The Economic Secretary to the Treasury (Miss Chloe Smith)
I congratulate my hon. Friend the Member for Kettering (Mr Hollobone) on securing this debate and those who have spoken in it. By way of a preamble, you, Mr Deputy Speaker, may know that, like Kettering, my Norwich North constituency has a fine history of shoe factories, which sits alongside a history of manufacturing chocolate, mustard and many other fine products that Members are welcome to come and enjoy on their holidays.
The House will be aware that my right hon. Friend the Chancellor will make his autumn statement on Tuesday, so I will not set out the Government’s plans for the future in this debate. However, with that caveat, I will address—or attempt to address—the extensive points made by my hon. Friend and others, with reference to the principles for good taxation, tax simplification and transparency and, of course, the public finances and public spending.
In many ways, tax freedom day is an absolutely excellent idea. We all insist on knowing what we are paying for our goods and services, whether they be chocolates, shoes or anything else. Where we have ongoing payments, we adjust our direct debits so that we know what we owe and pay only that. Understanding the value of paying tax in some simple way should not be sniffed at. To quote the HMRC slogan—I cannot quite believe I am doing this on the Floor of the House—“Tax doesn’t have to be taxing”. Tax and our understanding of its value to the Government should be simple. None of us wants tax to be imposed sneakily, through the back door. We want tax to be proudly transparent.
There is a problem, however, which is that our lives are not that simple. If I paid only income tax, perhaps a basic “money in, money out” assessment could be made, but we have a variety of taxes in this country, which helps to maintain a balance for the individual and the state. Tax provides carrots for some activities and sticks for others. Talking of sticks, I suppose I should note what my hon. Friend the Member for Dover (Charlie Elphicke) said, which surprised me somewhat, because I am told that he told the Finance Public Bill Committee in 2010 that he was giving up. Perhaps he would like to confirm that—or not—in the remainder of this debate. [Interruption.] I beg my hon. Friend’s pardon.
Let me return to the more serious content of the debate. Tax rightly provides carrots and sticks, and people will experience taxation differently, depending on their circumstances and choices. For example, my personal tax freedom day may vary if I go out for dinner tonight or drive an extra 30 miles—my hon. Friend the Member for Harlow (Robert Halfon) will remember what I said in a debate with him only a few days ago. If my daily income varies depending on my daily work, my personal tax freedom day might also be different. In summary, if, like some television personalities, I was a supercar-driving, spirit-consuming, cigar or cigarette-smoking, house-buying, asset-selling additional rate payer, I would experience an entirely different tax freedom day from many others.
If our intention is to bring about a better understanding of what happens to our income and how much tax we pay, let us try to do that by striving to improve the perception and interaction of our taxes. We need to be clear about what tax revenue does and about the value of the interaction between the individual and the state. These are complex issues, which sadly are not captured in the calculation of tax freedom day, as set out in the Bill.
Let me work through some of the points raised by my hon. Friend the Member for Kettering and others. I applaud his championing of the great British taxpayer, and I absolutely applaud his drive for transparency. One strong point of the Bill is that it turns to the independence of the Office for National Statistics. At this point, Mr Deputy Speaker, you would expect me to underline the independence of the Office for Budgetary Responsibility, too, and the benefit it can bring to the way we look at taxation and public spending.
I have heard the point that national tax freedom day has moved by more than 30 days. I was extremely interested to hear the historical point made by my hon. Friend the Member for Bury North (Mr Nuttall) who noted, if I recall correctly, that in 1900, it was 22 days —[Interruption.] Does my hon. Friend want to intervene?
Mr Nuttall
I do not have the figures with me, but I think the Minister is giving the figures for America. There was, however, a clear link between them and the figures for here, demonstrating that there has been a massive increase in the tax burden since the turn of the 20th century.
Miss Smith
I thank my hon. Friend for that clarification. I was briefly about to exercise my mental arithmetic by suggesting that while it was 22 days in 1900, it was 19 days in 1910, demonstrating that these figures, like all good things in life, can go down as well as up.
I particularly note the birth date of my hon. Friend the Member for Kettering. May I briefly wish him a happy birthday—with, dare I say it, his 50th birthday falling only the year before the next general election? What a miserable time to have one of one’s major birthdays—in 2004 and 2014! We must do our best to give him a happier birthday in this place than he would otherwise look forward to.
My hon. Friend rightly pointed out that the Government have no money of their own. Taxation is not the Government’s money; it is never that. Taxation is people’s money pooled for the common good. That is my view of taxation. I should note that we spent a good deal of time earlier this morning talking about the value of society in debating the previous Bill. Margaret Thatcher spoke about there being “no such thing as society”, but only individuals. The current Prime Minister has moved the point forwards by saying that there is such a thing as society, but it is not the same as the state. I put myself in both those traditions and, I hope, alongside the views of my hon. Friend the Member for Kettering in feeling myself to be on the side of people who work hard, want the Government off their backs and want to be left with as much money as possible in their pockets to spend according to their own choices.
I was interested to hear the debate about whether tax freedom day would be better under a Conservative or a Labour Government. I note that there might be a cricketing correlation here. I suspect that my hon. Friend the Member for Shipley (Philip Davies) is a cricketing fan, as am I. He might be interested to think about the successes of the national side in 1981-82, when I regret to have heard tax freedom day might have been at its peak. He is interested in fours and sixes and not singles, so let us see what we can achieve now that England is once again at the top of the cricketing league. Let us hope that Britain is at the top of other leagues.
My hon. Friend the Member for Shipley wishes, I think, to oblige the Government to make tax freedom day as early as possible. I note briefly that his comparison to the United States could be unfortunate, given that a number of American politicians have recently pledged never to increase taxes, which has led to some gridlock in the US political system. I am not sure that we would want to see that here, given the attendant impact on the credit rating of that great country.
Some interesting points of difference have emerged, which it would no doubt be delightful to iron out in Committee. One is about how we might celebrate tax freedom day: should we have a bank holiday or achieve it in some other way? An additional bank holiday will always impact on the economy. Many business people in my constituency and doubtless elsewhere express concern at the idea of having an extra bank holiday.
Philip Davies
Thanks to organisations such as the Adam Smith Institute, we are aware that tax freedom day this year is on 30 May. Does the Minister think she could get the combined brain power of the Treasury on to the case to work out when, if the Government were planning to collect enough in taxes during this year to finance all their spending, tax freedom day would fall?
Miss Smith
I am sure that the combined brains of the Treasury could make those calculations, but I regret to say that my brain, combined or otherwise, is not agile enough to engage in such mental arithmetic on the spot for my hon. Friend’s benefit.
I think that learning of the existence of a “tax app” has enhanced all our lives today. I have only recently acquired a more sophisticated phone. I could not possibly reveal the brand name, but Members should note that I am now tweeting. They may wish to begin following my tweets, as no doubt others will.
As I have said, I noted what was said about taxation on items such as cigarettes and fuel.
Regional variation has been mentioned. My hon. Friends clearly do not want centralised uniformity in any shape or form, and I do not imagine that they would want taxpayers in London, by dint of legislation, to have to pay the same as taxpayers in Wales, or vice versa. I am sure that they support the Government’s actions in not only rebalancing the economy in the direction of a thriving private sector everywhere in the United Kingdom, but creating a thoroughly localist agenda to give people as much freedom locally as possible.
My hon. Friend the Member for Shipley mentioned Belgium and Cyprus. He will be aware that Belgium has had no Government at all for the past 528 days. He might welcome that in principle, but regrettably I am not sure that the average Belgian punter does.
My hon. Friend the Member for Bury North took us for a canter through many different types of tax. He cited Twain, mention of whom, as a lover of literature myself, I always welcome in any debate. He also succeeded in teaching me about the crystal and glass industry—and perhaps you as well, Mr Deputy Speaker. I do not know whether you knew that the stems of some glasses are hollow, but I had no idea that that was the case. In the words of Abba, if I had a little money in a rich man’s world, I might know more about expensive glass and crystal.
Mr Deputy Speaker (Mr Nigel Evans)
Order. Had I heard a filibuster I would have stopped it, as the hon. Gentleman knows.
Miss Smith
Thank you, Mr Deputy Speaker. I had assumed that my hon. Friend the Member for Wellingborough (Mr Bone) would appreciate a Minister’s taking the points made by Back Benchers seriously and dealing with them individually, which is what I am endeavouring to do.
Let me return to the subject of tax freedom day, as it is right for me to do in the remaining minutes that are available. My hon. Friend the Member for Kettering invited me specifically to rebut four points. He felt that an aspersion had been cast on the methodology proposed in the Bill. The aspersion that I would cast is that there is no such thing as the average person. That is what chiefly concerns me about the calculation establishing when tax freedom day should fall: I do not believe that it would represent the average citizen in a meaningful way.
My hon. Friend asked me to deal with the way in which the proposed methodology does or does not regard or disregard public benefits. I am glad that he welcomes the fact that taxation has another side, namely what can be done with the money once it has been collected. I shall say more about that in a moment.
My hon. Friend also asked me to discuss whether tax freedom day had or had not varied very little in the last decade. I think that that has been covered by earlier remarks, and by the clarification offered by my hon. Friend the Member for Bury North. The numbers do go up and down by small amounts. Like other Members, I have reservations about whether we should burden the Office for National Statistics with this further task—and, indeed, whether we should burden the Treasury, which, as Members will know, is one of the smaller Departments in terms of the number of people who work there. No doubt Members welcome that, and do not wish it to become any larger.
Philip Davies
Given that the Economic Secretary has made such great play of the burden this would impose on Government, will she tell us what estimate the Treasury has made of the increased costs the Government would incur by introducing this measure?
Miss Smith
Unfortunately, I do not have that figure to hand, but I will be happy to look into the matter.
As I suspect my hon. Friend has often argued, both small and large businesses find regulation burdensome, as do citizens. The Government have therefore endeavoured to reduce the amount of regulation, and I question the need for this measure as it is an extra piece of regulation. My hon. Friend also noted that as we can spend on Europe, we should be able to spend on this measure. I agree with his point: we all wish to keep firm control on what we spend in respect of the European Union.
In the March Budget, the Chancellor set out the Government’s principles of good taxation. Our taxes should be efficient and support growth. They should also be certain and predictable: they should be simple to understand and easy to comply with. The tax system should be fair, and should reward work, support aspiration and ask for the most from those who can afford it most. Those are the principles to which we are committed, and against which our tax system should be judged.
In trying to meet those principles, our taxes will necessarily become clearer, a goal to which we all aspire. In debating tax in general, its role in our economy and why the burden of taxation may be felt more keenly at certain times, we must bear in mind our current economic situation. Britain had endured the longest and deepest recession in living memory, we were borrowing £1 for every £4 we were spending, and we had the largest budget deficit in our peacetime history—one of the largest in Europe, and the largest in the G20—yet following the 2010 general election no detailed plan to deal with all that had been left in place by the previous Government.
That was not the end of the story. In the preceding decade Britain had slipped down the international league of competitiveness, falling from fourth to 12th. We had seen our share of world exports decline. We were considered to be a worse country in which to start a business than many of our European neighbours. That was this coalition Government’s inheritance.
We have therefore set about restoring confidence and stability to our economy, with a clear strategy for growth. At the heart of that strategy is a credible plan to tackle the enormous budget deficit, which we are already implementing.
One part of that plan is making changes to taxation. We must understand the changes this Government have made in order to see that a tax freedom day does not fully accord with what we want to achieve. For any taxation, we must, of course, make it clear why we are asking for a contribution, what we are doing in terms of public spending to balance changes in taxation, and why it is important to strengthen the public finances.
Growth is a key component of a strong economy; all parties agree on that. In the Budget we set out four economic ambitions: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe in which to start, finance and grow a business; that we should seek to be a more balanced economy by encouraging exports and investment; and that we should have a more educated work force, who should be the most flexible work force in Europe.
For the past decade Britain has been losing ground in the world economy. Other nations have reduced their business taxes further and faster, and some have removed barriers to enterprise, while ours have grown higher still. We cannot afford for that to continue.
Our plan for growth is based on private sector enterprise, not public sector borrowing. It is based on growing businesses, not growing debts, and on securing sustainable long-term investment. An essential aspect of that is creating a competitive tax system that enables our businesses to compete on the global stage and that gives value to businesses in ways that this Bill would struggle to measure.
Mr Hollobone
claimed to move the closure (Standing Order No. 36), but the Deputy Speaker withheld his assent and declined to put that Question.
Miss Smith
I shall briefly move on to something that will be of significant interest to hon. Members and to the businesses that I have just begun speaking about, which is modernising the administration of the personal tax system and creating proper tax transparency for individuals. I note that a fine document is being given out by Her Majesty’s Revenue and Customs at the moment. Hon. Members could encourage businesses and individuals in their constituencies to respond to it and help in the effort that we all want to see to improve the understanding of taxes—