Finance Bill (Third sitting)

Mark Garnier Excerpts

Tuesday 13th October 2015 Public Bill Committees

[Harriett Baldwin]

Let me answer the hon. Gentleman’s question by agreeing that clause 18, given the way it is worded, applies only to banks. Clearly, it was introduced in response to the fact that the scale of bank compensation, to which I referred in my opening remarks, has been so significant. More than £25 billion has already been paid out, which has had a material and meaningful impact on the corporation tax receipts of Her Majesty’s Treasury. We have always been clear that we want banks to make a fair contribution to their historic costs and their potential impact on future risks to the economy.

The hon. Gentleman asked about compensation relating to the Volkswagen emissions scandal, which, as he is right to highlight, is a complete scandal. There is currently no intention to extend this measure. It is obviously early days in terms of the full scale of potential actions regarding Volkswagen, in particular Volkswagen in the UK and where the company pays corporation tax. However, I can assure the hon. Gentleman that the Government reserve the right to act decisively through legislation such as Finance Bills when they need to take steps to protect the public finances.

[Mark Garnier (Wyre Forest) (Con)]

On a point of clarification, the Minister mentioned that the costs of expenses incurred in addition to fines would also not be tax deductible. As she knows, under a section 166 agreement, the Financial Conduct Authority can ask a bank, at its own expense, to investigate an alleged misdemeanour. As I understand it from what she is saying, if that results in a fine, the section 166 cost is not tax deductible, but what would happen if it did not result in a fine and came off with a negative result? Would the section 166 undertaking be recoverable under tax?

[Harriett Baldwin]

My hon. Friend speaks with great insight and authority from his position on the Select Committee on the Treasury. I can explain to him that these measures are designed to tackle the material costs of compensation that are reflected, or provisioned for, in a bank’s accounts. In addition to that, a further 10% for the general costs of administration is attached. Were the costs that my hon. Friend refers to significant enough to require provision in the company’s accounts, they would be captured by this measure.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19

Banks established under Savings Bank (Scotland) Act 1819: loss allowance

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Rob Marris]

The amendments, as far as I can tell, are technical measures to smooth things out. As ever, these things come out in the wash, whether it is Mrs Gauke or someone else who spots them.

It is likely that I will ask my hon. Friends to support the clause but I want to probe the Government on it. As the Minister knows, this is one of the higher profile clauses in the Bill and has attracted a rather large postbag. Some landlords—not all—are concerned.

I appreciate that any landlord among the one in five paying more tax under the provision has almost two years from 8 July to April 2017 to sell the property if they wish to do so, so that they are not boxed in with de facto retrospective action, which can happen if there is only three months in which to sell. I salute the Government for giving that transition time.

I am surprised to hear that only one in five landlords will be affected, but the Government and the OBR have done their research. I am concerned that the measure will do nothing for house prices, which is perhaps a debate for another day. Would that it would bring down house prices, which are far too high around the country. Those prices might well get higher when pensioners, under the Government’s freedoms, buy not Lamborghinis but houses with the money freed from their pension funds.

[Mark Garnier]

I have a small amount of sympathy with the view that house prices are too high, but is the hon. Gentleman genuinely advocating that the principal method of saving for most people in this country should be reduced in value? The effect on households would be astronomically catastrophic if one were to start reducing house prices. Is that part of his policy?

[Rob Marris]

Yes, I would like house prices to come down; they are far too high. For most people, property is not an asset that is any good to them until they die—in which case, of course, it is no good to them. The house I live in is worth roughly eight times what we paid for it 30 years ago. That is almost entirely a windfall, though some of it is due to improvements we have made. I will not take long on this, Sir Roger, because I know you do not want us to be too diverted, but were my wife and I to move, we would have to pay an equivalent sum for something else. Yes, house prices are far too high but they will come down when the Government do their bit by increasing the supply of houses.

Meanwhile, returning to clause 24, this is the issue on which I wish to probe the Minister. I may have misunderstood these technical matters because I am not an accountant, but I believe the buy-to-let income accruing to the landlord is counted as income for income tax purposes. There will therefore be some landlords—perhaps the Government have figures—who, before this change, when their non-buy-to-let income, perhaps from a job, was added to their buy-to-let income were standard rate taxpayers, but who will become higher rate taxpayers after the change is made. Therefore, that group may end up paying considerably more tax.

It is not simply a question of landlords who are already 40% taxpayers because of other income being levelled, as it were, to 20%, which is what I understand the clause is designed to do. That is understandable. However, it would actually be promoting people—pushing them into a higher rate tax bracket—and therefore they would be losers. Does the Minister have any figures on that “in between” group—a rather maladroit phrase, but the Minister will understand what I mean—who will be pushed up. I hope that, now he has the piece of paper, he will be able to elucidate that point for the Committee. As I say, my inclination is to support the measure, but I am concerned about that cohort who may be suddenly treated in a slightly different way, which may mean that the figure of one in five the Minister quoted is somewhat low.

Finance Bill (Second sitting)

Mark Garnier Excerpts

Thursday 17th September 2015 Public Bill Committees

[Mark Garnier (Wyre Forest) (Con)]

My hon. Friend has referred to specific personal changes that help, but is it not also the case that the Government have done a great deal to support very small businesses, of which many are microbusinesses or sole traders? The reduction in corporation tax and the non-domestic rate relief for those very small businesses will also help households, particularly those who are self-employed and who run small businesses.

[Mr Gauke]

My hon. Friend is absolutely right. The best way to ensure that we have rising living standards is to have strong economy, which ensures that we encourage businesses, attract investment to the UK and reward entrepreneurship. That is the Government’s approach, but whether it is that of the official Opposition remains to be seen.

As we are talking about income tax, it is worth pointing out that 3.8 million individuals have been removed from income tax altogether since 2010 as a consequence of increases in the personal allowance. The Government are committed to continuing to make work pay and have pledged to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament. The Government also believe that people working 30 hours a week on the national minimum wage should not pay income tax. That is why we are introducing a change so that the personal allowance will automatically increase to ensure that it does not fall below the equivalent of 30 hours a week on the national minimum wage.

This will be the first time in history that the personal allowance has not been indexed on the basis of price inflation, instead ensuring that individuals who earn up to 30 hours on the national minimum wage will not pay income tax in the future. Clause 3 changes the basis of indexation for the income tax personal allowance from the consumer prices index to ensure that it is always set at a level at least equivalent to 30 hours a week on the national minimum wage. The change will take effect once the personal allowance reaches £12,500. Individuals working 30 hours a week or fewer on the national minimum wage will therefore be taken out of income tax altogether.

Clause 4 sets out that, until the personal allowance reaches £12,500, the Chancellor will have a legal duty to consider the impact of any proposed increase to the personal allowance on an individual working 30 hours a week on the national minimum wage. The clause also sets out the requirement for the Chancellor to make a statement on the impact that this will have on those individuals when an increase to the personal allowance is made at a future fiscal event.

The changes to income tax thresholds in the Bill will mean that an individual can work at least 30 hours a week without paying income tax both in 2015-16 and next year. In 2010, an individual could work only 21 hours on the national minimum wage without paying income tax. In time, an individual working 30 hours on the national minimum wage will be brought back into income tax.

On clause 5, it is worth pointing out how much the personal allowance has increased in recent years. In 2010-11, it was just £6,475; now, it is £10,600. Following on from that record, in this Parliament, we have committed to delivering a high wage, low tax, low welfare society. That includes reducing taxes for the lower paid, and that is why we have committed to increasing the personal allowance from its current level of £10,600 to £12,500 by the end of the Parliament. Clause 5 increases the personal allowance from £10,600 in 2015-16 to £11,000 in 2016-17 and to £11,200 in 2017-18.

In total, 570,000 individuals will be taken out of income tax altogether by 2016-17. That will increase to more than 660,000 by 2017-18. The changes represent a tax cut for 29 million taxpayers who will see their typical income tax bill reduced by £905 by 2016-17. Taxpayers who are over 65 will also benefit. From 2016-17 onwards, the tax system will be simplified so that all taxpayers will be entitled to the same personal allowance; the remaining age-related allowance of £10,660 will be merged with the higher personal allowance of £11,000.

The clauses allow us to support those in work by enabling people to keep more of the money they earn by paying less income tax. We are helping the lowest paid by taking them out of income tax altogether and we are moving towards a high wage, low tax and low welfare society.

Finance Bill (First sitting)

Mark Garnier Excerpts

Thursday 17th September 2015 Public Bill Committees

[Mr Gauke]

We fought the last general election saying that we would introduce this legislation. We won that general election, which suggests that the British people had confidence in the overall package of our fiscal policies. If Labour Members are worried about fiscal confidence, perhaps they should look somewhat closer to home.

[Mark Garnier (Wyre Forest) (Con)]

Does my hon. Friend agree that one thing any Government should be able to do is give some sort of confidence to households that their tax rates will not go up, providing them with the opportunity to plan for the future with more security than they would have if this measure were not in place?

[Mr Gauke]

My hon. Friend makes an important point. A striking point made by a number of my hon. Friends on Second Reading of the National Insurance Contributions (Rate Ceilings) Bill earlier this week was that the introduction of the tax lock in the context of employers’ national insurance contributions gives employers much greater confidence. Providing economic stability and security is an important part of the Government’s long-term economic plan. A credible party needs to present to the British people how it will provide economic security and stability. That is what this Government are doing. I look forward to the day when there is cross-party consensus that economic security and stability are important to this country.

--- Later in debate ---

[Barbara Keeley]

I do not think it is. In fact, if it is seen in the same way, someone needs to have a word with the Prime Minister. He constantly refers to the 0.7% commitment as a matter of huge pride and has quoted it a great deal in our debates about the refugee crisis over the past week or two. The difference with financial matters—this is probably why the current Chancellor was so critical of things in 2009—is that there are many opportunities to legislate. This is the third Finance Bill this year, so things could change. The 0.7% international aid commitment was a very long-term commitment. It came up a great deal in international discussions and still does, so there is a difference.

I was talking about the insurance premium tax and the fact that people are not protected from those sorts of tax increase. Paul Johnson, director of the Institute for Fiscal Studies, has said:

“The tax and welfare changes between them mean that poorer households have lost quite significantly and as a result of yesterday’s Budget, much more significantly than anything that has happened to richer households.”

He also said:

“Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.”

Let us bear in mind that many of the households that benefit from this tax lock have been adversely impacted by other tax changes. In fact, the summer Budget did not cut the overall tax bill; it raised it.

[Mark Garnier]

The hon. Lady makes a lot about feeling it unnecessary that the Government have to promise to legislate not to change tax rates and about the importance of not affecting working households, particularly those at the bottom end. Is it not the case that when her party was in government, there was an understanding that people at the bottom end would be protected, yet at that time the 10p tax rate was removed, causing huge problems for working households? What is sauce for the goose is sauce for the gander.

[Barbara Keeley]

There is a great deal of looking back, but let us look at what is happening this year and what will happen in the years following this Budget. The Office for Budget Responsibility forecasts net taxes to rise by more than £47 billion over the next four years, with much of the money coming from increases in dividend tax, insurance premium tax, vehicle excise duty and cuts in pension tax relief. Of course, welfare cuts will also raise almost £35 billion. It is one thing saying that families will benefit from the tax lock, but all of those measures will hit many families and individuals in the UK hard.

The combination of changes needs to be seen in the context of the cut to tax credits that Government Members voted through this week, which are likely to leave millions of families worse off. I was asked the other day, “What else would you do?” It is our contention that the welfare reform we need is to things such as overpayments and the error and fraud in the welfare system, because things are not properly checked at the point of application. Error and fraud cost £3 billion a year. The cut to tax credits will hit working people on middle and lower incomes, which undermines the Government’s argument that this is a Budget for working people.

--- Later in debate ---

[George Kerevan]

I am mindful of the fact that we have got another 48 clauses, so I will try to be brief—which is difficult for me. There are particular issues about the VAT lock that have to be put to the Minister.

VAT income to the Treasury is notoriously variable because VAT is a tax on consumption. It varies with the business cycle because it is a consumption tax. Unfortunately, in clauses 1 and 2 the Government are introducing the new doctrine that major taxes, including VAT, will be set once every five years at the start of each Parliament. I presume that in the Government’s mind the tax lock will exist in perpetuity and will be set at a different level every time we elect a Government. They are decoupling the raising of revenue—the revenue function of the Government and the Treasury—from the business cycle. As the business cycle goes up and down, income to the Treasury will go up and down independently of when we set tax rates—particularly VAT.

[Mark Garnier]

I am acutely aware of the fact that we have got a lot to get on with, but I find the hon. Gentleman’s argument utterly preposterous. He is arguing that, should the business cycle slow down, he would increase VAT—were he in a position to do so—which would have the effect of stifling consumption and thereby amplifying the problem, rather than negating it. This measure is quite clearly a cap, not a floor, so we can reduce VAT should we want to stimulate the business cycle.

[George Kerevan]

My good friend from the Treasury Committee anticipates what I was not going to say. All I am arguing is that we require flexibility in setting taxes to respond to events in the real economy. The doctrine that the Government are introducing of a tax lock in perpetuity removes such flexibly. That in itself creates uncertainty in the minds of business and the financial community, which the Government will have to address.

I accept the principle that we should try to set taxes in a way that is not destabilising. That should lead us to consult with the business community and community interest groups before we change taxes. That is perfectly possible and it is done in other countries. In Germany, for instance, there is mandatory consultation between the federal and regional Parliaments before income tax levels are changed. There are other ways to do that. The Chancellor accepted that principle in relation to North sea oil taxes when he gave an undertaking that any major changes would come only after consultation with the industry. Unfortunately, he did not extend that doctrine to the renewables industry, which would have been sensible.

To put a tax lock on VAT in perpetuity decouples revenue setting from the business cycle and, in the end, that is not tenable, because the taxes would be varied in an emergency. It is not tenable to decouple them, so the Government will live to rue the day that they put the lock in. That explains the reason for the lock. It is not for economic reasons; they are playing a political game. It is a gimmick.

Tax Credits

Mark Garnier Excerpts

Tuesday 15th September 2015 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

I am not going to pretend that it is easy to stand up and speak in favour of something that is, as the hon. Member for Feltham and Heston (Seema Malhotra) has said, going to be tough on families, but this is none the less the right thing to do. We have heard a great many estimates of how families are going to be affected, with a variety being produced by the Institute for Fiscal Studies. The one that I have seen gives a figure of £750.

This measure will affect families, but it is worth bearing in mind the fact that there are mitigating factors that will make a difference for those families. We have heard about the tax threshold increases, and it is also worth bearing it in mind that many of those families are also small and micro-business owners who have benefited from reliefs on business taxes and small business rate relief. The economy is also a lot better, with very low inflation rates at the moment.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Would the hon. Gentleman like to reflect on the fact that someone working full time and earning £17,000 a year will lose close to £2,000 as a result of these measures? Why do the Government want to punish hard-working families in this way, at the same time as they are increasing the inheritance tax threshold? This is vindictive and nasty.

[Mark Garnier]

I am not sure I recognise the figure of £2,000 on a £17,000 income, and I do not accept that this Government are punishing hard-working people. I see a Government who are doing an enormous amount by reducing the threshold tax rates and by helping small businesses. We have seen more people come into work than there have ever been before. This Government have had a huge number of successes, so I do not recognise what the hon. Gentleman is describing.

There are two particular reasons why I support this measure, the first of which was highlighted by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), the former Chancellor, and my hon. Friend the Member for Croydon South (Chris Philp) in talking about the effect that tax credits have on employers. We do not know exactly the extent to which this has been the case, but without a shadow of a doubt some employers will have been not paying the right salary or pay, given that the Government are subsidising not necessarily those people on low incomes but the employers employing people on low incomes. We also know that if that did happen early on, it is much more difficult to unravel it now, which is why it is very important that we have the new national minimum living wage. It is there to ensure that wages do start going up, although I concede that this does not necessarily cover it all.

[Helen Goodman]

How can employers take account of the tax credits, given that the tax credits are paid according to family circumstance and the wage is not?

[Mark Garnier]

Because employees will work for a wage that they can afford to work at, and if the Government are subsiding those household incomes the employers can take advantage of that. It is difficult—I completely concede that—to unravel this.

[Richard Graham (Gloucester) (Con)]

Conservative Members are clear that the macro picture is absolutely right and we have to reduce the welfare bill. Does my hon. Friend agree that the Government could do one specific thing that would help enormously? The BBC has withdrawn its online calculator for people who want to know how much they will be affected by this, and online forums suggest that different calculations are produced by different newspapers. Could the Government produce their own calculator so that our constituents can find out—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Mr Graham, you know you are pushing your luck. The hon. Gentleman has already given way twice and you are taking up your colleague’s time.

[Mark Garnier]

A very wise idea.

The second reason I am very supportive of these changes goes back to the old argument about reducing the deficit. Conservatives made it perfectly clear at the last election that we would seek to find £12 billion through benefit changes, and that was a manifesto pledge. We were elected with an increase in our number of Members of Parliament and a rise in the sitting MPs’ majorities. We have been asked by the country to deliver on our manifesto pledges, and this is part of that delivery.

We still have a budget deficit, and the tax credits system costs the taxpayer about £30 billion a year. The IFS this morning said that it expects these changes potentially to deliver £6 billion in savings. It is worth remembering that, as has been said, tax credits cost just £1.1 billion when they were first introduced, but that has now ballooned to the current level and that is simply not acceptable. It is also worth remembering that they ballooned in a period of so-called “high economic growth”. The then Chancellor, famous for many things but in particular for claiming to have ended boom and bust, was running a bizarre programme of increasing benefits at the same time as telling us that the economy was fine and growing steadily. Perhaps he knew something that he was not telling us, increasing benefits in anticipation of the collapse caused by the crisis—perhaps he knew it was coming. By 2010, 90% of families with children were receiving tax benefits. Do 90% of families actually need these tax credits, even after all those years of the Labour Government, when we would have thought that the families would be doing better? Apparently, they are not. These tax changes take us back to the real levels in 2007 and 2008.

I wish to finish by discussing one point. I was very struck, as were many Members, by the election whose result we saw on Saturday. I was particularly struck by the number of young people who were voting in that leadership election. They were voting in the name of voting against austerity. They were objecting to what they see as cuts being delivered to them today. In 20 or 30 years’ time, they will have to take responsibility for the mess that they find—we have to do something now. If we hand over the shop to them as we found it five years ago, austerity would not mean some managed cuts; it would mean devastating cuts that would be unbelievably painful. We have to take responsibility for the way things are now. I am not in the business of mortgaging the next generation’s future. I want to take responsibility for the problems we have today and not kick the can down the road. This is not austerity-heavy; it is common sense.

Finance Bill

Mark Garnier Excerpts

Tuesday 8th September 2015 Commons Chamber

However, the Government have undermined sustainability by creating perverse incentives and reducing the long-term tax base. They have undermined fairness by giving a big tax cut to a small number of global banks while increasing taxes for new challengers. Most importantly, they have undermined competition by choking off the growth of building societies and smaller banks. This is not a long-term plan to build a better banking sector; it looks like a quick fix to appease the likes of HSBC and Standard Chartered. It is a plan that has been criticised by the British Bankers Association, the Building Societies Association, the IFS, the Chair of the Treasury Committee and the Government’s own Back Benchers. The Minister does not have to take it from me, the Opposition spokesperson; she should take it from her own Back Benchers. The Government must take this opportunity to think again. I urge all parts of the Committee to support our new clause.

[Mark Garnier (Wyre Forest) (Con)]

It is a pleasure to follow the hon. Member for Wirral South (Alison McGovern), who mentioned me several times in her speech. In the broadest sense, I agree entirely with what the Government are doing, but I have one or two reservations, to which she alluded.

It is worth looking back to why the bank levy was brought in and to what it was a response. It was, of course, a response to the bank bonus tax introduced by the previous Government, which was brought in, in turn, to try to get some money back for taxpayers from when the banks were bailed out. I think that it is the right thing to do. Banks should help to pay back the taxpayer, but the bonus tax was never going to work. The banks were always going to get around it one way or another. Many suggestions were put out by newspapers and banks, but the one that summed up the banks’ approach best for me was a Matt cartoon in The Daily Telegraph. A trader was pictured sitting in front of his boss in a bank; the boss turned around and said, “I’m afraid you are not going to get a bonus this year, but we are going to buy your tie off you for three million quid.” That was the sort of approach that the banks were going to take.

It was therefore right for the Government to bring in a levy that could not be got around. Of course that was the right thing to do, and the intention was to raise enough money from the levy to make up the shortfall that would follow from getting rid of the bonus tax, which was around £2.1 billion to £2.2 billion. The levy was an unavoidable tax. It started out at nine basis points, rising on nine occasions to 25 basis points. That resulted from the reduction of balance sheets and from the slight change in the shape of the deposits profile—moving away from the deposits profile that would attract the levy.

It is worth bearing in mind what Douglas Flint said when he came before the Treasury Select Committee in January 2011. I asked him for his view about the future of HSBC in the UK and whether it would keep its domicile. The hon. Member for Wirral South mentioned Standard Chartered and HSBC in her speech. Douglas Flint said that the domicile was reviewed once every three years and that 2011 would be the year in which that happened. When he came before us again in January 2012 and I asked him what he was going to do, he said he was going to defer it.

It became apparent that the shareholders at HSBC, one of the best and biggest banks in the world—and, indeed, one of the most stable—were very upset about paying quite a hefty levy, which only got bigger, on their international earnings. The same applied to Standard Chartered, which had very little earnings within the UK. None the less, in responding to shareholder pressure—the shareholders were asking, of course, for an opportunity to get more return for their money—those chief executives were saying, “Don’t worry; we will ride this out and the bank levy will eventually disappear at some point.”

After five years of that, the pressure from shareholders was becoming very intense. If Standard Chartered and HSBC had left the country, the bank levy would have had to rise from 24 basis points to more like 35 basis points in order to maintain the £2 billion or so in revenue. Paying 50 basis points would be a very significant taxation on deposit levels within banks. Inevitably, then, if Standard Chartered and HSBC had left, the whole bank levy would have spun out of control and eventually wound itself into a knot that would have been completely unsustainable. That is why the Government had to do something about it.

Before I move on, it is worth looking at what the banks were getting as a result of paying the levy. The first thing—in justifying the levy to shareholders this is an important point—is that the banks were paying back the taxpayer who had bailed them out with a lot of money. The taxpayer required some sort of levy to get some of the revenue back. The second important point is that the bank levy could almost be seen as a type of insurance premium charged against the banks for having what is known as “the implicit guarantee”—the guarantee that, should the banks fall over as two of them did in 2007-08, the Government would stand behind them and pick them up.

However, the provisions of the Financial Sector (Banking Reform) Act 2013 were introduced in order to try to get to the stage where the banks would no longer need to be supported in the event of a collapse—that there would be an elegant collapse; there would be bail-in bonds and ring-fences around the important parts of the banks, so that never again would the Government step behind the banks. The banks would be allowed to collapse without causing contagion through the banking system. That is an incredibly important change.

The argument about the bank levy being an insurance premium would eventually diminish to nothing with the finalisation of the fairly expensive Banking Reform Act in 2019. As for paying money back to the taxpayer, we are in the process of doing so by means of the sales of RBS, Lloyds, Northern Rock Asset Management, and the various other assets that were bought. At some point, we shall be able to draw up a final P&L to establish whether we—the UK taxpayers who bailed those banks out—have got our money back.

European Union (Finance) Bill

Mark Garnier Excerpts

Tuesday 23rd June 2015 Commons Chamber

[Mr Gauke]

Yes, we would resist such a move. It would be a fundamental change to the nature of our relationship with the European Union, and one that would go in entirely the wrong direction for the United Kingdom. There were calls in the negotiations for such a step to be taken. There were calls, for example, for a financial transaction tax to be introduced to finance EU spending. We resisted that. The Prime Minister was very clear in ruling it out from any deal.

[Mark Garnier (Wyre Forest) (Con)]

My hon. Friend talks about the financial transaction tax, but the City is an incredibly important contributor to the UK economy and it has a significant turnover. Will he assure us that the Government will not allow the European Union to attack the City from a different direction as it looks for alternative sources of revenue from the jewel in our economic crown?

[Mr Gauke]

I certainly give that assurance. There was a strong push for a financial transaction tax, which would have had a particular impact on the United Kingdom, given that we have the pre-eminent financial centre not just in the European Union, but in the world. That could have been damaging for the City of London. We resisted it and we will continue to take that approach.

To make a broader point—although I will not go too far down this route, Mr Streeter—it would be more helpful if there was an acceptance in the European Union that the City of London is a jewel in the crown, to use my hon. Friend’s phrase, not just of the United Kingdom, but of Europe as a whole. We should have the pre-eminent financial centre in the United Kingdom, and trying to damage it would be disadvantageous to all within the European Union.

--- Later in debate ---

[Mr Gauke]

We have consistently argued the case for money being spent more wisely and for greater European Union public spending restraint. We have already made progress with that argument—we made progress in 2013 and the Bill relates to the negotiation, although it is on the revenue rather than the expenditure side. We will consistently argue that case.

[Mark Garnier]

I am grateful to the Minister for giving way—he is giving us a lot of his time. He mentions fiscal prudence and spending taxpayers’ money wisely. Two things that epitomise the wastefulness of the European Union are the Strasbourg circus—the waste of money moving the whole Parliament to Strasbourg—and the fact that the accounts have not been signed off for some two decades. The Prime Minister is working very hard to achieve fiscal prudence, but does the Minister agree that the mood around the whole EU is behind him in dealing with that? The problem is not unique to the UK. The Prime Minister has the wind in his sails and support from the rest of the EU to deal with those problems.

[Mr Gauke]

My hon. Friend makes an important point. I would perhaps go further: it is not just member states that recognise that things need to change and that there needs to be better value for money. Vice-President Georgieva, who has responsibility for the budget, also recognises the need to ensure that money is spent in a better way. The Prime Minister has consistently set out the fact that there are two sensible objectives: to cut the whole budget and to protect the rebate. We will continue to make that case.

--- Later in debate ---

[Alex Salmond]

It is a great pleasure to follow what must be the briefest speech I have ever heard from the hon. Member for Stone (Sir William Cash) on this subject—it is wonderful to see him able once again to stand in his place today.

Let me turn to the question of EU finance and agriculture. I know that agriculture is not a subject that much concerns the Conservative party; the Tory party these days is much more likely to be concerned with asset stripping, rather than agricultural production, and with financial derivatives, rather than agricultural crops—that is what gets its pulse moving.

I was concerned when the hon. Member for Worsley and Eccles South (Barbara Keeley) said that far too much of the European Union budget was consumed by the common agricultural policy. The fundamental reason for that—we did not hear this simple point from the Government Benches—is that the common agricultural policy is one of the few policies that financially is effectively under the competence of the European Union. If the European Union had competence over health, for example—I doubt that there is much support for that, from me or anyone else in the House—its agricultural budget would be totally dwarfed by what it spent on health. The dominance of the agricultural budget is a factor of its being one of the European Union’s relatively few common policies.

Of course, it is possible to argue that there should not be direct farm payments. Indeed, that was the argument that the right hon. Member for North Shropshire (Mr Paterson) took into the CAP negotiations. He started from the position that the UK Government, without much opposition from Members from rural constituencies in the Conservative interest, thought that there should not be direct farm payments, and he found himself in a minority of one in the negotiations; his position was not supported by any other member state. It was therefore decided that we were to continue with farm payments. Therefore, if we have a common agricultural policy, and it is a substantial part of the European Union’s budget, it is reasonably important to ensure that our share of the agricultural budget as component nations in these islands is fair and competitive, because our agricultural production has to compete in that common market with that in other member states.

Does the Minister really think that the share allocated to UK agriculture, and to Scottish agriculture in particular, can be counted as a considerable achievement, as he claimed in his opening remarks? Let us remind ourselves of some of the facts. Under pillar one of the CAP budget, it was agreed that the lowest that any member state should receive in support was €196 per hectare. It was agreed in negotiations that each country in the original 15 would work to that minimum. Scotland receives substantially less than that—just over half of that payment per hectare. That is going to cost Scottish agriculture about £1 billion in the period to 2019.

[Mark Garnier]

The right hon. Gentleman said from a sedentary position during the Minister’s speech that that was because Scottish farms are the biggest in the UK. It would be helpful if he could give a little flavour of the size of Scottish farms compared with English, Welsh and Irish farms, and how the numbers break down.

[Alex Salmond]

I was going to move on to that very point, because the Minister’s reply to my intervention inspired me to go to the Library in search of some figures. I will answer that point in a moment.

Let me move on to pillar two, the second major aspect of agricultural support. I have been doing some comparisons and looked at what would have happened if in negotiations Scotland had achieved from pillar two the same amount of agricultural support as the Republic of Ireland, which in many ways is a comparable country with regard to land area and agriculture as a share of the overall economy. The answer is that Ireland has achieved a budget four times the size of Scotland’s budget under pillar two—€2.19 billion compared with €478 million—in the years to 2019.

Given that it has been decided that the common agricultural policy should continue and that farm payments should continue to be made, how will it be possible for Scottish agriculture to compete effectively when it gets such a dramatically lower share than the minimum allocated to any other EU country? Far from getting an excellent deal on pillar two to compensate for the poor deal on pillar one, Scotland gets a miserable share in comparison with comparable countries.

Productivity

Mark Garnier Excerpts

Wednesday 17th June 2015 Commons Chamber

[Chris Leslie]

That is why I think it is so appalling that the Chancellor could not be bothered to mention it in the Budget speech in March. It should be at the top of the agenda of all Treasury teams and all Departments—

[Mark Garnier (Wyre Forest) (Con)]

rose—

[Chris Leslie]

I will give way in a moment to the hon. Gentleman, who will, I know, have plenty to contribute on the subject.

Our economic prosperity depends on maximising the output from the efforts of working people and the resources available to business. The amount of output per hour worked is a useful way for us to measure whether our economy is advancing and adding value, or whether we are just treading water. Creating a more productive economy means creating a virtuous circle of higher growth, higher living standards and, as a consequence, more effective deficit reduction. When working people can produce more and they have the tools and the skills to create output more efficiently, employers can afford to pay them more, tax revenues become more buoyant and our GDP can grow in a more sustainable way.

[Chris Leslie]

I will give way to my hon. Friend after I have given way to the hon. Member for Wyre Forest (Mark Garnier).

[Mark Garnier]

The shadow Chancellor is absolutely right: productivity is incredibly important. The Treasury Committee and The Economist have been banging on ad nauseam about it, certainly during my five years as a Member of Parliament. Why has he picked up on it only in the past six months?

Royal Bank of Scotland

Mark Garnier Excerpts

Thursday 11th June 2015 Commons Chamber

[Harriett Baldwin]

What can I say? It is extraordinary. I do not suppose we heard that kind of rant when the former Member for Kirkcaldy and Cowdenbeath was intervening in the banking sector. Perhaps the hon. Gentleman has not noticed that, in the single vote on legislation on Second Reading we have had in this Parliament, the Government won by a majority of 491. [Interruption.]

[Mark Garnier (Wyre Forest) (Con)]

When the hon. Member for Bolsover (Mr Skinner) has finished, may I welcome the Minister to her place? She brings with her a great wealth of experience from the City. Part of that wealth of experience is a full knowledge of the sunk cost fallacy. Does she agree that it is completely ludicrous to say that an investment decision made in 2015 should be based solely on the information known in 2008, and that that view betrays a staggering lack of knowledge about the investment process among those opposed to selling the stake in RBS at potentially a loss?

[Harriett Baldwin]

I thank my hon. Friend and constituency neighbour for his question, which shows his depth of knowledge. He is right. In my years of managing portfolios, what I paid for investments in the first place was a fact, but managers also have to factor in the future. None of us has a crystal ball. My hon. Friend’s words are wisely taken.

The Economy

Mark Garnier Excerpts

Thursday 4th June 2015 Commons Chamber

[Chris Leslie]

We have heard those arguments. I was asking the Government whether they plan to cut the top rate of tax of earnings of £150,000 from 45p, and perhaps down to 40p, and there is silence from the Government Benches and from the Chancellor. Perhaps he will come to that later in his speech.

The Queen’s Speech was high on rhetoric but was in reality the usual combination of diversion and distraction. As ever with this Chancellor, there is more than meets the eye. All the rhetoric is just the tip of a Tory iceberg, with 90% of their real agenda hidden below the surface, still invisible from public view. That agenda will not even be partly revealed until the emergency Budget on 8 July. Until then, serious questions remain unanswered about what drives the Government, and in what direction.

The trajectory of overall cuts set out in the March Budget goes beyond what is needed to eradicate the deficit by the end of the Parliament. According to the Institute for Fiscal Studies, the Queen’s Speech still leaves us totally in the dark about more than 85% of the Chancellor’s planned £12 billion of welfare cuts. Just this morning, the IFS criticised the Government for giving a

“misleading impression of what departmental spending in many areas will look like”.

Frankly, there is growing disbelief across the country that the Chancellor can protect those in greatest need while keeping his promises to the electorate on child benefit and disability benefits. My hon. Friends will not have failed to spot during Prime Minister’s Question Time yesterday how the Prime Minister, when challenged by my right hon. Friend the Member for East Ham (Stephen Timms) on the question of disability benefits, digressed into all sorts of reminiscences about the campaign trail and how much fun it was going to various meetings. The Prime Minister promised that

“the most disabled should always be protected”

and I will be looking to the Chancellor and the Secretary of State for Work and Pensions to keep the Prime Minister’s promises. The Government might have secured a majority, but they did not secure a mandate for specific cuts to departments or services because those were never explained or set out before the election. Nor have we ever had an explanation of how they will pay for their multi-billion pound pledges on tax and services or, crucially, for the NHS.

The Opposition agree with yesterday’s OECD assessment that a fair approach is the right one to take—sensible savings and protection for those on middle and lower incomes. Cuts that decimate public services would be too big a price to pay, especially as they may even result in higher costs in the longer term. We also heard how 8,000 nurse training places were cut in 2010. The use of agency nurses then proliferated to fill the gap. Is it any wonder, therefore, that NHS trusts now face a deficit of about £2 billion? Part of the reason the deficit is so big is that productivity has been so poor. Britain has the second lowest productivity in the G7, and output per worker is still lower than in 2010. This should have been at the top of the Chancellor’s agenda throughout the last Parliament, but he did not even mention it in his last Budget speech. For the Tories, it seems that productivity just springs magically if the Government just get out of the way, unrelated to any fiscal or policy choices that they make.

[Mark Garnier (Wyre Forest) (Con)]

The shadow Chancellor will know that many pundits have been looking at that productivity puzzle. The Treasury Committee has examined it for the past five years. If the Governor of the Bank of England, economists and everyone else does not understand that productivity conundrum, will he share with us where he thinks the lack of productivity comes from?

[Chris Leslie]

I will come to that in a moment. The hon. Gentleman must also be staggered that the Chancellor did not even mention it in his Budget speech. That was an omission that the Chancellor needs to correct. We take a different view of where productivity comes from because, for us, it depends in part on having decent infrastructure and public services—motorways that flow freely and trains that commuters can actually get on, tax offices answering business queries efficiently rather than keeping companies’ staff waiting on hold, employees who are off sick able to get treated swiftly in a decent NHS, an education system that supports a work force and provides training in high-quality skills. Each of these is crucial for our future economic productivity, and each depends on the Chancellor making the right fiscal choices for this Parliament.

--- Later in debate ---

[Mr Osborne]

I think I have dealt with the hon. Gentleman’s point.

[Mark Garnier]

The subject of debt is incredibly important, but debt is not just national; there is household debt as well. Does the Chancellor agree that the £1 trillion rise in household debt between 1997 and 2008, taking it up to £1.47 trillion, was one of the most pernicious acts of the Labour Government? It damaged households immeasurably and is the biggest crisis that we have to deal with.

[Mr Osborne]

My hon. Friend is absolutely right. There was no institution looking at overall debt levels in our country.

Finance (No. 2) Bill

Mark Garnier Excerpts

Wednesday 25th March 2015 Commons Chamber

[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a great pleasure and privilege to follow my hon. Friend the Member for Edmonton (Mr Love), who has been a distinguished Member of the House, particularly through his service on the Treasury Committee, which has added enormous insights into the deliberations of successive Governments. It is a great joy to follow my good friend and colleague.

I just want to make a few remarks. The budgetary process in the immediate run-up to the election has been very much a political stunt. The first thing to deal with is the illusion—or delusion—that there has been economic success and turnaround under the Conservatives. That is simply not the case; it is simply not borne out by the facts. The national debt is about £1.4 trillion—up 44%. Reference is made to the deficit and how much the debt is going up, but of course the current Government have borrowed more in five years than Labour did in 13 years—and we had to bail out the banks. The Government have lost the triple A rating. As I pointed out earlier, the number of people earning more than £20,000 is down by 800,000. There is a reliance on a fudging of the facts; this is a “fudge it” Budget, to make up for the fact that we have more and more low-paid people who cannot make a contribution towards the revenues in a sustainable way. Meanwhile, the Government continuously put up the tax threshold and say, “Who’s going to disagree with that?”, knowing everyone is scared to disagree. But that is the management of irresponsibility, because the money simply is not coming in to pay the bills.

So what we need is not a spat about tax and spend, but a serious consideration of how we generate productivity and growth, in order to have higher wages and a more sustainable plan for the future. Obviously, part of that was the debate about tuition fees and about enabling people to go, without fear, to university, so that we could get higher productivity and the students would not be hobbled by massive debt throughout their lives. Such debt can mean that they cannot get a credit rating and cannot get a house, and are scared of moving into a higher pay bracket because it pushes up their repayments.

Sadly, the Tories are creating a two-nation Britain. One nation will be the better off, who, lucky for them, own their own house, can get their sons and daughters into university and pass on money for them to put down a deposit on a property. There are others who may be equally or even more capable of going to university and of boosting the productivity in our collective economy but who are being stopped from getting houses in the future. We are at a turning point now. The party that gets elected will determine whether we have a more unequal or a less unequal future. I very much want us all to pull together as one nation to invest in the future.

The Conservatives have this massively political Budget profile, which has been described as a “rollercoaster”. Deep and savage cuts were going to take us back to the 1930s, but because that was pointed out by the BBC, the Office for Budget Responsibility and the Institute for Fiscal Studies, an adjustment was made. Bank shares were sold off and oil prices went down so that the public service time machine was moved back only to the year 2000. None the less, we all saw the Tories in their true oils. They were happy to make those savage cuts until the BBC highlighted what they were doing. Then they said, “Oh no, we’re not going to do that.” But there will still be savage cuts until the final year of the next Parliament, 2019-2020, when there will be a sudden acceleration in public spending—the biggest spending increase for 10 years—presumably to try to get Boris Johnson elected as the next Tory Prime Minister. That is probably what will happen in the unfortunate event of the Tories getting in again in some strange alliance with the UK Independence party, which would be a disaster for Britain.

We must strike a balance between trying to achieve economic growth and having to balance the books, instead of scrabbling around trying to decide which poor people to clobber. As my hon. Friend the Member for Edmonton pointed out, welfare cuts such as the bedroom tax raised only £400 million, which is small change compared with the numbers that we are talking about. Two thirds of the people hit by that tax are disabled. The cuts to tax credits are hitting people with children who are trying to work. It is ridiculous to try to squeeze more and more out of the poorest to make ends meet. Clearly, it is right that the richest pay more, whether those with more than £2 million pay the mansion tax—

[Mark Garnier (Wyre Forest) (Con)]

They do pay more.

[Geraint Davies]

They need to pay lots more, not a bit more. Of course some of the very rich are paying more, but that is because they are getting richer and richer on massive pay awards. They are earning so much more than anyone else, and the situation is getting out of control