Oral Answers to Questions

Barry Gardiner Excerpts

Tuesday 29th January 2013 Commons Chamber

[Ian Lavery (Wansbeck) (Lab)]

2. How many households no longer eligible for child benefit have opted not to receive it.

[Barry Gardiner (Brent North) (Lab)]

8. How many households no longer eligible for child benefit have opted not to receive it.

[The Economic Secretary to the Treasury (Sajid Javid)]

The Government estimate that in the 2013-14 tax year over 1 million out of 8 million families are affected by the new charge. As of 24 January, over 340,000 recipients have opted not to receive the payment. The charge will raise over £1.7 billion each year to tackle the deficit.

--- Later in debate ---

[Mr Speaker]

Order. Question Time must be conducted in an orderly way. It is not for a Minister to suggest that a Member should start getting up and answering questions. It is Ministers who answer questions, and that is the end of it.

[Barry Gardiner]

Will the Minister discuss with his colleagues in the Home Office and the Department for Work and Pensions the effect of the combined changes that those Departments and the Treasury have made, which mean that a young child in my constituency—a British child whose mother has leave to remain and work in the UK but who is estranged from their British father as a result of his domestic violence—will now not be able to receive child benefit for at least 10 years?

[Sajid Javid]

The hon. Gentleman raises a very specific issue. I think he will understand that I have not looked at that particular concern of his constituent, but I will be happy to look at it in more detail if he provides me with more information.

Income Tax

Barry Gardiner Excerpts

Wednesday 28th November 2012 Commons Chamber

[Mr Gauke]

I admire the hon. Gentleman’s ambition. To be fair, he did not make this point, but, when Labour voted on this matter in the Finance Bill debates, effectively they would have got us to a 40p rate—but there we go. It was HMRC’s assessment that a reduction from 50p to 45p would be relatively inexpensive, and, given the damage the 50p rate was doing to our competitiveness, we believed it would be well worth doing. Of course, all taxes are under review, but the 45p rate remains in place.

[Barry Gardiner (Brent North) (Lab)]

I understand the Exchequer Secretary’s point. He calculates that the reduction in the top rate of tax has been, in his eyes, more than compensated for—five times over, he said—by the other taxes. How, then, will the reduction in the top rate of tax provide the incentive to those taxpayers he wants to domicile here? How will this fivefold increase in tax not send them rushing abroad? I thought that was precisely his point.

[Mr Gauke]

Very simply, different taxes have different elasticities. It is perfectly simple: people are more likely to respond to high direct rates of income tax than to stamp duty. Of course, the OBR took into account the behavioural impacts when it assessed how much revenue would be raised on, for example, stamp duty land tax. As Tony Blair sets out in his memoirs, which I was flicking through last night, direct rates of income tax are not a good way of raising income.

Infrastructure (Financial Assistance) Bill

Barry Gardiner Excerpts

Monday 15th October 2012 Commons Chamber

[Chris Leslie]

That is a pertinent point. The Government seem oblivious to the thoughtful concerns being expressed by industry practitioners about the damage that is being done. Their ideological fixation with austerity has led them to a position in which they have completely pulled the rug out from underneath the economy, and we are still only at an early stage of being able to calculate the damage.

[Barry Gardiner (Brent North) (Lab)]

Will my hon. Friend answer a question on amendment 11, which proposes to add the words “within the United Kingdom” to clause 1(1)? One of the most important areas of infrastructure over the next decade will be energy, and the infrastructure required to meet our energy need will include interconnectors for electricity and gas pipelines that will come across Europe from the Caucasus. I presume that the Bill, as it stands, could incentivise investment in interconnectors and gas pipelines, but would it still be able to do so if the amendment were agreed to, even though parts of the pipelines would obviously be within the United Kingdom?

[Chris Leslie]

It is important to recognise that we want the benefits of any financial assistance to be felt in the UK economy. I shall deal with the details of the amendments in a moment. We believe that the scheme should focus on stimulating growth within these shores, and prioritising resources for infrastructure within the United Kingdom is the right approach. The Minister will undoubtedly point out that, as part of the guarantees under the scheme that the Government announced in July, a £5 billion export refinancing facility was introduced to underwrite the lending commitments of foreign buyers of UK exports. Of course we believe that export credit guarantees can be legitimate and helpful to construction exports, but in times of UK recession, our priorities should lie squarely here at home.

Incidentally, if there is such a great demand for the services of the Export Credits Guarantee Department—which is part of the Department for Business, Innovation and Skills—why does it appear to have underspent its existing budget in the past year? That does not suggest that there is a need to divert resources from domestic infrastructure into bankrolling foreign firms any more than is currently the case. The latest research shows that infrastructure spending within the UK will be of far greater benefit to our economy.

Indeed, the IMF had discussions last week about the multipliers. I do not want to go into too much technical detail, but the Office for Budget Responsibility used a fiscal multiplier of 0.5, which meant that Ministers thought that each pound they cut from public expenditure and capital investment would reduce economic output by only 50p. However, after examining the records of many countries that have embraced austerity since the financial crisis, the IMF reckons that the true multiplier is between 0.9 and 1.7. That has led the TUC to reveal that if the real multiplier is 1.3—somewhere in the middle of the IMF’s range—the OBR has underestimated the impact of the cuts by a cumulative £76 billion, more than 8% of gross domestic product, over five years. Instead of shaving less than 1% off economic growth during this financial year, austerity has potentially depressed it by more than 2%, which helps to explain why the economy has plunged into this double-dip recession. It is self-evident that providing financial assistance to infrastructure projects in the UK will provide a much greater stimulus to the British economy than giving financial assistance to projects abroad. Projects in the UK will boost employment in Britain; providing assistance to overseas projects will not.

Conservative Governments have a dubious record when it comes to underwriting foreign construction schemes. I am referring not only to the most recent, and much vaunted, export enterprise finance guarantee scheme, which assisted only five firms and has now folded because it was such a flop. I am also thinking of historic occasions such as that relating to the Pergau dam in Malaysia, which involved a too-close relationship between the aid being given to a foreign country and the trade that was taking place, particularly in relation to arms exports. It is very important that we learn the lessons from past failures when it comes to finance for foreign infrastructure schemes, and we particularly need to start prioritising schemes here in the UK.

--- Later in debate ---

[Chris Leslie]

I would not want the amendment to have that particular effect, and I do not think it need have it, especially if the Government were in a position to frame the legislation in such a way as to see this potential £50 billion focused very much on the needs of our own people in our own country. I hear what my hon. Friend says, but I do not think this is the be-all-and-end-all of Treasury expenditure, as there are other ways and means of dealing with those few projects that might have a cross-border character. When it comes to the underwriting capacity of this particular Bill, we think it important to prioritise investment here at home.

[Barry Gardiner]

My hon. Friend will be aware that the perimeter of Northern Ireland is defined as the six counties, and that the continental shelf offshore was never included in the original agreement drawn up by the Foreign Office. [Interruption.] I realise that my hon. Friend the Member for Foyle (Mark Durkan) knows this only too well. What that means is that we need clarity in respect not only of amendment 11, but of the “Short title, commencement and extent” provisions. At the moment, the Bill would preclude offshore wind development from the Northern Ireland coast. These matters may seem abstruse, but as constituted, the Bill does not make it clear that such infrastructure development would qualify for support. That question is as much one for the Minister as for my hon. Friend the Member for Nottingham East (Chris Leslie), but it seems to me that the question needs to be answered.

[Chris Leslie]

I am not sure I agree with my hon. Friend on the particular example he provided. It is quite clear that there would be benefit for the economy within the UK if those offshore schemes proceeded. The frustration I have is with the rather hasty drafting. Yes, we accept that it is necessary to frame a scheme that has sufficient flexibility, but there are dangers in enacting legislation that does not focus sufficiently on significant financial schemes, employment and jobs here in the UK. That is the purpose of the amendment.

--- Later in debate ---

[Sajid Javid]

I can confirm that CCS facilities are not excluded from the definition of infrastructure. If a project sponsor wanted to suggest such a project, it would be duly considered by the team under the scheme’s terms.

Finally, it would be difficult to define “national significance” and that may take away from the overall intention of the Bill. Perhaps I do not need to make that point because it was made very well by the hon. Member for York Central. I therefore ask the right hon. Member for Greenwich and Woolwich not to press his two amendments.

[Barry Gardiner]

I welcome the speech by the right hon. Member for Wokingham (Mr Redwood), who sought to tease out the Minister. Unfortunately, I am not sure that the Minister has provided the clarification that was sought. In clause 1, subsection (1), which provides that money may be provided by Parliament, is negated by subsection (5), which states that it would be provided on the say- so of the Treasury. This is a Government Bill that avoids real scrutiny by Parliament. I suspect that that is the objection of the right hon. Member for Wokingham, as well as my own.

I am grateful to the Minister for his clarification on interconnectors and gas pipelines. That is an important point.

Small Charitable Donations Bill

Barry Gardiner Excerpts

Tuesday 4th September 2012 Commons Chamber

[Miss Smith]

I should make it clear that I am in no way refusing to have such a meeting. I would be happy to take up that point. The scheme will be complementary to the gift aid scheme. Some charities have struggled to claim gift aid on certain types of donation—for example, cash donations whose donors it might be hard to persuade to stop and fill out a form. However, that is a different type of problem from the one to which my hon. Friend has just referred. I shall be happy to take up his point in greater detail.

I shall explain why we have had to put in place the three-year matching rule. There is an understandable reason behind it, and I think that charities will find it reasonable to work with. I am keen to avoid a situation in which the new scheme might become vulnerable to exploitation. None of us would wish to see funds that have been directed towards charities and the good causes they support being diverted or lost to fraud. I certainly hope that all Members cleave to that principle.

As I have said, HMRC pays around £1 billion a year in gift aid to charities, and such large sums inevitably attract fraudsters. Fraudsters scrutinise any payment system for weaknesses, and we have to be aware of that in designing any new scheme. As the new scheme is based on cash donations, records of the donor will, by their very nature, be limited. It could be said that this makes it even more attractive to fraudsters, so the very qualities of the scheme that are designed to make it work for charities—in other words, the ease of putting some money in a bucket—also help fraudsters. We have needed to find ways to protect the scheme from abuse, without adding to the paperwork that it might be feared would sit along small donations. One way we have tried to do this is by retaining the link to the gift aid scheme, which has tried-and-tested methods to protect against fraud. This also fits in with the desire, as I have said, for this scheme to be complementary to gift aid, not to replace it.

You will be able to appreciate, Mr Speaker, the idea I am developing of the need for charities to have a compliance record that will give HMRC a little more reassurance that the scheme is well protected against fraud. I am confident that every Member supports that. Charities with a good compliance record will be able to access the quite generous top-up payments available. Linking the scheme to claims made through gift aid gives not only HMRC, but all of us in this House, vital reassurance that checks and balances are in place.

[Barry Gardiner (Brent North) (Lab)]

We all appreciate the need to ensure that the scheme is not open to fraud. That will be agreed across the House. What assessment, however, has the Department made of the number, the size and the scope of the charities that the Minister believes will be able to access the benefits of the scheme, with these conditions attached? The industry seems to think that the number, size and scope of such charities will be severely curtailed.

[Miss Smith]

We hope that this scheme will be well used, and I have already set out that aspiration. I have set out the aspiration, too, that the scheme will get £100 million to charities. The hon. Gentleman will be aware of the numbers set out in the impact assessment, which has certainly been made available to him. The key point is that the scheme needs to be open and, as we have said, worth while for charities to access, which I think it will be. Equally, we need to be able to keep track of the possible costs of the scheme, which I am coming on to deal with. I can reassure the hon. Gentleman that a pool of around 100,000 charities have claimed gift aid in the past four years. It might be possible to take that number as an estimate of the number of charities that could be eligible to apply to the scheme. We hope that take-up will be high, but by its nature, it is somewhat hard to predict at this point, but I am not suggesting that all those 100,000 charities will put in claims.

--- Later in debate ---

[Cathy Jamieson]

The hon. Gentleman makes an interesting point and that is precisely the kind of thing that the Bill Committee will want to consider very closely. Anything that makes reviewing and improving the Bill once it has been enacted better is worth considering and, potentially, supporting. I also hope that we will see where we can improve the primary legislation to make it less likely that we will need to revisit or revise it quickly. I hear what he says and I am sure that we will have further such discussions in Committee.

Let me return to some of the issues raised by the charities and the voluntary sector. The Bill proposes that an eligible charity must have been registered with HMRC for a minimum of three years, have made a gift aid claim in three of the past seven years and not had a penalty imposed as a result of a gift aid claim. One obvious concern raised by many small charities who rely on small cash donations is that they will not necessarily have a three-year history of claiming gift aid. They feel that that has the potential to disadvantage them from the start. I shall say something else about that shortly.

Another area of concern is the matching provision outlined in clause 1, and the Minister has given us some information about her thinking and why she decided to set the ratio at 2:1 rather than at the point she originally intended. In order for a charity to take full advantage of the scheme, claiming the maximum £1,250 on £5,000 of small donations, it will need to have claimed at least £625 in gift aid in the same year. Charities say that that raises a number of potential problems. As we have heard, many small charities may not be registered with HMRC, and unless they register they will not be eligible to join the scheme. There is a worry that the three-year period may not give people an incentive to do so. Many may simply decide that the scheme is too complex, particularly some of the small charities that do not have the resources or an extensive staff network; they may just rule themselves out.

Additionally, many small charities only receive cash donations, so they often do not raise enough to claim the maximum £625 in gift aid in a year that they would need to benefit from the scheme. Ministers may want to give charities some reassurance about that, because charities that claim less under gift aid are at a direct disadvantage as a result of the matching provision, compared with those that are better able to use the scheme. That could further reduce access to the very small charities that the Minister said she would like to see benefit.

The NCVO recommends that the matching 2:1 principle is dropped, and would welcome steps to open up the scheme—for example, so that start-up charities and those currently not registered for gift aid had the opportunity to register and get into the system sooner. I heard what the Minister said about anti-avoidance measures and potential fraud, but we want to ensure that we do everything possible to allow smaller charities that try to respond to local issues, or are set up to respond—not quite on an emergency basis—to a particular issue, to get as much benefit as possible.

On the connected principle, charities have identified additional areas of concern in clauses 4 to 9, which cover the rules intended to stop charities and community groups fragmenting in order to be eligible for greater amounts under the scheme. Clause 5 defines the meaning of “connected” using section 993 of the Income Tax Act 2007, where a person who has control is “a trustee”, or a person who

“has power to appoint or remove a trustee…or…has any power of approval or direction in relation to the carrying out by the trustees of any of their functions.”

However, charities are not connected

“unless the purposes and activities of the charities are the same or substantially similar.”

Once again, charities and the organisations that represent them have pointed out that in reality many trustees will serve on more than one trustee board, which is particularly likely at local level. The concern is that there could be an impact on the charity’s eligibility to join the scheme if a trustee sits on the boards of two organisations that are considered similar. Charities suggest that that could easily occur, because if an individual has expertise or an interest in a particular area of service provision, they might sit on the boards of two comparable organisations. It is important that the rule is not seen as a barrier to attracting people or appointing high quality trustees with experience and expertise. I hope the Minister will look at the issue and offer some reassurance and, if necessary, some changes so that we get the maximum benefit from the Bill.

It is highly unlikely that an organisation would be incentivised to fragment to increase its accessibility to the scheme, which has been given as the main reason behind the provision. The majority of charities simply want to get on with doing the job—I see the Minister nodding. Of course they want to maximise their resources and the last thing on their minds is setting up different structures to fragment to obtain some other advantage—as it has been described. Will the Minister consider providing further clarification so that charities with similar purposes will not be disadvantaged simply because they have a common trustee?

[Barry Gardiner]

Does my hon. Friend agree that because of the matching requirement the conditions to stop fraud in gift aid will already be followed through? There is not the capacity for the extent of fraud that the Treasury fears, because it is already captured by gift aid requirements.

[Cathy Jamieson]

My hon. Friend articulately outlines one of the points that some of the charitable organisations make. They want a balance between ensuring that there is no fraud and maximising the income for charities. Many of them believe that the current provisions give the protection for that.

A number of organisations have raised concerns about community buildings. Clause 6 attempts to recognise that some charities have multiple independent local groups, which should not be excluded from the scheme if they would have been eligible as completely separate organisations. Having run a charity in a previous existence, I know something of the practicalities and difficulties of trying to work in that context. I recognise that it is difficult to get this right and we will have to return to this in Committee.

The proposal is that the use of a community building always should serve as a proxy for assessing eligibility of the independent local groups. Clause 6 stipulates that charities running activities in separate community buildings, which could be considered independent, might be entitled to an additional specified amount under the scheme. The additional community building limit applies only to small donations that are made to the charity in the community building in the tax year while it is running charitable activities. The charities tell us that, once again, that could be problematic.

Beneficiary and donor groups are usually separate, and it is often the exception, not the rule, that funds are raised during charitable activity, so the charities are saying that the provision risks disadvantaging those charities for which it would not be appropriate or possible to raise funds in that way. They give the example of a support group for people who are recovering from addiction problems, which would not be expected to raise funds during counselling or one-to-one sessions, whereas a church or a church organisation might often take up a collection during meetings. It is more relevant, therefore, that the funding is directed towards the activities of the local group, rather than that donations are made in the building during charitable activities.

Clause 7 stipulates that a charity running activities in separate community buildings, which could be considered independent, might be entitled to an additional specified amount with respect to the scheme

“if it carries out charitable activities with a group of 10 or more people in the building on 6 or more occasions in the tax year”.

However, specifying the number of beneficiaries could limit the types of organisation that may access the scheme of their own accord. Again, I hope that the Minister will listen to what the charities are saying about that. They are also concerned that some community groups are based in a community building that is itself a registered charity, with a number of non-registered organisations carrying out activities in an umbrella organisation of some kind underneath that. It is not entirely clear to the people who will have to work the scheme on the ground how the rules apply in such a situation. Perhaps the Minister can clarify that. If not, we shall return to the matter in Committee.

There are a number of other situations in which the criteria might not apply. Local groups of charities that deliver services such as counselling to individuals or small groups might well not meet the 10-people rule, although they might be doing good and valuable work. In local groups of conservation or animal welfare charities, the individuals present might be volunteers. One concern about the Bill is when a person is a volunteer, a staff member or a beneficiary of the charity. The reality of many of those organisations is that people might occupy each role at different times, or indeed occupy some of those roles at the same time. There could also be problems where local groups carry out home visits and service delivery in the buildings of partner organisations.

There are some limitations to such an approach, which sees the links with the community buildings as the most effective way to identify an independent local group. The concern is that, for those groups, the Bill restricts eligible fundraising activities to those conducted in the building. If that is the case, it is unhelpful and will disadvantage those groups compared with other charities using the scheme, where no such restriction is in place.

Clause 8 stipulates that a community building cannot include a building, or any part of a building, used wholly or mainly for commercial or residential purposes. That point has already been referred to. It is said that the provision aims to ensure that groups run from homes and commercial entities such as charity shops cannot access a separate entitlement to the scheme.

The intention behind the provision is clear, but once again a number of challenges are posed. For instance, many charities that may be part of a group structure run activities that are residential in nature. Hospices have already been mentioned. Further examples are care homes and respite care. It will sometimes be difficult to decide what the main purpose is. It would be interesting to hear Ministers’ views on that. It may be difficult for those charities to access the scheme independently, as they may be entitled to only one limit across the whole group structure, unless they are awarded special consideration. Charities or community groups carrying out contracted services may also be considered commercial. That is a genuine issue for some of the charities that are delivering services on which many of our constituents depend.

If the additional limits are awarded only to groups carrying out charitable activities, this should be sufficient to restrict charity shops from accessing the scheme, if that is the purpose. Commercial activity that is carried out as part of the delivery of charitable activities—so-called primary purpose trading—should be exempt from falling under this definition.

A number of charities and voluntary sector organisations have expressed their concerns about the Bill, and the Minister gave us some information about involvement in consultation. The Bill has also raised concerns among some in the legal profession, including the Law Society of Scotland. It supports the policy intent of the Bill and suggests that it is an attempt to strike a reasonable balance between pragmatism and identifying fraud, so the Minister has the support of the Law Society of Scotland in that context. However, the LSS makes the point that it is difficult to identify a way of achieving in practice what the Bill attempts to do in theory. It suggests that flexibility be built into the legislation, as has already been mentioned this afternoon, or that there should be provision for a review of how it is working, as it may prove easier to identify ways to widen the scope of the legislation once it has been in operation for a time.

The Law Society of Scotland echoes the points made by NCVO and others that the legislation is likely to have limited impact and that it will not catch all the charities that could usefully benefit from it. The LSS goes on to highlight some specific issues about the drafting of the Bill. I do not want to spend too much time dealing with those this afternoon, but I shall set out a couple. On clause 3, the LSS has voiced concerns that £20 is too small an amount and that in certain situations it may be difficult for managers to police. It notes that the schedule to the clause provides that

“Where a gift of cash is made to the charity and its managers do not know whether the gift is £20 or less, the condition in sub-paragraph (1)—

With which I am sure the Minister is au fait—

“ is to be treated as met if the managers have taken reasonable steps to find out.”

The Minister and I have had enough exchanges in Committees to know that there are always questions about what “reasonable steps” in such a case would mean. This is another example where something that makes perfect sense to those drafting the wording of a Bill may not easily translate into practice and I, like the LSS, am left wondering what the “reasonable steps” envisaged might be in practice and whether the Minister is proposing guidance on this point.

I seek clarification from the Minister whether the provisions laid out in clause 12 are intended to provide continuity where a charity opts to change its legal form. Does she agree that although it would be sufficient in respect of incorporations, more would be required in the case of mergers? Does the primary legislation need to be wider in that respect?

Although the Bill of course covers the UK and contains provisions for different parts of the United Kingdom, particularly the exception for Northern Ireland, the Minister will be aware that there is different legislation for charities in Scotland. Concern has been expressed by the Law Society of Scotland that the definition of “charitable purpose” in the Bill is the English definition. Will the Minister clarify whether the wording in clause 17(2)(a) is necessary or desirable in view of the terms of sections 7, 8 and 356 of the Charities Act 2011? Scottish charities will need to be aware of the different legal definitions that will apply to them for different purposes.

I know that all probably sounds pretty technical when broken down clause by clause, and there might be Members on both sides of the House whose eyes are now glazing over because of all the detailed points I have made, but it is an example of what we are going to have to deal with in Committee. However, I think that it is worth reflecting on the fact that these issues have been raised because charities have told us that the changes will affect people in our communities.

The CFG has highlighted the example of a local branch of a national charity that works with disabled children. The branch is independently managed and holds its own business contracts. It runs in-home services for children and young people and focuses on developing independent skills. It occasionally holds social groups for its beneficiaries in different venues, depending on the cost of rent and availability. A local commercial hotel and leisure club often provides it with low-cost space to hold such events. The branch regularly claims under gift aid and often fundraises with collection buckets in the local area and through events at local schools.

One of the concerns that have been raised is that that organisation might be unable to claim gift aid fully under the proposed scheme because, as a local branch of a national charity, it might be considered to be connected and so would fall under the community buildings rules. As its services are not linked to one community building, it might be unable to claim for small cash donations. Residential and commercial buildings are not eligible, so it will not be able to register off the back of regular meetings in beneficiaries’ homes or the local hotel that provides low-cost space. One-to-one services do not count, as the legislation stipulates that meetings in community buildings must take place with at least 10 people present, not including staff and volunteers, and at least six times a year. Donations are not always made during the course of its charitable activities or within a community building used for those activities, but rather through separate fundraising events and activities. That picture of what a typical charitable organisation or set-up involves is one that we will have to look at more closely in Committee to ensure that absolutely everything is put in place to assist them.

In conclusion, the scheme is a welcome addition to the gift aid landscape and could be of particular benefit to small charities. We know that millions of pounds in potential gift aid is left unclaimed every year, and the scheme could go some way towards bringing some of that money back to the beneficiaries who need it most. We know that giving small amounts of cash is the most common donation method, and it has been estimated that in 2010-11 the average person would have donated £11 through charity buckets or donation tins.

Therefore, charities are asking the Government to simplify the scheme substantially to make it fairer and allow improved access for smaller organisations and equal access for similar charities. The abiding principle they want to see adopted is that the scheme should be easy to access and not tied up in red tape—something I am sure Ministers will absolutely wish to ensure. It would be helpful if the Minister gave some response to the concerns about the matching ratio requirement, the eligibility criteria and the community buildings rules. We have also heard some concerns about gift aid, such as the burden on charities of its being a paper-based system in an increasingly digital world. Indeed, the comment has been made that it is perhaps time to look again at the whole gift aid system and ways of bringing it up to date. I would be interested to hear her views in that regard.

Finally, I welcome what the Minister said about being committed to the consultation process and the new public reading stage for Bills, but I must reiterate the comments I made in my earlier intervention. It has actually been quite difficult for members of the public to find the information on the Cabinet Office website and take part in the consultation. If this is a pilot for the future, I hope that she will consult colleagues on how the whole experience could be improved. She has updated us on a number of comments that have been made, but perhaps she will also give us a specific time scale for when the information will be given to Members so that we have the opportunity to engage fully with the organisations that took the time to contribute.

The Opposition support the principle of the Bill and want to see it progress to Committee, where it needs to be amended to reflect the views of those who have contributed so far and the needs of the charities and community amateur sports clubs that do so much good work in our local communities.

--- Later in debate ---

[Barry Gardiner (Brent North) (Lab)]

I apologise for having been absent from the Chamber for the past couple of speeches. I was present at the beginning of the debate, however.

I wish to right a calumny. This summer I spent a couple of days clearing out my garage, and one of the things I threw into the skip was a short tome entitled, “The achievements of the Major Government”. A friend of mine had given it to me at the time of the 1997 general election, and its pages were, of course, blank—it was a joke. I recall, however, that John Major set up gift aid in his 1990 Budget: he instituted one-off charitable donations being made free of tax for gifts of, I think, £600. That proved extremely popular with charities, and the provision should have been written into that tome, even though it was an achievement not of John Major’s Government but of his time as Chancellor. Gift aid has been widely welcomed by Members on both sides of the House and by charities throughout the country.

That £600 limit was reduced to £400 in 1992, and ultimately a Labour Government abolished it entirely in the Finance Act 2000. In the 2007 Budget, the then Labour Government announced a number of measures to support the take-up of gift aid. The then Chancellor also announced, however, that the 10% starting rate of tax would be abolished from 2008-09 and that income tax on earned income would be charged at two rates: the basic rate of 20% and the higher rate of 40%. The gift aid scheme allows a charity to recover sums at the basic rate, so the cut in the basic rate from 22% to 20% hit them hard. That was why after my right hon. Friend the Member for Edinburgh South West (Mr Darling) became Chancellor he announced in his 2008 Budget a new transitional relief for charities, to compensate them for the impact of that basic rate cut. At the time—in 2008-09—the relief was projected to cost £60 million, and then £105 million in 2009-10 and £120 million in 2010-11. That was greatly welcomed by the charitable sector.

In 2010, Peter Fanning, chief executive of the Chartered Institute of Taxation, submitted a report on improving gift aid based on the gift aid forum’s discussions. Although the report did not discuss donations outside the scope of gift aid, one of its principal recommendations was that

“small charities are particularly vulnerable at times of economic stress and some find dealing with Gift Aid difficult. Their needs should be a priority.”

In December of that year, the then Economic Secretary, the right hon. Member for Putney (Justine Greening), wrote to Mr Fanning, and was generally supportive of his report, but ruled out extending gift aid transitional relief on the grounds that prolonging its life would not target support effectively and that it was always “intended to be temporary”—we have heard that from the Dispatch Box today, too, from the current Economic Secretary. In response to a parliamentary question, the then Economic Secretary said:

“Gift aid transitional relief was introduced as a temporary measure to give charities time to prepare their financial plans in response to a lower rate of relief from gift aid. By April 2011, when the relief ends, charities will have had four years since the announcement of the 20% basic rate of income tax to prepare for the change. In 2009-10 charities benefited by £105 million from this relief and it is forecast that they will benefit by £120 million in 2010-11. The Government believe the £100 million transition fund announced in the spending review will better target support on charities most in need.”—[Official Report, 14 March 2011; Vol. 525, c. 92W.]

Much of today’s discussion has been about those charities most in need, and that will be the focus of my remarks.

In the 2012 Budget, the Government confirmed their plans to introduce a small donations scheme from April 2013. Under the scheme, charities are entitled to claim top-up payments on income from cash donations totalling up to £5,000 a year. Qualifying cash donations can be up to £20 each, rather than £10, as initially proposed—we are grateful that the current Economic Secretary listened to some of the objections raised by the industry and amended some of the initial proposals. The size of the top-up payment on each small donation will be equivalent to the tax relief given under gift aid so that a charity can claim a maximum of £1,250 a year.

The Bill requires work in Committee. Its proposals are complex and run the risk of disadvantaging some charities. Eligibility for the scheme is limited. That will prevent those who need it most from using it. The amount a charity can claim being linked to the amount of gift aid already claimed—the matching principle—will disadvantage the charities that most rely on small cash donations, as they may not have made sufficient gift aid claims to be able to take full advantage of the new scheme. Charities need to have a three-year record of claiming gift aid, but many small charities that rely on small cash donations simply will not have established that. This Bill was part of proposals designed to meet the problems that smaller charities have in being unable to access gift aid. Creating this matching requirement is therefore going to prove very difficult for them.

The Economic Secretary talked about the problems of fraud and the need to introduce such conditions for small charities, in order to avoid the problems that might arise through charities being able to stipulate the amount of small donations they had received. All Members will recognise the need for the Bill to include protection against fraud for the taxpayer, but in so doing it proposes that a charity has to have been registered for three years, to have made a gift aid claim in three of the past seven years, and not to have had a penalty imposed as a result of such a claim. I ask those on the Treasury Bench to consider whether this is not a question of “belt and braces”, and whether those provisions could be relaxed.

Clause 1 includes the matching provision. Here, the amount that a charity can claim is limited to £5,000 in donations a year, or, if less, double the amount of donations that have been put through the gift aid process. This provision matches the amount that a charity can claim with the amount it has claimed on gift aid at a ratio of 2:1. Therefore, for a charity to take full advantage of the scheme—claiming the maximum of £1,250 on £5,000 of small donations—it needs to have claimed at least £625 in gift aid in the same year. That is precisely what is so difficult for many small charities to achieve, and the Treasury recognised that in saying that this process would be “without form-filling”. When the Chancellor introduced this measure, he said it would be good for the bucket collectors because it would be without form-filling. However, that will be required, and it is precisely that threshold that many of these charities will find so hard to match.

Many small charities are not even registered with HMRC, and the three-year period will not incentivise them to do so, because they can see the scheme’s possible returns recede into the future. Many small charities receive such small amounts in cash donations that they do not claim gift aid at all. I do believe that these provisions are intended to help the smallest charities, but in fact they will hold that intention back. That is why, when I asked the Economic Secretary about her assessment of the number, size and scope of the organisations likely to benefit from the scheme, I was disappointed by her response. She talked about her “aspirations” regarding the number of charities that might try to access the benefits of the scheme, rather than talking about a real assessment by the Treasury Bench. In summing up the debate, can the Exchequer Secretary give us the Treasury’s actual assessment of the likely number, size and scope of the charities that are likely to benefit from the Bill if these restrictions and regulations are kept in place? If an assessment has been made, we need to know precisely what the answers to those questions are, to ensure that the Bill will deliver to the small charities that Members in all parts of the House want to benefit from it.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

We have had a thoughtful and constructive debate, although the hon. Member for Harrow West (Mr Thomas) perhaps introduced a party political element in the past few minutes.

Throughout the debate we have heard hon. Members from all parties raise thoughtful points. My hon. Friend the Member for Dartford (Gareth Johnson) made the point that the purpose is to complement, not replace, gift aid. The hon. Member for Clwyd South (Susan Elan Jones) gave us a history of charity law and taxation going back to 1601, although she missed a bit before returning to more recent years—the House is probably grateful that she did not run through the 17th, 18th and 19th centuries in detail. My hon. Friend the Member for Stafford (Jeremy Lefroy) pointed out the need to strike a balance between simplicity and preventing fraud. A number of speakers returned to that point, including the hon. Member for Banff and Buchan (Dr Whiteford), who raised a number of detailed points, as did my hon. Friend the Member for Warwick and Leamington (Chris White). I know that he has also done so in correspondence with my hon. Friend the Economic Secretary. As has already been pointed out, he also highlighted the generosity of the good people of Leamington. The hon. Member for Foyle (Mark Durkan) also set out a number of detailed points, as did my hon. Friend the Member for Milton Keynes South (Iain Stewart) and the hon. Member for Brent North (Barry Gardiner). I hope to address as many of those points as possible this evening, but I am sure that the Public Bill Committee will enjoy scrutinising them very thoroughly.

I am grateful for the widespread support from across the House for the principle behind the scheme and I hope to be able to respond to the issues raised, but before I do so let me recap. As my hon. Friend the Economic Secretary set out at the beginning of the debate, the new scheme is not designed to replace gift aid. It complements it, allowing charities to claim for the cash donations they receive for which it is too difficult or impossible to get a gift aid declaration. The scheme is not intended to replace gift aid or to be a substitute for it in cases where it is straightforward to operate for charities of all sizes. Whenever and wherever possible, we want charities to make full use of gift aid, which is a very successful tax relief that contributes more than £1 billion annually to the charitable sector’s income.

A number of Members were concerned about complexity in the scheme and the fact that it might exclude the small community charities that could benefit most from it. Let me assure Members that it will not do that, as the basic scheme is very simple. Claiming on donations under the scheme will be simple, with no requirement to obtain a gift aid declaration from donors and with claims being made on the same form used to claim gift aid payments. Charities will not be required to keep any additional records of the money received over and above best practice record keeping. As the scheme is simple and based on cash donations and will have limited donor records, the scheme could, however, become attractive to fraudsters. I am sure that all hon. Members will agree that we must protect the scheme from abuse and one way of doing that is by linking it to gift aid.

It was said that the gift aid small donations scheme excludes those charities that would most benefit from it—the small charities that do not currently claim gift aid—but it is right that it should be a requirement for charities participating in the small donations scheme to claim gift aid alongside it. Gift aid is easy to use if the charity is simply collecting donations of money and it will soon become even easier when HMRC introduces its new online system for claiming gift aid next year. We hope that the small donations scheme will encourage those charities that do not use gift aid to do so.

The design of the scheme, with a requirement for a three-year successful track record of claiming gift aid, is one way to counter the fraudsters and protect the scheme from abuse. It is a straightforward way to protect the scheme from exploitation without reintroducing all the paperwork that it is designed to remove. I am sure hon. Members will agree that it is only sensible for the scheme to have a test, such as that three-year check, so that HMRC can be more certain that a charity will not abuse the scheme. Reducing the three-year limit, as has been suggested, would significantly increase the cost of the scheme.

Let me turn now to the point specifically raised by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) about trustees and the concern about charities that are connected by a shared trustee. The Bill sets out that for trustees to be connected they would have to have purposes or undertake activities that were the same or substantially similar. If someone was a trustee of two charities that were completely unrelated and did very different sorts of charitable activities, those charities would not be connected under the scheme. We received some feedback on that rule during the consultation and adapted it to meet concerns that charities would unintentionally be caught by the rule as originally proposed. We are looking further into that, however, to see whether it would be possible to amend it further to ensure that no charities are caught unintentionally.

Another concern that has been raised is the community building rule and the question of access to the scheme for those charities doing similar work at a local level. The community building rule has been written into the Bill to ensure fairness of access and to avoid significantly unfair results. Most charities will not need to worry about the rule because they are independent and collect less than £5,000 in small donations, so they will get their £5,000 allowance regardless of their activities or where they collect the donations. But we sought fair access to the scheme. As my colleague the Economic Secretary said, in developing the scheme, it soon became clear that without some special rules, some charities would benefit hundreds or even thousands of times more than others, based purely on the way they were historically set up. That clearly is not right, so the community building rule was introduced to avoid significantly unfair results between charities carrying out similar activities in local communities, either as independent charities under an umbrella organisation or as local groups operating as part of a single large charity.

The vast majority of charities will not need to concern themselves with the extra allowance. For those that do, there will be detailed guidance to ensure that it is simple to access. It is important to remember that the basic principle of the scheme is that each eligible charity should be entitled to top-up payments on a maximum of £5,000 in donations. I am sure hon. Members will agree that we are doing the right thing to ensure fairer access to the scheme for charities that would otherwise lose out, just because of the way they were historically set up.

The intention of the community building rule is not to allow all buildings where charitable activities take place to receive a separate allowance of up to £5,000 of small cash donations; it is to remove the worst inequalities that would otherwise exist, so that some charities would be able to claim hundreds, perhaps thousands, times more payments under the scheme than others undertaking similar activities. We believe that the rule as drafted achieves that objective.

I want to pick up a point about the definition of charitable purpose raised by the hon. Members for Kilmarnock and Loudoun and for Banff and Buchan and about its application in Scotland as well as in England, given that charitable purpose is being used in the English definition. Given that top-up payments are not a tax relief, clause 17(2)(a) makes it clear that the definition of charitable purpose according to the law of England and Wales is to be applied across the United Kingdom. The hon. Member for Banff and Buchan raised an important point about the Bill applying across the UK, and said that we should ensure that devolved issues are considered. I assure the House that the devolved implications have been explored and agreed with policy administrators in all the devolved Administrations.

The hon. Member for Kilmarnock and Loudoun and my hon. Friend the Member for Stafford referred to the £20 limit and asked what is meant by managers taking reasonable steps to find out whether a gift was £20 or less. Charities will be expected to have a process to ensure that their staff and volunteers do not deliberately include gifts of £20 or more as small donations. HMRC is developing guidance to explain the steps it would be reasonable for charities to take, but those steps will be proportionate to the risk because we want to ensure that the rules are applied with a light touch and give charities maximum flexibility. The aim of the scheme is to allow a top-up payment without a gift aid declaration on small donations, and we think £20 covers that. For larger donations, charities are more likely to be able to ask the donor for a declaration. We have already increased the limit from £10 to £20 following earlier representations.

Another issue raised by the hon. Member for Banff and Buchan related to donations by text—which are growing in use—cheque or credit card, which are not allowed under the scheme. The aim of the new gift aid small donations scheme is to allow charities and community amateur sports clubs to claim a gift aid-style payment on cash donations received in circumstances where it is difficult to collect a donor’s details or where donors may be reluctant to give them. As a donor may be giving details to the charity through other channels, and the extra amount of information needed for a gift aid declaration is therefore relatively small, we are focusing the scheme on cash. Where a charity has an ongoing relationship with a donor, we believe it should use gift aid if at all possible.

In an intervention and in his speech, the hon. Member for Brent North asked about the Treasury’s assessment of how many charities would take up the scheme. We estimate that around 80,000 individual charities will claim annually by 2016-17. Some charities will make extra claims on behalf of their local groups under the community building rule and some of those local groups may make claims for gift aid on behalf of their parent charity. However, it is only an estimate, so the take-up rate could be higher or lower. The fundamental methodology for costing the scheme, at around £100 million, as my hon. Friend the Economic Secretary pointed out earlier, was signed off by the independent Office for Budget Responsibility in the 2011 Budget. The final numbers, including assumptions about local groups, will be submitted to the OBR for approval at the next fiscal event.

[Barry Gardiner]

I am grateful to the Minister for answering the question directly. Could he be slightly more specific than just the number of groups? The concern is not just about the number of charities, because they may be medium-sized or larger; it is about their nature, scope and size. Does he have any evidence about that from Treasury assessments?

[Mr Gauke]

More information may be available during the Public Bill Committee—the hon. Gentleman looks like an enthusiastic volunteer. My hon. Friend the Economic Secretary pointed out earlier that a pool of about 100,000 charities have claimed gift aid in the past four years, and we think about 80,000 of them will make a claim under the scheme.

To return to the central point, there is a reason for linking the scheme to gift aid: to prevent fraud and ensure that the money goes to genuine charities. I am sure we share the belief that the measure is the best way of doing that. I hear the concerns that have been raised about smaller charities that may not submit gift aid applications, but we have to remember that the scheme involves paying out taxpayers’ money, so we need to ensure that it goes in the right direction.

To conclude, in designing the gift aid small donations scheme the Government have listened to the sector and made a number of changes following consultation. We reduced the level of matching required between gift aid claims and donations under the scheme, to make it easier for small charities to claim. We refined the rules for better targeting when charities are connected to one another, and we increased flexibility for connected charities to share their allocation under the scheme. However, I remind hon. Members that the overall objective of the scheme is to allow individual charities to claim a top-up payment on up to £5,000 of donations. The Bill will provide much-needed additional financial support to the charitable sector in these tough times. I therefore commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

small charitable donations bill (programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Small Charitable Donations Bill.

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 30 October 2012.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Angela Watkinson.)

Question agreed to.

SMALL CHARITABLE DONATIONS BILL (MONEY)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Small Charitable Donations Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Angela Watkinson.)

Question agreed to.

Finance Bill

Barry Gardiner Excerpts

Monday 2nd July 2012 Commons Chamber

[Charlie Elphicke]

I was not there at those times, I did not sit through those Bills and I cannot comment. I am only a newish Member, elected in the 2010 general election, and I have personally been pretty consistent in making the case that we should not have tax avoidance and should be far more vigorous in tackling tax avoidance by individuals and by corporates. Corporate tax avoidance is particularly important, but it is not on the subject of this debate, so I shall move on quickly before you call me to order, Mr Deputy Speaker.

There is an issue and we need to tackle it. Overall, I want the allowances for the least well-off to be higher so that we take more of them out of tax. I think the Government have taken the right Budget decision on the higher rate numbers and have taken a difficult but principled decision on age-related allowances. The Government have struck the right Budget balance.

[Barry Gardiner (Brent North) (Lab)]

“No cash losers”: I must say that I think that those are the most disingenuous words that I have heard in this Chamber for a great many years. I remember that in the Budget the Chancellor was not particularly keen to draw the House’s attention to this change.

In the Budget, the Chancellor glossed over the whole issue of the granny tax very quickly indeed, yet only a year before, he came to the Dispatch Box on Budget day and said that he would not hide anything—he would tell it like it was. He would tell the bad with the good. That was just a year before, but in this year’s Budget, he glossed over the granny tax altogether.

“No net losers”—how accurate is that if we look at the total picture for pensioners? For existing pensioners, the age-related allowance will be frozen. It is interesting that the year before, it was not the Chancellor, but the Prime Minister, no less, who promised that the allowance would increase in line with the retail prices index. “No net losers”—those who believed the Prime Minister’s promise to pensioners might be excused for feeling that they were losers under the change. That is what happens. People listen to what the Prime Minister says, and make their financial plans on the basis of it: “The Prime Minister promised me, so of course I can expect to have that.” Well, it did not happen, and I think that is disingenuous.

We heard in this Chamber that there are no net losers, but what about people who are about to become pensioners? Are they net losers? They certainly expected an age-related allowance, but they find that, for them, it is not frozen, but cut. We can stand here and call black white, but it is incumbent on us not to take the public for fools, and I am afraid that the speech from the hon. Member for Dover (Charlie Elphicke) did that. I regret that, because he is not a disingenuous character—he is quite a lovable character in this House—but to say what he did is to treat people with contempt. It is treating them as though they do not understand their own affairs, when it is their own affairs—their own pennies, in many cases—that we are talking about. That hits hard.

[Ian Lavery]

Is it not a fact that 4.4 million pensioners will lose roughly £83 a year from next year, and that people who turn 65 next year could lose up to £322 a year? That implies that it is disingenuous to suggest that people are not losing out—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. “Disingenuous” is not a word that we should use. I know that it is meant to be an appropriate term, but it is not the sort of parliamentary language that we accept. I am sure that we will not be using it again.

[Barry Gardiner]

I apologise to you, Mr Deputy Speaker, and to the hon. Member for Dover, if that is unparliamentary language.

[Mr Deputy Speaker]

Order. In fairness, Mr Gardiner, you said that you did not think that the hon. Member for Dover (Charlie Elphicke)was disingenuous. We were all right up to that point.

[Barry Gardiner]

Thank you, Mr Deputy Speaker. I absolutely recognise the figures that my hon. Friend the Member for Wansbeck (Ian Lavery) laid before the House, and of course I think that they are accurate. He is right to say that we are talking about a cut—a cut in what people were, with legitimacy, expecting. That is the point. It was legitimate for somebody coming up to pensionable age to expect that their retirement could be based on the figures that they were using. They had a promise from the Prime Minister that that would be the case. That promise was not honoured, and they have experienced real hardship as a result.

I want to focus on one other aspect of the debate: people’s behaviour at different rates of taxation. Let me be clear that I do not, in principle, want a 50p rate of tax to continue in place in perpetuity. Indeed, the Labour party does not want that, as was made very clear when my right hon. Friend the Member for Edinburgh South West (Mr Darling), as Chancellor, introduced the tax before the 2010 election. He made it quite clear that we felt it was necessary in the short term, but would ultimately wish to get rid of it. There is no desire on the Labour Benches to see a 50p tax rate imposed for ever more.

--- Later in debate ---

[Barry Gardiner]

From a more-than-sedentary, almost recumbent position, he says, “Hear, hear! Let’s go to 20%!” Does he really think that there is not a limiting point at which the argument tips? Does he really think that there is not a point below which, instead of more revenue coming into the Exchequer, there is a dramatic loss of revenue? Of course there is.

[Jacob Rees-Mogg]

I do indeed think that there is a point at which revenue would drop off, if rates got low, and the Laffer curve shows such a point. However, as a general point, I think that the lower the rates are, consistent with raising the revenue that is needed, the better, and that we have not tested the argument properly to see how low we could go.

[Barry Gardiner]

Well, there we are: the Great British public are being treated to an experiment. “We want to test how far the Laffer curve theory can go.” Is that really the Government’s policy? Is it really their policy to see how low they can get tax before the economy collapses?

[Jacob Rees-Mogg]

I am grateful to the hon. Gentleman for giving way once again. Sadly, I am not Her Majesty’s Government. He must address his comments to those on the Treasury Bench, rather than to me.

[Barry Gardiner]

I am sure that it is only a matter of time. In so far as the hon. Gentleman seeks to speak for his party—

[Mr Graham Stuart]

Does he?

[Barry Gardiner]

I do not want to see dissent break out on the Government Benches. No fighting amongst yourselves, please, gentlemen. These are serious matters. They cannot be treated as an experiment because people suffer.

[Charlie Elphicke]

I thank the hon. Gentleman for giving way. He is a courteous and jolly fellow. Let me help him by digging him out of the hole that he is rapidly getting himself into in his exchanges with my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). The point that we are making is simple: reducing the top rate will not change the income and revenue numbers significantly, but it sends a message to wealth creators that their investment is encouraged and will help to grow the economy.

[Barry Gardiner]

The hon. Gentleman has already said once in the debate that he does not believe the Treasury’s figures. He has now reinforced that. The Treasury has made the calculations. He can choose to say, on a personal level, “I think the Red Book is a load of tosh,” but he cannot say that that is the Government’s position. The Government’s position is that the measure will cost £3 billion a year. [Hon. Members: “No, it is not.”] The Government cannot get out of this one. They say that it will cost money. That money will be taken away from some of the poorest people in our society to pay for it.

That is what people find so distasteful about the way the Government are behaving. They are taking away from some of the poorest in our society, yet feel that it is so important to send that signal out to some of the wealthiest. The people who are being excoriated in the public conversations around the country for what they have done and what they continue to do to our economy—those are the people who will benefit, and it is the poor in our constituencies who will suffer.

[Sheila Gilmore]

Did my hon. Friend spot the illogicality in the position of the hon. Member for Dover (Charlie Elphicke), who made an impassioned claim to be a scourge of tax avoiders, but is in effect endorsing tax avoidance by arguing that we have to reduce the rate of tax because so many people are trying to avoid it? Would it not be better to look at ways of preventing people from avoiding tax?

[Barry Gardiner]

My hon. Friend, yet again, makes an excellent point. There is an implicit acceptance that people will try to avoid tax, and that therefore it is better to reduce the level of taxation so that there is not the same level of avoidance.

Most of my constituents listening to this debate and to the debate that has been going on since the Budget think the Government do not understand what people are going through, what they are feeling and just how difficult it is for some of them to make ends meet. They do not understand that precisely because of the sort of signals the hon. Member for Dover just mentioned. The Government consider it more important to make those signals to the wealthy. They think it is more important to focus on what they understand about their involvement in society, and they do not give the same attention to getting those messages to the poor in society.

What the Government have done in the Budget is to say, “If you are poor, we know that the best thing for you is to cut your benefits to make sure that you work harder, and if you are rich, we know that the best thing for you is to cut your tax so that you work harder.” People look at that and say, “This doesn’t make sense. It’s one law for the rich and another law for the poor.”

[Charlie Elphicke]

Yes, we do understand, and I in particular understand because my constituency is one of the most deprived in the south-east. The economic numbers are much more like those of a constituency much further to the north of England than the hon. Gentleman’s constituency. We do understand, and we also understand that wages have stagnated since about 2004, on the hon. Gentleman’s Government’s watch. This is not a new problem. We understand that, which is why we need to reduce the top rate of tax to encourage the job creators to create the jobs and the money that will give my constituents more prosperity.

[Barry Gardiner]

The hon. Gentleman talks about the way in which wages have broadly stagnated. We are now seeing wages going down and jobs being lost, and we are back in recession. He should look at the promises of his Government in that first Budget. The promises, commitments and assertions were that the measures in it would pull us out of the problems that we were in and get the economy back on track. They would deliver growth and prosperity, but they have not. He will remember, because he is an honest fellow, to use his word, that at the time, on the Opposition Benches, people were saying, “No, this will lead to a double-dip recession.” All those on the Government Benches told us in unison that we were wrong and that the Budget would pull us through the problems.

The electorate look at that, see the analysis, see what steps were taken and ask, “Who was right?” They know, because we are back in double-dip recession, that the Government got it wrong. We are at a point where there is £150 billion extra borrowing, the largest single increase year on year in the UK’s history.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I know the hon. Gentleman is painting the big picture, but we need to come back to the relevance of income tax. We have discussed personal allowances. I know he will come back to the point.

[Barry Gardiner]

I accept your ruling, of course, Mr Deputy Speaker, and you are right. We have strayed wide of the initial focus of the amendment. It was not my intention. All I can say in mitigation is that I was led down the path by the interventions that I took.

[Mr Robert Syms (Poole) (Con)]

I welcome this debate because the decisions that we take on tax rates are critical. We have had a slightly more general debate than I expected. Opposition Front Benchers particularly presume that the Government can somehow control events. However, there is a big wide world out there and anybody watching television or watching what had happened in the eurozone knows that there is a limit to what any Government can do in the present circumstances, when confidence is low, countries are being bailed out and businesses, even those with money, are not investing as rapidly as one would like. All the Government can do within the global context is try to make the best decisions they can on the information that they have. We have a plan, which I think is a good plan, and by and large we are sticking to it. The deficit has come down by 25%. That is a start and we need to do more.

On the subject of income tax rates, I think we tax people at far too small a salary. We do not increase incentives to work. A key point of the coalition programme is to up the basic allowances to make work pay. We all know—I am sure even the hon. Member for Brent North (Barry Gardiner) knows—that the benefits system can be a big disincentive to people taking jobs. People act rationally, and if they are not going to be much better off or if they are going to lose money, they will not take work. A reform of benefits is needed, with the universal credit coming in, and we have to up the income tax allowances for those at a lower pay level in order to increase incentives for people to take jobs. Hopefully that will get more people into work over a period of time.

All the evidence suggests that work is good for people. It is better for their health, including their mental health, and it is a better way to bring up a family, and of course those in work have a better chance of gaining skills, reskilling and getting on in life. That is the key point about what the coalition Government are trying to do. Therefore, I commend them for what they have done to take many millions of people out of income tax and hope that they continue to make progress in that area so that incentives to work increase over the next few years.

Business and the Economy

Barry Gardiner Excerpts

Monday 14th May 2012 Commons Chamber

[Nicholas Soames (Mid Sussex) (Con)]

I start by wholly agreeing with the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) about House of Lords reform.

It is a great privilege to speak in this debate on the Queen’s Speech in the year of Her Majesty’s diamond jubilee, when all of us across this wonderful country will have an opportunity to celebrate the Queen’s exemplary attention to her duties over the past 60 years, when the Olympics will come to London, and when there will be vast opportunities for Britain to place itself at the centre of world interest.

I am sorry that the principal spokesman for the Opposition, the hon. Member for Streatham (Mr Umunna), has left the Chamber. What he said was really foolish and profoundly ignorant. Anyone who has had anything to do with UK Trade & Investment in the past year will know that it is functioning probably better than it has ever done. Let me tell the House a story. The other day, I went to speak at a dinner in Scotland. It was an international gathering of the whisky industry, and the chairman of probably the biggest company in that industry said to me, “I think you should know that the Government’s export efforts have never been better run, and that the attention from the diplomatic service and our embassies abroad is quite outstanding.” The Government deserve credit for that.

I pay tribute to the work of Lord Green, Lord Marland, and Lord Sassoon, who have led tremendously successful trade missions all over the world—missions that have secured contracts and goods for this country that we have never secured before. Our exports are up £50 billion on previous years. The hon. Gentleman will find that he has done himself no good by speaking as he did of UKTI.

[Barry Gardiner (Brent North) (Lab)]

rose—

[Nicholas Soames]

I hope that the hon. Gentleman will forgive me, but I have only six minutes, and I have a few points to make.

I support and endorse the Queen’s Speech. Much in it deserves and commands support at this very difficult time. The Government are right in their determination to drive the economy forward, to bring the UK’s productivity and growth up to world standard—they are not at that standard at the moment—and to focus on getting the big things right and resolving the stubborn, difficult and often politically very unappealing challenges that have long kept the UK’s economy from fulfilling its true potential. Our national problems are serious. Many of the causes of Britain’s plight cannot justly be blamed on Greece, Brussels, or even the banks. There is the dire state of too many of our schools and thus, through no fault of their own, the poor skills of too many young people; there is the decline in size of our manufacturing industry—an industry that the Germans sustain so well—and there is the plight of small businesses, which are still groaning under oppressive bureaucracy and employment law. We really need to get on and fix those problems. This country remains, on its good days, a wonderfully civilised place, but there is no contradiction in recognising that our traditional national values will not suffice to support us through this century unless they are allied to harder work, vastly improved skills, and a drastic reality check about the standard of living that we have for so long taken for granted.

I wholly endorse the views that my right hon. Friend the Foreign Secretary expressed yesterday in a really interesting, punchy interview in The Sunday Telegraph. He set out clearly the great opportunities for British trade and the great efforts being made to secure them through our outstanding commercial diplomacy. The success of our economy locally, nationally and globally will depend on how we build our economic growth around a tapestry of skills, with science, finance and sound regulation working together. In many ways, the Queen’s Speech sets out a way forward on that. It is worth remembering that growth, as a public policy, can achieve a great deal. It can create jobs and it reduces welfare dependency, but it is not an end in itself.

I am trying to develop an idea that takes advantage of the south of England’s local geography and opportunities. Starting with the south of my constituency, I want to develop an international technology hub between Burgess Hill and Brighton, and between Brighton and Southampton. The work required to deliver improvements to the A27 must happen, and I do not see why that should not be carried out by a public-private partnership of some sort. We need to get on and develop the sort of creative clusters that are essential for economic growth, making the most of the university of Sussex and the brilliant Brighton university, through to Portsmouth and Southampton—an area with ample office space and housing. The advantage of such a scheme is that it contains all the conceptual ideas that begin with the creation of jobs and extend to kick-start a knowledge-based economy. One of the points that the Gracious Speech makes—

--- Later in debate ---

[Barry Gardiner (Brent North) (Lab)]

Thank you, Mr Deputy Speaker. Having spent the afternoon cutting my speech, I shall now have to cross out all the omissions—but, seriously, I am delighted by your ruling.

If asked to identify what is most surprising about the Queen’s Speech, I would have to say it is finding that this Government consider it a priority to remove the rights of ordinary working people and to make it easier to fire people—and not just to fire people, but to fire them unfairly. We have 2.7 million people unemployed, we have a double-dip recession—the first in 37 years—and we see this Government putting through legislation to make people more insecure. How does that build confidence in our economy? How does that serve to increase productivity? It does not.

That is just one part of the injustice that lies at the heart of this Queen’s Speech—which explains why so many Opposition Members have spoken about it. It is not just an unforeseen consequence, and it is not proposed merely in the mistaken belief that it will get the economy going. We recognise this for what it is: a deliberate political philosophy. It is a deliberate attack on the rights of working people, and I have to say that while one would expect that from the Conservatives, the fact that the Liberal Democrats have colluded in it in quite the way that they have is to their eternal disgrace. I hope working people will punish them accordingly.

The director general of the CBI identified a different test by which to judge this Queen’s Speech: whether it will help business to grow. He mentioned the energy Bill and the regulatory reform Bill. While he said he did not have much confidence in the regulatory reform Bill, he said he thought there was a chance that the energy Bill might help in this regard. I wish that were the case, but I fear Mr Cridland has let his optimism get the better of his customary forensic analysis. We have been promised sight of a draft Bill for pre-legislative scrutiny on 22 May —or, to be more precise, we were promised it for 20 minutes on the Department of Energy and Climate Change website on the afternoon of the Queen’s Speech, but then the commitment to the 22 May was taken down. Will the Minister responding to the debate tell the House whether, and when, that Bill will be published in draft form?

The Government’s draft Bill to reform the electricity market to deliver “secure, clean and affordable” energy will need to go a great deal further than the current four pillars set out by the Department. The Government are not prepared to introduce real competition into the electricity markets, because they do not dare break up the vertical integration of the wholesale and retail elements of the big six electricity companies as they fear losing the investment they so desperately need to replace the 25% of existing energy generation that will go off stream by 2020. Some £200 billion of investment is required in the energy sector and the price of that investment, in the Government’s mind, is a quiescent Government, cowering in the face of the big six and unwilling to regulate to open up the market to the competition and the free market forces that they say they believe in. The effect will be higher costs for small and medium-sized businesses and, of course, for domestic consumers.

The energy crisis facing this country will do more to undermine prosperity than anything else in the next 10 years, except perhaps the impact of the death throes of the eurozone. I am not a traditional fan of the speeches of the right hon. Member for Wokingham (Mr Redwood) and the hon. Member for Stone (Mr Cash), but today they rightly pointed out the effect on the UK of the shrinking of the European economy. It is worth reflecting on the fact that although the total amount of Greek debt owned by UK banks and the UK Government together is an eye-watering €14.2 billion, the French Government alone hold €15 billion of this debt and French banks hold a catastrophic €42 billion, giving France a €57 billion exposure. We now have a French President calling for a growth package to go alongside the financial stability and austerity measures agreed by the 25. France needs Germany and the European Central Bank to fund an ever-expanding Greek bail-out to stop the implosion of French banks. Simultaneously, France needs Germany and the ECB to provide liquidity to stimulate the growth that the new President has made his political priority. Does any Government Member seriously believe that EDF, a company owned by the French Government, will not be under Gallic pressure to invest in its home market in preference to the UK and that that will not have a dramatic impact on the investment capacity and potential in the UK over the next five years?

Only two out of the big six—Centrica and Scottish and Southern—have the UK as their primary investment focus, and what all of them look for is a clarity of purpose and a stability of regulatory regime that creates the right investment climate for long-term energy investments to achieve their expected return. This Government, in just two years, have spectacularly undermined business investors’ confidence. With the carbon reduction commitment, the Government retrospectively snatched £1 billion from business. With the North sea tax regime changes, they sent shock waves throughout not just the big oil companies, but the whole investor market. Of course, with the solar photovoltaic feed-in tariff, the Government became a laughing stock for investors. But the laughter will stop as the desperate truth sinks in that business no longer regards the UK as a stable investment regime, and the UK courts have compounded that by ruling against the Government on these issues.

That is what is going to undermine the possibility of growth in this economy: the lack of business investment in the energy markets and the way in which generation capacity will go off stream after 2017, with businesses then not just paying more for their power, but not being able to get it. That will be because this Government are failing the absolute cast-iron test of putting through real structural reform in the energy market. That is what business has called for, that is what business knows it is not getting and that is why business has condemned this Government for a weak and feeble Queen’s Speech.

IMF

Barry Gardiner Excerpts

Monday 23rd April 2012 Commons Chamber

[Mr Osborne]

I would say that it is to make sure that the fire brigade has enough water to deal with the problem.

[Barry Gardiner (Brent North) (Lab)]

The IMF should be plan B; plan A should be the European Central Bank. Does the Chancellor not accept that until the ECB properly backs the euro, the only people who will welcome more money coming in through the IMF are the traders who are making much money by picking off the peripheral countries around Europe as they go from one to the other?

[Mr Osborne]

Since December, the ECB has provided €1 trillion in its long-term repo operation, so it has provided a lot of support, most of which has been used by some of the eurozone banks to stop them falling over. The ECB has taken action, but the Prime Minister, myself and other members of the Government have in public, as well as in private—but in public—over the last six months, urged the ECB to do more; urged that greater fiscal transfers take place. On many of those things the ECB has made a lot of progress since the autumn. There is a much bigger eurozone firewall. As I say, the ECB, which was not in the game at all last autumn, has now provided €1 trillion of liquidity, so it has made those contributions, and therefore the rest of the world, as well as the UK, thought it appropriate that we should make sure that the IMF is well resourced.

Finance (No. 4) Bill

Barry Gardiner Excerpts

Monday 16th April 2012 Commons Chamber

[Charlie Elphicke]

Aid charities have made the case that corporations headquartered in the UK should be paying more tax overseas. That is not our job. Our job is to secure our own tax base in the UK. That is what I want to focus on, and it is what the previous Government totally failed to do over many, many years. If we put a stop to it and raise the due amount of tax from companies not resident in the UK with anti-avoidance measures and proper tax reform, we could have lower fuel duties for hard-pressed families and a lower basic rate of tax—and goodness knows we could even pay down some more of the debt that the previous Government shockingly, disgracefully saddled this country with.

I hope that the anti-avoidance measures in the Bill will be widened in the following way: the first principle is that business tax rates should be low, simple and attractive. Britain should be open for business, but open for business on a level playing field for national and international companies. Businesses should have a social responsibility to pay a fair share of tax. Some object to the idea of morality in the tax system, but this is an issue of corporate social responsibility. Tax avoidance should be dealt with firmly and rules changed to stop the avoidance. I shall come to specific measures in a moment.

For many years, the European Union has consistently and systematically sought to undermine our tax base in its pursuit of a common corporation tax base. We need the EU to support member states in protecting tax revenues rather than undermining them with so-called anti-discrimination rules.

[Barry Gardiner (Brent North) (Lab)]

Could the hon. Gentleman enlighten the House as to his view of the patent box? The Chancellor first mentioned it in last year’s Budget—I think—although it was Lord Mandelson who introduced the concept in the first place.

--- Later in debate ---

[Mrs Anne McGuire (Stirling) (Lab)]

It is a pleasure to follow the hon. Member for Dover (Charlie Elphicke). I am always interested to hear people say that they are a poacher turned gamekeeper, because I always want to know what they did when they were a poacher. The hon. Gentleman laudably admitted that he was a tax lawyer, and it would be interesting to know whether, in giving people professional advice, he ever recommended that they set up tax-efficient systems for managing their taxes. I point out to him that, in more than 15 years in this House, I never once heard a Conservative Member ask the Labour Government to do anything about tax avoidance rules. There is too much piety among Government Members as they try to suggest that we wilfully ignored the matter of tax avoidance. I hope the hon. Gentleman will reflect on what his party was doing during those 15 years, while he was being a poacher, not a gamekeeper.

[Barry Gardiner]

If my right hon. Friend looks at all the Budget measures put through by the Labour Government, she will see that the average figure achieved by each measure to clamp down on tax avoidance was £1.8 billion. The most that this Government have managed is £0.8 billion.

[Mrs McGuire]

My hon. Friend the Member for Leeds West (Rachel Reeves) dealt ably with that point earlier today, and I am delighted that my hon. Friend the Member for Brent North (Barry Gardiner) has echoed her comments.

--- Later in debate ---

[Jacob Rees-Mogg]

I agree with my hon. Friend that VAT is a tax of immense complexity. However, it is an essential tax for the revenue-raising that this country needs and it has to include in it things that all of us like and would rather not be taxed. Equally, it will include things that some of us do not like, do not particularly wish to eat and do not mind how heavily taxed they are. If I am put the question, I would choose a sausage roll over a pasty, but I know that others have different views.

I also want to mention briefly the freezing of the threshold about which the right hon. Member for Stirling (Mrs McGuire) spoke interestingly. Again, the Government were right. Because the big step is being taken to raise thresholds altogether, it makes absolute sense, at no cash cost to any current pensioner, to freeze this level and allow it to even out so that we have one threshold. Every time we have variance in tax levels, be they rates or thresholds, we simply employ more people at Her Majesty’s Revenue and Customs, we have a more expensive cost of collection and we fail to achieve the objective of simplicity across the tax system.

This has been a great Budget and I wish to finish by speaking briefly about this terrible question of tax avoidance. I agreed with my hon. Friend the Member for Dover (Charlie Elphicke) when he cited that notable judge with his phrase about allowing the taxman to take the biggest shovel. If people avoid tax, that is legal because we, as Parliament, have allowed them to do so. The following clauses in part 1 of the Bill allow legal tax avoidance: 13, 14, 15, 16, 19, 20, 38, 39, 40 and 44. All those clauses in the first 50 allow tax avoidance of which the Government approve. We will all approve of some of them, because they allow MPs £30,000 tax free when they leave Parliament, allow cars that must be made secure because people are at risk to be tax free and allow people in particular situations and circumstances to pay less tax than they would in normal circumstances. The enterprise initiatives under clauses 38, 39 and 40 allow investment that the Government want to encourage. Those are all examples of tax avoidance that is liked by the Government.

We have to be fair to taxpayers. We can only expect them to follow the law of the land as it is written—the black letter law of the land. We cannot expect taxpayers to look at their affairs and say that the Government might like them, if they are feeling kind, to pay more tax than they are being asked for. None of us has an obligation to do that and it is wrong and dangerous to elide tax avoidance and tax evasion.

[Barry Gardiner]

Does the hon. Gentleman therefore disagree with the Chancellor, who said on Budget day that he wanted the approach to be applied not simply according to the black letter of the law, as the hon. Gentleman puts it, but according to the spirit of the law?

[Jacob Rees-Mogg]

I do not believe that the law has a spirit; that is unduly philosophical for my view of tax law. Tax law is what Parliament passes and I have grave doubts about a general anti-avoidance principle. I do not think that we can reasonably expect people to pay tax on the basis of what Parliament might want, as they can only do it on the basis of what Parliament has passed into law. To undermine that is to undermine the rule of law on which we all depend, and it is fundamentally unjust to elide tax avoidance and tax evasion.

Although I know that I have unlimited time and that people are gathering for the excitement that the winding-up speeches hold in store, let me reiterate that this is a great Budget and a good Finance Bill. The criticisms have been fundamentally trivial but the basic point is that we will have—as Tories always have and as they always have had when they have come in after Labour Governments—sound money.

Budget Leak Inquiry

Barry Gardiner Excerpts

Thursday 22nd March 2012 Commons Chamber

[Mr Gauke]

I do not think that we can draw a conclusion that there has been a decline in the standards of journalism just from the fact that in 2005 the predictions of what was in the Budget were more consistently accurate than in 2012.

[Barry Gardiner (Brent North) (Lab)]

Surely a leak is an unauthorised or inadvertent publication of restricted and confidential information. On that basis, this could not have been a leak, because it was clearly not inadvertent and it was clearly authorised. It was none the less in severe conflict with the ministerial code, and that surely is what the Prime Minister should investigate.

[Mr Gauke]

I am not sure that there was a question there, but I thank the hon. Gentleman for his views. The Government clearly authorised some information to be put out in advance of the Budget. For example, there was a speech by the Prime Minister. The Prime Minister makes speeches from time to time; I am not sure that people should be getting upset about that.

Amendment of the Law

Barry Gardiner Excerpts

Wednesday 21st March 2012 Commons Chamber

[Mr John Redwood (Wokingham) (Con)]

I fully support the Government’s aim. We need to earn our way out of the fiscal crisis, the massive over-borrowing and the large deficits. I also fully support their aim to get more money from taxing the rich, and we need a tax break for everybody else. We need a stimulus to demand and growth in this country and it is welcome that, given the difficult figures before the Chancellor today and the situation he inherited, he has managed to find a way of cutting tax for most people. That will be welcome relief from the relentless pressures on private budgets that hon. Members and their constituents have been experiencing as we try to climb out of the crisis.

It would be helpful to remind the House of the general shape of the five-year programme to try to get the deficit down. We want to get to a position in which we are adding less to the new borrowing. It is not that we are paying off the debt or dealing with the nation’s mortgage and credit card; we are just not flexing them quite as much as before. The Government have said that, over the five-year period of the planned coalition Government, they wish to increase current public spending by £90 billion and tax revenues by £174 billion a year by the fifth year of the programme, compared with the last Labour year. The House can see that, on most normal ways of looking at the situation, the plan is for the heavy lifting of getting the deficit down to be done by a very large increase in tax revenues.

Those tax revenues best roll in if the economy grows reasonably rapidly. The more quickly the economy grows, the easier and less hurtful it is to get money out of people; the less the economy grows, the more the choices become difficult.

[Barry Gardiner (Brent North) (Lab)]

The right hon. Gentleman says that the heavy lifting will be done by the rise in tax, but does he accept that there is a ratio of 4:1 in the amount that will come from cuts in public spending and benefits to the amount that will come from tax rises?

[Mr Redwood]

I have just given the figures—they are taken from past and current Red Books—and the hon. Gentleman must make his judgment. I am giving the House my interpretation. Most people who see spending going up by £90 billion and revenue going up by £174 billion will say that the increase in revenue is doing the job of bringing the deficit down. If he compares that with Labour’s plans for even bigger increases in public spending, he can make a case. He may also have in mind—we have debated this in the House before—whether the cuts are real or not. Some programmes will experience real cuts. We know that because there is a much slower rate of growth in cash spending than anything this country has been used to for a very long time.

If debt interest takes too much of the extra money, and if welfare benefits take too much, other things will obviously be squeezed more, which could lead to very unpleasant consequences. That is even more reason why the Government are right to try to get the deficit down, so that we do not keep on increasing the debt at such a huge rate, and why they are right to keep official interest rates low—that helps with the cost of the deficit. It is also why they are right that we need to earn our way out of the situation by getting many more people back into decent jobs, so that they are paid more in work than they are paid on benefit. Surely the whole House can agree on that and share that aspiration.

--- Later in debate ---

[Barry Gardiner]

Does my right hon. Friend agree that one of the things that might look a little shakier later is the granny tax and the fact that 4.1 million people will be worse off in real terms, with an average loss of £83, and as a result of which 230,000 people will be brought into income tax?

[John Healey]

My hon. Friend is right. This might well become a Budget in which the closer people look, the less they like. That might apply to the granny tax, as he suggests, but it might also apply to the threshold for the 40p top rate of income tax, which many people might find themselves hit by over the next few years, rather than benefiting from the raised threshold for payment in the first place.

The consequences of the Government’s actions at a national level are already becoming clear. The UK economy grew by 3% in the year before the Chancellor stood up and delivered his spending review in 2010. In the 12 months that followed it grew by just 0.5%. That is because he took the decision to cut too far, too fast and choked off growth. Based on the economic projections we heard today, this country is still set for feeble growth in the coming year and the year after. It seems to me that a credible economic plan to deal with the deficit must be supported by a successful plan for jobs and growth alongside it. At present, the Chancellor is condemning Britain to being a one-legged man in a three-legged race. The International Monetary Fund has made a similar point, stating that

“growth is necessary for fiscal credibility.”

We have to look harder at what we earn as a country, not just what we spend. The UK’s GDP last year was still nearly 4% lower than it was before the global financial crisis hit in 2007-08. In other words, our economy was smaller and our national income was lower. If we draw a comparison with the US or with Germany, we find that both countries have a more balanced approach to dealing with their deficit, both countries are growing more strongly than Britain and both countries now have economies that have regained the loss of productive capacity which everybody in the modern, developed world suffered during the global financial downturn of 2008.

--- Later in debate ---

[Mr Bailey]

I am afraid I do not read comics such as The Dandy, and I have not come across any such predictions at all. I do not think that they are in the OBR’s projection, either.

From the moment the Chancellor came into office, he has ruled out any intelligent debate on the right balance of supply-side and demand-side measures that would achieve a level of economic growth that would eliminate the deficit and provide employment. When the Labour Government left office, the economy was growing, unemployment and inflation were falling and our public sector deficit was declining, but the Chancellor seemed to think that that was all wrong, and that the only recipe was austerity. His justification for that was the perceived threat that a credit rating agency would downgrade Britain’s triple A status, with all the horrors that that would entail. I congratulate the Chancellor on one thing: he has transformed credit rating agencies from being the most anonymous part of our financial services infrastructure into bedroom monsters that he conjures out of the wardrobe to frighten anyone who has the temerity to question the underlying philosophy behind the measures that he is taking. We have to suffer job losses, cuts to our public services and pay freezes, because if we do not, Moody’s and Fitch will get us. That is the Chancellor’s underlying approach.

[Barry Gardiner]

Could they possibly be the same Moody’s and Fitch that gave Lehman Brothers its triple A rating?

[Mr Bailey]

I think they probably were.

After we have endured two years of pain since the Government came into office, Moody’s and Fitch have rewarded the Chancellor for all his efforts by putting Britain’s triple A rating on negative outlook. The monsters have turned on their master. The pain has been in vain, and the Chancellor should acknowledge that and start genuinely to consider a more balanced approach that would enable us to implement the changes that we need to grow our way out of the deficit.

I remind Members that it was only last August when the Chancellor sneered at the American model and told us that the American economy was growing more slowly than Britain’s. Now, however, America has taken a balanced approach. Its economy grew 3% in the last quarter of 2011, and is predicted to grow further. Its deficit is predicted to drop next year, as is its unemployment. The fact is that the model that the Chancellor sneered at is actually delivering, while his is not. Last week, when I saw the Prime Minister having his cosy discussions with President Obama, I wondered whether he might have taken him aside and said, “Mr President, how is it that you have got your economic strategy so right and my Chancellor has got his so wrong?” But perhaps that was just a fantasy.

Parts of the Budget are good, and they might help, even though they deal with the supply side, when the demand side needs to be addressed. The national loan guarantee scheme is obviously a welcome measure, and some companies will benefit from it. However—this might be a good thing for those companies—some companies that use it would have invested anyway, while companies on the margins will not be able to access it: they will run up against the same problems as before. One cannot help but think that if more were done to inflate the economy and improve the demand side, more companies would become more viable in the future and more companies would be able to access the scheme.

The fact remains that while access to finance is still a barrier for many sound companies, this is not the only issue. Many companies are not going to the banks because their future market projections are such that they do not have enough confidence to invest any more. Although there has been a very modest improvement in business confidence, it is still very fragile overall, and this measure alone is not likely to counteract it.

The Institute for Fiscal Studies projections show that we are only a quarter of the way through the public sector cuts. If future public sector cuts designed to deliver on the Government’s objectives result in further unemployment, I foresee only a further squeeze on the financial situation of individuals and a further decline in the domestic market needed to give those companies the sort of confidence they need.

An earlier speaker mentioned the national insurance holiday that was introduced in a previous Budget. No mention of that whatever was made in this Budget; it has been a colossal flop. However, small businesses are campaigning up and down the country, arguing that if this were reshaped and if the money that has not been used were ploughed into it, all small businesses could qualify, provided that they employ more people. That would be a relatively minor tweaking to the Government’s Budget strategy, yet it could result in a significant increase in employment and a significant increase in demand. I am disappointed that the Government did not look at that.

On construction, much has been said about the national infrastructure plan. Fine, it is a great plan, but it is being projected as if having a plan results in delivery. So far, what has been conspicuously absent is any sort of funding mechanism to achieve this. We have heard about using pension funds, which may be a great idea, and we have heard about private investment, which may also be a great idea—we will see. The key point is that until there is a model for the financing of the delivery of these infrastructure plans, these are really pie-in-the-sky ideas. I have an uncomfortable feeling that these so-called plans are being used as a substitute for doing something.

The construction industry needs action on this level. Having enjoyed a revival in 2010 and early 2011—largely as a result of contracts initiated under the previous Labour Government—it is now shrinking. As of this moment, employment is predicted to drop by 45,000, with a further 3% in output in 2012. If the Government really want an infrastructure-led revival in our economy, they need to move quickly. We have the companies capable of delivering it, and we have the skills within those companies; what we need is Government action. Let me make one qualifying point. About 60% of the projects in the national infrastructure plan are based in London, but the greatest unemployment in the construction industry is outside in the regions, so the plan needs to be revamped to take that into consideration.

The Government are certainly making all the right noises about exports. What the Chancellor did not mention is that if we are to expand our exports to the BRIC countries—Brazil, Russia, India and China—reducing UK Trade & Investment’s budget by 17% is perhaps not the best way of doing it. Also, he did not mention that two of the most significant growing markets that we need to access, India and China—other Members have talked about this—are, as a result of the visa regime, hugely concerned about whether Britain is open to business. There is considerable evidence that that is damaging our economic relations with them.

My last point is very much a personal one. As a long-standing co-operator and as a believer in mutuality and employee share ownership, I believe that measures should be taken to foster and develop employee share ownership in this country. There is a huge body of evidence demonstrating that it leads to greater employee and consumer satisfaction, and greater productivity. The tax allowable savings rate for members who wish to invest in their companies has not been increased for donkey’s years. The Government have said that they will review it. Given the commitment made by both the Prime Minister and the Deputy Prime Minister, I would have wished for something a little more solid than that, and I hope that the review will deliver it.

--- Later in debate ---

[Barry Gardiner (Brent North) (Lab)]

The trouble with Budgets is that they tend to operate on a five-year cycle that has no relation to the actual cycles of the resources that we profess to manage. The immediacy of the political triumphs over the requirements of the actual.

The focal point of this Budget is 2016-17, when the Government hope that the hole in the public finances will have been filled, but interestingly four fifths—more than £90 billion—of that filler comes from cuts in services and benefits, while only one fifth comes from rises in tax. Yet 73% of the tax rises have already been put in place, and less than 20% of the cuts in services and benefits have happened.

The Government might think it prudent to delay the pain, but Government Back Benchers might care to reflect on what that has done to their electoral prospects.

[Mr Robin Walker (Worcester) (Con)]

The hon. Gentleman mentions the figure of £90 billion, but will he acknowledge that the £36 billion reduction in interest payments, which we have already seen, makes a substantial contribution to that?

[Barry Gardiner]

The hon. Gentleman refers to interest payments, but he knows that on that score this Government are paying out £150 billion more than they predicted, so his argument does not hold up.

A Budget is a mechanism for the distribution and allocation of scarce resources, so let us examine what this Budget means for a child born today. A child born in my constituency today brings us this message: “By the time I reach my 18th birthday, the world will require 30% more fresh water, 45% more energy and 50% more food.” This child is part of the generation that will see the global population move from 7 billion to 10 billion people. How do we respond to this child? Do we become the most selfish generation of the most selfish species in our planet’s history? Or do we become the generation that understood that justice and sustainability are essentially the same thing? If you want peace in the world, create justice. If you want justice, live sustainably.

We must get away from both sides of the political divide arguing that they uniquely possess the key to growth. We listen to the stale arguments about whether more spending now will raise growth and reduce the deficit more quickly, or whether less borrowing now will ultimately be a surer path to bring our economy back into GDP growth. But what both sides are talking about is yesterday’s economics: Hayek pitted against Keynes.

The Chancellor wants to set markets free and insists that we cannot spend our way out of debt, but he wilfully ignores Hayek’s equal insistence that the boom gets started with an expansion of credit—the very liquidity that the Chancellor has told the banks they must provide for business. Hayek would have been appalled to find his theories invoked by a Chancellor literally printing money through quantitative easing. In Hayek’s view, that leads only to unrealistically low interest rates and to the cycle of boom and bust starting all over again.

Keynes of course believed in consumption-led growth as an economic stimulus, but he did not live in a world of 7 billion people. He assumed that growth was sustainable and natural resource was, for practical purposes, infinite. We know that it is not. As a result, we have an obligation to make sure that growth is sustainable, not simply to assume that it will be.

[Mr Jackson]

The hon. Gentleman is making a cogent and interesting argument. We all agree that we should give 0.7% of our GDP to international development. Surely he will concede that unless we grow our GDP, the absolute amount of cash that we have to give to good causes across the world, in supporting sustainability, will not be enough to do the things that he wants to do.

[Barry Gardiner]

The hon. Gentleman precisely misconstrues my point; the issue is not about the amount of aid given to developing countries, but about understanding the valuation of natural capital and incorporating that into the Government’s accounting framework. That is in the natural environment White Paper, if he cares to read it.

In a world of 7 billion people, growth can be sustainable only if it is predicated on advances that bring increased productivity and greater efficiency in the use of resources. That is what Hayek would have called a sound capital structure and proper allocation of capital. For the world to continue to achieve a 3% per annum growth target, and to maintain a trajectory that keeps carbon emissions below the 2°C threshold of dangerous climate change, we must increase our productivity per tonne of carbon emitted 15 times over.

The Budget simply does not address that technological challenge. It was extraordinary to see the Secretary of State for Energy and Climate Change join forces with the Treasury last Friday evening and issue a press release at 6 pm, embargoed until midnight, to exempt gas-fired power stations from the emissions controls set out in the fourth carbon budget by the Committee on Climate Change. Those emissions reductions were, in the Committee’s view, part of the necessary regulatory framework for achieving our target of at least 80% emissions reductions by 2050.

The press release set out no alternative mechanisms that would be adopted to keep to those targets and no Minister has sought to expand on the issue since last week. It is a measure of the shame that the Government felt on reneging on the fourth carbon budget that they issued their press release in such a furtive manner. What is worse, what happened shows that the new Energy Secretary has no command over his brief and has been fingered by the Treasury as a weak Secretary of State.

Since William Ewart Gladstone instituted the modern accounting and budgetary processes of the House of Commons 150 years ago, modern economics has come a long way in its understanding of capital. In Gladstone’s day, the notion of capital was very simple; it represented money and machinery. Gradually, we have come to realise that capital is not just money and plant. We have developed sophisticated concepts of social and intellectual capital. We know that a well functioning legal system is very much a part of the wealth of a society, inviting commerce and trade to practise where certainty and redress prevail. That is certainly a form of capital different from a bridge, printing press or motorway, but we now measure them all in our assessment of the national wealth of a country.

Resource economists now point out that we have left out of our economic calculations perhaps the most important capital of all: natural capital. We have left it out for a very simple reason—we always took it for granted. We thought that it was a free good. It cost us nothing and we assumed the supply was infinite. In the language of classical economics, natural capital was a mere externality, “as free as the air you breathe”.

What we have now begun to realise is that the air we breathe is not actually free—at least, it is not without a quantifiable value. Any sound cost-benefit analysis of public policy must take that value into account. The Environmental Audit Committee report on air pollution estimated that the costs from air pollution are up to £20.2 billion. That is the cost of respiratory and other diseases associated with poor air quality, both in treatment and lost productivity.

The natural environment provides not just a physical stock of resources—forests and fish, minerals and fresh water that human beings depend on—but a network of services essential for human life. The pollination of our crops by insects, the stabilisation of our soil by trees and the regulation of our watershed by peat bogs are just some of the ecosystem services that a new economic model must begin to incorporate into our Government’s accounting framework. That new accounting renders inadequate the concept of GDP growth because it reveals one of the central conundrums of classical economics: that a country can become poorer while increasing its GDP.

The Chancellor said nothing today that showed that he understood that. Another important consideration is that those wider benefits, although immensely valuable, do not accrue to an individual private property owner; they are experienced by a community at large. They are regarded as free goods by the wider community, and in classical economics as externalities, and because they are not directly captured by a landowner they rarely feature in a landowner’s decision on how or whether to dispose of them. That is why the exercise of private property rights can often be to the public detriment. It is also why the role of the state in regulating the disposal of land is so important. Today we have heard much talk of stamp duty and how to raise revenue from the rich. It therefore seems quaint that no one has commented on the fact that the land registry for England, which was established in 1928, still accounts for only some 64% of the land in England, while in the registry for Scotland the figure drops to a mere 21%.

Of course, there is a reason why almost a century later we have not yet been able properly to map the title of land in the UK—it is that so much of it has never been sold but has been passed down in families, from parent to child, in enormous estates. If the Government genuinely want to raise tax from the very wealthy, they should examine not only houses sold for over £2 million but the vast tracts of our country that have been accumulated in great estates for centuries and are still owned and managed not for the benefit of the population at large but to maximise the income and pleasure of a very few private individuals. I do not claim that all hereditary estates are badly managed in respect of the environment, but I do claim that good management comes not only as a result of inheritance. Land tax reform is long overdue. If we wish to become a more equal society, then we need to consider the taxation of land and land use in different and more imaginative ways, for the benefit of society as a whole.

The Chancellor sought in his Budget to bury another important piece of environmental news. Next Tuesday, the new national planning policy framework is published. That deserves our attention not least because we know that the Chancellor takes the view that the planning system is a blockage to economic growth. The NPPF will cause havoc up and down the country as planning uncertainty and ambiguity filters down to local communities. Fundamental to the new framework is the presumption in favour of sustainable development. In practice, this means—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.