Finance Bill
Harriett Baldwin Excerpts(12 years, 8 months ago)
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Catherine McKinnell
Thank you, Mr Deputy Speaker; I appreciate that clarification.
New clause 7 makes changes to the procedure for the granting of interim payments in common law claims relating to taxation matters so that the treatment of tax cases commenced under common law court claims and tax tribunals will be more closely aligned in future. We support this simplification process, and the Minister’s response to our probing questions during his generous explanation of the new clause has clarified the issue.
Harriett Baldwin (West Worcestershire) (Con)
Is it appropriate, Mr Deputy Speaker, that I now speak to amendments 52 and 53, tabled in my name?
Mr Deputy Speaker
No.
Question put and agreed to.
New clause 7 read a Second time, and added to the Bill.
Clause 175
Election to be treated as domiciled in the United Kingdom
Sajid Javid
Amendments 17 to 29 make a number of technical changes to schedule 9 and clause 25 to ensure that the qualifying insurance policy regime works as intended. Let me set out some brief background to these changes. The qualifying policy regime was introduced in 1968 to preserve pre-existing tax treatment for traditional moderate value, long-term, regular premium savings policies that contain a significant element of life insurance.
No upper limit was set for the investment premiums that could be paid into a QP, which allowed individuals to obtain unlimited relief from higher rates of income tax. In the 2012 Budget, the Government announced a restriction to the tax relief available for QPs. Clause 25 and schedule 9 introduce an annual premium limit of £3,600 on qualifying life insurance policies. This restriction limits the amount of premiums payable into QPs for an individual to no more than £3,600 in any 12-month period, with effect from 6 April 2013.
This measure supports the Government’s objective of promoting fairness in the tax system by ensuring that tax reliefs for QPs are correctly targeted. Consultation since the Bill was introduced has continued and identified the need for Government amendments to clause 25 to deal with points of detail in 13 areas. None of these represents a change of policy; as I have said, they are technical adjustments to ensure that the rules operate effectively and as intended. The amendments have been discussed with industry representatives and have benefited from the comments received.
Let me briefly explain the amendments in slightly more detail. The purpose of the changes is to provide flexibility to deal with potential future exclusions from the non-assignment rule and potential future exclusions from the circumstances under which beneficiaries must make statements, to extend the period by which an individual must first make a statement and to clarify what information an insurer must provide and obtain from a policy beneficiary and what an insurer must provide to HMRC. In addition, a number of amendments make minor corrections or consequential changes to the more material changes that I have described.
If I may, Mr Deputy Speaker, I will speak to amendments 52 and 53, standing in the name of my hon. Friend the Member for West Worcestershire (Harriett Baldwin), at the end of the debate.
Harriett Baldwin
I rise to speak to amendments 52 and 53, standing in my name and the names of my hon. Friends the Members for City of Chester (Stephen Mosley) and for Finchley and Golders Green (Mike Freer).
I tabled these amendments to schedule 9 after being alerted recently to the consequences of the proposed changes to the life insurance qualifying policy regime for a small business in Malvern in my constituency, which is a market maker in traded endowment policies. The business provides a price at which it will both buy and sell an endowment policy, which creates welcome liquidity in these financial instruments. The firm has been recognised for its work with a Queen’s export award for industry.
The Association of Policy Market Makers estimates that the traded endowment policy market involves about 7,000 policies a year, out of the 20 million policies outstanding, and has a value estimated at approximately £150 million. The reasons why someone might want to sell an endowment policy vary. The most significant reason —accounting for 20%—is poor investment performance, although someone might be selling their house or trying to get some equity release. People sell endowment policies when they want to reduce their mortgage or improve their home—perhaps at retirement or when they lose their jobs, are bereaved or are getting divorced. Someone might want to buy a second-hand endowment policy to get a better rate of return than cash without a stock market risk. Endowment policies are also popular products with people with lump sums—such as victims of accidents who receive large payouts—because they have capital protection at maturity and tend to be priced to beat inflation.
The market is in natural decline, as endowment policies are no longer very popular and the existing 20 million policies have a finite end date. Nevertheless, there are thought to be seven such small businesses in the UK, employing about 200 people, including in the constituencies of my hon. Friends the Members for City of Chester and for Finchley and Golders Green. These firms worry that they will be put out of business by the change of tax treatment for these policies contained in schedule 9.
Royal Bank of Scotland
Harriett Baldwin Excerpts(12 years, 9 months ago)
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Sajid Javid
I do not know whether the hon. Gentleman was listening to the statement I made. If he was, he would realise that the RBS board made this decision.
Harriett Baldwin (West Worcestershire) (Con)
As the Minister knows, I think the sooner the Government get out of the banking business, the better. There has been a lot of discussion today about the price at which they should do that. What has the Minister been able to discover about the due diligence that was done on the price the Government paid to buy RBS shares in the first place?
Sajid Javid
My hon. Friend raises a good point, and it is actually quite easy to find out—although I do not think the previous Government wanted to advertise it, and nor do I think the current Opposition want us to continue highlighting it—that when RBS was bailed out, the then Government overpaid by over £12 billion and wrote that off at that time. They did the same in the interventions in Lloyds bank and Northern Rock, and, as we know, all this was a direct result of the previous Government’s failure to regulate our banking and financial system properly.
Oral Answers to Questions
Harriett Baldwin Excerpts(12 years, 10 months ago)
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Danny Alexander
The hon. Lady will know that housing completions are 19% above the trough of 2010, numbers of housing starts are 58% above the trough of 2009, and she should welcome that improvement. In the Budget, we announced a £5 billion package to help the construction sector through the Help to Buy shared equity scheme, which will support the construction of 76,000 properties, as well as a massive expansion of the Build to Rent programme. It is staggering that the hon. Lady cannot bring herself to welcome those measures.
Harriett Baldwin (West Worcestershire) (Con)
Will the Minister welcome today’s figures showing that the number of first-time buyers increased by 20% this month? Will he also welcome the fact that the Department for Communities and Local Government has shown that 37,000 new homes for social rent were built last year, which is a record since 1997?
Danny Alexander
I welcome those figures. They suggest that the policies being pursued by this Government are having the desired effect.
Cyprus
Harriett Baldwin Excerpts(13 years ago)
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Greg Clark
The Bank of England keeps the arrangements under constant review. I think it is fair to reflect that Cyprus is an infinitesimal part of the European banking system and an even smaller part of the world banking system. Although this is an extremely worrying time for citizens of Cyprus and our constituents who have investments or connections in Cyprus, in the wider context Cyprus does not have the systemic importance of other countries.
Harriett Baldwin (West Worcestershire) (Con)
Whatever the Cypriot Parliament decides this week, this has been a torpedo across the European banking system. What advice would the Minister give to pensioners who live in Spain and Portugal about whether they should maintain large deposits in eurozone banks?
Greg Clark
I agree that this is a warning and that it is necessary to have more robust financial arrangements in place to prevent this sort of crisis from happening in other countries. However, I reinforce the advice of the ECB that this problem is unique to Cyprus, which is particularly exposed and is in a state of particular indebtedness.
Oral Answers to Questions
Harriett Baldwin Excerpts(13 years ago)
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Mr George Osborne
I shall take that as a Budget representation. To be fair to the hon. Gentleman, he is always a powerful champion of the ceramics industry in his constituency.
Harriett Baldwin (West Worcestershire) (Con)
My constituents find it much easier to take out a payday loan than to open a savings account. What steps are the Government taking to make it much more difficult for my constituents to fall into that sort of temptation?
Sajid Javid
My hon. Friend will know that the Government commissioned an independent report from Bristol university on the high interest lending industry. That report shows severe consumer detriment and we have already taken action. We announced last week that we will be working on advertising content and placement, and we will be giving extra powers to the Financial Conduct Authority to impose fines and to close down firms in the most significant cases. She may have seen that last week the Office of Fair Trading announced it is investigating a number of firms: it has told a number of payday firms that they have 12 weeks to shape up; otherwise it will take severe action.
Tax Fairness
Harriett Baldwin Excerpts(13 years ago)
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Chris Leslie
The hon. Gentleman really needs to focus on the issue at hand. If he is standing up for the millionaires’ tax cut, he should simply say so. It will take effect in about three weeks’ time, and a number of his constituents will be absolutely astonished that he has voted for an average £100,000 tax cut for millionaires while they have lost their tax credits, found themselves paying more and seen a decline in the quality of public services.
Harriett Baldwin (West Worcestershire) (Con)
I am sure that the massed ranks of the shadow Minister’s colleagues behind him today would like to know whether he will pledge to increase the top rate of tax to 50p in his manifesto.
Chris Leslie
We certainly voted against the tax cut, and if we were in government now, we would not be cutting that 50p rate to 45p in April. Heaven only knows what other horrors the Government have in store over the next two years. We do not know what kind of situation we are going to inherit in regard to the deficit and to borrowing, so it is impossible to predict the tax situation that we will be faced with, if and when we inherit that position at the next general election.
Oral Answers to Questions
Harriett Baldwin Excerpts(13 years, 1 month ago)
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Sajid Javid
The hon. Gentleman raises a very specific issue. I think he will understand that I have not looked at that particular concern of his constituent, but I will be happy to look at it in more detail if he provides me with more information.
Harriett Baldwin (West Worcestershire) (Con)
Can the Minister explain why, at a time when we are having to make such difficult decisions on public spending, it is fair to argue, as Labour does, that we should pay child benefit to millionaires?
Sajid Javid
My hon. Friend raises a very important point. In the 13 years of the previous Government, the welfare budget went up by 62% in real terms; it was out of control. If we are going to deal with the problem that they left behind, we have to make sure that everyone makes a contribution.
Income Tax
Harriett Baldwin Excerpts(13 years, 4 months ago)
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Harriett Baldwin (West Worcestershire) (Con)
It was a privilege to be present for the maiden speech of the hon. Member for Cardiff South and Penarth (Stephen Doughty), who spoke eloquently and passionately about his local area. The picture that he painted has made me eager to take the first possible opportunity to visit his constituency.
Let me begin with a small maths problem that I often pose to students in my constituency. If income tax rates were set at zero, how much income tax would the Chancellor raise? The students always get the answer right: it is zero. I then ask this question: if the Chancellor set the income tax rate at 100%, how much more income tax would he raise? Usually, someone will put his or her hand up and say, “He would raise a lot more.” I should welcome an intervention from any Opposition Member who has a view on how much income tax the Chancellor would raise if the rate was set at 100%.
Sheila Gilmore
Giving such an extreme and ridiculous example is unhelpful, as I think the hon. Lady is well aware. No Opposition Member is suggesting that the income tax rate should be 100%.
Harriett Baldwin
I seem to recall that in my lifetime—under the Government of, I think, the predecessor but one of the hon. Member for Cardiff South and Penarth—income tax was set at more than 90%. If it were set at 100%, we should have no income tax revenue, because no one would consider it worth while to work.
I then ask my students what would happen if we lowered the rate of income tax from 100% to 70%. Would we raise more or less revenue? Again, I should welcome interventions from Opposition Members. Everyone realises that we would raise more revenue, because if the rate was 70%, we would take home 30p in the pound. I notice that the new socialist Government across the channel recently introduced that income tax rate. We will see how that stacks up over time, but I expect that it will prove to be a deterrent to additional work, too.
The motion contains the seeds of its own mathematical inconsistency, because the Opposition are extrapolating a linear relationship between the income tax rate and the amount of income tax revenue raised. They are also extrapolating that those who can, in what is a global market, take their labour to any other country in the world will not take into account any difference in tax rates between the UK and other nations, yet all the evidence shows that that is not the case.
The Labour motion refers to 8,000 people paying income tax on income of £1 million or more. In 2009-10, which is the last tax year in which we had the 40p tax rate, some 16,000 people had an income of £1 million or more. Through raising the tax rate from 40p—a rate that was in place for all but one month of Labour’s entire 13 years in office—we can see that millionaires can do other things with their income. They can take their entire labour overseas, or they can decide to shelter their income or not to take a dividend that year, or they can use any of the other methods to ensure they do not pay that increase in income tax. There was a reduction of £7 billion in revenue after the income tax rate went up from 40p to 50p.
Harriett Baldwin
I think that I have already taken two interventions, and I have only a minute and a half, unfortunately.
The Government have reduced the number of ways in which people on high incomes can reduce their taxable earnings. The Opposition opposed measures to reduce the amount people could put into their pension fund from more than £250,000 to £50,000. I also voted for the abolition of disguised remuneration, which was quite rampant under the previous Government. That also serves to limit the ways in which people on high incomes can reduce the amount of income tax that they pay.
The relationship between the rate of income tax and the amount of revenue raised by the Chancellor is non-linear. Between 0% and 100% there is a curve, and we need to agree about the optimal point on it—the point where the Treasury can get the most revenue from those at the highest end of the income spectrum. I suspect that 45p will be a lot closer to that optimal rate than 50p was.
The Government are focusing on tax cuts for those who are on the lowest incomes, lifting them out of income tax, and ending this tax cull on millionaires.
Oral Answers to Questions
Harriett Baldwin Excerpts(13 years, 4 months ago)
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Sajid Javid
The hon. Gentleman will know that the Government have introduced a permanent tax on bank balance sheets, which will raise far more than a bank bonus tax. If he is interested in the fiscal action the Government are taking to create jobs, maybe he can tell his constituents about the brownfield allowance the Government introduced for North sea oilfields a couple of months ago. A few weeks later there was investment of £1.6 billion, creating up to 2,000 jobs in Scotland and beyond.
Harriett Baldwin (West Worcestershire) (Con)
One of the fiscal measures that best increases the incentive to find work for those who have been out of work for a long time is the benefit cap. Is the Minister surprised to learn that this morning a measure that will save the taxpayer half a billion pounds over the next two years and greatly increase the incentives to work was voted against by the Labour party?
Sajid Javid
I thank my hon. Friend for bringing that to the House’s attention, and I am not surprised to learn it, given Labour’s opposition to the benefit cap. The Government are determined to make the welfare system work in order to help people find employment, and that includes the benefit cap as well as the introduction of universal credit.
Multiannual Financial Framework
Harriett Baldwin Excerpts(13 years, 4 months ago)
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Chris Bryant
I do not want to give way to lots of people, as that would steal away time from others, but I can never resist the hon. Member for West Worcestershire (Harriett Baldwin).
Harriett Baldwin
On the subject of big-ticket items, will the hon. Gentleman confirm that, when he was Minister for Europe, the previous Government signed up to the euro bail-out mechanism? It was the present Government who had to negotiate us out of that mechanism.
Chris Bryant
The hon. Lady praises me far too much. I was Minister for Europe for about 2.5 seconds. In those 2.5 seconds, however, the one thing that I argued aggressively with my socialist friends and with my European People’s party friends—with whom her party used to be friends—was that the next multiannual round had to be lower than before and should not have an inflationary increase. I am afraid that the hon. Lady is pitching at the wrong person in this particular round.
I believe that there is a role for the EU budget and it should relate to growth, research and development. There are some things where we can do more together as a continent and add value. Unfortunately, however, those are not the issues that grab the attention of the French, the Germans, the Italians and the Spaniards. That is why we have to, and have always had to, build alliances with other countries, particularly the smaller countries.