Finance Bill

Jonathan Edwards Excerpts

Monday 2nd July 2012 Commons Chamber

[Miss Smith]

This morning, I was indeed speaking in my constituency capacity about my wish that our regional economy will not be left in the sidings. The same is true of our national economy. We must ensure that Britain remains competitive. Our actions, which are part of a credible national plan, have kept Britain safe from the global turmoil around us. It is within that plan that we have listened and acted.

New clause 1 will defer the fuel duty increase that was planned on 1 August this year to 1 January 2013. As the Chancellor said last week, and as my hon. Friend the Member for Harlow (Robert Halfon) has noted, this decision means that pump prices are 10p a litre cheaper than they would have been if we had not abolished the previous Government’s fuel duty escalator. It is a real help for families, businesses and motorists across the country. The AA has said that it is

“great news for all motorists”.

The RAC Foundation has said that it is

“good news for drivers and good news for the country.”

The Government have taken action upon action to support motorists and have done more than any other Government. We have avoided the two years’ worth of increases planned by the previous Government. More than that, last year we abolished Labour’s fuel duty escalator, which increased fuel duty by above inflation every year until 2013. We have successively cancelled and deferred duty to deliver the longest period of unchanged fuel duty for more than five years. As a result of that repeated action, average pump prices are now approximately 10p a litre lower than they would have been. To put that in context, a typical Ford Focus driver will be £159 better off and an average haulier £4,900 better off between 2011 and 2013 than they would have been under the plans left by the previous Government.

This support for motorists is part of our broader plan of helping with the cost of living and promoting business growth, while reducing the deficit and rebalancing the economy. That has included freezing council tax and raising the personal allowance.

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

I, too, congratulate the Government on this decision, not least because it saves me from making a speech on an amendment that we had planned to table on this issue. Considering the gloating of the official Opposition last week, does the Minister recall the Labour party at any stage on Second Reading or in Committee making the case for this 3p cut?

[Miss Smith]

The hon. Gentleman has given me the perfect opportunity to note that, regrettably, the official Opposition’s Benches are astoundingly empty. The stance that they took last week showed astounding political opportunism, given that they had 13 years to support the motorists but did not, and that they left behind a depth charge of increases. I regret that I shall not be able to hear him put the case in his own words. Perhaps I may explain to him more of the actions that we are taking to support the motorist and businesses.

Businesses are seeing successive cuts in corporation tax, coupled with an extended business rates holiday for small businesses until April 2013. In passing, I should note that the high pump prices of recent years are causing real difficulties in ensuring that motoring remains affordable. However, pump prices have fallen by nearly 11p a litre since their peak in April. That said, at a time when money is tight, deferring the fuel duty increase from August to January will provide further support to motorists.

This is a Government who not only have a credible plan to support motorists, but are dealing with the debts created by the previous Government. A responsible Government are able to listen to, consider and respond to the concerns of motorists. Compared with the plans that we inherited, we have cut fuel duty, cancelled the previous Government’s escalator and introduced a fair fuel stabiliser.

I understand that we will also be discussing what the Opposition have planned for motorists, perhaps in some detail. I also look forward to hearing from my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) on biodiesels. I look forward to responding on those matters. This Government are on the side of motorists and our measures will support them when times are tight.

--- Later in debate ---

[Charlie Elphicke]

My hon. Friend tempts me, as ever. He knows that my view is that one should reduce the rate and clamp down heavily on tax avoidance. I respect the fact that he does not always share my views on tackling tax avoidance—I recall that in Committee he said that I was going to paint the cliffs of Dover red, so passionate was I that people should pay their fair share—but I do think that if we have lower, simpler taxes and a simple tax system, it will incentivise investment and encourage more economic growth. The argument for reducing the higher rate of tax, which was only a temporary increase in the first place—the Labour party seems to have forgotten that—was to get more investment in our economy and to encourage the entrepreneurs and wealth creators.

[Jonathan Edwards]

Does the hon. Gentleman agree that the major problem we have at the moment is that it is socially acceptable to avoid paying tax and that our job as politicians is to create a social climate where it is unacceptable not to pay what you are due?

[Charlie Elphicke]

I agree. There has been a climate in which it is somehow acceptable to avoid taxation and I made many speeches in Committee about how that culture is unacceptable and needs to change.

It is up to us to send a clear message, as Members of all parties, that tax avoidance is wrong. That was why I intervened on the shadow Minister earlier to say that the message sent by politicians who use personal service companies is deeply corrosive. They should all pay a fair share of taxation and should not try to avoid it in that way, because it sends the wrong message. In all fairness, I say that to members of my own party as much as to Labour members. It is not acceptable in the current age.

--- Later in debate ---

[Mr Syms]

I am not sure that that is a massive loss of income. The most recent issue we debated was the 3p cut on fuel, which will make more of a difference to pensioners in my constituency than this minor change in tax allowances. I think that the Government’s policy towards pensioners is fine.

Let me turn to the top rate of tax. We all know that there is a lot of politics in this. The rate was 40p under the previous Government, except for the last 37 days they were in office, so the 50p rate was one of the wonderful inheritances from them. Clearly, if we want to stop people looking to avoid paying tax, we have to keep a competitive rate. At 40p we have a rate that was competitive with many western European countries, but at 50p we do not. If we have a country without exchange controls, a very mobile population, as we do, and people with highly tradable skills, there is a danger that if we start to put up the rates we will lose revenue and people will go abroad. As my hon. Friend the Member for Dover (Charlie Elphicke) said, having had a 50p rate which meant people started looking at how to avoid taxation, that might stay in the system for some time. I welcome what the Government have done by reducing the higher tax rate to 45p. I think that it is a pity they delayed it, because I suspect that the impact will be to reduce income tax take for the current year, but when the rate drops to 45p for the year after, we will see an increase in the income tax yield.

It is important to give a message. I was in this House when the previous Government put up income tax. In one of his last speeches from the Government Back Benches, Stephen Byers said that he very much regretted that the Labour party had decided to do that. If all the evidence suggests that that has not raised very much this year, it seems to me that it is being done for ideological reasons, rather than practical, economic ones. If nothing else we ought to be practical in how we do things. Therefore, the Government’s reducing the top rate, as a start, is the right thing to do which will have a beneficial effect in the long term. But let us not forget that the allowances for the lower paid have gone up this year. The top rate of tax will come down next year, by which time we will have had another Budget in which I hope the Government will have made more progress on assisting some of those on lower pay and taking more people out of the tax net.

The one thing that can be said about the Government is that their thinking is joined up. We have welfare reform, we are pushing up the tax allowances to increase work incentives, and we are dealing with a whole range of tax rates, including trying to make corporation tax more competitive, and I think that that will make us a much more competitive country in the world. We look like an island of stability, certainly compared with the eurozone countries. Let us hope that they sort out their problems so that we can start selling them our excellent goods, but let us face the fact that we live in a competitive world and unless our taxes are competitive we will not be able to generate the wealth to pay for all the things we want: health, schools, foreign aid, defence and all the things we need to do. I think that the Government are on the right track. Clearly, it is a very bumpy economic environment, certainly rather bumpier than we might have thought it would be when we came into office, but provided we have leadership and vision, we will get through.

[Jonathan Edwards]

It is a pleasure to contribute to the debate. It has been very interesting listening to the debate on income tax for the 2013-14 financial year. Hon. Members already know the position of the Plaid-SNP-Green group; we were among the handful of Members who voted against the inclusion of the new 45% additional rate in the founding principles of the Bill at the conclusion of the Budget debate earlier this year. Indeed, the official Opposition seemed to miss that debate, with the exception of two Labour Members, the hon. Members for Newport West (Paul Flynn) and for Bolsover (Mr Skinner). I also tabled amendments in Committee, which were supported at the time by the official Opposition, including some that they have chosen to table for this evening’s debate, which naturally I will support if they decide to push them to a vote later.

Much of the debate on Second Reading and in Committee focused on differing interpretations of, and often selective quotations from, a series of reports. Hon. Members attempted to argue that their party’s interpretation of the statistics was most valid, and we heard some of that again this evening. They were essentially making economic arguments about taxation—about the Government’s claim that the loss of tax revenue from shifting the 50% additional tax rate to 45% would be compensated for by the stimulus it would provide to the wider economy, and that given the amount of forestalling and income shifting that the 50% rate has apparently generated, we would be better off in future and, ultimately, more tax would be paid. That is the thrust of the argument.

I simply do not buy the idea that a tax cut will make those avoiding the 50% rate choose to contribute to society by paying at the 45% rate. What the Treasury should be doing, rather than giving a tax cut to those earning in excess of £3,000 a week, which is almost twice the average income in two months for most of my constituents, is closing down all the clearly aggressive tax avoidance schemes, some of which have been highlighted in recent weeks, and ending the tax havens that provide a nice bolthole for those who wish to hide their income.

For my party, however, the issue of taxation is one of principle. We believe that people should be proud to pay taxes and contribute to society. It should not be a game in which those who can afford to pay an accountant pay less and then consider it a triumph or a success. As I said during a debate in Committee, the Scandinavian model of taxation and social security is in my party’s DNA. Some might say that that is the difference between ourselves and the Labour party, which announced the introduction of the additional rate as a temporary measure, bringing it in literally weeks before the party left government. Where we believe that the additional rate is part and parcel of contributions to society, Labour remains unclear how long the now official Opposition intended to continue the additional rate.

This tax cut for the mega-rich leaves a bitter taste in the mouth. Public sector workers in my constituency face pension changes, meaning that they have to pay more in, that they get less out and that they work longer—that is, those who still have their jobs after spending several years with pay freezes and the threat of regional pay dangling over them. Living standards for private sector workers in my constituency are being squeezed, and many families struggling to make ends meet are being stigmatised by the Government, while the disabled and the vulnerable face tribunals to decide whether their pain is real. It is not acceptable that we are in a society which tells those at the bottom that they have a culture of entitlement, while those at the top get huge and unnecessary tax cuts. Why do we think that we can cut the poor’s income to make them work harder, but incentivise the rich through tax cuts? That is perverse thinking.

We support the aim of amendment 3, which would give those public sector workers earning less than £21,000 who have had their pay frozen a £250 tax rebate. They deserve it, as do many private sector workers who have lost out because of the Treasury’s austerity economics.

We support also amendment 1, tabled by the official Opposition, despite its effect of wiping out the additional rate altogether for 2013-14. Given their failure to vote on the inclusion of the 2013-14 rate in the Bill at the time of the Budget, we recognise that their intent is to show their belated support for maintaining current income tax rates. If the amendment is successful, we expect the Government to reinstate the top rate at 50%.

With last week’s figures confirming that the double-dip recession is deeper than first thought, and with the cuts now beginning to feed their way through the system, giving a tax cut to the mega-rich is a funny way of showing that we are all in this together.

[Nigel Mills]

It is a pleasure to follow the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). I shall make a few brief remarks on various subjects in the Bill, starting with the granny tax, which I also spoke about on either Second Reading or during the Budget debate—we seem to have been debating it for a long time, particularly those of us who have done a few weeks in Committee on some of these topics.

I was one of those who heard the Budget, heard the Chancellor briefly mention what became known as the granny tax and did realise what it was likely to mean. I was not one of those, like the hon. Member for Leeds West (Rachel Reeves), who claimed that the Chancellor had hidden it in his speech; it was clearly there.

Those of us who, in our short time as Members, have argued that we need to simplify our tax regime face a problem when one way suggested by the Office of Tax Simplification is this very idea. To be fair to the OTS, it did not envisage its idea being introduced quite so quickly. I suspect that generally it would be quite keen to have its ideas legislated on in a matter of weeks, but on this one it intended there to be further consultation and deliberation. It was, nevertheless, one idea that it came up with as a way of removing one of the regime’s complexities, whereby an additional allowance has to be claimed, the policy justification for which was determined a long time ago. It is perfectly reasonable for the Government to revisit it and to wonder whether, of all the groups in society who need such extra help, pensioners earning more than the state pension are one of them.

Those people who have done the right thing and saved, and who now have a little private pension on top of their state pension, are generally the ones in whom we want to encourage pension-saving behaviour, but the basic personal allowance is rapidly heading towards the £10,000 target in the coalition agreement, and the benefit of that higher personal allowance has to be clawed back. We are seeing a complexity with a reducing benefit, and we are perfectly entitled to want to understand the policy justification for it when we spend the limited amount of money that we have. It is not, therefore, an unreasonable or illogical proposal for the Government to bring forward; there was a year’s notice, and there is a chance for consultation to consider its impact.