Finance (No. 2) Bill

Rachel Maclean Excerpts

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

[Mel Stride]

When we consider who benefits and who does not, we must assume that overall, given that more tax is being raised than hitherto, the banks are probably paying more tax on average as a consequence of these measures. However, the measures will obviously have different impacts on different banks, depending on their profitability and on whether they are at or above the capital threshold of £20 billion at which the levy itself begins to kick in.

In 2015 and 2016, the Government announced a set of changes in the way in which banks were taxed. We set out a phased reduction in the rate of the bank levy to 0.1% by 2021. We announced the changes that the Bill makes in the levy, reducing its scope so that it applies to banks’ UK rather than global balance-sheet liabilities. However, we also introduced an extra 8% tax on banks’ profits over £25 million, on top of general corporation tax. I hope that when the Opposition spokesmen respond to my comments and to the amendments and new clauses, they will at least recognise the important increase in taxation that has been applied to the banks since 2016.

[Rachel Maclean (Redditch) (Con)]

I, too, look forward with great interest to hearing from Opposition Front Benchers. Has not part of the Government’s overall approach been to back the independence of the Bank of England? Has that not also helped the overall regulation of banks, and ended the situation which, under Labour, led to some of the problems in the banking sector?

[Mel Stride]

My hon. Friend is absolutely right. I think it would pay all Members dividends to consider the comments made by Mervyn King at the time of the last crisis, when he said that the Bank of England had very limited scope to deal with the issues that were faced at the time. Since then, of course, we have fundamentally changed the structure of the oversight of banks. We have ensured that the Bank of England is at the heart of it, and that the independence of the Bank and the other institutions that we have set up is paramount. That is partly why the position of the banks is so much stronger than it has been hitherto.

We prevented the banks from reducing their corporation tax liabilities when they were required to pay compensation for misconduct, effectively applying additional taxes. The shift towards taxing profits means that the recovery in banks’ profitability will translate into higher tax receipts for the Exchequer, while also ensuring a sustainable long-term basis for the taxation of banks.

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[Peter Dowd]

Of course I am more than happy to support the shadow Chancellor, because that is the very point that we are trying to make—[Interruption.] I referred to red herrings a moment ago, and I hear Conservative Members mentioning Marxist herrings. That is very witty; it is nice to hear a witty comment from the Conservative side on occasions.

[Rachel Maclean]

The hon. Gentleman refers to red herrings, but surely the views and political ideology of his shadow Chancellor are relevant. I will therefore give him another opportunity to answer the question: is he a Marxist, like his fellow shadow Treasury spokesman? Does he agree with that ideology, or is there civil war in the Labour party as well?

[Peter Dowd]

I think that the shadow Chancellor is more interested in Groucho Marx than Karl Marx, quite frankly.

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[Peter Dowd]

“They were not the Government” is shouted across the Dispatch Box, but that brings me to the point I am making. The bottom line is that chapter 6 of “Freeing Britain to Compete” called for significantly less regulation of the banks. As I have said before, the right hon. Member for Wokingham effectively said in that document that the Labour Government at the time believed that, if we did not regulate the banks, they would steal all our money. Many people out there believe that that is, in effect, what happened. The taxpayer had to bail out the banks. Why did the taxpayer have to bail them out? Because of the lack of regulation. The shadow Cabinet at the time ratified a policy of less regulation. If we had followed the right hon. Gentleman’s exhortations, as ratified by the shadow Cabinet, we would be in an even worse state. I ask the hon. Member for Brentwood and Ongar (Alex Burghart) to go and have a look at that one.

[Rachel Maclean]

The hon. Gentleman is discussing the strictures and exhortations of my right hon. Friend the Member for Wokingham (John Redwood), who was then an Opposition Back Bencher. Surely the hon. Gentleman must recognise that it was the Labour party, in government, that deregulated the banks and took power away from the Bank of England. Whatever my right hon. Friend may or may not have said—he is an incredibly intelligent and learned person—he was not in government and was not making policy. It was the Labour Government who made the policy to deregulate and allow the financial crisis by taking away strength from the Bank of England at a time when it should have been strengthened.

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I read in the Scottish edition of The Sunday Times yesterday that Arthur Laffer has analysed the tax changes that the Scottish Government announced last Thursday in their annual Budget statement and found them wanting. He warns us that Scotland—[Interruption.] I am talking about this in the context of the bank levy, because bankers’ bonuses were mentioned. We are talking about the effect of taxation on incentive. Arthur Laffer warns us that Scotland is likely to be on a par with Greece—a place where enterprise and hard work are discouraged.

[Rachel Maclean]

My hon. Friend is talking about Scotland, but is he aware that, in the whole UK, while we reduced corporation tax from 28% to 19%, the amount collected has increased from £37 billion to £50 billion during the period 2010 to 2017. Will he comment on that as well?

[Stephen Kerr]

I am delighted to offer a comment on that, because that is exactly in line with the point that I am trying to make, which is that the Laffer curve is exactly that—we increase revenue as we reduce taxation rates. It is very much at the core of what we believe on the Government Benches. At one time, it was what the SNP also stood by, but now the Financial Secretary in the Scottish Government has not even heard of Laffer. He told a Select Committee in Holyrood that he had never heard of the Laffer curve. That is where we are at in Scotland. When it comes to incentive, hard work and industry—I am referring this to the bank levy and the bankers’ bonuses that were mentioned by Opposition Front Benchers—we are now at a point where £33,000 a year is classified in Scotland as “rich”. I think that that is dismal. We are talking not about people with yachts in the marina bays of the west of Scotland, but doctors, teachers and middle managers—the working men and women of Scotland. Therefore, when it comes to the bank levy and to bankers’ bonuses, and we talk about incentives to work hard, to exercise initiative and to take a few risks, it is just not on in Scotland now. The Scottish Government are sending out a clear message, which I find dismal and dismaying, that that is not the kind of Scotland that they want. It is the kind of Scotland that I want. It is the kind of United Kingdom that I want, which is why I unreservedly stand to support the Bill.

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[Jonathan Reynolds]

I have just explained that the policy was our idea to begin with, but it is effective only if it is accompanied by measures to increase supply.

[Rachel Maclean]

The hon. Gentleman says that he will support the policy if it is accompanied by measures to increase supply. That is exactly what the Chancellor has introduced in the Budget, so will the hon. Gentleman support the measure, or is he against cutting stamp duty for first-time buyers?

[Jonathan Reynolds]

No, we are not, as I have just explained, but there have to be measures that genuinely increase supply. I will explain to the hon. Lady that the measures in this Budget do not in any way contribute to that, and we will get on to the Office for Budget Responsibility’s definition.