Tax Credits
David Davis Excerpts(9 years, 1 month ago)
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Frank Field
Well, indeed. Our plea is to have made available the range of analysis that has traditionally accompanied any Budget statement that any Member of this House, however long he or she has served, has come to expect.
The Work and Pensions Committee has emphasised a fourth factor, which is that there may be some wage push as a result of the introduction of the national living wage. Will that be taken into account in the Government’s analysis? I am slightly sceptical about the extent of that wage push—again, it is one of the problems of having been a Member of this House for some time. When I was initiating the Low Pay Unit’s campaign for a statutory minimum wage, the official trade union position was to oppose it on the ground that there would be a mega-bill as we re-established differentials. However, when we look at the impact of the statutory minimum wage, we see a great deal of bunching of wages, and not the big increases that some people feared and expected.
Mr Davis
I can call him my right hon. Friend, because we have known each other for 40 years. On the data the Government provide, because this is an incredibly complicated area, there are elements of data that are important but that would not normally be provided. One of them is the marginal withdrawal rate of any scheme that the Government put into effect. Government spokesmen have previously said that people can work their way out of poverty, but it looks as though some of the effects of the national living wage will result in a 93% withdrawal rate, which will mean that people cannot work their way out of poverty. Will he add that to his list of data for the Government to provide?
Frank Field
I was waiting for those on the Treasury Bench to point out the difficulties involved with all such moves. It is important to say that we are not in the hole; the Government are in the hole. We are trying to make suggestions about how to get out of the hole. It is no use the Government turning round to us and saying, “Did you not realise that this would have this effect and that effect?” I know we will not get that from the Exchequer Secretary, but a suitable sense of humility from the Government would be welcome.
Mr David Davis
Does that point not reinforce the requirement for the changes to be made not with another yes/no measure such as a statutory instrument, but through primary legislation?
Frank Field
There would of course be a tendency for any Chancellor to say, “I’m going to make the Lords agree to my new SI.” If it was an SI that this House cheered on its way down to the other place, that might be wise. If it is an SI on which there was still deep disagreement, particularly among Conservative Members, I think it would be very unwise not to bring forward the proposal in primary legislation.
Stephen McPartland
That is a possible solution and I am sure that the Treasury is looking into it. I would like to work with the Treasury on how the mitigation could work, and I hope that it will listen.
Stephen McPartland
I would like to point out that I do not want a job.
Getting back to the people who are on £11,000 a year or thereabouts and who will be particularly punished by the policy as it stands, I am pleased that the Chancellor is now listening. Although I do not agree with what the House of Lords did, I accept that it has brought us to this position. I want the debate to focus not on constitutional issues but on the loss of income for people who have no ability to make it up elsewhere. How can we help those people?
I have talked about the increase in the personal income tax allowance from £11,000 to £12,500, which will cost about £9 billion. The Government spend over £700 billion a year, yet it seems as though if we cannot find this £4.4 billion it will be the end of life as we know it. We all know that that is not the case. There is a way in which the effects can be mitigated.
How do we reform tax credits without punishing those who are trying to do the right thing—those who get up, go to work and try to move their families forward? Some £3 billion of the £4.4 billion saving is down to the change in thresholds that I spoke about—the initial £1,200 cut. It is an incredibly broad instrument that will punish people whether they earn just over £6,420 or £19,000 and it must be mitigated and changed. We have to find a way around that initial £1,200 cut. It is too much and it goes too far.
There is talk of a discretionary hardship fund. I would certainly welcome that for people who are struggling in one way or another. There has been a lot of talk about national insurance. I would like people not to pay any tax on the first £11,000 or £12,000 of their income, but that will not be looked at fully because it would be incredibly expensive. For me, this debate is about how we can help these families.
Basic macroeconomics suggests to me that if we take £4.4 billion off the people who earn the lowest incomes, that is £4.4 billion that will be taken straight out of the economy, because it will be taken out of the pockets of people who would have spent it right away. Every pound that is taken off those people is a pound that is taken out of the shops in their local economies. It just does not make sense.
I do want to work with the Treasury. I can be a prodigal son and be returned to the fold, I am sure.
Mr David Davis (Haltemprice and Howden) (Con)
It is a privilege to speak in this debate. I am one of its co-sponsors, but the entire credit for the idea belongs to the right hon. Member for Birkenhead (Frank Field). He rightly identified the need for a cross-party, less partisan and, as it turns out, non-binding debate to allow everyone properly to explore these issues in the national interest without being fettered by feelings of joining one side or the other in the playground of politics.
The result has, I think, been good. I think this has been the best debate so far of a number on this subject. It falls on us all to be honest about it. This policy was a mistake. One can only think that, because I am sure that nobody in any party would intend deliberately to impoverish the working poor with dependent families—I am afraid I do differentiate in this context.
Mr Davis
Not for the moment.
The problem was compounded by the method employed—the measure was introduced by statutory instrument, and is therefore unamendable—and by a lack of sufficient information. As four or five Members have already pointed out today, there was no proper impact statement. Had the measure been introduced in primary legislation and thus been amendable, and had the Government provided proper information, the measure would not have gone to the House of Lords in its current form; it would have been reformed in this House, and that is what should have happened.
I subscribe to the Government’s wish to balance the books by 2020, which I consider to be an eminently sensible and responsible aim. However, I also subscribe to the view that we need to protect the poor at all costs. The question is, how do we identify what this policy does? I wanted to find some examples that would enable us to assess both sides of the argument—not just the attack, but the Government’s line as well—and I thank the Chancellor’s Parliamentary Private Secretary, my hon. Friend the Member for Kingswood (Chris Skidmore), for being so helpful in that regard. I put some of the points that he made in defence of the policy to the House of Commons Library, and I shall now give a couple of examples that the Library supplied to illustrate its impact.
The worst-case example that I could find was that of a working single parent with two children, who, without the mitigating effects, could be £2,000 a year worse off in virtually every year until 2020. That is an unbelievable sum to take from a family who are already poor. If the family were eligible for mitigation, in particular housing benefit, the sum could be reduced to roughly £700—the fine detail is unreliable—but, again, it would be lost in virtually every one of the next four or five years,
The great battle over the 10% rate when Labour was in power involved sums that were a quarter of that amount. The great battles over the poll tax, which I remember only too well, involved sums of that size. The impact on a family who are already on the poverty line, by definition, is unspeakable and unthinkable. I grew up in a rather poorer era, and I remember children being hungry on Fridays when the bills were just a bit too big, or it was cold and the heating costs were too high.
Guto Bebb
My right hon. Friend touched on the issue of housing benefits mitigating some of the tax credit changes. Is that not another problem with the policy? Someone living in rented accommodation and receiving housing benefit would receive mitigation under the current system, but someone who had bought their own property would not.
Mr Davis
Exactly—and before anyone suggests that a person who owns his or her house is better off, let me say that many people in that category have fallen into it and got out of it later. The idea that someone earning less than £20,000 a year, and with two children to support, should lose £2,000 is simply untenable.
The right hon. Member for Birkenhead suggested that there were four possible strategies, but in my view there are three. The first possibility is that we shift the burden elsewhere. The right hon. Gentleman proposed that we should shift it up the income scale, and Lord Lawson said the same during the debate in the House of Lords. I shall not elaborate on that possibility, because I think that there are better ways.
The second strategy is to find savings elsewhere. Here I strongly disagreed with the right hon. Member for Birkenhead, who almost encouraged the Chancellor to go hunting for the pensioner pound. It will not be today’s pensioner pound; it will be tomorrow’s. I think it would be very unwise to remove the tax benefits of investing in pensions and undermine what we have left of our private pension scheme. I am protected, because virtually all my pension is paid for now; it is the next generation that will have to worry.
Frank Field
I thought that my argument would appeal more to Conservative Members, because it was a free-market argument. When Governments have guaranteed a minimum, it is not our business to put our sticky fingers into other people’s lives and tell them how they should save or not save. Once there is a minimum pension agreement for everyone, how and when people save should not be a question for the House.
Mr Davis
I shall not go too far down that road. Let me simply say that middle-class pensioners are now paying one of the highest effective income tax rates in the country. People who have saved a lot for their pensions and gone above the lifetime allowance must pay 55%. I think we ought to be a bit careful, because if we let the Treasury get at that deferred income, it will take as much as it can.
The third option, which I think is probably the winner—although not by itself; it would have to be modified—is to stage the cuts. I believe that the right hon. Member for Birkenhead lit upon this strategy as well. The cuts would be staged to match movements in the minimum wage and the living wage so that people would not lose.
The Government’s figures for 2020 seem broadly to balance, although they are not perfect. We shall have to work through the mitigation carefully, and that is where the impact statement comes in. Those figures do two things. They protect the working poor, but they also achieve the deficit reduction, which is vital. If we hit the deficit reduction target by 2020—this point was made by my hon. Friend the Member for Stevenage (Stephen McPartland)—each saving of £4 billion a year is not critical. It represents less than 1% of the economy. The really critical issue is how the financial markets see the position. The financial markets do not care about the trajectory from here to 2020; the fact that we get there is good enough. We do not need to worry about the £4 billion a year in between, but we do need to worry about the final outcome. My argument, therefore, is that we should cut the tax credits in step with the minimum wage and the living wage.
The criterion is what is important here. The criterion that the Government must meet is that there should be no losses for the least well off in any of the three intervening years. The poorest, the working poor and their dependants cannot afford to lose one pound. I was never a great fan of the minimum wage, but I was persuaded that it was worthwhile.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Will the right hon. Gentleman give way?
Mr Davis
I am afraid not. I have already taken two interventions, and if I take another, I shall lose time.
One of the things that persuaded me that the minimum wage was worth while was the information in social data that it cut crime. We must not lose sight of the social impact of changes such as this: the distress caused to families, the breaking up of families, and the pushing of families towards food banks and, worse, towards loan sharks and petty crime. We have to think about those things, because there is a cost to them as well.
The Institute for Fiscal Studies told the Work and Pensions Committee, which is chaired by the right hon. Member for Birkenhead, that the Government could hit the 2020 target on a staged route. That is what we should aim for. We can achieve the fiscal target, while still remaining faithful to Conservative “one nation” aims. That, after all, has been the leitmotiv of the last few months for us. If we do that, the Chancellor will have good reason to be proud of his achievement.
Financial Services Authority and Connaught Income Fund
David Davis Excerpts(10 years, 7 months ago)
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Andrea Leadsom
I am grateful to the hon. Gentleman for making that point, which I will certainly look into further. Those two organisations belong to the same parent company, but are in fact different subsidiaries. As he might be aware, Government contracts are awarded in line with EU procurement rules.
In addition to the work by the FCA, I can also confirm that other law enforcement agencies are looking into this matter. I will urge the police to consider the case very carefully. I know that Members are interested to hear whether the police are looking at this matter, and I can confirm that they are. The FCA has been working closely with law enforcement agencies to identify and pursue avenues that will yield the best outcome for investors. It continues to look into the matter, and its work is very much ongoing. In the meantime, it is encouraging any investors who believe they might have been mis-sold a product to contact their independent financial adviser. It has disclosed information to the police and the administrators of the firms involved to help them with their inquiries.
A number of points were made during the debate, and I will try to address them. I was asked whether Capita Financial Managers Ltd was negligent in its operation of the fund and whether it breached its obligations under the Financial Services and Markets Act 2000, the operator agreement or its duty of care to consumers. The Government and the FCA take those allegations very seriously, and the FCA is carrying out its own inquiries, but the requirements on the operator of an unregulated fund are limited under FCA rules. I was asked whether the FCA has made a restitution order against Capita. I stress that the FCA is considering all the different avenues by which those who have suffered could obtain compensation. I was asked about the information provided by George Patellis.
Mr David Davis (Haltemprice and Howden) (Con)
In a number of these cases, some involving Capita and some involving others, it has been clear that the financial structure of the company has been set up with limited liability subsidiaries to prevent the compensation demands from going back to the parent. Will she ask the FCA to look at the acceptability of that approach, with a view to future concerns like these? It seems to me that it is a way for the company to get the benefit from a reputation, without meeting the liability that goes with it.
Andrea Leadsom
I completely agree. There are questions to be asked about how this apparent ability to avoid culpability has been allowed, whether steps can be taken to ensure it cannot happen again and whether there are compensation issues. The FCA is looking into all those matters, but I will take up the point my right hon. Friend makes.
I was just talking about the action the FSA took when it received information from George Patellis. The FSA met with other parties to discuss his concerns, and as a result of those discussions, it became seriously concerned about the financial position of Tiuta plc. Having considered the regulatory options in respect of Tiuta plc, in May 2011 a requirement was added to the permission of the firm that it should cease any further regulated mortgage lending. In the same month, the FSA issued the consumer alert on the fund. A further alert was issued to financial advisers asking them to consider the suitability of advice they had given to consumers who had invested in the fund and to take action accordingly. In light of the fact that very little of Tiuta’s business was regulated, the FSA considered those steps to be appropriate and proportionate at the time. I certainly take on board the point made by my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) about whether that was, with hindsight, acceptable.
On the other questions I was asked, Capita issued an information memorandum that consumers believe to be fraudulent, as the fund did not operate as it said it would. I was asked what action the FCA is taking against Capita. As I said, the FCA is considering all avenues by which investors might be compensated. Unfortunately, I cannot comment on that further at this time. One point I make, because the question has been implied, is that IFAs are not supposed to sell unregulated investment schemes to retail investors. The circumstances in which unregulated schemes can be promoted to consumers are generally restricted to certain types of consumers, such as sophisticated investors and high net worth individuals, for whom the products are likely to be suitable. The FCA has brought in new rules, banning the promotion of unregulated collective investment schemes to ordinary retail consumers. IFAs have the responsibility to promote the fund only to eligible individuals. That is an important point.
My hon. Friend the Member for Hexham (Guy Opperman) asked whether the police are involved. I confirm that they are. A question was asked about the deadlines for issuing complaints. The fund was incepted in June and July 2008 and suspended in March 2012. Action can be taken either six years from the cause of action, which will start to expire from June 2014—all those investors who invested in the early days of the fund need to take careful advice if they wish to make a complaint about that product, because the deadline is fast approaching—or three years from the date of knowledge of the cause of action, which is likely to expire in March 2015 or, at the latest, September 2015. I urge those consumers who feel that they were mis-sold the fund to look carefully at these deadlines. If the case goes to court, it depends on those courses of action. Insolvency reviews of those companies will be reporting in the near future. We do not have a more specific date for that.
Once again, I would like to thank sincerely my hon. Friend the Member for Vale of Glamorgan for instigating this debate on this important case, which is upsetting for many investors. I hope I have reassured him that the Government are fully aware of his concerns and that we take this issue seriously. We are absolutely determined that our financial services sector serves consumers in a right and fair way, and that investors receive the protections they need.
Transferable Tax Allowances
David Davis Excerpts(12 years ago)
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Mr Jackson
I could not have put it better myself. My hon. Friend’s intervention allows me to pay warm tribute to his fantastic work as children’s Minister. I look forward to the day that he is back in government, sharing his plethora of talents with the nation, but I know that he will do a fantastic job on the Back Benches for his constituents and the country.
I return to my argument about polling. My right hon. Friend the Secretary of State for Work and Pensions said during marriage week in February 2011:
“When asked about their aspirations, young people are very clear: three quarters of those under 35 who are currently in cohabiting relationships want to get married, and some 90% of young people aspire to marriage. So perhaps the question we should be asking ourselves is this: if people from the youngest age aspire to make such a commitment in their lives, what stops them doing so? Government cannot and should not try to lecture people or push them on this matter, but it is quite legitimate to ensure people have the opportunity to achieve their aspirations.”
I must, in addressing this point, congratulate the Secretary of State on bringing in the long-overdue reform that our benefits system requires and on introducing universal credit, which takes important steps to erode the couple penalty. However, the couple penalty remains such that, even with a fully transferable allowance, it would still be in place for all couples, apart from those without children. In other words, where one is dealing with one-earner married couples with children, the provision of a fully transferable allowance would not even create a level playing field, let alone any incentive to marry. It would simply erode the disincentive not to marry.
In the current context, where we make it harder for people to marry in this country than it is across the EU on average, the lack of support for marriage gives rise to family breakdown, not primarily through the breakdown of existing marriages, but by making marriage no more fiscally attractive than cohabitation, despite requiring a much higher and much more costly level of commitment than cohabitation. In such a context, cohabiting, which, as we have seen, is far less stable, inevitably becomes more attractive.
“Family breakdown in the UK”, a publication from December 2010, made the point that
“the problem is not divorce. While marriage accounts for 54% of births, the failure of marriages—i.e. divorce—accounts for only 20% of break-ups and 14% of the costs of family breakdown, amongst all families with children under five. Unmarried families account for 80% of the break-ups and 86% of the costs.”
It subsequently stated:
“These new statistics demonstrate dramatically that family breakdown is a huge and growing problem and that the main driver of family breakdown is the collapse of unmarried families. A failure to acknowledge these key points will lead to the inevitable failure of any government policy aimed at strengthening families. Witness the continued rise of lone parenthood since the 1980s at a time while divorce rates remained stable or declined.”
The arguments for a transferable allowance for married couples, defined narrowly in terms of the benefits of marriage, are more than enough to justify the change, but there are other compelling arguments for introducing transferable allowances: first, to make the tax system fairer by reducing the tax burden on one-earner families with modest incomes; and secondly, to make work pay, which is even more important.
In the first instance, it is not fair to place a tax burden on the income of one-earner families that is 42% greater than the OECD average. Crucially, most one-earner families who would benefit from a transferable allowance are in the poorer half of the population. The Institute for Fiscal Studies published figures shortly before the election showing that the transferable allowance proposals in our manifesto would have overwhelmingly benefited families in the poorer half of the population. In contrast, the IFS said that raising the tax threshold—the implementation of which has been prioritised to date in order to please the Liberal Democrats—would benefit mainly taxpayers in the top half of the population.
When independent taxation was introduced in 1990, it was realised that, unless special provision was made for families, they would lose out. As Nigel Lawson recognised at the time, the logical solution was to give a non-earner in a one-earner household the right to transfer their unused personal allowance to their spouse. He was not able to do that and as a compromise, the married couples allowance and the additional personal allowance were introduced. It is now clear that, without those allowances or transferable allowances, one-income married couples, most of whom are relatively poor, were bound to end up bearing an increasing share of the tax burden. That is what has happened, generating a completely unfair situation.
A few years ago, the Treasury published figures showing that, in 2009-10, a single taxpayer on three quarters of the median wage—approximately £20,000—was paying 21% less tax than in 1990. A single-earner married couple were paying 11% more tax. Under the coalition agreement, we are putting considerable resources into raising the tax threshold. For a single person under 65, the tax threshold this year is 170% higher than it was in 1990. However, the tax threshold for a one-earner married couple has risen by only 71%, so in real terms it is lower than it was in 1990. I urge the Minister to examine those figures carefully and to draw them to the Chancellor’s attention.
Mr David Davis (Haltemprice and Howden) (Con)
I commend my hon. Friend on his compelling analysis. Listening to him reminded me of something that my mother—my single mother—said about 40 years ago. She used an old phrase, “When money troubles come in the door, love goes out the window”, which is a good measure of the stresses that are put on families by financial pressures. Does he agree that there is no more important time than now for this issue, when the least well-off in our society are facing job and cost pressures as never before, which will put pressures on marriage as never before?
Mr Jackson
My right hon. Friend is bang on the money. Although such tax changes would be costly in the short term, the benefits for society would be incalculable, were we to enact them, which I hope we will in the Budget next March.
In considering the fairness arguments, it is also important to deal with the misguided claim made by some that, rather than helping one-earner families, the answer is to make them two-earner families. That logic is the occasion of great unfairness, because more often than not that option is not available. The latest DWP figures demonstrate that in 2.2 million households one member is in full-time work and the other is not earning; that 1.2 million, or 53%, of those households contain children; that in 700,000, or 58%, of those households with children there is a youngest child who is under five; and that a further 300,000, or 21%, have a youngest child between the ages of five and 10. Some 61% of all one-earner couple families have a young child under five, someone who is disabled or someone with caring responsibilities. Many of the remainder are likely to be doing voluntary work. It is clear that the majority of one-earner families are one-earners out of necessity rather than choice.
Professional Standards in the Banking Industry
David Davis Excerpts(12 years, 5 months ago)
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Mr David Davis (Haltemprice and Howden) (Con)
I will start by declaring an interest. When I was the chairman of the Future of Banking Commission it was funded by the Consumer Association, which might have influenced my views on this matter.
May I start by commending the Chairman of the Treasury Committee, my hon. Friend the Member for Chichester (Mr Tyrie), for the tone of his speech? I agree that we should not let the smoke of political battle in this place come between us and rescuing one of the most important industries in the country. Members on both sides of the House should bear that point in mind.
The title of the debate and of both motions refers to the professional conduct of the business of banking. This is not just about LIBOR and the LIBOR scandal. If it stopped there, we could deal with it through two actions: a change to the procedure to make it transaction-based and audited, and the criminal prosecution of everybody involved. That would resolve the issue once and for all, but that is not as far as this goes.
We all know that the practice of banking in this country has become perverted by huge incentives, which have led bankers to behave in ways that do not serve the economic interests of the country or our national interests—indeed, they have had the opposite impact. Although the Chairman of the Select Committee rightly said that the inquiry would need to be tightly drawn, it will nevertheless go pretty far. I am quite certain, for example, that even if it is confined to banking, things such as the derivatives market will undergo a lot of investigation in the course of the Committee’s investigation. We must understand that this issue is much bigger than just LIBOR.
Secondly, we should take on board the fact that we are debating the superstructure of the inquiry when we should perhaps be talking about its engine room. What matters are the inquiry’s powers, whichever we have, and they do not need to be so different for a judicial inquiry and for a Select Committee inquiry. I am afraid that the hon. Member for Eltham (Clive Efford) was just plumb wrong about the status of Select Committees in this House and their powers. I speak as a past Public Accounts Committee Chairman who summoned bankers, rail operators, pharmacy companies and all sorts of companies that did not want to come, to give their documents or to give evidence. We did not take evidence on oath, but they did not want to give evidence to the Committee and were made to do so.
Bill Esterson
I want to ask the right hon. Gentleman about the relative skills of a parliamentary inquiry and a judge-led inquiry. Some people in this House have very deep skills, but not everybody does, but a judge-led inquiry would have the necessary skills to carry out the kind of deep inquiry that he rightly says is needed. Will he comment on that?
Mr Davis
Absolutely. The Select Committee on Culture, Media and Sport and its inability to reach a unanimous view has been held up as an example. In my entire time as PAC Chairman—and, I think, that of all the subsequent Chairmen—there was never anything other than a unanimous outcome, because of the factual basis of the inquiries. That is what this inquiry must have. It must rest on the facts, which is why the Committee will need forensic accountants, lawyers and investigating teams. It will, I think, need one change in the law. It will need protection for whistleblowers, as we do not have that, but the same would be true of a judge-led inquiry. That would open the inquiry up to its full extent.
Let me make one more point about judge-led inquiries—it goes back to the Leveson inquiry and is slightly embarrassing for those on my side of the House, but I shall make it anyway. Judge-led inquiries cannot work around a criminal investigation without paying attention to it, and that can cramp what they do. If Members did not see it, I recommend that they look back at the evidence given by Andy Coulson and Rebekah Brooks, both of whom were facing potential criminal charges. Those were wholly useless days at the Leveson inquiry because the QC involved had to tiptoe around the issues. That might apply to almost every witness who appears before this inquiry, thanks to the issues facing it, so we must bear it in mind that we cannot solve that with a judge. We will solve it through a different mechanism that either approach would have to use and that, frankly, would be in camera hearings with those witnesses. Although the conclusion will have to be wide, open, wide ranging, honest and transparent, that might not be possible for the evidence-taking.
Although a House inquiry will be faster than a judicial inquiry—there is no doubt about that, for the reasons the Chancellor has given—there is the simple problem that any inquiry will have trouble completing by Christmas.
Alison McGovern (Wirral South) (Lab)
Will the right hon. Gentleman give way?
Mr Davis
I have taken one intervention and I cannot take any more.
Whatever the inquiry, it will take a long time, because it is a big issue, and it has to be got right. If it is got wrong and the inquiry is handled badly, and it turns out not to be well managed, it will do enormous damage to the City of London and the entire economy. If it is got right and it leaves the City of London with a reputation for clean and honest dealing it could be the single most important thing that happens under this Government.
Static Caravans (VAT)
David Davis Excerpts(12 years, 7 months ago)
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Mr Stuart
My hon. Friend is absolutely right.
I have good news, as I am sure the Minister will confirm later, in that the Government have listened to us. Hon. Friends on both sides of the House who represent East Yorkshire constituencies came together immediately after the Budget and we met the manufacturers. What we heard from them was chilling. The industry employs thousands in the manufacturing sector and tens of thousands in the parks. The Government estimate a 30% drop in demand, and that can only mean that thousands of jobs will be lost and that an industry that is struggling to recover from the credit crunch will be knocked backwards.
Mr David Davis (Haltemprice and Howden) (Con)
I congratulate my hon. Friend on securing this important debate. He has raised the central point. The aim of the Budget was, quite rightly, to encourage growth and jobs and to pay off the deficit. Is it not the case, however, that this particular measure is likely to destroy jobs and raise less money than we currently raise? It would therefore meet none of those objectives, and the Treasury ought to retract the measure in total.
Mr Stuart
My right hon. Friend is absolutely right. He and I have discussed this matter with the Chancellor, who has spoken to us about it separately on a number of other occasions. We also went in a group of 11 colleagues to see the Exchequer Secretary to the Treasury, my hon. Friend the Member for South West Hertfordshire (Mr Gauke). The reason for our only being 11 was that we did not think that there would be room for more around the table; it was not due to lack of interest. There is enormous concern about this issue.
I am delighted to say that, when we debated the matter last week, the Minister agreed to extend the consultation. The Chancellor confirmed that it was a genuine consultation and that the Government would look at the evidence from us and from those out there in the industry—everyone should get involved in that—and would be prepared to look at the matter in the light of the impact that the measure will have.
Finance (No. 4) Bill
David Davis Excerpts(12 years, 8 months ago)
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Mr Bradshaw
My hon. Friend is exactly right. As I said, the grant already covers only less than half of the cost of repairs, and the £5 million that is being offered to extend it to alterations covers only a quarter of the likely annual cost of those alterations.
A number of churches and cathedrals have already put on hold schemes that were planned or under way. My own cathedral in Exeter faces having to raise several hundred thousand pounds more for its exciting cloister project. The wife of the dean of Wakefield cathedral, which faces an extra £200,000 of costs for alterations, has famously composed a protest song about the VAT hike. The lovely little church in the small Herefordshire village of Llangarron, at which I attended Easter Eucharist, will have to find an extra £60,000 for a project that has been in the pipeline for seven years.
As 26 deans of cathedrals wrote in an unprecedented letter to The Sunday Times on Sunday, this change will seriously jeopardise the sustainability of many of our great buildings, not only for present-day use but for that of future generations. I urge the Government to think again on this very important matter, and I hope, Ms Primarolo, that you will help to facilitate the expression of the will of the House on it shortly.
Mr David Davis (Haltemprice and Howden) (Con)
I want to associate myself with the comments made by my right hon. Friend the Member for East Yorkshire (Mr Knight), by my hon. Friend the Member for Beverley and Holderness (Mr Stuart), and by my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson); I embarrass him again by calling him that. The proposal for VAT on static caravans will have a seriously deleterious effect on all of east Yorkshire, including Hull, dramatically cutting employment in the area at a time when we are trying to encourage growth and to balance the books. This proposal will do neither; in fact, it will reverse both.
This is a Finance Bill; the aim is to raise money. The latest estimates of the employment impact of this measure are that it will result in 4,000 to 7,500 job losses, of which 1,500 to 2,000 will be in the vicinity of our constituencies. The effect of that in financial terms is pretty straightforward to calculate. The Government estimate that they will raise £30 million to £40 million in VAT from this change. They will lose between £32 million and £65 million in lost national insurance, lost inland revenue, and extra welfare costs. It will therefore do the opposite of what the Budget is attempting to do. When I put that point to the Treasury, people said to me: “We don’t calculate things in that way.” That might sound silly, but there is a substantive point behind it—as I am sure that the shadow Chancellor, who is smiling, will know. Usually when one introduces a tax change that leads to job losses, people will, in due course, find another job. In east Yorkshire, two of the three Hull seats have dramatically high unemployment levels already, and the ratio of jobs available to unemployed people seeking them is one of the highest in the country. As a result, the resulting unemployment will not be short term but is likely to last for more than five years. We should calculate the effects of the proposal in this way because, for the foreseeable future, it will cost more than it will raise.
Diana Johnson
The right hon. Gentleman is making an excellent speech. Has he seen today’s report that 43 people in my constituency are chasing every vacancy? I set that figure alongside the comments that he is making.
Mr Davis
The hon. Lady makes a powerful point that I am not unfamiliar with. We have all been in similar battles over job losses at BAE in Brough and, in my constituency, job losses to the tune of 1,700 have been announced in the past six months.
This proposal does not stand up, on the Government’s own criteria. Accordingly, I support new clause 6 and will vote for it when it is put to the test.
Albert Owen
It is a pleasure to follow the right hon. Member for Haltemprice and Howden (Mr Davis). Although I agree with the contributions of Members on both sides of the House on the pasty tax and the church buildings tax, I will concentrate on the caravan issue.
As has been said eloquently by the previous speaker and my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), the exemption was put in place for good reason. It has been left as it is because previous Chancellors have understood its importance, not only to manufacturing but to tourism. Those two important industries will be damaged if this proposal goes forward. I do not have the confidence of some Members who have spoken that the Chancellor will extend the consultation and that all things will be rosy. The effect of the proposal will be catastrophic for tourism across the United Kingdom.
Amendment of the Law
David Davis Excerpts(12 years, 8 months ago)
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Danny Alexander
My right hon. Friend is, as usual, absolutely spot on. From next month, pensioners will see the largest ever increase in the basic state pension, because we have put in place the triple lock promised in our manifesto to ensure that never again will pensioners be awarded derisory increases of the sort that Labour brought us. Thanks to my hon. Friend the Pensions Minister, who is in his place, we will also be introducing, as the Chancellor announced, the single-tier pension at £140 or thereabouts a week, so that new pensioners will no longer be trapped in the means-testing system that Labour left them in for so long.
Danny Alexander
The full depths of the economic incompetence of the Labour party have been revealed in the course of the debate. [Interruption.] They are opposed to most of our spending reductions. They are opposed to many of the revenue-raising measures in the Budget. They have opposed tax cuts for business. I heard from the deputy Leader of the Opposition that they are opposed to our cap on unlimited tax reliefs for the wealthy. We know what Labour’s economic plan for this country would be—income taxes up, business taxes up, borrowing up, debt up, and interest rates and mortgage rates up. The only thing that would go down under the Labour party would be the British economy. It may seem astonishing that the party that got Britain into the worst economic crisis for a generation now wants to put us right back into the mess that this coalition Government are trying to get the country out of. The Labour party of the 1970s and 1980s is back and I hope the British public have been watching.
Danny Alexander
There we see it again—a party in denial about the mess it got this country into. [Interruption.] I know the hon. Gentleman is a rational man and has played a great role in Scottish politics, but he ought to have a bit more sense than to pretend that his party has no responsibility whatsoever.
Danny Alexander
The Budget is fair. It raises additional taxes from the wealthiest and asks the wealthiest in this country to pay more. That is why, for example, we are capping—[Interruption.]
Danny Alexander
You are quite right, Mr Speaker. I could not hear my right hon. Friend, but I am happy to give way to him.
Mr Davis
I will start by saying that I entirely support the growth orientation of the Budget, which is much better than everything we have heard for the past 10 years, but I hope my right hon. Friend will forgive me for raising a narrow issue, because 90% of the effect of one of his tax changes falls in and around my constituency—the VAT change on the production of static caravans. That will have an impact which, he says in his own Red Book, is £40 million positive, but the cost in unemployment will be £45 million negative. Will he review this issue?
Danny Alexander
My right hon. Friend will know that all these measures are consulted on, but I think the measure is appropriate. As he knows, mobile caravans are subject to VAT, but static caravans are not. Static caravans that are used for residential purposes, which people make their main home, will continue not to be subject to VAT. That may be some comfort to him.
I shall draw my remarks to a close by referring to the measures in the Budget that deal with the wealthiest in society. We have capped reliefs on income tax which the wealthy exploit. We have capped benefits; now we are capping reliefs. It is, if you like, a tycoon tax. We have introduced a new stamp duty land tax at the rate of 7% on properties worth more than £2 million. We are increasing the stamp duty charge to 15% for residential properties over £2 million and we are consulting on a new annual charge for people who continue to envelope their properties—a mansion tax on tax dodgers, if you like.
This is a fair Budget. It is for the millions, not for millionaires, a Budget for the many, not the few, and I commend it to the House.
Question put.
Eurozone Crisis
David Davis Excerpts(13 years, 1 month ago)
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Mr Baron
My hon. Friend is absolutely right. If he needs confirmation, I suggest that he look at the front page of City A.M., where he will see what Angela Merkel has said about political union. There is a political deficit in the eurozone at the moment, which is why Governments are being appointed and not elected in Greece and Italy. That is a consequence of the fact that the eurozone and the EU are hellbent on political union at the cost of democracy and getting the people’s consent.
Mr David Davis (Haltemprice and Howden) (Con)
I congratulate my hon. Friend on a formidably cogent speech. Sadly, I will not be here to hear the Minister’s attempt to answer it. The democratic deficit that I am worried about is the one in this country. We are having this debate in Westminster Hall. Whatever its outcome, it will not change what happens in the IMF. Is there any way that Parliament can have a say on British taxpayers’ money being used in pursuit of an end that is against their interests?
Mr Baron
My right hon. Friend makes a good point. By raising such issues in Parliament and in collaboration with other like-minded individuals, we can hope that we can force the Government to think again and to look at the various mechanisms at our disposal in the House. If we do not raise these points in our Chambers, the Government will not answer the questions that need to be put to them. My right hon. Friend is right; we will not change anything today. The hope is that together we can force the Government to think again.
Let me go back to why the IMF is getting involved at all. What makes the situation even worse is that the eurozone has resources that could do much more to help. For example, the Bundesbank has reserves of £180 billion, £130 billion of which is in gold, and gold is going up in price. That is in stark contrast to our country and the action of the previous Government, who sold gold at near the bottom of the market.
I agree with the point made by my hon. Friend the Member for Clacton about why we supported Christine Lagarde, the former French Finance Minister, being put in charge of the IMF. It is like putting the debtor in charge of the debtors’ prison. Christine Lagarde has admitted on record that the bail-out arrangements broke the rules, but she said that that could be justified because we all had to rally round to save the euro, which itself is a political objective. That is complete nonsense and it does not augur well for the future, and the Government taking confidence in the fact that the IMF has signed off the packages does not augur well either. The IMF signed off the initial Greek package and look at what happened then: the situation went from bad to worse. I suggest that it will get worse still. Having some sort of blind confidence in the IMF signing off the packages is basically abdicating one’s responsibilities of Government to question what is going on. I do not see that detailed questioning happening at the moment.
I suggest that the Government’s line on this issue—their approach to the eurozone crisis—is symptomatic of their flawed approach generally to the euro. The Government seem to have fallen in behind the French and Germans in this cry that somehow we must save the euro. I suggest to the Minister that that is economic clap-trap. Binding divergent economies into a single currency without full fiscal union was, and remains, a massive mistake. Similar thinking warned us of the perils of exiting the exchange rate mechanism, yet look what happened then: almost to the day that we exited the ERM, our recovery started and it was a very strong recovery.
I suggest to the Minister that the sky will not fall in if the euro breaks up. We will still have, by and large, a free market, although I think that it could be improved, and we will still have consumers demanding goods. If anything, by not trying to save the euro, we could help to stimulate demand, because by trying to save the euro we are cutting off one of the key ways to improve competitiveness—devaluation. By cutting off that option, we are making the austerity packages worse; we have to add to the austerity packages because the countries in need do not have the option of devaluation.
Saving the euro is making matters worse, yet the Government are silent on this issue. They have shown no leadership. They have fallen behind the line that saving the euro is everything—it is not. I suggest that the Minister and the Government look at the experiences of Norway and Switzerland, which have their own currencies and free trade agreements with the EU. Those countries are doing very well. Saving the euro should not be the ultimate goal, because it is making the austerity packages worse.
Oral Answers to Questions
David Davis Excerpts(13 years, 10 months ago)
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Mr Osborne
I am reminded of the speech in the City made by the right hon. Member for Morley and Outwood (Ed Balls), when he said in 2006:
“In my first speech as City Minister at Bloomberg in London, I argued that London’s success has been based on…light-touch…regulation”.
He also said that he hoped the City would take comfort from the way the Labour Government had responded to new risks and to events. That is the Bloomberg speech that he likes to forget.
Mr David Davis (Haltemprice and Howden) (Con)
There is a lot of public disquiet about alleged enormous sweetheart deals done with major public companies—Vodafone and others—in the last five years. Three or four months ago, I tabled a question asking how many of these deals had been done, costing more than £100 million at a time. The answer I received was that the information requested was “not readily available” and could be provided “only at disproportionate cost”. I received a similar blocking answer this morning. When is the Minister going to tell the House what HMRC has been up to?
Mr Gauke
The National Audit Office has investigated and examined that as a matter of course. There is no question of sweetheart deals. The reality is that HMRC is seeking to recover as much tax as is due. That is what it has done in a number of cases. I am not going to comment on individual cases. That is a matter of confidentiality; I do not get to see the details. None the less, I think wild allegations have been made against HMRC, for which there is little or no evidence.
European Union Economic Governance
David Davis Excerpts(14 years, 1 month ago)
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Mr Hoban
Although strong fiscal frameworks are vital, we also believe that fiscal sovereignty is crucial, and that is why the frameworks—the mandates, mechanisms and institutions—should be decided by national Governments and not by European legislation. That position is reflected in the taskforce report, and it is the position that we will adopt in discussions with the Commission.