Tax Credits

Roger Mullin Excerpts

Tuesday 20th October 2015 Commons Chamber

[Ian Blackford]

I find that extraordinary. We fought in the general election on delivering home rule to Scotland, which meant full fiscal autonomy. Given the damage that the hon. Gentleman and the Conservatives are going to do to hundreds of thousands of families in Scotland, they should give us the power over our economy and over welfare so that we can protect people in Scotland from the damage they are going to do.

We hear that individual Tory MPs have been summoned to speak to the Prime Minister and Chancellor to be straightened out. I appeal to them not to be bought off. They should do the right thing and support today’s motion. This is a Government who cut inheritance tax for those wealthy enough to have £1 million-plus properties and punish those on low incomes. “All in this together”?—well, we can reflect on that line.

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

Will my hon. Friend reflect on the fact that the Government have also refused to close what is called “the Mayfair loophole”, allowing more than 8,000 people earning more than £1 million a year to pay only 28% tax, while hammering the poor?

[Ian Blackford]

My hon. Friend is absolutely correct. We have seen growing inequality over the course of the last few years, and the Budget will only increase it.

Finance Bill (Fifth sitting)

Roger Mullin Excerpts

Thursday 15th October 2015 Public Bill Committees

[The Chair]

Before I call Mr Mullin, let me explain for the edification of not only new Members but some who are longer in the tooth that the lead amendment—the one that is first on the selection list—is always called first and moved after its introduction. No other amendment is moved at that time. It is not a question of saying, “I would like to move this.”

New clauses are always taken at the end of a Bill, so while they are debated in the context of the subject matter of the Bill, they are moved—if moved at all—at the end of the Bill. So there will be no occasion yet, as Mr Mullin will wish to know, to move the new clause. However, he is absolutely entitled to speak to it, as I am about to invite him to do.

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

Thank you very much, Sir Roger, for that clarification, which I am sure we all enjoyed. I wish I had fully understood it. [Laughter.]

“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.”

Those were the words of the Chancellor of the Exchequer in April 2012. He was right then, but he needs to do more about it now. We still find such loopholes continuing for the highest remunerated investment fund managers in the country. It may be a mere coincidence that some of them are significant donors to the Conservative party.

I recognise that the Government have moved a little way, but as is attested by page after page of technical explanation notes relating to these matters, we wait to see whether these modest proposals close or create further loopholes. I note the telling sentence in the explanatory notes, which says:

“HMRC will monitor the impact of these provisions”.

That is good. To ensure that we as legislators are fully informed, I am sure that our new clause, which calls for appropriate reporting, will be considered, notwithstanding the Minister’s recent comments.

The few thousand people who work in private equity firms are remarkably well remunerated. In the words of Stephen Feinberg, the head of PE firm Cerberus Capital in 2011:

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

The average European firm’s managing directors can expect to receive about £8 million in total personal compensation and the largest firms pay out even more. Even more junior directors and principals can expect to receive just over £1 million. Those figures will be relatively conservative for London, which has some of the highest paid private equity executives in London.

In some cases, executives have been able to bring tax rates on their carry-down even further by claiming entrepreneurs’ relief. As has been indicated already, private equity fund managers currently shrink their tax bills by arranging to pay 28% capital gains tax, rather than 45% income tax on their carried interest. Carried interest is in effect their remuneration for managing other people’s money and should therefore be taxed as income tax. The fund managers’ ability to pay capital gains tax instead of income tax also allows them to avoid paying national insurance contributions on a major part of their income.

Support for our measure comes from many quarters. Of particular interest to me is the fact that in May 2014 the OECD—not renowned for radical tax positions—released a raft of recommendations to tackle rising income inequality. Those include:

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

The injustice in all this can be seen through a simple comparison. A senior matron in a local hospital or a middle manager in a local further education college on £47,000 a year will have an effective tax rate of about 32.2%, yet a senior private equity executive receiving about £8 million will pay, at most, 29.4%.

[Christian Matheson (City of Chester) (Lab)]

Does the hon. Gentleman agree that this is an excellent early opportunity for the Conservative party to put words into action by showing that it is, as it claims, the party of ordinary working people, as opposed to, for example, the political wing of the City of London?

[Roger Mullin]

I fully agree; indeed, I look forward to the Minister’s response in that regard. This may have been a missed opportunity that the Government now recognise and will want to correct.

Let me make another comparison. In my own constituency, my wonderful constituency manager, Lynda Holton, pays about the same effective tax rate as many fund managers who earn 100 to 200 times more than her. [Hon. Members: “Pay her more!”] When I was on the phone to her this morning, she did want me to say “my underpaid constituency manager”. And she is underpaid, but of course I am a devotee to the rules of the Independent Parliamentary Standards Authority in this regard. Surely it cannot be right that people on much more modest incomes have effective tax rates that are higher than those for some of the highest paid people in our society. I am prejudiced in favour of the simplification of tax as well as justice in tax. For both those reasons, I hope that the Government will respond positively to our new clause.

[Rob Marris]

Sir Roger, I did understand your explanation. As you know, I am new and old—a retread—and I found it very helpful; thank you.

Clauses 40 and 41 are essentially anti-avoidance measures, so hon. Members on the Opposition Benches welcome them. I welcome the fact that there will be no base cost shifting—something that is discussed in the pubs and clubs of Wolverhampton every night of the week; we are very keen on that. However—there is on occasion a “however”—we do not think that clauses 40 and 41 go far enough, because the carried interest is still treated as capital gains. It seems to us that treating carried interest as capital gains is a bad idea and the Government should not permit it. It certainly appears to be a tax loophole—again, not illegal, but immoral—and we think that it should be closed. I have considerable sympathy with the spirit and wording of new clause 2, which was spoken to very eloquently by the hon. Member for Kirkcaldy and Cowdenbeath.

--- Later in debate ---

[Mr Gauke]

Again, I think we can find some consensus. I will not dwell on this, Sir Roger, because we will depart from the business before us if we start to discuss the failures of the regulatory system in the run-up to the financial crash in 2008. However, that is why we have undertaken substantial reform of financial regulation in the UK.

We should want a competitive and thriving financial sector in this country, but we must ensure that it does not pose systemic risks for the UK economy as a whole. That is the challenge that the Chancellor has referred to as the British dilemma in having a major financial centre, with many benefits to us. It is important that the City thrives. Some of my ministerial colleagues and I have visited the City—I do not know whether everyone can say that. However, we must ensure that we have a regulatory system that does not impose greater risks on the overall taxpayer. There is a question of judgment here, and ensuring that we have a thriving private equity industry is something we should welcome.

[Roger Mullin]

To clarify, we do not intend to press the new clause or any of our earlier measures to a vote at this stage, but we will return to them on Report, when we will also take account of the remarks the Minister just made, which I will want to challenge.

Finance Bill (First sitting)

Roger Mullin Excerpts

Thursday 17th September 2015 Public Bill Committees

[Seema Malhotra]

He is certainly a veteran. If there is a record for the Minister who has steered the most Finance Bills through Parliament, if he has not won it already, I am sure he is well on his way.

When I mentioned to a colleague that the Bill has only 50 clauses, they expressed concern that the Government are already running out of business, as they were in the months running up to the election. I recall that when I served on the Finance Bill Committee in 2012, that Bill had three volumes and 227 clauses. Indeed, last year’s Finance Bill had 295 clauses. This year, the Finance Bill has 50 clauses, and we are scheduled to have only eight sittings.

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

This is the third one in a year.

[Seema Malhotra]

I know it is. Perhaps the Financial Secretary does not have the same concerns.

Although some aspects of the Bill are to be welcomed, many others are worrying. The change to the climate change levy, for example, has been almost universally challenged. The increase in insurance premium tax, which will raise substantial amounts for the Government, will cause significant hikes in insurance premiums for millions of people across the UK, with possible adverse consequences for consumer behaviour that must be understood. Those issues were tackled, to some extent, in Committee of the whole House last week.

We need a Finance Bill that supports working people and does not penalise them, as the tax credit statutory instrument, which we discussed two days ago, does. We need a Finance Bill that supports business and provides long-term certainty, and which leads to investment now that will reap dividends in the future. A retrospective change to carbon taxes, for example, will not achieve that aim. That is the approach we will take in Committee.

Obviously it would not be proper to start proceedings without thanking the usual unsung heroes: not only the Treasury officials, whom I thank for their diligence, but the Clerks, Hansard and others who help keep our proceedings going smoothly.

I am sure I speak for all Members when I say that it is an honour and a privilege to serve on the Finance Bill Committee, and I am sure we will approach all the sessions in that spirit. Indeed, I hope we will scrutinise the Bill properly and methodically and do what we are all here to do, which is to serve the people of Britain.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

It is pleasure to serve under your chairmanship, Sir Roger, and that of your co-Chair, Mr Howarth, when he joins us later. I associate myself with the remarks of the shadow Chief Secretary, my hon. Friend the Member for Feltham and Heston, and welcome the Clerks, the Hansard reporters and others who will assist us in the days ahead, although it will just be one day ahead for me.

I welcome the members of the Committee and in particular those who came into the House in May. On the Labour side, that is my hon. Friends the Members for Bradford South, for Halifax, for Dewsbury, for Torfaen and for Cambridge, and we will be joined by my hon. Friend the Member for Erith and Thamesmead. We should also mention the stalwart work of our Whip, my hon. Friend the Member for Scunthorpe.

As has been said, this is the first ever Bill Committee for those new Members, and I remember when I served on my first Finance Bill Committee back in summer 2006. I checked back, and the Financial Secretary was on that same Committee. We know now that he has served on 11 Finance Bill Committees, so he certainly wins the prize. I am afraid I do not. I assure the Committee and him that we will scrutinise the Bill thoroughly, as is our duty. Members should be grateful that the Bill is much shorter than the Finance Bill in 2006, which had 21 sittings.

As an opening comment, the Bill sadly does little to help families and individuals on low and middle incomes, and I think that is a pity. Millions of those families have heard that they will be hit by the tax credit cuts that were voted through by Government Members earlier this week. Those savage cuts will come to be seen as the hallmark of the summer Budget of 2015, which was also a tax-raising Budget, but I will come back to that point.

In Prime Minister’s questions yesterday, we heard about a working family who would be hit badly by the cuts, and there will be so many more, because 3 million families will lose more than £1,000 a year. In my constituency, more than 8,000 families with children receive tax credits, of whom 5,300 are working families. The Bill does not contain that measure on tax credits, but it comes from the same Budget, so I will keep those families in mind as we work through all the issues in the Bill.

[Roger Mullin]

It is a pleasure to serve under your chairmanship, Sir Roger, along with my colleagues. I start by thanking everyone who has already been thanked, thus making sure that I miss no one out. I am slightly surprised that I am making this speech, because I did not know that this was how proceedings would begin, but on behalf of my colleagues, I would like to say that we look forward to scrutinising the Bill in detail. We are particularly unhappy about a number of matters, and we share the views already expressed by the Labour spokespersons.

We also want, through new clauses, to raise some matters that are of particular concern to Scotland and the people of Scotland, who are severely disadvantaged on a number of fronts by measures within the Bill. I hope we will contribute constructively and speedily. I had a wonderful experience when I attended the Sub-Committee of this Bill Committee on Monday; the thing I thought was particularly impressive was that it lasted one minute. I am sure this Committee will take a little longer, but we will do our best to contribute constructively and efficiently.

[The Chair]

Before I put the question, those who are long in the tooth in the House and those who are not have learned a lesson: most of the remarks just made were technically out of order—[Laughter.] However, within the half-hour available for this particular piece of the process, a Chairman is normally reasonably flexible.

I should have mentioned a couple of other things. I was asked by the Opposition Front Bench team what the form of address is. I am Sir Roger—for reasons I do not entirely understand—and George Howarth is Mr Howarth at the moment, although I am sure that will change in due course. In the English Parliament, in Committee as on the Floor of House, we refer to Members by constituency or by “my hon. Friend” or “the hon. Lady” or “the hon. Gentleman”, not by “you” or whatever. “You” is the Chair, and the Chair is non-partisan and does not take part in the proceedings. So if you say, “You have said that,” I shall leap to my feet and say, “No, I haven’t,” even though we all know what was meant. We will try not to be too heavy on that at the start, however.

Question put and agreed to.

Resolved,

That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Mr Gauke.)

Clause 1

Income tax lock

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[The Chair]

I assume that the hon. Member for Kirkcaldy and Cowdenbeath wishes to speak to his new clauses, but I may be incorrect. Before he does so, I ask hon. Members look at the amendment paper. I will reiterate what I said earlier for understanding. At the end of this morning’s amendment paper are new clauses 1, 2, 3 and 4. Only new clauses 1 and 3 have been selected for debate with clause 2, because they relate to VAT. New clause 2 does not relate to VAT, so although it appears on the amendment paper ahead of new clause 3, we are not debating it now. The new clauses will not be moved now. They can be spoken to by any hon. Member who wishes to address the subjects. Clearly, the hon. Gentleman in whose name the new clause was tabled will wish to speak to it. Others may also wish to speak to it; that is entirely in order. The new clauses will not be moved now. They will be moved, as with all other new clauses, right at the end of the Bill, which may be, I suspect, several weeks hence. There is an arcane form of words in which new clauses, as distinct from amendments, are moved. That is a pleasure in store for us, but we will deal with that when we come to it.

[Roger Mullin]

Thank you, Sir Roger. You have no idea how grateful I am to have you in the Chair guiding me through this process. I rise to speak to—not move— new clause 1, and later my colleague, my hon. Friend the Member for Glasgow Central, will speak to new clause 3.

New clause 1 addresses a long-running issue that has affected the provision of police and fire and rescue services in Scotland. The Scottish Police Authority is the only police authority in the United Kingdom that does not have relief from VAT, which costs it about £23 million per year. The Scottish Fire and Rescue Service is similarly disadvantaged and is liable for an annual cost of about £9 million to £10 million. The reason sometimes given is that—hon. Members may not be aware of this—a few years ago the Scottish Government, after taking advice, decided to go down the road of having a single national police force. It was undertaken for a number of reasons, and I would like to point out two that might be relevant and of interest to Government Members in particular.

First, we previously had eight forces. As hon. Members may recall, some years ago there was a terrorist incident at Glasgow airport. We are just as concerned about the impact of terrorism on our society in Scotland as other Members will be, quite rightly, in their constituencies. One thing the new police force has been able to do is join up measures so that we can address the terrorist threat more effectively than before. Similarly, it used to be that when the Scottish forces had issues, say of serious crime and relating to—[Interruption.]

[Simon Hoare]

The hon. Gentleman might wish to have cognisance of the note that his colleague passed to him.

[Roger Mullin]

That is one of the most helpful interventions of my entire parliamentary career. I hope I do not require any similar interventions in the future—[Laughter.] I am so glad that I can bring some levity—it was not deliberate. Where was I?

[Jake Berry (Rossendale and Darwen) (Con)]

Will the hon. Gentleman give way?

[Roger Mullin]

On that point, yes.

[Jake Berry]

Does the hon. Gentleman agree that it often pays to advertise?

[Roger Mullin]

Dare I agree? Back to a slightly less humorous point. When we had eight police forces in Scotland, some of them were very small, and at times that created difficulty in co-ordination on cross-border issues with forces south of the border. One benefit is that we now get much greater co-ordination of police forces across the United Kingdom. Terrorism and cross-border co-ordination are two serious areas where the police service is delivering benefits not for merely the people in Scotland, but for the people of the whole United Kingdom.

It seems strange, therefore, that the Government of the United Kingdom has continued to deny every overture made by the Scottish Government for VAT relief. My colleagues in Edinburgh inform me that no fewer than five letters from Scottish Ministers have been sent to the UK Government: two from the Justice Secretary, two from the Deputy First Minister and one from the Minister for Community Safety. There has also been: a letter from the cross-party Convenor of the Scottish Parliament’s Finance Committee to HM Treasury; eight letters from Scottish Government officials; and six meetings or conference calls in which the Scottish Government have sought to have our police and fire and rescue services treated in the same manner as all other forces in the United Kingdom.

We are not asking for something completely unusual or out of order. Since the amalgamations took place, the new transport agency, Highways England, has been granted VAT exemptions, so there is precedent. It is matter of common justice that this should be looked at. In new clause 1, we ask the Government to produce a report and lay it before the House to examine in greater detail some of the problems that arise because the police and fire and rescue services cannot reclaim VAT.

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Roger. I welcome the support of the hon. Member for Worsley and Eccles South for new clause 3, and I saw the Economic Secretary to the Treasury nodding as well. I therefore hope to get some support on this issue.

My concern with the VAT lock as presented is that it is very restrictive. Our new clause would leave a window open to resolve the injustice of VAT being levied on sanitary products. This injustice has long needed to be corrected and, as a female MP, I feel obligated to use this opportunity to raise the issue. My hon. Friend the Member for Glasgow North East (Anne McLaughlin) informed me that she campaigned on this issue in the 1980s, so it is a long-running one. The fact that it has not yet been resolved is quite disappointing and perhaps reflects a lack of willpower from the men who hold the purse strings in many of these cases. This is perhaps the chance for the Minister to make a difference. In the past, we have seen Jaffa Cakes and Tunnock’s teacakes go to the courts to fight for their zero ratings, and I seek the support of all Committee members to allow leeway for further consideration of this issue.

There seem to be a lot of inconsistencies in the application of the rating. As no one can fully control the manner in which sanitary products are required, it is a bit odd and incongruous that we do not treat them as we do other exempted items, such as medical incontinence pads and babies’ nappies, which I understand are both zero-rated. There is a recognition that those products do not fall under the full rate. Sanitary products are taxed at the 5% rate, but they are not, as the hon. Member for Worsley and Eccles South said, optional or luxury items. I certainly know of no woman who would exclaim, “Wow! I had my period—what a luxury!” We need a recognition that these are essential items that are very much required in households across the country. Indeed, if we were to go without these products, we would see public indignation, as there was when Kiran Gandi ran the London marathon in April without any protection, as a means of protest about the issue.

Another concern for me is that sanitary protection for women who have just given birth is not exempted from VAT. It is charged at 5%, despite being an absolute essential for women who have just had a child and being used for up to six weeks afterwards. These are medical products, in my view, and should also be exempted. We cannot do without them, and it would be both unsanitary and dangerous for our own health and that of our families if we were to go without them. We need a recognition that women across the country use these products. There is no recognition that they are essential items, and a zero rating would go some way to addressing that.

It has been mentioned that this is a European Union issue. My understanding is that Ireland has an exemption for these products, which is something we should look at. It would be useful if the Government were to take a stance on this, push it and send a message out to the rest of the European Union and women right across it, who would see a benefit if this went to the EU for further discussion.

What we are proposing today leaves a window open. I appreciate that we cannot ask for a particular change to be made, but it would leave the window open for negotiation, for further study and for a report, in order, I hope, for the issue to finally be resolved after many decades of campaigning.

Finance Bill (Second sitting)

Roger Mullin Excerpts

Thursday 17th September 2015 Public Bill Committees

[Daniel Zeichner]

rose—

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

rose—

[Mr Gauke]

I was about to conclude, but I will quickly take the two inventions.

[Mr Gauke]

That is our intention, yes; £200,000 will be the level for this Parliament.

[Roger Mullin]

I would be interested to hear the Financial Secretary’s reflections on the Chancellor’s speech, which my hon. Friend the Member for Edinburgh West has cited. Does the Minister accept that there is a fundamental problem of investment in the UK economy and that we need to do more to try to stimulate investment? One way of doing that would have been to retain the investment allowance at a higher level.

--- Later in debate ---

[Barbara Keeley]

We were committed to a better way of funding social care, and in future we will be committed to even better ways.

I want to finish by questioning the Government’s priorities. It is a question not only of priorities, but of the unintended impacts of the policy. We talked about downsizing and the effect on the housing market. The clause may have a significant impact, which is why we tabled amendment 7, which would require a report on the effect of the inheritance tax changes on different UK regions and on housing prices. The Minister seemed to signal that he will not look at or accept our amendment, but it is very reasonable, asking only for a report. If he will not accept our proposal now, we will bring it back on Report.

[Roger Mullin]

I do not think I need to go over the nine pages of the clause in detail, for which the Committee will be grateful. The hon. Member for Worsley and Eccles South did a good job of going through the minutiae and detail, for which she has our thanks. I will not repeat her.

I have one or two simple observations. I have paid particular attention to the Minister’s words in a number of his remarks. It is an extraordinary priority that the Government are putting in place these measures when they are also making some of the most vicious cuts in welfare that people have experienced in our lifetime. It was very telling when the Minister indicated that one criterion for the decision on inheritance tax—I think that I quote him fairly—was that it will give “peace of mind” to those who are no doubt relatively wealthy, with considerable assets. I did not hear the Government say that the peace of mind of the poor was a criterion when they brought in their tax credit cuts and other welfare reforms.

It is also interesting to reflect that the Minister talked earlier about the need to do things because of the trying circumstances that the economy is in. If we have to take account of those circumstances, why is this measure a priority? It contributes nothing. My party is wholly opposed to the Government’s proposal.

Tax Credits

Roger Mullin Excerpts

Tuesday 15th September 2015 Commons Chamber

[Maria Caulfield (Lewes) (Con)]

I am grateful for the opportunity to speak in this debate. I support the proposed changes to tax credits, but I acknowledge that it is a difficult and sensitive issue. I wish to make a few points to explain my reasons for supporting the measure.

While I acknowledge that tax credits were introduced to support low wage workers, it cannot be right in this day and age that people who work long hours, often doing difficult work, are reliant on benefits to supplement their wages because they do not earn enough to live on. The perpetuation of the tax credit system of topping up wages lets employers off the hook when it comes to paying a decent wage. As we have heard, even Alistair Darling, the former Chancellor, has said that tax credits are

“subsidising lower wages in a way that was never intended.”

The proposed changes to tax credits deal not only with the economic issues of reducing public spending, but aim to address the inequalities faced by those who find themselves on welfare despite being in work. Life on benefits can have a huge negative impact on life outcomes, even affecting length of life. Living on welfare can have negative outcomes on physical health, on mental health and on educational attainment, to say nothing of the dignity of living on benefits.

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

Will the hon. Lady give way?

[Maria Caulfield]

I will not, I am afraid.

It is very important that we make work pay. I have met many constituents who are on tax credits because they are paid so poorly. We are subsidising employers unwilling to pay a decent wage, but relying on the taxpayer to subsidise low wages. Currently, taxpayers, many of whom are earning just above the tax credit limit, are subsidising employers to pay low wages. This must end.

Change to the tax credit system is more than an economic argument to reduce public spending, but reduce it we must. I have heard nothing from Opposition Members on how they would do that if there are no changes to the tax credit system. To facilitate the changes to tax credits, the Government have not just introduced the national living wage but are providing free childcare for 30 hours a week, freezing fuel duty, freezing VAT, national insurance and income tax for five years, and increasing the tax threshold to £11,000 as a step towards raising it to £12,500, thereby keeping more money that people earn in their own pockets.

Changes to tax credits are needed to reduce public spending, as we are accountable to the British taxpayer who is currently subsidising low pay. What message is that to low-paid workers? If people get up early, go out to work, work long hours and come home late, they deserve a decent wage, not a life on benefits. We should, in this place, be pushing the agenda for better wages, instead of accepting that a life on benefits is inevitable. I will be going through the Aye Lobby tonight.

National Insurance Contributions (Rate Ceilings) Bill

Roger Mullin Excerpts

Tuesday 15th September 2015 Commons Chamber

[Kit Malthouse (North West Hampshire) (Con)]

It is often forgotten that companies do not actually pay tax. All they do is collect their tax on behalf of the Government from their customers and pass it on. If we go into the Tea Room and buy a Mars bar or whatever, we pay the cost not only of the ingredients, the machines and the capital deployed by the company, but of the corporation tax, the duty, the VAT and indeed national insurance as part of the price. Over the last 30 years that I have been in business, it has certainly been the case that the moving parts in running a business have become ever more complex, and tax in the general sense has occupied ever more time of the business person, particularly those who run small businesses. Anything that injects an element of certainty into the tax horizon for business is therefore extremely welcome, particularly at a time when lots of other things are changing for small businesses. The introduction of reforms in pensions, particularly auto-enrolment, changes to the living wage and other employment regulations create an atmosphere in which running a business feels very much like a game of 3-D chess.

We can look around the world at tax regimes for business where stability and lack of change have been a constant for some time and see success, irrespective of the rates. If we look at the United States, corporation taxes are actually quite high in comparison with this country—pleasingly—but also with the rest of the world. The US economy does extremely well, largely because tax rates have not changed for decades. The US has elected for stability and a lack of change to the relative level of the rate because it knows that one of the things most valued by businesses is certainty. Whenever people are starting or running a business, they spend their entire lives forecasting what the world is going to look like over the next two or three years. When people do that, they know that the day after the forecast, it will be wrong because of the many different moving parts, as I said. One area that business should be able to rely on for some certainty and stability is government. So the introduction of the Bill, which provides a four-and-a-half or five-year time horizon on national insurance, is extremely welcome.

There are people who might say that this is a gimmick, but much of what we do in the House is about signals. Economics is all about psychology and the individual choices that people make.

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

The hon. Gentleman talks about the need for certainty and explains why he believes that the Bill will give certainty to small and medium-sized enterprises. If certainty is so important, why have this Government removed the climate change levy exemption for many SMEs?

[Kit Malthouse]

The hon. Gentleman will have to ask my right hon. Friend the Chancellor of the Exchequer that question next time he appears. I hope that the hon. Gentleman would support me in urging those on the Treasury Bench generally to provide a level of certainty and in many ways to be slower about their decisions.

Finance Bill

Roger Mullin Excerpts

Tuesday 8th September 2015 Commons Chamber

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

There have been several very fine speeches in this debate so far. In particular I pay tribute to the hon. Member for Brighton, Pavilion (Caroline Lucas) who made some very telling arguments, but I also pay tribute to two Conservative Members: the hon. Members for Selby and Ainsty (Nigel Adams) and for Brigg and Goole (Andrew Percy). They made very important contributions which I hope the Government will reflect on, and I hope the Minister will show that in his concluding remarks to this debate. I also, however, hope the hon. Member for Brigg and Goole will forgive me if I do not take up his kind offer to visit his bedroom. [Interruption.] I may say I can quite believe that—this is getting rather off-piste.

I want to take up some of the points made by the Minister and the right hon. Member for Wokingham (John Redwood), in particular about the purpose of taxes in this area and about innovation, a word that the Minister mentioned. The right hon. Gentleman also discussed some of the effects this would have on business and I want to talk about that, too. I will come to those matters a little later, and, if I remember, I will also revisit the classic analysis by the famed Professor Porter of Harvard—the Porter hypothesis on environmental regulation and taxes and their impact on innovation.

In my maiden speech I referenced that great son of Kirkcaldy, Adam Smith. The father of economics said there were four requirements for effective taxation: equity, certainty, convenience and economy. This Government proposal fails to meet at least two of those; it fails on the ground of equity and completely fails on the ground of certainty, particularly certainty for businesses. I grant, however, that it meets one of Adam Smith’s criterion: that of convenience. It is perhaps too easy a convenience for the Government to raise further taxes.

However, perhaps the greatest criticism of the Government proposals is that they are fundamentally changing the nature and purpose of taxation, particularly environmental taxation. Indeed, in many respects this is an abandonment of environmental taxation as a principle.

Environmental taxation is aimed at changing behaviour, but this has, by eliminating the climate change levy for renewable energy, simply become just another tax for raising money. The Chartered Institute of Taxation has stated:

“Put simply, green taxes should ideally be easy to avoid (by a change in behaviour) but hard to evade.”

By removing the exemption for renewable sources of electricity, the incentive for sustainable and environmental choices by business is diminished considerably. Thus the removal of the CCL exemption for renewables serves to tax good behaviour and change what was an environmental tax into just another revenue-raising tax. It confirms, if confirmation was needed, this Government’s attack on the renewables sector.

There is also a Scottish dimension to this, as those speaking from the Front Benches have said. As the Chartered Institute of Taxation says, this measure potentially affects Scotland more than it affects most of the rest of the UK because of the high degree of development of renewable energy in Scotland. Indeed, the UK Government’s own figures show that 11,000 people are currently employed in the renewable energy sector in Scotland, with another 5,000 in the pipeline. Those jobs are put at hazard by these proposals.

The Scottish Government have set some of the most ambitious environmental objectives and targets in the world, unlike the UK Government. Scotland has become a leading figure in research into, and encouragement of, good environmental practice and behaviour. Removing the climate change levy from renewables is not only anti-environmental but anti those areas such as Scotland that want to practise good environmental behaviour.

It is therefore appropriate to ask the Minister some questions, which I hope he will address in his summing up. Given the importance of the renewables sector to Scotland, have the Government undertaken an impact assessment of the proposed changes in relation to the Scottish economy in general and to the renewables sector in particular? Given the Prime Minister’s famed Respect agenda, which he is fond of quoting in Scotland, I assume that the Government have respected the different objectives being pursued in Scotland. Will the Minister tell me whether he has been engaged in—or will engage in—discussions with the Scottish Government on the impact of this change on the Scottish economy and the Scottish environmental strategy?

These Government proposals have given a new meaning to the term “stealth tax”. At a stroke they are changing a green tax into a simple revenue-raising measure. They are not using taxation to encourage good behaviour, despite the wealth of evidence that taxation can have a positive effect in changing behaviour for the better. I mentioned the Porter hypothesis earlier. Professor Porter hypothesised that, in this area of the environment, good regulation and appropriate taxation encouraged innovation by encouraging businesses to invest in new and better ways of delivering energy.

Another aspect deserving of comment is the fact that this change is being introduced with just 28 days’ notice. If ever a measure went completely against the good practice that Adam Smith called for of providing certainty in a marketplace, this one certainly does. It will create uncertainty for every business connected with the renewable energy sector, and it flies in the face of every form of good practice.

[Sammy Wilson]

Much has been made of the sudden nature of the change in taxation, and the impact that that will have on the renewables industry. Would the hon. Gentleman accept, however, that many tax changes are made in a Budget and that they sometimes come into effect within a day or perhaps a month without having a disruptive effect? Is he not over-egging the destructive effect of this sudden change?

[Roger Mullin]

In relation to business investment, it would be normal practice to undertake considerable consultations. If big changes are proposed to the taxation affecting businesses, there would normally be a process of easing those changes in, to allow the businesses time to do the appropriate planning. There is no possibility of businesses in the renewables sector being able suddenly to change their financial plans for the next five or 10 years following the ridiculously fast introduction of this measure by the Government.

[Michelle Thomson]

It is anti-business and anti-innovation.

[Roger Mullin]

It is also anti-consumer and anti-environmental. The Government have managed to accomplish a whole series of negatives in one simple move, and it will give me the greatest of pleasure to vote against this proposal.

[Damian Hinds]

The exemption from the climate change levy has been one part of the support the taxpayer provides to renewable energy; the total package of that support amounts to some £5.1 billon this financial year. The climate change levy exemption was an indirect incentive for renewable energy. There is no denying it has had some success in the past, but by the early 2020s the total amount of renewable energy supplied will be greater than the total demand for electricity from all climate change levy-eligible businesses. The value of the exemption for generators would therefore be negligible by the early 2020s. For that reason, it would not have been a major factor in the long-term decision making of generators.

There were four reasons for removing the exemption.

--- Later in debate ---

I am genuinely happy to support clauses 16 and 17 for all the reasons I have discussed, but I say to the Minister that there may be unintended consequences. While I do not necessarily think we need an immediate review, given that this is going to be coming in over a number of years and changes will take a bit of time, the Treasury should have a look at the effect particularly on mutuals and the smaller challenger banks that possibly have non-banking earnings and are making profits of around the £25 million mark, to see whether this has a negative effect on them.

[Roger Mullin]

I wish to speak to SNP amendments 3 and 4, and let me say three things at the outset. First, I am seeking to curry favour by making my remarks fairly short, as we have had a long two days; I hope that is appreciated. Secondly, our amendment gives the Government the opportunity to change their approach to setting the 8% surcharge by introducing it in a tiered manner. This would have the benefit of removing a cliff-edge and replacing it with a more manageable approach. However, and thirdly, we do recognise that our amendment may not be the only way of achieving a more sensible introduction of the surcharge, and therefore we are keen to hear the Minister’s response.

What is the fundamental issue? A number of fine comments have already been made about building societies, the problems of retained profits and the like, so I shall mention some other matters. Our concern is primarily centred on the impact this Bill will have on challenger banks and the adverse consequences it will have on competition and diversity and in respect of entry barriers for prospective new challengers.

As Carlos Suarez Duarte, vice-president at rating agency Moody’s, said,

“profitable challenger banks will be the most affected by the new charge on profits,”

while changes to the bank levy

“will be positive for UK banks with large overseas operations such as HSBC and Standard Chartered.”

About 30 banks are subject to the current levy, but the new 8% additional tax on profits will affect any challenger bank with profits of more than £25 million, expanding the scope of bank taxes to potentially around 200 institutions, The Daily Telegraph estimates.

I and my colleagues have little issue with the surcharge applying to institutions that have posed a systemic risk to the sector, but the smaller banks have not posed such a danger. Indeed, the coming of the era of the challenger banks is seen by many as part of the solution to the problems posed by having too few, too powerful institutions. Challengers are not part of the problem in this regard; they could be part of the solution.

Indeed, the surcharge as currently proposed will have perverse effects on the Government’s own banking strategy. The Chancellor vowed only a couple of months ago to boost retail banking competition by proposing at least 15 new licences over the next few years, but as Nigel Terrington, chief executive of Paragon Group, which recently launched its own bank, said:

“This surcharge took everyone by surprise and does seem to be contrary to the stated government policy of wanting to increase competition.”

Indeed, as he has also commented:

“It feels like they’ve replaced a punishment tax on the larger banks with a charge on all of us. What did we do wrong—I thought we were part of the solution, not the problem?”

In effect, this surcharge will prove a barrier to encouraging new entrants. Indeed, the tax will hit small profitable domestic banks particularly hard, which completely goes against previous Government efforts to lower the barriers to entry for new lenders, which we welcomed. Anne Boden, the founder of Starling, has previously praised the Government strongly on more than one occasion, but she has recently been quoted as saying in relation to the new surcharge:

“It is not just a constraint on the development of smaller banks, but, more importantly, not in the best interests of consumers.”

Many of the challenger banks’ consumers and customers will be small and medium-sized enterprises. As a former owner and director of a number of SMEs myself, I know from bitter experience how difficult it can be, particularly in the early years of trading, to access banking support. That is why, in my life before entering this place, I was supportive of the move to enable the establishment of more challenger banks willing to deal more effectively with the needs of the SME sector. That is particularly important in the Scottish economy, which is heavily reliant on SMEs.

Analysts, including Gary Greenwood of Shore capital, have been highly critical. He, like others, has argued that the surcharge as currently planned will be counterproductive, and that it will inhibit the ability of smaller banks to grow and compete as effective challengers. He states:

“Banks can lever up their equity by 10 to 20 times, so for every £1 of tax you take off them, you rip £10 to £20 of lending capacity out of the market. It is crazy.”

Crazy indeed. By harming lending and therefore investment, particularly by SMEs, this will also have the effect of creating a further problem for achieving higher levels of productivity in the economy. We need more investment, not less; more lending, not less.

The Government’s explanations of why this burden should be placed so heavily on small profitable domestic banks are unconvincing. It is hard to find any analyst who sees this as helpful for competition, diversity or entry. I hope the Minister will reflect on these arguments, and perhaps address the following questions. Have the Government undertaken a detailed analysis of the likely effect on SME lending in the four countries of the UK, and if so will they publish it? Have the Government changed their policy on the need for effective banking competition? I look forward to hearing their response, and hope that it is strong and purposeful enough to satisfy our concerns.

[Huw Merriman]

I very much support the Government’s proposals, and I particularly welcome the balance that they intend to strike between ensuring that banks make a fair contribution and giving greater recognition to the role that they play in providing jobs and powering growth. I also welcome the fantastic critique given by my hon. Friend the Member for Wyre Forest (Mark Garnier), which has resulted in my putting half my speech into the bin. It would not have been half as eloquent as his.

The hon. Member for Wirral South (Alison McGovern) mentioned the behavioural implications of the proposed change. Scottish National party Members have also touched on that subject and asked whether challenger banks were being punished via their profits. I do not believe that tax itself, either on profits or on the balance sheet, will stop risky transactions. Indeed, the European Union transaction tax would mean that a bank would pay tax at the outset and would then be free to enter into a potentially catastrophic transaction at a flat fee. In comparison, the UK’s approach has been to require banks to set aside capital, with a requirement for more to be set aside against riskier transactions. That is not a tax; it is capital being set aside. By separating the balance sheet of retail banks from the riskier investment banks, the investment bank does not have the capital to enter into that potentially catastrophic transaction in the first place. Measures taken by this Government—and, to be fair, by the prior Government, too—have helped the UK buffer itself well following the crisis of 2008.

Finance Bill

Roger Mullin Excerpts

Tuesday 21st July 2015 Commons Chamber

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

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give a Second Reading to the Finance Bill because it fails to address the real economic needs of the country, continues to deepen the social divide between those who have and those who have not, restricts the financial discretion of the Scottish Government over its resources, fails to tackle the iniquity of the Scottish Police and Fire and Rescue Services being unable to reclaim VAT, creates unintended consequences for small challenger banks and building societies whose capital comes from retained profits, removes the exemption from the climate change levy of renewable energy resources and, in combination with welfare changes announced in the Summer Budget 2015 and inheritance tax changes, takes from people on low and middle incomes and gives to the very richest.”

I am proud to lead for the Opposition. I felt sorry, in many ways, for the hon. Member for Birmingham, Ladywood (Shabana Mahmood), as she sat there amidst the gathered masses of five Labour Members, which have now declined to three. I noticed that the Minister managed to attract 12 interventions, only one of which was from Labour.

[Shabana Mahmood]

You should have paid more attention to what I was saying.

[Roger Mullin]

Paying attention? That would be a good idea for the Labour party. You mentioned quality. If you stopped chuntering and listened, you might get a bit of quality.

We are going to do something that the Labour party has refused to do, which is to test the Finance Bill. The hon. Lady spent the first 12 minutes of her speech talking about other things because she said that there was nothing of any great substance in the Bill. I am going to try something rather unusual and talk about what is in the Bill.

[Shabana Mahmood]

I hesitate to be mean-spirited to the hon. Gentleman, but it is obvious from his remarks that he was not listening to my lengthy remarks in which I set out not that there is nothing of any substance in the Finance Bill, but that there are measures in the Bill that we support and measures that we have further questions about. That is different from the Budget, which contains measures on which we have a very real difference of opinion with the Government. We will test those when they come before the House in delegated legislation Committees.

[Roger Mullin]

So that, no doubt, explains why you could not think up a reasoned amendment.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I let the hon. Gentleman get away with it the first time, but now that he has done it for the second time, I must point out to him that when he says “you” he means me, not the hon. Lady. I am quite sure that he is addressing his remarks not to me, but to the hon. Lady.

[Roger Mullin]

My apologies, Madam Deputy Speaker.

Our amendment starts by stating:

“That this House declines to give a Second Reading to the Finance Bill because it fails to address the real economic needs of the country”.

As I sat through the Budget speech last week—in growing incredulity, it must be said—my greatest concerns were threefold: first, the crude and brutal attacks on protections for the most vulnerable in our society; secondly, the failure to address adequately the challenge of productivity in our economy—despite the remarks of the Minister at the Dispatch Box today, I will try to demonstrate why the Bill fails to address those requirements; and, thirdly, the impact on regional and national economies, not least in Scotland.

On receiving a copy of the Finance Bill and its associated papers, my concerns have not abated. Indeed, through reading the detail in the Bill, further concerns have come to light, and it is therefore my intention—and that of my colleagues—to table a series of detailed amendments in Committee.

Yesterday’s debate on the Welfare Bill exposed many of the negative effects that Government policy will have on the poor, the disabled, the vulnerable, the young, and in-work families. The Finance Bill adds another burden on hard-pressed families who will face a rise in national insurance premiums as a result of the increase in insurance premium tax.

[Michelle Thomson (Edinburgh West) (SNP)]

Does my hon. Friend agree with concerns expressed by the British Insurance Brokers Association, which stated that the rise in IPT is actually a tax on protection and will affect behaviour by limiting people from taking on that protection? It also states that that will affect young people disproportionately, and it is regressive in that it disproportionately affects families in lower socio- economic groups.

[Roger Mullin]

I agree entirely with my hon. Friend, and it must be a concern that the measure will lead many families not to take out necessary insurance, with those that do placing themselves in further hardship.

Those negative effects on the poor are matched by giveaway proposals for the rich. The extent of the commitment given to the rich is perhaps best evidenced by the fact that the Government devote no fewer than 13 pages of the Finance Bill to inheritance tax, ensuring that many loopholes are possible for the benefit of those with high-value homes. There is even a proposal to increase the allowance each year, based on the consumer price index, and to round that up to the nearest £1,000 in case the poor dears find it hard to cope.

The fact that the Government find it so essential to make changes that benefit holders of great wealth in our society, at the same time as they cut support for the most vulnerable, says much about the moral choices that they make. There is also a wider economic cost to such choices. The combination of sucking demand out of local economies by penalising the poorest in our society, combined with the largesse bestowed on the wealthy —who will no doubt find ways of spending or saving that do not benefit local economies—makes the simple point that the Government care more about rewarding their friends than about fixing the economy.

Let me move on to the Government approach to very high earners, who for years have found ways of avoiding and evading tax. I admit that I liked some of the Chancellor’s rhetoric during his Budget speech about closing tax loopholes and ensuring a fairer return from those with high earnings—often, people who earn more than £1 million per year—but looking at the detail in the Bill, it is clear that there is still a considerable distance to travel. For example, much more needs doing to close the so-called Mayfair loophole. It cannot be right that private equity fund managers will be able to continue paying capital gains tax at only 28% on so-called carried interest, rather than income tax at 45%. It is probably not unreasonable to estimate that more than £300 million extra revenue could be gained by tightening the rules in that area alone, and that would enable at least some mitigation of the worst excesses of the Government’s welfare proposals.

The Chancellor is undoubtedly highly skilled politically in his presentation—indeed, in that regard he may have been taking lessons from my predecessor in Kirkcaldy and Cowdenbeath. As always, however, the devil is very much in the detail, and the detail leaves too many loopholes.

Let me now address measures that are necessary to tackle some of the areas contributing to weaknesses in productivity—a matter that the Minister addressed.

[Angela Crawley (Lanark and Hamilton East) (SNP)]

If the Government are serious about improving productivity, should they not also be serious about improving capital investment?

[Roger Mullin]

Absolutely, and I am glad my hon. Friend raised a matter that I will come to shortly. Investment is critical for productivity in this country.

I am struck by how the detail of the Finance Bill suggests that, rather than addressing key issues in a positive manner, the Government present some highly counterproductive measures on productivity. I and my colleagues initially welcomed some of the changes to the banking levy and the introduction of a surcharge. However, whether through carelessness or incompetence—what I am about to say surely could not be planned—the scope of the changes now captures both challenger banks and many building societies whose practices are very different from those of the big banks. Challenger banks already face additional hurdles compared with the big banks, and as the British Bankers Association has pointed out:

“The surcharge’s disproportionate effect on smaller and challenger banks was evidenced by the resulting fall in their share prices following the announcement, in some instances of over 10%.”

Of more concern to me and my colleagues is that the BBA has estimated that:

“Our preliminary analysis based on modest growth projections across the sector suggests that the contraction in lending could be around £10 billion over five years”.

If there is anything we do not need when trying to boost productivity, it is a contraction in lending, particularly for SMEs. If that was to be the only drag on productivity it would be bad enough, but let me turn to another.

[Ian Blackford]

If we are to get sustainable economic growth in this country, we need sustainable growth in bank lending, but the Government’s actions will restrain what is necessary to deliver bank lending growth in this country. What has happened to the £375 billion of quantitative easing that was supposed to do exactly that and increase bank lending? It is another failure of this Government.

[Roger Mullin]

My hon. Friend answered his own remarks with his last four words. It has been a failure, and now the Government are also failing on productivity.

As I was saying, the potential contraction of £10 billion in lending is made worse because it is now paralleled by a further planned drop in public sector capital expenditure, as my estimable colleague, my hon. Friend the Member for Dundee East (Stewart Hosie), revealed earlier today in questions to the Chancellor.

[Sammy Wilson]

I agree with the hon. Gentleman about challenger banks and building societies, but rather than over-egg the pudding perhaps he could explain the mechanism by which £126 million of additional tax taken from those institutions will be multiplied up to a reduction of £10 billion in lending.

--- Later in debate ---

[Roger Mullin]

It is quite a complicated matter, I am told, and I would be willing to come back to it. I am sure that in one of our many discussions we could discuss precisely why that is, but I was not aware of the precise figure of £126 million that the hon. Gentleman mentions. The contraction in lending, mentioned by my hon. Friend the Member for Dundee East, suggests a loss of almost £5 billion over the next five years in public sector investment. Potentially, that adds up to a cumulative drop of £15 billion in private and public sector investment, and that can only be a major barrier to any chance of improvements in productivity.

Other factors with a direct impact on productivity are worthy of comment too. The ability to innovate is directly related to research and development. I therefore scoured the Finance Bill to see what was planned to boost the investment in company R&D. What did I find? Less than nothing. For example, the only change to R&D expenditure credits is the removal of universities’ ability to claim them. That in itself would not be such an issue if more would be done in other ways to significantly boost R&D expenditure, but that is not the case. Indeed, the Budget speech, and the accompanying Red Book, seemed keener to demonstrate adroitness with smoke and mirrors, rather than clarity and commitment to boosting research and development.

I turn now to the impact of the Finance Bill on Scotland in particular. The Chancellor may be many things, but he is far from stupid. In putting in place an income tax lock, which I admit to thinking is a very clever political trick, he has wisely not included in the lock the setting of bands. He recognises the importance of being able to adjust bands to suit economic conditions. He might find it odd that I wholeheartedly agree with him on that. I am sure he therefore appreciates why the SNP has called for the devolution of all aspects of income tax to the Scottish Parliament.

[Sammy Wilson]

The hon. Gentleman makes an important point. Would he acknowledge that the Red Book anticipates that receipts from PAYE over the period will increase by nearly 36%? That is faster than the growth in the economy and must be because of movements within bands.

[Roger Mullin]

I fully accept that: it is a very good point.

The Chancellor recognises the importance of the bands in terms of tax. Scotland needs full control of all aspects of income tax, so I hope that the Secretary of State for Scotland will learn from the Chancellor in that regard.

Of huge concern to Scotland, and to anyone with a concern for the future of our planet, is the continuing attack by the Government on the renewable energy sector. It would appear that the Chancellor has a bad addiction to carbon. He cannot get enough of it. How else can we explain the fact that the Finance Bill will remove the exemption for electricity from renewable sources? Combined with the Government’s insane attack on wind generation, we can see an attack on renewable energy, an attack on Scotland's economy, and an attack on all those working to take better care of our environment.

[Sammy Wilson]

Would the hon. Gentleman accept that carbon dioxide is not bad as such? It makes plants grow and allows increased productivity in agriculture. It is a good thing for the agricultural economy.

--- Later in debate ---

[Roger Mullin]

Climate change is largely man-made and carbon is no friend to the environment in that regard. I am sorry to disagree with the hon. Gentleman. I would add, as the owner of a hybrid car, that it seems perverse to add an estimated £1,000 to the cost of buying a greener car—more confirmation of the Chancellor’s addiction to carbon.

[Andrew Percy]

The hon. Gentleman mentioned the “insane attack” on, I assume, onshore wind. In areas such as mine, where people are surrounded by 100 turbines, they are driven literally to tears in my surgeries. They are genuinely concerned about the growth of onshore wind, and what we are saying is that we have reached the limit of onshore wind. We are responding to genuine concerns from real people, and my constituents are not insane for having the concerns they have.

[Roger Mullin]

I gently point out to the hon. Gentleman that the area of the United Kingdom that has made most progress in wind generation is Scotland. The Government’s attack pays no regard to the interests of Scotland or the policies of the Scottish Government. We are keen to develop renewable energy, not see it set aside.

Allow me to turn now to an area in which I hope the Government will find it easy to demonstrate some good will towards Scotland. Using the cover of technical consideration, Scotland’s police, fire and rescue services, unlike those elsewhere in the UK, are liable for VAT. However, I see from the Finance Bill that it is perfectly within the power of the Government to make special adjustments to taxation requirements. In part 4 of the Finance Bill, the Government have devoted six paragraphs to the London anniversary games, starting this week. In essence, they are deeming non-resident competitors to be free from the burden of having to pay income tax on earnings. It is even being backdated to 8 July. I am not complaining about that, but I would ask the Government to look again at exempting the Scottish police, fire and rescue services from the burden of VAT, with suitable backdating.

I declare an interest of sorts. My daughter’s partner, Dave, is a retained firefighter in Drumnadrochit in the highlands of Scotland. He often is called out to very difficult and tragic events. It is surely disgraceful that people performing such remarkable services for the community in Scotland should see their service penalised because of a technicality that the Government could easily resolve. If the Government right that wrong, I will be the first to thank and praise them for listening to Scotland. I hope that the Government will indicate a willingness to at least seriously consider an amendment to remove that unnecessary burden on Scotland’s police, fire and rescue services.

I commend the amendment to the House.

Budget Resolutions and Economic Situation

Roger Mullin Excerpts

Tuesday 14th July 2015 Commons Chamber

[Sajid Javid]

Perhaps the hon. Gentleman missed last week’s Budget and what the Chancellor said. The Chancellor did introduce the national living wage. Of course it will be phased in over five years, but by 2020 it will be equal to at least 60% of median earnings. It is the national living wage.

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

Will the right hon. Gentleman confirm the situation in Scotland for UK Government employees? Will they get his Government’s low national living wage or will they get the living wage that applies in Scotland, which is considerably higher?

[Sajid Javid]

People will be receiving the new national living wage, as set out by the Chancellor in his Budget. That is a huge step forward, raising the incomes of millions of people throughout Britain. At least 2.6 million people will benefit directly, and a further 6 million will also benefit. I am sure that the hon. Gentleman will join me in welcoming that.

--- Later in debate ---

[Michelle Thomson (Edinburgh West) (SNP)]

I beg to move an amendment, after “importation”, insert

“other than in relation to Police Scotland and the Scottish Fire and Rescue Service”.

The amendment stands in the name of my hon. Friend the Member for Dundee East (Stewart Hosie).

On this final day of the Budget debate, we have heard a great deal about debt and deficit, the Budget itself, and the recently released productivity plan. All the Scottish National party Members have listened with sadness to the planned cuts, which strike fear into our hearts and those of our constituents. I have found myself reflecting a great deal on it—both the conflict of moral principles and the economic madness I believe is contained therein. Called out by the Institute for Fiscal Studies, this Budget is described as having

“benefit cuts at the centre”;

and as a “tax-raising budget”, the IFS gives the stark warning that,

“unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average”,

and that ultimately it is a “regressive” budget.

We are supposed to believe that the smart economic choice is for the UK to eliminate any deficit, pay down all debt, and run—and then sustain—a surplus. We are fed the yarn that an economy must be in surplus; that the gain is worthy of the pain. Despite the concerns of Robert Chote of the Office for Budget Responsibility, who described the plan—somewhat euphemistically—as “ambitious”, and the concerns of 77 leading economic academics, the Chancellor has ploughed on regardless. Now, I know that a degree in history—or, for that matter, one in music—does not equip one with an instinctive understanding of cause and effect, supply and demand or even so-called Micawber economics for that matter, but history does teach us about previous economic choices, and that ability to look back provides real accuracy. We know how the Chancellor’s previous predictions failed to meet actuality, and we know that the much vaunted current growth has taken place only over the past few years.

A number of issues concern me today, one of which is levels of personal debt. The OBR predicts household debt going above the levels of 2008 and reaching an incredible 173% of GDP by 2019. That household debt figure excludes mortgages but is based on unsecured lending such as credit cards and store cards and, with increasing frequency, payday loans. Fundamentally, it contributes to a very real risk of a repeated debt crisis as a direct result of the cuts. We have seen a consumption-led crisis before, yet here it is planned again. I quote the Chancellor, who said:

“This growth is driven by stronger private consumption”.—[Official Report, 8 July 2015; Vol. 598, c. 322.]

There is a small mention in the productivity plan about championing enterprise by stimulating finance for small and medium-sized enterprises—but what and how specifically? Simply privatising RBS with the mantra “private equals good” is frankly not good enough. A lack of access to liquidity remains the biggest single issue for small business, while at the other end of the spectrum large businesses stockpile their cash. It has been asked before but is worth reiterating: where is the support for the challenger banks? The cut in corporation tax has been trailed as encouragement for businesses to invest, but there is no clear link or evidence to suggest that will happen. I would have thought that I would have been intervened on by now to ask what within the Budget I agree with, and I confirm that, although I am disappointed with the cut in the annual investment allowance from £500,000 to £200,000, it is better than what was proposed, which was taking it down to £25,000.

The continued focus on financial services, in which I must declare a previous interest, without rebalancing to improve our exports or manufacturing is a worry, particularly where we continue with the models we have adopted. The New Economics Foundation has expressed the view that the

“United Kingdom has the least resilient financial system among leading industrial (G7) nations. It is unusually large and homogenous, highly interconnected . . . highly complex and highly reliant on funding from the wholesale financial markets”.

I recommend to all Members that they read the foundation’s recent report; its concerns concur with those of many other economists.

The SNP is urging action so that we can end the unfair anomaly whereby Scottish police and fire and rescue services alone are liable for payment of VAT. The proposed change to the Budget resolutions would enable us to introduce the necessary changes to the Finance Bill. Were this unfair and discriminatory situation to be corrected, we could free up an additional £23 million of resource for the Scottish Police Authority and £10 million for the Scottish Fire and Rescue Service—money which, I trust, all hon. Members would agree could provide welcome funds to support the fantastic work that our emergency services do.

Our calls for an end to this anomaly have gained cross-party support in the Scottish Parliament, and I am disappointed that the Government have so far refused to address the disparity in their treatment of emergency services north and south of the border. I hope that Members will take the opportunity today to take action and put this situation right.

We all agree that this is about choices, and the choice is how we grow the economy. This must fundamentally be by investment. Despite the productivity plan and various Ministers suggesting an increase in capital expenditure, a comparison between the Red Book of July and that of March 2015 shows total capital spend going down through the lifetime of this Parliament. If the Chancellor is unwilling to invest in the UK economy, give us the powers in Scotland and we will get on with the job.

When talk turns to economic and productivity comparisons, we hear a lot about the G7, the group of the world’s largest western economies, with which the UK likes to compare itself.

[Roger Mullin]

On productivity in the economy, my hon. Friend may be aware that since 2008 and until about 2014, it is fair to say that in terms of productivity per capita the UK has effectively been flatlining, while many other countries, including smaller countries such as Ireland, have seen their productivity rise significantly. There is much to learn from others, is there not?

[Michelle Thomson]

I thank my hon. Friend for his intervention, and I thank the House of Commons Library for some excellent work on GDP per capita and GDP per hours worked, including in relation to Ireland. I shall come on to that.

Where the UK stands in relation to Germany, France, Italy, the USA, Canada and so on provides some useful benchmarks for relative economic performance. The fact that the UK lags behind its peers on so many key indicators is another, all too sad, story. Last out of the recession, lowest productivity, and lowest GDP per capita growth rates—a record that does not tally with the UK Government’s “back in business” narrative.

Although the G7 provides a useful comparison for the UK, its relevance to Scotland is less apparent. We do not aspire to be one of the largest economies in the world, to strut faded imperial grandeur on the world stage or to maintain the pretence of exerting some kind of global influence, 100 years after the height of the British empire. Our ambitions are different—more modest, some would say; more enlightened, others would call it. In business there is a saying, “Turnover is vanity, profit is sanity.” To be big is not always to be beautiful. Scotland seeks fairness and prosperity for those who live there.

Budget Resolutions and Economic Situation

Roger Mullin Excerpts

Monday 13th July 2015 Commons Chamber

[Greg Clark]

The justification is clear: over the past three years the rate of increase in rents for social tenants was twice that of private tenants. Since 2012-13 the increase in social rents has been 9.1%, and 4.8% for private tenants. It seems not unreasonable to reset the baseline—if I can put it that way—to reflect the experience in the rental sector of people in the country. I would be interested to hear from the hon. Member for Wolverhampton North East whether the Labour party will share our enthusiasm for the cut in rent for social tenants of 1% a year, when it has been increasing above inflation. It is an important move.

We want to encourage home ownership and build homes that people can afford to buy. We are extending Help to Buy, which has already helped 100,000 people to buy their own home. In autumn we will introduce the new Help to Buy individual savings account, and we will give more than 1 million housing association tenants the right to buy. The Budget and the productivity plan that the Chancellor published on Friday will free up brownfield land for development, speed up the planning system, and deliver thousands of new homes for aspiring homeowners.

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

The Secretary of State mentions the great productivity plan, but what a damp squib that is. It fails to address the key fundamentals of productivity, whether lending to business, raising intermediate and higher intermediate skill levels that are a major drag on our productivity, or other facets. Surely we deserve better than the damp squib that was produced on Friday.

[Greg Clark]

I do not think that the hon. Gentleman has read the productivity plan. If he does he will find it a substantial document. That this early in the life of this Government there is a clear focus on ensuring that our country is equipped to prosper in the long term is a mark of the Government’s seriousness, and I am surprised that he disparages that.