Consumer Rights Bill

Shabana Mahmood Excerpts

Tuesday 13th May 2014 Commons Chamber

[Philip Davies]

I am not going to give way.

This situation is very similar to the one I experienced when I was at Asda and we broke the net book agreement. Publishers had the right to set the price of books and nobody could undercut it, but Asda went to court and broke that agreement so now books can be sold at any price the retailer wants. It seems to me that Labour wants to go back to a time when publishers of books could set the price for books and ticket providers could set the price for tickets and nobody could do anything about it.

New clause 12, which guarantees that an event organiser must give somebody a refund up to 24 hours before an event, is essential if the Opposition want to get their way. If they want to ban somebody from selling on a ticket for the rugby world cup final, the only option for somebody who has bought a ticket and cannot go would be a refund. On too many occasions, event organisers will not allow refunds for events so what on earth is the customer supposed to do in such circumstances? The Opposition will not support insisting that they get a refund and they want to ban them from selling the ticket on, so somebody will be left with a ticket that they can do absolutely nothing with. How on earth can that be in the best interest of the consumer?

On the subject of the rugby world cup final, if people from New Zealand buy a lot of tickets for the final in the expectation that their team will get there only for it to be knocked out in the semi-final, we need a mechanism by which those fans can sell on their tickets to the fans of the team that will be in the final instead. It seems that the Opposition have not even thought about that prospect. The secondary market in tickets is an efficient way of getting tickets from one group of people to another so that the real fans can go. If Labour had its way, the real fans would not be able to go because they would be blocked from using any mechanism to get there.

I want to concentrate on new clause 13, which says:

“All products containing halal and kosher meat shall be labelled as such at the point of sale by retail and food outlets.”

For the purposes of the new clause, I have defined a food outlet as

“anywhere where food is served to the public.”

I have done that because I specifically wanted to include places such as schools and hospitals, as I think many parents and patients are concerned about food that they do not know the provenance or background of, and that information is important to them.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

If that is the hon. Gentleman’s intention, his clause is far too simplistic. Does he not agree that in the interests of fairness and consumer transparency consumers have the right to know about the origins of non-religiously slaughtered meat, whether that meat has been stunned or not, if it has been stunned what method was used and the method of non-religious slaughter? That is a lot of information, but observant Muslims or Jews would like that information as well as people who object.

[Philip Davies]

I have a great deal of sympathy with what the hon. Lady says. She seems to be making the point that we need more labelling, not less. If she is saying that my new clause is a step, but it does not go as far as she would like it to go, I am happy to take that criticism on the chin.

Section 5 of the European Communities (Amendment) Act 1993

Shabana Mahmood Excerpts

Wednesday 30th April 2014 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I am grateful to the new Financial Secretary to the Treasury for her introduction to the debate, and I congratulate her on her promotion to her new post. I look forward to continuing the debate with her in the Finance Bill Committee, which got off to such a strong start yesterday.

When I first looked at the motion, I was mystified about the nature of the debate, which is why I have thanked the Financial Secretary for her introduction to it. The motion, as framed, does not exactly leap off the Order Paper. When Members go to the Vote Office, as I did to find the convergence documents, they will find that the motion still does not quite leap out at us in respect of what is going on in the House this afternoon. That situation is not a state of affairs that is alien to Members, given that we often have to debate issues that can sometimes seem impenetrable to those on the outside, and often to those on the inside too.

Let us turn to what could be described as “minus page 2” of the Red Book. I thought it quite telling that underneath a note about the Crown copyright and the ISBN number, are the words:

“Printed on paper containing 75% recycled fibre”,

and

“The Budget report, combined with the Office for Budget Responsibility’s Economic and fiscal outlook, constitutes the Government’s assessment under section 5 of the European Communities (Amendment) Act 1993”.

That is relevant to today’s debate, as the Minister helpfully outlined in her introduction. This is in a very small font and is easy to miss, and it is not immediately clear what it really means.

Looking at the 1993 Act, Members will have spotted that it refers to the Maastricht treaty, article 2 of which states:

“The Community shall have as its task...a harmonious and balanced development of economic activities, sustainable and non-inflationary growth”.

Article 103 is relevant, too, as it talks about economic policies being a “matter of common concern” that should be co-ordinated within the Council. For some Members of all parties, these are the sort of words that are difficult to stomach. That article continues:

“For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy”.

Once we break through the rather impenetrable language and the odd nature of this old treaty obligation, the emphasis of which has changed from when the obligation was made to the state of play within the EU today, what we get to is the fact that the House is essentially being asked to approve the Budget Red Book as a true and accurate reflection of what is happening in the UK economy. When we are finally able to frame the question in that way—asking whether the Red Book is in and of itself a true and accurate reflection of that—I would have to say, “Where shall I start?” It will probably not surprise Government Members to know that the Opposition do not consider it a true and accurate reflection of what is happening in the UK economy

Let me start with the top line of page 4 of the Red Book:

“The government’s long-term economic plan is underpinned by its commitment to fairness.”

I seem to remember that during the run-up to the last general election, before the Government began their life in the current Parliament, the right hon. Member for Tatton (Mr Osborne), who was to become Chancellor of the Exchequer, uttered his famous line about how they were not going to balance the books on the backs of the poor. There was also that other famous line about how we were all in it together. On the face of it, who could say that those sentiments were wrong? Certainly, if they had proved to be genuine, we should be in a very different place.

At the heart of those lines of rhetoric, however, is the implication of a deep commitment to fairness. My charge against the Government is that that commitment—and the “commitment to fairness” to which the Red Book refers—can only be seen as genuine if we accept that “fairness” can describe an economic plan that gives a huge tax cut to the wealthiest in our country. In the 2012 Budget, the Government announced a tax cut for millionaires that would be worth an average of £100,000 to each of them—a sum that is far out of the reach of millions of people in our country today. Meanwhile, the Government are presiding over what might be termed one of our more successful growth industries, which, unfortunately, happens to be the food bank industry. The number of people receiving three days of emergency food has grown from 67,000 four years ago to 913,000. How can it possibly be true that, as the Red Book states, the Government have a deep “commitment to fairness”, when the richest members of our society receive a huge tax cut while the poorest, in ever growing numbers, are being forced to use food banks?

[Ian Swales]

Perhaps the shadow Minister will quote another statement in the Red Book, namely the statement that net income inequality is at its lowest since 1986. The period following that year has included 13 years of her party in government.

[Shabana Mahmood]

Later in my speech, I shall deal directly with issues relating to household income and what is happening to the ability of families on low and middle incomes to make ends meet.

[Mr Simon Burns (Chelmsford) (Con)]

The hon. Lady has been making a big point about fairness. Would it not be fair to point out that, since coming to power, the Government have considerably increased the personal allowance—from just under £7,000 a year to £10,000—and that that has helped the poorest who are in work and paying taxes, as well as middle-income families?

[Shabana Mahmood]

I shall deal with precisely what has happened to the personal allowance later in my speech, but let me make this point to the right hon. Gentleman now. It is true that the personal allowance has risen, and the Opposition have supported those changes, including yesterday when we debated clause 2 of the Finance Bill in Committee. However, it is also true that ordinary working people continue to be worse off despite the changes, and will still be worse off in 2015 than they were in 2010. This is a classic case of the Government’s giving with one hand and taking away much more with the other, and it goes to the heart of the “fairness” charge that I am laying at their door.

I was very struck by the suggestion made by a welfare Minister, Lord Freud, that the reason for the massive increase in the number of people who are using food banks and having to rely on food parcels from them was that

“there is an almost infinite demand for a free good.”—[Official Report, House of Lords, 2 July 2013; Vol. 746, c. 1072.]

I had to read that comment several times, because I could not quite believe that such words could emerge from anyone’s mouth during a discussion about food poverty and the fact that people are going hungry in our country. When the story about the huge increase in the number of people using food banks hit the news a couple of weeks ago, I was also struck by the main attack line from those on the Government Benches: the claim that the increase had a lot to do with advertising and the fact that many more people are now aware of food banks.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The hon. Lady will be aware that this is a very narrow motion. I am sure that she is using the matter to which she is referring as an example, which is in order, but I expect that she will be very careful not to stray too far from the very narrow terms of the motion.

[Shabana Mahmood]

I will, of course, be careful, Madam Deputy Speaker. However, the point that I am making relates directly to what is in the Red Book, to the nature of the motion that we are being asked to support, and to whether we are being presented with a true and accurate reflection of what is happening in the United Kingdom economy. My view, and that of other Opposition Members, is that the Red Book implies that the “commitment to fairness” is being met. I do not believe that a situation in the United Kingdom economy in which more and more people are being forced to use food banks while the Government see fit to give a tax cut to the wealthiest in our country indicates a genuine commitment to fairness, and it is for that reason that I have rejected the thrust of the motion—which asks us to approve the Red Book as such an accurate reflection—and supported the amendment.

The Red Book paints a rosy picture of the goals that have been met and the targets that have been delivered, but, although I looked very carefully, I could not find any reference to the Government’s failure to meet the terms that they had set themselves for their so-called long-term economic plan. The Minister said earlier that the Government were “on track”, which is fair enough, but the track to which she referred is not the track that the right hon. Member for Tatton said that we would be on when he became Chancellor. At the beginning of this Parliament, the Government said that the deficit would be eliminated by 2015, but we now know that that is not the track they are on. The deficit will not be eliminated by 2015; indeed, the current forecast is that it will not be eliminated until 2017-18, when we shall be well into the next Parliament. That is not the test that the Government set themselves for their economic plan, which has failed on its own terms.

[Mr Andrew Turner]

Does the hon. Lady agree that one of the problems was Europe, and the fact that its the budget burst into flames in 2011 or 2012?

[Shabana Mahmood]

What we are being asked to do today is approve a document on the basis that it is an accurate reflection of what is happening in the UK economy. I am afraid that the document does not accept the fact that the Government are not on track to meet the challenge that they set themselves, and promised the electorate that they would deliver on at the last election. They suggested that, if the Chancellor’s programme of fiscal consolidation was pursued—which it was—the budget deficit would be eliminated by the end of this Parliament, and the fact that that is not going to happen goes to the heart of the motion.

However, the Government are not just off track in relation to the central promise that they made to the electorate at the beginning of this Parliament about the elimination of the deficit. The national debt is rising, and the Government are set not to meet their target of ensuring that it falls as a share of GDP by 2015-16, although anyone reading the Red Book in isolation would be forgiven for thinking that everything was going exactly according to their original plan.

[Jacob Rees-Mogg]

I am enjoying a good deal of the hon. Lady’s speech, but she ignores the crucial point: the Office for National Statistics substantially revised downwards the economic growth in 2008 and 2009, so the origins of this problem lie with the previous socialist Government, who ruined the economy. Blaming it on the marvellous work of this Government is entirely false.

[Shabana Mahmood]

I am grateful to the hon. Gentleman for his intervention, but he will not be surprised to learn that I wholly reject the point he makes. Government Members often try to lay the whole cause of the global financial crisis at the door of the previous Labour Government, but it was a global financial crisis that affected countries all over the world; the Labour Government were not responsible for the fall of Lehman Brothers in the United States. That is the first point I would make in response to him. The second point is that this Government have now been in power for four years and they cannot keep trying to get off the hook about their own record. The important point is that they set a target for themselves. Previous Red Books show what was supposed to happen with this programme of fiscal consolidation, but it has not proceeded at the pace the Government set for themselves. That is not spelt out clearly in the Red Book in open language that anybody could understand.

Anyone looking at the Red Book would be forgiven for thinking that these are halcyon days and everything is exactly as it was always planned to be, but that is not a true and accurate reflection of what is happening in the economy. On page 1 of the Red Book, in a section from which the Minister quoted, we see that

“GDP growth has exceeded forecasts”.

It also states that

“the deficit as a share of GDP is forecast to have fallen by a half by 2014-15 compared to 2009-10”.

Again, that implies, “Everything is okay. Move along. There is nothing to see here.”

Yesterday’s growth figures and the 0.8% growth we have seen in the first quarter are welcome, but they do not make up for the previous three years of flatlining in the economy. We have to remember that in quarter 2 of 2010, growth was at 1.2%, and in 2010 after coming into power the Chancellor said that the economy would have grown by 8.4% by now, whereas in fact it has grown by just 3.8%, which is less than half of what he forecast. Again, what has happened is not quite as rosy when compared with what was supposed to happen in terms of the challenge the Chancellor set himself. It is also not as rosy a picture as is painted in the Red Book.

Let me deal with the point about personal allowances raised by the right hon. Member for Chelmsford (Mr Burns). We see a similar flannelling about what is really going on in the economy when we look at the impact of tax and benefit changes on people on lower and middle incomes and, in particular, on the interplay with their living standards. The Red Book tells us that

“a typical basic rate taxpayer will pay £705 less income tax…in cash terms than they would have paid in 2010-11.”

Page 10 of the Red Book tells us that pressures on household budgets “have eased”, but that is simply not the experience of millions of people on lower and middle incomes in our country. I fail to see how that statement can be true at the same time as the OBR tells us that wages will be 5.6% down in 2015 compared with 2010.

Treasury Ministers have failed to admit that latter point; they have been asked a number of times to accept that the OBR has said that wages will be 5.6% down, but no Treasury Minister has ever answered yes or no to that question. I will happily give way to the Financial Secretary if she wants to confirm that that is the case, but she is looking at her papers and I think she is going to do what every other Treasury Minister and colleague of hers has done, which is duck the opportunity to confirm on the Floor of the House and for the benefit of the record that the OBR is right in saying that wages will be 5.6% down in 2015 on the 2010 level.

[Ian Swales]

I am listening to the hon. Lady’s arguments. Would she like to add that because the income tax cut is a flat-rate amount it has the biggest impact on the low-paid and that the low-paid, particularly those on the minimum wage, have had a real-terms increase in their net pay?

[Shabana Mahmood]

And yet people in our country are on average £1,600 a year worse off. Let us look at the combined impact of tax and benefit changes. The Institute for Fiscal Studies figures, analysed for us by the House of Commons Library, show that on average people will by next year be about £1,000 a year worse off. This comes back to the central point: the Government say in the Red Book that pressures on household budgets are easing, but people are worse off, and not by trifling amounts, such as a tenner or £20 quid—they are worse off by nearly £1,000. That is a huge sum and it has a huge impact on a family’s ability to make ends meet.

The Government talk a lot about the personal allowance, and when the charge is made that ordinary people are suffering a deep-seated cost of living crisis, they often say, “But of course we have taken a large number of people out of tax altogether because of the increase in the personal allowance.” Although the personal allowance increases have been welcomed and supported by everybody across the House, they do not in and of themselves give a family the ability to make ends meet. We still have people who are desperately struggling, and who have their head in their hands every time a bill comes through the door. The truth remains that people on lower and middle incomes are worse off, and they will be worse off at the end of this Parliament than they were at the beginning of it. The balm offered, by the increases in the personal allowance in particular, is not enough to heal the deep wound that has been inflicted by all the other changes this Government have implemented since they have been in power. As I say, the combined impact of tax and benefit changes means that by next year people on lower and middle incomes will be about £1,000 a year worse off.

The Red Book also talks a lot about the Government’s economic policy in relation to savers. The Chancellor famously said:

“If you are a maker, a doer or a saver, this Budget is for you.”—[Official Report, 19 March 2014; Vol. 577, c. 781.]

There was not much in the Budget and the Red Book to help those who are making do—the people struggling with the cost of living crisis. But for the savers, there is much in the Red Book: about retirement choices, individual savings accounts and other savings devices. The Red Book has twice as much about savers as about supporting households. Again, however, it is not a true and accurate reflection of what is going on in the economy, because the Red Book fails to recognise that for many people saving, particularly at the moment, is a luxury that is desperately out of reach. I can imagine the welfare Minister I described earlier as being baffled about why people go to food banks being equally baffled about why people cannot save. People go to food banks because they have no money and they are going hungry. People do not save because they do not have any money left once they have met their other costs of living.

Hidden away in the documents that accompanied the Budget we found that the OBR says that the savings ratio has fallen in recent months and is projected to fall every year until 2018. I put that point to the Chancellor yesterday when I asked him to confirm that, despite his Budget for savers, the savings ratio is forecast to go down. He ducked the question and refused to accept that that is what the OBR is saying is happening to the savings ratio.

In recent weeks, we have had a number of surveys, particularly an important one carried out by the Money Advice Service, which have shown that 16 million British people are living life on the edge with no savings at all. Just 27% of people say that they can save on a monthly basis, and 37% say they have fewer savings now than they had last year. The truth, which we do not see in the Red Book, is that savers withdrew money from their accounts last year at the fastest rate for nearly four decades, according to Bank of England figures. Britons ended up taking out £23 billion from long-term savings in 2015. The ability of ordinary people on lower and middle incomes to save and to have enough money left over after the working week to put aside even £1 a day is fairly limited. Again, that is something that has not been spelt out in the Red Book.

[Mr Philip Hollobone (Kettering) (Con)]

It has certainly been spelt out in the convergence document produced by Her Majesty’s Treasury. Page 12 makes it quite clear that falls in the rate of saving are to be expected in periods when confidence is increasing. It goes on to say that total household debt as a percentage of disposable income has fallen more than 30 percentage points since its pre-crisis peak under the previous Government.

[Shabana Mahmood]

I am afraid that that does not get the Government off the hook when it comes to the impact of their own record. The decisions that the Government have made, both in this and previous Budgets, have left ordinary people worse off. The rhetoric around savers and how much there is in the Red Book for savers in our country misses the point and does not spell it out in ordinary language for the ordinary person to understand that saving is a luxury today for millions of people struggling with a deep-seated cost of living crisis.

The Red Book gives a rosy picture of what is happening in the UK economy, but is just a good line in rhetoric that is rather removed from the reality of daily life for millions of people in our country. For that reason, I urge Members to reject the Government motion and to support our amendment, which, at the very least, introduces an element of reality into what is a surreal characterisation of today’s British economy.

Oral Answers to Questions

Shabana Mahmood Excerpts

Tuesday 29th April 2014 Commons Chamber

[Mr Osborne]

Alongside the flexibility in and access to pension pots, we have increased the limit for both ISAs to £15,000. The new ISA will come in at the beginning of July and there will be complete flexibility in transferring funds from equity ISAs to cash ISAs. Of course, we have also abolished the 10p savings rate. Unlike the shadow Chancellor, when we abolish a 10p rate we get rid of it altogether, rather than doubling it.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

The Chancellor said that last month’s Budget was a Budget for savers, so will he tell us why page 106 of the Red Book shows that the saving ratio is falling and that it has been revised down this year, next year, the year after and in every year up to 2018?

[Mr Osborne]

What the hon. Lady did not say is that by 2018 the saving ratio will still be double what it was under the Labour Government. That is a rather important piece of information that she failed to tell the House. We are 15 minutes into Treasury questions. When will a Labour MP welcome the GDP numbers?

Finance (No.2) Bill

Shabana Mahmood Excerpts

Tuesday 8th April 2014 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I beg to move amendment 2, page 3, line 28, at end insert—

‘( ) The Chancellor of the Exchequer shall undertake a review, within six months of the passing of this Act, on the impact of an additional cut of one per cent to the main rate of Corporation Tax for financial year 2015-16, with particular reference to—

(a) the impact on businesses with fewer than 50 employees;

(b) the impact on investment by businesses with fewer than 50 employees; and

(c) alternative tax measures, including non-domestic rates, which would have a greater benefit for businesses with fewer than 50 employees.

( ) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.’.

This amendment would require the Chancellor of the Exchequer to publish a report on the impact of a cut of one per cent to main rate Corporation Tax on businesses, including small and medium sized enterprises (SMEs).

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

With this it will be convenient to consider:

Clauses 5 to 7 stand part.

That schedule 1 be the First schedule to the Bill.

[Shabana Mahmood]

Our amendment would require the Chancellor to publish a review of the impact of an additional cut of 1% to the main rate of corporation tax for 2015-16 with reference to the impact on businesses with fewer than 50 employees, their levels of investment and the impact of alternative tax measures such as a reduction in non-domestic rates—business rates—which we believe would have a greater impact on small and medium-sized enterprises, which tend to be businesses that have fewer employees and in the main occupy premises with a rateable value of less than £50,000.

Our amendment and our approach highlight the difference between us and the Government when it comes to business taxation. The Government have made a number of significant cuts to corporation tax. The main rate has been cut a number of times, and is due to be cut again from 21% to 20% next year. The main rate is paid by companies with profits of more than £1.5 million—about 40,000 or so businesses. The small profits rate is paid by companies with profits of under £300,000, and there is a marginal rate, which applies to companies with profits between £300,000 and £1.5 million.

The Government have announced cuts to the corporation tax rate in almost every fiscal event that we have had since 2010, with the rate falling from 28% in 2010 to 20% in 2015-16. This has brought the UK rate lower than most developed economies. As I said, the Government are planning another cut for April 2015 from 21% to 20%, at a cost of £400 million in 2015-16, rising to £785 million the following year, and £865 million the year after that. The cumulative corporation tax cut over this Parliament has been in the region of £10 billion. The Government’s central argument for cutting corporation tax is that a lower rate makes the UK more attractive as a destination for businesses to locate. They claim that a reduction in the main rate of corporation tax will reduce capital costs for businesses and promote higher levels of business investment.

[Simon Kirby (Brighton, Kemptown) (Con)]

Can the Opposition really be interested in business when not a single Back Bencher is present to listen to the hon. Lady speak to her amendment?

[Shabana Mahmood]

I assure the hon. Gentleman that Labour Members are passionate about business and our policy of a business rates cut for small and medium-sized businesses, which I will come to later.

The Government’s impact assessment says that the 1% cut in 2015 will lower the bills of 40,000 businesses that have profits of more than £1.5 million and pay the main rate of corporation tax. It will also benefit a further 41,000 businesses that have profits between £300,000 and £1.5 million and pay the main rate of corporation tax but receive marginal relief.

The Department for Business, Innovation and Skills estimates that the UK has 4.8 million private sector businesses, the majority of which, around 3.6 million, are sole proprietorships, and a further 1.02 million have fewer than 10 employees. That means that if 81,000 businesses benefit from cuts to the main rate of corporation tax, fewer than 2% of the total businesses in the UK are benefiting.

[Mr John Redwood (Wokingham) (Con)]

I would be grateful if the hon. Lady explained how the Treasury should go about making the calculations that she wants it to make. How would the Treasury know the consequence of that one particular tax change, and how would it know what it would be like without it?

[Shabana Mahmood]

I will come to the point about the different tax choices that we make and measuring their impact. Unlike the Minister, I do not have access to Treasury officials, so I am not versed in their methodology, but I do not deny that the Government’s corporation tax rate cuts in this Parliament, which we have supported, have benefited 2% of businesses. I will come later to the 98% of businesses that have not benefited from the cuts to the main rate of corporation tax, but which are struggling with the costs of running their business. The Opposition believe that the Government can and should go further in helping those businesses cope, in particular, with the business rates that they have seen increase.

[Ian Swales (Redcar) (LD)]

Will the hon. Lady acknowledge that the Government inherited plans to increase corporation tax for small businesses by 1%, but have cut it by 1%, so it is not true to say that the Government have done nothing for small businesses?

[Shabana Mahmood]

I will come to the Government’s record in helping small and medium-sized enterprises.

As I said, we have supported the reduction in the rate of corporation tax in this Parliament, except to raise concerns, which I am sure the Exchequer Secretary will remember, well before I was in my current post, about the financing of that change at the start of the Parliament by getting rid of investment allowances on which the Government have recently U-turned. But as the figures show, the change to the main rate of corporation tax, the central policy for business taxation, does not help 98% of business in this country. How are they faring under this Government?

Everyone agrees that SMEs are the engine of growth, a phrase that we hear regularly in the Chamber and the House, and it is also fair to say that they are part of our national life. High streets and corner shops are part of the very British way of life that we enjoy in this country. I have a personal affinity with these enterprises, as when I was younger, my parents had a corner shop. My first job was helping my parents by serving customers in our shop after school and at weekends, doing the stock-take and going with my dad to the cash-and-carry. Even if one did not grow up in such a business, they are easy to call to mind because there are so many of them. As I said, there are almost 5 million, and they are the heart and soul of our villages, towns and cities. They also provide about 47% of private sector jobs.

As for everyone—SMEs are no different—times have been tough, and SMEs have been struggling with a number of issues during this Parliament and I will come to the points raised by the hon. Gentleman. The first of those issues has been access to finance. Every time we discuss SMEs, access to finance is one of the key issues raised. It is fair to say that the Government have failed to get lending going to businesses. They are in their fourth year of office and their many schemes keep failing to have a significant and game-changing impact on the access to finance landscape. For example, business lending fell towards the end of last year as banks continued to squeeze funding for SMEs, despite attempts by the Bank of England to boost finance to the sector. Bank lending figures also show that businesses paid back £4.3 billion more than they had borrowed in the three months to the end of November. SMEs were the worst affected by that particular brake on lending, and that is despite the tweaks to the funding for lending scheme announced by the Bank that were designed to try to ensure that loans to smaller businesses would be favoured.

Although larger businesses can access the growing market for debt financing in the bond market, there is a problem for small businesses that are reliant on high street banks and specialist finance and lending businesses, which have become much more conservative in their lending practices since the global financial crash of 2008. SMEs have consistently reported that credit is either refused or offered at very high prices by the major lenders, as Members on both sides of the House must regularly hear from businesses in their constituencies. There has been much talk in this Parliament about the problems of access to finance for SMEs, but despite several different schemes being announced, the change in practices that is required if SMEs are to have the finance they need has not been seen.

That issue has also been considered by the Public Accounts Committee, which made a number of worrying findings in relation to the landscape for SMEs. It said:

“The departments’ schemes are managed as a series of ad hoc initiatives that are launched to address particular weaknesses in the market, rather than to act as a coherent programme.”

That is a real problem. The lack of a coherent programme from the Government, despite what I am sure are the best efforts of the Business Secretary and the Chancellor, has led to piecemeal action—a little bit here and a little bit there, but no overall drive to action, only some good rhetoric for set-piece debates in the Chamber, leading to not very much at all.

[Steve Baker (Wycombe) (Con)]

The hon. Lady seems to be arguing that banks should be less conservative, which implies a greater degree of risk, and says that she wants a more coherent, less piecemeal programme. I infer from that that she wants the banks to take a greater degree of risk, and the taxpayer to pick that up. Is that what she is saying?

[Shabana Mahmood]

As I set out, the issue is not just the risk taken by the banks, which have been very conservative in providing SMEs with access to finance. Members in all parts of the House accept that good businesses that have the capacity to grow, create more jobs and be successful are failing to get the finance they need. In my constituency, a number of successful, viable businesses are still failing to get finance from the banks. That is not a result of banks being a little bit conservative in their risk taking; they have significantly curtailed their lending, which is having a negative impact on SMEs and their capacity to grow and increase jobs.

The Public Accounts Committee also found that investment overall had declined and that Government Departments could not demonstrate whether their schemes had addressed the market failures that they had been set up to correct. There was no mechanism, the Committee said, for evaluation of the various schemes and no obvious goals were set for the schemes, making it easier for the Government to hide any failures. Goal setting of the kind envisaged by the Public Accounts Committee would make the failure of such schemes much starker, but would also lead to greater and quicker action to correct them and ensure that desperately needed finance reached SMEs.

An additional problem in the Government’s approach, according to the Public Accounts Committee—I think we can all agree on this—is the difficulty of raising awareness of the schemes available for SMEs, which are often small operations, one-man or one-woman bands. It is difficult to balance all the responsibilities of running a business, and often people do not have the time to engage with Government policy and how it affects them. They may hear about schemes randomly and it is not always easy to learn from Government websites what is available for small businesses. The Public Accounts Committee felt strongly that the Government lacked a clear strategy to ensure that SMEs were aware of the funding options available to them.

I noted at the weekend that the employment allowance introduced by the Government has been rolled out. Millions of letters have been written to businesses to make them aware of the £2,000 allowance that has come into effect. That goes to show the extent of the awareness raising that is required. I am sure that there was also a political advantage and motive to the writing of those letters. Writing to businesses telling them what change has occurred and how they might benefit is a good thing, but it shows the effort required to get the message out. Such effort was not necessarily apparent in the case of other Government schemes relating to access to finance.

[Nick de Bois (Enfield North) (Con)]

Perhaps the hon. Lady will understand my confusion and clarify this point for me. She has spent much of her speech suggesting that the Government were doing nothing for small business. Then, when they contact businesses and tell them how they can benefit from the Government’s policies, she seems a bit disappointed. Can she explain the contradiction?

[Shabana Mahmood]

I assure the hon. Gentleman that it is not a matter of my personal disappointment. The Government have announced a number of schemes, which everyone agrees have failed to get lending to the rate that is necessary to have a game-changing effect on the landscape for small and medium-sized enterprises. The employment allowance, which we supported—the hon. Gentleman served on the relevant Bill Committee—came after the national insurance contributions regional holiday, a scheme that was in place for three years and almost from day one failed to meet the ambitious targets that the Government set for themselves. Throughout the life of that scheme, we called on the Government to change course, which they did not do until the scheme came to the end of its three years, at which point they introduced the employment allowance.

--- Later in debate ---

[Ian Swales]

Will the shadow Minister enlighten us on how the calculation of a £5,000 saving is made, and on what she predicts about prices before and after such a freeze?

[Shabana Mahmood]

The hon. Gentleman is welcome to see our detailed calculations, which I can provide to him and are a matter of public record. If he really wants auditing of manifesto commitments, he should support our call for the Office for Budget Responsibility to be allowed to audit parties’ manifestos. We have nothing to hide on the policies that we have announced and the numbers behind them. We are very happy for the OBR to look at all that and to prepare a report for the benefit of the public so that they can see that what we are saying is based on good numbers and is deliverable. If the Government—both parts of the Government—have nothing to hide, they should fully support our proposal on the OBR audit, which is a good one. I am glad that the hon. Gentleman has given me a chance to remind the House that it is not Labour Members who are scared to have their numbers looked at.

[Ian Swales]

rose—

[Shabana Mahmood]

I will not give way; I am going to make a little more progress.

As hon. Members will know, the level of business rates is set by the Treasury, although the revenues are collected locally. Business rates increase with inflation, and the rate of increase each April is set according to the rate of retail prices index inflation in the previous September. In September 2013, RPI was 3.2%, so business rates were due to rise by 3.2% this year. Of course, that was before the Government made their autumn statement announcement, which capped that increase at 2%. Business rates have risen rapidly during this Parliament because of high inflation. More than one in 10 small businesses now say that they spend the same or more on business rates as on rent. This April, businesses have been hit by a rise of £270, on average, at a total cost to business of £45 million.

[Nick de Bois]

The hon. Lady spoke very passionately, and rightly so, about her parents’ corner shop business, which she is right to be proud of. In citing these numbers, however, she overlooks the fact that because of the Government’s extension of small business rate relief, anyone with a rateable value of less than £6,000 is not paying anything at all, as I found out when I went down my local high street and heard how grateful people are for this support. We need to keep some context when talking about these numbers.

[Shabana Mahmood]

I hear the hon. Gentleman’s point, which I will come to later in my remarks. On the action that the Government have taken in the round, he will not be surprised to hear that my criticism is that it does not go far enough. By comparison, our alternative proposal, which is a Labour manifesto commitment, goes much further and would result in a cut in business rates and a freeze the following year.

The only choice for many shops, workshops, start-up businesses and others who pay business rates is to pass the increases on to their customers, primarily through higher prices, which of course makes things difficult for those customers. They also face a continuing squeeze, which many of them complain means that they can no longer afford to stay in business. This is having a real impact, as I know from my casework in my constituency surgery. I have met many constituents with family-owned businesses whose stories are not dissimilar to the story of my own family, whose elder relatives came to this country in the ’60s and ’70s and set up businesses that they have passed on to their children and, in some cases, grandchildren. They are now terrified that the squeeze from the exponential growth in business rates might put their family-owned businesses out of business. I have seen constituents break down because every time the business rates bill comes they fear that many years of hard work, which is tied absolutely to their conception of what it is to be British and to enjoy the freedoms offered by this country, might be going down the drain.



Given how much businesses are struggling and given the collection of issues that SMEs are facing, we have said that the next Labour Government would cut business rates in 2015 and then freeze them in 2016. In 2015, we would cut business rates on properties with an annual rental value of less than £50,000, taking the rates back to the level of the previous year, and then freeze them for such properties in 2016. As we have said, we would pay for that by reversing the additional cut in the main rate of corporation tax due to go ahead next year, when it will fall from 21% to 20%. The main rate is paid by companies with profits of over £1.5 million, while companies with profits between £300,000 and £1.5 million pay the rate on a sliding scale, and companies with profits of less than £300,000, which pay the lower rate, will be unaffected by the cut.

All the money raised from the corporation tax increase that we envisage—that is, a rise from 20% back up to 21%—would be spent solely and exclusively on paying for our policy on business rates. That is an important point given some of the debate that has taken place in the House in the past week or two, when we have been speaking about the Budget and attitudes towards business taxation. Even at 21%, our corporation tax rate would remain competitive, being second lowest in the G8 and second lowest in the G20. Government Members often say that any corporation tax rise will have a negative impact on our country’s capacity to do business, but I disagree, because, as I said, even at 21% it will be the second lowest in the G8 and the G20. The headline rate of corporation tax is not the sole reason that businesses choose to come to this country to invest and create jobs. It is an important factor—no one can deny that—but it is part of a picture of support for business that those wishing to come to this country look at, or are advised on, before they make their decisions. I do not believe that putting corporation tax back up from 20% to 21% would have too great an impact on our capacity to attract businesses to this country.

[Simon Kirby]

Is not the problem that a proposed tax increase sends a message that it is the thin end of the wedge—the tip of the iceberg—and that under a Labour Government, God forbid, we might see considerably more tax rises?

[Shabana Mahmood]

I do not think it does send that message. Business people are much more sophisticated than that: they do not simply look at announcements about the headline rate. They will receive advice from their advisers—their accountants and lawyers—when they are making their decisions about where to base themselves and where to go to invest and grow their companies. It will be explained to them, and known to them, that this policy is designed to support a different type of business that benefits all of us who are interested in the business landscape.

We have been very clear that this is the only change to corporation tax that we envisage during the next Parliament and that we are doing this not because we want to put people off coming to this country, or prevent them from doing so, but because we want to use all the money to pay for a cut and then a freeze in business rates. We have also said very clearly that any choices we make that differ from what the Government are doing will be fully costed and fully funded. As I said, we are happy for the OBR to look at our figures and audit our manifesto, and to do so for all political parties ahead of the next general election to make sure that the public are as well informed as possible about the different choices being made by parties that want to be in government.

[Nick de Bois]

Given the extreme volatility of corporation tax collections for decades, how would the hon. Lady deal with the unpredictable nature of the amounts collected? Will whatever is collected one year be applied as a discount on business rates the following year? If the revenues were below the expected amount, would the hon. Lady go back to businesses to ask for more in business rates? She should consider the unfortunate, difficult and unpredictable nature of the issue. Business needs certainty.

[Shabana Mahmood]

I agree that business needs certainty. All our figures are based on analysis from the House of Commons Library. That is the best we have to go on and it is, of course, a respected source for making projections on the likely cost of cutting the rate and how much will remain for business rates. As I have said, all the money raised will go towards our business rate policy, which applies to 2015-16 and 2016-17. We will, of course, consider the circumstances in the early part of the next Parliament when deciding what to do about business rates.

During the Budget debates, Government Members tried to argue that our proposal to increase corporation tax back up to 21% meant that Labour was all about increasing business taxes. It is interesting that that argument has not been repeated since those debates. It quickly fell apart when it was pointed out to Government Members that, given that all the revenue from our corporation tax policy would be spent on cutting and then freezing business rates for small businesses, their argument did not seem to consider small businesses to be real businesses. I am glad that Government Members appear to have dropped that particular line of attack and I would warn them against trying to run it again, because it was insulting to small and medium-sized enterprises.

[James Morris (Halesowen and Rowley Regis) (Con)]

Under this Government, local authorities will be able to retain an uplift in business rates as part of local government funding. Has the hon. Lady considered the impact of a business rate freeze on the ability of local governments to benefit from an uptake in business rates, and on local government finance in general?

[Shabana Mahmood]

Our policy is fully costed. We do not envisage any loss of revenue for local government. Our key priority is to give practical assistance to businesses as soon as possible, so that people such as those who visit my constituency surgery to say that they are fearful that they will have to close their business get some relief from what is becoming a very real business burden.

Last week the Secretary of State for Education suggested to the British Chambers of Commerce that our policy on corporation tax and business rates pits businesses against each other, which is complete nonsense. The idea is not to tell one business that it is going to suffer while another business does really well; it is to get a better balance with regard to the landscape of business taxation.

As I have set out in detail, corporation tax cuts over the life of this Parliament amount to some £10 billion and 2% of businesses in this country have done very well with their tax bill. It is fair and right to consider what is happening to the other 98%, understand the struggles they face and make choices that the 2% might not like, but that will offer support to smaller businesses and that will go some way to ensuring that they can remain in business and continue to grow and do good for the economy.

Even if the headline rate of corporation tax increases from 20% to 21%, it is important to remember that it will remain competitive. I do not believe that the change would be destructive or damaging to UK plc. In fact, I think that it and the moneys that will go to businesses as a result of a cut and then a freeze in business rates could do real good, not just for SMEs but for the economy as a whole.

[Simon Kirby]

It is all very well for Labour to bash big businesses, but does the hon. Lady not understand that many of their customers and suppliers are small businesses? The issue is not quite as simple as she would have us believe.

[Shabana Mahmood]

I am really disappointed that the hon. Gentleman has not been listening to my speech. At what point did I bash big businesses? It was not something I said, and nor was it suggested by my tone. I have made it very clear that we supported the cuts to corporation tax in this Parliament. We are simply suggesting a switch spend—it will be in our manifesto for the next general election—which amounts to making a different choice on corporation tax in order to get practical and immediate help to smaller businesses that will make a real difference to them.

Given that the 2% of businesses that are larger have benefited by about £10 billion over the life of this Parliament as a result of a number of changes to their taxation, it is fair to switch our attention to a part of the business market that has been rather ignored. Although the Government have a number of schemes to help smaller businesses, those schemes are not going far enough or achieving the Government’s aims.

Our suggested switch spend is fair. It is not about pitting one business against another or valuing one above another. It is a simple recognition of the fact that 98% of businesses in this country have not received the practical help they need. They are desperate for change on their business rates and we will deliver it. The policy will be in our next manifesto.

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

On support for small businesses, does the hon. Lady regret the fact that when her party was in office, it planned to increase the corporation tax rate for small businesses from 21% to 22%? Does she also regret the previous Government’s plans to increase employers’ national insurance contributions and fuel duty, which would have affected small businesses?

[Shabana Mahmood]

What I primarily regret is that, as a result of the choices they made, this Government choked off the economic recovery that was under way when they came to office. That is the most regrettable thing: it led to three damaging years of flatlining, and it is ordinary people who are paying the price.

Following a vocal campaign by a number of business groups, ahead of the autumn statement the Government decided not to go ahead with the planned 3.2% increase in business rates and decided instead to cap them at 2%. The Government also announced in the autumn statement that they would provide additional help to retailers. That was action—it was relatively late in the day but it was action—but it does not go far enough, and the Government’s policy does not compare favourably with ours ahead of the next general election.

Ultimately, business rates are still set to rise this month by an average of £270. The Government’s autumn statement offer of £1,000 business rate relief was welcome for retailers, but it excluded workshops and offices used by high-tech start-ups. I particularly have in mind small jewellery makers in my constituency, which is famous for the jewellery quarter at its heart. Such businesses will not benefit from the Government’s announcements in the autumn statement and, as I have said, a significant rise in business rates is still envisaged for small businesses.

Our proposal for a switch spend from corporation tax to business rates is a much more comprehensive measure that would offer genuine and more far-reaching support to small and medium-sized enterprises. Given the scale of the problem, our policy seeks to offer practical help that would truly make a difference on the Witton road, the Coventry road and the Soho road in my constituency. The Exchequer Secretary will be pleased to know that it would also make a difference in his constituency. The Office for National Statistics report “UK business: Activity, Size and Location 2013”—a great read—tells us that more than 80% of the 5,750 VAT or PAYE-based enterprises in South West Hertfordshire employ no more than four people, while almost 75% of them have a turnover of less than £250,000. They are therefore not affected by the changes to the main rate of corporation tax, which he himself oversees; they are more likely to be in properties with a rental value of £50,000, and are therefore more likely to benefit from Labour’s proposal to cut and then freeze business rates in 2015-16.

In conclusion, we believe that our policy is the right one for helping small businesses. It meets the scale of the challenge that they face on business rates, and it makes the right choice about how to pay for the policy. We will want to vote on our amendment later this afternoon to highlight the impact of this Government’s decisions and the imbalances in their approach.

[Mr Redwood]

I remind the House that I offer advice for an industrial company and an investment company, although not on these subjects.

I thought that the hon. Member for Birmingham, Ladywood (Shabana Mahmood) started her speech very promisingly. I admire her background, and I can think of a former great Member of Parliament who came from a very similar background and who deduced some very sound principles about how economies and shops work. I thought that the hon. Lady was going to develop in that style. I was delighted when she said that she is now a convert to tax reduction. She said that she and the Labour party now think that taking corporation tax down from 28% to 21% was right. It is wonderful news that we seem to have cross-party accord on the fact that lower tax rates can bring businesses to Britain, keep more profit in Britain and, if we let such policies fructify for long enough, even lead to more revenues and help to promote the economic growth that we all want.

The hon. Lady went even further and thought up another tax reduction that she wants. I am not normally one to let a tax reduction opportunity go by, and she said that a reduction in business rates would be a very good idea. She said that it would be good to find a way to make a further reduction in business rates, because that would be very welcome after years of increases.

I was then disappointed, however, because the hon. Lady said, “Oh, you can’t have too much of a good thing. It might start to work. You’ve got to have a tax rise, as well as a tax reduction.” She did set one part of the business community against another, although she claims that she did not do so. I find that rather curious, because we are meant to be debating the Opposition’s amendment 2, which does not propose a reduction in business rates or an increase in the corporation tax rate, although she says that that is their policy. The amendment allows us to talk about that because it is very wide ranging. We can talk about any kind of tax because it invites us to look at alternatives to corporation tax in ways that she spoke about.

We have a contradiction: the Opposition say that they have a settled policy to put up the corporation tax rate for larger companies and to cut and then freeze business rates. However, we are asked to vote on a much weaker amendment, which just says that the Chancellor of the Exchequer should conduct a review of the impact of cutting the corporation tax rate from 21% to 20%, as well as of other options, presumably including the one that the hon. Lady has already adopted.

--- Later in debate ---

“Labour must realise that you can’t rob Peter to pay Paul…we question why a freeze or cut in business rates for smaller firms should be offset by a delayed reduction in corporation tax...The notion that you can offset cuts in one tax with changes to another doesn’t deal with the real problem…Ultimately, companies of all sizes need to be clear on taxes and rates bills, so that they can generate jobs and wealth with certainty.”

[Shabana Mahmood]

The Exchequer Secretary speaks about a positive business environment. Business rates have increased by £1,500 on average since his Government have been in power. Does he think that that has led to a positive business environment for those businesses affected?

[Mr Gauke]

It is worth pointing out that business rates have increased in line with RPI, which is exactly what the previous Government planned to do, and, indeed, exactly what the previous Government did when they were in office. What we have done, however, is double small business rate relief for every year of this Parliament, saving small businesses over £1.5 billion on their business rates bills to date. In the autumn statement we introduced the biggest business rates cut in over 20 years. This package of measures was larger than that proposed by the Opposition. Their proposal would have been worth significantly less than the £1 billion our package cost. Of that £1 billion, over 90% is going to businesses occupying small premises and targeted support is going to help the retail sector on the high street and bring empty shops back into use. The combined effect of the measures is to freeze, or even reduce, business rates bills for 35% of the smallest rate payers. This Government’s business rates measures are both more generous and better targeted than those proposed by the Opposition and benefit all businesses.

Amendment 2, tabled by the shadow Chancellor and his colleagues, proposes a review of the impact of the additional cut in corporation tax with particular reference to businesses with fewer than 50 employees. I understand from the comments made by the shadow Chief Secretary in last week’s debate that what is driving this amendment is a concern about the business environment for small businesses. The Government have done far more for small businesses than the Opposition would have done, including making it easier for small businesses to create new jobs by introducing the £2,000 employment allowance, which will benefit up to 1.25 million businesses and charities in the UK. We are lifting 450,000 small businesses out of employer national insurance contributions altogether. We have made it easier for small firms to invest and grow. We have doubled the annual investment allowance to £500,000 per year so that 99.8% of businesses will receive relief on 100% of their investment in the first year, and we have increased the small business research and development tax credit to the maximum level available under EU law. We have cut costs for small businesses by delivering the longest fuel duty freeze for 20 years and through the £7.1 billion package announced in the Budget to reduce energy costs for businesses and households.

It is worth pointing out that the rate reduction for corporation tax will lead to large firms investing more, with huge benefits for SMEs in their supply chains. Economic modelling by HMRC has shown that the corporation tax cuts introduced in this Parliament will increase long-run business investment by 2.5% to 4.5%. In today’s prices that is an extra £3.6 billion to £6 billion every year, a boost for the whole business community. As John Longworth, director general of the British Chambers of Commerce, said last year:

“All companies will cheer the news that Corporation Tax will fall to 20% by 2015.”

This is just one element of what we have done. If Members look at what we have done on business rates, the employment allowance and energy costs, it is clear that this is a Government who are supporting business. I am afraid, however, that, as always, what we hear from the Opposition is policies that are anti-business and that will drive away investment and growth, and no realisation of how the world has changed. The UK needs to compete for jobs and investment. The best way of doing that is through a competitive tax system. I am afraid that the biggest risk to our achieving a competitive tax system and economic growth is the Labour party.

These clauses see us continue to make progress towards delivering a simpler and more competitive tax regime that supports investment, productivity and growth. I urge the House to support the clauses and to reject the Opposition amendment.

[Shabana Mahmood]

We have had a very good and interesting debate. I was a little horrified when the right hon. Member for Wokingham (Mr Redwood) began his remarks by making what sounded almost like positive comments about me, but he very quickly moved on to comments that better reflected both his politics and mine. He raised a point that I did not hear clearly, but I am sure it was a withering put-down about me not doing my homework. On his criticisms of both the amendment and what it seeks to achieve, I say to him as gently as possible that if he had done his homework, he would know that the Opposition are somewhat constrained in the amendments we can table to Finance Bills and the impact they could have on the Exchequer, so often the best way for us to get a good debate on what we seek to achieve is through asking for a review. I hope that that settles his mind as to the nature of our amendment.

There has been a great deal of discussion today about our proposals to increase the headline rate of corporation tax from 20% to 21%. We would use every penny of the revenue from that tax increase to cut business rates for small businesses in 2015 and to freeze them the year after. Nothing that Government Members have said today has shown that they understand the true impact that business rates are having on small businesses up and down the country. The Government are not prepared to make choices or spending switches to support those small businesses, but that is what the next Labour Government will do in 2015. We intend to press our amendment to a vote.

Question put, That the amendment be made.

The House divided: Ayes 219, Noes 289.

--- Later in debate ---

[Shabana Mahmood]

I rise to support amendment 4, which stands in my name and those of my right hon. and hon. Friends. Our amendment seeks to require the Chancellor to publish a report on the impact of setting the additional rate—the top rate—of income tax at 50%, but unlike new clause 4, our amendment requires that the report must also estimate the impact of the top rate in 2014-15 if it is set at 45% and at 50% on the amount of income tax currently paid by someone with a taxable income of £150,000 a year and of £1 million a year. Our amendment therefore seeks to prescribe somewhat more than new clause 4 what the report that must be prepared by the Chancellor of the Exchequer should include. We intend to press our amendment to a vote at the end of the debate.

The Labour Government introduced the 50p rate, which came into effect in 2010-11. We have had a number of debates on the top rate of tax ever since, particularly since this Chancellor’s decision to reduce the top rate from 50p to 45p. That decision is an important indicator of both the Chancellor’s and his Government’s priorities. While ordinary people have been struggling with the cost of living crisis—based just on a measure of wages, they are £1,600 a year worse off, or, taking into account tax and benefits changes, they are £974 a year worse off—the Chancellor has seen fit to give a tax cut worth an average £100,000 to millionaires in our country.

When the Government came to power, they did not say anything in the coalition agreement about abolishing the 50p rate. In 2011, the Chancellor said that he was going to ask HMRC to look at the yields from the 50p rate. In 2012, with HMRC’s report, “The Exchequer effect of the 50% additional rate of income tax”, to back him up, he abolished the rate. The Chancellor knew that he needed cover for that deeply ideological decision and so was desperate, in my view, to claim that the 50p rate raised as little money as possible. Of course, if he could say that, he could justify with more of a straight face giving a tax cut to the richest in our country at the same time as knowing that on his watch ordinary people, those on middle and low incomes, have paid the price for his economic plan, which is failing on the terms he set himself when he came to power in 2010. This was a highly political decision driven by a desire to give a tax cut to the richest people in our country.

Reports at the time suggested that the Chancellor wanted to go further and cut the top rate back down to 40p, but was blocked from doing so by his coalition colleagues. As a compromise, 45p was settled on. Of course, we know that the Conservative party is chomping at the bit to see the rate lowered from 45p to 40p and it is a shame that the right hon. Member for Wokingham (Mr Redwood) has not been in the Chamber for this part of the debate, although we did cover some of his views in this regard in the earlier debate on corporation tax and business rates. As a result of his comments and use of figures, we have in the past week seen efforts to try to bolster the case for reducing the rate back to 40p. I note that the Government have not explicitly ruled out such a change.

We know from the Government’s own assessment that the cost of cutting the rate from 50p to 45p was more than £3 billion, excluding all behavioural changes. Given that the sum is so large, how does one justify the tax cut? The Government say that most of that potential £3 billion revenue would effectively be lost as a result of tax avoidance. Once they have assessed revenue lost as a result of tax avoidance and other behavioural change, the Government go on to say that the cost to the Exchequer is only £100 million. That implies that this is a neat and exact science, but nothing could be further from the truth.

[Kelvin Hopkins]

I think that my hon. Friend is suggesting that the Government have been soft on tax avoidance and tax evasion simply to make their figures work.

[Shabana Mahmood]

I will come on to the point about tax avoidance. One option open to the Government to protect revenue from the 50p rate was to do more on tax avoidance. This is a Government who like to trumpet their record on tax avoidance, but they certainly ducked the opportunity when it came to dealing with potential avoidance in relation to the 50p rate.

[Ian Swales]

Will the hon. Lady give way?

[Shabana Mahmood]

I will not, because of a lack of time.

The HMRC report says that all the analysis and estimation is highly uncertain, as does the Institute for Fiscal Studies. The scale of behavioural change is ultimately decided by Ministers, and it is primarily based on an assessment of taxable income elasticity—TIE. The IFS says that there is a huge margin for error. Staying within that margin, one could easily say that, depending on the TIE, cutting the rate could cost £700 million or could raise £600 million. That gives us an idea of the range of figures that we are talking about and how uncertain the projections are.

It might have fitted the Government narrative for them to imply that they knew for certain that the 50p rate would raise only £100 million, but even on their figures and HMRC’s report, there is a huge margin for error and this is all very uncertain. That is not the only thing that was wrong with the analysis. The HMRC report was based on only one year’s worth of data—the data related to 2010-11—which is a weakness in itself. It came too early. Given the history of the introduction of the rate and the Government’s decision to cut it, the reliance on year one is a further weakness in the Government’s argument, because we know that incomes were taken earlier to avoid the 50p rate and as a result incomes in 2010 and 2011 were artificially lower, suggesting a lower yield. Hence our request for a review.

The original HMRC analysis does not give a true picture, was done too soon after the rate had been introduced and was based on only one year’s worth of data. Income figures for that year were lower than otherwise might have been the case because people brought their income forward to 2009-10 before the rate came into effect. No one has redone the analysis so we are still going on the figures from the 2012 Budget. The Government should, at the very least, update the analysis based on the more recent data and prepare the report that our amendment and new clause 4 call for. A comparison of 45p and 50p rates for those on incomes over £150,000 and £1 million would be instructive to the public debate about the top rate, especially as some Members on the Government Back Benches want to reduce the rate to 40p.

[Mr Gauke]

The hon. Lady is generous in giving way. When her party announced that it would reintroduce the 50p rate in the next Parliament, she wrote in the New Statesman:

“latest figures from the HMRC show that people earning more than £150,000 a year paid almost £10 billion more in tax”

than was taken into account in the assessment that HMRC made. Is she happy to put on record the fact that the HMRC assessment took into account the numbers that she was talking about, and that the claims that she and her colleagues made at the time of the announcement of the 50p policy were in fact wrong about that?

[Shabana Mahmood]

Our analysis was based on projections that were available to us at that time, and on those projections that analysis was correct. The truth is that everyone accepts that all analysis in relation to the 50p rate—HMRC’s analysis and everyone else’s—is uncertain because we did not have the rate in place for long enough to make a full and thorough assessment. Now HMRC has available to it records for the following two years when the 50p rate was in place and it could update the report that was used for Budget 2012. That would give a much clearer picture to all of us who are relying on other figures and forecasts.

Just as people shifted income into 2009 and 2010 to avoid the 50p rate when it was introduced, once the Chancellor had said in his 2012 Budget that he would abolish it the following year in 2013, unsurprisingly people effectively decided to delay their bonuses and income until the new tax year 2013-14 began so that they could avoid paying 50p and pay 45p instead. That is what accounts for the revenue from 45p being higher, which in our earlier debates Government Members sought to rely on in support of cutting the rate further to 40p. The Government clearly reward tax avoidance at 50p with a tax cut to 45p, and their Back Benchers are now calling for 40p on the basis of revenue that they know is inflated owing to income shifting, which may well have cost the Treasury millions in lost revenue—warped priorities if ever there was a case of them.

The Chancellor is on record as saying that he considers tax avoidance to be “morally repugnant”, but as I have just said, he has rewarded a particular form of tax avoidance with a tax cut. I wonder if that has ever happened for people on middle and lower incomes. I think not. This is a Government who always tell us how proud they are of their record on tax avoidance, but I wonder how much effort they put into thinking of ways in which they could protect revenue from the 50p rate. The Government have introduced the general anti-abuse rule, the GAAR, which may have helped. They could have thought about a targeted rule. They could have looked to HMRC to do more. I understand that no specific measures are taken within HMRC to protect revenue from the 50p rate. Before rushing to abolish the rate, the Government could and should have looked at protecting revenue first. The truth is that there was no justification for giving a huge tax cut to the richest in our country. Bonuses, we now know, are up by 83% for those in the financial sector, while ordinary people are worse off now and will be worse off in 2015 compared with 2012. That certainly makes a mockery of the now not very often repeated phrase, “We are all in it together.”

I think the Government have been hoping that if they keep going on about the increase in the personal allowance, people will forget that they have made a political decision, a political choice and a political priority to cut taxes for the richest in our country. The truth is that the Government have given with one hand and taken away much more with the other. As I said, if one looks at wages, ordinary people are £1,600 a year worse off, and the combined effect of tax and benefit changes means that households will, on average, be £970 a year worse off.

This cut to the 50p rate cannot be justified at a time when the deficit is high and will not be eliminated towards the end of the next Parliament. Labour in government will increase the rate back to 50p to help us to get the deficit down in a fairer way. Just as we have said that we want the OBR to have powers to audit manifestos ahead of the next general election, because we believe that scrutiny will add to public understanding about the choices that are being made, so too we think that a review as envisaged in our amendment would help the public to understand the impact of the top rate of tax so that they can make up their own minds about who is standing up for them and other working people like them. Therefore, we will press amendment 4 to a vote.

[Mr Gauke]

It is a great pleasure, Mr Amess, to serve under your chairmanship. Before I deal with our annual debate at this stage in the Finance Bill on the 50p rate, I want to say a word or two about clause 1, which is included within the group, which ensures that income tax will be collected in 2014-15. Income tax is the Government’s biggest revenue source and the annual charge legislated in the Finance Bill is essential for its continued collection. There will be around 30 million income tax payers in the UK in 2014-15, and clause 1 states that these taxpayers will pay income tax this year at the same rates as in 2013-14. The basic and higher tax rates remain at 20% and 40% respectively, and the additional rate is 45%.

Clause 1 also means that the Government are meeting their commitment of raising the personal allowance to £10,000 one year ahead of schedule. The increase of the personal allowance to £10,000 reduces the income tax bills of another 255,000 low earners to zero and gives 25 million taxpayers an average gain of £50 in real terms. In other words, increasing the personal allowance by £560 will put an extra £112 of cash in the pockets of typical basic rate taxpayers in 2014-15.

Allow me to explain how these changes will help the Government to meet their objectives. When this Government came to office, the personal allowance was only £6,475. In 2010, everyone, including those working on the national minimum wage, had to pay income tax at the basic rate on incomes above this low threshold. Let me give an example of what this meant in practice. Someone working full-time on the October 2010 national minimum wage would have had to pay over £860 in income tax in 2010-11 alone. Thanks to this Government’s increases to the personal allowance, this year someone working full-time on the higher October 2014 national minimum wage will pay nearly £500 less than that.

Finance (No. 2) Bill

Shabana Mahmood Excerpts

Tuesday 1st April 2014 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

We have had an interesting debate today, which has made stark the difference between the Opposition’s priorities and those of Government Members. The Finance Bill is thick and heavy, but it is pretty light on content that is relevant to the working person on a modest income.

My hon. Friends have made some powerful and persuasive speeches highlighting precisely that point. My hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) spoke with passion about how her region was suffering as a result of the Government’s polices, and drew attention to the imbalance in the recovery that they have delivered. My hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) spoke in particular about business rates and the success of the jobs growth programme being run by the Welsh Labour Government, whom this Government like to bash at any opportunity, but who are having some real success on jobs in Wales.

My hon. Friend the Member for Bolton West (Julie Hilling) made a particularly powerful point. She reminded the House that the Chancellor said that this is a Budget for makers, doers and savers, but she said that it has nothing in it for those who are making do.

My hon. Friend also reminded us of the tragedy of zero-hours contracts. She gave a powerful example of a constituent who was sanctioned under DWP rules for leaving a job that gave him zero hours of work. It was a tragedy for the individual concerned, but it also shows how iniquitous the rules are in practice.

[Guy Opperman]

Is there anything the hon. Lady welcomes in the Budget, whether the raising of the income tax threshold, the extension of apprenticeships, the support for the high street or the work done to support manufacturing? Does she not welcome any of those things amidst this sea of opposition?

[Shabana Mahmood]

I very much welcome the Government’s U-turn on investment allowances, which we warned were a mistake in 2010. It is really good that the Chancellor has finally decided at the tail end of this Parliament to put right that bad decision.

My hon. Friend the Member for Glasgow North East (Mr Bain) reminded the House of two anniversaries: 15 years ago today the national minimum wage came into effect; and a year ago today the Government introduced the bedroom tax. That is a clear example of the big differences in the values and priorities of those on the Opposition and on the Government side. My hon. Friend the Member for North Durham (Mr Jones) spoke for some time, although not at his usual length, about the things that are missing from the Bill. He focused on the detail of the pension changes, which we will scrutinise, especially in relation to social care costs, which he was right to highlight.

My hon. Friend the Member for Edinburgh East (Sheila Gilmore) spoke of how some savers will benefit as a result of the Government’s measures, but for many people saving is a luxury that is far out of reach. My hon. Friend the Member for Gateshead (Ian Mearns) reminded the House of the imbalance of the recovery and how the north-east continues to suffer. He also made a point that no one made today in relation to the local government cuts, which are only just starting to bite and will further embed the regional imbalance in our country.

People are looking to this Government to take action to help them in the here and now. I am talking about the people who elected us to make decisions on their behalf. Those people are, on average, £1,600 a year worse off since this Government came to power. They will be worse off in 2015 than they were in 2010. Even if we take into account the combined effect of tax and benefit changes, they will still be £900 a year worse off. For those Government Members who are not sure what that really means, I will explain that £1,600 is about half the cost of the uniform required for membership of the Bullingdon club. For residents of inner-city Birmingham, which I represent, it is about three months’ rent.

Those people are working harder and harder for less and less, and they are looking for help in the here and now to make sure that at the end of the working week or month they have earned enough money to pay the rent, put food on the table and clothe their family. But this Finance Bill contains no such help. The fact that people are worse off and have to spend more on everyday essentials seems not to exist, according to the Bill. It is as if all Government Front Benchers have been caught in some kind of existential trance: if they cannot see or feel the cost of living crisis, it cannot exist; even if it exists, it cannot be communicated to others; and even if it can be communicated, it simply cannot be understood.

The people who are £1,600 a year a worse off need help in the here and now. This Bill could have done that; it does not. This Government could have done that; they did not. Where was the action to help working parents and families? We know that nursery costs have gone up by 30% since 2010. A parent working full time on the living wage with one child in nursery care will not see a penny of income until the beginning of the third week of the month. That is truly shocking. What do the Government offer? They offer help after the next general election, but nothing in this Bill. Why did they not take the opportunity in part 2 of the Bill to raise more money from the bank levy to fund an expansion of free child care for working parents of three and four-year olds from the current 15 hours to 25 hours? That would be real help. We will scrutinise the detail of the relevant clauses in Committee.

In opening, my hon. Friend the shadow Chief Secretary to the Treasury referred to an article from The Daily Telegraph, which is not often helpful to the Opposition. However, it has recently reported concerns that the Government’s planned changes to the bank levy might amount to a tax cut for the banks. The Government are not shouting that from the rooftops, but there are suggestions that some banks will pay £300 million less. We will need to see the detail and to press the Minister on that point in Committee.

It is a real embarrassment for the Exchequer Secretary that his projections on how much the bank levy would raise were so far off. Earlier, he ducked the opportunity to explain that; I would happily give way to him now if he were willing to explain, but he does not want to. No matter—we will return to the matter at length when we are locked together in a Committee room debating these issues.

On Government changes that might end up helping the banks pay less, I should also mention the small matter of the schedule 19 charge. In fairly impenetrable and hidden-away language, the Government seem to have given a £145 million tax cut for investment managers, whose industry is, frankly, doing rather well at the moment. It could have been asked to forgo that tax cut, given that the poorest and most vulnerable in our society continue to suffer. That shows the Government’s priorities.

[Mr Brooks Newmark (Braintree) (Con)]

Will the hon. Lady give way?

[Shabana Mahmood]

I will not for the moment. I will make some more progress—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Too many conversations are going on around the Chamber that have nothing to do with the speech being made by the shadow Minister. Members ought to have the courtesy to listen to the hon. Lady.

[Shabana Mahmood]

Thank you, Madam Deputy Speaker. I am not surprised that Government Members do not want to hear about their secret £145 million tax cut for investment managers.

[Mr Newmark]

rose—

[Shabana Mahmood]

I will not give way for now.

Instead, the Government’s priority has been the married couple’s tax allowance—hardly the here and now help clamoured for outside the Westminster village. What does it amount to in practice? It totals £3.80 for the couples who qualify, at a cost to the Exchequer of £500 million. I note that earlier the Chief Secretary to the Treasury turned down an opportunity to stand at the Dispatch Box and confirm his support for the measure. It does not look as if he wants to do that now. His silence says all that needs to be said.

The policy is slightly random; it excludes widows, widowers and people living on their own, for the sake of outcomes that are far from clear. It will help just one third of married couples, 84% of the gainers will be men, and just one in six families with children will benefit. What about the rest? There is nothing in the here and now for them either. What could the Government have done? For starters, they could have scrapped the married couple’s tax allowance and brought in a lower 10p starting rate of tax, which we have called for and which would help 24 million taxpayers, including 12 million people who are married, and almost half of whom—46%—would be women.

[Mr Newmark]

rose—

[Shabana Mahmood]

I will give way to the hon. Gentleman if he will confirm that a 10p starting rate of tax, 46% of whose beneficiaries would be women, is better than a policy 84% of whose beneficiaries would be men.

[Mr Newmark]

It is worth reminding the House that the Labour party abolished the 10p rate and that this Government abolished a 10% rate on savings. We will not take lectures from the hon. Lady. Furthermore, as a result of the raising of the personal allowance to £10,500, 3.2 million people have now been taken out of taxation altogether. That is helping the less well-off.

[Shabana Mahmood]

Yet after all that action, this Chancellor and this Government have given with one hand and taken away a hell of a lot more with the other. The hon. Gentleman knows that is true. He also knows that people will be worse off in 2015 than they were in 2010, which says everything we need to know about this Government’s priorities.

What is there for young people? Long-term youth unemployment has doubled under this Government, and 900,000 young people are out of work. What is there in the here and now, in this Bill, to help them? Not much. The Chancellor spoke yesterday of full employment, but where are the policies that would make that happen? The number of young people out of work for one year or more has almost doubled under this Chancellor, and what this Government have delivered—the Work programme—has returned more people to the jobcentre than have been found new work, while only 5% of disabled people have been helped to find a job.

The hon. Member for Dover (Charlie Elphicke), who is not in his place, cited the welcome decrease in long-term youth unemployment in Birmingham, Ladywood. He is not aware, though, that Birmingham’s Labour-run council administration has introduced a scheme called the Birmingham jobs fund, based on the Labour Government’s future jobs fund, specifically to tackle youth unemployment. That is why we have seen a decrease in long-term youth unemployment in my constituency and in other Birmingham constituencies. Although he might not have meant to congratulate my colleagues at Birmingham city council, I shall certainly pass his congratulations on to them.

Where was the help for small businesses—the backbone of economic growth in this country—who are crying out for extra support? We have said that instead of going ahead with the additional 1% cut in corporation tax, the Government should use that money to cut and then freeze business rates so that small and medium-sized enterprises can get some real help now. During last week’s debate on the Charter for Budget Responsibility, the Government tried to portray Labour’s policy as an anti-business proposal that would increase business taxes, but when it was pointed out to them that that argument flies only if one considers small businesses not to be real businesses, they seemed to change tack. Today, the Secretary of State for Education tried to posit it as setting one set of businesses against the other, but that totally and utterly misses the point.

Our proposal would use all the money saved by not going ahead with the corporation tax cut for the largest companies to support small businesses. At 21%, the corporation tax rate would remain competitive, but that switch in spending would strike a better and fairer balance. Business rates have already gone up by an average of £1,500 under this Government, and many businesses, including more than one in 10 small businesses, are now paying more in business rates than in rent. Unless things change, business rates will have risen by an average of nearly £2,000 by the end of this Parliament.

This Government have failed to help small businesses, and so the next Labour Government would cut business rates in 2015 and freeze them in 2016.

[Stephen Doughty]

I wonder whether my hon. Friend has had the same experience when talking to small businesses in her constituency as I have had in mine. The top two concerns that they have raised with me up and down the streets of Cardiff and Penarth are business rates and energy prices—two things that this Bill does nothing about.

[Shabana Mahmood]

My hon. Friend makes a powerful point. His experience as a constituency MP is exactly the same as mine. Almost every business that comes to see me at my surgery is struggling with its business rates and energy costs.

What does the Bill say about the top rate of income tax? Well, it remains at 45p. This Government have given an average tax cut of more than £107,000 to the 8,000 millionaires in our country. They seem to think that if they keep talking about the increase in the personal allowance, they will make people forget that the combined impact of the tax and benefit changes is that a typical household is £900 a year worse off, and that the richest in our country are getting an absolutely huge tax cut. The Government are desperate to be able to claim that the 50p rate raised as little money as possible because they want to make it easier for themselves to justify their decision to give a tax cut to the wealthiest at a time when ordinary families are really struggling.

The Government’s own assessment claims that the cost of cutting the rate to 45p, excluding all behavioural changes, was over £3 billion. To justify the tax cut, they argued that most of the potential revenue would be lost as a result of tax avoidance. Government Members were very excitable about the Government’s record on tax avoidance, which I will come to in a moment. But surely a Government as proud as they are of that record would have taken some targeted anti-avoidance measures to stop people avoiding the 50p rate. Instead, they ducked the opportunity.

The Government also claim that tax revenues rose after they cut the top rate of tax, but both the Office for National Statistics and the OBR have said that many of the highest earners moved their income and delayed their bonuses by a year after the 2012 Budget to benefit from the lower top rate of tax. That shifting of income will have cost the Treasury millions of pounds in lost revenue. When the deficit is high it cannot be right to cut the top rate of tax. The next Labour Government will put that rate back to 50p while we get the deficit down.

There was some excitement on the Government Benches about the Government’s record on tax avoidance. Although they like to pretend that that record is strong, it is nothing to write home about. The DOTAS—disclosure of tax avoidance schemes—measures were introduced by a Labour Government in 2004. Every time Government Members stand up and take credit for those measures, I shall pass on their thanks to the previous Labour Administration, who introduced them.

The Government have made a number of assumptions in their calculations of the value to the Exchequer of extending the accelerated payment scheme to both DOTAS and the general anti-abuse rule. Although HMRC is successful in about 80% of the cases it litigates, I find it hard to see why the same 80% success rate has been applied to potential cases under the GAAR when a case on the GAAR has yet to go to court. We will scrutinise the Government’s numbers in Committee: they have a history of overestimating the impact of their avoidance measures. We have spoken a lot today about the Swiss deal, which raised £2.3 billion less than expected. I am sure that the Exchequer Secretary will not—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The House is too noisy. If hon. Members listen quietly, perhaps the hon. Lady will be able to come swiftly to the end of her speech.

[Shabana Mahmood]

Thank you, Madam Deputy Speaker. I will bring my remarks to a conclusion, but I want to give the Exchequer Secretary an opportunity to intervene and explain to the House why he got the numbers so wrong on the Swiss tax deal. He is shaking his head, which implies to me that he is not prepared to stand up for his own record or admit that he has a history of overestimating his numbers. We will look at the numbers closely in Committee.

The Government had an opportunity with the Bill to provide help in the here and now. That is an opportunity they have failed to take. We will be voting against the Bill and in favour of our reasoned amendment, which lists the measures that we believe are necessary to tackle the cost of living crisis and make sure that people on lower and middle incomes start to see the benefits of recovery. We will seek to improve the Bill in Committee and try to persuade the Government to change course, but from what we have heard today and what we are no doubt about to hear from the Exchequer Secretary, I fear that the Government are so blind to the lives of ordinary working people that they will refuse to take the opportunity to do so.

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

It is a great pleasure finally to be able to wind up this debate, Madam Deputy Speaker. We have had an interesting debate and I thank all right hon. and hon. Members for their contributions.

My hon. Friend the Member for Cities of London and Westminster (Mark Field) referred to the naive populism and flagrant opportunism of the Opposition, and we have seen further evidence of that during the debate. He welcomed the fact that this was not a giveaway Budget but one of a Government who are sticking to the plan.

My hon. Friend raised concerns about the DOTAS policy and the way in which those in disputes are being asked to pay their tax before the matter is finally determined. It is worth pointing out that that will apply only when a DOTAS notification has been made or, in future, when the case relates to a general anti-abuse rule and HMRC believes there to be a dispute. None the less, final rights will be determined by the courts.

My hon. Friend also raised a concern about film finance. It is worth pointing out that the problems are a result of the first scheme introduced by the previous Government. The current film finance regime does not have the same difficulties as its predecessor.

The hon. Member for Houghton and Sunderland South (Bridget Phillipson) welcomed the policy on the annual investment allowance. It is often observed that Opposition Members run down the state of the economy and what is happening in their location, but I make no such complaint about the hon. Lady. She pointed out that more people are employed by Nissan than ever before and that there is much good news about Nissan and other companies in the north-east. I welcome her positive comments.

My hon. Friend the Member for Watford (Richard Harrington) raised a number of points. He highlighted the need for those who access their pensions to be able to receive appropriate advice. I reassure him that there will be free, impartial and, where wanted, face-to-face advice. He talked about wanting to create a business culture, and I agree with him about that. He also mentioned the new universal technical college in Watford, which I particularly welcome: it will help his constituents and, indeed, mine.

The hon. Member for Cardiff South and Penarth (Stephen Doughty) raised a number of points, including the issue of energy prices. In one sentence he said that prices are continuing to rise, but he then said that an energy provider has announced a price freeze. He claimed credit on behalf of the previous Government for cutting corporation tax, but now thinks we should increase corporation tax. He also disappointed the House by saying that he will not be serving on the Finance Bill Committee this year. Only now am I overcoming my dismay at that news.

My hon. Friend the Member for Redcar (Ian Swales) said that this Budget was another step in clearing up the mess we inherited. He highlighted this Government’s efforts and successes on tax avoidance. He raised concerns about how Labour’s policies on energy prices are spooking investors. He said that Labour is the anti-business party and highlighted the help in the Budget and this Bill for the manufacturing industry.

The hon. Member for Bolton West (Julie Hilling) made a speech in which, essentially, she tried to refight the 2010 general election. We certainly welcome that approach, because the Labour party got less than 30% of the vote. My hon. Friend the Member for Dover (Charlie Elphicke) took up that battle and made the case against the previous Labour Government. He also highlighted the vacuity of Labour’s current policies. At one point, he sounded very much like Len McCluskey.

I apologise for missing the speech of the hon. Member for Glasgow North East (Mr Bain), but I understand that he referred to the sunlit uplands of a Labour Government next year. I do not know whether that was an April fool’s joke. My hon. Friend the Member for Macclesfield (David Rutley) highlighted the positive mood among businesses in his constituency and welcomed the changes to air passenger duty. The hon. Member for North Durham (Mr Jones) had concerns about pensioners being able to spend their money wisely and was against raising the personal allowance. He will have the opportunity to vote against both policies this evening.

My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) delivered a characteristically erudite speech. He highlighted the fact that today is the anniversary of the death of Eleanor of Aquitaine, a mother of two sons who were deadly political rivals—the Marion Miliband of her age. My hon. Friend concluded his speech by saying that we should rejoice at the Budget. The hon. Member for Edinburgh East (Sheila Gilmore) then spoke and I think the best summary of her speech would be to say that she did not rejoice at the Budget—I think I will leave it at that.

My hon. Friend the Member for Hexham (Guy Opperman) highlighted the very supportive feedback about the Budget measures that he has received from chambers of commerce in the north-east of England. He also highlighted the benefits of our reforms of APD.

The hon. Member for Gateshead (Ian Mearns) set out his opposition to spending cuts, although he did not provide any suggestions about how the deficit could be reduced. I hope that he will serve on the Bill Committee this year—he nods his head—which to some extent makes up for the disappointing news about the hon. Member for Cardiff South and Penarth.

The hon. Member for Strangford (Jim Shannon) supported our policy on pensions and the recognition, through transferable allowances, of marriage in the tax system. He raised the issue of ensuring that employment is high, particularly to help young people. Although this was announced in a previous financial statement, it is worth pointing out that employer’s national insurance contributions will no longer be paid for employing under-21s from 2015, which will help to deal with youth unemployment. We are of course introducing the employment allowance—the £2,000 cash-back—for businesses, which will also help.

[Shabana Mahmood]

Will the Exchequer Secretary take the opportunity to do what none of his colleagues in the Treasury team has done? In particular, the Chief Secretary refused to answer this question in debates on the Budget. When all is said and done, will people be better off or worse off in 2015 than they were in 2010? It is a straight question—a straight answer, please.

[Mr Gauke]

The Labour party presided over the greatest recession that this country has seen for more than a century, which had an impact on people’s living standards. It is now up to this party and this coalition Government—[Interruption.]

Amendment of the Law

Shabana Mahmood Excerpts

Thursday 20th March 2014 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

What is clear from the debate we have had today and the Budget statement we heard yesterday is that this Government are hopelessly out of touch. There was no mention from Government Members, either yesterday or today, of the central fact that after four years of this Government ordinary working people are £1,600 a year worse off.

The Chancellor said yesterday that his Budget was for doers, makers and savers. Well, it might help some doers, some makers and some savers, but one would not want to bet the house on it. That is because of the Government’s record. In 2010 he said that he would eliminate the deficit by 2015, but we now know that he does not plan to do that until 2018. The Government have borrowed £190 billion more than they originally planned to. Indeed, they borrowed more in three years than the previous Labour Government borrowed in 13 years.

In 2011 the Chancellor announced his Budget for growth, but we saw his growth forecasts revised down. In 2012 he said that he would tackle tax avoidance to raise billions of pounds, but the UK-Swiss tax deal raised only a fraction of the money the Government promised. The truth is that he is way out on his own forecasts of where he said we would be when he came to power. He has failed on the terms he set for himself, and ordinary people are paying the price.

The Chancellor would have us believe that his Budget will improve the lives of ordinary working people at some point in the not-too-distant future, but I am afraid that it is a future that is just out of reach—it is not now. There is nothing in the Budget that will help the ordinary person in the ordinary family in the here and now. In the here and now, wages are down for the ordinary working person, bills are up and the economy will not return to pre-crisis levels until 2017.

Sure, for a doer earning £150,000 or more, or a banker taking a big bonus, this is a Budget and this is a Government for them. The Chancellor has already given a huge tax cut to people earning over £150,000, and bankers’ bonuses are rising. People earning over £1 million have received a tax cut worth, on average, £100,000. But what about the rest of the doers? The average wage in this country is £26,500. There are no meaningful measures in the Budget to help them. What is gained by the increase in the personal allowance has already been more than wiped out by the cost of living crisis affecting millions of people across our country. The truth is that this Chancellor has given with one hand but taken away far more with the other. There is nothing in the Budget for the millions of hard-working doers up and down our country.

As for the makers, there was some welcome news in the Budget, but I am afraid that it is a case of far too little, far too late. On both energy and business investment, the Chancellor was simply putting right the mistakes that he made in his 2010 Budget, especially the cut in capital allowances, a fact that he conveniently forgot to mention yesterday. In 2010 he hit businesses that wanted to invest. It is good that he is starting to put that right, but it is very late in the day and a lot of damage has already been done to the economy.

On exports, again there were some welcome steps, but revised export forecasts show that the Chancellor is set to miss his 2020 target. In fact, the Budget suggests that he will not even get halfway. Again, his own record does not give us a great deal of hope. The Government’s export enterprise finance guarantee scheme helped just five firms before it folded, and the export refinancing facility was still not operational over a year after it was first announced. That is not a record to be proud of.

On science and research—this relates to the discoverers and inventors that the makers of this country rely on—once again we saw the Government’s characteristic approach: a little bit here and a little bit there, but nothing in the co-ordinated and planned way that this country’s science community is crying out for. There is no long-term science framework, as was delivered by the previous Labour Government, and as will be delivered again by the next Labour Government in 2015. Everybody knows that this country’s science, research and innovation base, which punches well above its weight on the global scale, needs a long-term plan for certainty and to build the critical mass from which great innovation occurs, but this Government have once again failed to deliver it.

As for savers, we will have to look at the detailed proposals, but the Budget itself shows that the forecast savings ratio has been revised down for every year from 2013 to 2018. So much for a Budget to encourage saving! This afternoon, the Institute for Fiscal Studies has told us that the changes are based on “highly uncertain assumptions” and could create people who lose out. What of the millions of people in this country, in the here and now, who cannot save because of the cost of living crisis? Saving will be a luxury for the hundreds of thousands of people relying on food banks to survive and the tens of thousands of people who are being pushed into debt by the bedroom tax.

In this debate we have heard many examples of the effects of the Government’s failure in powerful contributions from my right hon. Friend the Member for East Ham (Stephen Timms) and my hon. Friends the Members for Westminster North (Ms Buck), for Coventry North West (Mr Robinson), for Middlesbrough South and East Cleveland (Tom Blenkinsop), for West Bromwich West (Mr Bailey), for Rutherglen and Hamilton West (Tom Greatrex), for Luton South (Gavin Shuker), for Feltham and Heston (Seema Malhotra), for Makerfield (Yvonne Fovargue), for Plymouth, Moor View (Alison Seabeck), for Stockton North (Alex Cunningham), and for Croydon North (Mr Reed). Every single Labour Member spoke of what the Government should have addressed in their Budget yesterday. This Budget is yet another missed opportunity to deal with the cost of living crisis.

[Christopher Pincher]

If the hon. Lady is concerned about the cost of living crisis, as we all should be, why did her party support an amendment to the Energy Bill in the other place that would have added £150 to energy bills? How would that help with the cost of living crisis?

[Shabana Mahmood]

The truth is that we have called for a freeze on energy bills, which are going up under this Government. Perhaps the Government might understand the cost of living crisis better if they had more women on their Front Bench. I notice that once again this afternoon there is not a single female Member on the Government Front Bench.

The cost of living crisis has meant that child care costs have spiralled by 30% since 2010. Energy bills are up by almost £300 since the election, with consumers having no way of knowing whether the bills are fair, owing to weak competition and poor regulation. Rent is using up more and more of people’s incomes, with rent arrears becoming the fastest growing debt, and food prices have risen by over 4% year on year, putting a huge squeeze on family finances. The Government know that this is not about choosing between bringing the deficit down and dealing with the very serious cost of living crisis. That is simply a false choice that they choose to hide behind, because this Budget could have addressed these things.

Labour Members have put forward a number of fully costed proposals that would deal with the cost of living crisis and get help to families here and now. On child care, we would use a levy on banks to provide 25 hours of free child care a week, worth £1,500, for working parents with three and four-year-olds. The Government’s proposals, which will not even kick in until after the election, will give most benefit to the highest earners, who tend to have the highest child care costs. On housing, we have committed to getting 200,000 homes a year built by 2020, whereas this Government have refused to take the action that is needed and are presiding over the lowest levels of house building in peacetime since the 1920s.

On energy, as I said to the hon. Member for Tamworth (Christopher Pincher), we would freeze energy bills until 2017, and, importantly, reform the energy market to stop consumers being ripped off. We would cut taxes for 24 million working people on middle and low incomes with a lower, 10p starting rate of income tax. We would put young people back to work with a job for the long-term young unemployed that they had to take, paid for by a tax on bankers bonuses. We would balance the books in a fairer way by reversing the £3 billion tax cut for people earning £150,000 a year, which this Government sought to prioritise ahead of any action to help hard-working families in our country.

Yesterday the Chancellor had an opportunity to help people who are struggling in the here and now, and he refused to take it. This Government’s so-called long-term economic plan has failed on its own terms, and people on middle and lower incomes are paying the price. People know that this is not about how the pound looks but how many they have in their pockets. Today they have fewer than they did in 2010, and in 2015 they will have fewer than they had in 2010. It is the same old story—you are worse off under the Tories.

[The Financial Secretary to the Treasury (Sajid Javid)]

It is always a pleasure to follow the hon. Member for Birmingham, Ladywood (Shabana Mahmood). This is the first time I have had an opportunity to speak in this House since learning of the sad death of the right hon. Tony Benn. With your permission, Madam Deputy Speaker, I would like to pay a short tribute to him. As a young boy growing up in Bristol, even though I did not necessarily agree with much of what he said, I admired him as a man of principle, passion and compassion. I extend my condolences to his family and friends.

I begin by thanking hon. Members from both sides of the Chamber for their contributions this afternoon. It has been good to hear some Labour Members actually offering opinions on the Budget’s measures, given their leader’s failure to do so yesterday. In 15 minutes at the Dispatch Box he more or less failed to acknowledge that the Budget even happened.

We should not be surprised. Not a single Labour Member seems to acknowledge the facts when they left office. They left the country with its biggest post-war recession, the largest budget deficit in the G20 and the largest banking bail-out in the world. Their policies destroyed the living standards of millions.

[Shabana Mahmood]

The Financial Secretary is talking about facts, so will he confirm one fact that his colleague the Chief Secretary to the Treasury failed to confirm yesterday, which is that working people are £1,600 a year worse off under this Government and that they will be worse off in 2015 than they were in 2010?

[Sajid Javid]

What I will confirm is that people in this country have been hurt because of the great recession that took place as a result of the Labour party’s policies. It was the biggest decline in our GDP in more than 100 years.

I am sure Labour Members will acknowledge that the best way to get our country back up on its feet and to improve the living standards of everyone in the UK is to have a growing economy that creates jobs. That is exactly what yesterday’s Budget continued to do. It is part of our long-term economic plan to give economic security to families across Britain and, through our increase to the personal allowance, to put more money back in the pockets of hard-working people.

Yesterday’s Budget sent a very clear message to all those businesses that are driving our economic recovery that, if they want to invest in new machinery, then, through our extension and expansion of the annual investment allowance, which will give 99% of businesses a 100% allowance, this Government will support them; if they want to manufacture but are concerned about the cost of energy, then, by capping the carbon price support rate, this Government will support them; if they want to export to emerging markets, then, with higher lending at lower interest rates, this Government will support them; and, crucially, if they want to employ, then, not just through our employment allowance, which comes into force next month, but through our extension of the apprenticeship grant for employers—which my hon. Friend the Member for Gloucester (Richard Graham) has referred to—this Government will support them. Those are measures that will help businesses to invest, manufacture, export and employ. As such, I hope that everyone in this Chamber will support them.

Tourism (VAT)

Shabana Mahmood Excerpts

Tuesday 11th February 2014 Westminster Hall

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I congratulate the hon. Members for South Down (Ms Ritchie), for Brighton, Pavilion (Caroline Lucas) and for Strangford (Jim Shannon) on securing the debate. It has been well attended, as proven by the time limit on speeches. We have had some brilliant contributions, some of which were rather fast-paced as people struggled with the time constraints. The debate has served as an important reminder of the importance of tourism to UK plc, and we heard some compelling arguments in favour of supporting the tourism sector and for reducing VAT to improve the sector’s international competitiveness.

The hon. Member for South Down opened the debate with a powerful speech. Her comparison of the UK and the Republic of Ireland was particularly forceful, and she spoke impressively on the potential impact on youth unemployment, given the relative youth of those employed by the tourism sector—a point that was also expressed by the hon. Member for Brighton, Pavilion. A connected point was made about low pay in the tourism sector, so the work force being relatively young is not the only issue. I am sure that all hon. Members will agree that tackling low pay in the sector is important not only for individuals who want to be paid more, but for the growth of the economy overall.

The hon. Member for Totnes (Dr Wollaston) made me smile when she said that, if God were designing the best constituency, he would create Totnes. I would of course argue strongly in favour of Birmingham, Ladywood. I was a little worried after her speech that every contribution would turn into a PR pitch for individual constituencies. One or two Members did indulge in that, so we will have to agree to disagree about the relative merits of the places that we represent.

The hon. Lady also expressed solidarity and support for those struggling with the floods, and I join her in expressing that sentiment. People are suffering desperately, and we must work together to get them the help that they need and to tackle the long-term issues that have led to the problems.

The hon. Member for Ceredigion (Mr Williams) said that his constituency is open for business, but the country should also be viewed as such. We are a favoured destination for tourists and rank as the seventh most-visited country in the world. We hold a unique position in terms of culture, heritage and language that makes us a destination of choice. Regardless of our position on VAT and expense, we are still well visited, and we should continue to reinforce that at every opportunity.

I will require photographic proof from the hon. Member for East Antrim (Sammy Wilson) that there is sunshine in his constituency given the horrible weather that we are experiencing at the moment.

I am interested in the all-party parliamentary group for the UK events industry’s report, which was mentioned by the hon. Member for Enfield North (Nick de Bois), who is the group’s chair, and the distinction between leisure and business visitors. I will discuss the matter later in my speech.

I will disappoint hon. Members today by not making a spending commitment to reduce VAT for the tourism sector. I apologise for that, but I would get into a lot of trouble if I did. I acknowledge the passionate views of Members present and the strong arguments of the Cut Tourism VAT campaign, but the Opposition’s stance is that an incoming Labour Government in 2015 will inherit a difficult financial situation. Deficit reduction alone does not make for a successful economic policy, but it is a necessary and important part of it.

[Caroline Lucas]

I thank the hon. Lady for giving way, but does she not accept what several hon. Members have said: precisely at a time of economic difficulty, we should be investing to get people into jobs and thus paying taxes to the Revenue? The idea that VAT should not be cut because we are in a time of economic difficulty indicates a misreading of the situation.

[Shabana Mahmood]

I am grateful for the hon. Lady’s intervention, and I will in a moment explain why I cannot quite go as far as she would perhaps like.

Although we are determined to build a fairer society and to deliver the long-term changes that our economy needs, including rebalancing, of which the tourism sector could and should play an important part, we must ensure that the sums add up. We will therefore not be able to reverse all the cuts and tax rises that this Government have pushed through to date, but we have had well-documented disagreements with the Government over VAT.

Although we are too far away from the general election to make detailed commitments across all the areas that may appear in our manifesto, we know now that we will face difficult choices. The Government’s day-to-day spending plans for 2015-16 will be our starting point, and we will not borrow any more for such spending. Any changes to the current spending plans for that year must and will be fully funded. That is not only a statement of our current economic policy, but an invitation to those involved in the VAT campaign perhaps to present some proposals that might work under the tests that we have set for policies come 2015, and I can confirm that my hon. Friends the Members for Barnsley Central (Dan Jarvis) and for Eltham (Clive Efford) are already working closely with the tourism sector.

Although I cannot commit to the VAT cut that the campaign calls for, I can commit to engaging in the conversation and working with the shadow Business, Innovation and Skills team, the shadow Culture, Media and Sport team and the shadow Treasury team to examine what else we can do to support the industry and to ensure that it plays its full part in getting us towards sustained economic growth.

Tourism is one of the UK’s biggest employers. The sector provides 9% of total jobs and contributes £134 billion to the economy, with revenue increasing by £9 billion last year. As I said earlier, we are the seventh most-visited country in the world. It is important that we continue to engage in the conversation and with the campaign to ensure that we support this vital industry as much as possible.

One or two Members touched on this topic, but we have not discussed in detail immigration policy and whether we make ourselves as easy to visit as other countries. The visitor visa regime has well-documented concerns, for example. On this subject, I speak not only as a shadow Treasury Minister, but as a former shadow universities and science spokeswoman. Higher education is our seventh largest export industry, and there is tension between the economic benefits, which are similar to those of tourism, and effective immigration control.

Our regime for visa applications, fees and monitoring to avoid over-staying is not the simplest. There is particular tension with the countries that we deem to be at risk, from where we may expect people with visitor visas to visit with the intention of over-staying. Countries that have historically been placed in that group, such as India, can actually be those from which we benefit greatly. In tourism, for example, growing numbers of genuine visitors want to come to this country, spend their money and help to boost our economy, while having a great time. It is important to resolve that tension, so that those growth sectors do not suffer unnecessarily and so that we get the maximum benefit from our tourism policy.

We cannot agree now to the cut that has been called for by campaigners and hon. Members present for the debate; however, we are committed to working closely with the sector. We will take seriously other help for the sector that does not have cost implications, including immigration changes.

National Insurance (Contributions) Bill

Shabana Mahmood Excerpts

Tuesday 10th December 2013 Commons Chamber

[Mr Gauke]

The exemption is available up to, but not including, the month in which the employee turns 21. I hope that that makes the matter clear to my hon. Friend.

Returning to the Opposition’s amendment, I see little point in the Treasury publishing a review of the level of youth unemployment. The Office for National Statistics is responsible for publishing statistics on employment, and those regular releases are available to the public through the ONS website. There is a limited case for the Treasury intervening and also publishing a review.

In addition, I do not think that there is much value in attempting to estimate the impact of a policy being introduced on a theoretical date. We announced in the autumn statement that employer NICs would be abolished for those under 21 years of age from April 2015. I can understand why the hon. Lady raises the question, but attempting to deliver that a year earlier, in 2014, would increase the administrative costs to business, and rushing the measure through in that way would be likely to lead to cost confusion and the failure of many employers to take it up. Such a tight time frame would not give employers, payroll software developers and Her Majesty’s Revenue and Customs enough time to update their IT systems. It would also not give HMRC enough time to ensure that the policy could be implemented in a way that did not disrupt its other important IT systems. Given that the policy cannot be delivered in April 2014, it would not be a good use of Government time and resources to attempt to estimate the impact of something that we do not intend to do and that cannot be delivered.

I dare say that I shall return to this matter later, but in the light of those comments, I hope that the hon. Lady will not press her amendment to a vote. I also hope that the new clause will be able to stand part of the Bill. It is an excellent measure that will help many of our constituents by increasing employment.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I wish to speak to amendment (a) to new clause 3. I welcome the Minister’s explanation of the thinking behind the new clause and his clarification of how the age limit will be interpreted. His clarification of the measure’s impact on pensions was also helpful, given that we did not have these proposals before us when the Committee considered the Bill.

In general, the Government’s new proposal, announced in the autumn statement last week, will hopefully encourage employers to take on more young people under the age of 21. With youth unemployment so high—it is nearly 1 million—and long-term youth unemployment a real concern, some action is welcome but, as the Minister has anticipated and as our amendment suggests, we have some concerns about how the Government are going about dealing with the issue.

I will deal first with some practical points relating to new clause 3 before moving on to our more substantive concerns about the Government’s approach. I have briefly discussed the impact of the measures with various stakeholders who have been scrutinising the new clause since the Government tabled it. Given that we were unable to scrutinise it in Committee, because of when it was tabled, it would be helpful if the Minister at least gave the House the benefit of his thoughts on the issues I am about to raise. Members of the other place can then take forward some of our concerns if there is more in them.

What impact does the Minister think the new measure will have on young people who are employed part time? As he will know, we have seen a huge rise in part-time employment and insecure employment, for example through the growth of zero-hours contracts, something the House has debated a great deal in this Parliament. My understanding is that many young people who work part time will not be caught by the measure because they earn far beneath the primary threshold. What consideration has he given to the impact on young people who are employed part time, given that for so many of them their first job is part time? As many Members will know, it is now not unusual for young people on the Work programme to be offered only part-time employment of zero-hours contracts, so it would be helpful if he explained the Government’s thinking on that.

I would also welcome the Minister’s view on how the measure might interact with the willingness of employers to take on graduates and the impact it might have on graduate employment. That is not about passing a value judgment on whether someone is taken on when they are 18 or whether employers decide to employ a graduate, but the Minister knows that the other announcements made in the autumn statement in relation to young people were about an increase in student numbers of 30,000 and a removal of student number controls to enable universities to take on as many students as they like. The number of 18-year-olds, in particular, participating in higher education is likely to increase.

It would therefore be helpful if the Minister outlined the Government’s thinking on how those two changes will interact and how they will ensure that they work in a complementary way, rather than skewing one type of recruitment practice ahead of another. Those issues are worthy of much greater deliberation than we will have the opportunity for today, so we might need to return to them, depending on what happens as the Bill makes progress.

I have two other points to make on the practicalities of new clause 3. First, we need to ensure that it is promoted properly to employers, particularly micro-businesses and even one-man bands, which might be encouraged to take on a young person, perhaps a family member. How will we ensure that they know exactly how that will operate and how it will interact with the employment allowance? That is important to ensure that micro-businesses, in particular, are well aware of how the two things align and that there is no confusion that could lead to a decrease in take-up. Secondly, my understanding is that no new funding has been announced to pay for the proposal, so it would be helpful if the Minister set out where the money will come from and how the costs are expected to increase, and not only in the first or second years, but in future years.

There are two main points of difference between the Opposition and the Government in relation to the new proposal. First, it is not bold enough. The Minister will know, because we have discussed it before, about the scale of the challenge we face and what the Government could and should have done to tackle the scourge of youth unemployment.

[Jenny Chapman (Darlington) (Lab)]

Welcome though the measure surely is, does my hon. Friend not feel, as I do, that with almost 1 million young people unemployed, it might be too little, too late?

[Shabana Mahmood]

I am grateful to my hon. Friend for her intervention and agree with her entirely. I was going to move on to that point. We disagree with the Government’s approach because we do not think that the proposal is bold enough, but we are also concerned about the timing—I will return to this later—because it has a direct impact on our proposed amendment to the new clause.

Youth unemployment is nearly 1 million—around 940,000 young people are unemployed—and the most recent figures, published in November, show that long-term youth unemployment has increased. Given the scale of the problem and the impact that every single day of unemployment has on a young person’s overall life chances, I believe that the Government should have come back with a much bolder offer in the autumn statement. It was a missed opportunity to go further and faster.

The Minister will not be surprised to hear that I think the Government should have adopted our alternative proposal for a compulsory jobs guarantee for every young person under the age of 25 who is out of work, funded by a tax on bank bonuses. [Interruption.] It has been spent only once—Government Members should look at the detail. The young person would have to take up the job or risk losing their benefits.

[Sheila Gilmore]

I am sure that my hon. Friend will agree that the idea of a jobs guarantee has been proposed not only by the Labour party; it was also a recommendation of the Government’s recent social mobility commission, which criticised the impact of the Youth Contract and suggested that a jobs guarantee would be a much better approach.

[Shabana Mahmood]

My hon. Friend is absolutely right. The Government’s Youth Contract has been branded a failure by their own advisers. It is also worth noting that the Work programme is finding work for only one in six long-term unemployed people. The House heard earlier, when the Secretary of State for Work and Pensions was called to answer an urgent question, about the other difficulties with the Work programme.

The scale of the problem we face in relation to youth unemployment is stark. I speak as the Member who represents the constituency with the highest rate of unemployment in the country. I meet many young people every day in my constituency who are themselves the children of people who found themselves unemployed in the last great recession in the 1980s. They are having the same problems that their parents’ generation had. Every day that a young person tries hard but fails to get a job increases their desperation and depression. I recently held a youth jobs fair in my constituency, along with my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) and my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). More than 2,000 young people attended, and every one of them spoke of their desperation and their desire to find work and the difficulties of finding work in the current climate.

In those circumstances, knowing how much of a knock a young person’s life chances take when they find themselves unemployed for a long period, I think that it is right for the Government to consider taking much bolder action. The fact that they have failed to do so shows that they have failed to meet the scale of the challenge of our times. I fear that we are storing up a much bigger problem for the future.

In the absence of such action, my point to the Minister is that we hope the new clause will stimulate more employment for young people and encourage employers to consider taking on a young person, and that it therefore helps to get to grips with some of the problems. It is a good proposal. It does not go as far as we would like and perhaps it will not have the impact that a compulsory jobs guarantee would have, but on its own terms it is a good proposal, so why not do it now? Nothing the Minister mentioned seemed to be an insurmountable problem. He said that the IT situation would be a little difficult, but we should not let IT difficulties at HMRC stop us getting to grips with the scourge of youth unemployment. He has failed to introduce the employment allowance as soon as we believe it should have been introduced. He also decided not to scrap the regional national insurance employers holiday, so letting it run for three years, yet he knows that it fell far short of the targets that were set for it at the beginning.

The Minister said that the problem with the April 2014 date is that the Government wanted to wait until real-time information was all online and working properly. However, I have interrogated others on this point, and it was apparently not impossible or too difficult for the Government to amend the IT situation so as to enable the employment allowance to be brought in earlier than April next year. I am afraid that the same point applies to the proposal on national insurance for under-21s. The Minister has said nothing that suggests that it should not be brought in as early as possible, April 2014 being the best date on offer.

[Richard Fuller (Bedford) (Con)]

If I heard the hon. Lady correctly, she said that she wanted the cut in the jobs tax to be brought in sooner, yet in 2010 she said in Committee that she was proud to stand on a record of increasing the jobs tax. Does that represent a flip-flop?

[Shabana Mahmood]

It does not represent a flip-flop, as the hon. Gentleman well knows. It would not be a debate on this issue if he did not make the point that he has made on a number of occasions. I would have felt as though I had missed out on something if he had not made that intervention, so I am grateful to him. He will not be surprised if I repeat my previous answers to him in relation to national insurance. I was very proud to stand for election on the Labour party manifesto at the 2010 general election and proud that the Labour Government had got the recovery under way at the time of that election—a recovery that was choked off by this Government as soon as they came into power. [Interruption.] Government Members might not like to hear it, but I am afraid that that does not stop it being true.

Let me clarify my point about the employment allowance. From the moment it was announced in the Budget, our immediate critique was not that it should not be introduced —we supported its introduction from the beginning—but to say, as we have continued to say, “Bring it in as soon as possible—why wait?” If there were compelling reasons for the wait, it would be understandable, but I am afraid that I find nothing compelling in anything the Minister has ever said about the delay in bringing these proposals forward. All the issues relating to IT and systems and getting software up and running could be sorted out, with a bit of will.

I understand that software developers are still waiting on HMRC to give them the full guidelines on what software they will need to produce to make sure that take-up of the employment allowance goes ahead with relative ease. I hope that the Minister has had sight of the submission by Mr Holloway of the Learn Centre to the National Insurance Contributions Bill Committee, which was submitted after the Committee had disbanded but was still made available to all its members, because it contains concerns about the delay in getting proper clarification and explanation to software developers on what they need to do in relation to the employment allowance. Given that it is December and they have to get ready for the employment allowance to come online in April 2014, they will not have a huge amount of time to get everything in place and ready. If that is the position on the employment allowance, then why not add in the proposal on NICs for under-21s and deal with both issues at the same time?

Given that we are speaking from the Opposition Benches—unfortunately—our amendment does not propose that the measure should be introduced immediately in 2014; otherwise Government Members would no doubt have shouted at us about the cost of doing so and the spending commitment entailed. However, we have asked for a review that would look at the level of youth unemployment now and the impact that introducing the measure in April 2014 would have had on the level of youth unemployment as it stands today. That is because the Government should not escape scrutiny for the impact that this measure may have had compared with what it will have, I hope, when it comes into force in 2015. If it is found that the measure would have had a significant impact, as we believe it would, that is an important bit of information and the Government would be put under pressure to introduce it sooner than they intended.

This Government found money in the autumn statement for the married couples allowance. They have always said that the recognition of marriage in the tax system is symbolic. However, government is about choices and priorities, and if money can be found immediately to do something that is symbolic and sends a message, then surely it should be found for a practical Government measure that helps to prioritise our young people who need jobs today and not on a date far from now. The choices and priorities of this Government are wrong and they should think again. The emergency presented to this country by the current rate of youth unemployment cannot wait to be dealt with on some future date. The Government should reconsider the start date of this proposal. We therefore intend to press our amendment to a vote.

[Mr Brooks Newmark (Braintree) (Con)]

I am someone who looks at a glass of milk as being half full, not half empty, and I think that the Government have done much to help young people back into work. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) may wish to mock the Youth Contract, but it has encouraged businesses to offer over 21,000 jobs to people at risk of long-term unemployment. Those 21,000 people appreciate the youth contract and want the job that it has enabled them to have.

We have over 1 million young people in apprenticeships, which are also getting young people back on to the jobs ladder. Indeed, the latest Office for National Statistics labour statistics indicate a significant rise—of about 50,000 in the past three months alone—in the number of young people in work. The number of young people seeking jobseeker’s allowance has fallen by 13,000—the 17th consecutive monthly fall. That is good news indeed. Many constituencies, of Members throughout the House, have benefited, as has Braintree, which has seen a fall in long-term unemployment, regular unemployment and youth unemployment.

On top of all that, I was absolutely delighted to hear the Chancellor supporting the Million Jobs campaign manifesto, which, I hasten to add, I helped to draft, by abolishing the jobs tax for under-21s. It is extremely important that if we are cutting taxes we do it to help those in society we really want to help. As a father of five children between the ages of 16 and 25, I am extremely sensitive to that age group. It is important that we get young people into work, and the new Government initiative does just that. It will enable even more young people to get a foothold on the employment ladder by providing a highly attractive incentive for businesses to hire a young person under 21. I thank Lottie Dexter, the director of the Million Jobs campaign, who has worked extremely hard not only in running it but ensuring that the draft manifesto that we put out only six weeks ago caught the Chancellor’s attention so much that he decided to support it in his autumn statement. I am delighted to support the new clause.

--- Later in debate ---

[Mr Gauke]

New clause 4 is needed as it addresses a tax issue arising under existing partnership tax rules where the immediate entitlement to partnership profits is restricted by the alternative investment fund managers directive—AIFMD. HMRC received further information about this during the partnerships review consultation. Following their discussions with the funds sector representatives and the Financial Conduct Authority with responsibility for the AIFMD implementation in the United Kingdom, the Government intend to put in place a statutory mechanism to address the issue, subject to parliamentary approval.

It is important to note that the vast majority of fund managers would not be affected; only those who operate through a partnership would be affected. Under existing partnership tax rules, tax is charged on profits as they are earned, rather than when they are received. An unfunded tax charge can therefore arise on profits that are allocated to an individual partner of an AIFM partnership and which are then deferred in line with the regulatory requirements of the AIFMD. That is because the partner cannot access the deferred profits in the year when they arise.

The new mechanism that the Government propose is designed in such a way as to meet the Government objective of a partnership review to achieve fairer taxation by stopping tax-motivated allocation of profits in mixed membership partnerships that typically include individual and corporate members. The new power introduced under new clause 4 will support the introduction of the mechanism and will be used to change the relevant national insurance contributions legislation by regulation, once the related Finance Bill 2014 legislation becomes law. It will also allow NICs legislation to be amended in future to reflect any subsequent changes to income tax legislation in that area, to maintain symmetry between tax and NICs positions.

New clause 5 and amendment 2 replace clause 13, which would have removed limits on the Treasury categorising members of limited liability partnerships who satisfy certain conditions as employed earners for the purposes of NICs, rather than self-employed earners. New clause 2 provides an express power to treat LLP members who meet certain conditions as employed earners for NICs purposes. Those conditions will be set out in regulations and will follow income tax legislation introduced in the Finance Bill 2014. Broadly, it will mean that the individual member of the LLP has no or little real economic interest or risk in the LLP, and instead will be rewarded by a fixed salary. Those conditions will be based on proposals on which HMRC has consulted, as part of the public consultation on changes to partnership tax and NICs rules. HMRC has been advised that in response to those proposals, structures with only corporate members were being promoted as a way around the proposed legislation. The schemes involved the individual establishing a personal service company or other intermediary, with that intermediary becoming a member of the LLP in place of the individual in order to avoid those provisions.

New clause 5 provides power to make regulations to achieve the policy objective of the measure, and counteract the artificial imposition of a company or intermediary to avoid the impact of the measure. Regulations will follow new income tax legislation in the Finance Bill 2014. That power will enable the reclassification by regulation of certain LLP members as employed earners for NICs purposes, even when they hide behind a company or intermediary.

The treatment of members of LLPs as self-employed was designed to replicate the position of traditional partnerships. The new clause will ensure that those tax rules are not used to create a tax advantage, and it creates a level playing field between partnerships that have not sought to misuse tax rules for LLPs and those that have done so. I appreciate that that was a rather technical explanation for rather technical new clauses, but I hope it was of use and that the House will agree that new clauses 4 and 5 be added to the Bill, instead of clauses 12 and 13.

[Shabana Mahmood]

I am grateful to the Minister for that helpful explanation of new clauses 4 and 5, and particularly the technical points and why the Government are no longer proceeding with clauses 12 and 13. I had some concerns in Committee about the impact of clause 13 in disapplying section 4(4) of the Social Security Contributions and Benefits Act 1992. That seemed to be possibly going too far and was ripe for lawyers to have fun with—I was one in my former life. I note that the Government have got rid of that problem and clarified their intention for LLPs by tabling new clause 5.

New clauses 4 and 5 both state that the Government can bring forward regulations to deal with their more technical aspects. Will there be an opportunity for consultation on those draft statutory instruments when they are ready, so we can ensure that no further issues arise as the Government try to implement the objectives that new clauses 4 and 5 are trying to achieve?

[Mr Gauke]

I thank the hon. Lady for her support for these measures. Detailed proposals in the form of draft regulations will be published early in the new year, and they will tie in with measures in next year’s Finance Bill. There will therefore be plenty of opportunity to consult on those regulations, and I look forward to debating with her measures on partnerships in next year’s Finance Bill. In that sense, I assure the hon. Lady that the measures will receive an appropriate amount of scrutiny, and I hope that the new clauses will stand part of the Bill.

Question put and agreed to.

New clause 4 accordingly read a Second time, and added to the Bill.

New Clause 5

Limited liability partnerships

‘(1) SSCBA 1992 is amended as follows.

(2) After section 4A insert—

“4AA Limited liability partnerships

(1) The Treasury may, for the purposes of this Act, by regulations—

(a) provide that, in prescribed circumstances—

(i) a person (“E”) is to be treated as employed in employed earner’s employment by a limited liability partnership (including where E is a member of the partnership), and

(ii) the limited liability partnership is to be treated as the secondary contributor in relation to any payment of earnings to or for the benefit of E as the employed earner;

(b) prescribe how earnings in respect of E’s employed earner employment with the limited liability partnership are to be determined (including what constitutes such earnings);

(c) provide that such earnings are to be treated as being paid to or for the benefit of E at prescribed times.

(2) Regulations under subsection (1) may modify the definition of “employee” or “employer” in section 163, 171, 171ZJ or 171ZS below as the Treasury consider appropriate to take account of any provision falling within subsection (1)(a) to (c).

(3) If—

(a) a provision of the Income Tax Acts relating to limited liability partnerships or members of limited liability partnerships is passed or made, and

(b) in consequence, the Treasury consider it appropriate for provision to be made for the purpose of assimilating to any extent the law relating to income tax and the law relating to contributions under this Part,

the Treasury may by regulations make that provision.

(4) The provision that may be made under subsection (3) includes provision modifying any provision made by or under this Act.

(5) Regulations under this section are to be made with the concurrence of the Secretary of State.

(6) Section 4(4) of the Limited Liability Partnerships Act 2000 does not limit the provision that may be made by regulations under this section.”

(3) In section 4B (power to make retrospective provision in consequence of retrospective tax legislation), in subsection (3), after paragraph (c) insert—

“(d) section 4AA (power to make provision in relation to limited liability partnerships)”.

(4) In section 10 (Class 1A contributions: benefits in kind etc), at the end, insert—

“(11) The Treasury may by regulations modify the law relating to Class 1A contributions in the case of an employed earner’s employment which is treated as existing by virtue of regulations under section 4AA.”

(5) SSCB(NI)A 1992 is amended as follows.

(6) After section 4A insert—

“4AA Limited liability partnerships

(1) The Treasury may, for the purposes of this Act, by regulations—

(a) provide that, in prescribed circumstances—

(i) a person (“E”) is to be treated as employed in employed earner’s employment by a limited liability partnership (including where E is a member of the partnership), and

(ii) the limited liability partnership is to be treated as the secondary contributor in relation to any payment of earnings to or for the benefit of E as the employed earner;

(b) prescribe how earnings in respect of E’s employed earner employment with the limited liability partnership are to be determined (including what constitutes such earnings);

(c) provide that such earnings are to be treated as being paid to or for the benefit of E at prescribed times.

(2) Regulations under subsection (1) may modify the definition of “employee” or “employer” in section 159, 167, 167ZJ or 167ZS below as the Treasury consider appropriate to take account of any provision falling within subsection (1)(a) to (c).

(3) If—

(a) a provision of the Income Tax Acts relating to limited liability partnerships or members of limited liability partnerships is passed or made, and

(b) in consequence, the Treasury consider it appropriate for provision to be made for the purpose of assimilating to any extent the law relating to income tax and the law relating to contributions under this Part,

the Treasury may by regulations make that provision.

(4) The provision that may be made under subsection (3) includes provision modifying any provision made by or under this Act.

(5) Regulations under this section are to be made with the concurrence of the Department.

(6) Section 4(4) of the Limited Liability Partnerships Act 2000 does not limit the provision that may be made by regulations under this section.”

(7) In section 4B (power to make retrospective provision in consequence of retrospective tax legislation), in subsection (3), after paragraph (c) insert—

“(d) section 4AA (power to make provision in relation to limited liability partnerships)”.

(8) In section 10 (Class 1A contributions: benefits in kind etc), at the end, insert—

“(11) The Treasury may by regulations modify the law relating to Class 1A contributions in the case of an employed earner’s employment which is treated as existing by virtue of regulations under section 4AA.”’.—(Mr Gauke.)

Brought up, read the First and Second time, and added to the Bill.



New Clause 1

Post implementation review

‘(1) Her Majesty’s Revenue and Customs must, after one year, prepare a post implementation review of the employment allowance which the Minister shall lay before Parliament.

(2) The review must consider—

(a) what impact the employment allowance has had on the number of jobs;

(b) what impact the employment allowance has had on wage levels;

(c) overall take-up of the employment allowance;

(d) the geographical spread of businesses, charities and sports clubs taking up the employment allowance; and

(e) the effectiveness of Her Majesty’s Revenue and Customs’ strategy to promote the employment allowance.’.—(Shabana Mahmood.)

Brought up, and read the First time.

[Shabana Mahmood]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss

New clause 2—Administrative and compliance costs review

‘(1) Her Majesty’s Revenue and Customs must, after six months of the Act coming into force, prepare a review which the Minister shall lay before Parliament.

(2) The review must consider—

(a) whether there are any administrative or compliance costs associated with the employment allowance being reported by those applying for it; and

(b) whether businesses, charities and sports clubs are having any problems in claiming the employment allowance.’.

[Shabana Mahmood]

Given that I am still relatively new to my shadow Treasury brief, I am not yet—as hon. Members who served in Committee will no doubt be pleased to note—suffering from review fatigue. Both of the new clauses seek further reviews from the Government. New clause 1 envisages a post-implementation review, which was the subject of some debate in Committee, and I felt it was worth having a further discussion to push the Government a little more in relation to the impact that the employment allowance will have on jobs and wage rates, and the effectiveness of the promotion of the employment allowance to all those who are eligible for it.

New clause 2 envisages an administrative and compliance cost review—a one-off review to take place six months after the employment allowance comes into force. It was prompted by the evidence of Mr Holloway, which I mentioned earlier, and I shall go into more detail shortly.

In Committee, the Minister helpfully indicated that he would publish information on two of the elements that I have included in new clause 1—the overall take-up of the employment allowance and its geographical spread. I understand from his comments in Committee that the information on the geographical location of those taking up the employment allowance will probably be available on a regional basis. I hope that he will clarify that point when he responds to the debate. The Minister said that he would put information on both elements in the Library so that Members can raise questions about the effectiveness of the employment allowance and its take-up levels. We have in mind the previous regional national insurance employers’ holiday, which had difficulties from the start. We have made the point that those difficulties should have been dealt with sooner, and it is in that context that we think the Government should have a formal post-implementation review of the take-up of the employment allowance.

[Richard Fuller]

The hon. Lady earlier made the breathtaking assertion that although the Labour party was proudly in favour of increasing the jobs tax in 2010, its attempt now to reduce it was not a flip-flop. With the proposal of an annual review, businesses will be concerned that the Labour party is not committed to the employment allowance, as we are. The hon. Lady said in Committee that she could not commit the Labour party to supporting the employment allowance at the next election, so will she therefore admit that Labour’s support for employment allowance is at risk in their shuffle of policies before that election?

[Shabana Mahmood]

I will repeat exactly what I said to the hon. Gentleman when we had this debate in Committee: we have been unequivocal in our support for employment allowance since it was introduced in the Budget earlier this year. We have taken every opportunity to say to the Minister and his colleagues in the Treasury team that it should be introduced sooner. We could not have been more unequivocal in our support.

The purpose of the review is not to put the employment allowance at risk. The regional national insurance employers’ holiday scheme had problems with take-up from the start. They were raised with Ministers in this House at every available opportunity—in oral and written questions—yet we had to wait for the full three years of the scheme to run before the Government brought forward a proposal without the same problems. That is the context for tabling new clause 1. We want employment allowance to succeed and not suffer from low take-up—we want it to be taken up. The Government say that it will be taken up by 90% of eligible employers. I am sure that all Members want to see 100% take-up, and there seems to be no real reason why 10% should be missed off. We want to ensure that take-up is not affected by any unforeseen issues during roll-out.

[Ian Swales]

Does the hon. Lady accept that she can comment on the previous scheme precisely because the Government keep all such schemes under review? Neither scheme needs a review to be in the Bill.

[Shabana Mahmood]

It would be helpful for the review to be in the Bill, as it would concentrate the Government’s mind in ensuring that it works. We had to wait the full three years for the previous scheme to finish before we had a change of course towards something that will not suffer the same problems. Both points are good reasons to include a review in the Bill.

In Committee, the Minister remarked on take-up and geographical location. I am sure all Members want the scheme to be taken up nationally, and for it not to be skewed by region because promotion is not good enough in some parts of the country and employers do not find out about it. We had a good debate on whether the review should consider the impact on the overall number of jobs and wage levels. I included both in the new clause because they are worth considering.

The Minister and other members of the Committee said that they hoped the £2,000 made available to employers through employment allowance will be passed on to employees, either by increasing wages or taking on more employees. There was also the hope that employers would be encouraged to reinvest that money in the business, in research or innovative practices to help productivity. It is worth trying to measure the impact of employment allowance on job levels and wage levels. I take on board the point made in Committee by the Minister, and by members of the Committee on both sides of the House, that the decision to either increase wages or take on new workers is, for any business owner, based on a number of factors, and that employment allowance may be one of them. The policy is not being introduced in a vacuum. There is a clear intent and desire for it to stimulate employment and, hopefully, an increase in wages.

It seems sensible at least to consider the relationship between the employment allowance and job and wage levels. The new clause does not envisage a methodology, but I remind the Minister and hon. Members that when the Bill was introduced, the Federation of Small Businesses carried out a survey asking its members what they expected to do with the £2,000 allowance, and many said that they would increase job or wage levels or reinvest in their business. Employer surveys and other stakeholder engagement methods would be useful means of interrogating the impact of the employment allowance on job and wage levels. It is worth putting that in the Bill.

[Ian Swales]

The hon. Lady makes an interesting argument, but who would be responsible for carrying out such a survey? Would the FSB, for example, be the best people to carry it out or does she envisage some kind of Government process?

[Shabana Mahmood]

In evidence to the Committee, the FSB said it would survey its members again anyway. The Government could look at that survey and work with the FSB to see how it surveys its members. They might want to take a representative cohort of people who have taken up the employment allowance; discuss with them its impact on their businesses; and then extrapolate lessons for national take-up. I do not seek to prescribe exactly how they should carry out the review—I am sure there are clever bods in the Treasury whose job it is to think of these things—but given what has happened already in this Parliament on national insurance, it is important that we concentrate the mind of the Government. The House expects and wants this policy to succeed and not to suffer the problems of the previous policy. It also wishes to continue pressing the Government on this point.

The last element of new clause 1 concerns the effective promotion of the employment allowance to all who are eligible. In particular, I have in mind the FSB’s evidence to the Committee about the effectiveness of that communication. It is worth considering that in a review, particularly if there is a problem, such as a geographical inequality, with overall levels of take-up. How the allowance is promoted will clearly have an effect. Charities and sports clubs are rightly eligible for this £2,000 reduction in their national insurance bill, but there is a risk that they might miss out and that we promote the allowance to businesses more effectively just because they have more stakeholders and larger bodies getting the message out. The new clause seeks to ensure that we keep across that concern and that not only eligible businesses but other groups that rightly fall within its scope take up the employment allowance.

New clause 2 seeks a short administrative and compliance costs review six months after the Bill comes into force. It is motivated by two things in particular. First, as I mentioned earlier, the Government expect 90% of those eligible to claim the employment allowance. The Institute for Fiscal Studies and others—we heard this in the Committee evidence session—have asked about the other 10%. The system for claiming the employment allowance is straightforward and everybody expects the running of it to be smooth. However, one wonders why 10 per cent. are always assumed to miss out.

--- Later in debate ---

[Mr Gauke]

Let me return to my earlier remarks and the commitment I made in Committee, which I have repeated this afternoon, that we will publish take-up numbers twice-yearly. That information will be provided on a regional basis, which I hope reassures the hon. Gentleman that he will be able to monitor take-up in Northern Ireland.

The other point I would make—again, it is a point I made in Committee and on Second Reading—is that there are a number of distinctions between the employment allowance and the NICs holiday that we had in place earlier in this Parliament and, indeed, the Opposition’s proposals for a NICs holiday. What we are proposing is a much easier policy for employers to implement; in fact, it is largely automatic. Those with an up-to-date payroll—that essentially applies to nearly every employer—will find that the employment allowance is automatically applied. Those employers essentially just need to click on a box and then it should work.

Given those reassurances and in the light of my existing agreement to make information about take-up available twice yearly, I hope that the hon. Member for Birmingham, Ladywood will withdraw her new clause.

Let me deal with the hon. Lady’s new clause 2, which seeks to require HMRC

“after six months of the Act coming into force”

to “prepare a review” to be published in Parliament. Such a review should consider

“whether there are any administrative or compliance costs”

reported by employers claiming the employment allowance, and

“whether businesses, charities and sports clubs are having any problems in claiming the…allowance.”

The new clause is unnecessary for two reasons. As I have pointed out, the tax information impact note already commits the Government to keep the scheme under review through the communication of stakeholders affected by the measure. As part of this review, HMRC will speak to interested parties to gauge their view of the employment allowance and to ascertain the ways it has been used.

As I said, HMRC talked over the summer to various interested parties, including software developers, charities and small and medium-sized businesses, about the design and operation of the allowance, including the claims process. There are continuing discussions between HMRC and these groups around the guidance and publicity, and they will continue after the launch of the employment allowance next April. These contacts between HMRC and relevant representative groups will provide the basis for a continuous review of the way in which the allowance is working. I acknowledged in Committee that hon. Members will relay any concerns or thoughts about the allowance on behalf of employers in their own constituency. Hon. Members will also recall the commitment I gave in Committee to publish the information twice yearly, as I mentioned. That in itself will provide an indication of the ease with which employers are able to claim the benefit of this relief.

As I pointed out earlier this afternoon, the employment allowance will be very easy to claim. Employers will receive it through the routine operation of PAYE—pay as you earn. Employers will simply need to confirm their eligibility by their regular payroll processes. Enabling the employment allowance to be claimed by employers through the payroll software will ensure that it is straightforward to claim. Employers simply have to indicate yes once in their EPS—employer payment summary—and the claim will continue from tax year to tax year.

After making the claim, employers will not need to pay their first £2,000 of secondary class 1 national insurance contributions if their liability is lower than £2,000 in the first month or quarter—depending on whether the employer pays his PAYE liabilities monthly or quarterly—and any unused allowance will be carried forward to the next month or quarter until it is exhausted. If an employer does not have an employer payment summary on their software, the free HMRC basic PAYE tools package can be used. For the small number—about 2,000—of eligible employers who still submit their returns to HMRC on paper, there will be a paper process to mirror the IT process.

With those reassurances, I hope that the hon. Lady will withdraw her new clause.

[Shabana Mahmood]

I am grateful to the Minister for his comments on my new clauses 1 and 2, particularly for the additional information he made available on the issues raised by new clause 2. Given his explanation, I am happy to withdraw the motion.

Clause, by leave, withdrawn.

Clause 12

Alternative Investment Fund Mangers

Amendment made: 1, line 2, leave out Clause 12.—(Mr Gauke.)

Clause 13

Members of Limited Liability Partnerships

Amendment made: 2, page 11, line 8, leave out Clause 13.—(Mr Gauke.)





Third Reading

--- Later in debate ---

[Shabana Mahmood]

First, may I join the Minister in paying tribute to all the members of our Bill Committee, who helped to scrutinise the Bill and provided valuable insight into its measures? If there was the occasional predictable question, it was always asked with good humour and good grace.

We have supported the employment allowance from the moment it was announced in the Chancellor’s last Budget. Our bone of contention with the Government has not been about the detail of the EA or who it applies to; rather, it has been about the time scales for its introduction. We believe that the Government should have changed course much earlier, particularly given what happened with the previous regional national insurance holiday scheme. Although that helped a lot of businesses, the number certainly fell far short of the 400,000 it was supposed to assist.

The Government say this Bill is about helping our country compete in the global race, but if we are going to compete in the global race, we will have to start getting out of the starting-blocks more quickly. I therefore say to the Minister that the Government should have acted more swiftly on national insurance. If the Government had changed course sooner, we may have been well into the take-up of the EA by now instead of having to wait for it finally to be introduced in April next year, and the country might already be enjoying all the good effects that all of us across the House hope will flow from it.

In last week’s autumn statement the Government introduced a new measure that we have also supported today: the abolition of employers’ NICs for all employees under 21 years of age. I repeat what I said to the Minister in our earlier debate, however: we would have liked bolder action from the Government in their autumn statement to help deal with the problems of youth unemployment. We do not think this measure, which will come into force only in 2015, goes far enough, nor will it stimulate higher levels of youth employment as quickly as we would like. The real bone of contention, which I fear we will continue to debate until this measure finally comes into force in 2015, is the delay. None of the reasons the Minister gave in his winding-up of the debate on new clause 3 for waiting until 2015 sounded sensible to me. He said that if the Government could have done so, they would, of course, have wanted to bring the measure forward in 2014. But the Government could also have got rid of the regional national insurance employers’ holiday scheme earlier when it was clearly failing, but they did not do so. I do not understand why it is impossible to introduce this measure earlier. I am sure we will examine that issue further when the Bill is debated in the other place and through oral and written parliamentary questions. The Minister and I will continue to debate the merits of the introduction of that measure in 2015, as opposed to the introduction of the new clause, which is what we would have liked.

We have supported the EA in the Bill and we consider that the extension of the GAAR to apply to national insurance contributions is sensible, although we continue to have very real concerns about the extent of the GAAR.

[Julian Smith (Skipton and Ripon) (Con)]

Does the hon. Lady wish to put on record in this Chamber that she regrets that Labour did not bring an anti-avoidance rule into law during its 13 years in government?

[Shabana Mahmood]

As the hon. Gentleman knows, we had exactly the same line of questioning in the Bill Committee and I remind him that the Labour Government brought in the disclosure of tax avoidance schemes, which has raised a hell of a lot more money than the Government believe the GAAR will. We have a proud and strong record on tax avoidance. Also, that does not get the Government off the hook in respect of their GAAR, which will not make quite the impact on the tax gap that everybody would like.

The measures relating to oil and gas workers and to limited liability partnerships have changed in order to clarify the Government’s intentions in the new clauses and the removal of old clauses 12 and 13, but they are both sensible measures that we are happy to support. So, although we have real concerns about the pace at which the Government are moving to deal with the challenges that this country faces—especially youth unemployment, which we are debating today as a result of the measure in the autumn statement—we support the measures themselves and will support the Bill’s Third Reading.

Oral Answers to Questions

Shabana Mahmood Excerpts

Tuesday 10th December 2013 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right. The OBR is a very good change—one that I am pleased has finally won support across the House—and we do not want to jeopardise its credibility or reputation.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

After those answers, we still do not know why the Chancellor is resisting our proposal to allow the OBR to audit all party spending and tax plans ahead of the general election. We know that in private the Chief Secretary agrees that it is a good idea, so what is the Chancellor so afraid of?

[Mr Gauke]

In 2010, the noble Lord Eatwell said that

“we on this side agree…to confine the activities of the OBR to consideration of the impact of government policies alone. I am sure it is right that the OBR should not become embroiled in political controversy.”—[Official Report, House of Lords, 8 November 2010; Vol. 722, c. 16-17.]

I think he made a reasonable point.

Oral Answers to Questions

Shabana Mahmood Excerpts

Tuesday 5th November 2013 Commons Chamber

[Sajid Javid]

My hon. Friend is absolutely right. Some Opposition Members believe that only people who have rich parents that can help them meet some of the large deposit requirements should be able to buy their own home. That is not the policy of this Government, who support hard-working families.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

On the issue of fiscal steps to help people buy homes, the Chancellor of the Exchequer said last year that people buying homes through a company to avoid tax was unacceptable, and he would come down on it

“like a ton of bricks”.

Has he investigated reports that the Under-Secretary of State for Transport, the hon. Member for Wimbledon (Stephen Hammond), has avoided tax in that way, and will he come down on him like a ton of bricks?

[Sajid Javid]

I welcome the hon. Lady to the shadow Front Bench team. I look forward to debating with her. The Government have already taken steps to ensure that property buyers pay more in tax, by increasing stamp duty and by dealing with purchases through companies, and it would not be appropriate for any Minister to make a comment on any individual’s tax circumstances.