David Gauke
Main Page: David Gauke (Independent - South West Hertfordshire)Department Debates - View all David Gauke's debates with the HM Treasury
(14 years, 1 month ago)
Commons Chamber2. What assessment he has made of the likely effect of the proposed increase in the standard rate of value added tax on the retail sector in Wales.
A full impact assessment was published on Budget day. Although it focused on the compliance costs for all businesses, it had an emphasis on retailers, as it acknowledged that they were expected to incur higher compliance costs. However, having experienced two VAT changes in the previous two years, retailers should now be familiar with the necessary system and process changes.
I am sorry but that was a really complacent answer. Much of the retail sector in my constituency is very dependent on the business that comes in through the door from pensioners. There are 13,000 of them in the Rhondda, a growing number, and they are the people who will be very heavily hit by the VAT increase, because they will have less discretionary income to spend on gifts and the things that make life worth living. Will the hon. Gentleman look specifically at how the retail sector in more distant areas—outside the main city centres—can be supported?
The fact is that we had to raise VAT because there was no money left. I do not know whether the hon. Gentleman is proposing that we should have cut spending by even more, but I do not think that that would have a lot of support on his Benches or on ours. After all, our predecessors looked very closely at raising VAT and would have done so had the previous Prime Minister not vetoed it.
What would the people of Wales make of the fact that the previous Government were going to raise VAT to 19%? Would they not surely conclude that this was going to happen under any Government elected in May 2010 because of the mess made by the last one?
When the Chancellor rose to give us his Budget a few weeks ago, he promised that he would give it to us straight. He somehow forgot to tell us that Britain’s pensioners may face an £8 billion VAT bill over the course of this Parliament. Given that neither Government party has a mandate for introducing VAT increases, does the Minister agree that, at the very least, this House deserves a report on the impact of VAT on pensioners before the increase comes into effect?
We have provided more detail of the distributional impact of this VAT rise than the previous Government ever did or would have done had they increased VAT last December. The fact is that this Chancellor—like this Treasury team—has the courage of his convictions to do the right thing, unlike his predecessors, who neither pursued the policies they believed in nor had a leader they believed in.
3. What recent representations he has received on the level of the UK national debt relative to that of other countries; and if he will make a statement.
6. What representations he has received from employers in the north-west on relief from national insurance contributions for new businesses; and if he will make a statement.
The holiday on national insurance contributions will support enterprise and private sector job creation. Representations from employers have been supportive of reducing taxes on jobs, and 400,000 new businesses are expected to benefit from the holiday on employer national insurance contributions, including about 70,000 in the north-west.
It is clear that this important Budget proposal will help to generate much-needed jobs for small businesses. Does my hon. Friend agree that this is a much better way of supporting job creation in places such as Macclesfield and the north-west, and in other regions, than relying on the public sector, as the Labour party did?
How many businesses—perhaps the Minister could name them given that there are so few—will do better because of the national insurance cut and will not suffer because of the VAT increase and the cutback in demand, which will be disastrous for businesses in the north-west?
The fact is that businesses would much rather we focus on dealing with the jobs tax, which our predecessors brought in. We recognise that we have to reduce the deficit and that tax has to play a role in that, but what we can do to create jobs in the private sector is reduce the burden from national insurance contributions. This particular policy, directed at areas where the public sector is largest and where we need a stronger private sector, has to be the way forward.
7. What plans he has for future changes to income tax arrangements.
In the Budget, the Government announced a £1,000 increase in personal allowances for under-65s. We estimate that 23 million basic rate taxpayers will gain by up to £170 per year from this measure, and that 880,000 will be taken out of tax altogether. This is the first step towards our long-term objective to raise the personal allowance to £10,000.
I am very grateful to the Minister for that informative answer. Can he give a more precise timetable for when the £10,000 threshold will be released? Will it be before the end of this Parliament? In other words, can it be even earlier than the five years that would otherwise be required?
I cannot give a precise timetable, but as I said, that is our long-term objective. I know that the right hon. Gentleman has a long and distinguished record in campaigning for that policy. I am sure that he will be pleased with the steps that we have taken so far, and I hope that others will follow.
When Ministers are thinking about the future planning for local income tax, do they not understand the concern on the Opposition Benches and in the country that this afternoon the chief lobbyist for the banking industry has been introduced as a Member of the other place, meaning that the interests of the banking industry will come before those of low-income families?
8. What assessment he has made of the level of tax avoidance during the period when the rate of capital gains tax was at 18%.
The Government estimate that prior to the emergency Budget, upwards of £1 billion of income tax revenues was forgone through income being turned into capital gains.
I thank the Minister for that reply, which shows that when the previous Labour Government reduced capital gains tax, they created an enormous loophole for tax avoidance for the wealthiest in our society. Does he have any further plans to clamp down on tax avoidance, to ensure that the wealthy pay their fair share?
There are measures contained in the Finance Bill, which we are currently debating, that will reduce tax avoidance. We take the issue seriously, but the hon. Lady puts her finger on one of the problems. There were a number of structural difficulties in the tax system as it was left to us, one of which was the wide disparity between income tax rates and capital gains tax rates, and we have been able to do something about that.
In introducing the Budget, the Chancellor justified the move to a 28% rate in the following terms:
“I asked the Treasury to examine what would have happened if we had increased the rate much further beyond 28%, and its dynamic analysis showed that that would have resulted in smaller total revenues.”—[Official Report, 22 June 2010; Vol. 512, c. 178.]
Can the hon. Gentleman justify that?
Yes, and had the hon. Gentleman been in the Chamber at about quarter past 10 last night, he would have heard me doing so at some length. The fact is that for every 1% by which the gap between income tax and capital gains tax is reduced, we get an extra £60 million from income tax. However, there is also a countervailing pressure, which is that fewer transactions are entered into. The analysis based on studies done in America and elsewhere shows that 28% is about the level at which we maximise revenue.
9. What assessment he has made of the effect on low-income families of the implementation of the proposals in the June 2010 Budget.
T2. Does the recent experience of changes in VAT rates support the assumption of both the Treasury and the Institute for Fiscal Studies that there will be full pass-through of the proposed increase in VAT, or might we reasonably hope that large retailers will shoulder some of the burden?
The assessment set out in the Red Book is that it is likely that two thirds will be passed on immediately and most of the rest will be passed on over the course of the next 12 months. In some cases retailers may bear some of the increase themselves, and we will obviously be studying the matter very closely.
Does the Chief Secretary, in the Chancellor’s absence, agree that the independence and credibility of the OBR are absolutely paramount? Sir Alan Budd said to the Treasury Committee this morning that the numbers he released two weeks ago
“were not an appropriate basis for attempting to estimate the effects of the June Budget on general government employment”,
and the Prime Minister was quite wrong to claim that they were. Would it not be better for the OBR to be more accountable to this House, with its appointments being subject to confirmation hearings by the Treasury Committee, and for its deliberations to be completely open and transparent? What we have at the moment is a good idea strangled at birth by the way in which this Government have been treating it.
T4. When the Exchequer Secretary answered the hon. Member for Edmonton (Mr Love) earlier on capital gains tax, he quite properly justified the increase in CGT on the basis of a dynamic model of both income tax and CGT. Will he publish that model and its supporting evidence?
T3. The Chief Secretary justifies massive cuts to the public sector through fears of a sovereign debt crisis as the credit rating agencies downgrade our debt, but those same agencies were giving triple A ratings to junk financial instruments right up to the crash. Can he explain whether credit rating agencies, discredited as they are, or Tory ideology is driving these cuts?
T5. I am sure that Ministers can understand the disappointment of my constituents when Cadbury’s new owners stated their intention to move mass production abroad from the Summerdale plant near my constituency. In the light of this and of the dramatic decline in manufacturing employment over the past 13 years—down from 4.7 million jobs in 1997 to 2.6 million jobs now—what steps are they taking to support manufacturers in this country?
My hon. Friend is absolutely right to highlight the fact that we live in a globalised world and that businesses can choose where they locate their activity. That is why we are introducing substantial cuts in corporation tax, from 28% to 24%. I was delighted to read this morning that the previous Chancellor was an enthusiast for reducing corporation tax—although we did not see so much evidence of that when he was in power. The fact is that the Budget proposals will benefit all sectors of society, including manufacturing, and we will see £13 billion more investment over the next few years as a consequence of those measures.
Many businesses in the north-west saw the value of regional development agencies and were very much opposed to their abolition. What consultation was carried out with business leaders on the proposal to abolish RDAs?
T6. In view of the importance of this issue to Opposition Members and their colleagues in the other place, can the Minister confirm that there are no plans for the Government to introduce VAT on the sale of hardback books?
Mums in my constituency who work part time in the public sector and earn, say, £11,000 or £12,000 a year are telling me that their pay is to be frozen, so far from low-paid workers being protected, as was promised, it seems they are going to be hit the hardest, because that pay freeze is pro rata. Can the Chief Secretary confirm that and tell me how many low-paid part-time public servants will be affected?
T8. The Chancellor took the difficult decision to increase VAT to deal with the dire economic legacy of the previous Labour Government. Will the Minister commit to reviewing the increase in VAT once this coalition Government have dealt with the deficit and got the economy back on its feet?
I can tell my hon. Friend that he is right; this decision was necessary and unavoidable. The intention is to get the public finances under control over the course of this Parliament. We will debate what we do at the end of that process nearer the time, when we will work out what we will do with the proceeds of growth.
In a speech last night to the bankers, the Financial Secretary referred to the Government’s proposals on a financial activities tax. Is it the Government’s intention that that sort of proposed legislation is just in reserve in case the bankers are too generous with themselves with bonuses, or are the Government determined to introduce such a tax? Why not go further, with a full financial transactions tax?
T10. Average wages in my constituency are below the national average, so the rise in the income tax threshold announced in the Budget was most welcome. Can the Minister please give an assurance that he will maintain a focus on increasing the personal tax threshold, as the prospect of being taken out of tax altogether is far more appealing than the prospect that the previous Government offered, which was the non-stop filling in of forms to claim back just a fraction of the money that people had already earned?
Can the Chief Secretary tell the House whether he thinks it is completely ethical for the definition of “unemployment” to be changed just before Prime Minister’s Question Time and for that be made public without telling the media that that was the case? Would he comment on the fact that the person who did this was seconded from a hedge fund and is therefore not independent? Will the Chief Secretary therefore confirm that that was the reason why this person had to resign and bring scorn—