Finance Bill

Sammy Wilson Excerpts

Monday 26th October 2015 Commons Chamber

[Rebecca Long Bailey]

I welcome the right hon. Gentleman’s comments. He is certainly a silver-tongued fox, and I look forward to staring at him from these Benches in the months to come. He raises some important issues. Hopefully, I will address them during my speech.

[Sammy Wilson (East Antrim) (DUP)]

rose—

[Rebecca Long Bailey]

I wish to make a little progress before I take any further interventions.

Let me cite an example to show the absurdity of the current proposals. Although I appreciate and agree that VED needs to be reformed as it is unsustainable in its present form, the current proposals create the obvious absurdity of a Mitsubishi Outlander plug-in hybrid owing as much VED as a BMW 5 series saloon from year 2. On top of that, many vehicles that harness the latest technological developments tend to be rather expensive and may be hit by the supplementary rates as well as by the higher flat rate. For instance, the Volvo V60 plug-in hybrid estate—a hybrid suitable for families—would have to pay a first-year rate of £320 and a supplementary rate of £450 for five years thereafter despite being at the forefront of low-emission technology.

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[Roger Mullin]

I agree with much of what the right hon. Gentleman says, but I would go wider. Our whole tax system is incredibly and unnecessarily complicated. Why do we not begin to think about moving towards an alignment, say, of income tax and national insurance in the longer term? There are many areas where the over-complication serves nobody’s interests well. It does not serve the Exchequer or the wider public, so I have some sympathy with the right hon. Gentleman’s argument. I return to the point I was trying to make before his two excellent interventions.

In Committee some Members implied that no other country in the world was doing anything to close the loophole. My recent research shows that that is not the case. For example, the Netherlands has already tackled the issue more thoroughly than we have in the UK. France has moved—perhaps not as far as some in France would have liked at the time—further than the UK to address the problem, and in other countries, such as Sweden and even the United States, it is a growing element of the political debate.

[Sammy Wilson]

Is that not the most important point? Provided the tax change does not impact upon the ability of the financial market to do its job, it is right to bring tax rates into line and to close the loophole. If closing the loophole were somehow to distort the financial market or make the financial market work less efficiently, I could understand the argument from the right hon. Member for Cities of London and Westminster (Mark Field), but that is not the case. It does not seem to have had that impact in other countries, so why should it do so here?

[Roger Mullin]

I thank the hon. Gentleman for that intervention. I point out that, as I am sure he fully understands, this issue is not unique to the United Kingdom; it has international resonance. It has particular resonance with people who are relatively poor and suffering under austerity. As I said in Committee, my constituency manager—we all know how well paid our constituency managers are—will pay an effective rate of tax that is higher than that paid by the vast majority of highly paid fund managers. That cannot be described as fair, as I think people in this country and elsewhere recognise.

In his speech, the Chancellor spoke of his desire to take further action to prevent the wealthiest in society from avoiding their obligations to contribute fairly to society. We only wish that he would do more. We are not asking for them to do more than others; we are asking for them merely to contribute in the same way as others in our society. I hope that many hon. Members will feel able to support our new clause.

[Sammy Wilson]

I think that there is merit in what is proposed in new clause 3, at a time when the tax system is under scrutiny and people feel under pressure. We must look at both the economic and political consequences of tax proposals, because no tax regime can be viewed in isolation from the political context in which it is set. At a time when many people in lower-income groups feel that they are bearing a disproportionate burden, despite paying less tax, loopholes that become apparent should be closed where possible. I would be worried if it was shown that closing such loopholes would have a detrimental impact on the efficient working of the capital markets, but if that is not the case, then I think there is an important reason for closing them.

With regard to the Opposition’s amendment on vehicle excise duty, I must say that I was very surprised by the stance taken by the hon. Member for Salford and Eccles (Rebecca Long Bailey). The one thing that is quite clear in the amendment is that although it might be very green, it is not very fair, with regard to the burden of taxation. It is more likely to impose a higher tax burden on those on lower incomes, who tend to have older cars with higher emissions, so it would be highly regressive.

[Rebecca Long Bailey]

The average car currently emits 128 grams of CO₂ per kilometre, which is actually in the lower band. It is also important to note that these provisions would come into effect from April 2017, so they would not be retrospectively applied—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I fully appreciate that it is the hon. Lady’s first time at the Dispatch Box, but—I am not reprimanding her, but merely giving a little hint for future reference—turning her back on the Chair is not acceptable. Even though she wants the hon. Member for East Antrim (Sammy Wilson), who is sitting behind her, to hear what she is saying, she still must face the Chair at all times. [Interruption.] No, she need not apologise, because it is her first time at the Dispatch Box, but she will always get it right in future.

[Sammy Wilson]

I accept that the provisions would not be retrospective. Nevertheless, older cars tend to more polluting and would therefore, under the new clause, carry the higher rates of duty.

The second argument that has been made is about the sale of low-emission cars, whereby it is said that the duty that will be imposed, which is a small percentage of the cost of a new car, will distort the market or dissuade people from purchasing one. When people are purchasing a new car, whether it is a hybrid car or a low-polluting car, the last thing on their minds when deciding to lay out £20,000, £25,000 or £30,000 will be whether they will pay a couple of hundred pounds in vehicle excise duty. It is argued that this will hurt the car market and the emerging market for more energy-efficient cars, but the price elasticity of such cars, or their running cost, is unlikely to impact on the demand for them.

I think the Government have got the balance right on this one. Yes, we do have to consider the detrimental impact of emissions that come from cars, and there should be a tax on that, but we must also recognise that a vehicle is very important for most families across the United Kingdom. As lower-income families tend to have older cars, a regime that ramps up tax payments according to the car’s age and emissions would be unfair. The proposal in the Bill is therefore acceptable.

I have a question that the Minister did not give a clear answer to, and I hope he will do so when he sums up. On the road fund that is being proposed as a result of the money that is collected, given that infrastructure developments are devolved issues in Northern Ireland, Scotland and Wales, it will be important to know how exactly that fund will be allocated. Will there be separate accounting for the tax that is collected in each of the areas? Will it be done on the basis of Barnett consequentials or will some other regime be put in place? It is important that we know that, because if this is to be one of the ways in which infrastructure developments are to be financed in future, there needs to be certainty for devolved Administrations as to what money is likely to be coming their way and how it will be calculated.

[George Kerevan (East Lothian) (SNP)]

I want to make a brief contribution on new clause 3. The Minister, elegantly as he does, fobbed us off by saying, “We’re having a consultation and so on, but meanwhile we’ll press on regardless.” However, there is still a major issue regarding a potential tax loophole that has not been closed.

I accept that fund managers are remunerated on two different and distinct levels: they are paid for the work they do as investment managers and also receive a reward for hazarding their own capital. I also accept that there is a gain in having fund managers hazard some of their own capital, perhaps more so than they do at the moment. Unfortunately, though, if we charge very different marginal rates on the income component and on the hazarding their own money component, we will create the capacity for a loophole in paying the lower tax on the capital gain and less on the income.

It does not matter what short-term changes the Minister makes to try to prevent existing ways in which hedge funds allow the personal investment component of the investment to be organised, because people will just think up new ones. We have to close the loophole at source. The obvious way to do that would be to go back to a previous situation in which income tax and capital gains tax were charged at the same marginal rate.

Unfortunately, for the past several decades we have proceeded down a road of constantly cutting taxes on capital. I think there was a case in the 1990s for cutting marginal rates of tax on capital, because it was a difficult economic period and we had to encourage investment, but the Government have transformed that into an ideological demand that we always go on cutting taxes. Indeed, one of the core philosophies of the Finance Bill is to cut corporation tax even more, despite the fact that, on both a UK and a global level, we have pyramided up corporate surpluses, which are not being used. The current problem is not to find more loose capital, but to find fiscal incentives to make the owners of capital invest it.

The inherent philosophical problem with which the Government present us in the Bill is the imbalance created when marginal rates of taxation on capital are pushed lower and lower while significant taxes on labour are not reduced effectively and significantly. Our new clause 3 is specifically designed to force the Government to respond to the philosophical principle that the loophole should not be created in the first place. I do not think that the Minister has answered that effectively, which is why we will press new clause 3 to a vote.

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[Sammy Wilson]

I accept the point that the hon. Gentleman is making, but will he explain why he believes that we are more likely to have a successful review of inheritance tax when we move into a surplus, when the pressure on public finance is less, than when we are in deficit? Does he not think that the best time for a review of inheritance tax—that is, the giving up of tax revenue—is when we have a deficit problem?

[Rob Marris]

No; I disagree with the hon. Gentleman. We want to achieve economic stability—something that has been sadly lacking over the past seven years and that will probably continue to elude us for the rest of this Parliament—at which point we can pause for breath. This is part of the Labour Opposition’s overall approach: we believe that our Government finances need something called zero-based budgeting. This will be a major undertaking, in which we start by looking at what society needs rather than looking at what it has been spending its money on and simply topping that up, salami-slicing it away or whatever. We need to step back from that, but we can do so only at a time when we have a budget surplus and are not running a current—I stress the word “current”—deficit. That is the right time to look at this question.

I want briefly to talk about new clause 1, which has been tabled by Scottish National party Members, and to which I imagine they will speak later. It seems slightly odd that they wish to evade the consequences of devolution. As I understand it, a decision was taken in Scotland to amalgamate eight police forces and, I think, a similar number of fire and rescue services to create a single police force and a single fire and rescue service. My understanding is that, because they were new organisations, they became liable to VAT, which their predecessor organisations had not been. I quite understand the sentiment behind new clause 1, but it seems a little strange that, having used the powers of devolution which were quite properly passed by this House, the people of Scotland—refracted through their Parliament—should wish to change the rules on VAT. That said, we are heading towards a position of full fiscal devolution—[Hon. Members: “Are we?”] Well, I am not saying that we have got there yet, but we are heading towards it. That is the trajectory, and we would therefore not oppose new clause 1.

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[Sammy Wilson]

Does the hon. Gentleman not see the contradiction in saying that the Government should be looking for ways to encourage high-intensity energy users to use more renewables, which are three times more expensive than producing electricity from gas, while lamenting the decline in energy-intensive industries in the UK?

[Rob Marris]

I disagree with the hon. Gentleman. The difficulty is that we have high energy prices because we have not invested in new technology to bring them down. For example, if we had cracked the holy grail of carbon capture and storage on a commercial basis—it is already cracked on a scientific basis—this country would be quids in, because of all the coal we have.