Finance (No. 2) Bill
Lord Foster of Bath Excerpts(10 years, 8 months ago)
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Danny Alexander
No.
The Bill also recognises that social enterprises have a role to play not only in growing the economy but in rebalancing the economy and in reforming public services. At present, public services are often ineligible for existing reliefs. The Bill introduces a new tax relief for investment in social enterprises at a rate of 30%, the same as for existing venture capital schemes. I believe that this will unlock up to £500 million of additional investment in social enterprises over the next five years. I hope that Members on both sides of the House will welcome that.
Danny Alexander
I am told from a sedentary position that the Opposition voted against that measure. They voted against the whole Finance Bill, of course.
The Bill also introduces three new tax reliefs to support employee ownership. The Deputy Prime Minister has rightly given a high priority to employee ownership, and the measures in clause 238 will introduce a capital gains tax relief, an inheritance tax relief and an income tax exemption for employee-owned companies. This will make the sale of a business into an employee ownership structure much more attractive. It will give employees of indirectly employee-owned companies an income tax relief of £3,600 a year on their bonuses. That will help to encourage more firms to become employee-owned in the years to come and, therefore, to improve the structure of our economy.
It is also worth reminding hon. Members of some of the other measures this Bill introduces that will support specific UK industries: it legislates to reform the banding of air passenger duty; and it includes a measure that will help make the Glasgow athletics grand prix a success this summer, putting in place a tax relief for athletes competing in that competition, which is an immediate predecessor to the Commonwealth games. Having tax reliefs for both the Glasgow grand prix and the Commonwealth games will help to ensure, as the UK Government rightly should be ensuring, that the world’s best athletes are encouraged to come to compete in the Glasgow 2014 Commonwealth games. Everyone, in all parts of this House, hopes they will be an enormous success for Scotland and for the whole UK.
The Bill also includes a package of measures to support oil and gas exploration in the UK continental shelf; it introduces a new allowance to support early-stage investment in shale gas; and it reduces the tax on beer by a penny a pint and freezes the duty on spirits, rightly offering particular support to the Scotch whisky industry, as Scotch is one of this country’s most successful exports. Those measures will support not only our pubs, but brewers and so on. All those measures, taken together, cut the costs for business, support innovation, boost exports and show that this Bill will help British businesses to help the British economy grow.
Tax Fairness
Lord Foster of Bath Excerpts(11 years, 9 months ago)
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The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
I begin by thanking those Members who gave a welcome to my hon. Friend the Member for Eastleigh (Mike Thornton). I join them by adding my own welcome.
The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is absolutely right. The debate may have been robust, but it was genuinely thoughtful. It is thus a great disappointment that when she closed the debate and the hon. Member for Nottingham East (Chris Leslie) opened it, they did not take the opportunity to apologise to the country for the Labour Government’s role in creating the economic difficulties in which we find ourselves. The hon. Member for Swansea West (Geraint Davies) was right too. On the Government Benches and in the country at large, we say “What a fine mess you’ve left us.”
I congratulate the Opposition on their proposal, because one good thing happened today: after three years of opposing our revenue-raising policies, three years of opposing our cuts and three years of failing to propose a single solution for the economic mess they left us, I am glad that in the Chamber today they have at last put forward an actual concrete policy. As we heard, it is a Liberal Democrat policy, but I am delighted that Labour Members now support our mansion tax. I shall be even more delighted when it takes pride of place in my party’s election manifesto in 2015—something I can say but they apparently cannot.
Mr Foster
Let me make a little progress and I will happily give way.
We have been perfectly up front: this is a matter on which the two parties in the coalition disagree. As my hon. Friend the Member for Bristol West (Stephen Williams) made clear in an excellent speech, the Conservatives have always been vocal in their opposition to such a scheme and Liberal Democrats have always been vocal in our support for it.
Catherine McKinnell
May I put a suggestion to the Minister? If Liberal Democrat Members support the motion and the Government bring forward proposals, they would not need to include the scheme in their next manifesto.
Mr Foster
I may return to the hon. Lady’s comments in a second.
We are supportive of the motion because we agree with Adam Smith, the father of free market economics. He supported higher taxes on property to reduce taxes on more industrious endeavours. We think it unfair that the richest people in the country pay the same council tax on their multi-million pound palaces as a family in a three-bedroom house in the suburbs. We agree on that.
Both parties in the coalition have been open about our disagreement, but the Opposition’s attempt to drive a wedge between us is infantile. Both parties know where we stand, and the public are clear about it too. The hon. Lady has to remember that all coalition tax policy is made by agreement between the Conservatives and the Liberal Democrats, and the mansion tax is an issue on which we simply could not agree. However much Liberal Democrats want a mansion tax, we know that the country’s economic future would be in severe jeopardy if the coalition fell apart on this issue. The country’s future is far too important for us to engage in the Opposition’s petty political games.
Chris Leslie
On the point about putting the coalition first, to save us a great deal of time and effort, can the Minister tell us if there is any circumstance in which he envisages that he could ever support any motion tabled by the Opposition?
Mr Foster
As I said, this is the first time in three years that we have had any positive proposal from the Opposition in the Chamber. If the hon. Gentleman comes forward with further proposals to help deal with the economic mess that his Government left us, we will seriously consider them.
Mr Foster
No, I will not give way to the hon. Lady.
It is worth reminding ourselves that although we as Liberal Democrats accept that a mansion tax would be a further step in creating greater fairness, by being part of the coalition with our Conservative colleagues we have made huge strides towards building a fairer society and a stronger economy. I agree with the hon. Members for Edinburgh East (Sheila Gilmore) and for Scunthorpe (Nic Dakin), who said that creating fairness is vital. Our achievements in doing so are in marked contrast to those of the Labour Government.
Mr Foster
No.
The previous Government introduced the fuel duty escalator, hitting the pockets of families and businesses, whereas we have taken steps that will make pump prices 13p per litre lower than they would have been under Labour. They abolished the 10p tax rate, hitting 800,000 single earners, whereas we are taking 2.2 million people out of paying tax altogether. Whereas in 2000 they gave pensioners a miserable 75p a week pension increase, last year we gave the biggest ever increase of £5.30 a week.
Mr Dave Watts (St Helens North) (Lab)
Will the Minister explain why he thinks it is fair that at the same time as they introduce the bedroom tax, the Government find money to give the richest people in the country a tax break?
Mr Foster
We are not here to discuss the under-occupancy arrangements. Let me remind the hon. Gentleman, who has breezed into the Chamber, that we have had discussions on many occasions about this. I am aware of 300,000-odd families with two or more spare bedrooms and 250,000 families who are overcrowded, so it is right and proper that we take action to try to help them out, and that is what we are doing. I am more than happy to talk about this Government’s record on fairness.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Mr Davies, you have spoken. It is up to the Minister when he gives way. It is not for you to keep reminding him, saying that he should give way.
Mr Foster
Thank you, Mr Deputy Speaker.
It is worth repeating yet again that the Opposition put the 50p tax rate in place for a whopping 36 out of their 4,758 days in power. As my hon. Friend the Exchequer Secretary made clear, a recent review showed that the additional rate is a distortive and economically inefficient way of raising revenue. So we have decided—sensibly, in my view—that it is neither efficient nor fair to maintain a tax rate that is not effective at raising revenue from high earners and risks damaging growth. That is why we have introduced a top rate of 45p, which will be higher than the top rate that existed under Labour for all but 36 days of their 13 years in office.
It is not true to suggest, as some have done, that the Government are not requiring the wealthiest to pay more. We have continually increased the tax contribution of the richest since the election. The 2010 Budget introduced a higher rate of capital gains tax; the 2011 Budget tackled avoidance through disguised remuneration; and the 2012 Budget increased stamp duty land tax to 7% on residential properties costing £2 million or more. We are also the Government who took action in the autumn statement to reduce the cost of pensions tax relief, and we introduced a 15% rate of stamp duty for properties owned through a corporate vehicle. I am grateful to my hon. Friend the Member for Rochester and Strood (Mark Reckless) for a number of suggestions of further measures that we can take in this area, which we will certainly consider, but I can confirm that if a property is taken out of a corporate envelope, SDLT will be paid in full.
As a result of the Government’s actions, the richest pay more tax on capital gains, more stamp duty on their homes, more tax on their pension contributions, and more on income tax. As the Institute for Fiscal Studies has confirmed, the rich are now paying a higher percentage of income tax than at any time under the previous Administration. Given our measures to boost compliance, more of the tax owed will be collected. I thank the hon. Member for Scunthorpe for his praise for our work in this area.
As well as making the wealthiest in society pay more, we are asking less of the poorest in this country. As the hon. Gentleman said, we are helping the hard-working families in this country. From April 2013, the income tax personal allowance will increase yet again by £1,335 in cash terms to £9,440. This change will benefit 24 million individuals, lift an additional 1.1 million out of income tax altogether, and provide a real-terms gain of £223 a year to basic rate taxpayers.
In total, the coalition’s actions since we came into office mean that 2.2 million people under the age of 65 will have moved out of paying income tax altogether, and there is a tax cut of £600 for more than 20 million people. We are proud of the way in which we are putting fairness firmly on the agenda. As the Secretary of State for Business, Innovation and Skills said earlier today, parties should be judged on what they deliver on fairer taxes, not on what they say about them. It is deeds not words.
The Labour party when in office failed to back our mansion tax proposals, and now we are not even clear whether it is willing to include a mansion tax in its 2015 manifesto. The Liberal Democrats have made it clear that we are in favour of such a scheme, but I urge my colleagues to support the Government’s amendment, which reiterates our party’s support for the mansion tax without putting the coalition Government at risk. It is the country’s economy and people that need a strong, co-operative and working Government, which this coalition Government are providing. The do not need a Labour party playing the exact kind of cynical political games that the public so revile. The hon. Member for Ashfield (Gloria De Piero) said that the public disliked infantile Punch and Judy politics. So do I, and that is why I urge the House to support the amendment.
Question put (Standing Order No. 31(2)), That the original words stand part of the Question.
Amendment of the Law
Lord Foster of Bath Excerpts(12 years, 8 months ago)
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Ms Harman
But certainly not to do what this Government have done—without any consultation or any discussion at all. We certainly promoted the film industry.
To return to the tax break for video games, we first proposed a tax break for the games industry, and we put it in our Budget in 2010, but what did the Tory Chancellor say in his very first Budget? He said that
“we will not go ahead with the poorly targeted tax relief for the video games industry.”—[Official Report, 22 June 2010; Vol. 512, c. 175.]
And what did he do? He axed it. For the UK games industry, it could have been game over. He is introducing the tax relief now, but this misjudgment and delay have come at a price. Our video games industry was the third biggest in the world and has now fallen to the sixth. Many jobs have been lost, with nearly half going abroad to countries such as Canada, lured by its tax relief.
This policy, then, is not an original; it is a cover version—and like most cover versions, just not as good as the original. Although tax credits are worth while on their own, they are not enough to ensure that Britain fulfils its potential as a global hub for the creative industries. Just as this Government do not have a plan for jobs and growth in the economy, they do not have a plan for jobs and growth in the creative industries.
Where is the long-awaited communications Green Paper? The Minister did not say a word about it—not one word. Perhaps it is still waiting for some high-level policy input from a premier league Tory donor.
Where, too, is the action on protecting intellectual property? This is a fundamental issue for the creative industries—the bedrock of the knowledge economy. A tax break helps to boost investment, but more investors would be more confident if they knew that the product to which they were committing was not vulnerable to theft on an industrial scale. If an industry has been given a tax break, it makes it even less sensible to stand by and watch any of the value drain away through IP theft. The last Labour Government recognised that, which is why in 2010, we passed the Digital Economy Act with cross-party support. It needs to be implemented now. We already have the Digital Economy Act; it would be good to go with it. Professor Hargreaves has conducted another review of the same issue, but what the industry and economy are crying out for is action.
Mr Don Foster (Bath) (LD)
I have listened to a lot of drivel in my time, but is the right hon. and learned Lady seriously telling me that she recommends going ahead with all aspects of the Digital Economy Act when Ofcom has shown that part of it was simply unworkable, as Liberal Democrats pointed out during the passage of the Bill?
Ms Harman
But it needs to be implemented now, with a clear timetable and a code of conduct so that notification letters can be issued. We want the Government to show leadership by ensuring that search engines such as Google play their part, and, if there is no agreement, to carry on and legislate in the forthcoming communications Bill.
Where is the action on young people and skills in the creative industries? The future of our creative economy is built on our young people—young people who are consumers, and many of whom want to work in those industries. We must ensure that there are opportunities for creative development from primary school to the workplace, but the signs are not good. Creativity is being stifled in schools, and since last year the number of applications for degree courses in creative arts and design has fallen by 27%. We all know why that is: it is because of the Liberal Democrats’ shameful betrayal on tuition fees. The Liberal Democrats were meant to be a brake on the Government—remember that?—but it is obvious that they have zero influence on policy. Perhaps they just did not have enough money to buy dinner with the Prime Minister.
Where is the action on access to finance for the creative industries? London is a global financial capital and Britain’s creative industries are world leaders, yet they struggle to obtain the finance they need to grow. Most creative businesses are small or medium-sized, and they need the banks to lend to them to help them get started and grow. However, as has been pointed out by the British Chambers of Commerce, credit easing
“will not help the smaller, younger, and high-growth firms that have trouble getting credit in the first place.”
Operation Merlin figures show that banks are still failing to meet their lending targets. Net lending to small businesses fell by £10 billion last year. Banks must start lending to creative businesses rather than throwing money away in bankers’ bonuses, and the Government must start making that happen rather than throwing money away on tax cuts for rich bankers.
Mr Don Foster (Bath) (LD)
I am delighted to follow the right hon. Member for South Shields (David Miliband) who said quite clearly that the coalition Government were not responsible for and had not invented the problem. I might ask him to consider who did. Our country has had to face the biggest boom and bust, with the biggest deficit in the G20, and has had to cope with the biggest banking failure and the biggest crisis among our European neighbours. As a result, we have seen, under Labour, manufacturing falling and personal and national debt rising to a situation in which for every £4 we spend, we have to borrow £1. Every single day, we are spending £120 million just to pay off the interest on the country’s debt. Of course this coalition Government did not create the problem: we are trying to put it right and we are now in the early stages of recovery.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The hon. Gentleman is making some pressing points, but in the light of everything he has said is he seriously saying that the priority at this time should be a tax cut for those earning more than £3,000 a week?
Mr Foster
Let me come to that in a moment. First, let me tell the hon. Gentleman what I thought this Budget needed to do. First, it needed to continue the process of reducing the deficit. It needed to continue to maintain confidence in the international markets not least to keep interest rates low and it needed to develop a fair taxation system. I believe that the tax policy that was introduced through this Budget is a fair one. It has moved us more rapidly than many of us could have hoped to a Liberal Democrat aspiration to achieve a tax threshold of £10,000. As a result of what this Government have done by lifting that tax threshold to more than £9,000 by April next year, we will have taken 2 million of the lowest paid out of paying tax altogether and 24 million people will have been given a tax cut of more than £500. That is in marked contrast to the 5 million low-paid people who had to pay more under the Labour Government who cut the 10p income tax band.
The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) seems to suggest that the rich are getting off lightly, but if he looks at all the figures, he will see that that simply is not the case. Under the measures that have been included in the Budget with the 7% increase in capital gains tax, the 15% on stuff that is owned offshore by foreign companies and the measures on tax loopholes, the figures demonstrate that those who are best placed to pay will be paying even more as a result of this Government.
Mr Foster
I will not give way because I want to make progress.
I was pleased with the comments of my hon. Friend the Minister because he was able to put at the heart of what the Government are doing some of the really important work of the Department for Culture, Media and Sport. He showed how the work being done there can help to deliver the growth in the economy that is really necessary, particularly in relation to the creative industries. As he said—and I am grateful to the deputy leader of the Labour party for agreeing—we have in this country some of the brightest and best people working in our creative industries. We need to give them as much support as we can. Even before the Budget, work had been done to try to achieve that, such as the establishment of the creative industries council, which is already making valuable recommendations on the skills and training needs of the sector.
Tristram Hunt
Is the right hon. Gentleman happy that as a result of the tuition fees introduced by his Government, we are seeing a massive collapse in the numbers studying modern languages, humanities and the creative industries?
Mr Foster
If the hon. Gentleman looks at the figures on applications to our universities, he will see that the predicted fall-off has simply not happened. As we heard earlier in the debate and in the Budget statement, investment in science is being increased. The creative industries want a better base than what is taught in our schools. Because of this coalition Government, the way computing is taught in schools is to be changed, and because of the work of the Henley review, we are going to put culture and creativity back in schools. That will be crucial to the sector. The former Chancellor talked about young people; I hope that he has looked at the real benefit that will be produced by the enterprise loan scheme for young people introduced in this Budget. Work is now being done to roll out high-speed broadband and ultra-high-speed broadband in many of our cities. Everyone in the creative industries will benefit from measures such as the cut in corporation tax, the simplification of tax collection, the loan guarantee system, the enhanced business finance partnership and so on.
I welcome many of the measures that have already been introduced and those that are in this Budget, but of particular importance are the tax breaks for producers of computer games, high-end television productions and animation. They will bring real benefits to those elements of the creative industries, helping the UK economy and increasing employment and opportunities for innovation and investment. As many have said, their effect is already being felt. Only a couple of days ago, I received an e-mail from an animation company, Blue-Zoo, saying that it
“has scrapped all planned moves abroad and intends to make shows 100% in this country”
It also says:
“not only that, we are now planning to invest further in our infrastructure, creating jobs, and growing our industry”.
There are many other examples.
Having been very positive, in the few seconds remaining let me raise three concerns about the Budget. First, the Budget introduces a change in gaming machine taxation, the broad thrust of which is welcome, but the failure to take account of irrecoverable VAT in the calculation will, I believe, be to the disadvantage of some aspects of the gaming industry, particularly bingo. I am also concerned about the impact of tax relief changes on philanthropy, and of VAT changes on work done on listed buildings. With those three—
Mr Campbell
The only place I could take them is the canteen. I might get something there, but I am sure I would not get anything in Downing street.
The 50p tax rate has been widely discussed since the Budget statement. We were told it does not do anything and that no one is paying it, which makes me wonder why we have it. We have just heard the previous Chancellor explain why he put it on, but I have to ask: if people can fiddle a 50p rate, surely they can fiddle a 45p rate? And if they are fiddling the 50p rate, what else are they fiddling?
In the Budget statement, we heard the Chancellor say he opposes people fiddling their taxes. I have been here 25 years—I suppose I am an old man compared with some—and I have heard that time and again. Every Chancellor in history—certainly while I have been here—has said, “I’m going to come down heavy on tax evaders”, but what do we see? People making profits in this country and swanning off with their swag to some tax haven—an island somewhere. They cannot go to Switzerland now, because the Swiss will give the show away, but the Government should remember the old saying, “There’s honour among thieves.” There is honour among bankers as well, so I doubt they will be getting much information from the Swiss.
The Liberals have been telling us how wonderful the Budget is, but 14,000 people in this country are going to get a £40,000 tax rebate at the expense of £3 billion from old people—pensioners. I always thought the Liberals had a little heart in them. I do not know what deal they did to get what they wanted, but I am getting a weary feeling in my bones that they sold out the health service to what they think is a good deal. I am sure, when it comes down to it, that is what they did. They sat round the table and told the Tories, “We’ll get your health Bill through Parliament, but we want this and we want that.” Well, they have come unstuck, because in fact they are getting nothing.
Mr Foster
I do not know whether the hon. Gentleman has looked at the detail of the OBR’s calculations, but if he does he will see that the additional money going to pensioners totals £1.75 billion and the cost of the removal of the age-related allowance is £360 million. That means a net increase to pensioners—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman has made his speech and there are many Members who will not get in. It is fine to intervene, but I certainly do not want a second speech.
Amendment of the Law
Lord Foster of Bath Excerpts(13 years, 8 months ago)
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Vince Cable
It is new money and of course this has to be employer-led; otherwise, there would be no job to follow the apprenticeship. That is why it has got to come from the private sector and why this is the best way of investing in training.
In my concluding comments, I wish to move on to the issue of fairness. It is a legitimate challenge to any Budget to ask about its distributional impact.
Mr Don Foster (Bath) (LD)
I confess that I am about to be disappointed here. In 46 minutes, we heard hardly any news from the shadow Chancellor about what a Labour Government would do. My right hon. Friend is about to disappoint me by not even mentioning some of the other fantastic things he has done for businesses, such as the research and development tax credit, the entrepreneurs’ relief, the increased bank lending, the developments in the enterprise investment scheme and so on. Why is he not referring to these many other good things?
Vince Cable
I probably was going to disappoint my right hon. Friend, because the Chancellor covered those issues very well yesterday. However, there is a lot more where that came from.