Finance (No. 2) Bill
Debate between Angela Eagle and Stewart Hosie(14 years, 1 month ago)
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Ms Eagle
The hon. Gentleman was not in the House at the time, but the reduction in VAT was part of the fiscal stimulus that kept the economy afloat during the most dangerous parts of the credit crunch. The growth figures for the early part of this year show that that fiscal stimulus package was working.
Stewart Hosie (Dundee East) (SNP)
The hon. Lady talks about the fiscal stimulus package working. It did work, of course, and I backed fiscal stimulus. Does she not now regret that the previous Government was one of only two in the G20 fully to withdraw the fiscal stimulus package in 2010?
Ms Eagle
That is our starting point as we move forward to judge what the Government will announce in a few days’ time. The issue here is the scale and speed of the deficit reduction, and how that impacts on our approach to being able to see some kind of economic recovery sustained, given what is happening in the rest of the world. The worry that we have always had about the Budget judgment implicit in the June announcements and soon to be reinforced in the forthcoming spending review is that the medicine being fed to the patient runs a higher risk of killing it off. We do not want the deficit reductions to be too soon and too deep to sustain a recovery. The Irish example demonstrates the risks of focusing on getting the deficit down at too high a cost to the growth potential of the economy. The Government have a particular view on those judgments, but we disagree with them on the necessity for speed and the ferociousness of the deficit reductions. We are not saying that deficit reductions will not be necessary. The Chancellor used to mention the Irish example all the time as the Irish Government made their extremely deep and fast cuts, but lately he appears to have stopped referring to it at all. I wonder why.
The Government are gambling on their outdated and dogmatic view that if only the state would get out of the way, the private sector would spontaneously move to fill the gap and quickly create the 2.5 million extra jobs that the Office for Budget Responsibility has calculated would have to be created to get the deficit down as forecast. Thus our economy is meant to perform better in job creation terms than it has ever done before, even in much more benign economic circumstances than those we face.
We have just lived through the most dramatic example of the limits of that market fundamentalism that any of us are likely to see in our lifetime. It was not the private sector that rescued the world financial system from meltdown in the credit crunch; it was the co-ordinated action of Governments. Governments have a crucial role to play in fostering economic growth and helping to encourage the emergence of a better, more balanced economy, yet the Bill does nothing to restore the support for industry that the Government have already cut. It does nothing to reverse the £3.6 billion tax hike that will hit our manufacturers in order to pay for the corporation tax cuts announced in the June Budget, £1 billion of which will go straight back to the banks.
Abolishing allowances and reliefs effectively hits businesses with a tax hike when they invest. It benefits investment-light industries such as financial services over investment-heavy industries or new sectors looking to grow. That change penalises companies that need to make sustained investment to establish themselves and grow. It is a strange way for the Government to signal that they wish to see a rebalanced economy and the creation of new industry. Little wonder, then, that the plans have been described as “a disaster” by the senior economist at the Engineering Employers Federation and that the Institute for Fiscal Studies has said:
“Cutting investment allowances to fund a cut in the mainstream corporation tax rate would help companies which make large profits with little investment, at the expense of businesses that are investing heavily in the UK but making only marginal returns.”
There is no sign of a serious growth strategy.
Stewart Hosie
I agree with much of what the hon. Lady has said. Would it not carry more weight, however, if her Labour Government had not abolished, for example, industrial buildings allowance and agricultural buildings allowance—the very sort of allowances that she described that would help investment now. Would not her argument carry more strength if her Government had not butchered those important allowances only a few years ago?
Ms Eagle
I remember the detailed discussions that we had on that issue in previous Finance Bill debates. The hon. Gentleman has probably been in more of them than I have. The issue is not the abolition of allowances that are 40-odd years old and increasingly do not recognise the changed shape of UK industry. It is about abolishing allowances completely to fund a cut in mainstream corporation tax, with the result that the incentives for investment are taken away at the point of investment.
One of the measures that the Bill ought to have contained but does not is the creation of a tax relief for the video games industry. We all know in the House that in the UK we have a particular expertise in creating video games, which was beginning to create high-value jobs in the UK in what has become a multi-billion-pound industry. We also know that our brightest software engineers are being tempted abroad by generous and possibly illegal tax breaks, and that we risk the decimation of our UK base if we do not respond. That is why, while we were in government, we developed the video games tax credit, which was to operate along the same lines as the film tax relief. In opposition, just before the election, the Conservative party supported that. On 13 April 2010 the hon. Member for Wantage (Mr Vaizey), now the Under-Secretary of State for Culture, Olympics, Media and Sport, said:
“We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years.”
Like so many other things said during the general election campaign, that pledge was abandoned immediately after it. We will want to explore the issue further in Committee.
Before the Minister uses the standard Treasury line about how the video industry can always make use of the research and development tax credits that are available more generally, he might care to put all our minds at rest and deal with the nasty rumours swirling around that the entire R and D tax credit may be at risk in the cuts to come. Perhaps the Economic Secretary will reassure us on that point.
Another notable omission from today’s Bill is any reference to increasing the resources which will allow HMRC to build on its already excellent work to tackle the tax gap. Obviously, as was said earlier, the more that tax due is collected, the more effectively the deficit can be tackled and the less pain our society will be forced to endure during the adjustment ahead. During the conference season the Deputy Prime Minister made much of the need to close the gap between the taxes that are due and those that are actually collected. He made grand and welcome pronouncements that it is “ethically wrong” to avoid paying our taxes. He was followed by the present Chief Secretary to the Treasury who announced, interestingly, that he regarded both tax avoidance and tax evasion as “morally indefensible” in times like these.
Finance Bill
Debate between Angela Eagle and Stewart Hosie(14 years, 4 months ago)
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Stewart Hosie
I thank the Economic Secretary for her response. Clearly, the way forward for people reaching 75 is sensible. The two-year deferral until the consultation is complete is right. It recognises the problem and ensures that no one else falls through the cracks between now and the end of the consultation. I am slightly disappointed that no hope was offered that the consultation could allow a slightly retrospective element to those very few people who have become 75 in the past few years, did not take an annuity and are managing their own funds. I will not press the amendment, but I will have another think about it before we reach Report next week, when I may revert to it. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ms Angela Eagle
I beg to move amendment 61, page 3, line 12, at end add—
‘(2) Schedule 3 shall not have effect unless the Chancellor of the Exchequer has laid before the House of Commons a report on the implications of the abolition of compulsory annuitisation of pensions, including—
(a) the revenue implications of abolition; and
(b) a distributional analysis showing who would benefit from abolition.’.
The amendment would mean that the age at which compulsory annuitisation is required could not rise, as the Government announced in the Budget, from the current 75 to 77 until the Chancellor lays before the House a report setting out the implications of abolishing the compulsory annuitisation of pensions savings. That would include the revenue implications and a distributional analysis of who would benefit from the abolition, in the interests of transparency. It is important to explore in more detail the Government’s precise thinking and intentions.
Before I do that, I shall comment on the sudden appearance this morning of a written ministerial statement, to which the Economic Secretary referred, on the matter. It appeared without the courtesy of any warning before our debate on the subject.
I spent some time on the Treasury website trying to avoid the increasingly odious comments on the “spending challenge website”, which continues to publish offensive and outrageous suggestions for savings, such as sterilising the poor, reopening the workhouses and the forced repatriation of immigrants. It appears to be completely unmoderated by the Treasury, and I hope that the Economic Secretary will convey my strong view that something should be done about that thing on the Treasury website.
What I could not find on the Treasury website, right up to the point when I came into the Chamber for today’s debate, was a copy of the consultation document that the written ministerial statement said would be there. I have a copy of the complete list of Treasury consultation documents that was on the website at around 12.30 pm. It featured the bank levy consultation, but not the consultation alluded to in the written statement. I therefore had to go the Library and have it printed so that I had the chance to look at it before I dashed into the Chamber, but the Minister has been waving it about. Will it be the usual behaviour of those on the Treasury Bench to give Members of the House so little time to look at a 53-page document? There was no advance warning, and the document was unavailable on the Treasury website, even though the written ministerial statement said it would be there. The Minister should get her Department to do a lot better than it has done today. That the document was unavailable anywhere other than via a photocopying machine in the Library at the last minute is a discourtesy to the House.
When I had a look at the consultation as I sat on the Front Bench while other debates were going on, the first thing I noticed was that the consultation will be a mere eight weeks long. It starts today and will end on 10 September, which is four weeks shorter than is recommended as good practice in the code on consultation, the second criterion of which states:
“Consultations should normally last for at least 12 weeks with consideration given to longer timescales where feasible and sensible”.
The consultation is an eight-week, rushed consultation that includes the entirety of the August holiday, when many of the people who have expertise on this matter will be sunning themselves in very much nicer climes than most of us could probably afford to visit, before they come back to pronounce. That is a very peculiar way to consult on such an important matter.