Finance (No. 2) Bill

Debate between Peter Dowd and Robert Courts

Committee: 1st sitting: House of Commons
Monday 18th December 2017 Commons Chamber

[Robert Courts]

It is a great honour to speak in the debate on this very important matter, and particularly to follow the hon. Member for Bristol South (Karin Smyth). She made some very interesting points, and I am glad that she supports many of the technical education measures that the Government are bringing in. I entirely agree with her that this is one of the great challenges the country faces, and I applaud the Government’s work in setting out a framework for technical education in the future.

I want to talk directly about the bank levy. All hon. Members on both sides of the House probably accept that it is very important for the banks to pay a fair contribution towards public services and the tax yield in this country. They are significant employers with significant operations and they are wealthy and profitable enterprises, but it is very important to have a balance. Such a balance throws into relief the fact that banks are responsible not just for being profitable and therefore for paying tax, but for introducing liquidity into the system and enabling us to borrow.

If any hon. Member has ever borrowed to buy a car or a house or to invest in a business—many of their constituents will of course have done so—the money will have come from a bank in most cases. It is very important that banks are enabled to provide precisely that service, so there has to be a balance. Yes, they must pay a fair share towards the economy and society in which we all live, but that share should not be so large that their ability to lend is decreased. I suggest that this Government have got the balance right. In 2010, the Conservative coalition Government increased regulation, and in 2011 they introduced the bank levy, which reflected the risk inherent in the banking sector. It is an inherently risky sector because of the very nature of the way in which it operates, and the bank levy was introduced precisely to recognise that risk. It was introduced to incentivise the banking sector as it then was to invest in a way that was less risky than the ways in which it had operated up until that time.

That spirit of balance, which is the keynote point of my few remarks this evening, is why we need reform now. There is a gradual shift from the levy to taxing profit, recognising that the regulatory regime globally, as well as in this country, has moved on considerably since it was introduced. Since 2016, we have had an 8% tax on bank profits—the corporation tax surcharge—which will raise £9 billion between 2017 and 2022. The bank levy rate will be reduced to 0.1% over the same period. Of course, there is the additional fairness brought by ensuring that the levy affects only UK balance sheets. UK-based banks must never be disincentivised from being based here, rather than being based abroad and operating here. We can make those changes now because of the improvements in global regulation.

Members from all parts of the House should recognise that it is important that we, as politicians, do not become too fixated on the rate of taxation, but rather look at the revenue that is earned. I suggest that this Government have got that balance—that key focus—correct. That is the economic paradox of taxation rates. We heard about the Laffer curve from my hon. Friend the Member for Stirling (Stephen Kerr). If there is 0% tax, 0% taxation is received. If there is 100% tax, 0% taxation is received. The point is where precisely the balance is struck. I suggest that the Government have got it correct.

The measures that we have brought in since 2015 have introduced an additional £7 billion through to 2023, bringing in a total of £30 billion over and above what would have been brought in through corporation tax in any event.

[Peter Dowd]

I am not quite sure that the hon. Gentleman is correct about that, because the Institute for Fiscal Studies states:

“Cuts to corporation tax rates announced between 2010 and 2016 are estimated to reduce revenues by at least £16.5 billion a year in the short to medium run.”

Even the Treasury’s own figures show that the cost has been significant.

[Robert Courts]

I simply do not accept that point, with the greatest of respect to the hon. Gentleman. It is quite clear that the reduction in corporation tax, which I am glad he has mentioned, has led to an increase in revenues over that period. It is accepted that GDP is expected to increase by 1.3% in the long run. The receipts have increased by 50% since the Government have been reducing the corporation tax rate, from £36 billion to £55 billion between 2010 and 2016. That is an increase to £55 billion going to the Exchequer over that period.

--- Later in debate ---

[Robert Courts]

It is exactly the same principle with personal taxation. My hon. Friend makes an absolutely outstanding point. He is quite right and we must not forget that the principle is the same for personal taxation as it is for corporation taxation. Not only is the tax yield increasing, it is also borne by those who earn the most. It is indeed progressive and, I would hope, something all Members could support.

I know other Members wish to speak, so I will conclude with this point. An Opposition Member suggested that no one on the Government Benches has spoken about wages, public services and so on. I would very much like to concentrate on them in these last few seconds of my speech. It is through our tax regime, the sensible taxation policies that this Government have put in place since 2010, that we are now able to see an increase in—

[Peter Dowd]

Given those sensible taxation levels and rates, will the hon. Gentleman explain why productivity is the lowest of all our competitors, inflation is higher than our competitors, wage stagnation is almost becoming endemic, investment is slower, and economic growth is on the floor? If having these so-called lower rates of tax is such a fantastic opportunity for businesses, how come we are still in this particular situation?

[Robert Courts]

I am grateful, as ever, to the hon. Gentleman for making his points. He makes a number of them and it will not surprise him that I do not agree with him. We have record investment, an extraordinary economic miracle and a jobs miracle. We are still having to recover from the economic mess the Labour party left us in. There is absolutely no two ways about it: the Labour party left us with record levels of national debt.

Our economy is seeing an increasingly benign environment. That has been made possible by the sensible taxation measures the Government have allowed to take place and have sponsored. It is through that tax regime that there is more to spend on public services: companies can look to increase wages, hire more staff, pay more tax and thereby fund the public services we all need.