Section 5 of the European Communities (Amendment) Act 1993

Kelvin Hopkins Excerpts

Tuesday 24th March 2015 Commons Chamber

[Mr Gauke]

We seem to have entered day five of the Budget debate. Let me make one or two brief points in response to the hon. Lady. First, let us remember what the state of the economy was in 2010, and the state of the public finances. Our borrowing levels were over 10% of GDP, which is a peacetime record, and we were forecast to have the highest level of borrowing in the G20. Over half of that amount has now been dealt with, but we have further to go and further steps are needed to deal with borrowing. That is why this House overwhelmingly voted for the charter for fiscal responsibility, which means that the cyclical current budget will be balanced by 2017-18. That is a target that those in all parts of the House signed up to, including Labour Members, but we heard nothing from them during the Budget debates, or today, about how they would meet that ambition. Whereas my party has set out our plans for finding £12 billion from welfare cuts, £13 billion from departmental spending and £5 billion from tax evasion, tax avoidance and aggressive tax planning, we have had no such indications from Labour. There is a huge hole where there should be an Opposition party policy.

[Kelvin Hopkins (Luton North) (Lab)]

The hon. Gentleman constantly talks about cuts—very unpleasant cuts that are going to affect a lot of poor people—but the real problem is an income problem, because we have a tax gap of £120 billion through evasion and avoidance that the Government refuse to recognise to its full extent. If we looked at the income side and made sure we collected the tax that should be paid, then we could address the problems with the deficit—if they are serious problems—and, at the same time, not inflict cuts on poor people.

Amendment of the Law

Kelvin Hopkins Excerpts

Thursday 19th March 2015 Commons Chamber

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

It is a privilege to respond to the Budget. I have calculated that, if we include emergency Budgets, this is the 20th successive Budget to which I have responded. I have begun to recognise some common traits, one of which is that the shadow Chancellor, whoever it is, has to adopt a tone of outrage. The current shadow Chancellor does outrage very well—I will concede that—but what he does not do so well is memory. He has the same problem as his party leader of forgetting important things.

The shadow Chancellor seems, for example, to have had problems remembering his own version of the millionaires’ tax cut, when throughout almost all the period of Labour Government the top rate of tax for millionaires was 40% rather than the 45% it is today. I think he has forgotten his authorship of that famous phrase, “No more boom and bust,” and his own role in boosting the banking sector such that it became overweight, toppled over and caused much of the damage and hurt we are still living with today. I think he has forgotten his record as a forecaster: we all remember his triple-dip recession—there was no triple and there was not even a recession.

There is help at hand, however, because one of the genuinely good legacies of the previous Labour Government is the Crick Institute, which will open shortly and will do medical research. I understand it will be taking forward some of the excellent work of University college London on neural pathways. That will open the door to a cure for amnesia, which seems to be the shadow Chancellor’s main problem.

[Kelvin Hopkins (Luton North) (Lab)]

Does the Secretary of State not accept that the real change took place when Mrs Thatcher and Geoffrey Howe abolished exchange controls, raised interest rates, raised the value of the pound, destroyed manufacturing and shifted power to the City?

[Vince Cable]

From what I remember of the facts, the biggest decline in manufacturing took place when the hon. Gentleman and his colleagues were in government. I will come back to that later.

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[Kelvin Hopkins (Luton North) (Lab)]

I shall be sorry to see the hon. Member for Dudley South (Chris Kelly) leave us. I have greatly enjoyed his company as a fellow member of the European Scrutiny Committee. Although we disagree about politics and I want Dudley South to become a Labour seat, I shall miss him.

The Budget statement was a process of glib window-dressing for election purposes: let us not kid ourselves about that. It was full of holes, and it failed to mention the harsh realities of the ongoing cuts agenda—an agenda that is really about reducing the role of the state on a road to the Hayekian nightmare of a world governed by private markets rather than democratic government.

My right hon. Friend the Leader of the Opposition spoke trenchantly and, I think, very intelligently yesterday in criticising the Chancellor, and my right hon. Friend the shadow Chancellor did the same today. My hon. Friend the Member for Halton (Derek Twigg) spoke very well about the effects of the cuts agenda on local government, and on child protection and adult and elderly care. We are already seeing vulnerable people being left at risk. There are crises of child abuse and insufficient child protection, and more elderly people are suffering from dementia. All those people depend on local government, which is being cut. We need more resources for local government, not less, and quality care for those who need it.

Millions of people are also in need of decent homes, as my hon. Friend the Member for Halton mentioned. In Luton, we have 8,000 on the waiting list. The only real solution is to recreate and restore the council housing sector. It was first attacked in 1972 with the then Housing Finance Act, which I well remember as a councillor at that time. Subsequently, we have had forced council house sales, which have left millions on waiting lists unable to get into a decent home, and a high proportion of those council homes sold did not end up in owner-occupation; they are now being let out as private rents.

The NHS is also threatened with deep cuts and creeping privatisation, inexorably driven by Government policies. It is substantially under-resourced now. Germany and France spend about 2% more of their GDP on health than we do, and that would amount to about £60 million per constituency per year. I would like my £60 million for Luton North now. It would make a tremendous difference.

The police have had savage cuts already, with more to follow, yet at the same time they are being asked to deal with terrorism threats and child abuse, looking at historical as well as current cases. They cannot do that unless they have the resources to do it, and they need more, not less.

On the subject of the deficit, the Government have refused to take the tax gap seriously, which is in reality £120 billion a year, not the £30 billion or so that they claim. What have the Government done? The Chancellor has decided to let another several million people not fill in tax returns, which is inevitably going to reduce the income to the Exchequer and make the tax gap, and the deficit, worse. Thousands of Her Majesty’s Revenue and Customs staff have been sacked already or lost their jobs, with more to follow, yet it is estimated that senior HMRC staff collect 20 times their own salary and junior staff 10 times their own salary, so more staff means getting in many more times the cost of those staff and helps to bring income to the Treasury. It is income that is the problem, not expenditure. The Chancellor’s biggest mistake, however, which I think he may come to regret, is abolishing tax returns for many people.

Today’s debate is really about business, however. I and many others are concerned about manufacturing. What the Chancellor has failed to recognise, despite pressure from me and others, is the crucial role of the exchange rate. After 1931, we had recovery after a big devaluation; after 1992 and the collapse of the exchange rate mechanism, we had a devaluation that drove recovery; after the 2008 crisis, we had a very substantial depreciation against both the euro and the dollar. We depreciated sterling by 27% against the euro and 31% against the dollar, which saved Britain from becoming another Greece, but writ large. We have survived simply because of the ability to devalue and the Government should thank my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) for keeping us out of the euro, which will be the case indefinitely now. That devaluation has saved us from a worse fate. It has still been difficult, but nothing like as bad as it would have been if we had not been able to devalue.

However, despite that depreciation we are still overvalued. We still have a massive trade deficit, with the EU in particular, amounting to about £1 billion a week, which is about 1 million jobs that we have exported to the continent of Europe. We must get an appropriate exchange rate for our economy that is considerably lower than it is now. Because the euro is depreciating, the pound is appreciating, which is going to make things worse. We therefore have what is called the J-curve effect: things seem to get better initially, but will get much worse later on when our competitiveness is seriously damaged by a depreciating euro. We therefore ought to be addressing the exchange rate, seeking to manage it down to an appropriate value, which will give us long-term protection for our manufacturing. As a result of consistent over-valuation over decades, manufacturing has fallen to half the size of that of Germany. Germany manages its exchange rate; it cemented it against all its competitor countries in the EU, which has protected it. We must do something similar, not by joining a fixed currency, but by managing our exchange rate. Our balance of trade is a serious problem that has to be addressed.

If competiveness is damaged by a poor exchange rate, investment is less likely. We still have a low level of investment compared with the average for the rest of the world, and it is a tiny fraction of China’s investment. We therefore still have low productivity. We have the second lowest productivity in the G7, above only Japan. All these factors are affected by the exchange rate. I hope the next Government—it should be a Labour Government—will address the exchange rate and ensure that we have a long-term appropriate exchange rate to make sure our industries survive and prosper.

Oral Answers to Questions

Kelvin Hopkins Excerpts

Tuesday 10th March 2015 Commons Chamber

[Danny Alexander]

I congratulate the hon. Member for Harrogate and Knaresborough (Andrew Jones) and my hon. Friend on the their work, and I met them recently to discuss it. There is a strong case for investment in the Harrogate-Leeds-York line and in the rail link to the airport that my hon. Friend describes. Ensuring that degree of connectivity for one of the fastest growing airports in the country, which has huge potential for growth, could also take off the roads the traffic caused by people travelling to other airports in the country. We shall be considering the matter carefully.

[Kelvin Hopkins (Luton North) (Lab)]

The Minister will have noticed the substantial depreciation of the euro in recent times, which is bound to cause damage to the British economy. When will the Government take the exchange rate seriously and seek to secure an appropriate exchange rate for sterling?

[Danny Alexander]

We take seriously the need for this country to have a set of policies that ensure the long-term health and growth of the UK economy, and the appropriate mix of fiscal policy, monetary policy and long-term investment. That is why we have the fastest growth in the United Kingdom of any advanced economy, and why there are now more than 2 million more people in work in the private sector than there were in 2010. That is a record I am proud of, and the hon. Gentleman should congratulate the Government on it.

Oral Answers to Questions

Kelvin Hopkins Excerpts

Tuesday 27th January 2015 Commons Chamber

[The Chief Secretary to the Treasury (Danny Alexander)]

During his time in Parliament, my hon. Friend has been a champion of the beer industry, small pubs and small brewers across the country—and a very effective champion he has been, too. Of course I cannot make any commitments about the Budget at this stage, but I welcome his recognition of the progress made on this subject during the course of this Parliament, and I will certainly take his recommendations for the Budget very seriously.

[Kelvin Hopkins (Luton North) (Lab)]

Britain has an enormous and persistent trade deficit with the European Union—clear evidence of a misaligned exchange rate. The significant weakening of the euro in recent days will make the position even worse and cause damage to British industry. When are the Government and the Bank of England going to take seriously the need to achieve and sustain an appropriate sterling-euro exchange rate?

[Mr George Osborne]

This Government do not target a particular exchange rate. Successive previous Governments found to their cost that doing so was difficult and damaging. What we do is ensure that Britain is competitive. I think the best thing to do to support exports is to make sure that our British businesses are taxed in a competitive way; they have great skilled work forces working for them—[Interruption.] They are chuntering away on the Opposition Front Bench. I seem to remember that when the Labour leader was asked recently when Britain would join the euro, he said it depended on how long he was the Labour leader. It is still official policy to join the euro and tie the currency up to the eurozone—with all the ensuing chaos that would follow.

Charter for Budget Responsibility

Kelvin Hopkins Excerpts

Tuesday 13th January 2015 Commons Chamber

[Mr Kenneth Clarke (Rushcliffe) (Con)]

That last speech clarified the fact that the shadow Chancellor admits that fiscal consolidation of the kind we are describing will be necessary for whoever comes into office after May and that getting back to a balanced economy depends on continuing efforts to improve the underlying growth rate of the economy. He was not able to produce any specific ideas at all. The only things on to which I could latch were that he was going to put up the minimum wage and restore the completely pointless 50% tax rate on the very highest earners. If he thinks that that is an economic growth plan to stimulate our underlying trend in growth to the levels of Chile and Mexico, he is showing the same levels of competence that he displayed when he was the main economic adviser to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in the previous Government.

What we are talking about and what I hope we will get agreement on—I hope that the reality of this will dawn on the Labour party as a whole eventually—is that the essential pre-condition of any economic policy that will get this country back to healthy balanced growth is fiscal consolidation by eliminating the deficit, controlling the overall level of debt and, at the top of the cycle, running a surplus on the budget to get the stock of debt back to a manageable level. That is a message that the present Chancellor has been trying to get across in the four years that it has taken to get us to the position that we are in at the moment, which is much more successful than that of almost every other western democracy in similar troubles. If the Labour party has really taken that on board, at least it is beginning to be fit for office. But as far as I can see, it has no other policy.

[Kelvin Hopkins (Luton North) (Lab)]

The former Chancellor may remember that, in the 1920s, similar policies were followed and that, at the end of the 1920s, the debt was larger and we had a decade of unemployment and poverty. After the second world war precisely the opposite policy was adopted, and we had rapid growth, full employment and the debt came down.

Oral Answers to Questions

Kelvin Hopkins Excerpts

Tuesday 9th December 2014 Commons Chamber

[Danny Alexander]

I wholeheartedly agree with my hon. Friend on that. He has done more than most Members of this House to promote apprenticeships, the creation of skills and the manufacturing industry, and I pay tribute to him for his work. I ask him to look at what we have said about this in the autumn statement, which contains particular measures to promote the provision of better careers advice in schools.

[Kelvin Hopkins (Luton North) (Lab)]

T8. This week, growth forecasts for the eurozone economies have again been downgraded, but the European Central Bank is refusing to adopt counteracting measures of quantitative easing. What plans do the Government have for protecting Britain’s economy in the event of a full-blown euro crisis?

[Danny Alexander]

The best protection for the UK is to stick to the economic plan that is creating jobs and growth up and down this country. That is what the coalition has done and will continue to do. The OBR’s forecast, published last week, showed that it expects the UK, despite the difficulties to which the hon. Gentleman refers, to continue to have economic momentum over the next few years.

Oral Answers to Questions

Kelvin Hopkins Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Danny Alexander]

I do share my hon. Friend’s concerns. As he knows, a currency union is not going to happen because it would expose the rest of the UK to economic risks that it could not control and leave Scotland unable to control its economy in the face of huge risks and uncertainty. An effective currency union needs a fiscal union and a political union, yet that is what the nationalist campaign wants to dissolve. The only way for Scotland to keep the pound as it is now is to remain part of the UK, and that is what I believe my fellow countrymen will vote for on 18 September.

[Kelvin Hopkins (Luton North) (Lab)]

Britain has an enormous trade deficit, especially with the EU, which is clear evidence of a misaligned exchange rate, and UK manufacturing is again suffering as the euro has depreciated relative to sterling. When is the Chancellor going to take the exchange rate seriously?

[Mr Osborne]

I follow the practice that previous holders of this job have followed over the past 20 years, which is not to comment on the exchange rate, but as I said in my response to the first question in this session, the weakness in the eurozone is an emerging risk to the UK economy and something to which we need to be alert.

Finance Bill

Kelvin Hopkins Excerpts

Tuesday 1st July 2014 Commons Chamber

[Shabana Mahmood]

Focusing on the actual figure is important. It concentrates the mind when assessing the scale of the task both for this Government and the successor Government in 2015. By anyone’s analysis, £35 billion is a huge sum, which, if collected, would make a very significant difference to the nation’s finances.

[Kelvin Hopkins (Luton North) (Lab)]

My hon. Friend is making an excellent speech and she is right that this is a large sum of money. It is equivalent to 9p on the standard rate of income tax.

[Shabana Mahmood]

My hon. Friend makes an excellent point. He is of course right that this is a huge sum of money and that people are rightly concerned that £35 billion-worth of tax is potentially going uncollected in our country.

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[Shabana Mahmood]

I am grateful to the hon. Gentleman for his intervention, but as I just said, the tax gap has widened: despite those efforts, it has gone up by £1 billion or more.

The Public Accounts Committee also raised concerns about the monitoring of tax relief at HMRC and the Treasury. In 2013, there were 1,128 tax reliefs in the UK taxation system—a number that continues to grow. Tax reliefs can range from fundamental components of the tax system, such as the level of the personal allowance, to tax expenditures with more specific objectives to change behaviour, such as film tax relief. They play an important role in the tax system, but can be abused. Indeed, even in this Finance Bill the Government have had to take steps to close down the abuse of tax reliefs. It is therefore very worrying that the Public Accounts Committee has concluded:

“There is a lack of transparency and accountability for tax reliefs and no adequate system of control, following their introduction. HMRC and HM Treasury share responsibility for tax reliefs, but there is no accounting officer with responsibility for the stewardship of tax reliefs, as there would be for”

other elements of

“public spending. In 2010, HM Treasury committed to developing a framework for the introduction of new reliefs”.

However, no measures have been implemented so far.

In December 2013—this is relevant to what the hon. Member for Dover (Charlie Elphicke) said a moment ago—there were just four full-time officers in the fugitive unit, trying to catch 124 HMRC fugitives. The Government launched a “most wanted” campaign in August 2012, but earlier this year it was found that just four fugitives had been caught since the publication of the list. Moreover, it was admitted that of the 32 “most wanted”, 11 could not be located. If the Government are to support their claim that they are succeeding in the fight against tax avoidance and evasion, they must be able to demonstrate that they will catch those who break and abuse the rules, and will prosecute them to the full extent of the law.

[Kelvin Hopkins]

Does not what my hon. Friend is saying suggest that there is a cosy relationship between the Conservative party and the very rich? The Conservatives do not want to chase those people, because they do not want to upset their friends.

[Shabana Mahmood]

My hon. Friend has made his point powerfully, and in his characteristic way.

As we can see, despite the Government’s claims, their record of tackling tax avoidance is simply not good enough in a number of areas. They will say that the avoidance measures in this Bill are radical and bold, and are evidence of a commitment to tackling avoidance. We have supported the measures relating to follower notices, accelerated payment notices and the need to tackle promoters of tax avoidance schemes, although we have questioned the Minister about some of the deeply felt concerns of those who will be affected by the follower notices regime and by accelerated payment notices, which have caused a great deal of debate outside the House. However, although those measures have received the Opposition’s support, the fact is that they are not revenue raisers. They will simply bring in money that the Government were expecting to collect, but which had been clogging up the various back channels and alleyways of the legal system.

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[Shabana Mahmood]

My hon. Friend is absolutely right about the findings of that report and we know that this is a real problem, particularly for people in the construction industry.

[Kelvin Hopkins]

My hon. Friend is making a very fine speech and I agree with what she is saying. In 1970, I serviced on the TUC construction committee, and a major item on the agenda at the time was bogus self-employment and the loss to the taxpayer. Another point is important, too. They do not pay their national insurance, so they will suffer when their pensions come to be paid.

[Shabana Mahmood]

I am grateful to my hon. Friend, who is right that this is a long-standing problem for Governments of all colours and persuasions who have for too long been unable to deal with these very serious issues which result in people not being entitled to sick pay, holiday pay, maternity and paternity leave and other employee rights.

The third problem associated with disguised self-employment is that the unhealthy level of self-employment in the construction industry—40% compared with an average of 14% across all other industries—does not offer a sustainable skill supply for emerging growth opportunities or a change in the economic weather. Employers who want to invest in their staff and employ directly are losing out to companies that use payroll companies which, because they are paying less tax, can sometimes offer slightly higher pay to poach skilled staff.

In July 2009, we published proposals to tackle the problems of false self-employment in the construction industry, but it was not until last year’s Budget that the Government took an interest in the problem when they announced that they would consult on proposals to tackle tax avoidance by intermediaries based offshore who provided labour services to UK companies. We are still waiting for the Government’s response to their consultation on onshore intermediaries, which closed, I think, in March.

Last year, the shadow Secretary of State for Work and Pensions, my hon. Friend the Member for Leeds West (Rachel Reeves), reviewed the issue and, based on an investigation of the available evidence and widespread consultation with the industry, we have proposed that workers should automatically be deemed to be treated as employees for tax purposes if they meet criteria that most people would regard as obvious signs that they were employees rather than self-employed subcontractors. It is important to note that the measure would not only close a costly tax loophole but remove a perverse financial incentive for those workers whom most would regard as being in an employment relationship to be classified as self-employed. Such a shift would be good for the construction sector and its work force, too. We want the Government to take further action today to consider the issue and prepare the report envisaged in our new clause.

The third area in which we seek greater action is that of dormant companies. It has been estimated that 30% of all UK companies are not asked to submit tax returns. One explanation that has been given is that those companies are either dormant or are not liable to pay tax in the UK as they trade exclusively overseas. Once companies have declared themselves dormant, they are exempted from filing a corporation tax return for five years. For some companies, that window could be used as an opportunity to trade with tax impunity and yesterday we set out our proposals whereby we will require annual confirmation of dormancy and will further explore the possibility of banks’ automatically informing HMRC when there is activity in supposedly dormant accounts. That would deal with an issue of tax evasion, rather than tax avoidance, but it is important that the tax lost as a result of weaknesses in the rules of dormancy is firmly on the Government’s radar and it has not been to date.

As I have set out, tackling tax avoidance and closing the tax gap effectively remains a top priority for the public. This Government’s record is not good enough. Our new clause pushes for greater action on three important issues and practical measures that can help to close the tax gap. We hope that it will have the support of the House this evening.

[Sir Gerald Howarth]

I am pleased to take part in this debate—it is the first time I have participated in a Finance Bill debate for quite a long time. I rise to take issue with the hon. Member for Birmingham, Ladywood (Shabana Mahmood), who made a long and interesting speech, about her definition of tax abuse. Indeed, there was no definition of what is considered to be abusive tax arrangements. I think that we have all become lax in our use of language in a matter which is of huge concern to our fellow citizens, for the powers of the Inland Revenue—HMRC—to take money earned by our fellow citizens is an important power and one that should be used very carefully indeed. This House has a responsibility to ensure that these matters are properly debated.

I have to tell my hon. Friends that I am increasingly alarmed by the Government’s rhetoric on what they refer to as “aggressive tax avoidance”. I was brought up to understand that tax avoidance is not only legitimate but, indeed, the duty of the head of every household. It is not their duty to maximise their tax; it is their duty to minimise it. It is our money, which is taken from us by the Government.

[Kelvin Hopkins]

Will the hon. Gentleman give way?

[Sir Gerald Howarth]

Quite a lot of people want to speak, but the hon. Gentleman is a good man, so I will give way to him briefly.

[Kelvin Hopkins]

It is a simple point: the great majority of wage earners and salary earners can never escape, avoid or evade tax because they pay through PAYE. They have to pay every penny of their tax every week, every month, every year.

[Sir Gerald Howarth]

The hon. Gentleman is entirely right, but overwhelmingly it is the entrepreneurs of this country who drive our economy. Ensuring not only that our entrepreneurs are encouraged to invest in providing jobs for people but that this country is a good place in which people from overseas wish to invest their enterprise must be a major consideration.

As I say, I was brought up to understand that tax avoidance is entirely legitimate, and if a scheme is found to be outwith that which the Government intend, it is for Parliament to close any loopholes; tax evasion, on the other hand, is illegal. However, we have become consumed by the idea that because some high-profile companies do not pay tax in this country, tax avoidance as a whole is somehow immoral. I think that some of the companies that do not pay tax here ought to and I strongly support endeavours by the Government to ensure that they pay their fair share, but when, 10 days ago, I was approached by a constituent who told me about the accelerated payment scheme, I became very concerned indeed.

My constituent, a pharmacist, together with a local GP practice and a dentist, wishes to set up an enterprising, innovative scheme in Aldershot to provide a new, modern facility, but if he is told to pay the thick end of £100,000 when he understood the scheme to be perfectly lawful, where is that money to come from and what happens then to his investment in his proposed business? I think this measure will lead to great uncertainty. I pay tribute to my hon. Friend the Member for Cities of London and Westminster (Mark Field) for the clear way he has drawn attention to the potential repercussions of the Government’s proposal.

The Government are proposing to confer massive powers on state officials. Clause 213(3) provides that

“The payment required to be made under section 216 is an amount equal to the amount which a designated HMRC officer determines, to the best of that officer’s information and belief, as the understated tax.”

There we have it—huge power residing in the hands of unelected officials. We, as right hon. and hon. Members, all know from our constituency experience the number of cases where HMRC gets it wrong. We are invoked to try to recover the money that constituents in many cases have been unable, by direct contact with HMRC, to secure for themselves. Very often, it is only after our intervention that the matter is put right. A dangerous precedent is being set here for a rapacious future Government, perhaps a Labour Government. Perhaps that is what the hon. Lady was threatening; I am not sure that I would yet be in a position to accuse her of being rapacious, but perhaps she will let us know her intention.

We should be careful about giving these extensive powers to HMRC. Interestingly, my noble Friend, Lord Howard of Rising, asked Her Majesty’s Government

“how much money was repaid to taxpayers as a result of overcharging by HM Revenue and Customs in each of 2009-10, 2010-11, 2011-12 and 2012-13.”

The noble Lord Deighton responded:

“The information is not available as HM Revenue and Customs does not collect information on amounts underpaid or overpaid.”—[Official Report, House of Lords, 23 June 2014; Vol. 754, c. WA135.]

Therein lies a severe problem. If HMRC is incapable of giving us that information, what confidence can we have that it will exercise these powers carefully?

I quite understand the challenge faced by my hon. Friend the Exchequer Secretary, who is a very splendid Minister indeed, in trying to restore the public finances to order after they were destroyed by the former Prime Minister and Chancellor of the Exchequer. It is a massive challenge that we face. But we could make a start by looking at some of the money owed to Departments. I understand that the Ministry of Justice, for example, has quite a lot of money outstanding. In November 2011, the National Audit Office reported that the Ministry of Justice was owed £2 billion in outstanding fines and uncollected criminal assets. Last year, it wrote off £76 million in uncollected court fines, which was a 50% increase on 2010-11.

I also understand when my hon. Friend says that the Government want to address the issue of taxpayers dragging out contested cases in the courts. It is a fair point. But if the measure goes through, what incentive will there be on state officials, never knowingly understanding the importance of time, to expedite contested claims themselves? The president of the Chartered Institute of Taxation made a good observation. He said:

“We have sympathy with the Government’s need to accelerate dealing with some tens of thousands of outstanding mass marketed avoidance cases which are jamming up the courts…However, handing HMRC almost unprecedented executive powers to decide who falls within the mischief they intend to deal with, without the usual safeguards and appeal rights, is not something which should be done lightly”.

I strongly endorse that.

I remind my hon. Friends that when we came into office 35 years ago, and the noble Lord Howe, then Sir Geoffrey Howe, as Chancellor of the Exchequer, delivered his first Budget on 12 June 1979, he and his successor, my noble Friend Lord Lawson, set about reducing tax, because they believed that by reducing the burden of taxation, they would reduce the incentive for taxpayers to incur costs in seeking tax avoidance schemes. I urge the Government to look more carefully at how we might increase our drive to reduce taxation itself as a more efficient way, a more Conservative way, to reduce the incentive for taxpayers to seek avoidance schemes.

I will not support new clause 12 and do not think that the House should do so, but I do think that it needs to look much more carefully at the powers that the Bill proposes to confer on HMRC officials.

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[Charlie Elphicke]

I will endeavour to be as brief as possible, Madam Deputy Speaker.

I have often made the case against tax avoidance—international and national—in the House. I have often mentioned the behaviour of the water companies, which used the quoted eurobond exemption to further their strategies. Yet I cannot support the new clause, which is, in the words of the Labour party’s head of policy, the hon. Member for Dagenham and Rainham (Jon Cruddas), nothing less than an “instrumentalised, cynical” nugget

“of policy to chime with…focus groups and…press strategies”.

The shadow Chancellor showed that at the weekend.

The new clause would not raise £500 million. I will be interested to hear the Minister say exactly how much it would raise, as in many cases double taxation treaties could be used. When I raised the loophole in question, my case was about the debt-equity gearing ratio—a far more effective way of looking at the issue. I would be surprised if the Labour party had consulted experts beyond its own advisers. Indeed, there was a consultation on this issue in 2012. I stand to be corrected, but I do not believe the Labour party gave a response to that consultation. It simply thought, “What wheeze can we table as a new clause to plonk out there for our press strategy as our instrumentalised policy nugget?”

The new clause is highly cynical. It has been devised purely to make a case and to say, “Yes, we are on the pitch in the tax avoidance debate.” In fact, when the Labour party was in power receipts from income tax doubled but receipts from corporation tax went up by 6%. Again, we heard cynicism in the debate today with remarks about the tax gap going up by £1 billion to £35 billion. That is because the economy is growing. In reality, the percentage has fallen from 7.1% to 7%, so the tax gap has been heading in the right direction.

The Government have done a lot to make the case on this issue and to take the battle to the tax avoiders. I support the accelerated payments regime—I differ from my hon. Friend the Member for Aldershot (Sir Gerald Howarth) on this—because people who are subject to it know that they are engaging in a tax avoidance arrangement that is going to be under attack, and so should be prudent and keep the money to one side. If they are not doing so, they should be thinking about things rather more carefully, because they know they have entered into an arrangement that is likely to be under attack from the Revenue.

[Kelvin Hopkins]

It is a disgrace that while millions of ordinary people suffer the privations of wage cuts, unemployment and poverty, a rich minority is avoiding and evading taxes. I am talking about corporates and billionaires. There is indeed one law for the rich and one for the poor, the poor being the great majority of wage and salary earners. They are not necessarily poor in the specific sense, but they pay their taxes—I pay PAYE myself.

The Government’s concerns about the deficit seem hypocritical given that they have failed to collect the taxes that are owed. The estimate of the amount of uncollected tax made by HMRC and the Government is of the order of £40 billion. But estimates by others—including the Public and Commercial Services Union, the trade union that represents the workers in the tax collecting industry, the TUC and Richard Murphy, a noted tax expert I have seen speak on many occasions—put the amount at £120 billion or even more.

Even if we take the £40 billion figure, if the Government collected half of it, that would be an extra £20 billion a year, equivalent to 5p on the standard rate of income tax. I suggest that that would not just bring down the deficit but would give us plenty more to spend on the health service and on decent pay rises for public servants, who have suffered so much for so long.

As for staffing in HMRC, I have spoken out about that under previous Governments as well, not just this one, because that has been a weakness for Government efforts to challenge tax avoidance and evasion for a long period. I will tell a little anecdote. In 1997, when I first came into Parliament, I went to visit my local VAT office. The people there said that if they had more staff, they could collect more taxes. In VAT from local businesses alone, every individual tax inspector collected five times their own salary. Naturally I wrote to the then Chancellor of the Exchequer. I got an answer back from a civil servant, not from the Chancellor, which said that the Treasury wanted to make savings by cutting staff. That is utterly irrational when staff collect many times their own salary.

As I said, with VAT from local firms the amount collected is five times a staff member’s salary. When it comes to the big corporates, extra staff collect many, many times their own salary, and we should have many more tax staff. Perhaps if HMRC did not have such difficulties with staffing, it would be able to work more accurately and would not make the mistakes that have been mentioned.

We have recently seen Vodafone, which apparently owed something like £7 billion in tax, do a cosy little deal with Dave Hartnett, the then boss of HMRC, and pay £1 billion. The rest was siphoned through Luxembourg, I think—wherever it was, large amounts of money were lost from the corporates. Interestingly, Dave Hartnett, who was a public servant and should have been committed to the public interest, retired and finished up as an adviser to corporates on tax avoidance. That is unacceptable. Civil servants should be motivated by the public service ethos and be determined to collect taxes. They should not be cosying up to the corporate world.

Finally, as my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) has pointed out, the 1,000 richest people in this country have seen their wealth double in the past five years from a quarter of a trillion pounds to half a trillion pounds. That is a staggering amount of money. Much of that must be to do with tax avoidance and tax evasion. If we were to collect just some of that, we would have no deficit and plenty more to spend on the health service.

Section 5 of the European Communities (Amendment) Act 1993

Kelvin Hopkins Excerpts

Wednesday 30th April 2014 Commons Chamber

[Nicky Morgan]

I know that my hon. Friend is an assiduous follower of these matters, and he is right. The other place had a short debate on the convergence programme on 9 April. He will know, and I am learning, about the vagaries of timetabling debates, which have meant that this was the earliest day that we could debate the convergence programme in the House. I am told that in previous years the convergence programme has been sent in draft to the Commission, but we were keen that we should debate and send the final document. The convergence programme document was put before both Houses in a written ministerial statement dated 3 April, and placed in the Libraries on the same date. Members have therefore had an opportunity to consider the draft document since that date, although I appreciate that the recess has intervened.

[Kelvin Hopkins (Luton North) (Lab)]

I have raised this matter before on similar occasions. First, there is constant talk about convergence, but the European Union’s economies have always exhibited divergence, not convergence. Secondly, do we want to converge with an economy that is failing and growing more slowly than we are?

[Nicky Morgan]

I have read previous debates and know that the hon. Gentleman is assiduous in attending such debates and in following these matters. The language used in titles of various EU programmes is not a matter of choice for this Government. Perhaps a better word could be used, but it has not been selected by the Government. I take his remarks on board. I think all of us know that the eurozone has not been as strong as even those of us outside the eurozone would like it to be—it is important for our businesses and our exporters—but I will come on to show that things are looking better. The recovery taking place in the rest of the European Union is slower and it is important that we are fully aware of, and the European Commission fully monitors, the economies of other eurozone countries, even though—let me make it clear again—the Government have no intention of joining the euro.

The convergence programme explains the Government’s medium-term fiscal policies as set out in the 2013 autumn statement and in Budget 2014, and also includes Office for Budget Responsibility forecasts. As such, it is drawn entirely from previously published documents that have been presented to Parliament. With the Budget on 19 March and Easter recess timings as they were, I appreciate, as I have already mentioned, that the timetable for this debate has been particularly tight. Against this backdrop, the Treasury has made every effort to provide early copies of the convergence programme document in advance of today’s debate. The document makes clear that this year’s Budget reinforces the Government’s determination to return the UK to growth, and reiterates the Government’s No. 1 priority: tackling the deficit. As we have already heard in interventions, there are differing views on the value of submitting stability or convergence programmes, especially for the UK, given that the Government have ruled out joining, or preparing to join, the single currency.

The document forms part of the European semester process, which provides a broad framework for the co-ordination of the monitoring and surveillance of member states’ fiscal and economic policies, including necessary structural reforms across the EU. The positive value of the European semester is that it is a useful means to encourage other member states to grip the urgent growth challenge across the EU.

Budget 2014 set out the Government’s assessment of the UK’s medium-term and budgetary position. The UK economy is still recovering from the most damaging financial crisis in generations. We had the biggest bank bail-out in the world, the biggest deficit since the second world war and suffered the deepest recession in modern times. In the face of such a daunting economic challenge, it is essential to have a clear and comprehensive plan.

In 2010, the Government set out clear, credible and specific medium-term consolidation plans to return the public finances to a sustainable path. Our plan makes clear that we will fix the economy and deal with the deficit, cut tax to encourage investment, back businesses, control welfare and invest in skills. We are putting that plan in place. We have adhered to it and we are delivering results with it. The Government’s fiscal strategy has restored fiscal credibility, allowing activist monetary policy and the automatic stabilisers to support the economy and ensure that the burden is shared fairly across society.

Finance (No.2) Bill

Kelvin Hopkins Excerpts

Tuesday 8th April 2014 Commons Chamber

[Mr Redwood]

Indeed, there are timing issues with VAT, as the hon. Gentleman says, but I do not really see how that affects the argument about whether putting the rate up brings in more money. That is in the figures.

I fear that we are drifting a bit far even from the wide subject of the amendment, but I suppose the alternative options to help business could include cutting VAT. However, it is clear that if we cut the rate of VAT again, there would be a substantial loss of revenue, whereas we have just cut the income tax rate and there has been a colossal revenue gain. We should learn from those points.

I think the shadow Minister suggested that there would be no loss of revenue to local government from cutting and then freezing business rates. I do not know whether she wants to intervene, but that was my understanding of what she said. I think the Labour party has been converted to the Laffer effect. It now asserts—I do not know on what evidence—that if we cut and then froze business rates, we would collect the same amount of revenue. I would need persuading about that, because I am not sure that business rates are at that point yet, but if they were, it would be a sensible proposal for the coalition Government to take up. It would make it an even bigger pity that Labour has not bothered to table a proposal along those lines for us to vote on today, which might even have drawn me into the Lobby against my own party’s Front Benchers if the case had been well made and I felt that the Laffer effect of lower business rates was well established. I have profoundly shocked my Front-Bench colleagues now, having earned myself a brownie point through my earlier remarks. As they are well aware, they are quite safe, because there is no proposal on the amendment paper to cut business rates. [Interruption.] The Whip has just found that out—she needs to do a little more homework before coming to these debates. [Interruption.] Now she is complaining that she did not say that. As she will be in the record as having said nothing, who am I to disagree?

Before I get into any more trouble, I will conclude my remarks by saying that I will not support the amendment. I do not believe that a review would help, and I do not understand how it would be judged. Nor does it seem that it would have any impact on Labour policy. I am perplexed by the fact that when Labour has a clear policy for once, it has not tabled a proposal so that we can debate it fully and vote on it. I strongly support lower corporation tax rates, which will be very helpful.

[Kelvin Hopkins (Luton North) (Lab)]

It is a great pleasure to speak briefly in this debate. There is everything to be said for reviewing the effects of changes in tax rates, but to do that one must eliminate all other factors. A great surge in demand over a certain period, with unemployment going down and output going up, and all sorts of other factors can affect tax revenues. It is not just tax rates. As my hon. Friend the Member for Edmonton (Mr Love) said, if there was a direct relationship between lower tax rates and increased revenues, a zero tax rate would mean big revenues and a higher tax rate would mean lower revenues. It is just not like that.

I also suggest that marginal changes to tax rates will not make much difference. Everybody in business likes lower taxes, and no doubt most citizens do. It is in the nature of things, because they have more money in their pocket. At the same time, in a civilised society—I like to think that we still have some remnants of a civilised society—taxation is vital to pay for the things that make it civilised. I would personally like higher revenues, so that we could spend more on the things that make our society worth living in. Over the past few decades, there have been some regrettable cuts in tax revenues. Perhaps we should not go back to the 98% top rate of the 1970s, but when Nigel Lawson got rid of the 60% rate and brought in the 40% rate, it led to substantial income for better-off people.

[Mr Redwood]

Would the hon. Gentleman not accept that cutting the top rate from 83% to 40%, or from 98% to 40% for so-called investment income, meant a huge surge in revenue? Rich people not only paid more in cash terms and real terms but paid a bigger proportion of total income tax. What’s not to like?

[Kelvin Hopkins]

We can argue about particular cases, but when we measure the impact of tax changes, we have to ensure that we are not measuring other factors. I met some people in the City just after Nigel Lawson cut the tax rate, and a lot of them were aghast at the Budget, saying, “Why has he cut the taxes? We don’t need the money.” They were clearly not of the same mind as the right hon. Gentleman, but they were civilised, decent people who thought that good tax revenues and higher taxes were a good thing.

[Mr Redwood]

As they were civilised people who did not need the money, all they had to do was give it away. They could have given the money to the state or to charity.

[Kelvin Hopkins]

The problem with charity is that only nice people give to it. The great thing about tax is that it applies to everyone equally, which is the way things should be.

[Simon Kirby]

The hon. Gentleman’s argument, interesting though at first it may appear, is totally busted when we look at France. Hordes of rich French people are coming to pay tax in this country rather than in France. The net effect is worse than if the taxes had been lower in the first place.

[Kelvin Hopkins]

I am one of those who would like to see a little more insulation between countries on financial matters, rather than a free flow of finances across borders, but I am a traditional leftist and Keynesian. I am not of the same mind as those who believe in breaking barriers and people having complete freedom to do exactly what they like with their money anywhere in the world. I hope that one day we will return to a more sensible approach.

The problem with tax is not the tax rates but the collection. For a long time we have seen vast amounts of tax not just avoided but evaded. The thick end of avoidance is the thin end of evasion. The precise line between avoidance and evasion is ill-defined, and I would like stricter rules so that a lot of what is now called tax avoidance is defined as tax evasion. If we sent one or two of the big tax avoiders and tax evaders to prison, it might concentrate a few minds and bring in more tax. The research on behalf of the TUC by Richard Murphy shows that, in his view, the tax gap is in the order of £120 billion a year. If we collected a fraction of that sum, we could solve all our problems, including the famous deficit. I am very much in favour of reviewing the effect of tax changes.

[Mr Love]

My hon. Friend talks about the tax gap. Whatever we believe the tax gap to be, everyone recognises that there is one. Is it not surprising that we are seeing cuts to HMRC staffing at a time when we need to reduce that tax gap?

[Kelvin Hopkins]

My hon. Friend is absolutely right. I have called many times in this Chamber, including in the past week or two, for more tax officers to be employed. Every tax officer collects many times their own salary. A VAT officer told me that, even for VAT on small businesses, tax officers collect some five times their own salary. When it comes to the big corporates, if we had a good chief tax officer, Vodafone might have paid a few more billions, as it should have done. We could then start to solve our problems. We have to focus on the big corporates, which are getting away with murder.

[Ian Swales]

I have a lot of sympathy with the hon. Gentleman’s comments on HMRC staff, which I raise frequently on the Public Accounts Committee, but surely he must regret the cut in 10,000 compliance staff when his party was in government and welcome the addition of 2,500 compliance staff under this Government.

[Kelvin Hopkins]

I made exactly the same speeches when my party was in government. I demanded that the previous Government employ many more tax officers. There has been a conspiracy between Front-Bench Members for some decades to get away from being too unpleasant to the corporates and to let them have their way. Well, I do not want to let them have their way; I want them to pay their taxes so that we can pay for the things that ordinary people need, particularly those who are less well off and those who are more vulnerable.

[Mr Gauke]

I note the hon. Gentleman’s comments on wanting to have more HMRC staff, but surely the most important point is that HMRC’s yield should increase. Has he noted that the forecast yield over this Parliament is almost double the yield over the previous Parliament?

[Kelvin Hopkins]

That is very welcome, but I do not believe in the immutability of a certain level of tax revenue and that, whatever we do, we cannot change that level because somehow the world will not produce more than 38% of GDP in tax. It is just a question of collecting that tax and enforcing the tax rates to ensure that the big international corporates, in particular, pay their taxes. When we do that, we will see a substantial increase in revenue. Of course there are countries where overall tax revenues are substantially higher than ours, and they are not necessarily countries that are doing badly economically; they are countries that are doing well, but a higher proportion of their economy is in the public sector. Those countries have higher taxes and higher public spending, and they are civilised societies, too. The countries with the lowest levels of tax and public spending are often some of the poorest, where the gulf between rich and poor is much greater and, generally speaking, life is less pleasant, particularly for the poor and the less well off.

I look forward to more enforcement and a higher tax take by enforcing the existing tax rates and ensuring that people, particularly the corporates, pay their taxes. When it comes to taxation, the behaviour of the economy is crucial.

[Mr Jim Cunningham (Coventry South) (Lab)]

My hon. Friend has said that we should look at tax avoidance. There are negotiations between the Inland Revenue and multinational companies in which the Inland Revenue estimates what it thinks the tax should be, rather than collecting the real tax.

[Kelvin Hopkins]

My hon. Friend is absolutely right. The recent head of HMRC is now a tax adviser to corporate companies, but when he worked for HMRC he seemed to have had a cosy relationship with some of the biggest corporate companies and was doing deals over lunch on what those companies should pay. That was wholly inappropriate. He should have said, “You have to pay your taxes, and we are going to chase you until you do.” That is what I want to see—HMRC staff at the highest level who view their job first as being a public servant who collects taxes for the state, the public and the ordinary citizen, rather than letting the international corporates, and indeed the domestic corporates, get away with what is effectively appalling tax fiddling. I applaud my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) for saying that we should have a review of the effect of tax rates from time to time.

[Steve Baker]

This is not the first time that I have agreed with the hon. Gentleman. It is important that taxes are collected according to the law, not an individual’s opinion of what the figure ought to be, but does he concede that the situation is as it is because the tax code is far too complex?

[Kelvin Hopkins]

I am not an expert on tax codes, but taxation is too complex and could be made much simpler, although I think tax should remain progressive. The idea of a flat tax, which the UK Independence party is talking about, is complete nonsense. I fundamentally oppose UKIP not because of its views on the European Union, on which I might have some sympathy, but because of its views on everything else. UKIP is extremely right wing. It wants to get rid of rights at work, privatise the health service and introduce a flat tax. Frankly, UKIP is barking and I will oppose it at every turn.

My hon. Friend the Member for Birmingham, Ladywood talked about a review of the impact of tax changes, which is absolutely right and I support her.

[Priti Patel (Witham) (Con)]

I have thoroughly enjoyed the debate so far. I am astonished by the ground that we have covered, because we are solely here to address corporation tax, which has not been explored anywhere near enough in the light of the Labour party’s amendment.

As my hon. Friend the Member for Enfield North (Nick de Bois) said, the amendment would create uncertainty and put jobs and future investment at risk—there is no doubt about that. The Labour party wants to reverse the Government’s low business tax approach by putting up corporation tax, which would send out all the wrong messages to the business community. It is farcical that Labour Members are dressing up their so-called policy as a way to help small businesses with business rates. They are cynically trying to pitch big business against small business. The Government have clearly shown that we can help all businesses, both large and small, by cutting corporation tax and, importantly, easing the burden of business rates, which the Minister and the Chancellor of the Exchequer have done.

--- Later in debate ---

[Jonathan Edwards]

That is a very valid intervention. My political position would be to support a 50p rate, but let us have the evidence to make the decision. As I am outlining, the evidence suggests to me that 50p would be a better top rate than 45p, and certainly better than 40p.

[Kelvin Hopkins]

I agree with everything that the hon. Gentleman has said. If it were shown that an increased tax rate at that level brought in lower revenues, would not that simply be evidence of more tax evasion and insufficient enforcement?

--- Later in debate ---

[Shabana Mahmood]

I rise to support amendment 4, which stands in my name and those of my right hon. and hon. Friends. Our amendment seeks to require the Chancellor to publish a report on the impact of setting the additional rate—the top rate—of income tax at 50%, but unlike new clause 4, our amendment requires that the report must also estimate the impact of the top rate in 2014-15 if it is set at 45% and at 50% on the amount of income tax currently paid by someone with a taxable income of £150,000 a year and of £1 million a year. Our amendment therefore seeks to prescribe somewhat more than new clause 4 what the report that must be prepared by the Chancellor of the Exchequer should include. We intend to press our amendment to a vote at the end of the debate.

The Labour Government introduced the 50p rate, which came into effect in 2010-11. We have had a number of debates on the top rate of tax ever since, particularly since this Chancellor’s decision to reduce the top rate from 50p to 45p. That decision is an important indicator of both the Chancellor’s and his Government’s priorities. While ordinary people have been struggling with the cost of living crisis—based just on a measure of wages, they are £1,600 a year worse off, or, taking into account tax and benefits changes, they are £974 a year worse off—the Chancellor has seen fit to give a tax cut worth an average £100,000 to millionaires in our country.

When the Government came to power, they did not say anything in the coalition agreement about abolishing the 50p rate. In 2011, the Chancellor said that he was going to ask HMRC to look at the yields from the 50p rate. In 2012, with HMRC’s report, “The Exchequer effect of the 50% additional rate of income tax”, to back him up, he abolished the rate. The Chancellor knew that he needed cover for that deeply ideological decision and so was desperate, in my view, to claim that the 50p rate raised as little money as possible. Of course, if he could say that, he could justify with more of a straight face giving a tax cut to the richest in our country at the same time as knowing that on his watch ordinary people, those on middle and low incomes, have paid the price for his economic plan, which is failing on the terms he set himself when he came to power in 2010. This was a highly political decision driven by a desire to give a tax cut to the richest people in our country.

Reports at the time suggested that the Chancellor wanted to go further and cut the top rate back down to 40p, but was blocked from doing so by his coalition colleagues. As a compromise, 45p was settled on. Of course, we know that the Conservative party is chomping at the bit to see the rate lowered from 45p to 40p and it is a shame that the right hon. Member for Wokingham (Mr Redwood) has not been in the Chamber for this part of the debate, although we did cover some of his views in this regard in the earlier debate on corporation tax and business rates. As a result of his comments and use of figures, we have in the past week seen efforts to try to bolster the case for reducing the rate back to 40p. I note that the Government have not explicitly ruled out such a change.

We know from the Government’s own assessment that the cost of cutting the rate from 50p to 45p was more than £3 billion, excluding all behavioural changes. Given that the sum is so large, how does one justify the tax cut? The Government say that most of that potential £3 billion revenue would effectively be lost as a result of tax avoidance. Once they have assessed revenue lost as a result of tax avoidance and other behavioural change, the Government go on to say that the cost to the Exchequer is only £100 million. That implies that this is a neat and exact science, but nothing could be further from the truth.

[Kelvin Hopkins]

I think that my hon. Friend is suggesting that the Government have been soft on tax avoidance and tax evasion simply to make their figures work.

[Shabana Mahmood]

I will come on to the point about tax avoidance. One option open to the Government to protect revenue from the 50p rate was to do more on tax avoidance. This is a Government who like to trumpet their record on tax avoidance, but they certainly ducked the opportunity when it came to dealing with potential avoidance in relation to the 50p rate.

--- Later in debate ---

We have enabled people to keep more of the money they earn to reward those who work hard for their families. The gains from our personal allowance increases are spread widely. Altogether, this Government will already have taken more than 3 million low earners out of income tax by the end of April. That number will further increase to more than 3.2 million by April 2015, when the personal allowance will be more than £2,800 higher than under the previous Government’s plans.

[Kelvin Hopkins]

Ministers have talked a lot about low incomes, and that is all very well, but is not the reality that the better off people are and the higher the rate of tax they are on, the more they benefit, so in fact higher-rate taxpayers benefit more than lower-rate taxpayers?

[Mr Gauke]

That is not correct, because of the way we have done this. I will not spend a lot of time on the matter, but I can tell the hon. Gentleman that in preparation for this speech I have seen various responses from those raising concerns about higher-rate taxpayers not benefiting from the increases in the personal allowance in the way that basic-rate taxpayers have. Indeed, those earning more than £100,000 a year do not benefit from increases in the personal allowance because it starts to be taken away.

The reality is that basic-rate taxpayers have benefited most from the measures that we have taken in increasing the personal allowance. More than 26 million taxpayers will be up to £570 better off in real terms in 2015-16 as a result of this Government’s changes. In 2014-15, basic-rate taxpayers already pay up to £700 less income tax than they would have done four years ago. By 2015-16, the Government will have cut their income tax bills by over £800 per year. Together, all the personal allowance increases since 2010 mean that this Government have cut the number of income tax payers more in five years than any Government in a similar period since records began.

--- Later in debate ---

[Mr Gauke]

I suppose we are talking about the people who for almost the entire time the Labour party was in power were paying a lower rate of income tax, a lower rate of capital gains tax and a lower rate of stamp duty. I hear the Labour party’s position. [Interruption.] If we are trying to build consensus, let us look at what some Labour politicians have said. The noble Lord Myners, a former Treasury Minister, has said:

“The economic logic behind Ed Balls’s thinking would not get him a pass at GCSE economics,”

and that

“Ed Balls takes us back to old Labour and the politics of envy.”

Lord Jones, the former trade Minister in a Labour Government, described the policy as “lousy economics”.

[Kelvin Hopkins]

He is a Tory.

[Mr Gauke]

To be fair, Lord Jones was a Minister in a Labour Government. The Mail on Sunday has reported a key supporter of Tony Blair as saying of Labour Front Benchers:

“The trouble is they are economically illiterate and have no understanding of business or profits.”