Finance (No. 3) Bill

Luke Graham Excerpts

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

[Mel Stride]

My hon. Friend is absolutely right. The tax avoidance activities that I am describing are way beyond the reach of many businesses of a certain size up and down the country. Thinking particularly of our high street businesses, we have a duty to ensure that fixed costs in the form of taxes represented by business rates are reduced to the extent that they can be, and the Chancellor was able to announce a 30% reduction in business rates for those smaller retailers that typically populate our high streets. That was an extremely important move as we work, through our future high streets fund and other approaches, to enable our high streets to transition and become more vibrant and successful places.

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

The Minister is talking about business rates. As a result of the Government’s action, Scotland should receive about £43 million in additional Barnettised revenues. What work will he be doing with the devolved Administration to ensure that that will help high streets in Scotland as much as the Government are helping high streets elsewhere in the UK?

[Mel Stride]

As a UK Government, we are always happy, and indeed keen, to work co-operatively with the devolved Administrations, including the Scottish Government, as my hon. Friend suggests. Ultimately, however, these will be decisions for the Scottish Government to make. It will be for them to decide how to spend the revenues that will come through by way of additional funding via the Barnett formula. I can only suggest once again—I think this echoes my hon. Friend’s thoughts—that the best way forward is to keep taxes down and, in the case of Scotland, to have a country that is known for low taxation, rather than gaining a reputation for higher taxation.

Clauses 46 and 47 address the use of contrived arrangements that seek to avoid stamp duty on shares. The Government are aware that some corporate groups are transferring shares to connected companies for an artificially low consideration. The clauses create a targeted marketed value rule for transfers of listed shares to connected companies. This rule will prevent the use of artificially low consideration by charging stamp taxes on shares on the higher of the market value of, or the sum paid for, the shares transferred.

The Bill also re-emphasises our commitment to leading the way in implementing internationally agreed initiatives to combat tax avoidance. Clauses 19, 20 and 23 make changes to the UK’s rules on controlled foreign companies, hybrid mismatches and corporation tax exit charges to ensure that they comply with the EU’s anti-tax avoidance directive. The UK is a strong supporter of the objectives of the directive, as it will ensure that member states take a common approach to tackling tax avoidance. The UK’s rules are already comprehensive, and they already meet or exceed most of the requirements set out by the directive, but some limited changes are needed to ensure that we are fully compliant in all areas.

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[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.

[Luke Graham]

rose—

[Bim Afolami]

rose—

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[Alison Thewliss]

I agree that that loss of expertise is a huge issue. I have a constituency interest, because many of these centralised offices end up being in Glasgow Central, but this also comes at a significant cost to the taxpayer. It is no secret that city centre office space in Glasgow is expensive, and there would be greater benefits in keeping those services in areas such as the Clyde Gateway, which is also in my constituency but much cheaper, or in Livingston. That would provide better value for money for the taxpayer than having them all in city centre offices.

[Luke Graham]

I thank the hon. Lady for giving way. She is making some good points about decentralisation. Would the SNP join me in looking at some of the Scottish Government’s new powers? Instead of basing offices in Dundee, offices should be located in more affordable areas, such as Clackmannanshire or Perth and Kinross.

[Alison Thewliss]

Dundee is affordable. There is a balance—[Interruption.] The hon. Gentleman is not listening, but there is a balance here. We need local infrastructure, transport and so on to support such things, but there is an argument for doing all that. It used to be UK Government policy to decentralise large office blocks, but they have cut that back over the years, and offices are now disappearing. He can give me no lectures about that. There are countless examples of the UK Government cutting offices. So many jobcentres in the city of Glasgow have been cut that my constituents now have to take two buses just to get to one, and I do not see any Scottish Conservatives standing up for that.

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Last year’s Finance Bill ended permanent non-dom status, and this Bill adds to the track record of this Government in cutting down on tax avoidance. Conservative measures have seen £185 billion collected through anti-evasion and anti-avoidance since 2010. The difference between what should be collected and what is collected in taxation—the so-called tax gap—is now at a five-year low of 5.7%, one of the lowest in the world. These measures are more significant than anything the Opposition did on tax avoidance during their time in office, when the tax gap was about 10%. As always, Labour likes to talk the talk, but fails to act. By closing the tax gap further, we boost this nation’s tax revenues, not by putting up tax, as the Opposition want to do, but simply by ensuring that people pay the tax that they are expected to pay by law.

[Luke Graham]

I refer the Committee to my entry in the Register of Members’ Financial Interests.

Several provisions in the Bill will help to deal with money laundering and tax avoidance, and I want to touch on a few of them, as well as on some of the comments that have been made by Labour and SNP Members, but first I would like to echo some of the Minister’s comments about tax in general. Conservative Members pride ourselves on having a low-tax but fair system that rewards work and enterprise, but ensures, in all things, that when someone has a tax liability, they should indeed pay it.

Tax should be low right across the United Kingdom. One of my Scottish colleagues referred to charges for higher-rate taxpayers in relation to the movement of residency between Scotland and England. As I am sure that SNP Members will appreciate, it is not just higher-rate taxpayers who are affected. As has been well documented over the past few months, anyone earning over £26,000 in Scotland is now worse off than if they were anywhere else in the United Kingdom. In fact, it had to be confirmed by one of the senior generals in the British military that because of the SNP’s changes, men and women in the British armed forces would pay more tax in Scotland than they would anywhere else in the world. These changes are disadvantaging my constituents and companies.

The counter-argument is that somehow those tax changes will make things fairer for my constituents, that they are providing huge opportunities, and that we should be ashamed of ourselves for not doing more. As my hon. Friend the Member for Walsall North (Eddie Hughes) said, the tax changes introduced by this Conservative Government have increased constituents’ income by £1,250. The tax changes made by the SNP in Scotland have given my constituents 38p a week. That is it—all this change, all this cost and all this disadvantage for 38p a week. If the SNP Government are going to make changes, they must make real changes that make people’s lives better and follow some of our copybook.

A key point has been raised about Scottish limited partnerships. I sat on the Committee that considered last year’s Finance Bill, and when we discussed that matter with several Opposition Members, I voiced my support for changing these partnerships. We saw a change in the law in 2017, and there are now disclosure requirements for those in a limited partnership, but I want to ensure that the context of these partnerships is understood. They were originally enabled under the Partnership Act 1890, and then confirmed again in 1907 by Scottish, English, Welsh and Northern Irish MPs, so this measure was not somehow imposed in Scotland.

[Alison Thewliss]

Does the hon. Gentleman acknowledge that the regime of persons with significant control has not been enforced to any extent? SLPs owe the UK Government £2 billion in fines. Would he not welcome that money for his constituents?

[Luke Graham]

I thank the hon. Lady for her intervention. Whenever we have made a law, we should enforce it. I recognise the Government’s contribution through investing more money in HMRC, but another key area is Companies House, where a lot of this information is held. I would argue that it certainly could do with extra resources to ensure that things can be properly cross-referenced. A number of issues in my constituency have revolved around significant control and ownership of different corporate entities across the United Kingdom. Companies House would benefit from additional resourcing to help to tackle some of these issues.

The hon. Member for North Ayrshire and Arran (Patricia Gibson) talked about PFI schemes. She was very critical of Labour’s schemes when it was in administration in Edinburgh. It is important that the SNP takes some responsibility for the fact that it has been in power for over a decade, as the implementation and management of a number of these PFI schemes was overseen by the SNP. Although they have now converted to the PPP scheme, there are still a number of criticisms, including of the healthcare facility in North Ayrshire. It is right to be critical, but that criticism should be even-handed.

[Alison Thewliss]

Will the hon. Gentleman give way?

[Luke Graham]

I will just make a bit more progress.

The successes that we have seen from this Government include lowering corporation tax, which has led to record income from corporation tax, and collecting an additional £185 billion of revenue since 2010, which we would not have been able to achieve were it not for the Government’s tightening of tax and tax avoidance measures.

The Conservative party prefers to have a low-tax and fair system. Some of the measures in the Bill are specifically fit for purpose in this more globalised and complicated economy. For example, schedule 4 is on profit fragmentation, which means that Government can focus on where profit is earned rather than getting caught between the different jurisdictions in which corporate bodies lie.

Clause 83, on international tax enforcement, is particularly important. Before I came to this place, I worked in international finance. With multinational companies, it is very difficult to track where income is earned and where it will finally end up, and that may not be due to deliberate action by such companies. New tax enforcement measures that give HMRC and the Treasury additional powers of disclosure will be very valuable and will increase transparency in our tax system.

The hon. Member for Oxford East (Anneliese Dodds), who is no longer in her place on the Labour Front Bench—

[Lyn Brown (West Ham) (Lab)]

She’s only nipped to the bog.

[Luke Graham]

I appreciate that; I am sure that it will be well recorded in Hansard.

I, too, was an active participant on the Sanctions and Anti-Money Laundering Bill, and I agreed with the hon. Member for Oxford East on many points, especially about looking at the actions taken on overseas territories and Crown territories. In accepting some of the amendments, the Government committed to a course of action, and I am sure they will be pushing that through.

Tax collection is one of the most important duties of the Government. Whether in central Government, the devolved Administrations among the nations or, indeed, down in local authorities within the devolved Administrations and right across the United Kingdom, tax collection and record keeping are incredibly important. I welcome some of the measures introduced by the Government to increase the resourcing to HMRC. I would hope to see from right hon. and hon. Members the sharing of best practice and that we ensure that some of the people working for our tax collection authorities around the United Kingdom are going right around the United Kingdom. A number of local authorities need additional support and help with tax collection, and the sharing of best practice in technology, to ensure that they are actually collecting the tax revenues they are due.

I have two local authorities in my constituency, Perth and Kinross Council and Clackmannanshire Council, both of which face very extreme council funding issues in terms of raising local funds and cuts imposed by Edinburgh. When we look at the local services that have had to be cut as a result of the reduction in funding from Edinburgh, despite the increase in the Scottish block grant, we see that it is having a significant impact on education services, health services and local street services in my constituency. I would hope that even SNP Members could put pressure on the devolved Administration to make sure that they focus on proper tax collection, and also on proper tax expenditure.

As I have said, action taken by this Government has helped to bring in over £185 billion of additional tax revenue that we would not otherwise have been able to collect. Corporate tax revenues have also increased.

A key point has been raised—many Labour Members have spoken about it—about inequality when talking about absolute and relative poverty. This is important to note, because I think that the House should look at more objective statistics. In last night’s debate, I talked about strengthening the OBR to make sure that we can have credible statistics that Members on both sides of the House recognise, acknowledge and accept.

One key aspect of that is to look at the Gini coefficient, which has been recognised as a measure of inequality for a long time. If we look at the Gini coefficient in 2010 compared with where we were in 2016-17, we see that there has been a reduction in the coefficient, which means an improvement in the living conditions of people in the United Kingdom. Inequality has actually reduced according to the Gini coefficient.

[Jim McMahon]

rose—

[Luke Graham]

I think that is a good thing that should be welcomed, as I am sure the hon. Gentleman agrees.

[Jim McMahon]

Statistics can always be massaged to fit the agenda of the person citing them, but what cannot be escaped is the fact that increasing numbers of people are queuing up to use food banks because they cannot afford to feed their families and put food on the table. That is my measure of whether this country is doing well. How does the hon. Gentleman respond to that?

[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?

[Luke Graham]

I thank my hon. Friend for his intervention and I could not agree more. Intangible assets are becoming an increasing part of the global economy. Just a few years ago, I did a study in relation to the Prince’s Accounting for Sustainability project. When we looked at some of the figures, they clearly showed that up to 80% of the value of the Standard & Poor’s 500 index in the United States was being held in intangibles. In considering some of the accounting standards and taxation measures that we are introducing, we could be missing up to 80% of that value, which would not then be reflected in the share price or indeed in the tax revenues that could be captured. I agree with my hon. Friend that we should look at those measures.

Without giving the Prince’s Accounting for Sustainability project too much of a push here in the Chamber, I will say that a number of the reports that it has put forward, in partnership with businesses in the United Kingdom and internationally have been really positive. They look at how we can capture some of the value of intangibles, but they also consider human and social capital. The organisation has published a number of reports, and I encourage Members to read them, because they could help to inform our policy making not only on the digital services tax, but when it comes to evaluating the impact and true value of some of the companies and enterprises across our country. It does not matter whether it is the small enterprise on our high street or, indeed, the new multinational that is capturing funds from around the world. It is about our identifying value and then being able to show to shareholders, Government and the local community the social, human and physical capital contributions that are being made to our economy.

Some people find Budget debates dry, but I find them incredibly exciting. The hon. Member for Aberdeen North (Kirsty Blackman) said last night that she enjoyed a good read of the Budget documents at home—I could not agree more. This Budget gives us plenty to read and plenty of food for thought, which is why I will support the Bill today.

[Chris Philp]

It is a huge pleasure to follow my hon. Friend the Member for Ochil and South Perthshire (Luke Graham), who is always an incredibly eloquent and articulate commentator on matters financial.

I am delighted to see that news of my speech has spread to the office of the shadow Chancellor, the right hon. Member for Hayes and Harlington (John McDonnell), and that he has come to the Front Bench especially to hear it. I am delighted that he has chosen to come to the Chamber for this purpose; I eagerly await the imminent arrival of the Chancellor as well.

I want to speak to new clauses 5 and 6, which were tabled by the shadow Minister, the hon. Member for Oxford East (Anneliese Dodds). Their substance would require more analysis and reports on various aspects of the Government’s programme in the areas of avoidance and evasion. However, as so often in life, action and results speak much louder than reports and words. The Government’s actions and the results they have achieved are far more powerful than any call for evidence or any call for a report can demonstrate.

The hon. Lady posed some questions about whether the tax gap is the best measure. It is an internationally accepted measure and it provides for consistent comparison over time, so it is a good way of consistently comparing the record of one Government with that of another. There may be other measures, but it is at least a consistent measure and it is also a good way to compare different countries, as well as to make comparisons within a country over time.

The current tax gap in the United Kingdom is 5.7%, which is extraordinarily low by comparison with other major countries and significantly lower than it was when Labour was in office, when it was between 8% and 10%. Whatever quibbles the hon. Lady may have about the things that are included or excluded, what is clear is that the tax gap is low compared with what it was under Labour and low by comparison with other countries. That is not surprising.