Section 5 of the European Communities (Amendment) Act 1993

Debate between Kelvin Hopkins and David Gauke

Tuesday 24th March 2015 Commons Chamber

[Mr Gauke]

We seem to have entered day five of the Budget debate. Let me make one or two brief points in response to the hon. Lady. First, let us remember what the state of the economy was in 2010, and the state of the public finances. Our borrowing levels were over 10% of GDP, which is a peacetime record, and we were forecast to have the highest level of borrowing in the G20. Over half of that amount has now been dealt with, but we have further to go and further steps are needed to deal with borrowing. That is why this House overwhelmingly voted for the charter for fiscal responsibility, which means that the cyclical current budget will be balanced by 2017-18. That is a target that those in all parts of the House signed up to, including Labour Members, but we heard nothing from them during the Budget debates, or today, about how they would meet that ambition. Whereas my party has set out our plans for finding £12 billion from welfare cuts, £13 billion from departmental spending and £5 billion from tax evasion, tax avoidance and aggressive tax planning, we have had no such indications from Labour. There is a huge hole where there should be an Opposition party policy.

[Kelvin Hopkins (Luton North) (Lab)]

The hon. Gentleman constantly talks about cuts—very unpleasant cuts that are going to affect a lot of poor people—but the real problem is an income problem, because we have a tax gap of £120 billion through evasion and avoidance that the Government refuse to recognise to its full extent. If we looked at the income side and made sure we collected the tax that should be paid, then we could address the problems with the deficit—if they are serious problems—and, at the same time, not inflict cuts on poor people.

Finance (No.2) Bill

Debate between Kelvin Hopkins and David Gauke

Tuesday 8th April 2014 Commons Chamber

[Kelvin Hopkins]

I made exactly the same speeches when my party was in government. I demanded that the previous Government employ many more tax officers. There has been a conspiracy between Front-Bench Members for some decades to get away from being too unpleasant to the corporates and to let them have their way. Well, I do not want to let them have their way; I want them to pay their taxes so that we can pay for the things that ordinary people need, particularly those who are less well off and those who are more vulnerable.

[Mr Gauke]

I note the hon. Gentleman’s comments on wanting to have more HMRC staff, but surely the most important point is that HMRC’s yield should increase. Has he noted that the forecast yield over this Parliament is almost double the yield over the previous Parliament?

[Kelvin Hopkins]

That is very welcome, but I do not believe in the immutability of a certain level of tax revenue and that, whatever we do, we cannot change that level because somehow the world will not produce more than 38% of GDP in tax. It is just a question of collecting that tax and enforcing the tax rates to ensure that the big international corporates, in particular, pay their taxes. When we do that, we will see a substantial increase in revenue. Of course there are countries where overall tax revenues are substantially higher than ours, and they are not necessarily countries that are doing badly economically; they are countries that are doing well, but a higher proportion of their economy is in the public sector. Those countries have higher taxes and higher public spending, and they are civilised societies, too. The countries with the lowest levels of tax and public spending are often some of the poorest, where the gulf between rich and poor is much greater and, generally speaking, life is less pleasant, particularly for the poor and the less well off.

I look forward to more enforcement and a higher tax take by enforcing the existing tax rates and ensuring that people, particularly the corporates, pay their taxes. When it comes to taxation, the behaviour of the economy is crucial.

--- Later in debate ---

[Kelvin Hopkins]

Ministers have talked a lot about low incomes, and that is all very well, but is not the reality that the better off people are and the higher the rate of tax they are on, the more they benefit, so in fact higher-rate taxpayers benefit more than lower-rate taxpayers?

[Mr Gauke]

That is not correct, because of the way we have done this. I will not spend a lot of time on the matter, but I can tell the hon. Gentleman that in preparation for this speech I have seen various responses from those raising concerns about higher-rate taxpayers not benefiting from the increases in the personal allowance in the way that basic-rate taxpayers have. Indeed, those earning more than £100,000 a year do not benefit from increases in the personal allowance because it starts to be taken away.

The reality is that basic-rate taxpayers have benefited most from the measures that we have taken in increasing the personal allowance. More than 26 million taxpayers will be up to £570 better off in real terms in 2015-16 as a result of this Government’s changes. In 2014-15, basic-rate taxpayers already pay up to £700 less income tax than they would have done four years ago. By 2015-16, the Government will have cut their income tax bills by over £800 per year. Together, all the personal allowance increases since 2010 mean that this Government have cut the number of income tax payers more in five years than any Government in a similar period since records began.

--- Later in debate ---

[Mr Gauke]

I suppose we are talking about the people who for almost the entire time the Labour party was in power were paying a lower rate of income tax, a lower rate of capital gains tax and a lower rate of stamp duty. I hear the Labour party’s position. [Interruption.] If we are trying to build consensus, let us look at what some Labour politicians have said. The noble Lord Myners, a former Treasury Minister, has said:

“The economic logic behind Ed Balls’s thinking would not get him a pass at GCSE economics,”

and that

“Ed Balls takes us back to old Labour and the politics of envy.”

Lord Jones, the former trade Minister in a Labour Government, described the policy as “lousy economics”.

[Kelvin Hopkins]

He is a Tory.

[Mr Gauke]

To be fair, Lord Jones was a Minister in a Labour Government. The Mail on Sunday has reported a key supporter of Tony Blair as saying of Labour Front Benchers:

“The trouble is they are economically illiterate and have no understanding of business or profits.”

Sixth-Form Colleges (VAT)

Debate between Kelvin Hopkins and David Gauke

Tuesday 17th December 2013 Westminster Hall

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

Thank you, Mr Bayley, for calling me to speak. It is a great pleasure to serve under your chairmanship. I congratulate the hon. Member for Wigan (Lisa Nandy) on securing this debate, and on making her case so strongly. Indeed, it is noteworthy that this is a well-attended debate, as she has mentioned.

In the light of the remarks made by my hon. Friend the Member for Beverley and Holderness (Mr Stuart), I should mention that I am here as a Treasury Minister, as the debate relates to the VAT system. In respect of House of Commons workings, this is a Treasury matter, and this week the Treasury, rather than the Department for Education, was up for debates, although the hon. Member for Wigan has been most ingenious in getting a debate on sixth forms in a week in which Department for Education Westminster Hall debates were not occurring.

The hon. Lady has highlighted how sixth-form colleges interact with the VAT system. Let me say a little bit about that. VAT can be a rather complex matter. It might help if I provided some background, before turning to the specific issue of sixth-form colleges. One basic feature of VAT is that businesses are able to reclaim the VAT that they pay on their inputs. However, this does not apply to purchases, acquisitions or imports made in relation to non-business activities, such as the provision of free education. This means that bodies such as schools can end up with VAT costs on the goods and services that they buy in.

Clearly, it is always an option to meet these costs by increasing the funding made available to schools, for example. However, there is a risk of the burden of that funding falling on local taxation, as the state education system in England and Wales has historically been delivered by local authorities. To deal with that, in 1973 the Government introduced a scheme, now under section 33 of the Value Added Tax Act 1994, allowing local authorities to recover the VAT incurred on goods and services purchased relating to non-business activities. Local authority maintained schools are able to recover VAT under the umbrella of the local authority.

Since then, there have been extensions to that scheme, in particular to cover the position of academy schools. The Finance Act 2011 introduced a new VAT refund scheme, under section 33B of the 1994 Act, to ensure that funding for academy schools’ non-business VAT costs was consistent with that for local authority maintained schools. The specific purpose of the scheme is to ensure continuity in the funding of institutions that are leaving local authority control to become academies, so that they are not put at a financial disadvantage.

I hope that this slight historical excursion has made it clear that there is clear logic to the VAT treatment of local authority schools and academy schools making the move out of local authority control. That logic is rooted in the nature of the service being provided and the relationship to public sector local authorities.

Let me turn to the campaign by sixth-form colleges, of which hon. Members in the Chamber are well aware. The campaign has gained the support of 74 Members representing constituencies that contain, or are serviced by, sixth-form colleges, and the likes of my hon. Friend the Member for Beverley and Holderness. They wrote to the Secretary of State for Education, expressing their concerns.

Hon. Members have welcomed the introduction of the new 16 to 19 funding formula, which will mean that all 16 to 19 education providers are funded in the same way, and which is reducing the historical disparity between school sixth forms and colleges. However, the 74 hon. Members feel that the way that sixth-form colleges interact with the VAT system leaves them at a disadvantage, compared with local authority or academy schools. In particular, as we heard today, they have asked for their differential VAT treatment to be recognised in the way that they are funded.

[Kelvin Hopkins]

My memory goes back to when sixth-form colleges were grouped—by mistake, I think—with further education colleges and put into the FE sector. That is why the VAT mistake was made. Had sixth-form colleges been kept in the schools sector, this would not have occurred. Does the Minister agree?

[Mr Gauke]

I think that is probably a fair description, historically. Schools have been treated one way, in part, because of the relationship with local authorities and funding at local authority level, whereas other elements of the public sector do not get funding for VAT in the way that local authorities do. Sixth-form colleges and further education colleges are examples of that.

--- Later in debate ---

[Mr Gauke]

I am grateful for the opportunity to complete my remarks. The academies VAT refund scheme is very specific. The Treasury has no plans to extend that scheme to colleges, and many other providers of public services are expected to cover their VAT costs from their funding allocations. That funding model is applied to many bodies delivering public services, and to some spending by Departments and non-departmental public bodies.

The Department for Education, however, has considered whether adjustments could be made to funding for 16 to 19 education to recognise the differential VAT treatment of different types of providers. In particular, the Department for Education has considered whether it could additionally fund sixth-form colleges by an amount equivalent to their typical VAT costs. The Department for Education has concluded that that is not affordable in the current fiscal climate. The £20 million estimate applies only to sixth-form colleges; extending extra funding to further education colleges, which have a similar case to sixth-form colleges, would cost some £150 million.

[Kelvin Hopkins]

I echo the Chair of the Select Committee on Education, the hon. Member for Beverley and Holderness (Mr Stuart), by saying that the amounts are small in the scheme of things. They are piffling amounts compared with the volume of the Government’s public spending. One penny on the standard rate produces £4 billion, and we are talking about £30 million for sixth-form colleges. It is a tiny amount of money.

[Mr Gauke]

I am not entirely surprised by the hon. Gentleman’s comments. I have no doubt that he would not hesitate to put up income tax by 1p. In the context of the current fiscal situation, we have to be very careful with public expenditure. The Department for Education will, of course, keep the sector’s funding under review.

Although I recognise that colleges have concerns, the reform of 16 to 19 education is one of the Government’s priorities. The Government remain committed to moving towards fairer funding of 16 to 19 education by levelling the rate of funding for schools and colleges by 2015.

Age-related Tax Allowances

Debate between Kelvin Hopkins and David Gauke

Monday 9th September 2013 Westminster Hall

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

It is a great pleasure to serve under your chairmanship, Mr Hollobone, for, I think, the first time. I congratulate the hon. Member for Luton North (Kelvin Hopkins). He put his case with great eloquence and passion. I thank my hon. Friend the Member for Suffolk Coastal (Dr Coffey), who, as she says, represents a large number of pensioners in her constituency, including my uncle Norman. Hon. Members have had the opportunity to discuss these matters a number of times, as the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) said. In fact, we last debated the topic during proceedings on the Finance Act 2013, not to mention the lengthy debates during proceedings on the Finance Act 2012. I am pleased to have another opportunity to explain the Government’s position.

As hon. Members are aware, a phased withdrawal of age-related allowances was legislated for through the Finance Act 2012, meaning that there would be no new recipients of such allowances from April 2013. The existing age-related allowances have since been kept at their 2012-13 levels, meaning that we have frozen the age-related allowances at £10,660 for individuals born before 6 April 1938 and £10,500 for individuals born over the following 10 years. Once the personal allowance aligns with those levels, there will be one personal allowance for everyone. I appreciate that there is opposition to the measure, but we believe that in the light of the other changes we have made, particularly those that relate to the basic state pension, those steps will help us achieve a fairer, simpler tax system.

The Government’s first priority for income tax has always been to increase the personal allowance, and the allowance has seen above-inflation increases in every year since we came to office. Given his earlier remarks, I am sure the hon. Member for Luton North supports that. In this financial year, the allowance rose by £1,305—the largest cash increase ever—and next year it will continue to rise by a further £560. Those steps mean that we will meet our target of increasing the personal allowance to £10,000 a year early, taking the number of taxpayers who have seen the benefit of our increases to 25 million. We remain committed to ensuring that personal allowances are set high enough that pensioners who are solely reliant on the basic state pension do not pay any tax. As such, half the people over 65 will not have to pay any income tax at all in this financial year.

[Kelvin Hopkins]

The point being made is that many pensioners do not pay tax because their incomes are simply too low.

[Mr Gauke]

In a moment I will turn to what we are doing with the basic state pension and the steps we have taken to ensure that it is rising more quickly than it otherwise would have.

My hon. Friend the Member for Suffolk Coastal touched on simplification. We want to make the tax system simpler and easier for people to understand, and the changes to age-related allowances are an important part of that. It is worth pointing out that we are not the only people to conclude that such allowances add unnecessary complications to the tax system. A 2009 report by the Public Accounts Committee commented:

“The age-related allowance rules are complex and hard for older people to understand and place too much emphasis on older people having to prove their eligibility, resulting in errors in claims and potential overpayments of tax.”

And, in March last year, the Office of Tax Simplification published its interim report on pensioner taxation, highlighting no fewer than nine complexities.

The taper feature is one of the main sources of complication in age-related allowances. It is worth setting out how it works, to demonstrate the degree of complexity in age-related allowances. The taper removes an individual’s age-related allowance where their income exceeds the aged income limit,—£26,100 in 2013-14—at a rate of £1 for every £2 over the limit. The age-related allowance is reduced up to the point at which the income tax allowance is exactly the same as the normal personal allowance. That taper creates a 30% effective rate of tax for individuals on modest incomes and, most importantly, brings hundreds of thousands of people into the self-assessment system when, in many cases, they would otherwise have no need to complete a tax return.

Our changes to age-related allowances will remove such complexity and confusion for older taxpayers. The simplification is not only of benefit to taxpayers; a simpler tax system is also easier for the Government to administer, enabling HMRC to focus on reducing the tax gap, which I know the hon. Member for Luton North cares about passionately.

--- Later in debate ---

[Mr Gauke]

The hon. Lady makes an important point about the difficulties faced by many of those who rely on their savings to support themselves. It is in all our interests that we have a strong and growing economy, and in the current economic climate it is right that we have low interest rates. We acknowledge that that creates difficulties, but the alternative—higher interest rates—would have significantly damaged the economy over recent years. Importantly, we have been able to bring in the triple lock, which has enabled us to increase the state pension at a faster rate than before and has included the largest-ever cash increase. That demonstrates the Government’s commitment to supporting pensioners wherever we can.

It is also worth re-emphasising that as a result of the decision to remove age-related allowances no one will pay more tax than before. Other factors, such as wage inflation and increases to the basic state pension, may, of course, affect tax liabilities, but no one will pay more tax from one year to the next because of the policy change alone. In fact, people over the age of 65 who pay no income tax at all—about half of all pensioners—are completely unaffected by the reform.

It is also worth reminding right hon. and hon. Members that, as the Chancellor announced in the Budget two years ago, the Government remain committed to exempting pensioners from national insurance contributions. There is a strong, principled case for that, because people have contributed throughout their working lives on the basis of a return, and I distinguish that argument from the one about personal allowances. I have debated this matter on a number of occasions and have never heard a strong case for those under the age of 65 having a lower personal allowance than those over that age.

[Kelvin Hopkins]

The Minister is doing his best to provide comforting words to pensioners but the reality, according to the Institute for Fiscal Studies, is that the average annual loss in the current year from all the tax credit and benefit changes since 2010 is £245 for a single pensioner and £470 for a pensioner couple. Those are substantial sums.

[Mr Gauke]

The hon. Gentleman refers to the Institute for Fiscal Studies, and it is worth remembering that last year the IFS concluded that pensioners are the group least affected by the Government’s tax and benefit changes.

I will run through some of those changes in a moment, but I want to come back to the point about how pensioners are taxed in comparison with those who are not pensioners, taking into account national insurance contributions. There is a good reason for the national insurance measure; I am not critical of it, and it is worth bearing in mind in the context of this debate.

Let me give an example of the burdens faced by pensioners compared with those faced by people of working age. Even under the freeze, a 69-year-old with an income of £16,000 in this financial year will still pay less than half as much tax and national insurance as someone aged 30 earning the same amount. A 69-year-old further up the income scale, earning £26,000 a year, still pays only 56% of the amount of tax and national insurance their working-age children pay. Someone born before 6 April 1948 earning £26,000 would have previously been eligible for age-related allowances but, following the withdrawal of the allowance, they will still see their total tax and national insurance bill reduced by 40% when they reach state pension age.

It is only right that we do not consider the changes to age-related allowances in isolation—I appreciate that I have made that point a number of times already this afternoon. Only about 40% of pensioners currently receive the age-related allowances but, by contrast, almost every pensioner in the UK—more than 11 million people—receives the basic state pension. Those 11 million pensioners have already benefited significantly from our decision to introduce the triple lock for the basic state pension, and they will continue to do so.

Last April, the basic state pension increased by the consumer prices index inflation rate of 5.2%, which represented the largest-ever cash increase in the basic state pension. This April, the triple lock guaranteed an increase of a further 2.5%, which was larger than the corresponding increases in inflation and average earnings. In contrast, under the previous Government’s plans, the basic state pension would have increased by only 2.8% last April and only 1.6% in the current fiscal year. In addition, we must not overlook the other benefits available to this age group, including winter fuel payments, free bus passes and prescriptions, and free TV licences for those over the age of 75. As I have said, the conclusion of the IFS is that pensioners are the group least affected by the tax and benefit changes implemented by the Government.

We are doing our best to protect this group of society, and to ensure that older generations can live with the dignity and respect they deserve. Taken as part of our wider policies on pensions, our changes to age-related allowances will reduce complexity while maintaining a more generous tax and national insurance regime for pensioners than for other groups. It is perhaps for those reasons that we hear none of the main parties advocating the return of age-related allowances, and I can confirm that the Government have no plans to reverse our policy in that area.

Finance (No. 2) Bill

Debate between Kelvin Hopkins and David Gauke

Thursday 18th April 2013 Commons Chamber

[Mr Gauke]

Let me say something about clauses 1 and 16. Clause 1 deals with the income tax charge for 2013-14, which requires legislation every year. I assume that Labour Members will not oppose the clause, given that the legislation raises £154 billion a year. However, a few weeks ago they did oppose the income tax charge in the Budget resolutions. If they had been successful, the deficit would have increased by more than £150 billion a year. Moreover, whereas the Government have taken some 2.7 million people out of income tax, Labour would have taken about 30 million people out of it, including millionaires.

I understood the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) to be opposed to clause 16. I shall say more about that shortly, but let me first comment on the three main parts of her interesting speech. She began by calling for greater economic growth in the economy. That section of her speech was followed by a part opposing the abolition of the 50p rate of income tax and containing no acknowledgment that it was an anti-growth measure which was not helping the United Kingdom to grow, was sending a signal that the UK was not open for business, and was higher than the rates imposed by many of our competitors. The third part of her speech set out her opposition to the cap on reliefs contained in clause 16 and schedule 3. [Interruption.] The hon. Lady says that concern is not opposition, but what she said sounded an awful lot like opposition to me.

[Kelvin Hopkins]

As the Minister may know, in Denmark the standard rate of income tax is about 30% and the higher rate is about 60%. Denmark has a very successful economy. High tax rates do not equal poor economic performance.

[Mr Gauke]

The fact remains that the 50p rate was higher than the rates imposed by many of our competitors. It was also considerably higher than the rate imposed by the hon. Gentleman’s party, a rate that stood at 40p for 155 of the 156 or so months during which his party was in office. I appreciate that he has always been very consistent in this regard, and I assume that he considers even the 50p rate to be too low.

[Kelvin Hopkins]

indicated assent.

[Mr Gauke]

I thank the hon. Gentleman for confirming that. However, I am not entirely clear about the principled position of those on his party’s Front Bench. I do not know whether they think that 50p, 60p, 45p or 40p is the right rate.

Finance (No. 2) Bill

Debate between Kelvin Hopkins and David Gauke

Monday 15th April 2013 Commons Chamber

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

I beg to move, That the Bill be now read a Second time.

It is a great pleasure to present this year’s Finance Bill—a Bill that further demonstrates the Government’s commitment to creating a tax system that is fairer, simpler and more transparent, and one that will promote growth and reward work. Unlike the Opposition, those of us on the Government Benches recognise that we have to address the fiscal mess left us. That means that we have to resist the voices of those wanting to engage in a further splurge in borrowing. But we can take steps to make ourselves more competitive and help people with the cost of living, and that is what we will do in the Bill. I will happily take interventions this afternoon, but to give some structure to my speech it is perhaps worth while my laying out to the Chamber the order in which I intend to discuss the Bill. First, I will talk about the measures that will support growth and enterprise, then the measures that will tackle avoidance and evasion, and then the measures that will increase fairness. Finally, I will talk about the way in which the Bill will help to deliver a simpler tax system.

[Kelvin Hopkins (Luton North) (Lab)]

On the issue of avoidance and evasion, the press reported over the weekend that Britain and its dependencies have more tax havens than almost any other country. Will the Government tackle evasion and avoidance seriously, and save us an awful lot of money?

[Mr Gauke]

As I was trying to make clear a moment ago, I will turn to the subject of evasion and avoidance later on in my speech. The Government have a proud record of taking steps to reduce evasion and avoidance, with legislative measures, support for Her Majesty’s Revenue and Customs and what we are doing at an international level to encourage greater co-operation between jurisdictions to ensure that the net is closing in on those who wish to evade their responsibilities. We will continue to take positive steps on that front.

--- Later in debate ---

[Mr Gauke]

Where there is an element of dishonesty, it is clearly tax evasion, and Her Majesty’s Revenue and Customs has indeed been successful in bringing prosecutions in a number of high-profile cases. Under this Government we have seen the number of prosecutions by HMRC increase fivefold, which is a reflection of how seriously we consider tax evasion and of our determination to assist HMRC in addressing it as much as possible.

[Kelvin Hopkins]

A theme I have raised many times in the Chamber is the number of staff in HMRC. I am sure the Minister knows that every additional tax officer collects many times their own salary, and in the case of business taxation, it can sometimes be hundreds or even thousands of times their salary. Do we not simply need a substantial increase in the number of professional staff in HMRC to make sure we collect all the tax?

[Mr Gauke]

The hon. Gentleman and I have debated that point on a number of occasions. The important thing is to ensure that HMRC has the right expertise and skills, and the right people doing the job. In truth, there has been a significant reduction in HMRC staff over recent years, the vast majority of which occurred under the previous Government. We are increasing the numbers working in the enforcement and compliance area, but a lot of the answer is about ensuring that HMRC can work in the most effective way. I was struck by the increase in the number of tax professionals being trained by HMRC. We do want to invest in skills within HMRC. This is not simply a numbers game but, as it happens, the number of people working for HMRC in enforcement and compliance is going up, not down.

Oral Answers to Questions

Debate between Kelvin Hopkins and David Gauke

Tuesday 6th November 2012 Commons Chamber

[Kelvin Hopkins (Luton North) (Lab)]

The Minister talks—it might be wishful thinking—about bringing in an extra £7 billion a year, but the tax gap is at least £120 billion a year, and some people think it is more. Is it not time that the Government took chasing billionaire tax dodgers more seriously and stopped cutting public spending and squeezing the poor?

[Mr Gauke]

The hon. Gentleman will be aware that the figure of £120 billion does not have much support from anyone who knows much about statistics. The actual figure is £32 billion. That is the number we inherited from the previous Government and we are determined to bring it down.

Finance Bill

Debate between Kelvin Hopkins and David Gauke

Monday 2nd July 2012 Commons Chamber

[Mr Gauke]

HMRC’s analysis, which is a good piece of work, showed through two different mechanisms that the reality was that the amount being raised was somewhat less than had been predicted. The fact is that the behavioural response was much greater.

Let me say a word or two about that. To start with, HMRC estimates that as much as £18 billion worth of forestalling took place in 2009-10, of which about two thirds, up to £11.3 billion, has been estimated to unwind in 2010-11, but this forestalling was not factored into the original revenue calculations. Furthermore, HMRC estimates that between one third and one half of the behavioural effect comes from genuine reductions in income. We have heard this evening that this is all about tax avoidance, that tax avoidance increases when we increase the rate and that we can be sure we will get the benefit of it as we unwind, but the reality is that between one third and one half of this was simply the result of less economic activity, because people reduced their hours and participation in the UK labour market and moved elsewhere.

[Kelvin Hopkins]

The Minister has said it: the amount raised from the increase in tax declined because the economy went into relative decline as a result of the Government’s policies. The fact is, however, that all this is about the feebleness of our tax-collecting system—the laws governing it and HMRC, which has been shown to be soft on big companies, in particular, and soft on the rich when it comes to tax collection. Light-touch regulation: that is the poison.

[Mr Gauke]

I strongly disagree, but before I turn to tax avoidance let us remember that between one third and one half of the reduction is because of less participation in the labour market. It is not because of the decline in the economy; we are talking about people moving elsewhere, people retiring earlier and people working fewer hours because it is not worth their while, in their opinion, to work as hard as they would otherwise do. Let us not forget that when someone moves from this country to Switzerland, we miss not just the difference between 45p and 50p, but everything, the whole 50p, and not just that bit above £150,000, but the first £150,000. That is the consequence of a tax rate that drives people out of the country and does not attract them here.

Finance (No. 4) Bill

Debate between Kelvin Hopkins and David Gauke

Thursday 19th April 2012 Commons Chamber

[Kelvin Hopkins]

The Minister may be too young to remember, but the Conservative Government under Mrs Thatcher abolished the Rooker-Wise amendment. The basic state pension would have been much higher now had that amendment been kept in place. What about raising the basic state pension in steps to where the pension would have been had the Rooker-Wise amendment never been abolished?

[Mr Gauke]

The Rooker-Wise amendment related to tax thresholds. As for indexation, we are using the higher of earnings or inflation or 2.5%. The plans we inherited were just earnings. That is an important point.

Despite difficult economic conditions, the Government continue to protect benefits for pensioners, including winter fuel payments, free bus passes and free prescriptions, to name but a few. Many pensioners are also benefiting from the Government’s decision to make funding available to local authorities to freeze council tax, and we also have the Warm Homes discount. The Institute for Fiscal Studies has submitted evidence to the Treasury Committee showing that pensioners are the group least affected by the tax and benefit changes implemented by the Government. It has given evidence that pensioners have benefited the most from the distributional impact of tax and benefit changes for some years. I assure the House that the Government are supporting, and will continue to support, pensioners.

Oral Answers to Questions

Debate between Kelvin Hopkins and David Gauke

Tuesday 1st November 2011 Commons Chamber

[Kelvin Hopkins (Luton North) (Lab)]

In 1945, Britain had higher Government debt than now and the Government of that time did not impose cuts but ran a full-employment economy and there was rapid growth. Is it not time that the Government took a leaf out of Labour’s book in relation to running the economy?

[Mr Gauke]

May I just make the point about the 1945 Government that they were running surpluses from 1948 onwards? If memory serves, the debt in 1945 was 232% of GDP and by 1951 it was 178% of GDP, so they brought debt down. That is not a bad thing to do and this Government want to do it, whereas the Labour party wants to put debt up.

Oral Answers to Questions

Debate between Kelvin Hopkins and David Gauke

Tuesday 8th February 2011 Commons Chamber

[Mr Gauke]

I appreciate my hon. Friend’s concerns about online filing. It is the case that one of the providers has been unable to meet the timetable that HMRC set out, although a number of other software providers have been able to do so. We are seeking to ensure that we implement this in a way that is sympathetic to businesses, but we want to stick to the original timetable. Those businesses that have delivered should not be punished because of the failures of another.

[Kelvin Hopkins (Luton North) (Lab)]

Manufacturing has undoubtedly been helped a lot by the depreciation of sterling, which took place under the last Labour Government. That was only possible because Labour wisely kept us out of the euro. There is now a possibility that interest rates might rise. Will the Chancellor be putting pressure on the Monetary Policy Committee not to raise interest rates?

National Insurance Contributions Bill

Debate between Kelvin Hopkins and David Gauke

Thursday 13th January 2011 Commons Chamber

[Kelvin Hopkins]

My hon. Friend is absolutely right, and in the context of the current economic situation, the level of Government cuts and what the Government are spending on the European Union, bailing out Ireland and so on, £1 billion is a small amount of money, especially when it is spread over a number of years. My right hon. Friend the Member for Delyn is right to insist that the new clause be inserted into the Bill, so that we can measure its true impact.

I will leave my comments there, although I will wish to speak to other amendments later. The Bill is modest, and, as my right hon. Friend has suggested, we must ensure that a true measure of its impact is published.

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

It is a great pleasure to return to the Bill and to some of the arguments that were made many times in Committee, and indeed many times in the speech of the right hon. Member for Delyn (Mr Hanson) this afternoon. It is always fascinating to hear Opposition Members talk about the beneficial effect on employment of reducing employers’ national insurance contributions, although to be fair, I should exempt the hon. Member for Luton North (Kelvin Hopkins) from that comment.

I do not intend at this point to address all the points about regional matters and so on that the right hon. Member for Delyn touched upon, because we will return specifically to them later. I shall address new clause 1, which would require the Treasury, after Royal Assent, to provide to Parliament an annual report on the national insurance contributions holiday for new businesses. The report would be required to contain the total sum of business expenditure saved under the scheme and a breakdown by constituency of

“the number of businesses availing themselves of the secondary contributions holiday…the number of employees designated qualifying employees under the scheme; and…the total expenditure saved by businesses under the scheme.”

I think it would be fair to say, as my hon. Friend the Member for Wimbledon (Stephen Hammond) did, that it is not uncommon for Oppositions to table amendments requiring reports on the implementation and operation of a Bill, and for Governments to resist them. I say to the right hon. Member for Delyn that I do not believe the new clause is necessary, because in Committee I undertook to provide updates to the House and the public on the operation of the scheme after the end of the tax year, including information at regional level. His point that we should provide such information was entirely reasonable, and I can now give a little more detail about what we intend to provide.

We envisage a factual report that will state, regionally and nationally, the number of new businesses applying, the number of applications rejected, the number of qualifying employees for whom a holiday has been claimed and the amount claimed. The main difference between what I am saying we will do and the requirements of the new clause is that the latter would require a constituency-level breakdown, even though the scheme is regional in England and will not cover every English constituent.

The central point, which I made in Committee several times—the hon. Member for Luton South (Gavin Shuker) also touched on it—is that the locations of people’s work and of the businesses for which they work are not necessarily the same as the locations of people’s homes. Many people travel to work, and operating specifically on a constituency basis could result in a somewhat misleading view of the way in which the scheme works. We could identify one constituency that falls within a relevant region, where many businesses that benefit from the scheme are created and have many employees, and where public sector employment or unemployment is not high, and the right hon. Member for Delyn might then say, “This is an example of the scheme not operating as it should. Money is going into a relatively prosperous area and is not well targeted.” However, that ignores the fact that many employees who benefit from the scheme could live in neighbouring constituencies that are heavily dependent on the public sector, or where unemployment is high. I believe that looking at the matter on a constituency basis does not necessarily give a fair indication, and that examining it on a regional basis is better and more accurate. I therefore intend to prepare my reports on not a constituency but a regional basis. None the less, that should be helpful to hon. Members.

--- Later in debate ---

[Mr Gauke]

First, may I welcome the right hon. Member for Wentworth and Dearne (John Healey)? It is a great pleasure to debate with him again. My first experience as a Front Bencher was debating with him and, although we now sit on different sides of the House, it is good to do so once again. I am pleased to be sitting on the Government Benches now, rather than on the Opposition side, but I am sure he has ambitions to return to these Benches. There are not many subjects on which I agree with the vast majority of Labour MPs, but one on which I do is the high regard in which they obviously hold the right hon. Gentleman. I am pleased by his popularity and the progress he has made.

Amendment 8 would require the National Audit Office to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. It may be useful to clear up one or two potential misconceptions. The amount that is to be spent on the NHS was confirmed at the spending review, and is unaffected by whether funds come from national insurance contributions or elsewhere. The amount of national insurance contributions allocated to the NHS depends on economic circumstances as well as the proportions specified in legislation. I would like to reassure the House that it is no part of Government policy to cut NHS funding automatically if, for example, global economic conditions lead to a reduction in national insurance contributions allocated. To be fair, that has not been the position of any Government, notwithstanding the fact that there has been an allocation element of national insurance contributions not just from 2003, but from 1948 when the NHS was created.

[Kelvin Hopkins]

We have to be very precise about what we mean when talking about cutting funding. Previous Governments and Ministers have talked about funding not being cut when it has stayed the same in money terms, which is a real-terms cut. Even raising funding in line with one or other measure of inflation may mean a cut. We have to talk about this in real terms in the sense of what is actually done within the health service. That is the measure we should use, in order to make sure nothing is cut inside the health service.

[Mr Gauke]

I note the hon. Gentleman’s remarks. The position is set out in the coalition agreement, and the October 2010 spending review met the Government’s commitment on HNS funding in full, and did so without changing the allocation of national insurance contributions to the NHS. The effect of our policy is to maintain the level of national insurance contributions allocated to the NHS and to allocate additional revenues from rate rises to the national insurance fund. This helps ensure that plans for payment of pensions and other contributory benefits are sustainable in the long term. We can protect pensioners by the new triple-lock, which guarantees each and every year a rise in the basic state pension in line with earnings, prices or a 2.5% increase, whichever is greater.

In ordinary circumstances, we should expect contributions to rise broadly in line with earnings, and therefore to rise in real terms. Therefore, under the Government’s proposals we should expect allocations to the NHS to rise in real terms in a typical year. Amendment 8 would require the NAO to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. The Government’s view is that this would be a pointless exercise, since whether or not the NHS allocation grows, the Government have decided on the amount the NHS will spend. In any case, the amount allocated to the health service from national insurance contributions would, other factors being equal, be expected to grow in line with earnings and therefore grow in real terms every year under the terms of the Bill. This amendment is therefore unnecessary, and I recommend that the right hon. Member for Wentworth and Dearne withdraw it.

I have focused my remarks narrowly on what the amendment is about and why it does not do what is intended. However, I must remind the House of Labour Members’ comments on the subject of health spending more widely. The right hon. Gentleman’s predecessor as shadow Health Secretary, who is now shadow Education Secretary, has said:

“It is irresponsible to increase NHS spending in real terms within the overall financial envelope that he, as chancellor, is setting.”

It was also not that long ago that the shadow Chancellor, whose remarks we study closely, said that there was

“no logic, sense or rationality”

to the policy of ring-fencing NHS spending. I am pleased that Labour Members are now taking a different approach. It has been clear from the remarks made by the right hon. Member for Wentworth and Dearne that they are in favour of real-terms increases in health spending, and we are pleased that the Government have won that argument.

--- Later in debate ---

[Mr Gauke]

I shall give way to someone who has not been advocating cuts in national insurance contributions.

[Kelvin Hopkins]

The chief economic adviser for the Chartered Institute of Personnel and Development has said that

“the VAT hike will prove a far more significant ‘tax on jobs’”—

to use the Government’s term—

“than the hike in…National Insurance contributions”.

That outside organisation estimates that 250,000 jobs will be lost because of the VAT rise.

[Mr Gauke]

I recommend to the hon. Gentleman the radio programme “More or Less”, which recently pointed out that the national insurance contributions increase would have raised only a quarter of the tax revenue that the VAT increase will raise.

Finance (No. 2) Bill

Debate between Kelvin Hopkins and David Gauke

Monday 11th October 2010 Commons Chamber

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

I beg to move, That the Bill be now read a Second time.

As observant Members will note, this is the second Finance Bill of this Parliament and the third one this year. The date of the general election earlier this year reduced the time available for scrutiny of technical measures in advance of that election, and the short timetable available between our emergency Budget and the summer recess has made it necessary to have a third Finance Bill to address various technical measures.

Given the content of this Bill, I suspect that there will be a fair amount of cross-party consensus on the matters in it but, in any event, I would like to congratulate the newly appointed shadow Treasury team. In particular, I congratulate the hon. Member for Wallasey (Ms Eagle), the shadow Chief Secretary to the Treasury, both on her election success as a member of the shadow Cabinet and on her appointment to her current position. She will bring considerable experience of Finance Bills to the shadow Treasury team, both as a former Minister and from the Finance Bill earlier this year.

Although he is not present, I should like also to congratulate the newly appointed shadow Chancellor, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson). He stated over the weekend that his first task was to read an economics primer, but he also expressed the need to hit the ground running, because of the Finance Bill today. Whatever his education programme, I suggest that he should not necessarily begin with the scrip dividend treatment of real estate investment trusts or the taxation of long cigarettes. However, we wish him well in that process.

At the emergency Budget in June, my right hon. Friend the Chancellor set out this Government’s fiscal mandate, acting swiftly to tackle the deficit and restore credibility to the public finances. In the short, summer Finance Bill, we quickly put the core elements of the Budget on to the statute book, reassuring the British people and the financial markets that we would not allow Labour’s debt to spiral out of control.

[Kelvin Hopkins (Luton North) (Lab)]

The Minister mentioned cigarettes. Are the Government going to do anything to tackle the £4 billion that is lost through cigarette smuggling? That is four times the amount of money that they are apparently hoping to save by cutting benefits to the better off.

[Mr Gauke]

The hon. Gentleman makes the fair point that there is too much cigarette smuggling, and this is a matter that we are keen to address. My right hon. Friend the Chief Secretary to the Treasury has already announced proposals to provide additional funding to Her Majesty’s Revenue and Customs to tackle cigarette smuggling, among other things. I very much welcome the hon. Gentleman’s intervention but, let us be honest, it would be unrealistic to say that we could prevent all cigarette smuggling. We can, however, take steps to reduce it. That would be to the benefit of the Exchequer, and I am pleased that the Government are moving ahead and doing that.

It is our determined actions that have restored confidence in the economy, stabilised the nation’s credit rating and halved interest rates on Government short-term borrowing. We are saving money today so that we can invest in tomorrow. Ours is the right approach for the country, and that has been widely recognised. Only a fortnight ago, the International Monetary Fund said that our deficit plan was essential to restoring confidence in the UK’s public finances and “supports a balanced recovery”. That is the approach that we will take forward, including in the spending review.

Finance Bill

Debate between Kelvin Hopkins and David Gauke

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

The hon. Gentleman was a Member of the House in the early days of the previous Government, so he knows all about rolling up numbers. I could roll up the numbers for how much will be raised from the bank levy—I do not have the details in front of me, but we would get to about £8 billion—but I am not sure that that is a terribly helpful way of approaching things.

The corporation tax reduction is just one part of the wider package to build a private sector-led recovery. Instead of increasing the small profit rate by 1%, we will cut it to 20% in next year’s Bill, which will benefit some 850,000 companies from April 2011. We are increasing the threshold at which employers start to pay national insurance contributions and have announced a package of support for small businesses. The package will also include a reduction in the writing-down value of plant and machinery allowances to 18% and a reduction in the annual investment allowance to £25,000. That will still provide for allowances that are broadly in line with depreciation, while the annual investment allowance will still cover the annual qualifying expenditure of 95% of businesses. Furthermore, we are reducing the main rate of corporation tax this year and changing allowances in 2012. We are giving companies a timing benefit that will form part of the £13 billion extra that will be invested as a result of the changes.

The third and final area that we are addressing is fairness. Clause 2 increases the rate for capital gains tax for higher rate payers to 28%. That progressive change will substantially reduce the incentive for individuals to disguise their income as a return on capital. It will ensure that the appropriate rate of taxation is paid, which is fair in itself.

Avoidance is a significant issue for the Government and it has been a significant topic throughout the Bill’s passage. It was raised with reference to corporation tax and capital gains tax, and it is the target of clauses 8 and 9, which protect about £200 million of revenue a year. I assure the House that the Government are absolutely committed to tackling avoidance and evasion robustly.

[Kelvin Hopkins (Luton North) (Lab)]

Will the hon. Gentleman give way?

[Mr Gauke]

If the hon. Gentleman will forgive me, I am keen to press on.

We have inherited plans to limit tax relief on pension savings for the wealthiest. Under the approach in the Finance Act 2010, individuals on the highest incomes who were able to make very large pension contributions could have continued to get pensions tax relief worth up to £51,000 a year. We have concerns about the complexity and fairness of the previous Government’s approach. Given the state of the public finances, we cannot ignore the £4 billion or more of revenue that the policy was set to raise, and as we are committed to protecting the public finances, the alternative needs to raise no less revenue than the existing plans. We are looking at an approach whereby the annual tax relief available will be restricted to less than half that under the previous Government’s plan, which will significantly curtail the ability of the super-rich to benefit from pensions tax relief.

We have touched on annuities. We want to enable people to make more flexible use of their pension savings. We intend to end the obligation to annuitise by the age of 75 from April 2011, and last week we launched a consultation on the details of the change. Before a new system is introduced in next year’s Finance Bill, this Bill puts in place interim measures that will delay such decisions until an individual is 77. That will prevent anyone turning 75 on or after Budget day from being disadvantaged by having to make a decision before the new rules are in place.

The Bill is at the heart of the Budget changes that are necessary for this country’s tax system. Unlike our predecessors, we do not believe that, in a pit of debt, we should still be digging. We do not believe that we can just borrow to pay for front-line services. In the words of the previous Chancellor:

“If we are not credible in what we do and say, people will assume there will be more borrowing or huge tax rises to come.”

Our predecessors failed that test but we are succeeding.

In the words of the shadow Business Secretary, we cannot wish the deficit problem away. The Bill will promote enterprise. It is progressive and responsible, and I commend it to the House.