Turks and Caicos Islands (Tax Agreement)
David Gauke Excerpts(10 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
An arrangement comprising of an exchange of letters amending the 2009 tax information exchange agreement (TIEA) with the Turks and Caicos Islands was signed on 26 November 2013 to permit automatic and spontaneous exchange of information. At the same time an agreement was also signed to improve international tax compliance which sets out the precise details of the information which will be automatically exchanged. The text of the agreement to improve international tax compliance has been deposited in the Libraries of both Houses and will be made available on HM Revenue and Customs’ website. The text amending the tax information exchange agreement will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
International Tax Compliance Agreements (Bermuda and Montserrat)
David Gauke Excerpts(10 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
Agreements to improve international tax compliance were signed with Bermuda and Montserrat on 25 November 2013. These agreements set out precise details of information which will be automatically exchanged with the UK. The text of the new agreements has been deposited in the Libraries of both Houses and will be made available on HM Revenue and Customs’ website.
Tax Information Exchange Agreement (UK/Gibraltar)
David Gauke Excerpts(10 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
An arrangement comprising of an exchange of letters amending the 2009 tax information exchange agreement (TIEA) with Gibraltar was signed on 21 November 2013 to permit automatic and spontaneous exchange of information. At the same time an agreement was also signed to improve international tax compliance which sets out the precise details of the information which will be automatically exchanged. The text of the agreement to improve international tax compliance has been deposited in the Libraries of both Houses and will be made available on HM Revenue and Customs’ website. The text amending the tax information exchange agreement will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
International Tax Compliance (Cayman Islands)
David Gauke Excerpts(10 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
An agreement to improve international tax compliance was signed with the Cayman Islands on 5 November 2013. This agreement sets out precise details of information which will be automatically exchanged. The text of the new agreement has been deposited in the Libraries of both Houses and will be made available on HM Revenue and Customs’ website.
Oral Answers to Questions
David Gauke Excerpts(10 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
Disposable income increased last year at the fastest pace since 2009. In March, the Office for Budget Responsibility forecast that real household disposable income growth would accelerate each year from 2014 to 2017, reaching 2.3% in 2017. The best way to raise living standards is to stick to the Government’s economic plan and deliver a recovery that works for all. Britain is back on the path to prosperity, the economy is growing, the deficit is falling and jobs are being created.
Julie Hilling
I do not understand how the Minister and the Chancellor can think that their economic policies are a success. After three wasted and damaging years of flatlining, working people are on average £1,500 a year worse off. Is it not clear that his plan has failed hard-working families?
Andrea Leadsom (South Northamptonshire) (Con)
On the subject of the cost of living, does my hon. Friend think it astonishing that Opposition Members do not understand that this Government have done so much to keep council taxes down? If we were still subject to their policies, the average council tax cost would be £210 a year higher.
Andrew Gwynne (Denton and Reddish) (Lab)
Why does the Minister think that April 2013 was the only month on this Chancellor’s watch in which pay rose faster than prices? Does he agree with the ONS that it is because people deferred their bonus payments to make the best use of the Chancellor’s millionaires’ tax cut?
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Does my hon. Friend agree that one way of tackling rising prices is to leave people with more of their own money in their pocket? Will he confirm that the 50% tax cut we have given to those on the minimum wage has done exactly that and shows that we are on the side of hard-working people?
Alec Shelbrooke (Elmet and Rothwell) (Con)
7. What recent fiscal steps he has taken to help people who want to buy their own home.
John Howell (Henley) (Con)
9. What recent fiscal steps he has taken to support small businesses.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government are very supportive of small businesses. We demonstrated this support again at Budget 2013 through the introduction of the new £2,000 employment allowance for small businesses and charities from April 2014.We have extended the small business rate relief from April 2013. We have increased the small business research and development tax credit to 225% and the lifetime limit on entrepreneurs relief to £10 million. In addition, we have launched a £1 billion British business bank to improve access to finance for small and medium-sized enterprises in the UK.
John Howell
I congratulate my hon. Friend on the fact that the new employment allowance will mean that 450,000 small businesses pay no national insurance contributions at all. Is this not a positive help to small businesses such as those in my constituency as they seek to take on more employees?
Mr Gauke
I entirely agree. That £2,000 for every business will feed through by helping businesses take on new staff, invest in their business or pay higher wages. It is a positive contribution, which contrasts with the proposals that we inherited for an increase in employer’s national insurance contributions.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
Why since 2011 has SME investment and lending to SMEs fallen by £30 billion?
David Morris (Morecambe and Lunesdale) (Con)
Does my hon. Friend agree that it is good news that, due to the investment in small businesses, unemployment in Morecambe has fallen by 10% in the past three months?
Sheila Gilmore (Edinburgh East) (Lab)
Why should we believe from the Minister that the present scheme for dealing with national insurance contributions will be any more successful than his previous scheme, where take-up was extremely poor and did nothing to increase jobs?
Mr Gauke
I do not know whether Labour is opposing the scheme. That was not the impression I got. This is a very simple scheme. It does not require applications or involve any of the complexities that we saw with two of the Labour national insurance contribution schemes. We are confident that the current scheme will work. It has been widely supported by business groups and I think it will make a big difference to small businesses.
Mr Dave Watts (St Helens North) (Lab)
10. What assessment he has made of the effect of his spending plans on the cost of in-work benefits.
Mrs Mary Glindon (North Tyneside) (Lab)
T10. Will the Chancellor make a statement on why the decision has been taken to extend HMRC’s pilot of the new customer service model in the north-east by two months until the end of December?
The Exchequer Secretary to the Treasury (Mr David Gauke)
We want to look at the evidence further, so that seems to be a sensible approach; we want to see whether the model is working. The final decision has not been taken on whether to extend it. This is about improving the service for the people who need it most. We believe that that is an important objective.
Sir Edward Leigh (Gainsborough) (Con)
T8. As you know, Mr Speaker, I am of a nervous disposition. I was therefore alarmed this year—not three years ago—to hear predictions that 1 million jobs would be lost, there would be a decade of lost growth and the recovery would be choked off as a result of the Government’s plans. Will the Chancellor allay my fears and explain what has happened in the real world?
National Insurance Contributions Bill
David Gauke Excerpts(10 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
The Bill underlines this Government’s belief that pro-business policies help growth and job creation. For too long, our economy has been dependent on a booming financial services sector, on the one hand, and unsustainable levels of public spending, on the other. That made us particularly vulnerable to the crisis of 2007-08, the consequences of which continue to be felt today.
The challenge the Government faced in 2010 was how to begin the process of getting our public finances in order and to put in place the conditions for growth. Some believed that it was not possible to do both and some argued that measures to reduce the deficit would result in higher levels of unemployment. It was the Leader of the Opposition, no less, who said that the Government clearly had
“a programme that will lead to the disappearance of one million jobs”.
That was just over three years ago and there are now more people in work than ever before.
Since the coalition came to power, employment has increased by more than 1 million and there are 1.4 million private sector jobs, more than there were at the time of the last election. Employment in the three months until August 2013 was at its highest ever level, at 29.87 million. Those predicting disaster massively underestimated the capability of businesses up and down the country to adapt, innovate and expand, but they also failed to appreciate that we now had in place a Government on the side of businesses who were willing to put in place the conditions that help them to invest and expand, whether by addressing burdensome regulations or reforming our tax system.
In case we forget, such action included reversing the worst effects of the previous Government’s jobs tax. Yes, at a time when we needed businesses more than ever to take on more staff, Labour’s contribution to deficit reduction consisted of increasing the tax on jobs.
Mr John Redwood (Wokingham) (Con)
Does my hon. Friend think that it is possibly because they are embarrassed by that record that there are only two Labour Back Benchers in the whole Chamber and nobody from the other Opposition parties? How many extra jobs does he think his excellent Bill might help to create?
Mr Gauke
My right hon. Friend makes a very good observation. I can rarely remember so few Labour Members being present for the opening of a Second Reading debate. I was beginning to take it personally, but he has reassured me that this issue does not attract the interest of the Opposition. Labour is the party that intended to increase the jobs tax. Pretty much the only measure that they had for deficit reduction was to increase employers’ national insurance contributions, which was not a sensible approach at all.
We are not predicting how many jobs the Bill might create because a number of factors apply. It is interesting to note, however, that the Federation of Small Businesses believes that the measure is better than the one that it had advocated, which it anticipated would have created 45,000 new jobs. It has carried out a survey of its members and 28% of respondents believed that this measure would help them to increase the number of people they employ. That is a very encouraging step.
Guy Opperman (Hexham) (Con)
I accept entirely that the Minister cannot give specifics on the number of jobs the Bill will create, although quite evidently it will create jobs. Can he estimate how many employers he expects it to assist, particularly in the north-east?
Mr Gauke
That is a similar point, and, as I say, I am nervous about giving precise numbers. Of the FSB respondents, 28% believed that this would help them. We believe that we have to consider a range of measures, but clearly measures that reduce the cost of taking on staff must help in increasing employment. For example, the Bill would enable a business to take on four people on the national minimum wage and not pay any employers’ national insurance contributions at all. That will clearly help.
Margot James (Stourbridge) (Con)
My hon. Friend mentions the welcome for this Bill from the FSB. Is he aware that charities and social enterprises will also benefit from it? Alex Swallow, chief executive of the Small Charities Coalition, said:
“For a lot of the smallest charities, having one paid member of staff is a big step forward…having this allowance now helps them to do that, so it is a very positive thing.”
Mr Gauke
I am very grateful to my hon. Friend for that intervention. She makes an important point that applies to both businesses and charities. Taking on the first member of staff can be the most difficult step, as it is a big event for a business. If we are able to help and to reform our tax system to enable businesses or charities to take that member of staff on without paying the jobs tax—employer’s national insurance contributions—that will clearly encourage those businesses, which, I hope, will then take on further staff and expand.
Charlie Elphicke (Dover) (Con)
Will my hon. Friend confirm that the measure was the largest tax cut in the Budget? Does he therefore not think it is all the more surprising that there are no Labour Members here to scrutinise a major plank of that Budget?
Mr Gauke
Another observation one could make is that there are no Labour Members of Parliament here because they are—[Interruption.] I apologise. That remark is unfair and I withdraw it. There are the Labour Front Benchers and now three Back Benchers. Who knows? We might reach five or six by the end of the debate. Perhaps Labour Members have confidence in, and enthusiasm for, the Bill and can find nothing to criticise. However, we look forward to the speeches to come later. On that note, as the hon. Member for Bolton West (Julie Hilling) has waited so patiently, and as it is about time that we heard from a Labour Member, I give way to her.
Julie Hilling (Bolton West) (Lab)
I thank the Minister for giving way. Has he considered the fact that there are only a few Labour Members here because, to our relief, he has, in the end, listened to what we have been asking for and included a great deal of it in the Bill? I congratulate him on listening to us, and therefore on introducing the Bill.
Mr Gauke
That, too, is a theory, but I am not sure that it is necessarily persuasive. When we fought the previous general election, the Labour Government’s big policy for deficit reduction, among a pretty thin set of policies, was a big increase in national insurance contributions. We have already reversed the worst effects of that, and the Bill is a further measure that will help businesses up and down the country to create jobs.
The hon. Member for Bolton West is referring to one element of Labour’s five-point plan, which we do not hear much about any more, but there were serious problems with Labour’s proposal; this one is very different from that. It was a much more targeted scheme aimed at smaller employers taking on new employees, which raised all sorts of practical questions about how to define a new employee and how to prevent there being perverse incentives. I put it to the House that that scheme was neither workable nor likely to achieve its objectives. I suspect that we shall return to that issue.
Christopher Pincher (Tamworth) (Con)
While the Labour Whips hunt for a seventh dwarf—
Christopher Pincher
No, I am definitely Bashful. Cheeky is probably on the other side of the House.
Does my hon. Friend the Minister agree that the key component—the most important innovation in the proposal—is the fact that it encourages confidence among businesses, particularly small businesses? I held a jobs fair a couple of weeks ago and 500 jobs, part-time and full-time, were available. Many small businesses at the fair thought that cutting their tax through this measure was the right thing to do.
Mr Gauke
I am grateful to hear of the experience in Tamworth, and my hon. Friend is right to raise that point. Particularly for those small employers taking on their first person, the fact that they do not have to pay employer’s national insurance contributions at 13.8% will help them. In many cases, the Bill will have exactly that effect. I welcome what appears to be broad support for the measure.
Anne Marie Morris (Newton Abbot) (Con)
Following on from the earlier point about confidence, does the Minister agree that, although all the surveys indicate that confidence is at an all-time high, the challenge is investment? A Federation of Small Businesses survey has said that the measure will enable 28% of businesses to take on additional staff; that is what businesses want to do. Some 25% of those surveyed would invest in new machinery and equipment, and 21% in new staff training. That is exactly what we need; we need to turn confidence into a deliverable result.
Mr Gauke
My hon. Friend raises an important point. I pay tribute to the work that she does on the all-party parliamentary group on micro-businesses. She provides a very strong voice in the House for smaller businesses, and she is absolutely right to do so. She is right to draw the House’s attention to the FSB survey. We have already talked about the contribution that the measure will make to the taking on of more staff, but where more staff are not taken on, there will very often be investment in the business, which will clearly help it to expand.
The Bill cuts the jobs tax for 1.25 million employers and takes 450,000 of them out of employers’ national insurance contributions altogether, making it less expensive for businesses to take on new staff, so the Bill will help job creation. It contains four main measures. We have touched on the employment allowance. I will also say something this afternoon about the fact that the Bill gives effect to the general anti-abuse rule on national insurance contributions. It also amends the Social Security Contributions and Benefits Act 1992 to allow regulations to be made on the certification of non-UK employers of oil and gas workers, and makes changes in connection with two elements of the partnerships review carried out by Her Majesty’s Revenue and Customs. The Bill also makes a small number of technical corrections that I am happy to take the House through, should there be demand for that; if there is not, I am sure that we can cover them in some depth in Committee.
Returning to the employment allowance, as part of our efforts to remove barriers to growth for businesses and to equip the UK economy to compete in the global race, the Chancellor announced in this year’s Budget the creation of a new employment allowance, as my hon. Friend the Member for Dover (Charlie Elphicke) pointed out. It will take effect from 6 April next year. Businesses, charities and community amateur sports clubs in the UK will be entitled to a £2,000-a-year allowance towards their employer national insurance contribution liability.
The employment allowance builds on action that the Government have taken to make the tax system more competitive, and to encourage growth. That includes cutting corporation tax, increasing the rate of the research and development tax credit for small and medium-sized enterprises, increasing the annual investment allowance to £250,000, and giving a cash-flow benefit to those who invest in plant and machinery.
The objective of the employment allowance is to help businesses with the cost of employing their staff by reducing their employer class 1 national insurance contributions bill each year. It will support thousands of small businesses that aspire to grow, perhaps by hiring their first employee or expanding their work force, as well as those already employing others, or facing temporary cash-flow problems.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
In the emergency Budget that followed the last Westminster election, the Treasury said that it wanted to rebalance the economy geographically, but the only measure that we have seen to date is the reduction in employers’ national insurance contributions for companies outside London and the south-east. The employment allowance is a UK-wide measure. Does that indicate that the Treasury has given up on its ambitions geographically to rebalance the UK economy?
Mr Gauke
No, not at all. There is a whole host of measures, including the regional growth fund, and there is some really good news; exports are up significantly in the west midlands and the north-east in particular. We are taking steps to strengthen industries up and down the country. The hon. Gentleman touches on the regional employers’ NICs holiday; let me turn to that, because I suspect that the policy will feature heavily in the arguments that we hear from Opposition Front Benchers.
Mr Brooks Newmark (Braintree) (Con)
The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) made a good point about rebalancing the country’s economy. Is my hon. Friend the Minister aware that we have had the biggest growth in construction in six years? The Chancellor and the Treasury should be congratulated on ensuring that the Government are rebalancing financial services and manufacturing in the economy.
Mr Gauke
The striking point about the most recent growth numbers is that they demonstrate growth in every sector, and that is very encouraging. I began by saying that the economy in the mid-2000s, say, was very dependent on financial services and on London and the south-east. Of course we want a successful financial services sector and we want London and the south-east to do well, but it is also important that growth is better balanced throughout the United Kingdom, and the Government continue that commitment.
Charlie Elphicke
While hesitating to introduce any controversy into the debate, does my hon. Friend agree that the hikes in the jobs tax under the previous Government destroyed jobs, and that this Government’s policy of reducing the jobs tax, particularly in this Bill, will enhance job creation and aid the recovery?
Mr Gauke
I do agree. Given that we want to increase employment, it would not have been sensible to undertake the increase in national insurance contributions that the previous Government intended. That was clearly a mistake. I am sure that my hon. Friend will be delighted to know that not only are he and I in agreement but Tony Blair said last week that he thought it was a mistake.
Sheila Gilmore
Can the Minister explain how a measure that was not actually implemented destroyed jobs, as the hon. Member for Dover (Charlie Elphicke) suggested?
Mr Gauke
To have implemented the policy we inherited would have destroyed jobs. It did not do businesses in the United Kingdom any good to have the prospect of an increase, sending the wrong message that we were going in the wrong direction. I am pleased to say that we have reversed that direction of travel by not implementing the previous Government’s policy in full. We have increased thresholds for national insurance contributions, which has clearly helped. Now, through this Bill, we are providing an employment allowance of £2,000.
Margot James
Does my hon. Friend agree that the reason the previous Government proposed the ridiculous increase in the jobs tax was testimony to the fact that they could not countenance cutting public expenditure? That was their downfall. They were content to continue to borrow £1 for every £4 this country was spending, and their proposal was evidence of a wholesale mismanagement of the economy.
Mr Gauke
My hon. Friend makes a valuable point that is well worth highlighting. When running a deficit of the size that we were running, we face some tough decisions. We have taken a range of measures to reduce the deficit, and it has reduced by a third.
Ultimately, though, whoever was in government was going to have to take these difficult decisions. If we are not prepared to take difficult decisions on spending—there is no evidence that Labour Members would do so—the answer is that we have to increase taxes. When we look around to see what taxes are available, it is clear that some very difficult decisions have to be made. Labour Members chose to go for employers’ national insurance contributions; perhaps they considered that that option was less visible to the general public than some of the others. However, the consequences would have been higher unemployment, and this Government were not prepared to face that.
Sir Edward Leigh (Gainsborough) (Con)
What business hates more than anything else is the complexity of the tax system. We still have one of the longest tax codes and one of the most complex tax systems in the world. Will the Minister explain how we are still setting about our long-term objective of simplifying the tax system and achieving a much flatter rate of tax for the sake of business?
Mr Gauke
The Bill will result in a big simplification for 450,000 businesses, because they will no longer have to pay any employers’ national insurance contributions. That is significant progress. We have established the Office of Tax Simplification, which has produced a number of reports. Anyone who has studied recent Finance Acts closely will have seen that a whole range of measures have been introduced as a consequence of the OTS’s recommendations. Of course, there is more work to be done and we as a Government remain committed to that, but there have been a whole range of measures. The OTS is looking at employee benefits at the moment, and that is significant.
Julian Smith (Skipton and Ripon) (Con)
One of the concerns that small businesses had about the national insurance holiday—which was an excellent policy, despite the Opposition’s comments—was about the forms that had to be filled in to qualify. Will the Minister clarify how easy it will be for businesses to take advantage of the new proposal?
Mr Gauke
My hon. Friend makes a good point. I want to turn to the employers’ national insurance contributions holiday, because I suspect it will feature in the speeches of Opposition Members. They will make the point that take-up was not as high as we had anticipated. [Interruption.] Let me give the numbers: 26,000 employers and 90,000 employees have benefited from it. Our expectation was that take-up would be much higher. [Hon. Members: “How much?”] Don’t worry; I am going to set it out.
We said that 400,000 businesses and 800,000 employees would benefit from the scheme. I think that the reason why that did not happen is closely aligned to what my hon. Friend has just pointed out: a scheme that was, essentially, quite targeted and required businesses to apply—even though we worked hard to try to make the application process as simple as possible—simply meant that fewer businesses applied for it than we had anticipated. Take-up was lower than expected and there are lessons to be learned from that. We should be open about that.
We need a system that is simple and that can be applied easily. Under the new proposal, no application process is needed as such. Businesses will receive the benefit of the employment allowance simply by using up-to-date payroll, and the introduction of real-time information makes that much easier to apply. We believe that this is a much-improved policy. It contrasts with the employers’ NICs holiday, because that was a targeted regime. It also contrasts both with the policy advocated by Labour in its five-point plan, which was even more targeted, and with the policy we heard about yesterday on the living wage. Complicated, temporary schemes requiring applications are likely to have disappointing levels of take-up, whereas permanent schemes automated through the payroll system will, we believe, apply much better.
Chris Leslie (Nottingham East) (Lab/Co-op)
Will the hon. Gentleman give way?
Chris Leslie
I am grateful to the Exchequer Secretary and I also welcome the new additions to the Government Front Bench. He will remember that we both sat on the National Insurance Contributions Bill Committee—I think it was one of his first Bills as a brand new Treasury Minister—and Labour said at the time that the proposal was very complicated. We said that he needed to be very careful with the convoluted regional design that he put in place and that the scheme would not get the anticipated take-up, which evidently it did not. It is sometimes invidious to say these things, but we told you so. Will the Exchequer Secretary go a little bit further, accept that we were right and he was wrong, and be big enough to say sorry?
Mr Gauke
If I remember correctly, that was in autumn 2010, when the next leader of the Labour party was saying that 1 million jobs would go missing. The hon. Gentleman says that the NICs holiday was too complicated. One of the lessons that can be learned from the NICs holiday is that the simpler the scheme, the better. Perhaps the Labour party has not been listening to him because since that debate, it has proposed two NICs schemes, both of which are more complicated than the one that we had in place. If he is making the case for keeping NICs schemes simple, perhaps he ought to have a word with his party leader.
Margot James
My hon. Friend is being exceedingly generous in giving way. Does he agree that the Opposition’s latest wheeze of giving a subsidy to employers who take on employees at the living wage will have a huge dead-weight cost, because 12 months before the appalling prospect of the return of a Labour Government, employers are likely to stop giving salary increases to workers who are on the minimum wage, mindful of the fact that if they give it another year, they might get it all rebated by the taxpayer?
Nick de Bois (Enfield North) (Con)
The Minister has talked about wages. Interestingly, the Federation of Small Businesses has said that about 29% of its members will use the employment allowance to give a pay rise to some of their employees, which they have been unable to do because of the economic circumstances. Does that not show that this policy is a way of delivering sustainable growth and sustainable wages, and not just a gimmick that will do more harm than good?
Julian Smith
Will the Minister confirm that he will take no lessons from the Labour party, because during the debates on the national insurance contributions holiday, it advocated more bureaucracy in the form of annual reports and the like?
Mr Gauke
My hon. Friend is right. The policy of providing a NICs break only for new employees raised all sorts of practical questions such as who constituted a new employee and what perverse incentives might have been created. That is not dissimilar to the point that my hon. Friend the Member for Stourbridge (Margot James) has made about Labour’s current policy.
I will turn to the other elements of the Bill. Clauses 9 and 10 relate to the general anti-abuse rule. The Government announced at last year’s Budget that they accepted the recommendation of the Aaronson report to introduce a GAAR targeted at abusive tax avoidance schemes. The GAAR was introduced in part 5 of the Finance Act 2013 and has been in force since July. This Bill will apply the GAAR to national insurance contributions.
Clause 11 relates to oil and gas workers. In this year’s Budget, the Chancellor announced that the Government would strengthen the legislation on offshore employment intermediaries. The Bill will address the non-payment of employer’s national insurance contributions in the oil and gas industry through the placement of the employer of oil and gas workers who are working on the UK continental shelf outside the UK. The measure has been subject to consultation. The consultation document, “Offshore employment intermediaries”, was published on 30 May 2013 and the consultation closed on 8 August 2013. The summary of responses was published in October.
The Government intend to address those offshore employment schemes largely by using existing powers contained in social security legislation. The Bill supplements those with a new certification provision for the oil and gas industry. That provision will apply where the national insurance obligations are fulfilled by someone on behalf of the person deemed to be the employer for national insurance purposes.
Clause 11 is part of a measure that, as a whole, is expected to bring in the region of £100 million per year to the Exchequer, without having a significant economic impact on the oil and gas industry. Staff costs for some businesses may increase if they had not previously been accounting properly for all tax and NICs. There will be little cost to the Government through additional administration, other than HMRC implementing the new certification system, and I hope hon. Members will agree that this is a straightforward and uncontroversial provision.
Finally, I wish to refer to provisions in the Bill concerning HMRC’s partnership review, which are contained in clauses 12 and 13. Following the Chancellor’s Budget announcement, HMRC carried out a consultation on two aspects of the partnership rules between May and August this year, and the Government are bringing forward measures in the Bill as a result of that review. The Government are proposing two sets of changes, the first of which was not part of the consultation proposals but resulted directly from information received during that consultation. It concerns a tax issue that can arise from the interaction of the alternative investment fund managers directive—AIFMD—and existing partnership tax rules. Only those alternative investment fund managers who operate as a partnership will be affected by the proposed changes in the Bill.
A provision in the Bill will allow regulations to be made to modify the class 4 NICS liability of partners whose profits will be deferred under AIFMD, which aims to improve investor protection and reduce risk. The regulations will be based on new tax legislation that will be included in the forthcoming finance Bill. Measures will be included in the NICs Bill, the forthcoming finance Bill and secondary legislation to reclassify certain limited liability partnership—or LLP—members as employed earners for tax and national insurance purposes, to tackle the disguising of employment relationships through LLPs.
The tax and NICs changes are expected to bring in approximately £125 million to the Exchequer in the first year, while the broader economic impact is expected to be negligible. There will be changes to the NICs liability for certain partnerships and individual partners in the alternative investment fund sector. The Bill will also result in some LLPs in certain industry sectors where disguised employment has been most prevalent paying increased amounts of NICs.
Richard Fuller (Bedford) (Con)
I greatly appreciate the Minister giving way. Before he sits down, will he or one of his colleagues respond on the financial costs of the employment allowance contained in the Treasury documents? What impact on the take-up of tax credits were included in the estimate of £1.25 billion impact on the Exchequer in 2014 through to £1.7 billion in 2017-18? I do not expect the Minister to have those numbers to hand, but if his colleagues could reply to that later, or send me a note, I would appreciate it.
Mr Gauke
I am grateful to my hon. Friend for that observation, and we will of course take a cautious estimate on the impact on tax credit take-up. Those numbers were signed off by the Office for Budget Responsibility, but I will ensure that my hon. Friend receives an answer on the detailed technical point before long.
This is an important and necessary Bill. Through the employment allowance it will allow us to support businesses with the cost of employing their staff, as well as small businesses that are aspiring to grow. The Bill also includes a package of measures aimed at activity that attempts to reduce the national insurance contributions payable to the Exchequer—an issue we are seeking to address.
This is another Bill that will help to create a system of low taxation that is properly enforced. It will continue to help businesses help our economic recovery, and it will help jobs and job creation. I commend the Bill wholeheartedly to the House.
Shabana Mahmood
I was proud to stand as a Labour candidate at the general election when the economy was starting to grow, but that recovery was choked off by the hon. Gentleman’s Government.
During the Committee stage of the National Insurance Contributions Act 2011, we tabled amendments to extend the national insurance holiday to charities. The employment allowance will do just that. This is effectively our policy, so we are of course delighted to support the Bill. Since the policy was announced in the Budget, we have been calling for it to be enacted immediately, rather than waiting until April 2014.
Mr Gauke
I note that the hon. Lady did not respond to the question from my hon. Friend the Member for Bedford (Richard Fuller) on whether she supported the Labour party’s policy of increasing employers’ national insurance contributions. Does she recognise that the Labour party’s policy has been to target the NICs scheme at small businesses—not all businesses, as she said—and only for new employees, not all employees? That substantially complicates the scheme, requires applications and shares many of the complexities of the NICs holiday.
Shabana Mahmood
I thank the Minister for that intervention. I am not surprised he wants to turn the attention away from his own U-turn. I remind him that our proposal was a refinement and an extension of his failed policy. We could see it was failing and, doing our job as a responsible Opposition, we were suggesting ways in which the Minister might be able to rescue his failed national insurance holiday. I must correct him: the scheme was not for small businesses only, but all existing businesses.
Tax Avoidance
David Gauke Excerpts(10 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
This Government are committed to delivering a progressive tax system that is affordable, fair and encourages growth.
As announced by the Chief Secretary to the Treasury on 17 September 2013 the Government will introduce legislation to stop people avoiding tax by using rules known as compensating adjustments.
The rules are being exploited in two areas. In the first, partnerships pay companies for services at cost price and use the tax rules to create a mark-up which is not actually paid, but which reduces the income tax bill of individual partners.
In the second type of case individuals lend money to a company in which they are a shareholder, charging excessive interest payments on which they do not pay full income tax.
The Government have consulted on technical detail and will introduce in the next Finance Bill legislation, effective from today, to stop this exploitation by denying compensating adjustments for transactions between income tax payers and connected companies.
In certain circumstances the compensating adjustment will be treated for tax purposes as a distribution of profits.
Further details on these measures are contained in a technical note published today, together with the draft legislation.
Air Passenger Duty
David Gauke Excerpts(10 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
We have had an interesting and wide-ranging debate, given that it has focused on one particular tax, and I thank hon. Members for their contributions. We began with the hon. Member for East Antrim (Sammy Wilson), who delivered a wide-ranging speech in which he made it clear that APD did not constitute a green tax but that, even if it did, he would be against it. He was described by various hon. Members as “trenchant”, “outspoken” and even “abrasive”—and those were the comments from his hon. Friends. However, he set out a strong case on behalf of Northern Ireland and, indeed, the UK more widely. Interestingly, the motion applies to APD across the UK; it is not specifically a Northern Irish issue.
We heard from the new Economic Secretary—I add my words of welcome to the many warm words already offered—who has already demonstrated that she will be a formidable Treasury Minister. We then heard from the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), whom I also congratulate on her move to the post of shadow Economic Secretary, although I am saddened that she is no longer the shadow Exchequer Secretary. I am pleased, however, that we have had the opportunity to debate again so soon, and I am sure that we have many happy hours together in Finance Bill Committees ahead of us. She was very critical of Government policy although, as her history of APD pointed out, the regime in place is largely the one that we inherited from the previous Government. Despite her criticisms, she did not give us any examples of what she would change, but we were grateful for her contribution none the less.
My hon. Friend the Member for Spelthorne (Kwasi Kwarteng), who has a strong interest both in aviation and in lower taxes, made the point very strongly that we have to reduce the deficit. His injunction that we should not slacken on deficit reduction was sensible advice.
The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) raised Scottish concerns, citing criticism that APD rates had rocketed since 2007. I should point out that, since 2010, APD has risen in line with inflation—it has been frozen in real terms. That means, for example, that since 2010, the price of an economy ticket for a short-haul flight—such tickets apply to the majority of passenger flights—has risen from £12 to £13. It is worth pointing out that that is an increase of £1. He also raised concerns about the impact of APD on Scotland, but the most recent figures I have—for 2010-11—show that passenger numbers at Scottish airports grew by 5.5%, so they are not being slashed by any means.
Mr MacNeil
I do not need to take the credit for the Scottish Government, because the Minister has already given the credit to them, for which I thank him. Can he discern any real difference between his position and that of the Opposition, because I cannot?
Mr Gauke
Is the implication of the hon. Gentleman’s question that he managed to identify the position of Labour Front Benchers, because I could not particularly?
My hon. Friend the Member for Brigg and Goole (Andrew Percy) delivered a thoughtful speech in which he set out the evolution of his own thinking and made the case for regional airports. The hon. Member for Mitcham and Morden (Siobhain McDonagh) raised a point on behalf of her constituents who originally come from the Caribbean. Such a point was also made in interventions, so let me reiterate that APD must adhere to international rules on aviation tax—a point that she acknowledged—specifically the Chicago convention. The capital city convention in APD ensures that the duty complies with the rules. She asked why we could not reform the bands. We could move to having two bands, and we did examine that as part of the 2011 consultation, but no banding structure can be entirely free of anomalies, and a revenue-neutral move to two bands would require an increase in APD for about 90% of passengers, including those flying to Europe and the United States. We were not attracted to that approach.
The hon. Member for Paisley and Renfrewshire North (Jim Sheridan) raised a point about Scotland, following on from the contribution by the hon. Member for Na h-Eileanan an Iar. He rightly said that there would be an implication if the tax were devolved to Scotland and then abolished, because the cost of that would have to be found from the block grant. We have not estimated what that would be, but such a decision would have consequences to comply with EU state aid rules. It is also worth pointing out that we would need to take into account any market distortions that would be created and that the cost would have to take into account any lost revenue for neighbouring English airports, for example. That is not an insignificant point.
The hon. Member for South Down (Ms Ritchie) spoke about domestic flights. It is worth pointing out that several European countries put VAT on domestic flights, whereas the UK does not—the rate is 19% in Germany, 21% in the Netherlands and 27% in Hungary. My hon. Friend the Member for Mid Norfolk (George Freeman) made the point that we would like to get rid of most taxes, but we are not in a position to do so. He also highlighted the fact that rates have increased with inflation. The hon. Member for Strangford (Jim Shannon) argued that there would be a net gain for the Exchequer if APD were abolished, but we do not agree—I shall set out the reasons why in a moment.
The hon. Member for North Antrim (Ian Paisley) spoke against the tax and also hoped that we could all unite behind the motion. I am terribly sorry to say that I have to disappoint him on both fronts. The hon. Member for South Antrim (Dr McCrea) summed up the debate, arguing that we should perhaps follow the example of the Republic of Ireland, which is not always an argument that I hear from him.
As I have made clear, APD makes a crucial contribution to tackling our fiscal challenges. The tax raises nearly £3 billion in annual revenue. Contrary to the claims of the PricewaterhouseCoopers report, which has been cited frequently, scrapping APD would not be costless; it would result in a significant loss to the Exchequer. Unless we were to give up on our fiscal goals—my hon. Friends have been absolutely right to highlight the need for us to maintain discipline on reducing the deficit—the lost revenue would therefore need to be found elsewhere, either by increasing other taxes or by further reducing our public spending. In the course of the debate, I have heard few realistic proposals as to how that could be done. Not only would scrapping APD create substantial costs to the Exchequer, but the benefits of such a step would be small compared with those of the policies that the Government have already put in place.
We are not persuaded by the case that has been put before us. We cannot take risks with the public finances, so we will not be supporting the motion.
Question put.
The House proceeded to a Division.
Madam Deputy Speaker (Dawn Primarolo)
I ask the Serjeant at Arms to investigate the delay in the No Lobby.
The House having divided: Ayes 13, Noes 284.
Double Taxation (Republic of Panama)
David Gauke Excerpts(10 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
A new double taxation convention with the Republic of Panama was signed on 29 July 2013. The text of the convention has been deposited in the Libraries of both Houses and made available on HM Revenue and Customs’ website. The text has been scheduled to a draft Order in Council laid before the House of Commons on 12 September 2013.
ECOFIN
David Gauke Excerpts(10 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
A meeting of the Economic and Financial Affairs Council was held in Luxembourg on 15 October 2013. Council discussed the following items.
Current legislative proposals
The presidency provided an update on the following financial services dossiers: central securities depositories regulation (CSDR); omnibus II; markets in financial instruments directive (MiFID); the Commission noted the formal adoption of the single supervisory mechanism (SSM); single resolution mechanism (SRM); bank recovery and resolution directive (BRRD); and deposit guarantee scheme directive (DGSD).
Preparation of the European Council on 24-25 October 2013
a) Indicators and policy areas for strengthened economic policy co-ordination:
ECOFIN held an exchange of views on indicators and policy areas for strengthened economic policy co-ordination. The Government consider that, consistent with the June European Council conclusions, participation in any new measures for economic and monetary union should be voluntary for those outside the single currency and be fully compatible with the single market.
b) Commission-EIB SME initiative:
ECOFIN considered Commission-EIB designs for financing instruments aimed at leveraging finance for SMEs, of which participation in any scheme should be voluntary for member states.
European semester: Lessons from 2013 and way forward
ECOFIN held an exchange of views on lessons to be learned from the 2013 European semester.
Follow-up to G20 Finance Ministers and governors’ meeting on 10-11 October and annual meetings of the IMF and World Bank Group on 11-13 October in Washington
The Commission and presidency provided a short update on the outcomes of the G20 ministerial and IMF meetings in October.
Preparation of the 19th conference of parties to the United Nations framework convention on climate change (UNFCCC) in Warsaw from 11-22 November 2013
ECOFIN endorsed conclusions on climate finance ahead of the UNFCCC conference in Warsaw on 11-22 November.