Mark Field
Main Page: Mark Field (Conservative - Cities of London and Westminster)Department Debates - View all Mark Field's debates with the HM Treasury
(11 years, 1 month ago)
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Mr Gauke
My hon. Friend is absolutely right that we need to do what we can to ensure access to finance for those strong, viable small businesses that want to expand. That is why we have taken measures such as the funding for lending scheme and why we want to ensure that we have a business-friendly environment. I am grateful for his observations on export guarantees. He will be aware of some of the measures that the Government have taken over the past two or three years to try and support those exporting businesses. I note his comments and calls for us to go further.
Mark Field (Cities of London and Westminster) (Con)
I appreciate that the Minister has to deal with an incredibly difficult situation that is not made any easier by this constant battling over borrowing figures. We all know how serious the situation is, and for my part I will not be spending my time blaming the last Government, which is unhelpful. We must look to the future.
My hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) rightly pointed out the importance of export guarantees. If we are to get trade moving again, it is essential that we ensure a much more efficient export guarantee process, particularly with small and medium-sized enterprises. We must appreciate—I hope that the Minister does—that part and parcel of the guarantee is recognising that some of those guarantees will not come off and so will have to be paid for by the Government. If we are to break into developing markets, however, we need to do so with some aplomb.
Mr Gauke
I am grateful to my hon. Friend for his remarks. It is right to say that exporting is important. It is one area where, as an economy, we have not performed as well as we would have liked over many years, although we are making striking progress in some of the major developing economies. However, we face difficulties, in particular with the eurozone, which is our biggest export market.
Let me return to what we are doing as a Government to ensure that we meet our objective of having the most competitive tax system in the G20. We have already made considerable progress. As evidence, let us look at the KPMG annual survey of tax competitiveness, in which senior tax professionals were asked to name their three most competitive tax jurisdictions. In 2009, just 16% named the UK among their top three, but by 2012 the UK was named by 72% of respondents, ahead of every other jurisdiction. Since that survey was undertaken, the corporation tax rate has fallen from 24% to 23%, but we will not be complacent. Clause 4 will cut the main rate of corporation tax to 21% from April 2014. As we announced at the Budget, we will then reduce the corporation tax rate by an additional one percentage point from April 2015—a measure in clause 6 that will mean that the United Kingdom has the lowest business tax rate of any major economy in the world.
Mr Gauke
My right hon. Friend makes a valuable point. This underlines the fact that the Government were right to reduce the 50p rate of income tax, because it was out of line with the vast majority of our international competitors. We have to look at the tax system as a whole. I believe that we have made striking progress in delivering that, and in ensuring that we are open for business. It is also striking that, since we have embarked on our package of reforms, the flow of businesses leaving the country has already been stemmed. Indeed, we have seen many businesses either returning to the UK or coming here for the first time. They include WPP, Lancashire, AON, Rowan and Seadrill, and I believe that more will follow.
Mark Field
I give my hon. Friend credit for what he has done for the animation and video games industries in my constituency. As he will know, there has been a long-standing campaign for such provisions, and I am by no means the only Member of Parliament who has lobbied for them in recent years. Will he ensure that we will be able to act as nimbly as possible if our tax rates become uncompetitive, for whatever reason, for those internationally competitive businesses? Such action might need to be applied to a whole range of industries, well beyond the IT and animation industries. As he has rightly pointed out, it is very easy to lose such jobs nowadays, and we need to ensure that they come back to these shores at the earliest possible opportunity.
Mr Gauke
My hon. Friend makes an important point. The Government recognise that capital and investment can be very mobile, and that they are more mobile in some sectors than others. We have demonstrated a willingness to listen in this regard. Our principal policy in this area has been to adopt a lower rate, but we have recognised that in certain areas of considerable mobility, we need to respond to what is happening. We have done so through the measures in the Bill, and through the patent box in last year’s Finance Act, which was important in further ensuring that the UK is an attractive location for investment. I shall now give way to another Member of Parliament with a constituency interest in the video games industry.
Mark Field
The hon. Gentleman will appreciate that the global situation, particularly among the eurozone countries, makes it incredibly difficult for us to achieve the export-led growth that we would all have liked over the past three years. Will he give credit to the Government for the fact that more than 1 million private sector jobs have been created over the past three years? That should be welcomed and should counter some of the pessimism emanating from his speech.
Chris Leslie
If I can try to be optimistic, I hope that there will be a sustained increase in employment, but I am getting worried. The latest figures showed that unemployment is rising again. We must look at the underlying situation reflected in the productivity gap and the capacity problem in the economy, which the Treasury is worsening. The Minister spent a large part of his speech trumpeting the reductions in corporation tax that the Treasury have put into the Bill as the big solution to those problems. Of course we want the UK to be seen as a good place for investment, but the Treasury has not produced any analysis of how those further cuts in corporation tax will feed through into economic growth. We hope they will, but it is time we saw some clear proof that inward investment and business growth are flowing from that approach, and that we are not just stacking up corporate surpluses which are locked away because businesses fear that they will not be able to access bank credit.
Chris Leslie
We will undoubtedly be able to judge the success of these issues, but there are some deeper flaws in the design of the Help to Buy scheme; we will debate that issue in more detail this week. It all reeks of a policy that has not been thought through properly—designed in haste and yet again not having the intended effect.
Understanding what the Government have put into the Finance Bill requires an understanding of what they have not put in. This was the Budget and the Finance Bill that were supposed to learn the lessons of the 2012 omnishambles Budget and Finance Bill—the pasty tax, the granny tax and the caravan tax. Here is the product of all the Government’s care and vigilance this year; I am sure that the Minister’s officials will be proud of him. The Government have painstakingly avoided anything that will have a positive and significant impact on growth, meticulously evaded any measures that might stimulate job creation and sidestepped anything that might repair the mess that they are making of the public finances.
In fact, the only real aspiration in the Bill is to get through it without any more U-turns. But by avoiding the bold action that we need to stimulate the economy, the Government have created a Bill bereft of the major reforms we need. So many measures are conspicuous by their absence. The Government have cut public investment, and now they are cutting back on policies, too.
I had hoped that the Chief Secretary to the Treasury would be here today; normally, he would open the debate on the Finance Bill. I do not know whether his not being here is a deliberate strategy or whether he has a decent reason; the shadow Chief Secretary has a decent reason for not being here, but that could not apply to the Chief Secretary.
We had hoped, before the Budget, that the Liberal Democrats would stick to one pledge—their pledge to support a mansion tax. We even tabled a one-line motion for Lib Dems to vote for, but they did not want to offend the Conservatives. But they should not worry because we will give them another chance to support their own policy later in the week—a mansion tax on properties worth over £2 million to deliver a tax cut for lower and middle-income households. We favour a 10p starting rate of income tax as the best way to do that and we think that should be in the Bill.
Why have the Government not legislated for their child care voucher extension, which has been pencilled in vaguely for some time after the general election? Where is the national insurance help for small businesses that we have been calling for and which the Chancellor should be acting on sooner? Why is that not in the Bill? It is not good enough for such provisions to be in black and white in a Budget book; it needs to be in the Bill. There have been so many promises in the media, but they have not been seen through in the Finance Bill.
The Finance Bill could be the moment when the Government change their mind on the bedroom tax, and it should be the legislation that repeals their lovely gift of an average £100,000 tax cut for Britain’s lucky millionaires through the cut to the 50p tax rate. As I have said before, it seems that with this Government there is one rule for the rich, but only one room for the poor.
Where do the Government get such a gratuitously unfair sense of priorities? The language used to validate a cruel, harsh, selfish approach is breathtaking—they insist on the caricature of the “spare room subsidy” and bristle at the term “bedroom tax” because they know that the public can see the policy for the disaster it is proving to be. The Chief Secretary to the Treasury, who is not here, wrote in The Sun on Easter weekend that he wanted to tackle the “bedroom blockers”—that from a Liberal Democrat Chief Secretary who could and should have blocked the bedroom tax in the first place.
Mark Field
Like me, the hon. Gentleman represents an inner-city seat. He will know from his own mailbag that the biggest housing issue is overcrowding. I find that in my constituency, and I cannot believe for one moment that the hon. Gentleman does not get similar letters from constituents. That is what is behind the so-called “bedroom tax”. We are trying to ensure that more vital social housing resource is made available to those in genuine need.
Chris Leslie
The Government are not putting any of those resources into building affordable social housing. Kicking people out of their homes will not help people in that way. We have already seen evidence that nine out of 10 of those affected by the bedroom tax have no option of going anywhere else at all. The Government have totally neglected the supply of affordable housing. They have not prioritised that.
Then we come to the grotesque spectacle of a Chancellor of the Exchequer demeaning his office—using the case of a multiple child killer to argue for his changes to the welfare system. We knew that Conservatives relish any opportunity to do down social insurance protections and that the Government’s policies are actually pushing more people into welfare—not helping them out, but pushing up the welfare bill to record levels. However, we did not know the depths to which the Chancellor would stoop. The nasty party is back.
The Chancellor certainly grabbed the headlines, but I say to Government Members that what he said diminished his standing in the eyes of millions who rely on benefits—those in work relying on tax credits as well as people looking for work, pensioners and the disabled. Those millions have absolutely nothing in common with Michael Philpott whatever and were all sickened by the evil behind those crimes. In his speech at the beginning of the month, the Chancellor had the audacity to castigate his critics for their “shrill, headline-seeking nonsense”—he said that without a hint of irony. He suggested that those who dared to criticise his plans
“always complain, with depressingly predictable outrage”
and are just another bunch of “vested interests”.
Let us just think about that accusation—“vested interests”. Putting to one side for a moment the fact that the Chancellor knows a thing or two about defending positions of privilege, is he really saying that those who care about defending the well-being of some of the most vulnerable in society are “vested interests”? Well, for the record, yes—we are interested in, and deeply concerned about, the impact that the bedroom tax, the withdrawal of council tax benefits and the changes to disability benefits will have. However, the more important question is why the Chancellor is not interested. Why does he think it makes sense to tell 660,000 people, most of whom have a disability, that they need to give up a spare room but leave nine out of 10 with no option of moving anywhere smaller? Why does he think that some of the poorest and most vulnerable can cope with significantly higher council tax bills as a result of the withdrawal of council tax benefit, the arrears from which could end up costing a fortune to collect? Why does he think it makes sense to penalise working people by cutting their tax credits at a time when we should be making work pay?
The Chancellor is not concerned because for him this is a political game. He is not serious about helping those on welfare; for him, and for the Conservatives’ new spin supremo, Lynton Crosby, this is all about ideology and tactics.
Mark Field (Cities of London and Westminster) (Con)
If there is one small area where I would agree somewhat with the hon. Member for Nottingham East (Chris Leslie), it is that the Chancellor’s room for manoeuvre was incredibly limited as he delivered the Budget four weeks ago. There is no doubt that many of those constraints come as a result of global events. The latest stage in the eurozone debacle as Cypriot banks have been underpinned is a contemporary case in point, and we see ongoing problems in Portugal that I fear will deteriorate as the weeks and months go by.
However, it has become ever clearer that in the coalition Government’s first Budget in June 2010, they were, I accept, complacent about growth. The short pre-election boom following the 2009 VAT reduction and the very large early rounds of quantitative easing lulled the coalition, on assuming office, into believing that the growth that had come about in the two or three quarters before the 2010 election was baked into the system and would somehow do the heavy lifting when it came to deficit reduction. The coalition’s plans to eliminate the structural deficit required the gap between revenue and expenditure to be narrowed by some £159 billion by 2014-15. Tax rises were expected to contribute £31 billion and spending cuts £44 billion, and the remaining £84 billion was meant to come from compound growth of 2.7% throughout the Parliament.
Unfortunately, however, as we now know, the coalition ended up with possibly the worst of all worlds. It has received unwarrantedly relentless criticism from Labour Members for so-called harsh austerity measures when, in reality, it has too often lacked the political will to execute the levels of savings required. For all the rhetoric, we are still overspending by some £300 million every day. We are borrowing, not spending, that amount each and every day, and that means that we will continue to have to borrow to the tune of some £120 billion year on year.
Kelvin Hopkins
The hon. Gentleman seems to be saying that the Conservative coalition Government had the benefit of Labour’s reflationary strategy, which was implemented before the election, but then reversed it so that things have got worse ever since. Should they not simply have carried on with Labour’s strategy?
Mark Field
The hon. Gentleman makes a good case, I suppose, but we all know that the reality was that the short-term boost of VAT reduction and the early batches of QE was unsustainable. They were a pre-election boomlet, but, as I have said, the entire political class became rather complacent and thought, somehow, that the worst was behind us after the crash of 2008. We now know that that simply was not the case.
In 2010 the entire political class should have looked the electorate in the eye and been clear about the magnitude of the task that lay and, I am afraid, still lies ahead to rectify the public finances, but we are where we are. I personally take the view that talk of radical tax cuts from some on the Government Benches is perhaps unrealistic. I fear, for a start, that confidence is so low that until it is restored almost any tax give-aways are more likely to be squirreled away by individuals and companies than pumped back into the economy.
I also think we would run the serious risk of the markets losing faith if we were to play even faster and looser with public borrowing. In spite of the recent loss of our triple A rating from Moody’s, the Chancellor’s great achievement—it should not be underestimated—is that we are still able to borrow in international markets at such low interest rates. The lesson of both 1931 and 1976 is that once the markets turn, all is lost.
My main hope for the Budget and this Bill was that the coalition would take some of the longer-term decisions that the British economy requires. I am pleased that resource is being set aside for key, shovel-ready infrastructure projects. I had hoped that cash would be accompanied by decisions and leadership on aviation and energy infrastructure. We cannot let these sensitive political footballs be kicked once again into the next Parliament. I think that the UK, as a trading nation, requires certainty on those issues, not an endless parade of commissions and reviews.
I am pleased, however, that the Treasury has helped out small business. The march towards ever lower rates of corporation tax, as the Exchequer Secretary has pointed out, is highly welcome, as are assurances that small firms will be given a chance to bid for Government contracts under the small business research initiative.
The extent of capital gains tax relief to attract start-up capital for new limited companies is also very good news. Best of all, however, is the knocking off of the first £2,000 of employer national insurance contributions for small and micro-sized businesses. That will, I hope, begin to chip away at the worryingly high levels of youth unemployment by lifting some of the obvious disincentives to taking on new staff.
I am afraid that I am a little less sanguine about the Chancellor’s flagship Help to Buy plan. I appreciate its raw politics, underpinned as it is by a desire to help struggling younger people on to the housing ladder, many of whom are paying much more in rent than they would as part of a mortgage, if only they had a deposit. Nevertheless, I ask the Treasury to give considerable thought in the consultation period to what we are trying to achieve. Let us look carefully at supply rather than just finance, since I suspect that the latter will simply help keep prices out of the reach of the very people whom we wish to serve, as the hon. Member for Edmonton (Mr Love) has said. I do not wish the taxpayer to be on the hook for the consequences of a reinflated property bubble. Let us not forget the US experience that lay at the heart of the financial crisis.
I, like many other Members, am also disappointed that the Office for Budget Responsibility’s predictions for our economy as recently as the autumn statement on 10 December 2012 were proved, only 14 weeks later in the March Budget, to have been so considerably off beam. Few doubt that economic forecasting is an especially dismal science. However, the OBR’s intervention in December proved essential in buying the Chancellor crucial breathing space at a time when many commentators had assumed that we were about to flunk our plan to reduce the deficit year on year. To that extent I accept what the hon. Member for Nottingham East has said. Many even-handed people will regard that as a sleight of hand, but, more importantly, the scene was set for cynicism and deep disappointment when aggregate borrowing for the next four years was projected at some £49 billion higher only 14 weeks after the autumn statement.
It is worth saying, however, that that is part of a tradition during all my 12 years in this House. Every single Budget between 2001 and 2007 forecast that public finances would move back into surplus in about three or four years’ time. Instead, as the hon. Gentleman will remember, debt and the annual deficit rose inexorably while the Treasury conjured the illusion of fiscal stability. Similarly, at every autumn statement since June 2010, the OBR has, I fear, been forced to downgrade growth out-turns while continuing to hold somewhat optimistically to the notion that the public finances will be transformed by robust growth in two years’ time.
The establishment of the OBR was meant to herald a fresh era of forecasting credibility, but it now seems all too reminiscent of the previous Administration’s discredited financial projection. I think that observers are beginning to wonder whether we should have any regard for the OBR’s latest set of predictions or, indeed, take with anything more than a pinch of salt assurances that recovery is only around the corner.
Sheila Gilmore
Will the hon. Gentleman clarify his position? Is he suggesting that the OBR—which was hailed as a great independent organisation that would keep us right—has somehow gone wrong, rather than that it is his Government’s policies that have lead the OBR constantly to downgrade its predictions?
Mark Field
I am expressing the concern that the OBR was somehow seen as a panacea of independence in a lot of its projections when it has got things uniformly wrong almost every time. As I have said, that is partly because of international events that one cannot exclude. We live in a global economy and are a great global trading nation. The problem is that we have not been able to get the export-led growth that we all want and as a result there has been constant downgrading.
There was some good news in the Budget, as the Exchequer Secretary has said, about the co-operation between the Treasury and our Crown dependencies of Jersey, Guernsey and the Isle of Man on new financial disclosure agreements. As an adviser to the law firm Cains, I am pleased that our Crown dependencies have led the way with the FATCA—Foreign Account Tax Compliance Act—arrangements. That is to the Treasury’s credit. We saw at ECOFIN only last weekend that we are also looking to bring on board the Cayman Islands and the British Virgin Islands to ensure that there is more transparency. It is very easy to berate a lot of the international financial centres—many of which have long-standing historical links with not just the City of London, but the UK—but the importance of the liquidity that they bring into play should not be underestimated. It made a big difference in the immediate aftermath of the crash of September 2008 and might yet do so at some point in the future.
I am a little more concerned that the Treasury is not making entirely clear what is considered abuse and avoidance when it comes to tax arrangements. The earlier exchange between the hon. Member for Burnley and the Exchequer Secretary brought that to mind. [Interruption.] I apologise: it was the hon. Member for Redcar (Ian Swales)—my view of the hon. Gentleman means that it was an all too easy mistake to make. Without clarity about what amounts to avoidance as opposed to abuse, we risk throwing a veil of uncertainty over the UK’s business environment.
I speak to firms large and small in my own constituency. I say to those on the Treasury Bench that, suddenly, for the first time ever, global corporations are beginning to consider the almost unthinkable prospect of a certain amount of political risk being attached to the UK. Foreign direct investors would be right to feel aggrieved if legitimate tax-planning activities suddenly were deemed by Her Majesty’s Revenue and Customs to be aggressive tax avoidance, with punitive fines and damaging public relations to follow.
On that note, I should like to raise a specific instance of retrospection that is causing financial hardship among some of my constituents. Section 58 of the Finance Act 2008, brought in by the previous Government, was designed to close down certain tax-planning arrangements with retrospective effect. I am afraid that it has left some residents in my constituency with demands for huge amounts of back tax, which in some extreme cases is leading to threats of bankruptcy.
The Exchequer Secretary is aware of those concerns, because he has responded to my correspondence on them. Unfortunately, however, some of those affected by section 58 are not convinced that he is properly listening to the argument. One constituent advised:
“The tax arrangements I used were not only legitimate and openly declared, but expressly considered, debated and approved by parliament back in 1987. This means that according to the HMRC’s declaration, I was not engaged in aggressive and abusive tax avoidance but simple, legitimate tax planning.”
Although I accept that HMRC wants to bring more money in and to close down aggressive tax avoidance schemes, if it has known that arrangements or schemes have been in place for 25 years and has made no move to close them down, it cannot be right for retrospective activity to take place. My constituents therefore request the repeal of section 58.
I would be grateful if the Treasury gave serious consideration not only to the arguments of the campaigners, but to the message that retrospective legislation sends to business people who are trying to act in a lawful and transparent way in planning their taxes. The Exchequer Secretary rightly pointed out that we should be proud of being a country that is open for business, but we must ensure that what we do and what we say in that regard coincide.
To conclude, if I have one message for the Treasury as we consider the Finance Bill in the days ahead, it is to forget about the pressure for quick fixes and transient boosts, and instead to focus relentlessly on delivery and longer-term measures to make the UK an ever more tempting prospect as a place in which to do business. If the UK economy is not to get substantial growth before the 2015 election, let the coalition at least get some credibility for doing the right thing for the nation and giving our people a genuine sense of hope for the future.