Finance Bill

Debate between Catherine McKinnell and John Pugh

Tuesday 2nd July 2013 Commons Chamber

[John Pugh (Southport) (LD)]

How does the hon. Lady think she could work out the true implications and effect of the spending review in only three months? Why did she choose three months rather than six months, nine months or one year?

[Catherine McKinnell]

That is an interesting question because the new clause suggests that the review should be published “within six months”, so I wonder whether the hon. Gentleman has simply misread our new clause. We feel that there is no time to lose, but that six months is a reasonable period to give the Government time to consider the likely impact of the spending round in 2013 on tax receipts. Ultimately, if we are to balance the books and get borrowing down, we are going to have to increase our tax receipts into the Exchequer.

[John Pugh]

Does the hon. Lady recognise that one of the biggest effects of the spending review will be on local government expenditure, which of course has to be dealt with in the following May—falling outside the six-month period? Some of the greater impact of the spending review will be felt after she has asked the Government to produce the report.

[Catherine McKinnell]

I am pleased that we have the hon. Gentleman’s support in principle for the fact that the Government need to take stock of the impact of these spending decisions and his acknowledgement of the devastating impact of the cuts to local authority projects, which we have rehearsed many times here, particularly in areas such as the one I represent. We will not see the impact straight away; we will see it in six months, 12 months, 18 months or two years’ time. The Government have imposed cuts without allowing the economy time to grow, create jobs and consolidate the debt in a responsible way, so we will face the consequences of this economic approach for many years to come. I am pleased, as I say, that the hon. Member for Southport (John Pugh) recognises that.

--- Later in debate ---

[Catherine McKinnell]

It is open to the Government to support our proposed review of spending round 2013 and the impact that that may have on tax receipts. If the hon. Member for Central Devon (Mel Stride) wants to support our motion today and the Government in undertaking such a review, it is open to him to do so. We have not specified exactly what should be included in that review and it is open to the Government to look at whatever avoidance opportunities they consider relevant to ensuring that we protect future tax receipts.

I know from written answers that I have received from HMRC recently that staff numbers were projected to fall from 88,875 in March 2009 to 58,464 by March 2014. Will the Minister provide an update on those figures, and in particular what HMRC’s headcount is expected to be by March 2016, following last week’s spending review and the additional resource reduction flowing from it? It is concerning that despite much-publicised announcements about increased investment in tax avoidance and evasion activity, the number of HMRC staff working in enforcement and compliance was expected to fall from 34,762 in March 2009 to 26,905 in March 2014.

I assume that given the Government’s much-stated commitment to getting tough in this area, the predicted fall in staff numbers is no longer going to happen and that we will see a rise in the number of HMRC staff dedicated to enforcement and compliance work. It would be helpful if the Minister could confirm that for the House and tell us how many HMRC staff will be working in this area between this year and 2015-16.

In conclusion, the Government had the opportunity last week to boost tax receipts by announcing measures that would provide the short and medium-term boost our economy needs while providing a long-term return for the country, yet despite the catastrophic failure of their economic plan to date, the Chancellor came to the House and announced that he would continue ploughing the same infertile furrow he has been on since 2010. He just cannot bring himself to admit that it has gone badly wrong. We believe that conducting the review set out in new clause 10 might just help the Government to take stock and note the error of their ways to date. I therefore urge all Members to support the new clause, not only for the sake of their constituents, but for that of our country’s finances.

[John Pugh]

I will try to say something positive about new clause 10. It is quite laudable, in a way, because it would link spending to taxation and get us to engage in retrospective analysis, and frankly we do not do enough of that in this place. We talk about policy a great deal, but the long-term effects are often hidden from us. It can be quite counter-intuitive. We had an interesting debate yesterday on the 50% tax rate, the Laffer curve and the effect that such a rate might or might not have. There are plenty of other examples where the effect of taxation needs to be adequately scrutinised. In Committee we debated what tax avoidance measures would do to people’s behaviour, what petrol taxation would do to people’s behaviour and to the revenue we get, what landfill tax would do to councils’ behaviour, and what the video games industry would make of the various changes that will affect it.

My problem with what the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is saying is that I think Parliament should do what she is suggesting. It seems to me that Parliament does not have enough good, accessible data and that we make no real effort to examine the whole business of tax revenue yields in any systematic, thorough, regular or routine way. When it comes to spending, there is a very similar picture. There is no real scrutiny of spending in this place. The scrutiny we do is not even as good as that which might be found in a local council. We have the big events, such as the announcement of the spending review, but there is no detailed examination of expenditure.

If Members do not believe me, they should come along to estimates day tomorrow and see the examination of estimates that is imposed in this place. The last time we had an estimates day, I was actually ruled out of order by the Deputy Speaker—not you, Madam Deputy Speaker—for talking about the estimates, which was thought improper.

We do not examine the non-controversial, everyday departmental expenditure that goes on from year to year and the errors that occur in it. The Public Accounts Committee does a very good job of looking at the controversial stuff, but there is no rigorous, effective or ongoing examination of expenditure. We do not do enough of that and we do not know enough about what tax policy actually does, how Departments spend and what the profile of a Department is on a day-to-day, month-to-month and year-to-year basis.

Arguably, somebody in the basement of the Treasury knows the spending profile of Departments, but they would probably be unable to give the hon. Lady the answer she wants in three months, and probably not in six months. I think she has to recognise that she is making a hard ask and, in my view, probably a futile one, because if we do not do any real scrutiny of taxation in this place—we scrutinise policy, but certainly not outcomes—beyond headline figures and big grandstanding days such as the announcement of the spending review, then what we are essentially doing with the Government finance is firefighting.

What takes place in this place is not effective financial scrutiny. We do not look at the boring, pedestrian, routine and important spending, which is massive. The new clause asks the Treasury to mark its own work, and I am sure that it would be perfectly happy in some contexts to do so, but what we really need is to get Parliament to do the work and to give us an answer that would satisfy us, including the hon. Lady.