Income Tax: Top Rate
Debate between Lord Dubs and Lord Newby(9 years, 9 months ago)
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Lord Newby
My Lords, it is important to have competitive corporate tax rates, which is why we have reduced them, although it is obviously the case that you reach the point as you are reducing taxes when you lose revenue. The trick is to get the balance right, which is what we have done by reducing corporation tax, for example, and by putting capital gains tax up very significantly from the level it was under the Labour Government.
Lord Dubs (Lab)
Could the Minister explain how it is that some wealthy people—leaders of our big companies—manage to get themselves domiciled abroad, in places such as Hong Kong, as the senior management of HSBC has done? Surely, that is the real tax dodge.
Lord Newby
My Lords, we have taken a number of measures to make sure that non-doms pay more per annum and have introduced a new charge on non-doms of £90,000 a year for those who are in the UK for a long time.
Wealth Inequality
Debate between Lord Dubs and Lord Newby(9 years, 11 months ago)
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Lord Newby (LD)
My Lords, domestically, we have invested heavily in HMRC to ensure that the wealthy pay the tax they owe. We have led efforts through the G20 and the OECD to reform the international tax rules to tackle the issue of multinationals artificially shifting their profits to avoid paying tax. Since 2013, we have been the first G7 country to meet the UN commitment to spend 0.7% of GNI on development aid.
Lord Dubs (Lab)
My Lords, given what the Minister has just said, will the Government give their full support to the Private Member’s Bill on Friday which will ensure that we continue to meet the commitment to spend 0.7% of GNP on development aid into the foreseeable future? Secondly, is it not shameful that the world is still so unequal? We should all be ashamed that the richest 1% have all the wealth and that 99% should have very little. Is it not bad for governance and bad for the future of the world that that should be the case?
Lord Newby
My Lords, I can give the noble Lord the absolute assurance that the Government support the Bill that will be debated on Friday. As to global inequality, noble Lords might like to contemplate the fact that to be part of the 1%, the wealth threshold is just over £500,000; so we are all part of the 1%.
Income and Wealth Inequality
Debate between Lord Dubs and Lord Newby(10 years ago)
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Lord Newby (LD)
My Lords, according to the latest ONS statistics, income inequality in the UK is lower than when this Government came into office. Recent ONS data have also found that wealth inequality has remained unchanged since this measure began in 2006.
Lord Dubs (Lab)
My Lords, there may be some dispute about those figures, but for the moment let us go along with them. Is the Minister aware that today, or yesterday, the Institute of Directors, hardly a hotbed of left-wing views, denounced a pay package for a senior executive as being “excessive and inflammatory”? The chief executives of our leading companies have seen their average pay go up from £4.1 million to £4.7 million. That is at a time when the largest network of food banks says that increased demand for food bank services has gone up by 38%. Is that not a gross condemnation of our society?
Lord Newby
My Lords, I completely agree with the noble Lord that many directors have had pay increases which bear no relation to either pay increases that other people have had or the performance of their company, and that is why this Government have introduced a raft of measures to make firms more accountable to their shareholders for the pay packages that directors get. However, I remind the noble Lord that those people who are in the top 1% of wage earners and whose pay has gone up now contribute some 28% of the total income tax collected.
Income Tax: Top Rate
Debate between Lord Dubs and Lord Newby(10 years, 5 months ago)
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Lord Newby
My Lords, the noble Lord has a better memory than I have. I am very happy to take credit for the Government’s achievements. The proportion of income tax collected from the top 1% has gone up from about 26% to 28% during the lifetime of this Government. Certainly, income tax take from high earners is extremely resilient because they are prepared to pay it at the levels we now have.
Lord Dubs (Lab)
My Lords, is that not a fairly small sum of money compared to what we lose every year through people who dodge and evade taxes?
Lord Newby
My Lords, it is a very considerable sum of money, but we are taking steps across a range of areas to tackle evasion and avoidance, whether by individuals or firms. There is a measure in this year’s Budget specifically designed to get tax upfront from individuals who are engaged in schemes that might subsequently be found to be avoiding tax. That will generate a considerable amount of income. A number of other measures that we have taken are bringing in hundreds of millions of pounds from people who previously were able to avoid taxes.
Public Service Pensions Bill
Debate between Lord Dubs and Lord Newby(11 years, 10 months ago)
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Lord Dubs
My Lords, the amendment stems from the situation that arose on 31 March 2010 when Jarvis, a rail maintenance company, went into administration. The amendment is not intended to make any new demands but simply to close what I think was an unforeseen loophole in the Railways Act 1993. Schedule 11 to that Act was intended to provide railway workers employed by British Rail at the time of rail privatisation with the right to a protected pension. This amendment is intended to restore that right.
In other instances where rail companies collapsed or gave up contracts, the workforce had always been transferred to other companies, but this did not happen with Jarvis, due to complex reasons related to the application of the transfer of undertakings regulations. Nevertheless, many of the Jarvis workers who had been employed by British Rail at the time of privatisation rightly expected that at least their pensions would be protected by the 1993 Act. It was then discovered that the Act does not cover cases of companies going into administration, which meant that these workers simply lost out. It is estimated that some 650 former Jarvis workers have been affected, and that the cost of meeting the pensions shortfall that would arise from accepting this amendment would be in the region of £400,000. The amendment would also honour the spirit of the Railways Act 1993 and ensure that in the unlikely event that another successor company to British Rail went into administration and the work was not transferred to another company, any affected workers who were also employed by British Rail in 1993 would have their pensions fully protected.
I am seeking to put right something that was not foreseen and which clearly represents an unfairness and an injustice. Jarvis’s former BR employees are not receiving the protection that was promised at the time of privatisation. The major flaw in the protection order is that it is an obligation on the employer, but where the employer disappears it seems that there is no entity to take up that obligation. That is obviously a serious gap in the original privatisation process, and the former BR members employed by Jarvis were misled by the UK Government as a result. They expected to get the pensions to which they were entitled, instead of the much lower one they ultimately received.
I do not think that this amendment was debated in the House of Commons because it was not reached. If it was passed, it would mean that the British Government had honoured an obligation and a promise made at the time of privatisation that employees’ pension rights would be protected so that they were at least as favourable as the rights they enjoyed under the BR pension scheme. The new clause would provide the protection sought.
However, I understand that there is another option which the Minister may prefer. Under the terms of the Railways Act 1993, the Government could introduce an order to rectify the situation. The Minister therefore has two options. He can either accept the amendment or he can achieve the same end in another way. This is a matter of honour and integrity, and I think it is only right that several hundred workers should not be penalised due to something that was really only an administrative oversight. I beg to move.
Lord Newby
My Lords, as the noble Lord has explained, his concern relates to a situation that has arisen for people covered by the railways pension scheme, which is a very different kind of scheme from those covered by this Bill. That scheme was created as a railway industry-wide pension scheme for the multi-employer railway industry following privatisation. It is a unitised fund made up of a number of different sections, only one of which is underwritten by the taxpayer. Moreover, the scheme focuses predominantly on those working for private sector employers in the rail industry. Conversely, while some of the public service pension schemes in scope of the Bill may admit certain private or third sector organisations, they are predominantly focused on workers in the public sector. I will attempt to respond briefly to the points raised in the noble Lord’s amendment, but I am afraid that the primary focus of his attention should be my right honourable friend the Secretary of State for Transport.
The amendment would create a liability for the taxpayer to underwrite any shortfall in a railways pension scheme section. This underwriting would be required if the section develops a shortfall as a result of the insolvency of a participating employer or former employer who is the employer or former employer of a “protected person”. Protected persons are beneficiaries of the section who still retain certain rights deriving from British Rail days and enshrined in regulations made under the Railways Act 1993 in relation to their pension: for example, if their employer is obliged to provide pension scheme rights “no less favourable” than the relevant pension rights in their former designated pension scheme from British Rail days.
Let me set out the current position. As I have said, the railways pension scheme is a unitised fund that is divided up into sections. There tends to be one section for each employer. Most participating employers in relation to sections of the pension scheme are private sector railway operating companies. Only two sections of the scheme benefit from a solvency guarantee from government. The first of these is the “1994 Pensioners Section”, a closed section that deals primarily with the residual, deferred and pensioner members of the former British Rail pension schemes at the time of privatisation. The second is the “BR Section”, a section comprising a small category of contributing members and beneficiaries deriving from the former British Rail pension scheme. Even if the amendment were within the scope of the Bill, the Government do not believe that it is appropriate to amend the existing legislation in relation to railway pensions, as set out in the Railways Act 1993 and regulations made under it, and create a further liability for the taxpayer, as the amendment seems to propose.
The noble Lord has tabled the amendment specifically because of the Jarvis case. One employer, Jarvis, made use of the railways pension scheme, but has become insolvent. In a situation where the sponsoring employer of a section of the railways pension scheme no longer supports the pension’s scheme, there are complex legal requirements affecting how the scheme should operate in the future. The trustee of the RPS has been working with the Pension Protection Fund to understand whether the three sections of the RPS affected in this case are eligible for support from the Pension Protection Fund. The three sections are currently still in an assessment period. In the mean time, the trustee retains responsibility for paying benefits, although the Pension Protection Fund provides guidance on how the trustee should do this.
I hope that my explanation has provided some clarity for the noble Lord, although I appreciate that he might not have got the help he seeks. However, I hope that he will understand me when I say that the railways pension scheme is not a public service pension scheme in the same way as those being legislated for here, and that this is not the appropriate place to deal with the very important matters he has raised.
Lord Dubs
The Minister has given me a fairly complicated explanation and I think I would not be out of order if I said that I want to study it in Hansard rather than comment on it directly, particularly since I am not an expert on the intricacies of this issue. However, the outcome is disappointing. No one is challenging the principle that these Jarvis workers should have been better looked after than they were, given the commitments that were made at the time of railways nationalisation, so what has happened is rather unfortunate. This does not seem to be a fair outcome, whatever the technical process by which the Minister has reached his conclusion.
I should like to make two comments. The Minister has suggested that I should address my comments to the Secretary of State for Transport. I hope that he will be helpful to me if I redirect my arguments to the Secretary of State. I have no Bill under which to do that, although there may be other ways. I look forward to receiving the Minister’s help. Also, under the terms of the Railways Act 1993 maybe the Government could introduce an order to rectify the situation. The Minister did not comment on that suggestion, but I wonder whether he could take it away as an alternative to the other option he put forward. However, in the circumstances, I beg leave to withdraw the amendment.
Taxation: Tax Havens
Debate between Lord Dubs and Lord Newby(11 years, 11 months ago)
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Lord Newby
My Lords, the Government are fully committed to tackling tax avoidance and evasion wherever it occurs. This is an issue of international concern on which we work closely with European Union member states and other countries, in particular through the G20. The G20 focus has been on increasing international tax transparency and identifying gaps in the international tax standard to help better address profit shifting and erosion of the corporate tax base at the global level.
Lord Dubs
My Lords, I have a terrible suspicion that the Minister is saying, in effect, that nothing is happening. Perhaps I may ask him this. If the Government fail to get international agreement quickly, could we as a country at least move forward by doing two things? First, could we take action in those territories where we have power or influence? Secondly, could we change the basis of taxation of those companies that do not claim any profits in this country by basing the tax on turnover rather than on bogus low-profit figures?
Lord Newby
My Lords, the accounting rules are internationally based and it makes sense to change them on an international basis. That is why we, France and Germany, between us, have given €450,000 over recent months to the OECD to come forward with proposals to deal with this issue. Those proposals will come forward and there will be a progress report in February. There is a strong head of steam in this country and in France, Germany and the US to tackle this issue.
Taxation: Avoidance
Debate between Lord Dubs and Lord Newby(12 years ago)
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Lord Newby
My Lords, the Government are fully committed to tackling avoidance and evasion wherever it occurs. HMRC is to receive additional investment of £77 million to expand its anti-avoidance and anti-evasion activity, including resources to identify and challenge multinationals’ transfer pricing arrangements. Following the Chancellor’s call for international co-operation to strengthen international tax standards, the UK, Germany and France have pledged resources to the OECD to speed up work to tackle profit-shifting and base erosion at the global level.
Lord Dubs
My Lords, the Minister will be aware that if companies and individuals complied with the letter and spirit of the law, the Treasury would be £32 billion better off. Is he aware that the public are extremely angry about this and that the whole situation is grossly unfair to those companies that pay their taxes, such as John Lewis and Marks & Spencer? Is he further aware that the army of bankers, accountants and lawyers advising those companies on how to evade their taxes are the same people the Government employ for their own business? Will he take action in the tax havens that make all this possible?
Lord Newby
My Lords, HMRC does indeed estimate that the tax gap in 2010-11 was £32 billion, which represents 6.7% of total tax due. The tax gap as a percentage of tax due has fallen from 8.2% since 2004. It is not good enough but it is going in the right direction. The absolute determination of the Government to bear down on this was evidenced by the decision we took last year to divert £900 million into this area, which has since been supplemented by an additional £77 million to increase the specialist abilities within HMRC to deal with some extremely clever advisers and companies that seek to minimise their tax.