Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 4th June 2019 Commons Chamber

[Mr Gauke]

As I have said, I hope to say more about the approach we want to take, but there is a case that an approach on short sentences along the lines that I have discussed may reduce the prison population, but the principal purpose is not reducing the prison population. It will not be massively dramatic, but I believe it will help to reduce reoffending. That is the big prize, rather than what are likely to be relatively marginal changes to the prison population.

[Charlie Elphicke (Dover) (Con)]

12. What steps the Government is taking to reform the provision of legal aid.

Finance (No. 2) Bill

Debate between David Gauke and Charlie Elphicke

Wednesday 25th March 2015 Commons Chamber

[Mr Gauke]

Under this Government, child poverty has fallen, and pensioner poverty is at a lower level than it has ever been. Only today, we have seen numbers showing that there are 600,000 fewer workless households than there were in 2010. If we wish to deal with poverty, and we certainly do, the best way is to have a job-creating, growing economy, and that is precisely what the long-term economic plan is delivering.

To be fair to the hon. Member for Swansea West (Geraint Davies), he says that he would cut VAT, but I am not hearing that from Labour Front Benchers. I must remind Labour Members that, with a handful of exceptions, none of them voted against the increase in VAT in 2010. I note that one of the handful of exceptions is sitting on the Opposition Benches, but Labour Members did not vote against it.

[Charlie Elphicke (Dover) (Con)]

On the subject of deficit reduction, does my hon. Friend recall a report from the IFS a little while ago that said that Labour’s plans would have resulted in about £200 billion more borrowing if the Labour Government had continued, given the change in circumstances? Does that not show that there is a massive black hole at the heart of Labour Members’ current plans that would be made worse by the out-of-the-blue, panicky pledges on tax that they are suddenly making on the hoof on the news after pressure at today’s Prime Minister’s questions?

[Mr Gauke]

My hon. Friend makes a good point that is very relevant to the debate we are having about VAT.

The three main parties in this House have agreed that we will deliver a cyclical current budget surplus by 2017-18; that is what the charter of fiscal responsibility states. The vast majority of Labour Members trooped through the Lobby to support that measure. Independent analysis, as well as the Treasury’s analysis, confirmed that that requires some £30 billion-worth of fiscal adjustments. From my party’s point of view, that would be made up of £13 billion from departmental spending, £12 billion from welfare spending, and £5 billion from anti-tax evasion and tax avoidance measures.

The Liberal Democrats have set out how they will get their £30 billion. Their plan has a different balance and make-up from the Conservative plan, but they have set it out. The Labour party has not set out how it will reach that £30 billion. If Labour is not going to cut welfare in the way the Conservatives are, and if it is not going to cut departmental spending as we are—as far as I can see, that, after all, is the heart of Labour’s election campaign—more money must come from tax. That is why the question of who will raise taxes and what taxes will be raised is much more acute for Labour Members. They have questions to answer. There is a gap in their public finance plans, whereas we have set out plans that do not require us to put up taxes on hard-working people.

--- Later in debate ---

[Mr Gauke]

I will tell the hon. Gentleman where the credibility gap is. Labour Members effectively voted for a £30 billion target. They then denied it. They now will not indicate what adjustments they will undertake in 2016-17 and 2017-18. They have not said how they will reduce departmental spending, or how, or whether, they will reduce welfare spending. They have not said how much they will raise from tax. If they will not give us answers to those questions, we can only assume that it is because they intend to tax and borrow more. If they will not provide clarity on that, we will make that point time and again.

[Charlie Elphicke]

Speaking of Labour’s spending and tax commitments, how many times over have Labour Members spent the bank bonus tax? Is it 10 times, or more? I have lost count.

[Mr Gauke]

I thought it was 11 but I could be wrong. It may be 12 by now—who knows?—because that money may be being used to pay for Labour’s tuition fees policy.

Finance (No. 2) Bill

Debate between David Gauke and Charlie Elphicke

Wednesday 25th March 2015 Commons Chamber

[Mr Gauke]

My hon. Friend makes another excellent point. This year, the proportion of income tax paid by the highest earning 1% will be above 27%, higher than for any year under the previous Government. I dare say that we will debate that in a little more detail later this afternoon. On this Government’s record in ensuring that those with the broadest shoulders make the biggest contribution, the facts are very clear: they are doing so under us. A whole host of measures that we have taken, not least in areas of tax avoidance, have ensured that we are getting in that money.

[Charlie Elphicke (Dover) (Con)]

My hon. Friend is making a powerful case on the work that the Government have done to tackle tax avoidance. What is being done to throw the book at the promoters of tax avoidance schemes and people who continually try their luck by entering such schemes?

[Mr Gauke]

My hon. Friend—given his background, he is an expert in tax matters—has been a consistently strong advocate of taking tough action in this area. I can certainly reassure him that one of our very important strands of work has been to take on the promoters of tax avoidance schemes. Indeed, we are bringing in measures to place greater burdens on them to disclose the position they are in, as well as greater surveillance and supervision of them. During this Parliament, we have seen a dramatic fall in the number of tax avoidance schemes being promoted, which is very good news. There has been a real change in the climate, driven not least by the action that the Government have taken. I believe that we have a very proud record in dealing with tax avoidance and the causes of tax avoidance.

--- Later in debate ---

[Mr Gauke]

My hon. Friend does not want to revisit old debates, but I tempted to give a response that I suspect I have given him before. The general anti-abuse rule is a big step forward, and it was absolutely right that this Government introduced it. Other Governments had considered it but felt that it was not the right thing to do. However, it is there to complement the existing measures, and we will want to see how the GAAR works over time rather than rush to judgment. I do not believe that a future Conservative Government would want to risk opening up new loopholes because of uncertainty about exactly how the GAAR applies. It is of course an anti-abuse rule and sets a reasonably high bar for behaviour covered by it, and I suspect my hon. Friend agrees that that is right because of its broad nature. We will have to wait and see before I make any commitment to repealing various targeted anti-avoidance rules.

[Charlie Elphicke]

rose—

[Mr Gauke]

I give way to another Member who, like my hon. Friend the Member for Amber Valley (Nigel Mills), is a former member of the tax profession.

[Charlie Elphicke]

My hon. Friend is being extremely generous in giving way. May I turn to the provisions on oil taxation and the revenues from oil, given what has happened to the oil price? Does he have any idea of how big a black hole would be driven into the finances of an independent Scotland were there to be another referendum campaign fought by the losers from last time?

[Mr Gauke]

My hon. Friend is absolutely right. I believe that oil revenues are something like a 10th of what the Scottish National party predicted, but I will happily stand corrected if I am wrong. The fact is that a united kingdom is better able to absorb volatility in the oil price than an independent Scotland would ever be. Given what has happened to the oil price, it is clearly to the benefit of Scotland that those calling for independence were roundly defeated last year.

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 10th March 2015 Commons Chamber

[Mr Gauke]

I appreciate the point made by my hon. Friend. The Government’s support for small cider makers across the piece has helped to create a diverse and vibrant market in this area, and we will continue to study the Commission’s arguments carefully because we want to support this industry.

[Charlie Elphicke (Dover) (Con)]

8. What plans he has to introduce penalties for financial advisers who promote aggressive tax avoidance and tax evasion schemes.

Future Government Spending

Debate between David Gauke and Charlie Elphicke

Wednesday 4th March 2015 Commons Chamber

[Mr Gauke]

My hon. Friend makes an important point. The statistics he uses are absolutely right. With regard to public spending on services—I will turn to the detail in a moment—we are talking about returning to the levels of 2002-03, before the previous Government lost control of public spending.

[Charlie Elphicke]

The tenor of the Opposition’s argument is that public spending ought to be higher. Given that they are disagreeing with our plans, should they not specify how much higher they would want it to be?

[Mr Gauke]

My hon. Friend is absolutely right. I was struck that when it came to the substance of the shadow Chief Secretary’s speech, he rather rushed through that process. He tells us that he does not like our spending plans—I will come to the details of that in a few moments—but he does not tell us how much extra he would spend, or, if he is going to spend extra, how he is going to pay for it. Will it be through higher taxes or through more borrowing? We did not get any indication.

Tax Avoidance

Debate between David Gauke and Charlie Elphicke

Wednesday 11th February 2015 Commons Chamber

[Mr Gauke]

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

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

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

[Charlie Elphicke]

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

[Mr Gauke]

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

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

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

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

Tax Avoidance (HSBC)

Debate between David Gauke and Charlie Elphicke

Monday 9th February 2015 Commons Chamber

[Mr Gauke]

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

[Charlie Elphicke (Dover) (Con)]

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

[Mr Gauke]

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

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 9th December 2014 Commons Chamber

[Mr Speaker]

I call Pat Glass. Not here.

[Charlie Elphicke (Dover) (Con)]

5. What estimate he has made of corporation tax receipts in each year since 2010; and if he will make a statement.

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

Her Majesty’s Revenue and Customs publishes annual corporation tax statistics every August. They show that revenues from corporation tax, excluding the ring-fenced oil and gas regime, were £35 billion in 2010-11, £33 billion in 2011-12, £35 billion in 2012-13 and £36 billion in 2013-14. The Government have delivered major cuts to corporation tax, but increased growth and investment in the UK mean that revenues from the main regime were higher last year than in 2010.

[Charlie Elphicke]

Is my hon. Friend aware that non-oil corporation tax receipts have risen 16% over the course of this Parliament so far, compared with a rise of just 8% over the entirety of the previous 13 years? Does that not show that if you cut the rate, you up the take? [Interruption.] How will the diverted profits tax work?

[Mr Speaker]

Order. The question was simply too long. The hon. Gentleman should have cut it off when he was winning, instead of going on for too long, which is what he then continued to do.

Income Tax

Debate between David Gauke and Charlie Elphicke

Wednesday 5th November 2014 Commons Chamber

[Mr Gauke]

The hon. Gentleman should also be aware that business investment is increasing. The last few quarters have been very positive on that front, and we are moving in the right direction, despite having to deal with the mess that we inherited. The truth is that in the place where a credible Opposition economic policy should be, we have an empty gesture that will do nothing for economic growth, nothing for job creation, nothing for the public finances, and nothing to help reduce taxes for working people.

[Charlie Elphicke]

Will my hon. Friend confirm the position on the change in receipts? It looks to me from my studies of Inland Revenue statistics, which are frequent, that the receipts from this additional rate seem to have risen from about £40 billion to £49 billion.

[Mr Gauke]

I will turn to the analysis done by Her Majesty’s Revenue and Customs, which is at the heart of the debate, but there is no reason to believe that that has proven to be inaccurate, or that suddenly there is this huge stream of revenue that is available to the Exchequer that we have forgone. The truth is that there are much better ways of raising money from the wealthiest than a 50p rate that proved to be ineffective.

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 4th November 2014 Commons Chamber

[Mr Gauke]

We have already got in about £800 million, and we will get more, but that is money that we would not otherwise have received. That is a deal worth doing. It is worth pointing out that some people said that if we had not had this deal with the Swiss—which has brought in additional revenue—we would not have been able to make progress on automatic exchange of information, whereas the reality is that just last week the Chancellor signed a deal on behalf of this country that made progress on that.

[Charlie Elphicke (Dover) (Con)]

Does my hon. Friend the Minister agree that under the previous Government the tax gap grew and that all the running in this Parliament on ensuring that businesses pay their fair share of tax and cracking down on tax dodgers has come from our side of the House, and that this Government have made the case internationally as well?

[Mr Gauke]

The tax gap as a proportion of tax receipts was higher under the previous Government than for every year under this Government. We have introduced about 40 measures to close loopholes, one of which, on disguised remuneration, let us not forget the Labour party opposed.

Finance (No.2) Bill

Debate between David Gauke and Charlie Elphicke

Tuesday 8th April 2014 Commons Chamber

[Mr Gauke]

Indeed it has. I will say more about some of the other measures we are taking to make our tax system more competitive, but overall it is clear that our tax system—in terms of being open for business—has moved in the right direction over the last four years. It is important that we maintain that momentum and do not put it at risk by trying to reverse some of the progress we have made.

[Charlie Elphicke]

According to a report in City A.M. this morning, the British Chambers of Commerce has said that we are seeing the strongest investment and export growth for nearly a century. Did my hon. Friend see that report?

[Mr Gauke]

Indeed I did, and I heard the head of the BCC make the same point in a radio interview this morning. We are moving in the right direction, and this afternoon’s figures from the IMF are extremely significant. I hope that Members in all parts of the House welcome the news that the United Kingdom is the fastest-growing major advanced economy this year.

Finance (No. 2) Bill

Debate between David Gauke and Charlie Elphicke

Tuesday 1st April 2014 Commons Chamber

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

indicated dissent.

[Charlie Elphicke]

rose—

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 10th December 2013 Commons Chamber

[Mr Gauke]

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

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

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

[Charlie Elphicke (Dover) (Con)]

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

[Mr Gauke]

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

National Insurance Contributions Bill

Debate between David Gauke and Charlie Elphicke

Monday 4th November 2013 Commons Chamber

[Mr Gauke]

I am very grateful to my hon. Friend for that intervention. She makes an important point that applies to both businesses and charities. Taking on the first member of staff can be the most difficult step, as it is a big event for a business. If we are able to help and to reform our tax system to enable businesses or charities to take that member of staff on without paying the jobs tax—employer’s national insurance contributions—that will clearly encourage those businesses, which, I hope, will then take on further staff and expand.

[Charlie Elphicke (Dover) (Con)]

Will my hon. Friend confirm that the measure was the largest tax cut in the Budget? Does he therefore not think it is all the more surprising that there are no Labour Members here to scrutinise a major plank of that Budget?

[Mr Gauke]

Another observation one could make is that there are no Labour Members of Parliament here because they are—[Interruption.] I apologise. That remark is unfair and I withdraw it. There are the Labour Front Benchers and now three Back Benchers. Who knows? We might reach five or six by the end of the debate. Perhaps Labour Members have confidence in, and enthusiasm for, the Bill and can find nothing to criticise. However, we look forward to the speeches to come later. On that note, as the hon. Member for Bolton West (Julie Hilling) has waited so patiently, and as it is about time that we heard from a Labour Member, I give way to her.

--- Later in debate ---

[Mr Gauke]

The striking point about the most recent growth numbers is that they demonstrate growth in every sector, and that is very encouraging. I began by saying that the economy in the mid-2000s, say, was very dependent on financial services and on London and the south-east. Of course we want a successful financial services sector and we want London and the south-east to do well, but it is also important that growth is better balanced throughout the United Kingdom, and the Government continue that commitment.

[Charlie Elphicke]

While hesitating to introduce any controversy into the debate, does my hon. Friend agree that the hikes in the jobs tax under the previous Government destroyed jobs, and that this Government’s policy of reducing the jobs tax, particularly in this Bill, will enhance job creation and aid the recovery?

[Mr Gauke]

I do agree. Given that we want to increase employment, it would not have been sensible to undertake the increase in national insurance contributions that the previous Government intended. That was clearly a mistake. I am sure that my hon. Friend will be delighted to know that not only are he and I in agreement but Tony Blair said last week that he thought it was a mistake.

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 14th May 2013 Commons Chamber

[Mr Gauke]

This is the Government who have raised the personal allowance that has taken millions of people out of income tax and resulted in tax cuts for some 26 million people. A tax rate that does not bring in revenue is a flawed tax rate, which I assume is why, despite everything we hear from the Opposition, they will not commit to returning to a 50p rate of income tax. They know that it does not raise revenue.

[Charlie Elphicke (Dover) (Con)]

Q25. Can the Minister confirm whether, all things considered, the richest people in this country are paying a greater or lesser proportion of their wealth in tax than they were under the previous Government?

[Mr Gauke]

They are paying a greater proportion of their income. If we look at what the Government have done across the board, including stamp duty, capital gains tax and the cap on reliefs, we see we are ensuring that the wealthy are paying more. The reality is that there are better ways to ensure that than the 50p rate of income tax, which was uncompetitive and failed to raise revenue.

--- Later in debate ---

[Mr Gauke]

The CFC regime is designed to protect revenue for the UK, but we can do a great deal to help developing countries through exchange of information, new global standards and capacity building. The Government are doing a huge amount on those fronts.

[Charlie Elphicke (Dover) (Con)]

If the Government were to go out and borrow £28 billion as some suggest, what would the effect be on fiscal stability and interest rates for homeowners?

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 29th January 2013 Commons Chamber

[Charlie Elphicke (Dover) (Con)]

9. What plans he has to tackle corporate tax avoidance and to close the tax gap.

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

Over this Parliament, we have introduced 31 measures to tackle tax avoidance, including loophole closures. This year, our work will focus on strengthening the disclosure regime, consulting on new sanctions for avoidance promoters and introducing the general anti-abuse rule. HMRC will also increase its risk assessment and specialist transfer pricing resources to target multinationals. Combined, those measures will strengthen our commitment to tackling tax avoidance and reducing the tax gap associated with it.

[Mr Gauke]

My hon. Friend is right to raise that point. The Prime Minister has said that he wants to use the G8 for this purpose and to have a serious debate about tax avoidance. The OECD is looking at this matter. We are encouraging it to do so and have provided it with additional resources. It will report back on solutions that could be developed to tackle profit-shifting by multinationals and the erosion of the corporate tax base.

[Charlie Elphicke]

May I say how welcome it is that the UK is using the presidency of the G8 to tackle international tax avoidance, after a decade in which the Government of this country stood by while industrial tax avoidance was allowed to run rampant? I urge the Government to focus on the issue of tax presence, particularly for companies such as Amazon, which we all know are in this country and should be paying tax in this country, but are playing the rules to avoid it.

[Mr Gauke]

I will not get into individual cases. As I have said, the OECD, at the urging of my right hon. Friend the Chancellor, is looking at these issues. We want to ensure that there is an international tax system whereby economic activity is taxed where it occurs. That has been overlooked for too long and we are determined to address it.

Income Tax

Debate between David Gauke and Charlie Elphicke

Wednesday 28th November 2012 Commons Chamber

[Mr Gauke]

My hon. Friend is right, and harks back to what I was saying a moment ago. We have to bear in mind that the ability of high-earning individuals to be mobile has increased over time. It is striking, for example, that the number of UK citizens moving to Switzerland in 2010 increased by 29%. That demonstrates the fact that individuals will respond to fiscal incentives. They will respond to one of the highest rates of personal tax in the developed world, which was the position that the UK was in.

[Charlie Elphicke]

Is not the Minister’s point thrown into sharp relief by the fact that millionaires were paying approximately £13.4 billion before that measure was introduced, and that that went down to £6.5 billion? Is it not dangerous for our public finances to start jacking up the rate and driving people out of the country, as the previous Government did?

[Mr Gauke]

My hon. Friend sets out some dramatic numbers. They are the correct numbers, although it would be right to say that an element of that had to do with forestalling and people moving their income around. However, Opposition Members should not take great comfort from that. They demonstrate the enormous amount of behavioural change as a consequence of high rates. That level of forestalling is striking. What is also striking is that when the previous Government made their estimate of what would happen with income, no allowance was made for forestalling whatsoever, which again demonstrates flaws with the methodology that was in place.

--- Later in debate ---

[Mr Gauke]

Very simply, different taxes have different elasticities. It is perfectly simple: people are more likely to respond to high direct rates of income tax than to stamp duty. Of course, the OBR took into account the behavioural impacts when it assessed how much revenue would be raised on, for example, stamp duty land tax. As Tony Blair sets out in his memoirs, which I was flicking through last night, direct rates of income tax are not a good way of raising income.

[Charlie Elphicke]

I thank my hon. Friend for giving way once more; he is being incredibly generous.

On the point about elasticity, is income tax not notorious for raising more revenue, the more it is cut? We saw that throughout the ’80s, when it fell from the sky-high levels of Labour to 60% and then 40%. Each time, the take increased. Is it not the case that, if we cut the rate of income tax, broadly we end up increasing the take?

[Mr Gauke]

It depends where we are on the Laffer curve, but, if we have the highest rate of income tax of any of the G20 economies, we are clearly in a vulnerable position. That was the position we inherited and why we were right to remove it.

I want to touch on the HMRC report laid before the House of Commons at the time of the Budget. It contained the assessment of the 50p rate. It showed that the additional rate was distortive, inefficient, and damaging to our international competitiveness, and that the previous Government greatly understated its impact on the behaviour of those affected. High earners were able to bring forward about £18 billion before the new rate came in, which the previous Government did not account for in their revenue projections. The 50p rate has failed: it has been criticised by business, damaged the UK economy and raised much less for the Exchequer than the last Government had hoped. In fact, it could have generated a net loss. The HMRC report estimates that it raised at most only £1 billion, and, when indirect taxes are taken into account, could have raised less than nothing.

The Government have decided not to stifle the economy further and to show that we are open for business, which is why we will reduce the rate to 45p from April next year. This move to 45p, based on the central estimate of the taxable income elasticity, will cost only £100 million—a small price to pay to regain some of the international competitiveness we lost as a result of the previous Government’s decisions. In fact, when indirect taxes are taken into account, this move could even result in a positive yield.

The 50p rate not only harmed our economy and contributed little to the Exchequer, but placed us in the unwanted position of having the highest statutory rate of income tax in the G20. Our decision to lower the rate will see us drop below Australia, Germany, Japan and Canada. In 2011-12, the top 1% of taxpayers paid about 25% of income tax revenues, and for over a decade our dependence on them has grown. Owing to this considerable economic contribution to the UK, each highly mobile earner who is driven out by internationally high tax rates hits the Exchequer and results in less revenue for public services.

Opposition Members might not care when internationally mobile individuals leave, but, given our dependence on high earners, we want them working in the UK, creating wealth and paying taxes, not moving abroad or retiring early. A competitive tax environment is unambiguously in the UK’s interests, and failing to act decisively as we did would be to ignore our long-term interests, as the 50p rate continued to drive high earners out of the country.

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 11th September 2012 Commons Chamber

[Mr Gauke]

Retail sales growth has generally been positive over the past year. Let me underline this point: if the biggest problem faced by the economy at the moment is that we are not borrowing enough, that is, I am afraid, a very strange diagnosis.

[Charlie Elphicke (Dover) (Con)]

If the Government were to adopt that unfunded mandate and the other £200 billion of unfunded borrowing suggested by the Opposition, what would be the effect on interest rates and our national credit rating?

[Mr Gauke]

There is no doubt that such a policy would be taking an enormous risk with interest rates and our credibility. This Government are not prepared to take that risk.

Finance Bill

Debate between David Gauke and Charlie Elphicke

Tuesday 3rd July 2012 Commons Chamber

[Charlie Elphicke]

I want to speak briefly about new schedule 1. In my constituency is A and S Self Storage, run by Diana and George Pelly, which is a small family-run storage business. My concern is about how the new measure will work and I hope that Ministers will take on board some of my points.

The mischief that the new schedule seeks to attack is the business whereby big companies exercise the option to tax on a piece of land, build a storage facility and later disapply the option to tax, giving themselves a tax advantage. The Treasury have applied VAT on all self-storage and my concern is that some 250,000 people in the UK use self-storage and will find from September onwards that their bills will suddenly go up by 20%. I hope that the Government will consider this a little further and think whether there is a better way to deal with the real mischief, which is the abuse of the option to tax.

My other concern is that the revenue raised will disproportionately benefit larger businesses that can claim back costs under the capital goods scheme, rather than the smaller businesses, which cannot. Effectively, it will disproportionately benefit the four big players in the self-storage industry at the expense of smaller businesses such as A and S Self Storage. I hope that Ministers will consider that point.

The Exchequer impact is also in question. The Exchequer says that the measure will raise money, but the Self Storage Association’s brief states:

“In its calculations the Government has not taken into account the significant reclaim of VAT under the CGS rules, which Deloitte have calculated to be £43m based on the detailed results of their survey…According to Deloitte many operators, particularly the largest ones, could accelerate CGS recovery under existing VAT law.”

I want to plead for caution on the part of Ministers and ask them to consider carefully the question of tackling the underlying abuse, which is the business of disapplying the option to tax. I appreciate that many Members will find that exceptionally dull, as it involves highly technical VAT law, but my principal concern is that it is a hard thing to raise VAT across the board for 250,000 people when one really wants to target the few people who are playing the system to get more tax money for their businesses at the expense of everyone else and of the UK Treasury.

[Mr Gauke]

It is a great pleasure to respond to the debate. I thank my hon. Friends the Members for Truro and Falmouth (Sarah Newton), for Brigg and Goole (Andrew Percy), for St Austell and Newquay (Stephen Gilbert), for Amber Valley (Nigel Mills) and for Dover (Charlie Elphicke) for their remarks. In many cases it has been a pleasure to work closely with them on some of the Budget measures that we have discussed. I thank my hon. Friend the Member for St Austell and Newquay for his kind remarks. I am grateful for the courteous and constructive way in which he engaged with us, and I am grateful also to my hon. Friend the Member for Truro and Falmouth and, although he is not here, to my hon. Friend the Member for Camborne and Redruth (George Eustice), who were very involved in these matters. [Hon. Members: “He is here.”] I am delighted to see that he has joined us. Even if I did not know he was here, I would have said something nice about him. He can assess my sincerity on that basis.

My hon. Friend the Member for Dover made a point about the capital goods scheme. I think he was otherwise engaged earlier today, but I confirm to the House that we are making a separate provision by statutory instrument to amend the capital goods scheme so that self-storage providers affected by the measure and whose individual capital items are worth less than the £250,000 threshold for the scheme can opt in to the scheme and have the same input tax recovery benefits as larger providers with capital items that would already qualify for it. My hon. Friend can note that within two minutes of his making a request, the Government have acceded to it. I hope he is pleased with that.

I want to pick up on some of the points made and say a word or two about some of the new clauses. I think the point that the right hon. Member for Birkenhead (Mr Field) is addressing in new clause 3 is the funding of sixth-form colleges, as opposed to whether they are charged for VAT. Sixth-form and further education colleges are under the control of local authorities and have always been funded differently from schools or academy schools. I think he has in mind a refund scheme along the lines of that for academies.

Sixth-form colleges have never been able to receive VAT refunds against expenditure on their non-business activities, but the basic funding principle for sixth-form colleges is that their VAT costs are taken into account within their up-front funding allocation. Thus funding for sixth-form colleges includes cover for various costs, including VAT, on top of the direct costs of teaching. The right hon. Gentleman has put his argument on the record. Essentially, he argues for additional funding for sixth-form colleges. That must be assessed in light of the current fiscal situation.

New clause 10, which requires an assessment of the impact of the VAT borderline changes, is virtually identical to new clause 3, which was debated and defeated in the Committee of the whole House on 18 April, and to amendment 200, which was withdrawn in the Public Bill Committee on 21 June. Given that the amendment was debated and defeated the first time and withdrawn the second time, I suggest that the Opposition withdraw new clause 10 on this occasion.

On new clause 12, the Opposition have tabled an amendment to return the rate of VAT to 17.5% until

“such time as the Government presents to Parliament a report stating that the UK economy has returned to strong growth.”

This would be very costly. I know that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) was keen not to provide a cost to the House, but the proposal would cost £12 billion to £13 billion. That would substantially erode our fiscal credibility, and if credibility is lost and interest rates rise, the impact on the fiscal position would be severe. We would expect this to have a negative effect on the UK economy. If the Opposition believe that the answer to our current problems is more borrowing, they should stand up and say so. If the solution that the economy needs is a bigger gap between what we raise in tax and what we spend, let me give the hon. Lady the opportunity to say that now.

Finance (No. 4) Bill

Debate between David Gauke and Charlie Elphicke

Thursday 19th April 2012 Commons Chamber

[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.

Finance (No. 4) Bill

Debate between David Gauke and Charlie Elphicke

Wednesday 18th April 2012 Commons Chamber

[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.

Budget Leak Inquiry

Debate between David Gauke and Charlie Elphicke

Thursday 22nd March 2012 Commons Chamber

[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.

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 24th January 2012 Commons Chamber

[Mr Gauke]

It is also important not just to think of poverty in terms of moving someone from one side of an arbitrary line based on a percentage of median income to another, but to look more widely. That includes improving poor children’s opportunities. The Government, through the pupil premium and other measures, are concentrating on opening up those opportunities.

[Charlie Elphicke (Dover) (Con)]

Will the Minister tell the House how families can have a greater option of part-time working under the taxation changes, and whether they will have more encouragement to work with the introduction of the benefits cap?

[Mr Gauke]

With the work that my right hon. Friend the Secretary of State for Work and Pensions has undertaken, the Government are determined to ensure that work will always pay and that we do not have people trapped on benefits.

Oral Answers to Questions

Debate between David Gauke and Charlie Elphicke

Tuesday 21st December 2010 Commons Chamber

[Mr Gauke]

Had we proceeded with the spending formula that existed under the previous Government, some of the deprived areas that are most dependent on central Government grant would have faced a greater cut than the one in the proposals announced by my right hon. Friend the Secretary of State for Communities and Local Government.

[Charlie Elphicke (Dover) (Con)]

Does the Minister agree with me, and my constituents in Dover and Deal, that the council tax freeze is very welcome, and stands in sharp contrast to the massive rises that have hit the poor, elderly and vulnerable in recent years?

[Mr Speaker]

Order. The question is about the comprehensive spending review.

National Insurance Contributions Bill

Debate between David Gauke and Charlie Elphicke

Tuesday 23rd November 2010 Commons Chamber

[Charlie Elphicke (Dover) (Con)]

I welcome this measure. It is just the thing to spur on the private sector. In evidence to the Treasury Committee, Alan Clarke said that it was a “particularly encouraging measure”. Mr Whiting, of the Chartered Institute of Taxation, said that it was a

“worthwhile experiment for the small, new business with new employees.”

This is just the sort of measure to encourage the private sector that the House should be passing.

[Mr Gauke]

I am grateful for that intervention. We have to build this private sector recovery. This measure is a useful contribution, particularly to those regions where the private sector is not as strong as elsewhere. It is a transitional measure, scheduled to end in three years. We are committed to monitoring and evaluating its effectiveness over that period to ensure its success.

It is not our intention for this policy disproportionately to benefit businesses that employ highly paid staff. For that reason, the maximum amount that an employer can profit from any single employee is limited to £5,000. That cap ensures that the policy will not distort European Union markets and that it complies with state aid legislation. We do not expect any significant competitive disadvantage to arise either for existing businesses or for new businesses in regions where the holiday does not apply. The Bill also makes provision for the administration of this measure. Businesses benefiting from the holiday can withhold the employer contributions from the monthly payments they make to HMRC. If the payment cannot be withheld, the businesses can apply to HMRC for a refund. That will help to minimise employers’ costs as well as the costs of delivery.

The Government expect that hundreds of thousands of businesses will benefit from the measure over the next three years. In the Budget, we estimated that new businesses would save hundreds of millions of pounds worth of national insurance contributions during the lifetime of the scheme, giving them the ability to hire more staff, expand their business or invest in the recovery.

PAYE Contributions

Debate between David Gauke and Charlie Elphicke

Wednesday 8th September 2010 Commons Chamber

[Mr Gauke]

That is an operational matter that HMRC will need to consider, but I will discuss it with senior management. As far as staffing is concerned, there will be a spending review announcement on 20 October, and any announcements on HMRC’s budgets will be made at that time.

[Charlie Elphicke (Dover) (Con)]

The size of the problem, the number of people affected and the amount of money involved make it a real tragedy for this country. Some 2,000 of my constituents, and the constituents of each and every one of us, will have to stump up more money that is not planned for at a time when money is tight for everyone. May I urge Ministers to have compassion for those who find themselves in a difficult spot, and a review of HMRC, particularly its difficulties in operating computers?

[Mr Gauke]

Again, I confirm that HMRC will consider the matter sympathetically and will have flexibility to spread payments over up to three years.

Office of Tax Simplification

Debate between David Gauke and Charlie Elphicke

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

All policy decisions will be for the House and Ministers. The hon. Lady makes the fair point that one cannot take politics entirely out of the tax system, but there are times when it is simply a question of complexity versus simplicity. There is scope for improvement, which is what I hope the OTS will be able to deliver.

[Charlie Elphicke (Dover) (Con)]

Will the Minister make a special effort to simplify tax legislation so that it is understandable for ordinary people? As a former tax lawyer—a poacher turned gamekeeper—I know that too often, the best advice is the preserve of the richest. That is not fair.

[Mr Gauke]

My hon. Friend, too, makes a good point. On the day of the Budget we published our document “Tax policy making: a new approach”, which set out a more consultative and deliberative approach to tax law, ensuring that draft legislation is properly examined. We think that that is to the advantage of all people; greater clarity in tax law is clearly helpful.