Finance Bill

Lucy Frazer Excerpts

Tuesday 12th September 2017 Commons Chamber

[Mel Stride]

There are other considerations that the hon. Gentleman should focus on when he looks at individuals setting up in business, and there are many successful entrepreneurs throughout our country. We are the party and Government who have reduced taxation on business. It used to be 28% under the last Government and we have brought it down now to 19% and it will be further reduced to 17% over time. So the hon. Gentleman should look at this in the round, and I persist in my point that we need to look at the different tax consequences of the different models—an individual going into business on their own, whether as a sole trader or partner, or in an incorporated structure—to make sure we do not have people effectively just using one model for no other reason than the tax advantages thereof.

[Lucy Frazer (South East Cambridgeshire) (Con)]

My right hon. Friend refers to the importance of working out different tax models and how they affect the economy and the individual. Does he agree that Labour’s policy to increase tax negatively affects individuals’ income, investment to this country and therefore the country’s economy as a whole?

[Mel Stride]

My hon. and learned Friend is entirely right. As I have said, we are the party of bringing down corporation tax and small business tax, and we continue to bring those taxes down. The Labour party’s current policy is to raise corporation tax to 26%, which is going to do very little to encourage entrepreneurship in this country; it will in fact do the reverse. It must also be borne in mind that, on personal tax, it is Labour’s policy to start dragging more people into the higher tax rate, whereas it is this Government’s policy, through increasing the personal allowance, to take people out of tax and lower the tax burden entirely.

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[Mel Stride]

The hon. Lady may be aware that in the consultation we received the message from businesses that they broadly welcome these changes as we move into the digital age and do things more efficiently and effectively. However, businesses did have concerns, to which we have listened, about the timing and pace of the changes we originally proposed. The policy is robust, but the Government and I are determined to get the changes right and to make them at the right pace that suits those companies.

[Lucy Frazer]

Does my hon. Friend remember that in 2010, when the digitisation of VAT was introduced, more than half of businesses with a turnover of more than £100,000 signed up voluntarily? Does that show that moving to the new economy and technology is welcomed by many?

[Mel Stride]

My hon. and learned Friend is absolutely right. In my meetings with the Federation of Small Businesses we have all concluded and agreed that this is the right direction. Indeed, we will make provision to ensure that such businesses, although they will not be mandated to become part of this new regime, will have the opportunity to do so voluntarily, and I believe that a very large number of companies will wish to take that opportunity.

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[Lucy Frazer]

One matter that is in the Finance Bill is in relation to tax avoidance and tax evasion. Does my right hon. Friend remember that the Labour Government committed to recover £8 billion that had been lost through tax avoidance, and that the Institute for Fiscal Studies said that they would not recover even half that sum?

[John Redwood]

I do remember that. We also have the respective abilities in Government, and we see that this Government have been rather more successful at clamping down on tax loopholes that Parliament has thought unacceptable and that, in turn, has generated more revenue.

Very important to this Government’s strategy is the principle that, yes, we have to tax rich companies and rich people because they have the money, but that there is not enough money if we just tax the very rich. We must tax people who are comfortably off as well. There is also an understanding that, if we try to over-tax the very rich, we would end up getting less money, not more money, because the very rich have privileges and freedoms that the rest of us do not have. They have good lawyers, good accountants, and addresses in other countries. They can shift their businesses around, invest somewhere else, decide to spend their money somewhere else and go and live in a home in another country, which the rest of us are not able to do. Therefore, it is very important that the Government monitor the situation extremely carefully. For example, when the Government are taxing non-doms—they have got £9 billion in tax from non-doms, which is an extremely important contribution to our public services—they should be careful that they do not overdo it, because it would be quite easy to flip the thing.

I am not a particular friend of the non-doms. I have certainly never had the advantage of all these offshore facilities. I have always had a salary in Britain and paid PAYE like everybody else. Everything that I have had has had to go through the tax books quite properly, so I do not speak from any personal experience. However, what I do know is that I would rather live in a country that was tolerant of people who have riches and enterprise and who want to invest here than in a country that was completely intolerant. I would also rather that the non-doms paid some of our taxes for us than live in a country where the rest of us had to pay all the taxes because we had driven all the non-doms away.

So far, the Government have charted a sensible course, but I hope that they will watch the situation very carefully. I hope also that those in the Labour party who are serious about government and want to learn a bit more about how successful Governments, past and future, operate might learn from the corporation tax proposals in this and related Finance Bills. Interestingly, during the time when the Government have taken the corporation tax down from a 28% rate to 19%, they have massively increased the amount of revenue that companies pay. One problem with the Labour proposals before the last election was that Labour recommended a lot of spending that was not going to be financed by tax at all. It also recommended quite a lot of spending that it said would be financed by tax. One of its biggest alleged increases was from raising the corporation tax rate. If we tried that, we might find that we raised less money from corporations, drove marginal businesses away from our country and enabled clever accountants and lawyers in large corporations legitimately to base activities and profits in other countries, because they would no longer find our tax rates so acceptable.