Finance (No. 3) Bill

Julian Knight Excerpts

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Kirsty Blackman]

I absolutely agree and will come on to food banks, but on refugees and those seeking leave to remain in the UK, these are the people I see in my surgeries in the highest levels of poverty. They cannot work because the UK Government are not allowing them to, even though they have a valid immigration application. Concerns have been raised with me about individuals whose children are literally starving as a result of the UK Government saying that they cannot work or have recourse to public funds. This is a hostile environment that is impacting directly on the lives of children. The UK Government need to rethink. The bar should be set where children are not starving as a result, and then we can take action against those who are trying to swizz the system.

The only decent meal that some children receive is the meal that they have at school. The UK Government cannot continue to say that food bank use is increasing in European countries too, as if that somehow makes it okay. They have a responsibility to step up and to change the tax system, the minimum wage and the social security system to ensure that no child ever goes hungry.

Our new clause 7 would require a review of the impact on investment of changes to entrepreneurs’ relief, which extend the minimum qualifying period from 12 months to two years. Given that we have Brexit hanging over us and the massive uncertainty that that brings, putting another hurdle in the way of businesses is probably not the right course of action. Both the Chartered Institute of Taxation and the Association of Taxation Technicians have raised concerns about the unintended consequences of the change. I believe that a review is the only sensible option going forward. The Treasury regularly makes tax changes, but it does not regularly review their effectiveness, even after they have been in place for a number of years, and when it does it rarely makes those reviews public. It is all well and good to think that something may have a certain effect, but it is necessary to check whether the intended effect has come about. If such changes are made, a review should be undertaken regularly—certainly in the following two years—and it should be made public, in the interests of transparency and good policy making, so that everybody can see not just that the change has taken place, but what its effect has been, so that we are up front and honest and everybody is clear.

New clause 8 concerns the geographical effect of clause 9. The UK Government often fail to recognise the rurality of many of Scotland’s communities, and I am not clear that this change will not have a significant effect on those in our most remote communities. These are places where it is hard to get the staff we need for our life-saving services and where depopulation is a real and ever-present concern. They are also places that will be hit incredibly hard by ending freedom of movement. Given the hit to our crofters over the convergence uplift that was supposed to be given to rural communities in Scotland but was allocated elsewhere, it is clear that the UK Government are not prioritising our rural communities. They need to sense-check any such proposals and change them to ensure that they do not cause further difficulty for those living in our most remote areas, not just in Scotland but in other areas of the UK where being far from centres of population is an issue.

New clause 9 would require a report on the consultation undertaken on certain provisions of the Bill. Glyn Fullelove, the chair of the Chartered Institute of Taxation’s technical committee, has been critical of a number of measures in the Bill that were not previously consulted on, saying:

“The effects of inadequate scrutiny in the past are visible in the amount of tinkering in the new Bill”.

That is something I raised on Second Reading. He goes on:

“would all these tweaks have been necessary if there had been adequate consultation and more thorough scrutiny in the first place?”

If the Government intend to take back control, they need to ensure that control is in the hands of MPs, with adequate advice provided by expert stakeholders. It cannot be appropriate for tax changes to be drafted by officials and put into a Bill by the UK Government, with no opportunity for stakeholders to give oral evidence, no amendment of the law resolution and a total lack of a review of these clauses. That is not a sensible way to run anything, let alone a country. I have severe concerns about this part of the Bill. My concerns are mostly about transparency and process, as well as the lack of scrutiny of many of the measures.

In relation to the changes to personal allowance, the Government have not been progressive. We would expect that from a Conservative Government, but if they look up the road in Scotland, they will see that the changes that we have made have benefited the people at the bottom of the pile. The UK Government need to do more to benefit those people.

Lastly, the UK Government need to take seriously the fact that the personal allowance is not devolved to Scotland but the basic rate is, and changes need to be made. I would appreciate it if the Minister committed to considering making changes in the drafting of the Bill to separate out the devolved and reserved issues, so that we can have proper debates and better read-across, so that we can have transparency in the discussion of tax and spend in this place and so that we can make better laws as a result.

[Julian Knight (Solihull) (Con)]

It is an enormous pleasure to speak in this Committee stage of the Finance (No.3) Bill, and it is an even greater pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman) in today’s debate. There are always many responses to a Budget and a Finance Act, and people often look at them and pull them apart over time. In this case, however, I think most people would say that the Budget and Finance Bill have been tremendously well received among financial commentators and many pressure groups. One of the areas that have been most well received is the bringing forward by a year of the increases to personal allowances. The increase to £12,500 for basic rate taxpayers and £50,000 for the higher—40p—taxpayers will make a direct impact on the lives of 32 million of our fellow residents.

[Leo Docherty (Aldershot) (Con)]

Is my hon. Friend absolutely delighted, as I am, that this means that a basic rate taxpayer is paying some £1,200 less in tax, on an annual basis, than they were in 2010?

[Julian Knight]

My hon. Friend is correct. The very recent change will benefit basic rate taxpayers to the tune of £120 a year—a direct tax cut for millions of hard-working Britons—and that is to be welcomed.

[Rebecca Pow (Taunton Deane) (Con)]

Does my hon. Friend—I nearly called him my right hon. Friend, but he is not yet; perhaps he will be in the future—agree that the difference in the figures is stark? The personal allowance was £6,475 when this policy kicked in in 2010, and it has gone way up to £12,500. Surely, that is of huge benefit to the people we want to give more money to.

[Julian Knight]

I thank my hon. Friend for that short intervention. She makes a really good point, and it is almost the next point that I was going to make. The personal allowance will have nearly doubled in just eight short years. That is against a backdrop of trying to get the public finances under control from a debt of £152 billion a year—11% of GDP—which is an astronomical level outside wartime. It represents a real achievement for the Government to have been able to put this amount of money into the pockets of millions of hard-working Britons each year, so that their living standards can rise, despite the difficult decisions we have had to make.

Members from all parts of the House will probably know that I am no particular lover of the Liberal Democrats, and I am pleased to say that in my constituency of Solihull, we are now 24,000 votes ahead of them. However, I pay tribute to them in one respect. In the 2010 coalition agreement, we took on board what the Lib Dems had been proposing, and it was an excellent idea. I am pleased that the Conservative party was open enough to take on that idea and follow it through, from the coalition agreement, to raise those standards of living and raise personal allowances. I pay tribute to that sort of ideas process from the coalition. We have carried it on, as we see it as a key way in which to reduce inequality and expand opportunity.

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[Julian Knight]

My hon. Friend is completely correct. The realities are that the more tax people keep in their pockets—the more of their earnings they keep, without that money going through the Government filter—the more efficient it is, the better it is for the economy, and the better it is for what is known as the multiplier effect through a local economy. My hon. Friend’s on-the-ground view, reported here in Committee, is testament to why the process really benefits high streets and wider local economies.

[Rebecca Pow]

My hon. Friend has not yet touched on this, but the Government have kept down the corporation tax rate. Does he agree that in areas such as the south-west, where productivity is on average lower than it is in the rest of the country, it is crucial that we leave more money in local businesses so that they can invest, which will help with skills and eventually raise productivity?

[Julian Knight]

My hon. Friend is absolutely correct. Not only does cutting corporation tax increase the tax take, as we know, but in the round it allows companies to employ more people—I think that it has made a major contribution to the jobs miracle in this country—which then feeds through the taxation system and the multiplier and into the economy more widely, thereby boosting growth and productivity, plus the tax take down the line.

The abolition of stamp duty for first-time buyers of shared ownership properties worth more than £300,000 is an important step for our economy and for strivers in our country. We all know the difficulties that come about in respect of home ownership. I got my first home when I was 31—many years ago, I hasten to add—but I had to buy outside London to get on to the ladder. Even then, people were making enormous sacrifices to find their way on to the property ladder.

Frankly, the situation that I faced is nothing compared with what younger people face now. Not only is it now more difficult in respect of having the income required to get the amount of loan needed to buy, but many people have to rely on what is known as the bank of mum and dad. All that has a damaging effect on equality in our society and the passing down of wealth through the generations if we end up in a situation where those who gain housing wealth do so only if their fathers or mothers had that housing wealth themselves.

[Alex Burghart (Brentwood and Ongar) (Con)]

My hon. Friend is giving an important speech. Does he agree that in this context it is extremely important that we have embarked on the biggest programme of house building since the 1950s?

[Julian Knight]

That is exactly right. The point may not be specifically germane to the amendments we are debating, but my hon. Friend is absolutely correct about the context. This is just part of one strand of the strategy that we have to bring about an increase not only in home ownership but in the number of properties available to rent and basically for housing throughout the country. We know from the number of households that are forming that we need to build much more than we are building. This measure is part of considering the issues in the round, so I congratulate the Government in that respect.

We are now seeing the effects of things such as Help to Buy and of measures that—pardon the pun—build on Help to Buy, such as the abolition of stamp duty for shared ownership properties worth more than £300,000. According to the Financial Times—such an august newspaper that it never actually employed me—the rate of home ownership among first-time buyers is now at its highest in a decade. There is a long way to go before we get anywhere near where we were in the 1980s, for instance, but it has been a remarkable turnaround compared with where we were in 2010. The abolition of stamp duty for these properties sends a strong message, not only to people in shared ownership homes but to people more generally, that opportunities are out there and that we will help them by not imposing stamp duty.

Let me turn to tax fairness for individuals, which, I think, overarches the clauses and amendments to the Bill. We would not know this from hearing some of the arguments in this place, but the tax gap in the UK is one of the lowest in the developed world. That does not mean that there is not more to be done. Although we took some first steps in this Budget with internet companies and with organisations such as Amazon, everyone recognises that we need to go further, and we hope to move together in an international context to ensure tax fairness.

Since 2010, we have seen a cracking down on evasion—for example, in film investment schemes and schemes that collectively invest in property to avoid stamp duty. There has been a real concentration by Her Majesty’s Revenue and Customs and Treasury Ministers to ensure that people are aware that everyone should be paying their fair share in society. The hon. Member for Aberdeen North (Kirsty Blackman) mentioned tax equality and how much people are paying at the top end. I find it very telling that the top 1% in our society currently pay 28% of the tax, whereas the top 10% pay 60% of the tax. People would not believe that given the discussions that go on so often. However, this Government have done more towards closing that tax gap and towards ensuring equality in the tax system than anyone else in my lifetime. They have been very laser-like in their focus, and they should be congratulated on that.

[Stephanie Peacock (Barnsley East) (Lab)]

Does the hon. Gentleman agree that that gap will get wider if answers to my written questions are correct? In answer to a parliamentary question that I tabled, the Government admitted that the majority of their tax cuts would go to upper-rate taxpayers. Is that not exactly why we need the Government to publish the distributional impact of the tax cuts they are making?

[Julian Knight]

I am afraid that I really do not see the hon. Lady’s point. What I do see is the fact that we are giving tax cuts to 32 million people across the board, and, instead of being so churlish, the Labour party should welcome that.

[Leo Docherty]

Does my hon. Friend agree that the hon. Lady should check Hansard to see my question of a few moments ago in which I said that, since 2010, a basic rate taxpayer will pay £1,200 less in tax, which clearly shows that this Government are on the side of the hardest working?

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[Julian Knight]

My hon. Friend answered the hon. Lady’s intervention better than I did, so I do welcome what he said.

Let me sum up. In its treatment of tax thresholds and stamp duty, the Bill lays out a fairer tax system. It is a tax system predicated on a better society, and it is a system where people who can pay have to pay their fair share, but where that is achieved without being punitive and without, frankly, trying to put dogma over the reality of the situation.

[Peter Dowd (Bootle) (Lab)]

I am glad to have this opportunity to debate the issues surrounding new clauses 1, 2 and 3 in my name and the names of others in the Committee of the whole House, and to discuss them in the context of the Government’s attempts to distract attention from their woes. We have just had a lesson in voodoo economics from the hon. Member for Solihull (Julian Knight).

Members need to pay attention to Labour’s proposals in relation to new clauses 1, 2 and 3, but I must first point out that, in response to the Government’s authoritarian restrictions on amending this Bill, we had asked whether the entire legislation could be debated on the Floor of this House. That would at least have ensured a scintilla of constructive discussion among Members on the whole Bill. Alas, our request was denied by the Government, and we are left yet again asking for reviews and assessments as set out in our new clauses. It is important none the less to get these issues about child poverty out into the open. The Government increasingly seek to implement their austerity agenda—for that is what it is—behind closed doors. They will no doubt see our new clauses as an irritant that would highlight the differences between a slash-and-burn approach to public services by the Government juxtaposed with a policy of investment, renewal and rebuilding from this party based on a fair taxation system, as identified in our new clauses.

The Government have practised their manoeuvres in Committees that they have stitched up to give themselves the majority, which they do not deserve, and they do not have the guts to allow proper amendments to their Bill. No Minister has had the decency to defend that position and it is pretty pathetic. The electorate did not give them that mandate, but they arrogantly take it in any event, so it is important that we debate and tease out the issues that we have set out in new clauses 1, 2 and 3.

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[Richard Graham]

It is a pleasure to follow the hon. Member for Bootle (Peter Dowd), although there were moments during his speech when I found myself wondering whether history was being rewritten in a remarkably creative way.

The changes that the Government have proposed come against a background of remarkable achievement in cutting the deficit by four fifths, reducing the unemployment rate to its lowest since the 1970s, giving 32 million people tax cuts and taking 1.7 million out of income tax altogether. Some of those things were denied by the hon. Gentleman, who claimed at one point that the rich were only getting richer. I think it therefore falls to me to offer a few statistics to put his comments into context.

The first comes from the Institute for Fiscal Studies analysis of what went on under the previous Labour Government. The hon. Gentleman, who is chuntering with his colleague the shadow Chancellor, should focus on that IFS analysis. The independent analysis from the IFS shows very clearly that on most measures income inequality during the 13 years of the previous Labour Government went up. Part of the reason for that was explained, helpfully, by the hon. Member for Norwich South (Clive Lewis) in an interesting interview with The Guardian the other day. He pointed out that the attitude of the previous Labour Government was, to quote the former deputy Prime Minister, Lord Mandelson, “intensely relaxed” about the filthy rich. The hon. Member for Norwich South rightly went on to say that during the 13 years of the Labour Government:

“The huge fortunes of those at the very top…were left almost untouched.”

That is why the work done by this Government, which for example includes scrapping child benefit in 2013 for those earning over £50,000, has led to the lowest tax gap for a very long time. The percentage of income tax paid by the top 1% has doubled under the Conservative Government. The hon. Member for Bootle therefore needs to think hard about that IFS analysis. Income inequality went up under the 13 years of the Labour Government and it has gone down in eight years under the Conservatives.

There are other points worth highlighting. For example, people on lower and middle incomes actually have more money in their pockets now than at the start of the financial crisis under the previous Labour Government. The gap, as I pointed out, between those on the lowest and highest incomes is lower than it was when the Labour Government left power in 2010. In fact, income inequality is now close to its lowest point since 1986. That is a remarkable achievement. Over the past 30 years, which include 13 of a Labour Government, income inequality narrowed sharply under this Conservative Government.

Labour Members have made a lot of points about employment, so it is worth highlighting that the growth in employment benefits most the poorest 20% of households. The employment rate is now up by more than seven percentage points on where it was before the financial crisis under Labour in 2007. Thanks to the national living wage, the income of the lowest earners has actually grown by almost 5% since 2015, higher than at any other point across the earnings distribution. The actual situation today in our economy for those working is therefore very different from that painted by those on the Opposition Benches and by the hon. Gentleman.

A crucial and major difference between the Labour party and the Government is on taxing business. The uncomfortable truth for Opposition Members who would like to tax business more is that since the Government cut corporation tax in 2010 receipts have gone up by 50%, generating an extra £20 billion in 2016 over what was generated in 2010. The extra £20 billion we found for the NHS above inflation for this five-year period does not come from nowhere; it comes from increased receipts and growth in the economy. That extra £20 billion raised from corporation tax, as a result of cutting corporation tax, is one of the critical economic differences between those on the Government side of the House and those on the Opposition side. The Opposition still believe that if they tax businesses more they will get more tax. The truth, however, is that if we tax businesses less we incentivise business and entrepreneurs, generating more tax receipts to put into our vital public services.

[Julian Knight]

Does my hon. Friend recognise that £20 billion happens to be exactly the same amount of extra money that the Government have pledged to put into our national health service?

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[Leo Docherty]

It is an honourto follow the right hon. Member for Twickenham (Sir Vince Cable).

I welcome the Bill. As we consider the amendments, we are faced with a stark choice that faces all politicians and members of the public when they consider the basic question of how we manage our economy and how we manage tax and spending. It is the stark choice between responsibility and recklessness. If we cast our eyes back over the last eight years, we see the benefits of the responsible, balanced approach of the Conservatives. Since 2010 the deficit has decreased by 80%, and the economy has grown for eight consecutive years, by a total of 17%. Unemployment is at its lowest rate since 1975—the year before I was born—and the Government are managing to boost public spending while simultaneously cutting tax. I am particularly pleased about the almost doubling of basic-rate tax relief: those on the basic rate are paying £1,205 less every year than they were paying in 2010, which is a tremendous step forward.

[Julian Knight]

The increases in the minimum wage and the living wage have also had a fundamental impact on the earning capacity of people at the lower end of the income scale in our society.

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[Leo Docherty]

I am grateful to you, Sir Lindsay. I will come back more pertinently and conclude by bringing the debate back to the effect on small businesses. I hugely welcome the cut in business rates in the Finance Bill.

[Julian Knight]

Enterprise relief is the subject of one of the amendments. Does my hon. Friend agree that it is wrong-headed to say that only 52,000 people would benefit from the said changes proposed in the Bill? Does he agree that we should take account of the fact that many employees and others will benefit from entrepreneurs bringing about these businesses, and does he therefore support the changes to enterprise relief?

[Leo Docherty]

I am wholehearted in my support for the changes to entrepreneurs’ relief. I was in my constituency of Aldershot on Friday, visiting one of the many small and medium-sized enterprises that are the backbone of our economy there. Gemini Tec is one of the leading manufacturers of short circuit boards in the country, and that business is successful because of the entrepreneurs who have been driving it forward for the past 40 years. They do not ask any special favours from the Government. Indeed, they want the Government to keep out of their way and let them thrive. However, if the Government can in some way create an ecosystem and an atmosphere, through measures such as entrepreneurs’ relief, that is wholeheartedly to be commended. We have a tradition of tremendous innovation and creativity—not least in Aldershot, north Hampshire, the Blackwater Valley and Farnborough—and this drives a lot of the job creation that we are now seeing in this country. As I have said, this has led to the lowest rates of unemployment since 1975, the year before I was born.