Tax Credits (Working Families)

Debate between Shabana Mahmood and Caroline Lucas

Tuesday 7th July 2015 Commons Chamber

[Shabana Mahmood]

My hon. Friend makes her point powerfully, but it is not that Government Members do not understand—I think they know full well the impact of their decisions; they simply want to pretend it is not going to be as bad as everybody knows it will be.

A Resolution Foundation study of these proposals just a couple of weeks ago suggests that

“over two-thirds of the families affected would be in-work”,

that

“almost two-thirds of the cut would be borne by the poorest 30 per cent of households; and”

that

“almost none of the cut would fall upon the richest 40 per cent of households”.

On what basis, then, can the Tories claim to be the party of working people? These are the working people the Government are choosing to hit and hurt. If the Government are happy to make these choices, they should at least admit that, rather than hiding behind the rhetoric of being the party of working people, as if somehow that will get them through the next five years.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The hon. Lady is making a powerful case. Like many others, I have been inundated by constituents who are really frightened by the impact of these cuts. One wrote to me saying:

“Child Tax Credit allows people to get over difficult times which happen despite working hard, and cuts will end up forcing more people into poverty”.

Does the hon. Lady agree that these cuts will be counter-productive as well as deeply cruel?

[Shabana Mahmood]

The hon. Lady makes a powerful point, and I absolutely agree with her. Of course, it was the support available via tax credits that meant that in the recession some people could remain in work even when their employers had to cut back on their hours as a result of the global financial crisis. That is an important point.

The Government’s critique of tax credits over the last couple of weeks has implied that this is a flawed regime that does not work and simply subsidises so-called poverty pay, but a simple examination of the facts shows that the case undermining tax credits is weak. If the Government were serious about tackling the reasons why people have to rely on tax credits, they would come forward tomorrow not with planned cuts or immediate cuts to tax credits, but with longer-term measures to tackle the underlying factors of low pay, high housing costs and insecure employment.

There are 4.6 million households in the UK claiming tax credits. Four million of the families claiming them have children and 2.7 million of those families are in work. There are 5 million children in working families receiving tax credits, and over 70% of all of those, with or without children, claiming tax credits are in work. They were introduced in 2003 to tackle poverty and make work pay. Much of the debate at the time was focused on helping single parents to get into work. We know that the lone parent employment rate rose by 28% between 1997 and 2010, and by a staggering 43% between 1997 and 2014.

Tax Avoidance

Debate between Shabana Mahmood and Caroline Lucas

Wednesday 11th February 2015 Commons Chamber

[Shabana Mahmood]

I will not, because I am going to make some more progress.

Thirdly, we have said that we will prevent hedge funds that are avoiding stamp duty on shares from being able to do so. Hedge funds currently avoid stamp duty by not buying the shares directly; instead, they get intermediaries to buy them on their behalf. Those intermediaries are investment banks, which benefit from tax relief on stamp duty. The hedge funds then enter into a contract for difference with the banks, which means that they benefit from changes in the share prices without holding the shares directly. That is an exploitation of intermediaries’ relief by hedge funds.

We have had a great deal of discussion about hedge funds in the past few days. I note, in particular, that during Prime Minister’s Question Time today, the Prime Minister did not address the point of the relief that is being abused. He wanted to get involved in a debate about who had introduced the relief, rather than about the fact that it is currently being abused by hedge funds. We have said that we will stop the practice, but we hear nothing from the Government about what they intend to do about an issue of which they too are fully aware.

Fourthly, we will take forward proposals that we were developing in government to deem construction workers to be employed for tax purposes if they meet criteria that most people would regard as obvious signs of employment. That would reverse the Government’s decision to abandon these measures, thereby dealing with a major cause of avoidance in the construction sector.

Finally, we would scrap the Government’s shares for rights scheme, which allows individuals to trade key employment rights for shares in a company. The policy has received widespread criticism. Writing in the Financial Times, Paul Johnson of the Institute for Fiscal Studies has said:

“just as concern over tax avoidance is at its highest in living memory, just as government ministers are falling over themselves to condemn such behaviour, that same government is trumpeting a new tax policy that looks like it will foster a whole new avoidance industry. Its own fiscal watchdog seems to suggest that the policy could cost a staggering £1 billion a year, and that a large portion of that could arise from ‘tax planning’.”

Labour will scrap the shares for rights scheme and redeploy HMRC resources to other areas where they are greatly needed.

[Caroline Lucas (Brighton, Pavilion) (Green)]

I welcome the proposal for an anti-tax-dodging Bill, to which the motion refers. Does the hon. Lady support the idea of country-by-country reporting requirements, which I proposed in a private Member’s Bill a few years ago? They could at least have helped to show just how dependent HSBC was on Switzerland, and begun to ring alarm bells for the tax authorities at a much earlier stage.

Tourism (VAT)

Debate between Shabana Mahmood and Caroline Lucas

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.