Finance (No. 2) Bill

– in the House of Commons at 10:00 pm on 11th April 2016.

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Votes in this debate

  • Division number 233
    A majority of MPs voted to increase the personal income tax allowance, change the way dividends are taxed, cut capital gains tax and reduce the amount which can be taken out of a pension tax-free from £1.25m to £1m.

Debate resumed.

Question again proposed, That the Bill be now read a Second time.

Photo of Caroline Flint Caroline Flint Labour, Don Valley

I am grateful to the 50 colleagues from six parties who supported my ten-minute rule Bill, including every Back-Bench member of the Public Accounts Committee. I hope to build that cross-party support as I seek to amend this Bill. My interest today is not to grandstand, but to change the law.

In January 2012, the Prime Minister said:

“We need a tougher approach. One of the things that we are going to be looking at this year is whether there should be a general anti-avoidance power that HMRC can use, particularly with very wealthy individuals and with the bigger companies, to make sure they pay their fair share.”

Many in this House would agree with that.

Three months later, the Chancellor said:

“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.”

Many would agree with that.

In January 2013, the Prime Minister said:

“We want to drive a more serious debate on tax evasion and tax avoidance. This is an issue whose time has come. After years of abuse, people across the planet are rightly calling for more action and, most importantly, there is a gathering political will to actually do something about it.”

Just last week in Exeter, the Prime Minister said:

“It’s not fair when you’ve got companies who are basically shifting their profits around the world, rather than paying them in the country where they make their money.”

That is all the more reason why I hope the Government will adopt the purpose of the Multinational Enterprises (Financial Transparency) Bill.

However interesting the Prime Minister’s current or recent tax returns are, they are but small beer compared with the need for openness by sophisticated multinationals using various means to legally avoid paying tax in the countries where they earn much of their revenues.

The reputation of the UK is tarnished by the number of tax havens that fly the Union Jack. A World Bank review of 213 big corruption cases found that more than 70% relied on secret company ownership. Company service providers registered in the UK and its overseas territories and Crown dependencies were second on the list of those providing such companies. When the Government said that bankers should pay tax on their bonuses as on their wages, companies such as Deutsche Bank, when the Business Secretary worked there, put them out of reach offshore.

I am not a cynic; I am an optimist and I believe in the good of people to do the right thing. I do not believe there will ever be a perfect system to catch those who will use every device they have to avoid paying the tax that is due, but I do believe that backing public country-by-country reporting is vital to addressing deliberate and sophisticated tax avoidance. I urge the Government not to wait for the EU or the OECD, but to adopt my public disclosure measure in the Bill and let the UK lead where I am sure others will follow.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (House of Lords) 10:03 pm, 11th April 2016

It is a pleasure to speak in this Second Reading debate. I am delighted that you are back in the Chair, Mr Speaker, not least because I have written “Mr Speaker” throughout my speech and I get totally confused if a Deputy Speaker is in the Chair.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (House of Lords)

I am sure that they are many and varied, Mr Speaker.

As a relative newbie to Parliament, I am fascinated by the fact that this House manages to have incredibly complicated and incredibly cumbersome processes and hoops to jump through in order to get legislation through, while at the same time managing to ensure that those processes are entirely opaque and provide the general public with the smallest possible amount of useful information.

I want to speak about a number of things: oil and gas—you will not be in any way surprised by that, Mr Speaker; the travel and subsistence changes, for those in rural areas in particular; and the savings changes, which Rachel Reeves mentioned. The UK Government are attempting to undertake a savings swizz. This is not a Budget for hard-working people and young people at all. Increasing the level of tax-free savings will help only those who can afford to save thousands of pounds every year. Most hard-working people will not be helped by this. Just because somebody earns a high income, it does not necessarily mean that they are hard-working. A lot of hard-working people earn pretty low incomes.

Folk who are earning the Chancellor’s pretendy living wage, which is not recognised as being enough to live on, struggle to make it to the end of the month, let alone to have spare money to save for the future. The help to save scheme included in the Budget is welcome, but folk working the minimum 16 hours a week on the pretendy living wage will be earning only £500 a month, and they are hardly likely to be able to spend 10% of that income on savings rather than on immediate concerns.

The tax measures in this Finance Bill disproportionately reward unearned income, and they continue to ensure that tax avoidance is not illegal—only immoral. Many of my constituents find themselves living from pay cheque to pay cheque, and they cannot imagine having the comfort enjoyed by those with six-figure salaries, large savings and stocks and shares—in much the same way, I presume, as those in charge of the Finance Bill have no idea what is like to exist on a low income with a lack of long-term financial security and the absolute necessity of reliance on the state. Some people have no ability to put cash in the bank to fall back on. Rather than all being in this together, too many Members of this House cannot comprehend the real world that most of my constituents live in, and they could do with being given a reality check before they are allowed to make tax policy. The changes to ISAs and the uplift are hardly useful to anyone. As Opposition Members have said, ISAs disproportionately benefit those earning above £150,000 a year. That is not helpful for hard-working, low-income families or for young people.

I am delighted that repetition is encouraged in this place, because I am going to talk once again about oil and gas. That is quite useful, because I can recycle this speech fairly regularly—[Interruption.] Yes, I am also recycling the speech made by my hon. Friend Callum McCaig. Oil and gas are vital for Aberdeen and for Scotland as a whole. Some of the measures in the Finance Bill go a little way towards easing the situation for oil and gas companies in the current economic climate. Nobody quite knows when the oil price is going to go back up, or what level it will reach when it finally does so. Oil prices are completely unpredictable. The UK Government need to show that they are committed to the future of the industry in the North sea in order to ensure investor confidence.

There is positive movement in the reduction of the supplementary charge from 20% to 10%, but oil and gas companies will still pay significantly more than most companies. The oil and gas industry is vital to Scotland, particularly to the north-east of Scotland and my city of Aberdeen. Back in 2014, Sir Ian Wood published the Wood report. The Energy Bill, which is currently in ping-pong and will be discussed again down the Hoose corridor in the other place tomorrow, cements the position of the Oil and Gas Authority in legislation. The principal objective of the OGA, which arose from the Wood report, is to maximise the economic recovery of UK offshore oil and gas resources. That can only happen if the UK Government seriously consider the tax regime for companies extracting oil and gas in the UK continental shelf.

The tax regime has been built up over the last half century, with measures being added and taken away as the Government of the day make changes to the decisions of Governments past—or, in some cases, to their own decisions. Now that the UKCS can be considered a mature basin—in fact, some are calling it super-mature—I suggest that now is the time to look afresh at the fiscal measures in relation to the taxation of the oil and gas industry. Until the UK Government can commit to doing so, some issues need to be looked at as a matter of urgency. If we are doing only minor overhauls, rather than a major overhaul, these are the key issues for us.

Enhanced oil recovery is mentioned in the OGA corporate plan for 2016 to 2021. The OGA intends to issue an enhanced oil recovery strategy to the industry in the first half of this year. If the UK Government took action so that the activity of enhanced oil recovery could count towards a tax allowance to offset against income, rather than count as operational expenditure, I suggest that the OGA’s strategy could easily be more ambitious, but still achievable. Enhanced oil recovery is very important for the UKCS given its super-mature situation. We really need to work in different and new ways to get out the oil, which is much more difficult and costly, so we would benefit from a fresh look at the tax regime in relation to how that spend is considered.

Finally on specific issues relating to the offshore oil and gas industry, I welcome the fact that HMRC will produce updated guidance notes on the decommissioning allowance. It is very important, particularly for new entrants to the industry, to have the ability to take on such assets in the North sea and exploit them for a longer period than a big player perhaps would, so I am really pleased that that is coming in. On decommissioning terms, we suggested during the passage of the Energy Bill that tax incentives and allowances should be put in place in relation to decommissioning in the UK, so that as much as possible takes place in the UK and benefits UK companies. It is really important that the UK becomes very good at decommissioning, because we can then export that expertise. I would very much appreciate it if the Government considered incentivising UK spend in whatever ways are possible. We will talk about that during the next stage of the Finance Bill.

To move on from oil and gas to a more general point, I want to flag up issues about the Government’s proposal on the taxation of travel provided for those paid through intermediaries. There is no question but that this change will hit rural communities disproportionately. It is perfectly legitimate and sometimes incredibly sensible to pay individuals as contractors or through intermediaries, but I suggest that the Government have not really thought this one through or have not grasped quite how rural some of these communities are. It can absolutely be necessary for people doing work in rural areas to stay overnight to fulfil a task that can in no way be done as part of a daily commute. I understand what the Government are trying to do on daily commutes, but that does not apply in such situations. For example, on some islands off the coast of Scotland, a locum doctor or relief teacher has to stay because there is no regular transport. Surely they should receive tax relief on their hotel stays: it is not a daily commute, but a necessary part of the job, particularly if they cannot possibly get home because there is no boat.

For communities such as Shetland in particular, where there is heavy reliance on oil and gas companies, that may have a significant negative impact. Due to the level of expertise and specialisation in oil and gas, many people in the industry are employed as contractors—disproportionately so—and removing the tax allowance that workers can claim when they stay overnight in Shetland on the way to a rig would be a bizarre way to support either the oil and gas industry or small rural communities. A specific case could be argued for our rural communities, many of which are not diverse in their employment, and such a change may have a significant and disproportionate negative impact on them.

The SNP is concerned both about the future of the oil and gas industry and about the fate of contractors in rural communities. When we go into Committee, we will table new clauses and amendments. The Chancellor has claimed that he is going to listen and learn. We will test him on that claim.

Photo of John Mann John Mann Labour, Bassetlaw 10:13 pm, 11th April 2016

As ever with the Finance Bill, the Public Gallery is packed to the rafters.

Unusually, the shadow Chancellor is in the Chamber during my speech, which gives me the opportunity to pass on a bit of advice. This is also an opportunity—not for the first time, the second time or the third time, but for the fourth time—for the Government to recognise the advice I have given the House and that they have accepted. It started with the pasty tax, and the Bakewell pudding and other puddings were saved when the Government listened to the advice I provided. This time, it is the £1,000 threshold for taxation on interest. I proposed that for a different reason. I did not try to pretend that it was in some way an incentive for saving, as the Government are vainly attempting to do; I suggested that it was rather sensible, because so many people every year have the irritation of trying to work out miniscule amounts of interest for their tax returns.

That idea has been accepted, and I therefore have a fifth proposal ready and waiting for the Chancellor—I am sure he is listening—to improve future Budgets. This time, the Chancellor is keen on city regions. That is one of the few things he is doing on which I am not totally in disagreement with him. The Sheffield city region is moving ahead appropriately with the support of Bassetlaw council, among others. It would be sensible, in the near future, for the Government to devolve arts and sports funding to city regions, as I have already proposed. But to my mind, they should go a lot further.

Broadband is one of the key weaknesses in our infrastructure. I would like the delivery of broadband to be devolved to city regions during the next year, so that areas such as mine can get ahead of the game, and city regions can, as well; they will need to, because one of this Government’s great failures is that when it comes to broadband we are lagging behind too much of the world. We should be leaders, but we are not. It is false comfort that the Government give every year about progress, which is far too slow.

I was in Japan last week, and had the opportunity for a bit of a Skype using the superfast broadband available throughout that country. It gives a connectivity that we do not have in this country. It would be appropriate for broadband delivery to be devolved to the city region level. I hope that idea will be accepted by the Chancellor, because he says he is in favour of being a world leader in superfast broadband.

I will throw in a second idea, about housing delivery. City regions are having to agree targets on housing with Government. I would like to see those targets tied to a borrowing potential so that that housing can be delivered. We should allow a borrowing potential that is directly linked to the agreed housing target for city regions. Those two ideas would allow city regions such as Sheffield to develop superfast broadband ahead of many parts of the world and to get housing delivery moving.

As I have said previously—this has not been adopted yet by my own Front-Bench team, but I am sure it will be—when we talk about housing, the key demand in my area is for bungalows, and prefabricated bungalows are now coming on-stream, with the biggest producer anywhere in the country. Why bungalows? Because the Government ridiculously attempted to use the bedroom tax to force a lot of people out of large three-bedroom houses, because they were single elderly pensioners. We should offer them a cheap-to-heat modern bungalow. Many people would rent them willingly, and others would buy them. The demand would be huge. If we devolved that power away from central Government, housing delivery, which, again, is said to be a key Government priority, would be dramatically faster.

I put that idea forward optimistically, knowing that, as was the case with the community infrastructure levy, the pensions drawdown, the pasty tax and the interest on savings, my idea will be adopted. Of course it need not be attributed to me—none of the others were; the Government can take entire and total credit for it.

My advice to the Labour Front Bench and shadow Chancellor would be to hone in on this Government’s key fundamental weaknesses, and we should stick repeatedly to four key themes. The first is inequality, which has already been well articulated. The rich are getting richer, the poor are getting poorer, and the country does not like that. That is why there was such a huge reaction to the Prime Minister and the issue of offshoring. People do not like the idea that the rich are getting so much richer and the poor are getting poorer; that is not a British value. The Labour party should hone in on that, because it is about economic policy.

Secondly, the Government have a huge dilemma because they are not delivering on productivity. For the skills agenda in this country we have bandied about apprenticeships as if they are anything and everything, including 80,000 hairdressing apprenticeships that never become jobs, through to 60,000 at McDonald’s—

Photo of Andrew Griffiths Andrew Griffiths Conservative, Burton

What’s wrong with hairdressing?

Photo of John Mann John Mann Labour, Bassetlaw

Nothing is wrong with hairdressing, but it is wrong to have 80,000 apprentices who do not go into that industry because there are no vacancies. Instead, we should be spending money in areas where we need apprenticeships, such as manufacturing, and craft or building skills. That is more complex and difficult, and so we and the Government ducked it. That is why productivity fails to grow.

The third area is home ownership. That was regarded—this is an accurate historical comment—as the thing most associated with Margaret Thatcher, and it was fundamental to winning over Labour voters who shifted for a period of time and began voting Tory, particularly in ’79 and ’83, thanks to the concept that the Tory party was the party of home ownership. That concept has been destroyed over the past six years, and we should be taking up that mantle. We are in favour of home ownership. Of course young people in my area want rented accommodation temporarily, but their vision and aspiration is to own their own home. I do not know any people who do not want that, and the Government have repeatedly made that vision harder and more distant. We should be hammering home that core Labour value.

Fourthly, this Government have repeatedly accused the previous Labour Government of mortgaging the future and loading debt on to future generations, but this Chancellor, more than any other in British peacetime history, has loaded up the national debt, with his Back Benchers happily confusing deficit and debt every time it is debated. Under him, the national debt keeps going up dramatically. This year it is up dramatically, and the projections are for it to do that for the next five years. That is a fundamental economic failure of an unprecedented level by this Government.

Photo of John Mann John Mann Labour, Bassetlaw

I will certainly give way for confirmation of the facts from a member of the Treasury Committee.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

I am grateful to represent Conservative Back Benchers and leap to the defence of the Chancellor. Does the hon. Gentleman agree that the rate of increase of the debt was £156 billion a year in 2010, and that the Chancellor has substantially reduced that? He cannot deny that the Chancellor has done a terrific job.

Photo of John Mann John Mann Labour, Bassetlaw

So the losses are not as big as they were but they are still losses. Imagine if I had put that argument in 2009 or 2010—I do not have the references with me so I will not waste time by quoting from them, but they are in Hansard because the then shadow Chancellor and the Leader of the Opposition, and many Back Benchers, were happy to make precisely that point. That is a fundamental economic weakness, and it is putting this country at a huge, long-term economic disadvantage compared with our competitors.

My proposal about city regions and broadband was not a shopping list issue; it is fundamental to making this country economically competitive again. How can we have new growth industries in those areas when villages like mine cannot even get simple broadband most of the time and people struggle to get a mobile phone signal? This is not where the world is at any more, and this represents a fundamental economic failure for this country.

There is one more failure. I will end—this is a slightly long ending, Mr Speaker—on what I am sure all Members will agree is an incredibly important point, namely the failure of this Government to tackle tax avoidance and offshoring. We have heard a lot of the theory, but let me tell the House what the people who do the advising on tax avoidance say. They are the best source on this, rather than politicians of any party or persuasion. They are the ones who are competing for the business of the very people who want to minimise their taxes by offshoring because they are wealthy enough to do so.

Those tax advisers are eulogising the fact that the agreements reached with the Cayman Islands, the British Virgin Islands, Bermuda, Anguilla, the Turks and Caicos Islands and Montserrat are non-reciprocal. According to HSBC, that means that UK financial institutions will not have any reporting obligations under the terms of the agreements. That is a fundamental weakness in comparison with what the Americans have done. We are not the leaders in this; we are well behind what the United States has done on enforcing transparency.

The British overseas territories that I have just mentioned rely on us for their defence. We pay for their defence, so we have proper leverage. Those territories might be anachronistic quirks of history, but if they wish to remain part of the United Kingdom, they will need to play by our rules and, if you like, speak our language. I am a strong supporter of defending those territories, be it the Falkland Islands, Bermuda or the Cayman Islands, but it is unacceptable to have non-reciprocal agreements for residents of those Caribbean tax havens. There is nothing to address that in the so-called advanced and world-leading proposals in this Government’s previous Budgets that have already been implemented, and there is nothing in this Budget or in today’s announcements that will deal with the matter.

I also want to talk about the Liechtenstein disclosure facility. What does that have to do with those territories and tax havens? I thought that it probably did not have a lot to do with them because someone would have to set up an interest in Liechtenstein in order to qualify for the disclosure facility, but then I read about where we are with financial compliance obligations. Those who advise people who want to avoid paying taxes are absolutely clear about this. Let me quote from an article on a website called taxation.co.uk:

“It may be better to come forward under the LDF now, and clients who could benefit need to be identified.”

Another article says:

“Although there are several ways to make voluntary disclosures to HMRC, the LDF continues to offer extremely beneficial terms, despite the new restrictions on eligibility, and remains one of the most direct routes of disclosing to HMRC”,

and that

“participants…will…achieve immunity from prosecution…There is no need to have held an offshore asset at all in order to access the LDF.”

The only people who cannot do so are those who have already been criminally investigated by HMRC.

There are many examples of this, and that article explained in huge detail how, for example, a self-employed person could theoretically go for a Liechtenstein disclosure facility and—this has been widely advertised across the Caribbean and in other tax havens—why people should shift to it, because for the last three years, until 5 April this year, people could minimise their tax cheaply and beneficially through early disclosure. That is what the tax experts say, what they have advised people to do and what has been going on for the last three years. When the figures finally come out, which they will, we will see the vast numbers who have used that loophole, which was deliberately set up and advertised as such.

When it comes to dealing with tax avoidance, the Government talk tough but play soft. They give the nod, officially, allowing people to circumvent the system. As long as people pay for the right lawyers in countries such as Panama, they get that advice, and because they are competing, it is one of the few things that is publicly available. My advice to the House is this: let us remove these potential and actual loopholes forever. That is why this Bill is wholly insufficient and why the Government are failing on debt and the deficit. The tax is there; people are avoiding it legally. We have a duty to turn that around—a duty to the British economy and the future innovators and entrepreneurs who are being squeezed by the recession. They are the biggest losers of all in this, because they are the ones with brilliant ideas who cannot compete with those using tax loopholes and squeezing them out.

I will end on this, Mr Speaker—[Hon. Members: “Hear, hear.”] I know that Tory Members don’t like it up ’em, but they are failing the British economy, failing innovators and failing entrepreneurs, crowding them out and allowing tax avoidance on a massive scale. They have been caught and had their fingers burnt. There is a minimising—[Interruption.] I hear advice from a sedentary position. The Government have not delivered on tax avoidance, and that is why this Bill must be opposed.

Photo of George Kerevan George Kerevan Scottish National Party, East Lothian 10:33 pm, 11th April 2016

I realise that the hour is late and I will try not to try your patience, Mr Speaker, or indeed that of the House.

In an earlier life I was a journalist, and my editor thought it would be a good idea if I became a restaurant critic. It strikes me that some of the rules for identifying bad restaurants can be applied to this Bill. The way to detect a potentially bad restaurant is to look at the length of the menu. A very, very long menu means there are lots of stale, moulding ingredients in the back room or in the fridge, needing to be reheated. The Finance Bill before us has 580 pages and comes in two volumes that have to be stapled together. If we reflect on the scale of it, we find stale ideas, hasty ideas, ideas on the back of an envelope and ideas put together at the last minute. Conservative Members have made a good fist of trying to find good things within the 580 pages. There are some good small issues worth taking up. The change in the laws governing transfer payments on intellectual capital and branding, for example, is very good and should have been done a long while ago. There are some good things, but the sum total does not add up to very much.

This Chancellor has given us 14 Budgets, if we include the December statements and emergency Budgets, with 14 ancillary Finance Bills, yet we have got nowhere near the simplification that we require, for which Conservative Members have also called. Why is that? Quite simply, the Chancellor has just one view in mind. It is not to improve productivity, improve the current account balance or improve this and that; it is simply to end up with a budget surplus in the year 2020.

The Financial Secretary made an attempt earlier to provide some intellectual coherence to the Chancellor’s work, and I commend him for that. He told us that what underlies intellectually the 580 pages is the promotion of savings. My hon. Friends and I will vote against the Bill because the last thing it does is to promote savings. The Bill is anti-savings, because trying to run a permanent budget surplus itself undermines the whole rationale for savings.

When the Exchequer Secretary sums up, will he address some of these questions? If there is to be a budget surplus in 2020, more will be taken out of the economy in tax than will be put back in. If we run a permanent surplus, Government bonds and Government securities, which are the lifeblood of insurance companies and of safe investments, will inevitably not be issued. They will be taken away. If we add to that a running down of the special assets programme and quantitative easing, we will take even more Government securities out of the economy. I do not know what people are supposed to invest their savings in. The Minister might say that they should invest in shares, but we know that the whole point of quantitative easing is to keep share prices up artificially. When in the first couple of months of this calendar year there was a fear across the world that quantitative easing was being turned off, share prices went down. They have come back up again in the last four or six weeks only because Europe in particular has turned back on the quantitative easing tap.

I warn Ministers that if we go to a period of permanent budget surplus, share prices will be going down, not up. Where, then, in the end are people going to invest their savings, which the Chancellor wants to encourage in his 580 pages? The only place I can think they will be saving is abroad. I think there will be a big demand for foreign-based investment trusts. I cannot see anywhere else that the money will go. The Chancellor and his Ministers should think on that.

I would like the Minister to address another problem with running a permanent budget surplus. If we do so and ally it to our current account deficit, it means taking huge amounts out of the economy. We then have to borrow to put the money back in to make the national accounts balance. The OBR statement that went with the Budget suggested that if we are running a permanent budget surplus by 2020, the deficit that has to be filled will be about 4.5% of GDP a year. That will have to be borrowed. Ultimately, it means that consumers are borrowing. The very act of running a budget surplus forces consumers to borrow more.

Rachel Reeves made the point earlier that at this very moment the savings ratio is back at historically low levels. That is already happening before we even get to the budget surplus. If the numbers are telling us that savings are collapsing, how can we be told that this is a Budget for savings? It is not, which is why we have to oppose it.

If the Chancellor had used the Bill to tell us that pension tax relief would be reformed dramatically, and that a significant amount of relief would be given to lower earners and young people, I might have believed that he was serious about savings, but that is the very measure that he took out of the Budget a fortnight before this 580-page blockbuster arrived on the desk. He had to stand back and change the Budget entirely. A Chancellor does not run the country by changing a Budget a fortnight before presenting it.

The best summing up of what is happening in those 580 pages, and how it will be delivered, has just come in the form of the 2015 annual civil service survey. Each year, we ask civil servants throughout the Government what they think of the way in which the Government and the civil service are being run. According to the survey, only 25% of HMRC staff have confidence in HMRC’s senior management. There is rot within the delivery system, and there is rot within the mechanism for collecting the taxes. The Finance Bill, if we pass it, will not increase savings, and will not deliver what we are told that it will. It is 580 pages of nonsense.

Photo of Rob Marris Rob Marris Shadow Minister (Treasury) 10:41 pm, 11th April 2016

Well, the Chancellor has seen a small fraction of the light. The Bill contains some measures to support industry and some measures to crack down on tax avoidance, as well as the Government’s long overdue but welcome commitment to zero-rating VAT on women’s sanitary products, a cause long championed by my hon. Friend Paula Sherriff. The Government have also accepted our amendment to the Budget resolution to legislate on energy-saving materials. It is, however, unfortunate that those provisions are not in the Bill, which is leading to continuing uncertainty. I welcome the creation of 2 million jobs in the United Kingdom since 2010, but those jobs have been bought on a sea of debt.

The Government talk about the simplification of taxes, as they did when they were in opposition. Tolley’s Tax Guide has grown by 50% under the present Chancellor, the Finance Bill contains 827 pages, and, according to the National Audit Office, there are about 1,300 tax reliefs and the Government have some idea of the efficacy of fewer than 300 of them.

Before dealing with the Bill in more detail, I want to say something about the deteriorating economic context in which it is being introduced. We have heard some of the figures during today’s excellent debate, but I think it is worth reminding ourselves of them. The current account of the balance of payments worsened to a record deficit of 5.2% of GDP in 2015. The Chancellor rightly wishes to encourage individuals to save more, yet the household savings ratio has plummeted, and is worse than it was at the time of the 2008 economic decline. In the last quarter of 2015, productivity was 1.2% lower than it had been in the previous quarter—the steepest drop since 2008. UK productivity is 18 percentage points below the average in the rest of the G7.

Household debt is on its way back up, and the Office for Budget Responsibility forecasts that by 2020 it will be at about the same level as it was in 2008. Since 2010, median weekly earnings, in real terms, have fallen by more than 5%, and public spending has fallen by more than 10%. The national debt has risen by nearly two thirds in just six years. The annual deficit is the second highest in the G7, and last year it was worse than the one in Greece. In March, the OBR revised its projections for GDP growth downwards, and revised its estimates for UK debt upwards. Let us not forget that the Chancellor has missed two of his three self-imposed fiscal targets, and the OBR estimates that his chances of hitting the third are about 50:50.

After six years in charge, it is about time the Chancellor took some responsibility for his many and manifest failures. The evident economic mistakes made by the previous Labour Government, for which I have repeatedly expressed my deep regret in the House, are almost as nothing when compared with the Chancellor’s rotten record. The Chancellor does not learn. For example, he has put the income tax rise threshold for tax credits back to what it was initially under the Labour Government when it wreaked havoc on working families, and it has wreaked havoc on the Treasury. Labour learns from its experiences and its mistakes; the Chancellor evidently does not.

The Institute for Fiscal Studies says that the direct effect of Government tax and benefit policy has been to take money from working age benefit recipients towards the bottom of the income distribution. The Chancellor planned to cut disability benefits for some of the most vulnerable and he will make some of the poorest struggle to repay tax credit debts, yet he is introducing cuts to capital gains tax, costing £2.7 billion by 2021, and cuts to corporation tax despite the rate already being the joint lowest in the G20. He believes in cutting the incomes of the most disadvantaged in our society while increasing the wealth of his rich friends. He says that we are “all in this together”. I think not.

It is unfair that the adverse effects of the Government’s harsh economic policies fall most heavily on women. House of Commons Library figures indicate the gender bias of benefit changes. Some 86% of cumulative tax changes and cuts in social security benefits spending due between 2010 and 2020 will come from women. That does not even include the swingeing cuts to public services, let alone the impact of universal credit.

The Panama papers demonstrate the widespread problem of tax havens and of the lengths to which some of those who can afford it will go to avoid tax. The Government’s repeated promises over the past six years to tackle tax avoidance have been shown to be largely hot air. After all, the UK, along with its overseas territories and Crown dependencies, remains the biggest secrecy jurisdiction in the world, and the British Virgin Islands are by far the most popular tax haven revealed by the Panama papers. While containing a few, limited anti-avoidance measures, this Finance Bill will do nothing fundamentally to fix that. By not acting, we damage our own economy, but we also damage some of the poorest people on earth.

In July 2015, the Financial Secretary said that he expected the UK’s overseas territories with financial centres to set out a timeline for introducing registers of beneficial ownership or similarly effective systems by November 2015. Despite the timeline not being met, the UK Government had not even expressed their disappointment until recently. Of 10 overseas territories and Crown dependencies, only two have accepted the Prime Minister’s request to adopt a public register of beneficial ownership. The measures announced now, including a £10 million taskforce and a new criminal offence—conspiracy to evade taxes—for something that is already a criminal offence, are too little, too late. The Financial Secretary to the Treasury told us today that Crown dependencies have agreed to provide full access to a register of beneficial ownership, but that will mean a central register kept by those territories, not a public register, which is what we need. When will the Government take serious action and when will the Government take some responsibility?

The Chancellor is borrowing like a drunken sailor, using the nation’s credit card to pay the day-to-day bills, which is just plain wrong and will end in tears. Borrowing to invest in infrastructure is fine. It is like borrowing on a mortgage to buy bricks and mortar. That is what Labour would do. We advocate capital investment in mass house building because we have a housing crisis in this country that has got much, much worse in the past six years. The measures in this Bill will do far too little to address that housing crisis. I am a socialist who spent most of his working life in business, and I understand the laws of supply and demand, but apparently this Tory Chancellor does not. Let me spell it out for him: increase the supply of housing. To address the housing crisis caused by insufficient supply, the Government should themselves build more housing.

This Chancellor should stop wringing his hands and blaming the last Labour Government. He has been in office for six years now and it is high time he took some responsibility. This Finance Bill is palpably inadequate. In failing to address the severe challenges facing our country, this Government and this Chancellor are failing all of us, but they are particularly failing the next generation. I urge all Members to vote against Second Reading tonight.

Photo of Damian Hinds Damian Hinds The Exchequer Secretary 10:51 pm, 11th April 2016

This Government have delivered on growth, record levels of employment and a deficit that is forecast to be down by almost two thirds from its peak. This Finance Bill legislates to continue that record: it provides opportunity for families and hard-working individuals; it backs business and enterprise; and it puts the UK at the forefront internationally in tackling tax evasion and aggressive avoidance.

We started late, Mr Speaker, but we have had a lively and full debate, and I wish to respond to a few of the points raised. The hon. Members for Feltham and Heston (Seema Malhotra) and for Wolverhampton South West (Rob Marris), and others, spoke about the effects of Government policies on women. We have an employment rate among women that is now at a record high, with the majority of women in full-time roles. More than 1 million more women are in employment than was the case in 2010. By 2017-18, 13.1 million women will benefit from increases in the personal allowance, and about two thirds of those who benefit from the national living wage will be women. There are 300,000 fewer children in relative poverty compared with 2010 and there has been a massive reduction of 480,000 in the number of children growing up in workless households. Some 40% of two-year-olds—the least well-off—are benefiting from 15 hours of free childcare and working parents will be benefiting soon from 30 hours of childcare for three and four-year-olds, with tax-free childcare to come in from this month. There are also increases in childcare support under universal credit, including at small hours of work, to allow more women to re-enter the workplace.

Housing was mentioned a number of times, including, entertainingly, by John Mann. We absolutely agree on the centrality of housing in a number of respects, from affordability to social and geographic mobility and to productivity. That is why we have such a focus on this area, working towards 400,000 affordable housing starts by 2021. It is why the spending review doubled the housing budget from 2018-19. We want to get on with this as quickly as possible, which is why we are bringing forward capital for affordable homes and why central Government and local authorities are working collaboratively together, and with their partners, to release more land for homes.

The hon. Gentleman talked about his fifth proposal on devolution and I understand that he is due to meet the Chief Secretary to the Treasury soon. Likewise, Caroline Flint is to meet the Financial Secretary to discuss some of her points about tax transparency. The hon. Members for Leeds West (Rachel Reeves), for Aberdeen North (Kirsty Blackman) and for East Lothian (George Kerevan) talked about savings, and I am sure they will welcome not only the lifetime ISA, but, crucially, the help to save programme, which allows investment of up to £50 a month, with a Government 50% top-up, which could be worth a significant sum over the four years. For many people it could be the opportunity to build up a rainy day savings fund—a cushion against life shocks—for the very first time.

The hon. Member for Leeds West also talked about the tax gap—I think she said I was muttering at the time. I did not mean to mutter; the only thing I wanted to mention to her was that in the year to 2014 the tax gap was 6.4% of the tax due, whereas if it had stayed at its 2010 value of 7.3% of the tax due, £14.5 billion less tax would have been collected. This Government have a good record on narrowing the tax gap.

The hon. Members for Kirkcaldy and Cowdenbeath (Roger Mullin) and for Wolverhampton South West talked about transparency and publicly available information on company ownership. Our public register of company beneficial ownership will go live in June, but we want to go further, which is why we are consulting on extending transparency requirements to overseas companies purchasing property in the UK or bidding on public contracts. The overseas territories and Crown dependencies have to play their part as well, and at last December’s Joint Ministerial Council territory leaders agreed to hold company beneficial ownership in central registers or similar effective systems.

This Government have always believed that we should back working people. The Bill implements key measures to help working people to keep more of the money they earn, support the next generation, build up their assets and save. It increases the personal allowance by an extra £500 next year to £11,500, cutting taxes for 31 million people, with a basic rate taxpayer paying over £1,000 less in income tax than in 2010. It increases the higher rate threshold to £45,000 next year, taking 585,000 people to below that threshold. It introduces a new personal savings allowance that means that basic rate taxpayers will pay no tax on their savings income up to £1,000 and higher rate taxpayers will not pay tax on savings income up to £500. It also implements higher rates of stamp duty for the purchase of additional residential properties and £60 million of those additional receipts will enable community-led housing development in areas where the housing market is particularly affected by the prevalence of second homes.

Despite record-breaking increases in employment and strong overall economic growth, productivity growth has been weaker than forecast. The Bill takes further steps to back business, drive productivity and create yet more job opportunities. My hon. Friend David Warburton reminded us how fundamental those job opportunities are to families throughout this land. A highly competitive corporation tax rate has been a central part of the Government’s economic strategy to get businesses to invest in this country and the Bill drives progress even further by cutting the rate to 17% in 2020. It encourages investment in companies to help them to access the capital they need to grow by cutting the higher rate of capital gains tax for most assets from 28% to 20% and the basic rate from 18% to 10%.

The hon. Member for Aberdeen North rightly spoke up for her constituents and the key industry in her constituency, oil and gas. The Budget and Finance Bill deliver a £1 billion package of reforms to ensure the UK has one of the most competitive tax regimes for oil and gas in the world, taking the petroleum revenue tax to zero, halving the supplementary charge and extending the investment and cluster area allowances to safeguard jobs and investment. No other Government have responded on the scale that we have to the fall in the global oil price.

We must ensure that people have the right skills to realise our productivity potential. My hon. Friend David Rutley talked about the centrality of skills and how skills and investment go hand in hand. Improving the quality and quantity of apprenticeships is an integral part of the plan. The Bill ensures that that can be achieved by introducing from April 2017 an apprenticeship levy of 0.5% of an employer’s pay bill where it exceeds £3 million.

This Government have demonstrated that we are tough on tax avoidance and on evasion—a subject rightly raised by a number of speakers, including the right hon. Member for Don Valley, the hon. Member for Kirkcaldy and Cowdenbeath and my hon. Friend Nigel Mills. We have led the way internationally, acting unilaterally in Finance Act 2015 to introduce the ground-breaking diverted profits tax to deter large multinationals from avoiding UK tax. This Bill goes even further to ensure that all companies and individuals pay their fair share. It stops multinational tax avoidance by introducing new rules to address hybrid mismatch arrangements and by tackling contrived arrangements relating to payments of royalties.

Photo of Caroline Flint Caroline Flint Labour, Don Valley

Will the Minister meet me and colleagues from other parties to talk about the ways in which we can put into the public domain more information from the big corporate multinationals?

Photo of Damian Hinds Damian Hinds The Exchequer Secretary

I believe that a meeting has been set up for the right hon. Lady with the Financial Secretary, so I hope that, like him, she is looking forward to that.

The Bill targets key areas of online VAT evasion by providing stronger powers to make overseas sellers pay the VAT that is owed, helping to create a fairer market against UK players . It legislates to ensure that profits from the development of UK property are always subject to UK tax, reflecting the fact that land is a precious natural and national resource, and ensuring that UK developers share a level playing field with overseas developers.

Finally, the Finance Bill introduces a tougher anti-offshore tax evasion regime, with new criminal offences and civil penalties for those who evade or enable evasion. The Government’s position is clear. We will deliver a low tax regime for businesses, but they must pay their fair share of taxes here too. Evading tax is unacceptable and we will continue to bear down on it. The Government have announced legislation for 25 measures to tackle avoidance, evasion and aggressive tax planning, which are forecast to raise over £16 billion in this Parliament, on top of more than 40 changes made in the last Parliament.

As always, at Budget 2016 the Treasury updated its distributional analysis. The headlines are: it remains true that since 2010, the distribution of spending on different income groups or quintiles has remained essentially unchanged, while the incidence of taxation has shifted towards the most affluent fifth; the best-off 20% will pay more tax than all other households put together in 2019-20; and UK income inequality is now lower than it was in 2010.

Since 2010, the Government’s long-term economic plan has focused on sound public finances. Significant progress has been made, with the deficit as a share of GDP forecast to be cut by almost two thirds from its peak in the last year of the Labour Government. The Finance Bill ensures that the record can continue. It provides certainty for working people by reducing income tax and rewarding savers. It backs business and enterprise by cutting corporation tax and reforming capital gains tax. It supports the simplification of the tax system, and it takes bold steps to tackle tax avoidance and evasion. The Finance Bill demonstrates the Government’s commitment to a stronger, secure and more productive economy, and I commend it to the House.

Question put, That the Bill be now read a Second time.

Division number 233 Finance Bill 2015-16 to 2016-17 — Second Reading

A majority of MPs voted to increase the personal income tax allowance, change the way dividends are taxed, cut capital gains tax and reduce the amount which can be taken out of a pension tax-free from £1.25m to £1m.

Aye: 308 MPs

No: 248 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Absent: 88 MPs

Absents: A-Z by last name

Bill read a Second time.