Finance (No. 2) Bill

Ian Swales Excerpts

Wednesday 25th March 2015 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right. Very often, the debate in this House is about the impact on individuals of the freeze on fuel duty, which has considerably reduced how much fuel costs. As a consequence of our measures, £10 is saved per tank full of petrol. He is also right to mention the impact on businesses, because many of them, particularly smaller ones, pay this tax. We can sometimes forget that in that debate. Fuel duty is now 16p per litre lower than it would have been under the previous Government’s plans.

Let me return to the provisions on oil and gas. The new cluster area allowance will support the development of one of the biggest fields in the UK continental shelf, which is expected to generate about 3,500 jobs and more than £3 billion in capital investment. As hon. Members can see, the Bill tackles some of the challenges facing our business community and our economy.

Now that I have set out such competitive tax rates, designed specifically to support our businesses, let me say that we expect those taxes to be paid. The Bill continues the Government’s firm action against the small minority who seek out unacceptable ways to reduce or delay paying the taxes they owe. Under the Bill, we will legislate to create a fairer tax system by clamping down on tax avoidance and ensuring that banks contribute their fair share. Taking effect from the start of next month, the Bill will introduce a new diverted profits tax of 25%, aimed at large multinationals that artificially shift their profits offshore to avoid paying UK tax. As part of the project, I can confirm that we are working with five other tax authorities to investigate and challenge how digital multinationals shift their profits to tax havens. For the first time, we are gathering a full global picture of the tax risks those companies pose that is invaluable in helping us take decisive action.

The Bill will also increase the bank levy to 0.21% and introduce new rules for banks on carried forward losses, to ensure that banking companies can use them only to relieve up to 50% of company profits. Combined, those measures will raise nearly £8 billion over the next five years. We have always been clear that banks should make an additional contribution that reflects the risks they pose to the UK economy, and now that banks are strengthening their balance sheets and returning to profitability, they should make a greater contribution to the economic recovery.

[Ian Swales (Redcar) (LD)]

I welcome the increase in the bank levy. Does the Minister agree that it is extremely difficult for a bank to avoid the levy, whereas the tax on bonuses, for example, would be very easy to avoid?

[Mr Gauke]

My hon. Friend makes a very good point. Indeed, that is why the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), made it clear that the bank bonus levy could only really be effective for one year. It is important that we have something sustainable that can exist for much longer.

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[Mr Gauke]

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

[Ian Swales]

Will the Financial Secretary give way?

[Mr Gauke]

I will give way one last time, but I am conscious that many Members will want to speak.

[Ian Swales]

I thank the Financial Secretary. I am sure that he would accept, having looked at the business case for the changes in oil taxation, that the economic effects of the oil industry are much wider than simply the winning of oil. In particular, the engineering and manufacturing industries in the north-east of England are pleased by the moves that have been made.

[Mr Gauke]

My hon. Friend makes a good point. Particularly in the north-east of England, a number of businesses are ancillary to the oil industry, so I am grateful for his remarks.

The Bill takes further steps to deliver long-term, sustainable economic growth. It puts in place a more competitive environment for business, takes more people out of income tax, continues our reforms of the tax system and supports the continued success of our industries. I commend it to the House.

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[Chris Leslie]

It is in the very first clause of the Bill: it seems that the Government’s proudest achievement is to cut the highest rate of income tax for those earning £150,000. They want the rate to be 45p instead of 50p. That has been their priority. They regard that as something that the country has been crying out for and that will make a big difference to the economy. I suppose if one views the economy through a trickle-down prism and believes that tax cuts lavished on the very wealthiest in society will percolate down and everybody else will benefit as a result—

[Ian Swales]

rose—

[Chris Leslie]

Well, maybe that is the logic of the Liberal Democrats in supporting these particular measures. I will give way to the hon. Gentleman, but he has to admit that it was an error to ensure that those earning more than £150,000 received a tax cut. Anyone earning £1 million this year will have benefited to the tune of £42,000 in tax cuts. He does have regrets about that, doesn’t he?

[Ian Swales]

Will the hon. Gentleman explain why the Government he was a part of put up 100 taxes in 13 years, but rejected putting up the higher rate of income tax for the entire period until the day they left office? It was 40% then—those same millionaires were that much better off under his Government.

[Chris Leslie]

That sounds as though the hon. Gentleman was in favour of the 50p rate and regrets that it was not implemented earlier. That is the usual argument: why did the previous Government only put it up towards the end of the Parliament? The global banking crisis hit in 2008, when we were already a long way through that Parliament. [Interruption.] The hon. Gentleman seems to be a banking crisis denier. He seems to think that it had nothing to do with the fiscal situation. He must admit in his heart of hearts that the banking crisis created great pressures on our public finances. It reduced a number of revenues and caused the deficit we have had to tackle. As a consequence, the tax changes that followed the banking crisis were bound to come in 2009, and that was the period in which we chose to introduce the 50p top rate. He should not be surprised that it came in towards the end of that Parliament, because the banking crisis and all the ripples that flowed from it also happened at the end of the Parliament. Let us nail that one for a start.

The cut in the rate of income tax was the wrong thing for the hon. Gentleman and the Conservative party to have prioritised. I think many people in our country regard it as a real obscenity. It is a perverse set of priorities and we would reverse them because the public finances need the extra support. The public finances need those with the broadest shoulders to contribute a fairer share.

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[Ian Swales (Redcar) (LD)]

For someone who did not feel that we had been given enough time today, the hon. Member for Nottingham East (Chris Leslie) made an incredibly long speech.

I welcome the measures in the Budget, especially those benefiting business, and I am not the only one. At a lunch event on Friday, I spoke to members of the North East Chamber of commerce, and they also welcomed the Budget—particularly the measures involving oil and gas, which are very important for manufacturing industry and contractors in the north-east. The moves on corporation tax and support for business are clearly welcome. I do, however, agree with the hon. Gentleman that there is concern about the speed with which the diverted profits tax is being introduced. I congratulate the hon. Member for Amber Valley (Nigel Mills)—who has just left the Chamber—on triggering a Westminster Hall debate on the subject, during which we scrutinised it a little further.

[Mr Love]

There is significant concern, indeed alarm, out there among some of the tax professionals and accountancy bodies about the lack of adequate scrutiny. Does the hon. Gentleman share that concern?

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[Ian Swales]

As I said a moment ago, I do share some of that concern. The new diverted profits tax is quite complicated, and I agree that introducing it after so little time is risky. However, I also think that it is a very necessary tax. Far too much of our economic activity in the United Kingdom has been booked elsewhere, and too many of our profits are being shoved elsewhere. I therefore welcome the overall measures, and hope that they can be made to work.

I welcome the increase in the bank levy. It is clearly more sensible than taxing bank bonuses at a total rate of 115%, which is what I understand the Opposition to be proposing. That clearly would not work, and I think that their proposal shows a lack of competence. I welcome the fact that the rich are paying more. The hon. Member for Nottingham East used the emotive word “obscenity”. I think that there was something of an obscenity in the fact that people on the minimum wage were having to pay about £1,000 a year in tax under the last Government. The Liberal Democrats’ priority is to change that, and to raise the tax threshold. Our original target was £10,000, but I am delighted to say that it is now on the way to £11,000 as a result of our work in this Government.

The rich are paying much more in tax. Their income tax rate was held at 40% for 13 years by the last Government. When we came to office, the rate of capital gains tax was 18%, lower than even the basic rate of income tax; it is now 28%. People are allowed to put a quarter of a million pounds a year into pension schemes and receive full tax relief on them: the allowance is now £40,000. The lifetime allowance has been reduced again, to £1 million. I welcome all those measures. I am not going to become involved in a long debate about VAT, but it is worth noting that the VAT on a new Ferrari is £50,000. The idea that it is all paid by pensioners is clearly not right when we take account of the goods that are not subject to the standard rate of VAT.

The Budget raised stamp duty on property, and introduced yet more measures to deal with avoidance. Of course, there was industrial-scale avoidance under the last Government, and many cases are still coming to light, having arisen before 2010. I welcome the moves on the cost of living and on alcohol taxes, which support many of our important industries. I must declare an interest, as a cider drinker who greatly welcomes the reduction in cider duty. Overall, there is an inconvenient truth for the Opposition. Inequality has narrowed under this Government, whereas it widened under the last Government. People are better off than they were in 2010, and the Institute for Fiscal Studies has been saying so since January. The £1,600 figure was never about the total; it was about average incomes, which have, of course, been affected by the huge fall in youth unemployment, the huge rise in the number of apprenticeships, and the huge fall in bank bonuses. The Opposition’s stance does not bear scrutiny.

I have been asked to be brief. Let me end by saying that my part of the world has gained huge benefits under the present Government. We have benefited from the regional growth fund, from the local enterprise partnership—which is highly successful—and from the fact that this Government have spent five times more on capital investment in the Tees Valley than the last Government did in five years. In the last year, unemployment in my constituency has fallen by 781. It is still too high, but we are heading in the right direction.

My party will support the Bill today.

[Chris Evans (Islwyn) (Lab/Co-op)]

Let me begin by expressing my disappointment that there is to be no Public Bill Committee. I have served on every single one in the present Parliament. I do not know what I did wrong in the Whips Office, but I feel that I am missing out on something.

I congratulate the hon. Member for Redcar (Ian Swales), who is, of course, a Liberal Democrat. Following the embarrassment of the Chief Secretary standing on the steps of the Treasury with his Fisher-Price lunch box, announcing a Liberal Democrat Budget the day after the real one that he said he had signed off, I admire any Liberal Democrat who can stand up now and defend the Government’s policies.

I want to say something about the Finance Bill and the Budget. This is the truth as I see it: for one hour, the Chancellor, simply because a general election is on the way, changed his tune from that of the Conservative party conference in October, when he told us swingeing cuts were on the way and we should prepare for an age of austerity. Now, 44 days before a general election, he tells us, like a latter-day Harold Macmillan, that we’ve “never had it so good.”

Those of us who are historians remember what happened after the complacency of that Conservative Government of the 1950s and the eventual devaluation of the pound in the 1960s. The problem is that for vast swathes of constituencies like mine across the country which are trying to deal with the post-industrial age the Government did not offer any hope or optimism for the future. Families in my constituency are £1,600 worse off than they were five years ago; that is the truth, and I challenge any Government Member to come to Islwyn, walk down the streets with me and go to the food bank in Risca where I was taken the other day. I could not get through the front door because so many people there were in need. Some might say they were there for kicks, but so many of them just needed help with benefits or the health service—they were there because there was nowhere else to go. That is a sad indictment of this Government’s policies.

Islwyn is a constituency dealing with the post-industrial age. Under the last Labour Government we attracted investment, but the problem is that this Conservative- led Government have created two Britains. There is the Britain of the affluent, who are enjoying a tax cut because we are in the grip of an economic theory that failed and only brought about deficits in the ’80s. That continues with the tax cut from 50p to 45p. We also see a different kind of Britain, however: a Britain of people gathered around the kitchen tables worried about paying the bills—about how they are going to pay the mortgage, how they are going to pay the rent. These are the people who deserve the tax cut.

It is all very well the Prime Minister committing today at Prime Minister’s questions not to put VAT up. He made that commitment before the last general election, yet VAT went up. It is only ever the Tory party that puts VAT up. VAT is regressive because everybody has to pay it, whatever goods they buy; whether they are a pensioner, a student, in work, a lord or a duke, they have to pay VAT. It does not matter what they earn. That is why VAT is a regressive tax.

The Government have forgotten who pays the bills around here. It is not the millionaires. It is not the business people. It is the people on the ground. I have nothing against anybody earning big money; I have no problem with success or aspiration, or ambition or achieving anything. However, if we give a tax cut to the very rich in society, they will employ accountants who will hide the money, but if we give a tax cut to people in the middle, they will spend it in the shops and businesses and get the high streets moving. That is not what is happening. That is not the reality on the ground.

We can talk all we want, but the simple fact is there is a problem with the word “conservative”. It means preserve or conserve—to conserve a way of life that never existed. If we want examples of how the Conservatives constantly look back to a golden age that never existed, we need only listen to the references to Agincourt. This is what I say: if we are looking back constantly, we are not moving forward.

The NHS is in crisis but the Budget says nothing about that most important public service in Britain. The Tories last week confirmed plans for extreme spending cuts in the three years after the election, which will put our NHS at risk.

[Ian Swales]

I always enjoy listening to the hon. Gentleman’s speeches, but he ought to note that the Budget included a huge £1.25 billion for mental health spending in the NHS.

[Chris Evans]

I welcome any money that goes towards mental health, and I think anybody suffering from a mental health issue would welcome that as well, but I have to say this to the hon. Gentleman: I am fed up, especially as a Welsh MP and a Welshman, at the way the Welsh NHS has been attacked by this Government. It is a shame because when the Government attack the NHS in Wales, they are attacking the nurses, the doctors, the cleaners, the porters—everybody who works so hard to provide the best possible health care to our patients.