Finance (No. 2) Bill

Debate between David Gauke and Sheila Gilmore

Wednesday 25th March 2015 Commons Chamber

[Mr Gauke]

I have heard the hon. Gentleman make both points in the past, and if I remember correctly, I responded to an Adjournment debate on those matters. There are significant benefits in our tax system for charities, but the Government look at cases partly depending on the demands on the public finances and what is affordable. We have looked in particular at hospices. There is a particularly strong case there, and to some extent they are put at a disadvantage compared with parts of the NHS because of the irrecoverable VAT that they pay. This is a matter that any Government would keep under review. I am sure that the hon. Gentleman, as a persistent Member, will raise the matter again if he has the opportunity to do so in future.

In new clause 1, the Opposition ask us to publish a report on the impact of the increase in the standard rate of VAT in 2010. No doubt, the hon. Member for Birmingham, Ladywood (Shabana Mahmood) will set out her thinking on that, but let me make a pre-emptive strike, if the Prime Minister has not already done so. Before I turn to the details and the imposition of VAT in 2010, I shall briefly set out the context for that decision.

Let us be clear that we increased the standard rate of VAT in 2010 as a consequence of the mess that the Opposition left the public finances in and the fact that, although the previous Government had left a mess, they had not left behind a plan to clear it up. Of course, a tax impact information note was published by HM Revenue and Customs at the time of the June 2010 Budget, but let us look at the situation that we inherited. At that time, the independent Office for Budget Responsibility’s pre-Budget 2010 forecast revealed that the structural deficit—the part of the deficit that will not go away with the recovery—was higher than previously thought: around £9 billion or 0.6% of GDP higher in 2010-11. Debt repayments were forecast to reach more than £67 billion by 2014-15, more than was spent on defence or on schools in England. The UK had one of the highest deficits of any advanced economy, so this Government had to take urgent action to eliminate the bulk of the structural deficit, which is a necessary precondition for sustained economic growth.

[Sheila Gilmore (Edinburgh East) (Lab)]

The Minister referred to the Prime Minister’s pre-emptive strike, but he will be well aware that similar statements were made before the last election. Does not the whole VAT issue illustrate the difference between the parties? The Labour Government’s response to an economic recession was to stimulate the economy by reducing VAT. The response of the incoming Government was to deflate the economy by increasing VAT.

[Mr Gauke]

The previous Government brought VAT back up. We know from his memoirs that the then Labour Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), believed that a Labour Government after 2010 should increase VAT. A Budget document was even published showing VAT going up to, I believe, 18.5%. I know that that was published by mistake, but it clearly shows that serious consideration was given to that. The previous Labour Government recognised that taxes would have to increase. They had proposals to increase employers national insurance contributions, or the jobs tax. Given that there is such uncertainty about the Opposition’s plans for what they would do in government, the question is whether they would rule out increasing employers national insurance contributions.

--- Later in debate ---

[Sheila Gilmore]

Thank you for your guidance, Mr Hood. I am sure that you would not want me to stray on to the whole issue of food banks, which would probably take us to midnight.

In conclusion, new clause 1 would provide us with an opportunity to look at the impact of VAT changes over this Parliament. We believe that they have been regressive and that many of our constituents have been affected, and we are concerned about the future. We need to look very carefully at what has happened before any decisions are made on further increases. We are always taken to task for proposing new clauses to Finance Bills that would set up reviews, and I understand that there are technical difficulties. I am sure that current Government Members will have the same difficulty when they come to scrutinise a Finance Bill in opposition in the next Parliament. Perhaps we will then make the alternative criticisms.

It is important that we fully understand the impact of the VAT changes, and not just through some kind of impact assessment that is done theoretically, but through an assessment of what has actually happened; they are not always the same thing. However, such proposals have been turned down in every Finance Bill I have encountered in this Parliament. The hon. Member for Dover (Charlie Elphicke)—he has still not returned to his seat—and I are obviously similar; we are either terribly keen to serve on Finance Bill Committees, or we are such a soft touch that when our Front Bench teams or Whips ask, “Wouldn’t you like to serve on the Finance Bill Committee?”, we say, “Oh, all right then.” Some of us have certainly done our stints on Finance Bill Committees, and I am sure that we all hope to be able to do so again from a governmental position.

[Mr Gauke]

We have had a lively debate and heard contributions from a number of Members who could be described as Finance Bill recidivists. I am delighted that so many of them were able to participate on this, the last occasion to debate tax matters in this Parliament. The hon. Member for Edinburgh East (Sheila Gilmore) talked about VAT on sanitary products. Under EU law, we are permitted to have a reduced rate for sanitary products—indeed, it has been reduced to 5%—but they are not among the products for which we can have a zero rate under EU law. Consequently, without changes at EU level, it is not possible to reduce it further. I have a lot of sympathy with the argument that is made on that point, but it would need to be addressed at EU level.

Finance Bill

Debate between David Gauke and Sheila Gilmore

Wednesday 2nd July 2014 Commons Chamber

[Mr Gauke]

Let me quickly try to address some of the points that have been raised, many of which related to guidance. As I said earlier, the issue features in Labour’s new clause 9, but it is not directly related to the Finance Bill. I will be as helpful as I can. On the question of whether guidance will only be face to face, the face-to-face offer will be available to those who need and want it. However, that is not to say that it will be the exclusive delivery channel. Not everyone will want face-to-face guidance, as my hon. Friend the Member for Rochford and Southend East (James Duddridge) has made clear. For many people, both now and in the future, other channels will better suit their needs. We are currently considering the appropriate range of options for delivery channels, to ensure that consumer needs are properly understood and met, building on the views and evidence received during the consultation. We have asked the Financial Conduct Authority, working closely with the Pensions Regulator, the Pensions Advisory Service, the Money Advice Service and consumer groups, to co-ordinate a set of clear and robust standards that the guidance will have to meet.

The point was made about costs and, in particular, the £20 million funding. It is important to realise that that is a development fund for the purpose of getting the initiative up and running; it is not to pay for the ongoing costs of the scheme. We will talk more about that later.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does not that illustrate the need for gathering and publishing the information, as proposed by our new clause 9? We are constantly hearing new things, such as, “There will be more costs for guidance, but we don’t know what they are or what will happen.” If the information is going to be gathered anyway, as the Exchequer Secretary constantly assures us, why not publish it to make sure we get this right?

[Mr Gauke]

I do not know whether the hon. Lady was present earlier—[Interruption.] I am pleased that she was. She will have heard me say that we have consulted on this matter and will respond shortly. If I may provide a little more clarity, that will happen before the summer recess, so it is at that point that we will set out our proposals and, obviously, there will be an opportunity over the months ahead for the House to give them considerable scrutiny.

To address the particular point made by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) about whether the numbers in the tax information and impact note have been changed, the answer is no. The TIIN has been amended to take account of the Government new clause and new schedule, but the impacts remain the same, so there is no fiscal cost. I hope that that clarification is helpful.

Lastly, to be clear about the guidance—we will get the full details on it—as we have said throughout, it will be impartial and will not include recommendations for specific products or providers. It will not be a sales process; it is important that the sales process is separate.

I hope that that information is helpful to the House. I hope that new clause 13 can be added to the Bill, and I advise my hon. Friends to oppose the Opposition’s new clause 9.

Question put and agreed to.

New clause 13 accordingly read a Second time, and added to the Bill.

Oral Answers to Questions

Debate between David Gauke and Sheila Gilmore

Tuesday 24th June 2014 Commons Chamber

[Mr Gauke]

Absolutely. If we want to see jobs and investment in this country, we should be taxing jobs and investment less, not more.

[Sheila Gilmore (Edinburgh East) (Lab)]

13. What plans he has to review the effects of the Help to Buy scheme.

Finance (No.2) Bill

Debate between David Gauke and Sheila Gilmore

Tuesday 8th April 2014 Commons Chamber

[Sheila Gilmore]

Value added tax has been a difficulty for a lot of individuals and for small businesses. The amendment is an opportunity for us to review these matters. If Conservative Members are right that such a change would be harmful, a review would show that. It has to be demonstrated to the small businesses of this country why a proposal of this kind is thought to be harmful to our economy.

[Mr Gauke]

It is a great pleasure to serve under your chairmanship, Ms Clark, and to respond to the first of what will no doubt be many detailed debates over the course of this year’s Finance Bill. It may be helpful if I set out a little context as to what the Government have done in terms of corporation tax.

When we came to office in 2010, the main rate of corporation tax was 28%, and the small profits rate was 21% but was due to rise, under the plans of the previous Government, to 22%. In 2010, we set out the corporate tax road map. We set out our ambition to give the UK the most competitive tax regime in the G20. We wanted a corporation tax system that would support, not hinder, growth and would boost investment to support the economic recovery, so we reversed the previous Government's planned increase in the small profits rate and cut it to 20%, and embarked on the biggest reduction in the main rate of corporation tax since the 1980s. Last week, the rate was cut to 21%. Next year it will fall to 20%— the joint lowest rate in the G20.

--- Later in debate ---

[Sheila Gilmore]

I do not think that the Minister has yet addressed the lack of balance in the growth that is being shown, and the concern that has been expressed about that by the IMF and others. If policies such as the reduction in corporation tax were intended to boost manufacturing and exports, I should like to know why that still does not appear to be happening to the degree that would convince people that this is a balanced recovery.

[Mr Gauke]

As a result of our corporation tax reforms, businesses are moving their headquarters here. The north-east of England, for instance, has benefited from Hitachi’s investment. However, if the hon. Lady’s point is that the job has not yet been done and that further steps are needed to make our economy more productive and competitive, I entirely agree with her. That is why we must stick to the long-term economic plan.

Oral Answers to Questions

Debate between David Gauke and Sheila Gilmore

Tuesday 11th March 2014 Commons Chamber

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

The question was about help for those who earn below the income tax threshold. It is worth pointing out that 2.7 million people who earn below the current income tax threshold would be above the threshold but for the actions of this Government to raise the personal allowance. Those in work who do not pay income tax have benefited from, for example, frozen fuel duty and council tax, and reduced energy bills. The Government are also introducing universal credit to ensure that work always pays.

[Sheila Gilmore]

I thank the Minister for his reply, but I am not sure that the 17% of employees—4.6 million people—who are already under the income tax threshold will be impressed by the main policy being to increase the threshold yet again. The problem for these people is that the tax cuts that have taken place already have been more than wiped out by reductions in working tax credits and child tax credits. What targeted help will the Government give to such people, such as extended free child care or serious work on earnings thresholds being increased?

[Mr Gauke]

I have to remind the hon. Lady of the state of the public finances when we came to office and the very difficult circumstances that we face. The fact that 2.7 million people have been taken out of income tax as a consequence of our policies shows the emphasis by the coalition Government on supporting those in low-paid work.

National Insurance (Contributions) Bill

Debate between David Gauke and Sheila Gilmore

Tuesday 10th December 2013 Commons Chamber

[Mr Gauke]

Yes; this will not make any change in that regard. It is worth bearing in mind that the changes relate to employers’ national insurance contributions, and that employees’ contributions will remain unchanged. There is no change in terms of contributory benefits.

The new clause contains regulation-making powers to vary the age group and the rate of secondary class 1 NICs for that group, and to reduce the rate of secondary class 1 contributions for a previously specified age group. For example, the Government could allow for an increase in the age bracket of employees falling into the zero-rate band of secondary class 1 contributions. I want to reassure hon. Members that that power is capable of placing an employee only in a lower percentage bracket, and that it is therefore a relieving power only.

There is also a regulation-making power to ensure that the benefit of the zero rate or reduced rate of secondary class 1 NICs will be enjoyed only in respect of earnings below a certain level. In other words, the power will provide a means of introducing an earnings limit. As the Chancellor announced in the autumn statement, this will be set initially at the level of the upper earnings limit, which is expected to be the equivalent of about £42,000 a year in 2015-16. I would be happy to take the House through the new clause, subsection by subsection, although all that information is provided in the explanatory notes. Perhaps, instead, I will respond to any questions on those subsections that arise during the debate.

Let me turn to the Opposition’s amendment (a) to the new clause. It proposes:

“The Treasury shall publish a review of the level of youth unemployment as at December 2013 and the effect on the level of youth unemployment if the amendments made in this section were required to be brought into force on 6 April 2014”—

rather than in April 2015. I hope that the hon. Member for Birmingham, Ladywood (Shabana Mahmood) will not mind my anticipating some of her remarks, but I want to take this opportunity to explain why the amendment is unnecessary.

The Government are committed to increasing employment levels for all, and employment is now at its highest ever level, while unemployment is lower than when we came to power. I recognise the challenges posed by youth unemployment, and dealing with them has long been a priority for the Government. For example, about 370,000 young people have been supported through the Work programme since June 2011. Furthermore, the Youth Contract provides almost £1 billion in funding to support up to 500,000 young people into employment and education opportunities. The autumn statement announcement on abolishing employer NICs for under-21s builds on those policies and has been widely welcomed by industry. Indeed, the director-general of the CBI, John Cridland, has said that the policy

“will make a real difference and help tackle the scourge of youth unemployment.”

[Sheila Gilmore (Edinburgh East) (Lab)]

There has been considerable criticism that there has not been a significant take-up of the wage incentive attached to the Youth Contract. To what degree has that influenced this decision to try to achieve the same thing through national insurance measures?

[Mr Gauke]

Our motivation—and, I am sure, that of any sensible Government—is to do everything we can to address the issue of youth unemployment. That means trying a number of approaches and adopting a number of policies. It is difficult to quantify the number of jobs that will be created as a consequence of the measure, because many factors will come into play, but we believe that it will be helpful none the less. As I said, the director-general of the CBI also believes that it will make a real difference in tackling the scourge of youth unemployment.

Oral Answers to Questions

Debate between David Gauke and Sheila Gilmore

Tuesday 5th November 2013 Commons Chamber

[Mr Gauke]

That is very good news. As we are hearing from various constituencies, unemployment is falling. It is going in the right direction and it is important that we stick to the economic path.

[Sheila Gilmore (Edinburgh East) (Lab)]

Why should we believe from the Minister that the present scheme for dealing with national insurance contributions will be any more successful than his previous scheme, where take-up was extremely poor and did nothing to increase jobs?

[Mr Gauke]

I do not know whether Labour is opposing the scheme. That was not the impression I got. This is a very simple scheme. It does not require applications or involve any of the complexities that we saw with two of the Labour national insurance contribution schemes. We are confident that the current scheme will work. It has been widely supported by business groups and I think it will make a big difference to small businesses.

National Insurance Contributions Bill

Debate between David Gauke and Sheila Gilmore

Monday 4th November 2013 Commons Chamber

[Mr Gauke]

I do agree. Given that we want to increase employment, it would not have been sensible to undertake the increase in national insurance contributions that the previous Government intended. That was clearly a mistake. I am sure that my hon. Friend will be delighted to know that not only are he and I in agreement but Tony Blair said last week that he thought it was a mistake.

[Sheila Gilmore (Edinburgh East) (Lab)]

rose—

[Mr Gauke]

Whether all four of us will agree, I wait impatiently to find out.

[Sheila Gilmore]

Can the Minister explain how a measure that was not actually implemented destroyed jobs, as the hon. Member for Dover (Charlie Elphicke) suggested?

[Mr Gauke]

To have implemented the policy we inherited would have destroyed jobs. It did not do businesses in the United Kingdom any good to have the prospect of an increase, sending the wrong message that we were going in the wrong direction. I am pleased to say that we have reversed that direction of travel by not implementing the previous Government’s policy in full. We have increased thresholds for national insurance contributions, which has clearly helped. Now, through this Bill, we are providing an employment allowance of £2,000.

Finance (No. 2) Bill

Debate between David Gauke and Sheila Gilmore

Thursday 18th April 2013 Commons Chamber

[Mr Gauke]

Clause 3 sets the basic rate limit for income tax for the 2013-14 tax year. Let me make it clear at the outset, as I did in the previous debate, that we understand the financial pressures faced by households. As a Government, we have taken action to reward employment and to support hard-working families. That is why we have increased the personal allowance. I endorse the remarks made by my hon. Friend the Member for Worcester (Mr Walker) in support of the policy we have pursued. Budget 2013 announced that we will go further, with the personal allowance increasing by a further £560 to reach £10,000 in 2014-15, meeting the Government’s commitment a whole year early. These changes will benefit 25 million individuals and will take 2.7 million people out of income tax altogether by April 2014.

Clause 3 reduces the basic rate limit by £2,360 to £32,010 in 2013-14. When combined with the £1,335 increase in the personal allowance provided for by clause 2, the higher rate tax threshold for 2013-14 will be reduced to £41,450. This allowance increase will benefit all taxpayers with incomes below £116,000 by £200 a year on average in real terms. About 30% of the gains from the personal allowance increase for 2013-14 will be shared with most higher-rate taxpayers. The national insurance upper earnings and profits limits remain aligned with the higher rate tax threshold.

It might be helpful if I set out the reasons for this change. I have explained that this coalition Government are committed to creating a fairer tax system that rewards work, with real-terms progress every year towards increasing the personal allowance to £10,000. We are meeting that target one year ahead of schedule and the final step towards it will be legislated on in next year’s Finance Bill. For now, the £1,335 increase in the personal allowance, introduced by clause 2, represents a major milestone on the journey to £10,000. The changes that we are making for the 2013-14 tax year will lift an additional 1.1 million individuals out of income tax altogether and give 24 million taxpayers an average real-terms gain of more than £200 a year. For the typical basic rate taxpayer, that will mean an extra £267 of cash in their pocket for 2013-14, which is an extra £5 a week since the start of the new tax year.

On the specific issue of gains for higher rate taxpayers, when increasing the personal allowance by £10,000 in 2011-12 we also had to make sure it was consistent with bringing the public finances under control. Therefore, higher rate taxpayers did not benefit from that increase. However, we decided that the benefits of later increases should be shared with higher rate taxpayers. This supports growth by increasing the rewards to work for a wide range of individuals.

The £1,335 increase from April 2013 was announced in two parts. For the increase of £1,100 announced at Budget 2012, rather than pass on the full benefit of the personal allowance to higher rate taxpayers, an equivalent amount of funding was provided to assist in the fair implementation of the child benefit reforms. However, gains from the additional £235 increase announced at autumn statement 2012 have been passed on equally.

At that time the Government also decided that the higher rate tax threshold—the point above which the higher rate tax starts to be paid—will increase by 1% in both 2014-15 and 2015-16. These will be cash increases, the first in this Parliament, and they will ensure that higher rate taxpayers will gain equally from future increases to the personal allowance. The Government recognise that these are below-inflation increases, so they also raise about £1 billion in revenue to support our efforts to deal with the large deficit we inherited from the Labour party. We make no attempts to conceal that and have been very open and up front about it.

Opposition amendment 10 calls for a report on the cost of living for basic rate taxpayers. As I have said, we recognise the pressures that households face and we are taking action to support them with the cost of living. Indeed, in our debate earlier this afternoon I set out some of the policies. I have touched in this speech on the personal allowance and one could also point to our policies on fuel duty and beer duty, which were announced in the recent Budget, and on council tax, which are all intended to relive households from some of the pressures they face.

The Government have taken unprecedented steps to publish a distributional analysis alongside each Budget and autumn statement document. Such analysis shows the impact of all the Government’s policies on household incomes and separates the impact of tax measures from their other policies. It is important to consider all the Government’s policies, not just their taxation measures. The distributional analysis published at the Budget shows that the top 20% of households continue to make the greatest contribution towards reducing the deficit, both as a percentage of their income and in cash terms. We believe that producing a further report to supplement that would be unnecessary and a waste of money.

We have debated the wider point of the cost of living in two debates this afternoon, although admittedly this second debate has been short. As I made clear, the Government recognise the considerable pressures, consequent on rising commodity, food and fuel prices, that our constituents have felt strongly in recent years. The Government have taken difficult decisions to try to reduce the deficit, and undeniably that has had an impact on people, but we ought to be straight with the British public: whoever is in government will have to take measures to reduce the deficit. Anyone in a position of responsibility has to recognise that we cannot continue borrowing 11% or 12% of our economy. [Hon. Members: “But you are!”] While in office, we have reduced the deficit by a third.

Having listened to Opposition speeches this afternoon, I do not for one moment doubt their sincerity, but there has been the temptation to ignore the fact that there is a very large deficit that has to be dealt with by raising taxes, cutting spending or a combination of the two, and to pretend otherwise is to not be straight with the British public. Some of this afternoon’s speeches have given every indication that Labour is content with being a repository for people’s anger. To use even stronger language, Labour often gives every indication of being simple fellow-travellers in sympathy, but not leaders. That is Labour’s approach.

[Sheila Gilmore]

Would the Minister not rather be understanding of people’s very real anger than just ignore it? [Interruption.]

[Mr Gauke]

As the Financial Secretary to the Treasury points out, people should be angry about the state of the public finances left to us by the Labour party. I described Labour as the “repository for people’s anger” and as a “simply fellow-traveller in sympathy”, not leaders, because those were the words of the last successful leader of the Labour party, Tony Blair. I am afraid that Labour is too often in its comfort zone. We know that there are pressures on living standards, but ignoring the deficit is no way to deal with them. The Government are prepared to take those difficult decisions, while Labour is failing to address them.

Finance (No. 2) Bill

Debate between David Gauke and Sheila Gilmore

Monday 15th April 2013 Commons Chamber

[Mr Gauke]

One has to look at the tax system as a whole, including capital gains tax, and I am not sure that I necessarily agree with my right hon. Friend’s interpretation of the period as a whole in relation to CGT revenues. In the year in question, there was certainly a reduction in deals done and transactions completed after the increase in the rate of CGT, but subsequent CGT revenues have picked up. We also have to bear in mind the relationship between CGT and income tax. I agree strongly with my right hon. Friend that it is important to have a competitive tax system that encourages enterprise and growth—indeed, I will turn to that now.

One of the most important questions facing the country is this: at a time when much of the world is still coming to terms with the consequences of the financial crash, when many of our export markets face significant difficulties, and when international competition is becoming greater, and, because of the recklessness of the previous Government, we cannot afford to borrow more, how do we put in place the conditions for growth? In the specific context of the Bill, how do we ensure that we have a tax system that helps us to achieve growth and encourages businesses to locate and invest in the United Kingdom? As the Chancellor has made clear, our objective is to have the most competitive tax system in the G20.

[Sheila Gilmore (Edinburgh East) (Lab)]

How can the Minister square the statement he has just made with the fact that all his predictions for borrowing are on the way up? Three years ago, we were assured that the Government’s policies would resolve this problem. If we are borrowing, would it not be better to borrow to invest, rather than to deal with failed economic policy?

[Mr Gauke]

Borrowing is down by a third from the position it was in when we came into office—that is the reality of the situation. We have to remember that if we had the policies advocated by the previous Government, borrowing in this Parliament would be £200 billion higher than it is going to be.

--- Later in debate ---

[Mr Gauke]

I do not recognise those numbers. We have taken steps to try to get the country out of a significant fiscal hole. We have taken steps to reduce the amount of tax that millions of households will pay as a consequence of the increase in personal allowance. We have reduced income tax for 25 million people. That is something we are proud of, and something that we did not see when the Opposition were in power.

[Sheila Gilmore]

What the Minister fails to appreciate, in saying that he does not recognise those figures, is the fact that the increase in the tax threshold has been wiped out for many families, particularly those with children, by the changes in tax credits. At the same time, the cost of increasing the tax threshold is £9 billion, so it is not the best way of targeting help on the low paid.

[Mr Gauke]

I am grateful to the hon. Lady for putting on the record her opposition to the increase in the personal allowance. I am sure that is something that will be read with interest by her constituents.

Tax Fairness

Debate between David Gauke and Sheila Gilmore

Tuesday 12th March 2013 Commons Chamber

[Mr Gauke]

I noticed that that very point was one that the hon. Member for Nottingham East seemed to struggling with. He seemed to suggest that there were ways in which the Opposition would address that. I am not sure whether that was included in the costings they have produced. There is an issue for the asset-rich, cash-poor which would need to be addressed in the design and would obviously have an impact on the costing.

[Sheila Gilmore (Edinburgh East) (Lab)]

Would the Minister suggest to people in those circumstances that they might want to take a lodger, just as it has been suggested to my 60-year-old constituent that the answer to the bedroom tax is to take a lodger?

[Mr Gauke]

I am not going to debate at length the spare-room subsidy, which is an area of public spending constraint that we need to engage in. There is a genuine issue in respect of the asset-rich, cash-poor that the hon. Member for Nottingham East appeared to recognise and which would have to be addressed.

The mansion tax would be administratively burdensome for HMRC to operate, not to mention intrusive for the person having their home inspected. We would have concerns that in Labour’s hands, the starting level for such a tax would not stay at £2 million for very long. What began as a mansion tax would soon become a homes tax. To coin a phrase, it would become a tax for the many, not for the few.

Oral Answers to Questions

Debate between David Gauke and Sheila Gilmore

Tuesday 29th January 2013 Commons Chamber

[Mr Gauke]

I will take that as a Budget representation. The point is that the 50p rate was not effective in raising revenue—my hon. Friend is absolutely right to make that point—and it was damaging to our competitiveness. There are better ways in which we can get more money from the wealthiest, and that is exactly what this Government have done.

[Sheila Gilmore (Edinburgh East) (Lab)]

Perhaps the Minister could explain how the changes in child benefit have simplified the tax process in this country.

[Mr Gauke]

A moment or so ago we heard lots of shouting about the 50p rate, yet the Labour party is the first to defend the idea that those very people should continue to receive benefits. Ensuring that child benefit is targeted best meant either looking at this on a household basis—which would have meant putting 8 million households into the tax credit system—or adopting the approach that we have chosen, but the Labour party is always there, ready to spend taxpayers’ money where—

The Economy

Debate between David Gauke and Sheila Gilmore

Tuesday 11th December 2012 Commons Chamber

[Mr Gauke]

My point is that we could not continue in that way. The difficulty with the Labour party’s record is that it believes most problems can be solved by throwing money at them. We have run out of money and cannot afford to do that. That is why we are taking difficult decisions and the welfare uprating will be 1%—we now know that the Labour party will oppose that. We must get welfare spending under control. That measure will save £2 billion, and if one looks at other measures introduced in the autumn statement, one sees that working households—including those in the lowest decile—will gain in 2013.

[Sheila Gilmore]

Will the Minister give way?

[Mr Gauke]

I will press on because we are running out of time. If all measures to be introduced next April are taken into account, all working families gain, including those in the lowest decile. It is the right thing to do. We have raised the personal allowance yet further and cancelled Labour’s increase in fuel duty next January. Each time the average car is filled up, the motorist will pay £5 less fuel duty than they would have done had we implemented the Labour party’s plans.

As the Prime Minister and Chancellor have said, we face a global race and must make ourselves more competitive. That means moving from current spending to capital spending, which is why we will be spending £9 billion more on capital in this Parliament than the Labour party would have done. Do Labour Members support that switch from current spending to capital spending? That is why we can afford—and why it is necessary—to reduce corporation tax from 28% to 21%. The Labour party allowed our tax position to become uncompetitive.

There is competition for investment. Businesses can choose where they locate and invest. To ensure they choose this country, we need improved infrastructure and to control public spending. We must reform welfare and public services and we need competitive taxes. The Government are prepared to take difficult decisions but the Labour party consistently ducks those decisions and opposes every spending cut and reform. It opposes getting to grips with welfare spending and panders to every group, and the country will recognise that at the next election.

Question put and agreed to.

Resolved,

That this House has considered the matter of the economy.

Oral Answers to Questions

Debate between David Gauke and Sheila Gilmore

Tuesday 11th December 2012 Commons Chamber

[Mr Gauke]

I will be interested to know whether the hon. Gentleman will support the benefits uprating Bill. He is shaking his head, so I take it that we have finally got an answer on the Labour party’s position.

[Sheila Gilmore (Edinburgh East) (Lab)]

6. What assessment he has made of the effectiveness of the funding arrangements which he agreed with the Secretary of State for Work and Pensions for the Work Programme.

Income Tax

Debate between David Gauke and Sheila Gilmore

Wednesday 28th November 2012 Commons Chamber

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

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes that the previous administration maintained the top rate of income tax at 40 per cent for 13 years, only increasing it to 50 per cent in April 2010, one month before the Government was formed, and that this new rate was damaging to UK competitiveness; further notes that the independent Office for Budget Responsibility certified the Government’s central estimate that reducing the 50 per cent rate to 45 per cent would have a cost to the Exchequer of £100 million per year and that measures introduced at the last Budget increased taxes on the wealthy by some £500 million; recognises that in contrast to the previous administration that abolished the 10 per cent rate of tax which increased taxes on more than five million low earners, the Government is cutting income tax for 25 million low and middle earners while taking two million low-paid people out of income tax altogether through increasing the tax free personal allowance; recognises that every Budget under this Government has increased taxes on the rich, including a new stamp duty land tax rate for properties over £2 million, an annual charge on these properties, introducing a cap on previously unlimited income tax reliefs and an extension to the capital gains tax regime, clamping down on tax evasion and aggressive tax avoidance, and bringing in a General Anti-Abuse Rule; and welcomes the introduction of the Triple Lock, which led this year to the biggest ever cash rise in the state pension.”

The amendment is in my name and those of my right hon. and hon. Friends. After all the anger and bluster the House has just heard, may I bring to its attention a few pertinent facts? Hon. Members have been told that the 45p rate for high earners is too low, which ignores the fact that there was a top rate of 40p for all but 36 of the 4,758 days of the Labour Government. We have been told that the rich should pay more. That ignores the fact that other changes in the tax system introduced in the Budget will raise five times the amount of tax from the wealthiest than the 50p rate raised in practice. We have heard that moving to 45p is wrong, but the Opposition will not commit to reversing it after the next general election.

[Sheila Gilmore]

Will the Minister confirm a report that I read in, I believe, The Sunday Times, which stated that the number of property sales above the level of increased stamp duty has fallen since the Budget? When will he produce figures on whether such so-called additional taxes raise any additional money?

[Mr Gauke]

I note with interest that the hon. Lady appears to be arguing that an increase in tax can sometimes lead to a loss of revenue. She is right—that can sometimes happen. As it happens, the revenue on stamp duty land tax is holding up all right, but she makes an important point, one that I hope is understood more widely in her party. I am pleased that the Opposition are keeping open the option of not increasing the 45p rate of income tax. Although it is right that those with the broadest shoulders bear the greatest burden—I will set out how the Government are making that happen—it is also necessary to ensure that the UK is competitive in attracting wealth creators to locate and stay in this country. A Government that are serious about the UK winning the global race for growth should be very careful about pursuing a policy that places a huge “closed for business” sign over our economy. That is exactly what the 50p rate of income tax was—a “closed for business” sign. I hope that at the next general election there will be a consensus that we do not want to re-erect that sign over our economy.

Finance Bill

Debate between David Gauke and Sheila Gilmore

Tuesday 3rd July 2012 Commons Chamber

[Mr Gauke]

So when borrowing is higher than we plan it to be, it is a disaster, but when borrowing is higher because the Opposition would bring that about through a deliberate policy, that would be a fiscal stimulus. I am not entirely clear where they are trying to go with this. We know why the public finances are more difficult than we had anticipated. It is to do with the eurozone, the increase in commodity prices and the fact that the economy took a bigger hit than anyone had previously realised, but a discretionary fiscal loosening of £12 billion or £13 billion, which is what the Opposition are about to vote on, would be taking a huge risk with our credibility.

It is worth making the point that if we do that, we lose our fiscal credibility and we are likely to see long-term interest rates rise. That will result in our paying out more in debt interest. A one-point rise in interest rates would mean £7.5 billion in additional debt interest payments by 2016-17, and an increase for the average mortgage borrower of £1,000 per year. Is that what the Opposition want? Do they think that would help?

[Sheila Gilmore]

The Minister should accept that he has given a partial quotation from his own Office for Budget Responsibility. He is fond of saying that the recession has been deeper than previously thought. Yes, the OBR did say that, but it also said at exactly the same time that the climb out of that recession had been faster than had previously been thought. That was a result of the economic stimulus measures that the previous Government put in place.

[Mr Gauke]

The OBR was very clear about the reasons why the economy did not grow as quickly as it had predicted. That was not because of the measures that we had taken to clamp down on borrowing. It was because of the factors that it set out. Now, at a time when we see other countries without fiscal credibility facing enormous difficulties, the Opposition want a discretional fiscal loosening of £12 billion or £13 billion a year. That is not responsible opposition. That is not a responsible policy and it is not a policy that this Government will pursue. I urge the Opposition not to press new clause 10.

I note that the Opposition are also opposing the VAT measures in total. That would be an additional cost of £210 million. These are measures that will remove anomalies. We have listened to the concerns raised by hon. Members and others to improve what we initially set out.

--- Later in debate ---

[Mr Gauke]

We debated that in the Committee of the whole House. The purpose of the CFC rules is to protect the UK tax base, as has always been the case, but the Government have a proud record of supporting developing countries, and we have a firm commitment to meeting our international obligations on that front. This country also has a proud record of building capacity in developing countries and improving their ability to collect taxes. In many developing countries, the UK has already made a substantial contribution, and we will continue to do so.

Both the patent box and the CFC changes form part of the Government’s wider plans, which will help UK businesses to operate in an increasingly globalised world. I am sure all Members agree that those measures are essential to restore medium and long-term growth.

Despite the challenging economic backdrop that the Government inherited, we have made significant progress. We have already introduced a further cut in the rate of corporation tax that will give us the lowest rate in the G7, the fourth lowest rate in the G20, and the lowest rate that this country has ever known. By next year, the Government will have cut corporation tax by 6%, helping to make the UK the most competitive country in the G20. According to the OBR’s assessment of the Budget, the reduction will increase the level of business investment by about 1% by the end of the forecast period. That is equivalent to an increase in the total amount of business investment of £3.4 billion between now and 2016.

Many businesses have seen that we are, as promised, open for business. WPP and others have recently announced that they are considering returning to the UK, or that they wish to set up business here. I am delighted to say that Rowan and Lancashire have already come here, and once the CFC rules are in place in 2013, we shall be looking for more businesses to follow them. Following the Bill’s publication in March, one of the big four advisory firms announced that it was engaged in discussions with between 10 and 15 multinational companies that were considering locating substantial operations in Britain as a result of corporate tax reforms. The CBI has commented that these much-needed changes

“will help make the UK a more attractive place for companies to invest, do business and create jobs.”

The Government aim to create a tax system that is easy to understand and with which it is easy to comply, and the Bill contributes to that. It provides real help for families and business. It raises the personal allowance to £8,105—which, curiously, was not mentioned very frequently in Committee—and, combined with the further increase of £1,100 next year, will mean a tax cut for 24 million people and 2 million people being taken out of income tax altogether.

[Sheila Gilmore]

rose—

[Mr Gauke]

The hon. Lady made many contributions in Committee, although I am not sure that she ever dwelt on this particular issue, but I will give her the opportunity to do so now.

[Sheila Gilmore]

The Minister was waxing lyrical about simplification, and I was wondering whether he has reconsidered his view as to whether the proposed child benefit reform creates simplification or complication.

[Mr Gauke]

If we do not want people earning £20,000, £25,000 or £30,000 a year to be paying for benefits to go to much wealthier households, the alternative would be an extension of the tax credit system. That would have placed a much greater burden both on households and the Government. Of the available alternatives, we have gone for the simpler option.

We are deferring the 3p per litre duty increase that was planned for August to January next year. Action by this Government to reduce the deficit and rebuild the economy is already benefiting businesses and families and keeping mortgage rates low. As hon. Members know, this Government have also had to make difficult decisions so we can tackle the deficit left to us by the previous Administration. They include withdrawing child benefit from households earning more than £50,000. That is a fair way to make savings, so we can meet our targets to cut the deficit.

We are also taking steps to ensure that the wealthy pay their fair share too. The Budget package ensures that the wealthiest will pay five times more than the cost of reducing the additional rate of income tax. The introduction of a new higher rate of stamp duty land tax of 7% on properties sold for more than £2 million will raise over £1 billion in the next five years. At the same time, this Government are also tackling avoidance, as demonstrated in the Bill. The new SDLT enveloping entry charge rate of 15% will deter those seeking to put their high-value property into corporate structures to avoid tax. Also, debt buy-back measures will raise over £500 million from banks that try to avoid paying the tax due, and the introduction of the UK-Switzerland agreement will ensure we can address the tax loss from those who put their money into Swiss banks to evade tax.

There has been extensive scrutiny of this Bill, including about 44 hours in Public Bill Committee. From looking at some of the new clauses tabled for today, I am happy to see that the Opposition continue to stick to their same theme on this Bill, which is to ask for reports, rather than focusing on policies. We have seen 34 Opposition-requested reports over the last 10 weeks, but no real policy alternatives. Yesterday, we were discussing Groucho Marx, and I wonder if the Opposition ever needed to be reminded of the quote:

“The problem with doing nothing is that you never know when you are finished.”

In order to make progress with Government business in good time, we agreed with the Opposition, through the usual channels, to programme parts of this Bill.

It is a delight to see my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) once again in his usual place. As he rightly said yesterday, this legislation is the body, soul and guts of this Budget.

I thank all who participated in Committee and on Report.

Finance Bill

Debate between David Gauke and Sheila Gilmore

Monday 2nd July 2012 Commons Chamber

[Mr Gauke]

No I cannot, but I know that, for example, the Arsenal manager remarked that the 50p rate put him at a disadvantage. Earlier, the hon. Gentleman mentioned Ipswich Town and whether its players deserved a tax cut or pensioners did, and I have to say that on last season’s performance one or two looked as if they could qualify for the age-related allowance, but that is not at the heart of my argument.

The point is that we have to be competitive, and we want to attract talent to the UK, but having a higher rate than France, Italy and Germany is not competitive.

[Sheila Gilmore]

Generally, when changes are made and we want to assess their impact, we carry out properly independent research. On the changes to housing benefit, for example, the university of Sheffield has been commissioned to produce reports, but what research into our short experience of the 50p tax rate was carried out that gives rise to the conclusions mentioned? Do we have some research that we can look at, or is there just speculation that people might have retired or might have gone to Switzerland?

[Mr Gauke]

The hon. Lady asks what research we have. I am holding it in my hand: the document produced by HMRC, which sets out a thorough analysis. I urge her to read it and to see that it is far from speculative; it is a thorough piece of work, which shows that as a result of the 50p rate total income fell by between £2.9 billion and £4.4 billion and GDP was between 0.2% and 0.3% lower. There has been not just a loss of tax revenue, but a loss to the whole economy through lower productivity and lower economic activity.

Changes to the Budget

Debate between David Gauke and Sheila Gilmore

Monday 11th June 2012 Commons Chamber

[Sheila Gilmore (Edinburgh East) (Lab)]

The Minister started by saying that this was a Budget for families, so will he now consider another U-turn and restore the tax credits to working couples on low wages and low working hours?

[Mr Gauke]

rose—

Budget Leak Inquiry

Debate between David Gauke and Sheila Gilmore

Thursday 22nd March 2012 Commons Chamber

[Mr Gauke]

Some things are not entirely new. The Labour party really does have to think back to its time in government and to the behaviour undertaken then. What is remarkable is that Opposition Members managed to brief some of their announcements, given that most were decided only at the very last minute.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will the Minister clarify whether he expounds the virtues of advance notification and discussion because we have a coalition, or whether he thinks that it is a bad thing to leak? Was the one thing that he did not share with his coalition partners perhaps the granny tax?

[Mr Gauke]

All Budget decisions were agreed by the Government as a whole, and the quad was heavily involved at all stages in that. People in a coalition will always make their arguments and set out their case, and some of that will be done in private, some of it in public, but it is a far more orderly process of Budget policy making than we have seen for many years.

Living Standards

Debate between David Gauke and Sheila Gilmore

Monday 5th March 2012 Commons Chamber

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

After all the sound and fury that we have just heard, perhaps I may provide a little context for the benefit of the Opposition. When this Government came to power, we had the highest borrowing in our peacetime history. We were borrowing one in every four pounds that we were spending. It was clear then, and it has since become clearer, that countries that lack fiscal credibility pay the price in higher market interest rates, at a cost to mortgage holders and businesses throughout the country.

In order to reduce a structural deficit—that is, one that will not go away with growth—it is necessary to cut spending or raise taxes, or a combination of the two. Cutting spending and raising taxes will, unfortunately, have an impact on people’s living standards. We do not want that to happen—we did not go into politics to do that—but the impact on living standards is the inevitable consequence of the dire state of the public finances left by Labour and the recognition by the coalition parties that we could no longer continue to borrow in the same reckless way.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does the Minister acknowledge that if some of the families that we are talking about give up their employment and claim other benefits—including, in some cases, help with their mortgages, to which they would then become entitled—the savings that he is trying to achieve would simply not be made?

[Mr Gauke]

I shall speak in greater detail about the reforms to the working tax credit in a moment, but there is a question that we all have to answer. As the hon. Lady knows, there is a threshold for claiming the credit. For lone parents, it is 16 hours a week. We think it entirely reasonable that the joint target for couples should be not 16 hours a week but 24; we believe that that incentive will be helpful. The principle of a threshold has been in the tax credit system since it was put in place.

--- Later in debate ---

[Mr Gauke]

No, I am going to make a bit more progress. I have already given way to the hon. Gentleman once, and I think that that was enough for all of us.

It is because of our decisions that we have secured record gilt yields, feeding through to record low and stable interest rates that make a real difference to families paying their mortgages and businesses refinancing loans throughout the country. If we are going to discuss a squeeze on living standards, let us discuss what an increase in market interest rates would mean for families throughout the United Kingdom. It would force taxpayers to find an extra £21 billion in debt interest payments, increase the cost of business loans by £7 billion, and add £10 billion to mortgage bills every year, an extra £1,000 for the average family—and that is just a 1% rise. Let me remind the House that when the Government came to office, our rates were tracking those of the likes of Spain and Italy, and that they are now close to those of Germany. It is because of the tough decisions that we have made to cut the deficit that the UK has broken ranks. In the last year alone, its rates have fallen by about 1.5%, whereas those of Italy and Spain have risen by almost 3%.

I know the shadow Chancellor considers that low interest rates are a sign of trouble, and that he would prefer higher interest rates, a bigger squeeze on families, and an even bigger fall in living standards, but the simple truth is that the Opposition have no credible response to the economic challenges that the country faces.

[Sheila Gilmore]

rose—

[Mr Gauke]

I look to the hon. Lady to rectify that.

[Sheila Gilmore]

I am wondering whether the Minister has been out of the country for the past few days, and therefore has not noticed that several banks are increasing their mortgage rates.

[Mr Gauke]

If we had pursued the policy advocated by the Opposition, our market rates and gilt yields would be going up and we would be facing a very significant problem. We have record low interest rates at present. That does not necessarily mean mortgage rates will remain at their current levels for ever across the board, but the fact is that the tough steps we have taken have ensured that interest rates are much lower than they would otherwise be, which is to the advantage of both mortgage holders and businesses looking for finance.

Finance (No.2) Bill

Debate between David Gauke and Sheila Gilmore

Monday 8th November 2010 Commons Chamber

[Mr Gauke]

The new clause would link the future withdrawal of child benefit from higher rate taxpayers with the principle of independent taxation. The payment of child benefit is clearly a spending issue and is not directly linked to the Bill. I therefore shall not try your patience, Madam Deputy Speaker, but it is important to set out the background to the change.

The spending review set out how the Government will tackle the deficit that they inherited from the previous Administration. Given the comments that have been made by the Leader of the Opposition—I congratulate him on becoming the recipient of another child benefit payment, and wish him and his family well—as well as by the hon. Member for Nottingham East (Chris Leslie) and several other Labour Members today, I take it that the Labour party remains opposed in principle to our reform of child benefit and believes that it should continue to be paid to all households.

[Sheila Gilmore]

Does the Minister agree that this is a case of reforming in haste and repenting at leisure? However tempting it might be to put in place something that sounds simple in principle, the complexity of the proposal should have been examined. The Government could have acted differently, such as by making child benefit part of taxable income. I do not necessarily suggest that that would be the best solution, but it would mean that several issues around independent taxation would not apply. If the Government wish to reduce child benefit to some households, there are other ways of doing it.

[Mr Gauke]

I take the hon. Lady’s point, but I am not clear about whether her party’s position is to say, “Something should be done, but we don’t like the way it’s being done,” which, I think, is the position that she sets out, or to say, “We don’t think anything should be done at all,” in which case we must include the £2.5 billion that the measure will save the Exchequer—that is an estimate from the Office for Budget Responsibility—as part of our assessment of the Opposition’s fiscal policies.

--- Later in debate ---

[Sheila Gilmore]

Earlier today I made the point, on another matter, that it may be unwise to reform in haste and repent at leisure. I am very pleased that the Minister has now decided to agree with me.

[Mr Gauke]

I am delighted if that is how the hon. Lady interprets my remarks, and if that pleases her, it pleases me.

In June, we produced our paper on the making of tax policy and we believe that it is very important to adopt a deliberative and consultative approach and, wherever possible, to consult thoroughly. We wish to avoid the experience of making reactive and piecemeal policy announcements that have been insufficiently thought through and result in unexpected consequences—we saw too much of that under the previous Government. Instead, we believe that appropriate consideration should be given to changes, thus providing an opportunity for those affected to comment and have certainty about our decisions. Any change on this matter should go through that process to ensure that we can come to this House with legislation that will work as intended.

Let me be clear that I agree that the wording in the current definition is outdated and that I am committed to delivering change. As I have said, my officials have already started to work with LITRG and will work with other groups that have the expertise to ensure that we get this right. The hon. Member for Nottingham East (Chris Leslie) has alluded to the fact that LITRG is happy to work with Treasury officials and accepts the need to get this right. I believe that it will be possible to deliver change to the definition in the next couple of years along the timetable that LITRG accepts.

I ask the hon. Gentleman not to press his new clause to a vote, but I hope that he will engage with us on how to make the change behind the clause that we both agree is necessary. I am grateful to him for raising the issue in Committee and today. I agree that this should not be a matter of party political dividing lines and we will seek to address it. It has been of long-standing concern, but the Government are determined to address it, so I ask him to withdraw the clause.