Finance (No. 4) Bill

Chris Bryant Excerpts

Wednesday 18th April 2012 Commons Chamber

[Owen Smith]

I am not going to indulge in this procedural nonsense much longer, because frankly the country is interested in the substance of the debate. However, if the Exchequer Secretary wants to intervene on me one more time, he can take the opportunity that the Prime Minister eschewed earlier today and correct the misleading comments that he made about the 50p rate, which he said raised no money. We know that it did raise money. We know that page 52 of the Her Majesty’s Revenue and Customs report makes clear how much money it raised and how much it would have raised in future. If the Exchequer Secretary wants to intervene on that point he can, but as for our amendment, drafted on the Clerk’s advice, we are confident in it, we are happy about it and we will debate the substance rather than the nonsense.

[Chris Bryant (Rhondda) (Lab)]

I am grateful to my hon. Friend and neighbour from Pontypridd for giving way. He will know that my constituents, like his, find it inconceivable that the Government should be trying to reduce the tax rate from 50p to 45p at this time. Will he confirm that literally the only people in this House who can even table an amendment to put it back to 50p are Ministers of the Crown? That is what they should be doing today, rather than hiding behind the procedure of this House.

[Owen Smith]

I am grateful to my hon. Friend because he reiterates the point that I have made. The Government are the only body in this House who can choose to raise taxation.

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[Owen Smith]

The 50p rate was introduced, as I said earlier, when we were in the depths of the biggest global recession—[Interruption.] I add the word global, unless Government Members are still suggesting that the collapse of Lehman Brothers in the US was the fault of the Labour Government. Among the many risible claims of the present Government, that is right up there with “expansionary fiscal contraction”. While we are still asking the poor to pay the price for that global recession and piling misery upon misery on them, with VAT changes, increased job insecurity and wage stagnation, cutting the 50p rate is fundamentally the wrong thing to do.

[Chris Bryant]

My hon. Friend the shadow Minister has referred to several things that are uncertain, but has it not already become clear that two things are absolutely certain? The first is that the Prime Minister gave us a pork pie earlier when he was talking about how much the 50p rate would raise. Secondly, the only reason there have been so many cock-ups in the Budget and the Finance Bill is that the Government have had to try to justify to the public their cut to the 50p rate. The whole mistake of the Budget hangs on that one initial mistake in cutting the 50p rate.

[Owen Smith]

I grateful for that intervention. I am not sure whether the pork pie was served at ambient temperature, but it was certainly a pork pie.

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[Elizabeth Truss]

Yes, and perhaps some Opposition Front-Bench Members should move to France, where they might find that such policies are more conducive to their way of thinking.

At this time of increased international competition and great movements of people and capital around the world, and with new economies rising such as in India and China, according to the World Economic Forum Britain is 94th in the world in respect of the effect and extent of our taxation. One factor in that is the top rate of tax under the previous Government, and another is the extremely long tax code, which is a result of their meddling with our tax system over many years.

The UK is 11% less productive than the G7 average, and our skills base is lower than that of the US, France and Germany. If we are to become competitive again and improve our productivity and skills, we need incentives for people in this country to work and to invest in their skills, and we need to rebalance the tax system away from income tax and taxes on work such as national insurance, which the previous Government increased. We also need to reform our education and welfare systems and take the 2 million lowest earners out of tax, in order to give everybody more incentive to work. We must also merge our income tax and national insurance system to make things simpler for employers. We need to get rid of the previous Government’s flagship 50p tax rate as well, as it has done so much damage to people in this country who are seeking to work, to invest and to be part of building our future economy.

The Government have made it clear that we want shareholders to have proper control over executive pay in their companies, and that must happen. People must be rewarded in line with the skills they use, the risks they take and the income they generate. We need incentives for people to set up businesses, and to create and produce more. We also need to look outside Britain and see what the rest of the world is doing. We need to move away from the myopic approach that it does not matter what is going on elsewhere. If our country takes that approach, we will not succeed.

[Chris Bryant]

I had not intended to speak in this debate, but the previous—[Interruption.] I am grateful for all the waves from Government Members. The contribution of the hon. Member for South West Norfolk (Elizabeth Truss) has prompted me to speak, however.

First, I want to talk about what my hon. Friend the Member for Pontypridd (Owen Smith) referred to as the constitutional shenanigans. For many centuries, it has been a convention in this House that only a Minister of the Crown can lay a charge or an amendment to a Finance Bill that increases or changes a charge and thereby adds a duty to the people of this country, but that is a mistake. The myth that we have a Budget needs to be exploded, too. We do not have a Budget. What we have is a speech by the Chancellor of the Exchequer, followed by a Finance Bill and some Ways and Means resolutions. In addition, we have a separate process whereby Supply is granted. That system does not result in our properly evaluating whether we are raising money properly and fairly and whether we are spending it properly. I know many of these processes have existed for a very long time, but they lead to profound confusion in most ordinary voters’ minds about how we in this House conduct our business.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does the hon. Gentleman therefore join Members on my side of the House in applauding the Government for establishing the Office for Budget Responsibility, which is conducting independent forecasting and analysis of the Budget, and for putting far more information than before in the Red Book about the distributional impact of tax changes on the people of this country?

[Chris Bryant]

Broadly speaking, yes, I do, just as I supported making the Bank of England independent at a time when the Conservative party was opposed to doing so. However, my point remains that this House does not really vote properly through the expenditure of the Government; we do not, in any sense, analyse it line by line. We also do not match expenditure with the raising of taxes, unlike nearly every other legislature in the world. Most countries that have based their system on ours have now amended their processes and have better processes than we do for budgetary matters.

[Mark Field]

I entirely associate myself with the comments made, because the hon. Gentleman is absolutely right, and I hope that most Government Members would also agree with what is being said. He might also point out that it is probably difficult, given that we have a deficit of £126 billion, to match that expenditure with tax, and going down that route might well lead to the significant reduction in the deficit that many Government Members very much support.

[Chris Bryant]

I do not entirely disagree with the hon. Gentleman. However, if the Government want to take the country with them as they are taking through enormous cuts, it is important that they have a process in Parliament that people can understand. We simply do not have that, which is one reason why people are so angry about some of the cuts that are happening.

[Mark Reckless]

I commend the hon. Gentleman on what he says and associate myself fully with his remarks. May I ask whether the Opposition Front-Bench team would support amendments to Standing Orders to put our tax and spend process on the proper basis that he describes?

[Chris Bryant]

That is way above my pay grade. I am just speaking for myself in this regard, and I hope that hon. Members will take my comments in that sense, but I have made this argument for a very long time and tried to do the same when I was Deputy Leader of the House.

I just say to the hon. Member for South West Norfolk that my constituents do not particularly want very high rates of tax, either for themselves or for wealthy people. There is no sense of bitterness and a determination to grind the wealthy down among my constituents, many of whom have very noble aspirations to be wealthy themselves. They hope one day to be paying higher rates of tax, so the point for them today is not about whether a 50p rate of tax is ever the right thing; it is about whether that is the right thing now. I say to her that my constituents feel that the past few years have been very tough, not just the Conservative years, but the last two years of the Labour Government, because of the global financial crisis. People such as my constituents have suffered the most in that time and they do not see people in the City of London suffering—the sales of champagne have still been pretty good—but they do feel themselves suffering. In that situation, it is all the more incumbent on us to think very hard before lessening the tax rate for the wealthiest.

[Several hon. Members]

rose—

[Chris Bryant]

I will give way to the hon. Member for South West Norfolk, because I referred to her directly.

[Elizabeth Truss]

The point that the hon. Gentleman makes is a political one. Is not the crucial issue here the economics and what will actually benefit his constituents? Should he not be considering the issues of whether they will have jobs, whether new businesses will flourish and whether people will aspire to work harder? Rather than the political presentation, should he not be considering the economic case?

[Chris Bryant]

I will deal with the economic case, but this is where I fundamentally disagree with the hon. Lady ideologically. I do not think we can put economics and politics into separate boxes; the one drives the other. If we want a happier country, where people prosper because they feel that the whole of society is engaged in the same endeavour, we have to make sure that it feels as if everyone has equally got their—I am going to get my metaphors all mixed up—shoulder to the grindstone. I say to Government Members that in my constituency it does not feel that that is the case at the moment. It feels as if the poor are having a very rough time, and there is very little prospect of changing that. I believe that my hon. Friend the Member for Pontypridd said that 2,700 unemployed people in his constituency were going for 200 jobs. The statistics are even worse just up the road in my constituency. It is not a question of someone getting on their bike and going somewhere else to find a job, which is why the politics matter. I am talking not about party politics, but about the sense of whether we are genuinely all in this together.

[Alun Cairns]

The hon. Gentleman has made a powerful point in comparing the incomes of people in his constituency with those of some in the City of London. But in order to raise the wealth and prosperity of people in his constituency and in every other constituency across the UK, particularly those in the north, Wales and Scotland, do we not need to attract investors and to attract the best brains in the world? That 50% rate is extremely important in respect of providing investment to his constituency, my constituency and others of hon. Members across this House.

[Chris Bryant]

I do not want a 50p rate to last for ever and I accept that the City of London plays a very important role in the whole UK economy, but I tell the hon. Gentleman that I feel anxious that this country’s economy depends far too much on what happens in London and the south-east. My fear about the way in which this policy has been developed in the past few months is that the Government intend to increase that dependency, rather than undermine it. I know that there are logical arguments to say that we should have different pay rates for public sector jobs in different parts of the country—

[Richard Harrington (Watford) (Con)]

rose—

[Chris Bryant]

Just one moment. However, I say to Government Members that if they do that, they will further exacerbate the gap between peripheral parts of the economy—places such as the Rhondda and the Vale of Glamorgan—and the south-east of England and London. That will undermine the very competitiveness that the hon. Member for South West Norfolk is trying to advance.

I also disagree with the move that the Government are making because, politically, it sanctions the process of avoiding paying tax, in which some wealthy people have engaged. I have not been in this place for that long—just for 11 years—but in that time I have heard an awful lot of Chancellors say, “The solution to this is to close a tax loophole.” However many times we try to close these loopholes, wealthy people will still employ accountants to try to minimise how much tax they pay. I would prefer to live in a country where the vast majority of wealthy people said, “You know what, I am a wealthy person and I want to contribute my fair share. However easily I can legally avoid paying tax, I actually want to pay my fair contribution.”

[Several hon. Members]

rose—

[Chris Bryant]

If hon. Members bear with me, I will give way. I have already promised to give way to the hon. Member for Watford (Richard Harrington), so I will do so in a moment. I just say that the message coming out of this is, “Frankly Mr Wealthy Person or Mrs Wealthy Person, if you have not got an accountant and you are not trying to minimise how much tax you are paying, you are pretty daft.” That is a bad place for us to be in ethically.

[Richard Harrington]

I apologise for stopping the hon. Gentleman in mid-flow on two occasions, but I would like to ask him whether he accepts that for people in business, who are creating wealth and—we hope—employing a lot of people and investing money, a very high personal income tax rate is a disincentive to doing that. Does he accept that however public-spirited business people are—in my experience, most people do take the view that he put forward and they are prepared to pay a reasonable rate of tax; they do not try to avoid paying every penny and they want to contribute to society—a high tax rate is a disincentive and would lead to a lot of people saying, “I am just not going to do the extra and employ more people”?

[Chris Bryant]

Broadly speaking, of course I agree with the hon. Gentleman; a very high tax rate could act as a disincentive to many people and, as the hon. Member for Vale of Glamorgan (Alun Cairns) was intimating, could make this country uncompetitive compared with other countries. However, I just ask two questions in return, the first of which is: what counts as a “very high” tax rate? That is a judgment call; it is about our rate relative to that of others and whether we have the balance right. My second question is: given that, when is the right time to change? I just say to hon. Members that now is not the time, because this country will gird our economic loins and start seeing economic growth only if everybody does genuinely feel we are all in it together. This move undermines that precise point.

[Nadhim Zahawi]

The hon. Gentleman is making a thoughtful speech and some serious points. He talks about the relativity of the level at which we set income tax, but of course we must not forget that it is not just 50p because there is national insurance on top, taking one over the 60p mark to 62p. Some of the things we need to look at are the behavioural changes we saw when income was moved to avoid the 50p rate when it was first brought in, and the disparity between corporation tax and capital gains tax. When income is taxed at 62% but capital gains and corporation tax rates are much lower, those very wealthy individuals who are creating wealth have options to move money around, so there will be behavioural change as we go up the income tax scale and create that differential.

[Chris Bryant]

I am grateful to the hon. Gentleman for giving way. Broadly speaking, I agree with elements of what he said. For example, it is a mistake, as hon. Members have said, to seek to tax people solely via their income because that is not the sole determinant of wealth and therefore of what one should put into the national pot. Similarly, I am quite critical of those in my constituency who say, “Mrs Jones down the road—she’s never paid tax.” Nobody never pays tax because everybody pays VAT in some shape or form; everybody makes some kind of contribution. My fundamental point is that now is not the right time to change the top rate. We are living in austere times and if the country is to gird its economic loins, we need everyone to be on the same side, but this measure is relatively divisive.

[Nadhim Zahawi]

rose—

[Andrea Leadsom]

rose—

[Chris Bryant]

I am not going to give way to the hon. Member for Stratford-on-Avon (Nadhim Zahawi) again—[Interruption.] No, he gestures that his intervention would be short but the last one went on for ever, so I am going to give way to my hon. Friend the Member for Wirral South (Alison McGovern) instead.

[Alison McGovern]

May I draw my hon. Friend back to his remark about the ethics of this issue? The ethics of whether people feel as though we are all making a contribution turn very much on what is happening around this rate of tax. Paul Johnson from the Institute for Fiscal Studies has said:

“The truth is we still do not know the true effect of the 50p rate on revenues.”

Does not this make it extremely difficult to make the right political and ethical choice at this time?

[Chris Bryant]

My hon. Friend is absolutely right. In fact, I think she must have been reading my notes, which were very close to her face, because they say that it is completely uncertain how much this will cost. That is, as my hon. Friend the Member for Pontypridd said, at the nub of this. The Government have no idea how much this is going to cost them or how much would have been raised had we continued with the 50p rate of tax for another five years. That rate has not been in place long enough for us genuinely to see how it has affected people’s behaviour. Sometimes, when a new rate of tax is brought in it has a sudden impact that then evaporates two or three years later. There is absolutely no certainty and I say to Government Members, who I am sure are going to march loyally through the Lobby with the Exchequer Secretary this afternoon not because he is persuasive but because they believe in this—[Interruption.] He may be persuasive, but I do not think he is going to persuade me. I say to them that I think this will end up being a divisive measure.

[Mark Field]

rose—

[Andrea Leadsom]

rose—

[Chris Bryant]

The hon. Gentleman cannot have another go, but the hon. Lady can.

[Andrea Leadsom]

I am very grateful to the hon. Gentleman. I want to draw his attention and that of the hon. Member for Wirral South (Alison McGovern) to a point about ethics. Does the hon. Gentleman accept that the Government intend to increase the tax take from the wealthiest in this country? Where ethics are concerned, it is appalling that people have deliberately used a company to buy a multi-million pound house simply to avoid paying stamp duty. Does he accept that taking measures to ensure that people pay what is a reasonable and acceptable level of tax is a better method than trying to enforce something that is very easily avoidable for many people?

[Chris Bryant]

Well, I am really impressed by the hon. Lady. I can understand how my hon. Friend the Member for Wirral South read my notes but not how the hon. Lady managed to read them from over there. I was going to come to exactly the point she makes but not quite in the same way. Yes, there is an ethical clash about whether this is the right time to introduce this measure for political and economic reasons, but my concern is that because the Chancellor had, I think, personally decided that he was going to cut the 50p rate to 45p, so many other elements of the Budget had to follow that change. A prime example is the fact that the Prime Minister and the Chancellor wanted to be able to say that the rich would pay five times more tax after the Budget than before—I think that is, broadly speaking, the point that the hon. Lady is making. I am not opposed to some of the measures that will increase the amount of tax paid by people who have wealth in a variety of circumstances, but I think that some of the measures in the Budget and the Finance Bill ended up there only to try to shore up that argument, and I do not think that due diligence was done around them.

Let me take one example—I note the look in your eye, Mr Hoyle, and I shall bring my remarks to a close very soon. I think that the measure about capping the tax relief available for people giving money to charities is in the Budget solely so that the Government can argue that the rich will pay more. It is not based on fact or research. There might be perfectly good things we could do on whether charities outside this country that are not covered by the Charity Commission should be removed from the system or on whether greater powers should be given to the commission, but I think that the only reason that the measure was in the Budget was so that the Government could say that tax has increased. This has left the Chancellor and the Prime Minister somewhat double-faced—I shall not say two-faced, because obviously I could not. On the one hand they are saying that the top rate of tax should go down and the rich should not pay so much and, on the other, they are saying that the rich should pay more.

I hope that I have persuaded all the hon. Members on the Government side to change their mind. I see that I have persuaded the reckless Member over there, the hon. Member for Rochester and Strood (Mark Reckless), to support the amendment in the name of my hon. Friend the Member for Pontypridd.

[Mr Christopher Chope (Christchurch) (Con)]

I do not think it is necessary for me to speak to amendment 1 because my hon. Friend the Member for South West Norfolk (Elizabeth Truss) and others have, in their interventions, destroyed the Opposition’s argument. I recall that the TaxPayers Alliance organised a wonderful celebratory dinner not long ago, in the Guildhall I think, at which the guest of honour was none other than Dr Laffer of the Laffer curve. I am delighted that the Treasury is now paying more attention to the principles behind the Laffer curve, which, in my view, are well represented in the argument for reducing the top rate of tax back to 40%, rather than 45%. I hope that in due course my hon. Friend the Minister will explain why someone like me should not be tempted to vote for amendment 1 on the basis that it would reduce the level to 40%.

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[Jonathan Edwards]

I am grateful to the hon. Gentleman for confirming that we are more efficient than the official Opposition.

[Chris Bryant]

The hon. Gentleman knows that I am very fond of him, so may I give him a tip? It is not to believe what he reads in newspapers, not to believe what he reads by Guido Fawkes—most hon. Members would agree with that—and not to listen to Liberal Democrats, who will support and vote for the cut from 50p to 45p, but to focus his anger on the Government, who are introducing this change.

[Jonathan Edwards]

I am grateful for that intervention. I am coming to that. Unfortunately, the papers did not report Labour’s shameless record on some of these issues.

Monday’s Second Reading saw Members from both sides continuing to trade a barrage of figures to explain why the additional rate should be cut or remain as it is. I thought the contribution from the hon. Member for Pontypridd on Monday night was excellent in explaining the political and economic value of the 50p rate. It is clear that there is no agreement over the mechanics of the issue, and given that Labour’s agreement to the 50p rate in the first place was based on revenue-raising rather than principle, that is a very important fact.

The Treasury should therefore instigate a report on the income-shifting and avoidance measures used to lower the amount of tax paid under the additional rate, and on possible revenue from a 50% and a 45% rate, taking into consideration the outlying factors that always impact heavily on the first year of any tax innovation. Such a report would clarify the situation and allow the House to make a considered judgment one way or the other in the next Finance Bill. As always, the majority of people pay the tax that they should, but there are some who will always try to avoid as much as possible.

The artificial shock of the Chancellor at the scale of tax avoidance suggests that he takes Members of this House for fools. Although I accept the argument for a relationship between a lower taxation rate and economic growth and perhaps larger revenues, I find that argument counter-intuitive for income tax rates on this occasion. The majority of those who seek to avoid paying income tax at 50% will, I suspect, also seek to avoid paying it at 45%—and, as the Government contend over the 50% rate, they will have the resources to avoid doing so.

My amendment 76, which would require a review, neatly coincides with the Opposition’s amendment, so I assume that when my amendment is pressed to a vote they will join us in the Lobby. After all, they have already signed up to my amendment 7, which, I shall explain for the benefit of the Committee, is consequential on the additional rate changes relating to dividend and trust payments, the transferring of retirement benefits to a non-additional rate tax payer and the notional tax credit attached to some capital payments. We look forward to dividing on amendment 76 at the appropriate time.

[Karl MᶜCartney (Lincoln) (Con)]

It is a great pleasure to follow my hon. Friend the Member for Christchurch (Mr Chope), the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) and, of course, the hon. Member for Rhondda (Chris Bryant), who should take heart from the fact that although our initial reaction on the Government Benches perhaps disproves the adage that everybody goes crazy about a sharp-dressed man, we agreed with some of the points he made, which were valid. I will cover in my speech some of the points on which I perhaps do not agree with him.

[Chris Bryant]

You broke my leg.

[Karl MᶜCartney]

Not on purpose.

We were told during the dying days of the previous Labour Government that the 50p tax rate was always intended to be a temporary measure. That remark came from very near the top level, as it was made by the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling). Many of us suspect, however, that at the top of that economically discredited Labour Government, the then Prime Minister, who is now much missed in his absence, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), had a more political plan, perhaps with three prongs. First, the 50p tax rate was a bone to throw to the Opposition’s political masters who run the unions. It said, “Look how we are clobbering those who earn—or should I say ‘are paid’—slightly more than you.” Secondly, it was part of the Labour party's scorched-earth policy, a desperate act up there with the protectionist decision of the right hon. Member for Kirkcaldy and Cowdenbeath further to increase the indebtedness of our armed forces’ budgets by ensuring the most watertight contract, despite the fact that Whitehall lawyers are not renowned for their prowess in closing legal loopholes, for two new aircraft carriers, which funnily enough were not to be built in English or Conservative Members’ constituencies.

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[Karl MᶜCartney]

No, I certainly will not at this stage.

[Chris Bryant]

That is very ungenerous to a lady.

[Karl MᶜCartney]

Later, I will be as generous as the hon. Gentleman was if hon. Members will let me get through some of my speech. I certainly will not speak for as long as he did.

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[Mr Gauke]

The hon. Gentleman is right that the assessment of Her Majesty’s Revenue and Customs, signed off by the Office for Budget Responsibility, is very similar to that of the Mirrlees review, which looked at evidence from the 1970s and the 1980s. Given that the big behavioural impact owes much to the mobility of international labour at that end of the scale—the highest earning individuals in the world are very mobile—and given that the mobility of labour has clearly increased, particularly in that sector, since the 1980s, it would appear that the hon. Gentleman is making a case to suggest that the elasticity we are using is too low, not too high, so he might like to have a conversation with my hon. Friend the Member for Rochester and Strood (Mark Reckless).

[Chris Bryant]

On a point of order, Mr Hood. You may not be aware of it, but the media are reporting that, contrary to what was announced to the House yesterday afternoon, Abu Qatada might have been arrested by the Home Office illegally because it had not consulted the European Court of Human Rights on the last available date to—

[The Temporary Chair (Mr Jim Hood)]

Order. I have heard enough of the hon. Member’s contribution to give him a ruling. That is not a point of order for me. He can request that the Government make a statement to the House on the media or television report to which he refers, and if the Government agree, they can do so. As I said, it is not a point of order for me to deal with in this debate.

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[Mr Stuart]

My hon. Friend is quite right. That is why the hon. Member for Ynys Môn (Albert Owen) has a fair point. Some people will be able to afford permanent housing, thereby further pressurising the housing market in areas where such housing is limited. Static caravan parks have been a perfect arrangement, because they allow both the local community and people from outside to benefit. They have meant that the local worker who is looking for a house—often someone who works at a caravan park—has been better able to find a house.

[Chris Bryant]

I hope the hon. Gentleman will accept that in some cases people will not be making choices but will have absolutely no choice. In my mother’s case when everything had gone wrong in her life and the only money she had was the money she was going to spend on a static home, the difference between £30,000 and £36,000 would have been the difference between homelessness and having a home.