Finance Bill 2013: Measures with Immediate Effect
David Gauke Excerpts(11 years, 5 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.
The Government are today announcing measures that will help build a fair tax system and tackle tax avoidance. The legislation for these measures will have effect from today and will be included in Finance Bill 2013.
The protocol on announcements made outside scheduled fiscal events, published at Budget 2011, sets out the criteria the Government will observe when changing legislation with immediate effect. The Government are acting in accordance with the protocol in announcing the following changes to legislation.
Bank Levy—double taxation relief
The Government will introduce legislation to take effect from 1 January 2013 which will put beyond doubt that foreign bank levies are not an allowable deduction for income tax or corporation tax purposes. The legislation will also ensure that where a company makes a claim on or after today’s date for double taxation relief for a foreign bank levy against the charge to the UK Bank Levy, none of that foreign bank levy will be an allowable deduction for income tax or corporation tax purposes.
Tax Mismatch Schemes
The Government are introducing legislation to counter tax avoidance schemes that aim to reduce a company’s liability to corporation tax through asymmetric tax treatment of loans or derivatives (tax mismatch schemes), including, although not limited to, schemes involving companies which are members of a partnership.
Due to the repeated use of partnerships and similar collective structures in tax avoidance schemes, the Government will be considering the area of the taxation of partnerships and similar structures as part of their review of high-risk areas of the tax code.
Property total return swaps
Legislation is also being introduced to block schemes that use property return swaps to convert capital losses within a group into income losses, and that use the legislation to generate capital gains which are not in proportion to those actually arising from the swap contract.
Manufactured payments
The Government are introducing legislation to address schemes involving stock lending arrangements. In these schemes a company lends stock, and instead of receiving a manufactured payment which is taxable, for example as a trade receipt, receives value in some other non-taxable form. The draft legislation provides that the lender will be taxable when value representing a manufactured payment is received in any form.
Payments of patent royalties
Legislation is also being introduced to abolish the income tax relief for non-trade payments of patent royalties in order to counter an avoidance scheme which exploits the relief, and to simplify the tax code. There is understood to be little use of the relief by compliant taxpayers, but anyone who thinks they will be adversely affected by this change is invited to contact HM Revenue and Customs (HMRC).
Further details on the measures listed above are contained in the draft legislation, explanatory notes and “Tax Information and Impact Notes” published on both the HM Treasury and HMRC websites.
Extra-statutory Concession A19
David Gauke Excerpts(11 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
It is a great pleasure to serve under your chairmanship again, Mr Streeter, and I congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing the debate. Once again, he is bringing to the attention of the House his knowledge and expertise of the tax system and representing his constituents so well on a number of matters. He does so today with regard to the extra-statutory concession A19, and the debate has been helpful. I am grateful for the opportunity to respond, and I hope to be able to address his questions.
Before doing so, it is worth recognising that HMRC has made considerable progress in modernising the PAYE system and bringing the legacy issues for PAYE customers up to date. The national insurance and PAYE computer system—NPS—became operational in early 2010, enabling HRMC to bring all taxpayer records on to a single national database held under unique references. For the first time, HMRC has been able to bring together all sources of income for a customer under one reference. Although I know that there were considerable problems with the implementation of NPS, now that it is fully automated, it is a very cost-effective process that enables HMRC to reconcile nearly 60 million PAYE tax records very quickly.
In October 2010, HMRC’s late chief executive, Dame Lesley Strathie, made a commitment to the Public Accounts Committee, in response to an NAO recommendation, that HMRC would bring PAYE up to date for taxpayers by the end of 2012-13. It is on track to deliver on that commitment and it has already settled 17.9 million unreconciled customer records. As a consequence of those improvements, in the last two years, the number of unexpected tax repayments and demands issued by HMRC has been higher than usual, and in turn, that has led to an unprecedented number of customers contacting HMRC for help and advice. HMRC recognises that on occasions its customer service has fallen short of the standards that it wants to provide. HMRC has taken steps to improve its customer service over the past year—for example, by investing in its contact centres—and it is making customer information more accessible and easier to understand. It recognises, however, that there is more to do, and it is building on this year’s improvements to give all taxpayers the services that they rightly expect.
A significant proportion of the complaints that HMRC has received relate to HMRC’s implementation of ESC A19, and HMRC consulted on the operation of the concession over the summer. It has listened to the views of taxpayers and to comments in the media. Its current operational process was developed in response to the exceptional circumstances of 2010, when steps needed to be taken to ensure that the 166,000 requests that it received could be dealt with quickly. To respond to a question raised by my hon. Friend, from September 2010 to 31 March 2012, HMRC received 166,000 claims to the value of £185 million, and 41,766 of those requests were successful, at an estimated value of £53.7 million.
HMRC looked to deal with those matters as quickly as possible, creating a dedicated team and a streamlined process that included a more relaxed approach to the reasonable belief test during 2010 and 2011. It also raised the collection threshold to £300, and as I said in my statement to the House in January 2011, HMRC would not reconcile the tax affairs of 250,000 pensioners for whom we believe a request under the concession would have been successful. HMRC recognises that there is much more that it needs to do to improve its implementation of the concession for the future. There is work in progress to deliver process improvements and better guidance for officers dealing with requests, and particularly to improve the service for those customers who will always need help understanding and managing their tax affairs. That work is specifically aimed at reducing the number of customer requests that become formal complaints.
At this point, it may be helpful if I try to respond to some of my hon. Friend’s specific questions. He asked whether HMRC had published all the internal guidance on ESC A19. HMRC has published all guidance except where it considers that publication of the decision-making process that it uses to determine the reasonable belief test would prejudice its application. If HMRC published certain items, all cases would be phrased in a particular way to meet it. That would not be helpful, but that is the only reason why guidance would not be published.
HMRC has not changed its policy on ESC A19. HMRC has been looking to improve its consistency of decision making in these cases. Taxpayers have an appeal route to the Revenue adjudicator if they cannot agree the position directly with HMRC. Perhaps it is worth saying a word or two about that appeal route, which was raised by my hon. Friend. If a claim is refused, the taxpayer can request a second review. The taxpayer can make a formal complaint to HMRC. The taxpayer can then request a review of the formal complaint decision. The taxpayer can ask the adjudicator or ultimately even the parliamentary ombudsman to conduct a review. It is correct to say that there is no statutory right of appeal to the tribunal. That point has been tested with the tribunal, and that was the conclusion reached in that case.
Of course, HMRC has a responsibility to collect the tax correctly as prescribed by Parliament. ESC A19 is a concession that applies where HMRC has not acted in a timely or accurate way, but clearly there is not complete flexibility for HMRC to agree not to collect the tax that is due.
My hon. Friend asked whether, in some cases, the matter should be taken to the employer or pension provider first, rather than going to the taxpayer. HMRC has a process that allows it to approach both the employer and the taxpayer at the same time. In the majority of cases, a review under ESC A19 can be conducted quite quickly to establish the nature of the error. HMRC is happy to discuss individual cases with taxpayers if the taxpayer feels that it is their employer who has made the mistake.
Nigel Mills
Is it not the case that under, I think, PAYE regulation 72, the Revenue should go to the employer first? I think that it can then issue a notice to say that it can go after the taxpayer. In theory, the taxpayer should be sent a copy of that notice. I am not entirely sure that that is the process that is followed very often, but I think that it is the one set out in the regulations.
Mr Gauke
If I may, I shall come back to that specific point, because I want to deal with another issue raised by my hon. Friend, which was whether the P14 forms could be used for information and why that does not happen. I just point out that due to the volumes received each year—approximately 60 million—P14 forms are processed over several months. That is an automated process. There is currently no scope within the process that would enable HMRC to identify and amend a tax code for the current year on receipt of the previous year’s P14.
My hon. Friend asked about the ESC A19 consultation. The outcome of that consultation has yet to be decided. Obviously, he will be keen to know what it is. When that has been concluded, I will ensure that he is fully aware of it.
It is right to say that HMRC has delivered a real change in the operation of PAYE and brought its legacy issues up to date. That means that 85% of PAYE customers will have paid the right tax during the year. The remaining 15% will be due a refund or owe tax for a variety of reasons other than HMRC error. Furthermore, the vast majority of customers will be notified of their tax position well before the end of the tax year.
ESC A19 is designed to apply routinely when HMRC has failed to act on information received and also fails to notify the customer of their arrears for a full 12 months after the end of the tax year. This year, HMRC has received significantly fewer requests, and most of those were received immediately following the issue of the tax calculation. The vast majority were not eligible for the concession because there had been notification of the arrears within the 12-month deadline. The occasions on which taxpayers will need to make a request under ESC A19 in the future are significantly diminished. HMRC does not envisage the problems and complaints that arose from its implementation of the concession in the exceptional circumstances of the past two years arising to the same extent in the future.
However, my hon. Friend raises an important point about the difficulty that some taxpayers have when they simply have a tax code. That can make it difficult for them to assess exactly what the right amount of tax to be paid is and, if they are paying the wrong amount, what can be done about it. My hon. Friend will be pleased about the progress that we are making with tax statements. We are making much more information available to taxpayers, so that they can see what tax has been paid. The way I see that developing is that ultimately it should provide a much clearer route—much greater clarity to taxpayers—to ensure that the correct amount of tax has been collected.
Let me return to regulation 72, which my hon. Friend raised a moment or so ago. He is correct about the process. The NPS is fully automated and cost-effective and deals with 1.5 million underpayment cases per annum without recourse to this process—without going into regulation 72. These cases do not arise only because of employer error. Regulation 72 is really an anti-avoidance measure to prevent collusion between employer and employee. I hope that that provides some clarity to my hon. Friend.
It is important to distinguish between HMRC’s obligation to apologise and provide redress for customers who experience poor service and its collection and management discretions in effect to withdraw tax rightly due from the Consolidated Fund. HMRC has a statutory obligation to collect the right amount of tax from each taxpayer and to be fair to all taxpayers in that respect.
ESC A19 was intended to remedy the hardship and injustice of unexpected demands caused by the then Inland Revenue’s error and delay. Although HMRC’s tax commissioners can forgo tax in cases of financial hardship, its discretions to forgo tax that is rightly due are limited and are certainly restricted to the strict application of the conditions of the concession.
Compensation payments to remedy the cost and distress of poor service are ex gratia and are applied using the guidelines in the “Managing Public Money” rulebook. Those must not allow recipients to gain financial advantage as a result of poor customer service. It would be acting outside the parameters of the authority delegated to HMRC to provide redress that clearly linked someone’s tax liability with the amount of their compensation. To be fair, HMRC does have to operate a difficult balance.
We must recognise that the complaints and problems that we have heard about today, although serious and distressing for the individuals involved, have arisen in exceptional circumstances. HMRC has recognised and apologised for poor service and is taking steps to put things right for the future, particularly for pensioners and other vulnerable customers. It is working closely with professional organisations and charities to understand customer needs and improve services.
The need for customers to turn to ESC A19 for redress in response to an unexpected tax demand is diminishing. I would like to reassure my hon. Friend that HMRC will compensate customers for poor service, using its authority within “Managing Public Money” rules, and use its collection and management discretions to forgo tax where that is appropriate and necessary and where it has the power to do so.
Question put and agreed to.
HM Revenue and Customs
David Gauke Excerpts(11 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
The vast majority of people and businesses pay their fair share of tax. However, the Government are fully committed to clamping down on those who avoid or evade paying their tax. The Government are today announcing a series of actions that are being taken to tackle tax avoidance and evasion through domestic and international action: new investment in HM Revenue and Customs (HMRC), further developments on progress internationally and more powers that will underpin the Government’s commitment to tackle avoidance and evasion. These announcements come ahead of the Chancellor’s autumn statement on Wednesday 5 December.
New funding for HMRC
The Government are already investing over £900 million in HMRC to secure an additional £7 billion of revenue a year, taking HMRC’s total compliance revenues to £20 billion in 2014-15. A further £77 million will be provided to HMRC in this spending review period to further expand its anti-avoidance and evasion activity focused on offshore evasion and avoidance by wealthy individuals and by multinationals. This investment will secure a further £2 billion in 2014-15, £22 billion in total. This is 70% higher than in 2010-11.
As a result of this new funding, HMRC will:
Accelerate work to identify and challenge multinationals’ transfer pricing arrangements and further strengthen its risk assessment capability across the large business sector. That will help to ensure that multinationals do not shift profits out of the UK, and therefore pay the tax due in accordance with UK tax law.
Expand its affluent unit with 100 extra investigators and additional risk and intelligence staff to target avoidance and evasion by the wealthy. Increasing the number of specialist personal tax inspectors to tackle offshore evasion and avoidance of inheritance tax using offshore trusts, bank accounts and other entities, focusing in particular on the agents and tax intermediaries involved.
Increase capacity to tackle aggressive avoidance schemes, including long-running cases involving partnership losses by creating a settlement opportunity that offers a good deal to the Exchequer and accelerating litigation against those that fail to take up the settlement opportunity.
Create a new “centre of excellence” to develop a comprehensive approach to tackling offshore evasion. The team will be made up of HMRC staff and external experts who will look at how HMRC can best use data to identify offshore tax evasion, review HMRC’s legal powers and work with other tax administrations to close the net on offshore evasion. A comprehensive strategy on offshore tax evasion will be published in spring 2013.
Improve its risking technology, including increased use of third-party data. HMRC have today published “Closing in on tax evasion: HMRC’s approach” which sets out how HMRC are using technology to tackle those who break the law through tax evasion.
Agreement with US
A groundbreaking agreement with the US—the UK/US agreement to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA)—will significantly increase the amount of information automatically exchanged between the two countries. The agreement sets a new standard in international tax transparency and will further enhance HMRC’s ability to tackle offshore evasion. The Government will look to conclude similar agreements with other jurisdictions.
Action to tackle the promoters of tax avoidance schemes
Over the summer the Government published a consultation document, “Lifting the Lid on Tax Avoidance Schemes”, on a wide range of proposals to increase information about tax avoidance.
The consultation involved constructive engagement with a large number of representative bodies and businesses. It also demonstrated very strong support from mainstream tax advisers for new measures to crack down on those who market tax avoidance schemes. In response, the Government will bring forward proposals to introduce significant new information disclosure and penalty powers that will go further than existing, general rules on the marketing of financial products and consumer protection. The new powers will allow HMRC to better target the marketing of tax avoidance schemes that pose a high risk to users and the Exchequer.
The Government will also strengthen the existing disclosure of tax avoidance schemes regime through legislation in 2013 that will extend the range of information that must be disclosed to HMRC and impose additional sanctions for non-compliance.
The introduction of a general anti-abuse rule (GAAR)
In December 2010, the Government asked Graham Aaronson QC to lead a study that would consider whether a GAAR could deter and counter abusive tax avoidance, while providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for taxpayers and HMRC. The GAAR the Government are now introducing will provide a significant new deterrent to abusive avoidance schemes and strengthen HMRC’s means of tackling them where they persist. Guidance and draft legislation on the GAAR will be published in December.
Balance of Competences Review (Taxation)
David Gauke Excerpts(11 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government have today published a call for evidence on the balance of competence between the United Kingdom and the European Union on taxation.
Following the Foreign Secretary’s oral statement launching the Balance of Competence Review in July 2012 and written statement on the progress of the review on 23 October 2012, Official Report, column 46WS, the public call for evidence on taxation will run for 12 weeks from 29 November 2012 to 22 February 2013.
HM Treasury is seeking evidence from individuals and groups with an interest or experience in taxation policy and its application.
The report, following the call for evidence, on the current balance of competence on taxation and what this means for the national interest will be published by the summer of 2013.
Copies of the document have been deposited in the Libraries of both Houses and are available on the Treasury website at: www.hm-treasury.gov.uk
Income Tax
David Gauke Excerpts(11 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“notes that the previous administration maintained the top rate of income tax at 40 per cent for 13 years, only increasing it to 50 per cent in April 2010, one month before the Government was formed, and that this new rate was damaging to UK competitiveness; further notes that the independent Office for Budget Responsibility certified the Government’s central estimate that reducing the 50 per cent rate to 45 per cent would have a cost to the Exchequer of £100 million per year and that measures introduced at the last Budget increased taxes on the wealthy by some £500 million; recognises that in contrast to the previous administration that abolished the 10 per cent rate of tax which increased taxes on more than five million low earners, the Government is cutting income tax for 25 million low and middle earners while taking two million low-paid people out of income tax altogether through increasing the tax free personal allowance; recognises that every Budget under this Government has increased taxes on the rich, including a new stamp duty land tax rate for properties over £2 million, an annual charge on these properties, introducing a cap on previously unlimited income tax reliefs and an extension to the capital gains tax regime, clamping down on tax evasion and aggressive tax avoidance, and bringing in a General Anti-Abuse Rule; and welcomes the introduction of the Triple Lock, which led this year to the biggest ever cash rise in the state pension.”
The amendment is in my name and those of my right hon. and hon. Friends. After all the anger and bluster the House has just heard, may I bring to its attention a few pertinent facts? Hon. Members have been told that the 45p rate for high earners is too low, which ignores the fact that there was a top rate of 40p for all but 36 of the 4,758 days of the Labour Government. We have been told that the rich should pay more. That ignores the fact that other changes in the tax system introduced in the Budget will raise five times the amount of tax from the wealthiest than the 50p rate raised in practice. We have heard that moving to 45p is wrong, but the Opposition will not commit to reversing it after the next general election.
Sheila Gilmore
Will the Minister confirm a report that I read in, I believe, The Sunday Times, which stated that the number of property sales above the level of increased stamp duty has fallen since the Budget? When will he produce figures on whether such so-called additional taxes raise any additional money?
Mr Gauke
I note with interest that the hon. Lady appears to be arguing that an increase in tax can sometimes lead to a loss of revenue. She is right—that can sometimes happen. As it happens, the revenue on stamp duty land tax is holding up all right, but she makes an important point, one that I hope is understood more widely in her party. I am pleased that the Opposition are keeping open the option of not increasing the 45p rate of income tax. Although it is right that those with the broadest shoulders bear the greatest burden—I will set out how the Government are making that happen—it is also necessary to ensure that the UK is competitive in attracting wealth creators to locate and stay in this country. A Government that are serious about the UK winning the global race for growth should be very careful about pursuing a policy that places a huge “closed for business” sign over our economy. That is exactly what the 50p rate of income tax was—a “closed for business” sign. I hope that at the next general election there will be a consensus that we do not want to re-erect that sign over our economy.
Mark Pritchard
The new growth guru in Europe is of course President Hollande of France, who is well known to the Opposition Front Bench. I wonder whether my hon. Friend thinks that the higher 75p rate of tax in France has helped entrepreneurs and business people to stay within France, or to flee to other shores, such as the low tax economy in Britain.
Mr Gauke
My hon. Friend raises an interesting point. Perhaps I should not be drawn too much into discussing the domestic policies of one of our close European allies, but it will be interesting to see the impact in France of a very high rate of income tax, and whether people will move out of that country and we see any additional revenue as a consequence.
Mr Graham Stuart
I appeal to my hon. Friend not to be too harsh on the Opposition. Does he not understand that the Labour party now gets 90% of its funding from the trade union movement? If the trade unions insist that there should be a 50p tax rate—even if it does not raise money and undermines public services—it may feel obliged to put it in its manifesto regardless.
Mr Gauke
My hon. Friend displays an unusual degree of cynicism. I am still hopeful that Labour Members will share with us a desire for the UK to be a competitive environment for business that attracts high net worth and high-earning individuals to locate and pay tax in the UK, and that we can raise more revenue from them. Perhaps, however, my hon. Friend will turn out to be right and they will be driven more by their trade union paymasters.
Paul Flynn
Did the hon. Gentleman see the filmed interview with the treasurer of the Conservative party who demanded £250,000 for an invitation to dinner with the Prime Minister? Does not that give us an idea of the source of the Tory party’s funds?
Mr Gauke
I suspect, Mr Speaker, that you would not want us to be drawn into a lengthy debate about party funding. All I can say is that the Conservative party and this coalition Government will make decisions on tax policy on the basis of ensuring that we have a fair and competitive tax system, and that is exactly what we are doing.
Andrew Bridgen
Does the Minister agree that when data show that the top 1% of earners already pay 28% of all income tax, we want to encourage them to stay, and, indeed, attract other high earners to our economy?
Mr Gauke
My hon. Friend makes an important point. Our income tax receipts are dependent on high earners, and that will continue to be the case. We will continue to raise substantial sums from those high earners, but we must ensure that the UK is an attractive place for them to be located. At a time when labour mobility is perhaps greater than it has ever been before, particularly for such individuals, we have to recognise that the UK is competing for talented individuals and business investment, and that a 50p rate of income tax does not help us do that. That is the essence of the reason why we reduced the rate to 45p.
It may be helpful to provide some background to the policy we are debating. As the House will be aware, the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), announced in his 2009 Budget that the additional rate of income tax would come into effect in April 2010. It was accepted that there would be behavioural change as a consequence of that. The shadow Chief Secretary referred to the figure of £3 billion, which she alleged was the cost of cutting the 50p rate to 45p. She got that figure by looking at the static cost—not including any behavioural change whatsoever. It is worth pointing out that when the previous Government announced the increase from 40p to 50p, they assumed a behavioural change that would mean that rather than raising £6 billion, approximately only £2.5 billion would be raised. That was the assumption made by the previous Government. Such a substantial behavioural impact is inevitably bad for the economy. Not only were we left with an economy in a disastrous state and a huge budget deficit resulting in public sector debt growing very rapidly, we were left with a tax system that was highly uncompetitive and drove away big contributors to tax revenue.
Andrew Bridgen
I thank the Minister for giving way again—he is very generous. Does my hon. Friend agree that having a high income does not guarantee friends, happiness or health but does guarantee choice, and that one of the major choices is where one is domiciled for tax?
Mr Gauke
My hon. Friend is right, and harks back to what I was saying a moment ago. We have to bear in mind that the ability of high-earning individuals to be mobile has increased over time. It is striking, for example, that the number of UK citizens moving to Switzerland in 2010 increased by 29%. That demonstrates the fact that individuals will respond to fiscal incentives. They will respond to one of the highest rates of personal tax in the developed world, which was the position that the UK was in.
Charlie Elphicke
Is not the Minister’s point thrown into sharp relief by the fact that millionaires were paying approximately £13.4 billion before that measure was introduced, and that that went down to £6.5 billion? Is it not dangerous for our public finances to start jacking up the rate and driving people out of the country, as the previous Government did?
Mr Gauke
My hon. Friend sets out some dramatic numbers. They are the correct numbers, although it would be right to say that an element of that had to do with forestalling and people moving their income around. However, Opposition Members should not take great comfort from that. They demonstrate the enormous amount of behavioural change as a consequence of high rates. That level of forestalling is striking. What is also striking is that when the previous Government made their estimate of what would happen with income, no allowance was made for forestalling whatsoever, which again demonstrates flaws with the methodology that was in place.
Lyn Brown (West Ham) (Lab)
The hon. Gentleman makes an erudite argument, as always, and he sounds plausible, but can he not see that ordinary families, who are losing at least £500 per year, facing difficulties buying food and struggling with petrol costs, find it really hard to stomach why the Government are choosing to give £107,000 per year to people who are earning £1 million? It does not make sense to them. It does not make sense to us.
Mr Gauke
In the Office for Budget Responsibility assessment there is a tax cut of £100 million that goes to those who are paying the 50p rate.
In the same Budget package, however, there are measures to deal with stamp duty avoidance on properties over £2 million, a stamp duty increase on properties over £2 million, which is bringing in revenue, and caps on reliefs directed at high-earning individuals. So who is paying the stamp duty and not benefiting from the reliefs as before? They are high-earning individuals. They are paying for the cut in the 50p rate five times over as a consequence of the measures announced in the last Budget. That is the explanation to the hon. Lady’s constituents, and mine, of how the cut is being funded.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
Will the Exchequer Secretary confirm that the expectations in the OBR’s assessment in March on income tax and VAT receipts are not being met?
Jonathan Edwards
Obviously, my party does not agree with this measure and voted against it following the Budget statement, but, if the Treasury intends to pursue this line of argument, when will it drop the rate to 40p?
Mr Gauke
I admire the hon. Gentleman’s ambition. To be fair, he did not make this point, but, when Labour voted on this matter in the Finance Bill debates, effectively they would have got us to a 40p rate—but there we go. It was HMRC’s assessment that a reduction from 50p to 45p would be relatively inexpensive, and, given the damage the 50p rate was doing to our competitiveness, we believed it would be well worth doing. Of course, all taxes are under review, but the 45p rate remains in place.
Barry Gardiner (Brent North) (Lab)
I understand the Exchequer Secretary’s point. He calculates that the reduction in the top rate of tax has been, in his eyes, more than compensated for—five times over, he said—by the other taxes. How, then, will the reduction in the top rate of tax provide the incentive to those taxpayers he wants to domicile here? How will this fivefold increase in tax not send them rushing abroad? I thought that was precisely his point.
Mr Gauke
Very simply, different taxes have different elasticities. It is perfectly simple: people are more likely to respond to high direct rates of income tax than to stamp duty. Of course, the OBR took into account the behavioural impacts when it assessed how much revenue would be raised on, for example, stamp duty land tax. As Tony Blair sets out in his memoirs, which I was flicking through last night, direct rates of income tax are not a good way of raising income.
Charlie Elphicke
I thank my hon. Friend for giving way once more; he is being incredibly generous.
On the point about elasticity, is income tax not notorious for raising more revenue, the more it is cut? We saw that throughout the ’80s, when it fell from the sky-high levels of Labour to 60% and then 40%. Each time, the take increased. Is it not the case that, if we cut the rate of income tax, broadly we end up increasing the take?
Mr Gauke
It depends where we are on the Laffer curve, but, if we have the highest rate of income tax of any of the G20 economies, we are clearly in a vulnerable position. That was the position we inherited and why we were right to remove it.
I want to touch on the HMRC report laid before the House of Commons at the time of the Budget. It contained the assessment of the 50p rate. It showed that the additional rate was distortive, inefficient, and damaging to our international competitiveness, and that the previous Government greatly understated its impact on the behaviour of those affected. High earners were able to bring forward about £18 billion before the new rate came in, which the previous Government did not account for in their revenue projections. The 50p rate has failed: it has been criticised by business, damaged the UK economy and raised much less for the Exchequer than the last Government had hoped. In fact, it could have generated a net loss. The HMRC report estimates that it raised at most only £1 billion, and, when indirect taxes are taken into account, could have raised less than nothing.
The Government have decided not to stifle the economy further and to show that we are open for business, which is why we will reduce the rate to 45p from April next year. This move to 45p, based on the central estimate of the taxable income elasticity, will cost only £100 million—a small price to pay to regain some of the international competitiveness we lost as a result of the previous Government’s decisions. In fact, when indirect taxes are taken into account, this move could even result in a positive yield.
The 50p rate not only harmed our economy and contributed little to the Exchequer, but placed us in the unwanted position of having the highest statutory rate of income tax in the G20. Our decision to lower the rate will see us drop below Australia, Germany, Japan and Canada. In 2011-12, the top 1% of taxpayers paid about 25% of income tax revenues, and for over a decade our dependence on them has grown. Owing to this considerable economic contribution to the UK, each highly mobile earner who is driven out by internationally high tax rates hits the Exchequer and results in less revenue for public services.
Opposition Members might not care when internationally mobile individuals leave, but, given our dependence on high earners, we want them working in the UK, creating wealth and paying taxes, not moving abroad or retiring early. A competitive tax environment is unambiguously in the UK’s interests, and failing to act decisively as we did would be to ignore our long-term interests, as the 50p rate continued to drive high earners out of the country.
Mr Anderson
Has any assessment been made of how many people have become highly mobile and left, how many will leave and how many will come back?
Mr Gauke
The HMRC assessment set out the impacts that had already emerged. I highlighted the number of people moving to Switzerland and so on. The assessment of the behavioural impact was that about one third to half was a consequence of reduced economic activity—either people retiring or moving outside the UK. That is a considerable impact. It is not good for the UK economy, and the sooner we take steps to address it and set out plans to get rid of the 50p rate, the better.
Andrew Bridgen
Following on from the Exchequer Secretary’s last point, has the Treasury assessed the impact that the top rate of tax was having on dissuading foreign people from coming here?
Mr Gauke
That is also included in the HMRC assessment of the consequences for economic activity. My hon. Friend raises an important point, however: it is not just about people leaving the UK, but the fact that people would not be moving to the UK, thus damaging our reputation as a business centre. I am pleased to say that under this Government we now have a competitive top rate and corporate tax system. That is why, just this week, UBM and Seadrill announced they were moving to the UK—because it is a good place to do business, and our tax system plays a part in that.
We have taken measures to ensure that high earners make a fair contribution without resorting to punitive and populist measures that damage the economy. We have raised revenues from the most well-off in society in every Budget since we came to power, creating a fairer tax system—one where those with the broadest shoulders bear the greatest burden. That has included increases in capital gains tax and stamp duty. We have also taken a tough stance on avoidance and evasion. For example, we introduced the disguised remuneration legislation in the 2011 Budget, raising £750 million a year, mainly from higher and additional rate tax payers. That is seven and a half times the amount that was being raised by 50p as compared with 45p—and by the way, the Opposition voted against it.
In the 2012 Budget we set out policies on tackling tax avoidance. All our Budgets have included firm measures to close loopholes and strengthen HMRC’s ability to deal with tax avoidance.
Mr Michael Meacher (Oldham West and Royton) (Lab)
Will the Minister give way?
Mr Meacher
If the Minister is trying to make a point about how tax loopholes are being closed, how can he possibly justify changing the controlled foreign company rules in 2013-14 to reduce the rate on multinationals with a finance company in a tax haven from the current 23% to just over 5%?
Mr Gauke
The CFC reforms are making the UK much more attractive for businesses headquartered here. The House will remember that in 2007 a number of businesses left the UK. Now some of them are returning, including UBM, which announced just two days ago that it was moving to the UK. Artificial diversion of profits is dealt with under the reformed CFC regime. The old CFC was past its sell-by date. It was unattractive and was driving businesses out of the UK. Indeed, there has been cross-party consensus on the need to reform the CFC legislation. Because of that, we are now seeing businesses moving to the UK, which I welcome.
We have taken steps to deal with tax avoidance. I would like briefly to touch on the issue of pensioners, as the shadow Chief Secretary raised it and it is touched on in the motion. The House should remember that we have seen a substantial increase in the state pension this year. Indeed, the increase has been £120 a year greater than it would have been had we stuck with the plans inherited from Labour. The abolition of the age-related allowances will not result in any cash losers. There are those who are affected by the withdrawal, but they will benefit from the largest ever cash increase in their personal allowance—a real-terms tax cut of £170. Since coming to power, we have taken steps to increase the personal allowance. That is the really big tax cut that dominated the last Budget and it is benefiting millions of people.
We have taken steps to cut fuel duty, with pump prices now 10p a litre lower than they would have been under the previous Government’s plans. We are supporting those on benefits by improving incentives to move into work and increase the number of hours they work. The introduction of universal credit will see the number of people losing more than 70% of their earnings when they move into 10 hours of work fall by 1.2 million. In addition, the single taper in universal credit will ensure that practically every household will face a marginal tax rate of less than 80% when they increase gross earnings, compared with 500,000 under the current system.
In all parts of this House we agree that those who can most afford to should contribute their fair share to the Exchequer, but those in opposition who insist that we should do that through a 50p rate that damaged our economy, sacrificed our international competitiveness and did not raise the revenues intended are making a big mistake. Those advocating a return to a 50p rate have to answer this question. Given that it will not raise any significant amount of revenue—it may even cost money—why do it? It is not about deficit reduction or economics, and it is not even about getting more from the wealthy, because there are better ways to do it; it is all about the politics. But at what cost? At a time when the UK must compete to prosper in a globalised world and when we have a choice to sink or swim, those who advocate a 50p rate are taking the easy choice—short-term populism triumphing over increased competitiveness; a traditional message of “bash the rich” prevailing over the need to attract and keep wealth creators in this country. This country’s route to success will not be through the lazy populism we have heard from Labour. Instead, we have taken steps to ensure that those with the most contribute the most, but also ensured that we have a tax system that enables us to compete on a global stage, creating a fairer tax system that still shows that the UK is open for business.
Transferable Tax Allowances
David Gauke Excerpts(11 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
It is a pleasure to serve under your chairmanship, Mr Turner.
I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing the debate, on making such a forceful, passionate and well-informed speech and on ensuring that there would be significant participation—at least among my hon. Friends. I congratulate all those who made speeches: the hon. Member for Strangford (Jim Shannon), and my hon. Friends the Members for Congleton (Fiona Bruce), for South West Bedfordshire (Andrew Selous), for Aberconwy (Guto Bebb) and for Enfield, Southgate (Mr Burrowes).
The debate has demonstrated the degree to which members of my party value commitment and how important we believe the institution of marriage to be to society. That point came across clearly, and, as has been pointed out on several occasions, the Conservative party said, in our 2010 manifesto, that we would recognise marriage and civil partnerships through the tax system. We want to send a clear message that marriage is important and commitment is valued, and that we want to encourage and support hard-working families.
In the past two and a half years, the Government have taken a lot of action to help hard-pressed families in difficult economic times, and I want to say a word or two about some of the steps we have taken before returning to the specific issue of marriage. The Chancellor has said, in his principles for good taxation, that our tax system should be fair, rewarding work and supporting aspiration, and that it should ask most from those who can most afford it. In the context that the Government inherited a difficult financial position in 2010, we have taken steps to bring Britain’s tax system into line with those principles. First and foremost, we chose to focus on tackling the deficit and promoting growth. Among other things, we have focused our efforts on reforms that are intended to ensure that work pays—that point was raised by several hon. Members—including through the introduction of universal credit and our successive increases in the personal allowance.
Given the current economic climate, it is more important than ever that we recognise the wide variety of pressures faced by working families, and we have taken action to help them. For a start, our policy on the personal allowance has helped low and middle earners by improving rewards for work and putting money in their pockets. We have said that raising the personal allowance to £10,000 is our priority for the income tax system, and we stand by that. In the June 2010 Budget, we announced a £1,000 increase in the personal allowance for those aged under 65. We talked about making real-terms steps through the rest of the Parliament to achieve our goal, and those were not idle words, because a further increase of £630 followed at the 2011 Budget. This time, the benefits were passed on to higher rate taxpayers, which meant that there was a real-terms increase of £42 for every taxpayer earning up to £115,970. We promised that we would raise the personal allowance by at least the equivalent of the retail prices index until our objective of £10,000 was reached, but both those increases were significantly above inflation, thus making a real-terms difference to hard-working people.
Those two announcements have taken the personal tax allowance from £6,475 in 2010-11 to £8,105 in 2012-13, and basic rate taxpayers have gained £210 a year in real terms. In the 2012 Budget, we went further and announced an increase of £1,100 from April 2013. That is both the largest real-terms increase in the past 30 years and the largest ever cash increase in the personal allowance. The increase will take the allowance to £9,205 from April 2013, which will provide a real-terms gain of £170 for most basic rate taxpayers in 2013-14. The £10,000 goal is now within touching distance.
Other policies, such as on cutting fuel duty, on council tax, and on keeping interest rates low, have of course helped hard-pressed families. We have provided extra funding to support family support services. The Department for Education set up a relationship support division worth £30 million over four years, which will encourage stability—the very thing that several hon. Members have raised in the debate—and provide support for couples who are experiencing difficulty in their relationship. We hope that that will help some couples to stay together, and that when that is not possible, for whatever reason, it will lessen the impact that the breakdown of parents’ relationships can have on children.
We have touched during the debate on child care. The Government have taken steps to help families with three and four-year-olds by increasing the child care support that they get in a week, as well as to extend support to 260,000 disadvantaged two-year-olds. Indeed, we are looking at what we can do to improve the affordability and accessibility of quality child care.
Universal credit has been touched on in the debate. We are reforming the benefit system to ensure that work pays. Entitlement to universal credit will be based on household income and a single payment will be made to the whole household. That will support family budgeting and ensure that there is no penalty for families, whether one parent chooses to stay at home or both choose to work. Families will be able to keep their benefits for longer before withdrawal at a single rate, which is a much needed improvement on the current system of multiple earnings disregards, as multiple withdrawal rates can leave families confused and trapped out of work.
Mr Stewart Jackson
Will the Minister disabuse the Opposition of the notion that the policy is about giving married couples an unfair tax break? It is about nudge behaviour, so that they can make a proper choice between cohabitation and marriage, which is a different thing.
Mr Gauke
My hon. Friend was right to point out that the previous Government recognised marriage in the context of inheritance tax, which is generally applicable to wealthier households, yet seemed resistant to any recognition of marriage in the tax and benefits system that would help poorer households.
Marriage and civil partnerships are about commitment and stability. They represent a firm promise to stick to something and keep working at it. We want to rectify the way our tax and benefits system relates to that. Studies have shown that married couples are less likely to split up than cohabiting couples, and stability is vital to children. An unstable home life can have a detrimental effect on their happiness and development, and that has been shown by numerous studies, some of which have been quoted today. A recent example is the “Understanding Society” survey by the Institute for Social and Economic Research, which found that parents’ happiness in their relationships had a quantifiable effect on the happiness and well-being of their children. Family is one of the most important influences on a child’s development. The family is where one learns a sense of responsibility. It is where people learn how to behave and how to treat others, and about the things that are important in life.
We are committed to finding ways to support marriage in the tax and benefits system. My hon. Friends will be aware that at the general election we set out a policy of allowing married couples and civil partners to transfer up to £750 of unused tax-free personal allowance when the recipient is a basic rate taxpayer. There is, as we have heard, a reference to that in the coalition agreement, with a statement that the Liberal Democrats can abstain on transferable allowances. None the less, the Government—from the Prime Minister downwards—have made it clear that we remain committed to recognising marriage in the tax and benefits system. I reassure hon. Members that considerable work has been done to examine ways of doing that, and we have heard various ideas about where we should focus our attention during the debate.
During difficult economic times, we want to provide real, tangible support to families. We remain committed to recognising marriage in the tax and benefits system, the case for which was powerfully made by several of my hon. Friends. Our policies have helped hard-working families. It is true that we are prioritising increasing the personal allowance, which increases the rewards for work for those on low and middle incomes, but we remain committed in the way that I have set out.
Fuel Duty
David Gauke Excerpts(11 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
We have seen this evening how what might have looked like a clever wheeze to the Opposition on Friday looks opportunistic on Monday and merely exposes their lack of credibility and consistency. That is perhaps a pity: as my right hon. Friend the Member for Wokingham (Mr Redwood) pointed out, the cost of living is an important issue.
I thank my right hon. and hon. Friends for their contributions today—and, indeed, Opposition Members. In particular, I thank my right hon. Friend the Member for Wokingham and my hon. Friends the Members for Ipswich (Ben Gummer), for Waveney (Peter Aldous), for Tamworth (Christopher Pincher), for Cleethorpes (Martin Vickers) and for Witham (Priti Patel) and, perhaps above all, my hon. Friend the Member for Harlow (Robert Halfon), who, unlike Labour, has a record of consistency on fuel duty.
Given the general sense of amnesia on the part of the Opposition, perhaps I can begin by setting out a little of the context, which was the set of policies proposed by the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), for reducing the deficit—his discretionary fiscal tightening. It was a plan seen as inadequate by the International Monetary Fund, the CBI, the Governor of the Bank of England, the credit rating agencies and, judging by the general election result, the British people. In lacking credibility, the plan ran the risk of leading to higher interest rates, and as my hon. Friend the Economic Secretary pointed out, for a mortgage of £100,000, a 1% increase in mortgage rates would lead to an additional £1,000 in mortgage payments.
What did the Darling plan not include? It did not include anything to increase the personal allowance for income tax, which under our policies has resulted in cash savings of £546 for basic-rate taxpayers, or anything on council tax. Our freeze—in contrast to the average 5% increases we saw from Labour—saved average band D households nearly £220. What was actually in the Darling plan? We had an increase in employers’ national insurance contributions—the jobs tax, which was largely reversed by us, although that does not stop Labour calling for cuts in employers’ national insurance contributions. Most pertinent for today, we also saw fuel duty increases, with a 1p increase on 1 October 2010, a further 0.76p increase on 1 January 2011 and then 1p increases in real terms on 1 April in 2011, 2012, 2013 and 2014.
The argument we have heard this evening from Labour is: “It’s all very well; we made the announcement, but we had no intention of implementing those proposals”—that is one for fiscal credibility from Labour. Alternatively, the decision has been completely ignored, so that one could have missed the fact that any scheduled increases in fuel duty are Labour’s proposed rises. Now Labour’s argument is: “We intend to save the nation from our very own policies.” It is as though the last Labour Government never existed, but unfortunately for all of us they did, and we are having to live with the consequences.
We know that high oil prices are causing real difficulties in ensuring that motoring remains affordable. We have listened to hard-pressed motorists and businesses, and we have acted. This Government have acted by easing the burden on motorists by £5.5 billion between 2011 and 2013 and by cutting fuel duty. We acted by cancelling the previous Government’s fuel duty escalator for the rest of the Parliament and by introducing a fair fuel stabiliser, so that fuel duty will increase by inflation only when oil prices are high. We acted to ensure that there will be no increase in fuel duty this year by deferring the next increase to January. That action ensures that duty at the pump will have been frozen for 21 months, and pump prices are now 10p lower than under Labour’s plans. Even following the inflation increase in January, average pump prices could still be approximately 6p a litre lower than if we had implemented the previous Government’s fuel duty escalator in 2011 and 2012. That means that a typical Ford Focus driver will be £159 better off between 2011 and 2013, and that the average haulier will benefit by approximately £4,900 during the same period.
Labour Members argue that we could do more about tax avoidance, but that ignores the fact that under the present Government yield raised by HMRC will increase by approximately 50%. It also ignores the fact that it was their party that voted against proposals to deal with disguised remuneration—a particular form of tax avoidance—which are now saving us £750 million a year. Instead, we hear about umbrella companies that are inflating workers’ travel and food expenses and reducing tax and national insurance contributions.
In an article, the shadow Chancellor—who, of course, is not here today to defend his own policies—wrote of tax avoidance:
“Ministers have failed to take tough action to stop it happening.”
What he did not mention was that the Ministers in question must have been those who consulted on the matter in 2008 and then decided not to change the law. Even four years on, the shadow Chancellor cannot stop himself briefing against the Treasury team of the right hon. Member for Edinburgh South West.
Incidentally, HMRC has strengthened compliance in this area. It has, among other things, won a large case worth £158 million. Moreover, changes in the national minimum wage scored an increase of £90 million, while protecting low-paid workers.
The fact is that it is this Government who are reinvesting money in HMRC, enabling us to secure an additional yield of £7 billion by the end of the current Parliament. It is this Government who are increasing the number of people working in compliance and enforcement in HMRC. It is this Government who are introducing a general anti-abuse rule. It is this Government who have passed legislation to deal with disguised remuneration. None of those measures was introduced by the Labour party when it had the opportunity to do so.
We have recognised the impact that high pump prices are having on motorists, families and businesses. The last Government had no credible plan to deal with the debts that they created and no credible plan to support motorists, but we have listened and responded. We have cut fuel duty, we have scrapped the fuel duty escalator, we have ensured that there will be no increase in fuel duty this year, we will have kept fuel duty frozen for 21 months, we will continue to support motorists with our fair fuel stabiliser, and we have tackled tax avoidance. We taken action not only on fuel duty, but on council tax and on income tax.
The British people know that this is a Government who, within the considerable constraints left to us by the Labour party, will take action to protect them from rising pressures and difficulties with the cost of living. The Labour party has tabled an incredible, opportunist motion. I urge the House to reject it and to support the Government’s amendment, safe in the knowledge that we will do all we can to protect the British people from the rising cost of living.
Question put (Standing Order No. 31(2)), That the original words stand part of the Question.
Anti-Avoidance
David Gauke Excerpts(11 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
The consultation on the introduction of a general anti-abuse rule closed on 14 September 2012, and the response document will be published in December. I am today announcing that the advisory panel will be established formally as a committee by the commissioners for HMRC, but HMRC will not be represented on the panel. The formal process will commence shortly to appoint a chair of the advisory panel, who will play a leading role in the appointment of other panel members during 2013. In order to put necessary arrangements in place for the consideration and approval of draft guidance, HMRC has invited Graham Aaronson QC, who led the GAAR study group, to lead an interim group of panel members to review and approve the guidance. Draft guidance will be published in December and will be approved in time for the introduction of the legislation into Parliament.
Oral Answers to Questions
David Gauke Excerpts(11 years, 6 months ago)
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Jesse Norman (Hereford and South Herefordshire) (Con)
6. What recent representations he has received from businesses on the fiscal implications of employee ownership.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government expect that the scheme will cost up to £100 million in 2017-18. The initial estimate will be refined following the Department for Business, Innovation and Skills consultation on the implementation of the new employee-owner status, which involves engagement with business and others and will close on 8 November. The annual breakdown of the estimated Exchequer cost of the policy will then be published at the autumn statement once it has been certified by the Office for Budget Responsibility.
Pauline Latham
Will the Minister update the House on the response he has had from businesses and business organisations about the new employee organisation ownership scheme?
Jesse Norman
Studies have shown that employee-owned companies grow as fast as limited companies, are more resilient and better at creating and keeping jobs, and have higher levels of staff well-being and fairer pay, which means that they are proven to create social value. As well as removing current tax incentives, will the Government consider a new capital gains tax relief for businesses sold into employee ownership?
Mr Gauke
My hon. Friend will be aware of the Nuttall review, which reported last week. The Treasury is also considering its role in helping employee ownership to support growth as well as options to remove barriers, including tax barriers. That work is being considered in the run-up to the autumn statement.
Lindsay Roy (Glenrothes) (Lab)
Does the Minister agree with the chief executive of Sainsbury’s, who said that “trading employment rights” for company shares is
“not what we should be doing”?
Mr Gauke
What Sainsbury’s does is a matter for Sainsbury’s, but I also point out the comments made by the likes of the leaders of the Federation of Small Businesses, the British Chambers of Commerce and the Institute of Directors, who have said that this measure will help entrepreneurs, start-up businesses and the fast-growing companies that we need. Surely the whole House should welcome that.
Mr Michael Meacher (Oldham West and Royton) (Lab)
Given that the Government have been keeping extremely mum about the tax avoidance implications of the scheme and that it looks like a wide-open tax loophole for the better off, what capital gains tax avoidance does he estimate it will create?
Mr Gauke
In the design of the scheme we will take steps to deal with tax avoidance opportunities to ensure that we do not create any loopholes, but this is a scheme that will encourage entrepreneurs and start-ups to provide businesses with an opportunity to expand rapidly, and it is exactly the sort of flexible approach that this country needs in the current economic climate.
Sir Nick Harvey (North Devon) (LD)
Will the Minister clarify the status of the idea of trading employee rights for share ownership? It has been described as a voluntary scheme, but does the Minister accept that it will swiftly become a de facto compulsory scheme? What level of employee shareholding is anticipated? The media have speculated that it could range from 2,000 from 50,000. It might be acceptable at 50,000, but it would be very different at 2,000.
Mr Gauke
There will be a range of options—the minimum is 2,000, and the maximum is 50,000—but this is not going to be a matter that is compulsory. It will not be the right answer for every business, but there are some businesses that need flexibility to find employee status somewhere between a full employee and someone who is self-employed such as a partner, as many hundreds of thousands of people are. I think that it is a sensible, pragmatic response.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
5. What the level of public sector net borrowing was in the (a) first six months of 2012-13 and (b) equivalent period in 2011-12.
Glyn Davies (Montgomeryshire) (Con)
14. What fiscal steps he has taken to reduce the cost of living.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government have taken wide-ranging action to support households. We cut fuel duty last year and have kept it frozen since then. We have also helped those in work by raising the personal allowance by £1,100 in April 2013—the largest tax cut for the median earner in more than a decade. The Government recently announced another year of a council tax freeze and a reduction of the rail fare cap for two further years.
Glyn Davies
A major factor in the costs facing families across the United Kingdom is the rapidly increasing cost of energy. Does my hon. Friend agree that Governments have a responsibility to limit such increases as far as possible, including the costs to energy users of paying for the unsustainably large subsidies paid to onshore wind farm developers?
Mr Gauke
My hon. Friend is right to raise the issue of energy prices. The Government are doing what they can on that front. We are supporting Ofgem’s work in ensuring that there is competition in the energy markets, and of course we are determined to do what we can to get people on lower tariffs.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Does the Minister accept that the Government’s increase in VAT has led to 5p on a pint of beer and 3p on a litre of fuel?
Mr Gauke
We have to take action to try to deal with the deficit that we inherited, and let us not forget that. The hon. Gentleman mentions fuel. Because of the steps that we have taken on fuel duty, petrol pump prices could be as much as 10p lower per litre than they would have been had we stuck with the fuel duty escalator that we inherited.
Andrea Leadsom (South Northamptonshire) (Con)
16. What recent steps he has taken to reform banking and to redirect banking fines to the public purse.
Bob Blackman (Harrow East) (Con)
17. What recent steps he has taken to tackle tax evasion and reduce tax avoidance.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government are investing over £900 million in strengthening Her Majesty’s Revenue and Customs’ response to evasion and avoidance and are on course to bring in around £7 billion in additional tax each year by 2014-15. HMRC is increasing the number of staff working on compliance and using innovative approaches to improve how it identifies and tackles evasion. The Government will soon introduce the UK’s first general anti-abuse rule while also strengthening avoidance disclosure rules and publicity.
Bob Blackman
I am a strong supporter of lowering direct tax rates on individuals and companies, but hard-working families in my constituency want to know that companies and high-worth individuals are paying their fair share of tax. What is my hon. Friend doing to ensure that individuals and companies pay their fair share of tax rather than avoid it?
Mr Gauke
My hon. Friend is absolutely right. That is why we are taking action to strengthen HMRC’s compliance capability, why we are introducing a general anti-abuse rule, why we want to ensure that everyone pays their fair share of tax, and why the Chancellor made it clear yesterday in Mexico that we are working at an international level to ensure that the system that applies to multinational companies does just that.
Kelvin Hopkins (Luton North) (Lab)
The Minister talks—it might be wishful thinking—about bringing in an extra £7 billion a year, but the tax gap is at least £120 billion a year, and some people think it is more. Is it not time that the Government took chasing billionaire tax dodgers more seriously and stopped cutting public spending and squeezing the poor?
Stephen Williams (Bristol West) (LD)
The Minister will be well aware of the anger of many of our constituents about the activities of companies such as Starbucks and Amazon to minimise their tax rates through aggressive tax avoidance. Is not part of the answer more international co-operation, perhaps among OECD countries, to restrict the ability of those multinationals to siphon off profitable activities into low tax havens?
Mr Gauke
My hon. Friend is right to point out that we need to be vigilant about aggressive tax avoidance and the diversion of profits from where genuine economic activity occurs. That is why the Chancellor of the Exchequer is leading the way on that, working with the German Finance Minister, and why we had the announcement from Mexico yesterday that the G20 is focusing on that and encouraging the OECD to progress its work so that we can deal with this as soon as possible.
Mr George Mudie (Leeds East) (Lab)
18. What estimate he has made of the level of economic growth since the October 2010 spending review.
Mr Adrian Sanders (Torbay) (LD)
20. What his policy is on taxation on unearned wealth; and if he will make a statement.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government are committed to a fair tax system in which those with the most contribute the most. The UK’s tax system is a progressive one, and wealthy individuals make a substantial contribution to the Exchequer. The Government have increased that contribution in a number of ways since the election.
Mr Sanders
Social mobility for younger people in Torbay is often curtailed by inequality not of income but of wealth, meaning that far too many will never be able to buy their own homes. Will he redress that imbalance by taxing unearned income as much as we tax the wages of the vast majority of my constituents?
Mr Gauke
The Government have increased stamp duty land tax on the most valuable properties. We have also increased the rate of capital gains tax. It is a question of balancing that with practicalities; we think that some of the proposals in this area may have a number of practical difficulties. But we have taken action on some of the taxes that have increased the burden on the wealthiest.
Mr William Bain (Glasgow North East) (Lab)
21. What recent assessment he has made of the effect on economic growth of the level of bank lending to businesses.
Lilian Greenwood (Nottingham South) (Lab)
T3. Instead of insulting hard-working parents and calling them “fiscal nimbys”, will the Minister explain how it is fair that a couple earning up to £100,000 a year will keep all their child benefit, while a one-earner family on £50,000 will see theirs cut?
The Exchequer Secretary to the Treasury (Mr David Gauke)
We looked at introducing this measure on the basis of household income, but it would mean bringing 8 million households into the tax credit system and impose a much greater administrative burden on many people. At least Labour Members are consistent: they have opposed every measure to try to reduce the welfare budget, whether it be the welfare cut or child benefit for higher earners. It is time for us all to look at public spending in that area and bring it under control, but the Labour party will simply not do that.
Karl MᶜCartney (Lincoln) (Con)
T10. In the light of a recent report by the Centre for Economics and Business Research, which suggests that UK growth will outstrip many of our European neighbours in 2013 and 2014, will my right hon. Friend assure the House that the Government will continue to deal with the UK’s structural deficit? That deficit started to emerge before 2008, despite repeated protestations to the contrary by the shadow Chancellor.
Mr Andrew Love (Edmonton) (Lab/Co-op)
T4. What is the Minister going to do about all those multinational companies that are paying little or no tax? Her Majesty’s Revenue and Customs claims that it is powerless because those companies are gaming the system. Instead of pious statements issued from Mexico about what we might or might not do, may we have some action from the Minister? He could start by increasing from 65 the number of tax experts who actually deal with this problem.
Mr Gauke
Anyone would think that there was a completely different arrangement in 2010, but I am afraid that is not the case. The Government are working at an international level to ensure that multinationals pay the tax that is due, and that profits on their economic activity is paid where it occurs. We are also strengthening HMRC’s capacity in that area and giving it greater skills to tackle the issue. I would have thought the Labour party welcomed the progress we are making when compared with the lack of progress under the previous Government.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Does my right hon. Friend agree that one way to stimulate additional growth is through better use of the prompt payment code? Will he join me in calling on businesses and public sector organisations to adopt that code and adhere to it?
Nigel Mills (Amber Valley) (Con)
The Government have seen the benefits that transparency can bring. Would it be good to require large corporates to publish their tax returns so that we can all see how they achieve the low rates of tax they pay?
Mr Gauke
It is right that large corporates engage in this debate, and there is a lot of public interest in the matter. One must ask whether tax returns in themselves will provide the full information—my hon. Friend has great expertise in this area—and whether that is the right way to address the issue. We have a tradition of taxpayer confidentiality in this country, as does every major economy.
Robert Flello (Stoke-on-Trent South) (Lab)
T8. Will those on the Treasury Bench tell us the expected cost to HMRC in, for example, extra staffing and IT support of dealing with the massive number of extra self-assessment returns—it is estimated at around 500,000—that will result from child benefit changes?
Mr Gauke
The cost of implementation of the child benefit policy will be £100 million over five years, but it will bring in £1.7 billion in the first year. I should also point out that the likelihood is that the number of people in self-assessment next year will be no higher than the number in self-assessment last year.
David Rutley (Macclesfield) (Con)
Will my hon. Friend tell the House what steps he is taking better to support small and medium-sized enterprises through the tax system?
Mr Gauke
We have taken a number of measures, including reducing the small profits rate from 22%, which it would have been, to 20%. We have also introduced measures such as seed enterprise investment schemes and small business rate relief. We have taken such measures because we recognise that small businesses will be an engine for growth for our economy and in employment.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
T9. The Prime Minister has said that a family with children will lose an average of £511 under the Government’s changes this year alone. Is that fair when the Government are cutting taxes for the most wealthy?
Double Taxation Convention
David Gauke Excerpts(11 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
A protocol amending the double taxation convention with India was signed on 30 October 2012. The text of the protocol has been deposited in the Libraries of both Houses and will be made available on HM Revenue and Customs’ website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.