Autumn Statement

Stephen Williams Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

This Government came in in May 2010, picking up the pieces of an incredibly difficult economic inheritance. We were recovering from the deepest recession since the second world war—which, as I pointed out in my statement, was a contraction of over 6% in the economy, which puts today’s numbers into some context—and we were dealing with the problems in the banking system, and we have been hit with the problems in the eurozone. Despite all that, we have made progress. We have got credibility in the bond markets, as my hon. Friend the Member for Lichfield (Michael Fabricant) said, the deficit has come down, and jobs are being created. It is a difficult situation, but we are on the right track. Going back, as the right hon. Gentleman would suggest, would be a complete disaster.

[Stephen Williams (Bristol West) (LD)]

Liberal Democrat priorities for the coalition have been delivering £10,000 of tax-free pay for every working family in the country, effective taxes on the wealthy, and closing down opportunities for tax evasion and tax avoidance. Does the Chancellor agree that today’s very welcome news of a further rise in the personal tax threshold—to £9,440, putting us within touching distance of £10,000—a restriction on tax relief on pension contributions for the very rich, and more resources to tackle tax evasion and tax avoidance effectively show that the coalition Government are committed to tax fairness even in difficult times?

[Mr Osborne]

I do agree with my hon. Friend. It is worth remembering that we put together these difficult autumn statements and the like in a coalition. We are able to demonstrate to the rest of the world that Britain has strong and decisive government. I am grateful to my Liberal Democrat colleagues who have helped me in this. I hope that Liberal Democrats and Conservatives can celebrate the increase in the personal allowance. There are many Conservatives who also wanted to achieve that, and it was in the Liberal Democrat manifesto too. The fact that we are able to do that shows that we are helping working people even in these difficult times.

Public Service Pensions Bill

Stephen Williams Excerpts

Tuesday 4th December 2012 Commons Chamber

[The Economic Secretary to the Treasury (Sajid Javid)]

I thank the hon. Member for Edinburgh East (Sheila Gilmore) for her speech. For the short time for which I have been a Minister so far, in every debate and in every Bill Committee in which I have been involved, no matter what the subject, she has spoken. I can always rely on her to quiz me and keep me on my toes, so I thank her for that.

Let me also thank all other hon. Members who have contributed to the discussions we have just had: the shadow Financial Secretary, the hon. Members for Hayes and Harlington (John McDonnell) and for Banff and Buchan (Dr Whiteford), the right hon. Member for Wentworth and Dearne (John Healey) and my hon. Friends the Members for Bognor Regis and Littlehampton (Mr Gibb), for Bromley and Chislehurst (Robert Neill) and for Finchley and Golders Green (Mike Freer). I shall try to deal with all the points that were raised.

I am glad that we are starting with new clause 2 and that we have started our debate discussing annual benefit statements. It is right that scheme members should be kept informed of their pension rights and provided with an annual update. I fully understand the case for doing more in that area and find myself in agreement with the arguments that Members on both sides of the House raised today and in Committee.

I agree that information should be provided for some members, without request, in one format or another. However, I cannot support the precise wording of the new clause. For example, it does not distinguish between active, pensioner and deferred members but we would need to take that distinction into account. I would also wish to ensure that any change was future-proof—for example, we should not inadvertently mandate paper statements when it might be easier and cheaper for schemes to implement online and perhaps mobile technologies in the future.

Although I respect and understand the spirit in which the new clause was tabled, and although I have listened carefully to what hon. Members have said, I would not propose to use its exact wording. I am now persuaded that there is a case for going the extra mile to ensure regular updates are provided for scheme members. That is why we will consider the matter further and propose an amendment in the other place to deal with annual benefit statements.

[Stephen Williams (Bristol West) (LD)]

I welcome the Minister’s statement. I had quite a lot of sympathy with the Opposition’s case, simply because many of the representations made to me as a constituency MP while the negotiations were taking place contained a mixture of misinformation that came, perhaps, from the trade unions or from a basic misunderstanding of the scheme. The Government and all the scheme employers definitely have a role to play in clarifying the terms and conditions of the scheme so that we do not have these misunderstandings again.

[Sajid Javid]

My hon. Friend makes a good point and I hope that he is also reassured by the commitment I have just given.

I also want to thank my hon. Friends the Members for Finchley and Golders Green and for Bedford (Richard Fuller) for their input on this issue in Committee.

Income Tax

Stephen Williams Excerpts

Wednesday 28th November 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I am glad to join others in saying how pleasant it was to listen to the new hon. Member for Cardiff South and Penarth (Stephen Doughty). I am well familiar with various parts of his constituency from family visits. It is nice to welcome another Welsh Stephen to the Chamber; I just wish our accents were as mellifluous as the hon. Member for Islwyn (Chris Evans).

We are discussing an Opposition motion, so let us examine the Labour party’s record when in office. In 1997, Tony Blair said that there would be no increase in the basic rate or the top rate of income tax while he was Prime Minister. As the Exchequer Secretary was saying, the Labour Government were in office for 13 years—for just over 4,700 days—and it was only in the last 35 days that the top rate of tax was increased to 50%. To put it another way, only one of the 156 pay slips that higher rate taxpayers would have received in that period would have shown an increase in their taxation. That suggests that the Labour party had no record of action and no philosophical appetite when it was in government and had the opportunity to do these things for higher taxes on high earners.

On tax relief for high earners Labour also had a lamentable record compared with its rhetoric today. It increased the relief for higher rate taxpayers to set against their pension contributions; people could put £215,000 into their pension fund and get higher rate tax relief in 2006, but that had been raised to £255,000 by 2010. The capital gains tax rate that Labour inherited in 1997 from the previous Government was 40%, but that was reduced steadily to 18% by the time Labour left office. On the lowest paid in society, the 10p rate of income tax was introduced in 1999, with the then Chancellor saying it was a measure to help the low-paid. I agree with that, but unfortunately he scrapped it in 2007, to loud cheers from his Labour colleagues—I well remember witnessing it from the Opposition Benches—because that tax rise for the lowest paid was financing tax cuts for those on higher earnings. Such is the record of the Labour party when it was in office.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

Does my hon. Friend agree that it is really unusual that under a Labour Government in power for so long the rich became richer and the poor became poorer?

[Stephen Williams]

My hon. Friend says it is unusual, but I would say that it should not be surprising, given what Tony Blair said would be the intention of his party while it was in office. Of course, that gives us another opportunity to remind ourselves of Lord Mandelson’s comment that new Labour was

“intensely relaxed about people getting filthy rich”.

Let us compare the Labour Government’s record with what the coalition has done. Liberal Democrat priorities in the coalition are twofold: tax cuts for the lowest paid and effective taxes on the wealthy. We have seen the £10,000 tax-free threshold go from the front page of our manifesto and election leaflets through to the coalition agreement and it is on course for delivery within this Parliament. We will have raised the tax threshold from £6,475 steadily towards £10,000 possibly within four years and certainly within five. In the previous decade under the Labour Government, the tax threshold was raised by just £2,090. Under the coalition, more than 20 million people will have a tax cut of up to £700 and 3 million will have been raised out of income tax altogether. That disproportionately helps people who work part time, who are disproportionately women, and is particularly effective in helping the young. Indeed, a young person on the minimum wage can now work full time without paying any income tax. That is a huge difference from the position we inherited.

[Sheila Gilmore]

I am listening very carefully to what the hon. Gentleman is saying. Would he support urging the Government to change how they will approach universal credit? Under the new rules, people will be assessed on their post-tax income and as a result for every £1,000 increase in tax allowance people on tax credit will receive only £70. Would he support an amendment or a change to that?

[Stephen Williams]

I think that universal credit will be seen in time as a major piece of welfare reform, sitting with what the 1945 Labour Government and 1906 Liberal Government did, and will have huge significance in simplifying the benefit system. Surely the hon. Lady, like me, will have visitors in her surgeries who fall between the stools of council tax benefit, housing benefit, jobseeker’s allowance, employment and support allowance, and all the others and who ask her to sort that out for them. The Government are making progress on that. There are intricacies to sort out—I grant her that—but the reforms are yet to be brought in and I hope that there is still time to ensure that the system, when it starts, genuinely helps the most vulnerable in society, which we certainly want to see.

The top priority for the Liberal Democrats in this coalition is the £10,000 tax-free threshold. That is now the flagship policy of the coalition and both parties should be pleased that it is being delivered, but we also want to see effective taxes on the wealthy. The Government have already raised the rate of income tax from the 18% we inherited to 28%. We have raised stamp duty on properties worth more than £2 million from 5% to 7%. That is an extra £40,000 of stamp duty that someone will pay when acquiring a property worth £2 million or more. We have also imposed a 15% surcharge stamp duty to discourage the tax avoidance that was rife under the previous Labour Government, when people used corporate vehicles to acquire personal property. We have effectively put measures in place to block that. Of course, I now want the Government to go further and to see whether in our next couple of Budgets we can get an effective mansion tax and annual wealth tax in place.

When the announcement was made in this year’s Budget that the 50p top rate would be reduced next year to 45p, the Chancellor ensured that other measures put in place would raise five times as much revenue as was predicted to be lost as a result. I am interested in having an effective top rate of income tax and 45% compares well with the international situation. In Germany, the top rate of tax is 47.5%, but it bites only after about £208,000 of income. In the US, the rate is roughly 42% in the states that have the highest rates of taxation, but it bites only at £240,000. In France—I am surprised that Opposition Members have not mentioned President Hollande more often—the top rate of tax is 41%, lower than the 45% that ours will be next year, whereas the 75% that he talks of introducing will be only on incomes of more than €1 million if it is introduced in 2013.

Rates and thresholds are effective only if taxes are collected, which is why I am pleased that the Treasury has set up an affluence unit to target people who have assets and income of more than £1 million and why we are introducing a general anti-abuse and anti-avoidance rule, for which I have called for many years. That action has been taken by this Government and was dismissed by the two Chancellors of the previous Government.

When Labour was in office, it made a virtue of low taxes on the wealthy and high earners. The coalition has slashed tax for the poor, has effective taxes in place on the wealthy and is cracking down on tax avoidance. I know which record I prefer.

Bank of England

Stephen Williams Excerpts

Monday 26th November 2012 Commons Chamber

[Mr Osborne]

There should not be any conflicts of interest, because he is very clearly the Governor of the central Bank of Canada, will remain so until the end of May, and will fight Canada’s corner as we would expect him to do. However, he is also the chair of the Financial Stability Board, of which we are a member. He is already heavily involved in international financial regulation and in decisions that have a real impact on our financial services. Moreover, Canada is a G7 country, and is probably one of our closest allies: it is difficult to think of a closer ally than Canada. We already work incredibly closely with the Canadians. Incidentally, the fact that we co-ordinated the press conference in Ottawa and the statement in the House of Commons today and the news did not leak in advance shows that the two Governments work together and trust each other.

[Stephen Williams (Bristol West) (LD)]

On behalf of the Liberal Democrats in the coalition, I welcome Mr Carney to his post. Although he will not take up his position until next summer, no doubt his views will be keenly studied in expectation of his doing so. Does the Chancellor agree that one thing that all our constituents will want to hear from him is a clear indication that he will expect the very highest professional standards in the banking industry, so that bankers can be seen to be working in favour of taxpayers and consumers and not just with self-regard?

[Mr Osborne]

Mr Carney has been pretty tough in Canada, and Canada has a much better record than this country of avoiding bail-outs and keeping Canadian banks safe. As chair of the Financial Stability Board, he has been very keen to secure international agreement on new, tougher rules on pay, risk-taking and the like in order to ensure that individual financial centres do not try to out-compete each other for less and less regulation. I should also make clear that he supports the John Vickers reforms that will be introduced in the Financial Services (Banking Reform) Bill, including the ring-fencing of retail banking, which is the really major reform of banking that the coalition Government are bringing about.

Oral Answers to Questions

Stephen Williams Excerpts

Tuesday 6th November 2012 Commons Chamber

[Mr Gauke]

The hon. Gentleman will be aware that the figure of £120 billion does not have much support from anyone who knows much about statistics. The actual figure is £32 billion. That is the number we inherited from the previous Government and we are determined to bring it down.

[Stephen Williams (Bristol West) (LD)]

The Minister will be well aware of the anger of many of our constituents about the activities of companies such as Starbucks and Amazon to minimise their tax rates through aggressive tax avoidance. Is not part of the answer more international co-operation, perhaps among OECD countries, to restrict the ability of those multinationals to siphon off profitable activities into low tax havens?

[Mr Gauke]

My hon. Friend is right to point out that we need to be vigilant about aggressive tax avoidance and the diversion of profits from where genuine economic activity occurs. That is why the Chancellor of the Exchequer is leading the way on that, working with the German Finance Minister, and why we had the announcement from Mexico yesterday that the G20 is focusing on that and encouraging the OECD to progress its work so that we can deal with this as soon as possible.

Multiannual Financial Framework

Stephen Williams Excerpts

Wednesday 31st October 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

The hon. Member for Vauxhall (Kate Hoey), who I assume has gone to light her bonfire—I am not sure whether Mr Barroso or anyone else will be on top of it, but I hope that she enjoys the heat south of the river—said that the House was at its best when it is united. I entirely agree that the House is at its best when united on an important point of principle in which we all genuinely believe, and some Members are genuinely standing up for what they believe in—the hon. Members for Rochester and Strood (Mark Reckless) and for Wellingborough (Mr Bone), for example, who are genuinely Eurosceptic—but when the public see nakedly opportunistic Opposition motions, that is when the House is at its worst in their eyes, and that is what undermines public confidence in the work of Parliament.

[Chris Leslie]

Will the hon. Gentleman remind the House what he said about tuition fees before the general election?

[Stephen Williams]

This is about a debate we are having now on a budget from 2014 to 2020, not about a position we took in 2009 before any of us knew we were going to be in a coalition Government. This is a position we can decide for ourselves, knowing the circumstances we are currently in. They are entirely different situations.

We are essentially discussing a comprehensive spending review of the European Union from 2014 to 2020, for which the European Commission has asked for a budget of €972 billion. That is roughly €100 billion above what would be a real-terms freeze. That is completely unrealistic at a time when EU member states are under real budgetary pressure, and some more so than others. It would be unacceptable for the United Kingdom to agree an increase of that magnitude, because it would represent roughly £10 billion in extra contributions. Therefore, it is absolutely right that the UK Government are going into the negotiations, in concert with many other member states, asking for a real-terms freeze. That is what is important: the position our Government are taking is in agreement with that of many other member states. It is a position that has a realistic prospect of achieving the success that most of us actually want. Undermining the United Kingdom’s position today will blow a hole in that negotiating position and make it much less likely that we will get the outcome many of us wish to achieve.

[Andrea Leadsom]

Does my hon. Friend agree that it blows a hole in our credibility with our European colleagues regarding not only the budget but other reforms where we have a significant, perhaps once in a lifetime, opportunity to create real structural reform of the EU?

[Stephen Williams]

I absolutely agree, and I will come to that shortly.

The negotiating position of arguing for a real-terms freeze is agreed right across the coalition Government. There is no one more Europhile than the Deputy Prime Minister, who tomorrow is going to make a speech in which he highlights several of the reasonable differences that exist between the coalition parties on our relations with the European Union and makes it absolutely clear that he fully agrees that a real-terms freeze is the right way forward.

My hon. Friend the Member for South Northamptonshire (Andrea Leadsom) mentioned the case for reform. The European Union spends 33.8% of its existing budget, as negotiated in 2005, on the common agricultural policy and 5.7% on a very bloated central administration system, with the caravan moving between Strasbourg and Brussels, and it could make cuts in those areas. Yet it spends only 9.2% of its budget on the competitiveness agenda—on supporting research and development and small and medium-sized enterprises. That is where we want the European Union to spend whatever its agreed budget is in future.

The Government are right to argue against what the European Union calls its “own resources”—in other words, tax revenues directly hypothecated for the EU—and to say that we do not want that to happen with VAT. They are also right to argue against a Europe-wide financial transactions tax. My colleagues and I think that there is a good case to be made for a financial transactions tax across all the global financial centres, but many of those are outside the European Union, most obviously in Switzerland. It is not for the European Union to make the case for an FTT, and it certainly should not be the recipient of any revenues from an FTT should one be imposed in future, because it would then be taking on the personality of a state and a Government, and that is not the vision of the European Union that the Liberal Democrats wish to see. It is also right that the Government should argue for the retention of the British rebate.

Labour’s position is quite extraordinary. The hon. Member for Bolsover (Mr Skinner), who is no longer in his seat, gave the game away by alluding to the Maastricht votes of 20 years ago. Its position is a marriage of genuine Euroscepticism—I accept that—and naked opportunism. We in the coalition Government have waited two and a half years for Labour Front Benchers to tell us which of the cuts that the coalition Government are implementing they agree with, and, if they disagree with all of them, which has been the position thus far, at least to suggest alternatives. There has been total silence. The only cut that they are brave enough to suggest is one that has to be imposed by 26 other member states—they show no bravery at all in suggesting cuts in our own budgets. That is incredible, and for those Labour Members who are Europhiles, it is an embarrassing position in which to find themselves. I can only assume that they have been put there by their more senior Front-Bench colleagues who are not with us at the moment.

Labour Members should know that it is not possible to achieve a real-terms reduction in the MFF. They did not manage it in 2005, when they negotiated an increase. The current leader of the Labour party, the current shadow Chancellor and the current shadow Foreign Secretary were leading members of that Government. Liberal Democrat MPs and Conservative MPs voted against an increase in November 2007. In recent years, our Members of the European Parliament, Liberal Democrat and Conservative, have consistently voted against a real-terms increase in the European budget. Labour Members of the European Parliament have voted against a freeze in the EU budget; all they voted for was extra money for the trade unions. We want the EU to spend more on measures that grow the European economy, deepen the single market and make the EU globally competitive.

Public Service Pensions Bill

Stephen Williams Excerpts

Monday 29th October 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I shall try to keep within the 12 minutes: it is my intention to make only a short contribution.

First, I wish to establish some general principles for why reform is needed. They can be grouped into two areas. The first is the general societal changes that have taken place that necessitate reform and to which the Government must respond, such as the increase in life expectancy and the changes in employment practices over recent decades. The second is the changing balance over time between the sharing of the cost of public sector pensions between the taxpayers, through the Government acting as employer, and the employees who receive the pensions.

It is important to establish that the reforms in the Bill would be needed with or without the current cost pressures that the Government face. We hope to bring public sector borrowing under control by 2017, but these reforms are intended to last for a generation. They are not driven by the short-term need to recover costs: they are driven by a long-term desire to ensure that public sector pensions survive into the future in a sustainable way.

Any reform should be done fairly and, as far as I and my Liberal Democrat colleagues are concerned, protect those in the public sector on the lowest earnings. The overriding principle should be that the public sector should continue to act as an exemplar to other employers. There should not be a race to the bottom: the public sector should set the gold standard for affordable and attractive public sector pensions that attract the very best people into the public sector, who are paid in a fair way and guaranteed a secure and attractive income into retirement.

The first principle is that of life expectancy. We all know that we would hope for ourselves and people in our families to live longer. Indeed, people retiring now at age 60 can expect to spend 40% of their adult life in retirement—so only 60% of their adult life would have been spent in work. The state pension age has been changed relatively infrequently over the 103 years of its existence. If it had been uplifted in line with life expectancies, people would now be drawing their state pensions at age 75. Several other countries, in particular Scandinavian countries, have ongoing commissions that examine life expectancy and uplift pension ages according to that evidence. That might be a good approach in the future for this country.

The biggest societal change driving the need for reform is the difference that has arisen over time between private sector and public sector remuneration. It always used to be much quoted that pay in the private sector was more attractive than in the public sector and that part of the balancing factor to make public sector employment attractive was a good pension, and perhaps other good terms and conditions. In recent decades, that maxim does not hold. Indeed, the Institute for Fiscal Studies said that in 2011 people in the public sector doing a broadly similar job to people in the private sector were likely to be paid about 8.3% more. But pension provision in the public sector continues to be much more attractive and offered on a much wider scale than to people in the private sector.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Does the hon. Gentleman regret the way in which the Government have pitted public sector pensions against private sector pensions, when in fact the average local government pension for men is £4,000 a year and for women is £2,600? There is no doubt in my mind that this is an intentional attack on public service and the public sector as a whole.

[Stephen Williams]

The hon. Lady’s final sentence illustrates her prejudice against the Government’s intentions. This is not an attack on the public sector. The coalition Government are trying to ensure that public sector pensions remain across the board, so that every person in the public sector is able to access a pension, which is not the case in the private sector, as I am about to say; that they are affordable to the taxpayer; and that they are offered on very good terms. Without reform, those provisions would not be in place. I would not want to be associated in any way with an attack on public sector employees who perform services that are absolutely vital to all of our constituents. I would not want to be associated with any reform predicated on that basis, and I genuinely think that that is not the basis on which the reforms are being carried out—from the perspective of both parties in the coalition.

On coverage, 100% of public sector employees are in theory eligible to join a pension scheme, because it is offered to everyone, but only 35% of employees in the private sector are able to join a scheme, and only about a third have a contribution made to their scheme by their employer. There are many schemes in the private sector in which the employer simply does not make a contribution. There may be a scheme, but it is not funded by the employer. The biggest anomaly is in the type of scheme available to people in the different sectors, between those on defined benefit, final salary or career average schemes, and those who are on defined contribution schemes. Currently, just under 80% of people in the public sector are in defined benefit final salary schemes, but only 9% of people who work in the private sector are able to access such schemes. That percentage is falling year on year, and soon nobody will be joining a final salary scheme in the private sector. Many of them will be closed and no further contributions made by current members.

There is also the cost to the public purse of maintaining public sector pensions, which puts an onus on us to look at the case for reform. Those costs have to be shared between the Government as the employer, all of us as taxpayers, and the employees themselves, who will ultimately be the beneficiaries. Between 1999 to 2009, the cost of the NHS pension scheme rose by 47%, the cost of the civil service scheme by 23% and, as we heard from the hon. Member for Bognor Regis and Littlehampton (Mr Gibb), who is not in his seat, the cost of the teachers’ pension scheme by 37%. That has necessitated a shift in the contribution rates of the employee, who is the beneficiary, and the employer, who is the Government and the taxpayer. For instance, there used to be rough parity in the teachers’ pension scheme—the employee put in 5% and the Government 5%—but employees now contribute 6.4% and the Government about 14%. That is unfair on the general mass of taxpayers who cannot access these types of schemes. So there is an imbalance between the public and private sectors, and the cost to the Exchequer of public sector pensions is now £32 billion. Those costs cannot be allowed to grow uncontrollably.

The pension reforms must be done fairly, however, so I am pleased that there will be no change to the terms and conditions and contributions of employees who earn up to £15,000—about 15% of the public sector work force. Some 750,000 people will see no change in their pension contributions and will still be able to draw the pension they expect at the moment. Those on salaries of up to £21,000 will have their increases capped at 1.5%, so a typical employee on £21,000, after 20% tax relief—everyone gets tax relief on their pension contributions—will pay just £8 extra a month to remain in a defined benefit scheme. And, of course, employees within 10 years of retirement this April will see no change in their terms and conditions and expected pensions.

It is also entirely fair that over time we move to a career average scheme. That will benefit the broad mass of people in the public sector, who have annual salary increments but whose starting salary after inflation is not drastically different from what they start with. A final salary pension scheme, on the other hand, disproportionately benefits those in the public sector who someone described as the star performers—the people on huge incomes, the senior managers, head teachers and directors. It is fair, then, that we move to a career average scheme.

Our own arrangements, which no one has mentioned thus far, are now entirely a matter for the Independent Parliamentary Standards Authority. If, however, the public sector moves to a career average scheme, Members should expect IPSA, which now sets our terms and conditions, to move us on to a career average scheme, rather than a final salary scheme, as well.

There is no doubt that reform is needed—that is shown by demographics and the change in employment practices—and it is right that the Government are doing it in a way that is fair to public sector employees as well as to taxpayers. That will ensure that public sector pension schemes are not only the best on offer in the country but are offered on terms that are sustainable.

Tax Avoidance and Evasion

Stephen Williams Excerpts

Thursday 13th September 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I am very pleased that we are having this debate, and I thank the right hon. Member for Oldham West and Royton (Mr Meacher) for persuading the Backbench Business Committee to obtain the time for it. I have sat through loads of debates on the general economy, Finance Bills and all the rest of it during my seven years in the House, but we have never really engaged in a debate on the rights and wrongs of the tax system. We have started to get there in today’s debate, although, if I may say so, I did not think that the right hon. Member for Oldham West and Royton quite got there himself. I felt that some of his opening remarks were a bit too aggressive towards the Government. However, I am glad that he initiated the debate, because it is important to debate the definitions of tax avoidance and tax evasion, the perceptions of those quite different issues, and where the wrongdoing actually lies.

This is not about the tax rates that we discuss quite often in the Chamber, and it is not about who is paying their fair share, although I agree with my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) that there is an important debate to be had about how much an individual and a corporation should contribute to society, and whether there should be a floor below which no one who is making a profit should drop in any given year. What we should be discussing today is payment of what is assessed and what is legally due: no less and no more.

Tax evasion is always wrong. I do not think that that is said clearly enough. It is illegal, and it is a fraud on the public and other taxpayers. It is always wrong, whoever is doing it, and whether a person is squirreling away millions in a secret bank account, paying in cash for work to be done on his or her own house, or paying a guest house owner. We shall all be going to party conferences soon, and I hope that none of our delegates will be tempted to pay guest house owners in cash. Those who do so should know, and should own up to themselves, that they are avoiding the obligation to pay VAT, and that it therefore follows that the person they are paying for the service is not putting the transaction through the books and is evading income tax as well.

[Steve Baker]

Does my hon. Friend agree that one of the reasons low-paid people evade tax is that taxes on them are far too high? One of the things that we need to do is continue the trend of lifting the lowest paid out of tax altogether.

[Stephen Williams]

I entirely agree with my hon. Friend. I am sure that he is delighted that his party is in a coalition with mine, because we are indeed lifting more of the low-paid out of tax completely by progressing towards a £10,000 income tax threshold. We should make taxes simpler as well as lower for people on low earnings.

This is a moral as well as a legal issue, and I think that perhaps we should discuss morals more in the Chamber. We all have a duty to pay, and cash in hand actually means cheating your neighbour. I think that, as Members of Parliament, we should be more courageous about making that clear. I agree with what the hon. Member for Walsall North (Mr Winnick) said about Sir Philip Green, but he is an easy target. We should be clear about the fact that if you are evading tax, it does not matter who you are: it is always wrong.

Health issues also arise, relating to tobacco and alcohol. My hon. Friend the Member for Amber Valley (Nigel Mills) mentioned beer duty. I am the chair of the cross-party group on smoking and health, and later this year I shall chair an inquiry into the smuggling trade—particularly the trade in tobacco, but there are cross-over issues involving alcohol. There is a very easy thing that the Government could do about those problems: they could tighten the bonded warehouse regime. There are currently very few restrictions on who can operate a bonded warehouse. Perhaps the Public Accounts Committee could consider that as well. A large amount of tax is evaded through the misuse of bonded warehouses and, as a result, people consume more alcohol and cigarettes and damage their health.

While evasion should be a black-and-white issue—it is always wrong—in respect of avoidance there are many shades of grey, which is a big problem. At the innocent end of the spectrum, tax avoidance is when people plan to pay no more tax than we in Parliament intend them to pay under the schemes we lay out in Finance Bills every year. I assume most of us have an individual savings account. I opened a new ISA earlier this year with Triodos bank, the ethical bank that has its headquarters in my constituency. Some of us signed a joint letter urging all parliamentarians to set an example by moving our money into ethical providers of finance, such as Triodos and the Co-op bank. By investing in ISAs, however, we are, of course, avoiding some income tax on our surplus capital.

I support all the various enterprise incentive schemes to encourage entrepreneurs to set up new businesses. I should declare a former interest, in that before entering Parliament I was a tax consultant working for some of the large firms that the right hon. Member for Oldham West and Royton laid into, but what we were doing was enabling people who were setting up businesses to take advantage of the reliefs his Government had introduced, in order to encourage more such people to take up good ideas, transform them into a business, create wealth and employ people. That is a good thing; that is good tax avoidance in the dictionary sense. Things go wrong, however, when such sensible planning is stretched too far and there are egregious schemes of avoidance, artificial transactions and contrived schemes.

The Chair of the Public Accounts Committee mentioned the very good exposés The Times did during the summer. As well as attacking Sir Philip Green and other fat cats, parliamentarians should make it clear that we condemn similar activities by those who are popular with the public—pop stars in Take That, premiership football players or Formula 1 racing drivers whom we are asked to believe all live in Monaco. These people make huge amounts of money because of the public enjoyment of what they do and they do not need to mitigate their tax below what the people who watch them perform think they have to pay.

What should we do about this? First, Her Majesty’s Revenue and Customs needs to focus much more on tackling avoidance. The headline figure of the number of people who work in HMRC has been mentioned, but how many people work for a particular arm of Government is less important than what they actually do when they are working. I hope the Minister will confirm that the efforts in the HMRC large business units and high net-worth units will be ever more relentlessly focused. The staff must have the appropriate training so they can match the skills levels of the lawyers, bankers and accountants pitted against them, and they must also have the necessary IT and other technical resources.

We parliamentarians have a duty as well. We can change the rates and rules, and we have done that in several Budgets since the 2010 general election. Last year, the Government tightened the rules in order to block a scheme of disguised remuneration, where individuals were receiving loans from their employers that they had absolutely no intention of ever repaying, and thereby were avoiding income tax. However, the Labour Front-Bench team at the time—I do not think its current occupants were part of that team, so I do not hold them personally responsible—instructed all its Back Benchers to vote against that coalition Government measure.

Under this year’s Finance Bill, we are introducing new stamp duty regimes in order to tighten up on the move of people buying properties via corporate envelopes and thereby avoiding stamp duty. The Liberal Democrats, and in particular my right hon. Friend the Business Secretary, called for that at the last election. Avoiding stamp duty in that way will now be almost impossible unless people want to incur an enormous liability in the future.

I listened carefully to what the right hon. Member for Oldham West and Royton was saying about the general anti-avoidance or anti-abuse regime. His words would have had more force if he had at least acknowledged that this Government had commissioned a report by Graham Aaronson. He has been in the business for more than 40 years, so I cannot think of anyone better to chair a committee looking at how we can tighten up on avoidance schemes. At least this Government are introducing an anti-abuse regime. It may not be perfect to start with, but a rule is being introduced. The right hon. Gentleman’s Government had 13 years to do that, but it was persistently ruled out by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

[Mark Durkan]

Is that observation not a bit like saying that if the Government were looking at creating an anti-strike rule, the person to put in charge would be Bob Crow?

[Stephen Williams]

Would the hon. Gentleman say that again, as I am not sure that I followed it?

[Mark Durkan]

On the logic that the hon. Gentleman has just deployed about the most suitable person to be looking at anti-avoidance, given his skills and predilections in that area, would the equivalent for a Government committing to an anti-strike rule not be to put Bob Crow in charge of that exploration?

[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.

--- Later in debate ---

[John Pugh (Southport) (LD)]

I congratulate the right hon. Member for Oldham West and Royton (Mr Meacher) on stimulating this debate. I also welcome the Exchequer Secretary, who survived the ministerial cull. We all welcome his dry wit and expertise. Indeed, I debated this very subject with him in Westminster Hall about a year ago.

As other Members have said, we live in a society where the rights, benefits and privileges that people extract from society are often disconnected from the obligations that they feel towards it. That brings the spectacle of people benefiting from society and thriving because of it, but avoiding contributing to the tax base through either evasion or, more commonly, avoidance. Tax avoidance is a deliberate attempt to frustrate tax law and the intentions of tax legislators. It differs radically from tax evasion, whereby one deliberately ignores or flouts the letter of the law.

There are various remedies for tax avoidance. One, as has been suggested, is to simplify the law to make avoidance more evident and stark. That is what the Mirrlees review was, in part, about. Another remedy, which has been very attractive to people in this place, is to outlaw individual tax avoidance schemes piecemeal. That has been tried in Finance Act after Finance Act, only for further countermeasures to be needed for other schemes. That exercise is a bit like a cat chasing its tail—it is endless. That is why I favour a general anti-avoidance rule and have argued for it consistently in this Parliament and the previous one. That is also why the Government are considering it and why it is in the coalition agreement.

I do not want to comment on Mr Aaronson’s specific proposals, but a GAAR essentially bans schemes that have no commercial benefit other than to frustrate the intent of the law. The right hon. Member for Oldham West and Royton has argued that the progress does not look as though it will be enough. Other people have argued that it goes too far. There are those who believe that we should go only by the absolute letter of the tax law and therefore oppose a GAAR. There are Government Members who believe that. I call such people tax fundamentalists, because they argue that a GAAR would create an element of tax uncertainty and that what is not expressly prohibited should be allowed. They add to that the argument that if we had a GAAR, there would be other disbenefits, such as an increase in litigation and a reluctance to make investment decisions.

More fundamentally, some people argue that it cannot be wrong to do what is not formally and expressly forbidden. That argument is astonishingly weak. It reminds me of the arguments that cropped up during the expenses scandal, when people argued that it was acceptable to buy duck houses or to flip homes because it did not breach a particular rule, even though it frustrated the intentions of the scheme. It is worth noting that there is under-specification in other areas of law, not just in tax law. Disturbing the peace encompasses a number of scenarios, as does defamation in civil law.

None the less, there are ways in which the operation of a GAAR in tax law can be made more certain to address those concerns. The first is through the pre-vetting of tax schemes and disclosure. The previous Government went some way down the road to ensuring that that could and should happen. The second is, during the passage of the legislation, to make clear the intent of the law and what it is contrived to do. The objection about uncertainty is slightly exaggerated. When Tesco set up a holding company in Liechtenstein for its properties, it received no commercial benefit, unless it was in avoiding the property taxes that the Government expected it to pay.

In a recent speech, the Exchequer Secretary spoke about things that would be covered:

“Buying a house for personal use through a corporate entity to avoid”

stamp duty

“is avoidance. Channelling money backwards and forwards through complex networks for no commercial reason…is avoidance. Paying loans in lieu of salaries through shell companies is avoidance. And using artificial ‘losses’ deliberately accrued to claim back tax is avoidance.”

Those examples give a clear indication of the kind of things that should be caught by a GAAR. As my hon. Friend the Member for Bristol West (Stephen Williams) said, we can contrast that with other things that would not be caught, such as charitable tax relief. In that case the Government encourage people to organise their tax affairs in a way that causes a loss to the Exchequer.

We can speculate for as long as we want on the effects of a GAAR, but in some ways we do not need to, because we have a certain amount of evidence to go on. A lot of countries have GAARs in place, and not all of them produce uncertainty and litigation, although some do.

[Stephen Williams]

I believe that the UK is actually unique in not having a GAAR or a rule that is called something else but is effectively a GAAR.

Oral Answers to Questions

Stephen Williams Excerpts

Tuesday 11th September 2012 Commons Chamber

[Mr Osborne]

This is, of course, the key challenge in these difficult financial conditions, which have endured for five years or so. I know that there is a particular challenge in Northern Ireland, where the collapse of the banking system in southern Ireland has had a real impact. The funding for lending scheme, launched last month, is an £80 billion Treasury/Bank of England scheme to reduce bank funding costs so that banks are able to lend to businesses and households. A number of banks, such as Barclays and Lloyds, have already launched products that will bring those lower interest rates to the hon. Gentleman’s constituents.

[Stephen Williams (Bristol West) (LD)]

The fact that the deficit has come down by a quarter enables the British Government to borrow at roughly the equivalent rate of the United States Government—a rate lower than every EU member state apart from Germany. Does the Chief Secretary agree that this enables the Government to contemplate infrastructure investment and to use the strength of our balance sheet to facilitate and guarantee private sector infrastructure investment?

[Danny Alexander]

My hon. Friend is absolutely right. We can use the strength of the balance sheet that has been built up as a result of this Government’s fiscal credibility to provide, for example, £40 billion of guarantees to infrastructure investment and £10 billion of guarantees to registered social landlords. The Labour party may oppose these guarantees, but they have been widely welcomed by infrastructure providers, by the business community and, in the latter case, by housing associations. That shows precisely the benefit of the tough fiscal policy decisions this Government have taken.

Finance Bill

Stephen Williams Excerpts

Tuesday 3rd July 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

Before I turn to the broad sweep of the Bill, I want to mention again clause 180, to which the Minister referred in his winding-up speech in response to my hon. Friend the Member for Argyll and Bute (Mr Reid). Many of us will have been written to by a coalition of charities such as Christian Aid and ActionAid, with which I have been working closely on the effects of the clause. The reason for that concern is felt internationally. The OECD has estimated that developing countries lose three times the amount of aid that they receive from developed countries through tax avoidance in their own countries.

In 2011, the United Nations, the International Monetary Fund, the World Bank and the OECD came together and said that the G20 countries have an obligation to ensure the smooth running of the international tax system. It was therefore appropriate for G20 countries to undertake spill-over analyses of proposed changes to their own tax systems and the possible impact of those changes on the fiscal circumstances of developing countries.

[Fiona O'Donnell]

Will the hon. Gentleman take this opportunity to explain to the House why, if he is so passionate about the issue, he withdrew his amendment in Committee and failed to vote for ours?

[Stephen Williams]

If the hon. Lady was so interested, she could have studied the Hansard record of the debate. The purpose of my amendment at that stage of the Bill was to probe the intentions of the Government and to get on the record statements from my hon. Friend the Minister that the Treasury and the Department for International Development were going to work more closely together. The hon. Lady’s party made it clear that it would not support my amendment in order not to hold up that controlled foreign companies change going through. I suggest that she has a word with her Front-Bench team.

I move on to new clause 6, which I tabled. Because of the length of time spent once again discussing the bank bonus levy and Labour’s five-point plan, we did not get to it this evening. Perhaps the hon. Lady might like to think about why that was the case. New clause 6 called for joined-up working between the Treasury and the Department for International Development. You, Mr Deputy Speaker, I and many other hon. Members and Members of the House of Lords were in Committee Room 14 this morning to listen to President Carter, Archbishop Desmond Tutu and former Irish President Mary Robinson, three of the Elders, who were talking about human rights and in particular developing nations. They specifically praised the record of this Government as the first major Government in the world to reach the 0.7% target for overseas aid. I urge my colleagues in Government again to build upon that achievement by making sure that our aid is well spent and raises the capacity of overseas Governments to develop their own tax collection capability so that they are not so dependent on us in the future.

As others wish to speak, I turn to the wider measures in the Bill. For those of us who have been on the entire journey, it has been a long trip from the Budget to Second Reading, to Committee of the whole House, to 18 sittings of the Committee, and to the past two days. Some of the things that were there at the start did not make it all the way through to the end. Maybe somewhere in Cornwall there is someone sitting in a caravan, eating a pasty washed down by sports drinks, filling in a gift aid form, perhaps to a church restoration fund. Such a person ought to be happy that this Government listen.

Some things, to be fair, were consistent all the way through that process. We heard them again this evening from the hon. Member for Leeds West (Rachel Reeves)—Labour’s five-point plan. As a boy, I was brought up to go to Sunday school, so I cannot help but be reminded of the parable of the feeding of the 5,000; they start off with such a small amount and expect it to achieve so many things, but without the benefit of miraculous intervention.

When all these measures are long forgotten, having simply been about tens of millions or hundreds of millions of pounds, it is the really significant measures in the Budget, which involve billions of pounds, that will be remembered in the sweep of history. The most significant of those is the progress towards raising the income tax threshold towards £10,000. My party, the Liberal Democrats, can take particular pleasure in the fact that the Budget and the Finance Act, as the Bill is soon to become, set us off towards another milestone on the route to achieving the £10,000 tax-free threshold. It will already lift 800,000 people out of income tax, and it will do so for 1.1 million people over the coming year and 2 million next year, allowing more people to retain the benefits of their work. We also saw in the Budget the introduction of effective wealth taxes, new rates of stamp duty, a new clampdown on stamp duty avoidance, something the previous Government shirked on many occasions, and new restrictions on reliefs against tax.

When the history of this Government and this Budget is written, it is the rise in the threshold to £10,000 that will be long remembered when all the ephemera we have been dealing with, and which Opposition Members have been so keen to raise over the past 12 weeks, are long forgotten. The raising of the threshold, which will lift people out of taxation, is the big issue that will be remembered for many years to come.