Finance Bill

Debate between Mark Field and Philip Boswell

Monday 5th September 2016 Commons Chamber

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

The hon. Member for Aberdeen North (Kirsty Blackman) will be glad to know that she can also come to my constituency and hear a few Aberdonian accents from time to time, without having to go out to the middle of Texas.

I have a lot of sympathy for the situation that the hon. Lady finds herself in. Inevitably, there has been a lot of tinkering with tax rates in oil and gas. In my 15 years in the House, it has seemed that barely a year goes by without many paragraphs of any Finance Bill being part and parcel of this. Clearly, we are not yet to know whether the gas price and oil price will be stabilised at $50 to $60 a barrel or will go in different directions. I am sure that the Treasury has this whole issue under constant review.

[Philip Boswell]

Many believe that the oil and gas industry has been adversely affected by Brexit. Earlier this year, I asked this Chancellor, in his first Treasury questions, when the people of the UK could get an insight into the scale of capital flight following Brexit. He replied:

“a series of data publications during the late summer and autumn will inform a proper response at the autumn statement.”—[Official Report, 19 July 2016; Vol. 613, c. 664.]

Many other hon. Members in this House asked similar questions to which the Chancellor gave a similar answer—that all will be revealed in the autumn statement. Does the right hon. Gentleman agree that the Chancellor, having now had a few months to think about it, should at least furnish us with the date of the coming autumn statement?

[Mark Field]

I suspect we all know that the autumn statement will be coming up at some point in late November or early December, if precedent is anything to go by. As someone who was also very firmly in favour of Britain remaining in the European Union, I say to the hon. Gentleman that we have to make Brexit work, and this will take time. I understand the frustration of many who would like to see the Government put forward a template on these matters today, but I think they are right to recognise that we have to play our cards close to our chest. This is a diplomatic process that will take some considerable time. One of the great strengths that we have had as the United Kingdom in diplomatic affairs, going back many centuries, is the sense of being able to make something work for the interests of this country. We have to recognise what is going on in world affairs, whether in the oil and gas price or in prices in other areas. This is an incredibly volatile time, politically and economically, and the notion that we can have any direct template in place now, or indeed at any point during the course of this year, is wholly misleading.

[Philip Boswell]

The hon. Gentleman is being most gracious and I thank him for his time. The right hon. Member for Broxtowe (Anna Soubry) has mentioned real concerns expressed by the Japanese Government re investment in the UK. This concern was echoed when President Obama confirmed, post-EU referendum, that the EU is a much greater priority for US trade relations than the UK outside of the EU. Given US investment in oil and gas in the UK, does the right hon. Gentleman agree that this Government have had more than enough time to give the British people a definitive definition of “Brexit” and should be informing the public of urgent action they are taking now to support important industries such as the oil and gas sector?

[Mark Field]

A huge number of actions are taking place now. It is far, far too early to have any definitive approach as to exactly what Brexit will entail. We have to ensure, to an extent, that we get as much of the benefit of being in the single market—I see that, obviously, in the context of the City of London and its passporting rights—as is compatible with the public’s clear view about free movement of people. I hope that in the months ahead we will begin to work on that. However, it is far too early, and it would be doing a disservice to all industries—oil and gas and others—that are so dependent on exports and on being global industries, with the expertise that they have across the globe, to be definitive about precisely what role Brexit has to play.

I wanted only to make a few brief comments on new clause 10 with regard to the patent box. I am sorry if I am moving slightly ahead of the observations of the hon. Member for Hayes and Harlington (John McDonnell) on this matter. There has perhaps been a danger that Governments of all political colours over the past decade or so have been rather too much in thrall to certain industries, whether financial services or the global internet technology industries. It is worth pointing out that the benefit—the very significant benefit—of the whole patent box plan that was put in place by the former Chancellor some years ago is that it has begun to enable intellectual property value to be quantified and used as collateral in many of the fast-growth companies in the technology sphere. It strikes me that the Treasury, any Treasury, will now need new sources of revenue to swell our collective coffers at a time when the deficits remain dangerously high. Indeed, in what might be regarded as normal peacetime conditions we have an unprecedentedly high rate of deficit.

I also think that it would be wise not to ignore the level of public anger at the wilful tax avoidance of a number of the digital disruptors that are potentially the beneficiaries of this patent box plan, and the influence of that on the western economies has at times been somewhat pernicious. The sobering truth is that the global technology and communications service providers’ stratospheric growth over the past two decades has been aided by their ability to avoid taxation. Whether it is Google, Uber, Facebook or Apple, to name but four, they have been able to squirrel away their profits in the most tax advantageous manner, and I hope that the Treasury will consider that, as well as issues around the patent box, not just in the next six months but in the years to come to ensure that we have a more equitable situation that will be accepted by the public at large.

I accept also that as regards creative industries and global technology players it would be wise to reflect that perhaps elements of this advantageous tax treatment, not just by the UK Government but by other Governments in the western world, have been the price that taxpayers have had to pay to secure the essential co-operation in the sphere of internet surveillance that western Governments believe—rightly, in my view—to be so vital to national security.

I do believe, however, that it is time to recognise that corporation tax as we know it is probably past its sell-by date as an appropriate means of capturing value in a modern globalised economy. A levy on turnover, rather than profits, might in time be the best way forward—[Hon. Members: “Hear, hear.”] I appreciate that the Floor of the House is perhaps not the place to be making policy, but I hope that the Treasury will at least give it some serious thought, particularly for these sort of industries. I always worry when “Hear, hear” comes from the wrong quarter, and I only wish there were a few colleagues on the Benches behind me to agree—but it came from the hon. Member for Wolverhampton South West (Rob Marris) and from elsewhere.

At the beginning of the year, Google made the headlines when it was revealed that despite employing some 2,400 people in the UK and harvesting a national estimated profit in excess of £1 billion—we obviously do not know exactly what that profit level was—it was able to pay corporation tax at a level of just 3%. Even before its recent travails, last year Apple declared foreign pre-tax profits of some $47.5 billion, on which it paid only $4.7 billion—some 9.9%—of tax, compared with group-wide income taxes of some $17.7 billion. That suggests that taxes on profits will not be the right way forward, particularly in these global industries where there is a risk that money can be squirreled aside. That said, it is important to say that the patent box, while purportedly and in some ways giving preferential treatment in this area at which we should look closely, has none the less brought some significant benefits.

One of the biggest problems that faces many internet businesses as they grow is the ability to quantify the value of their intellectual property rights. In many ways, failure to do that means that they do not get the opportunity to collateralise their book value to be able to borrow for the future. The patent box has made some successes in this regard.

I apologise for jumping the gun, as I know that we are slightly more interested in hearing the justification from the Opposition for their new clause 10. I do not feel that it would be the right way forward at the moment, but there are some important debates we need to have not just on the workings of the patent box-type legislation but on ensuring that we have a level playing field and a system that—more importantly—is understood and supported by the general public. Nothing has been more damaging for many of the big internet and technology service providers than the slew of bad headlines over the past few years about their avoidance of tax. In these difficult economic times, in particular, that is something that we can ill afford in this country.