Philip Davies
Main Page: Philip Davies (Conservative - Shipley)Department Debates - View all Philip Davies's debates with the HM Treasury
Taxation Freedom Day Bill
Philip Davies Excerpts(12 years, 12 months ago)
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Mr Hollobone
Indeed. Before the U-turn the burden of taxation on the British economy went down but then, as we know, it all started to go wrong, and from 1973 to 1975—three calendar years, in effect—those 21 days were reversed and taxation freedom day went back up to 2 June. One of the major reasons for that was the very high price inflation of that period. The Government of the day did not re-index all the taxation allowances and there was a huge fiscal drag effect, taking people into high rates of income tax.
Taxation freedom day did not change much until 1978. Between 1978 and 1982, it moved by 24 days, from 27 May to an all-time peak, 20 June, in 1982. In that period we had the rapid appreciation of sterling, particularly against the dollar, there was the doubling of VAT from 8% to 15% in Geoffrey Howe’s first Budget, a huge collapse in gross domestic product—not as sharp a fall as we are currently experiencing, but nevertheless a very dramatic slow-down in the economy—and another period of high inflation fuelled, in part, by a second big rise in oil and petrol prices. That meant that in 1982 the average British taxpayer had to work for 172 days, with all their income for those 172 days going, in effect, to Her Majesty’s Government.
There then followed quite a long period, from 1982 to 1996, just before the end of the Conservative Government, when taxation freedom day fell back by 25 days, from 20 June to 26 May. In 1997, when Tony Blair came in, taxation freedom day started to rise once again. Interestingly—I hope that this will convince the two Opposition Members present that I am trying to be as politically neutral as possible—taxation freedom day in 1997, when Labour took office, and in 2010, when Labour left office, fell on exactly the same day: 27 May. It rose in the middle of that period to 4 June, an increase of nine days, but in other years it fell by three days.
Philip Davies
I commend my hon. Friend on introducing his Bill. I presume that his aim is to try to shame the Government into making taxation freedom day fall as early as possible each year, which is certainly the basis on which I support it. With that in mind, has he considered specifying a date beyond which no Government can allow taxation freedom day to fall, to ensure that we guard against excessive taxation?
Mr Hollobone
I am most grateful for that intervention from my hon. Friend, who is a legend not only in his constituency, but in this place, precisely because of that sort of contribution. I also take it as a bid to serve on the Bill Committee. I for one would welcome that as an amendment that would improve the Bill, because I know that one of the major roles he performs in this place is providing helpful ideas to Members and the Government on how legislation might be improved, and what he suggests is one of the best examples I have heard. Like me, he believes that the burden of taxation in this country generally is too high and would like to see it fall. However, Members need not share our views to support the Bill. It is possible to be an enthusiast for more taxation to provide more public services and still to support the Bill. The Bill would make the burden of taxation transparent to everyone.
Mr Hollobone
I know that my hon. Friends are shocked by that news, and I very much hope that I am mistaken. When our hon. Friend the Economic Secretary to the Treasury rises to make her remarks, I hope that she will disabuse us of that notion, because in 2003 Lord Saatchi in the other place launched a Bill to make taxation freedom day a bank holiday. It was official Conservative party policy, supported at the time by the then shadow Chancellor, the right hon. Michael Howard, and a great deal of news was made about it.
I do not propose in my legislation to make taxation freedom day a bank holiday.
Mr Hollobone
That is a very good question, and it may well be the subject of another amendment that my hon. Friend tables in Committee, because I for one support the idea of a bank holiday to celebrate taxation freedom day. I personally think that it should replace the May day bank holiday, which for most of my constituents and most people throughout the country is not an appropriate day for a public holiday. If it were replaced by taxation freedom day, that would be a very good thing, but that is not in the Bill.
Philip Davies
I commend that idea to my hon. Friend. It might encourage the Labour party to bring forward taxation freedom day each year so that it coincides with May day.
Mr Hollobone
That is a very good suggestion, and yet another reason for Opposition Members to support the Bill today.
My Bill does not propose that taxation freedom day be a bank holiday. What it does propose is that, basically, Her Majesty’s Government make official recognition of what taxation freedom day does. In the Taxation (Information) Bill, the Conservative party Bill that was launched in the other place in 2003, Lord Saatchi suggested the following mechanism for calculating how taxation freedom day should be arrived at. He said that taxation freedom day is
“determined by taking total tax revenue, including direct and indirect taxes, local taxes, capital taxes and national insurance contributions as a percentage of total income”,
and that it is
“calculated as general government tax revenue as a proportion of net national income”. —[Official Report, House of Lords, 9 July 2003; Vol. 651, c. 380.]
Net national income differs from the more familiar gross domestic product, or GDP, in two ways: first, net national income adds in net property and the entrepreneurial income of UK citizens from abroad; and secondly, it subtracts capital consumption. Net national income is therefore smaller than GDP, making the ratio of tax revenue to net national income larger than that to GDP.
I do not particularly mind what mechanism the Office for National Statistics uses for calculating taxation freedom day, because there are all sorts of suggestions about how it be done, but whatever mechanism is used, it ought to be clearly explained and consistent year on year, with lots of backdated calculations—perhaps even to the start of the 20th century, as my hon. Friend the Member for Bury North suggests—so that we can track consistently how taxation freedom day has moved around. There we have an official Conservative party suggestion from 2003, however, and it is a helpful contribution to the idea of pushing this Bill forward.
None other than the current Chancellor, before he became Chancellor, has spoken about taxation freedom day on two occasions. First, interviewed by Polly Toynbee in The Guardian on 2 June 2006, he said:
“This Saturday—June 3—we celebrate Tax Freedom Day. That is the point in the year when people stop working for the chancellor and start earning for themselves.”
In 2006, according to this enlightened quotation, the then shadow Chancellor saw the value of taxation freedom day. I very much hope that now he is the actual Chancellor he can put his words into practice. On another occasion, when interviewed in 2007 about taxation freedom day having slipped to 1 June in 2007 from 27 May in 1997, he was quoted in the Daily Express as saying:
“Here’s the proof that Gordon Brown’s stealth taxes hit us every hour of the working day. Hard-working people hand their money over to the Chancellor and the tragedy is that they cannot trust him to spend it wisely.”
In his role as shadow Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne), has on two occasions publicly backed the idea of taxation freedom day. That is extremely helpful, and I hope that point of view is now consistent with Her Majesty’s Treasury in its present form.
On 6 June—D-day—2000, Mr Deputy Speaker, none other than your boss, the Speaker, tabled a ten-minute rule Bill called the Taxation (Right to Know) Bill, which had three main elements. If I may quote Mr Speaker in his absence, he said:
“In my Bill, the Treasury is required to prepare and send to every household and business an annual statement of the rates of each tax and excise duty…My second proposal is that the proportion of the purchase price of key products that is represented by tax and excise duty should be publicly displayed on the bills that customers pay…My third suggestion is that each year the Treasury should publish an assessment of the merits of each tax, considering not only its yield but its administration cost, its compliance cost and its economic cost in terms of lost output and diminished competitiveness.”—[Official Report, 6 June 2000; Vol. 351, c. 175-176.]
In his remarks to the House, the right hon. Member for Buckingham (John Bercow) stressed that our taxation freedom day, which in 2000 was on 29 June, was no fewer than 20 days worse than in the United States, where it had fallen on 10 May. The Bill proposed by Mr Speaker—before he was Speaker—in 2000 and my Bill essentially try to do very similar things. We are trying to make the burden of taxation on every individual business and organisation in this land far more transparent so that taxpayers can understand how much of their money is going to the Government and what it is being spent on.
That drive for transparency is being promoted by all sorts of organisations, not least the TaxPayers Alliance, which, in a major tax transparency campaign, has launched a tax app. For those of us who are rather technologically challenged, that might not be immediately appealing, but that will not be so for enlightened individuals such as my hon. Friend the Economic Secretary, or even my hon. Friends the Members for Harlow (Robert Halfon), for Bury North, and for Shipley (Philip Davies), who are at the forefront of IT developments. The Tax Buster app for smartphones allows shoppers to find out how much they really pay when buying everyday items. With a few details about any particular purchase, it can calculate how much money from an item went on VAT and duties.
Mr Hollobone
Indeed. The Office for National Statistics is a thoroughly competent organisation whose judgment we all respect, and I cannot believe that to get this exercise under way would place a massive burden on it or Her Majesty’s Treasury. The Adam Smith Institute, through its good offices, has published its version of this information. That is a small, privately funded organisation. Given all of Her Majesty’s Treasury’s resources, at taxpayers’ expense, I am sure that getting this exercise under way would be a small matter. On parliamentary time, we are talking about one statutory instrument a year, and we know that passing hundreds of statutory instruments accounts for only a small fraction of the cost of running Parliament.
Philip Davies
Is it not bizarre that the Government, who are happy to give £18 billion a year to the European Union without so much as a by-your-leave, are quibbling over the cost of setting out when tax freedom day is each year?
Mr Hollobone
It does rather put it into perspective, does it not? I shall not be led too far astray, Mr Deputy Speaker, but I cannot resist adding to the strength of my hon. Friend’s point. Our bill to the EU for the last five years of the previous Government was £19 billion, but in the lifetime of the coalition Government to 2015 it is set to be £41 billion. It will more than double.
Philip Davies (Shipley) (Con)
I commend my hon. Friend the Member for Kettering (Mr Hollobone) for introducing his Bill. He is a great champion in this House not just of his constituents, but of common sense. This Bill is a prime example of the common sense he is trying to bring to bear on this House and on the Government.
I am optimistic, and would urge my hon. Friend to be optimistic too, because in the Minister we have someone who is broad-minded. She will not just be persuaded by the drivel that was written by the Government machine—as I think he so delicately put it—but will listen to the force of his argument. I was certainly persuaded by the power of his argument, and I am sure that other hon. Members were. If we were persuaded, I see no reason why she would not be persuaded either, given her qualities and her open-mindedness. I therefore look forward to a rethink of the briefing from the Government machinery. Indeed, I am sure that her speech is being torn up as we speak, to reflect the points that my hon. Friend made.
My hon. Friend is a reasonable man—something that probably I am not—and he made the point that his Bill is neutral. He did not say whether taxes should be higher or lower; he is merely trying to introduce some transparency. Therein lies the weakness of his Bill, if he does not mind me saying so. I return to the point that I made in my earlier intervention. The Bill would be much healthier if it were far more partisan and made the point that taxes are too high and should be lower. I would therefore love to insert in the Bill a date each year beyond which tax freedom day must not fall, thereby acting as a safeguard to prevent taxpayers from excessive taxation, however bad the Government were in future. When his Bill goes to Committee, as I am sure it will, I would wish to move an amendment proposing that. I think that most taxpayers would welcome it.
My hon. Friend made the perfectly reasonable point that there is a slight discrepancy in how tax freedom day is calculated. I would therefore wish to guard against Governments obsessed with spin—I am sure he can think of some from the not-too-distant past—trying to manipulate the calculation of tax freedom day to suit their own ends and their own agenda. I do not know whether he considered this in preparing his Bill, but although the Government may well be strapped for cash—it seems that they cannot afford to announce when tax freedom day is; I am not entirely sure what the cost incurred in doing so is, but it is clearly substantial—perhaps we should encourage them to state where the UK is in the league table compared with other countries. If every country is being calculated on the same basis, at least we will know, however it is done, that every country is being calculated on the same basis, so we can look at where Britain stands in the league table and see whether we are doing relatively better or worse than other countries. Helpfully, the Molinari Economic Institute has provided such a document based on the reports it produces each year.
Relevant to this debate is the issue raised by my hon. Friend the Member for Kettering about the differences in calculations. He and I think that tax freedom day fell on 30 May this year, which was three days later than it was in the previous year, which might be one reason why the Government have changed their minds about the publication of tax freedom day. They might not wish to draw attention to the fact that tax freedom day is three days later this year than it was last year. I put that out there as a possible explanation for the change of policy.
Those who produced the document that calculates tax freedom day across Europe are clearly more generous because they have this country’s day as falling on 17 May —13 days earlier. I do not think we should be led astray by what date it is; what is important to me is where the United Kingdom falls in relation to other countries in the European Union—and, indeed, countries outside the EU, which also appear in the table. The figures show how competitive our economy is in comparison with our neighbours.
My hon. Friend may be surprised to know that the UK does reasonably well, even though 17 May might seem too long for those who believe that taxes are too high. I would urge my hon. Friend, however, to avoid Belgium like the plague, as Belgian tax freedom day, according to this document, is 4 August. I certainly urge people in Belgium to rise up against their Government and demand lower taxes.
In order that people do not become complacent, I point out that in Cyprus tax freedom day is 13 March. I do not know about my hon. Friend, but I would certainly urge the Government to move more towards a Cypriot level of taxation than to a Belgian one. This gives the Government something to aim for—perhaps a target. I am not usually a big fan of targets, but perhaps the Government could target themselves to beat Cyprus.
Mr Hollobone
My hon. Friend is making an excellent speech, which I am hugely enjoying. Does he have the figures for Greece? Can he confirm whether the Greek Government actually collected any taxes at all?
Philip Davies
My hon. Friend makes a good point. According to the document I have with me, Greece’s tax freedom day is 12 June. Whether that was simply an academic exercise rather than a real one, I am not entirely sure. I probably share my hon. Friend’s implied view that, for far too many Greeks, tax freedom day was 1 January. I am not advocating that this Government aim for a 1 January tax freedom day, but I am sure they can do better than they are at the moment—on the best analysis I have seen, the middle of May or what we think is actually the end of May.
Charlie Elphicke
Is not a central point about tax freedom days in relation to Greece the need to avoid the risk of creative accounting? We must be sure that accounts are accurate, especially where there has been a change of Government. I believe that the Labour party has so far spent its bank tax nine or 10 times over. We must ensure that, whatever happens, there will be no creative accounting; we must be able to trust the figures.
Philip Davies
My hon. Friend is right, and I believe that the Bill will provide a good safeguard against Governments exercising sleight of hand in their presentation of figures. If we have an independent body—I do not really care whether it is the Office for National Statistics, which is mentioned in the Bill, or the Office for Budget Responsibility—and a set of figures that can be trusted, no matter how many times the Government announce the same tax increases or tax cuts, we would at least know where we stood as we would have trusted figures that overrode the spin. I think that the Bill is a particularly good safeguard against that.
The Adam Smith Institute has been on to this for quite some time, and has helpfully informed people when tax freedom day falls in this country. Although the transparency element is important, what I find most striking is the fact that British people must work for 149 days just to pay their taxes. I was also interested by the regional variations mentioned by my hon. Friend. The Welsh, for instance, spend 35 days paying their income tax, while people in London spend 51 days paying theirs.
I do not understand why the Government do not want to make people aware of how difficult the Government’s financial position is. The Adam Smith Institute used a tax freedom day-style mechanism to illustrate the extent of the United Kingdom’s debt problem. It calculated that our burden of debt was so great that UK taxpayers would need to work for nearly a year and a half, with their entire wage packet going to the Government and not a penny being spent on public services, just to pay off the national debt.
When the Government talks of our being heavily in debt, whether they are telling us that we are adding £150 billion a year to our debt or that the debt burden is more than £1 trillion, it is difficult for people to get their heads around the figures. Millions used to sound like a lot of money, but nowadays no one is interested unless it is billions. Explaining to people in simple terms that they would have to pay tax for a year and a half without any of it being spent on public services would make the extent of the debt clear to them.
We could also be shown a way out of our financial problems. Sam Bowman, head of research at the Adam Smith Institute, says:
“Tax Freedom Day underlines the huge burden of government on working people’s lives. For five months of the year, we are slaves to the state. No wonder growth is so slow—we need robust tax reform now, bringing lower, simpler, flatter taxes. The government should resolve to make Tax Freedom Day something we can celebrate earlier and earlier each year.”
I think that Sam Bowman is on to something. When we can see the facts for ourselves, when we worry about where growth in the economy will come from and conclude that it depends on people having more and more disposable income so that they can go to the shops and buy things—thus helping businesses—and when we are made aware of how long people are having to work just to pay their taxes without even having a disposable income, the way out of our debt problem begins to become clear. If we can indeed make tax freedom day arrive earlier and earlier, people will have more and more disposable income that they can use to try to get the economy going. I think that that would help the Government to see a way towards economic growth, which is what will solve our debt problem—together with, I hope, a cut in Government expenditure at some point. They do not seem to have been able to manage that so far.
Let me draw my hon. Friend’s attention to the position in other parts of the world, particularly America. Traditionally, America has been far better at generating economic growth than the wretched European Union ever has. This year, tax freedom day in the United States will arrive on 12 April, well over a month before it arrives in this country. Whereas in this country people must work for 149 days just to pay their taxes, in America they need work for only 102. Many of my constituents would much rather work for 102 days than 149.
The great recession has reduced tax collections even faster than it has reduced income. After a long debate, President Obama and the Congress extended the Bush-era tax cuts for two additional years, which is very welcome. Despite those tax reductions, Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined, despite the fact that tax freedom day falls much earlier in America.
The statistics in America are calculated by state—my hon. Friend the Member for Kettering gave figures for different parts of the UK—and they are very revealing. Mississippi has the lowest average tax burden of all the states, and its tax freedom day falls as early as 26 March, whereas in Connecticut it falls on 2 May and in New Jersey it falls on 29 April. There are massive regional variations, therefore, and drawing comparisons can serve to promote competition between states. If voters in America can see how their state compares with other states, they might be encouraged to say, for instance, “Well, hold on a minute; if Mississippi can have tax freedom day on 26 March, why can’t we have that in Connecticut, too?”
One of the best ways to get Governments to reduce the tax burden is to introduce an element of competition. That is why I want the Bill’s provisions to be strengthened so that we encourage the Government to set out in the calculations how the UK compares with other countries in respect of a tax freedom day, and in particular how we compare with countries such as America whose economic growth has traditionally been stronger than ours. After all, if we want to grow the economy, we should want to adopt best practice. Any business that wants to improve its performance will look at what its competitors do. That is how most organisations seek to improve; they benchmark their own performance against that of similar organisations to see what they might do better. I would like the Government to start doing that in respect of taxation rates. If they are forced both to show that lower taxes can be delivered in other parts of the world and to consider how those countries achieve that, they might then try to introduce a similar discipline and focus to this country.
Mr Hollobone
I am sure there will be intense competition for places on the Committee, but does my hon. Friend share my optimism that the Bill might be able to pass through that stage and complete its passage during this parliamentary Session, so that many of his welcome ideas become legislation?
Philip Davies
My hon. Friend is very kind. I would not be so bold as to say that my amendments would improve his Bill, as it is perfectly good in its current form. I am merely using this opportunity to suggest some ways in which it could, perhaps, be strengthened. If my hon. Friend is seeking cross-party consensus and therefore does not entirely share my agenda, I could, perhaps, be persuaded to ditch some of my more strident amendments in order to get the basic measures through. I merely offer these amendments up now to show that the Bill could be improved.
Mr Peter Bone (Wellingborough) (Con)
My hon. Friend was making a very good speech up to that point; the idea that he should retreat or give in on any issue is appalling, but when he is absolutely right, as he is on this one, I must ask him to press it very firmly in Committee.
Philip Davies
Again, my hon. Friend is very kind. I am probably more strident than my hon. Friend the Member for Kettering, and my hon. Friend the Member for Wellingborough (Mr Bone) is clearly more strident than I am, so I invite him to take part in more debates that I am involved in to show what a moderate I am. His presence is very helpful in that regard and I thank him for that.
The country is in a massive financial hole. I want to stress that I do not think that the Bill is simply something that will add transparency to the situation so that people can see where they stand; I think it has the potential to be much better and more radical than that. It will give an opportunity for people in this country to start questioning seriously why our rates of tax need to be so high, given that other countries, often ones doing better than us, seem to manage with a much lower rate of tax. If we can get that agenda discussed in politics, we can do something that will transform the British economy—it does need transforming.
We cannot carry on as we are, trying to get ourselves out of huge debt by scoring a few quick singles here and there. We need to go for some boundaries—we need to go for some fours and sixes if we are to get ourselves out of this. Quick running between the wickets, on its own, is not going to make any impression. The Bill has the potential to change radically the way we think about taxation in this country, and about how we press our Governments to do the right thing and be more efficient in the way they do government.
I do not want to overstay my welcome, Mr Deputy Speaker, so I will close on that point, but I say to my hon. Friend the Member for Kettering that, once again, he has put a vital issue on to the political agenda. Although my speech will certainly not have persuaded the Government to support his Bill, I still see no reason why his speech would not have done so. I look forward to the Government supporting the Bill and at least allowing it to go into Committee.
Mr Nuttall
My hon. Friend makes a very good point. That would weigh even more, I am sure, and it is certainly weighing more on the efficiency and competitiveness of British business. As he will be aware, my view is that the sooner we can free ourselves from the acquis communautaire the better.
When one considers those facts, it is no wonder that adopting a simple way of demonstrating to people the size of their tax burden by calculating and publishing the number of days the average individual would have to work to discharge it is such an attractive idea. The result of all the complexity, of course, is that people do not understand how much tax they really pay, but putting it in terms of how many days the average person has to work solely to pay taxes would start to bring it home to people.
Philip Davies
May I float another idea past my hon. Friend? Not only should the day on which people have paid off their taxes be announced as tax freedom day, but there should also be an announcement of the day on which the Government’s spending programme has been matched fully by taxation. In America, tax freedom day is on 12 April, but if all the money to pay for all the Government spending had to be collected—$1.48 trillion more—the date would be 23 May. Perhaps we should also see what the gap is between taxation and the amount that the Government are incurring in expenditure.
Mr Nuttall
My hon. Friend makes a very good point. That could be dealt with in Committee; we could amend the Bill to include that date as well. That opens up a whole new area of complexity, because there is not only the difference between income, expenditure and the actual spending programme to consider but the effect of existing debt that needs to be paid off.
Let me deal with the Bill in a little more detail. Clause 1(1) requires the Chancellor of the Exchequer to specify one day each year that
“shall be observed as Taxation Freedom day.”
Unfortunately, the Bill is silent on how we as a nation are to observe this great day. I understand the reluctance of my hon. Friend the Member for Kettering to suggest having another bank holiday, but I submit that it might be appropriate to mark the day with an annual debate in the House on the ways in which the burden of taxation could be reduced in future years and hence the day brought forward.
Rachel Reeves (Leeds West) (Lab)
I congratulate the hon. Member for Kettering (Mr Hollobone) on securing this debate, which is clearly of great importance to him. He referred to two dates: 1972, when tax freedom day would have been earliest in the year, and 1982, when it would have been latest.
In 1972 we had a three-day week, so there was not much happiness, and there would not have been much to celebrate on taxation freedom day. In 1982, we had unemployment of 3 million. The reason taxation freedom day came so late that year might be that there were not enough jobs and more was being paid out in benefits with not enough coming in via tax revenue.
The hon. Member for Shipley (Philip Davies) said that he would like us to be more like Cyprus and less like Belgium. The Belgian economy has grown by 1.8% over the past year, and Cyprus is one of just three countries in the European Union, along with Portugal and Greece, that has had a slower rate of growth than the anaemic growth that we have seen in the UK this year. I think that many of our constituents would rather we were a little more like Belgium, with stronger growth and lower unemployment, and a little less like Cyprus, but we may differ on that.
Philip Davies
I take it from what the hon. Lady has said that the Labour party’s official stance is that it would like taxation freedom day in this country to be 4 August.
Rachel Reeves
No, that is not our stance. If the hon. Gentleman would like us to be a bit more like Cyprus, he might want to look at it in the round, because, as I said, Cyprus is one of just three countries in the European Union that has grown at a slower rate than the UK this year.
Conservative Members have spoken about the difference between taxation freedom day in the US and in the UK. One of the reasons taxation freedom day in the US will come a little earlier is that it does not have a national health service, and, as a result, people have to pay from their own income for the health service. If hon. Members took into account how much individuals and businesses contribute towards health care insurance in the US, they might find that its taxation freedom day came a little later in the year—perhaps even later than in the UK.
My main question is why we need a Bill on this. Hon. Members, particularly the hon. Member for Kettering, have spoken about the work of the TaxPayers Alliance and the Adam Smith Institute. If they have all the facts and figures, why do they not organise a celebration for taxation freedom day? Why do we need Government legislation? If we had Government legislation on taxation freedom day as a result of passing this Bill, the day might fall a little later in the year because of the additional costs.
Rachel Reeves
I guess that we disagree on that. There are costs associated with all these things and I do not think this is a cost that my constituents and many hon. Members’ constituents would want to bear.
That brings me to my main point. This is a worrying time for businesses and families throughout the country. They are struggling with higher food prices and fuel bills, and are worried about their jobs and their children’s future. I am not convinced that the hon. Member for Kettering has explained what the Bill would do to help an ordinary family in Kettering who are struggling with stagnant wages, high unemployment and high inflation. In Kettering, there has been an increase in long-term youth unemployment of 127% since January this year.
It seems to me that the most important thing that Members of Parliament can do in representing our constituents is to put in place policies to address those issues. I am not sure that celebrating tax freedom day would help get young people back to work, help families facing a squeeze in their living standards or help businesses that are seeing demand dry up. I am certainly not sure what it would do for the 4,000 people who are unemployed in my constituency of Leeds West.
One tax that the hon. Member for Kettering might want to change is VAT. I wonder whether next Tuesday he and other Government Members will support the Opposition when we argue that VAT should be cut temporarily. That would bring forward tax freedom day and put £450 in the pocket of the average family. It would be a real step to help families and businesses across the country.
The hon. Member for Dover (Charlie Elphicke), who is no longer in his place, spoke about the tax on cigarettes. Many people would think—[Interruption.] Oh, here he is. Welcome back. It seems that if anyone mentions cigarettes, he is automatically in his place. Most of our constituents recognise that cigarettes should be taxed because they have social costs beyond the cost of producing and selling them. However, if one looks at the increase in the cost of petrol that we all face when we fill up our cars, reducing VAT back down to 17.5% would reduce the cost of petrol by 3p in the pound.
Philip Davies
If the hon. Lady is so keen for people to have an extra £450 back in their pocket, which I could certainly support, will her party propose a reduction in income tax to deliver that? If her party proposed cutting income tax to give £450 back to people, I might even be tempted to support it.
Rachel Reeves
The hon. Gentleman mentioned earlier—or it might have been the hon. Member for Bury North (Mr Nuttall), but I am sure that they agree—that the increase in the income tax threshold means that fewer people are paying income tax. The good thing about reducing VAT is that it has a progressive effect, because people on lower incomes spend a higher proportion of their income on VAT than people on higher incomes. A reduction in VAT would therefore help to get money in the pockets of the people who most need it at the moment in a way that a cut in income tax would not.
Rachel Reeves
I am afraid I only went to a comprehensive school, so I did not study Latin. Maybe the hon. Member for North East Somerset (Jacob Rees-Mogg) would like to do some interpretation.
The hon. Member for Kettering reminds me of my holidays when I was at school. As he knows, I used to go to Kettering in all my school holidays, because my grandparents lived there. I still have many family members in Kettering.
Rachel Reeves
I expect not.
I was just thinking about the lives that my grandparents led and the things that mattered to them. Every day, they benefited from what happened in both the public and private sector. They worked in the shoe factories in Kettering, as the hon. Member for Kettering knows—we have discussed it before. However, they also lived in a council house, when they were ill they used Kettering general hospital, and their children went to state schools in Kettering. My father went to Kettering grammar school.
Having a tax freedom day suggests that until that date in May, June or whenever it falls, people are contributing to someone or something else, or to the Exchequer. Actually, the money that they pay in taxes every day from the beginning of January until the end of December is used for things that matter to them, for instance building council houses such as my grandparents lived in, paying for teachers and for schools such as they went to and paying for nurses and doctors in the hospital that treated them when they were ill. It seems a little irrelevant to have a tax freedom day, because whether it is 5 February or 25 November, people need both what they pay their taxes for and disposable income to pay for things that matter to them. That is why those suggesting a tax freedom day misconstrue the situation.
Miss Smith
I thank my hon. Friend for that clarification. I was briefly about to exercise my mental arithmetic by suggesting that while it was 22 days in 1900, it was 19 days in 1910, demonstrating that these figures, like all good things in life, can go down as well as up.
I particularly note the birth date of my hon. Friend the Member for Kettering. May I briefly wish him a happy birthday—with, dare I say it, his 50th birthday falling only the year before the next general election? What a miserable time to have one of one’s major birthdays—in 2004 and 2014! We must do our best to give him a happier birthday in this place than he would otherwise look forward to.
My hon. Friend rightly pointed out that the Government have no money of their own. Taxation is not the Government’s money; it is never that. Taxation is people’s money pooled for the common good. That is my view of taxation. I should note that we spent a good deal of time earlier this morning talking about the value of society in debating the previous Bill. Margaret Thatcher spoke about there being “no such thing as society”, but only individuals. The current Prime Minister has moved the point forwards by saying that there is such a thing as society, but it is not the same as the state. I put myself in both those traditions and, I hope, alongside the views of my hon. Friend the Member for Kettering in feeling myself to be on the side of people who work hard, want the Government off their backs and want to be left with as much money as possible in their pockets to spend according to their own choices.
I was interested to hear the debate about whether tax freedom day would be better under a Conservative or a Labour Government. I note that there might be a cricketing correlation here. I suspect that my hon. Friend the Member for Shipley (Philip Davies) is a cricketing fan, as am I. He might be interested to think about the successes of the national side in 1981-82, when I regret to have heard tax freedom day might have been at its peak. He is interested in fours and sixes and not singles, so let us see what we can achieve now that England is once again at the top of the cricketing league. Let us hope that Britain is at the top of other leagues.
My hon. Friend the Member for Shipley wishes, I think, to oblige the Government to make tax freedom day as early as possible. I note briefly that his comparison to the United States could be unfortunate, given that a number of American politicians have recently pledged never to increase taxes, which has led to some gridlock in the US political system. I am not sure that we would want to see that here, given the attendant impact on the credit rating of that great country.
Some interesting points of difference have emerged, which it would no doubt be delightful to iron out in Committee. One is about how we might celebrate tax freedom day: should we have a bank holiday or achieve it in some other way? An additional bank holiday will always impact on the economy. Many business people in my constituency and doubtless elsewhere express concern at the idea of having an extra bank holiday.
Philip Davies
Thanks to organisations such as the Adam Smith Institute, we are aware that tax freedom day this year is on 30 May. Does the Minister think she could get the combined brain power of the Treasury on to the case to work out when, if the Government were planning to collect enough in taxes during this year to finance all their spending, tax freedom day would fall?
Miss Smith
I am sure that the combined brains of the Treasury could make those calculations, but I regret to say that my brain, combined or otherwise, is not agile enough to engage in such mental arithmetic on the spot for my hon. Friend’s benefit.
I think that learning of the existence of a “tax app” has enhanced all our lives today. I have only recently acquired a more sophisticated phone. I could not possibly reveal the brand name, but Members should note that I am now tweeting. They may wish to begin following my tweets, as no doubt others will.
As I have said, I noted what was said about taxation on items such as cigarettes and fuel.
Regional variation has been mentioned. My hon. Friends clearly do not want centralised uniformity in any shape or form, and I do not imagine that they would want taxpayers in London, by dint of legislation, to have to pay the same as taxpayers in Wales, or vice versa. I am sure that they support the Government’s actions in not only rebalancing the economy in the direction of a thriving private sector everywhere in the United Kingdom, but creating a thoroughly localist agenda to give people as much freedom locally as possible.
My hon. Friend the Member for Shipley mentioned Belgium and Cyprus. He will be aware that Belgium has had no Government at all for the past 528 days. He might welcome that in principle, but regrettably I am not sure that the average Belgian punter does.
My hon. Friend the Member for Bury North took us for a canter through many different types of tax. He cited Twain, mention of whom, as a lover of literature myself, I always welcome in any debate. He also succeeded in teaching me about the crystal and glass industry—and perhaps you as well, Mr Deputy Speaker. I do not know whether you knew that the stems of some glasses are hollow, but I had no idea that that was the case. In the words of Abba, if I had a little money in a rich man’s world, I might know more about expensive glass and crystal.
Miss Smith
Thank you, Mr Deputy Speaker. I had assumed that my hon. Friend the Member for Wellingborough (Mr Bone) would appreciate a Minister’s taking the points made by Back Benchers seriously and dealing with them individually, which is what I am endeavouring to do.
Let me return to the subject of tax freedom day, as it is right for me to do in the remaining minutes that are available. My hon. Friend the Member for Kettering invited me specifically to rebut four points. He felt that an aspersion had been cast on the methodology proposed in the Bill. The aspersion that I would cast is that there is no such thing as the average person. That is what chiefly concerns me about the calculation establishing when tax freedom day should fall: I do not believe that it would represent the average citizen in a meaningful way.
My hon. Friend asked me to deal with the way in which the proposed methodology does or does not regard or disregard public benefits. I am glad that he welcomes the fact that taxation has another side, namely what can be done with the money once it has been collected. I shall say more about that in a moment.
My hon. Friend also asked me to discuss whether tax freedom day had or had not varied very little in the last decade. I think that that has been covered by earlier remarks, and by the clarification offered by my hon. Friend the Member for Bury North. The numbers do go up and down by small amounts. Like other Members, I have reservations about whether we should burden the Office for National Statistics with this further task—and, indeed, whether we should burden the Treasury, which, as Members will know, is one of the smaller Departments in terms of the number of people who work there. No doubt Members welcome that, and do not wish it to become any larger.
Philip Davies
Given that the Economic Secretary has made such great play of the burden this would impose on Government, will she tell us what estimate the Treasury has made of the increased costs the Government would incur by introducing this measure?
Miss Smith
Unfortunately, I do not have that figure to hand, but I will be happy to look into the matter.
As I suspect my hon. Friend has often argued, both small and large businesses find regulation burdensome, as do citizens. The Government have therefore endeavoured to reduce the amount of regulation, and I question the need for this measure as it is an extra piece of regulation. My hon. Friend also noted that as we can spend on Europe, we should be able to spend on this measure. I agree with his point: we all wish to keep firm control on what we spend in respect of the European Union.
In the March Budget, the Chancellor set out the Government’s principles of good taxation. Our taxes should be efficient and support growth. They should also be certain and predictable: they should be simple to understand and easy to comply with. The tax system should be fair, and should reward work, support aspiration and ask for the most from those who can afford it most. Those are the principles to which we are committed, and against which our tax system should be judged.
In trying to meet those principles, our taxes will necessarily become clearer, a goal to which we all aspire. In debating tax in general, its role in our economy and why the burden of taxation may be felt more keenly at certain times, we must bear in mind our current economic situation. Britain had endured the longest and deepest recession in living memory, we were borrowing £1 for every £4 we were spending, and we had the largest budget deficit in our peacetime history—one of the largest in Europe, and the largest in the G20—yet following the 2010 general election no detailed plan to deal with all that had been left in place by the previous Government.
That was not the end of the story. In the preceding decade Britain had slipped down the international league of competitiveness, falling from fourth to 12th. We had seen our share of world exports decline. We were considered to be a worse country in which to start a business than many of our European neighbours. That was this coalition Government’s inheritance.
We have therefore set about restoring confidence and stability to our economy, with a clear strategy for growth. At the heart of that strategy is a credible plan to tackle the enormous budget deficit, which we are already implementing.
One part of that plan is making changes to taxation. We must understand the changes this Government have made in order to see that a tax freedom day does not fully accord with what we want to achieve. For any taxation, we must, of course, make it clear why we are asking for a contribution, what we are doing in terms of public spending to balance changes in taxation, and why it is important to strengthen the public finances.
Growth is a key component of a strong economy; all parties agree on that. In the Budget we set out four economic ambitions: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe in which to start, finance and grow a business; that we should seek to be a more balanced economy by encouraging exports and investment; and that we should have a more educated work force, who should be the most flexible work force in Europe.
For the past decade Britain has been losing ground in the world economy. Other nations have reduced their business taxes further and faster, and some have removed barriers to enterprise, while ours have grown higher still. We cannot afford for that to continue.
Our plan for growth is based on private sector enterprise, not public sector borrowing. It is based on growing businesses, not growing debts, and on securing sustainable long-term investment. An essential aspect of that is creating a competitive tax system that enables our businesses to compete on the global stage and that gives value to businesses in ways that this Bill would struggle to measure.