Hot Takeaway Food (VAT)

Nigel Mills Excerpts

Wednesday 23rd May 2012 Westminster Hall

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak under your chairmanship, Mr Scott. I join in the congratulations to my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert) on securing the debate. Those of us with a history in taxation wish that every new tax measure could be the subject of an hour and a half of detailed debate. I suspect that we would make much better law if that were the case.

This is an interesting situation. I think that we all agree that tackling tax avoidance and sorting out anomalies is something that the Government should do, but when they come forward with proposals, there is a huge outcry about them, because trying to sort out some of those anomalies is much harder than people think. The reason why this anomaly has lasted for nearly 30 years is that it is incredibly hard to sort out. I jokingly wonder whether, if the Government had called this a fat tax, it would have received a lot more support, but I am not sure that that is a road I would like to encourage them to go down.

Like many other hon. Members, I am concerned about the impact on high street bakeries, especially the small local ones that are a real attraction on the high street. I am talking about those shops on the high street that drag people in to shop there because they like the better-quality product, the choice and the service that they get, compared with the standard, bland products that they might think they get from a supermarket.

I can list many bakeries in my constituency. There is Luke Evans, which has a factory shop that has been in existence for 200 years. There is the Birds chain of bakeries, which I suspect the hon. Member for Bassetlaw (John Mann) will know well; it is a big chain in the area. It has just opened a new shop on Heanor high street, and given that Heanor is a high street with some challenges, anyone opening a new or revamped shop there is very welcome.

I have real sympathy for such businesses. Their shops sell a wide range of products. Pasties and sausage rolls are a sizeable part of that range, although nowhere near the majority of their trade. They are one very useful way of getting income and dragging customers in. However, they are clearly craft bakeries, selling freshly baked products. That is how they make their money. They are not trying to be a disguised takeaway or to flout the law. They are trying to run a perfectly sensible, viable and valuable business of long standing that we desperately want to support in our high street.

[Mr Offord]

My hon. Friend is making an eloquent speech. Does he agree with my constituent Jonathan Grodzinski who runs Grodzinski’s bakeries, a business that has been in his family for well over 120 years, who says that the difference between his products and supermarket foods is the quality, which my hon. Friend has already mentioned? Mr Grodzinski’s concern is that customers will decide that they would rather buy cold food and that that will mean that they are buying food that is less than fresh, compared with when it first comes out of the oven.

[Nigel Mills]

Absolutely. I thank my hon. Friend for the intervention. The last thing that we want to do is to encourage people to buy horrible cheap food with only processed ingredients. That is much less healthy for us than buying proper quality stuff. I therefore have some sympathy for my hon. Friend the Minister in his predicament. It would be useful if he could set out what has tipped the Treasury over the edge into making the change. Was it a case of having to get the train home and thinking, “I’m a bit hungry. It’s been a long day in the Treasury. I can’t face the Chancellor’s bowl of jelly. I’ll have something from the station on my way. If I go to McDonald’s and buy a burger, I pay VAT, but if I go to that nice-looking pasty stand, which seems to be selling only hot pasties, for some reason there is no VAT”? Is that the contrast that tipped him over the edge or is it the fact that supermarkets are selling things that clearly should be VATable but they are manipulating their way around that? Is that what tipped the Treasury over the edge? It would be interesting to know.

[Glyn Davies (Montgomeryshire) (Con)]

I am grateful to my hon. Friend for taking my intervention, particularly as I missed the first part of the debate. He is very generous. Since I have been an MP, I have been approached several times by fish and chip shop owners. Perhaps unusually for an MP, they are the only approaches I have had—and I have had a lot—complaining bitterly about unfair competition, because people are selling pasties and using a microwave to heat them up after they have been sold. I understand exactly why people are concerned, but if we are challenging the whole concept of VAT on pasties, we need an answer—I certainly need one—on that issue.

[Nigel Mills]

I am grateful to my hon. Friend for that intervention. The point I was trying to make was about a craft baker on the high street who is not trying to be a takeaway in disguise for VAT planning, which is in contrast to what looks like something trying to be a takeaway, but is in fact something different. That is perhaps one of the things that has tipped the Treasury over the line. It would be interesting to know what mischief it is trying to fix. Which bad guys are we tackling? I honestly suspect that the bad guys are not the high street craft bakers who will be dragged into this. Their staff will be in a horrible situation.

I went to a couple of bakers in my constituency to see what the measure will mean. The sausage rolls are out of the oven and slowly cooling down in the very much non-heated—I was careful to check—displays in the shop. I guess that if they have been there for 20 minutes, they will still be hot, and therefore there might be VAT. If they have been there for 30 minutes, they might be on the border. If they have been there for 40 minutes, perhaps they are cold enough for no VAT. I have a horrible picture of the member of staff having to poke their finger into my sausage roll to check whether the one they are selling me is cool enough not to charge VAT on or still too hot.

There is a practical issue of how the shops will know day to day that the products sat cooling have cooled long enough for me to get a 20% discount, or have not cooled so the customer has to pay VAT. I suspect that such shops will put VAT on everything and put the prices up by 20%, and they will get a nice windfall for the bits that they can convince the Revenue are not VAT-able. In practice, they will not want to charge separate prices depending on whether someone buys a product marginally above or below the ambient temperature. That would be an unfeasible and rather strange situation for everyone to get into.

[Dan Rogerson]

With his expertise in the intricacies of tax law, the hon. Gentleman makes good points. I suspect that the windfall he mentions will be offset by any decline in trade due to the 20% increase in the cost of the product, set against cold products such as sandwiches.

[Nigel Mills]

I suspect that that is probably right. This will put people off buying some products entirely. I was trying to say that I suspect that the customer will end up with a 20% price rise on all products and it will be down to the baker to match that loss of sale with the income that they get to keep on non-VATable stuff.

The Government need to produce coherent, understandable and enforceable rules. The suggestion that a product would definitely be VATable if any effort was made to keep it warm, by putting it in a heat-retaining bag, under a hot lamp or on a heated rack, after it had been baked would lead to an understandable and clear situation. I am not sure that it would tackle all the mischief that the Government seek to tackle, which is why it would be helpful to understand exactly what problem they want to solve. It would not stop something that looks a lot like a takeaway pretending to be a bakery, which I suspect is something that they would like to deal with.

[Ian Swales]

I pay tribute to the hon. Gentleman’s tax knowledge, from which we are benefiting on the Finance Bill Committee. Does he agree that there is an EU law that requires changes in taxation to be clear and precise? From his knowledge, does he recognise that the Government could be challenged under EU law owing to the complexity of the potential change?

[Nigel Mills]

I spent many years in practice looking at areas where UK tax law could be challenged under EU law. As the years went on, the European Courts became a little more sensibly in favour of the tax authorities rather than the taxpayer, so I never like to predict what a challenge under EU law could achieve. The hon. Gentleman makes a fair point; as taxpayers, we are entitled to expect clear tax law that can be sensibly enforced.

Can the Minister think of other ways to tackle the mischief he wants to tackle without putting staff in every high street in a situation where they have to finger all the products they sell? I am not suggesting that they will literally do that; they will have to have some kind of technical probe or something.

Could the Minister find a way to exempt businesses in which the sale of hot baked products accounts for no more than half their turnover? Clearly they are not in the business of selling hot food, but are trying to sell cakes and bread, so such products are but a small part of their trade. That suggestion will not fix the problem for my hon. Friends from Cornwall, who are looking at businesses based entirely on pasties, but it would take away the worst position for high street shops, for which there are definitely unintended consequences. I fear that otherwise we will end up with a measure that will not work, will clobber the innocent, and those who flout it will find a way to redesign their businesses to get out of it. That is the worst situation—innocents caught in the crossfire. Some people have pushed the whole system too far.

We all know that thirty years ago, Lord Lawson tried to exempt bakeries that produced freshly baked goods. We have a picture of bakers putting things in ovens at 5 o’clock in the morning and customers queuing to buy hot bread, and that clearly should not be VATable. That is not really what happens in most high street bakeries, where the goods are baked in a central bakery and appear in the shop early in the morning. It is unlikely that I would get hot bread, unless I was in the shop nearest to the central bakery very early in the morning. We need to get away from that quaint image that probably applies only to a factory outlet bakery of the type that Luke Evans has. I do not think that most of the baked products I buy are hot, except for those that are carefully baked on site, and they tend to be the products that the customer wants to have a chance to eat hot. That is the line we need to work around.

What exactly are we concerned about? What mischief are we trying to fix? What are we trying to protect? The proposals the Government are consulting on will not get them to where we all want them to be and will need some careful revision.

Finance (No. 4) Bill

Nigel Mills Excerpts

Thursday 19th April 2012 Commons Chamber

A number of Government Members have tried to set the young against the old by suggesting that young people resent any benefit that pensioners receive. Throughout my life, I have observed exactly the opposite. I believe that young, middle-aged and elderly people think it important for us to value pensioners, to try to give them certainty, and to do what we can to ensure that they enjoy a reasonable standard of living. The Government will make pensioners’ lives more difficult at very short notice if they proceed with this measure, and I hope that they will decide not to do so.

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate, in which there has been a wide range of contributions. We have had a rerun of the Budget, Second Reading and most of yesterday’s debate. It would seem unreasonable for me not to make a wide-ranging contribution on this topic as well.

[Lyn Brown]

Will the hon. Gentleman be steering wide of the granny tax because he is ashamed of the policy of those on his Front Bench?

--- Later in debate ---

[Nigel Mills]

No, I will happily discuss the granny tax. I feel no shame about my Government’s policies. Unlike Opposition Members, I am not trying to airbrush out most of the last 12 years of history and pretend that all those disasters never happened. I am happy to address what the Government are doing.

We need to put the position in context. In the financial year that has just ended we were still spending £126 billion more than the tax revenue that was raised, and we expect to spend more than £90 billion more than tax revenue in the current tax year. That is not a healthy financial situation, and it is not a desirable position. We do not have enough money to go around doing many things that we would like to do, no matter how useful or socially valuable. The global financial situation is very difficult, and we must make difficult decisions. During the election campaign, Government Members told potential constituents “This will be a difficult Parliament. We will have to make cuts, not because we do not think the things we are cutting are good and not because we would not prefer to leave them as they are, but because we must try to sort out the horrible mess that exists.”

[Jack Dromey (Birmingham, Erdington) (Lab)]

Did the hon. Gentleman say to his constituents “Elect me, and we will introduce a granny tax to fund a tax cut of £40,000 for 14,000 millionaires”?

[Nigel Mills]

Obviously I did not say that, because I would have been wrong if I had, but I did say that no section of the population would be spared the pain caused by our sorting out the mess that we would have to deal with. I would also have said that I considered the 50p or, more accurately, 52p tax rate an invidious measure which had been devised as a political trap, that it was a terrible tax policy, and that it would probably raise very little money.

The two independent studies that support the Budget have shown that the cost of lowering the rate to 45p is about £100 million a year. The saving from the so-called granny tax is approximately 10 times the size of that. If anything in the Budget is being funded by the granny tax, it is the reduction in personal allowances for the low earners in society.

[Charlie Elphicke]

Does my hon. Friend recall the former Labour Prime Minister Tony Blair saying back in 1997, “Elect us and we will destroy the private pensions system on which you rely for your retirement with a £150 billion impost”? I do not recall anything of that nature appearing in the Labour party’s manifesto.

[Nigel Mills]

I think my hon. Friend is suggesting that we should view the issue in the round—the issue, that is, of how we can encourage people to fund their own retirement and achieve the decent level of income that they want in a way that is not unaffordable for the taxpayer.

[Mr McKenzie]

I suspect that at the last election the hon. Gentleman did not tell his constituents that he would impose a granny tax on them, but that he did tell them that if the Conservatives were elected they would be a fair Government. Is it fair to impose this granny tax while also giving a tax benefit to millionaires? Will he go back to his constituents and tell them that this is a fair Government, therefore?

--- Later in debate ---

[Nigel Mills]

I certainly did say to my constituents that we would be a fair Government. I support fair tax measures. My hon. Friend the Member for Bristol West (Stephen Williams) quoted the IFS saying the granny tax was a

“a relatively modest tax increase on a group hitherto well sheltered from tax and benefit changes.”

While Opposition Members may not wish to believe the Government’s pronouncements, or even those of the Office for Budget Responsibility or the Office of Tax Simplification, perhaps they will believe those of the IFS.

We are not in a happy situation. I do not think any of us are happy about the types of Budget we are going to need to have throughout this Parliament and even perhaps most of the next one. There will have to be a series of measures on both taxation and spending that are going to hurt large parts of the population, while we try to tackle the deficit, which still amounted to £126 billion last year.

[Kate Green]

Something interesting and important was said a few moments ago: it is important that we design a system that encourages people to save and to look after themselves to a degree in retirement, and which rewards them for doing so. Does the hon. Gentleman agree that one of the problems with the granny tax is that people who have been able to make modest savings into small pension pots for their retirement, and who therefore perhaps now have an income of £12,000 or £13,000 a year, are seeing the effort they made to save completely wiped away? Is that not an injustice that is of particular concern if the Government want to incentivise saving for retirement?

[Nigel Mills]

I accept that that is an issue in respect of the granny tax proposal, but I suspect that the £5 billion tax raid which has been referred to and a whole series of other measures that have discouraged saving will have far more serious impacts. I am sure the hon. Lady would join me in welcoming the Government’s proposal to introduce the flat-rate individual state pension of, I think, £140 per individual, as that will help address the problem she mentioned.

[Charlie Elphicke]

Does my hon. Friend agree that the previous intervention was a real cheek? The party of the hon. Member for Stretford and Urmston (Kate Green) destroyed our pension system and raided our pension funds, and it also destroyed thrift by introducing means testing into the pensions system, thereby totally disincentivising any form or saving and personal responsibility whatever.

[Nigel Mills]

I wholeheartedly agree with all those sentiments.

[Rachel Reeves]

If the hon. Gentleman is such a strong advocate of saving, will he join me in expressing disappointment about the fact that this Government have abolished the savings gateway and the baby bond, and have watered down automatic enrolment so that it will be introduced at a later date, and for people earning higher incomes than envisaged under the last Labour Government?

--- Later in debate ---

[Nigel Mills]

The hon. Lady is tempting me to make an even more broad-ranging speech than I had intended, and if I were to talk about such matters, I suspect I might be in danger of being ruled out of order. Let me repeat that there are things that would be nice to have but that are unaffordable in the current situation. Difficult decisions have had to be taken and spending has had to be targeted where it is most needed.

Returning to the topic of the granny tax, I do not feel guilt—that is the wrong word—but I do strongly believe that we need to simplify our tax system. Setting up the OTS is a great measure that this Government have taken, and it has performed the tasks given to it incredibly well. Those of us who advocate tax simplification have to accept that whenever we try to simplify tax, it is likely that some people will win and others will lose out. At a time of budget constraint, there is no way of softening the blow on those who will be losers, so we are left with a choice between muddling on as we are, with a ridiculously complicated and clunky tax system, or trying to simplify it in the hope that in the long run we will end up with a far better system.

[Sheila Gilmore]

rose—

[Nigel Mills]

I have given way many times, so I shall not do so again.

I am not sure that the Government have quite gone down the model line by picking up on the key points made in the OTS report on pensioner taxation. However, if we consider the tax system for pensioners—with higher personal allowances for those over 65 and those over 75, the tapering or claw-back of money depending on how much income they have, as well as all the other different allowances—we can see that the situation is incredibly confusing.

[Elizabeth Truss]

Does my hon. Friend agree that one of the things we need to do at the moment is encourage employers to take on more staff? If we have a system such as the Chancellor proposes in the long term and is certainly looking at, whereby national insurance and tax are simplified, it will be much easier for employers to process those expenses and to take on new staff, and that will really help to get the economy going.

[Nigel Mills]

I entirely agree about a simplified tax system, and if we could have found a way of merging income tax and national insurance, taking away one complexity, that would have been a great step forward. The tax regime for pensioners—people in retirement—is far too complicated and we need to find a way of simplifying it.

[Fiona O'Donnell]

rose—

[Nigel Mills]

Not at the moment. I am sure that all hon. Members have seen pensioners in their surgeries who have suddenly been landed with a huge tax bill that they were not expecting because PAYE had not been deducted from a private pension or because they had different income levels from those they were expecting. All of a sudden these people are facing a bill of a £1,000 or more that they literally cannot afford, and through no fault of their own. So the whole spirit of trying to simplify the tax position for pensioners is exactly the right way forward. This measure is not the end of that; it will be the start of trying to get to a place where everyone can understand what their correct tax position will be and will not have to fill in myriad tax returns. People have to claim this age-related allowance, and that is slightly unusual. Normally, people expect their personal allowance to be an automatic thing, but people have to write to claim this, and that has always struck me as a strange anomaly.

The direction we are trying to take is clearly the right one. This measure is not something that any of us would have wanted to do, and I feel sympathy for all those pensioners, including my parents, who will lose money as a result of it. This is one of the many issues about which we do not just get grief from our constituents; we get grief about it from our own families every time we see them. I have to try to explain to my family why they have to put up with this pain. When we have got the personal allowance up to £10,000, the actual value of these increased allowances over that level will have been greatly reduced compared with the £3,000 difference that I believe the figure was at the start of this Parliament.

I do not think that anyone in this House is saying that as the basic personal allowance is rightly hiked up to £10,000, there is any way we can afford to hike the pension one up by the same amount—all anyone was ever expecting was for it to go up by some measure of inflation. As that benefit was to be so reduced by the end of this Parliament, we have to wonder whether or not the actual benefit to people would have been worth all the complexity, and all the hassle of maintaining these things and the delivery cost.

So I say to the Government that simplifying tax is right. This measure is one of those in the box marked, “Necessary, but unpleasant and not what we wanted to do”. We would all much rather find ways of giving our pensioners more income, but I am convinced that this is one of those things that we just have to do to take our tax system in the right direction and try to fix the deficit. However, I encourage the Government to examine all the other things in the Office of Tax Simplification’s report on tax and pensions and try to introduce some of them too, so that we get a fully developed and balanced reform, rather than just this start.

[Several hon. Members]

rose—

Finance (No. 4) Bill

Nigel Mills Excerpts

Wednesday 18th April 2012 Commons Chamber

[Owen Smith]

I am grateful to you, Sir Roger, although I found that debate terribly entertaining. [Interruption.] Oh no, I am more than happy to talk about tax avoidance all evening, especially about the Swiss deal, which is particularly disgraceful. No doubt we will do that upstairs in Committee.

I return to the question of the bank levy and the bank bonuses tax and which was the most effective measure. It is clear that, as the OBR said, the bank bonus tax raised £3.5 billion in 2010, which is almost twice what the levy raised in 2011. Those are not disputable facts; they are there in black and white in the Red Book and the OBR’s analysis. Choosing not to reinstate our bank bonus tax represents an effective tax cut for the banks.

[Nigel Mills (Amber Valley) (Con)]

rose—

[Brandon Lewis]

rose—

--- Later in debate ---

[Owen Smith]

I would not dispute that for a moment. Many of the banks are under water and so will not end up paying tax for a significant period, but not all of them, and that is my point. Broadly speaking, the banks and financial services account for about 8% of corporation tax in this country. Overall, there will be a reduction to the Exchequer, through the cut in corporation tax to 22%, of about £5.5 billion per annum. That is leaving aside the CFC changes. On average, then, we would expect the financial services and banks to get about £450 million off their tax bills as a result of the Government’s changes. That is the point I am making. The question that needs to be asked in the round is what we are doing to tax corporations and tax our banks.

[Nigel Mills]

Does the hon. Gentleman agree that we need a predictable tax system, so that investors can understand what they will be expected to pay? When measures are described as “one-offs” or “temporary”, we ought to be able to rely on that, rather than allowing them to be permanent fixtures.

[Owen Smith]

By and large I would agree with the hon. Gentleman. Tax policy ought to be predictable. Indeed, the current Government deserve some credit for continuing with the trajectory set by the previous Government on tax policy planning and tax making, by seeking to consult significantly and publish things well in advance. [Laughter.] For some reason the Minister is chuckling. I would point to the introduction of the 50p rate, which was first mooted in 2009 and introduced in 2010, which was probably what led to all the forestalling. However, that approach is a good idea, by and large. We ought to consult carefully on tax policy, because as this Government are learning to their cost, so often there are unintended consequences of tax policy. I might highlight, for example, the simplification introduced so blithely by the Chancellor in his Budget speech, when in just one sentence he waved away Churchill’s special personal allowance for the elderly and introduced the granny tax. That was a simplification that seemed sensible at the time, but in hindsight it has had unintended consequences.

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[Owen Smith]

I am grateful, Sir Roger. I am bringing my remarks to a conclusion.

The amendment we have tabled is very simple. It simply requires the Government to look at the possibility of reintroducing a payroll tax on the banks.

[Nigel Mills]

Will the hon. Gentleman give way?

[Owen Smith]

No.

We think that would generate significant revenues, which could be used to create youth jobs to tackle the scourge of youth unemployment in our country and to create new affordable homes. We want the Government to look at that; we want them to get their priorities right; we want them to undo some of the damage they have done in the last two years. That is why we will of course press the amendment to the vote when the appropriate moment comes.

--- Later in debate ---

[Karen Bradley]

I do not agree about the contradiction. If it is suggested to the banks that the rate of tax will be at a certain level and that there will be a bonus tax, that will discourage them from remaining in the UK but it will not stop them paying the bonuses, which is what the Treasury wanted the special one-off tax to do.

[Nigel Mills]

Does my hon. Friend agree that the bank payroll tax has morphed from its original role of reducing bonuses to become purely a revenue-raiser in the eyes of those who want it, and that it is not even intended to reduce the amount of bonuses paid?

[Karen Bradley]

I was coming to exactly that point. It is, in fact, a revenue-raiser. We need to return to the question of how money can be raised from the banks, and if that is what we wish to do, I think that the bank levy is a better way of doing it.

In preparation for the debate, I rang various former colleagues and others involved in the financial services sector. I could not find anyone who would express the view that the bank levy was a terribly bad thing. They all accepted that the tax needed to be paid, and they thought that this was a reasonable way in which to pay it.

[Karen Bradley]

My point is that it is not the Government’s job to try to drive the level of bonuses. The last Government wanted to do that, and failed miserably. It must be accepted that the bank bonus tax is a revenue-raiser and not a behaviour-driver, and that it will not determine the way in which bonuses are paid. The actions taken by the present Government to limit the level of cash bonuses that can be paid, and other such measures, are far more effective in ensuring that the bonuses that are paid reflect the performance that contributes to the building and growth of a financial services business. That is what we want in our economy. We want businesses to grow, because if they do, they will pay more corporation tax. They will also pay more payroll tax, because a 13.8% national insurance charge is levied on all employers for the sums they pay their employees. Therefore, if the banks make more money, they will pay more in payroll tax, which is a good thing.

[Nigel Mills]

Does my hon. Friend agree that targeting a payroll tax at one industry is not a particularly coherent way of running a tax system? If those who propose doing that were truly concerned about inappropriate bonuses and high pay, they would want to impose a tax on other areas, too, such as high pay in the City—and, perhaps, on footballers or on energy businesses—rather than targeting it on just one industry that they do not happen to like at the moment.

[Karen Bradley]

My hon. Friend makes an important point. Financial services are an incredibly important part of our economy. The 2002 pre-Budget report revealed a drop in revenue, and the explanation it gave for that was that the expected City bonuses had not been paid, and as a result those bonuses were not contributing as much tax as forecast—and we all accept that we need to raise tax in order to pay for our schools, hospitals, police officers and all our public services.

The bank levy is the right way to tax the banks. It is not unpopular with the industry, so far as I can ascertain from the experts to whom I have spoken. They accept that they have to pay their share, and that that is the way they will do it.

Budget Resolutions and Economic Situation

Nigel Mills Excerpts

Friday 23rd March 2012 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the hon. Member for Luton South (Gavin Shuker); we have heard each other speak many times over the past few weeks.

When I was asked what I wanted to see in the Budget, my general response was “Not a lot.” The key thing is to keep a steady course and not scare the horses with a sharp change of direction, and that, as we can see from the Red Book, is the Chancellor’s main strategy. In the current financial year, the deficit is still about £126 billion, so there is no real scope for the Chancellor to take major expensive action. Looking forward to next year, we still see a deficit of about £90 billion, with public spending of £683 billion, which is nearly £2 billion a day. The most significant Budget measure for the coming financial year is the corporation tax cut, which is highly welcome. It is worth just under £400 million, which is about four hours’ worth of public spending. There has not been scope, and there is no scope, for major changes in that situation.

What most investors want from the British tax regime is stability and predictability. That is the strategy the Government set out at the start of this Parliament, and I am glad they have stuck to it, and that when we hit the start of the new financial year in a couple of weeks’ time, there will be no major changes for everyone to understand over the next fortnight. Most of what will apply was well signalled and we all knew about it months ago. There has been detailed consultation on many of the major measures; others are to do with anti-avoidance, which clearly we cannot consult on, but they are more than welcome.

As the debate today was opened by the Secretary of State for Transport, it would be rude not to touch on a few transport issues. Like other Members, I welcome the investment in transport infrastructure. One thing that has not had much attention in this debate is the decision to set up the transport innovation centre. I am sure the Government will recognise the overwhelming case for it to be based in Derby, where we have Rolls-Royce, Toyota and Bombardier. I can think of nowhere else in the country where transport plays a greater role in the economy and where there are more people with the skills to make the centre work effectively.

In all the Government’s recent announcements about the electrification of rail lines, it is a pity that they missed out the east midlands main line. It serves a large part of the country and a number of deprived areas. We suffer from a much slower train service than the east coast or the west coast, which must have an effect on economic activity. In fact, to get to London for 9.30 this morning, it was quicker for me to catch a train to Tamworth and change to the west coast main line than to stay on the east midlands line. There is an overwhelming economic case for electrifying the line and I hope that that will be brought forward.

As my hon. Friend the Member for Cleethorpes (Martin Vickers) said, after three days of Budget debates most of the good points have been made. Obviously, I warmly welcome the increase in personal tax allowance for the lowest paid; it will affect 23 million people, which is a strong signal of where we think our values should be. Of all the money the Chancellor has at his disposal, the £3.3 billion annual cost when that measure takes effect shows where his focus and priorities lie.

I welcome the measures announced previously to try to get more finance to small and medium-sized businesses—the loan guarantee and credit-easing schemes. We hope the banks will take them on so that businesses around the country have access to the finance they need to grow and create jobs.

I shall spend the last few minutes of my speech talking about the importance of tax simplification, which was front and centre in the Budget. I especially commend the valuable work of the Office of Tax Simplification on this Budget and the previous one. I only hope that the Government, having seen the value of the work of the OTS, will commission it to do something more ambitious and look at how we can radically reform business taxation and corporation tax to make them simpler and to make the country even more attractive to investors.

The OTS recently produced a report on the taxation of the smallest businesses. I welcome the fact that the Chancellor went further than it recommended, in effect allowing businesses with turnover of up to £77,000 not to prepare detailed accounts, but just to pay tax on their cash surplus each year. If that coincides with VAT thresholds, businesses will know that if their turnover is less than about £77,000 they will not have to prepare detailed accounts for tax purposes or deal with VAT. That is a powerful message to send to the smallest businesses. I look forward to the consultation to see how that measure can be made to work. However, there is just one issue I want to raise. We all want the guy who is making a nice living for himself—perhaps a successful plumber—to be able to grow his business, and to take on someone to train. The risk is that if he does so, and takes his turnover beyond £77,000, he will suddenly be clobbered by having to register for VAT and going through the accounts process. We need to think about how we transition successful people who take on extra staff, which would tackle unemployment, and bring down the compliance level for them, but that is not to take away from what is a welcome measure.

A slightly less welcome review from the Office of Tax Simplification was the review on taxation of pensioners, which is where the Budget measure that has been most controversial—the changes to the personal allowances for people over a certain age—may have originated. Those of us that have argued for tax simplification have had to accept that whatever we try to change there will be some winners, who will be very grateful but probably very quiet, and some losers, who will be somewhat less grateful and no doubt quite a lot louder. Understandably, that is what has happened. When there is no fiscal room, there is no way of easing the burden on those that lose in the short term or of trying to spread that pain, although the increase in the state pension tackles some of that. But the change is a year away and there is scope to have a look at it.

I welcome the Budget. It sticks to the course that we need and takes our finances in the right direction, heading back towards stability. I think it will be a successful Budget for growth in this country.

Budget Leak Inquiry

Nigel Mills Excerpts

Thursday 22nd March 2012 Commons Chamber

[Mr Gauke]

I am afraid that if we were looking at the previous Government we could round up the usual suspects there, because there was plenty of leaking under them, but we heard none of the synthetic outrage from the Labour party then.

[Nigel Mills (Amber Valley) (Con)]

I have a dream in which the Budget is merely the confirmation of ideas that have been fully consulted on and people can actually understand what the tax regime will be in advance. I commend the Minister for his work in trying that, rather than worrying about this flim-flam.

[Mr Gauke]

My hon. Friend makes a good point about our more deliberative and consultative process for tax policy making, and some of the announcements in the Budget yesterday were the culmination of a long process of consultation, for example the reforms of controlled foreign companies, which have been widely welcomed. As a corporate tax regime, ours is increasingly recognised around the world, and I am delighted that, as my hon. Friend the Member for Mid Norfolk (George Freeman) pointed out earlier, we had the announcement from GlaxoSmithKline this morning.

Public Service Pensions

Nigel Mills Excerpts

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

There is a squeeze on living standards and, indeed, on our economy for a combination of reasons, including the crisis in the eurozone and the catastrophic mess that the hon. Lady’s party made of the economy. I think she should start by admitting that.

[Nigel Mills (Amber Valley) (Con)]

I congratulate the Chief Secretary on reaching an agreement. The last thing that any of us want is a regular five-yearly salami slicing of public sector pensions. What aspects of the deal will make it future-proof over the 25-year period to which he has referred?

The Economy

Nigel Mills Excerpts

Tuesday 6th December 2011 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the hon. Member for East Antrim (Sammy Wilson). Having recently joined the Northern Ireland Committee, I am becoming more familiar with the issues that he raises and, in particular, with Northern Ireland’s attempts to show that one can compete on tax rates to grow one’s economy. It has the right idea in wanting to match Ireland’s lower corporation tax rate in order to grow the Northern Ireland economy, but I sense that it will not want to match Ireland’s new higher VAT rate in an attempt to grow the economy over there. That is aiming for the best of both worlds.

I welcome the chance to contribute to this important debate on what is the central issue for my constituents. I am sure that every Member who has spoken to constituents and businesses cannot have failed to notice how difficult economic conditions have become, and that is why I welcome in particular the fact that the Chancellor, in his autumn statement last week, did not try to hide the full extent of the difficulty, but set out exactly how difficult things are now and will be for the next few years.

The response was robust, and it should see us maintain the market’s confidence, which is the key to our recovery. I am not aware of any serious commentator who suggests that we should change our plan, and borrow more and spend more than we plan to, when we are running a deficit of more than £120 billion this year already. The shadow Chancellor chose earlier to quote Voltaire, and I have found a second quotation for him:

“Common sense is not so common.”

Some of his speech showed eminently that that is true.

I shall touch on the measures in the autumn statement that are relevant to my constituents and work through those issues that are raised most frequently. People—especially first-time buyers—complain that they cannot get mortgages or, if they can, that the deposit requirements are too high or the cost is too high, so last week we announced measures to make it easier for first-time buyers to get mortgages and thus get the building industry started again. I can think of some building sites where a couple of houses were started on the edge but the rest of the estate was mothballed for a few years, and getting those finished has to be a good thing.

Small businesses have for a long time complained that they cannot get funds out of the banks, and, although all our measures may have helped a little, they certainly have not solved the problem, so the loan guarantee scheme will I hope be a real step forward. Many businesses are struggling to decide whether investment is a great idea in the current climate, but as things start to improve the scheme will be in place and enable them to secure the finance that they need. In the meantime, every small business will welcome the extension of the business rate holiday for a few more months, but it keeps being extended, and at some stage it might be nice to extend it to a distant horizon so that we know where we are.

The worst impact of any economic downturn is on unemployment, and especially on youth unemployment, and the £1 billion of funding that we announced to tackle that will be hugely welcome. As I visit businesses throughout my constituency, I see that some are taking real steps, at their own cost, to employ local young people. I pay tribute especially to David Nieper in Alfreton, a fashion business that has started its own fashion academy, taking students from nearby universities and showing them the entire industry—from designing clothes all the way through to marketing them, selling them and producing brochures—in order to give them that whole-industry experience so that they really are job-ready.

[Helen Goodman]

I am pleased that the hon. Gentleman congratulates David Nieper, because my sister works in that factory.

[Nigel Mills]

Well, I am sure that she recognises how great an employer it is—and it is very kind of the hon. Lady to give me an extra minute!

Many other businesses in my constituency have expressed their concern about the impact of rising energy bills, especially given the Government’s climate change policies, which increase those costs. In my constituency, I have another great business, Denby Pottery. I do not know whether the hon. Lady has family working there, too, but it has expressed a real concern that even the welcome help that we announced for energy-intensive industries last week will not assist the ceramics sector, so I urge the Government to keep working on those measures to protect such valuable and historic industries.

Another particularly welcome announcement for me was the announcement of expenditure on infrastructure and road building. New road construction in Amber Valley has been a little neglected, so I urge the Government to look favourably on the bid that I and Amber Valley borough council have championed for the new Ripley-Codnor bypass, which would link the A38 and M1. We are not asking for the full funding, because the council is busy arranging it through developers that can pay for up to half the bypass, but if the whole road were completed it would present a real chance for regeneration and a real chance to attract new business to the area, which is exactly what the Government’s infrastructure funding is trying to do.

I am happy with what the Government have announced. In a difficult situation, they have announced some short-term measures to tackle the worst impacts of economic downturn. Now, we need to look at the long-term strategy and at the measures we need in place to make our economy as competitive as it can be in five or 10 years’ time.

In the final minute of my speech, I shall turn to the reform that we need in our tax system. As my hon. Friend the Member for Chichester (Mr Tyrie), the Chairman of the Treasury Committee suggested, many tax regimes that affect our businesses are unduly complex and out of date, discouraging investment while encouraging strange and perverse behaviour, which is why we have to introduce a huge number of more complex anti-avoidance rules, such as those announced today.

Wholesale simplification would ensure that we had a system which encourages what we do want and make it easier to stop the avoidance behaviour that we rightly wish to tackle—and I think the Government are coming round to that. Last week, they announced that 100% capital allowances will be made available to enterprise zones, and, to all those businesses in my constituency which would like to invest in new machinery and need to do so to remain competitive, we should send the message that we want to provide tax incentives for people to invest in capital equipment at this time. If we need 100% capital allowances for enterprise zones, can we not find a way of being more generous with capital investment throughout the whole country, not just in those zones?

Fuel Prices

Nigel Mills Excerpts

Tuesday 15th November 2011 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on his tireless campaigning to secure this debate. I think it was back in February that I last spoke in a debate on fuel prices. Indeed, it should be a tradition that we debate fuel prices two or three weeks before every Budget or the autumn statement. The last debate was a great success, because shortly afterwards the Government scrapped the 5p rise and introduced a 1p cut. We hope that our new Minister will follow that trend and that the next 3p rise will be scrapped, with perhaps even a small cut made to encourage people.

The price of fuel is one of the topics we debate where so many of our constituents feel the pain personally, either as individuals or in the businesses they run.

[Mr McCann]

It is nice of the hon. Gentleman to give way, because he will remember that I followed him when he made his maiden speech in the House. Does he think that his constituents are feeling the pinch of the increase in fuel prices attributed to the VAT increase that his Conservative and Liberal Democrat coalition introduced?

[Nigel Mills]

I am tempted to say that I will give way again to the hon. Gentleman if he will tell us whether he voted against the VAT rise. We have heard a great deal of concern expressed today about the VAT rise, but it is surprising that those feelings are so strong, given that most Members did not vote against it. We have often said that we had to introduce that increase in part to fix the mess that Labour left for us. If the hon. Gentleman wants to take away that £12 billion or £13 billion of tax revenue, he will have to find a way of replacing it. I shall return to the question of fuel prices before I run out of time.

The point has been well made that this issue is all-pervasive, in that fuel costs affect everything that we buy. Today the headlines are telling us that inflation has fallen to 5%. Who on earth would have thought that we would be reading such headlines? The last thing that the Government want to do is put up fuel prices, which would affect everything that we buy, thereby pushing up inflation again.

[Elizabeth Truss (South West Norfolk) (Con)]

Does my hon. Friend agree that the situation is particularly difficult for people living in rural areas? One of my constituents who was unemployed has found a job further afield. He is earning £17,000, but he is spending £3,000 of that on petrol.

[Nigel Mills]

I absolutely agree with my hon. Friend. I have similar situations in parts of my constituency. Petrol prices are much higher there than they are in large cities. I have perhaps had a bit of luck recently in that Asda has opened a branch in the past year, which has pushed some petrol prices down a little—not that I like to pay tribute to supermarkets all that often.

Governments of both parties have spent nearly 20 years putting up petrol prices, and they have justified that in part by saying that it would encourage us to change our behaviour by buying smaller cars and driving less. Well, I think we have all got that message now. I have a smaller car that does many more miles to the gallon, as have most of my constituents, and many of the businesses that I talk to have reformed the way they transport their goods in order to reduce the number of lorry loads. The message is already out there, and we do not need any more nudging. We all understand it, and there is little more that we can do. For many people, their journeys are essential, and we risk pricing them off the road and out of economic activity completely.

The price of fuel is high. In fact, the underlying price—excluding the duty—has increased by about 20% over the past two years. There is no need for an inflationary rise in the duty to ensure that the price goes up in line with inflation, because the price has already risen by that amount. I cannot see any justification for a price rise on that basis. The only argument left for a further fuel duty increase is the fact that we need tax revenue, but this would be an especially bad way of generating that revenue, given the damage that it would do to our economy at this difficult time. I therefore urge the Government to scrap the rises that are planned for next year, and to try instead to find a way of reducing the duty in order to stimulate the economic activity that we need.

Eurozone Crisis

Nigel Mills Excerpts

Thursday 27th October 2011 Commons Chamber

[Mr Osborne]

I completely agree with my hon. Friend. It is a remarkable position for the Labour leader to take when he says:

“I don’t think Brussels has too much power.”

What sort of negotiation would it be if he were in charge?

[Nigel Mills (Amber Valley) (Con)]

I, too, welcome the Chancellor’s efforts to protect British taxpayers from further bail-outs. I also welcome his statement that the International Monetary Fund exists to support countries that cannot support themselves, but I reiterate my concern that the IMF does not end up supporting a currency if a country chooses not to take the right action.

[Mr Osborne]

My hon. Friend has made a good point. The IMF exists to support countries, and supports 53 at present. It does not exist to support currencies.

Finance (No. 3) Bill

Nigel Mills Excerpts

Monday 4th July 2011 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

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

[Madam Deputy Speaker (Dawn Primarolo)]

With this it will be convenient to discuss the following:

New clause 14—Group filing for corporation tax—

‘The Chancellor shall direct the Office of Tax Simplification to report by 31 March 2012 on the potential for the introduction of a consolidated corporation tax filing for UK-resident companies meeting the current definition of a group for corporation tax purposes, to include an assessment of the potential cost savings for companies and HMRC, and the potential for reducing tax avoidance.’.

Amendment 15, in clause 4, page 2, line 16, leave out ‘is treated as having come into force on 1 April 2011’ and insert

‘shall come into effect when legislation shall have been enacted requiring that all public limited companies registered in the United Kingdom shall be required to submit the arrangements for the payment of salaries and bonuses of their directors to a binding vote of approval by their shareholders at an Annual General Meeting.’.

Amendment 20, page 2, line 16, leave out ‘is treated as having come into force on 1 April 2011’ and insert

‘shall come into effect when legislation shall have been enacted requiring all public limited companies registered in the United Kingdom to publish the current salaries and bonuses of their directors.’.

Amendment 51, in clause 7, page 4, line 6, at end insert—

‘(10A) The Chancellor shall produce, before 30 August 2011, a report on the Government’s discussions with the industry on the implementation of the increased charge’.

Amendment 17, in clause 42, page 27, line 4, after ‘appoint’, insert

‘after a Report has been submitted to the House of Commons detailing the number of EIS schemes previously approved, their total cost in terms of tax relief, the number of jobs created by the companies enjoying such relief and the number of companies that failed subsequent to relief being granted allowing for an estimate to be made of the cost of each job created under the terms of this scheme when compared to the cost of tax relief given.’.

Amendment 9, in clause 43, page 27, line 35, at end insert—

‘(11A) In section 1052 in subsection (2) after paragraph (a) insert—

“(e) incurred on premises costs

(f) incurred on design costs

(g) incurred on patent, trade mark, registered design, copyright, design right or plant breeder’s right (see section 1139)”.

(11B) After section 1142 add—

“1142A Premises costs

(1) In this part “premises costs” means rents and business rates costs of the studio where R&D is undertaken.

1142B Design costs

‘(1) In this Part “design costs” means—

(a) user interface costs,

(b) user testing costs,

(c) aesthetic costs,

(d) new business model costs.

(2) In subsection (1)(a) “user interface costs” means—

(a) costs occurred from designing the visual and functional appearance of the application,

(b) costs occurred from designing the code that reacts to user inputs.

(3) In subsection (1)(b) “user testing costs” means—

(a) costs occurred during product testing.

(4) In subsection (1)(c) “aesthetic costs” means—

(a) costs occurred from the artistic design of the product.

(5) In subsection (1)(d) “new business model costs” means—

(a) marketing of building a new business monetisation model,

(b) marketing of testing a new business monetisation model.”’.

[Nigel Mills]

The aim of new clauses 12 and 14 is to encourage the Government to move a little faster in simplifying our corporation tax system, which is far too complex to meet modern needs.

On a day on which we have celebrated the 100th birthday of Ronald Reagan, it is appropriate to start with a quote from that great tax reformer. He said in 1985:

“Later in this session of Congress, we’ll be presenting our proposals for tax reform that will lower tax rates, broaden the tax base and make the tax code simpler and fairer. We’re looking at a top rate on personal income taxes of 35 percent, very possibly less. And we’ll be sure that incentives for capital formation are maintained. And I just want to reemphasise one thing: Tax reform will not be a tax increase in disguise.”

Those words are as relevant today as they were 26 years ago. To be fair, the Government have received that message. The Exchequer Secretary recently said:

“Taxation in Britain is far too complex. A clearer and more straightforward tax system will bring benefits for tax payers, tax professionals and the Government alike.”

I hope that the whole House would entirely agree with those sentiments.

The Government have taken welcome steps in the right direction. We have established the Office of Tax Simplification, and I commend the work it has done. In fact I am keen to ensure that we get maximum value out of it by giving it a bit more work to do under these two new clauses. At a time when we are assessing the value of all our quangos and outside bodies, the more work we get out of them the better.

We need to hasten the work of the OTS along. We are already a year into this Parliament and we rightly have a process now whereby we consult in detail on major changes to the tax system. If we do not bring forward our proposals in the next year or so, we will struggle to get any benefit from them in this Parliament, and that is the direction in which I am encouraging the Government to go tonight.

The Exchequer Secretary has made such a great start in tax simplification that he has had the honour of being named the tax personality of the year. We could start making various jokes about accountants’ personalities, but we would probably cause grave offence to all my former colleagues, so perhaps we should leave that subject. We have had a consultation on removing a few simple tax allowances, such as the reliefs for angostura bitters and black beer—if going that far gets the Minister that award, just think what garlands could be thrown at his feet if he tackled some of the real complexities of our tax system!

It was just last week that the Government announced the next areas that they want the OTS to consider, rightly including the taxation of pensioners and employment taxes. However, at a time when we need business to drive the growth that will sort out the deficit and our economy, we need to look at the taxes that encourage—or perhaps discourage—business from making the investment that we need. That is why new clause 12 would require the OTS to consider ways to simplify the capital allowance system, or to replace it if simplification is not possible. If the Minister questions why we need that provision, I draw his attention to the Bill, in which we have had to introduce various measures that tinker with the capital allowance system, because we know it is out of date and not working. It is hard to imagine that anyone would design from scratch a system in which we have to introduce a modification to ensure a different system for short-life assets and then we have to change the definition of short-life assets to eight years. I wonder how often businesses invest in assets that they expect to have a useful life of eight years, never mind any longer. That is a clear sign that the system is not working, out of date and far too complex. It needs to change.

I am sure that Members have taken a fascinating look through this country’s tax code and seen how many types of capital allowances we now have. We have a basic regime—the general pool—which from next year will produce an allowance on a reducing balance basis of 18%, meaning that it will take a long time for a business to get the full economic relief for its investment. It would take well in excess of six years to get the majority of that relief. We then have the short-life asset pool for assets that a business thinks might have a life of less than eight years. That effectively means that it has to track those assets and work out when to scrap or dispose of them to get the final balance. We also have a long-life asset regime for assets that have a particularly long life, but which are not suitable for the general pool. Furthermore, we have different rules for cars and environmentally friendly assets, and completely different rules for assets on a finance lease, where effectively we allow account depreciation.

This range of reliefs for simple investments in plant and machinery beggars belief. Frankly, if I was an overseas business or someone with some cash wanting to start a business in the UK, and if I wanted to invest in a heavy manufacturing business, was investing in large numbers of plant and equipment and went to my adviser and said, “I want to invest in the UK. Can you tell me how I get relief for all this investment?” and I got the answer, “Well, it depends on whether it’s a long-life asset, a short-life asset, an ordinary asset, an environmentally friendly asset, and it depends whether you lease it, hire purchase or buy it outright”, I would start to wonder whether it was really worth the effort. Surely there must be a simpler and better way of doing this than having to go down all these different routes.

We know what happens. The system creates complexity for businesses having to track and make all these returns. Then the Revenue has to audit and scrutinise those returns and ensure that everything is done properly. It therefore takes work on both sides to support a system that I suspect is achieving the opposite of what we want, which is to encourage existing and new businesses to invest in new, modern and environmentally friendly equipment, and to create more jobs in the manufacturing sector that we so value in this country.

[Louise Mensch (Corby) (Con)]

My hon. Friend is making a powerful speech, and I share his interest in this subject because, like him, I have large amounts of manufacturing industries in my constituency. Have any businesses in his constituency made representations to him about how much such a measure could save them or help them to invest?

--- Later in debate ---

[Nigel Mills]

I can think of many things on which businesses lobby their MP, but the details of the tax system are a little way down that list. We would find that businesses take a different view of whether they benefit from the current regime. However, as we continually reduce the rate, this will become of greater interest to more and more businesses. Yes, businesses come to me and say, “The general tax system is just far too complex. The corporation tax system as a whole is far too complex.” The issue I have raised is just one particularly good example of where the system is now out of date.

If the Minister needs more encouragement to simplify the system, I would add that the more complex we make a system, the more attractive we make tax avoidance and the more loopholes we create for tax avoidance. Through the Finance Bill we have had to introduce anti-avoidance measures to try to stop people exploiting the system’s complexities. How much more attractive would it be if we simplified the regime either by retaining capital allowances that provide the attraction of a simple fixed rate of relief, or by allowing a business to relieve the depreciation charge it makes in its accounts? In previous debates, we have heard of the risk that businesses could massage their tax results to accelerate the deduction in advance of the economic life of those assets ending. These things can be tackled, however. In effect we are allowing a business with an intangible asset to take relief for its accounts depreciation. It is strange that we allow that for intangible assets that we cannot, by definition, touch and for which there is no scientific data proving the lifespan, yet for tangible assets—the core things we want businesses to invest in—people have to go down this hugely complex route.

In reducing the allowance rate from 20% to 18%, the Government think that they will more closely align rates with the economic life of assets these days. I am not sure that businesses in my constituency are saying that that is their experience. These days, things move on so fast that the life of an asset is quite hard to predict. If someone is looking for a return on an asset over six years-plus, it is hard to be confident in the current market. There are many issues with the capital allowance system, and I suspect that each year a different aspect will become the hot topic. The Minister will be lobbied by different interest groups, as I suspect he was this year in his attempt to move—quite rightly—from four years to eight years, but when he is next lobbied and gets proposals in his Red Box to add another layer of complexity to the system, I hope he will say, “Actually, there must be a better way we can do this.” This is fundamental to our corporate tax system, it is fundamental to how we encourage investment in our country, and there must be a better, simpler, fairer way that removes some of the potential for abuse. New clause 12 would get the Office of Tax Simplification to consider whether a better system could be introduced. I would strongly encourage the Government to consider carefully going down that line.

Let us step back in history to the time of President Reagan. One example of how not to simplify a tax system was his Tax Reform Act of 1986, which introduced what was called the “double-declining balance method”, switching to the straight line method at a time to maximise the depreciation allowance. I raise that issue only to show that this is not as simple as saying that we need either the current system or accounts depreciation—different things could be done that might encourage investment, although I am not sure that the double-declining balance would meet my aim of simplifying, even if it might give businesses the joy of accelerated relief. I shall not ask the Minister to respond in detail on that particular method, however, as I suspect that it will not have featured in his recent studies.

New clause 14 addresses a slightly less hot topic—groups of companies. These can range from groups with two companies through to multinationals with dozens or even hundreds of UK companies. For corporation tax purposes, we currently ask groups to file a tax return for each entity. Then we ask them to file separate claims and elections for all the various inter-group transfers and allocations. They are allowed to transfer a loss from one company against the profit of another, and they are allowed various elections on the transference of assets around the group. All these things create a huge compliance headache for taxpayers and the Revenue.

It is worth considering whether there is a simpler way of getting groups to deal with their corporation tax compliance by filing a tax return covering the whole group. There are precedents: many other tax regimes under our competitors allow groups to file a single tax return for their whole group, and in fact we allow groups to make group VAT elections and effectively file single VAT calculations. I wonder how much easier it would be for a group if it had the same basis for VAT as for corporation tax. Let us consider all the potential savings for businesses and the Revenue in not having to go through dozens of individual tax returns. We should bear in mind the fact that many entities in a group will have few entries and will add very little. Under my proposal, we would no longer require all these group relief returns when businesses allocate losses from one company to another, then make a change following submission and have to change all those returns, after which one company makes a loss the next year that changes the previous year’s return, meaning that they have to re-file them all. All these things add huge complexity and costs but very little value to the tax system.

I accept that they add some value to the Treasury, however, through the hope that, somewhere in a group, some losses or something else will not get relieved but will get trapped, whereas under a simplified system they would get used. I am not sure that our predecessors, when they passed these reliefs to support and encourage business, were aiming to put in place systems so complex and out of date that some relief would get denied when it ought to be given.

There are further reasons behind my proposals. We impose on UK group companies various requirements to review the pricing of transactions that take place between them. There is no tax at stake if company A sells something to company B for £100, then has to work out whether the price ought to have been £95 or £105. The only result is that one entity ends up with a slightly reduced profit, and the other with a slightly higher one. Both pay the same rate of tax, so the present arrangements simply result in a paper chase that creates compliance headaches for business and the Revenue alike. All such transactional requirements between group companies would disappear if they were allowed to file one tax return.

--- Later in debate ---

[Mr David Hanson (Delyn) (Lab)]

I am grateful to the hon. Member for Amber Valley (Nigel Mills) for kicking off this wide-ranging discussion on a number of important tax issues. He certainly enlightened me when he revealed that the Minister is tax personality of the year. I missed that; despite all my “Gauke” Google alerts, I missed the fact that he was tax personality of the year. May I offer the official Opposition’s wholehearted congratulations to him on that?

The hon. Member for Amber Valley gave a number of Ronald Reagan quotes and he said today was the 100th anniversary of Ronald Reagan’s birth. That was on 6 February, in fact, but this is the 100th year since Ronald Reagan’s birth. As you will know, Mr Deputy Speaker, today is the day on which we shrank the UK tax base by giving away America 200-odd years ago, and I hope that, as part of his plans for simplification, the hon. Gentleman will recall that.

New clauses 12 and 14 were proposed by the hon. Gentleman and he may be surprised to learn that I am not averse to his suggestion in new clause 14, because there are grounds for discussing the simplification of UK corporation tax returns for multinationals. It is worth while considering the review that he suggests, provided that it examines whether such a simplification will decrease, rather than increase, tax evasion—an increase is always the worry with such a simplification. New clause 14 potentially has merit and although I do not expect the hon. Gentleman to push it to a vote, I hope that the Minister will consider the issue.

New clause 12 proposes to review, or possibly even remove, capital allowances and asks the Office of Tax Simplification to report on replacing them with a different form of relief. The hon. Member for Amber Valley will know that Labour Members had substantial concerns about reducing capital allowances for firms, which explains why I cannot support the new clause. My hon. Friends and I tabled a number of amendments in Committee to oppose the reduction in the capital allowances. I realise that the reduction was tied up strongly with the decision to cut corporation tax to 24% by 2014-15—shortly thereafter it was decided to cut it to 23%— which was one of the flagship growth measures in the June Budget. However, that was paid for by slashing investment and capital allowances, which encourage businesses to take a long-term view by providing tax relief on the purchase of equipment and machinery. The view that I expressed in Committee has not changed, although I know that it will cause disagreement: companies that invest, particularly in manufacturing—car industries in my own area of north Wales, advanced manufacturing, wind turbine manufacturing, plane makers and so on—will benefit from capital allowances, whereas the tax cuts are, unfortunately, aimed at financial services.

At the time of the June 2010 Budget, manufacturers expressed concern at what this approach will mean for industry. More recently, the engineering manufacturers association warned that the Government risk moving to a tax system that contains “a bias” against big manufacturers. Members on both sides of the House are trying to encourage manufacturing growth, and I believe that the review that the hon. Gentleman seeks in the new clause could be damaging to the growth of capital investment and, therefore, to the growth of manufacturing industry.

[Nigel Mills]

I wish to clarify something. My aim in new clause 12 was not to do what the right hon. Gentleman fears will happen, but to do the opposite. I was aiming to ask the OTS to consider simplifying or replacing the capital allowances regime with one that would match the tax relief more closely to the life of the assets being invested in. My concern was that an 18% reducing balance was giving tax relief over a far longer period than the actual useful life of those assets. I felt that having a simpler system, where a shorter “life” meant that the tax relief would be obtained much faster, would incentivise investment, not discourage it.

[Mr Hanson]

That is an interesting argument, and I bow to the hon. Gentleman’s detailed knowledge of these matters, which goes back to his professional experience before entering the House. My worry has been placed on the record on Second Reading, in Committee and on several other occasions. For the moment, it is best that we keep our arguments to the effectiveness of capital allowances, and I will, thus, still be unable to support the new clause.

My hon. Friend the Member for Hayes and Harlington (John McDonnell) tabled amendments 15, 20 and 17. I suspect that he was even more surprised than me to hear the hon. Member for Wycombe (Steve Baker) offer his unflinching support for my hon. Friend’s suggestions on this matter. I thank him for tabling his amendments because they make an extremely important contribution to the debate. We face a real issue in how we collectively address what is now a cross-party concern and shed light on the remuneration of executives, who are ultimately paid by the companies for which they work and by us as consumers of those goods in our society at large.

--- Later in debate ---

[Mr Gauke]

There have been assessments of the enterprise investment scheme, which has been in place since 1994. We want to encourage greater investment, particularly in smaller companies. We recognise that sometimes there is market failure in that area, which is why tax incentives are justifiable. We have set out as much information as we can, but it is not something on which we can provide precise numbers. That is not the nature of the economy, but the scheme will encourage greater investment and that should be welcomed.

I thank my hon. Friend the Member for Amber Valley (Nigel Mills) for his remarks on my award as tax personality of the year. Some may think it a somewhat oxymoronic award, but I can tell the House that it has changed my life considerably.

My hon. Friend brings much greater expertise to these matters than I do. I welcome the fact that he seeks simplicity, which is not always the case with new clauses and amendments to Finance Bills. I want to make a couple of points that relate to both his new clauses.

First, we do not see it as our role to direct the Office of Tax Simplification. The office has done a lot of good work, but it is important that its independence is respected. Secondly, in its broad work the OTS has looked at the various allowances and reliefs in the tax system and has concluded that they are not areas where it wants to devote its efforts. None the less, I know that the OTS will closely read my hon. Friend’s speech. We are always keen to look at areas where we can improve the administration of the tax system, including his proposals in new clause 14 on consolidated filing.

On new clause 12, the OTS has given initial consideration to capital allowances as part of its review of tax reliefs and its ongoing review of small business taxation. The Government have set out their approach to capital allowances in the corporate tax road map. Allowing each business asset to be written off for tax purposes in line with its own depreciation rates would not necessarily bring the benefits to businesses that the new clause anticipates. Some business assets would depreciate more slowly than they currently do under the capital allowances regime, and it should be noted that the annual investment allowance gives immediate write-off for the plant and machinery expenditure of 95% of UK businesses. There is thus a danger that the new clause could increase business tax complexity.

I know that my hon. Friend tabled his new clauses as probing provisions. I may not have entirely satisfied him, but he has put his case on record and the OTS will of course look carefully at what he says.

I turn finally to amendment 51, tabled by my right hon. Friend the Member for Gordon (Malcolm Bruce), who has played a constructive role on the issue in the three months since the Budget announcement on oil and gas. He made an important contribution when the House debated clause 7 in the Committee of the whole House. He has stressed the importance of working closely with the industry in the months ahead, which the Government committed to do at the time of the Budget. We announced then that we would work with the industry in three key areas: setting the right trigger price for the fair fuel stabiliser; looking at whether we can find a way to provide long-term certainty on decommissioning relief; and looking at the case for new categories of field qualifying for the field allowance. I am pleased to tell the House that we are making good progress in these discussions. My hon. Friend the Economic Secretary, who is here this evening, will update the House on progress on those discussions as soon as is appropriate. I hope and expect that she will be able to do so in the very near future. I thank my right hon. Friend for tabling his amendment. Although I have been unable to respond in full detail, I hope that the Government will be in a position to do so shortly.

In conclusion, I remind the House that it is the Government’s aim to create the most competitive corporate tax regime in the G20. We have set out our plans for reform over the next five years in the corporate tax road map, which was published last November. In order to provide businesses with the certainty they need to invest in the UK, tax reforms need to maintain stability, avoid complexity and ensure a level playing field for taxpayers. Therefore, although we have had a good debate, I invite my hon. Friend the Member for Amber Valley to withdraw the motion.

[Nigel Mills]

My purpose in moving the new clause was to encourage the Government down the route of tax simplification, which I hope I have achieved tonight. Therefore, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Clause 1

Charge and main rates for 2011-12

[Mr Hanson]

I beg to move amendment 10, page 1, line 9, at end insert—

‘(3) By 31 March 2012 the Office of Budget Responsibility, in consultation with HMRC, will report to Parliament on the revenue of the 50 per cent. rate of income tax and its impact on the UK economy.’.