Tax Credits

Jeremy Lefroy Excerpts

Thursday 29th October 2015 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

It is a great honour to follow the hon. Member for Dumfries and Galloway (Richard Arkless). Indeed, I am one of those who have visited his constituency on holiday, and I remember one evening being bitten alive by midges on Clatteringshaws loch. We had to escape into our car and smoke cigars to keep them away—of course nobody under the age of 18 was in the car at the time, I hasten to add.

One noticeable thing that happened earlier this month, and which may not have come to everybody’s attention, was that the International Monetary Fund—not an organisation I have always had a lot of sympathy for, particularly when I was living in Tanzania in the 1990s—made a remarkable statement under its excellent managing director Christine Lagarde: excessive inequality damages growth and the economy. It is amazing and very welcome that the IMF has come to that conclusion. It has come to that conclusion not just in respect of developing countries, but in respect of any country.

In my opinion tax credits have been a means of reducing inequality and particularly excessive inequality in this country. That is why when I spoke in the Opposition-led debate last week I urged the Government to look again at the policy, especially its timing. I am very glad the Chancellor has said he will do that and will bring forward measures. I pay particular tribute to my hon. Friend the Exchequer Secretary because he has always been listening and is a great credit to his position, as indeed is the Chancellor’s Parliamentary Private Secretary sitting behind him, my hon. Friend the Member for Kingswood (Chris Skidmore).

I mentioned two other things last week, one of which was predictability. Income is about predictability; it is not just about levels of income, and if we cannot predict our income it is a great driver into relative poverty. We see that all over the world. The proposals originally before us would lead to cuts of perhaps 10% or 15% in people’s income without their knowing what is going to happen, as the hon. Member for Nottingham North (Mr Allen) and others have said. They would be getting a letter in December or January for something starting in a couple of months and would not have an opportunity to correct that.

I also mentioned the problem of scarcity. For those with a low income things are more expensive. The inflation rate is much higher for people on low incomes than for people on higher incomes. They are not buying electronic equipment, which comes down in price every year, or flying with Easyjet on holiday, both of which have brought the inflation rate down. We need to bear that in mind. The inflation rate may be 0% at the moment, but it is certainly not 0% for people on the lowest incomes.

[Stephen McPartland]

Does my hon. Friend agree that the real poverty in this country is poverty of education, of opportunity and of aspiration and that the people on the lowest incomes are trying to work their way out of that poverty?

[Jeremy Lefroy]

Absolutely; if we see everything in terms of income we are a poorer society, as John F. Kennedy once so magnificently said.

Members have also talked about the fallacy of trickle-down economics—and it is a fallacy. It was supposed to be the way in which the poor would get richer, but, as I have seen around the world, that is rubbish. What we need is surge-up economics, because those on lower incomes spend their money locally, and it goes into taxes and VAT. Of the £4.4 billion, probably several hundred million pounds will be spent on VAT and will come straight back into the Treasury. So we have to remember the consequences and effects on the local economy of the loss of this spending power, as the hon. Member for Dumfries and Galloway said. If one thing is to be reduced, we must see the other sources of income increase simultaneously.

There is also the impact on those on fixed incomes such as carers, which I mentioned last week and other Members have mentioned. Full-time carers who will not see rises in their income often have no opportunity to go out and work more hours. There is also the impact on the self-employed, and indeed on farmers in my constituency who have seen their milk prices, their only source of income, fall. They are reliant on tax credits as much as anyone else. Sometimes, people see them as asset-rich because of their farmland, but they are the ones providing our milk, wheat and other things on which we rely, week in and week out. Their incomes are low, and they, too, rely on tax credits.

I want to look to the future. Other hon. Members have mentioned areas in which we could raise the extra income to offset the cost of delaying the tax credit reductions. I mentioned a couple last week and I shall not repeat them. I want to make a couple of points about the future, however. The first is about national insurance. There has been talk in the past about merging national insurance and income tax, but I think that would be a big mistake. It is incredibly important to have a progressive national social insurance system to which people contribute—even those on low incomes, perhaps at a very low rate—in which they feel they have a stake and from which they are entitled to receive benefits if the need arises. I urge the Government to look closely at how we can improve the national insurance system, rather than getting rid of it. Perhaps we should consider adopting something like the German system, to which we would contribute more but which would provide guaranteed benefits for when people were sick or out of work and for when they eventually retired.

Secondly, we need to look at our savings. We do not save enough; that is a fact. If we look at other countries around Europe, such as Italy, we see that they are far better at saving than we are. The Japanese are excellent at saving. We have one of the lowest savings rates. When my colleagues and I produced a report on social stability last year, we emphasised the importance of introducing a lifetime savings account, which could perhaps be supported through tax-free contributions over the course of a person’s lifetime. People would be able to draw down funds from such an account at difficult times in their lives, perhaps if they became seriously ill or were out of work. Such an account could eventually be converted to become part of their pension. That would encourage people to put aside money, supported by the state, to top up any benefits they might need to claim. Those benefits are always likely to be fairly basic, because they are paid out of the state system, but it is to be hoped that people would still be able to live on them.

I welcome the Chancellor’s statement this week, but I encourage him to look at all the incredibly important points that have been made by Members on both sides of the House in a spirit of co-operation. Above all, I thank the right hon. Member for Birkenhead (Frank Field) for his initiative and his sagacity in bringing forward this debate.

Welfare Reform and Work Bill

Jeremy Lefroy Excerpts

Tuesday 27th October 2015 Commons Chamber

[Helen Goodman]

People can take different views on this matter, and I have just been describing the view I take with respect to lone parents.

I want to make one final point. Conservative Members have repeatedly said that the Opposition have no proposals for savings and they are the only ones who are concerned about the deficit. The Opposition voted against the inheritance tax cuts, which will benefit the richest 60,000 households, and we went into the last general election with a proposal to cut the winter fuel allowance for wealthy pensioners. Personally, I think that would be a better thing to do than hit disabled people once again.

[Jeremy Lefroy (Stafford) (Con)]

I am going to speak extremely briefly to amendment 29 in my name and that of my hon. Friend the Member for Stevenage (Stephen McPartland), which asks the Government to look again at withdrawing the full amount of the WRAG component, which affects approximately 492,000 people. Let me briefly explain the reasons.

First, as the hon. Member for Banff and Buchan (Dr Whiteford) mentioned earlier, many in the WRAG are in that group for a long period—two years or more, compared with six months on average for jobseeker’s allowance, for instance. As she said, it is extremely difficult to exist on these levels of income for long periods, whereas it might be possible for a few weeks or even a few months for those with other kinds of support. It is therefore important that we look at the length of time.

Secondly, the costs for people in this group are often higher. It has been said to me that the personal independence payment will compensate. It will not compensate for all those costs; for instance, heating is not part of PIP, nor are the special diets people may have, although caring and mobility are part of PIP, of course.

Thirdly, there is the question of the incentive. Because the support group has a component of £36.20 a week at present as opposed to the WRAG of £29.05 a week, which it is proposed to take away, there will be the incentive and a tendency for people to be put into the support group rather than the WRAG. Surely the whole point is to bring people into the WRAG so that they can be given support to come back into work. For instance, 30% of people with Parkinson’s are wrongly placed in the WRAG. This means that instead of receiving the £29.05 component a week, they will receive nothing in future. I have seen instances of people placed in the wrong group in my constituency.

We are talking about a benefit where sanctions are wrongly applied in a number of cases, as has been mentioned in the debate. I need to be very brief and I apologise for not making my points in more detail, but I want others to come in. I ask the Minister to come back on this—

[Mr David Burrowes (Enfield, Southgate) (Con)]

This may be an opportunity to mention amendment 31. I recognise my hon. Friend’s concerns. What we need is specialised tailored employment support. I understand that in Committee the Minister agreed to come back in the autumn with details of what support the Government will give when the package rises from £30 million to £100 million. The sooner we get those details, the better.

[Jeremy Lefroy]

I entirely agree that we need specialised tailored employment support, but people also need cash to pay their heating bills. That is extremely important and needs to be borne in mind.

Finally, I was not quite clear from my hon. Friend the Minister’s remarks earlier whether the freezing of benefits applies to those in the WRAG who will be on the present JSA rate of £73.10.

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[Priti Patel]

My hon. Friend is right about the Government’s clear desire to support more disabled people into employment, and as we discussed in Committee, we will strive continuously to fulfil that commitment. I can assure him that in everything we do, including through the £100 million of investment to help people with disabilities and health conditions—something that Labour did not do in government—we will share information with the public and report back to the country on our progress. The Government stand by the principle of encouraging and rewarding work, and the Bill builds on that success.

Naturally, we want more people to have the dignity of a job, the pride that comes with earning a pay packet and, importantly, all the wider advantages that come with employment. All those who want to enter employment and contribute to the growth of our economy should be supported to do so, which is why we are committed to full employment. The Bill will support that commitment with a statutory duty to report on our progress towards full employment and our ambition to deliver 3 million new apprenticeships. In addition, it will put in place a statutory duty to report on our progress in supporting troubled families with multiple, highly complex problems, including in helping them to move closer to work. It will encourage parents into work and support those trapped on benefits without the opportunity to move into work, such as those with health conditions or disabilities in particular. As my hon. Friend the Member for Enfield, Southgate (Mr Burrowes) rightly highlighted, we will support them into work.

As a one nation Government, we believe that everyone in the country should have the chance to benefit from the security and sense of purpose that comes from being in work. Work provides purpose, responsibility and, in particular, role models for children, yet getting people into work is about more than earning a salary. Growing evidence shows that work can help people to remain healthy and help to promote recovery where somebody falls ill. It is right, therefore, that we look at how the system supports people with health conditions into work. We know that 61% of those in the work-related activity group want to work, but only 1% come off benefits each month. The system has failed them, and financial disincentives have left them trapped on benefits.

As we discussed in Committee and on Report, the changes in the Bill will apply to new ESA claims and universal credit from April 2017. This will enable us to provide significant new funding for additional support to help claimants with health conditions and disabilities into work and to transform people’s lives. Furthermore, we are providing £60 million of funding in 2017, which will increase to £100 million a year by 2020. That will be direct support to get people into work and provide new employment opportunities for those who want to work but have been unable to do so. We recognise the long-term conditions that some people face and will support them back into work.

[Jeremy Lefroy]

That help into work is absolutely vital, but what would the Minister say about those who have been in the work-related activity group for one or two years, or perhaps even longer, and who are unable to get back into work, however hard they try? New claimants will not have that work-related activity group component.

[Priti Patel]

We recognise that there are people who cannot work, as a result of illness, and they will be in the support group. They will absolutely be supported in that group, as is right and proper.

It is our responsibility to ensure that the welfare system is affordable and sustainable. Those on the Opposition Benches who oppose our making difficult decisions on welfare must say what they would cut or which taxes they would put up to pay for their proposals. The Bill will correct many of the unaffordable and disproportionate increases in benefits compared with earnings by freezing most working-age benefits. As we have said throughout the passage of the Bill, this will protect taxpayers from the cost of subsidising increasing social housing rents through housing benefit. Those rents have climbed by 20% since 2010, but we will now act to reduce them by 1% a year for the next four years.

The Bill will continue to restore fairness to the system. We do not think it is fair that someone on benefits should receive more than working households earn, and 77% of the public agree. The benefit cap reintroduced fairness. Reducing the benefit cap to £20,000—and to £23,000 in Greater London—reinforces and strengthens that message. The new cap better aligns the level with the circumstances of hard-working families across the country.

Tax Credits

Jeremy Lefroy Excerpts

Tuesday 20th October 2015 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

Many of those who have spoken, and indeed the Chancellor himself, are quite right to say that we have to view all the measures put forward as a package—not just the effects of the tax credit changes, but the many other measures that have been spoken about. I would like to make three points: on timing, predictability and the concept of scarcity.

On timing, the measures will come in at different times. It is vital that their timing should be synchronised. It is not there at the moment and I therefore ask that the timing of the introduction of the various changes to tax credits be looked at. I fully agree that we need reductions in the tax credit bills, but it is the timing that will bring great problems to many families.

On predictability, families want to know what their income is going to be. They want a reasonable measure of forewarning, so they can talk and negotiate with their employers, and plan their future. If their income is going to be reduced, they need time to do that.

[Barbara Keeley]

The hon. Gentleman is making a good point about timing. I raised a point earlier about carers. Carers who work 16 hours a week on the minimum wage will lose their tax credits. They cannot change that, they cannot plan for that and they cannot find any way out of that. What does the hon. Gentleman think about that in relation to the 689,000 carers?

[Jeremy Lefroy]

The hon. Lady must have read my notes, because I was going to come to that and say precisely that this is the other major issue. Those on fixed incomes do not have the ability to go out and work the two or three extra hours a week to cover the cost of the changes to tax credits. Full-time carers are not the only example, but they are the most obvious. I entirely agree with her.

Scarcity might seem a rather arcane concept to introduce, but studies have shown that for those who find sudden scarcity imposed on them economically, the costs are very great. The inflation rate for people on lower rates of pay is considerably higher than for those on higher rates of pay. If they suddenly receive a lower income—perhaps a cut of 10% or more—their costs will actually rise, because they will be unable to make the decisions to buy in bulk or in advance that they were otherwise able to make.

Finally, I am not one of those who does not want to eliminate the deficit. I absolutely do. If we have a change in timing—as I urge the Government to consider, including in relation to carers—we will need to find extra sources of revenue and we will have to take that on the chin. In particular, I have written to the Treasury to ask it to consider various income tax and corporation tax reliefs.

Draft Asian Infrastructure Investment Bank (Initial Capital Contribution) Order 2015

Jeremy Lefroy Excerpts

Monday 19th October 2015 General Committees

[Jeremy Lefroy (Stafford) (Con)]

I draw Members’ attention to my entry in the Register of Members’ Financial Interests as chairman of the Parliamentary Network on the World Bank and International Monetary Fund.

I have four questions. The first follows up the point made by the hon. Member for Feltham and Heston on overseas development aid. I imagine that our contribution will be made from our overseas development budget and will be counted as part of ODA. ODA can be applied only to low and middle-income countries, so I would welcome confirmation that the rules of the bank will prevent it from investing in or lending to countries that are not low or middle-income countries.

My second question is about the directorship. Our World Bank director is the Secretary of State for International Development, whereas the Chancellor of the Exchequer is our director of the International Monetary Fund. I notice that, for the AIIB, which is also a multilateral development bank, our director will be the Chancellor of the Exchequer. I wonder what the difference is between the work of the World Bank and of that development bank, and whether any consideration was given to whether the AIIB should also be part of the remit of the Department for International Development.

Thirdly, as the Minister will know, the World Bank has four major bits. The first is the development bank—the International Bank for Reconstruction and Development. The second is the International Development Association, which is very much a soft fund, largely for giving grants to low-income countries. Is it expected that the AIIB, a development bank, will follow the World Bank in doing that? The third part of the World Bank is the International Finance Corporation, which invests in private sector equity. Again, I wish for clarification as to whether the AIIB intends to do that. The fourth part of the World Bank is the Multilateral Investment Guarantee Agency, or MIGA, which puts out guarantees rather than direct financing. Is it intended that the AIIB has an arm of that type as well?

Finally, as I said, I chair the Parliamentary Network on the World Bank and International Monetary Fund, which seeks to inform parliamentarians of countries that are members of those organisations and to give some form of accountability, so that we can look at what work is being done. Is it intended that a similar form of parliamentary network will be established for parliamentarians of the 57 countries so far engaged with the AIIB, to ensure that it is accountable in some way to parliamentarians in the countries that have invested in it?

Tax Avoidance (HSBC)

Jeremy Lefroy Excerpts

Monday 23rd February 2015 Commons Chamber

[Mr Osborne]

Some very serious allegations have been made about HSBC Swiss and its role in knowingly advising people on tax evasion. Of course, our prosecuting authorities will want to look into the matter, but the House needs to know that the information that was received from the French authorities under the last Government—[Interruption.] This is important, and it is relevant to the right hon. Gentleman’s question. The information was received as the result of a negotiation with the French authorities about what use it could be put to, and the French agreement struck by the last Government said that we could use it only for prosecuting or pursuing individuals with regard to their tax affairs. We are currently in active discussion, which I think will come to a fruitful end, to get the French to allow us to pass some of that information to the Serious Fraud Office and other prosecuting authorities, to address the concern that he rightly raises about the potential or alleged role of banks in the affair.

[Jeremy Lefroy (Stafford) (Con)]

Will my right hon. Friend explain to the House how many tax avoidance schemes that he inherited in 2010 he has had to close down?

[Mr Osborne]

More than 40 tax avoidance schemes or loopholes have been closed. Of course, we have also introduced an anti-avoidance and anti-abuse rule, which the Labour Government had 13 years to introduce. Now Labour Members are saying that we should be stiffening the penalties under that anti-abuse rule, but—[Interruption.] I will tell Members who was in charge. The shadow Chancellor was in charge for 13 years and did absolutely nothing. We came in, closed the loopholes, introduced the anti-abuse rule, got rid of the abuse of partnerships by hedge funds, got rid of the abuse of stamp duty by the richest in our society and started collecting the tax that should have been collected long ago.

Oral Answers to Questions

Jeremy Lefroy Excerpts

Tuesday 29th April 2014 Commons Chamber

The Chancellor of the Exchequer was asked—

[Jeremy Lefroy (Stafford) (Con)]

1. What assessment he has made of the effect of freezing fuel duty on the price of petrol.

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

This Government will freeze fuel duty for the rest of this Parliament. As a result, petrol will cost a full 20p per litre less than if we had stuck with the previous Government’s hated fuel duty escalator. We can afford to do this because we have got a grip on the public finances.

The House will also want to know that today we learned that GDP grew by 0.8% in the first quarter of this year. That is 3.1% over the year and today’s figures show that Britain is coming back. We cannot take that for granted. We have to go on working through our long-term economic plan, but for the first time in a decade all three main sectors of the economy—manufacturing, services and construction—have grown by at least 3% in the past year.

The impact of the great recession is still being felt, but the foundations—

[Mr Speaker]

Order. The Chancellor will resume his seat. The answer was not just too long—it was far too long.

[Jeremy Lefroy]

I welcome today’s growth figures, which reflect the hard work of the people of the United Kingdom and mean more jobs and more economic security. Based on the dynamic modelling my right hon. Friend has done, what contribution have his decisions to cut and freeze fuel duty made to that economic growth?

Oral Answers to Questions

Jeremy Lefroy Excerpts

Tuesday 10th December 2013 Commons Chamber

[Mr Gauke]

Of course, we keep all these matters under review, but as I mentioned a moment ago, there are a number of protections in the UK tax system. However, we continue to monitor this area.

[Jeremy Lefroy (Stafford) (Con)]

12. What recent steps he has taken to regulate financial services.

[The Financial Secretary to the Treasury (Sajid Javid)]

Following the failure of the previous Government’s tripartite system, this Government have created a new architecture for financial regulation. The Bank of England has responsibility for financial stability, and two new regulators—the Prudential Regulation Authority and the Financial Conduct Authority—have been set up with clear responsibilities for prudential and conduct regulation.

[Jeremy Lefroy]

Good regulation can only enhance the vital contribution that financial services make to the employment, tax revenues and balance of payments of our country, but constituents of mine find that there is still insufficient protection for so-called non-sophisticated investors when they are sold products without sufficient explanation. What is the Financial Secretary doing to improve protection for customers and to ensure that the Financial Ombudsman Service is their champion?

[Sajid Javid]

My hon. Friend is right to highlight the contribution of the financial sector. Last year it paid over £60 billion in taxes and employs over 1 million people throughout the country. Where consumer detriment occurs, the Financial Ombudsman Service provides a valuable service, providing swift resolution to complaints, but of course we must stop consumer resolution occurring in the first place. That is why we have created a new regulator—the FCA, a regulator with real teeth.

Autumn Statement

Jeremy Lefroy Excerpts

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

I absolutely agree with my hon. Friend. We need a responsible recovery. We need to help not just this generation, but the next one. Whether we are talking about providing opportunities for young people to get training and skills and get on in life, abolishing the jobs tax for the young people or, above all, dealing with the debts that the people who created those debts were not prepared to deal with, this is all about being on the side of young people.

[Jeremy Lefroy (Stafford) (Con)]

I very much welcome the removal of the arbitrary cap on student numbers, which I believe is a decision taken in the long-term interests of this country and which will bring significant economic growth in the future. Does my right hon. Friend agree that this is precisely the time for universities to invest in the future? They should not do what Staffordshire university is perhaps doing by thinking about moving away from Stafford; it should invest there for the future expansion of university education.

[Mr Osborne]

I very much support my hon. Friend and his campaign to make sure that the university thrives in Stafford, and I commend him for identifying this as such an important issue for our country. Some 60,000 people a year have the grades, have the ambition, are willing to take out the loan and want to go to university, but at the moment we say no, because of a Gosplan system that has been in place. We get rid of that today. There will be a big increase in student numbers—of course quality will be maintained—and that will be great for the people he represents.

Oral Answers to Questions

Jeremy Lefroy Excerpts

Tuesday 14th May 2013 Commons Chamber

[Danny Alexander]

The Government’s position was made very clear in the coalition agreement and was confirmed in the mid-term review document published at the beginning of this year: we wish to maintain British membership of the European Union and during this Parliament we will exercise our influence to the utmost to win the arguments in Britain’s national interest, in favour of jobs, investment and growth in this country.

[Jeremy Lefroy (Stafford) (Con)]

Research and development is key to current and future growth, and I welcome the Government’s support for it. What measures are the Government taking to ensure that we rise to the level of our major competitors on research and development?

[Mr Gauke]

One measure that I know my hon. Friend will be well aware of was the reform of research and development tax credits. We are making those more generous and bringing in a new above-the-line R and D tax credit. That is making the UK increasingly competitive in this sector.

Oral Answers to Questions

Jeremy Lefroy Excerpts

Tuesday 29th January 2013 Commons Chamber

[Danny Alexander]

The hon. Lady will know that working people in this country are net beneficiaries of the measures announced in the autumn statement. I would have thought that she would welcome the fact that 2.2 million Scots will gain from the increase in the personal allowance. It is a massive policy to ensure that the working people of this country have more of their own money back in their pockets to use for themselves.

[Jeremy Lefroy (Stafford) (Con)]

7. What progress HM Revenue and Customs has made in closing loopholes in the tax system.

[Charlie Elphicke (Dover) (Con)]

9. What plans he has to tackle corporate tax avoidance and to close the tax gap.

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

Over this Parliament, we have introduced 31 measures to tackle tax avoidance, including loophole closures. This year, our work will focus on strengthening the disclosure regime, consulting on new sanctions for avoidance promoters and introducing the general anti-abuse rule. HMRC will also increase its risk assessment and specialist transfer pricing resources to target multinationals. Combined, those measures will strengthen our commitment to tackling tax avoidance and reducing the tax gap associated with it.

[Jeremy Lefroy]

I thank the Minister for that answer. How will the Government use the presidency of the G8 this year to tackle international tax loopholes that have an effect on receipts to the UK Treasury?

[Mr Gauke]

My hon. Friend is right to raise that point. The Prime Minister has said that he wants to use the G8 for this purpose and to have a serious debate about tax avoidance. The OECD is looking at this matter. We are encouraging it to do so and have provided it with additional resources. It will report back on solutions that could be developed to tackle profit-shifting by multinationals and the erosion of the corporate tax base.

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[Danny Alexander]

I think that is a very poor way to phrase the question, especially when the hon. Lady will know that disability living allowance payments, for example, are continuing to be uprated in line with inflation, even as we have to take more difficult decisions on other parts of the economy.

[Jeremy Lefroy (Stafford) (Con)]

T9. A recent article in MoneyWeek suggested that raising the minimum wage would cut the cost of tax credits and benefits and increase employment. What work has the Treasury done on the interrelationship between the level of the minimum wage, the cost of benefits, tax revenues and employment levels?

[Sajid Javid]

It is not clear that tax credits are being used to supplement lower wages, but what I can say is that the Government have taken action to bring unsustainable levels of tax credit spending under control. It has already been reduced in respect of eligibility from nine out of 10 families with children to six out of 10. Our reforms are also making work pay. Universal credit will unify the current complex system of welfare and make sure it always pays for people to go into work. The withdrawal rate will aim to smooth that transition into work.