Finance (No. 4) Bill

Mark Reckless Excerpts

Wednesday 18th April 2012 Commons Chamber

[Owen Smith]

We should give the hon. Gentleman time to warm up, but if he wants to intervene to tell me where in the HMRC report we can find a definitive set of data on the impact on competitiveness of the various rates of tax, I will gladly sit down and wait for him to do so.

[Mark Reckless (Rochester and Strood) (Con)]

rose—

[Owen Smith]

Does the hon. Gentleman want to intervene on me on the point of competitiveness using evidence or anecdote?

[Mark Reckless]

The document says that all this is highly uncertain. That means that there is a significant possibility that the 50p rate was losing the Government revenue. Would the hon. Gentleman therefore welcome support for his amendment from the Government Benches at 4 o’clock?

[Owen Smith]

I am very pleased that I gave way to the hon. Gentleman. His intervention has exposed the fact that Conservative Members do not read the documentation, even though they listen to the flannel from their Front Bench. I repeat that page 39 of the document shows, under the heading “Adjusted impact on 2010-11 tax liabilities”, that the post-behavioural yield is £1.1 billion. It is there in black and white. That is how much money the 50p rate raised. No one is disputing that, and I presume that the Exchequer Secretary is not going to get to his feet and dispute what is written on page 39, or indeed, what is written on page 2, in the summary. I do not think that he is going to do that.

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[Owen Smith]

I grateful for that intervention. I am not sure whether the pork pie was served at ambient temperature, but it was certainly a pork pie.

[Mark Reckless]

rose—

[Mr David Lammy (Tottenham) (Lab)]

rose—

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[Owen Smith]

I hate to say it, but it is worse than that. What happened is that the Chancellor made up his mind, and then made the evidence fit his decision. [Interruption.] I am asked where is the evidence, but 32 times in the one exculpatory piece of evidence provided, the Treasury covered its behind by referring to uncertainty. I shall go through them in a minute, but that shows how often it was necessary to justify this damascene conversion.

[Mark Reckless]

Does the hon. Gentleman not accept that because the situation is uncertain, the 50p rate might have cost revenue, so the Government had less money for the least fortunate in society?

[Owen Smith]

I do not know how many times I need to keep telling the hon. Gentleman this, but the simple answer is no. He should turn to page 2 of the document, which clearly says that this rate raised £1 billion; he should turn to page 39, which says that it raised £1.1 billion; he should turn to page 51, which says that it will rise to £3.1 billion next year. These would be the static costs. It goes on to say—[Interruption.] No, £1.1 billion is the actual amount lost to the national accounts as a result of this change. That is a fact. It is not uncertain; it is a fact. The Treasury thinks that the money would have gone up to £3 billion, rising to £4 billion subsequently.

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[Mark Reckless]

My hon. Friend makes a powerful case for the merits of a 40p top rate of tax. Will she therefore support the Opposition amendment?

[Elizabeth Truss]

I am not quite sure whether their amendment expresses what they wanted it to express. As with the HMRC report, there may be some uncertainty about what exactly the Opposition intend to do.

First, the introduction of the 50p tax rate diverted resources from the productive economy at a very important time—just as we were heading into the worst recession, thanks to the dreadful economic policies of the previous Government.

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[Chris Bryant]

I do not entirely disagree with the hon. Gentleman. However, if the Government want to take the country with them as they are taking through enormous cuts, it is important that they have a process in Parliament that people can understand. We simply do not have that, which is one reason why people are so angry about some of the cuts that are happening.

[Mark Reckless]

I commend the hon. Gentleman on what he says and associate myself fully with his remarks. May I ask whether the Opposition Front-Bench team would support amendments to Standing Orders to put our tax and spend process on the proper basis that he describes?

[Chris Bryant]

That is way above my pay grade. I am just speaking for myself in this regard, and I hope that hon. Members will take my comments in that sense, but I have made this argument for a very long time and tried to do the same when I was Deputy Leader of the House.

I just say to the hon. Member for South West Norfolk that my constituents do not particularly want very high rates of tax, either for themselves or for wealthy people. There is no sense of bitterness and a determination to grind the wealthy down among my constituents, many of whom have very noble aspirations to be wealthy themselves. They hope one day to be paying higher rates of tax, so the point for them today is not about whether a 50p rate of tax is ever the right thing; it is about whether that is the right thing now. I say to her that my constituents feel that the past few years have been very tough, not just the Conservative years, but the last two years of the Labour Government, because of the global financial crisis. People such as my constituents have suffered the most in that time and they do not see people in the City of London suffering—the sales of champagne have still been pretty good—but they do feel themselves suffering. In that situation, it is all the more incumbent on us to think very hard before lessening the tax rate for the wealthiest.

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On Second Reading I gave some rough figures. The Government’s proposals would yield about £1.5 billion a year, but if instead there was a charge on all those earning more than £60,000 a year, the yield would be £2 billion. Not only would the yield be higher, but the costs of administration and collection would be much lower and the opportunities for confusion, fraud and evasion much reduced. I hope that my hon. Friend the Exchequer Secretary will tell us that the Government will look into whether it is right that we should increase the complexity of the tax system when the Government’s avowed intent is to reduce it.

[Mark Reckless]

Will my hon. Friend confirm that the estimates of administrative and staff costs the Government have given us for the higher income child benefit charge are actually somewhat higher than the entire revenue that they estimate, with some uncertainty, we will lose from reducing the top rate of tax from 50p to 45p?

[Mr Chope]

Exactly. My hon. Friend’s excellent point shows the gravity of the complexity that the Government are introducing. The figure is more than £100 million in administration costs to take away child benefit from 1.2 million families, either in total or in part.

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[Charlie Elphicke]

The Business Secretary is well known for having strong and principled positions from which he never resiles. The hon. Gentleman makes a fascinating point, although I do not know the detail of that quotation.

Let me turn to tax planning, and avoidance and evasion. As I have said, people set up personal service companies and, quite frankly, fiddle the system. To be honest, we need stronger anti-avoidance legislation to stop that kind of thing. However, the important point is that we need it if the rate is at a level at which people regard it as socially acceptable to pay, and do not feel that they are being completely fleeced.

[Mark Reckless]

My hon. Friend has substantial expertise as a tax lawyer. Does he think that a “look-through” anti-avoidance measure for personal service companies of that type would work?

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[Mr Gauke]

The central estimate, which the OBR has confirmed, is £700 million. We are reducing the rate to 45%, and the central estimate of the cost of that is £100 million. Were we to take it down to 40%, which would be the consequence of the hon. Gentleman’s amendment, the central cost would be £700 million.

[Mark Reckless]

I think the Minister is being rather too modest. On page 21, the report states that

“most of the studies…produce TIEs”—

taxable income elasticities—

“in the range of 0.4 to 0.7”.

Let us take a central estimate of 0.55 from within that range. If we look at page 51, we see a graph that suggests that a reduction in the additional tax rate—whether to 45% as proposed by the Government, or to 40% as proposed by the Opposition—would raise £600 million. Could the Minister use some of that money to enable him to accept our amendments on child benefit?

[Mr Gauke]

My hon. Friend is right to say that we have taken a cautious approach to this matter. Indeed, many estimates suggest that we are overstating the amount that the 50p rate is bringing in. He is right to cite those figures.