Finance (No. 3) Bill

Rachel Maclean Excerpts

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Peter Dowd]

Dear, dear—none. The hon. Gentleman really has to take his nose out of the Tory voodoo economics book, widen his horizons and look at Labour’s “Funding Britain’s Future”.

One only needs to look at our European neighbours to see that the rate of tax on higher earners in this country is relatively low compared with Germany, France, Sweden and even Ireland. To set the ball rolling, Labour’s new clause 1 would require the Chancellor to lay before the House a distributional analysis of the effect of reducing the tax threshold for the additional rate to £80,000 and introducing a 50% supplementary rate for those earning more than £125,000 a year.

These are Labour’s policies, committed to in Labour’s very, very popular manifesto of 2017. They will put—[Interruption.] I know that Government Members do not like to hear this, but these policies will put the country on a much fairer fiscal footing, ensuring that the wealthy pay their fair share for the restoration of our social fabric, which is crumbling after eight years of gruelling Tory austerity.

The fact is that since the financial crash a decade ago, the very rich have only become richer. The Institute for Fiscal Studies identified that the top 1% have received an increase in share of total income from 5.7% in 1990 to 7.8% in 2016. In response to the hon. Member for Aldershot, it is no wonder they are paying more taxes—they have had the biggest share of total income.

[Rachel Maclean (Redditch) (Con)]

Does the hon. Gentleman not accept that this Government are determined to tackle these important issues of income inequality, to the point where income inequality and inequality of disposable income are now at their lowest level since before the financial crisis, when his party were managing the economy?

[Peter Dowd]

Well, they are not making a very good job of it—there are 4 million people in poverty. That is the fact. Conservative Members can deny that until they are blue in the face, but that is the reality.

Let us move on to the issue of infant mortality. Infant mortality has risen for the first time since the 1990s, when the Tories were last in government, and, as I indicated, there are 4.5 million people living in poverty. That is a fact, and they should not pretend otherwise. They should at least have the guts to admit that their policies have got us into this situation.

This stark contrast in living standards has been driven by the Government’s remorseless austerity agenda, which has chopped away at our fiscal checks and balances. By narrowing the tax base while continuing austerity, they have entrenched poverty and inequality across the nations and regions, leaving vulnerable groups—particularly women—worse off.

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[Peter Dowd]

My hon. Friend will send the hon. Gentleman a copy and he will sign it—and Conservative Members might actually learn something. I know it is difficult for my hon. Friends to grasp the concept that Conservative Members might learn something, but they actually might.

Entrepreneurs’ relief costs £2.7 billion a year alone, and benefits only 52,000 people. This bloated relief—and it is bloated—is overwhelmingly spent on a small number of wealthy individuals, with 6,000 claimants receiving relief on gains of over £1 million. I will repeat that: 6,000 claimants receive relief on gains of £1 million. It is no wonder then that the IFS and the Resolution Foundation have called for it to be scrapped. Clause 38 and schedule 15 represent yet another Conservative half-measure.

[Rachel Maclean]

As a former entrepreneur, as in my entry in the Register of Members’ Financial Interests, I did not benefit from this particular relief, but many in that community do benefit from it. Does the hon. Gentleman believe that this should be scrapped, which would penalise people who start businesses in this country and go on to employ people who then pay taxes and put food on the table for their families? Is the position of the Labour party to be completely anti-entrepreneurs?

[Peter Dowd]

The Treasury has not reviewed the relief and does not know whether it is working, but it has chucked £2.7 billion—I repeat, £2.7 billion—at a relief that affects only 52,000 people. There is something not quite right with that. I get that and my hon. Friends get that, but Conservative Members are in denial about it, as they are about child poverty.

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[Richard Graham]

My hon. Friend is absolutely right. The remark made by the shadow Chancellor earlier that the public—all our constituents—would have to pay zero extra to fund the widespread nationalisation of all the utility companies, the train companies and anything else was really quite extraordinary. To be honest, I would be surprised if somebody did not raise that on a point of order in terms of misleading the House and the nation, because clearly those figures are a mile away from what independent analysts have calculated.

[Rachel Maclean]

Has the shadow Chancellor not been on record stating that it does not matter if his sums do not add up, and that it is largely irrelevant, which demonstrates my hon. Friend’s point?

[Richard Graham]

My hon. Friend is absolutely right. As she knows well, the truth of the last Labour Government—during their 13 years—was that although they promised no more boom and bust, they gave us the biggest bust in peacetime history as a result of wildly overspending. I am afraid the net result of that is, as always, that the poorest feel the effects worst. In my constituency of Gloucester, 6,000 people lost their jobs during the great recession under Labour. Only since the Conservative Government came back have we seen employment rise sharply and youth unemployment and unemployment fall sharply.

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[Leo Docherty]

My right hon. Friend has made a very good point. The rise is not just good for the taxpayer, but good for the Government.

This balanced, responsible approach is in stark contrast to the reckless and ideologically driven approach of the Opposition. Members will probably need no reminding that in 2016 the shadow Chancellor declared, “I am a Marxist”. He pursues—well, let us call it a policy of half-based Marxism mixed with 1970s-style union militancy.

[Rachel Maclean]

Does my hon. Friend recall that, along the same lines, the Labour Opposition were preparing for capital flight and a run on the pound, and does he share my alarm at that prospect?

[The Chairman of Ways and Means (Sir Lindsay Hoyle)]

Order. May I share my wisdom with you both? The debate is about the clauses and new clauses before us. Members tried to go down this route once before. The new clauses are quite clear, and the clauses are quite clear. I am sure Mr Docherty wishes to stick to that, and I am sure Members will not tempt him again.

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[Rachel Maclean]

Does my hon. Friend agree that when we are talking about support for businesses, through entrepreneurs’ relief and all these other measures, we are talking not just about the people who own those businesses, but about the people working in them who have a job because of these measures?

[Jack Brereton]

Absolutely, and we want to see the number of those workers and the opportunities and jobs in those industries continue to grow. That is why it is so shocking to hear views from the Opposition that would damage the jobs miracle that we have seen over the last few years in this country.

Wages are rising, inflation is stable, unemployment has been so low for so long that the Office for Budget Responsibility believes that the equilibrium rate has fallen, income inequality is down and disposable income is up. This is the extraordinary record of making work pay. It is a huge economic success story, after the financial meltdown that the Labour party presided over. I want to see the success continue, and I know that to do so this House must support the Bill. I shall continue to do so, not least because of the concrete measures it contains for putting money in the pockets of Stoke-on-Trent’s very many hard-working people.

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[Alex Burghart]

As ever, my hon. Friend puts it extremely well. “Wise after the event” might be one of the Labour party’s mottos.

I am pleased to welcome, in clauses 41 and 42, further improvements to stamp duty to help more people to get on the housing ladder and buy the homes that they so richly deserve. Those measures will put more money into the system and encourage the building of more homes, to allow us to progress down the route of building what must be built for the home owning democracy.

Alongside that, I was pleased to see an additional £1.7 billion being put into universal credit, to give the poorest people in society more money in their pockets—money that benefits them and flows straight into the economy. I take this opportunity to thank my right hon. Friend the Member for Tatton (Ms McVey), who is not in her place, for her service as Secretary of State for Work and Pensions. She did her job extremely well. It was under her leadership that a number of improvements were made to universal credit and this decision to put an additional £1.7 billion into the service was concluded. That Secretary of State bore her unfair share of personal criticism while she was in that job; the person rather than the issue was often played. Although I fully take on board the remarks made by the hon. Member for Colne Valley (Thelma Walker) about the desire of that great Labour Prime Minister Clement Attlee for a caring society, when I have seen and heard some of the slander thrown at my right hon. Friend the Member for Tatton, I have had to wonder whether all parts of the left are really as caring as Clement Attlee would have had them.

[Rachel Maclean]

Does my hon. Friend agree with Cicero on this point: when you have no basis for argument, you should abuse the plaintiff?

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[Ruth George]

My hon. Friend the Member for West Ham (Lyn Brown) has just said from a sedentary position that the Government have set the parameters for the scope of amendments in this Bill. The same happened with the previous two Finance Bills that they brought to the House. They have not allowed any substantive amendments to the Bill. They will not allow their policies to be tested on the Floor of the House, because those policies have been found wanting in terms of redistribution of wealth from the best off in our society to the poorest. It is actually the poorest who pay 42% of their income, while the richest pay just 34%. How is that fair?

This Budget has done nothing to support the poorest people. After raising VAT to 20%, the Government have doubled insurance tax and are raising council tax across the country by 5% a year, hitting the poorest in our society and hitting those who can afford it the least. They are also hitting those who are homeowners with universal credit. We have heard that the Government aspire to support homeowners, so why is it that, under universal credit, 74% of people who lose out are actually homeowners? They have seen their clawback of income nearly doubling from 39% under the Labour Government to 63% under this Government, and it is going up to 75% for taxpayers.

If the Government disagree with our analysis that this Budget is not helping people in poverty and that it is actually entrenching the serious divides and the serious destitution and poverty within our society, they should prove their case by supporting our amendment for an equalities impact assessment. But they have form on this. I have been calling for an equalities impact assessment of universal credit changes since 2015 and since I first came to this House, and it has been refused. They are now refusing to hold one in this Budget. Anyone would think that this Government had something to hide. I know from people around my constituency, which is relatively affluent, that it is not just the poorest people who are appalled at the level of food bank use, the level of homelessness and the level of evictions that are being inflicted on the poorest people in our society. People across my constituency are writing to me, imploring me to stand up for the poorest, because otherwise we are poorer as a society.

[Rachel Maclean]

It is a pleasure to follow the hon. Member for High Peak (Ruth George). I rise to speak in favour of the Bill and against the Opposition amendments. I will start by correcting a comment that I made earlier. Just to correct the record, let me say that I incorrectly said—I apologise to the House—that the shadow Chancellor was on record saying that the fact that Labour’s numbers did not add up was largely irrelevant. I offer my apologies as it was not the shadow Chancellor who said that, but a Labour party adviser who wrote it in a book that was endorsed by the shadow Chancellor.

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[Rachel Maclean]

I thank the hon. Gentleman for his intervention, but I fear that we are getting bogged down and dragged into areas that I do not wish to go into, given that I do not have very much time. I merely wish to make the point that Labour’s record demonstrates its disregard for managing public finances responsibly. What it also does, as we have heard from Members, particularly from those on the shadow Front Bench, is help us to see their approach to entrepreneurs—those people who sacrifice and work, sometimes for decades, to start businesses. They seek to attack and punish those people who often put their lives on the line and who often take considerable sacrifices to start businesses. Those entrepreneurs up and down the country may not be paying themselves for many, many years because they have to meet the payroll of their workers. We see the approach from the Opposition to those people. We are talking about entrepreneurs’ relief that will come to fruition only when that entrepreneur wishes to sell or dispose of part of a business that may have lasted over a lifetime during which they have paid tax, contributed to our economy and created jobs.

[Peter Dowd]

rose—

[Rachel Maclean]

I am sorry, but as much as I enjoy debating with the hon. Gentleman, I will not take any more interventions because I do not have much time and I have taken one already.

We have heard a lot of philosophy tonight. I will not quote Cicero again, but I will draw the House’s attention to the Jewish philosopher Maimonides who said more than 2,000 years ago that the greatest form of social justice and charity is to start a business and to create jobs. Therefore, I reject the Opposition’s amendment on the entrepreneurs’ relief. However, we should definitely keep it under review, and I am absolutely sure that the Treasury will do so because we on the Government Benches want to ensure value for taxpayers’ money in all the things that we do. We recognise that we are spending not the Government’s money, but our constituents’ money, and we need to do that carefully.

I now wish to address the movement on the tax thresholds, because this relates to a fundamental Conservative value.

[John Howell]

Will my hon. Friend give way?

[Rachel Maclean]

I am sorry but I will not give way. I only have a couple of minutes left. Please forgive me.

The movement on the tax thresholds is a fundamental point at the heart of our Conservative philosophy, which is freedom of the individual to spend their own hard-earned money how they wish. What this Budget and this Finance Bill are doing is taking people out of tax. A basic rate taxpayer will pay £1,205 a year less than in 2010, when Labour left office, and that is, effectively, a pay rise for those people, leaving them with more money in their pockets.

Let me say this to the Opposition: they often talk about how they want people to pay more tax. Well, people are free to pay more tax voluntarily, but, surprisingly enough, that is not often what people do. What we do see as a result of our tax policy of lowering tax rates is a greater tax take coming into the Exchequer. We see that fundamental principle illustrated time and again because of the policies advocated and enacted by the Government. It is right to lower the tax thresholds for low and middle-income earners. In fact, the shadow Chancellor and the shadow Chief Secretary do not even oppose that; they agree that we should keep those tax thresholds low. We need look no further than corporation tax, as those receipts are up 50% to £53.6 billion because of the lowering of the rate that has happened under this Government. That is £53.6 billion more for this Government to spend on strong public services up and down the country.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Surely, the hon. Lady is aware that just about every analysis that has been done regarding the reason for the increase in corporation tax revenue says that it is due not to the reduction in rates, but to factors such as the banks’ return to profitability after the financial crisis, so it is not right to link the two.

[Rachel Maclean]

I do not accept those comments because we have seen new businesses in my constituency and in the constituencies of many other hon. Members. In Redditch, we have record rates of business start-ups because of measures in this Budget, this Finance Bill and other Budgets. I am a great supporter of the Bill because it will drive more revenue into the Exchequer that I would like to see spent on strong public services in Redditch.

[Mel Stride]

May I say what a pleasure it is to serve under your chairmanship, Dame Eleanor?

Let me first pick up on some of the comments made by the hon. Member for Aberdeen North (Kirsty Blackman), speaking from the Scottish National party Front Bench. She raised the issue of the higher rate threshold in clause 5 and asked whether the Bill might be organised in a slightly different manner. The most important thing is that we have put forward the information in a simple and straightforward way. As I am sure she is aware, the rise to the basic rate limit is dealt with in clause 5(1), with the amendment to £37,500 in the Income Tax Act 2007. That of course gets added to the personal allowance. The higher rate threshold is UK-wide for both dividends and savings income, which is what the amendment to the Income Tax Act deals with and focuses on.

Clause 5(2), Dame Eleanor—as I know you and other Members of the House will be aware, having read this Bill in significant detail—deals with the rise in the personal allowance to £12,500, which once again is a UK-wide scope. Therefore, it is appropriate that it is in a clause that is not subject to the provisions of English votes for English laws.

Clause 5(4)—I notice the hon. Member for Aberdeen North looking at this quite closely—also breaks the link between the personal allowance and the national minimum wage, which is once again a UK-wide measure. On the hon. Lady’s very specific point, it is appropriate that all these measures are contained within one clause.

The hon. Lady also mentioned the national minimum wage and the level at which it is set for those aged 16 to 24. She will know that a review is currently being conducted by the Low Pay Commission, which will report in spring 2019, although the commission has said in the past that increases up towards the level of the national living wage—which is what I think the hon. Lady is seeking—may have a detrimental impact on the level of employment. Of course, this Government have overseen a halving of the level of youth unemployment since 2010, something of which we are justly proud.

The hon. Lady brought up the issue of raising the personal allowance to £12,750, in line with her party’s new clause 19. The important point is that we have been able to raise the personal allowance from around £6,500 in 2010 right the way up to £12,500, taking about 4 million of the lowest paid out of tax altogether. That comes at huge cost, and the estimated cost of going still further, to the level that hon. Lady suggests, would be of the order of £1.5 billion. For that reason, we believe that the very significant rise that we have put in place is proportionate and should be welcomed by many of the lowest income earners, whom the hon. Lady quite rightly seeks to protect.

The hon. Lady raised the issue of poverty, as did a number of other hon. and right hon. Members. I remind the Committee that there are 1 million fewer people living in absolute poverty than in 2010, including 300,000 children. It is also the case that there are two thirds of a million fewer children living in workless households. We have heard a great deal about the importance of employment and our record on employment, with virtually the highest level of employment in our history and the lowest level of unemployment since the mid-1970s. Work is a very important route out of poverty and we have a strong record in that respect.

A number of Members mentioned entrepreneurs’ relief. The hon. Member for Aberdeen North suggested that the shift from the one-year to the two-year qualifying condition might actually impose a hurdle to entrepreneurship—I think that was the expression she used—but we see it as important that we at least have entrepreneurs who are not in and out within a period of 12 months, but who are actually there for the longer term. Of course, the Labour party seems to be entirely hostile to the whole notion of an entrepreneurs’ relief, which is not surprising given the general approach it seems to take towards business.