Oral Answers to Questions
Michael Connarty Excerpts(9 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
The idea behind the starter homes scheme is precisely to offer homes at a discount to young people who want to get on the housing ladder. I would have thought that was an objective that everyone in the House would welcome. If the hon. Lady wants to look at social rented housing, in this Parliament—and continuing in the next Parliament—we have the highest annual rate of social house building than under the previous Government or for the past 20 years. During Labour’s 13 years in office, the number of social homes fell by 421,000; we have increased it by over 300,000.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
10. What recent discussions he has had with the Finance Secretary of the Scottish Government on devolution of taxes.
The Chief Secretary to the Treasury (Danny Alexander)
I have had frequent and largely constructive discussions with the Scottish Cabinet Secretary for Finance, Employment and Sustainable Growth, including on the matter of devolution of taxes, as have my ministerial colleagues. The Scottish Minister recently met the Chancellor of the Exchequer. We have made huge progress in the area of tax devolution.
Michael Connarty
From reading the text of the Smith agreement, it seems to me that we have handed over income tax in particular to the Scottish Government, whereby allowances and bands can be varied. In fact, we have created the possibility of an independent tax system, apart from hanging on to the 20p tax as a kind of fulcrum around which it must work. Has the Treasury looked at the impact on the UK if there were an entirely independent tax system in the north of the United Kingdom?
Danny Alexander
Yes, we have. The hon. Gentleman is right. The Smith commission—rightly, I believe—devolves power over rates and bands in the income tax system. It does not devolve control of the tax base or the personal allowance. One of the bits of work that remains to be done is to ensure that we have a fiscal framework in place around that which means that the fact of devolution does not offer a financial advantage in and of itself either to Scotland or to the rest of the United Kingdom. I have had constructive discussions with John Swinney on that point and on many others. It is, of course, a matter for the Scottish Government to make sure that they have competent administrative machinery in place, which they will need next month when the process of the first wave of income tax devolution starts.
Tax Avoidance (HSBC)
Michael Connarty Excerpts(9 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Michael Connarty (Linlithgow and East Falkirk) (Lab)
The Chancellor has to realise that this will not wash with the general public and the tax-paying businesses in my constituency and elsewhere, or with the companies that paid their taxes under the arrangement in Switzerland and elsewhere when they transferred their money. The reality is that people want a law under which people will not only have money taken off them but go to jail. If he is not going to introduce such a law, he should step aside and let another Government do it for him.
Mr Osborne
These abuses happened when there was a Labour Government in office. That Government, and the former Chancellor, set in place the selective prosecution policy. We have increased the resources and, as a result, the number of prosecutions has gone up fivefold. There is still one particular barrier, however, to the potential prosecution of HSBC Swiss if it is found to have committed a crime. That barrier is the agreement signed by the last Government with the French Government, and we are currently in negotiations with the French Government to unravel that terrible agreement. Then, our independent prosecuting authorities will see whether there are any cases to bring.
Autumn Statement
Michael Connarty Excerpts(10 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I pay tribute to my hon. Friend, who has done a brilliant job in bringing to my attention, and that of Parliament, the needs of Norfolk, Norwich and East Anglia. Because of her campaigning, and that of my hon. Friend the Member for Ipswich (Ben Gummer), we have the Norwich in 90 and Ipswich in 60 campaigns, and the report. We are committing new trains to speed up those journeys, as well as a massive road investment on the A47, A11, A12 and A14. None of those things happened under a Labour Government, and East Anglia was completely neglected in terms of infrastructure for the future. That is not the case any more and my hon. Friend has put East Anglia on the map.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
When I was a teacher of children with learning difficulties, some of the children did not finish the race but were still given a prize. The Chancellor is different: he has run only half the distance he promised by the next election. Instead of apologising for not getting rid of the deficit as he promised, he wants us to applaud him. He says we are all in it together, but for the people I represent, yes, the claimant count has gone down, but the real value of their income has gone down by £2,000 per household. Last weekend, at Tesco, the warm-hearted people of my constituency had a massive collection for food banks. When will the Chancellor deliver for those people, instead of the millionaires who he claims are all in it together with them?
Mr Osborne
I have taken measures to reform stamp duty in a progressive way and introduced a tax, which could have been introduced in any Budget by a Labour Chancellor, to deal with multinational companies that divert their profits overseas. I have ensured that profits cannot be written off against losses incurred during the financial crisis—again, any Labour Chancellor could have done that but they did not. I am determined to ensure that the richest in our society make a contribution and that businesses pay our low taxes. More generally, the result of a pro-business policy is that in the hon. Gentleman’s constituency alone—I think he just dismissed this out of hand—unemployment has fallen by 20% in the last year. I would have thought he would welcome that.
Oral Answers to Questions
Michael Connarty Excerpts(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Michael Connarty (Linlithgow and East Falkirk) (Lab)
4. What recent discussions he has had with England's international football representatives on allegations of corruption within FIFA.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mrs Helen Grant)
These are very serious allegations. Of course, major sporting events need to be awarded in an open, fair and transparent manner, but, as the Prime Minister has already said, we need to wait to see the results of Michael Garcia’s inquiry before discussing next steps.
Michael Connarty
I thank the Minister for that very cautious response. I have just finished two years as chair of the sports committee of the Parliamentary Assembly of the Council of Europe, and I am its rapporteur on corruption and governance in sport. Now that the investigative journalists of The Times have revealed how much corruption is going on, and Greg Dyke has spoken out very boldly on this, does the Minister agree that it may be time for a Joint Committee of the House to look at this question in some detail before the beautiful game is mired by the behaviour of FIFA?
Finance Bill
Michael Connarty Excerpts(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Michael Connarty (Linlithgow and East Falkirk) (Lab)
On the question of tax avoidance, if the Government do not design the tax system properly and people who should pay tax can avoid it if they do so legally, that might be correct legally, but it is not necessarily correct morally. Having said that, if the Government design the tax system in that way and someone takes advantage of it, particularly an entrepreneur, who might take the money they save in tax and reinvest it in further jobs and enterprises, that person can defend that on the basis that if the Government were really skilful they would not be able to avoid it. On the question of tax evasion, people should go to prison if they evade tax. It is very simple in my view.
I have written to the Minister on behalf of a constituent who is an entrepreneur. He is about to retire and will probably dispose of his company in the process, because he is not talking about another income stream coming from continuing contact with the company. He accuses the Government of bringing in retrospective legislation in this Finance Bill, because from clause 192—I have read this part of the Bill right the way through to chapter 3, which is on accelerated payments—it is quite clear that the Government intend these retrospective investigations to go back to 2004. It gives HMRC power to declare in the arrangements for follower notices the ability to claim the tax based on other cases that might be similar to the case it is investigating or discussing. If it does so, it can claim the payment from the individual based on that follower notice.
Ian Swales
On a quick point of clarification, the retrospective application that most people are concerned about is that which was applied in the Finance Act 2008, which was enacted by the previous Government.
Michael Connarty
I understand that the advice given to my constituent, who is a business person, came from one of the best financial advisers in Scotland. In fact, it was the financial adviser who wrote to Equitable Life long before anyone realised that it was defrauding people by enhancing assets falsely, and who was the first person called to give evidence to the Treasury Committee. They have advised my constituent that the problem is, in fact, in this Bill and the performance under its terms. It might be based on a previous ability to do so, but the concept of follower notices and accelerated payment notices are, in fact, in this Bill and did not exist before.
The question is whether the provision is retrospective, because I believe that the Minister is on record—I think that it might be in writing—as saying that he does not agree with retrospective tax powers. I also understand that the Treasury Committee confirmed in a recent report that this is indeed retrospective and the Government are yet to explain what is wholly exceptional about the performance they have put in this Bill—the follower notices and the accelerated payment notices—that will justify the use of retrospective claims for taxation.
It seems to me that when someone is doing their tax planning, particularly when coming to that later period in life—quite a few Members of this House are in that age group—they look at the law at the time, take tax advice from advisers, make arrangements and do their tax planning accordingly, and that is what they think will be their future income. Those people tend not to be receiving a pension paid by someone else; they are earning their pension by their own efforts and enterprises. If that advice is taken and their tax planning goes ahead, I want the Government to assure me that they will not then be told after this Bill is passed, “You made that arrangement in 2000, but we have decided that from 2004 that that tax planning, although legal then, is not legal, so we want you to pay a substantial amount of tax back that was not in the tax arrangements then.” I think that it is only just that the Government give people an assurance that they will not come seeking to turn what was a legal tax arrangement into an illegal one and cost them a substantial amount of money.
David Rutley (Macclesfield) (Con)
The hon. Gentleman is making a powerful argument. However, he should consider whether his model of an individual looking at tax approaches is the right one; many businesses look to tax advisers for advice. It is those tax advisers, who have given what is at least imperfect advice to businesses, who need to be examined more carefully.
Michael Connarty
I hope that the hon. Gentleman thinks I am a bit smarter than his question implies. If someone does something that is tax-efficient but not legal or justifiable, it is clear that the Government can say that it is illegal and they want the money back. People pay financial advisers quite a bit for good, legal, tax-efficient plans—to find ways not of cheating the system, but using it efficiently.
I might think it wrong for people to avoid tax and I might say that they should put it all in the bucket, like those in the PAYE system. The reality is, however, that tax efficiency is about people seeking to minimise their tax; that advantages people employed by their enterprise or seeking a just reward for their efforts throughout their life as an entrepreneur. I am not against that. If we want to close an avoidance loophole, we should close it. If the loophole is open and used, the Government should not be able to come back 10 years later and say, “We’ve changed our mind. Yes, it was efficient and legal, but we want money from you.”
Under this legislation, once the decision has been made, there is no appeal; someone would have to go to private litigation to fight the taxman. That is the problem. The system will not be fair, but completely and utterly repressive—designed to give all power to HMRC and the Government and none to the private individual. My constituent is 65. He has worked for a long time and employed lots of people in my constituency. He has done things legally, but on retirement he could face the prospect of being chased by HMRC under this law, the only way to fight it being to have enough money in the bank to bring private litigation.
The proposals give all power to the taxman, and that is not a correct, just or moral way to run the country. I hope the Minister will assure us that the law will not be used in such a way and that, if required, amendments will be tabled to ensure that.
Oral Answers to Questions
Michael Connarty Excerpts(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Michael Connarty (Linlithgow and East Falkirk) (Lab)
11. What recent discussions he has had with Digital UK and Ofcom on the re-allocation of the television spectrum to be vacated by BBC Three.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr Edward Vaizey)
The BBC Trust is currently considering the proposal to stop broadcasting BBC Three. I have not yet discussed what may happen to BBC Three’s Freeview channel number with either Digital UK or Ofcom.
Michael Connarty
I know that the Minister is very conscious of the concern felt by people in Scotland about Scottish Television’s proposals to introduce local television. Is it not a problem—I have spoken to Ofcom about this—that the BBC seems to think that it can keep the BBC Three channel and invent BBC One plus one, even though it is currently failing to use the channel properly? Is it not important for the BBC not to have a monopoly, and for the channel to be available to other public broadcasters?
Mr Vaizey
I know that the hon. Gentleman met Ofcom this week, and that he has raised this subject in the House and led a debate on it. The BBC Trust will make the final decision on whether the BBC Three channel should go to an online service, but I understand that Digital UK will allocate the channel in the normal way, taking account of the due prominence rules in the public service broadcasting guidelines. However, I have noted the hon. Gentleman’s point, and will follow it up.
Fairness and Inequality
Michael Connarty Excerpts(10 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr MacNeil
Well, a principled abstention by the Labour party is news to me, but I take on board what my hon. Friend says.
I was talking about hunter-gathering. I was not so much hunting Labour Members as asking why they did not go through the Lobby on the 50p tax rate. I was discussing why people have certain outlooks in life. I think that when people view the fruits of their success as being the result of a hunt that involved a great deal of good fortune and support, they might have a tendency to be slightly more left wing, whereas those who think the fruits are the result of their own individual hard graft might have a tendency to be more right wing and view their gains as a gather. I will make no further judgment on that idea—I just want to put it out there and let people chew it over—but I think there is something deep-seated in our own personal biases as to why we arrive at certain points of view.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
Will the hon. Gentleman give way?
Mr MacNeil
It would be a great pleasure to give way to the hon. Gentleman. Perhaps he will tell us why Labour did not vote against the cut to the 50p tax rate.
Michael Connarty
I would be quite willing to brief the hon. Gentleman later about the technicalities of why the vote was not called on that particular night.
The hon. Gentleman is talking about a sociological analysis, but some people have moved on since then and done a socialist analysis. When society is divided into those who support capital and those who support labour, what happens is that the forces of those who have the power in the land—the landed classes—join with the merchant class to support capital, and they have succeeded in increasing the value of capital by driving down the cost of labour. That is why we have the inequality we have, and that is the structure of the society we—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. It is very good to have a lecture, but not during an intervention. If the hon. Gentleman wants to catch my eye later, I am sure he will be able to do so and give me a lecture then.
National Minimum Wage
Michael Connarty Excerpts(10 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Vince Cable
I keep hearing the call from Opposition Members for a political intervention. Are the hon. Gentleman and his colleagues saying that this system—a very good system that his Government established, based on the Low Pay Commission analysis—should be torn up and a political settlement imposed? Is he suggesting that the remit, which takes account of the impact of the minimum wage on employment, should be disregarded? Is that the argument?
Michael Connarty (Linlithgow and East Falkirk) (Lab)
Let me give the Secretary of State an example. The Low Pay Commission recommended against amending section 31(1)(b) of the minimum wage regulations, which allowed employers to pay hospitality workers out of their tips. The last Government took the courageous step of changing that provision and preventing that from happening. That is a good example of where politics looks to the good of the individual and does not play to what I believe are the prejudices and fears of people in the Low Pay Commission. Is it not also true that if the minimum wage were raised—I have seen many cases of this—the bill for tax credits would go down and the Government would probably be better off in terms of public sector expenditure?
Vince Cable
On the last point, the hon. Gentleman may well be right, although I have seen an analysis suggesting that, because of the effect on corporate taxation, which offsets those gains, he is not. However, on the more substantive point about politicians intervening to override the Low Pay Commission, I believe that we should not be dogmatic about it. In the overriding majority of cases, it behoves the Secretary of State to listen carefully to the Low Pay Commission and it would be unusual to override it. He cites one case, and I have actually overridden the Low Pay Commission—on the apprenticeship wage, which I thought was excessively low, giving the wrong signal to young people and others who wanted to do apprenticeships. I made a decision on that specific issue to intervene and disregard the advice of the Low Pay Commission. If that became a habit, however, and if its advice were overridden on a major issue of pay policy, the minimum wage structure would crumble from being politicised in that way.
Vince Cable
I have taken several interventions already.
Finally, let me say a few more words about enforcement. Clearly the minimum wage is only effective if it is properly enforced and has the force of law. It is important not just for its own sake but to give workers confidence that if they complain, those complaints will be followed through. There are several levels as enforcement is a complicated process. First, it is a problem of securing arrears and then imposing fines. We then have a name and shame system, and ultimately there is prosecution in court, but that has hardly been used either under the last Government or this one because it requires a demonstration of proof of intent, which is very difficult to demonstrate.
Let me explain how these various levels are now operating. In the last year, arrears of about £4 million were paid, compared with an average of about £3 million over recent years. About 26,000 workers benefited from that. Fines are crucial, because under the last Government and this one, that is where the main enforcement action has been taken. Last year 700 enforcement cases were taken to the level of fines. The amount paid was seven times as much as was paid under the last year of the Labour Government. One can argue about this from one year to another, and these things fluctuate, but any suggestion that the regime has become easier is simply not true.
Vince Cable
I am going to proceed to the end of my speech.
We are now in the process of considerably increasing the penalties, both in terms of raising the fine from £5,000 to £20,000, subject to the House approving the legislation, and applying it per worker rather than per firm, which is, of course, much more draconian.
The new guidelines for the naming and shaming process were issued to HMRC in October. There is also the question of due process. Companies that are about to be named and shamed can appeal, and it is estimated that that process takes roughly 150 days. I imagine that a significant number of cases would begin to emerge by the end of February; we can test that when the issue arises.
To summarise, we have a good system, but we want to strengthen it, and to strengthen enforcement. We also want to respect the principles of the Low Pay Commission. We want to see improvements to the minimum wage, but that needs to be done properly, through the independent Low Pay Commission. I therefore urge my colleagues to oppose the motion, and to support the Government’s amendment.
Banking
Michael Connarty Excerpts(10 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Leslie
We have to feel sorry for senior bankers facing a bonus of merely the same amount as their basic take-home pay, as 200% bonuses are obviously vital for their survival—for the record, this is sarcasm. It is complete nonsense, of course.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
I have been listening intently to my hon. Friend’s delineation of the big ticket items where the banks have failed and where the Government appear not to criticise them, but on a more localised issue, Scottish constituents of mine have consistently been rack-rented and ruined by RBS, as the Tomlinson report said, yet these bankers complain in the local press in Scotland that their £4 million-worth of bonuses is less than the £6 million that HSBC bankers get—and these are people who consistently destroyed companies in Scotland. I hope the Minister will address the question of their faults and how they have acted since the crash.
Chris Leslie
Of course, we want to see rewards, bonuses and pay that reflect performance. That is my hon. Friend’s basic point. It is not asking for too much.
In too many areas, reform has been left unfinished. Four times the Government have rejected our proposals for bankers to face an independent licensing regime with an annual validation process for competence; they have delayed a decision on leveraging that could prevent excessive risk taking; and they have continued to resist a sector-wide back-stop power for the full separation of retail and investment banking, should the ring-fencing not work. Moreover, there is insufficient scope for proper scrutiny before the further sale of Treasury assets, and we know that the Government sold both Northern Rock and the first tranche of Lloyds shares at a loss. Despite month after month of persistently falling lending to small and medium-sized enterprises—a fall of £12 billion in the past year alone—the Government have had to throw out Project Merlin, ditch credit easing and reboot their funding for lending programme, but still to little effect. It is obvious that we need a serious British investment bank, supported by a network of regional banks and capitalised with revenues from the market value of 3G spectrum licences, yet here we are, in the fourth year of this Government, and their half-hearted attempt at a business bank is still not fully up and running.
Sajid Javid
I will give way to the hon. Gentleman; I might be about to hear an apology, so I will listen carefully.
Michael Connarty
I think anyone who reads the transcript deserves an apology from the Minister, who forgot to mention that the relaxation of banking controls started with Mrs Thatcher and the Conservative Government. He forgot to tell people on the record that when people like me on the Opposition Benches were urging constraint—I am an economist—the Minister’s right hon. and hon. Friends were calling for fewer controls and a lighter touch with the banks, as was the SNP in Scotland.
Sajid Javid
I think the hon. Gentleman has a challenged memory of events. I am sad to see that he had an opportunity to apologise, but did not take it.
Let us look at the facts. At the time of the changes Labour was making to the financial sector, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) warned the then Government in November 1997:
“The process of setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day.”—[Official Report, 11 November 1997; Vol. 300, c. 732.]
Let me share another quote, in this case from the current shadow Chancellor from a speech he made as City Minister in 2006:
“Nothing should be done to put at risk a light-touch, risk-based regulatory regime.”
What we are hearing from Labour is the same old headline-chasing nonsense that we have come to expect and no answers at all to the problems they created.
I agree with the hon. Member for Nottingham East on one thing: public confidence in the banking system and in bankers is still low, just as—let us be honest—public confidence in the political system and the people in this Chamber is still low. That is precisely because, five years ago, partly as a result of the irresponsible decision of some bankers, but largely as a result of the policies of the then Labour Government, our country found itself in a huge mess. When trust is lost on that scale, it is not won back overnight.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
If I refuse to take interventions, it will not be because I do not think Members have a good contribution to make, but because I would like to limit the length of my speech. I recall often ending up with only four minutes to speak when the debate started off with an eight-minute limit.
The Minister did not focus on the motion, but I always look at the motion on the Order Paper rather than bring my prejudices with me and try to fit them around the debate. The motion says that, so far, Government reforms
“have failed to deliver a competitive banking system”.
I want to focus on what has happened since the crash, and on the behaviour of the banks that my constituency businesses have had to deal with, and ask why that should influence our decisions on bonus levels.
I welcome the EU regulation. I heard the right hon. Member for Wokingham (Mr Redwood) on the radio this morning saying that the European Scrutiny Committee, on which I am the longest-serving Labour member, unanimously supported the position on an individual veto for the UK on a number of items. In fact, he misquoted us. If he had looked at the policies in the document on the scrutiny of EU business in this House, he would have seen that paragraph 2.80 states that we supported the idea of a red card for items in the EU. That would mean that a majority of the EU countries would have to agree to send back a policy, such as the 100% bonus limit, to the EU in order to reject it. That is not the same as the UK having the right to mount an individual challenge to such a policy.
In the public’s mind, this debate focuses on whether the banks have changed their behaviour, whether they are better organised and are working better for our constituents, and whether the people who run them deserve to get larger amounts of money as a reward for what they have done in the interim. The reality is that RBS, the bank that took a £44.7 billion bail-out from the last Government, has again and again been awarded substantial bonuses for failing. It has not been performing well.
The Tomlinson report found that RBS had been involved in what can best be seen as malpractice in its relationship with the business community. Small businesses have account managers at the bank who suggest that they should take money from the bank. They are told that they will be looked after by their account manager. They are not told that, in the background, a group of people known as debt recovery executives are looking at those same deals and asking themselves how they can make that company go bust and get its assets. They are also thinking about how they can revalue those assets downwards so that the company will be found not to be solvent enough to pay its debts.
I have watched that happen to businesses in my constituency again and again. They were told that they were getting a good package and a good deal, only for someone to appear from another part of the bank to tell them that their assets had been revalued. Incidentally, the same valuers were used again and again by the bank to downgrade those companies’ asset values. The companies were then told that they were in trouble because they could not pay their debts, but that the bank would give them another loan, charged at an additional 10% interest over and above what had originally been agreed. I have watched company after company go to the wall on that basis.
RBS is in print as saying that its bankers deserve a £6 million bonus, rather than the £4 million that they would be limited to under the EU rules. Those bankers say that they could get £6 million if they went to work for HSBC—well, good riddance to them, if that is how they are going to run the banking system. We are failing the same people that we failed under the last Government. I make no apologies for the last Government. They took certain choices, and I criticised them for it. When I was at university, the banking system was a solid, solvent organisation. I had a very right-wing professor, Andrew Bain, who said that banks should have a low leverage point of about 12.5 times the level of its reserves. That all went to pot under the last Government, and I do not see why anyone who criticised the Government for that should apologise.
The pattern at RBS is being repeated at the Clydesdale bank. I have been with that bank since I was a student. Ballantine’s iron foundry had an order for £1 million of wrought iron work in this building. It had a full order book. Following an offer from an account manager, it transferred to the Clydesdale bank. The bank looked at the company’s £2 million of property assets and also judged its assets held in patents and rare mouldings to be worth £1 million. Further down the line, however, other people from the bank emerged to tell the company that its property had been revalued and was now worth only £500,000 and that its patents were worth nothing. The company had been in existence for 180 years, and its owner put £70,000 of his own personal cash into the company’s bank account to keep it moving and to prove to the bank that his business was viable in the long term. It was put into administration anyway, and it has now closed, with the loss of 70 jobs. I blame the Clydesdale bank for that.
This is the problem that I have: the Tomlinson report talked about RBS, but the problem is constantly occurring. Banks have the ability to write down their own debt by making good businesses go to the wall and selling off their assets to bring in money. They write off a debt and bring in assets at the same time. That has been going on since this Government came to power. It happened under the last Government as well, but we are talking about what this Government are doing.
Part of the motion that could hold out some hope for people is the proposal to
“ensure that major new banking service providers are created”.
The only way to achieve that is by splitting the big five banks. Their domestic banking businesses would need to form a whole new banking system, with the risk-takers and speculators going off into other banks. The idea of setting up little banks here and there will not work, although I must admit that I have taken advantage of the facility of moving all my accounts—including my MP’s office account—to the Trustee Savings bank, which has now been split off from Lloyds. The Airdrie Savings bank has also opened a new branch in the adjacent constituency of Falkirk, and a number of people are going to it because they want to be treated as customers. When they talk to their account manager, they do not want to feel that there is someone in the back room wondering, “How can I get money off this individual?” or “How can I trap this small business?”
It is important for people to have new banks. We are not talking about bank closures, despite the myths about that. We need to create a major new banking system by splitting the banks, and we need to encourage people to diversify and to leave a bank if it is not treating them well. We also need to ensure that people who get bonuses receive only the maximum allowed by the EU, and I hope that the Government fail in their challenge to that proposal in the European Court of Justice.
Oral Answers to Questions
Michael Connarty Excerpts(11 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
This is coming from the party that has opposed every single measure we have taken to reduce the deficit. If we had taken the approach that the Labour party advocated, we would have borrowed a further £200 billion. That is not responsible or fair on future generations; that would put our economy at risk.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
11. If he will introduce limits on debt interest deductions used by private equity companies to reduce their corporation tax liabilities.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The UK tax system, as with those of most other OECD countries and in accordance with international accounting standards, gives reductions for interest as a business expense. The UK already has a variety of defences that protect against excessive interest deductions. These include the worldwide debt cap, transfer pricing rules, anti-arbitrage rules, unallowable purpose rules, distribution rules and withholding tax on interest under certain circumstances.
Michael Connarty
I thank the Minister for that extremely interesting answer. We all use Boots, but is he aware that Alliance Boots, which is now equity-owned, was funded by £9 billion of loans, which allowed it to write off £1 billion of corporation tax? There is now a complaint by War on Want and Change to Win at the OECD about the company breaking the OECD’s rules by engaging in self-dealing, which allowed the owner of the new company, Stefano Pessina, to make £400 million in profit. What will the Government do about that fraud, as well as the abuse of the taxpayer’s money?
Mr Gauke
I am not going to comment on individual cases, but as I have said, there are a number of protections in the UK system to stop abuse in this area. We have strengthened the capacity of Her Majesty’s Revenue and Customs, and it is also worth pointing out that the UK has led the way in the OECD’s work on base erosion and profit shifting, which is also looking at interest deductibility.