Finance Bill

Jonathan Edwards Excerpts

Tuesday 1st July 2014 Commons Chamber

[Shabana Mahmood]

Let us see the report. The Minister has had many opportunities in Finance Bill debates where the Opposition have tabled amendments and new clauses calling for such a report. He has not produced one. I have no confidence that he will go away today and ask his officials at HMRC suddenly to produce a report. If he has such a report in mind, he should accept our new clause, and we can then have that debate. We have said that we will increase the rate to 50p. We believe that that can raise money and will be a good part of a much fairer deficit reduction policy.

The truth is that there was no justification for giving a huge tax cut to the richest in our country. We now know that bonuses are up by 83% for those in the financial sector, while ordinary working people are worse off now and will be worse off in 2015 compared with 2010. Wages will be 5.6% down at the end of this Parliament from what they were at the beginning.

The Government have not ruled out cutting the additional rate back down to 40p. We know that this is the ardent desire of many of their Back Benchers. Perhaps when the Minister replies he could tell the House whether the Government are planning any further cuts. They have ducked the opportunity on previous occasions to confirm that they will not go down from 45p to 40p. It will be good to hear from the Minister whether that is the case. The Government’s priorities are all wrong. Ordinary working people continue to struggle with their finances, and the link between the wealth of the nation and the money in people’s pockets and in their household budgets is broken. This Finance Bill does nothing to change the reality of the lives of millions in our country, yet Government Members want to cut taxes for the richest.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The Labour party now proposes a 50p rate for the additional rate. Is that a permanent measure or a temporary measure to deal with the deficit?

[Shabana Mahmood]

The hon. Gentleman has made that point in previous debates, and I repeat the answer that I gave then. We have said that we would increase the rate to 50p in the next Parliament as we get the deficit down. I could not be clearer than that.

It is the richest in our country who are benefiting the most from the recovery delivered by the Government. The return of economic growth has overwhelmingly benefited the top 1%, as shown by analysis of HMRC figures by the House of Commons Library, which covered the year when GDP growth returned and the top rate of income tax on earnings over £150,000 was reduced. The share of post-tax income of the top 1% of taxpayers—300,000 people—rose from 8.2% in 2012-13 to 9.8% in 2013-14. Yet during the same period, the bottom 90%— 27 million taxpayers—have seen their share of post-tax income fall.

This cut to the 50p rate cannot be justified when the deficit is high and will not be eliminated towards the end of the next Parliament. Labour in government will increase the rate back to 50p to help us to get the deficit down in a fairer way. Just as we have said that we want the Office for Budget Responsibility to have powers to audit manifestos ahead of the next general election, because we believe that that scrutiny will add to public understanding about the choices that are being made—a call the Government only last week rejected—so too we think that a report as envisaged by the new clause would help the public to understand the impact of the top rate of tax so that they can make up their own minds about who is standing up for them and other working people like them.

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[Rushanara Ali]

I could not agree more. I heard the speech of the right hon. Member for Wokingham (Mr Redwood), but it is clear that there are major divisions in our society. We should all be concerned about that. Tax breaks are given to those who do not need them—to millionaires; responsible millionaires will admit that the stance being adopted is divisive. We should protect those who are struggling the most as well as ordinary middle-income families in this cost of living crisis. I hope that the Government will take on board some of the points made about the social consequences of the tax inequalities that the Government are introducing and making worse.

Let us take my constituency of Bethnal Green and Bow as an example. Families there are significantly worse off than they have ever been. Child poverty is at 42% and there is still high unemployment. There are still major problems of worklessness and young people who are not in training or education. That is a major problem around the country: 870,000 young people remain unemployed.

Changes in taxes and benefits made since 2010 make one-parent families working to support children an average of £3,720 a year poorer. That staggering fall in living standards will affect the most vulnerable. The issue is not envy, but the fact that my constituents are struggling. They will rightly continue to ask why millionaires in the City are receiving a tax cut from the Government of about £100,000 a year. My constituents are working hard to make ends meet and their children are living in poverty. While they continue the battle to survive, they ask why the Chancellor is giving £3 billion a year in tax breaks to millionaires. How is that fair? How are we all in this together if that is the Government’s priority?

[Jonathan Edwards]

Given what the hon. Lady is saying, would she support a 50% rate on earnings above £100,000?

[Rushanara Ali]

I am here to debate the new clause. I am focused on what the Government are doing. I support the new clause because it is not fair that £3 billion a year should be going to millionaires. On top of that, as my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) mentioned, bonuses in the financial sector are up by 83%. My constituents are living between the City of London and Canary Wharf; they see the inequities and want a fair chance. They are not complaining about people earning a decent living, but they want the Government to be fair in how they tax.

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[Shabana Mahmood]

My hon. Friend has made his point powerfully, and in his characteristic way.

As we can see, despite the Government’s claims, their record of tackling tax avoidance is simply not good enough in a number of areas. They will say that the avoidance measures in this Bill are radical and bold, and are evidence of a commitment to tackling avoidance. We have supported the measures relating to follower notices, accelerated payment notices and the need to tackle promoters of tax avoidance schemes, although we have questioned the Minister about some of the deeply felt concerns of those who will be affected by the follower notices regime and by accelerated payment notices, which have caused a great deal of debate outside the House. However, although those measures have received the Opposition’s support, the fact is that they are not revenue raisers. They will simply bring in money that the Government were expecting to collect, but which had been clogging up the various back channels and alleyways of the legal system.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The hon. Lady has mentioned a number of measures, and has made some good points. Should not the Government be pursuing large multinationals such as Microsoft and Google, which are not paying a penny in corporation tax?

[Shabana Mahmood]

I think the Government should adopt an across-the-board strategy. I think they should deal with companies of all sizes, as well as individuals who engage in the various types of tax avoidance and evasion. I have mentioned a number of areas where there is concern about the Government’s action to date, and about their record of being able to narrow the tax gap.

The Government’s other flagship policy, introduced last year, is the general anti-abuse rule. Of course, it will take some time for the GAAR to settle in, as it is a new measure, and it is not yet clear how it will operate in practice, because it has not yet been the subject of a court case. It is, however, striking that no penalties regime associated with abuse falls within its remit. One would have thought that such a regime was a deterrent, and that the Government would want to make it clear that the type of abuse caught by the GAAR—abuse of the most egregious nature—would not be tolerated. However, it seems that an individual who fell foul of the GAAR, having engaged in the most egregious form of tax abuse, would incur no penalty but would merely be required to pay the amount that had been disputed. That strikes me as an interesting omission from the GAAR and the Government’s arsenal of measures to tackle tax avoidance.