(8 years, 5 months ago)
Commons ChamberIt is a pleasure to be called so early in the debate. As I am trying to respond to a Budget without having as long to read it as I would normally expect, I now know how the Leader of the Opposition feels.
I welcome the many measures in the Budget that help hard-working people in Amber Valley. The further rise in the personal allowance is a welcome measure for which I have been campaigning for several years. We want someone living on the minimum wage—or the living wage, as it will be—to pay no income tax on their wages. The rise in the 40% tax band is also welcome and will help people who should never have been caught by that band—I think especially of one-earner families. I think we should aspire to increase the band still further.
I am happy about the slightly unexpected freeze in fuel duty. Many of us have been slowing preparing our constituents for a rise. I have been telling mine that perhaps the freezes are coming to an end, that it will have to increase and that this might be the year, so I welcome the freeze being continued, as fuel duty is a significant cost. The freeze will help families and small businesses to meet what is a significant bill.
I also welcome the measures targeted at the east midlands: the aerospace grants worth £15 million for the east midlands, including £7 million for Rolls-Royce in Derby; the changes to Midlands Connect to place it on a statutory footing; the funding for the M1 improvements so we get a smart motorway right through the east midlands up to Yorkshire; and an investment fund for the midlands of up to £250 million to help small businesses grow. Those welcome measures show that the Government recognise the importance of the midlands and the east midlands to the UK economy. The east midlands had the highest productivity growth throughout the last Parliament.
I also welcome the changes to business rates, especially for small businesses, which will help the high street in my constituency. Business rates are a significant cost for small businesses, and the long-term certainty of a permanent lower rate, rather than the annual uncertainty—“Will this be the last time we benefit from an exemption?”—will really help.
One thing that was not announced in the Budget, of course, was a devolution deal for the east midlands, the north midlands—or whatever we have been calling it in recent weeks. The deals announced today are a model for how the east midlands can go forward. I want to see a powerful voice in the east midlands to ensure we get our fair share of spending investment, to make the case for the east midlands as a great place to invest and to show that we can compete with the west midlands and south Yorkshire. To those disappointed that the deal has not been announced, I say that we should rethink our proposals. It would make for a far better bid, if Nottinghamshire, Leicestershire and Derbyshire could join together and come up with a three-county proposal, much like the East Anglian one. It would be more coherent economically, have a better chance of getting buy-in from people across the east midlands and be more likely to succeed, because the area would be based around the airport and the new HS2 station and would have the M1 running through the middle, and it would fit the great synergies between three big cities and the surrounding areas. I urge those in local government trying to negotiate a deal to rethink what they are asking for and to go for a three-county proposal.
Is my hon. Friend’s concern the lack of collaboration—or the weakness of collaboration—between the constituent areas or the lack of ambition? As we have seen in Birmingham and elsewhere, bold decisions are welcomed by Ministers.
The leaders of Nottinghamshire and Derbyshire have shown ambition in trying to find a deal that works outside the core cities, but there are always challenges, in areas where people do not all look to one city, in working out whether closer working or more competition is the right way forward. I think there is also a lack of trust in Derbyshire and a feeling that a Greater Nottingham bid would centralise too much in Nottinghamshire. A bid that covers three cities and three counties would look less focused on the biggest city and take a more strategic and sensible approach that could help the whole region to compete with neighbouring regions. To be fair, however, there has been a lot of ambition already to bring the counties together. We just need to find a situation that works. That we had to change the name from D2N2 to East Midlands and then to North Midlands suggests we have not got the geography right.
I come to a couple of areas on which major changes have been announced. The first is the pensions system. The Chancellor announced some welcome changes in the Budget. I like the idea of the Help to Save scheme—we appear to have help for everything now—to give people on low incomes a 50% bonus if they can save a certain amount for two years or longer, and I like the idea of the lifetime ISA and making pension saving a bit more flexible so that people can save when they can and then, if they need to—if they want to buy a house or need to do some repairs, or if they fall out of work and want to live on their savings—draw down the money and put it back later. That sort of system is more flexible, is better suited to how people live and can help people to manage the ebbs and flows in their financial situation.
We need to stand back and ask, “What are we trying to do in using taxpayers’ money to help people save?” We are in the slightly strange situation of compelling people—generally those on low incomes—to enrol on to a pension scheme, hoping they do not opt out and then giving them roughly a 25% bonus from the Exchequer on what goes into that scheme. We have now produced another savings vehicle—Help to Save—whereby we give them a 50% bonus if they save a certain amount for a certain period. For some people on low incomes, it might be better to be enrolled on to the latter—they would have a more flexible savings pot with a bigger taxpayer-funded bonus—than a pension scheme that locks the money away for a long time, which has high charges and which they cannot use flexibly when they need to.
We ought to consider giving employers the choice of auto-enrolling people on to the lifetime ISA, which might be a more flexible and attractive solution for people on low wages—the ones generally in auto-enrolment—who we are trying to help to save and have the right savings at the right time in their lives. We are going in the right direction, but we need to make sure that what we are strongly encouraging—not compelling—people to do makes sense now that there are different vehicles on the market.
The pensions dashboard, which is hidden away in the Red Book, will be of great use in getting the industry to produce one place where people can go to see what they have in their pensions and savings. It will mean they can see what they can have in their retirement and what more they need. I welcome the move to make that happen. It has long been talked about, and we have to assume it can be done, given how IT is used these days. I look forward to seeing it happen.
I want to make a few remarks about the corporation tax changes. There are some welcome measures here to crack down on tax avoidance and evasion, and I hope they can all be made to work as effectively as they can. We can do more to give the public confidence that our large businesses are complying with tax requirements. My sense is that most of them do, and it is only a small proportion that go in for the aggressive avoidance that we cannot accept. I urge the Government to look at the idea of making large companies publish their corporation tax returns when they file their statutory accounts, so that we can actually see in some high-level way how much tax each company says it owes and how they have got from what is in their accounts to the cash tax bill.
Given the amount of disclosures of their actual accounts we require from companies, this would not put much sensitive information in the public domain. The principle of taxpayer confidentiality applies to individuals but should not apply to large companies, which might disclose their income in any case. I believe this would bring greater confidence and it would show, I hope, that most of those companies are not doing anything that is not acceptable.
I welcome the changes to try to expand how withholding tax works on royalties. Our rules in that area have been somewhat outdated and they do not apply to all forms of royalty. Extending them to certain other payments and trying to ensure that we actually collect the tax has to make sense. We should be careful to draw this wide enough to ensure that we catch things such as know-how payments or payments for access to recipes or whatever else companies will try to say their payments are. If it is not a payment for a tangible service or product, it probably ought to fall in the royalty regime and the withholding tax ought to apply.
I am not entirely sure how we will get this through our tax treaty network or the EU interest in royalties directive without having to give zero rates to nearly everyone we pay royalties to. I guess the measures announced for how we deal with situations where royalties have flowed through a regime that we would accept into one about which we have concerns, particularly about how to ensure we collect the tax in those situations need to be worked through.
I welcome, too, the proposals to simplify loss release for companies that are having to spread them across a group of companies. Five years ago, I tabled an amendment to the Finance Bill to try to argue that the Government should look at a group tax return so that large groups would file one tax return for all their companies, rather than having to file many dozens. I thought that would help to tackle tax avoidance by taking away the scope for funding arrangements between those companies that do not have any economic effect. If we are to simplify how companies use losses, it would be easier to let them file one tax return to show their group profit, and have one loss offset, rather than try to find a way for a group to calculate these things in a strange way further confusing HMRC. I think HMRC will benefit from knowing exactly how much profit a group is declaring in one return, so that it can then be compared with real turnover.
The announced interest restrictions are a sensible idea. We have moved past a situation in which we can justify allowing large companies to borrow in the UK, claim tax relief for profits not earned here without paying tax and dividends that come back. We have to be careful to do this right. We have attracted a lot of head offices here by the generous exemption we chose to give. We do not want to lose them all, but we also do not want to make infrastructure spending far more expensive than it needs to be. That can justify high levels of interest; there is generally no income in the early days. I hope we can find an exemption to get right and for the private equity industry as well.
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