Queen’s Speech — House of Lords, 2016-05-25
Topic: Macroeconomics
Howard Leigh (Conservative, Centre-right): My Lords, I add my welcome to the right reverend Prelate the Bishop of Newcastle. As someone who at best can do a half-marathon, I can only admire her. I share with her my recollections of the late Baroness Birk, whose views on faith I shared I shall focus my remarks today on economic affairs. Surrounded as we are by a maelstrom of political polls, referenda and intrigue, it is perhaps worth reappraising where we are in the primary mission for which the Government were elected, which is of course economic security. Whatever relationship with the EU we may end up with, Britain must continue to show global leadership in growth, job creation, fiscal responsibility and free trade. After all, it is exactly because of that leadership that the OECD has predicted that the UK economy will be the fastest-growing developed economy this year, with a record 2 million jobs created since 2010 and unemployment down 142,000 this year. It is because of this leadership that the deficit is down to two-thirds from its peak, although, as my noble friend Lord Flight has said, there is some way to go Whether we are outside the EU plotting our own path or inside urging our fellow members to follow our lead, we must stand up for free trade. I urge the Minister to continue promoting the TTIP treaty, which will of course help in that. We need to continue to explain more clearly that the NHS will remain excluded from it. If we are to rebuild any kind of popular consensus for this type of free and fair capitalism, businesses and Governments must come together to show that they are serious about tackling the pervasive unfairness in one aspect of our economic life. I am referring here to tax avoidance. Globalisation has brought many benefits, and I am in no doubt that it will continue to spread prosperity to even the hardest-to-reach communities. However, as the economy is globalised, our tax systems are still local. Multinational businesses are taking advantage, playing off one nation state against another. We must rebuild trust in our system, and fast If we do not continue to strive to make capitalism fit for purpose, the siren voices against capitalism will become even more alluring. We can easily guess what the shadow Chancellor meant when he said that he wanted to break the narrative when it comes to saving money to balance the books. More populist easy answers were peddled at a recent economic policy conference, where Labour promised to break with economic orthodoxy. This should concentrate the minds of those of us who still take a responsible approach to economic management. We need to show that the system that we have can deliver for the whole of the UK I am therefore delighted to see included in Her Majesty’s gracious Address the criminal finances Bill to tackle tax evasion, and indeed many measures in the recent Finance Bill help to take us in that direction. The UK has made great progress on tax evasion and tax avoidance. Through his leadership of the G20, the Prime Minister put tax avoidance at the top of the international political agenda. Progress has been made on many of the action points included in so-called BEPS—base erosion and profit shifting—which was in fact the subject of my maiden speech. On transfer pricing in particular, where corporates move money around different locations to minimise the tax bill, it was somewhat galling to read today that the French seem to be slightly more fleet of foot than we are. On the matter of reducing the tax deductibility of debt interest, where it is used to artificially avoid tax, measures in the Finance Bill that cap this at 30% are to be welcomed Similarly, the March Budget also brought a long-overdue clampdown on carried interest, a private equity tax advantage that had little economic benefit except to practitioners themselves. That robust approach has brought the tax gap down to a record low. This is in contrast to the party opposite. Indeed, I agree with the comments of the former right honourable Member for Blackburn, who said on Labour’s record, "There was action that we could and should have taken straight away, but we didn’t". To be fair, I agree with the comments from the noble Baroness, Lady Jones of Whitchurch, on covenant-lite. She is quite right to draw attention to the growth of covenant-lite; it is a real threat I hope the Minister will agree with me in welcoming the Government’s pledge to look at VAT evasion, particularly for international e-commerce businesses. I draw your Lordships’ attention to my entry in the register of business interests, which includes a directorship of a company with 150 shops in the UK. I say that with some temerity, as sitting next to me is one of the country’s greatest retailers. None the less, we have 150 shops. I urge HMRC to move very quickly on this evasion, as UK taxpaying businesses are being disadvantaged. The current e-commerce directive makes clear that any business selling goods online in the UK has to make public its VAT status. However, international businesses from certain jurisdictions are selling goods from UK warehouses on well-known e-commerce platforms without accounting for any VAT at all. Platforms such as Google and eBay have stated many times that it is not their responsibility to act. Measures in the Budget suggest that this will not remain the case and that they could be made liable Currently, the e-commerce directive sits with DCMS, but I suggest that the Government investigate this matter to allow HMRC to issue what I believe are called "stop now orders", which are directed at individual businesses and would give HMRC the powers it needs to tackle VAT evasion. These important measures will help the Government collect the revenue they are owed from big businesses What about the smaller entrepreneurs? I welcome new investment in HMRC to help those filing digitally, and cutting capital gains tax for nearly all businesses will encourage greater business investment, as will continued reforms to entrepreneurs’ relief In conclusion, we are making progress in showing that our system can be reformed. We need to put beyond doubt that free markets are the best way to spread prosperity and opportunities for all. Clamping down on tax evasion by the abusers on the one hand and making our tax system simple to use for small businesses, entrepreneurs and ordinary taxpayers on the other hand means that this Government, in tax as in all things, are and should be for the many, not the few.