PAYE Contributions

Michael Fallon Excerpts

Wednesday 8th September 2010 Commons Chamber

[Mr Gauke]

First, let I say that I am perfectly happy to answer these questions and I am genuinely grateful for the opportunity to do so.

The hon. Gentleman asked about the backlog of cases. That matter has been well known—I believe that he and I have debated it in the past, and a National Audit Office report published on 30 June gave the most recent update on the position. There is nothing new in the backlog that has emerged in recent weeks. There is a problem and we and HMRC are seeking to deal with it, but it is a problem that has existed for many years and we are critical of the previous Administration for the lack of progress in resolving it. A specific concern that has featured very recently is that it has emerged that, in the last two tax years, 4.3 million people have overpaid tax and 1.4 million have underpaid. Our aim is to send cheques to all those who have overpaid over the course of the rest of the year—in dramatic contrast with previous delays in addressing overpayments.

The hon. Gentleman is right to raise the question of changed circumstances, and it is absolutely right that HMRC considers hardship cases. That is why we have announced today that HMRC will show flexibility in some cases to spread payment over three years. As I said, we are not seeking to pursue the matter mindlessly, without taking account of individual circumstances, especially of those owing large amounts.

The hon. Gentleman also rightly raises the subject of fraudsters, and I am grateful to have the opportunity to reiterate that HMRC will not send e-mails to members of the public; communication will be in writing. Of course, people should be cautious.

How long has this problem persisted? The fundamental problem with PAYE, in the sense of there being too many open cases, and underpayments and overpayments, is a long-standing issue. In part it has to be recognised that, inherently in the PAYE system, there will sometimes be underpayments, because not all the information will be available in-year. For example, all the information about benefits in kind, company cars and so on, will not necessarily be available to HMRC or to employers. That will come to light at the end of the year, and then there will be a need for reconciliation, but that problem has always existed.

The hon. Gentleman specifically asked how long Ministers have been aware of the problem. This Minister has been aware of a problem with PAYE since day one, and that is one reason why we made proposals for reform when in opposition.

The hon. Gentleman asked also about future reform. It is important that there is trust in the PAYE system, and it is right to say that in 85% of cases PAYE is correct in-year, but there are still problems, and we are consulting on proposals so that information is more up-to-date—if you like, so that it is real-time information. That means that HMRC will be able to respond to changed conditions much more quickly, and that we will have a system that is fit for the 21st century, in which people move around, change jobs and have multiple sources of income. We think that that is the direction in which we need to move.

[Michael Fallon (Sevenoaks) (Con)]

Is it not rather revealing that this question was not tabled by the Labour party, which presided over such a decrepit system for so long? Does not the sheer number of incorrect payments illustrate the need to move to a system that reflects modern working and allows tax payments in real time, rather than on the basis of either guesswork in advance of the tax year or reconciliation a year or two later?

[Mr Gauke]

My hon. Friend is absolutely right. As the Government, we are seeking to address the short-term issue, which is the overpayments and underpayments. We cannot just brush them to one side or park them for another year; we need to address them. However, we must also look at the longer-term solution, and that, as my hon. Friend rightly says, means moving towards a much more up-to-date system so that the information is more up-to-date and we are able to respond accordingly.

Oral Answers to Questions

Michael Fallon Excerpts

Tuesday 13th July 2010 Commons Chamber

[Danny Alexander]

He also made it clear that he did not think that that risk was a likely one. In the Budget—this is the important central judgment that the House needs to understand—we have faced up to the fact that if we had carried on with the plans of the previous Government, the big risk facing the economy would have been higher interest rates, fewer jobs, and a reduction in growth, and we would have faced the big risk that we have seen in other countries, which we need to ensure does not happen in this country. Our Budget has ensured that that risk is avoided; the previous Government would not have done that.

[Michael Fallon (Sevenoaks) (Con)]

Given that the IMF report said that we would have had the highest public borrowing in the G20 this year and the worst structural deficit in the OECD, has the Chief Secretary, the Chancellor or any Treasury Minister yet received a formal apology from the Labour party for the appalling state of the economy?

[Danny Alexander]

Sadly, there has been no formal apology. Labour Members are free to offer one during this questions session should they wish to. In fact, with the revised Office for National Statistics forecasts of the last couple of days, we have seen the predicted reduction in the size of the economy go from 6.2% to 6.4%. Even after they have left office, their recession is still getting worse.

Alignment (Clear Line of Sight) Project

Michael Fallon Excerpts

Monday 5th July 2010 Commons Chamber

[Michael Fallon (Sevenoaks) (Con)]

It is a pleasure to follow my hon. Friend the Member for Gainsborough (Mr Leigh), and all of us look forward to hearing from him in this Chamber on his 90th birthday.

I, too, welcome warmly and, I hope, briefly the motion and the Government’s early action on the clear line of sight project. As my hon. Friend the Minister said, it has had a very long gestation. We are being asked to take note of a document that is 16 months old, and of a proposal that is at least three years old, and probably four years old. For all that, it is a welcome proposal, because it puts budgets, estimates and accounts on the same basis, and the Treasury Committee has long encouraged such a move. It is very good news to hear from the Government that the budgets will be aligned from this April, and I understand that the estimates will follow from April next year. I welcome that.

I have only three technical points and then a proposal. I hope that they are not too technical, but if they are I am happy for my hon. Friend to write to me. First, I understand that in budgets, public capital expenditure by private bodies is treated as capital expenditure, but that, when it comes to estimates and accounts, it is treated as recurrent expenditure. My hon. Friend proposes to remove the cost of capital charges from the accounts, but I am still not quite clear how the estimates and how Parliament will see the capital that private bodies expend on the public’s behalf.

My hon. Friend the Member for Chichester (Mr Tyrie) has already discussed my second point at length, and I am grateful to him for his kind words. It is about the loss of control—to which my hon. Friend the Member for Gainsborough referred in an intervention—between the gross and net income totals. We have to accept that there is some loss of control, but I hope that my hon. Friend the Minister will reassure us that what matters is the detail of the net income to be provided. For current expenditure, that might be fees for capital expenditure, receipts or whatever, but it is important that we have sufficient sight of the income totals, and I am sure that my hon. Friend will reassure me on that.

The hon. Member for Birmingham, Yardley (John Hemming) touched on my third point, which is about the treatment of private finance initiative contracts. I understand that, under international finance reporting standards rules, PFI contracts are now shown on the balance sheets of individual departmental accounts, but that they might not appear in the calculation of net debt in the new, whole of Government accounts. Therefore, I would be grateful if my hon. Friend the Minister could explain how he proposes to reconcile public sector net debt, which is calculated on the national accounts basis, with the same figure that appears in the departmental accounts using the IFRS standard. That will be especially important as the PFI process peaks.

As the proposals are adopted, and as the assessments are prepared on that basis next year, the ball returns to our court. Therefore, I shall touch on the suggestions that my hon. Friends the Members for Chichester and for Gainsborough made and, indeed, what the Minister and his shadow, the hon. Member for Harrow West (Mr Thomas), said. It is true that we will have the advantage of the Backbench Business Committee being able to allocate further days for debate, but they will be for debate only. What is unsatisfactory about the current process, particularly when it comes to the supplementary estimates, is that literally billions of pounds go through on three particular evenings a year after only a single debate or, perhaps, two debates about just two items of departmental expenditure, important though they are. Those huge sums flash through on three particular evenings.

We have the new Select Committee structure and the new Select Committees, which have been elected by the whole House, and I am therefore wary of the suggestion from my hon. Friend the Member for Gainsborough that we set up yet another Committee. I think that he was going to call it the Budget committee, but we have an awful lot of Committees, and given that we now have elected Select Committees I ask the House to think again about how we involve them more in the process under discussion. I fully take the objection to pork barrel politics, which bedevils the United States Appropriations Committee that my hon. Friend seemed to like so much, and I should not suggest line-by-line amendment or, indeed, veto by a Select Committee. However, I should suggest that no supplementary estimate be presented to the House by any Minister unless it has first been approved by the relevant Select Committee. Nothing would transform the power of Select Committees more than my simple suggestion.

It would be up to the Department to establish a proper relationship with its Select Committee, and it would be up to the Secretary of State to plan his expenditure properly, knowing that if he went back to the Department with a huge supplementary estimate and wanted suddenly, mid-year, to transfer a vast sum from one end to another, he would have to explain himself to the Committee and win its approval. I do not suggest that the Committee should have the power to amend the proposal, simply that it should have to give its approval before that supplementary estimate is presented to the whole House. At a stroke, we would transform the relationship between the Executive and Parliament and give our Committees the power not simply to grandstand, ask questions and hurl abuse at witnesses, but to become more thoroughly involved with the work, planning and control over the money of the Departments that they scrutinise. The Committees would, therefore, become interested not simply in policy but in the huge sums that Departments spend. With that proposal, and my three technical comments, I warmly welcome the motion.

Budget Resolutions and Economic Situation

Michael Fallon Excerpts

Thursday 24th June 2010 Commons Chamber

[Michael Fallon (Sevenoaks) (Con)]

It is always a pleasure to follow the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke), but he will not be surprised that I cannot agree with his analysis. I wish to make two specific comments to him. First, he spoke passionately on behalf of the poorest people in his constituency, but I cannot see how one helps the poorest and those out of work in Coatbridge by messing up the public finances and producing spending plans that are unaffordable and cannot be carried through. Making promises of that kind does the poor no favours.

Secondly, I disagree with the right hon. Gentleman’s accusation that we take pleasure in the measures that were announced on Tuesday. There are many things in the Budget that I do not take pleasure from, and many spending cuts are coming that Members in all parts of the House will probably wish had not been made. There are certainly tax increases in the pipeline that we would not have wished for. However, many of the decisions that the Chancellor has taken were simply unavoidable because of the mess that we have inherited. We take no pleasure in the judgments that have had to be made.

It is heartening to Members on the Government side of the House, after so many years of hubris, boasting and declaration, to have a Budget that is so clear, honest and straightforward. Even if the right hon. Gentleman disagrees with the measures in it, it sets them out clearly and simply. It is refreshing to have a Budget that takes the longer view—a Budget for a whole Parliament. It is good to know now the structure of the measures in it, unpopular and unpalatable as some of them are to Members on our side of the House as well as his, and that if those decisions are carried through, the current structural deficit will be closed by the end of this Parliament.

It is refreshing also to have a Government who face up to a situation that has deteriorated rapidly, as we have seen in the eurozone. There is no exact parallel between our deficit and that of Greece, or between our debt and that of Spain, but there was a parallel between the Labour Government and the Governments of Greece and Spain in that all of them ignored successive warnings. They were all warned by the International Monetary Fund, the OECD and the European Commission to start putting their public finances in order, and they ignored those warnings. That is why we have had to be confronted with a second Budget in a year—an emergency Budget that puts right the weaknesses that have been identified.

[Mr Tom Clarke]

When the hon. Gentleman makes comparisons with other countries, will he bear in mind that we in Britain are not in the euro? Will he also, as he did when he was on the Treasury Committee, recognise that there is a big difference between short and long-term debt, and that that matters?

--- Later in debate ---

[Michael Fallon]

I accept both those points, and I am not drawing exact parallels with Greece and Spain. I am making the much more general point that when a country is warned by all the international agencies and commentators, and depends on the international markets to finance its accelerated borrowing, it has to listen to those warnings. That is why we are now confronted with a second Budget in three months.

The Budget is to be welcomed because the pain is quite clearly shared. We can of course argue about its relative impact on various deciles and so on, and we have had that argument. We can also discuss whether we should include the measures taken in earlier Budgets or just consider this Budget itself. What cannot be argued about, however, is that the pain is spread across all income groups and sectors. My constituents will bear some of that pain, just as the right hon. Gentleman’s constituents will in Coatbridge.

Let us be clear about some of the spending cuts that will ensue: they are legacy cuts; in the end, they are Labour’s cuts. We discovered that some of the spending promises made in January would, shockingly, have been financed from the reserve, which was set aside to ensure that our troops in Afghanistan would be properly financed if new need arose there for equipment and so on. It would have been raided to finance the extra spending commitments that were announced in the pre-election rush. The plain fact is that the spending was unfunded. We cannot continue to spend £700 billion and raise only £545 billion in taxes. That gap must be bridged and the Budget, for the first time in a series of Budgets, sets out a credible path for achieving that.

I am pleased that, when the Chancellor considered the make-up of those spending totals, he decided not to cut the capital spending programme further. That is important. Clearly, there are implications for jobs, and the capital spending totals were already being halved from their peak. There are explanations for that, but it was right not to cut them further.

I note that when the Chancellor reviewed the capital spending programme and future capital spending commitments, he was careful to preserve some of the commitments for key infrastructure projects in, for example, the northern cities. It is not true that the Budget hits Scotland, Lanarkshire or the north harder than other parts of the country. The dualling of the A21, for which we have long campaigned in Kent, was one of the first casualties of the spending review. Long-cherished projects in the south-east, too, are being further postponed. The pain is being spread across the country. That should be borne in mind when particular decisions, such as the loan to Sheffield Forgemasters, are considered.

I want to make three further comments about the Budget judgment. First, I assume—obviously, I must await the completion of the spending review—that there will be further contributions from annually managed expenditure. I assume that, as well as the decisions that have already been made—I accept that Labour Members may oppose them—about housing benefit and some of the other grants that have been mentioned, there will be more changes through some of the welfare reforms that my right hon. Friend the Secretary of State for Work and Pensions and his team are considering.

Secondly, I hope that, when an element of spending is protected, it will not be wholly insulated from the same downward pressures that we apply elsewhere to reducing management, eliminating unnecessary bureaucracy and focusing more spending on the front line. That must apply equally to health and international development as to other matters. Otherwise, in two, three or four years, those who happen to work in the health service will end up being better rewarded than those who have chosen to work in the education service or the police service. That would not be right.

Thirdly, I want to say a little more about the proposed freezes. There are freezes on public sector pay, child benefit and council tax. The reasons for them are all too obvious: the private sector has had to accept a huge measure of freezing—I pay tribute to trade unions in the private sector for the extent to which they accepted the necessary restraint on pay and the changes in working practices that had to follow in the teeth of one of the worst recessions we have had to face. It is therefore right that, as well as freezing pay, we should continue to consider the greater flexibilities that we need, and equity between the private and public sectors. Working practices, various entitlements and inherited rights should also be examined. It is not simply a question of freezing pay for two years and exposing public services to some of the problems that we have experienced in the past with incomes policy, when there is immediate demand for catch-up, immediate pressure for comparability and so on. While the freezes are in place, it is important to continue the search for radical reform, which helps restructure those services. That should apply across the public sector, where we have frozen pay and in local government, where we will freeze council tax. We must continue the drive for more efficient services, and shared services between councils.

The principle may also apply to some of the frozen benefits, such as child benefit, where freezing the benefit does not wholly tackle some of the inherent difficulties with universal benefits—the deadweight cost that is expended on those who are well able to afford to bring up their children but are entitled to exactly the same amount of child benefit as those much further down the income scale. Those issues need to be addressed while the benefits are frozen.

As we rebalance the economy away from the expansion in the public sector to encouraging the private sector to grow again—I welcome the enterprise measures in the Budget—it is enormously important to continue to focus effort on reskilling and ensuring that those who have to change their jobs and seek the new opportunities that are being provided have the necessary skills to alter their position in the labour market. We must get alternative training providers in alongside jobcentres and existing services.

Labour Members have described the Budget as a gamble. It is not a gamble, but a necessary judgment to restore the public finances and get our economy growing again in a way that provides the jobs of the future. We are in politics to make such judgments, and I am delighted that my right hon. Friend the Chancellor has set out his judgment so honestly in the Budget that I support.

Oral Answers to Questions

Michael Fallon Excerpts

Tuesday 8th June 2010 Commons Chamber

[Mr Osborne]

Let us be clear about who the losers would be if we did not deal with this record budget deficit. The whole country would lose out, because there would be higher interest rates, more businesses would go bust and international investor confidence would be lost. The hon. Gentleman needs to examine what is happening in the rest of the world, and realise that because Britain has the largest budget deficit of any advanced economy, we have to get on and deal with it.

[Michael Fallon (Sevenoaks) (Con)]

I welcome the Chancellor to his position. Will he give an absolute assurance that the coming Budget, and future Budgets, will always be presented first to Parliament, and that they will not have to be pre-notified to, or approved by, Brussels?

Government Spending Cuts

Michael Fallon Excerpts

Wednesday 26th May 2010 Commons Chamber

[Mr Speaker]

Order. Understandably, there is intense interest in this subject, with a very large number of Members wishing to contribute. If I am to have any chance of accommodating even a significant proportion of those who are standing, I require from each Back-Bench Member a single, short, supplementary question. I know that there will be an appropriately economical reply from the Chief Secretary.

[Michael Fallon (Sevenoaks) (Con)]

Does my right hon. Friend accept that although there were, obviously, extenuating circumstances on Monday, it is always best if these announcements can be made to Parliament first? Will he also confirm that the economic recovery is unlikely to be jeopardised by cuts to the cost and bureaucracy of quangos? It is far more likely to be put in danger by a Government who would simply sit on their hands for the next 12 months.

[Mr Laws]

I agree with both my hon. Friend’s points. First, he is right that we will seek, wherever we can, Mr Speaker, to make sure that these statements are made in the House, and we welcome the scrutiny from Members on both sides.

Secondly, I agree with my hon. Friend about the importance of cutting quangos. No serious economist believes that the actions we have taken this week will jeopardise the recovery. If the shadow Chancellor were being straightforward with us, he would acknowledge that the previous Government were already taking action to seek to deal with the deficit by tightening policy—for example by putting the rate of value added tax back up to 17.5%.