Finance (No. 2) Bill

Catherine McKinnell Excerpts

Monday 15th April 2013 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

We have had a surprisingly good debate despite what was, frankly, a disappointing and lacklustre Budget. I use the word “surprisingly”, because the lacklustre nature of the Budget was no more evident than in the opening speech made by the Exchequer Secretary to the Treasury.

Hon. Members on both sides of the House have powerfully put the case for securing growth in our economy, and I especially want to commend several of the contributions made by Labour Members. My hon. Friend the Member for Islwyn (Chris Evans) made a powerful speech about aspiration that included a poignant reminder of the words of Harold Wilson that it does not matter what the rate of employment is because to a person who is unemployed, that rate is 100%.

My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) made a characteristically forceful and insightful speech about the impact of the Chancellor’s failing plan on economic development in the north-east, which is a region close to my heart. He reflected on the double-dip, double-debt and double-downgraded Chancellor.

My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) reflected on the banks simply not paying their fair share, while my hon. Friend the Member for Luton North (Kelvin Hopkins) gave a colourful insight into the Bill’s historical context. My hon. Friend the Member for Bolton West (Julie Hilling) reflected on her memory of Budget day and a Chancellor who simply looked lost as to what to do about his flatling economy and failing plan.

My hon. Friend the Member for Corby (Andy Sawford) made a passionate speech about the real impact of the Chancellor’s failure. The amounts involved under the bedroom tax might be worth just half a bottle of claret to the Chancellor, but to the people affected, they make the difference between heating and eating.

My hon. Friend the Member for Glasgow North East (Mr Bain), like other hon. Members, talked insightfully about the Chancellor’s campaign against the poor and the divisive nature of his economic policies. My hon. Friend the Member for Edinburgh East (Sheila Gilmore), with her insightful wit, put Government Members to shame for their failure even to show up today to defend their Chancellor’s Budget. We have just heard my hon. Friend the Member for Swansea West (Geraint Davies) reflecting on the divisive nature of the Chancellor’s failing plan.

We heard good speeches from the few Government Members who bothered to attend the debate—[Hon. Members: “Three.”] I am reminded that we heard three speeches from Government Members, and I was surprised by how few of them turned out to support their Chancellor’s Bill. The Exchequer Secretary claimed in his lacklustre speech that the Bill will inject energy into our economy, but it has not injected any energy into Government Back Benchers, so it is even less likely to inject any energy into our bumbling economy that is staggering under the weight of the Chancellor’s complacency.

The emptiness of the Government Benches has been stark. For most of the time, we have seen only the Minister, his Parliamentary Private Secretary and a token Liberal Democrat. Are Government Members too ashamed to defend their downgraded Chancellor? Even the Chief Secretary to the Treasury has not shown up today.

It is a shame that the hon. Member for Cities of London and Westminster (Mark Field) is not in the Chamber because he made a compelling speech in which even he lamented, to use his words, the Chancellor’s “sleight of hand” in manoeuvring to bring his borrowing down to just under £121 billion. That represents a rate of deficit reduction of not 1%, nor even 0.1%; at that rate, it would take 1,000 years to reduce the deficit. He acknowledged that debt will not fall in this Parliament, so the Chancellor should at least focus on the long term, instead of quick-fix gimmicks. That was sound advice.

The hon. Member for Redcar (Ian Swales) defended the Government’s failing plan, and suggested that a VAT cut would simply benefit the well-off. Has he even noticed the Chancellor’s tax giveaway to millionaires? The hon. Member for Macclesfield (David Rutley) proudly declared that the Chancellor’s plan was a continuation of Thatcher’s legacy, and told people to cheer up and stop moaning. He should try telling that to the 2.5 million people who are unemployed.

Deep down—perhaps it is evident from their poor attendance—even Government Members know that the Chancellor’s Budget failed to deliver what is needed to get us out of this economic mess. Let us consider the situation facing the Chancellor as he composed his Budget last month. What were the key economic indicators to which any genuinely in-touch Chancellor would want urgently to respond? Before we consider the current economic situation and this year’s Budget, let me take the House back briefly to the Chancellor’s first Budget—the June 2010 so-called emergency Budget—which, according to him, was necessary to deal decisively with the country’s record debts and produce a credible plan to deal with the record deficit. Right hon. and hon. Members may recall that the Chancellor used that emergency Budget speech to predict that the UK economy would grow by 1.2% in 2010, 2.8% in 2012, and 2.9% in 2013. He was dreaming. As a result of his failure, we have had a double-dip recession and the economy is stagnating, with just 0.8% growth since the 2010 spending review, compared with 5.3% forecast at the time. He consistently blames factors beyond his control, but only three G20 countries have grown more slowly than the UK in the same period.

The independent OBR has halved its predictions for 2013, anticipating growth of just 0.6% this year, compared with the 1.2% forecast in December, a mere four months ago. The most recently published figures suggest that industrial production in February was down 2.2% on the year before, while the UK’s trade deficit has widened to £9.4 billion following a worrying 4.7% fall in exports to non-EU countries. Indeed, over the past two and a half years, lack of confidence created by the Chancellor’s failing plan has seen business investment fall by £3 billion, compared with the OBR’s forecast of a £24 billion rise. Of the G20 nations, only Italy and Saudi Arabia have experienced a sharper fall in investment in that period. As a consequence of the Chancellor’s economic failure, Government borrowing has risen, not fallen, with the coalition set to borrow £245 billion more than the forecast in autumn 2010. [Interruption.] I am astounded that Ministers shout that we would be borrowing more; they are borrowing more.

The Chancellor’s promise to balance the books by 2015 will not be met, and the national debt will not fall until 2017-18 at the earliest, which has resulted in the downgrading of Britain’s triple A credit rating by Moody’s. More recently, Fitch has put the UK on negative watch—the very cover that the Chancellor used for his accelerated spending cuts in 2010. What does that economic failure mean for ordinary people up and down the country? Who is paying the price for the downgraded Chancellor’s economic plan, which lies in tatters? The most recent figures, published on Budget day, show that unemployment has risen again, and the trends behind the employment figures are increasingly worrying. Long-term unemployment remains far too high, and the risks have become dangerously entrenched while youth and female unemployment is up again.

Ministers regularly claim—and Government Members have done so again this afternoon—that the coalition has helped to create more than 1 million private sector jobs, but about 200,000 of those were created as a result of the reclassification of further education and sixth-form colleges in the private sector. Half the jobs that have been created since 2010 are part time, and almost 1.4 million people who want full-time work can only find part-time work. People who are in work have found that their wages have simply not kept pace with inflation. There is also the deeply worrying phenomenon of falling productivity, with more people apparently producing less. Is it any wonder that we have seen a disturbing rise in so-called zero-hours contracts, with recent media reports suggesting that almost a quarter of larger employers are recruiting staff in that way?

This is the reality for many people in this country—not for the Chancellor’s millionaire pals, but for the millions of ordinary people in this country who are facing the reality of unemployment and, for those in work, squeezed living standards, under-employment and increasing insecurity. The truly startling but unsurprising reality, confirmed by the OBR, is that people will be worse off in 2015 than they were when this Government came to power.

What was the Chancellor’s response to this dire situation on 20 March? A package of measures genuinely and urgently to kick-start our flatlining economy, boost confidence, stimulate investment and create jobs? No. A recognition that his plan has completely and demonstrably failed? Again, wrong. What this country urgently needed was a Budget with the X factor. Instead, we have a one-direction Chancellor who clearly believes that it is impossible to admit that he got it wrong and to change course. We got a more of the same Budget from a more of the same Chancellor, who would rather continue down the same path no matter what long-term damage it does to our economy and to local communities than come clean with the British public.

Of course, there were some welcome measures. The Opposition have consistently called for a tax break for small firms taking on new workers and the Chancellor is now set to introduce a scheme. Let us hope that it has a better success rate than his previous policy which, at the last count, has created 70,000 jobs, which is to be welcomed, but which is just a little shy of the original prediction of 800,000. On tax avoidance, the Government are consulting on how to clamp down on abusive payroll services based in tax havens, as well as confirming their intention to strengthen the tax disclosure provisions introduced back in 2004 by the Labour Government. Again, those are both areas where the Opposition have been calling for urgent action for some time.

Despite all the tough talk on tax avoidance, we continue to get a series of mixed messages from the coalition and a lack of real action. We repeatedly hear the Chancellor and the Prime Minister claiming to be leading on international tax avoidance action at the G8, yet days ahead of the meeting the Exchequer Secretary boasted that the UK has moved ahead of Ireland, the Netherlands and Switzerland in “tax competitiveness”. I wholeheartedly agree with the sentiments expressed by the hon. Member for The Cotswolds (Geoffrey Clifton-Brown), who is not in his place at present. He rightly pointed out that the UK needs to be careful of promising competitive tax rates if companies get away with not even paying them. He also rightly pointed out that we need to analyse what impact tax avoidance has on developing countries. We will introduce amendments to that effect.

Perhaps the most mixed message of all is the coalition’s incredible decision, announced in last year’s omnishambles of a Budget and confirmed in this year’s Budget document, to give some of the wealthiest people in this country an average £100,000 tax cut this month. A Chancellor who claims that he finds tax avoidance “morally repugnant” is determined to carry on with his game of “Who wants to bung a millionaire?”, reducing the 50p rate of income tax because the “behavioural response” was “larger than expected”. No doubt he will have phoned a few friends last weekend to remind them of his good news. This means, in effect, that top earners have been so nifty at shifting their income to minimise their tax liability that this Government, who talk tough on tax avoidance, are rewarding them by cutting the rate. Liberal Democrat colleagues will be telling themselves that this indefensible decision does not matter and that everything is okay because of the much-trumpeted increase to the personal allowance. But they have not quite owned up to the fact that families on average will be £891 worse off in this tax year, and cuts to tax credits and benefits have been introduced since 2010.

Indeed, the small rise in the personal allowance is hugely outweighed by the cuts to tax credits and child benefit, the bedroom tax, the granny tax and the increase in VAT, which the Liberal Democrats campaigned against so vociferously before it was announced in June 2010. The straight fact is that the dire economic situation in which we find ourselves is of the Chancellor’s making and that of the coalition Government, but the brunt is being borne by millions of ordinary people and local businesses—

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

[Catherine McKinnell]

The dire economic situation demanded an urgent response from the Chancellor. Indeed, the director general of the British Chambers of Commerce, John Longworth, said:

“We are at an unprecedented moment in our economic history, and the government should be doing everything in its power to get the economy moving. Many of the Chancellor’s measures are positive but may come too late, particularly for smaller and medium-sized companies. We need urgency, scale and delivery today.”

We agree, but what we got from the Chancellor and what we have before us this evening is a bit of tinkering around the edges and more of the same. It is just not good enough and Britain deserves better. That is why the Opposition will vote against this inadequate Budget from an inadequate Chancellor who is increasingly out of touch and totally out of his depth.

HMRC Closures

Catherine McKinnell Excerpts

Tuesday 26th March 2013 Westminster Hall

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Benton. I commend the hon. Member for Isle of Wight (Mr Turner) on securing this afternoon’s extremely timely and important debate. His record of assiduously standing up for his constituents and their interests is well known to the House. The issue of HMRC closures is clearly of particular importance to the people living on the Isle of Wight, given its geographical isolation from the mainland. He set out clearly and carefully the potential impact of HMRC’s proposals on his constituents. I look forward to hearing the Minister’s reply and how he intends to ensure that such problems and issues are mitigated and addressed.

The debate is timely: we heard only two weeks ago about HMRC’s proposals to change the way in which it supports customers who need extra help. I use the word “customers”, because that is the language deployed by HMRC and, no doubt, the Minister will use it in his reply, but as the Public Accounts Committee has frequently articulated, those who come into contact with HMRC have little choice about whether they do so. Many of those people—an estimated 1.5 million—find dealing with HMRC difficult because they have a disability or a mental health condition; they have low literacy or numeracy skills; they do not speak or read English; they do not have the confidence or capacity to deal with what can be a very complex situation; or because of a combination of any or all of the above. Ensuring that such people have access to the best possible support and advice in their dealings with HMRC is, of course, something that we all wish for, and we on the Opposition side of the House have regularly advocated that.

[Mr Mark Williams]

I want to add something to the mix of problems that the hon. Lady identified. In my constituency, we have a problem with broadband: 20% of my constituency is not broadband-enabled. The assertion is made that a lot more of the transactions and discussions can take place over the internet, but that simply is not available for many of my constituents. The Government are doing some sterling work to change that, but a solution for my constituents is some way off.

[Catherine McKinnell]

I thank the hon. Gentleman for raising that issue, which is very important, not only for areas without access to good broadband that allowed online dealings with HMRC not to end in utter frustration —even when people have broadband, it may not be sufficiently fast—but for constituents who do not even have computers or have access to them. I will mention later a concern in my constituency, which is that many public services, such as libraries and community centres, are struggling, and some are set to close, but many provide the only access that some people have to a computer. Although we would love to live in a digital age, we are not there yet.

We heard from the hon. Member for Isle of Wight, in his excellent contribution, about the 10-week consultation that was launched on 14 March, and the proposal to close every one of the 281 inquiry centres that provide face-to-face advice for customers. The centres are apparently to be replaced by “more accessible”, “targeted” and “tailored” services for people who need extra help in engaging with HMRC, either all the time, or in response to a particular life event, such as a bereavement. It is proposed that the new service will include specialist expert help over the telephone by a new team, and face-to-face support delivered by a mobile team of advisers, who can meet customers at suitably convenient locations in the community, or in their home.

That issue is particularly pertinent to me, not only in my capacity as shadow Exchequer Secretary, responding to the debate, but because I represent the esteemed people of Newcastle upon Tyne North, and HMRC proposes to trial or pilot the new idea on them. From 3 June to 31 October, the pilot will run throughout my region of the north-east, and 13 inquiry centres will be closed in the process. For the record, those centres comprise Alnwick, Bishop Auckland, Hexham, Darlington, Durham, Middlesbrough, Morpeth, Newcastle, Stockton, Sunderland and—although I, and many proud Yorkshiremen and women, might quibble over the Minister’s geographical knowledge of the north-east—Bridlington, Scarborough and York. Apparently, depending on the outcome of the consultation and the pilot, HMRC states that it will look to introduce the new service across the UK in February 2014, resulting in the closure of the remaining inquiry centres between March and May next year—including the one in the Jobcentre Plus in Newport, on the Isle of Wight.

The proposal will clearly also have a direct impact on the 1,300 HMRC staff employed in inquiry centres across the country, although I understand the intention is that many of them will be redeployed either within HMRC or to other parts of the civil service, and that is to be welcomed. As I stated earlier, I fully support the notion of providing a better service to the most vulnerable people with whom HMRC comes into contact. I welcome the fact that HMRC has said that it is working with TaxAid, Tax Help for Older People, the Low Incomes Tax Reform Group, Citizens Advice, Gingerbread, the Child Poverty Action Group and Age UK as part of the consultation on what additional support may be required and how it might be delivered. However, I want to probe the Minister on exactly how he thinks that HMRC will be able to improve its performance in that area, given the context in which the Department is operating.





I have previously told the Minister—indeed, only last month in this Chamber—that serious concerns remain about the customer service provided by HMRC. The National Audit Office report on HMRC’s customer service performance, published in December, revealed genuinely troubling findings about the way in which HMRC treats some of its customers. To remind hon. Members, 20 million telephone calls went unanswered by HMRC last year, costing customers £33 million in call charges; that is in addition to the estimated £103 million cost of customers’ wasted time. As I have stated previously, that is particularly worrying for people on low incomes who cannot afford to sit waiting on the telephone, and for small businesses that could be making much better and more profitable use of their time, which is particularly important in the current economic climate.

The Public Accounts Committee report on HMRC customer service published earlier this month was equally scathing, describing the Department as having an “abysmal record” in this area. Those concerns have been echoed by eminent professional bodies, such as the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales, whose members’ surveys have found significant concerns regarding the customer service performance of HMRC, which often fails to meet its basic responsibilities.

I acknowledge that there appears to have been some recent improvement in HMRC’s handling of post, but I would be grateful if the Minister could clarify the current position on its call-handling performance. According to the answer to a parliamentary question I received from the Minister only last month, the percentage of calls not handled—in other words, unanswered—by HMRC had gone up from 25.6% last year to 28.6% in this financial year to date. Given that we are now only days away from the end of the financial year, will the Minister confirm whether that fall in performance has continued, and if it has, what specific measures he has put in place to ensure that it does not fall further?

That point is, of course, pertinent to this debate, not only because of the concerns raised by the hon. Member for Isle of Wight, but given the recent words of the Chair of the Public Accounts Committee, my right hon. Friend the Member for Barking (Margaret Hodge):

“Just how the department is going to improve standards of customer service, given the prospect of its having fewer staff and receiving a higher volume of calls, is open to question. HMRC plans to cut the number of customer-facing staff by a third by 2015. At the same time, the stresses associated with introducing the Real Time Information System, Universal Credit and changes to child benefit are likely to drive up the number of phone calls to the department…Since our hearing it has also been announced that HMRC is to close all of its 281 enquiry centres which give face-to-face advice to customers. This will undoubtedly put even more pressure on phone lines.”

That is also relevant because HMRC’s consultation document appears to suggest that anyone who requires a face-to-face appointment with HMRC staff under the new system can obtain one only once they have spoken to at least two helpline advisers— and then a face-to-face appointment will be offered at the discretion of HMRC staff.

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On resuming—

[Catherine McKinnell]

I would welcome a guarantee from the Minister today that HMRC will significantly increase its call handling and customer service performance —perhaps beyond the relatively low targets it sets for itself—before the new service is introduced.

Of course, the proposals that we are discussing today are simply out for consultation. Indeed, HMRC itself has stated:

“No final decision will be made until we have consulted on and piloted the new service, and fully assessed the findings of the consultation and the pilot.”

It has also said:

“We plan to close our Enquiry Centres as the new service is introduced in 2014. This is subject to our making a formal assessment of how the closures affect our customers, the local communities they serve and our staff—as well as to the outcome of a pilot of the new service in the North East of England.”

However, I question the extremely tight time scales and the nature of the process. HMRC’s consultation ends on 24 May, yet it proposes to introduce the pilot in my region, thereby closing the existing inquiry centres, on 3 June—five working days later. It would be a genuinely impressive improvement in HMRC’s response times if it were able to process and adequately respond to all the consultation submissions it receives in such a short period. What will happen to the inquiry centres in the north-east if the pilot does not turn out to be a success? Will they re-open? Indeed, what measures will HMRC use to determine whether the north-east trial delivers what is intended? We often hear that Government pilots are “doomed to succeed” and I very much suspect that that is the case in the present instance. Does the Minister share my concern that HMRC staff have apparently already been told that it is “highly likely” that all 281 centres will close before the outcomes of either the consultation or the pilot are even known?

I understand the rationale behind HMRC’s proposals, based as they are on the decline in the number of people using inquiry centres over recent years from more than 5 million in 2005-06 to around 2.5 million in 2011-12. HMRC also states that it has conducted detailed research, which

“confirms that inquiry centres no longer meet the needs of our customers”.

Will the Minister address the concerns of the PCS union that that research was flawed? Did those conducting research on behalf of HMRC really not give people the option of selecting “speaking to someone in person”, when asking whether customers would prefer to deal with the department “by phone, post or online”?

It is not only PCS that is raising concerns about the proposals. The director of tax at Berg Kaprow Lewis, David Whiscombe, has said:

“No doubt many taxpayers would be happy to deal with HMRC online or via call centres if either were reliably available. But there is a swathe of taxpayers who are uncomfortable with these methods including numbers of the elderly, less literate or less articulate sections of the population for whom face-to-face contact delivers the only sensible option.

For HMRC to disregard them is arrogant, insensitive and, dare I say it just plain stupid”.

Jane Moore, tax faculty technical manager at ICAEW, commented:

“I'm disappointed because I think a lot of people could still make use of the Enquiry Centres. For the last few years I don't think the Revenue has done enough to publicise them or provide a comprehensive service.”

Those are worrying concerns being expressed by experts in the field.

Finally, I would like to mention an important concern in addition to those that I have raised already, and those raised by the hon. Member for Isle of Wight. It was briefly addressed when the hon. Member for Ceredigion (Mr Williams) raised it. HMRC states that it will be able to provide its new tailored service to those customers who need most support in a number of venues, including local libraries and community centres. However, as I have said, hundreds of libraries, community centres and other local facilities are either closed or facing closure as a result of the cuts that the Government have dished out to local government funding.

Those cuts are being targeted at areas such as northern cities, and many of the London boroughs with the highest needs. In such places there are likely to be more of the type of people for whom HMRC states it wants to provide a better service. What discussions is the Minister having with his colleagues in the Department for Communities and Local Government about the impact of their funding decisions on the venues from which HMRC hopes to be able to provide its new service? I am sure we would all agree that there is little point in HMRC offering face-to-face advice in community facilities if those facilities no longer exist.

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[Mr Gauke]

I am not in a position to answer that specific question. I am sure that my hon. Friend is closely informed of the job opportunities available on the Isle of Wight. I made a general point that HMRC will show considerable willingness to deal with staff in the best way possible. If one looks at the scale of the reduction in the number of people working for HMRC over a long period—since its formation in 2005—compulsory redundancy has been necessary on a very limited number of occasions. HMRC has a good record of ensuring that its staff are well looked after.

Concerns were raised that the closure of the inquiry centres marks the end of HMRC’s dedicated face-to-face advisory service. I can reassure hon. Members that that is simply not the case. A face-to-face service is about people, not bricks and mortar. What is important is that HMRC provides an accessible and flexible, face-to-face service that meets the needs of customers and can be tailored to the specific needs of particular locations, including the Isle of Wight. That is what HMRC proposes to do, only it will do it where it is most convenient for customers, whether that is in their local community, place of work or even, if they so wish, in their own homes. A modern face-to-face service is not about maintaining a patchwork network of buildings set up in the 1950s, when the needs and expectations of customers have changed. Inquiry centres are not universal; large parts of the UK are not even served by them.

The use of the centres has fallen sharply in recent years: visitor numbers have halved, from more than 5 million in 2005-06 to 2.5 million in 2011-12, and some inquiry centres are now open just one day a week, because local demand is so low. I shall address the Isle of Wight specifically. My hon. Friend quoted some numbers on the usage on the Isle of Wight. HMRC’s management information system shows that the Isle of Wight inquiry centre had 7,032 visitors in 2005-06, but since then the number has fallen: in the 2011 calendar year, it was 4,763; in the 2011-12 financial year, it was 3,622; in the 2012 calendar year, it was 3,298; and the projected number of visitors for the 2012-13 financial year is 2,886. There is a clear trend. The number is going down.

[Catherine McKinnell]

What does HMRC analyse as being the reason for the decline? Is it entirely because people contact it in a different way—over the internet, telephone and so on? Does the projected number take into consideration the significant changes pending for universal credit, the real-time information system, child care and so on?

[Mr Gauke]

As far as we can see, the driver for the fall in the number of people using inquiry centres is that people prefer to use other means of communication. There are always particular challenges within the tax system that might cause an increase in demand and phone calls. Steps are taken to reduce some of that demand from time to time.

In that context, it is worth turning to the research, which the hon. Lady touched on, that helped guide HMRC in its decision. It was undertaken by an independent agency, adhering to strict industry guidelines, and its findings confirm that face-to-face support works best for some HMRC customers who need extra help. It also says that any service for customers who need extra help must be as flexible and as accessible as possible, which is why HMRC is introducing specialist, expert over-the-phone help and working closely with the voluntary and community sector. A face-to-face service is an important part of the proposal, but it is worth underlining that the inquiries of the 2.5 million or so who visit HMRC centres are satisfied over the telephone. They use the inquiry centres to phone contact centres, which leads us to the important issue of ensuring that contact centres provide an adequate service.

I shall take this opportunity to respond to the hon. Lady’s questions. The number of call attempts handled for February this year was 91.8%, which is considerably higher than it has been at any time since HMRC’s formation. I remember that the number was 45% for 2010-11, and I think it was about 75% for the previous years, as it has been subsequently. HMRC’s ability to handle calls has therefore increased, which is welcome progress, and that, to be honest, is what we should expect from HMRC—progress on the standards.

To elaborate on the point I made a moment or so ago, HMRC’s analysis of inquiry centre use shows that 84% of the centres’ customers did not need a face-to-face meeting and were able to get the help they needed over the phone or online. The 400,000 customers who did need face-to-face advice had to travel to their nearest inquiry centre to make an appointment, and if there was no appointment free at that time, go back on another day to take up their appointment. The service is not particularly convenient even for those who do have a centre nearby.

HMRC’s research, which I referred to a moment ago, shows that up to 1.5 million customers need extra help with their tax and benefits affairs. Many just need help for a specific event in their lives—for example, when they approach retirement, deal with the death of a family member or declare new income for the first time—and others may have low literacy or numeracy skills, or difficulties coping with their affairs as a result of a mental health condition. Most of the 1.5 million people who need extra help do not currently use an inquiry centre. HMRC has researched the needs of those customers and that research has helped in the design of the new service.

The new service will provide specialist expert help over the phone for those who need it, and its advisers will take the time to sort out issues if they can. Customers will be able to phone from home and arrange a call-back if they cannot afford the call themselves, or they may use a free phone at a local Jobcentre Plus. Customers needing extra help will be quickly identified and put straight through to a trained adviser who has more time, as well as the skills, knowledge and empathy needed to handle the inquiry at a pace that suits the customer.

If the adviser cannot sort out issues over the phone, face-to-face support, delivered by a mobile adviser, will be arranged at a place and time convenient to the customer. It might be at a library or a local authority location close to the customer’s home, but I must reassure my hon. Friend that it will not involve the Isle of Wight ferry service. If someone needs a home visit, HMRC will arrange for a local home visitor to contact them and arrange a convenient appointment time between 8 am and 8 pm every working day. That is much more convenient than being constrained to a fixed location that is potentially difficult to access and often open for only one day a week. Extra help will also be delivered through voluntary and community sector organisations, such as Citizens Advice and TaxAid, with additional funding from HMRC.

The new service will be not only better but more cost- effective. Customers will save an estimated £12 million a year, through such things as reduced travel costs, and from April HMRC will convert its 0845 numbers to 03 numbers, making calling HMRC cheaper for all customers.

The current network of 281 inquiry centres is unsustainably expensive. The average cost of an appointment across the network has risen from £106 in 2009-10 to £152, and in some inquiry centres it is up to £500. By comparison, it costs an average of £3 per phone call and just 9p per online transaction. Members will appreciate that that expense is just not sustainable in the current economic climate. The new service will save HMRC up to £13 million a year.

HMRC will reinvest some of the savings from the closure of the inquiry centre network into the new face- to-face service and the voluntary and community sector support. To ensure that the phones are answered when people call, HMRC is investing £34 million in its contact centres. HMRC has also worked extremely hard to make big improvements to its customer service following the Public Accounts Committee report, which was touched upon by my hon. Friend the Member for Isle of Wight and the hon. Member for Newcastle upon Tyne North. As a result, it currently answers more than 90% of the call attempts it receives each week.

In designing the new service, HMRC has worked closely with a number of voluntary sector partners, including Citizens Advice, as well as tax charities such as TaxAid and Tax Help for Older People. On 14 March, HMRC launched a public consultation on how the new service would be implemented. The consultation focuses on the following: how a new service would be delivered in practice and whether refinements are needed for particular customer groups; the impact that closing inquiry centres would have on local communities, customers and diversity groups; the impact of the new service on the voluntary and community sector; and the support needed for customers to make the transition to other channels. The public consultation will enable staff also to feed in their views, and a summary of the responses will be published by the end of summer 2013.

A pilot of the new service in what I should perhaps describe as the greater north-east of England, will involve closing 13 inquiry centres and testing the new service between 3 June and 31 October 2013. That will help in gathering more information to ensure that the service is absolutely right for the customer, and a decision on whether to roll out the service nationwide will be made in December 2013. If the roll-out proceeds, the new service is expected to be launched between February and May 2014.

In conclusion, HMRC is making the changes in order better to meet the needs of the 1.5 million customers who need more help with their tax and benefits. HMRC is modernising its approach to break free from the outdated network of bricks and mortar and to provide a more flexible and accessible face-to-face service for people who really need it, including on the Isle of Wight. The proposals will target help at those who need it most, in a way that is better for them and more cost-effective for both them and the taxpayer. As a responsible employer, HMRC is taking all the right steps to minimise the impacts that the changes will have on its staff.

Oral Answers to Questions

Catherine McKinnell Excerpts

Tuesday 12th March 2013 Commons Chamber

[Mr Osborne]

My hon. Friend has that assurance. The funding for lending scheme, joint with the Bank of England, is now supporting the small and medium-sized business sector as well as the mortgage market, and is repairing the damage to the financial system caused by the financial crisis. He is also right to say that small businesses are the bedrock of our economic revival, which is why we have cut the small companies tax rate, which before the general election the Labour party wanted to put up. We have also carried on the relief for small businesses from business rates, and in the autumn statement we increased tenfold the annual investment allowance, so that small businesses can invest for the future and create jobs. The Government understand that there needs to be a private sector recovery in order not to repeat the mistakes of the past.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Chancellor boasts that all is going well for British business, but terrible figures out this morning show that manufacturing is down by 3% compared with last year’s figure. Business has lost all confidence to invest, so when will he pull his head out of the sand and see that his plan is clearly failing?

[Mr Osborne]

The manufacturing sector halved as a share of the British economy when Labour was in office and we had the fastest decline in British manufacturing in British history. The steps that we have taken to support manufacturers, to help with investment allowances and to ensure that they have access to fast-growing parts of the world, such as China and India, are all part of rebalancing and rebuilding the British economy. I was in the west midlands a couple of weeks ago, and there are 67,000 new private sector jobs in that region alone; I mention the region because private sector employment fell during the boom years under the previous Labour Government. We must get behind the private sector and we must get behind business: that is exactly what this Government are doing.

Tax Fairness

Catherine McKinnell Excerpts

Tuesday 12th March 2013 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to follow my hon. Friend the Member for Luton North (Kelvin Hopkins)

This has been a good debate on what is really quite a simple premise—that our taxation system should be based on fairness and equity—but there have been some disappointing, although I would also say unsurprising, contributions from Government Members. The Minister’s speech in particular seemed to confirm that the Government have their head in the sand when it comes to their disastrous economic policies and performance. Manufacturing has fallen by 3% since last year, business confidence and investment are plummeting, growth is flatlining, and the economy desperately needs some emergency care. Borrowing is going up, not down, and it is rising to pay the price of the Government’s failure. My hon. Friend the Member for Swansea West (Geraint Davies) described the position very passionately.

The hon. Member for Bristol West (Stephen Williams) complained bitterly that the Opposition had been stealing the Liberal Democrats’ policy. He now admits that it is his policy. In fact, he could have written it himself. I therefore still hope that the Liberal Democrats will go through the Lobbies with us today to support what will be a very measured step towards ensuring that the cost of deficit reduction is borne by those with the broadest shoulders as well as by those who can bear it least but who are, at present, bearing the brunt.

[Mel Stride]

The hon. Lady referred to the hon. Member for Bristol West (Stephen Williams), who asked a simple question of her Front-Bench team: will a mansion tax be in the next Labour party manifesto, yes or no?

[Catherine McKinnell]

We gave a simple response to that question—[Interruption.] First, we challenged the Minister to say what would be in the Government’s Budget next week. He will not specify that, so we are not able to announce at this stage what will be in our manifesto in two years’ time. If it is appropriate and a mansion tax will seek to deal with the mess that we anticipate this Government are going to leave this country’s finance in, it is certainly something we will consider.

[Mel Stride]

Is the hon. Lady seriously suggesting that just because a Minister will not make a serious breach of parliamentary protocol by leaking a Budget in advance she will not inform the House whether her party will have a mansion tax in its next manifesto?

[Catherine McKinnell]

No. That illustrates why the Government were not giving away what they are going to do in next week’s Budget, but we have said clearly that if we were in government now, we would not be cutting taxes for millionaires. We would be looking to put in place a mansion tax, which the Liberal Democrats would support, and we would be using that to take a measured approach to deficit reduction. Unfortunately, we are not in government. The Chancellor is presiding over a flatlining economy, so we are suggesting a way for him to try to get some growth back into the economy —we hope that the Liberal Democrats will support us today and proposals will come forward.

[Jonathan Ashworth (Leicester South) (Lab)]

My hon. Friend should take no lessons from Conservative Members, because when they were in opposition they refused to specify—apart from supporting Labour’s spending plans—any of the policies that would be in their 2010 manifesto.

[Catherine McKinnell]

I thank my hon. Friend for his impassioned slap-down of the hon. Member for Central Devon (Mel Stride). What is clear from today’s contributions is the gap between what Labour Members—and, we hope, Liberal Democrat Members—believe to be the fair and right thing to do, and what many Conservative Members believe.

As I said, the Opposition motion is based on a simple premise: a mansion tax on properties worth more than £2 million should be part of a fair taxation system and used to fund a tax cut for millions of people on middle and low incomes. Let us be honest—I know that Government Members cannot stay in denial of this any longer—those people are finding that their household budgets are seriously squeezed. An increasing number of hard-working families up and down the country are reaching breaking point. A number of hon. Members gave heartfelt accounts of the difficulties that many of their constituents are facing: the rise in the use of food banks; the VAT increase; rising energy and fuel bills, rail fares; and other household budget difficulties.

[Stephen Williams]

rose—

[Catherine McKinnell]

I will give way to the hon. Gentleman because he has been mentioned twice.

[Stephen Williams]

The hon. Lady again mentioned the tax cut for millions of people on middle and low incomes, which is in the Labour motion and indeed the coalition Government’s alternative. Will she confirm that the tax cut in the Labour motion matches up with what the Labour leader said last month when endorsing our policy of a mansion tax and that the tax cut that Labour is talking about is reintroducing the 10p tax rate?

[Catherine McKinnell]

We have made Labour’s approach clear. We have said that we would like to fund a 10p tax rate for the lowest earners. We have not specified that that is what the Government should do with this; we have said that it should be used to fund a tax cut for those on low and middle incomes. So if the Liberal Democrats want to support us in the Lobby, they can then pressure the Government to use that money in any way they see fit.

So let me remind the House of the context of today’s debate. Many of our constituents are struggling to make ends meet, due to a combination of under-employment, stagnating wages, rising food, fuel and child care costs, and of course the Government’s hike on VAT. Our constituents will be further hit by a £6.7 billion cut in working-age benefits and tax credits over the next four years. [Interruption.] The Under-Secretary of State for Communities and Local Government, the right hon. Member for Bath (Mr Foster)—the Liberal Democrat Minister—is groaning but that is the reality for many families up and down the country. At the same time, we read of hundreds of bankers at different financial institutions, including one owned by the state, earning more than £1 million per year. We have a Chancellor seeking but failing to use his ever-diminishing influence in Europe to fight against proposals to limit bankers’ bonuses to “just a year’s salary”. We have a coalition Government who will give the 13,000 people in this country earning more than £1 million a year a tax cut of £100,000 next month. No wonder people are angry and no wonder our economy is not growing when ordinary people cannot afford to spend and invest. We—or, more accurately, the Prime Minister—heard only last week from the OBR that fiscal consolidation measures have reduced economic growth over the past couple of years.

[Stewart Hosie]

The hon. Lady is absolutely right that the tax cut for millionaires is dreadfully unfair, but can she explain why, when the Labour party had the chance, it failed to oppose the tax cut for millionaires?

[Catherine McKinnell]

These arguments have been rehearsed many times and we have made clear our absolute opposition to cutting the top rate of tax at this time while slapping charges on the poorest in society. No wonder the hon. Member for Harlow (Robert Halfon) has spoken of the Government’s need to neutralise claims that they cut taxes for the rich.

Let us look at the Opposition motion, because I think the Liberal Democrats are dancing on the head of a pin when they say that they cannot support it. It calls for the introduction of a charge on properties worth more than £2 million, a mansion tax that the Liberal Democrats have estimated would raise £2 billion. We say that it could be used to fund a 10p tax band of up to £1,000, benefiting 25 million basic rate taxpayers to the tune of £100. We believe that Liberal Democrat Members should put aside their loyalty to the Conservatives and vote in favour of a principle—the principle of tax fairness at a time when so little of it is in evidence from this Government.

How could the Liberal Democrats do otherwise? Only last month, they made the introduction of a mansion tax the centrepiece of their Eastleigh by-election campaign. Recent media appearances have certainly suggested that they will support the principle, with the Business Secretary declaring that if the Opposition motion

“is purely a statement of support for the principle of a mansion tax I’m sure my colleagues would want to support it.”

Asked again at the weekend which part of the Opposition motion he disagreed with, the Liberal Democrat president, the hon. Member for Westmorland and Lonsdale (Tim Farron), replied, “None of it.” The former leader, the right hon. Lord Ashdown, declared that it would be “weird” if the Liberal Democrats voted against it. He is not the first person to call Liberal Democrats weird, but they have the opportunity to put that right today and to get on the road to normality by supporting their own policy.

Only yesterday, the hon. Member for Bristol West—I shall mention him one last time—said of the Opposition motion,

“I could have written it myself”,

yet today he complains that we have stolen his party’s policy. If such childishness gets in the way of the Liberal Democrats supporting their own policy in the Lobby, members of the public will be baffled and extremely disappointed.

[Stephen Williams]

rose—

[Catherine McKinnell]

I would give way, but I am running out of time.

We think that the Opposition motion presents those of us who believe in a fair and equitable taxation system with the opportunity to demonstrate that fact by voting in favour of it today. Will this be yet another example of the Liberal Democrats saying one thing to the electorate and doing something very different in government? What about their partners in crime—I am sorry, Mr Deputy Speaker, I mean partners in government—the Conservatives? We know that an increasing number of Conservative Members fear that they appear out of touch and that some, most notably the hon. Members for Harlow, for Camborne and Redruth (George Eustice), for Aberconwy (Guto Bebb) and for Cleethorpes (Martin Vickers), all of whom are noticeably absent from the Chamber, have argued that a way to counter that impression would be to reintroduce a 10p tax rate.

I have argued before that the best way to neutralise the impression that the Government are out of touch and only cut taxes for the rich is to stop cutting taxes for the rich, such as the millionaires’ tax cut that will take effect from April. I also acknowledge that it was a mistake to get rid of the 10p rate in 2007, although it enabled the 22p rate to be reduced to the 20p rate that is still in place today.

We believe that the best way to fund a new 10p tax band is through the mansion tax. Many right hon. and hon. Members have expressed concerns about how the mansion tax would work in practice, about how properties would be valued and about how people who live in £2 million properties but are apparently cash poor would pay. We have also heard, however, that the Treasury is drawing up detailed proposals for an annual charge on high-value residential properties owned by companies, partnerships or investment vehicles. It demonstrates that our plans—Liberal Democrat and Labour plans—for a mansion tax, an annual charge on high-value residential properties owned by private individuals, are entirely feasible, entirely realistic and entirely possible.

Our motion calls on the Government to bring forward proposals for a mansion tax, so that they can be considered in more detail by the House. The Opposition motion is simply expressed; it responds to Liberal Democrat concerns, and we still hope they will support us by voting for it. It calls for a tax on individuals fortunate enough to live in a high-value residential property, to support a tax cut for millions of hard-working low and middle-income families up and down the country at a time when they desperately need our support to put money back into household pockets and demand back into the economy. The motion provides all Members with the opportunity to demonstrate their support for a tax system based on fairness and equity, and I commend it to the House.

--- Later in debate ---

[Catherine McKinnell]

May I put a suggestion to the Minister? If Liberal Democrat Members support the motion and the Government bring forward proposals, they would not need to include the scheme in their next manifesto.

[Mr Foster]

I may return to the hon. Lady’s comments in a second.

We are supportive of the motion because we agree with Adam Smith, the father of free market economics. He supported higher taxes on property to reduce taxes on more industrious endeavours. We think it unfair that the richest people in the country pay the same council tax on their multi-million pound palaces as a family in a three-bedroom house in the suburbs. We agree on that.

Both parties in the coalition have been open about our disagreement, but the Opposition’s attempt to drive a wedge between us is infantile. Both parties know where we stand, and the public are clear about it too. The hon. Lady has to remember that all coalition tax policy is made by agreement between the Conservatives and the Liberal Democrats, and the mansion tax is an issue on which we simply could not agree. However much Liberal Democrats want a mansion tax, we know that the country’s economic future would be in severe jeopardy if the coalition fell apart on this issue. The country’s future is far too important for us to engage in the Opposition’s petty political games.

Infrastructure

Catherine McKinnell Excerpts

Tuesday 12th February 2013 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

This has been a good and thoughtful debate with Members on both sides of the House illustrating how important infrastructure projects are to their constituencies, to the wider region and to UK plc as a whole.

I want to highlight some of the more memorable moments in the debate. My hon. Friend the Member for Swansea West (Geraint Davies) summed up the Minister’s opening speech as a dismal display of dither and delay; I hope that I have paraphrased him correctly. The hon. Member for St Albans (Mrs Main) gave the Government’s position away by speaking up for dither and delay and cautioning against a mad dash for growth. One could not accuse the Government of that—it is more like a mad dash for the dip.

My hon. Friend the Member for Corby (Andy Sawford) spoke my mind when he expressed deep concern about the Government’s very backward-looking approach on this issue. He also made a passionate plea for more infrastructure investment in his area. My right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) spoke passionately about High Speed 1—a major achievement by Labour in government—and set out his concerns about the lack of housing investment by this Government.

The hon. Member for Rochester and Strood (Mark Reckless) limited his comments to rail infrastructure. He claimed that that was because the Government’s infrastructure activities are too broad and varied, but I would argue that it is the only area they are taking any action on at all.

My hon. Friend the Member for Croydon North (Steve Reed) raised the crucial issue of youth unemployment, which the Government, with their complacent approach, seem to overlook too often. My hon. Friend the Member for Sefton Central (Bill Esterson) recalled the cancellation of Building Schools for the Future—the decision made so rashly by the Government on taking office that has impacted not only on children but, as we now know, on economic growth.

My hon. Friend the Member for Bishop Auckland (Helen Goodman) talked about the lack of investment in the north-east region, with 0.05% of Government investment being the north-east’s share to date and the Government’s decisions being driven by a political rather than an economic rationale. My right hon. Friend the Member for Tottenham (Mr Lammy) set out the desperate need for investment in London. He was seconded by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), who cited the Mayor of London’s having called for much the same thing.

The majority of Members on whom I have commented are Labour Members. That is because we called this debate to raise the fundamental role that infrastructure projects could and should be playing in getting our country and our economy on the road to recovery and growth. This is an economy that has been flatlining as a result of the Government’s failing plan, that did not grow at all in the whole of 2012 and that has now shrunk in four of the past five quarters.

[Andy Sawford]

This country’s growth rate since the 2010 comprehensive spending review is 0.4%. On infrastructure, does my hon. Friend agree that the huge contrast between us and America, Germany and other countries that are maintaining their stimulus is highlighted by the fact that they are now above their pre-crisis peak? They are now growing by 3% or 4%, compared with the abysmal record of this Government.

[Catherine McKinnell]

Indeed. My hon. Friend makes that point very well. Infrastructure investment fell off the cliff when this Government came to power and we are seeing the economic consequences of that today. Many Members have referred to the Chancellor’s 2010 spending review. It took place in the fourth quarter of 2010 and the UK’s economy has grown by just 0.4% since then. During that time, the USA economy has grown by 4.2%, Germany’s by 3.6% and France’s by 1.5%. Our economy, however, has been stagnating for the past two years, and borrowing is now rising, not falling, as a result.

[Geraint Davies]

Will my hon. Friend give way?

[Catherine McKinnell]

I do not have much time left, but I will give way.

[Geraint Davies]

Does my hon. Friend agree that the United States strategy for the top 2% to pay more towards reflating the economy and getting 1% extra growth is a good idea and that we should not be hitting the poor to pay for debts?

[Catherine McKinnell]

This Government’s choices on spending and tax have resulted in millionaires being given a tax cut while the poorest bear the brunt. We are seeing the results of that, not just in the suffering that we see at our constituency surgeries, but in the lack of economic growth. That is why it is so disappointing—indeed, unforgiveable—that the coalition Government have been asleep at the wheel on the issue of infrastructure investment.

[Andrew Bridgen (North West Leicestershire) (Con)]

Will the hon. Lady give way?

[Catherine McKinnell]

I will give way one last time and then I must make some progress.

[Andrew Bridgen]

I thank the hon. Lady for giving way. Does she not recall that a pledge was slipped into and hidden away in the Labour manifesto to cut capital spending—that is, infrastructure spending—by 50% had her party formed the next Government?

[Catherine McKinnell]

That shows, once again, the Government’s utter complacency and head-in-the-sand approach to this whole issue. The hon. Gentleman knows that his Government have spent £12.8 billion less on capital investment than Labour planned, so I will not take lectures on that from any Government Member.

Time and again over the past two years we have heard the Prime Minister and Chancellor expound the value of infrastructure investment in delivering growth in the economy and, crucially, creating new jobs. All the evidence shows, however, that their record is one of inaction, complacency, delay and failure to deliver, which, combined with private sector uncertainty, is having a highly damaging effect on Britain’s construction industry for one.

The much-vaunted national infrastructure plan, published back in 2011, identified 40 priority projects that the Government stated were

“of national significance and critical for growth”.

However, despite the Government’s proclaimed focus on those so-called priority areas—and, indeed, a Cabinet Committee that is supposed to be overseeing progress—we are yet to see spades in the ground for too many of those projects.

Last year’s autumn statement announced a £5.5 billion infrastructure package, but this is to be paid for by cuts to departmental spending and underspend, including capital underspends, and one third of the projects included in the package had been previously announced by the Government. Indeed, describing the 2011 infrastructure plan as

“hot air, a complete fiction”,

the director general of the British Chambers of Commerce urged the Government to develop

“bold leadership and some creative ideas”

and to “get a grip” on this issue in order to stimulate economic growth.

The CBI’s assessment of the Government’s performance does not get any better, with its annual infrastructure survey last year finding that 73% of its members do not think that transport infrastructure will improve over the next five years and that two thirds believe that the UK’s energy and water infrastructure is unlikely to get any better. This has been damningly described by the CBI director general John Cridland as

“a wake-up call that businesses in Britain are looking for action and we haven’t seen any yet.”

Even the Deputy Prime Minister finally appeared to wake up to the importance of this issue—although a little late in the day—when he acknowledged last month that the coalition cut capital spending too deeply when it came into government. We were all desperately disappointed that the latest apology did not come via YouTube—the “I’m Sorry” infrastructure remix. We were offered this particular mea culpa via The House magazine, which he told:

“I think we’ve all realised that you actually need, in order to foster a recovery, to try and mobilise as much public and private capital into infrastructure as possible.”

Yes, that is what the Opposition have been saying all along.

In their first three years, this Tory-led Government have spent £12.8 billion less in capital investment than would have been spent under the plans inherited from Labour. That is a fall of 8%. According to the Government’s Office for Budget Responsibility, the coalition will spend £7.3 billion less on capital investment over the course of this Parliament than was planned by Labour.

This debate is not just about investment. Ensuring that infrastructure projects get off the ground and deliver jobs and growth requires the political will and determination to drive things through—something that is sadly and damagingly lacking under this Government. The economic situation in which we find ourselves requires urgent action from Government, such as that proposed in Labour’s five-point plan for jobs and growth, which would bring forward long-term infrastructure projects, as we did in the aftermath of the global financial crisis. That plan includes the construction of thousands of affordable homes.

We need a comprehensive long-term plan to rebuild Britain’s infrastructure for the 21st century—a long-term framework that gives investors the confidence that they need to invest consistently and that will deliver real results for the UK economy. That is why my right hon. Friends the Leader of the Opposition and the shadow Chancellor have asked Sir John Armitt, the chair of the Olympic Delivery Authority, to conduct a review into how long-term infrastructure decision making, planning, delivery and finance can all be improved.

As this issue is of such national significance, a cross-party consensus is required to deliver what we need. We have seen what can be achieved when we reach a consensus and plan for the long term across Parliaments and across political divides. The Olympics showcased Britain as the great country and the one nation that it is, but that was Labour’s legacy. What will be this Government’s legacy? If they are not careful, it will be dither, delay, stifled economic growth and stagnation. It is time to get a grip. The Opposition motion calls on the Government to do just that, and I commend it to the House.

HM Revenue and Customs

Catherine McKinnell Excerpts

Tuesday 5th February 2013 Westminster Hall

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Howarth. I join colleagues in congratulating my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing this morning’s extremely timely and interesting debate. His interest in all matters related to HMRC is well known, particularly through his work as chair of the PCS parliamentary group. I am keen to take this opportunity to commend him for his tireless commitment to ensuring that those who work for HMRC and their concerns are properly represented in this place.

I described today’s debate as timely not least because, until very recently, I had anticipated being briefed this morning by HMRC’s chief executive in my capacity as shadow Exchequer Secretary. Sadly, that meeting was cancelled at short notice—or was it perhaps prevented from taking place? I could not comment. In any event, as luck would have it, my hon. Friend successfully secured this debate, and the Minister will be pleased to know that many of the issues that I wanted to raise with the chief executive I will now raise directly with him instead.

What is clear from the many excellent contributions this morning is the absolutely crucial function performed by HMRC and its staff. Of course, HMRC does not just act as the UK’s “credit control department”. It has a vital role to play in delivering key Government policies, such as the impending universal credit, to which I will return. HMRC interacts with most of the UK’s adult population of 45 million and, indirectly, with their children, as well as with about 5 million businesses, and its primary function in doing so is to make our taxation system work. Indeed, without the money that HMRC collects, there would be no funding to invest in public services. That is why the capacity and resources that it has to perform its role are so critical and an ever-more pressing issue in this period of austerity and growing Government debt—a point that was made forcefully by my hon. Friend the Member for Leeds East (Mr Mudie).

HMRC staff can provide a pretty impressive return on investment. We know that, last year, senior HMRC officials brought in £16.7 billion over and above that which was returned by businesses and individuals. Indeed, the Association of Revenue and Customs—ARC—estimates that a senior tax official, earning £50,000 a year, can expect to generate an additional yield of at least £1.5 million a year—a return of 30 times the cost of their salary. Many hon. Members have referred to the excellent analysis provided by the PCS of the yield provided by HMRC’s office in Wick alone. That office is scheduled for closure in this financial year, as hon. Members have also mentioned. Each member of the 15 staff working in the Wick office in northern Scotland is responsible for bringing in about £1 million in tax a year. The total is more than £14.3 million. That compares with the overall annual salary and rental bill for the office of £494,000. It is an impressive return.

Despite the impression that one may have gained from recent media reports, we are fortunate to live in a generally tax-compliant country, with 93% of all tax paid as it should be. However, that figure, which compares well with those for our trading partners, can be maintained and improved only if we have a properly resourced HMRC. The Government should be doing everything within their power to assist HMRC to close the remaining tax gap, which my hon. Friend the Member for Bolton West (Julie Hilling) talked about in some detail. Many hon. Members have contributed today to give colour to the picture of just how difficult it will be to close that tax gap in the context in which HMRC currently operates.

As we are all too aware, HMRC faces budget cuts of £2 billion in the course of this Parliament. The Minister is likely to mention that the Government are “reinvesting” more than £900 million in HMRC, but the straight fact is that that is money that the Treasury had planned to take away from HMRC and is now returning. That still leaves HMRC with a £2 billion net reduction in resources. The Prime Minister may claim that HMRC’s staffing levels are increasing under his Government, but a quick fact check reveals that HMRC is losing 10,000 staff. It is little wonder, therefore, that there are serious concerns that HMRC staff and resources are being stretched to the absolute limit, and that situation is likely to get worse.

Indeed, the National Audit Office report on HMRC’s customer service performance, published in December, revealed truly worrying findings about the way in which HMRC handles its customers. A completely unacceptable 20 million telephone calls to HMRC went unanswered last year. As other hon. Members have mentioned, the NAO estimated that it cost customers £33 million in call charges while waiting to speak to a human being, on top of the estimated £103 million cost of wasted customer time. That is particularly concerning for those on low incomes, who literally cannot afford to keep hanging on the telephone, and for struggling small and medium-sized enterprises, which could be making far more productive use of their time. The hon. Member for Cities of London and Westminster (Mark Field) made a very passionate plea for small businesses in his contribution to the debate, and I agreed with much of what he said.

It is therefore welcome that HMRC appears to be improving its performance in that area, but I am sure that the Minister would acknowledge the Public Accounts Committee’s conclusion that that is from a very low base, with targets far below industry standards. I urge him to ensure that the recently announced move away from 0845 numbers will benefit people on low incomes, who often use pay-as-you-go mobile phones rather than mobile contracts or landlines.

We also heard the truly staggering statement by HMRC’s chief executive at a Public Accounts Committee session just last month that the agency currently has about 100,000 unanswered letters, although admittedly the number has fallen from the incredible 1 million at one point last year.

It is not just the NAO and the PAC that believe that HMRC is creaking at the edges. A survey by the Chartered Institute of Taxation of its members in the summer of 2012 found significant concerns regarding customer service provided by HMRC, including: delays in post handling; telephone calls that are passed to a customer service centre, resulting in a four-to-six week further delay; increases in basic errors; and delays in getting through to PAYE telephone lines.

A similar survey by the Institute of Chartered Accountants in England and Wales found that HMRC is often failing to meet its “basic responsibilities”, with phone calls and letters frequently going unanswered and staff often lacking the knowledge and training to handle complex inquiries. That is not just an inconvenience for taxpayers; mistakes by HMRC can be very costly and can make all the difference to a struggling SME or a struggling family. Every hour spent on hold to HMRC is holding back our economic growth, and that is at a time when the Government are relying on SMEs to dig us out of this economic stagnation.

Of course, the situation is not helped by a Government who simply do not seem to think through how their policies will be delivered on the ground. The debacle over the changes to child benefit, which came into force last month, has seen 475 staff drafted in to deal with that policy at a cost of £11.7 million and an additional 500,000 taxpayers being drawn into the complex self-assessment regime. I would therefore be grateful if the Minister confirmed from which areas of work those 475 staff have been taken in order to implement that ill-thought-through policy. What assessment has been made of the impact on what would be their usual work?

Will the Minister also give us some clarity this morning on progress in relation to the real time information system? He is well aware of the concerns of small businesses about the huge financial and administrative burden that that will place on them at what is already an extremely challenging time. It is extremely worrying, given that the functioning of universal credit will depend on that system functioning properly, that answers to recent written parliamentary questions suggest that the IT system matching employers with their bank records in the RTI pilot has a current failure rate of 25%. Will the Minister outline whether the success rate has improved in recent weeks? Can he provide us with some reassurance that he is confident that real time information will be delivered by HMRC as intended and on time?

Those are just two areas of significant change where HMRC is being expected to deliver ill-thought-through Government policy with significantly reduced staff and resources.

One area in which the Government have been making themselves look extremely busy of late is that of initiatives to tackle tax avoidance. The Chancellor’s announcement ahead of the autumn statement of £77 million of “new” funding for HMRC to expand anti-avoidance and evasion activity is welcome. However, the Minister must acknowledge that that does not come close to the £2 billion of swingeing cuts that HMRC faces. I have asked him this question before, and my hon. Friend the Member for Leeds East asked it again this morning: can he clarify whether that is indeed new funding or whether it just represents funding being shifted from one area of HMRC to another? If it is the latter, what assessment has been made of the revenue that will be lost from elsewhere as a result of reduced resource and capacity?

Time is limited, so the final key concern about HMRC capacity and resources that I will raise this morning—the case has been made powerfully by my hon. Friend the Member for Hayes and Harlington—is about the staff. Many concerns have been expressed about the number of highly skilled, experienced staff who have left HMRC. The Association of Revenue and Customs describes it as a “demographic time bomb”. I understand that more than half of HMRC’s work force are over the age of 45 and 18% are over 55. I have nothing against older employees, but there are genuine concerns about future work force planning and the ability of HMRC to deliver on some of the Government’s priorities.

HMRC is being asked to deliver ever-more complex taxation legislation, to deliver what have been described as “undeliverable” Treasury policies, to close the tax gap and to improve dramatically its customer service—all the while receiving £2 billion less in funding and operating with 10,000 fewer staff. Nobody disputes that efficiencies need to be made—every part of the public sector needs to make them and HMRC does not expect to be immune from that requirement—but it has already made hugely significant savings over recent years, including under the previous Government, so I urge the Minister to accept that there must be a limit to HMRC’s capacity to do more with less.

Taxation (Living Wage)

Catherine McKinnell Excerpts

Tuesday 22nd January 2013 Westminster Hall

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Robertson.

I commend the hon. Member for Harlow (Robert Halfon) on securing this debate on what is undoubtedly a crucial issue, not just for families on low incomes, but for our society and economy as a whole. We both share a great passion for promoting the importance of apprenticeships, and I believe we were among the first Members to employ an apprentice in our offices. Given today’s debate, it also seems that we share a passion for ensuring a fair distribution of wealth, for eliminating poverty and for creating incentives to work. That is why I am delighted that he secured the opportunity to debate this important subject, and particularly the benefits of a living wage, although I fear that our views diverge on the solutions that we would pursue to achieve those aims.

I commend hon. Members who contributed to the debate. The hon. Member for Strangford (Jim Shannon) made a powerful speech about the plight of low-paid workers and the striving private sector in his constituency. The hon. Member for Aberconwy (Guto Bebb) also made a comprehensive and powerful speech, although I dispute some of the issues that he raised, and particularly something that many hon. Members have talked about today—the idea of taking money away and giving it back.

No one, however, mentioned the impact of some of the Government’s changes. The strivers’ tax that was voted through by Government Members last night will have a devastating impact on many women across the country. Huge support is given to help women to cope with their child caring responsibilities and to support them to stay in work by making work pay, despite the significant costs of child care and taking maternity leave. That seemed to have been completely overlooked in the debate, so I wanted to draw attention to it.

[Mr Rob Wilson (Reading East) (Con)]

Will the hon. Lady let us know whether the Labour party is in favour of a 10p tax band or against it?

[Catherine McKinnell]

At the moment, the key issue is the impact of the Government changes, particularly on low-paid workers. The Government present the rise in the personal allowance as a benefit for some of the lowest-paid workers, but the reality is that several of the measures announced in the Budget and the recent autumn statement are impacting on those very workers whom Government Members profess to want to support. After one does the maths, there is huge concern regarding making work pay for those people.

The hon. Member for Cleethorpes (Martin Vickers) talked about the withdrawal of tax credits and keeping more money in people’s pockets, but Government Members have overlooked the major issue of the increase in VAT, which has had a massive effect on many people’s pockets. There is talk about how people should be required to make a contribution, yet low-paid workers throughout the country are making a contribution every day because of the additional VAT that is levied on them.

[Mr Rob Wilson]

Will the hon. Lady give way?

[Catherine McKinnell]

I want to make a bit more progress on setting out our position.

I challenge the hon. Member for Harlow on his approach, given that he, along with Government Members, yesterday voted through a measure that is effectively a real-terms cut for millions of striving families throughout the country. He voted for £6.7 million in working-age benefits and tax credits to be taken away over the next four years, thus cutting such support in real terms. I will be interested to hear the Government’s response to his contention that the reintroduction of the 10p tax rate would be the solution to the devastating impact on many families of such changes.

We are all too aware that the economic situation in which we and the Government find ourselves is challenging, to say the least. As a result of the Government’s failure to generate jobs and growth, they are set to borrow £212 billion more than planned, and the Chancellor has had to admit that he is set to miss his target of getting the national debt falling by 2015. The Office for Budget Responsibility has revised social security spending up by £13.6 billion by 2015-16, which is the price tag of higher unemployment. Although it is welcome that the unemployment figures have fallen recently, if we look behind the headline numbers, we see that long-term unemployment is not coming down, and that unemployment rose in a third of England over the past month.

People are struggling to make ends meet due to a combination of under-employment, stagnating wages, rising food, fuel and child care costs, and the hike in VAT. The situation is leading many people to a point at which they are increasingly using food banks and are often forced to work two or even three jobs just to keep their heads above water. Only yesterday, an alliance of 100 energy companies, charities and businesses joined forces to warn the Prime Minister that Britain is heading towards a fuel poverty crisis as a result of the Government’s failure to tackle that problem properly, with perhaps up to 9 million homes affected by 2016.

We heard several interesting contributions about the living wage, especially from the hon. Member for Harlow. To some extent, they built on the debate earlier this month that was secured by my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) which, like the hon. Member for Strangford, I read with great interest. The living wage campaign has been around for just more than a decade, but events of recent years have meant that the policy has come of age and is now right at the top of the political agenda. There is no doubt that Labour’s national minimum wage transformed the lives of millions. The policy not only affected people’s personal finances, but meant that the Government had made a clear statement that there was a line under which pay for an hour’s work would be unacceptable.

[Mr Rob Wilson]

The hon. Lady is being generous in giving way and I hope that she will not mind me restating my question, but I have not yet heard the answer. I am not asking for a policy, only whether, in principle, she and the Labour party are in favour of a 10p tax band or against.

[Catherine McKinnell]

The hon. Gentleman is well aware that Labour introduced the 10p tax rate. In the context of levelling out income tax and the personal allowance, the tax rate went from 22% to 20% and the 10p rate was abolished. There were various debates about winners and losers at the time, and there is no particular move at the moment to reintroduce the 10p rate. We are more concerned about the impact of the Government’s economic measures on low-paid workers, which the hon. Member for Harlow was discussing.

The Labour party’s approach has been clear—to tackle issues of low pay and to ensure that work always pays. We therefore want support for those who need extra help to make work pay, to keep them off benefits and to ensure that they can afford necessities such as child care so that they can stay in work. We have made our policy clear and we are therefore proud of what we achieved through the tax credit system.

[George Eustice]

I am grateful to the hon. Lady for giving way on this obviously difficult point. Having been in opposition, I fully understand her difficulties with people trying to bounce her into writing a manifesto commitment for the next election, but can she say whether the Labour Government made the right decision to abolish the 10p rate or, with hindsight, was that a mistake?

[Catherine McKinnell]

I appreciate the hon. Gentleman’s concern, but I am trying to discuss the premise proposed for debate today by the hon. Member for Harlow, which is people on low pay and the living wage campaign, so I will return to my point on the national minimum wage, which transformed the lives of millions. The policy is now taken for granted, but it was implemented in the face of often strident opposition, in particular by members of the Conservative party. Despite significant opposition at the time, however, it now seems to be universally accepted as an important aspect of our economy in ensuring fairness across the board.

The squeeze on people’s incomes and the ever-increasing cost of living, of which we are all aware and which we have all seen among our constituents, mean that for many the national minimum wage is simply not enough to make ends meet. Thus, a higher rate of £7.45 per hour outside London and £8.55 per hour inside the capital has been calculated by the Centre for Research in Social Policy as the level required to enable people to provide for themselves and their families.

[Guto Bebb]

On the minimum wage, although I was not in this place for the debates, my recollection is that the issue was about the scale and level of the minimum wage. My real concern was that the state was imposing a minimum wage on small businesses but also helping itself to tax from that minimum wage. Surely it is a good thing that the coalition is ensuring that people on the minimum wage are now paying significantly less tax.

[Catherine McKinnell]

Could the hon. Gentleman repeat his premise about how the Government are helping people on the minimum wage to pay less tax?

[Guto Bebb]

The point is simple. The Labour Government brought in a minimum wage, and yet the Government of the day helped themselves to significant amounts of tax from that minimum wage. In other words, small businesses in constituencies such as mine felt that they were being forced to pay higher levels of wages in order for the Government to be able to help themselves to tax. Surely this Government, by increasing the personal allowance so significantly, have reduced the tax take from those on the minimum wage.

[Catherine McKinnell]

I accept that the Government have increased the personal allowance, but their other policy changes have impacted on those very people whom they purport to be helping, with a real-terms effect on families up and down the country. In fact, the hon. Member for Cleethorpes admitted that his constituents are certainly not happy about some of the changes and their impact. I know for certain that my constituents would agree, but the shocking fact is that almost 5 million people across the UK are currently paid less than the living wage, and 3 million of them are women. The Government may believe that the way to motivate people on low incomes is to pay them less, and the way to motivate those on the highest incomes is to pay them more, but the Labour party believes that this is an issue of dignity at work and social justice.

[Mr Andrew Smith]

My hon. Friend is doing a very good job of batting off the attacks from Conservative Members. Does she agree that the hon. Member for Aberconwy (Guto Bebb) must not be allowed to rewrite history? The Conservative party argued vigorously against not just the level of the minimum wage, but its very introduction. It said that it would destroy jobs, but after it was introduced, 1 million extra jobs were generated in the economy. I think the Government now accept the point, but the hon. Gentleman must not be allowed to get away with rewriting history.

[Catherine McKinnell]

I thank my right hon. Friend for making that important point. I said that there was fierce opposition, particularly from Conservative Members, when the national minimum wage was introduced, and he has given some colour to the debate that took place at that time. We are moving on to the next stage, and the Labour party is backing the living wage campaign, which is a perfect example of how we can deliver a one-nation economy in which everyone has a stake, and prosperity is fairly shared. That is why Labour councils are delivering a living wage throughout the country, despite straitened economic circumstances for many and in the face of swingeing Government cuts. We believe in doing the right thing for low-paid employees. Those local authorities include Islington, Lambeth, Wigan, Camden, Oxford, Preston, Southwark, Hackney and, from November last year, my city council, Newcastle, which is meeting the cost of paying the living wage entirely from a reduction in management costs.

Labour councils are paying a living wage because it is a powerful symbol of the change that the Labour party wants to see in our economy. We do not want the race-to-the-bottom approach backed by the Government, who seek to erode workers’ rights and make it easier to sack staff. We want to aim for a higher skilled, higher waged and more productive economy that can genuinely compete on the global stage so that workers are not forced into several jobs with no chance of spending proper time with their families.

It is vital that the Government, both central and local, take a lead, but it is not enough, as hon. Members have said, for just the public sector to implement the living wage. It is great news that around 140 private sector employers have taken that step, including notable firms such as KPMG, Barclays, Deutsche Bank, PWC, Lush, Westfield shopping centres and InterContinental Hotels Group. Many of those firms have been clear about the positive impact that paying a living wage has had on their companies. KPMG has reported higher employee morale, motivation and productivity alongside a reduction in staff turnover and absenteeism since the policy was implemented.

[Mr Andrew Smith]

Does my hon. Friend agree that the really important commitment is not just that large organisations commit to the living wage, but that they require their contractors and subcontractors to do so? Otherwise there is a risk that they will simply outsource their low-paid jobs while taking credit for paying the living wage to their direct employees. We want everyone to have it.

[Catherine McKinnell]

My right hon. Friend raises an important point, and I will come to the Government’s approach to procurement in the private sector as the ripple of understanding of the benefits that the living wage can bring spreads to employers throughout the supply chain.

[Robert Halfon]

The hon. Lady mentioned some companies that have supported the living wage. That is all well and good, but they are big corporate companies that can afford to pay it. The issue for me is that smaller companies will find it much harder to afford to implement it. Surely the best way to help the lower paid is what the coalition is doing—cutting tax for low earners and taking 2 million lower income people out of tax all together. Is that not a much more effective way of helping the lower paid?

[Catherine McKinnell]

As I have said, the impact of the Government’s changes and the raising of the personal tax allowance have provided some help for those on the lowest wages, but the real impact has been detrimental. The figures from the Institute for Fiscal Studies show clearly that a family with one working earner will be worse off, on average, by £534 by 2016 because of all the tax and benefit changes that have been pushed through. I take on board the hon. Gentleman’s point, but the Government’s policies are hitting lower paid workers, not helping them.

[Robert Halfon]

I thank the hon. Lady for being so generous. She is right if she takes the benefits changes by themselves, but if she then looks at the lower tax for lower earners, the council tax freeze and other measures the Government have introduced, lower income workers will not be worse off in the way she describes.

--- Later in debate ---

[Catherine McKinnell]

That is certainly not the case in the studies that I have read on the overall impact of the tax changes that the Government have pushed through. The hon. Gentleman raised the important point about the best approach. I am sure that he is aware that the analysis by the Institute for Public Policy Research and the Resolution Foundation suggested that introducing a living wage could lead to a net gain to the Treasury of more than £2 billion a year when the costs of paying it throughout the public sector are set against reduced benefit and tax credit payments, and higher income tax and national insurance receipts.

As the living wage campaign takes hold, wins the arguments and wins over more and more companies, including those throughout the supply chain and smaller companies, it will improve the economy as a whole, and help to put more money in people’s pockets to spend in the local economy. That is vital when so many high streets and local companies are struggling. We have seen many worrying examples of high street shops closing. That compares with the suggestion of the hon. Member for Harlow to reintroduce the 10p tax band, which the Library estimates would cost around £6 billion a year. The cost of the hon. Gentleman’s approach is indeed high, particularly when set against the gains made to the Treasury from its ill-thought-through cut in support for low-paid families that was voted through last night.

The hon. Gentleman has set out his suggested approach for supporting low-paid workers. The Government’s approach needs a little more inspection at this stage. Last night, the striver’s tax was voted through, and according to the IFS, 7 million working households will lose an average of £165 per year. Indeed, its calculations show that the impact of the changes announced in the autumn statement between now and April 2015 will be to reduce the real-terms income of a one-earner working family by £534 on average by 2015-16. We know that a further 200.000 children will be pushed into poverty as a result of the uprating measures that were voted through last night.

Despite what the Chancellor may like to believe and some of the rhetoric from hon. Members on the Government Benches, it will not be so-called shirkers who suffer the impact of the changes. The Children’s Society has calculated that up to 40,000 soldiers, 300,000 nurses and 150,000 primary and nursery school teachers will lose out as a result of the 1% uprating decision. I have mentioned the impact of the mummy tax on women. The Government are not content that two thirds of those affected by the 1% uprating of benefits and tax credits will be women; they want to impose an effective tax cut of £180 on working women through their real-terms cut in statutory maternity pay.

Those are just a few examples of the Government’s warped priorities for workers on lower incomes, and there are many more. People are angry that they are being asked to pay the price of the Government’s economic failure when they are already struggling to get by, and when—all credit to the hon. Gentleman for raising this—the Government have decided to give a tax cut to millionaires. They need to neutralise the perception that they are giving tax cuts to the rich.

[Paul Uppal (Wolverhampton South West) (Con)]

That point is well worn and made continually, and I am sure that all Members are aware of the top rate of tax being cut, but there is an element of financial amnesia here. As even people who only have a rudimentary understanding of economics will appreciate, the main way that wealthy people accumulate wealth is through wealth creation, rather than income, which is always variable. If we look at capital gains tax, the current rate is 28%, which is in stark contrast to the previous Labour Government, where venture capitalists were paying capital gains tax at a rate of 10%—often much lower than the cleaners who were cleaning their offices.

[Catherine McKinnell]

I appreciate the hon. Gentleman’s point. We always have to support business growth and creation. Unfortunately, many of the Government’s policies are impacting on individuals and on consumers who will buy the goods that such companies make. In reality, that is resulting in stagnation and no growth in the economy, which is taking the country backwards, not forwards, but I take his point on board.

I suggest that a simple and effective way of pulling off an image neutralisation attempt would be by not going ahead with that tax cut for the rich, and by not pushing through real-term cuts for people in work, but on low pay. The hon. Member for Harlow has put forward his alternative argument—the restoration of the 10p rate of income tax on income between £9,205 and £12,000. However, as he notes in his early-day motions, restoring the 10p rate of income tax would move workers on the minimum wage only

“about halfway towards earning the Living Wage”,

and that would be at a cost to the Exchequer of around £6 billion a year, according to the Library. I can see alarm bells potentially ringing in the Minister’s head at that prospect, particularly when the Government are forecast to borrow £212 billion more than they planned to borrow two years ago and are failing one of the key economic tests that they set themselves.

In conclusion, the Government have repeatedly stated that they support the living wage and encourage businesses to take it up where possible. That is laudable, and the Opposition agree that the living wage should not be mandatory, but we encourage as many companies as possible to implement it. I would be grateful if the Minister could provide us today with examples of measures that the Government have taken to encourage the uptake of the living wage, as well as specific examples of what firms are now doing as a consequence of the Government’s actions.

I know from my work on apprenticeships that the use of the public procurement system in encouraging take-up has been a particular area of interest for the hon. Member for Harlow. My right hon. Friend the Leader of the Opposition has suggested that we can learn from local government procurement to see whether central Government can use their buying power to insist that large firms winning major public contracts commit to being a living wage employer. I suspect that the Minister may cite EU procurement rules as preventing that from becoming a reality, but the European Commission has stated:

“Living-wage conditions may be included in the contract performance clauses of a public procurement contract ‘provided they are not directly or indirectly discriminatory and are indicated in the contract notice or in the contract documents’.”

Will the Minister clarify whether the Government have any intentions of taking that idea forward?

Finally, I would be grateful if the Minister outlined which Departments are now living wage employers and which are not. It is absolutely vital that the Government show leadership on that issue. Will he clarify whether the Treasury pays the living wage to all its staff?

Once again, I applaud the hon. Member for Harlow for securing the debate, and for highlighting the plight of low-paid workers and the squeeze on families in these straitened times. I am interested to hear the Minister’s response to the suggested approach; how that can be reconciled with the squeeze on low-paid workers that his Government forced through Parliament last night; and what his Government will do to encourage more businesses to pay their workers the living wage.

--- Later in debate ---

[Mr Gauke]

The reality is that one has to look at all the measures that we are undertaking, which is what I would seek to do. It is worth pointing out that working households will gain an average of £125 in 2013-14 as a consequence of all the measures that we are undertaking. The right hon. Gentleman raises an important point—I shall return to the 10p rate in a moment—but let us remember the context in which we are having this debate now about the steps that we can take.

I will set out a case about the way in which the Government have taken substantial steps with regard to the personal allowance to help low-paid workers. We have done that at a time when we inherited an enormous deficit, and we have had to make difficult decisions about how we reduce that deficit. We have been clear in the distributional analysis of where the contributions are coming from. The facts are very clear. The top 20% of earners are making the biggest contributions, not just in cash terms but in relative terms, to reducing the deficit.

Let me return to the people who lost out from the abolition of the 10p rate of income tax. People under the age of 65 with non-savings income between £5,435 and £19,355 would have paid more, because they lost more from the abolition of the 10% rate than they gained from the cut in the basic rate. It is worth reminding ourselves that a Labour Government took that measure and that those low-paid workers would have paid more tax. The loss was greatest, at £232 a year, for someone earning £7,755—the top of where the 10% band would have been. Those most affected by the abolition of the 10p rate appear to have been those below the age of 65 with an income under £18,500 who were in childless households. The effect was greatest on those households where no individual was above the age of 60, because the household would not then benefit from the higher winter fuel allowance. That is the legacy of the last Budget of the right hon. Member for Kirkcaldy and Cowdenbeath.

Let us now consider what we have done in this difficult financial situation. We should remember that 2007 was still the age of apparent plenty; we have been in a much more difficult situation. Rather than reintroducing the 10% rate of tax, we have taken steps by increasing the personal allowance; we have taken real steps towards making the first £10,000 of income free from tax. I am grateful to a number of hon. Members for supporting that policy this afternoon. Since 2011, we have announced successive increases in the personal allowance, totalling £2,965. That includes a £1,100 increase announced in the 2012 Budget and a further £235 announced in the autumn statement last month. Following those announcements, the personal allowance rises by £1,335—the largest cash increase in history—to £9,440 from April 2013. Taken together, those changes will benefit 25 million individuals and provide a real-terms gain of £443 to most basic rate taxpayers in 2013-14. More than 2.2 million individuals with low incomes will have been taken out of income tax altogether.

I shall give some more examples of how the changes work. Let us take the context of the national minimum wage. My hon. Friend the Member for Carlisle (John Stevenson) referred to the personal allowance matching the national minimum wage for full-time employees, but let us examine what has happened to a person on the national minimum wage in full-time employment. In 2010-11, someone earning the national minimum wage would have had earnings of £10,979 and paid income tax of £901. In 2013-14, someone earning the national minimum wage will have estimated earnings of £11,691 and pay estimated income tax of £450. In other words, their bill will be halved. Another way to look at it is that, in 2010-11, such a person would have been able to work only 22 hours a week tax free; they can now work 29 hours a week before starting to pay income tax.

Another way to look at the situation is by comparing the approach that we have taken in increasing the personal allowance with the approach that the previous Government took in doubling the 10p rate of income tax. I talked about those who earn £7,755 a year and lost the most—£232 a year—as a consequence of the doubling of the 10p rate in 2008-09. In that year, an individual would have paid £344 in income tax. Under the present Government, in 2012-13, such an individual, with income adjusted for inflation to £8,299 a year, will pay about £39 in income tax—not £344 but £39 in tax, which is a saving of £305. In 2013-14, again with income adjusted for inflation, such an individual will pay no income tax at all. That is a contrast that I am very happy to highlight.

[Catherine McKinnell]

The Minister is setting out an interesting argument. Is he therefore making the case or suggesting that the Government will support the hon. Member for Harlow in his call for the reintroduction of the 10p tax rate?

[Mr Gauke]

The argument that I am making is about the contrast that can be drawn with the approach taken by the present Government, who have focused on reducing the tax bill for low-paid workers. That could be done in different ways, but we have undoubtedly, as a Government, reduced the income tax bill for low-paid workers. That compares favourably with the approach taken in the last Budget of the right hon. Member for Kirkcaldy and Cowdenbeath, in which he introduced a measure that increased pretty substantially the amount of income tax that low-paid workers had to pay. It is worth highlighting the point that we as a Government have done more, in very difficult circumstances, for those low-paid workers than the previous Government did.

I think that my hon. Friend the Member for Harlow agrees that we should meet the £10,000 target. The debate is then about where we go next. I will not be drawn into going beyond the firm commitment that we have in the coalition agreement and that has been evidenced by the steps that we have taken at every Budget and in the last autumn statement to make progress towards meeting that £10,000 target for the personal allowance.

My hon. Friend has set out very clearly the case for focusing on reintroducing a new lower rate. There are pros and cons of such an approach, and the debate on that will continue. As he would expect, I will not make any commitments on the matter. Clearly, there is a substantial fiscal cost in reintroducing a 10p rate of income tax. However, the Government’s values are clear. The overall cost of the personal allowance by the end of this Parliament will be around £9.5 billion a year as a consequence of the measures that we have taken. Clearly, where we can, we have been prepared to take substantial steps, at quite significant cost, to reduce the income tax bill for those on low earnings. That is something of which we should be proud, and as a number of my hon. Friends have said, we should be communicating that out there, because it demonstrates our values.

--- Later in debate ---

[Mr Gauke]

I should perhaps check the numbers, but I believe that my hon. Friend is in the right area. Those are, I think, the realistic costs. I am not here to make any further commitments beyond what we have said in the coalition agreement, but it is right that we have this debate. It is also right that we acknowledge that we are all trying to do the same thing, which is to reduce the tax burden on those hard-working, low-paid workers who have to pay more tax, partly as a consequence of a specific decision taken by the previous Chancellor in 2007 to double the 10p rate.

[Catherine McKinnell]

We are nearly at the end of the debate, and I am conscious that the Minister has not really addressed any of the issues that relate to the living wage and what the Government might do to promote that policy as well.

[Mr Gauke]

The Government are supportive of the living wage, which the hon. Lady has described as commendable or laudatory. However, unlike the Opposition, the Government do not believe that it should be mandatory. She appears to be in search of a dividing line on that issue. [Interruption.] I am pleased to see her shaking her head. There is cross-party consensus that the living wage has a useful role to play. We support it; we welcome it when organisations adopt it; but we do not believe that it should be mandatory. There are risks involved. In some circumstances, it might increase the cost to the taxpayer in higher salaries, and in others, it might result in higher unemployment. That is why we do not think it should be mandatory and why, I assume, she feels the same way, unless she has a different rationale.

[Catherine McKinnell]

I was seeking clarity on the questions that I raised and whether the Government are taking positive steps to promote the living wage.

[Mr Gauke]

It is very much for organisations and institutions to determine their own remuneration policy. We support such a wage in principle, but we will not make it mandatory, and there is cross-party consensus on that.

I turn now to the other steps that we are taking to support the low-paid workers whom my hon. Friend highlighted so well in his remarks. We have helped local authorities to freeze council tax for three years in a row, and we are proposing to set the council tax referendums thresholds at 2% for 2013-14.

I cannot, of course, go through a debate with my hon. Friend without referring to fuel duty. He is a keen campaigner on that point and he will be well aware of the steps that we have taken to ensure that average pump prices are currently 10 pence per litre lower than if we had implemented the fuel duty escalator. They will remain at least 10 pence per litre lower over the remainder of the Parliament than they would have been had we stuck to the plans that we inherited. In practical terms, it will cost £5 less for a typical motorist to fill their tank today and £8 less by the end of the Parliament.

We are taking numerous other steps to ease the load on those on low and middle incomes. We have capped average regulated rail and Transport for London fare increases at RPI plus 1% for the third year in a row. We have increased the basic state pension by £5.30 last year, which is the biggest cash increase ever, and we have introduced a triple guarantee, to ensure that it will increase each year using the increase in earnings, prices or 2.5%, whichever is highest.

I am conscious of the time, so let me say that I congratulate my hon. Friend on securing the debate and all the other attendees on their excellent contributions. As I have said, I think that my hon. Friend and I agree that the Government should reduce the tax burden on people on the lowest incomes. Our focus has been on increasing the personal allowance. I am confident that our policies, both on the minimum wage and the personal allowance, are exactly the right ones to achieve that.

Corporate Tax Avoidance

Catherine McKinnell Excerpts

Monday 7th January 2013 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Let me take this opportunity to wish you, Mr Speaker, and colleagues throughout the House a happy and productive new year.

I begin by commending the hon. Member for Redcar (Ian Swales) for securing this afternoon’s debate on corporate tax avoidance, an issue that provokes increasing attention from all parties in this House and about which the public’s awareness and media interest have probably never been higher. That is thanks in no small part to his and his colleagues’ work over the past year or so on the Public Accounts Committee, which is formidably led by my right hon. Friend the Member for Barking (Margaret Hodge). The quality and range of contributions that we have heard from Members of all parties build on those made during the excellent debate in September on tax avoidance and evasion, which was secured by my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), who also spoke today, passionately and thoughtfully, about his General Anti Tax-Avoidance Principle Bill, or GAntiP.

I also commend the many valuable, thoughtful and powerful contributions made by my right hon. Friend the Member for Birkenhead (Mr Field) and my hon. Friends the Members for Paisley and Renfrewshire North (Jim Sheridan), for Edinburgh East (Sheila Gilmore) and for Hayes and Harlington (John McDonnell), and to those Government Members who have spoken, including the hon. Members for South Norfolk (Mr Bacon), for Lincoln (Karl MᶜCartney), for Cities of London and Westminster (Mark Field), for Bognor Regis and Littlehampton (Mr Gibb), for Amber Valley (Nigel Mills), for North Cornwall (Dan Rogerson), for Stevenage (Stephen McPartland), for Thurrock (Jackie Doyle-Price), for Dover (Charlie Elphicke), for Bristol West (Stephen Williams), for Eastbourne (Stephen Lloyd) and for Southport (John Pugh) and the right hon. Member for Bermondsey and Old Southwark (Simon Hughes). I hope that I have not missed anybody out.

Members have touched on a wide range of issues, many of which I will pick up on in my comments. There seems to be a degree of cross-party consensus on the problem. I am less sure that there is an entire consensus on the solution, but I am sure that we are all much better informed about the issue and members of the public will know the strength of our feeling about it after today’s debate.

I join those Members who have applauded the individuals and organisations who have fought for some time to move this issue up the political agenda, whether they be Private Eye, Reuters, the Tax Justice Network or development organisations such as Christian Aid, whose tax bus I joined in Newcastle last autumn. Today’s debate has vividly illustrated the fact that the issue of tax avoidance and the strength of feeling about it will not go away any time soon.

It is clear that many ordinary people and businesses are angry about corporate tax avoidance. They are angry about the unfairness and injustice of working hard and paying their far share in taxes while a small but significant number of incredibly wealthy and powerful multinational corporations go to great and complicated lengths not to do so—and get away with it.

Let me be clear—hon. Members have referred to this—that nobody doubts the importance of multinational corporations to the British economy in terms of the jobs they create and support, the investment they bring and the goods and services they provide to UK consumers. Labour absolutely believes that we need the most competitive tax and regulatory environment possible for British businesses as part of a wider package of measures to drive the economy back to growth.

People are angry, however, at the apparent ability of multinational corporations to use extremely complex and, indeed, aggressive tax-planning arrangements, devised and promoted by highly paid tax experts, to shift profits offshore that have actually been generated from economic activity here in the UK. These profits have been generated from hard-working, UK tax-paying consumers and firms, in what appears to be yet another example of one rule for those at the top and another rule for everybody else.

People are also angry at the hugely significant amounts of money being lost to the Exchequer at a time when living standards are being squeezed, Government borrowing and debt figures are up, growth forecasts have been downgraded yet again, and the public services on which we rely are being cut up and down the country. The Government’s priorities are to give a tax cut to millionaires while striving, low and middle-income families and pensioners are struggling to make ends meet, so it is little wonder that we are seeing increasing hostility to those multinational corporations that are managing to avoid paying their fair share—and, indeed, to a system that allows them to do so—when it appears that the poorest and often the most vulnerable in society are bearing the brunt.

We all know that there are varying assessments of the tax gap—the difference between the tax owed and the tax that would be collected if everybody complied with the letter and the spirit of the law. Her Majesty’s Revenue and Customs recent estimate stands at £32.2 billion, which differs from the estimates of other organisations, such as the Tax Justice Network, which puts the figure at £120 billion. Whatever the actual figure, a hugely significant sum of money is being lost to tax avoidance. Although those involved in this practice may believe that they are simply beating the taxman, their tax planning arrangements are actually beating our schools, hospitals, Sure Start centres and all the other vital services that rely on public expenditure. This issue is becoming ever more pressing in this period of austerity and growing Government debt.

What must be done? The recent recommendations of the Public Accounts Committee following its investigation into tax avoidance point us in the right direction. However, I will turn first to the Government’s response to the problem to date. It is fair to say that tackling tax avoidance has risen up the coalition’s agenda. I have no doubt that the light being shone by the Public Accounts Committee and others on this complex and sometimes murky world has speeded up that process.

The position in which the Government find themselves—being forecast to borrow £212 billion more than they planned two years ago and failing the one test they set themselves of balancing the books and getting the debt down by 2015—lends ever greater urgency to the situation. Indeed, the Prime Minister, who has previously described tax avoidance as “morally repugnant” pledged last week that he was going to make “damn sure” that “really aggressive tax avoidance” by multinational corporations would be stopped. He even went on to suggest that such behaviour lacked “moral scruples”. Those are tough words, but they have been questioned today by some Members, including those on the Government Benches, notably the hon. Member for Lincoln. We are yet to see those tough words being backed up by tough action.

The coalition has been making itself look busy in tackling tax avoidance with a series of recent announcements. The Chancellor’s announcement ahead of his autumn statement of £77 million of new funding for HMRC to expand its anti-avoidance and evasion activity was certainly welcome, but it is a tiny proportion of the more than £2 billion of swingeing cuts to HMRC that he is already pushing through. If the Government were really serious about tackling tax avoidance, they would at least rethink the plan to cut a further 10,000 staff from HMRC, which risks being a false economy, as was argued powerfully by my hon. Friend the Member for Hayes and Harlington.

Last year, HMRC officials brought in £16.7 billion over and above that returned by businesses and individuals. The Association of Revenue and Customs, which represents senior staff in HMRC, published a proposal in November outlining the case for £120 million of additional investment, arguing that it could deliver £3.7 billion to the Exchequer in return. I understand that the ARC is now developing a comprehensive investment proposal for the 2013 Budget, which sets out a long-term strategic approach to challenging and reducing the tax gap. It believes that the scale of the budget deficit and the tax gap are such that modest investment is no longer enough. It would be helpful if the Minister outlined today what discussions he has had or will have with the ARC on those proposals and if he acknowledged the contribution that HMRC could make to reducing the tax gap and the deficit if it was properly resourced.

There are serious concerns at HMRC that it is being stretched to the limit. Severe pressure is being caused by problems created by the Government’s policies, including the debacle over the changes to child benefit, which come into force today; the impending chaos of the introduction of universal credit, with its dependence on real-time information; and the unacceptable delays for taxpayers and businesses when trying to contact HMRC by phone. Will the Minister clarify whether the £77 million of funding announced in the autumn statement will see entirely additional staff brought into HMRC or whether existing staff will be diverted from other HMRC activity? Given the hugely complex nature of tax avoidance schemes and arrangements, will he outline the specific steps that he is taking to ensure that staff are sufficiently skilled and experienced to take on the highly paid army of accountants and consultants who are engaged in the avoidance industry? That is a crucial part of what we are discussing today and of what has been highlighted so effectively both this year and last year by the Public Accounts Committee.

There is a niggling feeling, whether rightly or not, that HMRC does not deal with multinational corporations and complex tax avoidance schemes in the way that it deals with other tax offences by smaller firms and individuals. In its treatment of companies such as Vodafone and Goldman Sachs, which have been mentioned by a number of Members and in particular by the hon. Member for South Norfolk, there is a sense that HMRC takes the easy road and cuts easy deals, whereas it comes down hard on people paying their plumbers cash in hand. If the Minister could clarify the resources that HMRC will receive to tackle the problem, that would provide some reassurance.

Of course, the nature of multinational corporations means that Britain cannot act alone in tackling the problem. It is therefore welcome that the Prime Minister has written to G8 leaders setting out that tackling tax evasion and avoidance will be one of his priorities for the UK’s presidency of the G8 in 2013. It is absolutely right that that is at the top of the G8 agenda, alongside promoting jobs and growth. I look forward to hearing from the Minister what specific measures he hopes the G8 will agree over the coming months and what outcomes he hopes will be delivered.

I would be grateful if the Minister also clarified what progress the OECD is making in preventing artificial transfers of profits in tax havens, and told us how much funding the UK is committing to providing support for that important work. Will he also state whether changing OECD tax treaty standards on company residence and permanent establishment is on the agenda? I know that Government Members are always heartened to hear about closer European working, so I would be grateful if he also outlined the UK’s position on the European Commission’s action plan on tackling tax avoidance and evasion, which was published last month.

Perhaps one of the key planks of the Government’s approach is the proposed general anti-abuse rule, which is now expected to take effect from July. The hon. Member for Southport made a thoughtful contribution on that issue. The Minister is well aware of the various concerns that have been expressed that the Government’s proposals will do little to tackle the problems that the public feel vexed about.

Finally, I turn to the findings of the Public Accounts Committee, and particularly to the entirely curious announcement by Starbucks on the publication of the Committee’s report that it would pay a significant amount of tax in 2013 and 2014 regardless of whether the company was profitable. That seemed to miss the point somewhat, as Members have said today. I am sure that many of my constituents in Newcastle would welcome the ability to inform HMRC of how much tax they intended to pay and when, regardless of what their circumstances may be, but that is not how our taxation system should work. Taxation is not voluntary, and it requires transparency, public confidence, fairness and integrity if it is to function properly. It is now time to change the situation and ensure that HMRC has the powers and resources that it needs to ensure fairness across the board.

Oral Answers to Questions

Catherine McKinnell Excerpts

Tuesday 11th December 2012 Commons Chamber

[Mr Gauke]

That is a very good question, but I am afraid I cannot give an answer to it. What I can say is that we have today published draft legislation for a general anti-abuse rule and it will come into force next year.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Government’s shares for rights scheme is not only unpopular with the business community, but the head of the Institute for Fiscal Studies warned in the Financial Times today that it will

“foster a whole new avoidance industry”,

and the Office for Budget Responsibility believes the tax avoidance loophole it will create could cost up to £1 billion. Does the Minister agree with the OBR estimate? If so, why is he pressing ahead with a policy that is unpopular with business and could cost the taxpayer £1 billion?

[Mr Gauke]

First, it is not unpopular with business. Business groups have welcomed it, and the fact is that some aspects of our employment law can stand in the way of job creation. The OBR estimates that within the scorecard period this policy will cost £80 million in 2017-18. We believe it is the right move in order to ensure we have a more competitive environment.

Transferable Tax Allowances

Catherine McKinnell Excerpts

Wednesday 28th November 2012 Westminster Hall

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Turner.

I congratulate the hon. Member for Peterborough (Mr Jackson) on securing this debate. We have heard many sincere contributions. The previous speaker—the hon. Member for Enfield, Southgate (Mr Burrowes)—said that he was looking forward to hearing my response, but I think he should be looking forward instead to hearing the Minister’s response, because that is where the lack of clarity lies about what is actually going to be happening with this policy proposal that hon. Members have so vociferously supported this morning.

This is an important debate, given the lack of clarity and detail from the Government on what kind of scheme—if any—they plan to introduce. Conservative Members have repeated—I agree with their comments—that they intend to introduce some kind of recognition for marriage in the tax system; indeed, the Prime Minister himself repeated his commitment to such a plan at one of his first Prime Minister’s Question Times. Since that day, however, we have had no confirmation of what the policy might look like.

I want to tackle head on the allegation that families are a low priority for Labour Members. Quite the contrary: the Labour party stands up daily for hard-pressed families, who are feeling the squeeze in these tough economic times. However, we look to stand up for all families, not just couples who are married where one spouse stays at home and the other earns at the 20% rate of tax. It is those couples that the hon. Member for Peterborough and the Members supporting him propose to support.

It has been quite interesting to hear the number of comparisons made with our European neighbours and to hear them spoken of with such great admiration, with Members wanting to follow their lead. That is refreshing in many ways.

I understand the importance of marriage, but I am not convinced that recognising it through the tax system as proposed is the right way to go about this, and I will set out clearly the reasons why.

[Mr Stewart Jackson]

Perhaps the hon. Lady is feeling her way towards informing us of what the Labour party would do if this issue were brought to a Division in an indicative vote on the Floor of the House. However, I should remind her that the previous Labour Government established the precedent of recognising marriage in the tax system in 2007, through transferable allowances in respect of inheritance tax, so it is not as though the Labour party has never considered transferable tax allowances to support the family.

[Catherine McKinnell]

As I said, I am going to set out clearly why we do not agree that this policy is the right way to go about supporting the families Members believe it will support.

When the Minister without Portfolio told The Daily Telegraph that married couples should not count on getting a tax break before 2015, the party machine swung into action to correct it. A retraction was issued within 24 hours, and the Minister without Portfolio now completely accepts that a tax break will be introduced and that tax is a matter for the Chancellor. It is therefore good that we have the Exchequer Secretary with us to clarify what the Government plan to do, because it has been two and a half years, and Members on both sides of the House are waiting to hear the Government’s proposals. As Members have said, the Conservative party set out in its election manifesto its view of what a tax break for married couples might look like, but times have changed significantly. I therefore look forward to the Minister telling us what the policy might look like and whether it will be implemented, and I am sure other hon. Members look forward to his remarks in the same way.

The strength of feeling on this subject is clear from the number of Conservative Members who have contributed, and that is entirely appropriate. There are, however, serious concerns about the proposal, and Members have referred to the Liberal Democrat party.

[Jim Shannon]

I should say that the Democratic Unionist party is also on record as supporting the transferable tax allowance.

[Catherine McKinnell]

I apologise to the hon. Gentleman; I was going to pay tribute to his comments a little later. I am facing the Conservative Benches, and I take his point.

Many Members have mentioned the Liberal Democrat party, which was very ready to abandon its principles on tuition fees and the VAT bombshell, which it campaigned so hard against. However, Liberal Democrat Members have said clearly that they refuse to support this policy in principle, although no concrete proposals have come forward, so we still do not entirely know what they will do or whether they will support the proposal in its final form. We await clarification on that too.

At a time when families up and down the country are being hit hard by cuts to tax credits, a squeeze on their living standards, rising prices and frozen wages, with pensioners losing their tapered relief, and young people finding it harder than ever to get into work, many people will find it regrettable that Conservative Members’ focus today is on securing a tax break for a limited number of married couples. The previous Labour Government based their help for families on need and on a clear and targeted approach to alleviating child poverty, rather than on distinguishing between particular family structures.

If the policy the Government announce is the same as that set out in the Conservative party’s manifesto, it will, as Members have acknowledged, be worth just £2.88 a week. Furthermore, it has been targeted at an extremely narrow group: the only people who will be able to claim this tax benefit will be married couples where one partner earns above the income tax threshold and the other does not; whether the couple has children will be entirely irrelevant.

[Andrew Selous]

rose—

[Catherine McKinnell]

I know the hon. Gentleman has raised concerns about that matter.

[Andrew Selous]

The previous Labour Government recognised family breakdown as a cause of child poverty; indeed, the Treasury Minister and I were shadow Ministers when the Child Poverty Act 2010 went through the House. Would the hon. Lady like to confirm that now? Will she acknowledge that family breakdown is a significant cause of child poverty?

[Catherine McKinnell]

What is rather counter-intuitive about the arguments being put forward today is that this tax incentive, small though it is, would be targeted at the very families that are not in dire straits. Members seem to be turning their backs on children in families that are facing the difficulties they have described. Unmarried couples, including those with children, have lost out on tax credits—many have had their tax credits cut because they cannot find more hours of work—or have been hit with housing benefit cuts, but they will not benefit from these changes. If a marriage ends for circumstances entirely out of somebody’s control, or if they are widowed or have to flee the marriage because of violence, they will lose the proposed benefit, but it could still be available to the perpetrator of the domestic violence, who could get married again. Nor would this benefit be available to married couples where both partners are working, unemployed or low earners.

Hon. Members have mentioned analysis by the Institute for Fiscal Studies, but that analysis shows that this benefit will be available to only 32% of married couples. This policy is meant to recognise marriage in the tax system and to send an important signal that we value couples and the commitment people make when they are married. Do Members believe that only 32% of marriages should be valued, while the other 68% are of less value and less worthy?

[Guto Bebb]

Will the hon. Lady give way?

[Catherine McKinnell]

Unfortunately, I do not have much time. I appreciate this is an important subject, and I would like to give Members more time, but I want to finish my comments.

I strongly disagree with the hon. Member for Enfield, Southgate, who attempted to dismiss out of hand any notion that this policy recognises not marriage in general but just one type of marriage, where one partner is the breadwinner and the other stays at home. He dismissed the Deputy Prime Minister’s comments that such things are a throwback to the Edwardian era, but that is a sincere concern for many people.

I appreciate the comments of the hon. Member for Strangford (Jim Shannon) and the sincere manner in which he made them, but I disagree with him. Designing the system in a way that penalises all couples and families that do not fit in with one specific model, regardless of need, sends out a strong signal—intentionally, it would seem—that one type of family is worth more than another and that one type of parent is worth less than another. That is a very dangerous signal to send to children. It is unfair and out of touch, and is not the best way to support families in the tough times of 2012.

[Andrew Selous]

Will the hon. Lady give way?

[Catherine McKinnell]

I do not have much time, and I wanted to make a final point. The hon. Member for Cities of London and Westminster (Mark Field) made a powerful point, which I would make too: the Government, while talking about promoting or supporting marriage in the tax system, are removing valuable child benefit for many families and children.

Unfortunately I have run out of time, but I will be interested to hear what the Minister has to say in response to my concerns and those of other hon. Members.