Finance (No. 2) Bill

Peter Dowd Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Jane Ellison]

I will make a little more progress and then I will happily give way.

Before setting out the Bill’s contents in more detail, I should of course refer to the fact that the Prime Minister has today announced her intention to lay before this House a motion calling for an early general election.

[Peter Dowd (Bootle) (Lab)]

When?

[Jane Ellison]

Members should be paying more attention. Earlier today the Leader of the House updated right hon. and hon. Members on how that motion, if it is passed, will impact on the business of the House. We hope to hold constructive discussions with the Opposition, through the usual channels, on how this Bill will proceed.

--- Later in debate ---

[Peter Dowd (Bootle) (Lab)]

Plausibility ran through every sentence in the Minister’s speech. Plausibility ran riot, but plausibility I do not accept.

Who would have thought that a general election would be called on the day we were in this Chamber, which is packed-out, for this scintillating debate? I do not think anyone would have thought that. Only a few weeks have passed since the Chancellor’s shambolic Budget U-turn, yet today the Prime Minister has announced a U-turn in relation to the general election. We all thought the lady was not for turning, as she has led us to believe on at least seven occasions, and of course we were wrong. [Interruption.] Apparently the Prime Minister did not want an election, and clearly in the last few days she has had some sort of damascene conversion—a damascene conversion to democracy, apparently. We had the Brexit referendum last year which gave authority to push on with Brexit, but we now find that the Prime Minister says she wants even more authority. I thought we had been getting the Brexit vote pushed on us time after time, but clearly that has not been enough. The Prime Minister might possibly be feeling slightly insecure; I really do not know, but we are where we are.

As the Finance Bill is a product of the Budget, it is only right that we start this debate by offering a reminder of its contents. Notwithstanding what the Minister has just said, the Budget continued the Government’s programme of tax cuts for multinational corporations and the super rich: by the end of 2021 they would have received £70 billion-worth of tax breaks, paid for by those on middle and low incomes and of course the self-employed. [Interruption.] That is a fact; it is clear from the Office for Budget Responsibility’s figures and the Government figures.

The Budget failed, however, to address adequately the social care crisis, and we are now seeing 900 adult social workers in England leaving the profession every day—and goodness knows how many GPs getting their pension statements are ready for moving on as well. It also did little to support small and medium-sized business owners, who are the lifeblood of the economy and increasingly feeling the pressure as the economy slows and inflation rises.

More importantly, the Budget demonstrates that this Government are willing to break their manifesto commitments at the drop of a hat. Despite the Chancellor’s bravado, the Government’s economic ineptitude after seven years is clear for all to see. His Government have presided over the slowest recovery since the 1920s, with growth and average earnings downgraded yet again. The Chief Secretary said in his Budget speech that the Government do not believe in “spending and promising” what they “cannot deliver” and agreed that that is an important barometer by which to judge the Government’s record. Let us look, therefore, at what the Government have promised over the past seven years and what they have actually delivered.

On coming to power, the Conservatives committed to balancing the books by 2015—a Conservative broken promise. They said that would be pushed back to 2019-20—another Conservative broken promise. Instead, by 2020 they plan to be borrowing an eye-watering £21.4 billion. Some 10 of the Government’s 14 Budget and autumn statements since 2010 have seen an increase in forecasted borrowing. This Government’s record on borrowing has been missed target after missed target, with constant upward revision. The Government pledged that debt as a percentage of GDP would start to fall in 2015; instead it continues to grow—another Conservative broken promise.

The Government’s record on growth has been one of epic failure. The OBR has now revised down economic growth for 2018 and for every remaining year of the Parliament, notwithstanding the comments made before about the OECD. The British people wait to see any benefits of growth, but the only growth they can expect to see is in the size of the Government’s Finance Bills; this one is a whopper, coming in at 762 pages, longer than any previous Finance Bill and one of the largest pieces of proposed legislation ever presented to this House. Those 762 pages are hardly riveting reading, I have to say. [Interruption.] I have read every single syllable of it, several times.

We would need to search long and hard through those hundreds of pages for anything that helps ordinary taxpayers. Instead it is replete with ever-more complex giveaways to corporations and the super-rich. But even those hundreds of pages are not enough to contain the Government’s giveaways to the rich. This mammoth Bill will be supplemented by an unprecedented number of statutory instruments, on the back of the Treasury’s already unheard of use of SIs. There were 90 in the last Session, and there have already been 88 in this one. We have heard about Henry VIII edicts, but this makes the Chancellor look like a committed parliamentarian.

The growth in the size of the legislation is matched only by the growth in the number of broken Conservative promises. Are this Government doing anything to deliver growth that benefits the average household? The Chancellor has consistently pledged action to tackle the UK’s productivity gap, but under this Government, this country’s productivity gap with the G7 has grown by a fifth, and we now have the largest gap since 1991. The Conservatives were in government at that time as well.

This Government have done little to tackle the scandal of chronic low pay and insecure work. Despite falling unemployment, workers are currently suffering their worst decade for pay in 70 years. Rising inflation is now outstripping wage growth and, according to the Resolution Foundation, real-terms pay is now falling for around 40% of the UK workforce. The Government’s promise of a £9 national living wage has been consistently revised downwards—first to £8.80 and now to £8.75—while rising inflation results in the cost of living going up for everyone. It is clear that when it comes to introducing a wage that working people can live on, only a Labour Government will deliver. This Finance Bill does little to address the crisis in living standards that many of our constituents are currently feeling. Nor does it offer support for small and medium-sized businesses, which are facing rising costs and a lack of investment due to the Government’s hard Brexit strategy—if you can call it a strategy.

[Tom Tugendhat (Tonbridge and Malling) (Con)]

The hon. Gentleman is making some interesting points, but I hope he will forgive me for saying that they seem to run contrary to the facts as I see them. I see businesses coming to Britain, I see investment moving to Britain, and I see opportunity starting in Britain. This all seems to run contrary to his argument, and I wonder whether he can explain why businesses see Britain as a land of opportunity and growth when he clearly does not do so.

[Peter Dowd]

If that is what the hon. Gentleman sees, I suggest that he needs to take off his rose-tinted spectacles.

We are all aware that the only Conservative idea for the shape of a post-Brexit economy is to turn our once pride-worthy economy into a bargain basement tax haven. That is what the Conservatives want. We have had seven years of slogans from this Government, but we still have no evidence that their negotiations on Europe amount to anything more than something written on the back of a fag packet. They are non-existent, and they have been non-existent for the two or three years since the announcement of the referendum, other than their preparation to sell us down the river to tax avoiders and dodgy dealers across the globe.

The Government make great claims on tackling tax avoidance in the Bill—we heard the Minister talk about this earlier—but it is a charter for tax avoiders, and no amount of smokescreens and bluffing can hide that fact. The Chancellor wants us to believe that measures to bring some non-doms into tax will really tackle the problem, but throughout the Bill we see measures to preserve the special status of non-doms and to privilege that group over domiciled taxpayers. Even the Government’s headline “deeming” measure is undermined because they have chosen to preserve the non-dom status of offshore trusts. How on earth is this going to get more taxes paid if non-doms are being forewarned that they can simply hide their money away in a trust and still keep it beyond the Revenue’s grasp? When is closing a loophole not closing a loophole? When it is hidden in a magic spreadsheet.

The Bill fails to introduce any meaningful measures to tackle tax avoidance and evasion, which even this Government admit are costing at least £36 billion a year. In short, this Finance Bill continues to push our country towards a low-tax and low-pay economy in which a small minority of the rich can get wealthier at the expense of everybody else.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

I would love this to be a low-tax economy, but is the hon. Gentleman aware that tax as a percentage of GDP is going to be at its highest level since Harold Wilson was Prime Minister?

[Peter Dowd]

I am grateful to the hon. Gentleman for bringing that to my attention. Let me put it like this: if we had a Labour Government, the percentage would be even higher.

The Finance Bill does nothing to fund the NHS, which is facing its worst ever crisis. As the former Secretary of State for Health, Lord Lansley, has said, the Government planned for five years of austerity, but having 10 years of it was neither planned for nor expected. That came from a man who wasted £3 billion on a top-down reorganisation of the NHS. By underfunding and overstretching the NHS, the Tories have pushed health services to the brink; that must be in everybody’s postbag.

[Tom Tugendhat]

It is very kind of the hon. Gentleman to give way again. As he has brought up the NHS, I feel that it is only right for us to ask how Labour is doing on the NHS. We have to look to Wales to see how Labour is doing—not well, is the answer. The statistics from the NHS in Wales indicate that treatment is poorer, waiting lists are longer and people are less satisfied than they are in England or, indeed, in Scotland, where the SNP has, sadly, also delivered worse results.

[Peter Dowd]

I draw the hon. Gentleman’s attention to waiting lists in England, where an estimated 3.8 million people are waiting for treatment. I suggest that he should be more concerned about those 3.8 million people in England than he is about Wales.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Does my hon. Friend think it is remotely credible for a Tory MP on the eve of a general election to boast about the NHS? If one thing is certain as we go into this election, it is that people know who they can trust on the NHS.

[Peter Dowd]

My hon. Friend is completely right about that. If Conservative Members want to send me their manifestos on the NHS, I will be happy to look them through. As a matter fact, I might get even more votes if I put those manifestos through the doors in my constituency.

The Finance Bill does nothing to help to fund the NHS. It is as simple as that. By underfunding and overstretching the NHS, the Tories have pushed health services to the brink. The number of NHS beds has been cut by 10% since the Tories came into government; that issue has been raised. GP recruitment is at an all-time low, and more GPs are moving out of practice. Community pharmacy funding has been savagely cut back, in some instances by as much as 20%. As a result, as many as 3,000 pharmacies, in rural and urban communities alike, face closure. That is not the best record on the NHS; it is as simple as that.

[Sammy Wilson]

I accept what the hon. Gentleman has said about the difficulties that the NHS is facing. However, earlier in his speech he described borrowing as eye-wateringly high, so how does he propose to fill the gap in funding to increase standards in the NHS?

[Peter Dowd]

I referred earlier to the money—£70 billion, I believe—that the Government have given away to corporations. That would be a start, and I would welcome the hon. Gentleman’s support for my proposal in the next Parliament.

We have seen £4.6 billion cut from the budget for social care, which is linked to, and on a continuum with, the NHS. The Chancellor has pledged to return only £2 billion over the next three years—£1 billion for the year 2017-18 and £500 million a year for the two following years—which is half what the King’s Fund has estimated that the social care sector needs not for next year, but today. That is another Conservative broken promise. Missed targets are pushing the NHS and social care into further crisis. The Government are behaving like an ostrich in that regard, and the situation is coming back to bite them.

I turn to small and medium-sized businesses, which contribute more to the British economy than they have ever done. SMEs are forecast to contribute £217 billion to the UK economy by 2020, but the Finance Bill does little to address the concerns of many business owners. The business rate system continues to be rigged in favour of giveaways for big corporations at the expense of SMEs. How can it be right for the business rates bills of a leading supermarket’s biggest stores to fall by £105 million, while independent shopkeepers struggle with a cliff-edge hike in their rates? That is a fact today. The system needs to be fairer and weighted more in favour of SMEs, which is why a Labour Government would bring in a package of reforms to ease the burden of business rates. Rising business rates and rising inflation are creating a perfect storm for SMEs. Small business inflation has risen to its highest point in eight years, with basic costs soaring by 3.2% last year. SMEs’ costs are predicted to go up by £6.8 billion by the end of this year. All that is happening while the Conservatives continue to look the other way in complete denial.

[Victoria Atkins (Louth and Horncastle) (Con)]

In that spirit, does the hon. Gentleman welcome the additional £20 million to £25 million a year to support some businesses that will no longer receive small business rate relief after the revaluation?

[Peter Dowd]

Of course I welcome that figure, but the hon. Lady has to ask herself whether businesses should have been put in that position in the first place. That is the fact of the matter. It is too little, too late. I accept the £20 million figure, which is fine. Small businesses need all the support that they can get, because we are talking about people’s jobs and about businesses that people have worked hard to grow and nurture, and there is a danger that they will go out of business as a result of Government policies.

[Sammy Wilson]

Given that larger stores weathered the recession much better than many small businesses, would the hon. Gentleman consider the policy that has been introduced in Northern Ireland whereby larger stores pay a 15% premium on their rates to finance some relief for smaller businesses in town centres?

[Peter Dowd]

If that suggestion came from the Government side, I would say that I would listen to the representations, and we would listen to any representations, so to speak, that would help small businesses.

Moving on to alcohol duty, the Finance Bill will only further undermine our local pubs, which are already under threat, with 29 pubs closing every week. While we welcome plans to make tax digital, the Government’s plan will shift huge administrative burdens on to small businesses and the self-employed, who are just trying to pay the taxes they owe—so much for the Conservatives being the party of small business. There is no reason businesses should have to submit quarterly digital tax returns, particularly when they lack the time, resources and capacity to convert records into digital standards on a frequent basis. All that comes when they are under stress from business rates. That is why we support the view of the Treasury Committee and of small business owners and the self-employed that it is better to exempt the smallest taxpayers from quarterly reporting and to phase in making tax digital to ensure that implementation is right for all, rather than the Conservative party wasting taxpayers’ money and time by correcting mistakes further down the line.

Making tax digital will also place new burdens on HMRC, which is already teetering on the edge after the constant slashing of its resources over the past few years. Thousands of hard-working staff have already been dismissed, and taxpayers are waiting on the phone for hours, which costs far more than the cuts have saved. The closure of dozens of tax offices across the country is still to come, putting thousands of jobs at risk in my constituency alone. How will HMRC cope with the ever-increasing complexity of its responsibilities with just a skeleton staff? How will any of the “reduction in errors” expected from making tax digital actually come about? How will we ever close the tax gap when there are no tax inspectors left to help taxpayers get their returns right and when HMRC has been filched of the resources it needs to run a service? It is a total false economy.

[Jane Ellison]

I am sorry, but I rise to defend HMRC. What the shadow Minister just said is the most outrageous attack on the hard-working men and women of HMRC. Far from people hanging on the phone for hours and the various other exaggerations that we just heard, I suggest that he look at the publicly available figures for HMRC performance in a range of areas, where he will see that what he said is far from the truth. HMRC’s performance has been excellent in recent years in many areas, as shown not least by the £140 billion extra raised since 2010 from avoidance and evasion.

[Peter Dowd]

That attempt at plausibility has gone amiss yet again. The reality is that we are constantly contacted by people about HMRC. Those on the frontline, such as the thousands in my constituency, are doing a damn fine job. The idea that I would attack thousands of people from my constituency is complete nonsense. They are struggling against the odds, which have been stacked against them by this Government. That is the reality. The Finance Bill was a failure before it was even started. It is a busted flush.

The Minister referred earlier to helping homeowners. If the Government are setting aside resources to help homeowners, such as through lifetime ISAs, they should also tackle the threat to the stability of the housing market from organisations such as Bellway, which is tying people to their homes through its leaseholds. That is a scandal and an outrage. The housing market is in danger if such scams are allowed to continue. The Government are quite rightly putting in resources to fund the housing market, so if we are to deal with the issues in it, they should be calling those organisations in, getting a grip on them and telling them to stop ripping off the people who bought homes from them.

The Bill is making income tax payers, small and medium-sized businesses, and the self-employed pay the bill for the endless stream of tax cuts for corporations and the super-rich. It takes no serious action to tackle tax avoidance, putting in place get-outs and workarounds that mean it is just another smokescreen.

[Lucy Frazer (South East Cambridgeshire) (Con)]

Does the hon. Gentleman accept that the Bill comes from a Government who have significantly increased the number of people in employment? Earlier this year, only 370 people were unemployed in my constituency.

[Peter Dowd]

A million people in employment are on zero-hours contracts. Millions of people are in insecure work. Of course I welcome employment, but it has to be secure, well-paid, reasonable, sensible employment that allows people to sustain their families. Under this Government, millions of people are unable to sustain an ordinary life with the wages they receive. That is the reality.

[Tom Tugendhat]

The hon. Gentleman is being generous in giving way. Does he understand that his pledge further to increase taxes runs directly contrary to his hope for better employment? Increasing taxes and increasing the burden of the state on companies around our country would lead to employment falling, not rising. Welfare cases would rise, not fall. It would be generally bad for our entire economy.

[Peter Dowd]

I do not know which speech the hon. Gentleman has been listening to, but I did not refer to raising taxes.

[Tom Tugendhat]

You did!

[Peter Dowd]

No, I did not. I was asked earlier how I would pay for the changes, and I indicated that I would start with corporations. In effect, corporations receive £70 billion in relief over a five-year to six-year period through banking levy reductions and so on. That is the starting point for us. As far as I am concerned, the Bill takes us no closer to knowing when the Conservatives will finally meet their target of closing the deficit. A series of failures has led them to borrow more than any other Government in history, and far more than every Labour Government combined. That is the fact of the matter.

[Lucy Frazer]

Can the hon. Gentleman tell us how much Labour would borrow under his plan?

[Peter Dowd]

Certainly less than you. In short, this Bill is another Conservative broken promise, and I urge the House to refuse it a Second Reading.

--- Later in debate ---

[Mr Rees-Mogg]

Absolutely. That is an important part of the reforms, but there has perhaps been a tone—more from the previous Chancellor than from the current Chancellor—that the non-doms were using the system. A lot of them could actually go anywhere in the world, but they come here because of the great virtues of investing in the UK: we have clear rights of property; we have an effective rule of law; and we have had simple regulations that have allowed them to be here. However, we have now increased the charges on them and increased their eligibility for certain taxes, and I think we should be very cautious about that because one never knows, with these sorts of things, where the tipping point will come. It may be that the annual charges applied to non-doms seem quite small compared with their wealth, but when we consider that they have families—the charges have to be multiplied for the wife, the number of children and grandparents, or whoever—we may find that the charges become quite high. The people bringing such wealth into the country have enormous mobility: they can go elsewhere. I know that standing up for non-doms six weeks before an election is not necessarily going to be a great rallying call for North East Somerset, but ultimately I think good economics leads to good politics rather than the other way around. A lot of what was done with regard to non-doms was much more about politics and perception than the contribution non-doms make to this country. In the context of Brexit, we want to show that we are genuinely open to the rest of the world. We want people to come here to invest and to spend their money, because that is so important to our long-term economic prosperity.

There is a broad challenge with this Finance Bill, as there will be with its successor which will no doubt come. I have a feeling that this will be one of those happy years where we get more than one Finance Bill. Finance Bill debates are particularly enjoyable parliamentary occasions because they have no time limit. The hon. Member for Aberdeen North (Kirsty Blackman) said that we might go right through the night and not be able to have our debate tomorrow. I look forward to that happening at some point in the future, but I have a feeling it is not going to happen today. Finance Bill debates are the best debates because of their fluidity and flexibility.

When we get to the second Finance Bill, a fundamental choice will still have to be made. This relates to the answer we had from the hon. Member for Bootle (Peter Dowd) on the Opposition Front Bench. There is an absolutely key point at the heart of this Finance Bill, as there will be at the heart of any new Finance Bill. When I intervened on him and said that the tax rate as a percentage of GDP was at its highest since the days of Harold Wilson, his answer to me was that under Labour it would be even higher.

[Peter Dowd]

May we just have clarity on this? I did not say that. The hon. Gentleman brought it to my attention that it was high under Harold Wilson and I made the point that yes it was.

[Mr Rees-Mogg]

I look forward to reading the characteristically accurate transcript Hansard will have for us tomorrow. The great thing about Hansard is that it allows us to correct our grammar—indeed, it often corrects it for us—but it does not allow us to correct the sense, so we will see what was said precisely.

That is the choice. If the hon. Gentleman now wishes to move away from that choice I think that is telling: with an election approaching Labour Members are nervous about it, but the Labour party—the socialists—remains the party of high taxation. The Conservative Government have had to increase taxation because of the enormous deficit left by the spendthrifts of the last Labour Government who almost bankrupted the country. We would probably have gone to the International Monetary Fund at the time if it had had any money left, but it was bailing out Greece and everywhere else so it did not have much for us by the time the Conservatives came in. Through hard work, control of expenditure and, I am sorry to say, some tax rises, the deficit has been brought under control. That is the fundamental achievement of this Government.

As we go into an election, it is the really big picture that matters. It will give such a clear and forthright choice to the British people. Do they want to continue to be governed by people who recognise that it is their money—the money of the individual taxpayer—of which the Government must take as little as possible to finance that which they are required to do? Or are we going to go back to the days of socialist tax and spend, with a huge increase in the deficit to finance spending programmes and tax increases that are even higher than those in the days of Harold Wilson? It was, of course, Denis Healey who said that he would squeeze the rich until the pips squeaked. That was his approach to taxation. Do we, by dutiful, sensible and prudent management of the economy, get things back under control where, with proper reforms, we can lower the tax burden?

--- Later in debate ---

[Peter Dowd]

If the long-term economic plan was such a wonderful strategy, why did the former Chancellor and the current Chancellor keep missing their targets?

[Mr Rees-Mogg]

Targets are based on forecasts and forecasts have variables within them that even the wonderful, or not always wonderful, boffins cannot get absolutely right. What matters is not the precision of the forecast, but the broad trend of the economy. We have had consistent economic growth. We have the highest employment on record. This is an enormous achievement. As I said a moment ago, we have the fastest growing G7 economy.