National Infrastructure Plan

Sammy Wilson Excerpts

Wednesday 4th December 2013 Commons Chamber

[Danny Alexander]

The hon. Gentleman can be assured that that project will be considered as part of our work on the feasibility study on trans-Pennine access. It is good to hear that there is cross-party support for the project and, indeed, that there is any infrastructure project that Labour Members are prepared to support.

[Sammy Wilson (East Antrim) (DUP)]

Coming as I do from a part of the United Kingdom where an £18 billion investment project for the next 10 years has already been cut by 20%, the Minister will understand why I am cynical about this plan. How can we have any confidence in his estimate of the asset sales income to finance it given, first, that he cannot necessarily commit future Administrations to capital budgets, secondly, that the pension funds have already failed to deliver on private finance, and thirdly, that it must be seen in the context of the Government’s record on asset sales?

[Danny Alexander]

Let me start by paying tribute to the hon. Gentleman, who until recently performed a fantastic service to Northern Ireland in his role as Finance Minister in the Northern Ireland Government. He and I worked closely together in that regard. I would have thought that that work alone gave him confidence in the plans that I have set out. I do not think that his claim about the £18 billion for Northern Ireland is factually accurate, for reasons that he and I have discussed many times and, I am sure, will continue to discuss long into the future. As for the rest of the plan, he can be confident in it for the reasons set out in the document, which I very much encourage him to read and support.

Air Passenger Duty

Sammy Wilson Excerpts

Wednesday 23rd October 2013 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

I beg to move,

That this House recognises that the UK has the highest rate of air passenger duty (APD) in the world; believes that this is detrimental to attracting inward investment, encouraging exports, drawing more tourists to the UK and helping ordinary families to benefit from aviation; notes research carried out by PricewaterhouseCoopers and others stating that abolishing APD would not only pay for itself but would be a permanent economic boost to the UK economy and create tens of thousands of jobs; further believes that the abolition of this tax would be of benefit to all regions of the UK; further notes that it is the intention of the Prime Minister to review green taxes; and calls on the Government, as part of that review, to give high priority to the abolition of air passenger duty.

May I offer you my congratulations on achieving your position, Madam Deputy Speaker? This is the first time I have spoken while you have been in the Chair.

I am pleased to say that the debate has received endorsement from the very highest level. During today’s Prime Minister’s questions, the Prime Minister made it clear during his exchange with the Leader of the Opposition that it was his intention—and presumably therefore that of the Government—to “roll back…green regulations”. His office has also promised a review of green taxes.

[Henry Smith (Crawley) (Con)]

I also welcome that statement by the Prime Minister. However, air passenger duty should not be confused with green taxes. It is a tax that costs the economy more than it brings into the Exchequer, so it is important that we concentrate on that as well.

[Sammy Wilson]

I will come to that in a moment, but we must make it clear that APD started off as a green tax and that it is still regarded by many as a tax that is meant to cut down emissions from the aviation industry. Like many other taxes that started off as green taxes, it is highly damaging to the economy.

[Graham Stringer (Blackley and Broughton) (Lab)]

Given the hon. Gentleman’s views, I expect that I will agree with most of what he says, but he is wrong on that point. I went back to Hansard and checked what the Government said at the time of the introduction of APD. It was not introduced as a green tax. It has been stolen by the green movement, but it was introduced because the right hon. and learned Member for Rushcliffe (Mr Clarke), who was Chancellor of the Exchequer at the time, thought that aviation was under-taxed, even though that was not the case. I agree with most of the hon. Gentleman’s points, but the tax was not introduced as a green tax.

[Sammy Wilson]

I am not going to go back into the history of Hansard to dispute that point. However, whether the tax has been hijacked, or whether it was originally intended to be a green tax, it is still cited today as one of those taxes that we need to hold on to if we are to cut our carbon emissions.

There is, of course, general concern about electricity prices, the cost of air travel and a whole range of issues affecting the UK economy. The previous Government were, of course, the same on green issues as the present Government, but the zeal of UK Governments to deal with such issues is not found in other parts of the world or of Europe, and that places us at a disadvantage. We have to stop this King Canute attitude to climate change whereby the UK Government think that they can somehow use fiscal powers to affect what is happening to the climate across the world, although they are damaging our own economy at the same time.

[Lady Hermon (North Down) (Ind)]

A label has been attached to the hon. Gentleman—quite unfairly, I am sure—to the effect that he is a climate change denier. I cannot believe for one moment that that could be true. Would he like to take the opportunity to put on record the fact that he actually believes that there is climate change?

[Sammy Wilson]

Only a fool would deny that there is climate change. The world’s climate has been changing ever since the world was in existence. The question is what is the cause of that climate change, and what impact might the fiscal measures introduced by the House have on it.

[Mr Nigel Evans (Ribble Valley) (Ind)]

On measures to address climate change, does the hon. Gentleman agree that air passenger duty has led to passenger change? Instead of flying from UK domestic airports, people are going to Schiphol, Paris, Frankfurt and Madrid for their long-haul flights, which means that the UK just loses out.

[Sammy Wilson]

We in Northern Ireland, of course, feel that much more than anyone else because we share a land boundary with another country and are just 100 miles away from what is now a major international airport at which there is no air passenger duty. That places airports in Northern Ireland at a grave disadvantage.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I will glide over the hon. Gentleman’s advertising of Dublin airport. Is not his main point that this has nothing to do with climate, as it is really about demand management at Heathrow, where there is not enough capacity to deal with demand? That demand-management tool then damages other airports in Scotland, Northern Ireland or wherever.

[Sammy Wilson]

I do not know whether it is about demand management at Heathrow, but I do know that there has been an impact not only on the pattern of where and how people fly but, much more importantly, on economic growth in the United Kingdom and on the connectivity that many of the regions need if they are to develop markets elsewhere in the world.

Let us look at the facts. Since air passenger duty was introduced, it has increased by 160% for short-haul flights and by 225% for long-haul flights. The tax brings £2.8 billion into the Exchequer, and that is expected to rise to £3.8 billion by 2016-17. If we make a comparison with other EU countries, we can see where the problem lies. Many EU countries do not have any APD, while some introduced it but abandoned it because of its impact. The countries that have retained it have done so at a lower level than here in the United Kingdom. I shall not bore the House with all the percentages, but others might want to cite them to demonstrate the impact on airports in their areas.

I do not want to be parochial, although other Northern Ireland Members may wish to spell this out in much greater detail, but it would be remiss of me not to point out that air passenger duty has a significant impact on the economy in places such as Northern Ireland. We cannot transfer between air and train travel, so the only option for people who wish to travel to places outside Northern Ireland, whether in Great Britain or elsewhere, is to travel by aeroplane, and hence to pay the duty. The Irish Government abolished air passenger duty in the Republic, with which we share a land boundary, because they recognised the importance of air connectivity to the general well-being and growth of the economy, the promotion of jobs, the attraction of inward investment, and a range of other economic benefits.

[David Simpson (Upper Bann) (DUP)]

Is not a typical example of the benefits of zero air passenger duty provided by the Dutch Government who, having abolished it in 2010, discovered that £1.3 billion had been lost to infrastructure and the economy since its introduction?

[Sammy Wilson]

The Dutch Government were not the only Government to change their mind in that regard.

It would be churlish of me not to accept the role played by Ministers—especially the Exchequer Secretary to the Treasury, who is in the Chamber, and the former Minister of State for Northern Ireland, the right hon. Member for East Devon (Mr Swire)—who listened to what was said by Northern Ireland Members about long-haul flights and, in particular, one long-haul flight to north America that connects us to a major investment market. We have managed to attract a great deal of inward investment from that place, but the main fear expressed by the Northern Ireland Executive was that the loss of that route—which was likely to go because of the air passenger duty issue—would lead to the loss of an important economic lever in the investment package of the Minister of Enterprise, Trade and Investment.

Notwithstanding what has been said about this not being a listening Government, on that issue the Government did listen and act. As a result, we have retained the long-haul flight to north America, which is still paying dividends in terms of connectivity and investment. The industry Minister has announced a number of investments from north America in the last few months, and I have no doubt that part of that success is due to the ease with which managers from New York and Boston, for example, could fly into Northern Ireland for meetings with the firms that they had set up there.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

I pay tribute to my hon. Friend for the leadership that he provided in discussing these issues as Northern Ireland’s Finance Minister. Does he agree that what Northern Ireland really needs—apart from a solution to the APD problem—is a proper air strategy that takes account of the role of each of our airports and enables us to adopt a joined-up approach?

[Sammy Wilson]

I think that that applies to the United Kingdom as a whole. The debate about whether Heathrow should be expanded or whether there should be an alternative to Heathrow is relevant to regional airports in not just Northern Ireland, but other parts of the United Kingdom, to which I am sure other Members will refer.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

The hon. Gentleman rightly emphasises the importance of protecting the existing route between Northern Ireland and north America, but does he agree that APD is also preventing new routes from opening up? May I offer an example from Manchester airport in my constituency? AirAsia X was looking to open a new route from Kuala Lumpur and was considering Manchester as the destination, but it dropped the plan in favour of Paris Orly simply because of APD.

[Sammy Wilson]

That is one of the reasons why the Northern Ireland Executive sought the devolution of long-haul APD. We pay the price for that, as the lost revenue has to come out of the block grant for Northern Ireland, but despite that, it was important because of the freedom that it gave us to look for new long-haul routes, which would be good for the economy. I have heard time and again from regions in England and Scotland that industry leaders believe it is important to try to get new long-haul routes for connectivity in terms of selling exports, getting inward investment and making business connections, but that is being held back because of the high level of APD for long-haul flights.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

I have listened with great interest to what the hon. Gentleman is saying about the effects of APD on Northern Ireland and the complexities of the issue. Is he aware that it is also a tremendous issue in the Caribbean? Because of the arbitrary way in which it has been zoned, people pay more APD to go to the Caribbean than to go to north America. Does not all this point to the need for a holistic look at APD and its effects on not only the economy of Northern Ireland, but traditional allies of Britain in the Caribbean?

[Sammy Wilson]

I do not want to get into the complexities of how APD is calculated, but anyone with just a basic knowledge of geography knows that the Caribbean is closer than California, yet California is regarded as closer in terms of calculating APD. Even here there are anomalies that have regional impacts.

[Mr David Lammy (Tottenham) (Lab)]

Have the Northern Irish been able to forge any solidarity with the small nations in the Caribbean that are suffering in this way? The hon. Gentleman will recognise that there are many British citizens of Caribbean background and, as they are certainly not the country’s richest citizens, many of them cannot afford, as a family of four, £332 extra in APD to fly back to the Caribbean on a once-in-a-lifetime trip.

[Sammy Wilson]

The right hon. Gentleman makes an important point. Although this tax is regarded by some as a tax on the rich and therefore a progressive tax, it is not: it is a flat-rate tax and therefore it is a regressive tax. Many of those who are hit are travelling on holidays or to see their families, and they save up for that even though many of them are on low incomes. Indeed, 45% of those who are hit by it would be regarded as being on medium or below-medium incomes, yet they pay the same tax as those earning more than £80,000. Leaving aside the impact on growth, on exports and on industry, the regressive nature of the tax makes it an unfair tax, and that is another reason this issue needs to be looked at.

[Sir Alan Haselhurst (Saffron Walden) (Con)]

Bearing in mind the huge revenue APD currently yields for the Government and the fact that passenger demand is rising, it would be quite a good idea to concentrate on some of the anomalies in the structure of the tax at present. That might be the weakest point of the shell around the argument—the perverse way it impacts in Northern Ireland, as the hon. Gentleman has persuasively been saying, in the Caribbean and, indeed, in other parts of the Commonwealth.

[Sammy Wilson]

The right hon. Gentleman is right. One of the reasons why we in Northern Ireland sought devolution of the long-haul tax is that we could not have afforded to have all our passenger duty devolved, with the impact that that would have had on the block grant. Nevertheless, chipping away at APD as the right hon. Gentleman describes is important.

I will come later to the revenue that the Government currently make from APD, as I am sure that is the point that the Minister will make. It is one thing to rant about the unfairness and inequity of air passenger duty, but where will the Government get the money from otherwise?

[Mr MacNeil]

Does not all that the hon. Gentleman is highlighting show the mindset of the zero sum game? There is no concept that, if APD were devolved, that would cause growth in the economy and the Government doing that would be rewarded. All that happens is that devolved Governments are penalised, while another Department in London gets the extra revenue in the economy.

[Sammy Wilson]

I have dealt with the issue in Northern Ireland, so I shall deal with that as a general issue for the United Kingdom economy as a whole. Let us look at the Government’s present objectives. We wish to achieve economic growth. We have heard the Chancellor on many occasions in the House argue that growth cannot be achieved simply by injecting more public funds into the economy, although some of us would query whether a particular type of injection, especially in infrastructure, would not have benefits.

Leaving that aside, the Government’s main thrust is that, if industry in the United Kingdom became more productive and more export-oriented and sold goods abroad, we would be able to achieve economic growth. Yet if there is one tax militating against export-oriented growth, it is this tax. Businesses currently pay about £500 million per year in air passenger duty. That, according to all the reports that have been done, influences the willingness and the ability of businesses to go overseas to look for suppliers, markets, investment and opportunities, and the frequency with which they do so. Therefore, air passenger duty has a deflationary effect and reduces the incentive for businesses to do what the Government want them to do. It therefore impacts on the ability of firms to increase their markets, increase their productivity and bring in investment, which can create further competition and help to increase the health of the economy.

[Mike Thornton (Eastleigh) (LD)]

The hon. Gentleman raises some interesting points, but I am puzzled about one thing. If reducing APD increases flights, where will those planes land? We seem to have a shortage of capacity at present. If we were full because we were doing so well, what would happen?

[Sammy Wilson]

The point was made earlier by my right hon. Friend the Member for Lagan Valley (Mr Donaldson) that APD must be seen in the context of an overall strategy. However, as has been pointed out by a number of Members, there are airports other than Heathrow and Gatwick which are capable of taking long-haul flights. Having those direct long-haul flights or even short-haul flights to other destinations would help many regional economies significantly, and there is excess capacity there. We should not always think in terms of only the main hub airports when we are talking about the industry’s capacity.

Studies have been done on the impact of removing air passenger duty and a report by PricewaterhouseCoopers went to the Chancellor. All economic models can be challenged. As an economist, I used to tell youngsters when I was teaching them in school that the model is only as good as the assumptions put into it, and those may change before the model has been run for sufficient time. We always have to be careful about economic modelling, and I am sure that the Minister will make the same point. The model used by the consultants took cautious views about elasticity of demand for tourism and elasticity of fiscal changes. It used a model that is used by the Treasury to measure the impact of policy changes. When the Chancellor comes to the House with Budget policies and tells us that behavioural changes will lead to this or that, he uses exactly the same kind of models that were used in this report. The outcome was that to remove air passenger duty altogether would lead to GDP growth in the first year of 0.45%, and in the next two years of 0.3%. During those three years, £16 billion would be added to GDP and there would be 60,000 jobs, an increase in exports of 5% and an increase in inward investment of 6%.

When people asked me for money, I would ask where it was to come from. If they wanted me to spend money on this, I would ask where we would spend less. If they wanted taxes on business reduced, I would ask where we were to get the money from. There must always be a counterbalance, but the good thing about this proposal is that it is fiscally neutral. If anything, given its impact on exports, investment and growth, the £4 billion that would be lost by 2016-17 would be more than compensated for by the increase in tax revenues and the reduction in benefit payments. That is most unusual for any fiscal change. The reasons for it are, first, that the level of taxation is so high in the UK compared with elsewhere that there would be a positive impact. Secondly, there is the importance of transport. This is borne out not just by the model but by the Department for Transport. The importance of transport to the economy is such that there is a huge multiplier effect. Lastly, because of the connectivity that this gives to other markets, there would be a positive impact.

The coalition Government promised to look at a replacement for air passenger duty and said that the revenue raised—they did not say that more would be raised—would be used to offset income tax changes. If the Government changed the method of taxation for air travel, they did not see that money as going into the general pot, either to reduce borrowing or to facilitate spending on other Departments, but as something that would be given away anyway to taxpayers. Therefore, as for how we pay for it, all the work that has been done indicates that it should be revenue-neutral. However, I assume—perhaps I am just being naive—that if the Government had made a promise that the revenue from taxing air travel would be given in income taxes and that had been factored in already, they did not actually need it for their fiscal reduction plans anyway.

I was going to talk about the environmental concerns. Members might have gathered that the impact of CO₂ emissions, or whatever other emissions there might be from air travel, on the world environment does not feature very high on my list of priorities. I am one of those who believe that there is a big orange globe up in the sky that has influenced the Earth’s climate for billions of years and will continue to do so and that the impact humans have on that is very limited. We should certainly not be strangling our economy in order to try to change the climate, especially when countries around the world that emit far more CO₂ than we ever will, do not give two hoots about emissions, so anything we do strangles our economy and is likely to have very little impact anyway.

Another reason why I do not believe that we should spend too much time on the environmental concerns is that air passenger duty, as a number of Members have pointed out, is not a green tax anyway. In that case, I am sure that Members will not be using arguments about polar bears sinking to the bottom of the Arctic ocean, or whatever other emotive arguments and blackmail they might wish to use, during this debate. Actually, it also means that I do not even have to deal with the environmental concerns.

[Mr MacNeil]

I hear a sigh of relief from behind you.

[Sammy Wilson]

There probably is a sigh of relief from hon. Friends behind me, because they do not all share my views on that.

[Nigel Mills (Amber Valley) (Con)]

I was enjoying that part of the hon. Gentleman’s speech. For the Assembly, how close did the abolition of APD in Northern Ireland come to being a viable way of encouraging investment? Was it anywhere near that, or was it way down the Assembly’s list of priorities?

[Sammy Wilson]

It was very high on the Assembly’s list of priorities. We entered into the devolution of air passenger duty for long-haul flights not knowing what the final bill would be, but we did so in the knowledge that, regardless of what the bill would be, it was a very significant issue for the Northern Ireland economy—I can say that now because the bill has been settled, but if I had said it earlier Treasury Ministers might have thought, “Oh well, we can stick the arm in as far as we like.” It was one of our top priorities. Indeed, many people argued at the time that it was all about tourism, but it was not; it was essentially about the investment strategy that had been set out for Northern Ireland and the need for connectively with one of the main markets from which we attract inward investment. All the indications we had from investors show that ease of travel was very important, whether for their managers into Northern Ireland or for staff going to north America for training purposes or whatever, so for Belfast to have that connection was essential. For those reasons, the Northern Ireland Executive decided to seek the devolution of air passenger duty for long-haul flights.

[Nigel Mills]

I understand that completely, but can the hon. Gentleman explain why the Executive are not taking a similar view on short-haul flights and why it presumably thinks that there are better ways to encourage inward investment or tourism than at least partially reducing APD for flights from Northern Ireland?

[Sammy Wilson]

It really comes back to the point made in an earlier intervention about chipping away at it and trying to use arguments to undermine the tax and its anomalies and to highlight its impact at the regional level. We took the view that it was most important that the long haul part of the tax should be devolved because we were about to lose Continental Airlines flights into Northern Ireland. That issue had immediate priority.

As the Executive have discussed again just this week, we believe that the problem is UK-wide. One of the reasons why this debate is important and why we did not frame it solely in terms of Northern Ireland is that we believe it is about a UK-wide issue. If there is to be change, it should be made here in Westminster rather than the full cost—anything up to £90 million—being borne solely by Northern Ireland. That would have a significant impact on the block grant.

[Kate Hoey (Vauxhall) (Lab)]

I fully accept that, but does the hon. Gentleman not accept that Northern Ireland is special and different because there is a lot of sea between it and the rest of the UK? Those who cannot afford to fly have to take a long route. It might help if Ministers sometimes did not fly to Belfast, but took the route that many poorer people have to take because it is so much cheaper to go all the way up to Stranraer.

[Sammy Wilson]

That is exactly right. The road or road-and-rail journey is also long and expensive.

To sum up, I trust that during this debate we will hear from Members about the impact that they have seen the tax having on the parts of the economy that they represent across the United Kingdom. Since there is to be a review of green taxes, semi-green taxes, pale green taxes, taxes that used to be green but are no longer, or whatever, and given that this issue should be revenue-neutral yet fit in with the Government strategy of export-led growth, I trust that APD will be given serious consideration in the review of fiscal policy.

--- Later in debate ---

[Nicky Morgan]

I am always happy to meet hon. Members to discuss these matters. That sounds like an interesting idea. It might help me to learn more about these issues, as I am doing in this debate.

In order to make our tax system more competitive, we plan to reduce the rate of corporation tax to 20% from April 2015. At that point, the UK will have the joint lowest corporation tax rate in the G20 and by far the lowest rate in the G7. Increased rate relief on research and development, combined with the patent box, will make the UK one of the most attractive places to innovate. As a result, the latest KPMG annual survey of tax competitiveness rated the UK as the No. 1 most competitive tax regime internationally.

As well as supporting UK competitiveness, within the constraints of the need to repair the public finances, the Government are also supporting households to meet the cost of living. By April 2014 the Government will have increased the personal allowance to £10,000, which will take 2.7 million people out of income tax altogether. In Northern Ireland, since 2010 the rising personal allowance has already taken 75,000 people out of tax. In recognition of the impact of persistently high pump prices, the fuel duty increase that was planned for 1 September this year was cancelled, and the Chancellor has also announced his intention to cancel the September 2014 duty increase.

On aviation taxes, the House will recognise that the UK is one of only four EU countries that does not charge VAT on domestic flights. That stands in contrast to rates of VAT on those flights of 19% in Germany and 20% in the Netherlands. There is also no duty charged on the fuel used in international, and virtually all domestic, flights. Finally, as I have already said, despite the fiscal challenges, the Government have ensured that APD rates have been frozen in real terms since 2010, rising by just £1 for the vast majority of passengers since then. The Government therefore reject the suggestion that we have pushed taxes on aviation too high.

Let me turn to the report on APD published earlier this year by PricewaterhouseCoopers and to which today’s motion refers. The report claims that abolishing APD would give such a boost to the wider economy that it would make other tax receipts increase by enough to offset the loss of APD revenue—the £3 billion I referred to a moment ago. The report’s conclusions, however, are based on economic models that rely on a series of significant assumptions. In particular, the report makes a series of assumptions about the behavioural impact of scrapping APD—how much business air travel would increase by—and the resulting increase in overall UK productivity.

The Government have reviewed the report, its modelling and the underlying assumptions carefully. We do not agree with the assumptions needed to justify the claim that abolishing APD would be revenue neutral overall, and, in our view, abolishing APD would have a significantly smaller impact on UK economic activity than PWC has estimated. There would therefore be a smaller increase in other taxes than PWC predicted, with overall tax revenues falling as a result. We also note that under some of the less optimistic assumptions that PWC considered in its report, its models predicted a net loss of revenue in the longer term. As I have said, any revenue loss would either need to be made good by increased revenues from other sources, or would need to be compensated for by further reductions in public spending.

The Government dispute the claim by PWC that APD is a regressive tax—I am sorry that the right hon. Member for Tottenham (Mr Lammy) is no longer in his place, as this goes to the heart of what he was talking about. PWC compared APD rates with average weekly household expenditure of different income groups, but its analysis took no account of the fact that not all households pay APD at all. A better measure of fairness would be to compare what households spend on APD, relative to their incomes. Using that measure, statistics from the Office for National Statistics show that lower-income households spend a lower proportion of their disposable income on APD than higher income households.

[Sammy Wilson]

I am amazed at the way the Minister is trying to deal with this issue. Surely we only measure the impact of a tax on someone who consumes a service. The PWC report looked at various income groups and found that the tax fell far more heavily on those with lowest income levels—that is 45% of travellers— compared with those with the highest levels. We are already comparing travellers. Indeed, the tax represented 28% of their average weekly income. If that is not regressive, I do not know what is.

[Nicky Morgan]

ONS statistics show that lower-income households spend a lower proportion of their disposable income on APD than higher-income households. We are looking at what people actually spend.

Spending Review

Sammy Wilson Excerpts

Wednesday 26th June 2013 Commons Chamber

[Mr Osborne]

It is certainly our intention to increase the number of girls going into science and engineering and, indeed, to increase the number of people doing science and engineering subjects, both as schoolchildren and young adults. Our support for skills will help to deliver that.

[Sammy Wilson (East Antrim) (DUP)]

Some 10% of the capital funding for Northern Ireland will be in the form of financial transactions money, which requires the identification of private sector loan or equity investment-type arrangements. Can the Chancellor assure us that, with local Administrations, he will look for the greatest possible flexibility in the choice of those and in the timing of that spend?

[Mr Osborne]

I am happy to look at both the flexibility and the timing, and to make sure that my Department works closely with the devolved Administration in Belfast.

Economic Growth

Sammy Wilson Excerpts

Wednesday 15th May 2013 Commons Chamber

[Mr Osborne]

The shadow Chancellor could not answer the simple question of how much the amendment he is asking us all to vote on this evening would cost. Surely he must reflect a little and realise that each year his appearance in these debates is a source of consolation and comfort to the Government. He must wonder why each year he makes the same arguments for borrowing but there is no improvement in Labour’s economic credibility. He does not seem to understand that the public think that Labour spent too much, wasted their hard-earned money and would do it all again. Does he not feel that he owes it to the British people to apologise for the mistakes he has made and the damage he has inflicted on their living standards? Should he not stand up and say, “I’m sorry, we got it wrong and we won’t do it again”?

[Sammy Wilson (East Antrim) (DUP)]

The Chancellor’s point, “You can’t borrow more to borrow less”, is a good soundbite, but he does himself a disservice, because some of the borrowing undertaken by this Government has been very effective in reducing the deficit. Only yesterday, we saw 850 new jobs in Allstate in Belfast as a result of investment in the broadband network—that is 850 new taxpayers. Does he not accept that we can borrow, and that by borrowing and putting the money into the right things we can bring the deficit down?

[Mr Osborne]

I am all for spending money on vital economic infrastructure, including broadband, and all for trying to switch the budget more from current spending to capital spending. That is precisely what we are engaged in as part of this spending round, but we have to take the hard decisions on where we are going to get our revenue from or take the hard decisions on what we will cut instead. We are making a sensible switch towards capital spending.

--- Later in debate ---

[Sammy Wilson (East Antrim) (DUP)]

It is a pleasure to follow the hon. Member for South Dorset (Richard Drax). The Democratic Unionist party endorses his views on the amendment, which we support. We believe it is important that the people of the United Kingdom should have a say about their relationship with Europe. Some of those who oppose the commitment to a referendum claim that it will somehow leave us with four years of uncertainty and that that will damage investment in the UK, but the genie is out of the bottle as far as renegotiation and a referendum are concerned. Any investor knows what will happen at some stage in the future, so there should be no difficulty in giving the people of the United Kingdom a say on this very important issue. I will concentrate on other issues that relate to economic growth, but I accept that our relationship with Europe impacts on economic growth in this country.

If we are to achieve the objectives in the Queen’s Speech of giving people job opportunities, rewarding hard work and reforming welfare, economic growth is important. If we are to create economic growth, we need proper stimulus. The Chancellor and the Government argue that we cannot borrow more in order to borrow less. That is not true. Good, solid investment in the economy would help us to grow and to pay our debts. That is not the view of those on the extreme left wing; it is the view of the IMF, which is hardly a left-wing organisation. In fact, many of its policies resonate with what is said by the Government. It is also the view of many industry organisations.

More importantly, the evidence of what has been happening in the economy bears out that view. The hon. Member for Wyre and Preston North (Mr Wallace) talked about what is happening in his constituency. Nearly every example that he gave was the result of stimulus through Government borrowing and spending to create infrastructure and produce jobs. I could give stacks of examples from Northern Ireland. There has been investment in our tourism industry. Not so long ago, we got a Barnett consequential as a result of the Government deciding to spend more money on housing. We put it into co-ownership housing, which has brought money down from the banks and has led to almost half of the houses being built in the private sector. Just a small amount of money from the public sector has created construction jobs and allowed people to pay their taxes, which adds to Government revenue and helps to pay off the deficit.

There is a strong case, even from traditional supporters of the Government, for borrowing and spending more money to stimulate the economy. The Chancellor made a big point today about the money markets. Actually, the money markets are quite relaxed about this. They are lending money to the United Kingdom on negative interest rates. There is more demand for Government bonds than supply. If there are sensible investment policies, the money can be made available. The question is whether there is the will or whether the Government have some other motive.

I am disappointed that there is not much detail on what the Government intend to do about banking. According to the figures published by the British Bankers Association, lending by the banks in Northern Ireland has fallen substantially since 2010. We have not dealt with the banking crisis. There is not time in this debate to talk about the detail, but unless the Government grasp the nettle and decide what to do with failing banks that are undercapitalised and unable or unwilling to lend, we will not stimulate growth. I believe that there is great potential and that a Government stimulus could release the billions of pounds of cash assets that are sitting on company balance sheets, which would enable us to get growth and achieve the objectives of—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.

Finance (No. 2) Bill

Sammy Wilson Excerpts

Wednesday 17th April 2013 Commons Chamber

[Stewart Hosie]

I am almost at a loss for words at the suggestion that anyone could imagine that the world will hold its breath waiting on a Liberal Democrat pamphlet! [Interruption.] I do not want to digress, Mr Hoyle, but that is a mind-boggling proposition.

The confusion in the hon. Gentleman’s contribution was far from saying that new clause 5 does not make sense; rather, it confirmed why the new clause was necessary. There are so many flaws, omissions and potential avoidance mechanisms in the Liberal Democrats’ proposals—and we had all assumed that they were worked up to some extent when they went into this miserable Government—that it makes perfect sense for the Treasury to investigate them with all their flaws to determine whether they, or another version of them, are even workable. If the hon. Member for Nottingham East chooses to press new clause 5 to a vote, we will be happy to support it.

[Sammy Wilson (East Antrim) (DUP)]

One of the common themes that has emerged on the Opposition Benches throughout the debates on the Budget is that the Government can and should do something to stimulate the economy by means of additional capital spending. One way of doing that—and one way of rapidly stimulating the construction industry—is to build houses; and, of course, many other social benefits arise from house building.

The Government have chosen a particular path towards the stimulation of house building, and I am not sure whether they have chosen it simply in order to avoid the registration of additional borrowing as part of Government debt. The means by which they have decided to stimulate the housing market—this is significant, because it is stated in the Red Book—will have no implications for central Government public sector net borrowing; it will have an impact only on the central Government net cash requirement. It seems that the Government may be engaging in the contortions described by the hon. Member for Nottingham East (Chris Leslie) in order to avoid certain Treasury accounting arrangements, rather than considering what policy will prove effective.

That is the first thing that we should consider. The second was alluded to by the hon. Member for Dundee East (Stewart Hosie). If the sole intention is to stimulate the housing market and the construction industry and it does not really matter who buys the houses or benefits from the policies, the Government ought to make that clear. Such a move would have various side effects, perhaps benefiting people who, in the opinion of many Members, do not need help with housing. If the policy is to provide a general stimulus across the board which is not relevant to the size of people’s incomes, to whether they are first-time or second-time buyers or to whether they are buying to let or buying to live in their houses, that should be made clear to us.

I do not think that the Government should be afraid of new clause 1. One of its two policy schemes, the guarantee scheme, does not involve any expenditure, because it will come into operation only if a house has to be sold at less than the price that was paid for it. There is evidence that such schemes work. In the Irish Republic, the National Asset Management Agency introduced its 80-20 scheme in an attempt to stimulate demand for some of the properties that it had taken over, and I hope that it will introduce the scheme in Northern Ireland as well. It owns property there, and is currently putting it on the market. There is evidence that the guarantee enabled people to secure loans that would not normally have been available to them, because the lenders had been relieved of some of the risk.

The right hon. Member for Delyn (Mr Hanson) asked whether such schemes would apply throughout the United Kingdom and in all the devolved Administrations. He mentioned the potential for distortion in the housing market, suggesting that people might move from one country in the UK to another in order to take advantage of them. I understand that the guarantee scheme will apply throughout the United Kingdom.

The second scheme involves equity loans. I do not think that the Government should be worried about scrutiny of its likely effectiveness. For some time, Northern Ireland has operated a co-ownership scheme which enables people to rent half a property and buy the other half. We were able to negotiate that with the banks because all the risk was being taken by Co-ownership Housing and the public purse, which would be responsible for the first 50% of any loss. The banks have actually dropped the requirement for a 20% deposit. The good thing is that there has been no cost to the public purse; it has simply been borne by the banks not requiring the deposit, because the risk has been taken out of the house purchase.

[Mr Steve Reed (Croydon North) (Lab)]

Does the hon. Gentleman also see scope for more stimulation of co-operative housing schemes in the mix in the United Kingdom? In Germany and Canada, some 10% of housing is co-operative. In parts of Scandinavia, the figure is 18%. The figure is higher in those countries because their Governments act to promote the development of co-operative housing. In the United Kingdom, it accounts for just 0.6% of all housing. It offers a way for people to get their foot on the housing ladder, without the need for unaffordable deposits.

[Sammy Wilson]

It does indeed. Let me illustrate the success of co-ownership in Northern Ireland, which is similar to the co-operative housing that the hon. Gentleman describes. More than 50% of new houses in Northern Ireland are being sold through the co-ownership arrangement. Importantly, because it is targeted at first-time buyers, it has enabled them to get their foot on the housing market ladder, stimulated demand in the economy and created the jobs in the construction industry that are so sorely needed.

Be it the mortgage equity scheme or the mortgage loan scheme, the Government should have no fear of new clause 1. If they have confidence in the schemes they propose, they should not fear scrutiny of them. Indeed, all the evidence from the Northern Ireland market and the Irish Republic market shows that the schemes will work.

[Bill Esterson (Sefton Central) (Lab)]

Does the hon. Gentleman agree that there is a particular need across the country for affordable housing to rent and to buy, and that, on striking the balance that he referred to earlier, there is a grave danger, as the Royal Institution of Chartered Surveyors has said, of creating another housing bubble if the wrong level is set? Is that the point he is driving at?

[Sammy Wilson]

That is the next point I want to make—

[Stewart Hosie]

Before the hon. Gentleman moves on, he is making a number of very serious points about the financial transaction part of housing support, but I hope he agrees that the one downside is that it does not allow that cash—such as it is—to be used for capital spending in any way apart from housing, and that it is being paid for by a real-terms cut in the Revenue departmental expenditure limit over the next two years.

[Sammy Wilson]

rose—

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

Order. I hope that the hon. Gentleman is coming to the end. I know he has a lot to say, but other Members want to contribute and I want to make sure that the Minister can reply.

[Sammy Wilson]

Thank you, Mr Hoyle; I will finish, then.

What, therefore, are the reservations about this scheme? The first concerns the way in which the spend will be dealt with. Of course, loans have to be repaid, and the scheme has been financed through a DEL cut across Departments of 1%. Secondly, it amounts to £4 billion over the next three years. The question is, could that money, if it is spent on housing, target the most needy, rather than being spent across the board with no restriction on income, meaning that people can buy second homes? Is there a better way of spending that £4 billion? Or, as the hon. Member for Dundee East suggested, if the approach were less prescriptive, are there other capital areas it could be spent on, leading to a far greater multiplier effect and impact on the infrastructure of the United Kingdom? Those are questions about the scheme that need to be asked.

My last point is that although the dynamics of the housing market would suggest that if someone moves from their home to a more expensive, bigger home—I am sure that the Minister will make this argument—it releases houses further down and starts the market moving. My main priority for constituents who come to see me is those who are not even in the housing market at all. Even though the dynamics of getting people to move up the housing chain are important, it seems to me that the priority ought to be those who cannot get social houses and who cannot afford privately rented housing as rents, certainly in Northern Ireland, are going up at a rate that prices many people out of the market. The opportunity should be provided for them to get in at the low end of the market through affordable housing. That is why we need a much more targeted scheme. One reason why I think it would be useful to examine the scheme within a short period of time is that it would show whether the real objectives and priorities in the housing market are being addressed by these schemes.

[Stephen McPartland (Stevenage) (Con)]

I appreciate the opportunity to speak in this debate, Mr Hoyle, and I shall make my speech very short as I appreciate that two Opposition Members wish to speak. I will speak for about three minutes tops and will rattle off my points as fast as I can.

The first issue I want to raise on new clause 5 is the fact that it refers to property and does not distinguish between residential property and business property. That concerned me greatly when I first looked at the new clause, as it would create huge concerns in the business community. In my constituency of Stevenage, we have some large business interests. GlaxoSmithKline has a huge operation employing 4,000 scientists in Stevenage—[Interruption.] Although the new clause mentions the “mansion tax”, it just states that it would be on “property”.

How would that property be valued? There seem to be two values in property at the moment: the value one thinks one’s property is worth and the value at which someone would buy it. There is always a big disparity between those values. Such a change would lead to a large revaluation exercise across the UK and my concern is that once we have that revaluation exercise, council tax revaluation will be a real problem across the country. A huge number of people will be very concerned about council tax increases if all their properties have been revalued. Council tax more than doubled under the previous Government and I am pleased to say that under this Government it has been frozen for the past three years—[Interruption.] I see the annunciator has just changed to show my name, although I will sit down in about one minute.

My other point is that the new clause also refers to a tax cut for low-income and middle-income earners, and I am proud that this Government have introduced a tax cut that will be worth more than £700 next year for those low earners on up to £10,000. I am sure that the Opposition would agree with the Government that the best way to introduce a tax cut is to have a tax rate of zero rather than the 10p tax rate on which my colleague the hon. Member for Bristol West (Stephen Williams) had a very robust exchange with Opposition Members.

I shall now sit down as you are gesturing for me to do so, Mr Hoyle.

--- Later in debate ---

[Alison Seabeck]

The hon. Gentleman has completely misconstrued my remarks.

We need to invest to grow jobs. We need to grow our economy, and as we do that, there will be more jobs. People want to work, but the evidence is that the jobs are not there. People are having to work part-time, even to have multiple part-time jobs, in order to keep body and soul together. We need an economy that is growing, and we are not getting that from this Government. We need Labour’s bank bonus to invest in jobs, to tackle unemployment across the country, and to help young people.

[Sammy Wilson]

Although we have not heard many speeches by Government Members, I am a bit surprised by the attitude they have adopted to this proposal in view of one of the Government’s declared objectives in the Budget book. Under the heading, “Fairness”, it states:

“The Government’s economic and fiscal strategy is underpinned by its commitment to fairness”.

I would have thought that anyone looking at the proposal would find it very difficult to say that it does not have a core of fairness within it. It is directed towards an industry, the banking industry, which was partly responsible for the economic crisis we face, the impetus for which was people in that industry being given incentives to behave in a reckless way that led to the kind of borrowing and lending that created our current difficulties. They were bailed out by the taxpayer, with bonuses then being paid out of that bail-out. I would have thought that on the grounds of fairness alone, Government Members would see at least some merit in the arguments for the proposal which have been advanced.

I have often heard it said, not only by Labour Members, but particularly by Government Members who are close to small businesses—perhaps many of their supporters are small business owners—that the banking industry has strangled those businesses in the middle of the recession, refusing to lend to them even when there are good, viable propositions and putting the squeeze on them when they most needed liquidity. I would have thought that Government Members would have some sympathy for a proposal that said to them, “We cannot reward people at the top of an industry who are destroying, squeezing and making it difficult for the businesses that many of you would regard as your supporters”, yet they seem to be opposed to it.

[Huw Irranca-Davies]

The hon. Gentleman is making a very powerful speech. Has he had the same conversations as I have with lower-paid bank clerks and bank staff who are equally appalled by the excesses of their extremely well-remunerated paymasters right at the top of the organisation? They would look at this amendment and think that it is completely fair and should be delivered for them, as well as for us.

[Sammy Wilson]

The hon. Gentleman brings me to my next point. Even some within the banking industry would say that there is no economic rationale for the obscene bonuses that are given at the top of the industry, and that there is no necessity for those bonuses to make it work efficiently. On a weekly basis, businesses and individuals come to me and say that if anything is strangling growth and the potential for it, in the economy today, it is the performance of the banking industry. When I hear about of some of these bonuses, I wonder what they are being paid for. They are certainly not being paid because the banking industry is performing well in helping to grow the economy and lift us out of recession.

[Mark Garnier]

The hon. Gentleman is making a very powerful point. However, that is exactly why some of us have spent the past nine months on the Parliamentary Commission on Banking Standards examining the problems he is talking about. It is why the Government introduced the Financial Services Act 2012 in order to repair the regulatory environment and to establish the Financial Policy Committee to look at the instability in the system that can come about as a result of perverse incentives from bonuses. It is why the Government are currently taking the Financial Services (Banking Reform) Bill through Parliament. A huge amount is being done for exactly the reasons he mentions.

[Sammy Wilson]

Yet the situation continues. Despite all that, we do not see any change.

Some of the arguments advanced by Government Members, mainly through interventions, as to why the proposal is a bad idea, have become increasingly desperate as the debate has progressed. I believe that this should be done, first, on the basis of fairness, and secondly, because it has some potential for changing behaviour, and that ought to be given serious consideration.

The first argument was to say, “If we do this, we will be taking money out of the economy.” What do these people who get the bonuses do with them? Are they generating additional expenditure in the economy? If someone gets a bonus of £1 million, are they likely to spend it? We all know, and it is well evidenced in economic theory, that the more money we get, the higher the proportion of that additional income we tend to save—it does not contribute to the economy. During the Budget, the Chancellor said that the poor performance in the economy was because consumer spending had been suppressed and was not what had been anticipated. When I hear the argument that discouraging these bonuses, or taking them back in the form of tax, removes spending power from the economy, I find it rather bizarre.

[Alison Seabeck]

The hon. Gentleman is reinforcing a point that I touched on earlier. In Plymouth, we are losing £16 million a year in benefits, and the people who usually get those benefits are poor and would spend the money in their local areas, not on foreign holidays or by putting it into bank accounts.

--- Later in debate ---

[Sammy Wilson]

Although saving is, of course, good in any economy, the important question at the moment is: how do we generate spending? The hon. Lady has reinforced the point that if money goes to unemployed people they are likely to spend 100% of that income, but someone who gets a £1 million bonus is likely to save 90% of it—perhaps more—so it will not be injected into the economy. I do not think that the argument that the amendment would remove money from the economy and, somehow or other, deflate it stands up to scrutiny.

The second argument, which was made by the hon. Member for Dover (Charlie Elphicke)—he tried to promote it in a couple of interventions on the hon. Member for Nottingham East (Chris Leslie)—is that all this levy would do is make finance either pricier or less available. As has been said, that implies that the only part of bank spending that is sacrosanct is the amount of money spent on bonuses. Making an activity more expensive tends to direct people away from it, and I cannot see how the banks would be any different. If we make it more expensive and more costly for them to give bonuses, they will be driven away from using those funds in that way and it would create a behavioural change. If that change did not happen, however, and bonuses continued to be paid and the tax on them recouped from customers, the alternative would be regulation. The customer should not have to pay for them—if banks do not change their behaviour, we should ensure that the taxes cannot be passed on to customers.

The third argument—I found this one bizarre, especially with regard to the bank levy—is that since we cannot be sure how much money will be raised, we should not pursue it. If that were true, we probably would not tax anything. How often do we hear the Government predict the amount that will be raised in tax revenue, only then to revise the figure within six months, either because behaviours have changed and the expected amount has not been raised, or because the economy performed in a different way than expected?

The hon. Member for Wyre Forest (Mark Garnier) made that argument, but on that basis we would not have the bank levy, which was supposed to raise £2.5 billion this year, and raised only £1.1 billion. I do not know why that revenue was not raised—perhaps there was some change in the economy—but whatever the reason the bank levy did not raise the money intended. Moreover, the Government made spending plans on the assumption that that revenue would be available. I do not think that the amendment can be argued down on the basis that it may not raise the money and therefore no commitment should be made.

[Mark Garnier]

On that point, the hon. Gentleman does not seem to have read the amendment, the whole point of which is to raise money specifically to be invested in creating new jobs and tackling unemployment. If the Opposition want to invest a specific amount, they need to know how much money they will raise.

[Sammy Wilson]

The hon. Gentleman has missed my point; perhaps I did not make it very well. When the Chancellor declares what taxes he intends to levy in the Budget, that announcement is accompanied by what he intends to spend that tax revenue on. Sometimes that revenue materialises and sometimes it does not.

The only requirement that I would make of an amendment of this nature is that it does not throw out a reckless figure and say, “We will make £x billion from this provision and spend it.” The Minister was right to ask on what basis the amendment’s calculation was made, but it cannot be argued that, because there is a degree of uncertainty, this is not a good proposition. I would have been very unhappy had the amendment said, “Let’s raise the money and then we’ll see what we will do with it.” It is much easier to make an argument on the grounds of fairness: “Let’s raise the money and this is what we will do with it.” Knowing where the money comes from, the purposes for which it was being used and the purposes for which it will be used once collected would enable us to judge whether the proposition is fair. It is not possible to divorce how the money is raised from what will be done with it.

[Neil Carmichael]

Does not this line of argument represent the thin end of the wedge with regard to hypothecation? Raising taxes is a general activity and the decision on how they should be allocated for expenditure purposes has to be made on other grounds. The obvious example is the health service.

[Sammy Wilson]

I agree that a general proposition that every specific tax raised should be hypothecated for a certain purpose would be very dangerous, but this is not a general proposition; it relates to one specific case and that case has to be made.

[Geraint Davies]

In following the logic of the hon. Gentleman’s eloquent argument, am I right in saying that he agrees that what banks should really be doing is supporting small businesses that have large order books and successful products and that want to upsize and build their business, but that do not have a lot of collateral and houses? That is what the banks should be focusing on in our local communities and economies, not on massive bets against share price changes and derivative bundles, which will develop multi-billion pound bonuses in an almost virtual world. What we want is a real economy supported by banks, not a bonus culture backed up by the state.

[Sammy Wilson]

That is one of the arguments for separating retail banking from the riskier banking activities described by the hon. Gentleman.

The fourth argument is totally different from the others, but I think that Government Members were getting increasingly desperate as they clawed for arguments against what is a reasonable proposition. One Member asked several times whether the amendment was designed to change behaviour, to act against perverse incentives or to raise revenue. All taxes tend to have behavioural consequences anyway; it is in their nature to change behaviour. Some are specifically designed to do so, while some are more genuinely revenue-raising because they do not affect behaviour as much. If the revenue from the tax goes down because fewer bonuses are paid, that does not necessarily mean that it is bad for the economy. For example, if banks decide not to pay bonuses and to keep the money as profits, corporation tax revenue will go up; or if they decide to put the money back into the bank and thereby increase liquidity, that will have a beneficial effect on the economy, because banks will be able to make more loans to businesses. Just because it may change behaviour does not necessarily make it a bad proposition. In fact, the proposition stands, as it could have other tax revenue-raising consequences or induce changes in bank behaviour that mean they have more money to do what the public expect them to do, rather than simply giving huge bonuses to their top-ranking employees.

--- Later in debate ---

[Richard Graham]

The hon. Gentleman is contributing to the anti-bank ranting that we have had for the past couple of hours. What about the second part of the amendment, which provides that the levy shall be used to create jobs and employment? As a former economics examiner, does he believe that it is the business of the Government to create jobs? If so, what sort of jobs—Government jobs or state aid that would fall foul of EU rules? What does he think of the Government’s performance on employment? Is he surprised that unemployment is not higher?

[Sammy Wilson]

I hope that my speech has not been interpreted as an anti-bank rant. Indeed, I made the point at the beginning that banks are essential to the working of the economy. They provide the oil for the economy, and we want to find ways to make them do the job they are meant to do. If a bank bonus tax is one of the ways in which we could get them back on track and away from providing perverse incentives for particular employees to behave in certain ways that have not been helpful to the economy, that would be beneficial.

A properly functioning banking system is important for the economy. Rather than this proposal being anti-bank—[Interruption.] From a sedentary position, the hon. Gentleman says, “Answer the question.” He asked me two questions and I am answering the first. Banks are an essential part of the economy and we want to ensure that our proposals address that.

The hon. Gentleman also asked whether it is the role of the Government to create jobs. It is the role of the Government and the private sector to create an environment for jobs and in which economic growth can take place. In some cases, that will mean direct involvement by the Government in job creation. Even some of the most right-wing members of the hon. Gentleman’s party, who are adherents of supply-side economics, would accept that it is the role of Government, for example, to provide opportunities for people to train. That creates jobs. It increases the skills base of the economy, which makes it easier for the private sector to create jobs. It is a question of co-operation. It is not a case of either/or. It is a simplistic view of the economy to suggest that only the private sector creates jobs and the Government sit on their hands—

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

Order. May I remind the hon. Gentleman that this is a timed debate that will end at 7.15 pm. I hope that he will forgive me for interrupting, but it would be good to hear what the Minister has to say.

[Sammy Wilson]

I will conclude on that basis. I hope that I have addressed some of the points made by coalition Members. The amendment should be supported on grounds of fairness, of improving the banking system and of ensuring that the money that the Government raise from this provision could be used to help to stimulate the economy.

[Greg Clark]

I am grateful to you, Ms Primarolo, for allowing me to get a word in edgeways in this debate. It has been a most illuminating debate. We have discovered that it is the policy of the Opposition to raise £2 billion from a bank bonus tax when the pool of bank bonuses this year is forecast to be £1.6 billion. The Opposition Front-Bench team was commended for proposing an imaginative measure. It certainly is imaginative. Indeed, it is the stuff of fantasy that more could be raised in revenue through a tax than is contained in the tax base to which it applies.

The Opposition have done this before, as I shall say later, and this is a familiar debate. We had this debate in 2011 and in 2012, and now the Opposition have tabled a more or less identical amendment on a policy that was introduced in the dying days of the last Labour Government for one year only—a payroll tax on banks. When the then Chancellor introduced it in December 2009, he insisted that it would be a one-off tax. Indeed, it was not even for a full year, but from December 2009 to April 2010. But in the Finance Bill Committee of the whole House almost exactly a year ago, the hon. Member for Pontypridd (Owen Smith) revealed:

“If Labour had won the election, it may have changed its view and continued the bank bonus tax.”

On reflection, he said,

“I think a Labour Government would have continued it”.—[Official Report, 18 April 2012; Vol. 543, c. 391.]

The annual reappearance of this temporary Labour tax should remind us all that whenever Labour proposes a temporary tax, it is best to assume that it is for life—

Financial Services

Sammy Wilson Excerpts

Wednesday 6th February 2013 Commons Chamber

[Greg Clark]

The discount in fines given for co-operation is one reason for organisations to co-operate, but I will look at my hon. Friend’s point on individuals.

[Sammy Wilson (East Antrim) (DUP)]

The report indicates that, so arrogant were some bank workers, they treated themselves as masters of the universe to whom normal rules of fair play did not apply, which has impacted on banks and their reputations. The banks rather than the taxpayers will pay the fines, as they are required to do, but how will the Minister ensure they do not simply pass on additional charges to customers to recoup the costs?

[Greg Clark]

It is essential that the banks do not do that. They need to be transparent as to the source of the payment to meet the fines—that is essential. Far from those people being masters of the universe, they are culpable of doing a great disservice in falling way short of the standards of behaviour by which most decent people up and down the country would expect to live their lives.

Autumn Statement

Sammy Wilson Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

I do agree with my hon. Friend. It is worth remembering that we put together these difficult autumn statements and the like in a coalition. We are able to demonstrate to the rest of the world that Britain has strong and decisive government. I am grateful to my Liberal Democrat colleagues who have helped me in this. I hope that Liberal Democrats and Conservatives can celebrate the increase in the personal allowance. There are many Conservatives who also wanted to achieve that, and it was in the Liberal Democrat manifesto too. The fact that we are able to do that shows that we are helping working people even in these difficult times.

[Sammy Wilson (East Antrim) (DUP)]

I acknowledge some of the positive impacts that this statement will have on Northern Ireland, including saving people from increases in their electricity bills as a result of the exemption from the carbon price floor, lifting 8,000 people out of tax, and an additional £135 million of capital spending. However, given the rocky road that the Chancellor has said lies ahead and given his credibility in the markets, could he not find his way to borrowing more money for infrastructure projects to create jobs, rather than paying to keep people on the dole?

[Mr Osborne]

I welcome the hon. Gentleman’s support for some of the measures we have taken to help the Northern Irish economy, which I am well aware has particular problems in the banking system that require even more attention. I have always sought to respond to the Executive’s proposals where there is a specific case for Northern Ireland, as we did with transatlantic flights, for example. More generally, we are committing additional money to infrastructure, and I want some of that additional infrastructure to be in Northern Ireland. We are also guaranteeing infrastructure projects across the United Kingdom, and £10 billion of projects have pre-qualified for that under the legislation we took through Parliament this autumn. That scheme is available to people and companies in Northern Ireland, and if the Executive want to talk to the Treasury about what more we can do to encourage take-up in Northern Ireland, I would be happy for those conversations to take place.

Income Tax

Sammy Wilson Excerpts

Wednesday 28th November 2012 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

I approach the debate from a different angle from some Opposition Members. I am sympathetic to the view that we ought to aim for a low-tax economy, which offers benefits. Only this week in Northern Ireland, we announced tax cuts for small businesses. Measures that we announced six months ago have had an impact in creating jobs. Fifty-two new businesses have started, and over 100 jobs have been created in return for a modest reduction in tax revenue. We are also seeking the devolution of corporation tax, so that we can introduce a lower corporation tax rate.

As I have pointed out to Members of the Northern Ireland Assembly, all of that means that there are certain things that we cannot do. We have to find efficiencies in public spending, and there are things on which we cannot spend money. The logic of the measure is accepted by Sinn Fein, which supports it, although some of its members are probably to the left of Labour Members.

However, I oppose the measure that the Government introduced to reduce the top rate of income tax for the best paid. I do not believe that the cost will be as low as the Government said. The Minister said that it will cost £100 million, but that figure is surrounded with lots of conditions and caveats, such as notions about how tax changes are sensitive to how people behave. As the Office for Budget Responsibility has pointed out, estimates of tax income elasticity vary from 0.35% to 0.48%, which is a difference of nearly 40%. Whatever the assumptions about behavioural consequences—whether people will move back to the United Kingdom or stop moving out; whether they will stop avoiding tax or keep using existing measures—given the cost of moving back or changing pension or retirement arrangements, it is unlikely that the impact will be as great as suggested.

Even if the measure were correct—the hon. Member for Dover (Charlie Elphicke) said that he was glad that the Government had divorced politics from economics in making that tax decision—we should not introduce it at a time when we are telling people across the United Kingdom that they have to tighten their belt, spend less and accept that they will have a lower income. We are saying that to pensioners, to lower-paid people and to people on middle incomes. We cannot send out a contradictory message that that is okay for people at the lower end of the income spectrum, but not for people at the higher end. If the Government really want to sell their message of austerity, that message must be clear so that people know that everyone will be equally affected. If a pensioner faces a £7 weekly decrease in their pension and a millionaire gains a £2,000 increase in their weekly income, people will not take the view that we are all in this together.

The politics of the measure is important. The Government might believe that low taxes can stimulate the economy because they will attract the rich to the UK, where they will create jobs, but it has been proven that other tax cuts costing an equal amount would provide a far greater stimulus to the economy. For the same price as reducing the top rate of income tax for the top 1%, we could reduce VAT on extensions on premises to provide jobs in small businesses in the building industry. There is much greater price elasticity in demand for that activity, as has been shown, so such a measure could provide a much greater stimulus.

The policy is wrong economically; it is wrong politically; and it is wrong on the basis on which the Government have tried to sell it. For that reason, I support the motion.

Multiannual Financial Framework

Sammy Wilson Excerpts

Wednesday 31st October 2012 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

It is a great joy to follow the hon. Member for Harwich and North Essex (Mr Jenkin). In this debate, I believe the people of Northern Ireland would expect me to lay down the marker that if we as citizens of the United Kingdom have to share in the necessary austerity measures required to get us out of our current financial problems, we should expect the same rigours to be placed on the European Union.

I have the honour of serving as Finance Minister in the Northern Ireland Executive. Over the last couple of years, I have had to defend and explain and implement a 40% cut in the capital budget of the Northern Ireland Executive. I have had to resist Ministers who stood out in the streets protesting against cuts to the education budget, the health budget and other budgets, and explain that we were at an end of making money available for all the things we had to do. I think the people would find it difficult if, when it came to the over-fed bureaucracy of Europe, we did not take the same stance. As for the arrogance of the bureaucrats in the European Union—sometimes described as the Bisto bureaucrats who think that the gravy train is still running—we need to put down a marker and say that the years of simply asking for money and getting it are at an end.

Many Members have said today that this is only a cynical exercise, that it will hurt the Prime Minister, that Labour Members are jumping on the bandwagon and that they are a bunch of hypocrites. I must say that I share some of the cynicism about what happened in the past, but this is not about what happened in the past; it is about what we are going to do now. I am sure that if the former leader of my party were here, he would tell the House that there is great joy in heaven over one sinner that cometh to repentance, and that there should be unbounded delight on the other side when a whole party-load of sinners may have come to repentance and renounced their fiscal sins of the past.

Regardless of the motives behind it, the amendment does not weaken but strengthens the Prime Minister’s position. It enables him to go to Europe and say, “The entire House of Commons supports my position, and I have to go back to the House and explain. Either you make changes in the budget, or I cannot carry it in the House of Commons, because I am facing united support for the stance I am taking.”

[Mr Dominic Raab (Esher and Walton) (Con)]

The hon. Gentleman is making his case in typically passionate terms and I am reluctant to interrupt him, but, as a realist, is he aware that the 8% increase in the last multiannual budget was the smallest increase ever agreed in the EU? The chance that Brussels will now accept a real-terms freeze, let alone a cut, is virtually zero, and therefore we are almost inevitably heading for a veto. Is not the only real question whether the Leader of the Opposition joins the Prime Minister and the Deputy Prime Minister in supporting that veto?

[Sammy Wilson]

I have no difficulty with the veto. I do not have to be ambivalent about the veto. Whatever is required in these vital negotiations—whatever leverage is required—must be used. The point I am making is that the best leverage that the Prime Minister can exert in the negotiations is his ability to say, “Regardless of their positions on the party-political spectrum in the House of Commons, all its Members support me in saying that we will not give an extra penny to the European Union, and, furthermore, we want to see a reduction in the amount of money that we give to the European Union.”

[John Hemming (Birmingham, Yardley) (LD)]

I agree that we should constrain the amount of money we send to Europe, but in financial terms the difference between the amendment and the original motion could be less than £1 a year. Why divide the House when we all wish to constrain that amount?

[Sammy Wilson]

The hon. Gentleman is wrong. As so much of our rebate is not covered in the new arrangements owing to increases for new member states, our contributions would go up by 5.3% over the seven years even if we opted for and secured a real-terms freeze in the budget. We are talking not about pennies, but about billions of pounds.

The bottom line that is suggested in the motion would actually prove very costly for the British taxpayer, which is why a motion proposing not a real-terms freeze but a real reduction in our contributions to the EU could, and in my view should, gain unanimous support in the House. That is the only way of ensuring that the austerity that people in the United Kingdom have had to experience is also experienced in the European Union. It is not that there are no ways in which money can be saved. For 17 years, the European Union’s accounts could not even be signed off because billions could not be accounted for. The amount of waste that takes place in the EU shows that it is not impossible to make reductions.

I do not know whether I shall be on the right or the wrong side of the vote tonight, in terms of who wins, but I do know that the Lobby that I go through will be the Lobby entered by Members who are standing up for people who have experienced austerity, and experienced it stoically because they believe that it is the right way to ensure the financial soundness of the United Kingdom. I will go through that Lobby because I am on the side of those who want to give the Prime Minister the best hand in the negotiations. I will go through that Lobby for the sake of the people who want to see an end to European and bureaucratic waste. For those reasons, I shall support the amendment.

Public Service Pensions Bill

Sammy Wilson Excerpts

Monday 29th October 2012 Commons Chamber

[Danny Alexander]

No, there will not. Let me describe how this works. The negotiations that my ministerial colleagues and I conducted in UK Government Departments allow considerable flexibility within the parameters of the Bill—for example, the link between the state pension age and normal pension age, and the move away from final salary—and within the so-called cost envelope set up around the schemes. For example, the hon. Gentleman will note that the teachers pension scheme has agreed a different balance between accrual rates and revaluation factors for its new scheme from that for the health workers pension scheme. There is great flexibility in the provisions, provided things stay within the cost envelope. Under the Bill, the devolved Administrations are free to make more generous provision, as happened with the offer for prison officers. The Ministry of Justice agreed to fund an additional element of the proposed scheme to enable prison officers to have enhanced early retirement factors beyond those that were affordable within the cost envelope. The Ministry had offered to put additional resources on the table from its own departmental expenditure limits, and that was part of the offer that prison officers sadly rejected. Should the devolved Administrations wish to do something similar, they will be within their rights to do so, at their own expense.

[Sammy Wilson (East Antrim) (DUP)]

One of the options open to the devolved Administrations was for their pension schemes to be included in the Bill. In Northern Ireland, the Executive decided not to take that option, which could mean that, simply because of the timing of the legislation, the new scheme will be in place here, but not in Northern Ireland, even if Northern Ireland decides to follow suit. Will there be a penalty if there is a time gap between the implementation of the legislation in the rest of the United Kingdom and any delayed implementation in Northern Ireland?

[Danny Alexander]

I am not aware of any technical reason why a time gap should occur, but I know that officials in the Northern Ireland Department of Finance and Personnel discuss this regularly with my officials in the Treasury. If there is any evidence of such an occurrence, I will be happy to consider it in the normal way. There have been regular discussions on these matters, not least in our Finance Ministers quadrilateral. We will meet again in a couple of weeks in Edinburgh, when this subject will be on the agenda, so we can discuss it then.