Finance (No. 2) Bill

Suella Braverman Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Nigel Mills]

I agree with the hon. Gentleman that we have to think about how to do the annual adjustments—they have to be made only once—if we move to a quarterly system. A lot of very small businesses are already on simplified accounting methods in any case, so perhaps those issues will not apply to that extent. The Minister reminded me that the Government have been trying to expand on those simplified accounting measures to make things easier for small businesses, and so I hope that some of those issues would not arise.

During the debate on my first Finance Bill as a Member of this House, one of my amendments sought to suggest that we move the corporation tax system much closer to the annual accounts that people submit, rather than having lots of different tax adjustments. Such an approach would be much clearer for business and would create big cost savings. With more of these things, perhaps I will eventually get to that dream I had nearly seven years ago, although I am not entirely optimistic about that. To be fair, we should welcome the fact that the Government have relaxed the timetable for businesses whose turnover is less than the VAT threshold. I welcome that and it has been largely welcomed by most small businesses in my constituency, which did have concerns about this.

As we are dealing with corporation tax and as I was talking about amendments I tabled to the first Finance Bill on which I served, let me say that one of my other amendments sought to allow groups to file one corporation tax return for their whole group, rather than having to file one for every individual entity and then making loads of complicated claims about how losses are moved around the group. This Bill contains restrictions on how many of the losses brought forward from previous years can be used, but we are allowing those losses now to be used right across the group, rather than just in the entity that originally made the loss. That is a welcome change.

As we leave the EU and can finally lay to bed all the worries we had about whether we would have to include all EU companies in a group tax return, if we had one, because it would be discriminatory under EU law to include only UK companies, perhaps now is the time to look, as many other countries have, into allowing groups of companies to file one tax return that shows the profit for the whole group and does not have to track every individual transaction between all the companies. That would help us to tackle some tax avoidance schemes that have played on the different treatment of transactions between companies. It would make it easier to comply and help to tackle avoidance so, as we move through the Brexit process, I hope we can look at those issues that we have previously found difficult.

[Suella Fernandes (Fareham) (Con)]

Does my hon. Friend agree that the cut in corporation tax from 19% to 17% in 2020 is only going to be good for the economy—the previous cut produced an increase in revenue from corporation tax—and will set Britain out as a favourable place for business and investment as we enter the next phase of our history through Brexit?

[Nigel Mills]

I absolutely agree: it is important that we continue to send the signal that Britain is a great place to do business and to invest. We want as much international investment here as we can get, so it is absolutely right to have a headline corporation tax rate that is as low as we can have it. I welcome the fact that we are going to get it down to 17%. The previous Chancellor hinted that he might have used 15% to give a sense of direction; perhaps the Government will look into using that in the manifesto we are about to produce.

--- Later in debate ---

[Suella Fernandes (Fareham) (Con)]

I am pleased to speak in support of this Finance Bill on a day when the general election has been announced, giving the British people a real choice to determine the future of our country—a choice between an overspending, overtaxing, profligate Labour Government propped up by SNP subversives and a prudent, fiscally sensible Conservative Government who can continue the achievements that have been secured so far.

I will focus my comments on clauses 1 and 2, relating to income tax. First, though, it is important to put it on the record that the British economy is strong, resilient and robust, which enables it to punch above its weight in the world. Thanks to the decisions of this Government, employment is at a record high. In Fareham, 968 fewer people claim out of work benefits, a drop of 73% since 2010. The budget deficit has been reduced by nearly three quarters, and public sector net borrowing is forecast to fall from 9.9% of GDP in 2010 to 2.6%. In addition, the Bank of England has upgraded its forecasts for growth in 2017. Global businesses such as Google and Nissan are making huge investment decisions in our country. We are seeing expansion in manufacturing, construction and services. So all the predictions that we heard last year about recession, unemployment and stagnation have not been borne out.

While the Bill does not change the income tax thresholds for the 2017-18 financial year, the Government have made sensible changes to income tax in clauses 1 and 2, which should be highlighted. In particular, by raising the tax-free personal allowance threshold to £11,500 this year, we are supporting families, workers and those on lower and middle incomes. This means that the amount that someone can earn tax free will be over 75% higher than it was in 2010. Someone on a salary of £15,000 will pay £800 a year in tax now, compared to £1,700 in 2015. That is a massive boost to those incomes. By taking millions of people out of income tax altogether, we are committing ourselves to supporting people to keep the money that they earn and we are incentivising work.

So why are these lower taxes important? This is a basic principle of economics that the left simply fails to grasp. They just do not seem to get that raising taxes stifles innovation, reduces the incentive to work and kills the desire to get out there and earn a salary.

[Mrs Main]

My hon. Friend is making an excellent speech. Of course it is the Conservative party that has increased the thresholds so that people keep more of their own money. The Labour party got rid of the 10% tax rate and brought more people into paying tax than ever before.

[Suella Fernandes]

I could not agree more. That is the point that I want to make. It is a principle of basic economics. My hon. Friend the Member for Louth and Horncastle (Victoria Atkins) referred to her A-level economics. She will be familiar with the Laffer curve and basic economics, which say that higher taxes do not necessarily lead to higher tax revenues because they reduce the tax base.

[George Kerevan]

Does this Bill not raise taxes on insurance, and on this, that and the other thing? Is the hon. Lady in favour of the Bill or not?

[Suella Fernandes]

I completely agree. I am not saying no tax rises at all. I am saying that tax rises have to be prudently applied, and this Conservative Government definitely apply that principle, as we are seeing when it comes to income tax. Let us look at why people work. They go to work because they want to preserve the amount of money that is not taxed. It is the post-tax amount, not the pre-tax amount, that we all work for. Increasing the tax rate reduces the amount that people have available for themselves and decreases the amount available to be taxed.

[George Kerevan]

They are paying for the health service.

[Suella Fernandes]

Yes, but let us see what history has shown. When Gordon Brown increased the higher rate of tax, tax revenue fell. When my right hon. Friend the Member for Tatton (Mr Osborne) dropped it again, tax revenues increased. It shows that we need to incentivise people to work and invest in education and training, and incentivise businesses to invest in this country and to employ people, which generates more economic activity and revenue that can be ploughed back into our public services. That is what Opposition Members fail to grasp and Conservative Members see very clearly. That is why under Governments led by Labour we ended up with higher taxes, higher borrowing, higher debt and in a recession that this Government are still tidying up.

To close, I am pleased that this Government are committed to enabling people to keep more of the money they earn so that individuals and businesses can take part in our economy. We can create a fairer Britain, and a country in which we can all prosper and be rewarded for our efforts.