Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.Donate to our crowdfunder
There has been a lot of discussion, Madam Deputy Speaker, about large corporate entities and taxation so I will talk a little bit about taxation from a personal point of view, because it is often the case that lots of smaller transactions from a large number of individuals can also make a significant difference. In my previous life as a financial planner, I very much did things along the lines of capital belonging in the hands of the people to give them the power to shape and determine their own futures. Our taxation system is something of a Frankenstein’s monster. Alison Thewliss was right earlier when she said that we tinker around the edges. I agree that we tinker around the edges in many ways. The wholesale, scrapping and rewriting of the entire system would be absolutely preferable, but it is a massive undertaking that no Government would ever do, so unfortunately we will always be restricted to tinkering around the edges.
That tinkering inevitably leads to the wonderful law of unintended consequences, loopholes and other things that appear, but despite all that, as a financial planner I always used to say to people that paying tax was a privilege. In many countries around the world there are people who would be delighted to be able to have their own businesses and to thrive, grow and pay tax, as we do. So it is a privilege, but everyone should pay their fair share, and that word “fair” is thrown around very easily these days. It is a very esoteric concept. It is a little bit in the mind of the beholder.
There has to be a point—a sweet spot—where there is no incentive to avoid taxation, and we saw it perfectly when we reduced the highest rate of tax from 50% down to 45%. The amount of revenue generated actually increased and there has to be a point where the incentive is gone. Fairness is not a concept that is available only to the Opposition Benches. What about the concept of fairness to the individual who went to university, stayed on for a master’s degree, started off at the bottom of an organisation, works 80 to 100 hours a week, sacrificing time with their families and lots of other social benefits so as to carve out a successful career, climbed the ladder and got to high levels of income and found that the taxation system was punitive and a punishment on success? It is not hard to see why the highest earners take steps to mitigate their tax levels.
As a financial planner, I always ensured that all the legitimate tax breaks were used—the simple things such as the ISA allowance, pensions allowances or capital gains tax allowances. Then, for people who have particular approaches to risk, there are vehicles such as enterprise investment schemes and venture capital trusts. That word “allowance” crops up all over the place in our tax code. There are legitimate ways to mitigate tax. We encourage it. Governments of all colours and descriptions have encouraged legitimate tax mitigation for decades, and it is important that we realise that the vast majority of the public engage in legitimate tax avoidance every day through pensions and ISA investments. We need to change the language we use a little bit to ensure that avoidance and evasion are treated and understood very, very differently.
Let us be clear that every £1 of evaded tax is £1 less for our vital public services. Everybody across this House and, more important, in the country, recognises that clearly. This Government are tackling the issues, and for Opposition parties to decry those efforts is just disingenuous. During the shadow Chancellor’s opening remarks, Opposition Members yelled, “Ten years, 10 years”, when we talked about our measures to fix the economy. Damn right it took 10 years. How long was it supposed to take? What would be reasonable from where we were in 2010? The tax gap was 7.3% previously, now it is 5.6%. There was an annual deficit of £153 billion; it is now an absolute shadow of that.
The Labour party complaining about 10 years is like people going around setting fires and then complaining that the fire service do not put them out quickly enough. It is nonsense, especially when, in the past two years, Labour Members have voted against various measures that would have helped tackle tax avoidance, evasion and non-compliance. If you will pardon the pun, Madam Deputy Speaker, the hypocrisy is a bit rich.