Finance (No. 2) Bill

George Kerevan Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Jane Ellison]

I do not know whether the hon. Gentleman was in the House earlier, but the International Monetary Fund has today upgraded its growth forecast. All the economic indicators are pointing to robust growth, despite the acknowledged challenges of the negotiating period ahead.

[George Kerevan (East Lothian) (SNP)]

In the interests of this potentially more consensual period in the run-up to Prorogation, as we try to work out what will remain in the Bill, could the Financial Secretary tell the House where the £2 billion per annum to replace the non-raising of the national insurance contribution is going to come from, if she is so wedded to balancing the books?

[Jane Ellison]

The Chancellor was clear at the time and in our statements about the Budget and subsequent decisions that we are looking to balance the budget across the period. Clearly, if we are going into a general election campaign, we will have more to say about that in the manifesto. We will lay that out there; this is not the place for that.

[George Kerevan]

This is the Finance Bill!

[Jane Ellison]

Well, there are measures in the Bill that are immediately and openly about revenue raising, and we will come to some of those. The Chancellor was very direct about that when he made his Budget statement and, indeed, at the time of the autumn statement.

Let me say a bit about what the Government have done to support fairness between the generations. An essential priority for this Government is that everyone should have access to our NHS when they need it, and that everyone should enjoy security and dignity in old age. That is why we announced in the spring Budget an additional £2 billion—that has just been referred to—in funding for adult social care. This means that councils in England will have access to, in total, £9.25 billion more dedicated funding for social care over the next three years as a result of changes introduced by this Government since 2015.

On top of that, in the last two fiscal events we have done much to help to build a better future for our younger generation by helping people to save more of the money they earn; by investing in education and skills, which was a key theme of the autumn statement and of the Budget; and by building more affordable homes. The Finance Bill will build on this work, particularly by helping to tackle childhood obesity and to deliver a healthier future for our children.

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[Nigel Mills]

I absolutely agree: it is important that we continue to send the signal that Britain is a great place to do business and to invest. We want as much international investment here as we can get, so it is absolutely right to have a headline corporation tax rate that is as low as we can have it. I welcome the fact that we are going to get it down to 17%. The previous Chancellor hinted that he might have used 15% to give a sense of direction; perhaps the Government will look into using that in the manifesto we are about to produce.

[George Kerevan]

Can the hon. Gentleman explain why Germany, which has a much higher headline rate of corporation tax, does so much better industrially?

[Nigel Mills]

I think I would have had to attend several of the hon. Gentleman’s lectures to understand better how the German economy works, but that is not something I have ever studied. We could probably talk about euro rates and the history of investment in skills and so on, but I suspect it is not all down to corporation tax.

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

It is a great pleasure to follow the hon. Member for Birmingham, Selly Oak (Steve McCabe) and to join in this discussion on the great subject of sugar. While listening to my hon. Friend the Member for Vale of Clwyd (Dr Davies), who told us the extraordinary fact that an average five-year-old eats his own body weight in sugar during the course of a year, I considered my own children. I do not have a five-year-old—I have a six-year-old, a four-year-old and lots of others—but the six-year-old weighs 3 stone, which seems to me to be similar to the weight likely to apply to five-year-olds. That is 42 lb, or 672 oz, so if a five-year-old is eating his own body weight in sugar in a year, he is eating 1.84 oz of sugar a day, which is equivalent to 11 teaspoons of sugar. One thinks of the lines of Mary Poppins:

“Just a spoonful of sugar helps the medicine go down”,

and one wonders whether the medicine goes down even better after 11 spoonfuls of sugar.

In spite of thinking that 11 teaspoons of sugar is quite a lot, I am not in favour of sugar taxes, because I do not think it is the job of the Government to tell me how much sugar to give to my children. I think that is a matter for parents to decide for themselves, and the tax system should be there to raise the revenue the country needs to pay its way. The tax system is not there to tell us how to live our lives. There may be an exception with tobacco, but that is not really the case with alcohol, which is a matter of raising revenue. Our rates on alcohol work very well in raising revenue, as, incidentally, do those on tobacco, which is a serious generator of funds for the Treasury to pay its way.

I am sceptical about the proposed approach. I was struck by my hon. Friend’s comments that a lot of obesity is in fact genetic. If that is the case, we are penalising people who have a genetic propensity to obesity while it is fine for people like me.

[George Kerevan]

rose—

[Mr Rees-Mogg]

I give way to another hon. Gentleman for whom it is fine to eat lots of sugar.

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[George Kerevan]

Indeed, I had a fine East Lothian Easter egg. Does the hon. Gentleman accept that the difficulty with the hands-off approach he suggests, leaving it entirely to the individual, is that there is a vast advertising industry that also influences consumer behaviour and that using a sin tax is a way of evening out that process?

[Mr Rees-Mogg]

There is indeed an advertising industry, but we live in a free country and people ought to be able to advertise products. We have a lot of misinformation, have we not? We now learn that fat is not as bad for people as it was said to be, and that people have put sugar into products from which they have removed the fat in order to make them taste nicer because fat-free products without sugar taste disgusting. Advice that turned out to be wrong has led to manufacturers doing things that then turn out to be unhealthy. I am suspicious of the advice that comes from Government and their ability to get it right. If they end up getting it wrong, force us to change our behaviour and tax us, we get the worst of all possible worlds.

A little bit of sugar does nobody any harm at all—only taking it to excess does so—and the only justification, which has indeed been made, is for children. However, I think that ignores the responsibility of parents, most of whom are responsible, and puts up the cost for responsible parents of giving their children what may, in many households, be an occasional treat rather than a regular habit. It is a tax that falls hardest on the poorest in society, who may occasionally be giving their children something that they like, because of the excesses of others. I do not really think that that is the job of the Government.

That leads me to the issue of hypothecated taxation. Ministers should write out 100 times a day, “Hypothecation is a bad idea.” That has been the Treasury orthodoxy for as long as there has been a Treasury. Hypothecated tax does not work because it produces the wrong amount of money for what it is seeking. We see that with the prospect of putting money from the sugar tax into schools. We now discover that not enough money is likely to come from the sugar tax to meet the obligations given to schools, and that money will therefore have to come out of general taxation.

If it were a good idea to put the money into schools in the first place, it ought to have come out of general taxation in the normal way. If it was not a good idea, but just a clever way of spending the money, taxpayers’ money should not have been used. If we get into the position that something is now being done that did not need to be done because it was promised as money from a tax that has not arisen, that is not a good way of carrying out Government policy. All hypothecation of taxation should be struck off: it simply leads to the wrong amounts.

That leads me to the broader point I want to make about this Finance Bill and the Budget that preceded it. It is very good news that an election has been called, because the Budget has become so hemmed in by the number of promises on taxation and revenue expenditure that have quite rightly been kept. Governments ought to keep their promises, and this Government have been absolutely rigorous in doing so, even ones that I do not like. For instance, I am not in favour of the 0.7% going on overseas aid, which I think has been a wasteful and extravagant promise when money is needed elsewhere. However, the justification was that it was in our manifesto, and in manifestos parties make a pact with the electorate that they ought to continue with except under the most extraordinary circumstances that have not arisen.

Such an approach has led to very many areas of expenditure being fixed, while taxation has been limited at the same time. The deficit has been brought down to a third of what it was when this Government came in—a very substantial achievement, of which this Government and their predecessor ought to be proud—but it has become very hard to take that any further because of the encapsulating commitments that are limiting the Chancellor’s freedom of action. That is why the Finance Bill, for all that it has 700 pages, will not lead to a great deal of fundamental reform. It is tweaking things at the edges—looking at little bits of money here and little bits there—rather than taking a fundamental or basic approach to our tax system.

Our tax system has become overly complex and, from the pressure of having to find little bits of money, it is becoming even more complex, which makes it difficult for taxpayers to pay the right amount of tax. We can see that more anti-avoidance legislation has come in to stop avoidance, because we have overcomplicated the tax system in the first place and a corrective measure has therefore had to be taken to try to prevent revenue from seeping away. A good example is the discussions we are having about perceived employment as opposed to self-employment. The Government were extremely proud of their achievement in making self-employment easier, but a constituent who came to see me explained that the £3,000 national insurance contributions exemption for small businesses had led to all the people working for him having to become individual companies, whereby it cost £3,000 a year less to pay them than if they were directly employed or were employed through one subsidiary company.

Very good ideas come into individual Budgets—particular tax breaks to encourage particular forms of behaviour to lead to certain outcomes that the Government wish to see—but they then have to be corrected by anti-avoidance measures because they get taken and used in a way that was not intended under the initial legislation. That is why the election will be a great opportunity to stand on a platform of tax simplification, and I hope we will achieve the sort of majority that will help to push that through. To achieve tax simplification, it will be necessary to ensure that avoidance is removed at source, rather than by anti-avoidance measures. That means taking away some of the existing exemptions and incentives that encourage people to set up more complex systems than they need to minimise the amount of tax they pay.

I am a defender of people taking such an approach. If Parliament legislates for tax to be collected in a certain way, with certain exemptions and thresholds, the individual taxpayer is completely and legitimately entitled to use them to their fullest extent. The approach is the fault not of the taxpayer, but of Parliament for putting exemptions into or leaving them in legislation. We should always be very careful to distinguish avoidance from evasion. Evasion is straightforwardly criminal—not paying the amount of tax that is, by law, due. Avoidance is looking at the tax system and saying, “I do not owe that tax, and I do not have to pay it because Parliament has not legislated for me to pay it.” As individual taxpayers, we are all entitled, as are all our constituents, to pay the tax Parliament requires, not a penny less or a penny more. If we had a system that was simpler overall, that would be hugely beneficial.

There is a lot about anti-avoidance in the Finance Bill, including the new rules for non-doms, about which I would be very careful. We live in a world where some very rich people want to come to the United Kingdom, and when they are here they employ people, spend money and pay taxes. We have a system that has barely changed since the days of Pitt the Younger—I cannot say I remember them, but I wish I did—and that broadly unchanged system was actually very beneficial for our economy because it brought into this country wealthy individuals who then provided economic activity. It is absolutely right to ensure that people who are obviously domiciled here in all normal senses of the word should be seen as being domiciled here, but we do not want such a difficult regime that people who might come here and contribute to our economy feel that they cannot do so.

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[Mr Rees-Mogg]

Targets are based on forecasts and forecasts have variables within them that even the wonderful, or not always wonderful, boffins cannot get absolutely right. What matters is not the precision of the forecast, but the broad trend of the economy. We have had consistent economic growth. We have the highest employment on record. This is an enormous achievement. As I said a moment ago, we have the fastest growing G7 economy.

[George Kerevan]

I cannot let the hon. Gentleman continue with his analysis of the previous Chancellor’s single plan for the economy. In the first two years of the previous Chancellor’s reign, from 2010 to 2012, there was a very rapid move to austerity—tax rises and cuts in spending. Growth slowed precipitously and by 2012 the Chancellor reversed his policy. In fact, he got the Treasury and the Bank of England to print money and pump it into the housing market, so there was a change in policy. The original austerity did not work.

[Mr Rees-Mogg]

I do not agree with that analysis. My analysis is that the austerity allowed for a looser monetary policy which had beneficial consequences, that between 2010 and 2012 it was essential to operate a very tight fiscal policy to permit exactly the type of monetary policy to which the hon. Gentleman has referred, and that it would not have been possible to maintain the confidence of the markets if we had operated a loose fiscal policy and a loose monetary policy during those two years. The lack of economic growth during that period ties in with the considerable problems—the severe crisis—experienced by the eurozone and other economies.

On this occasion, I do not agree with the hon. Gentleman’s analysis of what went wrong, although I often do agree with him. I see a continuity in the policy of my right hon. Friend the Member for Tatton. However, although no time limit has been imposed this evening, I do not feel that I should go on forever. Many Members wish to speak, and others want to have their dinner. Let me end by reiterating that we face a great choice: between the higher taxes proposed by the hon. Member for Bootle and the opportunity for lower taxes, sound economic growth and prosperity. I know you are independent, Madam Deputy Speaker, but vote Conservative.

[George Kerevan (East Lothian) (SNP)]

I shall support the amendment, although that does not prevent me from believing that there are many interesting and good things in this draft Finance Bill. However, I find myself agreeing with my colleague on the Treasury Committee, the hon. Member for North East Somerset (Mr Rees-Mogg), in one respect. We will have two Finance Bills, because the current process has been truncated, and a much smaller Bill will be passed before the dissolution of Parliament. When a second Bill arrives later in the year, we shall have a chance to be more strategic and reforming, rather than continuing to add bits and pieces and ending up with the monstrosity—in terms of length—that we have at present. That said, I think that in the final few days, as we move towards a slimmed-down Finance Bill, there may be some room for an agreement between Government and Opposition on what can be achieved. In that context, I ask the Minister to deal with a couple of points when she responds to the debate.

Inevitably, in dealing with the financial period between 2015 and 2020—the year that would normally have marked the end of the current Parliament—the autumn statement and the March Budget made certain predictions about Government expenditure and taxation, along with certain promises about what would be achieved by 2020. One Parliament cannot bind another, and this Parliament, as it reaches its end, cannot bind the one that will arrive in the summer; nor can we predict who will govern following the general election. However, I think it would be helpful to Opposition Members if the Minister provided certain clarifications about the Government’s intentions, should they be returned in June, in respect of meeting the obligations that they set themselves for the period between now and 2020.

Let me give an example. The Government have guaranteed that they will meet their obligation to spend £1 billion derived from the sugar levy—the tax on the sugar industry—over the period ending in 2020. Normally that would fall, so I should like some indication of whether, should the Government be returned, that would continue to be their intention between now and the next Parliament It would be helpful for Opposition Members to know that. Although I think that the tax on the soft drinks industry is inadequate, and a bit quixotic in terms of what is and is not taxed, I also think that it is a step in the right direction. There are hypothecation issues, but, given that this is where we are, it would be useful if the Government guaranteed that, if re-elected, they would continue in the same direction.

City deals are another issue for Opposition Members. We were reaching an agreement with the Treasury on a number of city deals in, for instance, Edinburgh and East Lothian—some in the east of Scotland and some in the west—and I understand that the Treasury had intended to sign them off following the local government elections. Again, one Parliament cannot bind another, but I think it would be possible for the Treasury to provide some comfort on the subject of city deals before dissolution.

[Mrs Anne Main (St Albans) (Con)]

The hon. Gentleman is presenting a marvellous argument for people to vote Conservative. He is presenting the positive argument that if the Minister assures him that the wonderful things that he expects us to do will indeed be done, they will definitely be delivered if the electorate vote Conservative. I look forward to the Minister’s assurances, given that the hon. Gentleman has basically asked everyone to vote Conservative.

[George Kerevan]

I was very careful to say that I was not anticipating who would actually be in government. I was giving the present incumbents in the Treasury a chance to say what they might do should they be re-elected.

Let me move on now, because I think it important to analyse the contents of the Bill. I think that it contains two sets of structural weaknesses. The first reflects what I consider to be a change in the pulse of the economy, which has occurred since the end of 2016 and is embedded in all the latest data that we have—data that have emerged in the last month, since the start of the Easter break. I fully accept that the Government have presided over a period of economic growth since 2010. I do not want to dismiss the figures—in a number of years, our growth rate has been higher than those in other large industrialised countries—but what has underpinned that growth? All the figures suggest that it has been underpinned by consumer spending, largely funded by the rise in consumer debt.

I do not gainsay the growth, but, in her opening remarks, the Minister placed a great deal of emphasis on the Government’s success in that regard. If economic growth is founded merely on consumer spending, and that consumer spending is based on borrowing, it is not sustainable, and I think it entirely legitimate to question how long the Government can go on relying on consumer debt to fund growth. In fact, we are now approaching the end of that period. What worries me is that the fiscal plan embedded in the autumn statement and the March Budget assumes the continuation of growth that is beginning to falter.

Let me make a point that I raised after the autumn statement, and also during the Budget debate. It seems to me that the Chancellor gave himself plenty of fiscal fire power in the autumn statement through increased borrowing—or, at least, the removal of some of the more over-optimistic projections of the previous Chancellor, and some of his more egregious games with time limits in relation to when income would arrive. The current Chancellor, in the autumn statement, clearly borrowed sufficient money in order to give himself some fire power should the economy slow. The trouble is that in the autumn statement all that spending power was delayed until post-2019, which is when we will see what the Brexit deal actually is. If the economy slows between now and 2019, it will be too late to use the fiscal fire power. That was the criticism of the autumn statement that was made by me, and by other Opposition Members.

The March Budget was fiscally neutral, by and large, but it has run into some headwinds. If the incoming Government, whoever they are, post-8 June, do not make up the projected shortfall from the proposed rise in national insurance contributions by the self-employed, there is a hole of a couple of billion pounds to fill. That aside, as I have said, the March Budget was fiscally neutral. If we put together the autumn statement and the March Budget, the Chancellor has a nest egg that he can bring to bear on a slowing economy, but it is pencilled in for 2019. For the next two years, he is relying on economic growth funded by consumer debt. However, all the latest numbers show that that is no longer happening.

[Jane Ellison]

The hon. Gentleman is making an interesting speech and I welcome the consensual tone that he has struck on a number of measures. I have to push back on the charge that fiscal firepower will be delayed beyond 2019. The Chancellor was explicit in the autumn statement that we borrowed to invest in greater productivity and some of that is happening now. Some of the national productivity investment fund is for short-term investment. In addition, as the hon. Gentleman knows, Barnett consequentials of £800 million for the Scottish capital budget are there for the Scottish Government to spend as they see fit.

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[George Kerevan]

I accept what the Minister says, but the extra investment from the productivity fund that is going into the economy at the moment totals hundreds of millions, not billions, of pounds. The bulk of the spend, when it comes in 2019, will be in long lead items. A lot of it will be for housing, which is one aspect of the productivity investment fund I have never quite understood, as I do not see how investing in housing will raise industrial productivity.

Let me come back to the key point on which I want the Minister to respond. The latest data on the economy show that consumer spending is starting to slow. The first quarter retail figures, out just this month, are the worst for six years. It is clear that the reserves of spending in consumer hands are disappearing.

The previous Chancellor was very lucky in that in 2010 to 2013 windfall gains came into consumers’ hands, particularly from insurance on mis-selling. In 2015, even though wage rises were limited, there was a precipitous fall in the inflation rate. That raised real incomes. It is clear that, in 2016, because of that boost to real incomes, people started borrowing again and consumer debt started to rise. By the end of 2016, the savings ratio in the UK had fallen to historically low levels. One can sustain that amount of consumer borrowing and spending only for so long. By the end of 2016, it was beginning to fall.

Like the hon. Member for North East Somerset, I was never moved by the visions of economic Armageddon from the Bank of England and the Treasury during the Brexit discussion. However, I do think that, in the next two years, investment will be impacted upon by Brexit fears. That is not happening at the moment. Therefore, I think that there is reasonable evidence that the tapering off of consumer expenditure is not to do with the Brexit debate; that is still to come down the highway. It is to do with the fact that consumers no longer have the reserves to go on increasing their spending, in which case we are looking at an economic downturn in 2017. That is precisely the time the Chancellor should be using his economic firepower, rather than, as in the March Budget, having a fiscally neutral stance.

When questioned on the matter, the Chancellor has said that the slack would be taken up by business investment. There is no sign of that. In real terms, business fixed investment has been falling since 2015. It started to fall well before the Brexit debate. It blipped a little in the middle of 2016, but it has gone on falling. There are no organic signs anywhere that business fixed investment is increasing. Business spending is going on all sorts of things—for example, moving corporate activities to Europe to protect against Brexit—and a lot of money is being spent on buying British companies. However, we are not getting fixed investment in machinery and plant, and even if we did, it would take several years for that to feed through into productivity gains.

The latest quarterly market purchasing managers’ report suggests that growth projections from purchasing managers, who are pretty hard-headed, have halved since the last quarter of 2016. My general conclusion is that the Government are being far too optimistic about where growth is going in the UK. It is going down.

Conservative Members like to quote international comparisons. The latest OECD projections for growth in 2017—the OECD never quite got to the more insane evaluations of a collapse in growth that some other agencies did in 2016—suggest that growth in the G20 countries, in the United States, in Germany and in Canada will on average outstrip UK growth, so the situation is no longer as rosy as the Minister would have us believe. Some of the fiscal proposals in the Bill are based on a previous analysis of where the economy is. They have been overtaken by events. If we go through a general election and come to an autumn Budget and a second Finance Bill, all bets are off and we will be back to square one. That is not the way to run an economy.

Earlier, we discussed corporation tax, which is a key element. There is a long-term plan to cut it, and that hinges on what happens in the Brexit discussion. Clearly, the Government want to try, in a post-Brexit world, to make Britain a very low-tax economy, in the sense of attracting inward investment by having low levels of corporation tax. The danger of that strategy is that other countries will follow us, particularly the US; the Trump Administration have already threatened that. However, there is a stark contrast between countries such as Germany, where the headline rate of corporation tax is still 30% to 33%, and the UK, which is cutting corporation tax. Germany has much better productivity and higher industrial investment. Why is it that it can do that, and outstrip the UK economy, when we, with corporation tax that is low at the moment and going lower, cannot seem to generate the industrial investment and higher productivity?

It comes back to the issue of consumption and relying on debt-fuelled consumption to power growth. If we power our economy through consumer debt, it becomes dangerous to raise taxes on consumers, because we would immediately see a drop in consumer spending. Germany has focused on driving its economy through industrial investment and exports. Once you have that, you take the pressure off taxation on the consumer. That is the solution to the riddle and it is why the Germans seem to tax their industries more but, by running the economy at a higher level and generating more sales from exports, take the pressure off. They recycle a lot of the tax money back into industrial and infrastructure investment. They equate the basis for the industrial wealth that they tax—

[Kevin Foster]

I am listening with interest to some of the hon. Gentleman’s points. Does he agree that one of the issues that the German economy has, particularly in its industrial sector, is that many of its markets are locked into exchange rates by the euro? In more free-flowing economies and in previous exchange rates, it would have been able to devalue and so increase its competitive advantage.

[George Kerevan]

I am happy to agree with that point. The weakness of the euro is that across Europe it has locked the German supply chain into an artificially low exchange rate. On the back of that, Germany has generated a massive trade surplus, which it is not redistributing. That is undermining the whole European economy. I perfectly accept that. I was not arguing that the German economy is perfect; rather, I am suggesting that it is too simplistic to link the headline level of corporation tax with the performance of the economy, because we can find all sorts of examples that go the other way.

My real criticism, which I still direct to the Minister, is that the growth that the Conservative Government have trumpeted as their success is based on the shifting sands of consumer debt, which has now reached a level that cannot be sustained, so we need something else. We definitely do need to increase the level of industrial investment, and that requires a different set of fiscal tools in order to encourage consumer saving and recycle that consumer saving into industrial investment. That is the whole weakness that underlies the Finance Bill: it is a set of small measures based on the assumption that the economy will go on growing because consumers will go on spending. If they do not, the whole rationale of the Finance Bill falls apart.

I will now briefly move on to the second pillar, and the second strategic weakness, of the Finance Bill. In order to maintain the level of consumer spending, this Government have had to pass a series of pieces of legislation to bind their own hands when it came to raising taxes on consumers. If we do that, we then have to find money from somewhere else. Therefore, although this Bill contains a series of small tax rises here and there, in the aggregate what is happening is that this Government are being forced to start distorting the entire tax system because they have no other way to go but to invent new stealth taxes to maintain the level of income to Government.

The Clerks to the Treasury Committee came up with a rather interesting example on probate—the tax, if tax it be, on the probating of wills. The proposal for the levy on probating added to the cut in inheritance tax results in an anomaly. Where a father and mother leave a house to their children that is worth, let us say, £1 million and one penny, the inheritance tax is tiny—it works out at 40p—but the probate that has to be paid is £8,000. So in effect, cutting inheritance tax and replacing it with a probate levy gets us back to where we started. We can see that once we start down that road, we will go on increasing the levy on probate simply as a revenue earner.

That is not just happening with the tax on probate; it is happening in a whole series of small tax changes. By legislating to put a lock on income tax and other taxes, we end up having to raise revenue in a series of anomalous and distorting ways, and that makes the Finance Bill even more complicated.

[Mr Rees-Mogg]

Does the hon. Gentleman share my concern that the difficulty with doing this through charges is that they come through in a statutory instrument, whereas new taxes go through a much fuller parliamentary procedure? We should all be concerned about taxes that do not see the full rigour of parliamentary scrutiny.

[George Kerevan]

I could not agree more, and I look forward to the hon. Gentleman taking that up in the 1922 Committee—as I am sure he has.

If we run through a whole series of the provisions in the Bill for raising taxation, we see this creeping distortion of the tax system, such as the tax-free allowance on dividend incomes being cut from £5,000 to £2,000 to raise £800 million, which is a substantial, chunky sum. We can see where the tax-free allowance on dividend income is going to go. As for VAT on mobile phones used outside the EU, I can pretty well guarantee that if this Government are returned, the moment we are out of the EU that roaming tax will go on to our phone bill when we are taking our holiday in the 27 member states.

The insurance premium tax is one of the worst means that this Government have tried simply to increase revenue. They keep raising it year by year, so the increase of 20% proposed in the November autumn statement is simply a revenue-raising tax—there is no rationale other than simply to raise money. In terms of the insurance premium tax, there is a whole series of insurance forms not yet covered by the tax, so one can quickly see a future Chancellor saying, “Well, let’s put the insurance premium tax on reinsurance, or on buying shipping and aircraft. Why shouldn’t an airline pay insurance premium tax on buying an aircraft?” Rather than using the core taxes like income tax, we will end up with a series of distorting taxes, including the rise in spirit duty and the tax on whisky in the March Budget. I presume the Chancellor said to himself, “Well, with the significant fall in the value of the pound, there will be a gain in terms of export prices, so we can afford to claw some of that back as a tax,” but it is not strategic to the needs of the industry; it is simply a revenue-raising power.

What is wrong with the Bill as it stands? It misunderstands the nature of where the economy is and makes no allowance for the fact that consumer spending is about to decelerate, and it introduces a whole raft of new taxes, or increases in stealth taxes, which are fundamentally a change in direction and a distortion of economic processes.

I hope that when we come back after 8 June for a second bite of the cherry with a second Finance Bill, the Government might, should this Government be returned, be willing to look at some of these matters.

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[Suella Fernandes]

I could not agree more. That is the point that I want to make. It is a principle of basic economics. My hon. Friend the Member for Louth and Horncastle (Victoria Atkins) referred to her A-level economics. She will be familiar with the Laffer curve and basic economics, which say that higher taxes do not necessarily lead to higher tax revenues because they reduce the tax base.

[George Kerevan]

Does this Bill not raise taxes on insurance, and on this, that and the other thing? Is the hon. Lady in favour of the Bill or not?

[Suella Fernandes]

I completely agree. I am not saying no tax rises at all. I am saying that tax rises have to be prudently applied, and this Conservative Government definitely apply that principle, as we are seeing when it comes to income tax. Let us look at why people work. They go to work because they want to preserve the amount of money that is not taxed. It is the post-tax amount, not the pre-tax amount, that we all work for. Increasing the tax rate reduces the amount that people have available for themselves and decreases the amount available to be taxed.

[George Kerevan]

They are paying for the health service.

[Suella Fernandes]

Yes, but let us see what history has shown. When Gordon Brown increased the higher rate of tax, tax revenue fell. When my right hon. Friend the Member for Tatton (Mr Osborne) dropped it again, tax revenues increased. It shows that we need to incentivise people to work and invest in education and training, and incentivise businesses to invest in this country and to employ people, which generates more economic activity and revenue that can be ploughed back into our public services. That is what Opposition Members fail to grasp and Conservative Members see very clearly. That is why under Governments led by Labour we ended up with higher taxes, higher borrowing, higher debt and in a recession that this Government are still tidying up.

To close, I am pleased that this Government are committed to enabling people to keep more of the money they earn so that individuals and businesses can take part in our economy. We can create a fairer Britain, and a country in which we can all prosper and be rewarded for our efforts.