Oral Answers to Questions

David Gauke Excerpts

Tuesday 10th December 2013 Commons Chamber

[Huw Irranca-Davies (Ogmore) (Lab)]

7. What recent representations he has received on reform of the Office for Budget Responsibility.

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

The Chancellor receives representations on a wide range of matters, including on the role of the independent Office for Budget Responsibility.

[Huw Irranca-Davies]

Labour has called for the OBR charter to be amended so that it can independently audit the manifestos of political parties in the run up to elections. Will the Minister now support that proposal?

[Mr Gauke]

We are cautious about that because, as a Labour spokesman in the House of Lords said in 2010:

“the OBR should not become embroiled in political controversy.”

I understand that the Labour party is seeking ways to improve its economic credibility. I suggest that a better, more obvious approach would be to change the shadow Chancellor.

[Charlie Elphicke (Dover) (Con)]

Does my hon. Friend agree that, while we are all indebted to the shadow Chancellor for this idea and so much more, the OBR is working well and should not become a political football or controversial?

[Mr Gauke]

My hon. Friend is absolutely right. The OBR is a very good change—one that I am pleased has finally won support across the House—and we do not want to jeopardise its credibility or reputation.

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

After those answers, we still do not know why the Chancellor is resisting our proposal to allow the OBR to audit all party spending and tax plans ahead of the general election. We know that in private the Chief Secretary agrees that it is a good idea, so what is the Chancellor so afraid of?

[Mr Gauke]

In 2010, the noble Lord Eatwell said that

“we on this side agree…to confine the activities of the OBR to consideration of the impact of government policies alone. I am sure it is right that the OBR should not become embroiled in political controversy.”—[Official Report, House of Lords, 8 November 2010; Vol. 722, c. 16-17.]

I think he made a reasonable point.

[Greg Mulholland (Leeds North West) (LD)]

8. What estimate he has made of the cost to the economy of the leased pub company model.

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

Last week the Office for Budget Responsibility forecast public sector net borrowing on an underlying basis to be £111 billion, or 7.3 per cent. of GDP in 2013-14, down from 11 per cent. of GDP in 2009-10, the highest deficit in our peacetime history. By 2018-19 the OBR forecasts that the UK will be running a small surplus.

[Dr Coffey]

I thank my hon. Friend for that terrific answer. Does he agree that calls to abandon the Government’s long-term economic plan and to borrow and spend more would mean higher taxes and mortgage rates going up for hard-working families in Suffolk Coastal?

[Mr Gauke]

I thank my hon. Friend for her terrific question. Yes, I agree.

[Alison McGovern (Wirral South) (Lab)]

When the Chancellor made all his cuts in his emergency Budget, he said that it was because he had to close the deficit by the end of this Parliament. We said that that would be a false economy and that it would not work. In the autumn statement, the Chancellor agreed with us. What do they have to say for themselves now?

[Mr Gauke]

I am not sure that the hon. Lady heard the Chancellor correctly if that is what she thinks he said. The reality is that we have to get the deficit down and we have gone through two years of great challenges in the economy. Our argument was that because of those challenges it was more difficult to get the deficit down. Labour argued that the economy could not grow while getting the deficit down. We were right; they were wrong.

[Richard Fuller (Bedford) (Con)]

The record deficit left by the last Labour Government was, in essence, a tax on the future opportunities of our children and grandchildren, denying them opportunities that our generation was able to have. Will my hon. Friend assure the House that he will not repeat the mistakes of the last Labour Government and that he will prioritise further reductions in the deficit so that our grandchildren can have the same futures that we have enjoyed?

[Mr Gauke]

My hon. Friend is absolutely right. It is irresponsible to future generations if we do not take action to reduce the deficit. The approach we had from the party—[Interruption.] The shadow Chancellor has just said that the deficit is going up. He has been saying that all along, and I am afraid he is just plain wrong.

[Ian Lucas (Wrexham) (Lab)]

In 2010, the Chancellor of the Exchequer told us that the deficit would be gone by 2015. Why should we believe him this time?

[Mr Gauke]

This is coming from the party that has opposed every single measure we have taken to reduce the deficit. If we had taken the approach that the Labour party advocated, we would have borrowed a further £200 billion. That is not responsible or fair on future generations; that would put our economy at risk.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

11. If he will introduce limits on debt interest deductions used by private equity companies to reduce their corporation tax liabilities.

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

The UK tax system, as with those of most other OECD countries and in accordance with international accounting standards, gives reductions for interest as a business expense. The UK already has a variety of defences that protect against excessive interest deductions. These include the worldwide debt cap, transfer pricing rules, anti-arbitrage rules, unallowable purpose rules, distribution rules and withholding tax on interest under certain circumstances.

[Michael Connarty]

I thank the Minister for that extremely interesting answer. We all use Boots, but is he aware that Alliance Boots, which is now equity-owned, was funded by £9 billion of loans, which allowed it to write off £1 billion of corporation tax? There is now a complaint by War on Want and Change to Win at the OECD about the company breaking the OECD’s rules by engaging in self-dealing, which allowed the owner of the new company, Stefano Pessina, to make £400 million in profit. What will the Government do about that fraud, as well as the abuse of the taxpayer’s money?

[Mr Gauke]

I am not going to comment on individual cases, but as I have said, there are a number of protections in the UK system to stop abuse in this area. We have strengthened the capacity of Her Majesty’s Revenue and Customs, and it is also worth pointing out that the UK has led the way in the OECD’s work on base erosion and profit shifting, which is also looking at interest deductibility.

[Ian Swales (Redcar) (LD)]

The previous Government left a system that encourages offshore ownership of UK business, with highly geared structures and foreign interest rates as high as 16%. Many countries limit allowable foreign interest deductions; will the UK look at doing the same?

[Mr Gauke]

Of course, we keep all these matters under review, but as I mentioned a moment ago, there are a number of protections in the UK tax system. However, we continue to monitor this area.

[Jeremy Lefroy (Stafford) (Con)]

12. What recent steps he has taken to regulate financial services.

--- Later in debate ---

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

T8. Businesses across the country will welcome the news that rate rises are to be capped at 2% and that small businesses will receive a £1,000 discount on their rate bills. Independent retailers in my market towns of Stratford, Henley-in-Arden, Shipston-on-Stour and Studley have been lobbying me on that. How many businesses nationwide will benefit from that, and how much will they save in total?

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

We estimate that about 300,000 shops, pubs and restaurants in England will benefit from the £1,000 business rates discount, and that in aggregate the measures announced in the autumn statement will save businesses around £1 billion in business rates, although the amounts will of course vary from business to business.

[Andrew Gwynne (Denton and Reddish) (Lab)]

The Chief Secretary might like to reflect on the very poor answer he gave my right hon. Friend the Member for Wentworth and Dearne (John Healey) earlier, because I have in front of me Office for National Statistics Table 1A, which clearly shows that infrastructure construction output to September 2013 has fallen by 15%. What went wrong, or is he seriously disagreeing with the Office for National Statistics?