Tax Avoidance and Evasion
Kwasi Kwarteng Excerpts(8 years, 1 month ago)
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Dr Lee
Of course I am talking about the tax system. There have been some concerns about it, to do with extortion and potential for kidnapping the very wealthy. However, if the system is applied with a log in and all the necessary things that need to be put in place, I do not see a problem with it. In the first couple of years, everyone will be interested—twitchy curtains—in what everyone else is earning, but after that, things will settle down.
I have contributed today and I feel strongly about this because if we do not have trust, not just in us but in this establishment and in Government, we cannot achieve much. The challenges that the country faces with the long-term sustainability of health and welfare, particularly pensions, mean that there will be some difficult decisions for whoever is in power. For them to be implemented, we must be trusted. Everything that we do here should be about that. That is why I think that our priorities should be transparency, simplification and scrapping taxes that have long been out of date.
Kwasi Kwarteng (Spelthorne) (Con)
I am grateful to my hon. Friend for his interesting speech. Does he believe that tax transparency will automatically lead to greater trust among the electorate? I feel that the electorate has reached the point where transparency may not necessarily lead to greater trust.
Dr Lee
I agree with my hon. Friend that initially no, it would not. However, in time, once the system beds down, it will. The richest man in Norway, who published all his wealth and income, is now extremely popular because it turns out that he is a great philanthropist. People do not have a problem with others being successful. I certainly do not detect that in the British public. However, I think that there is a suspicion that something underhand is going on in some quarters and, as the Prime Minister says, transparency is the best disinfectant.
We need to act because trust matters. Without trust, we cannot implement what is necessary, whatever the policies are. Anything that the Government can do to encourage the public to trust in the system and in this institution will get my support.
Mr Anderson
I haven’t got a clue what unearned earnings means—I have never been in a position to have unearned any earnings. The Minister might be able to answer that when summing up the debate, and I would be interested to find that out.
The Chancellor of the Exchequer is paid £120,000 a year. He also receives £34,000 a year in rental income from his house, because he lives at No. 11 Downing Street, as well as dividend payments of £44,000 a year. But what does he say to nurses, care workers, prison officers, police officers, and, yes, tax collectors? He says they must work harder and longer—
Mr Anderson
Sit down.
The Chancellor says to those people, “You must work harder, and you must accept that you will have to work for longer before you get your pension.” How can he expect steel workers in this country, who are facing the possibility of a life on the dole, to believe that he really understands what they are going through?
The Mayor of London receives £143,000 for doing his day job, a quarter of a million pounds a year for writing for The Daily Telegraph, another quarter of a million in royalties from his books, and more money from his savings. Ordinary people in this country are fed up with carrying the can for the mistakes of the rich in this country—mistakes that led us into the economic crisis that is blighting the daily life of men and women who will never get the chance to save anything in the first place, let alone squirrel it away in the Caribbean, the Virgin Islands or the Channel Islands, where no questions are asked as long as people know the drill.
In two weeks the Trade Union Bill will come back to this House, and the most tightly regulated body in the country will face even more restrictions under the sad reality of what we have been told is the sunshine of transparency. The hon. Member for Lewes (Maria Caulfield) spoke about trade unions not paying corporation tax, but I dare bet that them not doing that involved fully audited accounts that have been signed off, not hidden away. Why do we not subject financial markets, regulators and dealers to the same tight regulations that this Government intend to impose on trade unions, whose only job is to look after the interests of ordinary men and women in this country? Why do we not put the same effort into chasing tax dodgers as we do into hounding so-called benefit cheats—a process that traduces innocent people and sees their families rubbished? People are sanctioned without money for weeks on end, and at the end of that someone says, “Oh, we made a mistake.” What happened in the meantime? Why on earth do the Government think that people in this country are angry?
A lot has been said about the politics of envy, but this is about the politics of fairness. Make no mistake—this week we are seeing the end of the farce of “We’re all in this together”. Hon. Members should read today’s motion carefully because it is a roadmap, a loophole and a get-out for Conservative Members to say to people in this country, “We’ve heard your anger and frustration. We hear what you say. Let’s work together and find a way out of this.” Instead, they have shut the door and want to carry on the dodgy deals. No matter what they say, yet again there is one law for the rich and one for the poor, and the people of this country will not stand for it.
Tax Avoidance and Multinational Companies
Kwasi Kwarteng Excerpts(8 years, 3 months ago)
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Kwasi Kwarteng (Spelthorne) (Con)
This is a timely debate and I am grateful for the opportunity to speak in it. It is important to remember what the previous Government did, because members of it are speaking, eloquently in many cases, in this debate. It is absolutely relevant, therefore, and gives us the context in which this debate has been called.
For 13 years Labour was in power and for at least the last five of those years these multinational companies—Amazon, Google, Apple—paid almost no corporation tax whatsoever. That was the immediate context. The right hon. Member for East Ham (Stephen Timms) suggested that that Government had a great record, but it was not great. These companies paid very little; this is the general context.
It is quite right for the shadow Chancellor to bring up this debate. I think he makes a reasonable point that ordinary people—our constituents—expect companies to pay their fair share, but I would observe that the very facts he points out about Google employing thousands of people at very high salaries shows, in a way, the success of Google. It shows the success of this Government in creating a business-friendly environment in which these companies can operate. In fact, every single one of those employees, who are paid an average of £160,000 a year, are contributing very significantly to the Treasury in the form of income tax and other taxes that they pay. That fact should be observed in this debate.
If we are looking at being able to tax multinational companies, we must consider the fact that, as my hon. Friend the Member for Sherwood (Mark Spencer) suggested, they are operating in lots of jurisdictions and, in many cases, if they are not internet companies they will probably be paying tax in only one country. There are lots of variations that we need to consider, and I do not think it is right for Opposition Members simply to try to make political capital in this sensitive and highly complicated debate.
As my hon. Friend the Member for South Norfolk (Mr Bacon) has said, the reason that companies avoid tax is the complexity of the system. There is a direct correlation between their propensity to avoid paying tax and the complexity of the tax system. Again, the last Labour Government had a pretty poor record on that. This is a complicated debate, and I object to the fact that Labour Members are trying to score political points in it.
House of Lords Reform
Kwasi Kwarteng Excerpts(8 years, 4 months ago)
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Gavin Newlands (Paisley and Renfrewshire North) (SNP)
I pay tribute to my hon. Friend the Member for West Dunbartonshire (Martin John Docherty) for securing the debate and opening it in his own inimitable and passionate style, and to the Backbench Business Committee for allocating time for it.
I am grateful for the opportunity to discuss how and why the second Chamber should be reformed to allow Parliament to work more effectively and democratically for the electorate throughout the United Kingdom. In its current form, the House of Lords can only be seen as an affront to democracy, and it has no place in a modern democratic decision-making process.
Since my election in May, I have become familiar with the strange traditions that surround this place. There are many outdated rules and conventions that range from the slightly odd to the ridiculous, and from trivial matters such as fancy dress to much more important issues like 15-minute votes which stifle the democratic process. However, the most outdated relic with which we have to deal is the unelected second Chamber of peers. What does it say about us that here, in the 21st century, we need to rely on an undemocratic body that includes religious leaders, defeated MPs, party cronies and donors to oversee and scrutinise the work of the democratically elected representatives of this place?
That bloated and out-of-date Chamber is the second largest legislative body in the world, with 821 peers. It is second only to the National People’s Congress in China, which has a similarly undemocratic basis. The number of peers in the House of Lords is growing continually, and after the recent election we saw the Government appointing party loyalists to “serve” there. Kenneth Gibson, a Member of the Scottish Parliament, has obtained figures showing that nearly 75% of those appointed to the Lords since the election are defeated, retired or deselected MPs, or former advisers. The United Kingdom also stands out among other western democracies in giving religious leaders seats in its legislature, as of right.
The Scottish National party does not put forward any individuals to be appointed to serve in the House of Lords. We have a long-standing opposition to that costly, undemocratic and bloated Chamber, and will continue to oppose it at every opportunity. In contrast, all the other parties regularly put forward individuals to serve as peers. In fact, 586 of the serving peers come from one of the main political parties that are represented in this Chamber.
As well as the long-standing democratic outrage, there is the equally long-standing financial cost of having such a ridiculous Chamber. In 2014-15 it cost nearly £95 million to run the House of Lords, with over £20 million going on Lords expenses and allowances. If we contrast that with the £87 million it cost to run the Scottish Parliament, we can easily see why so many of our constituents are royally fed up with the Chamber.
Kwasi Kwarteng (Spelthorne) (Con)
I appreciate that the hon. Gentleman is new to the House. I have been here for five years now and I just want to say that not a single constituent of mine has ever mentioned the House of Lords. How many of the hon. Gentleman’s constituents have brought up this subject?
Gavin Newlands
This point was made earlier on. Although many other issues do come up and this is far from being the No. 1 topic of conversation on the doorstep, it has certainly come up many times, and I am about to come on to the question of public levels of support.
It is clear to most people that the second Chamber needs radical reform if we want to be able to call ourselves a true modern democracy. In a YouGov poll of September 2015 people were given a range of options, and it found that 41% believe the House of Lords should be entirely elected, but crucially only 5% thought that the system was acceptable in its current format.
Even though the recently published Strathclyde review did not comment on the composition of the House of Lords, it provides an ideal opportunity to discuss the future of the House of Lords in more detail. This review was hastily announced by a Government in a petty huff following their humiliating defeat on tax credit cuts in the Lords. It is clear that this review was set up to curb the second Chamber’s ability to hold this Government to account. These issues need to be properly debated, not pushed through hastily without the revising Chamber having full powers of scrutiny.
The UK Government want to muzzle the Lords in the same way as they have already muzzled charities and others who have criticised welfare reform and austerity. I accept that the Government have a majority of MPs in this Chamber; however, they should not confuse that with having a majority of wisdom. On matters of parliamentary procedure and set-up, the Government should be willing to listen to, and work with, those with different views, whether they be other MPs, parties or Parliaments, outside organisations, or indeed the second Chamber.
The SNP does not support the current approach to the House of Lords, how we pay those who attend and the privilege associated with it, but we have to acknowledge that on occasion the Lords can be useful, for example in helping to force the recent tax credits U-turn. The recent Lords review on the impact of the planned cuts to employment and support allowance led by Cross-Bench peers is another example of the kind of invaluable review of policy that we need a second Chamber to take forward.
I do not support an unelected second Chamber and believe fervently that the House of Lords must be abolished. In such an eventuality, there is the option of having a unicameral Parliament, as outlined previously, with a beefed-up Committee structure somewhat like that of the Scottish Parliament, rather than a bicameral set-up. However, for the purposes of this debate I have presumed there is a settled will for having two tiers. Whatever arrangements are made, we must be able to properly scrutinise and hold this Government to account.
I have to be honest and admit to being very conflicted when we are forced to rely on the unelected Chamber to defend the welfare state against the cuts planned by this Conservative Government. It took the House of Lords, as flawed as it is, to tackle the planned cuts. It may well be down to the second Chamber to face the Government again as they seem determined to cut ESA, further penalising disabled people, some of whom lobbied Members in Westminster Hall yesterday.
It highlights the absurdity of the UK’s current constitutional arrangement that we are relying on unelected peers to protect us from some of the worst aspects of this Government’s policy agenda. This situation has caused a lot of anger in Scotland. Why are we forced to rely on unelected peers to defend our fellow citizens and their families? Scotland has seen unprecedented levels of democratic engagement during and after the referendum, so the idea of having to rely on this outdated, out-of-touch and undemocratic institution to defend the welfare state does not sit well with people—and it does not sit well with me.
The second Chamber in its current form is nothing more than an affront to democracy, and the way successive Governments have used the patronage system to reward party loyalists is only the tip of the iceberg. We recently learned that once again friends of Cabinet Ministers have been rewarded for their services with a place in the Lords. The numerous former MPs, special advisers and party aides who were awarded peerages after the election make the House look like a dumping ground or a retirement plan for party cronies. The numerous expenses scandals involving the Members of the second Chamber also do nothing to improve people’s image of the Lords.
Whatever my feelings on this issue, however, I recognise the benefits of having a second Chamber at Westminster with the current Government in office. We do not need to reinvent the wheel. A range of reviews have been carried out into the current set-up, and several organisations have done a lot of work on the issue and come up with several options. Groups such as the Electoral Reform Society and the University College London constitutional unit have carried out in-depth research into the House of Lords and possible alternatives to it. We need a comprehensive and transparent debate on this matter in Government time, but I imagine that this Conservative Government would be reluctant to grant such a debate, judging by the way in which they have rushed through the Strathclyde review.
Labour and the Conservatives have been guilty in the past of failing to follow through on their intentions to reform the House of Lords. The introduction of the Parliament Act 1911 was the first indication of any Government’s intention to reform the Lords, but after 105 years we are still waiting for any real reform to take place. The recent tax credits U-turn shows that the second Chamber has its place, but we need a Chamber that can hold the Government to account and properly scrutinise legislation. At the moment, the House of Lords is just one more outdated Westminster relic that should be consigned to history. Until that happens, and until we have a second Chamber that actually works, I will continue to speak up for change. It is time to ensure that we have a modern and flexible democracy by abolishing the medieval House of Lords. We need to look ahead, not backwards.
Tax Credits
Kwasi Kwarteng Excerpts(8 years, 6 months ago)
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Seema Malhotra
Perhaps the hon. Gentleman should ask what will happen to the 4,500 working families in his constituency who are set to see an average cut in their household income of more than £1,300. What impact will that have on whether they can keep their home, put food on the table or afford clothes for their children? I suspect that he will have a lot to answer for in his constituency.
A million single parents who are in work are set to be £1,000 a year worse off and 1.5 million married women will be £600 poorer.
Seema Malhotra
I will in a moment.
These cuts will also hit the self-employed who are on tax credits. Since 2010, self-employment has grown at twice the rate of overall employment. We know that, on average, self-employed people earn 40% to 50% less than those who are in regular employment.
Seema Malhotra
I will in a moment.
This weekend, The Observer included the case of somebody in Manchester who is self-employed. He expects his tax credits to be reduced to virtually nothing from next April. I hope that in his response, the Exchequer Secretary will be straight about what these changes mean for the self-employed.
Kwasi Kwarteng
I thank my constituency neighbour for giving way. We have heard an impressive array of statistics, but does the hon. Lady have one proposal for reducing the deficit?
Seema Malhotra
That is absolutely incredible. We have answered that point in the media and in articles, and I do not need to keep going over that ground. The hon. Gentleman might want to respond to the 3,000 families in his constituency who will be hit by these changes, and say how he will reply to institutions that have done hard research into these matters. The Government have chosen to carry out no impact assessment for what has been described as an “array of statistics”. This debate is about people’s lives, and the hon. Gentleman should stand up for his constituents, just as Labour Members will do when voting in the Lobby tonight—[Interruption.]
Damian Hinds
I am grateful, Madam Deputy Speaker.
Our increases to the tax-free personal allowance mean that a typical basic rate taxpayer has seen their income tax bill cut by £825 since 2010. We are adding a further £80 next year and a further £40 the year after.
Kwasi Kwarteng
Will the Minister explain to the House how increasing the personal allowance has helped the very people the Labour party is claiming will be affected by this cut?
Kwasi Kwarteng (Spelthorne) (Con)
I am very much obliged to you, Mr Speaker, for being able to speak in this debate. We have heard lots of passionate speeches and many well-argued speeches, but I wish to start by referring to the one made by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke). He said that when we look at the election, we see that there was a clear choice between the Conservative party and other parties on economic credibility. It is on that rock of economic credibility that this Government are doing something that is difficult but essentially the right thing. Opposition Members have to outline where they are going to find the £4.4 billion of savings, and they have not done so in any way.
Kwasi Kwarteng
I am not going to give way. [Interruption.] I am not frightened of the hon. Lady, but I realise that I have limited time. I am not frightened—
Kwasi Kwarteng
I am not frightened with respect to this debate, but perhaps in other ways I should be.
The Opposition parties have a number of questions to answer. Where are they going to find the savings? More broadly, most of us agree that this system of tax credits subsidises employers, so is that subsidy to them to be paid year in, year out until kingdom come? Do we want to keep doing this for the foreseeable future, perhaps in perpetuity, or should we try to reform it and impose some conditions on employers to increase wages and share general increases in prosperity? The Government are doing the right thing. Clearly, this is a difficult decision. We cannot kid ourselves that some of these choices are easy, because they are not, but that is why we have been given the mandate—to do difficult things. If it were easy, we would have done it already and we would not have a problem. This is the right thing to do.
As other Conservative Members have observed, the conditions could not be more propitious to institute a reform of this kind. We have rising incomes and rising wages, and unemployment has fallen. I recall that in the last Parliament the doomsayers were saying that we would hit 5 million unemployed, but that never happened. We have good labour conditions and this is exactly the right time to bring about a reform of this nature. The last thing I would say is that although we engage in pantomime, Punch and Judy politics, this idea that the Government have done nothing for working people is ridiculous. We have to stress the fact that the national living wage has been introduced and the personal allowance has been trebled, and we also have to consider the doubling of free childcare for working parents with three and four-year-olds. This is a good comprehensive measure that helps people.
Neil Gray
I agree with my hon. Friend that the Government do not have a mandate to implement these tax credit cuts. That is not what the people who voted Conservative voted for.
The changes are fundamentally regressive. They disproportionately target those in low-income households and punish them for this Government’s ideological obsession with austerity, which is failing socially and economically.
Neil Gray
No, I will not.
An International Monetary Fund report in June highlighted the fact that reducing income inequality not only leads to reduced poverty, but boosts growth. By extension, the policy of cutting tax credits, which will increase income inequality and drive more of our citizens into poverty, will, in fact, harm growth and therefore harm the Government’s apparent aim of reducing the deficit.
I absolutely agree that we need to make work pay. I believe in a fair day’s pay for a fair day’s work. I also believe that work should be a means to escape poverty, but 60% of children now living in poverty in Scotland live in working households. It was puzzling to me to see how cutting tax credits could possibly achieve the goals of making work pay and eradicating poverty.
The Government have absolutely no mandate for these tax credit cuts, as I have said, but I welcome the minimum wage rise that was announced in the Budget. Why, however, are the Government attempting to sabotage and undermine the real living wage campaign by giving their minimum wage the same label, especially when the Chancellor is giving once with one hand and taking twice back with the other?
The House of Commons Library has calculated the cumulative impact of the summer Budget on a single-earner couple with two children where the singer earner works 35 hours per week and earns the minimum wage. The Library’s independent analysis shows that a family in that situation will be £1,500 per annum worse off in 2016-17—the year all these changes will start to take effect—and more than £2,000 per annum worse off by 2020-21. How on earth can that be described as making work pay? The Government cannot reduce the deficit by waging a war on the backs of those who are least able to pay, and as the IMF has demonstrated, it makes little economic sense to do so.
I find it morally and socially reprehensible that these tax credit changes are being forced through by the Government without a mandate to do so. I hope that Ministers will look at this matter very carefully, and that compassionate Conservative Back Benchers will keep that in mind when the Division bell goes this evening, as they consider the full consequences of these shameful tax credit cuts.
National Insurance Contributions (Rate Ceilings) Bill
Kwasi Kwarteng Excerpts(8 years, 8 months ago)
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Huw Merriman
Not at all. Perhaps I can come on to deal with that by considering the macro levers the Government will have over this term, which will give a real boost to the economy, and other matters where it might be right to leave things open.
I was talking about the need to create jobs, which is what is essential here. Jobs change lives, creating hope, aspiration and well-being for all of our constituents. Any move to create more jobs should be welcomed by all parties, not just the Conservative party, and should not be branded as a “stunt” or a “gimmick”.
Kwasi Kwarteng (Spelthorne) (Con)
Does my hon. Friend feel that this Bill chimes in well with what we saw from the last Government, who created about 1 million new jobs in the private sector? Does he agree that this is exactly the kind of direction the country needs to pursue?
Huw Merriman
I absolutely agree with that. I recall that five years ago there were howls of derision when the Government announced that they would seek to create one new job in the private sector for every one public sector job lost. At the end of the five-year period I believe that the actual figure was five for every one. We had great success, and it shows that we are the Government who can manage the economy and turn it around, despite what we were faced with in 2010.
The content of this Bill was at the heart of this Government’s manifesto commitment. Today is all about honouring promises—it is not about gimmicks or stunts. What has this House become if, when we stand proudly and enact our manifesto in legislation, it is branded as a gimmick? What does that say about the manifestos of other parties, given that it is only four months since the previous election? I was reassured to hear from the Cabinet Office that a unit is in place to ensure that every Department is making good on this Government’s manifesto pledges, as opposed to the Labour party which, as mentioned, is tearing up its pledges after only four months and a leadership change.
With the commitment not to increase national insurance, which is, after all, a tax on job creation, Conservative Members are making good on our commitment to support business and create a platform for jobs.
Kelvin Hopkins (Luton North) (Lab)
I apologise, Madam Deputy Speaker, for having to leave the debate for a short while, but I managed to catch the major part of the speech by my hon. Friend the Member for Bishop Auckland (Helen Goodman). It was an excellent speech and I agree with every word of it, but I did not know that she was half Danish. I want to say something about Denmark, a very sensible country with a more appropriate taxation system than we have. As the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) said, would Members prefer to live in Denmark or Mexico? I know which I would choose; Denmark is clearly a more sensible country.
I have been to Denmark on a couple of occasions and it does two very sensible things. First, the Danes have retained their own currency, which is sensible, but they also seek to manage its value, which we do not, and that is also sensible. One result of the Danes’ sensible taxation system is that they can sustain students without fees but with grants until the age of 25. A few years ago, I understand, the average class size in schools in Denmark was 15. No wonder they have advantages that we do not; they are prepared to pay for them—[Interruption.] I shall talk about national insurance, but I wanted to mention the sensible country of Denmark, which I so admire, before I started.
The lock on the taxation system is a gimmick, as my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) has said from the Front Bench. Surely a promise from the Chancellor of the Exchequer would be appreciated, understood and believed by the business sector. A Conservative Chancellor making a promise is enough. This Bill is like saying, “I promise not to rob the bank any more, but do put the handcuffs on me.” He is clearly not a bank robber, but does he need to have those handcuffs on him just to do what he believes to be the right thing? He has given away flexibility in any case, and I certainly would not do that, because we cannot foresee what will happen.
There is a real possibility, for example, of another financial crisis coming down the road. I mentioned in my speech on the Budget forecasts that there will be another serious economic crisis in the not-too-distant future. Precisely when that will happen, we do not know, but we ought to retain flexibility with all the economic levers at our disposal to ensure that Britain is protected if that happens.
In the previous crisis, the British Government, led by Gordon Brown, persuaded the world to recapitalise the banks. If we had not done that, the whole financial system might have collapsed and we would have been in a much worse situation. I am not saying that I agree with everything that my former right hon. Friend did, as I was often a critic of our policies. Nevertheless, that had to be done, even though in a sense it rewarded the gamblers who had gambled away our future and made our lives so much more difficult. Those difficulties continue today, but it was the bankers gambling on the free financial markets who caused the problem. It was nothing to do with the Labour Government, and, indeed, all sorts of economists say that Labour did the right thing when the crisis happened.
Kwasi Kwarteng
We are wandering rather further from the topic of the debate than I would like, but how would the hon. Gentleman explain the consistent deficits we ran from 2001, as the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) suggested? We were in deficit every single year for the last nine years of the Labour Government.
Kelvin Hopkins
I can only refer the hon. Gentleman to the excellent article by the economist Ben Chu, which goes into detail showing why Labour was not to blame and was not responsible. The crisis caused the deficits, but if we had not recapitalised the banks, where would we be now?
Let me go back to the instability mentioned by the hon. Member for North West Hampshire (Kit Malthouse), who is no longer in his place. He talked about businesses wanting stability. Instability arises because of the globalisation of financial markets. Before 1979, we managed financial markets with exchange controls. The breakdown of the Bretton Woods agreement is what caused the problems.
Kwasi Kwarteng (Spelthorne) (Con)
I am pleased to follow the hon. Member for Luton North (Kelvin Hopkins), although I felt as though I was entering a time warp when listening to his speech; it is a long time since I have heard anyone defend exchange controls. I believe that the limit on the amount of money that someone could take out of the country was £50, and they had to declare everything else. Given the current political climate, it is very interesting to hear a Labour Member advocate such a policy.
Kelvin Hopkins
It was a temporary limit imposed on holidaymakers by Harold Wilson, but most had no problem spending money abroad. What we did was ensure that the bankers and international speculators did not have free rein.
Kwasi Kwarteng
I am glad to hear that everything was all right because it was Harold Wilson who imposed the limit, which I think was £40.
Of course this is a sensible Bill. Of course it makes sense to limit national insurances contributions, because they are, after all, as has been pointed out, a tax on jobs. My hon. Friend the Member for North West Hampshire (Kit Malthouse), who is no longer in his place, made an excellent point about the things we do here being a signal to people outside, such as investors, potential entrepreneurs and people who want to set up businesses. If the Government get the Bill through, I am confident that it will send a very good signal to people who want to invest in the British economy and in our constituencies and who want to set up small businesses.
My constituency of Spelthorne is very near Heathrow airport and lies on the Thames, and it is a case in point. It is an area where small business and private enterprise is at the core of people’s way of life. It is the basis on which people go to work, save and plan for their retirement. Essentially, they are people who are driven and motivated by small business. Therefore, a Bill that caps national insurance tax is an excellent development that will be warmly appreciated across my constituency.
We have heard a number of arguments this afternoon that simply do not make sense. On the one hand, we have heard from Labour Members that the Bill is a gimmick and that it is wrong. On the other hand, they have said that they will support it. Indeed, we have also heard that they were apparently the first people to come up with that gimmick. It seems very odd. I am still utterly confused about their position.
The hon. Member for Dundee East (Stewart Hosie) made a very good point, but I recall that before the general election his party was the biggest deficit denier—it was even worse than the Labour party in denying the deficit and ranting against austerity. It is a very confused picture. I would be very interested to see what the SNP will do if the House divides on the Bill.
Budget Resolutions and Economic Situation
Kwasi Kwarteng Excerpts(8 years, 10 months ago)
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James Cleverly
As is often the case, I am in considerable agreement with my hon. Friend, who I know shares my passion for, and understanding of, small business.
I feel guilty that I have not yet congratulated my hon. Friends on the Conservative Benches who have just made their maiden speeches. I will now set that right. Both of them have strong business backgrounds and credentials—my hon. Friends the Members for Kensington (Victoria Borwick) and for Brecon and Radnorshire (Chris Davies). I almost said “Brecon and Renfrewshire”.
James Cleverly
That would be a big constituency.
I also wish to put on record my huge admiration for the hon. Member for Paisley and Renfrewshire South (Mhairi Black) for her excellent and punchy delivery of what was an impassioned and very well thought-through maiden speech—I have already written a personal note to her. Her maiden speech was more political than I would perhaps have delivered, but it was none the weaker for that.
An understanding of small business is essential if the British economy is to succeed and I am proud that my Government have recognised the significant part small businesses play not just in the economic prosperity of this country, but in its social prosperity. Employment does not just give people the opportunity to pay the bills; it gives them a sense of worth and place, and it is a foundation stone in their lives that enables them to blossom and flourish in so many other areas.
James Cleverly
I will take it that the hon. Lady misheard the opening of my speech. I did not say that the shadow Business Secretary failed to mention business; I said I was horrified by how seldom he used the words “business” and “firm” in his speech.
Kwasi Kwarteng
The broader point my hon. Friend makes is absolutely right: in the run-up to the election the Labour party gave absolutely no indication whatever that it had the faintest interest in the wealth-creating business part of this country. There was—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman has made his speech; I do not need to hear a repeat of it.
Mr Anderson
It is absolutely clear that that is the case and that this was nothing other than a political ruse to try to mislead the country and to wrong-foot the Labour party to pave the way for the Chancellor to move from No. 11 to No. 10 Downing Street. It is nothing other than that.
The Government now call this the new living wage, but we have been here before. We were there in the 1980s and 1990s, when the Conservatives tried to pretend that the community charge was not really the poll tax. We have been with them over the past five years as they have tried to pretend that the spare room subsidy was not a bedroom tax. Just as those two ideas have never stuck, the new living wage will not stick. People know that it is nothing more than half of a new minimum wage that blocks out young people in this country.
I want to move on to something else the Chancellor said last week:
“The left will never understand this, but we on the Conservative Benches know that the wish to pass something on to your children is about the most basic, human and natural aspiration there is.”—[Official Report, 8 July 2015; Vol. 598, c. 330.]
Well, he is half right. The left never will believe that providing for the grown-up children of dead millionaires with a bung from taxpayers while poor families and children go hungry is a basic, human or natural aspiration. What is basic is that far too many families face the reality of sending kids to school hungry, and worrying about where the next meal will come from and whether they can afford to clothe and feed their children. Too many families are worrying about whether to keep the house warm or not, and now they are being hit even harder in the struggle to pay their rent. The hit is £60 a week in this city and £120 a week for the rest of us across the nation. When the landlord says, “I want your rent off you,” the tenant has to say, “I’m sorry, I can’t pay the rent this week and, by the way, next week I will pay you £120 a week less than I am now.” I really do not know where those people will end up. That is basic, that is life at the sharp end and that is what is happening in the real world. That is what happens when the children of dead millionaires are prioritised over the children of poor working people. It is an utter disgrace.
Mr Anderson
I certainly will, even though the hon. Gentleman has only been here for five minutes.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I think that I am the judge of how long people have been here. We have already had one intervention from Kwasi Kwarteng and I can assure the hon. Gentleman that he has been here for a lot longer than five minutes, although it might only feel like that.
Kwasi Kwarteng
I promise that my intervention will not last five minutes. Who are the dead millionaires that the hon. Gentleman is talking about?
Mr Anderson
The people who die leaving property worth £1 million. In the past, some of that would have been taxed and now it will not be. Instead, the Government will tax poor working people, people who are on the dole and people who have more than two kids—they can have two kids, but no more.
Let us also consider the deliberate misuse of language by this Government over the past five years. They have replaced the notion of social security with the idea of welfare, yet they pretend to be the workers party. The concept of social security is crucial to the notion of how civilised we are in this country. Social security underpins the lives of working people and is based on the real concept of people being in this together, with a national insurance scheme that we all pay into if and when we can work and a security net that will support us when we cannot work for whatever reason. I know that the Conservative party has spent the past 10 years trying to paint everybody who uses public services or needs social security as a skiver and not a striver, or a shirker and not a worker, to further its own political narrative. That despicable tactic has to be challenged as the poor, the vulnerable, the ill, the young, the women and the disabled people of this country struggle to make ends meet in desperate times. They are the people the Tories are making pay for the economic mess that their friends in the City, the banks and the hedge funds got us into.
At the same time, the Tories are attacking the millions of public sector workers in this country who take care of the nation by freezing their pay for what will become a decade. We have to stop making nurses, careworkers, firefighters, police and other public sector workers pay the price for the failure of the Tories’ friends. Let us acknowledge in the debate about productivity the productivity gains that have been made in the public sector, where far fewer people are doing a lot more.
Paul Scully
Absolutely. I could not have said it better. The number of jobs that we have created and the amount of wages that we are putting in people’s pockets are real measures. With this increase in the national living wage, the Chancellor has put cash in people’s pockets.
Kwasi Kwarteng
This is a pertinent question. For the edification of the House, does my hon. Friend have any idea what happened to the Ed stone?
Paul Scully
No. I believe it was in a London warehouse, but your guess is as good as mine. I think it may be auctioned off as a fundraiser at some point in the future.
The lowest paid people in this country will be more interested in the cash in their pockets than in the semantics being played by Labour. The big leap in the national living wage chimes with me as an employer. A good employer does not scrape around the bottom and pay people the bare minimum. The Chancellor has allowed the lowest paid to get more than that. As an employer, I tend to try and look after my employees, pay them more than the market rate and give them other benefits as well, to make them feel valued. In that way an employer gains loyalty and has people who want to work with him as a career, rather than as a job.
We have increased the employment allowance by 50%, which will help ease the burden on employers. A couple of months ago I was at an independent shop in Cheam, Dragonfly. I was speaking to the proprietors with an Evening Standard journalist. When we talked about what the Government have done over the past five years, they explained that they had benefited from the small business rates relief, which enabled them to pay very little, if any, business rates. They also explained that they had benefited from the employment allowance. The fact that they knew that term floored the Evening Standard reporter. The employment allowance, they explained, had allowed them to take the gamble of taking on a part-time worker when times were tough financially—a gamble, they went on to explain, that had worked out for them and helped them grow their business.
Paul Blomfield
I will tell the hon. Gentleman that too many people are employed on zero-hours contracts, and I could cite countless examples of people in my constituency whose lives have been destroyed by them and who have raised the issue with me.
It was interesting last week to hear Ministers, almost in the same breath, expressing their concern about low pay and then condemning tube staff for their industrial action.
Paul Blomfield
I will not at this stage, simply because other Members want to speak and I am conscious of time.
Over a generation, we have seen a shift of between 5% and 7% of GDP from wages to profits, and from profits to shareholders’ dividends. That has widened inequality and reversed a century of progress towards a more equal society, and it started with deliberate decisions in the 1980s to weaken the bargaining power of working people and the trade unions that represent them. A sensible policy response to low pay would be to strengthen the negotiating hand of working people, but instead the Government made it clear in the Queen’s Speech that they want to weaken their position further with more attacks on the trade union movement.
Paul Blomfield
It is absolutely true that when people go on strike, everybody gets hit, including those on strike. Trade unionists go on strike only with enormous reluctance, because of the impact on services and their wages. The uncomfortable truth for Conservative Members is that improvements in living conditions, health and safety and other workplace situations have been won through the struggle by trade unions.
The campaign for a living wage was a great response to the challenge of low pay. Members on both sides of the House have rightly praised the work of the Living Wage Foundation, but that work has been made more difficult by the Chancellor’s attempt to steal its clothes. We need to be clear. The increase that he proposes to take the wage floor up to £9 for many workers is welcome, but let us not pretend that it is a living wage. Let us call it the over-25s rate or the national minimum wage supplement, or we could just call it the national minimum wage, but he should not damage the brand of the living wage by associating his proposal with it.
We should continue to work to encourage employers to adopt the living wage and to incentivise them to do so. We need to recognise, as the Living Wage Foundation has pointed out, that the rate will need to rise to take account of the cut in tax credits. Here is the rub: although the new rate of the national minimum wage might benefit up to 5 million workers, more than half of them will be worse off—an estimated 3 million families, according to the Institute for Fiscal Studies—by an average of £1,000 a year because of the changes in tax credits. It could not be any other way: an estimated wage uplift of £4 billion is being offset by welfare cuts of £12 billion.
The Chancellor will argue that raising the tax threshold will benefit low-paid workers by taking them out of tax, but he knows that that is not true. He knows that lifting the tax threshold is a regressive tax measure, because it benefits everybody equally except the lowest paid. Six million workers who are already paid too little to pay tax in the first place will not benefit at all from raising the threshold, whereas Members of Parliament will get a tax break. Frankly, in comparison with low-paid workers, we do not deserve one.
Paul Blomfield
Perhaps the hon. Gentleman can explain how people can choose not to take a tax break.
The hon. Member for Braintree (James Cleverly) rightly spoke forcefully about small businesses. I do a lot of work with small businesses in my constituency. They are a driver of growth. When there is any increase in pay, they face a challenge, as does the voluntary sector. They need support, but the Government and the Budget have got it wrong. Support should not have been provided through a greater cut to corporation tax; it should have been provided to small businesses by further cuts to business rates.
The Prime Minister is right that company profits should not be subsidised by the public purse. If he is serious, why not tax listed companies that fail to pay the real living wage to recoup the cost? If he is serious about tackling poverty pay, what about strengthening labour market enforcement? We know, for example, that thousands of workers do not even get the national minimum wage in the care sector because employers refuse to pay for travelling time. We debated that in the last Parliament. Ministers admitted that the practice was widespread and said it was illegal, but nothing is happening to chase down those rogue employers and bring them to book.
Budget Resolutions and Economic Situation
Kwasi Kwarteng Excerpts(8 years, 10 months ago)
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Robert Neill (Bromley and Chislehurst) (Con)
I normally regard my right hon. Friend the Secretary of State as one of the most generous-hearted men in politics. When I listened to the opening of his speech, I thought he was being a bit harsh on the Opposition, but having heard their reaction, I think he was, if anything, over-generous. When one of the more thoughtful Members of the shadow Cabinet is reduced to tripping out every stereotypical canard in the socialist book and attempts to take refuge in the same view that was adopted by the last Bourbon King of France, Charles X, who was wholly and genuinely convinced that the French revolution was a terrible aberration, and that people would wake up one day and realise that they had got it wrong and that the divine right of kings was the only answer, I realised the difficulty that any Blairite on the Labour Front Bench faces. If it is any help for the historians here, Charles X lasted three and a half years before he was got rid of. I shall be interested to see how long the next leader of the Labour party lasts.
I also felt genuinely sorry for the current leader of the Labour party. After trying to inject a modicum of realism in relation to benefits and welfare reform, she was entirely disavowed by her own party. It is rather sad when the official Opposition of this country take as their role model the ostrich. They expose their thinking parts to us and bury the realities in the sand, and the country deserves better.
Kwasi Kwarteng (Spelthorne) (Con)
Has my hon. Friend heard anything today about the Opposition’s current view on the welfare cap? Has he learned anything interesting about what their actual position is?
Robert Neill
Not at all. As there are probably something in the order of 230-plus different views, we could not cover them all in time. It is also rather remarkable that the Opposition have adopted an entirely different stance to elected mayors from that which I remember when I was the leader of the Conservative group on the London Assembly and facing the first ever elected mayor in this country—the first Mayor of London. I am glad to say that things have improved since then. As some may remember, the office of Mayor of London came into being as a result of legislation introduced by the Labour party. It comes back to the same trope. Why does the Labour party now regard any elected mayor as anathema? Because it was an idea of Tony Blair’s, and must therefore be cast into utter darkness.
I find it truly bizarre that a normally thoughtful party that wants to talk about devolution objects to the opportunity to take up city deal models with an elected mayor. The idea has not been forced upon Labour; it is Labour’s choice whether to have it or not. It was Labour that imposed more central control over local government, not just in planning, not just in terms of whether there could be a committee structure or not, not just in terms of whether a very strict and rigid standards regime was imposed, not just in terms of the comprehensive area assessment, not just in terms of planning policy, and not just in terms of financial policy and the cap. After all that, Labour had the gall to complain about an offer—take it or leave it—put forward by my right hon. Friend.
Kwasi Kwarteng (Spelthorne) (Con)
It is an honour and privilege to speak in this important debate after a number of Members on both sides of the House have given good maiden speeches and accounts of the challenges that their constituencies face. I am sure that all today’s maiden speech-givers will become distinguished parliamentarians and will give good service to their constituents.
This was an excellent Budget and I am pleased to support it. When the coalition Government took office in 2010, the deficit was £153 billion. In the Red Book, published last week, we discover that the deficit is £69 billion. There is still a long way to go, but people will recognise that that is a remarkable achievement given the international context and the fact that growth has been much more sluggish across many western economies than we had ever anticipated. The Red Book also makes it very clear that the growth rates we are enjoying as a country and have enjoyed in 2014 and 2015 are particularly enviable. They are the highest across the western world, and we should celebrate that on both sides of the House. That does not happen by accident. It is not an accident that the deficit has been more than halved; nor is it an accident that we are growing faster than nearly all our competitor countries in the G7—I think that we have the highest growth rate in that body.
We appreciate that if the election had gone differently, we would not be in such a good position and there would not be such optimism about the future. It was clear during the election that there was a binary choice confronting the country between a Conservative Government, when the Conservatives had largely delivered very effectively as the leading party in the coalition, and a potential Labour Government—let us be honest, it would have been a coalition—without any economic credibility, when the Labour party was largely responsible for the mess in which we found ourselves in 2010.
I want now to address the specific issues in the Budget that I am particularly happy to endorse and welcome. As a south-east MP, I naturally look to the interests of business—I do not think that business is a dirty word—because lots of my constituents work in small businesses. In fact, 82% of people who are in work in Spelthorne work in the private sector. They work in small businesses, including businesses related to Heathrow airport, and they will welcome the further reduction in the corporation tax rate that my right hon. Friend the Chancellor announced. They will also welcome the fact that the Government are being very serious about addressing the deficit.
The Government’s ongoing commitment to building more housing will also be welcomed. We have talked about the need for more housing, and the Government are happy to take on that challenge.
I am particularly gratified that various measures have been introduced to increase the living wage. The Government are doing absolutely the right thing in reducing the amount paid in tax credits. That is a bold and challenging move, but I am happy to say that it is the right thing to do. However, if the Government are going to do that, they must ensure that companies do not get away with simply exploiting low-paid workers. It is a legitimate corollary of reducing tax credits to try to boost the living wage and the minimum wage. I understand the logic of that move and it is to be commended, even though Thatcherite purists may argue against increasing the minimum wage and particularly the living wage.
Finally, we cannot pretend that the deficit has been resolved or that we are out of the woods in terms of our approach to fiscal discipline. I support and commend my right hon. Friend the Chancellor’s commitment to running surpluses, because my earnest hope is that we will run a surplus at the end of this Parliament. However, when we finally get a budget surplus, the last thing we need is a return to the Labour spend, borrow and tax regime. We need to set in stone a regime whereby this country, like Germany and Switzerland, will have a much more mature and disciplined approach to public finances, and I hope that in the course of our debate we will be mindful of the need to balance the books every single year.
Mr Douglas Carswell (Clacton) (UKIP)
I, too, will vote for this Budget. Tomorrow’s vote is a binary choice and although I have reservations about some of the Chancellor’s proposals, on balance I support the measures. We must never return to Ed Balls economics.
I support a number of measures. I unequivocally back the idea of having a fiscal charter, to echo the point made by the hon. Member for Spelthorne (Kwasi Kwarteng). It is a commitment to run a budget surplus by 2019-20 and to retain that approach in subsequent years unless growth is less than 1%. The principle behind that idea is exceptionally good; as a country, we cannot go on living beyond our means. I believe I am right in saying that we have only had budget surpluses in six of the past 40 years. That is unsustainable and also deeply unfair on the next generation. If we keep on running up these debts, someone will have to pay them, and it is deeply unfair and irresponsible of us to pass them on to the next generation. I only hope that the Chancellor manages to meet his own fiscal charter objectives. He has introduced, I think, five Budgets and in each one he has pushed back the date by which he hopes to balance the books.
I also support the proposal to remove the climate change levy exemptions for providers of renewably sourced electricity.
Kwasi Kwarteng
I am particularly gratified to hear the hon. Gentleman espousing the cause of sound finance. I just wonder how he feels being surrounded by people who deny that there is any need to reduce the deficit.
Mr Carswell
I will come on to say a little about my views on the unreformed Opposition. In fact, I will make them a proposal at the end of my short speech.
My party loves new energy technology. However, there is something we find objectionable: if the technology is so wonderful, why does it need to be subsidised? Removing some of those subsidies is a good thing, particularly when they push up the cost of energy, but the Government lack a fully coherent free market energy policy that allows real choice and competition.
I also cheer Government changes to vehicle excise duty. The new tariff will reflect changes in technology. Given that most new cars’ carbon dioxide output is below the old CO2 low threshold variable, vehicle excise duty is fast becoming a subsidy from poor people, who cannot afford new cars, to rich people, who can. VED will also be used for the creation of a road fund in 2020-21. That is a very sensible move, as it means that taxpayers will see directly where their VED goes and the tangible benefits that come from it.
I also support raising the personal allowance to £11,000 by 2015-16 and to £12,500 by 2019-20. That should be welcomed as a tax break for everyone who works. Indeed, I hope that at some point we will be able to raise the threshold even higher, to £13,000.
I also support welfare reform. When the tax credit system was put in place, I do not think that we ever expected that it would allow big corporate interests to rely on the taxpayer to subsidise their payrolls, and yet in effect that is what has happened. I fear that tax credits may have contributed to wage compression. Welfare reform is possible and necessary, but it is also very important that, as the Chancellor has said, we are prepared to raise the minimum wage to try to offset some of the impact of that reform.
Having outlined where I support the Government, I am afraid to say that there are one or two measures about which I have some concerns. I am particularly concerned about limiting public sector pay increases to 1%. I fear that that may not be politically sustainable over the next four years. There was a pay freeze in the public sector between 2010 and 2013. Since 2013, pay rises have been limited to 1% and, given that inflation is often above 1%, that has, in effect, amounted to a pay cut. If the economy grows in the way that the Chancellor expects it to, I am not sure that four more years of 1% is sustainable.
I also have some doubts about the Chancellor’s fiscal projections; I fear that there is a degree of fiscal complacency. In its manifesto, my old party told us that it would run a budget surplus from 2019, which is only four years later than promised five years ago. In fact, that target has now been pushed back to 2020.
This year, we will still manage to accumulate a deficit of £70 billion and we still have a bigger primary budget deficit than Greece. The budget deficit last year was 5.7% of GDP, which was higher than that of any country in the eurozone apart from, I think, Spain and Cyprus. UK national debt stands at £1,600 billion, which is £950 billion higher than when the Chancellor first took office. That is not an impressive record. Servicing that debt costs £40 billion a year. Think of what we could do with £40 billion—that is more than the entire defence budget. Think of the tax breaks we could give people and, more to the point, think of how much greater that sum will be when interest rates go up.
I will support this Budget, and I look forward to the Finance Bill that follows. If Her Majesty’s Opposition will repudiate Ed Balls economics and table sensible amendments, I will be delighted to support them, bearing in mind that the Government have a rather slender majority. However, there must never be a return to the recklessness of the Parliaments between 2001 and 2015.
As the UK Independence party’s sole Member of Parliament, I will support classical free market liberal economics. From that point of view, this Budget is not perfect, but it is infinitely preferable to the alternatives.
Tax Credits (Working Families)
Kwasi Kwarteng Excerpts(8 years, 10 months ago)
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Kwasi Kwarteng (Spelthorne) (Con)
Does my hon. Friend agree with those of us who were in the previous Parliament that it is strange that the Labour party has learned nothing about welfare reform, deficit reduction and the need to have sound public finances?
Mr Gauke
My hon. Friend makes a very, very good point. We are in a similar position to that of five years ago: we have one side of the House recognising the need to address our deficit and to put in place the conditions for growth and the other side opposing any measures to try to address the problem.
Ian Blackford
Absolutely. I concur 100% with the hon. Gentleman. When we come to vote on the emergency Budget, I appeal to Conservative Members to examine their own consciences, look at the pain that will be caused if they go ahead with cutting tax credits, and recognise that we need to invest.
Kwasi Kwarteng
Why in such debates do Opposition Members never mention the deficit or the country’s financial and fiscal situation? I am curious as to why they make no attempt to address that matter.