Finance (No. 2) Bill

Caroline Flint Excerpts

Carry-over motion: House of Commons
Monday 11th April 2016 Commons Chamber

Question again proposed, That the Bill be now read a Second time.

[Caroline Flint]

I am grateful to the 50 colleagues from six parties who supported my ten-minute rule Bill, including every Back-Bench member of the Public Accounts Committee. I hope to build that cross-party support as I seek to amend this Bill. My interest today is not to grandstand, but to change the law.

In January 2012, the Prime Minister said:

“We need a tougher approach. One of the things that we are going to be looking at this year is whether there should be a general anti-avoidance power that HMRC can use, particularly with very wealthy individuals and with the bigger companies, to make sure they pay their fair share.”

Many in this House would agree with that.

Three months later, the Chancellor said:

“I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right.”

Many would agree with that.

In January 2013, the Prime Minister said:

“We want to drive a more serious debate on tax evasion and tax avoidance. This is an issue whose time has come. After years of abuse, people across the planet are rightly calling for more action and, most importantly, there is a gathering political will to actually do something about it.”

Just last week in Exeter, the Prime Minister said:

“It’s not fair when you’ve got companies who are basically shifting their profits around the world, rather than paying them in the country where they make their money.”

That is all the more reason why I hope the Government will adopt the purpose of the Multinational Enterprises (Financial Transparency) Bill.

However interesting the Prime Minister’s current or recent tax returns are, they are but small beer compared with the need for openness by sophisticated multinationals using various means to legally avoid paying tax in the countries where they earn much of their revenues.

The reputation of the UK is tarnished by the number of tax havens that fly the Union Jack. A World Bank review of 213 big corruption cases found that more than 70% relied on secret company ownership. Company service providers registered in the UK and its overseas territories and Crown dependencies were second on the list of those providing such companies. When the Government said that bankers should pay tax on their bonuses as well as on their wages, companies such as Deutsche Bank, when the Business Secretary worked there, put them out of reach offshore.

I am not a cynic; I am an optimist and I believe in the good of people to do the right thing. I do not believe there will ever be a perfect system to catch those who will use every device they have to avoid paying the tax that is due, but I do believe that backing public country-by-country reporting is vital to addressing deliberate and sophisticated tax avoidance. I urge the Government not to wait for the EU or the OECD, but to adopt my public disclosure measure in the Bill and let the UK lead where I am sure others will follow.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Damian Hinds)]

This Government have delivered on growth, record levels of employment and a deficit that is forecast to be down by almost two thirds from its peak. This Finance Bill legislates to continue that record: it provides opportunity for families and hard-working individuals; it backs business and enterprise; and it puts the UK at the forefront internationally in tackling tax evasion and aggressive avoidance.

We started late, Mr Speaker, but we have had a lively and full debate, and I wish to respond to a few of the points raised. The hon. Members for Feltham and Heston (Seema Malhotra) and for Wolverhampton South West (Rob Marris), and others, spoke about the effects of Government policies on women. We have an employment rate among women that is now at a record high, with the majority of women in full-time roles. More than 1 million more women are in employment than was the case in 2010. By 2017-18, 13.1 million women will benefit from increases in the personal allowance, and about two thirds of those who benefit from the national living wage will be women. There are 300,000 fewer children in relative poverty compared with 2010 and there has been a massive reduction of 480,000 in the number of children growing up in workless households. Some 40% of two-year-olds—the least well-off—are benefiting from 15 hours of free childcare and working parents will be benefiting soon from 30 hours of childcare for three and four-year-olds, with tax-free childcare to come in from this month. There are also increases in childcare support under universal credit, including at small hours of work, to allow more women to re-enter the workplace.

Housing was mentioned a number of times, including, entertainingly, by the hon. Member for Bassetlaw (John Mann). We absolutely agree on the centrality of housing in a number of respects, from affordability to social and geographic mobility and to productivity. That is why we have such a focus on this area, working towards 400,000 affordable housing starts by 2021. It is why the spending review doubled the housing budget from 2018-19. We want to get on with this as quickly as possible, which is why we are bringing forward capital for affordable homes and why central Government and local authorities are working collaboratively together, and with their partners, to release more land for homes.

The hon. Gentleman talked about his fifth proposal on devolution and I understand that he is due to meet the Chief Secretary to the Treasury soon. Likewise, the right hon. Member for Don Valley (Caroline Flint) is to meet the Financial Secretary to discuss some of her points about tax transparency. The hon. Members for Leeds West (Rachel Reeves), for Aberdeen North (Kirsty Blackman) and for East Lothian (George Kerevan) talked about savings, and I am sure they will welcome not only the lifetime ISA, but, crucially, the help to save programme, which allows investment of up to £50 a month, with a Government 50% top-up, which could be worth a significant sum over the four years. For many people it could be the opportunity to build up a rainy day savings fund—a cushion against life-shocks—for the very first time.

The hon. Member for Leeds West also talked about the tax gap—I think she said I was muttering at the time. I did not mean to mutter; the only thing I wanted to mention to her was that in the year to 2014 the tax gap was 6.4% of the tax due, whereas if it had stayed at its 2010 value of 7.3% of the tax due, £14.5 billion less tax would have been collected. This Government have a good record on narrowing the tax gap.

The hon. Members for Kirkcaldy and Cowdenbeath (Roger Mullin) and for Wolverhampton South West talked about transparency and publicly available information on company ownership. Our public register of company beneficial ownership will go live in June, but we want to go further, which is why we are consulting on extending transparency requirements to overseas companies purchasing property in the UK or bidding on public contracts. The overseas territories and Crown dependencies have to play their part as well, and at last December’s Joint Ministerial Council territory leaders agreed to hold company beneficial ownership in central registers or similar effective systems.

This Government have always believed that we should back working people. The Bill implements key measures to help working people to keep more of the money they earn, support the next generation, build up their assets and save. It increases the personal allowance by an extra £500 next year to £11,500, cutting taxes for 31 million people, with a basic rate taxpayer paying over £1,000 less in income tax than in 2010. It increases the higher rate threshold to £45,000 next year, taking 585,000 people to below that threshold. It introduces a new personal savings allowance that means that basic rate taxpayers will pay no tax on their savings income up to £1,000 and higher rate taxpayers will not pay tax on savings income up to £500. It also implements higher rates of stamp duty for the purchase of additional residential properties and £60 million of those additional receipts will enable community-led housing development in areas where the housing market is particularly affected by the prevalence of second homes.

Despite record-breaking increases in employment and strong overall economic growth, productivity growth has been weaker than forecast. The Bill takes further steps to back business, drive productivity and create yet more job opportunities. My hon. Friend the Member for Somerton and Frome (David Warburton) reminded us how fundamental those job opportunities are to families throughout this land. A highly competitive corporation tax rate has been a central part of the Government’s economic strategy to get businesses to invest in this country and the Bill drives progress even further by cutting the rate to 17% in 2020. It encourages investment in companies to help them to access the capital they need to grow by cutting the higher rate of capital gains tax for most assets from 28% to 20% and the basic rate from 18% to 10%.

The hon. Member for Aberdeen North rightly spoke up for her constituents and the key industry in her constituency, oil and gas. The Budget and Finance Bill deliver a £1 billion package of reforms to ensure the UK has one of the most competitive tax regimes for oil and gas in the world, taking the petroleum revenue tax to zero, halving the supplementary charge and extending the investment and cluster area allowances to safeguard jobs and investment. No other Government have responded on the scale that we have to the fall in the global oil price.

We must ensure that people have the right skills to realise our productivity potential. My hon. Friend the Member for Macclesfield (David Rutley) talked about the centrality of skills and how skills and investment go hand in hand. Improving the quality and quantity of apprenticeships is an integral part of the plan. The Bill ensures that that can be achieved by introducing from April 2017 an apprenticeship levy of 0.5% of an employer’s pay bill where it exceeds £3 million.

This Government have demonstrated that we are tough on tax avoidance and on evasion—a subject rightly raised by a number of speakers, including the right hon. Member for Don Valley, the hon. Member for Kirkcaldy and Cowdenbeath and my hon. Friend the Member for Amber Valley (Nigel Mills). We have led the way internationally, acting unilaterally in the Finance Act 2015 to introduce the ground-breaking diverted profits tax to deter large multinationals from avoiding UK tax. This Bill goes even further to ensure that all companies and individuals pay their fair share. It stops multinational tax avoidance by introducing new rules to address hybrid mismatch arrangements and by tackling contrived arrangements relating to payments of royalties.

[Caroline Flint]

Will the Minister meet me and colleagues from other parties to talk about the ways in which we can put into the public domain more information from the big corporate multinationals?

[Damian Hinds]

I believe that a meeting has been set up for the right hon. Lady with the Financial Secretary, so I hope that, like him, she is looking forward to that.

The Bill targets key areas of online VAT evasion by providing stronger powers to make overseas sellers pay the VAT that is owed, helping to create a fairer market against UK players. It legislates to ensure that profits from the development of UK property are always subject to UK tax, reflecting the fact that land is a precious natural and national resource, and ensuring that UK developers share a level playing field with overseas developers.

Finally, the Finance Bill introduces a tougher anti-offshore tax evasion regime, with new criminal offences and civil penalties for those who evade or enable evasion. The Government’s position is clear. We will deliver a low tax regime for businesses, but they must pay their fair share of taxes here too. Evading tax is unacceptable and we will continue to bear down on it. The Government have announced legislation for 25 measures to tackle avoidance, evasion and aggressive tax planning, which are forecast to raise over £16 billion in this Parliament, on top of more than 40 changes made in the last Parliament.

As always, at Budget 2016 the Treasury updated its distributional analysis. The headlines are: it remains true that since 2010, the distribution of spending on different income groups or quintiles has remained essentially unchanged, while the incidence of taxation has shifted towards the most affluent fifth; the best-off 20% will pay more tax than all other households put together in 2019-20; and UK income inequality is now lower than it was in 2010.

Since 2010, the Government’s long-term economic plan has focused on sound public finances. Significant progress has been made, with the deficit as a share of GDP forecast to be cut by almost two thirds from its peak in the last year of the Labour Government. The Finance Bill ensures that the record can continue. It provides certainty for working people by reducing income tax and rewarding savers. It backs business and enterprise by cutting corporation tax and reforming capital gains tax. It supports the simplification of the tax system, and it takes bold steps to tackle tax avoidance and evasion. The Finance Bill demonstrates the Government’s commitment to a stronger, secure and more productive economy, and I commend it to the House.

Question put, That the Bill be now read a Second time.