Finance Bill

Roger Mullin Excerpts

Tuesday 28th June 2016 Commons Chamber

That brings me on to new clause 9, tabled by my right hon. Friend the Member for Barking (Dame Margaret Hodge), which is supported by those on the Labour Front Bench. I will let my right hon. Friend explain its necessity and desirability to the House if she catches the eye of the Chair.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

In the light of our debate this morning, an appropriate opening remark would be to point out that I believe that in the next hour we are debating the most important part of this year’s Finance Bill. Many amendments have been spoken about already this morning, and I am sure that Members will forgive me if I try to make my remarks brief and to focus only on three matters: the appropriate changes discussed in amendment 1, tabled by the right hon. Member for Don Valley (Caroline Flint) and others; new clause 8, tabled by me; and new clause 9, tabled by the right hon. Member for Barking (Dame Margaret Hodge). Let me say at the outset that the Scottish National party supports both that amendment and that new clause.

I will be brief, because I want to allow more time for the right hon. Ladies to present their case as fully as they can. Let me say something in general about why we are concerned. We all know that there is huge concern among the public about the extent of tax evasion and hidden wealth. It was a growing concern before the release of the Panama papers, and I remember discussing it in this House in the first week in February. It has been fuelled by concerns as people become more aware of the hiding of money in tax havens by individuals, corporations and trusts.

Let us put this debate into a broader context. According to Jason Hickel of the London School of Economics, tax havens hide one sixth of the world’s total private wealth. He has estimated that at about $20 trillion. Whether that is very accurate or not, all observers would agree that the total amount of money involved is absolutely staggering in scale. Indeed, the Panama papers from Mossack Fonseca are just the tip of the iceberg as regards what we face in the world today.

Many issues need addressing. Neither this debate nor the proposed amendment and new clauses address them all, but they are a start. I have been very disappointed by some of the Minister’s reasoning, particularly that on amendment 1. It struck me that he started to redefine on at least three occasions what he meant by multinational. First, he seemed, in my view, to be speaking as though it was almost global in nature, then it became EU-specific, then it became about just a few countries. It struck me that it is not amendment 1 that has not been thought through thoroughly, but the Government’s response to it. If the right hon. Member for Don Valley proposes to press it to a vote, the SNP will certainly follow her into the Lobby.

We know that many different groups are involved. The amendments specifically refer to corporations, but more than corporations are involved. If we had tabled our own amendment, we might have chosen slightly broader amendments to encompass trusts, for example. Being reasonable, we must put ourselves in a position where we make the first step. Sometimes somebody needs to make the first step.

When the Minister was talking, he reminded me of the days when I used to trod through the library at Stirling University, taking students and showing them back copies of Hansard. We could look at back copies of Hansard from the 18th and 19th centuries, and the subject that arose more than any other in debates in the House was slavery. One of the arguments continually used against doing something to make slavery illegal was that it would not create a level playing field.

Somebody has to be first. This is not just about finance and technical considerations, but about fundamental ethical considerations. Those ethical considerations are why we hope that these matters will be pressed to a vote and we will support the right hon. Ladies in that.

[David Mowat]

The hon. Gentleman is right that somebody has to go first. I have one thought for him, and I would be interested in his view. His country relies quite heavily on the oil industry. Is he absolutely certain that it is right to impose something on Shell or BP that the Italian Government will not impose on Eni and the French Government will not impose on Total?

[Roger Mullin]

I thank the hon. Gentleman for being interested in my view. Although I understand the point that is being made as well as that being made by the Minister, I think that in these matters, for all large corporations that operate nationally, taking the first step puts them at a reputational advantage because they are seen to lead the way even though there might be occasions on which doing that appears to put them at some short-term commercial disadvantage. So this is not as simple as saying that anyone is necessarily incurring a commercial disadvantage. For those reasons, we would welcome these new clauses, and we are aware that they would also apply to important sectors of the Scottish economy.

I shall briefly say something about the Scottish National party’s new clause on whistleblowing. I am particularly grateful to the right hon. Member for Barking for asking the Minister why he would not support that new clause. Indeed, as she spoke, I thought that, rather than our pressing the new clause to a vote here, it might be best to engage in cross-party discussions on how best to construct a thorough way forward. I agree wholeheartedly with the right hon. Lady, because when we look at the number of cases that have involved taking whistleblowers to court, one wonders where the balance of the scales of justice lie.

I recognise that changes have been made to the requirements on whistleblowing, some of which come into effect this September in the banking sector, but the requirements oblige companies to do things such as appoint their own whistleblowers champions and report the amount of whistleblowing to their boards. Those things require a culture of willingness in companies. If the will is not there, the current processes will have next to no effect. We are not saying that we know precisely how to secure effective whistleblowing. That is why it would be useful to have some cross-party discussions, in which I am sure the right hon. Lady would be happy to engage. In that spirit, although we believe in the new clause, we will not press it to a vote and look forward to supporting the votes led by the right hon. Ladies.

[Caroline Flint]

I rise to support amendment 1, in my name and those of my hon. Friends the Members for Hackney South and Shoreditch (Meg Hillier) and for Houghton and Sunderland South (Bridget Phillipson) and the hon. Members for Amber Valley (Nigel Mills), for Southport (John Pugh) and for Edinburgh North and Leith (Deidre Brock). I am grateful for the support of six other members of the Public Accounts Committee who signed this amendment: my hon. Friends the Members for Islwyn (Chris Evans) and for Bristol South (Karin Smyth) and the hon. Members for Berwick-upon-Tweed (Mrs Trevelyan), for South Norfolk (Mr Bacon), for Peterborough (Mr Jackson) and for Warrington South (David Mowat). In total, 77 right hon. and hon. Members have signed the amendment, and it is a pleasure to follow the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin).

Apart from the Labour party’s support, for which I am extremely grateful—particularly that of my hon. Friend the Member for Wolverhampton South West (Rob Marris), who has been fantastic in his liaison and advice—Scottish National party, Liberal Democrat, Ulster Unionist party, Social Democratic and Labour party, Plaid Cymru, Green party and UK Independence party Members, alongside a number of Conservative Members, and the independent hon. Member for North Down (Lady Hermon) support amendment 1. There is truly cross-party support, and I am therefore grateful to all those right hon. and hon. Members.

Amendment 1 also has the welcome support of the business-led Fair Tax Mark and the Tax Justice Network and that of development charities such as Christian Aid, the Catholic Agency for Overseas Development, Oxfam, Action Aid, the One Campaign and Save the Children.

It is understandable, given the momentous events of recent days that are creating ripples that reach all corners of our nations and across parties, if Members are a little distracted from the business that we are debating today, so let me be clear about what is at stake. If amendment 1 is agreed to, the Government’s requirement that companies publish their group tax strategy on their websites will include, for large multinational enterprises with bases in the UK, the headline details required on their revenues and taxes paid, in accordance with the OECD requirements for country-by-country reporting. In lay terms, this is Parliament’s Google moment.

I should like to clarify something: the amendment would require companies to publish everything that the Government already require them to report to HMRC. Yes, I agree with the Minister that it would not achieve worldwide reporting for any multinational enterprise, but it would catch not only those parts of a multinational enterprise that are in the UK but those that are over a certain size and have a turnover of more than £600 million.

--- Later in debate ---

[Sammy Wilson]

Of course, all businesses will seek to emphasise the additional costs that the levy imposes on them. However, many businesses that face a shortage skills in Northern Ireland now recognise that there must be a means to ensure that we have a supply of skilled labour. Opinions differ on how to provide that supply of skilled labour and how the apprenticeship levy should be applied and used, but people now accept, given the importance of skilled labour to firms, that they have to pay for it.

[Roger Mullin]

I return to the earlier point that the hon. Gentleman was making about inward investment. Does he agree that, compared to Brexit, this measure is pretty marginal in its likely impact in encouraging inward investment? As I am sure we are both very concerned about inward investment, does he agree that we should have an urgent debate to consider the implications of the Brexit vote?

--- Later in debate ---

We are supportive of most of the measures up for discussion in this group of clauses, but I hope that the Minister will take account of the Opposition’s concerns that I have outlined about the entrepreneurs relief, investors relief and employee shareholder schemes. However, what we cannot support is such a huge, huge tax giveaway for the wealthiest in society with this cut to capital gains tax while our communities are completely starved of investment. We will therefore oppose clause 72.

[Roger Mullin]

I welcome the hon. Member for Salford and Eccles (Rebecca Long Bailey) to her new post. If I recall correctly, one of the first debates that we took part in together was about that very important topic of whisky. It is appropriate that I mention that given the Minister’s condition.

[Rob Marris]

It was not from drinking whisky.

[Roger Mullin]

No, I know, but perhaps the Minister could take a few drams to relieve the pain. I certainly think that he deserves it given what he has put himself through over the past couple of days.

May I also say to the hon. Lady that we on the SNP Benches agree with everything that she has argued? I am delighted to say that we will be supporting her opposition to clause 72.

[Rob Marris]

That was a short speech.

[Roger Mullin]

It is not quite as short as that.

I want to speak to new clause 2, which is in my name, and I will begin with a quote that I have used before in this House:

“I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right.”

I entirely agreed with the Chancellor of the Exchequer when he said that in April 2012. That is precisely why we are bringing this new clause to the Floor of the House today. Many people in remunerated employment, working hard every day of the week, will be surprised to learn that the managing director of an average European firm can expect to receive around £8 million in remuneration. Private equity fund managers are able to shrink their bills by paying, as we have heard, only 28% in capital gains, rather than 45% in income tax simply because it is classified as carried interest. In effect, they are getting a remuneration for managing other people’s money, and therefore they should be taxed in the same way that other people are taxed—through income tax.

A fund manager’s ability to pay capital gains instead of income tax allows them to avoid paying national insurance on part of their income. I am well aware of the Minister’s technical explanations about why we are dealing with a different form of gain. However, that does not wash with people in society who are undertaking their work in most other occupations in life. The Government yesterday indicated that they were content to squeeze yet more money out of the contractor sector, affecting teachers, nurses, people in rural communities and the like. These are not the people who are aggressively avoiding tax. The people who are aggressively avoiding tax are people working in the City of London. They are avoiding paying the income tax that the rest of the people in society are quite happy to comply with.

The loopholes that continue are simply an example of the over-complication of our tax system, a matter that has been referred to by hon. Members on both sides of the House. As we look at the thousands upon thousands of pieces of paper in the tax code, it is clear that the bigger we make it the more we create the possibility of loopholes. Surely the time has come for a more fundamental review of all forms of business taxation, a matter that I know the hon. Member for East Antrim (Sammy Wilson) has raised in the past.

Indeed, some of the people gaining considerable sums of money have great sympathy with this. I would like to quote not some of the campaigners but one of the highest-paid people in the country, the head of the private equity firm Cerberus, Stephen Feinberg. He said in 2011, tellingly:

“In general, I think that all of us are way overpaid in this business. It is almost embarrassing.”

I do not think that we should allow this gentleman, the head of an investment fund, and others to be embarrassed any more. I think we should end their embarrassment by making sure that in the future they pay appropriate levels of income tax.

We also find ourselves in agreement with the OECD, which in May 2014 recommended in its position on tax

“taxing as ordinary income all remuneration, including fringe benefits, carried interest arrangements, and stock options”,

and that this should be paid as income tax.

We have evidence not just from campaigners but from people in the City who admit that this is an anomaly that needs closing, so I ask the Minister to give further consideration to this important move. I would also say in general that we welcome quite a lot of the technical changes that have been made on investment, entrepreneurs relief and the like. We want to encourage an entrepreneurial economy, but not at the cost of heightening income inequality and of further division in society.

[Mr Gauke]

I shall be relatively brief in responding to the debate. I addressed one of the issues that we have debated in my fairly lengthy remarks earlier and there is also a certain sense that these are issues we have debated in the past. I certainly remember debating the issue of carried interest with the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) in last year’s Finance Bill. He made very similar points and I am inclined to make very similar points in response, so I will not necessarily run through all that once again. I remind the hon. Gentleman that where we are talking about remuneration that is income, we are determined to ensure that it is taxed as income. As a Government we have shown a willingness to make changes in this area.

Let me turn to the wider issues of capital gains tax and yet again welcome the hon. Member for Salford and Eccles (Rebecca Long Bailey) to her position. I wish her a long and distinguished period as shadow Chief Secretary, given that I understand that there might be uncertainty more generally on the Labour Front Bench. It is extremely important that our tax system is competitive and encourages investment, which will drive our economy forward in the future. A number of external bodies have welcomed the steps that we have taken in reducing CGT rates. The CBI and the Institute of Economic Affairs have welcomed these cuts as means to encouraging entrepreneurship and growth. A number of internal studies indicate that lower rates of CGT support equity investment in firms and promote higher-quality investment in start-ups. That is an important source of innovation and growth.