Sheila Gilmore
Main Page: Sheila Gilmore (Labour - Edinburgh East)Department Debates - View all Sheila Gilmore's debates with the HM Treasury
(11 years, 1 month ago)
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Mr Gauke
One has to look at the tax system as a whole, including capital gains tax, and I am not sure that I necessarily agree with my right hon. Friend’s interpretation of the period as a whole in relation to CGT revenues. In the year in question, there was certainly a reduction in deals done and transactions completed after the increase in the rate of CGT, but subsequent CGT revenues have picked up. We also have to bear in mind the relationship between CGT and income tax. I agree strongly with my right hon. Friend that it is important to have a competitive tax system that encourages enterprise and growth—indeed, I will turn to that now.
One of the most important questions facing the country is this: at a time when much of the world is still coming to terms with the consequences of the financial crash, when many of our export markets face significant difficulties, and when international competition is becoming greater, and, because of the recklessness of the previous Government, we cannot afford to borrow more, how do we put in place the conditions for growth? In the specific context of the Bill, how do we ensure that we have a tax system that helps us to achieve growth and encourages businesses to locate and invest in the United Kingdom? As the Chancellor has made clear, our objective is to have the most competitive tax system in the G20.
Sheila Gilmore (Edinburgh East) (Lab)
How can the Minister square the statement he has just made with the fact that all his predictions for borrowing are on the way up? Three years ago, we were assured that the Government’s policies would resolve this problem. If we are borrowing, would it not be better to borrow to invest, rather than to deal with failed economic policy?
Mr Gauke
Borrowing is down by a third from the position it was in when we came into office—that is the reality of the situation. We have to remember that if we had the policies advocated by the previous Government, borrowing in this Parliament would be £200 billion higher than it is going to be.
Mr Gauke
I do not recognise those numbers. We have taken steps to try to get the country out of a significant fiscal hole. We have taken steps to reduce the amount of tax that millions of households will pay as a consequence of the increase in personal allowance. We have reduced income tax for 25 million people. That is something we are proud of, and something that we did not see when the Opposition were in power.
Sheila Gilmore
What the Minister fails to appreciate, in saying that he does not recognise those figures, is the fact that the increase in the tax threshold has been wiped out for many families, particularly those with children, by the changes in tax credits. At the same time, the cost of increasing the tax threshold is £9 billion, so it is not the best way of targeting help on the low paid.
Mark Field
The hon. Gentleman makes a good case, I suppose, but we all know that the reality was that the short-term boost of VAT reduction and the early batches of QE was unsustainable. They were a pre-election boomlet, but, as I have said, the entire political class became rather complacent and thought, somehow, that the worst was behind us after the crash of 2008. We now know that that simply was not the case.
In 2010 the entire political class should have looked the electorate in the eye and been clear about the magnitude of the task that lay and, I am afraid, still lies ahead to rectify the public finances, but we are where we are. I personally take the view that talk of radical tax cuts from some on the Government Benches is perhaps unrealistic. I fear, for a start, that confidence is so low that until it is restored almost any tax give-aways are more likely to be squirreled away by individuals and companies than pumped back into the economy.
I also think we would run the serious risk of the markets losing faith if we were to play even faster and looser with public borrowing. In spite of the recent loss of our triple A rating from Moody’s, the Chancellor’s great achievement—it should not be underestimated—is that we are still able to borrow in international markets at such low interest rates. The lesson of both 1931 and 1976 is that once the markets turn, all is lost.
My main hope for the Budget and this Bill was that the coalition would take some of the longer-term decisions that the British economy requires. I am pleased that resource is being set aside for key, shovel-ready infrastructure projects. I had hoped that cash would be accompanied by decisions and leadership on aviation and energy infrastructure. We cannot let these sensitive political footballs be kicked once again into the next Parliament. I think that the UK, as a trading nation, requires certainty on those issues, not an endless parade of commissions and reviews.
I am pleased, however, that the Treasury has helped out small business. The march towards ever lower rates of corporation tax, as the Exchequer Secretary has pointed out, is highly welcome, as are assurances that small firms will be given a chance to bid for Government contracts under the small business research initiative.
The extent of capital gains tax relief to attract start-up capital for new limited companies is also very good news. Best of all, however, is the knocking off of the first £2,000 of employer national insurance contributions for small and micro-sized businesses. That will, I hope, begin to chip away at the worryingly high levels of youth unemployment by lifting some of the obvious disincentives to taking on new staff.
I am afraid that I am a little less sanguine about the Chancellor’s flagship Help to Buy plan. I appreciate its raw politics, underpinned as it is by a desire to help struggling younger people on to the housing ladder, many of whom are paying much more in rent than they would as part of a mortgage, if only they had a deposit. Nevertheless, I ask the Treasury to give considerable thought in the consultation period to what we are trying to achieve. Let us look carefully at supply rather than just finance, since I suspect that the latter will simply help keep prices out of the reach of the very people whom we wish to serve, as the hon. Member for Edmonton (Mr Love) has said. I do not wish the taxpayer to be on the hook for the consequences of a reinflated property bubble. Let us not forget the US experience that lay at the heart of the financial crisis.
I, like many other Members, am also disappointed that the Office for Budget Responsibility’s predictions for our economy as recently as the autumn statement on 10 December 2012 were proved, only 14 weeks later in the March Budget, to have been so considerably off beam. Few doubt that economic forecasting is an especially dismal science. However, the OBR’s intervention in December proved essential in buying the Chancellor crucial breathing space at a time when many commentators had assumed that we were about to flunk our plan to reduce the deficit year on year. To that extent I accept what the hon. Member for Nottingham East has said. Many even-handed people will regard that as a sleight of hand, but, more importantly, the scene was set for cynicism and deep disappointment when aggregate borrowing for the next four years was projected at some £49 billion higher only 14 weeks after the autumn statement.
It is worth saying, however, that that is part of a tradition during all my 12 years in this House. Every single Budget between 2001 and 2007 forecast that public finances would move back into surplus in about three or four years’ time. Instead, as the hon. Gentleman will remember, debt and the annual deficit rose inexorably while the Treasury conjured the illusion of fiscal stability. Similarly, at every autumn statement since June 2010, the OBR has, I fear, been forced to downgrade growth out-turns while continuing to hold somewhat optimistically to the notion that the public finances will be transformed by robust growth in two years’ time.
The establishment of the OBR was meant to herald a fresh era of forecasting credibility, but it now seems all too reminiscent of the previous Administration’s discredited financial projection. I think that observers are beginning to wonder whether we should have any regard for the OBR’s latest set of predictions or, indeed, take with anything more than a pinch of salt assurances that recovery is only around the corner.
Sheila Gilmore
Will the hon. Gentleman clarify his position? Is he suggesting that the OBR—which was hailed as a great independent organisation that would keep us right—has somehow gone wrong, rather than that it is his Government’s policies that have lead the OBR constantly to downgrade its predictions?
Mark Field
I am expressing the concern that the OBR was somehow seen as a panacea of independence in a lot of its projections when it has got things uniformly wrong almost every time. As I have said, that is partly because of international events that one cannot exclude. We live in a global economy and are a great global trading nation. The problem is that we have not been able to get the export-led growth that we all want and as a result there has been constant downgrading.
There was some good news in the Budget, as the Exchequer Secretary has said, about the co-operation between the Treasury and our Crown dependencies of Jersey, Guernsey and the Isle of Man on new financial disclosure agreements. As an adviser to the law firm Cains, I am pleased that our Crown dependencies have led the way with the FATCA—Foreign Account Tax Compliance Act—arrangements. That is to the Treasury’s credit. We saw at ECOFIN only last weekend that we are also looking to bring on board the Cayman Islands and the British Virgin Islands to ensure that there is more transparency. It is very easy to berate a lot of the international financial centres—many of which have long-standing historical links with not just the City of London, but the UK—but the importance of the liquidity that they bring into play should not be underestimated. It made a big difference in the immediate aftermath of the crash of September 2008 and might yet do so at some point in the future.
I am a little more concerned that the Treasury is not making entirely clear what is considered abuse and avoidance when it comes to tax arrangements. The earlier exchange between the hon. Member for Burnley and the Exchequer Secretary brought that to mind. [Interruption.] I apologise: it was the hon. Member for Redcar (Ian Swales)—my view of the hon. Gentleman means that it was an all too easy mistake to make. Without clarity about what amounts to avoidance as opposed to abuse, we risk throwing a veil of uncertainty over the UK’s business environment.
I speak to firms large and small in my own constituency. I say to those on the Treasury Bench that, suddenly, for the first time ever, global corporations are beginning to consider the almost unthinkable prospect of a certain amount of political risk being attached to the UK. Foreign direct investors would be right to feel aggrieved if legitimate tax-planning activities suddenly were deemed by Her Majesty’s Revenue and Customs to be aggressive tax avoidance, with punitive fines and damaging public relations to follow.
On that note, I should like to raise a specific instance of retrospection that is causing financial hardship among some of my constituents. Section 58 of the Finance Act 2008, brought in by the previous Government, was designed to close down certain tax-planning arrangements with retrospective effect. I am afraid that it has left some residents in my constituency with demands for huge amounts of back tax, which in some extreme cases is leading to threats of bankruptcy.
The Exchequer Secretary is aware of those concerns, because he has responded to my correspondence on them. Unfortunately, however, some of those affected by section 58 are not convinced that he is properly listening to the argument. One constituent advised:
“The tax arrangements I used were not only legitimate and openly declared, but expressly considered, debated and approved by parliament back in 1987. This means that according to the HMRC’s declaration, I was not engaged in aggressive and abusive tax avoidance but simple, legitimate tax planning.”
Although I accept that HMRC wants to bring more money in and to close down aggressive tax avoidance schemes, if it has known that arrangements or schemes have been in place for 25 years and has made no move to close them down, it cannot be right for retrospective activity to take place. My constituents therefore request the repeal of section 58.
I would be grateful if the Treasury gave serious consideration not only to the arguments of the campaigners, but to the message that retrospective legislation sends to business people who are trying to act in a lawful and transparent way in planning their taxes. The Exchequer Secretary rightly pointed out that we should be proud of being a country that is open for business, but we must ensure that what we do and what we say in that regard coincide.
To conclude, if I have one message for the Treasury as we consider the Finance Bill in the days ahead, it is to forget about the pressure for quick fixes and transient boosts, and instead to focus relentlessly on delivery and longer-term measures to make the UK an ever more tempting prospect as a place in which to do business. If the UK economy is not to get substantial growth before the 2015 election, let the coalition at least get some credibility for doing the right thing for the nation and giving our people a genuine sense of hope for the future.
David Rutley
In 2014. [Interruption.] We have to take a stepped approach to rectify the changes Labour put through. The allowance is important and will be welcomed, and the other measures we are taking on the supply side, such as the reduction in corporation tax, will all help to create a platform for economic growth.
Sheila Gilmore
Is the hon. Gentleman aware that the enterprise allowance will be partly funded by the substantial increase in national insurance contributions that employers and employees will pay as a result of the flat-rate pension? That has been brought forward by a year—even though the Select Committee was told that it would be logistically difficult—to produce that extra income. In fact, the Government are just moving things around and a lot of people will find themselves a lot worse off when those higher national insurance contributions kick in.
David Rutley
It is sad to see such gloomy faces on the Opposition side of the Chamber. I accused the shadow Minister of being a bit Eeyore-like and I think it is catching on the Opposition Benches. Labour Members should cheer up a little and look at the reaction to the Budget. The Federation of Small Businesses says that it
“asked for a budget for small businesses and this is what has been delivered. This Budget opens the door for small firms to grow and create jobs.”
Sheila Gilmore (Edinburgh East) (Lab)
The hon. Member for Macclesfield (David Rutley), who is no longer in his place, will be rather disappointed, because I cannot share his view that we have the best of all possible worlds. Perhaps his name is really Dr Pangloss. I hear an awful lot of Panglossian politics in Scotland, where it takes the form of, “If we were only independent and we waved our magic independence wand, everything would be wonderful,” but to get it here is astonishing.
The other surreal aspect of today’s debate, which would astonish anyone listening who cannot see the Chamber, is that we have heard from a grand total of three Government Back Benchers prepared to speak up for their own Government’s Budget. They were not so shy about coming forward last week to recall what were to them the glory days of Lady Thatcher’s Government. They were all very keen to come down here especially to talk about it. Many of my constituents thought we should have talked about that today, and perhaps we should have, since Government Back Benchers clearly did not think it worth debating the Finance Bill. Much effort and money could probably have been saved.
I was not one of those who came last week, because I spent most of the recess talking to my constituents. If this were the Government’s first Budget, not their fourth, we would be better placed to believe the words they keep using. We were told in 2010 that this would work—that we had a terrible financial crisis and that we all had to tighten our belts and get through it together, but that it would be worth it. Just how long do we have to wait? These Budgets and these Budget debates and debates on the Finance Bill are turning into groundhog day. The Government say all the same things and, I have to admit, they will no doubt say that Opposition Members all say the same things, but that is because the debate has not moved on. On this, the Government’s fourth Budget, we are indeed saying the same things. Perhaps that is why Government Back Benchers did not feel it worth coming—because they know perfectly well that there is no point in saying the same things because the Government’s approach is not working.
The Government’s answer to many of the criticisms of their policies—particularly their policies to reduce tax credits and benefits—is that people can get around those cuts by working more hours. In fact, they even defend a lot of their measures by saying that they will put a rod into people’s backs and get them out there working those extra hours. The assumption seems to be not just that unemployment is, as they allege, a lifestyle choice, but that under-employment is apparently a lifestyle choice too and that, really, people have to get up and go out there, and everything will be fine.
My constituent Joe—one of the many people I talked to in the recent recess—is affected by the bedroom tax because he was housed by the council in a two-bedroom house. It was not his choice; that is where he was given a house. He went to his supermarket employer to ask whether it would increase the 15 hours a week he works in his job to help to pay the extra amount. His employer said no. That might have been partly because, at 15 hours a week at the minimum wage, he is nicely underneath the threshold for paying national insurance. Doubtless his employer prefers to have another part-time employee at that level. However, even if his employer offered him more hours, at whose expense would that be? Would it mean that another employee got fewer hours or, if Joe was given full-time work, that somebody else would not have a job at all? Unless the supermarket wants to employ people to stand around doing nothing, one has to presume that it has calibrated its work force according to the work that needs to be done. It is not a charity. His employer is not there to give him a few extra hours so that he can pay his bedroom tax. It needs only the workers it needs. It is therefore a myth to assume that people such as Joe just have to get out there and everything will be fine. That sums up exactly what is wrong with this Government’s economic policy. Austerity reduces demand. Indeed, it has reduced demand all over Europe, which is one reason why we are not coming out of this recession through exports—one of the promises made to us in 2010—because everybody is in the same boat.
As Joe’s current employer will not give him the extra hours, he could, I suppose, find out whether there is another job out there. Perhaps he should see who else is hiring for his type of work in the city. I would stress that, compared with many other areas—such as that represented by my hon. Friend the Member for Glasgow North East (Mr Bain)—Edinburgh does not have high unemployment. In fact, the unemployment rate in my constituency is only 4.8%, which in a lot of people’s terms would be very low. I thought, “I’ll look at the Government’s great new innovation,” which is a website called Universal Jobmatch. I do not know whether any Member present has looked at Universal Jobmatch—I have, on several occasions—but I put in “shop assistant, Edinburgh area” to see what would come out the other end. If I had been Joe, things would have looked quite hopeful at first, because there appeared to be four pages of jobs. There were 25 on each page—I counted—so I thought, “Well that’s 100 jobs. That’s not bad.”
In fact, there turned out to be 76 job entries, because the last page had only one entry, so things were not quite as healthy as I thought, but when I looked, I saw that 57 of those 76 entries were for a firm offering jobs taking out catalogues and trying to sell things door to door—the archetypal job that people often have to take during a recession. In fact, we can read all about that from the 1930s, which is where we are again—it is not the 1980s; in fact, it is the 1930s. Most of those 57 entries were not even for jobs in Edinburgh, and in my view they were not proper jobs. Maybe Joe should see whether he can make the extra hours by selling whatever it is he would have to sell. It is absolutely extraordinary, however, that 57 of the 76 job vacancies advertised in the Edinburgh area—which, by the way, stretches to Fife and to Falkirk—were what most of us would probably describe as non-jobs. Of the others, only six were actually in the city. If Joe were to apply for a job just outside the city, he would have to take on board the fact that it would cost him money to get there, and that that might negate all or part of any extra income he might earn. So there were six jobs in retail in Edinburgh, a city in which, we are told, unemployment is really not too bad and we should not worry too much about the state of the economy. That is not a growing economy. It is not a healthy economy. It is, however, the reality for Joe and many others like him.
I also spoke yesterday to a constituent who clearly understood how economics should work. She told me that she and her husband had already lost £85 a month in tax credits; their income had gone down. Her husband is a self-employed taxi driver, and she told me that because people were pulling in their horns, spending less and having fewer nights out, he was getting less business. His earnings were dropping. He was out driving on Monday and Tuesday nights last week, for five or six hours each night, yet he took in only £55 a night, from which he would have to take off his costs. She reckoned that people were not spending because they did not have sufficient income, either because they had lost their jobs or because they were on shorter hours. That is what low demand means. It has a ripple effect through a local economy, and people like that taxi driver who are working and who want to earn more cannot do so. He cannot make people take his taxi if they do not want to.
Sheila Gilmore
I will not give way to the hon. Gentleman, because he has not been here through all these hours or taken part in this important debate.
We have heard a lot about extra jobs being created in the economy. The Economic Secretary, who I understand is going to respond to the debate, tweeted during the recess that job creation in the three years of this Government was running higher than during 10 years of the Labour Government by a factor of 2:1. Those figures just are not true. They seem to have been plucked from a work of fiction. People are being told over and over again that that is what is happening, yet their own personal experience is very different. Joe cannot get extra hours in his job, and if he looked on Universal Jobmatch, which is where people are told to go to find jobs, he would find only six jobs in his field in his city. The numbers simply do not add up.
We know that some of the so-called jobs are unpaid jobs, and that some are jobs that have been translated from the public sector to the private sector. The real world is one of no growth. All the commentators have clearly stated that this Budget will not create more growth, as has the Office for Budget Responsibility, the organisation that we were told would be totally independent and correct. A Conservative Member even said earlier that he no longer believed in it. Actually, it is telling the truth.