ECOFIN: 25 May 2016
David Gauke Excerpts(7 years, 12 months ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
A meeting of the Economic and Financial Affairs Council will be held in Brussels on 25 May 2016. EU Finance Ministers are due to discuss the following items:
Anti-tax avoidance package
The presidency will seek a Council general approach on a compromise text relating to the anti-tax avoidance directive.
Current legislative proposals
The presidency will update the Council on the state of play of financial services dossiers.
State of play of the banking union
The Commission will give an update on several dossiers linked to the banking union: the single resolution fund, the bank recovery and resolution directive and the deposit guarantee scheme directive.
VAT action plan
The Council will exchange views and aim to agree draft Council conclusions relating to the Commission’s VAT action plan, published 7 April, and a European Court of Auditors special report.
European semester
Following preparation by the Economic and Financial Committee, the Council will adopt conclusions on the 2016 in-depth reviews of macroeconomic imbalances and the implementation of the 2015 country specific recommendations.
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UK Economy: Post-Referendum Assessment
David Gauke Excerpts(8 years ago)
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Mr Bernard Jenkin (Harwich and North Essex) (Con)
(Urgent Question:) To ask the Chancellor of the Exchequer to set out his latest assessment of the UK economy following the result of the EU referendum, which he has published today; and if he will make a statement.
The Financial Secretary to the Treasury (Mr David Gauke)
Last month, the Treasury published a detailed report on the long-term impact of EU membership on our economy. Today, the Treasury has published a full assessment of the immediate impact of leaving the EU. It provides yet further evidence to support the Government’s firm belief that it is in Britain’s best interest to remain in the European Union. The analysis makes it clear that a vote to leave would cause a profound economic shock, creating instability and uncertainty that would only be compounded by the complex and interdependent negotiations that would follow. The central conclusion of the analysis is that the effect of this profound shock would be to push the UK into recession and lead to a sharp rise in unemployment.
Two scenarios have been modelled to provide analysis of the adverse impact on the economy: a shock, and a severe shock. In the shock scenario, a vote to leave would result in a year-long recession, a spike in inflation and a rise in unemployment. After two years, our economy would be about 3.6% smaller than if we remain a member. The value of the pound would fall by about 12%, house prices would sink by about 10% and unemployment would rise by about half a million, affecting people in all regions of the United Kingdom.
Under the severe shock scenario, the effects would be even starker, with GDP 6% lower than it would otherwise be, a fall of 15% in the value of sterling and unemployment up by more than 800,000. If negotiations with the EU were to take longer than two years to conclude, or if the outcome were to be less favourable than expected, the UK economy could be subject to further instability, which would depress UK economic prospects further. That would undermine the hard work of the British people in forging an economic recovery since the crash of 2008.
As I set out at the start, today’s paper forms part of the case that the Government are making that Britain will be stronger, safer and better off if we stay in the European Union. It is based on serious, evidence-based analysis, and I commend it to the House.
Several hon. Members rose—
Mr Jenkin
I reflect on the fact that obesity was rather less of a crisis for the House this afternoon than I imagined it would be, Mr Speaker.
May I first say to the Minister that we all know that these forecasts are just rubbish being produced by a Government who are now obsessed with producing propaganda to try to get their way in the vote rather than enlightening the public? Has this report been signed off by the same Professor Sir Charles Bean who has previously said that models of economic shocks are based on “gross simplifications”? Will the Minister confirm that the so-called shock scenario suggests nothing more serious than that the economy will remain the same size as it was just last year? Does that not demonstrate how Ministers have become preoccupied with dishonestly talking down Britain’s economic prospects, which is highly irresponsible?
Why do the Government not agree with the chair of the remain campaign, Lord Rose? He has been reassuring in saying:
“Nothing is going to happen if we come out of Europe in the first five years…There will be absolutely no change.”
What about my right hon. Friend the Business Secretary? He said in February last year:
“As I’ve said before, a vote to leave the EU is not something I’m afraid of. I’d embrace the opportunities such a move would create and I have no doubt that, after leaving, Britain would be able to secure trade agreements not just with the EU, but with many others too”.
What does the Minister say in response to his Conservative predecessor, my noble Friend Lord Lamont? He said this morning:
“A lot of the Government’s so-called forecast depends on business confidence, which the Government is doing its best to undermine. Economists are no better than anyone else in predicting shifts in confidence…We have nothing to fear but fear itself—which the Government is doing its best to stir up.”
The Government say that wages will fall, so why did Lord Rose tell the Treasury Committee that wages would rise if we left the EU? Is this report produced by the same Treasury that failed to foresee the banking crisis and the great recession that followed?
Why do none of the Government’s post-referendum economic assessments look at the risks of remaining in the EU? Given that in 2014 the UK contributed £10 billion net to support other, failing EU economies rather than our voters’ own priorities, what effect will the continuing collapse of the eurozone economies have on the EU budget as a whole, and particularly on the UK’s net contribution?
Does not the Government’s entire campaign reinforce the unfortunate impression that today’s political leaders will say anything they think will help them get what they want, whether it is true or not? Does the Minister not realise that my right hon. Friends the Chancellor and the Prime Minister are contributing to cynicism about politics and a sense that voters should not trust their rulers but should make their own choice and judgment, which is why they will vote leave on 23 June?
Mr Gauke
The economy is a key issue in the debate and in the choice that the British people will make on 23 June. Today’s analysis is an attempt to assist the British people in making an informed decision, based on the likely consequences of the United Kingdom leaving the European Union. Indeed, many supporters of the leave campaign have been prepared to acknowledge that leaving the EU would at the very least have a short-term impact on our economy and create a shock.
As my hon. Friend said, the analysis produced by the Treasury has been signed off by Sir Charles Bean, the former Deputy Governor of the Bank of England and a distinguished macroeconomist. He said that
“this comprehensive analysis by HM Treasury, which employs best-practice techniques, provides reasonable estimates of the likely size of the short-term impact of a vote to leave on the UK economy.”
It is not only the UK Government who are highlighting the risks of leaving the European Union; the International Monetary Fund, the OECD, the leadership of pretty much every ally we have, business groups, and many respected independent economists have all made it clear that this country would lose out from leaving the EU. However one looks at this debate, we cannot get away from that central fact.
Rob Marris (Wolverhampton South West) (Lab)
Unusually, perhaps, I find myself agreeing with a great deal of what the Minister has said. The hon. Member for Harwich and North Essex (Mr Jenkin) tried to rubbish the report and referred to trade agreements. If we were to leave the European Union, we would have to negotiate in very short order trade relationships with the rest of the world, including more than 50 other countries. Rome was not built in a day, and there would be huge uncertainty. As he will know—and as I know from having been in business—one key concern of business is always uncertainty.
At the moment, our economy is in great shape in terms of jobs, but on almost any other indicator—productivity, balance of payments, the housing crisis, investment in infrastructure, and the national debt, which has risen by two-thirds in the past six years—the economy already has red lights flashing, as almost every economist has said. Were we to leave the European Union, that would become considerably worse. I welcome the fact that the Prime Minister and the Chancellor of the Exchequer now recognise that the large majority of the problems we faced in 2008 and onwards were caused not by a Labour Government, but by a world recession. We now need not a Tory Brexit, but an economy that is strong and will remain stronger if we stay in the European Union, but that still needs considerable changes, particularly in investment in infrastructure and skills. Our security, both economic and military, will be strengthened if we remain within the European Union. We should build on a strong economy by investing, not by leaving the European Union.
Mr Gauke
The hon. Gentleman’s point about uncertainty is right, and there is clearly uncertainty in the economy at the moment as a consequence of the referendum on Brexit. It is absolutely right that we have that referendum, but such uncertainty can resolve itself quickly on 23 June if there is a remain vote. If there is a leave vote, we clearly face at least two years of uncertainty, and quite possibly longer.
On the state of the economy—this is perhaps where the hon. Gentleman and I may differ—we have taken steps to address the long-term challenges faced by the economy, but there is no doubt that the past few years have been difficult for the British economy. We are now one of the fastest-growing major economies in the world, and our progress over the past six years would be put at risk were we to vote to leave the European Union.
Dr Liam Fox (North Somerset) (Con)
I am sorry that my hon. Friend has had to come to the House to defend this disreputable, shabby and misleading report. The last Treasury report set out three scenarios, including membership of the European economic area. Why was that left out of this report, and was the permanent secretary in agreement with that major departure from normal procedure?
Mr Gauke
As I understand it, the leave campaign have made it clear that they would not want to go down the Norway route and be members of the EEA, because that would require continued contributions to the EU budget, continued compliance with EU regulations, and continuing to be signed up to free movement of labour. Given that the leave campaign is now focused almost exclusively on immigration, it would be strange to suggest that one option to take would be one that has been dismissed by the campaign to leave the European Union.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
Here we go again. The Government seem determined to recycle “Project Fear”, based on Treasury projections invented on the back of its now famous neo-classical fag packet. If all the Government have to offer is fear, they do the cause of the EU no favours. There are many positive reasons for staying in the EU. Why is there no analysis of the emerging trading opportunities for business; why is there no analysis of the value of appropriate immigration to the labour market; and why is there not more respect for those of us who want to make a positive case for the EU?
Mr Gauke
If the hon. Gentleman wants a positive case, let us put it this way: according to the shock scenario we have set out, in two years’ time, the UK economy will be 3.6% bigger if we stay in the EU than it will be if we leave. He criticises and wants to re-fight the Scottish independence referendum. May I just remind him—I suspect it will not be for the last time—that the Unionists won that referendum?
John Redwood (Wokingham) (Con)
Why does the forecast leave out the very beneficial impact of spending another £10 billion, which we would get back in contributions, on our own priorities, jobs and services, which would boost the economy by 0.6%? Why does it leave out the impact of the lower interest rates and the big injection of liquidity that the Bank of England says it will grant the economy around the time of the vote?
Mr Gauke
First, the report is for the next two years. As my right hon. Friend will be aware, even if we vote to the leave the European Union, we will continue to be members of it for those two years as we negotiate our departure. During that two-year period, we would continue to make contributions to the EU budget. May I also point out what the International Monetary Fund has said? It said that, essentially, if the economy shrinks by 1% or more, any fiscal gain from ceasing to make contributions to the EU will be wiped out by lower tax receipts and greater costs. Indeed, under the central scenario set out in the report, the public finances will be £24 billion worse off as a consequence of our leaving the EU.
On interest rates, the assumption in the report is for no changes to fiscal or monetary policy. I point out to my right hon. Friend that one of the predictions in the report is that we would see the pound falling in value and inflation increasing. The Monetary Policy Committee has made it clear that it would have a difficult trade-off to try to get the economy going at a time when there would clearly be a slowdown. At the same time, the pound would be falling and inflation would be rising. In those circumstances, the safest thing to do is to make no assumptions on what monetary policy would be.
Diana Johnson (Kingston upon Hull North) (Lab)
Has any assessment been made of the impact if we leave the EU on 23 June on companies such as Siemens, which invest in new industries in this country such as renewables?
Mr Gauke
The hon. Lady’s point is particularly significant because of the long-term impacts. It is very clear to any of us who engage with those who invest in the UK—businesses that make decisions on where to locate investment—that access to the single market is an important attribute for the UK. It is clear within the report that business investment would fall significantly in both the short and long term as a consequence of leaving the EU.
Sir Gerald Howarth (Aldershot) (Con)
Leaving aside the Treasury’s notorious incompetence at forecasting, does my hon. Friend—for whom I have a lot of time, normally—not agree that this document really does plumb new depths in “Project Fear”? The Government are trying to scare the public witless. If the consequences are so dire, why on earth did the Prime Minister say on record that Britain could prosper perfectly well outside the EU? Why do the Government, through this report, say:
“as our economy transitions to a worse trading arrangement with the EU.”?
Does my hon. Friend not accept that that is utterly dishonest? The Europeans export £72 billion more to us than we export to them, so it will be in their interests to do a deal with us. And we will have a Government far more capable of negotiating than the present Government have been able to do.
Mr Gauke
First of all, may I say that I have an awful lot of time for my hon. Friend normally, but that I disagree with the points he makes? On trading arrangements, it is impossible to see how we could negotiate a trading arrangement as strong as the one we have at the moment. Access to the single market and its benefits, particularly in the context of non-tariff barriers, is very important. We would undoubtedly be a less open economy as a consequence of leaving the EU.
On the report and trying to scare people, it is worth pointing out the Treasury’s assumptions and what the Treasury is not suggesting is underlying what will happen. We are not putting forward a view that there will be an immediate financial crisis—for example, a current account crisis. We are saying that we can reach a deal within two years, which, I have to say, is ambitious. We are not saying, under the shock scenario, that there would be any economic contagion as a consequence of the UK leaving the European Union. If we wanted to put a much more dramatic, scary report together, there are a number of things we could have included in the report, but simply did not. This was a cautious, careful, small “c” conservative report, which, as I say, has been signed off by perhaps the leading authority in this area in this country.
Mr Dennis Skinner (Bolsover) (Lab)
Isn’t the premise that the Treasury spokesman is trying to convince people of the one that the economy under this Government is doing exceptionally well? In reality, of the many people who have a job, several million are on zero-hours contracts and do not know which way to turn. A hell of a lot of people are now borrowing money on loans they cannot afford and many people are going to food banks to make ends meet each week. The whole idea the Treasury announcement is trying to convey is that everything in the garden is lovely but that that will all be thrown away if we do something else. The truth is that it is based on a phony premise.
Mr Gauke
The hon. Gentleman and I differ in our assessment of the state of the UK economy, but whether he takes his view or I take mine, in neither case would our economy and our constituents benefit from pursuing a policy that would increase unemployment by 500,000 and see average wages fall by nearly £800. I hope he considers the impact that leaving the European Union would have on his constituents.
Jeremy Lefroy (Stafford) (Con)
A 3.6% higher GDP, lower unemployment, lower inflation and a better exchange rate—surely these are things to celebrate? May we have the argument made that these are good things that will happen if we remain in the EU, rather than the other way around?
Mr Gauke
My hon. Friend makes a good point. Let me put it this way: the UK benefits from being an open trading nation. Membership of the single market helps us to pursue the approach of having an open trading economy. That is a very positive thing, one I hope the British people will ensure we continue to have.
Tom Brake (Carshalton and Wallington) (LD)
Is the Minister as concerned as I am that the leave campaign dismisses as a conspiracy the views of the Treasury, the International Monetary Fund, the World Bank, the OECD, the CBI, the Bank of England, the Office for Budget Responsibility and the London School of Economics? Does he hope that in June people will vote with their hearts and their heads to stay in the EU, which, with NATO, has provided peace and prosperity for the longest period since antiquity, according to the outgoing London Mayor?
Mr Gauke
Actually, I think I have seen it—the right hon. Gentleman reminds me.
There is an overwhelming consensus on the economic benefits of membership of the EU, and I hope that the British people, when they make their assessment, be it with their hearts or their heads, carefully consider the economic consequences of their decision. It is a very important decision that will have an impact not just for a year or two—the focus of this report—but for many years ahead.
Mark Pawsey (Rugby) (Con)
Is not the simple fact that countries trade with one another to increase their mutual prosperity and that trade with our principal trading partners is easier as a member of the EU?
Kelvin Hopkins (Luton North) (Lab)
The institutions and individuals forecasting economic doom if we leave the EU have got it wrong time and again in the past and seem likely to do so again. The exchange rate mechanism debacle, driven by the whole Europhile spectrum; the prediction that the skies would fall in if we did not join the euro; and the complete failure to foresee the 2008 crisis coming down the road—all this shows just how hopeless they are. Does the Minister accept that a plausible opposite case—that we would be better off outside the EU—can easily be made? If not, I will happily provide him with one.
Mr Gauke
I look forward to hearing that plausible case when it is made. I look forward to an analysis, supported by leading economists, making that case, but we have not heard it yet. The hon. Gentleman and I agree about our membership of the euro—we always have done—but if we were to single out two politicians in this country perhaps more responsible than anyone else for keeping us outside the euro, I would highlight, from my party, William Hague and, from his party, Gordon Brown, both of whom believe we should remain in the EU.
Mr John Baron (Basildon and Billericay) (Con)
“Project Fear” has reached new lows. Following the predictions of world war, we now have a forecast of recession equal to that of the great depression should we leave. Does the Minister accept that the Treasury got it absolutely wrong when it forecast an economic shock if we left the ERM and that the Treasury, the OECD, the IMF and even the Bank of England did not see the last recession coming?
Mr Gauke
The Treasury—indeed, some of the same civil servants—was involved in making the assessment of the five economic tests that kept us out of the euro. I suggest that my hon. Friend looks carefully at the report. We do not make any claims of the sort he suggests—about it being the greatest depression since the great depression of 1929—but suggest that the “shock” scenario involves the economy shrinking by 3.6% compared with the base, which is the forecast for the next few years. This is actually a very measured, conservative assessment of the impact, but none the less there would be an impact and it would result in 500,000 more people being unemployed than need be the case.
Chris Leslie (Nottingham East) (Lab/Co-op)
When does the Minister think that those advocating leaving the EU will level with the British public and provide their own economic assessment? Half of them think we can leave the EU and stay in the single market and the other half say, “Oh no, we won’t be part of the single market at all.” Is it not useful, therefore, that today’s analysis gives a snapshot of what a “severe shock” would look like if we were still in the single market? Will he also say a bit more about the “severe shock” analysis—falling back on the WTO membership rules—and how it could lead to 800,000 more people becoming unemployed?
Mr Gauke
The hon. Gentleman is right that under the more severe shock scenario, unemployment would increase by 800,000 and GDP would be 6% lower than it would otherwise have been. These are significant numbers. They are not equivalent to the great depression, but they are still significant numbers that would have a significant effect on his and my constituents. The hon. Gentleman raises an important point, and I hope we will get greater clarity about exactly what leaving the EU would involve. It seems to me that there is a clear trade-off: the closer a country is to membership of the EU, as for example with the European economic area model, the more it will continue to have the attributes of EU membership; the further away it is, it may have that greater freedom and flexibility, but it will clearly face a much bigger economic shock.
Mr Robin Walker (Worcester) (Con)
Inward investment is crucial to this analysis, and my constituency attracts it from China, Australia and the United States as well as from Japan. One crucial factor that has led me to believe that we are stronger in is the fact that all those countries and their businesses want to see us as part of Europe. Indeed, some of those inward investments are European headquarters. What estimate has the Treasury made of the potential relief rally in investment in this country, as and when we choose to stay in?
Mr Gauke
That is an important point. Anyone who has met international investors who are considering where to locate their European headquarters, for example, will be aware that they value and support membership of the European Union. Without that, it would clearly be harder to attract some of that inward investment. My hon. Friend also raises an important point about whether we would see a recovery. Evidence suggests that there has been a slowing down of investment due to the uncertainty about our relationship with the EU, but that—the Bank of England has supported this view, if not the IMF—there is likely to be a reasonably quick recovery if we vote to remain on 23 June, and we would see the investment coming back without a long-term detrimental impact.
Ian Mearns (Gateshead) (Lab)
The north-east is a manufacturing region, and recent analysis suggests that manufacturing is already in recession. Does the Treasury analysis go into the detail of distinctive regional impacts on areas such as the north-east of the shock or severe shock scenarios if we leave the EU? It used to be said that if America sneezes, Britain catches cold, but when Britain catches cold, regions such as the north-east get pneumonia.
Mr Gauke
The hon. Gentleman raises an important point. The increase in unemployment would affect every region of the UK, and the north-east of England would not be immune to that. Indeed, as an important exporting region, it might be particularly vulnerable. The Treasury assessment suggests that there would be something like 20,000 more unemployed people in the north-east of England as a consequence of leaving the EU.
Philip Davies (Shipley) (Con)
When the Chancellor set up the Office for Budget Responsibility, he said that
“the public and the markets have completely lost confidence in government economic forecasts.”
He went on to say:
“Again and again, the temptation to fiddle the figures, to nudge up a growth forecast here or reduce a borrowing number there to make the numbers add up has proved too great… But I am the first Chancellor to remove the temptation to fiddle the figures by giving up control over the economic and fiscal forecast.”
Why does the Minister now disagree with the Chancellor, and why does the Chancellor now disagree with himself?
Mr Gauke
The remit of the Office for Budget Responsibility is set out in legislation, and it can set out forecasts only in accordance with Government policy. Today’s report, however, as I said earlier, has been signed off by Sir Charles Bean, who said that
“this comprehensive analysis by HM Treasury, which employs best-practice techniques, provides reasonable estimates of the likely size of the short-term impact of a vote to leave on the UK economy.”
We have third parties endorsing the analysis, having worked through the details.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
Is it not the truth that this report simply echoes the concerns about the adverse impact of Brexit that have already been expressed by businesses in all our constituencies up and down the land? They include the ceramics industry in my area, representing manufacturing, and in recent days our biggest local private sector employer, Bet365, representing international services. Yesterday, The Sunday Times set out in detail the fundamental concerns of London’s vitally important financial and professional services industries. Does the Minister agree, therefore, that all the evidence not only suggests, but shows, that there is absolutely no economic rationale for the United Kingdom’s leaving the European Union?
Mr Gauke
The hon. Gentleman has made a good point. The analysis that we have set out in our document is consistent with what businesses up and down the country are telling us: every business survey has indicated that they are in favour of our remaining part of the European Union. It is also consistent, as we have heard, with the view of the likes of the International Monetary Fund, the OECD and the Bank of England, all of which have highlighted the risks of our leaving the EU.
Mr David Nuttall (Bury North) (Con)
Given that the independent think-tank Open Europe, which is not taking sides in the referendum debate, has said that it is a mistake to think that short-term forecasts are inevitably more accurate than long-term forecasts, can the Minister tell us, in percentage terms, what the chances are of these forecasts actually being true?
Wes Streeting (Ilford North) (Lab)
It is not just the Government who are warning of the economic risks of Brexit, along with the OECD, the IMF, the World Bank, and every other mainstream economic voice in this debate. The former Mayor of London’s former economic adviser himself warned of an economic shock in the wake of Brexit. Does the Minister agree, however, that it is not Project Fear that the other side are complaining about, but Project Fact? Does he agree that the leave campaign argument would be a great deal stronger if those campaigners had produced a single shred of credible evidence to demonstrate that Britain would be better off out, when the mainstream economic opinion in this country and around the world is that our economy is stronger through our remaining in the European Union?
Mr Gauke
The hon. Gentleman is absolutely right: mainstream opinion does support the United Kingdom’s being part of the European Union. I should be fascinated to read a report similar to ours arguing the other case. We produced our long-term report last month, and I look forward to receiving a proper, detailed response to it. I think that the reason no analysis of that kind has yet been produced is that there is insufficient support for such a view, and I hope that that will become more and more apparent over the next month.
Martin Vickers (Cleethorpes) (Con)
Each year we have a Budget statement and an autumn statement in which the Chancellor corrects the forecasts in the previous statement. Will the Minister assure us that, after we vote for Brexit, the Chancellor will come to the House regularly to correct the forecasts contained in this document?
Mr Gauke
This scenario has been set out by means of perfectly normal, widely used techniques, and signed off by the leading economist in the field. We have made a number of assumptions that have been cautious, and have in no way sought to exaggerate the risks. I have to say to my hon. Friend that there is a real risk to the UK economy. This is not fearmongering, or scaremongering; it is simply setting out what the risks are to the British people—matters of which the British people should be aware when they vote on 23 June.
Ronnie Cowan (Inverclyde) (SNP)
Much as I am enjoying the Punch and Judy show in the Conservative party, may I remind the Minister that if both leave and remain continue to run negative campaigns, the most negative campaign will win? At a time when we should be engaging with the electorate of the United Kingdom, they will be turning off in their droves, and that does not serve democracy well.
Mr Gauke
What we are doing is making clear what the risks to the British people would be were we to leave the European Union. All I would say to SNP Members is that if they have a positive contribution to help the remain case, let them make it, rather than lecturing others on how to put across important factors that will, I hope, sway the British people. The British public are seeking information on the consequences of leaving the European Union, and the Government have a duty to provide that information.
Keith Vaz (Leicester East) (Lab)
It is right that we should deal with scare stories as quickly as possible, and I think that the Minister has done a very good job in that regard. Will he comment on the remarks made by the Minister for Employment in Leicester last Thursday, when she parked a very big red bus in front of the biggest temple in my constituency and announced that if we stayed in the European Union all the curry houses in Leicester would have to close down because the EU was responsible for a crisis in chefs? Will he confirm that the issuing of visas is actually a matter for the UK Government and has nothing to do with the EU? Will he also confirm that if the British people vote to stay in the EU, we will still be able to eat curry in Leicester, but if they vote to go out, Leicester City will still play in the European Champions League?
Mr Gauke
I shall try not to be drawn too much on the subjects of curry or Leicester City, although I of course congratulate Leicester City and look forward to their season, and possibly more, in the Champions League. Immigration policy for those outside the European Union is clearly a matter for this Government and for this House, and that will continue to be the case, whatever the result on 23 June.
Mr David Hanson (Delyn) (Lab)
Airbus, which employs 7,000 people across north Wales and north-west England and many thousands more elsewhere in the United Kingdom, has, with the full support of the trade unions, written to every employee of Airbus to explain to them why they should vote yes in the forthcoming referendum. Will the Minister confirm that the short-term and long-term risks outlined in today’s report are the very reason that companies such as Airbus have come off the fence to strongly support a yes vote on 23 June?
Mr Gauke
The right hon. Gentleman makes a good point. Businesses are perfectly entitled to write to their employees when they see a risk to the business that they undertake, and those consequences should be made very clear. It is striking how the concerns of individual businesses, big and small, about the consequences of leaving the European Union are consistent with some of the concerns that we have set out in the Treasury document—namely, that the UK would be poorer outside the European Union and that we are stronger, safer and better off within it.
ECOFIN
David Gauke Excerpts(8 years ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr David Gauke)
An informal meeting of the Economic and Financial Affairs Council was held in Amsterdam on 22-23 April 2016. EU Finance Ministers discussed the following items:
EU budget
Following an introduction from Commission Vice-President Kristalina Georgieva, Ministers discussed challenges for the EU budget, caused by unforeseen events.
Strengthening the banking union
Views were exchanged between Ministers and Central Bank governors on the regulatory treatment of banks’ sovereign debt on the basis of a presidency note and a draft report from the high-level working group.
Panama Papers
The European Commission gave a policy reaction outlining measures being taken to tackle tax avoidance. The UK, along with France, Germany, Italy and Spain, launched an initiative on the automatic exchange of beneficial ownership information in April and wrote a G5 letter to EU member states asking them to join the initiative. As a result of UK leadership all EU Finance Ministers have now agreed to enter into the project which will see tax authorities and law enforcements agencies automatically share information on who really owns and controls companies.
Sustainable finance
On the basis of a presidency paper, Ministers and Central Bank governors discussed ways in which the transition to a sustainable economy could be financed and ways in which transparency could be improved.
Stability and growth pact
Ministers discussed a number of options to make the stability and growth pact simpler and more transparent including whether more work should be done exploring the use of the expenditure benchmark and the medium-term orientation of the fiscal framework.
VAT fraud
In the final session, the Commission and presidency led a discussion in relation to VAT fraud following the publication of the VAT action plan on 7 April. In particular, Finance Ministers looked at steps that could be taken to improve co-operation between member states’ tax, customs and judicial authorities.
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HMRC Office Closure (Walsall)
David Gauke Excerpts(8 years ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
May I begin by congratulating the hon. Member for Walsall South (Valerie Vaz) on securing the debate? I welcome the opportunity to discuss HMRC’s proposals and, I hope, to address some of the points she raised.
Before doing so, it is worth recapping briefly on what we are trying to achieve with HMRC. The organisation provides an essential service to people in the United Kingdom, not only helping hard-working families with the benefits they need, but making sure that the taxes that fund our vital public services get paid. We want to help HMRC do that better. We want it to be faster and more efficient. We want it to cost less but to deliver more for taxpayers and tax credit recipients. We want it to focus on our top priority: tackling tax evasion and avoidance.
We have already done a lot to move in that direction. Since 2010, we have driven down the tax gap—the difference between what HMRC should theoretically bring in and what it actually collects—to just over 6%, which is one of the lowest rates in the world. That progress is important; without it, we would not have collected £14.5 billion in extra tax. The hon. Lady quoted Richard Murphy’s £119 billion estimate of the tax gap. She said that, as far as she is aware, that figure has not been challenged, but it has been challenged repeatedly, and it is not a number we accept by any means. None the less, it is important that we reduce the tax gap.
We have also committed to investing £1.3 billion in HMRC to make sure it can offer the digital services people expect in the 21st century, and we have committed millions more to improve customer services.
By the end of this Parliament, therefore, customers will start to see real improvements, whether that is reduced call waiting times, finding it quicker and easier to pay taxes online, or being able to use HMRC’s special phone line for businesses. Furthermore, by 2020, we expect HMRC to be saving £700 million a year, as well as delivering an additional £1 billion in revenue in 2020-21.
However, we want to go further. We want to save £100 million a year by 2025, by transforming the estate the HMRC works through and by creating a smaller but more highly skilled organisation. When HMRC was formed in 2005, it had 570 offices spread all over the country. That could hardly be termed efficient, and even now, in 2016, HMRC has around 170 offices, ranging in size from 5,700 people to fewer than 10. In the case of the Walsall office, at Pattison House, for example, there are 56 employees.
Back in November, therefore, HMRC announced its intention to finish the job of making itself more efficient. Over the next 10 years, the department will bring its employees together in large, modern offices in 13 main locations serving every region and nation in the UK. Those offices will be equipped with the digital infrastructure and training facilities they need to work effectively. Not only will these new offices encourage people to work more closely together, but they will provide more opportunities for them to develop their careers.
HMRC is fully aware that its most valuable asset is its people, and I commend the hon. Lady for her interest in the arrangements we are making for the around 56 employees of HMRC in Walsall for when the office is closed. I would like to reassure hon. Members that we are committed to making sure that the people in Walsall—indeed in every HMRC office—are supported through the changes and informed every step of the way.
First, I should remind the House that this is about changing the locations, not cutting staff. Although the Walsall office, in Pattison House, will be closed in 2016-17, HMRC hopes that everyone who is able to will transfer to an office in central Birmingham and then to a regional centre in Birmingham that will be home to over 3,000 staff.
In February, HMRC made sure that everyone in Walsall had the chance to discuss, on a one-to-one basis, how this will affect them. In particular, that meant checking whether they will be within a reasonable daily commute of the new office and finding out what support they may need to make the move. That could, for example, include an extra contribution towards travel. It is worth pointing out that someone who lives within a reasonable daily commute of another office could get support for up to three years with any additional transport costs. Those outside the reasonable daily travel requirements could receive support with their fares for up to five years. There is therefore support for individuals, which can be considered on a one-to-one basis. However, we remain confident that most people will be able to travel to the new office in central Birmingham.
HMRC will also be asking its Walsall staff to change their area of expertise. As the hon. Lady will be aware, many of them currently specialise in personal tax. As part of HMRC’s restructure, it will be asking them to put their skills to good use in new roles in debt management. To help them make that change, HMRC will be running a full programme of induction and learning.
To address the hon. Lady’s point about why the process has been accelerated, jobs are now available in Birmingham in debt management. The desire is for those jobs to be filled as quickly as possible, and HMRC believes that the staff in Walsall are well placed to perform these roles. That is the reason this has been offered.
Valerie Vaz
First, if the Minister disputes the figure of £119 billion of tax avoidance, will he drop me a letter to say how he calculates that so that I can put it to the source? Secondly, this has not been communicated to the staff in Walsall, who were not told that they have been given other jobs; all they were told was that the office would close. The Minister has not dealt with why the process was accelerated.
Mr Gauke
These debt management roles are available in Birmingham, and it makes sense for people currently working in Walsall who are capable of moving to Birmingham to fill them at the earliest opportunity. That is why this has been done. As I say, it was announced in November that Walsall was going to close in the course of the year 2016-17. As these roles in debt management are available, it makes sense to move quickly to fill them.
I am happy to write to the hon. Lady about the tax gap. HMRC publishes its own estimate of the tax gap that is based on considerable work and makes use of highly skilled statisticians. The National Audit Office has described it as “credible”, if I remember correctly. Mr Murphy’s estimates are well known to be controversial—let us put it that way—so this will not come as a surprise to him. He is very well aware that HMRC’s estimate of the tax gap is very different from his. I will set out in my letter some of the reasons why HMRC believes that Mr Murphy’s estimate is not credible. I have debated this issue on a number of occasions, so it would be more than a pleasure to set it out once again.
Mr Winnick
As my hon. Friend the Member for Walsall South (Valerie Vaz) emphasised, the staff feel strongly that the closure has been dealt with in an arbitrary manner. They are clearly not satisfied, despite what the Minister is saying about full consultation. As I said earlier, this is having a negative effect on the borough as a whole.
Mr Gauke
I note the hon. Gentleman’s points. This was announced in November last year. PCS was present for the announcement and has been engaged throughout this period. I do not accept that HMRC has acted in an arbitrary way. There has been consultation and a series of one-to-one meetings.
Let me pick up on a point raised by the hon. Member for Walsall South about the administrative assistants in cases where there are no suitable roles within debt management. A personal tax team within HMRC is working with those individuals to see whether they are suitable for promotion to a higher grade and, if so, whether they could be offered posts within debt management.
It is necessary, in the view of HMRC—a view that the Government support—to move towards fewer offices where there is an ability to concentrate staff and to have greater flexibility as to the work that they undertake. It will also ensure that there is greater availability of career opportunities within the regional centres. That is the direction that HMRC is going in—we support that—and it does require staff to be moved from some of the smaller offices to the regional centres, in this case to Birmingham.
Valerie Vaz
This is the first time I have heard the term “debt management” in this regard. As a previously practising lawyer, I know what that means. In effect, these staff have been deskilled. They are going from personal taxation into debt management, which is just chasing debts.
Mr Gauke
No, I do not accept the description of debt management as a deskilled role. Debt management often involves making judgments on whether, for example, a business should enter into a time-to-pay arrangement, which is a highly skilled and sensitive role. HMRC’s assessment is that the teams in Walsall are well placed to be retrained to perform this role within debt management. Debt management is not an unskilled role within HMRC.
Mr Jim Cunningham
Would the staff transferred to Birmingham be on the same pay grades, or would there be differences? What would happen to somebody who was put into a lower grade and did not want to go into it?
Mr Gauke
As far as I am aware, there is no suggestion that people will be put into a lower grade as a consequence of these changes. In a couple of cases, HMRC is looking at whether the move will involve a promotion for those members of staff, but there is no suggestion that anyone would have a reduction in pay. As I outlined earlier, this has to be worked out on a one-to-one basis. Staff may find that they are getting a contribution for up to three years for their additional travel costs as a consequence of a move.
Mr Gauke
I think a significant number of jobs are available. The question is how many of the Walsall staff are in a position to move to Birmingham. There is no suggestion of those who are capable of moving to Birmingham entering into redundancy. Jobs are available for Walsall staff. As I say, the jobs in debt management should not be demeaned, criticised, or suggested to be of a particularly low-skilled nature.
We are determined to keep moving forward in helping HMRC do its crucial job more and more effectively. That is why we are supporting these changes, which put the interests of taxpayers at the heart of what HMRC does. HMRC is working closely with all the staff who will play their part in this important reform, and it is determined to continue to do so throughout the process. I hope that hon. Members will join me in commending the work that HMRC does. Although I may not have persuaded the hon. Member for Walsall South, I wish to reassure her that HMRC will continue to work with staff based in Walsall. These changes will help to move HMRC forward to become a more effective, efficient and successful organisation.
Question put and agreed to.
HMRC: Building our Future Plan
David Gauke Excerpts(8 years ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
Back in November, HMRC announced important changes to how it would operate. Its aim was simple: to create a modern, efficient organisation that would continue to protect this country’s tax revenues, while, at the same time, providing better value to the taxpayer. HMRC is determined to make sure that it is better able to focus on its core priority—to bring in more revenue by tackling tax evasion and avoidance.
Since 2010, it has made real progress. For example, it has driven down the tax gap—the difference between what HMRC should theoretically bring in, and what it actually collects—from 7.3% in 2009-10 to 6.4% in 2013-14. That is one of the lowest rates in the world. To make the importance of that quite clear, let me put it this way: if the Government and HMRC had not taken action to achieve that, we would have collected £14.5 billion less in tax.
We are determined to transform HMRC into a more efficient, more highly skilled organisation, which offers the digital services people expect in the 21st century. That is why, in the spending review of 2015, we made the commitment to invest £1.3 billion in transforming the digital capabilities of HMRC. In this year’s Budget we allocated a further £71 million to help HMRC improve its customer services. By the end of this Parliament that will bring the change we need to make it quicker and easier for taxpayers to report and pay their taxes online. It will deliver a seven-day-a-week service, improved telephone services and reduced call waiting times, as well as dedicated phone lines for new businesses. This investment will pay off. By 2020, we expect HMRC to be saving £700 million a year, as well as delivering an additional £1 billion in revenue in 2020-21.
The next stage of the plan to bolster HMRC and help it deliver more for less is to transform the estate through which it works. In 2010 we challenged HMRC to make savings. We asked it to reduce costs by a quarter and reinvest £917 million of those savings in making sure that more businesses and people paid the tax that they should, bringing in an additional £7 billion a year in 2014-15. HMRC delivered, making savings of £991 million, including reducing the cost of the estate. At the same time, it kept up progress in cutting the tax gap and improving customer service. So far from endangering our plans to clamp down on tax avoidance and improve customer service, as some have suggested today, these plans are crucial to those aims.
Let me remind the House that HMRC’s plans will generate estate savings of £100 million a year by 2025.
Mr Gauke
I have many points to get through, but if I have time I will give way.
When HMRC was formed in 2005, it had around 570 offices spread out all over the country—an inefficient way of doing business in the 21st century. Reorganising this network of offices was a priority even then, which is why, following a number of reorganisations, that number was reduced to around 390 in 2010. It now stands at around 170 offices, ranging in size from 5,700 people to fewer than 10. That is a start, but it is not efficient enough. The changes that we announced in November represent the next stage of HMRC’s estate transformation programme.
Over the next 10 years, the department will bring its employees together in large, modern offices in 13 locations equipped with the digital infrastructure and training facilities they need to work effectively. These new high-quality regional centres will serve each and every region and nation in the United Kingdom, creating high-quality, skilled jobs and promotion opportunities in Birmingham, Belfast, Bristol, Cardiff, Croydon, Edinburgh, Glasgow, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Stratford.
There are significant advantages to such a system: the new offices will have the capacity to encourage people working in different roles, at different levels, to work more closely together, as well as providing more opportunities for them to develop their careers. The offices will be in locations with strong transport links and with colleges and universities nearby, to ensure a ready talent pool close by. In short, they represent the way business is done in the 21st century. HMRC expects the first centre to open by 2017, with the others opening over the following four years.
On the point about consulting HMRC staff, HMRC fully recognises that its most valuable asset is its people. HMRC can only do what it does thanks to its dedicated members of staff who bring in the money that funds our essential public services, as well as helping hard-working families with the benefits they need. That is why HMRC has kept its workforce fully abreast of all its plans to change how it operates, which were first announced internally two years ago. Since then, HMRC has held around 2,000 events across the United Kingdom, talking to colleagues about these changes. Everyone working for HMRC will have the opportunity to discuss their personal circumstances with their manager ahead of any office closures or moves.
I should remind the House that this is about changing the locations, not cutting staff. Indeed, the department’s policy is to keep any redundancies to an absolute minimum. HMRC’s analysis indicates most employees are within reasonable daily travel of a new centre, although that is subject to the one-to-one discussions which every member of staff will have about a year before any planned closure.
Let me pick up the point about trade union representation. One-to-one meetings are an opportunity for managers and staff to discuss how the proposals will affect staff, and HMRC will consult every one of its staff. Once decisions are taken, staff will of course have the opportunity to have representation. This is not a change of approach; these are fact-finding discussions with all members of staff to understand their personal circumstances. Trade union reps have never been in such meetings, but they will be involved, as they would normally, at a later stage.
Chris Stephens
My understanding is that, once there is an outcome at the one-to-one meetings, there is an appeal mechanism, but the trade union will not have access to that either. Will the Minister clarify that?
Mr Gauke
The purpose of the one-to-one meetings is to ascertain the particular circumstances of each individual likely to be affected by the proposals. From that, further proposals will come forward, and the usual trade union representation will be available to members of staff.
Since announcing its decision on the locations of its new offices in November, HMRC has been busy negotiating with suppliers, designing the look and feel of buildings, and planning how it will move its existing workforce. That has included one-to-one meetings with almost 2,500 members of staff who are most immediately affected, to look at their individual needs.
I stress that those are operational changes, decided at an operational, rather than a political level. Making changes to how HMRC offices are organised is an integral part of the Government hubs programme. It is essential to make the organisation fit to deliver better customer service, as well as to make it harder for the dishonest minority to cheat the system—and all at a lower cost to the taxpayer. That has the Government’s full support.
On staff engagement, HMRC staff are currently spread across about 170 offices across the country, many of which are a legacy of the 1960s and 1970s, lack modern facilities and technology support, and do not reflect new ways of working. The current state of the estate is undoubtedly a factor in the levels of engagement from staff, many of whom look forward to working in new, modern, fit-for-purpose offices—the type of workplaces that will also help HMRC to attract and retain the skilled workforce it will require in the future.
There has been much comment about the Mapeley contract entered into by the previous Government, and I for one am certainly not going to defend it. It is not a good contract for the taxpayer, which is precisely why HMRC wants to get out of it. If we do not get out of it now, HMRC will be fixed in it for years to come.
On customer service standards, call handling last week was at 90%, and the average wait was six minutes, but we invested more money at the Budget to improve that.
On Welsh-speaking services, HMRC is committed to maintaining services in Welsh for its Welsh-speaking customers. The quality of those services must continue to be high, and HMRC is actively exploring the ways it can best achieve that.
If we want HMRC to do its job effectively, we must ensure that it is fit for the challenges it faces. We have to be willing to modernise, find efficiencies, target resources, and make long-term strategic decisions. That is precisely what HMRC is doing: transforming itself into a smaller, more highly skilled organisation with modern, digital services and a data-driven compliance operation that will deliver more for the taxpayer at lower cost. That is the policy it has embarked on, and I hope it will have the support of the House.
UK Bilateral Loan to Ireland
David Gauke Excerpts(8 years ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
HM Treasury has today provided a further report to Parliament in relation to the bilateral loan to Ireland as required under the Loans to Ireland Act 2010. The report relates to the period from 1 October 2015 to 31 March 2016.
A written statement on the previous statutory report regarding the loan to Ireland was issued to Parliament on 15 October 2015, Official Report, column 22WS.
[HCWS704]
Oral Answers to Questions
David Gauke Excerpts(8 years, 1 month ago)
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Henry Smith (Crawley) (Con)
The Financial Secretary to the Treasury (Mr David Gauke)
The Government are committed to providing data on active national insurance numbers used by people from other EU countries. HMRC is currently compiling that information and is working closely with the Office for National Statistics, which is reconciling the four main sources of international migration data. The data on active national insurance numbers will be published as part of, or alongside, the ONS’s publication. It is up to that independent statistics authority to decide when it is ready to make public the information.
Henry Smith
I have been asking HMRC for the figures since January. The British people have a right to know such facts, particularly in the context of the UK’s EU referendum debate. Will we know before 23 June how many foreign nationals from other EU countries have national insurance numbers?
Mr Gauke
It does take some time for HMRC to combine and match multiple datasets and hundreds of millions of lines of its own and the Department for Work and Pensions’ data. The intention is to publish the information alongside the ONS analysis. I note that according to its website the ONS plans to publish in May a note on migration incorporating the latest available migration data, and helping to explain further why the two datasets show different trends.
Chris Leslie (Nottingham East) (Lab/Co-op)
What about the 3.3 million people—one in 10 of the existing workforce—who pay their national insurance and tax and whose jobs are linked to UK exports to the EU? Does the Minister agree that leave campaigners should not just cross their fingers and dismiss reality and that Members on both sides of the House have a duty to spell out the fact that leaving the EU would put real jobs at real risk?
Mr Gauke
The hon. Gentleman will be aware of the Treasury analysis published yesterday that shows the various models and the consequences were we to leave the EU, including a permanent reduction in our GDP compared with what it otherwise would be and significant damage to productivity growth. The hon. Gentleman is right to highlight that point.
Mr Steve Baker (Wycombe) (Con)
Do the Government welcome the opportunity to bring forward actual data without the need to project forward 14 years using techniques that have proved to be inaccurate every six months?
Mr Gauke
As I said, HMRC has gone through the data and will provide them to the ONS. It is for the ONS to decide the timing, but I have drawn the House’s attention to what it has said.
Returning to the Treasury analysis, it compares one scenario with other scenarios, and all three possible scenarios for leaving the EU would leave this country poorer than we otherwise would be.
Helen Goodman (Bishop Auckland) (Lab)
The impact of EU membership on jobs is obviously significant. Will the Minister pass on my congratulations to the officials who did the useful analysis that was published yesterday? A regional breakdown on page 65 of the document suggests that 100,000 jobs in the north-east are dependent on EU exports. I had thought that the figure would be 140,000, so will he ask the officials to look at it again with a view to revising it up?
Mr Gauke
I will certainly take that representation on board. Of course, the north-east of England has the very large Nissan plant, which provides a significant number of jobs. The argument in the Treasury analysis is that we benefit from an open economy. If we leave the single market, we become a less open economy, which will have a cost to the British people in their living standards.
Mr Philip Hollobone (Kettering) (Con)
The disgracefully dodgy document published by the Treasury yesterday is, frankly, worthy of the children’s programme “Jackanory”. The immigration figures suggest that there will be 3 million more immigrants in this country by 2030, placing my hon. Friend in clear breach of the Conservative manifesto commitment to reduce immigration to tens of thousands a year. What is his response to that accusation?
Mr Gauke
The numbers are based on the ONS projection that was used at the last Budget. No account is taken of the achievements of the renegotiation secured by the Prime Minister. On the Treasury analysis, a large number of independent economic commentators have argued that it is broadly in the right direction. My hon. Friends who advocate that we should leave the EU should come forward with their own analysis, setting out exactly what model they would follow and what the economic consequences would be.
Victoria Prentis (Banbury) (Con)
Justin Madders (Ellesmere Port and Neston) (Lab)
The Financial Secretary to the Treasury (Mr David Gauke)
Corporation tax cuts have been a central part of the Government’s economic strategy, and that strategy is working; there are 2.3 million more people in employment since 2010. The further cuts in the main rate announced at the Budget, which will bring it down to 17% by 2020, will benefit over 1 million companies, large and small. Lower corporation tax rates will support UK companies to invest and grow, creating jobs as they do so.
Mr Hanson
One of the justifications for the corporation tax cut was that businesses would pass it on to workers through the increase in the living wage. Evidence is now emerging that some companies intend to pocket the tax cut and squeeze conditions for their employees, so what steps do the Government intend to take to monitor that?
Mr Gauke
The cuts in corporation tax will result in greater investment in this country, and greater investment drives productivity growth, and productivity growth is what will drive higher living standards. Let us remember that it is this Government who have brought in the national living wage, and we have seen very large numbers of people see increases in their wages and salaries.
Justin Madders
Owing to changes in personal independence payments, people with disabilities are set to lose £1 billion at the same time as corporation tax is being cut, so can the Minister honestly say that he is comfortable with prioritising big business over disabled people?
Mr Gauke
We are providing more support to help the disabled get into employment, but let me just make this point to the hon. Gentleman, and to the House: the way this country is going to be prosperous and able to afford good public services and support for the most vulnerable is by having a strong, growing economy, and competitive business taxes help us to have that strong, growing economy.
David Rutley (Macclesfield) (Con)
Is my hon. Friend aware that the Federation of Small Businesses has said that the decision to further lower corporation tax to 17% is an important statement of intent and will provide a boost for the affected firms? Does he agree that that will help to further underpin the enterprising economy that we need?
James Berry (Kingston and Surbiton) (Con)
Does my hon. Friend agree that it is easy to trot out phrases such as “tax cuts for companies”, but it is vital that we have low corporation tax to attract investment into this country and to ensure that we have jobs here? The Chancellor has repeatedly encouraged companies to pass on tax cuts to workers, which is where they should go.
Grahame M. Morris (Easington) (Lab)
The Financial Secretary to the Treasury (Mr David Gauke)
A general anti-avoidance rule was considered by an independent study group led by Graham Aaronson QC in 2011. The group recommended an anti-abuse rule for the UK because it felt strongly that it would strengthen and complement existing tools available to HMRC. The Government accepted the recommendation and introduced a general anti-abuse rule in 2013, striking the right balance between protection against avoidance and certainty for taxpayers.
Grahame M. Morris
One way to put an end to aggressive tax avoidance is a general principle—a principle, not a rule. I am sure the Minister understands there is a difference: people can find a way around a rule, but it is not easy to do that with a principle. Will the Government therefore back their public statements about tackling aggressive tax avoidance and legislate for a general principle of tax avoidance?
Mr Gauke
I remind the hon. Gentleman that the last Labour Government looked at this issue and declined either a general anti-abuse rule or a general anti-abuse principle because of fears of uncertainty. We believe we have got the balance right. However, alongside the introduction of the anti-abuse rule, we have brought in measures to deal with accelerated payments and promoters, we closed 40 tax loopholes in the last Parliament and we have announced 25 closures in this Parliament already. It is worth pointing out that avoidance is coming down.
Scott Mann (North Cornwall) (Con)
Martyn Day (Linlithgow and East Falkirk) (SNP)
The Financial Secretary to the Treasury (Mr David Gauke)
This Government are bringing in a register so that we will know the beneficial ownership of people or structures holding property in this country. We have not had that before, and we are making progress on it.
Chloe Smith (Norwich North) (Con)
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Mr Gauke
Let me be absolutely clear with the House that we are not talking about quarterly tax returns. This is not about having to do a full tax return but about reporting; indeed, the purpose of the changes is ultimately to reduce the burden on businesses. It will start to be introduced in 2018. I hope that we will set out further information about the plans in the coming weeks. The intention is to ensure that we reduce the tax gap and, ultimately, help businesses to comply with the tax system.
Mr Charles Walker (Broxbourne) (Con)
I thank the Chancellor and the Economic Secretary for their good humour in their dealings with me over the past few days. This afternoon I will be moving new clause 9 to the Bank of England and Financial Services Bill. Are the Government now minded to accept new clause 9?
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
The Public Accounts Committee report issued last week highlighted the £16 billion of the tax gap that is tax fraud. The money brought into the Treasury for that has stayed pretty static, at 3% of total tax liability. Does the Chancellor think that there is more to be done, and does the fact that the number of the wealthiest individuals being investigated will increase from 35 to 100 by 2020 not demonstrate that he has missed an opportunity?
Mr Gauke
We are taking strong action on tax evasion and significantly increasing the number of criminal investigations—I understand that around 90 investigations into offshore tax evasion are currently ongoing. We announced in the Budget last summer an additional £800 million for Her Majesty’s Revenue and Customs to support its activities, and through the common reporting standard—and ultimately through registers of beneficial interest—we are now getting access to much more information so that we can take on offshore tax evaders.
Several hon. Members rose—
Mr Gauke
It is the case that the Crown dependencies and overseas territories are, at our prompting, ensuring that they have got registers of beneficial interests. It is also the case that the UK is co-operating, as my right hon. Friend the Chancellor has made clear, with other jurisdictions. I hope we move to a position whereby public registers are the norm, but even before we get to that point, clearly we will look at the opportunities for the information on the central registers to be shared among co-operative economies and jurisdictions.
Mr Stewart Jackson (Peterborough) (Con)
I remember the good old days when the Chancellor regarded Treasury predictions as so discredited that he established the Office for Budget Responsibility instead. I cannot think what could have changed. The GDP projections in his dodgy dossier are predicated on breaking our manifesto commitment on immigration, while the cost implications of his new policy of mass migration for school places, housing, health and transport are not made explicit in the document. Why is that?
Tax Avoidance and Evasion
David Gauke Excerpts(8 years, 1 month ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
It is a great pleasure, for the second time this week, for the Government to be able to inform the House of how much more we have done than the previous Government to tackle evasion, avoidance and aggressive tax planning and to become a world leader in tax transparency. In 2010, we inherited a situation in which no one could find out who really owned a company in the UK or find out the details of a London property if it was owned by a foreign company. Not only were the international rules governing multinational companies out of date, allowing the tax base to be eroded and profits to be shifted, but there was no attempt to bring those rules up to date. Nor was there any sign that those matters were going to change. Loopholes, secrecy and concealment are the issues that we are sorting out, not only through what we are doing in the UK but through our firm and decisive action overseas.
John McDonnell
I want to clarify something that the Minister just said. Can he confirm that, under his proposals, members of the public will not have access to the register of beneficial owners of companies and trusts in overseas territories or elsewhere?
Mr Gauke
Let me tell the hon. Gentleman precisely what I just said. In 2010, no one could find out who really owned a company in the United Kingdom. From June, we will be publishing a public register of beneficial ownership. What is more, HMRC could not find out who owned a company based in an overseas territory. As a consequence of the agreements we have reached this week, HMRC will be able to do exactly that. That is evidence of the progress that has been made under this Government, and that was not the case under the previous Government.
Clive Efford (Eltham) (Lab)
As my hon. Friend the Member for Hayes and Harlington (John McDonnell) pointed out, we have had lots of honeyed words from the Government about how they are going to deal with this matter. However, is that not belied by the fact that they appointed someone as the executive chair of HMRC who thinks that taxation is “legalised extortion”? Does that not demonstrate the attitude that exists in this Administration?
Mr Gauke
It is unfortunate that the hon. Gentleman seeks to smear a public servant who has served Governments of—[Interruption.] Let me make this point. This is someone who has served Governments of both colours and with whom I have worked extensively over six years. He has been and is determined to do everything he can to ensure that our tax laws are properly enforced and deal with avoidance and evasion. I suggest to anyone who throws around one line from an article written in 1999 that they look at the entire thing, because his argument is about properly addressing tax avoidance by ensuring that we get the law right. It is unfortunate when accusations are thrown around about dedicated, impartial public servants.
John Glen (Salisbury) (Con)
I pay tribute to my hon. Friend’s work over several years in dealing with some of these issues. Will he comment on the fact that this country now has the smallest gap on record between tax owed and tax paid? That is the real story about this Government’s efficiency in dealing with tax collection and the difficulties in the system.
Mr Gauke
My hon. Friend is right. The reality is that the tax gap, as a percentage of tax revenues, has fallen considerably over the past six years, which is testimony to the effort put in by not only this Government but HMRC. Bringing the tax gap down involves considerable challenges, such as tax evasion, tax avoidance, and inadvertent error on the part of taxpayers, which does happen from time to time as I am sure all hon. Members will recognise. We are determined to do what we can do improve and strengthen our systems. I am grateful for the opportunity today to make progress on that.
Robert Jenrick
Will the Minister emphasise the point about the tax gap? One of the most relevant measures is the tax gap specifically for those paying corporation tax. It was rising when the coalition Government came to power in 2010 and has fallen by almost 50% over the past six years, which is a major achievement.
Mr Gauke
I will give way to the hon. Gentleman, but I stand by the point that he has sought, not for the first time, to attack an impartial, dedicated public servant, who cannot answer back, by selectively quoting an article written in 1999. I have set out to the House the context in which that article was written. It is clear that this is someone who believes that the law should be properly enforced and who has a record over many years of doing precisely that.
Clive Efford
I am grateful to the hon. Gentleman, but he accused me of smearing this individual when I was actually quoting him word for word. He went on to say that tax is legitimised
“only to the extent of the law.”
If the bar is set too low, fewer people will pay tax and more will be able to avoid it. My point—I stick by it—is that this Government’s attitude towards tax avoidance is lax and their words are more honeyed than their actions.
Mr Gauke
This is a Government that closes loopholes year in, year out, whose actions led to the OECD work on base erosion and profit shifting, that have given more powers to HMRC, that have seen a significant fall in the tax gap, particularly in the context of avoidance, and that have a proud record on dealing with tax avoidance, tax evasion and with all abuses in the tax system.
Huw Merriman
This Government, via HMRC, have raised £2 billion since 2010 from offshore tax evasion. Does that not demonstrate that this Government ensure that the tax that should be paid is paid?
Several hon. Members rose—
Mark Durkan (Foyle) (SDLP)
I thank the Financial Secretary for giving way. He referred to the Government’s record, but that record also includes changes to the controlled foreign companies rules, which in effect cost Exchequers here and, more importantly, in developing countries.
Mr Gauke
I do not accept that. The hon. Gentleman and I have debated the issue on several occasions. When we came to office in 2010, the controlled foreign companies regime was outdated and was driving businesses out of this country. Since our reforms, more businesses have located in the United Kingdom and more businesses have located their European headquarters here. The change has added to the UK’s attractiveness as a place to do business. As for developing countries, I have said to the hon. Gentleman before that the UK has been at the forefront of building the capacity of tax authorities in developing countries to ensure that they are able to collect the tax that is due under their laws.
Several hon. Members rose—
Rehman Chishti (Gillingham and Rainham) (Con)
I thank the Minister for giving way. I of course welcome all that the Government have done on tackling tax avoidance and evasion. He says that more could be done on tax avoidance, but does he accept that, following the comments of the former Labour Foreign Secretary and Lord Chancellor, who said that the Labour Government could have taken but did not take action on tax avoidance and the previous Labour Government’s deficit, the Government are playing catch up?
Mr Anderson
In the interests of the people listening to this debate, will the Minister provide, either today or by putting something in the Library, details of companies or schemes identified since 2012 that could be classed as either morally repugnant or morally wrong, terms that were used by the Prime Minister and the Chancellor in 2012 to describe such schemes? Has any work been done on that? Can we get a register so that we know who to look out for in future?
Mr Gauke
I think the hon. Gentleman is actually being helpful—not that I ever doubted that he would be. When there is artificial, contrived behaviour and when schemes are clearly contrary to the intentions of Parliament, we need to take strong action. We are also entitled to be critical of those involved in promoting such schemes. Indeed, we brought in a regime whereby we can name and shame the promoters of tax avoidance schemes that are clearly contrary to our intentions.
Maria Caulfield
I thank the Minister for giving way. If Opposition Members want to be helpful, they could speak to the unions. Unison paid no corporation tax in 2011 or 2012, despite owning £51.6 million of stocks and shares and generating an income of over £5 million.
Mr Gauke
It would be fair to say that I try to make it a rule not to comment on the individual tax affairs of taxpayers, but perhaps those who are happy to wade in on such debates should answer such questions.
HMRC is committed to exposing and acting on financial wrongdoing. Its specialist offshore unit is currently investigating more than 1,100 cases of offshore evasion around the world, with more than 90 individuals subject to current criminal investigation. The motion calls for greater HMRC resourcing. This shows precisely why at the summer Budget of 2015 we confirmed an extra £800 million to fund additional work to tackle evasion and non-compliance by 2020-21.
We have already heard quite a lot today about HMRC resources and headcount. I have to concede that there was a period when the numbers working in compliance and enforcement fell—that period was up to 2010. If we look at where the numbers were in 2010 compared with where they are today, we see that the enforcement and compliance numbers are higher than they were when the Prime Minister, the Chancellor and I took our respective positions—there has been an increase. I accept that much more of HMRC’s work on processing self-assessment forms, for example, has been automated and the number of staff working in that area has fallen. However, the number of people working in compliance and enforcement has increased over the past six years.
Several hon. Members rose—
Mr Gauke
I want to make a few more points. Even before last week, HMRC had already received a great deal of information on offshore companies, including those in Panama and including Mossack Fonseca. This information comes from a wide range of sources and is currently the subject of intensive investigation. HMRC has asked the International Consortium of Investigative Journalists, the BBC and The Guardian to share the data they have received from last week’s leaks. Clearly, it is important to examine the data very closely, which is why we are providing new funding of up to £10 million for an operationally independent cross-agency taskforce to analyse the Panama papers and take action on any wrongdoing and regulatory breaches. The taskforce will include analysts, compliance specialists and investigators from across HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority. Between them, those agencies will have some of the most sophisticated technology, experts and resources to tackle money laundering and tax evasion anywhere in the world. The taskforce will report to my right hon. Friends the Chancellor of the Exchequer and the Home Secretary on the strategy for taking action, and we will update Parliament later this year. I stress that the taskforce will have total operational independence. If it finds people to prosecute, it will prosecute them. If it finds information about illegality, it can act on it. In addition, the independent FCA has written to financial firms asking them to declare their links to Mossack Fonseca. If the FCA were to find any evidence that firms have been breaking the rules, it, too, has strong powers to take punitive action.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The Minister mentioned last year’s Budget and the £800 million for non-compliance issues. However, I understand from his answer to a written question that only £266 million of that has been allocated specifically to address tax fraud. How much of that will be spent on dealing with tax evasion?
Mr Gauke
The vast majority of the additional money we have put into compliance, both the £800 million announced last year and the £1 billion announced in the last Parliament, is going to dealing with tax evasion. All of it is going into compliance, which is in the areas of dealing with tax evasion and tax avoidance, at its broadest points. I am happy to let the hon. Lady have details of the precise numbers and to write to her on that subject, but this money is going into compliance exactly to deal with these areas. We have taken this very seriously, substantial sums will be raised for us over the course of this Parliament and we are proud of our record on this.
Chris Stephens (Glasgow South West) (SNP)
First, on headcount, will the Financial Secretary confirm that there are 14,000 fewer staff in HMRC now than there were in 2010? Secondly, will he inform the House whether any HMRC staff currently have a compulsory redundancy notice?
Mr Gauke
I make no secret of the fact that HMRC is a smaller organisation than it was in 2010 in its headcount. That is because efficiency savings are capable of being found in an organisation that devotes a number of staff to processing pieces of paper when we are moving to a more digital world and we can make greater use of technology. On the area that is relevant to today’s discussion and is the concern of the House, the concern is to ensure that HMRC has the resources to deal with tax evasion and tax avoidance. In that area, headcount is not the be-all and end-all; it is about what we get out, not what we put in. As it happens, however, the numbers of people dealing with enforcement and compliance have gone up under this Government. That point sometimes seems to be missed from this debate.
In a globalised world, international action is clearly vital to stop cross-border tax avoidance, evasion and aggressive planning. The UK Government can be proud of having done more than any other country to stamp out these practices. On avoidance, we have already implemented the OECD recommendations for country-by-country reporting to improve transparency between business and tax authorities, and have advocated public country-by-country reporting on a multilateral basis. The Commission’s proposals for public country-by-country reporting are a step in the right direction towards new international rules for greater public transparency. However, we need to consider carefully the details of the Commission’s proposal, including how the reporting is done and how the information is broken down.
On transparency in the context of tax evasion, which is a key point, the UK will be the first major country to publish a register of company beneficial ownership, free for anyone to access, allowing everyone to see who owns what company. My right hon. Friend the Prime Minister made it a personal priority to use our G8 presidency to set a new global standard of tax transparency. As a result of our G8 presidency, 129 jurisdictions have committed to implementing the international standard for exchange of tax information on request, and more than 95 jurisdictions have committed to implementing the new global common reporting standard on tax transparency. This is a huge breakthrough. I recall that six years ago no one believed that we would get to that position, and I am delighted that we have done so. This is a step change in transparency.
Robert Jenrick
To emphasise that point, none of our major international economic competitors has agreed so far to have a public register of beneficial ownership. In fact, the state of Delaware, in which 90% of United States public companies are listed, has said that it has no intention of implementing this. We really are leading the world and leading our major competitors.
Mr Gauke
My hon. Friend is absolutely right to raise that point, and I will address the subject of the public register in a moment. It is considerable progress to have got central registers at all. We have pressed for that, and I am pleased that overseas territories and Crown dependencies have agreed to sign up to it.
Callum McCaig (Aberdeen South) (SNP)
The Prime Minister has stated that the registers that the overseas territories will provide will be available to tax authorities here. However, as this debate has clearly highlighted, this is a global problem, so will those registers be shared with other tax enforcement agencies globally so that they can ensure that tax is not being avoided from other countries?
Mr Gauke
The hon. Gentleman raises an important point, and I think there is scope for going further on it. What we have agreed is to ensure that we have access to those central registers. That is clearly very helpful but I think more progress can be made in that area and it is something to return to in the future.
Panama is one of the very few financial centres that has not yet fully committed to these international standards. We are clear that it should do so, and we continue to press for Panama to join the club of responsible nations. Of course, there is more international work to be done, particularly on tackling money laundering. That is why we are hosting an anti-corruption summit in May, with the aim of encouraging consensus not just on exchanging information, but on publishing such information and putting it into the public domain, as we are doing in the UK. Once again, Britain is leading the world on transparency, accountability and responsibility.
Mr Gauke
There are a few more points that I want to make, if the hon. Gentleman will forgive me.
Let me address the subject of the UK’s Crown dependencies and overseas territories. Reform of the regimes of the overseas territories and Crown dependencies has been a key objective for the UK, and the reforms that we have secured have been considerable. All the UK Crown dependencies and overseas territories with financial centres are signed up as early adopters of the common reporting standard, reporting annually from 2017 in respect of data that have already been collected. The Crown dependencies and overseas territories will share information with the UK from this year, one year earlier than the rest of the world. All the UK Crown dependencies and overseas territories with a financial centre have committed to transparency on company ownership.
Last Monday the Prime Minister announced that our overseas territories and Crown dependencies have agreed that they will provide UK law enforcement and tax agencies with full access to information on the beneficial ownership of companies. For the first time, UK police and law enforcement agencies will be able to see exactly who owns and controls every company incorporated in those territories. This is a major step forward in transparency, the result of the Government’s sustained work in this area.
It is right that we expect the overseas territories and Crown dependencies to meet international standards, and indeed they do. Yes, we want them to move towards a public central register. That is not yet the international standard. If, as the Leader of the Opposition suggests, every former colony that does not have a public register should be recolonised, where would we begin? Is he proposing that we invade Delaware? [Interruption.] Now we come to mention it, says the hon. Member for Wolverhampton South West (Rob Marris).
The reality is—and this is the point that my hon. Friend the Member for Newark (Robert Jenrick) was right to raise—that the UK is in favour of a public register. We are implementing a public register in June for the first time. We have never had one before. We want other countries to do it, but very few of our European Union colleagues do so. It is not the case that the US does it. We want to ensure that it becomes the new international standard, but Orders in Council condemning overseas territories for failing to do what most of our EU colleagues do not do would not be fair or effective. The approach that we have taken has brought the overseas territories and Crown dependencies a long way. I fear that the approach advocated by the Labour party would fail to work.
Mr Gauke
I will make some more progress. The hon. Gentleman has just arrived.
As well as leading international action, we have ensured that domestically our regime is both tough and transparent. We have invested more than £1.8 billion in HMRC since 2010 to tackle evasion, avoidance and non-compliance. The £800 million extra funding that we announced in the summer Budget 2015 will enable HMRC to recover a cumulative £7.2 billion in tax over the next five years, and to triple the number of criminal investigations it can undertake into serious and complex tax crime. In the last Parliament, we made more than 40 changes to tax law, closing down existing loopholes and introducing major reforms to the UK taxation system, raising £12 billion.
Penalties increased, new offences created, loopholes closed, new measures introduced, more money raised—it does not stop there. In this Parliament, we have already announced a further 25 measures for legislation to tackle avoidance, evasion and aggressive tax planning. These measures are forecast to raise £16 billion by 2020-21. This week, we announced that we will bring before the House this year legislation to make it a crime for corporations to fail to prevent their representatives from criminally facilitating tax evasion. This new corporate offence goes further than any other country has gone in holding corporations to account for criminal wrongdoing. It will apply to both UK and overseas corporations, and will set a new standard for corporate responsibility and accountability. I am sure that Members on all sides of the House will support any measures as they go through.
What a contrast to the 13 years of the Labour Government. This week, the Opposition ramp up the rhetoric, but it was not on our watch that private equity managers had a lower rate of tax than their cleaners. It was not on our watch that the wealthy could sidestep stamp duty. It was not on our watch that high earners could disguise their remuneration as loans that were never repaid. Those are just some of the loopholes left open by Labour—loopholes that we have been busy closing ever since.
Let me make one further point about the approach of the Labour party over the past week. Yes, taxes should be paid in accordance with the law and the intentions of Parliament, and we should take action against those who fail to do so. Those of us on the Government Benches certainly hold that view. But too often in the past week, Labour has appeared to be motivated by something else. That something else is hostility to the wealthy—not for dodging taxes, but just for being wealthy, for being successful, for earning money and for wanting to pass it on to their children. Those are things which millions of people aspire to do.
Thanks to the actions that this Conservative Government have taken domestically and overseas, we are revolutionising tax transparency and putting an end to offshore tax evasion. This is strong and firm action from a Government committed to ensuring that every penny of tax that is owed is paid. I urge the House to reject the motion.
Finance (No. 2) Bill
David Gauke Excerpts(8 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
I do hope that this will be worth waiting for, Mr Speaker. As my right hon. Friend the Chancellor set out in the recent Budget, the Government’s long-term economic plan is securing the country’s economic recovery. The British economy is set to grow faster than that of any country in the G7. Our labour market is delivering the highest employment in our history. This year, the deficit is forecast to be cut by almost two thirds from its peak, and is set to fall each year after that, so that we will deliver a surplus in 2019-20. However, being one of most open economies in the world means that we are not immune to global slowdowns and shocks, which makes it all the more imperative that we continue the hard work we have carried out over the past six years to help our economy face up to those challenges.
This Finance Bill demonstrates this Government’s commitment to putting stability first.
Mr Gauke
I will very happily take interventions, but let me first set out to right hon. and hon. Members the order in which I intend to discuss the measures in the Bill. I will outline, first, how this Bill provides opportunities for households, then how it supports British business, and finally how it ensures that the businesses pay the tax that they owe.
Sir William Cash
In the context of the European side of the global question to which the Minister has referred, is he aware of the substantial deficit in the last quarter figures that the Office for National Statistics has just published in respect of our relations with Europe, which is causing a lot of difficulty for the United Kingdom economy? Last year, we had a deficit on current account transactions—imports, exports, goods and services—of £58 billion, whereas we had a surplus with the rest of the world in the same services of about £30 billion. By contrast, Germany had a surplus of £67 billion in its dealings with the other 27 member states, which shows a significant reason why we should leave the European Union: this single market just does not work for us.
Mr Gauke
My hon. Friend takes me away from the Bill, but let me say in response that I do not accept his analysis. First, on trade, both voluntary parties to any transaction benefit from trade. Secondly, we have to remember that trade deficits or surpluses are the result of a series of transactions decided by individuals and businesses on the basis of what they perceive is of value. I would argue that it is always desirable to seek to remove trade barriers to facilitate fair and free trade. The removal of trade barriers within the single market is, I think, one of the advantages of membership of the European Union, so I am not persuaded by his argument.
Let me start by looking at the measures in the Bill that provide opportunities for families who work hard and save. The Government have long been committed to the principle that those who work should be able to keep more of the money they earn. As a result of action taken in the last Parliament, almost 28 million individuals received a tax cut, with a typical tax bill reduced by £825. We go even further in this Bill by increasing the tax-free personal allowance to £11,500 in 2017-18—a £500 increase from 2016-17. The higher rate threshold will also increase by £2,000 from £43,000 in 2016-17 to £45,000 in 2017-18. As a result of those changes, we will be cutting tax for more than 31 million people by 2017-18. Compared with 2010, a typical basic rate taxpayer will be paying more than £1,000 less in tax in April 2017. That is a proud record.
Sir Edward Leigh (Gainsborough) (Con)
We still have one of the most complex tax systems in the world. I do not know if my hon. Friend was here for the Prime Minister’s statement and our long session of questions about tax avoidance, but does he recall that I wrote to him a year or two ago—I have also led debates on the subject—about moving towards a flatter tax system? I appreciate that because the top 1% pay 27% of all tax, we cannot make that move in one bound, but does he agree that unless we stop our tax system becoming so complex and instead have flatter taxation and merge rates and allowances, we will never get rid of the vast tax avoidance industry? I do not expect an answer, but I would appreciate an indication that, as the Treasury prepares for the next autumn statement and Budget, it will be thinking in terms of simplifying our tax system.
Mr Gauke
Simplification does matter. One of the measures announced in the Budget—it is not in the Bill, for reasons that will become apparent—is the abolition of class 2 national insurance contributions. National insurance contributions are not covered in Finance Bills, but that is an example of a tax being removed—a tax that created a considerable administrative burden for both taxpayers and Her Majesty’s Revenue and Customs.
The Bill also puts the Office of Tax Simplification on a statutory footing. In the last Parliament, the OTS made approximately 400 recommendations, almost half of which have been implemented. The OTS is being strengthened; it has a new chair, Angela Knight, who is already performing a valuable role in leading the debate, and its resources have been increased. I am sure my hon. Friend will follow the OTS’s progress closely, scrutinise its performance and decide whether it is proposing measures that take us in the direction of which he approves.
Nigel Mills (Amber Valley) (Con)
Would my hon. Friend welcome the OTS looking at some more fundamental tax simplification measures such as wholesale reform of individual taxation, rather than focusing on small, individual parts of taxes, as a way of moving us to a much simpler tax system more quickly?
Mr Gauke
My hon. Friend makes an important point. There is considerable value in the OTS looking at specific areas, but I think there is a case for it looking at broader matters. Indeed, in its reviews—of small business taxation, for example—it is addressing some of those bigger questions.
Greg Mulholland (Leeds North West) (LD)
I thank the Minister for being so accommodating in giving way. Looking at part 10 of the Bill and given the pressure the Prime Minister has been under this week, with the Panama papers and the statement today, I wonder why the Bill does not include a measure to allow HMRC to name and shame publicly those who are involved in tax avoidance not after the third warning but after the first warning, and so send a much clearer signal?
Mr Gauke
I will discuss avoidance and evasion shortly, but on that specific proposal, we have strengthened HMRC’s capabilities in this area. The ability to name and shame facilitators of tax avoidance was introduced by this Government, and I think it is right that we have done that. As for the precise process, we think the balance is about right—it is difficult to see that there would be a substantial difference in terms of effectiveness if action were taken earlier. The whole idea of the regime was introduced by this Government.
As well as helping working households, the Government are committed to creating a nation of savers. In the Bill, we legislate to increase the personal savings allowance from April 2016, meaning that basic rate taxpayers will pay no tax on their savings income up to £1,000 and higher rate taxpayers will pay no tax on their savings income up to £500. As a result, 95% of taxpayers will pay no income tax on savings.
While supporting savers, we must also ensure that support is well targeted. The pension lifetime allowance is currently set at £1.25 million, but 96% of individuals now approaching retirement have a pension pot worth less than £1 million. We want a system that is targeted and sustainable and supports the majority of those approaching retirement. That is why the Bill reduces the pension lifetime allowance to £1 million—a change that will affect only the wealthiest pension savers.
The Bill also implements long overdue reform of the outdated and complex dividend tax system. The current system was designed at a time when total tax due on dividends was as high as 80% for some taxpayers; it also provides incentives for individuals to set up a company and pay themselves through dividends to reduce their tax bill. For those reasons, the Government are modernising and simplifying the dividend tax system by abolishing the dividends tax credit and replacing it with a new £5,000 tax-free allowance. The Bill also sets the dividend tax rates at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. Some 95% of all taxpayers and more than three quarters of those receiving dividend income will either gain or be unaffected by the changes.
Supporting home ownership and first-time buyers is a key priority for the Government. Although people should be free to purchase a second home or invest in a buy-to-let property, that can affect other people’s ability to get on the property ladder. The Bill therefore implements higher rates of stamp duty land tax for the purchase of additional residential properties that are three percentage points above the standard rates.
I have been made aware that the Bill as drafted might lead to some main houses with an annexe for older relatives attracting the higher rates of SDLT intended to apply to additional properties. I thank my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles) for bringing that to my attention. I am happy to reassure the House that that is not our intention and the Government will table an amendment in Committee to correct the error and ensure fair treatment for annexes.
Sir Eric Pickles (Brentwood and Ongar) (Con)
I am most grateful for that clarification from the Government. It is important in terms of social policy, as annexes are used not only by elderly relatives but by other family members, disabled children with special needs and so on. The Government are making an important statement that these annexes should prosper. I hope my hon. Friend will forgive me for saying that I will look carefully at the detail of the amendment, but I am grateful for the courteous way in which he dealt with me.
Mr Gauke
I am grateful to my right hon. Friend for the courteous way in which he dealt with me, too. He achieved a great deal in his role as Secretary of State for Communities and Local Government by addressing the issue in the context of council tax. He will find in this case—and he will want to look at the details, as we are going a bit further than council tax rules to provide support and reassurance to families—a small number of transactions are affected by the measure, but it is important that we provide clarity. We certainly do not want to discourage people who wish to create an annexe for an elderly or disabled relative, providing them with support close at hand.
The measures that I have outlined are important, and help working people to keep and save more of what they earn while ensuring that we have a modern and targeted tax system. I should like to address briefly an important issue that we discussed in the Budget debate: VAT on sanitary products. We heard people’s anger loud and clear, and we said that we would fight for agreement to reduce the VAT rate to zero, and all European leaders agreed our plan to do just that. Last week, the European Commission action plan on VAT was published, and it is an important step towards a common-sense VAT system that works for British businesses and people. The Government are committed to making that change, and let me make that point to those who have raised it, including the hon. Member for Dewsbury (Paula Sherriff), who is in the Chamber, and other hon. Members. I am proud that in the Finance Bill we are legislating to enable zero VAT rates for women’s sanitary products.
Mr Christopher Chope (Christchurch) (Con)
I congratulate my hon. Friend on the progress he has made. Why does clause 115 say that the measure will not come into effect when the Bill receives Royal Assent, but is subject to the Treasury introducing a provision at some later stage? Why can we not legislate on this in the Bill without any qualification?
Mr Gauke
It is customary, with changes in VAT rates, to give retailers notice. It is not usual for VAT changes to be put in place on the date of Royal Assent, as notice is usually provided. I reassure my hon. Friend that the intention is to provide a short period of time, following Royal Assent, in which retailers will have an opportunity to adjust prices. This is no desire by the Treasury to kick this into the long grass—we want to make progress on the matter.
Alison Thewliss
Will the Minister tell the House exactly what he is going to do to ensure that that price reduction is passed on to consumers by retailers, who should not seek to continue to sell the product at the same price?
Mr Gauke
Pricing is essentially a matter for the producers, retailers and customers. We would certainly expect the reduction to be passed on, and I have no doubt that considerable attention will be given to what happens to the pricing of sanitary products after the VAT reduction, and there will be pressure on retailers to pass on the benefits to customers. We do not have a position—we do not have the capability to direct and order people—and we do not have a prices policy as such, but we expect that the reductions will be passed on to customers.
Paula Sherriff (Dewsbury) (Lab)
I thank the Minister for being accommodating. I have written to leading retailers and manufacturers of female sanitary products asking to meet them to discuss this. I would be grateful if he offered his support for that course of action. If the Government are unwilling to do that, we may need to consider adding a provision to the Bill.
Mr Gauke
I very much support the hon. Lady’s cause, and she supports my cause that manufacturers and retailers should pass on the VAT abolition to customers, and we expect to see that happen.
I should like to turn to the way in which the Bill will support British business and ensure that our employees have the skills they need. The Government committed in the Budget to put stability first, because it gives businesses the certainty that they need to invest, grow and employ people. The core of our support for British business is low taxes, and the Budget provides the biggest ever cut in business rates, worth over £6.7 billion over the next five years. Measures in the Bill will do more. First, we will again cut the main rate of corporation tax and reduce it to 17% in 2020, ensuring that we have the lowest corporation tax in the G20. By the end of this Parliament, corporation tax cuts delivered since 2010 will save businesses almost £15 billion a year, providing an important boost for our international competitiveness.
Our labour market is delivering the highest employment in our history, but we need to ensure that it has the right skills. The Bill introduces an apprenticeship levy of 0.5% of an employer’s pay bill, where it exceeds £3 million, from April 2017. That will deliver 3 million apprenticeship starts by 2010. By 2019-20, Government spending on apprenticeships in cash terms will be double the level of spending in 2010-11. We will put funding in the hands of employers to ensure that it delivers the training that they need by ring-fencing apprenticeship funding in England.
In the last Parliament, we took important steps to help entrepreneurs who start and grow businesses. We also want to ensure that they can access the investment that they need as they grow, and to that end we are legislating to reduce the higher rate of capital gains tax from 28% to 20%, and the basic rate from 18% to 10% from April 2016. Gains on residential property and the receipt of carried interest will remain unchanged. Those changes will create an incentive to invest in shares over property, and will help British companies to access the finance that they need to expand and create more jobs.
Finally, the recent Budget took necessary and radical action to support the oil and gas tax regime through difficult times. The Bill will legislate for a key part of this strategy in permanently zero-rating petroleum revenue tax. From April 2016, petroleum revenue tax will be reduced from 35% to 0%. We believe that wherever possible, we should use the tax system to stimulate growth and investment, whatever the sector.
John Mann (Bassetlaw) (Lab)
I have heard all of this on skills before from the Government. Will the Minister explain the productivity puzzle? Productivity appears to have gone down, rather than up. Why is that, because in every Budget attention has been given to skills? What has gone wrong with productivity in this country?
Mr Gauke
The hon. Gentleman makes an important point. It is a long-standing issue for the United Kingdom economy. I would argue that the steps we have taken as a Government to ensure that we have a competitive, business-friendly tax environment, that we invest in skills and increase the number of apprenticeships, and that we spend more on transport infrastructure—we are spending £60 billion over the course of this Parliament—will help to drive up productivity. Without those measures, our productivity levels would not be as high as they are. Further work still needs to be done, but policies that result in, for example, financial crisis so that we cannot afford transport infrastructure spending or that drive investment away from this country by being unfriendly to business will only damage productivity and will not help.
George Kerevan (East Lothian) (SNP)
On investment in transport infrastructure, the Budget surely says that between 2018-19 and 2019-20 the Government will cut infrastructure investment by a whole £7 billion in one year in order to accommodate the Chancellor’s desire to run a budget surplus in 2020. How does that justify what the Financial Secretary has just said?
Mr Gauke
The Budget brings forward the expenditure on transport infrastructure in this Parliament so that we can gain the benefits of that investment earlier. The hon. Gentleman should welcome that.
Before discussing the measures in the Bill that address avoidance and evasion, I shall briefly address the issue that the Prime Minister covered earlier today—the Panama papers. Those papers have again put the spotlight on the global scourge of tax evasion and avoidance. As the Prime Minister set out earlier today, we are taking further action. First, HMRC and the National Crime Agency will lead a new joint taskforce to analyse the Panama papers and take rapid action where there is wrongdoing. It will initially have new funding of up to £10 million and will report to the Chancellor and the Home Secretary later this year.
Secondly, we will bring forward plans to introduce a criminal offence for corporations which fail to stop their staff facilitating tax evasion, ahead of next month’s summit to tackle corruption in all its forms. For the first time, companies will be held criminally liable if they fail to stop their employees facilitating tax evasion. Thirdly, our Crown dependencies and overseas territories have agreed to provide UK law enforcement and tax agencies with full access to information on the beneficial ownership of companies. We have finalised arrangements with all of them except Anguilla and Guernsey. Guernsey currently has elections and its Parliament is not sitting, but we expect both those territories to follow in the coming days and months. For the first time, UK tax and law enforcement agencies will see exactly who really owns or controls every company in those territories. This Government’s message is clear: there are no safe havens for tax evaders, and no one should be in any doubt that the days of hiding money offshore to evade tax are gone.
Mr Gauke
The move is towards reciprocal agreements, but for the first time our law enforcement agencies and our tax authority, HMRC, will have access to information held about beneficial ownership. That is a significant step forward and must be viewed in the light of the fact that we have introduced the common reporting standard, meaning that much more information is provided automatically to our tax authority in respect of money held there.
Mr Gauke
I want to make a little more progress.
It is vital that we support businesses through low taxes. We must also ensure that tax is paid where it is due. This Government have set out a comprehensive package to tackle avoidance and evasion. In total this package will raise £12 billion by 2020-21. The Bill implements a number of those measures.
First, we are leading the way internationally by being the first country to adopt the OECD recommendations on hybrid mismatch arrangements. The Bill will introduce new rules to stop multinationals avoiding paying their fair share of UK tax through the use of cross-border business structures or financial transactions. It is estimated that this will raise more than £1.3 billion over the next five years. Secondly, we are ensuring that profits from the development of UK property are always subject to UK tax. This will level the playing field between UK-based and non-UK-based developers and raise £2.2 billion in revenue by 2020-21.
Finally, we will target the unfairness that many small businesses feel when they compete against companies on the internet. Overseas sellers are evading between £1 billion and £1.5 billion of VAT each year on sales to UK customers via the internet, unfairly undercutting British business and abusing the trust of UK customers. The Bill will provide stronger powers to require overseas sellers to appoint a UK tax representative who can be made liable for the VAT owed. This is part of a package of measures designed to level the playing field for firms trading in the UK. Once again, this Government have introduced a Bill which makes it clear that everyone has a responsibility to pay the tax they owe.
Robert Jenrick (Newark) (Con)
I am grateful to the Minister for giving way, and grateful for the Prime Minister’s and the Minister’s announcements today on tax. May I make two suggestions to the Minister? One is that the UK, through HMRC, should consider adopting the US model that requires taxpayers to list as part of their tax return all foreign bank accounts where they hold more than a minimal amount of money. That would force UK citizens to list those bank accounts that they might hold in other jurisdictions. Secondly, would the Government consider looking into worldwide taxation of earnings, which the US has? That would force UK passport holders to decide whether they want to pay UK taxes for the privilege and security of holding a passport.
Mr Gauke
I am grateful to my hon. Friend for those suggestions. We are not persuaded by the move towards worldwide taxation. On providing information about offshore accounts, if tax is due, people have to provide that information. It is worth pointing out that we are moving into a different environment where it is that much easier for HMRC to obtain information about foreign bank accounts, and it is much, much harder to evade tax, thanks to the common reporting standard and the progress that we are making on beneficial ownership.
The Finance Bill provides opportunities for households. It supports British firms seeking to create jobs and growth, and it ensures that businesses pay the tax that they owe. At a time when storm clouds are gathering on the global horizon, it is right that we do all we can to make our economy strong and secure, to put stability first, and to ensure that the UK remains fit for the future. That is what this Finance Bill does, and I am delighted to commend it to the House.
National Reform Programme
David Gauke Excerpts(8 years, 2 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr David Gauke)
On 24 March, the Government published the UK 2016 national reform programme. The document was sent to the European Commission, as part of the European semester.
National Reform Programme
Under Council recommendation 2010/410 of 13 July 2010, member states send national reform programmes each year, which report to the Commission on their structural reforms and plans.
The UK 2016 national reform programme reports on actions taken by the UK as a whole, including by the Government and by the devolved Administrations where policy responses are of a devolved competence.
The 2016 national reform programme:
puts the UK’s structural reforms in the context of deficit reduction, the 2015 autumn statement and Budget 2014
reports on the broad macroeconomic context
reports on policies to tackle the three country-specific recommendations addressed to the UK by the June 2015 European Council: correcting the deficit, boosting housing supply, and addressing skills mismatches and improving the availability of childcare
sets out the UK’s approach to national monitoring, in line with the five headline Europe 2020 targets agreed by the European Council in June 2010.
The national reform programme is based heavily on the announcements and forecasts of Budget 2016 and the autumn statement and spending review 2015. It is, furthermore, drawn entirely from information already in the public domain.
A copy of the document has been deposited in the House of Commons Library and is available on the Treasury website.
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