1. What steps he is taking to support small businesses through public procurement.
7. What steps he is taking to improve access to Government procurement by small and medium-sized enterprises.
Over the past five years, we have implemented a wide range of measures to open up the way we do business to make sure that small companies are in the best possible position to compete for contracts. These measures include increasing transparency, making opportunities more accessible, removing unnecessary bureaucracy, improving payment terms and clamping down on poor practice.
I thank the Minister for that answer. He will be aware of the report of the Public Administration Committee that showed that at the time not enough was being done. Does he accept that there still needs to be a real culture change in the civil service to open up Government procurement to small and medium-sized enterprises?
We have obviously made a lot of progress and there is more to do, but we intend to extend and embed the reforms that we have made over the past five years. I would just remind my hon. Friend that at the last general election, only 6.5% of direct central Government procurement spend was with smaller businesses, and we had no idea how much was spent in the supply chain, so we have made huge progress.
The Minister omitted to say in his answer that nine out of 17 Departments spent less with SMEs in 2013-14 than they did in 2012-13. With just 10% of Government contracts going to small businesses, why have this Government been so poor when it comes to procurement from our SME sector?
In 2010, the Government set an aspiration that by 2015 25% of Government procurement spend by value should go to SMEs directly and into the supply chain. In fact, we have exceeded our target, and a record 26.1% is now being spent with SMEs. That is a record to be proud of, and a tribute to my right hon. Friend the Minister for the Cabinet Office and Paymaster General.
May I congratulate my hon. Friend on all the measures that he and his colleagues have taken on this subject? I know that four businesses in my constituency are currently benefiting from their measures.
I know my hon. Friend is a great champion of small businesses in his constituency. One of the wider benefits of this programme of commercial reform is that it enabled the Government to make the huge saving of £15 billion in the years 2010 to 2014. As I say, that is a lasting tribute to my right hon. Friend.
The Minister might confess that it would help if he bought enough desks for civil servants. In answer to 11 parliamentary questions, Whitehall Departments have told me that they have more civil servants than desks. In the Department for Transport, there are 6,600 officials and 1,500 desks. This sounds more like musical chairs than hot desking. Is it the cause of all the chaos and confusion in this Government?
I am not quite sure whether that is a serious question, because all modern companies and the modern civil service should be hot desking, which is exactly what is taking place.
2. If he will expedite the review of papers held on people convicted in 1973 in relation to alleged incidents during the national building workers’ strike at building sites in the Shrewsbury area so that the review is completed as soon as possible.
Yes.
I am very grateful for that answer, and I wish I believed it. Sadly, it was confirmed in a debate yesterday afternoon that despite this House overwhelmingly agreeing on 23 January last year that the papers would be released—and that Ministers would assist in getting the papers released—they have not been. The campaign has consistently met blockages. I am calling on the Minister to bring forward the release of these papers as quickly as possible and to stop the 43-year cover-up, which will see innocent men going to their graves as convicted criminals to protect the Tory Ministers of 40 years ago. It is a disgrace.
I am afraid that the hon. Gentleman is unaware of the actual situation. The review of which he speaks is under way at present, but the papers—and the particular parts of those papers that were kept back on security grounds—have all been given to the Criminal Cases Review Commission, which has looked at them and is using them in the course of its review. There is no question of any injustice of the kind he describes occurring as a result of the lack of those papers being present. I, however, assure the hon. Gentleman that if I find myself in my current post after the election, I shall seek to expedite the review.
The hon. Member for Blaydon (Mr Anderson) asked a serious question. This was an establishment stitch-up 42 years ago, and for 42 years it has been an establishment cover-up. Does the Minister not realise that there cannot possibly be any state security reasons why the records of an industrial dispute should not be made public?
My hon. Friend is also suffering from a misconception. The bulk of the papers involved were released. The bits that were not released relate to security and make specific references to the security services and their activities. Those are being reviewed, and a decision will be made. He is absolutely right that the crucial point is that the people involved deserve justice, so the CCRC needs to see the unexpurgated version, and it has. It has been given full sight of all the papers.
It is increasingly clear that there is simply no justification for the delay in the review or for the refusal to release the full papers about the case. The Minister may refuse to act, but a Labour Government will act. We will release those papers with the urgency that the situation demands. Justice delayed is justice denied. Why is he so determined to ignore the will of Parliament, ignore the public and ignore the urgency of the situation, and why will he not release the papers now?
I am sorry that the shadow Minister wrote that question before she heard my previous answers. If, as I hope she will not, she finds herself a Minister after the election and has to make this decision—[Hon. Members: “Hear, hear.”] If she finds herself in that position, I hope that she will discover the truth, which I have already told the House—that the CCRC has already seen the papers, so there is no question of justice being either delayed or denied.
3. What assessment he has made of the effectiveness of the work of the Government Digital Service in implementing the digital-by-default programme.
The Government Digital Service has created the award-winning, world-leading gov.uk, the single web domain for Government information and services, and 25 major services have been redesigned to make them simpler, clearer and faster to use. That will not only provide savings to the taxpayer but improve delivery for the public, so that it is focused on user need, not Government convenience. In the next Parliament, we will deliver government as a platform, building common services such as a once-for-all payments platform.
The Government Digital Service has been one of the current Government’s unsung success stories, improving the efficiency and effectiveness of public services and saving the taxpayer money. Will my right hon. Friend, on the occasion of his final Cabinet Office questions, accept my congratulations on the fantastic revolution in public services that he has led over the past five years?
I am grateful to my hon. Friend for those kind words. There has been a great success with the Government Digital Service, which the Washington Post has hailed, stating that the UK has set “the gold standard of digital government” The Obama Administration and the Australian Government have created their own analogous organisations, explicitly modelled on what we have done.
I do not know what the Minister is eating for breakfast this week, but you do not seem to be able to keep him down, Mr Speaker —I half expect him to announce a U-turn on his intended retirement before the week is out Is not the secret success of the Government Digital Service the confidence that it has given Departments to develop solutions in-house with an agility that was simply impossible in the days of lengthy contractual negotiations with large IT companies?
My hon. Friend is completely right. From a time when British government was synonymous with failed IT projects, we have moved to being the world leader in digital government. There is still a huge amount more to do, but I am grateful to him for his support for our work.
4. What savings have accrued to the public purse from the Government's reforms to trade union facility time.
At the time of the last general election, there was no proper monitoring of trade union facility time in government. We now have controls in place that have saved the taxpayer some £26 million in the past year, and we have reduced the number of taxpayer-funded full-time union officials from 200 in May 2010 to just eight today.
While I generally support the principle of the union movement—[Interruption.] Why is that surprising? I generally support the principle, but it is not for the taxpayer to fund. What was the cost of giving trade union representatives in the civil service taxpayer-funded time off when this Government came to power?
Part of the problem was that it was not monitored, but the information we put together showed that the cost was £36 million, which we have cut to less than £10 million. There is a perfectly proper role for union officials to be embedded in the workplace, as they can resolve disputes and grievances quickly, but the situation was completely out of control and we have brought it under control.
Will the right hon. Gentleman take this opportunity to thank those civil servants—mainly trade unionists—who have had to implement Government policies, particularly in the Department for Work and Pensions, such as referring people to food banks? Perhaps against their own judgment, they have had to implement austerity, which has done great damage to the people of this country.
I point out to the right hon. Gentleman, for whom I have great respect, that the need for austerity was caused by the huge budget deficit that we inherited from the Government of which he was a part. We would rather have not had to do that, but I give credit to civil servants across the country who have done a huge amount. The civil service is smaller than at any time since the second world war, but it is doing more than it was before and productivity has improved dramatically.
The Paymaster General has spent the last five years attacking civil servants’ facility time and check-off. We now learn, a week before Dissolution, that he is inserting a gagging clause into the civil service code. Why is it so necessary and urgent to change the civil service code now?
The change to which the hon. Gentleman refers simply makes clear what was already the case. There will be considerable concern about whistleblowing, and we will do whatever is needed to ensure that we continue to be much more open about things that have gone wrong. Things are much less suppressed than they were when the Labour party was in power.
5. What progress he has made on promoting digital inclusion.
This is a devolved matter but in England and Wales more than 70 public, private and voluntary sector organisations now support activity under the digital inclusion charter, working together to help individuals, small businesses and charities to realise the benefits of being online. Later today the Government will launch the Digital Friends initiative that will call on civil servants to go out into their communities and teach digital skills to friends, family, neighbours, or colleagues who are offline.
The Minister will be aware that, unfortunately, Glasgow has one of the highest levels of population who are offline. The Government have recently run a series of adverts on Glasgow radio stations about encouraging people to switch their electricity and gas suppliers, but they are asking people only to use the online route. What assessment has he made about how we can encourage digital inclusion and the appropriate way to target Government adverts?
As I said, this is a devolved matter. The Scottish Government published their digital participation strategy in April 2014, led by the Cabinet Secretary for Culture, Europe and External Affairs, Fiona Hyslop MSP, and supported by a ministerial advisory group.
6. What assessment he has made of the effect on local economies of the reduction of jobs in the civil service.
Although the civil service is now at its smallest size since the second world war, officials have helped to deliver efficiency and reform savings of £11 billion in this financial year to January against a 2009-10 baseline. I pay tribute to the hard work and dedication of hundreds of thousands of civil servants up and down the country.
Can the right hon. Gentleman explain why he shut an office in my constituency that I fought long and hard to maintain, given that people have more than met the targets they have been given on every occasion in every year? Will he personally—he has not got long to go—have a wee look at that and perhaps write to tell me why he shut that office?
I am not sure which department the office is in, but every department must look to its efficiency and many are transforming what they do and delivering more and better for less. We have shown that that can be done, but there is much more still to do.
With the news this morning that HSBC is choosing Birmingham over Singapore or Hong Kong, and that Jaguar Land Rover is opening a new plant in the Birmingham area, will my right hon. Friend pay tribute to the civil servants who enabled that to happen in a new, clean, civil service that is lean and effective?
I pay warm tribute to what my hon. Friend has done to support the bringing of employment to the west midlands. He is a hugely energetic local Member of Parliament. Yes, the civil service does these things extremely well. It is a smaller civil service, but it is more effective than it was. I think its leadership would agree that there is still much more to do.
My hon. Friend the Member for Central Ayrshire (Mr Donohoe) raised the issue of the Government closing down the Her Majesty’s Revenue and Customs office in his constituency. Why is the Minister closing down the HMRC office in my constituency, the Army recruitment centre in my constituency and the Crown courts in my constituency?
As I said to the hon. Member for Central Ayrshire, every Department in Government has to look to its efficiency, make sure it can live within its means and do the job on behalf of the public. The civil service does not exist to provide employment; it exists to serve the public. We found that that can be done more efficiently and effectively, doing more and better for less. At the same time as employment in the public sector has fallen, it has risen in the private sector by 2.3 million.
Does the Minister agree that in the parts of the United Kingdom where there has been an over-dependence on the public sector and large numbers of jobs in the civil service, such as in Northern Ireland where the Executive are trying to reduce the dependence on the public sector, central Government should support inward investment through the private sector?
I completely agree with the hon. Gentleman. He is quite right to identify both the problem and the solution. The Northern Ireland economy will undoubtedly benefit from more private sector investment, from overseas or from within, with a smaller public sector.
8. What steps he has taken to increase the accountability to Parliament and the public of senior civil servants.
The Prime Minister can now exercise choice in making permanent secretary appointments. We have introduced fixed tenure for permanent secretaries. We publish their performance objectives, as well as improved management information, to allow them to be held to account. We have revised the Osmotherly rules to ensure that senior responsible owners are directly accountable to Parliament for project implementation and to allow former accounting officers to be called to Select Committees.
Will the Paymaster General update the House on the role that Ministers might have in the performance review of permanent secretaries?
We have now instituted a formal process where formal input must be provided by Ministers to the Cabinet Secretary and head of the civil service on the performance of their permanent secretaries. That input has to be taken into account as part of the end of year appraisal undertaken by the head of the civil service.
Order. There are so many noisy private conversations taking place it is quite difficult to hear the Minister’s answer. Let us have a bit of order for the Chair of the Public Administration Select Committee of the House of Commons.
At what may well be my right hon. Friend’s last appearance in the House of Commons at the Dispatch Box, may I remark that his five-year term as Minister for the Cabinet Office in charge of civil service policy for the Government will have truly left its mark not just on the civil service but on this House? His tenacity, commitment and sincerity are of great credit to him.
I am extremely grateful to my hon. Friend for his kind remarks. I pay tribute to him for the way in which he and his Committee have held us to account for what we do. He has done that consistently and persistently. It has not always been comfortable, but that is what the House of Commons is for.
T1. If he will make a statement on his departmental responsibilities.
My responsibilities are for efficiency and reform, civil service issues, public sector industrial relations strategy, government transparency, civil contingencies, civil society and cyber-security.
I would like sincerely to thank my right hon. Friend and neighbouring Member of Parliament for all his assistance and advice over many years., Can he estimate the amount of taxpayers’ money that has been saved through efficiencies in his five years in the Cabinet Office
In the course of this Parliament we have saved more than £50 billion through efficiency and reform savings. I am extremely grateful to my hon. Friend for the support he has given throughout the process. He is a completely brilliant local MP, and I am confident he will be back here after the election.
With your permission, Mr Speaker, I would like to pay tribute to the right hon. Gentleman, given that this is likely to be his last appearance in this place. He has a long record of public service, which he has always pursued with principle, dignity and drive. Even when it has not served his own career, he has never been afraid to speak out, and I have always respected him for having a clear agenda. He is a moderniser and impatient for reform, and despite our disagreements, I am sure that Members on both sides of the House will want to pay tribute to his distinguished career Looking to his future, I wonder whether he wants to follow in the footsteps of his friend Michael Portillo. If so, I am happy to arrange some practice sessions for him cosying up on the sofa with my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott). I wish him well with his future plans, albeit with me taking his place in the Cabinet Office, and I wondered whether he wanted to take this opportunity to tell us some of his fondest memories of this place.
I am extremely grateful to the hon. Lady for her kind and warm words; they are hugely appreciated. We have pursued a difficult and often controversial agenda of reform, but one of things that has given it strength has been the robust support from her and her predecessors. Whatever the result of the election—I hope it will not be the one she foresees—this programme of reform must continue and be followed through.
T2. In joining the tributes to my right hon. Friend for his sterling public service, may I ask what else he could have achieved in the past five years had he been a member of a real Conservative Government?
That is a tempting question, but actually we have achieved a huge amount. I pay tribute to my right hon. Friend the Chief Secretary to the Treasury, who has worked closely with me and my officials on driving through this programme. It is hard to see how we could have done much more in that context.
T4. Does the Minister agree that one of the great failures of this Government has been their inability to check the quality of private companies engaged to deliver our people’s public services? Has that not been one of the fatal policy weaknesses of this Government?
We have improved the quality of the commercial directors and teams across Government so that we can monitor much better what is done than was the case under the hon. Gentleman’s Government, and I announced yesterday some principles for transparency that will take this process yet further. It is much better than it was, but there is still a lot to do.
T3. My right hon. Friend has been an outstanding Minister on cyber-security. He recently visited Pakistan and met the chief of general staff in the Pakistan army. Did they discuss greater co-operation between our two countries on cyber-security and sharing the good practice he has developed in this area?
I am grateful to my hon. Friend for his comments. Yes, we had a fruitful visit to Pakistan and are collaborating and co-operating with the Government of Pakistan in several important areas.
T5. What assistance is the Minister for Civil Society giving to the National Citizen Service to maximise the number of students from disadvantaged backgrounds who participate in it so that they can play their full part in a programme that would benefit them more than those from more affluent areas?
The hon. Gentleman’s interest in the NCS is welcome and I know is reflected in his constituency, where demand for the programme is high among pupils at Bulwell academy and Bluecoat Beechdale academy. I am delighted that the latest independent evaluation found that in 2013 16% of NCS participants were in receipt of free school meals, compared with about 7% of 16 and 17-year-olds in the general population.
T6. The Cabinet Office has been relentless in reducing waste from public services. However, does my right hon. Friend share my concern that the hidden cost to the taxpayer, as well as the lack of local accountability, from doing away with the shire fire and rescue services and trying to create a national fire service as Labour proposes would be considerable?
I share my hon. Friend’s view that the local accountability that comes with local fire services is extremely important. I would be very loth to see that change.
Q1. If he will list his official engagements for Wednesday 25 March.
I know the whole House will wish to join me in offering our deepest condolences to the families and friends of all those killed in yesterday’s Airbus crash in France. It is heartbreaking to hear about the schoolchildren, the babies and the families whose lives have been brought to an end. As the Foreign Secretary has said, it is very likely that some British nationals were involved. At this stage, three British nationals have been identified as having been on the flight. The Foreign Office is working urgently to establish whether any further British nationals were among those on board. We are providing consular assistance and will give further information as it becomes available. Our ambassador to France is at the crash site today. I spoke to Chancellor Merkel and Prime Minister Rajoy last night and made it clear that the UK is ready to offer any assistance we can. I expect to speak to President Hollande later today This morning, I had meetings with ministerial colleagues and others, and in addition to my duties in this House, I shall have further such meetings later today.
May I join the Prime Minister in expressing sympathies to all the families affected by yesterday’s tragedy In 2014, the number of people working on zero-hours contracts increased by 19%, unsecured borrowing rose by 9%, and the percentage living in relative poverty was at the highest level since 2001. Does the Prime Minister agree that on his watch the future of our young people is only getting darker?
What has happened on my watch is that 174,000 more people are employed in Scotland. Zero-hours contracts account for one in 50 jobs, and it is this Government who have outlawed exclusivity in zero-hours contracts—after the 13 years of inaction from the Labour party. In the hon. Lady’s own constituency, the claimant count has fallen by 32% since the election. That is evidence that our economic plan is working in Scotland, as it is throughout the rest of the United Kingdom.
One of the most disturbing scandals has been the infection of thousands of people across the nation with HIV and hepatitis C through contaminated blood. Today Lord Penrose publishes a report that follows nearly 25 years of campaigning by Members on both sides of this House to address the scandal. Will the Prime Minister, as the last act of his Government, ensure that there is a full apology, transparent publication and, above all, proper compensation for the families terribly affected by this scandal?
My hon. Friend is absolutely right to raise this, with the Penrose report being published today. I can do all of the three things he asks for. I know that many Members on all sides of this House have raised the question of infected blood, and I have spoken about how constituents have been to my surgeries. While it will be for the next Government to take account of these findings, it is right that we use this moment to recognise the pain and the suffering experienced by people as a result of this tragedy. It is difficult to imagine the feelings of unfairness that people must feel at being infected with something like hepatitis C or HIV as a result of a totally unrelated treatment within the NHS. To each and every one of those people, I would like to say sorry on behalf of the Government for something that should not have happened No amount of money can ever fully make up for what did happen, but it is vital that we move as soon as possible to improve the way that payments are made to those infected by this blood. I can confirm today that the Government will provide up to £25 million in 2015-16 to support any transitional arrangements to a better payments system. I commit that, if I am Prime Minister in May, we will respond to the findings of this report as a matter of priority Finally, I know that Lord Penrose was unable to present the findings of his report today because of illness. I am sure the whole House would want to send him our very best wishes.
Let me first say that I fully associate myself with the remarks that the Prime Minister has just made about the victims of infected blood. We undertake today to act on those recommendations as well. I also join the Prime Minister in offering my condolences to the families who lost loved ones in the devastating plane crash yesterday, especially remembering the three British victims. Our thoughts are with all the victims, their families and their friends On Monday, the Prime Minister announced his retirement plans. He said that it was because he believed in giving straight answers to straight questions. After five years of Prime Minister’s questions, that was music to my ears. So here is a straight question: will he now rule out a rise in VAT?
In 43 days’ time, I plan to arrange the right hon. Gentleman’s retirement. But he is right: straight questions deserve straight answers, and the answer is yes.
No one is going to believe it. No one is going to believe it because of the Prime Minister’s extreme spending plans, because his numbers do not add up, and because he promised it last time and he broke his promise. Now, if the Prime Minister is in the mood for straight answers, let us try him with another one. Can he confirm that a spending cut—[Interruption.]
Order. The Leader of the Opposition will be heard. If we overrun, so be it; it does not matter to me. The right hon. Gentleman will be heard, and the Prime Minister will be heard, and every other Member will be heard.
Can the Prime Minister confirm that the spending cuts that he plans in the next three years will be even greater than anything seen in the last five?
The right hon. Gentleman is wrong about that, but look: straight answer from me, straight question to him. I have ruled out VAT. Will he rule out national insurance contributions? Yes or no?
The Prime Minister will have plenty of time to ask questions after 7 May—and I am afraid to say that his own Office for Budget Responsibility has referred to “a much sharper squeeze on real spending…than anything seen over the past five years” Next question, and this should be an easier one. Five years ago, the Prime Minister promised to cut net migration to tens of thousands. Straight answer to a straight question: is that a broken promise? Yes or no?
Let me give the right hon. Gentleman a second chance. I answered a very simple question about VAT. I ruled out an increase. Let me ask the right hon. Gentleman again: will he rule out an increase in national insurance contributions We all know that this is Labour’s jobs tax. This is Labour’s tax of choice. This is what Labour clobbers working people, families and enterprises with. So let me ask the right hon. Gentleman again—straight question, straight answer—will he rule it out?
There is only one person who is going to raise taxes on ordinary families, and that is the Prime Minister—and he is going to cut the national health service. Moreover, he did not answer the question. Let me now ask him a question about the NHS. Five years ago, he promised no top-down reorganisation of the NHS. Now, this is an easy one: can he confirm that that is a broken promise? Yes or no?
I will tell the right hon. Gentleman what is happening in the NHS. There are 9,000 more doctors, 7,000 more nurses, and 20,000 more bureaucrats. But we have heard it now: a clear promise on VAT from this side of the House, and no answer on national insurance from that side of the House. And it goes to a bigger point. The right hon. Gentleman has had five years to come up with an economic plan, he has had five years to work out some policies for the future of this country, he has had five years to demonstrate some leadership, and he has failed on every count.
Nobody believes the right hon. Gentleman’s promises on VAT and nobody believes his promises on the national health service because he has broken his promises in this Parliament. Now, let us try him on one more: three years ago he cut the top rate of income tax. Can he rule out, under a Tory Government, a further cut in the top rate of income tax?
The richest in this country are paying more tax under this Government than they paid under the last Government. We have set out our plans for tax cuts: if you are young and you work hard, you will get an apprenticeship; if you are a family, we will take you out of tax until you earn £12,500. I do not want to see middle-income families drawn into the top rate of tax. We have made our promises. Now, let the right hon. Gentleman make a promise: will he increase national insurance? Yes or no?
Nobody believes the right hon. Gentleman’s promises. He has had five years of failing working families, with worse to come—more spending cuts, more tax cuts for the richest, more betrayal. This has been a Government of the few for the few. It is time for a better plan. It is time for a Labour Government.
Well, we have seen it all: absolutely no ability to answer a question. This is a country where unemployment is falling; the economy is growing; the deficit is coming down; in our NHS, the operations are going up; there are more good school places for our children; living standards are rising; inflation is at zero; and there are record numbers in work—all of this could be put at risk by Labour. That is the choice in 43 days’ time: competence and a long-term plan that is delivering, instead of the chaos of economic crisis from Labour.
Q3. Thirteen months ago, my constituent Leigh Smith tragically lost her three-month-old baby Beatrice due to a rare heart condition. In an effort to help other families avoid the grief and despair of losing a child, Mrs Smith wants all schools to install defibrillators and to teach life-saving skills. Will the Prime Minister offer his support to this vital cause?
First, let me say to my hon. Friend and his constituent that there is nothing more heartbreaking than losing a child and we should do everything we can to help with this. The Chancellor announced in his Budget £1 million for defibrillators, including putting defibrillators into schools. I want to see a situation where community buildings, schools, pubs, village halls—all of them—have defibrillators, because we can save lives in this way, and particularly when we are saving such young lives, as in my hon. Friend’s constituent’s case, we must do better.
Q4. May I start by expressing my condolences to the families of those who lost their lives in the tragic Germanwings air crash?There are not any in the Prime Minister’s constituency, there is just one in the Home Secretary’s seat, and yet there are 680 people seeking asylum in Rochdale, more than in the entire south-east of England. We are all proud of the assistance that this country offers to those in need, but public services in Rochdale are already stretched and this uneven dispersal of asylum seekers is not helping the situation. Does the Prime Minister accept that this is not fair on Rochdale, and what does he plan to do about it?
I think the hon. Gentleman is absolutely right to raise this issue, that what we inherited was completely unacceptable. The numbers of asylum seekers are down by a third from the peak they reached under Labour. We are fast-tracking more cases and we are resolving more cases more quickly, but I have to say to him that the legislation governing the distribution of asylum seekers was put in place under the last Labour Government I have been following what the hon. Gentleman has been saying. He has sent some very good dispatches from the front in terms of knocking on doors in Rochdale, and this is what he says: “Any Labour politician that says to you they knock on a door and Ed Miliband is popular are telling lies.” He says that about his own side. He says: “You know, this north London elite view of the world just doesn’t play in Rochdale, Rotherham, Runcorn or anywhere else beginning with an ‘R’ outside the M25.” I would like to encourage him to do more interviews, because he could add Reading, Redditch, Redruth, Reigate, Rochford, Romford, Romsey, Rossendale, Rushcliffe, Rutland, Rye—and probably Rosyth too the way they are going.
SNP gain!
Q5. I don’t think so love. In May 2010, unemployment in South Derbyshire, an ex-mining area, stood at 1,540. Today it is almost a third of that, at 580. Does my right hon. Friend agree that the strong Conservative Government and a Conservative district council with a long-term economic plan are able to succeed in bringing jobs and growth where the Labour equivalent failed to do so?
My hon. Friend is absolutely right; in South Derbyshire, since the election, the claimant count—the number of people claiming unemployment benefit—is down by 68%. Those are the statistics, but every one of those people is someone with a job, with a livelihood and with a chance to provide for their family. That is what this election is going to be about: for young people who want jobs, we are offering apprenticeships; for young families who want homes, we have got homes with Help to Buy; and for pensioners who want security, we have got the pension and the pension benefits guarantee. That is what is on the ballot paper and that is what I think people will choose at the next election.
Following the publication of the Select Committee on Northern Ireland Affairs report on the disgraceful on-the-runs debacle yesterday, it has now been revealed that the man who went about distributing these letters to IRA fugitives, Gerry Kelly of Sinn Fein, has actually received the royal prerogative of mercy for certain crimes. Will the Prime Minister now list in the Library of the House all those other Sinn Fein members and leading republicans who have likewise received a royal pardon, so that republicans in Northern Ireland can know which of their great stalwart leaders have begged or asked for, or received, probably on bended knee, such a royal pardon and secondly, so that everybody in the country can know which Governments have been involved in such nefarious activities?
I will look very carefully at the question the right hon. Gentleman asks and what more we can do to be transparent, because this Government, not least by holding the on-the-runs review, have been transparent. What I would say to him is that Governments in the past have had to make difficult decisions with respect to Northern Ireland to try to bring parties together and produce the peaceful outcome that we have today. That has involved difficult compromises and things that he and probably I have found, at times, deeply distasteful. None the less, sometimes, in the pursuit of peace, some of these things have to be done.
Q6. May I congratulate my right hon. Friend and the Department for Transport on their securing a £50 million rail infrastructure improvement scheme in South West Trains, which feeds my constituency? However, we still need better infrastructure—additional track; flyovers and power supply—if we are to get longer trains and faster journey times to Weymouth and Portland. Will he meet me to discuss this further to see whether we can further boost the economy in South Dorset?
I am always happy to meet my hon. Friend and discuss these issues. I believe this Government have done right by the south-west, not least with the announcement the Transport Secretary has made of an additional 57,000 seats on South West Trains every week from December and 1,400 extra car parking spaces at train stations across the region. We can have this strong transport investment, not just in the south-west, but right across our country, only because we have a long-term economic plan that is delivering the growth this country needs.
Has the Prime Minister not put himself on a fixed-term contract? Is he not now concerned that it will be a zero-hours contract after 8 May?
It is very simple what I have said. I answered a very clear question, and perhaps the Leader of the Opposition will have to answer some clear questions. It is very simple: two terms, 10 years and one kitchen.
Q7. Is my right hon. Friend as alarmed as I am— Order. The hon. Lady must be heard. Is my right hon. Friend as alarmed as I am that Alex Salmond is planning to impose a series of demands on the UK Government? Will my right hon. Friend confirm that he will have nothing to do with such demands?
My hon. Friend makes a very important point. As far as I can see, Alex Salmond has taken the entire Labour party hostage, and today we have got the ransom note. The ransom note is very clear. It says, “Higher borrowing, uncontrolled immigration, unfettered welfare, higher taxes and weaker defence.” That is what is being demanded, and the British people have only one way of saying no to this appalling hostage situation, which is to vote Conservative on 7 May.
May I ask the Prime Minister about the continually dire position at London Bridge station, which is a cause of major concern? Is he aware of the abysmal service and the chaotic scenes that have accompanied Network Rail’s latest stage of development? Will he instruct the Secretary of State for Transport personally to take responsibility for resolving the debacle and for bringing forward an early straightforward compensation scheme for the many tens of thousands of commuters who have had their lives so seriously disrupted?
The hon. Gentleman is right to raise that matter. Anyone who has seen the pictures of what has happened some mornings at London Bridge station knows that the pressures are immense. What we need to do is ensure that Transport for London and the Department for Transport are working together—as they are—to bring about the best possible solution. People cannot criticise this Government for failing to invest in London’s transport infrastructure. The Crossrail scheme, which I visited again a couple of weeks ago—[Interruption.] Labour Members say, “We did that”. They did not. They left an enormous bill, but it was this Government who put in the money and got it built. It is one thing to promise something, but another to put the diggers in the ground and to get it done, which is what we have done.
It is very easy to say the words, “long-term economic plan”, but in Brighton, Kemptown, the past five years have seen sharply falling unemployment, huge increases in business start-ups, and a massive £480 million investment in the new hospital. Does the Prime Minister think that the sun will continue to shine on Brighton?
First, let me pay tribute to my hon. Friend who has been a real champion for Brighton. He has campaigned so hard for the extra investment and the rebuilding of the hospital, and I am glad that the redevelopment of the Royal Sussex county hospital will take place. I also note that, in his constituency, the claimant count has gone down by 52% and the long-term youth claimant count by 50% since the last election. On that basis, I think that we can say that the sun will continue to shine on Brighton.
Q9. I agree with the Prime Minister that the sun shines on Brighton; it shines bright green on Brighton Pavilion. The Brighton Argus recently revealed that, in the space of a single month, nearly 1,700 trains between Brighton and London Victoria ran late, but, to add insult to injury, unfair train company rules meant that passengers could claim compensation on just 59 of those 1,700 journeys. Will he join me in backing The Argus newspaper campaign for a fairer compensation system that puts money back into passengers’ pockets?
I should have said in my previous answer that the only place in Brighton where the sun does not shine very brightly is where the local Green council is incapable of emptying people’s dustbins. We need a Tory gain there as well. But the hon. Lady is right to raise the case of rail compensation. We are looking closely at The Argus campaign and at what can be done to make the compensation scheme simpler and easier to deliver for people.
Q10. Thanks to funding from this Government, thousands of constituents in the East Riding of Yorkshire and North Lincolnshire now enjoy access to superfast broadband. That is helping to bridge the digital divide between rural and urban areas. It is also helping small businesses in rural areas to benefit from our “long-term economic plan”—I had to say it once. However, getting broadband rolled out for the remaining properties in East Riding will be particularly difficult. Will my right hon. Friend meet me and other East Riding MPs to ensure that we can get the delivery out as quickly as possible?
I am always happy to meet my hon. Friend who is a real champion for his constituents. He is right to put this issue of rural broadband front and centre in his campaign. As he knows, we are investing around £780 million to get superfast broadband to 95% of UK premises by 2017. That programme is going well. Every day, our roll-out reaches another 5,000 homes and businesses. [Interruption.] The Labour party complains, but broadband roll-out has doubled under this Government. That is what has happened because of the work that we have put in. We are investing extra money to ensure that we can get to the most hard-to-reach premises, and that will include subsidising the cost of installing superfast satellite services, which will give access to those in the hardest-to-reach areas who currently have the slowest speeds.
Michael Connarty.
SNP gain!
Q11. A young couple in my constituency—[Interruption.]
Order—on both sides of the Chamber. It is a gross discourtesy to the hon. Gentleman and to his constituents. The hon. Gentleman’s question will be heard.
A young couple in my constituency were persuaded by Mr Steven Macsporran of the Advice Centre for Mortgages to put a legacy they had into a flat to rent in Turkey. He was an agent for ROPUK. They got no flat and lost £47,000. The Financial Ombudsman Service said that it could not give any advice because it was unregulated advice. Does the Prime Minister agree that that company, and companies like it, should not be allowed to advertise themselves as being regulated by the Financial Conduct Authority if they give such advice, and is it not time we dealt with this rip-off Britain problem?
First, I pay tribute to the hon. Gentleman, who is standing down at the election. He has been a Member of Parliament for—[Interruption.] He is not?
I am not.
I am sorry. Let me rephrase that. [Interruption.] I want to defend my team, because this is my 146th appearance at the Dispatch Box for Prime Minister’s questions, and they normally get these things right. Let me pay tribute to the hon. Gentleman anyway and wish him luck in the current battle he has in his constituency We have all heard such cases in our constituency surgeries, from people who put their money into timeshare schemes with companies that subsequently turned out to be disreputable. We have all then had the challenge of getting those companies properly uncovered and regulated. I will look into the specific case and write to him, either in his capacity as an MP or whatever it is after the election.
Q12. The Prime Minister knows that I have often been unhelpful to the Government in the Health Committee, but as a member of that Committee it is my duty to be impartial. Does he share my concern that the objective scrutiny role of the Select Committee system has been fundamentally undermined by Labour’s refusal even to discuss a draft report, having heard evidence of decreased administrative costs since the health reforms, privatisation slowing since 2005, the Transatlantic Trade and Investment Partnership not posing a threat to the NHS, no charges or top-ups introduced, and no plans to do so, and does he agree—[Interruption.]
Order. The remainder of the question—I know that it is finishing very soon—must be heard.
Thank you, Mr Speaker. The Committee heard evidence of no charges or top-ups being introduced, and no plans to do so, and does the Prime Minister agree that refusing even to discuss that flies in the face of our public—[Interruption.]
Prime Minister.
My hon. Friend makes a very important point. That Select Committee report has been held back because Labour Members of Parliament do not want to tell the truth about our national health service; they are only interested in trying to weaponise it. The fact is that there are more doctors and more nurses and more operations are being carried out. That is the truth, and it is disgraceful that Labour is trying to cover it up, just as it did in office.
No SNP gain here. This is, in fact, my last Prime Minister’s questions after 23 years in this place, but I hope that my very good friend the former Member for Banff and Buchan will be rejoining this place in May. Can the Prime Minister please tell us which causes him more anguish: his imminent return or my imminent departure?
I was quite looking forward to missing you both, but obviously that is not going to be—[Interruption.] I have sat in this House for 14 years, and all the time that the right hon. Gentleman has been a Member of Parliament, I remember some very passionate speeches, not least on the Iraq war. I remember some very passionate speeches about civil liberties in our country and making sure that we respond in the right way to terror. He has always stood up for his constituents, he cares passionately about Wales, he cares passionately about rugby, and he will be missed by everyone.
Q13. On the very last day before the 2010 general election, the Prime Minister, then Leader of the Opposition, visited Montgomeryshire. It was a joyous occasion which led to my presence in the House today. Will the Prime Minister make another visit to see for himself the dramatic improvement in business confidence and the dramatic falls in unemployment that have taken place in Montgomeryshire as a result of the Government’s long-term economic plan?
It was a huge pleasure to go and visit my hon. Friend just before the last election. I thought it was a bit of a long shot, but none the less he made it here and he has been a fantastic Member of Parliament, standing up for his constituents. In Wales since the election we have 22,000 more small businesses, employment in Wales going up by 52,000, unemployment coming down and private sector growth. We see a real recovery in Wales and it needs my hon. Friend back here, standing up for his constituents and for Wales in the House of Commons.
I have here a cutting from The Press in York on 24 April 2010, which says: “David Cameron last night dismissed claims the Tories would put up VAT if they win the election” That was at the last election. Why should the public believe promises that he makes at the coming election?
I have given the straightest possible answer, and this time in government we know what needs to be done—we know the changes, and both sides of this House have voted for a £30 billion adjustment. Those on the Labour Front Bench voted for it too. We have set out what needs to happen with departmental spending, welfare and tax avoidance. The Labour party has said that half of the £30 billion must be raised in taxes, so we know it: there is a tax bombshell coming from Labour, and it is going to be, we learned today, a jobs tax bombshell. They wanted to do it before the last election, and they want to do it after the next election. It would wreck our economy and put up taxes for working people, and there is only one group of people who can stop it.
Q14. Many hundreds of households in Amber Valley still suffer from noise from the A38 through my constituency. Does my right hon. Friend agree that measures to reduce the noise should be brought forward, and that where development takes place which uses the advantages of being near the A38, the developers should use their profits from those sites to fund noise reduction measures?
Today is a good day to discuss noise pollution. It is probably appropriate that we quieten down and think about the subject for a minute. My hon. Friend has consistently campaigned on this issue. He is quite right to do so—it is a big concern to his constituents. We are providing £75 million for noise mitigation on our national road network. We are resurfacing 80% of that network with low noise surfacing. That can make a real difference, and I will look carefully at what we can do for my hon. Friend’s constituency.
Last week some of the rougher elements of the House chose to refer to the Prime Minister as “chicken”. I hope we have moved on. However, does the Prime Minister agree that it is entirely fair now to refer to him as a lame duck?
I will tell the hon. Gentleman what is a lame duck—trying to get into Downing street on the back of Alex Salmond’s coat tails. The Opposition now know that they cannot win the election on their own, so they are preparing to answer the ransom note. Higher taxes, more borrowing, weaker defence, breaking up our Union—that is what we have to stop. Never mind talk of ducks; I am looking at Alex Salmond’s poodle.
Q15. On Friday, together with local businesses and the local enterprise partnership, I will be launching a new campaign, Gateway to Growth, calling for a link road from the M4 to the Avon ring road that will help to deliver millions of pounds of extra investment and new jobs to the Bristol region, and provide the Kingswood area with the access to the motorway it needs. As part of his long-term economic plan, will the Prime Minister look closely at the campaign and the case for an M4 link? First of all, let me pay tribute to my hon. Friend for his very hard work for people in Kingswood and in Bristol more generally. He is absolutely right that we do need to see better transit schemes in Bristol, and I know that the Transport Secretary will be happy to look at the campaign and the case he makes. It is also of note—and I am sure that, as a great historian and, indeed, someone who has written about Richard III, my hon. Friend would want me to say it—that we should not let this day pass without noting that of course Richard III will be buried tomorrow. That is worth remembering. It is the last time that someone did in one of their relatives to get the top job and the country ended up in chaos. Bill Presented Protection of Children (Removal of Police Discretion) Presentation and First Reading (Standing Order No. 57) Mr Barry Sheerman, supported by Sarah Champion, Mr Elfyn Llwyd, Meg Munn and Liz McInnes, presented a Bill to require the Secretary of State to remove the discretionary decision-making power afforded to police officers in charging individuals with rape in cases relating to acts of sexual intercourse involving persons aged under 16; and for connected purposes Bill read the First time; to be read a Second time on Friday 27 March 2015, and to be printed (Bill 195).
I beg to move, That leave be given to bring in a Bill to require country by country public reporting for all multinational companies; to strengthen controlled foreign company rules and overseas bond rules; to establish a public register of beneficial ownership, including in the Crown Dependencies and Overseas Territories; to introduce a penalty regime for the General Anti-Abuse Rule; to measure the impact of tax regimes on developing countries; to establish a commitment to use the international aid budget to strengthen tax systems in developing countries; and for connected purposes It has been a great privilege over the past three years to serve as a member of the International Development Committee and to see with my own eyes the difference that UK aid is making in the poorest countries around the world. That is something that we should be all be proud to champion during the general election campaign. Not only is eradicating poverty a worthwhile ambition in itself, it is also the best route to reducing conflict in an unstable world When I joined the Committee, it was considering its report on tax in developing countries. The introduction to the report begins with the following words: “Tax is an issue of fundamental importance for development. If developing countries are to escape from aid dependency, and from poverty more broadly, it is imperative that their revenue authorities are able to collect taxes effectively. Tax revenues represent a more predictable and sustainable source of revenue than aid flows ever can.” This Bill seeks to empower developing countries at a time when they are vulnerable to companies seeking to exploit their natural resources and economic development potential. The citizens of these countries should benefit from those resources and that economic growth so that they can shape the future of their own nation and of generations to come who can grow up free from poverty if we act to ensure fairness and transparency and to prevent this wealth from flowing to nameless beneficiaries This is not just an issue that exercises people in this place. Tax avoidance has become a hot topic. A ComRes survey last year found that 85% of the public believe that corporate tax avoidance is morally wrong even when legal. Outside Parliament, a collective of international development charities and many of my constituents have called on the UK Government to introduce an anti-tax dodging Bill early in the next Parliament. The charities say that such a Bill could raise an additional £3.6 billion for the Treasury, as well as help developing countries to improve their revenue collection and national income. They say that developing countries currently lose $160 billion a year in potential revenue owing to corporate tax dodging, which is more than the amount given annually in overseas aid by all rich countries. I should like to put on record my thanks to those charities for their work, especially Christian Aid and ActionAid Not only does tax dodging remove revenue from developing countries that could help them to create infrastructure and growth, but it takes money from public services and undermines the social contract between citizens and the state. The current Government have not done enough to tackle tax avoidance. The amount of uncollected tax has risen year on year, increasing to £34 billion in 2012-13. I am proud that my party—the Labour party—has committed to tackling tax avoidance in its first Finance Bill if it wins, or rather when it wins, the general election The Tax Transparency and International Development Bill seeks, by closing loopholes and imposing penalties, to ensure that multinational companies do not receive unjustified tax breaks, and that our tax rules do not incentivise companies to avoid tax in developing countries. It also seeks to make our tax system more transparent While leading the G8 at Lough Erne in 2013, the Prime Minister said that the agenda for the world’s most powerful nations should focus on trade, tax and transparency, and made it clear that that should be to the benefit of developing countries, and yet, reporting to the House in autumn last year following the G20 meeting in Brisbane, he did not mention developing countries once. He mentioned tax avoidance in his statement—he reported that an additional $37 billion had been taken from big companies as a result of steps taken by the G20—but when I asked him how much of that revenue had benefited developing countries, he did not know the answer Tackling avoidance is key to tackling global poverty and inequality and it cannot therefore be an afterthought. That is why the Bill is crucial. With that in mind, let me describe the specifics of the Bill. The Government introduced the general anti-abuse rule, which aims to catch those who set up abusive schemes, but there is currently no penalty scheme, so the rule lacks teeth The Bill calls for tough penalties to ensure that companies cannot avoid paying their fair share. I welcome the fact that the Government have committed to introducing a diverted profits tax, commonly known as a Google tax, from April 2015, which aims to impose a 25% tax rate on profits that companies have diverted out of the UK. That policy is flawed because it does not apply to loan arrangements, which allow multinationals to give loans to their subsidiaries in higher tax countries, the interest on which is deductible against tax, giving the subsidiaries a tax break while the interest payments end up overseas in a tax haven. Closing that loan loophole for exemptions could mean that by 2017-18 we will raise even more than the £350 million that is estimated in the Budget Red Book Similarly, in the 1980s, the controlled foreign companies rules were introduced to deter British companies from shifting profits to tax havens by stipulating that profits could still be taxed at their full UK rate. CFCs not only helped us to maintain our tax base, but they helped other countries, including developing countries, to raise decent taxes. In 2013, the Government altered the rules so that they applied only to profits shifted out of the UK, and not to profits shifted out of other countries. In effect, the coalition gave a green light to avoidance by multinationals based in the UK. In contrast, the Bill would reverse the revisions and strengthen the rules, which the Treasury has said cost UK taxpayers £900 million a year The altered controlled foreign companies rules highlight the need for the UK Government to carry out spillover analysis. However, we need to go further by assessing whether there are any adverse consequences on the ability of developing countries to collect tax. The Netherlands and Ireland have already done so. Given that the UK has led on so many aspects of development policy, we should not allow ourselves to lag behind on that While the UK Government are beginning to work on strengthening tax systems, we need to ensure that more is done, and that aid is targeted on it. Prosecution is only one deterrent against avoidance; public pressure is another. That is why we need to ensure that we know how money is being raised and spent, and we must push for country-by-country reporting for all multinationals Although the G20, OECD and the UK Government support country-by-country reporting—with the Government stating in their Budget Red Book that reporting will bring in £10 million of additional tax by 2018-19—they have not agreed to make the information public. That means that people in developing countries will not be able to access the information. The work of the Public Accounts Committee on corporate tax avoidance illustrates the importance of public engagement with these issues In line with the 2013 G8 declaration, which stated: “Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily”, the UK has introduced the first register of beneficial ownership in not only the UK, but the world. We should be proud of that, but we need to do more to make sure that the overseas territories and Crown dependencies have public registers, too. To date, none of those countries has committed to a public register Following the Prime Minister’s statement to the House on the G7 meeting in Brussels last June, I asked him what progress had been made. He replied that “we should commend them for the work that they have done to bring their arrangements up to date. I had this conversation with them almost exactly this time...They have made huge steps forward, and we should commend them for that and encourage them to go further.”—[Official Report, 11 June 2014; Vol. 582, c. 555.] However, that is simply not the case. When I raised the issue with the Business Secretary, he confirmed that we have not used our influence effectively We must continue to push this issue, and that is why it is central to this Bill. Despite the Government’s warm words, four of the overseas territories and Crown dependencies have so far ruled out a public register and none has committed to one. We must do more to deliver on the Lough Erne leaders’ communiqué signed off by our Prime Minister This Bill will ensure that multinational companies do not receive unjustified tax breaks, by closing loopholes and imposing penalties. It will give a fairer deal, do more to tackle poverty and give transparency to our tax system. The developing countries of this world deserve no less. I commend this Bill to the House Question put and agreed to. Ordered, That Fiona O’Donnell, Dame Anne McGuire, Anas Sarwar, Steve Rotheram, Ann McKechin, Jeremy Lefroy, Sheila Gilmore, Valerie Vaz and Fabian Hamilton present the Bill Fiona O’Donnell accordingly presented the Bill Bill read the First time; to be read a Second time on Friday 27 March, and to be printed (Bill 196).
I beg to move, That the Bill be now read a Second time Finance Bill 2015 takes another step forward in this Government’s long-term economic plan. As my right hon. Friend the Chancellor set out in last Wednesday’s Budget statement, we have grown faster than any other major advanced economy in the world; more people have jobs in Britain than ever before; and the standard of living is rising and set to rise further. We are cleaning up the economic mess we inherited in 2010 and delivering a fairer economy for all This Bill will build on that success. It will help British businesses to invest and create jobs, help British households to work and save, and help ensure everyone in Britain pays their fair share of tax.
That will also have the effect of increasing complexity in the taxation system. Whatever happened to the tax simplification project?
We have established the Office of Tax Simplification and put in place a large number of its recommendations. I could spend some time talking Members through some of them. It is also worth pointing out that just last week the Chancellor of the Exchequer announced plans to take very large numbers of people out of having to pay income tax on their savings, reducing the need for them to be in the self-assessment system. Indeed, we have set out longer-term plans to simplify the operation of the tax system through a more digitised system with online tax accounts, which will make a substantial difference to many people. I should also point out that from April of this year we will have one rate of corporation tax, which means that we no longer need a marginal rate with some 50,000 businesses having to calculate what to pay in a more complicated way. The Government have taken a number of steps on tax simplification We are committed to all the tax measures that the Chancellor set out last Wednesday, but appreciating the constraints on the timetable we have deliberately held a number of measures back and published a shorter Bill than would otherwise have been the case. Unlike under previous Governments, legislation for Finance Bills since 2011 has been published in draft three months ahead of the final publication of the Bill. Under this new approach, we published more than 250 pages of draft legislation in December for technical consultation, again meeting our commitment to expose legislation in draft We are proceeding today on the basis of consent. The Opposition required us to remove five clauses from the Bill following discussions last week. The clauses concern a new tax exemption for the travel expenses of members of local authorities; a new statutory exemption from income tax for trivial benefits in kind, implementing a recommendation of the Office of Tax Simplification’s review of employee benefits and expenses; simplifying link company requirements for consortium claims under corporation tax; a separate rate of excise duty for aqua methanol; and changes to scheme rules for the enterprise investment scheme and venture capital trusts. The Government would look to legislate on all five of those clauses at the earliest opportunity at the start of the new Parliament I will happily take further interventions this afternoon, but let me first set out the order in which I intend to discuss the measures in the Bill. I will begin by talking about those that will boost growth and enterprise. Next, I will cover those that tackle avoidance and aggressive tax planning and then I will cover those that help families and savers do more with the money they earn. Finally, I will talk about how the Bill, like previous Finance Acts in this Parliament, will help to deliver a simpler tax system Let me begin with the measures designed to boost growth and encourage enterprise. Hon. Members will be aware that our long-term economic plan is working and confidence is returning to businesses and our markets, but that growth would not have been possible without the hard work of businesses up and down the country. During our five years in office, we have created the right environment to help businesses start, grow and succeed. When we came to office, Britain had one of the least competitive business tax regimes in Europe. Now it is the most competitive. Next week, corporation tax will be cut to 20%, one of the lowest rates of any major economy in the world. By 2016, that will mean £9.5 billion savings for businesses across the UK every year. That is why more and more businesses are moving operations here, starting up here or growing here The Bill will also bolster support for research and development and the creative sector. We are increasing the research and development tax credit for small and medium-sized enterprises from 225% to 230%, increasing the rate of film tax relief to 25% for all expenditure and introducing a new children’s television tax relief. I am sure those are industries that Members on both sides of the House will support The Government will not sit back and let hundreds of thousands of jobs be put at risk thanks to falling oil prices. The Bill recognises the importance of the future of the North sea oil and gas industry, our largest industrial sector. With effect from the start of next month, the Bill introduces a single, simple and generous tax allowance to stimulate investment at all stages of the industry, giving investors early certainty for their long-term investment decisions. We are also cutting petroleum revenue tax from 50% to 35% to encourage continued production in older fields. Backdated to the beginning of January this year, as announced by my right hon. Friend the Chancellor last week, the Bill also cuts the supplementary charge from 32% to 20%.
My hon. Friend talks about the policies that are being put in place by the Government to help businesses. Does he share my view that the freezing of fuel duty has helped not just businesses but individuals, and will he tell us how much of a saving businesses and individuals make every time they fill up their vehicle?
My hon. Friend is absolutely right. Very often, the debate in this House is about the impact on individuals of the freeze on fuel duty, which has considerably reduced how much fuel costs. As a consequence of our measures, £10 is saved per tank full of petrol. He is also right to mention the impact on businesses, because many of them, particularly smaller ones, pay this tax. We can sometimes forget that in that debate. Fuel duty is now 16p per litre lower than it would have been under the previous Government’s plans Let me return to the provisions on oil and gas. The new cluster area allowance will support the development of one of the biggest fields in the UK continental shelf, which is expected to generate about 3,500 jobs and more than £3 billion in capital investment. As hon. Members can see, the Bill tackles some of the challenges facing our business community and our economy Now that I have set out such competitive tax rates, designed specifically to support our businesses, let me say that we expect those taxes to be paid. The Bill continues the Government’s firm action against the small minority who seek out unacceptable ways to reduce or delay paying the taxes they owe. Under the Bill, we will legislate to create a fairer tax system by clamping down on tax avoidance and ensuring that banks contribute their fair share. Taking effect from the start of next month, the Bill will introduce a new diverted profits tax of 25%, aimed at large multinationals that artificially shift their profits offshore to avoid paying UK tax. As part of the project, I can confirm that we are working with five other tax authorities to investigate and challenge how digital multinationals shift their profits to tax havens. For the first time, we are gathering a full global picture of the tax risks those companies pose that is invaluable in helping us take decisive action The Bill will also increase the bank levy to 0.21% and introduce new rules for banks on carried forward losses, to ensure that banking companies can use them only to relieve up to 50% of company profits. Combined, those measures will raise nearly £8 billion over the next five years. We have always been clear that banks should make an additional contribution that reflects the risks they pose to the UK economy, and now that banks are strengthening their balance sheets and returning to profitability, they should make a greater contribution to the economic recovery.
I welcome the increase in the bank levy. Does the Minister agree that it is extremely difficult for a bank to avoid the levy, whereas the tax on bonuses, for example, would be very easy to avoid?
My hon. Friend makes a very good point. Indeed, that is why the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), made it clear that the bank bonus levy could only really be effective for one year. It is important that we have something sustainable that can exist for much longer.
The Chancellor indicated to the Treasury Committee yesterday that he was minded to make the bank levy permanent. Will the Financial Secretary reassure the House that that is his intention?
We believe that the bank levy and the additional contribution from the banking sector are not just for the short term, but need to be sustainable, so I entirely endorse the Chancellor’s remarks yesterday.
My hon. Friend is being generous in giving way. I welcome the diverted profits tax and I think that my constituents will very much welcome that measure. Will he confirm that it comes on top of all the work the Government are leading at the OECD and that, in September or later this year, we will therefore see further rules coming in to clamp down on base erosion?
My hon. Friend again makes a very good point. This Government have led the way in the establishment of the OECD’s base erosion and profit shifting project. We are already implementing some of its conclusions, including in this Bill, but there is more work to be done. The diverted profits tax is consistent with the direction that we want the BEPS project to go in, which is to align economic activity more closely with taxing rights. That is the direction in which the international tax system needs to move, and the diverted profits tax is consistent with that approach The Bill legislates for corporation tax loss refresh prevention, which will stop companies obtaining a tax advantage by entering highly contrived arrangements to turn old tax losses into new, more versatile losses. We will close loopholes to make sure that entrepreneurs relief is available only to those selling genuine stakes in businesses. We are strengthening civil sanctions targeting individuals with hidden income, gains or assets overseas to ensure that taxpayers who do not pay their fair share are penalised. We are tackling avoidance by large businesses and wealthy individuals, and we are tackling tax evaders.
My hon. Friend is talking about fairness in the tax system, which we all want. Will he confirm that under this Government the top 1% of taxpayers will pay more in tax than they ever did under the previous Government?
My hon. Friend makes another excellent point. This year, the proportion of income tax paid by the highest earning 1% will be above 27%, higher than for any year under the previous Government. I dare say that we will debate that in a little more detail later this afternoon. On this Government’s record in ensuring that those with the broadest shoulders make the biggest contribution, the facts are very clear: they are doing so under us. A whole host of measures that we have taken, not least in areas of tax avoidance, have ensured that we are getting in that money.
My hon. Friend is making a powerful case on the work that the Government have done to tackle tax avoidance. What is being done to throw the book at the promoters of tax avoidance schemes and people who continually try their luck by entering such schemes?
My hon. Friend—given his background, he is an expert in tax matters—has been a consistently strong advocate of taking tough action in this area. I can certainly reassure him that one of our very important strands of work has been to take on the promoters of tax avoidance schemes. Indeed, we are bringing in measures to place greater burdens on them to disclose the position they are in, as well as greater surveillance and supervision of them. During this Parliament, we have seen a dramatic fall in the number of tax avoidance schemes being promoted, which is very good news. There has been a real change in the climate, driven not least by the action that the Government have taken. I believe that we have a very proud record in dealing with tax avoidance and the causes of tax avoidance.
rose—
I will give way again, because I know that the hon. Gentleman does not have long left in this House. I am more than happy to give him another opportunity to intervene, but I must then make a little progress.
I thank the hon. Gentleman for being so generous with his time. The Chancellor has indicated that, if he is returned to government, he will look for £5 billion of savings from evasion and avoidance; yet in its Budget report, the Office for Budget Responsibility could find only just over £3 billion of savings among the Chancellor’s provisions, which leaves a gap. Will the Financial Secretary explain to the House how he intends to fill that gap during the next Parliament?
Given this Government’s record on the measures introduced in Finance Act after Finance Act, the support provided to Her Majesty’s Revenue and Customs in additional powers and resources for this area and the fact that yield has increased very substantially during this Parliament—from £17 billion in 2010 to £26 billion now—we are confident that further savings can be found. Through a combination of measures dealing with tax evasion, tax avoidance and aggressive tax planning, we believe that £5 billion can be found I now turn to how the Bill will help hard-working families. This Government have a proud record of reducing tax for the lowest-paid. Not only will the Bill deliver our commitment to raise the income tax personal allowance to £10,600 from the start of the new tax year, but it will legislate to raise it to £10,800 in 2016-17 and to £11,000 in 2017-18. By 2017, a standard rate taxpayer will be £900 better off than under the previous Government’s plans and an individual on the national minimum wage working up to 30 hours a week will not pay any income tax whatsoever. That is a tax cut for 27 million people, and it means that this Government have taken almost 4 million of the lowest-paid out of income tax altogether We are passing on the full gains of that policy, so for the first time in seven years, the threshold at which people pay the higher tax rate will rise not just in line with inflation, but above inflation. It will rise from £42,385 this year to £43,300 by 2017-18. Under the Bill, the rate of the new transferable tax allowance for married couples will rise to £1,100, providing help for more than 4 million couples. We are legislating to exempt children from air passenger duty so that, together with measures introduced in the Finance Act 2014, a family of four flying to Australia will now save £194. The Government have made clear their commitment to support households in the UK and to put more of their hard-earned money back in their pockets, where it belongs Finally and briefly, I turn to tax simplification, which was touched on earlier. Under this Government’s new approach to tax policy making, we published more than 250 pages of draft legislation in December for technical consultation. As such, the majority of measures contained in the Bill have been drawn up following lengthy consultation with interest groups and businesses. The Bill continues to build on the excellent work of Michael Jack and John Whiting at the Office of Tax Simplification, and it includes a package of measures that will help to simplify tax administration for businesses in several ways.
rose—
I will give way one last time.
According to the Financial Times this morning, the Bill will add significantly to the complexity to the tax code. The number of pages in Tolley’s is going up and up. We are told that we now have the longest tax code in the world, having overtaken India some years ago, but the Financial Secretary is presenting this as if it were a simplification. This is contrary to the entire thrust of public debate on these issues. When will we get some tax simplification?
The hon. Gentleman may be interested to hear, or he may already be aware, that the Office of Tax Simplification has looked at what constitutes complexity within the tax system. One conclusion that it reached was that the number of pages in the tax code is not a particularly good barometer of complexity. For example, the rewriting of the tax code that occurred over many years lengthened it, but the intention was to make it simpler to understand I would make this challenge to the hon. Gentleman: which elements of the Bill would he not want? For example, there are 40 or so pages on oil and gas tax reform, which I believe all parties recognise is a necessary response to the current circumstances, but that will lengthen the tax code. A number of pages are being added to the tax code because of the diverted profits tax, but all parties recognise the need for such a tax to deal with artificially contrived arrangements. I appreciate his point and the spirit in which he makes it and I share the desire for greater tax simplification, but there are some challenges in that for a Government who also want to deal with avoidance and ensure that we have a competitive tax system for the oil and gas sector.
I do not wish to revisit old debates about simplification, but does my hon. Friend have a view about the future strategy on anti-abuse rules? I believe that when Graham Aaronson examined the general anti-abuse rule, he thought that after about five years we would be able to start to do away with individual anti-avoidance rules and rely on the GAAR. We could therefore remove some of the more complicated provisions and the loopholes that go with them. Does my hon. Friend think that could work, or does he think it should be ruled out and that we must have both the general and specific rules?
My hon. Friend does not want to revisit old debates, but I tempted to give a response that I suspect I have given him before. The general anti-abuse rule is a big step forward, and it was absolutely right that this Government introduced it. Other Governments had considered it but felt that it was not the right thing to do. However, it is there to complement the existing measures, and we will want to see how the GAAR works over time rather than rush to judgment. I do not believe that a future Conservative Government would want to risk opening up new loopholes because of uncertainty about exactly how the GAAR applies. It is of course an anti-abuse rule and sets a reasonably high bar for behaviour covered by it, and I suspect my hon. Friend agrees that that is right because of its broad nature. We will have to wait and see before I make any commitment to repealing various targeted anti-avoidance rules.
rose—
I give way to another Member who, like my hon. Friend the Member for Amber Valley (Nigel Mills), is a former member of the tax profession.
My hon. Friend is being extremely generous in giving way. May I turn to the provisions on oil taxation and the revenues from oil, given what has happened to the oil price? Does he have any idea of how big a black hole would be driven into the finances of an independent Scotland were there to be another referendum campaign fought by the losers from last time?
My hon. Friend is absolutely right. I believe that oil revenues are something like a 10th of what the Scottish National party predicted, but I will happily stand corrected if I am wrong. The fact is that a united kingdom is better able to absorb volatility in the oil price than an independent Scotland would ever be. Given what has happened to the oil price, it is clearly to the benefit of Scotland that those calling for independence were roundly defeated last year.
Will the Financial Secretary give way?
I will give way one last time, but I am conscious that many Members will want to speak.
I thank the Financial Secretary. I am sure that he would accept, having looked at the business case for the changes in oil taxation, that the economic effects of the oil industry are much wider than simply the winning of oil. In particular, the engineering and manufacturing industries in the north-east of England are pleased by the moves that have been made.
My hon. Friend makes a good point. Particularly in the north-east of England, a number of businesses are ancillary to the oil industry, so I am grateful for his remarks The Bill takes further steps to deliver long-term, sustainable economic growth. It puts in place a more competitive environment for business, takes more people out of income tax, continues our reforms of the tax system and supports the continued success of our industries. I commend it to the House.
It is a strange moment in the life of this five-year Parliament to be here debating the coalition’s last Finance Bill. Obviously I have great disagreements with the Financial Secretary and his colleagues in the Treasury team, but I want to extend a little hand of friendship across the Chamber. I know that this can be a difficult, even frenzied time, trying to draft legislation straight after a Budget and get things together at the last minute. However, we all aspire to be good parliamentarians, and it is incumbent on us to do our duty to scrutinise the Bill’s provisions properly and ensure that they are considered fully We are in the dying hours of this Parliament, but the Bill’s provisions—as my hon. Friend the Member for Edmonton (Mr Love) said, they will add to the tax code—are significant and will have a real impact on the economy and on many people’s tax and financial affairs. Ensuring that the Bill has proper scrutiny is therefore incredibly important. If we are honest, we have limped along in what has felt like a zombie Parliament in the past year in particular, with little going on. I am therefore a little surprised that there is a burst of energy all of a sudden, given that many of the Bill’s provisions could have been discussed, published and thought through at a more civilised pace. It is almost as though the Financial Secretary were doing one of those cycle races in a velodrome where it is all very slow until the last minute. There seems to be a bit of a panic in the Treasury The Bill contains 131 clauses of complex tax changes, affecting the energy generating sector, tax avoidance, pensioners and businesses, but we have been given only six hours to cover all of it. I accept that we have little choice about that because of how the Fixed-term Parliaments Act 2011 works—in the fifth and final year of the Parliament we can see that Parliament will prorogue at a given point. Nevertheless, I want to put on record our disappointment that we have not found a better way of improving the scrutiny of this year’s Finance Bill. Normally we would have a Public Bill Committee, in which we could spend fun-packed hours going through every provision. Sometimes I feel that such Committees go all too quickly.
Will the hon. Gentleman give way?
I will; perhaps the Minister can say how we will compress that process into six hours.
I share the hon. Gentleman’s sense of loss that there is not the usual Committee stage upstairs this year. To be clear, it is necessary to pass a Finance Bill after Budget resolutions have been passed, and there is clearly a short period between those resolutions being passed and Prorogation. I am sure he recognises that there were discussions last week in the usual manner, and that clauses that the Opposition believed should be debated and dealt with in the next Parliament have been withdrawn. The clauses that remain are those that the Labour party accepted should be dealt with in the Bill.
I do accept that, and it is good that we have had discussions through the usual channels, treating the Finance Bill this year more in what is known as the “wash-up” procedure rather than our normal less-constrained procedures. Nevertheless, I think we should pause and dwell on the fact that in a fixed-term Parliament the date of the final Budget may have consequences downstream for the legislation that is spat out at the other end. Perhaps we should consider allowing a little more time between the final Budget and the end of the Parliament—obviously a Labour Government will be in power for the next five years, so this may be quoted back at me in five years’ time—so that we have a more considered approach.
Is it a Labour party manifesto commitment to have an early Budget in the last year of a Labour Government in a fixed-term Parliament scenario?
The hon. Gentleman must wait for our manifesto in which we shall reveal all those details.
Is my hon. Friend as concerned as I am that there is so little distributional analysis in the Finance Bill, given the past five years in which the poorest in society fared the worst and our concerns about an increase in VAT looming in the not-too-distant future if the Government get back in?
My hon. Friend’s point about distributional analysis is a good one. We know that those on lower and middle incomes have been hit particularly hard: people on the lowest incomes do not benefit from many of the changes that the Government have made, and we must consider what data we need My point about parliamentary procedure is not just about the political dates of Budgets and so forth; it is also about the time that officials and civil servants have to draft some of the provisions and proposals. I do not understand why it has to be so last minute and by the seat of their pants. It is one thing to exclude one’s political opponents from the reveal moment of the Budget, but surely it would be good to ensure that proper internal arrangement are in place in the Treasury for drafting these arrangements The Institute of Chartered Accountants in England and Wales has its concerns: “we do not think that Parliamentary consideration amounting to only one day is in any way sufficient to consider and pass another significant Finance Bill that runs to 349 pages and contains a considerable amount of controversial legislation.” An article in today’s Financial Times quoted Heather Self of the law firm Pinsent Masons. She said that the decision to rush through the Finance Bill was “an abrogation of the parliamentary process…Legislation this complicated should not be going through without parliamentary scrutiny” My hon. Friend the Member for Edmonton was right when he talked about Tolley tax handbooks—I know his walls are adorned with the tax code in fine, leather-bound tomes. He will know that when the coalition came to office, there were 17,795 pages in that tax handbook, but by the end of this Parliament that has risen to 21,414 pages. The Minister says that is not a good barometer. I suppose it is good for publishers and perhaps makes my hon. Friend’s library a little more expansive and extensive, but I suspect it makes things more difficult for people to understand and follow. I think that our constituents deserve better and want proper scrutiny of the Finance Bill, and we will try our best to do that. The House should bear in mind the fact that the Bill appeared in the Vote Office yesterday, so it is difficult even for my diligent hon. Friends properly to absorb and assimilate all the provisions and to do justice to the Bill. Nevertheless we will give it a go and try our level best Ultimately, the Finance Bill could not disguise the coalition’s failures of the past five years. There is a slow recovery, but it is not being felt far and wide. By the standards and tests that the Government set when they came to office and made their promises in 2010, the Conservatives and Liberal Democrats have failed, particularly on the public finances. They have failed to eliminate the deficit, which should have gone by now. In fact, in the autumn statement 2010 the Chancellor trumpeted that he would bring forward to 2014-15 the year by which the current structural deficit would be eradicated, yet we find ourselves with a £90 billion current budget deficit, which fell by only 5% on the previous year—not exactly the rate we were promised There are many other structural issues in the economy. I do not know whether my hon. Friends remember the Chancellor’s promise about the march of the makers, but I am afraid that this country’s exports have not lived up to the £1 trillion target set for 2020; we are already a mere £300 billion off course in achieving that. Before the last election the Chancellor set the litmus test of cherishing our triple A rating, but of course that was downgraded One thing in the Finance Bill that supports the Government’s fiscal strategy was the revelation of how extreme the cuts will be to public services over the next three years—twice as deep over the next three years as we have seen for the past five years. In the words of the Office for Budget Responsibility, the “rollercoaster” is about to go over the precipice, and public finances, social care, the police, defence and many other public services will be pushed over the edge of that cliff should the coalition parties Government have a further five years in office It is no wonder that when people look at the impact of deep and extreme cuts to what Government Ministers term “non-protected Departments”, and see how deep they will be, they say, “Well that isn’t going to happen; it’s impossible to countenance that they would end up taking 30%, 40% or 50% from some of those Departments.” It is no wonder that people then believe there must be another plan, either for raising taxes or for cutting other services that some assume ought to be protected, in particular the national health service We had the debate on VAT, but I find it difficult to take the Prime Minister’s words seriously. These days, he has a habit of shooting from the hip—about whether he is retiring or what his views are for the day—so I am not sure that people will necessarily say, “Oh well, the Prime Minister said he’s not going to do it. That’s that then.” That is sort of what he said before the last general election about having absolutely no plans to raise VAT, but it was only a matter of weeks before he got round to doing it.
My hon. Friend will know that the number of people earning more than £20,000 has fallen by 800,000 since 2010, and the slack has been taken up by more and more people on low pay and zero-hours contracts. Does he accept that we are facing these draconian cuts because the Government are overseeing a completely unsustainable business model and creating more and more low-paid people who cannot pay any tax? The revenues are not coming in, which is why they have borrowed more in five years than Labour did in 13.
As ever, my hon. Friend manages to sum up the Government’s record in a pithy and simple intervention. I had not heard those statistics about the number of people earning more than £20,000, but I shall certainly take a look at the points he makes. We shall perhaps look at those statistics in more detail My hon. Friend’s point about living standards is a good one that all Members should intuitively and properly understand. If we do not include everybody in the growth of the economy, if everybody does not have a stake or a share in it, if their consumer capabilities are not stronger, and if we do not tackle the sustainability challenge for growth in the future, we should not be surprised to find that we have an unequal recovery. Britain will only succeed if working people succeed. That is a catchy way of summing that up, and Government Members may well hear it a few more times in the coming weeks, but it is true Ultimately, our public finances are not determined in isolation, as though they are frozen in aspic. They cannot simply be dealt with in terms of cuts or changes in revenue: there is a dynamic, strategic set of issues that relate to what is happening in the real economy and the real world. The health of our economy will ultimately determine the health of our public finances. The Prime Minister and others say, “Why are you talking about living standards? Why are you talking about these things? That is not really the economy; it’s not about growth.” Of course it is. Ultimately, these things are related The low-wage economy the Chancellor has been heading us towards is a danger to our public finances. We are enduring an epidemic of job insecurity. The number of zero-hours contracts has ballooned by more than 20% in the past year alone. That is a problem for those who cannot plan even for the child care they need for the week ahead, let alone for getting a mortgage. It is also bad because it undermines the tax receipts the Treasury needs to sustain and pay for public services. It means that tax credits need to be higher to subsidise low pay and it is why the social security bill is £25 billion higher than the Chancellor expected Those living standards issues come up time and again in surgeries, meetings and encounters that my hon. Friends have with our constituents. Some 900,000 people are using food banks, and some 600,000 people have been hit by the cruelty of the bedroom tax. These issues will come back to haunt Ministers. They have attempted to deal with the deficit by hurting those on the lowest incomes. It has not worked; it has not succeeded; and it is a strategy that will just get worse in the coming years.
I was at a Budget briefing in Dunfermline given by a local accountancy firm, Thomson Cooper, on Friday. It was pointed out that those earning more than £150,000 a year under this Government actually have a lower marginal tax rate than those earning £100,000 a year. Does my hon. Friend think that that is a really good example of how the Government have got their numbers completely wrong? Those who can afford to pay the most are in fact paying far less.
It is in the very first clause of the Bill: it seems that the Government’s proudest achievement is to cut the highest rate of income tax for those earning £150,000. They want the rate to be 45p instead of 50p. That has been their priority. They regard that as something that the country has been crying out for and that will make a big difference to the economy. I suppose if one views the economy through a trickle-down prism and believes that tax cuts lavished on the very wealthiest in society will percolate down and everybody else will benefit as a result—
rose—
Well, maybe that is the logic of the Liberal Democrats in supporting these particular measures. I will give way to the hon. Gentleman, but he has to admit that it was an error to ensure that those earning more than £150,000 received a tax cut. Anyone earning £1 million this year will have benefited to the tune of £42,000 in tax cuts. He does have regrets about that, doesn’t he?
Will the hon. Gentleman explain why the Government he was a part of put up 100 taxes in 13 years, but rejected putting up the higher rate of income tax for the entire period until the day they left office? It was 40% then—those same millionaires were that much better off under his Government.
That sounds as though the hon. Gentleman was in favour of the 50p rate and regrets that it was not implemented earlier. That is the usual argument: why did the previous Government only put it up towards the end of the Parliament? The global banking crisis hit in 2008, when we were already a long way through that Parliament. [Interruption.] The hon. Gentleman seems to be a banking crisis denier. He seems to think that it had nothing to do with the fiscal situation. He must admit in his heart of hearts that the banking crisis created great pressures on our public finances. It reduced a number of revenues and caused the deficit we have had to tackle. As a consequence, the tax changes that followed the banking crisis were bound to come in 2009, and that was the period in which we chose to introduce the 50p top rate. He should not be surprised that it came in towards the end of that Parliament, because the banking crisis and all the ripples that flowed from it also happened at the end of the Parliament. Let us nail that one for a start The cut in the rate of income tax was the wrong thing for the hon. Gentleman and the Conservative party to have prioritised. I think many people in our country regard it as a real obscenity. It is a perverse set of priorities and we would reverse them because the public finances need the extra support. The public finances need those with the broadest shoulders to contribute a fairer share.
My hon. Friend will know the excellent work of the Union of Shop, Distributive and Allied Workers in raising the profile of issues affecting workers in the retail sector, who are sometimes at the sharp end when it comes to serving the public. They do a very important job. I recently met members from across the north-east who raised exactly the points he is making about insecurity at work and the need to tackle zero-hours contracts. This is a major area of concern, and retail workers in particular feel that the Government are failing to act.
The retail sector is edging towards greater and greater insecurity, as companies feel that the only way to make that extra margin is by eroding standards of contract security for many of their work force. In that context, I have to reiterate the position of those of us on the Opposition Benches: someone who works regular hours deserves a regular contract. That is why we intend to abolish exploitative zero-hours contracts.
Following on from the previous intervention, in Scotland we are seeing an abuse of apprenticeship payments to young people in the retail sector. There are a lot skills involved in working in retail, but to call three months working in a shop an apprenticeship undervalues them. That does, however, help the Scottish National party to massage the figures.
My hon. Friend should bear that in mind when we hear Ministers trumpeting their apprenticeship numbers in aggregate, because there is always a story behind them. We need genuine apprenticeships to help the next generation obtain skills and career assistance, rather than what has been happening: the re-badging of many apprenticeship programmes, existing training courses and other arrangements that have been rebranded to allow tax support for applications for apprenticeships The Bill is not just divisive and unfair but a missed opportunity. There are several omissions. It is not just that the Chancellor could barely drag from his lips those three little letters, NHS, which I think got one mention in the Budget—Agincourt got twice as many. We should have had action to help the next generation, for example by reducing tuition fees to tackle the burden of debt facing students. Students graduate typically with £44,000 of debt, which is a burden not just on those individuals but on the national finances. Government Members should be very scared by some of the projections. Owing to their inability to collect tuition fees from some students, barely half of all tuition fees will be collected, which is adding to the national debt in the hundreds of billions of pounds. That needs to be tackled.
Will the hon. Gentleman explain how his tuition fees policy will be paid for, given that his party has been clear that it supports all the measures in the Budget, including the personal savings allowance, for example?
We are delighted that the Government took a shine to our proposals for pension tax relief changes—I suppose that imitation is the best form of flattery. We will stick with our policy to reduce tuition fees to £6,000, and we will set out in our manifesto, in a matter of days and weeks, how it will be funded. Still at this late hour, the full costings in our manifesto are available for the Office for Budget Responsibility to audit and verify—if only the Minister had shaken my hand on that. I offered him the hand of friendship—was it on the “Daily Politics” the other day?—but sadly he could not do it. It is important that we have fully costed and funded manifestos and that all parties engage in the process. We will look closely at the Conservative party manifesto. The Conservatives have made some grand promises about tax which will cost at least £10 billion to implement, even in the final year of the next Parliament, yet we have not seen a dicky-bird—even in the Budget figures—on how they will be paid for. I am looking forward to reading that chapter in its manifesto.
I mentioned that low productivity was driving down wages. Is not the point of tuition fees policy to increase the number of qualified people, productivity and national wealth, to end the deterrence on going to university, to stop people having credit ratings that prevent them from buying houses and to stop them not wanting a pay increase in case they have to pay back more of their fees? Surely this makes economic sense, while the Conservative party’s unsustainable economics of low pay and austerity is sending us into bankruptcy.
My hon. Friend knows that the change from £9,000 to £6,000 would make an appreciable difference. Of course, it is still a significant fee, but we will only ever make promises we know can be kept and that are fully funded. I would love to do more on many other tax issues, but given the state in which the Chancellor will be leaving the public finances in only a matter of weeks, we must show students that we understand the burden of debt on them and the nation. The Government never appreciated that so many students would never be able to pay back their debts and that the bill would have to be picked up by the taxpayer sooner or later As well as measures on tuition fees, the Bill should have contained a proper bank bonus tax for the starter jobs that many young people who are having trouble finding employment need.
Will the hon. Gentleman clarify his statement about the Government not realising how many people could not pay back their tuition fees loan? If tuition fees were reduced to £6,000, under his party’s policy, at what salary would people start to pay that back?
The arrangements for the rate of payback were set out in the policy documents we published, but the hon. Gentleman should know that on current projections, by 2030, which is only 15 years away, £281 billion is expected to be added to the national debt now that we have reached the proportion of 49% of people who are incapable of paying back their tuition fees. It might have been a miscalculation by the Department for Business, Innovation and Skills, so perhaps he could blame the Liberal Democrat Business Secretary—that might be the function the Liberal Democrats fulfil—but whether it was the Business Secretary’s miscalculation or the Treasury’s miscalculation, I would urge hon. Members just to take a look at the projections.
rose—
I want to make some progress—I have several pages still to get through and I want other Members to contribute The Bill should have contained a bank bonus tax for starter jobs and measures to scrap the bedroom tax. Given today’s timetable, however, I must move rapidly to some specific issues in the Bill and ask the Minister some questions. It is not just that we have general objections to the 45p higher rate of tax for earnings over £150,000; we have anxieties about the plans for a married couples allowance that will benefit only one third of married couples and only one sixth of families with children, and although the increases in the personal allowance are a concession, rather than leap straight to a 20p basic rate, it would be better to start with a 10p rate, as a fairer and more effective way to ease people on lower incomes into income tax.
My hon. Friend makes an important case about the bedroom tax. The average cost of the bedroom tax is £700 per annum, and across Greater Manchester, 28,000 people have been affected. In my constituency alone, 3,038 families—the highest figure in the land—suffer from it, whereas in Witney in Oxfordshire, 300 families suffer from it. This has been of huge detriment to northern regions—across the country but mainly northern regions. Government Members have no understanding of its impact on our constituents.
This is always the dilemma. Do Government Members not understand—is it just a question of ignorance?—or have they just turned a blind eye? My hon. Friend has been a diligent campaigner against the bedroom tax and has managed to articulate very successfully the harm and difficulties that people have encountered, particularly those with disabilities who need the extra space in the house. Again, that should have been covered in the Bill.
Does my hon. Friend agree that, given that such an iniquitous tax raises so little money for the Exchequer, it would be simple for the Government to abolish it tomorrow?
Many studies suggest that it costs more than has been raised. Of course, the Government knew how unpopular the bedroom tax would be and came up with their “discretionary fund” to allow local authorities to ameliorate the impact, but it has not been enough and has certainly not been extended to many people who need it. My hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) will also note that there has been no guarantee that the fund will continue into future years. The Government are hoping that this will go away and that nobody will notice, but our constituents will notice.
rose—
My hon. Friend feels strongly about this, so I will give way one more time.
I do feel strongly about it. I can cite, with his approval, the case of Mr Gunning from my constituency, which has five wards in Labour Manchester and three in Tory Trafford. He lives in Tory Trafford and was not given the discretionary payment. If he had lived in Labour Manchester, he would have got the discretionary payment, although by now it would have come to an end.
That is interesting. This sort of postcode lottery has afflicted many people, so my hon. Friend makes an important point. I now want to move on This Finance Bill contains a series of measures relating to vehicles and emissions. On clauses 7 to 9, will the Minister take some time in his response to explain the direction of travel—if he will pardon the pun—in the differential for different types of vehicle and different years of what is charged for ultra-low emission vehicles? Our reading is that there is a differential of 4% for the financial year 2017-18 and then 3% for 2018-19. If there is an explanation for that, I am not clear what it would be. We would be grateful if the Minister could seek some inspiration over the next hour or so and help us out with that. Similarly, why are the Government using the Bill to remove the incentive for companies to provide zero-emission vans over the next Parliament? Again, I cannot understand the logic behind the provisions as it appears in the explanatory notes, so it would aid the process of debate if the Minister could clarify it for us In clauses 13 and 14, the Government are legislating to protect two particular groups, carers and ministers of religion, who may suffer as a result of the Bill’s abolition of the £8,500 exemption on what are known as “benefits in kind”. That is obviously welcome for those who benefit from it, but will the Minister reassure us and confirm that adequate due diligence has been applied to ensure that no other categories of low-paid worker could be adversely affected by this change? The provisions are very specific in naming the particular types of occupation, but I always slightly worry when particular types of job have to be named that other forms of occupation or employment might be affected. I would like to know more about the process the Treasury pursued in framing the clauses in that particular way The Bill brings forward several clauses relating to tax avoidance. Everybody knows that the Government’s record on this is atrocious, given that the tax gap increased by £1 billion to £34 billion last year. We also know that Lord Green, the champion of the Tories on many of these issues, has his own track record at HSBC. In this context, any moves to tackle extreme tax avoidance and evasion are welcome—clause 33, for example, provides for anti-avoidance measures on carried-forward losses and there are provisions on entrepreneurs’ relief—but we have some questions that it would be helpful for the Minister to answer Clause 12 deals with the abolition of the dispensation regime. Is there a danger that, during the course of the simplification of expense reimbursement—a principle we support—some opportunities for abuse might arise? For example, a flat-rate expenses allowance could lead to some avoidance issues. Do the Government have some figures to show the amount of taxes collected through PAYE and the benefit audit from current companies We support the principle of clause 20 on intermediaries and gift aid, encouraging charitable giving and making gift aid a more attractive prospect by removing the need to send off the gift aid forms through the post. Donating online is obviously welcome, but can the Government confirm how they will prevent rogue intermediaries from seeking to profit from the gift aid market? How will the Government ensure sufficient understanding of this so-called “tax to cover” principle? Do the changes outlined in clauses 26 and 27 undermine the original anti-avoidance intentions of the late interest rule? Could these provisions be rendered in any way redundant by the ongoing BEPS—base erosion and profit shifting—process? Will the capping of group interest deductions be covered? Labour Members want to hear that proper attention has been paid to this international process and that we are not unduly jumping the gun We have questions about the clause 28 restrictions on research and development relief, whereby the costs of materials incorporated in products that are then sold commercially will not be eligible for that relief. Have the Government considered any exemptions for companies selling items that they had not intended to sell—for cash-flow reasons, for example? What will be the impact on liquidation of a company? Would its R and D credit-containing assets be devalued Before leaving my assessment of the anti-avoidance measures, I want to draw the House’s attention particularly to part 3 on diverted profits tax, which tries to deal with artificially contrived arrangements. Opposition Members want arrangements to work effectively, but we worry about the haste and laxity of the drafting. In his opening remarks, the Minister introduced this new tax on diverted profits through counteracting arrangements by which foreign companies exploit the permanent establishment rules and prevent companies from creating tax advantages by using transactions or entities that lack economic substance. We were told that the draft clauses published in December would be replaced, but the first we saw of the new iteration of the provisions was when the Bill was printed yesterday. That provides insufficient time to scrutinise and assess such a large number of highly complex and potentially important measures. This, I fear, is a direct result of the rushed timetable with which we have been presented today These are my questions to the Minister. What is the expected impact on the base erosion and profit shifting process? What challenges is he expecting on the basis of EU law and how will he address them? Why is it still showing such a low yield in the Red Book, given that the UK turnover of the multinational tech giants is so significant? What research has the Department undertaken into the effectiveness of the proposed enhanced civil penalties for offshore tax evasion and will the increase improve compliance We welcome the measure on country-by-country reporting and common reporting standard issues, but the Office for Budget Responsibility has labelled the costings and related aspects as “highly uncertain”. I understand that the wording in the draft clause that we have seen would enable public disclosure of the country-by-country reporting rules, if the OECD updated its guidance to allow for it. Is that still the case for the clause before us today? Will the Government push for public disclosure or is the Minister trying to allow the disclosure only secretly for the Revenue authorities? Public disclosure is where we should be; if not, why not The clauses that extend capital gains tax arrangements to foreign individuals when they dispose of UK residential properties are welcome, but again the way in which the Government have brought them forward at the last minute means that we have little opportunity for proper scrutiny. It is worrying to those outside this place to see attempts to pass such provisions in this way. We understand that the Treasury might have further legislative proposals, but can the Government address the concerns raised by the Chartered Institute of Taxation about the complexity of the new rules and the perceived unfairness in how they apply to people temporarily on assignments overseas who would not normally be required to pay a CGT charge on their main residence On the simplification measures, there are questions about the correct penalty regime for the new reporting requirements in the Finance Act 2014. Removing the need for a tribunal process is one such arrangement, but there might be consequences from rushing through this legislation My shadow DEFRA colleagues would certainly want to ask the Government why they have not done more on flooding and flood prevention. The tax change to encourage private investment in flood prevention is certainly welcome, but is it not more of a fig leaf to cover the Government’s failures properly to support flood defences? The de-prioritising of flood defence investment that we saw at the start of this Parliament will be a legacy that many communities will not forget On the new tax reliefs for film, TV programmes and video games, the Minister will know of the history of scams, tax shelters and bogus arrangements that have been exploited in the past. Some have been convicted of abusing those arrangements. Will he assure us that proper due diligence has been done to prevent some of those abuses from happening again Finally, let me deal with the measures relating to the oil and gas industry. My hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) wrote to the Minister about the impact of the Bill on the safeguarding of the future of the North sea oil industry. The recent fall in global oil prices has put a number of jobs at risk in the sector, which is one of Scotland’s greatest success stories, and its current predicament requires a long-term solution We welcome the measures that will cut the supplementary charge and petroleum revenue tax, which were outlined in Labour’s “oil industry roadmap” in January. However, we have also consistently called for greater certainty for the sector, particularly because of the long-term nature of much of its investment. A simpler investment allowance should be delivered, as long as the industry can be assured that the transition from the current regime will not cause any interruption in investment The Finance Bill should be establishing a mechanism for joint reporting by the Treasury and the finance directorate to the United Kingdom and Scottish Parliaments on the fiscal risks of volatility, and how they will be managed in the future to maximise recovery from the UK continental shelf. I also urge the Minister to consider the need for a full assessment, in the round, of the impacts of tax reliefs and rates My hon. Friend the Member for Birmingham, Ladywood will shortly have an opportunity to talk about other changes that we feel are necessary. Let me say now, however, that we should like to see a review of the impact of the rise in VAT in recent years, and of the changing of the top rate of tax from 50p to 45p. I hope that we can extract some more data and information from the Treasury. We should be finding ways of helping small firms with a cut in business rates, rather than always prioritising a small number of larger companies, as the Government are doing. Their priority is reducing corporation tax rather than cutting business rates in 2015-16 and freezing them in 2016-17, which we think would be preferable We should have had a Finance Bill that deals in the round with many of the problems that our country faces: the living standards that have been squeezed, and the fact that wages have been surpassed by prices for such a long time during the present Parliament. Our public services require revenues to help them to serve our constituents—particularly the national health service, which we have to conclude is at risk because of the Government’s extreme plans for cuts. Those plans go way beyond simply focusing on the deficit, as the Government have also done. The Office for Budget Responsibility have talked of “a sharp acceleration in the pace of implied real cuts to day-to-day spending on public services” At the general election in, I believe, 43 days’ time, the country will have a clear choice between the failing plans, the failing Budget and the failing Finance Bill that we are debating today, and a better plan to put working people first and to save our national health service. We will raise living standards by increasing the minimum wage to £8 an hour, and we will try our best to fund 25 hours of free child care for working parents with three and four-year-olds by means of changes in the bank levy. Our plan will help to transform our NHS with a “time to care” fund, which we will support by asking those who are fortunate enough to live in properties that are worth at least £2 million to chip in a little more, and it will ensure that we balance the books fairly by reversing the approach of the Government parties. That would be a better Finance Bill and a better Budget, and I look forward to seeing it under a future Labour Government.
For someone who did not feel that we had been given enough time today, the hon. Member for Nottingham East (Chris Leslie) made an incredibly long speech I welcome the measures in the Budget, especially those benefiting business, and I am not the only one. At a lunch event on Friday, I spoke to members of the North East Chamber of commerce, and they also welcomed the Budget—particularly the measures involving oil and gas, which are very important for manufacturing industry and contractors in the north-east. The moves on corporation tax and support for business are clearly welcome. I do, however, agree with the hon. Gentleman that there is concern about the speed with which the diverted profits tax is being introduced. I congratulate the hon. Member for Amber Valley (Nigel Mills)—who has just left the Chamber—on triggering a Westminster Hall debate on the subject, during which we scrutinised it a little further.
There is significant concern, indeed alarm, out there among some of the tax professionals and accountancy bodies about the lack of adequate scrutiny. Does the hon. Gentleman share that concern?
As I said a moment ago, I do share some of that concern. The new diverted profits tax is quite complicated, and I agree that introducing it after so little time is risky. However, I also think that it is a very necessary tax. Far too much of our economic activity in the United Kingdom has been booked elsewhere, and too many of our profits are being shoved elsewhere. I therefore welcome the overall measures, and hope that they can be made to work I welcome the increase in the bank levy. It is clearly more sensible than taxing bank bonuses at a total rate of 115%, which is what I understand the Opposition to be proposing. That clearly would not work, and I think that their proposal shows a lack of competence. I welcome the fact that the rich are paying more. The hon. Member for Nottingham East used the emotive word “obscenity”. I think that there was something of an obscenity in the fact that people on the minimum wage were having to pay about £1,000 a year in tax under the last Government. The Liberal Democrats’ priority is to change that, and to raise the tax threshold. Our original target was £10,000, but I am delighted to say that it is now on the way to £11,000 as a result of our work in this Government The rich are paying much more in tax. Their income tax rate was held at 40% for 13 years by the last Government. When we came to office, the rate of capital gains tax was 18%, lower than even the basic rate of income tax; it is now 28%. People are allowed to put a quarter of a million pounds a year into pension schemes and receive full tax relief on them: the allowance is now £40,000. The lifetime allowance has been reduced again, to £1 million. I welcome all those measures. I am not going to become involved in a long debate about VAT, but it is worth noting that the VAT on a new Ferrari is £50,000. The idea that it is all paid by pensioners is clearly not right when we take account of the goods that are not subject to the standard rate of VAT The Budget raised stamp duty on property, and introduced yet more measures to deal with avoidance. Of course, there was industrial-scale avoidance under the last Government, and many cases are still coming to light, having arisen before 2010. I welcome the moves on the cost of living and on alcohol taxes, which support many of our important industries. I must declare an interest, as a cider drinker who greatly welcomes the reduction in cider duty. Overall, there is an inconvenient truth for the Opposition. Inequality has narrowed under this Government, whereas it widened under the last Government. People are better off than they were in 2010, and the Institute for Fiscal Studies has been saying so since January. The £1,600 figure was never about the total; it was about average incomes, which have, of course, been affected by the huge fall in youth unemployment, the huge rise in the number of apprenticeships, and the huge fall in bank bonuses. The Opposition’s stance does not bear scrutiny I have been asked to be brief. Let me end by saying that my part of the world has gained huge benefits under the present Government. We have benefited from the regional growth fund, from the local enterprise partnership—which is highly successful—and from the fact that this Government have spent five times more on capital investment in the Tees Valley than the last Government did in five years. In the last year, unemployment in my constituency has fallen by 781. It is still too high, but we are heading in the right direction My party will support the Bill today.
Let me begin by expressing my disappointment that there is to be no Public Bill Committee. I have served on every single one in the present Parliament. I do not know what I did wrong in the Whips Office, but I feel that I am missing out on something I congratulate the hon. Member for Redcar (Ian Swales), who is, of course, a Liberal Democrat. Following the embarrassment of the Chief Secretary standing on the steps of the Treasury with his Fisher-Price lunch box, announcing a Liberal Democrat Budget the day after the real one that he said he had signed off, I admire any Liberal Democrat who can stand up now and defend the Government’s policies I want to say something about the Finance Bill and the Budget. This is the truth as I see it: for one hour, the Chancellor, simply because a general election is on the way, changed his tune from that of the Conservative party conference in October, when he told us swingeing cuts were on the way and we should prepare for an age of austerity. Now, 44 days before a general election, he tells us, like a latter-day Harold Macmillan, that we’ve “never had it so good.” Those of us who are historians remember what happened after the complacency of that Conservative Government of the 1950s and the eventual devaluation of the pound in the 1960s. The problem is that for vast swathes of constituencies like mine across the country which are trying to deal with the post-industrial age the Government did not offer any hope or optimism for the future. Families in my constituency are £1,600 worse off than they were five years ago; that is the truth, and I challenge any Government Member to come to Islwyn, walk down the streets with me and go to the food bank in Risca where I was taken the other day. I could not get through the front door because so many people there were in need. Some might say they were there for kicks, but so many of them just needed help with benefits or the health service—they were there because there was nowhere else to go. That is a sad indictment of this Government’s policies Islwyn is a constituency dealing with the post-industrial age. Under the last Labour Government we attracted investment, but the problem is that this Conservative- led Government have created two Britains. There is the Britain of the affluent, who are enjoying a tax cut because we are in the grip of an economic theory that failed and only brought about deficits in the ’80s. That continues with the tax cut from 50p to 45p. We also see a different kind of Britain, however: a Britain of people gathered around the kitchen tables worried about paying the bills—about how they are going to pay the mortgage, how they are going to pay the rent. These are the people who deserve the tax cut It is all very well the Prime Minister committing today at Prime Minister’s questions not to put VAT up. He made that commitment before the last general election, yet VAT went up. It is only ever the Tory party that puts VAT up. VAT is regressive because everybody has to pay it, whatever goods they buy; whether they are a pensioner, a student, in work, a lord or a duke, they have to pay VAT. It does not matter what they earn. That is why VAT is a regressive tax The Government have forgotten who pays the bills around here. It is not the millionaires. It is not the business people. It is the people on the ground. I have nothing against anybody earning big money; I have no problem with success or aspiration, or ambition or achieving anything. However, if we give a tax cut to the very rich in society, they will employ accountants who will hide the money, but if we give a tax cut to people in the middle, they will spend it in the shops and businesses and get the high streets moving. That is not what is happening. That is not the reality on the ground We can talk all we want, but the simple fact is there is a problem with the word “conservative”. It means preserve or conserve—to conserve a way of life that never existed. If we want examples of how the Conservatives constantly look back to a golden age that never existed, we need only listen to the references to Agincourt. This is what I say: if we are looking back constantly, we are not moving forward The NHS is in crisis but the Budget says nothing about that most important public service in Britain. The Tories last week confirmed plans for extreme spending cuts in the three years after the election, which will put our NHS at risk.
I always enjoy listening to the hon. Gentleman’s speeches, but he ought to note that the Budget included a huge £1.25 billion for mental health spending in the NHS.
I welcome any money that goes towards mental health, and I think anybody suffering from a mental health issue would welcome that as well, but I have to say this to the hon. Gentleman: I am fed up, especially as a Welsh MP and a Welshman, at the way the Welsh NHS has been attacked by this Government. It is a shame because when the Government attack the NHS in Wales, they are attacking the nurses, the doctors, the cleaners, the porters—everybody who works so hard to provide the best possible health care to our patients.
The hon. Gentleman is making a passionate and powerful speech highlighting why it is such a travesty that he is not at the forefront of the Leader of the Opposition’s team, as he should have been. Does he join me in regretting the fact that the Leader of the Opposition seems to be planning a jobs tax were Labour to get elected at the general election?
I thank the hon. Gentleman for his kind comments, and I have to say that over the years that we have served together in this House he has always been courteous to me and I count him as one of my friends from the other side.
The dark side.
Yes; I thank the hon. Gentleman for that, and admire his cheek in trying to get me into trouble. I shall move on quickly. Working people know they are worse off than they were five years ago.
The hon. Gentleman must accept that five years ago the personal allowance was just over £5,500, and after this Budget it will be in excess of £10,000. That is an enormous tax break, putting money into the pockets of all our constituents, some of them on the minimum wage, some of them on the lowest pay. Surely he must welcome that when he talks about working people.
I would welcome it had VAT not been hiked up from 17.5% to 20%, which has affected many people and squeezed their wages down I do not have long left—[Interruption.] I hope I have longer in this place, but I do not have long left in terms of my speech. The people I speak to did not want the Chancellor to present an image of something that they were not experiencing. The statistics may speak differently, but for the many families I speak to who are worried about their job security and jobs being offshored, that was not their reality I want to end my last speech in this Session by thanking everybody on both sides of this House whom I have come to know for their various kindnesses and friendships. I have been immensely proud and honoured to represent the Welsh valleys that I was born in and grew up in, and I thank everybody for their help and advice over the years.
I want to make some brief comments on a number of issues that have come up in the debate so far: tax simplification, where the impression is being given that these measures will simplify taxation; avoidance and evasion, where there are major problems in delivering on the commitments the Government have given; welfare reform, where the Government’s track record is appalling; and the impact on income distribution, where it is being suggested that those on the top incomes are most affected by the Budgets over recent years, when actually it is quite different First, let me join in the chorus of concern about the lack of scrutiny under this wash-up process. There have been many comments in the media today from various experts—taxation bodies, chartered accountants and others—all expressing concern that, given the level of complexity involved in this Finance Bill, we simply will not get adequate scrutiny by rushing through all its stages in one day. I share that concern, and I am pleased to see that it is a concern that is recognised across the House. I would have preferred a much simpler Bill that included only a limited number of provisions. When we return and there is a Labour Government, we can have a Finance (No. 3) Bill, enacting proper measures to deal with the problems in this country I wish to discuss four issues and the impact this Budget and previous Budgets since 2010 have had. The first issue is tax simplification. It would be wrong to suggest that our taxation code is not getting more complex, and this Bill will add significantly to the complexity. I put it down simply to the way in which Whitehall operates; our bureaucracy is geared to the creation of legislation and of taxation measures. To take a perfect example, the Treasury is full of people who are there to guide and advise the Government on the latest taxation measures. Up against them we have a tax simplification project that consists of three nominated officials and a few civil servants. It is an unfair game; it is impossible for the tax simplification project to counter the further moves being undertaken towards complexity in our taxation system. It requires government—I include government on both sides—to address the real need, look carefully at whether all the taxation measures in our code are necessary, and take appropriate steps to reduce the number of codings and to make our taxation system simpler The second issue is avoidance and evasion. The Chancellor has said that his way of saving money over the next Parliament, should the Conservatives be re-elected, is to pencil in £5 billion-worth of reductions in avoidance and evasion. The first thing that has to be said is that that is an incredibly ambitious target. HMRC’s projection for the tax gap is currently about £35 billion, out of which about £4 billion is avoidance and £3 billion is evasion. So the total for avoidance and evasion, according to HMRC, is about £7 billion, yet we are being asked to believe that the Chancellor can deliver £5 billion through tackling evasion and avoidance in the next Parliament. That is a very tall order and we need to look very carefully at his proposals. The Office for Budget Responsibility has looked carefully at the suggestions being made, both in the Budget and in the consultation document released the day afterwards, and it can find only just over £3 billion-worth of savings. It has attached to those £3.1 billion savings either a “very high risk” or a “high risk” as to whether there will be delivery. So a gap is already opening up between what the Chancellor has promised and what he can deliver, and the OBR is suggesting that the task may be very difficult for the Government because of the high-risk nature of this. We can all recall the Swiss bank fiasco; it was suggested that £3 billion to £4 billion would be raised, but we now have a much more realistic figure, much below that. In order that that does not happen again, we ask that the Chancellor be much more ruthless and realistic in his appraisals about what can be saved by tackling avoidance and evasion—it certainly is not the £5 billion that he has suggested in this Budget Similarly, on welfare reform the Chancellor is suggesting that he wishes to save £12 billion. I will discuss how he is suggesting it will be saved later, but first let me indulge a little in recent history. Over the past five years the Chancellor has instituted policy changes that he said would deliver £21 billion-worth of savings, yet according to the Institute for Fiscal Studies the actual reduction in the welfare bill—the actual cash saved—was £2.5 billion. So there is an enormous hole in his accounting. He is suggesting he will save £12 billion between now and 2020, but he has indicated only where £3 billion of that will be saved—there is another £9 billion to go. We hope that over the period of the general election he will give the electorate some idea of how he is going to save such an enormous sum, recognising his total failure to save the money in this Parliament. His track record is not good. Given all the other imponderables—the things that are not under Government control that can affect the welfare budget—it is difficult to see how he can save that amount of money That leads us to the elephant in the room: if the Chancellor does not save money from avoidance and evasion or from welfare reform, where is he going to make up the difference in order to deliver the £30 billion-worth of savings? That is where we come back to VAT. That is where the Conservatives’ track record shows from the past, and that is where we will be scrutinising carefully the comments that are made. Tax rises are on the horizon. I am being asked to cut my remarks short so I do not have time to deal with the distributional impact, but let me just say that the Budget will not affect the highest paid but will affect those in the two lowest deciles of payment more than anyone else. It is a regressive, retrograde Budget, as previous Budgets have been This is my last speech in the Chamber. The experience has been great and I have met a wonderful group of people, on both sides of the House. I have enjoyed it immensely, and I retire having said my piece on this Budget.
It is a great pleasure and privilege to follow my hon. Friend the Member for Edmonton (Mr Love), who has been a distinguished Member of the House, particularly through his service on the Treasury Committee, which has added enormous insights into the deliberations of successive Governments. It is a great joy to follow my good friend and colleague I just want to make a few remarks. The budgetary process in the immediate run-up to the election has been very much a political stunt. The first thing to deal with is the illusion—or delusion—that there has been economic success and turnaround under the Conservatives. That is simply not the case; it is simply not borne out by the facts. The national debt is about £1.4 trillion—up 44%. Reference is made to the deficit and how much the debt is going up, but of course the current Government have borrowed more in five years than Labour did in 13 years—and we had to bail out the banks. The Government have lost the triple A rating. As I pointed out earlier, the number of people earning more than £20,000 is down by 800,000. There is a reliance on a fudging of the facts; this is a “fudge it” Budget, to make up for the fact that we have more and more low-paid people who cannot make a contribution towards the revenues in a sustainable way. Meanwhile, the Government continuously put up the tax threshold and say, “Who’s going to disagree with that?”, knowing everyone is scared to disagree. But that is the management of irresponsibility, because the money simply is not coming in to pay the bills So what we need is not a spat about tax and spend, but a serious consideration of how we generate productivity and growth, in order to have higher wages and a more sustainable plan for the future. Obviously, part of that was the debate about tuition fees and about enabling people to go, without fear, to university, so that we could get higher productivity and the students would not be hobbled by massive debt throughout their lives. Such debt can mean that they cannot get a credit rating and cannot get a house, and are scared of moving into a higher pay bracket because it pushes up their repayments Sadly, the Tories are creating a two-nation Britain. One nation will be the better off, who, lucky for them, own their own house, can get their sons and daughters into university and pass on money for them to put down a deposit on a property. There are others who may be equally or even more capable of going to university and of boosting the productivity in our collective economy but who are being stopped from getting houses in the future. We are at a turning point now. The party that gets elected will determine whether we have a more unequal or a less unequal future. I very much want us all to pull together as one nation to invest in the future The Conservatives have this massively political Budget profile, which has been described as a “rollercoaster”. Deep and savage cuts were going to take us back to the 1930s, but because that was pointed out by the BBC, the Office for Budget Responsibility and the Institute for Fiscal Studies, an adjustment was made. Bank shares were sold off and oil prices went down so that the public service time machine was moved back only to the year 2000. None the less, we all saw the Tories in their true oils. They were happy to make those savage cuts until the BBC highlighted what they were doing. Then they said, “Oh no, we’re not going to do that.” But there will still be savage cuts until the final year of the next Parliament, 2019-2020, when there will be a sudden acceleration in public spending—the biggest spending increase for 10 years—presumably to try to get Boris Johnson elected as the next Tory Prime Minister. That is probably what will happen in the unfortunate event of the Tories getting in again in some strange alliance with the UK Independence party, which would be a disaster for Britain We must strike a balance between trying to achieve economic growth and having to balance the books, instead of scrabbling around trying to decide which poor people to clobber. As my hon. Friend the Member for Edmonton pointed out, welfare cuts such as the bedroom tax raised only £400 million, which is small change compared with the numbers that we are talking about. Two thirds of the people hit by that tax are disabled. The cuts to tax credits are hitting people with children who are trying to work. It is ridiculous to try to squeeze more and more out of the poorest to make ends meet. Clearly, it is right that the richest pay more, whether those with more than £2 million pay the mansion tax—
They do pay more.
They need to pay lots more, not a bit more. Of course some of the very rich are paying more, but that is because they are getting richer and richer on massive pay awards. They are earning so much more than anyone else, and the situation is getting out of control
rose—
I will not give way to the rover from Dover, thank you very much. He is known as the Dover soul. [Laughter.] Obviously, that was the highlight of my speech. Finally, I wish to comment on the rabbits that have been pulled out of the hat. Today, we were told, “Oh, there will be no VAT increases.” Is the Prime Minister going to commit himself to that in his five-year plan? A couple of days ago, we heard that another £46 billion was being spent on various railway connections in the north. There seems to be a desperate attempt to make things up on the hoof I do not necessarily disagree with this devolution of economic and service power to the north—to Manchester. We did that in Wales, but it was done on the back of an Act of Parliament and a referendum. In their haste to generate higher ratings at the polls, the Government are doing anything, including undermining the constitution and the economic balance and fragmenting the NHS in the process. Their recent track record, therefore, has not been impressive. The future looks bleak. I very much hope that we can focus on increasing growth. We should consider tuition fees, a cast-iron promise to stay in the EU, which is so important for inward investment, and procurement. The reality is that when it comes to procurement we should look at favouring, if we can, small British companies that pay British tax—corporation tax and income tax—rather than giving the work to foreign companies that do not pay our tax and do not contribute towards growth.
rose—
I will finally give way to the hon. Gentleman.
I thank the hon. Gentleman for being so generous in giving way to the rover from Dover. I gently point out that the reason why we cannot show a preference towards our own businesses in matters of procurement is to do with the European Union, which he loves so much.
Order. Believe it or not, that discussion is outside the scope of the Budget resolutions. But given that the hon. Gentleman had just acquired a nickname—although I will not be addressing him as such—I decided to allow him to intervene. Mr Davies, I should be grateful if you returned to the Finance Bill.
Clearly, I accept the ruling on the rover from Dover. I was simply making the point that, in our growth strategy, we should be encouraging small businesses. In Wales, something like 60% of procurement goes to small businesses, half of which are based in Wales. In England, the comparable figure is something like 25%. I am suggesting that, through encouragement rather than breaking EU rules on competition, we should make things easier for small businesses in order to help growth, tax, and supply chains. We should do that, rather than just say, “What can we do?” Labour increased this economy by 40% in the 10 years to 2008, before the banking crisis.
Order. Mr Davies, you are way out of scope now, so we will go to the concluding remarks of this debate, because we are running out of time.
I have only a short time in which to speak, so let me start by saying that we have heard some very good speeches today. The debate was opened powerfully by the shadow Chief Secretary, my hon. Friend the Member for Nottingham East (Chris Leslie). My hon. Friends the Members for Islwyn (Chris Evans), for Edmonton (Mr Love) and for Swansea West (Geraint Davies) all spoke well. The rover from Dover will live long in our memories and trumps, I think, “Dover soul”, which is not really up to the mark in quite the same way I pay tribute to my hon. Friend the Member for Edmonton who made his valedictory speech today. I am sorry that he had to cut his remarks short, but I wish to put it on the record that he has had a very distinguished period of service in this House. It has always been a pleasure to sit in debates on Treasury matters and to hear him speak. I have learned a huge amount from him. His service on the Treasury Committee has been to his credit, and he has a record of which he can be proud. The House and his constituents will miss him greatly As my hon. Friend the shadow Chief Secretary said in his opening remarks, the Budget is as fundamental as it gets when it comes to the business of the Government, and the Finance Act—the legislation that enacts most of that Budget—is also fundamental. But, effectively, the vast majority of this Bill will go through without debate. I confess that the negotiations into which I entered with the Financial Secretary last week was my first experience of the wash-up. Although I acknowledge the hard work done by his officials and even by him in terms of the tenor with which he approached those discussions, neither of us can pretend that this is a satisfactory way in which to make very complex taxation legislation. In particular, we know that outside commentators have an eye today on the diverted profits tax. The Opposition have to make a judgment call based on often very little, or last minute.com, information. For example, we have to judge whether blocking something now so that we can do it better later would give a signal that it will not happen at all and so cause uncertainty or whether an appropriate reassurance can be made I know about the lively discussions outside the House about the diverted profits tax. Let me just say that we support the thrust of what the Government intend to do, but the Bill was being drafted at the end of last week, when the Minister and I were trying to conclude our negotiations. That is unsatisfactory, because the Bill is complex. In our first Finance Bill when we are in government, we will seek to remedy any defects that prevent that measure from being both effective and strong. I am happy to let it through not because I think that it is a completely 100% foolproof bit of work, but because I fear that the Tories in opposition might not be quite so keen to see the measure on the statute book. I wanted to ensure that we got it passed, and then we could fix any issues later Although we will support many of the measures now going through—later we will debate the measures that we think are missing—we think that the Bill is a missed opportunity, as my three hon. Friends who spoke from the Back Benches all said. The Government could and should have taken the opportunity really to start making a difference to the lives of our constituents across the country, but they failed to do so. Only a Labour Government and a Labour Finance Bill immediately after the general election will start putting those matters right.
It is a great pleasure to close this debate on Second Reading. I would like to thank everyone who has spoken for their contributions, particularly the hon. Member for Edmonton (Mr Love), who has served this House with such distinction. I wish him well. We have had an interesting debate. I should like to set it in the context of the Chancellor’s Budget last week A number of points about living standards have been raised. I reiterate that living standard will be higher in 2015 than they were in 2010, real household disposable income per capita will grow at its fastest rate since 2001 and, according to the Institute for Fiscal Studies, families are now set to be £900 better off this year than they were previously. That is all in line with our plan to fix the British economy, take us out of the dreadful mess we inherited back in 2010 and, quite rightly, give the British public the recovery they deserve The Bill marks the next step in that plan. It puts more money in people’s pockets, delivers further growth and puts fairness, which has been mentioned, at the heart of our recovery. We continue to put fairness at the heart of the recovery through our increase in the personal allowance. We will take people on the national minimum wage and working up to 30 hours a week out of income tax altogether by 2017. That is about rewarding work and raising living standards, which is what this Government stand for I will address a number of points that have been raised. The hon. Member for Edmonton spoke about £5 billion in tax avoidance. To answer his question, yes, it is a realistic achievement to bring in the revenue that has been spelt out. There is no reason to doubt that the Government can raise the figures we have already announced, so we will proceed with that. On the point about the tax code, we established the Office of Tax Simplification in 2010, and the Bill includes a number of measures that build on its recommendations Points were also raised about oil and gas. The Bill introduces radical measures to support the oil and gas industry, giving investors long-term certainty. We have been working very constructively with the industry to ensure that the package will provide it with the right fiscal environment On clause 12, which the hon. Member for Nottingham East (Chris Leslie) mentioned, the exemption will not apply where expenses are paid under a salary sacrifice arrangement. That will stop employers artificially lowering their national insurance contribution bills by replacing some of their employees’ salaries with expenses Clauses 13 and 14 implement recommendations set out by the Office of Tax Simplification. On clause 20, which relates to gift aid, more details will be set out in regulations, which of course will improve donor understanding of tax to cover. On clause 28, I should like to reassure the hon. Gentleman that it applies to expenditure on consumable items only if the item is transferable in the ordinary course of the relevant person’s business Flooding was mentioned. In the spending review the Government committed an unprecedented £2.3 billion to tackle flooding and coastal erosion. In addition, clause 35 supports business contributions to alleviate the impact of flooding The hon. Gentleman also mentioned clause 29, which sets out film tax relief opportunities. The structure of the current relief is completely different from that introduced under the previous Government’s scheme, which was prone to abuse, so there are no issues of avoidance in this case. He also mentioned zero-emission bands. Stakeholders have asked for rates to be announced four or five years ahead, and the Government have been committed to announcing rates three years in advance, which is why we have done so Let me move on to the whole issue of tax avoidance. The UK is demonstrating further leadership by implementing the diverted profits tax, which is also consistent with the principle of aligning taxing rights to economic activity. The Bill quite rightly ensures that everybody contributes fairly to the Government’s long-term economic plan. During this Parliament, Her Majesty’s Revenue and Customs has secured £100 billion in additional revenue, thanks to this Government’s avoidance and evasion policies. Over a third of the Bill’s provisions will enact measures that go even further in tackling avoidance and evasion, including new measures on corporation tax and offshore evasion and avoidance and, of course, increases in the bank levy. That will raise nearly £8 billion more over the next five years, helping to reduce the deficit and strengthen the country’s economic recovery The Bill will help households up and down the country with the cost of living, make the country even more competitive internationally and, through the tax avoidance and evasion measures that we are putting in place, ensure that everyone pays their fair share of tax. The Bill marks the next step forward in our long-term economic plan, and I commend it to the House Question put and agreed to. Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, 24 March).
With this it will be convenient to discuss the following: Clause 67 stand part New clause 1—Report on impact of value added tax— “(1) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the impact of the increase in the standard rate of VAT which took effect from 4 January 2011 (2) The report must estimate the impact of the increase in the standard rate of value added tax on— (a) living standards; (b) small businesses; (c) the fairness of the taxation system; and (d) economic growth.”.
Before speaking to clauses 66 and 67 and new clause 1, may I first say what a great pleasure it is to serve under your chairmanship, Dame Dawn? This is the last of a great number of Finance Bills in which you have played one role or another, and I have had the privilege of serving with you on a number of those occasions. This is the last afternoon on which you will be dealing with tax matters, having done so for an unconscionably long period, so I thank you for all that you have done over many years and for your service as Deputy Speaker and wish you a very happy retirement Clauses 66 and 67 set out the Bill’s provisions on VAT. Clause 66 refunds VAT to charities involved in co-ordinated search and rescue operations, air ambulance charities, hospice charities and blood bike medical courier charities. Clause 67 refunds the same levels of VAT to the strategic highways company—from 1 April it will take over the functions of the Highways Agency—as are paid to the Highways Agency itself. It is largely a tidying-up matter It is worth pointing out that refunding VAT will benefit around 400 charities that work alongside the emergency services, provide palliative care to terminally ill patients or support the national health service. The Hospice of St Francis in Berkhamsted in my constituency is very appreciative of the measure and thinks that it will make a significant difference to the service it can provide to my constituents in South West Hertfordshire. I suspect that clauses 66 and 67 will not cause great controversy in Committee, but I will of course be happy to take any questions on them.
I am sure that we all welcome the clauses relating to VAT relief for hospices, which do such a tremendous job. Can the Financial Secretary help me by explaining how charities are selected and how VAT exemptions are secured? I have previously raised the case of a charity dealing with disabled people in Wrexham that provides transport services, which are subject to VAT under the current arrangements. The process of securing exemptions seems easier for ski lifts, for example, than for disabled people in my constituency, so I would be interested to find out how on earth one secures exemptions for worthy charities.
I have heard the hon. Gentleman make both points in the past, and if I remember correctly, I responded to an Adjournment debate on those matters. There are significant benefits in our tax system for charities, but the Government look at cases partly depending on the demands on the public finances and what is affordable. We have looked in particular at hospices. There is a particularly strong case there, and to some extent they are put at a disadvantage compared with parts of the NHS because of the irrecoverable VAT that they pay. This is a matter that any Government would keep under review. I am sure that the hon. Gentleman, as a persistent Member, will raise the matter again if he has the opportunity to do so in future In new clause 1, the Opposition ask us to publish a report on the impact of the increase in the standard rate of VAT in 2010. No doubt, the hon. Member for Birmingham, Ladywood (Shabana Mahmood) will set out her thinking on that, but let me make a pre-emptive strike, if the Prime Minister has not already done so. Before I turn to the details and the imposition of VAT in 2010, I shall briefly set out the context for that decision Let us be clear that we increased the standard rate of VAT in 2010 as a consequence of the mess that the Opposition left the public finances in and the fact that, although the previous Government had left a mess, they had not left behind a plan to clear it up. Of course, a tax impact information note was published by HM Revenue and Customs at the time of the June 2010 Budget, but let us look at the situation that we inherited. At that time, the independent Office for Budget Responsibility’s pre-Budget 2010 forecast revealed that the structural deficit—the part of the deficit that will not go away with the recovery—was higher than previously thought: around £9 billion or 0.6% of GDP higher in 2010-11. Debt repayments were forecast to reach more than £67 billion by 2014-15, more than was spent on defence or on schools in England. The UK had one of the highest deficits of any advanced economy, so this Government had to take urgent action to eliminate the bulk of the structural deficit, which is a necessary precondition for sustained economic growth.
The Minister referred to the Prime Minister’s pre-emptive strike, but he will be well aware that similar statements were made before the last election. Does not the whole VAT issue illustrate the difference between the parties? The Labour Government’s response to an economic recession was to stimulate the economy by reducing VAT. The response of the incoming Government was to deflate the economy by increasing VAT.
The previous Government brought VAT back up. We know from his memoirs that the then Labour Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), believed that a Labour Government after 2010 should increase VAT. A Budget document was even published showing VAT going up to, I believe, 18.5%. I know that that was published by mistake, but it clearly shows that serious consideration was given to that. The previous Labour Government recognised that taxes would have to increase. They had proposals to increase employers national insurance contributions, or the jobs tax. Given that there is such uncertainty about the Opposition’s plans for what they would do in government, the question is whether they would rule out increasing employers national insurance contributions.
rose—
I give the hon. Lady an ideal opportunity to do that.
I am grateful to the Financial Secretary. As we have been in the Chamber, he may not be aware that we have ruled out any rise in national insurance.
Well, there we go. I am struck by the fact that the Leader of the Opposition was very reluctant to say that earlier, but I am pleased that he has been bounced into providing that clarification. [Interruption.] I noticed that he did not answer questions earlier today. [Interruption.] Indeed, he will never have the chance to answer questions at Prime Minister’s Question Time.
It has taken me five years to learn that Prime Minister’s questions is about the Leader of the Opposition and us asking questions and the Prime Minister not answering them. It is not Leader of the Opposition’s questions; it is Prime Minister’s questions. We do not answer questions; the Government are supposed to.
I notice that the hon. Lady does not answer questions. I am glad we finally got some clarification on that point, but as I say, I do not think the right hon. Member for Doncaster North (Edward Miliband) will ever have the opportunity to answer Prime Minister’s questions.
Does the hon. Gentleman agree that VAT is a regressive tax in principle? Can he tell us why the Government chose to use an increase in VAT as a tool for bringing down the deficit?
I will turn to that question in a moment, but before I do so, I shall say a little about this Government’s record High public debt can lead to a loss of market confidence and higher market interest rates, raising the cost of borrowing for families and businesses and discouraging investment and consumer spending. So what has our long-term economic plan delivered? Today public sector net borrowing as a percentage of GDP is forecast to have halved between 2009-10 and 2014-15. Latest data from the IMF show that this Government also reduced the structural deficit by more than half between 2010 and 2013. In fact, the UK’s structural deficit fell by 4.6% of GDP over 2010 to 2013—a larger reduction than any other country in the G7. Since the autumn statement last year, the UK’s fiscal position has improved right across the forecast period, with higher receipts and lower debt interest. This Government have restored stability, put the public finances on a sustainable path and are about to put public sector net debt on to a declining path as a share of GDP.
Will the Minister give way?
Let me make a little more progress The previous Government failed to take decisive action to get our country moving again. Our record speaks for itself. Employment is now at its highest ever level. Economic growth is now firmly in place and at the Budget the OBR revised up its forecasts. The UK economy is forecast to grow by 2.5% in 2015, 2.3% in 2016, 2.3% in 2017, rising to 2.4% in 2019.
Is it not correct that in June 2010, when the Chancellor increased VAT, he said that he would eliminate the deficit by the end of this Parliament but has not done so? Despite the increase in VAT that he imposed, he failed in that aim. Why is that?
I suggest that the hon. Gentleman look at the analysis by the Office for Budget Responsibility of why its forecasts on deficit reduction were not met. It has been very clear that the three reasons it did not happen were the eurozone crisis; the after-effects of the financial crisis being greater than it or, indeed, other independent observers had expected; and higher commodity prices than had been expected. That made deficit reduction harder than it would otherwise have been The critique of Labour Members is sometimes to say that we have rigidly stuck to our plans to reduce spending, and on other occasions to say that we have failed to reduce the deficit as fast as we said we would. As regards our spending plans, the departmental and welfare spending reductions that we set out have been delivered. The automatic stabilisers came into effect; we have shown the flexibility to allow that to happen. As a consequence, we have delivered what we set out in terms of reducing spending, although we have faced more difficult circumstances. Labour Members are all over the place in this debate. Sometimes they say that we have stuck rigidly to plans that we should not have stuck to, and at other times they say that we have let the deficit rise We must remember that Labour Members opposed every single measure that we took to reduce the deficit. Had they been in power and had they been consistent in what they said—at least in their rhetoric—in opposition, we would have seen borrowing at a substantially higher level over the past few years, leaving our public finances in an unsustainable position, putting our recovery at risk, and damaging the economic credibility of the United Kingdom. Thankfully, they did not have the opportunity to crash the car, having done so once already.
Does the hon. Gentleman not accept that the deficit targets were not satisfied because the growth projections went down, and that is because consumption went down, and that is because VAT went up? I appreciate what the Prime Minister said earlier, but does the hon. Gentleman accept that if VAT went up now, when we have 0% inflation, that would spiral the economy down, and that it would be better to reduce VAT than to reduce tax thresholds in order to stimulate growth to balance the books?
Is the hon. Gentleman saying that we should reduce VAT?
I am saying that given a choice between lower VAT or lower tax thresholds, does the hon. Gentleman accept that lower VAT would give higher growth and help to reduce the deficit—or is he a just a politician without any economic sense?
Well, there we go: another pledge from a Labour Member that would increase borrowing levels. I should remind the House that when VAT was increased, Labour Members did not vote against it.
Does the Minister share my surprise that a policy is being proposed whereby the biggest winners would be pop stars, premiership footballers and bankers, who spend the most?
My hon. Friend makes a good point. I will come back to that later Our long-term economic plan has delivered economic growth and record levels of employment, and it has put this country on a sustainable economic footing. Specifically on VAT, we have maintained the VAT registration threshold, which is now £82,000—the highest in the EU. That is of significant benefit to small businesses right across the country. While the bulk of the deficit reduction has come from spending, we chose to increase VAT from 2011. If it is necessary to raise large sums of money, as it clearly was in 2010 when we saw the structural deficit deteriorate—at least, the assessment made by the previous Government, and then by the independent OBR, showed a significant deterioration—then it is necessary to raise one of the bigger taxes Happily, we are no longer in that situation under the plans put forward by the Conservative party. I am afraid that Labour Members’ plans—not engaging in reducing the welfare budget and not committing themselves to controlling departmental spending in the way we would—mean that they will need to find a substantial tax increase. A Labour Government in 2010 would have put up the jobs tax—a different choice from ours. In those circumstances, it is hard to believe that we would have 1.9 million more people in work today than we had in 2010.
If the Conservatives’ plan was so brilliant, will the Minister explain why, even at the height of the global crash in the UK, under the Labour Government we did not lose our triple A credit rating, but on his watch we did?
We have retained the confidence of the markets, and we have retained very low long-term interest rates. When we came to power, we were on a par with the likes of Spain and Italy; now, we are seen very much as a safe haven. The UK’s fiscal credibility has been maintained, and it would not have been had we stuck to Labour’s plans, even with a significant increase in the jobs tax.
Does the Minister not see that raising VAT and cutting benefits hits the most vulnerable in society? Does he think it is right that children in this country should lose weight over school summer holidays because their parents do not have enough money to feed them, that people are dependent on food banks, and that we have had people starve to death because of benefit cuts? Is that the way this country should be in this day and age?
Under this Government, child poverty has fallen, and pensioner poverty is at a lower level than it has ever been. Only today, we have seen numbers showing that there are 600,000 fewer workless households than there were in 2010. If we wish to deal with poverty, and we certainly do, the best way is to have a job-creating, growing economy, and that is precisely what the long-term economic plan is delivering To be fair to the hon. Member for Swansea West (Geraint Davies), he says that he would cut VAT, but I am not hearing that from Labour Front Benchers. I must remind Labour Members that, with a handful of exceptions, none of them voted against the increase in VAT in 2010. I note that one of the handful of exceptions is sitting on the Opposition Benches, but Labour Members did not vote against it.
On the subject of deficit reduction, does my hon. Friend recall a report from the IFS a little while ago that said that Labour’s plans would have resulted in about £200 billion more borrowing if the Labour Government had continued, given the change in circumstances? Does that not show that there is a massive black hole at the heart of Labour Members’ current plans that would be made worse by the out-of-the-blue, panicky pledges on tax that they are suddenly making on the hoof on the news after pressure at today’s Prime Minister’s questions?
My hon. Friend makes a good point that is very relevant to the debate we are having about VAT The three main parties in this House have agreed that we will deliver a cyclical current budget surplus by 2017-18; that is what the charter of fiscal responsibility states. The vast majority of Labour Members trooped through the Lobby to support that measure. Independent analysis, as well as the Treasury’s analysis, confirmed that that requires some £30 billion-worth of fiscal adjustments. From my party’s point of view, that would be made up of £13 billion from departmental spending, £12 billion from welfare spending, and £5 billion from anti-tax evasion and tax avoidance measures The Liberal Democrats have set out how they will get their £30 billion. Their plan has a different balance and make-up from the Conservative plan, but they have set it out. The Labour party has not set out how it will reach that £30 billion. If Labour is not going to cut welfare in the way the Conservatives are, and if it is not going to cut departmental spending as we are—as far as I can see, that, after all, is the heart of Labour’s election campaign—more money must come from tax. That is why the question of who will raise taxes and what taxes will be raised is much more acute for Labour Members. They have questions to answer. There is a gap in their public finance plans, whereas we have set out plans that do not require us to put up taxes on hard-working people.
The Minister is being unfair to Labour Members. They will manage to reduce the deficit by not opening any more free schools, and by abolishing police and crime commissioners. That will undoubtedly solve the problem.
We must not forget that Labour will put up gun licences—that is also on the list I note that the shadow Secretary of State for Work and Pensions, the hon. Member for Leeds West (Rachel Reeves), announced yesterday that she will “abolish the bedroom tax” and use the savings for something else. I am not sure that I understand how there can be savings from that measure.
Will the Minister give way?
I will give way one more time; I ought to press on.
The Minister’s case is that, because of the savings that the Government plan to make, there is no need to increase VAT. Why did the Chancellor not say that in his Budget statement?
What I have said is consistent with what the Chancellor has said again and again. Our plans do not require us to increase taxes for hard-working people, which is why we can rule out putting up VAT—[Interruption]—or extending it. The point the hon. Gentleman must answer is that his plans require taxes or borrowing to go up. He wants to ask hard questions about filling in fiscal black holes by raising taxes. They are questions for Labour Front Benchers, not for me, because our plans clearly do not need it.
rose—
I am spoilt for choice. It is important to share these things around, so let me give way to the hon. Member for Swansea West (Geraint Davies), who has been very patient.
The Minister assumes that the choice is between tax and spend. Does he accept that if the tax and spend options are made in one way rather than another they will promote more growth and therefore more revenues? If more money goes to poorer people who spend all their money, as opposed to rich people who hide it in tax havens—10% of UK wealth is offshore—and if we had a Labour Government and a fairer distribution, we would surely have more growth and fewer cuts.
I am deeply unpersuaded of the idea that, somehow, magically, growth will shoot up if we have a Labour Government.
It did last time.
The hon. Gentleman says growth shot up last time, but we had the biggest contraction of our economy in living memory under the Labour Government—[Interruption.]
Order. I shall ask Members once not to shout across the Chamber at one another, and to listen to whoever is on their feet, which at this time is the Minister.
Thank you, Mr Hood When President Hollande took office, with the enthusiasm and support of the Labour party in this country, I have no doubt that he wanted growth to increase in France. The fact that our economy is growing something like seven times faster than France’s is not because of a lack of desire on the part of the French Government, but because some policies work better than others. The Labour party’s policies would not result in higher growth—it is so anti-business that it would drive investment from this country, and its tax policies seek to punish wealth creators. I question Labour’s supply-side policies.
Does not the latest Labour U-turn on the jobs tax—perhaps it was forced into it—create an even bigger black hole in its finances? How will Labour balance the books?
My hon. Friend makes a very good point. I confess that I am a little young to remember the 1959 election, but some hon. Members will recall it.
Thank you.
I am looking at the hon. Gentleman. He may recall, as a very young lad, the 1959 general election.
indicated assent.
He does. I am sure he was a very young man at the time. Under a great deal of pressure, Hugh Gaitskell ruled out all sorts of tax increases and at the same time made all sorts of promises about public spending. The British people rumbled the Labour party in 1959 and did not believe that that was a credible position. As a consequence, they returned a Conservative Government with an even bigger majority. Labour Members might want to be a bit careful about drawing parallels with 1959.
As we are talking about rumbling the Government, the election will be an opportunity to scrutinise the Chancellor’s claim about the £30 billion of savings. He has said there will be £12 billion savings from welfare reform but has indicated how only £3 billion will be found. He has said he will get £5 billion from anti-evasion and avoidance measures, but has indicated where only £3 billion of that will come from. There is still a huge credibility gap. Will the Minister help us with it?
I will tell the hon. Gentleman where the credibility gap is. Labour Members effectively voted for a £30 billion target. They then denied it. They now will not indicate what adjustments they will undertake in 2016-17 and 2017-18. They have not said how they will reduce departmental spending, or how, or whether, they will reduce welfare spending. They have not said how much they will raise from tax. If they will not give us answers to those questions, we can only assume that it is because they intend to tax and borrow more. If they will not provide clarity on that, we will make that point time and again.
Speaking of Labour’s spending and tax commitments, how many times over have Labour Members spent the bank bonus tax? Is it 10 times, or more? I have lost count.
I thought it was 11 but I could be wrong. It may be 12 by now—who knows?—because that money may be being used to pay for Labour’s tuition fees policy.
For the avoidance of doubt, and for what feels like the 278th time in Treasury debates, I should tell the Minister that the bank bonus tax will pay for one policy and only one policy: the paid starter jobs—the compulsory jobs guarantee. Why do the Government not match us on that policy rather than harp on about their failed rhetoric on the bank bonus tax?
The Government have a very good record in delivering jobs—sustainable jobs—in this country.
rose—
I will give way to the hon. Gentleman, who will no doubt enlighten the House about the 1959 general election.
I would be delighted to do so. I campaigned against Sir Oswald Mosley in Kensington North—admittedly, I was only 11 years old, but I did a fairly good job. He did not win I put it to the Minister that, in 1959, the Conservative party was very different—it was a much more consensual, nay Butskellite, Conservative party. One thing the Conservatives stood on was house building. They had a proud record. Does the Minister believe that the Bill will help house building in this country?
I share the view that we need to build more houses in this country, but I am pleased that last year housing starts were at a record high for seven years or so, that planning permissions are going up, and that we have reformed planning law to enable more houses to be built. In the Budget last week, there were details of 20 housing zones that could support something like 45,000 homes. That is consistent with a desire to ensure greater opportunity for people to acquire their own home It is also worth pointing out that in last week’s Budget we introduced Help to Buy individual savings accounts, which will enable people to acquire deposits so that they can enter the housing market. In terms of continuity, I would not necessarily be proud of everything connected with the Conservative Government of the 1950s. I absolutely think we need to do more to get more people into the housing market, and this Government are delivering on that and we are definitely moving in the right direction.
I thank the Minister for being so good with his time. All the measures in this year’s Budget stoke up demand for housing. It has little or nothing to say about supply. Will that not result in higher house prices?
It should be noted that the Office for Budget Responsibility does not believe that any of the measures announced last week will feed through to higher house prices. We also announced supply-side policies and 20 housing zones last week. It is right that we take steps to support supply The hon. Gentleman said that I was being generous with my time, but I am conscious that I am also being generous with the Committee’s time, so let me make a little progress. To return to the point made by the hon. Member for Telford (David Wright), the VAT increase in 2010 applied only to the standard rate. Everyday essentials such as food and children’s clothing, as well as newspapers and printed books, have remained zero-rated throughout this Parliament, which protects those on low and middle incomes. On fairness, we have reduced income tax for more than 27 million individuals, with basic rate taxpayers £905 better off in cash terms compared with 2010 There is no need to publish a report on the impacts of the rise in VAT announced in 2010—a rise that, after all, the Labour party did not oppose. The Government’s economic record speaks for itself: record employment in the UK against virtually record unemployment in France. By 2017, basic rate taxpayers will be £905 better off in cash terms compared with 2010, and 3.7 million individuals with low incomes will have been taken out of income tax altogether. The European Union’s own analysis describes UK living standards as the fourth highest in the EU, above those of France, Italy, Spain, Ireland and the Netherlands We have delivered sustainable economic growth while across the EU economies stagnate, but we recognise that the job is not finished. This Government continue to take the difficult decisions needed to secure a responsible recovery and stay on course to prosperity. I therefore hope that the Labour party will not press new clause 1 and that clauses 66 and 67 will stand part of the Bill.
I have now to announce the result of the deferred Division on the question relating to the draft Infrastructure Planning (Radioactive Waste Geological Disposal Facilities) Order 2015. The Ayes were 277 and the Noes were 33, so the Question was agreed to [The Division list is published at the end of today’s debates.]
It is a pleasure to serve under your chairmanship, Mr Hood. New clause 1 stands in my name and those of my right hon. Friend the Member for Morley and Outwood (Ed Balls) and my hon. Friends the Members for Nottingham East (Chris Leslie) and for Kilmarnock and Loudoun (Cathy Jamieson). It requests the Treasury to commission “a report on the impact of the increase in the standard rate of VAT which took effect from 4 January 2011.” The report must estimate the impact of that increase on living standards, small businesses, the fairness of the taxation system and economic growth The House has debated issues relating to VAT on a number of occasions, which the Minister referenced in his opening remarks, and it was, of course, a hot topic of debate at Prime Minister’s questions today. If the Prime Minister or any Conservative Member thinks that they can put the issue to bed today, let me tell them that they will not find it that easy, and I will set out the reasons for that during the course of my speech. Frankly, to believe what the Prime Minister has said today about VAT would be rather like believing what the Deputy Prime Minister said about tuition fees before the last general election. The public are simply not going to buy it, and I think the whole House is well aware of that Our new clause asks for a review because Oppositions are limited in what they can call for in amendments to a Finance Bill, but no Member can be in any doubt about our argument about the consequences of the political choices that are being—and that have been—made by the Conservative party and signed up to by the Liberal Democrats, even though they have been desperately trying to pretend that they had nothing to do with the fiscal assumptions given to the OBR, on the basis of which it made its assessments of what is likely to happen in the next Parliament. I welcome to the debate the lone Liberal Democrat on the Government Benches, the hon. Member for Burnley (Gordon Birtwistle). Perhaps if I give way to him he can rule out raising VAT.
I thank the shadow Minister for inviting me to give my views on the fiscal situation. My constituency has seen unemployment fall from 7.5% to 2.5% and has received more than £50 million of Government money. I remember 1959, because I was 16 and had just started work. I canvassed for a guy called Arthur Davidson, who was a Labour Member, and he said the same old things that the Labour party always says: “Vote for us and there’ll be no problems. We’ll have full employment.” Well, I remember what happened after 1959, because I lived through it. It is very cruel of the hon. Lady to suggest that some of the thing we are agreeing to now are wrong—
Order. The intervention is too long.
Thank you, Mr Hood. I am grateful for the hon. Gentleman’s intervention, during which he did not rule out a rise in VAT under the Liberal Democrats. Perhaps we will have to wait for others to comment on that.
Will my hon. Friend give us a bit more detail about new clause 1? I would like the study to look at the impact of VAT on the poorest people in our community, who are hit disproportionately by increases in VAT. The Conservative party has form on VAT, so the poorest people will be very concerned that it will rise again after the election.
My hon. Friend is absolutely right. That is exactly what people across the country will be concerned about. The Conservative party has form, about which I will go into in detail during my speech. History proves that what the Prime Minister said at Question Time today should not be believed, because it has all been said before and VAT has always gone up.
rose—
I give way to the rover from Dover.
Would the hon. Lady rule out a Labour Government keeping VAT at the same level, or would they reduce it? The hon. Lady ought to tell the Committee.
I will come on to what we announced yesterday, but we are not going to raise VAT. That is as clear as it gets, and the hon. Gentleman knows that I remind the Committee that VAT is the tax that hits everyone, with the same rate paid by the pensioner as by the millionaire. For many pensioners and those on the lowest incomes, it is the biggest tax that they pay. It is also the tax that hits people every single day, whether they are buying a cup of coffee or filling up the family car. Everybody does that every single day. The Government’s decision to raise the standard rate of VAT has, without doubt, hit the living standards of millions of people. According to the Treasury’s own figures, it has cost families an average of £1,800 over the past four years. That is no small trifling sum of money, even if it is averaged over four years As I heard from constituents across Birmingham when I was there with the shadow Chancellor yesterday, £1,800 has had a huge impact on their ability to make ends meet and to do the basic things in life—putting food on the table and keeping a roof over their families’ heads, desperately hoping they will not have to go to a food bank, even though they have a job, just to put food in the bellies of their children. That £1,800 is a significant sum of money and, coupled with the other facts of this Government’s record, such as wages being down by an average of £1,600 a year and the combined impact of tax and benefit changes, families are on average more than £1,000 a year worse off.
Given that both parties have ruled out an increase in VAT and that the hon. Lady will not commit to a reduction in VAT, it is hard to understand Labour’s position. This debate is a theatre of the absurd.
I have a lot of time for the hon. Gentleman and we spend much time debating Finance Bills, but I must say to him as gently as I can that that was an absurd intervention. We have made a clear commitment to the British people on what will happen to VAT on our watch. It will not go up. We know that it will go up if his party wins the next general election. There are no two ways about it. It does not matter what the Prime Minister has said and it does not matter what the hon. Gentleman says now. We know that because of his party’s record and form on VAT. I shall give a lengthy exposition of that history and form very shortly.
The hon. Lady says that the Conservative party will definitely increase VAT. What proof does she have of that? If she has proof, will she come clean about it today?
If the hon. Gentleman gives me a few minutes, I shall get on to that point very shortly. He will understand that the past performance and form of the people who sit opposite me today, the Conservatives, is the clearest and surest indicator. Unfunded tax cuts have already been promised and spending plans have been made that require a Government to cut further and faster in the early part of the next Parliament than they have in this Parliament, and that is the clearest indication we can get. They can do nothing else but put up VAT; that is their tax of choice when it comes to raising the tax revenues they are looking for As I have said, the independent Institute for Fiscal Studies has said that the Government’s Budget plans mean that spending cuts after the election will be twice as deep as anything seen in the past five years. The cuts will go deeper and be made faster in the early part of the next Parliament than we have seen during the past five years. In reality, that will translate into extreme cuts to our crucial front-line public services, such as the police, defence and social care. The cuts will be so deep that they will be almost impossible to achieve, first, without putting the NHS at risk, and secondly, without making a further rise in VAT on the Tories’ watch simply inevitable Not only do the choices that the Government, and the Conservatives in particular, have made about spending and deficit reduction make such a VAT rise inevitable, regardless of the Prime Minister’s bluster today they are ingrained in their collective DNA. Before the 1979 general election, the then shadow Chancellor Geoffrey Howe said: “We have absolutely no intention of doubling VAT.” He specifically talked about doubling it. In his first Budget, however, he raised VAT from 8% to 15%. Conservative Members may take comfort from the fact that eight times two is 16, not 15, but they should not be proud of a seven percentage points rise in VAT or show off about its not being the eight percentage points rise that it might have been, given that such a rise had been absolutely ruled out and that there was no intention to double VAT. [Interruption.] Such a point brought no comfort to people who ended up paying the 15% rate of VAT, despite what the Financial Secretary, who is chuntering from a sedentary position, seems to think In 1991, Chancellor Norman Lamont increased VAT from 15% to 17.5%, claiming that his approach was “consistent” with the “strategy for tax reform” first set out by Geoffrey Howe in the 1979 Budget. Chancellor Lamont was correct that the approach was consistent: it was consistent with the approach of raising VAT rather than doing anything else. It seems that that approach may have slipped his mind, because just a year later, before the 1992 general election, Norman Lamont told Parliament that he “again made it clear that the United Kingdom has no intention of changing our VAT rate.”—[Official Report, 13 June 1991; Vol. 192, c. 627W.] That promise was reiterated by the former Prime Minister John Major, when he promised Parliament: “There will be no VAT increase. Unlike the Labour party, we have published our spending plans and there is no need for us to raise VAT to meet them.”—[Official Report, 28 January 1992; Vol. 202, c. 808.] He also said that year that he had “no plans and no need to raise extra resources from value-added tax.” The arguments then are almost exactly same as those we are hearing now Will Government Members remind us what happened after the 1992 election? There are no takers, because they know the answer: the Conservatives remember their consistent approach to raising VAT. The then Chancellor introduced VAT on domestic heating and fuel in the 1993 Budget, phasing it in at 8% from 1994. When he became Chancellor in 1993, the right hon. and learned Member for Rushcliffe (Mr Clarke) refused to reverse that increase saying that “no one is going to die from VAT on heating.” That is a very bad way of making a point, because people have in fact ended up dying from the cold. We know that people, the elderly in particular, often have to choose between heating their home and eating. Had it not been for a Labour defeat in the House of Commons, under the Conservatives we would have seen VAT on electricity and gas bills increase to 17.5% in April 1995 Twenty years later we find ourselves listening to a familiar story. Before the last general election, the Prime Minister, the then Leader of the Opposition, said: “We have no plans to put up VAT, it’s not part of our plans.” I like the double emphasis: say it twice, and that might make it true. The Chancellor, the then Shadow Chancellor, said: “The plans we set out involved around 80 per cent of the work coming from spending restraint”— cuts— “and about 20 per cent from tax increases. The tax increases are already in place, the plans do not involve an increase in VAT.” So such a rise was ruled out by the Prime Minister and by the Chancellor when they were in opposition. However, just weeks after taking office, like all the former Conservative Chancellors before him, the current Chancellor increased VAT to achieve his plans of 20% consolidation coming from tax increases and 80% coming from spending cuts. He said: “To achieve that additional tightening while maintaining the right ‘four-to-one’ balance between spending and taxation means that I have to announce further tax rises today. On 4 January next year, the main rate of VAT will rise from 17.5% to 20%.”—[Official Report, 22 June 2010; Vol. 512, c. 177.] There is no doubt that such a rise has hit family budgets hard. Despite knowing that that would happen, and that there would be a huge impact on the economy as a whole, the Chancellor chose to do what every Conservative Chancellor has always chosen to do—put up VAT. That is why we can say so emphatically—I say this to Liberal Democrat Members in particular—that if the Tories are elected at the general election in just a few weeks’ time, they will do it again. It is in their collective DNA, and ruling it out but then doing it is precisely what they have form on. That is their history, and I believe that they will honour their history if they are elected Analysis produced by the Treasury in July 2010 showed the estimated impact of a one percentage point rise in the standard rate of VAT. That analysis means that we know, for instance, that in the past four years the Government’s VAT rise has cost a single pensioner £500, a one-parent family £900, a pensioner couple £1,100 and a couple with children £1,800.
I do not want my hon. Friend to be too charitable to the Chancellor of the Exchequer, so may I remind her that in addition to the 2010 increase in the standard rate of VAT, the Chancellor made proposals in 2012, in the middle of his disastrous economic policy, to extend VAT through the pasty tax and the caravan tax? Not only did he increase VAT in 2010, but he went back to the well in 2012 when the policy was collapsing.
I was just about to make exactly that point. My hon. Friend is absolutely right that in 2012, having already done what all Conservative Chancellors do and put up VAT, the Chancellor sought to expand it by applying it to pasties and caravans in the so-called omnishambles Budget. I have always thought that it was a bit of a shame that that term from “The Thick of It” was used, because if the sequence of events that unfolded following that Budget had been presented to the scriptwriters of “The Thick of It”, they would not have touched it. They would have said that even for “The Thick of It” it was an unbelievable series of events. Yet that is what the Chancellor delivered. My hon. Friend is absolutely right that the Chancellor tried to expand the scope of VAT, yet today the Conservatives wonder why nobody will believe what the Prime Minister said at Prime Minister’s questions We do not have to go back over the past 20 or 30 years. We can just look at the record of the current Chancellor and Prime Minister on VAT. They like to put it up, and they sought to expand its application. I noticed that earlier the Financial Secretary appeared to rule out an expansion of VAT, but I was not entirely sure whether he had done that deliberately. Will he intervene on me to confirm that not only will VAT not go up—that is according to the Prime Minister, although I do not believe it—but it will not be expanded? I wonder why the Financial Secretary is not biting my arm off to intervene and confirm that.
rose—
I am grateful.
The Prime Minister has been clear: we do not need to increase VAT or put VAT on essentials such as food and children’s clothes.
So basically, both those things are definitely going to happen if the Financial Secretary’s party is elected in a few weeks’ time Where are we today? The same old Tories and the same old story. Whatever the Prime Minister has said today simply will not answer the justifiable charge against the Government about why they should be trusted if we look only at their record and at what they have delivered in this Parliament. They broke their promise after the last general election and they will do the same after the next one. At the end of each Parliament since 1979 in which the Tories have been in government, they have raised an average of £13.5 billion from VAT changes. The electorate know that when it comes to VAT and the Tories, actions will always speak louder than words. People know that they cannot be trusted because they break their promises again and again. They broke their promises in 1979, 1992 and 2010, and they will break them in 2015.
This debate seems to be based on a false premise. The Government have been clear that a rise in VAT is not necessary to balance the books because we do not have a hole in our plans for public finances. The Labour party does have a black hole and it cannot be trusted on anything it says about the jobs tax.
If the hon. Gentleman will allow me I will answer that by posing a simple question back to him, and then I will give way so that he can answer it. Where will the £12 billion of cuts to welfare come from? How will the £5 billion for tax avoidance be found? If he can answer those questions he will go further than those on his Front Bench have managed to do while making those promises. Perhaps he can shed some light on the issue for the British public.
The Government have been clear in setting out their plans in the Red Book, and they have been audited, considered and reviewed by the Office for Budget Responsibility. What are not clear are the plans of the Opposition, although it is increasingly clear that there is a black hole in those plans and that they consistently make it up as they go along. I suggest to the hon. Lady that Labour’s so-called pledge on the jobs tax cannot be believed at all.
That was not even a valiant attempt to try to answer my questions, but the hon. Gentleman is not on the Front Bench and I suppose I am being a little uncharitable in suggesting that he cannot answer a question that his own Chancellor is not prepared to answer either We have numbers of £12 billion, £13 billion and £5 billion from the Chancellor, yet with all the might of the Treasury behind him and lots of officials to do the numbers we have no detail on how those figures will be found. The Government spent a whole Parliament trying to talk up their record on tax avoidance and they are saying that they will get £5 billion in the next Parliament, yet there is no detail on how those amounts will be made up and no guarantee that they will be delivered. I am not surprised that the hon. Gentleman cannot answer those questions if those on the Government Front Bench will not either The Conservative party’s plans for what they would like to do if elected in a few weeks’ time are extreme and go much further than deficit reduction. They are trying to deliver a surplus of £7 billion. That had to be changed from the previous desire to get a surplus of £23 billion, because the Government got spooked by recognition across the country of what that would mean for the size of the state. They have now come down to £7 billion, which still means that they have to go further and faster in the early part of the next Parliament than they have in the previous five years Those choices have to be paid for. Given that some budgets are protected and that commitments to international development and aid spending will not change, and given the scale of what the Conservative party wants to achieve with the country’s finances, it is physically not possible to do such things without putting the NHS at risk of cuts or potentially of charging, or without raising VAT. That is the charge being made—it is not just about the history and the record. The hon. Gentleman could have resiled from the Conservative party’s record, but he chose not to do so. The combination of the Conservative party’s history on VAT and its figures for the next Parliament tells us that if it is elected a VAT rise is coming. There can be no doubt about it, given the combination of those two factors The hon. Gentleman attacked our plans and commitments, but for every commitment that involves raising revenue, we have highlighted where that revenue will come from and we have made the figures public. It was the Labour party that called for the OBR to conduct an independent audit of all parties’ manifesto commitments. We could have avoided this debate if we had allowed the OBR to do so. I was very happy to submit my party’s plans to an independent audit. I wonder why the Government chose not to do so. Perhaps they had something to hide. Perhaps they did not want to be robbed of the ability to have a “tax bombshell”-type poster. The needs of the Conservative party’s election marketing material should not have trumped the responsible thing to do: to allow the OBR independently to audit all parties’ manifesto commitments. I was very happy for that to happen The bankers bonus tax would pay for one policy and one policy alone: the compulsory youth jobs guarantee. [Interruption.] If the hon. Gentleman thinks the stubbornly high rate of youth unemployment is a laughing matter, he is mistaken. The Conservatives stole a few of our policies in last week’s Budget. Rather than laughing off the idea of the bankers bonus tax, I would have been happy for them to have stolen that policy, as it would have delivered jobs for the young people in my constituency who could find themselves on the jobs scrap-heap for many years to come. The Conservatives should have adopted it; it would have made a real and practical difference.
I am extremely grateful to my hon. Friend for her innate generosity in giving way. Does she not agree that new clause 1 would provide transparency and openness, and that the report would be immensely useful? Does she honestly think that any true democrat and believer in fiscal transparency could do anything other than support the Labour amendment?
My hon. Friend is absolutely right. We have been debating whether VAT will go up, but new clause 1 is pretty innocuous. It calls only for a review and an assessment of the impact the rise in VAT has had on living standards. If the Minister wanted us to believe what the Prime Minister said today in Prime Minister’s questions—that he is ruling out a rise in VAT—then what is the problem? Adopt the new clause, add it to the Bill and let us have the assessment. He would be able to show how VAT has had an impact and why the Conservatives are doing such a good job, if they are elected again, in not letting it go up.
Given the lack of a response from Government Members, may I suggest that seeing the impact of the increase in VAT written down might make it harder for the Tories and the Liberal Democrats to break their promise the second time around?
My hon. Friend is absolutely right. That is the only conclusion we can draw from what the Minister and the Prime Minister have been saying today. If the Minister really wanted to back up the Prime Minister’s claims, and to give us a hint that he might be believed, he should have just accepted our new clause. It is straightforward, and adding it to the Bill would shine some light on the impact of VAT. We are very clear that we will not raise VAT. It may be that the Government do not want the facts out in the public domain because they plan to do so.
Will my hon. Friend give way?
I am going to finish now, because I want to give time to everybody else who wishes to speak in the debate We all know what is coming if the Conservatives are elected at the next general election: VAT will go up. That is what their record tells us and that is what their plans require. If the Minister wants to be even a little bit believable—even 1% believable—he should at the very least accept new clause 1 and set the cat among the pigeons, but I do not think he will take that opportunity today.
It is pleasure to speak in this debate—I hope it will have been worth the wait—and to serve under your chairmanship, Mr Hood. I hope that we both have the opportunity to repeat the experience after 7 May I rise to support this excellent improvement to the Bill proposed by my hon. Friends on the Front Bench, because I would like to better understand the impact of the VAT increase in my constituency. The Tory long-term economic plan is a marketing con and a rebranding of a five-year failed economic plan—five years of broken promises on borrowing, the deficit and VAT. I do not know if Government Members have been watching a new programme—on ITV down here, but on STV in my constituency—in which hypnosis is used to shift people’s perception of reality. I am not sure if that is what they are doing, although there does not seem to be anyone asleep in the Chamber. We all seem to be wide awake—certainly Labour Members are wide awake to the impact of the Government’s failure to deliver on their economic promises. Simply saying, “We’ll now call it a long-term economic plan, because it has not quite worked out in the short term”, is not going to fool anyone On the increase in VAT, I remember meeting my local chamber of commerce. In East Lothian, we do not have large-scale manufacturing or large employers, apart from in the public sector, so the private sector is largely made up of small and medium-sized enterprises. When I asked them how they were coping with the changes in the economy they said that the single-biggest factor for them was the VAT increase. It had done the most damage to their businesses. Other Members have spoken about its impact on the poorest in our communities, but in East Lothian it has also had an adverse impact on entrepreneurs and businesses—the people who should be creating the jobs that could eradicate unemployment in my constituency.
As my hon. Friend will have noted, the new clause states that the Chancellor should produce a report within three months of the passing of the Act. I suspect that the Treasury already have these figures and could probably move more quickly. If her point about businesses is right and businesses are complaining to Members, they must also be feeding this information back to the Treasury, so I suspect that it already has these figures and could publish the report any time it wanted.
My hon. Friend has been doing this job much longer than me, so I suppose he has earned the right to be more cynical. I am still flush with the newness of this change of role in my life, and I would like to think that that was not the Government’s intention, but I shall bow to his longer service in this place and more expert analysis It was interesting to hear the Financial Secretary speak about the role that VAT had played in the Government’s short-term failed economic plan over the last five years. He talked about the mess the previous Labour Government had left, but the economy was growing when we left office, and, as other hon. Members have said, part of the reason it reversed was the increase in VAT, which stifled confidence and the spending power of many in our communities. I would also like to hear from a Government Member whether a great deal of the deficit resulted from the decision by the then Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling), to bail out the banks. Would Government Members have bailed out the banks, or do they think we should have left them to fail? Is anyone going to jump up? Anyone? No, they are all hypnotised, it would appear, and unable to respond. Bailing out the banks was the responsible thing to do. It might have seemed unfair, but it was important to people in my constituency that when they went to the ATMs the next day they could still draw out their wages The Financial Secretary talked about the Government’s sustained economic growth agenda. I do not remember sustained economic growth following the increase in VAT. I seem to remember the worst recession that this country has ever had, following that intervention by the Government. That has hurt people in my communities and, I am sure, in communities right across the country.
It is a pleasure to speak under your chairmanship, Mr Hood. I want to say first how much my hon. Friend the Member for Edmonton (Mr Love), who is no longer in his place, has been valued in our economic debates. His contribution will be missed, and we all wish him well for the future The new clause is eminently reasonable, and it should not be a matter of dispute between the parties in the House that such a report would make a valuable contribution to any decision the Government take on VAT. We have had an interesting day on VAT because it was raised in Prime Minister’s questions. As hon. Members know—certainly the Minister will know—VAT is a subject in which I have an interest. Throughout this Parliament, I have pressed not just the Government Front-Bench team but the Labour Front-Bench team on the issue of VAT The Prime Minister is an honourable man. He has made a commitment from the Dispatch Box today that is different from the position outlined by the Chancellor of the Exchequer to the Treasury Select Committee only yesterday. I am interested to see the Treasury Minister nodding to confirm that there has, in fact, been a change in Government policy since yesterday. When I woke up this morning, I heard on the “Today” programme my hon. Friend the Member for Bassetlaw (John Mann) questioning the Chancellor on the issue of VAT. I heard the Chancellor set out the same mantra that there were no plans to extend VAT or increase its rate. My understanding of what the Prime Minister said today is that he has given a cast-iron guarantee—to use a phrase that the Prime Minister has used before—not to extend or increase the rate of VAT So the position has changed today, and it is a change that I welcome. For that reason, I think that the information requested under the new clause would be valuable. It is always better for us all to have more information about the impact of tax changes. We know, of course, that this Government introduced this tax change in June 2010 when they said that they would eliminate the deficit by 2015. The plan—the “long-term economic plan” then—was to eliminate it by 2015, and part of the plan was to increase the rate of VAT. It would be valuable to know what happened as a result of the raising of VAT in January 2011. In my constituency, people are under real financial pressure, and VAT affects all of us.
When the Chancellor decided to increase VAT, he must have asked Treasury officials to produce projections on its likely impact on the economy at that point. It would be interesting, would it not, to compare the projections given to him by Treasury officials with an official report, which this new clause suggests should be commissioned, to see whether the two tally up?
Indeed. My hon. Friend has made a very valid point. I think that we should all be interested to know what was the impact of the last Tory-Liberal Democrat increase in VAT, which was introduced in January 2011, because it should inform future policy. It seems extraordinary to me that that should be resisted According to the Office for National Statistics, the median salary in my constituency, Wrexham, has fallen by 7.4% in the last year. The town centre is, unfortunately, populated—like many other town centres throughout the country—by too many empty shops, and part of the reason for the emptying of those shops over the past few years has been a decrease in consumer activity. What VAT does—and this is why I am passionate about VAT—is take money out of the pockets of consumers on the high street and send it straight to the Treasury. It has a massive impact on local businesses. Those of us who run local businesses and employ people want to ensure that we have the best and fairest type of tax system to develop local economies That is why I want to know the impact of the 2011 VAT increase. I think that the Minister is a reasonable man. I cannot for the life of me understand why he does not want to have that information, or, if he has that information, why he does not want to share it with the House We have made a lot of progress today. The Prime Minister has been dragged, kicking and screaming, to a point at which he has ruled out a VAT increase by the Conservatives in the next Parliament—if he is ever in a position to make such a decision. That is major progress. It is certainly a change, not just from the Prime Minister’s position earlier in the current Parliament, but from the position that the Chancellor outlined in his Budget statement last Wednesday, when he set out the spending and taxation plans that he expected to be implemented. Why did he not tell us that the Tories were going to rule out a VAT increase in the next Parliament? That is what amazes me. What has happened between last week and this week? What happened yesterday What has happened, in my view, is that because the Labour party, in opposition, made a commitment not to increase VAT in the next Parliament, Lynton has been on the blower. He has said. “We are under pressure, Dave. We are under pressure, Prime Minister. We have to match the commitment that the Labour party has made. You have to rule out a VAT increase in the next Parliament.” So that is why the Prime Minister made his statement at the Dispatch Box today—a statement that I welcomed History will judge whether that promise will be kept. We heard from my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) about the history of Conservative commitments on VAT: about what happens before elections, and about what happens after them. When I speak to my constituents over the next six weeks, I shall remind them of that record. I shall remind them of what the Conservative party and the Liberal Democrats said before 2010 and what they did afterwards, and I shall remind them of what this Chancellor tried to do in 2012 with the pasty tax and the caravan tax The tax of choice for the Conservative party is VAT. History tells us that. If the Conservatives want to increase taxes, they increase VAT. The country will have to judge whether the commitment that the Prime Minister has given today is one that will stand the test of time.
It is a pleasure to serve under your chairmanship, Mr Hood. I was also going to say that it was a pleasure to be in the company of so many Members who had participated in Finance Bill Committees during this Parliament, but one by one they have disappeared from the Chamber—even the hon. Member for Dover (Charlie Elphicke), who has been one of the most assiduous Committee members—which is a shame as I was looking forward to hearing the usually very robust views they express, when we are upstairs in Committee at least. Presumably they have something else on their mind today The period we are in, which spans one VAT increase to possibly another, is a very interesting one. One of the things that the Government are trying to say—interestingly, some of the other parties are trying to say the same—is that there is no difference between the policies of the Government and the Opposition and that we would all have to make the same decisions. However, the Institute for Fiscal Studies has clearly stated that there is a huge difference between the forward plans of the Government and those of the Opposition. Our policies involve a different attitude towards spending cuts and tax increases in order to reduce the deficit over a period. That is what we said back in 2010; we were clear that we would be following a different pathway. We were not deficit deniers, as was sometimes suggested, but we were clear that we had a different view on how this could best be handled and that there would therefore be fairness in our measures. That remains the case because, prior to the Budget, the IFS said that, given our forward plans and taxation proposals, in contrast to the £55 billion of spending cuts the Conservatives would have to find, the Labour Opposition would be looking to make only £4 billion of spending cuts. More recently the IFS has said that in order to carry out our plans we would not need to make any further spending cuts in the forthcoming Government. So that is a very big difference in our policies. From that point of view, we are in a position to say not just that we would not increase VAT, but that we have a different and much fairer road to go down It is right for us to ask what the Government—whether the coalition or the Conservative party; it is not always clear—would be doing. Not only have they said that they need to find those spending cuts to carry out their deficit reduction proposals, but they have also suggested further tax reductions through the continued raising of the tax threshold. At no time since that announcement was made by the Prime Minister at the Conservative party conference has there been any clarity as to where that money would be coming from. So not only are they clearly tied to making substantial departmental spending cuts, but they have not shown us how they are going to close this financial gap. That is why people are saying, “We think it’s going to be VAT.” It is hard to tell where else it might come from. Of course, if it is coming from somewhere else, we would expect that to be said. So the Prime Minister stands up and says, “Oh no, we won’t be increasing VAT,” but the other half of that statement has not been made. We do not know how he is going to square this circle.
As we saw in 2010, what the Prime Minister says this side of an election is not necessarily the same as what then happens in future Conservative Budgets. Has my hon. Friend also pondered the quandary that they might stick to their pledge not to increase VAT this time, but they have not ruled out extending the scope of VAT to currently exempt items?
That is clearly another way the Conservatives might seek to close this gap they have opened up for themselves We need to know a lot more about this going forward, and so do the electorate. As hon. Members have said, VAT is a regressive tax. Even though those who have bigger spending power sometimes spend more and so may, in cash terms, spend more in VAT. It is a regressive tax, as are all these indirect taxes. Our position on this is clearly different: we do not believe it is right that people on low incomes should be taxed, in effect, to give other people tax cuts We have said a great deal about the 50p issue, which we will discuss later this afternoon, but one of my big concerns for some considerable time has been that low-paid workers already under the tax threshold were being offered nothing from the Government, who constantly talk about raising the tax threshold further. They have no plans to help those people any more. Those people face a real risk that if VAT is increased, they will end up paying the price of a reduction in income tax from which they will not benefit by one penny.
Does my hon. Friend agree that a rise in VAT will not only have an impact on the living standards of millions, but do something to inflation? Does she think, as I do, that inflation may well rise with a VAT rise, again inflating the costs of ordinary, basic things for ordinary people?
I thank my hon. Friend for her intervention. Of course the position she sets out is exactly what we saw in the early part of this Parliament when VAT was increased and a number of other measures were put in place. At that point, inflation hit about 5.5%, which then allowed the Government to say, “Aren’t we wonderful? We have just put pensions up by the biggest ever amount.” But that increase would have come even under the old system—even under a system that was simply tracking pensions to inflation—because of the inflation rate. Pensioners were not getting some amazing extra increase that year; there was a simple tracking of what had happened, largely because of the VAT issue Not only have many of those low-paid people not got any further gain to get if the tax threshold keeps increasing, but they have actually lost out at the same time, because one thing that has helped to pay for all this has been the reductions in things such as tax credits. Many low-paid people lost more in tax credits than they gained in the rise in the tax threshold. The Government keep endlessly repeating that low-paid people are the ones who have benefited, but that has not been the case in practice for many of these people, particularly those with families and children—they have particularly suffered. For them, the Budget is a bit of non-event and it will continue to be so That is why the £12 billion of welfare cuts that have been pencilled in for some two years now in various statements by the Treasury, and by the Chancellor in particular, are very important. Part of that approach might be to cut away further the support given to people in work, perhaps through the tax credits system, at some future point. Tax credit is to be replaced by universal credit, but the issue remains much the same in terms of how it tapers off and where the losses might come We already know that in many respects universal credit will be less beneficial for a lot of people in work, as they increase the hours of work they do. So how much of this £12 billion will come from that source? Again, people may be given a little bit with one hand, through the increase in the tax threshold, but find that they lose as a result of what the other hand is taking. We just do not know because we have been given no detail; it has been deliberately withheld, although one suspects that someone, somewhere has a plan. It would be strange if they did not have a plan. If, under welfare cuts, we are taking away things such as support for people who are in work, it is extremely important The other area is housing benefit, because, again, that is increasingly being claimed by people who are in work, not just by people who are out of work. Those people who are in work will be hurt again if there are further attempts to reduce the housing benefit bill, by eroding the amounts that individuals get. Again, we have this lack of clarity and detail. It is understandable why some of us are extremely suspicious about the alacrity with which the Prime Minister wished to distance himself from a VAT increase. For all the talk about a long-term economic plan, we have a lack of any clear policy and detail about what the Conservatives will do if they are re-elected. I hope that they will not be in government, so perhaps they do not need to give any detail, but the people who will be voting in a few weeks’ time deserve to know such things. We should not be in the position that we were in before the 2010 election when we were promised things, such as that there would be no VAT increase, that were undone very, very quickly. I do not think that people were told about the scale of the reductions that would be made.
My hon. Friend is making a very good speech. She has returned to the point about the scale of the cuts. Is she as concerned as I am about that? My local council has been cut by 43% since 2010. We now have 1,000 people losing their social care packages this year. Is it not very frightening that what we face in the next couple of years are cuts that are deeper than anything we have seen before? I find that prospect frightening for social care and local services, which are already crippled, and for policing—for keeping our local community safe. Does she feel that way, too? We have already seen what has happened—
Order.
I thank my hon. Friend for her intervention. Clearly, those are the kinds of concern that people have On the VAT proposals, the changes and exemptions that the Government may wish to make for some worthy cause are welcome. I am talking here about the help for organisations such as hospices. But there is scope to go further. I will say something now that, although not Front-Bench policy, is perfectly legitimate to raise in Committee. As someone who has been very involved in housing, I know that the housing world is keen to see VAT relief on improving and restoring properties VAT can make refurbishing properties more expensive than rebuilding. Demolition and rebuild has become a cheaper option than preserving some of our properties. Having worked with many housing associations, I know that there have been times when they have wanted to do that kind of refurbishment and preservation work, but they had to do a massive upgrade behind that to bring the homes up to the required standard. Such a VAT exemption is something for which the housing world has campaigned for a long time. As we all want to increase sustainability, I hope that that is an issue that my own Front-Bench team will reconsider when they are in government.
I understand that we are not talking to a benevolent Government here, but as my hon. Friend is listing what she would like to see VAT removed from, I would like to include sanitary products. I know that many of my constituents think that, as those are not luxury goods, they should be exempt from VAT. I just thought that I would add that to the list of things that should have VAT removed.
I think that campaign has taken off again, having been going for a considerable number of years.
Decades.
Indeed. As the current campaigners have noted, there is no VAT on shaving cream, but there is on sanitary products, which suggests—
It suggests that men made the law.
Yes, it is gender-made law. We will all have received a considerable number of e-mails about that recently, and I am sure that the campaigners would be pleased to hear the Minister commit at least to reviewing the situation.
On that issue, growing a beard is an option for a man, but being unhygienic is not an option for a woman. My local food bank is increasingly having to offer women sanitary products because they simply cannot afford them.
That is a very interesting piece of information, and it is something that people should bear in mind—
Order. It is very interesting, but we are straying a wee bit from what we are supposed to be debating.
Thank you for your guidance, Mr Hood. I am sure that you would not want me to stray on to the whole issue of food banks, which would probably take us to midnight In conclusion, new clause 1 would provide us with an opportunity to look at the impact of VAT changes over this Parliament. We believe that they have been regressive and that many of our constituents have been affected, and we are concerned about the future. We need to look very carefully at what has happened before any decisions are made on further increases. We are always taken to task for proposing new clauses to Finance Bills that would set up reviews, and I understand that there are technical difficulties. I am sure that current Government Members will have the same difficulty when they come to scrutinise a Finance Bill in opposition in the next Parliament. Perhaps we will then make the alternative criticisms It is important that we fully understand the impact of the VAT changes, and not just through some kind of impact assessment that is done theoretically, but through an assessment of what has actually happened; they are not always the same thing. However, such proposals have been turned down in every Finance Bill I have encountered in this Parliament. The hon. Member for Dover (Charlie Elphicke)—he has still not returned to his seat—and I are obviously similar; we are either terribly keen to serve on Finance Bill Committees, or we are such a soft touch that when our Front Bench teams or Whips ask, “Wouldn’t you like to serve on the Finance Bill Committee?”, we say, “Oh, all right then.” Some of us have certainly done our stints on Finance Bill Committees, and I am sure that we all hope to be able to do so again from a governmental position.
We have had a lively debate and heard contributions from a number of Members who could be described as Finance Bill recidivists. I am delighted that so many of them were able to participate on this, the last occasion to debate tax matters in this Parliament. The hon. Member for Edinburgh East (Sheila Gilmore) talked about VAT on sanitary products. Under EU law, we are permitted to have a reduced rate for sanitary products—indeed, it has been reduced to 5%—but they are not among the products for which we can have a zero rate under EU law. Consequently, without changes at EU level, it is not possible to reduce it further. I have a lot of sympathy with the argument that is made on that point, but it would need to be addressed at EU level.
The Chancellor fought incredibly hard in the EU to protect bankers bonuses, so can the Minister tell us what efforts the Government have made to have that rule changed?
This has been a long-standing issue. The experience of trying to bring in new zero rates has been very difficult. If an opportunity arose, any future Government would want to pursue that Let me make a couple of points. We need to make progress on a number of items of business this afternoon. On living standards, this Government have taken many steps to help with living standards in difficult circumstances, such as the increase in the personal allowance, the freezing of fuel duty and the freezing of council tax. With reference to the impact on small businesses, this Government have a proud record of helping small businesses in the current difficult circumstances, not least by introducing the employment allowance, which is a cut in the jobs tax, and introducing an exemption for under 21s starting in April, which is a cut in the jobs tax. The following year, there will be no jobs tax for apprentices under the age of 25. We have a record of reducing the jobs tax. That is not the position of Labour My party has set out how we will reduce the deficit in terms of departmental spending, welfare and tax evasion and tax avoidance. Our plans are clear. The same is not the case with the Opposition. There is a black hole in their finances. As a consequence, the risk of a big increase in tax from the Opposition is clear. Their tax of choice is employers national insurance contributions. That is the one that the British public should be frightened of. The Leader of the Opposition refused to rule it out earlier. I understand that a panicky press release was issued this afternoon, but the British public know very clearly what will happen under a Labour Government—borrowing and taxes will go up. Consequently, I urge the British people not to allow that to happen, and I urge the Committee to reject new clause 1 today Question put and agreed to. Clause 66 accordingly ordered to stand part of the Bill. Clause 67 ordered to stand part of the Bill. New Clause 1 Report on impact of value added tax (1) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the impact of the increase in the standard rate of VAT which took effect from 4 January 2011 (2) The report must estimate the impact of the increase in the standard rate of value added tax on— (a) living standards; (b) small businesses; (c) the fairness of the taxation system; and (d) economic growth.—(Shabana Mahmood.) Brought up, and read the First time. Question put, That the clause be read a Second time.
I beg to move amendment 1, page 2, line 1, at end insert— “(3) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the impact of setting the additional rate of income tax at 50 per cent. (4) The report must estimate the impact of setting the additional rate for 2015-16 at 45 per cent and at 50 per cent on the amount of income tax currently paid by someone with a taxable income of— (a) £150,000 per year; and (b) £1,000,000 per year.”
With this it will be convenient to discuss clause 1 stand part and clauses 2 to 5 stand part.
It is a pleasure to serve under your chairmanship, Sir Roger. Amendment 1 stands in my name and those of my right hon. Friend the Member for Morley and Outwood (Ed Balls), my hon. Friends the Members for Nottingham East (Chris Leslie) and for Kilmarnock and Loudoun (Cathy Jamieson), and the hon. Member for Brighton, Pavilion (Caroline Lucas). It calls on the Chancellor to produce within three months of the enactment of this Bill a report on the impact of setting the additional rate of income tax at 50%. The report must estimate the impact of setting the additional rate for 2015-16 at 45%—the current higher rate—and at 50% on the amount of income tax currently paid by people with a taxable income of £150,000 and £1 million a year As we all know, the 50p rate of tax for those earning more than £150,000 was reduced to 45p by this Government in 2012. That was hotly debated at the time and it has been hotly debated ever since. The Minister refers to a debate on the additional rate of tax as an annual event whenever we discuss a Finance Bill. Government Members may groan that the debate is rearing its head again, but I am, if nothing else, an optimistic person and I continue to hope that Government Members will be swayed by my arguments and be persuaded to accept our eminently sensible and reasonable amendment.
indicated dissent.
It is a little unfair of the hon. Gentleman to shake his head at such an early stage of my speech. He should at least give me a chance to develop my arguments.
Does my hon. Friend agree that one of the worst aspects is the massive loss to the Revenue? Am I right in recollecting that the projected annual revenue loss to the public purse in 2011 was some £3 billion?
My hon. Friend is absolutely right. The measure has a static cost of £3 billion a year, and behavioural changes also have an impact. That is the hot debate in which the Minister and I have been engaged ever since I have been in the shadow Treasury team.
The hon. Lady raises an interesting point about the static and behavioural effects. She will be aware that the shadow Chief Secretary to the Treasury said: “We have a choice about a tax rate that would raise £3 billion”.—[Official Report, 5 November 2014; Vol. 587, c. 849.] Does she believe that putting the 45p rate back to 50p would raise £3 billion for the Exchequer?
The Minister is tempting me to go further than I want to at this stage, because I am going to develop exactly those arguments about the costing, what the measure is likely to raise, and the inherent uncertainty in the Government’s work and the report that they produced. The Minister will be welcome to intervene once I have reached that point in my speech.
As always when it comes to talking about the 50p tax rate, my hon. Friend is incredibly persuasive. Does she not find it strange that the Government are projecting a £7 billion tax cut but refusing to raise tax in this way, so the only conclusion the public can come to is that they must be looking to break their promise and raise VAT?
My hon. Friend is both generous and correct. Members who were here for the last debate will know that Government Members utterly failed to meet the charge levelled at them, which was that the combination of their history on VAT and what they wish to achieve in the next Parliament means that a VAT rise is inevitable if the Conservative party is elected to government in a few weeks’ time We know that the Government’s decision to reduce the top rate of tax for those earning more than £150,000 is as much at the heart of the current political debate today and in the next few weeks as it was in 2012. The debate is about where we raise revenue from and who we ask to shoulder the burden to help bring down the deficit further.
I know that the shadow Minister was not a key part of the previous Government, but does she believe that the right shoulders to bear the burden were those of people on minimum wage, who were paying £1,000 in tax? The highest rate of income tax was 40% for every single day but one that Labour sat on the Government Benches.
I was not a Member at that time, so I was not a part of that Government at all, but I am proud of the previous Government’s record over 13 years. The hon. Gentleman will know that we raised the top rate of tax to 50p in response to the global financial crisis, and that was the right thing to do—[Interruption.] He asked about the minimum wage and mentions it yet again from a sedentary position, but we were the Government who introduced the minimum wage in legislation. That was one of our proudest achievements, and my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) told me last week that the last all-night sitting of the House of Commons was when the Labour Government introduced the national minimum wage. Labour Members were in the House at eight in the morning to vote it through and they were absolutely right to do so.
My hon. Friend is absolutely right to recognise the importance of the national minimum wage to many people in this country. Of course, tax changes are one side of the equation, and the other has been the changes to tax credits, which benefited many people under the previous Government. Is it not the case that we have seen a £3 billion cut for the very richest with the cut in the 50p rate, at a time when average families are £1,100 worse off as a result of the tax and tax credit changes?
My hon. Friend is absolutely right. I was coming on to exactly that point. This is a question about living standards: what is happening to the poorest in our society and where the burden should ultimately rest for sorting out the nation’s finances after the global financial crisis At the Budget last week, the Chancellor would have had us believe that people are on average £900 better off as well as more secure as the result of his policies. I have to hand it to him—he has been highly innovative in using a new measure of living standards to try to back up his claim, but it includes income to universities and charities. I do not blame him for trying, but he knows the truth, as do Members and the public, which is that people say time and again that they are worse off. A poll of 5,000 consumers’ responses to the Budget showed that three quarters of people have seen no improvement in their living standards. A Populus poll before Christmas found that only one in seven adults said they were feeling the benefit of recent economic growth As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) has said, wages after inflation are down by £1,600, and the combined impact of tax and benefit changes has left families on average £1,127 a year worse off. That was the context in which it was decided to reduce the additional rate of tax to 45p, giving millionaires a tax cut worth an average of £100,000, which is a huge sum of money by any standards. As I have just said, wages are down by £1,600 a year, tax and benefit changes have left people £1,127 worse off, and, as we heard in the previous debate, higher VAT has left people £1,800 worse off over four years. For people at the bottom end of the income spectrum, such sums are the difference between being able to put food on the table and to put clothes on their children’s back or not, while the choices for those at the other end of the income spectrum, who are benefiting from a tax cut to the tune of £100,000, are probably about the poshness of the car on the forecourt of their home, not the basic necessities of life and of survival. That is the important point for struggling families across our country.
Is my hon. Friend interested, as I am, in the line developed by the Liberal Democrats that the 50p rate was in place only at the end of the previous Labour Government for a very short time?
One day.
Indeed. This is all about the choices made to bring down the deficit. We made a choice—a forward offer or plan—to use a higher top rate of income tax to bring down the deficit, and the Liberal Democrats decided to vote against that strategy.
My hon. Friend is absolutely right. The hon. Member for Redcar (Ian Swales) always takes part in Finance Bill debates, and he always makes one point in exactly the same way. I sometimes wish that he would listen to the answer he gets when he does so. The answer is that the top rate was increased as a specific response to get down the deficit after the global financial crisis. It was the fair and right thing to do then. It was unfair and wrong to decrease the rate from 50p to 45p, which he, as a member of one of the parties of government, supported. It will be right for the next Labour Government to raise it to 50p again.
The hon. Lady is absolutely right that that rate of tax should have gone up to 50p during the downturn and that it should not have been cut. She is equally right to compare the tax cut for millionaires with the poverty of ordinary people, so why did Labour Members sit on their hands when we had the one opportunity not to have a tax cut for millionaires?
One of the things about the annual debate on the 50p rate is that the usual suspects make the same points in exactly the same way. We have heard that point from several members of the hon. Gentleman’s party. I say to him what I have always said—that we have had a consistent approach to the top rate of tax. There has been no change to that, and we will put it up to 50p if we are elected in a few short weeks’ time.
My hon. Friend is making a powerful case. Is not one example of how the burden is not being shared fairly the fact that, as we were reminded earlier today, there was one food bank in Scotland when Labour left office, but there are now 50? I am sure that example could be repeated throughout the entire country, and it emphasises the inequitable nature of the Government’s policies.
My hon. Friend is absolutely right. In fact, when I was talking about VAT in my constituency yesterday, I was struck by the number of people I met who were in work but using food banks. They are trying to do the right thing and working as hard as they possibly can, yet they still cannot put food on the table. How must it feel for them to find themselves in that situation and to know that under the current Government, a millionaire is better off to the tune of a hundred grand a year? I would say that it feels pretty rubbish, and that is what my constituents are telling me every day.
I was on the phones canvassing the other week, and a man from a neighbouring constituency said that he felt the Government should be more Thatcherite in their attitude towards taxes. I did not really know where to go with that, but I listened on. He said that it was because Margaret Thatcher had had a 60% tax rate for some years, only getting rid of it in 1988. He said that the current Government, who seem to idolise Margaret Thatcher, might take a leaf out of her book. He had been a Tory voter, but stopped being one simply because of the unfairness of the rate going down from 50p to 45p. I never thought that I would stand here urging Conservative Members to be more Thatcherite, but to represent such views fairly I think it is my duty.
My hon. Friend has acquitted herself of that duty in her usual brilliant way. We may not be able to persuade the Conservatives to be fully Thatcherite, but getting them part of the way there would be welcome. If they cannot bring themselves to support bringing back the 50p rate, which of course they will not, they should at least support our amendment. As I said, it comes down to a simple question: is the burden of deficit reduction and dealing with the fall-out from the global financial crisis being shared fairly across all parts of our society? The amendment is genuinely intended to shed some light on that.
I am grateful to my hon. Friend for giving way again. She is always incredibly generous, especially in Committee debates on Finance Bills If the Government are correct in their assertions about tax take and behavioural change—that a 45p rate generates more than a 50p rate and is fairer—does my hon. Friend share my surprise that they object to bringing forward a report that would tell us exactly that?
That is exactly the point. If the Government have nothing to hide and nothing to fear from all the data being out there for us to interrogate, they should accept our amendment and get on with the review that we have called for. They should have got on with it when we first called for it, immediately after they made the change to the rate. Our amendment genuinely seeks to shine light on what has been happening to people’s incomes and the impact of changes to the top rate of tax. When the Government commissioned their report, the data were not extensive, and the report has been contentious from the minute it came off the printer. The reasons for that go to the thrust of what the Financial Secretary was asking me earlier, and I will come on to those points shortly As we have heard, the Labour Government introduced the 50p rate. It came into effect in 2010-11 and was a decision made after the financial crisis as we sought to get the deficit down. There was nothing in the coalition agreement about abolishing the 50p rate, but in 2011 HMRC was asked to look into it and the yields it produced. It did not take a genius to work out that the Chancellor was thinking about cutting the top rate of tax, and in 2012 with HMRC’s report, the Exchequer effected a 50% additional rate of income tax to back up the Chancellor cutting the rate to 45p.
My hon. Friend talks about the work done by HMRC. Is that almost the same piece of work that the Labour amendment would require the Government to do, in that it would show an analysis of how much money the 45p rate is bringing in and how much the 50p rate would bring in? It would also allow hon. Members to have a proper debate about the proportion of taxes that should go towards deficit reduction as opposed to spending cuts.
As ever, my hon. Friend is absolutely right, and it is precisely to get that additional data that we have tabled this and similar amendments ever since the change was made. Why would the Government go through the process of looking at yield and getting HMRC to produce a report in 2011? That is important, because everyone knew—both at the time and ever since—that there were not enough data to come to an accurate view about yield as the rate had not been in place long enough. To put it bluntly, the Chancellor probably felt that some people might not agree with his decision to give people earning more than £150,000 a massive tax cut, given the state of the rest of the economy and the crushing of people’s living standards on his watch. What he needed to back his decision was a report that said that the 50p rate hardly raised anything at all, which is precisely what the HMRC report said. After analysing a host of facts and figures, the report concluded that a cut that would, by the Government’s initial estimates, cost £3 billion— the so-called static cost, excluding all behavioural changes— would cost only £100 million The trouble with the report is that, as everyone acknowledges, there are too many uncertain variables to be anywhere near sure that the figure of £100 million is even close to reality. The report was based on only one year’s worth of data relating to 2010-11. That is a significant weakness, since we know that some incomes were taken earlier to avoid the extra tax. Further detail is now available, including for the tax years of 2011-12 and 2012-13 when the 50p rate was still in place. The writers of the 2011 report did not have those data available, so their report is therefore lacking. That could be remedied were the Government to accept our amendment The report attempts to quantify behavioural change. The scale of behavioural change is primarily based on an assessment of taxable income elasticity—basically the extent to which taxable income changes when the tax rate changes. The IFS says that there is a margin of error within calculations for the 2011 report, and that staying within that margin of error one could easily say, depending on taxable income elasticity, that cutting the rate of tax could cost the Exchequer £700 million or could raise £600 million. That gives an idea of the range of figures we are talking about and of how uncertain such projections are I return to my central point: more data are now available and could help to calculate a truer picture of the yield of a 50p tax rate as opposed to a rate of 45p. If Conservative Members are so certain that their position on the abolition of the 50p rate is true, why will they not agree to the scrutiny that the amendment suggests?
I come back again to what the hon. Lady’s colleague, the shadow Chief Secretary, said from the Opposition Dispatch Box, when he referred to the 50p rate as “a tax rate that would raise £3 billion”.—[Official Report, 5 November 2014; Vol. 587, c. 849.] Does she stand behind the statement that the 50p rate would raise £3 billion?
I was here for that debate and my hon. Friend the shadow Chief Secretary was recognising that the first thing we start with is the static costing. That is the only certain figure we have and that starts us off at £3 billion. We have, of course, to make an allowance for behavioural change and that will impact on the yield, but the calculation for how we get to understanding the behavioural change is the bone of contention between the Financial Secretary and me.
The hon. Lady is making a perfectly sensible point now, but it is a very different point to that made by the shadow Chief Secretary. He did not say, “The static cost is this, but then there is the behavioural cost” and so on. He said that it was “a tax rate that would raise £3 billion”—[Official Report, 5 November 2014; Vol. 587, c. 849.] It sounds to me that the hon. Lady does not agree with that. She is not claiming that it would raise £3 billion. Is my interpretation of what she is saying correct?
My interpretation of what the Minister is saying is that he is making a valiant attempt at trying to create something out of nothing. As I said, I was here for that debate and I remember that exchange very well. The Financial Secretary and my hon. Friend the shadow Chief Secretary had a bit of to-ing and fro-ing over the static costing, but the rest of the debate and everything my hon. Friend said was absolutely clear. It has always been our position that we start with the static costing and that is not in doubt: it is £3 billion. The question then is: what happens when we allow for the impact of behavioural change? My contention—it has always been our contention; it is exactly what the shadow Chief Secretary said in his remarks in that debate on that day—is that the extent of behavioural change, as envisaged in the 2011 report, was based on an uncertain set of figures and that we have much more data now to be able to get to a certain point.
rose—
I am not going to give way again, because I have very little time. The Minister can pick the point up again in debate and I am sure he will do so It is not sufficient for Government Members simply to point at the increased yield following the rate cut to 45p and deem that their point has been proved. Just as people brought forward their incomes before the rate was introduced, so people held off taking income until the rate was lowered. We know the increase in yield at 45p was due primarily to record bonuses, which were up 80% in the year after the rate was reduced. If the truth is what is sought, then rigorous analysis is what is required. The blunt truth, however, is that the truth is not what is being sought here by the Government. The decision was taken for ideological reasons. There is no other justification. The abolition of the 50p rate was nothing other than a huge tax cut for the very richest, while ordinary families continued to struggle, and struggle for longer There is growth in the economy and that is welcome, but it has been a long time coming. It is ordinary families who have ended up paying the price. That is why we have continued to press home the point about the top rate of tax. While ordinary families are paying the price, we have let the very wealthiest in our country have a huge tax cut. That cannot be right. A top rate of tax at 50p will play an important role towards fair deficit reduction under the next Labour Government. If the Government have absolutely nothing to hide or fear in the facts and figures behind the cut from 50p to 45p, they should accept our amendment to clause 1
It is a great pleasure to serve under your chairmanship, Sir Roger First, I shall say a word about the clauses in this group. Clause 1 provides the charge and sets the rates for income tax for 2015-16; clause 2 relates to limits and allowances; clause 3 sets the personal allowance for 2015-16 at £10,600; clause 4 relates to the basic rate limits; and clause 5 sets the personal allowance for 2016-17 at £10,800 and for 2017-18 at £11,000. That is a dramatic increase on the rate we inherited in 2010, when it was below £6,500, and makes good progress towards the target that my party and the Liberal Democrats have set of £12,500 by the end of the next Parliament.
It would have been popular.
None the less, under this Chancellor and this Government, we will stick to the long-term economic plan and avoid populist giveaways that could damage the public finances I could spend some time on these clauses—they are a significant achievement for the Government and I am delighted we are making further progress on increasing the personal allowance—but I shall deal with amendment 1, tabled by the Opposition. It is the annual debate we have on these matters; it is familiar to me and, I suspect, to you, Sir Roger. It proposes that the Government publish a report reviewing the impact of setting the additional rate at 50% within three months of passing the Bill. In addition, it asks for an assessment of “the impact of setting the additional rate for 2015-16 at 45 per cent and 50 per cent on the amount of income tax currently paid by someone with a taxable income of…£150,000…and…£1,000,000 per year.” To be credible, such an analysis would need to take behavioural impacts into account, like the HMRC report on the additional rate published at Budget 2012. Simply looking at theoretical income tax liabilities when increasing taxes is not enough. For perhaps the first time in a long time in these debates, we might have made a bit of progress in trying to understand Labour’s position. The HMRC report concluded that the underlying yield from the introduction of the 50p rate was much lower than originally forecast owing to large behavioural effects. It would be fair to say that when the 50p rate was introduced by the previous Government, they made allowances for behavioural effects. The question is whether it was sufficient When HMRC looked at this again, it was clear that the behavioural effect was greater than anticipated by the previous Government. Indeed, it is quite possible that it cost the Exchequer money. So let me take this opportunity to assure hon. Members once more that the Government already consider the impacts of any policy decisions taken, and they take the behavioural effects into account. The simple point is that the 50p rate was failing to raise the money anticipated.
People find some of these behavioural effects hard to imagine. One of them, of course, was that under the previous Government somebody paying tax at that kind of rate could put £250,000 into a pension fund and save all the tax—£125,000. The maximum that can be saved now is £18,000.
My hon. Friend raises an important point. There are a number of behavioural effects. Sometimes when we have this debate, there is a tendency for Opposition Members to say, “Ah, behavioural effects. You are just talking about tax avoidance.” Tax avoidance can be an element, but it can also be behaviour that is clearly compliant both with the letter and the spirit of the tax system yet will reduce yield. Increasing contributions to pension schemes, for example, could result in a reduction in revenue. It could be that somebody decides to relocate out of the United Kingdom. It could be—an important point that gets to the heart of why we reduced the tax— that international businesses in deciding where to locate staff might conclude that the costs of doing so in the UK are greater than elsewhere, and that there are better climates and environments in which to locate highly paid staff Those are some of the behavioural impacts that are a consequence of having an uncompetitive rate of income tax. That is one of the challenges that Governments have to face. To be fair, the previous Labour Government, for the vast majority of their time in office—this point has already been made by my hon. Friend the Member for Redcar (Ian Swales)—did not increase the 40p income tax rate. Tony Blair was very clear that in his view increasing the rate above 40p would be a mistake. We have taken the view that it was right to reduce the rate down to 45p, but the important question remains of what is the purpose of having a high rate of income tax. Is it to raise revenue or is it simply about sending a signal? If it is to raise revenue, we have to ask ourselves how much it will raise This is why I return to the comments—I cited them accurately and in context earlier—made by the shadow Chief Secretary on 5 November: “We have a choice about a tax rate”— he is clearly talking about the 50p rate— “that would raise £3 billion, and it is important that we take that opportunity to tackle our deficit, rather than giving that money away to those people who are already in an extremely privileged position.”—[Official Report, 5 November 2014; Vol. 587, c. 849.] He is talking about raising £3 billion. I pressed the hon. Member for Birmingham, Ladywood (Shabana Mahmood) on two or three occasions because she was making a different argument. She was saying that the static cost is £3 billion, and then it is a question of working out what the dynamic and behavioural effect will be so that we have a true and accurate position on how much this tax will raise. That is a perfectly reasonable point—it is not possible to disagree with the fact that there is a static number, but that is not terribly helpful in guiding us towards a sensible policy, because we have to know the behavioural effects. Let me be clear. The hon. Lady is clearly stepping away from the suggestion that this will raise £3 billion—
Not at all.
Given that the hon. Lady has said that, I will certainly give way to her. If she is not stepping away from how much this would raise, I would be interested to hear what she is saying and how much she thinks it would raise.
If the Minister was listening to my speech, he would know that I am asking for a report to give us a better idea of what this measure will raise—including all the data to hand from the additional years in which the rate was in place but not included in the 2011 HMRC report. All I can say to him on the figures is that the only certain figure we have is the £3 billion static cost. I accept that behavioural change will bring that down and decrease the yield, but neither he nor I can say, with hands on our holy books, that we know the exact number. That explains what I have asked for in the amendment. I believe this could be a revenue-raising measure to get the deficit down in a fairer way. The extent to which we can do that is the thrust of my amendment.
We are making further progress. The hon. Lady has now explicitly said that the 50p rate will not raise £3 billion. [Interruption.] She has explicitly said that, because she has accepted that there will be a behavioural effect that will bring the amount down. I do not know why she is complaining and chuntering, because she has just made the unarguable point that the amount raised will be less than the static cost. That is not the point that the shadow Chief Secretary was trying to make Labour politicians are generally very good at saying, “It is a £3 billion giveaway”, in an attempt to give the impression that it will be a £3 billion increase in revenue. I accept that the shadow Chief Secretary probably misspoke, and that when he said that the 50p rate would raise £3 billion, he was getting a little carried away. Labour politicians usually avoid saying, “It will raise £3 billion”, for the very good reason that that is a completely unsupportable position. To be fair to the hon. Member for Birmingham, Ladywood, she is not making that case today. However, I wish to point out that even the Labour party does not believe that the 50p rate will raise £3 billion, which it clearly will not.
I appreciate that we are five and a half weeks from a general election, so we can exchange party-political knockabout. Having said that, I would politely say to the Minister that the point he is making—very eloquently, I must say, if I am being fair to him—is precisely the point made by my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood). There is a degree of uncertainty. Is that not exactly why he should support the amendment?
I accept that I can be carried away with party-political knockabout. I look to the hon. Gentleman as a statesman who rises above such lowly behaviour, and I shall always seek to emulate his balanced and considered approach to the House of Commons.
I thank the Minister for giving way again. He is being very generous with his time As assessment has been made by an independent group, the Institute for Fiscal Studies, which came up with a figure of about £100 million. Labour Members have used the word “exact”. Does the Minister reject the idea that the amount can ever be estimated exactly, partly because of the behavioural factors to which he referred a few minutes ago?
That is a very good point, which leads me to the two quotations that I was about to give. Paul Johnson, the head of the IFS, said in a paper that was published on 27 January 2014: “The best available estimate of what reversing the cut would raise is therefore about £100 million too.” He also said that “the best evidence we have still suggests that raising the top rate of tax would raise little revenue and make, at best, a marginal contribution to reducing the budget deficit an incoming government would face after the next election.”
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I am spoilt for choice, but ladies first.
I thank the Minister for his generosity in giving way again. The Institute for Fiscal Studies has said that the Government’s plans for tax cuts by 2020 would cost £7.2 billion. Can he tell us where that money would come from?
We have a record of increasing the personal allowance. This is a very good time to make that point, as we are debating, among other things, clauses 1 to 5, under which the personal allowance will move up to £11,000 during the next few years. We have a record of being able to deliver big increases in the allowance, and that is what we will do Let me now press on. The economic recovery is well under way, and last year Britain grew faster than any other major advanced economy in the world. The Government will not consider any action that would put the United Kingdom’s recovery at risk. While the additional rate has been reduced to ensure that the UK remains internationally competitive, the Government’s policy is to repeatedly increase the tax contribution of the wealthy. The share of income tax paid by the top 1% of taxpayers is projected to rise from 25.1% in 2010-11 to 27.3% in 2014-15, which means that they are expected to pay a greater share of income tax in 2014-15 than in any year under the last Government.
I beg to move amendment 2, page 3, line 39, at end insert— “(3) The Chancellor of the Exchequer shall undertake a review, within six months of the passing of this Act, of the impact of a cut of one per cent to the main rate of Corporation Tax for financial year 2016, with particular reference to— (a) the impact on businesses with fewer than 50 employees; (b) the impact on investment by businesses with fewer than 50 employees; and (c) alternative tax measures, including non-domestic rates, which would have a greater benefit for businesses with fewer than 50 employees (4) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.”.
With this it will be convenient to discuss clause stand part.
The review proposed in amendment 2 would give us a better understanding of the factors that are helping small businesses to grow and those that are limiting their expansion. Most small and medium-sized businesses with a smaller number of employees tend to be run from premises that have a rateable value of below £50,000. I should say at the outset—the Minister and I have had this debate before—that Labour does not oppose the recent changes to the rate of corporation tax that have so far come into effect. That is in keeping with our party’s policy over the past 15 years. When Labour left office, Britain had the most competitive rate of corporation tax in the G7. The rate has been cut several times over the past few years. The small business rate for companies whose profits are less than £300,000 now stands at 20%, and the rate for companies earning more than that will be 21% from April—in just a few days.
Is not a theme developing today: the extent to which tax cuts and spending cuts should contribute towards deficit reduction and, with regard to tax cuts, who should benefit? As with the debates on VAT and the 50p tax rate, we are arguing for greater consideration to be given to small businesses, because larger businesses have already benefited from corporation tax cuts.
My hon. Friend is right. This comes back to the impact of the choices being made—who is being prioritised and who is not, who is bearing the greater share of the burden and who is not. That is the material point We know that the Government’s impact assessment prepared for the 2014 Budget estimates that the cost to the Exchequer of the corporation tax cut would be some £400 million in 2015-16, £785 million in 2016-17 and £865 million the following year. In the 2015 Budget Red Book the estimates are revised upwards: for 2015-16 £550 million, for 2016-17 £1.045 billion, and for 2017-18 £1.1 billion. Those are not insignificant sums for a policy that affects a relatively small number of businesses. That is exactly my hon. Friend’s point The Government estimate that some 40,000 businesses pay the main rate of corporation tax and a further 41,000 businesses pay at the marginal relief rate. The Department for Business, Innovation and Skills estimates that the UK has some 5.2 million private sector businesses, the majority of which—3.9 million—are sole proprietorships, and 1 million have fewer than 10 employees. Clearly, if about 81,000 businesses benefit from the corporation tax cut, the opposite is also true—5.1 million businesses do not benefit in any way from that rate change The Government believe that a further cut in the corporation tax rate makes UK plc a more attractive place to invest and a more attractive destination for business to locate. The Minister and I have often debated the importance of the headline rate of corporation tax when that judgment call is made by businesses. It is important—a point that I have made on several occasions—but it is worth noting that on the former point it is far from clear that this is the case. We know that business investment fell from 8.2% of GDP in 2010 to 7.8% in 2013. That should not come as a big surprise Businesses tell us that they face a range of issues and that their decisions about where to locate and where to remain and invest are not based only on the headline rate of corporation tax. They take many other factors into account, such as infrastructure and the skills available in the labour market. Businesses often say that these factors are very important to their decision making, but they worry that under this Government those areas of policy have not gone in the right direction.
This is one point on which I think we can agree. Does the hon. Lady share my worry that investment is threatened partly by the uncertainty about the UK’s place in Europe, and that evidence is growing that that is already having an impact?
This might be the one time during a Finance Bill debate when the hon. Gentleman and I have been in complete agreement. The uncertainty caused by the Conservative party’s positioning over Europe and the Prime Minister giving in to the needs of his party, rather than the national interest, have caused a huge amount of uncertainty. In every conversation that I have had with businesses ever since the Prime Minister made his announcement, that has been the No. 1 issue that they have raised when talking about their future in our country, their future ability to invest in our country, and their future ability to employ more people in our country. It has caused a huge amount of consternation and uncertainty, and the Conservative part of the coalition has been wrong to put its party interest ahead of the national interest Our amendment seeks to put flesh on the bones of what is happening to corporation tax by assessing the impact on and the benefit to smaller companies with 50 or fewer employees, which make up the vast majority of private companies in our country. At a time when there are still difficult financial choices to make and a relatively limited number of ways to raise revenue and help support businesses to grow, the evidence suggests that now is the time to give much more support to smaller businesses, and to prioritise smaller businesses for some change in their circumstances, ahead of larger businesses, which have, with the support of all parts of the House, fared pretty well when it comes to cuts to the headline rate of corporation tax There is general agreement that small and medium-sized enterprises are the engine of growth in our country, employing more than half the private sector work force and contributing to 50% of UK GDP, but times remain tough and they face wide-ranging challenges. They struggle with high energy costs that do not seem to be getting much better despite wholesale price cuts of 20% in the past year, and with late payments and charges. According to the Government’s own figures, 44% of SMEs had a problem with late payments last year, with the average small business owed over £30,000—an astonishingly high figure.
Does my hon. Friend agree that it is important that we assess what the larger corporations do with their extra income as compared with small businesses? Small businesses in my constituency are more likely to create jobs, while larger companies are more likely to give the money to their shareholders.
My hon. Friend makes an important and interesting point. This is not only about how we how we make choices that prioritise help for those who particularly need it—my case is that SMEs need particular help with business rates—but the impact of the choices we are making and whether they are leading to the change that we hope to see. My case—I know she will agree—is that additional support for SMEs will yield greater gains for UK plc This is not about pitting one type of business against another. Government Members have tried to argue that the rise in corporation tax from 20% to 21% that we advocate is an anti-business move, but every single penny of the money from that change will be spent on SMEs, and I defy them to try to imply that they are not true businesses.
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If my hon. Friend wants to intervene, I will give way again.
I am grateful to my hon. Friend; I was enjoying her contribution so much that I was going to desist. Does she agree that in the Consumer Rights Bill the Government missed an opportunity to give small businesses consumer rights, and that is often leaving them open to abuses by larger organisations?
My hon. Friend is right. I am glad that she has put on record the interplay between the Consumer Rights Bill and small businesses. That was a missed opportunity. The Government should have taken the opportunities available to them during the passage of that Bill to offer a further boost to these struggling businesses—all 5.1 million of them. The vast majority of businesses in our country could have been supported Small businesses struggle not only with high energy costs, late payments and charges, but with access to finance. Every time we discuss these issues, the problem of access to finance comes up. I am afraid that the Government have failed to get a grip on this. Since 2010, lending has fallen by a colossal £56 billion. Even in the most recent quarter, net lending to small business fell by a further £1 billion. Research has shown that some 85% of small businesses are locked into the big five banks alone. It has also shown that most SMEs will approach only the larger banks when looking for finance, and that even then the rejection rate is about 50% Then there is the pressing issue of business rates. Business rates are levied on the estimated market rental cost of most non-residential properties, and currently based on 2008 rental values. In 2012-13, they raised £26.1 billion. Relief on business rates exists for low-value properties—those with a rateable value of below £6,000—which are subject to a 100% discount. Since April 2013, local authorities in England have been able to retain between a quarter and a half of the rates raised from new developments For many small businesses, business rates are a significant overhead that they need to factor in. More than one in 10 small businesses say that they spend more on business rates than on their rent. The only choice for many of those shops, workshops, start-ups and others that pay business rates is to pass the costs of the rates on to their customers.
Does my hon. Friend agree that supporting small businesses, developing skills and apprenticeships and cutting tuition fees, which is what a Labour Government would do, would also benefit large corporations? We need broader measures that work in the interests of the whole economy.
My hon. Friend is absolutely right and her point takes us back to our earlier debate about the value of the headline rate of corporation tax and the policy environment that supports it Clearly, more needs to be done on the business rates regime. We back the announcement of a review of business rates. There are problems in the system. For example, a factory investing in a new piece of equipment will find that its bill will go up next year because property is now worth more, which could be a disincentive to invest. Although our corporate property tax system needs to be fundamentally rethought, small businesses need urgent and immediate relief. Our proposal for a cut in business rates in the first year of the next Parliament, followed by a freeze in the second year, will make a genuine difference. I hope that Government Members will today take the opportunity that they have failed to take previously, support our amendment and thereby show their support for small and medium-sized businesses.
This might be my last contribution in this place, so I would like to say what a great privilege it has been to represent the people of Redcar for the past five years. I thank colleagues for making my time here such a vivid experience. I would struggle to apply the word “vivid” to the many Finance Bill Committees and finance debates I have taken part in, but overall I have had a terrific time I support the lower rate of corporation tax. When opponents of such things talk about lower tax rates, retaining profit is often described as some kind of evil, but what happens to that money? The characterisation is that it will probably end up in high pay for the people at the top, but companies with money have lots of choices and do lots of different things. They might pay more money to their shareholders, the vast majority of which are institutions such as public sector pension funds. They might invest the money or employ more people. They might spend the money on innovation or on building skills, and they might spend more money with SMEs, because all big companies have supply chains that involve small companies.
It is an honour to intervene in what might be the hon. Gentleman’s last speech in this place. Has he considered the impact on the rural economy, which suffered particularly harshly during the recession? The recovery there is very fragile and corporation tax cuts will not help rural communities. Does he not think that this could be the wrong cause?
The economy of the country is an ecosystem. No company exists in isolation and each relates to other companies. One measure that we are not talking about this afternoon is the cut in fuel duty, which is enormously helpful to rural citizens and rural companies, so the Government have taken some steps, although that is probably not relevant to this debate Of course, we expect people to pay their share of corporation tax and to do it properly. I remember the head of the CBI saying towards the end of 2013 that he was confused about what Parliament wanted because there was so much noise about tax avoidance. It is not very confusing at all: we want businesses to account for their operations in the UK properly and to pay tax on the money they make in the UK. I do not think that that is complicated, but some businesses appear to think that it is I welcome the successive measures that the Government have taken on tax avoidance. They are not just about individual avoidance but about corporate avoidance, too. The Bill contains many provisions, but I shall mention just three: it stops contrived arrangements on carried forward tax reliefs; it restructures bank loss relief; and it puts limits on research and development tax credits to deal with certain items. Once again, the Government are looking in great detail at how companies sort out their tax and picking up anything that looks anomalous. I welcome that We can go a step further. Both the Chancellor and the Chief Secretary to the Treasury said last week that we are now consulting on new criminal measures to deal with companies that advise on or enable tax evasion. I am choosing my words carefully. Aggressive tax avoidance, which we often hear about, is more of a grey term, but tax evasion is very clear. If a company advises people on how to evade tax or enables that through the provision of accounts or processes, it is not just the person evading the tax who is criminal. We want those who help—I think aid and abet is the legal term—to be in the dock, too. That will further help to change the climate and the number of prosecutions necessary will be much less than the amount of activity that the provision prevents just by existing I welcome the consultation that has started, which is yet another step that would be helpful. We are talking about corporation tax and it is relevant to mention the diverted profits tax. As we know, a lot of corporations divert their profits or do not account properly for their operations in the UK. The diverted profits tax is a good step forward. It is quite limited in scope, but it will help to put the initial stakes in the ground for how we want to deal with things in the future There is more to do. I was pleased to hear the Minister talk in his opening remarks about the need to look further at internet companies, because we all know that they can position themselves anywhere. It is quite wrong to assume that the address of the server is where the business is. It is really where the customer is. In fact, the HMRC small print already says that, but it is quite difficult to implement. There is a lot more to be done for internet companies, not least because they are competing against bricks-and-mortar companies, particularly the small businesses that the shadow Minister has been very vocal on and quick to talk about. That is another step that needs to be taken.
Does the hon. Gentleman think it right for a Government to take money from a city where a lot is paid in rates—with people from outside the area coming into it—and then spread it around the rest of the country?
Another thing that the Government have done is to move towards localising business rates again. Certainly my part of the world, which had huge industrial sites such as the one I have mentioned, was pretty nonplussed when all that money was collected by a Government in the 1980s, taken to the centre and then doled out in different proportions. We need to move towards more localisation, not least to incentivise councils to drive economic development. I would argue that that has not been happening sufficiently in some parts of the country, and I live in one of them I understand the hon. Gentleman’s point, and there is also the issue about where people live, where they work and what services they use. The south-west has a particular issue when its population doubles every summer, because people may not make a contribution through taxes paid directly in the south-west, but they are using services there. There is another whole argument to be had about the location of rates versus how they are collected I will not detain the Committee long. The Government are on the right track with corporation tax. Let us put it this way: there is plenty of work for the next Parliament to do, and I shall watch with interest from afar.
It is a great pleasure to follow the hon. Member for Redcar (Ian Swales), because we have served together on a number of Finance Bill Committees during the past five years. The debates on the details of a Finance Bill in Public Bill Committee are often better than those on the parts of the Bill taken on the Floor of the House. The theory is that the debates on the more important and bigger parts of the Bill are taken in the Chamber and then the Bill goes upstairs, but the Public Bill Committee often allows us to have quite fruitful debates on many of the issues One thing that has been very clear during this Government—perhaps this has always been the case, but it seems to be growing—is that all the political parties are falling over themselves to talk about the importance of small and medium-sized businesses, and we are all the friends of small business. Small businesses are probably very pleased to hear politicians talk so much about them, but then the issue becomes one of whether it is talk or action. It is very easy to praise small businesses, but such businesses, especially new ones, sometimes feel that the system is set against them One new business in my constituency involved two young women who set up a fitness studio. They went into premises on what was effectively a redevelopment area after our old hospital had been relocated. Largely because of the financial crash and the recession, the whole redevelopment took longer than expected, so the population to support new businesses had not arrived at the expected rate. Although they got a rent holiday for the first 18 months from the developer who was renting them their premises, which was welcome, they were struggling with business rates. Oddly, even though my local council said that it wanted to encourage economic development and had particularly encouraged the redevelopment of that site, it was not particularly forthcoming with help for a new business Those young women were not in the region of having to worry about corporation tax—that was not where their business was. They had to worry about the rates. It was touch and go, but I was pleased to see recently that they are still there and have managed to overcome their initial difficulties. Some of the other redevelopment is beginning to happen, so I hope that they will continue to be successful. However, we do not always join the dots either locally or nationally. Things such as rates are essential for a lot of small businesses, and we have to support such businesses to the greatest extent that we can I have some sympathy with the hon. Gentleman in his points about business rates being retained locally. We have to work through the conflict between that and redistribution to ensure that different areas of the country are assisted in developing. When I was on the council in Edinburgh, we often raised the issue. It was and still is an expanding city, and it generates a lot of business. We have big events that generate worldwide attention, and a lot of businesses feel that they bear the cost of all that without necessarily seeing the rates coming back to the city. It is all very well to say that we get rates in because we have events such as the festival and big tourist attractions, but sometimes it feels that the rates are not coming back. I understand the tension between that and looking at the region or country as a whole and trying to build wealth. It is not easy, but we have to incentivise businesses as far as possible to feel that keeping on growing is to their advantage as well as to wider advantage Politicians and political parties must not just pay lip service to the importance of small business. We must do specific things to assist, and that is what amendment 2, moved by my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood), is intended to do. The hon. Member for Redcar probably has a different view of economics from mine, but he appeared to be of the view that if a company is making a profit, it will be ploughing it back in the right directions. I do not think that is necessarily always the case. Big businesses in particular should make a good contribution to our society, and we have to ensure that they do. I urge the House to support the amendment.
It is a pleasure to see you back in the Chair, Mr Hood I wish to talk particularly about the rural economy and the opportunities that the Government might be missing, given the importance of small and medium-sized enterprises to rural economies. Given that this may be my last contribution in this Parliament, I also want to reflect briefly on the political situation in Scotland We have had more than one eclipse in Scotland in recent weeks. It seems to be a daily occurrence that Alex Salmond’s moon blocks out Nicola Sturgeon’s sun. At one time, the current leader of the Scottish National party—people might easily be confused as to who that is these days, but I remind them that it is Nicola Sturgeon—did a U-turn on the SNP’s proposal in its White Paper “Scotland’s Future” to reduce corporation tax by 3%. I welcome that, because I do not think it would have been a progressive move or have provided the right environment for the stability, job creation, employment rights and pay and conditions that we want in a fair, modern and successful Scotland. The Minister may wish to reflect on that and the debate that went on around the referendum, because the measure was not popular with working people or businesses—certainly not with SMEs that would not have seen any benefit The Financial Secretary said that he does not want to do anything to risk the recovery, but I urge him to think about what more his Government can do to aid recovery in rural areas. Most of the conversation and discourse I have heard from Government Members—for example in the Enterprise and Regulatory Reform Bill Committee—was about employment rights. The Minister seemed to think that the way to help small businesses was to erode workers’ rights, but I think that has the opposite effect because it can be more difficult for them to recruit staff Much as I admire the beautiful city of Edinburgh, our capital, I am concerned that so many people from my rural constituency commute there for work. At a time when the population of East Lothian is set to grow at the fastest rate of anywhere in Scotland, with 10,000 more homes, we need jobs in our own communities. We must look at the impact that the Budget will have on SMEs with 50 or more employees, and we are asking the Government to pause and reflect on what that impact might be We are losing many skills in local, rural and remote economies, especially in the construction industry—that relates to the point raised by my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) about difficulties with lending. Small construction firms are finding it very difficult to access lending, which means that they are disadvantaged when it comes to procurement contracts. If they take on small housing developments in the community, the people working on the construction sites will often be local young men and women who are benefiting from an apprenticeship and learning skills, and they will be spending money in that local community. The healthy cycle of the rural economy is thus given new impetus and energy. Will the Minister at least reflect on that When small businesses fail, it does not make the headlines in the same way as when a large manufacturing company announces job losses. The news about Longannet, which is across the water from my constituency and where many of my constituents are employed, is deeply concerning. When a small business fails, it does not make the headlines in the same way, but for the rural economy and community it can be devastating. The village where I live in East Lothian, Pencaitland, has two village shops and a pub, and the thought that any of those could fold at any time would have a devastating impact on our community. At that point, community cohesion goes and the place becomes just a dormitory, somewhere people go to lay down their head at night, rather than the vibrant community we want We have heard much about devolution during this Parliament. When it comes to how we support and drive growth in the SME sector, we need to trust people at local authority and community level to make decisions about how businesses are supported, how they grow and create jobs and wealth, and how they provide sustainability. We must trust the people who know the area and the skill requirements to make those decisions. Talking about who gets to vote on what Bill does not have the same impact; it does not empower. It may take power away from individual MPs, but it does not empower communities, which is what devolution should be about I ask the Financial Secretary to consider the intervention I made on my hon. Friend the Member for Birmingham, Ladywood who spoke from the Opposition Front Bench. What evidence do the Government have that cutting corporation tax will create more jobs than supporting SMEs, particularly in the rural context I am very grateful to Members who have been sitting patiently and silently for allowing me to make this pitch on behalf of the rural economy. I look forward to hearing the Minister’s comments.
It is always a pleasure to serve under your chairmanship, Mr Hood. It is also a pleasure to follow my hon. Friend the Member for East Lothian (Fiona O'Donnell), who I am almost certain will be back in the next Parliament to pursue these cases vigorously with the next Labour Government. I was tempted to speak by the Minister’s generosity in likening me to a future statesman. I appreciate that I have some way to go, although I have not handed him the Red Book across the Table, as I did to his Liberal Democrat counterpart on Thursday The debates we have had today really come down to one issue: balance and priorities. It is about the share we expect to take from tax or the share we expect to take from spending cuts to deal with deficit reduction in the next Parliament. As I said in an intervention on my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood), the issues are the same whether it is the VAT debate, the 50p debate or the debate we are now having on business rates and corporation tax.
The best way to get the tax contribution is to give people real jobs with real pay; then we will get the money in.
My hon. Friend is absolutely right, and that goes to the nub of the issue today. As my hon. Friend the Member for Birmingham, Ladywood eloquently set out from the Opposition Front Bench, the numbers are clear. In respect of corporation tax, we are talking about a very small number of large businesses operating across the country. The benefits of that tax cut will not necessarily be felt throughout the wider economy. I would argue—I know my hon. Friend makes the same argument—that targeting the same amount of money on a business rate cut for the first year and a freeze for the second year is much smarter, because it would affect 5.1 million small and medium-sized businesses and others. That is the right thing to do for the struggling high street I therefore urge the Minister to consider very seriously what the Labour Front-Bench team is asking for. We are not asking him to implement Labour party policy, as much as I would like him to, and we are not asking him to freeze business rates or to cut them. We are asking him to conduct a review so that we can have a proper debate on whether his approach of cutting corporation tax is the right one, or whether, as we argue and believe, cutting and then freezing business rates is a much smarter way of using the same amount of money, as it would create a bigger boost for the economies of towns, villages and cities across the country I want to add one note of caution. I am very supportive of the devolution agenda in England. As a Greater Manchester MP, Members would expect me to say that I very much support the efforts by the Greater Manchester combined authority and the 10 local authorities—eight are Labour, one is Conservative and one is Liberal Democrat controlled—and recognise the benefits of the conurbation working together. The Government’s announcement included the retention of additional business rates from growth, but I urge caution. I support the proposal, but we have to approach it on a conurbation, city region and county region basis. Growth areas in cities and counties are often located in particular geographical areas, whereas needs are spread across whole areas. With that, I urge the Minister to accept Labour’s amendment, which requires nothing more than a report that I think would back our plans 100%.
First, I pay tribute to my hon. Friend the Member for Redcar (Ian Swales), who spoke in this debate as he has done in so many Finance Bill debates over the past five years. He has always provided a voice of calmness and sanity. I have not agreed with everything he has said, but he has mostly made helpful contributions, and thoughtfulness is a consistent characteristic of those contributions The corporation tax rate is set in legislation a year in advance on an annual basis. Clause 6 sets the corporation tax rate and charge for the financial year beginning on 1 April 2016. The House will be aware that in 2013 legislation was passed cutting the main rate of corporation tax from 21% to 20% for the 2015 financial year. The cut will take effect in seven days and give the UK by far the lowest rate in the G7 and the joint lowest rate in the G20. The clause confirms that the rate will remain at 20% in 2016. The Government have made it clear that we want a business tax regime that is competitive and fair, and since 2010 we have made clear strides towards that goal. The main rate of corporation tax was 28%. We have cut it by almost a third to make the UK more competitive and to support growth and investment. At the same time, we have taken significant measures to clamp down on tax avoidance, and on Second Reading we debated the diverted profits tax introduced by the Bill Low corporation taxes enable businesses to increase investment, take on new staff, increase wages or reduce prices. Overall, the corporation tax cuts we have delivered since 2010 will save businesses £10 billion a year from 2016. To give Members a sense of scale, that is the equivalent of giving businesses enough money to hire 270,000 new employees. Oxford university’s centre for business taxation estimates that our reduction in the corporate tax burden will increase business investment by £11 billion; and as well as supporting businesses already operating in the UK, lower rates of corporation tax make the UK more attractive to international businesses. Last year, UK Trade & Investment reported a record number of inward investment projects that led to the creation of 66,000 new jobs and safeguarded 45,000 more The corporation tax cuts and other reforms, such as the introduction of the patent box, have completely changed perceptions of the UK tax regime. Five years ago, businesses were leaving the UK because of our tax regime. That regime has now become an asset that attracts firms to the UK. In surveys, the UK is now regularly cited as one of the most competitive regimes in the world. The clause embeds the message that the UK is open for business by affirming that the UK rate will remain at the record low of 20% in 2016 The Opposition amendment proposes a review of the impact of a 1% cut to the main rate of corporation tax for the financial year 2016. A great deal is already known about the impact of corporation tax policy. We know that lower rates encourage growth and investment, and that stable and simple taxes give businesses confidence to invest and expand. The clause refers only to a single rate because we have already legislated to unify the main rate and small profits rate of corporation tax and to scrap the complex marginal relief system for all companies, except those with ring-fenced profits These changes will take effect next week and give the UK for the first time a single headline rate of corporation tax and provide administrative savings for a huge number of businesses, particularly the nearly 50,000 companies that pay the marginal rate of corporation tax each year. The move was recommended by the Office of Tax Simplification, and I would like to take the opportunity to pay tribute to Michael Jack, John Whiting and the team for all the work they have done since we introduced the OTS at the start of this Parliament. The Institute for Fiscal Studies has also been supportive of our reforms. In a recent report, it said: “The simplification of moving to a single rate of corporation tax…is a real achievement of the coalition government’s tax policy, and it is one that should not be reversed.” The evidence on corporation tax is clear: low rates and a simple system support business and support growth. In our view, the proposed review would provide little benefit, so we are not minded to accept the amendment. As far as business rates are concerned, the Government recognise that they represent a fixed cost for businesses. That is why during this Parliament we have continued to double the small business rate relief schemes, supporting 575,000 businesses, of which 385,000 pay no rates at all. We have capped the inflation-linked increase in the business rates multiplier at 2% for two years, and we have provided a £1,000 retail discount this year, rising to £1,500 next year for small shops, pubs, cafés and restaurants, supporting the high street Labour said it would cut business rates by 1% for lower-value properties in 2015-16. Under its plan, the smallest single properties would pay more. A property with a rateable value of £5,000 saves £1,165 under this Government compared with the Opposition’s proposals. The high street would also lose out. A shop with a rateable value of £30,000 saves £1,080 under this Government when compared with the original proposals. We have published terms of reference for a wide-ranging ambitious review of Budget business rates to report back to the Government. That is, of course, on top of what we have done on fuel duty, which helps small businesses, and the employment allowance, which does the same In conclusion, cutting corporation tax has been a central part of our economic strategy—a strategy that is working. In 2014, growth in the UK outstripped that of every other G7 country. Employment is at record levels, business investment is growing rapidly, and this clause ensures that the rate of corporation tax for 2016-17 will remain at 20%—an extremely competitive rate and a foundation of tax system designed to support growth and investment. Reversing the progress we have made would be a big mistake and send a terrible signal to businesses around the world. That is why I believe the clause should stand part of the Bill Question put, That the amendment be made.
On a point of order, Mr Hood. Can we look again at the way in which the business of this House is organised, because it brings our procedures into real disrepute when we have not had the chance even to look at a set of important amendments, much less to debate them. [Interruption.]
Order. I ask Members for order to allow the hon. Lady to make her point of order.
I was simply making the case that our procedures are brought into disrepute when we have not had the chance even to debate a huge number of amendments, much less to put them to the vote, including an important amendment that would have closed a tax-dodging loophole for private equity firms. Can we look again at the way in which the business of this House is organised, Mr Hood?
I thank the hon. Lady for her point of order. She may want to take her point up with the Procedure Committee. Unfortunately, it is not a matter for me.
On a point of order, Mr Deputy Speaker. It has just come to my attention that the Government have tabled a motion for debate on the final day of this Parliament, with no notice whatever to myself as shadow Leader of the House. The motion proposes changes to the way in which the Speaker is elected—procedural matters in the House—with no consultation with Her Majesty’s loyal Opposition and no consultation with the Chair of the Procedure Committee, for debate in only one hour tomorrow. Is this in order? Do you believe that the procedures of this House should be bandied around by the Government in this way, and that we should have surprises delivered to us in this manner on the last day of the first ever fixed-term Parliament? The motion attempts to influence the results of the first thing that will happen in the next Parliament, with no chance for large numbers of Members who had no knowledge that this was happening to participate.
It is a business matter for the Government, as the shadow Leader of the House is well aware. Rightly or wrongly—whichever the House may decide—a business motion was agreed to yesterday, as I understand it, and as we know, business of the House is decided by the Government, not by the Chair, so it is not a matter for the Chair.
Further to that point of order, Mr Deputy Speaker. Usually I am an assiduous attender, as you know, of business questions, but I was unable to attend last week. Was this announced then? If it was not, can you tell us when you and Mr Speaker were informed that the motion was to be tabled?
It was a business motion that was agreed yesterday, but not the terminology, I presume. Mr Speaker is not in the Chair so I do not know when he was told. I was told about five minutes ago when I came into the Chair. [Interruption.] No, that is correct. There is a business motion. [Interruption.] Mr Doughty, we are trying to deal with this. We have many other points of order on that matter.
Further to that point of order, Mr Deputy Speaker. We have had some slightly strange events on the Budget, with Ministers speaking from the Government Dispatch Box—from the Treasury Bench—but speaking for their parties. My understanding is that the Government speak from there—the Government Benches. May we be clear? Is the motion a Government motion, which has therefore been signed off by the coalition partners, or is it a motion from the Conservative party?
We are getting into areas that are not a matter for the Chair. This is agreed business of the Government. That answers that.
On a point of order, Mr Deputy Speaker. Is it in order for a member of a Select Committee who has been involved in a serious leak and a possible breach of privilege in this House then to raise that, as happened today at Prime Minister’s questions in a question from the hon. Member for Bristol North West (Charlotte Leslie), thus exacerbating the situation the Committee has found itself in? I would be grateful for your advice.
Further to that point of order, Mr Deputy Speaker. Other members of the Health Committee are also affected. The hon. Member for Bristol North West (Charlotte Leslie) has openly leaked the private considerations of the Committee. What action can be taken immediately?
May I just say that we are raising a matter where a Member is being discussed? I presume that they are aware that this matter was going to be raised as a point of order.
Further to that point of order, Mr Speaker. Like my hon. Friends, I think that we, as members of the Health Committee, need the advice of your good self as to how we can address the distorted report of events at the private sitting of the Committee without falling foul of the very convention that prevents this. Conservative members of the Health Committee have previously been referred to the Liaison Committee by a vote in the Committee, and here we have it again. How do we defend ourselves?
Does anyone else want to speak on this matter?
Further to that point of order, Mr Deputy Speaker. I do think it is an absolute outrage that the hon. Member for Bristol North West (Charlotte Leslie) did not give us notice that she was raising the matter. She is subject to a referral. Other Select Committees have chosen not to publish reports.
I am sure that you are aware that Mr Speaker has sent a letter to the Chair of the Select Committee. I can also inform you that it is not a matter for the Chair; it is a matter for the Committee. In the new Parliament, there will also be a new Committee that can look into it. Unfortunately, as I say, it is not a matter for the Chair.
I beg to move, That the draft Terrorism Act 2000 (Proscribed Organisations) (Amendment) (No. 2) Order 2015, which was laid before this House on 23 March, be approved The threat level in the UK, which is set by the independent Joint Terrorism Analysis Centre, remains at “severe”. This means that a terrorist attack in our country is highly likely and could occur without warning. We can never entirely eliminate the threat from terrorism, but we are determined to do all we can to minimise the threat to the UK and to our interests abroad. It is also important that we demonstrate our support for other members of the international community in their efforts to tackle terrorism wherever it occurs. Proscription is an important part of the Government’s strategy to disrupt terrorist activities The two groups we propose to add to the list of terrorist organisations, amending schedule 2 to the Terrorism Act 2000, are Jamaat ul-Ahrar and the Haqqani network. This is the 18th proscription order under the Act. Under section 3, the Home Secretary has the power to proscribe an organisation if she believes it is currently concerned in terrorism. The effect of proscription is that a listed organisation is outlawed and is unable to operate in the UK. It is a criminal offence for a person to belong to, support or arrange a meeting in support of a proscribed organisation, or to wear clothing or carry articles in public that arouse reasonable suspicion that an individual is a member or supporter of a proscribed organisation Having carefully considered all the evidence, the Home Secretary believes that JUA and the Haqqani network are both currently concerned in terrorism. Hon. Members will understand that I am unable to comment on specific intelligence, but I can provide a summary of each group’s activities in turn Jamaat ul-Ahrar is a militant Islamist group that split away from Tehrik-e-Taliban Pakistan in August 2014. JUA aims to establish an Islamic caliphate in Pakistan and aspires to extend global jihad into the Indian subcontinent. The group has claimed responsibility for a number of recent attacks. In September 2014, JUA’s spokesman released a statement criticising the British Government for arresting suspected Al Muhajiroun associates and made a threat, stating that “your future security depends upon how nicely you treat the Muslims in Britain” Additionally, the group has claimed responsibility for the fatal attacks on Christian sites in Lahore earlier this month The Haqqani network is an Islamist nationalist group seeking to establish sharia law and to control territory in Afghanistan. It is ideologically aligned with the Taliban. It has links with a number of terrorist groups in the region, including proscribed central Asian group Islamic Jihad Union, and long-established links with al-Qaeda The Haqqani network continues to play an active and influential role in the Afghan insurgency in the east of the country, and is seeking to expand its influence into other areas of Afghanistan. Given the Taliban practice of claiming attacks on behalf of the insurgency as a whole, it can be difficult to identify the Haqqani network’s specific responsibility for attacks, but the group is believed to have been responsible for the attack against the British embassy vehicle in November 2014 that killed six people, including a UK national and an Afghan member of UK embassy staff, and that injured more than 30 people. It is likely that the Haqqani network will continue to view Kabul as a key target location due to the concentration of UK and western interests in the capital In conclusion, it is absolutely right that we add JUA and the Haqqani network to the list of proscribed organisations in schedule 2 to the Terrorism Act, subject to the agreement of the House and the other place. The order will come into force on Friday 27 March.
I thank the Minister for his statement. There is a long tradition of cross-party co-operation on national security. The Opposition will support the Government motion. We are satisfied that the groups included meet the test of terrorism under section 3 of the 2000 Act This is the last time we will discuss a proscription order during this Parliament. I believe it is the eighth time I have responded for the Opposition on a proscription order, and the sixth time in the past two years. The increasing rate of proscription orders reflects the increasing terror threat in recent years and the emergence of terror groups across the world During this Parliament, we have proscribed groups such as Boko Haram from Nigeria, and Imarat Kavkaz from the Caucasus. Less than two years ago, we were proscribing the Islamic State in the Levant, which is now the world’s largest, best-funded and most powerful terrorist organisation ever. The two groups we are discussing are, in some ways, a break with the trend of the past five years. They are established and well-publicised groups relating to long-standing terror groups including al-Qaeda and the Taliban The Opposition, as always, have not had access to the same information about the groups as the Minister. However, given that the two groups are already well established and high profile, and are linked to a series of shocking and violent terrorist acts, we are happy to support the Government motion As the Minister laid out in his statement, JUA is an Islamic extremist group that is seeking to establish a so-called Islamic caliphate in Pakistan, and to commit a global jihad across the Indian subcontinent and beyond. As he explained, the group is linked to several high-profile attacks from last year, and has spoken out to support UK-based hate preacher Anjem Choudary The Haqqani network appears to be an even larger group, hailing from Afghanistan and aiming to establish sharia law and take control of territory. As the Minister said, the group is aligned with both the Taliban and al-Qaeda, as well as with other known terror groups such as Islamic Jihad Union. Taken together, the groups provide a substantial force with a reach across central Asia. The Opposition are particularly concerned about the apparent involvement of the Haqqani network in attacks on the British embassy, and so absolutely support its proscription. I agree with the Minister that proscription is a vital tool against terrorism, and that it enables us to tackle and disrupt terror groups co-operating around the world, but as we come to the end of a Parliament during which there has been an exceptional number of proscription orders, we need to consider whether the proscription powers we currently use are having the results we require. The effect of a proscription order is to make it illegal to join, support or even wear a uniform associated with a terrorist group, but it seems that proscription orders are not having the effect of reducing a group’s presence on social media. I am sure the Minister is acutely aware of the findings of the Intelligence and Security Committee that social media sites were a “safe haven” for terrorist groups The last proscription order we passed in the House related to a group that had Arabic and English official Twitter accounts, and an official YouTube channel. They seem to be unaffected by the proscription order. Various Twitter accounts associate themselves with the Haqqani network and an associated group that has posted numerous YouTube videos Does the Minister agree that we need to reconsider the situation whereby legislation says it is illegal to wear a uniform, but there is no problem hosting extremist videos or distributing hate messages to millions of people? Why was there nothing in Monday’s counter-terrorism strategy announcement to deal with social media I want to press the Minister on the issue of prosecutions of members, supporters and facilitators of proscribed organisations. The ISC report on Lee Rigby’s murder, which was published last year, highlighted the low number of prosecutions and the difficulties the police face in obtaining the necessary evidence. Have the Government had a chance to respond to that particular aspect of the report?
I do not want to detain the House for longer than is necessary. I welcome the Minister’s commitment to the changes. The attack on the church in Lahore was carried out by people who move from organisation to organisation. Some of those involved have also been involved in other attacks, but they go under a different name each time. Is it possible for us to take a different approach? Rather than having to come back here every time a new organisation claims responsibility for something that involves people who have been involved in other attacks, is there any way that we could circumvent this process On social media, last night I attended a talk on women and terrorism that underlined very clearly the threat of social media and how it is used to influence people. Is there anything more we can do to address the issue of social media?
On social media, I underline the work of the counter-terrorism internet referral unit, which since February 2010 has secured the removal of more than 80,000 pieces of unlawful terrorist-related content that encourages or glorifies acts of terrorism. In the context of today’s debate, CTIRU has identified and secured the removal of nine Twitter accounts and one Facebook account relating to Jamaat-ul-Ahrar. The Haqqani network has no formal social media presence at present, but the CTIRU continues to monitor the situation The industry must ensure that the internet does not become a safe haven for terrorists and extremists. Communications service providers have a responsibility to prevent their networks from being used to recruit vulnerable people and plot attacks. That is why the Home Secretary attended the recent countering violent extremism summit in the United States—it was attended by representatives from more than 70 countries and large communications service providers—to emphasise the importance of the work we are doing and the fact that more needs to be done. That is precisely what this Government are committed to doing On enforcement, between 2001 and the end of March 2014, 33 people were charged with proscription offences as a primary offence in Great Britain and 16 have been convicted. Obviously, the ability exists to make arrests, and arrests are being made in relation to alleged proscription offences. That may lead to other charges relating to terrorism, and it is important that that is understood I welcome the House’s support for the proscription order under discussion. It is important that we are vigilant. The threat we face from terrorism is real and pervasive and it will continue. We have a generational struggle against ISIL and the ideology that underpins it. That is why this Government are committed to our continued security In my last speech of this Parliament, I know this House will want to join me in commending and sending a big thank you to the police, the security services and our intelligence agencies for their tireless work in keeping us safe and ensuring that that continues into the future Question put and agreed to.
With the leave of the House, we shall take motions 5 to 10 together Motion made, and Question put forthwith (Order, 24 March and Standing Order No. 118(6)), Pesticides That the draft Public Bodies (Abolition of the Advisory Committees on Pesticides) Order 2015, which was laid before this House on 15 December 2014, be approved Social Services That the draft Care Act 2014 and Children and Families Act 2014 (Consequential Amendments) Order 2015, which was laid before this House on 5 February, be approved Statistics Board That the draft Statistics and Registration Service Act 2007 (Disclosure of Revenue Information) Regulations 2015, which were laid before this House on 5 February, be approved Broadcasting That the draft Community Radio (Amendment) Order 2015, which was laid before this House on 26 February, be approved Local Government That the draft Local Authorities (Prohibition of Charging Residents to Deposit Household Waste) Order 2015, which was laid before this House on 25 February, be approved That the draft Council Tax and Non-Domestic Rating (Powers of Entry: Safeguards) (England) Order 2015, which was laid before this House on 27 February, be approved.—(Mr Wallace.) Question agreed to.
I would like to present a petition from my constituents in Hitchin and Harpenden, who are concerned about the tiring and lengthy journey to London that many cancer patients requiring radiotherapy have to make, sometimes daily. They call for a satellite radiotherapy centre to be established at the Lister hospital. The petition is similar to one presented by my hon. Friend the Member for Stevenage (Stephen McPartland) and my hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald) and has 1,602 signatures The petition states: The Petitioners therefore request that the House of Commons urges the Government to encourage NHS England to provide a radiotherapy facility at Lister Hospital in Stevenage in order to make the journey for radiotherapy treatment much easier for patients who live in the Hitchin and Harpenden constituency Following is the full text of the petition: [The Petition of residents of the constituency of Hitchin and Harpenden, Declares that patients who are residents of Hitchin, Harpenden, Redbourn, Sandridge, Wheathampstead and the surrounding villages have to travel to Mount Vernon Hospital in Hillingdon to receive radiotherapy treatment and that this journey is long and exacting and often has to be made on consecutive days. The Petitioners therefore request that the House of Commons urges the Government to encourage NHS England to provide a radiotherapy facility at Lister Hospital in Stevenage in order to make the journey for radiotherapy treatment much easier for patients who live in the Hitchin and Harpenden constituency. And the Petitioners remain, etc.] [P001491]
My petition concerns the remediation of contaminated land in Coedpoeth and Brymbo The petition states: The Petition of residents of the UK, Declares that land in Coedpoeth and Brymbo is contaminated as a result of pollution from lead smelting on the site over 200 years ago...further that residents of Coedpoeth and Brymbo are calling for the Government to step in in the same way that they did in Blanefield, Scotland where part of the cost of removing lead and arsenic contamination was met by the Government; and further that a petition from residents of Coedpoeth and Brymbo has been signed by 1555 individuals The Petitioners therefore request that the House of Commons urges the Chief Secretary to the Treasury to provide funding for the remediation of contaminated land in Coedpoeth and Brymbo Following is the full text of the petition: [The Petition of residents of the UK, Declares that land in Coedpoeth and Brymbo is contaminated as a result of pollution from lead smelting on the site over 200 years ago; further that the local council has informed residents that they must pay a proportion of the remediation which, in some cases, could cost up to £10,000; further that residents of Coedpoeth and Brymbo are calling for the Government to step in in the same way that they did in Blanefield, Scotland where part of the cost of removing lead and arsenic contamination was met by the Government; and further that a petition from residents of Coedpoeth and Brymbo has been signed by 1555 individuals. The Petitioners therefore request that the House of Commons urges the Chief Secretary to the Treasury to provide funding for the remediation of contaminated land in Coedpoeth and Brymbo. And the Petitioners remain, etc.] [P001483]
The petition is from many hundreds of residents in my constituency The petition states: The Petition of residents of the constituency of Stone in Staffordshire, Declares that residents of Eccleshall and Woodseaves object to the use of the A519 (running through Eccleshall and Woodseaves) by HGVs; further that the Petitioners object to the application for a new access road to serve the Raleigh Hall Industrial Estate, which would increase HGV use of the A519; further that the new access point would be more dangerous because large HGVs would be turning to join a 60mph road; further that the number of these vehicles using the A519 route has become completely unacceptable, with hundreds passing through a day; further that the increased HGV traffic poses a serious danger to pedestrians; further that the risk of a crash is high, and could cause considerable damage to property and loss of life; further that the subsequent volume of HGVs using Stafford Street and Castle Street in Eccleshall means they are damaging the road surface; further that this situation has led to problems in Eccleshall because HGVs have difficulty passing each other on the Stafford Road outside the Claremont Garage, putting pedestrians at risk; further that the pavements in Woodseaves are very narrow, and HGVs are mounting them to pass one another; further that the A519 is not a primary route and there is no intention of it becoming a primary route and that Satellite Navigation companies should be advised of this matter; further that planning permission has been provided for haulage companies to set up in the Eccleshall area with a focus on the A519; further that Woodseaves residents in particular have been forced to abandon their front gardens because of noise and pollution, they are unable to sleep at night because of the noise, and their homes are being damaged by the weight of HGV traffic on the road; and further that approximately 3 HGVs pass through Woodseaves per minute The Petitioners therefore request that the House of Commons urges the Department of Transport to impose a speed restriction and weight limit on HGVs using the A519, to object to the proposed application for a new access road off the A519 that will serve the Raleigh Hall Industrial Estate and to advise Satellite Navigation companies that the A519 is not a primary route And the Petitioners remain, etc [P001482]
The petition states: The Petition of residents of Nelson, Declares that the Petitioners believe patients of Fairmore Medical Practice of 211-213 Leeds Road, Nelson are having difficulty finding suitable parking places near the practice, and that the Petitioners believe there is a vacant site on Leeds Road, Nelson near the practice that could be used as a car park facility The Petitioners therefore request that the House of Commons urges the Government to support the Fairmore Medical Practice Patient Participation Group in securing additional parking spaces and to encourage NHS England to reconsider their funding request to support extending car parking facilities at Leeds Road And the Petitioners remain, etc [P001485]
I wish to present a petition on behalf of my constituents calling on the Government to fund an urgent care centre at Chippenham community hospital. The proposals come from Chippenham’s doctors. The town’s three GP practices came together to draw up the plans, which would bring urgent services together in one place—accessible 24 hours a day, seven days a week—relieving pressure on accident and emergency departments at nearby hospitals in Bath and Swindon. The petition is signed by several hundred local residents on paper and online The petition states: The Petition of residents of the Chippenham constituency, Declares that an urgent care centre at Chippenham Hospital is needed to improve access to urgent health services and to relieve pressure on nearby Accident and Emergency departments The Petitioners therefore request that the House of Commons urges the Government to fund an Urgent care centre at Chippenham Hospital as proposed by Chippenham’s GPs And the Petitioners remain, etc [P001486]
I wish to present a petition on behalf of my constituents to prevent housing development on Midmar Paddock in Edinburgh The petitioners declare that Midmar Paddock in Edinburgh is used by hundreds of people every week for open-air exercise with children, families and dogs, as a green lung in the city; further that it is green-belt land, a special landscape area, designated open space and a local nature reserve, where planning developments have been resisted for decades; further that it is under imminent threat following its sale with development potential for housing development, and a planning application is expected shortly; and further that a local petition on this matter was signed by 330 individuals in the local area, supported by the wonderful Friends of the Hermitage of Braid, and the Morningside community council, especially Mr Goff Cantley The Petitioners therefore request that the House of Commons urges the Secretary of State for Scotland to encourage the Scottish Government and the City of Edinburgh council to intervene to stop housing development on Midmar Paddock Following is the full text of the petition: [The Petition of residents of the UK, Declares that Midmar Paddock in Edinburgh is used by hundreds of people every week for open air exercise with children and dogs; further that it is green belt land, a special landscape area, designated open space and a local nature conservation site; further that it is under imminent threat of housing development and a planning application is expected shortly; and further that a local Petition on this matter was signed by 330 individuals. The Petitioners therefore request that the House of Commons urges the Secretary of State for Scotland to encourage the Scottish Government to intervene to stop housing development on Midmar Paddock. And the Petitioners remain, etc.] [P001487]
I should like to present a petition on behalf of my constituents about the Government’s proposed changes to GP budgets in Wakefield. It is supported by many of our local GPs, local councillors such as Councillor Rory Bickerton, and Ryan Case, who is a local resident The petition states: The Petition of residents of the Wakefield constituency, Declares that the Petitioners are concerned about the proposed £3.8 million cuts from budgets for GPs; further that these cuts could result in small practices closing, 38 full time doctors or 95 full time nurses being lost and patients waiting longer to be seen by a GP; and further that a local petition on this matter has been signed by 850 individuals The Petitioners therefore request that the House of Commons urges the Government to reconsider the proposal to make cuts to budgets for GPs in the Wakefield area And the Petitioners remain, etc [P001489]
I wish to present a petition on development on green-belt land in Edinburgh The petition states: The Petition of residents of the UK, Declares that the Local Development Plan 2015–2020 has proposed a number of sites on the south side of Edinburgh for development; further that local residents want the sites at Broomhills, Old Station Road, Burdiehouse, The Drum, Ellen’s Glen and Moredun to be exempt from the new plan; further that local residents, community groups and the local community councils— especially the Gilmerton Inch community council and the Liberton and District community council— are concerned by the likely impact on local amenities if these plans are approved; further that the Petitioners call for the plan to be scrapped and a proper process to be put in place to determine the future development of the city which works in conjunction with local communities and not against them; and further that a local petition on this matter was signed by 130 individuals It was also signed by the Liberton and District community council and the Gilmerton Inch community council The Petitioners therefore request that the House of Commons urges the Secretary of State for Scotland to encourage the Scottish Government to remove the sites on the south side of Edinburgh (Broomhills, Old Station Road, Burdiehouse, The Drum, Ellen’s Glen and Moredun) from the Local Development Plan’s proposals for development and to put a process in place to determine future development of Edinburgh which works in conjunction with local communities And the Petitioners remain, etc [P001488]
On a point of order, Madam Deputy Speaker. I had intended to present a petition to the House tomorrow in relation to my constituents wanting three ships—HMS Cressy, HMS Hogue and HMS Aboukir—to be protected under the Protection of Military Remains Act 1986. However, I have been advised that as tomorrow is the last sitting day, there will be no Adjournment debate, and on that basis no Member can present a petition to the House. Can you advise me? If I bag the petition today will it still be regarded as having been formally presented to the House?
The hon. Gentleman asks a good question, and he has done well in drawing to the attention of the House, Members on the Treasury Bench and undoubtedly the relevant Minister the point that he quite rightly wishes to make on behalf of his constituents. I can assure him that if he produces the petition today, it may go in the bag, and it will be treated as a presented petition. The House has heard what he has had to say.
As has now been confirmed several times, this is the last occasion to raise such issues in this Session, and I wish to speak about the unfair treatment of some veterans owing to the disparity in the way that different armed forces compensation schemes are treated when social care costs are calculated. I pay tribute to Poppyscotland and the Royal British Legion, which highlighted that issue with their Insult to Injury campaign. In the past, I have been pleased to work closely with the Royal British Legion, both nationally and locally in Blackpool, and together we delivered a petition with 3,000 signatures calling for stronger punishment for those who vandalise war memorials. I was also pleased to support the Blackpool armed forces covenant and veterans charter in 2011. I wish to touch on that veterans charter and covenant, praying in aid the arguments I will present tonight As chair of the all-party group on veterans, which deals with a number of issues, including welfare, I was fortunate to initiate a meeting in Parliament with the Forces in Mind Trust. Its latest report is about support for veterans’ families, and we will hear tonight about veterans who are losing the means to support their families when compensation payments are removed. Fundraising year-on-year by the Royal British Legion and other ex-service organisations, including Poppyscotland, provides extra support for veterans. Locally and nationally, our veterans should not be left by the state in financial circumstances that are unfair. The state must do its bit, particularly when there are unequal Government regulations Tonight I will focus on the disparity between the way that the two different compensation schemes operate. Those injured before April 2005 received compensation for particular injuries through the war pension scheme, which provides regular payments based on the severity of injury. Those injured from April 2005 onwards receive support for any disablement through the armed forces compensation scheme—AFCS. That comes in two parts: a lump sum and, in a similar fashion to the war pension, a regular payment for the most severely disabled veterans and ex-servicemen. Those two schemes seek to compensate for the pain and challenge of particular injuries that some veterans receive when serving bravely in our armed forces, but when it comes to how they are processed through the social care system, they are treated very differently As of 2012, any veteran supported by the newer AFCS scheme has all that income disregarded while they are means-tested for social care. Although their other forms of income are rightly considered so that they make the same contribution as any civilian to their social care, they will still have left over the income they receive to compensate for the injuries they received in the military. Those on the older war pension scheme, which could cover awards from the second world war up to 2005, receive far less support. Only £10 of their war pension is automatically disregarded, and the rest can be clawed back by local authorities into paying for their standard social care. The full value of the war pension—which of course reflects the level of disablement suffered by that veteran—is on average £80 a week and can be as much as several hundred pounds a week for the most severely injured Does the Minister agree that it does not show enormous respect to veterans on the war pension scheme, who have fought in conflicts from the second world war to Korea, the Falklands and in some cases as recently as Afghanistan, if we suggest that the pain of those disabling injuries is worth only £10 a week? What compounds that regrettable diminishment of the veterans’ sacrifice is the apparent injustice and inconsistency in the way the two schemes are treated in social care and the way different arms of Government look at the problem Almost all local authorities use their discretion fully to exempt the income from both compensation schemes when council tax or housing benefit is calculated, and central Government have recognised that both types of compensation should be left untouched when the new universal credit is calculated for recipients who have served in the forces. Yet protecting that income for council tax and housing benefit will be in vain if the great majority of it is then lost to pay for social care. As I have said, Government guidelines only disregard £10 of the war pension, and in present circumstances local authorities have not been able to go much further, with only 12% of councils using discretionary funding fully to exempt those on the older scheme. That is completely inconsistent with the way that civilian personal injury compensation is treated in social care means-testing. When saved in a trust fund, that income is fully disregarded by local authorities as they calculate care costs. What is left appears to be a social care system that, however worthy its objectives, fails to meet two criteria of the armed forces covenant that Members from both sides of the House were proud to support.
It is appropriate that the last Adjournment debate of this Parliament concerns our veterans and our soldiers, and I congratulate the hon. Gentleman on securing it. Many Members have a particular interest in the armed forces. In the years that I have been a Member of Parliament, we have had the chance to speak on behalf of our veterans. I know many veterans who suffer from post-traumatic stress disorder and their number, after Iraq and Afghanistan, has increased significantly in the past few years. Does the hon. Gentleman agree that the onus is on the Ministry of Defence, the Department of Health and local government to work together to address this issue? The Minister represents the Department of Health. Other Departments, which are not represented here tonight, need to work alongside her.
I agree with the hon. Gentleman, who is assiduous in covering veterans’ issues in this House. I pay tribute to the military from Northern Ireland for the sacrifices they have suffered over the years. He is absolutely right. We are pleased that the Minister is here tonight, but the issue can only be solved out of Government silos The covenant enshrines the principles of no disadvantage and special treatment. These, in turn, dictate that a person should experience no disadvantage as a result of military service and that it is appropriate in some cases for special treatment to be applied to those who are serving or have served. We have already seen that as a result of failing to disregard the war pension, Ministers are not providing any special treatment for veterans. More fundamentally, however, they end up failing the rule of no disadvantage, too, as the injuries incurred purely as a result of action in the armed forces receive little compensation when income such as the war pension is diverted into providing standard civilian social care I am pleased, therefore, that my colleagues in the Labour Front Bench team have pledged, under a future Labour Government, to review the compensation schemes to see where they might be improved. In particular, the focus should be to take a laser-like focus to existing and new rules that affect veterans through the prism of the armed forces covenant. We want to ensure that the principles of no disadvantage and special treatment are met by all arms of government All Members have, at one time or another, drawn attention to the strong feelings of many veterans and others about insufficient engagement with the concerns raised in relation to social care and military compensation. I welcome the reports from the Government, the Royal British Legion and Poppyscotland that talks are ongoing about how the two schemes might be aligned, but we need to see results. After all, every year, as more elderly veterans pass away, the group of people who could benefit from a change in the rules diminishes by 5%. Half that group are aged 70 or over. We are running out of time to offer these people the chance to navigate social care in far greater comfort, with access to the full deserts of their military compensation. With a change in the rules, we can put this right, but it needs real Government commitment. I have to say, however, that when we look at the Government’s stated objections so far, they seem to give the impression of delaying progress rather than accelerating it Ministers have claimed that some of those on the old war pension scheme also receive top-ups to their pension, which are designed to help to pay for care costs. Only 6% of war pensioners actually receive such care top-ups. More to the point, it is surely not beyond the wit of the Government to devise guidelines that will include those care top-ups in the payment for social care, but not include that part of their income that relates to the pain suffered through injuries received in the field of conflict. This is a position that the Royal British Legion accepts would be perfectly reasonable Ministers have also suggested that military compensation could be placed in a trust fund to protect it from social care means-testing. However, given how war pension works, only a small amount is provided as a lump sum. For the most severely injured veterans, most compensation is provided through regular payments that cannot be placed in a trust. It has also been suggested that the war pensions scheme was established before the modern understanding of personal injury compensation, yet it is clearly understood that way, as is evident, as much as anywhere, from the words of the veterans Minister, who said: “The War Pensions Scheme provides no fault compensation to Service personnel disabled as a result of their service in HM Forces.” In the discussion of all these disregards, different schemes and allowances, the human effects of these rules and their perceived injustices can too often be forgotten. In my area, the Royal British Legion estimates that 600 veterans in the pre-2005 group could see their war pension eaten up by care costs, and Members across the country will have service constituents who have told emotive tales of the effects of losing their compensation Keith Clarke, who is 43 years old, was left paraplegic while attempting to put out a fire on his submarine. He receives a large war pension for the most severe injuries, but £100 is lost every week to meet the cost of his care worker, who visits daily to help him dress and look after his two children, one of whom is also disabled. His only other benefit comes from statutory benefits. He told The Daily Telegraph: “I feel angry and frustrated. It’s…an injustice to be treated as a second-class citizen.” Fred Cannon, who fought on the Gold beach at Normandy on D-day when he was 19 years old, was the only survivor of the company to come home, but a severe bullet wound left him with one leg shorter than the other. Now in his 90s, like too many others, he is left with only £10 a week compensation. Then there is the 50-year-old Lancashire veteran who was diagnosed with osteoporosis from his time in the Army. He said: “Unless the system changes, I’m concerned that I will lose a lot of my pension, which isn’t fair. People who receive AFCS don’t pay for their social care—and rightly so—but why should we pay just because we were injured before April 2005? It doesn’t make sense.” Of the two principles of the armed forces covenant, it is ultimately not special treatment that veterans want; all they want is not to be put at a disadvantage: to have the injuries they suffered in the armed forces compensated for in their own right and then to make a contribution from their other income towards social care, just as any civilian would rightly do. They want fair treatment for all and a system that does not discriminate on the basis of an arbitrary date; they want to be treated the same in the different means tests that central and local government operate; and they want to be treated in the same way as civilians who receive compensation for personal injury Whatever the historical context of the creation of the war pension scheme or the complexities of its operation today, it is surely possible to design a system that will meet the requirements of the proper 21st century fairness that the veterans are asking for. The time has come to go beyond discussions and look for concrete solutions to the disparity between the two different military compensation schemes, rather than focusing on the obstacles to a more just system. I am pleased to note that Labour would review the fairness of military compensation in the light of the armed forces covenant, and I call on Ministers to show a similar political will and commitment Many Members will have the date of 7 May on their minds tonight, but many other people will have a possibly more important date—the next day—on their minds. That will be the 70th anniversary of VE-day. I feel honoured that both my late parents served in that conflict, and I am mindful of the debt we owe to those of that generation who remain with us. At this time, we must surely refocus our energies to ensure that we provide all the support that the brave men and women who have served in conflicts spanning the last 70 years deserve, particularly as they make their way through challenging periods of their lives in the social care system.
I am grateful to the hon. Member for Blackpool South (Mr Marsden) for bringing this important issue before the House. It provides me with an opportunity to clarify our current position. I hope the hon. Gentleman will allow me first to place the issue in the broader context, particularly the context of reforms in social care To make some sense of that broader context, at the turn of this century there were 25 times as many people aged 85 and over than there were at the turn of the last century. Although this is something to be celebrated, it also means there are more people needing care and support, and three quarters of us can expect to need long-term care Care and support is an issue that has, I think, been ignored for far too long, and I am proud to say that this Government have taken steps to put that right. The Care Act 2014 is a bold and historic piece of legislation that for the first time places adult care and support law in a single clear statute. The Act puts people at the heart of the system by enshrining the principle of individual well-being at its core. It will ensure that people themselves will be able to shape their care and support, focusing on what they want to achieve and the outcomes that matter to them, and it will support them to maintain their well-being and independence for longer The Care Act focuses on acting early to prevent people from reaching crisis points, and will ensure that everyone can access information and advice to help them understand the new system and what it means for them. This means services for the broader community—not just those with assessed needs—further supporting our aim to help people to stay independent for as long as possible. When we do need care, the Act provides for a single threshold for eligibility to care and support in England, ensuring transparency and consistency, irrespective of where we live. I am pleased that this historic legislation will come into force exactly one week from today We do not intend to stop there. How we pay for health care and support is just as important as the care we receive. Most people do not realise that care and support has never been free, unlike health, and we have always been asked to contribute what we can afford. Those who have the greatest needs and the longest care journeys risk losing nearly everything simply to meet that cost For all the other areas of life where we face such risks, we are protected by the welfare state or we can protect ourselves through insurance. When it comes to care, however, successive Governments have taken a different view. We are often left alone at the point when we are most vulnerable. That is clearly not good enough, and I am proud that we will be introducing the biggest reforms of how we pay for care in over 65 years. We do so through the cap on care costs, which will put an end to the risk of catastrophic costs, and we will provide greater financial help for those who need it most The detailed proposals of how the new system will work are currently out for consultation. With just under a week still to go, I am pleased that we have already had over 700 responses and have engaged with over 1,000 people through a series of events helping to ensure that we take account of a wide range of views. The new cap system will play a critical role in helping people to plan and prepare for the risk of needing care and support, and create the right conditions for the financial sector to create new products that could cover these costs When it comes to those who have served their country and have made a great sacrifice in the line of duty, this Government have given a very clear commitment to support members of the armed forces community, both serving personnel and veterans. The hon. Member for Blackpool South has illustrated exactly why that is the right thing to do. We have enshrined that commitment in legislation through the armed forces covenant As the hon. Gentleman outlined, for those who have been injured in the line of duty there are currently two different schemes that provide compensation, based on when the injury occurred. For those who were injured before the 6 April 2005, there is the war pension scheme; for those injured afterwards, there is the armed forces compensation scheme. While both schemes have the same goals—to offer financial support to those injured in the line of duty—they are ultimately both a product of their time and the social context in which they were developed. Under both schemes, personal injury compensation lump sums are disregarded when deciding how much someone can pay for care, provided the payments are placed in a trust—I noted the hon. Gentleman’s concerns about regular payments—but other sorts of payments may be taken into account The war pension scheme was created after the first world war in response to the large numbers whose lives had been irrevocably changed as a result of their service to their country. In 1918, however, there was no welfare state, no NHS and no benefits system. Most people did not have access to private pensions, meaning that for those needing care but without family or friends to support them, the outlook was often bleak. The scheme therefore provided for that. It provides a basic war disablement pension and a variety of supplementary allowances that would be equivalent to the modern benefits system, and it reflects the fact that people needed to pay for both health and care costs By contrast, the armed forces compensation scheme introduced in 2005 reflects the fact that we have an advanced welfare state. It therefore looks to the NHS and the benefits system to provide support, just as it would to anyone, ensuring the principle of “no disadvantage” enshrined in the armed forces covenant The scheme introduced a modern, fair and simple system that provides a strong basis for the future, but this is a difficult and complex issue. I note the hon. Gentleman’s frustration—as he said, there has been much discussion—but, as I have said, the issue is complex. Depending on the extent of their injuries, veterans can receive a number of different allowances under the war pension scheme, such as constant attendance allowance, an unemployability supplement, comforts allowance, age allowance, treatment allowance, mobility supplement, and medical expenses The Royal British Legion broadly accepts that the treatment of war pension scheme payments is complex. I am grateful to it for highlighting its concerns, and for continuing to working with departmental officials to help us to understand the issue better. It is vital for us to understand it fully before considering what is to be done next. We must understand how the two schemes work, and the implications of considering any changes, to ensure that there are no unintended consequences, and we must also understand any cost implications of change. I note what the hon. Gentleman said about the commitment of his party colleagues to reviewing the scheme, but that commitment to a review suggests that they too are cautious, and feel the same need to understand the possible implications.
I do not wish to intrude on the Minister’s time, and I agree that the process is complex. I recall Churchill’s observation that it was not the end or even the beginning of the end, but it might be the end of the beginning. Will the Minister tell us how far down the line we might be expected to be at this point, and what stage the Government think has been reached?
I will come to that, and will try to give the hon. Gentleman a bit of reassurance about the advanced and ongoing work that is taking place Social care is a priority for the Government, and, in the context of difficult spending decisions, we have taken steps to protect care and support services. For example, we have allocated extra funds for those services during the current Parliament. We have created a better care fund, which, next month, will introduce a £5.3 billion pooled budget for health and care that will provide much needed funding for care and support, and will break new ground in driving closer integration of services Although spending on care and support is ultimately a decision for local government, we must be mindful of the overall fiscal position. I think that Members on both sides of the House agree on that. We must ensure that if we change the charging rules nationally, the cost will be met. To that end, my officials are continuing to work with their counterparts at the Ministry of Defence—I hope that that gives the hon. Gentleman some sense of momentum, and deals with his concern about “silo” working—and with the Royal British Legion, with a view to considering the issue during the spending review that will take place after the election I hope that the hon. Gentleman—and, indeed, all hon. Members—will welcome the historic reforms that will come into force in just one week’s time. They are very significant in the context of the broader issue of care. This Government have been the first to prioritise care and support. I hope that Members in all parts of the House will feel able to welcome the clear plans that I have set out for the future. As for the specific issue that the hon. Gentleman has raised, I hope he recognises that this is ongoing work which is taken very seriously. His securing of what has turned out to be the last Adjournment debate of this Parliament has underlined the importance of the issue that he has raised. I think that, throughout the purdah period and beyond, the debate will give added momentum to the work that is being done Given that this has been the last Adjournment debate of the current Parliament, Madam Deputy Speaker—and you and I have shared a number Adjournment debates—let me take this opportunity to thank you and, through you, Mr Speaker and the other Deputy Speakers. I also thank all the staff of the House, and, in particular, those who have sat through some of our late-night health debates, of which there have been many. However, I especially thank the Chair, and all those who have supported the Chair during these important Adjournment debates, which give us a chance—as tonight’s debate has—to explore important issues in some detail, outside the heated atmosphere that the Chamber attracts on other occasions. I also thank Members in all parts of the House, some of whom are very regular attenders at these debates, for their attendance tonight, and for the interest that they have taken in these important matters.
I thank the hon. Lady for the gracious way she has thanked Officers of the House in respect of Adjournment debates. These debates are extremely important and she has taken part in many of them, as have I and the other Deputy Speakers and Mr Speaker, and we all appreciate how important they are. I also thank the hon. Member for Blackpool South (Mr Marsden) for introducing the final Adjournment debate of this Parliament Question put and agreed to.