Oral Answers to Questions

David Gauke Excerpts

Tuesday 6th March 2012 Commons Chamber

[Naomi Long (Belfast East) (Alliance)]

5. What recent assessment he has made of the effect on tourism of differential rates of VAT in the hospitality industries in the Republic of Ireland and Northern Ireland.

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

The number of overseas visitors to Northern Ireland grew by an estimated 11% in the first half of 2011, compared with just 7% over the first 10 months in the Republic of Ireland. Building on that performance, marketing campaigns by the Northern Ireland Tourist Board and Tourism Ireland are expected to draw 150,000 more visitors to Northern Ireland, create over 600 new jobs, and provide an additional £24 million in revenue for the economy in 2012.

[Naomi Long]

The Minister is right to draw attention to the success that Northern Ireland has enjoyed as a result of the efforts of the Northern Ireland Assembly. However, given that tourism is so price-sensitive, will the Government think again about the potential offered by a VAT reduction? We are currently the only part of the European Union that does not support our tourism industry in that way. Will the Minister reconsider, so that we can try to maximise the potential and grow even more jobs in the sector?

[Mr Gauke]

As I have said, Northern Ireland tourism is doing well at present. Were we to pursue a relief along the lines adopted in the Republic of Ireland, it would involve a cost of some £8 billion, £9 billion or perhaps even £10 billion, which would have to be made up for by higher taxes or spending cuts elsewhere.

[Mr David Amess (Southend West) (Con)]

8. What steps he is taking to reduce tax avoidance and evasion.

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

The Government are determined to tackle tax avoidance and evasion and ensure that the tax system operates fairly for all. By closing down two aggressive avoidance schemes on 27 February, we have demonstrated that we are prepared to take bold action to counter avoidance. The Government’s commitment has been underlined by their reinvestment of £917 million in Her Majesty’s Revenue and Customs, which will bring in additional revenues of £7 billion a year by 2014-15.

[Mr Amess]

The United Kingdom has the longest tax code in the world. It has 11,500 pages, and is 10 times longer than “War and Peace”. Does my hon. Friend agree that any simplifying measures would be welcome, as they would reduce tax avoidance and evasion and would prevent further ridiculous trials such as that of Harry Redknapp? I always thought that he was innocent, because he is such a good football manager,

[Mr Gauke]

I may be wrong, but I suspect that the hon. Gentleman should have declared himself to be a Tottenham supporter.

[Mr Amess]

No, West Ham.

[Mr Gauke]

So he is an ex-Harry Redknapp fan.

Complexity in the tax code can provide opportunities for avoidance, but, equally, much of the complexity that exists is a consequence of attempts to crack down on avoidance. The Government have set up the Office of Tax Simplification, and we are determined to do what we can to simplify the code and address avoidance and evasion.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Stamp duty land tax avoidance schemes cost the Exchequer hundreds of millions of pounds a year, but my questions on the subject have been met with complete complacency by Ministers. I was told:

“HM Revenue and Customs… is aware of a number of marketed… schemes. HMRC considers that none of the schemes… is effective in reducing… liability”.—[Official Report, 17 January 2012; Vol. 538, c. 708W.]

Now we hear that the Chancellor is going to crack down on such schemes. Which is it?

[Mr Gauke]

There are many marketed schemes that HMRC is convinced do not work, and that will be established in the courts. I suggest that those who are sometimes persuaded by claims that a particular scheme will work should treat them with caution. However, the Government are determined to crack down on stamp duty land tax avoidance. We took steps in the last Budget, we took steps in the autumn statement strengthening the disclosure regime, and there may well be more to come.

[Mr Peter Bone (Wellingborough) (Con)]

When the banks begin to make profits again, they will offset the losses that they made when they got us into a total mess, and will avoid paying tax. Whenever companies are paying tax on their profits, the banks will be avoiding tax on theirs. Will the Government look at that?

[Mr Gauke]

There are times when taxpayers engage in aggressive avoidance and we put a stop to it, as we did last week. However, the offsetting of losses is not novel—it is a long-standing element of the tax system—and, although of course we keep all such matters under review, the legitimate use of losses does not necessarily count as aggressive avoidance.

[Anas Sarwar (Glasgow Central) (Lab)]

Given the Government’s attempts to cut the deficit, it would make sense to clamp down on tax evasion, so why are they cutting 10,000 staff at HMRC?

[Mr Gauke]

We are cutting down on tax evasion. Whereas under the previous Government tax evasion coverage was reduced—the number of staff dealing with tax evasion was reduced—it can be seen that the number of people working on tax evasion in HMRC is now increasing.

[Ian Austin (Dudley North) (Lab)]

9. What assessment he has made of the effect of fiscal policy on the level of economic growth in 2011.

--- Later in debate ---

[Jason McCartney (Colne Valley) (Con)]

T6. With new businesses setting up and others expanding in my constituency, I very much welcome plans to promote equity investment in new business ventures through the seed enterprise investment scheme. What else is being done to support new business ventures across my constituency and the rest of our nation?

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

My hon. Friend is absolutely right to highlight the seed enterprise investment scheme, which will provide 50% income tax relief on investments in new start-up businesses. There is also the £50 million business angel co-investment fund, supported through the regional growth fund, the business coaching for growth arrangements and a number of measures that HMRC is taking to help start-up businesses.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

The Minister’s answer on the national insurance holiday for small businesses was simply not good enough, so may I press him again on why he will not expand eligibility for the national insurance holiday to all small businesses with fewer than 10 employees that take on extra workers, as set out in Labour’s five-point plan for jobs?

[Mr Gauke]

I am afraid that my answer is the same: we cannot keep doing things if we cannot fund them. We will have the Budget in two weeks’ time, but once again we hear proposals for tax cuts or spending increases but nothing to show how the books would be balanced.

[John Pugh (Southport) (LD)]

T7. What success are we having in stamping out VAT fraud, specifically missing trader fraud, which affects us more than it does other EU countries and costs us almost £10 billion?

[Mr Gauke]

This has been a major problem over a number of years. Progress has been made since the mid-2000s, when the problem was at its greatest, but we must of course remain vigilant and I know that HMRC continues to monitor the matter closely.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

Airports create jobs, yet next month’s increase in air passenger duty will apply equally to unused airports in regions with high unemployment and busy airports in the south-east. Will the Chancellor consider introducing a differential level of air passenger duty so that airports in regions with high unemployment can gain some benefit from it?