Oral Answers to Questions

David Gauke Excerpts

Tuesday 14th May 2013 Commons Chamber

[Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)]

Q3. What estimate he has made of the value of the reduction in the additional rate of income tax to 45% to a person earning £1 million a year.

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

The cost of reducing the additional rate of income tax to 45% is estimated at around £100 million per year. That is set out in table 2.2 of Budget 2013. We have not broken down the impacts of income ranges because a significant behavioural response is associated with the additional rate of income tax. The behavioural response is estimated in aggregate and reflected in the costing.

[Mr McCann]

I am grateful for the Minister’s answer, but I can give him the answer to the question I asked: millionaires will get a cut of £42,000 under this Government’s policies. Does he think it right that those in receipt of tax credits are making a bigger financial contribution to the country’s coffers than millionaires?

[Mr Gauke]

Of course that is not true. As the Institute for Fiscal Studies has shown, the biggest contribution to reducing the deficit is coming from the wealthiest 10%. The hon. Gentleman might also wish to ask himself why, when his party was in office, it had a top rate of income tax of 40% for all but 36 days out of 4,758.

[Jacob Rees-Mogg (North East Somerset) (Con)]

The Minister will be aware that in 1978-79 the top 1% of taxpayers paid only 11% of total income tax. That is now nearer 30%, which shows that the Laffer curve works and we are better off with lower rates. May I therefore encourage the Government to cut rates further?

[Mr Gauke]

I note my hon. Friend’s representation. It is worth pointing out that in 2010-11, the year in which the Government came into office, the top 1% paid 25% of income tax receipts: this year it is forecast that the top 1% will pay almost 30% of income tax receipts.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Government should listen to people such as the deputy chair of Harlow Conservatives, who has said:

“The voters are disillusioned with Cameron…They don’t like the fact that he didn’t keep the 50p tax. That has really grated and people feel here that he is not working for them, he is working for his friends.”

No wonder the Conservatives in Harlow lost so many seats to Labour last month. Will the Minister explain again, for the people of Harlow and elsewhere, just why the Government have prioritised a tax cut for those at the top while ordinary taxpayers are struggling?

[Mr Gauke]

This is the Government who have raised the personal allowance that has taken millions of people out of income tax and resulted in tax cuts for some 26 million people. A tax rate that does not bring in revenue is a flawed tax rate, which I assume is why, despite everything we hear from the Opposition, they will not commit to returning to a 50p rate of income tax. They know that it does not raise revenue.

[Charlie Elphicke (Dover) (Con)]

Q25. Can the Minister confirm whether, all things considered, the richest people in this country are paying a greater or lesser proportion of their wealth in tax than they were under the previous Government?

[Mr Gauke]

They are paying a greater proportion of their income. If we look at what the Government have done across the board, including stamp duty, capital gains tax and the cap on reliefs, we see we are ensuring that the wealthy are paying more. The reality is that there are better ways to ensure that than the 50p rate of income tax, which was uncompetitive and failed to raise revenue.

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

Tax evasion and tax avoidance undermine public revenues and the public’s confidence in the fairness and effectiveness of our tax system. The UK is pursuing action on both fronts through the presidency of the G8. We are promoting the development of new global standards on automatic information exchange and increased transparency of company ownership in order to better tackle tax evasion. We are seeking strong endorsement through the G8 of the importance of the work of the G20 and the OECD on tackling avoidance by multinationals.

[Andrew Stunell]

I thank the Minister for his reply. Does he think that it is now time to take a second look at the USA’s experience and its Foreign Account Tax Compliance Act to tackle the question of international tax avoidance?

[Mr Gauke]

My right hon. Friend makes an important point; indeed, we are doing that. We have signed an agreement with the US to implement FATCA as the new standard in tax transparency, and we are promoting that type of information around the world. We have reached agreements with the overseas territories and the Crown dependencies, while France, Germany, Italy, Spain and the UK have all agreed to exchange information based on the FATCA standard. That is very much the approach that we are taking in the G7, G8 and G20, and we have made remarkable progress so far.

[Stephen Gilbert]

Does the Minister recognise that, as well as capacity building in their domestic authorities, developing countries need better access to international tax information? Can that be part of the negotiations with the G8?

[Mr Gauke]

My hon. Friend makes an important point. It is important that we have better information that we can provide to developing countries. Whether we do that by exchanging information along the FATCA lines or by encouraging better global reporting to tax authorities by multinational companies, that information will prove very helpful for both developed and developing countries.

[John Cryer (Leyton and Wanstead) (Lab)]

The Minister will be aware that some employers are increasingly using payroll companies and umbrella companies to avoid paying tax and national insurance. What can the Government do to address that tendency?

[Mr Gauke]

We are taking measures to address this: the hon. Gentleman will be aware of the action that we took in the last Budget to close the loophole relating to offshore companies. We of course want a tax system that ensures that the tax is consistent with the economic reality, and that is what we intend to have.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

Do the Government believe that cutting £2 billion from HMRC’s budget will help or hinder its ability properly to address tax evasion and tax avoidance in this country?

[Mr Gauke]

This is the Government who have found £1 billion to support HMRC in dealing with tax evasion and tax avoidance. This is the Government who have provided resources in that area. Yes, we can find efficiency savings in HMRC—just as the previous Government did, to be fair—but we are putting more into those parts of HMRC that get the money in. We are making dramatic progress, with HMRC’s yield hitting record levels.

[Katy Clark (North Ayrshire and Arran) (Lab)]

Q12. If he will introduce a statutory code of conduct for the banking industry.

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[Graham Jones (Hyndburn) (Lab)]

T7. The Government’s housing policy focuses on new build which is exempt from VAT, but in my constituency one in 13 properties is empty, and building companies tell me that they rely on refurbishments which are not VAT-exempt. They are really struggling. Do the Government recognise that building companies in areas such as mine are being penalised in that way?

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

The difficulty is that if we were to reduce VAT on repairs and refurbishments, that would have a substantial fiscal cost. It would result in more borrowing and that is not something we can afford because of the circumstances we were left.

[Richard Graham (Gloucester) (Con)]

We now know there was no triple-dip recession and almost certainly no double-dip recession either. Of course there is no room for complacency, which is why I am holding my seventh jobs fair in the centre of Gloucester this Thursday. Does the Minister agree that it is time for the party of doom and gloom on the Opposition Benches to recognise that the economy is beginning to recover and that it is time to support British business—especially things made in Gloucester?

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[Jeremy Lefroy (Stafford) (Con)]

Research and development is key to current and future growth, and I welcome the Government’s support for it. What measures are the Government taking to ensure that we rise to the level of our major competitors on research and development?

[Mr Gauke]

One measure that I know my hon. Friend will be well aware of was the reform of research and development tax credits. We are making those more generous and bringing in a new above-the-line R and D tax credit. That is making the UK increasingly competitive in this sector.

[Naomi Long (Belfast East) (Alliance)]

Developing countries need assistance from the west with collecting the tax due to them from multinational companies. How will the Government use their presidency of the G8 to ensure specifically that the strengthening of disclosure standards takes place multinationally?

[Mr Gauke]

The hon. Lady is right to raise this issue, which we touched on earlier. One of our priorities for the G8 presidency is to bring forward measures on tax evasion and tax avoidance. It is worth pointing out what the Prime Minister said in an article in The Wall Street Journal yesterday; he wants to encourage

“better global reporting to tax authorities in both the developed and developing world”.

That could make a big difference.

[Mr Brooks Newmark (Braintree) (Con)]

Will the Minister join me in supporting Lord Young’s report on growing micro-businesses, which was released yesterday? It suggests a new package of support for starting and growing small businesses.

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[Mark Durkan (Foyle) (SDLP)]

Would a meaningful G8 outcome on tax evasion involve the Chancellor’s revisiting the controlled foreign company rules that he introduced? They incentivise the use of tax havens and deny revenue to the Exchequer here and, more so, to developing countries.

[Mr Gauke]

The CFC regime is designed to protect revenue for the UK, but we can do a great deal to help developing countries through exchange of information, new global standards and capacity building. The Government are doing a huge amount on those fronts.

[Charlie Elphicke (Dover) (Con)]

If the Government were to go out and borrow £28 billion as some suggest, what would the effect be on fiscal stability and interest rates for homeowners?