Comprehensive Spending Review

Lord Oakeshott of Seagrove Bay Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Oakeshott of Seagrove Bay]

Well, my Lords, that was the noble Lord, Lord Peston, at his peppery professorial best. I welcome what he said about Trident. I hope he will be paying tribute to the Liberal Democrats in Government. We are not meant to brag about this too much but I am still going to mention it. By a feat of negotiation we have managed to get the renewal of Trident put off until after the next election, which, we hope, will at least give time for Labour to change its policy as well. So there is a really serious chance that we will not be committed to a replacement of Trident which the other two main parties were putting forward at the general election.

It is always interesting to hear from the noble Lord, Lord Lamont, with his experience. He certainly does know all about markets losing confidence in governments. I was particularly impressed by the wise words of the right reverend Prelate the Bishop of Leicester about the importance of maintaining stable communities in social housing. I am afraid the real problem about the housing benefit situation is the way the social housing stock was run down disgracefully under Thatcher, Blair and Brown. That is the real reason we are in this mess on housing today.

The Chancellor announced £81 billion of cuts in the CSR and the official estimate of the tax gap—the total of tax avoidance, evasion and fraud—is £42 billion. We must close the deficit, but to do that in a fair and sustainable way, we must repair Britain’s broken tax collection machine. Volunteering is all very well, but not when it comes to paying tax. Just like any business in the real world, we must get our revenues up as well as our costs down. I declare my interest as a pension fund investment manager for the past 34 years. It is one of life’s rather strange twists that I went from advising a Labour Minister, Roy Jenkins, to working for Warburgs in the City, and the noble Lord, Lord Sassoon, went from working for Warburgs to advising a Labour Minister, Gordon Brown, at the Treasury. Today he is a Conservative Minister and I am a Liberal Democrat Treasury spokesman. With all his top-level experience at the Treasury in the Brown years, the Minister will know where all the bodies are buried and be ideally placed to answer our questions and respond to our concerns in this House.

My right honourable friend Danny Alexander told Parliament last week and the Minister repeated today that there is no place for tax cheats in our society. How we deal with tax cheats will be a crucial test of fairness for us. We will never persuade the great majority of hard-working British taxpayers who pay their dues and cannot afford expensive accountants and solicitors that we are all in this together unless we make fair tax our watchwords. This is not just some airy-fairy academic issue. At the Arsenal on Saturday we were having a moan at half-time about our failure to score against West Ham, when the man behind me suddenly said:

“I liked your piece in the paper, you know. These non-doms get away with murder”.

We know a fair bit about dealing with non-doms in this House. I pay tribute again to the fantastic support I have had from noble Lords sitting on all sides of this House for our long and successful battle against delaying tactics and outright opposition from the Front Benches to make all of us here pay full British tax. The House showed itself at its independent and robust best last June when we passed our amendment to the Political Parties and Elections Bill to ban non-dom and non-resident donations. That is now law and just needs a touch on the statutory instrument button. What are we waiting for?

Did your Lordships know that you inherit non-dom status from your father? Just like an hereditary peerage, it passes down the male line, and like an hereditary peerage, you are born a non-dom and you stay one unless you disclaim it. Leading accountants advise me that between three and four million people living in this country, most of whom have lived here all their lives, are non-doms and could claim non-dom tax status for tax purposes if they wanted. Does the Minister agree with that figure, or what is the Government’s best estimate if he does not? Can he give us the latest figures for the numbers paying the £30,000 flat charge? What is the Treasury’s best estimate, in its detailed review of Liberal Democrat proposals on tax avoidance, of the amount of extra tax which will be raised by limiting non-dom tax status to seven years—the Treasury always initially works these things out— in the absence of behavioural change? The really big benefit of paying no British tax at all—on your income, capital gains or inheritance tax—on all the assets and earnings that you have offshore goes, of course, to the really rich. That is because a £30,000 a year poll tax payment—a non-dom poll tax, if you can call it that—is really just a fleabite for the fat cats.

Our coalition agreement says:

“We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals”.

The Chief Secretary has made a good start in announcing a beef-up of the tax avoidance operation in HMRC. Yet if we can really close the tax gap, as it is suggested, by £7 billion a year in four years by investing £225 million a year in HMRC over the spending review period, why are we not investing far more? Anything like those rates—a 3,000 per cent annual return—would make Bernie Madoff blush, and if it is anything near that, we should be doing far more. If it is that easy to boost the tax take, what a condemnation that is, I am afraid to say, of Gordon Brown’s long years at the Treasury, when he tried to run every department but his own.

Very rich people are also past masters at cheating the rest of us on stamp duty. Anyone who knows their way around the property market will tell you that precious few luxury houses or flats worth more than, say, £5 million today ever feature on Land Registry records with stamp duty having been paid. There is an especially abusive scheme using a loophole in the law on Islamic finance to dodge stamp duty, which is sold to Jews, Christians and atheists with no questions asked. Rich tax cheats and their advisers know no shame. More resources for HMRC will help, but the way really to boost the tax take is to simplify the system and close the loopholes. Non-dom status is an open invitation to tax avoidance on a massive scale. That is why our policy on these Benches is to make non-doms come fully onshore after seven years. That gives plenty of time for visitors and people on short-term contracts, but then we say, “If you’re in our club, you pay the sub—full British tax, like all the rest of us”.

The Treasury is reviewing non-dom status as our coalition promised. I asked the Minister a question 10 days ago on the non-dom review which he did not answer, so he has kindly written to me as follows:

“This is a complicated policy area involving considerations of fairness as well as competitiveness. The Government is aware of the need for interested parties to be engaged on this issue and will make a more detailed announcement about the form and timing of the review, including any formal public consultation, at the appropriate time. I am sorry that I am not able to provide you with a more specific answer at this time”.

So am I. Who are the interested parties? Not just the non-dom bankers, we hope, who choose to be British when it suits them and foreigners when it does not. Those words are Vince Cable’s, by the way, not mine; he has not changed his mind. Let us act now to limit non-doms to a seven-year free ride and make Britain a country where the rich pay their fair share of tax.