Finance (No. 2) Bill

Mike Kane Excerpts

Wednesday 25th March 2015 Commons Chamber

[Chris Leslie]

I want to make some progress—I have several pages still to get through and I want other Members to contribute.

The Bill should have contained a bank bonus tax for starter jobs and measures to scrap the bedroom tax. Given today’s timetable, however, I must move rapidly to some specific issues in the Bill and ask the Minister some questions. It is not just that we have general objections to the 45p higher rate of tax for earnings over £150,000; we have anxieties about the plans for a married couples allowance that will benefit only one third of married couples and only one sixth of families with children, and although the increases in the personal allowance are a concession, rather than leap straight to a 20p basic rate, it would be better to start with a 10p rate, as a fairer and more effective way to ease people on lower incomes into income tax.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

My hon. Friend makes an important case about the bedroom tax. The average cost of the bedroom tax is £700 per annum, and across Greater Manchester, 28,000 people have been affected. In my constituency alone, 3,038 families—the highest figure in the land—suffer from it, whereas in Witney in Oxfordshire, 300 families suffer from it. This has been of huge detriment to northern regions—across the country but mainly northern regions. Government Members have no understanding of its impact on our constituents.

[Chris Leslie]

This is always the dilemma. Do Government Members not understand—is it just a question of ignorance?—or have they just turned a blind eye? My hon. Friend has been a diligent campaigner against the bedroom tax and has managed to articulate very successfully the harm and difficulties that people have encountered, particularly those with disabilities who need the extra space in the house. Again, that should have been covered in the Bill.

[Chris Leslie]

Many studies suggest that it costs more than has been raised. Of course, the Government knew how unpopular the bedroom tax would be and came up with their “discretionary fund” to allow local authorities to ameliorate the impact, but it has not been enough and has certainly not been extended to many people who need it. My hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) will also note that there has been no guarantee that the fund will continue into future years. The Government are hoping that this will go away and that nobody will notice, but our constituents will notice.

[Mike Kane]

rose—

[Chris Leslie]

My hon. Friend feels strongly about this, so I will give way one more time.

[Mike Kane]

I do feel strongly about it. I can cite, with his approval, the case of Mr Gunning from my constituency, which has five wards in Labour Manchester and three in Tory Trafford. He lives in Tory Trafford and was not given the discretionary payment. If he had lived in Labour Manchester, he would have got the discretionary payment, although by now it would have come to an end.

Tax Avoidance (HSBC)

Mike Kane Excerpts

Monday 9th February 2015 Commons Chamber

[Mike Kane (Wythenshawe and Sale East) (Lab)]

To the British people, this looks like one rule for the uber-wealthy and another rule for the rest of us. Will the Minister explain why there has been only one prosecution in five years?

[Mr Gauke]

Part of the issue is that, as I have said, HMRC has consistently used civil penalties as the most cost-effective way of collecting the revenue and changing behaviour. When these cases have been taken to the Crown Prosecution Service, it has taken the view that a successful prosecution would be unlikely without corroborating or additional evidence and just on the basis of the data from the leaks.

Oral Answers to Questions

Mike Kane Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Danny Alexander]

I could not possibly comment. They have to make their own career choices. In terms of the hon. Gentleman’s own constituents, in the past four years the claimant count is down by 40.7%, which means that there are more job opportunities in his constituency than there have been for very many years.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

13. What recent assessment he has made of the level of bank lending to businesses since May 2010.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

Net bank lending to business in the UK fell sharply following the financial crisis. The Government have acted decisively to stimulate lending, introducing schemes such as funding for lending and the British business bank. Against that backdrop, the picture has now begun to improve and the most recent figures from the Bank of England show that gross lending to small businesses has increased steadily since 2012.

[Mike Kane]

Those were not the figures released last week, which show that net lending to small businesses in Britain fell by £435 million between April and June. That followed a decline of £720 million in the first quarter. Two years on, has not the funding for lending scheme failed Britain’s small businesses?

[Andrea Leadsom]

No. The hon. Gentleman is completely wrong. The funding for lending scheme has undoubtedly made more credit available than would otherwise have been the case. As I have said, gross lending to businesses has improved and the Federation of Small Businesses has said that the outlook for small and medium-sized enterprises is now better than it has been before. I remind the hon. Gentleman that the peak-to-trough drop in GDP between 2008 and 2009 was 7.2%. That is the cause of the disastrous drop in the availability of bank funding to businesses in this country.

Finance Bill

Mike Kane Excerpts

Tuesday 1st July 2014 Commons Chamber

[Catherine McKinnell]

I agree with my hon. Friend’s concern. The lack of transparency from the Government about the interest in the scheme is why we tabled the new clause. It has been difficult to get information about the scheme’s potential take-up—how many businesses have expressed an interest? It has taken a freedom of information request to get even the most basic information, which I will outline a little later.

I should like to quote Justin King, chief executive of Sainsbury’s. What he says relates poignantly to the interventions made by my hon. Friends the Members for Alyn and Deeside (Mark Tami) and for Feltham and Heston (Seema Malhotra):

“This is not something for our business. The population at large don’t trust business. What do you think the population at large will think of businesses that want to trade employment rights for money?”

I could not have expressed it better myself.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

Does my hon. Friend agree that the measure lacks basic human dignity, which should be at the forefront of all public policy legislation? Does she agree with Lord O’Donnell, the former head of the civil service, who said that it was a form of modern slavery?

[Catherine McKinnell]

The proposition risks ringing of that. It lacks an ethical approach, given that it trades people’s rights for £2,000 of shares. More than that, it flies in the face of what we know to be true about productivity and engagement. We know that engaging a work force and building their trust makes businesses more successful. Sarah Jackson, chief executive of Working Families, says:

“It also flies in the face of everything we know about productivity and employee engagement. Treat your employees well, give them the flexibility they need, and you will be rewarded by highly motivated and high performing employees.”

The proposal we are discussing goes in completely the opposite direction, undermining the rights of employees and buying them off with shares that could carry a lot of risk for them. It is no wonder that so few businesses have taken up the offer.

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[Richard Fuller]

My hon. Friend speaks from great experience and is, as usual, exactly on the point. For many small business people, the biggest constraint is time: they have to be the sales person, the accountant, the HR person and the form filler. The policy that has given rise to new clause 11 is supposed to be helping those people, but I think there are many other ways we can support our small businesses that would have a greater impact.

One of those is that the Department for Business, Innovation and Skills should lose its great focus on a grand industrial policy, centred on our large corporations, and start to show a bit of passion about our small businesses. I know that the Secretary of State is a good friend of the Treasury Bench—obviously, he is a member of it—but somehow we are not getting the focus and heart for our small businesses that we should be getting, and it would be good to hear that voice coming through louder and clearer.

I am drawn by Opposition Members’ eloquence on the questions they are raising about this policy. It did not occur to me at the start of our support for the policy that it was going to be a big policy that would have an impact on many businesses. I would be interested to hear an update from the Minister on where the policy is taking us and what our goals are when it comes to promoting employee shareholding. What are his concerns? Does he share my concern that, in trying to put together promotion of employee shareholding and reductions in employee rights, we may be failing to make progress on two issues, rather than making progress on both?

[Mike Kane]

It is a delight to follow the hon. Member for Bedford (Richard Fuller), who spoke with such authority about his work now and previously with small businesses. It was a pleasure to serve with him on the Finance Bill Committee, where generally he spoke loyally from the Government Benches on his party’s agenda, even though he disagrees slightly with the policy before the House now. It is also a pleasure to follow my hon. Friend the Member for Islwyn (Chris Evans), who spoke articulately and ably, using his experience as a former trade union official.

I believe that shares for rights as it has been proposed lacks common human dignity. We know that the main purpose of Government is to protect individuals, communities and their property from exploitation and harm; Government must also provide a stable economic, social and legal framework for businesses and economies to thrive. The proposal does not do that. As I mentioned earlier, Lord O’Donnell described shares for rights as a form of modern-day slavery. It creates a two-tier market and a two-tier work force—one part having sold its rights and the other retaining them. I think that that is wrong for our economy.

The policy was announced with great fanfare in 2013, but the shares for rights scheme cannot be described as anything other than a massive flop. It is also proving to be another bone of contention in our fractured coalition. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), and the Secretary of State are nowhere to be seen near the proposal. The real problem, though, as the Chancellor has found, is that it has been impossible to get employer organisations to back the scheme. As my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said, according to the most recent information we have—hopefully, the Minister will update us—there were 19 expressions of interest by December last year. The Office for Budget Responsibility says it could be used as a tax dodge, costing us—the Treasury—nearly £1 billion a year. In this age of austerity, that is the last type of policy we need to be introducing.

Ministers seek to introduce the scheme without proper discussion, and without proper consultation, as my hon. Friend the Member for Islwyn said, and have proceeded in what can only be described as a very chaotic way. Following the publication of the details of the scheme, a Government source was quoted as saying that the scheme was on “life support”, but Ministers still went ahead. As was mentioned earlier, John Cridland, director-general of the CBI, said that this was a niche idea that businesses really do not want. There is unanimity among people who really care about employers and their rights and those Opposition Members who believe that employees should also be shareholders and work hard in their small and medium-sized enterprises, where most employees now reside.

[Chris Evans]

Does my hon. Friend think it is just a coincidence that the vast majority of the FTSE 100 companies also find themselves in the list of the top 100 best places to work in the UK, and they have not rolled back employment rights in any way and have successful share save schemes, as I mentioned earlier?

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[Mike Kane]

The best organisations offer benefits in kind, which can be shares to their employees. I and many in the House have no problem with that.

This measure is wrong for business and wrong for employee-business relations, and I urge all hon. Members to support the new clause.

[Ian Murray]

I apologise to the House for not being present at the beginning of the debate. The previous debate finished slightly earlier so there was a clash with something else that I had in my diary. However, I want to make a few comments on this because it harks back to new clause 14, which we debated earlier. All we are looking for in new clause 11 is some transparency on this policy. We know it was introduced with great fanfare by the Chancellor at the Conservative party conference last October when he said:

“Workers of the world unite.”

The conclusion to the workers of the world uniting was that everyone united against this policy.

This is incredibly relevant to the Finance Bill because it has created a significant tax loophole. On new clause 14 on the 50p tax rate and the need for transparency on how much tax that takes, the Government said clearly that 45p brings in more tax at the top rate than 50p, which brings in less because of tax avoidance. In this case, we are looking at the biggest tax avoidance measure we can get. It has been described by the Institute of Fiscal Studies as a billion-pound tax lollipop on the table. If we are serious about tackling such tax avoidance, it would be great for transparency, not just for the House but for the country, if a report were produced showing take up and the consequences of that.

Because it is such an important prospect, we need to look at what the Chancellor tried to do in his conference speech. We will end up in the situation where people are able to sell their rights for a few pounds that might be worth nothing. That is not the kind of working society that we want. It is not the kind of partnership that we want between employers and employees and trade unions, whereby people can sell their rights for maternity pay, unfair dismissal, and all those rights referred to by Beecroft in his report for the Prime Minister. We now have a fire-at-will culture, which does nothing to dispel the Government’s move towards a hire-and-fire culture with this proposal. There are the hallmarks of another tax avoidance scheme. Why on earth would we want to produce a scheme that not only allows people to sell their rights and not be covered by any employment rights, but to be in a situation whereby those at the top end of businesses can use these mechanisms to avoid paying tax? I hope that the Minister can address some of those serious concerns when he replies.

I cannot understand why the Government would not accept new clause 11 if they are so confident that this measure will be well used, resulting in a transformation in entrepreneurship, with people hiring more and more employees because they do not have what the Government would call the burden of employee relations. Why would they not want to produce a report showing how many people are using the measure? I do not understand why they do not want to produce a report showing the impact on the Treasury coffers, through capital gains tax and any other tax receipts that might be lost.

It is important for the Government to have confidence in their proposals. The Chancellor was confident when he announced it with great fanfare. I am not sure whether it will have any take-up, because of the way it has been presented and the message it sends out. Justin King, the former chief executive of Sainsbury’s, said that it sends out a poor message. Many chief executives and business owners say that it sends out such a poor message on the partnership we want in the workplace.

Therefore, if the Government wish to have confidence in their own policies, it is only right that they agree to new clause 11, bring forward the report setting out the take-up and the data collected on the scheme and publish further reports every year. If the scheme is denying people their rights at work at the same time as denying the Treasury valuable income, this House should know about it and be able to debate it so that it can hold the Government properly to account.

--- Later in debate ---

[Mike Kane]

A recent report by Felix Behling and Mark Harvey, “The Evasion Economy,” estimates that in the construction industry alone, 400,000 people are bogusly self-employed.

[Shabana Mahmood]

My hon. Friend is absolutely right about the findings of that report and we know that this is a real problem, particularly for people in the construction industry.

--- Later in debate ---

[Nigel Mills]

I will not vote for new clause 12, and I will briefly explain why.

A year ago, we enacted the general anti-abuse rule. One argument that Mr Aaronson made when he reviewed that idea was that it would allow us to have fewer of these complicated, focused anti-avoidance rules in Finance Bills and to avoid cluttering up the tax regime with more complexity because we would be able to rely on the general rule. I look forward to seeing that, rather than another huge, thick Finance Bill next year.

Subsection (1) of new clause 12 speaks of

“tax arrangements that are abusive.”

Surely those come within the general anti-abuse rule and can therefore be challenged, even if they are technically legal. Given that, we will not need to come back and assess the three items that are set out, because they will already have been tackled and there will be no further revenue to raise.

I racked my brains and did a bit of googling to try to find methods of tax avoidance using dormant companies. I struggled to think of one, because once a dormant company does something, it ceases to be dormant and therefore cannot be used to avoid tax. If what is meant is that companies are pretending to be dormant, but are actually active and are not filing returns that they know full well are due, that is tax evasion and should be clobbered severely using the existing rules. We probably do not need to create a huge compliance burden for every innocent dormant company out there. There might be sensible reasons for maintaining those companies, such as to protect a name or previous transactions, or simply that the cost and hassle of striking them off are greater than they ought to be. That would be an unreasonable compliance burden to impose.

We should be a bit careful about the language that we use about eurobonds. I have some sympathy with the view that when they were created 40 or 50 years ago and the exemption was passed, Parliament probably did not intend for intra-group loans to be traded randomly on Channel Island stock exchanges but never actually traded, just held by the same third party throughout the period. I see the temptation to remove the exemption and it was right that the Government proposed some sensible ways of doing so two years ago. However, if the Government consult on something and look into the detail, but then decide that it would not raise as much money as they thought and that it would act as a big disincentive to investment, it is unwise to come back to it so quickly. We should learn the lessons from that and just accept that if we want the UK to be attractive to investment and the hub of the private equity industry, which many small businesses in all our constituencies benefit from, it is foolish to risk putting up the cost of borrowing for that industry and adding complexity for it by revising the rules again.

I think that the new clause is superfluous and I will not vote for it.

[Mike Kane]

In the few moments that I have, I want to point out that self-employment is being used by far too many employers to engage workers in the construction industry, as my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) pointed out. According to the Union of Construction, Allied Trades and Technicians report “The Evasion Economy”, 400,000 workers are being engaged in that way. Those workers miss out on the rights that normal workers get. According to another UCATT report, “The Great Payroll Scandal”, this practice is costing the Exchequer up to £1.9 billion per annum.

When I talked to construction workers on Friday night, they spoke of the scandal of payroll companies making millions of pounds. This is a legitimised dodgy practice. The companies get workers to sign a contract to say that they are self-employed, but they work for a single employer. In any legal sense, their status would be defined as a direct employee, yet they lose all the rights that we have spoken about. It should no longer be possible for companies to instruct such construction workers to turn up on site when they want them. Construction workers need the security of employment rights and full national insurance contributions should be paid.

[Mr Gauke]

We have had a lively debate, and I will try to address as many of the points raised as possible in the time available.

New clause 12 seeks to have the Government produce a report on how to reduce the tax advantages arising from tax arrangements that are abusive. I agree that tax avoidance is a key issue, and the Government have made it abundantly clear that we will not stand for a minority of taxpayers continuing to seek unacceptable ways to reduce the amount of tax they pay through contrived and artificial means. That increases the tax burden on the rest of society and creates an unfair playing field for businesses.

Let me explain why I do not think that a report would be beneficial. The Government have taken strong and robust action to tackle avoidance. Since 2010 we have introduced 42 changes to tax law to close avoidance loopholes and make strategic changes to prevent and deter tax avoidance. Those measures include the introduction of a general anti-abuse rule, strengthening the disclosure of tax avoidance schemes regime, clamping down on stamp duty land tax avoidance with a new range of measures —including an annual tax on envelope dwellings—and numerous changes to business tax rules and reliefs to tackle bad behaviour, including misuse of the partnership structure and corporate loss buying.

We are going further. In the Finance Bill we are introducing new measures to put in place tougher monitoring regimes and penalties for high-risk promoters of tax avoidance schemes, and we are introducing accelerated payments and follower notice measures that will give HMRC the power to collect disputed tax bills up front, putting those who try to avoid tax on the same footing as the vast majority who pay all their tax up front.

Let me address the concerns raised by my hon. Friend the Member for Aldershot (Sir Gerald Howarth) and the hon. Member for Linlithgow and East Falkirk (Michael Connarty). The vast majority of people pay their tax up front, but it is possible for people working through self-assessment to make use of a tax avoidance scheme and hold on to the money during the—often lengthy—period where there is a dispute. The law is the law, however, and it is the law that existed when the arrangements were made that continues to apply. We are making a change, however, to say that while there is a dispute, the money should be held by the Exchequer and not the taxpayer, just as happens in many other circumstances where there is a dispute in our tax system. This is money that the individual would have already paid if they had not entered into an avoidance scheme. When completing their self-assessment return, they would have notified HMRC that they were taking part in a tax avoidance scheme under the disclosure of tax avoidance schemes regime, and as I said, the taxpayer can continue to dispute the case and will be paid interest should they win. The rights of the individual are therefore not being restricted. Prudent taxpayers should recognise that tax avoidance carries a significant risk of not working and the tax becoming payable, and they should make plans for such an outcome.

In addition to changes in law, we have invested £1 billion in increasing HMRC’s compliance resource, which has reaped huge benefits. HMRC is ever more successful at tackling the avoidance it sees, and it has an excellent record in litigating the avoidance schemes that taxpayers choose to take to tribunal. It wins about 80% of cases, and persuades many more taxpayers to settle before the case gets that far. Between April 2010 and March 2014, it won 94 avoidances cases in tribunals and courts, and in 2013-14 alone, its 30 wins protected £2.7 billion of tax.

The Government will continue to close loopholes in tax law and introduce strategic responses to tax avoidance across the tax system. We will act robustly to respond to abuses that we see. We consult on those measures where we can, although hon. Members will understand that in certain circumstances we must act quickly to close down abuse, so consultation is not possible. A report will add nothing to the progress that we have made and continue to make. Action is more important. We have proved we are taking action to tackle tax avoidance across the board, and we will continue to do so.

In the time available I do not think I can do justice to the fairly lengthy speech on eurobonds by the hon. Member for Birmingham, Ladywood (Shabana Mahmood), but the £500 million figure that she quoted, which is somehow supposed to be at risk, seems to be based on an article in a newspaper. It is not a figure we recognise. It wrongly assumes that the recipient of the interest would not be entitled to gross payment of interest and fails to take into account the fact that under the UK’s double tax treaties the tax would often be repaid anyway.

I extend again the offer that I made in March to the hon. Lady. I have been a shadow Treasury Minister and I recognise the challenges in developing policy in these areas without access to officials. I would be more than happy to meet her, with officials, to talk through some of the practical points of this issue. I think she will find that that £500 million is something of an illusion. In terms of the practical points that she raised about changing the withholding tax system, I ask her to bear in mind the double taxation treaties. Her proposals might not be as easy as she believes.

The alleged abuse of disguised employment in the construction sector is an important point. Some labour providers have created structures specifically designed to avoid tax and national insurance and gain a commercial advantage over those who play by the rules. The Government aim to put a stop to those practices in the construction sector and elsewhere through the new measures introduced in this Bill to tackle false self-employment intermediaries. They will provide a level playing field for compliant labour providers who help to facilitate the UK’s flexible labour market.

The new measures that we are introducing target structures set up to present workers as self-employed when they are really employees. This has been a growing problem in recent years and has spread from the construction industry to other sectors. That is not acceptable. Workers lose out on their rights, it creates competitive disadvantages for compliant businesses, and ultimately the taxpayer foots the bill. That is why we are acting now to stop the abuse. Intermediaries are the biggest mechanism for delivering false self-employment within the construction industry, and as I have said, the practice is spreading. Tackling employment intermediaries used to facilitate false self-employment will not only more effectively target a sizeable section of the false self-employment in construction—a point raised by the hon. Member for Wythenshawe and Sale East (Mike Kane)—but will stop the spread of the problem to the wider economy.

We believe our proposals are the best way to tackle avoidance in that area. The previous Government consulted on proposals to tackle false self-employment in construction in 2009, which deemed all construction workers to be employed unless they fulfilled one of three criteria. In practice, that would have meant that bricklayers would need to provide their own bricks and roofers would have had to supply their own tiles to be categorised as self-employed. As set out in the consultation response document, analysis suggested that the proposals could undermine legitimate commercial practice and run the risk of capturing genuinely self-employed individuals.

A dormant company is one that is not within the charge to corporation tax at all, whereas the new clause appears to relate to companies that are within the charge but fail to file returns. That is not avoidance but evasion. HMRC uses risk-based procedures and extensive data-matching analysis to identify companies that should have filed returns but have not done so. All such companies are risk-assessed to establish whether they come within the charge to tax. Research suggests that the risk of tax loss is small. HMRC’s activity is carefully targeted, ensuring administrative burdens for compliant customers are minimised while focusing on the non-compliant.

I draw the House’s attention once more to the Government’s strong response to the threat of tax avoidance, including our unprecedented action to close loopholes and provide new tools for HMRC to tackle avoidance. The report proposed by the Opposition is unnecessary and would distract HMRC from delivering on its important work tackling avoidance. I call on the hon. Lady to withdraw the new clause.

Oral Answers to Questions

Mike Kane Excerpts

Tuesday 24th June 2014 Commons Chamber

[Mr Osborne]

I can absolutely give my hon. Friend and his refinery that assurance. Refineries such as the one at Pembroke play a key role in the UK’s energy security and provide many thousands of skilled jobs across the country. Our energy policy enables companies to know that investment is coming in, and therefore to make investment decisions for the future. I hope that Valero will look at the British economy and see that it is recovering and on the rise, and that that, with activity increasing, will mean more requirements for refining capacity.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

T7. May I remind the Chancellor that it was actually Daniel Adamson, who envisaged the Manchester ship canal in 1882, who talked about an economic powerhouse of the north from the banks of the Mersey estuary through to the North sea at Hull? That vision’s time has come, but it will take leadership, guts and gravitas locally and nationally, and on both sides of the House, to create a powerhouse that will rival any on the global stage.

[Mr Osborne]

I agree with the hon. Gentleman. One of the refreshing things about the discussions we had yesterday was that they took place on a genuinely cross-party basis. The Labour mayor of Liverpool, Joe Anderson, came to the speech I gave and met me and the Prime Minister to talk about what we could do, as did the civic leaders in Manchester. We are working across the political parties, as northern MPs, to bring this about, and of course the ship canal could be part of the exciting Atlantic gateway project, which would create regeneration and jobs along the course of that incredible waterway.

Oral Answers to Questions

Mike Kane Excerpts

Tuesday 29th April 2014 Commons Chamber

[Mike Kane (Wythenshawe and Sale East) (Lab)]

T6. With average wages down, ordinary working people are increasingly being driven into the arms of payday loan lenders with their usurious rates of interest. What measures are the Government taking to give ordinary working people access to fair credit?

[Mr Osborne]

We are introducing a cap on payday lending, and that will be an important—[Interruption.] The shadow Chancellor chuckles. He was the City Minister; he could have taken that decision at any point when he was—[Interruption.]. Why has it taken so long? Labour had 13 years to do these things—13 years when its team were running the Treasury. That is why people will not listen to what they have to say. The answer to the hon. Gentleman’s question is this: by supporting credit unions, capping payday lending and encouraging competition on the high street, we will help his constituents and many others.

Finance (No.2) Bill

Mike Kane Excerpts

Tuesday 8th April 2014 Commons Chamber

[Priti Patel]

No. We heard from the hon. Gentleman earlier.

The last Labour Government ignored the benefit of expanding trade. Exports came up in the discussion. This Government have gone out of their way to expand overseas trade. The Chancellor is in Brazil this week at the beginning of export week. We are doing everything right to sell Britain overseas, and to encourage overseas companies to come here and benefit from the low rate of corporation tax, which Labour wants to destroy.

Putting up corporation tax does nothing to help small business, contrary to what Labour says in its shallow and feeble amendment. That only goes to demonstrate that the Opposition have no plan to expand our economy or create more jobs, growth and prosperity—creating those things is exactly the right approach that the Government are taking.

Amendment 2, which I obviously do not support, is completely irrelevant to the wider national debate currently, which is about sustaining growth in our economy, and expanding our economy with jobs, growth, prosperity, inward investment and exports. On that point, I heard a terrible diatribe earlier—an hon. Member said we are not exporting enough. In my county of Essex, the Essex chamber of commerce has helped more than 1,000 local firms, including many small and medium-sized businesses, in processing export documents and giving practical assistance. The value of those exports is well over £300 million. That is the message we want to send out to business of all sizes in the UK. I have no intention of supporting the amendment and support what the Government are doing.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

It is an honour to follow the hon. Member for Witham (Priti Patel). I concur that it is great news that the Chancellor is drumming up business for Britain in Brazil, but I wonder what first attracted him to the Copacabana beach.

I know debates in the House can sound like statistical conventions, but we have only to look at the statistics to realise that the debate is important. Some 99.9% of all private sector business in the UK is in SMEs, which also account for 59% of private sector employment and 48% of private sector turnover. As my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) said, SMEs account for 47% of all private sector employment. Labour Members will know that growing private sector trade unions such as the Union of Shop, Distributive and Allied Workers and Community the union are picking up on that growth.

I was intrigued by my hon. Friend’s story about starting out in a corner shop. I want to tell a story about a firm in my constituency. In 1985, a young woman—a housewife called Kamal Basran—was bringing up a young family and preparing food for them in her kitchen. She was fed up that she could not buy quality Indian cuisine from any of the major supermarkets. She took out a £5,000 bank loan and started supplying food to local restaurants and businesses. In the past nearly 30 years, she has grown that business and hopes to post a £50 million profit this year. It has grown year on year despite the recession. She now has 220 employees. As a new MP, I had the great honour of visiting that business in my constituency just a couple of weeks ago. The package I got as I left was superb. I do not declare an interest—I distributed the goods to parliamentary staff and constituents afterwards.

That success story is an example of why SMEs matter so much. In polling up to the last general election, people said that their work prospects were the most important things to them after health and crime—work prospects were always No. 3 or No. 4 on the list. That is why the debate is important.

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[Tom Blenkinsop]

Does my hon. Friend agree that a review would be important? A corporation tax cut would be welcomed by the business community, but it is not the priority in certain sectors. For example, energy-intensive industries are more concerned about capital allowances—the Government have had to U-turn on getting rid of them—and the carbon price floor, which affects the chemical and steel industries.

[Mike Kane]

I agree with my hon. Friend. Government Members have said that amendment 2 would create uncertainty, but if the Committee agreed to it and to a review, businesses would welcome it, because a review would be part of the ongoing debate.

The amendment would require the Government to publish a report on the impact of the planned cut in corporation tax in the 2015-16 financial year from 21p to 20p. The amendment calls for the assessment of the impact specifically on SMEs.

[Ian Swales]

I welcome the hon. Gentleman to the Chamber—this is the first time I have heard him speak. The amendment mentions “fewer than 50 employees”. Can he help me to make sense of that? Mainstream corporation tax would apply only to firms making more than £1.5 million profit. Is he suggesting that the amendment includes small companies that make more than £1.5 million profit? That is how it reads to me.

[Mike Kane]

I thank the hon. Gentleman for his welcome. Most SMEs have fewer than 50 people working for them, and a medium-sized enterprise is usually defined as one with fewer than 250 employees.

I welcome the fact that Labour Members want to cut business rates on properties with an annual rental value of less than £50,000 back to the level of the previous year. We would then freeze business rates for those properties in 2016. That can be paid for by reversing the additional cut in the main rate of corporation tax from 21% to 20% in 2015.

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in the debate. If there is one attraction to the amendment, it is that it allows a broad-ranging debate on any tax measure one can think of. Perhaps I could talk about the impact that a carrier bag tax would have on small businesses, especially a tax on bags that would allow the biodegradable element to get into the recycling stream, which damages recycling businesses in the plastics industry. That would perhaps stretch the debate a little too far away from the main rate of corporation tax, even though hon. Members might agree on such a measure.

We are going in exactly the right direction in trying to get the main rate of corporation tax down to 20%. That has been the direction of travel for this Parliament and it is the right place to be. I suspect that, if we get it to 20%, that will be the end of the journey, for the very good reason that having a corporation tax rate lower than the basic rate of income tax creates lots of interesting tax planning opportunities, as the previous Government found out when they had a small companies rate of 10%. Lots of strange people incorporated themselves as businesses—they looked a lot like one-man bands who ought to have been self-employed and made interesting tax deferrals or savings when pretending to be companies.

If we get to 20%, that is the end. I suspect that that is why we can no longer have a small companies rate of corporation tax that is lower than the large companies rate. If we lower one rate, we encourage behaviour that we do not want to encourage. It is right that we get both rates down to 20% and to have one rate of corporation tax. We can then scrap the hugely complex marginal relief calculation and everyone will know what rate of tax they pay on their profits. That has to be the right situation. A small growing business, whose profit increases during the year and suddenly hits more than a quarter of a million pounds, will wonder what tax rate it will pay in that year, so losing that whole calculation completely is a huge advantage.

amendment of the law

Mike Kane Excerpts

Monday 24th March 2014 Commons Chamber

[Mike Kane (Wythenshawe and Sale East) (Lab)]

It is a pleasure to follow the apolitical speech of the hon. Member for Spelthorne (Kwasi Kwarteng).

The Chancellor got it completely wrong. Ebbsfleet is not the first new garden city in 100 years: he is welcome to visit Wythenshawe, which was built in the 1930s and ’40s, any time. He should cross his border and see it in all its glory. I also say to the hon. Member for Dartford (Gareth Johnson) that there are possible twinning opportunities for us; he knows where my office is.

I give a cautious welcome to the reform in the Budget of air passenger duty. The current rules are crazy and unjust, as the Chancellor rightly said. He said that there would be support for new routes from regional airports, but we need more detail. His statement did not go far enough. The Government could go further and grant exemptions for new long-haul services from regional airports. That would make a huge difference at Manchester airport, in my constituency, attracting flights from cities such as Beijing. Eventually, that would link up with High Speed 2 and with the £800 million Chinese investment in the new airport city we are building in my constituency. It is an important measure, and I will challenge the Chancellor further on it in the weeks and months to come.

We are facing a cost of living crisis, and Labour Members will keep pointing that out. No one could have fought the by-election that I have just fought without speaking to the many people who had stories to tell in that regard. As was pointed out earlier, real wages are down by £1,600 a year compared with 2010, and the OBR has confirmed that all our constituents will be worse off in 2015 than they were in 2010. To compound the problem, people’s energy bills have risen by almost £300, on average, since the election. It is no wonder that many of my constituents are increasingly reliant on food banks such as that run by the Dandelion Community, which I visited on Friday.

I want to focus on three key things that would benefit my constituents, the first of which is freezing energy bills. I am reminded of the story of a former Member of this place, Richard Cobden, a Liberal campaigner from Manchester who was part of the Anti-Corn Law League. He stood up against the Peel Government of the time and brought working people and intellectuals together because the landed aristocracy who were running this place controlled the price of wheat bushels by not allowing external competition and free trade. He eventually won that argument, because millions of poor working people across the country were going hungry. Our energy providers are doing exactly the same thing today. The big conglomerates are controlling the markets. It is not a free market; it is not fair. The prices go up, and the energy providers never lose. The hon. Member for Spelthorne goes on about business, and he is right to do so, but those businesses take no risks. Whenever their costs go up, the prices go up. We would freeze those bills—

[Kwasi Kwarteng]

Will the hon. Gentleman give way?

[Mike Kane]

Of course I will. This will be the first intervention that I have taken in the House, so I ask the hon. Gentleman to be gentle.

[Kwasi Kwarteng]

I will bear that in mind. I was just wondering what the hon. Gentleman thinks Richard Cobden would have thought about the proposed energy price freeze.

[Mike Kane]

Poor working people were going hungry, and he campaigned for them, so I think he would understand that poor working people are now cold, and that he would campaign for them as well.

[Barry Gardiner]

Will my hon. Friend give way?

[Mike Kane]

Do I get an extra minute? Yes? Then I will give way.

[Barry Gardiner]

My hon. Friend is making an excellent speech. May I assist him by saying that Richard Cobden might have thought the price freeze less important than the restructuring of the vertical integration in the market, which it was buying time in order to do?

[Mike Kane]

I agree with that, even if I do not quite understand all of it. It was very good. I am very proud that Richard Cobden ran his campaign from Manchester and changed the world. Once he had won, the campaign eventually brought down the Peel Government, so there is hope for us on these Benches.

My second point is that we should put young people back to work. Nearly 900,000 young people are out of work in this country, and many are in my constituency. Their parents are very worried about their children’s future. Nearly 1,000 young people under the age of 24 in my constituency are in that position. We could pay for measures to address that with a tax on the bankers bonuses. In 1997, the new deal did an immense amount for the estates in Wythenshawe. In my opinion, it did even more than the introduction of the national minimum wage. It transformed the estates and got people back into work, which makes a great difference to the cohesion in our communities.

Finally, it would make a real difference to the standard of living in my constituency if we were to extend free child care for working parents to 25 hours a week for their three and four-year-olds. That would help more young women to get back into the workplace. The lack of affordable child care is a real obstacle for working poor families, but we could achieve that change in the next Parliament while balancing the nation’s books in a fairer and more equitable way.