Bank of England and Financial Services Bill [Lords]

Mark Field Excerpts

Monday 1st February 2016 Commons Chamber

[Mark Field (Cities of London and Westminster) (Con)]

I will be neither as discursive nor as time-consuming as my right hon. Friend the Member for Chichester (Mr Tyrie), but he made some important points. Even before 2008, banking was one of the most highly regulated industries. Although I agree that ideally we need to move towards a much more competitive world in the banking sphere, it is also worth reflecting that one reason why we have not had a great upsurge of challenger banks is because—at least in the retail banking sector—the banking world is insufficiently profitable to make it worth while for such competitors to come through. One reason for that is because there is ever more regulation and compliance in the retail world. It is therefore perhaps predictable that the furore surrounding this Bill has been concentrated on the role in the institutional architecture of the Financial Conduct Authority, and the changes that have already been referred to regarding the Government’s original proposals on the senior managers’ regime.

As the MP for the City of London, I have had my ear to the ground over 15 years as Governments—Labour, the coalition, and now Conservative—have grappled with devising a framework of regulation and compliance, in particular one that was fit for purpose in the aftermath of the financial crisis of 2008. We should all accept that that is not easy work and, in making such changes, it is important not to undermine our global competitive advantage in financial services—again, that was alluded to by my right hon. Friend the Member for Chichester, who pointed out that the most effective regulatory framework will probably have an international nature, rather than one specific to the UK.

We should all be much poorer if regulation is designed simply to punish banks and bankers. By the same token, sensible voices from the City of London—there are more than might be appreciated by certain elements on the Opposition Benches—fully recognise that the British public need to see the risk of future bail-outs kept to a minimum. For all the talk of maintaining free markets and global capital flows, the sheer importance of the financial system to the economy as a whole means that there will continue to be some form of implicit guarantee from taxpayers in the event of a future financial crash. The price to be exacted by the public for that guarantee is rigorous regulation and watchful compliance, as well as the ongoing banking levy that has been introduced and is, I think, here to stay.

As the Minister will recall, I must confess that I have consistently argued against the reversal of the burden of proof, which had been proposed as a key element of the senior managers regime. I am pleased that we have not implemented what was going to come into place on 7 March. I should therefore rightly pay fulsome tribute to the Treasury for rowing back from this draconian and potentially unenforceable measure. Likewise, I am pleased that the Government have fiercely resisted attempts in the other place to resist that.

There was already plentiful evidence that senior executives of global banks were thinking twice about relocating, or indeed continuing to be based, here in the United Kingdom. The notion of a criminal liability being levied on management for actions committed by junior bank staff who were perhaps working even in another jurisdiction, and such liability being regarded by the courts essentially as strict, risked leading to an exodus of senior management from London. Indeed, it has been my understanding that the senior managers regime, as originally proposed, was the single biggest consideration in the ongoing deliberations by HSBC and Barclays that they might headquarter outside the UK—more important than concerns over the bank levy, bonus caps, remuneration caps and the whole ring-fencing agenda.

[George Kerevan]

Is the right hon. Gentleman essentially saying that, from his knowledge, the Treasury was blackmailed into changing the proposed legislation?

[Mark Field]

I am not suggesting that for one minute, but we need to make legislation that is effective and enforceable. I think there were human rights implications about having a reverse burden of proof. If we are going to try to encourage a banking and professional services industry that is worth its salt here in the UK, we need to ensure we do not put it under burdensome regulations that apply here in the UK but not across the globe.

I agree very much with the Chancellor’s decision not to renew the contract of the first chief executive officer of the Financial Conduct Authority, Martin Wheatley. The concern went beyond the well-publicised leak over pensions policy, which saw £3 billion wiped off insurance company shares. In truth, Mr Wheatley had lost the confidence and, more importantly, the respect of many leading figures in the City. I suspect some Opposition Members would regard that as a badge of honour, but frankly for an industry regulator to let it be known that he regarded those working in the financial services industry as inherently dishonest is not the way to win hearts and minds. To be quoted as saying he would

“shoot first and ask questions later”

in championing customers against the banking fraternity may have played to the gallery, but it was not sensible regulation.

I am unconvinced that that superficially robust approach ever truly benefited customers. I commend my hon. Friend the Member for Aberconwy (Guto Bebb) for securing a Backbench Business debate later today on the failure, thus far, of the FCA to secure fair redress for victims of financial mis-selling of interest rate hedging products. I have constituents—I am sure all Members do—who are still waiting for redress from the mis-selling of such products in 2007. They now find themselves out of time, under the six-year rule, to initiate legal proceedings because the Financial Services Authority advised them to rely instead on its own processes and the FCA subsequently failed to devise a satisfactory structure for compensation.

I was pleased to see last week that the respected head of the Prudential Regulation Authority, Andrew Bailey, was appointed as Mr Wheatley’s successor. I know from my own dealings with him that he is no soft touch. I trust that his experience and his reputation for fairness, not only at the PRA but at the Bank of England, will restore credibility to this vital part of the regulatory infrastructure. The breadth of his experience should hopefully ensure that he is able to take a comprehensive view of the financial system that avoids some of the mistakes of the discredited tripartite system of oversight. Going forward, I believe City regulators—and central bank governors, for that matter—would perhaps do well to give careful consideration to the famous advice one is given on joining the Whips Office: why say one word when none will do? I fully endorse the clauses of the Bill that recalibrate the duties of the FCA. I hope the Government are now able to convince an admittedly sceptical public and a very wary financial services community that in its new iteration the FCA will achieve more—much more—of what was intended when it was set up.

It was fair of the hon. Member for Leeds East (Richard Burgon) to point out that the other place had made changes to regulation, but I am not sure it went far enough. I still think there is the risk of a virtually untrammelled power being given to the Governor to appoint or remove deputy governors. Granted, such appointments and dismissals would necessitate a statutory instrument procedure in the House, but such a process would not pass muster as good corporate governance of a FTSE 250 company, so why, in view of the Bank’s extensive powers, should it be tolerated here? This is not simply an academic concern. We are potentially enabling a Governor to pack his board with worthies happy to do his bidding and thereby outweigh the influence of the Bank’s independent directors.

As Mark Carney begins the second half of his term, we have seen in the past week the swooning of the financial press over Mario Draghi’s decisive actions as President of the European Central Bank. This cult of the central banker is nothing new—it goes back to the 1920s and the greater control central banks had in the aftermath of world war one—but I have long been sceptical about the practicality, or even the desirability, of fully fledged Bank of England independence. In the final analysis, strategic economic decision making must lie with elected politicians operating within financially responsible Ministries. The composition of the Bank should neither be nor, more importantly, appear to be the plaything of the Governor.

In wholeheartedly supporting the Bill, I trust that the Minister will give some thought to those genuine governance concerns as it makes its way through the House.

[John Mann (Bassetlaw) (Lab)]

I shall stick to your request that we keep to 10 minutes, Madam Deputy Speaker, not least because I hope to catch your eye in the second debate. I will therefore not speak about the FCA now, although it would be relevant.

I reiterate what can now be called the East Lothian question: if the ship goes down, should the captain not go down with it? I thank the constituent of mine who last night sent me the link to the footage of the session of the Treasury Committee in 2009 at which a Mr Andy Hornby and Mr Fred Goodwin gave evidence. Nothing could encapsulate the East Lothian question more profoundly than that hearing, their performance and their escape from real responsibility for their failures in office. The reverse burden of proof change and the dropping of the FCA’s culture review are two sides of the same coin.

The Chancellor’s actions are consistent with what he has done and said in the past. The House should remember that, speaking about regulation in 2007, one year before the crisis, he cited Ireland as an example of why there should be less regulation and greater deregulation of precisely the authorities we are talking about now. We saw in Ireland what would have happened here had we followed his advice, but we are a much bigger economy, so it would have been far worse for our people. History is not repeating itself; ideology is repeating itself.

I note some interesting clauses in the Bill. It is hard to disagree with the reduction in the number of MPC meetings from 12 to eight. There have been more than 80 since the last decision to change anything. One can begin to question, therefore, not whether there is group-think, but whether that body needs to put quite as much effort, month after month, year after year, into making no decision at all, and whether we need to put quite as much effort into scrutinising, month in, month out, its inability or unwillingness to make a decision—or perhaps even its correctness in making no decision. It shows how we are missing the point.

Some bigger things are not in the Bill. Transparency is missing at every level in the Bill. When it comes to it, there is no transparency. Minor improvements are proposed, but the workings of the Bank of England and the financial sector and its regulation remain in great secrecy. That is a fundamental problem.

In the past, I have proposed that there should be differential risk, particularly in retail banking. If I wish to speculate my money away with an Icelandic bank, the bookies or anybody else, I should be allowed and not be stopped from doing so, but I should not expect the taxpayer to pick up the tab if things go wrong. We have the principle with premium bonds, but we have not expanded that into the mutual sector, for example. There should undoubtedly be a lower interest rate. There should be absolute guarantees. We have failed to look at differentiating the risk for the consumer. That will come back to haunt us.

Lip service is paid to competition, with the Chancellor and the Treasury wanting again to dominate the FCA. Under clause 18, they want to be able to tell the FCA what it should be doing. What is missing from the bigger picture is competition. There are competition objectives, but it is the same old banks. In fact, it is far worse, as it is not just the same old banks—the building society sector has largely disappeared from the retail sector compared with 10, 20 or 30 years ago. I am certain that, if the old-style Halifax building society were resurrected, many of my constituents would wish to put their money there, as I did all my life, and as my mother, all my family and many people in the north did.

[Mark Field]

Is the hon. Gentleman able to answer my earlier point? If we have ever-more rigorous regulation and ever-more onerous compliance, with even the new challenger banks having to pay a large bank levy immediately, will that not provide a massive disincentive to the sort of competition that many want to see in the banking system? I am not saying it is an easy issue to resolve. We all want competition, but how will that happen in the banking sector if it is so heavily regulated—now and in the future?

[John Mann]

I have said many times in the past and repeat it briefly now that there should be a differential in the risk for retail banking.

We know what is going on here. The Chancellor has a problem—his accounts do not add up. I confidently predict that he will not get the surpluses he wants, as we will find out with the OBR report at the time of the Budget. He is therefore desperate to sell off the shares in Lloyds and RBS. That is what is going on. That is why all this is happening. That is why he wants a new settlement with the banks. He wants to maximise the price in order to create the surplus that he has created in his head and in his Budget for all of us. That is what is going on politically.

HMRC and Google (Settlement)

Mark Field Excerpts

Monday 25th January 2016 Commons Chamber

[Mr Gauke]

There is a difference between putting in a claim and determining the final result under the law of the land. That is what HMRC has done.

[Mark Field (Cities of London and Westminster) (Con)]

No one should underestimate the complex nature of trying to tax globally active corporations such as this. It is speculation to talk in terms of the numbers that have been bandied around. However, in view of the Government’s desire to get an international arrangement in place, can the Minister tell us today whether he believes this deal sets some sort of precedent, or is it just a one-off arrangement?

[Mr Gauke]

The important point to note is that the individual tax affairs depend on the application of the facts in the case; as I have mentioned a number of times, it depends on the economic activity and assets that are held in the UK, or indeed other jurisdictions. But I do think this signifies that companies are looking at their tax arrangements and there is a closer alignment between tax and economic activity, which I certainly welcome. That is what the BEPS—base erosion and profit shifting—process is designed to achieve, and that is what the UK Government have been advocating for some years now, and I believe we are making progress on that.

Draft Payment Accounts Regulations 2015

Mark Field Excerpts

Wednesday 9th December 2015 General Committees

[Richard Burgon (Leeds East) (Lab)]

It is a real pleasure to serve under your chairmanship, Mr McCabe. I thank the Minister for the way in which she outlined the regulations, which implement the EU payment accounts directive. The Opposition will not oppose the regulations, but since we want a banking sector that works in the interests of consumers rather than penalising them, I would appreciate further detail on some matters from the Minister and further explanation of the rationale behind some of the decisions that the Government have made.

Some payment account fees for switching accounts or using overdraft facilities have cost individual account holders billions of pounds. That has been subject to campaigning by consumer advocacy and advisory groups such as MoneySavingExpert.com and Which? for several years. Those campaigns have seen not only millions won back for consumers, but changes in the industry to fees and the information available about fees. That is to be welcomed, but with the most recent research from Which? in August 2014 confirming that several of the biggest banks have relatively poor customer satisfaction levels for their current account offerings, and continued concern regarding overdraft fees and their impact on people on lower incomes, the debate will clearly continue after today’s discussion.

[Mark Field (Cities of London and Westminster) (Con)]

The shadow Minister is making a robust case for the consumer, but does he recognise that ensuring that a basic account is available for any legal resident of the EU under the directive may increase the prospect of fraud or financial crime? How would he ensure that the concerns raised by some in the finance industry are dealt with properly, while standing up for those who otherwise would be left behind in the way that he suggests?

[Richard Burgon]

The Minister raised the issue of everyone in the UK being able to have a bank account. With respect, it is for the Government to suggest how fraud will be guarded against in these circumstances. The Minister may be able to address that in her further comments.

Today we are talking about the implementation of the EU payment accounts directive and our regulations. As the Minister indicated, the PAD has three main principles: first, to improve the transparency of fees relating to accounts that are principally personal accounts; secondly, to make it easier for consumers to switch accounts, and thirdly, to make sure that all EU consumers can access banking services by ensuring the availability of a sufficient number of accounts with basic features. When the Minister touches on that, she may wish to outline the Government’s position on the point that the right hon. Member for Cities of London and Westminster made about preventing fraud in such circumstances.

I will pick up the point on payment account fees. There is significant crossover between the regulations and the Competition and Markets Authority’s recent report on the banking sector. On overdraft fees, the CMA’s analysis shows that outcomes are particularly poor for heavy overdraft users and indicates that around 9% of customers have paid more than £20 a month in overdraft charges. Furthermore, around 2% have paid more than £60 a month in overdraft charges. So the CMA’s evidence shows how the monthly charges for using an unarranged overdraft can be as much as 15 times higher than for those with an arranged overdraft.

The consumer group, Which?, has said that the CMA should tackle higher overdraft charges. One proposed remedy is to consider stopping banks differentiating their charging structures for arranged and unarranged overdrafts.

With regard to switching accounts, research conducted for the Competition and Markets Authority found that 37% of people had been with their bank for more than 20 years and a further 20% had had an account for between 10 and 20 years. The report also found that only 3% of customers switched in 2014.

Will the Minister explain what analysis of this the Government have undertaken? If so few people change banks, as these figures suggest, is there a failure to extend the regulations to cover existing customers and is that undermining their effectiveness?

The CMA’s report also made the following points:

“Low levels of customer switching mean that banks are not put under enough competitive pressure, and new products and new banks do not attract customers quickly enough… Bank customers fear that switching their current account to a new bank will be complicated, time-consuming and risky.

[Mark Field]

Will the hon. Gentleman give the banks some credibility and accept that the lack of switching may be down to customers’ broad satisfaction? It is often assumed that we do not have large-scale switching. As the hon. Gentleman pointed out, many adults have bank accounts at a particular bank for decades—20 or 30 years at a time. That might reflect their broad satisfaction with the service they receive, rather than any fault of the Government, which have gone a long way in at least trying to ease the process of switching.

[Richard Burgon]

I am not seeking to attack the credibility of the banks, but I think that, given the statistics I have just cited, we need to look into this further and ensure that people are not staying with banks during their busy lives just out of habit, and that they are fully aware of the options. Opposition Members will also agree that competition is very important in the banking sector as it is elsewhere.

However, despite identifying those problems, the remedies that the CMA propose put the onus on consumers to navigate the system, focusing on measures to make it easier to switch bank accounts. With this in mind, will the Government say how they anticipate that the Competition and Markets Authority’s report into the banking sector will be integrated into this framework?

The regulations also state that the Money Advice Service would be required to operate a comparison website. There is some concern that this could be funded by cuts to Money Advice Service spending elsewhere rather than by increasing the levy on industry. Will the Minister clarify how the website will be funded and provide more detail about the timescale? For example, when does she expect the resource to be available to consumers?

Finally, during the consultation, no information was received about the anticipated costs to non-current-account switching members, as a result of the proposed approach on switching, nor did the responses address the costs or benefits to consumers as a result of the proposed measures. Will the Minister also comment on these points?

As I said at the beginning of my remarks, we do not oppose the measures. Public confidence in the banking system needs to be addressed urgently. It is vital to ensure that people in all categories are treated fairly, particularly those living on lower incomes who are hit by unexpected fees or stuck in accounts that do not give them the best deal for fear of being hit by switching fees. The measures go some way to achieving that and, therefore, we are happy to support them.

[Mark Field]

Mr McCabe, I apologise to you. I was a moment or two late for the beginning, but no discourtesy was intended. I would like the Minister to answer one quite straightforward question, in addition to answering the shadow Minister’s questions. Is the Minister satisfied that there is sufficient time for the banks to develop the solutions required to meet the challenge before the draft regulations take effect in nine months, in September 2016?

Although the Government are rightly putting a lot of obligations on our banks to ensure that fraud and any sort of financial crime is kept to an absolute minimum, there is a concern that giving free rein to any legal resident of the EU, rather than just UK residents, to be able to open bank accounts in this way is potentially quite a burden on the banks. Is the Minister satisfied that there is sufficient time? Also, if there are particular problems as we get closer to that September 2016 date, will she be open minded about looking at those to ensure that the banks can provide the robustness in security that we all want, and extend the services to provide the competition that the directive has in mind?

Finance Bill

Mark Field Excerpts

Monday 26th October 2015 Commons Chamber

[Mr Gauke]

My hon. Friend draws me more into the specifics, but I hope he will be satisfied if I ask him to let me look at the particular circumstances that his constituent has raised. In that context, before we get into process matters, he should let me look at those particular circumstances. There are good reasons why we are bringing forward new clause 4, which is consistent with our general approach to ensure that the schemes are properly targeted.

As I mentioned, we shall introduce secondary legislation to exclude subsidised renewable energy generation by community energy organisations. This follows the announcement in the summer Budget that the Government would continue to monitor the use of the venture capital schemes by community energy to ensure that the schemes were not subject to misuse and that they provided value for money to the taxpayer. All these changes on energy activities will take effect for investments made on or after 30 November. The Government intend to apply all these exclusions to the social investment tax relief when SITR is enlarged.

New clause 5 corrects a technical defect in the legislation relating to corporation tax instalment payments. Instalment payments are currently made by large companies—that is, companies with profits that exceed £1.5 million. The definition of “large” was previously included in primary legislation, which has since been repealed when corporation tax rates were unified from 1 April 2015, at which point the definition moved to secondary legislation. Following that, there is a mismatch between the cessation of the repealed legislation and the commencement of the new definition, which could be interpreted to mean that corporation tax payments would be due nine months and a day after the accounting period. There is no evidence of companies having acted on the defect, and corporation tax receipts are, happily, above forecast. The changes proposed in new clause 5 correct this uncertainty to ensure that the definition of “large” will apply for accounting periods that span 1 April 2015, so that corporation tax instalment legislation will apply.

New clause 8 addresses an unfairness whereby in certain claims for repayment of tax and restitution through interest payments, taxpayers might receive a significant additional benefit at the expense of the public purse. The vast majority of interest payments that are paid by Her Majesty’s Revenue and Customs are made under the relevant Taxes Act. These will continue to be subject to the normal rate of corporation tax. However, the interest payments targeted by this clause arise from claims made under common law, which stretch over a large number of years—in some cases, going back to 1973—and represent a unique set of circumstances.

As it stands under current law, any payments will be taxed at the low corporation tax rate that applies at the time the payments are due to be made. Since the interest payments targeted by the clause have accrued over years when the rate of corporation tax was much higher than companies currently enjoy, those making the claims receive a significant financial benefit. In addition, such payments may have to be calculated on a compound basis, further improving the advantage gained at the expense of the public purse.

[Mark Field (Cities of London and Westminster) (Con)]

While I support the robust way in which the Minister is protecting the public purse, he will also recognise, not least from the correspondence he must have received, that many colleagues and constituents feel that this fairness deal does not apply both ways. At times when individuals have owed the Exchequer rather more money, they have had interest charged at very high levels. Will my hon. Friend try to ensure that what is good for the geese is also good for the gander in respect of these matters? I entirely understand that he wants an equitable arrangement, but there is a sense from many taxpayers and indeed their financial advisers that all too often the Revenue does not see it in quite the same light when they are on the other side of the equation.

[Mr Gauke]

I can tell my right hon. Friend, who is a tireless defender of the interests of the taxpayer, that the measure is targeted at very specific circumstances in which compound interest may have to be paid in relation to claims which, as I have said, potentially date back to 1973. I hope I can reassure him that we do not believe the same approach should be applied in every case.

As I have said, such payments may have to be calculated on a compound basis, which would increase the advantage gained at the expense of the public purse. To address that unfairness, the Government are ensuring that an appropriate amount of tax, set at a rate of 45% , is paid on any such awards. That rate reflects the long period over which any such interest accrued, the higher rate of corporation tax which applied during the period, and the compounding nature of such potential awards. It is a special rate which applies in special circumstances. We are also introducing a withholding tax on those payments to provide for the easiest method of paying and collecting the tax that is due.

The changes will affect only a relatively small number of companies which have claims related to historical issues. They will affect fewer than 0.5% of companies making corporation tax returns. This is a prudent step to ensure that if any such payments have to be made, they are subject to a fair rate of tax. HMRC will continue to challenge all aspects of the claims on the basis of strong legal arguments.

New clause 8 will ensure that a principled and targeted system is in place to address a potential unfairness whereby a few businesses receive significant benefits resulting from the unique nature of this litigation at the expense of the public purse.

New clause 6 and amendments 71 to 88 relate to clauses 40 and 41. Let me begin with a brief reminder of the provisions in those clauses. Investment fund managers are rewarded for their work in a range of ways, one of which is known as carried interest. It is the portion of a fund’s value that is allocated to managers in return for their long-term services to the fund. The manager’s reward therefore depends on the performance of the fund. Aspects of the UK tax code meant it was possible for asset managers to reduce the effective tax rate payable by them on their carried interest awards. In particular, it was possible for them to pay tax on amounts much lower than their actual economic gains. The changes made by clauses 40 and 41 ensure that investment managers will pay at least 28% tax on the economic value of the carried interest that they receive.

Amendments 71 to 88 make a series of technical changes in relation to carried interest to ensure that it operates as intended. New clause 6 is an addition to the provisions dealing with the tax treatment of carried interest and the related measures on disguised investment management fees. It establishes a comprehensive definition when sums arise for tax purposes under these rules.

[Mark Field]

Will the Minister give us an indication of the amount of consultation that has taken place on these changes, which, obviously, have been introduced since the publication of the Finance (No. 2) Act 2015? While I entirely appreciate that he rightly wants to ensure that the Exchequer receives the correct amount of money, and while I also appreciate that there is clearly a potential for carried interest payments to be at least—shall we say—uncertain, is he entirely satisfied that there has been sufficient consultation to ensure that those who will be affected by the changes have had an opportunity to put their case?

--- Later in debate ---

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

It is an honour for me to speak from the Dispatch Box for the first time under your chairmanship, Madam Deputy Speaker, and I hope that this will be the first of many debates in the Chamber with the Financial Secretary to the Treasury.

I shall first speak to the Government’s amendments and new clauses, before speaking to our amendments on vehicle excise duty. On the whole, the Government’s amendments are technical in nature, designed to preserve the integrity of the Bill, to comply with EU law and to close loopholes. On that basis, we broadly support them, but I will make a few comments.

The explanatory notes and impact assessments relating to the measures were only provided by the Government at 11.50 this morning. Given the detailed nature of the proposed changes, that simply does not allow sufficient time for scrutiny. The hon. Member for Hereford and South Herefordshire (Jesse Norman) has already made that point, and KPMG has also voiced its concern, stating:

“It is important…that the Government is seen to follow the process consistently, and provide suitable time for consultation and Parliamentary scrutiny wherever possible: the addition of entirely new measures to the Summer Finance Bill so late in its passage through the Commons…is likely to foster only uncertainty.”

I hope that the Minister will take these concerns into account and ensure that this does not happen again.

New clause 4 will exclude certain contractual activities relating to reserve electricity generating capacity from the scope of venture capital trusts. These proposals are required to comply with EU state aid rules, along with amendments 31 to 45 and 46 to 70. New clause 5 relates to corporation tax instalment payments and corrects a legislative defect that has previously caused uncertainty over how the legislation will apply to accounting periods that run over 1 April 2015.

New clause 6 relates to carried interest and disguised investment management fees. These are technical corrections to clause 40 that are meant to ensure that where carried interest is charged to tax under the capital gains tax code, the full economic gain is brought into charge to tax. This new clause is intended to prevent sums arising to a fund manager as investment management fees or carried interest from being sheltered from tax through arrangements that have the effect that the amounts arise to other persons.

New clause 8 relates to restitution interest payments and introduces a new rate of corporation tax on amounts of restitution interest that may be paid by HMRC under a claim relating to the payment of tax on a mistake of law or the unlawful collection of tax. The interest element of a restitution award will be chargeable to corporation tax at a special rate of 45% instead of the normal 20% rate. We broadly support this measure, but the Minister will be aware of the hostile views that have been expressed by some businesses. He might wish to take this opportunity to respond to some of those views today.

New clause 3 requires the Chancellor to lay a report setting out proposals for amending the law to ensure that no element of the remuneration aid to an investment fund manager may be treated as a capital gain and that such remuneration shall be treated as income for tax purposes. We agree with the general aims of the new clause but we will listen carefully to what the Minister has to say on this issue.

The proposal dealing with vehicle excise duty relates to rates for light passenger vehicles in the UK and considerably flattens them out by introducing a flat-rate excise charge for every vehicle, regardless of carbon dioxide emissions, from 1 April 2017. First-year rates will continue to be determined by a sliding scale, depending on CO₂ emissions. For most greener cars, which emit below 120g of CO₂ per kilometre, people will now pay VED of up to £160 in the first year, whereas previously they paid nothing—only zero-emission cars will be liable for zero VED. In subsequent years, there will be a flat-rate of VED of £140 a year. Hon. Members will note that this will result in a substantial VED increase for low-emission cars in the first and subsequent years, while there is a substantial reduction for cars that are less carbon-efficient. Previously, VED for subsequent years was banded, with the more polluting cars paying more—up to £505.

Clearly, over time, the approach being taken strongly benefits more polluting cars, which will pay hundreds of pounds a year less, while greener cars, aside from those with zero emissions, will pay about £100 a year more. To put this into perspective, approximately 445 cars are currently in the top least polluting bands and so pay no VED, as they emit less than 100g of CO₂ per kilometre, whereas under the proposed changes only 13 will fall into the exempt category. That represents a significant drop. In addition to those proposals, moves are also being made to additionally penalise vehicles priced at over £40,000 and, over time, there will also be a supplementary rate of £310 for the first five years.

A tax on passenger vehicles has been a feature of Government policy since as far back as 1889, but it is important to note that it was the Labour Government in 1999 who introduced bands of VED linked to the levels of CO₂ emissions. The measure was designed to encourage the purchase and use of more fuel-efficient and low-emission vehicles, with the aim of lessening the environmental impact of an ever-increasing number of cars on the road. There is broad consensus on both sides of the House that VED reform is needed. Greener, more carbon-efficient vehicles are slowly becoming more commonplace across the UK, and this will undoubtedly have clear implications for VED as a future source of Government revenue. VED bands were set up in 2008, when the average emission was 158g of CO₂ per kilometre, whereas the average car now produces 125g of CO₂ per kilometre. Many cars therefore pay no VED at all.

Labour Members agree with the Government that this is unsustainable, but we question whether the approach they have taken to address it is pragmatic. We do not agree that increasing the duty paid on low-emission cars while decreasing the duty paid on higher-emission cars is the logical solution. The fact that zero-emission vehicles will continue to be exempt from road tax is welcome, but we are concerned that a flat rate of VED, as outlined in this proposal, will mean that low-emission vehicles will pay £800 to £1,000 more over a seven-year period than they do now, while many high-emission vehicles are expected to pay up to £440 less.

[Mark Field]

I congratulate the hon. Lady on her debut at the Dispatch Box, and I hope she will be looking across in precisely the same direction for many years to come. Will she give at least some thought to what was said by the Minister, in that there is a delicate balance to be struck here? We are trying not only to encourage people to have low-emission vehicles—this is not just about carbon dioxide, because nitrogen dioxide is increasingly seen as being a problem, although none of this legislation properly addresses that—but to ensure that relatively less well-off people who perhaps have to hang on to a car for many years should not be artificially penalised. Does she not recognise that the balance the Government have tried to put in place is at least a sensible one?

[Rebecca Long Bailey]

I welcome the right hon. Gentleman’s comments. He is certainly a silver-tongued fox, and I look forward to staring at him from these Benches in the months to come. He raises some important issues. Hopefully, I will address them during my speech.

--- Later in debate ---

[Mark Field]

Does the hon. Gentleman recognise that the concept of carried interest is integral to the way that private equity and venture capital industries operate? The Government have been pretty robust at trying to draw the distinction to which he refers, between capital and income, and any abusive schemes will be closed down. Carried interest is not a con. It is the very nature of the way in which venture capital funds operate in investing the funds they have for future projects.

[Roger Mullin]

I thank the right hon. Gentleman. I do not think I accused anyone of being engaged in a con. It is not a con; it is perfectly legal, as George Osborne himself recognised in 2012. The issue is that, despite the technicalities, the ordinary member of the public will look at this and say, “Is this fair, particularly at this time in the development of our economy?” I am primarily driven by what is fair to the wider public in our society.

[Mark Field]

I do not want to get involved in a philosophical debate about fairness or otherwise in relation to the tax system. The hon. Gentleman is making a perfectly logical argument and one that I have some sympathy with—that in the longer term we should try to move towards a system whereby capital gains and income gains are considered at similar rates. The fact that there is such a big disparity between those rates causes the imbalance.

[Roger Mullin]

I agree with much of what the right hon. Gentleman says, but I would go wider. Our whole tax system is incredibly and unnecessarily complicated. Why do we not begin to think about moving towards an alignment, say, of income tax and national insurance in the longer term? There are many areas where the over-complication serves nobody’s interests well. It does not serve the Exchequer or the wider public, so I have some sympathy with the right hon. Gentleman’s argument. I return to the point I was trying to make before his two excellent interventions.

In Committee some Members implied that no other country in the world was doing anything to close the loophole. My recent research shows that that is not the case. For example, the Netherlands has already tackled the issue more thoroughly than we have in the UK. France has moved—perhaps not as far as some in France would have liked at the time—further than the UK to address the problem, and in other countries, such as Sweden and even the United States, it is a growing element of the political debate.

--- Later in debate ---

[Mr Gauke]

The Government and the Treasury keep all taxes under review, and were contrary evidence to emerge, we would of course look at it and, if necessary, adapt the policy. We have, however, made a judgment on the evidence before us, and consumer research demonstrates that first-year incentives are by far the most important when customers come to choose new cars.

The hon. Member for Salford and Eccles asked why the Government are now taxing plug-in and hybrid vehicles the same as conventionally fuelled cars. Such cars will still benefit from cheaper rates. The updated CO₂ banding on first-year rates in the new VED system will strengthen the incentive to purchase the cleanest cars, including plug-in and hybrid vehicles. As I have said, the evidence suggests that up-front incentives are the most effective in influencing behaviour. We will continue to support hybrids and plug-in vehicles with beneficial rates of company car tax and enhanced capital allowances, as well as through the plug-in car grant. The Government have guaranteed that £5,000 grant until February 2016.

Our longer-term plan will be announced after the spending review. To drive down carbon emissions and air pollutants, we will give the greatest incentives to zero-emission cars—those that produce no air pollution or CO₂ whenever they are driven—which pay no VAT.

[Mark Field]

I appreciate that the current regime for vehicle excise duty reflects carbon emissions, but I mentioned in an earlier intervention that one of the biggest concerns in relation to clean air, particularly in London, is about NOx—nitrogen dioxide—emissions. That is a particular problem in emissions from diesel vehicles. Will some consideration be given to making that part and parcel of the consultation on adapting this duty in the years to come?

[Mr Gauke]

The view we have taken about NOx is that it is best addressed through regulation, rather than through vehicle excise duty. It is necessary for the Government to use all the tools in the toolbox in these circumstances. We think that that is the right way to address that concern. Indeed, new regulatory standards are being put in place for NOx.

I will, if I may, turn to the £40,000 premium surcharge. A concern was raised that it might slow the uptake of the latest carbon technologies, such as hydrogen fuel cell cars, where price is already a barrier to uptake. In response I would say that the Government are committed to supporting low-carbon vehicle technologies. All manufacturers will need to invest in affordable new technologies to meet their emissions targets, and the Government have committed £11 million through the hydrogen for transport advancement programme to support the roll-out of fuel cell electric vehicles and 12 hydrogen refuelling stations. Fuel cell electric vehicles are also eligible for the plug-in car grant and beneficial rates of company car tax. Hydrogen is also fuel-duty exempt.

Zero-emission cars, even ones with a list price of £40,000, will pay zero first-year rates. Only a small proportion of motorists can afford cars that cost more than £40,000. The most popular cars in the UK cost an average of £15,000, and even the most popular large family cars cost an average of £21,000. It is fair that premium cars—including low-carbon ones—pay more than ordinary family cars.

The hon. Members for East Antrim and for Carmarthen East and Dinefwr (Jonathan Edwards) mentioned the application of the road fund in the rest of the United Kingdom. Although changes to VED affect the whole UK, the road fund relates only to the English strategic road network, which is managed by Highways England. We are in discussions with the devolved Administrations on how exactly the money is allocated, to ensure that we reach a sensible and fair agreement that reflects the various requirements across the whole United Kingdom. In the meantime, just as for a range of other taxes and spending, the devolved Administrations will receive allocations in the normal way through the Barnett formula, as opposed to an assessment of road use or VED for the various nations of the United Kingdom. I hope that that provides some clarity.

New clause 3, tabled by the SNP, relates to carried interest. We had that debate in Committee, so it is rather familiar territory. I shall avoid the temptation to refer the House to the speech that I gave in Committee on a specific date and suggest that Members look at particular columns—[Interruption.] As the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) says, no doubt the House has already read it but would like to hear it from me again afresh. This point was also touched on by my right hon. Friend the Member for Cities of London and Westminster (Mark Field).

Carried interest is a reward for a manager that is linked to the long-term performance and growth of the funds they manage. They are therefore capital in nature, and should continue to be charged capital gains tax. The measure ensures that private equity managers pay at least 28% tax on the carried interest rewards that they receive. In addition the disguised management fee rules introduced in the Finance Act 2015 put it beyond doubt that when management fees are received by fund managers, the part of the remuneration that is not variable is always subject to income tax. If any part of the manager’s reward payment is properly regarded as income rather than capital, they will continue to be charged to income tax. The Government have launched a consultation to ensure that rewards that should be charged to income tax are always taxed in that way.

National insurance is not charged on capital returns and is payable only on earned income. Bringing carried interest into income tax could raise more initially, but over time the yield would disappear as the industry moved to more competitive jurisdictions.

That is the essence of the debate, and it is instructive to look back at what previous Ministers, not just from my party but from the Labour party, have said at the Dispatch Box, which is that we have to strike a balance, ensuring that we get the revenue we should get and that we properly tax income—certainly we want to tax income as income—while also ensuring that we have a regime that properly taxes capital gains as capital gains. There are risks if we put in place a regime that is uncompetitive and out of line with what happens in other jurisdictions. The point was made that other countries are looking at this issue and that there could be changes to the taxation treatment of carried interest in other jurisdictions. I am aware that there is a debate under way in other countries, but I am not aware of any concrete action taken by any competitor countries to change the approach that is generally followed. The UK is therefore in line with the general approach.

It is important that we do not allow income to be turned into capital in a contrived or artificial way. It is also the case that, as a coalition Government, we took steps in 2010 to narrow the difference between the rates charged for capital gains tax and for income tax. We increased the rate of capital gains tax. It is interesting to hear the argument in the Chamber today about whether there should be a greater alignment between the two. The last Government took two steps to increase the alignment: the first was to increase the rate of capital gains tax and the second was to reduce the additional rate of income tax to 45%. There is a long-standing structural danger when there is a large disparity between the two, but we should also understand why there have been differences in the rates. It comes from a desire to attract investment and encourage individuals and businesses to invest, which is why there is a separate capital gains tax regime. This is an issue that Ministers from all parties have wrestled with over many years, but by taking action in this Bill to create a greater focus on making sure that income is taxed as income and capital gains are taxed as capital gains, we are putting things on a sustainable and fair footing.

I also note the remarks that the hon. Member for Kirkcaldy and Cowdenbeath made about our constituency staff—on other occasions people have referred to cleaners paying a higher rate of tax than their employers—but the changes we have made ensure that we are not in that position. Many of the steps we have taken—for example, to increase the personal allowance—have taken many cleaners out of income tax altogether, whereas the changes we have made to capital gains tax rates have ensured that private equity managers pay a higher rate of tax than they might have paid some years ago.

The suggestion has been made that there is one rule for some and another for others, but the rule we have in place on carried interest ensures that investment managers who are receiving capital returns are taxed to at least 28%, the higher rate of capital gains tax. Any carried interest that constitutes income will be chargeable to income tax. The Government have launched a consultation to ensure that when investment managers should be charged for income tax, they will be.

I hope that is helpful to the House in dealing with the various points that have been raised. As I say, in this first group—[Interruption.]

Draft Double Taxation Relief and International Tax Enforcement (Algeria) Order 2015 Draft Double Taxation Relief and International Tax Enforcement (Sweden) Order 2015 Draft Double Taxation Relief and International Tax Enforcement (Senegal) Order 2015 Draft Double Taxation Relief and International Tax Enforcement (Croatia) Order 2015 draft Double Taxation Relief and International Tax Enforcement (Bulgaria) Order 2015 Draft International Tax Enforcement (Brazil) Order 2015

Mark Field Excerpts

Wednesday 21st October 2015 General Committees

[Mark Field (Cities of London and Westminster) (Con)]

I wish to make a brief contribution. I will leave it to the Minister, of course, to answer the issues raised by the hon. Member for Wolverhampton South West, but in part it is an EU convention to use this particular template, rather than an exercise of British fiscal power. One could almost ask—from my slightly different political standpoint—a somewhat different question, as I am someone who favours the idea of tax competition. I can see the advantage of having double taxation treaties, particularly given the importance of the UK as a global capital. There are a significant number of entertainers, artistes, sportsmen and others from Sweden, Croatia, Algeria and elsewhere, many of whom are constituents of mine but some may, of course, be constituents of the hon. Gentleman.

[Rob Marris]

The hon. Gentleman is not an Abba fan, is he?

[Mark Field]

I should perhaps say that, in my latest role as vice-chairman of the party, I spent this weekend in a place I suspect I will never go to again, Karlstad in the middle of Sweden, attending our sister party’s party conference. I can assure the hon. Gentleman that the exports of Sweden are not limited to Abba and it has to be said that the Swedes have a great love for our country. Something that I know will impress the hon. Gentleman is that there is a great passion from the Swedes that we should stay in the European Union—

[The Chair]

Order. I appreciate that consideration of such instruments sometimes benefits from some lighter interventions, but I would not wish those to take a disproportionate amount of time from the debate.

[Mark Field]

I take on board your view, Mr Chairman, and you can be assured that the light interventions will be light in time terms as well.

There is also an argument that having these double taxation treaties militates away from the idea of tax competition. In other words, we are standardising our tax across the globe. It makes a hell of a lot of sense, particularly in the three of the four cases we are dealing with of EU nations, that we should be looking to try and do that. It would be wrong in my view to assume that we are playing the whip hand and utilising our relative economic strength in this regard. It is healthy that we try to standardise these documents as far as possible. It is a good argument to Croatia and to future members of the European Union that they have similar treaties to those that apply to Sweden and I suspect to many other nations where we have double taxation treaties. This is a healthy development. I will now sit down and hopefully this will be my last contribution on this afternoon’s matters.

Tax Avoidance

Mark Field Excerpts

Wednesday 11th February 2015 Commons Chamber

[Mr Gauke]

I make the point that I have made before: there is no suggestion and no evidence that Lord Green was complicit in any wrongdoing—that remains the case. Opposition Members can stand up to make allegations and suggestions, but there is no evidence that he was engaged in that type of behaviour and certainly no information was available to Ministers to suggest that he was.

[Mark Field (Cities of London and Westminster) (Con)]

The Minister made the important point in earlier exchanges that there should never be any political inference, whichever Government are in power, in disciplining or legal action over these sorts of matters. We would be going down an incredibly dangerous path, particularly this close to an election, if the pressure became so strong that politicians tried to play to the gallery and interfere in any way with the legal process.

[Mr Gauke]

My hon. Friend makes an extremely good point, and the fact that some Opposition Members do not appear to agree with it is troubling. The role of the Government is to set out the policy. Our philosophy is clear: individuals and businesses must pay what they owe, just like the vast majority of UK taxpayers. That point has been reiterated by the Prime Minister and the Chancellor again and again. Aggressive tax planning and, indeed, tax evasion are simply not acceptable. As I will set out, this Government have a proud record on that front.

--- Later in debate ---

[Mark Field (Cities of London and Westminster) (Con)]

It is understandable, especially this close to a general election, that political fervour over tax avoidance comes to a contentious pitch. Politicians on both sides of the House would do well to reflect on the fact that there was virtually universal consensus on the appropriate level of regulation to be applied to the financial services industry in the decade or so before the crash in 2008. Since then both the erstwhile Labour Administration and the current coalition Government have made often courageous moves to take a global lead to clamp down on tax avoidance and evasion.

Those moves were courageous because taking unilateral action in that arena has been likely to disproportionately damage the UK’s own narrow economic interests. Moreover, while this Government have flagged up in successive G8 and G20 summits their desire to take that lead, they have also risked being criticised for a lack of delivery, as we have heard today, simply because other nations have been less willing to follow. The truth remains that for as long as the UK has a globally competitive financial services sector, effective regulation against tax avoidance can be achieved only by concerted, international and, ideally, global agreement.

Over the past four years, I have been an adviser to the law firm Cains, and as a result I have seen at first hand the work that has been done within the Isle of Man and other Crown dependencies to get our house in order in the sphere of tax avoidance and transparency. A key focus for the Isle of Man is engaging with the emerging markets to drive investment into the rest of the UK, not least the north-west region of England.

For decades, the Crown dependencies have also had a close and effective working relationship with the City of London. For the Isle of Man, this includes connections with many of the leading law firms, accountancy practices and banks in the City. This is a very important route in providing inward investment into Europe and the UK by foreign nationals and in assisting UK businesses to expand overseas. That involves not just financial services but, for example, precision engineering, aeronautical engineering, professional services generally, property development, shipping, yachting, and aircraft registration. As the local Member of Parliament representing the City of London, I am all too aware of the importance of the services provided by the Crown dependencies to the wider UK economy.

In recent years, the Isle of Man has attempted to strengthen its links with the UK regions, many of which desperately need good economic activity, with a view to providing them with foreign direct investment and jobs. It is working closely with the neighbouring cities of Liverpool and Manchester, and it has signed a memorandum of understanding with Northern Ireland. It believes that by working in a mutually supportive manner with the UK, wealth and jobs are generated for all of us, including those in the more deprived parts of the UK. Specifically, the UK banking industry’s competitive advantage is increased by having access to the Isle of Man funds, which have contributed some £40 billion a year in liquidity to domestic lending. That international offering of UK banking is in my view augmented by what would sometimes be called tax havens, but which are centres of excellence for things such as expatriate banking services.

Transparency lies at the heart of any effective tax avoidance regime. For some years, the UK Government have often led the way in ensuring that standards apply to all UK dependencies so that anti-money-laundering measures and countering the financing of terrorism are at the forefront of our ongoing commitments. Consistent initiatives over recent years have ensured that tax evasion, corruption and related criminality are subject to the strictest international standards.

As the Chancellor of the Exchequer rightly pointed out over the weekend, we are also subjecting so-called tax havens to a new rigorous beneficial ownership regime. The Isle of Man, for example, has already co-operated on this by ensuring and verifying the integrity of the company beneficial ownership information it collects, particularly through taking a leading role in the regulation of trusts and company service providers. As a result, the UK tax authorities have been provided, and continue to be provided, with effective access to all these markets. Nevertheless, the Governments of all our Crown dependencies have always been committed to maintaining domestic legislation, policies and procedures that ensure effective compliance with the international standards; and, where necessary, to progressing further measures in future to implement evolving international standards and the very best practice.

I wanted to put this on the record today because much feverish and worryingly inaccurate commentary surrounds the activities of our Crown dependencies, which, as I say, often provide great liquidity and real benefit, particularly in some of the poorer parts of the UK. Compliance with the highest international standards is at the heart of their activities nowadays. Our own Government have much to be proud of in their keen insistence that tax evasion become a thing of the past.

Tax Avoidance (HSBC)

Mark Field Excerpts

Monday 9th February 2015 Commons Chamber

[Mr Gauke]

This information about HSBC has been in the public domain since 2007—that is when the leaks occurred. The whole story may have come as a surprise to the hon. Lady, but it should not have done.

[Mark Field (Cities of London and Westminster) (Con)]

It is profoundly depressing that there is yet another scandal on the front pages to do with one of our banks, given the importance of a functioning banking system to our whole economy. It is also a bit depressing to watch people with the benefit of hindsight suggesting that they would have acted differently when in government. Will the Minister say how we can work across Parliament and all parties, to ensure a banking system that works for all small and medium-sized businesses that desperately require money to ensure ongoing economic growth?

[Mr Gauke]

I refer back to the point made by my hon. Friend the Member for Wyre Forest (Mark Garnier) about the work undertaken by the Banking Commission. I hope we have built a consensus around the significant reforms that occurred under this Government, which have put our banking sector on a much firmer footing.

Finance Bill

Mark Field Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Mr Gauke]

I am grateful to my hon. Friend for another example of Labour opposing yet another measure that this Government have taken to try to reduce the deficit. At least Labour Members did not make another spending pledge on this occasion, but we will, of course, continue to monitor their remarks very closely because they frequently do make spending pledges. [Interruption.] Perhaps the presence of the shadow Chief Secretary, the hon. Member for Nottingham East (Chris Leslie), has instilled some uncharacteristic discipline in Labour Front Benchers.

Let me turn to the question of why some circuses are excluded and some points of definition. With the exception of the named exclusions, other types of performing arts can benefit, provided that those giving the performance can demonstrate that they are wholly or mainly playing a role and that each performance is live and that the presentation of live performance is the main object, or one of the main objects, of the theatre production company’s activities. The Government believe that using that definition, which considers the nature of the performance, is more appropriate than listing types of performing arts. In cases where further clarity may be required, companies should seek professional advice or contact HMRC. On the subject of HMRC, I was asked about its resources. The House may be pleased to know that a specialist unit has been provided to assist businesses with making claims under this relief.

The definition of “touring” has been raised and whether more should be done in terms of relating it to geographical location. A production can qualify as “touring” if there is an intention to perform at six or more separate premises or to present 14 performances in two or more premises. The hon. Member for Bishop Auckland (Helen Goodman) is right to say that we considered alternative definitions of “touring,” including the use of geographical restrictions, but we believe that our definition provides a simple and effective way to support the range of types and sizes of tours that take place. That is why we have gone with that definition.

On the question whether this will cause a significant administrative burden for charities or not-for-profit theatre companies, minimising complexity and ensuring straightforward compliance was one of the central considerations in designing the relief. That is why we are basing it on the film tax relief model, which is also used successfully for other creative industry tax reliefs. We have worked closely with industry in determining the design of the relief, to ensure that it works for the industry, particularly the not-for-profit sector. Officials continue to engage with industry, including by attending events to help and advise in the run-up to companies starting to make claims in September. Ultimately, detailed guidance will be published on the HMRC website to ensure that companies and charities get the support they need.

[Mark Field (Cities of London and Westminster) (Con)]

Is it the Treasury’s intention, for the sake of simplicity and certainty, to ensure that the definition of “touring” is a nationwide one? In central London, which has a lot of theatres, it would be very easy to suggest that performing in only two or three theatres would not be a tour.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. It is not good for Members just to walk in and intervene, in fairness to those who have been here throughout. I know that the hon. Gentleman has a great interest in this issue, but may I ask Members to please not just walk in and intervene? I am sure, however, that the Exchequer Secretary would like to take the question on board, because it is such a good intervention.

--- Later in debate ---

[Chris Leslie]

I am sure those investment fund managers have absolutely no interest in the abolition of SDRT in any way! I thought the hon. Gentleman was once a Liberal Democrat. Before the general election, the Liberal Democrats used to pretend they were in favour of standing up for the vast majority of people, against the vested interests in society who tend to look after their best interests, yet here he is again, voting for tax cuts for investment fund managers. This is a specific element of the Bill that we opposed. We tried to persuade the Government to drop that measure, but we were unsuccessful.

[Mark Field]

I feel I must stand up for investment fund managers, not least because their business brings significant amounts of money to the UK. I reiterate the sensible words of the hon. Member for Redcar (Ian Swales): ultimately it is all of us who are investors in such funds who will reap the benefits of ensuring that this business comes to these shores, rather than to many other globally competitive financial centres.

[Chris Leslie]

The hon. Gentleman represents very many of those investment fund managers. He is doing the job he was sent to do, but this is a matter of priorities, and I have to say that the Opposition just disagree. The Treasury has finite resources at its disposal, and at a time of pressures, cuts, and rises in tax—through VAT and in other ways—that hit the least well-off in society, I just disagree with Ministers and Members on the Government Benches that this should have been the priority.

There were other specific areas where we tried to persuade the Government to improve the Bill, such as the proposal to give shares to employees in exchange for employment rights. We believe that undermines what should be a healthy approach to employee share ownership, because it gives the sense that something is being taken away, and that there is a disadvantage. That point was voiced not just by Opposition Members, but by some Government Members. Again, however, we could not persuade the Government on that.

So many tax loopholes need to be addressed, and the Finance Bill should have been the opportunity to tackle some of them, not least the notorious quoted eurobond exemption, which is costing taxpayers hundreds of millions of pounds. Ministers ought to have had the courage to take on that issue. Some of the Bill’s proposals for pensions flexibility are sensible, but big questions remain about the advice we will be able to give retirees to make sure that they get the guidance they need, at that most crucial point in their financial lives, to make the right choice, if they are not purchasing an annuity. Ministers have not lived up to the challenge of ensuring that that guidance and advice is possible. In the debate, I heard that that guidance may currently equate to 15 minutes of face-to-face advice—perhaps I should say face-to-faces advice, because the Minister with responsibility for pensions is now saying, “We will give you some guidance, but it might be as part of a group of people.” The Government have to improve the legislation in this area.

The Bill contains a proposal for a married couples allowance. The Chief Secretary to the Treasury and, I suspect, the Chancellor personally disagree with it, but in a coalition they have to throw a bit of meat to the Back Benchers. The allowance discriminates between forms of partnership and does not help many married couples at all, as we see when we look at the total number who will benefit. If we have tax cuts to give, they should be given to as many people as possible.

Of course, we also tried to improve the specifics and dissuade the Government from continuing their tax cut for millionaires—the reduction from 50p to 45p in tax on earnings of more than £150,000. Again, that is a sign of their priorities: they stand up for those who already have significant wealth in society, but do not respond to the needs and requirements of the least well-off.

We tried our best to improve the Bill, but it missed a number of opportunities. Significant reforms should have been in it, but are conspicuous by their absence. Why did the Treasury not put the cost of living concerns front and centre in this legislation? I am not just talking about making sure that energy companies stop ripping off households up and down the country, or about passing on wholesale price reductions to ordinary households; the Bill should have contained, for example, steps towards a 10p starting rate of tax. There are a number of ways in which cost of living issues should have been far higher up in this legislation.

--- Later in debate ---

[Mark Field]

I am glad that I am looking more youthful and Conservative this afternoon, Mr Deputy Speaker.

This is a very good Bill containing much that I agree with. The Minister has rightly pointed out that it does some important things, particularly on something close to my heart—the theatre industry in my constituency—but also on technology, which is one of the big growth areas for the future prosperity of this country.

I want to talk about an ongoing concern of mine. The Minister will be aware of what I am about to say. Barely a fortnight ago, Her Majesty’s Revenue and Customs began writing to some 5.5 million taxpayers to confess that it had got things wrong. Errors in the pay-as-you-earn calculation had led the taxman to charge some 2 million fellow citizens too much tax and a further 3.5 million Britons had been assessed too leniently. That latter group now faces the prospect of several years of repayments. All this is in spite of expensive IT and personnel reforms that were meant to improve the system’s accuracy.

That news came at a time when the House was scrutinising this Finance Bill, which proposes bestowing ever more powers upon that organisation—in my view, an unjust reward for yet another year of error-strewn performance. Meanwhile, a consultation is now under way as to whether HMRC should be given direct access to UK citizens’ bank accounts so that it can claim from source any tax that it believes it is owed. I share the view of many people on the Government Benches who are concerned that this coalition Government are overseeing the transfer of very considerable powers to the state. I fear that a precedent will be set for a future Labour Government, which we all hope will not come any time soon. However, such a Government might well be minded to expand further the taxman’s remit.

Will the Minister reconsider the new accelerated payments regime that is proposed in the Bill—other Members have spoken on that in the past couple of days—about which I raised my own concerns at Second Reading? It is vital that the Treasury considers carefully the impact of granting such powers to an organisation that, I am afraid, has proven itself time and again to have incorrectly calculated tax on a grand scale.

[Mr Gauke]

Since 1944, there has been an end-of-year reconciliation under the PAYE system, because not all the information necessary to calculate the PAYE amount is available to HMRC during the year. To some extent, the PAYE amount is a provisional one, which is corrected at the end of the year. Notifying people at the end of the year quickly is not the system failing; that is how the PAYE system operates. It is not errors; that is the system.

[Mark Field]

I do appreciate that, but the Minister will also appreciate that trust in many institutions, whether Government, banks or this House, has been at an all-time low in recent decades. If we are going to pass on more powers to such institutions we—

[Mrs Mary Glindon (North Tyneside) (Lab)]

Will the hon. Gentleman give way?

[Mark Field]

If the hon. Lady will excuse me, I will make some progress, as there are other Members who want to speak.

We are now looking at drawing tax avoidance measures so widely. It has been common practice for investors to err on the side of caution and sign up, as the Minister knows, to the HMRC’s own disclosure of tax avoidance schemes—DOTAS—register. Currently, if the UK tax authorities wish to challenge the legitimacy of a DOTAS-registered scheme in court, the taxpayer is permitted to hold on to the disputed tax while the case is being resolved. The Government believe that that incentivises scheme promoters to sit back and delay resolution, so they propose extending the accelerated payments measure to existing DOTAS-registered schemes. That will mean that disputed tax is paid up front to the HMRC, and will be returned if a scheme is subsequently found to be legitimate.

I quite understand why the Minister has felt tempted to explore that route. There is, I understand, a desperate need for money to shore up the public finances, which are still far less rosy than any of us would wish, with a recovery that remains somewhat fragile. There is also, understandably and justifiably, a consciousness of the need to deal more quickly with the tens of thousands of outstanding mass-marketed avoidance cases that are currently clogging up the courts.

However, there is also a vital issue of principle at stake. The Government have been celebrating and espousing their reverence for the eight-centuries-old principles set out in Magna Carta. It was that charter that established the supremacy of the law by dictating that no Englishman could be punished without first going through the proper legal process. That set in train a constitutional revolution that has seen billions across the globe having their rights expanded and protected against an all-powerful state.

Yet at the same time, our Government are now overseeing the creation of a law that will permit HMRC to confiscate a citizen’s property before the courts have established who is legitimately entitled to it. The DOTAS register was a good idea. It was designed to promote openness and transparency in investors’ relations with the HMRC. It is now, in effect, introducing retrospective legislation, with DOTAS declaration being used as a stick with which to beat legitimate investors—those who had never planned on having the liquid assets to meet disputed liabilities.

No doubt the Government—any Government—feel they can railroad those proposals through on a wave of popular demand for new measures to tackle tax avoidance, but although I agree that we have to clamp down on illegitimate tax avoidance, I worry about the potentially very wide-ranging consequences, including the fundamental undermining of the Government’s overarching aim to make Britain a place that is open for business. I support many of the underlying measures in the Bill that are focused on that aim, but this measure expands a profoundly anti-Conservative notion of retrospective legislation. The Minister and I have both been shadow Ministers; we know the number of Finance Bills proposed by the erstwhile Labour Administration in the latter half of the last decade that we expressed concern about because they contained precisely this type of anti-avoidance legislation with retrospective elements. We have to recognise that considerable hardship is imposed on many of those who are affected by such provisions.

I addressed these issues in an article in The Daily Telegraph several months ago. I was and continue to be inundated with letters and e-mails from ordinary people across the country who are utterly dismayed that a Conservative-led Government would initiate such a change in law. Let me highlight some of their comments, so that the Minister is fully aware of the impact of the proposal. One correspondent advised me:

“If this goes through, HMRC will be able to demand immediate and upfront payment of the money it says I owe as a result of their changing the law retrospectively—but without me even being able to present any arguments to the tax courts in my defence. If this were to happen I would need to lose my home in order to pay the bill. It is a monstrous injustice.”

Another correspondent wrote:

“If one was to listen to the Government, it could easily be believed that users of the structures declared under the DOTAS are malicious, super rich individuals, out to escape payment of their ‘fair share’, in contrast to ‘honest taxpayers’. I have been an employee of a company that provided a remuneration structure duly registered under the DOTAS.

In the aftermath of the most severe economic crisis in generations, the IT industry, in which I work, got hit very hard. I have been subjected to rate cut after rate cut since 2009, and for me, nominal income is only going in one direction: down. Yet, if I listen to”

the Government,

“it sounds like complying with an ‘accelerated payment’ will be but a well-deserved inconvenience, forcing me maybe to sell one of my numerous yachts or…homes. I am shocked and appalled at the cynical discourse that consists of creating this false image. I personally feel deeply insulted…. I am not a rich person by any stretch of the imagination; my partner and I rent a one bedroom apartment, and we live modestly.”

What is slightly depressing is that this sort of scrutiny has not really happened. I well understand why the Labour Opposition feel they do not want to stand up for those individuals affected by the accelerated payments regime. I ask the Minister once again in the implementation of the Bill to consider an exception in the case of existing DOTAS-registered schemes whose promoters have taken all reasonable measures to enable a dispute to be brought before the statutory appeals tribunal. I think there should also be a right to appeal against an accelerated payment on the ground that the money is not due, or that a follower notice or accelerated payment notice is not applicable.

Although the Government say the legislation is not retrospective, as it does not change an underlying tax liability, it will in fact apply with retrospective effect over the past 10 years to anyone who currently has an open appeal or inquiry. In my view, if the provision is to come into effect, it should be applied only in cases involving tax planning carried out after Royal Assent to this Finance Bill.

I am sorry if I sound a little churlish. The Minister is well aware, because we have discussed this privately as well as on the Floor of the House, that I think there is much that is good in the Bill, but it is right that these things are properly scrutinised and that scrutiny is ongoing. We are putting into place certain measures that I think set a potentially dangerous precedent and run counter to a principle that should be close to all our hearts: that the British tax system and the British economy should be open for business and open to the opportunities that we all want our constituents to benefit from as we move into a strong economic recovery in the years ahead.

Finance Bill

Mark Field Excerpts

Tuesday 1st July 2014 Commons Chamber

[Rushanara Ali]

I am here to debate the new clause. I am focused on what the Government are doing. I support the new clause because it is not fair that £3 billion a year should be going to millionaires. On top of that, as my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) mentioned, bonuses in the financial sector are up by 83%. My constituents are living between the City of London and Canary Wharf; they see the inequities and want a fair chance. They are not complaining about people earning a decent living, but they want the Government to be fair in how they tax.

[Mark Field (Cities of London and Westminster) (Con)]

The hon. Lady represents a seat next door to mine. We both have significant numbers of constituents living, as she would put it, in poverty—although poverty levels today are very different from those certainly in the first half of the last century and before—and significant numbers who are relatively well off. Does she not recognise that by reducing tax rates we are bringing more money into the Exchequer? She says that the issue is not about the politics of envy, but does she not recognise that higher rates of tax would bring less into the Exchequer to pay for the very services that our more poverty-stricken constituents so desperately need? She is undermining the very case she tries to make.

--- Later in debate ---

[Rushanara Ali]

The Government have made a great deal of their efforts to support middle-income families, but frankly their words have been empty. They have prioritised those at the top. Will the Minister say whether his Government will rule out reducing tax further for high earners to 40%? I give him the opportunity to say so now. The revenue that the Government are forgoing could be used to support others—to get young people back to work, for instance.

[Mark Field]

rose—

[Rushanara Ali]

I will not give way again as I am conscious that others wish to speak. I will conclude.

The Government’s so-called long-term plan should not be pursued at the expense of those in lower and middle-income families. That is why the new clause would rightly force the Chancellor to publish how much extra tax would be paid by high earners under the 50p rate. That would establish how much those earning more than £1 million per year would contribute. That would go a long way towards giving us the clarity we need.

Our vision is to work towards cutting taxes for the 24 million people on middle and lower incomes through the introduction of a 10p starting rate of tax. That is not only the way to a fairer system of taxation but the only way to nurture sustainable growth for all. After three years of flatlining, the growth that we are beginning to see is welcome, although it is still coming much slower than it is to countries such as the US and Germany.

Opposition Members have a vision for a broad-based recovery forged through the efforts of all people from all backgrounds. We must remember that average wages will have fallen by 5.6% by the end of this Parliament. How does that make our society one in which we are all in it together? I do not hear members of the Government or Government Back Benchers use that phrase any more. I challenge them to use it today if they still believe that it is not a joke as far as most people in this country are concerned. Only Labour’s plans for a fairer and more progressive taxation system will support the return of wages to a level seen before 2010.

In conclusion, I return to the basic premise of Labour’s argument. It is simply not acceptable or fair for millions of people to pay more in tax while millionaires pay less. Since 2010, tax rises and cuts to benefit have left average households worse off. Real-terms decreases in wages across this Parliament have made the financial plight of ordinary people across the UK tougher. People have become dependent on food banks as they have never been and there is rising homelessness in cities such as London. There is rising poverty—child poverty in particular—not only in my constituency, but up and down the country, but this Government still find the energy and will to reward the top 1% of earners while everyone else suffers.

The Government have pandered to the worst suggestions of their critics, namely that they are out of touch, have failed to spread any meaningful recovery to those who desperately need it and are out for the few and not for the many. For those reasons I support Labour’s proposals on the tax cut and support the new clause.

--- Later in debate ---

[Ian Swales]

I do not see VAT mentioned in the new clause. I was pointing out that, as the hon. Gentleman’s own Front Benchers say, the analysis of the benefits of the policy comes out as plus or minus zero: it could have a large cost or be a significant benefit. If we are in that sort of ballpark, we are clearly not talking about huge measures that will cut the deficit.

Under this Government, the wealthy have been paying a lot more every year in income tax than they ever did in any year under Labour. They are paying more in many other ways as well. The Labour Government thought it was okay for the wealthy to pay £250,000 in pension contributions and get full tax relief; the coalition Government have reduced that to £40,000, making £95,000 a year of tax benefits that the Labour Government were happy to give but this Government are not. Capital gains tax was at the derisory level of 18%, and is now 28%. The level the Labour Government charged on capital gains was lower than the rate of income tax, so hedge fund managers could be paying a lower rate of tax than the people who cleaned their offices, a truly shameful record.

If anyone is lucky enough to be spending £1 million a year, they will be paying £25,000 more in VAT. To answer a point made by the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) earlier, people on low pay spend very little on standard rate VAT items. Once again, the right hon. Member for Wokingham mentioned this: most of the day-to-day living costs of most people—housing, energy, food and many other costs—do not carry standard rate VAT, so the wealthy are paying more there.

The thresholds for inheritance tax were going up under Labour but have been frozen under this Government through the efforts of the Liberal Democrats. We know that the party with which we are in coalition would like to return the level to £1 million, as it campaigned on that during the last election and I believe it will do so again next time. We are pleased that the threshold for inheritance tax has been frozen throughout our time in Government, because we feel it is the right thing to do at this time. We also saw industrial-scale tax avoidance under the previous Government, and many cases now arriving in court go back to the days when they were in power. The idea that this Government are not taxing the wealthy does not stand up to examination.

[Mark Field]

Will the hon. Gentleman give way?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Mr Frank Field.

[Mark Field]

I’m not that bloody old, Mr Deputy Speaker.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I don’t think we use that language, either.

[Mark Field]

I am sure that the right hon. Member for Birkenhead (Mr Field) would agree.

The hon. Member for Redcar (Ian Swales) is making an important and courageous speech from the Liberal Democrat Benches. It is one that many of us on the Conservative Benches could have made, and I thank him for putting some of the issues that have been raised today into perspective. There has been a lot of outrage on the Opposition Benches but it is important that the history of precisely what went on during the previous Labour Government is put on the record.

[Ian Swales]

I thank the hon. Gentleman for that. I agree that it is important: the narrative that Labour taxes the rich until the pips squeak and that we do not does not stand up to examination.

Office for Budget Responsibility (Manifesto Audits)

Mark Field Excerpts

Wednesday 25th June 2014 Commons Chamber

[Ed Balls]

My right hon. Friend is absolutely right. If we, as a House, decide to proceed in a cross-party way today, and in the coming days, this reform can be agreed over the summer, the legislation to back it can be put in place, and we can have independent audits of manifestos at the next election. It is not a matter of timetabling, because the head of the OBR says that it can be done: it is only an issue of political will. If, in the end, the Chancellor—who has not turned up—does not want to do it, it is not going to happen. It is not going to happen not because the OBR will not do it, because we will not do it, or because it cannot be done, but because Government Front Benchers do not want it to happen.

[Mark Field (Cities of London and Westminster) (Con)]

I have some sympathy with what the shadow Chancellor is trying to achieve. While he is right that the OBR should be beyond partisan politics, it is the case that it has not been beyond reproach in relation to its predictions and continues to be well out of line, given what we expected our deficit to have come down to. Does he recognise that this process is not going to draw a line under any disputes over matters to do with economic programmes? Ultimately, it will be a judgment by the voters rather than the OBR, and this process should not be allowed to take it out of their hands come election time.

[Ed Balls]

Of course, none of us is beyond reproach, including the OBR and including the Chancellor. The OBR has had a few rather sharp things to say about some of the Chancellor’s practices over the past few months as regards fiscal decision making. In the end, of course the voters have to decide; they have to look at the manifestos and make their judgment. In our view, if an independent body—the OBR—scrutinises the costings of individual proposals to check that they have been done properly, that can only be to the benefit of the public debate. Ultimately, it does not take away the voters’ choice, but why would we choose to have them misinformed or uninformed when we could have them properly informed? That is the choice before the House.