Finance (No. 4) Bill

Karen Bradley Excerpts

Wednesday 18th April 2012 Commons Chamber

[Owen Smith]

The debate on the 50p rate was interesting in that it revealed the differing attitudes of Opposition Members and Government Members to paying taxation. From the way in which some Government Members responded to the debate, one could surmise that they are very comfortable with people finding every possible means, illicit or legal, to avoid tax. [Interruption.] Well, there was a clear implication from some hon. Members in the earlier debate that the boundaries and borders of the envelope can be pushed, as they were. In some respects, that argument was deployed to justify the cutting of the 50p rate, because so much money was, through fair means or foul, pulled forward into 2009 when it should have been taken in 2010.

[Karen Bradley (Staffordshire Moorlands) (Con)]

If the Labour party is so keen on stopping tax avoidance, will the hon. Gentleman explain why Labour Members voted against an anti-avoidance measure in a Finance Bill last year?

[Owen Smith]

Will the hon. Lady explain which anti-avoidance measure Labour Members voted against? I tell her very straightforwardly that all Chancellors ought to tackle tax avoidance in all Budgets. The current Chancellor has risked far too much credibility on his belief in his ability to tackle tax avoidance and his belief that he is doing more than previous Governments did so. The facts bear out my claim—the IFS, not the Labour party, has done the analysis—that Labour Chancellors, in seven out of last 10 Labour Budgets, raised more money for the Exchequer through tackling tax avoidance than the current Chancellor will do with this Budget.

--- Later in debate ---

[Owen Smith]

No.

We think that would generate significant revenues, which could be used to create youth jobs to tackle the scourge of youth unemployment in our country and to create new affordable homes. We want the Government to look at that; we want them to get their priorities right; we want them to undo some of the damage they have done in the last two years. That is why we will of course press the amendment to the vote when the appropriate moment comes.

[Karen Bradley]

It is a great pleasure to contribute to the debate on how we should tax our banks. First, it is important to put on the record the fact that I think banks should pay their share towards paying down the deficit. Every day, we are borrowing more money to pay for public services, so it is important for the banks to pay their share so that the deficit can be dealt with as soon as possible. How, then, does one take money or tax? As a tax accountant by training, I know that there are many different ways of extracting revenue from businesses. We can tax them based on their income or their profits or in many other different ways.

One thing about the bank levy introduced by this Government is that it guarantees that the banks will pay some tax. If they are loss making, their losses will not wipe out that tax. The bank levy cannot increase the losses; it is non-tax deductible for corporation tax purposes. We will be ensuring that, each year, the banks pay their fair share towards reducing the deficit.

Reductions in corporation tax are also not taken into account in the levy. It is absolutely the right thing to do to cut corporation tax. We need to cut it for all our businesses, to promote entrepreneurship, so that our businesses have more money left over at the end of every year to invest in new employment, new plant and machinery and shareholder returns. Given that shareholders are often our pension funds, it is extremely important that we ensure that those pension funds get the return that they so desperately need to allow our pensioners to enjoy the living standards they expect. As I say, reducing corporation tax is important, but we need to ensure that the banks do not benefit too much from that reduction—and the bank levy makes that happen.

[Alun Cairns]

Does my hon. Friend recognise that a balance needs to be struck? Banks need to pay their fair share, but we also need a level of taxation that will help us to attract to the UK the best bankers across the globe. We do not want to drive the banks overseas to Hong Kong, Switzerland or elsewhere, which would mean a net loss to the Treasury.

[Karen Bradley]

I entirely agree. Clearly 50% of nothing is not as much as 45% of something, It is important for us to tell the world that the UK is open for business, and to say “Bring your business to the UK”. That applies very much to the financial services sector.

We have already discussed how much money the banks might or might not pay towards reducing the deficit. What we are considering now is just the additional amount that they are paying as a result of the increase in the bank levy. They are, of course, paying an awful lot more to the Exchequer. I believe that the financial services sector contributes about £32 billion to our economy, and I think it important for us to retain and increase that amount of revenue. I firmly believe that we should have taxes that raise the maximum amount of revenue to be spent on our schools, hospitals and police officers, and that ideology should not determine how we set our tax rates.

The main point that I want to make about the bank levy is that it will raise the money irrespective of the amount of bonus paid. I remember when the previous Chancellor announced, in his 2009 pre-Budget report, that the banks would pay

“a special one-off levy of 50 per cent.”—[Official Report, 9 December 2009; Vol. 502, c. 367.]

At that time I was working in a large accounting practice, and was analysing the Budget. The biggest surprise came when the then Chancellor said that the Treasury expected the bonus tax to raise £500 million. Those of us who were in that firm at the time—it was one of the big four—were staggered that the Treasury should think that only £500 million-worth of bonuses would be paid, given that the tax meant that an equal amount would be paid to the Exchequer, and I think we have now seen that that did not happen.

The purpose of the levy was to drive behaviour. The point of it was that the banks would not pay the bonuses. The then Chancellor said that the Treasury expected a reduction in the level of bonuses that would be paid that year, but that simply did not occur: the bonuses were still paid. I personally believe that tax is a very blunt instrument for the purpose of driving behaviour, and that people will behave in the way in which they wish to behave, whether it involves charitable giving, buying pasties or paying bonuses. Tax is something that businesses “manage around”. They do not think of it as a behaviour driver, and it clearly did not drive behaviour in the way that the Treasury expected in that instance.

[Mark Durkan]

Has the hon. Lady not just contradicted what she said a couple of minutes ago? She suggested then that if we entertained this idea, we would ensure that banks became financial refugees in all sorts of other places in the world.

[Karen Bradley]

I do not agree about the contradiction. If it is suggested to the banks that the rate of tax will be at a certain level and that there will be a bonus tax, that will discourage them from remaining in the UK but it will not stop them paying the bonuses, which is what the Treasury wanted the special one-off tax to do.

[Nigel Mills]

Does my hon. Friend agree that the bank payroll tax has morphed from its original role of reducing bonuses to become purely a revenue-raiser in the eyes of those who want it, and that it is not even intended to reduce the amount of bonuses paid?

[Karen Bradley]

I was coming to exactly that point. It is, in fact, a revenue-raiser. We need to return to the question of how money can be raised from the banks, and if that is what we wish to do, I think that the bank levy is a better way of doing it.

In preparation for the debate, I rang various former colleagues and others involved in the financial services sector. I could not find anyone who would express the view that the bank levy was a terribly bad thing. They all accepted that the tax needed to be paid, and they thought that this was a reasonable way in which to pay it.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I am trying to follow the hon. Lady’s argument. What impact does she think the bank levy has had on the level of bonuses given to bankers?

[Karen Bradley]

My point is that it is not the Government’s job to try to drive the level of bonuses. The last Government wanted to do that, and failed miserably. It must be accepted that the bank bonus tax is a revenue-raiser and not a behaviour-driver, and that it will not determine the way in which bonuses are paid. The actions taken by the present Government to limit the level of cash bonuses that can be paid, and other such measures, are far more effective in ensuring that the bonuses that are paid reflect the performance that contributes to the building and growth of a financial services business. That is what we want in our economy. We want businesses to grow, because if they do, they will pay more corporation tax. They will also pay more payroll tax, because a 13.8% national insurance charge is levied on all employers for the sums they pay their employees. Therefore, if the banks make more money, they will pay more in payroll tax, which is a good thing.

[Nigel Mills]

Does my hon. Friend agree that targeting a payroll tax at one industry is not a particularly coherent way of running a tax system? If those who propose doing that were truly concerned about inappropriate bonuses and high pay, they would want to impose a tax on other areas, too, such as high pay in the City—and, perhaps, on footballers or on energy businesses—rather than targeting it on just one industry that they do not happen to like at the moment.

[Karen Bradley]

My hon. Friend makes an important point. Financial services are an incredibly important part of our economy. The 2002 pre-Budget report revealed a drop in revenue, and the explanation it gave for that was that the expected City bonuses had not been paid, and as a result those bonuses were not contributing as much tax as forecast—and we all accept that we need to raise tax in order to pay for our schools, hospitals, police officers and all our public services.

The bank levy is the right way to tax the banks. It is not unpopular with the industry, so far as I can ascertain from the experts to whom I have spoken. They accept that they have to pay their share, and that that is the way they will do it.

[Sheila Gilmore (Edinburgh East) (Lab)]

This debate has clearly demonstrated that Members have very different views on how to tackle the current economic situation. I was very struck by one commentator’s observation that the Government were leaving economic recovery to business—that they were expecting business to spring up and solve our problems. That is what we heard almost two years ago, in the so-called emergency Budget—which did not, in fact, do anything terribly urgent. We were told then that very shortly the shoots of private enterprise would spring to life, particularly if we cut the public sector. Almost two years later, we are still waiting for that, however; it simply has not happened. It is not good enough for us simply to sit back and say, “Somehow, this is going to sort itself out.” It is right to want to stimulate the economy, and to create jobs and work.

Construction and affordable housing are essential. I live in a city with an acute shortage of affordable housing. There are many planning permissions and consents in place for new house building, which would have had at least an element of affordable housing, so the problem is not the planning system. Nothing is happening, however. The ground lies idle, and the building firms have paid off their workers and are waiting for the upturn, hoping that the land values will carry them through.

What is so wrong with wanting to raise some extra revenue and stimulate the economy in that way? If building workers are back in employment and private building firms are flourishing, then those workers will have income with which to stimulate the economy.

There has been a huge downturn in retail over the past few months. I read today that there has recently been a slight upturn because of the good weather in March, but, certainly where I come from, that has now been followed by three weeks of pretty rubbish weather, so presumably that upturn will now have been reversed. There has been a downturn in retail because people feel they do not have money to go out and spend. The whole local economy is affected by that. The knock-on effects on the local economy of investment in affordable housing are huge.

Oral Answers to Questions

Karen Bradley Excerpts

Tuesday 1st November 2011 Commons Chamber

[Danny Alexander]

The right hon. Gentleman is absolutely right that unemployment is a heavy burden for any individual or any family. We inherited from Labour the largest budget deficit this country has ever seen. It was incumbent on this coalition Government when we came into office to take the action necessary, otherwise we would have found ourselves in a position that many other European countries face, which would have been a great deal worse for the very people the right hon. Gentleman claims to be concerned about.

[Karen Bradley (Staffordshire Moorlands) (Con)]

One of the key weapons in tackling youth unemployment is the use of apprenticeships, so will my right hon. Friend join me in welcoming the news that in Staffordshire Moorlands the number of apprentices has gone up from 480 in 2009-10 to 760 last year—an increase of 60%?

[Danny Alexander]

I certainly join the hon. Lady in welcoming that. It will provide significant new opportunities for young people in her constituency. Of course it is part of the increase of 250,000 apprenticeships that this Government have put in place.

Comprehensive Spending Review

Karen Bradley Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

The first thing I would say to the right hon. Gentleman is that we believe strongly, as do the major employers in this country and the people internationally who look at this economy, that dealing with the deficit is essential for sustainable growth. That is what this is all about: putting the British economy and our public finances on a sustainable footing so that we can create jobs in the future and so that the economy can grow.

The right hon. Gentleman talked about taxes on the top 1%. We introduced an increase in capital gains tax, and the truth is that not everyone in my party was particularly happy about it, but Labour had 13 years and all those Budgets in which to do that. The shadow Chancellor now rather lamely says that Labour supports the capital gains tax increase, but I would love to know, when the Cabinet minutes are published in 20 or 30 years’ time, whether he ever raised this matter in Cabinet. We took a decision to increase capital gains tax to the higher rate, and last week I published proposals for increasing tax on the very highest pension contributions. That is a £4 billion tax; it was not an easy thing to do, but we have done it. We have also accepted and lived with the previous Government’s decision to increase tax to 50%—of course, they introduced that in the last month they were in office. Again, that was not an easy decision. I am not instinctively in favour of higher marginal tax rates, but it is necessary at a time like this. I am determined that all parts of the income distribution should make a contribution, but that the people at the top of the income distribution should make the most.

Finally, on the disposal of the banks, at the moment we are not in a position to do that, but of course we monitor the situation the whole time and, as and when we can dispose of them, we will. I am very keen to create a more competitive banking sector at the end of this process, which is one of the reasons why we set up the independent commission.

[Karen Bradley (Staffordshire Moorlands) (Con)]

Areas such as Staffordshire Moorlands were neglected by the previous Government. Will the Chancellor tell the House how areas that have been let down by policies such as regionalisation will be helped by the measures announced by this Government?

[Mr Osborne]

We have much more focused local area partnerships that are going to help areas such as Staffordshire Moorlands, which I suspect were rather neglected by the regional development agency. I assume that such areas were not where the action was in the west midlands, and that the emphasis would have been on the big metropolitan centres. Her town of Leek and the surrounding countryside would, I suspect, have been ignored by the RDA. One of the advantages of local enterprise partnerships—and, indeed, the regional growth fund—is that we can focus on particular areas where we want to get more private sector involvement and create jobs.

Oral Answers to Questions

Karen Bradley Excerpts

Tuesday 12th October 2010 Commons Chamber

[Mr Osborne]

The Office for Budget Responsibility is using the statistics from the Office for National Statistics. Of course, one of the decisions that the previous Government made was to allow countries to join the European Union without any transitional controls whatsoever on their citizens’ movement to the United Kingdom. We are living with the consequence of that decision.

[Karen Bradley (Staffordshire Moorlands) (Con)]

T2. Many small businesses in Staffordshire Moorlands tell me that they have enough to deal with without the intricacies and complications of the tax system. Will the Minister provide more information to the House about how the work of the Office of Tax Simplification will help those small businesses?

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

My hon. Friend is right to raise the concerns of business. We have a complicated tax system and the longest tax code in the world. The Office of Tax Simplification will make a very useful contribution to assisting the Government to identify unnecessary complexity and finding areas of reform.

Office of Tax Simplification

Karen Bradley Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

As I mentioned earlier, the intention of the OTS is to look at the existing stock of tax law, not to examine new proposals for tax law. On the patent box, as we announced in the Budget, the intention is to carry out a consultation on intellectual property and on how the patent box works, how research and development tax credits work, and how the controlled foreign company rules apply in that context. We will be carrying out that consultation in the autumn.

[Karen Bradley (Staffordshire Moorlands) (Con)]

May I welcome the announcements about the OTS, particularly the appointment of John Whiting—a move that will be very popular in the industry? Does the Minister agree that by simplifying the tax code, the Government are reducing the opportunities for tax avoidance?

Budget Resolutions and Economic Situation

Karen Bradley Excerpts

Thursday 24th June 2010 Commons Chamber

[Karen Bradley (Staffordshire Moorlands) (Con)]

It is an honour to address this House for the first time today. It is an equal honour to do so as the Member for Staffordshire Moorlands. I could easily use up all the time available in praising my beautiful constituency, and although I shall resist doing so, as there are pressing matters facing the House, I make no apology for my pride in representing the people of the Moorlands, among whom I feel very much at home, as I represent the seat where I was born.

I would like to start by paying tribute to my predecessor, Charlotte Atkins. She made many friends in the constituency in her 13 years of representing the seat. There are many local causes that she made her own, including her advocacy for the charity Sailability and her vocal campaign for the preservation and promotion of the canal network. I am privileged to take up the baton in representing the Staffordshire Moorlands in this House.

Right hon. and hon. Members may be aware of the unique character of the Moorlands. Staffordshire is a large county with a great industrial history, but sometimes we overlook its claim as home to much of the Peak district. The geography of Staffordshire Moorlands is demonstrated not only by the name, but by the fact that one third of the seat is made up of Peak national park land. I see it as one of my responsibilities to encourage visitors to that beautiful place, which is something of an undiscovered tourist gem. When hon. Members visit the Moorlands, they will find a wealth of natural attractions. The very many hills enjoyed by walkers provide striking and inspiring scenery, including the famous Roaches. While among the peaks, hon. Members can slake their thirst in up to five of the 10 highest pubs in Britain.

Alongside the wild shapes and deep colours of the moors and the peaks, we should not forget, of course, that much of the wonderful rural beauty is conserved for our enjoyment largely thanks to the hard work and dedication of farmers. As a result, Staffordshire Moorlands is an important source of the nation’s food. We are now entering the summer country show season, when the quality and variety of livestock will be on prize-winning display. We all benefit from the maintenance of the land that supports that vital industry. It will be one of my aims to encourage the House to ensure that farming—not hidden by the catch-all “rural affairs”— is given due attention by the Government.

There are opportunities not only for walking, but for bird watching, including around Tittesworth reservoir, and for sailing on Rudyard lake, the place after which the famous Mr Kipling—not the one who makes cakes—was named. The lake is no mean feat of engineering, and was created at the end of the 18th century to feed the canal network, another important part of our tourism industry. On top of those natural attractions are other reasons to be confident about the future for the Moorlands. The constituency is home to the most visited tourist attraction outside London, Alton Towers. There is also a thriving arts community, building on a long history that includes William Morris, who lived and worked in Leek for a time. Local painters such as David Hunt continue the tradition, capturing the essence of the area.

Of course, Staffordshire Moorlands is no simple rural idyll; it is also home to towns with an industrial, textile and mining history. Biddulph grew up on mining, but has adapted and is now finding its way with more modern industries. Leek prospered from the silk trade and has long been the home to two large providers of financial services, Leek United and Britannia. Contrary to some reports, manufacturing in the UK is not finished. Small firms in the Moorlands are making gearboxes, seat belts, chemicals and agricultural equipment, to name just a few.

I believe that the traditional character of our towns and villages and our farms has been strengthened by a feeling of togetherness—a feeling of the moorlands being something unique—but we have to trade some of that positive feeling for our fellow moorlanders with the difficulty of ease of access. There is, for example, neither a train station nor a dual carriageway in Staffordshire Moorlands. That lack of infrastructure might be one problem for our businesses that seek to connect quickly with others, but another, more severe, problem has been one of neglect of places such as the Moorlands—neglect by the previous Administration who developed policy with an eye only on its metropolitan heartlands and large companies. They were an Administration who strangled small businesses with regulation and looked on in ignorance of anyone who works on the land or cultivates livestock.

However, I do not think that I have been elected by the people of Staffordshire Moorlands just to sing the praises of the area. I consider that they have elected me also to support the new Government in redressing the balance in focus of our legislation. I welcome the intention to devolve powers to the right local level and recognise that the diversity in our country requires that we have strong principles and that we apply them appropriately. I also believe that my constituents expect me, along with all other right hon. and hon. Members, to uphold the supremacy of Parliament, because that is how their interests will be represented most effectively.

That brings me to the point I want to make about today’s debate. We have the duty, as well as an opportunity in this new Parliament, to hold the Executive to account, but we must understand clearly what we mean by the Executive. Today, it is not simply Cabinet Government, but the extension of Government through the civil service and numerous Government agencies. We must ensure that, as we vote for laws in this House, what we pass is actually implemented in practice.

My professional background is as a chartered accountant and chartered tax adviser—and I realise how many people would be disappointed if the word “tax” did not appear in this maiden speech. Over the years I have advised businesses, large and small, on their tax affairs, I have seen many instances of where the intention of the law has been altered in practice, not by another Act of Parliament or even by a judge, but by officials in Government Departments—in my particular case, by Her Majesty’s Revenue and Customs. That is a question not necessarily of unintended consequences, but of deliberately altered consequences by officials.

Let me provide a concrete example of what I mean; it relates directly to our debate on green energy and reducing carbon emissions. Under the Finance Act 1999, the then Government encouraged people to cycle to work—which given the terrain in the Moorlands, would keep us extra fit. Parliament determined that if businesses provided cycles for their staff, that provision would be exempt from tax. There are several ways that a business could do that—for example, by creating a pool of bikes or by setting up a salary sacrifice scheme. In the latter case, a credit agreement between the employer and employee is required.

One of the principles in the legislation is that the benefit should be “generally available”. However, HMRC guidance drawn up in the normal way on the matter results in a subtle, but different, position—that the benefit must be “available to all”. Crucially, employees under the age of 18 cannot enter into a credit agreement. This means that most employers could not offer the option to all employees; and, according to the Revenue, if it is not available to all, it cannot be available to any.

A Department for Transport guideline produced 10 years later attempted to clear up the anomaly, but why did we need guidelines from one Department to interpret guidelines from another when the intent of the law was quite clear? Why should HMRC apply the rules in this way? Did not Parliament say that it wanted this tax exemption to be given to employees to encourage green transport? Who gave the Revenue, a Government agency, the right to re-interpret the law? That may seem a small instance, but it is indicative of the larger problem we face. There is a culture of control often masquerading as advice, and there is a tendency to complicate the law—and not just in the area of tax.

Too many times my constituents have said to me that they do not understand why MPs or councillors have to take legal advice or are following the official guidance rather than doing what the intent of the law says. Parliament must be supreme, and not just in fiscal matters. Ministers and Members of this House must be confident that they are the masters of the rules, because they are accountable to those who have sent them here. If we pass fewer but simpler and clearer laws, there will be less scope for confusion. Simplicity will help Parliament maintain that supremacy, while transparency will also help to restore the reputation of politics.

Our electors are more than capable of judging what we are doing—and seeing whether it is worth while—if they can see what it is, and clarity of principle might even increase interest in the business of Parliament. People will see this House as a place of serious and relevant debate, and, dare I say it, simplicity might even help us make efficiency savings. I therefore ask that in this Budget debate, and in the debates that follow on of the Finance and other Bills, we ensure that what we intend the legislation to do is what officials implement and enforce.

Before I sit down, Mr Deputy Speaker, I hope you will indulge one final comment, as I want to thank the voters of Staffordshire Moorlands for putting their trust in me. I will endeavour to work hard for all of them and represent their interests in this House.

Banking Reform

Karen Bradley Excerpts

Thursday 17th June 2010 Commons Chamber

[Mr Hoban]

I am grateful to the right hon. Gentleman for his comments. He takes a close interest in these matters. Of course, he will remember that in 2006 the right hon. Member for Morley and Outwood (Ed Balls) praised the system of “increasingly light-touch” regulation and claimed that he had

“resisted pressures from commentators for a regulatory crackdown.”

The right hon. Member for Oldham West and Royton (Mr Meacher) ought to take up some of these historical issues with his own Front Benchers.

As regards a change to the regulatory approach, we need to see a move away from the prescriptive, box-ticking approach that we have seen in a recent years to a system in which the PRA and the CPMA can make more judgmental decisions about what is happening in the markets they supervise and with the prudential decisions that individual institutions are taking. If we put judgment at the heart of the system, we are more likely to avoid some of the issues that we have seen arise in recent years.

[Karen Bradley (Staffordshire Moorlands) (Con)]

May I warmly welcome the Minister to his role? Will he tell the House about conversations that he has had with international colleagues about the need for radical reform of the regulatory system and the failure of the last Government’s tripartite system?