Stella Creasy
Main Page: Stella Creasy (Labour (Co-op) - Walthamstow)Department Debates - View all Stella Creasy's debates with the HM Treasury
(7 years, 3 months ago)
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John Redwood
The idea is to provide a better-quality service, applying modern technology and techniques to serve those who need the scheme. I am sure that the Minister will be interested in any detailed criticisms the hon. Gentleman may have. This Government have spent a lot of our public money on dealing with abuse on the tax side, because they rightly believe that we should be fair, crack down on tax abuse and ensure that people do not cheat the welfare system. Neither is a good thing to do. If we want a sensible financial balance, we should surely be fair to both sides by ensuring that we are not cheated out of public money and that we are not short-changed by people who break the law on tax.
Stella Creasy (Walthamstow) (Lab/Co-op)
The right hon. Gentleman was waxing lyrical about corporation tax earlier. Of course, private finance initiatives—with companies that Members on both sides of the House have concerns about—have been beneficiaries of the Government’s changes to corporation tax. Those companies benefit from the lower corporation tax espoused by the right hon. Gentleman, even though they signed contracts with the Government to pay a higher rate of corporation tax that was part of the value-for-money assessment for those contracts. If he wants to get the money owed to the public sector, does he recognise that corporation tax may need to be amended in certain ways and with some companies to reflect that?
John Redwood
The hon. Lady is very brave to mention PFI because that was a failed experiment by the Labour Government, who got through an awful lot of public money needlessly by not doing good deals with the private sector and not understanding that they had to be more careful in the kinds of contract they signed.
Stella Creasy
I welcome the right hon. Gentleman’s concerns about PFI. I would like to hear him talk about Private Finance 2, which is this Government’s proposal, including £23 billion of infrastructure investment that will be done under the same contracts, and which therefore faces the same challenges. Many Labour Members recognise the need to deal with PFI. I would hope to hear the right hon. Gentleman—a man who has been so proud of the role of corporation tax—deal with them equally rather than avoid the question. I am sure that his constituents would like that too.
John Redwood
I did not avoid the question at all. I pointed out that most PFI contracts were signed under the Labour Government. When I was a Secretary of State, I remember being offered a PFI route to financing a new hospital. I looked at the numbers and did not think they worked, so I said, “I’d rather finance it in the normal way by public borrowing because that would clearly be cheaper and give us more control.” That was a bit of a surprise to my officials but they quite liked the advice I gave them on the subject. It is the job of a Minister to understand these things, but a lot of Labour Ministers did not understand the contracts they were signing, and those contracts had weaknesses. If the hon. Lady has problems with contracts that Ministers are currently signing, it is her job as an Opposition MP—she will not be shy about doing this—to give chapter and verse. She has not been specific, but we do not have time to turn this into a debate about individual contracts. I am sure that my ministerial friends, particularly in the Treasury spending department, would be very interested to hear where she thinks they have gone wrong. However. we probably need to move on.
Stella Creasy
I thank the right hon. Gentleman for giving way again. I am pleased to hear his concerns. I note his intention to increase public sector borrowing. I repeat that the Government are talking about £23 billion of infrastructure spending financed by this Bill. They are looking at PF2, which is “exactly the same” as PFI. They are not my words, but those of the National Audit Office. Will he join me in supporting amendments to the Bill to ensure that those companies pay their fair share of tax and the public sector gets the money it deserves?
John Redwood
I have no evidence that makes me believe they will not pay their fair share of tax. I am sure that my ministerial friends have heard the hon. Lady’s point and will look carefully at the issue. It is good that a lot of our future infrastructure programme will be privately financed, but I always apply a simple test. If the thing is going to be privately financed, I want to ensure that the private sector is bearing significant risk in return for the reward it wants to earn. I do not like phoney PFIs, whereby the private sector cajoles the public sector into taking all or most of the risk while giving a higher reward than one would get on a normal Government bond in order for the contract to be signed. There were quite a lot of those under the Labour Government and the taxpayer is much the poorer as a result. It is part of the reason that we did not get the gains in public sector productivity that we would like to achieve. If we do not discipline the big investment spend, we do not drive forward the productivity gains that we clearly need to make across a large public sector.
In conclusion, the best way to raise the extra money we need to pay wages and improve public services—an aim that is shared across the Chamber, contrary to Labour’s belief—is to drive further growth in the economy so that more people are in jobs to pay tax, and so that more companies are doing things here and making profits here on which they can pay tax. We need a series of tax rates that are not too complicated and that are low enough to be sensible so that we are internationally competitive. Then individuals and companies will have every incentive to do more, invest more, work harder and work smarter in order to carry the economy forward. I trust that is what my hon. and right hon. Friends will be doing.
I do have some worries about the length of modern Finance Bills. It is useful to have another doorstop, but it is a bit of a barrier to our reading every page and giving it the credit that it undoubtedly deserves. It would be good to see whether we could have a period of fewer and simpler taxes so that we do not need quite so much language in Finance Bills. It would also certainly be good to look at what one can learn from the success of raising more revenue from richer income tax earners by going from 50% to 45% and getting more revenue out of companies by going from 28% to 19%. We could apply that principle more generally to other taxes because we would then have a win-win situation. We would have more money for our public services, more economic growth, more people in jobs and more people keeping more of the money they earn. That might make for happier constituents, and that is my main aim in being here.
Mr Harper
I am grateful to my hon. Friend for that intervention. By the way, Madam Deputy Speaker, I did not think that it would be out of order for me to make some brief remarks about something other than the Finance Bill, given that the Opposition Front-Bench spokesperson spent 10 minutes talking about yesterday and the hon. Member for Aberdeen North spent quite some time doing the same.
Let me move on to finance and the essential capability of the Bill, which is, of course, to raise revenue. My right hon. Friend the Member for Wokingham (John Redwood) talked about that, and of course the central point is about balancing the public finances. I shall not talk about that at length because I was fortunate enough to secure a Westminster Hall debate on the subject which, much like today’s, was well attended, with more than 20 Conservative colleagues and only one Opposition Back Bencher, the hon. Member for Islwyn (Chris Evans). To be fair to him, he spoke extremely well, but he was the only Opposition Back-Bench Member to speak in that debate, which demonstrated that when it comes to balancing the public finances, Opposition MPs are very good at spending money, but not so good at thinking of ways of balancing the books and ensuring that we have sound public finances. That is important because the sound public finances that the Bill helps to put in place will ensure that the country continues to grow and that we can continue to deliver pay rises for people across the country.
Stella Creasy
I want to take up the right hon. Gentleman’s challenge. I am sure that he is proud that the previous Government, of which he was part, extended capital gains tax to residential property sales for non-domiciles, so will he join me in suggesting that we close the loophole on commercial property sales? There is one idea that could raise some money for investment in this country.
Mr Harper
I am very pleased that the measures in this Bill, which Opposition Front Benchers seem so unwilling to support, raise something like £1.6 billion—I am sure that the Financial Secretary will correct me if I am wrong—on top of the £1 billion we have raised from non-doms. Put together, that is £2.6 billion, which is more than the Labour party raised in all the time it was in government. If the hon. Lady compares Labour’s record in government with ours, she will see that we have been much more effective in raising taxes from non-doms to spend on our public services than her Government ever was.
Wes Streeting
Imagine lacking both!
The right hon. Gentleman is absolutely right to say that we need more international co-operation if we are to curb the excesses of multinational corporations’ power. Does he therefore share my sadness that we are currently driving a coach and horses through the most sophisticated political and economic alliance in the history of the world—the European Union—which gives us that global power and the leadership to tackle those global excesses?
Stella Creasy (Walthamstow) (Lab/Co-op)
I congratulate the hon. Member for Moray (Douglas Ross) on a wonderful maiden speech. He paints a fantastic picture of a part of the country that I have yet to visit and that clearly has many delights to try, although, on his advice, I will pass on the home-made scones, if I may.
May I offer the hon. Gentleman some advice, as somebody who has been here all of seven years? He will find watching “Monty Python” a very useful guide to what goes on in Parliament. Sometimes this Chamber can feel like the argument clinic, where some people have been paid to argue. The Brexit Secretary also appears to be taking his lead from the Spanish inquisition in his approach to the negotiations, and he is equally effective. Ultimately, Brexit is really like the big Monty Python foot, slamming down on everything we do in the Chamber in this Parliament.
That is why this Finance Bill is so important and why I look forward to the many hours we will spend debating it in Committee. It is vital that we do not let Brexit deter us from dealing with some of the many problems we have in our country. The test we must therefore set for all proposed legislation in this House is, does it progress the needs of our communities and our country? I have to say that I find this Bill wanting in many different ways. The Government seem to have an economic plan based on personal debt, not UK productivity.
This week, I heard the Chancellor desperate for ideas. I want to be a helpful contributor to this House and to our debates, so in my speech today I shall set out for Ministers—I hope they will listen to some of our ideas—some suggestions on how we could get this country on to a sound economic footing. One of the Ministers is a former sparring partner of mine on the Public Accounts Committee, so he will know my personal commitment to value for money for the British public.
However, we first need to understand the context in which the Finance Bill is proposed—how we got to this position, why the legislation represents so many missed opportunities and why my colleague from the Scottish National party, the hon. Member for Aberdeen North (Kirsty Blackman), was right to talk about people feeling the squeeze. We know that for many of our constituents there is too much month at the end of the money. Therefore, when we are looking at tax measures, we are looking at how we might help our constituents, and we have to ask first about those who will bear the brunt of a Government who do not do things to tackle the impact on their lives of rising inflation, stagnant wages, low productivity and, indeed, that Brexit Monty Python foot.
Our country has an eye-watering £200 billion of personal debt. In every single legislative measure we make we must ask what we are doing to reduce that debt, because the consequences for so many are so great. My concern is that that debt is so high because the Government are balancing the books out of the pockets of our constituents.
In 2010, I sat on the Opposition Benches—a new MP, like the hon. Member for Moray—and listened to a Chancellor promise that the deficit would be eliminated. In 2016, I read the note from the Office for Budget Responsibility that recognised that the Government had broken their own deficit rule. The hon. Member for Moray talked about being a referee. We are not even on yellow cards with this Government as regards economic competency—it is a straight red card, as far as I am concerned.
Previous Chancellors have claimed time and again that they would get a grip on the public finances. Time and again, they have moved the goalposts. They changed the targets in 2014 to 2017 for eliminating the debt. In 2015, they changed the target to running a surplus in normal times by 2020-21. Then, in 2016, they changed the target again to reduce net borrowing to below 2%. Now, in the Tory manifesto, it has changed to 2026, and we are hearing that in the autumn Budget it could be changed to 2027. Last year we borrowed £52 billion, and it is expected that this year we will borrow another £60 billion. So forgive me, but I will not take any lectures from Government Members about fiscal responsibility. If, in these seven years, you had been on a business board and the finance director had come to you every single year, as Conservative Chancellors have, asking for more money because yet again they have not got to grips with how they were spending it, you would sack them. That is certainly what I hope the British public will do.
At the same time as we are borrowing more and failing to tackle the debt, our productivity is worse. I agree with the right hon. Member for Forest of Dean (Mr Harper), who is sadly no longer in his seat, that this is a challenge we cannot ignore, whatever is going on in Europe. A typical French person need only work Monday to Thursday compared with a typical Brit, and it is the same for Germany, which has a 29% higher GDP per hour than the UK. We have seen a lost decade of productivity in this country, and our communities and businesses are paying, so that we are now in an extraordinary position where it is more expensive than ever before to employ somebody, despite the squeeze on wages. Stagflation is upon us. Inflation is up by 12% since 2010, but wages are down by 6%. It is little wonder that so many in our communities are borrowing.
When we come to legislate on income tax or on the increasing numbers of people who are self-employed—the small business owners whom we all cherish in our communities—let us ask what we can do to help them. Let us not be blind to these challenges, or to the inequality that is stubborn in our country. During this time, the people who benefit from many of the measures in such legislation have done rather well. In 2000, FTSE 100 chief executives were paid, on average, £1.4 million a year. Now, it is £4.5 million—a 220% increase. That is not market forces, but it shows a failure by us as a country to invest in people. Our productivity reveals that challenge, and the personal debt of our communities is paying for it.
Ministers may ask what I would do to raise money—we have heard that question before—so let me give them some examples of things that we could put into this Bill. We could, for example, look at clause 16 on capital gains tax. Earlier I asked Government Members whether they might join me on this. After all, there has been much talk about tackling the issues of non-doms. Indeed, the previous Chancellor changed the legislation to put capital gains tax on to residential property sales, but now there is a loophole around commercial property sales. Let me reassure Government Members that if they choose to follow our advice on this matter, it has been tackled in the United States, in Canada and in Australia. It is not crazy economics but sensible planning.
We could apply the same rate of tax on carried interest to hedge fund managers. Why are they not paying the same rates of income tax as the cleaners who clean their offices—still, on this Government’s watch, seven years on? We could change business property relief, too often used to avoid inheritance tax, restricting it to small businesses and perhaps bringing in a cap of, say, £5 million, so that people do not use that to avoid taxation. We could deal with commercial real estate in cases where people are avoiding the 5% stamp duty by putting it into companies. Those are all things that could be put into clause 16 to raise money and to be fair about who is paying all the taxes that are avoided.
Clause 69 talks about gathering information. We should be dealing with the information about the debts that our communities are based around. Forty-one per cent. of consumer debt is on credit cards. Hon. Members should talk to the people in their communities who are now called zombie debtors, paying the interest but not the capital on the money that they owe. They are borrowing to stay afloat because their wages have not risen, and they are borrowing for basics—to put food on their table, to keep a roof above their head, and to put petrol in their car to get to their jobs where they are not getting the pay rise that they deserve. Nothing in this Bill will tackle the squeeze on them from that debt or help the third of people who are now in debt because they are behind on credit card repayments. Clause 69 could introduce an FCA consultation, as despite the fact it is looking at credit card debt it is not considering the lessons that Ministers could learn from the cap on high-cost credit companies. When some people are paying £2.50 for every £1 they are borrowing in this way to stay afloat, it is time to extend the cap on high-cost credit and payday loans to credit card companies. We could do that in this Bill; we could certainly gather the information on the impact it would have.
We could also look at the creditors we as a country owe. Members on both sides of the House will know of my interest in private finance initiatives and my recognition that Governments of all colours have used them and continue to use them. I note that Ministers have talked about the £23 billion they wish to invest in infrastructure and I am sad that the right hon. Member for Wokingham (John Redwood) is not in the Chamber given the concern we share about whether private finance is the best way to do that. Of the additional money put into the NHS in the spending review, 22% will leach out to PFI companies as profit, and every constituency in this country has one of these deals.
Let me give an example of the kind of money we are talking about. The company that owns University College Hospital in London has made pre-tax profits of £190 million out of the £735 million that we as taxpayers have paid it. That is enough money to build another hospital outright. This country now owes £300 billion in PFI debts on projects that should have cost £55 billion. Nobody in this House can be smug about PFI. When PF2 is as expensive and the preferred model for how the Government intend to invest in infrastructure, Members on both sides should be asking whether their communities can avoid such contracts.
With eight companies owning 92% of the equity stakes in the hospital sector, there is certainly more work to be done to look into them. Indeed, the Bill gives an exemption to the very companies for the interest that they pay on shares. These companies signed deals with the public sector to pay a certain rate of corporation tax and to commit to paying UK taxes. Indeed, the value for money assessments of the deals was predicated on that, and I note that the Government have not updated the value for money deal to take account of this information from 2013, despite promising more than four years ago that they would.
Schedule 10 to the Bill allows those companies to claim back the interest without the cap. How can we, as a society, give these companies more money through that investment relief as we see our public sector struggling and that money being leached out of it? Surely we should change that, and I hope that Members from all parties will listen and support changes to proposed new section 439.
While Brexit is a Monty Python foot, for many of our small businesses VAT is their biggest compliance issue. Many of them trade in Europe and therefore have to reclaim VAT from other countries. The clock is ticking for us to leave the European Union and the lack of information in this legislation about how companies will manage VAT post-Brexit is alarming. In particular, articles 170 and 171 of the Council of Ministers’ 2006 directive—I hope that the Minister is writing this down—are matched by section 39 of the Value Added Tax Act 1994. That allows companies in Britain to seamlessly reclaim VAT through intra-EU legislation. Those options will be gone for our companies when we leave the European Union unless we have alternative arrangements, so when the Government are making legislation through part 4 of the Bill on VAT, the lack of any correlation between the 14th directive and the importance of aligning those measures so that businesses have a seamless transition and can be confident that they can manage their VAT if they trade with other countries is very frightening.
Mel Stride
The hon. Lady’s point about VAT and the arrangements that may or may not pertain when we leave the European Union will be dealt with in the upcoming customs and excise Bill.
Stella Creasy
I thank the Minister for that point, but obviously the Bill is about Making Tax Digital and the intra-EU process is digitised. That is what makes it so seamless for so many companies. When we are making legislation about making VAT a digital entity and working online, surely we should be joining these things up to make it as easy as possible for our constituents who have to deal with these issues, rather than separating it out. My point is simply that this Bill is now coming towards the House at the same time as those negotiations are happening. Our constituents deserve clarity on how these things are going to work together.
That applies particularly to our self-employed constituents. Clause 64 could help many of them who have to deal with the errors relating to their welfare entitlement and their tax entitlement. We know that 18% of self-employed people get tax credits, compared with 10% of people who are employed, yet there is nothing in the Bill to help them. I am sure that my colleague—another gentleman from the SNP, whose constituency is I am sure as beautiful as Moray but unfortunately I have forgotten what it is—would agree that we could help those people through this legislation by joining up the way in which the state works with self-employed people. Issues such as how they deal with VAT, with universal credit and with insurance will all be covered in the Bill, but there is an absence of ideas from the Government on how to help those people.
The Government also seem to be overlooking some of the poorest people in our society. I know this because, 18 months ago, I took part in the consultation on tips, gratuities and service charges—the disguised remuneration that the Government are so concerned about—yet, 18 months on, we are no further forward on finding out what the Government are going to do to prevent some of the poorest workers in our retail industries from being ripped off by employers who dip into their tips and use them to prop up their businesses. I have given examples of this to the Treasury and to HMRC, and these issues could have been dealt with in this Bill, but there is nothing there. There is nothing in the Bill to protect workers who get their tips through an electronic system or to ensure that their employers are not taking a surcharge from them. There is nothing in the legislation that even gives a legal right to a payslip—a very basic piece of information that would help to stop those people being exploited.
Those 10 ideas reflect the things we could have done, through this Bill, to help the poorest hard-working people in our communities who will be stamped on by that Brexit “Monty Python” foot. I look at the gaps in the Bill and at the ease with which non-doms will slip through the loopholes, and I see a Government who are not only running out of ideas but running out of road on Brexit. God willing, with the work that we will do, they will also run out of time soon.