Finance Bill

Stewart Hosie Excerpts

Tuesday 21st July 2015 Commons Chamber

[Lucy Frazer]

If it was the birthday boy, I would be giving way.

It is remarkable that the position of both the SNP and the Greens is that this Finance Bill does not address the economic needs of the country and it continues to deepen the social divide between those who have and those who have not. Both amendments are very similar. But on both those questions, nothing could be further from the truth.

[Stewart Hosie (Dundee East) (SNP)]

Will the hon. and learned Lady give way?

[Lucy Frazer]

On the economy, it is an economic necessity—[Interruption.] When is your birthday?

[Stewart Hosie]

Will the hon. and learned Lady give way?

[Lucy Frazer]

Let me finish the sentence; then I will give way. On the economy, it is an economic necessity that as a country, we live within our means.

[Stewart Hosie]

I have no problem at all with getting to a position where any state lives within its means; it is how we get there that matters. But the hon. and learned Lady surely has misspoken. If a Government are choosing to increase inheritance tax thresholds while taking billions from the poorest with changes to tax credits, then they are indeed taking from the poor to give to the very wealthy.

[Lucy Frazer]

The hon. Gentleman is absolutely right that the question is how we get there. But when we are in a time of economic improvement, that is the very time in which we need to make changes. The changes to inheritance tax go back to a key principle and a key policy that we hold as Conservatives, which is that when you work hard and you spend money to buy a home to look after your family, and when you are taxed on the income with which you buy your home and pay tax, in the form of stamp duty, when you pay for your home, it is right not to have a third taxation when you leave your home. We all instinctively want to leave what we have earned to our children.

[Stewart Hosie]

Will the hon. and learned Lady give way?

[Lucy Frazer]

No; I have not finished. There is one further point. We are not taking from the very poorest; we are giving to the very poorest. [Hon. Members: “You are not.”] In some ways we are giving to the poorest. The introduction of the national living wage will mean that about 2.5 million people will immediately get a pay rise.

[Stewart Hosie]

rose—

[Lucy Frazer]

I gave way and I shall just continue.

--- Later in debate ---

[Caroline Lucas]

I would love to hear it, but not that much, so I am going to continue.

Then we have the senseless proposal to tax renewable energy as if it were a fossil fuel by removing the climate change levy exemption for renewables.

[Stewart Hosie]

On the VED changes being intended to tackle the debt or the deficit, I am sure the hon. Lady will have heard the Chancellor say that the entire set of measures was fiscally neutral and has nothing to do with bringing down the deficit or the debt.

[Caroline Lucas]

I thank the hon. Gentleman—my hon. Friend—for that well-made point.

As campaigners have pointed out, the policy on the climate change levy exemption for renewables is like making people pay an alcohol tax on apple juice. The Government claim that it is intended to prevent taxpayers’ money from benefiting renewable electricity generated overseas. In fact, it is a completely disproportionate measure that turns a policy that was designed to encourage low-carbon electricity into just an electricity tax for businesses. It is interesting that Ministers remain suspiciously silent on the shocking revelation earlier this year that the Government spend 300 times more on backing fossil fuel projects abroad than on clean energy via the export credit agency. If they are that worried about the issue, one would have expected a little more consistency from them. The scandalous public spending on fossil fuel subsidies should be cut, not support for clean, green, home-grown renewable energy.

I agree with the shadow Energy and Climate Change Secretary, the right hon. Member for Don Valley (Caroline Flint), that removing the renewables exemption from the climate change levy will undermine investor confidence in renewable energy, and that we should instead be seizing the massive opportunities for jobs and investment that moving to a low-carbon economy would provide for this country. I hope that we can work together across all parties to remove this stupendously senseless provision from the Bill altogether.

The Minister spent a long time talking about how important this Bill is for productivity. I am a great supporter of productivity, but I fail to see how, for example, plans to scrap the long-established zero-carbon homes policy will support it. Indeed, in an open letter to the Chancellor, over 200 businesses warned:

“This sudden u-turn has undermined industry confidence in government and will now curtail investment in British innovation and manufacturing”.

So much for putting our economy on a stable footing; so much for this Government’s phoney concern about energy costs. Scrapping this policy means that future homes, offices, schools and factories will be more costly to run, locking residents and building users into higher energy bills. Businesses are increasingly speaking out not against the so-called green crap, but against the tsunami of Government blue crap that is putting up energy bills, harming business and undermining climate action.

I have a few last words on the welfare aspects of the Bill. The Chancellor can crow about raising the tax threshold so that fewer people on low incomes pay tax, but although that is the right thing to do, it does nothing to change the overall impact of his Budget and of the Finance Bill. As the IFS has shown, it leaves us with a tax and benefits system that is more regressive. The biggest losers are those in the second and third poorest tenths of the population—the working poor. Under the cover of austerity, the welfare cap will make housing, in particular, unaffordable for many families. Young and disabled people have been unfairly singled out to lose benefits. Child poverty already costs Britain upwards of £29 billion, and is set to rise under plans to limit tax credits, which could leave 3 million families on average £1,000 worse off, even allowing for increases elsewhere.

According to Treasury’s own analysis, the plan to raise the inheritance tax threshold will benefit high-income and wealthy households. Given that it is one of the easiest taxes to both avoid and evade, and that the very rich often find ways to pay very little, it is clear that this whole area needs a complete rethink.

On tax dodging, I welcome the Government’s recognition that the so-called Mayfair loophole needs to be closed. Many of Brighton’s residents have written to me about this, and it is thanks to the determination and persistence of individuals and campaigners that we have got this far. Yet again, however, the Government spin machine is in overdrive and the reality does not match the rhetoric. I urge the Chancellor to address that by agreeing that carried interest counts as income and should be taxed as income.

Finally, if the Chancellor is serious about tackling tax dodging, as I hope he is, I urge him to reconsider his opposition to the Robin Hood tax and to adopt the comprehensive policies set out in the tax dodging Bill proposals, which are supported by 25 UK and international non-governmental organisations and would generate about £3.6 billion in the UK.

--- Later in debate ---

[Huw Merriman]

My constituents will be delighted that after the terror that this Government took over from, we are seeing earnings and incomes get back to their pre-recession levels. They are already there for those at pension age, of whom there are many in my constituency, and are getting there for those in other age groups. My goodness, if this Government had not taken the difficult decisions that the hon. Gentleman’s party has opposed all the way through, we would not be in the positive situation we are now in.

[Stewart Hosie]

Will the hon. Gentleman give way?

[Huw Merriman]

No, I will make some progress, if I may.

I was bemused by the Opposition’s attempts to lay claim to the policy of tax locks. Perhaps by losing the election and allowing this Government to gain a majority and introduce these clauses, they have brought the policy about.

This is a one nation Government that seek to help people into work and, in so doing, give them hope, aspiration and pride. By taking those who work 30 hours a week on the minimum wage out of the tax system, the Government are committing to the principle that work pays. Furthermore, by committing to review that principle and assess the tax position of an individual working 30 hours on the national minimum wage when reviewing the tax allowance over and above £12,500 in the future, the Government are demonstrating that they really mean for that proposal to be here to stay.

--- Later in debate ---

[George Kerevan]

I know that is true from talking to the small businesses in my constituency.

The Chancellor claims to want a productivity revolution, but that is given the lie by the fact that in the autumn statement in December and the March Budget he did not announce that the £500,000 allowance would stay or that it would in fact be £200,000. Investment requires long-term confidence—telling businesses well in advance what they can do in terms of investment. The fact that the Chancellor did not tell us, but has produced a rabbit out of a hat in the summer Budget, tells me that he is not that serious.

We have also heard today that the Chancellor intends to cut corporation tax progressively over the spending period to 18%. I do not gainsay that, but I ask the House to look at what happens when cutting corporation tax significantly is combined with a de facto reduction in the annual investment allowance. Surely we want to cut corporation tax to encourage firms to use their surplus capital to invest in plant and machinery. It is therefore necessary to maintain the £500,000 level—or perhaps even raise it further—to encourage firms to put their money into plant and machinery to raise productivity. By de facto cutting the investment allowance from £500,000 to £200,000 at the same time as cutting corporation tax, the Chancellor will encourage firms to keep their surplus capital sitting in the bank, instead of investing in plant and machinery. That is what has been happening in this country, and that is one of the reasons why productivity has fallen since 2008.

[Stewart Hosie]

Is it not therefore all the more important —at a time when the banks are still not lending fully—to incentivise to the highest possible extent to encourage businesses to use their own resources for investment?

[George Kerevan]

I take my hon. Friend’s point. We need incentives that co-ordinate and integrate, not just a series of random measures that allow the Chancellor to make headlines here and there but do not have an impact on productivity in the longer term.

The surplus balances held by British companies total something in excess of £0.5 trillion, and some estimates put it at more than £1 trillion. A reasonable estimate is £0.5 trillion or £550 billion. How do we incentivise firms to take that money out of the bank and put it into plant and machinery and create jobs? The Chancellor is doing his best to provide incentives in another direction. Raising the inheritance allowance on property is another way of encouraging shareholders—when shares are bought back by companies—to put their money into existing bricks and mortar rather than invest in companies.

We have a Budget that claims to be about productivity, but provides none of the efficient incentives required to get plant and machinery that will create jobs. Let us look at what has happened to productivity since 2008. Initially, when the recession started, UK productivity fell. What normally happens in the first few years of a recession, as workers are shed and firms rely on using their existing plant and machinery more intensively, productivity rises. It rose in most of the advanced industrial countries in Europe in the two or three years after the recession, and in America. Thereafter, we would expect firms to start to invest in new innovation and developments, and productivity would rise not simply from the shedding of labour but from expansion, new product lines and new companies. That is what has happened in America, which had a significant increase in investment and innovation, and productivity has risen significantly in a long-range curve, as American companies have grabbed market share. In the UK, we saw a second downward bump in productivity in 2011. That came just as the Chancellor realised the mistake he had made in rushing for austerity between 2010-11. He had made massive cuts, but at that point he changed. We have had several long-term plans. In 2011, his new long-term plan was to turn on the monetary tap and crank up an artificial housing boom. Of course, that created even more incentives for individuals, financial companies and businesses to put money into trading in property, rather than in factories and manufacturing.

What we saw post-2011 was British productivity getting even worse, while the productivity of other industrial countries—in particular the United States, but also China—started to improve for the very best of reasons: they were investing in new plant machinery. We have not solved our productivity problem because we have not got the incentives right. I see nothing in the Budget to change that.