Spring Statement — House of Lords, 2019-03-20
Topic: Macroeconomics
John Wakeham (Conservative, Centre-right): My Lords, the right reverend Prelate should not underestimate his contribution over the years to our economic debates. I have heard him many times, and he always brings a great whift of common sense to our debates. We are very grateful for his contributions When I was thinking about what I was going to say today, I thought my noble friend Lord Young would be introducing the debate. I was going to tease him slightly—and as he is here, I will do it anyway. He and I entered the House of Commons 45 years ago. In the early days I was the junior Whip sitting on the bench saying nothing; he was the parliamentary Secretary of one department or another. There was one Member of Parliament sitting across the way who raised a subject on the adjournment of the House. Other noble Lords who have been in the House of Commons will know that this happens last thing at night. He did it with utter charm and good will, full of information and so on. It seemed to me that night after night he got the short straw to do it, and when he addresses the House now, as he does from time to time with great skill, he might remember those days 45 years ago when he started I confess I have not known my noble friend Lord Bates for 45 years, but I have known him a good many years. I greatly admire the way he has tackled his ministerial jobs and his capacity for making complex issues understandable—and he has lived up to those high standards tonight in his opening remarks The Spring Statement was much better than I had anticipated, and augurs well for the position of the country when we can get the uncertainty of Brexit behind us. I will touch on one or two matters that were not mentioned in the Chancellor’s Statement. The Government have taken quite a number of steps to deal with tax avoidance in the UK. They have made some sensible adjustments to their initial proposals about making taxation digital, which is a move in the right direction if they can get it right. But I am not absolutely convinced that they have done all that is necessary to make those changes. It is a massive change in the way in which we run our taxation, particularly for small businesses, and I am not convinced that they have done all that is necessary to get those changes right The Chancellor has also made some welcome initiatives in tackling some of the big international technological companies that are trading in the UK but are not paying their fair share of taxes. To be effective, tackling the tax avoidance of big international companies will require international solutions—but it is also a UK problem. UK companies paying their proper corporation tax have to compete with companies that in many cases are not paying their fair share of tax. So, while it is an international problem, it is often a UK problem as well. In my view, that unfair competition has to stop Christine Lagarde, the head of the IMF, stated recently that the amount of international tax avoidance was in the order of $600 billion a year. That is massive—it is something like a quarter of all the corporate taxes that are collected in the world. We are talking about big potatoes; it is big money. The IMF recently issued a discussion document making some suggestions as to how this problem might be tackled. There is no doubt that it will be difficult. At the heart of the problem is the transfer of trading profits from high-tax companies to low-tax companies by rather doubtful finance charges and massive charges for intellectual property rights, which gets the tax down in that country and puts the profits into low-tax areas As far as I understand it from reading the document, the IMF seems to be saying that in essence it believes that profits should be struck before finance charges and intellectual property rights. That would be part of the solution, but obviously it brings other problems as well. Will my noble friend make sure that the Chancellor understands the problem? Of course he understands the problem, but he ought to understand this as well. The British taxation system and the expertise of our people are highly regarded in many parts of the world. We ought to be making a big contribution to the world’s solutions to these problems. We cannot do it all ourselves, but we can at least make a contribution. I think that is very important My noble friend Lord Forsyth, who is chairman of your Lordships’ Select Committee on Economic Affairs—a position which I held at one time, God knows how many years ago now—has called into question the way that HMRC seeks to deal with the loan charge taxes that the Government seek to impose on those who, often with accounting and legal advice, entered into arrangements to receive loans that were unlikely to be called in and at the same time saved a lot of tax and national insurance I have a great deal of sympathy for people in that position, but the schemes came out, if I remember rightly, around the year 2000 when I was still active in companies. A number of companies that I advised came up with these fancy ideas and I persuaded every one of them that it was not the route that they ought wisely to take. So, while the Select Committee was right to say that the people who perpetuate these schemes and bring them forward have a great deal of responsibility, I cannot entirely rule out the people who have entered into them. If you are offered a scheme that means that by some fiddle-de-do you do not pay any tax at all, you ought to approach it with a great deal of caution—and I do not think that that has entirely been the case. But I think that HMRC has a case against the people who perpetuate these schemes I will conclude with a nice reference to stamp duty. I do not think I have ever made a speech in this House on economic matters without touching on stamp duty. I was a Treasury Minister 30 years ago and I had awful battles in the Treasury over stamp duty because it wanted me to sign a foreword to a discussion document about stamp duty and I had a frightful battle to tone down the words. The Treasury loves stamp duty because it is an easy tax to collect. It raises a lot of money and it is efficient and easy to collect. However, as my noble friend behind me said, it is an economically damaging tax. It stops downsizing in housing and is essentially a tax on change. My noble friend was right to say that the Chancellor had made some changes. However, I will go on mentioning this every time I speak, until he makes the sort of changes that I want. Good luck to him.