Schedule 25 — Mutual assistance for recovery of taxes etc

Bill Presented — Police (detention and bail) bill – in the House of Commons at 9:15 pm on 5th July 2011.

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Votes in this debate

  • Division number 317
    A majority of MPs voted in favour of the measures in the 2011 Budget including reducing the threshold for paying higher rate income tax, increasing the income tax free personal allowance, reducing corporation tax and reducing the main rate of corporation tax from 27 to 26%.

Amendments made: 2, page 390, line 29, leave out ‘other than excluded matters’.

Amendment 3, page 390, line 31, leave out ‘other than excluded matters’.

Amendment 4, page 390, line 32, leave out sub-paragraphs (3) and (4).

Amendment 5, page 391, line 18, leave out sub-paragraph (4).

Amendment 6, page 393, line 15, at end insert—

(ca) if the foreign claim relates to an agricultural levy and the steps are ones to be taken in or in relation to Scotland, the Commissioners concurrently with the Scottish Ministers;’.

Amendment 7, page 393, line 42, leave out sub-paragraph (2).

Amendment 8, page 395, line 26, leave out sub-paragraph (3).—(Mr Gauke .)

Third Reading

Photo of David Gauke David Gauke The Exchequer Secretary 9:16 pm, 5th July 2011

I beg to move, That the Bill be now read the Third time.

During the course of the debates on this Finance Bill we have spent some time combing through the details of our plans to put the economy back on course. It is a Bill that will help ensure the stability of our financial sector, protect the most vulnerable in society from the worst effects of the downturn, make Britain a better place to do business and stimulate private sector growth. We are clearly the Government who are setting the agenda on the need for a tax system that encourages growth, by cutting corporation tax, improving research and development tax credits, extending enterprise investment schemes and increasing the entrepreneurs’
relief.

To be fair, after three months of debate we have not seen much policy from the Opposition. Of course, Ed Balls proposed a temporary cut in VAT in the middle of our proceedings, although I cannot but draw the House’s attention to the fact that he then failed to table an amendment to that effect until it was too late. It fell to Jonathan Edwards, who I am delighted to see here this evening, to table such an amendment. However, at that point the official Opposition abstained and failed to support the very policy for which they had been campaigning the week before. I would like to think that they were persuaded by the arguments made from the Dispatch Box that it was the wrong policy. Perhaps there is some cachet in being tax personality of the year after all, although on that evening not all Government Back Benchers were so easily persuaded by arguments from the Treasury Bench.

Hon. Members will be aware that this is the first full Bill in which we have demonstrated our commitment to the principles of tax policy making that were set out in last year’s Budget. To paraphrase Bananarama, it ain’t just what you do, it’s the way that you do it. I am sure hon. Members are aware that the Treasury Committee published its report on our new approach to tax policy making on 15 March, and that they will have noted the principles of good taxation set out by my right hon. Friend the Chancellor in his Budget speech. Like the Committee, he gave his views on what the key elements of our tax system should be. It should support growth and encourage competition; be certain and predictable; be simple to understand and easy to comply with; and be fair, reward work, support aspiration and ask the most from those who can most afford it. Those principles are central to the policy making process that is reflected in the measures that we see in the Bill.

The Bill supports growth in our economy, and will help to provide businesses with the most competitive tax system in the G20. We set out our plans for achieving that in “The Corporate Tax Road Map”, which was published last November. We are providing business with a clear understanding of our overall direction of travel; setting out the timetable for major areas of reform; and enabling businesses to have the confidence they need to invest, create new jobs and drive the recovery. John Cridland, director-general of CBI said, quite simply:

“This Budget will help businesses grow and create jobs. The Chancellor has made clear the UK is open for business.”

The Bill delivers some of the major changes: a cut in corporation tax to 26% this year and 25% next year, towards a rate of 23% in 2014, which will be the lowest corporation tax rate in the G7; cuts in the small-profits rates of tax; interim reforms of the controlled foreign corporation rules, before a full reform next year; and simplification of the rules relating to corporate capital gains. Those will help to deliver on making Britain competitive internationally, although that is not the only driver of growth: we are supporting British businesses through changes to the enterprise investment R and D tax credit schemes, making them more generous; we have doubled the rate of entrepreneurs relief; and we are increasing the disposal time for short-life assets to eight years.

We set out most of the measures in the Bill last year, just as we set out most of the measures for next year in Budget 2011. We will consult on draft legislation in the autumn to allow time to hear from interested parties, and as I have said, we have set out future changes in a number of areas, including for corporate taxes. Certainty is what British businesses need most, and that is what this Government are giving them.

On simplification, we recognised the spaghetti bowl of complexity in the tax system, so last summer we set up the Office of Tax Simplification to advise us on how to untangle matters. It has made substantial progress and has already examined the reliefs within the tax system. Following its recommendations, we have identified more than 40 reliefs for abolition, of which seven are repealed by the Bill. We recently launched a consultation on the remainder to ensure that taxpayers have sufficient notice of the changes, with a view to legislating next year. Furthermore, the OTS has made recommendations on the operational integration of income tax and national insurance contributions, and we announced in the Budget that we will take forward work on that. A simpler tax system is an easier tax system, and it reduces costs for business and the Government, although it may leave me with less to read on my quiet evenings in.

The final principle outlined by the Chancellor and echoed by the Treasury Committee is that of fairness. We have increased the personal allowance by £1,000, and will increase it to £10,000. We are making real steps in every year in this Parliament. We have cut fuel duty by only 1p, as opposed to the 6p increase that the previous Government would have imposed. We are freezing vehicle excise duty for hauliers, and there will be an inflation-only increase in vehicle excise duty for all other motorists.

We are supporting pensioners through the triple guarantee on state pensions and by removing the requirement to annuitise, and we are helping charities through changes to the substantial donors rules. We are taking action on tax avoidance to address issues that have spiralled out of control. In particular, we have introduced legislation to tackle disguised remuneration—the practice whereby well paid individuals disguise their remuneration as loans that are never repaid, which results in a loss to the Exchequer. That measure will raise more than £700 million a year, and I am genuinely surprised and disappointed that it did not receive Opposition support in Committee. We have also introduced the bank levy to encourage banks to behave in a less risky manner, while ensuring that they pay their fair share. The tax system must be fair, and this Government are ensuring that that is so.

When I thought that I would be making this speech on 4 July, I found it easy to weave in references to American independence, in which taxation played such a large part. The date of 5 July is a little less well known for historical events, although of course it was the date in 1948 on which the NHS was launched. My research on this day uncovered a further event of note, although I shall refrain from calling it historical—were Mr Hanson here, I would wish him a very happy birthday. I thank him for his constructive engagement during the passage of the Bill in Committee and on Report, as I do the hon. Members for Bristol East (Kerry McCarthy) and for Nottingham East (Chris Leslie). I hope that the right hon. Gentleman has found the time to celebrate. I would like to thank him for his good humour during the Bill. I would also like to take this opportunity to pass on my congratulations to an official who has been supporting me throughout the Bill and who is celebrating her 30th birthday today and showing her dedication to the cause. It may be her 30th birthday but she is still with us in the Chamber today.

We have a plan for deficit reduction that has been internationally endorsed, and we are sticking to it. We have a plan for growth—growth that will be driven by investment and exports, growth that is sustainable and growth that supports entrepreneurs throughout the country. The Bill puts in place the right conditions to allow British business to flourish, and I commend it to the House.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 9:25 pm, 5th July 2011

May I join the Minister in congratulating the Bill team on their hard work and unstinting efforts, especially in Committee, where unfortunately I was unable to join them? However, it has been a delight to revisit these issues on Report over the past couple of days. I would like to pay tribute to my right hon. Friend Mr Hanson, whose birthday it is today—I do not know where he is at the moment, but I am sure that he is watching proceedings avidly.

I should also say happy birthday to the NHS and to the official who has been helping the Minister. I am told that 30 is the new 20. I thank my hon. Friend Kerry McCarthy, and also my hon. Friend Lyn Brown. The Whips are often unsung in these matters, but we would not be here without their support and assistance—and tugging of jackets at various moments! I am not familiar with Bananarama’s greatest hits but the Minister, given his new personality award, might like to tell me a little more about them. I gather that “True Confessions” in 1986 was one of their greatest hits, but “Please Yourself” came in 1993—I think that somewhere between the two defines his approach to the Finance Bill.

Coming in at just under 400 pages, the third Finance Bill of the year, with a huge number of amendments, is a complex piece of legislation, but for all its detail and complexity, I am afraid that it represents a missed opportunity to tax the banks fairly and to support job creation across the UK. Those omissions make this a sub-standard and ill-judged piece of legislation. Of course, like every country we need to get the deficit down, but the Government are creating a vicious cycle in our economy because they are cutting too far and too fast—hitting families and costing jobs. More people out of work and on benefits will make it harder to get the deficit down. In fact, the Government are now set to borrow £46 billion more than they had planned.

The Government said they would cut the deficit by cutting spending, but putting people on the dole and suppressing growth is a waste of money and a waste of their potential. Instead, the Government need a plan B. They ought to follow our balanced deficit plan, which puts jobs first. Of course, although we need tough decisions, getting people off the dole and back into work is the best way to reduce the deficit. As we have made clear today, rather than giving the banks a tax cut, the Government should adopt Labour’s plan for a tax on bankers’ bonuses and use the money to fund apprenticeships, getting young people into work and supporting small business.

I am afraid that the Bill jeopardises job creation and fails to support existing jobs. The rushed decision to make a tax raid on North sea oil means that companies are reconsidering their future in Britain, and puts investment and jobs in jeopardy. Of course the Government should seek windfall profits at a time of high fuel prices, but they have rushed that decision without consultation or proper consideration of the longer-term economic consequences. By slashing the investment allowances by £2.6 billion, the Government are penalising those companies that invest, particularly small businesses and businesses in the manufacturing sector. Again, that is putting jobs at risk and holding back growth.

The Bill leaves a number of unresolved and unanswered questions. In Committee, the Government said the child trust fund replacement for looked-after children was still being considered by the Department for Education, but that there was no fixed time frame for implementation. The Minister has been unable to put on record whether any progress has been made on that issue, which is a pity.

Clause 26, which deals with disguised remuneration employment income provided through third parties, has stood out as being particularly badly drafted. It is long and complex, and has been subject to no fewer than 88 last-minute amendments. Businesses are still raising concerns about its scope and interpretation. However, although the drafting of clause 26 was unclear, we did not oppose the principle, and it would be wrong if our position on it were further misrepresented. All we wanted to know was whether the provisions would catch some genuine transactions and whether Ministers were working properly with businesses and professionals to clarify those issues.

The amendments made on Report to clauses 34 and 48 were about closing avoidance loopholes that HMRC have detected. We support those amendments of course, but we have raised concerns about avoidance in respect of the foreign profits clauses. We also had concerns about the loss of tax revenue to developing countries—something on which the Government claim to have conducted only an “initial analysis”. It is a shame that the Government have passed legislation when they cannot give a figure for the impact on developing countries’ tax bases—an assessment that we called for before implementation. We can therefore only hope that the poorest countries in the world are not unintentionally harmed by that measure.

To conclude, as well as leaving a number of questions unanswered and creating uncertainty, the Bill represents a missed opportunity to get banks to pay a fairer share of tax to society, through a stronger bank levy and a repeat of the bank bonus tax. Tragically, it is also a missed opportunity to tackle unemployment and get people into work—further evidence that this Government fail to understand that the best way to secure growth and get the deficit down is to get people off the dole.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West 9:31 pm, 5th July 2011

I shall make some brief remarks in this Third Reading debate on yet another Finance Bill. Unlike Chris Leslie, who is lucky not to have sat through every stage of the Bill, I have endured all of it, from the Budget and Second Reading right the way through to the upstairs and downstairs stages. I too congratulate my hon. Friend the Minister on being named tax personality of the year, which is indeed an exalted position. The tax personality of the year should, of course, know that 5 July is the end of a tax month; in fact, it is also the end of the first quarter of the traditional tax year, so he could have mentioned that too. I can only assume that the judges made their decision before they heard his Bananarama joke. Unfortunately you were absent at that point, Mr Speaker, so you will have to look in

Hansard to see what I am talking about.

In the spirit of cross-Chamber harmony, I too briefly congratulate Mr Hanson on his birthday. He has also been with us for all stages of the Finance Bill, apart from this one. I can only assume that he has thought of somewhere better than the Chamber of the House of Commons from which to watch the final stage of the Bill.

This is a good opportunity to weigh up the credibility of both the official Opposition and the coalition Government, after all the various stages of the Bill. We have heard many times that the Labour Opposition believe that fiscal tightening and a reduction in the budget deficit are needed. However, although we have heard from many Opposition Members about the cuts that they oppose, we have not heard from any of them about the cuts that they favour. We have also heard about their difficulties with the various tax changes that the coalition Government are making. As my hon. Friend the Minister pointed out, the Opposition pulled a rabbit out of the hat in the middle of our proceedings when the shadow Chancellor announced a great new policy with a flourish. His policy was that the Opposition would, after all, oppose the VAT increase to 20%. However, first the Scottish National party gave the Opposition an opportunity to vote against the increase and they abstained, and then Plaid Cymru gave them another opportunity and they abstained again. Indeed, the Opposition could have given themselves an opportunity to vote against the increase, but they failed to get their amendment in on time. That is two official abstentions and one botched attempt to oppose the Government’s policy, so the next time any Labour MP says that they oppose the rise in VAT, they will not have much credibility.

The Opposition also even opposed tightening a tax avoidance measure in Committee, and this morning the last vestige of Labour credibility—if Labour had any—in dealing with the economy was stripped away by the hon. Member for Nottingham East, when Labour refused to support the extension of special drawing rights arising from Britain’s contribution to the IMF. Of course, that was part of the initiative launched by the former Prime Minister, Mr Brown, when he supposedly saved the world—I think that was the phrase—at the London G20 summit in 2009. And today, his successor spokespersons for the Labour party refuse to support the spirit of internationalism in dealing with bail-outs around the world.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I hope the hon. Gentleman will allow me to put on record something that he admits has been conspicuous by its absence—namely, the fact that the UK’s subscription to the IMF is rising from, I think, £10.7 billion to more than £20 billion. I hope he will explain that figure to his constituents and tell them, at a time when we are also on the hook for the other European bail-out arrangements, why we should be paying twice in that regard. I would be interested to hear his point of view.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

I would be happy to invite the hon. Gentleman, as well as any other hon. Members and my own constituents, to read my blog, where I explained exactly that point straight after this morning’s debate. The explanation is of course a movement between the Government’s reserves and the reserves that we denominate in special drawing rights at the IMF. That does not involve additional Government borrowing or additional cuts, as the hon. Gentleman very well knows. What we saw this morning was the Labour party making a cheap, opportunistic point on a very serious issue.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I am grateful to the hon. Gentleman for being so nice about me just a moment ago. The Minister refused to tell us this morning, but does the hon. Gentleman know how much British taxpayers’ money is on the hook, via our IMF support for Greece? How many pounds sterling are on the hook? Does he know what our liability is?

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

The hon. Gentleman will have heard exactly what I heard this morning from the Financial Secretary to the Treasury, which was that, in its whole history since 1945, the IMF has never lost its money because it is always the first creditor to be paid. Our money is therefore not at risk, but our providing it is essential in order to ensure that the international economy stabilises. That is also in our own national interest.

I have dealt with the Labour party’s credibility, but what about that of the coalition Government? The points that the hon. Gentleman has just made lead me neatly to compare this country with Greece. During the passage of the Bill, we have seen the sad events in Athens, with the Greek Government having to make difficult and unpopular decisions. Greece’s bond rating, which reflects people’s willingness to lend to it, is CCC, while ours is AAA, even though our budget deficit is much higher than that of Greece. The difference is that our Government have a credible plan for repairing our public finances, and that is what gives us credibility in world markets and at home.

The Finance Bill and the Budget have also confirmed one of the most important measures that the coalition Government will introduce—namely, making the income tax system fairer. That was the No. 1 commitment that my Liberal Democrat colleagues and I stood on in the general election. We believe that work should pay, and that the lowest-paid employees in this country should be shielded from income tax. I am therefore pleased that the Bill takes another step towards making our pledge of £10,000 of tax-free income come true during the lifetime of this Parliament.

The Bill also puts in place a bank levy, so that the bankers will pay something back towards the problems that they helped to create during the last Government’s period in office. The budget is now under control. That is why the coalition Government were formed in the first place. Many of us might have thought at the time that it was a somewhat unlikely coalition, but it was put together to take these difficult decisions, to repair our public finances, to bring back international confidence and to give confidence to our own constituents that our country could get back on track. The difficult decisions have now been made, and we will see the job through.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales) 9:39 pm, 5th July 2011

I will not take up much of hon. Members’ time this evening. I regret to inform the Treasury that we will vote against the Government. Leaving aside our concerns about the speed and depth of the cuts, our main concern as a party is obviously the effect of the Budget on Wales. Given the economic headwinds that Wales faces, the Treasury might be interested to know that all four parties in the National Assembly, including the Conservative party and the Liberal Democrats, have today signed a joint declaration calling for an immediate reform of the Barnett formula, borrowing powers for the Welsh Government, including the ability to raise capital funds via bonds, and fiscal responsibility in respect of taxation powers. Although 5 July is not usually a historic day, I would say it is today because all the Unionist parties have adopted Plaid Cymru’s economic policies. I understand that the Treasury Minister will meet the First Minister on Monday and I hope he will embrace this fresh mandate from the people of Wales.

Question put, That the Bill be now read the Third time.

The House proceeded to a Division.

Ayes 285, Noes 225.

Division number 317 Finance Bill — Third Reading

A majority of MPs voted in favour of the measures in the 2011 Budget including reducing the threshold for paying higher rate income tax, increasing the income tax free personal allowance, reducing corporation tax and reducing the main rate of corporation tax from 27 to 26%.

Aye: 285 MPs

No: 225 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Absent: 136 MPs

Absents: A-Z by last name

Question accordingly agreed to.

Bill read the Third time and passed.