Finance Bill

Debate between David Gauke and Gregg McClymont

Wednesday 2nd July 2014 Commons Chamber

[Mr Gauke]

During the assessment of the policy announced in the Budget, we considered all the various issues, including the consequences for the Exchequer in both the short and long term. We will say more about the specific interaction with social care and so on in the near future. I would make the point that the very people restricted by the old regime were the people who, over the course of their working lives, saved responsibly and ended up with a pension sum that demonstrated their prudent approach to saving. It is not unreasonable to believe that the vast majority of those people will continue to act prudently when given greater flexibility. As a matter of philosophy, both parties in the coalition Government share the view that when we can give more power and responsibility to people, we should do so.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The Minister referred to the Budget and the documents published about this policy, but what was published was merely the estimated tax take for the Treasury. Nothing was published about the behavioural impact, the prospect of mis-selling or the interaction with social care. When I asked the Government via a freedom of information request to reveal the basis on which the policy was made, they refused to do so. Will we get more information as quickly possible about the basis on which the Government reached this policy position? The Minister is right, of course, that annuities need to be reformed, but the question is about the basis on which the policy was made.

[Mr Gauke]

On the question of social care, let me repeat the point that I just made: we will respond to the consultation in due course and set out our thinking on that point. As for the issue of mis-selling, we made it very clear on Budget day that it was important to have a guidance guarantee in place. We will set out details of how that will work in the near future, as the consultation period closed only relatively recently. It is important that we get that guidance guarantee right. That brings me to new clause 9.

New clause 9 would require the Chancellor to publish any analysis of the impact of changes made by clauses 39 to 43 of the Bill to schedules 28 and 29 of the Finance Act 2004. However, as I said in Committee, only clauses 39 and 40, which increase the amount that can be taken as a tax-free lump sum as a draw-down pension from 27 March 2014, make changes to schedules 28 and 29 of the 2004 Act.

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[Mr Gauke]

There are two points to make. First, we believe that individuals should be able to make their own choices. Of course, they should be provided with guidance, but essentially a system that relies on the state telling people precisely what their investment portfolio, as it were, should be is too restrictive, and does not perform the role that we should be performing. As for the systemic effect on the housing market, which was, I think, the hon. Lady’s central point, I do not think that our changes will have any such effect. Both the Governor of the Bank of England and the Chancellor of the Exchequer have made it clear that we need to ensure that we do not return to the bad old days and to the unsustainable housing market boom we saw some years ago. There are measures in place to reflect that, and we have the institutions in place to ensure that if there are problems they can be addressed quickly.

[Gregg McClymont]

I thank the Minister for giving way once again. Opposition Members become concerned—well, I certainly do—when Ministers refer to the state telling people what kind of investment portfolio to have. Most people have never invested in the way that that comment suggests. He is a well-intentioned and good Minister, but I become concerned when we think about investment for the majority of people in those terms. The fact is that on the day of the Budget the Chancellor said that there would be guaranteed advice, but that turned out not to be the case. It is now guidance, which is a very different thing. Unless we get that guidance absolutely right, there is a danger of the kind of mis-selling that Members on both sides will remember from the 1980s. It is crucial that we understand the way in which people tend to make decisions about these kinds of issues.

[Mr Gauke]

I agree that it is vital that we get the guidance right. I am sure the hon. Gentleman will understand that now is not the occasion for the Government to set out the details of how this will operate, but there will come a point when we will do that. There will be plenty of opportunity for the House to debate those matters. I have no doubt that he is looking forward to that opportunity and will scrutinise our policies on this matter with his customary vigour—[Interruption]—as indeed will the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). While it is very important to get the guidance right, we instinctively support giving people greater flexibility and freedom. Given the tone of the hon. Gentleman’s intervention, I am not sure that he is entirely comfortable with that.

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[Mr Gauke]

My hon. Friend is trying to draw me into the details of what we will say about how the guidance will operate. It is important that we have a system that is transparent and maintains the confidence of the general public, and that is at the heart of what we are trying to do.

[Gregg McClymont]

I will not try to draw the Minister into the details. He rightly refers to the instinct to give people more control over their own lives, and that is something we would all agree with. However, I urge him to read the debates involving a Tory Minister in his position in the 1980s who talked about the revolution in personal pensions using language very similar to that used by the Minister and, more exuberantly, by his colleagues about these reforms. He should compare that with what was said in the 1980s, which led to the mis-selling scandals and some of the loss of confidence in pensions. Greater control, yes, but let us also be aware of the lessons of history.

[Mr Gauke]

I take that point in the spirit in which it was offered. I maintain that it is right that we give people greater control and flexibility. This is about ensuring that individuals are in the best position to make the best decisions for them. Guidance is an important part of that, and, from day one, the Government have been very clear that that was the approach we wanted to take. I suspect that there is, at least at some level, a philosophical difference between Members on either side of the Chamber on this point. I do not think that a Labour Government would have brought forward these reforms, but I welcome any extent to which we can have a consensus.

Annuities for Pensioners

Debate between David Gauke and Gregg McClymont

Tuesday 7th January 2014 Westminster Hall

[Mr Gauke]

Let me put it this way: the industry, the Government, the regulator and consumers all have roles to play in ensuring that consumers get the best deal. So far, action by the Government, the industry and the regulator has focused on ensuring that the market works more effectively to ensure that consumers shop around; identifying conduct risks that prevent them from doing so; and ensuring that they have the right tools and information to make informed choices and provide competitive pressure on the market. However, as I said earlier, those measures are only as effective as the changes they bring about, and they should not stop here.

The Government look forward to the results of the ABI’s evaluation of the effectiveness of its code, and to the FCA’s findings following its thematic review of the market and how consumers are being treated. They will complement the Government’s review of the evidence on how the market is operating and whether improvements are necessary. However, to answer directly the question put by my hon. Friend, the Government are serious about ensuring that the action already under way has a clear and positive impact. We have not ruled out further action in future.

[Gregg McClymont]

Does the Minister accept that the thrust of pensions policy has been to accept the reality of inertia and harness it for the public good? Everything that he has read so far from his script has been about individual engagement. Does he think that individual engagement is enough in this market?

[Mr Gauke]

The hon. Gentleman is too quick to dismiss the role of individual engagement—it seems to me that he dismisses it almost completely. It is important that we engage individuals in such hugely important decisions, that we increase transparency and that we remove any hidden barriers that may exist. There is consensus—we all want the market to work. If we are to succeed, we must take every measure available to improve individual engagement. We should not dismiss it.

Oral Answers to Questions

Debate between David Gauke and Gregg McClymont

Tuesday 12th March 2013 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

12. What estimate he has made of what the annual value of his planned reduction in the additional rate of income tax to 45% would be to a person earning £1 million a year.

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

Owing to the significant behavioural responses to changes in marginal tax rates at high levels of income, the annual value of changing the additional rate of tax would not reflect the actual Exchequer impacts of the change. HMRC’s report “The Exchequer effects of the 50 per cent additional rate of income tax”, which was published alongside the 2012 Budget, set out that behavioural response in detail.

[Gregg McClymont]

Well, that was very clear, Mr Speaker. The answer, of course, is £40,000 a year. Why is a £40,000 a year tax cut for millionaires this Government’s priority?

[Mr Gauke]

The purpose of income tax is to raise money to fund public services. The 50p rate of income tax did not raise money to fund public services, so we have got rid of it.

Oral Answers to Questions

Debate between David Gauke and Gregg McClymont

Tuesday 29th January 2013 Commons Chamber

[Mr Gauke]

It would be right to say that the Government have taken 2.2 million people out of income tax—that is certainly a simplification for them. We have reduced the small profits rate of corporation tax and reduced the main rate of corporation tax. We have taken steps, wherever possible, to reduce taxes.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Can the Minister reassure the House that these attempts at tax simplification will be more successful than last year’s attempts, which saw U-turns on caravans, pasties, charities and the oil and gas sectors? Can he reassure the House that these attempts will work a lot better this year?

[Mr Gauke]

I can remember one particular tax simplification from the last Government, which was the abolition of the 10p rate. I think we have a better record than that.

Oral Answers to Questions

Debate between David Gauke and Gregg McClymont

Tuesday 11th September 2012 Commons Chamber

[Mr Gauke]

The Government are continuing to explore the potential of merging the operation of income tax and national insurance contributions. We also want to make the tax system as transparent as possible, and one of the steps we have taken is the introduction of personal tax statements that will make it clearer to taxpayers how much they are paying in both income tax and national insurance.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The Minister will be aware that his colleague the Chancellor presented the granny tax as a tax simplification in the Budget. Is the Minister confident that further measures of tax simplification will be more successful and less unpopular than the granny tax?

[Mr Gauke]

We believe that tax simplification is important. A simpler tax system makes it easier for taxpayers to see how much they are paying, easier for businesses to comply, and easier to tackle avoidance. It is something the Government believe in.

PAYE Contributions

Debate between David Gauke and Gregg McClymont

Wednesday 8th September 2010 Commons Chamber

[Mr Gauke]

The period of three years is one in which we have confidence that HMRC will be able to address the matter administratively. Beyond that, certain technical matters would need to be thought through. However, we are confident that HMRC is capable of addressing the matter over three years.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Does the Minister agree that the position of front-line staff in HMRC centres up and down the country is important? They do a stressful job at the best of times and regularly deal with frustrated taxpayers on the phone, but with the new problem, I am sure the Minister agrees that the staff’s position needs to be looked at. A statement of support for them from the Minister would be welcome.

[Mr Gauke]

I am grateful for the hon. Gentleman’s question. Some comments have suggested that the situation is the fault of HMRC staff who cannot add up, but those comments are ill-informed. The truth is that HMRC staff are committed to doing a good job. They are battling with a difficult system, and I give them my support. As a Minister, I have visited many HMRC offices, and I appreciate the hard work, enthusiasm and dedication of HMRC staff.