Income Tax: Top Rate

Debate between Lord Newby and Lord Razzall

Monday 16th March 2015 Lords Chamber

[Lord Newby]

My Lords, I am afraid that the noble Lord’s figures are just completely wrong. The figures produced by HMRC, which I am sure he has read, showed that its central estimate of the effect of reducing the top rate from 50p to 45p was a cost of £100 million, against which should be set—among other changes that this Government have made that exclusively hit the very affluent—the changes in disguised remuneration, which brought in £3.5 billion this Parliament, and the reduction in pensions tax relief, which will bring in £5 billion a year.

[Lord Razzall (LD)]

My Lords, following up on the question from the noble Lord, Lord Kinnock, does the Minister accept that a by-product of the much welcomed coalition pressure on banks and other organisations in the City to reduce bonuses, which I assume is welcomed by the Labour Party, has been a reduction in tax revenues?

[Lord Newby]

My Lords, there has been a reduction in the amount paid in bonuses in the City. This will undoubtedly have meant a fall in the amount of tax on those bonuses, but I am sure that the whole House will welcome that development and hope that it will lead to something of a change in bank culture.

Banking System

Debate between Lord Newby and Lord Razzall

Monday 9th February 2015 Lords Chamber

[Lord Newby]

My Lords, we do have a business bank. This Government have created one and it is growing very rapidly. As for standards, I completely agree that the standards that are adopted by bankers need to improve. Of course, the industry has itself recognised this by establishing the Banking Standards Review Council.

[Lord Razzall (LD)]

My Lords, I am sure the Minister is aware that the recently publicised excesses of HSBC’s Swiss subsidiary occurred under the regime of the previous Government. Does he believe that the system of banking regulation introduced by this Government would have made the excesses of HSBC less likely?

[Lord Newby]

My Lords, I think that all those involved in banking before the crash adopted laxer standards than they now accept are necessary. I know from discussions that I have had with senior representatives of HSBC before today that the new regulatory regime is far more intrusive and has been forcing them to address the way they do business in a manner which I am sure all noble Lords will welcome.

Income and Wealth Inequality

Debate between Lord Newby and Lord Razzall

Wednesday 26th November 2014 Lords Chamber

[Lord Newby]

My Lords, the commission has put great priority, in all its reports, on the importance of work in households. One of the telling statistics, for me, about what has happened in recent years is that there are now 390,000 fewer children in workless households than there were in 2010 and that the proportion of children in workless households is now at its lowest level since records began. We know that the family environment is extremely important to how children think about the workplace and to their chances of getting jobs.

[Lord Razzall (LD)]

My Lords, in the context of this important discussion on relative income and wealth inequality, do the Government have a view on the opinion of the Institute for Fiscal Studies, expressed yesterday, that since 2010 the position of pensioners has increased significantly relative to those in work, however palatable that might be to your Lordships’ House?

[Lord Newby]

My Lords, as for how resources are allocated, and where people feel more could be done or less, it is a bit like squeezing air round a balloon. It is interesting that I do not think that there has been a single question in your Lordships’ House on one aspect of the Government’s policy—the level of support the Government have given to pensioners.

Economy: Public Sector Net Borrowing

Debate between Lord Newby and Lord Razzall

Monday 14th July 2014 Lords Chamber

[Lord Newby]

My Lords, there are always questions when statements are made outside the House as to whether they should have been made inside the House. If the noble Baroness is concerned about it, she of course has the option of asking an Urgent Question.

[Lord Razzall (LD)]

My Lords, is the Minister prepared to take this opportunity, in view of the questioning, to move from the short to the long-term and comment on last week’s report by the Office for Budgetary Responsibility, which states that by 2050 the public sector borrowing requirement will be more manageable than it would have been were it not for the actions of the coalition since 2010?

[Lord Newby]

Yes, my Lords; my noble friend is absolutely right. The report to which he refers demonstrates two things: first, with an ageing population, there will over a long period be significant pressures on the public finances, everything being equal; secondly, that a number of steps which have been taken with cross-party support, such as raising the retirement age, are making those long-term additional burdens more acceptable and possible to deal with in a sensible fiscal framework.

Finance: Fiscal Devolution

Debate between Lord Newby and Lord Razzall

Wednesday 9th July 2014 Lords Chamber

[Lord Newby]

My Lords, the first point that the noble Lord makes is summed up very well in the introduction to the report to which his Question refers, in which Tony Travers, who chaired it, says:

“Devolution and localism face little opposition apart from national politicians’ cautious approach to constitutional change in Britain”.

That sums up the position very well, and I think that there has been considerable movement under this Government. I will take back the noble Lord’s second point to my colleagues in the Treasury.

[Lord Razzall (LD)]

Does the Minister agree that every political party during his adult lifetime has fought elections on the basis that it wants greater devolution of power to the regions or the cities and then, when it gets into power, it finds a reason not to do so?

[Lord Newby]

I am afraid that there has been a very chequered history of attempts to devolve power—within England, at least. This Government, by devolving half the income generated by business rates, have begun a process. The growth deals announced at the beginning of this week—under which, over a period, £12 billion will be devolved to local enterprise partnerships, whereas it would otherwise have been administered by central government departments—is a big move towards greater devolution. I suspect that in the next Parliament there will be much more pressure to do more.

Tax: Aggressive Tax Avoidance

Debate between Lord Newby and Lord Razzall

Wednesday 9th July 2014 Lords Chamber

[Lord Razzall (LD)]

My Lords, at the G8 meeting last year—it is now the G7—the Prime Minister led on the question of tax avoidance by the multinational companies that we all know, such as Starbucks, Amazon and Google. They seem to do significant business in the UK but pay very little tax. What progress has been made in that area?

[Lord Newby]

My Lords, the work in that area has been carried forward by the OECD, which produced a comprehensive 15-point action plan. Work on all those points is now under way. The first deliverables, on transport pricing, are due in September this year. At the EU level, noble Lords will have seen that the EU is currently investigating the tax position in Luxembourg, Ireland and the Netherlands, specifically with Amazon, Apple and Starbucks in mind.

Payday Loans: Debt Collection

Debate between Lord Newby and Lord Razzall

Tuesday 1st July 2014 Lords Chamber

[Lord Newby]

My Lords, the noble Lord is right that there is a question over whether Wonga in this case might have infringed both the Fraud Act and the Theft Act. The Law Society has asked the Solicitors Regulation Authority to investigate whether Wonga might also have breached Section 21 of the Solicitors Act 1974 and the Legal Services Act 2007. There is plenty of scope for legal action. On the fit-and-proper test, payday loan companies have been regulated by the FCA only since April. A full fit-and-proper test of each company will be undertaken in the autumn.

[Lord Razzall (LD)]

My Lords, is the Minister aware that the debt collection practice with which we are concerned has also been introduced by the Student Loans Company? Will he confirm that no other government agency follows the same practice and agree that it is difficult to complain about Wonga when a government agency is involved in similar activities?

[Lord Newby]

My Lords, there have been recent reports about the Student Loans Company. My right honourable friend David Willetts is in the process of establishing the facts of the practice. The offending letters that the SLC sent out are no longer being sent. Certainly, if it is found that the SLC or any other arm of government has adopted unsatisfactory practices, appropriate and firm action will be taken.

Finance: Interest Rates

Debate between Lord Newby and Lord Razzall

Tuesday 18th March 2014 Lords Chamber

[Lord Newby]

My Lords, I am afraid that I do not read the papers of the Economic Affairs Committee as assiduously as I should, and I cannot quite remember. My recollection from reading them from time to time is that the governor still goes, although not as frequently as when the noble Lord set up the committee. The committee was established specifically to review the workings of the Monetary Policy Committee; it was not an Economic Affairs Committee—I had the honour of sitting on it with the noble Lord. Although the governor does not come to the committee as frequently as he used to, he still does come—but I shall write to the noble Lord to tell him when the last time was.

[Lord Razzall (LD)]

My Lords, does the Minister agree that the powers of the Monetary Policy Committee are even greater than are often thought? Does he further agree that the best example of this—if he were to read the minutes of the last meeting which have been published—is that the governor’s wish to include reference to the output gap in forward guidance was overruled by the Monetary Policy Committee, thereby indicating its power?

[Lord Newby]

My Lords, one slightly surprising thing about the way in which the MPC has worked is the independence of its members vis-à-vis the governor. When it was established, I think that there was a view that it would be a poodle of the governor, because a significant number of members are other employees of the Bank of England. That has not proved to be the case, and governors have, if not regularly, then on a number of occasions been overruled by the rest of the committee over the years.

Economy: Growth

Debate between Lord Newby and Lord Razzall

Tuesday 11th February 2014 Lords Chamber

[Lord Newby]

My Lords, that just seems one of the many inevitable consequences were independence to take place.

[Lord Razzall (LD)]

My Lords, going back to the Scottish banking system, does my noble friend believe that Alex Salmond is behind the suggestion that RBS would relocate to England in the event of independence, as had the last taxpayer bailout occurred in an independent Scotland it would clearly have bankrupted the Scottish economy?

[Lord Newby]

My Lords, the noble Lord may be right. An independent Scotland would have banking assets equivalent to 1,254% of Scottish GDP—more than Ireland, Iceland and Cyprus when they ran into banking difficulties.

Economy

Debate between Lord Newby and Lord Razzall

Tuesday 28th January 2014 Lords Chamber

[Lord Newby]

My Lords, I am very pleased to do so. The figures quoted by my noble friend are matched by the fact that in the latest quarterly employment figures the biggest fall in unemployment was in the Midlands. Over the course of the past year, a record 526,000 businesses were created—an increase of some 42,000 over the previous year.

[Lord Razzall (LD)]

My Lords, does the Minister agree that it is obviously essential that business confidence should be maintained to ensure continued economic growth? In that context, would he care to comment on the remarks yesterday of his noble friend the Secretary of State for Business, Innovation and Skills that rhetoric on the European Union coming from some elements of the Conservative Party is in danger of damaging that business confidence?

[Lord Newby]

My Lords, at the moment, when we are seeing the largest increase in business confidence for a number of decades, any statement by anybody from any party which has the effect of undermining that confidence is very much to be deprecated.

National Insurance Contributions Bill

Debate between Lord Newby and Lord Razzall

Thursday 23rd January 2014 Grand Committee

[Lord Razzall (LD)]

My Lords, when I looked at the amendments that the noble Lord had put down and saw this one, I had a wonderful fantasy that what we were seeing here was Labour adopting the stance of being in favour of tax abuse through the use of NICs. I was already beginning to draft the leaflet that would pin this new policy on the Labour Party. Sadly, having listened to what the noble Lord said, I realised that that was not what he was saying at all.

No doubt the Minister will respond to attacks on the GAAR. I listened very carefully to the speech of the noble Lord, Lord Davies, but did not hear any explanation of why, if the GAAR exists and includes provisions in relation to tax abuse generally, NICs should not be included in it. I understand that the noble Lord does not like the GAAR and does not think that it is effective—but, given that we have it, I am not sure why we should not include national insurance in it.

[Lord Newby]

My Lords, I am grateful to the noble Lord for introducing this debate, because it has given me the opportunity to make a suggestion to him about what we might replace the term GAAR with. I wonder whether he would be happy if instead of calling it GAAR, we called it GREAT, as in Great Britain: the general rule to eliminate the avoidance of tax. If we had done that, we might have satisfied the noble Lord, and summed up our emotion when we think of the new provision.

The noble Lord’s basic argument is that we are not doing enough. As a veteran of debates on GAAR over the past decade, I recollect that noble Lords in the previous Government—perhaps even the noble Lord, Lord Davies—explained to me why the GAAR was totally impossible, completely unworkable and the Government would not countenance it. Indeed, they did not; they did not do anything in this area. The fact that the noble Lord finds this inadequate is slightly sad, given their failure to act in this area.

The noble Lord raised a number of points of failure, as it were, but one of them was in respect of the agreement with Switzerland. The agreement with Switzerland has not brought in as much as was expected, but the Exchequer has received almost £800 million via that agreement. That is £800 million that we would not have had, £800 million that the previous Government showed no inclination to pursue. That is only one of a large number of measures that we have taken to ensure that people and companies who are avoiding or evading tax do not get away with it. In terms of personal taxation, the Lichtenstein disclosure facility has yielded a lot more than was ever envisaged and, along with the Swiss agreement, is part of driving down the ability of those with large resources to avoid tax.

The new automatic information sharing agreements, which have followed the FATCA legislation in the United States, are revolutionising the ability of HMRC to gain information about the tax affairs and bank holdings of British nationals, whether those are held in the Channel Islands or some Caribbean tax havens. Along with the Swiss and Lichtenstein démarche, that will make a big difference to our ability to get the money to which the Government are entitled. On companies, as the noble Lord knows, the work being done in the OECD, particularly on base-erosion and profit-shifting, is aimed to deal with the particularly egregious examples of large multinationals paying very little tax indeed.

As for domestic action, GAAR is only one plank in our overall strategy. HMRC published Levelling the Tax Playing Field alongside Budget 2013 to provide an update on the strategy and to set out the full range of measures being taken in this area. Some people have argued that because GAAR is tightly focused, it will not hit many of the targets and almost gives a green light to other forms of tax avoidance, but if you look at the whole raft of measures that we have taken in Budgets and Finance Bills—most recently, some announcements in the Autumn Statement—it becomes apparent that we have taken measures to protect several billion pounds of Exchequer revenue which might otherwise not have been agreed.

We have, for example, taken firm action to clamp down on stamp duty land tax avoidance, introducing the new annual tax on enveloped dwellings, and continue to close loopholes as quickly as possible after they emerge. In the summer, we publish a consultation entitled Raising the Stakes on tax avoidance, seeking views on proposals for a new set of obligations for promoters of high-risk tax avoidance schemes.

HMRC does an excellent job defeating tax avoidance schemes in court and making sure that people know that many of the schemes simply do not work, but we know that there is much more to do. That is why the consultation also encouraged users of avoidance schemes to settle their tax affairs after similar cases have been lost in court or tribunal. The GAAR is an important step to increase the pressure on the tax avoidance industry, but it is only one step, and we continue to take further action and devote more resources to the fight against tax avoidance in all its forms.

With those reassurances, I hope that the noble Lord will feel that he does not need to press the point.

--- Later in debate ---

[Lord Razzall]

My Lords, the noble Lord has proposed that Clauses 13 and 14 should not stand part of the Bill. The clauses relate to tax avoidance and the abuse of limited liability partnerships. The Minister will be aware that there is concern among professional organisations, particularly the Law Society—not in relation to the Bill itself, but about what will happen in relation to the regulations that will be brought forward. Noble Lords will have received a briefing from the Law Society, because limited liability partnerships were introduced some time ago for professional partnerships, not primarily for tax purposes but to limit the liability of what were previously general partnerships to actions for negligence. That was the major driver for the creation of limited liability partnerships. Most significant law firms and firms of accountants now operate as limited liability partnerships, so there is clearly concern among them that the definitions of employees and partners should be clear.

I received representations from the Law Society this morning, but the basic thesis is that the consultation exercise to determine how a limited liability partner should be properly treated as a partner, or how they should be treated as an employee, was based on the wrong assumptions. The consultation went out on certain assumptions and the proposals on the implementation of the regulations, which I have not seen, change that basis. Therefore, the consultation itself is ineffective.

I appreciate that this does not go to Clauses 13 and 14 of the Bill, because they simply provide for the regulations to be brought in. However, between now and Third Reading the Government ought to respond, saying either that the Law Society in its representations is wrong, and why, or alternatively explain how they propose to deal with what I suspect the Law Society is asking for, which is further consultation before the regulations are brought in. I do not know which of the two is correct and I have not had time to form my own opinion on that. This is an important issue because the limited liability partnerships are important structural mechanisms for professional partnerships. We clearly need to get this right before we change the law in this respect.

[Lord Newby]

My Lords, I am grateful to both noble Lords for their contributions to the debate. I apologise to the noble Lord, Lord Davies, for the fact that he has only just received the letter. As he pointed out and knows very well, it has been a somewhat unusual week in terms of my ordered conduct of business and the letter was sitting on my desk for rather longer than it should have been. It is only fair to point out that this is no failure on the part of officials to respond in a timely manner; it is my failure. I am sorry that the noble Lord has only just got the letter.

Two points have been raised. The second was raised by the noble Lord, Lord Razzall, with regard to consultation. He asked whether the legislation had gone beyond the proposals set out in the consultation document. The Government believe that it does not go further than originally proposed or go beyond the original policy intention. In fact, as a result of the consideration of the consultation responses, the Government dropped the first of the original two conditions which were broadly in line with the employment status tests, which would have meant that even senior partners in major professional firms might have been reclassified as employees. The second condition, which contains ownership or economic interest or risk tests, has been slightly broadened because of this change, but it is still a narrower measure than if both conditions had been implemented as originally proposed. The Government also made clear in Budget 2013 and in the consultation document that the proposals will apply to higher-paid staff in the professional services sector and the lower paid if they are LLP members who receive a largely fixed reward and carry little economic risk or interest.

As regards the status of the secondary legislation and the issue of retrospectivity, the noble Lord referred to two sets of secondary legislation. The first, in Clause 13, had already been published in draft and the second, in Clause 14, was, I believe, enclosed with the letter to the noble Lord and has been put in the Library.

This legislation introduces half of a series of provisions that relate to income tax and national insurance. Slightly unusually, we are legislating for the national insurance part first because we happen to have this Bill before us. The relevant identical provisions relating to income tax will be in the Finance Bill, which will be introduced later in the year and will become the Finance Act 2014. The intention is that the provisions in respect of income tax and national insurance will not apply retrospectively but will apply from April 2014. That is made absolutely clear and set out in the secondary legislation.

I am told that the use of the earlier date in the primary legislation follows precedent in respect of other pieces of legislation and does not mean that the Government will introduce this measure going back a decade or, indeed, going back at all. There are technical arguments for putting that earlier date in the legislation, but the secondary legislation, as I said, makes it absolutely clear that the provisions will come into force from this coming April. Therefore, there is no question of an undue degree of retrospection. I hope that the letter which I sent to the noble Baroness, Lady Thomas of Winchester, set that out clearly and, I hope, satisfies the committee and the noble Lord.

Payday Loans

Debate between Lord Newby and Lord Razzall

Wednesday 11th December 2013 Lords Chamber

[Lord Newby]

My Lords, this matter has been looked into. The Financial Conduct Authority, which takes responsibility in this area from next April, has already proposed limiting continuous payment authorities to two payments and reducing rollovers to two. It has the power to constrain them further than that if that is still seen to be an issue. That is one of the things that the FCA will look at as part of its assessment of the total cap of the cost of payday loans, which it is currently considering.

[Lord Razzall (LD)]

My Lords, I will follow the previous two speakers but extend the question a little more widely. What steps do the Government propose to take to ensure that payday loan operators cannot simply move their headquarters overseas and operate outside the restrictions that are going to be brought in?

[Lord Newby]

My Lords, under the e-commerce directive, which was introduced during the lifetime of the last Government, payday loan operators are able to relocate. However, a majority of EU member states already have some kind of cap on the cost of payday loans, even if not necessarily as comprehensive a cap as we have, and there is an ongoing debate in those member states that do not yet have a cap about implementing one. There are already a majority of EU member states to which it would almost certainly be uneconomic or pointless for payday loan lenders to switch their bases of operation.