Small Businesses: Tax Reporting

Sammy Wilson Excerpts

Monday 25th January 2016 Westminster Hall

[Oliver Dowden]

I will come on to such points, but full consultation on any measures is important to inform exactly the situation faced by small businesses. The Chair of the Treasury Committee, my right hon. Friend the Member for Chichester (Mr Tyrie), has pointed out the specific problem of those without access to computers and IT altogether.

[Sammy Wilson (East Antrim) (DUP)]

Is the hon. Gentleman concerned about that point? In parts of my constituency especially, many small businesses do not have access to the internet at all, because the speeds are so low. To expect those businesses to exchange all that data with Her Majesty’s Revenue and Customs quarterly is unrealistic.

[Oliver Dowden]

There is an issue, but the Government have said in their response to the petition that they will consider it. I hope for clarification on the question of the speed of broadband connection—businesses in my and many other constituencies rely on fast broadband, so for it not to be in place makes things difficult—and on the broader point about ensuring that small businesspeople who fill out tax returns have sufficient skills to do so. I also hope for reassurance from the Minister about a training programme and other online resources to enable small businesses to have those skills.

Despite what the Government have said in their response to the petition, the proposals announced in the autumn statement raise a number of issues, some of which have already been mentioned in the debate. I, too, will address such matters before other Members have the opportunity to examine them in more detail.

The Petitions Committee recently undertook a public consultation via Twitter, and I thank the Clerks for their hard work, which made it possible. Unbelievably, in 24 hours we received 1,285 tweets from 565 contributors, all of which can be seen by searching #HOCpetitions. The responses reflect concerns also expressed to me by the Federation of Small Businesses. I will briefly address some of those concerns.

The proposed measures, as I understand the situation, form part of the Government’s “Making tax digital” proposals, which most people agree is the right direction of travel. An end to bureaucratic form filling and associated unnecessary complications, and full access to digital accounts, all of which are promised in “Making tax digital”, would certainly be welcome. I commend the Government for their commitment to that agenda.

As we all know, however, the path to new Government initiatives, in particular those involving new IT, rarely runs smoothly, and we only have to think back to the introduction of tax credits or to the Rural Payments Agency under the previous Government for the evidence. I therefore urge the Minister to proceed with caution.

I note from the Government response to the petition that there will be consultation throughout 2016 and voluntary introduction before full phasing in by 2020. Many people are concerned that users should be fully consulted and systems properly tested before full roll-out. Furthermore, the system should be properly secure.

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[Sammy Wilson (East Antrim) (DUP)]

Unlike some hon. Members who have spoken, I have difficulties with the concept of digitising tax returns. I have some experience from when Northern Ireland introduced digitisation and a need for internet access for planning applications and a whole range of civil service functions. Anyone who looks at the Government’s record, regardless of which Department is involved, will see that none of this ever goes smoothly and that the initial costs never turn out to be as low as predicted. The process of moving towards the objective is never smooth and, inevitably, many of those affected find it hugely frustrating. Sometimes the ironing-out period is short, but it can often last for a long time.

As hon. Members have pointed out, the issue of tax returns is not just a cause of frustration as, in some instances, it can be a matter of whether a business survives. Although the Minister has outlined some of the benefits and the reductions in administrative costs, we therefore have to ask ourselves whether we are sure that the transition period will not be so disruptive that it has an impact on many of the businesses in the United Kingdom that the Government are keen to expand.

One of the fastest-growing sectors of the economy in my constituency is people moving into self-employment—they are encouraged to do so. However, it would be detrimental to push those people into a situation in which it is difficult for them to do business because the Government have made it hard for them to carry out one of the most basic things—their tax transactions. The Government will undertake a consultation, and they have the 2020 deadline and so on, but we underestimate the trauma that some people might experience along the way because these things never work out easily.

I have read through the missive that the Minister has sent us all to sell this wonderful idea and, like others, I am still not clear what the Government are trying to achieve. The document cites headline figures, and says that the change will cut administrative costs and make things easier, and that people

“will be required to keep track of their tax affairs digitally”—

that is the kind of language that is used. It says that people will not have to

“wait until the end of the year, or even longer, before knowing where they stand with their taxes”

and that

“updates will be generated from existing digital business records”.

As some Members have asked, what does that actually mean for a business? Will a business know exactly how much tax it is due to pay every quarter? Will it pay that tax every quarter? Will the digitised records simply be a reflection of the information that is already gathered? Will they need to reflect the information that would be required at the end of the year? If so, that is radically different from simply saying, “Give us a lot of data about your business.”

There is significant work involved in getting some end-of-year records that businesses submit in their annual tax return. Those records might cover stock taking, work in progress, accruals, bad debts and one-off payments. Will all those things be required for every quarterly return? Is that what is meant by

“updates will be generated from existing digital business records”?

If that is the case, there is absolutely no way that the Government can argue that generating the accounts will not involve substantial extra work for businesses. If there is a quarterly requirement to pay tax, will businesses find themselves overpaying tax at the beginning of the year and then having to get a rebate at the end if end-of-year adjustments have reduced the tax burden? What does that do to a business’s cash flow? What do the Government intend?

Once the records go in, presumably the data will be looked at. If that is the case, will queries be raised, or will the data simply be ignored? If we are going to ignore the data, why provide them? If we are not going to ignore the data, will there be queries from HMRC not at the end of the year, when one tax return would have gone in, but on a quarterly basis? That would, of course, create additional work for businesses. The change will play an important part in how businesses generate the information. If it is simply a case of passing on digitally-generated information, will the process involve more or less information than a business would usually gather during the year?

[Seema Kennedy]

Does the hon. Gentleman agree that the transition will be complicated for businesses that are paid in cash and with cheques, as well as online? I am thinking of a self-employed hairdresser, for example.

[Sammy Wilson]

That is exactly the kind of question that any reasonable business would want answered when deciding whether the change is good or bad. It is easy to hide everything behind a term such as “quarterly, digitally-gathered business records” but the detail, as the hon. Lady says, is significant for businesses.

If the information is to be looked at in detail, that will affect how businesses go about collecting and verifying it. Most businesses do not want to make mistakes. They are not all treated—unfortunately, Minister—like the Googles of this world. Many businesses fear HMRC—they fear the taxman. They are afraid of making a mistake and of that being interpreted as them somehow trying to pull the wool over people’s eyes. Inevitably, instead of one visit to the accountant or auditor, there will be three or four visits. I do not think that this is just speculation, because one only has to look at what happened when VAT filing started. That was sold on the same kind of basis, because we were told, “You just fill in all the stuff,” but that was not what happened. People started going to accountants to get them to verify that they were sending in the proper information.

Will more queries be raised with businesses and will more time be tied up dealing with those queries? As businesses see the quarterly returns as something of great significance that have an impact on the tax they pay and how that might be scrutinised, will they face more compliance costs due to their asking professionals to do their returns? Alternatively, as some Members have described it, is it simply that they will have all the information on one spreadsheet, and that they can click a button to send it to HMRC, with that being the end of it? I doubt very much that that is how businesses will regard this, and HMRC has already accepted that there will be set-up and hardware costs.

[David Morris]

Does the hon. Gentleman agree that the best way to sort out such hardware and software costs will probably be to look at examples elsewhere? The Estonian Government, for instance, do not use paper at all; everything is done online. We have imported the car tax system from Estonia, and perhaps it would be good to look at how other countries manage similar taxation programmes.

[Mr David Hanson in the Chair]

[Sammy Wilson]

If we have long enough consultation and lead-in periods, there will be opportunities to find out where similar changes have been made and what lessons can be learned from them. I hope that that elementary step is taken so that we iron out some of those things. If the software is free, it does not mean that there will be no disruption to businesses because they will have to adapt to a universal form of data collection, which might be different from what they use at present. Of course, that requires training and changes to how things are done.

Many people in my constituency who have set up small businesses or become self-employed did so because they are good plumbers, carpenters, builders, mechanics or whatever, but they are not into the administrative stuff. Even if there is help and this standard software is provided free of charge, they will pay somebody to carry out the process, and if they have to pay that person four times a year, it will add to their costs.

As several hon. Members have said, while we talk about all this information being supplied online, that is not an option for many businesses throughout the United Kingdom. A report that was published on Friday by a group of hon. Members stated that it was accepted that the internet programme has not been rolled out as well as the Government had hoped. The report made substantial recommendations and asked whether we could implement them without breaking up BT’s monopoly.

One thing we know is that HMRC has accepted that 19% of businesses have no digital contact, and that 42% need assistance, so a substantial number of businesses will not find the transition easy. Connections in this part of the United Kingdom are much better than those in Scotland, Northern Ireland or other areas of England and Wales where the population is perhaps more dispersed, so the burden of not being able to comply with digital returns will be felt much more heavily in some constituencies than others, and that needs to be taken into consideration. I do not want to make a point that others have made, but if the system needs to involve other ways for people to contact HMRC, we already know that there will be difficulties. I do not want to go through all the statistics about phone calls not being answered—

[Rob Marris (Wolverhampton South West) (Lab)]

Go on.

[Sammy Wilson]

I am sure that the shadow Minister will make that point very effectively. We already know that there is a problem with communications other than those involving computers, so that is an important consideration when introducing a system in which people have to make contact four times a year.

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[Mr David Hanson (in the Chair)]

As there were two Divisions in the House, the debate may continue until 8 pm. When we divided, Sammy Wilson was at his peroration.

[Sammy Wilson]

I have three points to make in conclusion. First, although more than 100,000 people have signed the petition, I believe, despite what the Government have said, that that is probably an indication that many businesses are not even aware of the changes. If the policy announcement has not percolated down to those who will be affected, how can we be sure that they will be fully aware of the substantive changes to come until they are hit by them? There is a lesson to be learned about just how effective the announcement and the consultation have been. Secondly, although the Government argue that they want to reduce the regulatory burden on businesses, I cannot for the life of me, for the reasons I have given, understand how the approach will reduce that regulatory burden.

My third point is about political perception, but it is important, and I would have thought that the Minister’s party would have been particularly concerned about this. There is increasing cynicism that somehow big business gets away with things that small business does not. The measure will apply to small businesses but not to large ones, yet all the time the headline news is about how the latter—whether it is the Googles or the Starbucks —seem to walk away from their tax responsibilities. People will find it difficult to understand why there should be a greater onus on small businesses to declare their earnings and business details when some of the larger ones can get away without paying tax for 10 years and then get a slap on the wrist. As we discussed earlier in the main Chamber, they seem to get away with paying very little.

[David Morris]

I would like the hon. Gentleman to try to look at the matter this way: self-employment is the largest growing sector in the country, and that has to be taken into account when considering how taxation should be simplified. As my hon. Friend the Member for High Peak (Andrew Bingham) said, the sector is the powerhouse—the engine room—of our economy. I hope that the hon. Gentleman agrees that two different styles and sorts of businesses are being discussed in parallel. Our earlier proceedings in the Chamber were about the Googles of this world, and this debate is about the self-employed and small and up-to-medium-sized enterprises.

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[Sammy Wilson]

I take the hon. Gentleman’s point, but I think that I made it clear that a lot of this is about perception. Businesses that are struggling and already feel a heavy regulatory burden sense that further requirements are being imposed on them. It may well be that we are talking about different kinds of business, but we all know that perception is important in politics. There is cynicism and scepticism, and people take the view that somehow the big players get away with things that the small players do not.

The Government ought to be concerned to ensure that we are not seen to be imposing further regulation on the small, usually labour-intensive businesses that generate a lot of employment across the United Kingdom and which the Government seek to encourage. Many of the responses to the consultation have been from organisations that represent small businesses, and they have been negative. As several hon. Members have said, those organisations do not know what the Government hope to achieve, or what businesses will have to do, what information they will have to give and what the impact on them will be. Those points need to be cleared up, and that is one of the reasons why today’s debate has been good. The Minister’s response will be noted by hon. Members who have participated, but during the ongoing consultation and the roll-out of the policy, we need to bear in mind all the points that have been raised today.

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[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your chairmanship, Mr Hanson. I thank all Members who participated in the debate. I was struck by its measured tone and the many sensible inquiries made. I hope to respond to as many of them as possible.

Before I do that, may I add to those words said by my hon. Friend the Member for Hertsmere (Oliver Dowden) my own words of tribute to Lord Parkinson and of condolence to his family, following the announcement of his death today? I was fortunate enough to meet Cecil Parkinson a number of times in my years as a Member of Parliament and I was struck by his warmth and generosity of spirit. He will be greatly missed by both Houses of Parliament.

We have had a useful and helpful debate in which many points were raised. I am grateful for the opportunity to dispel some of the myths that I think exist with regard to the policy and to provide greater clarity where I can. This is an important policy and it is important that we get it right for small businesses. I would particularly like to thank the Minister for Small Business, Industry and Enterprise, my right hon. Friend the Member for Broxtowe (Anna Soubry), who was present for much of the debate.

I would also like to thank all those who took the time to respond to the petition. I hope that as many people engage in the consultations on the reforms that HMRC will launch later this year. The Government have always been on the side of businesses that help to create long-term, sustainable economic growth. That is why we have lowered the rate of corporation tax, increased the investment allowance and helped our companies expand into new markets. We believe in competitive tax, simple tax, and tax that is paid.

Before I say a few words about what is changing and why, I would like to make clear what “Making tax digital” is not and address some of the concerns raised by businesses. First, to respond to the point made by my hon. Friend the Member for Hertsmere at the beginning of the debate some hours ago, this transformation does not—I repeat “not”—mean four tax returns a year, but, by 2020, most businesses will be keeping track of their tax affairs digitally, updating HMRC at least quarterly via their digital tax account.

Quarterly updates will not involve the complexity of a full tax return, where the business, or its agent, has to gather together and manually input data on to an electronic or paper form and then perform various calculations. Instead, updates will be generated from digital records and, in most cases, little or no further entry of information will be needed. It will be much quicker, easier and far less burdensome than the current process. The agony of the annual tax return will be a thing of the past.

[Sammy Wilson]

If the information required will not be the detail required in the end-of-year tax return, what value will there be in the calculations made? If the aim is to give certainty to taxpayers about what they are likely to owe but the information is not substantial enough to work that out, what value does it have? How will that enable people to keep account of their tax affairs, as the Minister described it?

[Mr Gauke]

That is a fair question. The hon. Gentleman raised that point in his remarks and there is a distinction between the nature of the information provided. Whereas a full return can be complex, the update will be based on business records that are already being recorded. There will be one process for both business and tax purposes, which will involve a summary of income and expenses.

The hon. Gentleman asks what is the use of the data and how will they be helpful. First, keeping records digitally will reduce error, partly because that will be done on a more timely basis. Secondly, the data will allow HMRC to focus its attention on the small minority of small businesses that are evading their taxes, and not on those who are trying to get it right. One must also bear it in mind that the software will help taxpayers identify any errors in the information they provide. One of the key benefits permitted by a more digital approach is that errors can be spotted earlier by the taxpayers themselves.

I reassure the House that HMRC does not intend to increase interventions on the basis of quarterly updates. On the contrary: HMRC is seeking to reduce error at source and so reduce the need for interventions. It is the case that by keeping records in real time instead of processing paperwork at the year end, businesses are less likely to lose receipts or make basic accounting errors.

I confirm that the proposal applies to large businesses—it is not exclusively for smaller businesses. On whether the software will work, let me point out that there are already six free products on the market and we expect there to be more as small software firms innovate to meet business needs. Such firms are clearly keen to engage and produce new products and services—we see that in the growth of apps—and already 30,000 small businesses have downloaded free record-keeping apps suited to all varieties of devices, whether tablets or smartphones.

One point that came up repeatedly and which was made by the hon. Member for East Lothian (George Kerevan) was that we are rushing this through. Let me reassure him and others that the Major Projects Authority has examined the plans and that it views them as deliverable. However, neither the Treasury nor HMRC are complacent, and we do understand that there are challenges, and I will pick up on some of them. However, it is worth noting that this is a five-year roll-out. We are engaging in substantial consultation this year. The piloting and testing of the technology and the various processes will then follow.

Phone calls were mentioned on a number of occasions. I said in the main Chamber earlier this afternoon that HMRC’s performance in January, which is traditionally a busy month, because of the self-assessment deadline, has been at a very high level. The last number I saw, which was for last week, suggested that 89% of calls were being answered and that the average waiting time is four minutes, which, it would be fair to say, is better than the historic norm for HMRC.

It is worth pointing out that the overall £1.3 billion package of investment for HMRC will allow more of its customers—not just businesses, but individuals—to go online, thus reducing calls. In addition, HMRC gets many calls about information that will in future appear in taxpayers’ digital accounts. For example, people call to find out their reference number or to chase a refund, and digital accounts will take out a large number of those calls. As I said, call centre performance is now also much improved.

My hon. Friend the Member for South Ribble (Seema Kennedy) raised the issue of sanctions. We will consult on the sanctions that will be appropriate in a digital environment. Penalties and other sanctions will not be the same as those that apply now to end-of-year returns. We will want the new process to bed in before we turn on any sanctions. There is no plan to penalise those who try to comply. I point hon. Members to HMRC’s record on the introduction of real-time information. There was a careful and measured approach to penalising people, and only deliberate non-compliance resulted in sanctions while the system was being introduced.

A couple of hon. Members asked whether quarterly updates will be required to take account of accounting adjustments for stock and work in progress, which are currently made only once a year. Detailed issues such as the allocation of capital allowances and the counting of stock levels will be addressed through consultation. I stress that all allowances, deductions and reliefs that are currently annual will remain so. Of course, for the many businesses that use cash accounting, that is much less of an issue, but I recognise that it is an issue for some businesses. Again, for issues such as work in progress, we are not requiring information quarterly.

Concerns were raised about payment. No decision has yet been made about changing payment dates. In December, alongside the “Making tax digital” road map, we published a discussion paper on options to simplify the payment of taxes. An initial consultation will take place shortly, with a further, full consultation to take place later this year.

My hon. Friend the Member for Morecambe and Lunesdale (David Morris), who does so much for the self-employed in the role he plays for the Government, raised the issue of payments following quarterly updates. Again, I stress that no decision has yet been made about changing payment dates.

Questions about how the changes will affect seasonal businesses will be addressed through this year’s consultation. Businesses trading seasonally may be due a tax refund in-year. If they update HMRC more frequently than they do now, that will allow HMRC to assess them for such a refund, so there may be a financial benefit for them. Let me also stress that the quarterly update will be based on actual information, not forecasts. I hope that that provides some reassurance.

In terms of implementation, I reassure hon. Members that we will carry out extensive testing. Roll-out to businesses will take place when the process and the design are known to work.

I touched on cash accounting earlier. About 2 million businesses operate on a cash basis and do not need to account for work in progress, stock and so on. For others, updates will provide an increasingly accurate picture through the year. However, direct taxes will remain annual taxes, so some adjustments will need to be made at the end of the year. That should, however, be less of a task than the traditional annual tax return, because much of the information will already have been pulled together.

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[Mr Gauke]

I think the information has always been out there, but we are where we are, and I am grateful to have an opportunity to set out where we are consulting. If the hon. Gentleman likes, I can set out some of the communication that has already been done. There are issues we are consulting on, but I believe that the direction is absolutely right.

The hon. Member for Livingston (Hannah Bardell) asked about the cost of the proposal. The hon. Member for Wolverhampton South West (Rob Marris) asked about the cost to business and the publication of an impact assessment. As with any other tax measure, a detailed assessment of the impact on administrative burdens will be published alongside draft legislation, and that is expected to be in December 2016. That assessment will be informed by prior consultation of affected businesses. HMRC anticipates producing an initial draft impact assessment alongside the formal consultation process, which starts in the spring.

[Sammy Wilson]

Will the Minister give way?

[Mr Gauke]

I will, although I was about to respond to one of the hon. Gentleman’s points. Let us see whether it is the same one.

[Sammy Wilson]

Perhaps it is this very point. The Minister has told us the kind of information that will be required in the quarterly returns and the calculations that will be done. Will that give taxpayers an indication at the end of each quarter of what tax HMRC expects from them, and will it have to be paid quarterly?

Oral Answers to Questions

Sammy Wilson Excerpts

Tuesday 19th January 2016 Commons Chamber

[Greg Hands]

I have been to my hon. Friend’s constituency quite a few times over the past year and a half, but I do not think I have had the particular pleasure of meeting the company he mentions. I am very happy to meet him and that company, or perhaps to meet Lord Maude, if that is more appropriate, to see what could be done to help exporters in South Thanet.

[Sammy Wilson (East Antrim) (DUP)]

The concrete products industry used to have a surplus on the balance of payments but it now has a deficit of hundreds of millions of pounds. That is due to the imposition of the aggregates levy on products made in the UK but not on imported products, which has put thousands of jobs in jeopardy. Will the Minister consider imposing the same tax on goods produced abroad as is imposed on goods produced here in the UK?

[Greg Hands]

I am happy to look in detail at the points the hon. Gentleman raises. My understanding is that there have been legal challenges to aspects of the aggregates levy and that has prevented us from addressing some of these issues, but I am happy to engage with him on an ongoing basis to see what could be done better.

Oral Answers to Questions

Sammy Wilson Excerpts

Tuesday 1st December 2015 Commons Chamber

[Damian Hinds]

My hon. Friend is absolutely right. Of course, that is at the heart of the enterprise zones in the north, the city deals and the whole concept of the northern powerhouse—making sure that the cities of the north add up to something that is more than the sum of their parts—and Transport for the North, which he mentioned, is a vital part of that.

[Sammy Wilson (East Antrim) (DUP)]

What assessment has the Minister made of the impact on the long-term economic plan to grow the economy of the promises made and the policies put forward at the green junket in Paris this week in the mistaken belief that piling pounds on to power bills can somehow change the world’s climate?

[Damian Hinds]

We of course recognise the challenges that come with energy costs, but it is true that the green sector supports a number of jobs in this country. It is very important that we seek to lead on research and development, and the autumn statement was another important step towards that.

Spending Review and Autumn Statement

Sammy Wilson Excerpts

Wednesday 25th November 2015 Commons Chamber

[Mr Osborne]

Obviously, I thank my hon. Friend’s constituent for that comment. If we have improvements in the public finances, we can help families, we can reduce the deficit, as we have done, and we can make the investments in the long-term capital of the country. That is the advantage of having an economic plan that actually produces better results than were forecast, rather than worse results, which is what was happening when Labour Chancellors were giving autumn statements.

[Sammy Wilson (East Antrim) (DUP)]

The shadow Chancellor might wish to push Britain into the red, but we, like many Members, wish to see Britain in the black—I will not be reading anything out of my wee black book, mind you. While the Chancellor has been seeking to balance the finances, he has also listened on housing, tax credits, policing and the Barnett consequentials of HS2 for devolved Administrations. Does he accept that growth is still unbalanced across the United Kingdom and that although Administrations in Northern Ireland have been seeking to promote growth and paying out of a reduced budget for corporation tax, there is still much to be done? What is there specifically in this autumn statement for areas like Northern Ireland, where growth is still lagging behind and where we still need to see improvements in the economy?

[Mr Osborne]

First, I thank the hon. Gentleman for the support he has given to the measures we announced, including the Barnett consequentials for Northern Ireland. I also commend him and his party for the work they have done to reach the agreement with the other parties in Northern Ireland and with the UK Government on the Stormont House agreement, which of course unlocks further resources for Northern Ireland. In this specific spending review, there is an extra £600 million for capital investment in Northern Ireland. In the detail of the books we have produced there are also extra funds for regional air connectivity from Northern Ireland. I believe about 2,000 new flights a year will be able to be funded to and from Northern Ireland—this is a £7 million commitment. Above all, as I mentioned in my statement, if we can get the Northern Ireland Executive budget on a sustainable footing—I know how hard he is working to bring that about—we can achieve that goal of devolving corporation tax and having the 12.5% rate in Northern Ireland, which would make Northern Ireland super-competitive, not just on the island of Ireland but across Europe.

The Economy

Sammy Wilson Excerpts

Wednesday 18th November 2015 Commons Chamber

[Harriett Baldwin]

That is exactly my point: they will be disproportionately helped by the increase in the national minimum wage through the national living wage from next year.

The motion mentions productivity, and it was also raised by the hon. Member for Caerphilly (Wayne David), who is no longer in his place. Productivity has been a long-standing issue since well before 2010, and we accept that. But rather than grandstanding, we have set out a wide-ranging productivity plan. We are delivering the infrastructure projects we need, through our infrastructure pipeline, and we have set up the national infrastructure commission to take a long-term, depoliticised approach to major projects. We have seen a recent strengthening in productivity growth. Output per hour rose by 0.9% in the last quarter, and the Office for Budget Responsibility forecasts that productivity will pick up by 1.7% next year, and 2.4% in the year after that.

The motion also questions our long-term commitment to science, technology and green growth.

[Sammy Wilson (East Antrim) (DUP)]

Does the Minister agree that the freezing in cash terms of money spent on science and research and development has had an impact on productivity growth and the potential for increasing productivity in the UK economy?

[Harriett Baldwin]

We agree that maintaining the science budget is incredibly important. As part of the £100 billion of infrastructure investment that we have already committed to, £6.9 billion will be going towards research infrastructure.

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[Stewart Hosie]

I do agree. I thought it was telling that when the announcement in relation to onshore wind farms was made in this place to remove any support for those that had not passed every single hurdle, Tory Back Benchers were on their feet making the first attack on the solar sector as well. I agree with the hon. Lady entirely.

[Sammy Wilson]

Does the hon. Gentleman not see the contradiction, however, between some of the comments made by his own party colleagues last week when we were discussing the decline in the steel industry and the high energy prices and his support for renewables? Does he not accept that in Spain, for every one job created in the renewables industry, 2.2 jobs are lost in traditional industries?

[Stewart Hosie]

I have heard that argument before. I am not sure about its efficacy and I am not going to comment on it. On the substantive point, however, there is absolutely no contradiction at all between a general attempt to decarbonise, which is the right thing to do, and a clear recognition of the costs of high energy-using industries that are of strategic importance. There is no contradiction there whatsoever.

There is one final point of failure in the UK Government’s mismanagement of the economy: last week’s announcement of HMRC closures. If the UK Government are serious about clamping down on avoidance, evasion, fraud and even error, if they are serious about reducing the £16.5 billion tax gap from small and medium-sized enterprises, if they are serious about reducing the £14 billion tax gap from income tax, national insurance and capital gains tax, and if they are serious about maximising tax yield for investment, then closing 137 HMRC offices, including almost every single one in Scotland, is a catastrophic mistake.

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[Sammy Wilson (East Antrim) (DUP)]

I accept that the Government have done a number of things right for the economy, and the fact that they were elected indicates that many people across the United Kingdom take that view. That is not to say, however, that there are no flaws or faults in their current strategy.

The hon. Member for Cheltenham (Alex Chalk) accused us of saying that economic growth has been anaemic. The growth rate is as good as, and possibly better than, most other developed countries in western Europe. However, it is fragile growth. The Government and the Chancellor promised us that growth would be export-led, but that has not been the case. In fact, our exports have dropped dramatically. He promised that we would not go back to the days of boom and bust, with high consumer borrowing, and yet most of the growth is determined by consumer spending based on borrowing. The Government cannot be complacent. There must be recognition that there are difficulties ahead and that there is a fragility to the improvements in the economy.

I want to make two points. As the shadow spokesman said, this debate is a prelude to what we want to hear in the autumn statement next week. First, there must be an element of fairness in the difficult decisions that need to be taken because of the economic problems that we still face. I implore the Minister to take back the message that has come not only from the Opposition Benches, but increasingly from his own Back Benchers, that the burden cannot be placed on the shoulders of the working poor. There have to be substantial changes to the proposals made for the tax credit regime. The proposals will be contradictory anyhow, because for many people the Government’s aim of making work pay will not be realised.

Secondly, when we talk about borrowing, we have to distinguish between borrowing for the kind of spending that the TaxPayers Alliance has highlighted in the past couple of weeks, which is wasteful, and spending which is productive and gives a return. Spending on infrastructure and on science and technology has fallen by 14%, yet it has been proved we are one of the countries with the most effective spending on science and technology and on research and development. Why do we not concentrate on borrowing for those purposes?

On infrastructure, I think of my constituency. One road costing £46 million has removed almost entirely the traffic jams that cost local businesses millions of pounds a year. The development at The Gobbins has attracted thousands of tourists and bed and breakfast bookings have helped the local economy. There has been a good return on those investments. If the Government are looking for ways of spending money and if there is to be borrowing, let us make sure that it is for such infrastructure investments, which will increase productivity, give a return, improve our competitiveness, contribute to the export-led growth that we want to see, and give us strong growth for the future.

Tax Credits

Sammy Wilson Excerpts

Thursday 29th October 2015 Commons Chamber

[Frank Field]

There is clearly, as my hon. Friend says, a question about resources. We are arguing that Ministers should produce an analysis of the impact of the national living wage, but many local authorities are paying above that level now, so those workers already have that money in their wage packet. The ability of local authorities to increase wages will be limited in the years we are considering, so many public sector workers on the lowest pay will not be beneficiaries of the living wage; their pay increases will be limited by the requirement the Government have laid down. Perhaps that is a factor the Government will use in the analysis for which we are asking.

[Sammy Wilson (East Antrim) (DUP)]

Does the right hon. Gentleman also accept that when the data are being compiled, there should be an indication of the impact the changes will have on the under-25s, who will not be covered by the national living wage?

[Frank Field]

Well, indeed. Our plea is to have made available the range of analysis that has traditionally accompanied any Budget statement that any Member of this House, however long he or she has served, has come to expect.

The Work and Pensions Committee has emphasised a fourth factor, which is that there may be some wage push as a result of the introduction of the national living wage. Will that be taken into account in the Government’s analysis? I am slightly sceptical about the extent of that wage push—again, it is one of the problems of having been a Member of this House for some time. When I was initiating the Low Pay Unit’s campaign for a statutory minimum wage, the official trade union position was to oppose it on the ground that there would be a mega-bill as we re-established differentials. However, when we look at the impact of the statutory minimum wage, we see a great deal of bunching of wages, and not the big increases that some people feared and expected.

--- Later in debate ---

[Frank Field]

I am grateful to the hon. Gentleman for his intervention.

[Sammy Wilson]

rose—

[Frank Field]

I will give way again, but I will then begin to conclude.

[Sammy Wilson]

Does the right hon. Gentleman agree that the Government have accepted the principle he has just espoused about those who are already in the system? With the pension changes, for example, the Government have not required those coming up to the pension age who have certain expectations to change their expectations. Why does that not apply to those who are currently recipients of tax credits?

[Frank Field]

I could not agree more. I think those on the Treasury Bench are picking up a very strong message. There would be very little opposition to the Government introducing the reforms for people who are not claiming tax credits now, but who, if they claimed them in the future, would know the rules of the game. When this place has helped to shape people’s lives, expectations and drive, it is very different all of a sudden to blow the whistle and say, “We’re changing the rules.” People both in the Chamber and in the country feel very strongly about that.

--- Later in debate ---

[Sammy Wilson (East Antrim) (DUP)]

As other Members have said, this has been a measured debate—thanks in no small part to the way in which it started, with the contribution from the right hon. Member for Birkenhead (Frank Field). He approached the debate from the point of view that this proposal will adversely affect many of the people in our constituencies who want to improve their lives and who go out to work every day. The subject deserves the measured response and thoughtful ideas put forward by the right hon. Gentleman. He set the standard for the debate, and his approach has been replicated by other Members. A debate like this can lead to the kind of knockabout that we sometimes get in a confrontational Parliament such as this one. Some of us enjoy that kind of knockabout, but I am not so sure it would serve those whose lives are being affected by the proposal.

In the light of that, the way in which the Government respond to the debate will be important. They could rail against the constitutional outrage of the unelected House of Lords defying the elected House of Commons. They could even call, Henry II-like, for someone to rid them of those turbulent toffs down the corridor, and then bring in minimal changes. That would be a mistake.

Another option is for the Government to bring forward minimalist proposals in the autumn statement, which will deal with those who are uneasy on the Back Benches but will still not address the real problems. The Government could have a complete rethink and involve those who wish to make a constructive contribution. As Members have said, a number of Committees could be engaged in the process. The devolved Administrations should not be exempt from the process. The Northern Ireland Statistics and Research Agency has done extensive work for the Northern Ireland Executive on the impact of these changes on a wide range of groups. That work should feed into the data that the right hon. Member for Birkenhead referred to in his comments.

There are good reasons why the Government should take that constructive approach. There is widespread recognition—Members from all parties have made this quite clear—that we cannot continue to have taxpayers subsidising low wages from employers who can afford to pay more. That is the whole basis of the Government’s policy. It is about rebalancing the economy, and there is now a recognition that that needs to be done.

There is also a willingness to look at the matters that need to be addressed, the first of which is timing. If we are to make the change, there must be an assurance that the safety net currently available to the low paid will not be removed until the problem of low wages has been fixed. That must be the central premise.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

Does the hon. Gentleman agree that issues such as public sector pay increases must also be looked at? Often, very low paid public sector workers—school cleaners, cooks and nursing assistants—are the bedrock of our society.

[Sammy Wilson]

That issue will be addressed if we deal with it as I have suggested, by which I mean that the safety net is not removed until the issue of wages has been dealt with. That is the first important principle.

The second proposal is that we must be sure that we have identified all the groups that are likely to be affected during the transition. The one group I have mentioned time and again in debates includes those who will not be affected by the national living wage—the under 25s. Many of them will have families. If we set the pattern that work does not pay at the very beginning of their working lives, they will stay in that pattern. Therefore, it is important that we address the needs of that group.

Then there are the families with children. On that point, I would appreciate some answer from the Minister on the childcare allowance and the extra childcare funding that is available. It is a devolved issue in Northern Ireland, but will there be a Barnett consequential so that the same arrangements could be put in place as the Chancellor has suggested for England and Wales?

Thirdly, there must be recognition that different sectors in different regions are at different points in the cycle. There are some places where the labour market is buoyant, and where profits are increasing. In those sectors and regions, an increase in the national living wage can be afforded. However, there are other sectors and other regions where that may not be the case. There is no point in simply treating everywhere as if it were the south-east of England and the IT or banking industry and then imposing burdens on them. Small businesses and retail sectors have been identified here today. It is important that cognisance is given to the fact that there is uneven performance across the economy.

[Mr MacNeil]

We must also pay some attention to the larger picture. In the United States of America, for example, the top 0.1% have as much wealth as the bottom 90% and the gains of productivity go to those at the tops of firms, who get 350 times what the average worker in the firm can get. Certain people are taking the most and leaving the crumbs for everyone else.

[Sammy Wilson]

That brings me to my last point, which is how we fund all this. It is a reasonable question, and the Chancellor and the Prime Minister ask it all the time. Are we simply going to keep on borrowing or should we find other ways to fund it? There is one thing that I do know. I had the pleasure of being the Finance Minister in Northern Ireland for four or five years—I cannot count, which was not a help. In my first year as Finance Minister, the previous Government took over and that July 5% was taken off our budget, three months into the financial year. It was still possible to make the changes required because necessity required that. We are now talking about two thirds of 1% of the total UK budget that has to be found. No one can tell me that with planning that is not possible. Many suggestions have been made and different people will have different political priorities for the cuts, but I believe that it is doable if we have the will.

My fear is that because the Government are cocky at the moment and because the Opposition are perhaps not in the shape that they should be—I will not start making points about that, but they are not in the best shape—the temptation will be to use that disarray to try to force things through. We have heard time and again that the Government have a majority for their measures in the House of Commons. That does not matter. The question is whether their actions will be perceived as fair. If they are not, they will not have support across the country, regardless of what happens here in the House of Commons. My fear is that the Government, which taunts Labour time and again with being unelectable, might well annoy and anger people so much that the unelectable become electable. People can judge whether that is a good or a bad thing, but if the process of making that happen means that the strivers in society suffer or that the low paid workers suffer, I do not believe that it is a price worth paying.

Welfare Reform and Work Bill

Sammy Wilson Excerpts

Tuesday 27th October 2015 Commons Chamber

[Tom Brake]

rose—

[Sammy Wilson (East Antrim) (DUP)]

rose—

[Madam Deputy Speaker]

You see! Why can’t people just stand up? It is not difficult. Schoolchildren do it. Just stand up when you want to speak! I can now see a significant number of people wishing to speak. I cannot impose a time limit at this stage in the proceedings, but we have less than half an hour left in this debate, so I appeal for brevity: perhaps three or four minutes.

--- Later in debate ---

Opposition Members are opposing this change wholesale. If they wish to remove £4.4 billion-worth of public spending savings, which is what new clause 1 proposes, they have to be able to tell their constituents how they will afford that. Do they propose to put up taxes on hard-working people? Do they propose to cut spending on health, education or defence, or do they intend to carry on borrowing? The signals from both Labour and the SNP are that they want to carry on borrowing. Every pound we borrow in this generation is a pound future generations have to repay. That is why I urge all Members to grasp this opportunity to reform welfare and reform tax credits as part of a comprehensive package which helps those on the lowest wages. If we fail to do so, those Members on the Opposition Benches should justify to their children and grandchildren why we have saddled them with such high debts.

[Sammy Wilson]

We will be supporting the new clause—not because we are opposed to all welfare reform. Our voting record in this House and the fact that against the odds we have tried to drive through sensible welfare reform changes in Northern Ireland indicates that we do not take the blanket view that welfare reform is bad, full stop. Some of it is necessary, but some of it is wrong-headed, and this change is wrong-headed for a number of reasons.

First, I do not believe that the proposals will achieve what the Government want. We hear time and again—we have heard it today—that the Government want to make work pay and that those who go out every day to employment must have a reward for that and there must be an incentive. All the indications and assessments are that these proposals, because of their timing and their scale, will not make work pay. In fact, the OBR has said they will be a disincentive to work, because the rewards are being taken away from people but the mitigation will not be added quickly enough. Therefore, the objectives that the Government are setting out to achieve will not be achieved.

The second point is that in most cases we are not dealing with people who have a large buffer either of savings or additional income which can help them overcome the timing difficulty. We are talking about people on low wages and probably every penny that they earn goes on their living expenses. We have heard again today that as the tax credits come off, there will be tax cuts, additional childcare support and reductions in rent, and that all those things will mitigate the changes—and that on top of that there will be an increase in the national living wage. However, the tax credit cuts are coming in immediately, whereas the other things will be brought in over a period of time.

[Catherine West]

Does the hon. Gentleman agree that one way of bringing down the entirety of the welfare bill is to build more homes, so that we do not spend £60 billion in a Parliament on housing benefit?

[Sammy Wilson]

I agree, although that is not a short-term answer either. That is a long-term answer and it is certainly not going to deal with the issue facing us today.

The tax reductions will not affect all the people who are on low wages because they will not all hit the threshold. The childcare changes will affect only a fifth of the people whose tax credits will be cut. The national living wage increases will not apply, for example, to people under 25. So there is a whole swathe of the population who will not benefit from the other changes. Many of them will have families as well, of course. The Chancellor has said that the principal way in which the issue will be addressed is an increase in the national living wage, yet a whole swathe of the population will not be affected by that. For that reason, many people will be worse off. Even when all the changes are added together—the tax credits being removed, the tax thresholds being increased, the childcare element, the housing element, which does not apply to people in the private rented sector of course, and the national living wage—it is estimated that people will still find themselves on average a third worse off. This will affect many of our constituents.

Conservative Members should be very thankful that those in the House of Lords swapped their red Benches for red flags last night. That has probably done the Conservative party a favour. Many of the people who will be affected by these changes are the natural supporters of the Conservative party; they are the strivers of society, the people who want to do better, who want to improve themselves, and who probably look to some of the Government’s other policies. They will be hit hardest. I suspect that the Government have got off the hook, therefore.

The Government’s measures should be overturned by the House tonight and the Government should have a complete rethink. If they are serious about having a rethink, they should be supporting the amendments, to enable a radical rethink rather than a tinkering with the policy, which will be detrimental.

This question is rightly asked: what is the alternative? There are many alternatives. The changes represent less than 1% of total Government spending. Surely to goodness across Departments two thirds of 1% in savings can be found to finance dropping the changes. Over the life of this Parliament we can then work towards a sensible rebalancing, where employers pay proper wages and the state has to pay less in subsidies.

[Suella Fernandes (Fareham) (Con)]

We all share a belief in the welfare state, and in a civilised country like ours it is right that we offer help to the most needy, but the amendments are myopic and ill thought out because they forget about sustainability and fairness. Our welfare system is immensely unfair in its discrepancies. The clauses that would be amended—clauses 9 and 10—together freeze the main rates of most working age benefits, child benefit and certain elements of working tax credit and child tax credit for four years, starting from 2016-17, with important exemptions to protect the vulnerable, such as pensioners and those who are disabled, reflecting compassion and proportion.

Why are we doing that? Because since 2008 wages have risen by 12%, but for most working age out-of-work benefits the rise has been 21%. How can it possibly be fair or justifiable that the amount that people receive on benefits is increasing at a faster rate, and is more, than people receive in work? The freezes contained in clauses 9 and 10 go to the heart of reversing that damaging trend.

I want to make three key points about clauses 9 and 10. They support the original concept of welfare, as designed and intended by its father, Beveridge. In 1942, when the Beveridge report was published, he enshrined the key principles of what welfare should stand for—to help those who found themselves in occasional exceptional need. It was to help people cope with unexpected and temporary afflictions of sickness and unemployment.

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.

--- Later in debate ---

[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.

Tax Credits

Sammy Wilson Excerpts

Tuesday 20th October 2015 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

First, let me say that I do not think many people disagree with the analysis that has been made about tax credits. The question is: will the Government’s approach and the timing of their reduction solve the problem and avoid the difficulties that have been identified?

Let me deal with the three arguments put forward by the hon. Member for Spelthorne (Kwasi Kwarteng), the first of which was that Government credibility is at stake. In a democracy, it is not just the credibility of the Government that is important, but the fairness of the policies they are undertaking. They might argue that they are dealing with the deficit and taking tough action, and that those are good things, but those affected must also feel that they are being treated fairly. I do not believe there is fairness in this policy, because it does affect those people at the lower wage end of the economy. As has been said, we are talking about the strivers in society—the people who want to make a contribution and yet find themselves undermined.

[Jim Shannon (Strangford) (DUP)]

My hon. Friend has mentioned the issue of those who are going to be hit hardest. Some 300,000 more children will be put into poverty, as has been confirmed by the children’s charities. Does he share their concerns?

[Sammy Wilson]

My hon. Friend makes an important point. In Northern Ireland, 33,000 of those who will be affected have two or more children, and the impact is likely to be about £2,500 per year on them. The issue of fairness is therefore important.

The second point that the hon. Member for Spelthorne made was that this was the right time. The right hon. and learned Member for Rushcliffe (Mr Clarke) argued that the economy is buoyant, but that is not true in all sectors, or in all regions. There are many places where the labour market will not push up wages and where there is not the competition for employers to say, “We will have to hold on to workers by pushing up their wages to the national living wage or beyond.” It is not the right time in many parts or in many sectors of the economy. As the Office for Budget Responsibility has said—as has the Adam Smith Institute, which is hardly a hotbed of left-wing subversives who want to wreck the Government’s policy—the policy will price thousands of workers out of the labour market.

Finally, the safety nets that exist are not there for everybody. For example, the national living wage will not apply to a large group of people in society—to those who are under the age of 25. The new approach to housing benefit will not help those who are in the private rented sector, so they will face housing costs. The childcare costs will not apply right across the board. We will find similar things if we go through many of the other safety nets that the Government say they have put in place. For all the reasons that I have mentioned, this is an unfair change in policy.

Some Members have asked, “What is the alternative?” May I just say that I served as Finance Minister in Northern Ireland, and we had to find 5% cuts in the middle of a financial year, and then 3% cuts every year for four years? There is enough room in a budget of £400 billion to find the changes that are required to fund the phasing in of these kinds of changes. We do not have time to discuss that today, but suggestions have already been made. If this is a policy that the Government want to pursue, the real challenge is to find ways of introducing it humanely, fairly and effectively.

Finance Bill

Sammy Wilson Excerpts

Tuesday 8th September 2015 Commons Chamber

[Caroline Lucas]

I do not agree with the hon. Gentleman’s comments. There are some cases where renewables are being sited in areas where there is opposition, but those are a minority. I assure him that if he thinks there is going to be much popular objection to renewables, he should just wait until his constituents and others see the impact of fracking. That is when he is going to see an awful lot more opposition to the energy choices that this Government are making.

The fact is that the renewable energy industry is a fantastic advantage to our economy. It does some brilliant things, and it does so despite Government policy, not because of it. It is now absolutely at risk of not being able to get away from the subsidies. It does not need subsidies for much longer and has always understood that there will be digression. [Interruption.] From a sedentary position, the hon. Member for Daventry (Chris Heaton-Harris) is suggesting that this industry is surviving only because of subsidies. Nothing could be further from the truth. The subsidies are coming down. There is digression, but it has to happen in a planned way. It is not justifiable, or even reasonable, to expect an industry to not know what kind of economic situation it is working in from one year to the next. This Government keep changing the goalposts on an almost monthly basis. The renewable energy industry and the solar industry know that digression will happen and that subsidies will be withdrawn, but it must be to a predetermined timetable. When that timetable keeps changing, it is incredibly difficult for business to adapt.

Compare that with what is happening to the nuclear industry. The nuclear industry will have subsidies for decades to come. It is already 50 years old, and yet Hinkley Point C could not even begin to be built were it not for the fact that it has massive subsidies, which are hugely bigger than anything that the renewable energy industry could ever dream of. I will not hear suggestions that the renewable energy industry is somehow greedy when it comes to subsidies; absolutely nothing could be further from the truth.

[Sammy Wilson (East Antrim) (DUP)]

I thank the hon. Lady for giving way. I am sorry for stopping her in mid-stream, especially as she was getting so passionate about the subject. She cannot have it both ways. She cannot say that renewable electricity and power are coming down in cost because the industry is becoming more efficient, and at the same time wish to have tax breaks and subsidies maintained. Either the industry is becoming more efficient, its costs are converging and the tax breaks are not needed or, as many of us suspect, it will always be a lame duck and will always impose higher costs on electricity consumers.

[Caroline Lucas]

I wish that the hon. Gentleman had done a little bit more homework before making that point, because it is simply not the case. The point about the subsidies to the solar industry is that it has always been deemed that they would come down over time. The objection here is that they are suddenly being forced to reduce overnight at a time when the industry had been told that there was going to be a very different economic situation. Of course the costs of solar are coming down; they have been coming down in a remarkable way, and all credit to the solar industry for achieving that. But they are coming down in spite of the Government—in spite of their chopping and changing, their uncertainty and their lack of vision—and not as a result of something that they have done.

In conclusion, if the Government go ahead with applying this climate change levy to the renewable energy industry, they will strangle an industry that has so much potential for getting climate emissions down, creating jobs and bringing on a stronger and more resilient economy.

--- Later in debate ---

[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.