UK-Senegal Double Taxation Convention

David Gauke Excerpts

Tuesday 3rd March 2015 Written Statements

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

A double taxation convention with the Republic of Senegal was signed on 26 February 2015. The text of the convention has been deposited in the Libraries of both Houses and made available on the gov.uk website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.

Attachments can be viewed online at: http://www.parliament. uk/writtenstatements

[HCWS335]

Counter-terrorism Asset Freezing

David Gauke Excerpts

Monday 2nd March 2015 Written Statements

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

My noble Friend the Commercial Secretary to the Treasury (Lord Deighton) has today made the following written ministerial statement:

Under the Terrorist Asset-Freezing etc. Act 2010 (“TAFA 2010”), the Treasury is required to report to Parliament, quarterly, on its operation of the UK’s asset-freezing regime mandated by UN Security Council resolution 1373.

This is the fifteenth report under the Act and it covers the period from 1 September 2014 to 31 December 2014. This report also covers the UK implementation of the UN al-Qaeda asset-freezing regime and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU. Under the UN al-Qaeda asset-freezing regime, the UN has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under the Al- Qaida (Asset-Freezing) Regulations 2011. Under EU regulation 2580/2001, the EU has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under Part 1 of TAFA 2010.

Annexes A and B to this statement provide a breakdown, by name, of all those designated by the UK and the EU in pursuance of UN Security Council resolution 1373. The two individuals subject to restricted designations under section 3 of the Act are denoted by A and B.

The following table sets out the key asset-freezing activity in the UK during the quarter ending 31 December 2014:

Anti-avoidance

David Gauke Excerpts

Thursday 26th February 2015 Written Statements

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

The Government are committed to tackling tax avoidance to ensure the Exchequer is protected and fairness is maintained for the taxpayer.

HMRC has become aware of a proposed transaction that seeks to take advantage of a perceived gap in the sale and leaseback rules for capital allowances. The claimed effect of the transaction is to create tens of millions of pounds of capital allowances in respect of assets where no real expenditure has been incurred. The Government do not accept that these arrangements would have this effect, but we will put this beyond doubt by taking action today.

I am today announcing that legislation will be introduced in the Finance Bill 2015 to ensure that where an asset is acquired without incurring expenditure, an entitlement to capital allowances cannot be created by a sale and leaseback or connected party transaction. The legislation will have effect from today and will protect significant amounts of revenue.

We have acted quickly to prevent any exploitation of these rules. This Government will not hesitate to eliminate opportunities for avoidance that create significant risk to the Exchequer.

Draft legislation and further details of this measure are being published on HMRC’s website today.

[HCWS316]

Double Taxation Convention : United Kingdom-Algeria

David Gauke Excerpts

Monday 23rd February 2015 Written Statements

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

A Double Taxation Convention with Algeria was signed on 18 February 2015. The text of the Convention has been deposited in the Library of both Houses and made available on the GOV.UK website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.

It is also available online at http://www.parliament.uk/writtenstatements.

[HCWS291]

Tax Avoidance

David Gauke Excerpts

Wednesday 11th February 2015 Commons Chamber

[Shabana Mahmood]

I will not give way; I want to make some progress. Thirdly, we have had much discussion relating to—

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

Will the hon. Lady give way?

[Shabana Mahmood]

Of course.

[Mr Gauke]

On the quoted eurobond exemption, the hon. Lady will be aware—we have debated the issue on a number of occasions, and it is a quite technical matter—that I made available Treasury and HMRC officials to talk through with her the reasons why it would be ill advised to pursue this policy; it would not raise any significant sums of money, but would just create an administrative burden. I made that offer over a year ago, and the offer still stands. Will she take me up on it?

[Shabana Mahmood]

At the risk of repeating our previous debate about the quoted eurobond exemption, I said at the time that I was fearful that the Minister was patronising me. He assured me then that he was not, and I take that point on board again. I have not taken the Minister up on his offer of a meeting and I have no intention of doing so. The HMRC’s proposal for closing down the exemption on which the Treasury consulted involved instances in which there was no regular or substantial trading of the bonds in question.

We all accept that there is limited liquidity for many legitimate eurobond issues, so such a criterion would be difficult to put into operation. However, we propose to explore the possibility of removing the exemption when bonds are issued to connected persons. We are making a substantially different offer with the aim of closing a loophole that everyone knows is being abused, and on which the Government have failed to act. I should be happy to meet the Minister and talk to him about how we propose to close down the eurobond exemption. I do not have access to the same officials as he does, but I do have another way of closing down that exemption.

--- Later in debate ---

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

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes that while the release of information pertaining to malpractice between 2005 to 2007 by individual HSBC accountholders was public knowledge, at no point were Ministers made aware of individual cases due to taxpayer confidentiality or made aware of leaked information suggesting wrongdoing by HSBC itself; notes that this Government has specifically taken action to get back money lost in Swiss bank accounts; welcomes the over £85 billion secured in compliance yield as a result of that action, including £850 million from high net worth individuals; notes the previous administration’s record, where private equity managers could pay a lower tax rate than their cleaners, very wealthy homebuyers could avoid stamp duty and companies could shift their profits to tax havens; further recognises that this Government has closed tax loopholes left open by the previous administration in every year of this Parliament, introduced the UK’s first General Anti-Abuse Rule, removed the cashflow advantage of holding onto the money whilst disputing tax due with HMRC, and allowed HMRC to monitor, fine and publicly name promoters of tax avoidance schemes; notes this Government’s leading international role in tackling base erosion and profit shifting; welcomes the commitment to implement the G20-OECD agreed model for country-by-country reporting and rules for neutralising hybrid mismatch arrangements; notes the role of the diverted profits tax in countering aggressive tax planning by large multinationals; supports the Government’s adoption of the early adopters initiative; and recognises that as a result the UK is collecting more tax than ever before.”

The disclosures of the last few days have reminded us of an era when it was all too easy to squirrel assets offshore, reliant on offshore centres providing secrecy from tax authorities; a time when mass market avoidance schemes were prevalent, tax avoiders could enter schemes, however artificial or contrived, and wait for years before paying their taxes; a time when highly paid employees could disguise their remuneration and avoid tax on it; a time when the payment of stamp duty on expensive properties was seen as voluntary; and a time when HMRC did not get the support it needed to take effective action against those dodging taxes.

That time is behind us. Under this Government, loopholes are being closed, tax avoiders are paying their tax up-front, bank secrecy is being abolished, prosecutions are increasing, the international tax rules on multinationals are being reformed, and HMRC is bringing in the money to a greater extent than ever before. For all the bluster we hear, look at the record. As a Government who care about the public finances, we have done far more than our predecessors.

I will set out what we have done over the course of this Parliament. First, let me turn to the issue of HMRC. Lord Green was a very effective trade Minister, but let me be crystal clear: there is no suggestion, and no regulator has suggested, that Lord Green was at fault with regard to what happened with the Swiss subsidiary of HSBC. Ministers, and indeed the general public, were aware of the release of information pertaining to individual HSBC account holders. There is a long-standing legal requirement for taxpayer confidentiality. Ministers cannot under any circumstances be made aware of individual cases. At no point were Ministers made aware of the evidence that has emerged in recent days of wrongdoing by HSBC itself.

[Shabana Mahmood]

I am glad that the Financial Secretary to the Treasury is giving us some answers, although they are not shedding quite enough light on what actually happened. Let us look at the media reports. In September 2010, for example, everyone knew that The Daily Telegraph was talking about the number of HSBC customers who were involved. It therefore beggars belief that the matter was not raised with Stephen Green when he was appointed trade Minister just a few months later.

[Mr Gauke]

Let me put it this way. It was, and is, the case that UK residents can have bank accounts in Switzerland without committing any illegal acts. It is also the case that a Swiss bank can provide banking services to a UK resident without committing any wrongdoing. It was the case, in terms of what was known at that time, that a disc was acquired by HMRC relating to HSBC accounts. The question that HMRC was asking was whether the UK residents whose names were listed within those data had paid the tax they should have. Were they declaring their income as required under UK law? That was what the investigation was about. [Interruption.] I am afraid that the hon. Member for Birmingham, Ladywood (Shabana Mahmood) is making a non-point. It was known that there was an investigation into HSBC account holders—that was in the public domain. However, regarding the evidence we have seen of, for example, bricks of cash being handed out and advice being given to keep several steps ahead of the taxman who is dealing with tax evasion, that information has come to light in the public domain—and, indeed, to Ministers—in the past few days.

[Ian Lucas (Wrexham) (Lab)]

If the information was in the public domain, will the Minister answer the question that the Prime Minister refused to answer four times today? Did the Prime Minister discuss these matters with Lord Green when he appointed him to the Government?

[Mr Gauke]

The position is this: Lord Green was appointed in January 2011 and at that point the information about the fact that there was an investigation into HSBC account holders was in the public domain. There was no big secret about that. Of course, I was not privy to the specific conversations that were held, but there is no suggestion that Lord Green had acted improperly, that he was complicit in tax evasion or that he was involved in this particular activity. That could not be clearer.

[Shabana Mahmood]

I am grateful to the Minister for giving way; he is being generous. Does he agree that Lord Green’s continued silence on what he knew about what was going on at HSBC is creating a climate in which more questions are being asked? Does he also agree that what we need—and what our motion calls for—is a full and frank statement from Lord Green about what he knew? Yes or no?

[Mr Gauke]

It is a matter for Lord Green as to what he says. It is clear that the Government have taken the strongest action to deal with tax avoidance and tax evasion. Ministers are responsible for tax law and for resourcing HMRC’s enforcement of that law, so I would suggest that questions about activities that took place between 2005 and 2007 should be directed to those who were Ministers at that time. They might be in a better position to answer them.

[Ann McKechin (Glasgow North) (Lab)]

The Minister will be aware that in November 2012, a senior HMRC official who was being questioned by the Public Accounts Committee said that 12 prosecutions relating to HSBC cases were in line to be proceeded with. None of those prosecutions has been brought. Has the Minister received any explanation from HMRC as to why? Why did the Minister not, in turn, advise the House and the Public Accounts Committee of the change in tack?

[Mr Gauke]

Let me address the point about decisions to make a prosecution. First, HMRC determines whether to bring a prosecution and build up a criminal case, and then it is a matter for the Crown Prosecution Service to make a judgment as to whether it is confident that a conviction can be achieved. Rightly—I would hope there is consensus on this point—those decisions are made by HMRC and the CPS, not by politicians. It is very important that that independence be maintained. I do not believe it would be right for politicians to decide how many prosecutions are made, and that has not happened in this particular case.

[Andrew Gwynne]

The Minister continues to insist that Lord Green had neither knowledge of nor involvement in these matters while he was chairman of HSBC, having said that during Monday’s urgent question. That still suggests that the Government must have asked those questions, given that they are so certain in their answers. This is not just a matter for Lord Green; it is simply a matter for Ministers and the Prime Minister. The easiest way to resolve it is for the Prime Minister to place all the information in the House of Commons Library, so that Members of this House can be the judge.

[Mr Gauke]

I make the point that I have made before: there is no suggestion and no evidence that Lord Green was complicit in any wrongdoing—that remains the case. Opposition Members can stand up to make allegations and suggestions, but there is no evidence that he was engaged in that type of behaviour and certainly no information was available to Ministers to suggest that he was.

[Mark Field (Cities of London and Westminster) (Con)]

The Minister made the important point in earlier exchanges that there should never be any political inference, whichever Government are in power, in disciplining or legal action over these sorts of matters. We would be going down an incredibly dangerous path, particularly this close to an election, if the pressure became so strong that politicians tried to play to the gallery and interfere in any way with the legal process.

[Mr Gauke]

My hon. Friend makes an extremely good point, and the fact that some Opposition Members do not appear to agree with it is troubling. The role of the Government is to set out the policy. Our philosophy is clear: individuals and businesses must pay what they owe, just like the vast majority of UK taxpayers. That point has been reiterated by the Prime Minister and the Chancellor again and again. Aggressive tax planning and, indeed, tax evasion are simply not acceptable. As I will set out, this Government have a proud record on that front.

[Ian Lucas]

I agree with the point made by the hon. Member for Cities of London and Westminster (Mark Field), but let me come back to the question of what the Prime Minister discussed with Lord Green about the political matter of his appointment as a Minister, and these allegations. Why will the Prime Minister not tell us whether he had conversations with Lord Green about these matters?

[Mr Gauke]

I have nothing further to say on that point. The position is that Lord Green was appointed as a trade Minister. His appointment was supported across this House; many people from both sides of the House welcomed it.

[Karl Turner (Kingston upon Hull East) (Lab)]

We did not have the information.

[Mr Gauke]

The hon. Gentleman says from the Front Bench that the Opposition did not have the information, but just a few minutes ago he was saying that it was all in the public domain. He cannot have it both ways. The position is that Lord Green was appointed and his appointment was widely welcomed. We can hear the rhetoric from the Opposition, but the reality is that this Government have backed up rhetoric with hard, decisive action. Since we came to power in 2010—

[Graham Stringer (Blackley and Broughton) (Lab)]

Will the Minister give way?

[Mr Gauke]

I am going to make a little progress. Since we came to power in 2010, we have made a huge investment in HMRC to tackle avoidance, evasion and non-compliance. That investment has clearly made a difference. HMRC has secured more than £85 billion in compliance yield since the beginning of the Parliament, £31 billion of which was from large businesses and £850 million of which was from high net worth individuals.

HMRC’s successes were recognised last week by the National Audit Office in its report “Increasing the effectiveness of tax collection: a stock-take of progress since 2010”. In that report, HMRC’s response to the recommendations to tackling marketed tax avoidance has been exemplary, particularly in terms of co-ordinating action and seeking new powers to tackle promoters and scheme users. In every year of this Parliament, my right hon. Friend the Chancellor has stood up at the Dispatch Box and closed loophole after loophole, which, I am afraid to say, had been left open by the previous Administration.

We have made more than 40 changes to tax laws since 2010. Let me trot through just a few of them as I am conscious of time. We stopped groups of companies clubbing together to reduce their overall tax bill by using loans and derivatives between themselves; we stopped businesses using trusts to pay employees in order to pay less tax; we stopped banking groups avoiding tax on profits that they were able to make by buying back their own debt cheaply; we blocked the practice by which companies could wipe out their tax bills by accessing losses made in a different group and we stopped hedge fund managers in partnerships obtaining unfair tax advantages by allocating profits to companies they controlled.

In 2013, we introduced the UK’s first general anti-abuse rule to tackle abusive tax avoidance arrangements and to deter those who might be tempted to use them. We are not stopping there. We are currently consulting on options to target serial avoiders and, on the very measure the Opposition seek in their motion, a general anti-abuse rule penalty.

In the Finance Act 2014, we introduced a set of ground-breaking measures aimed at the small minority of wealthy people in this country who involve themselves in tax avoidance schemes. If individuals and businesses are suspected of involvement in tax avoidance schemes, they have to pay HMRC the disputed amount of tax up front while the dispute is being resolved.

Accelerated payments remove the cash-flow advantage that those who deliberately try to bend the tax rules by avoiding tax previously had over the majority who paid their tax up front. We saw the problem and we dealt with it.

[Paul Farrelly]

Given that list, will the Minister explain to the House why tax avoidance schemes used by multinationals such as the double Irish and the Dutch sandwich are still in existence and what the Government are doing to tackle that sort of multinational tax avoidance, which we have debated and scrutinised here on many occasions?

[Mr Gauke]

I will happily deal with that point. Indeed, if the hon. Gentleman will forgive me, I will turn to that very point in a moment or so. He raises a very fair question.

[Mark Durkan (Foyle) (SDLP)]

Will the hon. Gentleman also address the controlled foreign companies rules that were introduced by this Government? Those rules cost revenue here and in developing countries. Sir Martin Sorrell told “Newsnight” that they, and not the change in corporation tax, were the main reason why he was coming back from his business in Dublin.

[Mr Gauke]

The CFC regime is part of corporation tax. The hon. Gentleman makes my point for me. As a consequence of our changes to the controlled foreign companies regime, we are seeing businesses move operations back to the United Kingdom. It was not that long ago—2007 and 2008—when business after business was looking to move its head office out of the UK. That flow has not only been staunched but reversed. We are seeing businesses choosing to locate in the United Kingdom, which is good for business, a successful achievement for this country and something of which we should be proud.

The changes in accelerated payments will bring forward billions in tax revenue in the coming years to help us afford the public services on which the country depends. I am pleased to say that, since the introduction of accelerated payments only a few months ago, avoiders have already agreed to pay more than £185 million to the Exchequer’s coffers, and millions more is being collected from those who, having received their up-front bill, have conceded their tax position and settled.

As well as tackling the end users of tax avoidance, we have also introduced structural changes targeted at the small but persistent minority of promoters who peddle schemes that typically use concealment or misdescription. If those promoters do not change their behaviour voluntarily, HMRC now has powers to monitor, fine and publicly name them. All this has contributed to the fall in the use of tax avoidance schemes over this Parliament. The Opposition motion suggests several areas for further action—this Government will always give a fair hearing to measures that increase compliance and tackle evasion—but they have to be properly thought through and I am afraid that some of their suggestions simply do not pass that test.

Therefore, we will not be abolishing the intermediary relief in contract for difference trading. There is no way to raise sums of the kind mentioned by the Opposition without causing serious damage to London’s position as a global centre for listing companies, as was recognised back in 1997, when the measure was introduced, and again in 2007, when it was expanded. Yes, it is relevant that the Labour party was in government at the time.

Nor will we introduce a deeming test for self-employment in the construction industry. We considered that, but it was not practicable. Indeed, to be categorised as self-employed, a bricklayer would have had to supply their own bricks. Instead, we have addressed false self-employment in construction and other industries through the Finance Act 2014 measures on onshore intermediaries, raising £2.1 billion in the process.

The Opposition motion urges us to close the quoted eurobonds exemption loophole, but it is not a loophole. I have explained repeatedly to the hon. Member for Birmingham, Ladywood that that measure would create an administrative burden, but not raise money. I have even offered a meeting with officials to discuss that, which, once again, she has declined. She set out a new proposal, but it has been looked at and it is simply not practicable.

The Opposition might be trying to recover lost ground, given their failure to get on top of avoidance and evasion, but they have to do better than this. We have led the way not only domestically, but internationally. Let me deal with the point about multinational companies. We originated the base erosion and profit shifting, or BEPS, process and have set out our commitments to multilateral action through the G20 and the OECD. In last year’s autumn statement, my right hon. Friend the Chancellor announced UK action on two of the internationally agreed outputs of the BEPS project. We are introducing legislation to implement the G20-OECD agreed model for country-by-country reporting, which will require multinational companies to provide tax authorities with high-level information on profit, corporation tax paid and certain indicators of economic activity for risk assessment.

We are consulting on implementing the G20-OECD agreed rules for neutralising hybrid mismatch arrangements. We have gone further still to strengthen our defences against the erosion of the UK tax base. As a complement to the BEPS process, we have introduced the new diverted profits tax to counter the use of aggressive tax planning by large multinationals that seek to avoid paying tax in the UK on profits generated from economic activity here.

[Paul Farrelly]

I am aware of the international dimension, but HMRC has been criticised frequently for its timidity in challenging some of those arrangements. The hon. Gentleman will be familiar with the important concept of permanent establishment. For example, has HMRC challenged Amazon’s tax arrangements, whereby everything is billed through Luxembourg and it claims, for tax reasons, not to have a permanent establishment in the UK, despite having huge warehouse operations?

[Mr Gauke]

The first point to make is that it is a matter for HMRC to challenge in accordance with the law, and taxpayer confidentiality applies. As a Minister, I do not get involved in individual cases.

Furthermore, if we want to address broader matters—I am not talking about any individual company here—and if the hon. Gentleman wants to address the issue of businesses carrying on activities here but not paying taxes here because they do not have a permanent establishment, the diverted profits tax is just the measure he should want. It is designed to address that issue.

I say again that I am not talking about the specific case, but in general the measure deals with circumstances in which contrived and artificial arrangements are made so that a business manages to misuse, if you like, the permanent establishment rules. The hon. Gentleman raises an interesting point, but the Government are already dealing with it.

[Charlie Elphicke]

I welcome the diverted profits tax. Does my hon. Friend agree that there is a double problem, which is partly the European Union rules, particularly the parent-subsidiary directive, which makes tax avoidance all too easy, and partly the fact that international tax law is out of date? It was set in the 19th century, is no longer fit for purpose and needs to be updated and modernised, which is what the Chancellor of the Exchequer and the Prime Minister have been working on.

[Mr Gauke]

I agree with my hon. Friend, who brings great expertise on these matters to the House. There are constraints with regard to European law as to precisely what measures can be undertaken, and he is right to say that the international tax system needs to be modernised. The strongest voices calling for that happen to be those of the Prime Minister and the Chancellor of the Exchequer.

Under the UK’s presidency of the G8, we called for a new global standard of automatic tax information exchange. Endorsed by the G20, this marks a step change in the ability of Governments to tackle tax evasion. It will rapidly remove the remaining financial hiding places. The common reporting standard instigated by the UK along with our G5 partners—France, Germany, Italy and Spain—has seen over 90 countries and jurisdictions, including all the UK’s Crown dependencies and overseas territories with a financial centre, commit to automatic exchange of information, with the first exchange in 2017 or 2018. This will give HMRC access to information on billions of pounds worth of assets held offshore.

On Switzerland, our agreement has so far raised over £1.2 billion that would otherwise have remained beyond our reach. I think the hon. Member for Birmingham, Ladywood referred to £900 million. That is almost two thirds of the £1.9 billion that the latest forecasts expect it to raise. HMRC has contacted more than 22,000 of the 25,000 people who agreed that their accounts could be disclosed to HMRC and time is running out for those who continue to hide.

The Government have been tough on avoidance and evasion, both here in the United Kingdom and on the international stage. The measures that we have taken so far in this Parliament to tackle aggressive tax planning, avoidance and evasion add up to £7.6 billion in additional revenues in 2015-16. Do the Opposition think their proposals can get anywhere near that sum? As a result of the actions that we have taken, it is now much harder for avoiders and evaders to cheat the system and get away with not paying what they owe. Our multilateral agreements are systematically removing the remaining international hiding places. As a result, HMRC is collecting more tax than ever before, supporting our public services and helping this nation get back on its economic feet, because that is how we get a fair and balanced economic recovery for all.

[Several hon. Members]

rose—

Tax Avoidance (HSBC)

David Gauke Excerpts

Monday 9th February 2015 Commons Chamber

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

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on tax avoidance and evasion by HSBC.

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

I welcome the opportunity to respond to this question and to the information released today in respect of an HSBC subsidiary’s involvement in facilitating tax evasion during the course of the previous Parliament.

Her Majesty’s Revenue and Customs has a long-standing approach to tax evasion that is based on collecting the tax and interest due, changing taxpayers’ behaviour to discourage them from evading in future, and enforcing the most appropriate and effective penalties. Overwhelmingly, this means providing disclosure facilities to encourage tax evaders to sort out their affairs, backed by civil penalties to fine them for the offence. This has been the consistent approach under Governments of all parties. This Government have supported HMRC’s approach by increasing investment in its enforcement capacity and by strengthening its powers, including increasing the maximum fines for hiding money in tax havens to 200% of the tax evaded.

This approach has been very successful in tackling tax evasion, whether by plumbers, barristers and medics in the UK or by the wealthy hiding money in offshore accounts. HMRC has collected more than £1.6 billion from 57,000 disclosures as a result of a wide range of UK and international initiatives. Internationally, since 2010, HMRC has brought in about £2 billion in previously unpaid tax as a result of the UK’s agreement with Switzerland on a withholding tax on Swiss bank accounts, and the international Liechtenstein disclosure facility. In a small number of cases, HMRC will institute criminal investigations into serial tax evaders and those who deliberately conceal information from it, but in most cases disclosure and civil fines are the most appropriate and effective intervention. That is how HMRC has approached the receipt of data from leaks and whistleblowers, including the Swiss HSBC data that were shared with the department in May 2010.

Using the civil disclosure approach, HMRC has systematically worked through all the HSBC data that it has received and has brought in more than £135 million in tax, interest and penalties from tax evaders who hid their assets in Swiss HSBC accounts. HMRC received data from about 6,800 entities, and that, after removing duplication, resulted in information on 3,600 businesses and individuals. Of those cases, over 1,000 were challenged and the cases were settled. HMRC believes that the remainder are compliant but continues to monitor their activities.

HMRC is examining whether it has all the same data that the International Consortium of Investigative Journalists has, and that we have seen reported today, and it will be asking the ICIJ for any data that we have not already been given. HMRC received the HSBC data under very strict conditions that limited the department’s use of it to pursuing offshore tax evasion and prevented HMRC from sharing the data with other law enforcement authorities. Under these restrictions, HMRC has not been able to seek prosecution for other potential offences such as money laundering. However, the French authorities have today confirmed that they will provide all assistance necessary to allow HMRC to exploit the data to their fullest.

HMRC’s powers to crack down on international evasion are being further strengthened by the new international common reporting standards, which more than 90 countries have agreed to as an extra tool for closing down the options for tax cheats to pursue this increasingly high-risk practice. This has been as a consequence, in part, of the leadership shown by the Prime Minister and the Chancellor of the Exchequer at the G8. This is further evidence of progress made by this Government—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I cannot believe that I cannot hear the Minister. Please let him finish.

[Mr Gauke]

Thank you, Mr Deputy Speaker.

This is further evidence of progress made by this Government in tackling tax evasion and, indeed, tax avoidance—progress that was sadly lacking under the previous Government.

[Shabana Mahmood]

The Financial Secretary’s remarks simply do not go far enough. We need much more detail from him as to what the Government have been up to since they were made aware of this information and why they have apparently failed to act over such serious allegations.

First, when the French authorities passed this information to HMRC, who saw it and what was done with it? Were Ministers informed and what communications did HMRC have with the Treasury and No. 10? If there was no communication, why not, given the seriousness of the issue?

Secondly, what information did the Government seek from Lord Green about the allegations of malpractice at HSBC and his involvement in them prior to his appointment as a trade Minister? The Financial Secretary said this morning that the information was in the public domain before 2010. What information was sought and received? Any failure by this Government to question Stephen Green before his appointment would be an inexplicable and inexcusable abdication of responsibility, and the Government must address that point.

Does the Financial Secretary agree that the minimum to be expected now must be an immediate statement by Lord Green, with a full explanation of his role in these allegations while at HSBC; his knowledge of them while he was a Government Minister; and all communication he has had on these issues with Government Ministers?

Thirdly, at any point during Lord Green’s stint in government, did the Financial Secretary or any other member of the Government discuss allegations of tax avoidance and evasion at HSBC with Lord Green? In 2011, HMRC was open about conducting investigations into the UK individuals on the so-called Falciani list. Can the Financial Secretary give a categorical statement about what discussions have been had between May 2010 and now between HMRC and members of the Government about such investigations?

This Government have failed to back Labour in our calls to crack down on tax avoidance, whether on stopping hedge funds avoiding hundreds of millions—[Interruption.]

[Shabana Mahmood]

Thank you, Mr Deputy Speaker.

This Government have failed to back Labour in our calls to crack down on tax avoidance, whether on stopping hedge funds avoiding hundreds of millions in tax on shares or on closing the eurobonds loophole, and now it seems that wrongdoing may have been overlooked on their watch. As Richard Brooks, a former HMRC tax inspector, has said, the Treasury and HMRC

“knew that there was a mass of evidence of tax evasion at the heart of HSBC”

in 2011, but they

“simply washed their hands of it.”

[Mr Gauke]

The essence of the hon. Lady’s speech was the accusation that wrongdoing has been overlooked on this Government’s watch, but events between 2005 and 2007 did not take place under our watch—the Labour party was in government between 2005 and 2007. The allegations relate to activity between 2005 and 2007.

The hon. Lady’s first question was on what was done with the information. I almost feel like apologising to the House for going through this information in such excruciating detail. A total of 6,800 cases were looked at and it was discovered that there were a number of duplications within those data: they were not clean data. That left 3,600 and there has been a full investigation of more than 1,000 of them—the remainder appear to have no case to answer—and a settlement has been reached. As a consequence, £135 million has been raised for the Exchequer that would not previously have been raised. If we put that in the context of the very many other measures that this Government have taken to deal with the problem, we will see that it demonstrates a Government willing to address it.

Let me turn to Lord Green. He was a very successful trade Minister and there is no evidence to suggest that he was involved in or complicit with tax evasion activities. If we are talking about complicity and asking about what happened on someone’s watch, what about the City Minister at the time, the right hon. Member for Morley and Outwood (Ed Balls)? Sadly, he is not in the Chamber today. Indeed, let us look at the failure of the previous Government to address issues of tax evasion and tax avoidance. [Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am struggling to hear the Minister. I think it is beneficial for the Chamber that we all hear the Minister.

[Mr Gauke]

The essence of the charge is that not enough has been done to address tax evasion or tax avoidance, but the reality is that this Government have consistently cleared up the mess that we inherited. It was the case that wealthy people could avoid paying stamp duty land tax—we have sorted that problem. It used to be the case that aggressive tax avoidance schemes were prevalent, meaning that people could sit on the cash for years while cases dragged through the courts—that has now been addressed through accelerated payments. It used to be the case that remuneration could be disguised through loans and other instruments and that no income tax would be paid—we have fixed that, although the Labour party voted against it.

This Government have enabled HMRC to increase yields from £17 billion in 2010 to £26 billion this year, which is dramatic progress. Just as we have dealt with tax avoidance, we are dealing with tax evasion—we are seeing progress on the exchange of information—and that is a very big improvement on everything we inherited.

[Mr John Redwood (Wokingham) (Con)]

Is this not further proof that Labour’s fundamental changes to banking regulation at the beginning of its period in government did a lot of damage and meant that banks could not be regulated properly—most notably, they led to the collapse of a number of HSBC’s important competitors—and further evidence that Labour Members are blaming this Government for things that went wrong on their watch?

[Mr Gauke]

My right hon. Friend makes a very good point. There are many issues that Labour Members should apologise for, but the one issue that they have apologised for was their failures in bank regulation, and this is further evidence of that.

[Mr Dennis Skinner (Bolsover) (Lab)]

Is the Minister aware that on his watch, as opposed to any other, there are currently about 3,250 people examining benefit fraud while only 300 HMRC people are examining fraud by wealthy tax dodgers, many of whom give a lot of money to the Tory party? Why is there one law for the rich and one for the poor? It is time he answered.

[Mr Gauke]

I am afraid that the hon. Gentleman’s numbers are wrong. The biggest department in HMRC deals with enforcement and compliance. He may be referring specifically to the affluent unit or the high net worth unit, both of which are raising substantially more money now than under the previous Government. Again and again, the reality is that HMRC is now more successful in raising money from the wealthy and anyone else who tries to avoid their taxes.

[Mark Garnier (Wyre Forest) (Con)]

The Parliamentary Commission on Banking Standards spent the thick end of 18 months looking into the activities and standards of banks, as well as the abject failure of regulation under the Financial Services and Markets Act 2000. Does my hon. Friend agree that had the system in its report, which resulted in the Financial Services (Banking Reform) Act 2013, been in place, this would not have happened in the first place?

[Mr Gauke]

My hon. Friend makes an important point. One element of this is that we have to look at the regulation of banks, and there were clearly weaknesses in the system that we inherited. Just as we have addressed weaknesses in the way that tax was collected, we have addressed weaknesses in the way that banks were regulated.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Tax evasion is illegal in this country and in Europe. How many prosecutions have resulted from the revelations of tax evasion at HSBC?

[Mr Gauke]

As I outlined in my remarks, the main focus for HMRC has been the use of civil penalties. That approach has been followed consistently under Governments of all colours. There has been one prosecution in respect of this evidence. It is worth pointing out that prosecutions as a whole are on course to increase fivefold in this Parliament.

[Steve Baker (Wycombe) (Con)]

Successive Governments have incentivised particular investments using tax inducements, only to be surprised when things are taken too far. Will my hon. Friend publish a report that shows the extent to which this debacle was created by tax inducements introduced by the Labour party?

[Mr Gauke]

There clearly have been issues with some tax inducements being used for avoidance purposes. To be fair, this matter relates more to tax evasion. None the less, it is important that legislation is tested and it is important that we now have a general anti-abuse rule, which we did not have in 2010, to ensure that reliefs and exemptions are not exploited in a way that is contrary to Parliament’s intention.

[Stewart Hosie (Dundee East) (SNP)]

In March 2012, a protocol was signed between the UK and Swiss Governments, changing the previous tax agreement. It included the provision for a one-off payment to cover past misdeeds and tax rates of up to 41%. Given the revelations from HSBC, is it the Government’s intention to look again at the protocol, or does the Minister believe that it is robust enough for what we are seeing?

[Mr Gauke]

The Swiss deal is on course to bring in £1.2 billion that would not otherwise have been brought in. Since the agreement was signed, we have made much further progress, with 90 countries, including Switzerland, signing up to the automatic exchange of information, which means that the era of bank secrecy is over and that it will not be possible to hide assets in the way that it was in the past. That is a consequence of the UK’s leadership on this front.

[Paul Burstow (Sutton and Cheam) (LD)]

While we are pursuing those who have benefited from the HSBC tax evasion scheme, what is being done to pursue those who designed and offered the scheme in the first place, and what questions are being asked of the auditors of the bank, such as why they do not appear to have blown the whistle on the scheme?

[Mr Gauke]

One challenge in this case is that the behaviour was carried out by a Swiss subsidiary in Switzerland. It is for the prosecuting authorities in this country and HMRC to decide whether any action can be taken against that HSBC entity. To make a wider point, the Government have taken a lot of action to strengthen the powers against those who promote tax avoidance schemes. Indeed, we are implementing reforms to tighten those powers, making it much harder for people to promote tax avoidance schemes.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

To the British people, this looks like one rule for the uber-wealthy and another rule for the rest of us. Will the Minister explain why there has been only one prosecution in five years?

[Mr Gauke]

Part of the issue is that, as I have said, HMRC has consistently used civil penalties as the most cost-effective way of collecting the revenue and changing behaviour. When these cases have been taken to the Crown Prosecution Service, it has taken the view that a successful prosecution would be unlikely without corroborating or additional evidence and just on the basis of the data from the leaks.

[Margot James (Stourbridge) (Con)]

The last Government presided over an unsustainable boom in the financial services sector and, at that time, aggressive tax avoidance flourished. What steps has my hon. Friend taken to close the tax loopholes that were left wide open by the last Government?

[Mr Gauke]

My hon. Friend raises a good question, and this Government have closed 42 loopholes. We inherited a tax system in which not enough had been done to tackle tax evasion or avoidance, and we have addressed that over the past four and a half years. That is partly why the yield from HMRC’s activities has risen from £17 billion in 2010 to a forecast £26 billion this year.

[Jenny Chapman (Darlington) (Lab)]

Will the Minister confirm that he first received the files on this issue in 2010, and explain why in the past five years he has not seen fit to come to the House and share information about it? Indeed, he would not be here today had he not been dragged here by the Opposition.

[Mr Gauke]

This information about HSBC has been in the public domain since 2007—that is when the leaks occurred. The whole story may have come as a surprise to the hon. Lady, but it should not have done.

[Mark Field (Cities of London and Westminster) (Con)]

It is profoundly depressing that there is yet another scandal on the front pages to do with one of our banks, given the importance of a functioning banking system to our whole economy. It is also a bit depressing to watch people with the benefit of hindsight suggesting that they would have acted differently when in government. Will the Minister say how we can work across Parliament and all parties, to ensure a banking system that works for all small and medium-sized businesses that desperately require money to ensure ongoing economic growth?

[Mr Gauke]

I refer back to the point made by my hon. Friend the Member for Wyre Forest (Mark Garnier) about the work undertaken by the Banking Commission. I hope we have built a consensus around the significant reforms that occurred under this Government, which have put our banking sector on a much firmer footing.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Small businesses, which are the life blood of our economy, often complain to me about the lack of flexibility they receive when dealing with HMRC. How can the Minister justify promoting the former chief executive of a bank that was actively promoting tax evasion and avoidance to Ministers? What sort of message does that send to small businesses and wealth creators in my constituency?

[Mr Gauke]

HMRC has successfully run the time to pay arrangements over a number of years, which has provided support to a large number of small businesses up and down the country. Lord Green was a very good trade Minister—[Interruption.] Yes, “was”, because he is no longer a Minister, which may have escaped the notice of some Opposition Members. He was qualified to perform the role of trade Minister, and there is no evidence to suggest that he was involved in any of these activities.

[Sir Tony Baldry (Banbury) (Con)]

Will my hon. Friend clarify the fact that the previous Government introduced stamp duty intermediary relief in autumn 1997, and that the shadow Chancellor, who was then City Minister, extended that relief in 2007—relief that Labour now attacks? Is that a further example of confusion on the Opposition Benches about how to deal with tax avoidance?

[Mr Gauke]

My right hon. Friend makes a good point. That confusion was followed by the weekend’s confusion whereby countries that do not have a public central register—as opposed to other territories that do not have a public central register—are on a blacklist. Clearly the Labour party desires to say something about tax, but it is a pity that the bar is not set a little higher for it to say something sensible about tax.

[Chris Bryant (Rhondda) (Lab)]

The thing about the Prime Minister’s appointment of Stephen Green as trade Minister is that unfortunately the Prime Minister has got form on appointments—we have only to think of Andy Coulson. Somebody comes along from a company that has been up to no good, and the Prime Minister does not ask the important questions; he does not carry out due diligence but just goes, “Oh, you’re rich, you’re powerful. Come on in, no questions asked.” Does the Minister feel any element of shame that instead of tackling tax evasion and tax avoidance, this Government have effectively promoted it by putting it in the Government?

[Mr Gauke]

I have to say to the hon. Gentleman that that is pretty desperate. He says we have not dealt with tax avoidance and tax evasion. Look at the record. Look at the way the yield has increased. Look at the rules that have been changed. Look at HMRC’s additional powers. Look at the culture change we are seeing in this country, in terms of tax evasion and tax avoidance. I just regret that 10 years ago there was such a lax attitude to these things. The Government of the time have to accept some responsibility for that.

[David Rutley (Macclesfield) (Con)]

Does my hon. Friend agree that the failure of the previous Government to act on this matter fits with a pattern of inactivity on the deficit, on banking regulation and, again, on tax avoidance?

[Mr Gauke]

I think that is right. I suspect that the reason why the previous Government had a lack of grip and focus on tax evasion and tax avoidance was that there was simply the view that the public finances were going to be fine whatever, and that they did not really need the money and did not need to strain in this area. That is why there was a lack of progress. I am pleased that we are making that progress now.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

I do not want to personalise this; I have always rather admired Stephen Green for very many reasons. What I dislike is the culture that this HSBC scandal represents. The ordinary people in my constituency work hard and pay their taxes. They would get into terrible trouble if they tried to get away with anything. The fact is that those like PricewaterhouseCoopers, Grant Thornton and the banks, who have done these dodgy deals for years, have never had to pay.

[Mr Gauke]

When it comes to feeling abhorrence at the culture of those who think that they can not pay their fair share and can avoid or evade their taxes, I agree with the hon. Gentleman; he is absolutely right. It is necessary to take that on—to make changes in the law where necessary and ensure that HMRC has the capability to address these matters. People in businesses should pay the tax that is due under the law.

[Andrew Stephenson (Pendle) (Con)]

Labour first talked about introducing a general anti-abuse tax rule in 1997, but in 13 years did absolutely nothing. Will my hon. Friend confirm that we have now introduced such rules to deter the creation of abusive tax avoidance schemes?

[Mr Gauke]

I can indeed. The previous Government looked at this and said it could not be done. We have looked at it, and have put rules in place. Indeed, we are looking at introducing penalties for breaches of them as well. I am grateful to my hon. Friend for raising that point.

[Diana Johnson (Kingston upon Hull North) (Lab)]

The Minister said a couple of times that there was no information or evidence against Lord Green at the time of his appointment. Can the Minister spell out exactly what due diligence was carried out at the time of his appointment?

[Mr Gauke]

On HSBC generally, there are clearly questions that need to be answered about what happened at HSBC between 2005 and 2007. HMRC has been taking action against about 1,000 people who were involved in this matter, where there is evidence that they have broken the UK law. HMRC will continue to take action in the event of any further evidence arising; I make that point about our approach. On Lord Green, what I would say is that he was a successful trade Minister. There is no suggestion, and no regulator has suggested, that he was at fault with regard to what happened with the Swiss subsidiary.

[Richard Harrington (Watford) (Con)]

The Government should be congratulated on the results they have achieved in collecting taxes that had been avoided and evaded because of a lax regime before they came to power. This is really two points. First, should blame be cast on this Government for something that happened, and does need investigating, when the previous Government were in power? Secondly, on the appointment of Lord Green, there was presumably at least the same level of due diligence as there was when the last Labour Prime Minister put him on his close business policy advisory committee.

[Mr Gauke]

My hon. Friend makes two good points. For the good of the public finances, we have taken tough action to deal with tax avoidance and evasion, and we will continue to do so, because that is what the British people expect of us.

[Mr David Winnick (Walsall North) (Lab)]

Despite all the ministerial excuses, is not the truth that these tax cheaters and spivs—disgraceful people—are so connected with the Tory party that this Government will not take any action? They are allies of, and donate large sums to, the Tory party.

[Mr Gauke]

Putting aside the paranoia and conspiracy theories, let us consider the Government’s record and the steps we have taken, time and again, to ensure that those who should pay more in tax do pay more in tax. That is the reality.

[Mr Peter Bone (Wellingborough) (Con)]

This is an artificially generated question, because there is a general election coming up. Everybody in the House is against evasion, which is illegal, and successive Governments have closed loopholes on avoidance. In fact, this Government have been rather good at that. Is this not just a general election question?

[Mr Gauke]

My hon. Friend is more worldly than I am, perhaps, but he raises an important point. We have tried to do many things to reduce tax avoidance and evasion, but I accept that we have not been able to go back in time and stop it happening before we came to office.

[Kevin Brennan (Cardiff West) (Lab)]

Ten years ago, when the Minister’s party was in opposition, Conservative Members, including the Chancellor, were calling for less, not more, regulation of the banks and the City. Will Lord Green be at the Tory party’s black and white ball tonight for the uber-rich, and will the Minister advise Lord Green, if he has any spare cash, to donate it back to the taxpayer, instead of to the Tory party?

[Mr Gauke]

I think the hon. Gentleman has just made the point that my hon. Friend the Member for Wellingborough (Mr Bone) raised in the previous question.

[Julian Smith (Skipton and Ripon) (Con)]

Last week, Bill went missing. This week, it is Ed, who had sole responsibility for these issues in 2007. Why does the Minister think that no substantive action was taken in those years?

[Mr Gauke]

That is a very good question for the shadow Chancellor. It is a pity he is not here today.

[Derek Twigg (Halton) (Lab)]

In his statement, the Minister said that the information was passed to HMRC under conditions restricting what it could be used for. Will he enlighten the House on what those conditions were and whether Ministers were consulted about the nature of those restrictions?

--- Later in debate ---

[Mr Gauke]

The restrictions were essentially that the information could be used only for pursuing tax evasion prosecutions, not for other matters, such as money laundering prosecutions, for example. On the precise arrangements and conditions, it is worth pointing out that the first request for information was made by HMRC in February 2010, under the previous Government. I am not sure what conditions Ministers were consulted on at that point.

[Sarah Newton (Truro and Falmouth) (Con)]

Like me, small businesses in my constituency paying their taxes get angry when they see big international corporations getting away with avoiding their taxes. Will my hon. Friend update us on the action he is taking to ensure that multinational companies pay their fair share of tax to HMRC?

[Mr Gauke]

On multinational companies, I would make three points. First, we are ensuring that HMRC’s large business unit has sufficient resources to monitor large businesses adequately. Secondly, we are leading on international reform through the base erosion and profit shifting project with the OECD. Thirdly, I would highlight the diverted profits tax measure announced at the last autumn statement, which has been consulted on in recent weeks, and for which we hope to legislate in the Finance Bill before the end of the Parliament.

[Frank Dobson (Holborn and St Pancras) (Lab)]

The public cannot understand why the names of these self-confessed tax swindlers are remaining secret. Will the Government publish the list of those with whom HMRC has come to an agreement, so that the public can see it and we can check it against the list of donors to the Tory party?

[Mr Gauke]

HMRC is essentially performing the same process that has been undertaken for many years, including when the right hon. Gentleman’s party was in office. It is consistent, for example, with the Liechtenstein disclosure facility, which was agreed by the previous Government, the point being that it is the most effective way of getting the tax, the interest and the penalty; of getting the money into the Exchequer; and of changing behaviour. I make no apology for HMRC pursuing that route as the first line, because it has proven to be effective.

[David Mowat (Warrington South) (Con)]

Three years ago, HSBC was fined $2 billion for acting as money launderers for Mexican drug cartels. Those transactions, and those that we are discussing today, both happened before 2010. Is the Financial Secretary confident that the measures we brought in subsequently will stop either case happening again? Has he had a discussion with HSBC regarding continued transgressions of this type and its banking licence?

[Mr Gauke]

My hon. Friend makes an important point. When it comes to banking licences, politicians should perhaps not be directly involved; we have a regulator for that purpose. Ensuring a change of behaviour in our banks is important. We have all been appalled by this behaviour over the last few hours––for some of us, it has been longer. This occurred some years ago, at the same time as we saw banks acting recklessly in a number of ways. It is really important for the banking sector to get its house in order. We know that the reforms we have undertaken as a Government can play an important role in ensuring that happens.

[John McDonnell (Hayes and Harlington) (Lab)]

Let me ask a simple question. Was Lord Green interviewed about these matters by HMRC officials or the Cabinet Secretary at any time?

[Mr Gauke]

I am not aware of whether interviews were held on Lord Green’s appointment, either as a lord or as a business adviser, under the previous Government.

[Charlie Elphicke (Dover) (Con)]

Is the Minister aware that in the years up to 2010, income tax receipts rose by 81%, while non-oil corporation tax receipts rose by 6%? Does he agree that an industrial-scale tax-avoidance culture arose, fanned by the prawn cocktail offensive, whereas this Government’s actions have helped to close the tax gap?

[Mr Gauke]

As a Government, we believe in low and competitive rates of corporation tax, but we also believe that those taxes should be paid. That is why we have strengthened the capacity of HMRC, why we are introducing the diverted profits tax, and why we are leading the way in international reforms of the corporate tax system.

[Grahame M. Morris (Easington) (Lab)]

The public are rightly concerned about the City financiers and hedge funds that donate large sums of money to the Conservative party, which is seemingly enriched by the tax avoiding and the dodgy dealings. The Minister says that it all happened on our watch. Why, then, in 2012, when this Government introduced the national loan guarantee scheme, did they not specifically exclude those companies that were based in foreign tax havens?

[Mr Gauke]

Let me address the issue of hedge funds. It was this Government who brought in some reforms to limited liability partnerships, which have resulted in a substantial increase in revenue from those partnerships, many of which are hedge funds.

[Mr David Nuttall (Bury North) (Con)]

Can my hon. Friend reassure those of my constituents who seek to reduce their tax liability by, for example, investing in individual savings accounts—whether it be through HSBC or anyone else for that matter—that they are doing nothing illegal, and that it is only those seeking to evade tax by deliberately concealing their income, thereby misleading HMRC, who are breaking the law and risking prosecution?

[Mr Gauke]

Tax evasion is a criminal offence, and action will be taken in that regard. I should add that we also take firm action against aggressive, contrived, artificial avoidance. Having an ISA does not fall into that category, which is consistent with what Parliament intended, but when people try to abuse the rules, we will take action.

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

The Minister cannot have it both ways. He has asserted several times today that Lord Green had no knowledge of, or involvement in, these issues as chairman of HSBC. That suggests to me that the Government asked those questions of Lord Green. In the interests of transparency, will the Minister now commit himself to placing in the Library all the information surrounding the questions that I assume have been asked, given his certainty in answering, so that we can be the judge?

[Mr Gauke]

I repeat that, as far as I am aware, no one has come forward with any evidence suggesting that Lord Green was involved in the activities of the Swiss subsidiary about which we have been talking today.

[Mr Robin Walker (Worcester) (Con)]

Of course it is right for us to do all that we can to recover taxes that have been either wrongly avoided or illegally evaded, but is it not just as great a scandal that the Labour Government allowed their friends in private equity—the same people to whom they tried to sell Royal Mail and the Post Office—to avoid tax legally by keeping capital gains tax so low that multi-millionaires paid less tax than their cleaners?

[Mr Gauke]

My hon. Friend has raised an important point. There was a problem with the way in which our system was working, and, as my hon. Friend says, the fact that cleaners paid a higher rate of tax than some people in private equity demonstrates how the last Government went awry.

[Fiona O’Donnell (East Lothian) (Lab)]

The Minister spoke about the leadership that the Prime Minister had shown on the issue of tax and transparency, but let us not forget that this was the same Prime Minister who said that he was relaxed about publishing his own tax return, and we are still waiting. Can the Minister update the House on his progress, and success, in the Crown dependencies and overseas territories? How many of them have committed themselves to, or ruled out, a public register?

[Mr Gauke]

We are still putting pressure on overseas territories and Crown dependencies, but all of them have signed up to the automatic exchange of information, which is a substantial breakthrough. I do not agree with the idea of putting all of them on a blacklist when France, Germany and the United States—indeed, 33 out of 34 OECD countries—have still not signed up to a public register. They are signed up, by and large, to a central register, but not yet to publishing it.

[Bob Blackman (Harrow East) (Con)]

Will my hon. Friend confirm that over the last four years, as a result of tighter regulation and the closing of loopholes, an additional £31 billion has been collected in taxes from large businesses, and that much of it can be used to fund public services or pay down the deficit? Will he confirm that none of that happened under Labour?

[Mr Gauke]

As my hon. Friend says, £31 billion has been raised from large businesses as a consequence of HMRC’s compliance activity. That underlines our determination, and HMRC’s determination, to collect the tax that is due under the law.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

Will the Minister remind the House how much the Chancellor said would be raised by the Swiss tax deal, how much has actually been realised, and why he thinks the Chancellor got his sums so wrong, as he has in relation to so many other issues?

[Mr Gauke]

It was forecast that we would raise about £3 billion. The amount that we have raised so far is just short of £1 billion, and we expect that to rise to £1.2 billion. Other measures that we have introduced have raised more than the forecast amount, and that £1.2 billion would not have been raised had we not entered into the deal.

[Andrew Bridgen (North West Leicestershire) (Con)]

Does the Minister agree that it is Labour Members who have a record of avoidance? They avoid talking about the economy, they avoid talking about immigration, and after today’s debate, in which their disastrous record in government has been exposed, they will not be talking about tax evasion either.

[Mr Gauke]

I can only say that I hope the country can avoid another Labour Government.

[Michael Ellis (Northampton North) (Con)]

The public are rightly disgusted by tax evasion and avoidance, but is not the simple truth of the matter that when we cut through all the bluster from the Labour party, this Government have raised billions of pounds more than the previous Government did in this area, and have collected a huge sum more than Labour ever did?

[Mr Gauke]

I think that is a very good point to end on. Despite all the bluster, the numbers point to the fact that this Government are more successful in dealing with these matters than the previous Government were. It is not about the heat and the noise; it is about delivery, and this Government are delivering.

National Insurance Contributions Bill

David Gauke Excerpts

Tuesday 3rd February 2015 Commons Chamber

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

I beg to move, That this House agrees with Lords amendment 1.

Some right hon. and hon. Members may recall the important initiative on apprentices announced by my right hon. Friend the Chancellor of the Exchequer in his autumn statement on 3 December. The Chancellor announced that the Government will abolish employer class 1 national insurance contributions for apprentices under the age of 25 from April 2016, building on the removal of employer class 1 national insurance contributions for all under 21-year-olds from April 2015.

Amendments to section 9 and new section 9B of the Social Security Contributions and Benefits Act 1992 and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 give effect to the Government’s intention to abolish employer class 1 NICs for apprentices under the age of 25. From April 2016, employers of apprentices under the age of 25 will pay a zero rate of secondary class 1 NICs on the earnings of those employees, and that zero rate will apply to earnings below the upper earnings limit.

As my right hon. Friend the Chancellor made clear, apprenticeships are at the heart of the Government’s drive to equip people of all ages with the skills valued by employers. This measure is intended to support employers who provide apprenticeships to young people by removing the requirement that they pay secondary class 1 NICs on earnings up to the upper earnings limit for those employees. The measure is also intended to support youth employment. Under this Government, employment is at its highest ever level while unemployment is now lower than when the Government came to power. However, there is more to do to tackle youth unemployment and ensure that no one is left behind.

The amendment provides a zero rate of employer class 1 national insurance contributions on the earnings of apprentices under the age of 25 from 6 April 2016. The measure will apply to both new and existing apprentices aged under 25 and is not time limited.

The main features of the clause are, first, that there is a regulation-making power to define “apprentice”. There are existing statutory definitions relating to apprenticeships. For example, in England and Wales, the Apprenticeships, Skills, Children and Learning Act 2009 introduced the concept of an apprenticeship agreement, which is defined in part with reference to “an apprentice”. Because education and training is a devolved matter, and because not all apprentices are employed under apprenticeship agreements, we will need to look at the approaches taken towards apprenticeships in the different devolved Administrations. The power will allow time to discuss the definition with interested parties such as the Skills Funding Agency and their devolved equivalents. The power will also enable us to respond simply to changing statutory definitions and requirements in future.

Secondly, there are regulation-making powers to vary the age group to which the zero rate of secondary class 1 NICs for apprentices applies. For example, the Government could in future allow for an increase in the age bracket of apprentices falling into the zero rate earnings band of secondary class 1 NICs.

Thirdly, there is a regulation-making power to ensure that the benefit of the zero rate of secondary class 1 NICs for apprentices can be enjoyed only in respect of earnings below a certain level. In other words, the power will provide a means to introduce an upper secondary threshold for apprentices in the same way as we are doing for under 21s. That threshold will be set at the level of the upper earnings limit in the 2016-17 tax year.

The Government’s objective is to make all apprenticeships world class. Around £1.5 billion is spent annually to support apprenticeship training, and the Government are committed to driving up the quality of apprenticeships. We are currently taking forward a number of reforms that will have a positive impact. The Government believe that the measure will, alongside other initiatives on apprenticeships and the abolition of employer’s NICs for under 21s from April 2015, help to address the problem of youth unemployment in the UK.

I hope that, with that explanation, the House will accept the amendment made in the other place.

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

I am grateful to the Minister for introducing Lords amendment 1, which was the main amendment made in the other place. As he said, it enacts the announcement made in the autumn statement that employer national insurance contributions for apprentices aged under 25 will be abolished from April 2016. The Opposition support the measure. There is agreement on both sides of the House and across party political boundaries that we need more apprenticeships; and that youth unemployment, and long-term youth unemployment, remain a problem not only for the individuals involved, but for the economy as a whole. We hope the measure helps to alleviate that somewhat.

The Minister said that there is a regulation-making power within the measure for the definition of “apprentice” and referenced the 2009 Act definition, which relates to an apprenticeship contract. That concern was raised in the other place when the measure was debated. Will he give the House more information about progress in discussions with the devolved legislatures about the definition to be applied? How confident is he that the provision will not be manipulated in a way that enables a reduction by companies of their tax liabilities? The lack of a definition of “apprentice” causes concern that that might arise.

The current quality of apprenticeships has come under scrutiny in this Parliament. A recent report from the Department for Business, Innovation and Skills showed that 15% of apprentices are paid below the national minimum wage, and that 28% of level 2 and level 3 apprentices who do not have a written contract are paid below the national minimum wage. We also know that one in five apprentices receive no formal training. Will the Minister consider a stipulation on quality when he looks at the definition of apprentice? That would go some way to alleviating some of the concerns raised about potential gaps in the measure that could lead to abuse, or to a proliferation of apprenticeships that are not of a high quality and that do not add too much to the future prospects of the young people engaged in them. It would be helpful to hear the Minister’s further comments on those points.

[Mr Gauke]

I welcome the hon. Lady’s support for the measures. It is worth noting the considerable progress made on apprenticeships under this Government. We have created 2 million apprenticeships during this Parliament; they are giving young people the skills they need to succeed in the global race and get on in life. That is significant progress—progress on the number of apprenticeships has been considerably faster than was previously expected. For example, the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), said in 2008 that he intended to have 90,000 more young people taking part in apprenticeships by 2013. He said that, together with opportunities for those in their 20s and older, that would mean 220,000 people starting an apprenticeship each year overall. In 2011-12, 520,000 people started an apprenticeship, so we can see that there has been dramatic progress. The measure helps us to pursue that policy yet further.

[Jim McGovern (Dundee West) (Lab)]

I am intrigued as to how the Minister will define an apprenticeship these days. I was an apprentice in the construction industry. I served a four-year apprenticeship from the age of 16 to the age of 20. My father had to sign my indentures to say that I was indentured to that company, and possibly sold into slavery in a way. What is an apprenticeship these days? The Minister talks about half a million new apprenticeships, but are they apprenticeships as I understand them?

[Mr Gauke]

The hon. Gentleman goes to the heart of the question asked by the hon. Member for Birmingham, Ladywood (Shabana Mahmood) about who will qualify for the relief. As I have remarked, we are taking a power to define apprenticeships. Given that this is a devolved matter, it is important that we discuss it with the devolved Administrations. We want to support apprenticeships and will seek to achieve a broad definition for the purposes of the relief. However, the apprenticeship system across the UK is complex and evolving. Education and training is a devolved matter. Apprenticeships operate slightly differently in England, Scotland, Wales and Northern Ireland, and there are differences between Government-funded apprenticeships and independent employer schemes. The Government will discuss the definition of “an apprentice” with the Skills Funding Agency and its devolved equivalents before committing ourselves to a final definition. It is important that the definition is robust, satisfying minimum compliance standards while achieving the objective of supporting the provision of apprenticeships to the under-25s.

In terms of overall support for apprenticeships, the Government have done a great deal. We spend about £1.5 billion annually to support apprenticeship training. In Budget 2014, £170 million of additional funding was made available for apprenticeship grants for employers in 2014-16, providing a grant of up to £1,500 per apprentice for small businesses. The new budget will fund more than 100,000 additional incentive payments for employers to take on young apprentices.

It is also worth pointing out that in 2012 the National Audit Office recognised the strengths of the Government’s apprenticeship programme, highlighting how it continued to be valued by learners and businesses. It concluded that public spending on apprenticeships offered a good return, estimated at £18 for each £1 of Government investment. Evidence from the Department for Business, Innovation and Skills suggests that returns may be higher, at £28 for every £1 of Government investment. I hope Members will resist the temptation to criticise the substantial progress that has been made on apprenticeships over the course of this Parliament. It has been significant.

On the definition of apprentices, which I touched on earlier, there will need to be discussion with the devolved Administrations and the Skills Funding Agency. We want a robust definition, but we have to bear in mind the complexities in this area.

On eligibility, for a business to be eligible to work with training providers to create an apprenticeship programme, the employer offering an apprenticeship needs to employ an apprentice for a minimum of 30 hours per week, pay at least the national minimum wage for apprentices, support on-the-job learning and be involved in reviewing their progress. On the question raised by the hon. Member for Birmingham, Ladywood regarding manipulation, I would make the point that those safeguards are in the system.

One further point I believe is important is that, as the Government are doing with employment allowance and under-21s from April this year and as we did when we came to office and increased the threshold before employer national insurance contributions is paid, we have done a great deal to reduce the burden on businesses of employer national insurance contributions. That has helped in creating the substantial progress in employment we have seen in recent years. Had we pursued the policy we inherited—an increase in the jobs tax—we would not have seen that progress.

[Steve Baker (Wycombe) (Con)]

On reducing the burden on business, the Government have previously considered the notion of merging national insurance. Has the Minister made any progress down that line? I am acutely aware that national insurance still creates the impression that people have contributed to a fund out of which benefits are paid, when of course they are mostly pay-as-you-go. Can we reduce the burden on business, simplifying national insurance by simplifying the overall tax system?

[Mr Gauke]

My hon. Friend raises an interesting point in this context. He is absolutely right that the Office of Tax Simplification recommended we looked at that. There is quite a lot going on in relation to payroll: devolution of income tax in Scotland, the auto-enrolment of pensions and the introduction of real-time information to the payroll system. They have caused considerable challenges—all for good reason; all are doing much to improve the tax system—and we have held off pursuing further integration of income tax and the national insurance contributions system.

My hon. Friend was right to raise a point about people’s understanding of the tax system and greater transparency. The Government have introduced tax summaries so that people can see how much they are paying in income tax and national insurance. That brings greater transparency to our tax system, so we have made progress on that front. On the integration of national insurance and income tax more widely, it remains a position we continue to review. Some evidence from internal reviews was that the benefits to business of bringing the two systems together were perhaps not as great as some outside commentators had anticipated. In those circumstances, we did not want to rush into this matter, but I assure my hon. Friend that we continue to keep it under review.

[Steve Baker]

Will the Minister remind me whether tax summaries include employers’ national insurance? I am always conscious that when we are employees we must generate an amount of value for our employer somewhat greater than even our gross pay, so is employers’ national insurance contribution also reflected in the summary? If not, could it be?

[Mr Gauke]

There is a reference to employers’ national insurance contribution. The tax summaries state how much is paid in income tax and in employees’ national insurance contributions. There is also a line in the summaries saying, “Your employer has paid this much employers’ national insurance contribution.” Returning to the issue directly before us in relation to apprenticeships, there is an argument—I think a lot of economists would make this point—that ultimately the burden of employers’ national insurance contributions is taken up by the employee, as they receive less in salary as a consequence. There is also a case that it may be a disincentive for employers to take on employees.

We believe this sensible and well-targeted measure will encourage businesses to take on apprentices. We have not focused particularly on the limit, but there is provision to prevent manipulation such as the classifying of premier league footballers as apprentices, which might result in a 24-year-old footballer paying no NICs on a salary of £1 million. We have sought to address such abuses.

[George Hollingbery (Meon Valley) (Con)]

Will the Minister develop that point a little by saying exactly how many apprentices he thinks the change will encourage?

[Mr Gauke]

We anticipate that there will be about 3 million apprenticeships over the course of the next Parliament. The provision will come into effect in 2016-17. Not every apprentice is under 25, so not every apprentice will benefit from the provisions, but a large number of apprentices in the next Parliament will benefit.

Overall, we estimate that about 180,000 employers offering apprenticeships in the UK are likely to benefit from the measure. Apprenticeship data from the Department for Business, Innovation and Skills for England for the 2013-14 academic year show that about 500,000 apprentices under the age of 25 are employed throughout the country, and we estimate that about 130,000 apprentices in England are aged 21 to 24. That group will be directly affected by the measure, with those under 21 already benefiting from the zero rate for under-21s from April this year. I hope that information is helpful to the House.

Many Members were delighted by the Chancellor’s announcement on apprenticeships in the autumn statement, which demonstrated, yet again, the Government’s commitment to apprenticeships. If we wish to succeed in the global race, we need a well-educated and well-trained work force and to support employers who provide the training and experience that young people need if they are to be more productive and effective and more likely to make a substantial contribution to the economy.

Quite rightly, we often debate how to improve living standards, but ultimately it is down to improvements in productivity. As the economist Paul Krugman said—I do not often quote him:

“Productivity isn’t everything, but…it is almost everything”.

As part of our long-term economic plan, one measure we are taking to improve productivity is ensuring a well-trained work force, and encouraging apprenticeships is key to that. It is yet another aspect of our long-term economic plan. It will help us improve our productivity, and as productivity increases, so too will wages, salaries and living standards.

[George Hollingbery]

Will the Minister elaborate on the Government’s own productivity and on whether our investment in apprenticeships has been compared with other possible investments in productivity?

[Mr Gauke]

My hon. Friend makes a good point. As I said, the Government invest about £1.5 billion a year in apprenticeships. In its 2012 report, the NAO suggested that for every £1 spent in this area, we got a return of £18, and studies by the Department for Business, Innovation and Skills suggest that the return might be even greater: £28 for every £1 invested. Therefore this offers good value for money. Our policy on apprenticeships is an additional step, and I am delighted that the tax system can be used in this way. Once again, it demonstrates that the Government are on the side of those who wish to work hard, improve their skills and get on in life.

With those remarks, I hope that the House will agree with the Lords amendment.

Lords amendment 1 agreed to, with Commons financial privilege waived.

[Mr David Burrowes (Enfield, Southgate) (Con)]

On a point of order, Mr Speaker.

--- Later in debate ---

[Mr Speaker]

In that case, we shall come later to the hon. Gentleman. I am saving him up. It would be a shame to squander him too early.

Clause 2

Consequential etc power

[Mr Gauke]

I beg to move, That this House agrees with Lords amendment 2.

[Mr Speaker]

With this it will be convenient to consider Lords amendments 3 to 5.

[Mr Gauke]

This group comprises four minor technical amendments to clause 2 and schedule 1, which deal with simplifying the collection of class 2 national insurance contributions payable by the self-employed.

It might help the House if I briefly outline the four amendments. Amendments 2 and 3 are the Government’s response to the report, published on 27 November, by the Delegated Powers and Regulatory Reform Committee on the delegated powers contained in the Bill. The report drew to the House’s attention the power in clause 2 to amend primary and secondary legislation as a consequence of the reform of class 2 NICs. This power is currently subject to the negative procedure. The Committee said that the justification in HMRC’s “Delegated Powers Memorandum” was not sufficient for the negative procedure to apply where the power allows for the amendment or repeal of primary legislation, and the Committee recommended that in this instance the power be subject to the affirmative procedure. The Government have considered and acted on the Committee’s report. Lords amendment 2 provides that regulations made under clause 2 that amend or repeal primary legislation be subject to the affirmative procedure. Lords amendment 3 provides that the negative procedure will continue to apply to any use of the power set out in clause 2 where a statutory instrument does not contain any regulations amending or repealing primary legislation.

Lords amendments 4 and 5 are minor technical amendments dealing with the simplification of the collection of class 2 NICs payable by the self-employed. This is a matter that I have previously debated, if not at great length, with the hon. Member for Birmingham, Ladywood (Shabana Mahmood). Amendment 4 amends schedule 1, which inserts new section 11A into the Social Security Contributions and Benefits Act 1992. It will ensure that the relevant self-assessment penalties apply to class 2 contributions collected through SA by adding a missing reference to the SA under-declaration penalty contained in schedule 24 to the Finance Act 2007. It was always the Government’s intention to align penalties for class 2 contributions more closely with those for SA as part of the reform of class 2 so that the self-employed are not subject to two different regimes, but this penalty was unintentionally omitted. Lords amendment 5 makes a corresponding amendment to the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

With that explanation, which I know the House was keen to hear, I hope it will agree with the Lords amendments.

Lords amendment 2 agreed to.

[Mr Speaker]

I call the Minister to move the remaining Lords amendments.

[Mr Gauke]

Formally.

[Mr Speaker]

It is always a joy to hear the Minister develop the argument, but he is exercising a self-denying ordinance. I must say that the way he has addressed matters thus far—comprehensively and courteously, in his usual manner—has been accompanied by a slight increase in the number of Members present for the next business. It is not for me to suggest that those two phenomena are causally related, but some people might think they are. I suppose if one is in a tight corner and hoping that the Minister will develop the arguments fully, one can always best depend (a) on a Treasury Minister and (b) on a lawyer, and he is both.

Lords amendments 3 to 5.

Oral Answers to Questions

David Gauke Excerpts

Tuesday 27th January 2015 Commons Chamber

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

1. What recent estimate HM Revenue and Customs has made of the amount of uncollected tax in the UK.

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

Her Majesty’s Revenue and Customs published its latest tax gap estimates on 16 October 2014. In 2012-13, the tax gap was estimated at £34 billion, 6.8% of total tax due.

[Katy Clark]

The Government’s own figures suggest that the tax gap has increased by £3 billion. Independent experts say that the tax gap could be up to £120 billion. In North Ayrshire, the local tax office has been closed by this Government, and since 2010, 10,000 people in the Treasury have lost their jobs, despite the fact that every tax inspector brings in far more—in taxes—than they cost. Do the Government believe that they should rethink their strategy?

[Mr Gauke]

The reality is that the tax gap for 2012-13 was lower than in any year under the previous Labour Government. As for the yield—the money that is brought in by HMRC as a consequence of its activity—that has gone up by £9 billion since 2010-11, and is forecast to be £26 billion this year. That is a very good record.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

Will the Minister confirm that the compliance tax yield for this year has been revised up to £26 billion, which is an increase of £9 billion since this Government came to office?

[Mr Gauke]

My hon. Friend is absolutely right to make that point, and there has been an increase—[Interruption.] It is a point that bears repeating. Members really should take in the fact that, under this Government, we have seen a significant increase in HMRC’s yield. HMRC is more effective than ever in dealing with tax evasion and tax avoidance.

[Nick Smith (Blaenau Gwent) (Lab)]

Two thirds of people getting tax credits are in work, so why does the Chancellor want to cut tax credits again? That will penalise hard-working families.

[Mr Gauke]

I suspect that, a couple of weeks ago, the hon. Gentleman walked through the Lobby in support of the charter for fiscal responsibility, which requires us to find £30 billion of savings, either in tax increases or in spending cuts. If he is not prepared to take action in that area, he has to tell his constituents where he is prepared to take action.

[Mr Philip Hollobone (Kettering) (Con)]

I congratulate Her Majesty’s Treasury on its successful efforts to reduce the tax gap. Where are the main hiding places that people are using to try to avoid tax?

[Mr Gauke]

My hon. Friend raises an important question to which I could give a lengthy reply. But what I will say is that, as a Government, we have taken action, for example, to improve the automatic exchange of information between various jurisdictions, so that there is nowhere for people to hide their money. The net is closing in on those who have evaded their taxes, and we are increasingly effective at dealing with tax avoidance as well.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

With economic growth now showing signs of slowing and wages stagnating, is the Minister not worried that the amount of income tax and national insurance that he said he would collect is failing to live up to expectations? Will he tell the House by how many billions of pounds income tax and national insurance receipts have fallen short because of low wages, compared with the original Office for Budget Responsibility forecasts back in 2010?

[Mr Gauke]

We are aware that, since 2010, the economy has had to face challenges, which in 2010 were not anticipated by the OBR to occur in the way that they did. We have had to deal with the eurozone crisis, the high commodity prices at the time and the aftershocks of the financial crisis. The consequences have been significant, but if we want wages to rise we need to improve productivity. That is about improving our education system, and having more apprentices and a competitive tax system, and that is what this Government are delivering.

[Chris Leslie]

The answer is that income tax and national insurance receipts are down by a staggering £95 billion over this Parliament. Is it any wonder that the Minister and the Chancellor have failed so woefully to eradicate the deficit, and when will he realise that it is the low-wage economy that is the recipe for more borrowing, more welfare spending and more debt?

[Mr Gauke]

We discovered this morning that in 2014 the UK was the fastest growing major western economy. Employment is at a record level and unemployment has fallen dramatically, contrary to the Opposition’s predictions—but, yes, we have got further to go to reduce the deficit, which is why we need a Government who are prepared to make difficult decisions. All that we have heard from the hon. Gentleman is that he is going to put up fees on gun licences, which is not going to solve the deficit.

[Sir Tony Baldry (Banbury) (Con)]

Am I right in thinking that under the charter for fiscal responsibility, to which everyone recently signed up, we have made it clear that part of the savings that we are going to make involves bearing down on tax avoidance? Indeed, we have set out clearly exactly where we are going to save every penny of the £30 billion that needs to be saved. How is it possible for anyone to sign up to a charter for fiscal responsibility without making it clear where they are going to make those savings?

[Mr Gauke]

My right hon. Friend is absolutely right; the Opposition have given no indication of the balance between tax and spending and how they are going to find that £30 billion. At a time when Labour Back Benchers are saying that Syriza shows the way while those on the Labour Front Bench apparently support a £30 billion fiscal tightening, all we get from the Opposition is chaos.

[Kerry McCarthy (Bristol East) (Lab)]

2. What recent representations he has made to the EU on the cap on bank bonuses.

--- Later in debate ---

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

11. What progress he has made on his fiscal consolidation plans.

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

The Government inherited the largest deficit since the second world war. Since then, we have made substantial progress on reducing the deficit. Borrowing has already fallen by more than a third since 2009-10 and is forecast to have fallen by half this year as a share of GDP. The Government’s consolidation plans have been central to the reduction of the deficit.

[Daniel Kawczynski]

I thank my hon. Friend for that answer. Given the eye-watering amount of British taxpayers’ money that is spent on paying the interest on our national debt, I am pleased that the Government have already reduced the annual structural deficit by half. Does he agree that it is vital to continue with the policy of reducing the annual structural deficit in order to tackle our national debt?

[Mr Gauke]

I completely agree with my hon. Friend, who is right to make that point. We need to go on and run an overall surplus, to ensure that our public finances are sustainable over the longer term.

[Clive Efford (Eltham) (Lab)]

Is the Office for Budget Responsibility not right to say that stagnant wages have led to more borrowing? Is that not the key reason why the Government have missed their borrowing targets by more than £200 billion?

[Mr Gauke]

If we want wages to increase, which we do, we need to improve our education system, ensure that we have a welfare system that makes work pay, improve our infrastructure and have competitive tax systems. In brief, we need a long-term economic plan. That is what we have got with this Government, and it is not what we would have with the Labour party.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

My hon. Friend will recognise that getting the deficit under control is vital if we want a strong economy. For all the posturing that we have seen today from the Labour party about the NHS, does he recognise that Greece, which had a smaller deficit to the one we had in this country when we came to power, had to cut spending on health services by 14%? Does he agree that only a strong economy can deliver a strong health service?

[Mr Gauke]

I completely agree with my hon. Friend, who puts it well. We want a strong NHS, but a strong NHS requires a strong economy, and that requires the Government’s policies to continue.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

In the long-term economic plan—[Hon. Members: “Hurray!”] I would wait for the second part of the question. In the long-term economic plan, is missing a target by 50% evidence of success or failure?

[Mr Gauke]

We have turned the British economy around, and we grew faster in 2014 than any major western economy. Employment is increasing and unemployment is falling, including by 40% since 2010 in the hon. Gentleman’s constituency. That is a success.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

12. What recent representations he has received on creating a northern powerhouse.

--- Later in debate ---

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

T6. This Government are demonising those on benefits, while doing little about tax evasion and avoidance, which, as we have heard, have risen significantly on their watch. Today sees the launch of the Tax Dodging Bill campaign, as 85% of British adults say that tax avoidance by large companies is morally wrong, even when it is legal. Why will the Chancellor not impose penalties for breaches of the general anti-avoidance rule, as we have called for?

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

First, it was this Government who got the base erosion and profit shifting process running with the OECD, looking to deal with the international rules. It was this Government who announced at the autumn statement that we are bringing in a diverted profits tax to deal with some of the contrived and artificial behaviours that people are worried about. It was also this Government who introduced the general anti-abuse rule and it is this Government who are consulting on bringing in penalties for it. I have to say, it is not a bad record.

[Mr David Ruffley (Bury St Edmunds) (Con)]

T5. I commend the Chancellor’s aim of running an overall budget surplus in 2019-20 and cutting the national debt so that the next generation are not saddled with punitive taxes. Does he agree that this is a case of simple fairness, not ideology?

--- Later in debate ---

[Ms Margaret Ritchie (South Down) (SDLP)]

Considering the economic modelling carried out by one of the Treasury’s own economists, Professor Blake, what further progress has been made on reducing VAT on tourism, which would benefit all regions and particularly coastal regions in the UK?

[Mr Gauke]

We have looked at that, but there is a significant cost involved in making the changes. On the point of helping tourism, the hon. Lady will be aware of the substantial increase in Northern Ireland and other places over recent years and, secondly, the coastal communities fund provides a lot of support to many of the areas that benefit from tourism.

[Mr Nigel Evans (Ribble Valley) (Con)]

Cutting beer taxes, raising income tax thresholds and stopping the petrol tax increases proposed by the Labour Government have helped the Evans household and, probably, a number of other household budgets throughout my constituency. In the next Budget, will the Chancellor please keep calm and carry on cutting taxes?

Double Taxation Agreement (Croatia)

David Gauke Excerpts

Tuesday 20th January 2015 Written Statements

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

A double taxation agreement and protocol with Croatia was signed on 15 January 2015. The text of the agreement and protocol has been deposited in the Libraries of both Houses and made available on HM Revenue and Customs’ website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.

It is also available online at: http://www.parliament. uk/writtenstatements

[HCWS209]

Tax Information Exchange Agreement (Monaco)

David Gauke Excerpts

Friday 16th January 2015 Written Statements

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

A Tax Information Exchange Agreement (TIEA) with the Principality of Monaco was signed in London on 22 October 2014 and in Monaco on 23 December 2014. The text of the TIEA has been deposited in the Libraries of both Houses and will be made available on HM Revenue and Customs’ website. The text will be schedule to a draft Order in Council and laid before the House of Commons in due course.

It is also available online at: http://www.parliament.uk/writtenstatements.

[HCWS199]