Finance Bill

Debate between Mark Field and Roger Mullin

Monday 26th October 2015 Commons Chamber

[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.