Finance (No. 3) Bill

Kevin Foster Excerpts

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

[Alex Burghart]

It is an honour to speak in this debate and to follow the hon. Member for Colne Valley (Thelma Walker).

One of the most striking things about the Chancellor’s Budget speech was the moment in history that it reflected. As the Committee will know, in 2010 the Government—the coalition Government, as then was—inherited the largest peacetime deficit in our history, yet the Chancellor was able to stand at the Dispatch Box and say that the deficit had fallen by four fifths, from just under 10% to 1.9%, and that it would be less than 1% by 2023-24. This is an extraordinary achievement, not of this House or even this Government, but of the British people, who, yes, have had to cut their cloth to make it happen. However, it has been an essential task, yet sometimes, listening to some hon. Members, we can be led to believe that it could have been wished away, that it did not matter or that it was something that the Conservative party invented.

But that is not so. The deficit is a real, serious thing. The deficit is the debt that we pass on to our children and to our children’s children. It is the debt that we have not cleared ourselves. We have a responsibility to the future. We have a responsibility to pass on a natural environment that is not polluted and we have a duty to pass on an economy that is not polluted.

[Kevin Foster (Torbay) (Con)]

I am listening to my hon. Friend’s opening remarks with great interest. He is right to talk about the importance of tackling the deficit, yet we sometimes hear comments from the Opposition about debt going up. If they are so concerned about the level of debt, can he confirm to me how many deficit reduction measures he believes they have supported?

[Alex Burghart]

I thank my hon. Friend for his comments. I believe that the answer to his question is none, but I stand to be corrected.

Alongside the Budget, we heard the remarkable news last week that wage growth is at its highest level for a decade. That welcome return to growth benefits people in my constituency and around the country. In addition, we have the best employment figures in my lifetime. Sometimes, we are given the impression that such figures are idle statistics that mean nothing—that the Government are just chirruping on about that silly little thing, employment—but employment is not a marginal thing. Employment is what gives our constituents the opportunity to work, to support their families, to play their part in society and to have independence and choice. It is the greatest gift that the economy can bestow.

I always enjoy Finance Bill debates, because I am a genuine fan of the hon. Member for Bootle (Peter Dowd). I assure Hansard that I am not being sarcastic when I say that I genuinely enjoy his company and his speeches. Over the years we have shared in the House, we have enjoyed some debates on the Beatles, on Plutarch and on sausages. Today, I shall add to that list by picking him up on voodoo economics.

The hon. Gentleman has accused us of voodoo economics when it comes to reducing corporation tax and thus bringing greater revenue into the Exchequer. I encourage him, in the spirit of friendship, to go and talk to some of the businesses that have onshored to the UK to take advantage of our extraordinarily competitive corporation tax rates. That is why people are coming to this country to do business. It is why they are choosing to raise revenue here and pay taxes here. That is good for them, it is good for our economy and it is good for the people who use our public services. I respectfully suggest that if anyone wants an example of voodoo economics, they should look to the attempt to dig up the dead and rotting corpse of socialism, reinvigorate it with magic spells and have it wandering the streets, looking to bring rack and ruin. We find real voodoo economics in the suggestion that it will cost nothing to renationalise a range of utilities and services. As my hon. Friend the Member for Aldershot (Leo Docherty) has pointed out, it will not cost nothing; it will cost at least £176 billion. Contrary to what the shadow Chancellor says, it will not pay for itself. It will be paid for by British taxpayers.

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[Alex Burghart]

Cicero, as the hon. Gentleman knows, was one of the great minds of the Roman senate, and I can say with full certainty what he would have made of new clause 1. He would have said that it was a waste of time. We can rely on the Treasury to keep us informed of all the ins and outs of Government policy. We do not need additional laws and additional bureaucracy to achieve that. I know that the hon. Gentleman is a great lover of reviews. We have sat in many Committees together over the years, and he has tabled amendments calling for review upon review, which Parliament has always, sadly, declined to accept.

[Kevin Foster]

I am very much enjoying my hon. Friend’s speech. Does he agree that many analyses must have been done in the Treasury between 1997 and 2010 about why it was sensible to keep the tax rates as they were? The highest earners now pay slightly more, in terms of percentage rate, than they did throughout most of Labour’s 13 years in government, except for the last couple of months. It is quite strange to hear Labour Members’ enthusiasm for this type of taxation now that they are in opposition.

[Alex Burghart]

As ever, my hon. Friend puts it extremely well. “Wise after the event” might be one of the Labour party’s mottos.

I am pleased to welcome, in clauses 41 and 42, further improvements to stamp duty to help more people to get on the housing ladder and buy the homes that they so richly deserve. Those measures will put more money into the system and encourage the building of more homes, to allow us to progress down the route of building what must be built for the home owning democracy.

Alongside that, I was pleased to see an additional £1.7 billion being put into universal credit, to give the poorest people in society more money in their pockets—money that benefits them and flows straight into the economy. I take this opportunity to thank my right hon. Friend the Member for Tatton (Ms McVey), who is not in her place, for her service as Secretary of State for Work and Pensions. She did her job extremely well. It was under her leadership that a number of improvements were made to universal credit and this decision to put an additional £1.7 billion into the service was concluded. That Secretary of State bore her unfair share of personal criticism while she was in that job; the person rather than the issue was often played. Although I fully take on board the remarks made by the hon. Member for Colne Valley (Thelma Walker) about the desire of that great Labour Prime Minister Clement Attlee for a caring society, when I have seen and heard some of the slander thrown at my right hon. Friend the Member for Tatton, I have had to wonder whether all parts of the left are really as caring as Clement Attlee would have had them.

Finance (No. 3) Bill

Kevin Foster Excerpts

Committee: 2nd sitting: House of Commons
Tuesday 20th November 2018 Commons Chamber

[The Financial Secretary to the Treasury (Mel Stride)]

It is a great pleasure, again, to serve under your chairmanship, Dame Eleanor. The Government have always been clear that while taxes should be low, they must be paid, and that is exactly what we have delivered. Since 2010, we have secured and protected over £200 billion by clamping down on tax avoidance, evasion and non-compliance, and we have reduced the UK’s tax gap to less than 6%, which is one of the world’s lowest. In fact, if we were running at the level of the figures achieved under the last Labour Government in 2005-06, we would be deprived of sufficient income to employ every policeman and policewoman in England and Wales, so bringing in tax most certainly does matter.

We have led the way internationally in this respect, playing a leading role in the OECD’s base erosion and profit shifting project, and taking unprecedented action to secure funding for our vital public services and to ensure that everyone pays their fair share. It is worth reflecting on the fact that we do not just collect tax for the sake of collecting tax, because very few people enjoy paying tax. We do it for a purpose, which is to keep our financial affairs in good order and to fund the doctors and nurses in our national health service, and so on.

[Kevin Foster (Torbay) (Con)]

Does the Minister agree that we sometimes use tax to alter behaviour—for example, on tobacco and alcohol—as well as purely for funding? That is why measures to prevent the evasion of those duties are so vital to achieving public health gains, in addition to the obvious points in terms of the Treasury.

[Mel Stride]

My hon. Friend is entirely right. One thinks, for example, of the sugar levy to improve public health and to make sure that our young people, in particular, move towards a healthier diet. Tax can certainly have an effect in that respect. As my hon. Friend said, there is also the duty on cigarettes, tobacco, hand-rolling tobacco, and alcohol to make sure that as well as just raising revenues, we change behaviour in a way that is conducive to the public good.

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[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to participate in this debate and to follow the Financial Secretary to the Treasury. I will speak to Labour amendments 3, 4, 19 and 23 and to new clauses 5 and 6.

As other Opposition Members have noted, it is disappointing, to say the least, that the Government have been unwilling to allow proper scrutiny and challenge of their proposals in this Finance Bill, as they have failed to introduce an amendment to the law resolution. Members will be aware that this approach has been used six times in the past century, each time necessitated by Budget provisions needing to be passed quickly.

[Kevin Foster]

This is about scrutiny.

[Anneliese Dodds]

Indeed. When we are unable to table amendments on provisions within a Budget, it is a severe restriction on the House’s ability appropriately to challenge the Government’s policies. In any case, if the Government can muster backing for their approach to prevent a change in policy, they can do so.

[Kevin Foster]

If the Labour party is so committed to scrutiny of this Bill, how come the Opposition Benches are virtually empty? The hon. Lady says that it is because Labour Members cannot table amendments, but they could come along and make speeches.

[Anneliese Dodds]

The hon. Gentleman has made the point for himself. It is precisely because we do not have the ability to table meaningful amendments that we are in this position. I am sure that he is aware that, when it was possible for Labour Members, often with other Members, to table meaningful amendments to Finance Bills, there was a huge amount of participation, such as when amendments were tabled on country-by-country reporting. Sadly, despite those amendments, we have not yet seen the change in Government policy that we would have liked. When the House is given the power, we exercise it; when we are not given the power, we are unable to exercise it.

As “Erskine May” sets out very clearly, in these circumstances, the only permissible amendments are

“strictly limited to what is authorized by the specific resolutions on which the bill is founded.”

Because of those restrictions, the Opposition cannot expand the scope of measures against tax avoidance and evasion beyond the very limited scope presented in the Bill.

There is a whole host of areas in which the Government should be taking action but where the Bill is completely silent. There has been no new approach from the Conservative Government on the verification of information supplied by companies when they register, despite widespread evidence of tax avoidance and money laundering being facilitated through the registration of fake companies via Companies House.

On shell companies, the Government have provided only a consultation on partnerships rather than action, and they have failed to use to any great extent their legal ability to impose fines on partnerships that fail to provide beneficial ownership information. Despite their consultation on a new offence of failure to prevent economic crime finishing more than a year ago, we still appear to have no more progress on that. Although our Government now have, as I mentioned, the legal means to require country-by-country reporting wholesale, following that amendment to a Finance Bill two years ago, when we were able properly to amend the Bill, they have refused to take up that option.

Despite this catalogue of failure, the Government continue to talk up their record. We saw this elevated to the level of farce last night, when Conservative central office—I assume—released a graphic on Facebook with the laughable claim that Labour had just voted against cracking down on tax avoidance. Labour has consistently advocated much stronger measures on tax avoidance than this Government have done. Indeed, the weakness of measures in the Bill is one of many reasons why we oppose it. The graphic included a background of palm trees, presumably a bizarre reference to our overseas territories. It is bizarre, given the woeful lack of action by our Government in this regard.

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[Anneliese Dodds]

It is always a pleasure to hear from the hon. Gentleman, who is always a very friendly face. Sadly, however—I feel bad doing this—I do have to correct him on two of the points that he mentioned. He stated that the poorest people will not pay any tax at all. That is simply not the case. Of course, they will pay—[Interruption.] No, no—he said “any tax”. Let us be clear: of course, large numbers of very badly off people pay a lot of value added tax, which is a regressive tax, even with the exemptions that apply to it.

In addition to that, increasing numbers of low-income people across this country are now paying council tax, many of them for the first time, because of the swingeing cuts that the hon. Gentleman’s Government have delivered to local authorities’ budgets for council tax relief. So we now have very large numbers of very-low-income people being taken to court because they are unable to pay their council tax. That situation is novel in our country but some might say it approximates things that happened back in the 1980s, which I am sure that the hon. Gentleman is too young to remember but which the history books have certainly not forgotten.

We also need a thorough understanding of how the failure to tackle tax avoidance affects our different regions, given that austerity’s impact on incomes has been strongest in areas that were already struggling economically. We need a thorough impact assessment of the impact that the failure to deal with tax avoidance is having on child poverty. Yesterday Ministers tried to deflect attention from their record on poverty by using only figures on absolute poverty. They never speak about the measure that is instead used by most academics and experts—relative poverty—because they know that more children are now living in relative poverty under their watch: almost a third of children, in fact. The problem is such that the chief executive of the Child Poverty Action Group has described the Conservative Government as being “in denial” on child poverty.

I will explain why we need to look at relative poverty. We should not look simply at whether people are destitute, as measured by absolute poverty, even though, sadly, many are having to resort to food banks for bare necessities; we also need to look at what people’s incomes are in relation to the living standards that everyone else enjoys. That is why the concept of relative poverty measures whether people are poor in relation to median-income people. Relative poverty matters because it shows whether people can afford to live a decent life.

[Kevin Foster]

That is what absolute poverty measures.

[Anneliese Dodds]

No, it does not. Absolute poverty measures whether people can afford the bare necessities of life. To be able to participate in society—in their communities—they cannot fall so massively behind the median income. We are talking about families whose children cannot go to birthday parties for their friends because they cannot afford a card and a present. For me, that is a failure of our society, and it is to do with relative poverty, not absolute poverty. Over 4 million children in this country are classified as living in relative poverty, and that number is rising, not diminishing.

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[Kevin Foster]

It is a pleasure to speak in this debate, which is not the first I have ever taken part in on tax avoidance. We have all had some enjoyable banter across the Chamber, but I think it is worth paying tribute to the hon. Member for Oxford East (Anneliese Dodds) for the sheer number of interventions she was prepared to take when she knew they would be challenging. Not many Front Benchers are happy to do that, so it is worth putting it on record.

I spent two years as a member of the Public Accounts Committee, which looked at the details of HMRC’s performance and in particular what work was being done to ensure that the taxes we set by law in this Parliament are collected. We need to be clear about what we are talking about when we talk about tax avoidance. In theory, someone who has an ISA savings account avoids some tax. That is not what we are talking about. What we are talking about is those who seek to use lawful methods, but stretch them to the point of incredulity.

[Helen Goodman]

The hon. Gentleman has just made the absolutely ludicrous and childish suggestion that buying an ISA is engaging in tax avoidance. For the avoidance of doubt, does he believe that HMRC includes ISAs in its calculation of the tax gap?

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[Kevin Foster]

Normally I thank Opposition Members for their interventions, but that really was quite churlish. My point was that when people transfer their money from an ordinary savings account to an ISA they do not pay tax on the income from their savings, so guess what? They avoid a level of income tax. That is something we all think is right. It is how we incentivise saving and how many millions of people in this country save. So yes, tax is avoided but perfectly legitimately. That is not the point I am making, as the hon. Lady full well knows.

[James Cartlidge]

My hon. Friend is spot on: an ISA is technically a form of tax avoidance. The point, however, is that what irks our constituents is when international companies and others take advantage of avoidance schemes that may be lawful at the time, but which no normal citizen could in any way take advantage of—unlike an ISA, which is commonly available.

[Kevin Foster]

I thank my hon. Friend for that intervention, which gets to the point of the debate. Tax avoidance is when people create a very complex legal structure, for example having something offshore and routing it through a shell company. That is what we are targeting. People will look to minimise their tax liability; that is natural. I am talking about when it is clear that fictional legal companies are being created that do pointless activity or pretend to do something that is not being done, or when a value transaction is actually nothing more than just a wooden dollars transaction made with the intention of avoiding stamp duty or a liability. That is the point being made. We could go through the record of the Opposition before 2010 if we really wanted to, but we should focus on the issue itself. Tax havens did not just appear the day David Cameron walked into Downing Street—far from it.

The PAC looked at Google’s affairs. Before I sat on the PAC, I thought that a double Irish might be a drink and that a Dutch sandwich might be something involving Edam cheese. Actually, they were both ways in which corporations sought to avoid tax and route their profits into tax haven jurisdictions where the level of tax paid versus GDP was rather suspicious, or into islands, particularly Bermuda, where the amount being declared versus what the real economic activity was likely to be was rather suspicious. I will talk more about intangible property areas in a minute. The Dutch sandwich was an idea created by the Dutch Government to try to get IT firms to invest in the Netherlands. That was perfectly reasonable as something that they would look to do, but courtesy of some loopholes, people were allowed to transfer profits through from activity elsewhere. The result was not investment and jobs in the Netherlands, but significant levels of tax avoidance.

In the Public Accounts Committee, we used to be very keen on hearing more details about and having more of a focus in HMRC on where genuine tax evasion had taken place—where people had lied and hidden assets in offshore jurisdictions and not declared them. That is not about people using some clever trick; they had just lied to evade tax. It was vital that penalties followed on from that once it was discovered. If people constantly avoided prosecution, it almost sent a message that if someone is caught, they can just pay up. However, I am conscious that we are not discussing that area of the law today.

It was interesting to go through the House of Commons Library report on today’s debate and particularly to look at some statistics on where the tax gap comes from. The report mentions that in 2016-17, small businesses were part of the tax gap. However, there were also large businesses, and criminals were in third place—depriving us of billions of pounds of taxation revenue—which is why I welcome some of the measures that the Government are looking to bring in as part of the Bill.

For me, the big one is the provisions on intangible property. Clause 15 looks really simple—it is two lines—but schedule 3, which is the meat of the proposal, really starts to get into some of the detail. How the provision is enforced and how it works will be interesting, but I welcome the fact that we are moving to bring it in. As my hon. Friend the Member for Walsall North (Eddie Hughes) said, it is worth making a point about what intangible properties we are talking about. We are certainly talking about things such as adverts on Facebook and adverts on a search engine being pushed to the top, when someone searches for a particular brand or product. In the debate on the previous of group on amendments, there was an example where someone looking for help with gambling found that—guess what?—“How to help you gamble” was boosted to the top of a search engine’s results, because a particular company had paid for that to happen. That is the type of intangible asset that we will look to target.

[Rachel Maclean]

My hon. Friend has considerable expertise in this area and I welcome him updating the House. He mentioned some unintended and wholly undesirable consequences of this type of intangible property. Will he enlighten us on whether there are also some beneficial aspects of intangible property, given that the UK is a centre for tech creativity and dynamism and that these are the industries of the future?

[Kevin Foster]

That is what we have to balance in considering this new tax, because we do not want to shut down the entrepreneurial spirit in many companies and see such provision affecting those who are looking to set out for the first time to get a business going and perhaps to do something that changes the marketplace and really makes a difference. Some of the largest tech companies literally grew out of someone’s garage 10 or 20 years ago. Twitter did not exist when I joined the Conservative party. Facebook did not exist when I first stood for a local council back in 2002. We can see the way that those companies have grown and exploded. We do not want to set up a tax that knocks back genuine entrepreneurialism, but we also have to have a debate about how we ensure that there is a level and fair basis of taxation.

Reference was made earlier to high streets. The point is that a small shop in the centre of a town is paying business rates, collecting VAT, paying its staff and paying corporation tax, and we have to get to a point at which economic activities are fairly taxed. If a large online platform is taking millions of pounds in revenue and paying next to nothing, that is when the annoyance comes and there is a sense of unfairness.

We must have a mature debate on the future of tax in the online space, where activity is much more moveable. My hon. Friend was right to allude to that. These industries can shift much more easily than those that need a physical presence to trade and reach out to customers. A digital service company could be based in New Zealand, and we could all be using its services today from this building via smartphones, tablets or a standard internet link, in a way that would have been unimaginable 30 years ago.

We have to distinguish between genuine activity—for example, paying a company in New Zealand for a website design service—and a fake transaction or transfer of profits, where no one did anything other than raise an invoice in a convenient jurisdiction, into which the money was paid, even though all the economic activity was done elsewhere, the reason being there was an opportunity to avoid a layer of taxation. In such cases, one might see structures set up that link the corporate shell in that jurisdiction to another jurisdiction that is a tax haven or a place with a very low rate of taxation. The Dutch sandwich, which I mentioned earlier, started out as a good idea to encourage tech investment and ended up as a way to reroute profits and, when combined with the so-called double Irish, as a way of strongly minimising taxation liabilities.

[Sir Hugo Swire]

My hon. Friend is making some extremely good points with which I agree, but it is not only online companies such as Amazon that we need to work out how best to tax, but others, such as offshore gambling companies, that retain huge revenues generated by doing things in this country. Is he convinced that the thinking is going on in the Treasury on a root-and-branch reform of all taxation? It seems to me we are trying to play catch-up but that the world is changing quicker than our ability to tax this changing economy.

[Kevin Foster]

I thank my right hon. Friend for his thoughtful intervention. Obviously, I cannot speak for the Treasury, as a mere Back Bencher—[Interruption.]. I appreciate the confidence that my hon. Friend the Member for Walsall North has in me, but I cannot speak for the Treasury. I do not want to say too much about gambling taxation, given that we have just debated it, but we do need to look at the situation in the round, so my right hon. Friend was right to mention it.

My right hon. Friend is a distinguished Member of the House. He has been here for I think 17 years, during which time the economy has changed remarkably. Who would have thought back then that companies such as Woolworths would have faced a challenge from online competitors? Who would have thought that every one of us would be sat in this Chamber with a device that would allow us to buy the entire contents of a department store, order virtually anything we want, and access casino-like gambling opportunities for which not that long ago we would have had to make a trip to Monaco? We now have that all in our pockets—we can literally walk out of the Chamber and do it.

I share my right hon. Friend’s concern, but the economy is moving on. As I said in response to my hon. Friend the Member for Redditch (Rachel Maclean), we must not destroy the good, and we have to be careful not to chuck out the baby with the bathwater. The Treasury will have to look at that. The nature of work is changing, too, and that raises not only challenges for employment rights, but questions of how we tax fairly, given that it will be less and less the case that there is a big employer with lots of staff who are paid regularly, to which it is easier to apply restrictions.

[James Cartlidge]

I was waiting patiently for my hon. Friend to get back to what he thought intangible property was. Is he aware that proposed new section 608H(1) in schedule 3 to the Bill states:

“In this Chapter ‘intangible property’ means any property except…tangible property”?

[Kevin Foster]

Yes, it is an interesting one. I suspect that if I dealt with that intervention fully, I would be like the vicar in the church who has 10 minutes to unpack the Holy Trinity in an easy and understandable way—[Interruption.] I appreciate my hon. Friends’ confidence in my abilities.

[Mark Pritchard (The Wrekin) (Con)]

rose—

[Kevin Foster]

I will deal with the intervention made by my hon. Friend the Member for South Suffolk (James Cartlidge) and then I shall give way to my hon. Friend the Member for The Wrekin (Mark Pritchard).

The idea is that something intangible is something that we cannot see and cannot hold, whereas something tangible is something that we can literally have in our hands, such as a phone or the copy of the Bill that I am holding now, or something that we can wear. Something that is intangible can be something that we own and to which we have a right. A classic argument about something intangible once concerned a Star Wars computer game, of all things: if I busily bought lots of things in that game using money, and someone else playing the game then sent their forces, which they had bought, to raid that property, would my property be being stolen? That is an interesting legal argument, although it must be said that some people might have a little too much time on their hands if they can become so involved in a discussion of a Star Wars computer game.

There are things that we own but, of course, there are also our own identities and profiles. You probably do not want me to go too far down this path, Ms Dorries, but we have previously had debates about information that is created online, and a data trail can become an asset that is worth money.

[Mark Pritchard]

I am in danger of making one intervention in three—or three interventions in one—but let me develop the theological point raised by my hon. Friend. Steam, ice and water are, of course, all the same: they are three in one, and one in three. I hope that that clarifies his point.

[Kevin Foster]

I am very grateful. I am sure that a student of divinity is about to fire off an email to me and my hon. Friend saying, “Actually, I am not quite sure that that is the case,” but it is great to hear my hon. Friend’s explanation of how the “three in one” in the case of water could apply to the Holy Trinity. Nevertheless, a detailed unpacking of the Holy Trinity is not listed for consideration on today’s Order Paper, and I should be talking about anti-avoidance measures—[Interruption.] I am glad to hear that the hon. Member for Bootle (Peter Dowd) thinks that the former would be more interesting. I am sure that at some point he will accuse me of giving a sermon in this place, although I will probably not be covering that subject at the time.

My hon. Friend the Member for South Suffolk rightly pointed to the measure in which intangible property was defined. It is also worth while for us to consider some of the exemptions, and how their working will be monitored by the Treasury. I am conscious that the Minister is not present, but I am sure that those who are currently on the Treasury Bench will note my remarks.

Proposed new section 608J states:

“Section 608A does not apply in relation to a person for a tax year if the total value of the person’s UK sales in that tax year does not exceed £10,000,000.”

How will we make sure that we do not suddenly see lots of taxed persons with £9,999,999.99 who seem to know each other quite well, or at least seem to be engaging in similar activities? I understand that the provision is well intentioned, and I understand the need for a de minimis level so that we target the larger companies that are intended to be deal with. I also understand—this takes me back to the intervention from my hon. Friend the Member for Redditch—that smaller companies should not suddenly be burdened with having to deal with a very large piece of legislation. However, I should like to know how we can ensure that this does not become a way of avoiding tax.

Proposed new section 608L, which is on page 187 of the Bill, is entitled “Exemption where foreign tax at least half of UK tax”. Again, how can we be sure that that taxation provision is genuinely met so that it does not become an avoidance mechanism?

Most of the changes in the Bill are welcome, however. As we leave the European Union, I would expect that we will still seek to co-operate. I do not think any of us would argue that it would make sense for us not to ensure that we share information to prevent the excessive avoidance or evasion of taxation, just as we have sought to work with jurisdictions such as Liechtenstein, which is not in the EU but has a treaty agreement with us on sharing information to prevent tax avoidance. I am also interested in following the consultation on the digital services tax, which will consider how we can introduce it without snuffing out the entrepreneurialism that we wish to see.

I am conscious that I have detained the Committee for about 19 minutes—[Hon. Members: “More!”] I hear the requests from SNP Members, who are obviously keen to hear a lot more from me, but, sadly, I must disappoint them on this occasion.

This has been a worthwhile debate. Intangible property is a key area for the future, in terms of not just the straight issue of ensuring that one or two large corporations are not avoiding tax we might think that they are due to pay, but opening up the whole debate of how we arrange tax as we move into a digital economy, when we are less likely to have physical things we can put our hands on in respect of taxable activity.

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

The shadow Minister claimed earlier that our Chancellor has said that he wants to make the UK into a tax haven. For the sake of clarity and for the record, has my hon. Friend ever heard the Chancellor say that?

[Kevin Foster]

I have certainly heard my right hon. Friend the Chancellor talking about ensuring that Britain has competitive tax rates, that Britain is a competitive and good place to do business, and that we have a fair balance between raising taxation to pay for our public services and also ensuring that our tax system encourages rather than stymies economic activity in this country.

We heard earlier about the reactions of the EU27. I would point to the Republic of Ireland, which has a lower corporation tax rate than us. If we were to move towards the Republic of Ireland’s rate, it would be somewhat strange for it to say, “How dare you copy us.” This is not about encouraging a tax competition. States in Europe, whether they are inside or outside the EU, will look to provide the conditions for growth in their countries, and it is absolutely right that that is what the Chancellor and Treasury team in this country are looking to do. I certainly praise them for that. This is not about becoming a tax haven, although we might reflect on the fact that, judging by the actions of the Scottish National party and the Scottish Government, they are trying to turn England into a tax haven by shoving up tax rates in Scotland.

With that, I will draw my remarks to a close. I welcome what I see in this Budget. I do not think that the Opposition amendments and new clauses are necessary, for the reasons the Minister outlined at the Dispatch Box. This welcome Bill will bring in more tax, deal with avoidance and, at the same time, help to push our economy forward.

[Alison Thewliss]

The renowned Nobel laureate in economics Joseph Stiglitz has said that what we measure shapes what we strive to pursue. I tabled new clauses 14 and 15, in my name and the names of my hon. colleagues, to ensure that we are effectively striving to pursue the reduction in the tax gap and to consult fully on the provisions of this Bill. I support very much what the hon. Member for Oxford East (Anneliese Dodds) said and support her new clause 5 and amendment 23. She made some excellent points, most of which I fully agree with and endorse. I will not repeat what she said, however, as she made her points very clearly; she did a fantastic job in putting across the Labour party’s view.

It was bizarre to watch Government Back Benchers tie themselves in knots yesterday in opposing new clause 7, tabled by my hon. Friend the Member for Aberdeen North (Kirsty Blackman), in relation to entrepreneur’s relief. If the UK Government are confident that their policies are effective, they must not be afraid to review them. Indeed, reviewing them is all we can do under this Bill; as the hon. Member for Oxford East said, we are limited in what we can do here. So we do propose a review on that.

Likewise on the provisions on tax avoidance, we must gauge our progress by continually measuring the value and effectiveness of those policies. The hon. Member for Torbay (Kevin Foster) mentioned the Dutch sandwich. I am sure that was sensible when proposed and I am sure that the Dutch Government then looked at it and decided that actually it was not working. They then will have reviewed the policy and looked at the detail and clamped down on that loophole; I am sure they must have done that as otherwise it would still be an issue. Likewise, this Government should do better at reviewing their policies, testing them, seeing how effective they are and making changes as a result.

Our proposal is in the spirit of achieving better, more robust policies in the future. We should also look to the world to see where the best polices are and see what we can do to adapt them, and we should collaborate with our near-neighbours in Europe, particularly to make sure we are not allowing companies to move around at will seeking the best policies to save money, rather than paying the taxes that they ought to.

There are many reasons why HMRC does not always collect the tax that it ought to be paid, whether through criminal activity, through evasion or avoidance or just through human error, and there is much more that can be done to address that. While a greater focus on the non-compliance of corporations is welcome, there is still ample opportunity to avoid paying into the system, and we need to look at that very seriously.

The SNP has long argued that the tax system is unnecessarily cumbersome and complicated. There are layers and layers of regulations and exemptions, which lead to loopholes appearing. The system seems to get more complex every year when we look at the Finance Bill, and there also appear to be armies of tax avoidance specialists seeking to exploit whatever gaps they can find.

--- Later in debate ---

[Luke Graham]

The hon. Gentleman proves my point. He disregards an objective Gini coefficient statistic, which is accepted worldwide, and instead puts forward a subjective view on food banks that is widely contested across the House.

I would say that the increase of food banks is a major issue that we have covered extensively in debates in the House. However, taking those on the lowest incomes out of income tax altogether, getting more people into work and introducing the national living wage are the kind of measures that really do improve things for the poorest in society, and they are exactly what the Government are delivering. Our Budget has not only prioritised expenditure elements—I welcome a city deal in my region, the Tay region, with £150 million of extra expenditure—but focused on how to get more tax collected.

As I said at the outset, it is important that we have a low-tax system that is also a fair system, and that the people who should pay tax are paying the right amount.

[Kevin Foster]

I am listening to my hon. Friend’s speech with great interest. What are his thoughts about intangible assets, which we were talking about earlier? Does he agree that we really need to address such issues and to start considering how we can make sure that tax is both collected and fair?

--- Later in debate ---

[Chris Philp]

The fact that the Government have adopted three measures shows that they are not only a Government who listen and adapt, but a Government who have taken more than 100 anti-avoidance and anti-evasion measures since 2010. That is a record the Government can be proud of, although there is always more that can be done. I will come on to one idea later.

The hon. Lady suggested in her very long and at times entertaining speech—perhaps inadvertently entertaining, but it was entertaining—that the Government had not shown leadership in the area of organising international co-operation to combat tax evasion. She also said it was a concern that we are leaving the European Union as we might lose that as a forum in which to combat tax evasion and tax avoidance. The most effective forum is the OECD’s BEPS initiative—the base erosion and profit shifting initiative. The UK Government have been a leader in this area—for example, on action five, which limited the deductibility of interest payments against corporation tax. That is another area where the UK Government have shown genuine global leadership.

[Kevin Foster]

Listening to my hon. Friend’s speech, I can see exactly why the shadow Chancellor rushed to the Chamber to enjoy it. On global co-operation, what does he make of the many treaties we have signed with other jurisdictions, such as Liechtenstein, which have allowed us to get hold of tax information and ensure there cannot be places where British taxpayers hide?

[Chris Philp]

That is an example of one of the many areas where we have taken action. Getting information from that jurisdiction and, I think, Switzerland has helped us to combat people who are not paying the tax they should. The proof of the pudding is ultimately—I can see the flood of hon. Members on to the Opposition Front Bench continuing—in the eating. The fact is that the amount of money collected in corporation tax has gone up from £35 billion to £55 billion.

The hon. Member for Stalybridge and Hyde (Jonathan Reynolds), who was in his place earlier, shook his head when that point was made and referred to an IFS report, which he said made the point that if corporation tax rates were higher, they would raise more money. I have had the opportunity to look up that report since then. The article was in The Guardian, which is hardly a Conservative or right-wing newspaper—it may be too right wing for the shadow Chancellor, but it is not too right wing for me—and although any amount of money that might be raised in the short term is one thing, it goes on to say the IFS stated that “substantially less” will be raised in the medium term as companies respond by investing less.

The hon. Member for Oxford East asked what the intellectual backing was for suggesting that lowering tax rates increases revenue. That backing comes, of course, in the form of the Laffer curve, named after Professor Arthur Laffer, who made the case very coherently that lowering rates can increase the take—my hon. Friend the Member for Solihull (Julian Knight) made this point earlier—by encouraging investment and encouraging companies to relocate to a jurisdiction where there are lower rates of tax. That is no theoretical thing—[Interruption.] It is not only a theoretical thing, but a practical thing.

Since the Government introduced lower rates of corporation tax, a number of companies have chosen to take advantage of them by locating into the UK. Most recently, in August this year, Panasonic moved its European headquarters from Amsterdam into the United Kingdom, and clearly, competitive rates of tax were part of that. Back in 2012, when the former Chancellor, George Osborne, set this course, a whole number of companies announced that they were locating back into the UK, including Aon, which located here from the United States, Starbucks, which located its corporate HQ here from the Netherlands, and WPP, which located its corporate HQ here from the USA. More recently, Unilever considered moving its corporate HQ out of the UK to the Netherlands, but there was a huge shareholder revolt and it chose to stay here. Those are practical examples of a competitive tax system in action. That is part of the reason why the tax yield has gone up so considerably.

Finance (No. 3) Bill

Kevin Foster Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

[Peter Dowd]

The hon. Lady is right. The Government appear to want to put misery upon misery on families and children.

Despite the claims from Conservative Members, austerity was not some necessity nobly chosen by the Government of the day, but a political and ideological choice—it is as simple as that. If it was the only option, why did the United States not embark on a similar venture? Why did the likes of Germany and France not undertake a similar level of spending cuts, or Japan, or, for that matter, Australia? [Interruption.] Conservative Members are chuntering, but those are the questions that we need answering.

[Kevin Foster (Torbay) (Con)]

The shadow Minister referenced public spending in the United States of America. Is he seriously arguing that we should look to adopt its system of welfare and healthcare spending?

[Peter Dowd]

The hon. Gentleman knows that I am not saying that. He can twist his party’s policies if he wants, but he should not twist Labour’s policies.

--- Later in debate ---

[Kevin Foster]

Thank you, Madam Deputy Speaker. Hearing your announcement that the hon. Member for Ilford South (Mike Gapes) is not in fact a signatory to new clause 1 has, of course, completely changed my view. Clearly that has changed the whole speech I was about to give.

It is useful to be here for this debate on new clauses 1 and 5. I found the speech by the hon. Member for Bootle (Peter Dowd) of interest, as always. I know from one of our previous exchanges in the Chamber he will be very disappointed to hear that I am not going to give that promised talk on unpacking the holy trinity today. Even in the two hours available, that is probably not quite something that I can effectively manage. I am, however, going to go through an issue on which Members across the House generally have strong views and about which they are passionate: how we best tackle equality issues so that our policies are effective in ensuring that those who are in poverty have a route out of it.

It was not in pure jest that I made a comment in my intervention on the shadow Minister about spending levels in the United States. People talk about the US not having gone down the austerity route, but instead having had a spur or fiscal stimulus. To spend the same as the US, we would have had to make significant cuts to the public sector to get down to US levels of social spending, and in particular healthcare spending. The US has bizarre outcomes from its healthcare system: it spends more of its GDP on healthcare while achieving worse outcomes. No one in the House would wish to implement that system in this country given that failing of spending more and, bluntly, getting a lot less. It is therefore bizarre for that spending to be cited as a great stimulus. It most certainly was not. The US was still spending far less than us after our programme of austerity to bring the deficit under control.

--- Later in debate ---

[Kirsty Blackman (Aberdeen North) (SNP)]

Is that not a slightly bizarre argument? I think the Opposition are trying to ask the Government to take into account in the review the priorities we have, rather than the Government’s priorities. For example, they may be putting policies in the Finance Bill to raise taxes to do something specific, whereas we are asking them to look at public health impacts.

[Kevin Foster]

New clause 1 says what it says: it asks the Chancellor to produce a review of the impact of provisions and to lay a report of that review before the House. It does not require anything to be done. It does not set out a detailed list of policy changes and how they would be paid for. I do not really see where the hon. Lady is coming from. Members can generally debate all matters that are put before the House, what they believe their impact will be and whether they will make a difference.

I have to say—my Scottish colleagues like to raise this point—that in some areas, for example the Scottish education system, it would be interesting to look at how help is being provided to children so that they have a route out of poverty. In the past, the Scottish education system was one of the highest rated in the world, but I think the Scottish National party has now pulled Scotland out of the global rankings—not because it is going up them, it is safe to say. We can certainly have reviews both ways, and it will be interesting to hear whether comments from SNP Members reflect the impact that aspects of Scotland’s domestic policy, for which it has been responsible for most of the past decade, have had on some of the statistics they wish to complain about.

I welcome the fact that the Bill again increases the earnings that someone can receive before becoming an income tax payer.

[Debbie Abrahams]

Will the hon. Gentleman give way?

[Kevin Foster]

In a moment—I did not intervene on the hon. Lady.

Again, those with the lowest incomes will be able to keep more of what they earn. The days when earning £6,500 was considered enough for someone to start paying tax have disappeared. We were actually able to bring forward the increase in tax-free earnings for millions of people. That is a positive measure, which really makes work pay and helps the lowest earners the most.

[Debbie Abrahams]

What will be the effects of the Government’s increase in the personal allowance on the life expectancy of citizens of this country?

[Kevin Foster]

Any policy that encourages people to be in work and keep more of what they earn, and allows them to save, will help improve their overall health. One of the things that most improves someone’s life outcomes is being in employment. [Interruption.] It is bizarre to be heckled for saying that.

[Luke Graham (Ochil and South Perthshire) (Con)]

My hon. Friend is giving an insightful speech. One impact of the Government’s policies is the improvement in our Gini coefficient, which is widely recognised as an objective international measure of inequality. According to that objective international measure, our inequality has reduced since 2009-10. Nothing is perfect, but it seems that the direction of policies is working.

[Kevin Foster]

As always, my hon. Friend makes a well argued and succinct point. He demonstrates the positive difference that Government policies are making for his constituents and the UK as a whole. It must be said that that difference is being made by a whole package of policies, not just by the Bill. I know that a range of measures will help tackle the health inequalities in my patch, including intervention, better services, better urgent care, ensuring that we realise the benefits of technology in primary care, dealing with things such as rising obesity, ensuring that people have proper diets and continuing the welcome decrease in the smoking rate. It is bizarre that those who can least afford to smoke end up being impacted most by it, worsening already poor health inequalities.

The Bill is welcome. I do not think either new clause brings much to the debate, other than highlighting that people want reviews and statistics. With a genuine review, we think about our policy conclusions at the end, yet we hear Opposition Members say, “We want a review—but by the way, here are all our conclusions about the policies we believe should be adopted, even though we can’t really outline how we would pay for them, other than with a massive borrowing splurge that would need to be paid for by a future generation.”

It is welcome that, as has been pointed out, the number of people in absolute poverty is at a record low —1 million fewer people overall and 300,000 fewer children are in absolute poverty. [Interruption.] We hear a groan, but those are the statistics—the sorts of statistics the Opposition seek through their new clauses. The number of children living in workless homes has fallen to its lowest since records began. Being in work makes a positive difference to people’s lives.

[Debbie Abrahams]

rose—

[Kevin Foster]

If the hon. Lady wishes to argue with that, I am only too happy to give way.

[Debbie Abrahams]

No, I would like to ask the hon. Gentleman whether he believes in policy-based evidence or evidence-based policy. He seems to be talking about policy-based evidence. His argument is absolutely facile. He has no evidence to support it. It is absolutely ridiculous.

[Kevin Foster]

For policy-based evidence, we need only look to those who continue to argue that the Leader of the Opposition and the shadow Chancellor should be leading this country, despite the increasing evidence of what their economic policies would do to this nation. Anyone who takes a trip to Caracas will see the outcome there, and still some argue that we should bring those policies to this country. [Interruption.] It is lovely to be heckled all the way through my speech. I sometimes do it myself.

It is somewhat strange for the Government to be accused of not basing their policies on evidence by a party that crashed the UK economy eight years ago, and to continue to hear the excuse that the financial crash merely happened because of bankers in the United States, despite it being a former Labour Prime Minister who, just before the problem with the banks, predicted that a golden era for the City of London was about to start and set up the regulatory system that so badly failed to prevent this country from being exposed to the financial risks and shockwaves. It is somewhat strange to get that lecture on evidence, when there is plenty of evidence of what went wrong a decade ago, when we were left needing to make savings that Labour was planning to make anyway.

[Mrs Main]

My hon. Friend prompted me when he mentioned a golden era. Does he remember when a certain Labour Chancellor thought it an excellent idea to sell off our gold reserves at a record low?

[Kevin Foster]

Absolutely. We could spend a long time analysing the decision to flog the gold reserves. It was the same Chancellor who claimed to have abolished boom and bust—to be fair, he was right: he managed to end the boom at the end of his term, although he did very little to take us away from the bust. The economic cycle is still there, and those who pretended it did not exist were deluding themselves. They kept betting that things would always go up and then things started to go down.

The other thing that has made a difference in Torbay, whose economy has many jobs in the service sector, the hospitality industry and the care sector, is the introduction of the national living wage, because of which many people have had a salary increase. It is easy for an Opposition to pledge all sorts of things, but it is very different to actually deliver in government an income rise for the lowest earners. More people are being paid more than the national living wage—local employers in Torbay are paying beyond that level to attract the staff they need, given the fall in unemployment. We cannot say that the Government’s fiscal policies have had nothing to do with that; they have made a positive difference to the lives of people in my community and others across the UK.

[Colin Clark (Gordon) (Con)]

Does my hon. Friend agree that it is this Government who are trying to build a fairer economy and that, in my constituency and his, the gap between the highest and the lowest incomes has fallen since 2010?

[Kevin Foster]

Absolutely. It is worth remembering, when we hear how the Opposition want to tax people and what our tax policies are, that the highest earners in this country are paying a higher percentage today than they did for all but the last few weeks of the previous Labour Government. The claim that the Government are being much more generous to the highest earners through income tax is completely false. Sadly, my hon. Friend now represents the highest-taxed part of the United Kingdom. I refer to the work of the SNP in making Northumberland a tax haven from its policies, which have hit a range of people on middle incomes. I am concerned that the impacts in Scotland of that policy will see its representatives here in Westminster blaming those impacts on Bills such as this one, when they are due to policies that the SNP, not this Parliament, has imposed on the Scottish people.

[Kirsty Blackman]

The Scottish Government’s Budget ensures that 90% of businesses will pay less in business rates than they would if they were anywhere else in the UK. Does the hon. Gentleman believe that his Government should change their policies to match Scotland’s?

[Kevin Foster]

I certainly do not believe that the Westminster Government should change their policies to match the SNP’s income tax raid on middle earners and those who drive the economy. On business rates, anyone who has sat through my speeches on the high street will know that I have taken the view for some time that we need to look at how we tax the high street in future. The era of large corner premises being the most profitable place to sell goods and wares is long gone. I have to say that I do not think I will be looking at the SNP’s record for much inspiration when it comes to the question of how to stimulate the economy and boost people’s earnings.

[Luke Graham]

rose—

[Colin Clark]

rose—

[Kevin Foster]

I will go to Ochil and South Perthshire first.

[Luke Graham]

The hon. Member for Aberdeen North (Kirsty Blackman) made a point about being able to lower business rates in Scotland. That has been fantastic. Will my hon. Friend join me in thanking the Chancellor for putting more than £40 million into the Scottish budget so that we could fund such a business rate cut?

[Kevin Foster]

Absolutely. That support was very welcome. However, one of the issues that I am surprised SNP Members do not want to be raised—although perhaps it is not a surprise, when I think about what would be said—is what the impact would be in all these areas if the Bill included a border between England and Scotland, making it harder for business to be done between those two parts of our great United Kingdom. What would be the impact on the economy if Scotland had to experience SNP Members’ overall economic and fiscal policies? Surprisingly, I do not think that they want that kind of analysis to be included in the review.

[Colin Clark]

I was quite surprised by what my constituency neighbour the hon. Member for Aberdeen North (Kirsty Blackman) said. She is well aware that the north-east of Scotland—its very engine room, and the area that she represents—has ended up picking up half the business rates in Scotland. Does my hon. Friend agree that it is dangerous for business rates to damage particular parts of the economy and to unbalance it disproportionately, whether in Scotland or in England?

[Kevin Foster]

I could not have put it better myself. If business rates unbalance the economy, that is clearly a real issue. It is no surprise that two years ago, when voters in the north-east of Scotland—which is, as my hon. Friend says, the powerhouse of Scotland’s economy—had to decide which party would be the best to drive forward economic policies and represent their interests, the area, funnily enough, suddenly turned quite a pleasant shade of blue, with only a dot of yellow in the middle. That reflected the confidence of those voters in this Government’s policies.

I am conscious that I have been speaking for a little while, and that others wish to contribute. Let me end by saying that I do not believe the two new clauses add anything to the Bill. They were tabled by Members who regularly like to give us policy-based evidence, and who advocate a form of economic management for the country that has failed many times in other countries. There is no reason why it would not fail again here if they were given the chance to implement it. I hope that the House will not accept the new clauses, but will accept that the Bill will make a difference to working families across the country, will help to drive our economy forward, and will have a positive effect on the country overall.

[Vernon Coaker (Gedling) (Lab)]

I support the two new clauses. Unlike the hon. Member for Torbay (Kevin Foster), I think that they are very measured. They simply ask the Government to review the impact of the Bill on poverty and inequality.

I do not know what other Members think, but let me describe what I think the vast majority of people in all our constituencies believe, and what they believe this Parliament should be saying and doing. They believe that the current levels of inequality in our country are simply and utterly unacceptable. They believe that the levels of child poverty are simply and utterly unacceptable. They are not interested in someone being able to tell them that there are 2 million children living in terrible poverty, or 1,850,000 children living in absolute or, indeed, relative poverty. That is what those people are sick of, and what I am sick of, and what this Parliament should be reflecting.

Across the country, people are asking, “Can you not do any better? Can you not do something about the fact that there are still pensioners in one of the richest countries in the world who cannot heat themselves properly in cold weather, including at Christmas?” They are asking, “What is Parliament doing when we see children living in absolute poverty who cannot afford to go to school, with shoes and clothes and food being given to them as an act of charity by people in those schools?” They are not interested in whether the figures have gone up by 0.5% or down by 1%. They are interested in what this Parliament is doing about it, and what we are saying.

All these new clauses do is say to the Government, “If you believe, for example, that clause 5, through allowing people to keep more of their income when in work, addresses some of those issues, let’s have a review to see whether or not that is the case.” That is what people would expect.

I am sick of this myself. When I drive around, not just my constituency but the country, I see enormous wealth. I am not talking about people who have worked hard and done well, which we all want to see; I am talking about massive accumulated wealth—not just income—with people able to afford to pay astronomical sums on different ways of life, while half a mile down the street there is a kid in a household that cannot afford to put any proper food on the table.