National Reform Programme
David Gauke Excerpts(8 years, 1 month ago)
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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.
[HCWS664]
Section 5 of the European Communities (Amendment) Act 1993
David Gauke Excerpts(8 years, 1 month ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
I beg move to move,
That this House approves, for the purposes of Section 5 of the European Communities (Amendment) Act 1993, the Government’s assessment as set out in the Budget Report and Autumn Statement, combined with the Office for Budget Responsibility’s Economic and Fiscal Outlook and Fiscal Sustainability Report, which forms the basis of the United Kingdom’s Convergence Programme.
After four days of debating the Budget I am sure the whole House will welcome a further opportunity to debate the UK economy, given the information that will be provided to the Commission this year under section 5 of the European Communities (Amendment) Act 1993.
As in previous years, the Government inform the Commission of the UK’s economic and budgetary position as part of our participation in the EU’s stability and growth pact. The convergence programme explains the Government’s medium-term fiscal policies as set out in the 2015 autumn statement and Budget 2016. It also includes the Office for Budget Responsibility forecasts. As such, it is based entirely on previously published documents that have been presented to Parliament. It is the content, not the convergence programme itself, that requires the approval of the House for the purposes of the 1993 Act.
Mr David Nuttall (Bury North) (Con)
Will my hon. Friend explain, for the benefit of the House, what he understands by the meaning of the word “convergence”?
Mr Gauke
The important point here is that the United Kingdom is not obliged to converge with other EU member states. If I remember correctly, the terminology dates back to the Maastricht treaty, and this is a part of the process that originates from that. The UK is not subject to any sanctions as a consequence of our participation in this process, nor are we required to take any directions from the European Commission in respect of our economic policies.
John Redwood (Wokingham) (Con)
But surely the purpose of tabling the numbers to the Commission is that it puts it under what it calls “surveillance”? It can then make an adverse report. It is very clear that the intention is that our budget deficit should never be more than 3% of GDP. I note that, for the first time in some time, the Government will at least get the budget deficit below 3%. I am in favour of doing that anyway, but is it not the case that they have to do that because that is what convergence is all about?
Mr Gauke
It is the case that the provision dates back to the Maastricht treaty—no doubt my hon. Friend the Member for Stone (Sir William Cash) can provide further details on its history—which was incorporated into the European Union (Amendment) Act 1993. That requires us to submit a report. The important point for the House is that this does not give the European Commission the ability to impose sanctions on the UK. I am in complete agreement with my right hon. Friend that the UK should not have excessive deficits, but that is a matter ultimately decided by this House, this Parliament and the elected Government of the United Kingdom.
Sir William Cash (Stone) (Con)
I know my hon. Friend listened to what I said in my point of order, so I would like to address the point to him personally. Section 5 states:
“Her Majesty’s Government shall report to Parliament for its approval”—
on the basis that it is accurate—
“an assessment of the medium-term economic and budgetary position”.
It is absolutely clear, unless he can tell me that this document was prepared since the controversy of the past few days, that this cannot be accurate and nor can it be a proper assessment. To report to Parliament something that is not accurate is quite an important and rather difficult problem for the Minister, is it not? What measures will he take to correct the position, so that Parliament can approve it on the basis of an accurate assessment?
Mr Gauke
I will return to that point later, but let me address it in short now. The information provided to the Commission under this process is and has always been based on information already published. It is not a new exercise. We do not ask the OBR to go through the process once again. It is required to produce its documentation and make its assessments at the times of Budgets and autumn statements, and we do not think that our requirement under European legislation is such that we should require the OBR to go through that process again.
The essential position of the public finances remains the same. Notwithstanding the announcement on personal independence payments, it remains the case that from next year debt will be falling every year, that the deficit will be falling each and every year of this Parliament and that we will be in surplus in 2019-20. I suspect that my hon. Friend the Member for Stone (Sir William Cash) would not be keen for us, as a consequence of this requirement—I suspect he is no enthusiast for our going through this process in the first place, but the fact is we have to go through it—
Sir William Cash
I just want to put this to bed. I have made the point that the documentation cannot be accurate—unless my hon. Friend is going to tell me the Government have changed the figures since publication—but there is a second point. It appears from the figures, which can be a bit confusing for some people, that there is a black hole. Some people allege it is as much as £4 billion and others say it is only £1.3 billion—it relates specifically to PIP—but he will appreciate that it is not possible for the documentation to be accurate. This has nothing to do with the OBR as such—it is not the OBR report being submitted—but concerns the Government’s own assessment. Will he be kind enough to get that right? It is important that we are accurate.
Mr Gauke
Our principled approach over several years has been that the documentation provided to the Commission is based on the most recent publications. I do not think it would be sensible or proportionate to rerun elements of a Budget process purely for an EU audience. That would not be the right thing to do.
George Kerevan (East Lothian) (SNP)
On the accuracy of the information being transmitted to the Commission, there is another matter, which has not been brought up. The figures for February’s tax receipts have led to a significant increase in February borrowing. It is therefore impossible in the final month of the financial year for the Government to hit their declared target for borrowing. It will be greater than the target—so, again, the information is inaccurate.
Mr Gauke
Again, I make the same principled point. We provide information already published in these reports—we do not seek to amendment it—although the hon. Gentleman makes an interesting point: should this be updated monthly in the light of public finance numbers? I would make a second point about the public finances, however. Having been in the Treasury for a little while now, I know that public finance numbers can be quite volatile, so one should take good news and bad on a monthly basis with a pinch of salt. It is only when one steps back that one has a good view of the overall position, and that is what the OBR does twice yearly.
On the process, I remind the House that although the UK participates in the stability and growth pact, by virtue of our protocol to the treaty opting out of the euro we are required only to endeavour to avoid excessive deficits. The UK cannot be subject to any action or sanctions as a result of our participation in the pact. Following the House’s approval of the economic and budgetary assessment that forms the basis of the convergence programme, the Government will submit that programme to the European Commission. The Commission is expected to make its recommendations to all EU member states in mid-May. These recommendations will then be agreed by Heads of State or Government at European Council.
Mr Nuttall
This process takes place, as we both know, every year, and we have this debate every year. What, however, is its purpose? What possible benefit is there in going through the motion or charade of submitting this document to Brussels every year? What are the benefits for this country and for my constituents?
Mr Gauke
Apart from the fact that the law requires us to do this, I would tell my hon. Friend that the UK has a proud record of structural reform. We are performing better than many other EU member states. To the extent that other such states are able to examine the measures that we have been taking to improve the performance of the UK economy and to the extent that they see it as an example well worth following, this will help to strengthen other EU member states’ economies, which might have a benefit to the constituents of my hon. Friend. The fact that we are leading the way as the fastest-growing major western economy means that we have a proud record. We should not be hiding our light under a bushel.
Budget 2016 set out the Government’s assessment of the UK’s medium-term economic and budgetary position. In uncertain times and against a deteriorating global economic outlook, the Budget delivers security for working people. It takes the next bold steps in the Government’s long-term economic plan. The UK is forecast to grow faster than any other G7 economy this year, with employment at record highs. Against that, productivity growth is weaker than forecast, while globally the economic picture is less positive than it was six months ago.
The OBR tells us that, in every year of the forecast, our economy grows and so, too, does our productivity, but it has revised down growth in the world economy and in world trade. The OBR also notes concerns across the west about low productivity growth, and has revised down potential UK productivity growth. In the face of the new assessment of productivity and the slowing global economy, the OBR now forecasts that UK GDP will grow by 2% this year, 2.2% again in 2017 and then 2.1% in each of the three years after that.
I shall not go through all the figures that have been debated at some length relating to the deficit and the debt, and I shall not go through all the Government’s measures. What is clear is that we are restoring our public finances, heading towards a surplus at the end of this Parliament and reducing the deficit year on year. I hope that the House will, in line with section 5 of the European Communities (Amendment) Act 1993, approve the economic and budgetary assessment that forms the basis of the convergence programme. I look forward to hearing this evening’s debate.
Section 5 of the European Communities (Amendment) Act 1993
David Gauke Excerpts(8 years, 1 month ago)
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Mr Gauke
The debate has addressed both the Budget and our membership of the European Union, so I am grateful to be on my feet at this point, and not later.
Let me respond to some of the points that have been made. To come back to what I said to my hon. Friend the Member for Stone (Sir William Cash) about the numbers, it is important that the document is based on information that has been published in advance and that we do not produce a mass of separate information and documentation for the purposes of meeting this requirement.
As my right hon. Friend the Member for Wokingham (John Redwood) will be aware—indeed, he touched on this—the requirement goes back to the 1993 Act. We are complying with obligations in our domestic law to provide this information, and it is therefore right that we do so.
The point raised by my hon. Friend the Member for Stone about our trade deficit with the European Union brings me to the wider issue of our membership of the EU. I know that he shares with me a belief in free trade, and in transactions where there is a willing buyer and a willing seller, both parties benefit from the transaction. The point I would make in the context of our membership of the EU is that, whereas 44% of our exports go to the European Union, only 7% of the European Union’s exports come to the United Kingdom.
My right hon. Friend the Member for Wokingham mentioned the contributions we make to the EU. It is worth pointing out that, thanks to the deal secured by the Prime Minister, our net contributions—whether in cash terms, in real terms or as a proportion of GDP—are in fact falling.
Let me turn to the remarks made by the hon. Member for Wolverhampton South West (Rob Marris), who speaks as a shadow Treasury Minister. For the first time in the six years I have been a Treasury Minister, we have heard an apology from the Labour Front Bench for borrowing too much money before the crash. That is something the hon. Gentleman deserves some credit for, because, try as we might on many occasions, we never got one out of Ed Balls.
The hon. Gentleman criticised the Government’s record on borrowing, but let us be clear: had we stuck with the structural deficit that we inherited, by 2020 we would have borrowed an additional £930 billion over 10 years. It is also worth pointing out that in May 2010, the International Monetary Fund forecast the UK to have had the largest budget deficit in the G20 that year. Between 2010 and 2016, the UK is forecast to have reduced its headline deficit at the second fastest rate in the G7—it is second only to the United States. The IMF forecasts that the UK will reduce its net debt as a share of GDP by more than any other G7 country between 2015 and 2020. If the hon. Gentleman believes that the problem is that we are borrowing too much money, perhaps he could explain why, time and again, the Labour party has opposed every measure we have taken to reduce the deficit.
We have had a lively debate, and I hope the House will support and approve the motion.
Question put.
Budget Changes
David Gauke Excerpts(8 years, 1 month ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
John McDonnell (Hayes and Harlington) (Lab)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on changes to the Budget.
The Financial Secretary to the Treasury (Mr David Gauke)
Immediately after this urgent question the Prime Minister will make a statement, and following that the Secretary of State for Work and Pensions will set out the Government’s position on personal independence payments and the welfare cap. For the rest of the day the debate on the Budget will continue, and tomorrow it will conclude with the Chancellor of the Exchequer responding. The House will therefore have three opportunities to discuss these issues before voting on the Budget tomorrow. I am grateful for the opportunity to talk about how this Government, through our long-term economic plan, are creating growth, generating employment, cutting the deficit, and securing long-term prosperity for the people of this country.
The Budget delivered last week by my right hon. Friend the Chancellor of the Exchequer set out how we are taking more people out of income tax, supporting small businesses, encouraging investment, tackling tax avoidance, helping young people to save, and investing in our education system, all while restoring the public finances. That is what the British people voted for last May, and that is what we are delivering.
John McDonnell
Thank you, Mr Speaker, for granting this urgent question. I asked it because the Budget process is in absolute chaos. It is unprecedented for a Government to have withdrawn a large part of the Budget and accepted two Opposition amendments before we have even reached the third day, and from what we have heard from the Chief Secretary to the Treasury today, we are little wiser. I have some sympathy for the hon. Gentleman, who has been sent out yet again to defend the indefensible, while the Chancellor insults this House by his refusal to attend.
This whole debacle started two weeks ago when the Government announced cuts of up to £150 a week in personal independence payments to disabled people. By the day of the Budget last week, we discovered that those cuts to disabled people had been forced through by the Chancellor to pay for cuts in capital gains tax for the wealthiest 5% in our society, and for cuts in corporation tax. I agree with the former Work and Pensions Secretary: such cuts are not defensible when placed in a Budget that benefits high earners.
How can the Chancellor any longer suggest that we are “all in this together”, when the Institute for Fiscal Studies confirmed today that poorer working age households with children will be the hardest hit? Will the Minister rule out any further cuts to support for people with disabilities in the lifetime of this Parliament? Over 600,000 disabled people and their families have been caused considerable distress over the last week, and they need the reassurance that their benefits are safe. If the PIP cuts are not going ahead, the money required from the Department for Work and Pensions still sits in the Red Book.
Will the Chief Secretary tell us which other vulnerable groups the Chancellor is considering targeting for cuts? If the Chancellor halts the attack on disabled people, a £4.4 billion black hole is created in the Budget. Add to this the billions of unidentified cuts, and the amendments on the tampon tax and solar power that we have won today, and within five days an enormous hole has appeared in the Budget. Is not the prudent thing for the Chancellor to do to withdraw this Budget and start again? I say that this is no way to deliver a Budget and no way to manage an economy.
Mr Gauke
First, may I thank the shadow Chancellor for promoting me to Chief Secretary to the Treasury? Secondly, may I just make this point about disability benefits? There is no question of this Government cutting disability benefits to the level we inherited in 2010. Spending on disability benefits has gone up by £3 billion in real terms. Thirdly, does the shadow Chancellor really want to talk about fiscal black holes? Does he really want to do that? [Interruption.]
Last week the Chancellor of the Exchequer reported on an economy set to grow faster than any other major advanced economy in the world. With wages up, the deficit cut by almost two thirds and 1,000 more people in work every single day, our economic plan is delivering for Britain. It is a Budget that continues this economic recovery, a Budget that takes us into surplus by the end of this Parliament, a Budget that backs British businesses, protecting jobs in difficult economic times, a Budget that helps more people buy their first home or save for their retirement, a Budget that builds our young people’s skills and invests in educating the next generation, and a Budget that helps to close the gaps between rich and poor and between north and south, because we believe in helping people to succeed wherever they come from. Since 2010, inequality is down, child poverty is down, pensioner poverty is down, the gender pay gap is smaller than ever, while the richest—[Interruption.]
Mr Speaker
Order. When the Minister is addressing the House, he is entitled to be heard. I know the Minister is raising his voice, but there should be no requirement to do so. Experience shows that all sides of the argument will be heard. Members need have no worry on that score. In the first instance, the Minister must be heard.
Mr Gauke
The richest 1% are paying a greater proportion of income tax revenue than in any single year of the Labour Government. This is the Government that introduced the national living wage, the Government that increased the personal allowance—in a year’s time, a typical basic rate taxpayer will pay over £1,000 less in tax than they paid in 2010—and the Government that are helping to generate record numbers of jobs, helping young people get on the property ladder, increasing spending on health and education, and disability benefits too, and protecting pensions and helping people achieve their aspirations at every stage of their lives. Delivering for Britain, creating economic security, jobs and growth—that is the record of this Government and the record of this Chancellor, and it is a record to be proud of.
Mr Kenneth Clarke (Rushcliffe) (Con)
Does my hon. Friend the Financial Secretary agree that the first duty of a Chancellor and his Treasury team when preparing a Budget is to have regard to the medium-term national interest and to provide sound finances for the benefit of our businesses, our investments and our employment? If we now have a situation in which Chancellors are expected to produce, on every occasion, popular spending commitments and popular tax cuts, while there is a failure to control out-of-control budgets, we will have the sort of economic performance achieved by the recent Governments of Greece, Italy or the United Kingdom under Gordon Brown.
Stewart Hosie (Dundee East) (SNP)
We are shortly to hear a statement from the Department for Work and Pensions, and if rumours are correct, it will announce a substantial change to the Budget announcements that we heard only last week. That is likely to result in either substantial extra borrowing or a requirement for substantial extra taxes or, potentially, the shredding of the fiscal charter rules. In any case, there is likely to be a substantial change to last week’s Budget. It is not good enough to announce that in a quick statement; surely it should require a supplementary corrective Budget. Let me ask the Minister whether his right hon. Friend the Chancellor has pencilled in a date for a summer Budget—and if he has not, may I suggest he does so now?
Mr Gauke
As the hon. Gentleman says, there will be a statement from the Secretary of State for Work and Pensions, and we also have two further days of Budget debates. As for changes to the fiscal position, in view of the oil price changes of recent months, I think we should look at the consequences for Scotland if it had been independent.
John Redwood (Wokingham) (Con)
On 9 December, the Government issued a policy document announcing an increase in VAT on energy-saving materials from 5% to 20% to raise £65 million in the first full year. May I take it that I can now welcome the Government’s decision not to go ahead with that proposal? I would dearly love it if they did not proceed with it. Also, how are they going to deal with the fact that the European Court and European VAT law require us to impose this very unpopular tax?
Mr Gauke
The decision was taken some weeks ago not to proceed with any changes to VAT on energy-saving materials in this Finance Bill because new evidence had emerged and we no longer believed that we needed to go ahead with what was previously suggested. It is also the case—the Prime Minister will say something about this later—that because the European Commission and other member states are willing to agree to our arguments about the need for greater flexibility on VAT rates, we do not believe that these changes will be necessary.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
Five days ago, the Chancellor stood at that Dispatch Box and published the Budget scorecard with a £4.4 billion cut to PIP. Where is the revised scorecard without it? Is it true that this cut will instead come from elsewhere in the DWP budget? If the Chancellor is too scared to answer questions in this House on the issue, he is not fit to do the job.
Mr Gauke
The Chancellor will debate the Budget resolutions tomorrow evening, and he will be the first Chancellor of the Exchequer to have done so since my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke). In 11 Budgets, Gordon Brown never once participated in the debate on the Budget apart from in his initial speech. As far as the public finances and compliance with the welfare cap are concerned, we will set things out at the autumn statement. Let us be absolutely clear that with the Labour party appearing to be upset about the public finances, Labour Members should listen to what they have been saying for the last six years.
Sir Edward Garnier (Harborough) (Con)
My hon. Friend will know that members of the armed forces are sadly not immune to mental health problems and that, even more sadly, some of them take their own lives. As a member of the advisory board of the Samaritans, may I thank the Minister and my right hon. Friend the Chancellor for the £3.5 million given to the Samaritans to assist military personnel who are suffering in this way?
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister has to accept that there will be a serious problem with the votes on the Budget resolutions tomorrow. How on earth is the House supposed to make a judgment when page 103 of the Red Book has been totally ripped up and changed? We are none the wiser about the contents of that section. Will he just answer one question? On a scale of one to 10, how embarrassed is he today?
Stephen Hammond (Wimbledon) (Con)
The role of the Budget is surely to promote growth and create employment. Has the Minister noticed that the small business rate relief measures have been widely welcomed by the Federation of Small Businesses because they will promote growth and employment across all strata of society?
Mr Gauke
Yes; my hon. Friend is absolutely right. There has been strong support from small businesses for the contents of this Budget. This is a Government who are backing small businesses and ensuring that they can provide the growth and employment opportunities that the British people need.
Tim Farron (Westmorland and Lonsdale) (LD)
I regret the chaos that one tends to get with these unstable single-party Governments, but not half as much as I regret the failure of the Chancellor to be here to answer for himself. His Budget will leave the richest 10% of people £260 better off, and, until he was found out this weekend, that was going to be paid for by punishing the disabled. Does not all that conjuring just show that the Chancellor’s choices are driven by cynical politics, and not by economic necessity? Should not the fiscal charter, which is now utterly discredited, be scrapped?
Mr Gauke
Let me point out to the House that 28% of income tax was paid by 1% of taxpayers in 2013-14. Under the policies that we are pursuing, the highest earning 20% will now be paying more than half of all tax revenues. That would not have happened had we stuck with the tax system that we inherited in 2010.
James Morris (Halesowen and Rowley Regis) (Con)
Does the Minister agree that what the British people want, and what they voted for 10 months ago, is a Government who encourage growth, creating employment on a scale not seen for 30 years, and who take the low paid out of tax altogether while still focusing on investment in the health service and in mental health and other issues, making them a one nation, compassionate Conservative Government?
Helen Goodman (Bishop Auckland) (Lab)
As the Financial Secretary to the Treasury has said, the cut in business rates has been welcomed by the small business community. In oral questions an hour ago, Department for Communities and Local Government Ministers said that local authorities would be completely compensated for that reduction, yet there is no sign of that in the Red Book either. Is this not simply another £1.7 billion black hole?
Philip Davies (Shipley) (Con)
I very much support the Chancellor in wanting to live within our means and trying to balance the budget as quickly as possible. In my normal spirit of helpfulness, may I suggest that the problem is that too many Government Departments’ budgets are ring-fenced, meaning that the other Departments face cuts year after year? Is it not time to end the ludicrous ring-fencing of the international aid budget?
Mr George Howarth (Knowsley) (Lab)
Harold Wilson once said that a week was a long time in politics. How long is a long-term economic plan? Three days? Four days? Five?
Mr Gauke
Let us be clear: this is a Government who have turned the economy round and delivered this country as the fastest-growing major western economy in 2014. We are forecast to be the fastest-growing again. We have record levels of employment. The deficit will be down by two thirds by the beginning of the next fiscal year. That is what this Government are delivering and will continue to deliver.
Chris Philp (Croydon South) (Con)
Will the Financial Secretary confirm that spending on disability payments has increased by £2 billion over the past five years and will increase by a further £1 billion over the coming five years?
Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP)
Today’s urgent question is not about the Budget documentation, the EU referendum or who is going to be the next leader of the Tory party, but about the hundreds of thousands of disabled people across this country and their fate. In the absence of the Chancellor today, will the Minister take the opportunity to apologise to all the disabled people across the country who have been left in turmoil over the past few days in relation to what support, if any, they are going to get from this Government? What are the future plans for them?
Nadhim Zahawi (Stratford-on-Avon) (Con)
You frequently remind us, Mr Speaker, about the people listening and watching at home—our constituents. On the second day of the Budget debate, the shadow Chancellor pledged that if the Government would look again at the personal independence plans, the Opposition would not play politics with that. Does my hon. Friend agree that this is too serious an issue to play politics with?
Rachel Reeves (Leeds West) (Lab)
Last week’s Budget makes the 2012 omnishambles Budget look like a model of good policy making. Can the Financial Secretary confirm that the Red Book is still the basis for the Budget and, if it is, that the £4.4 billion cut to disability benefits still stands?
Mark Spencer (Sherwood) (Con)
Some 600,000 small businesses will benefit from the rate relief cut. Will the Financial Secretary continue to support those small businesses, which generate the jobs for those people who want to work and generate the tax to support those people who cannot?
Hywel Williams (Arfon) (PC)
One of the smaller, disregarded mysteries of the Budget is the announcement of the north Wales growth field, which seems to exist in name only. Will the Minister enlighten the House about its details?
Simon Hoare (North Dorset) (Con)
Does my hon. Friend agree that it is thanks to the steadfast stewardship of the economy by our right hon. Friend the Chancellor and the Treasury team for the past six years that this year we have been able to introduce a Budget that has supported small businesses, supported the motorist, supported and helped local brewers and the pub industry, and that continues policies that support business and create jobs? Only steadfastness of purpose delivers that. Strength to the Treasury team’s elbow.
Mr Gauke
My hon. Friend puts it very well. This is a Government, and this is a Chancellor of the Exchequer, who have turned round the economy. We are in a position to be growing strongly compared with our international competitors, and we are bringing the public finances under control, having inherited the mess that would did in 2010.
Stephen Timms (East Ham) (Lab)
The Chancellor made no effort to justify the cut in disability benefits in the Budget statement, beyond saying that it would save a lot of money. Yesterday, we heard from the former DWP Secretary that the Chancellor’s view is that people claiming disability benefits will never vote Conservative so there is no reason for restraint in cutting their benefits. Will the Financial Secretary respond to that allegation?
Mr Robin Walker (Worcester) (Con)
Will the Minister confirm that, as well as continuing to take thousands of my constituents out of paying income tax, and as well as shifting the burden of taxation from small businesses, through business rates, to multinationals, the Government remain committed to a progressive target of halving the disability employment gap?
Ian C. Lucas (Wrexham) (Lab)
Last Wednesday, the Chancellor announced that this was a Budget for the next generation. Which member of the next generation will succeed the Chancellor?
Bob Blackman (Harrow East) (Con)
Does my hon. Friend agree that the best way to reduce the welfare bill is to create more jobs and to give people the opportunity to have the dignity of earning their own living, rather than being stuck in a life on benefits?
George Kerevan (East Lothian) (SNP)
As of last Wednesday, the Chancellor has delivered five Budgets in 15 months—one every three months. Are we to take it from the Minister’s statement that the Chancellor wishes to improve on that record and give us a new Budget every week?
Kevin Foster (Torbay) (Con)
I am sure the Minister, like me, will see the slight irony in the fact that an urgent question on the Budget is delaying an announcement and a debate on the Budget. However, will he reassure me that the Government, in looking at Budget changes, will be more influenced by a long-term economic plan than by the thoughts of Chairman Mao?
Rachael Maskell (York Central) (Lab/Co-op)
A simple question: when will the Budget schedule be published?
Paul Scully (Sutton and Cheam) (Con)
Will my hon. Friend confirm that the many positive things in the Budget—including the small business rate changes, which will remove a lot of business rates from independent shops in Sutton, Cheam and Worcester Park, and the tax threshold changes, which will help a lot of people who should never have been caught by the 40% tax threshold, including many public sector workers—will go ahead as planned?
Mr Gauke
Yes, I can confirm that. The changes to small business rate relief will help hundreds of thousands of businesses, particularly small businesses. We are delivering on the pledge in the Conservative party manifesto to increase the higher rate threshold to £50,000—this Budget takes it to £45,000—and we are also raising the personal allowance. The typical basic rate taxpayer is now paying more than £1,000 less in income tax as a consequence of the changes we have made.
Mr Chuka Umunna (Streatham) (Lab)
The Minister has talked about debt and our record. Of course, the last Government borrowed more in five years than the Labour Government did in 13 years. We understand that Conservative Members are clamouring for a change to the PIP proposals, on the basis that they disproportionately hit the disabled. If that is the case, why not also reverse another measure that disproportionately hits the disabled—namely, the disgraceful and appalling bedroom tax?
Mr Gauke
Let me deal with this point. During the whole of the last Parliament, we debated in this place measures to reduce spending and the Labour party constantly opposed them. It argued that we should borrow more—I presume this is what the hon. Gentleman means from what he has just said—to borrow less. If that is the position of the shadow shadow Chancellor, it is not much of an improvement on that of the shadow Chancellor. It is right that we try to find savings in the welfare budget, and the spare room subsidy is an important part of that.
David Morris (Morecambe and Lunesdale) (Con)
Before I became a Member of Parliament, I was one of a dwindling number of self-employed people in this country. The self-employment sector now numbers 4 million-plus. Does my hon. Friend agree that we have cut back on red tape on self-employment and put more money into the self-employed, which is more than the Labour party did in 13 years? I was a self-employed person, so I can speak with authority on that.
Mr Gauke
My hon. Friend brings much expertise to this issue, and I know that he is very pleased that one of the things we were able to do in the Budget was to finally remove class 2 national insurance contributions. That was a tax on the self-employed and it was also a significant administrative burden, so I am pleased that we have been able to remove it.
Mark Durkan (Foyle) (SDLP)
May I express the shock and sadness in my constituency at the loss of life of a family from Derry in Buncrana last night?
How can the Financial Secretary continue to talk about a long-term economic plan when he is describing what are increasingly ephemeral Budgets? Will the Government finally end the error of their ways in relation to the welfare cap and stop using it as a search engine for benefit cuts?
Mr Gauke
First, may I associate myself with the hon. Gentleman’s remarks and, through him, express the condolences of the whole House to the family who suffered so grievously last night?
On this Government’s approach, we believe that it is in the interest of the whole country that the public finances are on a sound footing. Reducing the deficit from a record level to surplus is a significant challenge, but it is one that we have to meet as a country, and we have to be willing to take the decisions that that involves. That is what this Government were elected to do in 2010 and what we were re-elected to do in 2015, and that is what we will do.
Mr David Burrowes (Enfield, Southgate) (Con)
Will my hon. Friend confirm that there has been no change in the Budget commitment to tackle homelessness with a record boost of some £115 million, which is on top of the protection for the homeless prevention grant? That very much shows this Government’s credentials in protecting the vulnerable.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
Given that the Chancellor has been warning us all about the so-called global cocktail of risks, and given that we learned from the Budget statement that our growth forecasts are down, as are those for our productivity, which is fast reaching crisis point, what possible justification can the Minister offer, considering all the other changes that have already been made to the Budget, for retaining the substantial cut to capital gains tax, which disproportionately benefits the better off and is simply a cut that, at this point, we do not need?
Mr Gauke
One of the important challenges that we face is improving productivity in this country. If we want to improve productivity, we want more investment. If we want more investment, we do not want high rates of tax that discourage investment. May I point out that in terms of capital gains tax, the rate is still higher than the one we inherited in 2010?
Richard Graham (Gloucester) (Con)
Last week, I met two constituents. One of them, Mark, was unemployed for five years from 2007. He has now got a job in security through DWP funding for a Security Industry Authority course. Another, Luke, who has significant disabilities, has been helped by a specialist agency called Pluss to get a good job with B&M. Both those constituents of mine have benefited hugely from the compassionate conservatism that has driven our financial policy. Will my hon. Friend confirm that that will continue and that people such as Mark and Luke will continue to be helped?
Mr David Anderson (Blaydon) (Lab)
In the Chancellor’s speech last week, he referred to £20 million being given to build houses in the south-west of England, and said that that was
“proof that when the south-west votes blue, their voice is heard loud here in Westminster.”—[Official Report, 16 March 2016; Vol. 607, c. 961.]
Does that not prove that this was not in the national interest; it is all about the political and personal interest of the Government and the Chancellor?
William Wragg (Hazel Grove) (Con)
The Budget contained many welcome measures for my constituents. Will the Minister comment on the idea that it is a sign of strength to have a Government who listen? Perhaps we should compare that with Gordon Brown and his refusal to reconsider the 10p tax rate.
Nic Dakin (Scunthorpe) (Lab)
Some £4.4 billion seems to have fallen out of the Budget. Will the Minister confirm that that is the case? When is the Chancellor going to come here and tell us where he is finding the money?
David Rutley (Macclesfield) (Con)
Does my hon. Friend agree that the Government’s positive track record of tackling unemployment and creating apprenticeships clearly demonstrates their commitment not only to enterprise but to improving life chances?
Mr Gauke
The Government’s record is that, again and again, we have taken steps to improve the life chances of the British people. It also helps, in the long term, the life chances of the British people to have public finances under control. Only a Conservative Government will deliver that.
Mary Creagh (Wakefield) (Lab)
Does the Minister agree with the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) that the cuts to personal independence payments for disabled people were
“not defensible in the way they were placed within a Budget that benefits higher earning taxpayers”?
Mr Gauke
Let us be clear about this Government’s record, and let us put this in the context of what the Government have done. As a consequence of the policy changes that we have pursued, it will now be the case that the highest-earning 20% will pay more than half of all taxes. That would not have happened had we stuck with the policies we inherited.
Steve Brine (Winchester) (Con)
The Financial Secretary to the Treasury will have noticed today that the new financial discipline of the shadow Chancellor has not lasted long, because speaker after speaker has promised to spend more and more money without any idea how they are going to pay for it. Will my hon. Friend pass on some thanks from me to the Chancellor, who found £2 million to start a new children’s hospital in Southampton? That will greatly benefit thousands of young people across the south and has nothing to do with the party politics that we are seeing in the Chamber this afternoon.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
We on the Scottish National party Benches agree that the deficit must be cut and that we must control the debt, but that that should not be done on the backs of the poor. With the disability cuts and the £3.5 billion of cuts to come in 2019-20, and with corporation tax cuts, capital gains tax cuts and an increase in the income tax threshold, does the Minister really believe we are all in this together?
Nigel Huddleston (Mid Worcestershire) (Con)
Will the Minister confirm what the top rate of income tax is today, what the top rate of income tax was for 99.3% of the previous Labour Government, and how many basic rate taxpayers have been taken out of paying income tax altogether under the Conservatives?
Barry Gardiner (Brent North) (Lab)
Does the Minister agree that it would have taken real courage for the Chancellor to come here today, and that in failing to show that courage he has shown he is not fit to lead his party? His failure of courage is not only that, however. It is a discourtesy to this House that renders us incapable of properly examining the Budget, because we do not know how the Chancellor proposes to meet his fiscal targets.
Lucy Frazer (South East Cambridgeshire) (Con)
One of the best ways to improve the life chances of those who are either able-bodied or disabled is to invest in education. Does the Minister agree that the £1.6 billion investment set out in the Budget will help the next generation to get the best start in life?
Mr Gauke
This was an excellent Budget for education; it was an excellent Budget for the next generation. If we are going to have the prosperity and economic security the country wants, we have to have a world class education system. That is exactly what the Government are in the process of delivering.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Is it fair to make £4.4 billion of cuts to disabled people through the personal independence payment when they are twice as likely to live in poverty, and at the same time give tax breaks in corporation and capital gains tax?
Mr Gauke
As I say, there will be a statement on personal independence payments later this afternoon. In the past six years, we have seen a significant increase in real-terms spending on the disability living allowance and PIP. We also need to ensure we have a productive economy that creates wealth in the first place. I make no apologies for our wanting to have a competitive tax system.
Rebecca Pow (Taunton Deane) (Con)
One notable point in the Budget was that self-employed people got some help. They can often be the unsung heroes of our communities and they play such an important part in local business. Does the Minister agree that by helping them the Government are really demonstrating that they understand what makes the economy work, and, ultimately, what will benefit so many more people?
Mr Gauke
My hon. Friend is absolutely right. The Government are backing the 4 million self-employed people we have in this country, whether through help with business rates or help with national insurance contributions. We are on the side of those who are going out, taking a risk, working for themselves and creating wealth for the British people.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Nearly 7,000 people with disabilities across Cardiff and the Vale of Glamorgan would have been hit by the cut to PIP. The Minister has not answered these questions, so I will ask them. Where is the Chancellor and why he is not here to apologise? Secondly, how will the £4.4 billion black hole be filled?
Mr Gauke
The Chancellor has worked tirelessly to turn the British economy around, and he is continuing to do that. In terms of a black hole, I just point out that every single day we hear proposals from the Labour party to oppose some spending item or tax cut—more borrowing, borrowing, borrowing.
Craig Williams (Cardiff North) (Con)
This welcome Budget for Cardiff is delivering the Cardiff city deal, in stark contrast to the Labour Assembly Government, who are the most centralising Government in western democracy. Businessmen and women welcome the business rates relief, and the localism in the Budget is incredibly popular. Would my hon. Friend encourage the Labour Assembly Government to follow our lead and empower businessmen and women?
Convergence Programme
David Gauke Excerpts(8 years, 2 months ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
Article 121 of the treaty on the functioning of the European Union (TFEU) requires the UK to send an annual Convergence Programme to the European Commission reporting upon its fiscal situation and policies. The UK’s Convergence Programme will be sent to the European Commission by 30 April. This deadline was set in accordance with the European semester timetable for both Convergence and National Reform Programmes. The Government support the European semester which plays an important role in EU level co-operation on economic and fiscal policy.
Section 5 of the European Communities (Amendment) Act 1993 requires that the content of the Convergence Programme must be drawn from an assessment of the UK’s economic and budgetary position which has been presented to Parliament by the Government for its approval. This assessment is based on the Budget 2016 report and the most recent Office for Budget Responsibility’s economic and fiscal outlook and it is this content, not the Convergence Programme itself, which requires the approval of the House for the purposes of the Act.
Article 121, along with article 126 of the TFEU, is the legal basis for the stability and growth pact, which is the co-ordination mechanism for EU fiscal policies and requires member states to avoid excessive Government deficits. Although the UK participates in the stability and growth pact, by virtue of its protocol to the treaty opting out of the euro, it is only required to “endeavour to avoid” excessive deficits. Unlike the euro area member states, the UK is not subject to sanctions at any stage of the European semester process.
Subject to the progress of parliamentary business, debates will be held on 23 March for both the House of Commons and the House of Lords, in order for both Houses to approve this assessment before the Convergence Programme is sent to the Commission. While the Convergence Programme itself is not subject to parliamentary approval or amendment, I will deposit advanced copies of the document in the Libraries of both Houses tomorrow and copies will be available through the Vote Office and Printed Paper Office.
The UK’s Convergence Programme will be available electronically via HM Treasury’s website prior to it being sent to the European Commission.
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Finance Bill 2016
David Gauke Excerpts(8 years, 2 months ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
Finance Bill 2016 will be published on Thursday 24 March.
Explanatory notes on the Bill will be available in the Vote Office and the Printed Paper Office and placed in the Libraries of both Houses on that day. Copies of the explanatory notes will be available on gov.uk.
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Draft Income Tax (Construction Industry Scheme) (Amendment of Schedule 11 to the Finance Act 2004) Order 2016
David Gauke Excerpts(8 years, 2 months ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
I beg to move,
That the Committee has considered the draft Income Tax (Construction Industry Scheme) (Amendment of Schedule 11 to the Finance Act 2004) Order 2016.
It is a great pleasure to serve under your chairmanship, Ms Dorries. We are considering an order that deals with subcontractors in the construction industry scheme. Members may know that it is a withholding regime that applies to the construction sector. The order requires the approval of the Committee and will apply from 6 April 2016.
As Members may know, the majority of subcontractors in the construction industry can be paid only after their contractors have made a deduction from their payment on account of their annual tax liability. Under the existing rules of the construction industry scheme, set out in sections 57 to 77 of the Finance Act 2004 and the Income Tax (Construction Industry Scheme) Regulations 2005, subcontractors who meet certain qualifying conditions can apply to be paid gross. Therefore, they do not have a withholding deduction taken from their payments.
Gross payment status helps businesses to improve their cash flow and reduces their administrative burdens. Some 82,000 subcontractor businesses are entitled to be paid gross in that way. To qualify to be paid gross, subcontractors must pass three tests that are set out in law: the business test, where the subcontractor must show that they are running a business that includes or consists of construction operations; the turnover test, where the subcontractor must show that their business has a minimum turnover as set out in law; and the compliance test, where the subcontractor must show that they have complied with their tax obligations to Her Majesty’s Revenue and Customs over the previous 12 months. If the subcontractor qualifies for gross payment status, HMRC will tell the subcontractor and all the contractors they work for that the subcontractor can now be paid without deduction. Gross payment status is kept under annual review and can be taken away if the subcontractor does not keep to their tax obligations.
In 2014, the Government held discussions with the industry and published a formal consultation on improving the administration of the scheme. That was well received and generated 43 responses, mostly in favour of the outlined changes. As a consequence, the Government now propose to relax the compliance test for gross payment status. At present, a subcontractor needs to show good compliance across a wide range of tax obligations. From April 2016, a subcontractor will need to meet only three specific obligations within the compliance test. They will need to file any contractor returns on time where they also have subcontractors of their own; pay any monthly liabilities to HMRC as a contractor or employer in their own right; and file their self-assessment or corporation tax return on time. Those changes will make it simpler for subcontractors to achieve gross payment status. They contribute to the Government’s vision for a tax system that is simple to understand and easy to comply with. I hope those explanations are helpful to the Committee. In conclusion, I commend the order to the Committee, and I am happy to answer any questions that right hon. and hon. Members may have on its provisions.
Mr Gauke
I thank the hon. Member for Wolverhampton South West for his questions. He touches on the change to the threshold for the turnover test to £100,000 and asks when he will be able to see the statutory instrument. That SI, together with the online filing mandation, will be laid next week. It will not necessarily be the highlight of his week, but that will be among the things emerging from the Treasury and HMRC next week.
It might be helpful to set out what we are doing to reduce the administrative burden of operating the construction industry scheme. HMRC is improving the online verification service and the CIS online filing service. It is making it easier for subcontractors to obtain gross payment status by reducing the threshold for the turnover test to £100,000 in multiple directorships and partnerships, and amending the regulations to reduce the number of obligations in the initial and annual compliance tests. It is introducing a digital service to allow subcontractors to view their payments and deductions online. HMRC is removing the obligation to file a nil return where a contractor has not paid subcontractors, and it is allowing earlier repayment where a company subcontractor is subject to a winding-up proceeding during the tax year—both measures were implemented in April 2015.
The hon. Gentleman raised the matter of those who, on religious grounds, do not wish to file online. I think some—not all—members of the Plymouth Brethren, for example, object to using computers. HMRC will make provision for persons falling into that category, in very much the same way as was done for real-time filing of pay-as-you-earn. Although not new, this is an issue and HMRC will seek to address it.
The hon. Gentleman asks about estimates of the consequences of these measures. I assure him that he has not missed anything. They have not been published, but they will be shortly—at Budget next week, I anticipate. He has a few days in which to look forward to that.
I do not think these changes throw up too many new challenges for HMRC’s IT systems. HMRC is continuously improving its services and its IT capability. I could take some time to set out the progress that has been made on that front, Ms Dorries, but will say only that HMRC is very much alive to the need to ensure that it is delivering an up-to-date digital service.
In assessing the impact of the measures, as is often the case with tax measures, there is a number of competing objectives. First, there is the need to protect a substantial amount of tax revenue—and the construction industry scheme does precisely that—but to do so in a way that keeps the regulatory burden on businesses and individuals to a minimum. The reforms are intended to continue effectively to protect revenue, which the construction industry scheme is designed to do. HMRC estimates that the construction industry scheme ensures compliance in the construction sector by monitoring payments of subcontractors, which protects £5.2 billion a year. Proper monitoring and the protection of revenue are important, but we want to reduce the regulatory burden and we hope that the measures before the Committee are steps toward getting that right.
I hope that I have given helpful clarification and that the draft order has the support of both sides of the Committee.
ECOFIN
David Gauke Excerpts(8 years, 2 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 8 March 2016. EU Finance Ministers are due to discuss the following items:
Mandatory automatic exchange of information in the field of taxation
The Council will hold a discussion on a presidency compromise text on the Commission’s proposal to amend the directive with regards to the mandatory exchange of information in the field of taxation as part of the EU taking forward the recommendations from the OECD.
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. Following this, the presidency will update the Council on progress to establish a European deposit insurance scheme which the UK is not participating in.
Fiscal sustainability report 2015
Ministers will adopt conclusions outlining the Council’s position on the Commission’s fiscal sustainability report.
Follow-up to the G20 meeting of Finance Ministers and central bank governors on 26-27 February 2016
Following the first G20 of the Chinese presidency in Shanghai on 26-27 February, the Commission and the ECOFIN chair will debrief Ministers on discussions.
European semester 2016: implementation of country-specific recommendations drawing on the country reports and in-depth reviews.
The Commission will report to ECOFIN on the implementation of 2015 country-specific recommendations with a particular focus on removing the barriers to investment. Also, the Commission will present the country reports, published 26 February. This will be followed by an exchange of views.
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Oral Answers to Questions
David Gauke Excerpts(8 years, 2 months ago)
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Neil Gray (Airdrie and Shotts) (SNP)
6. What support his Department provides for British citizens involved in tax disputes with other countries.
The Financial Secretary to the Treasury (Mr David Gauke)
Tax treaties provide protection for UK citizens from discriminatory taxation in other countries. The UK has one of the largest treaty networks, with more than 120 treaties in force. Her Majesty’s Revenue and Customs cannot intervene where a taxpayer is in dispute with a foreign revenue authority on a domestic issue. However, where a UK resident believes that a treaty partner is not applying the treaty properly, they can request HMRC to raise the issue with the other revenue authority.
Neil Gray
I thank the Minister for that helpful answer. My constituent David Duncan is currently being pursued by HMRC’s mutual assistance in the recovery of debt team for a tax payment relating to a time when he was residing in Germany but working in South Korea. Mr Duncan had been assured by his employer that he would have to—
The Financial Secretary to the Treasury (Mr David Gauke)
The Government are cutting taxes to encourage small businesses to grow. Corporation tax will fall to 19% in 2017 and 18% in 2020—the lowest in the G20. The employment allowance will rise by 50% this April, giving employers a £3,000 discount on national insurance contributions, and the Seed enterprise investment scheme supports investment in small, early-stage companies, helping more than 2,900 companies to raise over £250 million.
Neil Carmichael
Does the Minister agree that that impressive package for small businesses will equip them to benefit from the extension of the single market as negotiated by the Prime Minister, including in energy and services, and that this provides an even more emphatic case to remain in the European Union?
Richard Burgon (Leeds East) (Lab)
The plans to move towards quarterly online tax reporting are proving to be deeply unpopular with small businesses, so will the Chancellor confirm the impact on administration costs for small businesses of the Government’s plans for quarterly reporting to Her Majesty’s Revenue and Customs?
Mr Gauke
Overall, the Government are clear that HMRC’s target is to reduce the burden on businesses by £400 million by the end of this Parliament. Moving towards a digital taxation system is something that can help businesses to reduce their costs. We are consulting on the details, but let me make it absolutely clear that there will be no quarterly tax returns, as it has been wrongly reported that there will be in some cases.
Jack Lopresti (Filton and Bradley Stoke) (Con)
13. What fiscal steps he is taking to help people keep more of their earnings.
The Financial Secretary to the Treasury (Mr David Gauke)
The Government have committed to raising the personal allowance to £12,500 and the higher-rate threshold to £50,000 by the end of this Parliament. At the summer Budget, the Government took the first steps towards meeting these commitments by increasing the personal allowance to £11,000 and raising the higher-rate threshold to £43,000 in 2016-17. Twenty-nine million people will pay less tax after these changes and 570,000 will be taken out of income tax altogether.
Jack Lopresti
Does the Minister agree that it would be better to encourage savings by allowing people to keep more of their own money by increasing the tax limit on pensions rather than reducing it, particularly at a time when savers are struggling to get decent returns?
Mike Kane (Wythenshawe and Sale East) (Lab)
T2. The OECD has estimated that tax havens are costing developing countries three times the global aid budget. Does the Chancellor share my frustration over the fact that the UK overseas territories have ignored the pleas of the Prime Minister, and have not introduced beneficial ownership registers? What more can be done to end the secrecy and inaction?
The Financial Secretary to the Treasury (Mr David Gauke)
The United Kingdom is leading the way in respect of a public register of beneficial ownership, but other countries, including the overseas territories, are not committed to that. We continue to engage with them, because we believe that they should follow the same direction as us—as, indeed, should other countries.
Stuart Andrew (Pudsey) (Con)
T8. Tackling the deficit should rightly be a priority for the country. What steps is my right hon. Friend taking to ensure that everyone pays a fair share in meeting that objective?
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
T4. Figures from the Public and Commercial Services Union show that 2,000 HMRC staff in Scotland face redundancy, including 150 experienced and dedicated people in Inverness. At the same time, the HMRC overtime bill is about £6 million a month. Can the Chancellor explain to my constituents how that makes any sense at all?
Mr Gauke
HMRC is engaged in changes that will be focused on 13 regional centres across the United Kingdom. The same proportion of its work force will continue to be in Scotland, which is actually a larger percentage than the population of Scotland. We are seeking to improve the efficiency of HMRC, and we believe that regional centres will enable it to achieve more for less. It is already bringing in more money and a better rate of return than we have ever had before.
Dame Angela Watkinson (Hornchurch and Upminster) (Con)
The local economy in Hornchurch and Upminster comprises thousands of small businesses. Can the Chancellor offer any encouragement to the Federation of Small Businesses, which is pressing for tax simplification in order to reduce the burden of tax administration for small businesses?
Mr Gauke
One of the areas in which we can make progress is the digitisation of the tax system, which could help a lot businesses. I would also make the point that the Office of Tax Simplification has been strengthened and we are putting it on a statutory footing. We are looking forward to seeing a couple of reports from it over the next few days on what we can do to help small businesses in particular.
Dr Philippa Whitford (Central Ayrshire) (SNP)
T9. When services that have been removed from local authority control and centralised in England have been granted the right to reclaim VAT, does the Chancellor accept that the refusal to grant that right to Police Scotland—making it the only UK force to pay VAT—just looks vindictive? Will he not reconsider that decision?
draft Employment Allowance (Excluded Companies) regulations 2016
Employment Allowance (Increase of Maximum Amount) Regulations 2016
draft social security (Contributions) (Limits and Thresholds amendments and national insurance funds payments) regulations 2016
David Gauke Excerpts(8 years, 2 months ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
I beg to move,
That the Committee has considered the draft Employment Allowance (Excluded Companies) Regulations 2016.
The Chair
With this it will be convenient to consider the Employment Allowance (Increase of Maximum Amount) Regulations 2016 (S.I., 2016, No. 63) and the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016.
Mr Gauke
It is a great pleasure to serve under your chairmanship for, I believe, the first time, Mr Wilson.
All three sets of regulations before the Committee deal with national insurance contributions and it seems sensible to debate them together, so I am grateful that the Committee has agreed to that. As a matter of course, I can confirm that all the regulations are compatible with the European convention on human rights.
The substance of the two employment allowance statutory instruments was announced in the Chancellor’s summer Budget on 8 July last year, while the NICs rates and thresholds for the 2016-17 tax year were announced as part of the autumn statement on 25 November.
I will begin with the Employment Allowance (Increase of Maximum Amount) Regulations 2016. The Government are committed to supporting businesses that want to expand their workforce. To that end, the employment allowance was first announced in the Budget in 2013 as a reduction of up to £2,000 a year for eligible businesses and charities on their employer NICs bill. In the year 2015-16 the allowance has benefited almost 1.2 million employers, helping to cut the cost of employment in the United Kingdom.
The regulations increase the employment allowance to £3,000 from 6 April 2016, further supporting businesses and charities to enable them to grow. As a result, 90,000 more employers will be taken out of employer national insurance contributions altogether. Also, firms will be able to employ four workers full-time on the new national living wage next year without paying any employer national insurance contributions.
The draft Employment Allowance (Excluded Companies) Regulations 2016 focus the employment allowance on companies that support employment. Under these regulations, as was announced in the summer 2015 Budget, from April 2016 limited companies where the director is the sole paid employee will no longer be able to claim the allowance. That ensures that the allowance is focused where it should be, on its original objective of helping businesses with the costs of employment. The draft regulations have been subject to public consultation with interested parties, and that finished in January. Her Majesty’s Revenue and Customs anticipates, taking this measure into account, that about 1 million employers will benefit from the employment allowance in the next tax year.
Finally, as hon. Members may be aware, the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016 contain some technical detail, so I hope that they will bear with me while I explain. The consumer price index rate of inflation is the basis of indexation for most of the national insurance contribution limits and thresholds. The CPI rate of inflation was minus 0.1% in the year to September 2015. As a result, not all the national insurance contribution limits and thresholds will need to be changed in the 2016-17 tax year. The exceptions to this are the upper earnings limit, the upper secondary threshold, the upper profits limit and the new apprentice upper secondary threshold.
The upper earnings limit is the level of earnings at which employees begin to pay class 1 national insurance contributions at the additional percentage rate. It is aligned with the point at which higher rate tax is paid. The upper earnings limit will be increased from £815 to £827 per week from 6 April 2016 to maintain this alignment. The upper secondary threshold is the level below which employers are entitled to a 0% rate of national insurance contributions on the earnings of employees under the age of 21. Since its introduction in April 2015, the zero-rate earnings band for employees under the age of 21 has supported the jobs of more than 1.5 million young people. The UST will continue to be aligned with the upper earnings limit and will also be set at £827 a week from 6 April 2016.
From April 2016, employers will also be entitled to a reduction in secondary class 1 national insurance contributions on the earnings of eligible apprentices under the age of 25, which will reduce the cost to employers of providing apprenticeships for young people. The new apprentice upper secondary threshold will be the level below which employers are entitled to a 0% rate of national insurance contributions on the earnings of relevant apprentices. Like the UST, it will be aligned with the upper earnings limit, so it will also be set at £827 a week from 6 April 2016.
In relation to the self-employed, the regulations also set the upper profits limit for class 4 contribution liability. The UPL is the level of profits below which the self-employed pay the main class 4 percentage rate of national insurance contributions on profits above the lower profits limit. The UPL will also rise to maintain alignment with the level at which the higher rate of income tax is payable, to £43,000 for the 2016-17 tax year. The regulations also set the prescribed equivalents of the thresholds and limits that I have mentioned for employees paid monthly or annually.
In the 2016-17 tax year, employers will continue to pay contributions at 13.8% on earnings above the secondary threshold. Employees will continue to pay 12% on earnings between the primary threshold and the upper earnings limit, and 2% on earnings above that. This is in line with the Government’s commitment in the National Insurance Contributions (Rate Ceilings) Act 2015 to provide certainty for businesses and employees by locking the main rate of class 1 NICs for the duration of this Parliament.
I need to ensure that the national insurance fund can maintain a working balance throughout the coming year, which the Government Actuary recommends should be one sixth of benefit expenditure for the year. The regulations provide for a Treasury grant of up to 5% of benefit expenditure to be made available to the fund in the 2016-17 tax year. A similar provision will also be made in respect of the Northern Ireland national insurance fund.
I commend the regulations to the Committee.
Mr Gauke
I am grateful for hon. Members’ remarks on the regulations. I will pick up some of the points raised, particularly by the hon. Member for Wolverhampton South West. On the broader issues to do with the efficacy of the employment allowance, the hon. Gentleman talked about take-up. The most recent take-up statistics released in October last year show 1.17 million employers benefiting from the allowance. Around 680,000 employers—48% of all employers—have been lifted out of employer national insurance contributions altogether since the employment allowance was introduced in 2014-15. A further 90,000 employers are expected to be taken out of NICs when the employment allowance rises to £3,000 as a consequence of one of the regulations before us. It is worth pointing out that over 90% of the benefit of the allowance goes to small businesses with fewer than 50 employees.
In terms of what employers do with the employment allowance, that is a matter for them. The hon. Gentleman was right to refer to the debate that those of us who were around at the time had in respect of the primary legislation. The Government were careful not to put a specific number on this, because it depends on how people make use of the sums involved. Ultimately, it is up to employers as to how they use the allowance. We have not set targets for the number of jobs that we expect to be created. According to research by the Federation of Small Businesses, 29% of small businesses will use the employment allowance to boost staff wages; 28% will employ additional staff; and 24% will invest in resources. This is not attributable to one policy, but we are in the position where we have record levels of employment in this country. A measure that reduces the tax liability for businesses, particularly smaller business, plays a role in ensuring that we have a climate in which job creation is encouraged, and it has helped contribute to record levels of employment.
On the cost of the employment allowance, it is forecast to cost the Government approximately £1.4 billion in 2015-16 in tax revenue forgone, and 98% of that tax revenue is to the benefit of small and medium-sized businesses or employers employing fewer than 250 people. On the value for money assessment, the Government will internally review the employment allowance on various criteria, such as take-up levels, to determine the overall value for money of the policy. As a part of this process, we will speak to interested parties to gauge their views of the allowance and to ascertain ways in which their members are using it. However, at this point, we are encouraged by the wide take-up of the employment allowance; it is helping feed through into an environment that is good for employment and good for our constituents. I am sure it is not the intention of the hon. Member for Wolverhampton South West, but I hope that no one who reads his contributions would jump to the conclusion that the official Opposition are looking to abandon the employment allowance in order to save funds to use for other purposes, because that would be damaging for the many smaller businesses in this country that have done so much to ensure that we have such high levels of employment.
Rob Marris
I started my remarks with a quote from the Chancellor of the Exchequer, with which I agree, on support for small business. However, when dealing with revenue and revenue forgone, we must bear in mind the question of opportunity cost. In round terms, the figures that I have show that it is costing £560 million a year; the Minister talked about £1.4 billion. Either way, it is a lot of money. One has to consider whether such revenue support to encourage businesses to grow, a concept that we support, could be better spent by the Revenue in other ways. For that, one needs to measure. It is a question of how one allocates that money, not of support for business.
Mr Gauke
I note the hon. Gentleman’s remarks, which will no doubt be studied closely, probably by someone in Conservative Campaign Headquarters.
The hon. Gentleman and others have raised concern that the single director provisions could be avoided. We do not accept that avoidance behaviour will be as widespread as has sometimes been suggested. There are anti-avoidance provisions in the original legislation, and the proposed measures strike the right balance between maximising yield for HMRC, on the one hand, and ensuring that tax changes do not affect genuine businesses and charities that create employment, on the other hand. The anti-avoidance provision in the National Insurance Contributions Act 2014 provides that employers who would qualify for the employment allowance only by virtue of avoidance arrangements are disqualified. To be entitled to the allowance, companies with a single director cannot simply pay a second employee £10 to requalify. Rather, the regulations will mean that they must pay the second employee enough to accrue a secondary class 1 national insurance contributions liability, which is currently more than £156 a week.
The relief for apprentices under the age of 25 will be simple for employers to claim by inputting information in their payroll software. HMRC published guidance on 2 February 2016 on gov.uk to let employers know how to apply the relief and which evidence they are required to hold to ensure that it has been properly applied. That will include a record of the framework or standard being followed, which has also been publicised via HMRC’s employer bulletin. Ahead of the next tax year, HMRC will work with the Department for Business, Innovation and Skills to circulate the guidance further.
The purpose of the measure in relation to apprentices under the age of 25 is to provide support to businesses, which is helpful in improving the skills of the workforce in the UK. It is right that we use the national insurance contributions system to encourage employers that are undertaking expenditure in that area. The measure will be welcomed by employers, and it will help to achieve very ambitious targets in ensuring that far more people undertake apprenticeships in this country than in the past. We have seen dramatic progress in recent years, and we wish that to continue. The measure on apprentices under the age of 25 is part of that process.
I hope those points are helpful, and I commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Employment Allowance (Excluded Companies) Regulations 2016.
Employment Allowance (Increase of Maximum Amount) Regulations 2016
Resolved,
That the Committee has considered the Employment Allowance (Increase of Maximum Amount) Regulations 2016 (S.I., 2016, No. 63).—(Mr Gauke.)
draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016
Resolved,
That the Committee has considered the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016.—(Mr Gauke.)