Static Caravans (VAT)
David Gauke Excerpts(12 years ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
I congratulate my hon. Friend the Member for Beverley and Holderness (Mr Stuart) on securing this debate. He has already made his case to me, leading a delegation of MPs to see me on 17 April, as he said, and I know that he has also made representations to my right hon. Friend the Chancellor. He also spoke passionately about the proposal in our debate on the Finance Bill on 18 April. I am pleased to have the opportunity in the time available to respond in more detail to the concerns that he and other Members have raised.
Let me begin with some general points to put the measure in context. Removing the zero rate of VAT from static holiday caravans is one of a series of VAT measures announced in the Budget that are designed to make the VAT system fairer to all traders and easier to administer and comply with. It will help to create a level playing field by ensuring that all holiday caravans are taxed in line with the sale of other forms of holiday accommodation that have restrictions on permanent occupation, such as touring caravans, camper vans, narrowboats, timeshares and new holiday homes.
Let me address two issues that were raised in my hon. Friend’s speech and in interventions. The first relates to revenue and costings, the second to the impact on businesses. First, the conventions used in the Treasury’s policy costings were set out in the 2010 Budget policy costings document. In brief, policy costings take account of direct effects on the tax base, but do not include indirect behavioural effects—for example, on employment, wages and salaries, or general consumption. However, the indirect economic effects are not ignored; instead, they are captured in the Office for Budget Responsibility’s economic forecast, taking into account, for example, the changes on the relevant sectors.
Diana Johnson (Kingston upon Hull North) (Lab)
I am listening carefully to the Minister. There are 43 people chasing every job vacancy in my constituency this month. The Treasury is not going to make any money from introducing VAT on static caravans, as it has failed to take into account the undoubted unemployment that will result from this measure.
Mr Gauke
As I have said, the Office for Budget Responsibility takes into account the second-round effects of all measures in the Budget.
Time is short, so let me turn to the demand reduction estimates and the figure of 30% that a number of hon. Members have quoted. HMRC has estimated that, as with what are described as “discretionary leisure durables”, expenditure on static holiday caravans will be impacted by the measure, with a 1.5% fall for every 1% increase in price. However, we should all be clear that this reduction in expenditure will apply only to static holiday caravans sold to the final consumer, and only to the proportion of the price of such caravans not already subject to VAT. The reduction in expenditure does not, therefore, apply to the approximately one third of caravans sold to caravan sites for rental. Their price should not change, as the caravan site will normally be able to reclaim the VAT in the usual way. That part of the static caravan market will not be affected by the measure. Neither will the measure affect the 20% of the price of a static holiday caravan that is already subject to VAT in respect of its removable contents.
Taking account of those factors, the overall fall in expenditure should be less than the 30% reduction indicated in the impact assessment. That is because the estimated 30% reduction refers only to the specific parts of the market that will be impacted by the measure: sales to private individuals who cannot reclaim the VAT.
Mr Stuart
Can my hon. Friend confirm that the Treasury did not do that much work on this? Where did it get the one third figure from? It is not one that I have heard from anybody. The Tym & Partners report, which is available and has been since January, talks about 277,760 owned statics and 49,600 rented statics. By no means is 49,000 one third of 277,000. It has been suggested that 750 companies will be affected, but the real figure is more than 2,000. The Treasury did not do its homework and Ministers are in a tough spot because they did not spot that.
Mr Gauke
That estimate was made on the basis of the evidence that the Treasury and Her Majesty’s Revenue and Customs had before them. The point I wish to make is that a genuine consultation is taking place and we look forward to receiving evidence that my hon. Friend has and others have, so that we can make a further assessment of those costings.
Let me now discuss the impact on caravan manufacturers. We recognise that the impact on static holiday caravan manufacturers will not be trivial. The level of the impact will, of course, depend on the variety of products produced by those manufacturers. Many hon. Members are concerned about caravan sites, but it is worth bearing in mind that caravan holiday parks have a variety of sources of revenue, most of which will not be affected by the VAT change. Such sources include: charging a siting fee; running a shop; group insurance scheme commission; commission on the resale of used holiday caravans; and commission on letting on behalf of the owners—sub-letting—and so on.
I recognise that applying VAT to the sale of new holiday caravans will not be welcome, as this has been a significant income stream for many parks. However, there is a good deal of flexibility within the range of products and services that caravan holiday parks offer to allow them to adapt their mix of business to the new VAT treatment of holiday caravans. I recognise that there are challenges involved in adapting to these changes in the tax regime, but there is scope for adaptation.
The main point I wish to make today is that we would welcome any evidence provided through the consultation, which, as my hon. Friend has pointed out, has been extended, be it evidence on the costing or on other matters.
Mr Gauke
I have only one minute left, and I just wish to complete this point. We have listened to earlier representations, and we have extended the consultation period until 18 May to allow HMRC to engage further with representative bodies in order to better understand the implementation issues and how best to define a “holiday caravan” for VAT purposes. We are particularly keen to use the consultation to ensure that the new rules are workable and simple for businesses to administer. We understand the strength of feeling on this matter and genuinely want to listen to the concerns—
Oral Answers to Questions
David Gauke Excerpts(12 years ago)
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Nick Smith (Blaenau Gwent) (Lab)
5. What assessment he has made of the effect on pensioners of the proposed changes to age-related income tax allowances.
The Exchequer Secretary to the Treasury (Mr David Gauke)
No one will pay more tax in 2013-14 than they do today as a result of the changes. There are no cash losers. The Government remain absolutely committed to supporting pensioners. We have introduced a triple guarantee for the basic state pension, ensuring that it will increase each and every year by the highest of earnings, prices or 2.5%. We have also protected other benefits that make a real difference to the lives of millions of pensioners.
Nick Smith
What does the Minister have to say to those who are turning 65 in just under a year’s time? They are set to be more than £25 a month worse off than they thought they would be, but they have no time to plan for that change.
Mr John Leech (Manchester, Withington) (LD)
In the past couple of weeks, I have read in leaflets that pensioners have been hit by the Government axing free bus passes, free prescriptions and free television licences. Did I miss something in the Budget, or are those simply lies from the Labour party?
Owen Smith (Pontypridd) (Lab)
The Chancellor claims to be credible and consistent in his decision making, including his decision to withdraw the age-related tax allowances—the so-called granny tax that my hon. Friend the Member for Blaenau Gwent (Nick Smith) just asked about. In that case, will the Minister confirm why, in February 2009, the present Chancellor explicitly called for the tax-free allowance for pensioners to be increased?
Mr Gauke
In the light of the very substantial increase in the general personal allowance and of the concerns raised by the Office of Tax Simplification that the current structure does not have support, that is the right move. Pensioners are well protected by our policies and will continue to be so, but that move is one that results in a simpler and fairer tax system.
Iain Stewart (Milton Keynes South) (Con)
7. What progress the Government have made on the implementation of the national infrastructure plan.
Graeme Morrice (Livingston) (Lab)
8. What recent assessment he has made of the rate of income tax paid by those earning over £150,000 per year.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government are committed to ensuring that everyone pays their fair share of tax. The percentage of total income tax paid by the top 1% will be more than 27% in 2012-13 and in subsequent years, compared with an average of less than 23% between 1997 and 2010. Budget 2012 announced a package of measures to ensure that those on the highest incomes contribute more. This includes a cap on previously uncapped income tax reliefs, which will increase effective tax rates.
Graeme Morrice
The Prime Minister claimed in the House last week that the 50p top rate of tax had raised barely anything at all, yet the HMRC document sets out a figure of more than £1 billion, and the Minister confirmed in the House on the same day that it had raised £700 million. Should not the Prime Minister come to the House and set the record straight?
Tony Baldry (Banbury) (Con)
It is important to remember, though, that for 12 out of the 13 years that they were in government, the Opposition thought it appropriate to have a top rate of tax at 40p. Is not the important thing the yield that is raised by the top rate of tax, not having a tax rate that is punitive just for the sake of having punitive taxes?
Grahame M. Morris (Easington) (Lab)
22. Following on from the question from my hon. Friend and namesake the Member for Livingston (Graeme Morrice), we are aware that Treasury data published last week gave details of the levels of tax avoidance among top-rate taxpayers, but can the Minister confirm that someone earning £1 million a year will benefit to the tune of £40,000 a year from these taxes?
Mr Gauke
The point is that the assessment made by HMRC, supported by the assessment of the Office for Budget Responsibility, is that the 50p rate failed to raise the revenue that was anticipated. It failed to raise the revenue that we needed. Instead, we are taking measures that will succeed in getting money out of the wealthiest, not failing.
Kwasi Kwarteng (Spelthorne) (Con)
To what extent does the Minister believe that having the top rate of tax in the G20 helps British competitiveness?
Emma Reynolds (Wolverhampton North East) (Lab)
17. According to the Institute for Fiscal Studies, one year is not long enough to judge the effectiveness of the 50p tax rate. According to HMRC, the taxable income elasticity is highly uncertain. Therefore, will the Minister admit that his decision to scrap the 50p tax rate was ideological, rather than based on some flimsy evidence that does not actually exist?
Mr Gauke
It is not flimsy evidence; it is evidence that shows two different models. It is consistent with the academic literature in this area, and it is supported as a central and reasonable estimate by Robert Chote, head of the Office for Budget Responsibility and former head of the IFS.
David Mowat (Warrington South) (Con)
9. What assessment he has made of the effect of energy costs on the Government’s growth strategy.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government have proposed a new definition of a zero-rated caravan, based on whether it has been designed and constructed for residential purposes. To achieve that, we have proposed a test, based on British Standard 3632, indicating that the caravan has been designed for continuous, all-year-round occupation. We are consulting on whether additional criteria should be added to ensure that the zero rate applies only to caravans intended for residential use, although I know that my hon. Friend argues that such additional criteria would not be desirable.
Gordon Henderson
I am grateful to my hon. Friend for his answer, which demonstrates clearly the need for further consultation. There are 45 holiday caravan parks in Sittingbourne and Sheppey which will be hard hit by the imposition of VAT on static caravans. Will he listen carefully and sympathetically to representations from the holiday industry before making a final decision?
Mr Gauke
I can assure my hon. Friend that we will listen carefully and sympathetically to the arguments that are put to us. He, indeed, has already made strong representations on this point, and we have of course extended the consultation period to 18 May, as the Chief Secretary to the Treasury pointed out earlier.
Diana Johnson (Kingston upon Hull North) (Lab)
Can the Minister explain to my constituents why VAT on ski lifts in the Chief Secretary to the Treasury’s constituency is being reduced, but in my constituency thousands of people are going to lose their jobs with the implementation of the Government’s plans to increase VAT on static caravans?
Mr Gauke
VAT is chargeable on mobile caravans, camper vans, narrowboats, beach huts and tents, and we are seeking greater consistency in the area.
With regard to ski lifts and other forms of cable-based transport, there is a reduced rate in France, Germany, Austria and Italy, and most areas of public transport are zero-rated.
Mr Greg Knight (East Yorkshire) (Con)
I thank the Minister for agreeing to extend the period of consultation. During the consultation, however, will he not only reflect on the scope of VAT, but give some thought to the many thousands of people throughout the country who could lose their jobs if the proposals are implemented as originally announced? Will he give some thought to them before he decides whether to phase, delay, amend or withdraw these plans?
Mr Gauke
Of course, we will listen to the representations that are made, and my right hon. Friend has made representations to me on behalf of his constituents. We are seeking to have a fairer VAT system, but of course we want to listen to those concerns that are raised about the implementation of these matters.
Bob Blackman (Harrow East) (Con)
12. Whether he plans to re-establish the euro preparations unit within his Department.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The 50% rate raised a fraction of what was expected, which is why we are reducing it to 45% from April 2013. Maintaining the 50% rate would accrue an extra £50 million on top of what is expected in 2013-14, rising to £100 million a year once the impact on self-assessment receipts is included. However, any additional yield could be offset by reduced indirect tax revenues, and as such it may raise nothing relative to the 45% rate.
Kerry McCarthy
I think the Minister has somewhat deliberately obfuscated matters. What I wanted was a figure. It has been estimated that the 50p tax rate could have raised £3 billion in future years when there was not a forestalling effect. Have not the Government made a deliberate decision that they want tax cuts for millionaires as opposed to money being put back into the pockets of hard-working people?
Mr Gauke
It is worth pointing out that this £3 billion figure that the shadow Chancellor and others recite suggests an entirely static process. Nobody believes that a 50p rate has no behavioural impact whatever, but that is the Labour party’s ridiculous position. That was not its position when in government, and it is not a position that any credible economist would support.
Jane Ellison (Battersea) (Con)
T1. If he will make a statement on his departmental responsibilities.
John Mann (Bassetlaw) (Lab)
T3. A listed building that is dismantled and rebuilt as a new dwelling will be zero rated, but people will not be able to renovate an empty barn for the same price if it is VAT-able at 20%. Is that or is that not a perverse incentive to demolish empty listed buildings?
The Exchequer Secretary to the Treasury (Mr David Gauke)
As financial advice, I am not sure it is necessarily wise to dismantle and then rebuild a listed building to make a saving, but there is an anomaly in the tax system: people pay VAT for a repair on a listed building, but they do not pay VAT for an alteration. That does not seem right.
Mr David Amess (Southend West) (Con)
T7. What action have the Government taken to prevent multinationals from funnelling their profits into tax havens, as some do, rather than paying their taxes to the developing countries where they have subsidiaries?
Mr Gauke
The Government have taken great action to increase tax transparency, and on ensuring that there is more of an exchange of information between jurisdictions. We have taken action to prevent Switzerland, for example, being used as a place to facilitate tax evasion. In addition, Her Majesty’s Revenue and Customs provides considerable support to developing countries to improve their capability and capacity to collect tax revenues, which are very important.
Lilian Greenwood (Nottingham South) (Lab)
T4. Ramtech Electronics is a small business in my constituency that supplies wireless products to the static caravan industry. Tony Strickland, national key account manager, says that the effect of the Government’s decision to put VAT on caravans will be “catastrophic” for the industry and that it will“undoubtedly result in job losses.”Why does the Chancellor think that a tax cut for millionaires is more important than my constituents’ jobs?
Elizabeth Truss (South West Norfolk) (Con)
T8. In 2005, Germany exempted businesses with fewer than 10 workers from unfair dismissal regulations and created flexible mini and midi-jobs. Since that date, youth unemployment in Germany has halved. What steps are the Government taking to improve flexibility and to get more young people into jobs?
Stephen Williams (Bristol West) (LD)
I am sure we have all received letters from constituents over the years saying that they did not want their taxes spent on one thing and preferred them to be spent on something else. It is right in principle, therefore, that the Government cap the ability of the super-rich to allocate taxes to charities of their choice. Will my right hon. Friend the Chancellor acknowledge, however, that universities and medical research charities have always depended on philanthropic support? In reviewing the cap on tax relief, will he ensure that those institutions’ interests are safeguarded?
Mr Gauke
I am grateful to my hon. Friend for his support for the policy. As we said at the time of the Budget and in the Budget document, we are looking to explore with charities dependent on large donations how this can be implemented without it having a major impact on them. Of course, we will take into account the concerns of universities and others.
Ian Austin (Dudley North) (Lab)
Why does the Chancellor think his Budget is now widely seen as a complete and utter shambles?
Finance (No. 4) Bill
David Gauke Excerpts(12 years, 1 month ago)
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Rachel Reeves
We do not know what the economy will look like in three weeks, let alone in three years. The Government’s choices are making our economic prospects worse and worse. In the past year, the Office for Budget Responsibility has had to revise down its forecast for UK growth three times. It is now expected to be a third less than it was a year ago. We will publish our manifesto before the next election, but it will be very different from Government Members’ manifestos because we prioritise hard-working families, not a tax cut of £40,000 for 14,000 millionaires. That is why we will vote against the provision this evening.
The Exchequer Secretary to the Treasury (Mr David Gauke)
On the Government’s treatment of pensioners, the hon. Lady mentioned uprating the state pension. She will know that we have introduced a triple lock so that the state pension increases by the higher of 2.5%, CPI or earnings. She will also know that, according to the plans we inherited, pensions would rise in line with earnings. As a consequence of the increases by CPI rather than earnings, the state pension has increased by £127 more a year than it would have done under the plans that we inherited. Does she accept that?
Rachel Reeves
Not many Governments would want to take credit for the fact that inflation has reached 5.3%. Pensions have had to rise by just over £5 to compensate for the increase in the cost of living for pensioners. The Government increased VAT and took no action to tackle excessive gas and electricity bills, and that is why inflation is so high for ordinary working families and pensioners.
Rachel Reeves
That is like suggesting that if inflation was 10% and the Government had to increase pensions by £10 a week to keep pace, pensioners should celebrate and thank them. Of course they will not thank them because the increase in pensions only keeps pace with the rising cost of living. If the Government want to take credit for record high inflation, be our guest.
Charlie Elphicke
Exactly so. My hon. Friend makes a powerful point. It is true that we took away the whole issue of the earnings link, but we restored it, whereas the Labour party sat by as a spectator, including in its time in government. Overall, the package for pensioners means that no pensioner will lose out in cash terms. It is a fair settlement and this Government have looked after pensioners extraordinarily well.
Mr Gauke
Clause 4 makes changes to age-related income tax personal allowances, supporting the Government’s longer-term aim of simplifying the tax system by creating a single personal allowance regardless of age. In light of the Government’s commitment to increase the personal allowance to £10,000, together with our commitment that older people will benefit from future increases in the personal allowance above their 2013 allowance once these are aligned, there will be no need to continue with this complication in the tax system. One of the Government’s key objectives for the tax system is to make it simpler and easier for everyone to understand.
Elizabeth Truss
Given that the UK is 94th in the world according to the World Economic Forum for the extent and complexity of our tax system, has my hon. Friend heard any proposals from the Labour party about how to make our tax rates more competitive or how to make our tax system simpler?
Fiona O'Donnell
Perhaps I can make a helpful point to the Minister. Does he think it simplifies the tax system for 30,000 Scottish families to have to fill in a tax return to be entitled to child benefit?
Mr Gauke
I will deal with that in my remarks on child benefit, which we will debate shortly. The idea of people having the same personal allowance whether they are 64, 65 or 75 seems to me perfectly sensible.
The changes made by the clause will help ensure that people get the allowances to which they are entitled, pay the right amount of tax and make it more straightforward for Government to administer, thereby minimising costs to the taxpayer. A 2009 report from the Public Accounts Committee commented that the age-related allowances were
“complex and hard for older people to understand and place too much emphasis on older people having to prove their eligibility, resulting in errors in claims and potential overpayments of tax”.
In March this year, the Office of Tax Simplification published its interim report, “Review of Pensioner Taxation”, which highlighted no less than nine complexities in relation to the age-related personal allowance. One of the main sources of complication is the taper, which we have heard about in the debate this afternoon. The taper removes an individual’s personal allowance where their income exceeds £24,000 at a rate of £1 for every £2 over this limit, up to the point at which their personal allowance is the same as that for an individual born after 6 April 1948. This creates a 30% effective marginal rate of tax for individuals on relatively modest incomes and brings people into the self-assessment system when, in most cases, they would otherwise have no need to complete a tax return.
For some, in particular people whose tax affairs have previously been entirely dealt with under the PAYE system through their working lives, and who have therefore had nothing to do with HMRC, this can be a challenge. They now find themselves having to complete forms and tax returns for HMRC because they may be affected by the taper when they reach the age of 65. The changes made by the clause, alongside the increases that we have made to the personal allowance, mean that we can now simplify the system of personal allowances. This will remove complexity and confusion for some taxpayers. But nobody will lose out in cash terms as a result of these changes.
Let me emphasise that point. As a result of these changes, nobody will lose out in cash terms. In fact, half the people over 65 in 2013-14 will pay no income tax at all and are unaffected by these changes. Those who are affected by the withdrawal of age- related allowances will benefit from a £1,100 increase in the personal allowance.
Ian Austin (Dudley North) (Lab)
The Minister said twice that nobody would lose out in cash terms. Can he tell us how many people will lose out in real terms?
Richard Graham (Gloucester) (Con)
We heard from the Opposition some extraordinary statements which included the phrase “levelling down”. Will my hon. Friend confirm for the benefit of all Members of the House that the changes made to the tax-free element of income affect 24 million workers and take another 850,000 workers out of income tax altogether? That is called levelling up, not levelling down.
Mr Gauke
My hon. Friend is absolutely right. What we are seeing, and what we have seen over the past few years while this Government have been in office, are rapid increases in the personal allowance. The main personal allowance is rapidly catching up with the age-related allowance, which gives us this opportunity to make the simplification, as we are doing.
Those who are affected by the withdrawal of age-related allowances will still see the total amount of deductions that they pay reduce significantly compared to those under the age of 65, because we are retaining the exemption from national insurance contributions for those of state pension age. So, for example, even under the freeze, a 69-year-old with an income of £18,000 in 2013-14 will pay less than half as much in tax and national insurance contributions as someone aged 30 earning the same amount.
Kelvin Hopkins
The Minister may be too young to remember, but the Conservative Government under Mrs Thatcher abolished the Rooker-Wise amendment. The basic state pension would have been much higher now had that amendment been kept in place. What about raising the basic state pension in steps to where the pension would have been had the Rooker-Wise amendment never been abolished?
Mr Gauke
The Rooker-Wise amendment related to tax thresholds. As for indexation, we are using the higher of earnings or inflation or 2.5%. The plans we inherited were just earnings. That is an important point.
Despite difficult economic conditions, the Government continue to protect benefits for pensioners, including winter fuel payments, free bus passes and free prescriptions, to name but a few. Many pensioners are also benefiting from the Government’s decision to make funding available to local authorities to freeze council tax, and we also have the Warm Homes discount. The Institute for Fiscal Studies has submitted evidence to the Treasury Committee showing that pensioners are the group least affected by the tax and benefit changes implemented by the Government. It has given evidence that pensioners have benefited the most from the distributional impact of tax and benefit changes for some years. I assure the House that the Government are supporting, and will continue to support, pensioners.
Richard Graham
My hon. Friend raises some valid points about how much the Government have done for pensioners throughout the country, referring to all those crucial changes, such as the triple lock, the link back to earnings, and the retention of all the benefits that pensioners have. My constituents remember the sharp contrast between the rise in the basic state pension of 10% since the Government took office and the 75p offer from the previous Government, which, with collective amnesia, they seem to have entirely forgotten.
Mr Gauke
My hon. Friend is right to remind the Committee of that.
We must ask ourselves whether pensioners are disproportionately affected by Government policies. The answer is clearly no. The evidence is very clear on that. After the reforms, does the tax system treat pensioners unfairly? No. By definition, having one personal allowance across the board, regardless of age, is not unfair on pensioners. Is there a strong, principled case for different personal allowances based on age? We have not heard that case made today, other than the fact that Winston Churchill thought it was a good idea in 1925. The official Opposition’s policy is to tell everyone under 65 that they should have a lower personal allowance than those over 65.
Clause 4 supports the Government’s long-term aim of simplifying the tax system by creating a single personal allowance. It removes the complicated tapering system, making personal allowances easier to understand. In the longer term we will have a single, generous personal allowance for everyone while ensuring that no one is a cash loser. I ask the hon. Member for Leeds West (Rachel Reeves) to withdraw the amendment.
Rachel Reeves
If you believe what the Exchequer Secretary said, Mr Williams, you would think that pensioners would have come to Parliament today to thank the Government for everything they have done for them. The reality is that pensioners up and down the country feel seriously let down by the Government. In contrast to the out-of-touch speech we heard from the Exchequer Secretary, we have heard concerns from Opposition Members, including my hon. Friends the Members for Wirral South (Alison McGovern), for North Ayrshire and Arran (Katy Clark), for Livingston (Graeme Morrice) and for Edinburgh East (Sheila Gilmore), and we heard a contribution from the hon. Member for Banff and Buchan (Dr Whiteford). They stick up for their constituents, listen to them and understand their concerns that pensioners will lose £83 this year and those who will retire next year will lose £322, with very little notice, and that is after many other hits, including the increase in VAT, and despite the fact that pensioners face additional costs, such as heating, compared with other people, and that the Government have done so little to consult on these changes before they are introduced.
The fact is that this tax raid on pensioners is being used to fund a tax cut for millionaires—a tax cut worth £40,000 for 14,000 millionaires. That shows where the priorities lie for Government Members. The priorities for Opposition Members lie with ordinary families, young people and pensioners, who are feeling the full impact of the Government’s policies. All Members now have a chance to show where their priorities lie; are they with millionaires or with pensioners? Will Government Members listen to the leadership of their former leader, Winston Churchill, who introduced the age-related allowance in 1925, or to their current leadership, the Prime Minister and the Chancellor, who are making a tax grab on pensioners? It is up to Government Members to decide how they will vote, but pensioners up and down the country will be watching this afternoon to see where their priorities lie, because the reality is that the Government are introducing these reforms because they want to help millionaires and hurt pensioners. We will vote for amendment 65 and against clause stand part.
Cathy Jamieson
My hon. Friend makes a very interesting point, and I shall come on to address the effect of this measure on many families on that borderline.
Many Members will have come from, or know, families for whom child benefit—or the family allowance, as it was called in days gone by—was a lifeline. No doubt some on the Government Benches will characterise our position as Labour trying to give more cash to high earners.
Cathy Jamieson
But that argument simply does not wash from a Government and a Minister who have continued to support a tax cut to millionaires while millions of ordinary people, including Mrs Morris and many people in my constituency, are feeling the pinch. Article 27 of the UN convention on the rights of the child, which the UK has signed, outlines an obligation to assist parents in meeting the material needs of their children.
Helen Goodman
I am grateful to my hon. Friend. I was coming to that point. I want the Minister to address specifically the point about independent taxation of women. He was shaking his head earlier. I hope he will explain from the Dispatch Box in two minutes’ time how he can maintain it. My hon. Friend is right. As I said, there is an issue, thirdly, of complexity being added to the system.
Finally, the proposal is completely uneconomic. It will be bad for work incentives. People will think, “No, I’m not going to do extra hours.” There will be arguments in families about who does what. It will also mean that some people will refuse promotions. This is no way to make the British economy more efficient.
Mr Gauke
We are somewhat short of time. There are two reasons why we may not be able to do the measure justice. First, the Opposition tabled an urgent question, which took an hour out of our debate—[Interruption.] They may groan, but they did. We had agreed that there would be no statements today to allow us to have a proper amount of time. Secondly, the Opposition included in the debate both the clause and the schedule. They need only have put the clause in for us to have the debate. As a consequence, the schedule will not be scrutinised in the Public Bill Committee.
Clause 8 introduces a tax charge on a child benefit recipient or their partner if their income is above £50,000. The changes that we are introducing in the Bill ensure a balance between reducing the cost to the Exchequer of child benefit and ensuring that those on low incomes are not affected. Opposition Members like to forget that the reason why we are making very difficult decisions is the state of the public finances that we inherited. We must ensure that the measures that we take are both fair and reasonable. It is only right and proper that we ask those with the broadest shoulders to bear the greatest burden. That is why the measure and others announced by my right hon. Friend the Chancellor at the Budget—
Mark Reckless
The Minister said that the charge would apply if “their” income was above £50,000. That would be correct if he accepted the amendment of my hon. Friend the Member for Christchurch (Mr Chope). But actually it applies if his or her income is above £50,000. But on “their” income, they can carry on up to £100,000 as long as the amount is split equally between them.
Mr Gauke
The focus on doing this through the tax system and on having one taxpayer above a certain threshold enables us to avoid the position whereby we would have to put every child benefit claimant through the tax credit system and apply a means-tested system to 8 million different cases, creating a substantially greater administrative struggle for both Government and many individuals. That is why we have taken that particular point.
Mr Leigh
Unfortunately, we are introducing more and more complexity. For example, the new charge must be paid by the higher earner, who might not be claiming child benefit when the lower earner is claiming, even though the lower earner is not legally obliged to inform the higher earner whether he or she is claiming child benefit. This is an absurdity, making our tax system even more complex.
Mr Gauke
I recognise that not everyone wants to address the matter and that there are those who do not want to change the position whereby people earning £20,000 or £25,000 a year are paying taxes to fund child benefit for substantially wealthier families, and I realise that arguments are made to defend that. But if we are to do something about it, we have a choice. Do we do this through a tax credit system, which means putting everybody through that system, and doing it on a household basis, or do we try to find an alternative way of doing it that reduces the administrative demands? I do not deny that there is complexity in this method, but relatively, we believe that this is the simpler way of doing it.
Dr Whiteford
It is misleading to insinuate that poorer families are subsidising better-off families. If there is a need to address income inequalities, why should people who have children pay the price of that rather than people who do and do not have children according to their means?
Mr Gauke
The only benefit received by those in the top 10% of earners, which includes all of us, is child benefit, if they have children. That is the only benefit that we receive, so it is the only one that can be reduced or withdrawn. That is why we have this approach. It is perfectly fair that steps are taken to remove child benefit from those households that contain people in the top 10%.
Caroline Lucas (Brighton, Pavilion) (Green)
Has the Minister heard of progressive taxation? That would be a concrete way of clawing back money from those who can afford it. The danger of the Government’s approach arises when everyone has a service and everyone stands up to defend it. As soon as one starts to chip away at it, it is undermined, and the poorest lose out most.
Mr Gauke
We do have progressive taxation, and under this Government the top 1% of earners pay 27.7% of all income tax at a higher rate than at any point in our history. While considering the universality of child benefit, what is being done was not our first choice, but given the position that we were left in it was necessary. When a Government need to raise revenue it makes sense to turn to a measure with a broad base where a significant number of recipients are not reliant on the additional payments they receive, and child benefit is just that sort of payment. That is why my right hon. Friend the Chancellor said that we would seek to withdraw child benefit from higher rate taxpayers. We always said that we would consider how to implement the measure, and we have been clear that a complicated new means test is not a sensible way forward. Instead, we should look to the existing systems and processes to ensure that we can achieve this goal.
Mr Laurence Robertson (Tewkesbury) (Con)
I am still confused about why we cannot assess all the incomes in a household in the same way as when we quite correctly limit the benefits a household can claim to £26,000. What is the difference?
Mr Gauke
For those who are in the tax credit system, we currently make an assessment of household income. If a person is not in the tax credit system, we do not make an assessment of household income and so have information only on individual income. Were we to try to do this on the basis of household income—I understand the argument made by hon. Members that that is the right thing to do—we would have to accept that that would involve putting everybody claiming child benefit, all 8 million, into the tax credit system which would be a substantial administrative burden on the state and on those individuals.
A number of points have been made in the course of the debate. Let me see whether I can pick up on those, rather than addressing every amendment. My hon. Friend the Member for Christchurch (Mr Chope) argued that the provision should apply only to a household income of £100,000 or more. Not only would that result in the administrative challenge I have set out, but it would cost an additional £900 million, which would be unaffordable as well as impractical.
The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) asked about providing information at constituency level. We can release the information by region, but the survey data are simply not good enough at constituency level. I can say that 63,000 people in Scotland will gain as a result of the changes we announced in the Budget, compared with the previously announced policy. She asked what the £5 million for customer information will pay for. It includes provision for an online calculator and guidance for customers, and a letter that will go out in the autumn to all individuals above the higher rate threshold. We will also be updating existing guidance and testing it with customers, and there will be marketing spend to highlight the policy.
My hon. Friend the Member for Christchurch asked why the legislation refers to “high” rather than “higher”. He is right that “higher” is mentioned in some of the other documentation, but the point, which parliamentary counsel considered, is that “higher” begs the question, “higher than what?”, so we used “high”.
Mr Gauke
I have only one minute remaining and want to address the concerns raised during the debate, so I will not give way.
The question was raised of classification and whether or not this was a tax. As my hon. Friend the Member for Christchurch said, that will depend on the Office for National Statistics assessment. Let me deal with the question the hon. Member for Kilmarnock and Loudoun asked. Independent taxation will still apply, each partner will still have their own personal allowance and tax rate bands, and the amount of child benefit, even if it is received by the taxpayer’s partner, will not increase the amount of income liable to tax. Where there are two high earners in a household and they do not want to tell each other their incomes, there will be a mechanism whereby they can find out whether they have a higher or lower income but without the full details.
Mr Hoyle, my time is up. As I have said, the Government have had to make difficult decisions. In order to continue to provide child benefit, we must do so in a sustainable manner. At the current cost that is not the case. We have increased the threshold to £50,000 and put in a taper. This all mitigates some of the concerns that hon. Members have raised, but the budget deficit left by the previous Administration is the challenge we must overcome if we are to avoid a far worse predicament.
Mr Chope
I thank everybody who has participated in this spirited debate. Having heard the Minister’s explanation in relation to amendment 9, I will seek to withdraw it. Hopefully, we can have a vote on amendment 28, which deals with the injustice whereby a single-earner family earning £60,000 will lose their child benefit while a family with two people earning £50,000 will retain it. This issue will come back to haunt the Government, I fear. That sometimes happens when policies are drawn up on the back of a fag packet. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Finance (No. 4) Bill
David Gauke Excerpts(12 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Owen Smith
It is a great pleasure to be under your chairmanship, Mr Hoyle.
The legislation we deal with in this House can sometimes appear rather obscure or require a significant amount of interpretation. For financial legislation that is often true in spades, but not so with this Bill, because what do we have, straight off the bat, on page 1, in part 1, chapter 1, clause 1? A tax cut for millionaires—£40,000 for 14,000 millionaires, signed away in one short line, in subsection (2)(c), which cuts the additional top rate of tax from 50p to 45p. Let me be clear: our amendment would get rid of that provision. It would do what we as the Opposition are able to do and strike out from the Bill the change from 50p to 45p. Let there be no doubt whatever: we will be voting to remove paragraph (c) later today.
Owen Smith
But for now I look forward to the intervention that I am about to receive from the Exchequer Secretary.
Owen Smith
No; which is why I wanted to nose off on this point. Let us clear out of the way this obscurantist nonsense that we are hearing from those on the Treasury Bench—first from the Prime Minister earlier today and now from the Exchequer Secretary. He will know that protocol dictates that we cannot table an amendment that would straightforwardly put the rate back to 50p. That is what colleagues on the nationalist Benches attempted to do, and they were ruled out of order. However, what has been ruled in order by the senior Clerk responsible for this Bill is precisely what we have done, to try to get rid of the Government’s shift from 50p to 45p. The Government would then need to decide exactly what they would do with that rate, but our view is clear: it should be 50p, as it was previously. That is why we have tabled what we have tabled, on the Clerk’s advice.
Owen Smith
I will give the Minister one more chance, but I warn him that he will listen to the country, and the country is telling him that it knows where Labour stands on this issue. We are in favour of keeping the rate at 50p. The Government are getting rid of the 50p rate; the rest is complete nonsense, and smoke and mirrors. If he wants to blow some more smoke, come on up.
Mr Gauke
The country is aware that Labour did not vote against the change to the 50p rate in our debates on the Budget resolutions, although the nationalists did. It is indeed the case that there would be two income tax charges as a consequence of the amendment that the hon. Gentleman is moving. I do not want to do his job for him, but if he wanted to achieve the objective that he is setting out, he could have tried to remove subsection (2) entirely, but he did not. He has kept the charge at 20% and 40%. If his amendment succeeds, we will have those two rates of income tax next year.
Owen Smith
I am not going to indulge in this procedural nonsense much longer, because frankly the country is interested in the substance of the debate. However, if the Exchequer Secretary wants to intervene on me one more time, he can take the opportunity that the Prime Minister eschewed earlier today and correct the misleading comments that he made about the 50p rate, which he said raised no money. We know that it did raise money. We know that page 52 of the Her Majesty’s Revenue and Customs report makes clear how much money it raised and how much it would have raised in future. If the Exchequer Secretary wants to intervene on that point he can, but as for our amendment, drafted on the Clerk’s advice, we are confident in it, we are happy about it and we will debate the substance rather than the nonsense.
Owen Smith
I am not going to give way again to hear more obscurities of protocol. They are nonsense and are just being used to distract attention from the measures.
Mr Gauke
The hon. Gentleman has referred to the academic debate. May I refer him to page 20 of the HMRC document, which relates to the IFS study? It states that Brewer, Saez and Shephard estimated a TIE of 0.46 in 2008, and Gruber and Saez estimated a TIE of between 0.5 and 0.7. It also states:
“The TIE estimate of 0.35 used in the Budget 2010… estimate”
—which the hon. Gentleman described as “standard”—
“was deliberately at the low end of the academic elasticities surveyed.”
The 0.45 TIE is much more consistent with the academic position than the claims of the last Government.
Owen Smith
I am thrilled to have given way to the Minister, because his intervention has revealed that, although he may have read the dodgy dossier, he has not read the academic literature. If he had done so, he would have read more recent publications such as that of Saez, Slemrod and Giertz, which is a review of all the pieces of work done on TIE. It concluded that many of the earlier studies, including the HMRC study, had relied on estimates that were excessively high owing to flaws in the data and the methodology used. Saez et al suggested that
“the best available estimates range from 0.12 to 0.40”.
That is the same Saez from whose earlier paper the Minister quoted. In his most recent paper, he changed his mind and concluded that between 0.12 and 0.4 was the generally accepted estimate. The Treasury has cooked the figures on the basis of one academic study produced as part of the Mirrlees review.
Mr Gauke
May I help the hon. Gentleman? The motion on which he voted against the Government related to the tax charges for 2013-14. With apologies to the hon. Member for Pontypridd (Owen Smith), it would not have wiped out all the tax rates for this year. It was specifically for next year. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) is right. It would not have had the impact that the hon. Member for Pontypridd suggested.
Jonathan Edwards
I am grateful for that clarification.
The idea that the Tories would offer a tax break to millionaires would surprise nobody in my constituency—in fact, they would expect it—but that Labour would abstain after announcing it would vote against it has led to a great deal of confusion. I have had a lot of fun on the doorstep in the past few weeks explaining that, while campaigning for the local authority elections. It is similar to the way the official Opposition announced the policy of a temporary cut in VAT last June, then two weeks later abstained on the Finance Bill when I and my colleagues proposed such a measure. A lack of consistency and clarity on economic matters explains why it is so easy for the Government to continue to pin the blame on the official Opposition for the UK’s economic mess in spite of the flawed and ideological cuts programme which is destroying the fabric of the economy.
Charlie Elphicke
That is a really interesting question. In practice, it is incredibly difficult to distinguish between the person who is setting up a personal service company simply to play the system and the person who is in business and is genuinely using such a company so as not to go bankrupt. It is difficult to draw the dividing line to distinguish the husband and wife who are simply trying to play the system—that often happens—from the genuine business that is acting for true commercial purposes. It is quite invidious to separate the two.
It is better to set the rate at a level where, as the OBR would put it, the willingness of high-earning individuals is such that they regard it as slightly more socially acceptable to pay. Indeed, the OBR was not just the Exchequer’s patsy on this issue; rather, it was independent. As the OBR says on page 109 of its report, it reviewed in considerable detail what the HMRC report said about what the revenues would be, in considering whether to reduce the tax rate to 45p. It looked at the methodology used by the Institute for Fiscal Studies in the Mirrlees review, at the work of Brewer et al, while also adjusting for forestalling—a point the hon. Member for Pontypridd raised—and at the HMRC study on the underlying behavioural response. Therefore, a lot of work has been done on what exactly the position is.
It is true, of course, that things are quite uncertain. The cost to the Exchequer might not be £100 million. Indeed, students of tax history will know that when the rate originally went from 80% to 60%—a massive cut—the revenues did not fall, but rose dramatically. Did receipts fall when the tax rate was then cut from 60p to 40p? No, they rose dramatically. My understanding of the history, therefore, is that if we reduce the rate, we up the take. There is real risk and massive uncertainty. Indeed, rather than costing the Exchequer £100 million, this measure may well make the Exchequer up to about £500 million. From the history, it seems far more likely that we will have an increase in the take, which will mean improvements for our schools and hospitals, and in our ability to pay down the massive debt that the previous Government saddled us with. I therefore think this is the right policy at the right time.
Mr Gauke
As we all know, the previous Government were reluctant to take any meaningful steps to reduce the deficit. However, they could point to the imposition of an increase of more than 10% in the additional rate in three months, even though there was scepticism at the time about the projected levels of revenue. It is also worth pointing out that the then Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), accepted that the increase was “a temporary measure”. He recognised some of the difficulties with the policy. He accepted that the behavioural effect would steeply reduce potential revenues—the estimate at the time was that the measure would reduce revenues by two thirds. That is about £4 billion of revenue that he accepted would never materialise, owing to behavioural adjustments, such as individuals deciding to work less or not remain in the United Kingdom. He also accepted that the 50p rate would damage the UK’s international standing, giving us the highest statutory income tax rate in the G20. He also accepted, I am sure, the fact that although the measure was temporary, it would be politically difficult to reverse.
However, I have to say to the Opposition, and to the many hon. Members who have participated in this debate, that although Labour may claim to want to raise taxes on the wealthy, the reality is that the 50p rate was not succeeding in getting the money in. I do not think that it is a coincidence that the 50p rate was in place for only 36 of the 4,758 days for which the previous Labour Government were in power. When we came into office, we inherited a tax rate that we were told would damage our competitiveness, that would bring in questionable levels of revenue and that was always expected to be temporary.
Owen Smith
The Minister has repeated the line that the 50p rate was not getting the money in. What exactly does he mean by that? His own HMRC report says, in paragraph 5 on page 2, that the yield was
“around £1 billion or less”.
It does not say by how much less. Page 39 of the report states that the figure for the yield is £1.1 billion.
Mr Gauke
The hon. Gentleman cites the report; let me give him the full quote. On page 2, the summary gives the estimate that the yield from the 50p rate could be
“around £1 billion or less…and that it is quite possible that it could be negative.”
We need to compare that with the previous Government’s estimate of a yield of £2.6 billion—[Interruption.] Ah! The hon. Member for Pontypridd (Owen Smith) says that it was £1.3 billion in the first year. Let me explain why the figure was £1.3 billion in the first year. He is presenting that as a great triumph. Most of the money that comes in from wealthy individuals comes in through the self-assessment system, and most of the money raised from the top rate will be collected in the year after the rate is introduced. Only a certain proportion will come in through PAYE. The reason the figure was £1.3 billion in the first year was purely one of cash flow. If the hon. Gentleman is claiming that the revenue was only ever expected to be £1.3 billion, that is not a fair representation of the previous Government’s estimate, which was of a steady rate of £2.6 billion and rising.
Owen Smith
I simply want to ask the question one more time. If the yield was less than £1 billion, how much less was it? Surely the Minister knows how much the top rate got him.
Mr Gauke
The central estimate, which the OBR has confirmed, is £700 million. We are reducing the rate to 45%, and the central estimate of the cost of that is £100 million. Were we to take it down to 40%, which would be the consequence of the hon. Gentleman’s amendment, the central cost would be £700 million.
Mark Reckless
I think the Minister is being rather too modest. On page 21, the report states that
“most of the studies…produce TIEs”—
taxable income elasticities—
“in the range of 0.4 to 0.7”.
Let us take a central estimate of 0.55 from within that range. If we look at page 51, we see a graph that suggests that a reduction in the additional tax rate—whether to 45% as proposed by the Government, or to 40% as proposed by the Opposition—would raise £600 million. Could the Minister use some of that money to enable him to accept our amendments on child benefit?
Richard Harrington
Does the Minister agree that the Opposition are missing the point by talking about the amount that was raised by the 50p rate? The real point is the money that was not raised, owing to the disincentive that it created for people to set up businesses and to spend to create jobs and provide the growth that the country needs.
Mr Gauke
My hon. Friend is absolutely right. Let us put away some of the rhetoric that we have heard this afternoon and focus on the disagreement over the previous Government’s assessment of the behavioural impact of the 50p. Their assessment was that about 66% would be lost through behavioural impact. On the basis of the additional evidence that has emerged following the HMRC study, which is consistent with the consensus of the academic studies in this area, the estimate that the OBR has signed off is that the behavioural impact is closer to 83%. No reasonable case can possibly be made that there is no behavioural impact, yet the shadow Chancellor’s consistent argument that this is a £3 billion tax cut for the rich implies a behavioural impact of zero—miles away from any realistic case.
Mr Love
The Minister quotes research that is primarily associated with the United States rather than the United Kingdom. British research under the Mirrlees project related to events occurring 20 or 30 years ago. The reality is that there is great uncertainty in these areas; the Government’s claim that that is not the case simply ignores the reality. We can pick out whatever number we choose, but the reality is that we are losing taxable income as a result of this change.
Mr Gauke
The hon. Gentleman is right that the assessment of Her Majesty’s Revenue and Customs, signed off by the Office for Budget Responsibility, is very similar to that of the Mirrlees review, which looked at evidence from the 1970s and the 1980s. Given that the big behavioural impact owes much to the mobility of international labour at that end of the scale—the highest earning individuals in the world are very mobile—and given that the mobility of labour has clearly increased, particularly in that sector, since the 1980s, it would appear that the hon. Gentleman is making a case to suggest that the elasticity we are using is too low, not too high, so he might like to have a conversation with my hon. Friend the Member for Rochester and Strood (Mark Reckless).
Chris Bryant
On a point of order, Mr Hood. You may not be aware of it, but the media are reporting that, contrary to what was announced to the House yesterday afternoon, Abu Qatada might have been arrested by the Home Office illegally because it had not consulted the European Court of Human Rights on the last available date to—
The Temporary Chair (Mr Jim Hood)
Order. I have heard enough of the hon. Member’s contribution to give him a ruling. That is not a point of order for me. He can request that the Government make a statement to the House on the media or television report to which he refers, and if the Government agree, they can do so. As I said, it is not a point of order for me to deal with in this debate.
Mr Gauke
I do not have much time, so I would be grateful to the hon. Member for Edmonton (Mr Love) if he would allow me to press on.
The Chancellor made it clear in a pragmatic way that we wish to see the evidence. HMRC conducted a review, making use of the self-assessment returns that became available in January this year. They provide the most complete source of data on high earners’ tax affairs, which only HMRC can analyse as they contain confidential taxpayer information. In this report, we have seen that the additional rate is distorted, that it is damaging to international competitiveness and that it is an economically inefficient way of raising revenue. These conclusions are based on that analysis of self-assessment data and international studies. The report finds that the behavioural response has been substantially larger than expected. The previous Government had estimated the revenue from the 50p rate to be approximately £2.5 billion each year. The HMRC analysis states that the yield would be £1 billion at best, and at worst might raise nothing at all. That is because of the much greater than anticipated behavioural effect.
We have seen huge levels of forestalling, and HMRC estimates that between a third and a half of the behavioural effect comes from genuine reductions in income through such changes as reduced hours worked or reductions in participation in the UK labour market. This suggests that total income fell by £2.9 billion and £4.4 billion as a result of the 50p rate, and that gross domestic product is between 0.2% and 0.3% lower. So this is not just a loss of tax revenue, but a loss to the economy as a whole through lower productivity and economic activity. Those are the conclusions of HMRC’s analysis.
It is very clear that the 50p rate has failed. It has been criticised by business, it has posed the risk of lasting damage to the UK economy, and it has raised considerably less for the Exchequer than expected, possibly costing rather than raising revenue.
Mark Durkan
The Minister has said that the Chancellor wants to work on an evidence basis. He has previously told us that the Chancellor wants to pursue tax avoidance. Will he therefore accept amendment 76, which focuses on ensuring that the House is given the evidence relating to both tax avoidance and the effects of the additional rate of tax?
Mr Gauke
We have a report that produces evidence. I can also assure the hon. Gentleman that the Government have made clear their determination to reduce tax avoidance, and have taken a number of steps to do just that.
Amendment 1 has created some confusion. The Opposition Members who tabled it propose that the additional rate for 2013-14 should be left out altogether. Unlike the 45p rate proposed by the Government, the higher rate of 40% would apply to income over the higher-rate threshold. I understand that Labour sources have been briefing this afternoon that the amendment deliberately leaves the top rate undecided. It does not leave it undecided; it abolishes it. The Labour party has found itself in an extraordinary position.
We have heard astonishing suggestions that we should accept the “static” argument, although, to be fair to the hon. Member for Pontypridd, he has been somewhat hesitant about simply quoting the static numbers as if they were acceptable. We must take account of the behavioural impact, and as we have seen more evidence, it has become clear that it has been greater than was anticipated.
The effect of the 50p rate has been damaging not just to the Exchequer in failing to raise the money that was anticipated, but to competitiveness. There has been a 29% increase in Britain’s—[Interruption.]
The Temporary Chairman (Mr Jim Hood)
Order. I apologise for interrupting the Minister, but I cannot hear a word he is saying because of the noise made by his colleagues who are sitting on my right. I ask Members to give their own Minister some order when he is winding up a debate.
Mr Gauke
Thank you, Mr Hood.
As I was saying, there has been a 29% increase in the number of Britons given permission to work long-term in Switzerland, and the United Kingdom has become less competitive. As a result of our reforms—the additional measures that we are taking to cap charitable and other reliefs, and the measures we are taking to deal with avoidance—27% of revenue from income tax will come from the top 1%, who paid between 20% and 25% under the Labour party.
The reduction in the additional rate is understandably controversial, but we should look at the evidence, not the Opposition’s rhetoric. The 50p rate did not raise the revenues that it was intended to raise, and what money it did raise came with a cost of damage to growth and competitiveness. This is not a sustainable position, so we are reducing the rate to 45p, providing certainty and clarity for those affected. That will mean a relatively small cost to the Exchequer and a significant boost to our competitive position. As the CBI has said,
“Reducing the 50p income tax rate will send a clear signal that the UK is open for business. We must continue to encourage top talent to live and work in the UK.”
This change is good for our long-term tax revenues, it is good for our economy, and it is good for the UK as a whole. I therefore ask hon. Members not to press their amendments, and propose that the clause should stand part of the Bill.
Owen Smith
Labour Members do not believe that the cut from 50p to 45p is good for the economy, and we do not think for a moment that the Minister has justified it today. Nor do we think that he has justified the claim that the rate raised practically nothing, which is what the Prime Minister, rather curiously, told the House earlier today. The Minister himself contradicted the Prime Minister in conceding that it raised perhaps £1 billion. In fact, I think the Minister definitively said £700 million whereas the Prime Minister said it raised nothing. I do not know which of them is right, but I am assuming the Minister is right.
Owen Smith
I do not think I have time to give way, as I want to press the amendment to a Division.
Nor do I think the Government have succeeded in persuading any Member of this House that it is anything other than voodoo economics to suggest that the cost of this rate change will be only £100 million. It is very likely to be closer to £3 billion than to £1 billion.
As we remain wholly unpersuaded, we shall press the amendment to a vote—
Frank Dobson (Holborn and St Pancras) (Lab)
As the chair of the all-party parliamentary group on historic places of worship, I have been approached by people from all over the country and asked to come out against the proposal to take away the zero VAT rating on alterations to listed places of worship. Such alterations include improved access for the disabled, the installation of toilets and small kitchens, the provision of better heating and lighting and the introduction of more energy-efficient measures. They are not just for the congregation; they are for the whole community. They encourage the community use of religious buildings and make an increasing contribution to attracting tourists all over the country. These church buildings are vital, whether they be vast edifices like York Minster, of which as a York lad I am immensely proud, or small parish churches all over the country. The Government need to look again at this silly, stupid, unprecedented and unconsulted-on proposal.
Mr Gauke
We have had a thoughtful and impassioned debate this evening, and I am pleased to have the opportunity to set out the Government’s case for addressing some of the anomalies within the VAT system. In the time available, I will try to address as many points as possible, but I hope the Committee will forgive me if I do not take many interventions, so that I can cover as much ground as possible.
Let me begin with hot takeaway food. The current rules on the VATability of such food have been made complex and unfair by a patchwork of different legal decisions taken over the decades. The definition of hot takeaway food has been in place since 1984, and it applies to food that
“has been heated for the purposes of enabling it to be consumed at a temperature above ambient air temperature”
and that is
“above that temperature at the time it is provided to the customer”.
There have been repeated efforts since the 1980s, however, to chip away at this boundary. A number of businesses have argued in litigation that although the food they may provide to their customers is hot and is taken away, it should not be taxed as hot takeaway food, but should instead be zero-rated. Some have argued successfully that their intention was not to provide their customers with food to be eaten hot, but that they heated their food for other reasons instead—for hygiene reasons, or to finish the cooking process, or to provide evidence of freshness, or to create an aroma or to improve appearance, crispiness or texture.
Mr Gauke
No. As I said, I am not going to give way very often.
Those arguments have not always been successful, but they have resulted in some businesses being able to secure VAT-free treatment for a range of hot products, such as hot rotisserie chickens, meat pies, pasties and panini. Other businesses, however, have continued to apply VAT to the similar hot-food products that they sell. They have accepted or the courts have ruled that their intention is to heat their food products so that their customers can eat them hot. Under the current rules, a small independent fish and chip shop will have to charge VAT on its hot chicken, but a major supermarket will argue that its rotisserie chickens are zero-rated. One baker who keeps his sausage rolls in a hot cabinet to provide his customers with a hot snack will charge tax, but the baker next door who keeps them hot and argues that the purpose is to maintain an appealing aroma will claim that they are zero-rated. The current rules mean that many customers simply do not know whether they are being charged VAT on their hot food because the treatment depends on the particular supplier’s purpose in heating the food. The new rules will ensure a level playing field, and we are removing the subjective element.
Mr Gauke
Let me make a point about the arguments surrounding ambient temperature. This test has been in place since 1984. We do not expect staff to take detailed temperature readings every time they sell a pasty. HMRC will take a pragmatic approach, and provide businesses with guidance, taking into account the responses of businesses on how to implement the change. I have to point out that existing simplification schemes are already available to allow businesses to calculate their VAT liability by reference to a fixed percentage of their turnover without requiring staff to consider the temperature of every product sold. This is a pragmatic approach, already in existence.
Mr Gauke
No, I really want to make some progress.
None of that has been changed by the Budget announcement. There is a borderline that causes confusion between repairs and alterations. The Budget decision also reflects the view that grants provide a more flexible mechanism than VAT for providing specific financial support for heritage—
Mr Leigh
This is a key point. The Government have announced that they will increase the listed places of worship grant scheme by £5 million, but they have cut it from £23 million to £7 million, so that is totally inadequate. What we want tonight is a commitment from them that they will resolve the problem. Half the ancient buildings in this land are run by the Church of England, by ordinary people who want to support their local communities. The Government must compromise on this issue.
Mr Gauke
I refer my hon. Friend to the comments that I made before his intervention.
Let me respond briefly to what was said by the hon. Member for Wrexham (Ian Lucas). We are restricted in regard to what we can do for public transport. If we provided a reduced rate for passenger transport, we would not be able to focus it entirely on charities; it would apply more widely to taxis.
Taxing static holiday caravans and larger touring caravans will bring their treatment into line with that of other holiday accommodation. VAT is already paid on mobile caravans, camper vans, canal narrow boats and camping equipment. We therefore propose to replace the current definition of a zero-rated caravan, which is based on size, with a new definition based on whether the caravan is designed for residential use. We are considering applying British Standard 3632, and are also considering an additional test. However, I have received representations from, among others, my hon. Friend the Member for Boston and Skegness (Mark Simmonds) arguing against that, and we will examine those arguments closely.
Mr Gauke
I cannot, because I have only about two minutes left, but my hon. Friend has expressed his views to me very strongly.
We have heard a number of forceful and impassioned arguments this evening. The Government think it right to address anomalies in the tax system, but some of the arguments that we have heard outside the House and some of the media commentaries have not been terribly well informed, and we want a proper, informed debate and consultation. I have heard the arguments in favour of extending the consultation period and I think that that is reasonable in the circumstances, so rather than closing the period on 4 May, we will extend it to 18 May. We want people to respond to the consultation, although it is right for us to address the anomalies. For example, those with static caravans and those who run park homes or caravan sites are registered for VAT, but can recover—
Mr Graham Stuart
A two-week extension is not a large extension, but it is an extension none the less. However, the Government and the Chancellor must ensure that this is a genuine consultation. Ministers have heard what has been said tonight. They must think again, and reverse their proposal. If they say that they will do so, I shall be happy to take that at face value, but we do not want to see thousands of jobs in east Yorkshire axed as a result of this measure.
Mr Gauke
My hon. Friend continues to make his case very strongly. We are, of course, listening to the arguments, but we think it right to have a VAT system that deals with some of the anomalies, and that is why we have finally addressed some of the problems that have remained in our VAT system for too long.
Cathy Jamieson
At the outset of this debate there was a bit of laughing and joking, but the tone quickly changed as people realised the seriousness of the issues under discussion. The Minister’s contribution reminded me of the well-known phrase, “When you’re in a hole, you’d better stop digging”—particularly when Members on the Government Benches are looking so miserable.
I hope the Minister has listened to what has been said. In order to be helpful—and recognising that it was, perhaps, lack of attention to detail and unintended consequences, rather than malevolence, that prompted the Government to introduce these proposals, which would affect jobs and the economy—I beg to ask leave to withdraw the clause, but I shall press other new clauses in this group to a Division.
Clause, by leave, withdrawn.
Tax Avoidance
David Gauke Excerpts(12 years, 1 month ago)
Ministerial CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Hanson
To ask the Chancellor of the Exchequer how many promoters HM Revenue and Customs (HMRC) has required to disclose tax avoidance schemes since May 2010; how many such schemes have been (a) investigated and (b) closed (i) since May 2010 and (ii) in each year since 2005; and how many schemes are under investigation by HMRC.
[Official Report, 19 October 2011, Vol. 533, c. 967-8W.]
Letter of correction from David Gauke:
An error has been identified in the written answer given to the right hon. Member for Delyn (Mr Hanson) on 19 October 2011.
The full answer given was as follows:
Mr Gauke
Since 1 May 2010 78 promoters have disclosed tax avoidance schemes under the Disclosure of Tax Avoidance Schemes legislation.
To remove any doubt about a scheme's effectiveness, legislation has been changed in relation to the following numbers of disclosed schemes in each year since 2005:
Number | |
|---|---|
1 June 2005 - 31 May 2006 | 223 |
1 June 2006 - 31 May 2007 | 173 |
1 June 2007 - 31 May 2008 | 101 |
1 June 2008 - 31 May 2009 | 40 |
1 June 2009 - 31 May 2010 | 18 |
1 June 2010 - 31 May 2011 | 17 |
Legislative changes are, of course, just one of the ways in which HMRC may respond to disclosures.
All disclosures received by HMRC are subject to close examination. It is the returns of scheme users that are potentially subject to inquiry rather than the scheme disclosure itself and each disclosed scheme may have multiple users. Many users of the schemes are subject to further investigation by HMRC's teams of tax specialists. Although information on investigations is held by HMRC, it is not collated centrally in the form requested and it is not possible to provide details within the time and cost constraints.
The correct answer should have been:
Mr Gauke
Since 1 May 2010 78 promoters have disclosed tax avoidance schemes under the Disclosure of Tax Avoidance Schemes legislation.
To remove any doubt about a scheme's effectiveness, legislation has been changed in relation to the following numbers of disclosed schemes in each year since 2005:
Number | |
|---|---|
1 June 2005 - 31 May 2006 | 224 |
1 June 2006 - 31 May 2007 | 177 |
1 June 2007 - 31 May 2008 | 104 |
1 June 2008 - 31 May 2009 | 40 |
1 June 2009 - 31 May 2010 | 15 |
1 June 2010 - 31 May 2011 | 9 |
Legislative changes are, of course, just one of the ways in which HMRC may respond to disclosures.
All disclosures received by HMRC are subject to close examination. It is the returns of scheme users that are potentially subject to inquiry rather than the scheme disclosure itself and each disclosed scheme may have multiple users. Many users of the schemes are subject to further investigation by HMRC's teams of tax specialists. Although information on investigations is held by HMRC, it is not collated centrally in the form requested and it is not possible to provide details within the time and cost constraints.
Finance (No. 4) Bill
David Gauke Excerpts(12 years, 1 month ago)
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Rachel Reeves
I want the wealthy to pay their fair share in the deficit reduction, which is why I shall be voting this week against a cut in the taxes for 14,000 millionaires. Figures from the Institute for Fiscal Studies show that in Budget 2002—a Labour Budget—anti-avoidance measures were worth £1.7 billion. In Budget 2003—a Labour Budget—there were £1.7 billion of tax avoidance measures, and in Budget 2004, £1.7 billion-worth of tax avoidance measures—I could go on. The point is that in the Budget this year—a Conservative Budget, with a little bit of help from the Liberal Democrats—tax avoidance measures are worth £0.8 billion, lower than in all but two of the last 10 years. The idea that it is a tax avoidance Budget just does not stand up in the statistics. The Institute for Fiscal Studies knows it, so perhaps Members on the Government Benches should look at those numbers. Of course we should cut down on tax avoidance, but we should not then compensate the rich by giving them a tax cut worth £3 billion. If the right hon. Gentleman really wants to cut down on tax avoidance and ensure that the wealthy pay more, I hope he will join us in the Lobby to vote against a tax cut for the richest in society.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The hon. Lady will be aware that in last year’s Budget, there was a measure to tackle tax avoidance through disguised remuneration. She will also be aware that her party voted against the measure in a Finance Bill last year. Does she regret that?
Rachel Reeves
In Budget 2011, there was £1.1 billion-worth of tax avoidance measures, which is less than half the amount spent on such measures in Labour Budgets. We want more wealthy people to pay their fair share, but nothing in the Budget ensures that. The Government need to tackle tax avoidance, but they should not compensate for that by giving a tax cut to the wealthiest in society.
The Chief Secretary to the Treasury said about the 50p rate:
“The idea that we are going to shift our focus to the wealthiest in the country at a time when everyone is under pressure is just in cloud cuckoo land”,
but it turns out that the Liberal Democrats have joined their Conservative coalition partners in cloud cuckoo land. I hope that the Chief Secretary is enjoying himself there, but I am sure he had hoped to cover his humiliating climbdown by pointing to the benefits to lower and middle-income earners from the increase in the personal allowance. However, as I said in my intervention on him, the Institute for Fiscal Studies has made it clear that the gains from the policy are cancelled out many times over by the losses suffered by ordinary families as a result of the Government’s tax hikes, benefit cuts and tax credit changes. The Government are giving with one hand and taking much, much, more from ordinary families, pensioners and young people with the other.
The cover story that the wealthy will pay more in other ways is unravelling day by day. We have already seen that in the House this afternoon. The cost of the cut to the top rate of income tax is 10 times higher than the amount of money raised by the cap on tax reliefs. I hope we all agree that more must be done to reduce genuine tax avoidance, but that should be a standard feature of every Budget and every Finance Bill. I direct the Chief Secretary to slide 9 of the assessment that the Institute for Fiscal Studies has made of the Budget. It shows that between 2002 and 2009, the Labour Government reduced tax avoidance by over £12 billion, while this Budget reduces tax avoidance by a mere £800 million—less than Labour’s annual average, and less than all but two other Budgets in the past decade. That is before one takes into account the fact that included in the Government’s definition of tax avoidance is tax relief for donations to charities including UNICEF, Macmillan Cancer Support, the Royal National Lifeboat Institution, Oxfam and many others. The fact that the Government cannot tell the difference between that and real tax avoidance shows how incompetent and out of touch they are.
Sir Stuart Bell (Middlesbrough) (Lab)
It is a pleasure to follow the hon. Member for Macclesfield (David Rutley), who made a number of important points. The first of those was that the recovery being sought by the Government is a private sector-led recovery. We would all say amen to that, but what concerns us on the Opposition Benches is the imbalance being created between a private sector-led recovery and the social model that we have espoused and continue to espouse. The Government are somewhat unbalanced when they attack the welfare state while at the same time seeking the recovery.
The hon. Gentleman said that Opposition Members have not referred to corporation tax. Actually, I referred to it when the Chief Secretary to the Treasury wound up the Budget debate, because he omitted to say that the reduction in corporation tax to 22% would not come into effect until 2014. He amended that today and stated that that is the case. The Opposition welcome that, but we wonder whether the benefit of the corporation tax reduction will go into shareholder dividends rather than into growth. Although growth is a major topic in this debate, the Government have yet to say how a measure that will come into effect in 2014, which by my reckoning is two years off, will help growth.
We have heard a lot about growth and, in particular, about national insurance holidays, which were mentioned by my hon. Friend the Member for Leeds West (RachelReeves). I will come back to that later. The hon. Member for Macclesfield mentioned business investment, which is important. The £20 billion scheme introduced by the Government is very welcome. I will also come to that later.
The hon. Gentleman also mentioned Ronald Reagan. That was the second mention of him today. The hon. Gentleman talked about him in relation to alligators and cleaning the swamp. Earlier, my hon. Friend the Member for Leeds West referred to the Laffer curve, which was written on a napkin. It suggests that if one reduces taxation, one will get growth. It was pointed out on the Floor of the House that that does not really happen. Nevertheless, it is one of those myths that are in the system and that will stay there.
The hon. Gentleman mentioned cutting the regulatory burden. I agree with that. When I was in opposition before, a Minister came to a meeting and showed us the regulations that the former Government had introduced and those that the Conservative Government of the time had introduced. The second pile was twice as high. A great amount of what the Government do increases red tape and the regulatory burden. We are therefore happy that there is an attack on red tape.
The hon. Gentleman also mentioned Winston Churchill. This has been a day of famous names being thrown around the House. I will entertain the hon. Gentleman by telling him something that I imagine he does not know. The allowance that the Government are abolishing with their granny tax was brought in by Winston Churchill in 1925. That fact is little known, but my mind is full of useless and irrelevant information that I wish to share with the House. When Churchill made his Budget speech on that day, he used a whisky flask to replenish himself and, as he pointed out, to replenish the Treasury. The hon. Gentleman is therefore in good company in discussing these matters.
The hon. Member for Christchurch (Mr Chope), who is still in the Chamber and following the debate with great interest, made a number of important and significant points. He contradicted the hon. Member for Cities of London and Westminster (Mark Field) on the issue of child benefit. The hon. Member for North East Somerset (Jacob Rees-Mogg) also spoke about universal benefits. The hon. Member for Christchurch, who describes himself as a humble Back Bencher, although we would not necessarily agree with that term, said that there is a debate to be had about universal benefits. He mentioned fairness and asked where the fairness is in the system. People who have children receive child benefit and those who do not have children do not. The word “fairness” is in vogue; it is the great word. It is used by Opposition Members and by Government Members. However, unless fairness is linked to values, we have no idea what it means and what it should come to. There is no great appetite among Opposition Members for attacking universal benefits.
I congratulate the hon. Member for Christchurch because for a short while he was Chancellor of the Exchequer—not for a day, not for a week, but for the few minutes in which he made his speech and gave his own proposals. I predict that over the years, universal benefits will be whittled away. We are already seeing it. They will become lower and lower. As I tell taxi drivers when I talk to them about child benefit, free television licences for the over-75s and the winter fuel payment, in the years to come people will look at us in amazement and say, “Did you really have those benefits in the past?” That is the way things are going.
My hon. Friend the Member for Leeds West talked about VAT and my hon. Friend the Member for Dumfries and Galloway (Mr Brown) talked about the VAT on caravans. I would like to talk about the sad event of the 5% VAT rate on church repairs ending. The Chancellor called it an anomaly. When I was the Second Church Estates Commissioner, the Church of England worked long and hard to persuade the then Chancellor, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), on this matter. The former Archbishop of Canterbury took him across to Lambeth palace and offered him a cup of tea or coffee—not the celebrated whisky of Winston Churchill. On the back of that, the then Chancellor understood the importance of the heritage and fabric of our churches, and agreed effectively to reduce the rate of VAT to 5% for three years. When he became Prime Minister, he made the change for the duration of his Government. It is a matter of regret to the Church that the rate has now been called an anomaly and will no longer exist. That is a great pity for the Church and will create problems in maintaining its fabric.
My hon. Friend the Member for Leeds West made a very fine speech. When she was taking interventions, which she handled with great capacity and knowledge, there was confusion among Conservative Members about tax avoidance and tax evasion. Tax avoidance is legal, whereas tax evasion is not. I had the feeling that there was obfuscation among Conservative Members about the taxation regime for contributions to charity. The clear view is developing that the Chancellor will consider that matter again, which we respect and welcome. I will give my age away when I say that in the first Finance Bill on which I sat, which was in 1983, there was a measure that would have liquidated the co-operative insurance company. It would have wiped it out. We took the matter to Lord Lawson, who considered it and removed the measure from the Bill. We welcome the fact that the Government are looking at this issue and I am sure that they will take into account, among other representations, the statement made by the Archbishop of Canterbury.
My hon. Friend the Member for Leeds West talked about the Ernst and Young ITEM Club and mentioned a number of facts from its report today. My hon. Friend the Member for Dumfries and Galloway and the hon. Members for Cities of London and Westminster and for Macclesfield also mentioned it. Its spring forecast makes it clear that this year we can expect 0.4% growth:
“ITEM says that what the economy needs now is for UK companies to invest their substantial cash reserves. The strong recovery in the UK is partly due to buoyant business spending, whereas in the UK investment has fallen to 12% below its 2008 level”.
That is important and serious. There is a lack of investment and companies prefer to hold their money under the bed because of the Bank of England’s concepts of moral hazard and too big to fail, and because of the Basel accords, which have a higher capital requirement. The banks are therefore reluctant to lend and, of course, companies are reluctant to borrow. That is an important and significant fact that we have to deal with.
Ernst and Young also states:
“Ernst & Young’s Eurozone Forecast, Spring edition suggests after a fall of 0.4% in 2012, Eurozone GDP is expected to grow by about 1% in 2013 and some 2% a year in 2015-16. This year, economic conditions will test policy-makers’ commitment and ability to preserve the Eurozone in its current form, with large amounts of public and private sector debt to be re-financed, tighter credit conditions, job losses and further fiscal austerity.”
In these debates, we have been spared an attack on the eurozone and a declaration that the eurozone is responsible for our low growth. The eurozone sorted itself out in December.
Sir Stuart Bell
The Minister shakes his head, but Italy and Spain were able to raise finance on the markets at a reasonable rate. Since then, a firewall of something like £720 billion has been put in place. Does the Minister really want the eurozone and the euro economies to fail, given that 60% of our trade is with Europe? He is still shaking his head, so I invite him to intervene.
Sir Stuart Bell
I was able to drink my glass of water during that intervention, so it was appropriately timed.
I presume that the Minister is referring to Spain, where the yields have reached 6% on the open market. That is not the yield that investors are asking for on new issues, so he should settle down a bit—there is no crisis in the eurozone and the euro this week.
A lot has been said about growth in the small and medium-sized enterprise community. My hon. Friend the Member for Leeds West, the hon. Member for Cities of London and Westminster, my hon. Friend the Member for Dumfries and Galloway and the hon. Member for Macclesfield all referred to it. We, and the SME community, welcome the credit easing scheme that the Chancellor has introduced, which will enable the Government to help the banks lend it a further £20 million at 1% less interest than usual bank loans.
I note that although the hon. Member for Chichester (Mr Tyrie) welcomed that credit easing in his contribution to the Budget debate, he feared that the money would not go beyond the banks’ balance sheets. My concern is that it will not go up to the Tees valley and other local economies. It has always been a matter of regret to those of us in the north-east that when the Government came into office, they chose to treat all regions equally, failing to understand the vast discrepancy between the south-east and the old industrial heartlands of the north-east.
The hon. Member for Macclesfield referred to the investment in Jaguar. I congratulate the Prime Minister on announcing when he was in Tokyo that a new Nissan model would be manufactured in Sunderland, which followed a similar announcement about another model. Yesterday, we saw the unique event of a blast furnace that had closed two years ago, which everybody said could not be reignited, being reignited under the auspices of a new Thai investor who put £4 billion into buying the plant and £2 billion into getting the furnace going. What does it tell us about the global economy that a Thai investor can come over and invest that money in the north-east, and that steel slabs will be put on ships and sent right across the world to Thailand? We ought to remember that when we criticise the global economy and its impact on our own economy.
As a consequence of the Budget, the local enterprise partnerships in the north-east will receive £10 million of additional funding for the Growing Places fund, to unblock local projects. The hon. Member for Cities of London and Westminster mentioned that investment. We in the north-east, and certainly on Teesside, also welcome the manner in which our local enterprise zone has developed and is succeeding, which is a great tribute to our local community’s belief that there is a future for us.
I have no interest in being negative about the north-east and manufacturing, but as the Business Secretary has said, manufacturing has dropped from 18% to 10% as a share of our economy. He has also declared that he is a social democrat, and we welcome him to the fold. He must be disappointed, as we are, that the Budget does not go far enough or fast enough to increase jobs and growth and offset the pace of the Chancellor’s deficit reduction. The hon. Member for Cities of London and Westminster made that point ably.
I turn to the essence of the debate and of the Government’s proposals, which my hon. Friend the Member for Dumfries and Galloway and the hon. Member for Cities of London and Westminster touched upon—how to achieve growth at a time of steep deficit reduction. The Government could not even carry through their own deficit reduction programme for 2015, and they have had to extend it to 2017. My hon. Friend the Member for Leeds West made the point, which the hon. Member for Cities of London and Westminster took up, that public expenditure is still rising. That cannot be gainsaid.
The hon. Member for Cities of London and Westminster said that we could not live beyond our means. That reminded me of Oscar Wilde, who said when he was in Paris:
“I am dying beyond my means.”
Let us hope that the Budget will prove to be more on the upturn than the Oscar Wilde downturn.
The Opposition welcome any measure that helps manufacturing, reduces red tape and gives our people optimism and confidence. That word was used in an intervention earlier, and we want confidence, but we are not entirely convinced that this Budget will give it.
The Exchequer Secretary to the Treasury (Mr David Gauke)
We have had a wide-ranging debate, and I thank the 20 Back Benchers who contributed. Many of the speeches touched on the three great challenges that we face in our economy: how to reduce the deficit, how to ensure that we do it fairly, and how to ensure that the UK can be competitive and grow strongly. However, the first point was tackled exclusively by Government Members. Labour Members still show no recognition of the previous Government’s disastrous legacy or the fact that it is not credible to advocate that the way to reduce borrowing is to borrow yet more. A structural deficit of the size we faced meant that difficult measures on spending cuts and tax rises were necessary, but Labour Members continue to oppose almost every effective measure to reduce the deficit. That is why the country continues not to trust the Labour party on the economy.
The Bill is consistent with our determination to return our public finances to a position of respectability.
Mr Gauke
The provision on cable cars applies not only in Aviemore, but in, for example, the Isle of Wight and London. I confess that it does not apply in South West Hertfordshire or in Wrexham, but it applies in places around the country. It is worth pointing out that, by and large, public transport is exempt from VAT, and the provision brings cable cars into line with that.
Let me consider fairness. We inherited a personal allowance of £6,475, and the Bill increases that to £8,105. Next year, there will be a further increase of £1,100. The Government are taking 2 million people out of income tax, providing a tax cut for 24 million people and are well on course to meeting our target of a personal allowance of £10,000.
Let me turn now to the controversial issue of age-related allowances. We must look at the changes in the context of the £275 increase in the state pension. Labour Members tend to say, “That is simply because of inflation,” but let me remind the House that the plans we inherited from the previous Labour Government were for the state pension to increase in line with average earnings. That would have meant an increase of £127 less than our increase, so the Government have increased it more than Labour would have done.
Owen Smith
Will the Exchequer Secretary confirm—we asked one of his colleagues to confirm this earlier—that, on average, families in Britain, taking into account all the changes, will be £511 worse off, as suggested by the Institute for Fiscal Studies?
Mr Gauke
We inherited the biggest deficit in our history and have taken measures—through both spending and taxes—to reduce it. The fact is that the measures we have taken on the personal allowance will result in, for example, a tax cut of £170 a year for every basic rate taxpayer in the country.
Mr Gauke
No. I am going to make more progress.
Returning to the age-related allowance, it will remain the case that those receiving employment income above the retirement age will not pay national insurance contributions. We have heard nothing this evening about why the Opposition believe as a matter of principle that those under the age of 65 should have a lower personal allowance than those over the age of 65. Given that the personal allowance has increased so substantially, it is reasonable and sensible to simplify the tax system and have one generous personal allowance, regardless of age.
We have taken decisions to remove anomalies in the VAT system, but VAT is a broad-based tax and it is neither fair nor economically justifiable for similar or identical products to be treated in different ways on the basis of arbitrary distinctions. The same approach should apply to mobile caravans as to static, non-residential caravans, and to a hot pie served in a fish and shop and one served in a bakery.
Labour Members argue that removing those anomalies will hit living standards, but may I put those measures in context? Next year, basic rate taxpayers will get a £170 income tax cut. That will be sufficient to pay VAT on 1,300 Greggs hot sausage rolls. I confess that those consuming more than 1,300 Greggs hot sausage rolls—that is 26 a week—will lose under the Budget, but I suspect that that is the least of their worries.
We are taking a tough decision on child benefit, but it is right that those earning £20,000 or £30,000 should not pay taxes to fund child benefit for the families of those who earn substantially more. Each of those policies has produced opposition, and whenever there is opposition to a difficult decision, along comes the Labour party. It opposes each and every measure, however logical or fair it may be. Labour agrees with every interest group that comes along and says, “Don’t tax us,” or “Keep spending on this.” The Labour party is the party that likes to say yes, just as it did in government. Is it any wonder that it left the public finances in such a mess?
There is one tax increase that Labour has supported: the increase in the additional rate of income tax to 50p, which the hon. Member for Pontypridd (Owen Smith) spent so much time on. What is the effect of the 50p rate? We have the assessment of HMRC. What has the 50p rate achieved? More people work overseas; total income has fallen by between £2.9 billion and £4.4 billion; and GDP is between 0.2% and 0.3% lower. All of that is from the HMRC assessment.
Owen Smith
Will the Exchequer Secretary confirm that the HMRC report on the 50p rate stated on no fewer than three separate occasions that the calculation was highly uncertain and that table A2, which contains absolute numbers, shows that the loss will be £3 billion rising to £4 billion over the spending period?
Mr Gauke
Both HMRC and the OBR have made a central estimate, and that is what we have used. I am sorry it does not fit into Labour’s ideology, but the reality is that HMRC’s assessment is that the 50p rate raised less than half the expected amount and might even have cost the Exchequer. The OBR’s assessment is that it is a reasonable and central estimate.
It takes a special kind of incompetence to produce a policy that sends a terrible signal to our competitors, drives higher earners out of the country, damages GDP and fails to raise revenue. There are better ways of raising revenue from the wealthy—for instance, by addressing SDLT avoidance, raising the SDLT rate on properties worth more than £2 million and capping reliefs to ensure that the wealthy cannot opt out of income tax. Both sides of the House want to raise more money from wealthy people. The reality is that we are better at doing it.
We will get more money out of the rich as a proportion of income tax each and every year than the previous Government managed in 13 years in any year. We will not only end our having the least competitive higher rate of income tax in the G20 but provide for a corporate tax regime that becomes increasingly competitive—the main rate will fall to 22% in 2014. We are updating our controlled foreign companies regime, ensuring that companies choose to locate here, not move away. We are implementing the patent box, which is already resulting in additional investment in the UK, as announced by GlaxoSmithKline and AstraZeneca, and we have more generous arrangements for enterprise investment schemes and venture capital trusts, and a new enterprise investment scheme.
The Bill is good for growth. It encourages investment. It attracts entrepreneurs. It tackles avoidance. It helps those on low incomes. It asks the better-off to pay more. And it provides for a significant restructuring of our tax code. It takes difficult steps but delivers real change. Those changes will improve the tax system and the economy as a whole. I commend the Bill to the House.
Question put, That the Bill be now read a Second time.
Planned Tax Consultations (Publication)
David Gauke Excerpts(12 years, 1 month ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
Budget 2012 announced a number of tax policy changes that will be subject to consultation. HM Treasury and HM Revenue and Customs are today publishing the following documents:
Simpler income tax for the simplest small businesses— A consultation on proposals for introducing a voluntary simplified cash basis for income tax and simplified arrangements for certain expenses for small unincorporated businesses. The Government are also today publishing the response to the Office of Tax Simplification’s “Small business tax review: final report”.
Consultation on an “above the line” credit for research and development—A consultation on proposals for implementing an above the line research and development tax credit.
Proposed changes to the tax rules on manufactured payments—A consultation on proposals to simplify the tax rules on manufactured payments, including the rules on manufactured overseas dividends.
Possible changes to the income tax rules on interest— A consultation on proposals for changes to income tax rules on the taxation of interest received, and rules on the deduction of tax from interest paid.
The following consultations are due to be published before Parliament returns from recess on 16 April:
Week commencing 2 April 2012
Real estate investment trusts (REITs)—A consultation on (1) the role REITs can play in supporting the social housing sector; and (2) the tax treatment of REITs investing in REITs.
Remote gambling—A consultation on the design characteristics of a place of consumption based taxation regime for remote gambling.
Herbal smoking products—A consultation on bringing the tax treatment of legally available herbal smoking products in line with the treatment of those containing tobacco.
Details of these and other planned consultations are included in a consultation tracker, available from the HM Treasury website:
http://www.hm-treasury.gov.uk/tax_updates.htm.
The tracker includes specific anticipated launch dates wherever possible, to help representative groups and others manage their engagement with the Government on tax policy development. HM Revenue and Customs and HM Treasury will discuss the timing of consultations with these groups. Any changes to the dates mentioned above will be publicised on the tax consultation tracker.
E-Tabling of Written Questions
David Gauke Excerpts(12 years, 1 month ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
Further to that point of order, Mr Speaker. I note that the shadow Chancellor said:
“There will be a vote next week, and we will vote against the 50p change.”—[Official Report, 22 March 2012; Vol. 542, c. 960.]
What guidance can you provide, Mr Speaker, to right hon. and hon. Members to look at the Budget resolutions, where they will see clearly that resolution 72 referred to an additional rate of 45p, which was obviously a change from 50p?
Mr Speaker
I think the hon. Gentleman is seeking to offer that guidance, but he is a constituency neighbour of mine, so I know that what he would not seek to do, for it would be unworthy—and he would not be unworthy—is continue the debate that we have spent the past few days having. So we will leave it there for tonight. He looks contented, as he is smiling at me beatifically and that is a boon to the House.
Budget Leak Inquiry
David Gauke Excerpts(12 years, 1 month ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Chris Leslie (Nottingham East) (Lab/Co-op)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on whether he will instigate a Budget leak inquiry, in view of the accurate pre-reporting of a number of the detailed proposals in his Budget statement, including one of the matters that was agreed under the Provisional Collection of Taxes Act.
The Exchequer Secretary to the Treasury (Mr David Gauke)
As with every Budget, we have seen a vast amount of speculation, and, as ever, a vast amount of it has proven to be unfounded. As the Chancellor has said, a Budget produced within a coalition is different. The days of the Chancellor coming up with a Budget in secret are gone. This was not a Conservative or a Liberal Democrat Budget; it was a coalition Budget. In the course of coalition Budget negotiations, various proposals were raised, discussed and debated. That occurred more widely than in the past, when the Chancellor told the Prime Minister what was in the Budget the day before or, as in even more recent days, when the Prime Minister told the Chancellor what should be in the Budget the night before. The Treasury does make announcements throughout the year. For my own part, people will have seen the work on tax transparency and personal tax statements, which was in response to a consultation on this very issue laid before the House in November and subject to a ten-minute rule Bill from my hon. Friend the Member for Ipswich (Ben Gummer).
On the specific question, it is a long-established practice of the Treasury not to comment either on whether a leak inquiry has been established, or on its conduct or outcome. There will be ample opportunity to debate the Budget over the coming days. Today is the second of four days of debate on the Budget. It is perhaps an unfortunate consequence of this urgent question that this is being delayed, and so is delaying the shadow Chancellor, from whom I am sure the House is eager to hear.
Chris Leslie
Coalition government is absolutely no fig leaf for these very serious breaches of the ministerial code—[Interruption.] Government Members may wish to listen. Paragraph 9.1 of the code states:
“When Parliament is in session, the most important announcements of Government policy should be made in the first instance, in Parliament.”
There have been clear and flagrant violations of this crucial principle. It is a significant insult to the primacy of Parliament and this House of Commons, to whom the Chancellor should be accountable. It is a shame he was not able to come here to answer for himself on this matter.
Our constituents expect that Members of Parliament should be the first to hear and question policy announcements from the Chancellor, and hold him directly to account. The Chancellor is treating Parliament as a peripheral afterthought, and that is totally unacceptable. But this is not just about the sovereignty of Parliament; if the Chancellor and his acolytes are prepared to pre-brief and leak key information about very sensitive tax changes, that risks handing privileged information to those who can take advantage of any advance knowledge.
The ministerial code is enforced by the Prime Minister, who should instigate a leak inquiry if the Exchequer Secretary refuses to do so. He did not say whether he was or was not going to have an inquiry—at least he could leak that little bit of information for us today. It is also necessary, of course, to include an investigation of conversations between the Chancellor’s special advisers and the civil service and the media. Of course, civil servants are guided by the civil service code. It is unlikely that newspapers will reveal their sources, but Ministers and special advisers should be interviewed and asked who they spoke to, when the conversations occurred and who sanctioned those conversations. If information was released pre-Budget without approval from the Chancellor and was leaked, it is a very serious breach of security and of the civil service code.
Yesterday’s Budget was described by The Economist as
“more of a newspaper review than a Budget”.
Another view was that
“the Budget has had all the leak-free qualities of a teabag in a sieve.”
It might be quicker to list what the papers did not publish before the Budget, but for the benefit of the House I shall list some of those measures that did come out: the reduction in the 50p rate appeared in The Guardian last week and in the Financial Times; the changes to the personal income tax allowance appeared on ITV News on Tuesday night, when the exact figure was given; the stamp duty land tax changes appeared very precisely in the Financial Times and in basically all the newspapers on Wednesday morning; the changes to stamp duty land tax on residential property associated with capital gains tax changes appeared on the “Andrew Marr Show” at the weekend; and the North sea oil and gas commissioning certainties appeared in the Herald Scotland on Saturday 17.
The one Budget change that was not leaked was the £3 billion raid on pensioners, now dubbed the “granny tax”. Some 4.5 million pensioners are to lose an average of £83 next year. In times gone by, Chancellors did the honourable thing when it was revealed that their Budgets had leaked. In contrast, when asked about the Budget leaks on this morning’s “Today” programme, the Chancellor said:
“inevitably the days when the Chancellor dreamt this all up in secret, shared it with the PM 48 hours before he delivered his speech...are gone”.
Well times are not so different that they give licence to the Chancellor to fling around the contents of the Budget red box to any passing journalist, regardless of the consequences. Mr Speaker, we have heard the usual dismissive indifference from the Minister to these serious concerns, so perhaps I need to ask you, as a point of order, for general guidance about how the rights of this House, and the public’s expectations of orderly policy announcements, can be protected? Can you take steps to ensure that the Chancellor does not treat Parliament and the wider public with such utter contempt in the future?
Mr Gauke
I was not entirely sure whether that was a question or a point of order, Mr Speaker, and at one point I was not entirely sure whether the hon. Gentleman was complaining about measures not being briefed in advance or being briefed in advance. He referred specifically to the 50p tax rate. In the days running up to the Budget there were various reports about the 50p rate and it was public knowledge that the Chancellor had commissioned HMRC to undertake a report on the 50p rate and how much that tax was raising—an issue that I am sure the hon. Gentleman does not want to debate for very long. In that time, it was very clear that the Chancellor was going to make a statement, but what did we see in the press? We saw stories that it was going to stay at 50p, be cut to 45p or be cut to 40p. We saw press reports that it was going to happen this year or next year. There were at least five different versions of what was going to happen on the 50p rate, so it is not surprising that one of them turned out to be correct. However, it is also the case that four of them turned out to be incorrect.
The hon. Gentleman asked about sensitive numbers. I can assure him that the numbers on the stamp duty land tax—the increase to 7%—which I am sure he welcomes, certainly did not come from the Treasury, and neither did the exact number regarding the personal allowance as far as I am aware. We also heard from the hon. Gentleman that in days past these things did not happen. May I remind him what happened when he was last a Government Minister? In the 2005 Budget there was a leak about tax credit increases that turned out to be correct, a leak about alcohol duties that turned out to be correct, a leak about fuel duty that turned out to be correct, a leak about inheritance tax that turned out to be correct and a leak about stamp duty that turned out to be correct. There were also leaks about council tax refunds and the winter fuel allowance, all of which were entirely correct.
I could look at more recent announcements such as those about VAT in 2008, about the green bank, the youth jobs package, fuel duty and schools, all of which turned out to be accurate. I am sure that Government Ministers would then have said that that was speculation and I am sure that in many cases they were absolutely correct. It is difficult to give full credit to the hon. Gentleman given that detailed information about Budgets has been put into the public domain by previous Governments for many years, but he has only now suddenly become very upset. I am not surprised that the Labour party wants to focus on an issue of process rather than on the substance because this Budget is going to get the country growing again and is reforming the tax system in a sensible and growth-friendly way.
Jacob Rees-Mogg (North East Somerset) (Con)
I wonder whether my hon. Friend notices the incongruity of those who oppose openness in the Budget but were all in favour of it in terms of risk registers. Does he agree that the criticism is either muddled or synthetic?
Mr Ben Bradshaw (Exeter) (Lab)
Given the failure of Ministers to admit whether they will benefit from the cut in the top rate of tax and the description by the Chancellor of tax avoidance as “morally repugnant”, will the Exchequer Secretary now ensure that all Ministers’ tax arrangements are published?
Mr David Evennett (Bexleyheath and Crayford) (Con)
Does my hon. Friend agree that there will obviously be wild speculation before any Budget, much of which turns out to be wrong, and that we do not need any lectures from Opposition Members, who leaked everything all the time when they were in government?
Barry Gardiner (Brent North) (Lab)
Surely a leak is an unauthorised or inadvertent publication of restricted and confidential information. On that basis, this could not have been a leak, because it was clearly not inadvertent and it was clearly authorised. It was none the less in severe conflict with the ministerial code, and that surely is what the Prime Minister should investigate.
Mr Gauke
I am not sure that there was a question there, but I thank the hon. Gentleman for his views. The Government clearly authorised some information to be put out in advance of the Budget. For example, there was a speech by the Prime Minister. The Prime Minister makes speeches from time to time; I am not sure that people should be getting upset about that.
Lorely Burt (Solihull) (LD)
Does my hon. Friend agree that it is rank hypocrisy on the part of Opposition Members to accuse this Government of leaking? Can my hon. Friend remember how many times the Labour Government held inquiries into leaks about their Budgets?
Thomas Docherty (Dunfermline and West Fife) (Lab)
On Monday the Home Secretary came to the House and confirmed that there would be a leak inquiry into the Hillsborough media reports. Why is it that the Home Secretary has that grace, but the Minister does not?
Christopher Pincher (Tamworth) (Con)
Is my hon. Friend aware that Labour’s record of leaking is as long as its record in office. Not only did the last Govt leak like a sieve but Hugh Dalton, a previous Labour Chancellor, was forced to resign for leaking Budget secrets—
Henry Smith (Crawley) (Con)
The previous Labour Government leaked worse than the Titanic. Does my hon. Friend agree that, whatever the Labour party’s budgetary policies may be—we are not quite sure—they would be an equal disaster?
John Healey (Wentworth and Dearne) (Lab)
Will the Minister concede that the Chancellor has shot himself in the foot with such widespread leaks, because all that he had to announce yesterday was the tax grab on grannies, which he hoped people would not notice? Will he concede that the leak inquiry that may or may not be going on now in the Treasury should consider the leaks of Office for Budget Responsibility judgments, and that now is the time to put the OBR on a proper independent basis similar to that of the Office for National Statistics?
George Freeman (Mid Norfolk) (Con)
Does my hon. Friend agree that the only possible explanation for the general hypocrisy on the Opposition Benches, given their own leaking of this urgent question before the Speaker’s Office announced it, is their desire to avoid the good news of GlaxoSmithKline’s investment announced this morning?
Mr Gauke
I am interested to learn that this story was apparently briefed before any decision emerged. [Interruption.] I understand that that is incorrect and that it was not announced on Twitter before your decision, Mr Speaker. If it was, I am sure that there will be an internal Labour party inquiry.
Clive Efford (Eltham) (Lab)
The reference to Hugh Dalton in 1947 is of course wrong, because he resigned and the leak had been reported in an evening newspaper before he sat down. What we are talking about now is the ministerial code and the accurate and extensive reporting of what was in the Budget across the media the morning before the Budget statement. That is the difference, and that is what we want to be investigated. Are we going to have an investigation or not?
Mr Gauke
I have answered the hon. Gentleman’s first point. I should also reiterate that we have a coalition, which means that there are negotiations and discussions involving both sides. It also means that the Budget tends to be finalised some days in advance of the Budget speech. That is quite a contrast to previous years, when revisions were made, documents pulped and decisions taken at the last minute. I think that we have a much better process, thanks to the discussions within the coalition and the involvement of the Office for Budget Responsibility.
John Hemming (Birmingham, Yardley) (LD)
Does the Minister believe that the Opposition would improve by getting some consistency on whether information should or should not be released?
Geraint Davies (Swansea West) (Lab/Co-op)
Leeks are normally very popular in Wales, but given that only 4,000 people in Wales pay the 50p rate of tax, compared with 94,000 in London, taken alongside the regional pay leak, this represents a massive transfer from poorer people in Wales to richer people in London. Does the Minister not agree that spreading that sort of fear through leaks ahead of the Budget announcement is disgraceful, and has he not admitted that he has given leaks by referring to our alleged leaks?
David Tredinnick (Bosworth) (Con)
Will my hon. Friend accept that he made a mistake in saying that part of the Budget was leaked by the Labour Government in 2005? In fact, the whole Budget was leaked to the Evening Standard.
Helen Goodman (Bishop Auckland) (Lab)
One of the reasons why Budget leaks are particularly serious is that they facilitate tax avoidance. When the Budget speech was leaked in 1984, Lord Howe instituted a police inquiry and everybody working on the Budget was interviewed by the police. Why does the Chancellor of the Exchequer not do the same?
Mr Gauke
I know that the hon. Lady speaks with great knowledge on this issue. I agree that it is very important that sensitive information is protected and can assure her that, on the one potentially sensitive area of stamp duty, the Treasury was not involved. If something is announced in the morning, even if it comes into effect at midnight, people still have the opportunity to exchange contracts in the interim period, as indeed was the case when previous Governments raised stamp duty.
Margot James (Stourbridge) (Con)
I was an avid reader of pre-Budget commentary in the newspapers and found that there was plenty of new content in the Chancellor’s presentation yesterday that had not been covered at all and plenty that the media had got wrong. Is this not a complete waste of parliamentary time, and will my hon. Friend ensure that none of his official time is wasted in the pursuit of this phantom leak?
Susan Elan Jones (Clwyd South) (Lab)
Would the Minister describe it as a coincidence that the £3 million stealth tax on pensioners was one thing that was not leaked?
Bob Blackman (Harrow East) (Con)
Clearly, the most difficult job in Parliament is to respond to the Budget speech. If everything was leaked in advance, why did the Leader of the Opposition get it so spectacularly wrong?
Kevin Brennan (Cardiff West) (Lab)
By describing the systematic and orchestrated leaks as somehow an accident, does the Minister not realise that he and the Chancellor remind people of Captain Renault in “Casablanca” when he goes into Rick’s place and is shocked to discover gambling going on, even as he collects his own winnings? Is this approach not simply amoral, and should Ministers not have a higher standard around the Budget?
Nigel Mills (Amber Valley) (Con)
I have a dream in which the Budget is merely the confirmation of ideas that have been fully consulted on and people can actually understand what the tax regime will be in advance. I commend the Minister for his work in trying that, rather than worrying about this flim-flam.
Mr Gauke
My hon. Friend makes a good point about our more deliberative and consultative process for tax policy making, and some of the announcements in the Budget yesterday were the culmination of a long process of consultation, for example the reforms of controlled foreign companies, which have been widely welcomed. As a corporate tax regime, ours is increasingly recognised around the world, and I am delighted that, as my hon. Friend the Member for Mid Norfolk (George Freeman) pointed out earlier, we had the announcement from GlaxoSmithKline this morning.
Mr Andrew Love (Edmonton) (Lab/Co-op)
How does the Minister explain the headline on Wednesday morning in the Financial Times—it could have been any of the major newspapers—which stated: “Osborne in tax grab on top-end property”? The article went on confidently to assert that the duty would be 7% on properties priced at £2 million and above. Surely that was a leak. If it was not, what was it and what will he do about it?
Mr Gauke
I do not believe that the figure of 7% came from the Treasury, but we also ought to recognise that in last year’s Budget the Chancellor made it clear that we were looking at getting more money from those owning high-end properties, so it should not have come as a complete surprise that there was an announcement along those lines in the Budget yesterday.
Chris Heaton-Harris (Daventry) (Con)
It was widely reported in the press before the Budget, and in fact before Monday, that on Monday morning the quad would meet for a final sign-off of the Budget. Surely anything that was in the papers about the Budget before that point would have been complete speculation?
Diana Johnson (Kingston upon Hull North) (Lab)
The Liberal Democrats were briefing extensively in the past few days, and I just wonder whether the Minister would like to investigate why they seem to have preferential access to information before Parliament does.
Brandon Lewis (Great Yarmouth) (Con)
My hon. Friend mentions the consultation work that the Treasury does in order to reach final positions on the Budget. One of those was shown yesterday, with the new regime for oil and gas and decommissioning—something that the industry very much welcomes and which will provide a great boost. Does my hon. Friend agree that such consultations lead to speculation but are vital in terms of getting into the Budget the right result for people?
Ian Lucas (Wrexham) (Lab)
On stamp duty specifically, will the Minister implement an inquiry into how many transactions of more than £2 million took place between the time that such reports were in the newspapers and the Budget announcement, and into how much that cost the hard-pressed British taxpayer and pensioners who are having to pay the granny tax?
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
If the Minister is ever tempted to go down the route of a leak inquiry, will he at least commit to backdating it to 1997?
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
The Minister has said three times now in his responses that the Treasury was not responsible for leaking the stamp duty changes. The first time that he said so, he added, “as far as I know.” Is not the point that he should know and, therefore at least on that point, that a leak inquiry should be instituted immediately?
Mr Gauke
I have absolutely no evidence that the Treasury briefed on the 7% stamp duty announcement, but none the less an announcement was made in the morning, and the measure came into effect at midnight last night. We also ought to make the point that that measure, on stamp duty land tax, is going to get more money out of the wealthy, and much more successfully, than the Labour party managed with its failed 50p rate.
Penny Mordaunt (Portsmouth North) (Con)
Does the Minister agree that the fact that the Opposition have tabled an urgent question today on media management is further evidence that the Budget was a good Budget and Labour has nothing to say on growth or jobs?
Derek Twigg (Halton) (Lab)
I congratulate the Minister on some excellent press management this morning, and on the headlines, which have been very helpful to us. But I want to be helpful, so that he can be specific about the area of suspicion. Can he now say that no Treasury Minister directly, or special adviser indirectly on their behalf, gave information to the press about any Budget measures prior to the Budget yesterday?
Mr Gauke
Just to be clear, I will give the hon. Gentleman a Budget measure that was confirmed yesterday: personal tax statements. Ministers were aware that we were going to inform the press about personal tax statements, so the question he asks is extremely broad. There were measures announced yesterday in which Ministers were involved, but I am not aware of any Minister being aware of the briefing of market-sensitive information.
David Rutley (Macclesfield) (Con)
Does my hon. Friend agree that it is a bit rich to be asking this question today—[Hon. Members: “A bit rich!”] Does he agree that it is more than unfortunate to ask the question today, when articles such as the one I have with me, from The Guardian on 11 March 2008, state:
“Alastair Darling is set to deliver his first budget to the House of Commons tomorrow…but in reality, much of it has already been trailed”?
Mr Gauke
Some things are not entirely new. The Labour party really does have to think back to its time in government and to the behaviour undertaken then. What is remarkable is that Opposition Members managed to brief some of their announcements, given that most were decided only at the very last minute.
Sheila Gilmore (Edinburgh East) (Lab)
Will the Minister clarify whether he expounds the virtues of advance notification and discussion because we have a coalition, or whether he thinks that it is a bad thing to leak? Was the one thing that he did not share with his coalition partners perhaps the granny tax?
Mr Gauke
All Budget decisions were agreed by the Government as a whole, and the quad was heavily involved at all stages in that. People in a coalition will always make their arguments and set out their case, and some of that will be done in private, some of it in public, but it is a far more orderly process of Budget policy making than we have seen for many years.
Glyn Davies (Montgomeryshire) (Con)
In the context of coalition government, there will inevitably be much pre-Budget discussion and much greater media coverage. Does my hon. Friend agree that such coverage is bound sometimes to be right, and that it is ridiculous to interpret it as leaks?
Mr Gauke
I refer my hon. Friend to, for example, the 50p debate, which the hon. Member for Nottingham East (Chris Leslie) mentioned. In the days before the Budget there were five different versions of what was going to happen. One turned out to be correct and four turned out to be incorrect.
Ian Lavery (Wansbeck) (Lab)
We heard almost more information and detail on the Budget on Tuesday evening than we did on Wednesday evening. Was that due to the Liberal Democrats, was it due to the Conservatives, or were they simply all in it together?
Mr Rob Wilson (Reading East) (Con)
Does my hon. Friend agree that Budget leaks are to be deplored, as indeed is the alleged break-in at the Leader of the Opposition’s office, purportedly to find his Budget policies? I can inform the House that the would-be thief left empty-handed.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Does the Minister agree that, if any profiteering took place due to leaking the announcement on stamp duty land tax, it would be morally repugnant? What action will he take if his secret leak inquiry finds evidence that it took place?
Mr Gauke
We ought to put the matter into proportion. The idea that someone would be able to identify a property and exchange contracts in the course of a morning is highly unlikely. As I have said, I have no reason to believe that the Treasury was in any way involved in briefing that particular item, but there was a lot of speculation that there would be something on properties, and that speculation turned out to be correct.
Charlie Elphicke (Dover) (Con)
Does the Minister agree that such discussion as that which took place between the coalition parties leading up to the Budget is more healthy—more open and transparent—for our democracy than leaving things all in the hands of one, lone control freak?
Mr Gauke
I certainly agree that we do not want to return to the days when a Chancellor, in close co-operation with his special adviser, worked in a sort of secret bunker, not sharing any information with anyone, including the Prime Minister. That is not healthy, and, as we saw, it did not result in sensible tax policy making.
Paul Flynn (Newport West) (Lab)
Is not the most serious aspect of leaks the further degradation of ministerial code reform? The Public Administration Committee has been told by the previous independent adviser on the code that the Prime Minister himself is in breach of the code. If the Committee decides unanimously that the present adviser on the code is not fit to hold office, should Sir Alex Allan resign?
Richard Graham (Gloucester) (Con)
I would not dream of accusing anybody on the Opposition Benches of hypocrisy, but the last time I saw more assembled piety than there is on those Benches today was when I visited a Catholic convent in the southern Philippines in 1985. Has it occurred to the Minister, as it has occurred to me, that this urgent question is simply a distraction from the debate on a Budget for jobs and growth that helps working people? That is what my constituents in Gloucester want to hear us debate today.
Harriett Baldwin (West Worcestershire) (Con)
Given that the centrepiece of the Chancellor’s Budget yesterday was an increase in the personal tax allowance that gives a tax break to 24 million people on low and middle incomes, and given that that was in the coalition agreement, does the Minister agree that a journalist would not need to be Sherlock Holmes to speculate that that increase would be in the Budget?
George Eustice (Camborne and Redruth) (Con)
Does the Minister agree that it is typical of Labour Members to be obsessed by media headlines and spin when they ought to be doing what we do on the Government side of the House—make good policy?
Matthew Hancock (West Suffolk) (Con)
The hon. Member for Nottingham East (Chris Leslie) based his case on different speculation in the newspapers about the future of the 50p rate. Does the Minister not recall that when the 50p rate was introduced by the previous Government, the first news of it came from a newspaper, not the Dispatch Box?
Alun Cairns (Vale of Glamorgan) (Con)
In 2005, the Evening Standard covered details of the entire Budget; in 2008, the Daily Mail covered the details of VAT and The Daily Telegraph had details on fuel; in 2009, The Observer covered details on youth jobs; in 2010, there were details on the green investment bank. Would my hon. Friend welcome at least some consistency in policy and practice rather than the lack of constructive opposition that comes from Labour Members?
Chris Skidmore (Kingswood) (Con)
Before 10 o’clock this morning, the Labour party press office announced on Twitter:
“Urgent Question in the House this morning @ChrisLeslieMP calling for a Budget leak inquiry”.
Yet I understand from your office, Mr Speaker, that the urgent question was not officially announced to the House until exactly 10 o’clock. Will the hon. Member for Nottingham East (Chris Leslie) now call for a leak inquiry on that urgent matter?
Mr Gauke
Earlier this morning, the hon. Gentleman denied it. [Interruption.] He is shaking his head now, so he is clearly denying that that is the case. Presumably, it is reasonably easy to work out what time a Twitter post was made and to know what time the urgent question was announced. But it is not for me to lecture the Opposition; I am sure that they would be very concerned if there had been such a leak and they would be cracking down on it straight away.
Mr Speaker
It is not really a matter for the Minister. These matters are dealt with in a very specific and orderly fashion—the submission of a request, the consideration of the matter at the appropriate time of the day by my colleagues and me, and the disclosure of the result of the request to the interested parties. All was done—I know the hon. Member for Kingswood (Chris Skidmore) will be satisfied that it was—in an absolutely orderly way on this occasion as it is on every other.
Duncan Hames (Chippenham) (LD)
Has the Minister discussed this matter with his colleague the Chief Secretary to the Treasury? I have found the earliest published source of information on the Budget. It was written by my right hon. Friend the Chief Secretary—on the front page of the Liberal Democrat election manifesto nearly two years ago.
Mr Gauke
And it was all going so well. I confess that I have not spoken to my right hon. Friend the Chief Secretary this morning and that I have not read all that manifesto. But I would say that the Budget has Liberal Democrat policies and Conservative policies. It is a coalition Budget that is good for the whole country.
Anti-Avoidance
David Gauke Excerpts(12 years, 2 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Chancellor of the Exchequer announced today as part of the Budget the removal of the VAT exemption for grants of facilities for the self storage of goods and the removal of the VAT zero rate for supplies of services and materials in connection with approved alterations of protected buildings. This will have effect from 1 October 2012. For approved alterations that are already contracted for or under way, transitional relief will be provided for supplies made before 21 March 2013.
The Government have taken this step to address inconsistencies in the treatment of these supplies and to prevent VAT avoidance that exploits the VAT exemption for supplies of self storage. To protect the public finances from artificial avoidance of the change in VAT liability, the Finance Bill 2012 will contain anti-forestalling legislation to ensure that the VAT liability changes are fully effective.
Anti-forestalling legislation will apply to these types of supplies made on or after 21 March 2012. This will ensure that the new VAT liability will apply to these supplies if they are performed (or, in the case of supplies of materials, incorporated in the building) on or after 1 October 2012, even if the supply is treated as being made earlier than this because of an advance payment or delivery of materials. The new VAT liability will also apply to grants of rights or options made on or after 21 March 2012 to receive supplies of self storage to be provided on or after 1 October 2012.
Whilst the attached anti-forestalling legislation will apply for supplies treated as taking place on or after 21 March 2012, any VAT arising from its operation will not become due until 1 October 2012. Until then, suppliers should continue to apply the current rules.
Further information on the anti-forestalling legislation is available at: www.hmrc.gov.uk.