National Insurance Contributions (Reduction in Rates) (No.2) Bill

Debate between John Redwood and Richard Fuller

2nd reading
Wednesday 13th March 2024 Commons Chamber

[John Redwood]

No, I do not think that is the main point. I think the two main points are the ones I have made—the covid lockdown and the tax regime affecting the ability to set oneself up. I will meet the hon. Member a little of the way, because I do think that the 2021 reforms in particular put companies off dealing with the self-employed, and the self-employed often need business from other companies, as well as directly from the public, and that has been a problem. If he and his party are seriously interested, they should look at the 2017 and 2021 reforms, which I think they supported, to understand how they have backfired. That is a good example of the OBR and the Treasury thinking that they can get more money out of the self-employed by forcing more of them to be employed but ending up with a far less successful economy with far fewer people working.

[Richard Fuller]

It is an absolute pleasure to listen to my right hon. Friend. I want to reinforce his point about IR35 so that our colleagues on the Government Front Bench are clear about how important this is. He talked about how Labour in the past supported those measures, but does he share my concern that perhaps Labour has now recognised that those changes to IR35 have backfired and that it would be disastrous for the Conservative party to go into the next election not having made those changes while the Labour party is offering to do so?

[John Redwood]

I will not join my hon. Friend in suggesting that it could be disastrous to go into the election—I hope that, when we get to the election, it will be looking rather better. But I do agree that it would be great to have sorted out the IR35 taxation mess before we get to the election—after all, there could still be many months of happy Conservative Government ahead if that is the Government’s wish—as that would be a much better outcome. Failing that, it would be good to put it in the manifesto, but the self-employed would be quite right to say to the Conservatives, “If you have now got to the point of putting it in the manifesto because you think it needs changing, why didn’t you just fix it?”

Finance Bill

Debate between John Redwood and Richard Fuller

Report stage
Monday 5th February 2024 Commons Chamber

[Richard Fuller]

Can my right hon. Friend tell me if I have got this right? In the commentary ahead of the Budget, we talk about wiggle room and the Office for Budget Responsibility forecast and about £5 billion or £10 billion here and there, but I think I heard him say that this matter was completely out of the control of the those on the Treasury Bench and this Parliament; that the Governor of the Bank of England could unilaterally decide to crystallise losses on whichever extent of bonds he wished to, and then put that loss into the calculations of the Chancellor of the day; and that the Chancellor would then have to work around that in order to work out what the fiscal expenditure, public expenditure and taxation would be. Is that actually the case? It sounds mightily undemocratic to me.

[John Redwood]

That is an interesting point of debate, but my understanding of the constitutional position is that it is not as bad as my hon. Friend is suggesting because all the bonds were acquired with the express permission of the then Chancellor of the Exchequer. The Bank of England’s website says that the bond portfolio is held on behalf of the Treasury. Successive Chancellors of the Exchequer—beginning with the Labour Chancellor who first undertook quantitative easing and carried on by successive Conservative Chancellors—all signed an agreement with the Bank to say that they would indemnify against loss. So, given that the Government and this Parliament empowered the purchase of the bonds and now take responsibility for any losses on them, it seems perfectly reasonable for there to be a proper conversation about whether we want to take the losses.

I see nothing wrong with us here challenging the idea that, uniquely among the big quantitative easing programmes, it is the Bank of England that not only insists on selling the bonds at big losses but gets reimbursed. The ECB does not sell them in the market at big losses. The Federal Reserve Board sells them in the market at big losses but gets no money back; it simply puts on its balance sheet that it has lost a lot of money and takes the view that, as it is a central bank, it does not really matter if it loses a lot of money, because central banks create money and it is therefore not like a normal commercial business. So I hope that Ministers will look at this as part of the general assessment that is being invited by these new clauses.

I hope also that Ministers will look at the expenditure items in the overall accounts covered by new clause 4 on the public finances, because there has been a marked decline in public sector productivity in the years 2020 to 2023. It was quite without precedent in my experience of following public finances over the years, and this very sharp decline represents at least a £30 billion loss to our system, in that it now costs at least £30 billion a year more to run the group of public services covered by these figures than it did before the collapse in productivity. On top of that, there has also been the need for much bigger sums to cover inflation. This is not the inflation figure; this is the real loss figure from the productivity.

We are all sympathetic to the difficulties that lockdown and the transition out of lockdown caused, and there was bound to be disruption. Our public services were badly affected by that, as children could not go to school and hospitals were disrupted by covid, but that is now some time behind us and it seems perplexing that we cannot get those public services back to 2019 levels of productivity. I hear comment that maybe artificial intelligence will do it and that there needs to be a big investment in computers. Well, that should be on top. All that I am saying to the Government is that we can surely get back to 2019 productivity levels using techniques from 2019, which was very much pre-artificial intelligence and before the latest round of computerisation. Again, this is a big area that needs to be looked at as part of any review of the public finances.

The third area, which is also very large and very much in the news today, is that even more people in our country do not feel they can go back to work and that they need help at home because they are no longer able to work. The Government are working on some important programmes, through the Department for Work and Pensions, to show people that through a combination of part-time flexible working and working at home with proper support and training, and maybe with additional financial support to help them, they could go back to work for part of the time and make a contribution. We desperately need them, and I think their lives would be more rewarding. They would also be better off because we now have a benefits system that means it is always better to work. This should be a cross-party matter, because it is a problem that our nation as a whole faces. We can enrich those people’s lives, help to reduce the burden on the taxpayer and improve the net income of those concerned. Again, this involves many billions.

My point in making these three simple points apparent to the House is that there are very large sums of money indeed involved in bond losses and productivity, which we need to review because that would help in the formation of the next Budget. It would create more headroom, both for the tax cuts that we need if we are to promote growth, and for improved public service provision in the areas where the shoe is still pinching. I trust that will be part of any review that might emerge from these new clauses, or from the spirit of these new clauses. I hope that my right hon. Friend the Chancellor is thinking about this, as we will have a Budget hard on the heels of this Finance Bill, which came out of the autumn statement. In these conditions of recovery, and given the need for faster growth, I welcome having more than one Budget a year, and the fact that we may have three fiscal events quite close to each other, if all goes well. They must promote growth and reduce taxes, and this is a good start.

I welcome new clause 5, but can we please have more? Can we please look at the headroom that I think I have helped to identify?

Living Standards

Debate between John Redwood and Richard Fuller

Monday 5th March 2012 Commons Chamber

[Mr Redwood]

That is a very good example of the problem one can get into, and that is why I wish my right hon. Friends on the Treasury Bench every success in dealing with what we can all see is a problem, but I am not recommending to them that they give up and say that somebody on £200,000 a year should still be able to get full child benefit. That is not the right answer, and I should hope that Labour might sympathise with that proposition and agree, but I am grateful that some Opposition Members are now coming round to my view that high marginal rates of tax and of benefit withdrawal, at all levels of income, are a disincentive.

Just as Government Front Benchers are rightly trying to tackle the very serious problem at the lower end, perhaps with some support from Labour, they should have some sympathy for people in the middle of the income scale, where the situation can be equally unpleasant and difficult for families struggling to meet their bills. Sometimes Opposition Members forget that, although people in my constituency tend to have a higher average income than many of the average incomes in their constituencies, my constituents’ housing costs, their travel costs and other factors in their cost of living mean that they need higher incomes in order to have the same living standard as those whose houses are half the price or less, because housing is a very big component.

The Labour party has rightly said that it would be wonderful if we could tax the banks more, and I again find myself in agreement with that. It is an immediately attractive proposition. We all know that banks are pretty unpopular, and we like to think of them as very rich, so it would be good if we could tax them more. Unfortunately, Labour is wrong to suggest that the Government have just offered another tax break to some banks by cutting the marginal rate of corporation tax. The reason we are getting so little tax out of them is nothing to do with a small drop in the corporation tax rate; it is that two of the biggest banks, Royal Bank of Scotland and Lloyds HBOS, are loss-making, so it does not matter what corporation tax rate we set, because they are not going to pay a penny of it. That is a disgrace, but it is where we have got to because of the disasters and problems in bank management over recent years.

Worse still, we are in the position whereby, if those banks do start to make money—it is true that the losses have been much reduced in the past year and they might start to make money—they will not be about to pay any tax, because they have such huge inherited losses from the period under Labour when they plunged into massive deficit and got into a disastrous position.

[Richard Fuller]

My right hon. Friend is making very good points about the importance of companies being profitable so that they can pay tax, but when it comes to bankers and high earners paying taxes does he think that it is more important that the tax take is as high as it can be, or that we have a headline-grabbing marginal tax rate? Which is more important: the take or the rate?

[Mr Redwood]

I am very much of the view that we want a higher tax take, and I favour taking the tax from the people with the money, the rich, and from the companies with the money, rather than from the people who do not have it. That is what I believe, and I would hope that that again was common ground. The way we do so is by charging a rate that people are prepared to stay and pay, because the danger is that if we set the rates too high, people do not stay or they do not pay; they find clever accountants and lawyers, do less, invest less, risk less or go. It is the same with banks: if we get the rate wrong for banks, instead of getting more money out of them, we get less.

In 1979 when Labour had had a strongly socialist Government, they left office with a marginal income tax rate—in which some current Opposition Members would take pride—of 83p in the pound. In those days the top 1% of income tax payers contributed just 11% of the total income tax take, because the rich had either gone or had clever arrangements to avoid paying tax. When the Conservatives brought the rate down to 40%, not only did the amount of money paid by the rich go up, and the real amount that they paid go up significantly, but the proportion of total income tax that they paid more than doubled. Surely that is a desirable outcome, and it is the same with banks: we need to find a way of taxing them.

My first recommendation to the Chancellor for his Budget is to sort out the banks. We need to create some working banks out of the RBS framework, get them out there in the market, sell them off, get them into a profitable state without all the back history of tax losses, and create new entities that can trade properly and lend money for the recovery, and then we can get some tax revenue out of them. I hope that Labour Members might agree with that proposition. We then need to tackle the problem of inflation, which has been rising too rapidly.

I am glad that those on the Front Bench have done something about council tax bills—I hope that Labour councils will join Conservative councils in keeping those bills down, because they are very difficult for many people to afford—and have started to do some work on fuel prices, although they are still extremely high. We could do more to get water and energy bills down. I recommend that we allow more competition in those industries, particularly water. In the energy industries, we need more private sector-led investment, with an emphasis on cheaper power, which is needed to tackle fuel poverty and inflation and to secure an industrial recovery. The Government need to recognise that energy is now usually the biggest cost in many industries and, instead of favouring dear power, follow competition and private investment policies that will promote cheaper energy.