Finance Bill

Caroline Lucas Excerpts

Tuesday 21st July 2015 Commons Chamber

[Mr Gauke]

There is no disagreement over the need for a contribution from the banking sector towards the public purse. We have concluded that the better way to make that contribution is through a corporation tax surcharge, and that is what we are introducing. There was also a particular argument in 2010 about trying to influence behaviour, but, to some extent, that has now been addressed by a new regulatory regime. I agree that there is a need for a contribution. What we have here is a new surcharge on the banking sector, which performs precisely that task.

Britain’s insurance premium tax is also well below rates in many other countries, such as Germany, so this Bill proposes an increase to 9.5%. but that applies to only one fifth of all premiums. The Government are also committed to meeting their climate change objectives in a cost-effective way. Over the next five years, the climate change levy exemption for renewable energy is due to cost £4 billion, one third of which would subsidise overseas projects that bring no benefit to the UK. This Finance Bill therefore takes urgent action to stabilise CCL revenue.

Finally, to make the tax system fairer, the Bill restricts the amount of tax relief landlords can claim on property finance costs to the basic rate of income tax. That will ensure that landlords with the largest incomes no longer receive the most generous tax treatment. We are tackling tax avoidance by wealthy individuals and corporates, addressing imbalances in the tax system and taking bold steps to ensure that it remains fair.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The hon. Gentleman made a point a moment ago about the removal of the climate change levy for green energy. Does he recognise that that measure, by being retrospective and incredibly disproportionate to the ends he is trying to achieve, will seriously disrupt the green energy sector? The sector is already massively concerned about that. He talks about the importance of cost-effective measures to reaching green energy outcomes. Onshore wind is one of the most cost-effective energies out there, but his measures are undermining it.

[Mr Gauke]

I do not accept that point. Removing this exemption will achieve better value for money in the Government’s support for low-carbon generation by targeting support directly at generators and preventing UK taxpayers from subsidising overseas renewable projects that bring no benefit to the UK. That was the weakness; that was the failure of the existing regime, and it is right that we address it.

I now wish to deal with productivity. As my right hon. friend the Chancellor set out in the recent Budget, the rate of UK productivity has been a historical problem. It is vital to increase our productivity, because that is one of the fastest routes to creating jobs and raising the standard of living for everyone. Earlier this month, we published our productivity plan, setting out how we will tackle this long-term challenge. This Bill implements a number of measures taking this plan forward. A stable tax regime with competitive rates and strong investment incentives is essential to drive productivity forward. In the previous Parliament, the main rate of corporation tax was cut from 28% to 20% as a central part of the Government’s economic strategy. This Bill goes further, by cutting it to 19% in 2017 and 18% in 2020, saving businesses more than £6 billion by 2021 and giving the UK the lowest rate of corporation tax in the G20.

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[Mr Gauke]

Our record on business rates is that we have consistently looked after the interests of small businesses: we have extended small business rate relief on numerous occasions; we have introduced the rebate for retail premises; and we have made a number of reforms to business rates to assist small businesses in particular, as well as capping increases in business rates. A review is ongoing and I am not going to make any announcement today, however nicely the hon. Gentleman asks me what its contents will be. It is ongoing and the consultation period has only relatively recently finished. We are keen to progress this and we have brought forward the timetable by which we will complete that review; we will have something by the end of the year.

Improving productivity also means prioritising investment in infrastructure. Our road network has suffered from decades of underinvestment. This Bill implements reforms to vehicle excise duty to support the creation of a roads fund. The reforms will ensure that VED still incentivises purchases of the cleanest cars, while putting revenues on a sustainable long-term footing.

[Caroline Lucas]

The Minister will not be surprised to hear that I completely disagree with him, but it is not just me, as the Society of Motor Manufacturers and Traders also says that this change to VED means that the take-up of low-emission vehicles will be disincentivised. How can that be a positive thing to do? He talks about productivity and in other places about the importance of air quality, but these measures, again, undermine both.

[Mr Gauke]

That is an unlikely alliance, but what I say to both the hon. Lady and the SMMT is that there is still an incentive in the first year and the evidence suggests that that is most important in influencing behaviour. There are incentives within the system.

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[Sammy Wilson]

That is a very worrying intervention for those of us who wish to get to the airport and go back to our constituencies, and I hope it will not be followed up on later in the debate.

Another issue I want to raise is corporation tax. I welcome the reduction in the rate of corporation tax and also the allowances. This has an impact on Northern Ireland, because as the rate set centrally is reduced, the cost of devolving corporation tax to Northern Ireland is reduced as well. That probably reduces Northern Ireland’s competitiveness vis-à-vis other parts of the United Kingdom. However, as the real target of the reduction in corporation tax is our competitiveness vis-à-vis the Irish Republic, a reduction in the cost of devolution—which can affect either what money we have available in the block grant or, indeed, how far we can reduce the level of corporation tax—is welcome.

We recognise the importance of corporation tax in attracting inward investment. Even though there might be lots of capital allowances and so on, the importance of the headline rate has been shown in the Irish Republic. This is something that we in Northern Ireland wish to implement as soon as possible, although given the way that some of the parties in Northern Ireland, including the Social Democratic and Labour party, have behaved in recent times in respect of the Stormont House agreement, the prospect of devolving corporation tax, with the advantages that it might bring, is being pushed further and further down the line. I hope we will not find ourselves hitting even more problems.

The other thing I wish to raise is the whole issue of taxes on energy. The reasoned amendment talks about the removal of the exemption from the climate change levy on the onshore wind. I accept the argument that the Government have given. Given that many of the companies involved are owned abroad, the tax concession given to them was not benefitting people here in the United Kingdom. We also need to bear in mind not only that there is huge opposition to many of the renewable sources, on the grounds of aesthetics and environmental impact, but that people are becoming increasingly aware of the cost of switching from cheap fossil fuels to expensive renewable energy, in terms of fuel poverty and the impact on industry.

[Caroline Lucas]

indicated dissent.

[Sammy Wilson]

I know that the Member from the Green party gets appalled when we talk like this, but why do we even have a renewables obligation? Why is there an obligation on electricity distributors to purchase from renewable sources? If we were simply depending on market decisions, that would not be done.

[Caroline Lucas]

Will the hon. Gentleman give way?

[Sammy Wilson]

I will give way in a moment. Let me just finish the argument.

The renewables obligation is an obligation because the energy is more expensive. Indeed, the Department of Energy and Climate Change’s own estimation is that, by 2020, the cost of paying for expensive renewable energy, more and more of which is coming on to the grid, will be about £190 per household. At the same time, we in this House complain about fuel poverty, when one of the contributors to fuel poverty is the fact that we are orientating ourselves towards more expensive electricity generation. Only last week there were complaints about Tata Steel closing down its plant.

[Sammy Wilson]

I will give way in a moment.

High-energy users are increasingly finding that the United Kingdom is a place where energy is expensive—it costs jobs, it dips into people’s pockets and it causes fuel poverty. This is an issue that the Government are quite rightly addressing.

[Caroline Lucas]

rose—

[Carol Monaghan]

rose—

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[Sammy Wilson]

Of course, the hon. Gentleman is absolutely wrong when he talks about there being no price on carbon. We are talking about the climate change levy. That is one of the costs of carbon. There is also the cost of the European trading scheme, in which carbon is traded and carbon allowances are given, so of course there is already a cost.

[Caroline Lucas]

I am grateful to the hon. Gentleman for giving way. I am not sure whether or not it is parliamentary to say that the hon. Gentleman is talking rubbish, but he is talking rubbish. The point is that far greater subsidies go to nuclear power and fossil fuel than ever go to renewables. There is currently a small amount of subsidy going to renewables to bring them to grid parity. They will be there in a year or so. Solar is already there, and it is one of the most affordable sources of energy. I think he should speak about what he knows and not about what he does not know about.

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[Caroline Lucas (Brighton, Pavilion) (Green)]

Thank you, Mr Deputy Speaker, for the opportunity to contribute to this debate. I have two fundamental objections to the Bill. First, it continues the Government’s cruel and counterproductive austerity agenda, which is both socially destructive and economically illiterate. Secondly, it flies in the face of the Government’s own rhetoric about the threat of climate change to our economy, society, security and wellbeing. Not only does it ignore the public interest in mitigating climate risk, but it fails to realise the economic benefits to the UK of being at the forefront of the global transition to a zero-carbon, resource-efficient, sustainable economy.

Over the past few months, hundreds of leading UK businesses—not just environmentalists—have repeatedly called on the Chancellor to prioritise green investment and climate action, warning that the UK’s green economy is at a crossroads without clear policy direction. It is astonishing that, this year of all years, when the Government say that we need a bold agreement at the climate summit in Paris, the Treasury is undermining both the UK’s reputation and, more importantly, the chances of meeting our own emission targets. It is hard to see how the Government really do think that “Do as I say, not as I do” demonstrates any real leadership.

One such backward provision in this Bill is the change to vehicle excise duty. The Government claim that

“the new VED system will be reviewed as necessary to ensure that it continues to incentivise the cleanest cars.”

Yet once again there is a gaping chasm between the spin and the substance, because while zero-emission vehicles still pay nothing—so no change there—high-polluting cars will pay far less tax than at present. Again, it is not only those concerned with air pollution and climate change who are pointing out the idiocy of this measure. Once more the Chancellor has managed to unite industry and environmentalists, with the Society of Motor Manufacturers and Traders saying that

“the new regime will disincentivise take up of low emission vehicles. New technologies such as plug-in hybrid, the fastest growing ultra low emission vehicle segment, will not benefit from long-term VED incentive, threatening the ability of the UK and the UK automotive sector to meet ever stricter CO₂ targets.”

[Maria Caulfield]

The hon. Lady cannot have it both ways: she is either anti-austerity or she is not. The measures on VED that the Chancellor introduced in this Budget were to help low-income families who cannot afford a new car. Under the previous system, people who could afford to change their car were paying less VED than those who could not afford to do that. What does she say to the hard-working families in her constituency who will benefit from this measure?

[Caroline Lucas]

I say to the hard-working families in my constituency that I do not see why they have to choose between austerity and a greener world. We can have both if we have a bit of leadership, which this Government have been so conspicuously failing to provide. Why should only richer people be able to afford greener cars? No, we want to make greener cars the norm, because it is the poorest people who suffer from the air pollution that is caused by the cars that this Government are happy to have all over our roads. The hon. Lady’s question was wrong and misguided. I am very proud to say that I am standing up for some of the poorest people in my constituency, who should be able to have decent air quality as well as not suffering from the horrendous austerity that her Government are rolling out in front of them right now. In case the Chancellor has not noticed, air pollution in the UK is a serious public health crisis that is leading to 29,000 premature deaths every year. I would love to hear what the hon. Lady says to her constituents when they are facing that degree of air pollution and health imbalance as a result of her Government’s policies.

[Maria Caulfield]

rose—

[Caroline Lucas]

I would love to hear it, but not that much, so I am going to continue.

Then we have the senseless proposal to tax renewable energy as if it were a fossil fuel by removing the climate change levy exemption for renewables.

[Stewart Hosie]

On the VED changes being intended to tackle the debt or the deficit, I am sure the hon. Lady will have heard the Chancellor say that the entire set of measures was fiscally neutral and has nothing to do with bringing down the deficit or the debt.

[Caroline Lucas]

I thank the hon. Gentleman—my hon. Friend—for that well-made point.

As campaigners have pointed out, the policy on the climate change levy exemption for renewables is like making people pay an alcohol tax on apple juice. The Government claim that it is intended to prevent taxpayers’ money from benefiting renewable electricity generated overseas. In fact, it is a completely disproportionate measure that turns a policy that was designed to encourage low-carbon electricity into just an electricity tax for businesses. It is interesting that Ministers remain suspiciously silent on the shocking revelation earlier this year that the Government spend 300 times more on backing fossil fuel projects abroad than on clean energy via the export credit agency. If they are that worried about the issue, one would have expected a little more consistency from them. The scandalous public spending on fossil fuel subsidies should be cut, not support for clean, green, home-grown renewable energy.

I agree with the shadow Energy and Climate Change Secretary, the right hon. Member for Don Valley (Caroline Flint), that removing the renewables exemption from the climate change levy will undermine investor confidence in renewable energy, and that we should instead be seizing the massive opportunities for jobs and investment that moving to a low-carbon economy would provide for this country. I hope that we can work together across all parties to remove this stupendously senseless provision from the Bill altogether.

The Minister spent a long time talking about how important this Bill is for productivity. I am a great supporter of productivity, but I fail to see how, for example, plans to scrap the long-established zero-carbon homes policy will support it. Indeed, in an open letter to the Chancellor, over 200 businesses warned:

“This sudden u-turn has undermined industry confidence in government and will now curtail investment in British innovation and manufacturing”.

So much for putting our economy on a stable footing; so much for this Government’s phoney concern about energy costs. Scrapping this policy means that future homes, offices, schools and factories will be more costly to run, locking residents and building users into higher energy bills. Businesses are increasingly speaking out not against the so-called green crap, but against the tsunami of Government blue crap that is putting up energy bills, harming business and undermining climate action.

I have a few last words on the welfare aspects of the Bill. The Chancellor can crow about raising the tax threshold so that fewer people on low incomes pay tax, but although that is the right thing to do, it does nothing to change the overall impact of his Budget and of the Finance Bill. As the IFS has shown, it leaves us with a tax and benefits system that is more regressive. The biggest losers are those in the second and third poorest tenths of the population—the working poor. Under the cover of austerity, the welfare cap will make housing, in particular, unaffordable for many families. Young and disabled people have been unfairly singled out to lose benefits. Child poverty already costs Britain upwards of £29 billion, and is set to rise under plans to limit tax credits, which could leave 3 million families on average £1,000 worse off, even allowing for increases elsewhere.

According to Treasury’s own analysis, the plan to raise the inheritance tax threshold will benefit high-income and wealthy households. Given that it is one of the easiest taxes to both avoid and evade, and that the very rich often find ways to pay very little, it is clear that this whole area needs a complete rethink.

On tax dodging, I welcome the Government’s recognition that the so-called Mayfair loophole needs to be closed. Many of Brighton’s residents have written to me about this, and it is thanks to the determination and persistence of individuals and campaigners that we have got this far. Yet again, however, the Government spin machine is in overdrive and the reality does not match the rhetoric. I urge the Chancellor to address that by agreeing that carried interest counts as income and should be taxed as income.

Finally, if the Chancellor is serious about tackling tax dodging, as I hope he is, I urge him to reconsider his opposition to the Robin Hood tax and to adopt the comprehensive policies set out in the tax dodging Bill proposals, which are supported by 25 UK and international non-governmental organisations and would generate about £3.6 billion in the UK.

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[Damian Hinds]

I can confirm that absolutely. We have not managed six in my household but we do have three, and I, like my hon. Friend, do not think there is an ideal number of children to have in a family. I do not think it is for Government to say what that should be. But what we do say is that in making decisions about starting a family and about growing their family, people in different circumstances, whether they are supporting themselves entirely through employment or with the help of benefits, should have to make the same sorts of decisions.

[Caroline Lucas]

rose—

[Damian Hinds]

I must make progress. I must respond to several points that were raised in the debate.

This Bill takes the next steps towards Britain’s sustained economic security, putting us on the right path towards meeting our ambition to be the most prosperous major economy in the world within a generation. As the hon. Member for Worsley and Eccles South (Barbara Keeley) pointed out, the Bill is not about everything that is in the Budget. The Finance Bill is limited in scope specifically to tax measures intended for general expenditure. The national living wage is not within its scope, but as the direct question came up of how the Government would bring it in, I confirm that we will be making regulations to introduce it for April 2016.

I want to respond to a number of other points. The hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) suggested that changes to inheritance tax were only to protect the rich. As a result of rising house prices, inheritance tax increasingly hits people with normal family homes and, without action, the number of estates facing an IHT bill was forecast to double from about 35,000 in 2014-15 to 63,000 in 2021. As he will know, there are provisions such that it is clawed back from the very largest estates so that the wealthiest people do not in fact benefit.

The hon. Gentleman, the hon. Member for Hornsey and Wood Green (Catherine West) and others mentioned the so-called Mayfair loophole and the treatment of carried interest. Carried interest is treated as a capital gain in the UK, as in most other jurisdictions, because it is not exactly the same as a salary; it reflects the return to the manager in terms of some of the investment risk that they have undertaken. That is aligned to the tax treatment applied to other investors.

The hon. Member for Kirkcaldy and Cowdenbeath spoke powerfully about the vital and sometimes dangerous work done by the emergency services in Scotland, as did the hon. Member for Edinburgh East (Tommy Sheppard), and asked about VAT treatment. The discontinuation of local funding for police and fire and rescue services in Scotland was a decision by the Scottish Government, not the UK Government. The Scottish Government were explicitly advised of the VAT consequences of that reorganisation. Because these bodies are no longer funded through local taxation, the rationale for providing exemption under section 33 of the Value Added Tax Act 1994 does not apply.

The hon. Member for East Antrim (Sammy Wilson), apart from his very engaging mini-debate with the hon. Member for Brighton, Pavilion (Caroline Lucas), asked about take-up of the employment allowance in Northern Ireland. It has been taken up by 27,000 businesses—an 84% take-up rate, which is a wee bit below the UK average, but fairly close to it. Of course, we must continue to draw attention to its benefits.

The hon. Member for Hornsey and Wood Green rightly talked about the vital role of childcare in enabling productivity gains. She mentioned particularly the importance of enabling mums to return to the workplace sooner if they so wish. I am sure that she will therefore welcome our increasing the facility for three and four-year-olds to 30 hours.

The hon. Member for East Lothian (George Kerevan) talked about the productivity problem. I am sure he would not suggest that it is a new problem, but if he had, it would have been misleading, as it has been around for a long time. I make no apology for the fact that in 2010, facing the economic crisis that we did, the very top priority of the incoming Government was to keep people in work. The success of that approach has been reflected in the 2 million jobs created over the past five years.

The hon. Members for Foyle (Mark Durkan) and for East Antrim asked about what would happen with vehicle excise duty in Northern Ireland. Devolved Administrations will of course continue to get funding for roads through the Barnett formula, and they could establish a specific fund for their roads if they chose.

We heard a number of other excellent speeches. My hon. Friend the Member for Lewes (Maria Caulfield) reminded us of the context of the deficit. My hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer) said that it was easy to come up with reasons for not doing things now but that now is the right time to get on with these important measures. She and my hon. Friend the Member for Dudley South (Mike Wood) talked about the importance of businesses in creating jobs, and welcomed the apprenticeships levy.

Fairness was at the fore of the debate a number of times. My hon. Friend the Member for Charnwood (Edward Argar) put it very well when he said that we believe in a low-tax economy in which everyone pays their fair share. He is correct that our plans include improved tax recovery. It is partly because of that that we can ensure that everyone, especially the low-paid, can keep more of what they earn, as my hon. Friend the Member for Bexhill and Battle (Huw Merriman) noted.

Indeed, we have always believed that working people should be free to keep more of the money they earn. That is one of the most powerful incentives to aspiration. During the last Parliament, we increased the personal allowance from the £6,475 we inherited to £10,600. Clauses 5 and 6 will increase the personal allowance to £11,000 in 2016-17 and to £11,200 in 2017-18, and increase the higher rate threshold to £43,000 and to £43,600 respectively. As a result, nearly 600,000 more individuals will be taken out of income tax by 2016-17. These are important steps towards the Government’s ambition to increase the personal allowance to £12,500 by the end of the Parliament. We will ensure that, when that is achieved, the personal allowance will be uprated in line with the national minimum wage so that no one working 30 hours on the national minimum wage will pay income tax.