Oral Answers to Questions
Stephen Williams Excerpts(11 years, 2 months ago)
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Sajid Javid
Perhaps the hon. Lady missed it, but we have made sure that the people who earn the most in our society are making the biggest contribution to the necessary measures we have to take to make sure that the country lives within its means. In each year of this Government, the richest will pay a higher tax rate than under the Government she supported.
Stephen Williams (Bristol West) (LD)
Does the Minister agree that, come next April, a family where both parents earn wages will be £1,400 better off than they were in 2010, and that a child of theirs who works on the minimum wage—perhaps in the city centre of my constituency—will be lifted out of income tax altogether?
Sajid Javid
My hon. Friend is absolutely right. That is a big boost to family incomes. In fact, someone on a minimum wage who is working full time will find that their tax bill is more than halved as a result of this Government’s policies.
Corporate Structures and Financial Crime
Stephen Williams Excerpts(11 years, 4 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
I congratulate the hon. Member for Bassetlaw (John Mann) on securing the debate. It has been wide-ranging, but I will focus my remarks, at least to begin with, on the issue that he focused on most, which was company misuse. If I have time, I will address other issues that were raised, such as tax avoidance, although to be fair we had a debate on that a week ago.
I am pleased to address company misuse because, as my hon. Friend the Member for Banbury (Sir Tony Baldry) rightly pointed out, the Prime Minister has demonstrated leadership on this issue on the international stage. The Government are committed to tackling illicit activity and the misuse of corporate vehicles to facilitate such activity, and we are well aware of the impact such things have on the UK and the global economy. Such misuse is made possible because companies can be used to hide who is really in control and who is the beneficial owner. Hidden beneficial ownership to facilitate criminal activity is a long-standing issue, and international standards have proved difficult to implement effectively for many jurisdictions. For that reason, the Prime Minister put tackling that issue at the heart of the UK’s G8 agenda. I am sorry that one or two right hon. and hon. Members have been less than generous in recognising that.
Stephen Williams (Bristol West) (LD)
At Lough Erne it was agreed that each of the G8 countries would come forward with a national action plan for implementing the agreements made there, which for the UK will hopefully include the Crown dependencies. Have the Crown dependencies come forward with their draft plans, and do they include commitments to publish registers of beneficial ownership?
Mr Gauke
It is perhaps worth saying a word or two about the Crown dependencies because they have received criticism during the course of the debate. There is nothing illegal about an international structure, especially in a globally integrated economy, but what must stop is the use of offshore structures to hide assets and income illegally, and to evade taxes. The overseas territories and Crown dependencies have all committed to automatically sharing information to fight tax evasion, and to producing national action plans to set out how they will improve beneficial ownership transparency. The Crown dependencies have already published their plans, and the overseas territories have committed to do so by the end of the year. This is a significant step forward in transparency, and we will continue to work closely with the overseas territories and Crown dependencies to ensure that the action to which they commit is robust and ensures the effectiveness of their systems. It would be a pity for this debate to give the impression that we do not acknowledge the significant progress made in recent months.
Returning to the G8, there was collective action to improve transparency of beneficial ownership and make it easier for law enforcement and tax administrations to fight company misuse. The G8 have committed to a set of common principles, and each member has committed to publish a national action plan. The US, France, Italy, Japan, Canada and the UK, as well as the Crown dependencies, have published their plans already, and Germany and Russia have committed to do so before the end of the year, along with the overseas territories.
The G8 action plan means a number of things for the UK. First, we will legislate to ensure that all companies know who owns and controls them. Companies will be required to obtain and hold information on their beneficial ownership—a requirement that will make it harder for criminals to hide their identity, and easier for law enforcement bodies to trace company misuse. Secondly, we will require that information to be held centrally at Companies House and made available, at a minimum, to law enforcement and tax authorities. Again, that will enable law enforcement and tax administrations to track down beneficial ownership information much more quickly. It will also help us develop better working relations with our international counterparts, by responding to their requests more quickly during cross-border investigations. To address the point raised by my hon. Friend the Member for Wells (Tessa Munt), it is important that law enforcement agencies and tax authorities co-operate on such matters.
We will also consider whether that information should be made publicly accessible. Although there would be significant advantages to such an act, such as enabling greater scrutiny of the accuracy of the information and allowing investors and others to understand better with whom they are doing business, there would also be legitimate concerns about individual confidentiality and whether the information would always be used in the right way. The case of companies involved in animal testing raises an interesting point. Hon. Members may be interested to know that we have committed to consult on this issue.
Thirdly, we will be looking at what measures can be taken to mitigate the misuse of nominee—or sham—directors and bearer shares. The fact that both are currently allowed to exist is inconsistent with our desire to know who really owns and controls UK companies, so the Department for Business, Innovation and Skills will be issuing a public discussion paper on these precise issues shortly, setting out a number of options for reform.
I turn now to the issue of Companies House, which was raised by the hon. Member for Bassetlaw. The House will be aware that the core function of Companies House is to receive company information and make it available to the public, and a key part of this is ensuring that accounts and annual returns are delivered for every company. Compliance rates for those documents—97.9% for annual returns and 99% for accounts—are the best they have ever been and are amongst the best in the world, but we will continue to consider additional means to ensure that companies comply with all their statutory filing requirements.
For example, in response to calls for more transparency about the extent of company subsidiaries in tax havens, my right hon. Friend the Secretary of State for Business, Innovation and Skills has asked Companies House to check the accounts of all FTSE 350 companies for the disclosure of overseas subsidiaries information. Hon. Members may be interested to know that Companies House will publish the findings on this at the end of July.
On HMRC, there are legal remedies to stop taxes being avoided or evaded through dissolving companies without payment that HMRC makes regular use of. As an example, HMRC frequently requests restoration of companies to the register and then liquidates them, an act that allows liquidators to pursue directors for misfeasance and other wrongdoing. As a Government, we have reinvested in HMRC significant sums to deal with tax avoidance as a whole.
We are short of time and I am unable to address issues such as the general anti-abuse rule and the wider issue of tax transparency, but I am grateful for the opportunity to set out the Government’s commitment to dealing with opaque company structures that facilitate financial crime. It is thanks to the Government that this was put on the agenda for the G8 and that countries around the world are setting out action plans to deal with beneficial ownership. It is why there is a much greater exchange of information between jurisdictions now than we have seen before. We have a proud record in this area and I am grateful for the opportunity to make that clear.
Investing in Britain’s Future
Stephen Williams Excerpts(11 years, 5 months ago)
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Danny Alexander
I am grateful to the right hon. Gentleman for his comments and of course I will do that. That is why we have funded the local growth deal under the Heseltine recommendations, and this road investment will also help to unlock port facilities for greater use, for renewables among other things.
Stephen Williams (Bristol West) (LD)
My right hon. Friend has made a sweeping series of announcements that will be felt in every community around the country, in particular the investment in rail infrastructure. As well as that renewal of Victorian infrastructure, however, does he agree that his announcements on science, superfast broadband and low-carbon energy are paving the way for the hi-tech, low-carbon future?
Spending Review
Stephen Williams Excerpts(11 years, 5 months ago)
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Mr Osborne
I inherited from the last Chancellor a plan greatly to reduce capital spending—to cut it by 50%. In the 2010 review, we increased it from the plans we inherited. We increased it in the years since, and now we are maintaining it in the years going forward and setting it out for the rest of the decade. So the big reduction in capital spending that the right hon. Lady refers to is one I guess she must have supported, because she was a Minister of that Government.
Stephen Williams (Bristol West) (LD)
We all know that if we try to live a £40,000 lifestyle on a £30,000 salary, it soon leads to misery unless corrective action is taken. That was the legacy, at a national level, that we were left by the last Government. Despite that tough backdrop, have not this coalition Government secured funding for the national health service and for schools, including more money for children on free school meals, and today announced a massive boost to infrastructure spending and scientific research in order to smooth the way to sustainable economic growth?
Mr Osborne
My hon. Friend is right, and in the end this is about choices. I say to all the Labour Members getting ready to ask questions that, given that the Labour leader says that he will take these resource plans as a starting point, if they complain about any cut, they have to suggest what else they would cut. We have made choices as a Government. We have committed to protecting the NHS, committed to schools, committed to the pupil premium—we have done these things because we want a fairer society, and we also believe that investing in infrastructure and growth enhances our country’s economic performance. Those are our choices: if people have an alternative plan, we have not heard of it.
Oral Answers to Questions
Stephen Williams Excerpts(11 years, 5 months ago)
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Danny Alexander
A vast number of projects are under way, and a vast number of projects are in the pipeline to start, where work and planning permission are going on. These projects are being delivered up and down the country, and I have to say to the hon. Gentleman that he should show a little humility in this matter. After all, this Government are investing a greater share of our nation’s income in infrastructure during this Parliament than his party managed during its 13 years in office.
Stephen Williams (Bristol West) (LD)
I look forward to my right hon. Friend’s announcements about infrastructure on Thursday, but already on my weekly journeys from Bristol Temple Meads to London Paddington I can see the gantries going up around Reading to provide the electrification of the great western main line. Is it not the case that this Government are already presiding over the greatest investment in railways since the Victorian era, providing a stimulus to the economy in Bristol and all stations between there and London?
Danny Alexander
My hon. Friend is absolutely right, and rather than laughing, the shadow Chancellor should welcome the fact that there is the largest investment in our railways since Victorian times. Electrification is under way, ahead of schedule as my hon. Friend suggests; the intercity express programme train purchase programme will help to improve journey times yet further; what was in our announcements in the autumn statement last year will allow direct western rail access to Heathrow from his constituency and other communities served by that line.
Financial Transaction Tax and Economic and Monetary Union
Stephen Williams Excerpts(11 years, 5 months ago)
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Chris Leslie
The public are sick and tired of hearing more of the same from the Government—no solutions, just reasons for not doing anything differently. It should not need to be restated—although it clearly does for Government Members—that the global financial crisis and the collapse of many organisations in the financial services sector required an enormous bail-out from the public purse. That collapse in revenues led to an extra £300 billion on the national debt. As the Government have failed to turn things around, we can see that many of the consequences are still being felt today by our constituents and that we need to do something different.
Stephen Williams (Bristol West) (LD)
I just want to clarify that my position and that of my party is that a financial transaction tax could make a useful contribution to world development if it were introduced across all the global financial sectors. Is it the Labour party’s position that if the EU proposal, which, as constituted, would affect Paris, Frankfurt and perhaps London, were to go ahead, Labour would support it despite it not also applying to New York, Zurich, Shanghai and everywhere else?
Chris Leslie
I shall set out our position clearly: we do not think that the EU variant of the FTT is optimal. Of course it should be improved. We think there are better ways to design these things and I shall come to many of the arguments in a moment. I am delighted that the Liberal Democrats—well, the one Liberal Democrat who is in the Chamber—support the principle of a financial transaction tax. That is exactly why we phrased the amendment in the way that we did.
Let me read the amendment out so that the hon. Member for Bristol West (Stephen Williams) can consider it carefully, because I am minded to test the House’s opinion on it. We are calling
“on the Government to support the principle of an FTT”—
so far, so good—
“to learn lessons from the EU proposal”,
which, of course, we have to do, and to
“work with other global financial centres, especially the US”,
as clearly New York is central,
“to reach a consensus on a design set at a modest rate without creating negative economic consequences and which minimises international tax arbitrage”.
I am quite sure that in his heart of hearts the hon. Gentleman does not disagree with a single word of that.
Stephen Williams
The shadow Minister is absolutely right: I did not disagree with a single word he read out. It was, however, a selective reading of the amendment, because he left out the first couple of lines, which would leave out the reference to the fact that the Government are challenging the European Parliament’s decision in the European Court of Justice precisely because it affects this country adversely while we do not have global agreement. That is the problem.
Chris Leslie
Oh dear, oh dear, oh dear! The hon. Gentleman cannot seriously be suggesting that he is going to vote against the amendment because we have to leave out the reference to further noting that there is a Court challenge. I would have been quite happy to have tabled an amendment that did not leave out that bit of terminology, but—I am sure that you can confirm this, Mr Deputy Speaker—we did not do so because the Clerks tell me that a motion can only have 250 words. Of course, the Government use up their 250 words in the motion, so we needed to find space to insert the reference to the principle of the financial transaction tax. The hon. Gentleman should trust me: I have been considering the point and I did not want to leave anything out of the motion, but we wanted to put that reference in. I hope that with that assurance, he will think again, because the amendment is eminently supportable.
Royal Bank of Scotland
Stephen Williams Excerpts(11 years, 5 months ago)
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Sajid Javid
It might help the right hon. Gentleman if I tell him that Stephen Hester himself has said in the past 24 hours that, for him, privatisation was the “end of a journey”, and that the board was looking for someone who would see it as the beginning of a journey. He has said that, for that reason, he understands the board’s decision. This is a voluntary agreement and a mutual decision between Stephen Hester and the board. The RBS board has said in its statement that it is looking forward to having a bank that is more focused on UK business and on the inevitable privatisation process.
Stephen Williams (Bristol West) (LD)
A substantial proportion of the Minister’s statement dealt with setting out the generous remuneration and exit package that Mr Hester will receive. I am rather more interested in the package that British citizens will receive when the bank is returned to the private sector in order to recompense them for the different ways in which they have paid for the £45 billion bail-out. Will the Minister confirm that UKFI and the Treasury are seriously examining the idea, which I first promoted in March 2011, that all British citizens should be able to profit from the uplift in the share price when the bank is returned to the private sector?
Sajid Javid
My hon. Friend is right to emphasise the absolute importance of getting the best value for the taxpayer when RBS is eventually returned to the private sector. There are many ways of doing that, and there is an open public debate on the ideas. At this point, however, it is right for me to say that while I welcome open debate, the Government are looking at the options very carefully, and we will set out a way forward after the Parliamentary Commission on Banking Standards has issued its final report.
Economic Growth
Stephen Williams Excerpts(11 years, 6 months ago)
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Mr Michael Meacher (Oldham West and Royton) (Lab)
The Tory party is obviously going through one of its regular hissy fits over the EU. My experience is that it is best not to intrude in toxic family feuds, so I will confine my remarks to the economy.
Support for the Chancellor’s policy has totally evaporated. His intellectual ballast, provided by Reinhart and Rogoff—namely, that growth rapidly declined once a threshold of debt of 90% had been reached—has been blown out of the water. The International Monetary Fund, the citadel of neo-liberal capitalism, has deserted the Chancellor. The British Chambers of Commerce, the Federation of Small Businesses and even the CBI are now openly criticising from the sidelines. The only austerians who are still full square behind the Chancellor are those in the eurozone. I hope he takes comfort from the fact that that paragon of economic virtue is now his last remaining ally. Contractionary fiscal expansion—his policy—is, to use the words he used today, a totally busted flush. It is an absurd oxymoron, as it always was. Once the rate of growth has slowed below the expansion of debt, the policy is doomed, and that is exactly where we are. Given that, it is so counter-productive now to continue with a policy of semi-permanent stagnation that one has to wonder what the Chancellor’s real motives are—apart, of course, from his own personal survival.
The US has put in place demand-creating measures and is steadily coming out of recession. The UK and the eurozone have not put such measures in place and they are slowly sinking deeper into recession. So why is the Chancellor so obstinately refusing to accept what the evidence is telling him? Why is he refusing to accept what even the IMF is telling him to do? The only plausible explanation is that this is not, in the last analysis, a deficit reduction policy at all; it is ultimately driven by the obsession to shrink the state and squeeze the public sector into the farthest recesses of a fully privatised regime. If that is so, crucifying the UK economy on a cross of ideology is hardly a proper way to proceed.
Of course, the Chancellor likes to defend himself, as he did again today, by saying that any stimulus to the economy will only increase the debt and thus make matters worse, but that is simply not true. First, instead of being kitted out for privatisation, the Royal Bank of Scotland and Lloyds—which taxpayers and the Government own 82% and 39% of respectively—could be instructed to prioritise lending for industry, infrastructure, low-carbon technology and key manufacturing niches in which the UK has a natural advantage.
A second option is the taxation of the hyper-rich, who have so far contributed almost nothing to tackling the recession that they largely caused. The latest rich list published in The Sunday Times a month ago showed that the richest 1,000 people—that is, 0.003% of the adult population—have increased their wealth over the past four years since the crash by a staggering £190 billion. That is considerably more than the total budget deficit, and if it were taxed at the current capital gains tax rate of 28%, it could theoretically raise £53 billion.
Stephen Williams (Bristol West) (LD)
I note that the right hon. Gentleman talks about the “current” capital gains tax rate of 28%. Would he like to remind us what the rate was for the last five years of the Government in whom he served?
Mr Bone
May I make a little progress, as I am about to quote the question?
The question is clear:
“Do you think that the United Kingdom should remain a member of the European Union?”
If the Bill is passed, the Prime Minister could try to negotiate a European free trade area or, in other words, a common market, without all the regulations, red tape, and cost, without the EU laws, the European Court, the European Parliament, the Commission and the bureaucracy, without the £19 billion a year it costs just to be a member of the EU, and without the £30 billion-plus trade deficit with the EU each year. However, ultimately I do not believe that these negotiations will succeed, not because of the efforts of the Prime Minister, but because of the attitude of the EU elite.
Stephen Williams
I thank the hon. Gentleman for giving way. I sometimes think there are three parties in the coalition: my party, the Liberal Democrats; the sensible wing of the Conservative party, whose Members serve on the Government Front Bench; and the hon. Gentleman’s wing of the Conservative party. However, my information is that the Conservative party did not ask for this referendum to be in the Queen’s Speech, so I think he ought to have a word with his colleagues.
Mr Bone
It is very good news that the Liberal Democrats have had a change of heart and will now allow the European referendum Bill to come forward in Government time. I appreciate that useful intervention.
In any case, once these negotiations have finished, there will, for the first time in 30 years, be a vote by the people of this country on whether we should remain in the European Union. That will happen no later than the end of 2017, but of course it may be much earlier.
Anyone who votes against the amendment in the name of my hon. Friend the Member for Basildon and Billericay (Mr Baron) is clearly opposed to a referendum on our relationship with the EU. However, if Members vote for the amendment, they are clearly supporting the prospect of an in/out referendum. If the amendment is carried, the House will, in effect, have said that the Government should bring in an EU referendum Bill. It will say to the Prime Minister that the House of Commons supports his position. It will say to the Liberal Democrats, “How dare you block the will of this House and the will of the nation?”
The Liberal Democrats went into the 2010 general election claiming that they would offer an in/out referendum on Europe. On page 67 of their extraordinary manifesto “Change that Works for You”, the Liberal Democrats said:
“The European Union has evolved significantly since the last public vote on membership over thirty years ago. Liberal Democrats therefore remain committed to an in/out referendum”.
That works for me. This change of heart is, even by Liberal Democrats standards, totally absurd.
Now I shall turn to the position of the Labour party. The Labour Opposition promised a referendum on the EU constitution before they were elected, yet as soon as they came to power, they dropped the referendum. On Europe, they are the poodles of Brussels—they roll over and do everything the EU wants, including giving away Mrs Thatcher’s hard-won rebate. They simply cannot be trusted on Europe.
The shadow Chancellor sort of indicated that Labour Members would vote against the amendment today—it was impossible to know what he thought about an EU referendum—but every Member will have to make their mind up. Members who vote against the amendment are voting against an EU referendum—[Interruption.] Colleagues from the Scottish National party will do so, and their position is clear. Labour Members who do so will also make their position clear—they are against giving the people the chance of a say on the relationship with Europe.
A vote for the amendment today would give the Prime Minister the moral authority to bring in his EU referendum Bill as a Government measure. Members of the House should vote for the amendment because it is in the national interest. It is right that after 30 years the British public should have their say on Europe. When Members cast their vote tonight, they should not decide on the basis of party politics. That is not why we are in this mother of Parliaments; we are here to represent our constituents and to put the country first. I know that some principled Opposition Members will support the amendment, and many principled Opposition Members will oppose it, because they do not support having a referendum. One thing is for sure: every Member of this House must vote according to their conscience, and when it comes to the vote, their constituents will know whether they are in favour of an EU referendum or against it.
Richard Drax
I will not give way, because I have only a short time left.
France is a basket case. Outside the EU, the economies of the BRIC nations—Brazil, Russia, India and China—and Asia are growing. In the past few days, President Obama has been encouraging our Prime Minister to fix the relationship with the EU. We have been trying to do that for years and years, but we have not succeeded. We joined the common market to trade with Europe and that is the relationship that we need and must have. Finally, this is not about nostalgia, as I think an Opposition Member has said, but about reality.
Oral Answers to Questions
Stephen Williams Excerpts(11 years, 6 months ago)
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Danny Alexander
I cannot agree with anything the hon. Gentleman says. The truth is that this Government are creating more opportunities for young people to take steps towards work than any previous Government. Let me give an example from the Department of my right hon. Friend the Secretary of State for Business, Innovation and Skills. One million apprenticeship starts—a 50% increase on the previous Government—are creating valuable opportunities for young people to gain experience in the workplace and employment afterwards. The hon. Gentleman should welcome and support those efforts, not condemn them.
Stephen Williams (Bristol West) (LD)
The Archbishop of Toledo might well have been concerned about high rates of youth unemployment in Spain, which are much higher than they have ever been in this country, but does my right hon. Friend agree that, despite the fact that the problem, as he has just said, has been intractable for more than decade, the Deputy Prime Minister’s Youth Contract gives an opportunity for young people to have work experience in the private sector, from which most of the growth and job opportunities of the future are likely to come?
Danny Alexander
I wholeheartedly agree with my hon. Friend. The Youth Contract, which was launched in April, supports 500,000 young people into employment through a range of measures, including an in-work subsidy and access to work experience. Alongside the 1 million apprenticeships that my right hon. Friend the Secretary of State for Business, Innovation and Skills is starting during this Parliament, the Youth Contract offers a range of new opportunities for young people, which are necessary in getting more young people into work, which the House agrees is vital for the country.
Finance (No. 2) Bill
Stephen Williams Excerpts(11 years, 7 months ago)
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Catherine McKinnell
I very much share the deep concern expressed by my hon. Friend about the figures published yesterday. I hope the Chancellor will start to pay attention to the effect that his economic plan is having on people throughout the country but, I agree, particularly in the north-east, where unemployment is above 10%, which is a shocking figure and spells deep trouble for the long-term entrenchment of unemployment. I will come to that shortly.
As we have heard so often from this out-of-touch Chancellor, he is not for turning, despite the fact that the consequence of his economic failure means that Government borrowing is rising, not falling, with the Tory-led coalition set to borrow £245 billon more than it forecast in autumn 2010. His promise to balance the books by 2015 will not be met and the national debt will not fall until 2017-18 at the earliest. Who knows how many times that will need to be pushed back before the Chancellor realises that his plan is not working?
Of course, that dire situation has led to the downgrading of Britain’s triple A rating by Moody’s and the more recent decision by Fitch to place the UK on rating watch negative, both of which had been prized by the Chancellor and used as cover for the austerity measures he introduced back in 2010.
At a time when living standards are being squeezed, average earnings are rising at their lowest rate since the end of 2009, Government borrowing is up, growth forecasts have been downgraded again, the public services on which people rely are being cut or threatened up and down the country, and ordinary people are being asked to pay the price for the Chancellor’s economic failure, what we needed was a Budget that was on the side of ordinary, hard-working people and families, increasing numbers of whom are clearly struggling to make ends meet.
As my hon. Friend the Member for Stockton North (Alex Cunningham) noted, unemployment is rising again. What we needed was a Budget that would back Labour’s jobs guarantee, using money raised from the tax on bank bonuses to fund a guaranteed job—a real job—for every young person who has been out of work for a year or more. I am not sure whether Government Members have had a chance to analyse the long-term unemployment figures published yesterday, but I can tell them that in March this year 167,345 adults over the age of 25 had been claiming jobseeker’s allowance for more than 24 months. Let me repeat that figure: 167,345 adults had been out of work for more than two years, compared with 84,765 in February 2012 and 52,895 in February 2011. That is a disturbing rise of 97% since February 2012 and 216% since February 2011.
Targeted and urgent action is required if the unemployment situation is not to become dangerously entrenched. We believe that it is a totally unacceptable state of affairs and that action is needed now to stop people being put on the scrap heap and left there, as they were under the previous Conservative Government—and, of course, so that we do not continue building up long-term costs for the taxpayer.
What we needed from the Budget was a reversal of the Government’s decision to stop tax relief on pension contributions for people earning over £150,000 being limited to 20% to fund Labour’s compulsory jobs guarantee for long-term unemployed adults.
Stephen Williams (Bristol West) (LD)
Perhaps the hon. Lady will remind us of the maximum amount of pension relief an individual could get right up to April 2010, or perhaps a little later. In case she does not know, someone could put just over a quarter of a million pounds a year into their pension fund and get higher-rate tax relief, including at 50%. This Government have lowered that figure to £40,000.
Catherine McKinnell
I said that the Budget needed to be about priorities and that we need to look now at how to help people struggling on the lowest incomes and ensure that those with the broadest shoulders bear the greatest burden. In government, Labour took steps to ensure that its pension reliefs were fair to those at the bottom as well as those at the top. This Government have reversed that decision to limit the relief to 20%, and we have seen the result: the impact across the board is being unfairly borne by those at the bottom. When times are as tough as they are now, it cannot be right to subsidise the pension contributions of the top 2% of earners at more than double the rate for people on average incomes who pay the basic rate of tax. However, the Conservatives and Liberal Democrats clearly believe that the time is right to prioritise those earning more than £150,000.
What we got in this year’s Budget, and in the very first clause of the Finance Bill, is the coalition’s unjustifiable and grossly unfair decision to reduce the top rate of income tax from 50p to 45p, a cut that benefits just 267,000 people earning more than £150,000, 13,000 of whom are lucky enough to earn more than £1 million. Indeed, those lucky few are receiving an average tax cut of a whopping £107,000 according to HMRC figures. Who wants to bung a millionaire indeed?
I have no doubt that at this juncture Liberal Democrat Members will want to trumpet the increase in the personal allowance—to pipe up and explain that they are not prioritising the richest in society over those who genuinely need support, but unfortunately for them the facts state otherwise. Let us remind ourselves of the analysis of figures published by the independent Institute for Fiscal Studies. It shows that taking into account all the changes to tax credits and benefits introduced since 2010, households in the UK will, on average, be a staggering £891, or £17 a week, worse off this financial year.
Catherine McKinnell
The hon. Gentleman is chuntering from a sedentary position. Does he wish to intervene?
Stephen Williams
If you are going to quote from independent reports, you should not quote—
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
Order. I am not quoting anything.
Stephen Williams
The hon. Lady should not quote from reports selectively. Perhaps she should go on to say that the Institute for Fiscal Studies says that the top decile of income earners has been hit hardest by the combination of Government tax changes.
Catherine McKinnell
I suggest that the hon. Gentleman is quoting selectively in leaving out the fact that the greatest impact is on the bottom decile of earners. When you take the cuts and changes overall, those at the bottom bear the greatest proportional brunt.
Catherine McKinnell
We have made it perfectly clear from day one that we do not support the cut to the 50p rate now, and we call on the Government to analyse the impact of the introduction and premature removal of the 50p rate. When we come to publish our next manifesto, we will review the state of the economy and whether a 50p rate would be the right response. I hope that Members of other Opposition parties, as well as Liberal Democrats, will support our amendment, because it would help to establish whether the 50p rate would bring in the additional Exchequer revenue that was anticipated—but if the Government refuse to back it today, we will never know.
The President of the Liberal Democrats, the hon. Member for Westmorland and Lonsdale (Tim Farron), said:
“Cutting the top rate was a stupid thing to do. It probably raised up to £3bn a year. We should pledge to restore the 50p rate at the next election. It’s not enough to be fair, you have to be seen to be fair.”
Their current, or former, Treasury spokesman—I can never work out which he is—Lord Oakeshott—
Catherine McKinnell
Okay. I am pleased that that has been clarified for the record. Other hon. Members will feel the same.
Lord Oakeshott said:
“In such hard times, we should never have rolled over when the Tories wanted to cut the 50p rate unless we got a mansion tax in return. At the next election, both the mansion tax and a 50p rate should be at the forefront of Lib Dem tax policy.”
I have news for him. Liberal Democrats have had the opportunity to vote for the mansion tax, and today they have the chance to vote for their 50p rate. They do not need to wait for the next manifesto. They can make it happen today. Lord Oakeshott’s is an interesting view, however, given the Liberal Democrats’ decision to vote against their own mansion tax policy twice in as many months. I would join him, however, in urging his party colleagues not to roll over for the Tories on this issue, but to support our amendment.
We are obviously disappointed that our amendment to clause 16 was not selected for debate. The clause introduces schedule 3, which provides for the cap on 11 named income tax reliefs for amounts greater than £50,000 or 25% of an individual’s income. This policy was first announced in 2012. Like many others, the Opposition are pleased that this provision no longer includes the original proposal to limit tax relief on charitable giving. In one of the several U-turns on last year’s omnishambles, the Chancellor was forced to back down on this ill-thought-through policy, which threatened the charitable sector with a cut of up to £500 million in income per year. A powerful campaign backed by more than 1,000 charities was given the very simple title, “Give it Back, George.”
Several concerns about clause 16 remain, however, particularly about its potential impact on entrepreneurialism and small businesses. The Association of Accounting Technicians believes that the restriction of small reliefs on losses runs counter to the Government’s apparent commitment to encourage new business start-ups. It stated:
“In the current economic climate, start-up businesses are likely to operate at a loss in their early years, therefore our view is that an imposition of an arbitrary cap will be a further obstacle to entrepreneurship… Furthermore, existing legislation already prohibits relief for ‘artificial losses’”.
That means that any genuine losses sustained in starting or developing a business should be relievable, in accordance with existing legislation, in a way that enables the entrepreneur to recover tax previously suffered as quickly as possible in order to help to fund their new venture.
The Chartered Institute of Taxation shares similar concerns, describing the cap as a “blunt instrument” that could have an
“adverse effect on genuine businesses and the UK economy”
and saying that
“it gives the wrong message to entrepreneurs thinking of setting up a business. The net effect could be to reduce the tax take rather than increase it.”
It has drawn particular attention to concerns that the cap will catch owners of genuine commercial businesses who happen to incur a loss, instead of a profit—for example, where a new business is being established; where a business is weathering economic conditions and concentrating on simply surviving until the climate has improved; and where there has been an exceptional level of business expenditure, such as on the purchase of a major item of machinery or the recruitment of additional staff in anticipation of expansion.
The Institute of Chartered Accountants in England and Wales has said that the measure
“will hit small businesses by restricting loss relief for commercial losses. The measure will reduce cashflow, hamper business growth and could lead to small businesses that are experiencing difficulty in the current economic climate going bust”.
Surely even this Government would not want that outcome as a result of a Budget measure. I would therefore greatly welcome hearing from the Minister that the Chancellor might just be for turning on this issue.
Mr Walker
I take the hon. Gentleman’s point. I had thought that his party was in favour of progressive taxation. Certainly, I believe that raising the income tax threshold and taking many people out of tax is one of the coalition Government’s great achievements. It was a Liberal Democrat policy at the general election, and on this occasion I will admit that they had an excellent idea.
The coalition Government are right to recognise that it is vital to make work pay and that that cannot be done through welfare reforms alone. By also ensuring that people can keep more of the money they earn, we will stimulate the economy, reward work and alter the balance between dependency and opportunity.
I am delighted that Ministers have been able to bring forward planned changes to the income tax threshold by a year so that workers at the lower end of the wage spectrum will not have to wait until 2015 to pay less tax. As a result of the changes announced in the Budget, more than 34,000 people in Worcester will receive a tax cut and 3,370 people who would have been paying income tax in 2010 will pay none at all. That will not only reward those people, but directly stimulate our local economy—we have heard from Labour Members about the importance of people having money in their pockets to spend in the shops. In four years, the threshold at which people have to pay tax will have been raised by 50%, which is good news for millions of part-time workers who have been taken out of the tax system altogether and full-time workers on average earnings who benefit from a reduced burden of income tax.
The Opposition have downplayed those changes and focused on changes to tax credits to argue that some working families will be worse off. In doing so, they show a profound misunderstanding of the pride people take in the money they earn and their desire to support themselves. It is far better for the individual and their family to earn their money, keep the fruits of their labour and be able to spend it as they see fit than for it to be taken away and for the individual to be dependent on the faceless benignity of an all-knowing state that might choose to hand a proportion of it back—might—but that, if Labour ever gets control of the Treasury again, might find itself without the means to do so.
To listen to some of the speeches we have heard from the Opposition over the past few weeks, one might be forgiven for believing that the tax credits system, as it currently stands, was a vital part of Attlee’s welfare state and a bastion of the post-war consensus; it is not and it was not. In its current form, it is the creation not of a Beveridge or a Bevan, but of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who so rarely graces the House with his presence. I am glad that that complex system, which takes money away from working people to feed it through the Government sausage machine and re-allocate some of it, is to be rolled into universal credit and reformed to ensure that work will always pay.
It is far better to remove the tax from thousands of hard-working people in my constituency, and millions across the country, so that they can keep the money they have earned for their needs, their homes and their families. If we are to support families, it is far better, as the right hon. Member for Birkenhead (Mr Field) has argued, to use public money to invest in early intervention than to use it to prop up a complex system of credits that fails properly to support work and has always failed to reach millions of the people who, in theory, are eligible for it.
The fact that the Government are increasing the tax threshold shows that we are rewarding work at the same time as simplifying the tax system. The fact that we have been able to bring forward those changes shows that there is a sense of urgency about delivering an unalloyed public benefit, which many Labour Members have supported today.
I would argue that the same sense of urgency should be brought to the issue of child care support for working families. The Prime Minister set out exciting policies on that before the Budget but my constituents are being asked to wait until 2015 for the support. I have heard from many constituents who are delighted to hear that it will be available through the tax system but are then devastated to realise that by the time it is implemented, their children will have grown out of the eligibility criteria.
If a thing is worth doing, it is worth doing now. I urge the bright and brilliant men and women of the Treasury to bend their backs to the task of bringing those valuable initiatives forward in the shortest possible time. While they are at it, I urge them to consider a proper transferable married person’s tax allowance to support the family.
I welcome many initiatives in the Budget and I hope that the Chair will not rule me out of order if I touch briefly on a few of the others that will make a real difference to people in Worcester. Freezing once again the duty on fuel is more than welcome and much appreciated. Removing the much loathed beer duty escalator will raise a toast in many of Worcester’s pubs. The employment allowance will help more small businesses to create vitally needed jobs.
Returning to my opening remarks and the matter under consideration, I make one suggestion for the future, and I sincerely hope that Treasury Ministers can take it on board. Raising the income tax threshold is and has been the right thing to do, and it remains so. It is wonderful that we have brought forward to 2014 the date at which the threshold will reach the magic number of £10,000. However, today we should open a debate about that number. The figure of £10,000 was not worked out by economists or in careful consultation with employers and workers, nor was it based on any reflection of financial reality; it was drawn up as a manifesto promise in a party conference on the eve of an election.
In my view, the Conservative party missed out by not making that promise ourselves. Today we should start to consider the level at which the threshold for income tax should be set in the future. I believe that it should be the same as the earnings of a full-time worker on the minimum wage.
Stephen Williams
I was hoping that my hon. Friend would make that point. He has already acknowledged the Liberal Democrat pledge on the £10,000 threshold at the last election. We have already decided that at the next general election we are going to link the income tax threshold to the national minimum wage, which is currently £12,071. If my hon. Friend is about to say that he endorses the Liberal Democrat position at the next general election, I will welcome that.
Mr Walker
I will certainly urge my party to adopt a similar position. Raising the threshold to £11,500 or £12,000 in future Budgets would help millions more people and provide further stimulus. That, along with other policies that my party supports, and which the Liberal Democrats do not always support, such as keeping a freeze on council tax, could make a real difference. Raising the threshold would extend the legacy of that valuable change and do even more to make work pay. I urge Ministers to consider it for the future and commend them on the difficult job that they are doing well.