Independent Financial Advisers

Charlie Elphicke Excerpts

Wednesday 20th October 2010 Westminster Hall

[Harriett Baldwin]

There are indeed advantages, and I thank the hon. Gentleman for his helpful intervention. He obviously has a lot of experience of dealing with the sector.

It is estimated that there are about 45,000 IFAs in the country, many of whom are sole traders.

[Charlie Elphicke (Dover) (Con)]

Should those tens of thousands of small traders not be encouraged to use their entrepreneurialism to help people save, rather than being squashed by the dead hand of unthinking regulation?

Draft EU Budget 2011

Charlie Elphicke Excerpts

Wednesday 13th October 2010 Commons Chamber

[Gordon Henderson (Sittingbourne and Sheppey) (Con)]

Over the past few months, we have spent a lot of our time debating one aspect or another of the financial crisis in which the country finds itself. Britain has a huge deficit, and the British public have collectively built up a mountain of personal debt. All in all, we are in a real mess. The Government have set out a series of measures to reduce the national debt, and I know that many individuals—including people in my constituency—are trying hard to cut down their indebtedness. These are tough times for us all, and we are not alone. Many other countries around the world, including many in Europe, are facing huge financial challenges and struggling to balance their books without pushing their national economies into another recession.

In this era of uncertainty and austerity, what does that organisation of probity and good governance, the European Commission, do? It proposes to increase the EU budget next year by 5.8%, which in real money represents an increase of £6,102 million. What planet do European Commissioners live on? They live on the planet of self-indulgence. They live in a cushioned climate of privilege in which the Brussels gravy train does not stop long enough for them to see what is happening in the real world.

To be fair to our own British Government, at least they recognise the stupidity of the European Commission. As the Economic Secretary wrote in a briefing note and confirmed this evening, the Government are very concerned about the proposed increase in appropriations of 5.8%. They might be very concerned, but I would be absolutely livid. I give at least one out of three cheers to the Treasury for that statement but, sadly, I cannot bring myself to give it any more cheers. My hon. Friend let herself down in addressing the EU problem by proposing that the EU budget remains at cash levels equivalent to the 2010 budget. That is also why I cannot support amendment (a). I bet all those Ministers tasked with making a 20% cut in their departmental budgets are a bit narked. I am sure that in the present economic climate, they would be delighted to be given a zero growth budget.

Like many other right hon. and hon. Members, I have been inundated with letters and e-mails complaining about the proposed cuts in benefits, increases in tuition fees and changes to public service pensions. There is a great deal of disquiet out there and representing a constituency that has some of the most deprived areas in the south-east within its boundaries, I share some of that disquiet, but I am happy to go into bat on behalf of the coalition Government and to argue the case for those cuts. I believe that in their heart of hearts, most people in my constituency understand that we have no choice but to push through those cuts if we are to reduce the mountain of debt we inherited from the previous Government.

In common with my hon. Friend the Member for St Albans (Mrs Main), however, I would not be able to look my friends and neighbours in the eye if we drove through a programme of painful cuts in our public services, while at the same time bunging the EU billions of pounds to waste on grandiose schemes such as the European External Action Service and the European Institute of Gender Equality in Vilnius, Lithuania, for which, incidentally, the UK is being asked to cough up £800,000.

Next year, the European Commission proposes to spend £7 billion on administration. By my calculation, the UK’s contribution to those administration costs will be about £1 billion. If Government Departments and public bodies in this country are being asked to cut their administration costs, it is surely right to expect the European Commission to do the same.

[Charlie Elphicke (Dover) (Con)]

Does my hon. Friend note with concern that where the UK has a 15% increase in public spending over five years, the European Union wants to increase its spending by 60%?

[Gordon Henderson]

I am aware of those figures and I think that they are scandalous.

My hon. Friend the Economic Secretary has said that the British Government will press the EU to deliver greater value for money, and I am sure that she and the Government will do so, but does anyone here really believe that our friends across the English channel in the European Commission will actually listen to them? When the draft budget is eventually presented to the European Parliament for debate later this year, do Treasury Ministers really think that anyone other than a small group of British MEPs will take a blind bit of notice of their view? I think not.

I would personally like to see the Government unilaterally reduce the UK’s contribution to the EU budget for 2011 by the average percentage cut imposed on Whitehall Departments. If the European Commission and the European Parliament do not like it and kick up a fuss, we should immediately hold a referendum on Britain’s continued membership and let the British people decide our future once and for all. Perhaps we could hold it on the same day as the referendum on the alternative vote.

I support amendment (b), and I urge Members in all parts of the House to do the same.

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[Charlie Elphicke (Dover) (Con)]

I will be as brief as possible. I just wanted to note the following numbers. The total managed expenditure in the United Kingdom Budget will be £697 billion in 2010-11 rising to £700 billion in 2011-12. That is an increase of just 0.5%, whereas the European Union is really gunning for it with a 5.8% increase and, as we have heard, administration costs will rise by 4.4%.

It is worth noting what the Commission has to say about the administration costs. It says it has made particular efforts to limit its administrative expenditure and that rise is partially due to the higher than expected salary increases in 2009. So we in the UK are implementing austerity and limiting the pay rises for our public sector workers while the EU just carries on serenely as though nothing has happened. An increase of €380 million is entirely unacceptable.

We have heard about the total number of doctors, nurses and others who will be affected in the current circumstances, but let us look at the constituency numbers: nine doctors per constituency, 19 nurses, 23 policemen and 34 troops. That is the scale of the situation we are facing. The EU budget is therefore a ferocious and astonishing waste of money. It is entirely unacceptable that over a five-year period we in the UK are having a 10% rise in spending, but there will be a 60% rise for the EU. What do we as a nation get for that? Do we get any value at all?

Finally, I want to congratulate the Economic Secretary on making the strongest and most impassioned case on Europe from the Dispatch Box that any of us has seen in the past 20 years, setting out that the Government will take the EU to task and bang the table and make the points that need to be made. I hope I speak for the whole House when I say that in negotiating on this matter she has our strongest and best wishes. All Members on the Government Benches certainly want her to get the best deal for Britain.

Oral Answers to Questions

Charlie Elphicke Excerpts

Tuesday 12th October 2010 Commons Chamber

[Danny Alexander]

If anything demonstrates the independence of the OBR it is the appointment of the head of the IFS to be the head of the OBR, and I hope that will put an end to any such criticisms from the hon. Gentleman’s side of the House. The analysis was interesting, but the analysis we published at the time of the Budget was robust and soundly based. I have carefully studied the IFS’s additional analysis, and I think it makes some assumptions that push the boundaries. As a result it is not an analysis the Treasury would stand by. I would stand by the view that the measures we announced in the Budget were progressive and fair and hit the people on the highest incomes hardest.

[Charlie Elphicke (Dover) (Con)]

Can the Chief Secretary tell the House the benefits that the regional growth fund will have for neglected regions, in particular coastal and seaside towns?

[Danny Alexander]

I fear that the hon. Gentleman will have to wait until a week tomorrow for the spending review announcement to hear details of that sort, but I can tell him that the purpose of the regional growth fund is precisely to ensure that areas hit hardest by public spending cuts or areas most dependent on the public sector have an opportunity to put forward proposals for measures that would support their economic growth. The regional growth fund has been established to meet those proposals.

Finance (No. 2) Bill

Charlie Elphicke Excerpts

Monday 11th October 2010 Commons Chamber

[Charlie Elphicke (Dover) (Con)]

I would point out to the hon. Lady that the Office for Budget Responsibility says that there is a structural deficit of £109 billion—I believe that is the figure—which has nothing to do with the banking crisis or the recession and will not be eliminated by growth. Does she not accept that the previous Government have some or full responsibility for that structural deficit?

[Ms Eagle]

I think we need to have a much more grown-up discussion about how we ended up facing these economic challenges. One of the more underhand approaches that the Government have taken to this narrative has been to say that the economic challenges facing us, which are formidable, are somehow all about the previous Labour Government wasting public money and spending profligately. The hon. Gentleman knows that that is simply is not true—

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[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to follow the hon. Member for Northampton South (Mr Binley), and particularly to comment on his pleas on behalf of small business. In Scotland, we have 302,000 businesses, and 285,000 employ fewer than 50 people. They do not issue commercial paper or corporate bonds. They do not do rights issues. They are not listed on markets or exchanges in the main. Ninety-nine per cent. of them are owned in Scotland. They are almost exclusively solely dependent on the retail high street banks for their credit lines and working capital, so the more the Minister and her team can do to ensure that affordable lending goes up, and that we do not get the conversion of mortgages to loans, which puts the houses of small business directors on the line should a business fold, the better. Those businesses are hurting. Given that they provide the vast majority of employment in Scotland, we need to ensure that that powerhouse, the SME sector, drives forward with all the capital that it needs. However, that is not what I wanted to speak about today. It was, however, a fantastic opportunity to get it in again.

It would be normal on Second Reading of a Finance Bill to refer to the Budget which it follows, although this is the second Finance Bill following the emergency Budget debate on 22 June. It was the debate that followed that and the debate on the Finance Bill on 6 July that gave us the opportunity properly to debate the Government's whole approach to dealing with the economy, although listening to many of the earlier speeches, I am not sure whether I have gone back three months and we are having the first Second Reading debate. Those were the opportunities, along with the debate on VAT on 13 July, to point out that this Government plan an additional £40 billion of fiscal tightening—over and above the £57 billion of cuts and tax rises planned by Labour—to remind the House that the ratio of cuts to tax increases has gone from 2:1 to 4:1 and to remind it also of the damage that would cause. The debate on the VAT rise, which, as Shelter explained to us helpfully in advance, will lead to the poorest families in the country paying £31 every week in VAT, was the opportunity to make the case against that rise.

This Finance (No. 2) Bill—the third in the calendar year—is different. It contains what the Minister described on 15 September as minor and technical measures, but that does not mean that we should not give it our full consideration, in particular those clauses and schedules which tax practitioners have raised real concerns about. I am grateful, as was the shadow Chief Secretary, to the Institute of Chartered Accountants for its response to the Government consultation. I will draw on that heavily and do something quite unusual in a Second Reading debate: refer in detail to clauses in the Bill. I hope we will get some technical answers when the Minister sums up.

The Institute of Chartered Accountants asks, in respect of part 3, clause 25 and schedule 9, paragraph 7, which inserts new paragraphs 2A and 2B into schedule 53 of the Finance Act 2009, whether, where a company has a profit in an earlier period and a loss or non-trading deficit on loan relationships in a later period that is carried back, interest on the earlier period profits will continue to accrue if in the absence of a claim late paid corporation tax would have been due, up to nine months after the end of the later period. I would welcome formal confirmation that that mirrors the existing rules. The institute adds that those rules perpetuate the existing differences between the interest rules where losses are carried back and offset against profits of an earlier period. Under existing rules, where losses are carried back against profits and where additional corporation tax would be due, interest will run from nine months after the end of the first accounting period. However, in cases where losses are carried back resulting in a repayment of corporation tax, repayment interest will only run from nine months after the end of the later period. I would have expected that, in a genuinely harmonised regime, late paid interest and interest on overpaid tax would ideally run from the same date. Therefore, will the Minister explain the Government's thinking on those proposals?

The institute also believes that paragraph 10, inserting new part Al into schedule 54 of the Finance Act 2009 on repayment interest, would deliver the opposite provisions to what is proposed in new paragraphs 2A and 2B in schedule 9. Again, please confirm that the new rules mirror the existing rules. The same question applies to franked investments in paragraph 11 of schedule 9. Do the new rules mirror the existing provisions?

Paragraph 12 inserts new schedule 54A into the 2009 Act and makes two further changes to the general rules that were introduced in 2009. This relates to new paragraphs 1 and 2. As I understand this, subject to certain conditions, HMRC can recover as late payment interest amounts of repayment interest that have been paid, but which ought not to have been paid. However, this provision does not apply in cases where the whole or part was a result of HMRC error. Therefore, can the Minister please confirm that it is intended that these new paragraphs will have the same effect as those currently set out in section 826(8A) to (8C) of the Income and Corporation Taxes Act 1988? I know that these are technical questions but they are important. If we get this wrong, there will be all sorts of chaos within business. Some of the other clauses that I will come to pose even more dangers. Can the Minister also confirm that the latter provisions will be repealed when these new rules come into force?

New paragraphs 3 and 4 of new schedule 54A suggest that where there is an underpayment of corporation tax for one accounting period and an overpayment of corporation tax for another accounting period, neither late payment interest nor repayment interest will arise during a common period. The Institute of Chartered Accountants understands that this provision is intended to give statutory effect to HMRC's existing practice, but I would welcome confirmation of that.

A number of other questions are raised about particular provisions in those schedules and I would welcome the Minister’s assurance that, if there have been errors in drafting, oversight or inconsistencies as a result of what is in this Bill, the Government will table the appropriate amendments in Committee.

I turn now to clause 7, entitled “Settlor to return excess repayment to trustees etc”. Is there not a problem with that because of the change to make trusts pay income tax at 50%? Should the aim of the tax regime for trusts not be to maintain equality between income and gains of trusts and non-trusts? Does not taxing trusts at a 50% rate when the majority of settlors pay tax at other rates cut across that objective?

I understand that the scope of the clause is limited to repayments in respect of trust income deemed to be that of the settlor rather than reductions in the settlor's liability. Therefore, for the avoidance of doubt, can the Minister confirm that the settlor need not repay anything to the trustees where the settlor has miscellaneous income losses of his own brought forward which he has to use against the trust income?

There is also a general concern about the costs and administration burden on trustees, settlors and the Revenue in relation to implementing some of the measures in the Bill owing to the large number of tax repayments that now have to be made for small, or indeed very small, amounts, and the need for all settlors to be added into self-assessment. I would welcome the Minister’s comments on that. People with no or modest savings or dividend income are in the self-assessment regime, which is complicated and worrying for some people. Even for modest savers, the regime can cost £100 or so for an accountant to prepare a tax return.

Clause 5, “Venture capital schemes”, and paragraphs 1(4) and 2(8) of schedule 2, introduce a “financial health requirement” that prevents tax relief for investment in a firm that is “in difficulty”. The explanatory notes make it clear that the issuing company is in difficulty if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community guidelines on state aid for rescuing and restructuring firms in difficulty. However, the guidelines would appear no longer to have any effect. Paragraph 109 of directive 2004/C244/02 states:

“The Commission will apply these Guidelines with effect from 10 October 2004 until 9 October 2009.”

That implies that the guidelines have now lapsed. Will the Minister clarify whether the guidelines are still effective? Even assuming that they are, it is unclear how they will affect companies raising money under enterprise investment scheme or venture capital trust legislation, because paragraph 9 of the directive guidelines states that

“for the purposes of these Guidelines, the Commission regards a firm as being in difficulty where it is unable, whether through its own resources or with the funds it is able to obtain from its owner/shareholders or creditors, to stem losses which, without outside intervention by the public authorities, will almost certainly condemn it to going out of business”.

The implication is that for as long as the company can raise funds from its existing shareholders or creditors, but presumably not from new, external investors—that is not explicit—it does not fall within the definition of a firm “in difficulty”. I would be grateful if the Minister could confirm whether that interpretation is correct.

Paragraphs 10 and 11 of the directive guidelines clarify particular circumstances in which a firm would be regarded as being in financial difficulty, but they appear to be subsidiary to the primary condition—if a company can raise funding from existing shareholders, those paragraphs simply do not come into play. I would like the Minister to confirm whether that interpretation is correct.

The matter gets more complicated, because paragraph 12 of the guidelines states:

“For the purposes of these Guidelines, a newly created firm is not eligible for rescue or restructuring aid even if its initial financial position is insecure. This is the case, for instance, where a new firm emerges from the liquidation of a previous firm or merely takes over such firm’s assets. A firm will in principle be considered as newly created for the first three years following the start of operations in the relevant field of activity. Only after that period will it become eligible for rescue or restructuring aid”.

I understand that in effect, a newly created company would not be regarded as a firm falling foul of the firm-in-difficulty provisions for three years after the commencement of operations. Even if it were, I would welcome clarity on how the measure would apply in a group context. Does the three-year rule apply to a new holding company, operating subsidiary or indeed to the entire group?

On the point in time when the financial health requirement is viewed, proposed new section 108B(1) to the Income Tax Act 2007 states:

“The issuing company must meet the financial health requirement at the beginning of period B”,

which means the period beginning with the date of the issue of the shares. However, it is unclear how the Revenue will approach that in practice. The logical interpretation is that the issue should be considered only when the application for formal EIS approval is made using form EIS 1. It would create considerable difficulties for companies and their advisers if the Revenue could use the benefit of hindsight and withdraw EIS relief retrospectively, after a formal approval is given and certificates issued. It would also ultimately undermine the company’s ability to attract that EIS investment, as there is likely to be considerable uncertainty on whether that relief would be available at all.

There is also a question over the meaning of “permanent establishment” in paragraphs 1(5) and 2(12) of schedule 2. Proposed new section 191A(7) to the 2007 Act states:

“A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or general commission agent) acting in the ordinary course of the agent’s business.”

The implication is that if a company employee makes sales in the UK on behalf of the company, the company would have a permanent establishment in the UK. However, there appears to be no requirement for that employee to be resident in the UK, and that a visitor carrying on business on behalf of the company would qualify. Will the Minister confirm whether that interpretation is correct?

There are other issues in relation to that proposal. Proposed new section 191A(2)(b) to the 2007 Act states that

“an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company.”

It has been suggested that for clarity, the definition should follow that already established in the Finance Act 2003, which is that

“an agent acting on behalf of the company has and habitually exercises there authority to do business on behalf of the company.”

I realise that there could be difficulties in respect of groups with a holding company, because the Bill requires the issuing company—the holding company—rather than the subsidiary company that has the trading operation to which VCT or EIS funds will be supplied, to have a “permanent establishment”.

[Charlie Elphicke]

My understanding is that that provision is fairly well understood: “to do business” is a wider phrase than “to enter into contracts”. The “contracts” provision follows the OECD model of tax conventions on “permanent establishment” in a given jurisdiction, and it therefore tracks better the language of international tax law.

[Stewart Hosie]

I understand perfectly well that “to do business” is a better phrase than “to enter into contracts”, but I want the Minister to confirm the nature of the commissioned agent or an employee of the business. They might be based overseas while carrying out business here, and I should like absolute clarity and certainty on that rather than on the wider point on the difference between the phrases “to do business” and “to enter into contracts”. I am with the hon. Gentleman on that.

I am asking that question because as the Minister knows, in many groups, the holding company is a pure holding company, and undertakes no activity other than holding shares in its subsidiaries. My point is that such a company is unlikely to constitute a business as defined in the Bill. Consequently, to require a company to have a “permanent establishment” through which business is carried on or, if the proposed definition is maintained, a

“permanent establishment…to enter into contracts”,

could be seen as running counter to commercial reality. I would welcome further clarification on how such arrangements would be treated for those purposes.

I am dreadfully sorry, Mr Deputy Speaker, that I did not engage in a classic Second Reading debate or address more widely issues that are not in the Bill, but I thought it important for someone actually to ask some specific technical questions to probe the Government on it, rather than indulging in the kind of debate that I am sure we will have on clause stand part later in the Bill’s progress.

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[Alison McGovern]

We have competitive corporation tax. The hon. Gentleman is right that we must play on the global stage. Many of the companies in my constituency that I am talking about play on the global stage. I have seen the difference that other countries have made in working with business to ensure that they invest in their technology, which keeps them here for the long term. Let us consider, for example, the historical difference in the German automotive industry, where the Government did just that. We came very late as a country to that approach—to that industrial activism and to that investment in high-tech industry to secure employment for the long term.

I ask Ministers to consider their role. When we are dealing with global companies, the Government must always discuss with them the changes in their industry and what the next move needs to be in investment. I do not feel that an across-the-board corporation tax that hands profits back without any discussion about what is done with them is the way forward.

[Charlie Elphicke]

Does the hon. Lady not note with concern that the UK’s high rate of corporation tax, relatively speaking, has caused a whole load of British companies to leave the UK, thus destroying jobs and money?

[Alison McGovern]

I merely disagree on the facts. I disagree that we have had an overly high level of corporation tax and that we have not had inward investment. I would invite the hon. Gentleman to come with me to Vauxhall Motors or Unilever in my constituency, where they have just invested millions of pounds in high-tech kit that means that that research will go on in this country in the long term. I disagree with the hon. Gentleman on the facts, I do not think that what he says is the case, and I do not think that that is what is happening. There is a risk that it might happen in the future, unless the Government show an active approach to working with businesses to ensure that they have the right incentives to stay and invest in Britain.

In conclusion, I have three points that I ask the Government to take into account. I ask them to consider, on an ongoing basis, the effectiveness of HMRC and whether the resources allocated are enough to bring in the necessary taxes to bring the budget further towards balance. I question what more they can do to promote real growth and the rebalancing of our economy. I worry about the effect of the VAT rise on those people who are least able to cope with it and that that will yet again distort the economy in Britain. Our economy actually operates very differently in different geographical areas. I do not mean to point out a north-south divide, because parts of the south-west are likely to suffer in similar ways to my area. We need to be careful at this important time. Much can be done to work with businesses and assist them in making investments, and I hope that the Government will consider that as the Bill goes forward.

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[Jacob Rees-Mogg (North East Somerset) (Con)]

I congratulate my hon. Friend the Member for Skipton and Ripon (Julian Smith) on a speech that was excellently delivered and every word of which I agreed with. It was a fine maiden speech and a pleasure to listen to.

I also welcome the hon. Member for Nottingham East (Chris Leslie) to his new position. His speeches are in a somewhat different category, in that I always enjoy them but never agree with them. It is nevertheless a pleasure to see him in his place as his contributions in earlier debates were all listened to with bated breath, not least as we waited to intervene on some telling point.

This is a good and worthy Bill that is, perhaps, typical of the workmanlike approach that the coalition Government are taking to the difficult matters at hand to ensure that government is done fairly, justly and properly. In that context, it is interesting to look at the issue that was raised by the shadow Chief Secretary about the morality of taxation and whether it is moral, in one sense or another, to avoid taxation. We should be careful about eliding “avoid” and “evade”. The two are clearly different things, and this Bill exemplifies why that is so.

The Bill will relieve the taxpayer of burdens that Parliament probably never intended to place on them. For example, did we really want to have a special taxation for merchant seamen who are within the European economic area, as against those who are British subjects? Or was it an accidental result of historical legislation that meant that EEA citizens were caught in a way that the British subjects were not? As it happens, it is right and proper that Parliament should legislate to take people out of a tax that is misplaced, and it is equally right and proper that Parliament should legislate when it wants to bring people into a tax that it has not legislated for in the past.

The famous exponent of this was, of course, Lord Tomlin. In 1936, in a case brought by the Inland Revenue commissioners against the Duke of Westminster, Lord Tomlin said:

“Every man is entitled if he can to arrange his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure that result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax”.

That is why it is so important that we have these detailed pieces of legislation coming through, because when we look at the length of a cigarette, which is dealt with in clause 23, and whether it should be 3 inches or 4 inches—the measurements are all in centimetres, but being British, I shall stick to inches—and therefore be taxed differently, is that an issue of great, high morals, that should be referred to the College of Cardinals for debate, to decide which is one and which is the other? Or is it, in fact, a detailed point of law that is quite rightly passed by this House, so that taxpayers will know exactly where they stand? If we take an aircraft that weighs more than 8 tonnes—I shall not convert that into hundredweight, but I am sure that some will want to—should it be specially subject to value added tax, or should it not? Again, it seems quite clear to me that that is an appropriate matter for detailed legislation. The taxpayer who follows the letter of the law is never doing anything either wrong or immoral, and people who seek to try to confuse the two at seaside party conference are making a great error and doing a great unfairness to the British subject who is doing his best in an immensely complex area.

There is one other thing from this Bill that I would like to note, which is that clauses 5, 6, 14, 18, 19, 20, 21, 22 and 23 are, in whole or in part, requirements of the European Union. I mention that so that this House notes that we are perhaps not quite as free as we think we are to set our own tax rates, and that there is creeping Europeanisation. I see my hon. Friend the Member for Dover (Charlie Elphicke) is in his place. He is, in his port, at the forefront of our protection from creeping Europeanisation coming across our shores—this creeping Europeanisation that makes up almost a third of the Bill.

[Charlie Elphicke]

I thank my hon. Friend for his generous comments about our desire to buy our port. As far as Europe is concerned, does he not agree that it would be better if we were more masters and captains in the ships of our national destiny?

[Jacob Rees-Mogg]

That is put in an appropriately Nelsonian way. Of course we should sail the ship of state independently. It is important that so much of our domestic law is, in fact, coming from Europe, including our tax law, because that is the one thing that many people thought was broadly exempt from the interference of—

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[Charlie Elphicke (Dover) (Con)]

I wish to add my congratulations to my hon. Friend the Member for Skipton and Ripon (Julian Smith), who spoke in the most heartfelt way about his heartbreakingly lovely and beautiful constituency and in the most thoughtful and considered way about the impact of regulation on smaller businesses. I also wish to congratulate the shadow Chief Secretary to the Treasury on her elevation and the hon. Member for Nottingham East (Chris Leslie) on returning to the Front Bench, even if it is not the Front Bench that he would have preferred to be on—no doubt he is a patient man who will wait to have another go in due course.

This Budget, with this Finance Bill, is an essential piece of legislation. We have a country that is all but bust; its budget deficit is more than £150 billion and we face a structural deficit of £109 billion, according to the Office for Budget Responsibility. What does that tell us? It tells us that two thirds of the current extra borrowing each year has nothing to do with the recession and the global financial crisis, and has everything to do with the economic incompetence of the previous Government. The Leader of the Opposition urges that instead of adopting a fiscal position of raising taxes by one third and cutting spending by two thirds, we should make it 50:50. My hon. Friend the Member for West Suffolk (Matthew Hancock) has calculated that that would raise people’s taxes by another £1,300. Such a massive bombshell would not be constructive in this difficult fiscal environment. The Government have taken difficult decisions on taxes, but the further tax rises that the Opposition urge on us are not at all responsible or helpful.

It is therefore right that the coalition is taking the economically responsible and sensible position to step right and stabilise our country and its finances, but we need to have growth and a growth agenda. It is helpful that corporation tax is being reduced to 24% over the next few years, and I hope that in time the Government will be able to go further and bring it down to about 19%. I hope that they will give serious and substantial consideration to a holding company regime such as exists in places such as the Netherlands and Luxembourg, so that the UK becomes a holding company international headquarters of the European time zone. The UK and London, rather than the continent itself, would thus become the jumping off point for Americans investing in Europe, which would provide a massive fiscal stimulus to the UK economy and would make it the financial headquarters centre and the international business centre of the European time zone. We should be very alive to the competitive fight that we have with our European friends, and seek to maximise our position and that of London as the international financial and business centre of this time zone.

We may get a fiscal bounce out of encouraging large businesses to move to this country, set up here and stay here—I note that WPP and Hiscox have left and moved overseas, as have others—but if we want long-term sustainable development and growth, and more jobs and money over the longer term, we need to consider smaller business, because it has a stronger sense of growth over the long term and it supplies the entrepreneurial flair that creates more jobs and money.

[Kelvin Hopkins]

I entirely accept the need to sustain small businesses, but small businesses live off two things: first, big businesses, which make orders for them; and, secondly, demand in the economy, as we go for meals out, get building alterations done to our homes and so on. If people are not spending because they are frightened of losing their jobs and having their pensions and benefits cut, that damages small businesses at least as much as it does big businesses.

[Charlie Elphicke]

I would agree with the hon. Gentleman that confidence plays a massive role in our economy—and nowhere more so than with our smaller businesses. The confidence that we have seen since the election seems to be feeding through to the growth figures, which seem to suggest that we are coming out of the recession faster than anyone thought we would. Personally, I think we should be more positive about the prospects for the economy and the prospects for faster growth over the medium term, given the nature of the stabilisation and the confidence that the coalition Government have provided to the country. However, that does not mean that there is not more we can do for small businesses. We can and must, as my hon. Friend the Member for Devizes (Claire Perry) and others have said, have more liquidity for the small business sector. It has been too locked up in banks preparing their balance sheets—we need more lending.

[Mary Macleod (Brentford and Isleworth) (Con)]

Does my hon. Friend agree that a reduction in corporation tax is a way to encourage more small businesses and to keep big business in the United Kingdom, and that it will help the overall long-term growth of our economy?

[Charlie Elphicke]

Absolutely, yes. The previous Government were planning to increase corporation tax on smaller businesses and to do nothing for larger businesses. The reduction in corporation tax that we are seeing across the board is an incredibly positive move by the coalition Government that will help to create more jobs and money and help to encourage businesses—international businesses in particular—to set up in the UK.

We need more liquidity for smaller businesses, but we also need tax reform for smaller businesses. Earlier today, I met the Quoted Companies Alliance, which represents smaller quoted companies. It put to me the suggestion that we should perhaps think harder about the enterprise investment scheme and venture capital trust regimes. They are limited at about 50 employees, but EU state aid approval would be allowable for fewer than 250 employees under the EU SME definition. I hope that Ministers will consider that in due course and in further Finance Bills. There is a negative effect on businesses because they dare not grow over 50 employees. That is quite important.

The QCA says that the connected company or connected person regime should be considered, because business angels could be effective and useful directors and advisers to those businesses. The alliance also says that it would be better to have lighter-touch regulation. It would concede the income tax relief if it would help to keep the capital gains tax relief and increase the limits and thresholds available in the EIS and VCT regimes. I hope that Ministers will consider that and will consider the technical detail that will help to improve things for the smaller business sector.

On CGT, the alliance welcomes the entrepreneurs’ relief—it says that that is great—but asks why it lasts for only 12 months. Does that not encourage speculators? Should it not be for three or four years, to encourage long-term investment? Should it be restricted just to those who have 5% and are employees or should it perhaps involve those who have 5% or who are employees, to widen the investment base for smaller businesses that benefit from entrepreneurs’ relief? I hope that Ministers will also consider reinvestment relief when entrepreneurs come up with wonderful ideas, sell their businesses and reinvest. Perhaps they should be encouraged to do so with a wider base of reinvestment relief, to lock in more capital and investment, which will create more jobs and money over the longer term. I recognise that these are ideas to be developed in further Finance Bills, but I hope that Ministers and the Government will give them due consideration as time passes.

The other question the alliance raises is why we do not allow AIM shares to be put into individual savings accounts. That seems to make little sense. The AIM market has changed massively since the late ’90s and it would perhaps be constructive to allow AIM company shares to be in ISAs so as to widen the investment pool and widen the availability of capital to businesses that are typically smaller in nature and faster growing.

Finally, although the London stock exchange has said for a long time that we should have got rid of the stamp duty reserve tax, which is difficult to afford in the current circumstances, the QCA asks the interesting question: what would happen if we allowed getting rid of SDRT outside the FTSE 350 for smaller companies, to help to make their shares more liquid? Trading volumes would be lower and it might be more affordable. I hope that that is something to which Ministers will give due consideration and thought in future Finance Bills.

The most important thing for our country and our countrymen is to have more jobs and more money. I hope that over time we will develop a further growth agenda and deepen the one that we have already put forward, so that we can have faster structural trend growth and the UK can become the envy of not just our friends in the European Union but the world as a whole.

Equitable Life (Payments) Bill

Charlie Elphicke Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

That is an important point, but we also need to consider other factors such as the general state of the public finances and the other demands on public money in the spending review. We must also recognise that the Government have decided to introduce radical reform of financial regulation and to improve the regulation of retail financial services through the establishment of the consumer protection and markets authority. We can take a range of measures to help restore long-term confidence in savings, and people will have confidence in saving for the future if they recognise that the economy is on a stable footing, that we have got public spending under control and that we are tackling the deficit and keeping interest rates reasonable for as long as possible.

[Charlie Elphicke (Dover) (Con)]

I understand my hon. Friend’s desire to get full and final closure, but the consensus at a packed public meeting of my constituents in Dover and Deal was that it would be better to have staged payments over a number of years if affordability was a problem right now. Will he consider that very seriously?

[Mr Hoban]

I discussed that idea, but I received a strong representation from Equitable Life advising against it, because of the complexity that might be attached to staged payments. Some have suggested that we make payments into people’s pension funds, but some of the key criteria for judging the payments scheme will be simplicity, speed and transparency. People will be concerned that a series of small payments over a long period will not necessarily meet the simplicity, speed and transparency criteria against which a payments scheme ought to be judged.

--- Later in debate ---

[Stephen Timms]

No, the position we are in now is that there are two quite different ways forward. One was recommended by the ombudsman. The previous Government saw some serious difficulties in that approach, so called on Sir John Chadwick to give advice. The Government now need to choose which of those two options they intend to follow. Their difficulty is that every Treasury Minister—including all those I have mentioned—has pledged to adopt the ombudsman’s approach. The Government are currently saying both that they accept the ombudsman’s recommendation in full, and that Sir John Chadwick’s report is a building block for what is going to happen. Nobody knows what that means, however, as it is trying to ride two horses, when what is required is a decision.

[Charlie Elphicke]

As a member of the Select Committee on Public Administration, I know that we will take evidence from the ombudsman in due course. Can the right hon. Gentleman help me and the House by explaining what in his mind’s eye were the “serious difficulties” with the ombudsman’s report that he mentioned?

[Stephen Timms]

I will come to that in a few moments. There are some serious problems with the complexity of the procedure recommended. That is why, I think, the Government have realised that what they said before the election will not be honoured.

--- Later in debate ---

[Charlie Elphicke (Dover) (Con)]

I, too, would like to congratulate my hon. Friend the Member for Congleton (Fiona Bruce) on her excellent maiden speech. I have subsequently spent much of the debate dreaming of Sandbach.

I recently held a public meeting in east Kent for my constituents in Dover and Deal, alongside my hon. Friend the Member for South Thanet (Laura Sandys) and her constituents in Sandwich, Ramsgate, Broadstairs and other parts of her constituency. It was a lively meeting, and I undertook to report to the House the representations that were made to us. There were three clear positions that the Equitable Life victims wanted me to communicate.

The first was that the Chadwick report is not a sound basis for compensation, and that the contributory negligence concept implicit in it is entirely rejected. The second was that the ombudsman’s recommendations should be implemented, even if over a number of years with staged payments. The third was that payments should commence as soon as possible. For my part, I would like to say how sorry I am that the victims have been treated so badly for so long. I welcome the Bill, the compensation scheme and the action that is being taken.

[Guy Opperman]

Does my hon. Friend agree that, in these circumstances, an oral debate and a staggered system of intervention are two of the best ways ahead?

[Charlie Elphicke]

I absolutely agree with my hon. Friend. More than that, I urge Ministers to consider carefully a more generous compensation scheme than that recommended by the Chadwick report. I also urge them to consider making staged payments over some years, given the current pressure on the public finances as the nation today stands pretty much bankrupt. I hope that Ministers will give those points careful consideration when they bring forward the detail of the compensation package.

--- Later in debate ---

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

This has been a most interesting debate with very important contributions from many hon. Members. The hon. Member for Congleton (Fiona Bruce) made an excellent maiden speech. She gave a poetic description of the beauty of her constituency and, just for a second, all of us who heard her were transported back up to the north. She made the people of her constituency sound almost as good as the people of Harrow West. It was a pleasure to listen to her speech.

My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) and my hon. Friends the Members for Leeds North East (Mr Hamilton), for Ochil and South Perthshire (Gordon Banks), for Kilmarnock and Loudoun (Cathy Jamieson), for Bolton South East (Yasmin Qureshi), for Llanelli (Nia Griffith), for Derby North (Chris Williamson), for Edinburgh East (Sheila Gilmore) and for Foyle (Mark Durkan) all made strong speeches on behalf of their constituents. It would be remiss of me not to take this opportunity to praise in particular the contribution of my hon. Friend the Member for Leeds North East in jointly chairing the all-party group on Equitable Life policyholders. My right hon. Friend the Member for Holborn and St Pancras made the telling point that his general election opponents—like, I suspect, the opponents of all Opposition Members—did not mention any caveats when they signed the Equitable Life pledge in the run-up to 6 May.

To be fair, we also heard passionate speeches on behalf of their constituents from the hon. Members for Argyll and Bute (Mr Reid), for Angus (Mr Weir), for Chatham and Aylesford (Tracey Crouch), for Eastbourne (Stephen Lloyd), for Gillingham and Rainham (Rehman Chishti), for South Down (Ms Ritchie), for Witham (Priti Patel), for Worcester (Mr Walker), for Strangford (Jim Shannon), for High Peak (Andrew Bingham), for Redditch (Karen Lumley), for Macclesfield (David Rutley), for Richmond Park (Zac Goldsmith), for South Basildon and East Thurrock (Stephen Metcalfe), for Portsmouth North (Penny Mordaunt), for Central Devon (Mel Stride), for Brigg and Goole (Andrew Percy), for Mid Norfolk (George Freeman), for Warrington South (David Mowat), for Waveney (Peter Aldous), for Wells (Tessa Munt), for Newton Abbot (Anne Marie Morris), for Wycombe (Steve Baker), for Weaver Vale (Graham Evans), for Carmarthen West and South Pembrokeshire (Simon Hart), for Halesowen and Rowley Regis (James Morris), for Nuneaton (Mr Jones), for Sittingbourne and Sheppey (Gordon Henderson), for Oxford West and Abingdon (Nicola Blackwood), for Dover (Charlie Elphicke), for Harrow East (Bob Blackman), who is my constituency neighbour, for York Outer (Julian Sturdy) and for South Northamptonshire (Andrea Leadsom).

It was striking how much concern was expressed by those on both sides of the House about the lack of clarity in the Government’s position, with every Member noting the very big gap between the Chadwick approach and the ombudsman’s approach—albeit, I accept, that some did so very directly, while others did so with some sound and fury directed at those on the Opposition Benches. Members also noted the very different impression that Equitable Life policyholders are getting about the stance of Government Front-Bench Members now and that which they adopted before the general election.

As my right hon. Friend the Member for East Ham (Stephen Timms) said, we welcome the Bill and we will not oppose it, but we will seek to amend it in Committee, and we will want to probe the Government’s plans further. The Bill provides no detail on the criteria under which payments will be made, so we are no further forward in knowing what Equitable Life policyholders will get. No provision has been made for the independence of the compensation scheme to be established on a statutory basis. The Bill does nothing to ensure an independent appeal process for those who feel they have been unfairly treated—a point made by my hon. Friends the Members for Llanelli and for Ynys Môn (Albert Owen) and the hon. Member for Harrow East. There is also still no clear timetable governing when payments are to be made. The Bill makes no mention of the work of the independent commission. We will want to explore further in Committee how the commission is working.

I recognise that there are two serious tensions between the Treasury and the Department for Work and Pensions, but I was surprised to learn that the Financial Secretary has not resolved whether means-tested benefits will be affected by any compensation that Equitable Life policyholders on such support receive. Equitable Life policyholders on such means-tested support will now be worried that they will be hit by coming benefit cuts and then hit again because of any compensation they might get. I hope that when the Economic Secretary replies she is able to offer some further clarity, and we will certainly want to explore this matter in Committee.

What was most striking about the Financial Secretary’s opening speech was the absence of any effort to resolve the lack of clarity about whether he favours Sir John Chadwick’s approach or the ombudsman’s approach. The manifestos of the Conservatives and their Liberal Democrat partners, and also the coalition agreement document, appeared to be clear. The Conservative party said:

“We will implement the Ombudsman’s recommendation”

So the ombudsman’s recommendation was clearly mentioned there, and it was referenced yet again in the coalition agreement document, which committed both parties to “implement” the parliamentary “Ombudsman’s recommendation”. Even though the parliamentary ombudsman has been crystal clear in her profound disagreement with what Sir John Chadwick has recommended, the Minister notably did not clear up whether he agreed with her assessment of the Chadwick proposals as

“an unsafe and unsound basis on which to proceed.”

We now have a clear assessment of the estimated scale of relative loss, yet clear hints have also been given that the total payout will be very much less than those estimates. EMAG, which was rightly praised by those on both sides of the House, for the skill and persistence with which it has campaigned on this issue, invited candidates to sign its pledge and

“support and vote for proper compensation”.

Crucially, it said that that was to be as

“recommended by the Parliamentary Ombudsman.”

As my right hon. Friend the Member for East Ham said, every Treasury Minister signed that pledge and every one of them would have known then that they were committing themselves to a far higher figure than the sums now being suggested as a result of Sir John Chadwick’s conclusions.

In case there were any doubts, EMAG went out of its way, in the run-up to the election, to sweep away the possibility of confusion by making it very clear that it did not accept Sir John Chadwick’s work and wanted candidates to champion the ombudsman’s approach, which offered very different financial costs and scheme details from those that Sir John’s work would produce. Like the Grand Old Duke of York, the parties opposite have marched the Equitable Life victims up the hill only, once the election was over, to march them promptly back down again. Their hopes and expectations so cunningly built up before the election have been crushed in an exercise that, by any definition, looks breathtakingly cynical.

[Charlie Elphicke]

Speaking of breathtaking cynicism, it ill behoves the shadow Minister to offer thruppence and criticise others who offer sixpence or more.

Proposed Public Expenditure Cuts

Charlie Elphicke Excerpts

Monday 13th September 2010 Commons Chamber

[Mr Osborne]

I respect the fact that the hon. Lady is the Chair of the Select Committee on Work and Pensions, but I must tell her that the number of working-age people who claim disability living allowance has risen by more than 40% in the last decade, which is a substantial increase. When I considered reforms to the allowance, I saw that it would be possible to introduce such reforms as means-testing, but I rejected those. I said that it would be fairer to introduce an up-to-date assessment to help people to receive the benefit and ensure that they were eligible for it in future. I think that that is the fair way in which to proceed with this particular benefit, because I well understand that those who receive it are some of the most vulnerable members of our society.

[Charlie Elphicke (Dover) (Con)]

Can the Chancellor tell us whether, having bankrupted the country, the last Government left any detailed financial restraint, according to Treasury officials? This reminds me of the kids—the yobs—who smash the bus shelter and then throw stones at the people who are trying to clean up the mess. It is a disgrace.

[Mr Osborne]

The last Government left nothing except a letter from their Chief Secretary saying “I am sorry, but there is no money left”.

PAYE Contributions

Charlie Elphicke Excerpts

Wednesday 8th September 2010 Commons Chamber

[Mr Gauke]

That is an operational matter that HMRC will need to consider, but I will discuss it with senior management. As far as staffing is concerned, there will be a spending review announcement on 20 October, and any announcements on HMRC’s budgets will be made at that time.

[Charlie Elphicke (Dover) (Con)]

The size of the problem, the number of people affected and the amount of money involved make it a real tragedy for this country. Some 2,000 of my constituents, and the constituents of each and every one of us, will have to stump up more money that is not planned for at a time when money is tight for everyone. May I urge Ministers to have compassion for those who find themselves in a difficult spot, and a review of HMRC, particularly its difficulties in operating computers?

[Mr Gauke]

Again, I confirm that HMRC will consider the matter sympathetically and will have flexibility to spread payments over up to three years.

Office of Tax Simplification

Charlie Elphicke Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

All policy decisions will be for the House and Ministers. The hon. Lady makes the fair point that one cannot take politics entirely out of the tax system, but there are times when it is simply a question of complexity versus simplicity. There is scope for improvement, which is what I hope the OTS will be able to deliver.

[Charlie Elphicke (Dover) (Con)]

Will the Minister make a special effort to simplify tax legislation so that it is understandable for ordinary people? As a former tax lawyer—a poacher turned gamekeeper—I know that too often, the best advice is the preserve of the richest. That is not fair.

[Mr Gauke]

My hon. Friend, too, makes a good point. On the day of the Budget we published our document “Tax policy making: a new approach”, which set out a more consultative and deliberative approach to tax law, ensuring that draft legislation is properly examined. We think that that is to the advantage of all people; greater clarity in tax law is clearly helpful.

Finance Bill

Charlie Elphicke Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mary Creagh]

I will not, because we have only one hour left, and eight Members wish to speak. The Front-Bench spokesmen took their time, and I intend to take my time.

The labour economist David Blanchflower, a former member of the Monetary Policy Committee, has said that the Government’s prediction on jobs is wildly over-optimistic, given that the Labour Government created only 1.6 million jobs between 2000 and 2008, when the economy was, by consensus, booming.

The VAT increase for which the House voted will raise £12.1 billion in 2011-12, but will reduce the amount of goods and services that people can buy. It will depress demand and delay the recovery. It will increase prices permanently by 1%, thereby permanently reducing the value of future earnings and—one of the hot topics in the Bill—future pensions. It will also disadvantage the poorest, who spend the biggest proportion of their income.

Let me say something about the social impact of the Bill. It was difficult to hear the details of that as the Minister raced through his speech. We have heard from the Prime Minister that children need warmth, not wealth, and they will certainly miss out on the wealth part as a result of this Bill. Poor families in Wakefield will lose up to £1,200 as a result of changes in working families tax credit. From April 2011 the Sure Start maternity grant will be available only for the first child in a family. That means a £500 cut for low-income pregnant mothers who already have a child.

[Charlie Elphicke (Dover) (Con)]

Will the hon. Lady give way?

[Mary Creagh]

No. I am going to take my time. As I have said, I am not going to take interventions.

Nappies, prams, babygros, bottles, dummies and high chairs will all be more expensive for families in our constituencies as a result of the VAT increase, but the grants to help the poorest women in our society to afford them will be cut. When I asked the Secretary of State for Work and Pensions how he expected families to cope, he said that he wanted them to recycle prams, but if someone has a child one year younger than another child, where is the second baby supposed to sleep? In the same cot? The parent of a second child will still need to buy a new car seat and a double buggy. It will be more difficult for low-income families to buy all those items. We are losing the baby element of child tax credit, and we are losing Labour’s proposed toddler tax credit, which would have meant another £208—

--- Later in debate ---

[Charlie Elphicke]

I just point out to the hon. Lady that child poverty has risen by 300,000 since 2004, whereas under this Budget it will be frozen for two years. Does she not welcome that very positive fact?

[Mary Creagh]

Interestingly, when the Red Book refers to the effects on child poverty it talks about the next couple of years but does not mention 2013 and 2014. Thanks to the work being done by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the shadow Secretary of State for Work and Pensions, we are finding that this Budget’s impact on women—in particular on poor women, low-paid women and public sector worker women, and therefore on their children—is likely to hit disproportionately hard. I leave the hon. Gentleman with that thought.

What is absent from the Budget and the Finance Bill is any mention of the poor. The changes to the disability living allowance gateway are to save £1 billion by 2014, but we need clarity about which groups of disabled people are going to be affected. The housing benefit move to the 30th percentile of average housing will have an impact on families across the country. Stringent changes are being made to the housing benefit rules to say that anyone who has been on jobseeker’s allowance for more than a year will automatically lose 10% of their housing benefit.

If that is done to people, there are three possible outcomes. The first is that the people involved find jobs—and good luck to them. I am sure that that is the stated aim of the Government’s policy. The second possible outcome is that those people cannot find jobs because a further 1.3 million people are on the dole as the public sector and private sector job losses kick in, so they are forced to borrow the money. However, we are talking about people with a low income or no income, so they will, in effect, be forced into the arms of loan sharks and will fall into debt. The third possible outcome is that these people will spend £10 a week less feeding their children, so their children will be pushed back into poverty. The arguments being made about child poverty will not wash with Labour Members, because both the second and the third possible outcomes will tip those families back into poverty.

[Mary Creagh]

The beauty of the child trust fund is that both those things happened; this involved people who would never have thought of opening a trust fund. I count myself among them, because I had no idea what a trust fund was until I was “given it by the Government” when my son was born, but now that I understand what it is and I understand the secrets of how people save for their children in a tax-efficient way, it has enabled me to think carefully about how I plan for my children’s future. It enables families to do both those things.

Most families are using the child trust funds to put a little bit extra by. The parents who scrimp and save to put into the child trust fund will not let their children waste the money. The straw man that has been held up is that they will blow it all on their 18th birthday party, on buying fast cars and all the other things that 18-year-olds do—[Interruption.] That is certainly what has been stated by some Government Members as a reason for cutting the child trust fund; they have said, “You can’t give it to 18-year-olds because they won’t know what to do with it.” When their parents have paid into the fund they will make absolutely sure that that money, which for them is a life-changing sum, will be used wisely by their children.

[Charlie Elphicke]

rose—

[Mary Creagh]

I have taken one intervention from the hon. Gentleman, and I am aware that other hon. Members wish to speak.

The VAT rise in the Finance Bill will cost the NHS an extra £250 million each year, and it will be very bad for public health, too. Recent research by David Stuckler and his colleagues published in the British Medical Journal shows that social spending—housing benefit, disability living allowance and other such benefits—has more impact on tackling health inequalities than spending on the NHS. They studied 20 European countries over two decades, finding that mortality rates increased when social spending was cut. So the public health impact of cutting the housing, disability and incapacity benefit budgets will be felt by the poorest in our society in the reduction in their life expectancy.

In concluding, I wish to discuss what has happened in the past 10 weeks and the political impact that voting for this Budget will have on the Liberal Democrats. The past 10 weeks have been like a very dark episode of Doctor Who, with the Conservatives as the evil Cybermen. The Cybermen were originally a wholly organic species of humanoids that implanted more and more artificial parts into their bodies as a means of self-preservation. This led to the race becoming coldly logical and calculating, with every emotion all but deleted from their minds. They use human pawns and seek to further their number by conversion. The Liberal Democrats are the Conservatives’ hapless victims. The Cybermen have to assimilate their victims in order to drain their energy and live, but we all know that when the Cybermen have assimilated, they have only one further aim: they say to their victims, “You will be deleted.”

These are not progressive cuts. There is nothing progressive about slashing the extension of free school meals to the children of the working poor and thrusting 50,000 children back into poverty. There is nothing progressive about freezing the pay of dinner ladies, hospital cleaners and nursery workers. Why should low-paid women pay for the fiscal hysteria of markets and central banks, which presided over such colossal market failure? Why is corporation tax being cut by 1% a year for the banks when everyone in Wakefield is seeing their VAT increasing by 2.5%? Why is the annual exempt amount for capital gains tax rising each year with the retail prices index when housing benefit and occupational pensions in Wakefield will increase only by the consumer prices index?

Those are political choices. They are the wrong choices for my constituents and for those of other hon. Members. Economically, this is a deflationary Budget. It is wrong for Britain, wrong for families, wrong for pensioners and wrong for the poor. Politically, supporting this Budget will be the wrong thing for the Liberal Democrats. I urge all Liberal Democrat Members to think before they vote tonight, and before they throw away 120 years of Liberal tradition as the Tories’ new poodles. You are being assimilated. You will be deleted.

--- Later in debate ---

[Charlie Elphicke (Dover) (Con)]

I shall keep my remarks brief and discuss clause 1 in relation to corporation tax.

There are many pockets of deprivation in Dover and Deal, and the rise in child poverty during the previous Parliament was a serious concern, as was the widening of the gap between the richest and the least well-off. The abolition of the 10p rate hurt and upset many of my constituents, so the rise in income tax personal allowance is extremely welcome, but what we need to do, as has been much discussed today, is to increase the nation’s trend growth rate.

On that point, I particularly welcome the reduction in corporation tax to what will be 24p by the end of this Parliament. That is incredibly important, because business, particularly international business, is very mobile and can set up anywhere. WPP, for example, has gone off to Dublin, and that should concern every Member, because the Exchequer is going to lose about £240 million in corporation tax receipts every year.

If we are to compete with centres in the European time zone, it is important also that we consider how to build in a participation exemption, as the Netherlands and Luxembourg have, and as Ireland and Switzerland have in effective forms. We need to draw international business into the UK, because that is a critical path towards expanding the amount of jobs and money that we have.

I make one brief plea. Reducing the corporation tax rate to 24p by the end of the Parliament is welcome, but, if we are to make a step change, reducing it to 19p would, in my respectful submission, be transformational. It would draw in international business and, ironically, raise corporation tax revenues. That is the international evidence, and that is the short and simple case that I put to the Treasury team—to consider going further, harder and deeper in future.

Equitable Life

Charlie Elphicke Excerpts

Tuesday 20th July 2010 Westminster Hall

[Nicola Blackwood]

I believe that those issues were raised on 17 March and that there might have been a subsequent commitment. However, hearing the Minister’s confirmation would be helpful.

Two issues are at stake in the process. The first is purely financial.

[Charlie Elphicke (Dover) (Con)]

With respect, I add that Equitable Life victims in Dover are deeply concerned. I congratulate my hon. Friend on securing the debate and on her excellent argument.

[Nicola Blackwood]

The first of the two issues at stake is purely financial—the technical problems of designing a scheme that is fair, transparent, swift and simple. The second issue, which is almost more challenging, is ethical—the admission of responsibility by the Government for regulatory failures and the acknowledgement of what that failure has meant to Equitable Life members.

By failing to admit the full extent of the losses, we will fail on the latter issue, ethically, even if we succeed on the former, financially. I do not see any reason why we need to go down that route. All parties have consistently stated that final payments will have to be balanced against other calls on the public purse. The High Court stated that, as the Government were not required to create a compensation scheme, any legal objections to the nature of such a scheme were bound to fail, so there seems to be no legal barrier.

In my dealings with EMAG, representatives have clearly stated that they understand that full payment may well not be possible, but they want an acknowledgement, at least, from the Government of the full cost that they have shouldered.