Finance Bill — House of Commons, 2015-10-26
Topic: Macroeconomics
William Arthur Roger Mullin (Scottish National Party, Centre-left): I rise to support new clause 3, tabled in my name and those of my hon. Friends. I also welcome the hon. Member for Salford and Eccles (Rebecca Long Bailey) to the Front Bench. I was pleased to hear the Minister talk about his desire to see fairness in the tax system. We all welcome that If you will allow me, Madam Deputy Speaker, I want to start with a quote I used in Committee: "I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right." Those were the words, of course, of the Chancellor of the Exchequer, speaking in April 2012. He was right then, but we need to do more about it now. I acknowledge that, as the Minister said, some progress is being made in the clauses proposed by the Government in the Bill, and I welcome that, but for us they are not nearly sufficient. Not enough is being done, so we have brought back this new clause on Report As I also noted in Committee, support for our argument comes from many quarters. Of particular interest to me is the fact that in May 2014 the OECD, not known for its radical tax positions, released a raft of recommendations to tackle rising income inequality in the OECD area. They included "taxing as ordinary income all remuneration, including fringe benefits, carried interest arrangements, and stock options." Private equity fund managers shrink their tax bills by arranging to pay what will now be 28% capital gains tax rather than 45% income tax on their carried interest. Carried interest is in effect their remuneration for managing other people’s money and should therefore be taxed as income tax. Their ability to pay capital gains tax on what is properly income also allows fund managers to avoid paying any national insurance contributions on a major portion of their income. I note, however, that those who would be affected if we closed the so-called Mayfair loophole are, as a group, the highest donors to the Conservative party, which might be purely accidental I also note that not closing the loophole costs the Treasury between £250 million to £600 million annually. But this Government, through their moves on tax credits, seem more intent on hammering someone earning, say, £15,000 per annum than on asking someone earning £15,000 per week simply to pay their fair share. Stephen Feinberg, head of the private equity firm Cerberus Capital Management, said back in 2011: "In general, I think that all of us are way overpaid in this business. It is almost embarrassing." [Interruption.] Yes, I was rather surprised that it was "almost embarrassing." I would have thought it was thoroughly embarrassing The average European PE firm’s managing director can expect to receive around £8 million per annum in total personal compensation. The largest funds pay out some £15 million or more. Some very junior people can earn £1 million. These figures will be conservative for many in the London area, which has some of the highest paid equity fund managers. In Committee some Members implied that no other developed country was moving to close this loophole. This is not so.