National Insurance Contributions (Reduction in Rates) Bill

Dominic Raab Excerpts

2nd reading
Thursday 30th November 2023 Commons Chamber

[Priti Patel (Witham) (Con)]

I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on his remarks. He provided a lot of sensible context for this debate and I will address some of his helpful points shortly.

It is very unusual to talk about fiscal matters, or fiscal legislation, to an almost empty Chamber. It is unheard of during my time in Parliament. As my hon. Friend will know, back in 2010, after the financial crisis, when we had to consider the long-term economic plan to build back our economy and to restore fiscal competence, there were many long, heated debates, and rightly so, in which proper scrutiny was given not just to Bills and legislation but to an exposition on the state we were in and how we needed to get ourselves back on to an even keel by growing the economy through Conservative policies.

That brings me to today’s theme. Conservative policies have, over the last decade, helped to restructure the economy, rebuild our country and create jobs and economic growth. They have made us stand tall in the world once again. I remember, in 2010, 2011 and 2012, looking at our financial ratings with a degree of despair. Thank goodness we are no longer in that state, which I think we all welcome.

I welcome this Bill and thank the Treasury and, in particular, my right hon. Friend the Chancellor for bringing it forward. Any measure that brings down the tax burden should be welcomed, because it represents a positive and constructive step in the right direction for our constituents. Our constituents are taxpayers and, ultimately, they want to keep more of the money they earn, and they want to know that the Government are spending their money responsibly.

Reducing the class 1 primary rate from 12% to 10% will put money into people’s pockets from 6 January—the sooner, the better. I commend the Government for bringing forward this vital fiscal measure. I am disappointed that there are not more colleagues here to debate it, but that is just how Parliament is right now.

The £450 benefit to a worker on the average salary will make an important difference to households. My hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) put it succinctly when he spoke about what it means for households at this time of year and for domestic budgets and spending.

I am particularly pleased to see the elimination of the class 2 rate and the reduction of the class 4 rate, which will help the self-employed from the start of the new financial year. I never tire of coming to this Chamber to say that I represent a constituency and a county of entrepreneurs. We are self-starters. We are self-made people. We are very proud of the contribution that the people of Essex make to our country. They are net contributors to His Majesty’s Treasury, which is all the more reason why they should get a tax cut.

As a Government who believe in enterprise, economic growth and letting people stand on their own two feet, we should do everything possible to support the self-employed and sole traders. It is hard work being a sole trader and being self-employed. We know about the regulatory burdens and pressure that HMRC puts on sole traders and the self-employed in particular, but they are the backbone and the engine of our economy; they are the lifeblood that creates jobs.

Some 80% of my constituents are employed by small and medium-sized enterprises—that is 20 percentage points higher than the national average—and we want them to continue to thrive and grow, as is right and proper. They are the embodiment of the entrepreneurial spirit that our country needs to create growth. I sometimes feel that we do not always give them the voice they need. It is easy for the big companies that can lobby central Government Departments to get their voices and representations heard. We are here for our constituents as their MPs. Even at business questions this morning, Members spoke about three family-run businesses. That is who we should be supporting.

We have seen a reduction in the number of self-employed people from around 5 million just before the pandemic to just over 4 million this year. That is why I believe we must back them, support them and encourage their growth. We should hold out that ladder of opportunity. Where they need help and support, we should back them as a Government and as a country.

I always come to this House to give a shameless plug for family-run and self-employed businesses in my constituency. It is also important that we buy British and support local firms in our country and in our constituencies. It is important to remember that the self-employed contribute an estimated £278 billion to the economy, and the fiscal and supply measures will make it easier for them to trade.

The ability to do business, to trade and to set up a business are so important. Lower taxes will mean that more people want to give it a go and set up a business. They are the ones taking a risk, so they are the people we should back and support. If we want to be healthy, competitive and drive growth, these are the very people who innovate and invest in new technology and do things that are edgy and somewhat different, while providing vital services to so many of our constituents and being pioneers in certain sectors. That is why keeping taxes down should be at the core of our mission in government.

As we have already aligned the class 1 and class 4 thresholds, to match the tax-free threshold on income tax, we all welcome that the burden of national insurance contributions has been reduced for the self-employed. That is why I am disappointed that there are not more Opposition Members present.

[Dominic Raab (Esher and Walton) (Con)]

My right hon. Friend is making a brilliant speech. I totally agree with her on the NICs paid by employees and the self-employed. In Esher and Walton, the average employee will receive a tax cut of £589 a year, benefiting 50,000 people. She is right that we are here to give a voice to the ambitions and aspirations of local people in our constituencies. Aside from the Labour Benches being totally empty, there is not a single Liberal Democrat Member here. Is it not churlish that, at this particular time, they are not doing more to support people on low and middle incomes?

[Priti Patel]

My right hon. Friend is right about that; his observation is spot-on. He will recall that, as I said in my opening remarks, when we have been in this Chamber to discuss important fiscal and economic measures, it has more often than not been to a full House. It is appalling that when the Government are backing working people and doing the right thing for them by putting more money in their pockets, the Opposition are all hiding. They are failing to recognise something that their constituents will benefit from. The Opposition should be giving a positive voice and supporting it, because it means more jobs and growth in every constituency across the country. As parliamentarians, we should all welcome that.

Budget Resolutions

Dominic Raab Excerpts

Thursday 9th March 2017 Commons Chamber

[Mr Dominic Raab (Esher and Walton) (Con)]

It is a pleasure to follow other hon. Members. I hope that the hon. Member for Wallasey (Ms Eagle) will not be too offended if I say that I agree with more of what my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) said than what she said, but I find that the Budget debate always produces insightful contributions from both sides.

[Ms Angela Eagle]

Just to reassure the hon. Gentleman, I suspect that I would have been even more offended if he had agreed more with me than with his hon. Friend.

[Mr Raab]

It is good to at least start on a point of consensus.

When I hear the leader of the Labour party or the shadow Chancellor talking about the economy, I sometimes feel that there is a parallel universe. I listened carefully to the right hon. Member for Hayes and Harlington (John McDonnell) on “The Andrew Marr Show”. He explained that the economy was not growing fast enough. In fact, the British economy was the second fastest growing in the G7 last year, as it is this year, despite all the doom and gloom around Brexit. He needs to look at the economic facts.

The right hon. Gentleman went on to say that real wages are falling, which hon. Members have returned to on several occasions. I will talk about cost of living pressures, but the official figures are crystal clear. Real wages have been rising since September 2014 and, according to official data, are set to continue rising. [Interruption.] If the hon. Member for Heywood and Middleton (Liz McInnes) wants to intervene, I would welcome that, but otherwise she should go and check the facts. The raw truth is that employment is at a record level, real wages have been rising since 2014, income inequality—I know that she, like me, cares about that—is at its lowest in 30 years, the FTSE is at a record level, and there has been a fresh wave of investment since the referendum, including, most recently, the commitment by James Dyson.

[Seema Malhotra]

Does the hon. Gentleman agree that although he may be able selectively to cite headline statistics, there is a reality in our constituencies that comes through in our casework? Schools and parents tell me about people not being able to afford school uniforms, and people are relying on food banks. Does he acknowledge that we need to face that reality and that our economy and economic policy should deal with those things?

[Mr Raab]

I welcome the acceptance of the official figures at least, which was implicit in what the hon. Lady said. I accept that there are cost of living pressures, not least given that inflation is creeping up, but let us face it: inflation is still well below the Bank of England’s headline 2% target. I will address cost of living challenges and what we should do about them, but we live in the real world and we should not chase the Labour party leadership’s socialist pipe dreams, because they will do nothing to deal with cost of living pressures other than precipitate a lack of confidence and investment in the economy and falling living standards as a result of increasing unemployment.

I thought that the hon. Lady was going to intervene to welcome Dyson’s investment in a new 517-acre research facility in Wiltshire. Jaguar Land Rover is investing in creating the new Velar model, which will be exclusively manufactured in Solihull. The wave of investment is coming right across the country. There is a resilience and strength in the British economy, and fresh investment and enthusiasm about the opportunities that lie ahead. Having said that, I want to be careful not to allow any sense of complacency to creep in.

This Budget is all about the whole package. In what I like to think is my still relatively limited time in this place, I have never known a Budget that has not involved compromise. Trying to put together a package is the serious business of government. Hon. Members of all parties can be quite quick to allow the positive stuff that we like, whether that is taxation cuts or extra investment—I have been guilty of that in the past—but we also have to ’fess up and face up to the difficult decisions that have to be made. That is the serious business not just of politics, but of government. Look at what the leader of the Labour party said yesterday; he and his party are so unfit to govern because they are not willing to face up to those difficult decisions.

[Stephen Doughty]

The hon. Gentleman talks about not being positive enough about different things but, a moment ago, he tried to present quite a false impression of the inflation rate. The PriceStats indicator, which is actually a much more accurate indicator of the inflation rate, suggests that inflation has potentially risen to 3.3% in recent weeks. As my hon. Friend the Member for Wallasey (Ms Eagle) pointed out, that is certainly being reflected in the sorts of pressures that constituents come to us with. Does the hon. Gentleman not recognise that inflation is, in fact, potentially much higher than he suggests?

[Mr Raab]

I love to have a good haggle over stats, but the fact that the hon. Gentleman said that the situation is “potentially” worse than I indicated suggests that he does not have full confidence in his intervention. The raw truth is that I am citing the consumer prices index for inflation, which is the one that everyone uses, from economic forecasters to the Treasury and Ministers. If the hon. Gentleman wants to use a different one, it may, in fairness, be him who is trying to be selective.

Let us look at what the Government proposed and brought forward for the economy in this Budget. We continue to cut corporation tax, which is critical for encouraging businesses to come here and invest, and, from looking at the report from the Centre for Policy Studies, is also a good way of generating additional revenue because it is a dynamic tax cut. We want to create more revenue not just to spur business growth, but to pay for the precious things such as social care that we want in our society and in our public services. We need a strong economy to ensure that we remain at the most cutting edge of our competitiveness. I am afraid that the Achilles heel of the current Opposition is that they have no sense of what credible economics look like.

On top of corporation tax, I was delighted to see the Government address the issue of business rates, and to see the £400 million package to ease the transition towards reform of the wider business rates system particularly to ensure that smaller businesses on the high street are not unduly affected or penalised by the changes. I know from my own experience—particularly in a constituency such as Esher and Walton, which is really a constellation of towns and villages with a strong high street, but with a disproportionate number of smaller business—that the measures to ease the business rates transition will be well received. We want to ensure that the high street is able to compete with online businesses, and I was pleased that the Chancellor directly addressed that in the Budget yesterday.

As well as the measures to stimulate the economy and to ensure that we are at our most competitive, the Budget includes significant investment in skills. There has been a record level of investment in schools under this Government, and we have seen fresh money allocated to new schools and existing schools. I listened very carefully to the hon. Member for Wallasey. The truth is that 1.8 million more children are studying in state schools that are deemed good or outstanding than in 2010, when the last Labour Government were in office. That is probably the accomplishment of this Government of which I am most proud. The question now is not how we rest on our laurels, but how we build on that accomplishment.

Yes, we want to ensure that with a new wave of grammar schools the academically gifted—whether they come from the humble background of a council estate or a rural backwater—have the opportunity to make the very best of their talents. We also want to ensure that the bright but not necessarily bookish have a vocational route, through technical training or otherwise, so that every child who has talent, works hard, grafts and has something about them—no matter what their disposition—can make the very best of their individual abilities. That is what is so positive about the package brought forward by the Government yesterday, with T-levels as well as the new money going into grammar schools and existing schools.

Aside from schools and education, which are important for skilling up our economy, driving forward social mobility and ensuring that we build the vision of the meritocratic society as well as the enterprise economy, money has been allocated to social care because we have a Government who are willing and able to take difficult decisions. An extra £2 billion will go into social care on top of the £10 billion we will invest in the NHS by 2020. My constituency of Esher and Walton is a classic Surrey constituency in the sense that we have an ageing population, which is good news because people are living longer, but we need to ensure that we can cater for conditions and healthcare needs. Although there are many longer-term questions about financing and what model of social care we have, the extra money going into social care will be a crucial first step. I know, from looking around at the pockets of elderly poverty even in a relatively affluent constituency in Surrey, how important it is to ensure that we have that support, but that support is only there because we have a Government who are willing to make difficult decisions.

The hon. Member for Feltham and Heston (Seema Malhotra) made an intervention about the cost of living, which is a critical issue to address. The reality is that this Government are raising the national living wage to £7.50 an hour and have taken 3 million of the lowest paid out of income tax. Let us be very clear that for the average taxpayer, that is now the equivalent of £1,000 extra in their pockets each year as a result of the difficult decisions that a responsible Government are able and willing to make. Further measures in the Budget deal with tax-free childcare, and the doubling of free childcare for working parents with three and four-year-olds. I am not sure that I am eligible, but I do have a two-year-old and a four-year-old. As a member of a two-salary couple and team, I know the importance of such support, and I welcome it.

Difficult decisions are made in Budgets. There are issues and points in this Budget that I did not like much, but the truth is that we have to look at Budgets in the round and as packages. I will be honest that I struggle with the changes to national insurance for the self-employed. I am in the business of cutting taxes, not raising them, particularly for the entrepreneurial classes, but we need to know how we are going to fund everything we want to do in the Budget. That is the challenge that any responsible Government and, indeed, any credible Opposition, have to face. The advantage we have is that we will have a separate free-standing piece of national insurance legislation. The Minister, who is incredibly assiduous and very attentive to the concerns raised by hon. Members in this Chamber, will want to ensure that we get the package for national insurance right.

The Chancellor has raised the issue of the lack of parity between the way in which the employed and self-employed are treated. Of course, there are advantages and disadvantages to both statuses, and it is absolutely right to ensure the right, equitable treatment for both. I do not want us to penalise to entrepreneurial people in our society but, at the same time, I want to ensure that we have a system that is fair. Conservative Members must be extremely mindful that we satisfy not only the letter, but the spirit of our manifesto commitments. The advantage of having this free-standing legislation—I can see the Minister scribbling away—is to ensure that we get the right balance on this sensitive issue.

[Stephen Doughty]

Will the hon. Gentleman give way?

[Mr Raab]

I want to make one more point about the other aspect of the Budget that I struggled with a little bit—cutting the dividend-free income for savers. We have talked a lot in this Chamber and in the Government about the importance of encouraging people to save, given the challenges of debt, credit and household debt more generally. I want to ensure that we are not sending the wrong message with this change, when we actually want to incentivise and encourage savers.

I am therefore very honest and upfront about the challenges. The problem is that all the things we want—from the extra money for social care for the vulnerable, to the extra money for skills to drive forward social mobility, to extending the personal allowance to cut income tax—have to be paid for. I welcome, support and reinforce the Government’s inclination to face difficult decisions head-on and to make sure that we get the balance right, rather than just having a Budget that satisfies newspaper headlines but does not stand the test of time. The Government therefore have my support, and I know that they will want to look at the nuances of some of these measures.

In contrast, I was very struck by the speech from the leader of the Labour party yesterday, because it did not put forward any credible alternative. It rather felt like he was tilting at socialist windmills—like he was somehow lost in a field ranting at the wind. The tragedy for the Labour party is that, on some of these issues, where there are genuinely choices to be made, it has no credible alternative. That is what I think the public will see: a Government bracing themselves and taking difficult decisions, and a Labour party, under its current leadership, that has talked about £500 billion of extra spending that it cannot fund.

I pay tribute to the hon. Member for Nottingham East (Chris Leslie), the former shadow Chancellor, who rightly pointed out that satisfying those spending commitments would require us to double income tax, double national insurance—there was no mention of that from Labour Members—double council tax and double VAT as well. I am not sure, therefore, that Labour Members are really in a position, in the absence of a credible alternative, to start picking holes in one or another aspect of the Budget put forward by the Government.

[Wes Streeting (Ilford North) (Lab)]

Will the hon. Gentleman give way?

[Mr Raab]

Let me give the hon. Gentleman my three points; I will look forward to hearing his intervention after that.

There is also the whole concept of people’s quantitative easing—the idea that the Bank of England should print more money to spend on some of these ivory-tower, socialist-pipedream projects. That is the Mugabe school of economics; it is deeply irresponsible. Again, if we are talking about difficult decisions, that would be far worse for savers than any of the difficult decisions that have had to be made in this Budget.

Finally on the alternatives put forward by the Labour party, the leader of the Labour party is actually on record as being amused about the possibility of raising the basic rate of income tax by 5%—I have the quote here, but I will not embarrass Labour Members by reading it. Honestly, of all the tax rises in the world to contemplate, a rise in the basic rate is deeply irresponsible, not just economically but socially.

[Peter Dowd (Bootle) (Lab)]

Why do you not talk about your manifesto instead of our manifesto? Why do you not talk about the promises in your manifesto that you have broken?

[Madam Deputy Speaker (Natascha Engel)]

Order. The hon. Gentleman should remember that he is speaking through the Chair. It is not my manifesto—it is the manifesto of the hon. Member for Esher and Walton (Mr Raab).

[Mr Raab]

Madam Deputy Speaker, I thought for a moment that you were going to adopt the Conservative manifesto. Fortunately, you have resisted that temptation.

The shadow Minister makes his point, but I have addressed in the round the Budget that the Government have put forward. I have explained the bits I enthusiastically embrace and talked about the difficult decisions we have had to make. However, the truth is that the Labour party is incapable of putting forward a credible package.

[Several hon. Members rose—]

[Mr Raab]

I would say—

[Karl Turner (Kingston upon Hull East) (Lab)]

Give way!

--- Later in debate ---

[Mr Raab]

I will give way at a time of my choosing, not the Labour party Whip’s choosing.

If the shadow Minister would like to explain how it can possibly be right to hike the basic rate of income tax by 5%, I will give way.

[Peter Dowd]

I beg your pardon, Madam Deputy Speaker.

The bottom line is that we should be talking about the broken promises from the Conservative party manifesto. However, the national infrastructure plan involves £500 billion of expenditure—some public expenditure and some private—so I would ask how the Government are going to fund that.

[Mr Raab]

I am not sure that it is incumbent on me to fund the commitments that the Labour party may or may not be willing to make.

The truth is that we have a properly funded Budget in which difficult decisions have been made. Investment is being made in the right things, such as skills and social care, but—

[Peter Dowd]

Will the hon. Gentleman give way?

[Mr Raab]

No, I will not. The hon. Gentleman has had plenty of opportunity. I have allowed him to intervene on me and I am looking forward to hearing his speech. However, the truth is that he is unable to answer the question of how it can possibly be right to raise the basic rate of income tax. I would just point out that, as a result of the extension of the personal allowance, the average taxpayer will receive £1,000 a year extra.

[Peter Dowd]

It is fantasy.

[Mr Raab]

No, these figures have been properly costed. From the Institute for Fiscal Studies to the official figures, it is clear that, by raising the personal allowance, we are putting £1,000 back into the average taxpayer’s pocket. At the same time, the Labour party—[Interruption.] Not just the uber-rich—we are used to hearing about that predictable bugbear from the Labour party.

[Peter Dowd]

He’s frit.

[Mr Raab]

Having taken two interventions from the hon. Gentleman, I have to say that the suggestion that I am frit is a bit silly.

The truth is that the Labour party will want to put up taxes on not just the super-rich, but low and middle-income families. Frankly, that is fantasyland.

[Mr Stewart Jackson (Peterborough) (Con)]

Does my hon. Friend agree that the Budget statement is about not just arcane statistics and numbers, but societal change for the better? Did he notice, as I did last week, that the number of families in which no one works is at an all-time low under this Government? We have therefore delivered economic stability and positive societal change.

[Mr Raab]

My hon. Friend hits the nail on the head. The key thing the Government can do is to create the conditions for record levels of employment, with real wages rising, and with inflation—yes, it needs to be looked at—stable and under careful control. Even on the worst-case scenarios that have been forecast, inflation would rise above 2%, but come back down shortly thereafter.

The reality of this Budget is that we have a Chancellor and a team of Ministers grappling with difficult decisions at a sensitive time, when there is a degree of uncertainty because of the referendum result, and coming up with a sensible, measured package. We have the Labour party talking about printing money and £500 billion of spending commitments when it has no idea where it can fund them from, and we have a Government who are committed not to tilting at socialist windmills, unlike the leader of the Labour party, but to building a better Britain—not only an enterprise economy but a meritocratic society for our children—and to making sure that the most vulnerable, and particularly the elderly, have the social care they need. [Interruption.] If the hon. Member for Bootle (Peter Dowd) would like to intervene on me rather than chuntering in frustration—more in frustration at his own party, I suspect, than at me—I will give way.

[Peter Dowd]

The hon. Gentleman can make up as many false “facts” as he would like, but the fact of the matter is that he is making them up. He should concentrate on his own manifesto. He still has not answered the question about the £500 billion in the Government’s national infrastructure plan. Where are the Tories getting the money for that from?

[Madam Deputy Speaker (Natascha Engel)]

Order. We are mulling over making up false facts. I think we are starting to get quite close to language that is not really acceptable in Parliament. We should just be aware of it.

[Mr Raab]

As ever, Madam Deputy Speaker, I will be very mindful of your advice, and I will curtail my speech.

The truth is that Budget week is the week for difficult decisions. The Government set out their priorities—the media will always pick apart whichever bits they want to—but they have to put in place a package that strikes the right balance, and I commend them for doing so. I know the Minister will have taken on board the concerns that I and other hon. Members have raised. However, the contrast between a credible, serious Government and a leader of the Labour party and an Opposition who have abdicated responsibility for coming up with a credible alternative is palpable for all to see—everyone inside this House, but also the public at large.

Future Government Spending

Dominic Raab Excerpts

Wednesday 4th March 2015 Commons Chamber

[Chris Leslie]

It is amazing how quiet Conservative Members are on that particular point.

[Mr Dominic Raab (Esher and Walton) (Con)]

Will the hon. Gentleman give way?

[Chris Leslie]

I will give way to the hon. Gentleman in a moment, because a particular part of my speech is dedicated to him.

On the “Today” programme this morning, the Chancellor of the Exchequer—for it was he—uttered the phrase:

“We’ve got on top of our debts and deficits.”

Those were the words—[Interruption.] If Government Members really believe that they have been reducing the national debt and that the deficit has been eradicated, they are either delusional or not feeling particularly well.

[Mr Raab]

I thank the hon. Gentleman for giving way; he is being very kind. He has blamed the biggest peacetime budget deficit, which we inherited from the previous Government, on the global economic crisis. Will he confirm that the Office for Budget Responsibility’s public finances database clearly shows that public spending rose by £267 billion between 1997 and 2009-10, and that 71% of that rise took place by 2006-07—well before the financial crisis? Will he confirm that that is true?

[Chris Leslie]

I wonder whether the hon. Gentleman was making those points before the last general election. If he can point to evidence that he was warning, “No, those spending plans are entirely wrong and we shouldn’t be spending on schools and hospitals in that way,” I will give way to him again. Did he warn us about those problems at the time?

[Mr Raab]

I thank the shadow Minister for giving way again, but I think the way interventions work is that we on this side ask the questions. My question is simple: was the OBR right or wrong about 71% of the deficit coming from spending before the recession?

[Chris Leslie]

The hon. Gentleman is misrepresenting the OBR’s views. It is clear, as the Institute for Fiscal Studies has said today, that the global banking crisis had a devastating effect not just on this country’s public finances, but across the world. Conspicuous by its absence from the hon. Gentleman’s comments was any evidence that he had said in the past that public expenditure plans were all wrong. The Chancellor of the Exchequer and the Prime Minister signed up to support all the previous Government’s proposals.

--- Later in debate ---

[Mr Gauke]

That position is supported by the IFS. The figure is £30 billion. Where is it coming from? The Labour party simply does not have an answer. If it is not prepared to accept the £30 billion figure, it will be borrowing more. If it does accept the £30 billion figure, where is it coming from? If it is not coming from spending, it must be coming from tax.

[Mr Raab]

Does the Minister recognise the figure given by Paul Johnson of the IFS in The Times on 13 January, when he said that Labour’s plans amounted to £170 billion more on the national debt by 2020, which is about a third higher than the entire NHS budget? That is what we are talking about.

[Mr Gauke]

If the Labour party will not meet our spending plans and is going to borrow more—it is giving itself more wriggle room, even though it has signed up to the charter, which commits it to £30 billion of fiscal consolidation—where is the money coming from?

--- Later in debate ---

[Mr Gauke]

I am not persuaded by the argument that if we borrow more we ultimately borrow less—I am afraid that is far too easy an answer.

The Government believe that those with the broadest shoulders should bear the biggest burden, and as the Institute for Fiscal Studies confirmed today, that is exactly what is happening. That is why the richest in our society now pay more in tax than at any point under the previous Government. The Labour party can lecture us all it likes about taxing the rich, but it was not on our watch that private equity managers paid a lower rate of tax than their cleaners. It was not on our watch that the wealthy could sidestep stamp duty, or that higher earners could disguise their remuneration as loans that were never repaid. Under our watch, however, every single Budget that we introduced raised revenues from the most well off in society.

[Mr Raab]

Will the Minister confirm that, although the motion talks about reversing our changes to income tax, the latest HMRC data show that someone who earns £10,000 to £15,000 a year will pay 54% less income tax than they did under Labour, while someone who earns £1 million to £2 million pays 14% more?

[Mr Gauke]

My hon. Friend raises an interesting point, and the big tax cut that this Government have delivered has been the huge increase in the personal allowance that has benefited millions of hard-working people up and down the country.

Stamp Duty Land Tax

Dominic Raab Excerpts

Thursday 4th December 2014 Commons Chamber

[Mr Dominic Raab (Esher and Walton) (Con)]

It is a pleasure, as always, to follow my hon. Friend the Member for Nuneaton (Mr Jones), who made a range of important points in typically common-sense language.

I, like others, welcome the Chancellor’s autumn statement. Like business rates reform, which is another aspect I wholeheartedly welcome, a major overhaul of stamp duty is long overdue. I pay tribute to my hon. Friend the Member for St Albans (Mrs Main), who has conducted a tenacious campaign for major substantive reform of stamp duty. If the experience of our hon. Friend the Member for Harlow (Robert Halfon) is anything to go by, she will shortly be elevated to a senior rank. I am sure she will be thrilled by that.

I am delighted that the Chancellor is taking action against what was one of Labour’s most arbitrary stealth taxes. The way it operated was a pretty vindictive assault on aspirational low and middle-income savers. The point has been made that, economically, a well functioning housing market should enable people to engage in mutually beneficial transactions, and make efficient use of housing stock. That is extremely important. A family in a small house should be able to move to a larger one, if they need to do so because of a growing family or if someone is earning more following a promotion. Older couples should be free to downsize when they want, not least to free up cash for other needs. Stamp duty has been a poorly designed tax that has undercut social mobility upwards and downwards.

In my constituency, we have felt that burden disproportionately. Of course, there are many families living in Elmbridge who are on very high incomes, but that does not mean that across the board it is some kind of land of milk and honey. For many of the residents whom I come across, their home is a nest egg built up after many years of saving. They may be asset-rich but income-poor. They may want to downsize to release cash for income or even the costs of care. Stamp duty has had a totally arbitrary impact on them. We also have a problem with key workers, who are vital for the delivery of local public services. They find it unaffordable to live locally and stamp duty has exacerbated that problem.

Above all, we have a wide range and large number of middle-income families, working hard, saving and facing very high cost of living pressures, and affordable housing is a major factor. As of the second quarter of last year, the median house price in Elmbridge was £445,000. That price has almost certainly risen substantially since then, but it does not buy a mansion. I can say that as someone who lives in my constituency. Typically that price would buy a two-bedroom home, which under the old regime would land the buyer with a massive stamp duty bill of over £13,000. According to the most recent market data, a family in a small home looking to buy a larger one would be left facing a bill of £13,000 or more for the average two-bedroom property, and £23,000 or more for the average three-bedroom home.

The cumulative bill is staggering. In 2012-13 my constituents paid £56 million to the Exchequer in stamp duty on residential property, which is more than the total paid in the whole of the north-east of England and a third of the figure for the whole of Scotland. Of course, Esher and Walton is just one area, and there are obviously geographic differences in incomes as well as house prices, but they do not necessarily match up, and they certainly do not tally neatly or consistently in my constituency. Elmbridge is just one example of stamp duty’s geographical unevenness. London accounted for 41% of residential stamp duty in 2012-13, and the south-east of England accounted for a further 22%. England as a whole accounted for 94% of UK stamp duty. It therefore has a very particular geographical burden, and it is not filtered according to income.

Stamp duty is not an economically efficient tax, as we have heard time and again. Stamp duty on residential property distorts the whole structure of the housing market. In particular, the slab structure, under which the relevant rates apply to the full sale price, not just the part above the relevant threshold, has created huge cliff edges, as we have heard this afternoon. It is worth dwelling on the impact of the slab structure. I think that the Chancellor made the point exceptionally well yesterday. A £1 increase in the price of a home, from £249,999 to £250,000, triggers an extra £5,000 tax liability. That cliff edge has been shown to be harmful to home owners and would-be buyers. It is worth remembering that stamp duty is a tax on transactions, so it impacts on the purchaser and the seller.

Property experts London Central Portfolio, together with the Cass business school, have put together an analysis that estimates that close to 14,000 home owners a year are forced to reduce the asking price for their home in order to get under a stamp duty threshold. Other would-be sellers are either unable or unwilling to reduce their prices to below the nearest threshold. That causes bottlenecks in the market and a drought of available properties in certain price ranges in certain areas, which is very harmful to the market and has important social as well as economic impacts.

It is little wonder that the Institute for Fiscal Studies has described stamp duty as

“a strong contender for the UK’s worst-designed tax”,

with a “perverse” and “absurd” structure. The director of the IFS argued earlier this year that in the modern era of broadly based taxation, the case for maintaining stamp duty at all is “very weak indeed”.

[Mrs Main]

I pay tribute to my hon. Friend, who along with me secured the stamp duty debate in September and who has raised these matters on numerous occasions in the media. Does he share my concern that that debate was very poorly attended by the other parties? Indeed, it was very much Members on the Government side who were concerned about the matter.

[Mr Raab]

My hon. Friend, as usual, makes her point powerfully. As is so often the case, the real democratic debate and scrutiny is taking place on this side of the House, but at least the Labour party accepts these changes. I hope that in due course it will reflect and put paid to some of its ridiculous notions about a mansions tax, which is really about the politics of envy, rather than sensible economics or social fairness.

I want to move on to the impact of stamp duty, because it has also proved socially unfair. When the additional 3% and 4% rates were introduced in 2000, they were designed for the wealthy. Had the threshold risen in line with house price inflation, only properties worth £1.3 million would attract 3% stamp duty today. The Chancellor’s reforms will make a vital difference and I fully support the direction of travel. The move from the slab structure to marginal rates is far more economically efficient. It will unblock bottlenecks in the market, which also have a negative effect on housing supply and stock. I wholeheartedly welcome this move.

Likewise, I recognise that the vast majority of home buyers, and as a result sellers, will benefit. The tipping point at which buyers will pay more as a result of the reform kicks in at just under £940,000. I have two points to make about that. First—this relates to my earlier point about house prices varying dramatically across the country—there are plenty of three-bedroom homes in my constituency, as I am sure there are in London and in other constituencies, that will already be caught by the new system and will end up paying significantly more. They are not mansions owned by the super-rich; many are owned by people who have saved and so are asset-rich but income-poor. Again, London and the south-east will feel the burden. I do not think that we can always assume that it will hit only those with the broadest shoulders; it will also hit those who have saved and planned their finances over the long term, and it will have a significant impact.

Secondly—this is the missing piece of the jigsaw—given the forecasts for house price inflation, buyers of average-priced homes in many parts of London and the south-east will in a relatively short time find themselves paying substantially more. Over time, the higher rates will, by stealth, hit more and more middle-class buyers and sellers. In London and the south-east, median home buyers could be caught by the new 10% rate within 10 years, depending on how the forecasts for house prices turn out. To be clear, that means that within a decade—more or less—average home buyers could be hit by the 10% rate. Recent experience with the 3% and 4% rates of stamp duty under Labour shows that what starts as a tax aimed at the rich, within a relatively short period of time if we are not very careful ends up clobbering the middle classes. I hope that in the immediate or not too distant future Ministers will address that point square on by indexing the thresholds for all rates to house price inflation. That way, we can learn the lessons and avoid the mistakes of previous Labour Governments.

If we do not address fiscal drag now, and instead kick it into the long grass, we risk ending up over time robbing middle-class Peter to pay working-class Paul, and I do not think that we should be engaged in that, as a matter of sound economics, social fairness, or indeed long-term sustainable politics. Instead, we should be ensuring, as part of our long-term economic plan, that over the long term all low and middle-income aspirational savers and home buyers benefit from these important and welcome reforms.

Stamp Duty (Housing Market)

Dominic Raab Excerpts

Thursday 4th September 2014 Westminster Hall

[Mr Dominic Raab (Esher and Walton) (Con)]

It is a great pleasure to serve under your chairmanship, Mr Betts, I think for the first time. I congratulate my hon. Friend the Member for St Albans (Mrs Main) on securing this important debate with her characteristic tenacity. I can only reinforce the compelling arguments she has made, which I am sure will be conveyed to the Chancellor through Treasury Ministers and Parliamentary Private Secretaries. I hope that that will result in further action on this important issue.

I start on the key point of principle of economics: a well functioning housing market should enable people to engage in mutually beneficial transactions and make efficient use of existing housing stock. We know that we have a problem with the supply of housing stock, which is all the more reason to make the best use of the stock we have. I pay tribute to the coalition for its efforts to increase the overall housing supply and, in particular, the supply of affordable housing.

What does that principle mean for the average person? A family in a small house should be able to move to a larger one, if they need to or if they have a growing family, or because of a promotion from working harder. Older couples should not be forgotten. They want to be free to downsize when and how they want, not least to free up cash for other needs. They might want to go travelling, if they are in good health. They might want or need to use the money for care, or they might want to realise some of the value from their assets and free up some money from them. We should not be creaming money off people with those real social needs. The key point is that stamp duty is a poorly designed tax that undercuts that type of social mobility in both directions.

Further to what my hon. Friend said, I have all sorts of horror stories from my constituency, where we feel the disproportionate burden of stamp duty. Some families in Elmbridge are on very high incomes, but overall, looking beyond the small minority who are doing incredibly well and are very affluent, the truth is—I see this day to day, week to week and month to month—that it is no land of milk and honey. The vast majority are hard-working people on low and middle incomes. We also have pockets of acute deprivation and, in particular, as I alluded to, elderly deprivation. For many residents, their home is a nest egg that has been built up after years of saving. They may be asset-rich in statistical terms, but they are income-poor. They might want to downsize or need to release the cash for income or the cost of care, and stamp duty has an utterly arbitrary impact on them.

As my hon. Friend said, many key workers in local public services simply find it unaffordable to live locally, and stamp duty exacerbates that problem. Above all, I want to take time to speak out as a voice for the many people in low and middle-income households. They are working hard and facing high cost of living pressures, of which affordable housing is a major factor. As of the second quarter of last year, the median house price in Elmbridge was £445,000. That does not buy a mansion. Typically, it fetches a nice, but relatively modest-sized, two-bedroom home. According to market data, a family in a small home looking to buy a larger one would face a bill of £13,000 on the average two-bedroom property and a bill of £23,000 on the average three-bedroom home.

[Mrs Main]

Is my hon. Friend as concerned as I am about families growing up in cramped environments? What space is there for children to study? There is a direct correlation between people living in cramped conditions and achievement in life. If we are not allowing people to move up, that could be part of the problem.

[Mr Raab]

My hon. Friend has made a typically astute point. The problem has a social impact as well as an economic one. Let us remember that stamp duty costs are on top of the tax on income, the money that families scrape together for a deposit, the legal fees, which are increasingly high, and the money for a survey. The cumulative bill in my constituency is staggering. To give a sense of the big picture, for 2012-13, residents in my constituency paid £56 million to the Exchequer in stamp duty on residential property. That is more than the total paid in the whole of the north-east of England. I am not trying to set off some sort of north-south divide, but at some point in the debate on the redistribution of wealth, there needs to be some recognition that it is not just the uber-wealthy and the super rich who are paying the burden; it is middle England, the middle classes and those on relatively low and middling incomes.

The amount of stamp duty paid in my constituency is equivalent to a third of the figure for the entirety of Scotland. Frankly, in constituencies such as mine, stamp duty feels like an assault by the taxman on hard-working, middle-income savers, who are precisely the people we should be incentivising, not walloping—I would have said “clobbering”, but my hon. Friend has used that word. Of course, Esher and Walton is just one example of the geographic unevenness of stamp duty. London accounted for 41% of residential stamp duty last year, with the south-east accounting for a further 22%. England as a whole accounts for 94% of UK stamp duty. The tax clearly has an arbitrary effect in different areas of Britain.

More broadly, the tax is not economically efficient. If we look at the raw economics—I know my hon. Friend the Member for Harlow (Robert Halfon) and the Minister care deeply about economic efficiency—we see that it is an inefficient tax. Stamp duty on residential property distorts the whole structure of the housing market. My hon. Friend the Member for St Albans has mentioned the slab structure, under which the relevant rates apply to the full sale price, not just the part above the relevant threshold. That creates huge cliff edges. A £1 increase in the price of a home, from just under £250,000 to just over, triggers an extra tax liability of £5,000. The cliff edges have been shown to harm both home owners and would-be buyers. After all, why would someone put an offer in for a property at £255,000, when for the extra £5,000 in bricks and mortar, they would pay more in stamp duty? They would not—no one does, and the data from all the estate agents bear that out.

Data on the distribution of transactions show that most buyers are simply unable or unwilling to meet asking prices just above the £250,000 threshold, because of the extra £5,000 penalty in stamp duty. As a result, the property experts London Central Portfolio, together with the Cass business school, has estimated that 13,800 home owners a year are being forced to reduce the asking price of their house to get under a stamp duty threshold. Other would-be sellers are either unable or unwilling to reduce their prices to below the nearest threshold. That causes bottlenecks in the market and a drought of available properties in certain price ranges in certain areas, until market prices rise far enough to justify the additional stamp duty, which takes a while. That deters buyers and sellers and reduces labour mobility, as my hon. Friend pointed out, because people are discouraged from moving to where suitable jobs are available, which damages the economy as a whole. It is little wonder, therefore, that the Institute for Fiscal Studies has described stamp duty as

“a strong contender for the UK’s worst designed tax”,

with a “perverse” and “absurd” structure. The director of the IFS argued earlier this year that in the modern era of broadly-based taxation, the case for maintaining stamp duty is “very weak indeed”.

However, it is not just the economic distortions and inefficiencies that we should care about. Frankly, Government Members have perhaps been a bit too defensive about coming out and saying squarely, as my hon. Friend has, that this is socially unfair and wrong. That is illustrated by the data from my constituency and the impact of the 1% rate, let alone the 3% rate. Take a family—a two-salary couple who both earn £15,000 a year—who are mortgaged to the hilt to buy a property. The usual limit, which is strictly enforced, is debt at four times joint salary. They have scraped together the money for a 10% deposit, and that way they can buy a property at £150,000. Why should they pay £1,500 extra in tax at that point? It is just a penalty. It might seem like a small percentage of the price of the property, but for families on tight margins, working hard, it is utterly punitive.

When the additional 3% and 4% rates were introduced in 2000, they were designed to target the wealthiest, and had the original threshold for the 3% rate risen in line with house price inflation, it would be levied only on properties worth £1.3 million or more today. In 2000, 391,000 homes were exempt from stamp duty. Today, that number has almost halved. That is the level, scope and scale of the fiscal drag we are discussing. The average UK house price in 2000 was around £110,000, which is well below the 3% threshold, but the average price today, according to the Office for National Statistics, is £265,000, which is well over the 3% rate, landing middle-income home buyers with a bill of some £8,000. If we are really in the business of supporting and encouraging savers, how on earth can we justify such a penalty? Sales in the 3% band covering homes worth between £250,000 and £500,000 increased from 8% as a proportion of total sales in 2003 to 19% in 2013. According to London Central Portfolio and the Cass business school, revenue from the 3% band has almost tripled since 2000, rising from £724 million to close to £2 billion this year.

Such a fiscal drag is not only a serious problem in its own right, but should also serve as the starkest of warnings to anyone in any party who is tempted by a mansion tax, as proposed by Labour and the Liberal Democrats. That is perhaps why no Labour Back Benchers are here to justify either the stealth tax implemented by the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), or their current proposals.

[Mrs Main]

I am pleased that my hon. Friend mentions the mansion tax, because there has been much rhetoric about it catching only the wealthiest. I completely agree with him that people felt that the 3% stamp duty threshold was not for them and only for the wealthiest, but in areas such as mine and his, it will soon become a mansion tax for the ordinary and not the wealthy.

[Mr Raab]

My hon. Friend is absolutely right. When the Liberal Democrats originally started discussing a mansion tax, it was to be levied on homes worth £1 million, and when everyone complained about fiscal drag, stamp duty and the like, it was increased to £2 million. What is most interesting is that if the Liberal Democrats use that extra money for the perfectly laudable objective of increasing the personal tax allowance still further, there is a black hole of something like £6 billion in their spending plans, so they would have to increase the net of their mansion tax. The lesson from stamp duty that the Labour party has offered us, which the Liberal Democrats ignore and which Conservatives must take on board, is that what starts out as a tax on the rich always ends up—I will use the word my hon. Friend used—clobbering the middle classes. That is the stark reality that we must guard against.

Stamp duty should be abolished for homes under £500,000 and the remaining thresholds should be indexed to house price inflation in primary legislation. It would be a dynamic tax cut that would probably—it can never be guaranteed—raise additional revenue. I set out in a report for the Centre for Policy Studies how we could fund the change up front by cutting back on the waste mentioned by my hon. Friend. Extra revenue could be raised while a major economic and social issue is dealt with.

Stamp duty has morphed into a vindictive stealth tax on aspirational Britain. It distorts the housing market. It warps labour mobility. It penalises savers. It wallops those on relatively low and middle incomes. The case for reform is overwhelming.

--- Later in debate ---

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for St Albans (Mrs Main) on securing this important debate. She was right that the matter of stamp duty has not been debated very much from a principled position; we have had a number of debates in proceedings on Finance Bills about technical changes that the Government have introduced to stamp duty, particularly on the annual tax on enveloped dwellings, but we have only rarely discussed the issue in the manner that we have today. Her securing of this debate has allowed some important issues to be raised.

The hon. Lady said that she hoped that we could move away from politics. I am not sure about that, as taxation and tax issues are perhaps politics in its purest form, but I accept her point about partisanship in our approach to this debate. People across the country, in constituencies of Conservative, Labour and Liberal Democrat Members alike, are all affected in various ways by stamp duty and the rising cost of housing. Her argument about the impact in London and the south-east on people on more modest incomes was particularly well made.

The hon. Member for Esher and Walton (Mr Raab) and other Members discussed the slab structure that is a particularly problematic feature of this tax. Many commentators have called for reform of that structure. He also raised our mansion tax policy, so I hope you will forgive me, Mr Betts, if I take a moment to clarify the details of our proposals.

I make no apology for our policy to levy a mansion tax on properties worth £2 million or more. Let me be clear: only properties worth over £2 million would be affected by our proposals and that limit would be raised each year, either in line with the overall rate of inflation or—and there is a strong case for this—in line with the rise in house prices, to make sure that more modest properties were not brought into the scope of the tax.

[Mr Raab]

I thank the hon. Lady for that clarification, although there are serious questions about the amount of revenue that a Labour Government would be able to raise. Will the indexation be linked to local house prices or overall house prices? Although the threshold for the tax would rise superficially, there would still be a real risk of the arbitrary geographical unevenness that hon. Members have talked about.

[Shabana Mahmood]

I am grateful to the hon. Gentleman for his intervention. I have received submissions from various experts on the matter and we are looking at it very closely. We are clear about our start position. We do not want more modest properties to be brought into the mansion tax regime, and we are looking carefully at the details of our ultimate policy to ensure that that does not happen. I have had conversations with people about the issue, but I cannot tell him today what we will ultimately be able to take forward.

[Shabana Mahmood]

I am grateful to the hon. Lady for her intervention. She is right. I have received representations about the slab structure, as, I am sure, has the Minister. It is one feature of stamp duty that causes particular consternation, as we have heard from all hon. Members who have spoken in the debate today. I cannot make a manifesto commitment today, but I will make it clear later in my speech that we are alive to the issues raised today and that we are looking at them carefully.

I was pleased that the right hon. Member for Wokingham (Mr Redwood) made a customary reference to the Laffer curve. I feel that these debates are not quite what they should be if there is not at least one reference to the Laffer curve. I was pleased that he was able to make that point.

I acknowledge the passionate views of hon. Members in this debate. There has been a vigorous campaign on the issue. I suspect that many hon. Members are less concerned about what I have to say about Labour policy and more concerned about what the Minister might do ahead of the autumn statement on 3 December. We saw a similar vigorous campaign ahead of the Budget earlier this year. In the lead up to that Budget, the expectation was that there might be a doubling of the threshold to £250,000 and the introduction of a stamp duty tax credit system, but the Government did not ultimately go down that path. I suspect we are seeing a similar build-up of lobbying for the Government to do something in the autumn statement.

[Mr Raab]

Does the hon. Lady agree with the comments by the deputy Labour leader that the middle classes should pay more tax, and is that something that will feed into Labour policies on the mansion tax and stamp duty?

[Shabana Mahmood]

I am grateful to the hon. Gentleman for his intervention. I think the point that the deputy leader was making was about progressive taxation and the argument that those who are wealthier should pay more. That is the thinking behind our mansion tax policy. His Government have presided over more people being brought into the 40p tax band, for example, and he could ask his Minister about that today.

Stamp duty is a matter of growing concern to the public and a significant burden on people wanting to buy a new home, particularly first-time buyers. I acknowledge the strength of feeling among hon. Members and throughout the country, but I am not in a position to make a spending commitment via this debate. Stamp duty brings in a large and growing amount of revenue, and any policy change in this area would have to be fully funded. Our start point as an incoming Labour Government in 2015 would be the current Government’s spending plans for 2015-16 and any change to that spending round would have to be fully funded. That has been the thinking behind the policies we have unveiled. They are all fully funded and primarily involve switching from one area of spend to another to deal with some of our child care priorities and other measures.

The difficult financial position that an incoming Labour Government in 2015 would inherit means that we would have to make some difficult choices. Given that, our focus has been wider reform of the housing market and how it might stimulate greater home ownership. In particular, the problem of housing supply has become acute in the past few years and is causing many problems, such as people having to rely on the bank of mum and dad and home ownership occurring much later in life. The hon. Member for St Albans made a point about that, and it is true.

We are seeing the biggest housing crisis in a generation and we are not building even half the homes we need to keep up with demand. The shortage of decent homes has much wider social and economic costs and we heard about some of those relating to inflexibility in the labour market, as well as the impact on people in overcrowded homes and the impact on children’s health and educational outcomes.

What can we do to build more homes? That must be the centre point of getting more sense and fairness into our housing market. We supported the Help to Buy scheme, but we would have preferred a scheme that focused more on first-time buyers. Our policy shows that the Government have simply not understood that boosting demand without boosting supply risks putting prices out of reach of the very families and young people we particularly want to help to get on the housing ladder. That is why we have committed ourselves to building 200,000 homes a year by 2020. That is probably not enough, and we should build many more than that, but it is an ambitious start point. We currently have a housing commission, led by Sir Michael Lyons, which is looking at a detailed road map, so that we may be able to deliver our vision.

--- Later in debate ---

[Shabana Mahmood]

I disagree with the hon. Lady. I think that it is right to set targets and ambitions, and it is right that we look to such experts to help us to get to that position. We are looking partly at the expense of land and the housing market in different parts of the country. We will discuss those issues in greater detail as we get closer to producing our manifesto.

[Mr Raab]

I understand the shadow Minister’s caution, but she slated the coalition’s record even though if we compare the average number of affordable homes built each year, we see that it was some 31,000 under Labour and it jumped to 48,000 under the coalition. She slated that record, despite its being so much better than Labour’s, yet when asked a number of times what a Labour Government would do to spur the supply of housing, there is absolutely nothing that can be said within a year of an election. Does she understand that that totally undermines her criticism of the current Government’s supply-side record, but also any confidence that anyone could have that a Labour Government would make any difference in this area?

[Shabana Mahmood]

I make this point about the last Labour Government as well as the current Government. No Government have built anywhere near enough homes to ensure that supply keeps up with demand. That is why we are in this position with the housing market. I cannot pre-empt some of the proposals under discussion in the Lyons commission, but I am sure that we will return to the debate when we unveil what our road map towards the pledge of 200,000 homes a year looks like.

As I have said, given the very constrained financial circumstances and the difficult choices that have to be made, we have focused our energies on measures to increase supply. We did also put forward to the Government back in 2012—I am sure that the Minister remembers—a proposal for the Government to implement immediately. It was about using the sums raised by the sale of the 4G spectrum towards getting more homes built and towards a stamp duty holiday of two years for first-time buyers. That measure could have been taken forward by the Government. It might not have helped the constituency of the hon. Member for St Albans, but it would have helped first-time buyers looking at properties below the £250,000 threshold.

Changing the thresholds and providing holidays was something that we looked at and implemented towards the end of our term in office as we sought to stimulate the market post the financial crash. These are issues that we have considered, in the context of a stamp duty holiday for first-time buyers, in this Parliament. They are issues that we continue to receive representations on and continue to look at very closely. As I have said, I am not in a position to make any commitments today, but I suspect that the commitment that Government Members are looking for is from the Minister, who may or may not indulge them when he responds.

--- Later in debate ---

[Mr Gauke]

The Treasury keeps all taxes under review. If we look at the subject historically, there have always been challenges associated with reforming SDLT, because to do so can result in disruption to the housing market.

I thank all hon. Members who have contributed to the debate, in particular my hon. Friend the Member for St Albans. We will continue to ensure that we take every step necessary to increase the supply of good quality, affordable homes. As hon. Members might expect, we will continue to keep all taxes under review. Any decisions on future changes will be taken as part of the annual Budget process and in the context of the public finances. Having the opportunity to debate these matters has been beneficial to the House.

[Mr Raab]

I thank the Minister for giving way and for what he has outlined. I hope the Treasury will keep stamp duty under review, not just because of the situation and the snapshot we have now, but because of the risks of further fiscal drag. The average median property price in London and in my constituency will soon go through the 4% rate. There is also the impact of interest rates on those with mortgages at very fine margins. As a Government and as a party, we ought to put more cash into people’s pockets and leverage them off a reliance on increasing amounts of debt. Stamp duty is constantly under review, but I ask the Treasury to think about what is coming forward as well as the situation as it currently stands.

[Mr Gauke]

I am grateful to my hon. Friend. As a Government we have a proud record of ensuring the economic stability of this country, of putting in place the conditions for growth, and of addressing the challenges we face. The generation now seeking to get on the housing ladder faces perhaps greater challenges than earlier generations faced. Essentially, it is very important we ensure we have the supply of new homes to address that, but we want to ensure we have in place the right tax and spending policies to enable people to achieve home ownership. That is a long-standing and proud tradition of our party, and one that we continue to hold as extremely valuable.

With those remarks, Mr Betts, I thank you and hon. Members for our debate this afternoon.

Question put and agreed to.

Office for Budget Responsibility (Manifesto Audits)

Dominic Raab Excerpts

Wednesday 25th June 2014 Commons Chamber

[Mike Thornton (Eastleigh) (LD)]

Knowing that every poll, every doorstep inquiry in May, and every e-mail that I get shows that the public feel unable fully to trust Labour with the economy, and knowing that the OBR believes it would be difficult and time consuming at the moment to do what the shadow Chancellor proposes, I hope that it is not the shadow Chancellor’s sole concern today to bolster his uncertain economic credibility.

I understand that the shadow Chancellor likes to copy eminently sensible Lib Dem policies such as the mansion tax, the fact that we published the costs and savings on our proposals in 2010—for example, showing how we would afford our eminently sensible increase in the tax allowance—

[Mr Dominic Raab (Esher and Walton) (Con)]

Does the hon. Gentleman recognise that the Lib Dem proposals on the mansion tax and the further extensions of the personal allowance have been roundly rubbished by the Resolution Foundation and the Institute for Public Policy Research?

[Mike Thornton]

I do not know those details. I will take the hon. Gentleman’s word for it that they have been rubbished, but I personally support an increase in the tax allowance, so that no one on the minimum wage would pay any income tax. It seems silly to me to have a minimum wage and then charge people tax on it. But that is my opinion, of course.

I also agree with the Chief Secretary, who unfortunately is not here today, that auditing manifestos is well worth further consideration. But as the OBR said, although possible it would be difficult to do in a timely and sensible fashion before the next election. I remember that in 1997 the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) successfully persuaded the electorate of his prudence. Despite this latest attempt to do so, I feel that the right hon. Member for Morley and Outwood (Ed Balls) will not follow in his right hon. Friend’s footsteps, so let us commit ourselves to honestly publishing proper and well worked out costings for the proposals of all parties in the House, doing it ourselves, and spending the money ourselves, but follow that up—

Economic Growth

Dominic Raab Excerpts

Wednesday 15th May 2013 Commons Chamber

[Charlie Elphicke]

I thank the hon. Gentleman for his intervention. I have set out my concerns on behalf of my constituents, who raise immigration on the doorstep time and again. They simply say to me, “I want my sons and daughters to have a chance. I want to be able to get a job, do well and succeed in life.” The Conservative party is the party of aspiration and success, and the party of realising the potential that each and every one of us has. I support the Government’s reforms.

I also support the Government’s reforms on tax avoidance and evasion. Let us imagine the Labour party’s response if the Government doubled income tax and let “their chums” in big business off the hook. There would be howls of rage, and accusations that the Government are on the side of the rich and attacking the poor—accusations that they are latter-day sheriffs of Nottingham—but that is exactly what happened in 13 years of Labour government. Income tax receipts went up by 81%. The working people of this country were soaked with Labour party taxes. Meanwhile, leaving aside oil duties, corporation taxes went up by only 6%. Such is the legacy of the prawn cocktail offensive, representatives of which are in the Chamber.

The Labour Government sold the pass on fair and open competition for smaller businesses in this country in favour of large multinationals. People who work hard for a living were hit with high income taxes while large businesses were allowed to avoid taxes on an industrial scale. That is the legacy of 13 years of Labour. I am delighted that the Chancellor and the Queen’s Speech rightly take action on that.

YouGov polls show that 62% of the public consider legal tax avoidance—it is all perfectly legal, is it not?—to be unacceptable. A ComRes poll has found that 84% agree that the Government should crack down on tax avoidance by businesses operating in the UK. Indeed, 60% are prepared to call the bluff of every large corporation that threatens to disinvest from the rich, highly vibrant and successful UK market, saying that the Government should crack down on business tax avoidance even if it caused unemployment and caused some companies to leave the UK.

That is how strongly the British people feel. I feel strongly, and I was delighted to hear that my hon. Friend the Member for Redcar (Ian Swales) does, too. The Government are right to deal with the legacy of tax avoidance on an industrial scale. They are right to tackle the problem as an international problem, requiring international action. I therefore welcome the Chancellor’s use of the UK presidency of the G8 to take collective action to deal with tax avoidance and evasion.

In particular, we need to reform tax presence. The idea that Amazon is based in Luxembourg defies reality to the ordinary person. They look askance at Amazon warehouses from the motorway and just do not buy the idea that Amazon is based in Luxembourg. The rules need to be updated to cope with the globalised, competitive, internet-enabled world in which we live.

[Mr Dominic Raab (Esher and Walton) (Con)]

My hon. Friend is making a powerful speech. As well as welcoming the Government’s initiative on tax evasion and tax avoidance, will he join me in lamenting the fact that criminal convictions for tax evasion plummeted to 107 in the last year of the previous Government?

[Charlie Elphicke]

Absolutely. We need to send a clear message that everyone should pay a fair share of taxes. We have had too much unfairness for too long.

It is also important to reform the rules on transfer pricing. Starbucks has been the whipping boy for something that is done on a consistent basis by all large international businesses—accountants call it “supply chain optimisation”. Action to tackle it would be fiercely resisted, but it is something we should do. It is not right that profit parking by international tax planners means that our Exchequer does not receive its fair share.

Part of the agenda must be a positive, engaging discussion with the European Union where we say, “Look, these are the reforms we need.” I am pleased to see that the Chancellor has been getting the Germans on board and talking to the French. Indeed, he should talk to the US, because it too is losing tax revenues. Profits that should go back to the States get parked in tax havens, so Uncle Sam loses out as well. This is an international problem that needs to be dealt with internationally.

In Europe, a key reform must be to look again at the parent subsidiary directive, which a German MEP recently described as the heartland of tax avoidance, and which is too often abused. We need to ensure that the EU works positively with member states to help to secure their tax bases. The public finances of every member state in the EU are under pressure. Every member state in the EU should see it as in their interest to take effective, international co-operative action to deal with this problem that we all face. It is high time we stood up to large international businesses and said, “We have to secure our tax base.” We have to secure a fair deal for each individual who is living in this country, so that they pay a fair share of income tax while large international corporations pay a fair share of corporation tax. We must ensure that there is a level competitive playing field for home-grown businesses, just as much as there is a level competitive playing field for international businesses. That would be the right settlement and tax framework for the UK and all our European neighbours.

Multiannual Financial Framework

Dominic Raab Excerpts

Wednesday 31st October 2012 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

It is a great joy to follow the hon. Member for Harwich and North Essex (Mr Jenkin). In this debate, I believe the people of Northern Ireland would expect me to lay down the marker that if we as citizens of the United Kingdom have to share in the necessary austerity measures required to get us out of our current financial problems, we should expect the same rigours to be placed on the European Union.

I have the honour of serving as Finance Minister in the Northern Ireland Executive. Over the last couple of years, I have had to defend and explain and implement a 40% cut in the capital budget of the Northern Ireland Executive. I have had to resist Ministers who stood out in the streets protesting against cuts to the education budget, the health budget and other budgets, and explain that we were at an end of making money available for all the things we had to do. I think the people would find it difficult if, when it came to the over-fed bureaucracy of Europe, we did not take the same stance. As for the arrogance of the bureaucrats in the European Union—sometimes described as the Bisto bureaucrats who think that the gravy train is still running—we need to put down a marker and say that the years of simply asking for money and getting it are at an end.

Many Members have said today that this is only a cynical exercise, that it will hurt the Prime Minister, that Labour Members are jumping on the bandwagon and that they are a bunch of hypocrites. I must say that I share some of the cynicism about what happened in the past, but this is not about what happened in the past; it is about what we are going to do now. I am sure that if the former leader of my party were here, he would tell the House that there is great joy in heaven over one sinner that cometh to repentance, and that there should be unbounded delight on the other side when a whole party-load of sinners may have come to repentance and renounced their fiscal sins of the past.

Regardless of the motives behind it, the amendment does not weaken but strengthens the Prime Minister’s position. It enables him to go to Europe and say, “The entire House of Commons supports my position, and I have to go back to the House and explain. Either you make changes in the budget, or I cannot carry it in the House of Commons, because I am facing united support for the stance I am taking.”

[Mr Dominic Raab (Esher and Walton) (Con)]

The hon. Gentleman is making his case in typically passionate terms and I am reluctant to interrupt him, but, as a realist, is he aware that the 8% increase in the last multiannual budget was the smallest increase ever agreed in the EU? The chance that Brussels will now accept a real-terms freeze, let alone a cut, is virtually zero, and therefore we are almost inevitably heading for a veto. Is not the only real question whether the Leader of the Opposition joins the Prime Minister and the Deputy Prime Minister in supporting that veto?

[Sammy Wilson]

I have no difficulty with the veto. I do not have to be ambivalent about the veto. Whatever is required in these vital negotiations—whatever leverage is required—must be used. The point I am making is that the best leverage that the Prime Minister can exert in the negotiations is his ability to say, “Regardless of their positions on the party-political spectrum in the House of Commons, all its Members support me in saying that we will not give an extra penny to the European Union, and, furthermore, we want to see a reduction in the amount of money that we give to the European Union.”

Oral Answers to Questions

Dominic Raab Excerpts

Tuesday 11th September 2012 Commons Chamber

[Mr Dominic Raab (Esher and Walton) (Con)]

8. What steps he is taking to simplify the tax system.

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

The Government are committed to simplifying the tax system. Since 2010 we have set up the Office of Tax Simplification and acted on a range of its recommendations. We have abolished 43 tax reliefs, and from April 2013 we will introduce a new cash basis for calculating tax, benefiting up to 3 million small self-employed businesses. Her Majesty’s Revenue and Customs is also improving tax administration for small businesses, as set out in its publication at the time of the 2012 Budget.

[Mr Raab]

I thank the Minister for that response. The 2020 Tax Commission found that UK tax administration costs were double those of Norway, triple those of Estonia, and almost five times higher than in Switzerland, so I welcome the Minister’s drive for simplification. What progress has been made on merging national insurance and income tax, and other areas affecting business, that could yield an estimated £5 billion each year for the British economy?

[Mr Gauke]

The Government are continuing to explore the potential of merging the operation of income tax and national insurance contributions. We also want to make the tax system as transparent as possible, and one of the steps we have taken is the introduction of personal tax statements that will make it clearer to taxpayers how much they are paying in both income tax and national insurance.

Oral Answers to Questions

Dominic Raab Excerpts

Tuesday 26th June 2012 Commons Chamber

[Mr Osborne]

I suggest that tonight and tomorrow the hon. Gentleman turns on the television and watches the evening news, because he will see that there are problems facing many economies around the world. The Labour idea that somehow Britain alone faces these challenges because the Government are trying to deal with the debt is absolutely ridiculous. There are all these European economies in recession, the US economy had disappointing jobs data, and the Chinese economy is slowing. These are difficult times, but we are doing everything we can to help the British economy deal with the problems we inherited.

[Mr Dominic Raab (Esher and Walton) (Con)]

T9. Last year we lost the most working days to strikes in 20 years, and since the last election union leaders have never won the backing of a majority of their members for any major strike. Will my right hon. Friend task the Office for Budget Responsibility to provide annual estimates of the cost to the economy of strikes and of the concessions, paid for by taxpayers, to avoid them?

[Danny Alexander]

I am not sure that the hon. Gentleman’s suggested idea would be an appropriate task for the Office for Budget Responsibility to undertake, but he is right that strike action is costly to the economy. He would also be right to observe that it has not stopped this Government proceeding with the reform of public service pensions, and with pay restraint in the public sector, too, to help deal with the enormous mess left to us by the Labour party.