Tax Avoidance and Multinational Companies
Seema Malhotra Excerpts(8 years, 3 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I thank all right hon. and hon. Members who have made such excellent contributions to this debate, including my right hon. Friend the Member for Barking (Dame Margaret Hodge), who said that the Government have lost the argument on transparency. Other Members raised important issues about how we now seem to have one tax rule for large companies—multinationals—but another for small businesses in our country. We heard about the use of tax havens, transfer pricing, and the fact that the Tories cannot claim that they have continued Labour’s progress on this issue. I pay tribute to the work of those who have campaigned for tax justice, including Richard Murphy, Christian Aid and others, as well as the Co-operative movement, with its campaign for a fair tax mark that includes country-by-country reporting.
Over the past week, the Google tax settlement issue has shocked us all. The Chancellor cut a lonely figure when he tweeted that that tax deal was a “victory”. The tweet had scarcely had a chance of a retweet before Downing Street distanced itself and MPs in all parts of this House called the deal derisory. Questions then came thick and fast about how we could have reached a settlement that effectively implied a 3% tax rate. It was the moment when, as one journalist wrote,
“Google lost the argument in the court of public opinion.”
Yes, there is a lot to admire about Google. Millions rely on the access to knowledge and information that the Google search engine helps to put at our fingertips, and innovative products pushing at the frontier of our digital age have transformed our personal and working lives. However, we cannot tolerate this huge global business not playing fair when it comes to tax. We now know for a fact that Google has been short-changing us for more than a decade. Whatever else it has done, this settlement proves that fact.
The deal has left a series of questions in its wake. Do we know whether Google is paying its fair share of taxes, as it tells us? We do not know, because the deal is shrouded in secrecy, but there is lots to suggest that it is not. Only this week, we heard that Google’s parent company, Alphabet, is now the world’s most valuable company, with a valuation of $568 billion. In just four years, Google paid its chairman a total of £166 million—more than it paid in UK taxes for 10 years.
We support and celebrate success, but this is an issue of fairness. Many are therefore asking a second question—after his tweet, can we trust the judgment of the Chancellor on this issue? Can we trust the judgment of a man who describes what is effectively a 3% tax rate for the world’s most valuable company as a “victory”? In 2014 alone, Google UK made an estimated £1 billion profit; 20% tax on that alone would have been £200 million, enough for 4,000 police officers. Fairness in the tax system is important for us all, and this is not a victim-free zone. When global companies such as Google do not pay their fair share, businesses and families in the UK take a hit. We have all heard from businesses in our constituencies that wonder why there is one rule for large multinationals and another for them. British families lose out, too, because uncollected taxes mean revenue forgone, with bigger cuts to public services and lower levels of investment when we need it the most.
There is another reason for questioning the Chancellor’s judgment. How can people trust the judgment of a man who thinks it is right to undermine and demoralise his tax-collecting agency? It is a classic example of a false economy—short-term cuts that have long-term costs. Why has the inquiry, which was set up under the Labour Government in 2009, taken more than six years? Nobody knows, seemingly not even the Chancellor. If ever a situation showed a lack of political will, it is this one.
People’s trust in the Chancellor and in the fairness of the tax system has been undermined further by two recent reports. The Chancellor and 16 different Tory Ministers have had face-to-face talks with Google bosses over the last two years, but did any of them raise the issue of the company’s tax structures? Perhaps the Minister can tell us today.
People feel a growing sense of huge injustice when large multinationals can shift their profits so easily and avoid the taxes that they should be paying. Now we find out that, only last year, Tory MEPs were instructed on six occasions to vote against proposals to clamp down on multinationals that engage in aggressive tax avoidance. In addition, they have voted repeatedly against measures to tackle tax evasion.
The Chancellor has even failed to apply his Google tax to Google. Perhaps he can tell us whether the Google tax—the diverted profits tax—would have applied if a deal had not been reached. Things need to change, and we believe that the Chancellor has a duty to take steps to restore public confidence in how HMRC operates in cases such as this. He must now address widespread concerns about the lack of transparency surrounding the deal and show us how the deal was reached so that it can be scrutinised by Parliament and the public. Few can understand how HMRC accepted at face value Google UK’s claim that it, a company with more than 2,000 UK employees, does not have a permanent establishment in the country for corporation tax purposes.
Since last week, we have seen this deal unravel. Every step of the way, the Chancellor’s failure of judgment has been apparent. It is not the first time that the Chancellor has failed to stand up for people in Britain. He is hurting, not helping, British businesses and families. We need renewed focus and action on tax avoidance and tax evasion, and a real plan to close the UK tax gap. That is what Britain deserves and the British people expect. We need a plan that puts transparency and fairness first—a plan through which we work to reach international agreement on country-by-country reporting and drive forward its implementation. The deal, and the way in which it came about, must not be allowed to set a precedent. If the Chancellor will not act, Labour stands ready. I urge all hon. Members to vote with us in the Aye Lobby.
Oral Answers to Questions
Seema Malhotra Excerpts(8 years, 4 months ago)
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Damian Hinds
I absolutely agree with my hon. Friend about the importance of engineering. The evidence of that was shown in the spending review and the autumn statement, with enhanced support for science as well as the apprenticeship levy, which is an important structural change in the way we invest in our skills base.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Five years ago, the Chancellor said that he would rebalance the economy towards manufacturing, exports and the regions. The director-general of the British Chambers of Commerce recently said:
“None of those things have actually transpired in practice yet.”
Will the Minister tell me why not?
Damian Hinds
We are rebalancing the economy, but it is a long-term and sustained programme—indeed, it is our long-term economic plan. We have talked already today about some of the enhanced support for science, technology, engineering and mathematics and the skills base, the apprenticeship levy, and the catapult centres, which give British business access to the best in leading- edge technologies. Of course there are some things in international trade that we cannot control; for example, there was bad news again today from China. Nor can we control the world exchange rates. However, we are absolutely doing the things that we can when it comes to supporting British exporters.
Seema Malhotra
There we go again—it is everybody’s fault but this Government’s. Here is the truth: the Chancellor promised to boost manufacturing, but instead it is in recession. Manufacturing output is now 6.1% below its pre-crisis peak and falling. The British Chamber of Commerce’s survey of firms found manufacturing close to stagnation, with export sales and orders falling. Instead of helping the sector, the Chancellor closed the Manufacturing Advisory Service in November without so much as a mention. Is it not true that British businesses and families are now paying a heavy price for this Chancellor’s failures?
Damian Hinds
That is not true. The enhancement of manufacturing is absolutely at the heart of this Government’s approach, but we should not forget that services are also a very large part—in fact a bigger part—of the economy. The overall performance of the British economy is such that we had the highest growth rate in the G7 countries in 2014 and the joint highest in 2015. We have rising real wages and more people in jobs than ever before.
Oral Answers to Questions
Seema Malhotra Excerpts(8 years, 5 months ago)
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Mr Osborne
I certainly pay tribute to the very successful and thriving tech businesses in Bath and across the west country. There is an opportunity now, with the investment in cyber-security at GCHQ, not too far from Bath, in Cheltenham, to help create a culture of small start-up businesses and make sure that on the back of our national security we have commercial success and commercially successful companies building those sorts of businesses in the west country.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Will the Chancellor outline what measures he introduced in the autumn statement to support the UK’s renewable energy businesses?
Mr Osborne
We committed to double the investment in renewable energy over the next five years.
Seema Malhotra
What did we actually get from this Chancellor last week? The £1 billion to develop carbon capture and storage was cut; feed-in tariff subsidies for solar panels were cut by 87%; we heard not a mention of national projects such as the Swansea Bay tidal lagoon; and we had Britain at the bottom of the European league for renewables. Does he agree with companies such as Tesco, IKEA, Vodafone and Unilever that his renewable energy cutbacks now pose a risk to UK businesses and undermine confidence in investment?
Mr Osborne
We should all be proud of the fact that in this country jobs are being created and the economy is growing yet our carbon emissions fell by 8% in the past year. We are doubling our investment in renewable energy and at the same time putting investment into things such as low-carbon nuclear power and small modular reactors, which will be of real benefit to South Yorkshire and the north-west of England. My broader point is that we do not believe that the way to help save the Earth is by piling costs on people’s electricity bills, so we have also taken action to ensure that our home efficiency scheme is more efficient, so people’s household energy bills will go down by £30 as well.
The Economy
Seema Malhotra Excerpts(8 years, 6 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I acknowledge all the speeches made during our debate on the Government’s record on the economy. Among Conservative Members, the hon. Members for Cheltenham (Alex Chalk), for Eastleigh (Mims Davies), for Fareham (Suella Fernandes) and for Dudley South (Mike Wood) all have more than 3,000 families in their constituencies currently receiving working tax credits who will not have been reassured by their contributions today.
The hon. Member for Dundee East (Stewart Hosie) raised a range of issues about the unfairness of tax credits. My hon. Friend the Member for Sefton Central (Bill Esterson) spoke about the Chancellor changing his mind on his own fiscal target and the slowest recovery on record, as well as about concerns expressed by the business community. We heard a very passionate speech by my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on the devastating impact on families—thousands of jobs have been lost—of the Government’s lack of support for the steel industry and their lack of response to the steel industry’s five asks.
The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) talked about the impact of the Government’s policies on Wales. My hon. Friend the Member for Islwyn (Chris Evans) spoke about the demise of the green industry. My hon. Friend the Member for Swansea West (Geraint Davies) talked very eloquently about the business case for our economy of stronger investment in Britain. In the final Back-Bench speech, my hon. Friend the Member for Lancaster and Fleetwood (Cat Smith) spoke about the impact of the Government’s policies on women and young people.
This has been an important debate, as we move into the final week before the publication of the spending review and the autumn statement. Given the repeated calls from the police, the shadow Chancellor, the shadow Home Secretary and the Leader of the Opposition warning about the scale of potential cuts to the police service and the impact of those cuts at this time, it is a shame that the Chancellor has so far not committed to funding the policing we need, including the community policing that generates vital intelligence on the frontline.
What we have seen from the Chancellor is a record of failure in building the productive economy that we need. He has failed to meet his own deficit target, borrowing £200 billion more than he planned in the last Parliament. He has failed on productivity, with the gap between UK productivity per hour worked and that of the rest of the G7 being 20 percentage points last year, the widest productivity gap since 1991. He has failed on infrastructure investment, about which the British Chambers of Commerce recently stated:
“Britain’s infrastructure investment remains woefully inadequate”.
Progress on the Chancellor’s flagship infrastructure pipeline has stalled, with just 9% of its projects having started.
We know that British businesses still cannot access the finances that they need, with lending having fallen in nearly every month since 2011 and the latest figures showing an annual fall in lending to SMEs of 0.9%. Manufacturing is struggling, and Britain’s export market share is falling relentlessly. The Government’s target of doubling exports to £1 trillion by 2020 is now being met with ridicule. There is no better example of the Chancellor’s failure to support manufacturing than his inaction on the British steel industry. That high-tech, high-skill, high-paid industry is now in crisis, with thousands of jobs already lost and tens of thousands at risk.
We have seen that public services are not safe in the Government’s hands. In the NHS, waiting lists have increased by almost 1 million on their watch. The impending care crisis will heap even further pressure on our hospitals. The Government have failed to address the housing crisis. Local government is set to see a new wave of cuts to local services, leading to the closure of children’s services and putting social care under huge pressure. The proposed public health cuts could mean cuts to school nurses, sexual health services and other essential services—the vital prevention work that saves so much through early intervention.
The Chancellor’s policies are hurting not helping Britain’s businesses and working families. The tax credit cuts are yet another example of the Chancellor making the wrong choices. He is hurting not helping the people of Britain and holding back the British economy instead of building a better future. Last weekend, Labour campaigners went out across the country campaigning for a full and fair reversal of the Chancellor’s proposed tax credit cuts; standing up for the working families in their constituencies; and spreading the word that the Tories’ plans will make working families poorer, while making a few thousand families richer by cutting inheritance tax for the most wealthy.
It is not just those working families who will lose out. Millions of pounds will be lost to local economies as that money is sucked out from next April. That is cash that local people need to pay their rent or mortgages and their fuel and food bills. The Trussell Trust has warned today that the tax credit cuts will lead to a substantial rise in food bank use.
The hon. Member for Stevenage (Stephen McPartland), who last week boycotted a meeting in his constituency with a Tory Treasury Minister because the Minister thought it would be okay to turn up and refuse to discuss the burning issue of tax credits, has shown, through the publication of House of Commons figures, that child tax credits will be cut for many families—something that the Prime Minister denied at the time of the election. Only last week, the distinguished Financial Times columnist Martin Wolf said that this was “bad policy, dishonestly presented.”
In his 2011 Budget, the Chancellor promised to rebalance our economy. What has happened? Manufacturing employment has decreased by 10% since he has been Chancellor. He is hurting not helping our renewable energy industries. The Chancellor’s Britain is out of touch with other nations. This is the only country cutting the support for renewables in favour of non-renewables. The Chancellor is hurting not helping Britain by cutting research and development investment. The last Labour Government had a target to increase private and public sector R and D to 2.5% of GDP by 2014. The latest official figures show that it is at 1.67%, which is behind the OECD and EU averages.
Even the British Chambers of Commerce is calling on the Chancellor to change his latest fiscal charter and deficit target so that spending on infrastructure is not included. A wide range of economists are starting to speak up against the Chancellor’s economic choices, saying why they are wrong for Britain.
Labour’s starting point is that we need to do much more to ensure that there is a prosperous and secure future, with a fair deal for everyone and a chance for all to get on. That means the state working in partnership with the private sector to invest for the growth and jobs of the future. If people are to be able to access those jobs, we must get our education system right. Schools should not be struggling to recruit and retain teachers, and we must recognise that cuts in further education are a false economy because people leave education even less equipped to succeed. The best way to build jobs for the future, rebalance our economy and spread prosperity is to invest in skills, infrastructure and technology. We must invest in the support that companies need to take a good idea from being local to being global. That is the kind of economic ambition that Britain needs, backed up by practical help to make British people more prosperous and secure.
The Labour party is committed to balancing the books, but to doing so in a fair way by building a bigger and stronger economy based on investing in our future. Creating better skilled, better paid jobs is good for British workers and, when they spend their money, good for British businesses. It also means higher tax receipts for the Treasury. The Chancellor’s interventions may appear to be good politics, but all too often they turn out to be wrong economics. His policies are hurting, not helping Britain’s businesses and working families, and his short-term cuts will prove a false economy for British taxpayers. Labour will offer a real alternative, with positive choices to support Britain’s businesses and workers and equip people for the jobs of the future. The Chancellor’s short-term choices will leave our economy more vulnerable. There is an alternative, in the long-term interests of Britain, and I urge hon. Members to vote with us in the Aye Lobby today.
Oral Answers to Questions
Seema Malhotra Excerpts(8 years, 6 months ago)
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Damian Hinds
I agree with all that. It is rising productivity that underpins rising real wages and therefore improving living standards.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Mr Speaker,
“We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity in our nation is concentrated here in the centre of London.”
The Chancellor may recognise his own words from his Mansion House speech in July. Why was he so damning of his own record?
Damian Hinds
My right hon. Friend the Chancellor has been absolutely consistent in identifying the need to rebalance the economy and export more. I am afraid that this country’s productivity gap has existed for a very long time—I am not even going to try to pin the blame entirely on the previous Labour Government; it has existed for longer than that. We need to fill that gap and address the shortcomings that our economy has had over a long period. The productivity plan that this Government are bringing in is doing just that.
Seema Malhotra
I thank the Minister for his answer. The Chartered Institute of Personnel and Development has said that his productivity plan is “fatally undermined” by insufficient measures to improve the skills of the workforce. Could that be just one reason why the UK’s productivity gap compared with other G7 countries has widened to the largest on record since 1991?
Damian Hinds
The hon. Lady is right to identify the importance of skills, and that is why human development is absolutely at the heart of the productivity plan. The apprenticeship levy is a really important structural reform to help the delivery of 3 million apprenticeships. Then there is the network of institutes of technology and all the excellent work being done in the Department for Education, working on basic skills, including English and maths, which we know are vital and of such high value in the marketplace to both employers and employees.
Tax Credits
Seema Malhotra Excerpts(8 years, 7 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I beg to move,
That this House calls on the Government to reverse its decision to cut tax credits, which is due to come into effect in April 2016.
Today’s debate is incredibly important, but it is a shame that we have to hold it at all. It is deeply disappointing for the 3 million families across the UK who are set to lose an average of £1,300 from April that the Government have not taken the opportunity to step back, do the right thing and rethink these unfair proposals. The Conservatives omitted to mention these unfair proposals in their manifesto. Indeed, given another chance today to stop the changes—in the Welfare Reform and Work Public Bill Committee—they chose to vote against doing so.
Last night, we heard the latest arguments in favour of the cuts, which are already backfiring. The Government are seeking to make this a binary choice between cutting the incomes of the working poor and funding nurses, when in fact many of those in receipt of tax credits are our nurses, teaching assistants, care workers, civil servants and so many others who work day and night to keep our public services and our economy moving.
David Rutley (Macclesfield) (Con)
The decision to seek to reverse these reforms is an important one, but when was the hon. Lady made aware of it—on the Labour side? [Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. We will not have shouting from the Back Benches. Nobody will ignore anyone in this Chamber. We will have a measured debate on an important subject.
Seema Malhotra
I do not think I even need to respond to that intervention. The hon. Gentleman is seeking to trivialise this debate. We have been very clear about what we would do and about what we are calling on the Government and his party to do. His constituents will be watching him today and asking: who he is standing up for—his constituents or his party?
Several hon. Members rose—
Seema Malhotra
I will make some more progress and then give way.
These cuts will also hit the self-employed and those who run our local businesses. It is bizarre for the Government to take £1,300 off each family by highlighting how much more they have already taken in tax credits. Today, it has become even clearer that the Government have chosen to balance the books on the backs of the poor. The Chancellor has made this a debate about taking from the non-working poor or from the working poor, rather than a choice recognising that, in tough economic times, it is fairer that those who have more should contribute more.
Andrew Gwynne (Denton and Reddish) (Lab)
The £1,300 that my hon. Friend cites is of course an average. Many working people in my constituency will get clobbered by a lot more than £1,300 a year. Is not the really serious point that only in April the Prime Minister said on TV—in the studios—that he would not cut tax credits?
Seema Malhotra
My hon. Friend is absolutely right. It is not on the basis of one occasion that we are saying that the Government have changed their mind or have not told the truth; they have not told the truth on this measure step by step since it was first introduced in the Budget. They have tried to hide the impact on hard-working families across Britain. My hon. Friend is absolutely right that the £1,300 figure is an average, and many families are set to lose much more.
Chris Philp (Croydon South) (Con)
The hon. Lady will be aware that the Conservative manifesto made it very clear there would be £12 billion of welfare savings, so this was clearly flagged up. Will she explain where, if she opposes the measure, she will find the savings—which other benefit would she cut, or which tax would she raise?
Seema Malhotra
Perhaps the hon. Gentleman needs to talk to the Prime Minister about why he said on “Question Time” during the election that he would not cut tax credits. That is a conversation for him to have with the Prime Minister.
Barbara Keeley (Worsley and Eccles South) (Lab)
The hon. Member for Croydon South (Chris Philp) talks about the Conservative manifesto, but the manifesto cannot have outlined that 689,000 carers might be affected. Those who care 35 hours a week and then try to work 16 hours on the national minimum wage will be hit. What do Conservative Members have to say about that?
Seema Malhotra
My hon. Friend makes her point incredibly well. It is those who are working so hard to support us in every sphere—in our public services and the economy—who will be hit the hardest by this move. I hope that the Government will change their mind today. I will make some more progress before I take further interventions.
The Chancellor says that he wants a low-welfare, low-tax, high-wage economy—this may come as a surprise, but of course we all do—but what he says and what he does are two different things.
Seema Malhotra
I will give way in a moment.
The Chancellor decides to cut tax credits at the same time as cutting income tax and inheritance tax for some of the wealthiest in our society. His failure to grow wages in the last Parliament not only led to a drop in living standards, but meant that tax receipts were lower than they would otherwise have been. In addition, as the Institute for Fiscal Studies has highlighted, welfare spending was virtually unchanged during the last Parliament because of the growth in tax credit payments and the explosion in housing benefit payments caused by his low-wage economy. Indeed, the number of people earning less than the living wage has risen by 45% since 2009. The Government may seek to hide what they are doing and to make this a debate about the Labour party, but it is a debate about the quality of life for millions of families who are working hard to make ends meet.
Gareth Johnson (Dartford) (Con)
I will give the hon. Lady another opportunity to answer the question. If she were to reverse these reforms, how would she pay for it—would she raise taxes, cut spending or simply borrow more money?
Seema Malhotra
Perhaps the hon. Gentleman has not read any blogs or listened to any media in the last two days. We have been on the media repeatedly and have explained very clearly that we would do that through long-term growth, making sure that we invest in high skills and increased—[Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. I cannot hear the hon. Lady, so I assume that nobody else can hear her. This is a debate and we must be able to hear the opening speeches. Everyone will have a chance to shout in their own four or five minutes.
Seema Malhotra
Thank you, Madam Deputy Speaker. I hope that the hon. Member for Dartford (Gareth Johnson) heard my answer. Perhaps his constituents will also be asking whether he has heard them. I am sure they are wondering who he will stand up for today.
Seema Malhotra
I will give way in a moment if I can make some more progress.
It is shocking that the Government continue to avoid telling the truth about these changes, including the Prime Minister, to whom I wrote last week, asking him to clarify his comments that after all the Government’s changes a family where one earner is on the minimum wage will be £2,400 better off. He is yet to be clear about how he reached that conclusion, how many families will gain in the way he suggests or what assessment he makes of the analysis by the Institute for Fiscal Studies, the Resolution Foundation, Barnardo’s and so many others who are against these changes.
The Chancellor chose either not to perform or not to publish an impact assessment of these changes for the Commons—a move that was criticised in no uncertain terms by the Social Security Advisory Committee. There are only two ways to interpret that: the Government either do not want to know or do not want to tell.
Stella Creasy (Walthamstow) (Lab/Co-op)
My hon. Friend talks about the impact of these changes. Let me give her one simple example from my Walthamstow constituency of a working mum. When her tax credits were delayed, we had to refer her to a food bank because they were literally the difference between being on the breadline and having bread. Does my hon. Friend agree that that will happen to working people across the country if these changes go ahead?
Seema Malhotra
My hon. Friend is absolutely right. She highlights, too, the impact of the Government’s appalling administrative processes on our constituents. They are left trying to make ends meet and having to go to food banks. More than 60% of the use of food banks is due to issues with benefits and benefits administration.
Lucy Frazer
After an intervention, the hon. Lady asked whether Government Members had been listening to the media. I listened to an interview she gave on Radio 4 this morning. She gave only two examples of changes that she would make to the tax system. One related to inheritance tax and the other was to raise the tax threshold to 50p. In 2017-18, that would raise only £270 million. Where would she get the other £4.2 billion?
Seema Malhotra
I thank the hon. and learned Lady for her comments. Perhaps she will say what she is doing for the 6,300 families in her constituency who will be affected by these changes. Perhaps she should speak to those in her party who have raised serious concerns about the changes, including Lord Tebbit.
Before the debate on the statutory instrument in September, the Government chose either not to perform or not to publish an impact assessment of these changes, so one was not available for the debate in the Commons. The Exchequer Secretary seemed to suggest that they had done that, when clearly they had not. The distributional analysis that the Chancellor finally submitted to the Secondary Legislation Scrutiny Committee in the other place last week has been described by my right hon. Friend the Member for Birkenhead (Frank Field), the Chair of the Work and Pensions Committee, as a “sleight of hand” and an attempt to “bamboozle”.
Seema Malhotra
I will make a little more progress first.
It is worth reminding hon. Members exactly what the Government propose to do with these changes. First, they will effectively halve the threshold at which claimants start to see their tax credits award tapered away, from £6,420 a year to £3,850. Secondly, they will increase the rate at which the award is tapered away to zero. That means that for every pound that is earned above the threshold, their award will be tapered away by 48p. Previously, the rate was 41p. House of Commons figures show that a family with two children and two parents who earn the minimum wage will see a fall in their income of more than £1,800 next year. By the end of the Parliament, that family will lose a devastating £7,700.
Catherine West (Hornsey and Wood Green) (Lab)
Does my hon. Friend agree that this amounts to nothing less than a penalty for those in work? Such a work penalty is typical of this Government.
Seema Malhotra
My hon. Friend is absolutely right. The Conservative party claims to be there for the workers, but it is going against everything that hard-working families are doing to make ends meet. It is time for the Government to rethink what they are doing and stand up for those they pretended to stand up for at the time of the election.
Seema Malhotra
I will give way in a moment.
A family with one earner on the minimum wage will be more than £1,500 worse off next year and almost £7,000 worse off over the Parliament.
The claim that we have heard most is that working families should not be concerned because the minimum wage will see significant increases in the next few years. As the Institute for Fiscal Studies has made abundantly clear, the claim that those increases will close the gap is arithmetically impossible. Paul Johnson, the director of the IFS, summed it up:
“The key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of losses that will be experienced by tax credit recipients”.
He said:
“Unequivocally, tax credit recipients in work will be made worse off by the measures in the budget on average.”
Andy Slaughter (Hammersmith) (Lab)
There are 4,200 working families in my constituency who will be affected. Given that the Prime Minister said before the election that he would not cut tax credits, does my hon. Friend think that this House and the other place would be right to vote down the proposals?
Seema Malhotra
My hon. Friend is absolutely right. I hope that Government Members will make that decision today.
The IFS has found that, as a result of all the tax and benefit changes in the summer Budget, by 2020, households with incomes in the second, third and fourth deciles will be worse off by £1,250, £860 and £530 respectively. Indeed, the Resolution Foundation’s recent report showed that the changes are likely to result in 200,000 more children being pushed into poverty at a time when the Welfare and Work Bill is effectively erasing Labour’s Child Poverty Act 2010, the duty in it to eradicate child poverty by 2020 and the measures to monitor child poverty. Perhaps a Government Member would like to ask their own Front Benchers a question about that.
Seema Malhotra
Perhaps the hon. Gentleman should ask what will happen to the 4,500 working families in his constituency who are set to see an average cut in their household income of more than £1,300. What impact will that have on whether they can keep their home, put food on the table or afford clothes for their children? I suspect that he will have a lot to answer for in his constituency.
A million single parents who are in work are set to be £1,000 a year worse off and 1.5 million married women will be £600 poorer.
Seema Malhotra
I will in a moment.
These cuts will also hit the self-employed who are on tax credits. Since 2010, self-employment has grown at twice the rate of overall employment. We know that, on average, self-employed people earn 40% to 50% less than those who are in regular employment.
Seema Malhotra
I will in a moment.
This weekend, The Observer included the case of somebody in Manchester who is self-employed. He expects his tax credits to be reduced to virtually nothing from next April. I hope that in his response, the Exchequer Secretary will be straight about what these changes mean for the self-employed.
Kwasi Kwarteng
I thank my constituency neighbour for giving way. We have heard an impressive array of statistics, but does the hon. Lady have one proposal for reducing the deficit?
Seema Malhotra
That is absolutely incredible. We have answered that point in the media and in articles, and I do not need to keep going over that ground. The hon. Gentleman might want to respond to the 3,000 families in his constituency who will be hit by these changes, and say how he will reply to institutions that have done hard research into these matters. The Government have chosen to carry out no impact assessment for what has been described as an “array of statistics”. This debate is about people’s lives, and the hon. Gentleman should stand up for his constituents, just as Labour Members will do when voting in the Lobby tonight—[Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. The hon. Lady is clearly not giving way and hon. Members are wasting time in the debate.
Seema Malhotra
It is clear that the Conservative party is in disarray. Lord Tebbit, the hon. Members for Uxbridge and South Ruislip (Boris Johnson) and for Telford (Lucy Allan), and others, are calling for reforms, or for the Chancellor to think again.
Lucy Allan (Telford) (Con)
Does the hon. Lady agree that taxpayers’ money should be targeted at those most in need, and not used routinely to top up low pay?
Seema Malhotra
I think that comment represents a misunderstanding about what tax credits are supposed to help with. I hope that the hon. Lady’s Government will be more successful this Parliament in increasing wages—hopefully to a level where people start to come off tax credits—but they do not have a very good record to date. As I said, the number of people earning less than the living wage has risen by more than 45% since 2009.
Clive Efford (Eltham) (Lab)
In their interventions so far, Conservative Members have already conceded the argument. They started by saying that low-paid workers were going to be better off, and that Britain needs a pay rise and will get one. They have conceded that argument, but now it is all about choices and how tough it will be to balance the books. They have lost the argument.
Seema Malhotra
My hon. Friend is right, and as far as the public are concerned Conservative Members have lost the argument. It is now time for their constituents to ensure that they support the changes that we propose, and that they hold the Government to account at the next election.
The right hon. Member for Haltemprice and Howden (Mr Davis) has described the use of a statutory instrument as an attempt to avoid scrutiny, and on 6 October he said:
“The Government has to balance the books, but the burden shouldn’t be on the poorest…I hope this doesn’t turn out to be our poll tax.”
Even the Bow Group, which perhaps speaks for several Conservative Members who may not be able to speak today, has said:
“Tax Credit cuts could damage Britain’s entrepreneurial economy and the Conservative Party’s claim to be the workers party”.
Caroline Lucas (Brighton, Pavilion) (Green)
The hon. Lady is making a powerful case. In my constituency more than 4,500 families will be affected, in particular because of sky-high private sector rents. Does she agree that people will be hit particularly hard when cuts combine with the fact that Governments have not taken action to bring down rents in the private sector?
Seema Malhotra
The hon. Lady is right, and cuts are being made without any recognition of rising rents and the cost of living that affects household budgets. We cannot make such a move without thinking about the impact on family budgets, particularly of rents.
Several hon. Members rose—
Seema Malhotra
I will continue for a moment and then I will give way.
New House of Commons Library analysis that we have published today shows that at least £0.5 billion will be lost to the London economy if cuts to tax credits come into effect, and that will hit nearly 410,000 low and middle-income working families in London. In my borough of Hounslow, 13,500 working families will be affected, and the local economy will be hit by about £17.5 million of reduced purchasing power if the cuts come into effect.
Angela Rayner (Ashton-under-Lyne) (Lab)
I know from many conversations that I have held with Conservative Members that they agree that aspiration is key. I was on tax credits before coming to this place, and I also benefited from further education, so I plead with hon. Members to consider that. Does my hon. Friend agree that by cutting tax credits and further education the Government are preventing people like me from having those aspirations?
Seema Malhotra
My hon. Friend makes a powerful point and indicates through her own story how this anti-aspiration measure will hit families that are working hard not just for themselves, but to give their children a chance in the future. As they continue to struggle, these cuts will impact on those children, and it is projected that 200,000 more children will be moved into poverty.
I am conscious that many Members want to speak, so in conclusion I will say that this measure is set to hit the poorest the hardest. The Prime Minister is fond of saying that he supports those who work hard and do the right thing. His Conservative election manifesto stated:
“The British character is renewed every day by the millions who work hard, raise their families and care for those who need help, do the right thing and make this country what it is.”
He also said:
“We are fixing the economy so that everyone feels the benefit”,
but at the moment that could not be further from the truth. Far from being the party of the common ground or of workers, this move shows that the Government are no longer interested even in knowing how families are set to be hit by the choices they make. This decision is not just poor politics but poor economics, and families are concerned about what the impact will be as they struggle with paying the rent or their mortgage, and with putting food on the table at a time when food bank use continues to rise. The problem of low pay in the UK persists, and changes to tax credits are about to make things much worse. With 6 million people not earning enough to cover the basic costs of living, tackling in-work poverty is crucial, but we should not do that by making matters worse and hitting those who need help the most.
The Government have chosen to introduce these changes without even a transition plan, and when cross-Benchers and bishops start to express concern in the other place, we hear reports that No. 10 will threaten to suspend the other place if Members table and win a fatal motion. There is a chance today for every Member of the House to do the right thing and stand up for their constituents, by putting families in their constituency first and their party second. I urge Conservative Members to vote with us in the Aye Lobby today.
Draft Asian Infrastructure Investment Bank (Initial Capital Contribution) Order 2015
Seema Malhotra Excerpts(8 years, 7 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Gray, and to respond to the comments of the Chief Secretary to the Treasury. As he mentioned, this is a timely debate—the Chinese President Xi Jinping will arrive today, and the AIIB was proposed by China in 2013. In the spirit that the Minister outlined, we welcome the Government’s participation in and contribution to the AIIB, which is an important development for progress in the Asia-Pacific region and represents our sense, as a nation, of being part of and engaged in a global economy in which we participate as partners in development.
In the Labour party, we are committed to international development in commerce, trade and services, and to the investment in infrastructure through which we see nations develop and generate new possibilities for businesses and industry. Indeed, this delegated legislation is possible only because of the International Development Act 2002, which was passed by the last Labour Government.
We have a strong history of trade and economic relations with other countries, and in that spirit, we support the move being made today, but I acknowledge some points made by observers that it very much contrasts with the lack of investment made in our own industry in recent days and weeks, particularly the steel industry, which has been in such need of Government attention. I hope the Minister will reflect on that in his response.
Seema Malhotra
In which case the Minister may want to make some comments outside the Committee.
We recognise the spirit in which the bank is being set up, our role in it and the contribution we can make to it. The Minister has outlined some of the important priorities for the bank. For some of the nations that it will assist where poverty is still so rife, investment is absolutely vital in ensuring a greater quality of life and the opportunity for economic development in all parts of those nations. It is also vital in tackling poverty, for example, in India, the Philippines and many other nations, where there are issues with access to water, power and infrastructure, and where so many people live below the poverty line.
I hope the AIIB will live up to some of the expectations, but I also have a number of further questions for the Minister. First, how will we ensure that the investments made by the bank will be in the interests of those populations and make good on the commitment to the outcomes that we want it to achieve? How will we be sure that UK capital will not be used to support any kind of exploitative working conditions in projects in which we have a stake?
Secondly, as the Minister has outlined and as the explanatory notes show, our contribution will be $3 billion, or £2 billion, over five years. Will the Minister confirm that the capital contribution means an increase in the UK’s national debt, albeit corresponding to an increase in the value of assets? Will he also clarify whether the contribution counts towards the Government’s commitment to maintaining overseas development aid as a share of GDP? What are the implications for the Government’s new fiscal plan and charter commitments in the unlikely but possible event that contingent liabilities are called upon? Might the Government be forced to make other cuts or raise taxes to make good any temporary or permanent loss?
Thirdly, the Opposition want to ensure that our contribution represents value for money for the taxpayer. Will the Minister explain how that was weighed against the wider developmental or foreign policy benefits of the commitment? Finally, we want any contribution to be accounted for adequately and transparently—I am sure the Minister wants that, too—so that the Government can be accountable to Parliament and to the taxpayer about our contribution. We want the relationship to get off to a good start, and we need to set the expectations of, and rules and relationships for, the new bank to ensure a positive, constructive long-term relationship that meets the expectations and ambitions of the bank’s founder nations and of UK citizens.
Greg Hands
I thank colleagues for their questions. In response to the hon. Member for Feltham and Heston and her questions on how we ensure that investments are in the interests of the citizens of the recipient countries, and that we avoid exploitation, I say two things. First, we are debating today the capital contribution that the UK is making. There will be a separate opportunity in the House precisely to debate the function of the AIIB. However, the UK being there from the beginning, or near the beginning—we were the first European country in the bank—and with significant presence, will make it more likely that we will be of influence.
Seema Malhotra
The Minister talked about the functioning of the AIIB being subject to a separate debate. Will he clarify that that will include governance, role, transparency and accountability, and a voice in the governance of projects as well as of the bank?
Greg Hands
Everything the hon. Lady mentions is laid out in the Act. There will be two other orders to debate. Today’s is purely about the capital contribution. It would be beyond me to say precisely what will or will not be debated under the other two statutory instruments, which are coming through other Departments.
The hon. Lady mentioned the increase in the UK national debt, but, importantly, not the deficit. It is important to recognise that we are purchasing an asset—shares in a bank—and to date no multilateral bank has ever called in a contingent liability from the UK, so that is unlikely to happen.
My hon. Friend the Member for Stafford asked a question that was also asked by the hon. Member for Feltham and Heston, which was whether the contribution could be classed as ODA. We are awaiting a pronouncement from the OECD, which monitors the ODA rules. We expect that pronouncement by May 2016 and it would be retrospective as to whether something was ODA.
Seema Malhotra
The Minister is right on the low risk of contingent liabilities being called in, but will he clarify whether the Government have a process for the circumstances in which that might occur? Has he thought through what could happen in such circumstances?
Greg Hands
The Government have in place a number of procedures. Such contingent liabilities have been around for some decades. For example, the UK has been a contributor to the International Monetary Fund since the 1950s, and an interesting question might be whether the Opposition’s position is to continue being a contributor to the IMF, given that they voted against that in the previous Parliament. I will not dwell on that, however.
My hon. Friend the Member for Stafford asked why the World Bank is dealt with by the Secretary of State for International Development and the AIIB is dealt with by the Chancellor. That is a divide across various international financial institutions. The Treasury deals with the IMF, the European Investment Bank and others that focus on the market, whereas DFID concentrates on the World Bank, the Asian Development Bank and so on. The purpose of the AIIB is to support economic growth, which is clearly within the Chancellor’s remit, bearing in mind that we are talking about infrastructure.
My hon. Friend also asked about climate finance. The president-designate of the AIIB, Mr Jin, has made it clear that his vision is for a “lean, clean and green” bank; and the UK is at the table helping to make those decisions, by being an early contributory member. My hon. Friend’s point about the parliamentary network of the 57 countries was interesting, and we will reflect on whether there should be a parliamentary network in a similar way to what can happen for other multilateral institutions. I will perhaps write to him about that.
The hon. Member for Copeland asked whether there should be primary legislation, but the Opposition cannot have it both ways. They cannot claim that the orders result from their own Act—the International Development Act 2002—and at the same time question why there is no primary legislation. Perhaps they should get their position in order first.
Finance Bill (First sitting)
Seema Malhotra Excerpts(8 years, 8 months ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
I beg to move,
That—
(1) the Committee shall (in addition to its first meeting at 11.30 am on Thursday 17 September) meet—
(a) at 2.00 pm on Thursday 17 September;
(b) at 9.25 am and 2.00 pm on Tuesday 13 October;
(c) at 11.30 am and 2.00 pm on Thursday 15 October;
(d) at 9.25 am and 2.00 pm on Tuesday 20 October;
(2) the proceedings shall be taken in the following order: Clauses 1 to 11; Schedule 1; Clauses 12 to 15; Clauses 18 to 23; Schedule 4; Clauses 24 and 25; Schedule 5; Clause 26; Schedule 6; Clauses 27 to 31; Clause 33; Schedule 7; Clause 32; Clauses 34 to 42; Clause 44; Clauses 46 and 47; Schedule 8; Clauses 48 to 50; new Clauses other than those relating to the subject matter of Clauses 16 and 17 and Schedules 2 and 3 or the subject matter of Clause 43 or the subject matter of Clause 45; new Schedules other than those relating to the subject matter of Clauses 16 and 17 and Schedules 2 and 3 or the subject matter of Clause 43 or the subject matter of Clause 45; remaining proceedings on the Bill.
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 20 October.
It is a very great pleasure to see you in the Chair, Sir Roger. This is not the first time I have had the pleasure of serving under you in a Finance Bill Committee, and I know the Committee is in safe hands with both you and Mr Howarth.
I welcome all members of the Committee, and I am delighted we have such a large turnout for the beginning of our proceedings. I particularly welcome the Opposition Front-Bench team: the hon. Members for Feltham and Heston and for Worsley and Eccles South. I look forward to hearing their questions and inquiries. I do not know whether the Scottish National Party has the same Front-Bench arrangement, but I welcome all members of Opposition parties and, indeed, my own colleagues, in particular my hon. Friend the Economic Secretary to the Treasury, who will be sharing some of the burden over the weeks ahead.
I am pleased that agreement was reached at the Programming Sub-Committee, and I am grateful for the support of the usual channels. I thank my hon. Friend the Member for Central Devon and the hon. Member for Scunthorpe for their work in reaching that agreement. I very much looking forward to serving under your chairmanship in the weeks ahead, Sir Roger.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I thank the Financial Secretary for his opening words and his welcome, which I echo. I thank you, Sir Roger, and your co-Chair Mr Howarth, who I understand will be in the Chair this afternoon. It is a pleasure to serve under two distinguished Chairmen. Although I had the pleasure of serving on a previous Finance Bill Committee as a Back Bencher, this is the first time I have served on one as a Front Bencher. I was recently appointed shadow Chief Secretary to the Treasury.
I thank and pay tribute to my predecessor, my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood), and the other outgoing shadow Treasury Ministers, my hon. Friends the Members for Wirral South (Alison McGovern) and for Newcastle upon Tyne North (Catherine McKinnell). I also pay tribute to the previous shadow Chancellor of the Exchequer, my hon. Friend the Member for Nottingham East (Chris Leslie), who is a veteran of Finance Bills and has led much of our work this year. I also pay enormous tribute to my hon. Friend the Member for Worsley and Eccles South before she leaves the Treasury team, and in advance of her excellent contributions today, for her stellar work.
I extend my thanks to the hon. Member for Central Devon and my hon. Friend the Member for Scunthorpe. I have had experience of their office, so I know that the usual channels work behind the scenes to ensure everything goes well during Bill proceedings.
I welcome those who are relatively new to the House. If this is their first Finance Bill Committee, I am sure it will be an experience they will remember. It will be a good foundation for much more that they do in the House.
I know from past experience that we have many hours in Committee ahead. I am sure I speak for all here when I say that we relish the opportunity to get further into this legislation and to change it for the better. I also know that the Financial Secretary will relish the opportunity to serve on his 11th Finance Bill Committee—or is it the 12th?
Seema Malhotra
He is certainly a veteran. If there is a record for the Minister who has steered the most Finance Bills through Parliament, if he has not won it already, I am sure he is well on his way.
When I mentioned to a colleague that the Bill has only 50 clauses, they expressed concern that the Government are already running out of business, as they were in the months running up to the election. I recall that when I served on the Finance Bill Committee in 2012, that Bill had three volumes and 227 clauses. Indeed, last year’s Finance Bill had 295 clauses. This year, the Finance Bill has 50 clauses, and we are scheduled to have only eight sittings.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
This is the third one in a year.
Seema Malhotra
I know it is. Perhaps the Financial Secretary does not have the same concerns.
Although some aspects of the Bill are to be welcomed, many others are worrying. The change to the climate change levy, for example, has been almost universally challenged. The increase in insurance premium tax, which will raise substantial amounts for the Government, will cause significant hikes in insurance premiums for millions of people across the UK, with possible adverse consequences for consumer behaviour that must be understood. Those issues were tackled, to some extent, in Committee of the whole House last week.
We need a Finance Bill that supports working people and does not penalise them, as the tax credit statutory instrument, which we discussed two days ago, does. We need a Finance Bill that supports business and provides long-term certainty, and which leads to investment now that will reap dividends in the future. A retrospective change to carbon taxes, for example, will not achieve that aim. That is the approach we will take in Committee.
Obviously it would not be proper to start proceedings without thanking the usual unsung heroes: not only the Treasury officials, whom I thank for their diligence, but the Clerks, Hansard and others who help keep our proceedings going smoothly.
I am sure I speak for all Members when I say that it is an honour and a privilege to serve on the Finance Bill Committee, and I am sure we will approach all the sessions in that spirit. Indeed, I hope we will scrutinise the Bill properly and methodically and do what we are all here to do, which is to serve the people of Britain.
Tax Credits
Seema Malhotra Excerpts(8 years, 8 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
What we have just heard is a Government in denial about the impact these changes will have on what my right hon. Friend the Member for East Ham (Stephen Timms) has described as “wrecking family finances”. We are here today only because of the efforts of the Chairman of the Select Committee on Work and Pensions and of my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), who wrote to the Prime Minister in July to insist on a full debate on these cuts to tax credits, which were not included in the Tory manifesto. The original intention had been to implement these changes with the scantiest possible parliamentary scrutiny—through a statutory instrument not debated by the whole House, but considered by a short Committee session of no more than 15 MPs and without scrutiny in the House of Lords.
James Cleverly (Braintree) (Con)
I am obliged to the hon. Lady for giving way so early in her speech. Does she not recognise that rebalancing the financial relationship between the state, employers and employees was in the Conservative party manifesto, which was voted on and led to the return of a Conservative Government?
Seema Malhotra
The hon. Gentleman does not make it any better for his Front-Bench team, as what we have seen is a rise in child poverty. We absolutely agree that we need to find ways to encourage families to come off tax credits, but it should be done by a rise in income and through growth in the economy.
Lyn Brown (West Ham) (Lab)
During the election campaign, the Prime Minister told the country that the value of tax credits would not fall. Does my hon. Friend agree that the Government’s behaviour is putting democracy in peril?
Seema Malhotra
My hon. Friend is absolutely right, and it is shocking that a Government who profess to care about democracy should be so afraid of scrutiny.
Today’s changes are substantial and highly controversial, and we oppose them.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
Will the hon. Lady give way?
Seema Malhotra
I will in a moment.
These cuts in tax credits will hit working families in every constituency, and they were to be sneaked in through the back door. Indeed, when asked directly during the election campaign whether the Government would cut child tax credit, the Prime Minister said:
“No, I don’t want to do that.”
His statement was repeated on “Question Time” on 1 May. Today’s debate is about a political decision made by the Chancellor which is set to see more than 3 million families lose an average of £1,000 a year.
Seema Malhotra
I will in a minute.
This measure is ideologically driven, it is cynical, and it will directly increase levels of poverty in Britain.
James Cartlidge
If the measure is passed, will it be Labour’s policy to reverse it?
Seema Malhotra
I am unclear—[Laughter.] I am unclear about why the hon. Gentleman wishes to make this an issue about the Labour party, and not an issue about why his Government have presented the House with a measure that will have a negative impact on his constituents as well. He will have to account to his constituents for the decision that he chooses to make today when they come to his surgery, knowing that—[Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I certainly want to hear the shadow Minister, and I would expect Conservative Members to want to hear her as well. If they do not, I am sure that the Tea Room awaits them.
Seema Malhotra
Thank you, Mr Deputy Speaker.
As I was saying, this measure is ideologically driven, it is cynical, and it will directly increase levels of poverty in Britain.
Seema Malhotra
I will give way in a minute.
The measure is part of an ongoing attack on the incomes of some of the most hard-working families in our constituencies, the very strivers whom the Chancellor purported to support.
Clive Efford (Eltham) (Lab)
The Chancellor said that Britain deserved a pay increase and Britain was going to get a pay increase. The Tories over there cheered him to the rafters when he increased the national minimum wage, but we now know from a document produced by the House of Commons Library—I have a copy here—that the changes in tax credits will more than wipe out the increase in the national minimum wage. At the same time, the Tories are cutting taxes for millionaires. It is an absolute disgrace.
Seema Malhotra
My hon. Friend is absolutely right. It is indeed shameful that we are seeing a cut in the incomes of the poorest people in our constituencies.
Seema Malhotra
I will in a moment.
This measure will attack families in which people are working hard to do the right thing and to achieve what we all want to see: a higher-wage economy in which people are less reliant on tax credits to make ends meet. What is before us today must be called out for what it is. According to the Office for Budget Responsibility, it amounts to what will be a cut of more than £3.4 billion annually by 2020—a cut that the Government have sought to slip through without even having the courage to carry out an impact assessment.
Andrew Gwynne
I welcome my hon. Friend to her new position. I am very pleased that we are taking such a strong stance on tax credits. After the Prime Minister said that he would not cut tax credits, we are seeing the most pernicious and unfair cut imposed on some of the poorest people in society. Is that not why it is right for us to stand up for them today?
Seema Malhotra
My hon. Friend is entirely right. We are standing up for families who are doing the right thing: going out, working hard and trying to support themselves and their children.
Jack Dromey (Birmingham, Erdington) (Lab)
As a founder member of the drive, initially in London, for the real living wage, may I ask whether my hon. Friend agrees that the phoney living wage of the Chancellor of the Exchequer will not begin to compensate for the tax credit cuts, which will hit those in work particularly hard and will therefore punish the very strivers about whom the Chancellor is always lecturing us?
Seema Malhotra
I thank my hon. Friend for that intervention and for highlighting that the living wage will be lower than in any year since 2011. That is another example of this Government’s lack of transparency.
This move today amounts to a huge cut in the income levels of hard-working families.
Seema Malhotra
I will give way in a moment.
Effectively, these regulations, which come into force in April next year, will lower the level at which working tax credit starts to be withdrawn from £6,420 to £3,850, and increase the taper rate at which tax credits are withdrawn from 41% to 48%, meaning that for every £1 earned over the threshold there will be a 48p reduction in the level of tax credit entitlement. As a consequence of these changes to working tax credit, the level at which child tax credit begins to be taken away is lowered from £16,105 to £12,125. This change was not announced in the summer Budget, but is a consequence of steepening the taper for working tax credit.
Mr Jim Cunningham (Coventry South) (Lab)
Does my hon. Friend agree that the Government have created a new phenomenon regarding zero-hour contracts? Women cannot get tax credits because of those contracts, as they have no continuity of employment, which affects families in many different ways.
Seema Malhotra
I thank my hon. Friend for that intervention. He highlights the collective impact of the decisions this Government are making on the income levels of many of the poorest families in our constituencies.
Seema Malhotra
I will make a little progress, and then I will give way.
Far from increasing work incentives, these measures will reduce them. Reducing the work allowances or thresholds and increasing the taper rates mean families will have their incomes reduced earlier and more quickly than would otherwise have been the case.
Mr Kenneth Clarke (Rushcliffe) (Con)
Does the hon. Lady accept that the vast majority of Members in this Chamber probably agree that we would like to see Britain move away from being a low pay, low productivity economy to a more advanced, higher productivity, better paid one? Can she explain how she thinks we can possibly move in that direction, even now the economy is recovering, if we do not tackle the absurd level of taxpayer subsidy to low pay from the tax credit system?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I want to hear the hon. Lady’s reply.
Seema Malhotra
I thank the right hon. and learned Gentleman for his intervention. He may first want to explain why he voted against the national minimum wage when it was put to this House. We agree about people needing to come off tax credits, but we would do that through an increase in wages and in productivity.
The Government have sought to argue that working people will be compensated for the cuts by the increases in the minimum or living wage. That is contested by the Institute for Fiscal Studies, which says that it is “arithmetically impossible”. Although we welcome the increase to the personal allowance and the introduction of the so-called national living wage, as the Low Incomes Tax Reform Group has stated, any gains from those measures will not negate the impact of these tax credit cuts from April 2016. The IFS recently concluded that families will lose over £1,000 a year on average from cuts to tax credits, while they will gain between £100 and £200 a year at most from the proposed national living wage, and even that is seen as optimistic.
The IFS analysis has also shown that those on the lowest incomes are hit hardest by the Government’s tax and benefits changes. The reduction in annual income over the next five years is most marked for the poorest four income decile groups, highlighting the regressive nature of this Government’s fiscal choices.
Chris Philp (Croydon South) (Con)
I am grateful to the hon. Lady for giving way when there is such stiff competition. Does she agree with Alistair Darling that tax credits are a subsidy to unscrupulous employers who underpay their staff, and that by rebalancing our economy away from tax credits and towards higher pay, everyone will be better off?
Seema Malhotra
The hon. Gentleman continues to miss the point. We cannot remove tax credits in that way without ensuring first that there is an increase in wages for families so that they can support themselves and not see an increase in household debt.
Bill Esterson (Sefton Central) (Lab)
On that point, the Institute for Fiscal Studies figures that were given to the Treasury Committee show that the average gain is only £200 for the 8.4 million working age households who are estimated to lose £750 through this measure. Does that not show that the Conservatives’ claim of being the party of working people is a complete fraud?
Seema Malhotra
My hon. Friend has made his point incredibly well. I now wish to make some progress.
The IFS has also shown that those on the lowest incomes are being hit the hardest by the Government’s tax and benefits changes. It is also of great concern that many tax credit claimants will not be aware of the cuts and will suffer additional hardship from April without any time to adjust their budgets. Cuts in families’ income will have wider economic impacts. For example, the changes will hit local businesses, and less will be spent in our local shops.
It is staggering that the Budget document did not include a distributional analysis of the impact of the Chancellor’s spending decisions. It is no wonder that people believe that that was deliberate and part of the intent to hide the impact of these changes. That pattern has continued today.
Alison McGovern (Wirral South) (Lab)
Was my hon. Friend as astounded as I was to hear the Minister say that these changes protect those with the least and are being paid for by those with the most? Not only have the London School of Economics and the IFS demonstrated that the Government have hit those in the lower half of the income distribution, but I have evidence of a real family in Merseyside who will be £32 a week worse off. Does that not prove that what the Government are saying is a falsehood?
Seema Malhotra
My hon. Friend is absolutely right, and I can guarantee that all Members in this House will see more people with exactly the same problems in their advice surgeries.
The pattern has continued with no Government impact assessment for the statutory instrument that we are debating today. The Low Incomes Tax Reform Group has emphasised that fact along with the Social Security Advisory Committee, which complained in a letter last week about the lack of information that it was given on these regulations and the impact of the changes. It also said that more information should be made available to Parliament to allow for proper scrutiny. It said:
“In the case of the Tax Credits (Income Thresholds and Determination of rates) (Amendment) Regulations, which are affirmative, we would expect Parliament to want more detailed information that clearly explains the changes and potential impacts to ensure that they can be subject to effective scrutiny. We would encourage you to take those steps to make that material available for that purpose.”
The Members who are here today have no official information from the Government about the impact of the changes on which they are voting. I am talking about the impact that those changes are likely to have on their constituents. Instead, we have to use the IFS figures, which are the most authoritative figures available.
Seema Malhotra
I will not give way.
These measures will hit families with children the hardest and impact on child poverty at a time when the Government are also abandoning their commitment to eradicating child poverty by 2020, and effectively abolishing the child poverty watchdog. The Social Mobility and Child Poverty Commission’s remit will now just be social mobility. Tax credits have played an enormous role in tackling child poverty. I hope that Government Members will think twice before they go through the Lobby tonight.
Mr Rees-Mogg
I am very grateful to the hon. Lady for giving way and I congratulate her on her promotion and her new appointment. She is now more than quarter of an hour into her speech, but we still do not know where the £3.4 billion would be saved from, if not from this measure? The Opposition cannot be credible if they are still going to go for further deficit spending.
Seema Malhotra
The hon. Gentleman’s constituents will certainly be pleased to hear him raising their concerns about the likely impact of these changes on their incomes. I hope that he will engage—[Hon. Members: “Answer!”] He has heard the answer before from the Labour party. We certainly would not give tax cuts to the very wealthy in this country, which his party has had a good record of doing over the past five years.
Around 10 million people—a sixth of the population—will be affected by these changes. Every Member in the House represents some of those who will be hit—around half the working families in our constituencies. However, it is heartening to read in media reports today that at least five Members on the Government Back Benches are planning to vote against the changes. We have also heard reports, cited by the Chair of the Work and Pensions Committee, that the Chancellor spent yesterday talking to anxious Tory MPs and urging them not to defeat him in the vote today, after they took him at his word when he said that the Government represented low-paid workers. I am sorry that Conservative Back Benchers feel let down by their Chancellor, but it is not too late for the Government to change their mind.
It is disappointing that the Government have failed to tackle the real drivers of welfare spending—notably, low pay and the high cost of rent. That failure caused the Department for Work and Pensions to overspend by £25 billion over the last Parliament. The Chancellor has slashed entitlement to housing benefit, including through the bedroom tax and the benefit cap, yet the number of working people being paid housing benefit has still risen by 400,000 since 2010 because working people are not bringing home enough money to pay the rent. The number of people paid less than a living wage has risen by 45% since 2009, with 4.9 million workers today being paid less than the living wage.
This week the Government also launched the most sustained attack on rights at work in 30 years. The Trade Union Bill amounts to a suppression of the democratic rights of ordinary people, and the Government’s cuts to tax credits are a disgraceful attack on the incomes of families up and down the country. Labour would bring down welfare spending not by punishing the most vulnerable but through supporting a higher wage economy, introducing a real £10-an-hour living wage, tackling high rents by addressing the housing crisis, and supporting trade unions to ensure fair pay.
The proposed changes arguably represent the largest single cut to family incomes ever implemented by a Government. I hope that Conservative Members will search their consciences on this issue and vote with their hearts and their heads by joining us in the No Lobby today.
Budget Resolutions and Economic Situation
Seema Malhotra Excerpts(8 years, 10 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
The political presentation of the Chancellor’s Budgets has improved year on year. Sadly, we cannot say the same about his economics. That is not to say there were not some good things in the Budget—indeed, many of them were proposed in the Labour manifesto—but there are holes, contradictions and poor judgments running right through it.
The Budget fails as a coherent and strategic plan for Britain’s growth and prosperity. It is also unfair and unjust. Women will be hit twice as hard as men. A couple working full time on the minimum wage with two kids will be £700 a year worse off. People currently paid more than the minimum wage will be even harder hit.
In 2011, the Chancellor stood at the Dispatch Box and proclaimed a march of the makers. He painted a picture of how he saw Britain’s economy growing and being rebalanced away from financial services. There was, however, no plan behind it and it proved to be more of a mirage than a reality. Manufacturing output began to fall in 2012 and 2013, in part as a consequence of the Chancellor’s reckless rate of cuts. It was only when he began to slow the pace of cuts that manufacturing output began to recover. Some economists argue that had he embraced Alistair Darling’s balanced plan for reducing the deficit this might have been less likely. The Office for Budget Responsibility forecasts that the Chancellor will miss his export target in 2020 by a massive £370 billion.
Today, I would like to focus on two specific issues: investment in logistics and further education. Local businesses in Feltham and Heston tell me that there is an acute shortage of qualified HGV drivers that is crippling the British road haulage industry, and a shortage of qualified forklift truck drivers for manufacturing and distribution. If our businesses do not have enough support to get their products to domestic and foreign markets, we are holding back growth. There are some welcome proposals in the Chancellor’s Budget, but they do not go far or fast enough for the UK logistics sector.
I welcome the proposed compulsory levy on large companies to fund new apprentices, but it will not come into effect until 2017. We have a national shortage of more than 45,000 lorry drivers, and more than 60% of HGV drivers are over 45, which means that the problem is likely to get worse, not better. At least 40,000 drivers are expected to leave the industry over the next two years, but road haulage firms are able to train only 17,000 drivers a year.
Recently, I attended the launch of West Thames College’s logistics centre at Feltham skills centre, near Heathrow. It is an excellent college delivering key skills training for the logistics sector in the local and national economy. The college, from its reserves and with support from the local enterprise partnership, has funded the new centre, but it is now struggling to fund the courses. In his March Budget, the Chancellor cut the adult skills budget, which funds this training, by 24%, and on 4 June, he announced further departmental spending cuts, which might reduce this even further. In his March Budget, he also promised that the Government would work with road haulage firms on an industry-led solution to the HGV drivers’ shortage, including access to, and funding support for, training, yet last week he proposed no resources to tackle these problems, which was a huge disappointment.
While the apprenticeship levy will help from 2017, the crisis is now. The Road Haulage Association has asked for funding for the “driving Britain forward” scheme, developed with Jobcentre Plus, to train new HGV drivers between now and the introduction of the industry-wide HGV apprenticeship scheme. The logistics industry and the British economy need this support, which is why I shall today be writing to the Chancellor urging him to provide the funding the RHA has requested to tackle the HGV driver crisis between now and the introduction of the industry apprenticeship scheme; to stop further cuts to the adult skills budget; and to allow colleges such as West Thames to provide the logistics training that the industry needs and that Feltham and Heston businesses have called for.
The Chancellor has failed to rebalance the economy. His march of the makers appears yet to have taken its first step. I urge him to show leadership and provide the highly skilled workers that the UK logistics sector needs—a capital investment in the British people and British businesses. Keeping people jobless while companies call out for highly skilled employees makes neither economic nor moral sense. If he really wants to get Britain back on the road to recovery, rather than stuck on the hard shoulder, I urge him to take action now.