Oral Answers to Questions

Simon Hughes Excerpts

Tuesday 10th December 2013 Commons Chamber

[Danny Alexander]

The hon. Gentleman makes an incredibly important point. We in the Treasury and this Government have been examining the issue of natural capital, which we have taken forward in a way that previous Governments have not. I will certainly get the Minister responsible to reply in more detail on the specific point that the hon. Gentleman raises, because it is very important.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

In the autumn statement, in addition to very welcome changes to tax and spending in relation to housing, the Government announced a proposal to look at local authorities’ opportunities to develop much more public sector housing. How soon will that initiative see the light of day?

[Danny Alexander]

I am grateful to my right hon. Friend, who has been a doughty campaigner on these issues for many years. I am sure that he welcomes the increase in housing revenue account headroom for which local authorities will be able to bid to build more houses. We have also undertaken to carry out a wider review of this issue, and I will set out the terms and the process for that in the coming weeks.

Autumn Statement

Simon Hughes Excerpts

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

The economy is smaller because it fell 7%. That is why. It fell in the years 2008 and 2009 when the Labour party was in charge.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I warmly welcome the Chancellor’s announcement about capital gains tax for foreign owners of property, particularly in London, and the increase in the borrowing limits for local authorities. When he does his review, promised in the autumn statement, of local councils’ ability to deliver more affordable housing, will he look at some very good examples of housing associations that, by using private sector investment and private sales, have hugely increased their capacity to build social housing—not just at affordable rents, but at social and target rents as well?

[Mr Osborne]

My right hon. Friend is absolutely right. Some excellent housing associations have used private money and sold off some of the most expensive social homes in order to provide more resource for building more homes, which is precisely what we want to encourage. On the additional money in the housing revenue grant, which I know has been of particular interest to his party, we have said that that money should be available on a competitive basis to those councils that are going to work with housing associations, for example, to deliver the sort of innovative schemes that he champions.

Economic Growth

Simon Hughes Excerpts

Wednesday 15th May 2013 Commons Chamber

[Mr Osborne]

My party voted against the tripartite arrangement. I do not have the quote with me today—I will send it to the right hon. Gentleman or ensure that my right hon. Friend the Chief Secretary has it for the wind-up—but the shadow Chancellor at the time, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), warned in this House that taking prudential regulation away from the Bank of England was a massive mistake and that the Bank of England would not be able to spot the growth of debt bubbles in the economy. Tragically, that is precisely what happened a decade later, and in part the responsibility lies with the people who set up the regulatory system. Is it not extraordinary that Labour Members get up and say that the Conservatives said this or that, yet we are looking at the City Minister at the time? We are looking at the person who, before that, was the chief economic adviser who devised the system and who used to take pleasure in telling everyone that he turned up in government and gave Eddie George a letter saying that he was no longer in charge of banking regulation—that used to be the shadow Chancellor’s story, but he never talks about it now.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I think the country understands that we could not go on as we did, with a completely unregulated City, with bonuses out of control and with unjustifiable profits. The Government’s policy on taxation is fairer now than it ever was under the previous Government. May I ask the Chancellor, however, to address the matter of the housing market, to which he partly referred? In addition to the welcome measures in the Queen’s Speech, will he look into how we can increase the supply of social rented housing and deal with the fact that many non-domiciled people are buying property in this country, not to live in or to rent out, but to keep empty, forcing up prices for everyone, beyond what people can afford?

[Mr Osborne]

We are putting in place, right now, new guarantees—the first time that the Treasury has done this—for social housing associations to enable them to build more social homes; in the Budget, we also confirmed support for an additional 30,000 social homes, so we are taking action to help on that front. With our Help to Buy scheme we are also helping those who want to buy their own home in the private market. My right hon. Friend is absolutely right that we should do both, which is precisely what we are doing.

Public Service Pensions Bill

Simon Hughes Excerpts

Wednesday 24th April 2013 Commons Chamber

I am glad that we have extracted some concessions from Ministers and that the further review is on the table. I also commend David Kirby and MOD firefighters and police representatives for their unrelenting hard work in getting the Government to this position. The story is not over. We need to keep a watchful eye on things, particularly when the review is published. I want the Minister’s reassurance on each of the three points that I have raised, because they matter and it would be preferable if the House reached consensus.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I join in the thanks to the Minister and our noble friend Lord Newby for their work during all the stages of this end-of-term attempt at reconciliation, which has at last been achieved. I also thank colleagues on the Labour Benches and those on our Back Benches and on the Cross Benches in the Lords who made sure that the remaining issue in this huge Bill could be resolved amicably. The Lords’ proposal and the Minister’s amendment mean that this is not a closed book and I hope that this hugely important Bill to reform public sector pensions will be put on to the statute book this week. There is now a fixed time frame in which to address further the anomaly that was not spotted by the previous Government or by Lord Hutton, but that has since been brought to our attention.

I also join in the thanks to Mr Kirby and his colleagues for their efforts in making sure that we understood their concerns. Their request is not unfair. They are asking to be put in a position similar to those who do similar jobs—they are not identical jobs—in the civilian services. My hon. Friend the Member for Colchester (Sir Bob Russell) made the obvious point about the logic of that position when he said earlier this week that the argument in favour of Ministry of Defence firefighters and police and rescue people retiring at 60, as is the case in the civilian services, is, bluntly, that they do dangerous jobs that require them to be particularly fit. The argument that they can be expected to do their job properly and protect themselves and others after they reach 60 has not been made. We are all in favour of more flexible ages of retirement. I buy the argument that the retirement age has to go up, both in general and in relation to public servants, and I support the Government’s proposals, but we have to accept that the time when people are not fit enough to do certain jobs will come earlier than others.

I have a few questions. The Bill’s provisions will commence when it is enacted, but that does not apply to those in clause 9—the pension age provisions—which will be subject to an announcement by the Chancellor or a Treasury Minister at a later date. That is a perfectly normal procedure. Will the Minister explain in his response to the hon. Member for Nottingham East (Chris Leslie) when he expects that announcement to be made? That will be of wider interest, because it is a hugely important issue.

Secondly, I ask the Minister to accept that some of the facts and figures that he has used, which I think have also been used by the Government in the other place, are not accepted as facts and may be misinformed. I am not accusing the Minister of doing that wilfully. For example, he has made the fairly strong argument that an 8% increase in contributions would be required from these firefighers, rescue workers and police to fund a pension age of 60. The workers say that it would be a very small figure of about 2%.

That ties in to my third question. It is important that we take into account what this change would cost the Treasury and the taxpayer. The Government have in both Houses given the estimate of £10 million a year. The people who have come to see me have argued that the sum will be much smaller and may be in the order of £2 million a year. I do not pretend to be an expert on these issues, but I am sure that the Minister will say when he winds up that the Government will not go into this process with a closed view. It is a negotiation, so the arguments will be heard and I hope that the true facts will be accepted.

It has been accepted already in the conversations with the Ministry of Defence that the pension age for fire and rescue workers and police in the services can be held at 65 and not rise in line with the provisions of the Bill, which take account of increasing life expectancy. I want to reinforce the point that the people who will be affected argue not that their pension age should held at 65, but that it should be 60, in line with similar civilian workers. If that age is later renegotiated across the piece for firefighters, rescue workers and police, that is fine. I think the Minister understands that, but I wanted to put it on the record that that is where the workers want to start from. That is a reasonable expectation.

I am grateful to the Minister and am pleased that we have been able to carry out this bicameral activity again in a spirit of determined resolution, which I hope will mean that this important Bill becomes an Act on the statute book this week.

[Sir Bob Russell]

I am delighted that the trust and confidence that I placed in the Minister on the public record on Monday has been justified. I thank him, those around him and those in the other place for bringing matters to a resolution that, although a compromise, is one that I hope we can all live with. In that spirit of concord, I thank Opposition Front Benchers for their contribution. We should praise the representatives of the Ministry of Defence police and fire and rescue service, because without their sterling endeavours, we might have ended up with a right mess.

I remain critical of the Ministry of Defence, because if it had been involved at an earlier stage, we would not have got to the stage where a resolution was needed. I am still concerned that we are looking at this matter the wrong way around. It is the fitness of the people to do these very dangerous jobs that should be paramount, not the retirement age or the pension. They defend and provide security and fire services for nuclear installations. I urge the Ministry of Defence, notwithstanding the resolution of this particular matter, to look calmly at the security and fire protection that its police and fire and rescue services provide in the national interest to ensure that they are fit for purpose. Nobody doubts the courage and commitment of the individuals concerned. However, as I said on Monday, do we really want our nuclear installations to be looked after by people of my age?

Public Service Pensions Bill

Simon Hughes Excerpts

Monday 22nd April 2013 Commons Chamber

[Sajid Javid]

As I make progress and explain the Government’s position, I will come to that point.

The Government do not believe the amendments to be the correct way forward, either for the taxpayer or the forces themselves. I will briefly set out some of the key reasons for our position. Allow me first, however, to reassure both hon. Members and the work forces themselves that the Government understand their concerns. We have listened to the representations and reflected on the discussions in another place, and I want to make it absolutely clear that we recognise the unique position of these work forces and the important role that the defence fire and rescue service and the Ministry of Defence police play.

My colleague Lord Newby met DFRS and MDP officers to talk through their experiences on the ground and the demands of their roles. There is no doubt that these public services deliver a valuable service to the armed forces and the country more generally. The nature of the work they are called on to deliver is often very difficult and at times can be dangerous. On occasion, some members of these work forces might find themselves putting their lives at risk. No one in the House is suggesting otherwise, so let us not be distracted from this important discussion by cherry-picking anecdotes and citing emotive examples of the work involved, because that is not the issue being discussed today.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

Like many people, I have met representatives of workers in the MOD scheme, and they have referred me to Lord Hutton’s comments that he was not aware of the anomaly and therefore did not address it in his report, but that he was sympathetic. I have seen both sides of the argument. Our noble friend Lord Newby said that he would reflect on the debate in the Lords. Have there been any further conversations with Lord Hutton? In general, my understanding is that the Government are seeking to implement Lord Hutton’s recommendations, but this issue has clearly slipped through the net.

--- Later in debate ---

[Sajid Javid]

The hon. Gentleman has made a good point, and made it well. It is important to consider the capability of each work force, especially in view of increased longevity, and to ensure that the retirement age is appropriate. That is what I expect the MOD to do, and that is what it is doing, but it should do it in the context of the particular scheme for each work force, rather than by becoming involved in the details of each work force that are affected by the broad changes introduced by the Bill.

We have a responsibility to look rationally at the costs of the proposed changes. The additional costs may appear small in comparison with the savings that the Government are making through their overall programme of pension reforms, but the Government consider them to be both unnecessary and significant. They are unnecessary because those concerned will continue to have access to the civil service pension scheme, which is an excellent scheme that many in the private sector, including those doing the most arduous or specialist work, would envy. They are significant because some early indications suggest that they could be as high as £10 million a year for the lifetime of the schemes. This expenditure would take money away from front-line servicemen and women, and from other important defence priorities.

Those who support the amendments may believe that the members should pay the cost of the reduced retirement age themselves. That would imply increased employee contributions and a potential average take-home pay cut of over 8%—although it would depend on the exact terms—which might not necessarily be welcomed by members of the forces.

As politicians, we should not be trying to set the fine detail of public servants' pension schemes on the Floor of the House. Rushing at it might lead to mistakes. As I hope I have made clear, I acknowledge that the issue deserves further consideration allowing time for discussions between employer and employee. We owe it to the DFRS and the MDP to get this right.

[Simon Hughes]

What the Minister has just said is very helpful, provided that the Treasury too will be helpful if the negotiations between the unions and the MOD produce a different package. I understand the financial point, and I also understand that this is not just about retirement ages but about all the other benefits, which may be better than they are under the present arrangement. Can the Minister confirm that, if the MOD picks up the baton, the Treasury will not walk away and say “Nothing to do with us, guv”, but will continue to take an interest in the resolution of this outstanding bit of business?

[Sajid Javid]

What I can confirm is that the Treasury and the MOD are in exactly the same place. The MOD agrees with the terms that I am presenting today, and, as I have said, has made it clear that it will think about the issue. It has already written about it to members of the forces, as I would expect it to do in its capacity as the employer of these vital groups of workers.

The Government have not dismissed the claims of the DFRS or the MDP; far from it. The MOD has acknowledged in writing that there is a case for looking at their pension age to check that it is still appropriate.

Finally, there is a technical reason why the Government cannot accept these amendments as they currently stand. They would—unintentionally, I assume—confer powers on the Scottish Parliament and Welsh Assembly to make schemes for these civil servants. That would give new functions to devolved Administrations, without any proper consultation or consideration of whether that is the appropriate framework for managing the interests of these specialised work forces.

In summary, this is a complicated and inevitably emotive issue, and one that we have discussed at some length. I am sure I will not have persuaded all Members present today.

--- Later in debate ---

[Chris Leslie]

Quite a few of those employees already retire before the normal retirement age because of issues of physicality—the sheer effort involved in undertaking such physical tasks. It is entirely unreasonable and unfair that there is such a discrepancy between public service workers who carry out the same job. They are all called on to put their lives on the line. The burden of justifying the anomaly now rests with the Government, but other than some rather unconvincing arguments, which the Minister barely touched on, they have failed to discharge their burden and to illustrate why MOD firefighters and police are so different. The Minister took interventions from many colleagues and on a number of occasions he said, “Oh well, I’ll come to it in my speech,” but amazingly he never did.

[Simon Hughes]

Given that neither the Labour Government nor Lord Hutton spotted the issue, and it has now been raised with this Government, does the hon. Gentleman not think that a reasonable way forward is what the Minister suggested at the end of his speech? We should allow the MOD and the unions to see if they can negotiate a proposal that could be implemented under the broad remit of the Bill. That must be the reasonable, sensible, grown-up way forward.

[Chris Leslie]

At this eleventh hour, no, because the issue has been familiar to the Government for many months. The Minister said that there was not even a proposal on the table. We are able to judge, as Lord Hutton was able to judge, as suggested by the quotes from the House of Lords debate, the definitions of firefighter, police officer and armed forces, for whom the Bill categorically specifies the normal pension age as 60. The right hon. Gentleman is suggesting that some sort of negotiation is needed about whether those individuals are indeed firefighters or police officers of the same class. I disagree with him, if he is naive enough to think that the Treasury and the Ministry of Defence do not need to be pushed on the issue. Today is the opportunity to vote on it. I know he will listen to the debate and I hope he will vote in the right way and not try to find some excuse for kicking the issue into the long grass, hoping that people will forget about it yet again. We have the opportunity to deal with it now. Let us have a bit of gumption and deal with it in the way that we can do.

[Simon Hughes]

May I tell the hon. Gentleman respectfully why I disagree with that? This is not just about age. It is about a whole package of benefits, some of which are much more advantageous to people in the civil service than they would be to someone in a parallel position in local government. I am not in a position, and even those on the Labour Benches who represent unions are not in a position, to do a deal here on their behalf. If Government are committed to a deal being done, it must be right to remit the issue to the employer and the unions to negotiate an outcome.

[Chris Leslie]

I am very sorry that the right hon. Gentleman’s true colours have come through in that way. He is clearly not going to support the move to reduce the retirement age to 60. He should, and I will tell him why. The key question was put by Lord Eatwell in the other place, who asked about the different treatment and whether the Government could justify it. He asked:

“In what way is it less onerous, when they”—

that is, the MOD firefighters—

“have to work on military establishments”—

as the hon. Member for Colchester (Sir Bob Russell) said—

“dealing on occasion with extremely dangerous materials, and occasionally also in war zones? How is their job less onerous?”—[Official Report, House of Lords, 12 February 2013; Vol. 743, c. 568.]

Unfortunately, my noble Friend did not receive a satisfactory answer to the question, so I repeat it now to the Minister: what reason is there for that different treatment? Do not Ministry of Defence police officers have to stay fit, remain physically alert and intervene in events of great physical danger? Do not Ministry of Defence firefighters have to be ready to run the gauntlet, endure the exertions of search and rescue in extreme circumstances, take intense risks, prove their stamina and make sure that they can rise to the most testing of circumstances? The arguments that justify excluding the police and fire and rescue workers from the link between state pension age and normal pension age apply equally to the MOD police and the MOD firefighters. Just because they are a tiny number of workers should not mean that Ministers can just turn a blind eye and ignore the issue. We cannot allow it to be swept under the carpet. There is no reason for the difference, and the Government have no justification for opposing the amendments.

--- Later in debate ---

[Sir Bob Russell]

Well, the hon. Lady and I must beg to differ. I do not want her to think that her support for MOD firefighters and police officers is greater than mine. I was arguing in support of the MOD police when the previous Labour Government were cutting their numbers—so I can do without those sorts of comparisons.

I ask the Minister to give a categorical assurance on the concerns raised by hon. Members on both sides of the House. I particularly welcome the comments from the hon. Members for North Antrim (Ian Paisley) and for Blaydon (Mr Anderson) and my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes), who raised questions that have not yet been fully answered. My hon. Friend the Member for Argyll and Bute (Mr Reid) and the hon. Members for Stevenage (Stephen McPartland) and for Banff and Buchan (Dr Whiteford) also raised concerns.

[Simon Hughes]

I pay tribute to my hon. Friend’s work on this matter. I have had a chance to check the answer to the question from the hon. Member for West Dunbartonshire (Gemma Doyle). If the amendment were accepted, it would immediately transfer the people in question out of the civil service definition. They would get the benefit of an earlier retirement age, but they would also get the disbenefit of other comparative advantages. That is why we need a negotiated conclusion, not one-line changes to the Bill.

--- Later in debate ---

[John McDonnell]

Today we have at least set out the parameters of what the negotiations will be. The age of 60 has to be No. 1 on the agenda, followed by ironing out other anomalies. The second issue is the point I raised in an intervention on the Minister. We have to have a clear definition of the legislative process by which the negotiated settlement will be speedily agreed through the House. Will it be tacked on to other primary legislation or might there be a speedy regulation change that enables us to implement the process?

[Simon Hughes]

I, too, pay tribute to the hon. Gentleman for the work he has done. I share his view that it would be helpful if the Minister indicated in the winding-up speech that there will be a fixed timetable for concluding the process and that the age change from 65 to 60 would be on the agenda. If he can do that, I think that realistically, given that we are at the beginning of this financial year, that would be acceptable. I have not cleared that with the unions, but we need something that gives some parameters and the Minister would carry us with him if he set them.

[John McDonnell]

To go back a bit, I would also like some clarity about the legislative process. The time scale for negotiations can be set and the agenda for those negotiations clarified; my anxiety is that if we do not have a commitment on the time scale for legislation, the issue could be kicked into the long grass or even further. That would be seen by the workers as an act of bad faith unless a clear timetable was also given for the legislative process.

[Simon Hughes]

I have one quick thought—I am trying to be helpful. In every year there is inevitably a Finance Bill. This is a Treasury matter and could therefore be covered in the new Session by the Finance Bill.

[John McDonnell]

That is all I am asking for: clarity of process and time scale. It would be extremely helpful, as an act of good will and good faith, for the Minister to take back a reference to this matter in the Queen’s Speech. That would indicate to those involved that the Government attach a priority to ironing out what has been accepted as an anomaly. It is one that might affect only a relatively small number, but it does so critically and in a critical service, as others have said.

--- Later in debate ---

[Sajid Javid]

I thought I made myself clear but I will say it again: it would not require primary legislation if the MOD decided it was appropriate and right to make any changes to the retirement age.

[Simon Hughes]

The Minister is being very helpful. In answer to an earlier question, he alluded to the timetable that has started. Would it be reasonable to assume that the negotiations are intended to be concluded by the MOD during this financial year at the latest?

Finance (No. 2) Bill

Simon Hughes Excerpts

Monday 15th April 2013 Commons Chamber

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

Let me say to my hon. Friend and to those on the Treasury Bench that his announcement about a general anti-tax avoidance provision is hugely welcome, particularly in London, where people have seen companies get away with not paying taxes for many years—something that no previous Government have adequately dealt with. It is very welcome and we look forward to it becoming law as soon as possible.

[Sajid Javid]

I welcome my right hon. Friend’s support for the measure.

This Finance Bill includes measures to close 15 loopholes that have been used to avoid tax. Nine of these provisions have immediate effect from Budget day, and one—on tackling stamp duty avoidance—is backdated to the previous Budget, following the Chancellor's clear warning in 2012. This demonstrates the Government’s continuing commitment to fast, effective and targeted action to tackle avoidance. In addition, we are strengthening the successful disclosure of the tax avoidance schemes regime to increase the information that promoters of tax avoidance schemes have to provide about the users of their schemes. Together with the GAAR, these measures will increase tax revenues by almost £l billion by 2017-18, as well as protecting future revenues. In addition, the Government are investing almost £1 billion in HMRC’s compliance activities in order to raise additional revenues of £22 billion per annum by the end of 2014-15. This represents £9 billion more in compliance revenues—a 70% per cent increase since 2010-11.

This Finance Bill introduces a package of measures to ensure that owners of high-value properties cannot avoid paying their fair share of tax by placing their property in a corporate envelope. From April, residential properties held by certain non-natural persons that are worth more than £2 million will be subject to a new annual tax on enveloped dwellings. The Bill also introduces a new capital gains tax charge on these non-natural persons disposing of such high-value properties from April 2013.

Allow me, Mr Speaker, to draw my remarks to a close. [Hon. Members: “Hear, hear!”] I thought that that would bring a cheer. Finance Bill 2013 is a Bill for growth and fairness. It encourages investment, it supports innovation and entrepreneurs, it provides real help to families and working people, it tackles avoidance, and it asks those who are better off to pay more. I commend it to the House.

Question put, That the Bill be now read a Second time.

Tax Transparency (FTSE 100)

Simon Hughes Excerpts

Wednesday 6th February 2013 Westminster Hall

[Stephen McPartland]

I agree. My hon. Friend makes a valuable point, and has a wonderful legal mind. Many of the companies believe that they have a responsibility to their shareholders, but shareholders, to push up their returns, are interested only in the overall amount of tax that they have to pay globally. In their responses, some companies claimed that their overall tax rate is more than 45%, while others claim that it is about 25% to 28%. Although they all believe that they are as transparent as possible, it is perfectly clear that they are not being as transparent as the general public would like to see and understand.

We must move to a simpler tax system, in which it is much easier to see what is going on, and what companies have to pay in tax. I do not want this debate to appear to be anti-business or anti-FTSE 100. I am a Conservative Member of Parliament who is going to end up in the Morning Star as a result of this debate—probably the first one to do so—but the reality is that FTSE 100 companies make a huge contribution to Britain, including through the whole range of taxes that they pay. I understand that the FTSE 100 are responsible for almost 10% of the tax take in the UK, including the income tax and employer’s national insurance contributions that they collect on behalf of the Treasury.

The FTSE 100 are therefore massively good companies for the UK, and I am delighted that we have them in our country, but I want them to be a little more transparent, so that we can all have a bit more faith. As I have said, I believe that we have to lead the way in forcing them to accept the idea of tax transparency. Aggreko has said that it pays lots of tax and probably more than is needed, but that greater tax transparency was “a lousy idea” because it sees that as 500 new pages of the tax code and a great load of regulations that it does not want.

I could go on about the responses—I will if hon. Members wish—but the general thrust is pretty simple: the biggest companies in Britain believe that they all pay their taxes honestly and make a huge contribution to the economy by employing people who pay taxes. So far, most responses clearly show that they are not prepared to be proactive, and will comply only with current laws. Unfortunately, fancy corporate lawyers can blur the lines between tax avoidance and tax evasion, but that is clearly wrong, illegal and unfair to the rest of society, as I have mentioned.

I firmly believe that most employees in most of the FTSE 100, the FTSE 250 and other companies in the United Kingdom would expect their employers to pay their fair share of tax in the UK. We must start thinking about tax and tax transparency as a measure of corporate social responsibility.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I apologise for missing the first few sentences of my hon. Friend’s speech, but he knows that I am very much with him in this campaign. Has he thought of using his website to encourage shareholders of each of the top companies to raise the issue at their annual meetings and to force the issue internally, in the way that many green and environmental issues have been raised from within as well as through pressure from outside?

[Stephen McPartland]

My right hon. Friend makes a wonderful point, as he often does about tax transparency. I genuinely believe that that is an excellent way of moving forward. Many of the companies have offered to meet me, and I know that they have meetings with Christian Aid and ActionAid. Those companies are huge organisations that struggle to understand the complexity of what is going on within them.

I had a very positive response from the chief executive officer of AstraZeneca, who explained in great detail how he holds each member of his staff personally responsible for conducting its business, how he considers them to be ambassadors, and how he wants to help in any way he can to create tax transparency. There is, however, a fear that greater tax transparency will lead to greater regulation. He believes that many of the issues we are raising are already covered in the company’s accounting reports—the information is already collected—and that the question is how to go about demonstrating and sharing that information.

If we can demonstrate that there is great political will, shareholders will show great will to move the idea forward, saying, “Yes, this is important to us. It is like being green. Tax is part of our corporate social responsibility.” We will then be able to make progress. I very much take on board my right hon. Friend’s suggestion and will try to promote it.

The companies that I was referring to have a very devolved and developed sense of corporate social responsibility. British customers, employees and consumers want them to create greater tax transparency. There has been a huge hoo-hah about some large, non-British companies moving their profits overseas. Those companies have had difficulty in interacting with their own customers, and one of them has volunteered to pay tax. It should not be a voluntary option; it should be a legal requirement.

My new website—www.taxchallenge.co.uk—gives hon. Members’ constituents an opportunity to sign a petition calling for greater tax transparency, so that everyone will know which FTSE 100 companies are willing to sign up for that and which are not. Every one of us can then decide individually whether the biggest companies in Britain really care about the poorest in our society, at home and abroad.

Corporate Tax Avoidance

Simon Hughes Excerpts

Monday 7th January 2013 Commons Chamber

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

I sincerely congratulate the hon. Member for Redcar (Ian Swales) on securing this debate, which has been much needed for a very long time. He raised a series of important issues and I strongly endorse the gist of his recommendations. I shall explore a little further the reasons why the tax system has been corrupted in the way that he suggested, and therefore what needs to be done.

A conventional view and a charitable view is that the Government do the best they can, but are outgunned and outmanoeuvred by all those smart tycoons and multinationals who employ an army of accountants and lawyers to run rings round the flat-footed regulators and tax inspectors who are always behind the curve. That is, in my view, a pastiche of the truth. The reality is that Government, as I will show, far from cracking down on tax dodgers, not only turn a blind eye to all but the most egregious examples of tax misfeasance, but actually promote some of the most brazen examples of tax avoidance. I will come on to that.

This is scarcely surprising when the whole apparatus of tax policy has been captured by the corporate interest. The so-called clamp-down which the Government are promising will be run by the former City corporate tax lawyer and former Tory special adviser, Edward Troup, who is now in charge of tax at HMRC. It will be overseen by the HMRC chairman, Ian Barlow, who ran the most aggressive tax avoidance schemes for KPMG. Even the HMRC’s ethics committee is chaired by Phil Hodkinson, who is a director of the Resolution insurance company based in a tax haven. All that tells a pretty clear story.

As we all know, corporation tax avoidance has become a hot political issue only as a result of the relentless highlighting of it by analysts such as Richard Murphy of Tax Justice Network and journalists such as Tom Bergin of Thomson Reuters and Richard Brooks of Private Eye, as well as campaigners such as UK Uncut. Why is it left to voluntary campaigners to nail the tax dodgers who are cheating honest taxpayers and the Revenue out of, according to the Government, £35 billion to £40 billion a year? That is equal to about a third of the total deficit and the sum is probably a considerable underestimate.

One answer might be that the banks, which are by far the biggest tax dodgers, pay half the Tory party funds every year. [Interruption.] The Minister should not just shake his head. These are facts which are highly relevant. The multinational companies, which are the second biggest tax dodgers, pay most of the rest. If, instead of all the rhetoric that we get from the Prime Minister and Chancellor about moral repugnance and abhorrence, the Government were seriously concerned about stopping industrial-scale tax avoidance, let them answer three questions. If the Minister wants to answer them in my time, he is very welcome to do so.

First, since we all know that the really big numbers are not the tiddly Jimmy Carrs of this world but the transfer pricing by multinationals, why do the Government not bring in country-by-country reporting, which at a stroke would put a stop to the artificial switching of tax liability to low tax jurisdictions for no other reason than simply to avoid tax? I do not know whether the Minister wants to answer. Perhaps he will.

Secondly, since many, if not a majority, of the world’s most used tax havens are UK-controlled overseas territories and Crown dependencies, why do the Government not close them down? Why are not all such countries and territories—the Cayman Islands, the British Virgin Islands, Bermuda, Jersey and so on—required automatically to hand over details of income, assets and finance structures such as trusts to the UK authorities? This is the point that the hon. Member for Redcar made. If territories fail to comply, why do the Government not refuse to recognise the validity of any financial transactions emanating from them, as well as through domestic tax law, making it far harder, which the Government could well do, to get money into the recalcitrant tax havens in the first place?

The simple answer is that the Government could do that perfectly well and very effectively, but they will not do so because they do not want to, because their corporate and financial backers would scream blue murder if they ever tried to do so, and this is a very feeble Government, who are quite willing to bash the weak through benefit cuts but are not prepared to stand up to the strong.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I have great respect for the right hon. Gentleman, who has been consistent in pursuing the issue, but his last criticism is completely ill-founded. I do not speak as somebody who backed the previous Tory Governments or the previous Labour Governments when they failed to deal with the issue for years and years. Looking objectively, I have seen far more action from the Treasury under this Government than I saw under 13 years of the Labour Government whom he supported.

[Mr Meacher]

The right hon. Gentleman, whom I respect, wishes to raise a partisan issue when we are discussing something of much greater importance. Perhaps I can satisfy him by saying that I entirely agree with him. New Labour was just as bad as the Tories and I fully recognise that, but let us turn to where we are and what we ought to do about it.

The third question is this: if the Government are serious about tackling tax avoidance, why are they cutting the number of tax inspectors, many of whom recover more than 100 times the cost of their salary? In 2010 there were 68,000 of them. There are now far fewer. The problem is that when the Chancellor gives his dog-whistle that Britain is open for business, part of that coded message is that Britain is open for tax avoidance, and there will be far fewer tax inspectors nosing about and prying into shady practices.

While the Government have ostentatiously avoided all the actions that will end the transfer of tax avoidance, the truth is even worse. They are now drawing up measures which, frankly, will rip the guts out of the laws that safeguard the nation’s corporate tax base. They have exempted from tax multinationals’ foreign profits, but allow tax relief for the costs of funding them. In effect, that turns the UK itself into a corporate tax haven, which incentivises multinationals to shelter income offshore and to place real business overseas, using the UK as a worldwide platform for tax avoidance.

The Government are now going even further with the CFC—controlled foreign companies—rules. From January 2014, multinationals that open a finance subsidiary in a tax haven will have their corporation tax, as staggering as it may seem, reduced from the current 23% to 5.5%. In future, therefore, multinational companies really need not bother with tax avoidance any more, because the Government are serving it up to them on a plate.

The latest wheeze that the Government have come up with is the patent box. If a company has a product with a small patented component, it will qualify for a 50% cut in its corporation tax—that is 10% from April 2017—not only on that product but on the whole of its profits.

A third example is the general anti-avoidance rule, which the Government portray as their flagship measure against tax avoidance. Actually, it is the reverse. By being narrowly drawn it will block the worst kinds of tax avoidance, but by the same token—

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[Simon Hughes (Bermondsey and Old Southwark) (LD)]

This has been a really good debate. I pay tribute to my hon. Friend the Member for Redcar (Ian Swales) for going to the Backbench Business Committee and persuading it, with the support of some of us, that this is a debate we ought to have. We are on the centre court at the beginning of a new year, and I think that the Exchequer Secretary and his colleagues will be aware that this issue will remain an important one for the Treasury and the Government for the second half of this Parliament.

We have heard valuable contributions from among others my hon. Friends the Members for Bognor Regis and Littlehampton (Mr Gibb), for Stevenage (Stephen McPartland) and for Dover (Charlie Elphicke) and the right hon. Member for Oldham West and Royton (Mr Meacher), who is not currently in his place. We have paid tribute to others who have been part of the culture change, such as ActionAid’s tax justice campaign, people such as Richard Murphy and journalists such as Ian Griffiths and others who have ensured that we confront the issue.

My constituents, like yours, Mr Speaker, and others, will see posters reminding them that they have until 31 January to complete their tax returns if they have not done so already—MPs included. We all understand that there is a civic obligation to pay tax as individuals, but we all expect, particularly in times of austerity, that there should also be a corporate obligation to pay due tax, and that is what the debate is about. If we are encouraging people to be entrepreneurial and to start their own businesses, it is not a great encouragement for someone who wants to set up a coffee shop, a book shop or a garage, for example, to think that they will have to pay tax while some great international company might put them out of business or prevent them from gaining a foothold in the market by avoiding paying. It is about justice between small and medium-sized enterprises and big international enterprises.

There is a UK obligation, because some of the companies that offend most use tax havens that are UK Crown dependencies. Bermuda, the British Virgin Islands, the Cayman Islands, the Turks and Caicos Islands, Guernsey, Jersey and the Isle of Man feature regularly as places where the system is abused. There is clearly both a national obligation—we can do things ourselves—and an international obligation to act, and I am grateful that the Prime Minister understands that, as do others, and that it will be on the agenda for the G8 summit in Fermanagh later this year.

As I made clear earlier, when intervening on the right hon. Member for Oldham West and Royton, it was not really fair to criticise this Government on corporate tax, because all recent Governments have been very weak on it. The right hon. Gentleman conceded that new Labour had been poor and criticised it equally. I compliment the Government on their investment in additional effort in the Treasury on this issue, on the commitment to implement the anti-abuse rule later this year, on putting the subject on the international agenda and on making the UK more competitive for business to provide a disincentive for trying to fiddle the system. In particular, I congratulate my right hon. Friend the Chief Secretary to the Treasury on picking up on an idea I have lobbied him about a great deal: making sure that the Government look at those companies with which they, and local government, do business and ensuring that we do not give Government money to those who do not pay their taxes properly; it is exactly the right principle that they should not get contracts from the Government either. Of course, there have also been bilateral agreements with other countries.

Let me flag up one main area and one subsidiary area —in relation to the tax treatment of interest payments—which I ask Ministers to look at. Traditionally, interest has been seen as the cost of doing business while dividends are seen as the distribution of profits. For that reason, under accounting rules, interest payments are deducted from operating profits before corporation tax is paid, while dividends are distributed after tax has been paid. Debt can be used to strip out cash generated by companies and to move it offshore before it is taxed. There is also a large problem with private equity funds buying companies, making those companies take on a lot of debt, and using the cash to pay off the loans that they took out to buy them in the first place, so that they can end up owning a company for a fraction of its real price. Companies receive a huge tax advantage from the ratcheting up of debt.

In the finance sector, that is called creating a more efficient capital structure, and people will say that they are just working within the structure put in place by the Government. However, it has a huge effect on the businesses concerned and on the economy as a whole, as well as on the Treasury. It is not about efficiency, because the companies affected are often left seriously weakened and at risk. Many operate on the margins and are unable to withstand any financial shocks. That magnifies the impact of recent downturns. Comet is a recent example of the consequences of excessive borrowing. The increase in debt gives companies far less freedom to invest in new machinery or to make other capital investments, and that holds back growth.

[Charlie Elphicke]

If we believe in deleveraging the economy and deleveraging business, should we not put equity and debt on a similar footing?

[Simon Hughes]

That is a valid point.

As well as tax treatment of interest payments being an unfair incentive to avoid paying due taxes, shareholder loans are a particularly iniquitous example of these practices. That is my second and subsidiary point. Where owners of a company are receiving interest payments, they can manipulate the interest rates in order to remove their tax liability. The current transfer pricing rules are supposed to stop that, as they prevent a company from lending to a subsidiary at a higher rate than the market rate, but what is the market rate in a negotiated transaction between two parties that are, as it were, two sides of the same coin?

I want to give three examples of companies involved and then conclude with some proposals to add to those of my hon. Friend the Member for Bristol West (Stephen Williams) and others. I have often cited in this House the water industry in general and Thames Water—the local water company here, and a monopoly—in particular. In 2012, it paid £500 million in interest, which accounted for the vast majority of its operating profit of almost £650 million. In the same year, it paid no tax and instead received a tax credit of £38 million. In the previous year, it paid just £500,000 in corporation tax despite showing an operating profit of £600 million. Half its debt has been issued through its finance subsidiary in the Cayman Islands. Put simply, Thames Water raised the debt and gave the cash to Macquarie, which is based in Australia, so that that company could pay off the loans that it took out to buy Thames Water. The level of debt in the company is now equivalent to 90% of its value. Arqiva, which has Government contracts, receives annual revenues of about £1 billion a year, holds £3 billion in debt, and has an interest rate of 13%, which is extraordinarily high for a monopoly infrastructure provider. Boots, now Alliance Boots, has escaped paying £500 million in tax through a complex arrangement of companies.

I hope that in the forthcoming Budget Ministers will look at the tax treatment of interest payments and, specifically, do what countries such as Germany do in limiting the amount of interest payments that can be deducted before tax, adopting the earnings-stripping rule which applies there and elsewhere. I also ask them to consider whether that should be further dealt with if the company uses a tax haven, to address the question of UK dependencies, and to have an annual debate, as part of the Budget, on how to avoid such abuses of the tax system.

Infrastructure (Financial Assistance) Bill

Simon Hughes Excerpts

Monday 15th October 2012 Commons Chamber

[Chris Leslie]

That is indeed the approach taken in some of the underwriting provisions. Of course there can be circumstances in which that makes sense, perhaps to tip a project that is viable and in the national interest from something that might not happen to something that moves ahead in a way that benefits everyone.

The amendment does not even say that every contract should have a clawback provision: we are simply saying that the Treasury should be under a statutory obligation to give reasonable consideration to the insertion of clawback clauses in the contracts. That is the be all and end all of amendment 7 and I hope that the arguments are fairly straightforward. I look forward to hearing the Minister’s view.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I wish to speak briefly to amendment 12 and new clause 3, which are both in my name. Both relate to the reports that the Government propose in clause 3 should be annually produced, and to the transparency of the companies involved in this support for infrastructure, which I welcome.

Both the amendment and the new clause follow discussions that I have had with my right hon. Friend the Chief Secretary, who is now in his place on the Front Bench with his new ministerial colleague, whom I also welcome. The amendment and new clause are prompted by the fact that we often do not know the identities of the beneficial owners of the companies with which the Government do business. Companies often have shares owned by trusts or other companies based in countries that do not require disclosure of ownership, and I shall give a few examples.

The M6 toll road is owned by Midland Expressway Ltd, which is owned in turn by the Macquarie Motorways Group Ltd, which is in turn owned by Macquarie Atlas Roads International Ltd of Bermuda. It is controlled by Macquarie Infrastructure Group, but the identity of its investors and therefore of the owners of MEL remains unknown and undisclosed. In 2006, however, they paid themselves a £392 million exceptional dividend, and over six years made a return on their investment of more than 150% a year. This sort of profit at the public’s expense by we know not whom is not an acceptable arrangement, and I want the Government to be warned against it and to ensure that all owners are in the public domain.

Arqiva, as a private sector monopoly, is regulated by Ofcom. It runs all the transmission services for all UK terrestrial television broadcasters and for BBC Radio and most commercial radio services, owns two of the four digital multiplexes, supplies the Government with mobile and wireless communications and supplies three quarters of all police forces. It receives annual revenues of about £1 billion and makes annual losses of about £250 million. The ultimate owners of the company appear to be based in Bermuda, although we do not know who they are, and Arqiva has paid no corporation tax for four years.

Thames Water, the UK’s largest water supplier and a monopoly private sector company providing a public service with which the public therefore has no option but to deal was bought by Macquarie European Infrastructure Fund in 2006. The long-term debt held by the company was £3.4 billion and is now £7.7 billion. When the company was bought, Thames Water took on all the debt taken out by its owners to buy the company, which was more than £3 billion. To do that, it set up a company in the Cayman islands, Thames Water Utilities Cayman Finance Ltd, which is registered at an address at which are registered 18,000 other companies.

Over the past four years, Thames Water has made profits after tax of £314 million, £331 million, £225 million and £247 million, and has paid dividends of £398 million, £291 million, £271 million and £480 million, but in the last tax year paid no tax. In the previous year, it paid £500,000 in tax, and the year before that £16 million, yet it has a stable operating profit of about £600 million a year. I could go on. There are health care companies, and the company currently negotiating with the London fire brigade over the water to buy the old fire brigade headquarters looks as if it is based in the British Virgin Islands and the Isle of Man.

[John Healey]

rose—

[Simon Hughes]

I shall make one short point and then give way.

The other really important thing—this is the purpose of new clause 3—is that we should require due diligence to be carried out in the same way as we require it for money-laundering prevention. The trouble is that it is not done properly and is not effective.

[Hugh Bayley]

On a point of order, Mr Gale. I apologise for interrupting the hon. Gentleman. Surely, the point of a Committee stage is to allow a Bill to be considered at greater length and in greater detail than is possible on Second Reading. Owing to reasons beyond your control, Mr Gale, we have less than half the time for debate in Committee that we had on Second Reading. We have not yet finished clause 1. All the other clauses will go unconsidered in Committee. Would it be in order, Mr Gale, for you to make a report to the Chairman of Ways and Means about how this Committee stage went, so that he and the Panel of Chairs can consider whether it is appropriate for us to have such short Committee stages on the Floor of the whole House?

[Temporary Chair (Sir Roger Gale)]

The Chairman of Ways and Means will undoubtedly read what the hon. Gentleman has said, but the proceedings are in order according to the programme motion agreed by the House.

[Simon Hughes]

I give way to the right hon. Member for Wentworth and Dearne (John Healey)

[John Healey]

The right hon. Gentleman is making a powerful case against predatory capitalism and tax avoidance that ought to commend itself to the Treasury Front-Bench team. If they will not accept his argument and amendments, will he press them to a vote?

[Simon Hughes]

I am conscious that the first of my amendments is technically deficient—which was my fault, not anybody else’s—but I hope that Ministers will accept the point and amend the Bill in the other place. I will press them hard—I know that I have support from colleagues in both other parties in this place—to try to get the change made. I am hopeful that the Chief Secretary to the Treasury, who is in his place, has heard the proposition and will be able to respond.

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[Sajid Javid]

Yes, I can confirm that any application will go directly to the UK Treasury. If an application were made by one of the devolved areas, the Treasury would consider working with its counterparts in that area, but the decision would be made by the Treasury itself.

[Simon Hughes]

As my hon. Friend knows, my colleagues and I support the Bill strongly. May I give him a chance to deal with a point that he did not have a chance to deal with earlier? Will any investment made through the arrangements in the Bill allow the Government to track down the beneficial owners of any companies with which we do business, and to find out where they are based? May I also ask whether the due diligence rules that are set out in the Money Laundering Regulations 2007 will be applied, so that there will be a check on the interest rates, the creditworthiness and the ethics of the companies in question?

[Sajid Javid]

My right hon. Friend began to make his point in the earlier debate, but was unfortunately cut short. The Government are keen to ensure that when they analyse each application that will benefit from these guarantees, they establish the identities of the true beneficial owners of every scheme. Although that process is not included in what was deliberately designed to be a short Bill, much of the detail is included in the individual schemes. It will be in the UK guarantees scheme, and also in the programme that will cover the housing element of the guarantees, which will be published shortly.

My right hon. Friend also raised a point, in relation to one of his amendments, about the beneficiaries of the debt guarantees. He may have been alluding to the actual holders of the debt instruments. Although I understand and sympathise with his principle, this approach would not be very practical because debt instruments, particularly bonds, are tradeable and so, as with gilts, it would be hard to track the owners of those instruments.

[Sajid Javid]

The process of analysing each of the applications under the Bill will include a thorough due diligence process, which will examine the beneficiaries in each case. The Government will not issue a guarantee if they are not satisfied with the outcome of that due diligence process. It is not the standard procedure for the Government to publish all the information they look at when making decisions on guarantees, but the hon. Gentleman should be assured that this will be a very thorough process, which will have the assistance of outside sources if required.

[Simon Hughes]

It may be helpful if, at a date in the near future, friends from all parties might have an opportunity to talk through these things with the Minister when the other scheme on housing is published. May I alert him to the fact that the due diligence tests under the Money Laundering Regulations 2007 are, by objective assessment, not always effectively applied by the banks? So it is all very well having the tests in theory, but we need to ensure that the tests for this Bill are carried out in practice and that we can all see that they are effective and as stringent as they were meant to be.

[Sajid Javid]

My right hon. Friend makes a fair point, and I am more than happy to discuss this in further detail with him at a later stage.

--- Later in debate ---

[Chris Leslie]

We did not have time to discuss some of our amendments. We wanted far more information about the nature of the loans, underwriting and even grants being given to the private sector. The right hon. Member for Bermondsey and Old Southwark (Simon Hughes) tabled some important amendments that we did not get the chance to discuss in any great detail.

My amendment 5 simply talked about making sure that the public can know to whom the financial assistance is being given—a pretty basic tenet of transparency and accountability for public resources. The Minister could not say that that information would be in the public domain. We are not even necessarily allowed to know to whom the financial assistance is being given.

The Minister says that due diligence will be thorough as far as the Treasury is concerned, but what about the rest of us? Our constituents send us here to keep an eye on what the Executive are doing with public money. Without that basic information, how are we to judge the success of the legislation?

[Simon Hughes]

The hon. Gentleman knows that I share his frustration that we did not have more time to look at the issues in Committee. I suggest that that is not the Government’s fault. I remember many occasions when we had exactly the same problem under the Labour Government. Rather than blaming the Government, will he and his colleagues work with us to make sure that we have a system across Parliament—just a change in the rules that gives injury time if urgent questions or statements take up time for principal legislation? That is a way of solving the problem, and we would all be much happier as a result.

[Chris Leslie]

Of course we can have arrangements. There are perfectly available arrangements for making sure that there is time for legislation, but the Opposition do not control the timetabling of debates. I do not want to bang on about the procedure, but suffice it to say that it was inadequate.

We did not get a chance to debate the reporting mechanisms for what happens in terms of the financial assistance given to unknown persons. The hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips) asked what measure we would have of the Bill’s success. I think that there should be reports not every 12 months, but every six months. If the issue is so urgent and there is a national emergency—if it is a case of, “Let’s get infrastructure going and press ahead with capital investment”—let us have far more frequent reports.

We do not know how much taxpayers’ money is on the line, how much is being committed per project, what form the financial assistance will commonly take, what type of companies will receive the financial assistance and even what type of infrastructure projects will receive such assistance. There are a lot of unknown unknowns in the legislation.

I hoped that we would have the chance to cover other key points. For example, I am particularly concerned about the availability of social housing. I mentioned earlier that in my city of Nottingham, not a single extra affordable social house was built in the last financial year. That is unacceptable.

Perhaps the situation will be made worse by the fact that the housing stock of certain local authorities has been transferred to housing associations, but quite a number of authorities either retain their council housing stock or have arm’s length management organisations —ALMOs—doing that. As I read the legislation, if someone’s local authority has not moved to housing associations, they will not be able to benefit from the underwriting as much as people whose local authorities have, because ALMOs and local authority-retained stock areas cannot be underwritten because of the borrowing constraints. There is a perfectly legitimate question—not a partisan question—about how we ensure fairness from one city to another and one area to another, but we did not get an opportunity to debate those issues.

Tax Avoidance and Evasion

Simon Hughes Excerpts

Thursday 13th September 2012 Commons Chamber

[Margaret Hodge (Barking) (Lab)]

I, too, congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on securing the debate. I welcome the growing public interest in these issues, which is perhaps not reflected in the attendance in the Chamber on a Thursday afternoon. An issue that is sometimes seen as dry and complex and often portrayed as too difficult or obscure for people to get their heads around is now accepted as a matter of great public interest. I welcome the determination of the media in that regard, particularly that of The Times, which has done a good job of investigating the issues and identifying and exposing what is becoming a plethora of tax avoidance schemes that persist in the UK.

Hard-working British families, who have had to cope with a cut in their living standards and less money in their pockets because of the state of the economy and who pay their proper contribution in tax to fund all our collective endeavours and ensure that we have the public services and infrastructure on which we all depend, are rightly angry when they see a small elite in Britain—wealthy individuals and profitable large corporations—avoiding tax and putting so much time, energy and money into finding ways to avoid making their proper contribution. It is a terrible sickness at the heart of our society that too many well-heeled individuals and profitable corporations simply do not accept that they, too, have a duty, coming from their legitimate wealth, to contribute according to their means to the society from which they expect to take according to their needs and their expectations. Too many rich individuals and profitable companies see tax avoidance as clever, cool and worthy of praise and admiration, whereas it is immoral and wrong.

If we are to maintain public confidence in the tax system, it is vital that everyone knows and sees that it is fair, with everyone paying their fair and proper share to the collective purse. Tax avoidance and evasion are important because huge sums are involved. We have had the HMRC estimates and I have seen a Tax Research UK estimate that puts the tax gap at £120 billion. Whichever argument we believe, we are talking about many, many billions. A quarter of that sum is down to tax avoidance and evasion, but we should also have regard to the fact that the Government, in figures published last year, admitted writing off nearly £11 billion of tax that HMRC called “uncollectable”.

When the Select Committee on Public Administration considered how HMRC handled the large tax disputes with major corporations, we found that up to a potential £25 billion of moneys were outstanding to the Exchequer, although I accept that that figure is not precise. That is a huge sum and we need to set it against the cuts the Government have chosen to implement, such as the £24 billion per annum cuts in benefits, tax credits and pensions that hit the most vulnerable in our society.

The PAC considered a range of tax avoidance issues, including how HMRC handles disputes with large companies, the use of personal service companies and how those who engage in business with and make their money out of the public sector arrange their affairs to avoid tax. This autumn, we will receive a report from the National Audit Office on the tax avoidance schemes exploited by wealthy individuals exposed by The Times, which found that wealthy people were too often paying as little as 1% of their income on tax arrangements—for example, the K2 scheme used by people such as Jimmy Carr.

Based on that work, I want to focus on four points on which I think that the Government can take practical steps to tackle and stop avoidance and evasion. First, greater transparency is vital. We know so little and people get away with so much because the principle of taxpayer confidentiality is used and, in some cases, abused to prevent proper accountability to the public by the tax authorities. We uncovered the scandal surrounding the Goldman Sachs settlement because of the brave and determined efforts of one whistleblower. Questions surrounding other deals remain, such as, in the case of the Vodafone deal, whether the amount finally paid was correct and whether it was right for the company to be given extra time to pay. The Government should consider full transparency on the tax negotiations for the FTSE 100 companies. They are publicly quoted companies that publish their accounts, and we know from their accounts how much they pay, so we should also be able to monitor how settlements are reached and why the amounts are determined. People advising those companies use knowledge gained from negotiating one deal to get a better settlement for other clients. The public should also have that knowledge, so that they can consider whether avoidance exists.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I agree with the right hon. Lady and I thank her and members of her Committee for their diligent work. First, have they considered looking at countries that have a full transparency regime for publicly quoted companies? Secondly, will they ensure that no company that does business with the Government can use offshore tax havens in any part of its ownership arrangements? That is currently very common, particularly among public utilities such as water companies and others that supply key, nationally important infrastructure.

[Margaret Hodge]

The Committee tries to look at international comparators, but it does not do enough such work. The right hon. Gentleman’s second point was to be one of my suggestions to the Government, and I agree with him entirely. My final point on transparency is that there is a belief in the country at large that bigger companies are not treated in the same way as small and medium-sized enterprises, which are struggling and often pursued relentlessly by Her Majesty’s Revenue and Customs. That belief will be shattered or broken only if we have full transparency and people can see that there are no sweetheart deals.

My second point concerns the proper resourcing of HMRC to tackle avoidance and evasion. Of course we want more efficiency from everyone employed at HMRC. The Labour Government cut 3,000 jobs, but I think that was wrong because evidence shows that for every £1 invested in pursuing tax avoidance, £10 is raised from the money collected. We should, therefore, be sensible about how we cut the deficit and we should invest in those areas where we will get money back.

I say to the Minister that it is worrying to see the threshold at which HMRC intends to pursue fraud actions raised because it does not have enough legal resources. It is also worrying that the extra money released by the Government in the spending review is not currently being used because HMRC cannot work out the training programmes that are required to get individuals up to speed for work on tax avoidance and evasion.

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[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the right hon. Member for Barking (Margaret Hodge) and I join the congratulations to the right hon. Member for Oldham West and Royton (Mr Meacher) on securing this important debate. I have spent a lot of the last few months debating tax—it came up in the Finance Bill and at various other times—which shows how important it is. I promise that I will not list any Take That songs to embarrass celebrities who seek to avoid tax. I got enough flak for that the last time I tried it.

I agree with hon. Members who have spoken that it is absolutely right that the Government do everything they can to minimise tax evasion and avoidance. All hon. Members want everyone to pay the amount of tax they fairly owe, because that reduces the burden on everybody who does so. It is right that the Government take every step they can within the legal powers they have to ensure that that happens.

Hon. Members have discussed how much the tax gap is. The last HMRC figures say that it is £35 billion. I have served on the all-party group on beer, which has inquired into measures to tackle beer duty fraud, so I have been through in some detail the weakness of tax gap calculations. The same issue came up in the Select Committee on Northern Ireland Affairs, which has had an inquiry into fuel duty. There is a problem in calculating how much revenue we do not have—we do not get the revenue, so it is quite hard to know what it would be—but I suspect that £35 billion is not a million miles off either way. I fear that the figure will have increased in the last tax year. I am told that if we look at the difference between 2008-09 and 2009-10, we see that the big reduction was in the loss of VAT, which was probably caused by the slight lowering of the VAT rate. Obviously, the rate has gone up since, so the tax gap will probably have increased slightly.

A report has shown that the UK tax gap is one of the lowest in the developed world—it is about 14% of tax revenue. I believe the gap in the US is somewhat higher, so it is not as if we are the worst in the world or have the weakest regime. We might even have one of the best.

It is important to understand that the tax gap is not entirely due to complicated tax avoidance or deliberate tax evasion. Much of it is innocent error and people lacking care in filing their returns—they do not actively seek to get it wrong. Measures to tackle avoidance or evasion will not close all £35 billion of the tax gap. There is not much we can do to get tax off someone who has gone bankrupt. Perhaps we could do more to prevent the amount of tax they owe from building up that high, but there will always be some loss when a business goes bust before paying its taxes. So we will not get that £35 billion down to zero—this will not be the panacea for the Government’s deficit problems—but it is right that we seek to get it down as low as possible.

I commend some of what the Government have done. Only this week, we saw a press release from the high tax unit showing that it was well ahead of its target and had already saved the Exchequer £500 million. The Government have adopted the right strategy, building on that of the previous Government, to deal with tax avoidance: they get in the disclosure of these ridiculously aggressive schemes, which ought to be closed down, and then they close them down. Then the strategy is to improve and tighten tax legislation for the areas most under threat, so that those opportunities are not there.

I am not convinced, however, that a general anti-avoidance or anti-abuse rule is the right way to go. I have concerns that it would contravene the rule of law. We, in Parliament, should pass laws that are clear, so that everyone understands what the law is, and then we can expect taxpayers to follow it. And if they do not, they can be severely punished. The problem with a general anti-abuse rule is that it allows the Revenue to say, “Okay, maybe you’re within the law, but we don’t think the law should have said what it said, so you should’ve been outside the law, even though you weren’t, and so we’re going to punish you.” I am not sure that we would want to give that power to a state agency in any other field of the law—the power to enforce not the law as we set it but the law as it might think we ought to have set it.

However much we stretch the general anti-abuse or anti-avoidance rule, fundamentally we are saying that the Revenue can tackle abuse that ought to be tackled by saying, “Ignore what Parliament says. Produce something that you think it should have said. And then enforce that.” I worry that that is a step too far—not that most of the people who would be caught would deserve anything less than they get, but the Revenue would be able to raise that stick against all manner of innocent individuals and businesses as well.

I worked as a tax adviser before entering this place. I can assure hon. Members that I was drawing up advance agreements on transfer pricing. I was not engaged in any naughty tax avoidance of any kind. Revenue Inquiries, in using its powers, writes, “Please send me this information. I think this doesn’t work as you say it does. By the way, if you don’t agree, I’ll have to use the general anti-avoidance rule.” And we have this stick being wielded in all manner of innocent situations in which businesses or individuals have got themselves into a complex situation where tax law is not clear, especially if there are a lot of transactions involving overseas parties.

Those individuals might be making perfectly sensible commercial attempts to apply the law as they think it is. They might not be trying to avoid tax but might be trying to be fully compliant, so the possibility of having that stick held over them and being told, “If you don’t pay up, we’re going to throw all these huge things at you,” will rightly concern lots of businesses around the country. We risk using a large sledgehammer, missing the nut and just increasing the burden on taxpayers. We have to look at the downsides of our tax regime appearing too unfriendly and uncommercial. How much investment will we lose if international businesses and individuals think that this is not a great place to do business? We have to be careful, therefore, about how much power we give the Revenue to apply its own interpretation of the law, rather than getting Parliament to do it.

[Simon Hughes]

I understand all the arguments and have seen the reports about general anti-avoidance measures and so on. Is there not the principle, however, that we should expect everybody, whether individuals or corporate bodies, to pay in tax at least a certain percentage of their profits every year to the Revenue—whether 20%, 25% or whatever—so that people know that they will not be allowed, by clever ruses, to avoid a minimum obligation to the state in which they live and work?

[Nigel Mills]

I thank my right hon. Friend for his intervention. Although that idea sounds attractive, and although various regimes around the world have minimum profit taxes and things like that, it would add huge complexity to our already too complicated tax regime. What we want is for people to be easily able to work out what tax they owe and then to pay it.

I have tabled amendments to both Finance Bills while I have been here to make the tax regime simpler, so that companies can get their tax profit much closer to their accounting profit. It should be much easier for them to know what tax they ought to pay, and if they have made an accounting profit, they ought to pay tax on it. That kind of reform would be a far better way of going down this line and making the transparency agenda much clearer. We do not need most of the complicated adjustments, reliefs or allowances that were introduced, probably to support well-meaning ideas, over the last 150 years. Our regime is far too cumbersome. It incentivises things that we do not mean to incentivise and penalises things that we probably ought to encourage. If we moved to a much simpler, flatter regime, where what a business reports as its accounting profit is pretty much what it pays tax on, that would be in everyone’s interest. It would reduce avoidance and make it a lot easier for business to comply and a lot easier for the Revenue to see that there was compliance, so that the Revenue’s resources could then be focused on tackling avoidance and evasion, which is what we ought to see.

I would like to use my remaining time on a report published quite recently by the RSA called “Untapped Enterprise”, which I would recommend Members read. It looks at how we can try to move people out of the informal economy and get them to be fully compliant as employers and taxpayers. The RSA’s research and the conclusions it reached are quite interesting. The report says that a significant proportion of new entrepreneurs feel that they need to stay in the informal economy while they test out their business and see whether they can make a profit on it, because they know that once they get caught by all the tax compliance and other reporting requirements, that can take up so much time and money that they might not be able to get their business off the ground at all. Most of them do not stay in the informal economy because they want to avoid tax; rather, they just want to focus on running their business.

Some of the ideas in the report for tackling the hidden economy are quite interesting. It makes the point, which has been raised in the debate, that we need to nurture the concept that paying tax is right and moral, that we get proper value for public services from doing so and that everybody ought to be doing it. The last thing we want to encourage is a situation where people think the Government are against them, that the taxman is an enemy or that avoiding tax is a perfectly sensible, reasonable thing to do because they think, “It’s them versus us,” or, “Every penny I can save is a good thing.” We need to make the case that paying tax is the right thing and everyone should do it.

While I am on this subject, I agree that we need to reform the non-dom rules. I cannot see any justification now for saying that because someone’s father was born outside the UK they do not have to pay full tax, even though they have lived here for 30 years. There should be a cut-off at, say, 10 years, so that once someone has been here for 10 years as a non-dom, they lose their non-dom status and have to start paying tax on their worldwide income. That would be a fair compromise between not discouraging people from coming here in the first place and getting our fair share of tax out of them.

The report also sets out the need to simplify the formalisation procedure. We need to make it simple for people to register their businesses for tax and to start paying. It needs to be simple to work out how much tax is owed. Let us not have people making the excuse that they did not pay tax because they did not know how much they were supposed to pay.

My final point is that we are moving towards a cashless society. It ought to be harder for business to be informal, because it is becoming more difficult for people to pay cash—indeed, I do not carry around a large amount of cash to pay for things with. That should move us in that direction, but we should also say to consumers, “Don’t pay people in cash; don’t encourage tax avoidance.”

--- Later in debate ---

[Stephen Williams]

It was the Bob Crow bit that I missed. That may be a fair point, but I would not put Graham Aaronson on the same moral plane as Bob Crow; I do not think that Mr Aaronson has held the public to ransom at various points. However, poachers do often make good gamekeepers. The Government commissioned the report and are acting on it, and they should be commended on doing so, given that the previous Government did nothing to put that in place.

We have talked about the domestic scene, but I wish to say something in passing about our obligations abroad to the developing world. During debates on this year’s Finance Bill, I mentioned how the rules tightening up on controlled foreign companies—that is fine, as it is our responsibility to secure our own tax base—will have unintended consequences for developing countries. It is for the Treasury to work in close concert with the Department for International Development to ensure that every time we change our tax law, we think through the implications that that will have abroad. In addition, some of our expanding aid budget should be expended on training overseas Governments to build up their expertise to make sure that they are able to levy taxes effectively and collect them from the multinationals operating in their countries. I know that a coalition of charities, including Christian Aid, is going to campaign on this issue later this year. I have been working with them, and I look forward to continuing to do so throughout the rest of the year.

[Simon Hughes]

Will my hon. Friend also encourage the Government to examine anti-avoidance measures involving offshore territories such as those that have been started in countries such as Finland?

[Stephen Williams]

My right hon. Friend makes a good point. I think that there is a duty on Parliament to make sure that we are clear about our intentions and clear about what is wrong, and on the Government to allocate the resources to catch the people who go beyond the rules.