Income Tax (Charge)

Christopher Chope Excerpts

Thursday 4th March 2021 Commons Chamber

[Dr Coffey]

As the right hon. Gentleman will be aware, and as the Chancellor has said repeatedly, there was a specific reflection at the time of introducing the extra £20 a week uplift to recognise the issues regarding people who were newly unemployed. I am conscious that the right hon. Gentleman’s Select Committee is undertaking an inquiry on people with disability and employment, and we will provide evidence in due course, when we can perhaps discuss that matter further.

[Sir Christopher Chope (Christchurch) (Con)]

I would like to reinforce what my right hon. Friend said about the fantastic work of her departmental officials. The fact that her Department has not been in the headlines much over the last months is due to the efficiency of her officials. When some of those officials are looking for a transfer, might she recommend that they go to the Driver and Vehicle Licensing Agency, to try to imbue that department with some efficiency?

[Dr Coffey]

I am grateful to my hon. Friend for highlighting the really good work undertaken by officials. I would also like to thank my ministerial team, because we have worked together to do this. Indeed, arm’s length bodies such as the Health and Safety Executive have also done really good work in trying to ensure that workplaces are safe, helping employers to ensure that that is the case and minimising the transmission of this wretched coronavirus that we have endured. I will bear in mind his thoughts, but I do not think it is in the interests of the DWP to take on the DVLA as well.

Last week, the Prime Minister set out the road map that will lead us out of lockdown and back to the way of life that we are all eager to enjoy. As we all play our part in controlling coronavirus, and after a particularly wretched winter, we are ratcheting up for what I hope will be a spectacular summer. But we know that recovery will not be instantaneous for everyone, which is why the Prime Minister said explicitly that we would not just pull the rug out from under people’s feet as we start to see light at the end of the tunnel. That is why yesterday my right hon. Friend the Chancellor set out targeted measures in the Budget that would deliver on that commitment to help people and businesses through these next few months as we open the economy and deliver on our plan for jobs, helping people who are still impacted by coronavirus to get back into work.

First, to support low-income households we will extend the temporary £20 increase to universal credit for a further six months, on a monthly basis, taking it well beyond the end of this national lockdown. Working tax credits are administered by Her Majesty’s Revenue and Customs, and claimants will receive a one-off covid support payment of £500—this is largely driven by the way that system works operationally. That is in addition to all the other Government support for people on low incomes, be that support with some of the most expensive bits of the cost of living, through things such as the increase to the local housing allowance, which is going to be preserved in cash terms, or with other elements, such as through council tax support.

--- Later in debate ---

[Sir Christopher Chope (Christchurch) (Con)]

It is a privilege to be able to participate in this debate on the Budget, which is in a sense rather like an economic Olympics because so many records have been broken. The tax burden in 2025-26 will be 35% of GDP—the highest in over 50 years. The public sector net debt will reach 109.7% of GDP in 2023-24, which will be the highest in 60 years, and we know that the deficit in the current year, at 16.9% of GDP, is the highest in 75 years. As Allister Heath in The Daily Telegraph has reminded us today, it is the first time that there has been an increase in corporation tax since Denis Healey’s “pips squeak” Budget of 1974—47 years ago.

Let us also not forget that the proposed increase from 19 pence in the pound to 25 pence in the pound is an increase of more than 30% in corporation tax. The fact that 65 out of every 100 people questioned like the increase in corporation tax illustrates the extent of the economic illiteracy that sadly abounds. If that is really what the public want, the right hon. Member for Islington North (Jeremy Corbyn) would have won the general election with a landslide with his promise of an even larger corporation tax rate of 26 pence in the pound.

The Office for Budget Responsibility believes that the consequence of the changes in corporation tax will be an increase in the cost of capital and reduced business investments, and that that will, in turn, lead to lower productivity and lower wages. The question that I hope the Minister will answer later is why the Chancellor did not listen to people such as Sir Paul Marshall, an extraordinarily successful wealth creator, who sits on the Government’s Industrial Strategy Council. He has argued for a post-Brexit corporation tax strategy that is globally competitive and attracts inward investment. He calls it an aspiration to create a “Dublin-on-Thames”.

That is a reference to the success of Ireland, with its headline corporation tax rate of just 12.5%. Apple, Boston Scientific, Dell, Facebook, Ingersoll Rand, Merck, Oracle and Pfizer are all international companies that have put their headquarters in Ireland or that book their revenues through that country because of the Irish policy of attracting inward investment by having very low levels of corporation tax. Arthur Laffer popularised supply-side economics by drawing diagrams on napkins, one of which I have at home. The Laffer curve suggests that that works. When we had corporation tax at 28% in 2010, it delivered a yield of £43 billion, but when it was reduced to 20% in 2018-19, that yield had risen to as high as £57 billion. That is the supply-side effect—the Laffer curve—operating effectively.

This morning, the Chancellor of the Exchequer was challenged on the radio about why he believes that the dynamic effect of lower taxes no longer applies. I have to say, the Chancellor equivocated in his answers. He said that higher yields from lower taxes are more likely due to cyclical effects. He also said that there had not been the step change in capital investment due to lower corporation tax over the last three years, but he omitted to make any reference to the uncertainty over Brexit.

The Government say that they have to ask the taxpayer to pay to repair the damage caused by the economic car crash of the pandemic, but as everyone ought to know, those seeking compensation for such crashes have a duty to mitigate their loss. My concern is that the Government are not mitigating their loss. Why should taxpayers pick up the cost of accommodating, as the Chancellor put it, the “most cautious approach” to restoring social and economic freedom? UKHospitality estimates that the costs of not reopening to hospitality on 1 April is £9 billion, and that does not include such things as weddings and so on.

My concern, which I hope will be addressed in the Minister’s response to the debate, is this. Allister Heath in The Daily Telegraph today said:

“This was an avoidably bad Budget that will haunt the Tories for years to come.”

The key word is “avoidably”. One way in which we could have avoided this Budget would have been to create the end of the public health emergency and, as a result, restore economic and social freedom. The public health emergency is officially open, but it does not seem to have been recognised yet by the Treasury.