Finance Bill

Alison McGovern Excerpts

Tuesday 21st July 2015 Commons Chamber

[Maria Caulfield]

There are lots of hard-working families in my constituency and if the right hon. Gentleman visits us he can see for himself that they are fed up with having to go out and work long hours often on low pay to subsidise a benefit system that historically has not been there to help such people.

[Alison McGovern (Wirral South) (Lab)]

Will the hon. Lady give way?

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[Catherine West]

I thank the hon. Gentleman for his intervention and wish him a happy birthday. I am sure it is wonderful to be 21 again.

I understand that there are many examples of the living wage up in Caledonia, and many London authorities and others are trying their darnedest to introduce the living wage, which is a good and positive step.

Clause 45, on the climate change levy, removes the levy exemption for renewable source electricity generated on or after 1 August 2015. Unhappily, that is an example of the Tories undermining investor confidence in renewable energy. They have already tried to halt the development of the cheapest form of clean energy, by pulling the plug on onshore wind, and that comes hot on the heels of the rather flat green deal. I am not sure whether any Members know about the green deal. It was introduced back in 2010, it was heralded and much money was spent on it. The promotion money probably helped a few public relations companies to keep going, but the number of households that took up the deal was very low.

[Alison McGovern]

My hon. Friend makes an important point. May I remind her of the promise made—it sounds bizarre now, though I remember it being made at the time—to be the greenest Government ever?

[Catherine West]

I thank my hon. Friend for her intervention. Does she also remember the huskies trip? I am not sure whether we will be visiting polar bears any more with the huskies, but I remember around 2009 the promise to which she refers and, for a short while, a real sense that we were generating some momentum and genuinely approaching green issues with energy and commitment.

I wonder whether, as we move towards the Paris summit, we will see any improvement and any genuine debate, because this Budget fails to give any hope on the green agenda. I am pleased that Opposition colleagues have chosen the climate change levy as one of three topics to be debated in Committee in September. That is when we will all have more of a chance to debate this important deal—or lack of—and when we will table amendments.

Some of the statements on taxation are quite welcome, particularly those provisions that assist people on low and medium incomes. However, there are other provisions with which we could do more. In particular, we could consider gaining a little bit more from the financial sector. As we know, there have been some announcements on anti-avoidance measures. Provided that HMRC is resourced adequately to deal with those, we might see some positive developments in that regard.

However, we could be doing much more in relation to private equity and hedge fund managers. We could strengthen some of the proposed measures around the “Mayfair” tax loophole. For example, we could look at how private equity fund managers manage to shrink their tax bills, arranging to pay 28% capital gains tax rather than 45% income tax, which is what we could be getting.

Members will be aware from their advice surgeries that we are still in the tail of the recession. There should not be one rule for certain people in society and another rule for others. That is why we need to consider charging that 45% income tax rate—rather than the 28% capital gains tax—on the portion of income paid out of the profits of the funds that those managers manage, which is called carried interest. Carried interest is their remuneration for managing other people’s money and should therefore really be taxed as income tax. Their ability to pay capital gains tax on what is properly income also allows fund managers to avoid paying any national insurance contributions on a major portion of their income.

The “Mayfair” tax loophole also permits some fund managers to reduce their tax bills even further, sometimes qualifying for additional capital gains reliefs such as entrepreneurs’ relief. I do not hear that being offered to the small cafés or the small businesses on our high street, but the entrepreneurs’ relief for people in the City allows them to pay just 10% tax on up to £10 million of their carried income. That is why I throw back the idea that this is a Budget for working people—perhaps it is a Budget for those who work in the square mile. Some people in the City are still getting a 40% tax cut. They are paying less tax on much of their income than many nurses and teachers. We know what is happening to public sector recruitment: we are losing nurses and teachers every day, because they tend to earn much lower wages than others, and of those wages they are paying a higher proportion in tax than our friends in the City.

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[Lucy Frazer]

I have already taken one intervention from the hon. Gentleman, so I will carry on.

The question arises: what are the Opposition really waiting for before balancing our nation’s books? This Budget helps make work pay for the poorest in society and encourages those who do not have a job to get one. It seeks to ensure that we build a society in which work is rewarded.

[Alison McGovern]

The hon. and learned Lady asks what the Opposition are waiting for before balancing the books. I am waiting for the Chancellor to meet his promise. In that regard, what representations has she made to him about the detail in the Red Book pushing out his deficit target by yet another year?

[Lucy Frazer]

It is interesting that the Opposition were pushing—

[Alison McGovern]

Answer the question.

[Lucy Frazer]

I am answering the question. It is interesting that the Opposition were pushing for less austerity but now, when the Chancellor increases the time frame in which he wants to make the changes, the hon. Lady opposes it.

The Bill reduces taxes on working people by further increasing the personal allowance to £11,000 in 2016. The living wage will improve the lives of many people across the country. With tax credits, people are often penalised by deciding to change their hours because they lose far too much of their earnings. The Budget changes that.

It is worth noting that Labour has proposed no amendments of any nature to the Bill, which suggests that, at the very least, not everyone in the Labour party is opposed to all of it.

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[Huw Merriman]

No, I will make some progress, if I may.

I was bemused by the Opposition’s attempts to lay claim to the policy of tax locks. Perhaps by losing the election and allowing this Government to gain a majority and introduce these clauses, they have brought the policy about.

This is a one nation Government that seek to help people into work and, in so doing, give them hope, aspiration and pride. By taking those who work 30 hours a week on the minimum wage out of the tax system, the Government are committing to the principle that work pays. Furthermore, by committing to review that principle and assess the tax position of an individual working 30 hours on the national minimum wage when reviewing the tax allowance over and above £12,500 in the future, the Government are demonstrating that they really mean for that proposal to be here to stay.

[Alison McGovern]

I am listening carefully to the hon. Gentleman. I am especially pleased to hear that he pays great attention to the views of his constituents. When a single parent with two kids who loses thousands in tax credits comes to his surgery and explains how much worse off they are in work, what is he going to say?

[Huw Merriman]

I will say that this Government, by creating millions of jobs, will give that individual the opportunity to get into work. If I were on the Labour or SNP Benches, I would say, “We will keep you on subsidies, keep you in your place and not give you hope, aspiration and a better opportunity for your life.”

[Alison McGovern]

Will the hon. Gentleman give way?

[Huw Merriman]

No, I will not give way. I will make progress.

The first four clauses demonstrate that the Government are on the side of the worker, not the abstainer.

Clauses 7 and 8 relate to corporation tax and the annual investment allowance. I welcome the measures to reduce corporation tax to 19% by 2017 and 18% by 2020. In my constituency of Bexhill and Battle, the Government and East Sussex County Council have ploughed millions of pounds into a new link road between Bexhill and Hastings, which will deliver new homes, 500,000 square feet of new business park and a country park. The new link road and the labour that will come from the new housing will, if delivered in conjunction with the high-speed rail project from Bexhill to London St Pancras that we hope to get, encourage new businesses to relocate and existing businesses to expand.

However, we need to do more than deliver infrastructure. We need to encourage entrepreneurs to take risks, create new jobs and deliver wealth. That wealth will then be delivered to the Exchequer and the country as a whole. I therefore welcome the cut to corporation tax, which tells the world’s companies that UK plc is open for worldwide business, with the lowest corporation tax in the G7. I hope to use the favourable economic climate to champion the idea that companies should locate themselves in my constituency and to end its status as a constituency with no major corporate headquarters within its boundary.

I welcome the permanent status of the annual investment allowance. The temporary two-year allowance did much to boost spending on plant and machinery in rural constituencies such as mine. The trickle-down effect on suppliers, producers and small businesses has been immense. I welcome the manner in which my Government use the tax system to give firms more money to invest, rather than using the model of Government borrowing and spending, which crowds out private companies from the market.

The final clause that I wish to consider is clause 9 on the increased nil-rate band for homes that are inherited by descendants. Representing Bexhill and Battle as I do, I feel that the policy of effectively increasing the inheritance tax threshold to £1 million per couple will be highly relevant and even more highly welcome. Individuals who have worked hard and done the right thing deserve the right to hand on the fruits of their labour to their descendents, and that is particularly welcome in a period when interest rates on savings and investments has been low and delivered low yield, albeit that that has helped those with mortgages.

I welcome the mantra behind the Bill: lower taxes to make work pay; fairness by clamping down on those who do not pay their fair share of taxes; and rewarding endeavour by encouraging companies to invest and expand in this country by sending out positive signals that business is open under this Conservative Government. I look forward to proclaiming proudly the Government’s economic policies over the summer, and I am pleased that Labour Members have already stolen a march and are perhaps doing so already.