Taxation of Pensions Bill

Debate between David Gauke and Graham Stuart

Wednesday 3rd December 2014 Commons Chamber

[Mr Gauke]

I beg to move, That the Bill be now read the Third time.

The House has reached the final stage of its consideration of the Bill, which will give individuals more choice about how they access their savings in retirement. I have been pleased by our wide-ranging and informed debates.

I would like to remind hon. Members of the measures in the Bill and their aims. While the Bill makes the tax system fairer by ensuring that people have more choice about how they access their savings, it contains measures to prevent individuals from exploiting that new flexibility to gain an unintended tax advantage, and to ensure that the taxation of pensions savings on death remains fair and appropriate under the new system.

At Budget 2014, the Chancellor announced the most radical reform to how people take their private pensions for nearly 100 years. The current system restricts choice at the point of retirement. Those with the smallest and largest amounts of pension savings are allowed flexibility, but those with a medium amount of savings have very limited options. The Bill will change that by extending flexibility to everyone with a defined contribution pension, regardless of their total pension savings.

The Bill also introduces a new method to allow people to access their pension flexibly. At present, people taking their pension as cash have to take all their tax-free lump sum—25% of their fund—and then place the other 75% in a draw-down fund. Any money they then take out of that fund will be taxed at their marginal rate.

The uncrystallised funds pension lump sum—UFPLUS —is a new option that will give individuals the flexibility to take one or more lump sums from their pension fund without having to enter into draw-down or to take all their tax-free lump sum in one go. When using that option, 25% of each payment will be tax-free, with the other 75% taxed at the individual’s marginal rate. We are also increasing choice by introducing changes to encourage innovation in the retirement income market. Following extensive consultation with the industry, the Bill will give providers scope to make annuities much more flexible products in line with consumers’ needs. I have already discussed the fiscal impacts of those measures and related ones today, but I reiterate that the Government have now published Office for Budget Responsibility-certified costings for the policy overall alongside the autumn statement.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

My hon. Friend will remember, as I do, that one of the first acts of the previous Labour Government on coming to power was to put a tax on pensions that helped to destroy the healthiest, strongest and most successful pension system in Europe. This Government, however, in much less promising economic times, have managed to bring flexibility and hope to all those who save for a secure retirement.

[Mr Gauke]

I am grateful to my hon. Friend for helpfully reminding the House of that important point. It is a significant achievement of the Government that we have been able to undertake such a fundamental reform—perhaps the biggest for nearly 100 years—in this area. Our record compares favourably with that of our predecessor. Of course, the Bill is part of a wider set of Government reforms, including the single-tier pension, the rolling out of auto-enrolment and the triple-lock guarantee.

Finance Bill

Debate between David Gauke and Graham Stuart

Monday 1st July 2013 Commons Chamber

[Mr Gauke]

I entirely agree with my hon. Friend. The challenge for any sensible Government has got to be how to ensure both that the wealthiest pay a fair share and that we encourage a spirit and culture of entrepreneurialism. The 50p rate simply failed to deliver that.

[Mr Graham Stuart]

My hon. Friend is giving a thoughtful economic analysis, but he perhaps misunderstands where the Opposition are coming from, because I do not think they are particularly interested in the economics. The fact is that their position is now so desperate that they have their 36% strategy, they are entirely paid for by the union movement, and their desire now is to lurch to the left. They do not care if they get less money; what they want to do is appeal to a core vote which they hope will be enough to return them to power because of the invidious and unfair electoral system we have. That is what is going on, which is why we waste our time when we talk about entrepreneurialism or the benefits to public services, because they are not really interested.

[Mr Gauke]

My hon. Friend takes a sceptical view of the Opposition, and events may well turn out to justify it. I want to take a more charitable view, however—although perhaps it is, in fact, a different form of scepticism or cynicism. My view is that they are not really serious about the 50p rate at all; much though they talk about it, they will not, in truth, pursue this policy because they know it is so damaging and that it does not do anything to raise revenue. That is why, despite repeated questions earlier, the hon. Member for Kilmarnock and Loudoun, who does like to be straightforward with the House, refused to say whether Labour would support a 50p rate after the next general election. She makes the argument that Labour will have to delay and wait to see what the state of the economy is, but given that we know this does not raise any substantial amount of revenue, it cannot be dependent on the state of the public finances; instead, it is a matter of political calculation. I hope my hon. Friend is wrong and that the Opposition are trying to edge away from a position that they saw as populist but which, in truth, is economically incoherent.

Income Tax

Debate between David Gauke and Graham Stuart

Wednesday 28th November 2012 Commons Chamber

[Mr Gauke]

My hon. Friend raises an interesting point. Perhaps I should not be drawn too much into discussing the domestic policies of one of our close European allies, but it will be interesting to see the impact in France of a very high rate of income tax, and whether people will move out of that country and we see any additional revenue as a consequence.

[Mr Graham Stuart]

I appeal to my hon. Friend not to be too harsh on the Opposition. Does he not understand that the Labour party now gets 90% of its funding from the trade union movement? If the trade unions insist that there should be a 50p tax rate—even if it does not raise money and undermines public services—it may feel obliged to put it in its manifesto regardless.

[Mr Gauke]

My hon. Friend displays an unusual degree of cynicism. I am still hopeful that Labour Members will share with us a desire for the UK to be a competitive environment for business that attracts high net worth and high-earning individuals to locate and pay tax in the UK, and that we can raise more revenue from them. Perhaps, however, my hon. Friend will turn out to be right and they will be driven more by their trade union paymasters.

Static Caravans (VAT)

Debate between David Gauke and Graham Stuart

Thursday 26th April 2012 Commons Chamber

[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.

Finance (No. 4) Bill

Debate between David Gauke and Graham Stuart

Wednesday 18th April 2012 Commons Chamber

[Mr Gauke]

I will give way to my hon. Friend the Member for Beverley and Holderness (Mr Stuart).

[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.