(11 months, 3 weeks ago)
Commons ChamberI am glad that the hon. Lady’s constituents, among many others, will benefit both from our mortgage interest support and from there being almost double the number of mortgage products on the market now than in October 2022. I repeat the comment of my colleague, the Exchequer Secretary to the Treasury: if the hon. Lady is so worried about her constituents, what better way of helping them with the cost of living than to do away with the Mayor’s ULEZ tax?
In the UK, homebuyers are overwhelmingly dependent on short-term fixed rate mortgages of just two, three or five years, which means that in times of rising interest rates, as we have at the moment, they are hard hit by massively increasing mortgage bills. In most other countries, homebuyers have long-term fixed rate mortgages of 10 or 20 years, or of the entire length of the mortgage. Does my hon. Friend agree that the regulators should ensure a level playing field between short-term and long-term mortgages to give homebuyers a free choice of the sort of mortgage they want, so they can choose to have greater protection against rate rises if they want?
My hon. Friend has great knowledge of these matters. It was a privilege to work with him and the sector on how we can offer consumers and homebuyers more choice. That choice includes the opportunity of long-term fixed-rate mortgages, and my officials and I continue to work on how we can reduce frictions and barriers to those mortgages.
After a busy summer knocking around South Ribble and speaking to people, I have often popped in for a pint, including in Croston’s famous Wheatsheaf pub. From housing MP surgeries—as many pubs do—to being our community living rooms, pubs are absolutely vital. I have spoken to landlords, including those at the Black Bull and the fabulous Fleece Inn in Penwortham—
There is a pub crawl there for us all. They need our support, so may I invite the Minister to South Ribble—I will even offer to buy her a pint—to speak to Chris, the landlord at Longton’s fabulous Golden Ball, to hear about his business?
(1 year, 4 months ago)
Commons ChamberAn awful lot of people work hard. The specific issue that many of our constituents have raised is in the NHS. I have not been approached with this concern by senior police officers, but I have been approached by NHS doctors. If the hon. Gentleman feels particularly strongly about senior police officers, he could table an amendment so that people employed in the wider public sector, or in the police service, can be included in this measure. I think both police officers and NHS staff could be included, but it would be ridiculous to include everyone, no matter how little they do for the public good.
Not only NHS staff and senior police officers but state school headteachers, senior civil servants in our local authorities, air traffic controllers and senior Government scientists are affected by the lifetime allowance. In fact, about half the people affected work in the public sector. If the hon. Lady follows her rationale, she would end up with a completely different tax regime for public sector pensions. Does she think that would be fair for private sector workers?
Given how much we have relied on our public sector, and given how unwilling this Government are to come to the table on pay negotiations, it would be totally reasonable for this House to say, “Our public sector is incredibly important. We want to support our public sector workers, and therefore we want to give them differential access to lifetime allowance exclusions.”
Amendment 22 is consequential on amendment 21. Amendment 23 would allow the Secretary of State to specify which NHS bodies, or types of bodies, are covered, given that the NHS is structured in different ways in England, Scotland and throughout these islands. It makes sense for the Secretary of State to make that decision.
The amendments cover NHS staff who work, on average, at least 15 hours a week so that they cover all the NHS staff who have come to us with pension concerns, particularly doctors but also other senior NHS staff. I have a large teaching hospital in my constituency, and there is another hospital just over the boundary. There is a medical school too.
Not just now.
A significant number of doctors live and work in Aberdeen, and a number of them have come to me with concerns about the pension regime. One of them did not realise that he was about to hit the lifetime allowance until his accountant came to him and said, “This is how much you are required to pay in tax.” He had tipped over into this additional tax because he had taken on hours to teach junior doctors and medical students how to be better doctors. He had taken those extra hours on at the request of the hospital. This was because the immigration laws and rules have meant that a number of our doctors are struggling to jump through the hoops that the UK Government have put in a place or they are feeling that the Home Office is particularly against doctors coming from other countries.
That constituent had been asked to take on those hours as a result of the changes in some of the departments. He had willingly taken on those hours because he knows how important continuing professional development is in the NHS and how important it is to have a new generation of doctors coming through, but he had then been hit with a massive tax bill as a result. When I met him, he said to me, “I do not want to take on any more teaching as a result of what has happened to me. The amount I have been taxed means that the teaching costs me money. I don’t see why I should be asked to do this when I am training the next generation of doctors.”
I am glad that the hon. Lady recognises the dangers of high levels of taxation in discouraging people from work, as I believe those on both sides of the House can agree on that. Her amendment mentions the NHS and people who work for “an NHS body”. What does she think about this applying to GPs? The overwhelming majority of GPs do not actually work for the NHS—they are self-employed or work for their partnerships. Does she think that GPs should be excluded from this legislation as well?
That is one reason why our amendment 23 would allow the Secretary of State to make those specifications, so that all the people considered to be working for NHS bodies—GPs are commissioned by NHS bodies—are included. The measure was intended to allow that level of flexibility. If I had not intended to allow that level of flexibility, we would not have tabled amendment 23 to allow the Secretary of State that flexibility. We referred to NHS bodies and specified a number of hours so that someone who works for the significant majority of their time in private practice and private systems, and perhaps works an hour or so every few months for the NHS, would not be caught by this measure. The intention is that those people who work for a significant amount of their time in contributing to the health of the population, making people better and well, ensuring that they stay healthy and live longer lives, are recognised and given the opportunity to benefit from this measure.
My understanding, from everything that the Government have said previously about this, is that one of the biggest concerns in this area relates to NHS doctors. If the Government feel that there are other significant areas of the public sector where people could and should benefit, I look forward very much to the Minister standing up and explaining all of those. I am sure I will be asking further questions about this in Committee.
The lifetime allowance was in place for a reason and it does not work in relation to senior NHS staff, but it does work in relation to those places where people are not contributing to the health and wellbeing of our population and where people have not been on the frontline during the past few years, working under immense pressure for the public good. SNP Members will therefore vote against clause 18 standing part of the Bill if we have a vote on that. That clause is about the abolition of that lifetime charge. We do not agree that that should apply to everyone. The Government need to bring in a bespoke scheme to solve this problem, rather than applying it to everybody, no matter how much money is involved and how little public service they provide for that income that they receive. I ask the House to support amendment 21, which stands in my name and those of my colleagues.
Does the Minister agree that the 80% of employees who work for the private sector make a valuable contribution to the wellbeing of the country as well? Does he agree that they would have a right to feel annoyed at the idea that there should be an especially punitive regime just for private sector workers, which the public sector workers do not get punished by?
My hon. Friend makes exactly the point that I was making, and does so extremely well. It is wrong for us in this House to seek to assign to ourselves the ability to judge the virtuous nature of people’s activity. I am sure that an accountant in the private sector works as diligently as an accountant seeking to drive value for money and the best medical outcomes in the NHS. With the greatest respect, I think that the hon. Member for Aberdeen North goes a little too far in seeking to “unbake” the wonderful cake of our mixed economy health system, which involves contributions from the private sector, private forensic laboratories and private diagnostic machines, and the wonderful work of our clinicians, and administrative, ancillary and domiciliary staff, who are mostly in the public sector. As I have said, her approach is the wrong basis on which this House should proceed.
Clauses 18 to 23 will reform pension tax thresholds to remove the current disincentives for highly experienced individuals to remain in the labour market or even to return to the workforce to build up their retirement savings. Currently, there are limits placed on the amount of tax-relieved pension savings individuals can make each year and an additional second restriction that applies to the total. That is an unusual feature of the tax system, where almost every other allowance is on an annual basis. The Government listened to stakeholders from across the public and private sectors, who have said that the annual and lifetime allowances can influence the timing of retirement and act as a barrier to remaining in the workforce.
The changes made by these clauses will increase the annual allowance from £40,000 to £60,000 and remove the lifetime allowance charge from 6 April 2023. The changes will ensure that pensions tax does not act as a barrier to staying in or returning to work, and will eliminate the chilling impact that the mere fear of triggering an extra tax charge has, even for those who are not immediately subject to falling foul of the cap. Much as the opposition parties may not wish to hear this, these changes command support across the economy. The Guild of Air Traffic Control Officers told us that pension taxation risks causing its members to reject tasks essential for the safe and efficient operation of air traffic control in the United Kingdom.
Dr Vishal Sharma of the British Medical Association has said that this is
“an incredibly important step forward”.
He said that the abolition of the lifetime allowance will mean that
“senior doctors will no longer be forced”—
his words—
“to retire early and can continue to work within the NHS, providing vital patient care.”
The Forces Pension Society said that this is a positive development and that it had been lobbying for it for several years. It said that these changes will help keep our streets safe. Marc Jones, chairman of the Association of Police and Crime Commissioners, confirmed that, as it relates to the police, they
“will be a game changer for thousands who love their jobs and do not want to retire.”
To support those who have left the labour market to return and build up their retirement savings, these clauses will also increase the money purchase annual allowance from £4,000 to £10,000 from April 2023. This will enable more individuals who have previously retired to return to the workforce and to continue to build their savings. In line with these headline reforms, there are also technical changes. They increase the minimum tapered annual allowance from £4,000 to £10,000 and the adjusted income level required for the annual tapered annual allowance to apply to an individual from £240,000 to £260,000.
The hon. Gentleman is making the case for a special NHS-only or doctors-only regime. Does he accept that senior workers in other parts of the public sector are affected by the lifetime pensions allowance? There was already a separate scheme for judges, and we know about the former Director of Public Prosecutions having his own individual scheme, but does the hon. Gentleman accept that there are senior police officers, senior local authority civil servants, senior Government scientists, air traffic controllers—as we have heard—and other workers across the public sector who are disincentivised from continuing to work by the current regime?
I thank the hon. Gentleman for his intervention, but the argument we were hearing from hon. Members on both sides of the House was about NHS doctors and keeping them in work. The Chancellor himself, when he was Chair of the Select Committee, said that we needed targeted intervention to help NHS doctors. No one was talking about a wider scheme to affect everyone with the largest pension pots until the Chancellor stood up and made his announcement on Budget day. I respectfully suggest the hon. Gentleman focuses on our amendments in hand and on new clause 5, which suggests that, rather than proceed with a blanket scheme affecting everyone with a pension pot, we should do what I thought there was an emerging consensus around and develop a targeted scheme for NHS doctors.
Otherwise, the Government’s approach fails the critical test for any Government spending—whether they are spending public money wisely. Yet Ministers refuse to entertain the prospect of a targeted scheme for NHS doctors instead. That is why we have tabled new clause 5, which would require the Chancellor to make recommendations on what a scheme targeted at NHS doctors would look like. We believe that is a crucial question to be answered. I hope that any Conservative Members, including the hon. Gentleman, who are concerned about spending public money wisely, getting value for money and supporting our NHS, will vote for new clause 5 in the Division Lobby later.
No; I am going to make some progress. The hon. Gentleman has intervened quite a lot and I am looking forward to his speech, as I am sure everyone in the Committee is.
When the Economic Secretary responds, I would be grateful if he could address the points set out by new clause 4, in particular by giving some much-needed clarity on the scale of the impact the Government expect their changes to pension allowances to have. Can he tell us how many people are expected to stay in work or return to work as a result of these policies? What sectors do they work in? How many of them are NHS doctors? Those are important questions, yet it has been hard to get exact answers from Ministers. The Office of Budget Responsibility has said the changes to pension contribution allowances will increase employment by around 15,000, but Paul Johnson of the Institute for Fiscal Studies has said that figure is “optimistic”.
When the Financial Secretary to the Treasury was asked on Second Reading of this Bill how many doctors would stay in the NHS because of these measures, she confidently quoted Department of Health and Social Care statistics that around 22,000 senior NHS clinicians would have been expected to exceed the £40,000 annual allowance this year. However, she may not have known that, at the very same time, the permanent secretary who oversees Government spending was appearing before the Treasury Committee, where the hon. Member for South Cambridgeshire (Anthony Browne) was asking her questions. When asked about the evidence on how many of those 22,000 NHS clinicians would have been discouraged from working by the cap, she said the evidence was “mixed” and that they would need to do further evaluation.
It seems clear that the Government simply do not know how many people will be brought back into work as a result of their changes to pension tax-free allowances. They certainly do not know how many NHS doctors will come back into work, and they have clearly failed to do the thinking on how a bespoke approach for NHS doctors could operate.
That is why we oppose the Conservatives’ pension changes and why we will be voting for a fair fix for doctors’ pensions to get them back into work. We will be voting to spend public money wisely. We will be voting against a Government who choose to cut tax for the richest 1%, while pushing up stealth taxes and council tax on working people across the country.
It is a pleasure to follow my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell). I agree with everything he said.
I am a little surprised that we have ended up having to have this debate again today. Generally speaking, people who campaign for their own interests and ask for a special scheme for doctors do so because that was their particular area. However, if we stand back and ask how it is possible to make a special scheme for one particular sector work, we quickly realise that it is fiendishly difficult to do. There are all sorts of scenarios where we hit a problem. For example, some people have split careers, spending some time in the NHS and the rest of the time outside it. Others have split jobs where they might be a consultant for a couple of days a week and then spend another couple of days training the next set of doctors as a university lecturer. That puts them in a different pension scheme that is not subject to the same tax regime. They might say, “I have an NHS pension but I’ll pay it all on my other one,” so that would not work. What about people who are not employed by the NHS or any of the myriad trusts and organisations?
I do not want to pick too much on the amendment tabled by the hon. Member for Aberdeen North (Kirsty Blackman), because I have tabled enough in my time to know that they are not always drafted precisely. However, if we use the word “employed” in draft legislation, that cannot be stretched to include a partner in a GP practice, because they are not employed by anybody. If we use the phrase “employed in an NHS organisation”, that cannot be stretched to include somebody working as a locum, because they are a contractor rather than somebody who is employed. There is all manner of people in the NHS family who we want to encourage to stay in work, but this is not how we will achieve it.
I also think that the hon. Lady has chosen the wrong mechanism. This would result in her having a nightmare. As soon as a person who used to be exempt ceased to work more than 15 hours or retired, the lifetime allowance would kick in and clobber them when they drew their pension. I understand her intention, but I suspect that her mechanism of choice would be disastrous.
Having thought through the scenarios, how do we pick a sector and get the right people? Are we trying to help doctors or are we trying to help anybody who happens to be employed by the NHS? As I said earlier, we are basically helping accountants, finance directors and procurement directors—all manner of people who are paid very large amounts by the NHS. I probably do not have the same amount of sympathy for their contribution to public service as I do for that of frontline doctors. It is bizarre to give a tax advantage to an NHS finance director, who gets a very generous pension, and not to an entrepreneur who is trying to grow the economy and create jobs to pay for all of this. That seems to create a huge iniquity.
If we stand back and think about how we want tax policy to work—heaven forbid that the Opposition get into government and try to do this—it would be really hard, as my hon. Friend the Member for South Cambridgeshire (Anthony Browne) has said, to go down the route of justifying different tax rates for public sector employees. If we start asking why we are charging them the same income tax and national insurance, we will end up in a horrible world and a very complicated tax regime.
Those of us who have very good public sector pensions should be very careful. Unlike my hon. Friend the Member for Poole (Sir Robert Syms), my lack of career success means that I am not worried about the lifetime allowance, including under the old level, because 20 times my pension gets me nowhere near it. Strange situations are being proposed. When I was first elected 13 years ago, a big issue on the doorstep was, “Public sector pensions are too generous. It’s not fair. I work in the private sector, basically paying for that, and I’m going to get a tiny pension. People in the public sector are being paid the same or more than me, and they are getting a massively generous pension. It’s not fair.” The coalition Government’s response to tackling that perceived unfairness was to change the scheme from final salary to average salary. If we load on to that generous, inflation-protected, state-guaranteed pension a more generous tax treatment than that received by private sector pensions, that would recreate that horrible argument.
It is foolish and damaging to go down the route of cherry-picking favoured sectors and giving them different tax treatment from other sectors. It was a mistake to take that approach to judges and to Directors of Public Prosecution, and it would be a mistake to apply it to doctors. The tax system should apply to everybody across the board in the same way. If we want to provide more reward to people, we should do so by pay rather than by tax. That is a far better approach.
I want to address where the Government have ended up. We have a very complicated pensions tax regime where people do not pay tax on the way in or on an annual basis. Instead, they pay tax on what they draw out of the pension when they get to the end, unless they draw out a quarter of it as a lump sum, in which case they do not pay tax on it all. We have chosen a pension model whereby the state pension broadly provides people with subsistence to live on, and if people want more than that, we incentivise them with a generous tax regime so that they can save it themselves. The implication is that a higher earner gets a greater tax incentive because, unlike a lower earner, they save tax at 40% or 45%. They probably pick up a bit more tax at the end, but a large amount of people pay a lower marginal tax rate when they retire than when they are working. That is the system that we have chosen.
We then thought that perhaps that was a bit too generous to higher earners, so we introduced an annual cap and a lifetime cap. Quite why we needed both, I do not know. If we want to limit how much tax relief we give people, we could choose one of the two and still get to the right answer. The Government have now chosen the annual approach rather than the lifetime approach. The problem is that that does not help people whose earnings are not consistent. If someone is earning a relatively high amount at age 25 and then keeps earning it, that system will work very well for them. If someone starts a business that struggles in the early years and they cannot pay themselves a big salary or make big pension contributions, but then finally it is successful and they sell it and make a lot of money, under this new regime they would not be able to put that much in their pension because they would only be allowed to put in 60 grand a year. I think we could have chosen a higher lifetime allowance and not bothered with the annual allowance. That would have achieved a similar outcome, but we have not done that.
To complicate things further, we have decided that if people earn too much, we will start taking their annual allowance off them completely, meaning that they will be able to put next to nothing in a pension scheme. That does not strike me as being a pensions tax regime that incentivises people to save money in the way we want them to or to use it in their retirement. Effectively, as soon as people hit 57, that gives them a tax incentive to take a lump sum before they retire. We are saying, “The more you earn, the better off you are—unless you earn too much, in which case you are being made worse off and put back to where you started.” In order to put out this particular fire, I urge the Government to step back and consider what they are trying to achieve with the £50 billion or so a year of tax we defer—we actually lose the vast majority of it—and what they really want people to do with their pension savings. How can we use the tax regime to incentivise that and make it fair all the way around? We must come up with a coherent tax regime that drives our policy, rather than come back every couple of years, tweak things, find another fire to put out and think, “Well, it’s not quite working how we wanted, so let’s move it around,” and end up in a confused mess.
This should be a warning to us. If we have a confused mess, with different competing objectives, and we do not think about the whole system, we end up with an unintended consequence. The consequence we had was senior doctors retiring far earlier than we wanted them to because we got the pensions tax regime wrong. If we do not fix this, I suspect there will be another unforeseen consequence and we will have to come back and tweak it in another couple of years. Let us do the job properly, have a coherent regime and use the very large amount of money that we invest to drive the behaviours that we want.
I preface my comments with an absolutely fundamental underlying principle of all economic policy. Whatever we are talking about, I think this should be our first, axiomatic ground rule: whatever is right for the Leader of the Opposition should be right for everyone. There is a fundamental principle here, which is fairness, and I will come on to that.
First, though, I want to mention some of the underlying principles of the annual allowance versus the lifetime allowance, because during almost all of the previous Labour Government’s time in office, there was not a lifetime allowance. It was brought in at the tail end of the Labour Government. One of the Government’s concerns about tax relief for pensioners is the need to limit it so that we do not end up creating huge amounts of dead-weight costs for pension relief, particularly for the well paid. That is why we have an annual allowance that limits tax relief.
(1 year, 5 months ago)
Commons ChamberI beg to move,
That this House declines to give the Finance (No. 2) Bill a second reading because, notwithstanding the introduction of the multinational top-up tax and electricity generator levy, it fails to introduce a targeted scheme to address pension issues affecting NHS doctors, instead making blanket changes to tax-free pensions allowances which, as they will cost around £1 billion a year and benefit only those with the biggest pension pots, should not be the priority, and because it derives from a Budget which failed to set out an ambitious plan for growing the economy.
Six months ago the previous Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), described our economy as being stuck in a “vicious cycle of stagnation”, and on that one point he was absolutely right. To his credit, unlike many of his colleagues, he at least took responsibility, on behalf of the Conservative party, for more than a decade of economic failure.
However, although the previous Chancellor was right to point to our country’s economic stagnation, the prescription that he and the previous Prime Minister offered was nothing short of disastrous. They set the UK economy on fire, and people are still paying the price as a Tory mortgage penalty does lasting damage to the living standards of working people; yet the current Prime Minister and Chancellor expect praise for being better than the arsonists who preceded them. Could the bar seriously be any lower? British families and businesses deserve so much better than that. After 13 years of economic failure, people and businesses across the UK deserve a plan for the economy that offers more than managed decline.
I fear that the hon. Gentleman may know what I am about to say. Is he aware that, according to the International Monetary Fund, economic growth in the UK—GDP, either per capita or in terms of constant prices—has grown faster than economic growth in France, Germany, Italy and Japan, faster than the G7 average, faster than the EU average and faster than the euro area average? That is quite a record, and one to be proud of, so it is not a case of 13 years of economic failure. I invite the hon. Gentleman to pay tribute to the Government’s success in ensuring that our economy grows faster than the economies of all those other countries that have faced similar international challenges.
Just two weeks ago, we were promised a Budget for growth. Let us now look at the data that was published alongside that Budget. It shows that ours is the only G7 economy that is forecast to shrink this year. Our long-term growth forecasts were downgraded in the Office for Budget Responsibility report.
No, I am going to finish what I am saying before I give way again.
That data confirms that we are suffering the worst falls in household incomes in a century. The hon. Gentleman need look no further than the OBR report alongside the Budget, which make it very clear that this Government have little or nothing to be proud of when it comes to our economy. Across the UK, people and businesses want to get on with making our country better off, but we are being held back by a Government who are out of energy and out of ideas. That much is clear from the Bill that is before us today, which seeks to implement some of what the Government have promised.
Of course, consideration of any Bill on Second Reading must include what it omits as much as what it contains. Let us start with the fact that this Bill contains no mention of introducing stealth tax rises for working people, although we know that that is exactly what the Government are doing. We know that in the Budget of March 2021 and in the Finance Act that followed it, the then Chancellor, now the Prime Minister, froze the basic rate limit and personal allowance for income tax for four years. In the recent autumn statement of 2022 and in the Finance Act that followed that, the current Chancellor extended those freezes by a further two years. Now, following this month’s Budget, the OBR has made it clear that the Government’s six-year freeze in the personal allowance will take its real value in 2027-28 back down to its level in 2013-14. What is more, in a double whammy, families across the country will be hit next month by the Tories’ council tax bombshell, a move that will take the bill for a typical band D property above £2,000 for the first time. Look beyond the rhetoric from the Conservatives, and the reality is clear: their stealth taxes are hitting working people hard.
However, while the tax burden for working people is up, important measures that we have been calling for to make the tax system fairer are nowhere to be found in the Bill.
There is nothing in it to close the loopholes in the windfall tax on oil and gas giants, which we have been urging the Government to do for so long. Of course, we have been pressing for an extension of the energy price freeze for many months, and we were glad that the Government followed our lead in the Budget, but it is wrong that they are still leaving billions of pounds of windfall profits for oil and gas giants on the table when those windfalls of war should be helping to support families through the cost of living crisis.
I am sure there is, and I might intervene later.
My hon. Friend makes an interesting point about moving the 45% additional rate to £100,000, which I have previously recommended. Does he agree that it would be a good guiding objective for this Government, and indeed any Government, to try to reduce all marginal tax rates below 50%? It is a good, Conservative principle, but it applies to everyone, that people who work extra should keep at least half the money. People should never have to give more than half to the Government.
My hon. Friend speaks a truism that should not need to be spoken from the Conservative Benches, as it should be patently clear.
A sole trader who is running a good little business and doing quite well might be knocking on the door of £100,000 in profits—I would have thought that is not an unusual amount for some in the south-east of England, even in the building trades. Too many of them will say, “I’m not going to pay 60%, plus 2% national insurance. I will work four days a week and spend the fifth day on the golf course.” We are losing out through the 60% rate.
Ministers will not be surprised by my objection to corporation tax being increased from 19% to 25%.
It is a pleasure to follow the right hon. Member for Dundee East (Stewart Hosie). I will start where my hon. Friend the Member for South Thanet (Craig Mackinlay) did: people think that Finance Bills are a little dry, but somebody must have a sense of humour to produce a 456-page Bill and then hide in clause 346 the abolition of the Office of Tax Simplification, probably at the exact time that we really need it. When I used to practise as an accountant, I had a copy of all the tax legislation on my desk. I sense that if I were still working, I would need a much bigger desk for the successive Finance Bills we have had over the past 13 years. Perhaps at some point, we should stand back and think, “Do we really need to keep adding all of this stuff every year? At what point are we going to start taking away stuff that we have now effectively duplicated?” I suppose it would mean that I could work from home, because I probably could not carry all of those books around, so maybe there are some bonuses there.
Much of the technical stuff in this Bill has been pre-consulted on—we have seen it for a long time—and most of it is to be warmly welcomed. I will quickly mention clause 25, which finally sorts out the net pay arrangement for pensions. We have been trying to find a solution for this for quite some years; to put people whose pension scheme has chosen the net pay arrangement, rather than the other way of doing it, into the position that they should have always been in. We have finally found a solution through which HMRC will make it good, which is to be warmly welcomed. I cannot quite see a start date for that in the Bill, though—I hope it is soon—and it would have been nice if HMRC had actually paid some back pay. People who are saving pretty small amounts, who are the ones on the very lowest levels of income, could have had the tax back that they should have been getting for the past decade or so, but perhaps we should not be too greedy.
I want to focus most of my remarks on the pensions tax changes, and then on the corporation tax and the multinational top-up tax. There is a theme in those things: we have some welcome measures, but we end up on a rather haphazard journey to a very strange place where things competing with each other everywhere, and I do not quite have an idea of what we are trying to achieve.
On the pensions tax stuff, we had clearly created a problem through the reduction and freezing of the lifetime allowance. The only solution to a problem caused in that way is to undo what we have done, and it makes sense to scrap that completely. I would have probably preferred to have a higher lifetime allowance and scrap the annual allowance: if we are aiming to limit how much tax relief people get on pensions saving, I am not quite sure why we need to do it on a year-by-year basis when we should probably be more worried about the overall total. It seems a bit harsh to me that somebody who starts a business, scrimps and saves, saves every penny and reinvests it, and finally sells that business for a decent amount now cannot get the same pension as somebody who has been employed for all that time, taking much less risk, because they are capped on the £60,000 they can put in per year and by how many years they can look back. I am not sure what policy objective we are trying to achieve there, but it is welcome progress.
On the Opposition’s reasoned amendment, I am sceptical about the attraction of trying to have different tax regimes for different sectors. It becomes hard to work out which occupations we like and which we do not, and to which we want to give favourable status. Even if we wanted to do it, it becomes hard. Do I want a favourable tax regime for doctors regardless of where they work? I then have to define “doctor” and work out what sort of doctors I want to favour. Do I want it for people who work in the NHS, in which case it would have to include whoever is being paid large amounts, whether finance directors, human resources directors or diversity officers?
It would be slightly bizarre to give a more generous tax regime to a finance director in an NHS trust being paid a large amount of money, but not to somebody owning and running a business, trying to create jobs in the economy. That would be hard to do, and we would have to go through every senior public sector worker, as my hon. Friend the Member for South Thanet did, working out who to include. Even if we did that, how on earth would we work out which organisations to include? Most high-paid NHS staff are not employed by NHS England, but by God knows how many trusts around the country. If we wanted to apply the regime to GPs, too, they all have their own businesses. It would be phenomenally difficult to work out how to do that, if we think about how the lifetime allowance being set that way was causing a problem and driving people out.
My hon. Friend is making some excellent points about the problems of having sector-specific lifetime allowances, which would proliferate and become unbelievably confusing, as he says. We have all made the case about other public sector workers who would be affected by the lifetime allowance. We could introduce a regime where we exempt them one by one and effectively have a regime for all public sector workers, but does he agree that it would be unfair and economically irrational to have a completely separate pension regime for public sector workers and a far more punitive one for private sector workers, who are important for generating wealth in the country?
I agree with my hon. Friend. I remember the anger when I was first elected about people working in the private sector getting a very small pension and seeing the large generosity of the public sector ones that they could never dream of aspiring to. To have a more generous tax arrangement on top of a more generous pension that they were effectively paying for would be hard to sell to people. I think the Government have found a sensible fix on that.
Where has this situation left pension tax policy? We now have a regime where when someone earns the money and pays it into their pension, they do not pay income tax and national insurance on it, and when they draw the pension, they pay income tax, but not national insurance. We are not quite sure we like that. If someone is earning too much—more than £260,000 now—we start reducing the amount they can put in every year from the £60,000 cap down to a £10,000 cap. Then, if someone wants to draw their pension, they can have a quarter of it completely tax-free, even if they do that 10 years before they retire, but now we do not like that either, because that might be too much, so we have capped it at the level of the lifetime allowance that we have just scrapped. What are we trying to do? Added to that is the fact that if I have a defined-contribution pension that I do not draw and leave in my estate, there is no inheritance tax on it. I do not even pick up the tax at that point.
If we stood back and said, “What are we trying to incentivise and encourage people to do by the £50 billion or so of annual tax that we forgo”—or defer, strictly speaking—“on pension saving?”, I am not sure we would design this system. The Government would be well advised to create some kind of commission or review to look in the round at all the various ways we incentivise pension saving and all the ways we tax it and try to work out what a coherent system that people have some hope of understanding would be. I suspect we would get far better outcomes if we did that. I encourage the Government to do that. That would need to be on a long-term, cross-party basis. It cannot be done on a whim every few months.
The danger is that we get to a Finance Bill or Budget and we want a bit of money here, or we have found a little fire we want to put out there, or we want to make another tweak, and we end up building and building more and more strange bits on to this rather ugly looking house until it finally falls over. We should try to get it in some kind of shape before we get into that position.
Moving to the various corporation tax measures in the Bill, I am prepared to accept the rise in corporation tax. Given the fact we bailed out nearly every business in the economy three years ago in the covid pandemic, there is justification for saying that we need to pay those bills, and corporation tax, which businesses only pay when making a profit, is the right way to do that. It takes a little bit of believing to convince ourselves that we can raise the rate that businesses pay on all their future profits—all the fruits of their investment—and that that will not deter investment, but a short-term deferral of when they pay tax by having full expensing will somehow encourage loads of investment, even though they will end up paying the extra 6% on the profit they will earn from the use of new machinery at some point in the future. They will not pay it in the first year, but they will pay more in all of the subsequent years.
(1 year, 5 months ago)
Commons ChamberWe have looked very carefully at this, because we know that many in the House have been citing this figure. What concerns us about that analysis is that the study does not appear to take into account the behavioural ramifications of changing the current regime or of making it less competitive than that of our international partners. We do have to remind ourselves that non-domiciled taxpayers pay UK tax on their UK earnings to the tune of £7.9 billion.
The Leader of the Opposition led his charge against the Budget by saying that the UK was the sick man of Europe, yet the IMF shows that the UK had the fastest-growing economy in the G7 not just last year but the year before, and that since the Conservatives came to power in 2010 the UK has had the fastest-growing economy of the major economies in Europe. Does my right hon. Friend the Chancellor agree that, although there are clearly major economic challenges, there are many reasons—not least the tech sector in South Cambridgeshire—to be confident about the future of the UK economy?
I completely agree and, thanks to the brilliant efforts of the tech sector in South Cambridgeshire, we have now become the third largest tech sector in the world, after the United States and China, thanks to the Conservative Government.
(1 year, 5 months ago)
Commons ChamberI cannot speak for the due diligence that was done for HSBC, but it has got itself comfortable with it. We should also understand the relative scale of HSBC, which is an extraordinarily well-regulated, global and diverse bank. My understanding is that if we add all of the important clients of Silicon Valley Bank UK, which we had in the front of our mind as we sought to act over the weekend—if I may say so, we make no apology for acting in haste, because haste was absolutely the required procedure in this particular case—they would in their entirety be less than 1% of the overall client base of HSBC. With respect, I do not think that was the case in the examples to which the right hon. Member referred.
The sighs of relief across South Cambridgeshire this morning were so loud that they were almost deafening. Dozens of my technology companies, which had been in contact with me over the weekend, thought they were going to be wiped out this morning, but they can now operate as normal because of the decisive action by the Government. I very much congratulate the Minister, the Bank of England and the Treasury on that action.
I have also had questions about whether this is a sign that all the reforms of the financial system in the wake of the global financial crisis have failed or are failing. Does my hon. Friend the Minister agree that this is not a sign of the reforms failing, but a sign that they are working, and that without the reforms we would not be able to do a rescue in this way? Can he also confirm that the reforms that are coming through—the Edinburgh reforms—will not make future collapses more likely, or future rescues more difficult?
My hon. Friend knows a great deal about the sector, and it is due to past reforms that we were able to take this decisive action. Parliament has given—in extremis, and with the agreement of the Bank of England, the PRA, the FCA and the Treasury—sweeping powers to enable this sort of transaction to happen at great pace. Let me be clear that it is the shareholders and creditors of the bank, not depositors or the taxpayer, who have lost. In the system that we have, that is the right outcome, and I am pleased we were able to achieve it.
The Edinburgh reforms are designed to give this country the ability to continue to grow and to be internationally competitive with other markets, while adhering to the highest quality regulatory standards, and with the UK at the absolute cornerstone of organisations such as the Financial Stability Board. They will not put any more jeopardy into the financial system. Indeed, having good healthy businesses that grow and are profitable is the best way to avoid jeopardy.
(1 year, 5 months ago)
Commons ChamberI commend my hon. Friend the Member for Christchurch (Sir Christopher Chope) for bringing this Bill forward. It is on an incredibly important issue that has been the subject of massive public concern, as my hon. Friend the Member for North West Norfolk (James Wild) pointed out, in relation to the BBC and in national Government. It is also of concern in local government. In my area, the Cambridgeshire and Peterborough Combined Authority hired a chief executive officer who left after eight months and was given a £169,000 payment package last year. Such sums of money are completely incomprehensible to members of the public who pay the taxes that go to such payments. That one was at an incredibly high level that breaches even the BBC guidelines.
There is a fundamental problem. I have been chief executive of two organisations, and one of the horrible things about running an organisation is that occasionally one needs to get rid of people and make payments to them. The statutory payments are incredibly low, so we tend to give payments above that. If someone is working for a private sector organisation, they have a strong incentive to try not to give out too much money. I always capped my payments at one year’s salary. I resisted ever paying out more than that.
In the public sector, it is not your money; you are giving taxpayers’ money away, and often senior managers may well have a conflict of interest. My hon. Friend the Member for Christchurch did not quite refer to it as that, but a lot of senior civil servants will be conscious that they may one day themselves be in a position where they will get a payout, so there is perhaps a personal incentive to make sure that the regime is not capped in any particular way and remains generous.
This is a legitimate issue and an issue of public concern. I had not realised that the payments were so much—they are in the region of £1 billion a year now, and that is fiscally significant. These are not tiny sums of money by national standards. It is frustrating that action has not been taken, when it was in the manifesto eight years ago in 2015. The Government have been repeatedly pushing at it. The consultation that closed last year repeated the point about the £95,000 cap. I should say that with inflation at 10%, that £95,000 is becoming worth less and less, and the cap will bite in at a lower level and more and more people will be affected by it. I would certainly be keen to hear from the Government what they intend to do to finally bring this measure in and implement it. In their consultation, they suggest two different mechanisms for control processes. I would also be keen to hear whether this is just for national Government. It should apply across other parts of the public sector and local government, too. I support the intent of the Bill, and I am keen to hear what the Government have to say.
(1 year, 6 months ago)
Commons ChamberI welcome the fact that this Government are so committed to making the UK an innovation nation that they have just today set up a whole new Government Department to promote innovation, science and technology. I have about 400 life science companies in my constituency, and there are some reservations about the reform to the research and development tax credit, introduced to try to tackle fraud in the sector. Can my right hon. Friend reassure them that the Government are still committed to supporting research and development companies while tackling fraud?
My hon. Friend is a formidable advocate for that sector and I do want to give him that reassurance. That is why we protected our R&D budget in the autumn statement at its highest ever level. We are continuing to look at how we can support the R&D small companies sector without allowing that fraud to happen. Thanks to his campaigning and the work of this Conservative Government, last year, we became only the third trillion-dollar tech economy in the whole world.
(1 year, 6 months ago)
Commons ChamberWe are debating the importance of a fair tax system for the future of this country. This Government have sat on non-dom tax status for months and years. We are questioning why this Prime Minister is not heeding Labour’s calls to abolish the non-dom tax status once and for all, and spend the money on the NHS, childcare and a growing economy.
When the Government are making working people pay more tax, it is simply wrong to allow wealthy people with overseas incomes to continue to benefit from an outdated tax break. It is also bad for UK business. The loophole prevents non-doms from being able to invest their foreign income in the UK, as bringing it here means that it becomes liable for UK tax. That is why the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), first set out our party’s position last April—four Conservative Chancellors ago. She confirmed that, in government, Labour would abolish the non-dom status as part of our reforms to create a fairer tax system for working people. We will abolish that indefensible 200-year-old tax loophole and introduce a modern scheme for people who are genuinely living in the UK for short periods.
Labour believes that, if a person makes Britain their home, they should pay their taxes here. That patriotic point should be accepted on all sides of the political divide, yet Ministers in this Government, under this Prime Minister, seem desperate to defend the non-dom loophole. What is it about the current Prime Minister that makes him so reluctant to abolish non-dom tax status? The Government are increasing taxes on working people, businesses are struggling, and our NHS is in crisis. Yet the Conservatives defend a small number of rich people who use non-dom tax status and offshore trusts to wriggle out of paying taxes here in Britain.
We know that the Prime Minister understands how non-dom tax status works—he can hardly claim ignorance on that—so how can he possibly justify it? How do Conservative MPs look their constituents in the eye and tell them that their taxes will keep going up, while the taxes of non-doms must always stay down? It is indefensible, and that is why the next Labour Government will act by abolishing the non-dom tax status.
The hon. Member asks what makes this current Prime Minister reluctant to change non-dom tax status, but what made Tony Blair and Gordon Brown, the former Labour Prime Ministers, also very reluctant to scrap the non-dom tax status? They both reviewed it and both kept it.
We were not increasing taxes on working people when we were in government. The hon. Gentleman can start looking at the record 13 years ago, but it is high time that Members on the Government Benches took responsibility for what they have done in government—for the low growth, for the high taxes on working people and for the fact that our public services are crumbling.
As my hon. Friend reminds us, increasing taxes on working people has long been a hallmark of the Conservatives. That has led us to a situation where we have the highest tax burden on working people in more than 70 years.
No, I will make some progress. Our position contrasts with that of the current Government, whose Ministers have been at pains over the past year to protect this unfair loophole. When the Chancellor told the Treasury Committee last November that he wants
“to make sure that wealthy foreigners pay as much tax in this country as possible”,
his words could not have rung more hollow. They rang almost as hollow as the Prime Minister’s promise when he took office that he would run a Government of “integrity, professionalism and accountability.” The truth is that the Prime Minister is running a Government without even basic competence and it is hitting people across this country.
It is a pleasure to follow the hon. Member for Bradford West (Naz Shah).
I want to start by congratulating the Government on what today’s IMF report says about economic growth last year. Despite what some Opposition Members have said, the fact is that we had the fastest-growing economy in the G7 last year, with a growth rate of 4.1%. Our economy grew twice as fast as America and Germany, 1.5 times as fast as France and almost three times as fast as Japan. Those are the facts.
I turn to the Opposition motion. I will address first the policy, then the motion itself, and finally the politics. On policy, I think there is some agreement between our position, Labour’s and the SNP’s. We want a tax system that is fair—clearly people who are better off need to pay their fair share of tax—but that is also attractive to internationally mobile people, whether they are overseas students or international businesspeople. Thirty-five jurisdictions around the world have regimes involving temporary residence tax schemes similar to the non-dom scheme. They might go by different names, but they have the same basis. If people are in a country for a certain length of time but it is not their permanent destination, they should be subject to a regime whereby they pay tax on their local income but not on their international income, and, in fact, I think that that is Labour’s policy.
As for the non-dom scheme in the UK, this Government reduced the period to 15 years—it was previously a permanent scheme—and I think that that was the right thing to do, although questions are being asked about whether it should be reduced further, to 10 years or five. There are also problems that have been rightly ridiculed in the media. For example, people have previously been able to inherit non-dom status. There is also no clear legal definition of “domicile”, although it ought to be crystal clear. I would certainly welcome reforms to the regime. Labour says that it would abolish non-dom status, but I suspect that it would just introduce a new regime that would do remarkably similar things to ensure that internationally mobile people who bring benefits to the economy can come here.
As for the economic impact of scrapping non-dom status, I asked the hon. Member for Ealing North (James Murray) why he thought the previous Labour Prime Ministers, Tony Blair and Gordon Brown, had not done it, and gave him the answer: they had carried out a review and concluded that, overall, the benefits of non-dom status were greater than the cost and so it brought a net benefit to the economy. There is a spectrum of data, and we do need the data, but if the regime were scrapped and everyone who abided by it suddenly fled in a mass wealth exodus, there would clearly be a huge net loss to the Treasury, whereas if it were scrapped and not replaced with anything, and all those people stayed here and suddenly started paying tax on their overseas earnings, the £3.2 billion a year that we have heard about would clearly bring a net benefit. What really matters is what the response would be among existing non-dom people but also among future ones who might not come to the UK as a result. It is necessary to have the precise data to create the optimum scheme, so that we not only raise revenue for the UK Government to pay for public services but ensure that people pay their fair share.
We clearly should not publish Treasury advice, as the motion suggests, for all the reasons given by my right hon. and learned Friend the Member for Northampton North (Michael Ellis).
Finally, let me comment on the politics: why does Labour keep focusing on this one issue rather than many others that are actually more important? It is all about politics. Labour is the party of envy, and we are the party of aspiration. We are the party of workers. We have reduced tax on working people, we have increased funding for the NHS to historically record levels, and all that Labour Members are trying to do is play politics with us.
It is a pleasure to follow the hon. Member for St Helens South and Whiston (Ms Rimmer). On the wording of the motion, I cannot really add much more to the comments from my right hon. and learned Friend the Member for Northampton North (Michael Ellis). The Opposition know perfectly well that analysis from officials is confidential for a very good reason: to make sure that Ministers have the best possible advice without second-guessing what that might look like in the public domain and potentially affecting markets.
Turning to the substance of the non-dom situation, I really think this is a case where Labour is chasing a mirage. The Government could do with raising more tax if that low-hanging fruit, that £3.2 billion, was really out there, because of the present fiscal situation as a result of the money we have spent protecting people’s livelihoods during covid, through the furlough scheme, and on supporting people with high energy bills this winter. We could do with raising more tax easily, if it was really there.
The hon. Member for St Helens South and Whiston spoke about the LSE and Warwick research, but I do not find that figure of 0.3% very credible because it refers to fewer than 100 people who would consider leaving because of all that additional tax on them. That figure has been extrapolated from the behavioural response to the previous changes, but those changes were more modest. They were modest because the Government took their decision for the same good reason that the previous Labour Government did: looking at the issue in the round, they concluded that this would not be a revenue raiser and it would not be good for the economy overall if we drove people abroad.
The shadow Minister, the hon. Member for Ealing North (James Murray), said that when people make their home here they should pay all their tax here, but those non-dom people would not make their home here —they would not come and invest in this country or employ people in this country—if they had to pay tax in that way. That is the key point. We cannot assume that all that low-hanging fruit is out there without assuming the behavioural responses that would follow.
Talking about non-compliance more generally, as the shadow Minister did in his speech, this Government have tackled non-compliance consistently since they came to power, with more than 150 measures since 2010. The estimated avoidance gap under Labour in 2005-06 was £4.8 billion. It was down to £1.2 billion in 2020-21 under this Government. That is already more than the £3.2 billion the Opposition are claiming is available.
The wealthiest have been paying more under this Government and we have been taking the poorest out of tax altogether, contrary to what we have heard from the Opposition. The personal allowance that we inherited in 2010 was £6,475; it is now £12,570, and we have raised the national insurance level as well. We have taken many people out of tax altogether and at the same time ensured that the poorest—the least well-off—are earning more when they are working because we have consistently raised the national living wage. Those are Conservative principles in action: real changes rewarding work and letting people keep more of their own money to spend as they see fit.
Labour obviously aspires to government, about which there have been increasingly cocky briefings in the press, but government is not about easy slogans. It is about taking decisions in the best long-term interest of the UK. It is not about soundbites, party management and trying to buy off the people in Momentum. I might have thought Labour would learn from the last Labour Government. People like Gordon Brown, who considered a five-year cap but abandoned it. People like Alistair Darling, who said that
“such a charge could discourage men and women—doctors and nurses, business men and women—from coming to this country…and we do not want to turn them away.”—[Official Report, 9 October 2007; Vol. 464, c. 171.]
People like Ed Balls, who said:
“I think if you abolish the whole status then probably it ends up costing Britain money because there will be some people who will then leave the country.”
I am sure the shadow Minister admires all those former Labour Ministers, and I am sure he and the shadow Chancellor aspire to the jobs they once held, so why are they going down this road? Because it is an easy, if inaccurate, response to the question they cannot answer: how will they pay for whatever fresh commitment they have made in any given week?
My hon. Friend is making an excellent speech. Does he agree that Labour is playing the classic Labour game of class war as a mirage to try to gather votes from the left?
The right hon. and learned Member for Holborn and St Pancras (Keir Starmer) has a difficult balancing act, because he has to hold his party together. He made a lot of promises to the left to win the leadership, and he has junked them all, so he is giving them a little red meat on non-dom status to try to keep them on board. I am sure there is a lot of party management happening on the Labour Benches.
Labour has already committed the supposed revenue from this policy to multiple policies. First, it was breakfast clubs, and then it was midwives, nurses and health visitors. The shadow Health Secretary had to admit that, even on Labour’s questionable estimates, the funds supposedly raised would not be enough to cover its NHS reforms. Time and again, Labour Front Benchers and Back Benchers alike hide behind this dubious policy, which I fear is a mirage in terms of the money it would raise, to justify yet more uncosted pledges. Labour has made so many uncosted commitments already: £150 billion of spending and less than £60 billion of revenue rises. We have heard £90 billion of uncosted commitments from Labour in this Parliament, which would cost each household more than £3,000.
That is what we get under a Labour Government, which is why we need to stick with a Conservative Government. Labour has never left office with unemployment lower than when it came to power and, of course, it cannot be trusted with the public finances, as we know from the note left by the right hon. Member for Birmingham, Hodge Hill (Liam Byrne): “there is no money.”
We will get the debt down, we will halve inflation and we will get growth going again. Voting for Labour would put all that at risk.
I rise to speak against the motion on the Order Paper. It is important that we recollect what that is. It says that Treasury analysis of a potential tax policy should be laid before the House two weeks before the Budget. Having listened very carefully to the previous four speakers from the Opposition Benches, I do not recall any of them actually addressing that point. That is surely because the Opposition know full well that no Government could publish pre-Budget advice, for the simple and straightforward reason that Budget announcements are market sensitive. No Government of any colour have ever published that sort of advice. Those on the Opposition Front Bench know that full well and they know that, if the situation were reversed, which, hopefully, it never will be, they would not publish it, either. It is important that the public understand exactly what has been put on the Order Paper by the Labour party, which has brought us here today.
This Conservative Government are absolutely committed to a fair tax system, ensuring that the UK attracts talented people to work and do business here and, at the same time, generating tax revenue that pays for our public services. That was brilliantly set out by my hon. Friend the Minister. It is, of course, vital that our tax regime is competitive and that talented entrepreneurs overseas see the UK as a country where their risk taking will be rewarded and where their commitment to developing their business will bring jobs to British people, strengthening our economy and generating in turn more tax that will pay for more public services. It is a virtuous circle.
Let me be clear that I am not in any way suggesting a blank cheque or a free ride for non-doms. I absolutely accept that non-dom status should not be permanent and I am pleased that we have already moved away from that. I absolutely agree with my hon. Friend the Member for Amber Valley (Nigel Mills) that there is scope for further reform, but that should be considered calmly and rationally.
Let us remember that non-domiciled individuals already pay tax on UK income and gains. They also pay tax on foreign income and gains if those moneys are brought into the UK. We have heard of some £8 billion in UK tax contributed in 2021 alone. I also made the point, when I intervened on the shadow Minister right at the beginning of the debate, that successive Labour Chancellors tried to reform the system and gave up, because they realised it was not the easy panacea that those on the current Labour Front Bench would have us believe. Even Ed Balls has said that abolishing non-dom status would probably end up costing Britain money, because some people would leave the country.
I make those points because it is important that, when we consider headline-grabbing ideas, we take the time to look behind the headlines and think carefully about all the implications of a policy proposal. I know that is exactly what my right hon. Friend the Chancellor is doing as he prepares his Budget, listening to ideas and weighing up their implications.
My hon. Friend is making a powerful and important speech. Does he agree that the reason why the Labour party is focusing on this issue so much in this debate and during Prime Minister’s questions is that, while we are the party of aspiration, Labour is the party of envy and is just trying to play class war?
I have no alternative but to agree with my hon. Friend—otherwise, what on earth is the point of having this discussion? We believe in aspiring, striving and achieving and we then believe in paying our fair share of tax, which generates the public services that we value so highly.
As I was saying, the Chancellor is currently weighing up what are the best policies to stimulate growth. Of course that involves raising tax revenue, but we need to do so in a way that does not stifle the potential for economic growth in this country. There are plenty of people giving him advice on how to do that, including some of my constituents, and even me.
I believe that there are plenty of changes we could introduce. I would like us to look at the cap on private pensions; doing so would enable us to get more people in their 50s remaining in work or returning to the workforce. Some dub that current tax a doctor’s tax, because it creates a strong disincentive for doctors to work extra shifts—doctors, the very healthcare workers the Opposition are so keen that we should support. I agree that we should support them, so let us make a tax regime that creates the opportunity and potential for them to want to work more.
There are other taxes that also impede free markets—stamp duty land tax could be considered one of those—but this is not the place to consider the detail of all that. Nor is this the place for the publication of Treasury analysis on the effect of the abolition of non-dom tax status on public revenue, because of the time, just before a Budget, when the Labour party is suggesting it should be done. Let us instead focus on the real, pressing needs of our economy for our constituents: driving opportunities for growth, building a skilled workforce, creating jobs and so generating revenues that will support our public services for many decades to come.
(1 year, 7 months ago)
Commons ChamberNothing would give me more pleasure than to go back and speak with the Minister about these matters. We all worry about why the NHS is struggling to recruit. I can quite definitively tell people here today that the public sector struggles to recruit in North Devon because of the housing crisis.
We on the Conservative Benches are keen to tackle this issue. Yesterday’s cross-party drop-in session was hugely helpful. We heard from the officials behind the legislation, as well as from the Minister. It is just a shame that Opposition Members did not turn up—not one of them. They have tabled a number of amendments to the Bill, but do we really need to put reviews into legislation? One cannot help but wonder whether such amendments are politically motivated rather than aimed at delivering real change to constituencies that urgently need their housing markets to be rebalanced.
It is an honour and a delight to follow my hon. Friends the Members for North Devon (Selaine Saxby) and for Christchurch (Sir Christopher Chope). May I say at the outset that I completely agree with my hon. Friend the Member for Christchurch that you should be Sir Nigel, Mr Evans? If I call you Sir Nigel, will I have as much time to speak as my hon. Friend?
It is a pleasure to speak because, as the chair of the Back-Bench Treasury committee, I have done a lot of work on stamp duty policy, and I have had a slightly perverse interest in stamp duty for the last decade or so and written various policy papers and research reports on it. We all support raising the level of home ownership. In fact, rates of home ownership started to decline under the previous Labour Government. There is a home ownership gap of about 5 million people who want to own their own home but cannot. I will support all measures—well, pretty much all measures—to increase home ownership. Clearly, we are teetering on the brink of recession and need to promote economic growth, so I very strongly support the broad thrust of the Bill in cutting stamp duty to help people get on to and up the property ladder and to stimulate economic growth. I have some reservations about the proposal being temporary and about it applying to second properties.
I will address some of the key themes of stamp duty policy. We have heard various calls today—not least from my hon. Friend the Member for Christchurch—to abolish stamp duty outright, and in fact, I have called for that before. But it is not just Conservative MPs who think that stamp duty should be abolished outright; the Institute for Fiscal Studies, on whose advisory council I sit, talked in its magisterial work on taxation policy—the Mirrlees review—about all the damage of stamp duty and called for it to be abolished.
Lord Macpherson, a former permanent secretary at the Treasury, gave evidence fairly recently to the Treasury Committee, on which I sit, about tax policy. He highlighted all the damage that stamp duty did to the economy, for many of the reasons that my hon. Friends the Members for Christchurch and for South Thanet (Craig Mackinlay) set out earlier. Lord Macpherson certainly would not be sad to see its demise.
I want to raise a slightly more nuanced point than the outright abolition of stamp duty, which would lead to a big problem with revenue, as it raised £14 billion last year in total—about £4 billion for commercial property and £10 billion for residential. That would be a hole. My more nuanced argument is that people buying houses to live in are overtaxed, but people buying properties either as second homes or for investment are undertaxed. Exactly 10 years ago, in 2013, I wrote a paper arguing for a higher rate of stamp duty for people who are buying homes not to live in. Fundamentally, homes are for living in. Two years later, the Government introduced that policy. It is now the additional premium. I do not think the Government introduced it in the right way and there are all sorts of problems with it, but I will not go into detail on that now. The stamp duty regime at least recognises the difference between people buying properties for investment or as second homes as opposed to people buying properties to live in as their homes. That tilts the property market in favour of those buying homes to live in, which is welcome.
I apologise for intervening on the hon. Gentleman in his good, interesting speech. He said that it is possible for stamp duty purposes to distinguish between a second home and a first home. That means it would clearly be possible to distinguish between second homes and first homes for planning purposes, which would give local authorities the power to ensure that they protect a minimum number of homes for local families. I gave the Government the opportunity just before Christmas to vote for an amendment to do that—why does he think they did not do so?
I thank the hon. Member for that intervention. I must admit I do not know the reasons behind that, but it clearly is possible, at least from a taxation point of view, to distinguish between homes for investment and homes for living in. From a planning point of view, there are probably other considerations.
There may be many reasons.
The capital gains tax regime already distinguishes between homes for investment purposes and homes for living in. People do not pay capital gains tax on the home they live in, but if they do not live in it, they do pay. The reason that people buying homes are overtaxed has been laid out by many colleagues, so I will not overlay that, but clearly we need labour mobility and for people to be able to live in appropriate housing. If we overtax housing, we end up with lots of people living in inappropriate houses, not least the home hoarders at the end of their working lives and the empty nesters whose kids have gone and who live in too big a house and do not want to move. That has a damaging impact on labour mobility, as people want to move around the country. It is the most economically damaging tax.
The reason I say that people buying second homes for whatever purpose or homes for investment are undertaxed is that stamp duty is a transaction tax. All other transaction taxes—we can argue about whether VAT or excise duty on petrol are transaction taxes—are flat-rated. People pay the same rate, whatever the value. We pay 20% VAT whether we are buying something for £10, £100 or £100,000. Stamp duty, however, is a progressive transaction tax, with a lower rate at the bottom end that progressively goes up, as it is designed now. That zero rate and lower rate for lower value properties is for social reasons. It is basically to help first-time buyers get on the property ladder, which is welcome, and to help people get up the property ladder. That is a valid social reason to have progressive stamp duty, but that reason does not apply to people buying second homes or investment properties. There is no reason to have a graduated stamp duty to help property investors get on to the property investment merry-go-round.
Does my hon. Friend also agree that somebody in Christchurch who is having to buy an average priced house at the cost of £405,000—as compared with someone in Louth and Horncastle, who can buy the same house for £200,000—should not be taxed double, in a sense, in addition to having to pay a higher mortgage?
I thank my hon. Friend for that intervention. He proposed earlier that stamp duty should be based on the area of the property; I have some reservations about that for economic efficiency reasons. One of the considerations of taxation should be the ability to pay. If someone is buying a house for £400,000, clearly they will be able to pay a bit more tax than if they were buying a house for £200,000. But if the Government follow my proposal to get rid of stamp duty on residential properties altogether as an objective, his constituents will not have to pay any stamp duty whatsoever. They will pay the same stamp duty as the people buying houses in Louth.
(1 year, 8 months ago)
Commons ChamberI will repeat my previous point, and the hon. Lady will have her chance to speak later. It is the objective of the Government, in the course of the transition that my right hon. Friend the Member for North West Hampshire (Kit Malthouse) talked about, to protect the vulnerable and ensure that protection of access to cash. The hon. Lady’s statistic is right, but I reiterate that more than 95% of people today live within 2,000 metres of a free cashpoint, and I hope she recognises that.
I want to follow up on some of the comments from my right hon. Friend the Member for North West Hampshire (Kit Malthouse). Cash is being used far less than it was previously. That is good and convenient for many people. I fully support the Government’s moves and the ambition across this House to ensure that we have access to free cash, but there is no point in people having access to free cash if they cannot spend it on essential items. I just flag that many retail outlets no longer accept cash. It is not just parking; there are cashless bars and so on. That is fine, but there is a scenario where outlets that sell essential items such as food shops and chemists might at some point be required to accept cash, because if they do not accept cash, lots of people will be excluded.
My hon. Friend makes another important point, and I fear we are in danger of previewing the debate that we shall have this afternoon. When we talk about access to cash, we are not just talking about withdrawals; we are also talking about the deposits that are so vital. If our small businesses in particular are to continue to take cash, they need to be able to deposit that securely, safely and conveniently.
I rise to focus on new clause 24, tabled in my name and with the support of a number of Members on both sides of the House. It focuses on one of the great challenges of the moment, which is how we reverse the loss of habitats and forests around the world. Deforestation in South America, Asia and, to an increasing degree, in the northern parts of the world is a real crisis for our planet. It is appropriate that we are having this debate today, the day on which the biodiversity summit begins in Montreal. It is my hope that that summit will lead to a new international agreement on tackling habitat and biodiversity loss around the world.
New clause 24 focuses on taking the battle against illegal deforestation to the next step. This Government and this House took the first important step last year in the passage of the Environment Act 2021, which introduces a requirement for those dealing in potential forest risk products in the United Kingdom to have a due diligence process in place to ensure that they are not sourcing their products from areas of illegally deforested land. That was a substantial and very positive step, and I am pleased to see that the European Union has taken a similar step this week and is perhaps going slightly further in tackling the issue of forest risk products.
But a substantial area that remains untouched both here and in many countries around the world is the question of financial services investing, whether through equities, loans or bonds, in companies that source forest-risk products. We know from the work of organisations such as Global Witness that, over the years, there have been far too many examples of banks knowingly, or sometimes unknowingly, financing the activities of companies that purchase directly from those who are illegally deforesting areas of the Amazon, for example, for beef production or soya production.
We need to extend the work we have already done on forest-risk products, and those who directly deal in them, to the financial services sector and the banks that fund companies that have the potential to participate directly or indirectly, knowingly or unknowingly, in illegal deforestation.
I hope the Government will take this on board, and I am grateful to the shadow Minister, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), for her words of support. New clause 24 would replicate almost exactly what this House has already approved in the Environment Act 2021, translating it into a duty on the financial services sector to carry out similar due diligence to ensure that its work does not support illegal deforestation.
The reality is that these financial services businesses already do due diligence. No major institution simply lends or invests in a business without doing very careful due diligence on where it is putting its money, on the likely return on that investment and on the likely risks of that investment. New clause 24 would not ask them to do something wholly different from what they are already doing; it would simply require them to extend their due diligence into this area, which most institutions, at a senior level, would say is vital to all of us.
My right hon. Friend is making an incredibly important point about an issue I also massively care about, and I totally support the ambition to get some form of regulation in this space. When I was environment editor of The Observer and The Times, I often wrote about deforestation. There is a real problem with doing due diligence on supply chains, as the loggers in Brazil log illegally but tell their intermediaries that they log legally, so the intermediaries say they are logging legally, and so on. That is all quite difficult to trace. If there is not a robust due diligence system, and many people have struggled on that, my fear is that financial services companies will end up not backing any wood product companies at all, as even the legitimate ones would be seen as a risk.
My hon. Friend makes an important point. What makes it possible for big organisations to track their supply chains is the presence of Earth observation data, which many supermarkets now use to understand where they are sourcing from. Interestingly, it is a central part of this week’s proposal by the European Union. The data is available, but it is complicated. I recently had a meeting with a major institution that financially supports companies in Brazil, and it said it is incredibly difficult to track, all the way down the supply chain, where products are coming from. Well, it may be incredibly difficult, but it still has to be done.
New clause 24 would place a duty on financial institutions, as we did with retailers, to carry out proper due diligence on their investments, to understand and to be absolutely certain that the companies they deal with have due diligence processes in place themselves, so they know from where they are buying beef, soya or palm oil and so they work properly to ensure they deliver products from sustainable sources in a responsible way.
We hear warm words coming from the executive suites of our major financial institutions all the time about their commitment to sustainability, to net zero and to being responsible citizens. Sometimes they do it, sometimes they do not. There might be the will in head office, but sometimes a local branch does not deliver. New clause 24 would make it a clear duty on those institutions to do due diligence to make sure they know where products are coming from and so they know where investments are being made. This country has been a leader, and new clause 24 would be one further step in dealing with the blight of deforestation, which affects everyone’s future.
As I have made clear in previous iterations of this legislation, I am very broadly supportive of the aims of this Bill and on the Treasury Committee we have scrutinised it in detail, so I will limit my comments to just some of the huge number of amendments. I love this exercise in democracy where different MPs with different interests come forward with their amendments; I have actually worked with many of them in my life and have direct experience with them.
I absolutely support new clause 27 on freedom of expression, which my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) mentioned. UsforThem, which was founded by someone in my constituency, has done some great work campaigning on schools, but was utterly traumatised by the sudden loss of access to PayPal, and we need due process around that.
On new clause 28 relating to buy now, pay later, which the hon. Member for Walthamstow (Stella Creasy) mentioned, I was involved with the regulation of payday loans, something else that fell between the gaps and needed to be sorted—it was outrageous. I am convinced by her arguments that buy now, pay later is another gap that is not addressed. I am sure the FCA has powers to deal with that already, but I hear her frustration that the Government keep saying that they will deal with it but have not done so, so I urge the Minister to put that on his list of things to take up and deal with.
The same applies to new clause 11, which the Chair of the Treasury Committee, my hon. Friend the Member for West Worcestershire (Harriett Baldwin), talked about convincingly. It is an absolute scandal that huge swathes of the population cannot get access to financial advice and are impoverished as a result because of a failure of regulation, or excessive regulation—we can blame the EU. I was on an FCA taskforce some time ago to try to sort out this problem—I was trying to remember where it went, but it clearly ran into the sand. We absolutely need to deal with this urgently. Again, I take reassurance from the Minister’s comments that he will deal with it as a matter of urgency. I will hold him to that, as, I am sure, will the Chair of the Treasury Committee.
Access to in-person banking is really important. In fact, I negotiated the deal with the Post Office on behalf of the banks to open up post offices to offering banking services. There are actually more post office branches than all the bank branches in the country combined. A lot of people complained to me about the lack of access to certain banking facilities, and I would always point out that they can do those things at their local post office, which they did not know—we need to raise the profile of that.
Opposition Members need to define clearly what they mean by “in-person banking”. There are lots of different things. Do they mean going to ask for a mortgage or just paying a bill, for example? We do lots of different things in different places. The deal with the Post Office is being renegotiated, and I think the main thing there will be to ensure that whatever services we want are put into the negotiations.
Finally, I want to talk about access to free cash. I said in an intervention earlier that I massively support access to cash. Cash use is dwindling—clearly, more people are using cards and other payment types—but we need to make sure that people who do not want to use other means have access to cash and, indeed, access to free cash. I should say—I do not think anyone has remarked on it—that paid ATMs have been dying a death over the last 15 years. There is about half the number now than there was 15 years ago. People pay for only 5% of ATM withdrawals—I never do because I find it offensive to pay to take out my own money. I fully support the sentiment.
However, on new clause 7, there is already a power in the Bill for the FCA to ensure access to cash, and that could include pricing so that the FCA can ensure access to free cash. I have two things to say about the drafting of the new clause. First, it does not stipulate whether it applies to personal or business customers. Traditionally and historically, a lot of business customers have paid for cash-handling services. Is the new clause saying that they should no longer pay for them? It is not quite clear. If they are no longer required to pay, are non-cash businesses cross-subsidising them? Secondly, the new clause does not stipulate whether it applies just to sterling cash and not to foreign exchange. If I was a bureau de change dealer, I would be rather worried about having to offer my services for free.
With those comments, I basically urge the Minister to stand by the various commitments he has made this afternoon. I support the Bill.
I very much welcome the Bill and congratulate my hon. Friend the Minister on listening to and engaging with the points raised by many of us on the Back Benches.
I support new clause 11 in particular—I was heartened to hear what the Minister had to say about it—but may I perhaps reinforce a very simple message about the urgency required on financial advice? We in this country have been blessed with the City of London and many other world-leading financial institutions around the UK. I think I can say with some confidence that London is the financial capital of Europe, if not the world. The world comes here to do business on a variety of fronts. Yet we have very little good access to advice. In fact, if anything, we have a widening advice gap.
On the one hand, we have wealth managers raising their minimums, banks withdrawing from the high street and withdrawing fully from providing investment advice; we also have the retail distribution review, which I supported because it was ending the backhand commission for unit trusts—that was bad for the consumer—but it has resulted in independent financial advisers having to charge more and few of them being used. On the other hand, with all that advice in retreat, we have the Government and all parties saying that we must take greater control of our finances, there are greater pension freedoms and there is a great demand for good advice.
A lot of people of modest means who have no access to good advice fall into that void. They may be tempted, for example, to leave cash in the bank earning a pitiful rate of interest while inflation erodes its value. This is where the law of unintended consequences comes in, because all that regulation that had to be met before one could offer full-blown advice is fine when we are talking about full-blown advice, but there is a middle ground that needs to be covered. I offer a basic statistic that might interest or help those willing to take a particularly long-term view to their financial planning: instead of leaving money in cash, if they invest in equities over the long term—25 years, for example—they stand a very small chance of losing money. There will be volatility, but because they are investing, hopefully, in growing businesses, they will do well, and 97 times out of 100, that will beat cash deposits. That is the sort of advice that banks, building societies and many others could give, without getting too complex about financial planning. It would offer consumers a choice, rather than just letting their cash sit in banks and get eroded. Will the Minister therefore give impetus to the assurance he has given on new clause 11 and really get the Treasury looking at this issue, because there is a halfway house, and we must not stop regulation being the enemy of the good? That is what we are asking for.
I will add one other thing quickly in the minute I have left. Please make sure that our regulators listen to the various trade bodies when it comes to regulation, because we are inheriting—I very much welcome this Bill—a lot of powers from the EU. We are in control of our own destiny, but I take issue with the FCA on a number of points. One of them is that when it comes to investment trusts, there are such things as key information documents. They are an invention of the EU and are misleading about risk and putting consumers at risk of losing money—it is as simple as that. The Association of Investment Companies has said that. By the way, it has also said, in relation to those key information documents, “burn before reading”. Despite that, there has been no meaningful action from the FCA on that issue, and that is wrong. I ask the Minister to make sure that our regulators do not rest on their laurels, realise the greater freedoms they have got and rise to the occasion.