Banking Commission Report

David Nuttall Excerpts

Monday 19th December 2011 Commons Chamber

[Mr Osborne]

The banks themselves—inasmuch as we are talking about shareholders who own them—will benefit from a safer banking system. Among the casualties of the banking crash were shareholders of the Royal Bank of Scotland, Northern Rock and the like. They lost money too and, as my hon. Friend well knows, they were not all immensely rich City people; rather, many were actually on quite low incomes. The shares were their main source of savings, so the shareholders also lost out. Owners of banks, including small shareholders, will benefit from a safer banking system.

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

Given that the UK’s four largest banks hold seven out of 10 personal current accounts and eight out of 10 of the current accounts of small and medium-sized businesses, will my right hon. Friend reassure me that the proposed new legislation and regulation will neither result in banks leaving the UK or being deterred from expanding, nor deter new banks from opening in the UK, thereby reducing competition and restricting choice for customers?

[Mr Osborne]

The reforms will make the UK an attractive location for international financial services, which will know that our system is better regulated, and for retail banking, because customers will have greater assurances that the banking system is safe and that they will not have to bail out the banks if they go wrong.

Taxation Freedom Day Bill

David Nuttall Excerpts

Friday 25th November 2011 Commons Chamber

[Mr Philip Hollobone (Kettering) (Con)]

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

It is a privilege to move Second Reading of the Taxation Freedom Day Bill. It is a small Bill with an important message to Her Majesty’s Government from the Great British taxpayer and provides for an annual taxation freedom day to reflect the proportion of tax paid by individuals from their income. The idea is that each year, the Chancellor of the Exchequer must, by way of a statutory instrument, specify a day that will be observed as taxation freedom day. The purpose of this taxation freedom day will be to mark the day in any given calendar year on which the United Kingdom’s net national income reaches the level of the United Kingdom’s estimated level of national taxation for that calendar year.

In the Bill, total national taxation includes all forms of direct, indirect and local taxation and it will be calculated not by Her Majesty’s Government and not by me, but by the independent and trusted Office for National Statistics. Likewise, the Office for National Statistics would also be charged with calculating net national income.

Each year, the Chancellor of the Exchequer will determine the day in the year when taxation freedom day will fall using the proportion of the United Kingdom’s estimated level of national taxation to the United Kingdom’s estimated net national income. Under the terms of the Bill, an order would not be able to be made unless it was laid before and approved by resolution of each House of Parliament. Each year, before 30 November, the Chancellor of the Exchequer will have to lay before Parliament the estimated date of taxation freedom day in the following year and, before 31 May, the Chancellor will have to lay before Parliament a report setting out whether the estimated date of taxation freedom day in that calendar year was correct.

The purpose of the Bill is to try to provide some transparency for the British taxpayer about the burden of taxation on them and on the national economy. It is essentially politically neutral and is not an argument for or against any particular level of national taxation. I have my own views on that, on which I hope to elaborate later, but all I seek to do is to get across, in a readily understood and straightforward way, the proportion of our economy that is taken up in taxation. The Bill is one of almost a dozen that I have put before the House in this Session. I should like to place on record my thanks to Jonathan Isaby at the TaxPayers Alliance for his contribution to the Bill’s drafting. I thank also the Adam Smith Institute for its germ of an idea about having a readily understood national taxation freedom day, as well as the Freedom Association, which has been extremely supportive.

Taxation freedom day in 2011 was 30 May—three days later than last year—which means that, on average, every British taxpayer had to hand over all their income to Her Majesty’s Government for the first 149 days of 2011. Only after 30 May did they get to keep for themselves any income they earned. Having recognition of such a calendar date would reflect and get across in a very simple and straightforward way the burden of taxation on our economy.

The date of taxation freedom day varies from year to year, and the point is to make it easy to understand how the burden of taxation changes each year. In 1964, taxation freedom day was 23 April, whereas in 2011, as I have mentioned, it fell on 30 May. So, over that period, taxation freedom day moved by 37 days. In 1964, the average British taxpayer had to work for only 114 days before they could keep their income for themselves, but in 2011 they had to work for 151 days before they could keep their income.

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

My hon. Friend is making a very cogent speech. Is he aware that these figures have been calculated back to the turn of the 20th century? In 1900, the figure was only 22 days and in 1910 it was only 19 days.

[Mr Hollobone]

I am grateful to my hon. Friend for that most helpful intervention. Such interventions highlight how well he serves his constituents with the depth of his knowledge and research into legislation such as this. The figures he gave put into context the horrifying advance in the burden of taxation that we all have to pay. The fundamental truth is that Her Majesty’s Government and Ministers such as the Economic Secretary to the Treasury, who is on the Front Bench, do not have any income or resources of their own. Everything that the Government spend on our behalf either comes from the British taxpayer or is borrowed. The burden of that taxation demand is of concern to everyone.

There may well be Members, perhaps on the Opposition Benches, who believe that the burden of taxation should go up. That is a perfectly respectable argument. There are those who believe that the state can marshal the resources of the British people better than the individuals themselves. I do not happen to agree with that, but it is a perfectly respectable point of view. I would expect them to welcome taxation freedom day going up the calendar, so to speak, perhaps into June, July or even August. My Bill does not say that that is a bad thing. What my Bill says, in a politically neutral way, is, “Let’s let the British people know what the burden of taxation is so that they might make a judgment about whether it is acceptable or not.”

The figures that my hon. Friend the Member for Bury North (Mr Nuttall) cited from the turn of the 20th century demonstrate how far we have come, in an adverse way, since those days. My humble remarks go back only to 1964, which happens to be the year in which I was born. In 1964 British taxpayers had to work for only 114 days until taxation freedom day, and now, in 2011, the equivalent figure is 141.

Taxation freedom day has moved around quite a lot in the past 47 years. The House might be interested to know, for example, that between 1964 and 1970, taxation freedom day moved by 40 days, from 23 April to 2 June. Those were the days of the devaluation crisis, a great deal of trade union militancy and the public finances being in some disorder. The burden of taxation went up by more than a month’s worth—40 days’ worth—over that period. Then, from 1970 to 1973, taxation freedom day fell by 21 days, from 2 June to 11 May.

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[Mr Hollobone]

My hon. Friend is absolutely right. That is what Her Majesty’s Government are currently trying to do.

[Mr Nuttall]

More for less.

[Mr Hollobone]

Indeed. We can have better public services that are less dependent on public subscription. By making the burden of taxation transparent, through this calendar mechanism, the arguments for the more efficient use of public resources can be strengthened by the simple idea of trying to make taxation freedom day fall earlier.

The Conservative party has supported the idea of taxation freedom day in the past, but I am disappointed to see that, in the handout from the Government machine, the Government are going to oppose the Bill today.

[Mr Nuttall]

No!

[Philip Davies]

Surely not!

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[Mr Hollobone]

That is a very good point and the Economic Secretary has heard it. She will also have heard the voice of the House expressed only the other week in support of my hon. Friend’s motion. The burden of petrol taxation has got to such a level that it is probably constraining economic growth in an unacceptable way, at a time when growth from anywhere would be most grateful.

[Mr Nuttall]

My hon. Friend said what the gross figure would be for a higher rate taxpayer. Of course, we now have two rates of higher tax at 40% and 50%. Does he know to which of those rates his figure applies?

[Mr Hollobone]

I believe that the figure I quoted is applicable to the lower of the higher rates. The figure would be even worse for those who pay the top rate. I am sure that the Tax Buster app has a facility to calculate the tax burden for those on the very highest rate.

The aim of the app is to bring greater clarity and to illustrate for taxpayers the need for more transparent taxes. The Government have been pushing for more spending transparency, which is welcome. I hope that in her remarks, the Economic Secretary will welcome this effort to make our taxation system more transparent and offer the TaxPayers Alliance the Government’s support.

Another great concern for taxpayers is that this country has two big taxes on individual incomes: income tax and national insurance contributions. There are many in this Chamber and many organisations outside who believe that those two should be combined. That would make the taxation system more readily understandable for taxpayers. To most people, national insurance is almost indistinguishable from income tax. Its function is now essentially the same—raising revenue for the Government. Despite performing essentially the same task, the two systems operate in a different manner in eight key ways, for example in the collection period and the definition of earnings. That is unnecessarily complex and adds to the expense of collecting revenue for Her Majesty’s Treasury. Most importantly, national insurance contributions obscure the public’s understanding of how much they are being taxed. Most debate at the time of the Budget or the autumn statement focuses on the level of income tax. National insurance, despite being extremely important, is often overlooked.

I would support reforming national insurance to align it with income tax, which would cut costs, reduce complexity and improve transparency. I therefore believe that the Government should abolish national insurance for both employers and employees, and combine it into one taxation system. Abolishing national insurance would make the whole thing simpler, cheaper and more transparent.

I have spoken about the simple version of taxation freedom day, but of course we can take the matter a step further. As well as having a national taxation freedom day, we could break it down into regional variations. The Adam Smith Institute has done that for the United Kingdom. It calculates that in 2011, there are huge variations. In Wales, the regional equivalent is after 35 days, and in London it is after 51 days. The taxpayer in London is having to work for 51 days with all their income going to the Treasury, but in Wales it is far less. In the east midlands, where the constituency that I have the privilege to represent is located, it is 38 days.

The institute has also calculated the number of days that it takes Britons as a whole to pay off each individual tax. For example, income tax takes up the first 39 days of the year; national insurance the next 26 days; VAT the next 29 days; corporation tax the following 12 days; fuel duties and petroleum revenue tax the next seven days; local taxes including business rates and council tax the following 13 days; capital gains and inheritance tax the next two days; duty on alcohol and tobacco the next five days; and all other taxes the following 17 days. Again, that helps to clarify the burden of taxation on the hard-pressed British taxpayer and how it is split up by each of the individual taxes that we are all obliged to pay.

I mentioned earlier the briefing that the Government information machine has circulated about my Bill. I have to say, I am very disappointed by it, and it makes a number of points that need to be tackled head-on. I will do that now, so that instead of reading out those points the Minister can respond to them. The Government’s first attack point is:

“The methodology for calculating Tax Freedom Day includes all forms of direct, indirect and local taxes. This gives an exaggerated sense of the tax burden on an individual level and does not recognise the progressive elements of the tax system.”

I do not share that concern. I do not want to exaggerate anything; all I want is a transparent system.

I would welcome comments from the Government about how they feel the burden of taxation on the average British taxpayer ought to be calculated. I am not particularly fussed about the methodology of that, as long as it is consistent year on year and can be backdated for a reasonable number of years so that we can get a sense of the progression either way. As I stressed at the beginning, my Bill is politically neutral in that sense. It does not argue that taxation is a good or bad thing; it is simply intended to make the way of getting that across to the public as transparent as possible.

The Government’s second attack point is:

“Acknowledging the need for freedom from taxation disregards the public benefits that flow from the revenue raised, through public spending. These include some of the country’s most important priorities—the healthcare of our people, the education of our young, our nation’s security, and the infrastructure that supports our economic growth.”

Of course, that is right. We need taxation and public services. I am not arguing with that. My Bill is politically neutral in that sense and does not disregard the public benefits of taxation; it simply aims to get across to the British people how much they are obliged to cough up to pay for those public services.

The third point:

“In the past decade the date for Tax Freedom has varied very little. How can those supporting the Bill justify the expense and Parliamentary time that will be taken up designating a specific date each year?...What assessment have those supporting the Bill made of the costs to the Treasury of the proposed legislation?”

The Government must have been struggling to come up with attack points when they got to that one because I cannot imagine that much expense would be involved in designating taxation freedom day.

[Mr Nuttall]

Furthermore, as my hon. Friend has demonstrated, over the years tax freedom day has fluctuated wildly.

[Mr Hollobone]

Indeed. The Office for National Statistics is a thoroughly competent organisation whose judgment we all respect, and I cannot believe that to get this exercise under way would place a massive burden on it or Her Majesty’s Treasury. The Adam Smith Institute, through its good offices, has published its version of this information. That is a small, privately funded organisation. Given all of Her Majesty’s Treasury’s resources, at taxpayers’ expense, I am sure that getting this exercise under way would be a small matter. On parliamentary time, we are talking about one statutory instrument a year, and we know that passing hundreds of statutory instruments accounts for only a small fraction of the cost of running Parliament.

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

As always, it is a great pleasure to follow my hon. Friend the Member for Shipley (Philip Davies), who has demonstrated the great need for this Bill. I start by congratulating my hon. Friend the Member for Kettering (Mr Hollobone) on preparing the Bill and bringing it before the House today. In his opening remarks, he said that he thought that this was a simple and straightforward measure and, of course, in many ways it is. I have a great deal of sympathy for the measure, and I would have thought that hon. Members on both sides of the House could agree on the issue of transparency on tax matters.

I start from the position of broadly supporting the principle of ensuring that taxpayers should be given clear information about the size of their tax burden. I was initially very encouraged that the Bill would go a long way towards improving the transparency of our tax system, but when I began to study the detail of the Bill and consider all the issues involved, I found that in many ways it is far from simple and straightforward. Indeed, this is a fiendishly complex matter, which is not as simple and straightforward as it may appear at first sight.

I wish to deal with several issues in my contribution, the first of which is why making the tax burden more transparent is so important. Taxation legislation is incredibly complex, covering a wide variety of taxes and duties. Indeed, it is worrying that the list is so long. Most people, when they hear the word tax, automatically think of income tax, but that is just one of several taxes with which the individual might be burdened. To income tax, we can add value added tax, national insurance, capital gains tax, stamp duty, fuel duty, alcohol duty, tobacco duty, air passenger duty, insurance premium tax, landfill tax, corporation tax, petroleum revenue tax, council tax, the climate change levy and the aggregates levy. Then, for anyone who has still managed to live frugally enough to be left with any assets after paying their way through life while paying all those taxes, subject to the various exemptions and the nil rate band, those assets are taxed again, with the imposition of the inheritance tax.

[Robert Halfon]

Is my hon. Friend not making the case for a flat tax?

[Mr Nuttall]

There is a great need for simplification of our tax system and a flat tax might well have a part to play in that.

Mark Twain is often attributed with the quotation that the only two certainties in life are death and taxes, and throughout the ages Governments have always cast around for things to tax. Over the years, we have had window taxes, beard taxes and brick taxes. I particularly like—only because it will give me the chance to mention that great son of Bury, Sir Robert Peel—the glass tax that was introduced in 1746, in the reign of King George II. At that time, glass was sold by weight and manufacturers responded to the tax by producing smaller and more highly decorated objects, often with hollow stems, which are today known as excise glasses. If anyone has ever wondered why the crystal glassmaking industry flourished in Cork and Waterford, it was because in 1780 the Government granted Ireland free trade in glass, which continued until 1825, when the tax in Ireland was restored. That led to a gradual decline in the industry until the glass tax was finally abolished by that great son of Bury, Sir Robert Peel, and his Government in 1845.

The complexity of today’s tax legislation is perhaps best illustrated by the fact that Pythagoras’s theorem can be set out in 31 words—I was told it was 24, but when I counted there were 31—the Lord’s prayer contains 66, the 10 commandments contain 179, the US declaration of independence contains 1,300 and the entire United States constitution, with all 27 amendments, apparently contains 7,818, but to get to grips with the United Kingdom’s tax system, one would have to purchase several weighty volumes such as Tolley’s tax manuals, setting one back several hundred pounds.

[Jacob Rees-Mogg (North East Somerset) (Con)]

Is it, however, shorter than the acquis communautaire?

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[Mr Nuttall]

My hon. Friend makes a very good point. That would weigh even more, I am sure, and it is certainly weighing more on the efficiency and competitiveness of British business. As he will be aware, my view is that the sooner we can free ourselves from the acquis communautaire the better.

When one considers those facts, it is no wonder that adopting a simple way of demonstrating to people the size of their tax burden by calculating and publishing the number of days the average individual would have to work to discharge it is such an attractive idea. The result of all the complexity, of course, is that people do not understand how much tax they really pay, but putting it in terms of how many days the average person has to work solely to pay taxes would start to bring it home to people.

[Philip Davies]

May I float another idea past my hon. Friend? Not only should the day on which people have paid off their taxes be announced as tax freedom day, but there should also be an announcement of the day on which the Government’s spending programme has been matched fully by taxation. In America, tax freedom day is on 12 April, but if all the money to pay for all the Government spending had to be collected—$1.48 trillion more—the date would be 23 May. Perhaps we should also see what the gap is between taxation and the amount that the Government are incurring in expenditure.

[Mr Nuttall]

My hon. Friend makes a very good point. That could be dealt with in Committee; we could amend the Bill to include that date as well. That opens up a whole new area of complexity, because there is not only the difference between income, expenditure and the actual spending programme to consider but the effect of existing debt that needs to be paid off.

Let me deal with the Bill in a little more detail. Clause 1(1) requires the Chancellor of the Exchequer to specify one day each year that

“shall be observed as Taxation Freedom day.”

Unfortunately, the Bill is silent on how we as a nation are to observe this great day. I understand the reluctance of my hon. Friend the Member for Kettering to suggest having another bank holiday, but I submit that it might be appropriate to mark the day with an annual debate in the House on the ways in which the burden of taxation could be reduced in future years and hence the day brought forward.

[Mr Hollobone]

I am enjoying my hon. Friend’s speech hugely, and that is a most constructive suggestion. In formulating the Bill, I had in mind that at the very least the Chancellor of the Exchequer could make an oral statement to the House and we could then question him or her on the taxation freedom day proposals, but an annual debate—with a motion, one would hope—would be excellent.

[Mr Nuttall]

I am grateful to my hon. Friend.

[Mr Bone]

Will my hon. Friend make it clear that if there were to be such an oral statement by the Chancellor, it should be made to the House first rather than being given to the media in advance?

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[Mr Nuttall]

Yes; in view of recent publicity I am sure that all Government Ministers will want to make announcements to the House first.

The purpose of tax freedom day is set out clearly in clause 1(2), as being to mark the day in each year when

“the United Kingdom’s net national income (calculated from the beginning of the calendar year) reaches the level of the United Kingdom’s estimated level of national taxation for that calendar year.”

At this point the whole matter becomes more complicated. The term “total national taxation” is helpfully defined in clause 1(3) as including

“all forms of direct, indirect and local taxation”,

and as my hon. Friend the Member for Kettering mentioned, the task of making this calculation is given over to the Office for National Statistics. However, the problem with that approach is that very few people’s personal tax freedom day would actually coincide with the day specified under the Bill. Levels of council tax vary throughout the country and dwellings are divided into several bands within council tax. It seems to me that in this age of personalisation of services, the Bill could usefully go on to provide for the notification to each individual taxpayer of their personal tax freedom day.

That is not a new idea. In Canada, the Fraser Institute provides a personal tax freedom day calculator which takes into account variables such as the age of the head of the household, their marital status and the number of children they have. I wonder whether the TaxPayers Alliance app for mobile telephones and tablet computers that my hon. Friend mentioned earlier could be adapted to provide a personal tax freedom day for individuals.

What about so-called non-taxpayers? I am always mystified by the term “non-taxpayer”. I accept that there are people who, for various reasons, might not pay income tax, and thanks to the steps that this Government are taking, fewer and fewer people are paying income tax. I am pleased that we are moving towards the target of a £10,000 personal allowance each year. That is a huge improvement in the field of tax simplification and it has meant, for example, that this year’s £1,000 increase in the personal allowance has removed an additional 800,000 people from the burden of paying income tax.

However, we should not fall into the trap of thinking that those who do not pay income tax are non-taxpayers. They could still be liable for council tax. They may still have to pay insurance premium tax. If they travel, they will have to pay air passenger duty. Whenever they purchase goods or services that are liable for VAT, they will have to pay value added tax. The list goes on.

[Charlie Elphicke]

I thank my hon. Friend for giving way; he is being extremely generous in taking interventions. My own research has indicated to me that the effective tax rate on the least well-off in the past 10 years, under the previous Government, was higher than the effective tax rate on the richest. That is the inequality fostered under the previous Government.

[Mr Nuttall]

Yes, and we must not allow ourselves to think that people who are non-income tax payers are non-taxpayers. There is a great difference. They would, I suspect, be very surprised if the total tax liability from all the various forms of indirect taxation was calculated and expressed, as the Bill seeks to do in a general way for the nation, as their own personal tax freedom day.

We should ask ourselves why this approach to transparency has not been adopted before now by the Government and by previous Governments. The idea of a tax freedom day was developed decades ago in 1948, in the aftermath of world war two, when a Florida businessman who went by the great American name Dallas Hostetler trademarked the phrase “tax freedom day”. He proceeded to calculate it for the nation for the next two decades until he retired in 1971, when he transferred the trademark to the Tax Foundation, which ever since has continued to calculate the American tax freedom day. It is used as a mechanism for illustrating the proportion of national income that is diverted to fund the annual cost of Government programmes.

As my hon. Friend the Member for Shipley mentioned, since 1990 the Tax Foundation has been calculating a separate tax freedom day for each state. The concept of calculating a nation’s tax freedom day is enormously popular around the world. Dozens of countries produce their own calculations. There are too many, the House will be relieved to hear, for me to list individually. What is important for the purposes of comparison is for the calculations to be based on the same year. Fortunately, that can be done in the case of the European Union.

Last year a newspaper in Brussels entitled L’Anglophone compared the tax burdens for workers earning a typical wage in each of the 27 member states of the European Union. It took into account the income tax contributions and the social security contributions made by the employee and the employer, and included a projected value added tax contribution. From this research we see that the latest tax freedom day in one of the member states occurred in Hungary. It was 6 August, the 218th day of the year, representing a tax burden of an eye-watering 59.4%. The earliest tax freedom day in the EU was in Cyprus—this endorses the statistics produced by my hon. Friend—where it was calculated to be 13 March, or day 72, representing a tax burden of just 19.4%.

The importance of establishing a correct basis for calculation is perhaps best illustrated by looking at just one of those countries: Belgium. The accountancy firm PricewaterhouseCoopers calculated that for the second year running tax freedom day in Belgium fell on 8 June, whereas L’Anglophone research indicated that it fell almost two months later on 3 August, or day 215, representing a tax burden of 58.5%. The authors of L’Anglophone explained the discrepancy by noting that PricewaterhouseCoopers’s figures

“count revenue from all taxes (including those on corporate profits, petrol, cigarettes, &c.) and thus present a more complete picture of the country’s total tax burden.”

They added that it is

“an average applied to all Belgians—not all Belgian workers; in 2008, less than half of Belgium’s population (4.99 million working out of 10.67 million citizens) was legally working. Consequently, a huge share of Belgium’s tax burden is borne by the working population.”

That demonstrates the need for consensus around the world on an agreed formula for calculating tax freedom day, and I submit that that should be discussed and agreed at a future meeting of the G20. It also demonstrates the complexity of the tax involved and why for many people a personalised approached might be the way forward.

Another complication that would become apparent when comparing one year with another is the effect of a leap year. Indeed, next year will be affected, as 2012 is a leap year. It is worth noting that leap years have a slightly distorting effect on comparisons, to the extent of 1/366, or 0.27%.

I must deal with one of the major criticisms I have heard levelled at the idea of publishing a tax freedom day: the notion that that somehow devalues the importance of the work done by those engaged in public service. I do not accept that for one minute. I think that the British people are quite capable of recognising the need to pay our armed forces and police forces and all those who are essential public sector employees. The introduction of a taxation freedom day will provide citizens with a reminder of the amount of tax they pay and an opportunity to consider whether what they pay is reflected in the value of the public services they receive.

I have another concern, about the requirement set out in clause 1(2) stating that the UK’s net national income will be

“calculated from the beginning of the calendar year”.

I understand that the Adam Smith Institute calculates tax freedom day in that way. Indeed, having looked at the systems used around the world, it seems that calculating it from the start of the calendar year is the usual way. However, I suspect that that has arisen because in America the tax year is the same as the calendar year and, as the concept of tax freedom day started in America, that is what has been adopted in other countries.

Here in the United Kingdom, however, we of course run our tax year from 6 April, so I wonder whether it would not be simpler and easier to calculate the figures for notional income and the level of taxation on the same basis as the tax year, rather than the calendar year. Again, we could consider that in more detail in Committee.

The calculation period is particularly relevant when one considers the Chancellor of the Exchequer’s duties, which are set out in clause 2. The Chancellor will be required before the last day of November to estimate the taxation freedom day in the following calendar year, which will mean having to estimate the levels of taxation and spending for the following year before the annual Budget. The whole process might be better aligned with the annual Budget, however. Indeed, it could become a centrepiece of each year’s Budget, so that when the Chancellor made the annual statement he announced the annual tax freedom day.

It would of course be simple to base the calculation on the traditional tax year, and for the number of days required to be calculated on that basis. For example, if the 2011 Adam Smith Institute figure for the UK of 149 days—representing 40.8% of the year—had been calculated from 6 April, taxation freedom day would have been 1 September, and for the purposes of international comparison it could then, as it is now, be given as 30 May, the equivalent date from a 1 January start.

There is a further problem with calculating a national figure, and it arises in respect of Scotland. The Scottish Parliament now has limited tax-raising powers of its own, and if it exercised them it would lead to a distortion of the national figure. The existing power to increase income tax by 3p in the pound has not been used, but, when the new powers become available after the passage of the Scotland Bill, and with a Scottish National party Government in power in Scotland, they could be used, so a separate figure ought to be calculated for Scotland. It would not be fair or equitable for the UK Government to be criticised for spending decisions taken in Holyrood.

In conclusion, the Bill raises important issues about the levels of taxation and spending. Increased transparency in Government spending is vital, and I warmly welcome the measures that the Government have already taken to reveal the detail of public expenditure. Shining the searchlight of public scrutiny on the spending decisions of politicians is without doubt one of the best ways to control Government spending, and such moves help at the micro-level, but this Bill will extend the principle of public scrutiny, openness and transparency to the macro-level.

A single, simple day can be tracked each year. It can be monitored, and I venture that it could become a feature of general election contests, with the parties including in their manifestos their target for tax freedom day over the lifetime of the following Parliament.

I sincerely hope that the Bill receives its Second Reading and is able to proceed into Committee, so that we can take it through its remaining stages when we meet again on 20 January.

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[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I congratulate my hon. Friend the Member for Kettering (Mr Hollobone) on securing this debate and those who have spoken in it. By way of a preamble, you, Mr Deputy Speaker, may know that, like Kettering, my Norwich North constituency has a fine history of shoe factories, which sits alongside a history of manufacturing chocolate, mustard and many other fine products that Members are welcome to come and enjoy on their holidays.

The House will be aware that my right hon. Friend the Chancellor will make his autumn statement on Tuesday, so I will not set out the Government’s plans for the future in this debate. However, with that caveat, I will address—or attempt to address—the extensive points made by my hon. Friend and others, with reference to the principles for good taxation, tax simplification and transparency and, of course, the public finances and public spending.

In many ways, tax freedom day is an absolutely excellent idea. We all insist on knowing what we are paying for our goods and services, whether they be chocolates, shoes or anything else. Where we have ongoing payments, we adjust our direct debits so that we know what we owe and pay only that. Understanding the value of paying tax in some simple way should not be sniffed at. To quote the HMRC slogan—I cannot quite believe I am doing this on the Floor of the House—“Tax doesn’t have to be taxing”. Tax and our understanding of its value to the Government should be simple. None of us wants tax to be imposed sneakily, through the back door. We want tax to be proudly transparent.

There is a problem, however, which is that our lives are not that simple. If I paid only income tax, perhaps a basic “money in, money out” assessment could be made, but we have a variety of taxes in this country, which helps to maintain a balance for the individual and the state. Tax provides carrots for some activities and sticks for others. Talking of sticks, I suppose I should note what my hon. Friend the Member for Dover (Charlie Elphicke) said, which surprised me somewhat, because I am told that he told the Finance Public Bill Committee in 2010 that he was giving up. Perhaps he would like to confirm that—or not—in the remainder of this debate. [Interruption.] I beg my hon. Friend’s pardon.

Let me return to the more serious content of the debate. Tax rightly provides carrots and sticks, and people will experience taxation differently, depending on their circumstances and choices. For example, my personal tax freedom day may vary if I go out for dinner tonight or drive an extra 30 miles—my hon. Friend the Member for Harlow (Robert Halfon) will remember what I said in a debate with him only a few days ago. If my daily income varies depending on my daily work, my personal tax freedom day might also be different. In summary, if, like some television personalities, I was a supercar-driving, spirit-consuming, cigar or cigarette-smoking, house-buying, asset-selling additional rate payer, I would experience an entirely different tax freedom day from many others.

If our intention is to bring about a better understanding of what happens to our income and how much tax we pay, let us try to do that by striving to improve the perception and interaction of our taxes. We need to be clear about what tax revenue does and about the value of the interaction between the individual and the state. These are complex issues, which sadly are not captured in the calculation of tax freedom day, as set out in the Bill.

Let me work through some of the points raised by my hon. Friend the Member for Kettering and others. I applaud his championing of the great British taxpayer, and I absolutely applaud his drive for transparency. One strong point of the Bill is that it turns to the independence of the Office for National Statistics. At this point, Mr Deputy Speaker, you would expect me to underline the independence of the Office for Budgetary Responsibility, too, and the benefit it can bring to the way we look at taxation and public spending.

I have heard the point that national tax freedom day has moved by more than 30 days. I was extremely interested to hear the historical point made by my hon. Friend the Member for Bury North (Mr Nuttall) who noted, if I recall correctly, that in 1900, it was 22 days —[Interruption.] Does my hon. Friend want to intervene?

[Mr Nuttall]

I do not have the figures with me, but I think the Minister is giving the figures for America. There was, however, a clear link between them and the figures for here, demonstrating that there has been a massive increase in the tax burden since the turn of the 20th century.

[Miss Smith]

I thank my hon. Friend for that clarification. I was briefly about to exercise my mental arithmetic by suggesting that while it was 22 days in 1900, it was 19 days in 1910, demonstrating that these figures, like all good things in life, can go down as well as up.

I particularly note the birth date of my hon. Friend the Member for Kettering. May I briefly wish him a happy birthday—with, dare I say it, his 50th birthday falling only the year before the next general election? What a miserable time to have one of one’s major birthdays—in 2004 and 2014! We must do our best to give him a happier birthday in this place than he would otherwise look forward to.

My hon. Friend rightly pointed out that the Government have no money of their own. Taxation is not the Government’s money; it is never that. Taxation is people’s money pooled for the common good. That is my view of taxation. I should note that we spent a good deal of time earlier this morning talking about the value of society in debating the previous Bill. Margaret Thatcher spoke about there being “no such thing as society”, but only individuals. The current Prime Minister has moved the point forwards by saying that there is such a thing as society, but it is not the same as the state. I put myself in both those traditions and, I hope, alongside the views of my hon. Friend the Member for Kettering in feeling myself to be on the side of people who work hard, want the Government off their backs and want to be left with as much money as possible in their pockets to spend according to their own choices.

I was interested to hear the debate about whether tax freedom day would be better under a Conservative or a Labour Government. I note that there might be a cricketing correlation here. I suspect that my hon. Friend the Member for Shipley (Philip Davies) is a cricketing fan, as am I. He might be interested to think about the successes of the national side in 1981-82, when I regret to have heard tax freedom day might have been at its peak. He is interested in fours and sixes and not singles, so let us see what we can achieve now that England is once again at the top of the cricketing league. Let us hope that Britain is at the top of other leagues.

My hon. Friend the Member for Shipley wishes, I think, to oblige the Government to make tax freedom day as early as possible. I note briefly that his comparison to the United States could be unfortunate, given that a number of American politicians have recently pledged never to increase taxes, which has led to some gridlock in the US political system. I am not sure that we would want to see that here, given the attendant impact on the credit rating of that great country.

Some interesting points of difference have emerged, which it would no doubt be delightful to iron out in Committee. One is about how we might celebrate tax freedom day: should we have a bank holiday or achieve it in some other way? An additional bank holiday will always impact on the economy. Many business people in my constituency and doubtless elsewhere express concern at the idea of having an extra bank holiday.

Eurozone Crisis

David Nuttall Excerpts

Tuesday 15th November 2011 Westminster Hall

[Mr Baron]

My hon. Friend is absolutely right. The IMF is an integral part of the rescue package for the eurozone, but that is something that the Government are, at least publicly, not willing to acknowledge, which is very wrong indeed.

I question why the IMF is getting involved in these bail-outs. The eurozone is a currency union. If a state within the United States got into trouble, the IMF would not be expected to ride to the rescue. The same should be true of the eurozone. I contend that Greece is not economically sovereign: it has no central bank, it cannot set interest rates, it has no currency, and it cannot devalue. I would go so far as to question whether Greece is even politically sovereign. At least in the United States, the people can elect the governor of individual states. That is not happening in Greece and Italy. In some cases, we do not even have a Government.

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

My hon. Friend refers to the possibility of an American state finding itself in financial difficulties. Of course that has already happened in California. Can he confirm that, in those circumstances, the IMF was not involved and was not able to contribute?

[Mr Baron]

That is absolutely right. My hon. Friend reinforces my point. The US is a currency union and the IMF is not expected to ride to the rescue there, yet it is expected to ride to the rescue of countries in the eurozone, which is also a currency union. That is completely wrong.

European Budgets 2014 to 2020

David Nuttall Excerpts

Tuesday 8th November 2011 Commons Chamber

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

As ever, it is a great pleasure to follow my hon. Friend the Member for Brigg and Goole (Andrew Percy), who speaks straightforward common sense. I also rise to support the motion. We have had a good debate, and I want to make some brief points.

First, we must not lose sight of the fact that, under the proposed new EU budget, there remain very few net contributors to the budget. Perhaps if more EU nations contributed to it, the EU might become a more prudent organisation. Secondly, I agree with the wording of the motion that states that the Commission’s proposal for an increase is

“unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK”.

Those words would be a good candidate for the winner of the understatement of the year competition.

The Government state, in paragraph 97 of their explanatory memorandum on the EU budget, that their provisional estimate of the UK contribution to the next EU financial framework is 11.5%, after the UK rebate has been taken into account. The Commission’s proposed ceiling for EU payments within the financial framework over the period from 2014 to 2020 is €972 billion, so a UK contribution of 11.5% on that level of EU payments would see this country paying in almost €112 billion, which is about £96 billion at an exchange rate of £1 to €1.6.

[Mr Cash]

Is my hon. Friend aware that, according to the European Commission’s proposal for the lump sums “adjusted for relative prosperity”—the annual lump sums relating to the period from 2014 to 2020—Germany’s would be adjusted to €2.5 billion and the United Kingdom’s to €3.6 billion, which is more than Germany’s?

[Mr Nuttall]

No, I was not aware of that, and I am grateful to my hon. Friend for bringing it to the attention of the House.

This country will need to contribute about £70 billion to the EU budget during the Parliament that will run from 2015 to 2020. Finally, the EU is proposing a substantial extension of its ability to collect its own revenues by introducing new, EU-wide taxes—the so-called own resources decision. It is also proposing a new, dedicated EU VAT and a new financial tax. And, just to rub it in, it is proposing to end the UK’s rebate.

EU officials should spend more of their time ensuring that eurozone nations start to live within their means and less time devising new ways to tax my constituents. The EU wants to spend more and wants the UK to pay more. The EU wants to scrap the UK rebate, and the UK wants to bring in new Euro-taxes. To each of these, and to echo the words of Baroness Thatcher, it is absolutely right that our Government should say no, no, no.

Eurozone Crisis

David Nuttall Excerpts

Thursday 3rd November 2011 Commons Chamber

[Mr Hoban]

I do not think that anyone in the House is suggesting that the Greek people should not be in charge of their own destiny.

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

Does the Minister agree that the International Monetary Fund should not be expected to do what the European Central Bank is incapable of doing simply because of a lack of political will on the part of eurozone countries?

[Mr Hoban]

My hon. Friend has made a good point, but I think it important for the institutions in the European Union to work together to ensure that there is a return to economic and financial stability.

Eurozone Crisis

David Nuttall Excerpts

Thursday 27th October 2011 Commons Chamber

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

Does my right hon. Friend agree that now that the 17 eurozone countries have established the precedent of holding their own euro summit and have created yet another president, the president of the euro group, there is a real danger that they will start to agree policies to suit themselves and then impose them on the other 10 EU countries that, thankfully, like the UK, have not adopted the euro?

[Mr Osborne]

I agree with my hon. Friend that we have to be alert to the danger of the 17 eurozone members, which will have a qualified voting majority, caucusing on areas that are legitimately the preserve of the 27 member states. When this country, under the previous Government, allowed the eurogroup of Finance Ministers to be established and accepted that Britain would not be at that eurogroup, there was the fear that the eurogroup would caucus. That was one of the concerns of the then Government and Opposition. That actually has not happened. If anything, they have not co-ordinated and worked together closely enough over the past decade or so. However, he is absolutely right that we need to ensure that they do not caucus in the future in a way that undermines our voice and influence or that bounces all 27 member states. All member states not in the euro are alert to this challenge. Indeed, last night the Prime Minister had dinner with the Polish and Swedish Prime Ministers to discuss precisely that issue.

Eurozone

David Nuttall Excerpts

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

As I said, it was an independent decision of the Bank of England. In the explanation that the Governor gave of why the Bank took the decision, he explicitly referred to the situation regarding the euro. I agree with that decision. Work done by the Bank of England suggests that the method can work.

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

Following the bail-out of Dexia, does my right hon. Friend consider that there is an increased risk of the credit rating of other eurozone countries, particularly Belgium, being downgraded?

Oral Answers to Questions

David Nuttall Excerpts

Tuesday 6th September 2011 Commons Chamber

[Danny Alexander]

Yes.

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

5. What recent assessment he has made of the financial crisis in the eurozone.

[Glyn Davies (Montgomeryshire) (Con)]

12. What recent assessment he has made of the financial crisis in the eurozone.

[The Chancellor of the Exchequer (Mr George Osborne)]

The financial crisis in the eurozone is extremely serious. Fortunately, Britain is not in the euro; unfortunately, however, we are not immune to the instability on our doorstep. The euro area must implement its policy commitments to address the crisis, made most recently at the July summit. As I have said, the euro area should follow the remorseless logic of monetary union with greater fiscal integration. We must ensure that we are not part of that integration and that our national interests are protected and promoted at all points.

[Mr Nuttall]

I thank the Chancellor for that reply. Given that the crisis in the eurozone was caused by some member states having too much debt, would it not be a good idea—rather than increasing those debts with further bail-outs—for this country to press for the European treaties to be amended to allow a country to leave the euro while remaining in the European Union if it still wished to do so? As things stand, that is not possible.

[Mr Osborne]

As my hon. Friend knows, the treaty does not provide for a member state to leave at the moment, and there is no immediate prospect of major treaty renegotiation—something that the German Government have made very clear again this week. In other words, we need to focus on the task at hand, which is implementing all the agreements, communiqués and commitments made in recent months by the eurozone. That is absolutely crucial to the stability not just of the eurozone but of the wider global economy.

Regulatory and Banking Reform

David Nuttall Excerpts

Thursday 16th June 2011 Commons Chamber

[Mr Hoban]

The Bank of England and the FSA published a couple of weeks ago a document setting out the new regulatory approach that the PRA will set. They were clear that, rather than waiting for a bubble to burst and for problems to emerge, they will intervene earlier to force firms to take action to correct problems, and that shift in style—from waiting for a problem to happen to trying to pre-empt its creation—is absolutely vital. We are reliant on the judgment and the discretion of the regulators in following through that new regulatory approach, but rather than waiting until it is all too late, as happened in so many different examples over the past 10 years, giving the regulator the power to intervene early will have a significant benefit on outcomes for our constituents.

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

I welcome the Minister’s statement. Does he agree that the best way to protect consumers is to have a fully functioning and competitive free market, and that the best way for the free market to work efficiently is, ultimately, for all companies, including banks, to be allowed to fail?

[Mr Hoban]

My hon. Friend makes an important point, which goes back to the point that my hon. Friend the Member for Wycombe (Steve Baker) made about exit from the financial system. That is why it is important that resolution tools are in place to enable firms to be wound up in an orderly fashion, rather than being reliant on taxpayers’ money to keep them going.

Eurozone Financial Assistance

David Nuttall Excerpts

Tuesday 24th May 2011 Commons Chamber

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

Was not that line left in the motion because it is a fact—which there is no point in denying—that the European Scrutiny Committee stated that the European financial stability mechanism was legally unsound?

[Chris Heaton-Harris]

I shall come to that point directly.

Members on both sides of the House know that the Government would not have accepted the motion tabled by my hon. Friend the Member for Rochester and Strood (Mark Reckless), and that if we were to vote on the original text it would be probably be defeated, and the House would be left without a view on this matter. My amendment, which I should like to think has a good chance of being passed, would enable the House to adopt the words of the European Scrutiny Committee.

I believe that the legality of the EFSM, and indeed that of the European financial stability facility—the EFSF—has been questioned in relation to the EU treaty’s “no bail-out” clause, which states that the EU and member states

“shall not be liable for or assume the commitments of”

other member states.