Finance (No. 2) Bill

Debate between Cathy Jamieson and Jim Cunningham

Wednesday 9th April 2014 Commons Chamber

[Cathy Jamieson]

Yes, I hear what the Minister is saying and I shall deal with some of that in a moment, because I am concerned to ensure that we get all the sums right and reach figures that everyone would agree on. Again, that is one reason we want this report brought forward, because we are now being told that the levy will generate £2.3 billion in 2013-14, £2.7 billion in 2014-15 and £2.9 billion in each of the following three years. I would give way to him again if he were able to give the details, but perhaps it would be more appropriate if he did so his response later, as it may take time to get them. We do not have the detailed figures, the evidence or the workings to show how those figures are arrived at and whether things are on course to deliver them. That is why it is important to get the report we are calling for today.

Let me say something about the problems with the levy as we see them. As I have said and as my hon. Friend the Member for Nottingham East has in previous contributions, the Government’s levy lacks ambition. The argument is that the initial levy was set at a relatively low rate, both by international standards and when measured against the scale of the taxpayer subsidies received by the sector during the financial crisis and thereafter. In discussion of the Finance Bill in May 2011, he said:

“The bank levy is a sensible idea in theory, and we broadly support it. However, the yield suggested in the Bill—only £2.6 billion—is not just small but pathetic by international standards”.—[Official Report, 3 May 2011; Vol. 527, c. 482.]

I will happily give way to the Minister if he wants to comment on the international standards, but again, perhaps he will do so when he winds up.

One other problem with the levy is that its two objectives can be seen as a bit of a paradox or even somewhat contradictory. By setting the levy as a tax on bank liabilities in excess of £20 billion and charging a lower rate for more secure long-term liabilities, the Chancellor was actively encouraging the banks to reduce their exposure by moving towards more stable forms of funding.

[Mr Jim Cunningham (Coventry South) (Lab)]

My hon. Friend has just touched on the central point about the levy: that the Government never had the will to take on the bankers in the first place, as we see if we compare what happened in this country with what happened in the United States. That is why they cannot wholeheartedly support a proper levy on the banks; it is a token levy.

[Cathy Jamieson]

My hon. Friend makes an interesting point. I suspect that if I were to stray into a long debate on what happened in the US versus what happened here, I would see—yes, I do see—Mr Bone’s eye upon me to ensure that I did not yield to that particular temptation. However, I say to my hon. Friend that that could usefully form the subject of another debate at some point, but he makes an interesting point about the will to take on the banks. I want to choose my language carefully because I want to avoid getting into that whole thing of our being seen as aggressively pursuing the banks. I recognise that there are some in the banking sector who understand how badly they got it wrong and who want to see change, but the scale of the problem has not been universally accepted, and nor has the degree of culture change that is required. The Minister has heard Opposition Members talk about that issue many times when discussing other legislation.

Returning to the initial imposition of the levy, the Chancellor also wanted to generate more than £2 billion in annual revenues. One problem was that, as was pointed out earlier, the more the banks changed their behaviour and remodelled their balance sheets, the less money the levy generated. Was the Chancellor unable or unwilling to decide whether he wanted behavioural change or a targeted revenue sum? Was it possible to do both? Some evidence suggests that it was not, because it has not brought in the amount of revenue that he intended.

Not content with devising a levy the dual aims of which are somewhat contradictory, the Chancellor also proceeded to cut corporation tax annually, arguably handing the banks a tax break. In order to ensure that the banks do not benefit from the tax break, the Chancellor has had to increase the levy every time he cut corporation tax. We have consistently raised doubts about the levy’s ability to raise sufficient funds, especially in the context of the cuts to corporation tax. During consideration on Report of the 2011 Finance Bill, my hon. Friend the Member for Nottingham East said:

“The sector will have a tax cut of £100 million in 2011-12, £200 million in 2012-13, £300 million in 2013-14, and £400 million in 2014-15. That is a £1 billion corporation tax cut over this Parliament.”

He continued:

“The Treasury ought to supplement its very modest bank levy plan with the bank bonus tax because it is only fair that those who played such a central role in the global economic downturn make a greater contribution to help to secure the economic recovery by supporting jobs and growth.”—[Official Report, 5 July 2011; Vol. 530, c. 1383.]

I would have thought that that sentiment—that those involved in making some of the decisions that caused the problems have a responsibility to do what they can to secure economic recovery and a change in culture—would be shared by everyone in all parts of the House. A combination of two factors—contradictory objectives and corporation tax cuts—means that the levy has increased on no fewer than seven occasions. It is important for me to lay this out so that the House understands the time scale for what happened with the levy, because it adds weight to our call for a report to consider that in more detail.

Back in February 2011, it was confirmed that the rate would be higher than originally proposed. That was change number one. In March 2011, at the Budget, the levy was increased to offset the effect of the 1% cut in corporation tax and by the autumn statement in November 2011—autumn was already beginning to be stretched as far as we thought possible, although of course, autumn is now in December as far as the Government are concerned—the rates were increased to ensure that tax would raise at least £2.5 billion a year. I think that was a tacit admission that the initial rate was perhaps somewhat timid. In March 2012, at the next Budget, the levy was increased again to offset the 1% cut in corporation tax.

In the next autumn statement, when the autumn had been stretched as far as possible into the first week in December, the levy was increased again to offset the 1% reduction in corporation tax. At the March 2013 Budget, the levy was increased again—guess why: to offset the 1% reduction in corporation tax. In December 2013, again at the autumn statement, in what appeared almost to be a desperate attempt to get somewhere near the £2.5 billion target, the Chancellor increased the levy again and broadened the tax base in an apparent attempt to mitigate the impact of the very behavioural change that the tax is supposed to encourage.

Fuel Duty

Debate between Cathy Jamieson and Jim Cunningham

Monday 12th November 2012 Commons Chamber

[Cathy Jamieson]

I can tell the hon. Gentleman that on about 13 occasions the Labour Government decided not to put up fuel duty, to delay an increase or to change it because of economic circumstances, which was absolutely the right thing to do. We looked at the economic circumstances, and made decisions to delay or cancel when that was the right thing to do, including at the height of the economic crisis.

[Mr Jim Cunningham (Coventry South) (Lab)]

I hope my hon. Friend noted that about a fortnight ago there was an Adjournment debate in the House with cross-party support for a freeze on the increase. Although Conservative Members may go on about the increase under Labour, we must remember that they are in government now and that they could have stopped this 18 months ago.

[Cathy Jamieson]

My hon. Friend makes a good point. It is regrettable that some hon. Members who only a few weeks ago called for the very thing that our motion calls for now seem to have cold feet. Given that the economic recovery is fragile, the Government should back the motion.

Finance Bill

Debate between Cathy Jamieson and Jim Cunningham

Monday 2nd July 2012 Commons Chamber

[Cathy Jamieson]

I welcome the fact that it will make a difference for constituents, but once again, unfortunately, the way it was done did not suggest a Government who were organised or knew that they were going to make the announcement at that particular time. That is important in the context of how it will be paid for, but I shall come to that.

At the time, we expressed concern that the Chancellor’s Budget plan would mean a 3p hike in fuel duty in just five weeks. Previously, we had called for the Government to cut VAT, which would have knocked 3p a litre off fuel prices, as well as helping hard-pressed household budgets in other ways. We called for the August rise to be dropped because we believed that increasing the fuel duty at this time would have sent the wrong signal to retailers, who would have had to pass every penny on to drivers and put prices up just when they should have been cutting them.

We also made the point that with Britain now in a double-dip recession, the last thing our economy needed was another tax rise adding to the squeeze on household budgets and to the difficulties faced by many small businesses. The Government’s priority should have been to boost the economy, rather than to clobber families, businesses and pensioners just when they were feeling the squeeze the most. That is why we called on the Chancellor to stop the August fuel duty rise, at least until next January. We said that we would put that issue to a vote in Parliament, and that is why we tabled new clause 11.

[Mr Jim Cunningham]

One question that has never been answered is why the fuel duty decision was not taken in the Budget. Does my hon. Friend agree that the Government rushed into this without thinking about the consequences?

[Cathy Jamieson]

Indeed; my hon. Friend makes a good point. The way in which the decision was announced, and the aftermath of that announcement, does perhaps suggest that the Government were rushed into this. Also, many Government Back Benchers agreed that the fuel duty increase should be dropped. A number of them made that clear in a good Westminster Hall debate, and others publicly signed up to support the FairFuelUK campaign.

We tried to be helpful. We suspected that Ministers might say—as, indeed, they did—that they could not afford to stop the increase, even though they had found the money to give a tax cut to millionaires. As has been suggested, if there is money available, it ought to go to those whose household budgets are being squeezed the most. It is still astonishing to me that the Government seem intent on punishing families—especially those with children—while at the same time giving a massive tax cut to millionaires. [Interruption.] Government Back Benchers can shake their heads and look at the ceiling, but real people are being affected by this Government’s Budget, and those who are benefiting are the best off.

We suggested some ways of raising the necessary funds. We said that the Government could perhaps consider closing the tax loopholes that the Prime Minister had been condemning, and stopping hundreds of millions of pounds being lost through offshore tax havens. We also suggested that they might want to reverse the pension tax relief boost that they have given to people who are already well off—namely, those earning more than £150,000—and that they might want to use the £500 million underspent in the Olympics budget.

We were not being opportunistic. We understand that difficult decisions have to be made if we are to get the deficit down, and as a responsible Opposition we looked at the figures. We also recognised that, at difficult times in the past, Labour had put up fuel duty. On many occasions, however, we also delayed or cancelled planned fuel duty rises in the light of the circumstances at the time—including at the height of the global financial crisis —because it was the right thing to do to give assistance to the people who needed it most and to ensure that we balanced and grew the economy.

We know—and more and more commentators are agreeing with us—that raising taxes and cutting spending too far and too fast have backfired. Britain has been pushed into a double-dip recession, more people are out of work, and the result is a bigger benefits bill and £150 billion of extra borrowing. That is why we need a fairer and more balanced plan for our economy that will get people back to work, and why we are calling again for the Government to change course and put their efforts into tackling youth unemployment, as well as using the skills of people who have been made redundant, and who have something to give back, to support young people into the jobs market.

We agree with the Government that stopping August’s 3p rise in fuel duty is the right thing to do for British businesses and families. I do not know whether the Prime Minister and the Chancellor have ever had to worry about the cost of filling up their cars in the way that the nurse in my constituency does. She works night shifts, and she does not know whether she will have enough money left at the end of the month to fill up her car so that she can get to work. In response to the hon. Member for Dover (Charlie Elphicke), we are glad that the Government have at last started listening to those who face those difficulties, and we will therefore be supporting the Government tonight on this issue. As I said earlier, however, the manner in which the announcement was made raises a number of questions. It looked as though the issue had brought about the quickest U-turn in politics. The new benchmark for “a long time” in politics is no longer a week but overnight, with changes being made 24 hours after the initial announcement.

--- Later in debate ---

[Cathy Jamieson]

That is absolutely true. As I said earlier, that is exactly what happens to those who cannot work for the extra hours that would increase their working time to the 24 hours that would entitle them to maintain their working tax credit. These are people who want to work and pay their way—they want to do the right thing—but for some reason the Government have chosen to clobber them the hardest at the same time as giving millionaires a tax break. That makes no sense to me, although Government Members may say that it is a point of principle.

A commentator—I think that it was Fraser Nelson of The Spectator—recently suggested that the best definition of “Osbornism”, if there can be such a definition, had been provided by Groucho Marx:

“These are my principles. And if you don’t like them—well, I have others.”

I hope that the Government have received the message loud and clear from the Opposition and from the British public. We do not like the principles that are at the heart of the Government’s economic policy. We do not like, or accept, the principle of asking millions to pay more so that millionaires can pay less. That is why we are giving the Government the opportunity to put their well-practised U-turning skills to good use once again.

[Mr Jim Cunningham]

Should they not go further than that? Should we not deal with the amendment to existing legislation allowing the use of foreign countries as tax havens to avoid paying the debts of the developing countries, which can cost £4 billion a year?

[Cathy Jamieson]

My hon. Friend has made a good point. We will have an opportunity to discuss that subject in more detail tomorrow.

The Government once made much of their commitment to fiscal responsibility. Deficit reduction was to be their defining mission. Today, however, that task has been made even harder by the failure of their own economic plans, which involve £150 billion of extra borrowing. Their pledge to clear the deficit by the end of this Parliament has been blown to pieces, yet they still find the money for a tax giveaway to the top 1%.