Eurozone Crisis

Christopher Chope Excerpts

Thursday 27th October 2011 Commons Chamber

[Mr Osborne]

As the Foreign Secretary used to say at the time, he wrote his own speeches, and I write my speeches today—and those who have written my speeches before me have got themselves into the House of Commons, which is a good thing.

The serious point that I would make to the hon. Member for Huddersfield (Mr Sheerman) is this. I completely reject his idea that Britain has been marginalised. We have actually insisted that such matters be discussed at the European Council and ECOFIN. A key component of today’s agreement is the banking package, which is the area where there is most detail. There was a 10-hour negotiation to achieve the banking package last Saturday which Britain was right at the heart of, so we are at the centre of things. I suspect that the hon. Gentleman agrees with me that his party’s Front-Bench policy to marginalise us from the IMF would also see us leaving that key negotiating table.

[Mr Christopher Chope (Christchurch) (Con)]

Can my right hon. Friend confirm that the proposals for a financial transaction tax are now dead in the water?

[Mr Osborne]

I cannot confirm that they are dead in the water, because the eurozone is determined to pursue a financial transaction tax and talks about that in its statement. However, I can confirm to my hon. Friend that Britain will not accept a financial transaction tax at an EU27 level while other jurisdictions in the world do not impose one. We are not opposed to financial transaction taxes in principle—after all, we have stamp duty on shares in this country—but we will not have a financial transaction tax at a European Union level while countries such as America, China, Singapore and others do not have one. As their having one is a long way off, we will be waiting a long time—perhaps for ever—for a European Union financial transaction tax.

Renovation of Empty Property (VAT)

Christopher Chope Excerpts

Tuesday 18th October 2011 Westminster Hall

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Chope.

I wanted to secure this debate because of the pressure to build on the green spaces and the green belt in Sefton and elsewhere. Sefton council is consulting on its core strategy and, using the figures in the regional spatial strategy, it says it needs 480 new homes each year. To achieve that target, the council has suggested three options, two of which imply significant incursion into the green belt. The draft national planning policy framework does not continue the brownfield-first policy, and councils are not allowed to include windfall development sites, such as the Maghull prison site in my constituency, which would deliver several hundred homes. In addition, empty homes cannot be counted towards a council’s target, and so the 6,000 such properties across Sefton are not included in the figures. All that means that councils need an alternative strategy for building the homes that we—especially our young people—need. Affordable housing is in such short supply. A sustainable policy is needed, and a cut in VAT on the renovation and refurbishment of empty properties would contribute significantly to delivering the housing targets at the same time as protecting the green belt and important urban green space.

The VAT regime perversely incentivises new build on greenfield land because it attracts 0% VAT. A cut in VAT to 5% on the renovation and reuse of existing buildings would allow greater emphasis to be placed on urban regeneration, on which VAT is levied at 20%. The “Cut the VAT” campaign has a wide coalition of support; it is run by the Federation of Master Builders and supported by many organisations, including the Campaign for the Protection of Rural England and the Federation of Small Businesses. There would be many benefits to reducing VAT on building repairs and conversions, and there are strong environmental, economic and social grounds for doing so. In general, subjecting repairs and conversions to VAT is damaging, because it acts as a deterrent to urban regeneration, the proper maintenance of buildings and our caring for the historic environment.

The differential between VAT rates on new build and on repair creates a perverse incentive to leave properties in a state of disrepair or to demolish sound buildings, rather than encouraging their effective use and maintenance. The differential adds to the cost of bringing buildings back into use through repair, renovation or conversion, and contributes to a cycle of decline, because run-down areas are generally a less attractive proposition for investors and developers, even though they might present significant opportunities. I believe that the Government would agree with that analysis. I am looking for the Economic Secretary to nod—she is not doing so.

The additional cost that VAT adds to repairs and refurbishment distorts the market in favour of new build over reuse and refurbishment, which means that developers are incentivised to bring forward new development on greenfield sites before attempting to bring existing resources back into useful occupation. As well as assisting regeneration, making productive use of existing buildings can play an important role in conserving scarce resources such as the land, energy and building materials bound up in the properties, and such an approach also contributes to reducing waste. Government statistics indicate that there are more than 750,000 empty houses in England, and there are many other empty and underused buildings. That is an enormous waste of resources, and a reduction in VAT on refurbishment to create a level playing field between refurbishment and new build would, therefore, make a lot of sense.

Historically, it has been argued that a VAT reduction is not possible because of EU laws. However, the European Commission’s Economic and Financial Affairs Council agreed in March 2009 to allow member states to reduce VAT on housing repair and maintenance, so that barrier appears to have been lifted. The cut in VAT on renovation is now an option that would promote regeneration, bring empty buildings back into use and minimise the use of greenfield land.

Turning to the impact on the construction industry, a VAT cut from 20% to 5% would reduce rogue traders’ competitive advantage and help rescue many legitimate local firms from the brink of collapse. Dozens of small and medium-sized businesses would benefit considerably from a VAT cut on home repair, maintenance and improvement work, and that is why the campaign I mentioned has the support of the Federation of Master Builders. Given these tough economic times, a cut would make a huge difference to many small firms, certainly in constituencies such as mine. It would also make important home repairs more affordable, and help protect consumers from cowboy builders who currently flourish by evading VAT. It is a logical step to help boost the economy, and I call on the Government to take it as a matter of urgency.

The UK economy is facing a weak recovery from the recent recession. Output in the construction industry shrank faster than the economy as a whole during the recession, and recent forecasts suggest there will be no significant sign of recovery in the industry until 2014. Successful trials in a number of EU countries strongly suggest that a cut in VAT on home repair and improvement work would reap economic benefits for the UK. Independent research by Experian, based on a standard VAT rate of 17.5%, suggests that the total stimulus effect of reducing VAT in the sector would be in the region of £1.4 billion in the first year alone.

According to the Office for National Statistics, 249,000 work force jobs have been lost in the construction sector alone since 2007, and that has had a big effect on the Government’s finances as well as a considerable human impact. We know from independent research that a cut in VAT on home repair and improvement work would create thousands of new jobs in the construction sector and the wider economy. Again, independent Experian research based on a standard VAT rate of 17.5% suggests that 24,200 extra construction jobs could be created in the first year alone if VAT on home improvements was cut to 5%. According to the same research, such growth in the construction industry would also lead to 31,000 new jobs in the wider economy.

Those significant job losses—249,000—risk creating a major skills shortage in future years, unless the industry can recruit and train sufficient numbers of people now. The number of construction apprenticeship starts fell by 4,010 between 2008-09 and 2009-10. Almost 1 million people under the age of 25 are currently unemployed, but when the construction industry returns to more sustainable levels of growth there will not be a sufficient number of people equipped with the right skills to meet demand. It will be difficult for employers to make more apprenticeship places available unless there is an increase in construction activity.

We are building fewer than half the number of new homes needed to match the rate of household growth in the UK, and it is therefore shocking that there are up to 750,000 empty homes. Many of those homes require considerable repair work before they can be lived in, and the high rate of VAT makes that a very costly activity for private owners, landlords and local authorities, who could otherwise renovate more existing properties to help ease the pressure on housing supply. Making home repair and improvement work more affordable would encourage the use of existing structures, rather than continuing the urban sprawl and the possible building on green belt land.

Existing homes contribute about 27% of the UK’s total CO₂ emissions, and there is a vast amount of work to be done if the UK is to meet the legally binding emission-reduction targets. A simple, single cut in VAT on home repair and maintenance work would help millions of households to upgrade their homes and make them more energy efficient. Without help to reduce energy use, the number of households living in fuel poverty will continue to grow, as they struggle to protect themselves against rising fuel prices.

According to trading standards organisations, rogue traders steal a staggering £170 million each year from unsuspecting home owners across Britain, and cause significant damage to law-abiding businesses. Rogue traders flourish by evading VAT in order to offer a cheap deal. However, all too often, the deal comes without a proper written contract or any kind of paperwork, making the enforcement of consumer rights almost impossible if something goes wrong.

Again, a simple, single action to cut VAT to 5% on home repair and improvement work would protect consumers and legitimate businesses by significantly reducing rogue traders’ competitive advantage. By charging 20% VAT on all home repair, maintenance and improvement work, the Government are exacerbating numerous serious social, economic and environmental problems. Introducing a reduced rate of VAT for all home repair and improvement work is a simple plan to relieve the country of many of those problems.

[Mr Christopher Chope (in the Chair)]

May I give our newest Minister a warm welcome from the Chair?

Finance Bill

Christopher Chope Excerpts

Tuesday 28th June 2011 Commons Chamber

Given that we are told by the Conservative party that money is tight, is this a sensible way of spending scarce resources? The measure would cost about £440 million a year and I would sooner that those scarce resources went into the NHS, which benefits everyone in the general population. I do not think that the idea will fly even on the Government Front Benches. As I said in my opening, it is nice to see, in relation to this and the other amendments in this group proposed by Conservative Back Benchers, that the true face of conservatism is not dead in this place.

[Mr Christopher Chope (Christchurch) (Con)]

I am delighted to be regarded as the true face of the Conservative party, but I am also very pleased that there are lots of other true faces of the Conservative party present to listen to this debate. Not everyone recalls the great excitement that there was in the Conservative party and on the Conservative Benches back in 1989 when the then Secretary of State for Health, who is now the Justice Secretary, said that he was going to introduce tax relief for health insurance premiums. That policy, which was announced in a health White Paper and then put into practice in the 1990 Budget by Nigel Lawson, was the action of a self-confident Conservative Government. That same self-confidence carried on through the years when John Major was Prime Minister, and right up to 2001, when a proposal to restore the relief, which had been taken away by the mean Labour Government, was in our manifesto. Since then, we seem to have rather lost our way.

[Mr Kevan Jones]

I would never accuse the hon. Gentleman of losing his way, but can he remember why the Labour Government did that? It was not just because the relief was unfair but because they went on to use part of the money to reduce the VAT on heating fuel.

[Mr Chope]

That was the excuse put forward at the time, but I doubt whether it was the real justification. I suspect that the real justification was a feeling on the part of a lot of socialists—people on the Labour side of the House—who resented the idea that the health service should in any way be funded by the private sector. The problem we have in this country is that although our health service is funded by taxpayer money to the extent of most health services across the G7 or G8 countries, we lag behind those other countries in that we do not have enough private sector contributions to the health service. That is why the new clause tabled by my hon. Friend the Member for Mole Valley (Sir Paul Beresford) is brilliant, because it sends out a very strong signal to people that we want to encourage them to participate in and contribute to the cost of their health care.

It is good for people to contribute to the cost of their health care, and that of their family, if they can afford so to do. Some people who can afford to do that pay for their health care outright: in a sense, they pay as they go. Others who can afford to do that pay through insurance policies. Yet others who can afford to do that do not make a contribution at all, because they believe that it is in the national interest that the whole cost of their health care should be borne by other taxpayers, many of whom are less well-off than they are. Those are the three categories, and we should try to move more people from the category of those who could afford to pay for, or contribute towards, their health care but do not, into the category of those who do contribute.

[Mr Jones]

I totally disagree with the hon. Gentleman, but I understand where he is coming from. However, the scheme introduced in the 1980s did not do what he wants. It basically just gave a tax cut to about 500,000 people who already had private plans, so it did not work the last time it was tried.

[Mr Chope]

Obviously, the Treasury will always say that there is what is described as a dead-weight cost associated with such initiatives, in that people who would be paying for health insurance anyway would get the tax relief—but that is looking at only part of the issue. What I am trying to do—as is my hon. Friend the Member for Mole Valley in his new clause—is to encourage more people to come into that category, so that we grow that cohort of people. We certainly do not want to allow that cohort to be reduced, as it inevitably is when people who were on schemes provided by their employers retire and lose that provision. Taking on that burden, or responsibility, for themselves is a significant expense; my hon. Friend’s new clause would not eliminate that cost, but it would reduce it by a useful amount.

[Julian Smith (Skipton and Ripon) (Con)]

Will my hon. Friend tell us how, in the current financial situation, we could pay for any dead-weight costs? Where would the money come from?

[Mr Chope]

It is a matter of seeing what the countervailing benefits would be, because obviously, if as a result of my hon. Friend’s new clause a lot more people who are not contributing anything towards the cost of their health care started to do so, thereby reducing the burden on the NHS, the dead-weight cost that my hon. Friend the Member for Skipton and Ripon (Julian Smith) mentions would be exceeded by the overall benefits, and a reduction in the overall burden of taxation. More people who are getting health care in this country would be paying for it, or contributing to its cost, rather than relying on the state and the taxpayer to do so.

[Mr Leigh]

The dead-weight cost argument is always used against ideas such as school vouchers or tax relief for health insurance, but does my hon. Friend agree that the whole point of such proposals is to help the people in the middle? Quite rightly, Parliament is concerned about the people at the bottom of the heap, and the rich can always buy their way out, but this part of the Conservative party should help the people who struggle all their lives, and pay tax all their lives.

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[Mr Chope]

Exactly. My hon. Friend is absolutely right. There is a lot of resentment about the fact that people who arrive in this country can latch on to the health service, at no cost to themselves, when they have not made any contribution at all. The new clause would give people who have been making a contribution, either through their employers or by paying insurance premiums themselves, a bit of help in the form of tax relief when they retire. We are talking about modest sums, but that would send a useful message and be an incentive.

[Mr Kevan Jones]

If we were designing a system to increase the number of people with private health insurance, would not this proposal be a very inefficient way of doing it? I must draw the hon. Gentleman’s attention to the Institute for Fiscal Studies and King’s Fund report, which showed that when the scheme was abolished, 0.7% of people—4,000 people—gave up their policy. It strikes me that for most people, the scheme was a not a great incentive to buy health insurance.

[Mr Chope]

The hon. Gentleman quotes figures from the Institute for Fiscal Studies that go back, I think, to 2001—10 years ago. What concerns me is that there has been no update of those figures. If my hon. Friend the Financial Secretary to the Treasury, whom I am delighted to see on the Front Bench, comes forward with up-to-date statistics that show that the Government have been considering the issue seriously, obviously I will listen to his arguments, as I always do.

I am concerned that the issue has become one that the coalition Government do not want to discuss, and they are not prepared to commission research into it. They are not prepared to consider the argument put forward by my hon. Friends and myself that our proposal would generate more private sources of income for the health service. The Government are going for the simplistic version and concentrating on the idea that there would be an up-front dead-weight cost. There might be, but that would be outweighed by the other benefits.

[Barry Gardiner (Brent North) (Lab)]

Can the hon. Gentleman explain why the individual making the payment should not make it out of resources provided by another person for the purpose of enabling it to be made? If he can explain that, does he not believe that it would require a desperately intrusive large state to undertake investigations to ensure that the provisions in the new clause were adhered to?

[Mr Chope]

The new clauses being considered together are a word-for-word recital of the original legislation. The hon. Gentleman may have some good points, but I hope that those will not be taken by the Minister, because they would be points against the measures that followed the 1990 Budget.

[Barry Gardiner]

I am grateful to the hon. Gentleman for giving way again. I am simply trying to establish the extent of Government intrusion that would be required in order to enforce the clauses that he supports. The Government would have to intervene and find out whether the funds being made available for the premium had been supplied by a third party—perhaps children who wanted to help their ageing parents. How would the restriction be enforced?

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[Mr Chope]

In the same way as it was enforced before, as my hon. Friend the Member for Mole Valley says. As the insurance companies will be the beneficiaries, in a sense, because more business will be created for them, the provisions of the new clauses require those insurance companies, in effect, to participate in a regulatory regime supervised by the Treasury. That is the reasonable safeguard that we had before, and it would be a reasonable safeguard in the future. I am delighted if the hon. Gentleman’s only objection to the new clause is that whingeing technical objection, because that must mean that he is in favour of the substance of it.

[Charlie Elphicke (Dover) (Con)]

Perhaps my hon. Friend can help me. I am puzzled that Labour Members oppose the new clause as creeping privatisation, because when they were in office they privatised large sections of the NHS, with the independent sector treatment centre programme. I do not see how those two views sit together.

[Mr Chope]

As so often, my hon. Friend makes a telling point, which has got Opposition Members back on their haunches as a result of that good intervention.

Let us look at the total contribution made to health spending in this country by the private sector. The hon. Member for North Durham (Mr Jones) quoted from the Institute for Fiscal Studies report that came out in 2001. It said:

“Despite the increase in use of the private sector, private spending on health care makes up only 16.3 per cent of total health spending in the UK, which is lower than in any other G7 country.”

It goes on to describe how low health spending was as a percentage of gross domestic product. I concede, and am pleased, that since then health spending as a percentage of GDP has increased, but the percentage of private contributions to health care has not increased commensurately, as it should have done.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

That has been used as an argument against privatising the national health service, because the reason why the United States spends such a high proportion of its GDP on health care is that there is a completely free market there. The hon. Gentleman is actually making an argument for the national health service.

[Mr Chope]

I certainly support the national health service, but I do not think that the hon. Gentleman understands my point. My point is that even in very socialistic countries, such as Sweden, the other Scandinavian countries and others in Europe—quite apart from the United States—the proportion of total health spending that comes from the private sector is much higher than it is in this country. I think that it would be much better if a higher proportion of our total health spending came from the private sector and from individuals and companies.

[Mr Bone]

My hon. Friend is, as ever, making a powerful speech. Will he explain why some people think that not having private money gives us a better health service? Our European colleagues have better outcomes when they have more private money.

[Mr Chope]

My hon. Friend makes a good point. I think, and some of the research suggests, that when people contribute directly to the cost of their health care they take a greater interest in outcomes and hold the health service to account to a greater extent than when they can be told, “It’s all free, so what do you expect?” We talk about the health service being free at the point of delivery, which of course it is, but I want a health service that is available at the point of need, and the two things are very different. That is the gap that exists at the moment. A little more private sector resource, which would relieve some of the burden on the taxpayer or complement taxpayer resources, would be a good thing.

[Mr Kevan Jones]

Where is the evidence for that? The old scheme that the hon. Gentleman says was so great clearly did not do that, for example in relation to waiting lists. It would cost £140 million, and it would be far better if that money went into the health service to improve care for all, rather than to the small section of society that he is trying to benefit.

[Mr Chope]

Of course, the original scheme was brought in on the basis that it would apply to everyone over the age of 60, and initially would give full tax relief to higher-rate taxpayers, so the figures would be nothing like as high under the new clause, because its proposals would apply only to people over 65, and would give only 20% in tax relief.

[Mr Leigh]

Is my hon. Friend not being very moderate? Surely there is an argument for giving everyone tax relief, which is how we would move to a continental-type system with much better health outcomes, and blur the boundaries between the private and public sectors. That is what we, as Conservatives, should believe in.

[Mr Chope]

I absolutely agree, but I think that my hon. Friend the Member for Mole Valley, who tabled the new clauses, is a gradualist by nature; that goes back to his time as leader of Wandsworth council, when he was preparing for his time in Parliament and knew that things could not be done immediately but must be done gradually. He can speak for himself when he contributes to the debate, but perhaps that gradualism is part of his thinking.

I will finish soon, because many Members wish to contribute, but let us first put this suggestion in perspective by thinking about roughly how much it would cost. Let us suppose that an average health premium is about £2,000, which a pensioner or pensioner family would be faced with paying, and which previously their employer had paid as part of a contributory or non-contributory occupational scheme. Many pensioners would not pay that, but if we gave them the tax relief, which would amount to more than £400, I submit that many of them would carry on paying for their insurance, thereby contributing towards the cost of the health service, which would be a benefit.

The last time I spoke in a debate on a Finance Bill on Report it was about insurance premium tax. The insurance premiums paid for health insurance are already subject to tax, which the Treasury keeps increasing, so an alternative way forward might be to abolish the insurance premium tax paid on health insurance contributions. That is a separate argument and not the subject of this group of new clauses, but it serves as an example. The Financial Secretary to the Treasury would obviously say that we could not afford that—but does he realise that if we increased the number of people taking out health insurance, the Treasury would receive a lot more in insurance premium tax? I am sure that he will take that into account when he—in due course, having done the proper research—tells us the costs and benefits of the proposals in the new clauses.

We should not forget that the dynamic effect of these taxation changes could deliver great benefits and dividends. It is important to send a strong message to those who can afford to contribute towards their health care costs but who currently do not do so, that this would enable them to contribute at a lower cost than would otherwise be the case. I think that it is a well-rounded and sensible proposal, and I am delighted that it is getting so much support from colleagues on the Government side of the House.

[Frank Dobson (Holborn and St Pancras) (Lab)]

I am sure that people across the country would be astonished to discover that the first priority of Back-Bench Tories on health spending is to give a tax concession to people who pay, on average, £2,000 a year towards health insurance, because most people over 65 are in no position to pay such a sum towards health insurance. Most people across the country, including many pensioners, and perhaps even those pensioners who have private health insurance, think that the first priority for spending should be to avoid some of the cuts that the Government are already introducing and to direct spending to the national health service.

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[Thomas Docherty]

My hon. Friend is entirely right. It is interesting that there are now far fewer adverts for private health care. He is right that part of the reason for that is that we have a superb national health service. Having served in the House for longer than I, he should take a great deal of credit for the fact that we have a first-class health service. The second reason why I suspect private health companies are not advertising is that thanks to the policies of the Government parties, people cannot afford to have private health care. Of course, many people are losing their jobs. I will return to that point shortly.

The other huge issue about burden is that the private health system is a burden on the national health service, because it takes doctors, nurses and other medical professionals away from it.

[Mr Chope]

indicated dissent.

[Thomas Docherty]

Now the hon. Gentleman is shaking his head. There are many highly paid consultants who split their time between their private practice, their golf course and the national health service. The time that they spend in private practice is clearly time that is not available to the national health service.

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[Mr Hoban]

I thank the right hon. Gentleman; there are times when I am happy to accept congratulations from the other side of the House. We want to ensure, especially given the constraints that we are working under in these times of fiscal austerity, that measures can be well justified.

An Institute for Fiscal Studies report published in 2001 questioned how far the take-up of private medical insurance would ever respond to tax relief. It also suggested that the dead-weight cost would make it unlikely that tax relief could be self-financing.

[Mr Chope]

My hon. Friend was not in the House in 1989, but is he saying that my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), who was Secretary of State for Health at the time, was wrong to say that introducing this self-same measure would

“reduce the pressure on the NHS from the very age group most likely to require elective surgery, freeing resources for those who need it most”?—[Official Report, 31 January 1989; Vol. 146, c. 169.]

[Mr Hoban]

Loth as I am to suggest that my right hon. and learned Friend could ever be wrong on any measure, I want to make a point about the chances of a reduction of pressure on the NHS exceeding the cost of the tax relief. There is no evidence that there would be a net positive outcome for the Exchequer. When a similar relief existed in the 1990s, it had little apparent effect, and the IFS report from 2001 concluded that it was unlikely that such a subsidy for private medical insurance would ever be self-financing.

I appreciate the passion with which my hon. Friend the Member for Mole Valley has put forward his argument for the new clause, but I do not think that there is sufficient evidence at this point to justify the relief. There is no evidence that it would represent good value for money for the taxpayer, particularly at a time when our efforts should be focused on reducing the deficit and tackling the problems left by the previous Government.

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[Mr Jones]

My hon. Friend makes a very good point. The proposal is not subtle at all and his personal example is a good one. Why should someone who loses a spouse in an accident or through natural causes be penalised because, through no fault of their own, they have lost their spouse? That is the problem with trying to use tax in relation to marriage. As I have said, the measure is very different from what was put forward in the Conservative manifesto because it does not include civil partnerships. It clearly is not what Conservative Back Benchers have read in their own manifesto.

[Mr Chope]

The answer to the hon. Gentleman’s point was put succinctly in a Daily Telegraph editorial of 11 July 2007, which asked

“why should favouring married couples be an unacceptable interference when favouring single ones, as this Government does, is not?”

[Mr Jones]

The hon. Gentleman knows that there are always winners and losers in any tax system. I am very surprised at him because I know that he has very libertarian views on a whole host of subjects, which we have heard on many occasions in the Chamber. Is he really suggesting that we should use the tax system socially to engineer society by saying that people should marry rather than cohabiting or, as has been mentioned, becoming single through separation or bereavement? I am surprised at him because I thought he was very much against the state doing anything, but the measure has the state wanting to determine or influence exactly what an ideal society should be. I am sorry, but the statistics just do not bear out what the hon. Gentleman proposes. If such tax measures worked as a way of bolstering marriage and keeping families together, we would have expected marriages to rise with the married man’s tax allowance through the 1960s and 1970s, but they did exactly the opposite—we had record levels of divorce and separation. Hon. Members should look at the facts. Tax measures have not succeeded in doing that in the past, and I doubt whether they will in future. They certainly will not encourage anyone to get married for a small financial benefit.

It is important to dispel one myth, which has been put forward again by the Conservative party—the fact that a wicked Labour Government somehow did away with the married couple’s tax allowance and that Labour is responsible for the degeneration of society that the Secretary of State for Work and Pensions describes in his report. It is important to recognise what the previous Conservative Government did on this. It was Chancellor Norman Lamont in the 1993 Budget who proposed that the married couple’s tax allowance should be restricted to 20% from April 1994. That was the first time that happened for the basic MCA, which for a couple under 65 was then £1,720, so it was worth something like £608 for those who were on marginal rates of 40%, but only £344 for those on marginal rates of 20%. We then had the argument that it was unfair to have different amounts for people on higher tax rates than for those on lower tax rates. The then Chancellor said:

“There is no good reason why an allowance intended to recognise the responsibilities of marriage should give least to those on low incomes and most to those right at the top of the income scale.”—[Official Report, 16 March 1993; Vol. 221, c. 182.]

In the November 1993 Budget, the current Justice Secretary confirmed that change and went on to announce that the MCA would be further restricted to 15% from April 1995, so there was a slow change in the system. The provision restricting the MCA was made in section 77 of the Finance Act 1994. When this was debated in Committee, there was general support for the idea that the MCA should be the same across the board.

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[Mr Jones]

My hon. Friend makes a key point and I understand why she makes it. This goes right back to when income tax was introduced in the 1790s, when a spouse’s income was the property of the husband. That was the basis on which income tax was brought in and it continued for centuries. There was no recognition that even within marriages people might have separate tax affairs or sources of income that needed to be recognised.

It is interesting to look back at the debate that took place about the MCA. Baroness Maddock, who was then a Member of this House, argued that the MCA was

“a relic of the days when a husband was taxed on his wife’s income as well as on his own. It contravenes the principle that marriage should be tax neutral.”—[Official Report, Standing Committee A, 22 February 1994; c. 344.]

[Mr Chope]

The hon. Gentleman quotes my predecessor, the then hon. Member for Christchurch, but in order to emphasise how out of touch her opinions are, may I tell the hon. Gentleman that there is no longer a single Liberal Democrat councillor in the whole of my constituency?

[Mr Jones]

I am very pleased to hear that but I am not sure that that is very good news for the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) to whom I understand the Baroness is now married. However, I take the hon. Gentleman’s point.

Interestingly, the then Chief Secretary to the Treasury, Michael Portillo, concurred with Mrs Maddock’s view. The then Chancellor, who is now the Justice Secretary, recognised that and announced in his Budget speech that there would be a two-stage restriction of the MCA, stating:

“Now that husbands and wives are taxed independently—one of the best taxation reforms in recent years—the married couple's allowance is a bit of an anomaly.”—[Official Report, 30 November 1993; Vol. 233, c. 935.]

The important thing that this demonstrates is that change was taking place under a Conservative Government, and that it was not the wicked previous Labour Government who came up with this idea. However, the change did set off the forces who were arguing that the changes were wrecking marriages. In 1995, a major paper called “Farewell to the Family” appeared. It made much of the fact that the measure would change families and discourage people from marrying.

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[Mr Chope]

In making a brief contribution to this very important debate, I congratulate my hon. Friend the Member for Gainsborough (Mr Leigh) on getting it going. It came as a bit of surprise when my hon. Friend the Member for Congleton (Fiona Bruce) did not speak to the new clause, but I am delighted that she subsequently joined the debate to speak in support of it.

I come at this subject on the basis that the Prime Minister supports exactly what I support: recognising marriage in the tax system. He promised that the Government would recognise marriage in the tax system after the general election, and this debate rightly puts the focus on how that commitment will be implemented. I hope that when the Minister responds, he will say exactly when that is going to happen. Over a year ago, on 2 June 2010, the Prime Minister said:

“I believe that we should bring forward proposals to recognise marriage in the tax system. Those in our happy coalition will have the right to abstain on them, I am happy to say, but I support marriage. We support so many other things in the tax system, including Christmas parties and parking bicycles at work, so why do we not recognise marriage?”—[Official Report, 2 June 2010; Vol. 510, c. 428.]

Those were excellent words from my right hon. Friend. Then, some three or four months later—

[Mr Kevan Jones]

rose—

[Mr Chope]

No, I am not going to allow anybody to interfere with the words of the Prime Minister.

On 5 October 2010, the Prime Minister said:

“I have always supported the idea of supporting marriage through the tax system, specifically supporting the idea of a transferable tax allowance. The idea of a transferable tax allowance is in the coalition agreement.”

That is where my hon. Friend’s new clause comes in, because it calls for just that. One is entitled to ask why, having had two Budgets since the general election, we still do not have proposals to implement that very important pledge.

Labour Members are misrepresenting this proposal as an attempt to build new privileges for those who are in a marital relationship, but, as has been brought out time and again during the debate, the question is what we are going to do to prevent those who are married from suffering disadvantage under the tax system. That is what we are trying to put right with the new clause.

[Helen Goodman]

Labour Members would be far more sympathetic to the case that the hon. Gentleman and his colleagues are making in saying that they do not have negative attitudes towards single-parent families if they had not voted for the Welfare Reform Bill, which requires lone parents to pay to get the services of the Child Support Agency.

[Mr Chope]

Speaking for myself, I do not have negative attitudes towards single-parent families, but I do feel that single-parent families should not be advantaged in the tax system as compared with married families. That is the problem that we have at the moment, and that is what we are trying to put right in the new clause.

I am lucky in that my constituency is in an area described thus in a headline in last week’s local paper: “East Dorset is a place for love and marriage”. The article says:

“Married couples in East Dorset stick together. Latest…figures show that 65 per cent of marriages in the area last, well above the national average”,

with the seventh highest rate of marriage survival in the country. Even so, fewer than two out of three marriages survive, but that is a lot better than in many other parts of the country.

I am not suggesting that the tax system is causing marital breakdown, but I am saying that we should follow the very strong lead of our Prime Minister and put pressure on the coalition Government to implement their commitment to recognise marriage in the tax system.

[John Glen (Salisbury) (Con)]

Is not the real issue the calibration of the compromise? Most new Government Back Benchers recognise that in a coalition there has to be compromise. At the same time as we see moves forward on the individual allowance for our Liberal Democrat colleagues, we need to see some progress along the lines that my hon. Friend is setting out. The key issue is that there appears to be an imbalance in the compromise.

[Mr Chope]

My hon. Friend makes a very good point. We are seeking a route towards a destination. The Prime Minister set out the clear destination, but so far we do not seem to have made any progress towards achieving it. What was set out in detail on the Conservative website at the time of the election was a very modest proposal, which talked about a small proportion of the tax allowance being transferable, with quite a tight maximum income threshold in order for people to be eligible. Even that modest proposal has not yet been put forward by the Government in the Finance Bill so that we can support it and implement it.

[Mr Kevan Jones]

The hon. Gentleman has talked about the Prime Minister’s support for this proposal. Does he recognise that the Prime Minister included civil partnerships in what he said? If we agreed to this proposal tonight, civil partnerships would be excluded, which is clearly at odds with what the Prime Minister wants.

[Mr Chope]

If there is a defect in the wording of the new clause and it fails to recognise everything that the Prime Minister said—he certainly referred specifically to civil partnerships—the hon. Gentleman may have a point about that, but he does not have a point about much else, in my submission.

[Mr Leigh]

I am happy to make the concession to the hon. Member for Linlithgow and East Falkirk (Michael Connarty), who spoke at some length on this point, that if the new clause is defective, I am happy to withdraw it and for the Government to bring back a new clause that includes civil partnerships. I make it absolutely clear that we have nothing against civil partnerships.

[Mr Chope]

My final point is that there is a read-across between the new clause and the conundrum that the Government face in the debate about the withdrawal of child benefit from families that comprise at least one higher rate taxpayer. That issue is causing a lot of angst among our constituents, particularly for parents in single income households in which one parent stays at home to look after the children. As I have said in correspondence with the Minister, in some cases one parent stays at home to look after a disabled child. If there is one parent who is the breadwinner and he is a higher rate taxpayer on an income of about £45,000 or £50,000, he will be above the threshold and will be deprived of his child benefit.

[Michael Connarty]

Will the hon. Gentleman give way?

[Mr Chope]

I will give way in a minute.

In comparison, a household with two people earning between £35,000 and £40,000 each, which has a much higher income, will keep its child benefit. That is not fair. In response to correspondence, the Minister has said that there has to be a bit of rough justice and that to introduce a system of transferability of allowances and entitlements would be very complicated. However, that is exactly what was proposed by the Prime Minister with the transferability of tax allowances, and that is what is proposed in the new clause. That is of significance, because there is a read-across from this other thorny policy issue that faces the Government.

I hope that we will have a positive response from the Minister, and that he will spell out in detail when and how the Prime Minister’s pledges to the country will be implemented.

[Chris Leslie]

What on earth is going on with the Tories this evening? It is a perplexing situation, because Conservative Members usually accuse Labour Members of filibustering in an open-ended Finance Bill debate, but not at all this evening. Instead we seem to have a private family dispute breaking out.

--- Later in debate ---

The hon. Member for Christchurch (Mr Chope) highlighted child benefit and taxation for higher earners. The two issues are inextricably linked, because when challenged about his decision at the Conservative party conference, the Prime Minister said, “Oh well. Don’t worry. We’re going to be making moves on a transferable married couples allowance.” Of course we never saw such a proposal then, and we still do not know how the child benefit taxation arrangement will be implemented. That would be a major change to the independent taxation system.

[Mr Chope]

Will the hon. Gentleman give way?

[Chris Leslie]

This is the final intervention that I will take.

[Mr Chope]

I am sure that if the hon. Gentleman waits, he will hear a major announcement on that issue from the Minister very shortly.

[Chris Leslie]

The hon. Gentleman could have speeded that up by not intervening.

I shall finish by saying that, clearly, there are major problems with the transferable allowance. It is costly and not targeted, and it is unfair to those without a marriage certificate, whether they are divorced, widowed, single or in a couple. There are a host of anomalies and unintended consequences, as several of my hon. Friends have said. For instance, if a husband is killed in a tragic road accident, his widow and children will be left without support, and so on. The proposal undermines the principle of independent taxation, but most of all, we should focus our tax and benefits system on need and on the alleviation of poverty. I sincerely hope that the House will reject new clause 5.

Coinage (Measurement) Bill

Christopher Chope Excerpts

Friday 4th February 2011 Commons Chamber

[Mark Lancaster]

I thank my hon. Friend for his excellent suggestion, and I think it probably would. Perhaps we should put that suggestion to the International Olympic Committee. I am sure that he would like the Economic Secretary to do that on his behalf, but we will see what she has to say about it.

That brings me to the purpose of the Bill. As part of the Olympic programme, the Royal Mint is keen to strike those kilogram coins that my hon. Friend the Member for Tamworth (Christopher Pincher) mentions. As I said earlier, the current wording of the Coinage Act would effectively prohibit that. It is not possible to measure the variation from the standard weight in the case of the proposed Olympic coins because the weight of each coin is likely to be equal to or greater than the 1 kg aggregate limit for a sample under section 1.

Clause 1 therefore amends the Coinage Act so that the variation from the standard weight can be specified by royal proclamation, for which section 3 provides. That would grant the flexibility to adjust the size of the sample for the purposes of the section 1(6) weight variation test. I am sure that hon. Members will appreciate that that removes a technical legislative obstacle to the proposed Olympic coins, allows the Royal Mint to continue to develop new and innovative designs and provides exciting opportunities to push coinage boundaries.

Striking kilogram coins has recently become part of the Olympic games tradition. Most host nations in recent years—for example, Australia, Canada and China— issued such coins, and they proved extremely popular with collectors internationally. The Bill would allow the Royal Mint to continue that tradition in commemoration of the London 2012 Olympic and Paralympic games.

The large size means that the kilogram coins will be an exciting, artistic and eye-catching part of the Olympic games. The intention is for them to be significant works of numismatic art. The Royal Mint will approach high-profile British artists to prepare the designs—that is already under way.

After royal and ministerial approval, a commitment to strike kilogram coins was given to the International Olympic Committee during the United Kingdom’s bid to host the 2012 games. If the Bill is not passed, the kilogram coin element of the Olympic coin programme will unfortunately have to be scrapped. The Royal Mint, in consultation with the London Organising Committee, would need to consider an alternative product to fill the gap in the programme. However, none of the alternatives would have anything like the appeal of the 1 kg coin. There is a global expectation that the Royal Mint and the London 2012 Olympic coin programme will follow in the footsteps of London’s predecessors.

[Mr Christopher Chope (Christchurch) (Con)]

Will my hon. Friend assure the House that none of the coins will be given free to members of the International Olympic Committee, who seem to go in for lots of freebies?

[Mark Lancaster]

My hon. Friend makes a valid point. I would like to think that that would be the case. It is my understanding that the coins will be put up for sale—and sale only.

The Royal Mint wants to ensure that the two commemorative kilogram coins will crown the range of coins. Judging from the reception of similar coins around the world, and after consulting representatives of the coin trade and collectors, the Royal Mint is confident that the UK kilogram coins will be well received—but hopefully not by the IOC.

Loans to Ireland Bill

Christopher Chope Excerpts

Wednesday 15th December 2010 Commons Chamber

[Mr Osborne]

The second intervention draws me back into the rest of my speech, but in response to my hon. Friend the Member for Clacton (Mr Carswell), I have common-law powers to issue the loan and sign the loan agreement. I then have to seek statutory authority, but that could be done retrospectively. I thought it more appropriate to seek parliamentary approval first, and that was a discretionary choice that I had.

I will answer my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi) directly a bit later in my remarks, when I get on to the terms of the loan that we are going to consider.

[Mr Christopher Chope (Christchurch) (Con)]

Will my right hon. Friend give way on that point?

[Mr Osborne]

I will give way to my hon. Friend, and then I really must make some progress.

[Mr Chope]

I am grateful to my right hon. Friend. If the point that he is making is such a good one—it may well be—why did he not include it in paragraph 14 of the explanatory notes, making a virtue of the fact that he was bringing this matter before the House now rather than seeking retrospective approval?

[Mr Osborne]

I said in an earlier statement to the House that I was seeking to do that, and I had hoped that hon. Members were paying attention to what I said at the time.

The legislation that we shall pass today will allow the UK to be ready in the new year to meet its commitments to one of our closest international partners. As has been noted, the legislation before the House is narrow in scope—it is explicitly a Loans to Ireland Bill—but it is still enabling legislation. It sits alongside the actual loan agreement, which sets out in detail what we will offer Ireland. To ensure that Members have as much information as possible available to them for today’s discussion, a summary of the key terms of the loan agreement, which was agreed with the Irish Government only this morning, has been available in the Vote Office for more than an hour now.

--- Later in debate ---

[Mr Christopher Chope (Christchurch) (Con)]

I hope that the former Chancellor’s message to Germany is well received by the German people, because the fact that a price of eurozone membership was making transfer payments to sustain the currency in countries that are not so competitive was never sufficiently spelled out to them. This is essentially a eurozone problem and an Irish problem, and I do not think that we should put British taxpayers’ money into it other than to meet our obligations under our membership of the IMF. It is perfectly reasonable to contribute through that mechanism. As the Chancellor has said, in so doing, we get more security for our loan than we would from a bilateral agreement.

The proposed loan to Ireland is relatively soft. Interestingly, the Chancellor says that the proposed interest rate will probably be slightly less than that of the eurozone facility, and that that demonstrates the competitiveness of our economy. I see things differently. If we have such a competitive economy, why not make a profit on the interest rate and charge the same rate as the eurozone and get the benefit for the British taxpayer?

[Mark Reckless]

All we are doing is passing on to Ireland the quarter per cent. or so of benefit that we gain by being a better creditor than the eurozone. Most hon. Members feel that we should help Ireland, but I agree with my hon. Friend that it is not necessarily helpful to Ireland to have a huge amount of extra debt on top of the great debt it already has. On that basis, I understand his point.

--- Later in debate ---

[Mr Chope]

I am grateful to my hon. Friend for his observations.

None of my constituents, particularly those in the business community, understand how or why we can justify increasing our national debt to help Ireland. The line is that the Irish are friends in need, but I remind the House that there is a strong argument to suggest that the Irish Government exacerbated the original banking crisis. When we had problems with Bradford & Bingley and Northern Rock, and our Government limited the deposit guarantee to £50,000, the Irish increased their guarantee to all deposits. That helped the run on Bradford & Bingley and Northern Rock accounts, thereby developing our banking crisis. We did not get much help from the Irish when we were in need in that situation.

We must also not lose sight of the fact that the Irish people have received enormous sums of British taxpayers’ money through our membership of the EU. We make big net contributions to the EU, and a lot of that money was subsequently pushed into Ireland, enabling the Irish people to sustain for a time a much higher standard of living.

[Mr Bone]

Will my hon. Friend confirm that our net contributions to the EU over the next five years will be £41 billion, which is £21 billion more than in the previous five years?

[Mr Chope]

I am sure that my hon. Friend is absolutely right. We are contributing to Ireland through our EU membership, so the Irish people should be very grateful.

When, on behalf of my constituents, I weigh up whether we can be pleased with how Ireland conducts its affairs, I must express renewed disappointment that Ireland caved in on the Lisbon treaty, with the consequence that this country has been landed with it.

[Mr Hollobone]

Does my hon. Friend recall Ireland’s position a few months ago, when the UK Government tried to bring the European Parliament budget under control and needed a blocking third to prevent the proposed budget increase? Where was Ireland at our time of need on that occasion?

[Mr Chope]

My hon. Friend asks a rhetorical question. The answer is that I am not sure where Ireland was at that time.

I agree with my right hon. Friend the Chancellor that we should allow the Irish to have their own domestic policy. That is why it would not be right for us to interfere with their low corporation tax policy—it should be for them to decide. However, the other side of the coin must be that we let the Irish take the consequences and accept the responsibility for what happens as a result. We cannot say, “We’re going to help pay for the consequences while not being able to influence the policy.” I find what is proposed very intellectually trying to deal with.

When we have a border—our hon. Friends from Northern Ireland have made their points about this—that low corporation tax policy makes things much more difficult. Indeed, it is possible to argue that we have lost the corporate headquarters of major international organisations from London to Dublin as a result of Ireland’s low corporation tax policy. Now we are subsidising that policy, the consequences of which are that the Irish have been unable to meet their financial obligations and are desperate for additional loans. I am not convinced that we should be getting involved with British taxpayers’ money. It would be different if we did not have an awful national debt crisis, but we do. One consequence of the Bill, if it goes through today, may be to send out a signal to our constituents that says, “Don’t worry, the debt crisis is not as bad as we’ve been telling you, because we can afford to add to that debt further by giving a soft loan to the Irish.” At the same time, we are having to argue to our constituents that we cannot put pressure on the banks to give more soft loans to businesses, even if those businesses go bust or cannot expand as a result, with all the damaging consequences for employment that that would have in our country, so I am not convinced.

[Mark Durkan (Foyle) (SDLP)]

Does the hon. Gentleman not acknowledge the scale of the exposure of British banks in the Irish Republic’s economy or the key dependence of Northern Ireland’s economy on the role of some of the Irish banks?

[Mr Chope]

Of course I acknowledge that, because it is a fact. However, my hon. Friend the Member for Chichester (Mr Tyrie) made the important point that, in negotiating a bilateral deal, we might have been able to deal with the debts owed to those banks and, in a sense, directed any money that we wanted to give into those British banks, rather than into the Irish coffers in general. We could have linked those things, if that was what was needed. However, I do not think that the difficulties of those banks are a justification for increasing our national debt further in the way that the Bill proposes.

Loans to Ireland Bill (Allocation of Time)

Christopher Chope Excerpts

Wednesday 15th December 2010 Commons Chamber

[Mr Christopher Chope (Christchurch) (Con)]

There is one element of the guillotine motion that I particularly resent. That is the provision that if a group of amendments is being discussed when the guillotine falls, it will not be possible to vote on any more than the question that was before the House at that time, whereas under a traditional programme motion it would be possible, with the leave of the Chair, to vote on more than one of the amendments in the group.

My hon. Friend the Financial Secretary to the Treasury says he thinks it is reasonable that we should have the opportunity to give the Bill proper scrutiny. In my submission, scrutiny includes having the opportunity to test the view of the House on amendments before it. My concern is that if all the amendments are grouped together, and if the debate on that group carries on until the guillotine falls, it will only be possible to vote on one narrow amendment—amendment 3—although of course the guillotine motion allows the Government amendment to be voted on as well, because those are the biased terms in which the motion has been drafted.

The Bill is a very significant measure. I have had letters from constituents asking, “How is it that we can afford to lend £3.25 billion to Ireland when the Government are saying that they cannot do anything to make more money go to small businesses that are crying out for loans?” That is the sort of question that our constituents are asking, and I would have hoped that the Government would be more co-operative with the House by providing a bit more detail in the Bill.

We have heard that the Chancellor will be telling us in due course about the terms of the loan, the interest rate and the repayment schedule. Why could not those details have been included on the face of the Bill, to enable us to make an assessment and decide whether to table amendments? If the Government are really saying, “This is so desperately urgent that we need to do it straight away,” why were they not prepared to co-operate with the House a bit more and give us the maximum amount of information to enable us to deal with it in a constructive way today?

I am very concerned, and my hon. Friend the Member for Wellingborough (Mr Bone) has articulated the wider constitutional implications. We know that the other place was very concerned about the fact that the Government were taking forward a lot of emergency measures without giving the opportunity for proper debate and consideration—and that applied not just to money Bills but to other Bills too. This is a money Bill, so it will not be possible for the other place to consider it in detail. That responsibility falls fairly and squarely on this House.

We got a guarantee from the Government that if there was going to be fast-tracking or emergency legislation, the justification for it would be set out in the explanatory notes. I do not think the justification given in these explanatory notes is a justification for what the Government are trying to do today.

If this Bill were to be considered tomorrow or on Monday, we would have more time to debate it. Incidentally, we would also be able to consider what the Members of the Irish Parliament are saying on this very subject in their House today. If, for example, many of them were to say that they would not wish to repay the loan given to them by the United Kingdom, I would have thought that would be a very material consideration in our debate on the matter, but this motion denies us the opportunity to consider the implications of what transpires today in the Irish Parliament. I suspect that is not an accident; I suspect it is by design. That is why I will vote against this guillotine motion.

Savings Accounts and Health in Pregnancy Grant Bill

Christopher Chope Excerpts

Tuesday 26th October 2010 Commons Chamber

[Mr Hoban]

No; I want to make some more progress.

I realise that many people, including some hon. Members, will find these changes disappointing. As I have explained, however, the child trust fund is simply unaffordable given the deficit that we face and the need to focus our resources on supporting people now.

Although we need to reduce spending on the child trust fund, we remain committed to encouraging people to save. I want to see a saving system that is based on our principles of freedom, fairness and responsibility, as well as being affordable and effective.

[Mr Christopher Chope (Christchurch) (Con)]

I am with my hon. Friend 100% on the principle that he has just enunciated. Will he clarify the issue of encouraging people to save for their further and higher education? If they do so, they will apparently be penalised under the coalition Government’s proposals if they pay their fees upfront having done the right thing and saved for their education. Is that correct? If so, how is it consistent with what he has just said about our commitment to encouraging a savings culture?

[Mr Hoban]

My hon. Friend has made an interesting point. We want to encourage more young people to save and to give them some assets at the age of 18. I will look into his point and write to him.

As I have said, the saving gateway and the child trust fund are not affordable given the budget deficit that we inherited, so we are taking a different approach to encouraging saving that builds on the latest research on how to influence people’s behaviour.

The coalition agreement announced the roll-out of a free, impartial national financial advice service paid for by the financial services industry. The service will be fully rolled out by spring next year, providing information and advice on money matters and helping people to understand their options.

Draft EU Budget 2011

Christopher Chope Excerpts

Wednesday 13th October 2010 Commons Chamber

[Justine Greening]

I cannot confirm those reports, but I can tell the hon. Lady that the European Parliament is now considering in detail its response to the European Union 2011 budget. It might well decide to take a position that has a broader perspective than purely the size of the European budget and the split of that budget across the headings. As she will be aware, if there is no agreement, the conciliation process will take place, and of course I cannot prejudge how the European Parliament will approach that and whether it will seek a broader negotiation process than just that on the budget. She is right to flag up the fact that the Parliament might choose to do that, which is why it is all the more important that Ministers and the Chancellor are out making our case with the European Parliament and MEPs as to why we believe that saying no to the totally unacceptable 6% rise is absolutely vital for all MEPs. I hope that the Opposition will play their role with their MEPs in ensuring that the European Parliament takes the right position on the European Union budget. I have spoken with James Elles, an MEP who is on the Budgets Committee. As I have said, I will be in Brussels tomorrow to reiterate our position.

We anticipate that the long-overdue budget review paper from the Commission will be published in the next 10 days. We then expect the Commission to present proposals for the next seven-year framework for the EU budget in the first half of next year. I can assure hon. Members that the Government will strongly defend the UK’s national interests in the forthcoming EU budget negotiations. We are clear about what matters to the UK. We will defend the UK’s abatement, which is fully justified owing to distortions in EU spending, and we want the EU budget to be smaller, so that our domestic efforts to cut the deficit are not undermined by growth in EU commitments.

[Mr Christopher Chope (Christchurch) (Con)]

What my hon. Friend is saying in her feisty way is very encouraging. Will she assure us that if the European budget proposal is for something other than a reduction, the Government will veto it?

[Justine Greening]

The process clearly does not end there. It will go to conciliation and there will be further negotiation within the Council. We are aiming to have a majority in the Council standing against the European Parliament’s proposal for a higher budget.

[Mr Chope]

I think that my hon. Friend misunderstood my question. I was referring to the next seven-year budget, where we have a veto. I was asking whether we will be exercising that veto if we do not get our way in having the budget reduced.

[Justine Greening]

I will not pre-empt where we will be for the financial framework, but my hon. Friend is right to point out that this debate is incredibly important because it sets out the context for that next financial framework—

Finance Bill

Christopher Chope Excerpts

Thursday 15th July 2010 Commons Chamber

[Mr Christopher Chope (Christchurch) (Con)]

I beg to move amendment 18, page 2, line 23, leave out ‘“6 per cent”’ and insert ‘“5 per cent in the case of personal health insurance, and 6 per cent in any other case”’.

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

With this it will be convenient to discuss the following: amendment 19, page 2, line 23, leave out ‘“6 per cent”’ and insert ‘“5 per cent in the case of motor insurance, and 6 per cent in any other case”’.

Amendment 15, page 2, line 26, at end add ‘, subject to a report having been laid by the Secretary of State containing an assessment of the consequences of the changes in subsection (1) on consumers and the insurance industry.’.

Amendment 48, page 2, line 32, leave out subsection (4).

[Mr Chope]

The amendments aim to tease out from the coalition Government and, in particular, the Exchequer Secretary, who is responding to this debate, what the Government’s attitude is towards people who do the right thing and try to relieve the burden on the public sector and the national taxpayer. Although it would be wrong to suggest that the inspiration for the amendments came from the Secretary of State for Transport, he was on to an important principle recently when he said that if a pensioner has a bus pass but can afford to pay their fare, they should not use the pass but pay the fare themselves and thereby relieve the local taxpayer of the costs consequent upon the use of that subsidised bus pass. It is a subsidy of general application—it goes to people irrespective of their means and ability to pay.

We know that quite a lot of people choose to buy medical and personal health care in the private sector without burdening the state and the taxpayer. If those people choose to do that through personal health insurance, this Budget will increase the financial penalty on them. In other words, it will be a disincentive to people taking responsibility for their own personal health care through personal health insurance. Many years ago, it was the policy of the then Conservative Government that those who subscribed to personal health care insurance should have their subscriptions tax deductible. That was based on the worthy principle that, if we did that, we would encourage more people to take responsibility for their own health care. We have moved a long way from that now.

[Mr Peter Bone (Wellingborough) (Con)]

My hon. Friend is making a powerful speech, and I am grateful to him for giving way. Does he support the Government’s aim of coming up with suggestions that will reduce the charge to the taxpayer? Obviously, if more people take private medical insurance, there is less of a burden on the state and it is a win-win situation for the Government.

[Mr Chope]

Almost every contribution I make in the House is designed to try to help the Government and often to try to get better value for money for taxpayers.

If we were under any illusions about how important and critical the situation is in relation to health care, we should bear in mind that yesterday, in response to a question from my hon. Friend the Member for Pendle (Andrew Stephenson) about the NHS White Paper, the Prime Minister said that

“when we look at the NHS, we know that there are expensive drugs coming down the track, expensive treatments and an ageing population, and more children born with disabilities and living for longer. There are cost pressures on our NHS that mean that even small real-terms increases will be an heroic thing to achieve.”—[Official Report, 14 July 2010; Vol. 513, c. 950.]

My hon. Friend the Member for Wellingborough (Mr Bone) is making exactly the same point. I am trying to tease out from my hon. Friend the Exchequer Secretary whether it is the Government’s policy to try to encourage people to take responsibility for their own health care, if they can so do. This is not the subject of an amendment, but similarly, if people can afford to educate their children in the independent sector, should they not be encouraged so to do?

--- Later in debate ---

[Mr John Redwood (Wokingham) (Con)]

I am delighted by the case that my hon. Friend is making. As he is suggesting, people who insure for their health needs are paying twice, because they are also paying their contribution to the NHS, thereby helping doubly. Does he therefore think that keeping the tax rate at 5% is enough, or would he really rather it were lower?

[Mr Chope]

My right hon. Friend asks a pertinent question. I would prefer the tax to be much lower—indeed, perhaps there should be no tax at all—for particular insurance premiums. However, in order to try to carry as many people with me as possible in this debate, I thought that I would limit my ambition, by saying, “Why don’t we not increase the tax from 5% to 6% for specific types of insurance premiums?”

I have picked out a couple of examples of that, and I will come to another in a minute, but obviously the principles could apply much more widely. For example, many people are now taking out insurance against their long-term care needs. Indeed, the Conservative party said in its manifesto that for an £8,000 premium, a family would be able to secure themselves against the cost of having to fund long-term care. I do not know whether such a premium, if it were paid, would be subject to insurance premium tax, but perhaps my hon. Friend the Minister will be able to tell us about that. At the same time, perhaps he can let us know when he expects that part of the Conservative manifesto to be brought before the House for implementation in legislative form.

The principle of insurance is one that most Conservatives—most of my constituents—applaud. People can either self-insure, which means that they take the risks themselves, or they can pool that risk by buying an insurance policy, which many people do, by buying life insurance, pension insurance and so on. In the case of pension insurance, we are talking about incentives for saving; in the case of life insurance, we are trying to encourage people to ensure that if they die prematurely, their dependants have some support and are not wholly dependent on the state. Those examples do not fall within the scope of my amendments, but they would be covered by amendment 15, which goes rather wider. However, it is important that we should have this little debate, to try to tease out a bit more from the Government on these important issues.

Turning to my amendment 19, let me say that we have a real problem with motor insurance in this country. For young people, the price of motor insurance is almost prohibitive. Indeed, it is so high that people cannot afford to buy it. Instead, what happens is that young people might get their parents to put them on their policies, if they are lucky enough to have parents who will do so—sometimes in quite dubious circumstances, as we have been reading in the newspapers recently—but quite often they will take a risk and drive uninsured. I regard driving without insurance as an extremely serious motoring offence. It is reckless, and those who do pay for their motor insurance end up having to pick up the bill for those who cause accidents and injuries as a result of not buying insurance.

[Lorely Burt (Solihull) (LD)]

I am following the hon. Gentlemen’s argument, but when he says that the cost of insurance for young people is prohibitive, does he honestly believe that 1% either way is going to be a significant factor in a young person’s decision on whether to buy motor insurance?

[Mr Chope]

Well, 1% is 1%. I am sorry that the hon. Lady seems to be rather unsympathetic to the plight of people who are trying to get motor insurance. Lots of young people need a car to get to work. They find the cost of motoring increasing all the time and they find the cost of insurance also increasing, yet the proposal before us is to increase that cost further—not massively further, but to increase it nevertheless.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

As I hope to be able to say in my contribution later, I agree with the hon. Gentleman on this point. I am astonished to hear the comments coming from the Liberal Democrats that they do not care about the costs of motor insurance, which, especially to young people, can be £1,000 or more. Will the hon. Gentleman also note the perverse consequences for those who go uninsured? Yes, they might get six points put on their licence if they are caught, but the fine is often just £300 or £400, so they would almost be better off to take the risk and be fined rather than pay the cost of the insurance. That has to change.

[Mr Chope]

The hon. Gentleman is absolutely right. What he said is no great revelation for young people when they go out and party or communicate with each other via modern means of communication. They know that the risks of getting caught are not that great, and that if they are caught, the consequence will be penalty points on their licence and a fine. They will often be able to pay off the fine over an extended period.

Young people now face very substantial insurance premiums and those from the most deprived areas are often those with the highest premiums. One factor that is taken into account is the postcode. If the chance of someone’s car being stolen is high because of where they live or because they do not have garage, the premium will be higher than for someone who perhaps lives in a rural, perhaps law-abiding community. That is an additional problem that these young people face when it comes to motor insurance.

[Mr Greg Knight (East Yorkshire) (Con)]

This tax will hit not only young people, but people of all ages. Does he agree that those arguing that the motor car is a luxury and that taxes on luxuries are quite acceptable are ignoring the real problems that people in rural areas face? For them the motor car is not a luxury but a necessity.

[Mr Chope]

My right hon. Friend is absolutely right. What he and others are identifying in this debate is an element of confusion in public policy. Compulsory third-party insurance for people who drive cars is a matter of public policy. If such compulsory insurance is required by the law, we are effectively saying as law-makers that it is a good thing to have it. Are we seriously saying as law-makers, “Well, if you comply with the law, we are also going to charge you extra tax for your compliance”? It seems to me that we need more clarity of thought on the matter. If we do not think that insurance is important and necessary, we should remove the requirement for compulsory insurance. I think that motor insurance, and particularly third-party insurance, is not only desirable but essential. If we are to have it, however, why should we also have insurance premium tax on it? In particular, why do we need to increase the insurance premium tax at this time?

The yield from all the increases in insurance premium tax comes to some £400 million a year, but I suggest that the cost ramifications arising from uninsured driving, and the accident and injuries resulting from it, might be on a scale similar to the total yield of the entire increase in insurance premium tax. Because the current system imposes a flat rate on the level of the premium, the higher the premium, the worse the risk and the greater the penalty incurred.

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[Mr Knight]

I do not think my hon. Friend should gloss over this point too quickly. As he has said, this is a percentage tax, so we are effectively saying that a young driver seeking to insure an Escort RS motor vehicle should pay more in tax than a 55-year-old driver of a Bentley.

[Mr Chope]

My right hon. Friend has particular expertise and knowledge about that particular end of the market. I am sure that the Committee is obliged to him for that information. The point he makes is absolutely correct. If we are thinking in terms of equity and fairness as the guiding words of the day, let us see if we can look again with radical eyes at this whole structure of taxing insurance premiums. Let us see whether the Government accept the amendment today; if they do not, let us see whether they have anything else to put on the table by way of responding positively to the points raised in the debate. We can then decide whether we wish to divide the Committee on this issue or just put down a marker.

[Mr Bone]

Before my hon. Friend concludes his opening remarks, will he clarify this? I assume that the amendment is not really about whether to have the tax rise or not to have it, because it is very small. Is it more about sending out a signal that the Government want to encourage people to take responsibility and take out insurance?

[Mr Chope]

Absolutely. I make no apology for declaring my own view, which is that if it could be afforded, it would be sensible to give tax relief on insurance premiums where we think those premiums are for the public good and will result in reducing the burden on the state and the taxpayer. I would like at least to bring in incentives in the form of tax relief, let alone eliminate the insurance premium tax. As I said earlier, I do not think that the latter is affordable in the present crisis. That is why I tabled this very modest proposal in the hope that it will get the Government thinking about alternative means of raising money from insurance policies.

[Stewart Hosie (Dundee East) (SNP)]

I rise to speak to amendment 15 in my name and that of my friends. At face value, the increase in insurance premium tax in the Budget did not cause a huge stir, but as its consequences began to be felt, many representations were made by consumers and the industry. On balance, it is wise that we should have a report on the likely consequences of this tax rise on individuals, families, consumers and the sector. A number of concerns and predictions have been voiced. Eric Galbraith, the chief executive of the British Insurance Brokers Association, said that its research

“demonstrated that businesses and consumers were reducing insurance cover as a result of the recession”

and that

“we are concerned that increases to insurance premiums as a result of IPT could lead to even further underinsurance or even a lack of insurance protection. The last thing people need in a financial crisis is a higher insurance bill”.

That makes sense, given that taxes elsewhere, not least VAT, are going up. The insurance industry is worried that increased premiums may tempt people completely to stop insuring their homes, holidays or travel. Already, according to research by moneysupermarket.com, only one in five travellers always cover every trip they take here or abroad.

One consequence of underinsurance or non-insurance is that the number of illegal uninsured drivers is on the rise. According to the Motor Insurers Bureau, they already push up the average car premium for everybody else by £30 a year. If more people are underinsured or have no insurance at all, the premiums of those who pay the minimum third-party insurance will be pushed up even further. That is another burden that people really cannot do with in the middle of this recession, when times are tough. As the right hon. Member for East Yorkshire (Mr Knight) has made clear, in certain parts of the country, where the car is a necessity and people are honest, such premiums will be paid again and again. There will be a lot of hits to the honest insurer as a result of non-insurance elsewhere.

The Association of British Insurers has responded to the Budget by saying:

“Raising IPT is a direct tax increase for the vast majority of people who sensibly protect themselves and their families with insurance. This is regrettable and could have serious unintended consequences if it puts off consumers from protecting their homes, cars, holidays and everyday living.”

On uninsured trips, apparently some 2.9 million trips are made each year without adequate cover. Peter Hayman, the director of P J Hayman, expects that number to rise as more people opt to economise and use “free” cover as the cost of IPT increases. Perry Wilson, the founder of Insure and Go, has said:

“Our research suggests that the UK travel insurance industry receives over half a million claims for medical problems a year and nearly 400 000 for lost or stolen baggage. This tax rise will only act as a deterrent to those who sensibly want to insure themselves against these risks”.

Of course, the cost of not having insurance in certain circumstances can be extraordinarily expensive.

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[Mr Byrne]

It is an enormous pleasure to follow the hon. Members for Christchurch (Mr Chope) and for Dundee East (Stewart Hosie) and the right hon. Member for Wokingham (Mr Redwood). The strength of their contributions was in illustrating that the proposals in clause 4 raise a wide range of policy concerns and debates. Hitherto, the House has not had much explanation of the logic or rationale of all the changes set out in the clause. The arguments for some of the proposals are fairly easy to deduce, but the core of the clause is the increase in the standard rate of insurance premium tax, which has not been explained.

The lack of explanation underlines the fact that the Bill is somewhat piecemeal. It is fragmented. It is not a whole Bill; it is not even a half Bill; it is a bit of a Bill. We were told with great fanfare a few weeks ago that the Government were introducing an emergency Budget. The Bill and the clause illustrate in our debate this afternoon that the only emergency was the need to get some pretty difficult changes on to the statute book by the summer, before Liberal Democrat members on the Treasury Bench got cold feet or had, dare I suggest, too many conversations with their constituents.

So the result of that emergency—something that some would uncharitably call a panic—is a Finance Bill with measures such as clause 4 that so far are bereft of logical explanation. The strategy has also produced clause 5, which we shall debate later this afternoon, which withdraws tax legislation without putting anything back in its place. Where there is certainty, the Government in their panic have decided to substitute mystery. So much for the simplification credentials.

The effect of clause 4 on one level, as I have said, is reasonably straightforward. It raises the higher rate of insurance premium tax from 17.5% to 20%. That would appear to be a fairly automatic consequence of the decision to raise VAT to 20%. The higher rate of IPT was introduced in 1999 to prevent a problem called value shifting, whereby some retailers and other producers tried to lower prices of goods and bundle them with insurance policies, for which they redeemed some of the value. I was not sure whether that was some of the financial innovation that the hon. Member for Dundee East was beginning to welcome in his remarks. Perhaps he will say more about that a little later.

[Mr Chope]

Does the right hon. Gentleman know what proportion of the £400 million yield from IPT proposals is attributable to the increase from 17.5% to 20% and what proportion is attributable to the increase from 5% to 6%?

[Mr Byrne]

The hon. Gentleman raises an important question. The answer is that I do not know. It is a mystery. The Budget scorecard has a certain number, but of course it has bundled together the revenue that is to be raised from the increase in the higher rate and the increase in the standard rate. I hope that the Minister will be able to enlighten us.

It is possible to deduce why the higher rate has gone up, but it is curious that the Government have chosen to increase the standard rate. We have to assess that decision alongside the decision to preserve exemptions and zero-rating from VAT on a range of goods and services. We were told on Tuesday night by the Economic Secretary that the existing zero ratings and exemptions would be kept in place for the course of this Parliament. That commitment was given to the House on Tuesday night, and we will all watch the Government’s adherence to it with a great deal of attention over the next few years. That decision to keep in place a series of zero ratings and exemptions just adds to the mystery of why this standard rate has been singled out for such an enormous rise.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

We have had a wide-ranging debate on clause 4 and the amendments tabled to it; I am sure, Mr Evans, that you want to hear its conclusion. I was grateful to hear the contribution made by my hon. Friend the Member for Wellingborough (Mr Bone), who highlighted the freedom given to Government Back Benchers in Committee debates. I hope that my remarks will persuade my hon. Friends not to make full use of that latitude. We shall see.

The amendments are concerned with the general impact of the rise in the standard rate of insurance premium tax, particularly in respect of its impact on personal health insurance and the motor industry. I will come to those issues in detail in due course. Before I do so, I propose to set before the Committee the reasons behind the course that we have chosen.

Reducing the deficit and ensuring economic recovery are the most urgent issues facing the UK and they are the Government’s top priority. In the words of the shadow Business Secretary, it is no good wishing the deficit away; it is only by acting quickly to tackle the deficit and restore confidence in the public finances that we will achieve economic growth. That has meant that we have had to take many tough decisions to ensure that everybody makes a fair contribution. Part of that contribution will come from increases to the standard and higher rates of IPT.

Clause 4 legislates for that by increasing the standard rate of IPT from 5% to 6% and the higher rate of IPT from 17.5% to 20%, both with effect from 4 January 2011. IPT is, of course, a tax on insurers, not on their customers; 80% of all the insurance sold in the UK is exempt from IPT. All long-term insurance, such as life insurance and pensions, is exempt from IPT. My hon. Friend the Member for Christchurch (Mr Chope) mentioned Conservative party policy on long-term insurance. If he is a little patient, I am sure that my right hon. and hon. Friends at the Department of Health will say more on the subject. I just underline the point that IPT is not levied on long-term insurance.

[Mr Chope]

Does my hon. Friend mean that if there was an opportunity for somebody to pay £8,000 for long-term insurance, that would not be subject to IPT in the circumstances set out in the original Conservative party manifesto?

[Mr Gauke]

What I can say is that given how IPT is currently structured and where it is levied, it does not apply to long-term insurance; the conclusion to be drawn about something that falls within the definition of long-term insurance is fairly logical.

However, in respect of the types of insurance that are affected, insurers have the right to respond to the tax as they see fit. They are not obliged to pass on IPT through higher premiums. [Interruption.] We recognise that many insurers will pass it on to their customers through higher premiums, but I will not be dragged into the detail of the amendment tabled by the hon. Member for Nottingham East (Chris Leslie).

The question was asked whether further regulation should be imposed on insurers, making them display prominently how much is being paid in IPT. Unlike VAT, IPT is a tax on insurance, so there is no obligation to pass it on or to recover it for businesses. We do not think that that would be appropriate. Insurers are, of course, perfectly free to display the IPT rate on documentation, and many do so. Requiring them to do so, however, would be burdensome and unnecessary.

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[Mr Chope]

My hon. Friend framed his policy in rather negative terms by saying that the Government did not disapprove of health insurance and did not want to prohibit or deter it. Can he be a bit more positive and say that it is their policy to try to encourage people to take responsibility for their own insurance, on similar lines to the Secretary of State for Transport saying that he wishes people to take responsibility for paying their own bus fares, despite their having bus passes, if they can afford so to do?

[Mr Gauke]

As a Government—I am sure that this is a principle that my hon. Friend would support—we believe in giving people choice, and that is what we will do. We have set out our policies in that context, and I am merely underlining this Government’s commitment to the national health service.

The combined effect of the amendments tabled by my hon. Friend the Member for Christchurch would be to slow down fiscal consolidation. Through the Budget and this particular measure, the Government are trying to get our deficit under control, and slowing it down would not be an appropriate step.

--- Later in debate ---

[Mr Gauke]

Let us see what happens. I am not sure that the evidence necessarily supports that concern, but I am sure that if it happens the hon. Gentleman will come back to the House to highlight it. Many within the insurance industry have themselves acknowledged that the rises are very modest and will not have a significant impact on households or on the take-up of insurance.

Amendment 15 would make the IPT rise announced in Budget contingent on the publication of an assessment of the effect of the rate rise on consumers and the insurance industry. We believe it is unnecessary. I have set out fairly comprehensively in this debate the expected impact on households and businesses—in broad terms, that impact will be minimal.

I should also point out to hon. Members the considerable amount of information on the impact of the Budget that we have already put in the public domain. In particular, for the first time the Government have set out their analysis of the distributional impact on households of the Budget measures, including the IPT rate changes, in annex A of the Red Book. Separately, other organisations such as the Association of British Insurers have given estimates of the impact of the rise on households, which are very much in line with our own estimates. Naturally, the industry and consumers do not like the rises, and we do not like having to introduce them, but the industry accepts that they are going to happen and is preparing accordingly.

Finally, I wish to address amendment 48 which, as the shadow Chief Secretary said, is a probing amendment aimed at exploring the reasons for the rise and its impacts. He asked a specific question about the balance between the standard and higher rates. For 2010-11—Members should remember that the rate increases will occur in January 2011—the revenue raised will be £110 million from the standard rate and £5 million from the higher rate. For the following years, the higher rate will raise £25 million each year, with the balance made up from the standard rate, which in most years raises £450 million.

The shadow Chief Secretary also asked about the reason for the increase in the higher rate from 17.5% to 20%. As he correctly surmised, it is to do with value shifting and the fact that travel insurance is often sold with other products on which VAT is payable. A discrepancy between the IPT on travel insurance and other rates may create dangers of value shifting, and that is the reason for the proposal.

[Mr Chope]

rose—

[Mr Gauke]

It is always a pleasure to hear from my hon. Friend.

[Mr Chope]

Will my hon. Friend spell out the yield from IPT on motor insurance and health insurance, which amendments 18 and 19 cover?

[Mr Gauke]

As I said earlier, the cost of my hon. Friend’s amendment to exempt motor insurance from the IPT rise would reduce revenue by £160 million a year, and exempting medical insurance would decrease revenue by a further £40 million a year. I hope that that is helpful.

The increase is necessary. It is an attempt to bring our deficit under control. We need to make some tough decisions, and that is one.

--- Later in debate ---

[Mr Chope]

It is my pleasure to respond to an excellent debate and I thank everybody who has participated in it. At the beginning, other hon. Members and I conceded that the sums of money involved were relatively small, but we were concerned about the messages that were being sent. I am rather disappointed by the Exchequer Secretary’s failure to engage with that part of the argument. It is one thing to say that the Government do not disapprove of health insurance, will not prohibit it and do not wish to deter people from taking it out, but all those who take out private health insurance help not only themselves but the country.

My hon. Friend kept saying that our commitment—meaning the coalition Government’s commitment—is to the NHS, but surely it should be to the health of the nation. That depends on money going into health care and health protection from a mixture of sources. Some will come from taxpayers, and an increasing proportion in my view should come from private individuals and companies—we are also talking about company health insurance schemes. My hon. Friend had the opportunity to say to companies that have health insurance schemes for their employees, “Thanks very much indeed for your contribution; that takes a burden off the NHS.” He had the opportunity to tell those who take out private health insurance or self-insure and pay for their health care, “Thanks very much; you are relieving the state of a burden.” He did not. I do not know whether that was a deliberate omission or unintentional.

I am concerned about the messages that are being conveyed about the direction of travel and I am slightly bewildered about whether the coalition Government are wholeheartedly enthusiastic about people taking responsibility for as much of their own lives as they can, depending on their financial ability. If we are trying to build a responsible society, we should encourage people to take responsibility for all aspects of their lives and should not force them to feel that they should depend on the state.

We should certainly not encourage a state of mind whereby people think that they are being antisocial by not depending on the state. We have almost reached a stage when, if somebody says that they have private health insurance or that they send their children to independent schools, while paying through their taxes for state education for everybody else, the Government frown on them. It is too late in this debate, but I hope that the coalition Government will send out a much more positive message about the virtues of self-help and responsibility and of people not being dependent on the state. There are many definitions of what may or may not amount to the big society, but if it means anything to me, it is encouraging people to do their own thing and having much smaller state involvement and, ultimately, lower taxes.

[Sammy Wilson]

I am listening intently to the hon. Gentleman. Would he extend his argument to, for example, household insurance and the whole range of insurance premium tax? As was pointed out earlier in the debate, people insure their houses against flooding and fire, for example. There is therefore no burden on the state in the event of flooding, because the insurance companies carry it, and if a house catches fire, people do not have to look for a loan from social security, because they are covered by the insurance. Does he accept that the amount of money involved is hardly likely to act as a disincentive?

[Mr Chope]

The answer is yes; I would wish to extend my argument. However, I tabled two specific amendments so that we could have a focused debate. It has become apparent in the course of the debate—I did not know this before—that about half the yield from the IPT increase will be from motor and health insurance premiums, and about half from other insurance, such as household insurance.

I am concerned that in my constituency, particularly as a result of the rather reckless behaviour of the Environment Agency, there is a blight on a number of houses, whose owners find either that they cannot access flood risk insurance or that that insurance is much more expensive than it used to be. Because of how IPT works, the state benefits from the latter outcome through extra income, and there is an extra burden on householders. Some very important points were made by Members who are concerned about household insurance. It was open to anybody to table similar amendments, but I tabled two to focus the debate. The hon. Member for Dundee East (Stewart Hosie) did the House a service by tabling an amendment that calls for a proper analysis so that the House can know the full implications of the proposals before we are asked whether we support them.

We have spent two hours discussing this matter, but we have still not really heard from the Government about the direction of travel. We certainly have not heard whether the principles so articulately described by my right hon. Friend the Transport Secretary—he spoke of people who can afford to pay their fare using free bus passes—apply throughout the coalition Government, and to those who take responsibility for their health care, education or other aspects of their lives.

[Thomas Docherty]

On private health care, does the hon. Gentleman accept that people receive a premium service, and that it is therefore only right that they pay a premium tax? Does he also accept that health care provides only 10% of the total IPT raised?

[Mr Chope]

People take out private health insurance, which might be through a scheme in their firm, because they want access to health care that is currently not available. I gave some examples in my opening remarks of people in my constituency choosing to take out health insurance. A very large number of my constituents pay for various procedures and operations. They insure themselves because they believe that they can access those procedures when they need them rather than when the state tells them they can have them.

The essence of the argument is that countries with the highest standards of health care are the ones that encourage higher non-taxpayer funded input into health care. That is what I am trying to get across. I might be unable to persuade the hon. Gentleman, but I hope that I might start to persuade members of the coalition Government on the virtues of people taking responsibility for their health care, thereby relieving the burden on the NHS.

[Mark Hendrick]

Does the hon. Gentleman accept that the private health system is not independent? It is actually dependent on the national health service, and the vast majority of private health staff were trained and qualified in the NHS. The 6% we are talking about is quite small when it comes to disincentives for people to use the private health system.

[Mr Chope]

The hon. Gentleman demonstrates his old socialist credentials and his prejudice. I shall not get into a full debate about the NHS, as I hope that we will have an opportunity to do so when the private Member’s Bill tabled by my hon. Friend the Member for Wellingborough (Mr Bone)—which I support—is debated on a Friday in February. Let us not forget that many of our top clinicians stay in this country because they can supply their services to the NHS—[Interruption.] Yes, they do so for money, but they can also top up their income by getting money for providing their services to private patients. That mixed market in health care provision, including the providers of health care, is healthy for our country and I am sorry that the hon. Gentleman does not support it. That is a philosophical divide, but I think that we need the best health practitioners in this country. The private health insurance companies make a significant contribution to the health of the nation.

I shall not go through all the contributions that were made in this debate, but I wish to touch on the motor insurance issue, which found most common cause across the Committee. Because the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) did not seem to be committed to the idea of protecting motorists—especially young motorists and those from areas with high insurance premiums—and did not say that he would support my amendment, he has created a slight difficulty for me.

[Mr Byrne]

My ambition this afternoon was simply to tease out from the Government the principle behind the increase in IPT. The hon. Gentleman may be able to help me with this, but I think that I detected that the ambition was simply revenue raising. Was that his interpretation too?

[Mr Chope]

The right hon. Gentleman has deployed an old trick. Instead of responding to my challenge, he has put a challenge back to me. He has listened to the same debate as I have, and the Government need to raise money because—as he so candidly recognised—there is no money left. That is one of the reasons behind the insurance premium tax.

[Mr Byrne]

The hon. Gentleman is being slightly unfair. We had a very different approach to introducing £19 billion of new taxes. The Government have chosen a different course, but they have had to raise so much in VAT and IPT because the Budget so slows down the recovery that £9 billion in extra taxes will have to be raised to make up for the lost growth.

[Mr Chope]

I shall not get involved in that debate now, because I want to keep the focus on the narrow issues in my amendments. I am disappointed that the Minister did not respond to my concern—echoed by the hon. Member for Nottingham East (Chris Leslie) and others—about the regressive nature of the insurance premium tax, especially on the motoring public. One suggestion I made was that instead of having a standard tax on insurance premiums, we could have an individual transaction tax so that every motorist would pay the same tax for his annual insurance premium.

[Mr Gauke]

My hon. Friend is right to return to this point, and I apologise for not responding to it in my earlier remarks. If we took that approach on a revenue-neutral basis, we would end up essentially with the same transaction tax level on a big and small car—whether a Bentley or a Skoda, we would have the same transaction tax. Is that what he is advocating? That itself would be regressive.

[Mr Chope]

I was not thinking about Bentleys versus Skodas; I was thinking about the student living in Liverpool trying to run a vehicle that is perhaps 10 or 15 years old and finding it hard to make ends meet, and about the person who might have several Bentleys in the garage covered under some collective insurance. I am concerned about those living in high-risk areas or who are in high-risk groups—because they are young drivers, for example—whose insurance premiums are significantly higher than those of, for example, the person whom my right hon. Friend the Member for East Yorkshire (Mr Knight) mentioned who is in their mid-50s and happens to own a Bentley. I do not think that, prima facie, that is fair. I was throwing out a challenge to my hon. Friend the Exchequer Secretary to see whether an individual transaction tax that is not related to the size of the premium might produce a fairer result. It seems as though it might not, but perhaps we can correspond on that so that we can take the matter forward.

We have covered a lot of ground in this debate, and I have already expressed my disappointment. The question now arises of whether we should seek to divide the Committee on the proposals. I live in hope—perhaps I am naive—that in due course we will get a better and more positive response from the coalition to questions of responsibility and encouraging people to do the right thing, and that it will send out those positive measures. To seek a Division would probably be counter-productive because, apart from anything else, I would have to pick one, rather than both, of my amendments, which would mean picking on one particular type of insurance premium tax as against another. I am not sure that that is necessarily in accordance with the will of the Committee, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Mr Chope]

On a point of order, Mr Hoyle. It seems as though right hon. and hon. Members in the Opposition did not realise that it was open to them to object to the withdrawal of an amendment if they wished to vote on it.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

It is too late to object now, so let us proceed.

Clause 4 ordered to stand part of the Bill.



Clause 5

Power to repeal high income excess relief charge