National Insurance Contributions Bill

David Gauke Excerpts

Thursday 16th October 2014 Written Statements

[The Financial Secretary to the Treasury (Mr David Gauke)]

The Government are tabling amendments to the National Insurance Contributions Bill today ahead of Committee stage of the Bill starting on 21 October 2014.

The amendments update the Bill to include the 2015-16 class 2 national insurance contributions rate and small profits threshold. The share fishermen’s rate of class 2 contributions in the Social Security (Contributions) Regulations 2001 is also amended in line with Government policy announced in Budget 2011. A minor technical amendment is also being made in relation to the application of the promoters of avoidance schemes legislation to national insurance contributions.

ECOFIN

David Gauke Excerpts

Tuesday 14th October 2014 Written Statements

[The Financial Secretary to the Treasury (Mr David Gauke)]

A meeting of the Economic and Financial Affairs Council will be held in Luxembourg on 14 October 2014. Ministers will discuss the following items:

Measures in support of investment

Ministers will discuss measures in support of investment, including the Commission-EIB proposal for a new taskforce to identify significant European investments which are not being realised for economic, regulatory or other business reason.

Research and innovation as sources of renewed growth

Council will discuss a Commission communication on research and innovation, inviting views from member states on how to prioritise growth-enhancing expenditure, particularly in this area.

Follow-up to the G20 Finance Ministers and governors’ meeting and annual meetings of the IMF and World Bank Group in Washington

There will be an update from the Commission following the G20 Finance Ministers and governors’ meeting on 9-10 October 2014 and annual meetings of the IMF and World Bank Group on 10-12 October 2014 in Washington.

Banking union: single resolution fund contributions

The Commission will update the Council on progress towards laying the delegated act on contributions to the resolution financing arrangements under the bank recovery and resolution directive (BRRD) and the single resolution mechanism (SRM).

Business taxation

Following agreement at June ECOFIN, Ministers will be informed of progress on a joint statement between member states and Switzerland on business taxation.

Payment appropriations

The Commission will update Ministers on the state of play on payment appropriations, specifically the draft amending budget 3.

Mandatory automatic exchange of information in the field of taxation

The presidency will seek political agreement to the revised directive for administrative co-operation (DAC2), which will implement the OECD’s global standard for automatic exchange of taxpayer information (AEOI) in the EU.

Energy taxation

The presidency will present the energy tax directive, which sets minimum rates of tax for energy products used as heating fuel, motor fuel and electricity, to Council for an exchange of views.

Ministerial dialogue with EFTA countries

Ministers will meet with EEA EFTA states at this ECOFIN.

Tax Policy Consultation and Draft Legislation

David Gauke Excerpts

Tuesday 14th October 2014 Written Statements

[The Financial Secretary to the Treasury (Mr David Gauke)]

The Government’s approach to developing tax policy emphasises the benefits of policy consultation and legislative scrutiny.

Following Budget 2014, the Government have engaged with interested parties, seeking their views on more than 30 areas of tax policy. The next stage of consultation aims to ensure that the legislation works as intended.

Draft clauses to be included in the Finance Bill will be published on 10 December 2014, together with responses to policy consultation, explanatory notes, tax information and impact notes and other accompanying documents. The consultation on the draft legislation will be open until 4 February 2015.

National Insurance Contributions Bill

David Gauke Excerpts

Monday 8th September 2014 Commons Chamber

[The Financial Secretary to the Treasury (Mr David Gauke)]

I beg to move, That the Bill be now read a Second time.

This is the third national insurance contributions—NICs—Bill this Parliament. The Government have already taken action to reduce significantly the burden of NICs on earnings and employment through previous Bills. At Budget 2011, the Chancellor announced a £21 a week above-inflation increase to the employer’s NICs threshold. Last April, the employment allowance was introduced, which will benefit up to 1.25 million businesses and charities. Next April, the vast majority of under 21-year-olds in work will be lifted out of employer NICs, which will support 1.5 million jobs. All those measures have been strongly welcomed by business and have contributed to the current record levels of employment.

This Bill contains four measures: simplifying NICs paid by the self-employed; accelerating the payment to the Exchequer of NICs in dispute in avoidance cases, and providing for the issue of follower notices where the scheme or arrangements have been shown to fail in another party’s litigation; applying new information powers and penalties to promoters of avoidance schemes; and introducing a targeted anti-avoidance rule—TAAR—to prevent people from circumventing new legislation tackling avoidance involving employment intermediaries.

Let me explain each of those four measures in more detail, starting with the simplification of NICs paid by the self-employed, which is contained in clauses 1 and 2, and schedule 1. Hon. Members may recollect that at Budget 2014 the Chancellor announced that the Government intended to simplify the NICs collection process for the self-employed, who currently have to operate two different processes for two separate classes of NICs. This followed a 2012 recommendation by the Office of Tax Simplification and a consultation published in July 2013 entitled “Simplifying the National Insurance Processes for the Self Employed”, which sought views on proposals to simplify class 2 NICs.

The number of self-employed individuals in the UK is growing, with more people having multiple jobs and moving in and out of self-employment. Having two separate collection methods for class 2 and class 4 NICs causes confusion and extra work for both the self-employed and Her Majesty’s Revenue and Customs. The objective behind the measure is to modernise the way class 2 NICs are assessed and collected, making the system simpler and more straightforward, and reducing administrative burdens on the self-employed. Class 2 NICs are currently collected via a flat-rate charge of £2.75 per week, paid through six-monthly billing or by direct debit, while class 4 NICs are a percentage charge on profits—of 9% between the lower and upper profits limit and 2% above the upper profits limit—paid through self-assessment alongside income tax.

The aims of clauses 1 and 2, and schedule 1 are to change the way in which class 2 NICs are structured; change the means by which class 2 NICs are collected, by moving their collection into self-assessment, so that they can be collected alongside class 4 NICs and income tax; change the means by which class 2 NICs are enforced, with changes to associated appeal rights to mirror broadly those for class 4 NICs and income tax; and make consequential changes to legislation relating to maternity allowance to allow women to continue to become eligible for it post-reform.

Those changes are proposed to take effect for the 2015-16 tax year onwards, so that the collection of class 2 NICs under self-assessment will be from 6 April 2016. The changes are aimed at simplifying NICs for the self- employed and small businesses—sole traders, partnerships and unincorporated businesses—by enabling them to report their class 2 NICs liability and pay it through their self-assessment, thus reducing the administrative burden of the two current separate collection mechanisms. The six-monthly billing and direct debit systems will cease from April 2015 and July 2015 respectively.

During the consultation there was some concern that the reform would mean that the self-employed would no longer be able to spread the cost of paying class 2 NICs. I want to take this opportunity to reassure the self-employed that there is already the facility in self-assessment to make budget payments to spread the cost of tax and NICs through the year.

Hon. Members may be interested to know that one of the key changes that we made through this reform is that there will no longer be a need for customers with low profits who want to opt out of paying class 2 NICs to apply for a small earnings exception in advance—something that we know they find confusing and burdensome. Under this reform, customers with profits below the new small profits threshold, which will be equivalent to the current small earnings exception threshold, will not be liable to pay class 2 NICs, but will be able to choose to do so on a voluntary basis. That means that those with low profits who want to opt out of paying class 2 NICs will not need to do anything apart from confirm that when they are completing their self-assessment return, while those who still choose to pay in order to protect the benefits entitlement will be able to do so quickly and easily. Rather than a separate process, the decision will be built into the self-assessment return.

There is a small proportion of HMRC customers who pay class 2 NICs but who are not in self-assessment. Those individuals will continue to get a separate class 2 NICs payment request. They will receive that once a year instead of twice a year as they currently do. Hon. Members will be pleased to learn that the tax information impact note published by HMRC about this measure indicates a net administrative burden reduction to the self-employed of £74 million over five years as a result of these reforms.

I now wish to take the House through the provisions in the Bill that deal with accelerating the payment to the Exchequer of amounts of NICs in dispute in avoidance cases. That also includes providing for the issue of follower notices where there is a relevant case in which the scheme or arrangement has been shown to fail in another party’s litigation. Those provisions are in clauses 3 and 4 and schedule 2.

The provisions broadly follow, for NICs, new powers that are included in the Finance Act 2014—the hon. Member for Birmingham, Ladywood (Shabana Mahmood) and I debated this matter not that long ago—which allow HMRC to issue a notice to taxpayers who have used avoidance schemes that have failed before the courts in another party’s litigations. The provisions in the Bill and the Finance Act 2014 are estimated to raise £5 billion in tax and NICs for the Exchequer in the years ahead.

A follower notice sets out HMRC’s view that a judicial decision in another case is directly relevant and that those who receive the notice should settle their disputes. If the taxpayer does not settle in response to this notice, they will face a tax-geared penalty if they are unable to show that their case is materially different from the other party’s litigation or if they did not have reasonable grounds to continue the dispute.

An accelerated payment may be required from taxpayers in the following circumstances: where a follower notice has been issued and the taxpayer decides not to settle their dispute; where taxpayers are involved in schemes subject to disclosure under the disclosure of tax avoidance schemes—DOTAS—rules: and where taxpayers have used arrangements that HMRC decides to counteract under the general anti-abuse rule.

For both follower notices and accelerated payments, taxpayers will have 90 days to make representations. There is no formal right of appeal against the notices or payments, but taxpayers can appeal against any penalties. The measures are expected to lead to the issue of payment notices to around 43,000 taxpayers involved in avoidance schemes currently under dispute with HMRC over the period to the end of March 2016.

Now that I have outlined what the provisions in the Bill do, I want to address some of the points raised in debate on the Finance Bill and by some commentators. One point that has been made is that the measure effectively assumes that someone is guilty before they are proved innocent. The Government do not agree, as most people pay their tax up front and can apply for a refund afterwards, for example through pay-as-you-earn, VAT and tax on interest income, and the measure extends the existing practice of having disputed tax sit with the Exchequer. That is already the case when taxpayers seek tax refunds for disputed avoidance. The measure in no way alters the rights of appeal that people already have when disputing the tax or NICs they owe HMRC; it is only about where the money sits while the dispute continues.

Hon. Members might also be aware that the measure has been described as having retrospective effect. The Government do not agree. It is not retrospective and there is no change to the liability to make a contribution. It involves NICs that the individual and his or her employer would already have paid if they had not entered into the avoidance scheme. The taxpayer can continue to dispute the case and will be repaid with interest if they succeed.

It has also been suggested that taxpayers are likely to find it difficult to find the money to pay. The Government’s view is that we would expect a prudent taxpayer to anticipate that an avoidance scheme might not deliver savings and would be subject to challenge by HMRC and that such a taxpayer should have made some provision against that possibility. I can reassure the House, however, that when a taxpayer has genuine difficulties in paying some or all of the NICs, HMRC will use its usual collection tools, including appropriately structured payment arrangements, to assist taxpayers in paying the required amounts.

I have seen representations from businesses suggesting that they entered into such arrangements to reduce business costs and that the measures will now put unacceptable pressure on their business activity. The Government have put in place an attractive business tax regime and expect everyone to pay the taxes that are due. Avoidance involves trying to pass the burden on to the vast majority who have not tried to avoid tax and where business is concerned it involves attempts to gain an unfair competitive advantage against those who pay their taxes and do not try to avoid tax.

I want now to take the House to the provisions in the Bill that apply new information powers and penalties to the highest risk promoters of tax-avoidance schemes. The provisions are also contained in clauses 3 and 4 and schedule 2. The measure was announced for tax in Budget 2013 and the Government’s intention has been to extend it to NICs at the earliest opportunity. A consultation on the tax aspects, called “Raising the stakes on tax avoidance”, ran until 4 October 2013.

Hon. Members might also be aware that the Finance Act 2014 includes legislation that allows HMRC to issue conduct notices to promoters of tax-avoidance schemes and monitor promoters who breach a conduct notice. The Bill applies the tax legislation to NICs so that the legislation operates as one unified measure that covers tax and national insurance contributions. Monitored promoters will be subject to new information powers and penalties, which will also apply to intermediaries who continue to represent them after the monitoring commences. The monitored promoter will be named by HMRC and the naming details will include information on why the conduct notice was breached. It will be required to inform its clients that it is being monitored by HMRC. Clients of monitored promoters will also be subject to certain obligations that have a penalty for non-compliance and extended time limits for assessments.

The measure is part of the Government’s strategic response to avoidance. It will deter the use of avoidance schemes through influencing the behaviour of promoters, their intermediaries and clients and it is aimed at changing the behaviour of promoters of NICs and tax-avoidance schemes. Naming a monitored promoter should deter intermediaries from acting for them and clients and potential clients from using their products. I can confirm to the House that the measure is not expected to have any significant economic impact and that the cost to HMRC of dealing with the additional information and reporting it is expected to be negligible.

Now that I have outlined what those provisions do, I would again like to address several points that have been raised during Finance Bill debates and by some commentators. It has been suggested that the Bill is too wide and will catch innocent promoters, but the Government disagree. To be covered by the legislation, a person must be the promoter of avoidance schemes that give a tax advantage, or that avoid or reduce a NICs liability, and to have made a significant breach of a threshold condition. The vast majority of promoters will not be in that position.

Hon. Members may be aware that it has been suggested that this response to avoidance is disproportionate, but we disagree. The Government have made it absolutely clear that we are determined to crack down on tax avoidance. The vast majority of taxpayers pay the right tax and NICs at the right time, and should not have to subsidise those who participate in avoidance.

One part of the Government’s strategy is to tackle the behaviour of the supply side of the market—those highest-risk promoters who design and sell avoidance schemes. We want to ensure that promoters who avoid their obligations to HMRC and their clients are made to change their behaviour, and the Bill achieves that by imposing consequences for those who do not meet acceptable standards of behaviour. It requires monitored promoters to tell HMRC about their schemes and clients, and there will be significant fines if they do not comply.

Another argument that has been made against the measures is that they apply retrospectively. The House will not be surprised to learn that the Government disagree with that proposition. While the provisions involve looking back at a promoter’s past behaviour, they are designed to improve current and future behaviour. It is only if there is no improvement in the promoter’s compliance with their obligations that they are subject to significant information powers and penalties.

I shall now describe to the House the provisions relating to the new targeted anti-avoidance rule that will prevent people from circumventing new legislation that tackles avoidance involving employment intermediaries. The proposed TAAR is set out in clause 5. The National Insurance Contributions Act 2014 strengthened legislation in respect of offshore employment intermediaries. It was specifically intended to address the non-payment of employer’s national insurance in the oil and gas industry involving the placement outside the UK of the employer of oil and gas workers working on the UK continental shelf.

Hon. Members may be aware that the temporary labour market is quick to react to legislative change and to find new convoluted ways to reduce the amount of income tax and NICs that would otherwise be liable to be paid. Stakeholders have indicated to HMRC that intermediaries involved in the facilitation of false self-employment may set up avoidance vehicles with convoluted structures that are specifically designed to circumvent the 2014 Act. To dissuade such intermediaries, the Government propose that a TAAR is included in NICs legislation to deter such avoidance. That TAAR is similar to the tax TAAR established for the same purpose through the Finance Act 2014. The rule will focus on the motive for setting up arrangements—on whether it is to avoid NICs—and whether those arrangements result in less NICs being paid. To ensure that the tax and NICs TAARs operate as one, both will take effect from 6 April 2014.

Let me explain why we are bringing forward the TAAR now. The use of employment intermediaries as a way of avoiding tax has grown in recent years, and they are increasingly marketed and promoted as a way of avoiding employer’s NICs. The TAAR will dissuade some businesses from entering into convoluted arrangements to avoid NICs. The proposed measures will help to level the playing field for UK businesses and ensure that compliant UK businesses that facilitate the UK’s flexible labour market are not undercut by those trying to avoid tax.

The Government have already taken action significantly to reduce the burden of NICs on earnings and employment through previous Bills. At Budget 2011, the Chancellor announced a £21 a week above-inflation increase to the employer’s NICs threshold. Last April the employment allowance was introduced, which will benefit up to 1.25 million businesses, and next April the vast majority of under-21s will be lifted out of employer NICs, which will support 1.5 million jobs.

The Bill introduces further welcome measures and is both important and necessary. The modernisation of the way class 2 NICs are assessed and collected will make the system simpler and more straightforward and will reduce administrative burdens on the self-employed. The Bill also includes a package of measures aimed at activity that attempts to reduce the amount of NICs payable to the Exchequer. I commend the Bill to the House.

Stamp Duty (Housing Market)

David Gauke Excerpts

Thursday 4th September 2014 Westminster Hall

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend the Member for St Albans (Mrs Main) on securing the debate and putting forward her case with such tenacity, if I may borrow that word from my hon. Friend the Member for Esher and Walton (Mr Raab). I thank my hon. Friends the Members for Esher and Walton, for Richmond Park (Zac Goldsmith) and for Nuneaton (Mr Jones) and my right hon. Friend the Member for Wokingham (Mr Redwood) for their contributions to the debate.

I also thank the hon. Member for Birmingham, Ladywood (Shabana Mahmood) for her remarks. She said that she thought that the hon. Members present would be more looking to me, as a Minister, to outline possible thoughts for the autumn statement than expecting her to say anything about Labour party policy in this matter. I am sure that my right hon. and hon. Friends would not expect me to outline any announcements for the autumn statement, but I suspect that they did not expect to get much from the shadow Minister, either.

Ensuring that there is good-quality, affordable housing for all and an effective housing market is an important priority for this Government. As my hon. Friend the Member for St Albans said in her opening remarks, home ownership is very important to us. It is very important to the Government and the Conservative party. I entirely endorse and share her views about the importance of ensuring that as many people as possible have the opportunity to own their own homes.

Although I understand the concerns raised today that stamp duty is putting people off moving and preventing people from getting on the housing ladder, the fundamental point is about the high cost of property. Removing or reducing stamp duty land tax will not by itself address the fundamental issues. I will deal with SDLT and the various points that have been raised, but as other right hon. and hon. Members have acknowledged, we have to look at the housing market as a whole; in particular, it is worth highlighting the steps that the Government are taking to increase housing supply. Those measures, combined with support for home buyers, are, we believe, the right way to address this issue. That is why we have introduced a range of measures to get Britain building again, to fix the broken housing market and to help hard-working people to get the home that they want.

We are supporting home buyers, including through the Help to Buy scheme—a major package of measures to increase the supply of low-deposit mortgages for creditworthy households. We are also increasing housing supply through schemes such as the £474 million local infrastructure fund, the £19.5 billion of public and private investment in the affordable rented sector and the £1 billion Build to Rent scheme to support the growth of the private rented sector, because we believe that those matters are important.

[Mrs Main]

Will the Minister give way?

[Mr Gauke]

I will, of course, deal with stamp duty land tax in a moment if my hon. Friend wants—

[Mrs Main]

My point is about the Help to Buy scheme. Has the Minister done any analysis of the situation in areas such as mine, where, over two years, only seven people have availed themselves of the Help to Buy scheme? Has he considered that that could be because people still simply cannot afford to use the scheme?

[Mr Gauke]

Undoubtedly, the vast majority of those who have made use of the Help to Buy scheme have been at the lower end of the market in terms of house prices and have generally not been in London and the south-east—the greater south-east, if she will forgive a fellow Hertfordshire Member of Parliament for using that phrase. That, however, was the intention of the Help to Buy scheme—for it not to be focused at the top end of the market and more expensive homes.

I acknowledge my hon. Friend’s point that much of the activity has been away from areas such as London and the home counties, but that is not something that we are necessarily ashamed of. However, I will deal with her fundamental argument. I know the point that she is making—that stamp duty land tax has prevented use of Help to Buy in some parts of the country.

Let me return to the issue of the housing market. We are maintaining stability in the housing market by keeping interest rates low and supporting improvements to the mortgage market—and that is working. The number of first-time buyers is at a six-year high, mortgage approvals are up 8% on last year and repossessions are at their lowest level since 2007. More than 150,000 households have been helped to buy or reserve property since spring 2010 through Government-backed schemes. That includes nearly 50,000 supported through our Help to Buy schemes.

Housing supply is up. Almost 480,000 new homes have been delivered since April 2010. Starts on new homes in the past year totalled 137,780—up by 22% on the previous year and the highest annual total since 2007. The construction sector has been growing for 16 consecutive months and is currently experiencing the sharpest rise in house building orders since 2003, while companies are taking on new workers at the fastest rate since 1997. A growing pipeline of new projects is also emerging from the reformed planning system. Last year, successful applications for major housing schemes were up 23% and planning permissions were granted for 216,000 new homes.

The Government remain committed to improving the housing market, and that will remain a vital part of our long-term economic plan. That is why at the last Budget we introduced programmes including the £525 million builders finance fund and a £6 billion extension for the Help to Buy equity loan scheme, to run until 2020. We also announced our plans for an urban development corporation to deliver a garden city at Ebbsfleet and deliver up to 15,000 new homes.

In June, we announced that £400 million would be made available to support 20 housing zones to provide new homes on brownfield land. We remain on track to deliver 170,000 new affordable homes in the four years to March 2015, and a further 165,000 between 2015 and 2018. That will constitute the fastest rate of affordable house building for 20 years, a record that well withstands comparison with that of our predecessors. We must remember that the housing market, like the rest of the economy, is recovering after having suffered a severe downturn following the financial crisis, but we have taken measures to ensure that it is moving in the right direction. That is important to today’s debate, which is about ensuring that there are opportunities for people to own their own home.

I recognise that stamp duty land tax is an important issue, and my constituency, like that of my hon. Friend the Member for St Albans, experiences many of the issues that have been raised. The Government, however, remain committed as a priority to tackling our record deficit. SDLT is an important source of Government revenue; it raises several billion pounds each year to help pay for the essential services that the Government provide and support, and to reduce the deficit.

In 2013-14, SDLT raised £9.3 billion, a substantial sum—money that we need. I appreciate the argument that we have to ensure that taxes bring in the requisite revenue, and that it is perfectly possible for a tax rate to be too high and above the optimum level. My right hon. Friend the Member for Wokingham and I have often argued in the House of Commons Chamber in favour of the reduction of the top rate of income tax from 50p to 45p, which is a good example. I am not convinced, however, that the case is as strong in this context and that reductions in SDLT would pay for themselves.

My hon. Friend the Member for St Albans made the case for increasing the SDLT threshold to £500,000. On a static analysis, if we were to do that for 2015-16, the cost would be £4.2 billion. That static analysis does not take into account the behavioural response, but I do not believe that the behavioural impact of increasing the SDLT threshold to £500,000 would substantially reduce that cost. We should bear in mind that that is a substantial amount of money, especially at a time when we have to be careful with the public finances.

It is also worth pointing out that the majority of the revenue comes from those who buy the most expensive homes: 52% of SDLT residential yield comes from properties bought for more than £500,000, despite the fact that such properties represent only 6% of transactions. A third of all residential transactions do not involve the payment of any SDLT, which is a higher proportion than in 2007, when that figure was 29%.

[Mrs Main]

rose—

--- Later in debate ---

[Mr Gauke]

I recognise that that is not a third of transactions in Hertfordshire, which I suspect is the point that my hon. Friend is itching to make. In 2013, a further 42% paid the 1% rate, which meant that 75% of all residential property transactions resulted in the payment of less than £2,500. Even the proportion of residential transactions involving the 3% rate has remained broadly stable. In 2007, 18% of transactions were affected by the 3% rate; in 2013, the figure was 19%. I argue that SDLT is progressive, because those who purchase higher-value property pay a higher share of tax.

We must also consider who ultimately bears the burden of SDLT. The hon. Member for Birmingham, Ladywood referred to the Labour party’s policy announcement of an SDLT holiday for first-time buyers. We implemented such a policy for properties worth up to £250,000 from March 2010 until March 2012. HMRC analysis of the impact of that relief indicated that the majority of the saving was incorporated into higher property prices, which made the relief largely ineffective and poor value for money; what buyers did not pay in stamp duty, they paid in higher property prices.

My hon. Friend the Member for Nuneaton made the point that the situation can be complicated by the fact that it is easier to get a mortgage that covers the purchase price rather than one that covers the purchase price and the SDLT, but we must bear in mind that the impact of changes in SDLT can result in benefits to the seller, rather than to the buyer.

[Shabana Mahmood]

On a point of clarification, I should say that my point about a stamp duty holiday concerned a proposal that we made in 2012 about the sale of the 4G spectrum. I acknowledge that the Government proceeded with our proposal in March 2010 for a stamp duty holiday.

[Mr Gauke]

I am grateful for that clarification. If I maligned the hon. Lady, I will certainly withdraw those remarks.

Nearly everybody who contributed to the debate mentioned the fact that SDLT has a slab structure rather than a slice structure. I will make two points in response to that. If we wanted to raise the same level of revenue under a different structure, it would be necessary to increase the applicable rates. That would not mean that people would pay more, but it would mean that rates would increase. We would need to think about that.

My hon. Friend the Member for Nuneaton spoke from his experience of life before he entered the House about difficulties that arose in terms of reforms to stamp duty and their impact on the housing market. Before changing the slab system, which predates 2003—in fact, it goes back to the 17th century—we would have to think carefully about the potential impact on the housing market.

[Zac Goldsmith]

Is that work being done by the Treasury? Is the Treasury looking at how one might go about removing the slab or cliff-edge system and shifting towards a progressive system?

[Mr Gauke]

The Treasury keeps all taxes under review. If we look at the subject historically, there have always been challenges associated with reforming SDLT, because to do so can result in disruption to the housing market.

I thank all hon. Members who have contributed to the debate, in particular my hon. Friend the Member for St Albans. We will continue to ensure that we take every step necessary to increase the supply of good quality, affordable homes. As hon. Members might expect, we will continue to keep all taxes under review. Any decisions on future changes will be taken as part of the annual Budget process and in the context of the public finances. Having the opportunity to debate these matters has been beneficial to the House.

[Mr Raab]

I thank the Minister for giving way and for what he has outlined. I hope the Treasury will keep stamp duty under review, not just because of the situation and the snapshot we have now, but because of the risks of further fiscal drag. The average median property price in London and in my constituency will soon go through the 4% rate. There is also the impact of interest rates on those with mortgages at very fine margins. As a Government and as a party, we ought to put more cash into people’s pockets and leverage them off a reliance on increasing amounts of debt. Stamp duty is constantly under review, but I ask the Treasury to think about what is coming forward as well as the situation as it currently stands.

[Mr Gauke]

I am grateful to my hon. Friend. As a Government we have a proud record of ensuring the economic stability of this country, of putting in place the conditions for growth, and of addressing the challenges we face. The generation now seeking to get on the housing ladder faces perhaps greater challenges than earlier generations faced. Essentially, it is very important we ensure we have the supply of new homes to address that, but we want to ensure we have in place the right tax and spending policies to enable people to achieve home ownership. That is a long-standing and proud tradition of our party, and one that we continue to hold as extremely valuable.

With those remarks, Mr Betts, I thank you and hon. Members for our debate this afternoon.

Question put and agreed to.

Oral Answers to Questions

David Gauke Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Kevin Brennan (Cardiff West) (Lab)]

2. If he will take steps to allow the Office for Budget Responsibility to audit the spending plans of political parties.

[The Financial Secretary to the Treasury (Mr David Gauke)]

Autumn statement 2013 announced that, as required by legislation, the OBR is launching an external review of its publications over the course of 2014. The external review team will publish its independent report tomorrow. Following the outcome of that review, the Government will hold their own review of the OBR at the start of the next Parliament.

[Kevin Brennan]

That was very interesting but it had nothing to do with the question. The figure of £21 billion that the Chancellor mentioned in his answer to question 1 will presumably be sent now by the Minister to the OBR to be checked as to whether it is factually correct, or is the figure a political smear, as usual from the Chancellor, that he is not prepared to stand up by sending it for scrutiny to the OBR—yes or no?

[Mr Gauke]

Much of that £21 billion figure is based on the Labour party’s own announcements. I do not know why the hon. Gentleman is complaining about that. If the Labour party wants to have credibility on fiscal policy, perhaps it should stop making so many announcements of spending splurges. Our view is that the OBR is in its infancy. We want the organisation to succeed and therefore do not want to draw it into party political matters.

[David T. C. Davies (Monmouth) (Con)]

If the OBR ever does decide to look at the Labour party’s figures, perhaps it will be able to explain how it is possible for the Labour party to be able to call for reductions in borrowing and in the deficit while making all sorts of promises to spend billions of pounds that it simply does not have. Does it not show that the Labour Members are as incoherent on economics as they were when they lost the last general election?

[Mr Gauke]

My hon. Friend is absolutely right. The OBR is a very successful organisation that has achieved a lot, but trying to explain the fiscal policy of the Labour party is something that would currently be beyond it.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Why are the Financial Secretary, the Chancellor and the whole Treasury scared of having such an audit? It is the most appropriate thing for the OBR to do. The OBR is one of their better creations; we have complimented them on it and supported it all the way. Perhaps we should have set it up ourselves but we have got it now. I will tell the Minister why they will not arrange for such an audit. It is because they are frit. The whole Government know that the OBR would endorse and give a clear bill of health to our plans.

[Mr Gauke]

My memory is that the Labour party did not support the OBR all the way. There is a debate to be had about the future of the organisation, but we do believe that, in its infancy, an organisation of this sort needs to be secure. That argument was used by the Labour party when the relevant Bill was passed in the House of Lords.

[Stephen Hammond (Wimbledon) (Con)]

Does my hon. Friend agree that, rather than trying to untangle the mess of the current spending plans, the OBR’s time might be better used looking at the spending plans of the Labour party when it was in government so that the public have a verified and independent record of the mess it left before the next general election?

[Mr Gauke]

I am grateful to my hon. Friend for that suggestion, but I think the record is fairly clear whether the OBR looks at it or not. The previous Government left our public finances in a desperate mess and we are continuing to recover from that mess.

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

As well as auditing manifestos, we propose that the OBR should be tasked with monitoring and reporting on the Government’s progress on child poverty, including the impact of Budget decisions. Why will not the Government task the OBR with taking on this role? Is it because the Institute for Fiscal Studies predicts that by 2020 almost 1 million more children will be living in relative poverty and almost 1.4 million in absolute poverty?

[Mr Gauke]

Every week, another new task comes from the Labour party for the OBR. Child poverty is down by 300,000. That is the record and those are the numbers that have been produced. We believe that the OBR has had a very good start as an organisation. We value it and believe that it has an important future, and we will not jeopardise it by letting Labour use it for party political games.

[Robert Flello (Stoke-on-Trent South) (Lab)]

3. What recent assessment he has made of the effect of his fiscal policies on the level of child poverty.

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[Angie Bray (Ealing Central and Acton) (Con)]

8. What fiscal steps he is taking to help businesses to invest and export.

[The Financial Secretary to the Treasury (Mr David Gauke)]

The Government are actively supporting the export and investment aspirations of British businesses. To ensure that companies have access to world leading export finance, Budget 2014 announced that Export Finance’s direct lending facility will be doubled to £3 billion and the rate of interest cut by a third to the lowest level allowed by international agreements. UK Trade & Investment is on track to help 50,000 companies export by 2015, double the number supported in 2010, and to encourage investment, the Government have cut the main rate of corporation tax to 21% and will reduce it further to 20% in April 2015.

[Angie Bray]

I have a successful small company in my constituency that sells skin care products across the world, and most recently, to China, but it would appear that the Chinese Government are insisting that online customers in China can purchase only up to $100-worth of product at any time unless they turn themselves into a registered business. Surely that must be against World Trade Organisation rules, so will my hon. Friend will look into it as a matter of urgency?

[Mr Gauke]

My hon. Friend is a doughty champion for her constituents and businesses located in her constituency. She raises an important point and I will make sure that both our embassy in China and the Department for Business, Innovation and Skills are aware of her concerns. The Government recognise the importance of trade with China and we want to do everything that we can to bring down barriers to enable as much trade as possible.

[Sammy Wilson (East Antrim) (DUP)]

During the past week, two reports have shown that export growth is down because of external factors such as slow growth in the eurozone, sanctions against Russia and the strength of the pound, and at the same time lending by banks to small businesses this year has fallen by £1,200 million, affecting their investment plans. Is there not a real danger that future growth will now be dependent on unsustainable consumer borrowing? What can the Government do, first to force banks to lend money to small businesses, and secondly to make known to small businesses the plethora of initiatives that have been taken to encourage exports?

[Mr Gauke]

The hon. Gentleman is right to raise the fact that there are external pressures here, but there are steps that the Government can take, and, as he touches upon, we have taken a number of measures to help with exports. Whether that is support for UK Trade & Investment or new financing facilities, the Government are determined to do everything to help those businesses to export to overseas markets.

[Christopher Pincher (Tamworth) (Con)]

21. Does my hon. Friend agree that the extension of the runway at Birmingham airport, allowing long-haul flights now to fly direct to China, is another example of how the Government’s long-term economic plan to build a stronger and healthier economy in the west midlands will allow business men to travel there and do better business with China?

[Mr Gauke]

My hon. Friend makes an excellent point and that is one important example of the 2,000 infrastructure projects delivered by the Government.

[Ms Margaret Ritchie (South Down) (SDLP)]

The removal of the aggregates levy credit scheme in Northern Ireland has severely hit the construction industry. I was pleased to hear that the European Commission had ruled that the scheme was legal and will not be seeking back payments. What will the Minister do to reinstate the levy to help local businesses grow and create employment?

[Mr Gauke]

The hon. Lady raises an important point and I hope that we can say more about the steps that we can take to help businesses in Northern Ireland in particular that have been affected by this issue.

[Nick Smith (Blaenau Gwent) (Lab)]

9. What recent representations he has made to institutions of the EU on the cap on bank bonuses.

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[Iain Stewart (Milton Keynes South) (Con)]

11. What estimate he has made of the number of new businesses set up in Milton Keynes in the last year.

[The Financial Secretary to the Treasury (Mr David Gauke)]

The latest data indicate that 2,200 new businesses were set up in Milton Keynes in the year to July 2014.

[Iain Stewart]

I am grateful for that answer. Does my hon. Friend agree that more new business start-ups are vital to secure our economic recovery? Is he aware that this Friday my hon. Friend the Member for Milton Keynes North (Mark Lancaster) and I are hosting a business start-up event to give budding entrepreneurs access to the support and advice they need to get their businesses going?

[Mr Gauke]

I entirely agree that business start-ups are very important. I certainly was aware of the event at the national rail centre in Milton Keynes between 4 o’clock and 7 o’clock on Friday afternoon. I also note that unemployment in my hon. Friend’s constituency has gone down by 42% since the last election, which suggests that start-ups are thriving in Milton Keynes.

[Simon Kirby (Brighton, Kemptown) (Con)]

rose—

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[Sir Peter Luff (Mid Worcestershire) (Con)]

15. What estimate he has made of the potential effect of a rise in national insurance on employment rates and take-home pay.

[The Financial Secretary to the Treasury (Mr David Gauke)]

This Government inherited plans to increase the employer’s national insurance contributions rate by 1%. We largely reversed the negative effect of that by raising the employer threshold by £21 a week above indexation. We have also introduced the employment allowance. From April 2015, we will abolish employer’s national insurance contributions for under 21-year-olds, helping to support jobs for almost 1.5 million young people currently in employment.

[Sir Peter Luff]

It cannot be said too often: higher national insurance is a tax on pay and a tax on jobs. My hon. Friend will therefore understand my delight when the Government introduced the £2,000 employment allowance—he referred to it in his answer—which will help new businesses in particular to create new jobs. May I tempt my hon. Friend to say what further measures the Government plan to take to reduce the tax burdens on businesses and so increase employment in this country?

[Mr Gauke]

As I mentioned earlier, we have the removal of national insurance contributions for under-21s next year. I entirely agree with my hon. Friend about the impact of higher employer’s national insurance contributions, and I have to say that one of the risks that the economy faces is a future Labour Government putting up employer’s national insurance contributions.

--- Later in debate ---

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

T8. Since the Government updated the law in April, thousands of construction workers such as my constituent, Ron Boyle, are facing a new form of exploitation. Forced to register with sham umbrella payroll companies, they lose hundreds of pounds a month in bogus fees, and pay national insurance contributions that ought to be the responsibility of their employers. Will the Minister assure me that that loophole will be closed quickly, so that workers such as Mr Boyle are not continually conned out of a fair wage?

[The Financial Secretary to the Treasury (Mr David Gauke)]

I am grateful for that question, and we all sympathise with some of the difficulties that people have faced. It is fair to say that this Government are closing the loopholes in that area, dealing with intermediaries, and reforming the construction industry scheme to ensure that people who are employed have the full employment rights that they deserve.

[Mr Henry Bellingham (North West Norfolk) (Con)]

T7. Is the Chancellor aware that unemployment in my constituency has fallen by nearly 700 since July last year, thus giving new hope to many families? Will he tell the House how the UK’s job creation record compares with other G20 countries?

HMRC (Scotland)

David Gauke Excerpts

Tuesday 22nd July 2014 Commons Chamber

[The Financial Secretary to the Treasury (Mr David Gauke)]

I congratulate the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) on securing the debate. He continues to make a firm, clear and eloquent case on what is, understandably, a hugely important issue for him and his constituents: the future of the HMRC office in Cumbernauld.

Before dealing with some of the detailed points the hon. Gentleman raised, I would like to explain some of the context behind the changes occurring in HMRC staffing. As hon. Members will be aware, HMRC is currently reshaping itself in order to become a more modern, flexible and cost-effective organisation that can deliver better and more personalised services for customers, increased tax revenues through greater compliance activity and, crucially, better value for money for the public.

In order to provide the best possible value to the taxpayer, HMRC has had to downsize. In fact, it has been steadily reducing the number of employees since it was formed nine years ago. Over that time it has reduced its staff levels from around 97,000 full-time equivalents in 2005 to around 60,000 now. On top of that reduction, and as part of its increased work on digitisation, HMRC will soon be implementing a new system whereby it will scan incoming post. The rational behind that change is that it will remove the need for sorting and transportation. Instead, correspondence will be moved to where it can be dealt with instantly, ensuring that taxpayers’ queries are dealt with more quickly and effectively.

However, a consequence of that change will be that fewer staff will be needed to handle post, which will have an impact on HMRC’s five regional post rooms, as the hon. Gentleman mentioned. I should point out, however, that with regard to business presence and work force size, the recent changes have not had a disproportionate impact on Scotland. In April 2011, around 13% of HMRC’s work force were based in Scotland, and at the end of last month, following the significant reductions it has achieved across the UK, the proportion of its work force based in Scotland remains around 13%.

As it reduces in size, it makes sense that HMRC will need to bring its people together into larger sites where they can work more flexibly and more easily share the costs of office space and IT. In May 2012, HMRC made the concluding announcement about the estate changes it would be making during the spending review period. That saw, as the hon. Gentleman has said, a number of its offices across the country announced for closure, but at the same time it was also confirmed that there would be 16 strategic locations nationwide until at least 2020. Two of those are in Scotland—Edinburgh, encompassing Bathgate and Livingston, and Glasgow, encompassing Cumbernauld, East Kilbride and Paisley.

[Pete Wishart]

The HMRC office in Perth was, of course, closed in the past year under this Government’s stewardship. How many jobs has HMRC lost in Scotland under this Government, how many offices have closed and how many jobs does the Minister foresee going in the course of the next five years?

[Mr Gauke]

I reiterate that the changes in Scotland reflect those across the United Kingdom. The proportion of jobs is identical to what it was three years ago. It is the case that HMRC has reduced significantly in size since 2005, and it is anticipated that it will continue to do so across the United Kingdom. We have stated that we anticipate that staff numbers will fall to about 54,000 by the end of this financial year, although, to be fair, HMRC is expanding its staff in particular areas. There is no reason to believe that Scotland will be disproportionately affected by further reductions. That has not been the history of what has happened in the past.

HMRC continues to review its business, work force and estates needs, and is currently in consultation on a proposal to close a further 12 smaller offices during 2015, two of which are in Scotland—namely Glenrothes and Irvine. Those are all smaller offices and HMRC, for the reasons I stated previously, believes that it makes more sense, and will deliver better value to the public, to bring those staff into larger workplaces. I should make it clear, though, that the consultation on those decisions will, of course, include the consideration of equality impacts and will involve HMRC’s employees, their trades unions, Members of this House and other local interests.

It is also worth bearing in mind that, while the number of general business roles has been reducing in size—as HMRC tries to increase compliance-related yield—the number of roles in that specific area is increasing. Hon. Members may be aware that in June, HMRC advertised up to 2,100 vacancies primarily in compliance roles—up to 680 of which will be based at offices in Scotland. Many of those will be at the newly opened compliance centre in Edinburgh, and HMRC’s debt management and banking business aims to create up to 170 jobs in Cumbernauld, as the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East has pointed out. Therefore, as HMRC’s work moves forward, new opportunities are opening up for its work force, including in the Cumbernauld constituency.

The hon. Gentleman referred to the September referendum and the future for HMRC staff should there be a vote for the Union to come to an end. Neither the Scottish Government nor the UK Government know for sure what will happen if the people of Scotland vote to leave the UK. In the event of a majority vote in favour of independence, both the UK and Scottish Governments agree that negotiations would be needed. Both Governments have agreed that negotiations to establish a new Scottish state cannot begin unless—and until—there is a yes vote in the referendum. That does not mean, however, that representatives of the UK would or could facilitate everything that the Scottish Government have said they hope to achieve through independence.

If the people of Scotland were to vote to leave the UK, the negotiations that would follow would be unprecedented, highly complex and incredibly detailed. There are too many unknown factors at this stage to say how negotiations would proceed and how long they would take. As the hon. Gentleman will know, the Scottish Government’s White Paper set out what they would like to happen if Scotland became an independent state; it is not a blueprint or a legally enforceable document, and it cannot predict the outcome of the negotiations between the UK and the new Scottish state. In fact, much of what is included in the White Paper depends on the agreement of the UK Government and numerous other public bodies and organisations. In this instance, I therefore cannot get into any detailed discussion of what might happen should such an event occur. However, the hon. Gentleman was quite right to raise, on his constituents’ behalf, concerns about uncertainty for HMRC employees in the event of Scotland leaving the United Kingdom. I am sure that I speak for the vast majority of Members of the House when I say that I hope that those negotiations never come to pass.

To return to specific HMRC matters, HMRC as an organisation has to work within its resources and to fit its future shape. Its plans to deliver an increasingly modern service for its customers, while increasing tax revenues, depend on making changes to its structure and the size of its work force. The changes to date are making an impact and helping it to provide a much better service for the rest of the United Kingdom. In fact, last year it secured nearly £24 billion in additional compliance revenues—a record—and it achieved its best ever customer service levels, and all that was done by about 2,000 fewer staff, who oversaw £235 million of efficiency savings. The staff are doing an excellent job. Although I sympathise with the hon. Gentleman about the job losses in his constituency, which he mentioned, and with the staff themselves, we need to make sure that our services continue to provide the best possible value to the public. We remain committed to a consultative approach to ensure that any changes are managed in the very best way possible.

May I just make one further and final point, Mr Speaker? As the last speaker before the summer recess, I am the last hon. Member to speak from the Dispatch Box or indeed anywhere in the House and to turn to the Table to see the reassuring presence of Sir Robert Rogers. I know that the House has already had an opportunity to pay tribute to him, but I will just put my thoughts on the record. He has brought to his position an enormous amount of authority and a great love for this House. In an environment that can sometimes be a little heated, he has been a consistent embodiment of a sense of fairness, decency and not a little kindliness. In his distinguished career, he must have listened to many thousands of speeches delivered by many hundreds of right hon. and hon. Members. As the deliverer of the last of those speeches—and, I hope, on behalf of the many hundreds who have spoken before me—may I thank him for his outstanding service and wish him a long and happy retirement?

Question put and agreed to.

Councillors' Travel (Tax Exemptions)

David Gauke Excerpts

Tuesday 22nd July 2014 Written Statements

[The Financial Secretary to the Treasury (Mr David Gauke)]

The Government are announcing today that they intend to introduce legislation to exempt from income tax and national insurance contributions (NICs), travel expenses payments made to local councillors.

Local councillors perform a vital but frequently unsung constitutional role working on behalf of local people, often in addition to other professional and personal commitments. They are required to perform their duties in both the communities they serve and their council offices and most receive no payment other than allowances in recognition of the time and expenses they incur.

The Government want to ensure that nobody is discouraged from representing their local community as a local councillor and therefore intend to introduce this new exemption so that in the future, travel expenses paid to local councillors, including those to cover the costs of journeys to their council offices, are not subject to income tax or NICs.

The Government will provide further details of the exemption, and the time scale for introduction, in the autumn.

Stakeholder Child Trust Funds (Lifestyling)

David Gauke Excerpts

Tuesday 22nd July 2014 Written Statements

[The Financial Secretary to the Treasury (Mr David Gauke)]

The Government will formally consult in 2015 on the application of the “lifestyling” requirement to over 4 million stakeholder child trust funds (CTF). This requirement is designed to manage volatility in account investments as stakeholder CTFs approach maturity, when the account holder turns 18.

A number of respondents to the Government’s recent consultation on the transfer of funds from CTF to junior ISA questioned the value of lifestyling for many CTF holders. The Government wish to explore this issue further through consultation with CTF providers, account holders, parents and other interested groups. This consultation will take place alongside the Government’s changes to the CTF rules that will allow parents to transfer CTF funds to a junior ISA from 2015.

Pending the outcome of this consultation, the Government propose to amend the child trust fund regulations to defer the requirement upon CTF providers to commence lifestyling for two years. CTF providers will not therefore be required to begin lifestyling stakeholder CTFs before account holders reach 15.

Counter-Terrorism Asset Freezing Regime

David Gauke Excerpts

Thursday 17th July 2014 Written Statements

[The Financial Secretary to the Treasury (Mr David Gauke)]

Under the Terrorist Asset-Freezing etc. Act 2010 (“TAFA 2010”), the Treasury is required to report to Parliament, quarterly, on its operation of the UK’s asset-freezing regime mandated by UN Security Council Resolution 1373.

This is the 14th report under the Act and it covers the period from 1 April 2014 to 30 April 2014. This report also covers the UK implementation of the UN al-Qaeda asset-freezing regime and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU. Under the UN al-Qaeda asset-freezing regime, the UN has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under the Al-Qaeda (Asset-Freezing) Regulations 2011. Under EU regulation 2580/2001, the EU has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

Annexes A and B to this statement provide a breakdown, by name, of all those designated by the UK and the EU in pursuance of UN Security Council Resolution 1373.

The following table sets out the key asset-freezing activity in the UK during the quarter ending 30 June 2014: