EU Draft Budget 2017

Debate between David Gauke and Wes Streeting

Monday 31st October 2016 General Committees

[Mr Gauke]

I thank the hon. Gentleman for his questions. The EU budget as a whole is a matter for the United Kingdom and, as I say, there is regular communication. This time last week, I was in discussions with the Finance Ministers of Scotland, Wales and Northern Ireland, and issues relating to EU funding were relevant to those discussions. The position of the United Kingdom in respect of the EU budget is determined by the United Kingdom Government.

On our position on this year’s proposal, let me make it clear that what the Commission proposed is consistent with the seven-year multiannual financial framework, which was agreed in 2013. That was a significant achievement, because it reduced the EU budget for the first time. Some felt that the previous Prime Minister, David Cameron, would not be able to achieve that, but he did. That was consistent with this proposal.

The negotiations are live, so it would not be appropriate for me to give away our position prematurely, because that might reduce our chances of achieving the outcome that we want. The Government’s approach will be the one we have always taken in such circumstances: we will continue to push for maximum budget restraint and value for money to minimise costs for taxpayers. I hope that will have the support of all Committee members.

Scrutiny of the annual budget takes place on the Commission’s proposals. The proposals move very quickly and frequently, so timescales do not allow for a further round of scrutiny. The motion sets out the Government’s overall approach of seeking the best possible value for money, and I hope it has the support of all members of the Committee.

[Wes Streeting (Ilford North) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Buck.

I want to follow up on consultation. The Minister outlined the way that the Government are interacting with the Scottish and Welsh Governments, but will he outline what the formal mechanisms are for consultation with the Mayor of London? Clearly, a range of issues relating to our impending departure from the European Union will have a huge consequence for London and, as a direct result of that, will reach right across the United Kingdom. It is only right and proper that the Mayor of London or a suitable representative has a seat at the table.

[Mr Gauke]

I suspect that the hon. Gentleman is touching on issues wider than this debate. I suspect that he is not specifically asking about consultations with the Mayor of London on the EU budget proposal for 2017, about which, as far as I am aware, the Mayor of London has not expressed an opinion, but I may be wrong—perhaps I should check that.

On the wider issue of the EU, Brexit and the position of London and its Mayor, all I can say today is that there are regular conversations between the Treasury and the Mayor. Without revealing too much about the diaries of the individuals concerned without their permission, meetings occur, and there is one in the not-too-distant future.

[Wes Streeting]

I am grateful for the reply. To bring us back firmly within the scope of the budget, my hon. Friend the Member for Stalybridge and Hyde talked about analysis of the EU budget’s regional impact. Obviously, there are longer-term questions about replacing expenditure that currently benefits the regions and nations of the UK. What plans do the Government have to publish their analysis of the regional benefits and risks presented by Britain’s membership of the European Union, and of the risks presented by leaving the European Union, so that we can have an informed debate? A seemingly endless number of Government debates have been scheduled, but we will have those debates in the dark, as the Government seem reticent about publishing any relevant information about the benefits or risks of the negotiations.

[Mr Gauke]

I point out that the Government published a lot of information during the referendum debate. That information was made available to the British people, and I do not want a repeat of that debate. The British people made a decision, though it might not have been the decision that the hon. Gentleman or I campaigned for, and we have to respect that. The Government are looking at various options, so that we can make a success of the decision that the British people have made. There will be different regional implications, one assumes, of the United Kingdom leaving the European Union, but the Government are determined to ensure that this is a success for every part of the United Kingdom, and I am sure that the hon. Gentleman and every member of this Committee supports that.

[Wes Streeting]

This is my final question, I promise. I suspect that like me, the Chief Secretary campaigned to remain in the European Union, but accepts the result and now wants to get the best possible deal. As parliamentarians and the general public determine the best possible deal, can we take it that all Treasury documents published prior to the referendum—including all their figures and assumptions—are ones that we should stand by and use to inform the debate?

[Mr Gauke]

I fear that the hon. Gentleman wants to take me down a path that is a little way away from the motion in front of us. We are in new circumstances. The determination of the Government is to ensure that we deliver the best possible outcome for the British people in the negotiations with the European Union and in our relationship with the EU and other parts of the world, post-Brexit. That is our focus.

UK Economy: Post-Referendum Assessment

Debate between David Gauke and Wes Streeting

Monday 23rd May 2016 Commons Chamber

[Mr Gauke]

Of course I hope that none of them turns out to be true, because I hope that the hypothesis of our leaving the European Union is not realised.

[Wes Streeting (Ilford North) (Lab)]

It is not just the Government who are warning of the economic risks of Brexit, along with the OECD, the IMF, the World Bank, and every other mainstream economic voice in this debate. The former Mayor of London’s former economic adviser himself warned of an economic shock in the wake of Brexit. Does the Minister agree, however, that it is not Project Fear that the other side are complaining about, but Project Fact? Does he agree that the leave campaign argument would be a great deal stronger if those campaigners had produced a single shred of credible evidence to demonstrate that Britain would be better off out, when the mainstream economic opinion in this country and around the world is that our economy is stronger through our remaining in the European Union?

[Mr Gauke]

The hon. Gentleman is absolutely right: mainstream opinion does support the United Kingdom’s being part of the European Union. I should be fascinated to read a report similar to ours arguing the other case. We produced our long-term report last month, and I look forward to receiving a proper, detailed response to it. I think that the reason no analysis of that kind has yet been produced is that there is insufficient support for such a view, and I hope that that will become more and more apparent over the next month.

Tax Avoidance and Multinational Companies

Debate between David Gauke and Wes Streeting

Wednesday 3rd February 2016 Commons Chamber

[Mr Gauke]

We have a very open and transparent arrangement for disclosure of meetings. I am very clear that when it comes to determining the tax liability of a company such as Google—or, indeed, any other taxpayer in this country—there is no ministerial involvement. HMRC is entirely operationally independent. There is no ministerial interference in such areas, and no suggestion that there would be. When it comes to determining the tax bill of any taxpayer, it is a matter of HMRC enforcing the law; it is not for ministerial involvement. HMRC introduced new governance arrangements for significant tax disputes in 2012 to provide even greater transparency, scrutiny and accountability. They included the appointment of a tax assurance commissioner to ensure that there is clear separation between those who negotiate and those who approve settlements. The tax assurance commissioner oversees the process and publishes an annual report on his work.

Let me be absolutely clear. There are no sweetheart deals, and there is no special treatment for large businesses. HMRC resolves disputes by agreement only if the business agrees to pay the full amount of tax, penalties and interest. Otherwise, it is a matter for the courts—an arena in which HMRC has a strong track record of fighting and winning.

[Wes Streeting (Ilford North) (Lab)]

I am grateful to the Minister for his assurance that there are no sweetheart deals, but if the process is so independent and Ministers are so far removed from it, how can he give us that assurance? Similarly, how was the Chancellor able to hail the deal as a major success?

[Mr Gauke]

We have in place strong governance. The NAO has looked in the past at settlements when accusations have been made of sweetheart deals, and those accusations have been dismissed. It is very clear that HMRC’s remit is to get the tax that is due under the law, and no one has ever produced a shred of evidence to suggest otherwise; they have merely displayed a prejudice against HMRC staff and a tendency to insult them.

--- Later in debate ---

[Wes Streeting (Ilford North) (Lab)]

I am grateful for the opportunity to speak in this debate. As someone who represents a constituency containing thousands of business, of all shapes and sizes, many of which feed into the national supply chain, I wish to say at the outset that I am very proud of the role that not just my constituency, but this country plays, with many of our leading industries leading the way globally. I want this country to be a good place to do business and to set up a business, and to continue to lead the world with competitive tax rates.

This debate is actually about fairness and transparency. To follow up something that the hon. Member for Croydon South (Chris Philp) said, the fact is that the Minister could not tell us last week what effective tax rate Google would be paying. I can tell him what the effective tax rate is for businesses in my constituency—what rate of corporation tax they will be paying—so why is it so difficult for Google, a multinational giant, to be transparent with the public about the rate of tax it is paying?

[Mr Gauke]

Just to be clear, the statutory rate is 20% and that applies to everybody. There are businesses that will have a lower effective rate, entirely lawfully and in accordance with the spirit of the law, because, for example, they make use of capital allowances or they might have losses that they are making use of. Someone having an effective rate below the statutory rate does not mean that they are conducting avoidance activity.

[Wes Streeting]

That is a fair point, but of course many tax experts have estimated that Google is paying an effective tax rate of 3%. If that is not the case, we need to see the numbers that give us that assurance. We do not doubt the difficulties here. In an increasingly globalised world, where intellectual property and the growth of internet companies makes this more important in the debate about tax, these are difficult issues to grasp, but there is no hint of fairness or transparency about this deal, and that is what we are seeking with this debate.

We would have more confidence if there had been consistent messages on this issue from both the Government and Google. On 23 January, the Tory Treasury Twitter account—not the most accurate of sources—claimed that the

“Google tax bill is for years 2005-2011, almost all under Labour”.

Yet Google Ltd’s account for the period ended 30 June 2015 reported

“a liability to HMRC of £130 million in respect of additional taxes and interest due for prior accounting periods and the current accounting period.”

The Minister says that there has been no sweetheart deal, but, as I asked him earlier, how can he give us that assurance if he has not seen the deal and is as far removed from it as he says. The Chancellor said it was a “major success”. How can he laud it as a major success if he is not close enough to the deal? If it is such a major success, why did the Prime Minister in Downing Street run so far away from that claim? Why has the Financial Secretary to the Treasury not once in recent weeks stood by his Chancellor in saying that this deal is a major success? I believe that it is because he knows that it is nothing of the sort, and that this Government look deeply out of touch with the public.

Labour were accused of attacking HMRC staff. The fact is that HMRC has a responsibility to apply tax law. It has a duty to go for the full rate of tax due, but, as my right hon. Friend the Member for Barking (Dame Margaret Hodge) pointed out, it has not always applied that duty. I am sure that, following the work of the Treasury Committee and the Public Accounts Committee, we will find that the issue at HMRC is to do with resourcing and extra teams and whether there are the people and the capacity to pursue not just the current claims and outstanding tax, but the historical backlog that exists as well.

Also of concern is the fact that Google itself has made some rather odd claims. On the one hand, we see senior Google executives writing to the newspapers about how great the deal is and how they have stood by their obligations, while, on the other, they are committing to paying more tax in the future. What is the reality? Is it that Google is paying the tax liability that is due; that it has somehow got away with it and plans to pay more in the future; or that it sees tax as a means of charity towards the state and it is willing to prop up the Treasury coffers a bit more generously in the future? Whatever the reality, there is deep inconsistency in the messages from the Government and Google.

We should look at the comments recently made by the Mayor of London who went as far as to suggest that finance directors have a fiduciary duty to minimise tax exposure. That cannot possibly be the case. If the Mayor of London looked at the duties under the Companies Act 2006, he would see that they also have to make reference to

“the likely consequences of any decisions in the long term…the company’s business relationships with suppliers, customers and others”—

and—

“the impact of the company’s operations on the community and the environment”.

There is a problem with the ethos of those on the Conservative Benches. Many of them see tax as a form of theft, whereas we see it as a civic responsibility and duty and as a means of creating a more civilised society. I want businesses in my constituency to pay their fair share of tax, and indeed they do. It is not unreasonable to expect a multinational company such as Google to do the same. The Government need to do much more to ensure that there is transparency for all such companies in all of the jurisdictions in which they operate.

HMRC and Google (Settlement)

Debate between David Gauke and Wes Streeting

Monday 25th January 2016 Commons Chamber

[Mr Gauke]

The important point to note is that the individual tax affairs depend on the application of the facts in the case; as I have mentioned a number of times, it depends on the economic activity and assets that are held in the UK, or indeed other jurisdictions. But I do think this signifies that companies are looking at their tax arrangements and there is a closer alignment between tax and economic activity, which I certainly welcome. That is what the BEPS—base erosion and profit shifting—process is designed to achieve, and that is what the UK Government have been advocating for some years now, and I believe we are making progress on that.

[Wes Streeting (Ilford North) (Lab)]

The reality is that the practice of companies organising their business over multiple jurisdictions to minimise their tax liability is not new, and even if the diverted profits tax were to apply it would barely make a dent on Google’s real tax liability. Given that this week all our constituents and small businesses will be filing their tax returns and do not have the luxury of negotiating their own sweetheart deals, what message does the Chancellor think he is sending to those individuals and businesses by saying this paltry sum of money from Google can possibly be considered, as he says, a major success? Does this now show how complacent Ministers are?

[Mr Gauke]

All businesses have to pay tax under the law. It is under this Government that we have seen the diverted profits tax brought in, and it is under this Government that we are seeing the BEPS process change the behaviour of companies. We did not see any of this from the last Labour Government, and all we end up with is unsubstantiated claims about sweetheart deals, insulting HMRC staff, who have worked for years to ensure that Google and other companies pay the tax due under the law.

Finance Bill (Third sitting)

Debate between David Gauke and Wes Streeting

Tuesday 13th October 2015 Public Bill Committees

[Wes Streeting (Ilford North) (Lab)]

How many councillors does the Minister anticipate will benefit from these changes?

[Mr Gauke]

I think the numbers are difficult to calculate because they will depend on the particular arrangements that councillors wish to pursue and whether they claim or not. We received representations from a large number of councils—particularly county councils—that said the change would be welcomed.

[Wes Streeting]

I should have said that I am still an elected member of the Redbridge London Borough Council, albeit an unpaid one. The reason I ask is that, although I agree with the Minister’s case about fairness to local councillors, I wonder how he squares that with, for example, the changes the Government made to local government pensions, which meant that such people—in particular, leaders, mayors and cabinet members, who often give up their full-time work—are no longer eligible for the local government pension scheme. Surely these changes, which I do not think will apply to many authorities because many do not reimburse councillors for any journeys, are pretty small beer compared with the previous Government’s changes.

Tax Credits (Working Families)

Debate between David Gauke and Wes Streeting

Tuesday 7th July 2015 Commons Chamber

[Mr Gauke]

Cutting corporation tax rates for small businesses, introducing the employment allowance, helping under-21s and apprentices whose employers no longer have to face national insurance contributions, reducing the regulatory burden, restoring the economy to health and ultimately improving access to finance is what helps small businesses, and that is a record that we are proud of.

[Wes Streeting (Ilford North) (Lab)]

On two occasions in this House, the Secretary of State for Work and Pensions has been challenged on his argument that we can cut tax credits because we can increase the minimum wage or encourage employers to pay the living wage. The problem with that argument is that unless employers are encouraged or coerced to do that overnight, which would hurt small businesses disproportionately, it will hit families with children on tax credits the hardest. Is the Minister saying that the Government will not cut tax credits without compelling employers to pay the minimum wage? If he is not, the lectures he is giving us on hard choices are nothing compared with the hard choices facing those families.

[Mr Gauke]

The hon. Gentleman is trying to draw me in on the announcements that will be made tomorrow—

[Wes Streeting]

Of course.

[Mr Gauke]

He did it very skilfully, but unsuccessfully, I fear. If we want to help small businesses, we need to put in place a pro-enterprise environment and if he wants to see a Government who have done that, he should look at the record of the Government over the past five years.

European Union (Finance) Bill

Debate between David Gauke and Wes Streeting

Tuesday 23rd June 2015 Commons Chamber

[Mr Gauke]

I thank my hon. Friend for his excellent intervention. The answer to his question lies at the heart of our response to new clause 1. He raises an important point.

New clause 1 requires the Government to write to the Commission to review the basis of appropriations for the EU budget to see whether “alternative arrangements” would provide better value for money. Although the link between appropriations and value for money is an important one, it is not of the first order. The Government’s first priority is to control spending directly, not through the system of appropriations. Cutting low-value expenditure is the first and most important way of improving the quality of EU spending.

In delivering an historic real-terms cut to the budget, the Government took a decisive step. Within a smaller budget, we also made sure that expenditure was reoriented towards areas that provide higher value for money. Spending on the common agricultural policy will fall considerably as a proportion of the total budget, while spending on research and development and other pro-growth investment will increase. So it is possible to operate within the system of appropriations, if appropriate control is in place.

The new clause none the less raises the question of whether the system of payments and commitments is appropriate for delivering value for money. It is a question that we must ask. It is true that it is an unusual budgeting system and it is not the way in which the UK Government budget. If the EU were starting from scratch, we would not advocate using that system. Yet I do not think anything would be gained by requesting a review of the system—for one simple and compelling reason. The proposed review in new clause 1 has already been set in motion by the new Budget Commissioner, Vice-President Georgieva, through her recent “budget for results” initiative. We obviously cannot say what the review will include, but its terms of reference are widely drawn, providing ample space to review the current budget system, including the system of appropriations, and to explore possible alternative approaches that would offer better value for money and improved financial management.

The UK has publicly welcomed that initiative and has shared its expertise. The Chancellor has made it clear to other Finance Ministers during ECOFIN meetings that that is the UK’s position. The initiative will involve member states, the European Parliament and the European Court of Auditors.

[Wes Streeting (Ilford North) (Lab)]

I am grateful for that update, but perhaps the Minister will tell us what the Government are going to do proactively in terms of their own priorities to deliver the value for money that he talks about, beyond the generalities that we have heard all morning about better value for money, better spending and better priorities. Can we have some specifics? How will the Government exert real influence on that important review?