because it sends the wrong message. In all fairness, I say that to members of my own party as much as to Labour members. It is not acceptable in the current age.

[Ian Lavery]

The hon. Gentleman and I had some good discussions in Committee—I would not call them enjoyable, but they were good. Does he think it is fair to hit the grannies—to hit elderly people—with a £3 billion loss and at the same time to cut taxes for the richest people in the UK?

[Charlie Elphicke]

I think it is fair to say that we are not cutting taxes yet, because the change would not come through to the next financial year. Hon. Members will correct me if I am wrong, but I believe that that is the case. We must consider the Exchequer numbers, which show that the cost of the cut is very low. I think those numbers are wrong, as they have not taken into account the dynamic effects of the change, which will probably be tax accretive to the Exchequer when all is taken into account.

As for the issue of age-related allowances, the Government’s triple-lock guarantee will mean that the overwhelming majority of older people—in fact, all of them, I think—will be better off and there are no cash losers. Secondly, we are talking about the very richest of the oldest. We are not talking about the oppressed pensioner with no savings but about the richest of the oldest and, as I say, there will be no cash losers. Although it is uncomfortable for many people and has been uncomfortable for all of us, the Government have been doing the right thing by the elderly and have been looking after the least well-off elderly first of all. It is really important to protect them from the difficult economic times we have had.

--- Later in debate ---

[Charlie Elphicke]

The age-related tax allowances only kick in to benefit those pensioners who have a substantial income, or a more substantial income, in retirement. We are not talking about the very least well-off pensioners who are affected by grinding poverty, but about pensioners who are better off and who have savings and income. As I said, there are no cash losers and they have had a massive benefit from the pensions triple lock.

[Ian Lavery]

When the hon. Gentleman says that there are no cash losers, does that mean that pensioners will not lose out?

[Charlie Elphicke]

That is my understanding, yes. Pensioners will not lose out, there will be no cash losers and no pensioners will be worse off in cash terms, As the hon. Gentleman well knows, we can have the argument about future rates of inflation and future rates of RPI, but one must also take into account the other side of the equation, as pensions and benefits for elderly people will rise in the same way and at the same time. Overall, we are not talking about a great difference; we are certainly looking after the least well-off of the elderly, and we have done so very well indeed. That is an important achievement of this Government. Pensioners have been better off under the Government and have been shielded from the austerity measures.

Let us look across the piece at what the Government have done. We have done the right thing to reduce taxation at the top level, which was meant to be temporary, to encourage investment in our economy and to encourage entrepreneurs. The Government need to take further action to deal with people who abuse personal service companies and other tax wheezes and to ensure that we have stronger measures against avoidance by individuals. We have seen enough of it in the newspapers, so I shall not go into individual cases because, as we know, that ends up in a spat about whether one likes Take That or late-night comedy shows. Nevertheless, it is right that we should ensure that individuals cannot play the system and that the law should be changed. It is all very well for the Labour party to take the moral high ground on the issue of tax allowances, but Labour was asleep at the wheel for about a decade and failed to deal with tax avoidance in the individual and corporate spheres. That was completely wrong.