Finance Bill — House of Commons, 2017-09-12
Topic: Macroeconomics
Robert Edward Jenrick (Conservative, Centre-right): It is a pleasure to speak in the finance debate today on an important set of measures that will take the economy and the public finances forward in the right direction. Like other Members who have spoken today, I wish that the Finance Bill were shorter, given the relatively small number of measures, and that the effort that had begun under the last Chancellor, George Osborne, with the Office of Tax Simplification could continue and bear fruit. Budgets are becoming too complicated and too long, and the tax code ever longer, leaving small and medium-sized businesses struggling to cope with compliance. Even our largest companies spend far too much time in their board meetings discussing compliance and far too little time on innovation and how to move forward I am inspired by Paul Ryan in the United States, who suggested creating a tax return on a postcard for 95% of American citizens, and I would like us to move in that direction. In truth, no Chancellor since Nigel Lawson has taken tax simplification seriously. He was the last Chancellor to say that one in, one out should be our policy for creating new taxes. Perhaps that is something that we could take forward as we gain complete control over our own laws as we leave the European Union There are three points that I wish to make. First, following on from my hon. Friend the Member for Harborough (Neil O'Brien), I would like to say a few words about our record on tax evasion and avoidance. There is a lot of misinformation about, and much needs to be said about how successful the Government’s record really has been in this area. There has been a breakdown of trust. This is a question of trust, and the antidote to mistrust is not moralising or phoney outrage, but credible action, and that is what the Government have set out to do since 2010 When we came to power in 2010, the tax gap was rising in almost every area, particularly in corporate taxes. Today, in almost every area, it has fallen dramatically. Corporate taxes for large companies have fallen by 50%, and for small companies by 40%. In house ownership, stamp duty has fallen by 40%. These are significant achievements. They have been hard won by measures such as the ones in this Budget—I am talking about complex measures produced by Treasury officials who have gone to a great deal of trouble to work out how these falls can be achieved in a way that would simply never have happened under the last Labour Government. We have elevated the issue internationally—from David Cameron raising it and making it the centrepiece of the G8 summit to other opportunities—so that the UK is perceived internationally as a world leader in the area When the all-party parliamentary corporate governance group brought Leo Strine, the chief secretary of the Supreme Court of Delaware—the jurisdiction in which 90% of US companies are registered—to speak in the House of Commons, he said that there is no way that the state of Delaware would implement any of the major measures that we have. He particularly mentioned the most significant achievement: the creation of the world’s first public beneficial register of ownership. That was a significant step forward. There were legitimate arguments against it, including the invasion of privacy, but the Government took it forward none the less. It is a real achievement, which, like the state of Delaware, no other country—certainly not our major international competitors—is looking to implement. We have the general anti-avoidance legislation. We were also the leaders in the base erosion and profit shifting project under the previous Chancellor, as we are under the current one The results are stark, with major decreases in the tax gap of up to 50%. Had the tax gap continued on the trajectory left by the last Labour Government, it would be £47 billion and the public purse would be £11 billion the poorer. Instead, it is at its lowest ever level and is one of the lowest in the world. The way in which we report the tax gap is certainly one of the most transparent and best documented of any major country. That is a tribute to HMRC, the Treasury and successive Chancellors. We should be proud of that record and not spread misinformation that things are getting worse. As we now see internationally, the UK truly is leading the world as a result of these changes My second brief point is a more direct one about the Labour party and its approach not just to the Finance Bill, but more generally. The Labour party is asking the public to worship a false god. Labour says that taxing our businesses and entrepreneurs much more will result in a higher tax yield. That is not true. The richest 1% of this country pay 27% of all the income tax collected. The richest 5% pay 45%. Until the eve of Gordon Brown’s defeat in 2010, even he resisted raising the top rate of tax. He knew about getting our richest and most successful businesses and entrepreneurs to shoulder the greatest share of the burden, which they did—their share of tax rose under Labour as it has under the Conservatives—but it was precisely his hunger for more tax to spend and more money for the Treasury that led him to refuse to raise the top rate of income tax and to increase corporation taxes further We only have to look back within my lifetime to see the wealth creation unleashed when Nigel Lawson reduced the top rate to 40%. The Government then profited by taking a smaller slice of a much greater pie. The system that the Conservatives left to Labour in 1997 was more progressive and redistributive than the system that we inherited back in 1979 from Callaghan and Healey. In 1978-79, the top 1% of the population paid 11% of taxes, and the top 5% paid 25%. When we left office in 1997, the top 1% paid 21% of income tax—almost twice as much—and the top 5% paid 40%. The lowest 50% of the population saw the amount of tax they paid in that era fall from 20% to 11%. Lower tax rates mean higher tax yields. Higher taxes on the better off or on business for purely political reasons will not lead to a fairer tax system, even by the left’s own definition This is the paradox: to get people and businesses to pay a higher share of tax, we usually have to lower their tax rate, and so it has been with corporation tax in our experience in the last seven years. UK corporation tax receipts have surged to a record high during the last financial year, as the main rate has fallen from 30% in 2008 to 19% today. By reducing the rate and by having a Government with a credible economic policy, we have shown that the UK is open for business, and we have attracted international businesses from around the world that wish to open their headquarters and move a greater share of their operations here. Now, with heightened uncertainty over Brexit and a possible net outflow of businesses and investment, we need this policy more than ever Higher taxes on companies and individuals and their homes, as proposed under a Labour Government, will mean lower tax receipts and less redistribution.