Alan Reid
Main Page: Alan Reid (Liberal Democrat - Argyll and Bute)Department Debates - View all Alan Reid's debates with the HM Treasury
(11 years, 10 months ago)
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Mr Gauke
Members will recall that the independent Office for Budget Responsibility revealed that the underlying damage to the economy and our challenge in repairing it was much greater than anyone had thought. It was therefore vital for us to take decisive action to restore the economic stability that was needed for recovery, and the Bill is part of that. In order to address the enormous debts that we inherited, confront Britain’s problems and get the economy moving, the Government have undertaken a sustained programme of deficit reduction.
As I said earlier, the Bill supports business and growth. It implements milestones for the corporation tax roadmap, overhauls the controlled foreign companies regime, and introduces the patent box.
Mr Alan Reid (Argyll and Bute) (LD)
My hon. Friend mentioned the controlled foreign companies regime. I support the Government’s efforts to ensure that all the tax that must be paid in the UK is paid in the UK, but, as he knows, concern has been expressed about the possibility that by introducing these rules the Government will inadvertently harm small developing countries which may lose tax revenue. I hope that they will ensure that there is no such side effect.
Mr Gauke
We debated that in the Committee of the whole House. The purpose of the CFC rules is to protect the UK tax base, as has always been the case, but the Government have a proud record of supporting developing countries, and we have a firm commitment to meeting our international obligations on that front. This country also has a proud record of building capacity in developing countries and improving their ability to collect taxes. In many developing countries, the UK has already made a substantial contribution, and we will continue to do so.
Both the patent box and the CFC changes form part of the Government’s wider plans, which will help UK businesses to operate in an increasingly globalised world. I am sure all Members agree that those measures are essential to restore medium and long-term growth.
Despite the challenging economic backdrop that the Government inherited, we have made significant progress. We have already introduced a further cut in the rate of corporation tax that will give us the lowest rate in the G7, the fourth lowest rate in the G20, and the lowest rate that this country has ever known. By next year, the Government will have cut corporation tax by 6%, helping to make the UK the most competitive country in the G20. According to the OBR’s assessment of the Budget, the reduction will increase the level of business investment by about 1% by the end of the forecast period. That is equivalent to an increase in the total amount of business investment of £3.4 billion between now and 2016.
Many businesses have seen that we are, as promised, open for business. WPP and others have recently announced that they are considering returning to the UK, or that they wish to set up business here. I am delighted to say that Rowan and Lancashire have already come here, and once the CFC rules are in place in 2013, we shall be looking for more businesses to follow them. Following the Bill’s publication in March, one of the big four advisory firms announced that it was engaged in discussions with between 10 and 15 multinational companies that were considering locating substantial operations in Britain as a result of corporate tax reforms. The CBI has commented that these much-needed changes
“will help make the UK a more attractive place for companies to invest, do business and create jobs.”
The Government aim to create a tax system that is easy to understand and with which it is easy to comply, and the Bill contributes to that. It provides real help for families and business. It raises the personal allowance to £8,105—which, curiously, was not mentioned very frequently in Committee—and, combined with the further increase of £1,100 next year, will mean a tax cut for 24 million people and 2 million people being taken out of income tax altogether.
Rachel Reeves (Leeds West) (Lab)
I thank my hon. Friends the Members for Pontypridd (Owen Smith), for Newcastle upon Tyne North (Catherine McKinnell) and for Kilmarnock and Loudoun (Cathy Jamieson) and others for serving on the Public Bill Committee with me over the past several weeks. I also thank our able Chairs for supervising us during that process and the Commons Clerks for their advice and assistance throughout the process in Committee and in the House.
The Bill has been on quite a journey since it was first presented to the House just a few months ago. I fear that the Exchequer Secretary spoke too soon last December when he announced that
“the Government’s more open, predictable and simple approach to tax policy making is working well.”
He said that by publishing tax legislation in draft form first,
“we are giving greater certainty and stability to taxpayers and businesses”.
I do not think that taxpayers and businesses, or indeed Members of this House, realised that the Finance Bill itself was still only a draft when it was published in March. This Finance Bill has been through so many stages of crossing out and rewriting that it would have been easier for the Government to have scrapped it and started again, perhaps with some measures that would have supported jobs and growth.
As we have heard throughout the Committee and Report stages, the Budget has been a total and utter shambles. When we first saw this Bill back in March, it contained provisions to raise VAT on hot food, on static caravans and on improvements to listed buildings.
Mr Reid
What was in the Budget back in March was a consultation exercise on VAT on static caravans and so on. I am glad that after that exercise the Government listened and amended their proposals, but it was a consultation. This Government, unlike the previous one, listen to what people say in consultations.
Rachel Reeves
That is the first time I have heard a Finance Bill being called a consultation—I do not even know where to start.
The Budget in March also included a 3p rise in fuel duty in August and limits on charitable donations. All this was necessary, we were told, to deal with the deficit. Yet the Bill before us, as we reach Third Reading, contains none of those measures. We have had a series of abrupt reversals that, according to one estimate, will cost the Exchequer nearly £700 million.
Opposition Members argued that these measures were misconceived from the start, and that adding to the costs faced by families and small business at this time would make it even harder for our economy to climb out of the recession that this Government have dug us into. But it must be a matter of regret that so much uncertainty and confusion has been created for those affected, doing real damage to businesses, charities, pensioners and families, and that at a time of tight public finances the Government’s financial and fiscal planning seems to be in such disarray, with no one at all clear what the Government’s priorities actually are.
Despite the Government’s belated change of heart on those matters, the Bill remains a deeply flawed, unfair and utterly inadequate response to the problems facing our country today and that is why the Opposition will vote against it this evening. The Bill still offends against the most basic principles of fairness by giving priority to a reckless and irresponsible tax cut worth tens of thousands of pounds for a few thousand millionaires while at the same time asking millions of ordinary people who are already under pressure from rising prices, falling wages and cuts to tax credits and benefits to make further sacrifices and endure further hardship.
The Bill breaks a promise that the Chancellor made in the Budget last year to Britain’s pensioners that their age-related allowance would rise in line with inflation for the rest of this Parliament and instead imposes a stealth tax that will hit 4.5 million people over the age of 65, all of whom live on modest pension savings. The Bill is breaking the principle of universal child benefit and still means that one-earner families will lose thousands of pounds a year while a two-earner family on almost twice as much will keep all their benefit. It is a botched, half-baked measure dreamt up for a party conference speech but the measures are described by the Institute of Chartered Accountants in England and Wales as a “policy disaster” that are
“in danger of becoming a practical disaster when they come into effect”.
We have raised a number of other concerns about the Bill, such as the controlled foreign companies changes and the impact that they will have on developing countries. What is most wrong with the Bill, however, is that it represents a massive missed opportunity to end the recession and get our economy working for ordinary working families, pensioners, businesses and young people. It could have been a Bill that took the tough decisions necessary to ensure that those who could make a fair contribution to deficit reduction did so, so that those hit hardest by the current crisis were not put under even more pressure.
It could have been a Bill that cut VAT, giving immediate relief to hard-pressed families and giving our economy the stimulus it needs to get growth under way again and to make unemployment fall. It could have been a Bill that redirected money wasted on excessive bank bonuses and put those resources to better use, helping young people get back to work and constructing new affordable homes.
Bill Esterson
I am not sure what that has to do with what I was talking about. Perhaps the hon. Gentleman can agree with me that what we need is action from this Government—action to help young people find jobs.
The hon. Member for Dover (Charlie Elphicke), who is no longer here, mentioned several times the fact that the banks are not lending and said that that is the problem, but he forgot to say that the reason the banks are not lending is that they have no confidence in this Government—the Government who have pushed us back into a double-dip recession so that we are now one of only two countries in Europe in that position, the other being Italy. That lack of confidence is why banks would rather shore up their own position—and, of course, pay exorbitant bonuses to their top executives. The banks are not lending to the small businesses that need the money to create the jobs and drive the growth that is needed. Unless the banks start to do that, the Government need to step in.
That is why the proposal from Labour is so important. It is why repeating the bankers’ bonus tax would make so much difference to young people and to this country as a whole. But what did we get from this Government? The cut in the 50p tax rate. Three hundred thousand of the wealthiest people in the country will benefit from a tax cut paid for by the rest of us, particularly the poorest and pensioners through the granny tax. That is the reality of the Government’s proposal, which they are pushing through tonight. That is why we should oppose the Bill.
What I expected was an end to the sort of heckling we have heard from Ministers, who clearly enjoy the prospect of young people being out of work. I would like to think that that is not what they really think. I had hoped for a degree of fairness from the Government—perhaps I was being unreasonably optimistic. There is nothing fair in 300,000 of the wealthiest—
Bill Esterson
The hon. Gentleman keeps coming back for more—I am intrigued.
Bill Esterson
If it were true that it helps the poorest people in our society, perhaps the hon. Gentleman would have a point, but it does not help many of the very poorest and it does not help those young people I was talking about who cannot find a job because the Government will not take action and because they cut the future jobs fund when they first came into office.
What we really needed from this Government was a Budget of fairness. Instead, we got that tax cut. What they should be doing is repeating Labour’s bankers’ bonus tax, which raised £3.5 billion—[Interruption.] Government Members do not have to take my word for it; they can take the word of the independent Office for Budget Responsibility, which they themselves set up. They are even questioning their own organisation’s figures. That £3.5 billion was nearly twice as much as the £1.8 billion raised by the bank levy. The bank levy is a start, but the Government could repeat the bank bonus tax and use the money to get young people back to work and the housing industry going. The temporary VAT cut would help small businesses that cannot get loans from the banks.
I know that people want to get home. [Hon. Members: “Hurrah!”] Always happy to oblige. We have had a Budget for the wealthiest in our society. The Bill gives help to the top 300,000 earners, but does nothing for young people or those out of work.