Mel Stride
Main Page: Mel Stride (Conservative - Central Devon)Department Debates - View all Mel Stride's debates with the HM Treasury
Monday 11th December 2017
(6 years, 4 months ago)
Commons ChamberRead Full debate Finance Act 2018 View all Finance Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I beg to move, That the Bill be now read a Second time.
The Chancellor recently set out a bold and forward-looking autumn Budget. It reflected and responded to current circumstances, and it will build a Britain that is fit for the future. The UK economy has shown great resilience. Our GDP growth has remained solid, continuing for more than 19 quarters. Employment has risen by 3 million since 2010 and is close to a record high, while unemployment is at its lowest rate since 1975. Those employment trends are not being felt only in the south-east. Indeed, since 2010, 75% of the fall in unemployment has occurred elsewhere, and the biggest falls in the unemployment rate took place in Yorkshire and Humber, and in Wales.
The deficit has been reduced by three quarters from 9.9% of GDP in 2009-10—that figure was a shocking indictment of the last Labour Government—to 2.3% of GDP in 2016-17. In the coming years, borrowing is set to fall even further, reaching 1.1% of GDP in 2022-23, which will be the lowest level since 2001-02. However, at 86.5% of GDP, public debt is still too high and productivity growth remains subdued. This Budget therefore balanced short-term action with long-term investment, while rightly sticking to the principles of social responsibility that will continue to improve the health of our public finances, with our debt due to start falling from next year.
Gareth Thomas (Harrow West) (Lab/Co-op)
Given the recent terrorist attacks in this country and the fact that senior officers say that more funding is needed for community policing to help to tackle the risk of more terrorist attacks, will the Financial Secretary tell the House why there was no additional funding for policing in the Budget?
Mel Stride
As the hon. Gentleman will know, we made sufficient provision for policing prior to the Budget. We recognise the challenges that the police face, but I gently say to him that to secure our vital public services, including the police, the most important thing is that we have a responsible approach to bringing down the deficit and getting the public finances under control. Having looked at the proposals put forward by his party, I have my doubts that that would be the case were he in government.
It is sensible that all this is underpinned by the tax policies contained in the Finance Bill. The Bill is a mere 184 pages—under a third of the length of the previous Bill. Its length is partly the consequence of the Government’s move to a single annual fiscal event. In this transitional year, with less time than normal between Budgets, there is less legislation in process, which should prove some welcome respite for me, as I do not think that there are many Financial Secretaries who have presented two Finance Bills to the House within their first six months in post. The Bill’s size also reflects the Government’s serious commitment not to overburden people or to overcomplicate the tax system. It is a crucial plank in the Government’s legislative programme that will help young people to buy their first homes, improve UK productivity, and further the Government’s already excellent track record of cracking down on avoidance and evasion.
The Government support the aspiration of home ownership and are particularly committed to helping young people on to the property ladder. The Government’s package on housing that was set out at the Budget will boost housing supply and address the problem of affordability. In this critical endeavour, the tax system should not act as a barrier. First-time buyers are usually more cash-constrained than other purchasers, so to help these people—typically younger people—to get on to the property ladder, the Bill permanently scraps stamp duty for first-time buyers purchasing properties worth up to £300,000. Buyers will save nearly £1,700 on an average first-time buyer property, and those buying a house worth £300,000 to £500,000 will pay the existing 5% marginal rate of stamp duty only on the portion above £300,000. In doing so, they will make a saving of £5,000. This means that 80% of first-time buyers will not pay stamp duty at all, while 95% of all first-time buyers who pay stamp duty will benefit from the changes. Over the next five years, the relief will help more than 1 million first-time buyers to get on to the property ladder.
The joy of home ownership will be greatly diminished if, at the same time, we do not protect and preserve the environment in which we all live. Therefore, as a response to the Government’s national air quality plan that was published in July, the Bill establishes measures to improve air quality through the taxation of highly pollutant diesel cars. Diesel vehicles—even new ones—are a significant source of emissions. A test of the 50 best-selling diesel cars in 2016 found that on average they emitted over six times more nitrogen oxides in real-world driving than is permissible under current emissions standards.
Charlie Elphicke (Dover) (Ind)
The Financial Secretary is making a powerful argument. It is important to protect funding for the environment, schools, hospitals and, as the hon. Member for Harrow West (Gareth Thomas) pointed out, the police. Will my right hon. Friend tell the House how much money was raised from the banking sector last year compared with in the last year of the Labour Government?
Mel Stride
As my hon. Friend will know, we brought in a variety of measures in 2015 that changed the basis of taxation for banks. Over the period of the coming forecast, we will be receiving some £4.5 billion in additional income from banks by way of taxation as a consequence of those changes.
From April 2018, new diesel cars will go up one vehicle excise duty band in their first-year rate, and the existing company car tax diesel supplement will increase by one percentage point. However, drivers of petrol and ultra low emissions vehicles—cars, vans and heavy goods vehicles—will not be affected, and nor will those who have already bought a diesel car. As the Chancellor said at the Budget, white van man and white van woman can rest easy.
Dame Margaret Hodge (Barking) (Lab)
White van man and white van woman will rest easier if the Government successfully bring in all moneys due. Will the Minister explain why he has limited the scope of the Finance Bill in such a way that amendments cannot be tabled to ensure that we have a date by which measures such as country-by-country reporting, which is crucial to bringing in tax that is otherwise avoided, should be introduced?
Mel Stride
I think that the right hon. Lady is referring to an amendment of the law resolution. The previous Finance Bill was introduced under exactly the same Ways and Means procedure. There is nothing in the resolutions that prohibits full, open and proper discussion and scrutiny of the Bill. It will go through all its usual stages, including two full days in Committee of the whole House, and eight sittings—if it takes that amount of time—upstairs in Committee, before coming back to the Chamber for Third Reading.
Since the financial crisis, UK productivity growth has slowed. It now stands at just 0.1%. The Government know that restoring strong productivity growth is the only sustainable way to increase wages and improve living standards in the long term. Consequently, a quarter of a trillion pounds of public and private investment has been funnelled into major infrastructure projects since 2010, including the biggest rail modernisation programme since Victorian times, the Mersey Gateway bridge and, more recently, Crossrail. Many others are detailed in the Infrastructure and Projects Authority’s national infrastructure pipeline. The Government have also cut taxes to support business investment and improved access to finance through the British Business Bank. However, we can and will go further.
To boost productivity and create sustainable economic growth, the Government are making further provisions to support the UK’s dynamic, risk-taking businesses. The UK continues to be a world-leading place to start a business, with 650,000 start-ups in 2016 alone. However, some of the UK’s most innovative new businesses with the greatest potential are struggling to scale up due to lack of finance. Specifically, 10 of the UK’s largest 100 listed firms were created after 1975, compared with 19 in the United States of America. In order properly to understand these barriers to finance, the Treasury commissioned the patient capital review, led by Sir Damon Buffini. Supported by Sir Damon’s industry panel, the review concluded that knowledge-intensive companies, which are particularly research and development-intensive, often require considerable up-front capital to fund growth. It may be many years before their products can be brought to market and, despite their growth potential, such companies often face acute funding gaps.
In response to the review’s findings, the Government are acting. We are setting out a £20 billion action plan, combining investment with tax incentives. As part of the plan, the Bill will make more investment available to high-risk, innovative businesses. It does so by doubling the annual limits for how much investment knowledge-intensive companies can receive through the enterprise investment scheme and venture capital trusts schemes to £10 million, and doubling the limit on how much investors can invest through the EIS to £2 million, providing that anything above £1 million is invested in knowledge-intensive companies. In 2016-17, 62% of investment by EIS funds was aimed at capital preservation, rather than higher-risk, higher-potential, long-term growth companies. The Bill therefore reforms the schemes, redirecting low-risk investment into growing entrepreneurial companies, while changing venture capital trust rules to encourage higher-growth investments. In all, we expect these changes to result in over £7 billion of new and redirected investment in growing companies over the next 10 years.
Additional efforts to boost productivity also focus on increasing funding for research and development. At the 2016 autumn statement, £4.7 billion was allocated to R and D, and this Budget extended the national productivity investment fund to £31 billion and increased R and D investment by a further £2.3 billion. This means that the Government will be investing an additional £7 billion in R and D over the next four years—the largest increase in four decades.
We have already announced initial plans for this investment, including £170 million to help the construction industry to build cheaper and better homes; £210 million to develop new technologies that enable the early diagnosis of chronic diseases; a commitment to supporting the development of immersive technologies and artificial intelligence; and more than £300 million to develop and attract the skills and talent necessary to deliver our scientific ambitions. These efforts are complemented by our decision to increase the rate of R and D expenditure credit from 11% to 12%, as set out in the Bill.
The Bill will ensure that the tax system is fair, balanced and sustainable. To that end, it freezes the indexation allowance that currently allows companies but not individuals to reduce their taxable gains in line with inflation. It allows Scottish police and fire services to recover future VAT payments, which would otherwise be lost following the Scottish Government’s decision to restructure those services. I should pay tribute to my Scottish colleagues on the Government side of the House who lobbied so effectively in that respect.
The Bill narrows the scope of the bank levy so that, from 2021, all banks—UK and foreign-headquartered—will be taxed only on their UK operations.
John Howell (Henley) (Con)
Is not the important point about the bank levy that we are trying to get a fair contribution paid by the banks, matched against the risk they pose to the whole UK economy?
Mel Stride
My hon. Friend is entirely right, which is why we have generally moved away from a levy on the capital assets of banks as regulation has improved, and towards a tax on the profitability of banks as that profitability has recovered following the events of 2008, which happened on the watch of the last Government. This re-scope forms part of the broader package of reforms announced between 2015 and 2016 that included an 8% surcharge on bank profits over £25 million. The package will help to sustain tax revenues from the banking sector in the long term.
Charlie Elphicke
To follow on from my previous intervention, will my right hon. Friend confirm that the amount of tax paid by banks under this Government is nearly 60% higher than under the previous Labour Government?
Mel Stride
My hon. Friend is entirely right. A number of measures have driven the improved tax take from banks. Along with the 8% surcharge, there is the fact that we have restricted banks’ ability to carry forward losses to offset against profitability. We also exempted banks’ ability to offset charges in respect of mis-selling and payment protection insurance activities, which has also helped to improve the tax take.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The mention of banks gets me going because all the Financial Secretary’s good words sit ill with the fact that the Royal Bank of Scotland is going through a huge series of closures, particularly in my constituency. We bailed the bank out, so there is great unhappiness—indeed, anger—that it is acting in such a way all over Scotland.
Mel Stride
The hon. Gentleman raises an important issue, but these will be matters for the Royal Bank of Scotland. The most important aspect when one considers the Royal Bank of Scotland is clearly that it is brought back to being a fighting-fit organisation, employing as many people as possible as a business, contributing to the Exchequer, and creating value going forward.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I am interested to hear the Minister’s confidence about the money he will be taking through the bank levy. How does the money the hon. Member for Dover (Charlie Elphicke) says has been raised so far compare with the amount the taxpayer has already paid to bail out the banks, and how much of that money have we had back?
Mel Stride
It is interesting that the hon. Gentleman mentions the amount that was required to bail out the banks, given that it was the then Labour Government who caused the problem that required the bail-outs in the first place. There is a long and detailed history of exactly what happened: we had lax regulation, and the Bank of England was not in a position to regulate the institutions concerned. The hon. Gentleman might like to look up the answer to his question himself and then inform other members of the Labour party of what he discovers.
Vicky Ford (Chelmsford) (Con)
Does my right hon. Friend agree that since the bank levy was introduced, the risk of bank failure has decreased dramatically due to new capital requirements on banks, and the considerably reduced risk that British taxpayers will have to fund cross-border bail-outs, given that we have international agreements on such matters?
Mel Stride
Yes, my hon. Friend is entirely right. We have made huge progress in making sure that the banks are fit and able to withstand whatever external shocks there might be. The Bank of England has been heavily engaged in that, as have the Government, and we are in a much more secure position—certainly than we were when we inherited the economy we saw when we first came to office in 2010.
Kirsty Blackman (Aberdeen North) (SNP)
The Minister is being very generous in allowing interventions. I was concerned by the response he gave to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone). Given the Government’s stake in RBS, does he not feel that they should take some responsibility and use their influence to convince RBS not to go ahead with these closures? There have been over 90 since the start of the year, and this cannot continue.
Mel Stride
I am gratified by the hon. Lady’s confidence in Ministers making commercial judgments in respect of our banks and businesses, but it is far better to allow those businesses to take sensible commercial decisions, even though those sometimes have consequences that, in an ideal world, we would not wish to see. I go back to the point I made to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone): we need RBS to improve its strength, grow, employ more people and, ultimately, pay more tax to support our vital public services.
Gareth Thomas
I am grateful to the Minister for giving way to me a second time. May I just remind him of the Competition and Markets Authority investigation into banking, which noted the lack of competition in banking and highlighted the lack of innovation and the fact that the big five banks control 85% of the retail banking market and make excess profits? Might keeping the bank levy at its current rate not be compensation to the consumer and the taxpayer for those excess profits?
Mel Stride
At the heart of the hon. Gentleman’s point rests the notion, which I agree with, that we expect the banks to pay their fair share and recognise that they received bail-outs some years ago, and tax policy towards the banks has been geared towards making sure that they make a fair and proportionate contribution to our tax take.
The hon. Gentleman mentioned the importance of competition in the banking sector, and I wholeheartedly agree with him on that, which is one reason why we are keen to ensure that as many banks as possible are headquartered in our jurisdiction rather than in others. That goes to the heart of the changes in the Bill to ensure that banks domiciled here are not penalised by being charged on capital assets held overseas—a situation that does not pertain to overseas banks that operate in our jurisdiction.
We have included an 8% surcharge on banks’ profits over £25 million. The package will help to sustain tax revenues from the banking sector in the long term, and it is forecast to raise an additional £4.6 billion over the current scorecard period.
The Bill continues the Government’s already vigorous efforts to crack down on tax avoidance, tax evasion and non-compliance. Since 2010, the Government have introduced over 100 avoidance and evasion measures, securing and protecting over £160 billion of additional tax revenue. This has helped reduce the UK’s tax gap to a record low of 6%, which is one of the lowest in the world.
Grahame Morris (Easington) (Lab)
The Financial Secretary says that it is a record low tax gap, but it does not take account of the vast treasure trove unearthed by the Bureau of Investigative Journalism in the Paradise papers or of other vast sums of wealth, on which we have no idea how much tax is actually due. So the figure he gave is not really correct, is it?
Mel Stride
I am afraid I have to dissent from that view. The simple fact is that the International Monetary Fund has identified the tax gap measure as one of the most robust measures of its kind in the world. At 6%, our gap is among the lowest in the world, and it is the lowest we have had in our history since we have been measuring the tax gap. If we had the same tax gap today as we had under the previous Labour Government, we would be out of pocket to the tune of £12.5 billion a year—enough to fund every policeman and policewoman in England and Wales.
Stella Creasy (Walthamstow) (Lab/Co-op)
On the subject of tax avoidance, the Minister will know of my support for the Government’s willingness to close the tax loophole on the sales of commercial property by overseas companies. As my hon. Friend the Member for Easington (Grahame Morris) said, the Paradise papers show some of the ways in which tax is being avoided, including through holding companies in Luxembourg. When I asked the Minister about that before, he did not seem to know about the Luxembourg treaty and how it could affect this policy. What are his plans to address the problems created by the Luxembourg treaty, which could see us losing out on £5.5 billion a year of the tax collected through his changes?
Mel Stride
As the hon. Lady will know, a number of the measures coming out of the OECD’s base erosion and profit shifting project, which we have been in the vanguard of—including common reporting standards and access by our tax authorities to a variety of information in real time in overseas tax jurisdictions—are essential to bearing down on exactly the issues that she mentions. There are further measures in the Bill to deal with those who place their moneys in trusts, typically those coming under our non-dom reforms. By abolishing permanent non-dom status, which Labour failed to do in its 13 years in office, we have made sure that when individuals have assets that are protected while in trusts, those moneys fall due to tax in our country as soon as they are brought out of those trusts, even if people cycle them through third parties and other approaches. That means that we are securing more than £12 billion a year more for our public services than would have been the case had the tax gap remained at its peak of nearly 8%, which it reached under Labour.
The autumn Budget continued that work with a package of measures forecast to raise £4.8 billion by 2022-23, some of which are included in the Bill. It is important to note that the provisions in the Bill form part of a broader anti-avoidance and evasion agenda dating back to 2010. Since then, the Government have worked tirelessly and carefully to introduce an ambitious raft of anti-avoidance and evasion legislation. That commitment is borne out again in this Finance Bill, which implements several measures, including provisions cracking down on online VAT evasion to make online marketplaces more responsible for the unpaid VAT of their sellers; closing loopholes in the anti-avoidance legislation on offshore trusts, as I mentioned; tackling disguised remuneration schemes used by close companies; preventing companies from claiming unfair tax relief on their intellectual property; ensuring that companies are not able to claim relief for losses on the disposal of shares that do not reflect losses incurred by the wider group; closing a loophole in the double taxation relief rules for companies; and tackling waste crime by extending landfill tax to illegal waste sites. Those measures will help to raise vital revenue and ensure that individuals and corporations all pay their fair share.
Kirsty Blackman
I was not particularly pleased with the answer that the Minister gave to the right hon. Member for Barking (Dame Margaret Hodge) as to why the Government have not tabled an amendment of the law resolution, which would allow the Opposition to put forward more measures in relation to tax avoidance and evasion, for example. Why did they not put forward an amendment of the law resolution?
Mel Stride
We did not have an amendment of the law resolution on the previous Finance Bill, so we are carrying on with the situation that pertained to that Bill. As I explained, what matters is that we have an opportunity fully to scrutinise in this House the various measures provided and amendments that may be tabled in relation to those measures. There is nothing preventing that. As I have outlined, the Bill will go through its various stages, allowing for very thorough scrutiny.
Together, the measures that I mentioned continue the Government’s sustained crusade against tax avoidance, evasion and non-compliance—an endeavour that we will pursue with undiminished vigour right through the course of this Parliament. Let no one ever doubt, for even the briefest moment, this Government’s commitment to hard-pressed families, and to championing business and the wealth creators of the future. On the matter of taxation as set out in the Bill, let no one misunderstand us: we will continue to keep taxes competitive and fair, but we will also continue our vigorous and ceaseless drive to bear down on avoidance and evasion so that all pay their due. We will ensure that all pay a just and fair share for the support of our vital public services: for doctors, paramedics and nurses; for our police, our teachers, our fire services, and our brave armed forces who make our country so great. I commend the Bill to the House.
Peter Dowd
I have the greatest respect for the hon. Gentleman, but I refer him to the answer I gave earlier. He should have a look at and dig into the documents, which are very easy to find.
The bottom line is that, wherever they are in the country, businesses that play by the rules are disadvantaged, so it is unfair not just to individual taxpayers but to business taxpayers. Meanwhile, back in Westminster, the Government continue to have absolute contempt for parliamentary oversight.
Peter Dowd
I will give way to the Minister, who may tell me that the Government do not have such a view.
Mel Stride
The hon. Gentleman is being very generous in accepting interventions. From what I can understand, every time the shadow Chief Secretary is asked a question about what Labour promises and pledges will cost, he reverts to saying that people can go and look it up: they can dig into the documents and get on the internet. Equally, he is saying that the public are shifting his way. Is his message to the electorate to get on the internet and to look at his policies in order to understand them?
Mel Stride
I had largely made my point, but if I am to have a second bite at the cherry, let me just add a final point. Is the shadow Chief Secretary’s message to the great British electorate that when it comes to costing his own party’s plans, they should get on the internet and start googling to find out what those costs are?
Peter Dowd
My message to the great British public, who have showed their support for Labour on this, is to get out and vote Labour. That is the message. The other point is that the Minister’s hon. Friends have been waving an iPad around. I suggest they get on their parliamentary iPads and do their work.